PKP looks to begin expanding into telecom services in 1999
Starting Jan. 1, PKP has created a new division, Dyrekcja Telekomunikacji Kolejowej, to spearhead its efforts to capitalize on the 20,000 kilometers of fiber optic, cable and aerial lines that are part of its rail network.
"We have a good phone cable network" that can be used for reasons other than just the railroad, said Edward Mazur, head of telecommunications in PKP's infrastructure sector.
PKP plans to use its cables to create a long-distance network throughout Poland if it can win a license in a tender expected to be called for such services this spring. The Communications Ministry is planning this year to grant long distance licenses to three or four telecom operators. Although originally planned for release last December, a timeline for such a tender, which will be one of the most sought-after licenses in the telecom sector, is expected by the end of this month, according to Jerzy Kalinowski, director of telecommunications at PricewaterhouseCoopers.
If PKP is successful in creating a long-distance network, it will be following in the footsteps of other regional operators who have also branched out into telecoms. In the early 1990s, Deutsche Bahn set up a carrier for long-distance calling within Germany and Hungary's M+V helped to create Pan-Tel in 1997.
In its push to enter the telecom sector, Mazur said PKP would first look to upgrade the railroad's tele-transmission system from a capacity of 155 megabits per second to 2.5 gigabits per second. Then it will create a backbone network for data transmission and mobile phones. However, any cellular capability would not be available for three years.
In addition to upgrading switches to digital, which are now located in 11 communication centers throughout Poland, Mazur said PKP is also planning to install an additional 2,000 kilometers of fiber-optic cable within the next three years. But if investment conditions prove favorable, an additional 2,500 kilometers could also be added.
PKP is not the only business in Poland hoping to cash in on existing cable networks, however. If it goes for a long-distance license it will be competing against other state-owned companies such as the Polish Power Grid (PSE), which in 1993 set up its own phone company called Tel-Energo.
That company's network is meant primarily for the country's energy sector. But Stanislaw Filipiak, chief executive officer at Tel-Energo, said the network provides service between cities for closed networks. Currently, the company does not offer any service to the public sector. PKP also leases lines in a similar way and has about 230,000 clients.
The chances that companies like PKP and Tel-Energo could win long-distance licenses are good because the Communications Ministry would prefer to grant licenses to providers with existing infrastructure, said Jan Sudol, a telecom analyst with Donaldson, Lufkin and Jenrette in London.
He added that using its cable network to branch out into telecoms would be a good move for PKP, which like many passenger railroads operates at a loss. "Typically telecommunications ventures are high-growth and high-profit," he said.
Still, transforming PKP from an old-school, state-run rail operator into a company that can compete in a high-tech sector will not necessarily be an easy task, Sudol warned.
"The only reservation I have is that PKP does not strike me as a particularly commercial-minded organization," he said. "They don't have the organization to create a telecommunications company" and provide necessary features such as customer service and billing.
Sudol added that while PKP may have the infrastructure in place, it has no experience running a phone company.
This means that if PKP wants to be successful in this new venture, it may have to find an experienced partner.
Kalinowski said PKP has already been speaking to telecom operators such as Deutsche Telekom, Netia and others about some sort of cooperative arrangement. In addition to know-how, such an outside investor could also help the rail operator secure the capital needed to upgrade and expand its telecom systems.
While international financial institutions are eager to invest in telecommunications, they also want to see a solid business plan that conforms to Western standards, Kalinowski said.
He estimated that PKP would require $150 million-$300 million in new capital to make its network commercially viable.
In addition to experience and capital, PKP will also have to learn to deal with Telekomunikacja Polska (TPSA), which still has outdated, mechanical switching equipment in parts of Poland. This "makes it very difficult to connect new networks," Kalinowski said.
But at the end of the day it will be PKP's ability to run a phone company, as yet unproven, that will be the most important factor. "It's more important that they run the business," he said.
"We have a good phone cable network" that can be used for reasons other than just the railroad, said Edward Mazur, head of telecommunications in PKP's infrastructure sector.
PKP plans to use its cables to create a long-distance network throughout Poland if it can win a license in a tender expected to be called for such services this spring. The Communications Ministry is planning this year to grant long distance licenses to three or four telecom operators. Although originally planned for release last December, a timeline for such a tender, which will be one of the most sought-after licenses in the telecom sector, is expected by the end of this month, according to Jerzy Kalinowski, director of telecommunications at PricewaterhouseCoopers.
If PKP is successful in creating a long-distance network, it will be following in the footsteps of other regional operators who have also branched out into telecoms. In the early 1990s, Deutsche Bahn set up a carrier for long-distance calling within Germany and Hungary's M+V helped to create Pan-Tel in 1997.
In its push to enter the telecom sector, Mazur said PKP would first look to upgrade the railroad's tele-transmission system from a capacity of 155 megabits per second to 2.5 gigabits per second. Then it will create a backbone network for data transmission and mobile phones. However, any cellular capability would not be available for three years.
In addition to upgrading switches to digital, which are now located in 11 communication centers throughout Poland, Mazur said PKP is also planning to install an additional 2,000 kilometers of fiber-optic cable within the next three years. But if investment conditions prove favorable, an additional 2,500 kilometers could also be added.
PKP is not the only business in Poland hoping to cash in on existing cable networks, however. If it goes for a long-distance license it will be competing against other state-owned companies such as the Polish Power Grid (PSE), which in 1993 set up its own phone company called Tel-Energo.
That company's network is meant primarily for the country's energy sector. But Stanislaw Filipiak, chief executive officer at Tel-Energo, said the network provides service between cities for closed networks. Currently, the company does not offer any service to the public sector. PKP also leases lines in a similar way and has about 230,000 clients.
The chances that companies like PKP and Tel-Energo could win long-distance licenses are good because the Communications Ministry would prefer to grant licenses to providers with existing infrastructure, said Jan Sudol, a telecom analyst with Donaldson, Lufkin and Jenrette in London.
He added that using its cable network to branch out into telecoms would be a good move for PKP, which like many passenger railroads operates at a loss. "Typically telecommunications ventures are high-growth and high-profit," he said.
Still, transforming PKP from an old-school, state-run rail operator into a company that can compete in a high-tech sector will not necessarily be an easy task, Sudol warned.
"The only reservation I have is that PKP does not strike me as a particularly commercial-minded organization," he said. "They don't have the organization to create a telecommunications company" and provide necessary features such as customer service and billing.
Sudol added that while PKP may have the infrastructure in place, it has no experience running a phone company.
This means that if PKP wants to be successful in this new venture, it may have to find an experienced partner.
Kalinowski said PKP has already been speaking to telecom operators such as Deutsche Telekom, Netia and others about some sort of cooperative arrangement. In addition to know-how, such an outside investor could also help the rail operator secure the capital needed to upgrade and expand its telecom systems.
While international financial institutions are eager to invest in telecommunications, they also want to see a solid business plan that conforms to Western standards, Kalinowski said.
He estimated that PKP would require $150 million-$300 million in new capital to make its network commercially viable.
In addition to experience and capital, PKP will also have to learn to deal with Telekomunikacja Polska (TPSA), which still has outdated, mechanical switching equipment in parts of Poland. This "makes it very difficult to connect new networks," Kalinowski said.
But at the end of the day it will be PKP's ability to run a phone company, as yet unproven, that will be the most important factor. "It's more important that they run the business," he said.
