Q&A: Kulagowski
Fearing it would be left out in the cyber cold at the dawn of Poland's Internet age, national telecom operator Telekomunikacja Polska (TPSA) established an Internet subsidiary, TP Internet (TPI), in September 1999. Today TPI constitutes about 10% of TPSA's business. In the face of increasing competition from other fixed-line operators, TPSA is expecting rapid growth in the Internet services industry. At the beginning of this year, TPSA announced that its data transmission and Internet services would account for 40% of the company's total value, with fixed-line and mobile telephony comprising 30% each, by 2004. Slawomir Kulagowski, the president of TPI, talked to the Business Journal's Roseanne Gerin about the company's strategy, TPI's plans for its portal (www.portal.pl) and the prospects for e-commerce in Poland. The following is an edited version of their conversation.
Q: What is TPI's current and five-year strategy?
A: If we are talking about strategy, nothing has changed from our early plan to become a creator of a platform for general e-business in this country. This includes (creating) the infrastructure to help any players in e-business or other companies to go to the electronic market and establish their activities. We see our role more as a company (belonging to) the TPSA Group. We have enough power not to concentrate in one particular business only, but also to create some platform for the general market to help us and help everybody eager to play in the Internet market.
Q: Last year you acquired 33% of Parkiet newspaper (to add its content to portal.pl). Will you be acquiring stakes in any other financial portals or media companies or form partnerships with other firms as part of your strategy?
A: No, we're still discussing this. At the first stage, we are much more interested in some specialized vortal (so that) we will have the best knowledge in the portal segment. And in this case it's Parkiet (for financial information) and Erada, which established (the financial portal) Pilot Finansowy (www.pilot-f.pl). We are talking with some typical portals that could become our partner in the Internet business.
Q: Have many page views per month does Portal.pl (www.portal.pl) have?
A: At this stage, it's not so much. It's about 2 million a month.
Q: How much money did TPSA spend to create portal.pl last year?
A: It was very small about zl. 20 million ($5 million).
Q: TPSA is the largest and richest telecom in Poland, yet portal.pl is still lagging far behind the other portals. Why is that?
A: First of all, because it's only a seven-month-old portal. At this first stage, we would like to establish (ourselves) on the market. Second, our general strategy is not the same as a typical portal business, such as Onet (www.onet.pl) or Wirtualna Polska (www.wp.pl). We don't want to go the same path as these companies and spend a lot of money to establish a six-year tradition in the market. Instead, we will fight to establish a new kind of model. Not a typical portal, but more a platform and hub generally a gateway that cooperates with other partners in the market and helps people to access particular services on the Internet. From the portal side, we can help our partners from the infrastructure side to offer some tools that we have established on the portal platform. In this case, we would not like to be a typical portal. Portal.pl is not a direct competitor of Wirtualna Polska. It's a different (approach), and we expect this different (approach) to be much more successful in the next few years.
Q: When will portal.pl start earning a profit?
A: That's a very difficult question because we can talk about the portal only as a portal, and in this case we have revenue from advertising and transactions, but generally our portal doesn't exist as a strong part of the general platform (general e-business in Poland). This is very closely connected with a few other activities of the company, which should be part of the general platform in the market. The digital e-signature proposal, for example, some payment systems and secure access to services (are needed). It's difficult for me to say because this is very closely connected with the portal's activity.
Q: At the beginning of the year, TPSA presented its plans to invest at least zl. 27 billion ($6.75 billion) in IT and data transmission activities for the next three years as part of its strategy to turn more business to the Internet. How will TPI spend the money?
A: First of all, I'm not sure all this money will be consumed by TPI because TPSA is talking about Internet and data transmission as a much wider investment. Second, at this point in time I can't speak on behalf of TPSA or its strategic plan.
Q: Does TPSA have any plans to take TPI public?
A: There are no plans yet. From time to time we discuss whether it's possible and interesting for us to go public with TPI and at which point. It's possible, but (I can't) say whether we will take TPI public this year.
Q: More and more ISPs and Internet companies are offering the same kind of services that TPI does, such as leased servers, e-mail boxes, Web servers and Web-design services, for both businesses and individuals. Which companies are your main competitors and how will TPI distinguish itself from them?
A: If you're asking me about competitors, the first company that comes to mind is Elektrim Online because its Web business (www.poland.com) has a very (similar) business model to TPI's portal.pl. In the future, they will be our main competitor on the market.
Q: TPI started a local Internet cafe called Studio TPI this year. Wojciech Sak, TPI's finance manager, said that 'Internet cafes can only be profitable if all their equipment is used 95% of the time.' That's not the case for Internet cafes in Warsaw and in other cities. Will you continue to operate the cafe?
A: Yes, we are thinking more about a network of Internet cafes, not from a marketing point of view but from a business point of view. We're looking for the possibility to access the Internet and to access some services by people who don't have this possibility at home or work, or by people who are traveling. At some point we think it will help us improve relations with customers, our users, and create a better channel for promoting new services or help our customers to use them. (This) is much more a marketing tool. From a financial point of view, after two months in operation, Studio TPI is covering all operational costs.
Q: Do you have plans to set up other Internet cafes in other cities?
A: Yes, we're thinking that we will start with six to 10 in the first half of the year but it's possible to establish 50 networks by the end of this year or the beginning of next year. It depends on how quickly the marketing side of the project will go. The first eight to 10 will be located in the country's main cities. We have to establish some partnerships. We have one established with Silver Screen (cinemas) in Gdansk, one in Warsaw and one in Lodz.
Q: We keep hearing that e-commerce is about to take off in Poland. The fact remains that there are low Internet penetration and usage rates here. How optimistic are you about e-commerce?
A: I am a little optimistic. It is in the very early stage and this is what we will need to start e-commerce. First of all, we need to educate people how to use the Internet, because in Poland we haven't had long-distance buying of anything as in Anglo-Saxon countries and Germany, where you have 20 or more years of buying from catalogs. In Poland we only had the possibility of buying books from catalogs for 40 years, but it was never popular. Second, the Polish banking system should be ready to serve this kind of distribution channel very easily and with a secure way of paying for transactions. Third, some kind of authorization of secure transactions (is needed). An e-signature law is needed to stimulate the growth of this distribution channel. Fourth, and one that is still very important, is logistics; the cooperation among parties that handle goods.
Q: Your Web site says that 'all (TPI's) actions aim to develop e-commerce services and focus on Polish Internet and Internet traffic on TPI.' What are your specific plans for developing e-commerce? Are there any particular markets you plan to tap?
A: No, because if I'm talking about our strategic platform, we are working more as a manager of the shopping centers, not as managers of the particular shops that rent space in the shopping centers. You're selling infrastructure from the shopping centers like payment systems, the same tools for logistics. It is somehow very likely that we can be seen as this kind of model. We offer some standard tools, but we are not dedicated specialists of (different) sectors because it doesn't matter from my point of view who buys it or whether my partner sells shoes or theater tickets.
Q: Which areas of e-commerce do you think will be the most lucrative in Poland?
A: The sectors that will be very aggressively developed are financial services, which we're seeing right now, (and) tourism, entertainment and real estate.
