Struggling Net firm shuts down portal

Will Arena find extra money to revive its bankrupt operations?
By : Roseanne Gerin

   Arena (http://www.arena.pl), one of about 10 portals in Polish cyberspace, became the latest dotcom casualty last week after company officials reported the operation was bankrupt and that the portal’s remaining staff of 17, reduced from about 70 earlier this year, had been fired.

   Jan Steckiewicz, who took over as Arena’s new president, said he was holding meetings with some investors to find additional money or possibly sell the operations.

   But Arena will unlikely find extra money to revive its bankrupt operations, especially given the unfavorable climate for investing in Internet start-ups, analysts said. They also said that other smaller portals would soon suffer the same demise since most, like Arena, depend on revenue from Internet advertising, which is limited in Poland and is largely gobbled up by the two major portals, Onet (http://www.onet.pl) and Wirtualna Polska (http://www.wp.pl).

   “To me it really seemed like (Steckiewicz) is there to close up shop,” said Dorota Ubysz, an IT analyst at SG Securities in Warsaw. She added that she didn’t see any future for other small portals, such as Hoga (http://www.hoga.pl), “because they do not have sustainable sources of revenue other than Internet advertising.” (Hoga, the Katowice-based portal, debuted on the Warsaw Stock Exchange in May at zł. 4.50 a share, but has since seen its stock price drop by more than 50% to less than zł. 2 per share.)

   Włodzimierz Giller, an equities analyst at Erste Bank in Warsaw, said Arena had “poor operations and no sales or revenues, just costs.”

   “Sooner or later another portal will come to bankruptcy,” he said. “Smaller companies like (portals) Hoga and YoYo (http://www.yoyo.pl) are close to the end of their activity. There’s no chance for any portal to break even in the foreseeable future.” YoYo is an unlisted portal that has been operating since January 2000.

   Rafał Plutecki, the former president and one of the founders of Arena, could not be reached for comment. Leszek Bogdanowicz, Arena’s former vice president and cofounder, declined to comment. “I don’t want to talk about it,” he said. “It’s over.”

   Arena went online in April 2000 and was planning an initial public offering (IPO) last June, when Tel-Energo, the telecom network operator owned by Polish Power Grid (PSE), wanted to renegotiate its stake in E-Connections, their joint venture Internet service provider that was to supply the bulk of Arena’s income once the ISP’s operations began. Arena owns 51% of E-Connections and Tel-Energo holds the remaining shares.

   The rocky partnership in the ISP company as well as the dismal environment for tech issues sent red flags to prospective investors who failed to commit to buying shares during Arena’s subscription period. As a result, the IPO failed.

   On June 29, CentralEuropa.com, a holding company that controls 99% of Arena and is owned by the U.S. investment firm TDA Capital Partners, filed a lawsuit in Warsaw against Tel-Energo for zł. 71 million ($16.9 million) in compensation for scuttling Arena’s IPO. Steckiewicz indicated investors are continuing the lawsuit, although he said he didn’t expect a ruling within the next few weeks.

   In April, Arena said it had 200,000 registered users and 500,000-800,000 users who logged on to the site each month. According to a recent survey by market research firm Taylor Nelson Sofres/OBOP, Arena was the sixth portal used most often by Polish internauts.

   Arena’s collapse follows other Internet-related bankruptcies, such as the portal Ahoj (http://www.ahoj.pl) and the Polish operations of Globopolis, a regional travel and entertainment portal, earlier this year.