Szeptel eyes Warsaw niche
Szeptel expects that its recent debt restructuring and pairing with strategic investor Media-Net Interactive (MNI) will allow it to immediately boost its revenues and number of clients, as it attempts to take a serious crack at Warsaw fixed-line business customers - a segment it has shied from in the past.
The regional operator has thus far subsisted on revenues from individual clients from Szepietowo, Łomża, Białystok and, to a much lesser extent, Warsaw. It largely provides voice services, but also has 500 Internet customers. And now that it's nearly solved its multi-million złoty debt restructuring, by securing agreements with lender banks, MNI's board and executives anticipate that revenues will increase from an expected zł.18.6 million (€4 million) this year to zł.29.3 million (€6.4 million) next year. And, should all strategy changes go according to plan, Szeptel's customer base will grow from 19,700 to 24,900 next year, says Robert Niczewski, an advisor to the company's board.
While Szeptel's expectations are modest, its strategy to tap into the Warsaw fixed-line market, which has been dominated by Telekomunikacja Polska SA (TPSA) and other larger independent players, such as Netia, could be daunting, an analyst says, since size matters in Polish telecom.
Niczewski replied that, by necessity, Szeptel will have to compete on price, but also that joining forces with MNI will give it much greater clout in bargaining for agreements with TPSA and more services to help it win over undecided potential customers. MNI is in the process of taking over some zł.25 million (€5.5. million) in Szeptel's debt from TPSA and Pekao SA. Early next year, MNI and Szeptel are expected to agree to convert that debt into equity, a transaction that would increase MNI's 5.4 percent stake in the company to 27 percent, making it the largest shareholder.
Niczewski points out that MNI, which has been looking to tap into the fixed-line operations market for some time, brings a host of services to Szeptel. MNI provides SMS services to local mobile operators, Infoline services to TPSA and dial-up numbers for Internet users. Also, via its holding company, Media Holding, it offers the construction and rental of large business centers.
"They've been looking to get into the fixed line business for some time," Niczewski says. "Of course, there's not much choice in what companies to buy."
Now that they've secured this partnership, he adds, the two companies are going firstly to work to improve the agreements with fixed line operators in Warsaw.
At present, Szeptel has connection agreements with Telefonia Dialog and TPSA.
And it is working to exploit the "jewel in its crown," a fiber optic backbone that extends from Białystok to Warsaw, Niczewski says. It would offer high-end voice and data transmission services to Warsaw businesses over this glass fiber line. TPSA is the only other operator that has a Białystok-Warsaw glass cable, he says.
With its new product suite, Niczewski says Szeptel is gearing up to carve out a niche in the TPSA-dominated fixed-line market. Even as companies such as Netia, El-Net, and Telefonia Dialog, seem to be coming together to create a larger fixed line company, Niczewski claims that Szeptel's size may be to its benefit.
"It could be much easier for a small company to gain in market share," he says.
But analysts are not so sure.
Eugene Popov, senior analyst at Pyramid Research in London, says that Szeptel is following the lead of a number of independent telecom operators across Europe, in tidying up its finances and beginning to plug back into the market.
But, he adds, operators as small as Szeptel will find it difficult to wrestle market position from TPSA under the existing Polish telecom regulator, which has given short shrift to independent operators.
The regional operator has thus far subsisted on revenues from individual clients from Szepietowo, Łomża, Białystok and, to a much lesser extent, Warsaw. It largely provides voice services, but also has 500 Internet customers. And now that it's nearly solved its multi-million złoty debt restructuring, by securing agreements with lender banks, MNI's board and executives anticipate that revenues will increase from an expected zł.18.6 million (€4 million) this year to zł.29.3 million (€6.4 million) next year. And, should all strategy changes go according to plan, Szeptel's customer base will grow from 19,700 to 24,900 next year, says Robert Niczewski, an advisor to the company's board.
While Szeptel's expectations are modest, its strategy to tap into the Warsaw fixed-line market, which has been dominated by Telekomunikacja Polska SA (TPSA) and other larger independent players, such as Netia, could be daunting, an analyst says, since size matters in Polish telecom.
Niczewski replied that, by necessity, Szeptel will have to compete on price, but also that joining forces with MNI will give it much greater clout in bargaining for agreements with TPSA and more services to help it win over undecided potential customers. MNI is in the process of taking over some zł.25 million (€5.5. million) in Szeptel's debt from TPSA and Pekao SA. Early next year, MNI and Szeptel are expected to agree to convert that debt into equity, a transaction that would increase MNI's 5.4 percent stake in the company to 27 percent, making it the largest shareholder.
Niczewski points out that MNI, which has been looking to tap into the fixed-line operations market for some time, brings a host of services to Szeptel. MNI provides SMS services to local mobile operators, Infoline services to TPSA and dial-up numbers for Internet users. Also, via its holding company, Media Holding, it offers the construction and rental of large business centers.
"They've been looking to get into the fixed line business for some time," Niczewski says. "Of course, there's not much choice in what companies to buy."
Now that they've secured this partnership, he adds, the two companies are going firstly to work to improve the agreements with fixed line operators in Warsaw.
At present, Szeptel has connection agreements with Telefonia Dialog and TPSA.
And it is working to exploit the "jewel in its crown," a fiber optic backbone that extends from Białystok to Warsaw, Niczewski says. It would offer high-end voice and data transmission services to Warsaw businesses over this glass fiber line. TPSA is the only other operator that has a Białystok-Warsaw glass cable, he says.
With its new product suite, Niczewski says Szeptel is gearing up to carve out a niche in the TPSA-dominated fixed-line market. Even as companies such as Netia, El-Net, and Telefonia Dialog, seem to be coming together to create a larger fixed line company, Niczewski claims that Szeptel's size may be to its benefit.
"It could be much easier for a small company to gain in market share," he says.
But analysts are not so sure.
Eugene Popov, senior analyst at Pyramid Research in London, says that Szeptel is following the lead of a number of independent telecom operators across Europe, in tidying up its finances and beginning to plug back into the market.
But, he adds, operators as small as Szeptel will find it difficult to wrestle market position from TPSA under the existing Polish telecom regulator, which has given short shrift to independent operators.
