Szeptel to build out network despite small customer base
Local fixed-line phone operator Szeptel will complete the construction of the first 300 kilometers of its 5,000-kilometer fiber-optic network for voice and data transmission services by December, a company executive said last week.
The first part of the network will run between Bialystok and Warsaw, said Andrzej Binkowski, Szeptel's managing director. The company is spending $210 million within the next five years on the build out of a nationwide fiber-optic network, he said.
Like other telecom companies with similar plans to offer data transmission and internet services, the Szepietowo-based Szeptel will target corporate clients in the country's largest cities with the integrated service since the current subscriber base is small, Binkowski said.
"We are building an infrastructure that for the time being would be used for data transmission services," Binkowski said. Szeptel will take advantage of the liberalization of the domestic long-distance calling market in 2002 and offer integrated internet access, data transmission and domestic long-distance nationwide over its new infrastructure. Szeptel also plans to offer international voice traffic in 2003 when the market for international calls opens.
One local telecom analyst said that Szeptel's plans were too ambitious for a small operator. Pawel Zach, senior research analyst at Citibank (Poland), said that even though the company started in 1993, it has connected only 20,000 customers to date.
"The management is far from excellent," Zach said. "I don't believe it can change dramatically and start a fast expansion of its project from the local to the country level because the management is still the same."
To raise funds for the build out, Szeptel, which is listed on the Warsaw Stock Exchange's parallel market, cancelled a new issue for five to 10.5 million shares in June due to insufficient financing. The issue was rescheduled for autumn, but cancelled again. Binkowski said the launch would likely be completed in January.
"It would definitely secure our investments for the next year, and we would be ready to go with an international debt project within the next 12 months," said Binkowski, adding that the plans would depend on the rollout of project and its profitability projection. So far, the company has a financing deal with Bank Gospodarki Zywnosciowej (BGZ) and is in advanced talks with other investors, he said.
But Zach pointed out that Szeptel's failure to find a financial backer for six months indicated that the company's expansion plan was not attractive for investors. Furthermore, he said BGZ did not have a reputation as a great private equity investor.
Szeptel started its operations in 1993 as a local phone service operator in the former Lomza region in northeastern Poland. Earlier this year, Szeptel teamed up with Raiffeisen Investment and BMT brokerage to form Ogolnopolska Siec Szkieletowa (OSS) to construct its countrywide fiber-optic backbone.
