Tel-Energo seeks further expansion

By Timothy Sifert

Tel-Energo plans to primp its sales efforts and seriously weigh its expansion opportunities on the heels of completing its recent key acquisition of Telbank.

Now that the purchase is signed and sealed, the combined entity plans to begin aggressively integrating and bolstering its sales staffs and activities. And, furthering the much-publicized cause of creating the National Telecom Group (KGT), it is also to begin considering whether it wants to welcome the telecom company Pro Futuro into its existing telecom group that also includes NOM.

"What is the most important for us at this moment is to integrate the sales activities (of Tel-Energo and Telbank) in the quickest way possible," said Andrzej Arendarski, president of Tel-Energo and NOM. "We want to optimize the offer."

Telbank, set up by the National Bank of Poland, specializes in providing data transmission services to financial institutions.

Analysts view Tel-Energo's initial sales-focused strategy as essential, especially in the near term if the combined company wants to compete with what it considers more sales-savvy business communications providers, such as telecom operators Netia and Energis.

Michał Marczak, telecom analyst at BRE Bank, said that after the Office for Competition and Consumer Protection (UOKiK) granted permission for Tel-Energo to complete the roughly €68.5-million (zł. 300-million) deal, Tel-Energo's and certainly KGT's exact futures look vague.

"The other question is what to do next," Marczak said. "(Tel-Energo) has to fight for business clients, but I am not sure it has the sales force to do it."

He added that other business-focused players could prove more nimble if the group did not shift its sales strategy.

"Energis and Netia, the competitors, are very aggressive," he said. "The advantage of Tel-Energo is a larger network. (But) I am not sure if its sales forces are so good."

Marczak concluded that should Tel-Energo not make better use of its sales force, its other key asset - a large fiber-optic network - would become irrelevant.

Arendarski pointed out that Telbank is crucial to his vision of KGT as a business-focused rival to national operator and near monopolist TPSA, which has a "non-breakable" market position.

"It can be said that the transaction has had key importance for the fulfillment of the whole project," Arendarski said. "Without Telbank the idea of building a strong infrastructure operator would be quite impossible. Thanks to this transaction, our value has more than doubled."

Marczak agreed that Telbank is a welcome addition to Tel-Energo and NOM, two companies that merged last year but remain separate entities. He said that the deal is a perfect fit because Telbank previously leased communications lines from Tel-Energo. "So basically Tel-Energo bought the clients of Telbank," Arendarski said.

The next step in the creation of KGT could be adding Pro Futuro to the group, according to Marcin Gruszka, the spokesman of Tel-Energo and NOM. He said that Tel-Energo signed an agreement last year by which it would buy some 20% of Pro Futuro's outstanding convertible bonds. In the near future, the company would make a decision whether to finally sell those bonds or convert them into Pro Futuro shares. The latter action could be beneficial, Gruszka said.

Gruszka also said that Pro Futuro would fit well into the group consisting of NOM, Tel-Energo and Telbank, as it provides last-mile customer connection services, which the group lacks at present. He said that it could be beneficial "to have an influence on Pro Futuro's prices" and that owning the company's stock would give Tel-Energo this advantage.

Furthermore, Gruszka said that by adding a last-mile product to its mix Tel-Energo could offer customers end-to-end service for one price, though no decision has been made yet.

Whatever the upshot, Arendarski is keen to discuss the potential of a new, stronger telecom group.

"The general business strategy embraces the concept of the integration of the telecommunications assets belonging to the state treasury within one telecommunications group," he said of KGT. "Today's environment, considering the legal background and ... the non-breakable and stable position of TPSA, requires strong and integrated potential. This is the only way to achieve efficiency on this market."