Telecom-license hopefuls count on existing networks
The Communications Ministry is expected this Sunday, Nov. 15, to pick one of the five companies for a license to compete against TPSA in Warsaw, which is the country's most lucrative phone market. About 40% of all local-calling revenue in Poland or about zl. 2 billion ($570 million) is generated in Warsaw.
The companies bidding for the license are: Aster City Cable, Telefonia Poludnie POTEL, Netia Telekom Warszawa, Telefonia Lokalna and Regionalne Sieci Telekomunikacyjne El-Net.
Bringing down the cost of building a new network is crucial to make a new venture feasible as the licensing fee is expected to be steep. Although the five companies bidding would not disclose possible fees, telecom analysts expect the fees could range from $100 million-$300 million.
The need to use existing infrastructure has Poland's two largest cable companies hopeful that the new license will bring them fat rewards. Aster is confident that it can use its cable network, the largest in Warsaw, to quickly roll out phone service.
Its larger rival, Polska Telewizja Kablowa (PTK) is hoping to do the same, but decided to wait out the tender and plans to try and work with whoever wins.
"Our company already has a telecommunications network in Warsaw," said Bogdan Paszkowski, president of Aster, which is the largest cable operator in the capital. "We can quickly upgrade it without many complicated investments."
Aster's cable network goes into 275,000 apartments in the city, but the company already has access to buildings that comprise 520,000, or 82.5% of apartments in the area included in the license.
"It is a worldwide trend that cable-TV operators are entering the telephone business," said Jerzy Kalinowski, a telecommunications analyst at PricewaterhouseCoopers. "Aster has the potential to quickly acquire subscribers, as the most expensive part of the infrastructure is there."
"Negotiations for digging under Aleje Jerozolimskie might take as long as three years," said Michal Duszak, a board member at Aster.
PTK, which is a wholly owned subsidiary of Nasdaq-traded @Entertainment did not apply for the license because it would have been too expensive for the company. PTK's parent recently launched the Wizja TV digital television platform. But it believes it can easily team up with the tender winner.
"We'll get involved after the (telecom) licenses are already granted," said Donald Miller-Jones, @Entertainment's chief financial officer. He added that PTK would have to upgrade some of its operations to make the cable transmission two-way. But that, Miller-Jones said, would cost about $200 per subscriber.
"Right now we are looking at all possible options, and all potential partners," said Przemyslaw Szmyt, deputy president of @Entertainment.
Aster estimated that running cable to customers who are not part of its existing network would run about $650 per subscriber. "The cost will be much lower if the existing cables are used," Duszak said. "But individual costs may differ considerably."
Even at the higher level, the costs are much less than laying new telephone lines. Netia, the largest private fixed-phone operator in Poland, estimated that laying new lines would cost $950 per subscriber.
But even though it doesn't have a network in place, Netia too has hit on a way to lower costs. The company has signed agreements with energy companies in Warsaw to use their power grids as a telephone network. One of these companies, Zaklad Energetyczny Warszawa-Teren, has about 700,000 users in the region.
"This would certainly lower the cost of building a network," said Jolanta Ciesielska, a spokesperson for Netia.
But Netia doesn't have a lock on this idea. "We have the same possibility to use the power grid as Netia," said Jacek Blaszczynski, president of Telefonia Lokalna, a telephone operator in southwestern Poland. "We can also use the existing infrastructure."
El-Net is considering another cooperation option, according to Jerzy Fijalkowski, its president. The local telephone operator for the Bydgoszcz region said the company's trump card is a capital connection with Elektrim.
"Elektrim is the majority stakeholder in our company and Era GSM, so we can use its radio transmitting infrastructure for stationary telephones in Warsaw," he said. "We do the same in Bydgoszcz for about 14,000 subscribers."
And El-Net could also envision working with TPSA, even though whoever wins the license will be fighting with the former monopolist for customers.
"Our experience of cooperation with TPSA is not bad," Fijalkowski said. "Apart from the interconnections for long-distance calls, we use some of TPSA's infrastructure for local connections as well."
But Kalinowski said operators may be somewhat reluctant to work too closely with the state telecom company.
"In telecommunications the larger the scale of investment, the better off it is economically," Kalinowski said. "This means a possibility of cooperation with others, including TPSA. However, someone who pays $100 million for a license certainly would try to take users away from the competition." He added that this competition may not be too intense as Warsaw is large enough to handle more than one provider. "I would not mind a second telephone line in my house," he said. "And it can be from another operator."
The companies bidding for the license are: Aster City Cable, Telefonia Poludnie POTEL, Netia Telekom Warszawa, Telefonia Lokalna and Regionalne Sieci Telekomunikacyjne El-Net.
Bringing down the cost of building a new network is crucial to make a new venture feasible as the licensing fee is expected to be steep. Although the five companies bidding would not disclose possible fees, telecom analysts expect the fees could range from $100 million-$300 million.
The need to use existing infrastructure has Poland's two largest cable companies hopeful that the new license will bring them fat rewards. Aster is confident that it can use its cable network, the largest in Warsaw, to quickly roll out phone service.
Its larger rival, Polska Telewizja Kablowa (PTK) is hoping to do the same, but decided to wait out the tender and plans to try and work with whoever wins.
"Our company already has a telecommunications network in Warsaw," said Bogdan Paszkowski, president of Aster, which is the largest cable operator in the capital. "We can quickly upgrade it without many complicated investments."
Aster's cable network goes into 275,000 apartments in the city, but the company already has access to buildings that comprise 520,000, or 82.5% of apartments in the area included in the license.
"It is a worldwide trend that cable-TV operators are entering the telephone business," said Jerzy Kalinowski, a telecommunications analyst at PricewaterhouseCoopers. "Aster has the potential to quickly acquire subscribers, as the most expensive part of the infrastructure is there."
"Negotiations for digging under Aleje Jerozolimskie might take as long as three years," said Michal Duszak, a board member at Aster.
PTK, which is a wholly owned subsidiary of Nasdaq-traded @Entertainment did not apply for the license because it would have been too expensive for the company. PTK's parent recently launched the Wizja TV digital television platform. But it believes it can easily team up with the tender winner.
"We'll get involved after the (telecom) licenses are already granted," said Donald Miller-Jones, @Entertainment's chief financial officer. He added that PTK would have to upgrade some of its operations to make the cable transmission two-way. But that, Miller-Jones said, would cost about $200 per subscriber.
"Right now we are looking at all possible options, and all potential partners," said Przemyslaw Szmyt, deputy president of @Entertainment.
Aster estimated that running cable to customers who are not part of its existing network would run about $650 per subscriber. "The cost will be much lower if the existing cables are used," Duszak said. "But individual costs may differ considerably."
Even at the higher level, the costs are much less than laying new telephone lines. Netia, the largest private fixed-phone operator in Poland, estimated that laying new lines would cost $950 per subscriber.
But even though it doesn't have a network in place, Netia too has hit on a way to lower costs. The company has signed agreements with energy companies in Warsaw to use their power grids as a telephone network. One of these companies, Zaklad Energetyczny Warszawa-Teren, has about 700,000 users in the region.
"This would certainly lower the cost of building a network," said Jolanta Ciesielska, a spokesperson for Netia.
But Netia doesn't have a lock on this idea. "We have the same possibility to use the power grid as Netia," said Jacek Blaszczynski, president of Telefonia Lokalna, a telephone operator in southwestern Poland. "We can also use the existing infrastructure."
El-Net is considering another cooperation option, according to Jerzy Fijalkowski, its president. The local telephone operator for the Bydgoszcz region said the company's trump card is a capital connection with Elektrim.
"Elektrim is the majority stakeholder in our company and Era GSM, so we can use its radio transmitting infrastructure for stationary telephones in Warsaw," he said. "We do the same in Bydgoszcz for about 14,000 subscribers."
And El-Net could also envision working with TPSA, even though whoever wins the license will be fighting with the former monopolist for customers.
"Our experience of cooperation with TPSA is not bad," Fijalkowski said. "Apart from the interconnections for long-distance calls, we use some of TPSA's infrastructure for local connections as well."
But Kalinowski said operators may be somewhat reluctant to work too closely with the state telecom company.
"In telecommunications the larger the scale of investment, the better off it is economically," Kalinowski said. "This means a possibility of cooperation with others, including TPSA. However, someone who pays $100 million for a license certainly would try to take users away from the competition." He added that this competition may not be too intense as Warsaw is large enough to handle more than one provider. "I would not mind a second telephone line in my house," he said. "And it can be from another operator."
