Telecoms making headway

Netia and Energis unite in an aggressive strategy

By Timothy Sifert

Polish Power Grid's (PSE) planned sale of Tel-Energo SA could be an initial step in the creation of Telekomunikacja Polska SA's (TPSA) first formidable competitor. TPSA has enjoyed a near-monopolistic market position since its sale to France Telecom in 2001.

Last week, PSE short-listed telecom companies Netia and Energis to participate in the sale of a stake in the telecom group Tel-Energo; the group has considerable prize assets, including some 12,000 kilometers of fiber optic network, and Telbank, the successful finance-focused telecom. As Netia and Energis continue the due diligence on the company, their executives are mulling over future plans for the Tel-Energo asset, should they win the bid.

Wojciech Mądalski, CEO of Netia, says that Tel-Energo fits ideally into the company's business strategy. He explains that Netia plans to double its size by 2008 through acquisition and organic growth. That goal, if achieved, would allow it to chip away at TPSA's fixed-line market share - the size of which has been the focus of much criticism.

"This acquisition is a major part of our strategy to double in size by 2008," Mądalski points out.

This would also exemplify Netia's take-charge acquisitive role in the local market, he says: "If we were to become the consolidator of the sector, then we could be the major competitor."

He fully acknowledges that Netia's aspirations are aggressive. When asked when Netia would be able to capably butt heads with TPSA, he said, "This could happen in 2008, or sooner."

By contrast, Energis, which focuses on providing telecom services to the corporate sector, is gunning for the acquisition to reach what it considers to be "critical mass", and not because of any specific desire to be a major player on the market. "Energis Polska is a company whose strategy is to focus on the corporate segment, that is the 1,500 largest companies," says Jarosław Mikos, the company's chief executive officer. Energis, he explains, plans to hold fast to that strategy.

Mikos adds that the acquisition would be an attempt to become a company earning as much as zł.500 million in yearly revenue. He admits that Energis clearly has a long way to go before realizing that aspiration, as it expects to record only around zł.140 million in revenue this year.

Both bidders have cited Telbank as the most valuable part of the Tel-Energo group, especially because its client roster boasts some of the country's largest and most powerful financial institutions. These institutions represent important revenue streams. Netia had in fact already attempted to acquire Telbank in the past.

A Tel-Energo spokesman declined to comment for this article, referring all questions to PSE; PSE officials were unavailable at press time.