The country's May membership of the European Union - in general a more advanced telecom market - will also harbinger the further migration of local consumers away from traditional voice services and toward more sophisticated mobile and data transmission services.
Serious market contenders, in particular fixed-line providers, must acknowledge the trend or face dwindling revenue streams.
"This is the year of cost cutting and consolidation in the sector," said Michał Marczak, analyst at DI BRE Bank.
The much-scrutinized TPSA, which controls about 90 percent of the local telephone market, is aware of the pace and direction of the market, and notes that change is in the offing.
As such, Artur Tarnowski, investor relations director, explained that TPSA has a game plan in full swing. It includes employment restructuring, debt reduction, new services and packages, and improvement in customer relationship management (CRM), among other elements.
The plan is to create a more market-oriented and cost efficient company.
He said that the company launched a strategy in 2001 to streamline operations and shift away from the image of a cumbersome monopolist.
Cost cutting is key, he said.
"All incumbents (throughout Europe) were engineering-driven companies," he said. These telecom monopolies were not revenue-driven and were inadequately focused on market demands.
That has had to change throughout Europe, especially with the upcoming EU enlargement.
A large part of TPSA's path to efficiency thus far has included employment reduction. Furthermore, the company will trim its staff by around 5,000 this year. At present, it operates with a ratio of 304 subscriber lines per employee. Tarnowski said that this proportion should change to roughly 380 lines per employee in the future in line with European peers, such as Hungary's Matav.
Like other operators, TPSA has taken into account the fact that the industry is moving away from traditional voice services. The company is thus aiming to improve bread-and-butter voice products. And, at the same time, it will add new products as the market dictates.
"The strategy we've put in place has been to protect the revenue streams," Tarnowski added. "The number one way of doing this is customer satisfaction," he explained.
TPSA is now offering cheaper tariffs for off-peak minutes, and plans to provide customers with more voice and data product packages.
DI BRE Bank's Marczak said that he has been pleased with the former incumbent's restructuring thus far.
But he added that it still needs improvement in IT and in freeing up capital by divesting non-core assets. And both of these concerns are key to TPSA's strategy, according to Tarnowski.
Alternative provider Netia also realizes that the market is changing and that to be a success it must offer "more sophisticated services," said Wojciech Mšdalski, chief executive officer.
At present, these services, such as data transmission, comprise one third of the company's revenues. And he expects that portion to grow.
Netia, however, has other issues to contend with that are outside the scope of TPSA, because of the latter's market share.
Netia has set its sights on spearheading the industry consolidation and procuring a double-digit market share.
"Our M&A strategy is still in place," Mšdalski said. This is despite the fact that the treasury put the kibosh on Netia's much-publicized bid for Tel-Energo last year, and that other state-owned telecom sell-offs have been predictably slow.
Nevertheless, Netia is still on the hunt.
"We're actively pursuing several acquisitions," Mšdalski said. "If we were successful pursuing a bigger player, that would be the next big step in the industry."
He kept mum on most of his M&A plans. But he conceded that Netia was still very interested in buying Telefonia Dialog. Copper producer KGHM, one of Dialog's owners, has expressed an interest in dishing off the fixed line asset, he said.
"We are very interested in the process,"
he added.
Netia plans to buy one or two of the remaining fixed line operators, namely Dialog, Tel-Energo or El-Net, and form a worthy TPSA competitor.
Yet TPSA's Tarnowski doesn't see a formidable challenger emerging this year.
"There has been speculation of a competitor for the fixed line business," he noted. "But we haven't seen any consolidation happening."
The cost of capital would be too high, access to capital too difficult and existing infrastructure too small for any company to create a substantial TPSA challenger, he said.
"(They) say institutional investors will be interested, but what will be the cost of it?" he asked. "I expect it will be very expensive."
Netia's Mšdalski offered a reply to Tarnowski: "I would discount that. As far as Netia is concerned, we do have ready access to capital."
Netia has a clean balance, he said, which would give it access to cheaper capital than other companies. And the company maintains roughly zł.400 million cash in the bank.
DI BRE Bank's Marczak predicts that Netia - a company optimistic on its own - will probably be able to pull the trigger on a purchase of Dialog. "I think Dialog will be sold this year," he said. "I see no reason why KGHM will stay with Dialog when they plan to sell Polkomtel. The idea (for everyone) is to consolidate and cut costs."
Marczak explained that for fixed line players the average revenue per user (ARPU) would decrease this year as it has been falling in the past few years. This means that fewer players are required to reap revenues from a slowly growing user base.
TPSA does not view industry consolidation with disregard: Competition is necessary.
"The worst thing that could happen would be if there were no competition," Tarnowski said. "We are the incumbent. If there is no competition, it would not be good for us."
Among consumers and competitors, incumbents throughout Europe are often viewed as market bullies that strong-arm competition out of play to the detriment of consumers.
TPSA's reputation among Poles is less than ideal, Tarnowski admitted.
"But we are doing everything in our power to change that image," he said. "It's not easy."
Indeed, incumbents often have run-ins with local regulators and competition offices that often tarnish their public image.
Most recently, for instance, the Office for Competition and Consumer Protection (UOKiK) imposed a zł.20 million fine on TPSA for avoiding signing contracts with independent Internet suppliers.
And Tarnowski added that another benefit to competitors is that they will be able to expand the entire market. "Hopefully, the pie would get bigger," he said.
But whatever the size of the pie, it's clear that fixed line operators must maintain leaner operations - whether they're TPSA or not. And owing to the changing market, alternative providers must merge or risk further strains on their balance sheets.
The jury is still out on just how quickly and successfully this market trend will develop.
Timothy Sifert
Źródło:
