"We invested $70 million and we are prepared to defend that investment. Statements about our withdrawal are untrue."
UPC Slovensko Director General Václav Bartoň
The comments, made on January 10, came after the Telecommunication Office (TÚ), which also regulates cable communications in Slovakia, said that UPC could not raise its prices to the level it had planned - 40% in some cases - and can only raise them in line with inflation rates for 2000, roughly 12%.
The planned rises had caused a wave of protest from citizens and an official complaint from the Association of Slovak Consumers (ZSS).
The complaint led to the Anti-Monopoly Office (PMÚ) launching a preliminary investigation into UPC's possible abuse of its dominant market position.
In an earlier statement UPC had said that while it respected the decision of the TÚ it was now forced to rethink its strategy in Slovakia, including its 260 million ($5.65 million) crown Internet project which it said would have brought hundreds of new jobs.
"Such steps of the regulatory authority affect the operations of UPC in Slovakia. The company will therefore stop the Internet access project and telephone services through cable TV networks. The project would have created hundreds of jobs," the company said.
UPC Slovensko, an affiliation of United Pan-Europe Communications, based in Amsterdam, operates cable TV networks in 29 towns in Slovakia.
UPC bought the biggest cable TV provider in eastern Slovakia, Kabel Plus Vychodné Slovensko in spring 2000, taking a 66% share of the Slovak market.
The PMÚ at that time did not prohibit the concentration on a technicality, failing to reach a decision within the time laid down by law.
Since the beginning of 2000, UPC has raised its prices twice - January 1, 2000 and August 1, 2000 and will do so again February 1.
The Telecoms Office ruled November 14 that operators of media cable networks that are considering price rises have to submit all documents concerning costs to the office, after which the TÚ would consider the rises.
UPC Slovensko only submitted the required documents to the office on January 3.
TÚ head Milan Luknár said January 8 that until the documents are examined the company can only raise prices in line with inflation.
The moves by the two offices have been praised by both analysts and the Telecoms Ministry. Dušan Faktor, Deputy Telecoms Minister, told The Slovak Spectator January 9: "The TÚ has the right to regulate these [UPC's] price rises under law and is doing its job properly. It has said that the firm can only raise prices by the inflation rate. The TÚ will carry out a price/cost analysis and then make its decision. Until then, the rises will only be as per the inflation rate."
Boris Kostík, telecoms analyst at Slávia Capital brokerage house added: "We can see that the PMÚ is doing its job very well. It is doing the right thing in investigating the rises. UPC controls a large part of the market and it wants to raise its prices [by a large amount]."
UPC has argued that the rises are justified, citing the relative cheapness of its services in Slovakia. The company said that the current price for its extended package of services in Slovakia is approximately 5.2 euros, while in the Czech Republic more than 10 euros, in Hungary 9 euros and in Poland 8 euros.
Representatives from the Slovak PMÚ have travelled to Prague to meet their counterparts.
UPC has found itself in a similar situation in the Czech Republic, where, following its take-over of another cable company last year, it proceeded to raise prices by a large percentage. The Czech Anti-Monopoly Office subsequently launched an investigation.
Responding to the TU's decision Bartoň said that it "had changed the rules of the game" in making its decision, and called the move "unprecedented anywhere in the world".
Bartoň added, though, that UPC would not be giving up on the $70 million investment it has made in Slovakia since 1996.
"We invested $70 million and we are prepared to defend that investment. Statements about our withdrawal are untrue," he said.
He added: "Our shareholders have demanded a return on their investments and therefore we cannot permanently subsidise these services."
The Anti-Monopoly Office has been monitoring the activities of UPC since mid-2000 because of its dominance on the central European regional market. The firm has dominant market shares in Poland, the Czech Republic and Hungary.
UPC, may, though, still manage to raise the prices by the percentage it has proposed. The TÚ has pointed out that it is reviewing documents provided by UPC concerning the justification of the rises and that when the analysis is complete it may reconsider its decision.
15. Jan 2001 at 0:00 | Ed Holt