Monopoly's FWA bid endangers competition

The decision to allow telecoms monopoly Slovak Telecom to bid in an upcoming tender for three FWA (fixed wireless access) licences has raised fears that the stated goal of increasing competition on the market may be in jeopardy.
FWA services would allow users to bypass 'last mile' phone cables (those physically joining end users to local phone hubs) by sending communication signals via radiowave from a nearby transmitter. With Slovak Telecom (ST) owning the country's last mile connections, the FWA licences were expected to give customers an alternative to renting the cables from ST, thus creating competition.
Market regulator the Telecoms Office had said at the beginning of the year that the aim of the FWA tender would be to increase competition, and that ST would therefore be barred from participating.

The decision to allow telecoms monopoly Slovak Telecom to bid in an upcoming tender for three FWA (fixed wireless access) licences has raised fears that the stated goal of increasing competition on the market may be in jeopardy.

FWA services would allow users to bypass 'last mile' phone cables (those physically joining end users to local phone hubs) by sending communication signals via radiowave from a nearby transmitter. With Slovak Telecom (ST) owning the country's last mile connections, the FWA licences were expected to give customers an alternative to renting the cables from ST, thus creating competition.

Market regulator the Telecoms Office had said at the beginning of the year that the aim of the FWA tender would be to increase competition, and that ST would therefore be barred from participating.

But office director Milan Luknár told The Slovak Spectator April 9 that the rules had changed. "I must say, nobody is excluded [from bidding]," he said. "They [ST] are allowed to bid. There was some consideration that they would not be, but at the end of the day, they will not be excluded."

The bid deadline for the 70 million Slovak crown ($1.5 million) licences is April 27.

With ST permitted to be "a player in the game", analysts and competing telecoms firms said that given its financial strength, ST would be favoured to win one of the licences.

"ST would be in the strongest position to make the best bid," said telecoms analyst Boris Kostík of Slávia Capital brokerage house in Bratislava, which was an advisor to the state last year when Deutsche Telekom privatised ST. "You can't argue with their position on the market. They are strong, knowledgeable - one criteria will be local knowledge, and no international firm can beat ST - and they have proven financial resources.

"But on the other hand, the aim of the FWA tender was to create competition," the analyst continued. "And EuroTel [which is majority-owned by ST] could also get a licence, which would further decrease competition."

The Telecoms Office said that 12 companies had already expressed interest in the tender: ST, Slovak mobile operators EuroTel and Globtel, and telecom firms Callino, Nextra Wireless, KISS, RDT Telecom, GiTy Slovensko, Landtel NV Holding, Globalnet, Metis and Transtel.

In a similar tender last year in the Czech Republic, the then-monopoly Český Telecom was prohibited from bidding for FWA licences. Potential bidders in Slovakia said they had hoped the same rules would apply here, and that they were now concerned that ST and EuroTel would both receive licences, putting a stranglehold on competition.

"As far as I knew, the intention was to not have them [ST] in the game," said Dag Ole Storrosten of Nextra. "ST will probably be able to fulfil all the requirements. From this point of view, they will probably get one of the licences if they bid.

"The worst case scenario would be if ST and EuroTel both got licences because then they would basically have a complete monopoly, and that serves no one," Storrosten continued. "No company can work well without competition. It's everything. It's important they make sure they get it. Otherwise, without competition, you get high price levels and a poor development of services."

Peter Štubňa, IT director for potential bidder Gity Slovensko, said that his firm may rethink submitting a bid if they expect ST and EuroTel to both win licences.

"If ST is awarded a licence the other competitors will be at a big disadvantage," he said. "ST is now the biggest telecoms firm with the most advanced infrastructure, so giving them a licence would be total nonsense in terms of creating a competitive environment in this country. And if a licence goes to both ST and EuroTel, the third player would have little room for operation. [In that case], we would have to really reconsider applying for the licence."

Luknár said that winners would be selected based on their fulfilment of the tender requirements. He added, though, that the Telecoms Office would favour new entrants to the market over ST in case of equal bids.

"Of course, it depends on fulfilment of the criteria of the bids who will get it or not," he said. "But we must also bear in mind the creation of a competitive environment. This means that if we have two firms which fulfil the requirements equally, the newcomer will be favoured."

If newcomers are not brought on to the market, said Slávia Capital's Kostík, customers would ultimately lose out.

"As in any other market, when you have fewer players, it equals less choice, higher prices and lower quality," he said.

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