While it has been almost six months since Deutsche Telekom was written into the business register as the new owners of 51% in Slovenské telekomunikácie (ST), Slovakia's fixed line monopoly provider, the new German executives at ST have made very few public appearances as yet. The Slovak Spectator sat down to breakfast with three Slovak ST officials, one of whom, products and marketing director Pavol Bojňanský, answered the following questions regarding ST's market strategy.
The Slovak Spectator (TSS): Will ST bid for an FWA licence?
Pavol Bojňanský (PB): Yes. We have picked up the necessary paperwork from the Telecoms Office required to place a bid.
TSS: Do you think that if ST gets a licence it will hurt market competition?
PB: We don't think that our bidding for the licence will hurt competition because three licences will be granted, which guarantees that there will be sufficient competition. To compare, there have been only two licences issued for mobile phone operators, and nobody speaks about a lack of competition.
ST thinks that it's necessary to bid for the FWA licence, because it's our right, and nobody can prevent us. If Slovakia wants to be considered a legal state, we have to be allowed to take part in the tender.
TSS: How can you say that there will be no impact on competition when potentially two of the three licences will be gained by ST and EuroTel, in which ST owns a majority stake?
PB: Even if two were given to ST and EuroTel, competition on the market won't be hurt. There are conditions set for obtaining a licence, such as experience in similar activities abroad, which is a big advantage for a bidder who has it.
On the other hand, local loop services require a financially strong company which is able to invest in the construction of the FWA network. It should not be bought with the aim to launch the IPO and then to sell the license.
TSS: Wouldn't it help more if the three licences were taken by three companies which are not yet on the market?
PB: I don't think that if three licences were granted it would have a positive impact on the market. If some of the licences were gained by existing operators they could use them more effectively, as they are already operating a data system. The Slovak market has a certain size. It is growing enormously, but it's questionable whether it can feed three other operators, especially considering that UMTS licences will be granted later as well.
TSS: Is ST's philosophy that it is better to hold on to its full monopoly right up until market liberalisation on January 1, 2003, or do you think it would help if ST had the experience of fighting some competition on the market before the monopoly ended?
PB: ST has to prepare itself for market liberalisation. This takes some time, because we have to make changes within the company, improve communication with customers, ready for potential competition, and deal with the government as well as regulatory bodies. This is why the market will be liberalised in 2003, and why Deutsche Telecom stepped in. If the market was partially liberalised in areas in which it will be fully liberalised as of 2003, it could have a negative impact.
TSS: Many people say that ST is behaving like a monopoly, that it doesn't listen to others on the market, that it does only what it wants. Are you conscious of this image? If so, are you trying to change it?
PB: This is an image of the past that has begun to change in the eyes of the public, and elsewhere. On the other hand, it's important to realise that this country has certain rules that need to be followed. If the law calls for complete liberalisation of the market beginning January 1, 2003, this has to be followed. Most anti-ST activities begin because our competitors want to speed up market liberalisation.
TSS: Some of your critics say that it's ST which is not observing the laws. For example, a 1998 law liberalised data services, yet ST put frequency filters on data lines last year.
PB: Only data services were liberalised - leasing fees for data lines were not. Liberalisation of data line fees usually happens only when the entire market is liberalised.
TSS: Analysts, competitors and customers say that ST's prices for the Internet are too high. Internet growth is important for Slovakia, and ST is blamed for holding it back. How does ST balance the profit motive and interest in Slovakia's future?
PB: ST has done an enormous amount for Internet development, even though we got a late start on the market. The Internet market bloomed only after our arrival on the market. We have been innovative. Some services in Slovakia provide more for one's money than anywhere in Europe. Nowhere in Europe can you find an ISDN Internet connection for only 2.5 crowns per hour during the night hours. Concerning the prices of leased lines, our services are comparable with Europe.
TSS: But Slovakia's average wage is about one tenth of Germany's. While you may be comparable, prices are high for people trying to afford Internet in their homes. You also charge a pulse rate for local calls, whereas in North America, people pay a set fee and can use the Internet as long as they want without paying more. Even if Slovaks can afford the computer, afford the hook-up, they have to pay huge monthly phone bills. These bills are holding back Slovak Internet development. Why has ST continued with this pricing strategy?
PB: You are taking the pulse rates out of context. The North American system doesn't exist anywhere in Europe. Slovakia is in Europe, which is why the system is based on impulses. Our minute rates compare well with those of other European countries. We are even cheaper than the Czech Republic.
TSS: But Slovakia still has a low penetration rate compared to other countries. And the people who need the technology the most - students - often don't have access. Isn't there some kind of compromise ST could come to, giving free or discounted connections to schools, for example?
PB: We treat schools differently, but according to the law, we can only do so minimally. When a school wants an Internet connection, we do an ISDN connection for free - 30 so far, and 30 more are planned. Project Infovek [a non-profit project aimed at connecting Slovak schools to the Internet] issued a tender to connect schools to the Internet. We'll see what the results will be, but I think our interest in helping schools will be apparent in the future.
