Банкеръ Weekly

Briefs

YEAR 2004: LIBERALIZATION STARTS WITH MORE EXPENSIVE TELEPHONE AND POSTAL SERVICES

The New Year has brough higher rates of postal services. As of January 5 the prices of letters leaped by 25% on average. The hike was even more drastic for parcels. The amount of money that can be sent by postal order has been raised from BGN1,000 to BGN3,000. The transfer of that amount costs BGN16.35. The minimum amount to be sent by postal order is BGN5 and BG0.25 will be charged for that service. The prices of fixed telephone services will certainly go up in 2004, too. Insiders of the Bulgarian Telecommunications Company (BTC) expect an average increase of 20 per cent. The greatest hike will be that of subscription fees and of the prices of calls within the settlements; intercity conversations will become slightly more expensive, and international calls will be cheaper. And while the new BTC rates are waiting for the Cabinet's consequtive decision on the telecom's sale, its executives are discussing the necessary investments for the technological renovation of the fixed telephone network, about 30% of which has been digitalized so far. In order to maintain its positions on the telecommunications market, the company should invest between BGN250-400MN. BTC's profit may drop drastically in 2004, which would be disastrous for the national telecom operator, Deputy Premier and Minister of Transport and Telecommunications Nikolay Vassilev said. But the negatives will be much more serious, as until Bulgaria's accession to the EU, 80% of BTC's network should be digitalized. According to preliminary estimates, EUR500 will be necessary for the purpose. However, telecom experts believe that the liberalization of the market would hardly endanger seriously the BTC, which will practically maintain its almost monopoly position, despite the fact that it already has five competitors. In 2003 licences for voice telephony and establishment of a telecommunications network were granted to Orbitel, Globaltech-Bulgaria, Net Plus, East Telecommunications Company and Nexcom-Bulgaria. The licence enables the private telecoms to access household subscribers of BTC (10,000 telephone lines in the capital city and 1,000 in the district towns for each operator). The telephone numbers of the private telecoms in Sofia will probably begin with 40 and will have 7 digits, the Committee for Regulation of Telecommunications explained. In the beginning of 2004 there are no subscribers of private telecoms, but the BTC has made public its offer for mutual connection. Thus, the liberalization of telecom services may practically begin. Alternative operators began wooing BTC's business clients (whose number is about 3,000), promising them the same or even better technical level of services at much lower prices. But the cheap prices of alternative operatotrs will for a long time remain in force only for international calls via INTERNET (the so-called VoIP telephony). Orbitel has recently announced that the prices for calls in Europe go down to BGN0.23-27 per minute, and to BGN0.31-0.37/min. for calls in the USA and Canada. Thus, the clients of private telecoms may save between 43% and 61% from their telephone traffic, experts calculate. The prices for other services of alternative operators will be even higher than those of the BTC, because at present each of the state-owned telecom's competitors effect their subscribers' connections through BTC's network and pay it respecive fees for that.For the time being the establishment of an alternative fixed telephone network is hundreds of euro away. CableTel (with Peter Mandjukov and the Americans Ron Finley and Jim Philips as main shareholders) is closest to that target. The private company has launched an optic fibre cable trunk-line from Sofia to Plovdiv and promised to set up a national optic netowrk by 2005, making possible simultaneous transfer of 30,000 telephone conversations. The new system will offer a triple service (telephone, INTERNET and cable TV) and will compete to attract 15-20% of the business clients in the country, insiders specified. In the second half of 2003 talks began about competitors of the BTC with infrastructure via a satellite network (such as CITS, for example). The new infrastructure will make possible the establishment of own international traffic of voice, video and data, independent of BTC's network. In fact, as of the beginning of 2004 there are also other possibilities for an alternative traffic in Bulgaria. In addition to BTC, national optic fibre cable networks have been set up by the National Electricity Company (NEC) and Bulgargas. The latter has even been granted a licence for tranfer of data. Mobile operators also have their own networks (mainly radio-linear lines. They can already legally rent lines to each other and to third persons, or to set up lines for mutual usage when necessary. Trade in rented lines, which accounted for 10% of BTC's proceeds during its monopoly, would hardly be very cative. The telecom's most likely rival in 2004 in that respect will be only the analogue mobile operator Mobikom, whose subscribers continue to decrease in number.However, Mobikom's hopes for survival and development are not so much connected with renting traffic lines, but with the replacement of its analogue network by the CDMA technology. The project is worth about USD60MN. Mobikom's shareholders (the British Cable Wireless with a 49% stake, BTC with 39%, and the Samokov-based Radiolectronic Systems with 12%) postponed for end-January (when there will be clarity about BTC's privatisation deal) their general meeting which has to decide the future of the mobile operator.No tender for an UMTS (Universal Mobile Telecommunication System) licence is likely to be invited in 2004, despite the promises of the Transport Ministry and the Committee for Regulation of Telecommunications. However, the reason does not lie with them, but with the Ministry of Defence, which has not yet freed the necessary frequencies for the third generation mobile network. No money for the purpose has been projected in the ministry's 2004 budget.In fact, this problem can also be settled only after the end of saga regarding BTC's divestment. The telecom's principal, Deputy Premier Nikolay Vassilev, is also of the opinion that is should finally come to an end, in three stages. During the first one he will wait for the Privatisation Agency (PA) to decide if it will sign or not the deal with Viva Ventures. During the second stage he will restructure the BTC, notifying the PA about that. During the third stage, towards the end of 2004, Mr. Vassilev promised to give a free hand to the telecom's managerial team in the name of the company's good management and future. However, BTC's privatisation is still a topical issue in the working week of 2004. Viva Ventures' competitors - the consortium between Koc Holding and Turk Telecom - have officially announced that they extend by three months their EUR3MN guarantee for the deal.

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