Банкеръ Weekly



Before the governors do whatever revisions of the privatisation deal on the Bulgarian Telecommunications Company (BTC), they should be aware of the possible risks both to the Bulgarian side and to the eventual buyers. Among the threats are the already establishedalternative networkswhich will certainly take away a considerable part of BTC's market after January 1, 2003. Bulgargas, the National Electricity Company (NEC), the Bulgarian State Railways (BDZ), the state administration, and Cable Bulgaria (whose executive director until recently was the incumbent Minister of Transport and Telecommunications Plamen Petrov) already have optic fibre networks. Mobile operators are presently the biggest clients of transferring lines, leased from the BTC. After the end of BTC's monopoly, however, the lines will be replaced by their own transferring capacities and such, leased from other operators. So, as early as in the beginning of next year we'll witness a strong competition for the subscribers' access as wellin all bigger Bulgarian towns. In fact, competition already exists, but only for INTERNET. All distribution networks for cable television offer an alternative at the same and sometimes even better quality. However, the future battle shall not be for INTERNET access, but for the big corporative clients and for the quite attractive international traffic. Such networks (at that using the most state-of-the-art equipment) have already been set up in Varna (the MSAT cable TV), Sofia (the network of the state administration), certain regions and some of the cable televisions), and Plovdiv (the Eurocom cable TV).In all cases the alternative transferrence or access to end clients will be with a very good quality and at much lower prices than those of the BTC, experts warn and recommend that by the year-end the company should radically change its marketing and financial policies and invest all free sources in transferring networks (mainly in the big towns). This, however, cannot be implemented withoutraising the prices of subscription feesand rebalancing of telephone tariffs. If the governors again postpone the price increase, demanded by the BTC, the prices would drastically go up in the first months of 2003, experts warn. The price has two aspects - the first one is purely financial and concerns the tariff rates. Currently, subscription fees cover less than half of the costs for servicing each telephone, BTC's calculations show. The amounts, paid by subscribers, for each city and intercity call, are much lower than the real costs. The pricing methodology, underlying the package of documents for BTC's sale, was approved in 1998 and binds each following price hike with the accumulated inflation and the increase of the GDP. Due to purely political reasons on two occasions the former government refused the price hikes, demanded by the BTC as per the methodology. The incumbent Cabinet is about to repeat its predecessors' mistake, putting forward as a motive the company's financial profit, which, however, is a result of the internal redistribution of financial flows. The BTC presently covers its losses from city and intercity calls by the more expensive international conversations and the high prices of leased lines. With the end of BTC's monopoly the proceeds from both sources of income will steeply drop. In order to continue to operate the BTC will have to considerably hike the tariffs, at least to the cost of the offered services, or close down at least some of the telephones and the smaller telephone exchanges.

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