Incumbent TP Stays Intact, but Competition in Poland Will Heat up

October 23, 2009

Polish fixed-line incumbent Telekomunikacja Polska (TP) and Polish telecom regulator, the UKE, have agreed on how to implement market transparency and non-discriminatory practices with regard to alternative operators. The October 22 accord comes after months of negations between the regulator, alternative operators and TP. At stake was the integrity of TP, a subsidiary of France Telecom.

Since mid-2008, the UKE has been looking into a functional separation of TP into wholesale and retail units, following claims by alternative operators that TP would not fulfill its obligation to grant them equal access to its infrastructure. The new agreement will require TP to freeze its wholesale prices until 2012, to upgrade 1.2m broadband lines within three years, including making 1m lines capable of download speeds of at least 6Mbps, and to carry out other projects. It is understood that if TP follows through on the conditions of the agreement, the UKE will abandon its plan for functional separation.

The Polish market is thus becoming more competitive – a result not only of regulatory interventions but also of government initiatives to increase broadband penetration of the population. In addition, the regulator lowered the prices for local-loop unbundling in December 2008, and alternative operators such as Netia have taken advantage of it to expand their customer bases.

We expect broadband access lines to grow at a CAGR of 9% between 2008 and 2014, and the penetration rate will reach 21% of the population by 2014 (for details see our Country Intelligence Report on Poland; for more market projections, see our Pyramid Research Fixed Communications Forecast, Q3 2009). We also believe that TP’s grasp on the broadband market will loosen and that its share of broadband Internet accounts in Poland will decline from 45% in 2008 to a projected 29% of the total in 2014 (see exhibit).

On the other hand, smaller cable and telecom operators in Poland will perform well over the forecast period. The winners will be those that understand that customers want value for their money. Hence, initiatives such as UPC’s promotion for new clients – free double- or triple-play subscriptions in November and December – are set to add water to the operators’ subscriber acquisition mill.

Exhibit: Operators’shares of broadband Internet accounts in Poland, 2008 and 2014

Source: Pyramid Research Market Share Forecasts, Q3 2009

— Sylwia Boguszewska, Analyst

Related resources:

Poland: Competition Heating Up as Alternative Operators Come of Age
Country Intelligence Report published September 2009
Regulatory measures are fostering a more competitive market in Poland; as a result, Pyramid Research expects the Polish telecom market to show the second fastest growth in CEE. The market generated Zl 39.2bn ($16.3bn) in service revenue in 2008, a 5.5% year-on-year increase in local currency terms. This Country Intelligence Report analyzes Poland’s communications, media and technology industries, including key trends, regulatory pressures and the competitive landscape, making it an excellent complement to our Forecast products.

Central & Eastern Europe Fixed Communications Forecasts
Forecasts updated quarterly
Our Fixed Communications Forecast products provide a complete picture of wireline voice and data communications in each of eight Central & Eastern Europe markets. The Excel output includes five years of historical data and five years of market projections for metrics such as demographics and economic trends, penetration of broadband and narrowband lines, Internet users, business users, voice telephony lines, VoIP, PCs, IPTV and revenue. We believe our Fixed Communications Forecasts are superior because they capture granular data gathered through extensive field research and use a thorough methodology consistently applied to all markets.

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