Update: October 1999

Central and Eastern European Countries Synthesis of Update Memos

Last quarter (July – September 1999) was very rich in regulatory developments. Indeed, the Central and Eastern European countries are restructuring their telecommunications sector according to the European Union directives in the perspective of future integration. As we can see in the national reports, developing liberalisation in the telecommunications sector has led to numerous regulatory events :

1. Draft of new telecommunications and competition laws

• In Slovenia, a new law on Price Control gives the government more power to monitor prices and set control measures. The priority will go to the creation of transparent cost and price analysis methods. So far, there has been little control over the tariffs of the historic operator. Leased lines tariffs are particularly critical. High tariffs can delay the development of competitors (Internet Service Providers that rely heavily on the infrastructure of the incumbent operator, for example). High tariffs are also a problem for companies.

• In Poland, the government is preparing a new telecommunications law that embraces major transformations: privatisation of the national operator and evolution towards liberalisation.

• In Bosnia and Herzegovina, regulatory acts are going through a complete renewal process. The public broadcasting system is in phase of restructuring. Three public channels are to be established. The objective of the restructuring is to create a new fully multi-ethnic television broadcaster.

• In Latvia, the new government elected in July 1999, confirmed priorities concerning the telecommunications sector, among which the proposal of a new telecommunications law to the parliament before the end of 1999 and the liberalisation of the sector by 2003.

• The continuation of privatisation programs. Most of the Central and Eastern European countries have started to privatise their historic operator. This is the case of the Baltic countries, Latvia, Lithuania, Estonia, Romania and Poland. Privatisation appears to be the best way to generate capital and know-how, to accelerate the introduction of new technologies, to modernise infrastructure and to transform the traditional management methods.

• In Poland, the Ministry of Treasure has offered a further 25 – 35 % of TPSA shares for sale in August 1999. The 2 main potential investors are France Telecom and SBC. Both should submit final offers by the end of October 1999.

2. The issue of numerous licences in liberalised telecommunications fields :

• In Slovenia, a lot of licences were issued: 6 for the provision of data communications services, 2 to ISPs, 7 to cable TV distributors.

• In Poland, Centertel (the DCS 1800 operator) was awarded a GSM licence, while the 2 GSM operators were awarded DCS 1800 licences.

• In Romania, the mobile operator MobiFon (GSM) was awarded a licence of ISP in August 1999. This will enable them to provide new package services, including mobile and Internet services. The other mobile operators MobilRom and CosmoRom also intend to enter new telecommunications sectors.

The Central and Eastern European telecommunications sector is evolving very quickly. One can note the increased presence of Western European capital in newly privatised fixed and mobile operators. These partnerships could be seen as new trans-European operators. It is interesting to note the strong presence of Nordic operators (Telenor/Telia) in the Baltic countries and that of France Telecom in the Romanian market (RomTelecom), partnerships which are built upon historical and geographical proximity.

Participation of Western Europe operators in Central and Eastern European telecommunications sector

* Telia AB (Sweden) and Sonera Holding BV (Finland) own 49% of Estonian Telecom Limited. Estonian Telecom Limited is a holding company which holds the shares of the Estonian Telephone Company Limited (100%) and the Estonian Mobile Telephone Company Limited (100%).

Below you will find information on countries that have joined the ESIS II project in July

• Bulgaria :

• National operator, Bulgarian Telecommunication Company is to be privatised in a few months. The new shareholder (51% of capital) is the consortium including the Greek operator OTE and KPN Royal Dutch operator
• The telecommunications market is slowly opening. OTE and KPN Royal Dutch will be granted the second GSM licence. This attribution is part of the privatisation procedure.
• Full liberalisation : 1 January 2001

• Czech Republic :

• National operator, SPT Telecom is partially privatised : 51.1% National Property Fund, 33.5% Telsource (Swisscom, KPN Royal Dutch Telecom), 10.4% Chase Nominees ltd)
• All services are liberalised, except basic voice services that remain under the monopoly of SPT Telecom until January 1, 2001 date of full liberalisation

• Hungary :

• National operator, Matav is partially privatised : 59.6% MagyarCom (Deutsche Telekom/Ameritech), 6.6% the Hungarian Government, 2% EBRD, 1% IFC.
• The market is widely liberalised. Basic voice services only remain under the monopoly of Matav (and 13 concessions for local communications services) until 2002 date of full liberalisation.

• Republic of Macedonia  :

• National operator, Makedonski Telekomunikacii is to be partially liberalised in 1999 or 2000.
• The telecommunications market remains very closed in regard of other Central and Eastern European countries. Nevertheless, the opening of the telecommunications sector has become an important objective (Telecommunications Act 1998). Full liberalisation is planned for January 1, 2006.