Free computers, connections, credit cards

  • 1999-09-09
  • By Brooke Donald
TALLINN - The recent marketing strategy of Esto-nia's information technology companies can be defined by two words - freebies and giveaways.

Last week, on the heels of a free PC campaign by Hansapank and Microlink, Levicom Broadband announced the Sept. 6 launching of TELE2, a no-fee Internet dial-up service.

The free service provides users with unlimited access to the Internet, an unlimited number of e-mail addresses and free disk-space for a personal home page.

The only fee a customer pays is to Estonian Telephone for the cost of the local dial-in call.

Stefan Oberg, marketing director for TELE2, described his company's latest marketing scheme as preparation for the deregulation of telecommunications in 2001, when the domestic telephone services monopoly of Estonian Telephone will expire.

"We are investing in a customer base and brand to position ourselves for the opening of a free communications market," Oberg said. "Once the market is deregulated, we will be able to get a share of telecommunication revenues."

Until then, Levicom is relying on advertising revenue from its existing corporate web site to pay for the free service, Oberg said.

Some industry insiders doubt, however, that Estonian companies can rely on Internet advertising for profits, saying the Internet advertising market is still in its early stages of development.

"I am a little pessimistic about them making money," said Juri Luud, marketing manager at Uni-net, another Internet service provider. "I know the costs of the ISP business and the volumes of the market in Internet advertising. There is hard competition in advertising too."

Allan Sombri, marketing director for Microlink Online, Estonia's largest ISP, said he believes TELE2 "estimated a big loss next year while there is still a monopoly," upwards of 20 million ($1.35 million) or 30 million kroons. But, he added, "they have taken a big step - quite risky, very interesting."

Company representatives insist that the two giveaways - of PCs and Internet access - are not directly related, but Luud commented that because of the recent projects competition levels in Estonia's computer sector have risen exponentially, forcing all companies to find ways to stay in the race.

"Of course we have some ideas - we have to - competition has risen very quickly," said Luud. "Maybe we will move more towards our roots in telephones and mobile phones, but at the moment it is too early to say."

Luud added that Uninet has no plans to provide free Internet access and sees the PC giveaway as a project for computer hardware companies not Internet companies such as itself. Uninet's has approximately 5,000 Internet subscribers.

The two freebie campaigns undoubtedly have caused more competition in the market, but Sombri said each strategy has a different goal. In addition to a free computer, Hansapank is giving away free credit cards. Sombri said one aim of the project was to increase on-line shopping.

"There are a lot of people who use e-commerce but they are buying goods from abroad. Why not do it here," said Sombri. "The credit cards will help."

The free PC project has collected more than 1,500 applications. Microlink and Hansapank are offering only 1,000 computers and credit cards to people who agree to complete a three-year Internet service contract with Microlink. Som-bri said the companies are looking for clients with "stable incomes."

Levicom Chairman Ivar Lukk predicts the free Internet service will seize 40 percent of the Internet users in Estonia. Oberg said the company's goal is to capture that market by the end of next year.

Luud and Sombri said it is too early to estimate how many of their customers will switch to the free service, but agree that their respective companies will not suffer many losses because of the new no-fee option. Microlink On-line has 8,000 users. The second largest ISP is Estonian Telephone with 7,000 users.

"Free Internet has a two-year history in the world," said Sombri. "If you look at other markets, there are always paid ISPs also. The market is quite big."