Lietuvas Telekomas unafraid of competition

  • 2003-01-23
  • Steven Paulikas

Early expectations of swift change in Lithuania's telecommunication industry following the liberalization of fixed-line services on Jan. 1 have yet to materialize, and the prospects for true competition in the sector are unclear.

As of the first of this year, the Lithuanian Communications Regu-latory Authority began accepting applications from companies wishing to offer fixed-line services in competition with the former monopoly holder, Lietuvos Telekomas.

To date, six companies have stated their intention to enter the market, though none has yet begun offering services.

Few concrete details are available about the possible trajectory of deregulation of a key economic sector.

In a press conference on Jan. 16, Tapio Paarma, managing director of Lietuvos Telekomas, told reporters neither to expect an instant rush of competitors into the fixed-line market nor to underestimate the position of his company among potential rivals.

Pointing out the technological difficulties future competitors will face, Paarma emphasized that Lietuvos Telekomas' network is the most modern in the Baltic states and higher in quality that those of many West European countries.

"We haven't invested 1.8 billion litas (522 million euros) in infrastructure just for fun," said Paarma.

Paarma also theorized that Lietuvos Telekomas would be the only company capable of offering a full range of services throughout all of Lithuania, including rural areas.

Latvia demonopolized fixed-line telephone services on the same day as Lithuania, whereas Estonia's market has been open to competition since Jan. 1, 2001.

According to Paarma, because Lithuania's telecom industry has undergone a more gradual process of privatization, much of the profit potential for companies entering the market now is already gone.

"The cream has already been taken off the cake," said Paarma of potential growth for new fixed-line competitors in Lithuania. "I read that Latvia has had 20-25 applications for fixed-line service providers. This is not possible here," Paarma told reporters.

Indeed, if Estonia's two years of experience with fixed-line competition is to be used as an example, Paarma may be correct. Of the 30 or so fixed-line service permits issued in Estonia, only about 10 companies actually began fixed-line operations, and of those only three or four true competitors remain.

Potential competitors in the Lithuanian market are unconvinced by Paarma's analysis.

Tele2, the Swedish-based mobile provider and company pegged by Paarma as Lietuvos Telekomas' biggest potential rival, believes it can post ample profit in the fixed-lines service sector of the industry.

"It is always possible to find a niche," said Justas Vaitkevicius, press secretary for Tele2.

Vaitkevicius said that Tele2 was exploring the possibility of offering international, fixed-to-mobile, and urban services. At the same time, he said it was impossible to project a potential price scheme, saying only that Tele2 would try to undercut Lietuvos Telekomas.

Tele2 has the added advantage of maintaining good relations with the former monopoly holder. On Jan. 17, Lietuvos Telekomas agreed to reduce interconnection rates from its fixed-line network to Tele2's mobile network by 30 percent beginning in February.

The same cannot be said of Linktel and Interneto Pasaulis, both of which have also declared their intention to offer fixed-line services. Paarma stated his anxiety at future cooperation with these companies due to alleged debts owed to Lietuvos Telekomas.

Companies also interested in entering the market include the telecom operators Eurocom, Mediafon, and Linktelus.

A larger question regarding the future of fixed-line services in Lithuania is its viability in the face of the widespread popularity of mobile communications.

According to statistics published in the weekly magazine Veidas, fixed-line subscription rates peaked in 2000, with 33.8 percent of residents using fixed services - by 2002 that number had dropped to 28.1 percent. In the same period, mobile telephone usage rates more than tripled, rising from 15 percent to 45 percent.