Smaller firms trail-blaze LTE in Poland - Poland's 'big three' mobile operators playing catch-up in LTE as spectrum auctions face delay

Two start-up operators in Poland have stolen a lead on their larger rivals by launching commercial LTE services using 2G spectrum. CenterNet Mobile and Aero2's Mobyland – which both launched in Poland as new GSM operators two years ago – announced last September that they were to jointly build an LTE network using 1800MHz spectrum, initially covering the major Polish cities of Warsaw, Katowice and Lodz. Some 700 base stations were due to be deployed by year-end, covering a population of 7 million. The launch established Poland as only the fourth country in the world to commercially deploy LTE and was the first to deploy the next-generation technology at 1800MHz. The network was built by Huawei and claims peak downlink speeds of over 146Mb/s. Aero2 and Huawei are also building an accompanying TDD-LTE network, which was scheduled to go live "in early 2011."

According to the latest GSMA Intelligence data, the new CenterNet/Mobyland network had just under 5,000 connections at the end of Q1 2011, the vast majority via CenterNet. However, connections growth on the new network is set to rise rapidly if the operators are successful in striking wholesale deals. It was announced last month that they already have one such deal in place with Poland's largest satellite operator, Cyfrowy Polsat, which is trialling LTE services over the network with around 2,000 customers. Cyfrowy Polsat is offering participants a USB modem from IPWireless capable of supporting download and upload speeds of up to 73Mb/s and 25Mb/s, respectively. If the trial is deemed a success, the satellite operator is eyeing a commercial launch of the service in July.

The CenterNet/Mobyland LTE network could be the only available option for such services in the near-term, following reports this week that Poland's main LTE spectrum auctions have been delayed. Originally scheduled to begin later this year, UKE, the Polish regulator, said the process has now been delayed until at least 2012 due to a delay in the military relinquishing spectrum in the 2.6GHz band. Like other markets in Europe, Poland has earmarked both the 2.6GHz and the digital dividend (700/800MHz) bands for LTE deployments.

In an unusual move, UKE is thought to be selling-off just two blocks of LTE-suitable spectrum, each of them too large to be able to be used by a single operator. This appears to be a tactic to encourage next-generation network sharing between the market players, which has subsequently led to a flurry of operator alliances. Market-leader Orange and 3G specialist Play announced last summer that they are planning to form a JV to jointly bid for LTE spectrum. They are then expected to build-out a joint network under a separate brand, which will focus on reselling LTE services on a wholesale basis. Later in the year, Orange struck a separate deal with third-placed PTC to create a 50/50 network-sharing JV to "build, operate and maintain" their existing networks.

Such collaborations reflect the evenly balanced nature of the Polish mobile market. The big three GSM-based operators (Orange, Polkomtel and PTC) all have roughly equal market shares, while fourth-placed Play is a major 3G player. There is also CDMA competition in the form of Polkomtel's CDMA subsidiary, Nordisk Polska, which has been rolling-out services using the high-speed CDMA2000 1xEV-DO standard since 2008.

The market has also undergone several ownership changes in recent months. In December 2010, Deutsche Telekom took 100 percent control of PTC in a EUR2.1 billion deal, ending years of legal wrangling with its former co-owners, which included French conglomerate Vivendi. Meanwhile, Polkomtel recently announced it had drawn up a shortlist of around ten potential buyers, thought to include operators Telenor, Telefonica and America Movil, and a raft of private-equity bidders. Polkomtel is currently owned by Vodafone (24.4 percent) and four Polish state-owned utilities (75.6 percent). Elsewhere, Play's private-equity owners - Cyprus-based fund Tollerton Investments (50.2 percent) and Iceland-based fund Novator (49.7 percent) – are also thought to be looking to sell the operator to a suitable buyer, which could see it taken over by one of its larger domestic rivals.

Matt Ablott, Analyst, GSMA Intelligence:

As Yota proved recently in Russia, smaller operators that are quick-to-market with LTE can have a major impact. While there is no evidence yet that the Polish operators will follow the Russian model of uniting behind a single LTE network, all the main players appear open to collaborations that will enable them to share next-generation network costs and exploit economies of scale. And there remains the possibility of in-market consolidation with Play still an attractive-looking asset despite its larger rivals making up ground in 3G recently. In common with most European markets, the allocation of LTE spectrum in Poland comes at a time when local operators are struggling with declining voice prices in a saturated market: total connections in the country grew by just 3 percent year-on-year in Q1, while penetration is running at close to 120 percent. Mobile broadband is already well established in Poland; market-leader Orange claimed it had 5.5 million mobile broadband subscribers at the end of last year, representing over a third of its customer base. The move to LTE – especially if part a coordinated, industry-wide effort – will further develop this market, but will crucially also give operators the opportunity to refresh pricing strategies in the light of rising mobile data volumes. This is likely to see 'unlimited' offers phased out in favour of tiered tariffs, allowing operators to offset the costs of new network rollouts against (hopefully) higher service revenue.

Poland mobile connections by operator and technology (Q1 2011)
Source: GSMA Intelligence, company data