Polish Business Survey
IT sector consolidation likely
Having lived through the burst of internet fever in the past two years the IT market now looks as though it is about to settle down and consolidate.
The sale last year of a 33 percent stake in Optimus is considered by some analysts to mark the end the Polish distribution era and the beginning of the times for internet and other services.
Furthermore as competition hots up, consolidation of the sector is likely in order to cut costs. There are many examples. JTT has attempted, so far unsuccessfully, to link up with TCH Components.
Wrocław based AB is seeking a partner. ABC Data, the second largest computer distributor here was sold to the German Actebis. STGroup has linked up with California Computers. And as an example of where the market is not going is Techmex, one of the most dynamically growing companies in the sector who twice failed to make a public share offering.
Not looking good for leasing
Next year is looking particularly unpromising for leasing companies. The main reason is undoubtedly the high losses of BG Leasing which have terrified the banks and made them think twice before financing leasing operations.
What is ironic is that up until last year the sector was doing so well.
It enjoyed ten years of growth with continually improving results despite a lack of laws regulating the sector. Some companies such as CLiF, EFL, LTL and Leasco are now quoted. It all started to go wrong in the summer of 2000 with the news that BG Leasing had losses of nearly PLN100m.
The situation at BG Leasing may now have caused losses of up to PLN300m for its backers. The banks panicked, blocking credits and without finance the whole sector is likely to go under unless a dramatic change in policy is seen from the financing institutions.
The leasing organisation Konferencja Przedsiębiorstw Leasingowych has tried to come to a deal with the banking organisation ZBP. However the latter has only suggested talking to each bank on an individual basis.
Making a killing on phones
Whereas the major telephone revolution will not happen until 2003 when the market is liberalised, 2000, however will also be memorable for two major events in the sector. The first was the sale of the remainder of the shares in Telekomunikacja Polska to a strategic investor and the second was the rather dismal UMTS tender.
Not everyone may have been happy and others may have had cause for complaint — but not the state as the treasury was laughing all the way to the bank with its PLN25m windfall.
Other events for the sector include a new telecommunications law and the foundation of a watchdog, the URT. Also one should not forget that there is now long distance competition to TPSA and that many new companies are building networks for data transmission. Finally the last days of the year brought about a letter of intent signed by Deutsche Telekom to invest in the land lines of the Elektrim group which will be the first major competition to that sector of the market in which TPSA and France Telecom are placed. It is to be expected that the Germans will try to consolidate the largest local operators from the beginning of this year on.
In 1999 the treasury threw out the USD3m offer of France Telecom for TPSA and this meant that the French paid USD1bn more but held onto their money for longer. FT paid PLN38 per share, in 1999 they had offered only PLN23. However the sale remains controversial and many details remain un- clear.
Insurance companies stagnate
Last year saw a slow down in the insurance sector particularly in property insurance which is now stagnating. This year promises nothing new. The whole market is however overshadowed by the conflict over the ownership of PZU and foreign acquisitions of small Polish companies.
Eight percent more policies were sold in the first three quarters of 2000 as opposed to the same period in 1999. The best performer was Allianz which saw a 32 percent increase in sales which now puts it infourth place on the market.
Profitability is poor, especially in auto insurance. Fully comprehensive costs have increased but not the obligatory third party.
There are no plans on what to do to make motor insurance more profitable.
Life assurance is looking a little better. Each year has seen performances in improvement but last year was the best yet with overall increases of twenty percent. The star was Zurich which saw a 72 percent increase in new policies in the first three quarters of last year. Such increases however do not come without price.
Life assurance clearly has a lot of potential and seven new companies will be entering the market this year.
Last year showed that there is no place on the market for companies that are made up only of Polish capital. The second largest property insurer Warta became part of the Belgian KBC. The Austrian Uniqa took Polonia which may have saved the latter from sharing the fate of Gwaranta which went under at the beginning of last year.
The new trend is to link banking with insurance — bancassurance, This year will certainly see consolidation and different companies working together to make joint products.
The conflict over the ownership of PZU has brought the largest insurer to a standstill. Both sides are bringing up their heavy artillery as the value of the company falls together with that of the whole insurancebusiness.
Bad year for cars forecast
Forecasts suggest that the number of new cars sold this year could be as low as the figures for 1997 when 480,000 were sold.
The industry is above all unhappy with the number of imported used cars and is looking for ways to reverse the trend.
For ten years the number of new cars sold had dramatically increased — until last year. In the first eleven months of last year, sales of cars and vans was down 21 percent on the same period of the previous year.
No signs of a change this year are visible. On the contrary, there are those that suggest a further five percent drop over the figures for 2000 is possible.
The biggest loser was Daewoo. The year had begun promisingly for the Koreans when they were narrowly beaten into second place by FIAT in the car sales league for 1999. The problems of the mother company, Daewoo Motor Company, have put the Italian motor company in clear first position for 2000 despite massive sales drops.
A further feature of 2000 was the gradual reduction of assembly operations. Ford stopped assembly at Plonsk and Volvo is reducing assembly of lorries in Wroclaw. This year could see the same for Citroen at Nysa in south western Poland and for Renault in Starachowice. This could leave Lada as the only assembly operator in this country.
New hope for polish banking
This year could see a number of changes in the banking sector. Attention will be focussed on the privatisation plans of PKO BP and BGŻ as well as expected consolidation.
Both BKO BP and Bank Gospodarki Żywnościowej are expected to keep their Polish character after privatisation which has now become a major political football. There are, of course, those that would doubt that privatisation is possible if foreigners are to be kept out. Both banks require added capital — last year PKO BP received around PLN400m, this year it claims it needs a further PLN2bn. BGZ needs less — around PLN1.2bn — PLN1.7bn.
The treasury is hoping to have sold off PKO BP by 2002.
The form of its privatisation is yet to be made.