PL Telcos: Mrs. Sterozynska nominated as head of telecom regulator

The prime minister, Mr. Marcinkiewicz, nominated Mrs. Anna Sterozynska to the post of head of telecom market regulator (UKE), despite her name being not present on the short list of candidates, taking advantage of unclear wording of the telco–bill, which says that PM nominates head of UKE after "obtaining" (as opposed to "choosing from") the short list of candidates.

Mrs Sterozynska, current deputy minister responsible for supervising telecom sector, has presented a detailed program of introducing competition, enhancing competitive measures for the telecom services sector, aiming at multi–(PLN) billion savings for consumers. Mrs. Sterozynska said she would allow alternative operators to offer broadband internet access using TPSA's infrastructure immediately, which could undermine one of the company’s key growth areas. Her nomination signals a major change to the regulatory environment in Poland, which is likely to have a short-term negative trading impact on TPSA, but positive on Netia. Nevertheless, we note the inroads that TPSA has already made on its broadband initiatives as highlighted on their 1Q06 results, and its broader reach to compete in an increasingly open market. Additionally, we believe that the regulatory developments are already folded into current valuations. We recommend buying into any resulting weakness in TPSA, and selling on strength for Netia.