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10 Questions

with Clemens Wohlmuth
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By Paul Voosen
Staff Writer, The Prague Post
May 16th, 2007 issue

COURTESY PHOTO
The country's largest telecom deal this year, between Volný and eTel, "marks a clear alternative for customers," Wohlmuth says.
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The Wohlmuth File

Name: Clemens Wohlmuth
Job title: CEO, Volný and eTel
Age: 37
Nationality: Austrian
Family: Partner

In late April, telecommunication providers Volný and eTel announced the largest deal in the country’s telecom market so far this year. In a merger worth 90 million euros ($120 million/2.5 billion Kč), Volný’s parent company, Telekom Austria Group, took over eTel’s Czech operations, as well as the company’s branches in Austria, Germany, Slovakia, Poland and Hungary. Clemens Wohlmuth, the head of Volný in the Czech Republic, talks to The Prague Post about what this merger means for the Czech telecom sector and whether the combined alternative providers could jeopardize Telefónica O2’s dominant market position.
❶ What ramifications do you expect your recent merger with eTel will have?
It will strengthen the position of Volný and the former eTel on the market. The combined company will have a strong infrastructure and a well-balanced portfolio of products and customers in the residential and business field. With the support of Telekom Austria, we’re a clear alternative for customers to the incumbent [operator, Telefónica O2].
➋ Despite past mergers and acquisitions, no Czech alternative provider has been capable of posing a serious threat to the leading mobile and fixed-line operators. Why is that?
That’s not exactly true in the fixed-line business. Alternative companies have threatened the incumbent in the past, and that initiated a process of change and improvement for customers. The incumbent had to react a lot on its pricing and service quality.
Take the example of ADSL. Today you can get a two-megabit high-speed Internet line for 349 Kč [$17] from Volný. We pushed Telefónica O2 [formerly Český Telecom] by offering higher speeds at lower prices. Three and half years ago, when ADSL first came on the residential market, Český Telecom offered a slow connection for 1,349 Kč without the value-added tax. Can you imagine that?
I think this shows clearly how we challenged the incumbent. We’ve seen the same effect with fixed-line voice, with our pricing and innovative technologies in CPS and VoIP [voice over Internet protocol].
On the mobile side, I agree completely with you. There is no full competition. We are in an oligopoly, with three established operators splitting the market 40/40/20. We would be happy to start offering mobile services on top [of their networks], as a virtual mobile operator, and change the rules in this market. With the background of Telekom Austria, we have the concept already prepared. Unfortunately, none of the operators are willing to open their networks for other companies.
➌ Would it ever be possible to dethrone any of the telecom leaders, such as Telefónica, T-Mobile or Vodafone? How could it be done?
As mentioned before, right now we are in the position to challenge them. We do not intend to “dethrone” them. I think in the future there will be more cooperation between the remaining operators in the fixed-line business [as we compete] with mobile operators. This will keep competition strong.
➍ Mergers and acquisitions are quite popular nowadays. Will Volný consider any other mergers in the foreseeable future?
At the moment, we are working on the integration of eTel. We are screening the market for potential further acquisitions. We looked closely into the acquisition of Tiscali, but decided not to go for it as a whole. However, we have discussed potential cooperation and offers to their customers in case Tiscali does really leave the country, as announced at the end of last year.
➎ Volný says it’ll continue focusing on corporate customers. Why do you prefer corporate customers to retail clients?
We will continue to focus on two customer segments: residential and business. Standing on two strong feet gives us stability and strength. Our local loop unbundling and WiMAX-based infrastructure perfectly support both customer segments.
➏ Volný was the first telecom provider to launch VoIP services. Did you expect this service would earn more customers, since it’s such a cheap alternative to other voice services?
VoIP is just a technology that makes the backend easier for us. For the customer, it’s still a fixed-line voice service. The offer has very favorable pricing, like free calling within the network and cheap prices for international calling. We are very happy with the customer development so far. Considering that we’ve focused the product on a bundle with ADSL, the numbers are very good. And, thanks to our launch of VoIP on Nokia mobiles, customers will not only be attracted to cheap calls, but also to other services that we offer.
➐ What changes are we seeing on the broadband Internet market?
The broadband market has developed a lot over the last two years. Broadband is finally becoming devilishly fast, and users can experience the advantages. At current speeds, multimedia applications become interesting to use — and that’s just the beginning. This will create a lot of pressure on the slower-speed providers using Wi-Fi. On the other hand, there are also new entrants to the market. Cable operators offer Internet on their networks, and mobile operators have also started doing so. At the moment, it still seems ADSL is the simplest and cheapest way to offer truly high-speed Internet.
➑ Internet penetration to Czech households is still low, with only about one-third of households having access. Do Czechs tend to be ignorant of new technologies compared to other EU nations?
Absolutely not. I think the Czech people are very open to technologies and the relative development has been good. Previously, the pricing for high-speed Internet was limiting and keeping many people away from getting ADSL at home. Today, the limitation comes more from low PC penetration at home.
➒ Speaking of the EU, Czechs and Austrians have a lot of common history. As an Austrian manager, do you feel any rivalry with Czech businessmen?
I haven’t felt any so far. I think the Czech and Austrian mentalities go along quite well and Austrians get along much better than most other nationalities with the Czech.
➓ Perhaps the biggest tension between Czechs and Austrians has been caused by the Temelín nuclear power plant. Do Austrians really believe they can close the plant by blocking the borders?
Settling this issue is up to politicians and not businesspeople. I understand Austrians are afraid of nuclear power, since the country voted against it. However, I think the measures taken, such as blocking the borders, are absolutely not right.
Want your top manager to answer our 10 Questions? Send a message to Paul Voosen at
pvoosen@praguepost.com

Paul Voosen can be reached at pvoosen@praguepost.com


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