Privatizing telecommunications

The collapse of communism in Russia and Eastern Europe has seen capitalism begin to embrace telecommunications. Deutsche Telekom, together with Americtech of the USA, paid $875 million in 1994 for a joint share in Hungary's Matav PTT company. The Czech Republic has also sold a sizeable portion of its national telecommunications concern, SPT Telekom. Various international consortia were active in the bidding.

The path leading toward privatization is not always smooth. In Argentina, the first round of bidding for the public telephone service provider Entel was declared invalid, leading potential bidders to withdraw in exasperation. The process was eventually completed in 1991 with Entel split into a northern section, which was sold to Telefonica de España, and a southern concession, sold to a partnership comprising Italy's STET and France Cables & Radio. Greece has also experienced protracted delays in the attempted privatization of its Hellenic Telecommunications Organization.

The operating environment is a vital consideration for privatization of telecommunications. In the run-up to its share issue, Deutsche Telekom called for clear regulatory guidelines for Europe's telecommunications industry. The European Union governments agreed to end monopolies on their telecommunications networks by 1 January 1998. The use of cable TV, road, rail and energy networks for wider telecommunication services (other than basic phone calls) is in the process of liberalization. Alliances are steadily being formed to address cross-border opportunities for value-added data and private network services. Privatization is proving to be a major catalyst in the rapid transformation of telecommunications services.