Mission Description
The U.S. Department of Commerce is organizing an Information Technology and Telecommunications Trade Mission to Poland, Czech Republic, and Hungary, April 18-25, 2002. The mission will provide a unique opportunity for U.S. IT and telecom service and equipment firms to either gain a foothold or advance established interests in the above IT and telecommunications markets. The mission is expected to include ten participating companies.
Mission Goals
This is a commercial mission intended to increase export sales of U.S. goods and services with a focus on the IT and telecommunications sectors. The mission's goal is to provide first-hand market information and meetings with senior government officials and potential business partners for interested U.S. IT and telecom firms.
Mission Scenario
The trade mission is designed primarily for one-on-one business meetings which each participating U.S. firm will have with counterparts in Poland, Czech Republic, and Hungary. These one-on-one meetings generally will serve to introduce the U.S. participants to prospective agents, distributors, licensees, and other possible partner firms in the above countries, depending on each U.S. firm's particular mission objectives. Delegation members will participate in market briefings, where they will meet with U.S. Department of Commerce market specialists and local business officials to discuss current market conditions and opportunities for U.S. IT and telecommunications firms. Meetings with or briefings by local government officials on the IT, e-commerce, and telecommunications policies of the three countries may also be arranged. In addition, there will be official receptions to facilitate networking with the broader business community at each stop.
Timetable
The mission is scheduled to visit Poland from April 18-19, 2002, the Czech Republic from April 20-23, and Hungary on April 24-25. The itinerary is for mission members to arrive in Warsaw on Wednesday, April 17 and meet with key government and business officials on April 18-19. Mission members will depart for Prague on Saturday, April 20, spending the weekend there before conducting government and business meetings on April 22-23. Mission delegates will then travel to Budapest, Hungary the evening of April 23. Meetings in Budapest will take place April 24-25. The precise schedule will depend on the availability of government and business officials and the specific goals of mission participants in each country. For companies wishing to visit Bosnia and Herzegovina, Croatia, Slovakia, or Slovenia, the U.S. Commercial Service posts can arrange one-on-one meetings with local businesses either before or after the core mission dates under the Commerce Department's Gold Key Service.
Recruitment for the mission will begin immediately and is expected to conclude by March 18, 2002. Applications received after that date will only be considered if space and scheduling constraints permit.
Commercial Setting
Poland
Telecommunications
Poland is the giant of Central Europe with a population of 38 million and has one of the most successful economies of the region. Telecommunications is a key industry and is one of, if not the most, crucial sector of the Polish economy. The overall telecommunications market in 1999 was estimated at $8 billion, with telecommunications services estimated at $4.8 billion. Telecommunications services include fixed-line and mobile telephone services, data transmission and Internet access services. The value of the services market is growing at a rate of approximately 16% per year, with the cellular segment experiencing 45% growth. The Polish telephone network is estimated to be growing at a rate of 15% per year.
Planned investments in the telecommunications sector are $14 billion from 2001-2005, and an additional $17.5 billion by the year 2010. Despite huge investments over the last ten years, the Polish telephone infrastructure, with a telephone density of 26 telephones per 100 inhabitants, is still far behind other European countries. While there are about 33 telephones per 100 people in cities, the number drops to only about 15 per 100 people in rural areas. Cellular penetration is 10% (versus 42.5% in the U.S.). There is tremendous pent-up demand for telecommunications services and infrastructure in Poland.
Given the lack of sufficient domestic production of telecommunications equipment, Poland relies heavily on imports. U.S. exports of telecommunications equipment to Poland were $124 million in 1999. This amount declined by 35% in 2000 due to competition from Western European suppliers.
The Polish government has taken several measures to liberalize its telecommunications market. According to Poland's WTO commitment and its latest telecom law, the incumbent's (TPSA's) monopoly in long-distance public services ended on July 1, 2001, but TPSA will retain its control of international services until 2003. Domestic public services are entirely open to foreign investors, subject to obtaining a license through a public tendering procedure in accordance with government policy. Internet, data transmission, VSAT and paging services are also open to foreign investors (up to 49%) upon obtaining a license; licenses for these services do not require going through a tendering process.
Information Technology
The Polish IT market has been boosted by successive years of strong economic growth, a sharp rise in foreign direct investment, and implementation of large scale IT infrastructure projects in government administration, banking, and financial services. Additionally, major reforms in the public sector (health care, pensions, administration and education) and the privatization of entire sectors of the Polish economy continue to contribute to higher levels of investment in information technology. The IT market is pushed by strong PC sales and related technologies, the demand for LAN, and a growing Internet sector.
The size of the IT market in 2001 was $3.1 billion, of which $1.5 billion is spent on computers and peripherals. Poland's IT market grew 12 percent in 2001 and is expected to grow 10 to 11 percent annually over the next several years.
Hardware accounts for 60 percent of Poland's total IT market. In 2001, Poland's hardware market was worth an estimated $1.8 billion, growing 9.5 percent. The PC market is worth approximately $914 million and is expected to grow over 11 percent annually for the next several years. Due to the development of the telecommunications infrastructure, the data communications market grew 12 percent in 2001 to reach an estimated market value of $192 million.
The market for packaged software has grown substantially over the last few years, reaching a market value of approximately $400 million in 2001. Market growth reflects a rise in the demand for computer systems used for enterprise resource planning (ERP), data warehousing, web servers, and foundation-level databases. The major elements of purchasing decisions are: software quality (67%) and price (65%). Technical documentation, warranty conditions and support provided to clients are other key elements considered by clients. Supplier's market share is the least considered factor.
With upcoming deregulation of the telecommunications sector, higher phone penetration and falling prices of ISPs, Internet use in Poland is forecast to climb from eight percent at present to 50 percent by 2007. Approximately 38 percent of users obtain access through a university or other educational institution, 36 percent at work, and about 26 percent at home. Internet usage is concentrated in large metropolitan areas, with less than 9 percent of Internet users in smaller cities and rural areas.
Computer services are considered to be one the most dynamic and promising segments of the Polish IT market, representing over 28 percent of the total IT market. The services market grew 17 percent in 2001 to reach an estimated $884 million. The rapid development of IT service continues as the market moves toward technology applications and services in place of just technology itself. The range of computer services offered in Poland include integration services, operations management, computer educational training, consulting, hardware maintenance and services, and data processing. There is also a growing market for high-end consulting services. However, a direct presence in Poland is usually essential in order to secure consulting contracts. U.S. companies that do not have offices in Poland are advised to partner with Polish companies to jointly pursue projects.
Czech Republic
Telecommunications
The rapid development of telecommunications services in the Czech Republic has followed the equally rapid development of the telecommunications infrastructure. The penetration of fixed lines reached 37 lines per 100 inhabitants, while mobile penetration exceeded 50% in mid 2001.
The overall telecommunications market is estimated at $ 5.5 billion, with telecommunications services projected at $ 3.1 billion in 2001. The market for telecommunications services has started to boom after the monopoly for voice service ended on December 31, 2000. Since January 2001, the Czech Telecom Regulator (CTU) has issued 20 licenses for new operators, and more are expected to be issued during 2001. The projected growth of the services market in 2001 is 19%, followed by 25% growth in 2002, when full market liberalization will be reached by making available carrier pre-selection and number portability services.
Growing competition forces operators to offer new services and increase the service quality. In the area of data transfer services, competition is fierce due to early liberalization, the projected rise in Internet penetration and use, and analysts' projection of growth in revenues. In the end-user market (ISPs), growth is focused on broadband services. Czech Telecom, which owns the dominant infrastructure, has started to massively implement xDSL service. Since January 2001, three winners of the tender for establishing FWA (Fixed Wireless Access) have started to provide their services, which brought new opportunities mostly to small and mid-sized businesses. FWA services will soon be extended to 3.5 GHz, for which the tender is just being processed. Another trend that will particularly affect home-users is the spread of affordable broadband access via cable. The largest cable companies continue to invest in network implementation and plan to launch major data services in mid-2001.
The mobile market continues to be enhanced by tough competition among the three existing GSM providers and skyrocketing mobile phone penetration. As of June 2001, mobile phone the penetration exceeded 50%, with the yearly increase higher than 20%. According to analysts, however, the mobile market is becoming saturated. The possibility of increasing revenue is rising with data services and wireless e-commerce. All three operators have introduced WAP service and they are planning to offer greater bandwidth in the near future. Two of three mobile operators have introduced GPRS (General Packet Radio Service), which can increase data transfer speeds to 128 kBps. Next-generation UMTS networks are projected to start operation in 2002.
Information Technology
The market for IT products in the Czech Republic was valued at USD $1.74 billion in 2000, growing 11 percent from the previous year. Forecasts indicate this demand will reach USD $1.93 billion for 2001, USD $2.13 billion for 2002, and USD $2.32 billion for 2003. The IT market is expected to grow around 12 percent in 2001 and 7-9 percent annually over the next several years. Hardware sales account for approximately 47 percent of this market, while software and services account for the other 15 and 38 percent, respectively.
Banking and national public administration are two of the best demand sectors for IT products. According to IDC, the banking sector spent USD 90.5 million on information technologies in 2000, while the public sector spent around USD $71.8 million. Additionally, education, information, and entertainment industries will gradually need multimedia applications.
ISPs, banks, insurance companies, telecommunications operators, utilities, newly built retail chains, and the State government are driving the Czech hardware market. Factory automation and call centers also have a growing need for industrial computers.
Software is a major driver of the IT industry in the Czech Republic. There is a growing trend towards e-business applications and Internet connectivity, making ERP solutions, networking software, and software development areas of high growth. The Czech software market grew 12 percent in 2000 to reach USD $279 million in revenues, according to IDC. It is expected to expand 13 percent in 2001 and grow 10 percent annually in 2002 and 2003.
Software security products, such as Public Key Infrastructure (PKI) applications, firewalls, and products for digital signatures and associated applications also have high growth potential, particularly with the passage of the Electronic Signature Law. However, few Czech software companies focus exclusively on security.
The growing sophistication of technology, application solutions and integration, the limited skill base at user sites, and a trend towards networking and connectivity are making IT services the largest and most dynamic IT segment in the Czech Republic. Despite the relatively low wage rates of employees, external service and application providers are regarded as the best solution for organizations.
The Czech Republic's technical culture offers fertile ground for the development of the Internet. Although Internet usage in the Czech Republic is relatively low currently, it has increased exponentially since 1998. Czechs understand how it works, believe in its future, and grasp its potential. At the end of 2000, the Czech Republic had between 1.1 - 1.75 million Internet users (between 9-17 percent of the population), depending on the study conducted. The total number of Internet users is expected to grow at a compound annual growth rate of 31 percent over the next several years. Around 600,000 people currently use the Internet at least once a week.
Hungary
Telecommunications
Hungary's telecommunications market has been perhaps the most dynamic and fastest growing market in Central Europe during its transition period of more than a decade. Many analysts argue, that with a 37 percent teledensity, (the second highest and slightly behind Slovenia), Hungary's telecommunications sector can hardly be labeled "transitional". Hungary's telecommunications market is valued at an estimated $2.4 billion for 2001. According to forecasts, this number is expected to double by 2003. Cellular phone penetration at 39 percent has already exceeded fixed line penetration and is expected to double in 2001. Currently 15-20 major telecommunications companies dominate the market, and industry analysts expect that even after full liberalization only three major groups of telecom companies will be significant player for the next 4 to 5 years.
As a signatory to the WTO Agreement on Basic Telecommunications Services, Hungary committed to liberalize fully its telecommunications market by December 31, 2002. However, the latest telecommunications law, which will take effect on January 1, 2002, opens up all telecommunications services including domestic and international long distance for competition by December 31, 2001. The new telecom law is expected to reshuffle the balance of power among current market players, limiting firms with significant market power and supporting new entrants to the market.
In the absence of a significant domestic telecommunications equipment manufacturing industry, Hungary relies heavily on imports. Hungary is, however, the only country in Central Europe that has not signed the WTO's Information Technology Agreement. Therefore, tariffs on telecom equipment range from 7-15 percent. The U.S. government is currently negotiating with Hungarian government officials to reduce tariffs on IT equipment to the level of the EU's common external tariffs ranging from 0 to 5 percent. U.S. exports of telecommunications equipment increased by 20 percent from 1999 to 2000, reflecting Hungarian IT companies' desire to purchase state-of-the-art equipment manufactured in the U.S.
Information Technology
According to IDC, the size of Hungary's IT market was an estimated $1.3 billion in 2000, growing 11.6 percent from the previous year. Forecasts indicate IT demand was $1.47 billion for 2001, and will reach $1.65 billion in 2002, and $1.85 billion in 2003. The IT market is expected to increase 11-13 percent annually over the next several years.
Hungary's hardware industry has developed rapidly over recent years with large multinational companies dominating the market. More than two thousand firms are involved in hardware and software sales. The banking, information, and communications sectors, large public sector projects, and the continued growth in LAN server demand are driving market growth. According to IDC, the sales of data communications equipment in Hungary amounted to $82.2 million in 2000 and are expected to grow 16.6 percent to $95.9 million in 2001.
Hungary's Internet is highly advanced, even compared to most EU countries. Recognizing that economic development requires a modern telecommunications network, Hungary's government has made it a priority to improve the country's voice and data capabilities. Hungary's Internet market has benefitted from the privatization and limited competition in the telecommunications sector. The number of Internet users in Hungary has been growing steadily since 1996, with a cumulative growth rate of 50 percent per year, but has not yet reached the level of the United States or Western Europe. Most research studies put Hungary's Internet penetration rate between seven to 10 percent.
ISPs continue to arrive on the scene in Hungary, but industry experts predict a mass consolidation within the next two years. Startup ISPs have enormous opportunities in the Hungarian market, but they must have a sound business model, sufficient financing, competitive pricing, and a commitment to quality service to take advantage of them.
Hungary's software market is buoyant, but products are confined to low-end solutions. Only 25 percent of medium to large companies use integrated enterprise resource planning (EDP) systems, while only one-third of companies use other types of IT solutions, such as data housing, workflow management, or client resource management (CRM). Nonetheless, most IT companies currently in the market underestimate the level of knowledge and sophistication that Hungarian businesses have about various applications. Most IT companies have put very little effort into marketing new applications with the assumption that customers will shy away from them. Potential customers often simply do not know where to find the products or services that they want. Hungary's packaged software market was worth $326 million in 2001 and is expected to grow 12-13 percent annually over the next several years.
Criteria for Participant's Selection
A minimum of nine and maximum of twelve participating companies will be recruited in an open and public manner through direct mail and fax, e-mail, Internet advertising, public notices and press releases and targeted marketing through industry trade associations, domestic Commercial Service offices, state trade associations, and other multiplier groups. Notice of the mission will be published in the Federal Register, leading trade publications, and will be available at industry meetings, symposia, conferences, trade shows, etc. Any partisan political activities (including political contributions) of an applicant are entirely irrelevant to the selection process.
Contact
Mr. Jon Boyens
Office of Information Technologies
Telephone: 202-482-0573
Fax: 202-482-0952
Email: Jon_Boyens@ita.doc.gov
or
Ms. Beatrix Roberts
Office of Telecommunications
Technologies
Telephone: 202-482-2952
Fax: 202-482-5834
E-mail: Beatrix_Roberts@ita.doc.gov