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East: Conference Sees Potential In Central, Eastern Europe For IT Growth

While the European Union is considered a saturated market with little expected growth in the telecommunications industry, Central and Eastern Europe are being viewed as a lucrative expansion area with rates of growth exceeding by three to five times those in Western Europe. A number of speakers at a recent conference in New York on Central and Eastern European development stressed the potential of the region in terms of information-technology (IT) development and e-services.

New York, 7 November 2002 (RFE/RL) -- Potential investors are wary of the mixed investment climate in different parts of Eastern and Central Europe, but it is clear the region has attracted attention in the area of IT development.

That was one of the messages to emerge from a conference in New York last week on infrastructure development in the region. The conference, hosted by a private law firm, attracted a range of Western investors as well as municipal leaders from the region.

Many of those attending the conference expressed optimism regarding the region's investment outlook, saying Eastern and Central European economies are still expanding despite downturns elsewhere in the world. Other regional assets include a willingness among most area governments to continue with market liberalization as well as a relatively inexpensive and skilled work force.

Paul Grosse is the president and chief executive officer of Deutsche Telekom, Incorporated, a New York-based subsidiary of the Deutsche Telekom Group based in Frankfurt. Grosse led Deutsche Telekom's initial privatization efforts in Ukraine and Hungary 10 years ago. He told the conference his company has made great gains in the region since then. Deutsche Telekom is the largest investor in the telecommunications industry in Central and Eastern Europe, and Grosse said the company intends to expand further.

"The markets are also highly competitive -- perhaps with the exception of Slovakia and Croatia, where liberalization and competition will come only in 2003, but even there the competition is preparing for this moment. And what attracts us most, of course, is the growth potential that the markets still have. While we are looking at saturated markets in Western Europe there's still a lot of growth potential in Eastern and Central Europe," Grosse said.

Deutsche Telekom's revenues from Central and Eastern Europe totaled 8.5 billion euros in 2001 and represent at least 10 percent of the overall revenues of the Deutsche Telekom Group. Deutsche Telekom joint ventures have some 20 million customers throughout Eastern and Central Europe. Growth for the company's ventures in Russia and Hungary between 2001 and 2002 was 25 percent -- an unimaginable leap, Grosse said, in comparison to U.S. or Western European growth rates.

"Eastern and Central Europe is a growth driver for us. That's where we want to be, that's where we want to develop additional business and we want to lead these entities to successful competition and make them 'lean and mean' [cost-effective and powerful] in the market. There is a strong commitment of Deutsche Telekom to Eastern Europe and Central Europe and I think we have made a significant contribution to the economic development in that area," Grosse said.

Grosse's enthusiasm was echoed by Michel Noel, fund manager for DFC Group, a private investment group based in London. Noel announced that in the beginning of next year, the DFC Group will launch a special fund aimed at financing infrastructure projects in Central and Eastern Europe.

Trajan Basescu, the mayor of Bucharest, told the New York conference that the Romanian capital, as the most populous city in Central and Eastern Europe, is a natural base for development throughout the region. Basescu told RFE/RL that Bucharest has already achieved the necessary standards in its IT development.

"Bucharest, as the capital city of Romania, I think in this moment is one of the most advanced capitals from Central and Eastern Europe from the IT point of view. In Romania, we already privatized the [state] telecommunication company, we have three big GSM companies, we have already in Bucharest two systems for data transmission on fiber optics, we have two companies that cover all of Bucharest. We can say that from this point of view, Romania [has] already reached the necessary standards regarding the Internet and communications in general," Basescu said.

Antanas Zabulis is the general manager of Omnitel, the largest mobile-phone provider in Lithuania. He said this year the number of mobile subscribers in Lithuania surpassed that of those with fixed lines.

Among the three Baltic countries, Estonia remains the leader in IT-structure development and Internet penetration rate, at 38 percent.

Lithuania achieved a penetration rate of 21 percent this year, but in the next three years, Zabulis said, there will be significant changes of the overall Internet structure in the country.

"The fields of activity are to start with access -- the Internet access points -- spread over all over the country. The second part is the training. So, first we get people used to Internet. The second part is training how to use the Internet, and the third part is e-services," Zabulis said.

Zabulis said last year a consortium of private companies initiated the "Window to the Future" project aimed at establishing public Internet centers and making Internet easily available throughout Lithuania in the next three years.

"The public Internet centers project was very enthusiastically welcomed by the local governments and communities [who support] the very rapid establishment of the Internet centers. The whole idea is based [on the idea that] we provide the Internet, we provide some equipment and then the national government should pay themselves for the facilities for the Internet access points. They should also take [maintain] the Internet access points. And that is like a three-year contract. As soon as this three-year contract has expired, then the entire Internet access point is owned by the local government," Zabulis said.

In September, the Lithuanian government decided to join the activities of the alliance by signing a corporate agreement between "Window to the Future" and the Interior Ministry.