Update on the telecommunications market in Poland, the EU's sixth largest economy - Part 3

Brief profiles of the main operators

Leading operator Orange Polska

Orange Polska is 50.67% owned by the Orange Group and 49.33% by miscellaneous shareholders. The company claims that it is the largest telecommunications services provider in Poland with the largest fibre network covering 37 cities. As noted in Part 1, as of the end of 2015, according to statistics provided by the Polish communications regulator UKE, Orange Polska had a leading market share of 27.7% of the mobile services market and is also the Internet market leader with a 30% market share of fixed and mobile Internet markets. Although its revenue share of mobile services in 2015 according to UKE was around 40%. The company currently owns four 15 year mobile licences in its own right, i.e. one for LTE, one for UMTS and two for GSM, but also participates via a joint mobile networking venture with T-Mobile Polska in that company's licences.

The company reported its fourth quarter and full year results on February 13th as follows (Euro millions):

2016; 2015; 2014

Gross revenue: 2,644; 2,831; 2,913

O/W mobile services: 1,222; 1,314; 1,365

O/W mobile equipment: 249; 154; 102

OW fixed services: 1,068; 1,215; 1,319

O/W other: 105; 148; 132

O\W intra: 33; 31; 35

Adjusted EBITDA: 922; 842; 725

Capex in 2016 was PLN2.001 billion flat with PLN 1.998 billion in 2015.

Orange Polska took a significant goodwill impairment of Euro 507 million in 2016, based primarily on a decrease in competiveness on the ADSL market, a downward adjustment of the revenue estimates for the mobile market and an increase in the post-tax discount rate due to a decline in the country's sovereign rating by the rating agencies. The net carrying value of assets tested was brought down to the value in use of long-term assets and working capital at 100% at December 31, 2016 (Euro 3.8 billion).

As of the end of 2016, during which 755,000 additional households were passed by its fibre network, Orange Polska's had the capability to serve 1.5 million households in Poland with a fibre-based service. Actual connected fibre customers increased by 31,000 in Q4 2016 to 88,000 by the end of 2016, and according to the company as of early February it had over 100,000 subscribers. According to Orange Polska's CEO Jean-Francois Fallacher, 51% of the company's fibre customers take more than one service and 80% of the fibre customers the company added in Q4 2016 were completely new ones.

Orange Polska states its base of converged customers (those with more than one service) has grown from 539,000 in 2013, to 728,000 in 2015 and 879,000 at the end of 2016. On average, each of these customers takes at least four Orange services. According to its latest annual report for 2016, one of the key strategic objectives of Orange Polska is to be the 'convergence leader', providing mobile and fixed-line service bundles. The company says that it is the only Polish operator providing bundled services to the mass market and believes this gives it an edge over CATV companies that lack mobile service capability. In 2015, according to UKE it ranked second in subscriber terms in the bundled services market with a market share of about 15.3%,

Mainly as a result of the growth in fibre customers, Orange Polska's high-end broadband customers increased by 56,000 to reach 500,000, or about 25% of the company's total broadband customer base. Orange Polska has around a 55% share of the fixed telephony market, which also translates into a similar share of the xDSL market.

In December 2016, Orange Polska signed the extension of a cooperation, first set up in 2011, with T-Mobile Polska related to the sharing of network transmission  based on new 4G LTE technologies operating in the 800 MHz and 2.6 GHz frequency bands I

In December 2015 an EU Court upheld the decision of the EC of June 2011 that imposed a fine of Euro 128 million on Orange Polska for abusing its dominant position in the wholesale market for broadband Internet access in Poland. An Orange Polska appeal with the Court of Justice of the EU is due to be heard in 2017. In 2011, the Polish Competition Authority (UOKiK) sanctioned the four major Polish mobile operators, including Orange Polska, for collusion to delay the development of new services in the mobile television market. This sanction was nullified by the court for the protection of competition and consumers. UOKiK appealed and the decision of the court of appeal is expected in March 2017.

P4, operating as Play

P4 (Netia Mobile) of Warsaw is Poland's second largest mobile operator with a subscriber share in 2015 according to UKE of over 25%. In June 2016 Reuters quoted local news-source Puls Biznesu as saying that unnamed informants had told it the owners of P4, namely Greek fund Tollerton owned by Olympia Development and its Icelandic counterpart Novator, were aiming to sell the operator based on a valuation of around $3 billion. .The newspaper listed big private equity funds including KKR, Blackstone, Cinven, Advent and CVC as potential buyers. However, in early October 2016 Reuters reported that Tollerton had abandoned the idea as offers had not met their expectations.

In November 2016, P4 published results for Q3 2016, with total revenue up 12.8% YoY to PLN 1.566 billion. Total contract customers grew by 370,000 to 8 million and the total customer base reached 14.6 million. In March P4 reported that over 2016 its YoY revenues had grown by 12.5% and that it had ended the year with 14.41 million mobile customers, of which 58% were post-paid.

On March 10th it was announced that P4 had entered into a PLN 7 billion senior facilities agreement with at least eight banks, which would be used to refinance the outstanding debt of the group and a revolving credit facility.

Update on the telecommunications market in Poland, the EU's sixth largest economy - Part 1
Update on the telecommunications market in Poland, the EU's sixth largest economy - Part 2
Update on the telecommunications market in Poland, the EU's sixth largest economy - Part 3