Orange Polska Sa

Good morning, ladies and gentlemen, and welcome to the Orange Polska first half results call. After the initial presentation, there will be a question and answer session in which we'll have the chance to ask questions either by phone or by web. I will now hand over to the Orange Polska team. Please go ahead.

Thank you. Good morning, everyone. Welcome to our call summarizing second quarter NH1 2021 results. Our speakers for today's presentation will be Julien Ducarot, CEO of Orange Polska, and Jacek Kunicki, our CFO. Let me now hand the floor to Julien to begin the presentation.

Good morning, ladies and gentlemen. Welcome, everyone, in our conference summarizing second quarter and first half of 2021. So, as usual, I will start with the highlight of our quarter, Jacek will take over more on the financial and I will come back to summarize our second half of the year. So let me start on the slide number five. So those are the key highlights of the quarter. Obviously, one of the main items that you remember that was our announcement of our strategy.grow. at the end of June, which we have laid down our priorities for 2024. Just to remind you, so far, this is a natural evolution from the previous plan with as well some new elements, which we believe will help us to accelerate our growth and as well lay down foundation to go even further beyond 2024. Financially, we want to grow faster and in a more sustainable way, ensuring benefit of this growth with our shareholders. Financial results in Q2 and in H1 were strong, driven by robust performance of our core telecom services. Commercial results were solid, clearly in a context that was not as easy as we thought at the beginning of the year. I will mention here still the ongoing pandemic for the sales part. But as well, we have to notice that the weather was quite unexpected as well, impacting as well some of our operations, especially when we are talking about fixed. However, I believe that this is more a temporary drop and we are confident that the demand will come back after the summer break. We have as well revised our offer portfolio, and I will take some minutes to talk about it, which I believe is quite important, and it is in line with our strategy of more for more, and as you might have noticed as well, the environment is getting hot with inflation, and we believe as well for us the move of the more for more and create more value is important in this context. And as well, we have announced in July some important steps regarding the FibroCo, and we are still fully on track to be operational by the end of August, or operational from September. So going on the next slide, number six, let's start with the overview where we stand after half of the year versus our full year guidance and expectations. Revenue increased by an impressive 4.3%, driven by convergence, our ICT services, and equipment. This dynamic will slow down from Q3, when it will start to reflect regularly H1. Growing revenue fueled over 4.5% EBITDA growth. We are very pleased that this growth is derived from improving direct margin, which is the direction we want to take to have this sustainable growth for the long term. Please note as well that announcing our strategy, we increased our guidance for EBITDA growth this year. We now expect it rate will have a very low impact on the margin. CAPTEC is slightly higher, which reflects more evenly timing of spending and prolonging slowdown of the real estate market. Our full-year plans here also remain unchanged. On page 7, we start to review our commercial performance. So let me start with convergence and fibers. We present here together as fiber is a key driving force for performance in convergence, both in volume and value terms. A strong growth of convergence revenue is fueled almost equally by growth of customer base and growth of output. As I already mentioned, net addition this quarter were affected by low customer activity after lifting pandemic restriction, and as well, especially in Q2, due to weather conditions. Harpo growth, however, accelerates to 6%, mainly driven by an increasing adoption of fiber. One of the reasons why fiber generates higher harpo than copper is increasing popularity of higher speed options, which are additionally paid. Their share in the total fiber customer base is now 16% versus only 7% a year ago. So we can see that the demand of the customer for higher quality and higher speed is clearly growing, which mechanically, as I said, is growing our output. In Q2, we added 48,000 new fiber retail customers. This was more than a year ago. Fiber is now the largest technology in our total fixed broadband base with a share of 30%. This quarter, it overpassed ADSL, which symbolically marks our technological transformation. We went from technology gap to technology edge. Moving to slide number eight, mobile handset customer base is growing at a steady, healthy pace. In Q2, net additions were 83,000, which was more than last year and comparable to Q1. In pre-pay, In Q2, customer base returned to growth after a few quarters of declines. Lifting of pandemic restrictions resulted in higher mobility of people, which fueled activation of new prepay cards. You might remember I was commenting that we were not performing so well on prepay in the past due to the closing of the border or the restrictions to enter the country, which clearly we see now that it's getting better and now We are very pleased to say that in Q2, ARPO in mobile-only services was growing both in post-pay and in prepay. In post-pay handset offer, it increased by 1.8%. This turnaround has taken place both in B2C and B2B and is an outcome of our strategy focused on value. In Q2, it was also supported by partial return of roaming in this growth. In prepay, ARPO was growing for a few quarters, but in Q2, it accelerated to 6%. Also, as a result of our pricing strategy and growing share of customers with unlimited voice and text bundle. Here, we also benefit from higher ROI. With our different actions, we are able to minimize the impact of unfavorable impact of new cash back regulations. I'm going to the next page where I just wanted to take one minute to show you a bit more operation and how we came with the design of our offer. So we continue to adopt the more for more policy, which is especially important in this increasingly inflationary environment. It's done either through straightforward price increase or changes in the tariff structure in such a way that we will encourage customers to choose more valuable packages. In May, we increased our four mobile subscription plans by 530. It's on the left side of the chart. In exchange, we are offering increased data package and also subsidized OTT content. We lowered the barrier for 5G availability as we see that the penetration of the adoption of 5G smartphone is increasing in our portfolio. Change to convergence log offer were introduced a few days ago. They were not simple price hikes. Instead, we restructure our package to promote higher end option and TV content. Our value strategy is also supported in our smartphone price list as we subsidize handsets in the high-end tariff and earn a margin in the low-end option. As always, new subscription prices apply only to new signed contracts with custom. The terms of existing contracts do not change. In prepay, we have recently introduced another increase of pay-as-you-go tariff. More importantly, however, We aim to generate more value from unlimited services where a top-up allows unlimited voice and text and a defined data allowance for a given period of time. These options are growing in popularity. They are now responsible for majority of prepaid traffic and revenue with above average output. Here we have also modified our pricing in a more for more strategy. All these changes were made very recently. We expect positive impact to gradually contribute to our results and help to tackle the inflation pressure. Going on the next slide, number 10, just a brief update on the FiberCo. So we signed, I remind you that we signed the transaction in April. Now in July, we just concluded some important steps toward making FiberCo operational. So it's a good timing for an update regarding this very strategic transaction for us. First and more important, we obtained debt financing for 3.1 billion SLOTI that will finance more than 80% of FibroCo network rollout capits. Please note that obtaining this financing was equally crucial for the success of this transaction as finding right equity partners. So this is a major development to facilitate operating activities of FibroCo. Of course, this debt will not be guaranteed by Orange Polska and will not be on our balance sheet. Secondly, we carved out and transferred almost 700,000 fiber households out of our existing footprint to FiberCo. It ensures that the FiberCo will generate cash flow from the start of its operation. This means that we will now pay FiberCo monthly access fee for around 170,000 customers that have active services on this footprint. On the other end, We will render some services to FiberCorp so the net impact of this flow will be balanced. We are now only awaiting regulatory approval and we expect closing of this transaction by the end of August. So now let's go to the financial with Yacine.