Orange Polska Sa

Ladies and gentlemen, thank you for standing by. And I would like to welcome you to Orange Polska Q1 2022 conference call on the 26th of April, 2022. At this time, all participant lines are on listen-only mode. The format of the meeting today will be a presentation by the Orange Polska management team, followed by a question and answer session. So without further ado, I would now like to pass the line to Leszek. Please go ahead, sir.

Thank you. Good morning, everyone. Welcome to Orange Polska Results Conference, summarizing first quarter of 2022. Speakers for today are CEO of Orange Polska, Orange Dukera, and CFO of Orange Polska, Jacek Kunicki. Let me hand the floor to Julien to begin the presentation.

Good morning, ladies and gentlemen. Welcome everyone on our conference summarizing first quarter of 2022. I will go through and Jacek through the financial review and at the end I will answer your question. So let me start with slide 5 with our key message for Q1. So first, let me emphasize that the world around us changed dramatically at the end of February. We undertook immediate action to use our resources to carry support for Ukraine and the influx of refugees. I will talk more about it in a moment. Our commercial results in Q1 were quite solid, a bit contrasted with a slow start in the quarter and an acceleration toward the end of the quarter. ARPO continued to grow in all key services. Our financial results were in line with our plan. We achieved good underlying performance due to core revenue growth and cost saving. This has allowed us to mitigate a much higher energy bill, which we were flagging to you in February. I have a pleasure to say that a few days ago, we opened our 5G lab. As you know, 5G technology will be the key catalyst to new business opportunities, mainly on B2B, which is an important pillar of our growth strategy. In the lab, we will develop 5G use cases in an open model with partners and startup, and we will demonstrate their benefits to our customer and encourage them to adopt it. The lab will also stimulate our innovative mindset and contribute to our cultural transformation. In this context, we are obviously looking forward to distribution of dedicated 5G spectrum, which is necessary to unlock this potential. Let's look at the next slide. As soon as the war in Ukraine started, we rushed with support action on different fronts. In such circumstances, connectivity is crucial. Since the first day of the war, Orange teams have been working on all border crossing points, handling out free prepaid starters and helping in registration, which is obligatory in Poland. Until now, we have activated around 400,000 starters. You can see big jump in our reported prepaid base because of it. The big influx of refugees resulted in huge increase in traffic. For example, in the first day of March, data transfer between Poland and Ukraine increased over 200 times. This resulted in overloading of the site at the border and we had to boost network capacity by launching additional mobile base stations and enhancing some of the existing ones. In such moments, it's all about people. We offer some of our property to host refugees. The biggest one is our training center just outside Varshow, where we currently host around 350 people, mostly children, with their mother. this action are coordinated with the local authorities. Apart from this big effort, obviously coordinated by company management, there has been and still are plenty of grassroots initiatives spontaneously organized by our employees. I'm proud as the CEO of this company to be part of it and to be able to support the Orange team that dedicate their time and energy to provide humanitarian aid. Going to the next slide. Our financial results in Q1 were in line with our plan. They reflected the guidance that we presented to you in February. We maintain all our goals for this year. Revenue grew by 0.4%, but excluding regulatory impact, this was a strong 4.5% growth driven by core telco services, ICT, and energy resale business. Growing retail revenue fueled almost 2% EBITDA growth and helped to offset impact of surging energy prices on our costs. We also generated additional cost savings. Economic capex was much lower than last year, largely due to timing of project. We have not yet started renewal of our radio access network due to the delay of 5G auction. Let's look at our commercial activities on slide six. Our commercial results in Q1 were satisfactory, especially in fiber and mobile, taking into account challenging environment. The strongest demand in Q1 was for fiber and mobile in standalone offer. As a next step, we will focus on upselling convergence packages to this customer. Fiber, in particular, continued to sell very well. retail customer reach symbolic 1 million in the first day of April. Our fiber reach is now almost 6.2 million households and is growing mainly through the fiber GV. Mobile customer base is supported by all mass market brands and B2B. Our main brand is naturally positioned as a premium offer, but we are also mindful of the more price-conscious customer segment. We address this with our Flex new mobile and prepaid offering. I would like to underline especially good result of Flex offer this quarter. Because it is fully digital and very flexible, easy to onboard, it is an attractive proposal for migrants from Ukraine. ARPO continues to grow in all key services, which is obviously very important in the context of inflationary challenges. Let's have a closer look at this topic on the next slide. We have been the leader in the more for more strategy in Poland. Please note that we made the first price increase as far back as 2018 for B2B customers. Since then, we expanded this strategy to all other key services. This is a key factor behind turnaround and up of our result and trend in ARPO. On this slide, we wanted to give you the two directions by which we address the inflation. Firstly, to remind that price increases are only for new acquired and retained customers. So by nature, it takes two to three years for them to roll into entire customer base. The pie chart on the slide illustrates this process. The blue part represents customers that were already rolled out on new tariffs. The orange part is our further monetization potential. You will notice that it's around two-thirds that are on the latest one, and the rest is subject to more for more strategy. Secondly, value strategy is on top of our agenda in the current environment, and we have a number of options to pursue it further. Apart from potential further more-for-more price adjustments, we are reviewing certain fees that customers are paying us and also terms and conditions of customer contracts. For obvious reasons, we cannot be more specific. Naturally, we have to take into consideration the competitive and regulatory landscape, but we will continue to look for new levers to implement our value strategy. Let's zoom on ICT on the next slide. Q1 was another strong quarter for our ICT business. Revenue growth exceeded 20%, and this was purely organic growth. It was driven by two key business factors fueling our software and application domain. Firstly, our software subsidiaries continue to benefit from high demand for their services. Combined revenue growth of Bluesoft and Craftware amounted to 40%. Secondly, cloud adoption contract resulting mainly from transformation of company approach to data analytic and modern communication solution. These contracts are mainly based on Microsoft portfolio. We are pleased that portfolio of our city customer is getting more diversified. On the other hand, deadlock related to new EU fund is affecting volume of business with the public sector. We are looking forward to unlock this growth potential in the near future. On the slide, we provide a few examples of digital transformation projects from different industries realized by our group. Digitalization of business is the number one trend among corporate from many industries. It brings tremendous benefits. Reduced costs provide for new sales channels, enable for data analytics, just to mention a few obvious ones. Now, it is the level of digitalization that largely determines competitiveness and not low labor costs. Thanks to our very strong foothold in connectivity due to our massive investment in fiber and competency in the ICT area, built organically and through acquisition, we are uniquely positioned in Poland to take advantage of that trend. This is all for me. I hand the floor to Jacek.