Orange Polska Sa

Hello, good morning, everyone. Welcome to the Orange Polska conference summarizing results of 2024. We'll also summarize our dot-grow strategy. The format of the presentation will be a management team presentation followed by the Q&A session. Let me introduce speakers for today, starting with Ludmila Klimok, our CEO. Bożena Leśniewska, Deputy CEO in charge of business market, Jola Dudek, Deputy CEO in charge of consumer market, Jacek Kunicki, CFO, and Maciej Nowohoński, Management Board member in charge of wholesale market. And we have also with us Witold Droszcz, responsible for corporate strategy, who will join us for the Q&A session. Let me now hand the floor to Ludmila to begin the presentation.

Thank you, Leszek. Good morning and welcome everyone to our today's event. And we will start with key highlights for 2024 results. I have a pleasure to report on a very solid performance for Orange Polska for last year as we have delivered on all our objectives. And there are three areas of our performance which I would like to underline. starting with strong commercial performance. For 2024, we are reporting again the simultaneous increase of number of customers on all key telco products and of ARPO, particularly good in consumer segment. And it is fundamental as it brings the main contribution to growth of our revenues and growth of profits. On the enterprise segment, we were coping with challenging macro environment. We are looking to gradually rejuvenate the growth in ITNS area as we speak. In wholesale, we made full opening of our fiber network to our operators. This will boost monetization of our network and will limit the risk of overbuild. I am particularly proud that our customers have rewarded our efforts. In 2024, Net Promoter Score improved across all segments, allowing us to secure the top position on the market. This reinforces our dedication to a customer-first approach in everything we do. Secondly, we made important steps to secure our leadership and connectivity for our customers. After the first year of rollout, 5G network on newly acquired C-band spectrum is already available for 40% of population in Poland. This enables our customer to enjoy best of 5G with faster response and higher speeds. In parallel, we are advanced with renewal of our radio access network. This project will be completed this year. And as we deploy new radio, it brings immediately the improved quality to our customers. And also it is enabling us for better, more effective use of spectrum. In fiber, we have simultaneously expanded the coverage and brought the service quality up to a new standard. Thanks to XGS pond technology launched in 2024, we address the needs of the most demanding customers. As a result, Our financials were very solid. Growth of revenues from core telecom services, which has been exceeding 5% for full year. And this was the major driver for 4.6% of EBDA growth, which further was translated into the higher net income and close to one billion of generated cash. Let's make a zoom now on commercial performance. Commercial success is the essential driver for our profit generation, and namely, simultaneous growth of customer bases and our poor on key telco services. In convergence, which is the core of our strategy for household, we maintained a strong 5% year-over-year growth of the customer base, even with the improved dynamic of net additions versus a year ago. It confirms our right marketing approach to address the diverse competitive landscape. Our PO has been accelerating to more than 4%, reflecting our value approach in pricing, but also good demand for TV content and higher options for fiber speeds, which are now more and more popular among our customers. Growth in convergence is supported by continued growth for fiber. Fiber customer base has been increasing 16% year over year. It also includes 42,000 customers added from acquisitions of local fiber operators. We were more active in this area in last year. In mobile, we expanded customer base by a quarter of a million. Thanks to contribution of all brands on the consumer market and solid performance on SOHO segment in business. Here again, it was another year with ARPO growth as we are consistently executing on our value strategy. Going forward, we target to keep this good momentum. And I want to thank you for now and hand over the floor to Jacek.

Thank you, Ludmila. Good morning, everyone. Our financial results were strong as we visibly increased profits and delivered almost one billion zloty of organic cash flows. The headline revenue figure decreased year over year due to a drop of low margin product lines. However, revenues from value-accretive core services grew by more than 5%, driving up our overall direct margin. We maintained a high operating leverage and converted this direct margin growth into profits. As a result, our EBITDA increased by over 4.5%. We exercised discipline in capital expenses and translated the EBITDA to a solid net income and organic cash flows. Finally, We've further increased the return on capital employed, a key measure of value creation and capital efficiency. Let's now take a very quick look at how we performed versus our guidance. As you can see, we've achieved our 2024 financial objectives. with a low single-digit contraction of the top line, with a mid-single-digit growth of the EBDA, so at the higher end of the guidance, and with the e-CAPEX right in the middle of the guidance range. Obviously, the very good 2024 results create an elevated point of reference for 2025. But as you will hear from Ludmila later on, We're happy to take this challenge and continue the growth journey of Orange Polska. Let's now review our results in more detail, starting with the top line. Here you can see the revenue evolution in the last quarter of 2024. What is really important is that 6% growth of the core telecom services, which are absolutely key to our direct margins. we're constantly improving their growth trajectory through a simultaneous increase of the customer bases and the ARPUs. This is possible due to increasing fiber base, due to additional services upsold to our customers, and due to smart customer value management in our commercial activities. Now on to revenues from IT and IS. These have increased quarter over quarter by over 50%, or 180 million zloty, as we closed some important projects before the year end. It was not enough to match their level in the last quarter of 2023, but we definitely entered 2025 with a better sales momentum in this line. To sum up on the top line, We're very happy with the pace of growth of core telecom services. We're satisfied with the progress made in IT and IS services as we observe a better momentum here. Let's now turn to profitability. Our EBDA increased by almost 7% year on year in the last quarter of 2024, driving the full year results to a 4.6% increase. We are very happy with this performance. The increase was driven by higher direct margin stemming from the consistent growth of our core business. This was coupled with a slight decrease of indirect costs in Q4. On the one hand, costs were driven up by inflationary pressures and growth of the minimum wage. On the other hand, they were contained by cost savings and higher income from the fiber rollout that we do for the fiber. This last element brought us significant benefits in 2024, and we anticipate further solid margins from this going forward, both in 2025 and beyond, as we plan to further extend the footprint of Światłowódz Investition. To recap on the EBITDA, we delivered an excellent growth in 2024, over 4.5%. It was achieved by growth of core telecom services, so it's sustainable in nature. And we mitigated the impact of key headwinds with savings and with fiber rollout margin efficiency levers that we will also use in the future. Let's now take a quick look at net income. we achieved over 900 million of net income in 2024 as it increased by 12%. It was driven up by higher EBITDA and by lower costs of employee termination programs as we provided for the current social plan still in 2023. These gains were offset by higher financial costs and by higher depreciation linked with the new 5G license. Let's now move on to capex. Our economic capex amounted to 1.8 billion zloty in 2024. We invested into critical value creating assets. These include almost 230 million zloty investments in fiber, including EU subsidized rollout in the white zones and connections of retail customers. It also includes over 500 million zloty of investments in mobile. Here we reached a full run rate of 5G deployment and progressed well with renewal of the radio access network. This latter part will be finalized in 2025. These areas are key to our development and we're absolutely confident about the returns that we will be able to generate on these investments. Let's conclude the financial review with a quick look at cash flow. We're pleased with almost 1 billion zloty of organic cash loss last year. It was generated by a significant growth of cash from operating activity, driven predominantly by higher EBITDA. This was then offset by a different evolution of working capital requirements between the two years with a normalized level in 2024 as compared to an exceptional reduction of working capital requirements in 2023. My takeaway for organic cash flow is that we're happy with cash generation, close to the one billion Zloty mark. We're pleased that the growth of the OCF comes from operating activity, making it sustainable for the future. As you can see, we've also presented the free cash flows. It is important, an important measure, as it shows the all-in cash generation of Orange Polska. It includes fees that are less recurrent by nature, like Spectrum payments or EU subsidies. So we will continue to focus predominantly on the organic cash flows, but will also include the free cash flow in our regular reporting from now on. With this, I will conclude the review of 2024 results and hand the floor back to Ludmila.

Thank you. Thank you, Jacek. And as 2024 is an important milestone year for us, it is marking out the successful completion of our dot-grow strategy, which we have announced in 2021. It's time for a summary. In essence, this strategy was all about commercial growth. Growth in convergence, in mobile, in fiber, in wholesale, in IT and S. And performance achieved on all these areas was excellent. First, we have significantly increased customer basis simultaneously with ARPOS. We monetize our assets and investments with good execution of value strategy. As outcome, we achieved a 25% growth of revenues from core telco retail services during the plan. Secondly, we began to grab business opportunities in wholesale, reaching 60% revenue growth. And third, we excelled in providing ITNS solutions for digital transformation for Polish businesses, which resulted again in 60% increase of revenues, overperforming the growth of the market. Announcing DotGrow, we said that for us it is a value creation journey. And indeed, value creation from commercial engines was significant, offsetting the huge cost headwinds stemming from inflation and energy prices. And this source of growth makes it much more sustainable for the future. As a result, we have achieved higher financial outputs and we have returned to sustainable dividend payments, building value for our shareholders. In addition to robust financial performance, we also have delivered on a number of environmental and social goals. The most important was 78% decrease of CO2 emissions in the scope 1 and 2 versus the baseline, which we had in 2015. To sum up, the growth strategy has positioned Orange Polska is a leader across all key market segments. The net promoter score recognition, which I have commented earlier, confirms our customer trust in Orange Polska. And the success of all these achievements over the last four years would not have been possible without the dedicated efforts of our teams. And I extend my gratitude to all employees of Orange Polska. And now coming back to the core of our value creation. Throughout the .Grow strategy, all three commercial engines has delivered the growth of revenues and of the direct margin, each and every one. And as you can see, it was consistently growing value in every year of the strategy implementation. And I will now hand over to my colleagues to zoom in on the performance in respective markets.

Good morning. Convergence is a cornerstone of our commercial strategy in the B2C area. We initiated convergence strategy a few years earlier, but in DotGrow it really blossomed and delivered a lot of value. Convergence allows us to sell multiple services to a customer, satisfying his needs and maximizing the total business with the client. From the customer's point of view, It allows them to meet their needs in one shop thanks to a simple offer that gives an additional discount compared to stand-alone prices. This win-win situation results in higher customer ARPU and also in increased customer loyalty. During DotGrow we have increased the convergent customer base by 20% and I am pleased that we have simultaneously increased the ARPO from convergence by 18% due to value strategy, growing base of fibre and popularity of higher speed options. This combination of value and volume growth translated into almost 50% growth of convergence revenue over the last four years. These results are even more appealing, taking into account that competition in convergence has significantly intensified over the past few years. What was definitely critical for the success of convergence was the expanding the fibre footprint Let's look at that on the next slide. Fiber is a key asset in our commercial activity. It is a powerful tool to build long-term relationship with the customer and increase value to an upsell of more services supporting convergence. Fiber from Orange is now reaching around 9 million Polish households. We have extended the footprint faster than we had assumed in DotGrow. The key enabler for this was the rollout made by our FiberCoJV, but we are also extending our own network with projects using EU subsidies to deliver fibre to White Zones. Equally important is that we have significantly improved the monetization of our fibre investments through both in retail and wholesale activity. This is visible through higher saturation of our fibre network. We have achieved it despite fierce market competition, as we have benefited from strong demand for fast, reliable internet, successfully adjusted our marketing strategy to address local competitive battles, address the need for speed. Ludmila mentioned earlier today our offer with a speed of 8 Gbps, showcasing our quality leadership. Switching now to the mobile. Our mobile customer base increased by more than 1 million during DotCrow. It is a substantial achievement given that we are operating on a mature and very competitive market. There are several drivers for that. On B2B we are a key player in all segments of this market. Bożena will tell you more on that in a moment. On B2C we are addressing the needs of different customer groups and we benefit from the strength of the Orange brand. Main brand is complemented by very well performing B brand new and digital offer Orange Flex, which increased its customer base almost four times during dot grow. Precondition to the success is customer happy with connectivity experience. Quality and performance of our mobile network is essential to answer to constantly increasing data consumption. We significantly increased coverage and quality of LTE network. 5G C-band spectrum has doubled our total resources and, as we speak, is boosting capacity of our network. As a result, data download speed increased 4.5 times and we reduced number of congested sites. Customers appreciate that as evidenced by our return to Net Promoter Score number 1 position. Quality of our mobile network was an important facilitator of our more for more value strategy in commercial office. It was the key driver for mobile ARPU growth, which was consistently increasing year by year. Thank you and I hand the floor to Bożena.

Good morning, still good morning. In the dynamic landscape of the business market in the last four years, we solidified our leadership position in the telco sector and at the same time enhanced our role as an integrator and digital solutions provider. Let's begin with our core telco business. We delivered on our commitments across all business lines. In mobile, we enhanced our offering by focusing on customer experience and implementing a more-for-more strategy. This approach yielded positive results. Both ARPU and our customer base expanded significantly. Consequently, we achieved a remarkable 26% increase in mobile revenue. Our mobile offerings for business became the preferred choice throughout the period, as evidenced by a 32% market share, according to our estimates, obviously. Simultaneously, we addressed the growing demand for high-speed internet, which is crucial for the digitization of businesses. We doubled our fiber customer base and increased the share of fiber in our fixed broadband base. RPU rise by 11% and revenue from fixed broadband increased by 20%. In the area of data transmission, we faced the challenge of customers transitioning from legacy systems to more advanced solutions. We embraced this challenge by focusing on innovations based on our fiber network and software-defined WAN. This strategic pivot led us to 3% growth in the data transmission sector and strengthened our position as a preferred provider of network solutions reflected in our 58% market share. To summarize, despite the 40% decline in legacy narrowband, the overall revenue from B2B telco services grew by 10%. This resilience showcased our ability to adopt and thrive in a rapidly changing market landscape, providing that our growth strategy was not just about numbers, but about the fundamental shift in how we approached our business. Let's move to the page 21. During the dot-grow timeline, we experienced significant fluctuations in the IT and integrated services market. From the post-pandemic boom of digital transformation across all business sectors to a slowdown influenced by major tech layoffs and political shift in Poland. We demonstrated our ability to thrive in these circumstances, thanks to our diversified competencies and expertise in end-to-end integration and digital services. These resulted in a 60% growth in revenue. Orange Polska and our IT subsidiaries were ranked among the top service integrators in Poland, with the highest growth observed in cybersecurity and software development. In response to the increasing need for protection against cyber threats, we expanded our range of cybersecurity services, which includes threat intelligence, managed security services, incident response, vulnerability management, and obviously education on cybersecurity best practices. These services, provided by Integrated Solutions and Orange Polska teams, resulted in revenues from cybersecurity domain increasing by over 2.5 times. Our software subsidiaries, Bluesoft and Craftware, significantly increased their revenue from software development and technology solutions. helping businesses leverage technology to improve efficiency and thrive in the digital era. Our expertise in customized software development has been further enhanced by cloud data and AI solutions. The expansion into Internet of Things for industry and Spark Green solutions marked another significant milestone. We increased our presence in smart city solutions from 80 cities in 2020 to 150 in 2024. Additionally, we deployed a range of IoT solutions for transportation, logistics centers, retail, and media, with the number of machine-to-machine SIM cards used for IoT development exceeding 4 million. Thank you, and I hand the floor to Maciek.

Thank you Bożena. Hello everyone. Back in 2020 we have decided to pursue new opening for our wholesale line of business. We did it successfully. Let's see how we manage to deliver success. And here the market context is important. In the last five years telco market in Poland evolved quickly towards more fibre-based and more 5G-based connectivity. This evolution requires costly investments from each operator that has the strategy of growth. Our wholesale value proposition became for such operators a true alternative to their own investments. Our infrastructure is available now on a commercial basis to all operators. Wholesale access to fiber, high-capacity data transmission, long-haul fiber links, telecom ducts and poles, and mobile connectivity through such solutions like, for example, MVNO. Versus 2020, we have multiplied volumes of infrastructure sold to other telco players. The facts presented on the slide are self-explanatory. These achievements would not be possible without many improvements in the business model that we have implemented. This is in fact a story of rapid digitalization, automation, process simplification and focus on customer experience. Now our customers perceive us as true business partners and recommend our services to the others. A special attention needs to be made to the success of Światłowódz Inwestycje, Open Market Fiber Co. JV, co-controlled by Orange Polska and established back in 2021. As you recall, then we have decided that there will be a light business model applied in FiberCo. Almost all operations were outsourced to either Orange Polska or externally. And this model proved to be very successful. We are pleased with the cooperation with our investment partner. We are pleased with the operational results, both in terms of network construction and commercialization. Thank you, and I hand the floor back to Lyudmila.

Thank you, Maciej. After reviewing their commercial pylons activity, I want to have a look on transformation results. Transformation is another key area contributing to our value creation. The need to grow efficiency has dramatically increased over the past few years due to record high inflation and due to the surge of energy prices following Russian aggression in Ukraine. Nobody was anticipating such events in 2021 when we launched our dot-grow plan. We have pursued cost transformation across all our business model and you can see several examples on the slide and let me mention just two areas. First is digital acceleration. We have reached our ambition to run 25% of sales via digital channels which answers to customer needs for simple digital interactions and brings efficiency gains for us. The key lever here is our mobile app, which is now used by three times more customers versus what we had at the beginning of the plan. We now use as well AI to drive customer value management, which is improving customer loyalty and builds higher value for us. We have massively adopted the robotic process automation across the company, allowing us to save costs and to reskill our people. Second area which I want to underline is energy supplies. Facing the unprecedented energy shock in 2022, we mobilized our efforts to increase the share of green energy in our consumption mix. As a result, we have a portfolio of green PPAs that secure more than 60% of our energy needs, even going beyond by 2030. and at better prices versus currently available on the market. And this last topic connects us to ESG. And let's zoom on it for a moment on the next slide. Corporate social responsibility is in our DNA, in the DNA of Orange Polska, and it was one of the main pillars of the DotGrow plan. Four years ago, as we set our ambitious ESG goals, now we are proud to look on the results. I have mentioned already CO2 emissions. The objective to reduce it with two-thirds versus 2015 baseline seemed like a huge challenge, but today we state that we actually have overachieved it. We see from another side our purpose in empowering people in a safe digital world, in decreasing digital divide. So in addition to our focus on expanding highly performing superfast networks, bringing them closer to more people in Poland, we have conducted educational programs on digital skills, on responsible and safe use of new technologies for half a million of beneficiaries. By doing this, I'm convinced that we are making a real difference and we are contributing to the development of Polish society and economy. And I hand over the floor to Jacek to sum up on the financial performance of the DotGrow plan.

Thank you again. I've singled out five key metrics that underscore the great value creation which we have achieved during DotGrow. I believe that these figures speak for themselves. We grew revenues by 1.2 billion zloty since 2020. We grew the EBITDA by over half a billion zloty despite the unprecedented inflationary pressures and challenge from the rising cost of energy. We grew cash generation by over 50% and we halved our financial leverage. Finally, we achieved a fundamental improvement of the return on capital employed, raising it from 1.6% in 2020 to nearly 8% in 2024. This leap in performance has also enabled us to return to sustainable and growing dividends, which we are pleased to offer to shareholders. Let's now compare the DotGrow financial outputs with our mid-term guidance. DotGrow was always about increasing revenues and translating this growth through high operating leverage into a low to mid single digits increase of the EBITDA. Next, by keeping a stable capex, We plan to boost cash generation and the return on capital employed, all while maintaining a safe and sound balance sheet. The results show that we have done exactly as committed. Revenues in EBITDA growth is at the high end of the guidance. CAPEX spending is at its low end, and we have increased the return on capital employed by five times. We are really pleased with the value creation generated by the growth. We are already set on a new wave of growth for the future, but this is where I will hand the floor back to Ludmila for the outlook on 2025. Thank you very much.

Thank you. So as we have summarized on the results, and yes, we go to slide 28 on the priorities for 2025. So first of all, growth of core business remain the main goal. We aim to sustain the good momentum and convergence in mobile and fiber. Our second priority is to rejuvenate the growth in business segment and particularly in IT and AS services. Macro environment obviously is an important factor here that can impact us, but we are adjusting ourselves in order to better address customer needs in this area. We will further enhance connectivity experience for our customers. So this is our third priority by investing in 5G network, expanding our fiber footprint. As part of this, you are aware that we are participating in the 5G spectrum auction for 700 megahertz band. And 2025 is an important year for us as it is the first year of new strategic period. We are looking forward to presenting our mid-term strategy to you next month during a dedicated event. Now let's see how this agenda translates into the financial targets for 2025. So growth remain our main objective for this year. Our revenues will grow benefiting from the strength of our commercial plan. And we are confident to create value from revenue expansion in 2025. While we are guiding for growth on the total revenues, what is really essential is to keep the growth pace of core telco services. This is and will be the main growth driver for our profits. As you have seen, our EBDA increased by a strong 4.6% in 2024, above market expectations. Obviously, this raises the bar high for us for 2025. However, we are confident to increase the direct margin and keep our cost discipline, and we will guide for another sequential year of EBDA growth. And this is the key for further value creation by Orange Polska. The CAPEX guidance reflects investments in key areas needed for the future. Further 5G network rollout, completion of our radio network renewal, fiber rollout in white zones supported by EU subsidies, solid proceeds from disposal of real estate, By definition, it excludes the acquisition of mobile spectrum, obviously. And finally, let's have a look based on this picture at our dividend proposals, as it is an important factor that we will share the generated profits with our shareholders. As presented today, we have successfully completed our four-year strategy and delivered on our objectives for 2024. We recommend the cash dividend of 53 grosche per share from 2024 profits. This is a 10% increase versus last year, and it is the third consecutive increase of the dividend after we reinstalled it in 2022. If we look on this period, the dividend has more than doubled since we reinstalled it. I am pleased that our performance and balance sheet allow us to increase again the dividend even in the year in which the spectrum auction will consume a substantial part of our cash flows. This underscores our commitment to grow shareholder returns year after year on a sustainable basis. We will present the dividend policy for years to come together with our new mid-term strategy. Today, I can assure you that we are taking every effort to be in a position to increase dividends further in the future. This concludes our presentation and we are here now ready to take your questions.

Thank you. We'll now move to the Q&A session. If you are dialed in via the phone and would like to ask a question, please press star two on the keypad and wait for your name to be called. You may also ask a question, voice or text question using the webcast window. So again, to ask a question, star two on the keypad or press the question button on the platform. Our first question comes from the line of Rohit Modi from Citi. Rohit, your line is open. Please go ahead with your question.

Thank you, Isaac. Firstly, congratulations on the results, and thank you for the opportunity. A couple of questions from my side, if that's okay. Firstly, on your EBITDA growth this quarter and this year, there have been an element of margins you make on fiber rollout for the fiber core. If you can guide us in terms of for the next year, you see low single-digit growth, Is there any element of, you know, enhanced fiber rollout that you're doing for fiber coal there that's benefiting the EBITDA or that's coming basically from the coal business? Then, beyond 2025, in terms of your mid-term outlook, I know you'll be giving the mid-term outlook later on, but in terms of a bit more color, given you might be ending your fiber rollout in some time, your contact with the fiber force, that's kind of... that's coming up for you on the BIDAL. Similarly, a contract, a proving contract with Iliad is supposed to come to an end in 2026. So I think that's a bit of a headwind that's coming on the BIDAL side for you, you know, Victor. In your most color, how do you look at it? And then lastly, on the Capex side, a bit of an increase in Capex compared to last year. Give us a bit of color, what are the areas you're focusing on for next year? And obviously, we are not doing much of fiber on the whole core side, mainly on the fiber side. So where this Capex is going? Thank you.

Thank you for your questions. I guess it's fair to say when we're looking at the EBDA guidance and we're thinking about the EBDA going forward, what we need to remember is 2024 EBDA growth, first of all, came from the successful commercial activity. And this is the main factor that we intend to keep And this is what makes the EBDA growth sustainable. It relies on the core business. It relies on the growth of key customer bases and key ARPU indicators from the core business. And this will also constitute the main growth driver for 2025. In terms of the rest recurrent factors, obviously, we've seen the one off in Q3 linked with the capitalization of customer access costs. We've seen the higher profits of network rollout for the Fiber Co. Yes, these are not fully recurrent, even if what we are aware is we're continuing the project of Fiber rollout in 2025 with the Fiber Co. So we do intend to have another year where we will have margins coming from this project. And we are planning to further extend the footprint of Światłowódz Inwestycje, meaning there will be another rollout in 2026 and beyond. I hope that answers your question about when will this contract end. It doesn't end yet. Then I think we need to remember that we also had a number of headwinds this year that are not as repetitive in nature next year. So first of all, we've seen the steep fall of profits from the energy trading unit and this energy trading unit had above average exceptional profits in 2023. These were not repeated in 2024. So it gave us a year-over-year headwind. This will not be repeated in 2025. And also we are aware that inflationary pressures are still with us, but at a diminishing scale versus what we have observed in 2024. that was still coming out of very high inflation numbers from 2023. Here we need to remember that some of our contracts are indexed to the prior year inflation. So in 2024, we were indexing the cost of these contracts by the double digit inflation of 2023. And also we need to remember that the minimum wage was under a huge pressure in 2024. much bigger than it will be in 2025. So some of the headwinds are also not going to be repeated in 2025. And as I mentioned, yes, 2024, it is a very high bar. It's an elevated point of reference, but we are confident that the core business growth is robust enough that we can continue to grow the EBDA in 2025. And then I think on the Iliad, this contract, we will not comment for the precise contract, it lasts until 2026, so it's not a matter of 25, it's rather a matter of 2026. And I believe we will give you more thoughts on the midterm guidance in roughly one month time when we will present the new strategy. I think it is best to show you our thinking about the financials going forward when this is accompanied by the commercial plan, by the investment plan and by the transformation plan that will make these financials workouts in the future. So just a bit of more patience. And then if you could repeat your last question, I believe this was on capex. I think, you know, that the capex on 25 will continue to be, well, it will be within the guided range. So you can see that this is roughly comparable to what we are spending right now. um we will continue to invest in the eu subsidized fiber rollout this is a program that will definitely be progressing next year and we will continue to invest heavily into the mobile both rolling out the 5g network but also finalizing the radio access renewal this is a project that was long overdue and that this network was rolled out 12 to 14 years ago so it's high time for us to replace it we always thought about making this replacement program renewal program together with the 5g rollout because it makes economic sense not to visit the same base station twice and so we're conducting it now we're conducting it at speed and this is what is going to be still visible in the capex of 2025. thank you very much

Thank you. We are taking questions as we were receiving the order that we were receiving them. Next question came online from Maciej Bobrowski from BDM. There are two questions. First is on the labour expenses. Could you please provide further details on the labour expenses incurred in Q4? Could you explain why these costs were increased? 3.5% lower than in the previous year. Is this the start of the new trend in this position that could be seen in 2025 results? That's the first question. The second question, what are your thoughts on the pricing strategies of mobile and fibre service providers? Do you see an increase in aggressive price promotions compared to previous quarters? Actually, there's a third question. Sorry, I thought there were two. There are three questions. The third question. In 2025, Orange France aims to achieve EBITDA growth of around 3% year-on-year. Does Orange Polska have the potential to show higher dynamics than its parent company, Orange France?

Maybe we start with commercial. Obviously, we know how competitive is the Polish market. Particularly, we have seen in recent years it's becoming more and more competitive in in convergence area so there are several big players offering fully convergent offers to customers so we don't expect this to environment dramatically to change although on the policies obviously we will we will not comment on policies of you know our competitors and future looking on the orange and as on the ambitious for the growth, we are confident in our ability to deliver further value creation as we were reflecting to the guidance and we will see what will be the exact numbers.

Jacek, back to you on labor costs. I think on the labor costs, thanks for the question, very relevant. The Q4 was helped by some non-recurring elements linked with utilization of the holiday pay provision and also with some changes to the employee profit sharing provisions. If you were to take those out and look at the labor costs without these elements, we would have registered a growth of about three to four percent. This is quarter four year over year without those elements. And this is obviously on the one hand, you know, we're getting financial benefits of a lower employment. But on the other hand, the market was as it was and we are giving pay rises. So the pay rises are offsetting the benefit of the financial benefit of lower employment. And I think just adding on to one more thing on the guidance, obviously, we will strive to grow as fast as we can and as much as we can. this is reflected in our guidance please do remember that the faster we grow the more than we also help to help with the growth of the overall orange group epda as we are fully consolidated into those results so we do hope to maximize both our numbers and the numbers for the orange group

Thank you. Next will be voice question coming from the line of Marcin Nowak from IPOPEMA. Marcin, your line is open.

Good morning. Thank you for the presentation. Two questions from me. The first one, noticing that

So I guess we can start with leverage. We are at a leverage of 1.1 times right now. We're happy On the one hand, to have halved it, we obviously note that this is not exactly in the corridor of the outlook that we gave when guiding for the mid-term plan back in 2021. I think the decrease of the leverage came predominantly thanks to very good organic cash flow generation that we have achieved over this period. So this is where we are happy with our ability to generate cash. It also was helped by the highly value-accretive transaction that we did when we sold 50% of Światłowódz Inwestycja back in 2021. When considering the leverage versus what we thought in 2021, we need to remember, obviously, that the whole process of spectrum distribution, both for the C-band and for the 700 megahertz that is up for distribution right now, was heavily delayed over time. So you could imagine, even knowing the conditions of the existing auction, that had this been accelerated over time, we would have been with a greater leverage, both due to the price that we would have paid for this 700 MHz auction, And this is still ahead of us. And also because of the capex rollout that would have been the capex that would have been consumed for the rollout that follows this auction. So this is an important element to consider. And it's important to consider that the cash outlay for the auction is always an uncertainty. We are in the process. We need to wait for the process to end. Definitely. We will have a much greater clarity on the leverage and on the future cash flows when we, you know, when we're thinking about the free cash flows after the auction will be behind us. And then, you know, in addition, I did mention the. very positive contribution of the sale of Światłowódz Inwestycja back in 21 for the leverage. We do remember that we do have an option to reconsolidate Światłowódz Inwestycja between 20 27 and 2029. So we do keep it in mind, knowing that such reconsolidation would increase the level of depth that we would take on the balance sheet, regardless if you are assuming that this is 100 or 50% of the depth that would be attributed to us. This would increase the leverage that you are observing in the financials right now. And then regarding the core telecom services, well, we will not guide the particular revenue line, but you can see from the past performance that this is a reliable, solid growth driver. And it is very critical that we keep up the good growth that we have seen over the last four quarters in order for this growth to translate into profit generation.

Thank you. Our next question is coming from the line of Paweł Puchalski from Santander. Paweł, your line is open. Please go ahead.

Hello, can you hear me?

Yes. Some of my questions have already been answered. Still, I would... this investment and on your activity there but would you consider well moving it below EBITDA line because it is not core telco operation just like you did several years ago with real estate that would be my second question and the third one is well pretty obvious dividend per share I would like to understand what is your logic behind setting annual goals 10% I noticed your net profit grew 10% your dividend is growing 10% can I assume that your future dividend would be changing in line with net profit or maybe in your

I guess when it comes to the question of Światłowódz Inwestycja, this is a question that the answer doesn't change. We keep on getting it. Today we haven't decided whether we will exercise this option or not. We have the option available between 2027 and 2029. I think this is where we will be in a better position to decide. Today, what I wanted to stress is that we need to keep the balance sheet optionality for this to be a real decision, for us to be able to consider it in reality. But we do not prejudge whether we will or we will not exercise this option at that given time. Then answering your question about moving it below the EBDI, I think it is adequately presented right now. We don't present the incomes coming from this fiber rollout agreement in revenues because this is not part of the core telecom activity. We present it in other operating income because it is an other operating income. But please remember, we've been doing this now for four years. We'll do it for a fifth year. I've just mentioned that we will continue with, we plan to continue a further rollout, so some more years to go. This is really part of our operating activity. And then you made a reference to real estate. I think the main difference is when we sell real estate, we sell something that we do not no longer use. And on the other hand, we both presented as part of e-CAPEX. So simultaneously with moving the gains from real estate disposal from EBDA to below EBDA, remember that at the same time we were including the cash proceeds as part of CAPEX because we do really treat it as a transformation of our assets from legacy based assets that we needed for the corporate services. And this included a lot of real estate. into the assets that we need for the future. And right now, the focus obviously is on the mobile network, on the spectrum, and on the fiber infrastructure. So this was the reason behind that move. And Światłowódz investicje, the fiber rollout that we are doing, It is well presented within the other operating activity that we do, but this is multi-year tasks. This involves a lot of people in the organization. It is really part of the operating activity of Orange Polska. And then for the dividend per share, I think what I would comment is that first of all, The increase of the dividend that we have seen over the last years, it is representing the big value creation and the increase of financial outputs that we have been able to deliver, that we are proud to have been able to deliver during dot grow. We have been able to reinstate the dividend. We increased it three times. We have increased it by 10% in a year in which we know that there is a spectrum auction ahead of us, which will consume a large amount of the organic cash flows. So part of the dividend will be paid out of debt. And this is why we say that our dividends are sustainable. This is where we are happy to be in the position to propose a double digit increase of the dividend even in a year with such big and still uncertain cash flow that is ahead of us. That would be my comment to the dividends. Going forward, I propose that we discuss it in a one month time when we will discuss the dividends in the context of the strategy that we will deploy for the future.

Okay, thank you very much. One more question, may I?

Sure.

5G auction to come. My question would be, how much extra capex would be necessary to fill in all the regulatory obligations, et cetera? How much? into two spectrums and for how many years would it be?

Thanks, Paweł. That's a very relevant question, but a bit too early because I would prefer not to comment the ongoing auction process before it is finalized. We will be more than happy to discuss the overall CAPEX assumptions in one month time and more specifically the ones linked with the 5G auction as soon as the auction is finalized. You will appreciate that we are under the constraints of this important process.

Okay, thank you very much. Thanks.

Thank you. Next question is coming from the line of Dominik Niszcz from Trigon. Dominik, your line is open.

Thank you. Hello. Some questions were

innovation. I think generally it is difficult for us to exclude the profits of one given transaction, because then I would ask you also, do we exclude the fall of the profits from Orange Energia in between 2023 and 2024? The Fiber Core rollout is an important and long term element of our operating activity. It has been with us for a number of years. It will remain with us for a number of years. This is 25. I think it will also be 26 and beyond. So for the mid-term perspective, we ought to treat it as part of our operating activity. Now, obviously, the magnitude of the profits will change from one year to another. It will depend on how much profits can we extract from this rollout. Right now, in 2025, we are focused on finalizing the first rollout agreement, obviously. It is something that we will conclude and we will have another rollout agreement most likely in 2026. So I would not speak about these particular profits separately to the remaining part of the business. It is part of the operating profitability that we are delivering. I guess it's arbitrarily, you know, the high level tech, it would be smaller in most, but mostly tailored towards 2026. So it would not be as long of an agreement, but then let's wait when we will conclude it. We will let you know what are the exact conditions and what we expect from this in the given periods. I think what we can expect from real estate is we will continue to have good proceeds from real estate still in 2025. It is an important plan element of our CAPEX guidance. And then regarding the future, I think we will be more talkative in one month time unless Maciek you want to compliment something today.

Well, the amount that we will talk about in a month time, of course, it will not be equal to the amount that we have disposed in the perspective of the dot grow. You have seen the figures on the slide. It was over 600 million and if I Look back even further from 2018, the figure is even higher, 1.5 billion of Polish zloty. So definitely the real estate is not something that we produce or construct. And we have rightly sized the effort to the pace that we actually... stop using them. So you should expect smaller figure than I mentioned. But let's talk about it a bit later.

Okay, thank you very much. Thank you, Dominik. The last question that we see at the moment is coming from the line of Dawid Górzyński from PKLBP. Dawid, your line is open. Please go ahead with your questions.

Hi, could you hear me?

Yes. Go ahead. Okay, okay.

Okay, congratulations on this result. Many questions were answered, but if you may, I would like to understand a little bit the outlook for organic free cash flow for this year. What I have in mind is over 1 billion level but I wonder if 1.1 for example is at reach in your opinion so that would be the first question sure so you will appreciate that we don't formulate guide for OCF but I will try to give you some elements that could

help you model your own thinking about it. On the one hand, we are guiding for an increase, further increase of the EBDA. So that is definitely a plus. You will see that the CapEx that we're guiding is broadly or the range is very similar as this year. So both of these should be giving some boost to the organic cash flow. On the other hand, what we do see is that growing business will require more working capital requirements. This stems from two facts. First, as we are expanding, we need to invest more into accounts receivable linked with installments, handsets sold on installments. There is also a cash profile of the fiber rollout agreement, which is not evenly spread. And I would say it has been more front-end loaded. So we have... benefited more from this in 2023 and 2024 than we will benefit in 2025. So expect a growing EBITDA, expect capex which is broadly within the guidance range and you can expect some additional pressure on the working capital requirement. That is when we are thinking about the Organic cash flow, well, we've seen that, you know, debt is becoming a little bit more expensive. So obviously that is something that is also putting a little bit pressure on the OCF. And then going below the OCF, the main question that we will have is how much of the OCF will be consumed by the spectrum acquisition. I think those are the main moving elements that you need to consider when thinking about the cash in 2025.

Okay, but the spectrum is excluded from organic.

From organic, yes. From organic, it's EBITDA up, capex within the guided range and some pressures on the working capital requirement.

Okay, second question on CapEx and 5G rollout consumed so far in 2024. Could you give us some color on how much of, if I'm right, it was like one billion in total for three years, so how much was consumed in 2024?

I guess what we can say is that 24 shows us the full, I would say, speed of the 5G rollout, annual speed of the 5G rollout. We will, on the one hand, complete the radio access network renewal plan in 2025. So that should ease the pressure going forward. On the other hand, what we will have is most likely some capex linked with the rollout of 5G also on the newly acquired spectrum. So going forward, these are the main elements that we need to factor in. When you think about 2025 itself, I would not expect a huge change of the mobile capex versus 2024 number.

Okay, perfect. And last question on dividends. So, as Paweł noticed, there was quite significant slowdown in growth pace, year-on-year growth pace, almost 40% year-on-year, 10% year-on-year this year. And I just think if you should keep this 10%

I think what is really important for us is to really focus on growing our financial outputs. So to create conditions in which the outputs will be there and we will be able to share the fruits of the next strategy with shareholders. I will not go into the dividend policy of the new plan, but you can understand that the main focus is let's create a lot of value coming from EBDA, coming from organic cash flows. So there is something to be shared. When you're thinking about the dividend that we are proposing to be paid in 2025 out of 2024 results, I mean, yes, you are comparing it to the previous levels of increase. On the other hand, I'm really pleased that we are in a position to increase the dividends by double digits, even in a year in which we are faced with an uncertain but very large cash outflow item linked with spectrum acquisition. So this is what we have always said, that the dividend is sustainable and we are able to offer growth of the dividend in a year which is obviously handicapped with large cash outflows. A double-digit increase in 2020, well, the dividend paid in 25 out of 24 is something that we are really pleased to offer to shareholders.

Okay, thank you for all the responses. That was all from my side. Thank you.

Thank you very much. Thank you. It appears we have no further questions. So thank you very much for listening and watching us today. And see you all on the March 19th on the new strategy presentation. Thank you.

Thank you very much.

Thank you.