Tuesday, March 28, 2017

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

Preamble – Poland, a major beneficiary of EU membership, is booming

With a nominal GDP of $467.350 billion in 2016 and a population of around 38 million, Poland is the EUs sixth largest and the world's 25th largest economy. According to the latest IMF forecast Poland's GDP, after an increase of 3.1% in 2016, will grow 3.4% in 2017 more than twice the EU's predicated growth of 1.4% and almost exactly the same as the global growth rate for those two years. By comparison with the rest of Europe Poland, whose GDP per capita is only about 70% of the EU average, is booming, assisted both by net transfers from the EU budget of about Euro 12 billion per annum and also by substantial remittances worth, according to the World Bank, $7.2 billion in 2015 from an excess labour force working  in richer European countries, including notably 2 million citizens of Polish descent living in Germany (many historical remnants of boundary shifts) and about 800,000 working in the UK. The country has a liberalised and diversified economy including a strong net-exporting agricultural sector of about two million farms, which also supports a strong food-manufacturing sector. Poland currently has a female Prime Minister, 53 year old Beata Maria Szydło, vice-chairman of Poland's Law and Justice Party, and is the leading member of the Visegrad Group of central European countries, working on common interests and that also includes Hungary, the Czech Republic and Slovakia.
Although Poland joined the EU in 2004 and is nominally committed to joining the Euro currency group, it has not done so yet and has no specific target date for that accession. Of the four Visegrad countries only Slovakia uses the Euro.

Overview of Poland's telecoms market structure

Poland's main regulator of the communications and postal sector is UKE (Urząd Komunikacji Elektronicznej, or Office of Electronic Communications), and this agency publishes an annual review of the industry which is typically available at the end of June the following year, hence the 2016 numbers will not be published until June/July 2017. However, the Polish market is relatively mature and the following data for the year 2015 published June 2016 allow reasonable estimates for 2016 and 2017, providing major regulatory decisions and other important changes in the marketplace are factored in.

Broadbrush overview of size and structure of communications sector in 2015

Total Polish telecoms market value in 2015 of $10.5bn

The total size of the sector was estimated by UKE at PLN 39.5 billion ($10.477 billion) in 2015, or about 2.24% of GDP, which is rather low compared to OND's typical estimated range of 2.5%-3.5% for most countries (many factors can affect this ratio, including the state of the technology cycle in mobile communications and a fast secular decline in costs for equivalent communications services due to technical maturity and strong level of competition compared typically to an increase in costs in the general economy). The UKE report noted that this was the first growth in revenue in the whole sector in the last couple of years. The Polish communications sector can be described as strongly regulated, quite liberalised and competitive, but extremely fragmented compared to most European countries. In part this may be due to the fact that the regulator has often intervened to oppose consolidation.

14 million Internet users in 2015

Internet penetration percentage per person over the last six half years 2013 to 2015 was as follows: 27.3%, 29.4%, 30.2%, 31.6%, 34.4% and 35.7%, with penetration per household of: 77.7%, 83.6%, 86.1%, 90.0%, 98.0% and 101.6%. In 2015, there were in total 14 million Internet users in Poland - 7.1 million fixed-line and 6.67 million mobile. For mobile access significant growth of 0.9 million in the number of users was observed compared to 2014.

The largest market share, amounting to 30% in terms of the number of users in 2015, was reported by Orange. This is due to the fact that the company provides its services both in the fixed-line and mobile networks. Polkomtel was second with a 9.2% share.

Mobile services penetration in terms of subscribers down in 2015

The penetration of mobile services in 2015 shrank by 3 percentage points compared to 2014 and amounted to 147.2%. The operators had 56.6 million active SIM cards in their databases and the decline was caused by adjusting subscriber databases to the reality by the telecommunications undertakings. In 2015, the revenue from mobile telephony accounted for 43.7% of the total market value and totalled approximately PLN 17.2 billion.

Mobile operators in order of importance include: PTK Centertel/Orange, Polkomtel/Plus GSM, T-Mobile Poland, CenterNet, Mobyland, plus a number of MVNOs, including P4/Play and Mobile Vikings.

According to UKE, the market leader in 2015 in the Polish mobile market was Orange Polska with a market share of 27.7%, followed by P4 with 25.8%, then Polkomtel with 22.6% and T-Mobile Polska with 20.8%, leaving about 3.1% for other operators.

Fixed line market value declining for 5 years

The value of fixed line telephony in Poland declined steadily from PLN 5.2 billion in 2011 to PLN 3.3 billion, i.e. down 12.8% in 2012, down 13.5% in 2013, down 4.8% in 2014 and down 12.7% to PLN 3.3 billion in 2015. The 2015 value was just 8.35% of the total telecommunications market value, with 5.7 million fixed line connections, split by type of access as follows: POTS - 57%; ISDN - 13.0%; WLR - 14.0%; CATV - 14.1%; and xDSL - 1.9%.

Fixed operators include Orange Polska, Netia, Telefonia Dialog, Telekomunikacja Kolejowa (TK Telekom), T-Mobile Poland and Exatel.

Other markets

Cable TV operators include, in order of importance, UPC Poland, Vectra, Multimedia Polska, Toya and Inea, which serve around 75% of the country's 4.6 million CATV subscribers, with another 400 operators serving the remaining 20%. According to the Polish Chamber for Electronic Communication (PIKE, or Polska Izba Komunikacji Elektronicznej), a trade association that represents about 110 companies including broadband electronic communications operators and the associated manufacturers and distributors of equipment and services, its members serve about 75% of the Polish cable TV market, which makes up about 37% of a total digital TV market of over 12.145 million.

Poland has one of the lowest levels of FTTH penetrations in Europe, with only 140,000 users in 2014 and 170,000 in 2015. This is also, according to UKE, a very fragmented market with the top three service providers in 2015 - Inea, Telefon Dialog and Orange Polska - collectively serving less than 25% of the user base.