Monday, April 3, 2017

Update on the telecommunications market in Poland - Part 5

Profile of T-Mobile Polska, the 4th largest mobile operator

T-Mobile Polska is a subsidiary of Deutsche Telecom of Germany and the fourth largest mobile operator in Poland, serving over 10.6 million mobile customers. The company claims to provide a full range of telecommunications services to both private and business customers. In 2015 TMP acquired the fixed network and services of GTS Poland, thus enabling it to offer a full range of ICT services. T-Mobile customers also have access to a full range of financial services as part of its parent's banking services. Mobile Polska covers nearly 100% of Poland’s population with its 3G and 4G networks and currently employs around 4,400 people. For the calendar year 2016 it reported revenue of Euro 1,488 million and net profit of Euro 201 million, down from Euro 1,544 million and Euro 350 million, respectively, in 2015.

More specifically, in Q4 2016 T-Mobile Poland reported 10.634 million mobile customers, down 11.8% compared to 12.057 million at the end of 2015. This decline included the loss of 587,000 customers in Q4 2016 due mainly to the disconnection of unregistered prepaid users. Despite Q4 2016 revenue up 4.8% to PLN 1.723 billion; EBITDA margin fell by 1.8 points to 34.7%.

In mid-November 2016, T-Mobile Poland announced a limited commercial launch with the support of Samsung of VoLTE and VoWiFi but said that by the end of March 2017, it hoped to make the service available on a broader range of up to 500,000 terminal devices.  As previously reported, in early December 2016 T-Mobile Poland and Orange Poland extended their original cooperative agreement for radio access network sharing, originally signed in 2011, to include base station sharing for LTE services using the frequency blocks that they each separately obtained at auction in the 800 and 2600 MHz bands.

In early January 2017 Orange Poland announced that its LTE network, consisting of over 8,500 base stations using 800, 1800 and 2600 MHz band spectrum and at over 140 basestations 300 Mbit/s services using tri-carrier aggregation, had reached coverage of 99% of the population. In late January T-Mobile Poland announced changes in its business segment aimed at increasing the focus on customer care and its quality including strengthened management and making the Department of Business Customer Care the direct responsibility of a board member. In early February, the European Investment Bank published a request by T-Mobile Poland for Euro 250 million of co-financing investments in a mobile broadband infrastructure project in Poland expected to cost Euro 550 million.

Profile of UPC Poland the leading Polish cable operator

According to the $20 billion sales-level, 45,000 employee, 50 million homes-passed Liberty Global international TV and broadband group (with operations in over 12 European countries and the Caribbean and South America), UPC Poland is the largest of its operations in Central and Eastern Europe in terms of revenue, and the largest cable TV operator in Poland. UPC Poland, which as of the end of September 2016 projected revenue of $393.8 million for all of 2016, at that time passed 3.1 million Polish homes and provided video, broadband Internet and digital (VoIP) telephony services, including 2.9 million service subscriptions (RGUs) to 1.4 million customers split as follows: 1.2 million video RGUs; 1.1 million broadband RGUs; and 632,000 fixed telephony RGUs. According to the company, its network is 98% upgraded to two-way capacity, with almost all of its homes passed served by a network with a bandwidth of at least 860 MHz.

In late October 2016, UPC Poland agreed to acquire, for $760 million in cash, the cable operations of Multimedia Polska, the third-largest cable operator in Poland. However, that proposed merger is still the subject of a regulatory inquiry by Polish anti-monopoly authority UOKiK, whose analysis has so far shown that in many municipalities, the joint share of UPC and Multimedia Polska exceeds 40% for the pay TV and Internet market, a threshold which the competition law defines as a dominant and anticompetitive position.

According to Multimedia Polska's Q4 2016 financial report published in mid-March, its revenue were down 1.1% YoY to PLN 176.346 million compared to PLN 178.285 million in Q4 2015. Of the total, revenue from video services amounted to PLN 90.454 million, revenue from the Internet amounted to PLN 55.399 million, revenue from telephony amounted to PLN 22.073 million, and other revenue amounted to PLN 8.419 million. The total RGUs as of December 31, 2016 were 1.692 million, up 2% compared to the end of 2015. During Q4, the company increased video subscriptions by 20,300 to 868,000, and broadband customers rose by 7,100 to 537,400, while in telephony there were a total 266,600 customers.

The group had 783,200 customers at year-end, down from 790,000 at the end of Q3 2016.

Summary and commentary - economy strong, political stability in danger

Poland's economic situation for the moment looks extremely healthy, though much of it currently comes from external inputs such as foreign remittances and EU subsidies, which may not be sustainable beyond a medium-term horizon. However, Poland's political climate is blustery to say the least For the first time for many years Poland's rightwing Prawo i Sprawiedliwosc (PiS or Law and Justice Party), led by Jarosław Kaczyński, has an overall majority in Poland's Lower House, the Sejm, and is taking a strongly authoritarian approach to government, which has included the passing of a bill which seriously undermines the powers of Poland's Constitutional Court*. Together with attacks on the media, including the firing of about 60 politically suspect journalists from state television, the preparation of a bill which would limit the access of the media to the proceedings of the Sejm, and a remarkable episode in mid-December  in which opposition protests against the proposed restrictive media bill erupted into semi-violence in the Sejm, and as a result the government moved a planned session for the vote on the state budget for 2017 to another hall, with both journalists and opposition delegates banned from the session.

The EU has publicly raised questions about these anti-libertarian moves by the PiS. More recently, the Polish government has reacted with outrage to, and described as a deliberate humiliation of Poland by the EU, the re-election on March 9th as President of the European Council of Donald Tusk, a Polish politician still regarded as the de facto leader of Poland's main Opposition Party. Tusk led neo-liberal opposition party Civic Platform (PO, Platforma Obywatelska) from 2003 to 2014 and was the Polish prime minister from 2007 to 2014, and is detested by the PiS. Poland, as stated earlier, leads the four-nation Visegrad Group and has historically tended to ally itself with the UK and also look towards the U.S. politically rather than Germany. With Britain leaving the EU and Donald Trump looking to reduce the U.S.'s expensive overseas entanglements, and with a truculent and resentful Russia on its flank, Poland is beginning to feel dangerously isolated.

*   The changes introduced by the ruling Law and Justice party (PiS) require a two-thirds majority of the 15 judges to support a ruling for it to be valid, and also stipulate a quorum of 13 judges for rulings to be valid.