Integrated Report 2018

  • Introduction
    • Message from CEO
    • About the report
  • Company and our stakeholders
    • About our company
    • Our stakeholders
  • Business model and value creation
    • Business model and value creation
    • Key resources
    • Business model
    • External environment
    • Internal environment
  • Strategy
    • Q&A with CEO
    • Our strategy
  • Results
    • Q&A with CFO
    • Outputs & outcomes
    • Financial review
  • Risk
    • Risk management
    • Risk exposure
  • Corporate governance
    • Our approach to corporate governance
    • Our governance structure
    • Governing bodies activities in 2018
  • Selected financial data
  • Appendix
    • GRI table
    • Defining the Reports content
    • Sustainable Development Goals
    • Methodology
    • Glossary
    • Independent Limited Assurance Statement
    • Contact information
Strategy

Q&A with Jean-François Fallacher,
Orange Polska CEO

Q: 2018 was the first full year of your strategy Orange.one strategy. How is it going?

Let me start with a brief reminder of the key pillars of our strategy. On the consumer market, our goal is to win the highest share of households’ media and telecom bills by offering convergent packages. We see big potential here, the majority of households still buy their services from different operators. Consolidation brings both convenience and financial benefits.

On the business market, the key trend we see across practically all industries is digitalisation. Enterprises are both digitalising their internal environments, and enabling digital experiences for their customers. We want to be their partner in this revolution. To do that we are developing our competencies, mainly in the ICT area, which includes cloud solutions, security and software & applications.

A successful strategy in these two markets would not be possible without the rollout of our fibre network. Fibre is our long-term competitive advantage, which makes us confident about our success in convergence. We already reach almost 3.5 million Polish households and by the end of 2020 this number will exceed 5 million.

The final pillar of our strategy rests on rapid efficiency increases. We have introduced a comprehensive transformation programme to simplify and, where possible, to automate and digitise our business processes.

Results for 2018 were better than expected, and this is because we implemented our strategy effectively despite the environment, which remains challenging. On behalf of the executive team of Orange Polska, I would like to thank and congratulate the entire organisation for the huge effort that was necessary to reach these outstanding results.

Q: You call convergence the bedrock of your strategy. Aren’t you afraid of increasing competition in convergence, when more market players start to pursue this strategy?

First of all we are not surprised that other operators are starting to pursue a similar household strategy. We were pioneers, we showed the way, others follow us, which means that the strategy we adopted several years ago was right.

Secondly, the Polish market has always been very competitive so we are used to doing business in such an environment.

A third point: convergence still has relatively high growth potential in Poland. So if more players choose this strategy, the demand for such solutions on the market is likely to increase which should be beneficial for us as well. Operators with a mobile - only strategy will be under higher pressure. Please also note that one of our competitors will be using our fibre network to offer convergent products, so we will benefit from this on the wholesale side.

Saying all of this does not mean that we underestimate the competition. We take it very seriously. We modified and strengthened our Orange Love offer in March this year. Our goal is to compete on the quality of the offer and customer service, not on price. We strongly believe that our convergent offer and fibre to the home network (by far the largest in the country) put us in a unique position to meet all the needs of Polish customers.

Q: What are the key priorities for 2019?

We are in the middle of the implementation period for the strategy we announced in September 2017. We are satisfied with the results so far. This year we will continue our path towards turnaround. We are confident that we will be able to sustain the growth. In 2019 we plan not only to grow our EBITDA but also revenues, for the first time in many years. In pursuit of this goal we will stick to our strategic priorities. We will stay customer-centric and focused on value generation. We will also continue to simplify our processes and increase efficiency.

Poland’s macroeconomic situation remains very favourable with very low unemployment, growing disposable income and consumers being very open to new technologies. We want to take advantage of these trends. Please note that prices of telecom services in Poland are very low and we are one of the only sectors where they have been declining over the past few years, despite a growing economy and increasing purchasing power.

In 2018 we initiated our programme of cultural change at Orange Polska. Empowering employees and more direct and straightforward communication are the key elements of this change. I believe this cultural change is an important factor to achieve our business goals and we want to continue that.

Q: 5G technology becomes the key topic for the telecom industry for the coming years. How will your customers be able to benefit from it?

To begin with, 5G technology will further improve speed and latency for broadband users on mobile devices. It is an answer to the needs of new areas of the economy: growing digitisation, more video content, the need to be constantly online, automation of industrial processes, cloud solutions, electronic management of complex ecosystems (e.g. so-called Smart Cities), and the Internet of Things. In the future this technology will enable fast data transmission in many new services, some of which do not even exist today.

5G has become an important element of Orange Polska’s development. In 2018 we did first commercial trials and installed the first 5G base station in Poland. We are preparing for further tests in 2019. For 5G network deployment the industry needs new frequencies, decisions on which are in the hands of government institutions. We are actively supporting the Polish authorities’ 5G strategy development.

Q: Orange Polska is one of the leaders of corporate social responsibility in Poland. Are economic and social goals compatible?

A company such as ours, that offers services that are the basis for the development of communication and digital transformation, that supports millions of individual and business clients, that employs thousands of people in Poland and cooperates with thousands of suppliers, has a significant social impact. Such a company, first of all, should be aware of its influence. Secondly, it should manage this influence in such a way as to maximize the positive and minimize the negative. Orange Polska aims at running its business in a balanced and responsible manner.

The strategy of corporate social responsibility is key part of our business strategy, and it is based on a continuous dialogue with employees and customers, as well as cooperation with our business partners, social organizations and public institutions. With this approach and in cooperation with others, we are can positively influence the socio-economic development of the country and local communities, and build our competitive advantage

Q: How do you see the Polish telecom market and Orange Polska a few years down the road?

As I already mentioned, I have great hopes that the Polish market is heading towards some repair. This industry destroyed a lot of value in the prior years because of competition based solely on price. We believe the prices have finally stopped declining and the customer experience will be improved mainly based on infrastructure quality and excellence of service. The Polish telecom market is quite fragmented and consolidation processes are rather slow. I continue to believe that it will eventually consolidate and there will be fewer players, but more integrated and convergent.

By implementing our current strategy at Orange Polska, we believe we are building a company that is a better structural fit for future market opportunities and the competitive environment. We are focusing on convergence and fibre, two competitive advantages that are mutually reinforcing and they will fuel our resilient leadership in the market. We are investing in the future-proof infrastructure that will serve us for the next 20-30 years, and that we will be able to monetize both in retail and wholesale operations. We are intensively transforming ourselves from a legacy telco to a much lighter and more agile organization that will be appreciated by customers and employees, and valued by investors.