Integrated
Report
2019

Orange Polska

Business model and value creation

Key resources

Spectrum

Orange Polska is Poland’s leading telecommunication provider, operating in all segments of the Polish telecom market and holding licences for 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2600 MHz frequencies. Spectrum is a scarce and unique natural capital, to which access is regulated at the national and European Union level. Our access to the spectrum required for rendering telco services is at the regulator’s discretion. The amount of spectrum that is at our disposal influences the competitiveness and quality of the services we render.

Energy

Expansion of the telecommunications infrastructure in response to the growing demand for information flow entails higher demand for electrical energy in our industry. In order to compensate for this environmentally unfriendly trend, we take steps to optimise energy consumption. We also reduce electricity consumption through replacement of older technical devices with modern energy-efficient ones, modernisation of cooling systems, introduction of energy saving functionalities, and so on. We manage natural resources efficiently, monitoring the consumption of energy and other resources, as well as carbon dioxide emissions related to our operations.

Climate

Recent studies show that climate change is occurring at a faster pace than previously forecast. According to a UN report, only curbing global warming below 1.5°C will guarantee that the quality of life will not worsen and the world that we know will be saved. Average global temperatures have already warmed by 1°C compared to the pre-industrial era. In order not to exceed the 1.5°C threshold, we need to take concerted action immediately, so as to become climate- neutral by 2050. The first step in this direction is to reduce global greenhouse gas emissions.

Climate neutrality is a challenge for the whole world. Owing to Orange Group’s presence in 27 countries, we can act both locally and globally to help mitigate climate change. To this end we reduce our negative impact on the environment, decrease CO2 emissions, save energy, introduce circular economy principles and provide innovative services which help our customers to protect the environment. It is the Group’s commitment to achieve climate neutrality by 2040.

Debt and equity

We aim to maintain a responsible capital structure to support our business operations and finance capital expenditures. Equity and debt are balanced to remain within the frame of a safe financial structure and good credit standing.

Since 2014, our external funding needs are sourced from our majority shareholder Orange S.A. Such a policy allows for synergies in processes and cost efficiencies, as Orange S.A. is one of the largest telecom companies in Europe with ready access to a broad range of financing sources. The funding is provided on an ‘arm’s length’ basis, supported by market benchmarks.

Almost our entire debt is denominated in the local currency while its small part foreign currency denominated is hedged against currency fluctuations.

At the end of 2019 the duration of debt stood at 2.4 years on average. This is allowing us to maintain a balance between optimal costs and stable financial structure.

Our leverage is closely monitored and the ratio of net financial debt to adjusted EBITDAaL is a key measure of financial structure and liquidity.

Network Infrastructure

Our activities require significant manufactured capital: our mobile and fixed line networks, service platforms and IT systems are the foundations of the products our customers rely on. Maintaining a reliable and fault-free network is critical to our business success. We have to respond to changes in technologies and invest in the right mix of technologies - for example, we are currently making significant investments in the rollout of the fibre network. In our view this is necessary for us to stay competitive in the market and be in a position to offer the best convergent services. Over the last 10 years we have invested more than PLN 25 billion in fixed assets.

Software

We run a number of service platforms that combine our network and IT resources to underpin many of the key products we offer. Our internal IT systems enable us to manage our processes, handle customer information and deliver our products and services.

Points of Sale

We reach our customers and sell our products through various distribution channels: traditional points of sale (POS), telesales, active sales, alternative channels and on-line sales. This wide distribution network ensures that everyone has access to our products and services. Our distribution network is constantly evolving in line with changing customer preferences. At the end of 2019 we had 708 POS all over Poland, of which 33% (235 stores) were modernised in a new visualisation. 143 of our POS are adapted to the needs of customers with disabilities.

Employees

Engagement of adequately skilled employees plays a critical role in increasing long-term value generation. We invest in our people so they can succeed and contribute effectively to our business. We value diversity, providing equality of opportunities which we believe leads to higher skills-set and higher innovation - diverse workforce fosters greater innovation, helps us to better understand and serve our customers and empowers our peopleto deliver their best. Orange Polska Group has 12,376 employees (including NetWorkS!), while outsourced staff number 3,203.

Innovation

We have created Orange Labs to support development of new technologies and innovations. It is part of the international Orange Labs network, which includes over a dozen research and development (R&D) centres and laboratories. Orange Labs co-operates with external partners to develop, select and implement innovations, undertaking R&D tasks for both Orange Polska and the Orange Group. Any financial settlements between Orange Polska and Orange Group are done on an ‘arm’s length’ basis, supported by market benchmarks. The main areas of activity are: Digital Personal Life, Software Infrastructure, Ambient Connectivity, Digital Society, Data & Knowledge Trust & Security and Internet of Objects. R&D and co-operation with start-ups are very important to our business; we spend around PLN 50 million on research and development annually. We follow the Open Innovation model. As a result, our social impact is not limited to the direct influence of our innovations on the lives of people and communities, but is also reflected in the transfer of know-how to our partners.

We also empower employees to create innovations and implement their ideas to improve both: customer and employee experience. Program ‘Oz’ is to stimulate innovation driven by everyone in the Company and is based on four pillars: continuous improvement, wall of ideas, innovation challenges and intrapreneurs studio. Oz is enabling everyone in Orange Polska to take action, allowing employees to express themselves in a useful manner, receive support in developing their ideas and earn recognition from the Company and their peers.

Knowledge about customers and market

Knowledge about our customers and our market is crucial to our success. Building trust and loyalty among our customers and giving them what they want is vital to our sustainability in an increasingly competitive industry. The voice of our customers has a major influence on our business decisions. To deliver unmatched experience throughout the customer journey, we engage in active dialogue with our customers on different levels.

We conduct comprehensive surveys which compare our offers, products and network quality to those of our competitors. Our managers are engaged in a “Call Detractor & Promoter” initiative to solve customers’ problems and to better understand our own strengths as well. They also help frontline employees to understand the customer perspective.

Brand

Orange – strong globally…

Orange is a global company, serving over 250 million customers around the world and present in 29 markets.

In 2018, the Brand Finance ranking valued the Orange brand at $22.2 billion, making it the 51st most valuable brand in the world, first in France and eighth most valuable telco brand globally.

…and leading in Poland

According to external market research conducted in December 2019 (by PBS Research Agency), Orange was the first choice brand for Polish consumers with respect to Mobile voice (26%), Mobile broadband (22%), Fixed broadband (22%), Packages (22%) and Fibre (20%). It has also brought us high communication awareness for mobile market in December 2019 (57%).

We have been optimistic about technology, while making it accessible to as many people as possible. That’s why our role is “always in touch to connect what’s essential in your life”. Our Human Inside philosophy guides us in everything we do to ensure that everyone can easily use and know how to make the most of digital.

The Orange brand supports our philosophy and brings our role to life through powerful brand experiences that create positive impact.

The Orange brand is our consistent asset across all countries, and one of most valuable. It is also instrumental in demonstrating that we are a digital, efficient and responsible company.

Relations with market regulator, local authorities and the financial community

Good relationships with our key stakeholders are vital to the success of our business. To us, this means building trust, readiness for dialogue, and keeping in touch on an ongoing basis. In particular it is essential for us to establish and maintain constructive dialogue with the telecom regulator and local authorities. As a listed company we take care of our investors and the financial community by providing transparent communication of our financial results and engaging in direct dialogue with them.

Relations with business partners

Orange Polska is a partner or member of a number of industry, business and social organisations. We want our relations with our suppliers and business partners to be based on transparent long-term relationships and adherence to ethical standards and principles. We co-operate with both global vendors and local market players. Our activities include both one-off purchases and long-term contracts with 3,317 suppliers. We follow a competitive and open procurement policy which is ensured by the Procurement Process Rules. The document includes procurement procedures which regulate supplier selection, contracting and confidentiality, and address potential conflicts of interest. Our principles of cooperation with suppliers regarding social, ethical, environmental and human rights issues are contained in the Supplier Code of Conduct, which is part of the contract.

Social impact

It is important for us to maximize Orange Polska’s positive social impact and minimize any negative consequences, which is why we have created a corporate social responsibility (CSR) strategy. Combating digital exclusion is an important element of this strategy, involving not only access to new technologies but also education, particularly of young web users as well as residents of small towns and rural areas. We believe that teaching people to use new technologies for both their own benefit and that of the community is just as important as providing the technologies themselves. Through its initiatives the Orange Foundation has been encouraging people to gain knowledge, participate in culture and build communities with skilful use of the internet and digital technologies. This knowledge not only improves quality of life and contributes to society as a whole, but also benefits the long-term development of our business.

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