Annual
report 2020

Increasing efficiency

Facing very high competition, ongoing pressure on our top line and the still- significant burden of our legacy, our strategy puts a lot of emphasis on improving our efficiency on the cost and capital-expenditures side.

This area has been given new emphasis with the Orange.one strategy, which put particular focus on value in all aspects of our activities. 

Our ambition is to be an agile company, digital and flexible, with a strong online presence and highly automated processes, as well as a proven ability to cut costs and find efficiency savings.

Direct profitability benefits from value focus

With Orange.one, we redefined our commercial approach to one of greater balance between volume and value.

Orange Love convergent offers allowed us to distinguish ourselves from the competition and reach our commercial goals more efficiently. We have significantly reduced handset subsidies and optimised our distribution channel mix, which allowed us to improve direct profitability. To facilitate higher value-generation we have simplified and aligned our commercial offers, both convergent and mono, around a ‘more for more’ approach, cutting down on value-dilutive offers and introducing charges for every additional service.

Such a strategy was supported by more benign competitive environment, especially on the mobile market, where the competition has largely shifted from one based on price to one based on quality of the offer and customer service.

Transformation of processes

Our business model is a chain of interconnected processes that allow us to render our services.

These processes are usually complex, which is partly attributed to the incumbent operator status of Orange Polska. Within the framework of Orange.one implementation we have introduced a comprehensive transformation program to simplify, and where possible to automate and digitalise these processes. As a result, we have realised very significant savings in operating costs and capital expenditures.

Target exceeded for optimising indirect costs

We have been optimising our indirect operating costs for many years, generating hundreds of millions in savings every year.

We continued to do this under the Orange.one strategy. The savings came from the above-mentioned process improvements, which freed up resources, as well as from volume optimisations and simplification. We were more focused and more selective in resource consumption. We tackled all cost categories presented in the chart below. As one of our Orange.one financial ambitions we committed to a 12-15% reduction of this cost pool (which amounts to around PLN 4 billion) between 2016 and 2020. This figure was net of potential increases related to inflation, pressure on labour costs and costs related to new business development. We reached this target two years in advance: in 2018 our indirect costs were 14% lower compared to 2016. By the end of 2020 we delivered additional savings that bring the total level of reductions to 20%.

The largest cost category, and at the same time the most important source of savings, is labour. Over the past five years (2015-2020) we have optimised our employment by around a third, and we aim to continue. The scale of reductions is always negotiated with our social partners (there are 17 trade unions at Orange Polska). The social plan currently in force, signed in December 2019 and covering the years 2020-2021, enables us to continue with employment optimisation at a significant pace. According to the plan up to 2,100 employees may opt for voluntary departures in these two years, which constitutes 17% of the total workforce at the end of 2019. In 2020, 1,250 people will be eligible to leave the company within the framework of this social plan. We are significantly optimising not only full-time employees but also outsourced employees. The annual average number of outsourced employees between 2016 and 2020 went down by 58%

Strong pace of net savings in indirect costs…

yoy change in PLNm and in %

 

 

 

 

with 50% coming from non-labour areas

Indirect costs cumulative: 2017-2020

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