Our previous strategy reversed multi-year negative trends, delivering a financial turnaround, and improved the structure of our balance sheet. With .Grow we have entered a path of faster and more sustainable growth, based on solid foundations.
While expanding revenues, we will benefit from high operating leverage that will accelerate EBITDAaL and cash flow growth. Generation of sustainable returns is the key to .Grow and this is what makes it stand out from past performance. In our previous strategy, the turnaround was generated by huge savings on indirect costs, while direct margin continued to fall. In .Grow, the key driver for EBITDAaL growth will be revenue expansion fuelled by commercial activity. It will make this growth fundamentally healthier.
Revenue growth
driven by core business.
Expected 2021-2024 trends
Growth engine Low-to-mid single digit growth CAGR
Decreasing PSTN/xDSL/wholesale – trends maintained
Interconnect affected by MTR/FTR cuts (PLN ~1bn impact, very limited margin loss)
Hedge for the future high growth rates
We will continue to expand revenues at an average rate of low single digits between 2020 and 2024.
Our core business (which constitutes around 75% of revenues) will be fundamental to achieving this plan. Within the core business there are three main growth engines: convergence, ICT and wholesale. We plan to grow convergence and ICT revenues at a minimum CAGR of 8% and around 10%, respectively. Legacy services, comprising mainly traditional fixed line and interconnect, will be in decline. By the end of the plan, legacy will represent less than 10% of total revenues, so their further impact will be very limited.
We will also devise new services – new areas of growth. These are small today, but are very future-oriented and will multiply at a high pace. Examples include services based on IoT, big data, campus networks or the augmented home. They are not key to our financial performance until 2024, but their development will be critical for us in subsequent strategic cycles.
Total revenues
Core revenues key growth drivers
Convergence households strategy | Customer base growing (fuelled by fibre expansion) | + | ARPO growing (value, 5G & multiservice) | = | Revenues >8% CAGR | |
ICT centered B2B strategy | Growth on core integration, software & cybersecurity | + | New potential cloud, 5G, data & IoT | = | ICT revenues ICT 9-10% CAGR | |
New Wholesale monetising our assets | Fibre on existing & new reach | + | New growth in infrastructure & MVNO | = | New sources of revenues |
We will expand EBITDAaL at a low-to-mid single-digit pace. This growth will be predominantly driven by the expanding direct margin, as high operating leverage will allow us to benefit from higher revenues. Growth through commercial development will make our fundamentals much more solid and sustainable for the long term. Our cost transformation will continue. Indeed, the same digitisation trends that are enabling our growth leverage will also help us drive down costs further still. At the same time, using AI and process automation, we will improve our customer service: a win-win. We expect inflationary pressure to offset some of this margin expansion, but enough will find its way to operating profit to be able to grow our EBITDAaL margin.
Both revenue expansion and cost savings will now contribute to EBITDAaL growth
Our smart investment strategy will focus on growth, especially fibre and 5G, and on efficiency. Our capex structure will gradually evolve from the one driven by fibre to higher share of mobile. We will embark on a landmark modernisation of our mobile network. It is critical in order to ensure that we cope with the explosion of data, which is already taking place and will only accelerate in the future. It will be done on the occasion of the 5G rollout. While we will continue to expand our fibre footprint, it will not require significant direct capex engagement, as it will be mainly realised through partnerships. Despite these significant investments, we aim to keep eCapex at a steady annual level of PLN 1.7–1.9 billion on average over the period. This is how our business growth will translate into increasing cash flow generation.
Evolving capex structure but steady average annual level
*subject to final provisions of the cybersecurity act; excluding spectrum acquisition
Within the .Grow strategy we intend to resume dividend payments and we have presented a transparent dividend policy.
In 2022 we paid a dividend of PLN 0.25 per share, for the first time since 2016. Return to shareholder remuneration underscores the confidence that we have in our growth prospects and in our sound balance sheet. Our smart investment strategy will focus on growth, especially fibre and 5G, and on efficiency.
Cash dividend per share (in PLN)
Our capex structure will gradually evolve from the one driven by fibre to higher share of mobile. We will embark on a landmark modernisation of our mobile network. It is critical in order to ensure that we cope with the explosion of data, which is already taking place and will only accelerate in the future. It will be done on the occasion of the 5G rollout. While we will continue to expand our fibre footprint, it will not require significant direct capex engagement, as it will be mainly realised through partnerships. Despite these significant investments, we aim to keep eCapex at a steady annual level of PLN 1.7–1.9 billion on average over the period. This is how our business growth will translate into increasing cash flow generation.
*subject to AGM approval