Earnings Call: Q4 2020

Feb 18, 2021

Neshet, please go ahead. Hello. Welcome everyone. Good morning. Welcome to conference, Orange Postcard Conference summarizing quarter 4 and full year of 2020. I have a pleasure to introduce the larger group of speakers. Today starting from Julien Ducarral, our CEO. Last to him, Bozan Alechnizka, the Executive CEO in charge of Business Market and Jacek Kunifi, our CFO. Let me now hand the floor to Julien to begin the presentation. Thank you. Good morning, ladies and gentlemen. Welcome everyone on our conference summarizing Q4 and full year 2020. We will also quickly summarize our Orange.one strategy that has ended at the end of the last quarter. As usually, as it was said, we will take the opportunity to zoom on one of our key strategic activities around B2B. And at the end, we will take the answer. So let's move on the next slide, Summarizing our financial performance. So in 2020, as you can see, we have delivered Fully our financial commitment. We guided for growth of EBITDA and it was almost 3% year on year. Please note as well this is a 3rd consecutive year that we have been growing our operating profitability. Thanks to a very strong Q4, we managed to achieve small growth of revenue as well, Almost 1%. I'm very pleased with this because you might remember that at the beginning of the pandemic, We revised our outlook on revenue given the uncertain Outlook and environment and despite this, we have been able to deliver this growth of almost 1%. On the CapEx side, We are exactly in the middle of the range despite significant difficulty to sell our real estate due to There's a slowdown in this market, so we have been able to adjust our spending on the technical side. So having said that, I will move to the next slide, which summarize, I will say the environment and what we have been doing. So obviously, 2020 was not what we expected at the beginning. But I think despite those unprecedented challenges, we did good. So if I look back when we were in March, we immediately revised our priorities, Giving top focus to our employee, to our customer and as well to the business continuity. So we had to add up very quickly, almost 85% of our employee went to work remotely. But we didn't stop only on dose 3 point. We participate and answer the call of the Cyro City To provide different means and support to different organization, let me name some of it. So we supported the hospital with better connectivities as well providing smartphone and data bundle For people to stay in touch with their family. We supported as well teacher and student with a special offer On Orange Flex and we provided as well modem and tablet for those to continue and not stop education. Orange Foundation has as well delivered a lot of Seminar to help teacher to adapt to this new environment and provide tools and techniques To keep education online. For the elderly customer, we have as well provided facilities to delay payment and as well the free delivery at home of Materio. So I think we did a good job for our employee, which was very important as well to continue the business, But as well to support the Cyocity, we hold the asset that Orange Poland has. If I look now on the core subscription services, which you know this is our main margin contributor, We can say that our business has been very resilient during this period. We are as well very satisfied With the commercial performance, especially in H2, and I will come back on this one. But we have as well to mention that this crisis has put pressure on our business And I will name some of the area that has been affected. So obviously, the reduction of mobility, Whether it was internal or international has impacted the roaming, but as well as the prepay business. One of the areas that I think was the most impacted for us, as you know, we have a plan to dispose Our real estate. And this was obviously a slowdown. It is not Cancel plan, but this is a postponement and we are currently working in Remodeling our offer. And we do expect that the market, as soon as the crisis will Go away that the market will pick up again. So we had as well given those plus and minus Do some exceptional measure. You might remember some that we named last year on the OpEx And as well on the CapEx in order to compensate for this real estate shortfall. I think as we are still in the crisis, obviously, we are looking cautiously about the future evolution economically, But as well in terms of customer payment. Going on the next slide showing a more deep dive on the commercial performance. Obviously, this crisis has created an acceleration of the demand for Fixed and fast and high quality connectivity, which We have been extremely well positioned to answer this high demand. So you can see on the graph the growth. And if I look at Q4, we had obviously a very strong quarter, Both in volume, but as well on value as you see the evolution of the ARPU. We recorded 40,000 net addition, which is the highest in the last 3 years. This is obviously driven by fiber where we added 63,000 customer in Q4. And we can see that our base has increased by 10% in a single quarter. The driver, as I said, is a high demand. And as we commented in Q3, are still the same in the sense of We became very efficient in deployment plan, so choosing the right new household. But as well, our sales is becoming more and more efficient and we are able to increase utilization Great of our network. So this is confirming for me that our bet Of investing in fiber was the right one. And what we have been working on the fiber core It's the right direction for the company. So we have reached an important milestone of 5,000,000,000 household Rich in Poland in more than 150 cities. And within this €5,000,000 we can say that we have already 15% utilized by the customer, Which is bringing us around 750,000 fiber customer. Important to notice You see that on the graph that in terms of value, we follow this increase of volume as we have a strong increase of 5%. And this is obviously driven by the technology mix inside the broadband Where fiber has a higher ARPU than the other technology. Going on the next slide where we have tried to illustrate The main driver that is delivering this good growth of EBITDA of almost 3%. So as I said, the 2 main top line driver are convergence and mobile. So we commented on the convergence, so very strong growth of volume. But as well on ARPU for those 2 business segments. So for conversions, it was as well a record quarter, the best in the last 2 years With the underlying growth of the fiber, we are as well monetizing quite well This convergence in term of value and what we can say is that The total trend in revenue are sustained by those 2 pillar and Jacek will comment more. On the lower box on this chart, you can see 2 of the main reasons we are able To deliver the transformation we aim for. So the first one is related you see the decrease Of the headcount or the labor cost, which has been consistent over the last Yes. Thanks to social plan negotiated with our partner. And this is clearly as well helping us To transform and we will come back on the Dot 1 strategy as it was an important factor for this transformation. We see as well that the indirect costs are going down by 4% in 2020 versus This 2019. And as well, we have to mention that that was supported with an exceptional Mitigation measure that we cannot expect to see back this year. So if I look at this graph, the message for me is that we have a successful combination of Growing value from the core business, thanks to volume and value, so ARPU of the customer. And at the same time, we continue to transform our cost structure, which those two result in this Good growth of EBITDA. So let me now hand the floor to Jacek to go more in detail of the financial. Thank you, Julien. Good morning everyone. Let's start the financial review on slide 11, where we present the highlights of our performance. We're pleased with the solid financial results for 2020. We delivered on our goals. Our revenues expanded strongly in Q4 with rebound driven by the ICT business. This allowed us to finally report a small top line increase for the full year. Our EBITDA for 2020 increased by almost 3% year on year, thanks to an exceptional effort on the cost side. Q4 stand alone was down 4% due to around EUR 35,000,000 impact of claims and litigations accrued in the Q4 of the year. Economic CapEx in 2020 increased slightly year over year, Reflecting much lower real estate disposals due to a very challenging market environment. In order to mitigate this, We adjusted our CapEx spending accordingly. Lower real estate sales also marked the year on year dynamics of cash flows. We should note, however, that these were relatively strong with the exception of this item. Let's review the top line on Slide 12. So as mentioned, Q4 revenues expanded by 2.8% in quarter 4 year on year, Driving the full year dynamics into the positive. The key factor behind it were IT and IS revenues, which grew by 27% year over year in the Q4. Towards the year end, we benefited from a surge of demand for software licenses and solutions to digitalize our business customers. We're pleased with the ICT performance in Q4. However, it's not a repetitive subscription based service, so you do not extrapolate This growth rate directly into the future. What is even more important is the performance of our core telco services, so convergence, Mobile and fixed broadband as these build vast majority of our profits. These continue to increase And they have even accelerated their growth rate. They were up 3.6% year on year in Q4 As compared to an annual growth rate of 2% to 3% in Q3 or 1.4% registered 1 year ago. Going forward, we expect further benefits from customers' appetite for fiber and for mobile connectivity. Mobile prepaid revenues will however be slightly affected by new regulation in 2021. It allows prepaid users to claim our new stop ups when they churn, which will decrease the revenue recognition for us. Switching now to EBITDA performance on slide 13. Our Q4 EBITDA contracted by 4% year over year. This was driven by EUR 35,000,000 of provisions for claims and litigations. These type of provisions are not new for us. However, they do influence the growth rate of this particular So that's why we are mentioning them separately. The evolution of indirect costs also reflects a very low comparable base in Q4 of 2019, which was then boosted by a backward correction. What's particularly important in our Q4 performance is the dynamic of the direct margin, So the effect of our commercial activity on our profits. In Q4, it expanded by 2% year on year. Thanks to the growth of core telco services and despite COVID impact on roaming. This is a very positive sign for the future. We are progressively transforming the way in which we achieve EBITDA growth, striving to grow through profitable increase of revenues. Achieving this will make our EBITDA growth much more sustainable. Our full year EBITDA increased by 3% year on year and we're pleased with this performance. It was achieved thanks to solid 4% year on year drop of indirect costs. This reflects the underlying business transformation, but also an exceptional effort made in 2020 in the face of the COVID crisis. It included some non recurrent items such as the curtailment of employee benefits since the Q2. So further extrapolation should be made with caution. Finally, throughout 2020, we've closely monitored the Quality of our accounts receivable. As of today, cash collection continues to be solid. Nonetheless, we're all aware that the COVID crisis is far from over. So this area remains one of our key concerns and risk areas for the future. Let's now look at the bottom line at slide 14. We posted a EUR46,000,000 net profit In 2020, which was EUR 36,000,000 down versus the previous year. There were two reasons for this. First of all, much lower gains from Brida Estate disposal. As in 2019, we sold a very valuable real estate complex in Warsaw, which enabled us to generate record high results. While in 2020, obviously, this activity was hampered by the pandemic. Secondly, our finance costs were EUR 34,000,000 Up year over year, this was due to non cash foreign exchange losses on long term lease liabilities for rental of our offices. Now over to CapEx on slide 15. Our economic CapEx amounted to EUR 1,800,000,000 In 2020, roughly EUR 100,000,000 more than in 2019. It was pushed up by less proceeds from real estate sales. In order to mitigate this, we've made we've been more selective in our CapEx spending. And as a result, our gross CapEx Spend was around EUR 250,000,000 lower than in the previous year. That affected most areas of spending including mobile where 5 gs rollout was Obviously, postponed versus the original plans, also including fiber, albeit this was made without slowing down the expansion of our reach. We have invested slightly less into our backbone for new cities and relied more on expanding our reach through access to third party networks. Let's now look at cash flows on the next slide, slide 16. We generated EUR 640,000,000 of organic cash flow In 2020, it was €95,000,000 less than in 2019 due to less sales from real estate. Excluding this factor, Cash generation would have been higher than the year before. This resulted from 2 items. Firstly, the growth of our EBITDA and lower Working capital requirements translated into EUR 147,000,000 higher cash from operating activities. Secondly, cash out for capital expenses was EUR 260,000,000 lower than a year ago due to less investments. Growing EBITDA A solid cash generation translated into a decrease of our financial leverage with net debt now standing at 2 times the EBITDA. Finally, just as a reminder, in January, we've concluded an agreement to refinance to the EUR 7,000,000,000 Loan of our debt and in consequence, our average cost of debt will fall to around 2.8% from Q2 of 2021. Thank you very much. That's all for me for the financial review. And I hand the floor back to Julien. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Yes. Thank you. So after this 2020 financial review. We wanted as well to spend a bit of time today on presenting A summary and probably as well a conclusion that will help us to guide you through our next Strategy that we intend to present in Q2. So we would we wanted to summarize the Dot 1 program. So On Slide 18, we just have put back What were the main area that we had announced at the moment in 2017 When the program started and you might remember that one of the ambition was obviously a turnaround In the key segment and as well to become a more efficient operator, We can probably say that to move from a legacy operator to a modern telco. So we have met all our goal and we will review this. You know that we were on a multiyear negative trends And it was very important to reverse hence the creation of this Dot 1 program. So on the slide, If we look at the 5 different area and objective we have said, obviously, the very important one Was around the decision to invest on fiber network, because the fiber has been the bedrock for our growth and our, I will say, commercial success. And obviously, as we commented in the past, The current crisis has only amplified this need and I would say confirm The right choice we made in 2017 to go on an ambitious program Of deploying fiber. We changed as well our approach on the commercial and that was one of the objectives that was To be much more focused on value, what we call in marketing the more for more strategy and as well Contribute to the market repair with some price increase that we did over the year and that we see now Materializing on the ARPU of the customer. One other very important point, which I think was central In this strategy was around the customer obsession that we turned the company much more attentive toward customer satisfaction. And for this, we are measuring the NPS, which is a net promoter score. And I remind you that we were number 3 in 2017, and we are very pleased to report that in 2020, We have been number 1 sometime execco, but we have been number 1. So significant Progress has been made in this area. As well, another very important And I think reason of the success is the change of the culture that has been implemented in the company because those results Obviously, the contribution of the employee and we have been able to change the mindset And the culture, so to be much more customer focused and as well to be more cost Discipline driven as a company and that's I think this is what we have already demonstrated In terms of cost base and as well NPS. But nevertheless, I will as well conclude this part at the end by highlighting Some of the area that we failed in this program or let's say we could have done more And we will certainly embark then in our next strategy. So let's a bit deep dive on next slide on some of those topics to illustrate in more detail to which extent we have delivered those results. So starting with The fiber, so remember in 2015, a bit before the dotone strategy, We made a decision to invest in fiber, which was basically at that point a decision whether we wanted or not to stay in the broadband market Because legacy technology was being, I will say, challenged by cable operator. So we made this bet. And in 2017, we had a very ambitious target of going to 5,000,000 Household. And as I commented about 2020 result, we did this target. So that was This we have achieved and we have seen that it was a clear support for the current commercial performance and as well amplified by the crisis. So now we are the clear leader in this fiber infrastructure on the market. You probably know the number for the rest, but We are by far the number 1 and I think this is an asset that will stay for a few generation As obviously fiber is very competitive for the future and the technology is scalable and We are very happy with this achievement compared to the rest and we will not stop That's why we are as well contemplating the fiber core, which will allow us to continue This direction of keeping advantage of infrastructure. You see the numbers. So we have increased by 3.4x since 2017 in term of customer base On the fiber, we have increased obviously the utilization. As we commented in the past, We are becoming more and more efficient. So this is translated in obviously utilization of this EUR 5,000,000 That we have 750,000 at the end of 2020. In the total base of broadband, So including legacy technology, we have recorded 11% growth, which is as well Quite impressive over the strat or this point one period, 2017 to 2020. And as well, what is important is that the fiber is not by far A migration from copper to fiber. So when we look at Where the fiber customer are coming from, 70% to 80% of our new fiber customer Are coming from the market and not from legacy. So this is complementary over the time. Obviously, We want to accelerate as well the migration in order to step by step decommission the copper. So obviously, fiber is a technology enabler for what we call conversions for the customer. So if you move to Slide 20, we have a recap of the convergence. The convergence is More of the customer proposition that we have put under an umbrella called Orange Love. You might remember that In the beginning of 2017, we were the 1st on the market to come with a hard Conversion bundle, which is basically putting multiple services of a telco under one package that we called and we still call Orange Love, which is has been and is still very successful. We can say as well that the majority 3 of our broadband base and client are acquired under convergence, but the convergence penetration on our base It's around 65%, which is if I compare to other peers in Europe Showing that we are getting more and more mature, but there is still room for growth in this area. What we see as well is that convergence and this is one of the principle, more loyal customer. So we have better or less churn in convergence than in other type of product, which is very important for us. And as well, we have been able throughout this period to increase the ARPU of This convergence customer, thanks to more upsell, but as well change of technology mix, Which is help us to grow the convergence ARPU. So moving to Slide 21, focusing on mobile And we can say as well that the Dot 1 strategy has been successful for our mobile business. We have recorded 11% growth over the period, which is an average of 3% to 4% Every year of growth of the mobile base, this has been achieved thanks to our Rich value proposition for the customer that is going from a single SIM, SIM free and as well multi family multi SIM family and Complemented with a rich portfolio of devices. Behind this, we have discussed Before, but we have implemented the value management this more for more strategy, which has helped us to improve The value as well the churn went down and that was a focus of 0.1. And The reduction of the churn I think is a lot due to this customer obsession That the company has put since 3, 4 years illustrated by the number one position on NPS. So basically, it is proven that when you have more happier customer, Then they become more loyal to you. And this is proven in our numbers because the churn has been decreasing By almost a quarter, if I compare to 2017. The ARPU as well, we have stopped the decline. It was declining double digit in 2017. And if I look at 2020, Obviously, still declining, but if we remove the impact of COVID, which is impacting us in roaming, We will be much lower and it will be only 1% decline. So a clear stop of erosion Of value on mobile. Going to Slide 22, where we have highlighted some of the area that I do. And with the management team, we do consider we could have done more or more remain to be done, If I may say so. So obviously on digital, we have done some good progress. It was one of The strategy direction for PointOne, you see on the chart that we grew from 8% to 14% Share of online commercial act, but we have a higher ambition than that. We have seen, for example, that during The lockdown this share went to 20%, obviously helped by the closing of the shop or some of the shop, But nevertheless showing as well the willingness of the customer to buy. And this will help us to be more Because an increase of digital will allow us to reach a customer base That today might only buy online, but as well will help us to restructure our cost in term of distribution That we could foresee to optimize our point of sales Both in numbers, but as well in format. Then we had As well planned in this Dot 1 to go on adjacent business. So we have to be humble and recognize that our Competitive on Orange Finance was not successful and we decided to close this operation that was the wrong setup In terms of partnership parameters, we will reconsider In the short term, whether and how we could still go, we know from other market that there is opportunity And there is synergies and capillarity between Telecom and Banking. And this is something we will come back To you when we review the strategy for the coming 3 years. There has been other less Successful in term of revenue or margin, but still that need to be further developed. I'm thinking about Orange Energy, where we are stepping still not to a bigger scale that It's worth to report. I'm dedicated on it, but I do see and we will have the opportunity You talk in the strategy that there is a bright future, I believe, for energy as well when we combine that With the green angle, we want to have more now in orange Volskaya. On devices as well, we have been able to grow by specifically launching some Innovative proposition like installment that has helped us to compete on the device market. But again, this is an area that I do consider we can do more and not only on devices, But as well on connected object and accessories. We had a good result, But I think we need to go further around what we call Orange Smart Care, which is a shoot Our portfolio of products that allow you as a customer to be protected and protected physically, but virtually as well. So this is about insurance and security. And we have some good revenue and we aim to go further. So as you can see, we did some successful and some I think still remain to be done. Now let me pass To Bozena to look more in detail on one of our key priority on B2B. Good morning everyone. Now we are on the Slide 23. Well, whenever I think of our achievements of B2B over the last 3 years, I see a long journey that we went or even flew when we take into consideration the speed. From the pure telco provider to partner in digital transformation for business. Overall, we achieved 6% growth of revenue. In 2017, the situation seemed rather bleak. Almost 90% of our revenue was derived from telco services that were declining, just to mention a few. Mobile voice based ARPU was constantly declining. Fixed broadband revenue decreased yearly by 5%. Over the 3 years, we succeeded in not only fixing our legacy, but growing the new businesses, Meaning ICT, which now represents 26% of our top line. How did we do it? First of all, we capitalized on the investment in fiber network. Over the time, we more than tripled The number of the fiber accesses among our network. Thanks to this, we could escape battlefield of copper based services And capture potential for the high speed, high reliability Internet and WANs. The most vivid example is a rebound on data transmission market. After long years of continuous decline, we started to grow Whilst keeping our undisputable leadership position on the market. It's worth to underline That fiber is not only the ultimate access type for business customers, but it's also an important foundation for ICT services. Starting from security through cloud towards software, all making and comprehensive positioning for the digital work. From 2017, we more than doubled in ICT area, reaching revenue Of almost, almost very close to EUR 1,000,000,000 in 2020, exceeding by far my personal ambition. Let's now look at ICT area more closely on the next page. Over time, we developed this area considerably. Back in 2017, we were already privileged by having a separate entity integrated solutions To provide our customers with the 1st class solutions based on networking, security and integration. Over the time, we expanded competence of integrated services, which secured a solid organic growth. Integrated Solutions is nowadays the 3rd integrator on Polish market, but we didn't stop here. We decided to capture the immense growth of software and applications domain and acquire 1st In 2019, leading business systems integrator, BluSoft. And then in 2020, December 2020, The company Kraftware, an expert in connected CRM. Kraftware has been on the market Since 2009 and has the status of the Platinum Salesforce partner. Among its clients are large Companies from the Pharmaceutical, FMCG, Retail and Finance Industries. The CRM sales force competence of Kraftwerk perfectly complements the ICT offer both Blue Soft and Orange ICT. Thanks to that, our ICT revenues come from not only the fast growing, but also high margin services like cybersecurity, Horizontal and industrial specific software as a service solutions and application related services. ICT coupled with some more emerging domains like big data and AI will The important line of our business in the future and the part of our future strategy. That's all from me. And I hand the floor to Jafar. Thank you, Boujalain. Let's look at Slide 25. This slide shows a table with our financial recovery ambitions exactly as we have presented them during the strategy announcement in 2017. It's worth to underline that we have delivered on all of these promises in each of the years. In some cases, We've even exceeded the initial expectations. Our revenues have been growing for the past 2 years and EBITDA for the past 3 years. We have kept CapEx within limits and we have significantly progressed with debt reduction. Let's look on the details of this on the next slide, slide 26. While executing the Orange D'Orient strategy, We broke a long term negative trend of our financial performance. Both EBITDA and revenues are now growing After more than a decade of constant decline, it has been achieved through the combination of progressive Commercial turnaround coupled with a great cost optimization effort. We've successfully implemented our convergence strategy. It was possible thanks to dynamic growth of Faber as monetization of unconscionable investments in this area has begun. We have also paid particular attention to value in our commercial activities, including more for more price increases in mobile convergence and fixed broadband. Simultaneously, we've achieved a very high rate of cost savings. Since 2017, we've optimized Indirect costs by almost EUR 600,000,000 or 15%. This was done in spite of inflationary pressures in areas such as labor or electricity costs. So the effort to achieve the savings was even greater. We had a particular focus on automation. To give you the magnitude of our efforts, we decreased our workforce, so both permanent and outsource staff by almost 1 said during this period. Summing up, this turnaround has put us in a much better position than we were in In 2017, with growing revenues, growing EBITDA as well as a much safer balance sheet. Thank you very much. And I hand the floor back to Julien for the conclusions. Okay. Thank you, Julien. So on Slide 28, I wanted to share with you in terms of sorry. So on slide 28, I wanted to share with you our outlook and specifically our direction and priorities as a business and I will conclude with our guidance for 2021. So related to priorities, obviously, I hope you understood that. We have a strong commercial momentum that we have built over H2 2020 and we aim to sustain this good momentum that we have both on consumer, On the convergence and on mobile, but as well on B2B and ICT as we have just heard from Bozena. So on the end, the second one is obviously the pandemic is not yet over, which obviously as well is putting some Cautious view for us regarding what we can expect in 2021. So we remain obviously cautious In terms of outlook and especially when it comes to payment and as well related to our customer on the B2B side. But I think as well for us, it's an opportunity not only on the fiber demand, But as well to review our ways of working and as well our premises real estate that we are today occupying and we do foresee that once the condition will allow us to come back to the office, We will certainly come back in different ways of working and we are going to adopt Very soon an hybrid working model, which will certainly create some opportunity in term of cost Related to building. We will obviously continue our transformation. So we have largely I shared with you today what we did up to now and some of the topics are not finished. They have delivered results, but they will continue to deliver results. And here I'm thinking about automatization and much more digital processes inside the company. An area that you heard probably that we start to talk more and more and we will come back In the next strategy with commitment and target. But obviously, the green is a very important Part of our company now and it will be one of the core element of the next strategy. So it's about reducing Our carbon footprint, but as well helping our customer to manage this challenge and transition Toward a greener economy. And just to mention and to remind you that we have already purchased 10% of our energy needs coming from green energy. We have 2 big topics in front of us that will be structuring for the future of the company. The first one is the fiber core. So we are not going to go too much in detail on this one as we are, as you know, in the middle of it. And we do expect to come to a conclusion during H1 or before H1 As we are already in H1, but before H1 on this topic. And the second topic that will be very important for the future It's related with the 5 gs auction that as you know today we don't have yet full clarity Regarding to condition, we know that it should happen very soon, but we don't have the full visibility on the detail And in which conditions? So those 2 are very important for us financially, but as well as strategically. And I hope we will certainly have the opportunity to talk about it in our next result presentation. So that's for the direction. So as I said, we plan to announce our strategy in Q2, Which will be as well a good timing hopefully in relation with these 2 major strategic topics. So going to the slide 29 on the 2021 guidance. So to start with, We aim we want to achieve growth on both EBITDA and revenue. This is clear. The revenue driver, I'm not going to comment too much because I think we have explained to you how we did in 2020. And basically, we aim to do the same in 2021. As I said, we have a good momentum. We want to keep this momentum from fiber, mobile And B2B growth coming as well from ICT and the integration of a software and Bluestoft. We should not forget as Jacek commented that there is some regulatory headwinds In 2021, namely around the prepay and the new cash back regulation that was already implemented in January. And the second one will be on wholesale as a cut in MTR and FTR that will start in May That will have a significant impact on the revenue less obviously on margin, but still will impact our ambition regarding the Revenue. What is important to notice on EBITDA while the guidance is obviously growth, It will be the 1st year in 2021 where this growth will come from direct margin. And I think this is very important because this is showing that our core business is growing And this is healthy and I think helping us to have more kind of sustainable forecast When it comes to our profitability, so we are counting on growth of the core business to deliver growth of EBITDA. And not only just by optimizing cost, but we do expect for 2021 To be, I will call it a healthy growth of our profitability. We will continue obviously To optimize as well on the standalone basis the cost, but we have as well to be aware that it will not be at the size of 2020 Where we did some exceptional measure that Jacek commented previously. On the Guidance for economic CapEx. We assume more or less the same range as last year. And let me maybe a bit explain in light of the fiber core that we do expect to happen in our forecast Is that even if the fiber core will take over our CapEx in H2, We still have a lot of deployment coming from POPC. I think we commented in the past This is the European Fund Program where we are covering Difficult area, wide zone, so called. And we are arriving at the peak of this POTC. We are a bit delayed, But because it's a difficult condition as well, the pandemic has not helped us to accelerate In this area, but we are very confident in this area because the first one that we have deployed are Obviously, bearing very high utilization because this is on the high demand. So we are very confident that This CapEx will be well spent. And therefore as well we have a high ambition on real estate Because we believe that hopefully the environment will be better than 2020. And what we have not been able to sell in 2020 will materialize in 2021. We have as well the construction of a new data center that will as well mobilize some of our CapEx Real Estate Complex in 2019 for We need to migrate our data center and we will open this new. So that's My part and we are now open for your questions. Thank you very much. Thank you very much for the presentation. We'll now be moving to the question and answer session of the call. Thank you. Our first question comes from Mr. Titus Khan from Barclays. Please go ahead, sir. Your line is open. Good morning everyone and thank you very much for taking my questions. So it's just a couple from my side if I may. And the first one would be on 5 gs. So given that the auction process is probably still some time away, can you maybe update us on the existing 5 gs offer And how has the traction been with customers so far? And to what extent you have increased your coverage since the launch of services? And also what is the impact of the delay on mobile network CapEx Spending probably in 2021 and thereafter. And on the current regulatory environment, how do you view the plans to launch a State owned telecom operator. What could be opportunities for you on the cost side from such a launch, but also what are potential risks, for example, for government services? And if I may, just the second part of the question on the ICT business. First, congratulations For turning this around after the decline in Q3. Do you believe the rebound was partly driven by pent up demand after the uncertainty Of Q3. And are the underlying trends now back at expected levels? Or do you still see some hesitation to invest in risk into 2021? I will take the question on 5 gs. So first of all, from Customer perspective, obviously, you know that today we have a DSS technology where I would say it's good, but it's not 5 gs. However, I think what is promising for me that we see quite high around 20% Of the sales of handset being 5 gs capable, which I think is very promising for the future because the day When we will have the real C band 5 gs, then we will not start from 0 And we will deliver quite quickly to a number of customer because this is the one we have been acquiring Since last quarter, where we started to have a significant number of 5 gs devices. So I think on this side is Quite promising. I cannot really comment on the DSS satisfaction. We do see customer using a bit more data on DSS than on LTE. But for me, it's not yet the real 5 gs where we will be able to have more innovative services. Regarding CapEx and impact, well, we have fully kind of embarked in our budget the fact that 5 gs will not be massive this year. We are clearly focusing on the fiber, Both the other fiber core from H2, but as well as I mentioned, P0PC That will still deliver quite a significant number of household, which we do expect to have a high return on them. And as well we continue to have a continuous investment on the B2B when it come to fiber. So I think the story of 5 gs is a story given the calendar given by the government, Not the calendar, but the delay for sure and what we could foresee at the moment That will not have a significant impact on our CapEx for this year. We will still be in a very fiber Investment again. ICT, you want to hear. As far as ICT, thank you very much for this question. As far as ICT is concerned, I just want to emphasize that the ICT business It's not comparable to the telco business at all. It's not the recurring business. So all the revenues and all the business Comes from the building the pipe along the year. And the hesitation and the slowdown, which we noticed in Q3, was Exactly the result of the delaying the decisions of the customers due to the COVID situation due to the uncertainty. So just after the pandemic started in Q2, We noticed that customers postponed the decisions and it reflected the Q3 results because there is Some delay between the decision and the realization of the project, which comes from the delivery process Timing. And in Q3 in Q4 already we saw the result of the decisions of the customer made in Q3. And they were connected with few areas. First of all, we're securing the business for the further months of the pandemic. So the all the solutions around the security, around the workspace, around the software and Applications that are necessary to digitize companies, the growth of the e commerce, the growth of the Internal digitization of the companies was very visible and it is reflected in our Q4 Revenues. Additionally, the revenues of Q4 were supported by the big contract in the software area Connected with the business related to the Microsoft Enterprise Agreement with Polish Post. I'm quite positive about the future. I see that still the companies are thinking about being prepared for the Longer pandemic, so it means changing and digitizing the business. It's already reflected in Good beginning of the year. We also will integrate Kraftwerk to Our ICT business and this is also very, very optimistic when I look at the performance of Kraftwerk in 2020. Thank you very much. Thanks. That's super helpful. Thank you very much. Thank you very much. Our next question comes from Mr. Marcin Novak from Epopema. Please go ahead sir. Your line is open. Good morning. I have few questions actually, so maybe I will go 1 by 1. The first one is regards to The comment regarding CapEx in the 2nd semester of 2021, because I understand that the And that the FTTH CapEx will be lower due to Fibreco. Should we understand that your 2021 guidance Assumes the sale of Steg in Fiberco and it's the consolidation? Thank you for your question. What we have mentioned as part of the guidance is that And this is Julian's comment is that we will continue to invest into fiber. It's not that Fiber becomes automatically the CapEx of the fiber call. What we have assumed is that we will still spend A considerable amount on fiber next year, you could say comparable to what we have spent this year. We will invest on our own in H1 in the 1st semester as we are doing right now. We will invest for the entire year for the CapEx for key accounts, which we have been investing systematically and we will continue to invest on our own even after we have concluded the Fibreco transaction. We will obviously bear the CapEx for the delivery and the customer premises equipment. We will have a peak this year of CapEx for the POPC areas for the wide zones. And this again in the entire year will be realized by us. What we are assuming is that starting From the 2nd semester, Fiber Co. Will take over the production and CapEx and fiber build For the individual clients, so it's not a full year impact and it's not an impact of the entire scope. We are Assuming that Fibreco will take over, we are assuming that we will be successful in concluding this transaction. Still Signing is expected in the 1st semester. Hope that answers your question. Well, it answers my question regards to CapEx, but it doesn't answer my With regards to the EBITDA guidance, because if you are moving part of your customers to the fiber cost, then it should be You are selling 50% stake. So does your EBITDA guidance for 2021 assume the consolidation of fiber? Yes, it does. I think regarding the EBITDA guidance, what we can say is We've given a range and this range it shows the level of our ambition and our uncertainty. So on one hand, you have seen that we've grown the EBITDA by almost 3% this year. Our hopes And plans and ambitions would be to try and grow it even faster in 2021. We are however obviously aware of the risks and uncertainties that are ahead of us. First of all, linked with the pace of economic recovery, the risk of debt with the risk of Customer pipeline in the B2B also linked with this recovery. So this is where you get Your, I would say, range of the EBITDA guidance. But as I mentioned, we are Really progressing and trying to make sure that we can grow as fast as we can. Regarding the impact of the fiber coal itself, Yes. On one hand, we will transfer we will not transfer customers. We will buy wholesale access for about 150,000 of our retail fiber customers from the Fibreco. Since it will be a deconsolidated Structure that will result in costs being recorded on our P and L. However, it will not be a one-sided affair. On the other hand, We will be also rendering services towards the fiber core. We will be renting the services for network maintenance for connecting the fiber core last mile network to the global Internet for rent of some critical infrastructure. Finally, we will be also rendering the service of network built to this fiber cost. So the overall impact Of the fiber core on the 2021 EBITDA, it's much more balanced than you would think just by multiplying the 150,000 Customers times 6 times whatever rate you might imagine we will finally negotiate. It's not possible for us to comment on this more, I would say precisely right now because we haven't concluded the transaction. So obviously terms and conditions are not final. But it's not a one-sided FA only. And yes, it is included in the guidance that we have issued. Okay. So assuming that you indeed will sell 2nd fiber coal, This effect maybe let me rephrase. If you are not sell Your final call stake. Then your EBITDA guidance for 2021 should be also the low single digit growth? Yes. Okay, great. And regards to fiber coal, as you are still in the analysis process, I assume that you have decided which areas new deployments will be made. And how large share of those new deployments will be in places when you already have infrastructure And you already have clients and how large SaaS share of it will be in the new area? Well, as we've mentioned in the communication that we've already issued, FiberCo should build within the next 5 years, 1,700,000 New households connectable. It should be focused around medium and low competition areas. This is those are the areas suitable for such structure. Obviously, I will not and I can't comment in detail on where exactly we are going to build because that may also slightly evolve over time. But you may expect that this is medium and low competition areas. I would not want to get into too many more details. Sure. Understood. And regards to your current network, could you comment or provide updates on The size of third party connections within your 5,000,000 household network as of now. And Over the last year or 2, how much of new FTTH customers production was made on 3rd party networks? Okay. Thank you for your question. Regarding the 3rd party production or the 3rd party connections, It is, I believe, slightly in excess of 700,000 and it has grown by about no, sorry, it's almost 1,000,000. It's almost €1,000,000 and it has grown by about €300,000 within last year. Okay. And out of new customers, How large number of new customers is from I would need to get back to you on that offline. Okay. And so my last question is in regards to the Recent government's comments about plans for 700 megahertz band. Do you We aren't interested in participating in wholesale operator on 700 megahertz pumps. Regarding the 700 and probably you refer to the national operator, As you know, we have been commenting directly or via Association, our position and surprise in light of the first draft that we saw. Since then we had interaction as an industry with the authorities And I think it was as well confirmed in the press in the last days that the focus of For the idea, the intention is obviously to have something that answers the security concern Of Public Infrastructure. So the scope is obviously limited compared to The first draft and obviously to the question are we interested in the 700, the answer is yes. After we have to see whether it will be in the form that The government is today looking at or whether there will be a different form at the end. I think you know that the discussions are ongoing. So it will be a bit dangerous to speculate on what they will end up, but We are having constructive discussion with the authorities and together with the industry and the other competitor. Okay. Thank you very much. Thank you. Our next question comes from Mr. Nikhil Mishra from HSBC. Please go ahead. Your line is open. Yes. Thanks for thank you for the presentation. All of my questions have already been answered. Just one small question on At Jitsen. So can you just guide us on what kind of growth you are looking And also what kind of the market for this particular area tend to? Thank you. Nikhil, could you please repeat your question, which arrears your question referred to? Regarding the existing EBITDA, the finance and energy and the devices and sales care business. Okay. Thank you. So regarding the adjacent areas, you've seen that we've posted quite a Nice growth and nice revenue figure for those. In terms of the major values For those revenues so we've achieved revenues in excess of €200,000,000 for Orange Energy in excess of €150,000,000 for the SIM free devices and around €40,000,000 for the devices such as SmartCare. Obviously, the margin is a bit different. And to be honest, the margins coming from all three of those areas Quite similar when you measure them in the millions of zlotys. So Orange Spice Grill will have the largest Percentage margin with Orange Energy having the lowest percentage margin. Well, Orange Energy is specifically also due to the turbulence that we've seen on the market since the product and the concept was launched, but we believe we are now on a good path to continue to grow the revenues and to Continue to grow margins on a more substantial level. Question? There are no voice questions. Let me we received some questions online. Let me start with the questions from Mr. Victor Barzitski. First question on 2021 CapEx guidance. This was already partly maybe just maybe repeat. The question is with the 5,000,000 homes passed The FTTH ambition achieved. What are the reasons for the 2021 guidance to be at the 2020 level? What And plus spend on FTTH. So as I have mentioned, Our guidance for 2021 includes an assumption that we will spend A comparable amount of CapEx on fiber in 2021 as in 20 20, we are finalizing the POPC program. We obviously continue to Spend CapEx on customer premises equipment and delivery and that is a good thing because that means we're connecting more and more customers to our network at a faster and faster pace. We will continue to invest for the key accounts. And as I mentioned, we are going to Continue with our own build of fiber in H1. We've reached the ambition of 5,000,000 Home passed and this is a good thing. We are happy with the progress so far. We believe there is still a substantial Opportunity to build fiber in Poland in areas that are profitable, in areas that are with high demand. We see the confirmation of this in the very good uptake that we have when we build fibers to the single family homes with the penetration curve is much steeper than for the existing build. We see the confirmation of this in steep penetration uptake when we build in POPC areas. And that's one of the reasons why we would like to continue building fibers and this is one of the reasons While we have designed this concept of the fiber coal and we are pursuing this concept of the fiber coal. Please remember that the main goal of the fiber core is to continue to build and to build additional at least EUR 1,700,000 of homes Parts which are not in the €5,000,000 figure today. So that's why we continue to build. 2021 is a transition year. 2021 CapEx for Fibril will be on comparable level as in 2020. And that's one of the reasons why the overall guidance for CapEx for 2021 is also in a similar magnitude. Thank you. The second question is what is the company's long term target for leverage? I'll take this one. And I don't believe we have been communicating long term leverage targets as part of the strategy. We Always are striving and we will continue to strive to have a safe and sound balance sheet. So to that extent, it does not only imply a certain net debt to EBITDA or a certain Gearing level, but it needs to take into account our future plans, both for cash flow generation, major CapEx Spending as well as the EBITDA prospects and free cash flow generation prospects. So we will address all of it in a more complex And holistic way in the strategy that we are planning to disclose to you in the Q2 of the year. Next question is from Trigon Analyst. Could you please comment on trends in mobile ARPU? In Q4 2020, mobile handset ARPU ex Roaming fell by 1%, while in the previous quarter, it grew by 1%. What is the reason behind lower dynamics? Do you see price pressure in some client groups in mobile? Okay. I can take this. I think, first of all, the differences Between quarter 3 growth and quarter 4 growth that we mentioned are very small. Excluding roaming, the year on year increase in Q3 was somewhere around Polish Polish dollars, 0.20 gross and the year on year decrease in total for was around 0.20 So, euros 20, which is really, I would say, insignificant when we look on the overall trends. What we do see in the mobile mono ARPU are 2 contrasting trends. On one hand, we continue to monetize And we continue to pursue the value strategy. And as you have even seen the 5 gs Options were available in the high end tariff plans. This is the way that we structure our offers. We make sure that we Motivate customers to take higher data bundles, higher options of handsets And therefore staying on higher tariff plans with us. So that is the force which is driving ARPU up. On the other hand, the mono ARPU is being driven down by a few factors. First of all, by the mix. So within mono customer base for mobile, we have a higher and higher share of Business clients, especially key accounts clients are achieved at ARPU, which is below average. Also, we have Changing mix or changing share of different client groups within the B2C customer base with High value customers often choosing our love product and migrating from mobile mono to convergence And with a larger share of the clients in the B2C mono customer base comprising of lower ARPU I am customers in our offers of flex and new mobile. So I believe those are the forces that were play and the differences between Q3, Q4, this is really 20 Gross each year. So what is important is that the overall trend is tending towards the positive. So we do believe we will start to grow the ARPU. Next, a few questions from Petr Czybylski from Wood and Carl. I will take them 1 by 1. When do you plan to announce the dividend policy? We plan to come back in Q2 on this point. As we mentioned in Q3, our equation to return to dividend will be driven by the 5 gs Condition and I will say prerequisite and the parameters that will be hopefully announced soon Will depend on the fiber core outcome and will depend as well on our forecast An outlook for the year to come, which is linked with obviously our strategy. So we will come back on those points In Q2 around the same period as the strategy announcement. Next question is on guidance again. Does your CapEx guidance for 2021 includes any CapEx for 5 gs network rollout? Yes, it does. And the next question is how do you plan to support Orange Postcard customers In switching to green energy, does the company plan to start selling photovoltaic systems? Thank you for the idea. We are going to come back on this topic in more detail in strategy. But let's say you have looked in the right direction. Two more questions overall, one from Erste analyst about the commercial costs. We saw stable commercial costs By the material decline in equipment sales in Q4 2020, is it due to the higher share of expensive devices? I'll take this one. When you look on our commercial cost that includes Both the customer equipments, the sales commissions, also our advertising. So the mix is linked with Very high customer volumes that we've been able to achieve in quarter 4 and especially during Christmas. That includes advertising, which was faced differently than a year ago because We did not spend in quarter 2 when we were under the full lockdown. We spent more in Q4. That includes higher commissions and that does include higher cost of customer equipment. So all three of those and it's basically linked with very good sales in Q4. And the last question is from, I believe, an individual investor. Why with Having EUR 12,000,000,000 revenues, you're not producing any net profit whereas your competitors do. Thank you very much for this question. Our net profit indeed is not Very high in comparison to the revenues. Neither the trends As you have seen are not as we would wish them to be this year. I think when we look on our recovery, It is a sequential improvement that one can expect. We improved the revenue evolution then we Drive EBITDA growth through this and then we can expect an increase of net profits. So it shouldn't be a surprise that this is something that we are aiming and striving for to improve. It does have A link so that the low net income in comparison to our revenues does have a link with high depreciation charge, Because we have been significantly investing in our networks, in the fiber infrastructure, In buying at the Kuwait Spectrum and this is producing quite high depreciation costs which are there. We can expect those to progressively decline. As You will have seen that the fiber production will be taken over progressively by the fiber coal. So that will result in less depreciation Charges, we've reduced net debt and we do expect financial costs to go down. This year, the net profit was particularly, I would say, reflecting also the shortage of the gain On sale of real estate that we have not really achieved this year in comparison to the previous periods as the market was Well, quite frozen. We do plan to come back to the market, to come back to selling those properties. We do believe that they present a sizable value and we will continue to Our net income in the future with a positive gain on sale of our real estate. So we do expect this indicator to improve. It appears we have no further questions. So thank you very much to all of you who listened to us and watched us on the video. If you have any follow ups then you know how to reach us. Thank you and see you back in a couple of months. Thank you very much.