Orange Polska S.A. (OPL) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and I would like to welcome you to Orange Polska conference call considering FiberCo project. [Operator Instructions] So without further ado, I would now like to pass the line to Leszek. Leszek, the floor is yours.

Hello. Welcome, everyone, to our call regarding FiberCo project. Speaker for the call will be today Jacek Kunicki, our CFO. Let me hand the floor to Jacek now.

Thank you, Leszek. Good afternoon, everyone. Thanks for finding the time to dial in into our call. What we wanted to do is to take this time to go over the FiberCo deal that was signed over the weekend and to explain the rationale and the details of our endeavor. We've published a short presentation, which we will use to assist the explanation. The highlights of the project are laid out in 6 clear points on Slide 2. So they basically include building out 1.7 million of new households connectible in low and mid competitive areas. We will -- and FiberCo will build these lines in an open access model, so we will benefit both from retail and wholesale margins. The deal that we've signed over the weekend assumes that it will be a co-controlled joint venture with an independent balance sheet. Obviously, OPL will be a core tenant and a key industrial partner for the FiberCo. We've gained attractive terms the sale of the 50% stake. And I think this is both a success of this particular project, but it also shows the value, the underlying value of the assets, especially for the fiber assets that we have in Orange Polska. And obviously, Swiatlowód Inwestycje will significantly contribute to the social development of the areas that are targeted for its footprint. Now let me walk you through the details of this agreement, starting with the fiber rationale on Slide 3. Here, we are explaining what we're going to do in this fiber project. Fiber rollout was a key elements of the Orange.one strategy. We delivered on our ambition to have 5 million households within reach. But obviously, we want to continue to expand it. Why? Because penetration of fixed broadband in Poland is very low, especially if we take into account fast connectivity of more than 100 megabits per second. While centers of big cities are well covered and usually, the -- there are a few competing infrastructures, there are plenty of areas in Poland that rely only on inferior copper technologies and wireless for fixed. When we built our fiber, we see big customer demand in the undersupplied areas such as smaller cities or outskirts of big cities. This demand is obviously on the rise due to the continued digitalization and the consequences of the pandemic. So far, we're satisfied with our fiber investments, including the penetration rates and the rate of return that we are achieving on these, and that's why we have decided to continue the fiber rollout in Poland. We see fiber as the key engine for our commercial strategy. And I'm convinced that this network will constitute a competitive advantage for decades to come. The FiberCo concept is the best way to pursue fiber rollout -- further fiber rollout, and this is our main motivation for this project. Now where will FiberCo operate? This is shown on the next slide, on Slide 4. It will operate in -- well, first of all, open access model. So it will offer its services to Orange Polska but also to other competitors on equal terms on the same terms. Why open access? Well the footprint of the FiberCo is located in mid and low competition areas from the perspective of fast internet connectivity. So an open access network is beneficial for us in 3 areas in 3 points from 3 angles. Firstly, it allows to maximize customer take up and consequently the project IRR. We need to know that we are satisfied with both our retail margins in FTTH, as well as with the FTTH profitability in wholesale. Secondly, it discourages potential overbuild by other infrastructure providers of FTTH or fast Internet connectivity. And finally, it allows us to make this infrastructure available to other operators on predictable terms on known terms versus the risk of less predictable regulations upon a first opening regulated opening in the future. Please note that vast majority of FiberCo's footprint will be on areas of low- and medium competition as far as fast Internet is concerned. This joint venture gives us the opportunity of gaining additional fiber footprint, a very considerable fiber footprint without spending of around PLN 3 billion of CapEx. And this is only possible if we open up this network to competition and then the risk profile from the infrastructure perspective is much, much lower. On this side, you can see examples of areas where FiberCo will build. They will be located in different parts of Poland. They will include small cities not yet covered with fiber, suburban villages, residential housing districts and densification of existing fiber infrastructure. They were very carefully selected with us using our 6 years of experience and know-how in building fiber and taking into account the existing infrastructure, technical effects including various permissions and anticipated customer demand. These will be in low and mid competitive areas, which means that either there is none or there is low quality of high-speed broadband infrastructure. Turning to Page 5. FiberCo will be a co-controlled entity with Orange Polska and APG having a 50% stake each. This means that neither of the equity partners will have an effective control over this entity. So how it will be reflected in Orange Polska financials. It will --we will consolidate it using equity method which means that it will be accounted for in one line of the balance sheet as an investment. We will not consolidate FiberCo's EBITDA, and transactions with the FiberCo will be treated as external party transactions. In our P&L, we will consolidate 50% of FiberCo's net results, but this will be below the EBITDA of this. Consequently, neither FiberCo's CapEx nor debt will appear in our financial statements. The FiberCo will have its own debt financing of around PLN 3 billion. And this debt will not be guaranteed by Orange Polska. This is a nonrecourse debt facility. Negotiating -- negotiations with the financing banks were equally crucial for this transaction as we're in negotiations with investors. The debt facility will cover more than 80% of the total CapEx plan until 2025, and it will basically cover the fiber rollout CapEx. CapEx for the network rollout for 1.7 million households is estimated at PLN 3 billion, plus some costs of connecting the customers. So typical cost of final delivery. The unit cost of rollout will be higher than it was in OPL mainly because FiberCo will have to build some transmission network. And this CapEx in case of OPL was not reported as part of fiber. Also, what impacts the CapEx is that FiberCo will build in different regions of Poland. So investments will be dispersed, and we envisage a significant 40% to 50% share of single family homes. So houses and townhouses. Turning to Page 6. Here, we show the main flows of different services between the FiberCo, its clients and Orange Polska . We have been building fiber for the past 6 years, and we are by far the most experienced in this area in Poland. This covers not only technical aspects, but equally important knowhow regarding dealing with local authorities, infrastructure owners and many different legal bodies. So it's natural for FiberCo to capitalize on this proven network construction abilities. Orange Polska will manage the construction of the network using our unique system of subcontractors and service partners. We will also render a variety of services to the FiberCo, including service delivery, network maintenance, connection to the world Internet as well as support services like IT or accounting. All these will be provided on land basis. Naturally, FiberCo will offer its services to Orange Polska and other operators that will be interested in buying them in those particular areas. So OPL will be a natural anchor tenant for FiberCo services. And here, please note that what is important, there is no commitment from OPL regarding any minimum purchases of services that we would need to buy. We will be paying a variable fee per our retail clients that will be connected to this network. So on the one hand, we will be paying a BSA monthly fee for using FiberCo's infrastructure to connect new retail customers. On the other hand, we will have new revenue streams from the FiberCo for the services that I have just mentioned. As a result, we expect the EBITDA impact of the trade between Orange Polska and FiberCo to be quite balanced regarding the impact on our EBITDA while we will obviously benefit from the retail margin, on the additional footprint, on serving our customers on the additional footprint. Switching to the next page and switching to the financial aspects of the transaction that we have just signed. So the transaction enables us to take advantage of high valuations of infrastructure assets by executing the sale of a 50% stake in the FiberCo. We're happy and proud that our partner will be APG, which is the global leader in infrastructure investments. The valuation of the FiberCo was reached through a competitive process. It reveals the underlying value of Orange Polska assets and demonstrates strong value creation achieved through our FTTH strategy that was initiated 6 years ago. The proceeds will significantly strengthen our balance sheet. They are an important building block of the new strategy that we will present to you soon. We will receive almost PLN 900 million on closing, which we expect by the end of August. The remaining part of the proceeds will be received between 2022 and 2026. And they are conditional on us delivering on the scheduled network construction, which we are confident to deliver on time and in budget. The business case assumes that the project will require both partners to inject around PLN 300 million of equity capital to FiberCo, most of it in 2024 and 2025. The transaction will result in Orange Polska booking a significant gain in our P&L this year. Today, we are not in a position to precise this yet. We will announce this immediately as soon as we will know it. Last but not least, let me underline that this transaction fits well into Orange Polska's growing focus on environment and social aspects. We believe that the telecom industry has an important role to play in helping consumers and business alike to reduce carbon emissions. Development of very fast and efficient broadband network, which drives the shift into digital fits well into this task. These processes are obviously additionally accelerated by the pandemic. We're convinced that FiberCo project will contribute to the development of the local economies in its footprint, the digital infrastructure of Poland and will help us to further minimize digital exclusion. Thank you for your attention. We're now ready to take your questions.

[Operator Instructions] Our first question comes from Mr. Ivan Kim from Xtellus Capital.

Can I have 3 questions, please? First, on dividends. When do you think we'll know whether this transaction paves the way to resuming dividends? Secondly, on CapEx in '21. So can you just remind us of what the CapEx would have been in '21 ex FiberCo? So ex whatever CapEx will be deconsolidated now. And then secondly, what do you expect for the wholesale rate and take-up rates long term for this company?

Thank you very much for your questions. I think starting with -- with the dividend. So obviously, this transaction is significantly strengthening our balance sheet. And that is one of the conditions that is very helpful towards getting back to the dividend someday. I mean we will address the precise question of dividends with the strategy that we plan to disclose in the second quarter of the year. However, since the very beginning, we've noted 3 developments that need to be monitored with regards to the dividend. They obviously include the FiberCo project and its positive impact on our balance sheet. And here, by being able to tick this box, it is an important development. They also include the 5G spectrum auction and its conditions. And as of today, we don't have the knowledge on the conditions and on the precise timing of the 5G auction, which -- well, I will remind you, it was expected to take place last year, and it's continuously -- well, be moved forward being moved in delay. So we're eagerly anticipating what will be the conditions of this auction. Third is the pace of economic recovery post COVID crisis. I mean, obviously, we know that we are in another wave and another lockdown, and the -- well, the crisis is far from over. So we're monitoring all of those. We're monitoring the economic impact on us, short but also medium term. We're monitoring the spectrum conditions. These are not known yet, but definitely, this is a positive development. It allows us to strengthen our balance sheet. But we will precise and address the question of dividends in the strategy day which will be somewhere towards the end of Q2. Now your second question on CapEx. I mean, it really depends how you look at that. The original Orange.one strategy had assumed that we would stop fiber rollout post 2020, did not assume fiber rollout after 2020. So it was a choice of do we continue to invest heavily into fiber, and at the same time, do we need to -- well, fit in our CapEx, the costs that inevitably will come with the 5G rollout? Or do we -- or are we able to finance it in a different way? So well, this transaction was already envisaged by us when we have guided for the CapEx for this year to be between PLN 1.7 billion and PLN 1.9 billion. It does assume, and this guidance does assume that we will invest quite heavily into fiber this year, still quite heavily into fiber this year. So I mean, you can expect the fiber CapEx of Orange Polska this year to be not so much different from the amount that we've spent last year. Yes, it will be lower on the build that we realized by ourselves. On the other hand, we have the project with the European subsidy POPC, the Digital Poland Project, which is, well, basically in its peak year this year. And our fiber CapEx always included -- it does include still the CapEx for the B2B, which stays on the Orange Polska side and the CapEx for CPE and delivery, which stays on the Orange Polska side. So for this year, I would say it's comparable. For 2022, obviously, we will get the full benefit of the FiberCo. So here, the benefit will be much bigger, I would say, in comparison to 2020, it's on the fiber side, could be a benefit of around PLN 280 million up to PLN 300 million. But then we need to remember that this will be a year where we will most likely start rolling out 5G network on a significant scale. So I will refrain from guiding more precisely regarding the CapEx for 2022 now, and we will address it in the strategy day. But I think we need to remember that on one hand, we will invest less into fiber, but we will start rolling out 5G. And then in terms of the wholesaler rate, I think it's -- well, it's fair to say that these will not be -- well, the precise rates will not have not been published yet. I think it's fair to say that they will not be much, much different than the regulated rate that you see for the BSA on fiber footprint right now. So it will not be a surprise or a shock for neither for us nor for other wholesale clients of the FiberCo to see those prices published when we will be in a position to publish them, when the FiberCo publish them.

Thank you. Our next question comes from Mr. Pawel Puchalski from Santander.

Congratulations on the deal. A few questions from me. Just to confirm, if the transaction has been made on the first of January 2021, what would be impact on EBITDA? What kind of loss? If any, EBITDA loss should be included in our models? That's my question number one. The other question relates to -- well, I read in your communique that you that Orange Polska will guarantee construction of the network within predefined budget. Shall I read it as you guarantee that the CapEx for the total 1.7 million to be built fiber will not exceed certain amount? Well, that would be -- that would be my other question.

Okay. Thanks for your questions, Pawel. Starting with the EBITDA, I think it's fair to say that if we had started the EBITDA on January 1, so the full year impact of EBITDA, I would call it rather neutral, okay? Because we both have services that we will need to buy from FiberCo, which we, on a normal basis, would have not needed to buy because we need to buy access for the 160,000 clients that we have in the footprint that we are moving to the FiberCo. On the other hand, we have various services that I've mentioned that we will render to the FiberCo. And so the balance of those, I would call it rather neutral for the EBITDA. And then your second question concerns the CapEx, committed CapEx. So yes, in -- we have included in this agreement the commitment to guarantee the -- well, basically the prices at which we will build. Obviously, this means that if everything goes well, if we are able to build on time and at budget, then Orange Polska will earn a fair margin. And then on the other hand, if we were to be in a situation of a CapEx overrun, we would need to reflect this in our profit and loss statement, means we would be building with a loss. We believe that looking at the areas of where we are building and having paid sufficient attention to the topologies, we believe that we've assessed the cost to build in a safe way. We obviously have taken into account the growing costs linked with inflation pressures. And we do believe that we will be able to deliver this network on budget at time and being able to earn a fair margin.

Well, if I might expand, because my fear turns real, so what is your -- of course, you will not give me any precise guaranteed CapEx per line per household. But what is the CAGR of CapEx per household assumed by Orange Polska because then I will be -- we will be roughly able to recalculate whether you are on the safe side or not.

Well, as I've mentioned, Pawel, you're able to calculate the CapEx and the unitary CapEx albeit on a very average basis by dividing the CapEx facility of PLN 3 billion by the 1.7 million households that the FiberCo will build. You will see the CapEx that is at stake. You will see that this is -- it is higher than what we've been reporting and what we've been spending in Orange Polska. Due to the transport of the transmission network that I've mentioned also due to the topographies and the fact that that we all assume that costs will grow over time, and this is a 5-year CapEx facility, so you will need to take your own assumption how safe this is or how safe this is not. I do believe that we have structured this in a way that will allow us to deliver this on budget and to earn a reasonable margin on delivering this CapEx. It's one of the services that I have mentioned within the -- also within the EBITDA flows that I was explaining because we will, obviously, when we are building this CapEx for a third party, it will be part of the EBITDA equation and the EBITDA flows. So you will be able to -- well, on a recurring basis to see the effect of this.

May I have one more question?

Go ahead.

Well, you will receive PLN 0.9 billion when the transaction is closed. And the other PLN 500 million depends on the pace of development of the network. Who is deciding in new venture on the pace of development of the network because it looks like it might be crucial, whether you will see those PLN 500 million sooner or later. And additionally, if you fail to deliver on certain amount of new households in 1 year, is it delayed -- is the payment to Orange Polska delayed until the next year or it is lost?

So Pawel, thank you for your question. I think it sufficient to say that, first of all, we've mentioned the total amount. The pace of this deployment has been agreed in the business plan. So there is an explicit agreement on the pace at which we will want to run it. And we are quite confident that we will be able deliver this network, well, within this scope, budget and timing.

Okay. So the bulk of -- well, the most of PLN 500 million, shall we expect it in year 2025, '26? Or it is -- or shall I assume it will be, well, allocated proportionally by some PLN 100 million per annum?

Well, I don't think you should expect that we will build the entire network in the last year of the rollout. So I think if you do it, if you are modeling for yourself and if you're assuming a proportionate allocation, it's probably the safest way for you to model.

Our next question comes from Mr. Dominik Niszcz from Trigon.

So a question on the cost of services from the point of view of FiberCo. You said that in 2021, the EBITDA could be close to 0, right, as I understand. So this means that the cost of services that Orange offers is quite high, right? Can you say what the fixed cost -- what are the fixed costs in the FiberCo? I guess, they are quite low, right? So could you say like in the long term in 5, 6 years, what percentage of revenues of FiberCo could be spent on services provided by Orange, like rough view on this.

No, I will not go into the details of the long-term EBITDA of the FiberCo and the dealings. I think what's fair to say is first of all, from the perspective of Orange Polska, I did mention that the EBITDA upon the trade with the FiberCo should be relatively neutral. And of course, there isn't the opportunity for us to earn additional margin because we will have retail services that we will sell to our customers in those areas. Whenever we sell retail services of FTTH, we're usually able to upsell a lot of mobile on top of that. So we do anticipate to have a positive impact on the EBITDA from the entire -- well, I would say, projects. While the intercompany, I would say, settlement should be around neutral between us and the FiberCo. Regarding the EBITDA of the FiberCo, obviously, these type of infrastructure companies tend to have a very high EBITDA rate in the future. But this is part of the business plan, and I will not elaborate on that extensively right now.

And one more question. So this CapEx savings of PLN 280 million, PLN 300 million in 2022 that you mentioned, it refers to this year investments versus 2022, right? It's the change of growth from the income from fiber.

So you could say this is more or less the benefit that we can get by not pursuing the pace of rollout as we headed in 2020. So I'm comparing to 2020. However, you do really need to take into account that on the other hand, we will be beginning the rollout of 5G, which will consume considerable amount of CapEx. And this was one of the considerations when thinking about this project. The consideration was that, in fact, doing this project allows us to simultaneously roll out 5G network and expand the fiber footprint. So you can imagine that the financing, all of this from our own balance sheet would have had -- would have had an impact on the CapEx versus 2020. And we are able to limit that by, well, financing a lot of the fiber CapEx outside of the balance sheet and financing it through this cooperation in the JV.

So apart from the FiberCo and POPC, do you expect very limited increase in homes passed in the next 5 years?

Well, that I think is to be addressed by the long-term strategy that we will publish. I'm referring to more automated impact of the FiberCo on to our CapEx spending with relation -- well, in comparison to 2020, yes. And I think that's it. That's all I can say right now.

Because it showed on the presentation like this figure over 7 million, right, versus 5 million currently, 1.7 in FiberCo and 0.3 POPC, so that's been....

Well, this is what the FiberCo is enabling us to achieve. I mean when you're thinking about opportunities for further fiber footprint increase, obviously, there will be a lot of opportunities to further increase our fiber footprint. I mean, I will start with the POPC you have. What you don't have is POPC of other operators and further fiber build of other operators, which will most likely be also opened up to the telecom competitors. And we will benefit whenever there is such a chance to connect to a third-party network, we will do it. So I would expect that our fiber reach in the future will be greater than what we show here. What we do show on this slide is what the FiberCo is already enabling us to do. So it's almost, I would say, bankable, assuming that we do deliver the rollout. But it doesn't limit the options. I think there will be more options and a wider fiber reach or footprint potential in the future.

Our next question comes from Mr. Jakob Bluestone from Crédit Suisse.

I had a few questions. First of all, I've been just hearing a little bit more about how you came to your valuation that this was an attractive deal from your point of view. So what were some of the things you looked at? I mean, was it sort of the long-term EBITDA of the business? Is that kind of long-term EBITDA? Or how did you approach the valuation aspect of this transaction? And secondly, I'd just be interested in understanding any minimum volume commitments you've got and if there are any differences in the wholesale rates that you pay versus what other parties would pay. And finally, I don't know if you can comment on any sort of long-term assumptions around uptake that you expect from the -- or at the JV.

Thank you for your questions. So I will start with the minimum volume commitments. We do not have minimum volume commitments. We will buy -- as Orange Polska, we will buy access to the services or to the network of the FiberCo whenever we will have a retail customer on the end of each line. Second, the wholesale rate -- well, as I mentioned, we haven't -- FiberCo has not published its price list yet, but you may expect it not to be that much away of the regulated pricing that we see at the moment. So it's moderate rates. We will be paying -- we will have the same price list that will apply for Orange Polska and for any other operators that will want to participate as a wholesale customer. So there will be no discrimination and absolutely equal treatment of all of the operators. In terms of the long-term assumptions, I mean, these networks are in areas of medium or low competition. So if you take a very long-term view on these investments, you can imagine that the penetration from an infrastructure perspective, okay? So ignoring, will it be an Orange Polska client or a client of any other retail operator, the long-term penetration rates can be very close to the broadband penetration rate that we have or will have in the future. So it's -- you can assume well in excess of 60%. This is in the long-term horizon. And then I will not comment on the valuation itself. This was achieved through a competitive process. We think it's a fair valuation. We're satisfied with having this partner, we think it's a great opportunity for us to build value as it enables us to extend, has enabled us to -- well, take benefit from this. I think what's important when you will be making some comparisons between this FiberCo and some of the other FiberCos that are being set up in Europe is that this one is mostly about new builds. It's not a FiberCo where there is awful amount of clients, on the copper clients, on different technologies, and we are just swapping the technology. It's not a sale and leaseback. It's in fact a project where we really extend the footprint of fiber. And we really extend footprint of fiber into areas that are not benefiting from this. So it's a true joint venture with both risks and rewards shared between the partners of this joint venture.

Next question comes from Mr. Rohit Modi from Citi.

Just one question from my side. Sorry, correct me if I'm wrong, firstly, you mentioned about IRR and VAT in the slide of the JV. Given, as you mentioned, the transaction going to be a bit unusual for Orange, I believe whatever EBITDA you will be earning will be from third party. Just can you give more color on the JV level, how that IRR works out, what are the key assumptions you have on that?

Well, thank you for your question. We don't disclose the detailed assumptions regarding the FiberCo value. I think what's fair to say, and we did say it in the slide, is that when we look on our existing or the current fiber projects, and those are different projects. It's rollout that we have done on our own. It's rollout in the rural areas, which we are doing together with European Union funds, so so-called POPC, Digital Poland Program. It's fiber investments that we do for our key accounts, for our business customers. In all of those areas, we see that the internal rate of return is significantly above our weighted average cost of capital. And this is -- we've tested and proven this right time after time. So it is -- it's underscoring the value creation that we can achieve with these kind of projects.

We will take one more voice question, and then we'll move to text questions. The next voice question comes from Mr. Marcin Nowak from IPOPEMA.

A few questions from my side. I will go one by one. You mentioned that you will earn a reasonable margin on the CapEx services provided by OPL. So should we understand that the entire FiberCo CapEx will go through Orange's P&L? I mean, PLN 3 billion of revenues over the next 5 years.

No, this is -- we will not disclose the full PLN 3 billion of this CapEx in our revenues. You're right to ask this question, but this is not going to be accounted for in such way. The FiberCo will use the system of CapEx deployment that we have been able to set up over the years in Orange Polska, but it does not mean that the FiberCo will buy all of the services from Orange Polska. We'll be able to buy a lot of those services directly from our suppliers and subcontractors while we will have the revenues and the fees from coordinating, managing, supervising and guaranteeing this CapEx rollout. So it's a fair question and definitely not -- you should not assume that the whole PLN 3 billion will go through the revenues.

Okay, but speaking of reasonable margin, it should be above your current EBITDA margin or below?

I will not -- I think, really, you should not compare the margin of a telecom operator. The EBITDA margin of the telecom operator with the EBITDA margin of a construction business. I think this is probably the easier comparison to be made because the type of activities that we're providing is, in fact, delivering a network rollout. It's not providing telecom services. So it's a different magnitude of the margin. I will not disclose the margin in detail also because as we've discussed earlier with your colleague, with Pawel, it will really depend on the cost because we are guaranteeing the maximum prices. So we will need to do a true-up of what we are able to get. But even if everything was to go according to plan, it's definitely not a margin of telecom operator.

Yes. Sure. I'm investigating the issue because, as you said, you're expecting the neutral EBITDA impact. But rather short term, I'm wondering what -- how this impact will look like in few years' time after the end of the CapEx phase. That's the reason why I'm asking. So how large impact on EBITDA will you expect to see from FiberCo in 5 years' time?

Well, I think it's reasonable for us to expect that we will not suffer a significant -- or we will not separate an EBITDA loss due to this cooperation, even if you take the long-term perspective. I think it's not just CapEx rollout which is being rendered by us to the FiberCo. It's many other services that we have described. It's lease of critical network infrastructure. It's connecting the FiberCo to the world Internet and to other operators. And that's one of the reasons why we don't expect that even in the long term, we will have deficit of EBITDA due to this cooperation. I would say, we will have a positive impact. Thanks to this endeavor. Because we will be able to sell on additional footprint to our retail clients. So this is where the additional value.

If I may clarify, shall I understand then that you are not expecting any changes in your ARPU evolution from fixed services over the next few years versus this scenario of no FiberCo deployment, no FiberCo deal? So do you not expect any coming competition?

On the question of ARPU, I think what you can expect is, first of all, there will be a larger footprint of fiber. So regardless of ARPU, because this is not retail pricing that we are assessing right now, we will be able to sell to more customers because we will have a larger footprint that we will be able to address versus a scenario of no further fiber rollout. And this is what will -- and I'm confident this will provide us with opportunity for additional clients and additional margin. The ARPUs that we are reaching on the retail front, are in excess of what we will be paying to the FiberCo. So every time we'll have a customer, we will have a positive margin on this. And this ignores the fact what I've mentioned is that on the settlement between the FiberCo and Orange Polska, we don't assume a deterioration because of the FiberCo launch. We assume a rather neutral EBITDA impact.

I understand. Other thing with how large penetration on FiberCo households you will be emphasizing your retail business versus the targeted long-term 60% take up for entire fiber costs?

We will -- this will be a market in which we will be competing with other operators. And I'm confident that over the past years, we've developed sufficient market increase pricing, brand awareness, customer loyalty and customer appreciation of Orange Polska as a synonym of delivering fiber as well as a distribution and sales network that I believe is unmatchable today for selling fiber. So I am confident that we will have a high penetration rate within the footprint of the FiberCo.

Let's now switch to the questions couple of questions we received online. First question from Jakub Viscardi from BOS. Should we expect that after execution of an option to buy 1% in SPV and gaining control, you will change accounting method to full consolidation and a few billion zloty of debt will come back to OPL balance sheet? And then next, this is related question. What are the conditions under which you will be allowed to increase your stake to 51%?

Well, this is a question that we will answer in few years. Really what I think is important today is that today, this entity is co-controlled. It's neither of the party will have full control. And I could not tell you, honestly, whether we will exercise the 1% option or not in the windows that we have. It will be a decision that we will need to make at that time taking into account all the knowledge that we will have about both the FiberCo as an endeavor and about the prospects of Orange Polska at that given time. So I'm not able today to tell you what will be the -- I would say, the line of thinking in those few years' time.

Another question from [ Ekaterina Biris ] from an investment. What percentage of these new households that will be connected via JV are already connected to fiber by competitors?

It's an interesting question. Obviously, we have our clients that are on this footprint. So we have about 160,000 retail clients within the 600,000 to 700,000 footprint that we will be moving to the FiberCo. With regard to the rest of the footprint, well, here that the footprint has been chosen in a way that ensures that either there is no fiber infrastructure in those areas or the fiber infrastructure in those areas, it's -- or the high-speed broadband infrastructure in those areas is not of tremendous quality. So we do expect that even if some customers will be connected to other operators in those areas, the FiberCo's offer for the customers will be of a superior quality, and those customers will be incentivizing. They will be willing and wanting to migrate onto this fiber infrastructure over time.

I think we'll switch now to the last question -- to the last voice question.

[Operator Instructions] I will just pass the line now to Jerry Dellis from Jefferies.

I was just interested in how you think about the cable strategy in Poland. Presumably, cable is not overlapping the footprint envisaged by today's transaction. But in general terms, as you think about your competitive position and your ability to deploy fiber further, how does the presence of cable or otherwise play a role in your decision making?

Thank you for your question. Well, it always plays a role in our decision-making. We -- every time we deploy fiber, we analyze all other infrastructure in those areas. We have a history of deploying fiber entities that have been -- well, that are occupied with also cable infrastructure. So we have deployed fiber in Warsaw. We've deployed fiber in other big cities. We have been able to acquire significant amount of customers there. And what's important, these were win back customers. So in those big cities and [indiscernible] we've been investing in, we have had very little market share at the time that we've started to rollout fiber there. So we have proven, I think, over the years, our ability to take concrete market share away from cable operators. It's less relevant for this particular endeavor. As the FiberCo project, it's rather in areas with not so much fiber not so much cable footprint. And when we have and we will have cable footprint, this will not be the top-quality fiber-like footprint of the cable operators. So overall cable development is a considerable variable that we analyze each time that we decide where to invest and how much to invest. This time around, I think it's rather a variable that we've assessed, and we've decided to go outside the areas of the very good quality cable infrastructure, targeting quite specifically the areas where the infrastructure of this FiberCo will be, well, a very dominant for us from the infrastructure perspective, not to make this up with retail market share because, obviously, this infrastructure will be open to all market participants. However, from the infrastructure perspective, we've chosen the areas for this to be a very, very strong force in those local geographies.

Could I just ask one very quick follow-up, please? Are you aware in the new footprint of competing fiber projects, which are either already underway or at some close stage of planning? In other words, was there a particular urgency to act in these areas? Or is it simply natural the commercial opportunity?

Well, I mean, what we have done to the best of our knowledge and ability is we've tried to make sure that we choose the footprint of the FiberCo in such a way that we will not have an overlap with other fiber projects. Of course, this is a 5-year plan. So the FiberCo itself will be evaluating, reevaluating and precising the areas of the fiber rollout in the given quarter or in a given year to avoid overlap of infrastructure. We cannot be sure that everywhere we roll out, we will have no overlap with other infrastructures. But again, as I say, to the best of our knowledge and ability, we've tried and we will continue to try to map the footprint of the FiberCo in such a way as to minimize the overlap with other fiber infrastructure. Okay. I guess, Leszek is showing me that this is the last of our questions. So thank you very much for your attention. I hope we've been able to explain our rationale and the impact that this will have on Orange Polska. I'm sure we will have an occasion to talk about this a little bit more during the Q1 results conference, which is soon. For now, I wish a very good day.

Thank you. Bye-bye.