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

Good morning, ladies and gentlemen. Thank you for being with us this Monday morning. Four years ago, Orange presented our Dot One strategy. We had a big live event at the Warsaw Stock Exchange, and were able to talk to at least some of you in person. When Jean-François spoke about Orange ambition, we were in a difficult position. Many of you were skeptical it could be done. The market was in decline still suffering from years long price war and value erosion. Today, we are living in a world that is different. We are meeting online, working from home and telecom importance in everyday life is growing. This transition mirrors the changes that Orange went through. The last 4 years have been busy for us, investing in customer care, ICT competencies, rolling out our fiber and deploying new convergence proposal. All of this has translated into stopping and reversing the long-term negative trends in our business. This wouldn't have happened without Orange employee. Today, we are a different company than we were in 2017. Our customer proposition is reinvented with Love bundles that are very successful, and we have a simplified portfolio. We went from thousand of offers to a set of flagship products that are easy to navigate and understand. Our B2B proposal is another level, the new ICT competencies we have acquired allow us to offer end-to-end solution. Our customer care is also improved. We have the best Net Promoter Score among telecom and technology supporting seamless experience for our customer. Our networks are improved, allowing us to bring new value to the market. Last, but definitely not least, we have improved, and I mean the people of Orange and the way we work as a company. Back in 2017, Orange took a risk and it paid off. Let me remind you that the markets were not so happy when we launched our fiber program. Today, we are the biggest investor on the telecom market in Poland and the biggest fiber operator in the country. We wanted to become the fiber brand for Poland, and we did it. Fiber is our greatest asset, our differentiator on the market that support our value-creation model. It has been instrumental to our turnaround. This is what enabled us to close the technology gap and gain technological edge. There are so many opportunities to do more. When you think about necessities, the basics that we need to effectively participate in the economic and social life, we naturally think of food on the table, roof over our heads and other essential. Today, connectivity is an indispensable as water or electricity. Not only our digital solution the way forward, we have seen this clearly in the past year with the coronavirus lockdown, fast Internet is essential, a good offer's necessity. This means that our business is essential. However, there are still many people that do not have a fast Internet connection or don't know how to make use of it. It is our purpose to offer everyone the keys to the digital world. Therefore, the market offer great potential in term of fast broadband penetration, driven by this new demand and growing needs. The blurring of work, home and on the go is creating infinite possibilities and ever increasing demand because this is more than just broadband. Connectivity enables digital services for consumer, drive ICT and new businesses. We are in the perfect spot to fulfill customer need, answer their demand and benefit from it, plus our economic environment is supporting of the digital transformation. This demand for broadband is indispensably linked to the growth of the country economy. Disposable income is growing. People want to become more digital, driving further growth. Polish economy has been growing in many years and proved fairly resilient among the COVID-19 slowdown. European fund are undoubtedly playing a great role in filling in the white spot on the map, equipping local communities with high-quality modern Internet access. Continuing in this direction, under the new European budget and recovery plan will contribute to that goal. All these bring us here to this day. Four years ago, we were a different company, in a different position and different world. The market was stale and in decline. If I had to boil down Dot One and the situation we were in back then to a single word, I would say that will be must. We had to stop the declines. The choice was to change or to fail. There was no other way. And we changed, thanks to a joint effort by all of our Orange people. Did we fulfill our ambition? Yes, we did. We made convergence happen, we made fiber happen, became the leader in business solution and we delivered all our annual financial ambition guided in Dot One. This was a story about recovery, and we have recovered and turned around long-term negative trends. Our business is healthy now. After a decade of decline, we have moved on our path back to growth. This is the time for us to grow. Not only do we want to sustain growth but reach further, grow faster and become better. Don't get me wrong. What we are going to present today will be an evolution rather than a revolution. Orange.one fixed our core business, and now we are able to make the most of new opportunities. Now we are ready to take the next step forward and .Grow, why .Grow? Well, first, let me tell you that the dot at the beginning is not a mistake. With .one, it symbolize the end of a certain chapter. It was not a happy chapter. And we wanted to close it with that dot. Now we want to capitalize on the progress made in the last 4 years. The dot is a momento. It stands for the tremendous work that has been done because this is why today we can go for more and grow. So going back to the fundamental question, why .Grow? The answer is because for us, this is entirely new chapter. It's a breakthrough. Our first growth strategy in 15 years. If must was a word behind .one, .Grow can be boiled down to opportunity. The image you see is our strategy in a nutshell. This is who we are as Orange. This is what .Grow means to me. Our power stems from what we offer to our customers, from how we use our asset. It comes from the way we work with each other and the way we respect the world around us, communities and the environment. So let's travel to the future for a moment. We are in 2024. Based on what I've just shown you, what is Orange in 2024? We are the most loved brand for Polish consumers when they think about convergence. When they think Orange, they think smile. We are a digital leader in the market, offering a new dimension of tailored customer experience based on data supported by digital tools and providing the human insight when needed. We are growing together with the Polish businesses, supporting on their digital journey, cocreating the new digital economy. We have the best infrastructure in the country. We are strong as a leader in green transformation in Poland, offering real change, not only among telecoms, we are growing with our environment, customer and stakeholder because we believe that growth can only be inclusive. This is what I want Orange to be in 4 years and beyond. And here is how we plan to do it. So let me start with our core business. It is the absolute bedrock of our strategy and our future success. If I were to eliminate all the other parts of the strategy and only have this one, we will still thrive. But if we eliminate the core, there is nothing else left. Orange has been deploying fiber extensively for quite some time now. This investment plan was bold and unique on the market. When we started, we were the only big player doing it. Many people ask: is this really necessary? Wouldn't you do the same with mobile Internet? Now we are reaping the fruits of this investment. Our network, supreme mobile connectivity with 4G and 5G and more 5G in the future, plus our fiber is more than just infrastructure, it is a building stone of our consumer business proposition, a comprehensive offer for the household, comprising connectivity and entertainment based on cutting-edge technology. This is what allows us to grow organically. We bet on convergence many years ago, when it wasn't the market trend. And now we are ahead of our competitor. Today, they are turning to convergence for growth, even the one that not long ago were saying, this is not how they see their future. Today, the home has become the new frontier. This became clearer than ever in 2020. Our homes became our office and school. The pandemic is hopefully receding, but the changes that it's generated will be with us for the long term. This is why we are focusing our B2C value proposal on the home. And the home is where Orange is strong. We are the leader in conversion services in Poland, including customer satisfaction with the #1 Net Promoter Score in this segment. It works. The number of Orange Love customer is constantly growing, now exceeding 1.5 million. And not only the number, but also the average income that we have from each offer. Our strategy is working, and we want to stick to it and focus on execution. In the future, we want to grow convergence even more, both in terms of number of households that we reach and in what we offer. In 2024, we want to have 20% more convergence customers, continued investment in our fiber footprint and our proposition for the household will enable this growth. But we do not want to chase volume blindly, we want to build value. This is why we will bring new solution to the convergent world, extending our proposition for the home. So convergence will continue to be a key driving force for our growth. With 5G on the horizon, we will have new ways of evolving our 360 household approach and creating more value, both for customer and for the company, and we will remain a key investor on the Polish market, rolling out our 5G network. According to a recent study, Poland has the highest consumer awareness of 5G among all of Orange European market. One in 3 respondents say their knowledge of 5G is high and almost half says they will choose a 5G device when changing their phone. This also open new opportunities for enhancing the home experience. Our strong core will allow us to bring the 360-degree approach toward the household further to the augmented home. We do feel that our next battleground will be home, in a broad sense, being private or business. We like to see our role as a provider of enhanced digital services for your home. Obviously, our main service will remain connectivity, fixed and mobile, but we would certainly like to explore and test in the future value-added services such as entertainment, cyber security, work from home proposition, smart home and green energy. Besides infrastructure, we have highly skilled technicians, sales representative and sales network to install and advise our customers on those areas. Those assets will give us unique positioning to develop and design new services. We want to extend our fiber potential. As you know, we have created a new joint venture, FiberCos. It will be an infrastructural partner on the wholesale market for Orange and for other company. It will be powered by some of the networks that we have already built and by an external financial investor. Over time, it will roll out its own network. Partnership with other company from the market, such as FiberCos will allow us to continue investing. As a result, in 2024, we want to reach up to 8 million Polish households, 60% more than today. We want to actively seek new wholesale customers for our fiber network and mobile network. We are not a lazy incumbent. We have top quality infrastructure, the best in Poland. I'm sure that right now, many of you are thinking, but Julien, why to do it? Why let the fox into the hen house and open your most priced asset to other players? We believe it will create more value in an open model, especially considering the profile of the covered area. Thanks to the turnaround effort, new services generated more margin and bring value to the company, outweighting the legacy business. All this allow us to pursue a new opening on the wholesales market. Let me say that this again, loud and clear, Orange is a leading convergent operator. This is our philosophy. Now we see more and more interest in this direction. It is logical for us to open up our network and monetize this move towards conversions even further because it's going to happen anyway with or without us. And by opening our wholesales proposal, we can benefit from that fundamental shift on the market. We want to have 6x more wholesales customers using our fiber in 2024 than we have today. The demand for connectivity is growing rapidly. -- both in terms of fiber and mobile. We have the infrastructure and backhaul to answer that answer that demand. We want to monetize existing infrastructure better, extending national roaming services. We have just announced an extension of the national roaming agreement with play. We also want to address the MVNO segment. This is what maximizing core means to us. Now let's hear from Jolanta, our new VP for the consumer market and Maciej in charge of wholesales at Orange. [Presentation]

If I were to compare the first 2 pillars of our strategy, I would say that maximizing the core is the bedrock that we have today for the things that we will have tomorrow and new opportunities are the driver of our future growth beyond 2024. This is a story about disruption. It is caused by technology, by the digital transformation that has peddled immensely in the last 2 years. Some say that in 2020 alone, company introduced digital changes that were forecasted to happen within a decade. There is the saying, "The future is here, but it is distributed unevenly." To me, this means that what matters most is the vision, the ability to choose and prepare for what's coming. This is exactly what Orange did with fiber. Now we are on the threshold of a new era in business services. And we are well prepared for building the new foundation for the future. Some of you know that, I'm quite enthusiastic about the startup community and mindset. In the world of startup, venture capital, invest in ideas that they believe has a potential to win the market. You can never know for sure if this -- if your project is going to be successful. But if it is, you win big time. This is a kind of approach that I have towards those new opportunities on the B2B market and the culture I want to develop within Orange for the coming years. We have the asset, and we have the guts to invest it in new ideas, new business lines, such as Big Data and AI. Will all of these ideas work? Probably not. But we are ready for this learning curve because this is the only way to grow. There is no success without risk. What matter is that we are well prepared to take it. Today, Orange is a unique player on the B2B market. We aren't anymore a pure telco we are an integrator and provider of complex end-to-end solution made to fit and enable business transformation. Within last 4 years, we have more than doubled ICT revenues, reaching PLN 1 billion, driving the growth of the entire B2B market, and we aim for further very strong growth. In our new strategy, we plan to grow ICT revenue by about 10% every year, faster than the anticipated market growth. How? By playing our strongest cards, and not being afraid to bet on the future. Today, thanks to investment in our core, thanks to our experience and expertise in cybersecurity and digital competencies, we are able to say to our customer, "Okay, so you want to have an online retail business scattered around the country with offices, warehouses and representative, we can do that for you. We can equip you with a secure internal network, customer relations, software and a great app for your brand." And by the way, did you know that 1 in 5 small and medium enterprise in Poland suffered a cyber attack in 2020 alone. Clearly, there is much to do in this area. We will build on our unique blend of skills. We will continue building value in core business area, connectivity, both mobile and fixed; security; network and communication; as well as IT infrastructure. Additionally, after 2 successful acquisition of IT companies, BlueSoft and Craftware, we will further develop our offer of software and application offering and enhance CRM. Thanks to synergies within the subsidiaries ecosystem, we will offer more options for digitalization of business customers. In the new top 200 report on the ICT market published last week, all our subsidiaries were ranked in top 10 in their categories. All have improved since last year. This proves that thanks to the synergies created, we can grow even more and even faster. It will be complemented with best customer experience, delivering those big and comprehensive project. The next big opportunity for B2B will come together with deployment of 5G. It will usher a new era of connectivity, specifically for business customers with the potential of network slicing, creating on dedicated and secure private network within company, 5G will open the door to automatization, process simplification and digitalization on a new level. 5G will unleash the full potential of smart cities, transport, logistics, health-related services and Industry 4.0. Those are the areas that we are already exploring. Orange enabled new growth in the 4.0 economy with IoT solution, enhanced community and Big Data analytics. These opportunities may not generate huge value in the initial stage, but for us, they are investment in the future, which will pay off in the next business cycle. Now let's hear Bozena with a deeper dive into those opportunities. [Presentation]

So now you see that our third priority for the next 3 years is releasing our potential. Another lesson that we have learned from COVID-19 is what we can do huge things like switching 10,000 people to online work in a matter of days. This shows that we have the power, a great potential, built thanks to enormous transformation effort made in .one. If the first 2 priorities were about our business, what we do, this is about how we do it. Let me be blunt. We have to be digitally inside to help our customer grow in a digital world. And I mean that very literally. We are the first company in the Orange Group to appoint a Chief Digital Officer, but we do not want to make it just another division within the company. This digital approach will cut across all markets and our operation, becoming integral to our day-to-day business. The new structure will be our competence hub, working for and with all business line and operation. Our ambition is to be a digital operator for Poland. Putting it in numbers. In 4 years, we want 1; in 4 sales that we make to go through online channel; and 3 out of 4 customer care contact happening via digital. This is a major shift towards efficiency, automating routing task, making customer contact with Orange easier, better and more suited to our customer needs, wherever they are, whenever they want. We have strong assets and experience to build on Flex, Max and other solutions that are already in place. We know how to do it, and we are confident looking into the digital future. Let me introduce Artur, our first ever Chief Digital Officer, to tell you a bit more about that. [Presentation]

So digital is the way to go. At the same time, we understand that not all customers will want to go online with all their business with Orange. This is why we believe in an omnichannel approach, make it easy to start where you want online-offline and to go through the journey and to touch base with our people in the shop or on the phone. Because we understand that relationships are based on empathy and companionship and you cannot simulate that with AI. This need for human contact and is another thing that we saw vividly during COVID-19. So we want to be digital, but we know that there is no digital without people inside. There are several ways that we want to employ digital solution to become leaner and more efficient. We have already touched on introducing Big Data and AI solution to enhance customer care using the example of Max. Big Data will allow us to better position and tail a specific offer for specific customer translating, for example, into increasing loyalty. Big Data and AI can be used in network planning and management. Employing AI for network diagnostic can help us prevent failure based on analysis of data about the network behavior. It can support investment processes by helping us recommend specific location for rollout based on actual traffic and customer needs. We want to go to the market with those solutions and further monetize that Big Data and AI. As Bozena mentioned, our goal is to support our customer with managing and harvesting the data that they have already have and they are generating every minute. To release our potential, we need to carry on simplifying and focus on building those strong foundation for the future. This apply to swapping or even shedding some of our current belongings. We need to make room for the future. This includes phasing out older access technology that we will gradually be replacing 3G by the end of the plan; and as well, copper we extend, we will time by time, reduce it. They will be replaced by next-generation mobile and fixed network, improving efficiency and curbing the cost of legacy system. Clearly, this also apply to our real estate portfolio. We will continue our strategy in this area. Now that I have told you about our business and how we want to work to thrive, I want to talk more about the things that define us as a business. This is who we are and who we want to be. I recently had the pleasure of speaking with Professor Muhammad Yunus, a Noble Peace price winner who has basically spent his entire professional life fighting exclusion. He does this through business project implemented with organization, including a bank and a telecommunication company. Muhammad ideas of social business oriented towards the local community and solving specific everyday problem, might seems almost utopian too many. To me, it is inspiring. Can we, a large publicly traded company, orient ourselves exclusively to social causes? Obviously, we cannot. But we can act on that philosophy, considering the communities around us in our business operation contributing to their improvement, focusing on all stakeholders. In .Grow, we must do just that, act responsibly. There is no growth without the human insight, and responsibility is not a marketing slogan. It is a DNA of our company embedded in our daily business logic. I believe that this is the only way to go. Our only authentic engagement brings value to all stakeholders, instead of just generating costs like focusing on empty slogans does. This is especially true for environmental issue. I'm sure you are aware that going green is a major priority for us. It is our public commitment, and we will deliver it because we understand our role on a larger scale, the scale of our planet future. Let's hear from Maria representing UNEP/GRID-Warsaw on why it is important for a company to understand their role in all of this. [Presentation]

Right now, there is a lot of talk about being green, including in the business world. There are a growing number of myths surrounding being green and in my experience, 2 of them seems to be dominant. First, that working with the environment in mind must be expensive; and second, that is just a nice addition to what we call business as usual that can be shown in advertisement on the television. Meanwhile, customer awareness and expectations are rising. In a recent study called attack nearly 80% of respondents agreed that the current state of the planet required immediate action. Nearly 30% of the Polish believe that business should not should get involved in the fight against climate change and 17% are ready to give up buying a product or service if its provider harms the environment and all that this amid the pandemic that has defined our centering. Despite that, only a handful of company listed on the WIG20 Index have specific climate target. I'm proud that Orange Polska is one of them. Let me be very clear on this. We don't want greenwashing. It is exactly what is more expensive and make no sense. We want to act not just say we are acting. This is why we have set our final goal of carbon neutrality which we want to achieve by 2040, and we decided to make it clear that addressing the energy problem will be our priority along the way because the energy that power our infrastructure account for 90% of our emission. We are ready and want to be held accountable for our promises. Thinking of the distance care 2040 as a final stop on our road to neutrality, we have set a closer, more tangible milestone, a 65% reduction in emission compared to the 2015 baseline by 2025. Over these 4 years, we also want to transform our energy mix. So renewables account for at least 60% of our energy consumption. And we are doing it the smart way by purchasing clean energy directly from the producer. This is what has allowed us to have Orange Flex as the first climate-neutral telecom service. We believe that this is the future. When talking to Muhammad Yunus one of the things quote my attention. He was telling me about their telecommunication business, how it started to basically combat connectivity exclusion in rural area, digital exclusion is a real struggle happening right here right now. In the 2020 lockdown, force shift to online schooling, shopping and basically tackling as many daily needs as possible have shown that there are people that are digitally excluded right here in the middle of Europe. It can be your next door neighbor who thinks he's too old to learn how to use a computer, and it could be a family that you meet every day in your neighborhood. Survey conducted during the lockdown have shown that some pupils literally disappeared from the educational system for months, they have been left behind. And this all happened after several years of massive investment in telecommunication infrastructure, deploying fiber and 4G. Today, Internet access is more often than not a precondition for participation in economic and social life. Internet access should be widespread. We have to recognize the effort made by the government aimed at filling in white spot. Orange is the biggest private investor in POPC, and we intend to continue our support for the elimination of white spot in Poland. For more on that, let's hear from Witold. [Presentation]

To make use of our online potential, we need both access and competencies. This was clearly visible during the COVID lockdowns. We want to support our senior customer, and we will know we have succeeded when we reached the best Net Promoter Score in that group. The Orange Foundation has been fostering digital skills for over 15 years, and we will not let up on this effort. We have to work together. So we -- so that no one is left behind. This is the only way to boost the economy and generate healthy condition for people and company to grow in the long haul. I believe that we can tackle the challenges that we have already talked about only if we have an open culture and an open culture must mean diversity. The data proves that diverse teams are more effective and work better. This apply to all levels of an organization from the front line to the management board. Unfortunately, there are still stereotypes and that we have to fight. I see this in ICT, an industry that has a reputation of being a men's world and it should be our joint fight to create a supporting environment and promote talents. During my career, along the way, I have met inspiring women who thrive in ICT industry. I'm proud that I could work with them and promote their talent. I'm proud that within this stereotypically men's industry, 40% of Orange Polska employees are women, and I'm proud that Orange is part of the Polish chapter of the 30% Club, an initiative promoting a 30% share of women management board and supervisory board members. And that just 2 weeks ago, we were recognized with a Fair For Woman Award. But we want to pursue more opportunities and greater diversity. Now we focus on increasing the share of women leaders up to 35% and 40% share of women manager. This bring me to the underlying condition that determines our success in all this area. There will be no growth without the people. We can have the most elaborate system and a top quality network, but if there is no team to make it work and make sense to our customer, we will fail. This is why people are essential to our new strategy. The Orange team is at the root of all endeavors and successes. We have to and want to grow with our experts by bringing new talent on board and encouraging our people to grow, sometimes changing their skill set. By 2024, we want to equip 70% of our employees with data skills, half of the team will have their skill transformed to be ready for technology of the future. This entails digital, 5G, IT and programming, cloud, cybersecurity as well Big Data and AI. We will invest in this, more than PLN 15 million, but this is the best investment we can make. COVID-19 has changed the way we work. As a workplace, we have entered what is often called the new normal or even the never normal. We want to be smarter workplace, able to better address to the challenges ahead. We will do that with a well sought out and balanced hybrid model called SMILE mixing office work, for example, for creative meeting and brainstorming with remote to ensure safety, mobility and integration and the much-needed human touch. Driving innovation, well-being, diversity we want our culture to mirror our strategic goals and enable us to achieve them by encouraging an open digital mindset with agile corporation at its core. This is the only way to go. This is the only way to grow. So you heard all about our ambition, who we are, where we are going and how we want to get there. Let me give the floor to Jacek, who will put all of this into the context of very specific data.

Thank you, Julien. Good morning, everyone. Let me share with you how our strategy will deliver strong financial performance and shareholder value. Over the last 3 years, we've successfully implemented a turnaround of Orange Polska. We broke a long-term trend to financial decline and strengthened our balance sheet. We also prepared Orange Polska for the future, with products that are demanded by customers, assets that support these products and a more efficient cost structure. All of this is visible in our results. With the growth strategy, we're taking this to the next level. We are entering a path of faster and more sustainable growth based on solid foundations. We will expand the revenues and use our high operating leverage to accelerate the growth of EBITDA and cash flows. This is the financial key to our strategy and what makes it stand out from our past performance. Doing so, we will monetize our investments in the key areas of fiber and mobile and increase shareholder value. Our journey starts with revenues. We will expand revenues at an average rate of low single digits. To give you a better understanding of how we plan to achieve this, we've divided them into 3 groups, each with different dynamics and future potential. Core services are the key to our developments in this medium term. They make up 75% of our revenues, including convergence, fiber, mobile and ICT. They are well positioned with high customer demand. We plan to consistently increase them at low- to mid single-digit pace. So faster than during the last 3 years. At the same time, we will continue enhancing their profitability, increasing our operating leverage. Legacy services include traditional fixed line and interconnect. Fixed line will continue on its current decline. Interconnect from handling other operators' traffic will fall sharply due to regulated cuts of the termination rate. However, this impact on profit will be immaterial with less revenues, but also lower cost of the outgoing traffic. By the end of the plan, legacy will represent less than 10% of total revenues. So this further impact will be very limited. Looking ahead, we will devise new services, new areas of growth. These may be small today, but they are very future-oriented and will multiply at a high pace. Julien and Bozena shared some good examples of this already. They are not key to our financial performance until 2024, but their development will be critical for us in the next strategic cycles. As you can see, the overall single-digit revenue expansion combined some declining trends in legacy and a higher dynamic growth of our core business. Let's now zoom into this part. We have a solid plan to enlarge our core business, powered by 3 strong drivers. First is our convergent household strategy for the consumer. Convergence has become our #1 growth driver with a solid track record. It's centered around serving the needs of the households from fast connectivity, both at home and in mobile, all the way to entertainment, home security or automation. There is definitely more room for potential for growth in convergence. This includes new households in our widening fiber reach. This also includes serving more needs of the households, providing them with more value. The second driver is ICT and is giving new energy to our entire B2B segment. We have already developed its good momentum and solid margins. We have a strong mix of competencies in the area that are critical to the B2B: integration, IT and cybersecurity. We will capitalize on this in the post COVID environment and also develop new subsegments, including cloud, Big Data and 5G services. Finally, listening to Julien and earlier on, you won't be surprised that we consider wholesale as a key value driver. There is high demand for our infrastructure, both fiber and mobile, giving us an opportunity to accelerate in wholesale. We're confident that we can compete through differentiation in retail while the new opening in wholesale will maximize the monetization of our assets and return on capital employed. These areas will be the main levers that will power our EBITDA. We will expand EBITDA at low- to mid single-digit pace. How will we do it? Well, we've achieved the EBITDA turnaround through cost optimization, while direct margin was still contracting. This means that we had 1 engine fully operational, and we were progressively fixing the other. Now this is changing. Our future is based on 2 engines: EBITDA growth will be predominantly driven by the expanding direct margin, as high operating leverage will allow us to benefit for higher revenues. This will be supported by continued efficiency gains, which we will discuss in a minute. Growth through commercial development will make our fundamentals, more solid and sustainable for the long term. What makes us confident in this strategy is that is already happening. When you saw our Q1 results, the EBITDA was up by 5% year-over-year, driven both by higher direct margin and by cost savings. Now top line growth does not mean that we will forget about cost efficiency, and as usually, we have a busy agenda in this area. In 2017, we've set an ambitious target to cut indirect costs, and we've delivered on this target. We've optimized costs by almost PLN 600 million or 15%. We will continue the cost transformation along all the elements of our business model. We will further enhance our efficiency, this despite of our DNA. And we have new levers to achieve that. Let me give you just a few examples. We will benefit from the switch to digital in sales, in customer care and in the back office. You've seen some good examples earlier today. We will make better use of Big Data, for example, to limit network energy consumption or in preventive network maintenance. Our new post-COVID work environment will require less office space. And finally, we will switch to cheaper renewable green sources of energy. Transformation will counter some strong pressures that will inevitably swell our cost base. These obviously include inflation, which recently exceeded 4%, pay pressure coming from higher taxation and costs needed to sustain a larger business like more ICT subcontractors or cost of 5G. Nonetheless, we will continue to deliver efficiency gains, and this will be best visible through an increase of our EBITDA margin, EBITDA rates. Turning to growth again, and this is a growth strategy. Let's now focus on the investments that will fuel it. Our investments in fiber have been instrumental in making of our turnaround. They provided us with the right tools to win. They will now deliver solid returns on investment. Consequently, we are stepping up the development of the growth and value-driving infrastructure. We will enlarge our fiber reach and simultaneously invest in an important upgrade of our mobile network to be done on the occasion of the 5G rollout. Not all of these developments would require our direct CapEx engagement. The biggest fiber rollout will be done by the FiberCos. It will invest roughly PLN 3 billion to build over 1.7 million new fiber lines in very attractive areas and most of this will be done until 2024. We will complement this with rollout of EU-subsidized fiber in the countryside and more lease or third-party networks that are now becoming more widely available. At the same time, we will embark on a landmark modernization of our mobile network. It's critical in order to ensure that we cope with the explosion of data, which is already taking place and that will only accelerate in the future. As you have seen in the past, we are able to monetize higher data consumption through ARPU growth. So I am confident that these investments will create value. This investment strategy enables us to fuel the growth of the company, while maintaining the current eCapEx corridor of PLN 1.7 billion to PLN 1.9 billion on average throughout the period of the plan. As you can see, we plan to grow the EBITDA and at the same time to maintain CapEx within the current range. This will improve cash generation. We plan to share the benefits of this with investors. Let's now look at this area. We're happy to be able to return to remunerating shareholders. This is possible due to hard work, leading to our financial turnaround as well as due to solid growth prospects for the future. We commit to serve a dividend of PLN 0.25 per share out of the 2021 profits with 1 clear leverage condition that reflects the uncertainty of the upcoming 5G auction. Our policy for the future is very transparent. The PLN 0.25 per share is a sustainable floor dividend. We will work tirelessly to generate further upwards potential for shareholders in a sound and sustainable way. We will consider further changes to the dividend policy on the yearly basis. And while doing so, we will evaluate our updated financial projections at that time as well as the forecasted leverage. Now let's recap our main financial ambitions. We will create growth through value. This ties with a solid plan for the top line. It's a combination of consequence in execution of our convergence strategy, opportunities in ICT and a new wholesale. Benefiting from high operating leverage and efficiency gains, we will convert this growth into more profits. Our strategy will be supported by modern fiber and mobile networks, but we will keep CapEx within the current range, we will strongly benefit from the FiberCos JV. In consequence, we will multiply our returns and cash generation. We will also keep looking to extract more shareholder value from our assets. And the FiberCos is a good example of this thinking. Right now, we are fully engaged to complete this transaction, but we will also review other opportunities in the future. To conclude, our strategy will grow shareholder value. First, shareholders will own a larger business that is generating higher returns. Second, as we will come back to serving a dividend. With this note, I will end the financial strategy and hand the floor back to Julien for the conclusion.

Thank you, Jacek. Ladies and gentlemen, while listening to Jacek, I was thinking about 1 simple analogy. If I had to pinpoint Orange somewhere on the chart of effort, hope and faith that we will succeed this would have changed within the past 4 years. We started our transformation with high hopes. Obviously, there were many tough moments and many doubts along the way, but all of this led us to a good place. Today, we can say, yes, we can. Yes, we can grow. The whole company has worked hard to be here and to be able to believe that the future is bright for Orange. If COVID-19 has taught us anything, is that we do not live in a vacuum, the world is interconnected in a million different ways. That is why we cannot think about growing without thinking about our environment. We have set the bar high, but I firmly believe that in 4 years, we will be able to once again say, we did it, and we are proud to be here. In 4 years, Orange Polska will be a different company, digital and strong on the market, thanks to our people. We will grow sustainably. We will grow with our customers, making them more digital. We will grow with Polish business, supporting and guiding them on the highway to the digital economy. We will grow responsibly and consciously because we have no other planet. We will grow with local communities and stakeholders introducing to real answer to real challenge because that's the only way we can generate value for the company, for our shareholders and for our customers. I believe that is going in the direction will allow us to grow what's best at Orange. And this is just not my vision charted down in my office somewhere on the Orange campus. This is a conviction that we all share, and we are all in this together: myself, the Management Board and the Orange team. We believe in this plan. And to finish, I want as well to say that we have built a long-term incentive plan for the management, and the target you have seen today, especially the green one, are embedded in this long-term incentive plan, and I think we are the first Polish company to do so. So to conclude, we will grow together. I invite you to grow with us. Thank you very much.

Welcome now to a Q&A session dedicated for investors and analysts. There are 6 Management Board members that will answer your questions. Let me introduce starting from Julien Ducarroz, our CEO; to his left, Jolanta Dudek, Deputy CEO in charge of Consumer Market; to his right, Bozena Lesniewska, Deputy CEO in charge of Business Market; Jacek Kunicki, our CFO; and we also have Maciej Nowohonski, who is in charge of Wholesale Market; and Witold Drozdz, responsible for Strategy and Corporate Affairs. We will start the session with answering questions from teleconference listeners. Operator, please?

[Operator Instructions] Our first question comes from Mr. Titus Krahn from Barclays.

Yes. First, thank you very much for a very detailed presentation and also for taking my questions. Just 2 for now. So the first question is on your wholesale ambitions. On the fiber wholesale side, you want to increase, if I understand it correctly, the wholesale penetration 6x. This compares, I think, to a relatively limited non-Orange penetration at around 1% or so at the moment. What do you think is your idea non-Orange penetration rate of your own fiber going forward? And how do you plan to balance those opportunities with the clear ambition of play in T-Mobile to gain retail market share and fixed? And a second question would be on the 5G CapEx going ahead. And you provided a very helpful guidance for the split in 2023, '24, including the RAN renewal how would you expect the spending to develop thereafter? Do you expect more 5G investments to come? Or could there even be a gradual drop in annual CapEx after the RAN and 5G expenses?

So Maciej Nowohonski speaking. I will take the first question about the wholesale ambition. And well, here, clearly, situation for our plan is that the recovery of the economy is very much related to the further digitalization of business processes, but also households and fiber plays a key role here. So this is so obviously important for our retail business, but this is equally important for our wholesale business. And in that respect, we have initiated and launching right now our co-controlled Swiatlowód Inwestycje which will be playing a very key role to the popularization of the wholesale access along some other undertakings that have been already initiated a few years ago on that wholesale market. But here, clearly, Swiatlowód Inwestycje plays a very key role. But we should not forget that Orange Polska has very key assets still to share and to monetize on the wholesale front. And we talk about around 4 million households fiber plugs that are accessible to our operators on the Polish market, and we are going to be very active on that front in the respective horizon of the strategy. And the ambition that we have put here is purely reflecting how active we are going to be.

Thank you. The second question.

Yes, I can take the question about CapEx. So I think when looking on our CapEx guidance and generally on the CapEx that we spend, it's important to reflect on what's the returns are on the CapEx that we have already invested. And we're very happy with the way that our investment programs have been able to bring us from a situation of having a technology gap into today's situation where we have a technological edge over the competition. That's why we are confident to invest in the mobile network and in the fiber network for the next 4 years. Now where will we be in 2024? The renewal of the network will be, not entirely, but mostly done. So this part should gradually decrease. We will be embarked -- but again, this one, we will not be mostly done, we will be embarked on the rollout of the 5G network. And here, the pace has not been fully decided. So I will not comment in detail on the CapEx beyond 2024 because we don't know today the opportunities that we will have. But our stance will be the existing programs should be largely done and new opportunities will depend on the value creation potential that we may see beyond 2024 in new endeavors, in new ways to fuel our growth and to deliver shareholder value.

Okay. Yes, I fully understand. That's very helpful. And just perhaps just 1 more since we talked about wholesale. Can you maybe elaborate a little bit more on those opportunities in mobile since you mentioned MVNOs and other opportunity?

Yes. Thank you for this question. So we have here 2 clear directions for the mobile infrastructure. And I just would like to remind you that we own today a bit more than 5,500 masts and rooftops, and we are using another 5,500 through cooperation with one of the players on the market. So altogether, this is a substantial power that we are already using. And we have just prolonged a national roaming deal, which will generate around PLN 300 million until end of 2025, and we are open for any other new solutions here, not particularly only with other operators, but we know that with the 5G, new solutions will be possible here within the national roaming category. So it's an open front for us. However, this is not only that. This is also the dedication to start existing on the MVNO market as a host. In Poland, this market is constantly developing, and we believe we have here something to do, and we have a clear ambition to take the market for sure in this market, which will be value accretive for the monetization of our mobile activities here.

[Operator Instructions]

If we do not have at the moment questions from our teleconference listeners, let us switch to questions that we received online. There is quite a bunch of them. Starting from questions from Goldman Sachs. The first question: do you see value crystallization, asset sales opportunities in the medium term that could help reduce leverage?

I think I can take this. So as I mentioned a minute ago, we will -- we are always looking to extract value from our assets, value for shareholders. And I think FiberCos is a good example of us actually doing that, extracting value. Obviously, we will look for other opportunities and to extract value for shareholders. It's not on our agenda right now, not high on agenda right now as we're embarking on closing -- finalizing the FiberCos deal. But yes, we will carefully evaluate if we don't have other opportunities to create shareholder value from our assets.

The next question, can you share your thoughts over the potential impact of 5G on growth, margins, leverage and CapEx?

Well, let me start and I will pass to my colleagues as well. So first of all, as we presented, we believe, at least in the short term, the opportunities on B2B from product solution perspective, and Bozena will talk a bit about this. And on consumer, I think we have already our portfolio that are 5G-ready, leveraging what is already available today. As well, we see a lot of -- majority of smartphone now being 5G. And I think it is certainly a way to monetize data. And hopefully, in the midterm, after B2B, I believe we will find product and services on the 5G network. Maybe a bit more on B2B?

Well, hello, everybody. Thank you very much for these questions. I believe that what we announced today is important part of the B2B development. I mean the Campus networks and building the mobile private networks for the few verticals, which are first and most advanced in this area, will be very beneficial for us, but it will not go very quickly. We will go step by step. Our ambition is to build up to 2025 the 40 Campus networks in the main verticals like the factories like the ports, airports, stadiums, logistics centers. These are the most powerful verticals from this perspective looking. The revenue coming from the campuses obviously is split into fewer areas. It's about the connectivity, it's about infrastructure, it's about devices and obviously, about the software and services and the integration, which we are going to do there. So our integrating role will be very important, and it's why we used to build during the last years the kind of holding and full value chain proposition for our customers to be able to monetize when the 5G is already in place. Just to finalize, I just remind you that we started quite early, and we already have 2 networks. One is the special economic zone in Lódz and another one is the Miele plant factory also close to Lódz in Ksawerów and these are already in place and we are learning from this experience and believe that then step by step, we'll be able to gain the cooperation with the next customers who definitely see benefits coming from the 5G implementation and especially the services that are going over the 5G as a network. Thank you.

And then regarding CapEx and leverage. So first, CapEx. Yes, we will invest considerable amounts into 5G rollout together with the renewal of the mobile network. We've mentioned that this will be a few hundred million in years 2023-2024. So smaller amounts in '21-'22 and then the ramp-up of investments in the latter years. I think what's important is that we are nonetheless able to keep CapEx at today's level. And with a growing EBITDA, we are, in fact, aiming for an increasing cash generation. So from operations that would have a positive impact to decrease the leverage. Then you have the element of the potential one-shot cash outlays for the 5G spectrum. But here we are as eagerly as your, maybe even more eagerly than you waiting for the conditions of the auction to be announced so that we can have better knowledge of what we can expect.

Let me read the next question from Pawel Szpigiel from mBank Securities. There are 2 questions. First question, could investors count on monetization of mobile infrastructure? I think we've tackled that question already. And the second question how motivated are you to increase the dividend in the future? Do you want to allocate all free cash flows to the dividend, if the level of net debt is in line with your guidance?

Well, I think for the dividend, we've set out quite a clear policy. We wish to come back to paying PLN 0.25 per share next year from this year's profit, we have 1 single leverage constraint that takes into account the risk of the 5G auction, the uncertainty of the 5 auction. Then we wish the PLN 0.25 per share to be our floor dividend, and we will work in order to create the potential to increase it. We will do it on a sound and sustainable basis. So each year, we will take a decision whether we can increase this floor. And when we will be evaluating this decision, we will be looking on one hand on the updated financial model of the underlying projections for revenues, for EBITDA, for cash flows; and on the other hand, on the updated projections for leverage, which we would like to keep in the corridor between 1.7x to 2.2x net debt to EBITDA. So those are the key parameters we will be looking at. Those are the, I would say, threshold for us to consider increasing the dividend, and we will work in order to create this long-term sustainable upward potential for shareholders. So yes, we are motivated.

We have a couple of questions from Rohit Modi from Citi. Let me read them 1 by one. The first question concerns benefit of EU -- of recovery funds. Could you give more color on areas where you can benefit from recovery fund particularly with this benefit -- will this benefit FiberCos JV?

Maybe I start, and I will leave my colleague as well. So thank you for the question. I would say, first of all, they are not yet fully described. So I think it will be early to tell you how, when we will use them. Certainly, we have not embarked in our financial. So it's not part of the plan. But the past history have shown that they can be a great tool, both to fulfill our ambition of covering wide zone and as well our ambition regarding digital exclusion. And how and where we will use them in terms of financial, whether it will be our own or the FiberCos, again, I think once we will know the exact condition and the mechanism, we will be able to define whether we will do on our own or whether that will be a topic for the FiberCos.

Second question. Please, could you provide any update on investigation by a regulator on FiberCos JV? Can this lead to any further price regulation?

So maybe I will take it. Maciej Nowohonski speaking. So right now, we are in the process of all necessary proceedings or processes to make sure that we are fully cleared with the -- all necessary steps. We are expecting everything to be clear for us by the end of July. All is on good track. All is on good track. And in terms of, Leszek, second part of the question?

The second part of the question, can this lead to any further price regulation?

Okay. Thank you. So we believe we are not with the FiberCos on the part of the further regulations. We are in a very strict contact with our regulator in that respect, not from today, actually from the beginning of the process. So well, this is quite clear for us.

And the third question from Citi. Could you provide more color on 5G rollout? Whether you could build your network, including increasing your tower footprint or would you also rely on TowerCo's for network expansion densification?

Thank you very much for your question. Well, our primary plan relies on rollout of 5G -- mostly on the towers that are already within our footprint as we have a comprehensive network that allows us to avoid too much of tower built within this time horizon. So mostly, this will be done on the existing footprint. Regarding using the infrastructure, if we need new towers, we are always open to leasing them either in a build-and-lease formula or if there was infrastructure that would be available in attractive locations, naturally, we would consider leasing those towers instead of building them on our own.

Our next question comes from IPOPEMA Securities from Marcin Nowak. The question is on the towers, but in a specific angle. Are there any talks currently to include Orange Polska mobile infrastructure in Orange Totem project?

Well, I think that Orange obviously has this Totem project. So it's naturally that this will be one of the routes that we will also consider for the infrastructure. We haven't decided on this one. As I mentioned, we are committed to look for ways to create more shareholder value from our assets. But today, we're really concentrating on making sure that this highly value-accretive FiberCos transaction becomes reality that we are able to close the transaction to execute the cooperation. We will look for other ways. And obviously, Tower will be then high on our agenda. Obviously, Totem will be one of the rules that we have we will consider. But this is nothing where we have a concrete decision that we could share today.

We have the last question, but this is from Piotr Raciborski from Wood & Co. but this is, again, a question on the potential monetization of mobile infrastructure. So we will not be repeating. Actually, we have one more question that we have just received from Marcin Nowak from IPOPEMA again. Could you please comment on company's outlook for mobile pricing? Does the company sees room for further price hikes and second hike in postpaid introduced recently?

Okay. So let me -- thank you for the question, and let me give you a bit of flavor and color on this question on the future price increase and the recent one, if I understood right. Okay. So obviously, as we presented, the context of Poland, we always advocate for that. We believe in the long run, there is the need for market repair and as well, if we want to continue to invest in especially 5G and that has been our strategy on the 5G to position it as a high-value in order to leverage new investments, so we will stick to this strategy. I think as well, looking at the environment with inflation, there will be no choices globally to look for adjustment of prices in order to keep our financial. And the recent one we did, I think this is what we have been doing since .one, where we started to correct, and we have seen that the market, in some way, value as well that there is a need of market repair, especially when we benchmark versus rest of Europe, we do believe in Orange that there is still room to improve. But I think as well, when we look, for example, of the increase on the convergence revenue, this is not just because we increase the price, but this is as well because people want higher speed, for example, and we have a better mix of our proposition. So when we are talking about price increase on average, it will always be as well a mix of -- value mix of the customer coming. So we have a range of the portfolio, and we do see that people need more speed and more data. So it will translate as well into a price increase of the average revenue per offer.

It looks like we have no further questions. So thank you very much for listening to us today. If you need any follow-ups, any details, you know how to find us. Thank you.

Thank you very much.

Thank you.