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

Let me start with a story. Albert Einstein once set an exam at Princeton. And when one of his student has pointed out that, "Look. Questions are the same as it was last year." He replied, "Yes, but answers has changed." And this is exactly the essence where we are today. The world is changing, and so are we. The questions of -- in our industry are -- always remain the same. How do we grow? How do we create value? How do we make sure to win over the competition? But some answers has changed. And we know the answers. We know how to win the future. I must confess that I am very excited to work for telecommunication and tech industry and excited already for many years, but today, telcos are an indispensable part of digital economy. It's backbone. And we all know that future is about pervasive omnipresent connectivity, which will provide, is providing the foundation for the digital services of tomorrow, with AI embedded in our life, so our role in digital economy is crucial for what lies ahead. Now let's talk about where we are today. Over the past few years, we built a solid foundation. We have positioned ourselves to meet the connectivity and digital services needs of the market. And the results speaks for themselves, but our journey is just beginning. The future is not something which just happens to us. It is something which we are actively shaping. Let's take a closer look of what we have achieved and what is next for Orange Polska. Our .Grow strategy. It has given us a solid foundation. When we set it back in 2021, it was ambitious. And we have delivered on all our targets, setting the sustainable commercial growth model reflected in financials and shareholder return. If you remember, .Grow presentation event took place online, as it was in the middle of COVID lockdown. And it was a moment of recognizing [ of ] the essential role of telcos in our life. Now 4 years later, this role is even further reinforced when the accelerated path of new technologies is reshaping our habits, the way we live, work, learn, entertain. We see it in -- for instance, in our mobile traffic, which has been almost doubled in 4 years; or our fiber, our flagship product and main driver for our growth. Customer base, retail customer base, has more than doubled in 4 years. And wholesale base has been increased [ 6x ]. Over this period, we achieved an 11% growth in revenue, 19% increase in EBITDA (sic) [ EBITDAaL ] and a solid surge in organic cash flow. And these results are not only reflecting the transformation of our business but also position us perfectly for the next phase of growth. We are ready to scale, innovate and lead into the next era; and there are still a lot of opportunities. Market is still having great potential for the growth of very fast Internet. And driver is very clear. It is not connectivity by itself. It is digital services for consumers and businesses which are driving this demand. Today, Orange Polska is market leader in all key segments. Our success is built on best connectivity, with Orange fiber as our stronghold, reaching already 60% of Polish households, with leading technology for speed and for quality. Our 5G deployment plan allowed us as well to position us as benchmark for mobile network performance in 2024. For business customers, Orange is already much more than a telco. Along with strong position in our core market, we are #3 IT integrated services provider in Poland for both companies and for the public sector. In everything we do, we are driven by customer passion, which is reflected in the best NPS on the market, #1 choice for convergence and our reputation as #1 trusted brand. And all these results are reflected in a loyal and highly engaged customer base. All of this is made possible by our strong and engaged team, which is our greatest asset to drive and driving first -- force behind all this growth, motivated by our shared purpose to empower everyone in a safe digital world. .Grow plan put us in motion and brought us to this point; and now we are ready to take it to next level, ready for future. Let's see now how this future looks like. Let's try to jump 4 years ahead. Imagine that you are in 2024. And Polish market is a fantastic place to be. Polish economy has grown at a solid base with average of more than 3% per year. By 2028, connectivity demand has grown significantly for individuals, families, businesses. And they are able and willing to spend more for digital services. In 2028, 2 million more homes are using fiber, a 25% increase from 2024. Additionally, there are 3 million more mobile connections joining, reflecting the growing adoption of smart devices and applications. It is all about how people live, work and entertain boosting the increased demand for data. We are in a totally new dimension of digital era will -- connected devices all around us facilitating our life and work. Just imagine there are 200 million more connected devices in Poland in 2028, if we compare to 2020. This emphasizes the importance of seamless, sustainable, secure and open network to support this growth. In 2028, most companies, including even small businesses, are operating digitally. This is our new reality. Digital transformation is booming. And IT&IS market drives it and benefits from it, adding PLN 12 billion in overall revenue. EU funds dedicated to digitalization played an important stimulus for public and private sectors. And we are the backbone of this transformation, powering digital future of the country and society and our customers. The new strategy is about this future, leading the future. What is behind this name? Why Lead the Future? Because the future is not something we wait for. It is something we create. I have an analogy of the architect of tomorrow. It is not just about building the bridges to tomorrow, yes. We are designing the entire city. The future isn't just a destination. It is a masterpiece we are creating brick by brick, with technology and innovation as our blueprint. It is not about following in others' footstep but to create our own path, and we know how to do it. So how can we describe Orange Polska in 2028? What do we stand for? I define this destination by 3 key elements. First is customer champion. Orange is the most loved and trusted provider of digital services in Poland: for individuals and families, best one for connectivity, whether we speak about at home, at work or on the move, and the preferred interface to digital world connecting to entertainment, gaming, content, learning, all tailored to customer needs; for companies, the most trusted for ICT and digital transformation, helping them to grow and explore the potential offered by technology. Other 2 elements define our know-how, so the second stands for the unmatched connectivity that we provide, thanks to our omnipresent, resilient, reliable and [ performing ] network. And the third one stands for their innovation leader. We are bringing technological advancements that are changing everyday life. How we are going to do it. Our new Lead the Future strategy is the framework for our success. It is built on 4 pillars, and each one is a key to unlocking the future. First is the growth. It is the main pillar based on our commercial engines and it remains the main motion of this plan. We bring it to the next level, driving innovation and unlocking new opportunities to fuel our future. Second is about enhancing our infrastructure. It is a prerequisite for growth. It is like the work of great engineers building bridges, connecting communities, creating pathways and ensuring stabilities for generations to come. Our network is a bridge to the future. As for the third pillar, for the transformation, I'm inspired by great renaissance thinkers, who didn't just build on the past, but they have imagined what has been never there before. And we are rethinking the way we work, [ buildings ] on new possibilities equipped with new innovative tools like data, AI, automation. Moving forward and coming to the fourth pillar, empowerment. It is the ability to move hearts and minds. Our people, with their right ownership mindset and equipped with new skills, are true catalysts driving our growth and transformation; all of these coming to a sustainable value creation for all stakeholders, as a result. Some of you may find these words exaggerated, but I think that sometimes we need bold inspirations to move forward. And now we are [ governing ] all our best assets to push the growth and value creation to the next level. I will invite you now to see a small video which will be presenting our first pillar. [Presentation]

So nice testimonials from our customers. So the growth. We are taking our growth to the next level as we pursue our successful convergence strategy. And we are capturing new households and driving growth with a fully integrated digital experience, scaling on IT&IS where we are opening new opportunities beyond telco, unlocking commercial growth in the booming digital economy. So for consumers. We don't just connect. We empower. Customers don't just choose us. They love us for our digital connectivity and trust we build. Digital well-being is at our core. And what do I mean by digital well-being? Orange leads in creating peace of mind for our customers in digital age. Just in 2024 alone, we have blocked more than 3 million malicious SMSes and secured more than 5 million customers from phishing. This demonstrates our commitment to customer protection in a digital world. Convenience means the best innovation and seamless experience, simplicity, entertainment that perfectly fits in the way we live. Examples are 8 gigabit per second super-fast Internet which we launched last year; or superior WiFi 7 technology for home network, which we brought to the market in premiere in January this year; or our unique 100% digital flex offer; or advanced cybersecurity. We don't just connect. We create possibilities. And our commitments to -- our commitment to our customers is clear. We understand customer needs and we go beyond expectations to enrich their lives. And all of this to be the first choice for consumers today and tomorrow, from brand perception to connectivity and to experience. I will not surprise you and start our commercial strategy for households with convergence. It has been in the center of our commercial strategy for many years. We have been leading it. Market followed us, and it is still on the growing trend. And here I want to underline that convergence is not just a trend. It is a proven value driver. It remains a cornerstone of our strategy. Just to remind you: During 4 years of .Grow, convergence revenue increased by almost 50%. We are consistently increasing number of customers and ARPO. From customer point of view, convergence means all telco needs in one-stop shop, a simple offer at better price, so this win-win situation results in a higher customer ARPO and also in an increased customer loyalty. So to recap. .Grow strategy has demonstrated that convergence and value creation coming from it are driving forces behind our success. And we will continue mastering this strength to take it to the next level. In Lead the Future, we will explore new growth possibilities for convergence, capitalizing on expanding our fiber and 5G footprint and cross-selling. We will be supported by constantly improving, AI-driven customer value management platform. With AI-enabled personalization, we demonstrate to families that Orange is the best place for all their services. And as a result, over the next 4 years, we want to grow the number of convergent customers and ARPO by a solid double-digit percentage. We are the convergent leader and our goal is to stay on top. In Lead the Future, we want to take convergence to the next level. Our new focus will be reaching new families, expanding our presence and fostering new relationships to encourage choosing Orange products and driving loyalty. And we know how to do it. We will be building these relations gradually, upselling more services and creating new pool for growth for convergence. We aim to attract additional 0.5 million Polish households to choose Orange offers in the next 5 years. So how we will win them, how we will win customers. We know that every customer is unique, so we are creating a smart ecosystem for every family, all-in-one solutions for tech lovers or budget-conscious or digital-first customers. Our strategy is grounded in flexibility and freedom of choice, whether it is mobile, fiber, TV, standalone or bundled. We leverage strong, flexible, multi-brand offers and hyper-personalized AI models to ensure every customer gets exactly what they need. We will build the future together with our customers to ensure sustainable growth and becoming first choice for consumers. So this is our strategic approach for consumers. Let's now move to business. For us in business, being a clear leader in telco across all categories is not enough. Growing our IT&IS operations and adding 60% more revenue since 2020 and becoming #3 player on this market is not -- also not enough. Orange Polska is already a benchmark for integrated and successfully performing model. Now what we are doing, we are taking our unique position to the next-level growth with new wave of value from IT&IS even more integrated engine, setting yet a new standard for the industry. We will be riding in the next wave of digital transformation. The IT&IS market is expected to grow rapidly, much faster than telco. And that's where the biggest potential lies, and it very well aligns with our strategic goals. Digitalization becomes a necessity. The demand for digitalization within Polish companies and the public administration will grow, particularly as a considerable part of small business are still outside digital ecosystem. And it is clearly an opportunity for us. The demand is fueled by booming, new technologies like AI, big data and IoT, which support automation and robotization. Businesses need next-gen solutions like SD-WAN, 5G, IoT or e-commerce. We have already established the leadership with larger customers for IT&IS. And we are targeting now small companies' growing need for it. With our state-of-the-art connectivity and comprehensive ICT offering in IT infrastructure, cybersecurity, software services, we are uniquely positioned to deliver end-to-end solutions to business. And we are well positioned to lead. By 2028, IT&IS revenues will double, compared to 2020, and will be reaching PLN 2 billion. So let's capture on this momentum and go inside. Already now, the most significant share of our revenues from large corporate and public customers come from IT&IS. Telco connectivity represent a smaller part. This is a robust foundation and it positions us well to elevate our operations to the next level. To continue our growth in IT&IS market and meet customer expectations for next-level transformation, we need to adapt to the unique characteristics of this business. It is project-driven and people-centric. Unlike the subscription-based telco model, in IT&IS, the demand may fluctuate and we need different motivation schemes and greater agility. To address this, we are implementing a more integrated organizational model that group our competencies under one roof. This approach will enhance our strong position in infrastructure, security and software. It will also enable us to scale next-generation solutions based on 5G, IoT, multi cloud and AI. With an integrated model, we are unifying our strengths in IoT, M2M, SD-WAN, colocation and cloud security. The model will enable us to capture the full benefits of the technological shift and to drive commercial excellence and as well to unlock the full potential of our strategic partnerships. We aim to become a leading player on IT and integration services market in Poland. Our position in small and medium-size businesses is different. IT&IS services currently represent a smaller share in our revenues, with core telco dominating. We will reinforce our leadership in connectivity while exploring new opportunities for growth. We will expand our offering beyond telco to provide essential digital services for this segment. Small and medium-size business depends on the connectivity provided by our networks, so we will maximize the value of core telco business with smart, AI-driven tools. It has been already a part of our value strategy in mobile. It helped us to increase ARPO by 11% in the past 4 years. So small business, medium business must quickly adapt to the digital world. And they turn to us for the guidance. They need a partner who can help them navigate with transformation, and Orange is here. With our integrated IT&IS services, we provide tools businesses need so much to succeed. From cloud to cybersecurity, Orange is the best fit to support their growth and success. And we are the leader in this digital journey. Moving forward to wholesale, our third solid growth engine. We are focusing our position and focused -- and we are reinforcing our position as a one-stop shop offer for our telco operators, focusing on delivering exceptional customer experience. With a growing demand in the market, it is a clear opportunity to expand in wholesale and further monetize our assets. Wholesale fiber monetization is key for both Orange; and Swiatlowód Inwestycje, our fiber core joint venture. In Orange, we will increase the fiber customer base by 50% by 2028, adding to the monetization of our infrastructure. In Swiatlowód Inwestycje, our JV, we plan to expand footfall even more after a very successful first phase of investment which will end in 2025. Wholesale will remain significant, value-accretive business line in Orange Polska. Now we are moving to another pillar, and I invite you to watch another video. [Presentation]

So our network. It is at the core of everything we do. It is not just expanding. We are enhancing and reinforcing it. 5G unlocks new possibility for superior connectivity, innovation and advanced services. We are reinforcing our leadership in fixed network, delivering future-ready infrastructure. And this is the foundation of our growth. We are investing in the future of connectivity to secure our leadership in an evolving digital landscape. The next 4 years will be the 5G era. We will cover with 5G network almost entire Poland. First, how we will do it, with focus on quality, efficiency and resilience; and using the most efficient spectrum and world-class energy-saving practices. What will be the business benefit? More capacity to carry ever-growing data traffic; new business opportunities which will reveal based on 5G, with its capability in speed and latency, in slicing for specific use cases; ability to provide fast broadband proposition for our customers living in areas where there is no fiber, thanks to new low-frequency spectrum. 10 years ago, we started our fiber investments, and at that time, it was a bold move and unique on the market. Today, it is hard to believe that there were a lot of doubts at that time if such investments are necessary. And as a result, Orange became a synonym of fiber in Poland. We also created the larger -- the largest fiber wholesaler. What is now on our plan on fiber? By 2028, we will -- our fiber will reach additional 3 million households. We will deploy it mostly through Swiatlowód Inwestycje JV, which we own in 50%; and through other trusted FiberCo. Our own investments will be concentrated on building within EU subsidized projects in highly prospective areas. In parallel to expansion, we will further boost the usage by customers of our existing infrastructure, maximizing take-up and reinforcing our leadership in fixed network by improving its quality. So now I invite you to the next session -- section with another video. [Presentation]

So transformation. It is a must, not just a buzzword. And our next pillar, transform and innovate, is about redefining the way how do we operate; a 360-degree profound transformation to increase agility, efficiency and productivity. We are automating, integrating AI and reshaping to scale faster. This transformation is key to future-proof in Orange Polska, driving long-term value and enabling us to capture new opportunities. We have been never stopping transforming and reinventing ourselves, but now we bring it to the new level. And we are much, much better prepared to do it, thanks to last developments. I will bring you just a few examples. Our big data is now migrated to cloud. That allowed us to increase performance with 10 -- up to 100x. Data governance is in place and let us multiply by 10 the speed of AI models creation. We established a secured, responsible environment for AI use cases. 90% of employees are trained in new skills with data and AI, cyber, cloud, robotic process automation, of different levels. Sometimes it is more generic training, sometimes more advanced, but for instance, I will give you an example. It resulted in 800 active citizen developers among our employees, who are not professional developers, but now they're equipped to work with UiPath robotic process automation tools. Or with -- we do have over 140 projects implemented with AI engines inside, small and big, some targeted revenue boost, some operational efficiency. And we learned lessons and we are much better prepared for future. I will exemplify our 360-degree approach via a focus on 4 areas showing how we redefined the way we operate and serve our customers: digital sales and care, streamlining customer interactions with AI and self-service; automated smart network, enhancing efficiency with AI-driven maintenance and self-installation; lean processes and organization, optimizing operations via process reengineering; lighter assets, light assets base, reducing complexity through strategic decommissioning. And I will bring few examples. Like, looking on digital. Our ambition is to be the digital operator for Poland. We have made significant progress in digitalizing our sales and care during .Grow. 1 in 4 transactions that we make now are run through digital channels, and we want to further grow it to 35% and more. Digital channels carry less cost for us to acquire customers, but the most important, that at the -- in the same time, they're able to respond much better and faster to the needs of the customer, bringing best customer experience. How will we grow? My Orange app remains the key tool. We are constantly improving it, adding new useful functionalities for our customers. Supported by gen AI, it will be taken to the next level, vastly improving personalization. We will also focus on customer engagement in app and improve sales processes. Our digital offer Flex will be as well expanded with new acquisition tools. Max, our bot, has been supporting our customer care for years already. Today, 100% of our inbound calls are taken by Max. And we want to take Max to the next level, equipping him with the power of AI agents enabled by gen AI. We have already introduced Orange care AI agents in Flex, and results are very promising. 40% of contacts are successfully handled by AI agent. And we are planning further implementations. We are also finalizing the implementation of gen AI technologies to support the work of our service advisers. For instance, we will apply gen AI prompts for care advisers dealing with technical issues. We will continue to optimize our networks, with the power of AI, again, becoming central. We are improving field force efficiency. With AI-empowered dispatching and routing of technicians, we are enhancing productivity and responsiveness. This leads to faster, more efficient service for our customers. We are also making significant steps in network automation. Our goal is to move toward zero-touch cognitive network, one that anticipates needs, manage capacity and ensures reliability all through AI-driven processes. This is the future of network operations where efficiency and innovation come together to serve our customers better. Leading the future as well means to phase out legacy technologies to make room for next generations. During these, we also -- doing these, we also curb costs and optimize our asset base, contributing to better return on capital employed. Firstly, 3G, it will be switched off by the end of this year; and spectrum will be reused for 4G and for 5G. Secondly, of course, copper, we decommission it progressively. And we do it based on profitability area by area, migrating customers to modern technologies; followed by copper cables extraction and sale. Finally, we plan to finalize disposal of our real estate which we don't use anymore. We have been doing it for many years. It's generated cash proceeds and lowered maintenance costs. Over the past 10 years, we generated close to PLN 2 billion in proceeds. And during 4 years of .Grow, our operating costs, thanks to this program, were cut by more than PLN 40 million. And now to introduce the fourth pillar, again I invite you to watch a video. [Presentation]

Our people. People are the true driver of our success. By fostering an entrepreneurship, entrepreneurial culture empowering individuals with right mindset, we unlock their potential even more. This is how we build the leadership and innovation needed to shape the future, making sure that we attract and retain top talent who will lead us forward. We are building a winning team engaged and focused on execution and result, with a strong drive for efficiency to achieve our goals. Our entrepreneurial culture is rooted in customer passion and innovation, focused to create an agile and responsive organization. And as the best employer, we attract and we develop top talent, fostering network -- a work environment where people thrive and contribute to our long-term success. Coming back now to our purpose to empower people in a safe digital world. It's very inspiring mission. It drives us forward, but it also comes with responsibility. Sustainable development has always been a core value for us. We are aware that our business has an impact on the society and climate, and we are committed to make this impact positive. Sustainability is not a separate pillar of our strategy. It is actually embedded in our DNA. For us it is neither a trend, nor a regulatory environment -- or requirement. It is a license to operate. It is a fundamental principle guiding our actions and ensuring we continue and we contribute to a more sustainable and fair future. Let's now look on at our financial plans that will drive value creation. Jacek, the floor is yours.

Thank you, Liudmila. You've heard how we'll reach for more growth while transforming our costs and our investments. Now let me share how this strategy will deliver a strong financial performance and grow shareholder value. Let's start with our financial model. It is built to deliver consistent and sustainable returns. It is based on our ability to generate very resilient revenue growth, resilient because we seamlessly fulfill the essential needs of our customers and resilient because we offer them very high value for money. This is the key to our operating profitability. We convert this growth to EBITDA by ensuring an attractive gross margin and an efficient cost structure. Our model creates shareholder value visible through expanding cash and profits, underscored by a growing return on capital employed and ultimately reflected in dividends and share price appreciation. What is key is our ability to deliver value creation over the long term, both during the economic upturn as well as during a downturn. Our growth story starts with revenues. We will grow revenue, on average, at a low single-digit percentage. This ambition is underpinned by a consistent rise of core telecom services; convergence, mobile and broadband; and also by increase of sales of IT&IS. We are well positioned in these areas with rock-solid customer demand and our comprehensive product offering. We will grow these revenues and we will also increase their direct profitability. Legacy services like traditional fixed voice will see their value decrease over time. However, they will only constitute about 10% of our total today, so their future impact on the top line is much more limited. It is evident that core telecom services and IT&IS are the main lever for our growth and our margin, and we have a very solid plan for these. Core telecom services generates around 50% of Orange Polska revenues and 70% of our direct margin. Therefore, they are the bedrock of our growth story. They address the very essential communication needs of our customers like connectivity, digital security or entertainment. There is much more growth potential in our core telecom services in the future and we will harness this potential. On the one hand, we will grow the key customer bases, as our mono-product strategy will create an upsell pool for convergence. On the other hand, we will provide more value to our clients and -- as we fulfill their increasing digital needs. The IT&IS services are our second biggest growth engine. We intend to further capture the high growth potential with unfulfilled demand from the business. We will capitalize on our leadership among the large enterprises by creating a unified integrated operating model for ICT. Simultaneously, we will extend selected ICT activities to the SOHO/SME segment, where we have a super strong telco presence and we see a lot of unfulfilled demand. As you can see, we have a solid plan for the key revenues and their margins. To complement this, we will focus on efficiency gains on the cost side. We have always had a busy agenda in this area, and we are confident that we can progress further. The landscape should be slightly easier versus the high-inflation macro of the last 4 years, exerting relatively less pressure on costs. In this background, we will execute a major cost transformation cutting across all layers of the business model. We'll leverage new technical possibilities and continue initiatives started in the past. First, we will use digital NII to transform our sales and care activities, improving their cost efficiency and quality. You've seen some examples of this and the KPIs earlier on. Second, we've started a major transformation of our network cutting across all main processes, from field maintenance to core network operations. This will deliver major efficiencies. Third, we'll prune legacy assets. It's critical that we relieve ourselves from costs of legacy. And this will also pave the way to make our organization leaner and more agile. This wave of transformation will improve our cost efficiency and support the growth of the EBITDA. We will consistently increase our EBITDA at a low to mid-single-digit pace. This is the key value output from our operating activity and a critical contributor to further increase of the return on capital employed. How will we achieve this? Well, growth will mainly come from expanding revenues and our ability to convert these into a solid direct margin. This makes our developments sustainable, as it is based on satisfying the very essential needs of our customers. We will support our high operating leverage with a large cost transformation. This way, we will convert the direct margin into higher EBITDA. We are confident in this growth strategy also because it is already happening. Now let's focus on the investments that will fuel this growth. Well-allocated investments are instrumental for future growth. They underpin our service quality, seamless experience and security. They enable new services both in this strategy and also beyond, as well as enabling efficiency gains. Our yearly investment plan will be comparable in size to the amount of CapEx spend in 2024. CapEx allocation will prioritize areas that drive growth. We will spend close to 50% of CapEx on mobile network and on fiber. Fiber investments will focus on connecting new clients and finalizing the EU subsidized rollout in white zones where demand is absolutely terrific. We will invest PLN 0.5 billion yearly on mobile, with 5G capacity rollout finalized by 2028 and coverage rollout very well advanced by this stage. These improve network quality and throughput. They will also prepare us for the next generation of 5G services that will come in the next strategic cycle. CapEx in other areas will be optimized to reallocate and reprioritize growth -- well, CapEx to growth investments; and also to compensate for a progressive decrease of real estate sales, which will be nearly entirely disposed by the end of 2028. Improved CapEx allocation will result in this greater productivity, and we will see this through a decrease of the CapEx-to-revenue ratio over time. At the same time, by keeping CapEx stable in absolute value over time, we will improve the conversion of revenues and profits to cash. Our financial model is designed to convert revenues and profits into hard cash. We are committed to generate at least PLN 1.2 billion organic cash flows in 2028. We will achieve this through sustainable growth of EBITDA driven predominantly by the commercial activity. We will achieve this with support of efficient capital expenditure focused on high-return investments. We are absolutely determined to reach this objective, as organic cash flow is the ultimate financial output and performance measure as it supports our financial structure, giving us the strategic balance sheet flexibility. Finally, a strong, sustainable cash generation is the basis for shareholder value creation, including dividends. Our previous strategy resulted in a 44% total shareholder return, visible in the combination of sustainable shareholder remuneration and the growth of our share price. We are committed to further increase value for shareholders by generating higher financial outputs with a strong focus on cash; by continuing to offer sustainable, progressive shareholder remuneration. As part of this, we commit to a floor dividend of PLN 0.53 per share during this strategic period. We will work tirelessly to create further upwards potential for shareholders in a sound and sustainable way. Future growth of the dividend will be decided on yearly basis depending on the actual performance and projected financial outputs. Let's now sum up our value creation ambitions with the financial guidance for this strategy. So we will create value through growth. And obviously this starts with a sustainable growth of our EBITDA driven by higher revenues, supported by the cost transformation. The EBITDA will be supported and fueled by the return-focused disciplined capital investments allocated to the main growth areas. As result, we will significantly increase cash generation and offer attractive remuneration to shareholders. These are our commitments for the Lead the Future strategy and the drivers of shareholder value creation. Thank you very much. And I hand the floor back to Liudmila.

Thank you. Thank you, Jacek. So to summarize. Here we are in 2028 and here is what I want you to remember about our strategic ambition: customer champion, the best-loved and trusted provider of digital services bringing the unmatched connectivity, resilient, reliable and seamless; with future-proof operations, the benchmark for efficiency and productivity, with data and AI at scale; and empowered winning team with entrepreneurial mindset driving strategy with passion. And all these for sustainable value creation for all our stakeholders, with purpose and with impact. And I want to come back to Einstein, yes, who once said that, while questions remain the same, the answers change. Today at Orange Polska, we do more than just find the right answers. We ask the questions which define the future. And we are ready to lead digital transformation with right strategy, right ambition, right team. The future isn't a distant vision. It is the reality with -- we are shaping right now. So thank you for your time and for your attention. We will be now ready to answer your questions. We will be with you in a minute.

Welcome to the Q&A session. And this session will be dedicated, first, to analysts. The Q&A session for journalists, for media will be later. We are joined by the almost entire management board, so you have this unique opportunity to ask questions to such a big executive team. We have a strong representation of analysts in the room, so first, we'll be taking questions from the room. And then we will switch to online viewers. [Operator Instructions]

First, we are taking questions from the floor, as I said, so are there any questions from the floor? I can see Marcin Nowak from IPOPEMA.

Three questions from my side; the first question, regarding the IT&IS revenues. If the market is so booming and the ICT market is expected to grow faster than the telco market, then why your projected CAGR for revenues from ICT is barely higher than the quarter-ago service revenue? Okay. And second question, what was the rationale behind dropping any leverage target from your financial guidance? And the third question. Your strategy doesn't include any comment regarding plans for the stake in FiberCo, in the time frame on the strategy. Shall we expect that the -- any decision regarding that will be pushed behind 2028?

I will start with the first question. Thank you very much for it. We base on the estimation of the growth of the market. And in terms of telco, it's more or less 1.2% for the next, say, few years, 1.2%. And for the IT&IS, addressable IT&IS for us, it's a little more than 5%, 5.5%, so from our perspective, it's few times more, not just the small difference. Our plan is to grow quicker than market. And what we showed to you is the -- solely the organic growth. And we believe also -- we will also monitor the market. And still we are thinking about the -- some further M&As. So as you remember, in the .Grow, we were able to monetize the M&As which we did in 2019 and 2020; and we added it to our value chain for the customers. We also -- the .Grow was also very -- in the very interesting period, which was the booming period of the digital transformation just after COVID. And we benefited a lot from it having very diversified offering in the IT&IS area, so looking forward, we plan to grow the IT&IS market quicker, having in mind also the slowdown in 2024 and having in mind that this market is under the technological shift impacted by AI. So some areas which were our growth engines will probably shift into the new areas of the growth engine. And everywhere, the support of AI will be the -- crucial. So we plan in general, on the business market both on telco and IT&IS -- grow significantly above the forecast of the overall market.

Okay. And then on the FiberCo and leverage, I will answer the last question first. So no decision today has been made whether we wish to exercise the options that we have or not. And I do believe we will be making those decisions as we go, and we're not in a position to decide right now. And the leverage: Yes, we did not guide for the leverage. The current leverage that you do see, it's quite low. It gives us the flexibility of the balance sheet for a few things, for inorganic opportunities if they were to appear, for the stability of the dividend. And let me just remind you that we've increased dividend by 10%, I'm speaking of the dividend paid from last year's result this year, despite the auction that is ahead of us. So that is a few of the reasons. Regarding this question of the FiberCo. Obviously, reconsolidation would be quite a big impact on the balance sheet. It is not decided today. We shared with you that we are working on plans to further increase the scope of the FiberCo, so that makes it in terms of additional rollout. And this would mean that we need to keep those options open, at least for the time being, so no decision has been made. When it comes to the guidance, on the one hand, we did not guide for a specific corridor or value for the leverage. On the other hand, what we did do is we took a hard commitment for the organic cash flow generation. And first, I'd like to remind you that we set this as at least PLN 1.2 billion by this time. And it is the cash flow that is, I do believe, the best basis for the sustainability of the dividend over the long term, so while balance sheet; [ and the low, safe, sound ] balance sheet may shield us from fluctuations from 1 year to another, if we're thinking of value creation over the long term, and this is what we are focused on, we're also thinking about what are the best metrics for us to have and secure in order to be able to provide value creation for shareholders in a sustainable way. And this is where we made the choice to guide for the cash flow.

Next question will be coming from Pawel Puchalski from Santander.

Congratulations on your strategy. I've got 2 questions because I'm very pleased with your 2028 organic cash flow guidance. However, guidance for 1 year is not enough, for me at least. Could you, I don't know, commit that your average 2025, '28 organic cash flow would be above PLN 1 billion? That would be my first question because I would also know the path and where we are going for 2026 and '27. And the other question would be, of course, about dividends because, 10 minutes ago, I heard CFO saying that we are planning progressive growth in remuneration. And then 1 minute ago, I've just heard that Orange Polska wants to have stability in dividends, so the other question would be shall we see progressive growth or stability. Because that affects attractiveness of the stock.

Thank you for both. I think we can be clear. We decided to guide for 1.8 billion -- for PLN 1.2 billion of cash generation in 2028 to give a certain landmark of how we want to get there. And so I will not comment on the direct and exact path because it does depends on working capital requirement between the different years. It does depend on the level of CapEx that you want to spend, but it is a progressive increase of the cash flow that we are aiming for. So it's not that we are focused on 1 single year, but the path there may not be exactly linear. This is what I will say. Regarding dividends, it's clear. PLN 0.53 is the floor. And we will do our best to make sure that we create perfect conditions to be able to offer more to shareholders.

So there would be one more question on my side. You are guiding for double-digit growth at number of customers in convergence, double-digit growth at ARPO, high single-digit growth at TV customer as well. And then for the core telco, you are guiding for 4% to 6% growth. Well, am I missing something? Or maybe you are guiding for flat ARPOs in any other segment. Because that's the only way it would match the -- your official data.

I think the only difference was that, the 12% to 15%, these were during the period. And the -- well, the indication that we gave for core telecom services, this was CAGR. So that's the only difference.

And probably not to forget that what we are sharing with you is engines of future growth. And we should not forget about legacy because still we are facing legacy decline. And we will be managing it with a proper view on profitability, but it is not a secret that legacy, whether we speak about PSTN or broadband Internet, is decreasing. We are managing to overrun this impact, so -- to compensate it fully by future-proof technologies, but it is not like just positive waves are reflecting in our final numbers. We are -- still need to fight headwinds.

Yes. A final question, if I might. You mentioned transformation. And my question would be has an era of layoffs ended. Or should it be continued every second year going forward?

So I think here we have a solid track record of adapting our workforce to the conditions that we are in. And we will continue to adapt all of the costs, including the workforce, to the conditions that we will be in. In terms of more specifics, I mean, you know that we're implementing a 500-person social plan this year because this is part of the package that was already communicated. Anything else has to be first agreed with our social partners before we announce further concrete plans and before we provide for them in the balance sheet, but yes, definitely, transformation cannot be done without also impacting the level of the workforce that we have. This is obvious. When you saw the structure of the costs that I showed on one of the slides: It is not possible to perform a very profound transformation without touching this element.

I can see that Piotr Raciborski from Wood also would like to ask questions.

Yes. 2 questions from my side. First, on the dividend policy, have you considered announcing a dividend policy based on organic free cash flow or adjusted net income? If yes, why haven't you decided to implement this? What risks do you see that stopped you from adopting -- a bit more clearer for the equity market, investment -- dividend policy.

Thank you. Pegging the dividend in a hard way to the OCF or to the net income would -- or seemingly it would show more clarity to the market. However, what you are exposed then to is to fluctuations of the dividend in case you have a seasonal decrease of cash flow or a seasonal decrease of the net income. Let's assume we have a provision for claims and litigations or provision for some other restructuring items. Pegging the dividends to this is -- I would not say the best way to provide stability. When we -- our thinking forward is to keep a clear floor of the dividend, so say no less than, and then to stay focused on creating the best conditions to be able to increase it. I think the track record during .Grow shows that we are increasing it when we can, when we create those conditions, so we are really determined to create shareholder value. We are determined to provide more value to shareholders both from the share price appreciation and from the dividends. It's clearly a mix. And we will do our best to create the best conditions possible for us to be in a position to propose a higher dividend. I think another reason why we're not pegging this to a single indicator is that our policy allows us to look forward. So not only to the results that we have generated in the past but also to the projections that we have for the following years. And this is really critical, when we wish to be certain, that whatever we are proposing as a dividend is really a sustainable shareholder remuneration in the longer term.

Other question, about the indirect costs outlook. Do you expect the margin improvement only be driven by higher growth of the top line versus OpEx? Or do you see some areas in which costs can be nominally reduced? One area is probably the costs of the nonoperating properties. Do you see some other areas, maybe labor costs, that can be reduced over the strategy period?

Thank you for the question. We did mention that we would be striving to, first, preserve the high operating leverage that we have. And this always refers, from my perspective, to the indirect costs but also that we would be striving to improve the relation -- or to decrease indirect costs as a percent of revenue. So to make sure that we have higher and higher productivity. Obviously there will be areas where we will continue to have pressure on the costs side, starting with the energy bill. As soon as you deploy a bigger network, unless you optimize your energy usage, you are bound to consume more energy, so either you need to improve your sourcing or the consumption and the efficiency of the network build. That's an area that definitely will be under pressure, but then I did mention few areas like network transformation, where we are, I think, able to achieve nominal decrease, of course, during this strategic period. It will not come from today [ to ] tomorrow, but yes, we can work on a number of cost lines to make sure that this is decreasing over time.

Do we have any more questions? Yes. Nora Nagy from Erste Bank, who came to us all the way from Vienna.

Three questions from my side, if I may. Firstly, from your presentation, it sounded that you are planning to deploy 5G standalone. Could you please confirm this or share -- which technology do you use now for 5G rollout? Secondly, in your current reports, you also wrote about AI; that at some point, it should lead to an increase of revenues. Because, firstly, if I understand the sector correctly, firstly, it's about efficiency, but then at some point, it should lead to higher growth of revenues. And do you have a target, what you can share with us? What percentage of total revenues can you reach with AI until 2028 or for a longer-term period? And thirdly, about the national roaming agreement with Play, if you could share some color. Will this be extended beyond 2025? And is this included in your guidance?

So maybe I will take over the first question. We are ready to implement 5G SA. So all investments, all decisions were taken. Cooperation with the vendors on core, the customer base and signaling is ready. The only topic is just to, let's say, increase the capacity and build additional disaster, let's say -- place to have this network secured. Now we are using NSA, as other operators in Poland.

And on -- coming to AI as -- we were bringing the examples. We have quite an extensive experience already but, of course, much more to be explored in the future. We already have both revenue generated -- or revenue-generating activities and cost efficiency initiatives. So much more on cost efficiency but not necessarily already delivering similar value. Sometimes, we see much more value delivered from revenue generation, from value creation, but probably it would be right if I give the floor to my colleagues to give exact examples from B2B and from consumer. So Bozena, please.

I will not tell the exact number because we believe that AI will not be the separate domain. And it's not what we are going to sell. We are going to sell the different solutions based on AI and data analytics. We -- from the commercial, strictly commercial, perspective, we created, more or less, we started a year ago in BlueSoft, the specific domain or -- and dozen of the use cases already tested and implemented with different kind of the customers, which test, do the proof of concepts of different appliance of the AI solutions. These -- or they are connected with either the process optimization, automation, robotization, [ smoothing ] and increasing the efficiency in different areas -- and that they are connected with the retail segment, with legal segment, with supply chains and so on. So -- and future -- nowadays, I would be probably right saying that 30 customers are testing our different use cases. The second layer which we developed in BlueSoft to monetize AI usage is the modernization of the legacy IT systems with the usage of AI. We didn't put the specific number of the revenue to the domain of AI, but the different software domains; and different projects, which are bespoke projects in our case, and for different type of the companies are supported or based on the data analytics and AI. So it's more or less such an approach. And while mentioning the transformation of the IT&IS domain, I'm meaning that some -- the traditional software activities will be replaced by the automated way with the usage of AI, but some of them and some processes will be supported with AI. And it's where we are going to generate the new streams of the revenue.

I would add. In consumer market, we use AI mainly to be more efficient in revenue growth. Our customer value management is based on AI algorithms. We use 60 machine learning models. And the last 2.5 years, we built more than 1 million direct -- additional direct margin, thanks to that. And we will continue by implementing additional features like gen AI to those models and to communicate with customers. For us, those models, AI, is a engine to be more effective for loyalizing our customers, to make the proper offer to the customers. So hyper-personalization in this case is a crucial. Additionally, in terms of cost efficiency, it was said by Liudmila previously that first test of gen AI chatbot gives us 40% of increased, I would say, efficiency because the customer interactions were served by the gen AI bot. So we will continue for other product line for our customer care. And the future for us is to create virtual agent who will serve simultaneously few interactions with the customer.

Now about the question on the national roaming. You will understand that we are not in the position to guide you through a specific or commercial sensitive topics like specific contracts. What I can assure you is that we took reasonable assumptions, in the strategic plan, about all important contracts that we are enjoying. And one additional, I would say, message is that, in the scope of the strategic plan, we are assuming that we will enjoy the growth of the wholesale line of business with a decent CAGR every year since the demand which we are serving is going to continue, around 5G, around the development of the fiber networks. And we have became already a very reliable partner in this type of undertakings. And we will pursue all business opportunities on that front. I hope that this is satisfying you on that front. Thank you.

Any more questions from the floor? Yes. Dawid Górzynski from PKOBP.

I have 2 question. So first one, on CapEx plans. You said that, like, CapEx on mobile rollout should be PLN 500 million per year, on average, by 2028, so I wonder if that assume your projections about rollout -- like CapEx for rollout of the base stations for the new, like, auction that's ongoing, 700, 800 megahertz auction, if that is included. And also on CapEx, maybe you will be able to provide similar, like, target for CapEx on fiber rollout both internally and via FiberCo. So this is first question.

Thank you. So regarding mobile, I did mention it includes both our plans to roll out 5G for the capacity spectrum, so the C-band which was acquired, well, last year, and also assuming that we will have spectrum for the coverage. So this upcoming auction is obviously important for us. And then regarding fiber, it is obviously a much smaller portion. So it is on average, I would guess, below PLN 300 million, with a potential peak in 2026, when we will be finalizing the EU rollout -- EU subsidized rollout.

Okay. And the second question, on "EBITDA after lease" growth guidance. You said it may be from low single digit to mid-single digit. And I wonder about different scenarios, what may, like, imply this lower end and higher end. Of course, you said that ARPO and customer base may increase from 12% to 15% in the full period, but I -- yes, I wonder if you see another important factors.

No. I think it's our ability to execute the growth plan on the revenue side, which is in the range because that reflects the level of uncertainty. Obviously this is a commercial plan. It depends on our ability to maintain and, if possible, increase the direct margin that we have, which is above 55%. And it is about our ability to rein in on the costs; and to decrease the cost -- indirect costs-to-revenue ratio, which is right now at -- in and around 29.5%. And if we can bring it down, that is obviously helping. So it is the execution risk, I will say. This is not about any one-offs and unforeseen circumstances. We are aware that the comparable base of last year is a rather good result for EBITDA, as we have been discussing in February. And versus this result, we are guiding for this low to mid-single digit. It is a similar level of uncertainty that we had guided for during .Grow. It was also low to mid-single digit. The results varied between the different years. We're happy that, by the end of the day, we're at a rather mid-single digit than a low single digit for the CAGR. And we will do our best to replicate a high growth rate in the future.

And we have a question from Jakub Viscardi, on this side of the room, from BOS.

I have a follow-up question on FiberCo. Could you give us, please, a hint, what are the key factors which will determine your decision whether to buy this remaining stake in FiberCo or not? And the second question regards your real estates portfolio. What is the estimated value of the real estates which are remaining to be sold?

Okay. So I will start with the real estate. I guess Liudmila was showing it on the slide -- or Jacek, that -- in the portfolio that we still consider to be commercialized is slightly above PLN 0.5 billion. And in this long-term perspective, it is possible that we are able to commercialize, to sell basically, vast majority of that portfolio. I don't know if 100% because this is not easy to commit, but we have professionalized this activity within the company. And I have to tell you that it is not only a selling activity but also kind of a project, network project, activity in which we are, I would say, properly sorting out all the network issues. To secure the future existence of that in those properties, we have professionalized this activity. And in the perspective of the strat plan, we are able to achieve again a very good success here. Liudmila mentioned today that, last 10 years, we have commercialized almost PLN 2 billion in that perspective.

PLN 2 billion -- almost PLN 2 billion.

So it will -- discussion will flow in.

And I think, on the FiberCo, we will not set a concrete list of criteria, but obviously, when you're thinking about such move, you'll take the long-term view, long-term strategic view. It involves the assessments of how the relationship is developing, how the companies develop, of how much of the revenues and profits of this company are made from our retail clients versus the open market. It involves possible further CapEx plans or not. There is a variety of -- also our own appetite to take on more depth. Hence, I was mentioning that we need to be in a position to be able to consider this realistically, but these are broadly the list of items that we will take a look at, without setting a precise KPI for each of them or for neither of them.

Let us now switch to 2 questions that we received online. First question is on -- is from Bojan Djurickovic from ODDO BHF from Austria. It's on convergence growth. "Could you please elaborate a bit more on your ARPO growth drivers for convergence? What underpins your confidence in 12% to 15% growth?"

[ Yolly ] will take it, yes.

Yes. So convergence, as was mentioned, is most valuable of our product line, so we will concentrate on that. As you can -- as you know because we presented during the sum-up of .Grow strategy, penetration of convergence of our services is close to 70%. So the potential for grow within our base is kind of limited. That is why we would like now to go for the market to increase our relationship; and to combine our FTTH, TV and mobile services for -- with different -- with a bit different strategy to reach the convergence in -- based on new geographies where we would like to attack, but I think we plan a solid growth of convergence and of the ARPO. This is -- if I do not [ mistake, can now ] -- is on the level of PLN 19 growth. So it's a solid growth for next year. So 2 elements, very important: solid growth of the base and growth of the ARPO. I think this prove that the convergence strategy planned by us is very valuable.

Another question is coming, from Maciej Bobrowski from BDM. And his question is around what we had on the transformation slide which referred to the expression "lighter asset base." Could we, please, elaborate on this?

Yes. We mentioned several elements. So about our real estate portfolio, I think Maciej has been commenting already. So this is one of lighter assets. Second is obviously 3G switch off, which is we are on the way to finalize this program this year. So by end of the year, it will be fully switched off -- and accordingly, all the benefits of reusing the spectrum. Again, renewing technology to new generation, which is much more efficient, as energy consumption and as [ performance ]; and obviously copper. So lighter assets base, for us it's copper decommissioning, which we are doing. And we will be further progressed in this plan. So it's very clear 3 dimensions of our plan.

Are there any follow-up questions from the floor? Yes. We have Pawel Puchalski from Santander.

I might have missed it, but let me double check. Where are you with respect to prolongation of contract for Swiatlowód Inwestycje construction works? Just your strategy -- in your strategy, you are assuming termination of this contract in 2025. Or you include something beyond.

[indiscernible], yes.

So maybe it will be good to structure the information here. First of all, the original rollout that we have contracted here is by the end of this year, end of 2025. And by the end of this year, FiberCo will have 2.4 million households connectable. We are very satisfied with the performance within this rollout. And based on this success, we are right now in discussion very advanced with our partners to continue these investments in the period of the 3 next consecutive years. So '26, '27 and '28. And the figures that we have right now on the table are around 0.5 million additional households to be built within this period, with majority of that construction actually in the first year of this 3-year investment plan. So not everything is, I would say, set in the stone, in the marble as people say here, but this is the really very advanced plan that we have on the table. And we want to pursue.

[indiscernible]

And the extension of that contract is not included in your strategy, or it is.

[ We will do what ]...

We have -- we will not change the strategy or the guidance because of one contract.

Got you.

And anyway, we are guiding for the compound annual growth rates between now and 2028.

Right.

Any more questions from analysts? No, I don't see. So thank you very much for this session. And see you, talk to you in the coming weeks and months. Please let us know if you'd like to follow up. Thank you very much.