Who we are

Netia

comprises a group of subsidiaries of Netia SA. As a group of companies, Netia is a leading independent fixed-line telephony operator in Poland. It operates on the basis of its own state-of-the-art fibre-optic backbone network which covers major Polish cities (5,002 km long) as well as on the basis of local access networks. Moreover, taking advantage of the regulatory opportunities, Netia offers services based on an access to the fixed-line network of the incumbent operator (via bitstream access (BSA), local loop unbundling (LLU) and wholesale line rental (WLR)). Netia provides a wide range of fixed-line telecommunications services including voice, data transmission and Internet access, and wholesale network services. In addition, in September 2008 the Company launched mobile and convergent fixed-mobile services to its business clients, which are provided based on a long-term service provisioning contract with P4 Sp. z o.o. Netia‘s objective is to become the service provider of preference for broadband services and deliver growth by establishing the Company as the leader in the rapidly expanding Polish broadband market. 

On April 18, 2007 Netia announced its new operating strategy focused on growth through dynamic expansion of the customer base and an increase in customer value. The Company plans to build on the opportunities to access the fixed-line network of the incumbent operator, to leverage Netia’s investment in PLAY mobile project, and to capitalize on the Company’s already strong position in the business market. In particular, Netia aims to become the market leader for broadband services in Poland amongst altnet providers. Netia also intends to focus on the most attractive segments of the business market, significantly increasing the number of SME & SOHO clients and increasing profitability from large corporate clients while minimizing cash burn. The above growth strategy is supported by corporate culture changes aimed at strengthening our customer focus. Despite the sale of Netia’s stake in P4 Sp. z o.o., a mobile service provider operating under the PLAY brand, Netia expects to continue to leverage its position as a founding shareholder in P4 and continue a business partnership with P4 based on the key commercial agreements signed by both companies.

Netia acquired Tele2 Polska. On June 29, 2008, Netia concluded an agreement to buy a 100% interest in Tele2 Polska Sp. z o.o., and the transaction closed on September 15, 2008. The transaction values Tele2 Polska’s enterprise at between EUR 29.1m and EUR 33.9m, depending on the level of additional performance related payments. This valuation translates to a maximum of 156 PLN per voice customer, which is broadly comparable to direct acquisition costs for new customers acquired organically.
The acquisition of Tele2 Polska is a transformational move in realizing Netia’s mass market strategy. Netia projects to increase its annual revenue base by over 40%, becoming nearly 3 times larger by revenue than the next largest altnet. The combined business gains significant scale over Netia’s stand-alone operations and significant potential to upsell its broadband, value added and content services to Tele2 Polska’s clients. During Q3 2009, Netia migrated billing and customer care processes from Tele2 Polska’s outsourced legacy systems onto Netia’s systems, thereby completing the last major element of Tele2 Polska’s integration into the Netia group. Annualised synergies projected to be delivered in 2010 from completed initiatives total PLN 46.2m, 54% above the original estimate of PLN 30.0m.  

Cost saving initiatives (the “Profit” project). Following the acquisition of Tele2 Polska which significantly augmented the scale of the business, Netia performed a comprehensive cost review across all functional areas of the Company. Areas for operating cost optimisation were indentified, with a target to reduce full year operating expenses for 2010 and onwards by PLN 100.0m. It is expected that the savings generated under this program in 2009 will amount to approximately PLN 20.0m. Now in implementation for over 6 months, the program includes a reduction of Netia’s headcount, review of control and reporting processes, increase in work effectiveness, span of control increase and contract renegotiations. The Profit project is proceeding smoothly, with 75% of all initiatives already completed and another 25% in the implementation phase. Value-wise, already implemented initiatives are projected to produce 85% of the total savings envisaged for FY2009 and 63% of FY2010 savings target. One-off reorganization costs of up to PLN 15.0m associated with this project are expected to be recorded during FY2009 (the first PLN 10.3m of one time restructuring cost was recorded in the nine month period ended September 30, 2009 pertaining mainly to the labour downsizing process).

On November 5, 2009 Netia announced revised guidance for 2009 and medium-term outlook. Netia is projecting 525,000 broadband subscribers, 1,165,000 voice subscribers and 300 unbundled LLU nodes in total by 2009 year end before any positive impact of expected further Ethernet acquisitions. Revenue is expected to be approximately PLN 1,495.0m, with Adjusted EBITDA (excluding one-off restructuring costs associated with the “Profit” project and a gain on disposal of the first tranche of the transmission equipment to P4) of PLN 300.0m, EBITDA of PLN 290.0m and capex of PLN 250.0m. 
Furthermore, Netia revised its mid-term outlook and now estimates revenue increases for the combined retail segments (Home, Corpo and SOHO/SME) for the 2010-2012 period at 5-10% CAGR, while total revenue is expected to increase at 3-5% CAGR for same period due to the reduction in Carrier segment revenue resulting from the reduced scope of transmission services for P4 and the continued defocusing of lower margin wholesale services. In addition, Netia now guides for being operating free cash flow positive in FY2009 including acquisitions of Ethernet networks, a year earlier than previously expected, and bringing forward its deadline for reducing capex to sales to 15% from 2011 to 2010.

Netia’s broadband initiatives have resulted in 490 thousand broadband customers at the end of Q3 2009. Netia’s total fixed broadband market share increased to almost 9% from 7% at September 30. Netia’s voice service customer base (own network + WLR + LLU) reached 1,147 thousand at the end of Q3 2009. Netia’s total fixed voice market share increased to 11% from 10% at September 30, 2008. Netia is the undisputed leader in the roll-out of LLU services in Poland with 176 nodes unbundled and total coverage of approximately 1.8m lines as at September 30, 2009. During 2009 Netia expects to acquired new LLU clients through both new customer connections and the migration of the existing bitstream clients to LLU.
Revenue from continuing activities increased in 2008 by 42% versus 2007 to PLN 1,112.4m. Organic revenue growth from continuing activities (excluding Tele2 Polska Sp. z o.o. acquisition) was up 26% over the prior year to PLN 982.9m. EBITDA for 2008 was PLN 170.6m. Net profit was PLN 230.6m and included a one-off gain on disposal of Netia shares in mobile operator P4 of PLN 353.4m.  
For the first nine months of 2009, revenue from continuing activities was PLN 1,119.6m (+51% yoy), EBITDA was PLN 222.2m (+96% yoy), and Adjusted EBITDA (excl. one-off expenses related to the cost reduction Profit project and a gain on disposal of the first tranche of the transmission equipment to P4) was PLN 227.2m (+101% yoy).

Cash resources at September 30, 2009 totalled PLN 211.6m (PLN 163.3m in cash and cash equivalents plus PLN 48.3m in treasury bonds at market value), up by PLN 48.7m from June 2009, while Netia had PLN 295.0m of available undrawn credit lines.

Organizational structure

Employees