Orange PL - 3Q19 results’ forecasts
As one of the largest players in three key segments (fixed line, mobile and broadband) of the telecommunications market, Orange PL’s destiny is most critically linked with the current developments on the market. Last few years brought pressure to Orange PL’s situation due to (i) the high level of mobile penetration curbing any further growth, coupled with an aggressive strategy pursued by Play, the fourth MNO that has been constantly increasing its market stake, (ii) shrinking fixed line market (due to customers switching from the fixed line to mobile and VoIP telecommunications), (iii) stagnation on the broadband market (despite recent FTTH investments), combined with the successful and aggressive strategy followed by CATVs, and (iv) the restless market regulator (Office of Electronic Communications, UKE in Polish abbreviation), continuing its intensive efforts to stimulate the market competition.
On the back of recent changes on the market including: (i) partial prices reduction in Orange Flex offer, (ii) lack of price increases on the part of Cyfrowy Polsat and (iii) aggressive pricing of CATVs in order to defend their client base we are more cautious regarding the possible capacity for future ARPU growth as regards mobile, convergent and broadband services as well.
Given the update of our financial forecasts for the Company translating in a downgrade of our 12M EFV for Orange PL, we see the Company’s shares fairly priced at the moment. As a result, after a 14% decline of Orange PL equities since we rated it Sell we upgrade our LT fundamental recommendation for the Company’s shares to Hold. The depressed OPCF expected by us stemming from robust capex outlays (especially 5G tender) translating into a net debt/EBITDAaL ratio >2x in the next years will result in the lack of a dividend payment till 2021. Expecting no breakthrough in the Company’s quarterly earnings either in 3Q19 or in 4Q19, we keep our ST Neutral market-relative stance towards Orange PL equities unchanged.
Orange Polska SA is a supplier of telecommunications services in Poland. Co. provides services, including fixed-line telecommunication services, Integrated Services Digital Network, voice mail, dial-up and fixed access to the Internet and Voice over Internet Protocol. Co. is one of Poland's three DCS 1800 and GSM 900 mobile telecommunications providers. Co. provides also third generation UMTS services. In addition, Co. provides leased lines, radio-communications and other telecommunications value added services, sells telecommunications equipment, produces electronic phone cards and provides data transmission, telephone directories, multimedia services and various Internet services.
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