EUR 550.00 For Business Accounts Only

Orange Polska: A turnaround...but it's crawling

We cut OPL to SELL from Neutral but lift our FV to PLN 6.0 (from PLN 5.4) as we lift our EBITDaL 19E/20E/21E forecasts by 1%/4%/5% thanks to the faster real estate sale and a positive effect from recent ARPU increases. 3Q19 results were boosted by real estate and the BlueSoft consolidation and showed a few positive points like ARPU stabilization, good FTTX net adds, slowing mobile post-paid churn and further indirect costs optimization. OPL’s share price spiked after Orange’s (ORA FP) Investor Day held on 4th Dec during which ORA announced it plans to unlock value through Towercos which excited investors that OPL may soon sell and lease back its network infrastructure and unlock cash for deleveraging and dividends. Given all OPL’s network is within NetWorks!, where it has an equal share with T-Mobile, we do not think selling OPL’s network without T-Mobile’s consent is possible, thus we would expect ORA to start the Towercos project in less complicated countries, like France for example. OPL confirms its target to keep the top line and EBITDaL growing in 2020 YoY. The top line should not be a problem (ICT should materially support it) but we are a bit concerned the EBITDaL will be challenging due to its so far high base in 2019 and that 2020 will bring further cost pressure (energy and personnel costs).