Polish Telecoms: Price hikes priced in already (CPS stays HOLD, OPL downgraded to HOLD, PLY downgraded to SELL)
In this report, we update our views on the Polish telcos: Orange Polska (OPL) – HOLD (downgraded from Buy), with our price target (PT) raised from PLN 6.0 to PLN 7.15/share; Cyfrowy Polsat (CPS) – HOLD (unchanged), with our 12M PT upped from PLN 25.0 to PLN 30.5/share; and Play Communications (PLY) – SELL (downgraded from Hold), with our PT increased from PLN 24.2 to PLN 30.0/share. 2019 is unique in the history of the Polish mobile telecommunications, as it is the first time all the MNOs have increased their the prices, which could be seen as a market repair, after many years of price wars. The sector has faced a valuation turnaround, with the WIG Telecoms up 39% ytd. We appreciate the improved market environment, but believe that the price hikes are fully discounted by the market (we do not expect more this year) and we do not see further upside in the short term. In the meantime, we note that the Polish telecoms are ahead of considerable frequency-related capex: we expect the whole sector to spend PLN 4,350m (in line with the regulator’s estimates) on the 5G tender in 2020E. Moreover, while the mobile market competition has eased, we see new convergent offers appearing to the market (UPC, Play, T-Mobile), which might fuel competition in the bundled services market.
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.
Play Communications SA Formerly known as Play Holdings 2 SARL. Play Communications SA, formerly Play Holdings 2 SARL, is a Luxembourg-based provider of financial investment services. The Company is the owner of mobile operator P4 Sp z o o, that provides a wide range of mobile telecommunications services, including voice, data transmission services, messaging, video service (PLAY NOW), as well as Value Added Services and sales of handsets and other devices, to individual and business subscribers in Poland.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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