TP Group Results for the 9 months ended September 30, Warsaw October 25 th, 2007

Transcription

1 TP Group Results for the 9 months ended September 30, 2007 Warsaw October 25 th, 2007

2 Forward Looking Statement This presentation contains 'forward-looking statements' including, but not limited to, statements regarding anticipated future events and financial performance with respect to our operations, Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts, They often include words like 'believe', 'expect', 'anticipate', 'estimated', 'project', 'plan', 'pro forma', and 'intend' or future or conditional verbs such as 'will', 'would', or 'may', Factors that could cause actual results to differ materially from expected results include, but are not limited to, those set forth in our Registration Statement, as filed with the Polish securities and exchange commission, the competitive environment in which we operate, changes in general economic conditions and changes in the Polish, American and/or global financial and/or capital markets, Forward-looking statements represent management s views as of the date they are made, and we assume no obligation to update any forward-looking statements for actual events occurring after that date, You are cautioned not to place undue reliance on our forward-looking statements, 2

3 Table of Contents Introduction Financial review Update on H2 Action Plan Q&A session Maciej Witucki, President of the Board and CEO Benoît Mérel, Chief Financial Officer Maciej Witucki President of the Board and CEO Appendices 3

4 TP Transformation Roadmap put in action Q July 2007 Aug. Sept Dialogue with investment community initiated New UKE-facing approach Successful implementations of: New cash distribution policy Social Agreement and new incentive system WLR Launch of Warsaw real estate consolidation project Weekly monitoring of commercial performance Additional revenue initiatives New integrated organisation IT roadmap under review Presentation of TP Group s New Strategy Key strategic ambitions Key strategic ambitions service quality service quality Internet Internet Pay TV Pay TV no.1 customer satisfaction customer satisfaction mobile telephony mobile telephony offer range offer range Strategy implementation Definition of operating initiatives and actions Managerial responsibility allocated Implementation initiated New organization structure implemented Stock option plan launched 2007 share buy back finalized Intensification of new products, retention and promotion offers in all business segments Unqualified regulatory audit basis for Reference Interconnect Offer revision 4

5 Q3 Actions Towards Sustaining Revenues Mobile Focus on new attractive offers and competitive packages Continued Business Everywhere sales at 50% discount. Additionally, free anti-virus software for customers with 24-month loyalty agreements In post-paid mass market - Stop the clock after 2nd minute In pre-paid segment - promotion packs of cheap minutes Orange Free (mobile broadband) with laptop on installments Preparation of Orange Music and Orange Free-dom Broadband Focus on penetration increase and retention New ADSL customer acquisition: Neostrada with PC (combined sales of neostrada and Dell s laptop on installments) New price schemes: For You and Megainternet offer Gadget program supporting retention: Neostrada with free anti-virus program Preparation for diversified distribution sales through portals (e.g. Onet.pl) Videostrada roll-out to 41 cities in progress Fixed voice Initiatives to protect revenues and traffic despite deteriorating market environment Launch of new tariff plan and more minutes in Call Pack ILD / ILD call packs Launch and promotion of Unlimited offer Terminals promotion phones for summer 5

6 with strong Core Enhancement Strategic objectives Q3 Achievements Cross-selling Leverage TP Group sales and distribution network to increase penetration of 2P/3P customers WPmobi launched MVNO by Wirtualna Polska Sales and Customer Care function integration thanks to the Unity programme performed in TP and PTK OPEX optimization Lowering the cost base by PLN 1 bn (10% vs. 2006) by 2010 Further implementation of resource optimization initiatives Stricter resource governance rules Continuation of Social Agreement implementation 1,809 employees have voluntarily left to-date CAPEX optimization CAPEX converging towards European telco industry benchmarks without sacrificing growth Better coverage with less investments: UKE s acceptance for the use of PTK Centertel s 450 MHz frequencies to launch Internet access using the CDMA standard Number of investments launched, aimed at integration of IT systems and automation of processes Balance sheet optimization Improve return on asset base Real estate program Over PLN 38 million in proceeds Working Capital Management under control Days Sales Outstanding ratio fell to 38.9 days in September 2007 from 39.3 a year ago 6

7 Table of Contents Introduction Financial review Update on H2 Action Plan Maciej Witucki Benoît Mérel Maciej Witucki Q&A session Appendices 7

8 Market Slow Down Continues YoY market value evolution (%) 16,0% 14,0% 12,0% 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% -2,0% -4,0% -6,0% [PLN bn] ,8% 8.0% 6,3% 6.0% 4.0% 5,7% 2.0% 0,6% 0.0% -2.0% -4.0% -6.0% -3,6% -8.0% -6,5% Fixed Mobile Total Fixed Mobile Total Q1-Q3 06 Q1-Q3 07 Interconnect value structure 7,82 6,71 +16,6% 0,13 0,16 5,99-9,1% 5,44 0,10 0,07 6,67 5,62 5,10 4,64 0,94 1,03 0,79 0, Q1-Q3 06 Q1-Q3 07 others mobiles TP Mobile market growth slowed down by 45%, high SIM penetration ratio, and MTR decrease (Nov 06 & May 07) Fixed broadband market value growth slowed-down, due to price competition and heavy regulation Fixed voice market decrease accelerated by MTR-related price cut and heavy regulations All market players continue to face slower market growth than that of last year Source: TP estimates; operators data Notes: YTD Sep 2007 market data (excl, TPG) are preliminary estimates 8

9 Sustained Market Leadership YTD Sep 2007 Commercial Performance Mobile Broadband Market leadership maintained (value and customer base) Good progress in acquisition achieving >40% market share in gross adds, despite new entrants and fierce competition Growing broadband customer base despite market slow-down Growing Livebox customer base Maintained strong broadband retail market share Leadership position in each segment continues Fixed voice Retail traffic and access market share down by 1ppt vs, Q2 Over 3,5 mn clients in New Tariff Plans Access and traffic ARPU slightly below H1 level 9

10 September 2007 YTD Financial Highlights Revenues GOM before risk assessment* In M PLN In M PLN -2,5% -2,6% ,8% ,1% ,6 % of revenue 44, ,2 % of revenue 45,1 Sept.'06 YTD Sept.'07 YTD Q3'06 Q3'07 Sept.'06 YTD Sept.'07 YTD Q3'06 Q3'07 GOM Net FCF In M PLN -6,8% In M PLN ,9% As % of revenue 22,8% 23,7% 17,6% 24,5% 44,4 % of revenue 42, % of 45,1 revenue 44, Sept.'06 YTD Sept.'07 YTD Q3'06 Q3'07 * Provisions for claims and litigations, risks and other charges Sept'06 YTD Sept'07 YTD As reported net FCF Exlcuding income tax paid impact 10

11 TP Group: Revenue Transformation Continues* MOBILE Interconnect 10,9% 9,8% 9,8% 10,2% 10,4% Mobile - interconnect -5,0% Retail 27,8% 28,0% 28,9% 30,5% 31,7% Mobile retail +13,8% Data 11,8% 11,9% 12,5% 12,2% 12,0% Data -0,3% Traffic** 18,1% 17,2% 16,6% 15,8% 14,3% Fixed Voice traffic** -20,2% Access fees 22,9% 23,2% 24,0% 23,0% 21,7% -1,0% Access fees -5,8% Interconnect & others FIXED 8,5% 9,9% 8,2% 8,3% 9,9% 3Q2006 4Q2006 1Q2007 2Q2007 3Q2007 Fixed interconnect & others -3,7% TP Group -2,5% *Revenues allocation after intercompany eliminations **Fixed voice = fixed voice retail traffic + payphones Source: TP, IFRS 11

12 Fixed Voice Market Regulatory actions & F2M substitution impact Fixed Fixed voice market in in value TOTAL MARKET* TP value market share Market growth % y-o-y Market value (in PLN bn) YTD Sep'06-9,5% -10,8% 8,14 7,26 0,89 0,80 7,25 6,45 YTD Sep'06-10,2% -10,6% y-o-y 82,7% 82,1% Retail * Company estimates; ** in TP Network YTD Sep'07 * Wholesale TPSA FIXED VOICE REVENUES (in PLM M) -11,6% -11,5% YTD Sep'07 Retail Wholesale Traffic and access market LOCAL ACCESS MARKET IN POLAND (IN M) Household penetration rate 83,6% 82,0% 80,8% 79,9% 1,3 1,4 1,4 10,3 10,1 9,8 0,2 0,3 1,5 78,5% 0,5 1,4 9,5 9,2 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 TP retail lines LTO (estimated) WLR Traffic market share at 79,2% as at the end of Sep (- 1 p,p, vs, Q2 2007) ** Access market share, incl, WLR at 87,1% as at the end of Sep. 2007, in line with Q TP ARPL at PLN 58,7 in Q3 2007, (-0,7 PLN vs Q2 2007) Source: TP; IFRS 12

13 Fixed Broadband Market Competitive pressure slows down market value growth TOTAL MARKET Broadband market TP Group value market share 49,4% 48,6% Market growth % y-o-y Market value (in PLN bn) 1,77 YTD Sep 06 TP GROUP BROADBAND REVENUES Revenues growth % y-o-y Broadband revenues (in PLN M) +14,4% +24,9% 874 YTD Sep 06 +6,2% 1,88 YTD Sep 07* +4,2% 911 YTD Sep 07 Broadband market subscribers Penetration rate (% of households) TP Group market share in gross adds* TP Group market share in net adds* TP Group volume market share (retail) Total market customers (in K) ,9% ,0% 29,8% 31,2% 32,1% 46,4% 43,7% 45,2% 51,2% 45,1% 55,9% 54,4% 24,1% 33,4% 45,7% 43,0% 43,6% 42,4% 42,5% 43,1% Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 TP Competitors Bitstream * * Company estimates Source: TP; IFRS 13

14 REVENUE CONTRIBUTION Fixed Line Revenues in M PLN Volume Price -81 Volume -148 Substantial Regulatory Impact Usage -325 Price Volume Price Volume Price Others Data Fixed voice traffic Access fee Interconnect September 2006 YTD QUARTERLY REVENUES AND Y-O-Y DYNAMICS September 2007 YTD in M PLN Revenues Revenues y-o-y dynamic ,1% -9,3% -5,0% -6,1% -6,2% -6,7% -8,9% -9,0% -6,7% Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Source: TP; IFRS 14

15 Mobile Market MTR reduction and high penetration restrict market growth TOTAL MARKET Orange value market share Market growth % y-o-y Market value (in PLN bn) Mobile market in value 34,1% 34,3%* +14,5% 16,39 +6,3%* 17,42* Market penetration in population (in %) Orange Market share in gross adds Mobile market subscribers 91,3% 96,5% 99,4% 101,7% 105,1% 37,0% 35,2% 37,9% 38,1% 39,8% MOBILE REVENUES Revenues growth % y-o-y Mobile revenues (in PLN M) Retail Sep YTD 2006 Sep YTD 2007* +19,2% +6,2% Wholesale Sep YTD 2006 Sep YTD 2007 Orange volume market share Total market customers (in K) 33,7% 34,1% 33,7% 33,7% 33,6% Sep-2006 Dec-2006 Mar_2007 Jun-2007 Sep-2007 PTK Competitors incl. MVNOs * Mobile market value & value market share data for Q3 are based on internal estimation (excl, MVNO) Source: TP; IFRS 15

16 Mobile Revenues Affected by Mobile Termination Rates Cut BLENDED ARPU & AUPU AVERAGE SAC IN PLN 90,0 95,0 96,0 97,0 96,0 104,0 104, ,9% ,8% 22,5% 23,8% 23,3% 25,5% 25,1% 37,8 38,2 39,6 37,3 34,5 36,1 38, ,5 17,3 14,4 12,9 13,3 13,3 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 ARPU retail in PLN/Month AUPU in min/month REVENUE GROWTH CONTRIBUTION (IN PLN M) Wholesale ARPU wholesale in PLN/Month Including impact of MTR reduction ,2% Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q' Commercial costs as % of revenues Wholesale Retail Lower average price -24,8% Higher usage +12,1% Higher customer base +18,9% MVNO +0,1% Retail Sep YTD 2006 Sep YTD 2007 Source: TP; IFRS

17 TP Group: Profitability by Segment (YTD Sept 2007 vs, YTD Sept 2006) in MPLN Fixed Mobile TP Group YTD September Revenues % Change YoY -5,9% -8,2% 19,2% 6,2% 2,0% -2,5% Labour costs As percentage of Revenues 17,6% 19,1% 3,6% 3,7% 12,7% 13,2% Commercial expenses As percentage of Revenues 3,5% 3,3% 24,9% 24,7% 11,8% 12,4% Other costs (w/o risk assessment) * As percentage of Revenues 31,0% 31,7% 37,0% 33,1% 30,9% 29,9% GOM w/o risk assessment As percentage of Revenues 47,9% 45,9% 34,5% 38,5% 44,6% 44,5% Risk assessment * As percentage of Revenues 0,3% 3,5% 0,0% 0,0% 0,2% 2,1% GOM As percentage of Revenues 47,6% 42,4% 34,5% 38,5% 44,4% 42,4% provisions for claims and litigations, risks and other charges; PLN 283m in YTD Sep 07 and PLN24m in YTD Sep 06 17

18 Reduced Financial Costs Support Net Income Level In M PLN Gross Operating Margin Depreciation and amortisation Restructuring costs Other* Operating Income Net Financial Costs Income taxes Net Income # of shares (weighted average in period, in millions) EPS (in PLN per share) YTD Sep (3 434) (23) (46) (565) (404) ,22 YTD Sep (3 339) (361) (415) ,19 * Other includes Employee profit-sharing, Impairment of non-current assets, Gains (losses) on disposal of assets Source: TP; IFRS 18

19 M PLN YTD September Free Cash Flow Reduced by One-off Tax Payment Sept 2006 YTD Sept 2007 YTD Net cash flow from operating activities before income tax paid Capex Capex payables Net Free Cash Flow before tax paid as % of revenues Income tax paid Net Free Cash Flow after tax paid as % of revenues Sales of assets Other investing activities FCF before financing Debt repayment, net Dividend paid Purchase of treasury shares Other Net change in cash and cash equivalents (1 843) (535) ,7% (137) ,8% 9 (147) (1 630) (1 402) - (134) (132) (1 896) (378) ,5% (942) ,6% 48 (51) (1 961) (702) (154) Source: TP; IFRS 44 19

20 Ongoing Financial Optimization Debt Structure Optimization Finance cost decreased by PLN 208M YTD, due to reduction in average net debt by PLN 2.3 bn Net gearing ratio at 27,0% as at the end of September 2007 Net debt after hedging at PLN 7 582M as at the end of September 2007 vs, PLN 7 164M year ago Shareholder Return Share buy-back program has been completed in Q with PLN 700 mn spent and 31,2 m TP shares re-purchased from the market (2,23% of total TP shares) ROCE slightly improved to 15,7% in Q vs, 15,6% in Q Asset Base Optimization Real estate program Over PLN 38 million in proceeds Working Capital Management improvement Days Sales Outstanding ratio fell to 38,9 days in September 2007 from 39,3 a year ago 20

21 Table of Contents Introduction Financial review Update on H2 Action Plan Maciej Witucki Benoît Mérel Maciej Witucki Q&A session Appendices 21

22 Update on H2 07 action plan Initiative driven management Enhanced focus on customer care Leveraging good customer satisfaction achieved in H1 to expand market share Fighting to deliver on 2007 commitments New Strategy Rollout Leverage integrated operator model to boost revenues Disciplined execution of plans and initiatives Rolling 1-year horizon for decision taking and execution 22

23 Q4: Focus on Growing Revenues Mobile Maintain leadership through stronger focus on value market share Specific commercial actions to increase acquisitions in postpaid market Continue actions to stimulate active base in prepaid (Orange Music, X-mass promotion) Increase penetration of mobile broadband in business customer base Broadband IP TV roll-out to 41 cities as a tool to double its customer base in Q4 Increase loyalty and ARPU thanks to 3P bundles leveraged by IP TV Defend market share by leveraging Orange Free-dom (Bistream Access) Build position on content based on movies library of more than 1000 titles Improve customer retention, increase customer satisfaction and shorten service provisioning Increase data revenues by continuing leadership in IP VPN market Fixed voice Defending strong position in traditional voice through stimulating usage Preparation of new concept of TP unlimited offer for business clients Continuation of promotions for access 23

24 Actions to Enhance CORE Strategic objectives Q4 Action plan Cross-selling Leverage TP Group sales and distribution network increase penetration of 2P/3P customers Free-dom launched in October internet access service based on Bitstream Access provided by PTK Centertel Implementation of strong communication campaigns and push for sales of bundle offers OPEX optimization Lowering the cost base by PLN 1bn (10% vs. 2006) by 2010 Implementation and monitoring of initiatives for opex optimization Costs approval based on profitability as a main criteria for each commercial action CAPEX optimization CAPEX converging towards European telco industry benchmarks without sacrificing growth Focus on providing capacities required for Q4 07 / Q1 08 commercial actions IP TV roll-out ADSL capacity UMTS extension combined with mutualization of GSM Implementation of IT integration and process improvement Balance sheet optimization Improve return on asset base Continue Real Estate project Execution of 2nd phase of Warsaw real estate project 24

25 Guidance confirmed Number of mobile customers Number of broadband customers September 2007 YTD Actuals 13,5m 2m FY 2007 Guidance >13,5m >2,2m Revenue (YoY growth) GOM w/o provision for claims, litigations, risks and other charges -2,5% 44,5% Comparable to H1 07* GOM (as a % of revenue) 42,4% 42% to 44% Capital expenditure (as a % of revenue) 13,9% 16% to 19% * H revenue was down to 2.8% compared to H

26 Table of Contents Introduction Financial review Update on H2 Action Plan Maciej Witucki Benoît Mérel Maciej Witucki Q&A session Appendices 26

27 Table of Contents Introduction Financial review Update on H2 Action Plan Maciej Witucki Benoît Mérel Maciej Witucki Q&A session Appendices 27

28 Appendices Glossary Financials 28

29 Glossary (1/2) Access Fee revenues from monthly fee from New Tariff Plans (incl, Free minutes) ARPL Average Revenue per Line ARPU Average Revenue per User AUPU Average Usage per User CATV Cable Television CPS/CS - Carriers Pre-Selection/ Carriers Selection DLD Domestic Long Distance Calls DSLAM - Digital Subscriber Line Access Multiplexer F2M Fixed to Mobile Calls GOM Gross Operating Margin HFC - Hybrid Fibre Coax HSDPA High Speed Downlink Packet Access ICT Information and Communication Technologies ILD International Calls IP TV TV over Internet Protocol LC Local Calls Liquidity Ratio - cash and unused credit lines divided by debt to be repaid in the next 18 months LLU - Local Loop Unbundling 29

30 Glossary (2/2) LTO Local Telecommunication Operator MTR Mobile Termination Rates MVNO Mobile Virtual Network Operator Net FCF Net Free Cash Flow = Net cash provided by Operating Activities (CAPEX + CAPEX payables) POTS Plain Old Telephone Service RIO - Reference Interconnection Offer SAC Subscriber Acquisition Costs SDI Permanent (Rapid) Access to Internet SMP - Significant Market Power USO - Universal Service Offer VoIP Voice over Internet Protocol WLR - Wholesale Line Rental 30

31 Appendices Glossary Financials 31

32 Transformation of TP Group Revenues* Regulatory Impact MOBILE Category Retail Wholesale Interconnect 10,9% 9,8% 9,8% 10,2% 10,4% Retail 27,8% 28,0% 28,9% 30,5% 31,7% Mobile Termination Rates Negative Negative Data 11,8% 11,9% 12,5% 12,2% 12,0% Bitstream Access (BSA) Negative - Traffic** 18,1% 17,2% 16,6% 15,8% 14,3% Mobile Termination Rates Negative - Access fees 22,9% 23,2% 24,0% 23,0% 21,7% Wholesale Line Rental Negative - Interconnect & others FIXED 8,5% 9,9% 8,2% 8,3% 9,9% 3Q2006 4Q2006 1Q2007 2Q2007 3Q2007 * Revenues allocation after intercompany eliminations ** Fixed voice = fixed voice retail traffic + payphones WLR - Positive RIO - Negative BSA Positive Source: TP; IFRS 32

33 TP Group: Revenue Contribution by Segment Intercompany eliminations increased by PLN 44 mn vs YTD September 2006 (PLN mn) ( ) (8,3%) Fixed Line Segment Mobile Segment + 6,2% TP Group Revenue YTD Sep 2006 TP Group Revenue YTD Sep 2007 Source: TP, IFRS 33

34 Fixed Voice: Market share and ARPL evolution TP Traffic* and Access Market Share Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Gap vs. Q3 06 Sept 06 DLD*: 73.7% 73,7% 73,9% 73.9% 75,3% 75.3% 75.0% 75,0% 76.4% 76,4% 74,7% 74.7% ,8 ppt F2M*: 76.0% 76,0% 76.7% 76,7% 77,7% 77.7% 78.4% 78,4% 80.0% 80,0% 78,6% 78.6% ,9 ppts ILD*: 64.6% 64,6% 65,0% 65.0% 66,6% 66.6% 66.3% 66,3% 69.1% 69,1% 67,4% 67.4% ,4 ppts LC*: Overall Traffic M/S*: 81.3% 81,3% 78.9% 78,9% 80,5% 80.5% 77,9% 77.9% 80,6% 80.6% 79,0% 79.0% 81.0% 81,0% 79.2% 79,2% 81.9% 81,9% 80.2% 80,2% 81,2% 81.2% 79,2% 79.2% ,7 ppt ,3 ppts Retail local access** 89.1% 89,1% 88,8% 88.8% 88.5% 88,5% 86.0% 86,0% 84.3% 84,3% 83.4% ,4 ppts Total local access 89.1% 89,1% 88,8% 88.8% 88,5% 88.5% 87.6% 87,6% 87.1% 87,1% 87.5% ,3 ppts Total Retail Fixed Voice ARPL (Traffic + Access) PLN/Month 62,5 61,6 61,9 60,3 59,4 59,4 27,0 25,6 25,9 23,9 22,9 22,9 58,7 21,9 35,5 36,0 36,0 36,4 36,5 36,5 36,8 1Q'06 2Q'06 3Q'06 4Q'06 Q1'07 Q2'07 Q3'07 Access Traffic *Traffic market share measured at the end of each quarter based on TP network in Mass and Business Segment ** Local access without Wholesale Line Rental 34

35 Fixed Broadband Retail Broadband Customers (ADSL+SDI) Broadband Revenues (PLN M) ( 000) + 25,7% + 4,2% Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 * Sept.'06 YTD Sept.'07 YTD Retail Broadband ARPU (PLN) PLN/Month Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Overall customer base at 2,043k including 91k Bitstream access Gross adds amount to 523k. Churn highly affected by the grace period (one-off) in Q Increasing average length of contract in Neostrada new sales. Growing Livebox customer base at 313k. *TP estimate Source: TP; IFRS 35

36 TP Group: Focus on Profitable Growth Revenues and yoy dynamics ,5% 0,9% 2,7% 0,9% 2,6% 0,0% -2,7% -2,9% -1,8% 3Q'05 4Q'05 1Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 Adjusted* Gross Operating Margin & as % of revenues 44,3% ,1% ,5% Adj. GOM Adj. GOM before com. Exp. 44,6% 44,4% 45,0% 42,2% ,3% 44,3% 39,8% ,9% 57,9% 46,4% 57,3% 55,7% 56,5% 55,8% 54,7% 52,1% 57,7% Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 1Q'07 2Q'07 3Q'07 * Adjusted by release of HR jubilee provision of PLN130m in fixed in 2005 and PLN 45mn in 2006, FX impact of + PLN 41m in 2005; PLN 21m in 2006, -PLN 16m in Q1, +PLN 15 m in Q2 and -PLN 5 m in Q3 2007, Source: TP, IFRS 36

37 TP Group: Profitability by Segment (Q vs Q3 2006) in MPLN Fixed Mobile TP Group Q Q Q Q Q Q Revenues % Change YoY -6,2% -6,7% 20,5% 5,2% 2,6% -1,8% Labour costs As percentage of Revenues 16,6% 17,7% 3,3% 3,5% 11,7% 12,0% Commercial expenses As percentage of Revenues 4,0% 4,0% 22,5% 25,1% 11,5% 13,4% Other costs (w/o risk assessment) As percentage of Revenues 32,7% 31,6% 36,1% 32,9% 31,6% 29,5% GOM w/o risk assessment As percentage of Revenues 46,7% 46,7% 38,2% 38,6% 45,2% 45,1% Risk assessment As percentage of Revenues 0,1% 1,5% 0,0% 0,0% 0,0% 0,9% GOM As percentage of Revenues 46,6% 45,2% 38,2% 38,6% 45,1% 44,2% 37

38 Costs/sales (%) ,6% 57,6% (PLN mn) TP Group: OPEX Breakdown (YTD Sep 2007 vs YTD Sep 2006) Total costs ,9% 12,7% 13,2% Labour ,0% MTR decrease impact 15,5% 13,7% Purchase and payment to other operators (13,8)% 11,8% 12,4% 4,3% 5,0% 0,6% 1,0% Commercial expenses Network & IT Content services ,7% 61,7% 2,2% Higher Commission and distribution costs Higher Network maintenance & installation costs 7,2% 7,3% Other external purchases (1,3)% 3,0% 2,9% Other operating expenses, net (5,7)% Update of risk assessment provisions 0,2% 2,1% 0,3% 0,0% Provisions for claims and litigations, risks and other charges FX impact UMTS and other liabilities in foreign currencies September YTD 2006 (proforma) September YTD 2007 Source: TP; IFRS 38

39 TP Group: Labour Costs Labour Costs, YoY growth Labour Costs Reported YoY growth: 21,3% (8,1%) 0,0% 1,9% 1,2% Adjusted YoY growth*: 11,7% 12,4% 13,8% 13,7% 12,0% (1,6%) (1,0%) 0,0% 1,9% 1,2% Comparable basis YoY growth**: (4,0%) (0,9%) (0,3%) 1,6% 0,6% 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 as a % of revenues *Adjusted YoY growth = 2005 (130 MPLN, including 24 MPLN in Q2 05 and 106 MPLN in Q3 05) & December 2006 (45 MPLN) labour costs restated for HR jubilee provision release, **Comparable basis YoY growth = 2005/2006 labour costs restated for HR jubilee provision release and holiday pay provision P&L evolution as in 2006/2007 and one-off payments for unused holiday for people who leave voluntary, 39

40 PLN mn TP Group: Reconciliation of 2006 to 2007 labour costs comparable basis 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 TPG labour costs as reported Reported YoY evolution % 21,3% -8,1% 0,0% 1,9% 1,2% Reconciliation of 2005 and 2006 to comparable basis: TPG reported labour cost , Impact of HR jubilee Provisions , Impact of HR jubilee Provisions 2006 Adjusted 2005 and 2006 labour costs Adjusted 2006 and 2007 YoY evolution % -1,6% -1,0% 0,0% 1,9% 1,2% 2, Impact of phasing of holiday pay provision as in and 2006 labour costs comparable basis YoY evolution % comparable basis -4,0% -0,9% -0,3% 1,6% 0,6% Source: TP, IFRS 40

41 Employment optimisation TPG Headcount (Full Time Equivalent) 30 September December September TP Headcount (Full Time Equivalent) 30 September December September ,0% ( ) - 5,3% ( ) Social Agreement in TP: H employees, 3Q employees, Full Year above employees, TP Group employees by activities (%) 35% 49% 31% 54% Customer (include Innovation & prospective) Network & IT Support 16% 15% 30 September September 2007 TP Group s number of employees: increases in Customer functions by 5 %, decreases in Network & IT by 17%, decreases in Support functions by 9% 41

42 CAPEX TO SALES RATIO (in %) 13,2 12,4 13,1 13,9 13,6 13,1 YTD Sep 2006 YTD Sep 2007 TPG Fixed Mobile TP Group Capex evolution Overall Group capex increase of PLN 53 M vs, YTD Q due to: Regulatory compliance: WLR and BSA Transformation: Shared Service Centre and Network convergence Ongoing Capex reallocation towards revenue generating areas, Capex for regulatory investments at PLN 138 M YTD Q Transformation CAPEX at PLN 227 M YTD Q Revenue driven investmens YTD Q % 13% 29% YTD Q % 6% 12% CAPEX TRANSFORMATION YTD H Q % 13% 7% 17% 27% 79% 12% 11% 69% 69% GSM Fixed voice Customer care & other Fixed broadband 3G / EDGE Revenue driven Regulatory Business as usual Transformation Revenue driven Revenue driven Regulatory Regulatory Business as usual Business as usual Transformation Transformation 42

43 TP Group: Debt Structure Debt Structure after Hedging* Debt Breakdown PLN 88% EUR 11% USD 1% PLN mln Bonds Bank loans Accrued interest 31 Dec Sep Liquidity Ratio*** Total debt NET DEBT FV of debt financial instruments NET DEBT after hedge Net Gearing** 24,2% 27,0% 'Sep. 06 'Dec. 06 'Sep. 07 * Includes cash denominated in foreign currencies, swap and forward transactions classified as trade, cash flow and fair value ** Net Gearing Ratio = Net Debt / (net debt + Shareholders equity) excl, impact of hedging *** Liquidity Ratio = cash and unused credit lines divided by debt to be repaid in the next 18 months Source: TP; IFRS 43