Cyfrowy Polsat Group: strong operating and financial performance in Q3 2014

On the back of excellent sales of the smartDOM multiplay bundles, in Q3 2014 the Cyfrowy Polsat Group posted strong operating results with a further upside potential – a growth in the number of contract services and ARPU, with table churn. There was an increase in Telewizja Polsat's audience share as well as the broadcaster's share in the advertising market. These results were reflected in solid financial performance, with revenue of PLN 2.4bn, EBITDA of PLN 910m and EBITDA margin of 37.6%. 

Key operating and financial data

In Q3 2014, the Cyfrowy Polsat Group:

• had a stable base of 6.2m contract customers:

-        expanded the number of contract RGUs to 12.2m,
-        managed to increase ARPU to PLN 86.5,
-        reported RGU saturation per customer steadily growing, to 1.98x,
-        had a stable churn rate of 8.8%,

• recorded excellent sales of smartDOM services:

-        the number of smartDOM subscribers exceeded 380 thousand,
-        the number of RGUs attributable to smartDOM subscribers was above 1.2m,
-        in Q3 2014, smartDOM subscribers purchased 460 thousand additional services,
-        the smartDOM marketing campaign had a positive effect on sales of standard (single-play) services,
-        contract customer ARPU enhanced thanks to the scheme,

• recorded a leading audience share for Telewizja Polsat (24.1%) and a growing share in the TV advertising market, at 26.3%,

• delivered robust financial performance:

-        revenue:                PLN 2.4bn,      
-        EBITDA:                 PLN 910m,
-        EBITDA margin:       37.6%

“In the third quarter of 2014, we made further progress in implementing our strategy. With a stable base of contract customers, we were successfully increasing the market's saturation with multiplay bundles, selling an additional 460 thousand services in the smartDOM scheme. We went through the successive stages of the operational integration between Cyfrowy Polsat and Polkomtel to generate the planned synergies in revenue and expenses. Our projects and ongoing cost control translated into solid financial performance, which − what is worth noting − was achieved on a healthy growth in revenue. Once again, as the market's technology leader, we spearheaded new solutions – tests of LTE Broadcast, a multi-camera coverage service on IPLA TV and test transmission of LTE Advanced with a download speed up to 300 Mb/s on the aggregated 1,800 MHz and 2,600 MHz bandwidths,” says Tomasz Gillner-Gorywoda, President of the Management Board, Cyfrowy Polsat S.A. and CEO, Polkomtel Sp. z o.o.

Performance of the Cyfrowy Polsat Group in Q3 2014

* Excluding depreciation, amortisation, impairment and liquidation.

 “Q3 was yet another quarter in which we delivered excellent financial performance. The rise in revenue was not only a result of the Metelem group's consolidation, but also a steady organic growth of our business. Despite our investments in the smartDOM project and broadcast rights to the FIVB Men's Volleyball World Championship Poland 2014, as well as higher costs of data transmission due to the growing number of mobile Internet users, we delivered a sound EBITDA profit and margin. We are also generating the planned synergies in revenue, expenses and finance,” comments Tomasz Szeląg, Management Board Member and CFO, Cyfrowy Polsat S.A. and Polkomtel Sp. z o.o.

Retail and business segment

“In the retail and business segment, we continued our strategic focus on maximising the sales of our core services – TV, Internet access and telephone – to a single customer, which resulted in the growth of RGU saturation to 1.98 and of ARPU to PLN 86.5. A significant contributor to the growth in contracted services was the fast growing take-up of mobile Internet access and huge interest in the Multiroom service. Another important factor behind the Group's performance was the consistently stable churn rate,” comments Tobias Solorz, President of the Management Board, Polkomtel Sp. z o.o. and Member of the Management Board, Cyfrowy Polsat S.A.

In Q3 2014, the Cyfrowy Polsat Group:

• had a stable base of 6.2m contract customers:

-        managed to increase ARPU to PLN 86,5,
-        reported RGU saturation per customer steadily growing, to 1,98x,
-        had a stable churn rate of 8.8%,

• total RGUs reached 16.4m, including:

-        10.5m telephone RGUs,
-        4.4m television RGUs,
-        1.5m Internet RGUs,

• expanded the number of contract RGUs to 12,2m, including:

-        6.6m telephone RGUs,
-        4.3m television RGUs,
-        1.3m Internet RGUs,

• the base of active prepaid services was 4.2m:

-        prepaid customer ARPU stood at PLN 18.3,

• Power LTE – more than mobile broadband:

-        According to an independent ranking put together by the Komputer Świat magazine using the Speed Test application, the Group offers the fastest mobile broadband access among all mobile network operators in Poland,
-        In Q3 2014, Cyfrowy Polsat recorded an additional 145 thousand RGUs of contracted mobile Internet and 29 thousand RGUs of prepaid mobile Internet, which added up to a total increase of 174 thousand RGUs,
-        In total, the Group has over 1.5m RGUs of mobile Internet, which makes it the undisputed market leader,
-        Power LTE is increasingly chosen as an alternative to home internet plans,

• The average monthly number of users of IPLA, Poland's largest online TV service, was approximately 3.6m in Q3 2014, and rose to 5.1m in September,
• A new brand named Plush was launched by Polkomtel under the prepaid and mixed models with unlimited calls and text messages, targeted at young consumers,
• A new scheme under the name smartFIRMA was rolled out to allow business customers to combine mobile telephone, LTE Internet access and fixed-line voice services, delivering significant savings. The offering also includes PlusBank products, electricity from Plus, as well as a wide portfolio of additional services designed to support the customers' business.

“The entire segment's revenue, expenses and EBITDA increased as a result of the consolidation of the Metelem group's financial data. What is important, however, is that organic growth could also be seen in retail revenue – from pay TV, telecommunications, and broadband Internet traffic fees, which, alongside effective cost control, allowed us to maintain high profitability,” comments Tomasz Szeląg.

Retail and business segment performance in Q3 2014

* Excluding depreciation, amortisation, impairment and liquidation.

 TV production and broadcasting segment

“In the third quarter, POLSAT remained the leader in terms of the commercial audience share, despite the market's progressive fragmentation, and the Polsat Group, thanks to its successful programming schedule for autumn, excellent results of the Polsat Volleyball channels and addition to its portfolio of the TV4 and TV6 channels, claimed the highest share of the market. The Group's total viewership figures for the nine months of this year are consistent with our long-term strategy. Our advertising and sponsorship revenue, both in the third quarter and in the nine-month period, outpaced the market's growth thanks to an effective sales strategy on the expanding advertising market,” says Maciej Stec, Member of the Management Board, Cyfrowy Polsat S.A. and Telewizja Polsat Sp. z o.o.

Audience share of Telewizja Polsat channels:

• In Q3 2014, Telewizja Polsat was at the top of the audience share ratings with a total share of 24.1% in the commercial group. POLSAT, our flagship channel, was at the top of the audience share ratings with a share of 12.8%, while the thematic channels had a market share of 11.4%,
• In the first nine months of 2014, Telewizja Polsat had the highest audience shares in the case of its flagship channel (13.2%) and thematic channels (10.2%), which corresponded to an overall audience share of 23.4%.

 Telewizja Polsat's position on the advertising market:

• In Q3 2014, Telewizja Polsat's advertising and sponsorship revenue grew by more than 19.5%, to PLN 198m, translating into a 26.3% market share (up from 24.1%).
• In the nine months of 2014, Telewizja Polsat's advertising and sponsorship revenue was up 17.6%, to PLN 673m, chiefly as a result of the upswing in the TV advertising market, Telewizja Polsat channels' organic growth outpacing the market, and consolidation of the TV4 and TV6 results, which drove the Group's share of the market up from 22.9% to 25.3%.

“The TV production and broadcasting segment's financial performance in Q3 2014 was affected by non-recurring events, including the sale of RS TV, acquisition of Polskie Media and FIVB Men's Volleyball World Championship Poland 2014. What is important, however, is that Telewizja Polsat's revenue also grew organically, as the growth in its advertising and sponsorship revenue outpaced the growth of the entire TV advertising market. On the other hand, its expenses adjusted for the non-recurring events fell by 5%. To sum up, Telewizja Polsat's performance continues to be driven by the sustainable management of its programming content,” comments Tomasz Szeląg. 

TV production and broadcasting segment's performance in Q3 2014

* Excluding depreciation, amortisation, impairment and liquidation.

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