Market environment and competition

The Polish media and telecommunications markets have been converging as subscribers are increasingly seeking to receive media and communications services from one provider at affordable prices. In response, service providers are integrating pay TV, broadband Internet, and telephone services into bundles, thus enabling subscribers to purchase all of these services under a single contract, subscription fee and bill.

The bundled services market in Poland has significant growth potential in suburbs, small towns and rural areas, where such services are now available to a very limited extent. Apart from the low penetration rate of bundled services in less densely populated areas, the quality of Internet service provided by cable operators is usually poor.

This is an opportunity for pay TV operators (including Cyfrowy Polsat), who are not so limited by geographical reach and lack of fixed-line infrastructure as cable TV operators and telecommunications services providers are. They can become the leading providers of high quality bundled services to customers in suburban areas, small towns, and rural areas of Poland.

According to the European Commission’s ‘E-Communications Household Survey’ of November 2013, the saturation level of the bundled services market (defined as more than one service delivered by a single provider) in Poland at the end of March 2013 was 25%, versus 45% in the European Union, and over 60% in Luxembourg and the Netherlands (68% and 66%, respectively).

At present, triple-play services comprising TV, Internet and telephone are offered by cable TV operators such as UPC, Multimedia Polska S.A. and Vectra S.A., by telecommunications operators, such as the Orange Group (Telekomunikacja Polska S.A.), Netia S.A. (which launched its mobile TV offering in 2011) and Telefonia Dialog S.A. acquired by Netia in 2011, and by DTH operators like Cyfrowy Polsat.

The trends in the media and telecommunications market show the emergence of large provider groups offering bundled services and contributing to the integrated market’s development. Since 2011, TVN S.A. and Telekomunikacja Polska S.A. (currently Orange Polska) have partnered to offer the joint services of Internet (Orange) and TV packages (formerly the ‘n’ platform). At the end of 2012, the TVN Group and Canal+ Cyfrowy Sp. z o.o. finalised an agreement to merge their satellite platforms in March 2013. The partnership with TP was maintained and transferred to the joint nc+ platform.

Our Group’s response to these market developments is the cooperation between Cyfrowy Polsat and Polkomtel to cross-sell products and services, launched in 2012. The next step was Cyfrowy Polsat’s conditional share purchase agreement made in November 2013 in respect of shares in Metelem Holding Company Ltd., which indirectly holds all shares in Polkomtel Sp. z o.o.