To be able to render mobile telecom services we require access to radio spectrum. The amount of spectrum that is at our disposal influences the competitiveness and quality of the services we render and ultimately the customer experience. This is especially important in the light of huge growth in mobile data consumption.

Our competitive position in radio spectrum significantly improved in 2016 following completion of the relevant auction towards the end of 2015. As a result of the auction we acquired 10MHz spectrum in 800MHz band (the maximum that was allowed) and 15MHz spectrum in 2600MHz band. On top of our own spectrum permissions, based on the agreement with T-Mobile we also use part of T-Mobile’s spectrum in the 1800MHz band and 2.4MHz of T-Mobile’s spectrum in the 900MHz band. In order to continue to assure the best customer experience we need to continuously optimise our effective use of spectrum. Taking into account robust growth of data traffic on LTE technology (180% year-on-year growth in 2017) and lower needs for 3G and 2G technologies, we are planning to increase the amount of spectrum dedicated to LTE technology.

The current distribution of frequencies for the 700–2600 MHz bands and 3500-3700 bands is presented below

Details of telecommunications licences are as follows

(in PLN millions)	Acquisition date	Years to expirataion (2)	Net book value
			At 31 December 2017	At 31 December 2016
800 MHz	2016	13.1	2,676	2,880
900 MHz	2014	11.5	276	300
900 MHz (1)	2013	0.6	7	20
1800 MHz (1)	2013	10.0	159	175
1800 MHz	1997	9.6	-	-
2100 MHz	2000	6.0	479	574
2600 MHz	2016	13.1	103	111
Total telecommunications licences			3,700	4,060

Network development driven by customer needs

Our activities with respect to network development are driven primarily by the needs of our customers. These needs are evolving along with the growing number of mobile devices, cloud services, high-resolution videos, games and streaming services. In addition, our customers increasingly expect secure access to the digital world at home, at work, and on the move, with optimal quality and speed, regardless of technology. We believe that, among other factors, quality of connectivity is a key criterion when customers choose a telecom service provider.

To fulfil these needs, our network has to be widely accessible, reliable and safe. We are the only operator on the market with a converged network infrastructure (combined fixed and mobile networks). That

The largest network infrastructure in Poland

Fibre is also increasingly used to connect our mobile base stations, on one hand to boost capacity to withstand growing data consumption and on the other hand to ensure greater reliability of the network. At the end of 2017, 58% of our mobile base stations were connected to backbone through fibre. Not only cable infrastructure is shared between mobile and fixed networks but also higher network layers like core, control and service platforms. Our network is expected to undergo gradual transition to fully IP-based in the years ahead, which will require elimination of certain network elements (e.g. PSTN stack).

Access network based on technological evolution, local approach and customer demand

To ensure the best connectivity and optimum resource allocation we take into account the specifics of local markets. In cities, we are focusing on the development of Fibre to the Home (FTTH) coverage, whereas in less densely populated areas copper-based technologies, supplemented by mobile ones, are the primary broadband access solution.

In the fixed network we stepped up our intensive deployment of fibre. At the end of the year our fibre access network covered almost 2.5 million households in 75 cities. In the mobile network, thanks to LTE 800 rollout based on frequencies purchased in 2016, we were able to ensure almost 100% coverage with our 4G network. In response to the growing demand for high-speed internet access, Orange Polska is also steadily increasing the number of locations supported by LTE. Currently OPL operates on 5500 LTE 800 MHz and 2400 LTE 2600 MHz stations, and 3920 of them support Carrier Aggregation technology (4G+), which multiplies available bandwidth.

Over the coming years 5G technology will gain importance. In 2017 the “5G for Poland” agreement was signed, addressed to all interested parties: Ministry of Digital Affairs, the Office of Electronic Communications, telecommunications operators, economic chambers, providers of telecommunications services, equipment and solutions, research and development institutions, and technical universities and Polish start-ups. The aim of the agreement is to develop a “5G for Poland” strategy which will later be adopted by the Council of Ministers.

Orange Polska has also started its 5G launch preparations. We are the first operator in Poland to have tested vRAN (Virtualized Radio Access Network), which is one of the important components towards 5G.

Network reliability and resilience requires the adoption of self-healing network mechanisms and constant quality monitoring. We are capable of monitoring service quality not only at the statistical level but also from the perspective of an individual customer. We are proactive in our approach and respond before parameters start to deteriorate, preventing network congestion. We want to ensure the same connectivity experience, whether customers use our mobile or fixed networks.

The significant increase of security incidents in the online economy has led to growing customer demand for cybersecurity. Therefore we set up our Security Operations Centre (SOC), serving Orange Polska and Orange Group affiliates. We have introduced security services for individuals (e.g. Cybershield) and business customers. Orange Polska’s Computer Emergency Response Team (CERT) operates around the clock, taking care of all cybersecurity issues that impact users who access the internet through the Orange Polska network. CERT Orange Polska is also a part of the national cybersecurity ecosystem.

Network efficiency

To increase the efficiency of our infrastructure, legacy technologies and solutions which are mainly voice-oriented are being replaced with a converged network capable of handling all types of traffic: voice, data and video. We implement solutions that fully support IP technology, and, thanks to self-healing and dynamic reconfiguration mechanisms, provide for higher service quality while improving cost-effectiveness. In our efforts to provide customers with the best network in Poland we leverage our own investment by using third party infrastructure and benefiting from EU funds for network construction.

On the mobile side, we co-operated with T-Mobile to set up Networks!, a company responsible for network construction and network operation. We share sites infrastructure (over 10,000 shared sites) and frequency resources (in the 1800 MHz band), which enabled the fast introduction of 4G and optimisation of operational costs. We are also actively looking for opportunities for fibre coverage enhancement.

In areas where we are planning to upgrade our network to high-speed, we are also using modern third party infrastructure to supplement our own investments, if a reasonable commercial arrangement can be made. In 2017 we signed several agreements, which extended coverage of our VHBB services by over 200,000 households.

We participate in the national Operational Programme ’Digital Poland’ (POPC). From 2014-2020, POPC is implementing EU Digital Agenda objectives in Poland and providing EU funds to support network construction in areas where standalone commercial investment is not profitable. That will allow us to upgrade our network to high-speed capabilities in less populous areas.

Orange Polska is now carrying out projects won during the second POPC competition stage. These include the supply of fast Internet connections (at least 100 Mbps) to 423 districts. About 2,900 schools operating there will be also connected to super-fast internet. This means that, along with the investments that Orange Polska carries out from its own funds as part of the National Education Network, in the coming years we will connect optical fibre to almost 7,400 schools.

Network architecture

We aim to meet the needs of our customers by delivering unmatched data connectivity and products and services that matter to them. We want to be the number one operator for Polish households and the trusted partner of choice for businesses, supporting digital transformation. We offer a broad portfolio of telecommunication products and services for individual, business and wholesale customers. We are the only fixed-mobile convergent operator in Poland, offering fixed connectivity based on different technologies.

Our success as a business depends on delivering value to all our customers, enabling them to fulfil their needs and aspirations. This translates into increased market share on the one hand, and on the other hand into revenues and profits. To achieve success we have to design a palette of services that fit customer needs, are competitive and allow us to differentiate ourselves on the market. Finally, the offer has to be properly communicated.

Fitting customer needs

As customer needs are evolving rapidly and the continued digitisation of society generates a vast increase in demand for data transfer, we have to constantly develop our offer, adjusting it to customer needs and providing the right products at the right price. Our activities in this respect are different for the mass consumer market and for business customers. Furthermore, the business customer group is not homogenous either. We make a distinction for internal purposes between small businesses, bigger corporate customers and the largest customers (key accounts). An example of a change in customer needs is the trend towards fulfilling the digital needs of entire households, as opposed to the single service contracts that were the market standard a few years ago. Our products are available to all our customers regardless of their age, ability, skills or place of residence. We conduct an active dialogue with our customers to ensure that our services and products meet the relevant needs and requirements.

Competitiveness and differentiation

In order to be successful, our service portfolio must be competitive. So we very closely monitor the activities of our competition and react appropriately. The Polish market is very competitive with a significant number of players in all its segments. The level and dynamics of competition have had a very significant influence on our financial results. We are constantly looking for innovations in our product portfolio and the right balance between features and price. The key differentiator and the source of competitive advantage for us is the ability to offer both mobile and fixed services, which we call convergence. By addressing the household’s telecommunication needs in a comprehensive manner and encouraging customers to buy additional services, convergence increases customer satisfaction and reduces churn as compared to single service users. We accelerated our convergence strategy in 2017 by introducing the Orange Love convergent offer and making it the key commercial formula in the new Orange.one strategy. We also develop adjacent services that complete our basic telecom product portfolio for a household, like financial services and energy resale. On the business market a good example of differentiation strategy is our development of competencies in ICT, which in a lot of cases helps us to win business in our core services. Our global and widely recognised ”Orange” brand is a vital source of competitive advantage and also helps us to differentiate.

We aim to make it easy for our customers to access our products and services. We use different channels to connect with customers, including: traditional points of sale (our own or our agents’), independent distribution chain outlets (e.g. consumer electronics stores), online, telesales and door-to-door. To maximise value generation we must ensure the right mix of distribution channels, reflecting market evolution, local specifics, customer needs, competition and the range of services we offer.

More effective selling with a local approach

The Polish telecom market is not homogenous; households are divided fairly equally between big cities, small and medium cities, and rural areas. Each of these three zones is different with respect to factors like competitive environment, our market shares in particular segments, connectivity options and customer needs. As such we have implemented the ‘Macro2Micro’ model, dividing sales into 10 regions and 80 districts. This decentralised structure allows us to diversify our sales approach to match local expectations and customer needs. It also allows us to better recognise the potential of these markets and more effectively adjust our network investments to local demand.

Digitalisation and cross-channel

Our strategy with respect to the right mix of sales channels is driven mainly by evolving customer purchasing preferences and internal efficiency. We carefully monitor cost-to-revenue ratios. One obvious trend is the growing importance of online sales. In 2017 the number of active users of the My Orange application increased 26%, while the volume of sales transactions via this channel increased tenfold. Another trend is customer demand for the same experience regardless of distribution channel: face-to-face, by phone or online. To address this we have developed an omnichannel approach. Despite the growth of online sales, we do not expect traditional points of sale to lose their importance. Increasingly, we see customers hopping between these channels: they may start a transaction on-line but finalise it in the shop, or vice-versa. At the same time we actively manage our network of points of sale. This includes closures of non-profitable locations, relocations, modernisations and upgrades. In 2017 we also began to standardise our shops, replacing the current 5 formats with just three: compact, standard, and Smart Stores. We are particularly focused on the development of Smart Stores, interactive outlets designed to reflect the latest trends, where our customers can test all our services and products.

Delivering exceptional customer care across all channels of communication remains our primary task. We have strengthened our offer in this area by changing our approach to customer relationship management, which is now driven by the customer journey. In line with this approach, we review all our actions in terms of their impact on customer experience. We want to provide a unique customer experience which is the best on the market, as well as a uniform quality of service across all touch points.

Mix of friendly contact channels

We provide a highly cost-effective mix of top quality channels (digital, automated, human), which is adjusted to customer needs and expectations.

Orange Polska is the only telecom provider in Poland to hold the prestigious international COPC (Customer Operations Performance Center) certificate. It attests to the highest standards in customer care management. In all our contact centres we have implemented the relevant global management standards, which concern efficiency monitoring, quality, employee recruitment and development, etc. We currently have 22 contact centres, staffed by more than 4,800 employees, both permanent and outsourced (as of December 2017).

Customised service

Our customers have responded positively to our service approach tailored to their lifestyles and needs, which we implemented in 2016. Therefore, we continued this in 2017 and will maintain it in the coming years.

Customised service is a chance to offer each customer the approach they prefer:

• Young people (under 24): We offer them a more casual manner of conversation and encourage them to use the ‘My Orange’ app and other digital channels.
• Senior citizens (over 65): As the sole telecommunications company in Poland we hold the ‘OK Senior’ certificate for our dedicated infoline.
• Deaf people: We provide them with sign language interpreter’s services on our website to assist in contact with infoline consultants.
• Premium customers (subscribing to at least seven services): They are offered dedicated and personalised customer care.
• Fibre service customers: A dedicated team of experts handles all customer matters from start to finish (95% of cases are resolved within 24 hours).
• Most business customers: They are offered operational care tailored to three segments (small businesses, bigger corporate customers and key accounts), dedicated consultants handling cases from beginning to end, customised solutions as well as expert customer care in our sales outlets.