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Hello, welcome, everyone, to our conference summarizing Q3 and 9 months of 2020.
Let me introduce details for today's call. I have a pleasure to introduce our new CEO, Julien Ducarroz. And we also have Jacek Kunicki, our CFO, on the conference. I will now hand the floor to Julien to begin the presentation.
Good morning, ladies and gentlemen. Welcome, everyone on our conference summarizing third quarter and 9 months of this year. It's a pleasure for me to be here for the first time, and I'm looking forward to work with you.
I will start with business highlights, and Jacek will follow on the financial review. And then we will conclude with a conclusion and take your question.
So let's start on the Slide #6, which is an overview where we stand after 9 months of the year against our full year guidance and expectation. Our performance in Q3 was in line with our expectation and the full year plan remain unchanged. First of all, we do confirm the guidance for growth of EBITDAaL. It was flat in Q3 and is growing by more than 5% on a year-on-year basis after 9 months despite the negative impact of the pandemic. This results from our underlying turnaround that we started, combined with exceptional effort on the cost side that we did in Q2. However, the pandemic is still around, and we are cautious about our future performance.
We also maintained full year outlook for economic CapEx despite a visible shortfall in the sales of our real estate. The property market has not improved yet, and we manage our CapEx spending accordingly. We have this flexibility until the end of the year.
Going on the next slide, 7, where we talk about the COVID and impact on our business. This is not so much different from what was presented after the Q3 -- Q2 results, sorry. What I can comment is that the core telecom services are still relatively resilient to the pandemic, except as it was in Q2, the prepaid, that is impacted. And our roaming -- as you figure out that still the travel is not ticking up, and our roaming revenue are still impacted. But as you will see later, clearly, the fixed broadband remains very strong, as well our sales in mobile recovered after the Q2 downfall, both in consumer and business market.
The churn rate, which was particularly low in Q2 when the lockdown was in place, has gone up in Q3, but still remain on pre-pandemic level. When we presented to you our Q2 results, we mentioned a weaker pipeline in the ICT area as it was affected by the pandemic, and there was a slowdown of order and we see now that in our Q3 results was the ICT results are lower than Q2. I will leave Jacek later on to comment on this. Another impact is on the real estate. Obviously, our disposal of our asset on the real estate market has been slower than expected. The process and cycle is taking more time to close the deal. So this is as well a negative impact our -- on our plan.
Looking forward, obviously, this is a daily changes in this pandemic. So it's kind of difficult to predict precisely what will be the effect. But as I just said, there is anyway a mix of positive or strong demand and some other area that we need to mitigate. When it's about real estate, as I said, this is coupled with the CapEx, and we have the flexibility to manage in a way that we maintain our guidance.
We are not yet in a lockdown at least as of today. But we still see the last 10 days, more or less, a decrease in our retail. So we are very careful and monitoring and ready to apply the learning we had during the first lockdown.
So now going to the fixed broadband side. Next slide, Slide 8. We had another, as you see on the -- those chart, very good quarter for the fixed broadband, where both value and volume are going up. Our net customer addition for fixed broadband, we have 24,000. This is our highest number for the last 2 years. And as you imagine, this is very much driven by fiber, where we have added 54,000 net additions in the quarter which is again, by far, the best achievement we had so far in this area.
If I comment a bit what are the main drivers for this exceptional performance on the fiber, we mentioned 3 points. First of all, we touched it before that there is a very high demand from the customer. And that obviously, this crisis and the pandemic has accelerated appetite and need for a very high-quality and a very high-speed connection to Internet, which is what fiber is about.
The second one is as well our capacity to deploy fiber because we have continued to massively deploy fiber according our plan. But as well, we became after a few years of experience, more precise in choosing the good area that is a good return and the high penetration, which is a namely mid- and small cities, and we are as well having more single-family houses in the mix of what we are deploying.
And the third one, which I think is very important and promising for the future, we see as well the efficiency of the sales force getting better and better. And this is obviously a learning curve that we are on, and we see as a good result. On the chart, you can notice that now we have increased to 14.2%, the occupation on our footprint, which is very good.
And the last point, equally important as the volume that you see the ARPO of fixed broadband is as well increasing by 6% quarter-on-quarter, and this is driven by the mix of customer that we are getting on the fiber out of the total fixed broadband. The share of a single household is as well helping to have a better ARPO.
Going on the next Slide #9, talking more precisely on convergence and mobile. So commercial performance Q3 in this 2 areas also illustrate the combination of strong customer volume and improving underlying ARPO trends, that what you see on the chart.
On the net customer addition in convergence, we can report 31,000, which is the best quarter that we have for convergence. And again, this is strongly driven by our fiber result. On the mobile side, handset off a net addition in Q3 were the highest as well in a few years. This is as well a combination of stronger demand after the Q2 lockdown and as well as low churn. So the result of those 2 is obviously helping us to deliver the net add.
As well here, it's worth to note is that the value strategy that Orange Polska started a few years ago is paying off because both on the convergence and on mobile, we see an increase of ARPO. Those results will be even better if the roaming impact will not be there. So this is what you can notice on the chart. We have restated what it would have been without the impact of roaming. And you see that for the first time on the mobile handset, we would have seen growth without the impact of roaming. So very promising for me for the future. And as well confirming that the strategy that we are pursuing now since 3 years in that one is the right one.
On the below chart, you see about efficiency and transformation. So you can see that on the yellow box, the savings on indirect costs, which are still very strong. But as well, we continue in Q3 with the saving. The pink box is showing that after 9 months, EBIDTAaL is up 5% and this is thanks to the cost of optimization, but as well including, as you remember, the exceptional Q2 measure that we had taken.
So now let me hand over to Jacek.
Thank you, Julien. Good morning, everyone. Let's start the financial review on Slide 11, where we present the highlights of the performance. Our Q3 results were solid, in line with our expectations. The top line contracted due to a predicted drop of ICT sales and less roaming. However, growth of our core telecom services was steady and as steady as in Q2. Our Q2 EBITDA was stable year-over-year. This is a tremendous effort, considering the adverse impact of the pandemic on both revenues and on our direct costs. It was possible due to an enormous effort on the cost side, compensating for the adverse impacts of the pandemic.
Our eCapex is much higher in Q3 versus last year. This stems from less proceeds from real estate sales as the market is more challenging right now, while we recorded record high sales a year ago. Anticipating this, we have adjusted our CapEx spending accordingly, and we're confident to meet our full year plans and objectives in this area. The difference in real estate sales is also visible in the year-on-year dynamics of our cash flows, which were strong with the exception of this item.
Let's look at the top line on Slide 12. So as mentioned, our Q3 top line contracted by 2.7% year-over-year. This change in dynamics was expected by us, as you remember from our prior communication. It is due to the impact on the pandemic visible, especially in the marked drop of the roaming revenues, down by about 50% as well as in the decline of our ICT sales.
Now analyzing the main components of the top line. Revenues from core future-proof areas grew by 1.2% in Q3, and this is after they have enjoyed almost 8% growth rate in H1. They grew at a slower pace due to the previously mentioned change in ICT revenue dynamics. ICT revenues were down by 17% year-over-year in Q3, after they have been growing by more than 50% in H1. This was expected since the lockdown in spring when we observed many orders being postponed or canceled by clients. In addition, the comparable base was higher in Q3 as we started to consolidate our BlueSoft subsidiary in the third quarter of 2019.
On the other hand, revenues from our core subscription services continued to grow. They grew by 2% to 3% (sic) [ 2.3% ] in Q3, demonstrating the resilience to the situation. Revenues from convergence and broadband are the main growth engines, fueled by the customers' appetite for fiber. Their growth helped us to offset less roaming traffic and more challenging trends in prepaid, where we again observed a contraction of the customer base in quarter 3.
Finally, equipment revenues were 9% down year-over-year despite growing by 5% since quarter 2. They have not yet fully recovered as customers are more cautious than before on taking -- in taking on additional commitments for handsets sold in installments.
Let's now switch to Slide 13 for an overview of the EBITDA performance. Q3 EBITDA after lease was stable year-over-year. This is a strong performance as the pandemic-driven drop of our direct margin was offset by another quarter of solid savings in indirect costs. The direct margin was down PLN 42 million year-over-year. And this was due to the pandemic impact on our revenues, on our bad debt as well as on other provisions for future risk areas. This was then offset with a strong result in indirect cost management. These were 5% down year-over-year, with savings coming from labor costs, advertising and lower CRM expenses. This was achieved in spite of a steep increase in energy prices observed this year, which inflates our IT and network costs.
It's worth noting at this point that 2020 is our fourth consecutive year in which we generate net savings in almost every quarter, and at this year, costs reflect a truly exceptional effort to mitigate the impact of lockdown. It is achieved thanks to an underlying business transformation, but also in this year, this is thanks to some nonrecurring items, such as the curtailment of Jubilee provisions booked in quarter 2. So any extrapolation of this very solid trends should be made with caution for the future.
The EBITDAaL result after 9 months of the year allows us to confidently reiterate our growth guidance for 2020. However, as we are observing a second wave of the pandemic, and we cannot be certain as to the countermeasures that will be taken by the government, we continue to cautiously monitor the impact of the crisis on our future results.
Let's quickly take a look on the bottom side -- bottom results on Slide 14. We posted a PLN 53 million net profit in Q3. So similar to the previous quarter, but much below Q3 of last year. The reason for the year-on-year drop were record high sales of real estate in 2019 when we sold the Nowogrodzka-related complex in Warsaw. And this transactional amount generated over PLN 200 million of net gain last year. On the positive side, our net financial costs are PLN 24 million down year-over-year due to negative foreign exchange differences last year.
Over to cash flow on Page 15. We generated almost PLN 60 million of organic cash flow in quarter 3. This is significantly less than a year ago due to the already mentioned difference in real estate sales. In addition, our Q3 cash flows included around PLN 120 million of social security payments shifted from Q2 as part of the government's Anti-Crisis Shield. So these 2 items apart, the underlying cash flow performance was strong, supported by good cash collection and lower cash outflows for CapEx. Please also know that after 9 months of the year, the organic cash flow is on a comparable level to last year. Despite the gap in real estate, this is thanks to operating cash flows being supported by EBITDA growth and by good working capital management.
Finally, let's take a look at our net debt on Slide 16. The net debt is PLN 360 million lower versus last year. It stands at 2x the EBITDA as compared to 2x a year ago. This is important for us in the context of the upcoming 5G auction and the expenses related to the 5G rollouts that are expected in the future. We are progressing with refinancing of some of our net debt as we have significant loan facilities maturing in June and May of next year. We expect to complete this refinancing by the beginning of the next year at the latest.
Summarizing, we have a solid structure of the balance sheet, and a safe financing position.
Thank you for your attention. I hand the floor back to Julien for the conclusions.
Thank you, Jacek. So to conclude, Q3 was a very strong commercial and solid financial performance, as we have just seen, despite still some negative impact coming from the pandemic situation. After these 9 months, we feel absolutely confident regarding delivering growth for the full year, in line with what we promised. I would like as well to mention that we are extremely proud that Orange continued to be the most recommended operator on the Polish market. We maintain #1 position in NPS in this quarter. And this is a big tribute to all the employee in Orange, which we are having obsession for our customer and their satisfaction.
At the same time, the pandemic situation is now very dynamic, and we have to monitor this closely and adapt as we have done the first 9 months. And we have, as well, while we are preparing 2021 to look and stay and maintain this flexibility as no one knows how it will develop and how long it will be in 2021.
We commented on the FiberCo. And let me just reiterate that the process is in full track. 10 days ago, we shared an info memo with quite significant number of interested party. So we are pleased with the development so far of this project, and we aim to close in H1 this project, which is very, very important for us as it's related to our fiber. And as you have seen, the fiber is the core of our strategy and our results.
Just a few words about what we are focused on and the big topic for the company at the moment. So obviously, there is a 5G auction that we are waiting for more precision and exact timing, which, for the moment it's not the norm. Within this 5G, there is as well the discussion, and we are waiting the final cybersecurity law. And obviously, this is a lack of clarity for us. We are not in a position yet to have all the financial and their impact for the future, but we are prepared to act on it.
Then there is another point which is -- that was commented on -- around Iliad. So obviously, this is quite a news for the market. On our side, from my side, this is somehow a confirmation that the convergence is the right things to do on this market. And the fact that we have been doing it for many years, and as I told you that, what I believe are part of the reason of our good results is the fact that we know where and how to deploy. And we know how to sell, it's clearly an advantage. Nevertheless, we are integrating and doing some scenario regarding Iliad because clearly, hence as stated publicly, the aim for convergence. But we are fully working on this.
And the last point I wanted to tell you is that I'm working with the team as well to formulate the next cycle of strategy as we are completing the .one strategy, and I will be back to present to you in -- during Q2 of next year, and it will be the start of a new cycle.
Thank you very much for your intention. We are ready to take your question.
And so just -- we received a lot of questions electronically, but I suggest we start with those who listened to us on the call and able to ask the questions live. Operator, please?
[Operator Instructions] We have the first question from Dilya Ibragimova from Citi.
Congratulations on the strong results. I have 2 questions, please. First, on the cybersecurity regulation that is still in the draft form. Your peer in September issued release saying that they expect the maximum impact to be just below PLN 1 billion if the restrictions were to be applied within a 7-year perspective. Maybe you could quantify what you expect the impact would be if we just set similar parameters as Play did, just to give a flavor and indication -- yes, just to have a number in mind if you have one.
The second is on the FiberCo. You did mention that you have seen very significant interest. Can you share with us what exactly -- what are the interested parties are or the mix? Maybe is it a private equity infrastructure funds? Is it a mix of private and public companies? Any -- whether you have a feel of what makes the potential investors interested in the FiberCo. Yes, any color there would be very helpful.
Thank you for your question. So regarding the cybersecurity law, this is for now a draft, very, very draft bill. So we're obviously an active participant of the consultation progress. Regarding the figures, obviously, we have some numbers in mind, but we could share that with you only after the concrete conditions of the law will be known because there's too many uncertainties to speculate with the figure or a range of figures right now. So we will come back to you with this, but when we will know what are the conditions for the cybersecurity. I hope you appreciate that.
Regarding the FiberCo interest, well, the discussions that we are and will be having is on two fronts. It's with the equity partners, on one hand, it's also with the financing banks on the other hand. What we can say is just there is interest right now. You will appreciate that since these are not nonbinding offers that this interest is not yet fully representative. I think we'll be, again, able to share more when we will have some more progress and more binding offers. We hope to close this deal, as we mentioned, in H1 of next year.
Our next question comes from Mr. Piotr Raciborski from Wood & Company.
Congratulations to the company. I have 2 questions. First, considering Iliad, do you think that Iliad will be interested in the fiber wholesale deal with Orange? And will you be interested in such cooperation?
Well, I cannot comment on their intention. I would say, more on a general perspective, what we are aiming on the FiberCo is an open model, which, therefore, we will be interested to any player that is willing to buy from this model. So -- but regarding their interest, I'm not going to comment their interest.
I don't mean the FiberCo deal, I meant wholesale deal, just like you had with T-Mobile. So wholesale access to your fiber networks.
I think -- well, obviously, we are in both, the FiberCo project and our earlier project with T-Mobile demonstrate that we are open to -- we'll benefit with both retail activity, but also with our wholesale activity on the fiber front. I think the footprint of the future FiberCo and the footprint of the existing, that this is not the same. I would say geographies have not the same level of competition. So conditions will obviously vary.
But -- well, I think on the existing footprint in a number of areas, we are regulated in a number of other areas. We are nonregulated by the compete -- or the incorporation with T-Mobile shows that we are open for commercial agreements. And then the FiberCo, which will be the main vehicle to roll out fiber in the future, obviously, that is something where we are also quite open for wholesale cooperation. This will be related on an open network.
Okay. And my second question considers the plans for the mobile network. I know that you're currently focused on FiberCo. But in general, would you consider monetization of your mobile network? Recently, we've seen the news about Iliad partnering with [ sellers ] considering Play that -- Play got quite attractive valuation. Would that be an argument for you to consider monetization of mobile networks as well?
And from the other point of view, would you be interested in the cooperation with Play-Iliad TowerCo if there was such opportunity? And in general, would T-Mobile integration allow for such cooperation with network sharing?
Thank you for those set of questions. I think first of all, what we should remember and you should have in mind when comparing the potential, let's say, shares of infrastructure projects are the main goals that we have for the FiberCo. And these are, I would say, a bit different to what you could contemplate from any type of infrastructure projects on the mobile side. So on the FiberCo, I think the main idea is, first of all, to be able to continue to roll out fiber. We see still quite a lot of potential to -- in rolling out fiber. If you take a look at the penetration of Internet in Poland, it's around 62% versus 80% in EU. So there is a lot of space for all operators to gain clients, and fiber is the way to go. We are quite convinced about that. So first is to significantly extend our reach.
Second of all, what we would wish to is to build this in an open network and to build these -- the new infrastructure into rather medium and low competition areas from the infrastructure perspective. So here to gain both our retail, or increase our retail capabilities, but also to gain wholesale customers.
We think that in this context, using the FiberCo is a smart way to finance the build of this infrastructure, rather on the balance sheet of the FiberCo than on our balance sheet which we think we will preserve the flexibility which is needed in front of the 5G auction, in front of the rollout of the 5G network. And this is something which is one of the benefits of this infrastructure, I would say, project. And in addition to that, you have the potential to monetize upon this project because, well, I would say we would think that the value of this infrastructure could be worth quite a lot, and it would be beneficial to us and all the stakeholders for us to monetize on this. So there is a big rollout part and the infrastructure build part to this agreement.
Now if you compare this to the -- any potential, I would say, mobile projects, again, keep in mind that we already have around sharing agreement with T-Mobile. So a lot of, I would say, efficiency benefits have been already explored. So this is, I would say, a part, which is very different from the FiberCo. And here, we would say FiberCo is more about new build. Any transactions which I have seen on the market for any towers, it's more about the existing build.
So it's a very different transaction for us. Currently, not on the agenda. I would say the FiberCo project is very demanding for us. So first, let us welcome on the fiber project, which is -- with a long horizon anyway because we're thinking about closing the deal in -- somewhere in H1 of next year. And then we can contemplate anything on the mobile, but it's not on our agenda at the moment.
Okay. And my last question. You plan to publish strategy update in second quarter next year. Can we expect that you will declare something on the dividend payouts? Potentially in the...
Well, I think as any strategy, we will need to address this very vital point of the dividend. We are aware that our shareholders would like us to return to the dividend, and we would like to return to the dividend as well, someday. We want to make sure that we return to the dividend on a sustainable basis.
So in this context, this is the information which we've always been sharing with you. There are a few items -- checks that we need to ensure. First of all, we need to ensure that we have sustainable growth of our margins, sustainable growth of our EBITDA, sustainable growth of our free cash flows. We need to make sure that the structure of our balance sheet is safe enough. So in this context, reasonable pricing of the 5G is something that is vital. Obviously, the FiberCo project would help us -- could help us with both when you're taking the longer-term perspective. And I'm sure we will address your question of the dividend in the upcoming 5G -- in the upcoming strategy. Thank you.
[Operator Instructions] We have a follow-up question from Dilya Ibragimova from Citi.
Next question is on working capital. I think you've mentioned that in Q3, you had to pay off the payables related to second quarter. And then looking at the working capital, it was neutral in Q3. Was there an offsetting release elsewhere? Just if you could comment there. And maybe if you -- anything to expect in the fourth quarter or which will be more business as usual.
Okay. So no special additional nonrecurring circumstances that influenced the working capital, particularly in Q3. It was the -- part of the payment of the PLN 120 million for the social security. I think, generally, when we comment on the working capital, first of all, we are satisfied and quite happy with the cash collection. So customers are continuing to pay on time despite this economic crisis. And this is and was and will be one of the key areas, which we are monitoring in terms of the potential adverse impacts of the crisis. This is not materializing. So this is obviously helpful.
You will see that for the last 3 quarters, the sales of equipment were are not particularly high. And in this sense, the accounts receivable are not growing in the pace that they would have normally grown because we are not selling a lot of handsets in installments, at least in comparison to last year. And obviously, we've maintained solid discipline on our inventories and our standard trade payables. But nothing out of the usual that we have made or that happened to influence the Q3 results.
In terms of Q4 outlook, it's -- the vital question that we will be asking ourselves, but this is the same for Q1 of next year or Q2 next year. It's how will trade receivables behave and what will be the cash collection by the end of the day. Thank you.
Our next question comes from Mr. Marcin Nowak from IPOPEMA Securities.
It was said that this, at some point during the Q&A, that the smart financing deployment of fiber with FiberCo instead of balance sheet. But could you answer if you consider the financing new deployments of fiber with leasing? Because in your presentation, in net debt, you do not include leasing and present leverage without leasing. So also, we saw the examples in terms of using the Orange group in Spain is showing that new deployments of finance with leasing. So I would like to ask whether this option is on the table.
Thank you for your question. I think we can do better than leasing, to answer your question directly. So what we are contemplating is to set up the cyber co-vehicle, which would be co-controlled by us and by the equity partner. When you're thinking co-control, it means we do not consolidate this entity. We rather treat it as an affiliate company rather than a subsidiary. So the balance sheet of this company is not included in our net debt. This company will have its own debt facilities, which will finance a vast majority of the rollout. That's why I mentioned banks, not only the equity partners as the interlocutors that we are talking with when progressing on this deal.
And in such way, what we are aiming to do is not only to finance this off our balance sheet, but also through the sale of the 50% stake to monetize the value of this infrastructure, both current and future, and to try and well, bring this value to Orange Polska. So I would say we have thought about leasing, but we think we can do a project which will be more beneficial for us than the simple use of lease in network rollout. Thank you.
Okay. So follow-up to this. So if there's such value in we think -- off balance sheet, so why not do sell entire fiber infrastructure outside the company and not to consolidate entire fixed infrastructure? Only because you want to do it with the fiber and some other 600,000 households who will be put it with a net -- not entire current network?
Thank you for this follow-up question. So as we've been communicating in the past and right now, the future rollout is contemplated at around 1.7 million of households, which are mostly located in areas where there is very little alternative infrastructure. So I would say, from an infrastructure perspective, this is low competition area or medium competition area. The infrastructure that we are contemplating to move to this FiberCo, the aforementioned 600,000 households, it is also this infrastructure from our current footprint, which is located in mid and low competition areas, making this quite a coherent, I would say, vehicle.
Now the other parts of the infrastructure that we are using and that we have built, they are of a different nature. Some of it is in high competition areas from the infrastructure perspective, such as Warsaw or other big cities. And as such, their characteristics is very different and less suitable for the FiberCo vehicle. Not to mention the infrastructure that we are building as part of the EU-subsidized funds, which is -- well, it's more rural, it's with a subsidy. It will be an open network. It has already been financed with EU subsidies. So there is no further benefit or use to move this to the vehicle.
So to answer your question, it depends on the profile of the infrastructure, mid and low competition areas that we were preparing to build. This will be in the FiberCo. The more density, I would say, competition areas from the infrastructure perspective will stay with us. I hope that answers your question.
Yes. But let me be really put the question this way. In this low competition area, what possible uptake penetration of users on this 1.7 million households, do you think it's possible to achieve in -- if assuming that you will be deploying this fiber on your own? So I think 40% -- and how it compares to your target penetration in the high competition area?
Well, I think, first of all, when you're thinking about infrastructure, then the perspective that we have is quite a bit different from what we -- at the time perspective, is quite a bit different from what we, as a telecom company usually have. So while we will look at business cases and paybacks with a 10 or 20 or 25-year perspective, the infrastructure perspective is much longer. And in this case, if you're thinking about infrastructure in areas where there is no real alternative. Then the Internet penetration, be it current or be it future Internet penetration is your ultimate benchmark, especially if we're thinking of opening this network up. So being the only infrastructure that is there. If the infrastructure is open, there is no real rationale for somebody else to overbuild. And here, you are benchmarking yourself to the future forecasted penetration of Internet in Poland in those areas. So I would say that could be above the level that you are mentioning.
Today, when we are building them, the EU-subsidized infrastructure, we already see that the penetration can be strong double-digit within months. We can expect something like 30%, 35% within a year. So there is an uptake. And there's an appetite for this type of product. I think -- we think we found a way to deliver and finance it. And if you're taking a long-term perspective, it's really high penetration rate that you can count on.
Okay. And last question from my side, how many current customers on all the technologies do you already have on those 1.7 million new potential FTTH performance?
What we estimate is that by the end of the year, this will be around 150,000 customers on the footprint that we will be moving to the FiberCo. That obviously may and will change as we are continuing to sell. But this is the rough number that we would migrate together -- well, the rough number of accesses for which we would need to buy wholesale access from the FiberCo at the moment that we set it up.
Okay. So...
Because there will be no customer migration, so customers -- our retail customers stay our retail customers. We will buy wholesale access from the FiberCo for those customers that are in that footprint.
Okay. So should I understand that looking at those 1.7 million households, there are no currently fixed broadband customers in, I don't know, VDSL or LTE fixed? So there would be no consolidation of your...
So I was -- sorry, I was mentioning what is the amount of fiber customers in our 600,000 footprint.
Yes, yes. By asking whether there are current existing customers within those new 1.7 million.
There will always that -- there will obviously be a strong migration potential within the 1.7 million.
And the other point that we can add is that the exact location of that 1.7 million is not yet finalized. So -- but it's fair to take given our penetration on ADSL, VDSL, that there is an overlap. But at the moment, as 1.7 has not been yet frozen for different operational planning perspective, we cannot give you a precise number.
Let us now switch to questions we received electronically. There's a lot of the -- them. Questions from Santander from Pawel Puchalski.
The first question, can you discuss the risk of Iliad and its potential market disrupting convergent offer to your operations going forward? Is this a risk? Or you have some mitigants here?
Let me take the question. So obviously, Play has demonstrated that they are a strong competitor on the mobile side. The arrival -- the shareholder of Iliad is as well a strong signal as Iliad has a track record in some of the countries they are operating. So clearly, we are looking at this. But equally, I think, as I said in my presentation, we have already a few years of doing convergence. We are becoming more and more mature in execution and commercially.
And I would just say that this is part of our marketing plan, and we are contemplating different scenario. And when Play will enter on convergence, we will be ready, but we are confident that what we have built so far and the reason that we are showing today give us reasonable confidence that we know where we are going.
The second question is from Santander. What would be the scale of bad debt risk in coming periods? The same questions, scale of risk originating from B2B segment, if I understand correctly.
Okay. So I can take this one. Thank you, Pawel, for your question. You've probably seen in our financial statements that we have created a prospective bad debt allowance for around PLN 25 million. This is PLN 15 million that we've created in the second quarter of the year, it's been increased by PLN 10 million in the third quarter of the year. Well, this reflects the current conditions that we're observing, but also the future economic outlook that is being forecasted. We are using our past experience with crisis to extrapolate this based on a number of scenarios.
So to answer your question, we are trying to -- each time that we publish a financial statement, we're trying to estimate the potential for the future, and it's currently estimated at PLN 25 million. This is the allowance that is in our books already. We will continue to monitor the situation. We will also continue to monitor the cash collection, the quality of our accounts receivable, and we will be updating this allowance, this bad debt allowance for the prospective losses in every quarter. And obviously, you will see what is our best knowledge at the moment for that prospective future bad debts, it stands at PLN 25 million right now.
And maybe just to add on, on B2B, which on one side, for sure, we will be affected in case there is a severe degradation in some of sectors that might happen. But I think as well, equally, what we did in the past by investing in ICT with BlueSoft is as well making us quite resilient on the B2B side because while these crisis will certainly affect some sectors, there is -- there will be maybe with a delay like we have seen in Q3. But in the long run, digital transformation that -- where we are more and more investing and supporting our client will drive the demand and our result on the B2B.
So I think, yes, obviously, depending on the economy, we will suffer. But I think as well, we have positioned quite well to benefit from some areas that we'll see our growth independently of the crisis.
And the third question is from Santander. Should we expect the longer dividend to be paid out in 2021?
So I think I tackled the dividend question already. We will obviously come back with the answer as soon as we can. I think we've discussed the main areas where we need to have more clarity on to be able to answer this question. So I will reiterate that it is important for us to reinstate the dividend. We know it's important for the shareholders to reinstate the dividend. We wish to do it on a sustainable basis. So we need a bit more time to answer your question, Pawel. Thank you.
Another question comes from Pawel Szpigiel from mBank. The first question is, please give us an update on fiber goal, which I think has already been tackled.
So the second question is to the CEO, to Julien. Could you please share your first impressions about Orange Polska? What are your opinion about the key points that constitute the strength of the company on the Polish market? And how do you assess the entry of Iliad into the Polish market and its plans for the development of the fixed mobile convergence? I think the last one was already...
Okay. Thank you for the question. I will not comment on Iliad again. But regarding my first impression, so I will say that they reflect a bit what we presented today, which is a very strong result considering the market and the pandemic situation. Clearly, the convergence has been the right bet done in the past. And now it's paying off and it's even accelerated with this higher demand of high connectivity.
Then there is, as well, the B2B, as I commented. I think it's a very strong as well area, and we have ICT and cyber defense, which I believe are 2 strong growth potential for the company. And that has been accelerated with the pandemic situation that are trend -- that are here to stay in the long run.
So yes. I'm very impressed with the company, very honored to have been nominated in this position. And we are going to continue with the convergence, which is the right strategy. Some -- probably more segmentation will come as well given the market condition and the potential change of the competitive landscape, as well you will see and this will be part of the new strategy. We put forward much more accent. We were doing in the past, but maybe not enough communicating about it around growing and a sustainable company. 5G will be part of our agenda for the future. As I said, it will be as well our parameters to be able to return to dividend together with the FiberCo proceeding.
And there is another chapter that most likely we are going to open in the new strategy, which is a much more data-driven company where we will invest. ICT is one of the area, but internally in our capacity to leverage big data and artificial intelligence.
We are switching to question from PKO BP Securities from Malgorzata Zelazko. It's on FiberCo related. Do you consider including more than 600,000 households in FiberCo in case of high interest among financial investors? Is financing the future investments the only goal? Or do you consider improving your balance sheet?
Could you share some estimates -- this is a different topic. This is about Huawei. Could you share some estimates for a scenario in which telecoms wouldn't be allowed to buy Huawei equipment in the future, how does impact your CapEx? I think that was already well covered. So let's concentrate on the FiberCo question.
So for the FiberCo -- thank you for your question. For the FiberCo, after analyzing the structural differences of our existing fiber footprint, we think that clearly, the optimal solution is the 600,000 that we're planning to move to the FiberCo. The goal is to do both. The goal is to achieve smart financing for the future. And also to help increase the flexibility of our balance sheet as we do expect to monetize on the sale of the 50% shareholding in this fiber. So to answer your question, it's both. We want to improve our balance sheet and to smartly finance the future rollout. And we think the 600,000 is really the optimal structure for this vehicle. Thank you.
For a change, we have a set of questions from Konrad Ksiezopolski from Haitong about commercial performance, something different. About net additions in fiber, because in the past, we were showing how much of the net additions were coming from outside of OPL versus migrations from other technologies. Could you share what it was in this third quarter of this 54,000 figure? So that's maybe -- that was a question one by one because there's other.
So our fiber continues to bring a vast majority of the clients, which are new. It's on 70%, the new versus the migration.
He would like to also know fiber net adds breakdown. What is the percentage coming from big cities and what percentage coming from less dense areas, where you mostly develop fiber network? I don't think we can...
Right now, we don't provide the data.
We don't provide such detailed information. But obviously, one of the factors behind such strong net debt is the fact that we are developing more in the less dense areas in single-family houses in particular.
The third question is about mobile. Of course, part of the reason of this decent net adds in M2M are the strong overall net addition. But I'd like to ask about mobile handset, net adds which grew to above 100,000 from 60,000 to 70,000 in the past 3 quarters. Are there any special commercial story behind that growth?
There is no -- I think this is just the consistent execution of our plan, the quality of our services and networks, especially when it comes to our data quality, we were rewarded over the quarter for our performance of download. And obviously, in the current -- since 7 months, the appetite, both on fiber, but as well on mobile Internet to have access as well. So -- and we have as well to say, when we are talking gross adds, net adds, the churn is still at a good level, which is as well linked with our effort related in the customer experience and customer satisfaction that, as I stated, we are #1. So this translates in, obviously, the very good results that we are pleased with mobile.
Maybe one comment we didn't touch is about handset, where if you will relate the good growth signs and our performance of handset, which are as well explaining a bit why the revenue don't grow as much as last year is last year, we had an exceptional Q3 quarter when it was -- it came to a handset because we were running a promotion with voucher. So again, I think this indirectly answered your question on the specific action.
That was exactly the next question of Konrad. So you front-run the question that I might give. The next question is, what do you expect to -- what do you expect equipment sales to come back to previous levels seen before COVID-19 pandemic?
Well, this is a difficult question. I would say Q4 should be a bit better due to iPhone. And I think this is a usual cycle. iPhone has launched a bit later. So when we do the comparison, we might benefit as well from -- on the Q4, again, a bit penalized on the Q3 year-on-year basis due to the shift of iPhone launch date.
But yes, this is an area we are working on as well, we have to say that there has been an increase of the open market, people as well are moving more on digital to buy independently of the closing -- or not closing of the shop. So this is something we are working on, we adapt. And we are confident that we will not lose ground on this front.
Next question is about ICT. Could you elaborate more on outlook or ICT revenues, especially as you see ICT among short-term challenges? Do you think Q4 ICT dynamics could be under pressure as well? How do you see ICT clients in their budgets in -- how your ICT clients see their budget in 2021?
Thank you for your question. Well, ICT is one of the more volatile categories. Since the pandemic has started, we expect Q4 to pick up versus Q3 definitely. However, we must remember that there is a different phasing of sales between the different years. We -- I think we've had an amazing H2 of last year. We had a very, very good H1 of this year where we have benefited from projects that were started in the second part of last year. And revenue growth in H1 of this year was 50% in ICT. So the year-on-year dynamics will obviously be still under pressure for ICT for quarter 4. It will be better than Q3, where it will be under pressure year-on-year.
And as for next year, that will -- I think we should have a pickup because some of these delays are just delays, and we will have customers going back to the digital adventure, and we'll assist them with doing that. Now how soon will this pick up, I would say, take place. That really depends on the severity of the economic crisis. Short term, it's -- we know that it will be there. We know that the long-term trends are very positive for ICT, and we are confident to that respect. Now it's difficult for me to tell you if this will be Q1, Q2 or Q3. The situation is moving very dynamically at the moment.
The final question from Konrad is about the real estate. How do you see real estate market in Q4 and coming quarters? Do we expect some rebounds to come?
Well, we do expect rebound in the sense of we have some very attractive assets that we have put on the disposal list. Now I think it's a bit -- not exactly the same as the ICT, but there has been a slowdown, which we understand from the people. I think what is different from ICT, which is just the generic landscape and probably the process of approval are a bit longer. There is as well for some of the real estate we have that were planned to be office investment, that obviously, the potential buyer is waiting a bit as well to better understand whether the post-COVID in terms of office will be the same.
So here, again, for me, it's not a question whether it will happen or not because those assets are there. They are good quality, good location. But still, the question that is very difficult to answer is when they will enter into our proceed because some of the investor obviously are waiting to have more clarity about post pandemic. But again, the quality of the asset is -- are better. They are not getting down due to the crisis. And I'm confident that in the midterm, we will dispose them.
The last question electronically that I will ask is again, it's a follow-up from Pawel Puchalski. On the basis of pandemic risk, do you see that the risk that 2021 EBITDA coming lower year-on-year?
We will comment on that in February, Pawel, traditionally where we will issue the guidance for next year. Thank you.
I think we have one space of follow-up from Dilya Ibragimova from Citi. Let's give her the opportunity to ask to ask the follow-up.
Okay. We'll just pass the line back to you.
Okay. Thank you very much. There's a lot of questions, interesting conference. Thank you a lot. And see you back in February for the summary of the full year results. Thank you. Bye-bye. Stay healthy.
Thank you very much. Thank you. Have a nice day.