Orange Polska SA

WSE:OPL

Earnings Call Analysis

Orange Polska: Strong 2023 with Revenue and EBITDA Growth

Orange Polska ends 2023 on a high note, with nearly 4% revenue increase and over 3% EBITDA growth, marking the sixth consecutive year of profit growth. Despite inflation, the company successfully expanded its core business, with an 11% increase in direct margins accelerating compared to 2022. Mobile and fiber revenues surged by 6% and 19% respectively, benefiting from enhanced customer base and ARPO, which grew 3-4% in 2023. With disciplined investment spending, CapEx stayed at the lower end of guidance. Digitalization and a strong commitment to ESG led to a significant CO2 reduction, thanks to a 74% green energy mix. Looking ahead, Orange Polska is poised to intensify monetization of its new 5G spectrum.

Digital and Operational Efficiencies Fueling Growth

The cornerstone of the company's strategy hinges on leveraging digital tools to enhance customer interactions and operational efficiencies. Central to this is the widespread adoption of the My Orange application, which has seen a notable 50% increase in customer usage over two years. This surge is strategically offsetting traditional interaction channels such as telesales, underscoring an efficacious shift towards digital transformation. Furthermore, the company is harnessing artificial intelligence (AI) and machine learning to refine marketing endeavors, fostering personalized customer experiences, increased service uptake, and enhanced loyalty. Beyond marketing, an internal efficiency drive includes doubling the adoption of robots to streamline costs and reallocate human resources to more value-adding tasks.

Financial Strength: Revenue and Profit Uplift

The company's financial stamina is reflected in its strong performance across the board. Achieving growth in revenues, profits, and cash generation without buckling under inflationary pressures demonstrates resilience. Revenue growth was universal across major lines, fortifying the core telecom services—key to maintaining robust margins. An astute CapEx discipline ensured that this revenue uptick was effectively converted to a 3.3% EBITDA increase and a striking double-digit net income growth. Notably, the company's organic cash flow has soared to exceptional heights, surpassing PLN 1 billion for the first time in over a decade, signifying a potent mix of expanding profitability and sound capital allocation.

5G and Fiber Investment: Catalysts for Future Revenue Flows

The company is strategically navigating its final year under the .Grow strategy, eyeing the accelerated rollout of 5G to avail superfast internet to its customers. This expansion is underpinned by a significant PLN 1 billion investment dedicated to 5G rollout and network renewal over the next three years. The deployment of 5G C-band spectrum serves as a vital growth lever for the company by nearly doubling its existing spectrum resources, which will bolster future business opportunities and customer offerings.

Return on Capital Employed and the Dividend Pledge

A focal point for the investment community is the notable increase in return on capital employed (ROCE), which underscores the company's capital efficiency. Climbing to 7.6%, this metric illustrates a tangible increase in shareholder value. Furthermore, the company's prudent approach to leverage ensures it maintains a strong balance sheet, providing ample room for strategic maneuvers that may include value-accretive nonorganic growth or potential future M&A activities. These financials bode well for the company's commitment to a sustainable dividend policy, with a declaration to distribute a full payout of free cash flow as dividends for 2023 profits and setting a minimum payout floor for the 2024 dividend.

Earnings Call Transcript 2023-Q4

[Leszek Iwaszko, executive]

Ladies and gentlemen, thank you for standing by. I have a pleasure to welcome you on Orange Polska results conference summarizing full year 2023. [Operator Instructions]

Let me introduce the speakers for today's conference, starting from Liudmila Climoc, our CEO; Jolanta Dudek, Deputy CEO in charge of Consumer Market; Bozena Lesniewska, Deputy CEO in charge of Business Head; Jacek Kunicki, CFO; and we also have in the room, Witold Drozdz, who is a Management Board member, in charge of Strategy and Corporate Affairs.

I hand the floor to Liudmila to begin the presentation.

[Liudmila Climoc, executive]

Good morning, and welcome, everyone, to our conference summarizing the fourth quarter and full year of 2023. And I propose to start with Slide 5. I have a pleasure to say that 2023 was a very good year for Orange Polska. We delivered on all our annual objectives, growing our financial outputs year-on-year. Commercial results were the key to growth of our revenues and our profits. We achieved a simultaneous increase in our key customer bases and respective ARPO, and these delivered a lot [indiscernible].

From a strategic perspective, acquisition of 5G spectrum is an important point for further commercial deployment, and we are very happy that this lengthy process has been finalized.

Financial results were strong across the board. We are pleased that the grower revenues and EBITDAaL also translated in higher net income and cash generation. While being focused on current results, we also continue to transform our businesses on many fronts to be ready to meet the future challenges. We also remain committed to our ESG objectives, where we have done a significant progress. It contributes to lower cost and make our business much more friendly for their environment.

Our performance in 2023 proved again that we are on the right track to make the .Grow strategy, a real success and that our business has strong fundamentals. It was a collective effort of all Orange Polska teams, and I would like to thank them for this commitment.

And let's look now at the financial highlights on the next slide. In '23, we delivered on all our financial commitments. Revenues increased by almost 4%, with all key business lines contributing to this growth. Good top line performance was a key enabler to mitigate the impact of inflation on our cost and allowed us to deliver more than 3% EBITDA growth. And I would like you to note that we are reporting the growth of our operating profitability for the sixth consecutive year. Since 2018, we increased EBITDA more than 20% despite a lot of unexpected challenges and increased costs.

Economic CapEx in 2023 was closer to low end of our guidance as we were disciplined on investments. And this is a good demonstration of our ability to execute a well-designed plan and turning actions into concrete results.

Let's look in more details now on how we have executed our strategy in 2023. Here, on Slide 10, we show you that in 2023, we have made a real progress on all four pillars of our strategy. Starting with core business, its performance is a key driver for our growth. It was solid, both on retail and on wholesale markets. We achieved good revenue growth on the back of higher prices and stronger demand for our services and infrastructure.

Obtaining new 5G spectrum was obviously a key highlight of last year. It will unlock a lot of new opportunities over the medium and long term.

IT&IS had another good year with double-digit revenue growth despite the lower demand of IT services solutions on the market.

In terms of our efficiency plan, we are increasingly relying on digitalization and the new possibilities of Big Data NII to explore our potential. Firstly, we are developing digital channels, encouraging customers to use them, to buy, to upsell or to pay. And secondly, we are boosting adoption of robots to automate our processes.

In responsibility pillar, we delivered on a very ambitious commitments. We increased the share of green energy in our mix to 74%, which enabled significant reduction of CO2 emissions. They were almost 80% lower versus our benchmark level in 2015.

We are very proud to have succeeded in our flagship social [ program ] with foreign foundation. Over the past 4 years, more than 80,000 Polish teachers mainly from small towns and villages boosted their digital skills. This project was an important element of digital transformation of Polish schools being financed by European Union.

Let's look on the performance in greater detail on Slide 9. This success of our strategy lies in the strength of our core business. It consists of three strong engines, service for consumers, for businesses and wholesale services for other telecom operators. These engines consistently deliver growth of revenues and direct margins since the launch of our .Grow plan. They contributed to an 11% increase of direct margin. This is a strong achievement and key success factor behind the growth of our profits. As you see in 2023, this growth accelerated versus 2022, which was a vital element for our ability to offset the inflation impact on our costs.

Thank you. For now, and I hand the floor to my colleagues, who will tell you more about performance in their respective markets. Jolanta, please. Yes.

[Jolanta Dudek, executive]

Good morning. We are on Slide 10. This slide illustrates what is essential to our profit generation. This is simultaneous growth of customer bases and ARPO in key telecom services. We are satisfied with our performance in 2023. And convergence customer base increased another 5%, maintaining its level of growth from 2022. Fiber customer base recorded a healthy 15% increase. These results are even more appealing, taking into account intensified competition in this particular areas. .

As we commented many times, competition has intensified and fixed broadband as there are more retail fiber providers who use infrastructure of different fiber costs. Company has moved more to local markets, which require us to be more agile and innovative in our marketing strategies. Good results demonstrate that customers appreciate cost of our multiservice offers.

Our fiber service are available to almost 8 million households. This is more than 50% households in Poland. This means that we already reach high end of the strategic ambition for 2024.

What's important is that this consistent expansion of customer bases was accompanied by a good ARPO growth. It was growing in a range of 3% to 4% in 2023. In addition, in all the services, this pace of growth accelerated versus 2022. So our value initiatives are gradually rolling into our customer base.

We pursued our value strategy in 2023, increasing prices in more for -- more formula in fiber and convergence. We will continue this approach in 2024. In January, we adjusted our prices in -- again in the more or more spirit. Going forward, we want to keep the momentum.

Thank you, and hand the floor to Bozena Lesniewska.

[Bozena Lesniewska, executive]

Good morning, everyone. Let's look at Page 11. 2023 was a difficult year for business in Poland, but I have the pleasure to say that it was successful for us. Why was it difficult? Economic slowdown, high inflation, influenced decisions of our customers and decreased predictability of our business.

Why, despite that, we succeed? It is because we have unique assets. We are able to address needs of our customers in a complex way offering both connectivity and IT and integration services.

In connectivity, we continued our value strategy, both in mobile and fixed broadband, bundling value-added services and data allowance into flexible packages. Mobile revenues grew 6% and revenue from fiber, 19% year-on-year. Growth resulted from both expansion of customer base and growth of ARPO. Please note that since beginning of .Grow strategy, mobile ARPO increased by 10%.

Last year was also strong for network area, where we completed some complex projects, merging communication and integration competencies. In ICT, it was for us another year above the market revenue growth. Although -- contributed to it, starting from IT infrastructure and service -- cybersecurity and finishing with software and application. We benefited from the ongoing process of digitization, cloudification and automation of companies.

Last year, we continued also dynamic development of our solutions based off on Internet of Things. Our city management platform was appreciated by more than 100 cities who use our intelligent meeting and monitoring platform for light water transport management. All this improves quality of life and brings tangible savings for the customers.

Looking into 2024, we will finally be able to more intensively monetize 5G. We have ambitious plans regarding more private networks that we will implement for industrial customers, customers, municipalities and universities. We are also excited about prospects regarding unblocking EU funds, which will stimulate business activity and also our project pipeline.

Thank you. And I hand the floor back to Liudmila.

[Liudmila Climoc, executive]

Let's move at Slide 12 and speak about digital. Digital is one of the key enablers for us to increase further our efficiency and productivity. And here, I would emphasize two main directions. First one is the development of digital channels for interactions with our customers. Digital channels carry less cost for us to acquire customers. At the same time, we are able to respond better and faster to their needs. Sales through digital channels grow systematically and in 2023, constitute 20% of commercial acts. And we have a very ambitious plan to grow it further in 2024.

The key -- sorry, the key driver for digitalization of customer interaction is our application. We constantly develop it to make it more attractive and more useful for our customers. Over the past 2 years, 50% more customers use My Orange application. And looking on channel mix, the higher share of digital channels is mainly at the expense of telesales and accordingly, a number of customer calls to our info lines is systematically decreasing every year, improving our efficiency.

So the second direction is our internal efficiency and activities here embrace many areas, and I would mention just two. Firstly, to be able -- to be better in marketing, we are deploying machine learning and AI models to help us to manage customer interactions. This gives us a better personalization of contracts and offers. And as a result, it will translate into more services sold, increased customer loyalty and more revenues. And results achieved so far during first 2 years of this program are really promising.

Secondly, we are massively adopting robots across the company. We doubled the number of them in 2023 as we launched the robotization program using a local technology. It allows us to save cost and to relocate our human resources from repetitive job to more creative tasks.

And on the next slide, let me reiterate again why we're happy being able to use now 5G C-band spectrum. Why it is so important for us? As you can see on the upper left chart, this new 100-megahertz block almost doubled our total spectrum resources. Firstly, more spectrum means more capacity to carry ever-growing data traffic. This means higher CapEx efficiency for us. And secondly, more spectrum means also that we will be able to offer higher data packages to our customers, which will provide support for our commercial strategy.

Thirdly, 5G with its capabilities, speed, latency, slicing will constitute a basis for new business opportunities, which will gradually reveal over the number of years. For example, mobile private networks, where we have an ambition to be a leader in Poland, as Bozena just mentioned. Network rollout is obviously our key focus now as we speak, already more than 1,000 sites are available for our customers operating on the spectrum. And over the next 3 years, we will invest around PLN 1 billion for both 5G rollout and our radio access network renewal project.

This is in line with -- which we have presented for our .Grow strategy. And now, I hand the floor to Jacek for financial review.

[Jacek Kunicki, executive]

Thank you, Liudmila. Good morning, everyone. Let's start the financial summary on Slide 15. Our financial results last year were strong across the board as we delivered on all of our annual objectives. We increased our revenues, profits and cash generation. Top line growth was supported by all major revenue lines, including the core telecom services which are key to our margins. We maintained a high operating leverage and converted higher revenues to profits, hence, our EBITDA increased by 3.3% despite inflationary pressures.

We exercised an adequate disciplined CapEx and translated the growing EBITDA into a double-digit increase of the net income and the organic cash flow. The OCF has reached its highest level in over a decade, surpassing the landmark PLN 1 billion value.

The expanding profitability and good capital allocation have further improved our return on capital employed and KPI that we focus to create value for shareholders. It increased to 7.6%, and we continue in our efforts to further grow this key metric of our capital efficiency.

Let's now review our results in more detail starting with the top line. Our revenues increased by over 3% in Q4, rebounding from a temporary slowdown in Q3. The key reason is return to growth of IT&IS revenues, which after a deceleration in the third quarter, have rebounded in the last quarter of the year, benefiting from more integration projects.

Revenues from core telecom services grew at a solid pace of low to mid-single-digit percentage. It's driven by a simultaneous expansion of our key customer bases and their respective ARPOs, which we discussed a lot today.

Our core services have good fundamentals as we systematically execute our value strategy. Growth of the core telecom services was complemented by the expanding top line from equipment sales and also from our wholesale activities, increasing revenues were the main driver of our profitability.

And now let's take a look at the latter on the next slide. The EBITDA grew by over 2% in Q4, enabling us to reach a 3.3% growth in the full year. It was a very good quality growth, stemming from an expanding direct margin. It grew by over 3% year-over-year in the last quarter of the year and over 4% in the entire year, thanks to higher revenues and good profitability of our services. The indirect costs have increased versus last year and the pressure of inflation. It was partly mitigated by cost transformation, which included process digitalization as well as further headcount reduction. This helped us to contain the growth of costs during the critical time of high inflation.

As we now see inflation progressively slowing down, we're confident that the high operating leverage will continue to be our asset in the further growth of our profitability. The structure of EBITDA growth, relying on direct margin demonstrates the sustainability of this growth going forward, improving operating profits enabled us to grow the net results. Let's review this on Slide 18.

We achieved over PLN 800 million of net income in 2023 as it grew by 13%. There were three key elements to this achievement. First, the EBITDA growth that we have just analyzed. Second, discipline in CapEx resulted in lower depreciation while -- gains on sale of properties that we no longer use and require. Finally, our net income costs were lower year-over-year. This was helped by our -- debt and also by the foreign exchange gains on some of the euro-denominated long-term lease contracts. Please also note that quarter 4 net income included PLN 125 million provision relating to a new social plan for the years 2024, 2025.

And now let's switch to CapEx over on Page 19. Our economic CapEx for 2023 amounted to just over PLN 1.5 billion and came towards the low end of our guidance. This level was particularly low this year due to two main reasons. First, as the spectrum auction was only concluded in Q4, the CapEx for 5G network rollout was below the run rate that we will now see in 2024, '25. Secondly, we recorded strong sales of property no longer use. We generated almost PLN 230 million of proceeds, the most since 2019.

As Liudmila mentioned, buying the spectrum, 5G spectrum, opened up a new investment chapter for us, and we'll now spend more focusing on the rollout of our 5G networks in the coming years. At the same time, though we mainly grow our fiber footprint through the FiberCo JV, we will also incur some CapEx for the rollout of fiber as part of the EU recovery funds contest.

Finally, over to cash flow and balance sheet situation on Page 20. We're very happy to report almost PLN 1.2 billion of organic cash flows in 2023, the highest level in decades. Our cash generation was result of three main drivers. First, the growth of EBITDA; secondly, decrease in working capital requirements as we contained the growth of accounts receivable from handset sales through a large factor and facility; third, this was partly offset by higher cash CapEx, most of which are related for the CapEx of 2022, which was paid in 2023.

In results, our balance sheet remains very sound. Our financial leverage stands at 1.1x EBITDA or 1.2x if we include the full payment for the 5G spectrum and the last PLN 300 million was paid in early January. Finally, let's do a quick checkup of how we stand against our financial ambitions after 3 years of executing the .Grow strategy on the next slide.

Since its launch, our growth strategy is about increasing our revenues and translating this growth through high operating leverage into a low to mid-single digit increase of the EBITDA. Next, by keeping a stable CapEx, we plan to boost cash generation and the return on capital employed. The results of the last 3 years show that we have done exactly as we have committed. Revenues and EBITDA growth is at the high end of the guidance. Our CapEx spending is at the low end of expectations. Finally, we have increased the return on capital employed 5x and preserved a very sound balance sheet.

In addition, as you've seen today, we have significantly improved our cash generation. In short, after 3 out of 4 years of growth, we are on the right track to deliver all of our midterm financial commitments. Obviously, we now focus on execution, the last remaining year of the strategy as this is key for its finalization.

Thank you for your attention, and I hand back the floor to Liudmila for the outlook and conclusions.

[Liudmila Climoc, executive]

Thank you, Jacek. Talking about 2024 priorities. Indeed, this year is the final year of implementation of our .Grow strategy and we will focus on execution of the well-proven commercial strategy. Here, we will pursue further our value strategy and capitalize on strong customer demand, especially in fiber. Wholesale will continue to be developed, monetizing our infrastructure. We will accelerate the rollout of 5G so that our customers could benefit from superfast Internet on the move and on site. While commercial developments, is it the very heart of .Grow, we will absolutely not forget about our costs. We will continue to transform and make efficiency gains using new opportunities stemming from digitalization. And finally, we will continue to be committed to our ESG agenda and will push further this cultural transformation of Orange Polska. .

Let's now turn the page to see how our strategic agenda translates in financial targets. Our objectives for 2024 are not surprising as we target to reach all of their .Grow objectives. We will -- we target to grow our top line, benefiting from the solid demand for our services and our ability to implement the value strategy. Within the revenue performance of the core telecom services will be critical as they bring us the most in terms of margin.

Next, we will turn the revenue growth into high EBITDA, keeping a right grip on fixed cost and mitigating the inflationary impact. Finally, we will invest between PLN 1.7 billion and PLN 1.9 billion in capital expenditures, which will include the full pace of 5G rollout and the modernization of the mobile access network. Our financial plan for 2024 is fully consistent with the .Grow strategy designed to boost their return on capital employed and grow shareholder value. And obviously, the dividend is a key element for shareholders.

So let's turn to this final element of our presentation. As we presented to you today, we are on track within our strategy execution. We delivered on all our annual objectives, and I'm pleased that we are now in a position to share benefits of this growth with our shareholders. And in line with our policy, we recommend to the General Meeting of Shareholders a payment of PLN 0.48 per share cash dividend in 2024 for 2023 profits. This is the second consecutive increase of the dividend after we reinstated it back in 2022, and it reflects the confidence that we, as a management team, have in long-term prospects of Orange Polska.

This concludes our presentation, and we are now ready to take your questions.

[Leszek Iwaszko, executive]

Thank you. We will now be moving into the Q&A session. [Operator Instructions] We have the first question coming from the line of Dawid Górzynski from PKO BP.

[Dawid Gorzynski, analyst]

Congratulations on your results. I have three questions actually. First one, if you can provide any guidance for -- regarding free cash flow in 2024? My reasoning is that the level you achieved last year, I think possible to be repeated. But if you can comment on the direction of potential scale of the reduction to the outlook. This is the first one.

Second one is I have seen that the ARPO growth dynamic in postpaid mobile business decreased from over 3% year-on-year in previous quarters to 2.2% right now. So is there any specific reason behind that drop? Or if you can give more color on this area.

And the third question is about the CapEx in a little bit longer perspective. Could you provide some initial clue about, like a topic after that rollout -- like when can rollout of 5G network, so after 2026. Like do you think it may drop from the current level? Or you see -- or you already see some attractive investment projects that may like fill in this gap? So that's three questions from my side.

[Jacek Kunicki, executive]

Thank you very much for your questions. Maybe I will take 1 and 3, and we can do -- we can share the mobile voice ARPO. I think on the organic cash flow, obviously, the 2023 result was extremely strong. We achieved the highest level in 10 years.

Some of the drivers of this growth are sustainable. Some of them are not sustainable by nature. So if we analyze them to try and digest what is driving the organic cash flow, first, what is important is that we keep on growing our EBITDA and this is delivering more and more cash from operating activities. And this is something which is sustainable for the future. We are happy with the structure of EBITDA growth. We're confident in our ability to work and to make sure that the EBITDA that we generate year after year is becoming higher. And this will definitely give a boost to the organic cash flow.

And then for 2023 cash flow, specifically, you need to see the balance of two items. One is that the cash CapEx was quite high as we had a lot of payments that happened in 2023 relating to a peak of CapEx in 2022. The 2022 CapEx really peaked in the last quarter. So vast portion of the payments were made in 2023. This is, I would say, a negative factor that influenced 2023.

On the other hand, we did have good growth of real estate proceeds from real estate. And secondly, the increase of the factoring program that enabled us to reduce working capital. The working capital actions, this is definitely something which is not sustainable at this scale. And it needs to be viewed together with the downside pressure that we had on the cash CapEx part, and both of these are nonrecurring in nature.

When it comes to real estate sales, I am confident that we will continue to sell a lot of real estate that we no longer require but it's not something which is very predictable from 1 year to another. And I think the 2023 level is already very challenging to be repeated.

So yes, it is a very challenging [ matter ], 2023 organic cash flow. I think we're very happy that this surpassed the PLN 1 billion landmark. Over the long term, we will see organic cash flow continuing to grow. But there is a reason why we don't guide for it also because it fluctuates from 1 year or another. So I will not be very specific regarding the OCF that we expect in 2024. I think you need to have your own assumptions as to how much boost was given from the working capital and how does -- how is this reflected possibly in 2024.

Regarding CapEx. So 2023 had a particularly low level of CapEx as we were no longer investing in heavy amounts in fiber, and we did not yet reach the peak spendings for the 5G spectrum and for some of the capacity and run renewal projects that we have on the outlook. That's why 2024 guidance is not higher, and this is clear.

We can expect to be under the influence of 5G rollouts still in 2025, in 2026 because this is where this rollout will take place. I think we mentioned before that when it comes to the 5G rollout, we have spend around PLN 700 million already. There is about PLN 1.1 billion to be spent going forward within those 3 years. So we can expect CapEx to be rather higher than in 2023.

To be more specific, definitely, we will address this question next year when we present the new strategy as this will then include all the elements that we might want to take into account for CapEx, so I will not be that much more -- today. I think that the changing element is 5G for the short term.

[Liudmila Climoc, executive]

Yes. And on question on mobile, mobile ARPO, I must say that we are happy with the dynamic of ARPO growth. Value strategy is working and it is consistent, even if a dynamic between quarters can be different. And there are two main reasons for the slowdown of the trend in last quarter and Q4.

First is a slowdown of growth in roaming. It was going at a lower pace in last quarter. And this is -- you need to look on it comparing to trends in the first part of the year, where recovery of roaming was much higher because it was still recovery post pandemic. And accordingly, in last quarter, we are comparing already to a significantly higher base -- comparable basis for the second part of the year.

And also, you should note that lower revenues for roaming also were accompanied by lower costs. So it's -- we have a quite good performance on this business line and EBITDA. And secondly, a high comparable basis again of -- for previous year was due to the fact that price hikes in B2B in 2022 were effective in last quarter in Q4 2022. So comparable basis for now is much higher.

And as we have commented, we are committed to continue our value strategy, which is the main driver for growth for our commercial engines. And in January, we have done in our price hike for our consumer offers.

[Leszek Iwaszko, executive]

Our next question will be coming from the line of Dominik Niszcz from Trigon.

[Dominik Niszcz, analyst]

Dominik Niszcz, Trigon. So two questions for me. One, maybe follow-up on this ARPO question. So you now have around 3%, maybe 2% growth despite much higher tariff hikes. So I understand that it is also influenced by the migration of customers to cheaper subscription plans like new mobile Orange flags instead of Orange brands, I mean this B2C segment. Maybe some high ARPO customers migrates to the convergence offer. So do you think that this change of structure of alliance will subside in 2024 or stop and we will see greater impact of price list increases in ARPO in 2025, '26? Is it realistic to assume growth exceeds 5% in the medium term. Now we see a bottom here?

[Liudmila Climoc, executive]

On B2C, maybe you will complete, Jolanta?

[Jolanta Dudek, executive]

As was mentioned, we are very satisfied with the growth of ARPO in B2C 3% to 4% achieved in 2023. And we would be pleased to keep going with this pace. So we do not observe migration of our base from postpaid mobile to postpaid subscription like new and flex. The trend is the same like previous year means 2022. Those two offers noticed increase of customers in the base, but this is not migration from the poor postpaid.

We addressed by those two offers with subscription like flex, we addressed the specific segment of very digitalized customers. And with new is very appreciated brand and has its segment -- its customer who slowly, but very, very systematically, the base is growing.

We will continue our -- as I said, we will continue our approach for more for more strategy for mobile voice. So I'm convinced that the piece of increase of ARPO this year will be, I hope, similar or even better than in 2023.

[Dominik Niszcz, analyst]

Okay. So it was not a migration, but nevertheless, this change in structure took place, right, a little more of those cheaper bands customers paying to this side. So this should subside.

And the second question on your dividend, and not only this year, but what your considerations regarding next year. So you have a cash in terms of net debt-to-EBITDA. When thinking about dividend, it's 1.2, assuming this spectrum payment. However, you still have an option to acquire 1% in joint venture, which currently has PLN 1.5 billion net debt, and it's growing, like by PLN 700 million last year, I guess. So in 3 years, it will be probably much higher amount of debt there.

So do you -- are you considering this extra debt when making decisions about dividend payments this year and in 2025 and is it highly probable that you exercise that option? I understand economically, it's only half of the debt that we can attribute to you, but if you consolidate JV then all that will be on our balance sheet. So the ratio, net debt-to-EBITDA may change strongly. So the question is whether you consider this scenario currently?

[Jacek Kunicki, executive]

So if I will take this, it's worth to say we're really happy that we're in a position to increase the dividend again. As you remember, we reinstated the dividend in 2022, paying PLN 0.25 per share. We increased it by PLN 0.10 in 2023. And now, this year, looking at good performance, good prospects, we decided to make this increase a bit faster -- So this is where PLN 0.40 comes from. It is almost a 40% increase versus the -- well, figure last year, 37% increase versus the figure last year, almost 90% increase versus the initial figure.

And it is -- it does represent basically a full payout of the free cash flow. Basically, if you take our organic cash flow and you subtract whatever we paid for the license, including this PLN 300 million that we paid early January, we've basically distributed the entire free cash flow. I have the trust that the AGM will accept this proposal. As you thinking has always been to make dividend fully sustainable.

So first of all, we've already indicated that PLN 0.40 floor to be paid in 2025 for '24 results. So that's one measure of sustainability. And then if you remember, we've always said that when thinking about dividends, if we're looking at the long-term prospects for the operating profitability, cash generation and also the longer-term prospects for leverage. So we don't only look at the leverage that we have right now, the 1.2x, we look at the possible actions that we may or may not want to take in the next years.

And here, we come to the question that you asked about leverage. So it's good to have the sound business, a balance sheet and business case. This gives us the flexibility should we want to -- and should there be an opportunity to engage in a value creative nonorganic activity. And obviously, when we're thinking 3, 4 years ahead, we keep somewhere in the back of our minds the possibility to reconsolidate the FiberCo.

As you have mentioned, right now, the debt level is already material. And it will increase. I think we've mentioned that this is a PLN 3 billion debt facility, which was set up at the inception of the FiberCo. So this is something which, if we were to exercise it and it's -- I will not comment on the probability today because this is a decision that we will be able to take between 2027 to 2029.

We need to have the adequate flexibility to be actually in the position to consider this decision. So yes, it is always on our minds to be in a position to have the flexibility to make inorganic moves that would create value for Orange Polska in the long term. I hope that answers your question.

[Dominik Niszcz, analyst]

Yes. Can you maybe just remind us, you still have investment plans in JV for the next 2, 3 years, right, of this high level of spending and then it should drop significantly. Because when we take like half of this cash flow in JV and attributes to your organic cash flow, your dividend this year would be already higher than your cash flow rate. So can you just comment on this medium-term prospects, just a reminder.

[Jacek Kunicki, executive]

I think for the FiberCo, yes, the investment horizon of the FiberCo is until the end of 2025 with some -- there is a possibility, of course, of some investments being slightly delayed. But today, it's until the end of 2025. And if you're asking about our prospects and thinking about the dividend going forward, of course, we will address it in the next strategy on which we will be working on this year. So we should come back and present a new strategy early next year. And inevitably, this will address the question of capital allocation and also dividends for shareholders.

[Leszek Iwaszko, executive]

Our next question will be coming from the line of Rohit Modi from Citi.

[Rohit Modi, analyst]

Most of them has already been answered. Just two from my side. First, on the guidance. The revenue guidance of low single digit looks like slightly conservative compared to you had decent growth last year. And given what you said around B2C and ARPO growth, which looks like you have, the revenue, better ARPO growth there. What's driving the lower revenue growth guidance this year? What are the key factors? Are you seeing more demand or it is the competition or any other factors?

Second, if you can please give any color around FiberCo in terms of what is the take-up you're seeing -- take-up rate you're seeing at the FiberCo? What percentage of your current net adds coming from FiberCo footprint and what percentage is coming from your own footprints?

[Jacek Kunicki, executive]

Okay. So starting with the revenue guidance, I think you will see us being quite confident on our ability to continue to deliver this low to mid-single-digit growth of revenues coming from core telecom services. I think this is very important. It is something which is the main driver of the direct margin that we generate and therefore, the profitability that we are able to ultimately enjoy.

When it comes to other revenue lines, you will see trends which are a bit less predictable or they are under different, I would say, pressures. We do have considerable amount of revenues coming from energy trading activity. You will have seen energy prices fluctuating slowly -- strongly. You see that energy prices are down year-over-year when we compare even January to January of last year. And this is not a revenue line, which will continue to have the type of dynamics that we have been observing.

On the equipment front, the equipment was strongly separated by growth, both coming from the structure of handset, but also from the value strategy within the handset that we have been selling last year. And it's going to be quite difficult to repeat the same type of dynamics in the full year of 2024, hence, the low single digits.

I think we need to -- if we go back a year, we were much less confident about revenue growth when we were guiding for 2023. If I remember correctly, this was sort of flat to low single digits, which we then have upgraded. So it is something on which I don't see a change of trend, not on the key revenue drivers. It's rather the equipment or energy and other, I would say, noncore telco revenue drivers that are a bit less difficult to be predicted for this.

In terms of the FiberCo, I think it's fair to say they have a footprint now of 1.7 million households within reach. They have, well, about just about 440,000 customers. So this is an entity which is progressing. Obviously, right now, the main focus is to build on time and budget in the geographies that we want to build and to achieve -- reach a network that will be an attractive investment for us and a big opportunity to grow both our -- to grow our retail presence and make our share of the wholesale profits that this entity will generate.

[Leszek Iwaszko, executive]

We received two questions via web platform. The first question from [ Jakob ] from [ Bosch ] has already been addressed. I believe this is a question on the moving parts regarding dividend and the leverage. So it's very similar to the question that the Dominik asks, so I will keep this question.

Another question from Piotr Raciborski from Wood & Co. What level of 5G rollout related CapEx do you expect to record in 2024 and 2025? That's the first question.

And the second question, do you see room for further mobile and fixed broadband prices growth? When do you expect to increase prices again?

[Liudmila Climoc, executive]

Yes, I can start and very quickly answer on the second part of the question. Of course, we will not give any insights on our commercial decisions. You will see it when it will be implemented on the market. And I can just reiterate that we are committed to pursue our value strategy. And yes, if you want to take the question on CapEx?

[Jacek Kunicki, executive]

I think on the pricing moves, we anticipated the question, so we actually increased prices in January.

[Liudmila Climoc, executive]

To please the audience today.

[Jacek Kunicki, executive]

Yes, it is continued. And in 5G, we did mention, we've spent -- if we take 5G and run renewal together, because this is how we look at this program, we've spent around PLN 700 million on this to date. It's to roll out 5G and to renew the access network for the mobile. We have another, let's say, PLN 1.1 billion to be spent. And this will be predominantly spent in '24, '25 with some CapEx probably being still left to be finalized in 2026. So PLN 1.1 billion. Of course, the exact amount will really depend on many factors, but you could imagine a greater part of this in '24, '25.

[Leszek Iwaszko, executive]

It appears we have no further questions. So thank you very much for your attention for watching us. If you have any follow-up questions, please do not hesitate to contact us. Otherwise, see you again on the conference summarizing Q1 results in April. Thank you, and goodbye. Have a day. Thank you very much.

[Jacek Kunicki, executive]

Thank you very much.

[Liudmila Climoc, executive]

Thank you.