inwestor.netia.pl 2
PLNm
PLNm
PLNm
Total Netia | Key highlights for 9M 2016
1 Adjusted EBITDA excludes as appropriate, one-off costs related to restructuring, integration, M&A activity, impairment
2 Adjusted OpFCF = Adjusted EBITDA less Capex excluding integration capex, capitalised interests from the bank loan, investments related to
the Netia Lite project; Capex = investments in tangible and intangible fixed assets
3 Value of the adjusted EBITDA has been additionally adjusted for the costs of liquidated fixed assets related to the acquisition of subsidiaries (comparatives restated)
Revenues
AdjustedOpFCF2
Adjusted EBITDA1,3
• Revenue was PLN 1,150m for 9M 2016 (-2% y-o-y) and PLN 373m for Q3 2016(-4% q-o-q and -7% y-o-y)
– Profitability stable thanks to cost optimizations despite a continuousrevenue pressure
– Adjusted EBITDA1,3 was PLN 333m for 9M 2016 (-4% r-d-r) and PLN107m for Q3 2016 (-7% q-o-q and -13% y-o-y)
– EBITDA was PLN 325m for 9M 2016 (-6% y-o-y) and PLN 103m for Q32016 (-10% q-o-q and -16% y-o-y)
• Netia generated PLN 197m Adjusted OpFCF2 for 9M 2016 (+6% y-o-y) andPLN 55m for Q3 2016 (-19% q-o-q and -13% y-o-y)
• Net debt at PLN 250m on September 30, 2016 (-16% q-o-q and -22% y-o-y),representing 0.5x of Adjusted EBITDA3 for full 2015 year at PLN 459m
• On September 30, Mr. Cezary Chałupa, B2B General Manager, resigned fromhis position as the member of the Company’s Management Board.The resignation is effective immediately
400 403 390 387 373
0
100
200
300
400
500
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
123112 111 115 107
0
50
100
150
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
6356
73 68
55
0
10
20
30
40
50
60
70
80
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
inwestor.netia.pl 3
Total Netia | Profitability and OpFCF in operational Segments
B2C2,4
1 B2B comprises Business and Carrier customers sub-segments. TK Telekom results not included. 2 B2C comprises Residential and SOHO customers sub-segments3 Operating costs and capital expenditures for Petrotel fully separated from Q1 2015 4 Value of the adjusted EBITDA has been additionally adjusted for the costs of liquidated fixed assets related to the acquisition of subsidiaries ( comparatives restated)
B2B1,4
• Revenue was PLN 184m in Q3 2016, down by 3% compared toQ2 2016 and down by 10% y-o-y
• RGUs at 1,639k (-2% q-o-q, -6% y-o-y)
• Adjusted EBITDAwas PLN 32mwith a margin of 17,6%
• Revenuewas PLN 153m in Q3 2016 (-4% q-o-q and -5% y-o-y)
• Adjusted EBITDAwas PLN 62mwith a margin of 40.6%
PLNmPLNm
Petrotel3,4
• Stable revenue and margins between quarters
PLNm
TK TelekomPLNm
• TK Telekom financial data consolidated from July 21, 2015
2936 34 31 30
7 2 811
10
5 7 3 21
0
5
10
15
20
25
30
35
40
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Revenues Adjusted EBITDA Capex
160 160 155 159 153
42.9%40.5% 42.0% 40.8% 40.6%
0%
10%
20%
30%
40%
50%
60%
0
50
100
150
200
250
300
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Revenues Adjusted EBITDA margin %
205 200 196 191 184
21.9%21.0%
18.1%19.5%
17.6%
0%
5%
10%
15%
20%
25%
0
50
100
150
200
250
300
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Revenues Adjusted EBITDA margin %
6 6 6 66
47.3% 47.8%
40.9% 40.7% 39.8%
0%
10%
20%
30%
40%
50%
0
1
2
3
4
5
6
7
8
9
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Revenues Adjusted EBITDA margin %
4inwestor.netia.pl
Total Netia | Total RGUs by product and access type
Comments
Total Netia RGUs On-net and off-net RGUs
• Drop in total RGUs in Q3 2016 results mainly from strategic defocus of lower margin WLR and BSAservices (focus on retention)
• At the end of Q3 2016 the share of on-net RGUs in total Netia services was 57% (+3pp y-o-y)
(’000)(’000)
-1.1% -1.4% -1.2%-1.5%
-26 -30 -27-35
-12 -14 -14-14
-31 -28 -23-351,284 1,253 1,218 1,189 1,166
769 756 742 728 715
158 164 168 172 177
70 81 92 100 105
2,280 2,254 2,220 2,189 2,162
0
500
1,000
1,500
2,000
2,500
3,000
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Voice Broadband TV Mobile
-1,1%
-29 -25 -27-29
+3 -5 0-6
-1,4% -1,2%-1,5%
-26 -30 -27-35
1.239 1.242 1.236
1.041 1.013 984
1,.239 1,.242 1,236 1,.231 1,231
1,.041 1,.013 984 959 932
2,280 2,.254 2,.220 2,.189 2,.162
0
500
1,.000
1,500
2,.000
2,.500
3,000
III kw. 15 IV kw. 15 I kw. 16 II kw. 16 III kw. 16
On-net RGUs Off-net RGUs
inwestor.netia.pl 5
PLNm
PLNmPLNm
Total Netia | Revenue development by service
Revenue breakdown by service Data revenue1 breakdown by access
Other revenue2Voice revenue breakdown by access
1 Including revenues from VAS, elsewhere reported as Other Telecommunication revenue2 Includes revenues from TV services
PLNm
137 134 128 122 116
176 177 175 172 167
87 92 88 9290
400 403390 387
373
0
50
100
150
200
250
300
350
400
450
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Voice Revenues Data Revenues Other Revenues
82 84 85 84 82
48 46 44 42 40
45 47 46 47 44
176 177 175 172 167
0
50
100
150
200
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Own network - broadband Regulated access - broadband Own network - other data
59 59 56 55 52
76 73 69 65 62
2 22
22
137 134128
122116
0
20
40
60
80
100
120
140
160
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Own network Regulated access Indirect voice and other
22 23 22 21 21
30 30 29 33 30
3539
3738
39
8792
8892 90
0
10
20
30
40
50
60
70
80
90
100
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Interconnect Wholesale Other
7inwestor.netia.pl
B2B Operations |
Comments
Revenue by service
Revenue split and margins
PLNm
• Trends in broadband stable despite a competitive market environment
• Relatively stable profitability despite a strong price pressure thanks to a shift of commercialfocus on services with a higher margin
• Lower total B2B revenue q-o-q mainly due to decrease of wholesale traffic
Adjusted EBITDA margin and Adjusted OpFCF
PLNm
35 36 36 35 36
36 37 36 37 35
44 43 41 41 39
45 45 42 4643
160 160 155 159 153
0
20
40
60
80
100
120
140
160
180
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Broadband Other Data Voice Other services
160 160 155 159 153
42.9%40.5% 42.0% 40.8% 40.6%
0%
10%
20%
30%
40%
50%
60%
0
50
100
150
200
250
300
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Revenues Adjusted EBITDA margin %
inwestor.netia.pl 8
B2B financial performance | Adjusted B2B EBITDA bridge for 9M 2016
• ARPU decline related mainly to a visible price pressure in voice services
• Lower acquisition costs as a result of lower spending on B2B customers equipment
• Lower variable costs reflect a number of optimization initiatives introduced by the Company
Actual
9M 2015
vs
9M 2016
Comments
Increase in Adjusted EBITDA Decrease in Adjusted EBITDA
PLNm
8
1721
8
206
25
312
12
192
50
70
90
110
130
150
170
190
210
230
Adjusted EBITDA9M 2015
RGU reve change ARPU reve change IC and Other Acquisition cost Variable cost Adjusted EBITDA9M 2016
10inwestor.netia.pl
B2C Operations |
RGUs by access type
RGUs and ARPU per Customer
Average ARPU per Customer Comments
• Share of on-net RGUs up by 3 pp y-o-y to 47%
• TV cross-sell, higher broadband speeds offeredand unlimited voice keep ARPU per customer at arelatively stable level
• On-net bundling increases number of RGUs percustomer
• Most customer losses are single play off-net voice(WLR) and off-net broadband (BSA)
(’000)
PLN
Customers and RGUs
(’000)-20 -25-29
-22 -23-27
+2 -2-2
-28
-26
-2770 772 770 768 767
972 949 922 899 873
1,741 1,721 1,692 1,667 1,639
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
On-net RGUs Off-net RGUs
56 56 57 56 56
20
25
30
35
40
45
50
55
60
65
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
1.172 1.144 1.111 1.083 1.054
1.741 1.721 1.692 1.667 1.639
1.49x 1.50x 1.52x 1.54x 1.55x
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
-
200
400
600
800
1.000
1,200
1,400
1,600
1,800
2,000
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
Customer locations RGUs RGUs x
11inwestor.netia.pl
B2C Operations |
Broadband ports
RGUs by service
Voice lines
TV services Comments
• TV services at 173k in Q3 2016 (+2% q-o-q and+12% y-o-y)
• Focus on retention in regulated access RGUs
• 57% of broadband customers served directlyvia Netia’s own network (+4 pp y-o-y and +1 ppq-o-q)
• 46% of on-net broadband customers now takeTV services from Netia
(’000)(’000)
(’000)
+5 +4 +4+5
-11 -13 -13-14 -27 -25 -25-30
138 147 154 161 168
241 234 227 220 212
128 123 117 112 108
204 196 188 180 173
711 700 686 674 661
0
100
200
300
400
500
600
700
800
900
1 000
Q3 15 Q4 15 Q1 16 Q2 16 Q3 16
Own network - NGA Own network - legacy LLU BSA
155 160 165 169 173
0
20
40
60
80
100
120
140
160
180
Q3 15 Q4 15 Q1 16 Q2 16 Q3 16
`
236 230 224 219 214
96 93 89 86 83
478 461 440 424 407
810 783 753 729 704
0
100
200
300
400
500
600
700
800
900
1000
Q3 15 Q4 15 Q1 16 Q2 16 Q3 16
Own network LLU (VoIP) WLR
`
inwestor.netia.pl 12
B2C financial performance | Adjusted B2C EBITDA bridge for 9M 2016
Actual
9M 2015
vs
9M 2016
Comments
PLNm
• Revenue decline driven mainly by off-net RGU churn (WLR, BSA, LLU) and on-net ARPU reductions (bundling)
• Lower service cost reflects lower off-net rental payments to incumbent and lower interconnection costs
• Lower variable costs reflect a number of optimization initiatives introduced by the Company
Increase in Adjusted EBITDA Decrease in Adjusted EBITDA
127
105
22
4
1 10
1 339
20
4
15
35
55
75
95
115
135
AdjustedEBITDA
9M 2015
RGU revechange
ARPU revechange
IC and Other Service costchange
Acquisitioncost
Retention
CostsVariable
cost
A&P cost Fixed
costs
AdjustedEBITDA
9M 2016
14inwestor.netia.pl
Financial Performance | Key figures for Q3 2016
• Profitability y-o-y stable despite a continued price pressure in both segments
Comments
Revenues
Adjusted EBITDA1
Margin (%)
(PLN’ 000)
Gross profit
Change (y-o-y%)
Change (y-o-y%)
Gross margin (%)
Adjusted EBIT
Margin (%)
2015
Q3
Depreciation
EBITDA
Margin (%)
Change (y-o-y%))
EBIT
Margin (%)
Q2
380,340
29.0%
111,691
29.4%
7,947
2.1%
110,325
102,378
29.6%
112,622
10,244
2.7%
2015 vs 2016
9m 2015 y-o-y
(1.6%)
(4.0%)
(1.5%)
(27.5%)
9m 2016
1,150,288
29.0%
341,035
29.6%
26,535
2.3%
333,185
(1.3%)306,651
(6.4%)
28.2%
324,845
(50.1%)18,194
1.6%
Q1
388,718
29.2%
110,065
28.3%
8,095
2.1%
113,545
105,450
28.7%
111,489
6,039
1.6%
(10.5%) (9.9%)
(15.5%) (11.8%)
(11.5%) (6.0%)
400,426
30.8%
124,519
31.1%
20,561
5.1%
123,347
102,786
30.7%
122,945
20,159
5.0%
2.6%
(3.1%)
12.3%
Q4
402,697
27.7%
110,303
27.4%
1,084
0.3%
111,557
110,473
25.3%
101,947
(8,526)
(2.1%)
(1.6%)
(54.9%)
(0.3%)
1,169,484
29.7%
346,275
29.6%
36,603
3.1%
347,216
310,614
29.7%
347,056
36,442
3.1%
(7.9%)
(8.6%)
(2.3%)
2016
Q1 2016 Q2 2016
386,874
29.8%
111,767
30.4%
13,094
3.4%
115,196
102,102
29.7%
114,808
12,706
3.3%
390,494
28.4%
111,709
28.6%
3,978
1.0%
110,954
106,976
27.4%
107,128
0,152
0.0%
0.5%
(2.3%)
(3.9%)
1.7%
4.4%
1.9%
Q3 2016
372,920
28.7%
111,559
29.9%
9,463
2.5%
107,036
97,573
27.6%
102,909
5,336
1.4%
(6.9%)
(13.2%)
(16.3%)
1 Value of the adjusted EBITDA has been additionally adjusted for the costs of liquidated fixed assets related to the acquisition of subsidiaries (comparatives restated)
inwestor.netia.pl 15
Financial Performance| Adjusted EBITDA reconciliation to Net Results
9M 2016
345,172,289348,107,152Average number of outstanding shares (basic)
0.05EPS (in PLN, basic)
30,28316,107Net Profit +88%
(6,086)(4,707)Net financial expenses +29%
18,19436,442EBIT -50%
(306,651)(310,614)Depreciation and amortization -1%
324,845347,056EBITDA -6%
333,185347,216Adjusted EBITDA1 -4%
Unusual Items:
(4,260)M&A related costs
1,524Restructuring costs na
31,735Profit /(Loss) before tax -62%12,108
18,175Current tax and deferred income tax na(15,628)
PLN’000 9M 2015 Change
(368)(251)Integration costs +47%
(6,574)
1
Reorganization costs (260) 1.651 na
2
1
(100)
Mainly costs related to integration of TK Telekom
2
-98%
0.09
Return of the court deposit 4.000 - na
5
3 „Local Netia” and „Digital Netia” projects costs
-Transformation projects (909) na
-Access network modernization project (139) na
(913)Liquidation costs (1,479) +62%
-Extraordinary events (422) na
3
4
4 Costs of liquidated fixed assets related to the acquisition of subsidiaries
5 Increase of deferred tax asset and tax refund related to the new technologiesacquisition discount
Mainly staff redundancies related to cost of employmentrestructuring in TK Telekom
1 Value of the adjusted EBITDA has been additionally adjusted for the costs of liquidated fixed assets related to the acquisition of subsidiaries (comparative restated)
inwestor.netia.pl 16
• Capital investments in the B2C segment reflect mainly customer equipment necessary to connect newresidential customers to Netia’s access network and integration works within the cable networks located inWarsaw and Kraków, access network upgrades and IT licences
• Investments in the B2B segment include mainly extension of transmission network capacity, connecting newbusiness customers and IT licences
• Capital expenditures for the integration of TK Telekom in the amount of PLN 15 million are presented in theB2B segment
Capital investments by Operating Segments1
PLNm
Financial Performance | Capital Expenditure
Comments
1 Including TK Telekom and Petrotel in Other
84 87
7155
10
9
166
152
0
20
40
60
80
100
120
140
160
180
9M 2015 9M. 2016
B2B B2C Other
inwestor.netia.pl 17
• Netia delivered a set of solid financial results for Q3 2016, demonstrating relativebusiness resilience against a visible competition and price pressure in a difficultmarket environment for both commercial divisions
• The Group’s financial standing remains very strong with a leverage at a convenientlevel below 0.5x of the 2015 Adjusted EBITDA at PLN 459m
• On September 30, Mr. Cezary Chałupa, B2B General Manager, resigned from hisposition as the member of the Company’s Management Board. The resignation iseffective immediately
Conclusions
inwestor.netia.pl 18
Disclaimer
Some of the information included in this material contains forward-looking statements. Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements as
a result of various factors. For a more detailed description of these risks and factors, please see Netia's most recent financial report and press release. Netia
undertakes no obligation to publicly update or revise any forward-looking statements.