Recognising the importance of wireless-enabled 'everything everywhere' services to Polish connected consumers, Netia has pledged to invest PLN200mn in 2014 to expand its reach. A network of public Wi-Fi hotspots will be part of that expansion. Utilising several different Wi-Fi business models, the company aims to develop new revenue streams in addition to improving its customer acquisition/retention rates. BMI believes such strategies will be key to helping Netia survive in the fast-growing and highly competitive broadband market.
Netia served 1.489mn voice and 849,000 broadband subscribers, as well as 120,000 TV subscribers, at the end of 2013. However, its network is generally based on ageing hybrid fibre-coaxial (HFC) cable and Ethernet technology, unsuited to consumers wanting access to high-speed, high-definition services outside the home as well as inside. Rivals such as UPC, Multimedia Polska and incumbent TP SA have proved more adept at upgrading their networks to provide unified communications service packages and, in consequence, Netia's subscriber numbers have been falling since 2011.
|Multi-Play Key To Success In Poland|
|Broadband Sector Forecasts, 2012-2018|
In February 2012, Netia announced a partnership with Wi-Fi hotspot provider Fon, immediately giving its customers access to the 100,000 hotspots Fon operated in Poland. Today, Fon supports more than 250,000 hotspots in Poland and 12.6mn worldwide. These facilities have enabled Netia customers to access their broadband accounts and make voice calls from a wide variety of locations - typically in shopping malls, business centres and transport hubs. Yet subscriber numbers continue to fall.
Netia believes it must broaden the appeal of its Wi-Fi network beyond the fickle consumer sector, a sentiment that BMI shares. Netia was recently contracted to provide Wi-Fi services for the Coffee Heaven chain of high street stores; such deals offer greater long-term revenue earnings potential than ad hoc consumer connectivity. In addition to the revenues earned from operating the network on behalf of its client, Netia can earn extra revenues from on-net advertising.
Netia also quotes European Commission data, showing that 71% of data sent via wireless networks to connected devices in 2012 came from Wi-Fi networks. BMI believes this means that Netia may be looking to provide Wi-Fi backhauling and traffic offloading facilities for Poland's mobile network operators, which anticipate a rapid increase in data traffic volumes that even their 4G LTE networks might struggle to cope with. We believe this to be a lucrative business for Netia, which could indirectly benefit from reciprocal access to mobile broadband networks for its nascent TV-centric 'everything everywhere' services.
While Wi-Fi access remains an ad hoc means of accessing broadband services and is rarely used as an exclusive or standalone form of access for subscribers, Netia's increased investment in public Wi-Fi will not affect BMI's broadband sector forecasts. However, it will indirectly affect our outlook as increased availability of Wi-Fi will encourage more subscribers to adopt cable, fibre, xDSL and mobile broadband subscriptions and we think the investment will realise a small degree of uplift to our forecasts in the longer term. Currently, we envisage broadband subscription numbers in Poland rising from 11.967mn in 2013 to 14.235mn by 2018, with the penetration rate reaching 37.3% by the end of the period.