Niefinansowy Raport Polsatu za rok 2017

[GRI 102-15, GRI 102-11][Accounting Act - Opportunities and threats]

Opportunities and threats

We take advantage of our business opportunities

We are convinced that Poland is a very attractive market for the products and services that the Group currently provides or the ones it plans to provide in the future. The most important business opportunities are presented below:

  • Low penetration of multi-play services, in particular in non-urbanized areas;
  • Low penetration with fixed-line broadband Internet access services in Poland, makes mobile data transmission the fastest growing telecommunications market segment at present;
  • Development of the market of new technologies and devices, combined with a growth of access to audio and video content and consumption of such content;
  • Growing popularity of smartphones;
  • Development of advertising market in Poland;
  • Growing importance of thematic channels;

We analyze risks in detail

We understand business risks accompanying our operations. We also analyze risks in the area of ESG (Environmental, Social, Governance) related to social, employee, environmental issues, respect for human rights and preventing corruption. The most important risks identified by us are as follows:

(selected examples)

Risk area Key risk factors Polsat Group Cyfrowy Polsat Risk management method
Products and services:
Operating activities Losing the reputation of brands Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We regularly monitor the satisfaction level of our customers. While taking care of the image and reputation, we systematically analyze the main parameters of our brands’ condition (e.g. spontaneous and prompted brand awareness, Net Promotor Score) and their perception in relation to our main industry counterparts. We also cooperate with industry media and general media in order to build a positive image of our brands as well as consciously manage the relationships with our customers and partners. We regularly monitor discussion forums and social media in order to recognize possible negative phenomena and eliminate false information regarding our main brands. Moreover, we actively use our media (i.e., Polsat TV) to positively expose our brands.
Lack of possibility to effectively maintain and upgrade the telecommunication network and offer our customers attractive products and services in the areas threatened by digital exclusion Stroke 2 Created with Sketch. Inhabitants of small towns and rural areas have limited access to entertainment and education. We meet the expectations of these regions by presenting them with an attractive offer at affordable price. We also know that the universal Internet access is one of the biggest challenges of the information society of Poland and Europe at the moment. It is an extremely important element stimulating economic growth, culture and improvement of life of all citizens. Thanks to the investments into frequency, infrastructure and dedicated equipment, we have created a possibility of access to the fast speed Internet even in the areas in which there is no network coverage of other operators as well as to entertainment and education thanks to the television.

In order to be able to maintain and continuously develop our offer, we invest into knowledge of our technical and marketing teams which are responsible for preparation of state-of-the-art technology and services for our customers. We remain in an active dialog with industry advisors, standardization bodies and manufacturers of state-of-the-art telecommunication equipment which supports advanced technologies in order to identify future market trends and future needs of our customers as early as possible. We monitor the demand of customers for new services offered by competing entities in order to identify a possible and right moment to offer equivalents of such services.
Failing to maintain, extend or modify the distribution and sales network Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We strive to build a diverse distribution network (stationary sales, tele-sales, online sales, door-to-door channels) in order to diversify our sales channels. In each sales channel we cooperate with many partners, avoiding monopolizing of any channel by one strong partner who could decide to terminate the cooperation with us in the future. We also strive to protect our distribution network by taking over lease agreements for specific locations of Points of Sale which are important from the point of view of our business. We support our partners operating the sales network in local promotional activities. We organize attractive programs of rewarding the best sales representatives working in our sales channels
Insufficient protection of intellectual property rights Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. Within the concluded agreements we regulate the issue of obtaining the rights, we regularly monitor the time for which the licenses have been granted, we verify a need of obtaining intellectual property rights in each project, we contractually regulate the liability of entities granting rights for their possible legal defects.
A risk of fraudulent activities by our customers, in particular in relation to telecommunications and pay TV services Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We constantly monitor the usage generated by SIM cards registered in our systems, looking for any unusual traffic, voice, SMS or MMS patterns, which might signal a risk of fraud. If such a case is identified, we immediately take steps to prevent further stream of suspected illicit traffic. These activities include, among others, blocking of accounts or numbering ranges in Poland and abroad, using of anti-fraud solutions offered by the operators with whom we cooperate. In case of the international roaming services, accounts of our customers have usage limits, expressed as the maximum value of the bill, and the customer – after receiving a relevant SMS notification from us – can make an informed decision about cancelling such limits. In such a case, the customer is charged with the bill corresponding to his/her actual usage of roaming services.

We constantly monitor whether the intellectual property rights and anti-piracy measures and safeguards protect us against illegal access to our services and theft of our programming content. In case of detection of this type of fraudulent activities we take necessary legal actions. A risk of piracy is particularly severe for the operations of our television broadcasting and production segment and the paid distribution of content, and it is propelled by technological progress and conversion of multimedia content to digital formats, which makes it easier for high quality illegal copies of programs delivered in pay-per-view system through set-top boxes, unlicensed and unscrambled broadcasts in television or via the Internet to be created, distributed and rendered available on various media. Illegal use of our intellectual property may have a negative impact on our operations, harming our reputation and undermining confidence of our business partners in our capability to protect our own and licensed content.

We analyze in detail individual cases in order to implement possible precautionary measures, preventing similar situations in the future.
Alleged health risks of wireless communications devices leading to decreased wireless communications usage or increased difficulty in obtaining sites for base stations Stroke 2 Created with Sketch. We undertake educational activities with the aim to dispel possible concerns. We participate in local initiatives whose purpose is to provide the current status of knowledge to inhabitants of the areas in which we may possibly build our base stations. We strictly control signal strength on individual transmitters in order to meet the requirements of relevant standards for electromagnetic field emissions. We are actively involved in industry discussions accompanying legislative processes regulating the electromagnetic field emission standards.
Operational continuity:
Delays or lack of delivery of services, infrastructure or equipment and components from external suppliers Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We strive to cooperate with more than one supplier of each type of equipment or elements of our infrastructure. We place orders for the delivery of selected equipment components gradually, as the demand for certain products increases, in order to eliminate the situation in which accumulation of orders within a short period of time could lead to delays in delivery of a selected component. We develop a mid- and long-term rollout plans for our infrastructure which are then communicated to our main suppliers in due advance, which enables them to prepare the components we need within the agreed deadline.

We create lists of suppliers by categories and conclude Framework Agreements which allow for starting the cooperation on a very short notice.

We prepare in advance plans for the delivery of end-user equipment and monitor delivery schedules on an on-going basis, while maintaining an optimum level of inventory turnover in the Warehouse and in the Sales Network.

We secure ourselves against delays in the delivery of services and equipment by applying financial penalties in agreements with suppliers.
Network and broadcasting infrastructure, including information and telecommunications technology systems, may be vulnerable to circumstances beyond our control that may disrupt service provision
Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We strive to have redundant resources of the broadcasting, telecommunications and information technology infrastructure, in order to prevent or limit negative consequences of any emergencies. Redundant systems are usually housed in geographically distant locations, which prevents exposure of our infrastructure to locally based failures. We continuously work with regulatory bodies, trying to solve problems related to external interferences in the used frequencies.
Human resources:
Losing managerial staff and key employees Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We strive to ensure the attractiveness of the remuneration and incentive systems for our key employees and managerial staff. We regularly monitor the level of wages on the labor market, adjusting the level of remuneration offered by us to the market situation. We conclude clauses extending the notice period or non-competition clauses with selected employees. These clauses, among others, are to secure sufficient response time for us in order to prevent the loss of these employees. We support the development of key employees and managerial staff by offering them specialist trainings, MBA studies and other forms of professional trainings, while building their involvement and identification with the company.
Disputes with employees; growth of labor costs Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We take care of good relations with our employees and make sure that we meet all obligations of the employer under the labor law. If a dispute arises, we always strive to start a dialog in order to work out a compromise in the dispute with the employee. We have the Anti-Mobbing Policy and an efficient Anti-Mobbing Committee in place. We take good care of partner relations with employees’ representatives (2 trade unions).
Accidents of employees and sub-contractors Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We regularly train all our employees with respect to general Occupational Health and Safety regulations, as well as specific requirements for the scope of duties performed by them. We ensure appropriate level of safety at the workplace, as well as high quality of equipment and clothing guaranteeing the safety or our employees and sub-contractors.
Reputation and financial risk in case of bribery and corruption Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We regularly analyze the risk of corruption. We try to implement mechanisms which prevent or mitigate the risk of corruption. We strive to divide the responsibility related to making specific decisions, for instance through a multi-level and diverse path of approval of specific decisions. Such an approval usually goes across different areas in the structure of our company in order to minimize a risk of occurrence of corruption-generating circumstances.

Areas particularly vulnerable to the risk of corruption are subject to the detailed control with respect to appropriate application of internal regulations and guidelines.
Market and macro-economic environment Exposure to the effects of the regional or global economic slowdown
Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We strive to diversify our business activities into several areas and conclude contract agreements with our customers, which as a rule stabilizes our revenues in the mid-term. We try to offer services with a good quality-to-price ratio, which in our opinion will mitigate possible adverse impact of any economic slowdown on our financial results.
Legal and regulatory environment A risk that the Polish Office of Competition and Consumer Protection (UOKiK) deems the practices we use as limiting competition or violating the Polish competition and consumer protection laws Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We continuously analyze changes in the law which have implications for our market activities. All regulations, price lists and advertising campaigns prepared by our marketing departments are subject to verification and approval by our lawyers. We monitor the judicial practice of the Office of Competition and Consumer Protection (UOKIK) in order to adjust our activities to the guidelines defined by the Office.
Unfavorable rulings in administrative or court proceedings: Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We invest into knowledge of our own lawyers and we cooperate with specialized law firms which ensure the highest quality of legal services under the proceedings in which we are involved. Our in-house lawyers constantly monitor the judicial practice of courts or administrative bodies. We actively monitor the status of cases and participate in all meetings and hearings related to the cases in which we are involved. If an unfavorable ruling is issued in the end, we analyze with due diligence any appeal measures or methods of ensuring compliance with the recommendations of the relevant bodies or amicable solving of the dispute in cases in which there is a risk of upholding an unfavorable ruling by instances of appeal.
A risk of violation of Polish and EU law regulating our operations on telecommunications, pay TV and television production and broadcasting markets as well as possible sanctions and fines resulting from such a violation Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We invest into knowledge of the employees of our legal departments who are responsible for the implementation of new legislation to our business activities. We cooperate with specialized external law firms and consulting companies in order to support the organization in more complex projects. We actively participate in the activities of industry organizations which are involved in discussions with legislators and market regulators, in order to determine in due advance the scope of new legal obligations which may concern our activities.
A risk of violation of personal data protection law or requirements specified by the General Inspector of Personal Data Protection as well as possible sanctions and fines resulting from such a violation Stroke 2 Created with Sketch. Stroke 2 Created with Sketch. We invest into knowledge of the employees of our department dealing with personal data protection issues. We cooperate with specialized external law firms and consulting companies in order to support the organization in more complex projects. We invest into IT systems the aim of which is to restrict access to sensitive personal data of our customers only to justified cases. We collect and register declarations of our customers who express consent to using their personal data within the specific scope of our business activities or business activities of entities cooperating with us.
A risk of violation of Polish and EU law regulating in particular information obligations of the issuers of securities as well as possible sanctions and fines resulting from such a violation Stroke 2 Created with Sketch. We invest into knowledge of the employees of our department dealing with investor relations. We cooperate with specialized external law firms and consulting companies in order to support the organization in more complex projects. We regularly participate in conferences and trainings organized by institutions specializing in the field of information obligations, e.g. Polish Association of Listed Companies.

More information about risks affecting our operational and financial activities can be found in the Annual Report of Cyfrowy Polsat Group which is available online.

Main market trends

The main trends which we believe to be likely to have a material impact on the Group’s development prospects, revenue and profitability before the end of the current financial year include:

  • high level of market penetration with services provided by the Group as well as a high level of competitiveness of the markets in which we operate;
  • bundling of media and telecommunications services, as well as services from other sectors, such as electric energy or financial and banking products;
  • growing smartphone penetration among mobile network users; which entails the development of the mobile data transmission market;
  • growing demand for data transmission and high-speed broadband connectivity driven by changing consumer preferences and the resulting growing complexity of data transmission-based services;
  • development of state-of-the-art fixed broadband networks (NGA), optical fiber in particular;
  • dynamic development of non-linear video content, distributed via VOD and OTT services, accompanied by growing online ad spending;
  • entry of global VOD and OTT players to the Polish market, as well as investments of operators already present on the market in offered content on order to adjust it to the preferences of local viewers;
  • increasing sales of smart-TVs – television sets with integrated Internet access;
  • growing number of mobile customers and users, driven by, inter alia, gradual fixed-to-mobile substitution, and the growing popularity of machine-to-machine solutions;
  • pressure on revenue from traditional mobile telecommunications services caused by the intensifying competition on the mobile services market, and by traditional mobile telecommunications services being driven out by data transmission communication;
  • pressure on revenue from roaming services, resulting from the regulation of roaming charges in the European Union implemented in 2017;
  • change of pricelists on the TV advertising market resulting from high demand for advertising observed in 2017 and expected in 2018;
  • further fragmentation of the television market (growing share of thematic channels in audience and advertising revenue); and
  • consolidation of the pay TV market, in the cable TV segment;
  • ownership changes in the broadcasting and television production market;
  • consolidation of the telecommunications markets, manifested by acquisitions of local fixed-line operators by larger telecommunications groups; and
  • Significant slowdown of the scale of migration of subscribers towards free of charge digital terrestrial television.
WRÓĆ Wróć do początku strony