The European Commission said that it sent a letter to the UKE on Aug.20 threatening to veto its decision to cut interconnect rates to TPSA's competitors by 49%. Under rules passed in 2002, the Commission can force national regulators to withdraw regulatory measures based on faulty analysis, and it has done so five times. The UKE has until Oct.20 to respond to the Commission and said that it will re-write its proposals if the measures are vetoed.
Our view: We view this development positively as it underscores the excessive regulation in Poland, and supports our view that the UKE's measures willl have to be modified significantly. Given that the announced measures have already been discounted into TPSA's share price, we expect any positive development to unlock stock upside.