According to daily Parkiet, the European Commission is considering implementing regulations for wholesale rates in fixed telephony, which could translate into price hikes of up to € 8-10 per subscriber. According to the daily, the regulation relates to LLU users. The current wholesale rate for the LLU line paid by Netia to TPSA is PLN 22 (around € 5) per subscriber. The new prices would imply a hike of at least 50%. If the regulation is passed, it will be implemented from 2017.
According to our forecasts Netia will have 190k LLU lines at the end of 2012 and 232k at the end of 2017. The change in wholesale rates would boost Netia’s cost base by PLN 27.8m-50.1m in 2017 (or 5.6-10% of 2017 EBITDA). On the other side, the change would boost TPSA’s EBITDA by 0.6-1.2% in 2017. Taking a long-term perspective, and given that the announced rates are only a leak of the Commission’s proposal, we have decided not to apply these changes to our assumptions. We believe wholesale rates are unlikely to become equal across all of Europe and that the final decision on local rates will belong to the local regulator.