The head of telecom market regulator UKE, Mrs Strezynska, said that she is going to enforce a roaming agreement between new entrant P4 and existing operator Polkomtel, which would help the former to launch its services in 4Q06. The agreement has already been initiated, but not signed yet due to an objection from Vodafone, Polkomtel's minority shareholder.
Separately, the number portability in mobile pre-paid services would be finally introduced by all mobile telephony operators by 1 June 2006, after some initial delays. The fee for switching operators would be reduced to some PLN 50, from more than PLN 100, currently, according to sources at UKE, cited by oday’s ‘Rzeczpospolita’ daily.
While both news are positive for Netia’s mobile venture P4 (30% stake), they do not change our perception of limited business opportunities and execution risk for P4. Moreover, current valuation of 7.2x 2006F EV/EBITDA more than fully prices-in these developments. We do not believe Netia warrants the trading premium given that it owns only 30% of P4. We reiterate our Sell rating for the stock based on negative prospect for Netia's earnings.