P4's COO, Chris Bannister, said in an interview with Dow Jones Newswires, that the company is looking to launch UMTS services by 4Q06 if they manage to secure sites for their planned 400 base stations by September. P4 is targeting 17% to 25% market share within 10 years, and plans to spend roughly EUR 1bn on its network over the next 5-6 years. He added that he forecasts to be EBITDA positive within 5 years of the launch. Equally important, he said that they are set to reveal a "substantial" marketing spend to launch their brand awareness campaign in September, after they decide on a brand name.
In our view, the news is likely to have a negative trading impact on Netia. Whilst their 17%-25% 10-year market share target is marginally ahead of our 15% market share forecast by 2015 (we already factor-in a 2H06 mobile launch in our forecasts), we are forecasting P4 to be EBITDA positive by year 3, or in 2009. We believe the operating costs related to launching the mobile network operations will come significantly ahead of market expectations, and therefore keep Netia's bottom line in the red longer than the 2 years that they have guided for at the beginning of 2006. We maintain our Sell recommendation on Netia due to challenging valuations (7.0x 2006F EV/EBITDA versus average 4.8x for the integrated operators), and substantial execution risk related to their WiMax and mobile operations.