Tele2 has announced that it will start offering fixed access lines in Poland at 15% lower rates than TPSA following the UKE's decision in July that requires TPSA to offer unbundled lines to Tele2 at a 41% discount to its retail rates.
Our view: We could see marginal negative trading impact on TPSA although we note that the impact of deregulation is already priced-in at 5.0x 2007F EV/EBITDA and 10.1x 2007F P/E. Tele2 currently has access to some 1.3m of TPSA's fixed line subscribers and have expressed its aim of deploying fixed lines to up to 50% of their existing customers by the end of 2007. We have already factored-in a 15.0% y/y line churn and 13.9% y/y decline in overall fixed line revenues for 2007 in anticipation of full impact of the deregulation measures. We believe that the discount on the back of deregulation is overdone, and we maintain our Buy recommendation on TPSA.