We operate on the Polish pay television market.

In 2010, 38.1 million citizens lived in around 14.5 million households in Poland. According to our estimates, in 2010 the pay television penetration rate in Poland was less than 72%, based on the adopted assumption that there are 14.5 million households, adjusted by approximately 0.5 million households using more than one pay TV service.

The following table presents subscribers to pay television in Poland between 2006 and 2010 (in thousands at the end of a given year.)

 

The growth in the number of pay DTH satellite television subscribers from 2006 to 2010 was much faster than the growth in the number of cable television subscribers. From 2006 to 2010, the compound annual growth rate ("CAGR") of pay DTH satellite television households was 29%, while the CAGR for cable television over the same period was 5%. The slow growth rate of cable television households was due to a high penetration rate of cable television in urban areas as well as to the reluctance of cable operators to make significant investments in cable infrastructure in other areas. Therefore, towns with up to 50,000 inhabitants, suburban and rural areas are the natural target markets for DTH satellite television because there are limited opportunities to develop cable television infrastructure in those locations and the local population has access to a limited number of Polish terrestrial channels only. In addition, the rapid growth in the number of pay DTH satellite television subscribers also reflects the fact that the digital satellite television providers' offer of television channels is much broader than the programming offer of cable television providers. 

We estimate that at the end of 2010 our market share in the digital pay satellite television segment, based on the number of subscribers, was about 55%.

Our direct competitors

We are the largest, in terms of the number of subscribers, pay digital satellite television platform providing DTH services in Poland and the Central and Eastern Europe region, and the fourth platform in Europe. Our main competitors are other pay digital DTH satellite television providers and, to a lesser extent, the cable television operators. We believe that in the future we will also compete with the digital terrestrial television. In our opinion, competition is based on price, programming offer, possibilities of offering integrated services (television, the phone and the Internet), customer satisfaction with services and the quality of the infrastructure.

Over the past few years, the satellite pay television market developed the fastest. This resulted mainly from lack of investment in infrastructure, and thus further development of cable television in Poland, as well as the lack of infrastructure to enable effective IPTV service offering.

The following chart shows the share of particular services in the pay television market in the years 2006-2010 based on the number of subscribers. 

We divide our competitors into four groups:

Pay digital satellite television operators

Currently, there are four operators of pay digital satellite television in Poland: Cyfrowy Polsat S.A operator of Cyfrowy Polsat, Canal+ Cyfrowy Sp. z o.o. operator of Cyfra +, ITI Neovision Sp. z o.o. operator of "n" platform and Telewizja na Kartę and Telekomunikacja Polska S.A., which  started providing  free DTH television signal in Q4 2008 whereas in October 2009 it implemented pay packages to their offer. We estimate that our share of pay DTH satellite television market, by number of subscriber, amounted to about 55% at 31 December 2010.

Our share in net additions on the pay satellite digital television, as measured by the number of subscribers acquired in 2010, was 48%, whereas our share in net additions in the last three years averaged 49%. From 2009, due to the increasing market saturation, one may notice a decrease in the number of new additions net for both the overall market for satellite television and in our case.

The following chart shows the share in net additions on the satellite pay television market in the years 2008-2010, based on the number of subscribers. 

From June 2010 we provide integrated services offer, consisting of satellite pay television services, Internet access services and mobile services. Offering integrated services is our important competitive advantage on the pay satellite television market in Poland. We also owe our strong position on the market to high level of brand recognition, competitive pricing, strong programming offering and focus on retention of subscriber base.

Cable television operators

We compete with cable television operators to a limited extent, due to the fact that they concentrate on clients residing in densely populated areas with developed infrastructure, or in locations where establishment of such infrastructure involves relatively low cost per subscriber, whereas we focus on clients residing in areas with no, or limited cable television infrastructure. Cable television operators concentrate on the growth of average ARPU through introduction of new services such as broadband internet, fixed telephony lines, or VOD service, and to a lesser extent, on the growth of the subscriber base. We believe we have an edge over cable television operators because we deliver our programming offer in digital quality providing higher quality of sound and vision than cable television operators who, in a large part, offer analogue quality of signal. Currently, cable television operators are able to offer about 60 channels only and are not able to offer over 500 FTA channels offered by the pay DTH digital satellite television providers. However, cable providers have an edge over the pay DTH digital satellite television providers in terms of offering integrated services and telecommunications services as they may use the cable television infrastructure to provide those services. Certain pay DTH digital satellite television operators in other European countries started providing broadband internet access services and fixed line telephony through entering into agreements with other companies, or through acquisitions of companies which provide such services. In the second quarter of 2010, we introduced integrated services, consisting of the pay satellite television services, internet access services and the telephone service. We believe that the possibility of offering integrated services in the future will let us effectively compete with operators of cable televisions.

There are about 630 operators of cable television which serve over 1,100 cable networks in Poland. At present, the largest operators on the Polish cable television market are: UPC Telewizja Kablowa Sp. z o.o., Telewizja Kablowa Vectra S.A., Multimedia Polska S.A. and Aster Sp. z o.o. (in December 2010 bought by UPC under the condition of getting approval from the Office of Competition and Consumer Protection), which serve over 60% of the cable television market in Poland. 

Digital television through internet protocol (IPTV)

The competitive threat from IPTV providers results from development of digital television signal broadcast through internet protocol, which is currently developing at a relatively slow rate in Poland. Telekomunikacja Polska S.A. (TPSA) started providing IPTV to its clients with DSL in 2006. TPSA is the dominant provider offering fixed line telephony services and owning a developed infrastructure of subscriber loops, therefore the introduction of IPTV services by TPSA may have negative impact on the business of cable television operator in Poland. It should not, however affect the business of pay DTH digital satellite television providers because TPSA's plans regard launching IPTV services in the majority of urban areas. At present, it is difficult to assess when TPSA will be able to significantly develop the IPTV offer in rural and suburban areas and also in small and medium towns and the impact of the offer on the business of pay DTH digital satellite television providers. At the end of 2010, 115 thousand subscribers used IPTV services offered by TPSA, additionally 35 thousand customers used IPTV services offered by Telefonia Dialog (according to the data published by the operators).

Digital Terrestrial Television (DTT)

The main threat coming from the digital terrestrial television technology is the removal of limitations regarding granting licenses for broadcasting frequencies and, as a result, an increased number of terrestrial channels. Currently, there are seven analogue terrestrial channels and only four of them are available to over 90% households. However, digitization has been postponed due to lack of formal regulations; there is also no formal government plan for utilization of available digital frequencies. We expect that the frequencies will be allocated to: digital terrestrial television and the HD television, radio and DVB-H (the standard enabling broadcast of television channels to mobile telephones). Currently, it is too early to assess the potential influence of the competition from digital terrestrial television on our pay DTH digital satellite television business.

We expect that in the next few years, the business of digital terrestrial television will be limited to current analogue terrestrial channels and its offer will extend after 2012 as a result of availability of new frequencies. The switch-off of analogue broadcast has been scheduled for 31 July 2013.