This document is a conversion to pdf format of the official annual financial report that was issued in xhtml format. ORANGEPL RR ☐ - adjusted POLISH FINANCIAL SUPERVISION AUTHORITY Annual report RR for the year 2020 (year) (according to par. 60 s. 1 pkt 3 of the Decree on current and periodic information) for the issuers in sectors of production, construction, trade or services (type of issuer) for the year 2020, i.e. from 1 January 2020 to 31 December 2020 including, separate financial statements prepared under: IAS in currency: PLN date of issuance: 17 February 2021 ORANGE POLSKA SA (full name of issuer) ORANGEPL Telecommunication (tel) (abbreviated name of the issuer) (classification according to WSE/sector) 02-326 Warsaw (post code) (location) Al. Jerozolimskie 160 (street) (number) 22 527 23 23 22 527 23 41 (telephone) (fax) [email protected] www.orange.pl (e-mail) (www) 526-02-50-995 012100784 (NIP) (REGON) 259400TOMPUOLS65II22 0000010681 (LEI) (KRS) Ernst & Young Audyt Polska Sp. z o.o. Sp. komandytowa (auditor) Polish Financial Supervision Authority 1 ORANGEPL RR PLN ‘000 EUR ‘000 SELECTED FINANCIAL DATA 2020 2019 2020 2019 I. Revenue 10,479,000 10,646,000 2,342,095 2,474,778 II. Operating income 382,000 379,000 85,378 88,103 III. Profit before income tax 57,000 95,000 12,740 22,084 IV. Net income 47,000 79,000 10,505 18,364 V. Earnings per share (in PLN/EUR) 0.04 0.06 0.01 0.01 VI. Weighted average number of shares (in millions) 1,312 1,312 1,312 1,312 VII. Total comprehensive income 34,000 51,000 7,599 11,856 VIII. Net cash provided by operating activities 2,977,000 2,917,000 665,370 678,088 IX. Net cash used in investing activities (2,082,000) (1,919,000) (465,334) (446,092) X. Net cash used in financing activities (941,000) (1,193,000) (210,317) (277,326) XI. Net change in cash and cash equivalents (46,000) (195,000) (10,281) (45,330) Balance as at Balance as at Balance as at Balance as at 31/12/2020 31/12/2019 31/12/2020 31/12/2019 XII. Total current assets 2,991,000 3,103,000 648,132 728,660 XIII. Total non-current assets 20,913,000 21,492,000 4,531,724 5,046,848 XIV. Total assets 23,904,000 24,595,000 5,179,856 5,775,508 XV. Total current liabilities 7,399,000 4,015,000 1,603,320 942,820 XVI. Total non-current liabilities 5,972,000 10,090,000 1,294,097 2,369,379 XVII. Total equity 10,533,000 10,490,000 2,282,439 2,463,309 XVIII. Share capital 3,937,000 3,937,000 853,125 924,504 The statement of financial position data as at 31 December 2020 and 2019 presented in the table “Selected financial data” was translated into EUR at the average exchange rates of the National Bank of Poland (“NBP”) at the end of the reporting period. The income statement data, together with the statement of comprehensive income and statement of cash flows data for the years ended 31 December 2020 and 2019, were translated into EUR at an exchange rates which is the arithmetical average of the average NBP rates published by the NBP on the last day of each month of years ended 31 December 2020 and 2019. The exchange rates used in translation of statement of financial position, income statement, statement of comprehensive income and statement of cash flows data are presented below: 1 EUR 31 December 2020 31 December 2019 Statement of financial position 4.6148 PLN 4.2585 PLN Income statement, statement of comprehensive income, statement of cash flows 4.4742 PLN 4.3018 PLN Polish Financial Supervision Authority 2 Dear Shareholders, Despite unprecedented challenges resulting from the Covid-19 pandemic, 2020 was a successful year for Orange Polska. We delivered on our financial commitments thanks to exceptional measures related to cost savings, our value strategy, strongly supported by fibre, and the concerted efforts of all our teams. Overcoming such difficulties makes us more confident as we enter a new strategic period. OPL operations relatively resilient to the pandemic The Covid-19 crisis has tested our ability to adapt to dynamically changing external conditions. We reacted very swiftly, organising remote work for around 10,000 employees within just a few days and ensuring continuation of all business processes without disruption. I would like to thank all our teams for this effort, undertaken in exceptional circumstances. As the majority of our profits are derived from subscription services, our operations proved relatively resilient to the pandemic. Data and voice connectivity has become more essential than ever to the needs of consumers and businesses. Responding to social needs At the beginning of the pandemic, we were able to put our social responsibility values into action in areas where connectivity has become especially crucial. We lent our support in response to the community’s needs in numerous initiatives around the country. To mention just a few: we upgraded our network performance in hospitals and other critical public institutions. We provided various hospitals and medical centres with smartphones and free data allowance. For our elderly customers, we put in place delayed payment mechanisms and offered free shipping for online orders. Finally we supported pupils and teachers in the transition to online learning through a special Orange Flex offer, supplies of modems and tablets, and webinars organised by the Orange Foundation. Towards a different working model The pandemic has forced our teams to work remotely. We do have hopes that the life will return to normal as soon as possible however we believe that this experience is likely to permanently change our work environment. Engaging all our employees we have been developing hybrid work system that we called SMILE (that stands for Safe, Mobile, Integrated, Leading, Efficient). We received feedback from more than 900 of our people with different initiatives how to improve it. The new model is based on the introduction of 2/3 days of flexible working for the majority of our teams. It requires the development of various new digital skills and new tools in our offices. We will start work to optimise our office space after the pandemic. Orange fibre network reaches 35% of Polish households The crisis proved more than anything that the decision we made a few years ago to heavily invest in fibre was the right one. Our fibre customer base increased almost 40% last year to reach 725,000. Customer take-up accelerated, especially in the second half. Fast fixed broadband is increasingly seen as an essential household utility, and this trend was accelerated by the pandemic. Our strong fibre results were also driven by further extension of the fibre footprint, where our investment process shifted more towards mid and small cities where demand is higher, and by our improved sales performance. Our fibre services have reached five million Polish households, fulfilling our strategic ambition set in 2017. This is a unique infrastructure asset that will constitute our competitive advantage for decades to come. Encouraged by the big potential of this market we plan to extend our footprint, preferably with a different business model. We are looking to work with a financial partner to roll out open-access fibre as a joint venture. Our value strategy is working in fixed and mobile The shift to value in our commercial approach has been one of our key strategic priorities. In 2020 we successfully combined strong growth of customer numbers with improving trends in the average revenues they generate (ARPO). Growth of our fixed broadband customer base doubled versus 2019 to 95,000, with ARPO marking a spectacular turnaround increasing by almost 5% (as compared to c. 2% decline in 2019). Mobile handset customer base growth was the highest in 3 years. ARPO trend improved to -4% year-on-year (from -6% in 2019), despite a significant negative impact from roaming. Excluding roaming, the decrease was contained to less than 1%. The key drivers of these improvements were tariff increases made in 2019. In fixed broadband, results were additionally boosted by the growing share of fibre, which generates by far the highest revenue per customer of all technologies. As a result, revenues from key telecom services (combining convergence, mobile and fixed broadband), which are essential to our margin generation, more than doubled their growth rate in 2020 to 2.9%. OPL as strategic partner in digital transformation of business customers As part of our strategy we are strongly developing the ICT area, as we see significant synergies with our core telco services for business customers. Polish entreprises digitise their businesses, which means that on top of connectivity and infrastructure they also need software engineering, cloud and other digital enablers. The basis of our development is organic growth coupled with carefully selected acquisitions to complement our competencies. Our acquisitions of BlueSoft in 2019 and Craftware in 2020 perfectly filled gaps and increased our competitive edge against both other telecom operators and pure ICT companies. Craftware gives us premiere exposure to the fast growing CRM market. Rapid shift of purchases to online makes connected CRM a central element of the IT architecture of many businesses. Well-executed Orange.one strategy brought financial turnaround In 2020 we completed the implementation of our Orange.one strategy announced in September 2017. I have no doubt it made Orange Polska a much stronger player in all key market segments and much more efficient.