Market Insight

Orange to sell Polish online assets

October 31, 2013


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Orange Polska agreed to sell Wirtualna Polska, Poland's oldest online portal wp.pl and associated with it websites, to Grupa o2 for PLN 375m (€ 89.5 m). As a result, the companies will merge into the new entity Grupa Wirtualna Polska. The deal will be financed by private equity fund Innova Capital. The transaction is subject to regulatory approval and is expected to be finalised by the end of the first quarter of 2014.

Wirtualna Polska is Poland's oldest online portal. It generates revenues primarily from advertising. Founded in 1995, it was subsequently bought by the Polish national telecommunication provider Telekomunikacja Polska (TP) in 2001. By 2002, telecommunications provider Orange controlled the majority stakes of TP. The decision to sell Wirtualna Polska is a part of new strategic plan focusing on the Orange's core businesses.

Grupa o2 owns a range of online properties in Poland and generates most of its revenue from advertising on these assets.The group tried to file an IPO, but withdrew from it in July 2012 due to lack of investor interest.

In terms of real users figure, Wirtualna Polska is the third largest group on the Polish market with 12.6m users in June 2012 across all of its properties. Grupa o2 was at the tenth place with 9.6m users. Wirtualna Polska's main competitor, Onet.pl Group was second table with 13.4m users below only Grupa Allegro.pl with 11.4m users. Individually, the most popular Polish horizontal portal was onet.pl with 12.5m users in June 2012, followed by Wirtualna Polska's top site wp.pl with 11.2m users. Grupa o2 had only 4m users in this month. The merger gives opportunity for both companies to create a competitor to Onet.pl.

The business models of both Wirtualna Polska and Grupa o2 are based on online display and email advertising. Both groups also have video platforms. Wirtualna Polska has historically been primarily focused on its own content available on wp.tv and tosiewytnie.pl. This is new territory for Grupa o2 whose own content production started only a year ago. Unlike Wirtualna Polska, Grupa o2 owns services where users upload their own content - wrzuta.pl and smog.pl.  All of these services are advertising funded.

All of these mean that the activities of Grupa o2 and Wirtualna Polska are complimentary. The merger will give the scale currently needed to drive sustainable growth in the fragmented Polish online landscape. Thanks to the integration Grupa o2 and Wirtualna Polska will be able to offer to its advertising clients and users attractive content video, thematic services and mobile applications.  The merger of Wirtualna Polska and Grupa o2 bundle is attractive as the advertisers will benefit from extended reach of its spot by investing their budget in a single company. Although there may be some duplication of users between the two groups and therefore the number of real users for Grupa Wirtualna Polska is yet to be determined, it will be very comparable to the Grupa Onet.pl figure. It will benefit both the group and the market, as it will become more competitive than ever. 

Although Polish online advertising market is already well developed, gathering 22.9 per cent market share in 2012, its growth was restricted due to its high fragmentation.  Grupa Wirtualna Polska will help in market consolidation; even more so as the board want to invest in further acquisition of online players in the Polish market and beyond. For the group, the merger is an opportunity to increase not only their user numbers, but most importantly generate more revenues from advertising. IHS estimates that after an increase of 10.8 per cent in 2012, the Polish online advertising market will see 7.1 per cent growth in 2013 and a CAGR of 8.3 per cent in the years 2012-2017.

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