1st Quarter Results - Corrected

OTE GROUP REPORTS 2012 FIRST QUARTER RESULTS

UNDER IFRS

·; Higher mobile revenues (up 1.5%) boost Group sales

o Lowest Group revenue drop in two years

·; Stable EBITDA margin at 35.4%

·; Adjusted Net Income up 52%

·; Strong Operating Cash Flow, up 39%

·; Sharp reduction in Underlying Net Debt, down €1bn year on year

ATHENS, Greece - May 10, 2012 - Hellenic Telecommunications Organization SA (ASE: HTO, OTC MARKET: HLTOY), the Greek full-service telecommunications provider, today announced unaudited consolidated results (prepared under IFRS) for the quarter ended March 31, 2012:

* See Exhibit VIII

** Excluding impact of Voluntary Retirement Programs and Restructuring Plans

*** Excluding €211.3mn in net capital gain on sale of Telekom Serbia stake in Q1'12, and €32.6mn in Q1'11, reflecting the after-tax effect of VRS charges

Commenting on OTE's performance in the first quarter, Michael Tsamaz, Chairman & CEO, noted: "We started the year on a solid first quarter. Our competitive drive, notably in mobile, led to the underlying improvement of OTE's performance in the quarter. Thanks to our continued operating and financial discipline, we were able to deliver robust EBITDA and cash flow, and a sharp reduction in our net indebtedness, down nearly €1bn from last year. Strong operating performances and the sale of our stake in Telekom Serbia yielded a sharp rise in net income for the period." Mr. Tsamaz added: "For the balance of the year, OTE will face a number of challenging external factors. The macroeconomic environment in our markets will remain difficult, and mobile termination rate cuts should affect our performance in the coming quarters. Facing these developments, we will continue to do everything in our power to preserve our top line, adjust our cost base, and improve our financial structure."

Financial Highlights

BREAKDOWN OF GROUP REVENUES

In Q1'12, the OTE Group's revenues dropped by only 3.6%, reflecting improved underlying trends in the Group's core activities. Revenue stabilization continued in the Romanian fixed business. For the first time since Q4'08, the Group's mobile operations posted a year-over-year quarterly revenue increase. The 3.4% drop in Other Revenues in the quarter is mainly attributable to lower rental income charged by OTE Estate to other OTE Group entities, thereby having no impact on consolidated EBITDA.

Total Operating Expenses, excluding depreciation, amortization, impairments and charges related to voluntary retirement programs, amounted to €763.7mn in Q1'12, a drop of 3.8% compared to €794.0mn in Q1'11. The decrease reflects lower payroll and employee benefits, lower costs of telecommunications equipment as well as considerable cost-containment efforts across all operations. Other operating expenses were up by 4.5%, largely reflecting higher TV content costs as well as higher commissions and taxes (other than income tax).

Reflecting continuing cost-cutting efforts, OTE's consolidated pro forma EBITDA margin was unchanged at 35.4% from the comparable quarter of the previous year.

The Group posted net income of €306.6mn for the quarter compared to €30.2mn in Q1'11. In Q1'11, the Group net result had been impacted by a €39.7mn charge for early retirement, while net income in Q1'12 benefited from the €211.3mn after-tax capital gain on the sale of OTE's interest in Telekom Serbia. Excluding these items and their tax consequences, OTE Group net income would have been €95.3mn in Q1'12 and €62.8mn in Q1'11, up 51.8% year over year. 

Capital expenditures in Q1'12 stood at €118.5mn (or 10% of Revenues), down 28.8% from the comparable quarter of the previous year (€166.5mn or 13.6% of Revenues in Q1'11). Capital expenditures in Greek fixed-line, Romanian fixed-line, and mobile operations amounted to €22.2mn, €15.9mn and €79.6mn respectively.

During the quarter, the Group generated Net Operating Cash Flow of €234.2mn, compared to €168.4mn in Q1'11, an increase of 39.1% year over year, reflecting reductions in working capital requirements as well as lower early retirement and interest payments.

Reflecting strong cash flow generation, the Group's underlying net debt declined by approximately €1billion or more than 22% year on year to less than €3.4bn. In Q1'12, OTE further increased its holdings of short-dated highly rated government notes, included under Other Financial Assets. Following the placement of the proceeds from the sale of OTE's stake in Telekom Serbia, received in Q1'12 into similar instruments, total holdings under Other Financial Assets at the end of quarter stood at €706.8mn.

OTE Group debt outstanding breaks down as follows:

1. Fixed Line Operations, Greece

ACCESS LINES & TRAFFIC STATISTICS

In Q1'12, OTE fixed-line operations in Greece recorded a loss of approximately 94,000 PSTN and ISDN retail connections, roughly in line with the trend in prior quarters. The total Greek market (OTE active retail lines, Wholesale line rental connections and full LLU subscribers) declined by 3.1% in Q1'12, a further deterioration compared to previous quarters (Q4'11: -2.5%, Q3'11: -2.3%, Q2'11: -1.8%, Q1'11: -1.4%). 

At the end of March 2012, OTE's retail ADSL customers stood at 1.1mn, a net loss of over 4,000 subscribers in the quarter, while the total Greek ADSL market (based on the Regulator's assumption that about 80% of full LLU subscribers are ADSL customers) added approximately 35,000 subscribers in the quarter. Total market growth was nearly halved compared to Q1'11, reflecting the continued impact of macroeconomic developments. Once again held back by its inability to compete effectively on pricing and to help reverse the overall slowdown of the Greek broadband market, OTE experienced further market share erosion in the Greek ADSL market.

During the quarter, OTE made further headway in the implementation of programs aimed at enhancing customer satisfaction. Simplified customer access to OTE's online and call center platforms has significantly reduced response time and improved fault correction. In the quarter, a total of 12 shops were adapted to the new retail concept introduced at the end of last year, bringing the total to 42 at March 31, 2012. OTE's updated cost model for 2012, validated by the regulatory authorities, should allow OTE to introduce more competitive prices. 

After a successful launch of its satellite TV service, building upon the foothold gained through its IPTV offering, OTE had attracted nearly 18,000 satellite subscribers at the end of Q1'12.

SUMMARY FINANCIAL DATA

* Excluding impact of Voluntary Retirement Programs

Total Greek fixed-line Revenues declined by 9.1% in the quarter, a stabilization of the improved rate of revenue drop experienced in recent quarters (Q4'11:-8.5%, Q3'11:-10.3%; Q2'11:-15.0%; Q1'11:-13.4%).

Total Greek fixed-line Operating Expenses, excluding depreciation, amortization and charges related to voluntary retirement programs, amounted to €301.0mn in Q1'12, a drop of 10.0% compared to €334.5mn in Q1'11. Total personnel-related cost (payroll, benefits, staff retirement indemnities and youth account) stood at 32.9% of total revenues in Q1'12, down from 36.0% in the comparable quarter last year, mainly as a result of personnel-cost reduction through the new labor agreement reached in late September and other initiatives announced in 2011.

2. Fixed Line Operations, Romania 

SUMMARY FINANCIAL & ACCESS LINE DATA

* Excluding impact of Restructuring Plans

Against a backdrop of continuing but fragile macroeconomic stabilization in Romania, RomTelecom posted a drop in revenues of just 3.7% in Q1'12, as a 15% decrease in voice service revenues and lower equipment sales were largely offset by sharply higher revenues from broadband and TV services, up 20% and 31%, respectively.

Compared to the end of Q1'11, the total number of broadband customers rose by 9%, while total TV subscribers, partly bolstered by subscriber acquisitions in the middle of last year, rose by 12%. Consequently, as a percentage of total RomTelecom voice clients, broadband penetration rose to 47% and TV service penetration to 49% by the end of Q1'12. Increased penetration also benefited from RomTelecom's focus on the promotion of cost-effective customized bundles, which have been well received in the marketplace.

RomTelecom's CDMA wireless broadband network achieved an important milestone in the quarter, passing the 100,000 customer mark.

NextGen, RomTelecom's low-cost subsidiary, continued to gain market share, achieving an 11% increase in subscriptions compared to Q1'11.

Payroll and benefits were down more than 12% during the quarter, extending the sharp declines achieved last year. Cost of equipment was also down sharply, reflecting changes in commercial policy.

Conversely, reflecting the expansion of its customer base and the rich sports programming it distributes, RomTelecom experienced a sharp increase in TV content costs. Payments to international operators were also higher, reflecting increased traffic.

All told, operating expenses (excluding Depreciation & Amortization and one-off costs) were down 2.8% in Q1'12 as compared to the same quarter last year. Pro forma EBITDA excluding redundancy costs was down 5.8% compared to Q1'11.

Depreciation & Amortization was down 31.6% compared to Q1'11, reflecting the impairment charges taken last year. As a result, RomTelecom returned to positive EBIT performance in the quarter, after seven quarters of operating losses.

RomTelecom pursued its migration to a more flexible, cost-effective operating model. So as to further enhance work efficiency, end-to-end process redesign initiatives were launched towards the end of 2011, thereby improving responsiveness to customer requests and positively impacting customer satisfaction.

3. Mobile Operations

SUMMARY FINANCIAL DATA

*Excluding impact of Restructuring Plan at Mobile Operations in Greece

At the end of Q1'12, the mobile operations of the OTE Group counted approximately 20.4 million customers, up by 0.7% from the prior-year level, mainly due to the positive performance in Greece and Bulgaria. Conditions remained highly competitive in each of the four countries in which the Group is present. Notwithstanding this, the mobile operations successfully defended their market positions without impacting their overall EBITDA margin.

Mobile Operations, Greece

As of the end of Q1'12, Cosmote provided mobile telephony services to 7.9 million customers in Greece, up 3.5% from March 31, 2011.

Against the challenging economic conditions that continue to impact consumer spending, Cosmote recorded a service revenue increase of approximately 1% in the quarter compared to Q1'11, when service revenues were depressed by aggressive pre-paid offers.  

Cosmote has developed a strong position in mobile internet data, supported by innovative, flexible offerings targeting all customer segments. In Q1'12, smartphones accounted for over one-third of handset sales.

In Q1'12, blended AMOU decreased by 4.9% to 284.5 minutes, while blended ARPU for the quarter was €14.6, up by approximately 1% from Q1'11, mainly reflecting higher ARPU in the prepaid segment.

Mobile Operations, Romania

In Q1'12, Cosmote's total customer base in Romania reached 6.4 million, of which 23.4% was postpaid. With service revenues up by 5.4% in a contracting market, Cosmote Romania continued to strengthen its market share despite intense competition. This was achieved without impacting margins, as EBITDA was up by 44.7% compared to Q1'11, reflecting significant operating improvements, notably lower marketing and G&A expenses.

Mobile Operations, Bulgaria

Globul's total customer base reached nearly 4.4 million at the end of Q1'12, up 10.8% from the prior year level, reflecting increases in both postpaid and prepaid subscriber numbers, as a result of the company's innovative voice and data solutions. Globul's hybrid fixed telephony offer posted significant growth compared to Q1'11, with a total subscriber base of over 200k customers at the end of Q1'12, while its mobile data subscriber base nearly tripled versus the same quarter of last year.

Service revenues in Q1'12 increased nearly 1% compared to Q1'11 despite intense competition in the business market segment and lower off-bundle customer spend. In a highly competitive market, management estimates that Globul's service revenue market share remained stable during the quarter.

Mobile Operations, Albania

At the end of Q1'12, AMC's customer base was 1.7 million subscribers, down 15.3% compared to Q1'11, mainly as a result of the company's effort to clean up its customer base from inactive customers.

Revenues decreased compared to the same quarter of 2011, negatively affected by intense competition in a highly fragmented market, and adverse macroeconomic conditions. Following the deregulation of international MTRs, management expects performance to improve in the upcoming quarters.

By the end of Q1'12, following its 3G rollout, the company had deployed over 160 base stations, achieving 95% population coverage. This will enable the company to strengthen its competitive position in the data segment.

AMC management pursued its efforts to optimize the organization's cost structure with particular focus on payroll and network expenses, yielding an EBITDA margin of 33.3% in Q1'12.

4. Events of the Quarter

Sale Of Telekom Serbia Completed

On January 25, 2012, the sale of OTE's entire 20% stake in Telekom Serbia was completed. OTE received total proceeds of €397.0mn (€380.0mn as selling price and €17.0mn as dividend). The after-tax capital gain from this disposal amounted to €211.3mn and has been recognized in the Q1'12 results.

5. Subsequent Events

In April 2012, OTE SA prepaid €300mn in aggregate under the €900mn Revolving Credit Facility (Bond Loan) that was signed on February 9, 2011.

6. Outlook

In 2012, OTE expects a rate of revenue erosion in its various operations commensurate with that experienced in 2011. The implementation of mobile termination rates in Greece and Bulgaria may impact Group revenues and profitability in the second half of the year. Reflecting its wide-ranging cost-reduction efforts and the full-year impact of its new labor agreement in Greek fixed-line, OTE expects its operating performance to further stabilize throughout the year.

OTE Group is Greece's leading telecommunications organization and one of the pre-eminent players in Southeastern Europe, providing top-quality products and services to its customers.

Apart from serving as a full service telecommunications group in the Greek telecoms market, OTE Group has also expanded during the last decade its geographical footprint throughout South East Europe, acquiring stakes in the incumbent telecommunications companies of Romania and Serbia, and establishing mobile operations in Albania, Bulgaria, and Romania. At present, companies in which OTE Group has an equity interest employ about 28,900 people in four countries, and our portfolio of solutions ranges from fixed and mobile telephony to Internet applications, satellite, maritime communications and consultancy services.

OTE shares are listed on the Athens Stock Exchange, and the London Stock Exchange (in the form of GDRs). Following their delisting from NYSE in September 2010, the company's ADRs trade in the US OTC market. OTE's American Depositary Receipts (ADR's) represent ½ ordinary share.

Additional Information is also available on http://www.ote.gr.

Contacts:

Dimitris Tzelepis - Head of Investor Relations

Tel: +30 210 611 1574, Email: [email protected] 

Maria Kountouri - Assistant to the Head of Investor Relations

Tel: +30 210 611 5381, Email: [email protected]

Kostas Maselis - Senior Financial Analyst, Investor Relations

Tel: + 30 210 611 7593, Email: [email protected]

Christina Hadjigeorgiou - Financial Analyst, Investor Relations

Tel: +30 210 611 1428, Email: [email protected]

Sofia Ziavra - Financial Analyst, Investor Relations

Tel: + 30 210 611 8190, Email: [email protected] 

Exhibits to follow:

I. Consolidated Balance Sheets as of March 31, 2012 and comparative 2011

II. Consolidated Income Statements for the three months ended March 31, 2012 and comparative 2011

III. Consolidated Statement of Cash Flows for the three months ended March 31, 2012, comparative Q1'11, Q2'11, Q3'11, Q4'11

IV. Group Revenues for the three months ended March 31, 2012 and comparative 2011

V. Segment Reporting based on the Group's legal structure

VI. Mobile Operations

VII. Operational Highlights

VIII. EBITDA and Pro Forma EBITDA calculation

EXHIBIT I - CONSOLIDATED BALANCE SHEET

EXHIBIT II - CONSOLIDATED INCOME STATEMENT

EXHIBIT III - CONSOLIDATED STATEMENT OF CASH FLOWS

EXHIBIT IV - GROUP REVENUES

EXHIBIT V - SEGMENT REPORTING (3M 2012)

*Excluding impact of Voluntary Retirement Programs and Restructuring Plans

EXHIBIT V - SEGMENT REPORTING (3M 2011)

* Excluding impact of Voluntary Retirement Programs and Restructuring Plans

EXHIBIT VI- MOBILE OPERATIONS

 *Excluding impact of Voluntary Retirement Programs and Restructuring Plans

EXHIBIT VII -OPERATIONAL HIGHLIGHTS

EXHIBIT VIII -EBITDA AND PRO-FORMA EBITDA CALCULATION

EBITDA and pro forma EBITDA, as defined by OTE, are financial measures that help OTE to evaluate its core business operating results, before investing and financing activities, and before the effect of depreciation, amortization and impairment and to compare the performance of OTE and its subsidiaries with that of its peer group, which mainly consists of other European incumbent telecommunications operators. The following table provides a reconciliation of profit/loss for the period attributable to shareholders of the parent to EBITDA and pro forma EBITDA.