29th Nov 2006 08:14
Hellenic Telecomms Organization S A29 November 2006 OTE GROUP REPORTS 2006 THIRD QUARTER RESULTS UNDER IFRS (UNAUDITED) • Q3 operating revenues up 5.6% on good performance across all activities and markets • Greek fixed-line margin boosted by headcount reduction and cost-cutting; excluding €50mn in VRP reversal, OIBDA margin above 30% in 9 months, 35% in Q3'06 • Group OIBDA margin excluding VRP and other non-recurring items up 3.5 points in Q3'06 • Group realignment continues in Q4'06 with sale of ArmenTel stake for €342mn and completion of Germanos acquisition ATHENS, Greece - November 29, 2006 - Hellenic Telecommunications Organization SA(ASE: HTO, NYSE: OTE), the Greek full-service telecommunications provider, todayannounced consolidated unaudited results (prepared under IFRS) for the quarterand nine months ended September 30, 2006. CONSOLIDATED FINANCIAL HIGHLIGHTS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 IN ACCORDANCE WITH IFRS • mn except Q3 06 Q3 05 % Change 9M 06 9M 05 % Changeper share dataRevenues 1,483.9 1,405.2 5.6% 4,302.5 4,075.9 5.6%Operating Income/ 403.5 (546.8) - 869.3 (160.0) -(Loss)Pre-tax Income/ 378.1 (568.6) - 812.0 (154.7) -(Loss)Net Income/ (Loss) 223.6 (493.2) - 445.5 (296.7) -Basic EPS/ (Loss) 0.4562 (1.0062) - 0.9089 (0.6053) -(•)Operating IncomebeforeDepreciation & 678.1 (268.8) - 1,708.2 680.2 151.1%AmortizationPro Forma*Operatingincome before 628.3 544.6 15.4% 1,658.4 1,518.7 9.2%Depreciationand Amortizationas % of 42.3% 38.8% 3.5pp 38.5% 37.3% 1.2ppOperatingRevenuesCashflowfrom Operations 423.5 362.2 16.9% 1,212.3 1,045.6 15.9%CAPEX as % of 12.5% 11.9% 0.6pp 13.6% 9.9% 3.7ppRevenues *Excluding the impact of OTE S.A. Voluntary Retirement Program (€912.9mn chargein Q3'05 and €49.8mn reversal in Q3'06) and non-recurring gains related toCosmoRom at RomTelecom (€99.5mn in Q3'05). Commenting on the quarter, Panagis Vourloumis, Chairman and CEO, noted:"Our results this quarter are encouraging. We are defending or improving our topline in all operations, with strong growth in broadband penetration and inmobile. We are containing operating expenses as headcount reduction andcost-cutting in mature activities compensate higher expenses in ourfaster-growing businesses. With the sale of ArmenTel, generating a healthy gain,we have increased our focus on Greece and its direct neighbors, while theGermanos retail operations, which will be consolidated in the fourth quarter,dramatically reinforce our distribution capabilities in most countries." Mr.Vourloumis added: "To maintain a satisfactory level of performance and positionourselves for heightening competition in all our markets, we must take advantageof our improved situation to pursue and intensify the structural reforms thathave enabled us to get where we are." Financial HighlightsRevenuesOTE Group Revenues increased by 5.6% in the three months ended September 30,2006. The increase reflects higher revenues mainly from mobile telephony, ADSL,monthly rentals and sales of telecommunications equipment. OTE Fixed-line Voluntary Retirement PlanOn October 14, 2006, OTE successfully completed its Voluntary RetirementProgram. Out of 5,500 employees that had initially applied for early retirement,a total of 5,400 effectively departed since the beginning of 2005, in twotranches. The estimated accounting cost of the program was €939.6mn, fully charged inOTE's 2005 full-year results. OTE reversed part (€49.8mn) of this charge inQ3'06, reflecting the effective number and mix of departures as well as relatedadjustments in the present value of the VRP costs. In addition, to reflect thetax effect of this adjustment, deferred tax assets were reduced by approximately€12.5mn, with a similar amount charged in income taxes for the quarter. By theend of 2006, the total headcount of OTE's Greek fixed-line operations isexpected to fall below 12,000, including approximately 1,200 newly hiredemployees. Total Operating ExpensesTotal Operating Expenses excluding depreciation and amortization and excludingextraordinary items amounted to €855.6mn, down 0.6% from Q3'05, as higher OtherOpex was offset by the decrease in employee costs. Payroll and Employee BenefitsPayroll and Employee Benefits decreased by 11.1% to €278.0 mn in Q3'06,primarily reflecting the benefits of the OTE fixed-line Voluntary RetirementPlan. Other Operating ExpensesOther Operating Expenses were up 8.1% to €291.2mn, fueled by higher commissionsto distributors and advertising costs. Operating Income before Depreciation and AmortizationOperating Income before Depreciation and Amortization (OIBDA) totaled €678.1mnas compared to a loss of €268.8mn in Q3 last year, when the Group had incurred acharge of €912.9mn for its Voluntary Retirement Program but benefited from a€75.7mn reversal of fixed asset impairment and €23.8mn in extinguishment ofliabilities, both related to its mobile telephony operations in Romania. InQ3'06, OIBDA was boosted by €49.8mn in reversal of Voluntary Retirement charges.Excluding these non-recurring factors, OIBDA rose from €544.6mn in Q3'05 to€628.3mn in Q3'06, while the Group OIBDA margin rose from 38.8% to 42.3% overthe same period. Net incomeIn the quarter OTE Group posted Net Income of €223.6mn. In Q3'05 the group hadreported a net loss of €493.2mn, due to the VRP. Cash flowCash provided by operating activities amounted to €423.5mn for the three monthsended September 30, 2006. The 16.9% growth in cash flow from operations reflectshigher net income and working capital discipline, and was achieved despite acash outflow of approximately €115.0mn in the quarter related to Greekfixed-line redundancy payments. Capital ExpenditureCapital expenditure in the third quarter of 2006 totaled €185.9mn, more than 11%higher versus the respective period of 2005, mainly reflecting mobile telephonyinvestments. DebtOn September 30, 2006, the OTE Group gross debt was €4,197.2mn, an increase of22% compared to December 31, 2005, while net debt totaled €1,900.2mn, down 1.4%from 2005 year end. The debt break down for September 2006 excludes Armentel'sCash Balance of €36.8mn and Gross Debt of €33.0mn. OTE debt outstanding breaksdown as follows: • mn Sep 30, 2006 Dec 31, 2005 % ChangeShort-Term:-Bank loans 872.3 14.3 -Medium & Long-term:-Bonds 2,604.0 2,598.0 0.2%-Bank loans 720.9 794.2 -9.2%-Other loans 0.0 33.4 -Total Indebtedness 4,197.2 3,439.9 22.0%Cash and Cash equivalents 2,297.0 1,512.2 51.9%Net Debt 1,900.2 1,927.7 -1.4% 1. OTE Fixed-Line TRAFFIC STATISTICS Minutes, millions Q3 06 Q3 05 % ChangeLocal 2,530.1 2,596.6 -2.6%National Long - Distance 454.6 473.7 -4.0%International Long - Distance 76.0 85.3 -10.9%Fixed-to-Mobile 472.9 465.1 1.7%Special Calls 49.8 51.9 -4.0%Total Voice traffic 3,583.4 3,672.6 -2.4%Subscription Dial-up Internet 1,777.3 2,717.3 -34.6% OTE estimates that its share of the Greek fixed-line market, as measured inoutgoing call minutes (excluding subscription dial-up internet), was roughlyunchanged in Q3'06. • mn Q3 06 Q3 05 % Change 9M 06 9M 05 % ChangeRevenues 679.5 676.9 0.4% 2,056.8 2,019.6 1.8%- Basic Monthly Rentals 174.3 170.5 2.2% 518.6 503.2 3.1%- Fixed-to-fixed calls 118.7 122.9 -3.4% 386.7 399.8 -3.3%- Fixed-to-mobile calls 77.7 88.0 -11.7% 239.7 251.8 -4.8%- International 51.2 52.9 -3.2% 142.9 166.6 -14.2%- Other 257.6 242.6 6.2% 768.9 698.2 10.1%Operating Income/ (Loss) 157.8 (878.3) - 275.4 (833.5) -Operating income beforedepreciation andamortization/ (Loss) 288.2 (744.3) - 671.7 (429.6) -Voluntary retirementcosts/ (reversal) (49.8) 912.9 - (49.8) 938.0 -Pro Forma Operating incomebefore depreciation andamortization 238.4 168.6 41.4% 621.9 508.4 22.3%as % of Operating revenues 35.1% 24.9% 10.2pp 30.2% 25.2% 5.0ppDepreciation &Amortization 130.4 134.0 -2.7% 396.3 403.9 -1.9% In Q3'06, total fixed-line revenues were roughly unchanged at €679.5mn. Theincrease in PSTN/ISDN basic monthly rental tariffs implemented in April, alongwith strong ADSL take-up and stronger revenues from leased lines and datacommunications offset the decline in revenues from fixed-to-fixed,fixed-to-mobile and international telephony. The drop in fixed-to-mobile callrevenues is wholly attributed to lower termination rates implemented by themobile operators in June and passed on by OTE to its clients. As of the end of September 2006, there was a total of approximately 4.8 millionPSTN lines in service, down by 2.2% from the prior year level. ISDN lines (64K)rose by 4.2% to a total of nearly 1.4 million. At the end of September 2006, OTE had over 373,000 ADSL customers (with anapproximate split of 2/3 retail and 1/3 wholesale), with the total marketreaching nearly 390,000 customers. This compares to over 300,000 and 310,000respectively, at the end of June 2006. The ongoing strong take up partlyreflects the increased promotional efforts by OTE and resellers, which werefurther enhanced by OTE's upgrade of all ADSL access speeds, at no extra charge,during the quarter. According to a recent study issued by Point Topic on GlobalBroadband Statistics, Greece posted the world's highest rate of increase inbroadband penetration in the second quarter of the year. Installed ADSL capacity continues to grow at a rapid pace in order to enable OTEto meet strong market demand for broadband services. OTE remains on track toachieve its target of 500,000 ADSL customers at year-end. Total operating expenses excluding the impact of OTE S.A. Voluntary RetirementPlan in 2005 and 2006 amounted to €571.5mn, down 11% from Q3'05. Payroll andemployee benefits declined by 20% to €163.5mn, largely reflecting the positiveimpact of the Voluntary Retirement Program. Other operating expenses declined by 8.1% in the quarter, to €119.1mn, largelydriven by lower Repairs & Maintenance and Cost of Materials. In addition,Provisions for doubtful accounts posted a sharp drop, reflecting OTE's ongoingcollections improvements. Operating Income before Depreciation and Amortization excluding the impact ofOTE S.A. Voluntary Retirement Plan in 2005 and 2006 rose by 41.4% compared toQ3'05 and reached its highest quarterly levels for the past two years, at€238.4mn. OIBDA margin improved by 10.2 points to 35.1% of operating revenues. An analysis of the OTE Fixed-line Other Operating Expenses follows: • mn Q3 06 Q3 05 % Change 9M 06 9M 05 % ChangeRepairs, maintenance,Cost of materials 12.9 20.9 -38.3% 46.9 74.9 -37.4%Provision for doubtfulaccounts 13.4 24.0 -44.2% 47.4 64.0 -25.9%Advertising 11.9 11.7 1.7% 26.4 28.5 -7.4%Taxes other than incometaxes 3.6 2.4 50.0% 6.3 7.8 -19.2%Other 77.3 70.6 9.5% 230.5 218.7 5.4%-Third party fees 32.7 29.3 11.6% 95.3 92.0 3.6%-Travel costs 1.7 1.9 -10.5% 4.8 5.2 -7.7%-Audiotex 1.8 3.2 -43.8% 6.6 12.3 -46.3%-Other 41.1 36.2 13.5% 123.8 109.2 13.4% TOTAL 119.1 129.6 -8.1% 357.5 393.9 -9.2% 2. Cosmote SUMMARY CONSOLIDATED RESULTS FOR THE THIRD QUARTER OF 2006IN ACCORDANCE WITH IFRS (UNAUDITED) • mn Cosmote Greece AMC GloBul CosmoFon Cosmote Consolidated Romania Q3 06 Q3 05 % ChangeRevenues 435.6 40.9 92.8 15.8 12.5 593.5 501.1 18.4%Operating incomebefore depreciationand 201.1 25.2 34.1 4.7 -15.8 248.6 224.0 11.0%amortization as % ofOperatingrevenues 46.2% 61.6% 36.7% 29.5% n/a 41.9% 44.7% During the third quarter Cosmote revenues continued to grow, driven by strongperformance in both the Balkans and in Greece. International operationsaccounted for approximately 27% of revenues, a percentage that is expected tocontinue increasing. In Greece, Cosmote revenues rose by 6.4% in Q3'06, continuing the trends ofprevious quarters, despite the reduction in interconnection rates imposed by theRegulator. Operating Income before Depreciation and Amortization increased by10% in the quarter while the respective margin reached 46.2%. Higher usage and astrong subscriber take up boosted revenues. The successful promotion of bundledpackages resulted in 24% increase in monthly fees for the third quarter 2006. Blended AMOU continued its positive trend and reached 152 minutes at the end ofthe nine months, mainly driven by post-paid AMOU. Blended ARPU for the sameperiod rose to €30.5, marginally higher than the respective quarter of 2005. Atthe end of September 2006 Cosmote's customer base was over 5 million, 11% higherthan a year ago, affirming its leading position in the Greek mobile market. In Albania, AMC posted revenues of €40.9mn in Q3'06, 7.3% higher than in Q3'05,while Operating Income before Depreciation and Amortization increased by 7.1%reaching €25.2mn. Blended AMOU for the nine months was 62 minutes, compared to67 minutes a year ago and blended ARPU for the same period stood at €15.Subscribers totaled 900,965 posting an increase of 18.2%. In Bulgaria, GloBul sustained its strong performance in the quarter. Revenuesrose by 15.5% reaching €92.8mn, while Operating Income before Depreciation andAmortization increased by 4.0% reaching €34.1mn for a margin of approximately37%. Blended AMOU for the nine months was 70 minutes, posting a 13% increase,compared to the same period last year, while blended ARPU for the same periodremained at €11. In FYROM, CosmoFon realized a 29.8% revenue increase to €15.8mn, mainly drivenby a strong subscriber take up. Operating income before Deprecation andAmortization rose by almost 80% in the quarter with a margin of 29.5%. BlendedAMOU at the end of the nine months reached 55 minutes, while blended ARPU forthe same period stood at €10. In Romania, Cosmote Romania continued to work toward its targets for the yearand gained an increasing share of new subscribers. The total number of customersat the end of September 2006 was 669,685, the majority of which (c.83%) remainsprepaid. Blended ARPU rose to €6.2 in the nine months, and, as network coverageis improving, the customer mix is expected to lead to further progress.In all markets of operations, Cosmote has improved both its market position andfinancial performance. Consolidated revenues for the third quarter of 2006amounted to €593.5mn, increasing by 18.4% while consolidated Operating Incomebefore Depreciation and Amortization as percentage of Operating revenues fellfrom 44.7% in the third quarter of 2005 to 41.9% in the third quarter of 2006,reflecting the newly consolidated growth assets that are at an early developmentphase, with lower margins currently. Additional details are available in Cosmote's third quarter 2006 press releaseissued on November 9, 2006. 3. RomTelecom OTE, through its wholly owned subsidiary OTE International Investments Ltd,holds a 54.01% interest in RomTelecom S.A., the incumbent telecommunicationsoperator in Romania. RomTelecom's key financial figures are stated below: ROMTELECOM STATEMENTS OF OPERATIONS THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005IN ACCORDANCE WITH IFRS (UNAUDITED) • mn Q3 06 Q3 05 % Change 9M 06 9M 05 % ChangeRevenues 225.0 226.5 -0.7% 665.0 693.9 -4.2%Operating IncomebeforeDepreciation & 93.1 90.9 2.4% 259.8 267.7 -2.9%amortizationas % ofOperating 41.4% 40.1% 1.3pp 39.1% 38.6% 0.5ppRevenuesOperating Income/ 34.1 27.2 25.5% 66.6 58.1 14.7%(Loss)Net Income/ 27.0 35.6 -24.2% 41.6 95.4 -56.4%(Loss)Net Income/ 12.0% 15.7% -3.7pp 6.3% 13.7% -7.4pp(Loss) MarginIncrease/(Decrease) in 42.4 16.4 158.5% 101.7 66.0 54.1%Gross PP&E Fixed Telephony, 3,637,146 4,072,528 -10.7%Lines Sep 30, 06 Dec 31, 05Cash and cashequivalents 236.1 157.5 49.9%Short-term 0.0 0.0 -borrowingsLong-term debt (110.6) (148.4) -25.5%Net Cash 125.5 9.1 -Position In Q3'06, RomTelecom's revenues were €225.0mn, down 0.7% from revenues of€226.5mn in the same period last year. The decrease is attributed to a 10.7%reduction in the number of subscriber lines and a 22% drop in local traffic,largely due to intense competition from cable operators, as well as reducedwholesale revenues. These factors were partially offset by the recent tariffrebalancing in August. Wholesale revenues declined by 18.4% in the third quarter of 2006 compared tothe same period of 2005, despite the 16.5% increase in total wholesale traffic.This is a result of increasing competition from alternative and mobile operatorsusing RomTelecom's network at significantly reduced rates as mandated by theRegulator. Data services, a rapidly emerging revenue generator with emphasis on ADSL,recorded a significant growth (+143%) in Q3'06 compared to the same period lastyear, in line with company's objective to increase its share of non-voiceservices. Similarly, revenues from leased lines increased by nearly 33%.Operating expenses excluding depreciation and amortization for Q3'06 decreasedby 2.7% to €131.9mn, mainly reflecting lower redundancy payments. The company'sefforts to improve its image and promote newly launched products contributed toa 38% increase in advertising costs in Q3'06 compared to the previous year. Theincrease in Cost-of-Goods-Sold is directly related to the higher number of ADSLcustomers. Operating Income before Depreciation & Amortization in Q3'06 increased by 2.4%in comparison to the same period in 2005. Net income dropped by 24.2% to €27.0mnin Q3'06, mainly reflecting higher taxes and a larger share of the loss ofCosmote Romania. Headcount reached 12,667 at the end of Q3'06, down 3% compared to December 2005.Implementation of several projects and initiatives is proceeding according tothe Company's plan: O With the launch of satellite television services, to add valueto the already existing voice and data services, RomTelecom is making a firststep toward triple play; O Implementation of the Next Generation Network (NGN) continues,complemented by the Access Network modernization in all cities and selectiverural areas to allow the provision of broadband services; O New product offerings are targeting business customers whileloyalty schemes address the needs of residential clients. 4. OTEnet OTEnet, the Internet and IP services subsidiary of OTE, offers Internet access,IP telecom solutions, IT application development and hosting services usingInternet technologies. Revenues in Q3'06 were €27.4mn, up 8.3% compared to Q3'05, as a result of asignificant migration from PSTN-ISDN to ADSL connections as well as of the rapidgrowth in the number of new subscribers. Operating Income before Depreciationand Amortization was €1.2mn, down 65.7% compared to Q3'05, reflecting highmarketing expenses relating to the promotion of ADSL products. During thisquarter OTEnet launched a panHellenic "Innovation" competition, aiming topromote Innovating thinking and Internet usage. As of September 30, 2006, OTEnet had over 446,580 active residential customersusing retail products and services and over 17,150 business customers,representing significant increases compared to the same period last year. 5. Other International Investments Armentel ArmenTel's Revenues for Q3'06 amounted to €44.5mn compared to €30.1mn in Q3'05.This 47.8% increase is mainly attributable to the 45.9% increase in the numberof mobile subscribers, which reached 441,716 at the end of the quarter.Operating Income before Depreciation and Amortization reached €24.9mn, or 56.0%of operating revenues. 6. Events of the quarter REPEATED 54TH ANNUAL GENERAL ASSEMBLY OF SHAREHOLDERS On July 31, 2006, OTE held its third Repeated 54th Annual General Assembly ofShareholders, during which the company approved the cancellation of 432,490treasury shares and the ensuing amendments to Article 5 (share capital), Article25 (absolute quorum and majority) and Article 33 (Profits Distribution) of theCompany's Articles of Association. OTE plc's GMTN PROGRAM INCREASED BY €1.5BN On August 11, 2006 OTE plc's Global Medium Term Note Program guaranteed by OTES.A was increased from €3.5bn to €5.0bn. COSMOTE RECEIVED REGULATORY APPROVAL FOR ACQUISITION OF GERMANOS S.A. On August 17, 2006, Cosmote received the decision of the NationalTelecommunications and Post Commission (EETT), approving the acquisition ofGermanos S.A and its commercial agent, MOBILBEEP Ltd, subject to specificconditions that relate to issues of confidentiality, non-discriminatorytreatment of competitors and maintenance of the "Germanos" brand name for aslong as agreements between Germanos S.A and OTE Group's competitors are stillvalid. In addition to the EETT decision, Cosmote received approval from the competentauthorities of Bulgaria, FYROM and Ukraine. OTE ANNOUNCES ADSL ACCESS SPEED UPGRADES, FREE OF CHARGE On August 21, 2006 OTE announced the upgrade of all ADSL access speeds. Theupgrade process is expected to last approximately three months and applies toboth existing and new connections (retail and wholesale), free of charge. 7. subsequent events OTE VOLUNTARY RETIREMENT PROGRAM SUCCESSFULLY COMPLETED On October 20, 2006 OTE announced the successful completion of its VoluntaryRetirement Program (VRP) effective October 14, 2006.LOAN TO OTE AUXILIARY FUND On October 23, 2006, OTE S.A. signed an agreement with the OTE personnelAuxiliary Fund, pursuant to which OTE granted the Fund a loan of up to €180mn,repayable over 21 years. The loan bears interest at 2.9per mil annually, belowcurrent market conditions, and therefore a €63mn provision for future financiallosses will be recorded in the Company's Q4'06 financial statements. OTE ANNOUNCES THE RESULTS OF ITS €1.5BN BOND ISSUE On November 15, 2006 OTE announced that its 100% owned subsidiary, OTE plc, hadsuccessfully completed the bookbuilding process for its proposed issues of bondsunder its €5bn Global Medium Term Note Program. The proceeds from the issues ofthe bonds will be used for the refinancing of the €1.5bn bridge facility ofCosmote S.A., which was signed in August 2006 for the acquisition of GermanosS.A. The 9.5 year Fixed Rate Note of €900mn pays an annual coupon of 4.625%,while the 3 year Floating Rate Note (€600mn) pays interest based on Euribor plusa spread of 28 bps. The bond issue was significantly oversubscribed.OTE ANNOUNCES THE COMPLETION OF THE SALE OF ITS 90% STAKE IN ARMENTELOn November 16, 2006 OTE announced that it had completed the sale of its 90%stake in ArmenTel, the incumbent telecommunications provider in Armenia, toVimpelCom, for a total cash consideration of €341.9mn. The transaction shouldgenerate a pre-tax capital gain of €292.9mn.GERMANOS ACQUISITION On October 2, 2006, Cosmote acquired through its 100% subsidiary CosmoholdingCyprus Ltd, 42% of the outstanding shares of Germanos S.A. As a consequence,together with the 20.75% stake already acquired by Cosmote through the AthensExchange, Cosmote's direct and indirect participation in Germanos reached62.75%. Following this transaction, the Hellenic Capital Markets Commissionsapproved the prospectus of Cosmote's public tender offer for the acquisition ofthe remaining shares of Germanos. The acceptance period commenced on November 23and will end on December 21. By November 28, Cosmote held, directly andindirectly, 85.55% of Germanos shares. 8. Outlook For full-year 2006, OTE expects operating revenues in its Greek fixed-lineactivities to be roughly unchanged, while operating profitability shouldimprove, mainly due to implementation of its early retirement program. AtCosmote, revenues should increase significantly, reflecting the growth ofinternational operations, while Operating Income before Depreciation andAmortization margin will be held back by high development costs in fast-growingactivities and the cost of relaunching Cosmote Romania. Finally, RomTelecomexpects to post a full-year Operating Income before Depreciation andAmortization margin roughly equivalent to the level achieved in the first halfof the year. OTE will present an update to its Business Plan, together with its 2007 outlook,following the release of its 2006 full-year results in late February 2007. About OTEOTE Group is Greece's leading telecommunications organization and one of thepre-eminent players in Southeastern Europe, providing top-quality products andservices to its customers. Apart from serving as a full service telecommunications group in the Greektelecoms market, OTE Group has also expanded during the last decade itsgeographical footprint throughout South East Europe, acquiring stakes in theincumbent telecommunications companies of Romania and Serbia, and establishingmobile operations in Albania, Bulgaria, the Former Yugoslav Republic ofMacedonia and most recently in Romania. At present, companies in which OTE Grouphas an equity interest employ over 30,000 people in six countries, and ourportfolio of solutions ranges from fixed and mobile telephony to Internetapplications, satellite, maritime communications and consultancy services.Listed on the Athens Stock Exchange, the company trades under the ticker HTO aswell as on the New York Stock Exchange under the ticker OTE. In the U.S., OTE'sAmerican Depository Receipts (ADR's) represents 1/2 ordinary share. Additional Information is also available on http://www.ote.gr. Contacts: OTE: Dimitris Tzelepis - Head of Investor RelationsTel: +30 210 611 1574, Email: [email protected] Papagiannakopoulos - Senior Financial AnalystTel. +30 210 611 7593, Email: [email protected] Kozanoglou - Communications Officer, Investor RelationsTel: +30 210 611 1121, Email: [email protected] Diamanti - IR CoordinatorTel: +30 210 611 5070, Email: [email protected] Hadjigeorgiou - Financial AnalystTel: +30 210 611 1428, Email: [email protected] Forward-looking statementAny statements contained in this document that are not historical facts areforward-looking statements as defined in the U.S. Private Securities LitigationReform Act of 1995. All forward-looking statements are subject to various risksand uncertainties that could cause actual results to differ materially fromexpectations. The factors that could affect the Company's future financialresults are discussed more fully in the Company's filings with the U.S.Securities and Exchange Commission (the "SEC"), including the Company's AnnualReport on Form 20-F for 2005 filed with the SEC on September 30, 2006. OTEassumes no obligation to update information in this release. Exhibits to follow: I. Condensed Consolidated Balance Sheets as of September 30, 2006 and December 31, 2005 (Under IFRS)II. Condensed Consolidated Income Statements for the three months and nine months ended September 30, 2006 and 2005 (Under IFRS)III. Analysis of Group Other Operating Expenses for the three months and nine months ended September 30, 2006 and 2005 (Under IFRS)IV. Condensed Consolidated Statement of Cash Flows for the three months and nine months ended September 30, 2006 (Under IFRS)V. Group Revenues for the three months and nine months ended September 30, 2006 and 2005 (Under IFRS)VI. Segment Reporting based on the Company's legal structureVII. International AssetsVIII. OTEnetIX. Operational Highlights EXHIBIT I - BALANCE SHEET HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (OTE) CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2006 AND DECEMBER 31, 2005 (Amounts in • mn) Sep 2006 Dec 2005 --------- ---------ASSETS (Unaudited) Non - current assets:Telecommunication property, plant andequipment 6,348.2 6,739.6Goodwill 72.3 72.4Telecommunication licenses 383.7 393.0Investments 158.6 159.3Financial Assets 321.6 -Advances to pension funds 154.2 180.7Deferred taxes 233.5 257.7Other non-current assets 124.9 126.6 ------- -------Total non - current assets 7,797.0 7,929.3 ------- ------- Current assets:Materials and supplies 118.3 130.3Accounts receivable 1,123.8 1,066.7Non-current assets held for sale 297.8 -Other current assets 416.4 411.1Cash and cash equivalents 2,297.0 1,512.2 ------- -------Total current assets 4,253.3 3,120.3 ------- ------- TOTAL ASSETS 12,050.3 11,049.6 ======= ======= EQUITY AND LIABILITIES Equity attributable to equity holdersof the parent:Share capital 1,171.5 1,172.5Paid-in surplus 485.9 486.6Treasury stock - (5.9)Legal reserve 256.7 256.7Retained earnings 1,724.8 1,401.6 ------- ------- 3,638.9 3,311.5 ------- -------Minority interest 1,269.0 1,201.9 ------- ------- Total equity 4,907.9 4,513.4 ------- ------- Non - current liabilities:Long-term debt 2,547.8 3,104.3Reserve for staff retirement 187.4 172.7indemnitiesReserve for voluntary retirement 574.0 603.8programReserve for Youth Account 280.9 284.0Other non - current liabilities 129.3 139.9 ------- -------Total non - current liabilities 3,719.4 4,304.7 ------- ------- Current liabilities:Accounts payable 699.7 720.6Short-term borrowings 872.3 14.3Current maturities of long-term debt 777.1 321.3Income taxes payable 151.5 81.9Deferred revenue 162.0 179.1Reserve for voluntary retirement 207.0 434.9programDividends payable 3.8 5.2Liabilities associated with non-currentassets held for sale 61.6 -Other current liabilities 488.0 474.2 ------- -------Total current liabilities 3,423.0 2,231.5 ------- ------- TOTAL EQUITY AND LIABILITIES 12,050.3 11,049.6 ======= ======= Movement in Shareholders' equity -------------------------------- ---------- 2006 ---------- Unaudited Shareholders' equity, January 1 4,513.4 ----------Dividends declared (72.3)Profit for the period 566.0Net income recognized directly in equity (99.2) ---------- 394.5 ---------- ==========Shareholders' equity, September 30 4,907.9 ========== EXHIBIT II - CONDENSED CONSOLIDATED INCOME STATEMENT HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIES Prepared under IFRS for the three months and nine months ended September 30, 2006 and 2005 (• mn) Q3 06 Q3 05 % 9M 06 9M 05 % Unaudited Unaudited Change Unaudited Unaudited ChangeRevenues:DomesticTelephony 557.4 567.8 -1.8% 1,698.9 1,721.8 -1.3%InternationalTelephony 92.6 97.2 -4.7% 268.5 297.0 -9.6%MobileTelephony 548.4 482.5 13.7% 1,490.9 1,307.2 14.1%Other 285.5 257.7 10.8% 844.2 749.9 12.6% -------- -------- -------- --------Total Revenues 1,483.9 1,405.2 5.6% 4,302.5 4,075.9 5.6% ======== ======== ======== ======== Operating Expenses:Payroll andemployeebenefits (278.0) (312.8) -11.1% (931.1) (991.0) -6.0%Voluntaryretirementcosts 49.8 (912.9) - 49.8 (938.0) -Payments tointernationaloperators (54.4) (60.7) -10.4% (152.2) (171.0) -11.0%Payments todomestictelephonyoperators (183.3) (174.0) 5.3% (546.0) (486.7) 12.2%Depreciationandamortization (274.6) (278.0) -1.2% (838.9) (840.2) -0.2%Cost oftelecommunicationsequipment (48.7) (43.6) 11.7% (158.5) (125.4) 26.4%Reversal offixed assetimpairment 0.0 75.7 - 0.0 75.7 -Extinguishmentof liabilities 0.0 23.8 - 0.0 23.8 -Otheroperatingexpenses (291.2) (269.5) 8.1% (856.3) (783.1) 9.3% -------- -------- -------- --------TotalOperatingExpenses (1,080.4) (1,952.0) -44.7% (3,433.2) (4,235.9) -18.9% ======== ======== ======== ======== OperatingIncome 403.5 (546.8) - 869.3 (160.0) -Other income /(expense):Interestincome 20.1 9.8 105.1% 48.8 38.5 26.8%Interestexpense (48.8) (37.5) 30.1% (137.9) (117.5) 17.4%FXgain/(loss),net 3.0 (2.2) - 3.2 31.2 -89.7%Financial (25.7) (29.9) -14.0% (85.9) (47.8) 79.7%netInvestmentincome/(loss)/Gain on saleof investment 0.3 7.5 - 6.1 32.8 -81.4%Dividends 0.0 0.6 - 22.5 20.3 10.8% -------- -------- -------- --------Total Otherincome /(expense) (25.4) (21.8) 16.5% (57.3) 5.3 - ======== ======== ======== ======== Profit beforeincome taxes 378.1 (568.6) - 812.0 (154.7) - ======== ======== ======== ======== Income taxes (99.8) 162.4 - (246.0) 32.6 - -------- -------- -------- -------- Profit for theperiod 278.3 (406.2) - 566.0 (122.1) - ======== ======== ======== ======== Attributableto:Equity holdersof the parent 223.6 (493.2) - 445.5 (296.7) -Minorityinterest 54.7 87.0 - 120.5 174.6 - -------- -------- -------- -------- 278.3 (406.2) - 566.0 (122.1) - ======== ======== ======== ======== EXHIBIT III - GROUP OTHER OPERATING EXPENSE ANALYSIS • mn Q3 06 Q3 05 % Change 9M 06 9M 05 % ChangeCommission to dealers 57.3 44.1 29.9% 154.6 119.0 29.9%Repairs, maintenance,cost of materials 43.1 42.4 1.7% 136.9 145.8 -6.1%Provision for doubtfulaccounts 21.9 27.9 -21.5% 71.0 79.6 -10.8%Advertising 45.0 28.3 59.0% 121.6 85.0 43.1%Taxes other than incometaxes 13.1 8.9 47.2% 34.5 25.7 34.2%Other 110.8 117.9 -6.0% 337.7 328.0 3.0% TOTAL 291.2 269.5 8.1% 856.3 783.1 9.3% EXHIBIT IV - STATEMENT OF CASH FLOWS HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIESCondensed Consolidated Statement of Cash Flows Prepared under IFRS for the three quarters and nine months ended September 30, 2006 (• mn) Q1 06 Q2 06 Q3 06 9M 06Cash Flows from Operating Activities: Profit before taxes 203.4 230.5 378.1 812.0Adjustments to reconcile to net cashprovided by operating activities: Depreciation and amortization 284.3 280.0 274.6 838.9 Reversal of provisions for voluntary - - (49.8) (49.8) retirement Provisions 51.7 52.5 50.6 154.8 Investments and financial income/ (17.6) (39.6) (23.4) (80.6) loss Amortization of advances to pension 8.8 8.8 8.8 26.4 funds Interest expense 42.3 46.8 48.8 137.9 Adjustments for working capitalmovements related to operatingactivities Decrease/(increase) in materials and (6.7) (0.2) 12.9 6.0 supplies Decrease/(increase) in accounts (13.4) 2.1 (44.5) (55.8) receivable Decrease in liabilities (123.0) (90.9) (92.9) (306.8) Minus: Interest paid (42.1) (6.3) (73.7) (122.1) Income taxes paid (14.9) (67.7) (66.0) (148.6) ------ ------ ------ -------Net Cashprovided byOperatingActivities 372.8 416.0 423.5 1,212.3 ------ ------ ------ ------- Cash Flows from Investing Activities: Acquisition of subsidiary or - (191.1) 0.0 (191.1) associate, net of cash acquired Acquisition of financial assets - (222.8) (147.9) (370.7) Purchase of property, plant and (168.5) (230.9) (185.9) (585.3) equipment or intangible assets Interest received 9.0 10.8 6.6 26.4 Dividends received - 6.8 0.0 6.8 ------ ------ ------ -------Net Cash usedin InvestingActivities (159.5) (627.2) (327.2) (1,113.9) ------ ------ ------ ------- Cash Flows from Financing Activities: Proceeds from minority shareholders 12.0 - - 12.0 for issuance of subsidiary's share capital Proceeds from long-term debt and - - 870.9 870.9 short-term borrowings Repayment of long-term debt and (26.9) (18.8) (40.7) (86.4) short-term borrowings Dividends paid - (72.9) (0.4) (73.3) ------ ------ ------ -------Net Cash providedby/(used in) FinancingActivities (14.9) (91.7) (829.8) 723.2 ------ ------ ------ ------- Net Increase/(Decr ease) in Cashand Cash Equivalents 198.4 (302.9) 926.1 821.6Cash and Cash equivalents atbeginning of period 1,512.2 1,710.6 1,407.7 1,512.2 ------ ------ ------ -------Cash and Cash Equivalents atend of period(total) 1,710.6 1,407.7 2,333.8 2,333.8Cash and Cash Equivalentsincl.to assetsavailable for sale - (37.5) (36.8) (36.8) ------ ------ ------ -------Cash and CashEquivalents atend of period (b.s) 1,710.6 1,370.2 2,297.0 2,297.0 ====== ====== ====== ======= EXHIBIT V - GROUP REVENUES HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIES Consolidated Revenues prepared under IFRS for the three months and nine months ended September 30, 2006 and 2005 (• mn) Q3 06 Q3 05 Change 9M 06 9M 05 ChangeDomestic Telephony:Basic monthlyrentals 253.0 243.3 4.0% 738.3 717.1 3.0%Local and longdistance calls-Fixed to fixed 161.8 170.2 -4.9% 532.2 567.9 -6.3%-Fixed to mobile 119.3 132.9 -10.2% 360.6 376.9 -4.3% ------ ------ ------ ------ 281.1 303.1 -7.3% 892.8 944.8 -5.5% ====== ====== ====== ======Other 23.3 21.4 8.9% 67.8 59.9 13.2% ------ ------ ------ ------Total DomesticTelephony 557.4 567.8 -1.8% 1,698.9 1,721.8 -1.3% ====== ====== ====== ====== InternationalTelephony:Internationaltraffic 32.8 36.8 -10.9% 102.1 113.4 -10.0%Payments fromInternationalmobile operators 12.3 11.3 8.8% 30.9 29.9 3.3% ------ ------ ------ ------ 45.1 48.1 -6.2% 133.0 143.3 -7.2% ====== ====== ====== ======Payments fromInternationaloperators 47.5 49.1 -3.3% 135.5 153.7 -11.8% ------ ------ ------ ------Total InternationalTelephony 92.6 97.2 -4.7% 268.5 297.0 -9.6% ====== ====== ====== ====== Mobile Telephony 548.4 482.5 13.7% 1,490.9 1,307.2 14.1% ====== ====== ====== ====== Other Revenues:Prepaid cards 28.4 34.2 -17.0% 75.7 97.1 -22.0%Directories 13.6 14.2 -4.2% 42.2 41.9 0.7%Leased lines anddata communications 64.0 60.5 5.8% 174.0 167.0 4.2%ISDN, connection &monthly charges 40.5 35.3 14.7% 119.9 103.6 15.7%Sales oftelecommunicationequipment 35.0 21.3 64.3% 120.3 71.0 69.4%Internetservices-ADSL 34.4 24.1 42.7% 91.4 61.8 47.9%ATM 7.8 4.6 69.6% 24.7 17.2 43.6%Services rendered 15.3 21.9 -30.1% 46.8 49.7 -5.8%Interconnectioncharges 24.1 24.3 -0.8% 85.1 73.8 15.3%Miscellaneous 22.4 17.3 29.5% 64.1 66.8 -4.0% ------ ------ ------ ------Total Other Revenues 285.5 257.7 10.8% 844.2 749.9 12.6% ====== ====== ====== ====== Total Revenues 1,483.9 1,405.2 5.6% 4,302.5 4,075.9 5.6% ====== ====== ====== ====== EXHIBIT VI - SEGMENT REPORTING (9M 2006) HELLENIC TELECOMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIES Segment Reporting prepared under IFRS, for the nine months ended Sep 30, 2006 (In • mn) OTE Cosmote Romtelecom All Other Total Adjustments & Consolidated EliminationsRevenues:DomesticTelephony 1,198.8 - 451.4 51.3 1,701.5InternationalTelephony 142.9 - 97.3 34.1 274.3MobileTelephony - 1,575.1 - 39.6 1,614.7Other 715.1 55.5 116.3 254.3 1,141.2Total 2,056.8 1,630.6 665.0 379.3 4,731.7 (429.2) 4,302.5Revenues ------- ------- --------- ------- ------- --------- --------- IntersegmentRevenues (156.2) (128.8) (13.5) (130.7) (429.2) Revenue fromExternalCustomers 1,900.6 1,501.8 651.5 248.6 4,302.5 4,302.5 ------- ------- --------- ------- ------- --------- --------- OperatingExpenses:Payroll andemployeebenefits (587.8) (98.6) (174.9) (68.6) (929.9) (1.2) (931.1)Voluntaryretirementcosts 49.8 - - - 49.8 - 49.8Payments tointernationaloperators (101.4) (24.6) (19.6) (11.2) (156.8) 4.6 (152.2)Payments todomestictelephonyoperators (280.1) (293.5) (77.8) (13.9) (665.3) 119.3 (546.0)Depreciationandamortization (396.3) (225.5) (165.9) (53.7) (841.4) 2.5 (838.9)Cost ofequipment &prepaid cards (108.1) (53.5) (9.6) (4.6) (175.8) 17.3 (158.5)Otheroperatingexpenses (357.5) (517.3) (123.3) (145.5) (1,143.6) 287.3 (856.3)TotalOperatingExpenses (1,781.4) (1,213.0) (571.1) (297.5) (3,863.0) 429.8 (3,433.2) ------- ------- --------- ------- ------- --------- --------- ------- ------- --------- ------- ------- --------- ---------OperatingIncome 275.4 417.6 93.9 81.8 868.7 0.6 869.3 ------- ------- --------- ------- ------- --------- --------- Operatingincome beforedepreciationandamortization 671.7 643.1 259.8 135.5 1,710.1 (1.9) 1,708.2------------ ------- ------- --------- ------- ------- --------- ---------as % ofOperatingrevenues 32.7% 39.4% 39.1% 35.7% 36.1% - 39.7% EXHIBIT VI - SEGMENT REPORTING (9M 2005) HELLENIC TELECOMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIES Segment Reporting prepared under IFRS, for the nine months ended Sep 30, 2005 (In • mn) OTE Cosmote Romtelecom All Other Total Adjustments & Consolidated EliminationsRevenues:DomesticTelephony 1,204.9 - 478.4 39.9 1,723.2InternationalTelephony 166.6 - 109.0 27.2 302.8MobileTelephony - 1,257.6 2.9 189.9 1,450.4Other 648.1 34.7 103.6 212.2 998.6Total Revenues 2,019.6 1,292.3 693.9 469.2 4,475.0 (399.1) 4,075.9 ------- ------- --------- ------- ------- --------- --------- IntersegmentRevenues (156.0) (134.9) (5.7) (102.5) (399.1) - Revenue fromExternalCustomers 1,863.6 1,157.4 688.2 366.7 4,075.9 4,075.9 ------- ------- --------- ------- ------- --------- --------- OperatingExpenses:Payroll andemployeebenefits (644.1) (69.3) (211.8) (66.9) (992.1) 1.1 (991.0)Voluntaryretirementcosts (938.0) - - - (938.0) - (938.0)Payments tointernationaloperators (118.2) (20.9) (24.3) (11.3) (174.7) 3.7 (171.0)Payments todomestictelephonyoperators (276.9) (234.8) (70.7) (33.3) (615.7) 129.0 (486.7)Depreciationandamortization (403.9) (171.4) (182.7) (84.6) (842.6) 2.4 (840.2)Cost ofequipment &prepaid cards (78.1) (33.8) (7.6) (22.2) (141.7) 16.3 (125.4)Reversal offixed assets'impairment - - 75.7 - 75.7 - 75.7Extinguishmentof liabilities - - 23.8 - 23.8 - 23.8Otheroperatingexpenses (393.9) (363.6) (111.4) (160.7) (1,029.6) 246.5 (783.1)TotalOperatingExpenses (2,853.1) (893.8) (509.0) (379.0) (4,634.9) 399.0 (4,235.9) ------- ------- --------- ------- ------- --------- --------- ------- ------- --------- ------- ------- --------- ---------OperatingIncome (833.5) 398.5 184.9 90.2 (159.9) (0.1) (160.0) ------- ------- --------- ------- ------- --------- --------- Operatingincome beforedepreciationandamortization (429.6) 569.9 367.6 174.8 682.7 (2.5) 680.2------------ ------- ------- --------- ------- ------- --------- ---------as % ofOperatingrevenues -21.3% 44.1% 53.0% 37.3% 15.3% - 16.7% EXHIBIT VII - INTERNATIONAL ASSETS RomTelecom OTE has a 54.01% stake in RomTelecom, which is fully consolidated. ROMTELECOM INCOME STATEMENT For the nine months ended September 30 2006, in accordance with IFRS (• thousand) 9M 2006 (Unaudited)Basic monthly rentals 208,811Domestic Telephony calls 242,631 -------------Domestic Telephony 451,442International Telephony 97,270Other Revenues 116,309 -------------Total Operating Revenues 665,021 Personnel (inc Voluntary Redundancy) (174,881)Other operating expenses (230,320)Depreciation and Amortization (193,221) -------------Total Operating expenses (598,422) Operating income 66,599 Financial, net (11,434) Income before provision for income taxes 55,165 Provision for Income taxes (13,577) -------------Net income 41,588 ============= Armentel OTE has a 90% stake in ArmenTel, which is fully consolidated. ArmenTel's keyfinancial figures are stated below: ARMENTEL Highlights prepared under IFRS for the three months and the nine months ended September 30, 2006 and 2005 (Unaudited) • mn Q3 06 Q3 05 % Change 9M 06 9M 05 % ChangeRevenues 44.5 30.1 47.8% 112.9 81.7 38.2%Operating Income beforeDepreciation &amortization 24.9 18.2 36.8% 61.9 48.6 27.4%as % of OperatingRevenues 56.0% 60.5% -4.5pp 54.8% 59.5% -4.7ppOperating Income 16.4 13.3 23.3% 38.2 29.8 28.2%Net Income/(Loss) 16.4 11.2 46.4% 31.3 25.7 21.8%Net Income/(Loss) 36.9% 37.2% -0.3pp 27.7% 31.5% -3.8ppMargin Fixed Telephony, Lines 594,092 590,556 0.6%Mobile Telephony, Totalcustomers 441,716 302,838 45.9% EXHIBIT VIII - OTEnet OTE has a 94.6% stake in OTEnet, which is fully consolidated. OTEnet's keyfinancial figures are stated below: OTEnet Highlights prepared under IFRS for the three months and the nine months ended September 30, 2006 and 2005 (Unaudited) • mn Q3 06 Q3 05 % Change 9M 06 9M 05 % ChangeRevenues 27.4 25.3 8.3% 81.0 68.3 18.6%Operating Profit (0.5) 1.8 - 0.8 5.1 -84.3%Operating Income beforeDepreciation &amortization 1.2 3.5 -65.7% 5.5 10.1 -45.5%as % of OperatingRevenues 4.4% 13.8% -9.4pp 6.8% 14.8% -8.0ppDepreciation &Amortization 1.7 1.7 0.0% 4.7 5.0 -6.0% EXHIBIT IX -OPERATIONAL HIGHLIGHTS ----------------------------- Operational Highlights for the quarters ended September 30, 2006 and 2005 -----------------------------OTE Q3 06 Q3 05 % ChangePSTN lines 4,798,244 4,905,304 -2.2%ISDN, 64kb equiv. lines 1,379,072 1,323,604 4.2%Total lines 6,177,316 6,228,908 -0.8% ADSL subscribers 373,633 106,388 251.2% COSMOTE (Greece)Pre-paid sub. 3,210,173 2,801,526 14.6%Contract sub. 1,813,764 1,707,267 6.2%Total subscribers 5,023,937 4,508,793 11.4% AMCTotal subscribers 900,965 762,095 18.2% GLOBULTotal subscribers 2,881,499 2,156,262 33.6% COSMOFONTotal subscribers 450,321 358,342 25.7% COSMOTE ROMANIATotal subscribers 669,685 - - OTEnetResidential clients 446,580 382,660 16.7%Business clients 17,150 13,000 31.9% Employees:-OTE 10,965 15,752 -30.4%-COSMOTE (Greece) 2,145 2,105 1.9%-RomTelecom 12,667 14,720 -13.9%----------- -------- -------- -------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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