22nd Mar 2007 07:00
Hellenic Telecomms Organization S A21 March 2007 OTE GROUP REPORTS 2006 FOURTH QUARTER AND FULL-YEAR RESULTS UNDER IFRS • Q4 comparable operating revenues up 1.3% on solid mobile performance; reported revenues up 13.6% reflecting consolidation of Germanos and sale of ArmenTel • FY 06 Greek Fixed-line revenues up slightly, reflecting slower-than-expected competitor moves; Q4 down, chiefly on regulatory and interconnection impacts • Q4 Greek Fixed-line margins lower than Q3 on higher repairs & maintenance • Group OIBDA margin ex-VRP down slightly in Q4, mainly due to Germanos consolidation • Group Net Income after ArmenTel capital gain (€160mn) and loss on Pension Fund loan (€70mn) impacted by higher financial expenses and taxes • Management proposes dividend of €0.55 per share ATHENS, Greece - March 22, 2006 - Hellenic Telecommunications Organization SA(ASE: HTO, NYSE: OTE), the Greek full-service telecommunications provider, todayannounced consolidated audited results (prepared under IFRS) for the quarter andtwelve months ended December 31, 2006. CONSOLIDATED FINANCIAL HIGHLIGHTS FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2006 AND 2005, IN ACCORDANCE WITH IFRS • mn except Q4'06 Q4'05 % Change 12M'06 12M'05 % Changeper share dataRevenues 1,588.8 1,399.2 13.6% 5,891.3 5,475.1 7.6%Operating Income/(Loss) 219.0 183.9 19.1% 1,088.3 24.0 -Pre-tax Income/ (Loss) 271.8 157.8 72.2% 1,083.8 3.3 -Net Income/ (Loss) 129.1 79.7 62.0% 574.6 (216.8) -Basic EPS/ (Loss) (•) 0.2634 0.1626 62.0% 1.1723 (0.4424) -Operating IncomebeforeDepreciation & Amortization 508.6 451.1 12.7% 2,216.8 1,131.4 -Pro Forma*OperatingIncome beforeDepreciation and Amortization 508.6 452.7 12.3% 2,167.0 1,971.5 9.9%as % of Operatingrevenues 32.0% 32.4% -0.4pp 36.8% 36.0% 0.8ppCashflowfromOperations 573.9 487.2 17.8% 1,786.2 1,532.8 16.5%CAPEX as % of 23.7% 19.7% 4.0pp 16.3% 12.4% 3.9ppRevenues* Excluding the impact of OTE S.A. Voluntary Retirement Program (€939.6mn chargein 12M'05 and €49.8mn reversal in 12M'06) and non-recurring gains related toCosmoRom at RomTelecom (€99.5mn in 12M'05). Commenting on the quarter, Panagis Vourloumis, Chairman and CEO, noted:"Our performance in the last three months of the year, while not quite as strongas what we achieved in the previous quarter, underscores our continuingturnaround. OTE's Greek fixed-line activities were somewhat impacted byregulatory decisions and the loss of certain interconnection revenues, but wemade progress in further reducing our costs in the wake of last year's earlyretirement plan. Cosmote had another strong performance, boosted by the firstquarter of Germanos consolidation. RomTelecom once again hit by the severedeterioration of its top-line environment, partly offset this through reductionsof its operating expenses. Our updated three-year business plan, that we arepresenting today, shows that there is plenty more work to be done - the greaterresponsiveness of our organization, clearly visible in 2006, should enable us tomeet our objectives." Financial HighlightsRevenuesOTE Group Revenues increased by 13.6% in the three months ended December 31,2006, compared to the respective period of 2005. The increase reflects the firstconsolidation, as of October 2, 2006, of the Germanos operations, more thanoffsetting the de-consolidation of ArmenTel effective November 16, 2006.Excluding these two factors, Group revenues rose by 1.3%, reflecting higherrevenues from mobile telephony, ADSL and monthly rentals, offsetting weakness inrevenues from local, long-distance and international telephony. Total Operating ExpensesTotal Operating Expenses excluding depreciation and amortization and VRP-relatedcosts increased by 14.1% in Q4'06 to €1,080.2mn, as lower payroll and employeebenefits were more than offset by higher cost of telecommunications equipment inthe quarter, largely reflecting the consolidation of Germanos. Payroll and Employee BenefitsPayroll and Employee Benefits decreased by 7.6% to €310.4mn in Q4'06, primarilyreflecting the benefits of the OTE fixed-line Voluntary Retirement Plan. Other Operating ExpensesOther Operating Expenses were up by 1.2% to €333.2mn, as the continuing drop inGreek fixed-line operations was more than offset by higher expenses in theGroup's rapidly growing activities. During the quarter, OTE Group madesignificant progress in the containment of Advertising and Provisions fordoubtful accounts expense. Operating Income before Depreciation and AmortizationOperating Income before Depreciation and Amortization (OIBDA) totaled €508.6mnin Q4'06, as compared to €452.7mn in Q4'05, when the Group had incurred anadditional charge of €1.6mn for its Voluntary Retirement Program in Greece. TheGroup's OIBDA margin for the quarter stood at 32.0%, marginally lower than inthe same period last year. Net incomeIn the quarter, OTE Group posted Net Income of €129.1mn, up 62% from €79.7mn inQ4'05. Q4'06 consolidated net income includes a realized capital gain on thesale of the Group's interest in ArmenTel (€160.2mn pre-tax) as well as a totalone-off net financial loss of €70.0mn related to the loan that OTE granted tothe OTE Auxiliary Pension Fund, as disclosed in the Q3'06 results release. Cash flowCash provided by operating activities amounted to €573.9mn for the three monthsended December 31, 2006. The 17.8% growth in cash flow from operations reflectshigher net income and working capital discipline, and was achieved despite acash outflow of approximately €110mn in the quarter related to Greek fixed-lineredundancy payments. Capital ExpenditureCapital expenditure in the fourth quarter of 2006 totaled €377.1mn, more than37% higher versus the respective period of 2005, mainly reflecting mobiletelephony investments. For the full year, capex totaled €962.4mn, below theGroup's forecast of annual capex of €1.2bn. The difference is largely due toGreek fixed-line activities and reflects investment deferrals and redefinitions,as well as improved purchasing terms.DebtOn December 31, 2006, the OTE Group gross debt amounted at €4,590.5mn, anincrease of 33.4% compared to December 31, 2005, (as a result of the Germanosacquisition by Cosmote), while net debt totaled €2,548.0mn, higher by 32.2% from2005 year end. OTE debt outstanding breaks down as follows: •mn Dec 31, 2006 Dec 31, 2005 % ChangeShort-Term:-Bank loans 25.2 14.3 76.2%Medium & Long-term:-Bonds 3,844.3 2,598.0 48.0%-Bank loans 721.0 794.2 -9.2%-Other loans 0.0 33.4 -Total Indebtedness 4,590.5 3,439.9 33.4%Cash and Cash equivalents 2,042.5 1,512.2 35.1%Net Debt 2,548.0 1,927.7 32.2% 1. OTE Fixed-Line TRAFFIC STATISTICS Minutes, millions Q4'06 Q4'05 % ChangeLocal 2,997.0 3,079.3 -2.7%National Long - Distance 443.5 469.2 -5.5%International Long - Distance 73.5 80.4 -8.6%Fixed-to-Mobile 455.2 437.6 4.0%Special Calls 55.1 53.1 3.8%Total Voice traffic 4,024.3 4,119.6 -2.3%Subscription Dial-up Internet 1,702.2 2,745.6 -38.0% OTE estimates that its share of the Greek fixed-line market, as measured inoutgoing call minutes (excluding subscription dial-up internet), was roughlyunchanged in Q4'06. •mn Q4'06 Q4'05 % Change 12M'06 12M'05 % ChangeRevenues 657.7 687.4 -4.3% 2,714.5 2,707.0 0.3%- Basic MonthlyRentals 173.3 166.6 4.0% 691.9 669.8 3.3%- Fixed-to-fixed calls 132.2 141.1 -6.3% 518.9 540.9 -4.1%- Fixed-to-mobilecalls 74.1 85.7 -13.5% 313.8 337.5 -7.0%- International 38.2 49.4 -22.7% 181.1 216.0 -16.2%- Other 239.9 244.6 -1.9% 1,008.8 942.8 7.0%Operating Income/(Loss) 36.7 11.1 - 312.1 (822.4) -Operating incomebefore depreciationand amortization/(Loss) 168.4 149.8 12.4% 840.1 (279.8) -Voluntary retirementcosts/ (reversal) 0.0 1.6 - (49.8) 939.6 -Pro Forma Operatingincome beforedepreciation andamortization 168.4 151.4 11.2% 790.3 659.8 19.8%as % of Operatingrevenues 25.6% 22.0% 3.6pp 29.1% 24.4% 4.7ppDepreciation &Amortization 131.7 138.7 -5.0% 528.0 542.6 -2.7% In Q4'06, total fixed-line revenues decreased by 4.3%, compared to the sameperiod last year, reaching €657.7mn. The increase in PSTN/ISDN basic monthlyrental tariffs implemented in April 2006, along with strong ADSL take-up did notfully offset the decline in revenues from fixed-to-fixed, fixed-to-mobile,international telephony, interconnection and, finally, revenues from leasedlines and data communications. The drop in fixed-to-mobile call revenues ispartly attributable to the reduction in termination rates implemented by themobile operators in June and passed on by OTE to its clients. In addition, as ofDecember, OTE reduced its retention fee for all fixed-to-mobile calls byapproximately 12%. Revenues from interconnection and leased lines werenegatively affected by a regulatory decision taken in November (with retroactiveeffect for the whole year) to impose lower wholesale interconnection andleased-line tariffs. This resulted in a €12.6mn negative adjustment to Q4revenues, reflecting the lower tariffs for the whole year. As of the end of December 2006, there were approximately 4.8 million PSTN linesin service, down by 2.1% from the prior year level. ISDN lines (64K) rose by2.6% to a total of nearly 1.4 million. Total lines fell by 1.1% reaching6,160,369. With a total ADSL market in excess of 500,000 customers as of the end of 2006,OTE met its stated target. The Group had approximately 488,000 ADSL customers atyear end, with an unchanged split of roughly two-thirds retail and one-thirdwholesale. The total Greek broadband market exceeded 512,000 customers. Thiscompares to over 373,000 and 390,000 respectively, at the end of September 2006.The strong take up rate - continuing in the early months of 2007 - reflects theongoing promotional efforts by OTE and resellers. Installed ADSL capacity continues to grow at a rapid pace, enabling OTE and thealternative operators to meet the strong market demand for broadband services.At the same time the pace of local loop unbundling (LLU) is picking up, asadditional alternative carriers enter the LLU market and the number of exchangesavailable for co-location is increasing. Total operating expenses amounted to €621.0mn, down 8.0% from the Q4'05 levelexcluding VRP impact. Payroll and employee benefits declined by 13.9% to€177.1mn, largely reflecting the positive impact of the Voluntary RetirementProgram. The Q4'06 payroll figure includes approximately €10mn in provisions foremployee bonuses and incentives to be paid in early 2007. Other operating expenses declined by 8.3% in the quarter to €162.8mn, largelydriven by the decline in Provisions for doubtful accounts, reflecting OTE'songoing billing and collections improvements, as well as by lower Repairs &Maintenance and Cost of Materials. The decline in other operating expenses washeld back by the increase in third party fees, largely paid to other Groupunits. Operating Income before Depreciation and Amortization (OIBDA) excluding theimpact of OTE S.A. Voluntary Retirement Plan in 2005 and 2006 rose by 11.2%compared to Q4'05 and reached €168.4mn. OIBDA margin improved by 3.6 points to25.6% of operating revenues. An analysis of the OTE Fixed-line Other Operating Expenses follows: •mn Q4'06 Q4'05 % Change 12M'06 12M'05 % ChangeRepairs, maintenance,Cost of materials 28.4 32.5 -12.6% 75.3 107.4 -29.9%Provision for doubtfulaccounts 18.1 27.0 -33.0% 65.5 91.0 -28.0%Advertising 13.5 9.9 36.4% 39.9 38.4 3.9%Taxes other thanincome taxes 3.3 3.2 3.1% 9.6 11.0 -12.7%Other 99.5 104.9 -5.1% 330.0 323.6 2.0% TOTAL 162.8 177.5 -8.3% 520.3 571.4 -8.9% 2. Cosmote SUMMARY CONSOLIDATED RESULTS FOR THE FOURTH QUARTER OF 2006 IN ACCORDANCE WITH IFRS •mn Cosmote Greece AMC GloBul CosmoFon Cosmote Cosm/hng Germanos Consolidated Romania since Oct 2 Q4'06 Q4'05 % ChangeRevenues 412.6 40.9 93.3 14.2 17.2 251.7 751.8 505.3 48.8%Operatingincomebeforedepreciationand amortization 176.1 25.5 34.3 1.4 -19.4 19.0 233.1 184.8 26.1%as % ofOperatingrevenues 42.7% 62.3% 36.8% 9.8% n/a 7.5% 31.0% 36.6% In Q4'06, Cosmote revenues continued to grow, driven by ongoing strongperformances both in Greece and in international operations. Excluding thecontribution of Germanos, international operations accounted for approximately29% of the quarter's revenues, a percentage that is expected to continue toincrease reflecting the success of the Group's activities in the Balkans. In Greece, Cosmote revenues rose by 8.9% to €412.6mn in Q4'06, a faster pace ofgrowth compared to previous quarters, fueled by increased usage as well asstrong new net additions. Operating Income before Depreciation and Amortizationincreased by 18.4% in the quarter and the respective margin reached 42.7%. Blended AMOU further increased to reach 153 minutes in 2006, mainly driven bypost-paid AMOU. Blended ARPU for the year rose to €29.9, marginally higher thanthe 2005 level. At the end of 2006, Cosmote's customer base exceeded 5.2million, 12% higher than a year ago, strengthening its leading position in theGreek mobile market with a market share of approximately 37%. In Albania, AMC's revenues increased by 15.3% in the quarter, reaching €40.9mn,while Operating Income before Depreciation and Amortization rose by 21.8% andreached a margin of 62.3%. Blended AMOU for the year was 60 minutes, compared to67 minutes a year ago and blended ARPU for the same period stood at €15.Subscriber growth was stimulated by new commercial initiatives and AMC'scustomer base exceeded 990,000 at the end of the year, a gain of nearly 27% fromthe prior-year level, giving AMC a market share of approximately 52%. In Bulgaria, GloBul maintained its strong financial performance in Q4'06,delivering a 22.3% revenue increase compared to Q4'05. Operating Income beforeDepreciation and Amortization reached €34.3mn, nearly 50% higher than in Q4'05,for a margin of approximately 37%. The company achieved record new net additionsof almost 390,000, reaching a market share of approximately 40% and a totalcustomer base of nearly 3.3 million at year end. Blended AMOU for the year was71 minutes, 9.2% higher than in 2005, while blended ARPU dropped to €10. In FYROM, CosmoFon's revenues rose by 22.6% to €14.2mn in Q4'06, mainly drivenby a strong subscriber take up. Operating income before Deprecation andAmortization reached a margin of 9.8% in the quarter. CosmoFon held a marketshare of approximately 33% at the end of the year. Blended AMOU for the yearstood at 57 minutes, while blended ARPU for the period was unchanged at €10. In Romania, Cosmote Romania exceeded its operational targets for the year andreached a total of 1.23 million customers with approximately 556,000 netadditions during the quarter. The majority of the customers remain prepaid,while 19% of the new additions were post-paid. Cosmote Romania captured anapproximately 7% market share within one year of operation, and blended ARPU forthe year stood at €5. Germanos SA, whose acquisition by Cosmote became effective on October 2, 2006,was fully consolidated in Q4'06. Germanos revenues in the period amounted to •251.7mn, while Operating Income before Depreciation and Amortization represented7.5% of revenues. As of the end of 2006, Germanos owned and operated a total of 610 brandedstores, a number which is expected to grow to more than 800 by the end of 2007.Cosmote has improved both its market position and financial performance in allmarkets of operation. Consolidated revenues for Q4'06, including thecontribution of Germanos for the first time, stood at €751.8mn, a 48.8%increase. Operating Income before Depreciation and Amortization as a percentageof Operating revenues declined from 36.6% in Q4'05 to 31.0% in Q4'06, mainlyreflecting the peak losses from the Romanian operation and the newlyconsolidated Germanos operation. Additional details are available in Cosmote's Q4'06 press release issued onFebruary 22, 2007. 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 FINANCIAL HIGHLIGHTS FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2006 AND 2005, IN ACCORDANCE WITH IFRS •mn Q4'06 Q4'05 % Change 12M'06 12M'05 % ChangeRevenues 229.8 235.8 -2.5% 894.8 929.7 -3.8%Operating IncomebeforeDepreciation & Amortization 78.5 73.4 6.9% 338.3 341.5 -0.9%Operating IncomebeforeDepreciation &Amortization as % ofOperating Revenue 34.2% 31.1% 3.1pp 37.8% 36.7% 1.1ppOperatingIncome/(Loss) 17.8 9.0 97.8% 84.4 67.1 25.8%Net Income/(Loss) 13.6 (10.5) - 55.2 84.9 -35.0%Net Income/(Loss)as % of OperatingRevenue 5.9% -4.5% - 6.2% 9.1% -2.9ppIncrease/(Decrease) in Gross PP&E 106.4 25.8 312.4% 208.1 91.8 126.7% Fixed Telephony, 3,403,346 3,957,870 -14.0%Lines Dec 31, 2006 Dec 31, 2005Cash and cashequivalents 155.6 157.5 -1.2%Long term debt (105.1) (148.4) -29.2%Net Cash Position 50.5 9.1 - In Q4'06, RomTelecom's revenues were €229.8mn, down 2.6% from €235.8mn in Q4'06.The decrease reflects the drop in the number of subscriber lines and lowerretail traffic, largely due to intense competition from cable operators, as wellas reduced wholesale revenues. These declines were partly offset by the tariffrebalancing implemented last August. The combination of mobile substitution and heightened competition fromfixed-line alternative carriers affected the number of lines, which decreased by14% year on year, and particularly the amount of local traffic, which decreasedby 26%. Wholesale revenues declined by 16.9% in Q4'06 despite stable wholesale trafficas a result of intensifying competition from alternative carriers and mobileoperators using RomTelecom's network at significantly reduced rates as mandatedby the Regulator. Revenues from data services (ADSL, VPN, other broadband services) jumped by 145%in Q4'06, in line with company's objective to gain market share in non-voiceservices. The total number of ADSL customers at year end was approximately89,000, while leased lines revenues rose by 17%. Operating expenses excluding depreciation and amortization for Q4'06 decreasedby 9.6% to €151.3mn, largely reflecting lower redundancy payments and reducedpayments to operators. The company's efforts to raise its visibility and promotenewly launched products contributed to a 25% increase in advertising costs inQ4'06. Operating Income before Depreciation & Amortization improved by 6.9% in Q4'06,as a result of savings in operating expenses. Improvement in net income, from a€10.5mn loss in Q4'05 to net income of €13.6mn gain in Q4'06, is largelyattributable to lower financial expenses and taxes. Cash and equivalents were virtually unchanged at 2006 year end from theyear-earlier level despite a €43.3mn drop in long-term borrowings, dividendpayment of €100mn and a doubling of capex in 2006 compared to the prior year. Headcount was 12,257 at the end of 2006, down 6% or nearly 800 people comparedto 2005 year end. Implementation of several projects and initiatives is proceeding according tothe Company's plan:- The successful launch of satellite television services at the end ofNovember 2006 contributes to the repositioning of RomTelecom as a full-fledgedtelecom and media services provider: the new digital TV service, which isavailable countrywide via OTE's Hellas Sat 2 satellite, operates under the"Dolce" brand name and offers a standard package as well as a range of thematicpackages at highly attractive monthly rates;- 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;- New product offerings are targeting business customers and loyaltyschemes address residential clients' needs. 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 Q4'06 were €28.8mn, up 1.8% from Q4'05,reflecting the migration of PSTN-ISDN customers to broadband (ADSL) connections. 5. Other International Investments Armentel OTE's 90% stake in ArmenTel was sold on November 16, 2006, and deconsolidated asof that date. Revenues for Q4'06 through the date of the disposal amounted to€22.7mn, while Operating Income before Depreciation and Amortization was €8.8mn. 6. Events of the quarter OTE VOLUNTARY RETIREMENT PROGRAM SUCCESSFULLY COMPLETEDOn October 20, 2006 OTE announced the successful completion of its VoluntaryRetirement Program (VRP) effective October 14, 2006.LOAN TO OTE AUXILIARY FUNDOn 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, wellbelow current market conditions. Consequently, a €70mn provision for futurefinancial losses was recorded in the Company's Q4'06 financial statements. €1.5BN BOND ISSUEOn November 15, 2006 OTE announced that its 100%-owned subsidiary, OTE plc, hadsuccessfully completed issues of bonds under its €5bn Global Medium Term NoteProgram. The proceeds were used to refinance of the €1.5bn bridge facility ofCosmote S.A. signed in August 2006 for the acquisition of Germanos S.A. SALE OF 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. GERMANOS ACQUISITION BY COSMOTEOn 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 ended on December 21. 7. SUBSEQUENT EVENTS APPOINTMENT OF PRIVATIZATION ADVISOROn January 29, 2007, OTE announced the appointment of Merrill LynchInternational as its exclusive Advisor with regards to the sale of part of theHellenic Republic's 38.7% stake in OTE. The process was initiated by theHellenic Republic in late 2006. APPOINTMENT OF NEW ROMTELECOM CEOOn February 1, 2007, OTE announced the appointment of Georgios Ioannidis asChief Executive Officer of RomTelecom, in replacement of James Hubley, who heldthe position since March 2003. Mr. Ioannidis previously held the positions of CEO of OTEnet and Chief Technology Officer of OTE SA. EMPLOYEE EXIT PROGRAMOn February 28, 2007, OTE announced an agreement with the unions regarding anemployee exit program, under which certain employees with one to five remainingyears of service will get exit bonuses in order to depart during 2007.Approximately 450 OTE employees are eligible for this program. SQUEEZE-OUT OF REMAINING GERMANOS SHARESOn March 9, 2007, Cosmote announced that its request, submitted on February 23,to squeeze out the remaining shares of Germanos, accounting for 0.6% of theshare capital, had been approved by the Hellenic Capital Market Commission. TheGermanos shares will be delisted from the Athens Stock Exchange as of March 29,2007. EXTRAORDINARY SHAREHOLDERS MEETINGOn March 14, 2007, OTE held an Extraordinary Shareholders Meeting to revisecertain Articles of Association relative to the composition of its Board, theGreek State's participation in the Company, the establishment of a stock optionplan, and other matters. As the necessary quorum was not met, a second EGM willbe held on March 27. 8. DIVIDEND OTE management will submit to the Board of Directors a proposal to ask theAnnual General Meeting of Shareholders of June 21, 2007 to approve payment of adividend of €0.55 per share. 9. OUTLOOK As part of its three-year Business Plan outlined today, OTE indicated that Groupconsolidated revenues were expected to grow by a compound annual growth rate ofapproximately 6.5%, during the 2007-2009 period. Operating Income beforeDepreciation and Amortization margin should gradually increase from 36.8% in2006 (net of Voluntary Retirement Plan Q3 06 reserve reversal) to about 39% in2009. The integration of Germanos and changes in the competitive landscapelargely explain differences with earlier forecasts. 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 Relations Tel: +30 210 611 1574, Email: [email protected] Nektarios Papagiannakopoulos - Senior Financial Analyst Tel. +30 210 611 7593, Email: [email protected] Daria Kozanoglou - Communications Officer, Investor Relations Tel: +30 210 611 1121, Email: [email protected] Marilee Diamanti - IR Coordinator Tel: +30 210 611 5070, Email: [email protected] Christina Hadjigeorgiou - Financial Analyst Tel: +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 June 30, 2006. OTE assumes noobligation to update information in this release. Exhibits to follow: I. Condensed Consolidated Balance Sheets as of December 31, 2006 and December 31, 2005 (Under IFRS)II. Condensed Consolidated Income Statements for the three months and twelve months ended December 31, 2006 and 2005 (Under IFRS)III. Analysis of Group Other Operating Expenses for the three months and twelve months ended December 31, 2006 and 2005 (Under IFRS)IV. Condensed Consolidated Statement of Cash Flows for the four quarters and twelve months ended December 31, 2006 (Under IFRS)V. Group Revenues for the three months and twelve months ended December 31, 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 DECEMBER 31, 2006 AND DECEMBER 31, 2005 (Amounts in millions of Euro) Dec 2006 Dec 2005 --------- ---------ASSETS Non - current assets:Telecommunication property, plant andequipment 6,583.5 6,739.6Goodwill 540.8 72.4Telecommunication licenses 384.2 393.0Investments 158.7 159.3Advances to pension funds 188.1 180.7Deferred taxes 127.4 257.7Other non-current assets 709.7 126.6 -------- -------Total non - current assets 8,692.4 7,929.3 -------- ------- Current assets:Materials and supplies 205.4 130.3Accounts receivable 1,160.5 1,066.7Other current assets 447.8 411.1Cash and cash equivalents 2,042.5 1,512.2 -------- -------Total current assets 3,856.2 3,120.3 -------- ------- TOTAL ASSETS 12,548.6 11,049.6 ======== ======= EQUITY AND LIABILITIES Equity attributable to equity holders ofthe parent:Share capital 1,171.5 1,172.5Paid-in surplus 485.9 486.6Treasury stock 0.0 (5.9)Legal reserve 283.3 256.7Retained earnings 1,724.1 1,401.6 -------- -------- 3,664.8 3,311.5 -------- --------Minority interest 1,223.9 1,201.9 -------- -------- Total equity 4,888.7 4,513.4 -------- -------- Non - current liabilities:Long-term debt 4,037.3 3,104.3Reserve for staff retirement indemnities 198.5 172.7Reserve for voluntary retirement program 361.4 603.8Reserve for Youth Account 277.3 284.0Other non - current liabilities 126.9 139.9 -------- --------Total non - current liabilities 5,001.4 4,304.7 -------- -------- Current liabilities:Accounts payable 938.0 720.6Short-term borrowings 25.2 14.3Current maturities of long-term debt 528.0 321.3Income taxes payable 142.0 81.9Deferred revenue 196.2 179.1Dividends payable 3.7 5.2Reserve for voluntary retirement program 317.0 434.9Other current liabilities 508.7 474.2 -------- --------Total current liabilities 2,658.5 2,231.5 -------- -------- TOTAL EQUITY AND LIABILITIES 12,548.6 11,049.6 ======== ======== Movement in Shareholders' equity -------------------------------- ---------- 2006 ---------- Shareholders' equity, January 1 4,513.4 ----------Dividends declared (116.0)Profit for the period 730.8Net income recognized directly in equity (239.5) ---------- 375.3 ---------- ==========Shareholders' equity, December 31 4,888.7 ========== EXHIBIT II - CONDENSED CONSOLIDATED INCOME STATEMENT HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIES Prepared under IFRS for the three months and twelve months ended December 31, 2006 and 2005 (• mn) Q4'06 Q4'05 % 12M'06 12M'05 % Unaudited Unaudited Change ChangeRevenues:DomesticTelephony 561.7 590.4 -4.9% 2,260.6 2,312.2 -2.2%InternationalTelephony 78.4 94.0 -16.6% 346.9 391.0 -11.3%MobileTelephony 484.9 445.1 8.9% 1,975.8 1,752.2 12.8%Other 463.8 269.7 72.0% 1,308.0 1,019.6 28.3%Total Revenues 1,588.8 1,399.2 13.6% 5,891.3 5,475.1 7.6% ======== ======== ======== ======== OperatingExpenses:Payroll andemployeebenefits (310.4) (336.1) -7.6% (1,241.6) (1,327.1) -6.4%Voluntaryretirementcosts 0.0 (1.6) - 49.8 (939.6) - Payments tointernational (56.6) (46.9) 20.7% (208.8) (217.9) -4.2%operatorsPayments todomestic (174.9) (178.8) -2.2% (720.9) (665.5) 8.3%telephonyoperatorsDepreciationandamortization (289.6) (267.2) 8.4% (1,128.5) (1,107.4) 1.9%Cost oftelecommunications (205.0) (55.4) 270.0% (363.5) (180.8) 101.1%equipmentReversal offixed asset 0.0 0.0 - 0.0 75.7 -impairmentExtinguishmentof liabilities 0.0 0.0 - 0.0 23.8 -Otheroperatingexpenses (333.2) (329.2) 1.2% (1,189.5) (1,112.3) 6.9% -------- -------- -------- --------TotalOperatingExpenses (1,369.8) (1,215.3) 12.7% (4,803.0) (5,451.1) -11.9% ======== ======== ======== ======== OperatingIncome 219.0 183.9 19.1% 1,088.3 24.0 -Other income /(expense):Interestincome 22.0 15.4 42.9% 70.8 53.9 31.4%Interestexpense (140.9) (45.8) 207.6% (278.8) (163.2) 70.8%FXgain/(loss),net 1.0 3.5 -71.4% 4.2 34.7 -87.9%Financial net (117.9) (26.9) 338.3% (203.8) (74.6) 173.2% Investmentincome/(loss)/Gain 170.2 0.7 - 176.3 33.5 426.3%on sale ofinvestmentDividends 0.5 (0.0) - 23.0 20.4 12.7% -------- -------- -------- --------Total Otherincome /(expense) 52.8 (26.2) - (4.5) (20.7) -78.3% ======== ======== ======== ======== Profit beforeincome taxes 271.8 157.8 72.2% 1,083.8 3.3 ======== ======== ======== ======== Income taxes (107.0) (52.4) 104.2% (353.0) (19.8) -------- -------- -------- -------- Profit for theperiod 164.8 105.4 56.4% 730.8 (16.5) - ======== ======== ======== ======== Attributable to: Equity holdersof the 129.1 79.7 62.0% 574.6 (216.8) -parentMinorityinterest 35.7 25.7 38.9% 156.2 200.3 -22.0% -------- -------- -------- -------- 164.8 105.4 56.4% 730.8 (16.5) - ======== ======== ======== ======== EXHIBIT III - GROUP OTHER OPERATING EXPENSE ANALYSIS • mn Q4 06 Q4 05 % Change 12M 06 12M 05 % ChangeCommission to dealers 48.4 47.9 1.0% 203.0 166.9 21.6%Repairs, maintenance, 62.1 60.0 3.5% 199.0 205.7 -3.3%cost of materialsProvision for doubtfulaccounts 26.9 30.8 -12.7% 97.9 110.4 -11.3%Advertising 42.4 48.2 -12.0% 164.0 133.3 23.0%Taxes other thanincome taxes 12.6 4.4 186.4% 47.1 30.1 56.5%Other 140.8 137.8 2.2% 478.5 465.9 2.7% TOTAL 333.2 329.1 1.2% 1,189.5 1,112.3 6.9% EXHIBIT IV - STATEMENT OF CASH FLOWS HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIESCondensed Consolidated Statement of Cash Flows Prepared under IFRS for the four quarters and twelve months ended December 31, 2006 (• mn) Q1'06 Q2'06 Q3'06 Q4'06 12M'06Cash Flows from OperatingActivities: Profit before taxes 203.4 230.5 378.1 271.8 1,083.8Adjustments to reconcile to net cash provided by operating activities: Depreciation and 284.3 280.0 274.6 289.6 1,128.5 amortization Provisions for voluntary - - (49.8) - (49.8) retirement Provisions 51.7 52.5 50.6 66.2 221.0 Investments and financial (17.6) (39.6) (23.4) (193.7) (274.3) income/loss Amortization of advances 8.8 8.8 8.8 8.8 35.2 to pension funds Interest expense 42.3 46.8 48.8 140.9 278.8Adjustments for working capital movements related to operating activities Decrease/(increase) in (6.7) (0.2) 12.9 (36.3) (30.3) materials and supplies Decrease/(increase) in (13.4) 2.1 (44.5) 131.6 75.8 accounts receivable Decrease in liabilities (123.0) (90.9) (92.9) 13.2 (293.6) Minus: Interest paid (42.1) (6.3) (73.7) (56.4) (178.5) Income taxes paid (14.9) (67.7) (66.0) (61.8) (210.4) ------ ------ ------ ------- -------Net Cashprovided byOperatingActivities 372.8 416.0 423.5 573.9 1,786.2 ------ ------ ------ ------- ------- Cash Flows from InvestingActivities: Acquisition of subsidiary - (191.1) 0.0 (1,481.1) (1,672.2) or associate, net of cash acquired Acquisition of financial - (222.8) (147.9) 370.7 0.0 assets Loans granted - - - (66.4) (66.4) Loans received - - - 20.3 20.3 Purchase of property, (168.5) (230.9) (185.9) (377.1) (962.4) plant and equipment or intangible assets Proceeds from sale of - - - 316.2 316.2 investment Interest received 9.0 10.8 6.6 16.4 42.8 Dividends received - 6.8 - 6.8 13.6 ------ ------ ------ ------- -------Net Cash usedin InvestingActivities (159.5) (627.2) (327.2) (1,194.2) (2,308.1) ------ ------ ------ ------- ------- Cash Flows from FinancingActivities: Proceeds from minority 12.0 - - - 12.0 shareholders for issuance of subsidiary's share capital Proceeds from long-term - - 870.9 1,498.2 2,369.1 debt and short-term borrowings Repayment of long-term (26.9) (18.8) (40.7) (1,125.3) (1,211.7) debt and short-term borrowings Dividends paid 0.0 (72.9) (0.4) (43.9) (117.2) ------ ------ ------ ------- -------Net Cashprovided/(usedin) byFinancingActivities (14.9) (91.7) 829.8 329.0 1,052.2 ------ ------ ------ ------- ------- NetIncrease/(Decrease) in Cashand CashEquivalents 198.4 (302.9) 926.1 (291.3) 530.3Cash and Cashequivalents atbeginning ofperiod 1,512.2 1,710.6 1,407.7 2,333.8 1,512.2 ------ ------ ------ ------- -------Cash and CashEquivalents atend of period(total) 1,710.6 1,407.7 2,333.8 2,042.5 2,042.5Cash and CashEquivalentsincl. toassetsavailable forsale - (37.5) (36.8) 36.8 - ------- ------- ------- ------- -------Cash and CashEquivalents atend of period(balancesheet) 1,710.6 1,370.2 2,297.0 2,079.3 2,042.5 ======= ======= ======= ======= ======= EXHIBIT V - GROUP REVENUES HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIES Consolidated Revenues prepared under IFRS for the three months and twelve months ended December 31, 2006 and 2005 (• mn) Q4'06 Q4'05 Change 12M'06 12M'05 ChangeDomestic Telephony:Basic monthlyrentals 257.4 237.1 8.6% 995.7 954.2 4.3%Local and longdistance calls-Fixed to fixed 170.4 191.2 -10.9% 702.6 759.1 -7.4%-Fixed to mobile 109.6 138.8 -21.0% 470.2 515.7 -8.8% ------ ------ ------ ------ 280.0 330.0 -15.2% 1,172.8 1,274.8 -8.0% ====== ====== ====== ======Other 24.3 23.3 4.3% 92.1 83.2 10.7% ------ ------ ------ ------Total DomesticTelephony 561.7 590.4 -4.9% 2,260.6 2,312.2 -2.2% ====== ====== ====== ====== InternationalTelephony:Internationaltraffic 30.2 37.1 -18.6% 132.3 150.5 -12.1%Payments fromInternationalmobile operators 11.0 8.2 34.1% 41.9 38.1 10.0% ------ ------ ------ ------ 41.2 45.3 -9.1% 174.2 188.6 -7.6% ====== ====== ====== ======Payments fromInternationaloperators 37.2 48.7 -23.6% 172.7 202.4 -14.7% ------ ------ ------ ------Total InternationalTelephony 78.4 94.0 -16.6% 346.9 391.0 -11.3% ====== ====== ====== ====== Mobile Telephony 484.9 445.0 9.0% 1,975.8 1,752.2 12.8% ====== ====== ====== ====== Other Revenues:Prepaid cards 24.9 29.5 -15.6% 100.6 126.6 -20.5%Directories 15.8 14.1 12.1% 58.0 56.0 3.6%Leased lines anddatacommunications 40.0 44.4 -9.9% 214.0 211.4 1.2%ISDN, connection &monthly charges 39.0 37.8 3.2% 158.9 141.4 12.4%Sales oftelecommunicationequipment 221.3 41.2 - 341.6 112.2 -Internetservices-ADSL 41.7 19.2 117.2% 133.1 81.0 64.3%ATM 7.4 5.9 25.4% 32.1 23.1 39.0%Services rendered 28.1 22.6 24.3% 74.9 72.3 3.6%Interconnectioncharges 11.7 27.9 -58.1% 96.8 101.7 -4.8%Miscellaneous 33.9 27.2 24.6% 98.0 94.0 4.3% ------ ------ ------ ------Total OtherRevenues 463.8 269.8 71.9% 1,308.0 1,019.7 28.3% ====== ====== ====== ====== Total Revenues 1,588.8 1,399.3 13.5% 5,891.3 5,475.1 7.6% ====== ====== ====== ====== EXHIBIT VI - SEGMENT REPORTING (12M 2006) HELLENIC TELECOMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIES Segment Reporting prepared under IFRS, for the twelve months ended Dec 31, 2006 (In millions of Euro) OTE Cosmote Romtelecom All Other Total Adjustments & Consolidated EliminationsRevenues:DomesticTelephony 1,596.9 604.6 63.3 2,264.8InternationalTelephony 181.1 126.5 41.4 349.0MobileTelephony 2,091.2 0.0 47.6 2,138.8Other 936.5 291.1 163.7 342.9 1,734.2Total 2,714.5 2,382.3 894.8 495.2 6,486.8 (595.5) 5,891.3Revenues ------- ------- --------- ------- ------- --------- --------- IntersegmentRevenues (225.8) (169.7) (17.6) (182.4) (595.5) Revenue fromExternalCustomers 2,488.7 2,212.6 877.2 312.8 5,891.3 5,891.3 ------- ------- --------- ------- ------- --------- --------- OperatingExpenses:Payroll andemployeebenefits (764.9) (143.3) (240.1) (95.1) (1,243.4) 1.8 (1,241.6)Voluntaryretirementcosts 49.8 49.8 49.8Payments tointernationaloperators (143.9) (34.6) (26.1) (14.7) (219.3) 10.5 (208.8)Payments todomestictelephonyoperators (366.8) (388.7) (104.0) (16.9) (876.4) 155.5 (720.9)Depreciationandamortization (528.0) (318.9) (217.5) (67.7) (1,132.1) 3.6 (1,128.5)Cost ofequipment &prepaid cards (128.3) (253.2) (13.9) (8.5) (403.9) 40.4 (363.5)Otheroperatingexpenses (520.3) (686.1) (172.4) (196.8) (1,575.6) 386.1 (1,189.5)TotalOperatingExpenses (2,402.4) (1,824.8) (774.0) (399.7) (5,400.9) 597.9 (4,803.0) ------- ------- --------- ------- ------- --------- --------- ------- ------- --------- ------- ------- --------- ---------OperatingIncome 312.1 557.5 120.8 95.5 1,085.9 2.4 1,088.3 ------- ------- --------- ------- ------- --------- --------- Operatingincome beforedepreciationandamortization 840.1 876.4 338.3 163.2 2,218.0 (1.2) 2,216.8------------ ------- ------- --------- ------- ------- --------- ---------as % ofOperatingrevenues 31.0% 36.8% 37.8% 33.0% 34.2% - 37.6% EXHIBIT VI - SEGMENT REPORTING (12M 2005) HELLENIC TELECOMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIES Segment Reporting prepared under IFRS, for the twelve months ended Dec 31, 2005 (In millions of Euro) OTE Cosmote Romtelecom All Other Total Adjustments & Consolidated EliminationsRevenues:DomesticTelephony 1,617.3 640.5 56.4 2,314.2InternationalTelephony 216.0 144.2 38.3 398.5MobileTelephony 1,736.1 0.2 206.9 1,943.2Other 873.7 61.5 144.8 265.3 1,345.3Total Revenues 2,707.0 1,797.6 929.7 566.9 6,001.2 (526.1) 5,475.1 ------- ------- --------- ------- ------- --------- --------- IntersegmentRevenues (197.5) (178.9) (8.6) (141.1) (526.1) Revenue fromExternalCustomers 2,509.5 1,618.7 921.1 425.8 5,475.1 5,475.1 ------- ------- --------- ------- ------- --------- --------- OperatingExpenses:Payroll andemployeebenefits (849.8) (99.7) (288.8) (90.0) (1,328.3) 1.2 (1,327.1)Voluntaryretirementcosts (939.6) (939.6) (939.6)Payments tointernationaloperators (145.9) (29.7) (32.3) (15.2) (223.1) 5.2 (217.9)Payments todomestictelephonyoperators (372.7) (327.3) (98.0) (36.3) (834.3) 168.8 (665.5)Depreciationandamortization (542.6) (229.2) (238.0) (100.8) (1,110.6) 3.2 (1,107.4)Reversal offixed assets'impairment 75.7 75.7 75.7Extinguishmentof liabilities 23.8 23.8 23.8Cost ofequipment &prepaid cards (107.4) (60.8) (11.0) (22.9) (202.1) 21.3 (180.8)Otheroperatingexpenses (571.4) (525.6) (158.1) (183.2) (1,438.3) 326.0 (1,112.3)TotalOperatingExpenses (3,529.4) (1,272.3) (726.7) (448.4) (5,976.8) 525.7 (5,451.1) ------- ------- --------- ------- ------- --------- --------- ------- ------- --------- ------- ------- --------- ---------OperatingIncome (822.4) 525.3 203.0 118.5 24.4 (0.4) 24.0 ------- ------- --------- ------- ------- --------- --------- Operatingincome beforedepreciationandamortization (279.8) 754.5 441.0 219.3 1,135.0 (3.6) 1,131.4----------- ------- ------- --------- ------- ------- --------- ---------as % ofOperatingrevenues -10.3% 42.0% 47.4% 38.7% 18.9% - 20.7% EXHIBIT VII - INTERNATIONAL ASSETS RomTelecom OTE has a 54.01% stake in RomTelecom, which is fully consolidated. ROMTELECOM INCOME STATEMENT For the twelve months ended December 31, 2006, in accordance with IFRS (• thousand) 12M 2006 Basic monthly rentals 290,376Domestic Telephony calls 314,263 --------Domestic Telephony 604,639International Telephony 126,501Other Revenues 163,651 --------Total Operating Revenues 894,792 Personnel (inc Voluntary Redundancy) (240,150)Other operating expenses (316,331)Depreciation and Amortization (253,901) --------Total Operating expenses (810,382) Operating income 84,410 Financial, net (12,877) Income before provision for income taxes 71,533 Provision for Income taxes (16,332) --------Net income 55,201 ======== Armentel Until November 16, OTE held a 90% stake in ArmenTel, which was fullyconsolidated until that time. ArmenTel's key financial figures are stated below: ARMENTELHighlights prepared under IFRS • mn Q4'06 Q4'05 until Nov 16Revenues 22.7 32.4Operating Income before Depreciation & amortization 8.8 22.2 EXHIBIT VIII - OTEnet OTE has a 94.6% stake in OTEnet, which is fully consolidated. OTEnet's keyfinancial figures are stated below: OTEnetHighlights prepared under IFRS for the three months and the twelve months ended December 31, 2006 and 2005 • mn Q4'06 Q4'05 % Change 12M'06 12M'05 % ChangeRevenues 28.8 28.3 1.8% 109.7 96.6 13.6%Operating Incomebefore Depreciation &amortization -2.1 4.6 - 3.4 14.7 -76.9%as % of OperatingRevenues -7.3% 16.3% - 3.1% 15.2% -12.1pp EXHIBIT IX -OPERATIONAL HIGHLIGHTS -------------------------------- Operational Highlights for the quarters ended December 31, 2006 and 2005 --------------------------------OTE Q4'06 Q4'05 % ChangePSTN lines 4,778,245 4,879,544 -2.1%ISDN, 64kb equiv. lines 1,382,124 1,347,408 2.6%Total lines 6,160,369 6,226,952 -1.1% ADSL subscribers 487,799 154,530 215.7%Unbundled local loops 24,635 6,884 257.9% COSMOTE (Greece)Pre-paid sub. 3,368,170 2,919,850 15.4%Contract sub. 1,849,757 1,724,590 7.3%Total subscribers 5,217,927 4,644,440 12.3% AMCTotal subscribers 990,279 781,496 26.7% GLOBULTotal subscribers 3,270,878 2,393,717 36.6% COSMOFONTotal subscribers 472,501 384,186 23.0% COSMOTE ROMANIATotal subscribers 1,225,603 - - OTEnetResidential clients 528,140 413,200 27.8%Business clients 18,445 13,900 32.7% Employees:-OTE 11,755 14,741 -20.3%-COSMOTE (Greece) 2,158 2,125 1.6%-RomTelecom 12,257 13,078 -6.3%-------------- -------- -------- -------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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