30th Aug 2006 11:12
Hellenic Telecomms Organization S A30 August 2006 OTE GROUP REPORTS 2006 SECOND QUARTER RESULTS UNDER IFRS (UNAUDITED) • Q2 operating revenues up 4.6% on good performance of Greek fixed-line and mobile operations • RomTelecom experiencing top-line pressure ATHENS, Greece - August 30, 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 six months ended June 30, 2006. CONSOLIDATED FINANCIAL HIGHLIGHTS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005 IN ACCORDANCE WITH IFRS • million except Q2 06 Q2 05 % Change H1 06 H1 05 % Changeper share data Revenues 1,431.9 1,369.2 4.6% 2,818.6 2,670.7 5.5% Operating Income 237.6 232.1 2.4% 465.8 386.8 20.4% Pre-tax Income 230.5 237.0 -2.7% 433.9 413.9 4.8% Net Income 112.2 117.2 -4.3% 221.9 196.5 12.9% Operating IncomebeforeDepreciation & 517.6 504.8 2.5% 1,030.1 949.0 8.5%Amortization Operating Incomebefore Depreciation & Amortization as % 36.1% 36.9% -0.8pp 36.5% 35.5% 1.0ppof Operating Revenues Basic EPS (•) 0.2289 0.2391 -4.3% 0.4527 0.4009 12.9% Cashflow fromOperations 416.0 375.1 10.9% 788.8 683.4 15.4% CAPEX as % of 16.1% 8.3% 7.8pp 14.2% 8.9% 5.3ppRevenues Commenting on the quarter, Mr. Panagis Vourloumis, Chairman and CEO, noted: "Our performance in the second quarter of 2006 was roughly in line with ourexpectations and the guidance we provided earlier this year. Greek fixed-linerevenues were up, without contribution from exceptional contracts, reflectingstrong take-up of broadband services, while operating expenses are beginning toshow the results of our cost-cutting initiatives. Mobile in Greece andinternationally is continuing to perform well. In Romania, heightenedcompetition and delays in implementing a needed round of tariff rebalancingaffected the quarter's revenues, but we are cautiously optimistic aboutRomTelecom's ability to maintain its first half margin in the last six months ofthe year. We continue to operate in a fast-moving environment, where competitiveforces and regulatory decisions can have a sharp impact on our performance, butour results in the first six months definitely provide us with a solid platformto meet our full-year targets." Financial Highlights Revenues OTE Group Revenues increased by 4.6% in the three months ended June 30, 2006.The increase reflects higher revenues mainly from mobile telephony, ADSL,monthly rentals, and telecom equipment sales, partly offset by lower revenues atRomTelecom. Operating Expenses Total Operating Expenses excluding depreciation and amortization amounted to •914.3 million, 5.7% higher than in the second quarter 2005 results. Thisincrease is mainly attributed to the Group's fast-growing international mobileoperations. Payroll and Employee Benefits Payroll and Employee Benefits increased by 1.2% to • 334.5 million in the secondquarter of 2006, compared to the second quarter of 2005. The increase isprimarily due to RomTelecom, while payroll and employee benefits in Greekfixed-line were down 5.6%. Other Operating Expenses Other Operating Expenses increased by 15.9% to • 296.7 million. The increase islargely attributable to higher costs in fast-growing mobile operations, morethan offsetting the drop in Other Operating Expenses in Greek fixed-lineoperations. Operating income before depreciation and amortization In the second quarter of 2006, OTE reported consolidated Operating Income beforedepreciation and amortization of • 517.6 million, an increase of 2.5% from theprior year's quarter. The underlying margin stands at 36.1%, down slightly fromthe previous year level, reflecting higher expenses in international mobileoperations as well as the deterioration of RomTelecom's margin. Conversely,Greek fixed-line operations achieved a significant improvement in operatingmargin. Net income In the quarter OTE Group posted Net Income of • 112.2 million, down 4.3%compared to the second quarter of 2005, primarily due to higher income taxes,reflecting higher operating profitability at Greek fixed-line operations. Cash flow Cash provided by operating activities amounted to • 416.0 million for the threemonths ended June 30, 2006. The 10.9% growth in cash flow from operationsreflects higher net income and working capital discipline, and was achieveddespite a cash outflow of approximately • 78 million in the quarter related toGreek fixed-line redundancy payments. Capital Expenditure Capital expenditure in the second quarter of 2006 totaled • 230.9 million, morethan double versus the respective period of 2005, mainly reflecting mobiletelephony investments. Debt On June 30, 2006, the OTE Group gross debt was • 3,366.3 million, a drop of 2.1%compared to December 31, 2005, while net debt totaled €1,996.1 million,increasing by 3.5% from 2005 year end. The debt break down for June 2006excludes Armentel's Cash Balance of • 37.5 million and • 32.4 million Debt. OTEdebt outstanding breaks down as follows: • million June 30 2006 Dec 31 2005 % Change Short-Term:-Bank loans 9.8 14.3 -31.5%Medium & Long-term:-Bonds 2,601.8 2,598.0 0.1%-Bank loans 754.7 794.2 -5.0%-Other loans - 33.4 -Total Indebtedness 3,366.3 3,439.9 -2.1%Cash and Cash equivalents 1,370.2 1,512.2 -9.4%Net Debt 1,996.1 1,927.7 3.5% 1. OTE Fixed-Line TRAFFIC STATISTICS Minutes, millions Q2 2006 Q2 2005 % Change Local 2,915.2 3,049.8 -4.4%National Long - Distance 461.8 488.6 -5.5%International Long - Distance 76.7 86.7 -11.5%Fixed-to-Mobile 449.8 454.7 -1.1%Special Calls 49.6 50.3 -1.4%Total Voice traffic 3,953.1 4,130.1 -4.3%Subscription Dial-up Internet 2,170.2 3,044.4 -28.7% OTE estimates that its share of the Greek fixed-line market, as measured inoutgoing call minutes (excluding subscription dial-up internet), wasapproximately 73% in June 2006, unchanged from the previous quarter. • million Q2 06 Q2 05 % Change H1 06 H1 05 % Change Revenues 692.6 679.9 1.9% 1,377.3 1,342.7 2.6% - Basic Monthly 175.0 165.4 5.8% 344.3 332.7 3.5%Rentals - Fixed to fixed 131.0 137.8 -4.9% 268.0 276.9 -3.2%calls - Fixed to mobile 82.2 86.7 -5.2% 162.0 163.8 -1.1%calls - International 49.2 58.7 -16.2% 91.7 113.7 -19.3% - Other 255.2 231.3 10.3% 511.3 455.6 12.2% Operating Income 68.7 24.2 183.9% 117.6 44.8 162.5% Operating incomebeforedepreciation and 199.9 157.7 26.8% 383.5 314.7 21.9%amortization Operating incomebeforedepreciation andamortization as % of 28.9% 23.2% 5.7pp 27.8% 23.4% 4.4ppOperating revenues Depreciation &Amortization 131.2 133.5 -1.7% 265.9 269.9 -1.5% In the second quarter of 2006, total fixed-line revenues increased by 1.9% to • 692.6 million. Revenues in the second quarter reflect the tariff increase inbasic monthly rentals implemented in April, ADSL take-up and sales oftelecommunications equipment, more than offsetting the decline in internationaltelephony. The drop in fixed-to-mobile call revenue is due to lower terminationrates implemented by the mobile operators and passed on by OTE to its clients.Without the tariff reduction, which has no impact on profitability, revenuesfrom fixed-to-mobile calls would have been roughly unchanged. As of the end of June 2006, there was a total of over 4.8 million PSTN lines inservice, down by 2.5% from the prior year level. ISDN lines (64K) rose by 5.7%to a total of nearly 1.4 million. In April, OTE launched its first flat-rate packages, enabling customers topurchase monthly bundles of minutes covering all local and nationallong-distance calls. These packages, part of OTE's effort to develop targetedsolutions for specific customer segments, have been well received in themarketplace and rapidly adopted by high-volume users. At the end of June 2006, OTE had over 300,000 ADSL customers (approximately 65%retail and 35% wholesale), with the total market amounting to approximately310,000 customers. This compares to 213,000 and 220,000, respectively, at theend of March 2006. Installed capacity is growing at a rapid pace in order toenable OTE to meet continuing strong market demand for broadband services. OTEremains on track to achieve its target of approximately 500,000 ADSL customersat year end. Total operating expenses amounted to • 623.9 million, down 4.8% from the secondquarter 2005 level. Payroll and employee benefits declined by 5.6% to • 209.1million, as 3,390 employees had left the company by June 30, 2006. Reflectingdelays in securing approval from the authorities, most early retirementdepartures occurred in the last days of the quarter, limiting their impact onthe period's payroll, which also included adjustments for wage increasesrelative to the first quarter of 2006. Other operating expenses declined by 12.1% in the quarter, reaching • 124.3million, largely driven by a drop in Repairs & Maintenance from an exceptionallyhigh level last year, as well as lower Cost of Materials and Provisions fordoubtful accounts, combined with improving control over non revenue-relatedcosts. Operating Income before depreciation and amortization rose by 26.8% to nearly •200 million, its highest level in the past two years. Operating Income before depreciation and amortization as a percentage ofoperating revenues rose by 5.7 points to 28.9% compared to in 23.2% the secondquarter of 2005. An analysis of the OTE Fixed-line Other Operating Expenses follows: • million Q2 06 Q2 05 % Change H1 06 H1 05 % Change Repairs, maintenance,Cost of materials 16.4 34.3 -52.2% 34.0 54.0 -37.0% Provision for doubtfulaccounts 18.3 20.0 -8.5% 34.0 40.0 -15.0% Advertising 6.7 7.7 -13.0% 14.5 16.8 -13.7% Taxes other than incometaxes - 3.4 - 2.7 5.4 -50.0% Other 82.9 76.0 9.1% 153.2 148.1 3.4%-Third party fees 36.4 33.3 9.3% 62.6 62.7 -0.2%-Travel costs 1.8 2.0 -10.0% 3.1 3.3 -6.1%-Audiotex 2.3 4.0 -42.5% 4.8 9.1 -47.3%-Other 42.4 36.7 15.5% 82.7 73.0 13.3% TOTAL 124.3 141.4 -12.1% 238.4 264.3 -9.8% 2. Cosmote SUMMARY CONSOLIDATED RESULTS FOR THE SECOND QUARTER OF 2006 IN ACCORDANCE WITH IFRS (UNAUDITED) • million Cosmote AMC GloBul CosmoFon Cosmote Consolidated Greece Romania Q2 06 Q2 05 % Change Revenues 406.8 34.9 82.3 12.8 7.9 540.7 410.9 31.6% Operatingincomebeforedepreciationand 170.5 20.1 30.5 1.9 (18.2) 203.6 179.4 13.5%amortization Operatingincomebeforedepreciationandamortizationas % ofOperating 41.9% 57.6% 37.0% 14.5% N/A 37.7% 43.7% -6.0pprevenues During the second quarter of 2006, Cosmote's revenue growth was driven by strongperformance in all markets. International operations accounted for approximately25% of revenues, a percentage which is expected to continue increasing. In Greece, Cosmote revenues during the second quarter of 2006, compared to thoseof the second quarter of 2005, rose by 7.2%, boosted by strong growth intelecommunications revenues from higher usage and strong subscriber take up.Cosmote pursued its successful promotion of bundled packages during the firsthalf of 2006, resulting in a 25.3% increase in monthly fees. Blended AMOUcontinued to rise, reaching 146 minutes during the six months of 2006, mainlydriven by post-paid AMOU. Blended ARPU for the same period increased marginallyby 1.7% to • 29.7. Cosmote had approximately 4.9 million customers at the end ofJune 2006, an increase of 11% compared to 2005, and retained its leadership inthe Greek mobile market with a market share of 37.4%. In July 2006, Cosmote launched a new prepaid brand, called "frog mobile", whichappeals to customers interested in the basic use of mobile telephony services,at the most competitive rates. Early data suggest a very positive marketreception. In June 2006, Cosmote reduced interconnection rates to its network to• 0.12 per minute from • 0.145 previously. In Albania, AMC revenues rose by 8.7% during the second quarter of 2006,reaching • 34.9 million, while Operating Income Before Depreciation andAmortization increased by 4.3% reaching • 20.1 million. AMC held a market shareof approximately 52% at the end of June 2006 and retained its high profitabilitylevel in a maturing market. Blended AMOU for the first half reached 61 minutes,compared to 65 minutes a year ago, while blended ARPU for the same period stoodat • 15. In Bulgaria, Globul revenues rose by 29.6% during the second quarter of 2006,reaching • 82.3 million, while Operating Income Before Depreciation andAmortization increased by 44.7% reaching • 30.5 million for a margin of 37%.Globul held a market share of approximately 39% at the end of June 2006. BlendedAMOU for the first half reached 72 minutes, compared to 59 minutes a year ago,while blended ARPU for the same period stood at • 11. In FYROM, CosmoFon posted a 14.5% Operating Income Before Depreciation andAmortization margin and a 39.7% revenue increase in the second quarter of 2006.The company's market share stood at 33%. Blended AMOU for the first half reached51 minutes, compared to 45 minutes a year ago, while blended ARPU for the sameperiod stood at • 9. In Romania, Cosmote Romania continued to make significant market inroads andgained an increasing share of new subscribers. During the second quarter of 2006Cosmote Romania added 256,098 net new subscribers, bringing the total netadditions for the first half of 2006 to 482,685, and the total number ofcustomers to 531,619, corresponding to a market share of 4% after just sixmonths of operations. The majority of the subscriber base (c. 86%) is prepaid asthe company has been focusing on this market segment. Blended ARPU declined to •5.4. As network coverage is improving, the customer mix is expected to lead toARPU improvements. Cosmote consolidated revenue for the second quarter of 2006 reached • 540.7million, increasing by 31.6%, as a result of the consolidation of fast-growingGlobul, Cosmofon and Cosmote Romania. Cosmote consolidated Operating IncomeBefore Depreciation and Amortization in the second quarter of 2006 increased by13.5% reaching • 203.6 million, while Operating Income Before Depreciation andAmortization as percentage of Operating revenues fell from 43.7% in the secondquarter of 2005 to 37.7% in the second quarter of 2006, as the newlyconsolidated growth assets are at an early development phase, with lower marginscurrently. Additional details are available in Cosmote's second quarter 2006 press releaseissued on August 24, 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 HIGHLIGHTS SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005 IN ACCORDANCE WITH IFRS • Million Q2 06 Q2 05 % Change H1 06 H1 05 % Change Revenues 217.2 239.2 -9.2% 440.0 467.4 -5.9% Operating Incomebefore Depreciation & amortization 71.7 105.4 -32.0% 166.7 176.8 -5.7% Operating Incomebefore Depreciation & Amortization as % of Operating Revenues 33.0% 44.1% -11.1pp 37.9% 37.8% 0.1pp Operating Income /(Loss) 6.1 40.4 -84.9% 32.5 30.9 5.2% Net Income/(Loss) (4.1) 46.8 N/A 14.6 59.8 -75.6% Net Income/(Loss) Margin -1.9% 19.6% N/A 3.3% 12.8% -9.5pp Increase/(Decrease) in Gross PP&E 31.6 33.3 -5.1% 59.3 49.6 19.6% Fixed Telephony, Lines 3,770,514 4,185,458 -9.9% 30.06.06 31.12.05Cash and cashequivalents 224.4 157.5 42.5% Short-term borrowings 0.0 0.0 - Long-term debt (119.4) (148.4) -19.5% Net Cash Position 105.0 9.1 - In the second quarter of 2006, RomTelecom's revenues were • 217.2 million, down9.2% from revenues of • 239.2 million in the same period last year. The decreaseis due to the drop in the number of subscriber lines and lower retail traffic,largely due to intense competition from cable operators, as well as reducedwholesale revenues. The combination of mobile substitution and increased competition from fixed-linealternative carriers affected the number of lines, which decreased by 9.9% fromJune 2005 and the amount of local traffic, which decreased by 14%, while at thesame time fixed-to-mobile traffic rose 4%. Wholesale revenue declined by 16.2% despite a 16% increase in wholesale traffic.This is a result of increasing retail competition from alternative operatorsutilizing RomTelecom's network at significantly reduced rates (by nearly 25%),as mandated by the Regulator. Data services revenues, which represent a small but fast-growing segment ofRomTelecom's revenues, nearly tripled in the second quarter of 2006 compared tothe second quarter of 2005, in line with the company's objective to increasenon-voice services revenues. Similarly, leased line revenues have increased by19%. RomTelecom was not able to offset the overall decline in traffic through highermonthly rental charges. Its latest round of tariff rebalancing was approved bythe Regulator and implemented in mid-August, and should enable the Company toslow down revenue erosion in the remaining part of the year. Operating Expenses excluding depreciation and amortization rose by 8.7% to •145.5 million, reflecting higher payroll, a • 8 million charge for additionalvoluntary retirement, increased advertising costs ahead of the latest tariffrebalancing, and higher provisions. Reflecting the exceptionally low revenue level combined with higher operatingexpenses, Operating Income before Depreciation and Amortization as a percentageof Revenues dropped to 33.0% in the second quarter of 2006 and was virtuallyunchanged, at 37.9%, in the first half of the year. The Company posted a Net Loss of • 4.1 million in the second quarter, comparedto Net Income of • 46.8 million in the comparable 2005 quarter. This is largelydue to the drop in Revenues and higher Operating Expenses, as well asRomTelecom's share in the loss of Cosmote Romania (• 7.3 million) and a foreignexchange loss of • 1.6 million this quarter, versus a • 5.1 million gain in thesecond quarter of last year. Headcount reached 12,950 at the end of June 2006, down 1% compared to December2005. Implementation of several projects and initiatives is proceeding according tothe Company's plan: > The implementation of a Next Generation Network (NGN) has been initiated, supported by the continuation of the Access Network modernization program to support broadband services; > New product offerings targeting business customers and loyalty schemes addressed to residential customers; > Complete deployment of a new Human Resources and Payroll platform in June 2006 as part of the integrated e-business system. 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 the second quarter of 2006 were • 28.1 million, up 24.3% compared tothe second quarter of 2005, mainly as a result of the rapid growth in the numberof broadband subscribers, which more than doubled during the year. Operatingincome before depreciation and amortization was • 1.4 million, down 58.8%compared to the second quarter of 2005, reflecting high marketing expensesrelating to the promotion of ADSL products. As of June 30, 2006, OTEnet had over 446,500 active residential customers usingretail product and services and over 16,100 business customers, representingsignificant increases compared to the same period last year. 5. Other International Investments Armentel ArmenTel's Revenues for the second quarter of 2006 amounted to • 36.2 millioncompared to • 28.6 million in the second quarter of 2005. This 26.6% increase ismainly attributable to the 33.5% increase in the number of mobile subscribers,which reached 344,000 at the end of the quarter. Operating income beforedepreciation and amortization reached • 17.4 million, or 48.0% of operatingrevenues. 6. Events of the quarter OTE EXAMINES OPTIONS FOR THE DISPOSAL OF ARMENTEL On April 3, 2006, OTE announced that after consultation with the Government ofArmenia, it has initiated the process of examining options for the disposal ofits 90% stake in Armentel, the incumbent operator in Armenia. OTE ANNOUNCES NEW TARIFF RATES FOR HIGH-SPEED LEASED LINES On April 5, 2006, OTE announced new reduced tariffs for high-speed leased linesfor alternative (ISP and fixed-line) carriers and the launch of a wholesalediscount package branded: 'High Speed Pack'. The target is to significantlyreduce the cost of high-speed data transfer, thus contributing to thedevelopment of broadband in Greece. OTE INCREASES ITS PARTICIPATION IN COSMOTE'S CAPITAL TO 67% In April 2006, OTE purchased in the open market 9.5 million shares of itssubsidiary Cosmote SA, increasing its interest from 64.1% to 67.0%. OTE now ownsa total of 223,572,294 shares out of 333,688,110 outstanding Cosmote shares. COSMOTE ANNOUNCES INTENTION TO ACQUIRE GERMANOS SA On May 9, 2006, OTE's mobile telephone subsidiary, Cosmote, announced that it has reached an agreement regarding the purchase of a 42% interest in Germanos S.A., subject to regulatory approval. Cosmote intends to launch a public tenderoffer for the remaining shares of Germanos S.A. Germanos is one of the mostsuccessful telecommunications retailers in Greece and Southeast Europe. Itsacquisition will enable Cosmote to substantially increase its retail presence inGreece, Bulgaria, Romania and FYROM. OTE RECEIVES OFFERS FOR ITS 90% STAKE IN ARMENTEL On June 22, 2006, OTE announced that it received a total of 10 non-biddingoffers for its 90% stake in Armentel. After reviewing the bids only four partieshave been invited to participate in the next phase of the sale process. 54TH ANNUAL GENERAL ASSEMBLY OF SHAREHOLDERS On June 22, 2006, OTE held its 54th Annual General Assembly of Shareholders,during which management reviewed its full-year results for the 2005 fiscal year.The Annual General Assembly approved the re-appointment of three Board membersfor a three-year term and amendments to the Company's Articles of Association. 7. Subsequent Events REPEATED 54TH ANNUAL GENERAL ASSEMBLY OF SHAREHOLDERS On July 31, 2006, OTE held its second 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 • 1.5 BILLION On August 11, 2006 OTE Plc's Global Medium Term Note Program guaranteed by OTES.A was increased from • 3.5 billion to • 5.0 billion. COSMOTE RECEIVED THE APPROVAL FROM EETT FOR THE ACQUISITION OF GERMANOS S.A. On August 17, 2006, Cosmote announced that it received the decision of theNational Telecommunications and Post Commission (EETT), approving theacquisition of Germanos S.A and its commercial agent, MOBILBEEP Ltd, subject tospecific conditions 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 EETT decision, Cosmote received approval by 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. 8. Outlook For 2006, OTE expects a slight decline in operating revenues in its Greekfixed-line activities, while operating profitability should improve quarterafter quarter mainly due to the progressive implementation of its earlyretirement program. At Cosmote, revenues should increase significantly,reflecting the growth of international operations, while Operating Income beforeDepreciation and Amortization margin will be held back by high development costsin fast-growing activities and the cost of relaunching Cosmote Romania. Finally,RomTelecom expects to post a full-year Operating Income before Depreciation andAmortization margin roughly equivalent to the level achieved in the first halfof the year. 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, Serbia and Armenia, andestablishing mobile operations in Albania, Bulgaria, the Former YugoslavRepublic of Macedonia and most recently in Romania. At present, companies inwhich OTE Group has an equity interest employ over 35,000 people in sevencountries, and our portfolio of solutions ranges from fixed and mobile telephonyto Internet applications, satellite, maritime communications and consultancyservices. 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 June 30, 2006 and December 31, 2005 (Under IFRS) II. Condensed Consolidated Income Statements for the three months and the six months ended June 30, 2006 and 2005 (Under IFRS) III. Analysis of Group Other Operating Expenses for the three months and the six months ended June 30, 2006 and 2005 (Under IFRS) IV. Condensed Consolidated Statement of Cash Flows for the three months and the six months ended June 30, 2006 (Under IFRS) V. Group Revenues for the three months and the six months ended June 30, 2006 and 2005 (Under IFRS) VI. Segment Reporting based on the Company's legal structure VII. International Assets VIII. OTEnet IX. Operational Highlights EXHIBIT I - BALANCE SHEET HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (OTE) CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2006 AND DECEMBER 31, 2005 (Amounts in millions of Euro) Jun 2006 Dec 2005 --------- ---------ASSETS (Unaudited) Non - current assets:Telecommunication property, plant andequipment 6,413.1 6,739.6Goodwill 72.2 72.4Telecommunication licenses 390.6 393.0Investments 158.6 159.3Financial Assets 219.3 -Advances to pension funds 163.0 180.7Deferred taxes 250.0 257.7Other non-current assets 126.9 126.6 ------- -------Total non - current assets 7,793.7 7,929.3 ------- ------- Current assets:Materials and supplies 123.6 130.3Accounts receivable 1,065.6 1,066.7Non-current assets held for sale 273.9 -Other current assets 411.8 411.1Cash and cash equivalents 1,370.2 1,512.2 ------- -------Total current assets 3,245.1 3,120.3 ------- ------- TOTAL ASSETS 11,038.8 11,049.6 ======= ======= EQUITY AND LIABILITIES Equity attributable to equity holdersof the parent:Share capital 1,172.5 1,172.5Paid-in surplus 486.6 486.6Treasury stock (5.9) (5.9)Legal reserve 256.7 256.7Retained earnings 1,493.0 1,401.6 ------- ------- 3,402.9 3,311.5 ------- -------Minority interest 1,208.0 1,201.9 ------- ------- Total equity 4,610.9 4,513.4 ------- ------- Non - current liabilities:Long-term debt 2,573.8 3,104.3Reserve for staff retirement indemnities 180.3 172.7Reserve for voluntary retirement program 614.8 603.8Reserve for Youth Account 282.6 284.0Other non - current liabilities 149.4 139.9 ------- -------Total non - current liabilities 3,800.9 4,304.7 ------- ------- Current liabilities:Accounts payable 633.8 720.6Short-term borrowings 9.8 14.3Current maturities of long-term debt 782.7 321.3Income taxes payable 136.4 81.9Deferred revenue 132.4 179.1Reserve for voluntary retirement program 321.7 434.9Dividends payable 3.9 5.2Liabilities associated with non-currentassets held for sale 58.7 -Other current liabilities 547.6 474.2 ------- -------Total current liabilities 2,627.0 2,231.5 ------- ------- TOTAL EQUITY AND LIABILITIES 11,038.8 11,049.6 ======= ======= Movement in Shareholders' equity -------------------------------- 2006 ---------- Unaudited Shareholders' equity, January 1 4,513.4 ----------Dividends declared (72.3) ----------Profit for the period 287.7Net income recognized directly in equity (117.9) ---------- 169.8 ==========Shareholders' equity, June 30 4,610.9 ========== EXHIBIT II - CONDENSED CONSOLIDATED INCOME STATEMENT HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIES Prepared under IFRS for the three months and the six months ended June 30, 2006 and 2005 (• million) Q2 06 Q2 05 % H1 06 H1 05 % Unaudited Unaudited Change Unaudited Unaudited ChangeRevenues:DomesticTelephony 568.9 584.3 -2.6% 1,141.5 1,154.0 -1.1%InternationalTelephony 92.5 103.0 -10.2% 175.9 199.8 -12.0%MobileTelephony 493.2 435.6 13.2% 942.5 824.7 14.3%Other 277.3 246.3 12.6% 558.7 492.2 13.5%Total Revenues 1,431.9 1,369.2 4.6% 2,818.6 2,670.7 5.5% ======== ======== ======== ======== OperatingExpenses:Payroll andemployeebenefits (334.5) (330.5) 1.2% (653.1) (678.2) -3.7%Voluntaryretirementcosts 0.0 1.9 - 0.0 (25.1) -Charges frominternationaloperators (50.6) (68.8) -26.5% (97.8) (110.3) -11.3%Charges fromdomestictelephonyoperators (187.8) (167.1) 12.4% (362.7) (312.7) 16.0%Depreciationandamortization (280.0) (272.7) 2.7% (564.3) (562.2) 0.4%Cost oftelecommunica-tions equipment (44.7) (43.9) 1.8% (109.8) (81.8) 34.2%Otheroperatingexpenses (296.7) (256.0) 15.9% (565.1) (513.6) 10.0%TotalOperatingExpenses (1,194.3) (1,137.1) 5.0% (2,352.8) (2,283.9) 3.0% ======== ======== ======== ======== OperatingIncome 237.6 232.1 2.4% 465.8 386.8 20.4%Other income /(expense):Interestincome 18.4 16.9 8.9% 28.7 28.7 0.0%Interestexpense (46.8) (40.7) 15.0% (89.1) (80.0) 11.4%FXgain/(loss),net (1.2) 7.9 - 0.2 33.4 -99.4%Financial net (29.6) (15.9) 86.2% (60.2) (17.9) 236.3%Investmentincome/(loss)/Gain on saleof investment 0.0 6.1 - 5.8 25.3 -77.1%Dividends 22.5 14.7 53.1% 22.5 19.7 14.2% -------- -------- -------- --------Total Otherincome /(expense) (7.1) 4.9 - (31.9) 27.1 - ======== ======== ======== ======== Profit beforeincome taxes 230.5 237.0 -2.7% 433.9 413.9 4.8% ======== ======== ======== ======== Income taxes (84.7) (69.3) 22.2% (146.2) (129.8) 12.6% -------- -------- -------- -------- Profit for theperiod 145.8 167.7 -13.1% 287.7 284.1 1.3% Attributable to:Equity holdersof the parent 112.2 117.2 -4.3% 221.9 196.5 12.9%Minorityinterest 33.6 50.5 -33.5% 65.8 87.6 -24.9% -------- -------- -------- -------- 145.8 167.7 -13.1% 287.7 284.1 1.3% EXHIBIT III - GROUP OTHER OPERATING EXPENSE ANALYSIS An analysis of Group Other Operating expenses follows: • million Q2 06 Q2 05 % Change H1 06 H1 05 % Change Commission to dealers 53.6 39.0 37.4% 97.3 74.9 29.9% Repairs, maintenance,cost of materials 42.5 58.9 -27.8% 93.8 103.4 -9.3% Provision for doubtfulaccounts 27.9 25.8 8.1% 49.1 51.7 -5.0% Advertising 45.6 33.9 34.5% 76.6 56.7 35.1% Taxes other than incometaxes 9.9 6.7 47.8% 21.4 16.8 27.4% Other 117.2 91.7 27.8% 226.9 210.1 8.0% TOTAL 296.7 256.0 15.9% 565.1 513.6 10.0% 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 months and the six months ended June 30, 2006 (• million) Q1 06 Q2 06 H1 06Cash Flows from Operating Activities: Profit before taxes 203.4 230.5 433.9 Adjustments to reconcile to net cash provided byoperating activities: Depreciation and amortization 284.3 280.0 564.3 Provisions 51.7 52.5 104.2 Investments and financial income/loss (17.6) (39.6) (57.2) Amortization of advances to pension funds 8.8 8.8 17.6 Interest expense 42.3 46.8 89.1 Adjustments for working capital movements relatedto operating activities Decrease/(increase) in materials and supplies (6.7) (0.2) (6.9) Decrease/(increase) in accounts receivable (13.4) 2.1 (11.3) Decrease in liabilities (123.0) (90.9) (213.9) Minus: Interest paid (42.1) (6.3) (48.4) Income taxes paid (14.9) (67.7) (82.6) ====== ====== ======Net Cash provided by Operating Activities 372.8 416.0 788.8 ------ ------ ------ Cash Flows from Investing Activities: Acquisition of subsidiary or associate, net of - (191.1) (191.1) cash acquired Acquisition of financial assets - (222.8) (222.8) Purchase of property, plant and equipment or (168.5) (230.9) (399.4) intangible assets Interest received 9.0 10.8 19.8 Dividends received - 6.8 6.8 ====== ====== ======Net Cash used in Investing Activities (159.5) (627.2) (786.7) ------ ------ ------ Cash Flows from Financing Activities: Proceeds from minority shareholders for issuance 12.0 - 12.0 of subsidiary's share capital Repayment of long-term debt and short-term (26.9) (18.8) (45.7) borrowings Dividends paid - (72.9) (72.9) ====== ====== ======Net Cash provided by Financing Activities (14.9) (91.7) (106.6) ------ ------ ------ NetIncrease/(Decrease) in Cash and Cash Equivalents 198.4 (302.9) (104.5) Cash and Cash equivalents at beginning ofperiod 1,512.2 1,710.6 1,512.2 ------ ------ ------Cash and Cash Equivalents at end of period(total) 1,710.6 1,407.7 1,407.7 Cash and Cash Equivalents incl. tonon-current assets held for sale - (37.5) (37.5) ====== ====== ======Cash and Cash Equivalents at end of period 1,710.6 1,370.2 1370.2(balance sheet) ====== ====== ====== EXHIBIT V - GROUP REVENUES HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIES Consolidated Revenues prepared under IFRS for the three months and the six months ended June 30, 2006 and 2005 (• million) Q2 06 Q2 05 % Change H1 06 H1 05 % ChangeDomesticTelephony:Basic monthlyrentals 244.3 241.5 1.2% 485.3 473.8 2.4% Local and longdistance calls-Fixed to fixed 176.6 195.3 -9.6% 370.4 397.7 -6.9%-Fixed to mobile 125.3 129.2 -3.0% 241.3 244.0 -1.1% ------ ------ ------ ------ 301.9 324.5 -7.0% 611.7 641.7 -4.7% ====== ====== ====== ======Other 22.7 18.3 24.0% 44.5 38.5 15.6% ------ ------ ------ ------Total DomesticTelephony 568.9 584.3 -2.6% 1,141.5 1,154.0 -1.1% ====== ====== ====== ====== InternationalTelephony:Internationaltraffic 37.3 38.4 -2.9% 69.3 76.6 -9.5%Payments fromInternationalmobile operators 10.8 8.9 21.3% 18.6 18.6 0.0% ------ ------ ------ ------ 48.1 47.3 1.7% 87.9 95.2 -7.7% ====== ====== ====== ======Payments fromInternationaloperators 44.4 55.7 -20.3% 88.0 104.6 -15.9% ------ ------ ------ ------TotalInternational 92.5 103.0 -10.2% 175.9 199.8 -12.0%Telephony ====== ====== ====== ====== Mobile Telephony 493.2 435.6 13.2% 942.5 824.7 14.3% ====== ====== ====== ====== Other Revenues:Prepaid cards 26.7 32.4 -17.6% 47.3 62.9 -24.8%Directories 14.0 13.9 0.7% 28.6 27.7 3.2%Leased lines and data communications 55.2 52.3 5.5% 110.0 106.5 3.3%ISDN, connection &monthly charges 40.0 35.0 14.3% 79.4 68.3 16.3%Sales oftelecommunicationequipment 31.0 24.9 24.5% 85.3 49.7 71.6%Internet services-ADSL 32.0 19.4 64.9% 57.0 37.7 51.2%ATM 9.0 5.8 55.2% 16.9 12.6 34.1%Services rendered 17.1 15.7 8.9% 31.5 27.8 13.3%Interconnectioncharges 29.7 22.8 30.3% 61.0 49.5 23.2%Miscellaneous 22.6 24.1 -6.2% 41.7 49.5 -15.8% ------ ------ ------ ------Total Other 277.3 246.3 12.6% 558.7 492.2 13.5%Revenues ====== ====== ====== ====== ====== ====== ====== ======Total Revenues 1,431.9 1,369.2 4.6% 2,818.6 2,670.7 5.5% ====== ====== ====== ====== EXHIBIT VI - SEGMENT REPORTING (H1 2006) HELLENIC TELECOMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIES Segment Reporting prepared under IFRS, for the six months ended June 30, 2006 (In millions of Euro) OTE Cosmote Romtelecom All Other Total Adjustments & Consolidated EliminationsRevenues:DomesticTelephony 810.0 - 299.6 33.2 1,142.8InternationalTelephony 91.7 - 65.3 21.9 178.9MobileTelephony - 1,002.4 23.8 1,026.2Other 475.6 34.7 75.1 167.1 752.5Total Revenues 1,377.3 1,037.1 440.0 246.0 3,100.4 (281.8) 2,818.6 ------- ------- --------- ------- ------- --------- --------- IntersegmentRevenues (102.5) (86.3) (8.2) (84.8) (281.8) Revenue fromExternalCustomers 1,274.8 950.8 431.8 161.2 2,818.6 2,818.6 ------- ------- --------- ------- ------- --------- --------- OperatingExpenses:Payroll andemployeebenefits (424.3) (65.6) (117.3) (45.4) (652.6) -0.5 (653.1)Charges frominternationaloperators (63.6) (16.0) (13.8) (7.2) (100.6) 2.8 (97.8)Charges fromdomestictelephonyoperators (188.5) (192.2) (50.5) (8.1) (439.3) 76.6 (362.7)Depreciationandamortization (265.9) (149.0) (116.0) (35.1) (566.0) 1.7 (564.3)Cost oftelecommunica-tions equipment (79.0) (33.9) (6.4) (2.8) (122.1) 12.3 (109.8)Otheroperatingexpenses (238.4) (335.0) (85.3) (97.4) (756.1) 191.0 (565.1)TotalOperatingExpenses (1,259.7) (791.7) (389.3) (196.0) (2,636.7) 283.9 (2,352.8) ------- ------- --------- ------- ------- --------- --------- ------- ------- --------- ------- ------- --------- ---------OperatingIncome 117.6 245.4 50.7 50.0 463.7 2.1 465.8 ------- ------- --------- ------- ------- --------- --------- Operatingincome beforedepreciationandamortization 383.5 394.4 166.7 85.1 1,029.7 0.4 1,030.1------------ ------- ------- --------- ------- ------- --------- ---------Operatingincome beforedepreciationandamortizationas % ofOperatingrevenues 27.8% 38.0% 37.9% 34.6% 33.2% -0.1% 36.5% EXHIBIT VI - SEGMENT REPORTING (H1 2005) HELLENIC TELECOMUNICATIONS ORGANIZATION S.A. (OTE) AND SUBSIDIARIES Segment Reporting prepared under IFRS, for the six months ended June 30, 2005 (In millions of Euro) OTE Cosmote Romtelecom All Other Total Adjustments & Consolidated EliminationsRevenues:DomesticTelephony 806.3 - 323.6 20.1 1,150.0InternationalTelephony 113.7 - 72.7 16.7 203.1MobileTelephony - 767.7 2.8 146.4 916.9Other 422.7 23.5 68.3 145.8 660.3Total Revenues 1,342.7 791.2 467.4 329.0 2,930.3 (259.6) 2,670.7 ------- ------- --------- ------- ------- --------- --------- IntersegmentRevenues (101.0) (90.2) (2.9) (65.5) (259.6) Revenue fromExternalCustomers 1,241.7 701.0 464.5 263.5 2,670.7 2,670.7 ------- ------- --------- ------- ------- --------- --------- OperatingExpenses:Payroll andemployeebenefits (439.2) (43.5) (151.0) (44.7) (678.4) 0.2 (678.2)Voluntaryretirementcost (25.1) (25.1) (25.1)Charges frominternationaloperators (75.2) (13.3) (15.8) (7.8) (112.1) 1.8 (110.3)Charges fromdomestictelephonyoperators (175.7) (143.8) (45.8) (27.3) (392.6) 79.9 (312.7)Depreciationandamortization (269.9) (102.4) (127.7) (63.9) (563.9) 1.7 (562.2)Cost oftelecommunica-tions equipment (48.5) (21.3) (5.2) (6.8) (81.8) 0.0 (81.8)Otheroperatingexpenses (264.3) (223.5) (72.8) (127.4) (688.0) 174.4 (513.6)TotalOperatingExpenses (1,297.9) (547.8) (418.3) (277.9) (2,541.9) 258.0 (2,283.9) ------- ------- --------- ------- ------- --------- --------- ------- ------- --------- ------- ------- --------- ---------OperatingIncome 44.8 243.4 49.1 51.1 388.4 (1.6) 386.8 ------- ------- --------- ------- ------- --------- --------- Operatingincome beforedepreciationandamortization 314.7 345.8 176.8 115.0 952.3 (3.3) 949.0----------- ------- ------- --------- ------- ------- --------- ---------Operatingincome beforedepreciationandamortizationas % ofOperatingrevenues 23.4% 43.7% 37.8% 35.0% 32.5% 1.3% 35.5% EXHIBIT VII - INTERNATIONAL ASSETS RomTelecom OTE has a 54.01% stake in RomTelecom, which is fully consolidated. ROMTELECOM INCOME STATEMENT For the six months ended June 30 2006, in accordance with IFRS (• thousand) H1 2006 (Unaudited)Basic monthly rentals 133,977Domestic Telephony calls 165,663 --------Domestic Telephony 299,640International Telephony 65,328Mobile Telephony -Other Revenues 75,060 --------Total Operating Revenues 440,028 Personnel (inc Voluntary Redundancy) (117,339)Other operating expenses (156,010)Depreciation and Amortization (134,151) --------Total Operating expenses (407,500) Operating income 32,528 Financial, net (9,624) Income before provision for income taxes 22,904 Provision for Income taxes (8,276) --------Net income 14,628 ======== 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 six months ended June 30, 2006 and 2005 (Unaudited) • Million Q2 06 Q2 05 % Change H1 06 H1 05 % Change Revenues 36.2 28.6 26.6% 68.4 51.6 32.6% Operating Incomebefore Depreciation & 17.4 17.3 0.6% 37.0 30.5 21.3%amortization Operating Incomebefore Depreciation &Amortization as % of 48.0% 60.5% -12.5pp 54.0% 59.1% -5.1ppOperating Revenues Operating Income 9.6 10.1 -4.9% 21.8 16.4 32.9% Net Income/(Loss) 7.7 9.4 -18.1% 14.8 14.6 1.4% Net Income/(Loss) 21.3% 32.9% -11.6pp 21.6% 28.3% -6.7ppMargin Increase/(Decrease) inGross PP&E 20.0 4.5 344.4% 21.4 10.0 114.0% Fixed Telephony, Lines 593,328 587,891 0.9% Mobile Telephony,Total customers 344,088 257,679 33.5% 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 six months ended June 30, 2006 and 2005 (Unaudited) • Millions Q2 06 Q2 05 % Change H1 06 H1 05 % Change Revenues 28.1 22.6 24.3% 53.6 43.0 24.7%Operating Profit - 1.7 - 1.3 3.2 -59.4% Operating Income beforeDepreciation &amortization 1.4 3.4 -58.8% 4.3 6.5 -33.8% Operating Income beforeDepreciation &Amortization as % ofOperating Revenues 5.0% 15.0% -10 pp 8.0% 15.1% -7.1 pp Depreciation &Amortization 1.4 1.7 -17.6% 3.0 3.3 -9.1% EXHIBIT IX -OPERATIONAL HIGHLIGHTS ------------------------------ Operational Highlights for the quarters ended June 30, 2006 and 2005 ------------------------------OTE Q2 06 Q2 05 % ChangePSTN lines 4,822,307 4,945,910 -2.5%ISDN, 64kb equiv. lines 1,373,932 1,299,236 5.7%Total lines 6,196,239 6,245,146 -0.8% ADSL subscribers 300,053 88,379 239.5% COSMOTE (Greece)Pre-paid sub. 3,108,936 2,687,224 15.7%Contract sub. 1,773,487 1,692,293 4.8%Total subscribers 4,882,423 4,379,517 11.5% AMCTotal subscribers 849,466 730,786 16.2% GLOBULTotal subscribers 2,688,077 1,936,126 38.8% COSMOFONTotal subscribers 432,689 329,622 31.3% COSMOTE ROMANIATotal subscribers 531,619 - - OTE netResidential clients 446,500 365,300 22.2%Business clients 16,194 12,420 30.4% Employees:-OTE 12,511 15,925 -21.4%-COSMOTE (Greece) 2,141 2,081 2.9%-RomTelecom 12,950 15,254 -15.1%------------- -------- -------- -------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ote Ads