Greek PTO Hellenic Telecommunications Association (OTE) [NYSE: OTE] has reported a 19.6% fall in net profit year-on-year in the first quarter 2003, despite a rise in revenues and a strong performance from its mobile subsidiaries. OTE remains the dominant force in both the country’s wireline and wireless markets, despite the former being in its third year of liberalisation, but has cited an increase in competition in the fixed line market as the primary reason for the drop in profits. It retains a 93% hold on the sector, though this has fallen by 4% since the end of September 2002.
Mobile telephony revenues grew 27.6% to EUR260.6 million in the three months to the end of March, fuelled by local cellco Cosmoté, wireless revenues from its 90% stake in Armenia PTO ArmenTel and its 18 month-old Bulgarian GSM operator Globul. However, the strong growth in wireless revenues was at odds with OTE’s performance in the fixed voice telephony segment, where domestic telephony turnover rose by just 1.9% to EUR538.5 million. The continuing impact of fixed-to-mobile substitution contributed to a 1.9% drop in revenues from international telephony. The group’s Romanian operator RomTelecom, which was fully consolidated during the period, witnessed a 16% drop in revenues to EUR233.4 million as international interconnect traffic fell and the local currency witnessed a significant devaluation against the euro. Additionally, the cost of implementing 850 voluntary staff retirements in Greece impacted upon the balance sheet to the tune of EUR9.2 million. OTE expects the fruits of its extensive cost-cutting scheme to become apparent in its full-year financials, but warned that profits will not rise this year, with RomTelecom likely to remain a drain on accounts in the short term.