OTE results slightly below expectations

20 Mar 2008

Greek incumbent fixed line telco OTE’s 2007 full year consolidated group net income rose 15.3% year-on-year to EUR662.6 million (USD1.039 billion), driven by one-off capital gains from asset disposals, as well as the strong performance of mobile unit Cosmote. However, the result was below bottom-line expectations in OTE’s March 2007 three-year business plan. Annual revenues climbed 7.3% to EUR6.32 billion, slightly below estimates, and OIBDA was practically flat at EUR2.22 billion, broadly in line with expectations of just under EUR2.25 billion. Operating income for the year stood at EUR1.05 billion, down 3.8% on 2006’s figure. The percentage of revenues invested as CAPEX rose from 16.3% in 2006 to 17.4% in 2007, when total CAPEX slightly exceeded EUR1.1 billion, although it fell below the level forecast in the business plan.

Domestically, as of the end of December 2007 OTE had around 4.5 million PSTN lines in service, a drop of 5.6% compared to a year earlier, reflecting the impact of local loop unbundling (LLU) as well as continued fixed-to-mobile substitution. The number of ISDN lines fell by 2.7% to a total of over 1.3 million. The total number of fixed lines reached 5.85 million at the end of December, down 5.0% from year-end 2006. The pace of line loss for the year was in line with management forecasts in March 2007. According to OTE, the total Greek ADSL market exceeded 1.1 million subscribers at the end of 2007, compared to approximately 512,000 at the end of December 2006. OTE’s ADSL customer base reached approximately 825,000 subscribers at the same date, with a split of ‘over two-thirds retail customers and less than one-third wholesale’, according to the telco’s press release. Intensification of LLU as well as competition from alternative fixed line operators and from mobile services is putting increasing pressure on OTE’s retail market share. The former monopoly reported that the country’s LLU line total exceeded 300,000 at the end of 2007, up from a low base of approximately 15,000 unbundled connections twelve months earlier. OTE’s domestic and Balkan cellular division Cosmote and Romanian fixed line subsidiary RomTelecom have already reported standalone operational and financial results. OTE also owns a minority stake in Serbian incumbent Telekom Srbija.

Panagis Vourloumis, Chairman and CEO of OTE, said: ‘from an operational standpoint, our overall performance was largely in line with our business plan objectives. Greek fixed line activities proved resilient in the face of growing local loop unbundling; Cosmote achieved its 15 million customer target two years ahead of schedule; and RomTelecom’s expanded [fixed line and broadband] offering enabled it to weather fierce competition.’

Greece, Cosmote