OTE’s revenues, profits hit by weak economies; completes sale of additional 5% to DT

6 Aug 2009

Greek fixed line, mobile and broadband group OTE’s consolidated revenues for the second quarter of 2009 declined by 6.5% year-on-year to EUR1.488 billion (USD2.143 billion). Around half of the decline reflected lower sales of equipment, primarily mobile handsets at the group’s wholly owned mobile division Cosmote, with the remainder of the drop attributed largely to domestic fixed line factors, namely lower monthly line rental fees, lower fixed-to-mobile termination rates, as well as lower revenues from leased lines and interconnection, following regulator-mandated wholesale rate cuts. Pro forma operating Income before depreciation and amortisation (OIBDA) decreased by 11.2% year-on-year to EUR516.5 million in the three months to the end of June 2009, and the pro forma OIBDA margin stood at 34.7%, 1.9 percentage points below the comparable quarter last year, due to a lower fixed line margin. In 2Q09, OTE’s group net income plummeted to EUR4.7 million, 97% down compared to EUR159.3 million in April-June 2008, partly due to lower mobile and fixed revenues but also impacted by provisions for early retirement as well as by a new Greek tax levy on dividends received from Cosmote (EUR31 million).

Commenting on the second quarter performance, Panagis Vourloumis, OTE’s chairman and CEO, noted: ‘The second quarter of the year saw further weakening of the economies in the countries where we operate – spending on telecommunication services is estimated to have shrunk by around 7% in Greece since the beginning of the year, with similar or worse trends in Romania, Bulgaria and Albania. In Greek fixed telephony, OTE’s situation was exacerbated by long delays in obtaining regulatory agreement for price-competitive products, some of which were finally approved after the close of the quarter… To protect future margins, we are working hard on several fronts – 600 Greek fixed line employees will leave the company by the end of the current quarter; OPEX and CAPEX synergies with [part owner] Deutsche Telekom (DT) are being achieved ahead of schedule… and we are actively seeking ways to accelerate and expand these and other cost-cutting programmes. We are also continuing to look for opportunities to bolster our service offering – in Romania with a preliminary agreement to acquire a 3G operator [Zapp, agreed in July] to tap the growing mobile broadband market, in Greece with a licence to provide direct-to-home satellite TV [awarded on 4 August to OTE’s Hellas Sat unit] – in order to strengthen customer loyalty and our competitive advantages as soon as the markets pick up… Though we expect continued weakness in the economy in the second half of the year, our objective is to maintain a group profitability level roughly in line with that achieved in full year 2008.’

Meanwhile, on 3 August 2009 the Greek government notified OTE that it had reduced its direct and indirect participation in OTE’s total voting rights to 20% plus one voting share, after completion of a deal to sell DT an additional 5% stake for EUR674 million, raising the German group’s total interest to 30% plus one voting share.

Cosmote’s former Macedonian subsidiary Cosmofon was deconsolidated from OTE’s group results as of 12 May 2009 after a sell-off to Telekom Slovenije for anti-monopoly reasons (DT already owned local rival T-Mobile Macedonia). In Q2 2009 OTE recorded a capital gain of EUR24.4 million on the sale of Cosmofon.

Greece, Cosmote, Cosmote (old)