OTE’s net profit down 75.5%; telco tightens belt, opts to delist ADRs

13 May 2010

Hellenic Telecommunications Organisation (OTE) has reported a 75.5% year-on-year slump in consolidated net profit to EUR65.8 million (USD83.3 million) in the three months to the end of March 2010. Group revenues stood at EUR1.41 billion, down 2.7% on a pro forma basis compared to the first quarter of 2009, whilst capital expenditure decreased, reflecting lower investments at all operating units, notably mobile operations. Total CAPEX as a percentage of group revenues in 1Q10 was 13.6%, as compared to 15.2% in the corresponding period of 2009. CAPEX for OTE’s Greek fixed line, Romanian fixed line and mobile operations amounted to EUR45.3 million, EUR40.4 million and EUR99.4 million, respectively. Reported EBITDA was EUR478.7 million in 1Q10, down by 34.5% from EUR731.1 million in 1Q09, whilst pro forma EBITDA fell 5.1% y-o-y to EUR515.9 million. Excluding the Q1 2009 reversal of voluntary retirement costs as a result of the contribution by the Greek State of a 4% stake in OTE to the IKA pension fund, and adjusting for other early retirement charges, total operating expenses declined by 1.9% year-on-year, mainly reflecting lower charges from domestic telephony operators and a drop in ‘other’ operating expenses. As a result of cost-cutting measures, the company said, pro forma EBITDA, as a percentage of revenues, remained unchanged quarter-on-quarter.

OTE also announced it will delist its American Depositary Receipts (ADRs), saying, ‘This decision is aimed at cutting administrative costs, reducing complexity in financial reporting, and concentrating trading of its shares on the market providing the highest liquidity, the Athens Stock Exchange.’

Commenting on the effects of the wider economic troubles in its home country, OTE said in its statement: ‘In view of the expected negative impact of the Greek rescue plan on consumer spending, intense competition in telecommunications services and tense economic conditions across all markets where the group operates … group profitability, as measured by pro forma EBITDA as a percentage of revenues, could be impacted.’ Panagis Vourloumis, OTE’s CEO, continued: ‘Despite the negative economic conditions in Greece and the challenging environment in our other markets, OTE put in a resilient performance in the first three months of the year, containing the rate of revenue erosion to its lowest level in five quarters.’ However, he also warned, ‘As Greek businesses and consumers adapt to the austerity measures of the new [government and EU] economic rescue plan, we are likely to see an increase in disconnections and a slowdown in telecoms spending. Though we will continue our efforts to defend our market positions, we consider that we will not be able to maintain the rate of revenue decline and profitability at the first-quarter levels for the full year. OTE … will do everything it takes to see that the long-term interests of all our stakeholders … are protected.’

Greece, Cosmote