Ote Ads Regulatory News (OTES)

OTE GROUP REPORTS 2014 FIRST QUARTER RESULTS

UNDER IFRS

· Second consecutive quarter of stable revenues fueled by strong Greek fixed-line performance

· EBITDA resilient at Group level, up sharply in Greek fixed-line (38.8% margin)

· Higher CapEx on core infrastructure in Greece and Romania

· Net income excluding one-off items up 9.5%

· Free Cash Flow impacted by tax and timing - Full-year outlook confirmed (c.€0.5bn)

ATHENS, Greece - May 8, 2014 - Hellenic Telecommunications Organization SA (ASE: HTO; OTC MARKET: HLTOY), the Greek full-service telecommunications provider, today announced unaudited consolidated results (prepared under IFRS) for the quarter ended March 31, 2014.

 * Excluding the impact of Voluntary Retirement Programs and Restructuring Plans

 ** Cash Flow excluding discontinued operations, Voluntary Exit Programs, Restructuring and/or Spectrum payments

Note: All figures adjusted to reflect only continuing operations (Bulgarian operations treated as discontinued operations - but HellasSat included in Q1'13)

Commenting on OTE's first-quarter results, Michael Tsamaz, Chairman & CEO, stated: "OTE started the year with a healthy first-quarter performance, consolidating the string of sequential advances posted since the beginning of last year. Group revenues, unchanged on a reported basis, were actually up slightly in comparable terms, driven by good top-line performances in our fixed-line businesses. Mobile operations in Greece, no longer burdened by an unfavorable base of comparison, continue to face intense competition, while in Romania MTR cuts did not become effective until the end of the first quarter. Group EBITDA benefitted from the outstanding performance in Greek fixed-line following last year's voluntary retirement plan and sustained cost-control actions. The dip in free cash flow in the period, largely resulting from extraordinary taxation, will be reversed in coming quarters, leaving intact our full-year outlook."

Mr. Tsamaz added: "We are intensifying investments in our systems and contents, to build up the communications infrastructure in our markets, enhance and enrich customer experience, and strengthen our leadership positions. We are also investing in new talent to remain at the forefront of our industry in technical as well as commercial terms. We are confident that these initiatives will support our sales and profitability throughout the year."

Financial Highlights

BREAKDOWN OF GROUP REVENUES

Note: All figures adjusted to reflect only continuing operations (Bulgarian operations treated as discontinued operations - but HellasSat included in Q1'13)

OTE Group posted a second consecutive quarter of stable revenues despite the challenging macroeconomic, competitive and regulatory environment in the countries where OTE operates. Excluding the contribution of Hellas Sat in Q1'13 (deconsolidated as of March 26, 2013), Group revenues were up 1% in the quarter.

In Greek fixed-line operations, net broadband additions in the quarter were once again hampered by tough economic conditions and aggressive competitor moves. OTE's VDSL offering, launched in late 2012, had attracted more than 55,000 subscriptions by the end of March 2014, while TV subscriber numbers continued to post significant growth, adding nearly 23,000 new customers in the quarter, as OTE successfully enriches its programming content.

Greek fixed-line EBITDA rose by 5.0% in the quarter, resulting in a 350bps increase in EBITDA margin to 38.8% compared to Q1'13. This performance, mainly reflecting the benefits of the recent successful VES, the ongoing strict control of operating expenses, and capitalization of TV content, was achieved despite an increase in provisions.

In Romanian fixed-line operations, revenues grew by 7.7% in Q1'14, a second consecutive quarter of solid growth compared to previous quarters as a result of sustained ICT system and wholesale revenues.

In Greek mobile, revenues were down 5.9% in Q1'14, as the elimination of the MTR cut impact was partly offset by difficult economic conditions and heightened competition.

Cosmote Romania posted another quarter of strong revenue growth (Q1'14: +9.2%), helped by the introduction of new contracts and the postponement of mobile termination rate cuts. In Albania, AMC doubled its top-line growth to 7.1% (from +3.6% in Q4'13), resulting to an 18.6% increase in absolute EBITDA and a 350bps margin increase (35.9% in Q1'14 vs. 32.4% in Q1'13).

Total Operating Expenses, excluding depreciation, amortization, impairments and charges related to voluntary retirement programs and restructuring costs, amounted to €640.5mn in Q1'14, up 1.5% compared to Q1'13, mainly due to higher interconnection costs, following OTEGlobe's strong top-line performance. Reflecting the recent VES program, personnel expenses were down 27.5% in Greek fixed-line operations and 15.9% at Group level compared to Q1'13.

In the quarter, Pro forma EBITDA was down 3.0% to €333.4mn. Excluding the contribution of Hellas Sat in Q1'13, pro forma EBITDA would have been down by less than 2%.

In Q1'14, the Group posted net income of €55.8mn. Excluding one-off items (mainly the €65.7mnafter-tax capital gains from HellaSat disposal and the €50mn positive impact from the re-measurement of the Group's deferred tax position in Q1'13), adjusted net income would be up 9.5% in Q1'14).

Capital Expenditures amounted to €123.4mn in Q1'14, as OTE continues to develop its fixed and mobile networks in Greece and fixed-line infrastructure in Romania. Capital expenditures in Greek fixed-line, Romanian fixed-line, and mobile operations amounted to €38.5mn, €27.1mn and €56.6mn, respectively.

In Q1'14, the OTE Group posted adjusted Net Operating Cash Flow (ex-VRS and restructuring related payments) of €107.4mn, compared to €238.7mn in the same quarter last year, as a result of a €50mn extraordinary tax payment related to capitalization of reserves, €20mn in income tax payments from Cosmote, and the timing of working capital requirements.

Reflecting higher CapEx spending on core infrastructures on Greece and Romania, Q1'14 adjusted Group Free Cash Flow (ex-VES, spectrum and restructuring payments) was negative at €13.5mn.

During the quarter, OTE had an outflow of €58.6mn related to the purchase of own shares in the context of its existing share option plan.  

The Group's Underlying Net Debt amounted to less than €1.6bn at March 31, 2014, down €1.2bn or 42.1% compared to a year ago. The Group's ratio of Underlying Net Debt to 12-month trailing Pro forma EBITDA stood at 1.1x. As of March 31, 2014, the Group held €17.0mn in short-dated highly liquid financial assets, included under Other Financial Assets.

OTE Group debt outstanding breaks down as follows:

1. Fixed Line Operations, Greece

ACCESS LINES

In Q1'14, the total Greek market (OTE active retail lines, Wholesale line rental connections and full LLU subscribers) lost 9k lines, a second consecutive quarter of limited line losses (Q4'13: -6k, Q3'13: -42k, Q2'13:-35k, Q1'13: -26k). OTE fixed-line operations in Greece posted a net loss of 44k retail access line connections compared to net line losses of 49k in Q4'13 and 56k in Q1'13. In the quarter, net additions by competitors stood at 35k compared to 43k in Q4'13, reflecting another quarter of intensified competition.

In Q1'14, OTE achieved net additions of 14k retail broadband customers, bringing the total number of OTE broadband subscribers to 1,275k. OTE's high-speed VDSL broadband service, offering speeds of up to 50 Mbps, had been adopted by more than 55k subscribers by the end of the quarter, extending the rapid expansion this service has experienced since its introduction in late November 2012. OTE is pursuing the installation of cabinets to raise the size of its addressable VDSL market and experiences significant pick up in the areas where the service is introduced.

OTE also recorded continued strong growth in its TV offering. As of March 31, 2014, total TV subscribers amounted to 279K, an increase of 23K in the quarter. With extensive content and competitive pricing, OTE is continuing to gain share of the Greek pay-TV market.

SUMMARY FINANCIAL DATA - FIXED LINE OPERATIONS, GREEECE

* Excluding impact of Voluntary Retirement Programs & Restructuring costs

Total Greek fixed-line Revenues declined by 4.6% in the quarter, recording another significant improvement compared to previous quarters, despite tough economic conditions, intense competitive pressure, notably through fixed-mobile bundles. Through gaining penetration of its TV and broadband offerings and upgrades of its service quality, OTE is able to stabilize ARPU and contain the erosion of its service revenues.

Total Greek fixed-line Operating Expenses, excluding depreciation, amortization and charges related to voluntary retirement programs and restructuring, amounted to €227.5mn in Q1'14, a drop of 10.2% compared to €253.2mn in Q1'13, far ahead of the drop in revenues. Total Personnel Expenses were cut by 27.5% compared to the comparable quarter last year, and amounted to 22.3% of total revenues in Q1'14, a sharp decline from 29.4% in Q1'13, mainly reflecting the Voluntary Exit Scheme implemented at the end of 2013. The decline in Operating Expenses also benefited from capitalization of certain non-cancellable TV content contracts with multiyear durations. As a result, the pro forma EBITDA margin improved substantially, to 38.8%, a 3.5 percentage point increase compared to Q1'13, despite a one-off increase in provisions.

2. Fixed Line Operations, Romania

SUMMARY FINANCIAL & ACCESS LINE DATA

* Excluding impact of Restructuring Plans

In Q1'14, RomTelecom had a second consecutive quarter of strong revenue growth, driven by sharply higher wholesale traffic and significant revenues from large-scale information and communication technology projects. The drop in revenues from retail fixed services was in line with the trends recorded in 2013, as higher TV and broadband revenues continued to partly offset the decline in voice.

While voice revenues were down 15.0% in the quarter, television revenues were up 7%. Compared to the end of Q1'13, the total number of RomTelecom broadband customers was up 2.7% at March 31, 2014, reflecting organic subscriber acquisitions. As a result, broadband penetration as a percentage of total RomTelecom voice connections is now 56.2%. With slightly higher penetration rates (61.6%), TV subscribers rose by 7.3% compared to Q1'13. Both of these developments represent significant advances in RomTelecom's ability to defend its customer base despite intense competition. The urban footprint of cable TV continued to expand, allowing more households in major Romanian cities to gain access to RomTelecom's TV offering.

In Q1'14, wholesale revenues grew by 33% compared to Q1'13, with international traffic (both incoming and outgoing) increasing by 32%.

Total Romanian fixed-line Operating Expenses, excluding depreciation, amortization and charges related to voluntary retirement programs and restructuring, amounted to €127.7mn in Q1'14, a 16.4% increase compared to €109.7mn in Q1'13, mainly reflecting higher costs related to IT projects, increased interconnection traffic and an increase in infrastructure tax cost imposed by the Romanian government since the beginning of the year. Total Personnel Expenses were down 10.4% compared to last year's quarter, partly due to capitalization of personnel costs. The Pro Forma EBITDA margin reached 24.6%, a 2.6 percentage point decrease compared to Q1'13.

Closer integration of fixed and mobile operations is proceeding apace, aimed at combining the strengths of the two companies, joint managers have been appointed for the top and second levels of management for most organizations.

3. Mobile Operations

SUMMARY FINANCIAL DATA

* Excluding the impact of Voluntary Retirement Programs and Restructuring Plans

Note: All figures adjusted to reflect only continuing operations (Bulgarian operations treated as discontinued operations)

As of March 31, 2014, the mobile operations of the OTE Group counted approximately 15.5mn customers, down slightly from the prior-year level. Despite depressed conditions and intense competition in Greece, Romania and Albania, the Cosmote Group defended its market positions during the quarter.

MOBILE OPERATIONS, GREECE

As of the end of Q1'14, Cosmote provided mobile telephony services to 7.4mn customers in Greece, down 2.8% from March 31, 2013, mainly reflecting rationalization of multiple SIM prepaid connections.

The 7.6% service revenue drop recorded by Cosmote Greece in Q1'14 represents the smallest revenue decline of recent quarters. MTRs continued to decline - as of January 1, 2014, the MTR was cut down to 1.189 Eurocent/minute, as compared to 1.269 Eurocent/minute in January 2013 - but at a significantly lower pace and with a more modest impact on revenue performance than in previous quarters.

In line with its strategy to fully protect and develop its customer base focusing on customer experience and delivering high quality of services, Cosmote is investing heavily to maintain its leadership of superior network performance in terms of coverage, data speeds and voice quality. In Q1'14, Cosmote further expanded its 4G footprint, now covering close to 60% of the Greek population, and accelerated deployment of high definition voice services on in-network calls, providing its customers crystal-clear sound with significantly improved voice call quality.

The consistently higher demand for mobile handset data usage continued in the quarter, up 92% in Q1'14 compared to the first quarter of 2013, supported by growing smartphone uptake, which accounted for 57% of all handset sales in Q1'14.

In Q1'14, blended AMOU increased by 1.3% to 291.1 minutes, while blended ARPU for the same period was €11.4, down 5.7% from Q1'13, mainly reflecting shrinking customer spending and competitive pressures.

MOBILE OPERATIONS, ROMANIA

In Q1'14, Cosmote Romania's total customer base stood at 6.0mn, of which 26.6% was postpaid. The number of business customers grew by 26.5% compared to Q1'13, reflecting the company's targeted offers for professional users and synergies with RomTelecom in the B2B segment.

Service revenues increased by 5.9% compared to Q1'13, driven by higher data and SMS revenues. Cosmote Romania's EBITDA improved by 9.9% compared to Q1'13, with EBITDA margin at 22.6% reflecting significant operating improvements.

Blended ARPU increased by 8.6% in Q1'14 compared to Q1'13, due to higher incoming ARPU.

MOBILE OPERATIONS, ALBANIA

At the end of Q1'14, AMC's customer base stood at 2.1mn subscribers, growing by 8.8% compared to March 2013. AMC posted a 24% increase in mobile data revenues in Q1'14 compared to the same period last year, fueled by the efficiency of its network covering 96.5% of the population.

Compared to Q1'13, revenues increased by 7.1%, while service revenues were up 8.0% despite high competitive pressure.

AMC's EBITDA margin stood at 35.9% in Q1'14, up by 350bps, reflecting continued cost optimization.

4. Events of the Quarter

Acquisition of Own Shares

In the first quarter of 2014, OTE acquired 4,526,651 of its own shares, at an average price of €11.6 per share, solely in the context of its existing share option plan. As a result, at March 31, 2014, the outstanding number of own shares held by OTE was 5,724,610 shares, representing 1.17% of OTE's share capital.

OTE participates in the AAE-1 international submarine cable

On February 6, 2014 OTE, through its subsidiary OTEGLOBE, signed its participation in the construction of the new international submarine broadband cable Asia Africa Europe-1 (AAE-1). The AAE-1 submarine cable, spanning 25,000 km, is expected to be operational by 2016 and will connect Hong Kong, Singapore, Middle East, Africa and Europe, rendering Greece one of the main data gateways in Europe, along with Italy and France.

5. Subsequent Events

Redemption of OTE PLC Bond

On April 8, 2014, OTE PLC fully repaid the remaining outstanding amount of €364.7mn under the Notes maturing on that date along with accrued interest.

OTE Holds EGM

On April 30, 2014 OTE held an Extraordinary General Meeting, at which 67.97% of its Shareholders were present or represented. During the meeting,  the amendment of Article 2 of the Company's Articles of Incorporation was approved, and special permission was granted, pursuant to Article 23a of C.L.2190/1920, on the conclusion of a brand license agreement between affiliated companies of OTE S.A., namely Romtelecom and Cosmote Romania (Licensees) and Deutsche Telekom AG (Licensor).

6. Outlook

For the remainder of 2014, OTE expects a further deceleration of top-line contraction, helped by initial signs of recovery in the Greek economic environment, a more favorable base of comparison following the successive rounds of MTR cuts implemented in Greece through early 2013, the growing penetration of OTE new services, notably TV, and finally, resilient ARPU in mobile. Conversely, MTR cuts in Romania will impact mobile revenues and EBITDA in that country. OTE will pursue its cost-containment efforts, and its profitability should benefit from the continuing lowering of its cost base as a result of recent voluntary exit schemes. Cash flow from operations should recover in the coming quarters following the one-off and timing factors that impacted Q1'14. With a robust financial structure, OTE will continue to invest in its infrastructure to strengthen the economic potential of the countries in which it operates as well as customer satisfaction and future revenue streams.

OTE Group is Greece's leading telecommunications organization and one of the pre-eminent players in Southeastern Europe, providing top-quality products and services to its customers.

Consisting of the parent company OTE S.A. and its subsidiaries, the Group offers fixed-line (voice, broadband, data and leased lines), TV and mobile telephony services in Greece and Romania, as well as mobile telephony services in Albania. The Group is also involved in a range of activities in Greece, notably in real-estate and professional training.

OTE is listed on the Athens Stock Exchange and the London Stock Exchange. Following OTE's delisting from the NYSE, OTE's ADSs (American Depositary Shares) trade in the OTC (Over the Counter) market under the ticker HLTOY through the Level I ADSs program.

Additional Information is also available on http://www.ote.gr.

Contacts:

Dimitris Tzelepis - Head of Investor Relations

Tel: +30 210 611 1574, Email: dtzelepis@ote.gr

Maria Kountouri - Assistant to the Head of Investor Relations

Tel: +30 210 611 5381, Email: mkountouri@ote.gr

Kostas Maselis - Senior Financial Analyst, Investor Relations

Tel: + 30 210 611 7593, Email: kmaselis@ote.gr

Sofia Ziavra - Financial Analyst, Investor Relations

Tel: + 30 210 611 8190, Email: sziavra@ote.gr

Exhibits to follow:

I. Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013

II. Consolidated Income Statements for the quarter ended March 31, 2014 and comparative 2013

III. Consolidated Statement of Cash Flows for the quarter ended March 31, 2014, and comparative Q4'13, Q3'13, Q2'13, Q1'13

IV. Group Revenues for the quarter ended March 31, 2014 and comparative 2013

V. Segment Reporting based on the Group's legal structure

VI. Mobile Operations

VII. Operational Highlights

Note:

Starting with the third quarter of 2013, OTE reclassified certain Income Statement items to better align its reporting categories with its internal management and budgeting processes. To facilitate comparison, historical series have been reclassified accordingly. This reclassification has no impact on Balance Sheet and Cash Flow Statement presentations.

EXHIBIT I - CONSOLIDATED BALANCE SHEET

EXHIBIT II - CONSOLIDATED INCOME STATEMENT

Note: All figures adjusted to reflect only continuing operations (Bulgarian operations treated as discontinued operations - but HellasSat included in Q1'13)

* Excluding the impact of Voluntary Retirement Programs and Restructuring Plans

EXHIBIT III - CONSOLIDATED STATEMENT OF CASH FLOWS

Note: All figures adjusted to reflect only continuing operations (Bulgarian operations treated as discontinued operations - but HellasSat included in Q1'13)

EXHIBIT IV - GROUP REVENUES

Note: All figures adjusted to reflect only continuing operations (Bulgarian operations treated as discontinued operations - but HellasSat included in Q1'13)

EXHIBIT V - SEGMENT REPORTING (Q1 2014)

*Excluding impact of Voluntary Retirement Programs and Restructuring Plans

Note: All figures adjusted to reflect only continuing operations (Bulgarian operations treated as discontinued operations - but HellasSat included in Q1'13)

EXHIBIT V - SEGMENT REPORTING (Q1 2013)

* Excluding impact of Voluntary Retirement Programs and Restructuring Plans

Note: All figures adjusted to reflect only continuing operations (Bulgarian operations treated as discontinued operations - but HellasSat included in Q1'13)

EXHIBIT VI- MOBILE OPERATIONS

*Excluding impact of Voluntary Retirement Programs and Restructuring Plans

Note: All figures adjusted to reflect only continuing operations (Bulgarian operations treated as discontinued operations - but HellasSat included in Q1'13)

EXHIBIT VII -OPERATIONAL HIGHLIGHTS