Ote Ads Regulatory News (OTES)

OTE GROUP REPORTS 2013 SECOND QUARTER RESULTS

UNDER IFRS

·; Increase of Group EBITDA margin to 35.1%

·; Strong Greek fixed-line performance

- Smallest revenue drop since Q2'10

- Increase of EBITDA by 570bps to 34.2% from 28.5%

·; Decrease of Greek fixed-line payroll by 18%

·; Decrease of total operating expenses by 10.2% (excl. D&A and VRS)

·; Decrease of Group revenue decline

·; Higher Cash Flow generation, up 20% in first half of 2013

·; Decrease of Net Debt which now stands at 1.2 times EBITDA

ATHENS, Greece - August 8, 2013 - Hellenic Telecommunications Organization SA (ASE: HTO; OTC MARKET: HLTOY), the Greek full-service telecommunications provider, today announced consolidated results (prepared under IFRS and reviewed by the auditors) for the quarter and six months ended June 30, 2013

 * Excluding the impact of Voluntary Retirement Programs and Restructuring Plans

 ** Cash Flow excluding Voluntary Exit Programs and/or Spectrum payments

Note: All figures adjusted to reflect only continuing operations (Bulgarian operations treated as discontinued operations) as well as amended IAS 19:"Employee benefits"

Commenting on OTE's performance in the second quarter, Michael Tsamaz, Chairman & CEO, noted: "We are proud of the particularly resilient set of results we have achieved in the second quarter. Despite MTR cuts, intensifying competition in broadband and mobile, continued tough economic conditions and delays in obtaining regulatory clearance for competitive offers, we have experienced a lower rate of revenue erosion and boosted our operating profitability. The turnaround of our Greek fixed-line business is well on track, with a sharp increase in EBITDA margin as our initiatives to adjust our cost structure take hold."

Mr. Tsamaz added: "With the sale of Globul and incremental refinancing, we are in the best financial shape we have been in years, and have the resources we need to focus on our business and invest in the solutions our clients want and deserve."

Financial Highlights

BREAKDOWN OF GROUP REVENUES

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

The Group's total revenues were down by 8.6% in Q2'13, the smallest rate of revenue decline of the past four quarters. OTE Group top-line performance remained under pressure due to the severe impact on both fixed and mobile segments of mobile termination rate (MTR) cuts. In mobile operations, nearly two-thirds of the revenue shortfall compared to Q2'12 is due to MTR cuts. Excluding the impact of MTR cuts and the contribution of Hellas Sat in Q2'12 (deconsolidated as of March 26, 2013), Group revenues were down approximately 4% in the quarter.

In Greek fixed-line operations, OTE continued to attract a significant share of net broadband additions in the quarter; the company is awaiting regulatory approval to reinforce the competitiveness of its double-play offers, which have not been updated since their introduction in May 2012. Despite aggressive competitive offers and new OTE policies aimed at disconnecting overdue accounts earlier than in the past, the company was able to contain line losses. OTE's VDSL offering, launched in November 2012, attracted over 25,000 subscriptions by the end of June, and the company recorded another strong quarter of growth in total TV subscriber numbers.

The strong performance in Greek fixed-line is underlined by the increase of the EBITDA by 10.6%, boosting the margin to 34.2% (up 570bps compared to the same period last year).

In the Romanian fixed-line business, revenues declined by 4.9% in Q2'13, a significantly improved trend compared to Q1'13 as a result of lower wholesale revenue decline (Q2'13: -5.5%, Q1'13:

-24.0%).

In Greek mobile, the drop in Cosmote service revenues during the quarter reflects the steep MTR reductions, the difficult economic climate and heightened competition.

In international mobile telephony operations, both Cosmote Romania and AMC achieved significantly lower rates of revenue decline in the quarter.

Total Operating Expenses, excluding depreciation, amortization, impairments and charges related to voluntary retirement programs, amounted to €651.6mn in Q2'13, down 10.2% from €725.9mn in Q2'12. This sharp improvement is a direct result of OTE Group's active cost-reduction measures over the past years. Compared to Q2'12, Personnel Expenses were down 10.2% at Group level and 17.8% in Greek fixed-line operations.

Pro forma EBITDA was down 7.3% to €352.3mn. Excluding the impact of MTR cuts and the contribution of Hellas Sat in Q2'12, pro forma EBITDA would have been down just 1.3%.

As it managed once again to steeply reduce costs during the period, the Group achieved a pro forma EBITDA margin of 35.1% in Q2'13, compared to 34.7% in the comparable quarter of last year.

Interest expense in Q2'13 was €69.4mn, up 36.1% compared to the same period last year. However, in Q2'12, gains relative to bond buybacks below par reduced interest expense by approximately €14mn.

Capital Expenditures amounted to €252.0mn in Q2'13 compared to €94.4mn in the same quarter last year, reflecting the €130mn spectrum-related payment in Cosmote Romania. Capital expenditures in Greek fixed-line, Romanian fixed-line, and mobile operations amounted to €32.1mn, €17.5mn and €201.5mn, respectively.

In Q2'13, the OTE Group generated Net Operating Cash Flow (ex-VRS payments) of €249.9mn, up 13.2% compared to Q2'12. The strong cash flow generation during the period reflects a €63.3mn improvement in working capital. Continued Free Cash Flow excluding mobile spectrum licenses and VRS-related payments amounted to €128.4mn in Q2'13, up 1.6% compared to Q2'12.

Reflecting solid cash flow generation, the Group's Underlying Net Debt amounted to less than €2.5bn at June 30, 2013, down €740.6mn or 23.1% compared to June 30, 2012. The Group's ratio of Underlying Net Debt to 12-month trailing Pro forma EBITDA stood at 1.7x. Following receipt of the proceeds from the Globul disposal (received after the reporting date), the current pro forma Net Debt/EBITDA ratio should drop to about 1.2x. As of June 30, 2013, the Group held €93.3mn in short-dated highly liquid financial assets, included under Other Financial Assets.

OTE Group debt outstanding breaks down as follows:

* Net Debt included in Bulgarian operations excluded from June 30, 2013 reported figures and included in Assets/Liabilities held for sale

1. Fixed Line Operations, Greece

ACCESS LINES

In Q2'13, the total Greek market (OTE active retail lines, Wholesale line rental connections and full LLU subscribers) lost 35k lines (Q1'13: -26k, Q4'12: -21k, Q3'12: -51k, Q2'12: -43k). OTE fixed-line operations in Greece posted a net loss of 53k PSTN and ISDN retail connections compared to net line losses of 56k in Q1'13 and 75k in Q2'12. In the quarter, net additions by competitors further slowed down to 18k compared to 29k in Q1'13 and 32k in Q2'12.

In Q2'13, OTE achieved net additions of 24k retail broadband customers, or 37% of total net additions in the Greek market, bringing the total number of OTE broadband subscribers to 1,234k. The drop in OTE's share of net additions in the quarter primarily reflects the company's policy of accelerating disconnections of overdue accounts, as well as reduced competitiveness due to the regulator's delays in approving offers taking into account OTE's 2012 cost base.

OTE's high-speed VDSL broadband service, offering speeds of up to 50 Mbps, had been adopted by over 25k subscribers at the end of the quarter, extending the rapid expansion this service has experienced since its introduction in late November 2012. Regulatory approval of a significant expansion in the number of VDSL cabinets throughout the country should lead to strong growth in the number of subscribers to this service in the coming quarters.

OTE also experienced strong growth of its TV offering. As of June 30, 2013, total TV subscribers amounted to 175K, an increase of 26K in the quarter and nearly 99K compared to June 30, 2012. All of the increase has been coming from the company's satellite TV service, while IPTV subscriber numbers have remained stable. The service's rich content, expanded to include British Premier League coverage in the second half of the year, should continue to fuel its growth and market share gains in the Greek pay TV market.

SUMMARY FINANCIAL DATA

  * Adjusted due to amended IAS 19 "Employee benefits"

** Excluding impact of Voluntary Retirement Programs

Total Greek fixed-line Revenues declined by 8.1% in the quarter, the lowest rate of revenue reduction since Q2'10, reflecting OTE's advanced technological solutions, increasingly competitive offers and strong customer relationships.

Total Greek fixed-line Operating Expenses, excluding depreciation, amortization and charges related to voluntary retirement programs, amounted to €252.9mn in Q2'13, a drop of 16.6% compared to €303.4mn in Q2'12. Total Personnel Expenses were cut by 17.8% compared to the comparable quarter last year, amounting to 29.8% of total revenues in Q2'13, down from 33.3% in Q2'12, mainly reflecting the Voluntary Exit Scheme implemented at the end of 2012. The decline in Operating Expenses also benefited from partial capitalization of certain TV content costs. As a result, EBITDA margin improved substantially, to 34.2%, a 5.7 percentage point increase compared to Q2'12.

2. Fixed Line Operations, Romania

SUMMARY FINANCIAL & ACCESS LINE DATA

* Excluding impact of Restructuring Plans

In Q2'13, RomTelecom continued to partly offset lower revenues from voice (-16.7%) and wholesale (-5.5%) with increased revenues from TV (+10.5%) and Internet services (+5%).

Compared to the year-earlier level, the total number of RomTelecom broadband customers rose by 5% at the end of Q2'13, reflecting organic subscriber acquisitions. As a result, broadband penetration as a percentage of total RomTelecom voice connections stood to 54%. With similar penetration rates (57%), TV subscribers rose by 7.3% compared to the end of Q2'12. Both of these developments represent significant advances in RomTelecom's ability to defend its customer base despite the increased competitive pressure. The urban footprint of CATV continued to expand in the second quarter, allowing more households in major Romanian cities to gain access to RomTelecom TV offering.

Total operating expenses (excluding D&A and one-off costs) were down 3.0% in Q2'13, with personnel expenses down 1%. As a result, RomTelecom recorded a fall in EBITDA.

In the first half of the year, RomTelecom Business Solutions successfully implemented various ICT projects for business customers and was awarded several new contracts for the supply of turnkey ICT solutions involving managed services, desktop virtualization, unified communications, IT security, and others. In addition to consult, design, build, RomTelecom is increasingly taking on responsibility for operating the ICT solutions it develops.

3. Mobile Operations

SUMMARY FINANCIAL DATA

*Excluding impact of Restructuring Plan at Mobile Operations

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

At June 30, 2013, the mobile operations of the OTE Group counted approximately 15.6mn customers (excluding Globul's 4.6mn 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 Q2'13, Cosmote provided mobile telephony services to 7.6mn customers in Greece, down 3.2% from June 30, 2012. Cosmote, confirming its customer-centric strategy, is investing steadily in providing best-in-class voice and data quality as well as offering innovative propositions.

The 17.8% service revenue drop recorded by Cosmote Greece in Q2'13 chiefly reflects the latest round of regulator-mandated Mobile Termination Rate (MTR) cuts. As from January 1, 2013, the MTR was cut down to 1.269 Eurocents/minute, compared to 4.95 Eurocents/minute in Q2'12. In addition, revenues were negatively impacted by severely depressed consumer spending conditions as a result of the tough macroeconomic environment, as well as by intensifying competition.

The company further developed its advanced 4G network footprint, now covering over 80% of the population in Athens and 90% in Thessaloniki, as well as 50 additional cities and summer resorts across Greece. Cosmote also continued to upgrade the quality of voice communication with innovative high-definition voice technology and reduction of environmental noise.

In June, Cosmote launched an advanced online bookstore, Cosmote Books, offering a wide selection of 500,000 Greek and international books at highly competitive prices through a state-of-the-art platform.

Total Cosmote revenues in Greece were down 12.6%, an improved performance compared to previous quarters, reflecting higher seasonal sales of handsets and merchandise, notably through the Germanos network.

In Q2'13, blended AMOU increased by 2.5% to 302.6 minutes, while blended ARPU for the same period was €12.8, down 15.3% from Q2'12, mainly reflecting lower incoming ARPU (affected by mobile interconnection rate cuts) and contracting customer spending.

Mobile Operations, Romania

In Q2'13, Cosmote Romania's total customer base stood at 6.0mn, of which 25.3% was postpaid. The number of business customers grew by 17.1% compared to Q2'12, reflecting the company's targeted offers for professional users and synergies with RomTelecom in the B2B segment. In addition, the company's 3G customer base increased by 27.5% compared to Q2'12.

Service revenues declined by 2.2% compared to Q2'12, exclusively due to the termination rate cut implemented in September 2012. Despite the drop in service revenues, Cosmote Romania's EBITDA increased by 3.4% compared to Q2'12 while EBITDA margin rose to 27.0%, up by 1.4pp from the same quarter last year, as a result of cost-control discipline, business-process streamlining and synergies.

Blended ARPU decreased by 1.7% in H1'13 compared to H1'12, due to lower incoming ARPU adversely affected by mobile interconnection rate cuts.

Mobile Operations, Albania

At the end of Q2'13, AMC's customer base stood at 1.9mn subscribers, up 11.7% compared to June 30, 2012, despite continuing intense competition during the period. Thanks to the 96.5% population coverage it has achieved through its particularly cost-efficient 3G network, AMC posted a 53.0% increase in mobile data revenues in Q2'13 compared to the same period last year.

Compared to Q2'12, revenues were negatively affected by aggressive pricing offers chiefly targeting the prepaid and business segments, lower domestic interconnection tariffs imposed by the regulator in September 2012, and adverse economic conditions as a result of the prolonged recession in Greece and Italy, Albania's main trading partners.

Reflecting aggressive pricing competition, AMC's EBITDA margin declined to 37.0% in Q2'13, despite the company's ongoing efforts to optimize its cost structure.  

4. Events of the Quarter

Completion of the sale of Hellas Sat

On April 3, OTE announced that it had completed the sale of its 99.05% stake in Hellas Sat to Arabsat. OTE received total proceeds of €208mn and dividends of €7mn, pursuant to the Share Purchase Agreement signed in February.

Sale Of Globul

On April 26, the Group announced the signing of an agreement to sell its 100% stake in Globul and in Germanos Telecom Bulgaria A.D. to Telenor Mobile Communications AS, the Norwegian telecom operator, for an enterprise value of €717mn.

Bond Buybacks

In April and June, OTE PLC proceeded with partial buybacks of a nominal amount of €21.0mn and €17.3mn, respectively, under the April 2014 Notes. As a result, as of June 30, 2013, the outstanding nominal amount of the April 2014 Notes was €364.7mn and had been reclassified to the short-term portion of long-term borrowings.

BoD Member change

On May 23, OTE's Board of Directors elected Dr. Raphael Kübler as new member (non executive), replacing Mr Timotheus Höttges, for the rest of the latter's term, namely until the date of the Ordinary Shareholders' General Meeting of 2015. Dr. Raphael Kübler is a Senior Vice President Group Controlling at Deutsche Telekom AG, where he is responsible for the financial planning, analysis and steering of the overall Deutsche Telekom Group as well as the financial management of central headquarters and shared services of the Deutsche Telekom Group.

61st Ordinary General Meeting Of Shareholders

On June 26, 2013, OTE held its 61th Ordinary General Meeting of Shareholders. Among the issues approved during the meeting was the acquisition by OTE SA of up to one-tenth (1/10) of its paid-up share capital, i.e. up to 49,015,039 shares within a period of 24 months, at a maximum purchase price of €30 and a minimum purchase price of €2.

Awards For OTE at the 2013 Thomson-Extel Pan-European Investor Relations Survey

In the annual Thomson Extel Pan-European Investor Relations Survey, OTE was voted Greece's Best Company for Investor Relations, the OTE Group CFO, Mr Babis Mazarakis, was voted "Best CFO for Investor Relations in Greece", and the OTE Group Head of Investor Relations, Mr Dimitris Tzelepis was voted, for a second time in a row and for the fourth time since 2007, "Best Investor Relations Professional in Greece".

5. Subsequent Events

EBRD Loan

On July 24, Cosmote Romania signed a €225mn loan arranged by the EBRD to finance its broadband infrastructure. Cosmote Romania will receive €75mn directly from the EBRD and €150mn through a syndicated loan from commercial banks. The loan will bear an interest rate of Euribor plus 5.25% and will be repaid gradually through April 2018.

Completion of the sale of Globul

On July 31, OTE announced that it had completed the sale of Globul to Telenor. The pre-tax gain from the sale, estimated at €160mn, will be reflected in the financial statements of Q3'13.

6. Outlook

OTE expects its revenue base to remain under pressure in the coming quarters from difficult economic conditions, shrinking disposable income due to higher taxation, and intense competition across its activities. In addition, comparison with prior year performances will continue to be affected by the successive rounds of MTR cuts implemented through 2012 and early 2013. Against this background, OTE will relentlessly pursue its cost-reduction efforts and continue to invest selectively in solutions aimed at boosting future revenue streams and customer satisfaction. With a significantly reinforced balance sheet structure, OTE is well positioned to pursue the implementation of its strategy across all its markets.

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

Christina Hadjigeorgiou - Financial Analyst, Investor Relations

Tel: +30 210 611 1428, Email: cchatzigeo@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 June 30, 2013 and December 31,2012

II. Consolidated Income Statements for the quarter and six months ended June 30, 2013 and comparative 2012

III. Consolidated Statement of Cash Flows for the quarter ended June 30, 2013, and comparative Q1'13, Q4'12, Q3'12, Q2'12

IV. Group Revenues for the quarter and six months ended June 30, 2013 and comparative 2012

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

VI. Mobile Operations

VII. Operational Highlights

VIII. Discontinued Operations

EXHIBIT I - CONSOLIDATED BALANCE SHEET (*2012 adjusted due to amended IAS19)

EXHIBIT II - CONSOLIDATED INCOME STATEMENT

Note: All figures adjusted to reflect only continuing operations (Bulgarian operations treated as discontinued operations) as well as amended IAS 19:"Employee benefits"

EXHIBIT III - CONSOLIDATED STATEMENT OF CASH FLOWS

Note: All figures adjusted to reflect only continuing operations (Bulgarian operations treated as discontinued operations) as well as amended IAS 19:"Employee benefits"

EXHIBIT IV - GROUP REVENUES

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

EXHIBIT V - SEGMENT REPORTING (6M 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)

EXHIBIT V - SEGMENT REPORTING (6M 2012)

 * Excluding impact of Voluntary Retirement Programs and Restructuring Plans

Note: All figures adjusted to reflect only continuing operations (Bulgarian operations treated as discontinued operations) as well as amended IAS 19:"Employee benefits"

EXHIBIT VI- MOBILE OPERATIONS