Ote Ads Regulatory News (OTES)

OTE GROUP REPORTS 2021 THIRD QUARTER RESULTS

Highlights:

· Group revenues up 1.8% on further growth in Greece; Adj. EBITDA (AL) up 3.2%

· Positive momentum of Greek operations continues; Revenues up 3.5%

o Fixed retail up 1.8%, driven by strong broadband growth, favorable TV trends

o Mobile service revenues jump 8.2%, boosted by recovery in roaming

o Another quarter of strong Adj. EBITDA (AL) growth, up 5.0%

o Ongoing strength in KPIs and operational trends; increasing demand for faster broadband speeds - Fiber subscribers up +24%

o FTTH rollout ongoing, 479k homes passed

· Romania Mobile impacted by one-off comparable adjustments; improved underlying profitability

· Successful completion of Telekom Romania (Fixed) disposal; €174mn extraordinary distribution to shareholders

o €113mn extraordinary Dividend or ca. €0.25/share; €61mn share buy-back program

Note: The purpose and calculations of all 'Adjusted' data are detailed in the Alternative Performance Measures Section.

Note: All figures (apart from Balance Sheet) adjusted to reflect only continuing operations; Telekom Romania (TKR) operations along with certain significant commercial transactions (MVNO agreement and handset sales) between TKR and Telekom Romania Mobile (TKRM) have been treated as discontinued operations.

ATHENS, Greece -November 12, 2021 - Hellenic Telecommunications Organization SA

(ASE: HTO; OTC MARKET: HLTOY), the Greek full-service telecommunications provider, today announced consolidated results (prepared under IFRS) for the quarter ended September 30, 2021.

Message from the Chairman & CEO, Michael Tsamaz:

"Thanks to another strong performance in Greece, we are posting a solid third quarter. Group revenues, EBITDA and margin are all higher than last year. Our Greek top line benefited from growing demand for higher data speeds and volume in both mobile and fixed, and from the recovery in tourism driving a sharp rebound in visitor roaming. In Romania, we completed the sale of our fixed line operations and gained full ownership of mobile, where underlying trends are moving in the right direction."

"Our cash flow generation has been robust since the beginning of the year, supporting shareholder returns as well as our investments in state-of-the art infrastructure for our customers and our economy."

Outlook

OTE benefits from its superior network, delivering higher speeds, quality, and reliability to its retail and wholesale customers. Its effective deployment of FTTH and 5G provides the required infrastructure tο offer enhanced services to customers and pursue its expansion. Following the removal of COVID 19-induced lockdown measures and the easing of travel restrictions, OTE is well on track to achieve a material recovery in revenue and profitability in 2021.

The gradual deployment of the EU's €30.5bn Recovery and Resilience Plan in Greece should support economic growth in coming years. OTE intends to leverage its expertise to strengthen the digitalization of the country and provide the technological backbone that will accelerate its future growth. As demand for broader access to high-speed connection accelerates, OTE will continue to invest in fiber-to-the-home in coming years. These investments should support OTE's sustainable growth in the medium and longer term.

For 2021, Adjusted Group CAPEX should slightly exceed €550mn while management continues to expect Adjusted Free Cash Flow of approximately €575mn. Reported Free Cash Flow should reach €480mn, which also represents the shareholder remuneration amount for 2021. In addition, the Board of Directors has approved an extraordinary shareholder payout of €174mn, representing distribution of the net proceeds from the disposal of OTE's stake in Telekom Romania fixed operations.

OTE GROUP HIGHLIGHTS

OTE Group successfully completed the disposal of its fixed operations in Romania. This marks a major step in OTE's strategic refocusing on its most sustainable income-generating activities. OTE remains in the Romanian market with 100% ownership of Telekom Romania Mobile, following the acquisition of the 30% stake in this entity previously held by Telekom Romania.

OTE Group consolidated Revenues increased by 1.8% in Q3'21 to €861.4mn. In Greece, Revenues were up 3.5% to €789.9mn, supported by recovery in tourism and steady demand for higher speeds in fixed and data demand in mobile. In Romania, revenues totaled €80.8mn in the quarter, down 10.8%, reflecting certain positive one-off base effects recorded in Q3'20. Excluding these adjustments, Romania revenues would be down about 4%.

Total Operating Expenses, excluding depreciation, amortization, impairment, and charges related to restructuring costs (primarily voluntary leave schemes) and non-recurring litigation, amounted to €488.1mn in Q3'21, up 0.9% compared to Q3'20, as significant savings in personnel costs resulting from the strategic transformation initiatives implemented in 2020 nearly offset the increase in energy costs.

Group Adjusted EBITDA (AL) rose 3.2% to €352.5mn, resulting in a strong margin of 40.9%, on positive performance in Greece. In Greece, Adjusted EBITDA (AL) rose sharply (+5.0%) to €342.0mn, and the EBITDA margin was 43.3%, up 60 basis points. Romania Mobile operations recorded an Adjusted EBITDA (AL) of €10.5mn, down 33.5% from a high comparison base.

Group profit before tax amounted to €281.5mn, up €271mn from Q3'20, mainly reflecting an impairment of €160mn in Romania Mobile operations in Q3'20, as well as a €132mn reversal of provision in the current quarter, related to OTE's pension fund for voluntary leave schemes of past years.

The Group recorded an Income Tax charge of €71.1mn in Q3'21, compared to an income tax credit of €56.6mn in Q3'20, mainly reflecting positive deferred taxation related to the Telekom Romania disposal booked in Q3'20 following the announcement of the transaction last year.

Adjusted Capital Expenditures amounted to €161.4mn, an increase of 62.5% from Q3'20, partly reflecting higher payments for TV content. Investments in Greece and Romania mobile stood at €147.2mn and €14.2mn, respectively. In the first nine months of the year, adjusted Capital Expenditures totaled €398.5mn, up 4.3% relative to the prior-year period.

Group Adjusted Free Cash Flow after leases reached €115.8mn, up 1.3% year-on-year despite higher Capex spending in the quarter. Free Cash Flow stood at €108.0mn, up €16.4mn year-on-year on lower income tax, interest expenses and payments related to voluntary exit schemes.

The Group's Adjusted Net Debt stood at €763.9mn as of September 30, 2021, down 26.0% compared to September 30, 2020. The Group ratio of Adjusted Net Debt to 12-month Adjusted EBITDA (AL) stood at 0.6x.

Note: Adjusted EBITDA (AL) is defined as Adjusted EBITDA deducting the Depreciation for the right-of-use assets and Interest expense on leases.

GREECE

Operational highlights:

Fixed Segment:

OTE further expanded its fiber subscriber base in the quarter, with 44k net additions, raising the total number of fiber subscribers to 1,100k. As OTE continually upgrades the quality and speed of its service, penetration of fiber broadband increased by more than 7 percentage points year-on-year and half of all fixed broadband subscribers have upgraded to fiber. Customers continue to migrate to higher-speed FTTC/FTTH offerings, and the share of subscribers using broadband speeds of 100Μbps or higher has now reached 23% of all fiber connections, nearly twice the ratio one year earlier. With over one million customers still relying on standard speeds, increasing fiber availability should support the Group's long-term growth.

OTE continues to expand its FTTH footprint to meet the constant increase in demand for high-speed services. OTE reached 479k homes passed by the end of September and is on track to pass the 560k mark this year. FTTH is gaining traction, as OTE provides fiber access to ever growing portions of the population. As demand grows, OTE is deploying its fiber network, modernizing the country's infrastructure and ensuring its customers continue to enjoy state-of-the-art networks, while supporting its sustainable long-term growth.

As of September 30, 2021, the total number of TV subscribers reached 600k, a year-on-year increase of 6.6%. Cosmote TV captured 21k additions in the quarter, reflecting its ongoing investment in superior sport content, notably securing broadcasting agreements with eight out of fourteen Greek Superleague football teams. The Company also enriched its sports bouquet with the Greek broadcasting rights for the Italian Lega Serie A football league.

Mobile Segment:

As of September 30, Cosmote's mobile customer base stood at 7.0mn customers, a 1.0% decrease compared to the end of Q3'20, reflecting a drop in prepaid, while the postpaid base continued to grow, in line with Company targets. Consistent with its strategy, the Company recently launched "Cosmote Neo", the first fully digital mobile offering in Greece aiming to promote further upselling, mainly targeting younger tech-savvy population segments.

OTE is rapidly expanding its 5G service and expects to reach 60% population coverage by the end of this year and full coverage of the nationwide highway system by 2023, while continuing to promote data usage over its superior 4G/4G+ network. Population coverage in the country's two biggest cities, Athens and Thessaloniki, now exceeds 97% and 90%, respectively. In addition, the company has reached 5G roaming agreement with 34 countries.

For the fifth consecutive year, Cosmote's mobile network was recognized as Greece's "Fastest Mobile Network" by the recent OOKLA Speedtest AwardsTM . Download speeds increased by 90% compared to the same period in the prior year, largely driven by the performance of 5G networks included for the first time in the measurements. 

Financial highlights:

In Greece, revenues rose 3.5% to €789.9mn on strong broadband and mobile growth. 

Retail fixed service revenues were up 1.8% in the quarter, supported by continuing momentum in broadband revenues as a result of increasing demand for higher speeds, as well as an increase in TV revenues.

In mobile, service revenues posted a solid performance in the quarter, up 8.2%, on positive momentum across the board. Revenues from visitor roaming were up sharply, reaching 90% of the Q3'19 pre-COVID level, benefiting from tourism recovery during the summer period. Postpaid and prepaid revenues were also up in the quarter, reflecting seasonal offerings to boost data usage and promote Cosmote's more-for-more strategy.

Wholesale revenues were down 7.2% in the quarter, mainly due to the timing of international transit traffic revenues, expected to normalize in Q4.

Other revenues were up 11% in the quarter reflecting positive ICT momentum and growth in handset sales, positively impacted by the government subsidy program for students. ICT revenues were up 7% compared to Q3'20 as OTE remains the partner of choice for the digitalization projects of private and public organizations. Recent projects include solutions developed for the e-health sector, notably the "myHealth" application providing citizens digital access to e-prescription and to their health profile.

Total Adjusted EBITDA (AL) in Greece was up 5.0% in the quarter at €342.0mn, yielding a strong margin of 43.3%, compared to 42.7% in Q3'20, as high-margin roaming revenues and personnel savings more than offset higher energy costs and expenses related to Romanian operational separation. Energy costs represent approximately 4% of the total Greece cost base, and OTE expects 2021 additional costs of around €10mn as a result of current global price increases.

ROMANIA MOBILE

In Q3'21, total revenues from Telekom Romania Mobile were down 10.8%, reflecting a base effect impact due to one-off certain positive adjustments related to subscriber contracts in Q3'20.

Mobile service revenues totaled €56.1mn, down 1.9%, marking another quarter of improving trends, as the postpaid subscriber base posted further growth and roaming recovered. With a 7.1% increase year-on-year, the number of contract subscribers now represents nearly half of the total customer base. In July 2021, the Romanian telecommunications regulator implemented an approximately 8% decrease in mobile termination rates, with a further decrease expected early in the new year.

Other revenues were down 26.0% mainly reflecting a positive one off adjustment in handset revenues in Q3'20.

Total Adjusted EBITDA (AL) of Telekom Romania Mobile was down 33.5% in the quarter at €10.5mn, yielding a margin of 13.0%. Excluding the previously mentioned adjustments, Adjusted EBITDA (AL) was up approximately 11%, posting a significant underlying rebound compared to prior quarters.

SIGNIFICANT EVENTS OF THE QUARTER

Completion of Telekom Romania (Fixed) Sale

On September 30, 2021, OTE completed the sale of its 54% stake in Telekom Romania Communications S.A. ("TKR") to Orange Romania for a total equity consideration of €295.6mn. Following the disposal, the Board of Directors of OTE approved an extraordinary remuneration of €174mn to be distributed to OTE shareholders in the form of extraordinary dividend and incremental share buybacks. On September 9, 2021, the acquisition of a 30% stake in Telekom Romania Mobile (TKRM) was completed, for a consideration of €58.9mn, in compliance with the remedy to the TKR disposal mandated by the European Commission (EC).

Cancellation of Own Shares and Share Buyback Program

During the second year of its 2020-2022 Share Buyback Program and notably during the March 5 to September 30, 2021 period, the Company acquired a total of 7,096,041 own shares at an average price of €14.73 per share. The Annual General Shareholder Meeting of June 9, 2021, approved the cancellation of 3,469,500 own shares.

Following the completion of publicity formalities, these shares were canceled and delisted from the Athens Stock Exchange effective July 19, 2021. As of September 30, 2021, OTE holds 5,048,517 own shares.

SUBSEQUENT EVENTS

Extraordinary dividend and Share Buyback Program

On October 14, 2021, the Board of Directors of OTE, approved an extraordinary shareholder remuneration of €174mn, in the form of dividends and share buybacks, following the disposal of OTE's 54% stake in Telekom Romania Communications S.A.

In particular, the Board of Directors approved the distribution of an extraordinary dividend of €113.3mn or €0.248 per outstanding share (or €0.252068 adjusted for own shares outstanding as of the ex-dividend date) payable on November 19, 2021. In addition, the Board of Directors approved the allocation of approximately €60.7mn during the period running from October 29, 2021, to February 20, 2022, for incremental share buybacks, under the conditions of the relevant decision of the Extraordinary General Meeting of Shareholders of February 20, 2020.

OTE Group is the largest telecommunications provider in the Greek market and one of the leading telecom groups in Southeast Europe with presence in Greece and Romania. OTE is among the largest listed companies, with respect to market capitalization, in the Athens Stock Exchange.

OTE Group offers the full range of telecommunications services: from fixed-line and mobile telephony, broadband services, to pay television and ICT solutions. In addition to its core activities, the Group is also involved in maritime communications, real estate, insurance distribution and professional training.

Additional Information is also available on: https://www.cosmote.gr

Conference Call Details

Friday, November 12, 2021

5:00pm (EEST), 3:00pm (BST), 4:00pm (CEST), 10:00am (EDT)

Greece +30 210 9460 800

Germany +49 (0) 69 2222 4493

UK & International + 44 (0) 203 059 5872

USA +1 516 447 5632

We recommend that you call any of the above numbers 5 to 10 minutes before the conference call is scheduled to start.

Webcast Details

The conference call will be webcast in real time and you may join by linking at:  

 https://87399.themediaframe.eu/links/otegroup211112.html

If you experience difficulty, please call + 30 210 9460803.

Contacts:

Evrikos Sarsentis - Head of Mergers, Acquisitions and Investor Relations

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

Sofia Ziavra - Deputy Director, Investor Relations

Tel: + 30 210 617 7628, Email: sziavra@ote.gr

Elena Boua - Manager Shareholder Services, Investor Relations

Tel: + 30 210 611 7364, Email: eboua@ote.gr

Exhibits to follow:

I. Alternative Performance Measures "APMs"

II. Consolidated Statements of Financial Position as of September 30, 2021 and December 31, 2020

III. Consolidated Income Statements for the quarter and nine months ended September 30, 2021 and comparative 2020

IV. Group Revenues for the quarter and nine months ended September 30, 2021 and comparative 2020

V. Consolidated Statement of Cash Flows for the quarter and nine months ended September 30, 2021 and comparative 2020

I. ALTERNATIVE PERFORMANCE MEASURES "APMs"

The Group uses certain Alternative Performance Measures ("APMs") in making financial, operating and planning decisions as well as in evaluating and reporting its performance. These APMs provide additional insights and understanding to the Group's underlying operating and financial performance, financial condition and cash flow. The APMs should be read in conjunction with and do not replace by any means the directly reconcilable IFRS line items.

Definitions and reconciliations of Alternative Performance Measures ("APMs")

Alternative Performance Measures ("APMs")

In discussing the performance of the Group, Alternative Performance Measures ("APMs") are used such as: EBITDA and the respective margin %, Net Debt, CapEx and Free Cash Flow. The definitions and the calculations of these are presented in this section below.

Furthermore "Adjusted" measures are used such as: Adjusted EBITDA and the respective margin %, Adjusted Net Debt, Adjusted CapEx and Adjusted Free Cash Flow. These are calculated by deducting from the performance measures deriving from directly reconcilable amounts the Consolidated Statement of Financial Position (Exhibit II), Consolidated Income Statement (Exhibit III) and Consolidated Statement of Cash Flow (Exhibit V), the impact of costs or payments related to voluntary leave schemes, costs or payments for restructuring plans and non-recurring litigations and Spectrum acquisitions.

Costs or payments related to Voluntary Leave Schemes

Costs or payments related to Voluntary Leave Schemes comprise the exit incentives provided to employees and the contributions to the social security fund to exit/retire employees before conventional retirement age. These costs are included within the income statement as well as within the cash flow statement lines "costs related to voluntary leave schemes" and "payment for voluntary leave schemes". However, they are excluded from the adjusted results in order for the user to obtain a better understanding of the Group's operating and financial performance achieved from ongoing activity.

Costs or payments related to other restructuring plans and non-recurring litigations

Other restructuring costs and non-recurring litigations comprise non-ongoing activity related costs arising from significant changes in the way the Group conducts business and non-recurring legal expenses. These costs are included in the Group's income statement, while the payment of these expenses is included in the cash flow statement. However, they are excluded from the adjusted results in order for the user to obtain a better understanding of the Group's operating and financial performance achieved from ongoing activity.

Spectrum acquisition payments

Spectrum payments comprise the amounts paid to acquire rights (licenses) through auctions run by the National Regulator to transmit signals over specific bands of the electromagnetic spectrum. As those payments are of significant size and of irregular timing, it is a common industry practice to be excluded for the calculation of the Adjusted Free Cash Flow and Adjusted Capital Expenditure (CapEx) in order to facilitate comparability with industry peers.

Net Debt

Net Debt is an APM used by management to evaluate the Group's capital structure and leverage. Net Debt is defined as short-term borrowings plus long-term borrowings plus short-term portion of long-term borrowings less cash and cash equivalents as illustrated in the table below. Following the adoption of IFRS 16, financial liabilities related to leases are included in the calculation of Net Debt from 2019 onwards.

Adjusted Net Debt

Adjusted Net Debt is used by management to evaluate the Group's capital structure and leverage defined as Net Debt including other financial assets as they are highly liquidity assets. The calculations are described in the table below:

Net Debt & Adjusted Net Debt excluding leases

Net debt and Adjusted Net Debt excluding leases are used by management to evaluate the Group's capital structure and leverage excluding financial liabilities related to leases for comparability purposes with prior years. They are defined as Net Debt and adjusted Net Debt (described above) deducting financial liabilities related to leases as described below:

EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization)

EBITDA is intended to provide useful information to analyze the Group's operating performance. EBITDA is defined as total revenues plus other operating income less total operating expenses before depreciation, amortization and impairment, as illustrated in the table below. EBITDA margin (%) is defined as EBITDA divided by total revenues.

Adjusted EBITDA (Operating profit before financial and investing activities, depreciation, amortization and impairment, costs related to voluntary leave schemes, other restructuring costs and non-recurring litigations)

Adjusted EBITDA is intended to provide useful information to analyze the Group's operating performance excluding the impact of costs related to voluntary leave schemes, other restructuring costs and non-recurring litigations. Adjusted EBITDA is defined as EBITDA adding back costs related to voluntary leave schemes, other restructuring costs and non-recurring litigations, as illustrated in the table below. Adjusted EBITDA margin (%) is defined as Adjusted EBITDA divided by total revenues.

EBITDA After Lease (AL) (Earnings before Interest, Taxes, Depreciation and Amortization After Lease)

EBITDA After Lease (AL) is intended to provide useful information to analyze the Group's operating performance. EBITDA After Lease (AL) is defined as EBITDA deducting the depreciation and interest expense of leases, as illustrated in the table below. EBITDA After Lease (AL) margin (%) is defined as EBITDA After Lease (AL) divided by total revenues.

Adjusted EBITDA After Lease (AL) (Operating profit before financial and investing activities, depreciation, amortization and impairment, costs related to voluntary leave schemes, other restructuring costs and non-recurring litigations After Lease)

Adjusted EBITDA After Lease (AL) is intended to provide useful information to analyze the Group's operating performance.

Adjusted EBITDA After Lease (AL) is defined as EBITDA After Lease (AL) adding back costs related to voluntary leave schemes, other restructuring costs and non-recurring litigations, as illustrated in the table below. Adjusted EBITDA After Lease (AL) margin (%) is defined as Adjusted EBITDA After Lease (AL) divided by total revenues.

Adjusted Profit to owners of the parent

Adjusted Profit for the period attributable to owners of the parent is intended to provide useful information to analyze the Group's net profitability excluding the impact of significant non-recurring or irregularly recorded items in order to facilitate comparability with previous ongoing performance. Adjusted Profit for the period (attributable to owners of the parent) is calculated by adding back to the Profit of the period (attributable to owners of the parent) the impact upon it of the following items: costs related to voluntary leave schemes, net impact from impairments and write offs, reassessment of deferred tax, reversal of provision related to assets sales, other restructuring costs, non-recurring litigation expenses, gains from disposal of subsidiaries, effect of changes to tax rate, tax effect from deductible investment losses and intercompany dividends and tax effect from deductible provisions of prior years, as illustrated in the table below:

Capital expenditure (CAPEX) and Adjusted Capital expenditure

Capital expenditure is defined as payments for purchase of property plant and equipment and intangible assets. The Group uses capital expenditure to ensure that the cash spending is in line with its overall strategy for the use of cash. Adjusted capital expenditure is calculated by excluding from Capital expenditure, spectrum payments as illustrated in the table below:

Free Cash Flow (FCF)

Free Cash Flow is an APM used by the Group and is defined as cash generated by operating activities (excluding net cash flows from operating activities of discontinued operations), after payments for purchase of property plant and equipment and intangible assets (CAPEX) and adding the interest received. Free Cash Flow is intended to measure the cash generation from the Group's business, based on operating activities, including the efficient use of working capital and taking into account its payments for purchases of property plant and equipment and intangible assets. The Group presents Free Cash Flow because it believes the measure assists users of the financial accounts in understanding the Group's cash generating performance as well as availability for debt repayment, dividend distribution and own reserves.

Free Cash Flow After Lease (AL)

Free Cash Flow After Lease is defined as Free Cash Flow adding the lease repayments.

Adjusted Free Cash Flow

Adjusted Free Cash Flow facilitates comparability of Cash Flow generation with industry peers. Adjusted Free Cash Flow is useful in connection with discussions with the investment analyst community and debt rating agencies. Adjusted Free Cash Flow is calculated by excluding from the Free Cash Flow (defined earlier) the payments related to voluntary leave schemes, other restructuring plans and non-recurring litigation expenses and spectrum.

Adjusted Free Cash Flow After Lease (AL)

Adjusted Free Cash Flow After Lease is defined as Adjusted Free Cash Flow adding the lease repayments.

I. GROUP CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

II. CONSOLIDATED INCOME STATEMENT

III. GROUP REVENUES

IV. CONSOLIDATED STATEMENT OF CASH FLOW