Ote Ads Regulatory News (OTES)

OTE GROUP REPORTS 2012 FOURTH QUARTER RESULTS

UNDER IFRS

·; Steady operating cash flow generation at €1.3bn in 12M'12; net debt down €1bn Y-o-Y

·; Full-year EBITDA margin up 100bps at 35.4%

·; Adjusted net income up 16% to €364mn in 12M'12

·; Resilient operations in Fixed and Mobile

·; Continued cost-cutting actions, Group annualized cost base down by about €600mn over past two years

·; Successful deployment of multi-tiered refinancing plan

ATHENS, Greece - February 28, 2013 - Hellenic Telecommunications Organization SA (ASE: HTO; OTC MARKET: HLTOY), the Greek full-service telecommunications provider, today announced audited consolidated results (prepared under IFRS) for the quarter and twelve months ended December 31, 2012:

* Excluding impact of Voluntary Retirement Programs and Restructuring Plans

** Excluding €211.3mn in net capital gain on sale of Telekom Serbia stake in 12M'12, after-tax effect of VRS charges (€98.4mn in Q4'12 and 12M'12, €56.4mn and €12.2mn respectively in 12M'11 and Q4'11) and €136.8mn impairment after tax impact in Q4'11 and 12M'11

*** Excluding Voluntary Exit Programs and/or Spectrum payments

Commenting on OTE's performance in the fourth quarter and full year, Michael Tsamaz, Chairman & CEO, noted: "In markets that remain extremely challenging, we've achieved ahead of schedule all of the objectives we had set for ourselves. We preserved a healthy operating cash flow generation in the face of lower revenues, disposed non-core assets, and through an active refinancing program since last summer we strengthened our financial structure and extended the maturity profile of our debt. We durably reduced OTE's cost base, notably through the voluntary exit offer accepted by over 1,500 Greek fixed-line employees at year end, and are nearing the completion of our Group transformation plan."

Mr. Tsamaz added: "Getting our house in order is one thing, but our future also relies on our ability to continue to innovate and to invest. Strong growth in TV subscriber numbers, the rebound of our broadband offering and our extensive 4G coverage illustrate our vitality on these fronts. Assuming a supportive regulatory framework, we intend to maintain our ranking among the largest infrastructure investors in Greece and Southeast Europe. In 2013, we expect competitive pressure to intensify in tough markets, but our resolve to preserve our position, sustain our profitability and strengthen our financial structure will not weaken."

Financial Highlights

BREAKDOWN OF GROUP REVENUES

The Group's total revenues dropped by 9.1% in Q4'12, marking a slight improvement compared to the prior quarter (Q3'12: -10.2%). While the difficult economic environment in Greece continued to weigh on OTE's performance, the bulk of the revenue drop reflects mobile termination rate (MTR) cuts severely impacting both fixed and mobile operations in most of the countries in which OTE operates. In mobile operations, nearly 60% of the revenue shortfall compared to Q4'11 is due to MTR cuts.

In Greek fixed-line operations, continued robust take-up of OTE's more competitive double-play offers launched last May led to improved operating momentum in Q4'12. Despite aggressive competitive seasonal offers, OTE was able to contain line losses, and achieved healthy ADSL take-up and TV subscription growth. OTE's new VDSL offering, launched in November and enabling internet speeds of up to 50Mbps, had already attracted more than 6,000 subscribers by year end.

In the Romanian fixed-line business, revenues declined by 8.0% in Q4'12, leading to a full-year drop of just 5.4%, a considerable improvement compared to the prior year (12M'11: -8.6%). The slowdown in revenue erosion largely reflects improving retail revenue trends, down just 3.0% in 12M'12 (12M'11: -10.1%), while wholesale revenues were down by 11.2% mainly due to the reduction in termination rates.

In Greece, in addition to the difficult economic climate, the drop in Cosmote revenues during the quarter largely reflects steep MTR reductions.

In international mobile telephony operations, the Q4'12 revenue declines in Bulgaria and Romania were entirely due to severe termination rate cuts. In Albania, top-line performance was roughly unchanged in the quarter, leading to a full-year drop of 5.9%, a significant improvement from the previous year (12M'11: -21.1%).

Total Operating Expenses, excluding depreciation, amortization, impairments and charges related to voluntary retirement programs, amounted to €739.5mn in Q4'12, down 10.5% from €826.6mn in Q4'11. This dramatic improvement is a direct result of OTE Group's active cost-reduction measures over the past years. Compared to Q4'11, Personnel Expenses were down 9.9% at Group level and 19.6% in Greek fixed-line operations. Excluding the impact of the EDEKT pension fund contribution, which was fully amortized as of the end of 2011, Personnel Expenses were down 6.5% at Group level and 14.4% in Greek fixed-line operations in Q4'12.

As it managed once again to steeply reduce costs during the period, the Group achieved a pro forma EBITDA margin of 34.7% in Q4'12, up from 34.0% in the comparable quarter of last year.

In the quarter, OTE successfully carried out a Voluntary Exit Scheme (VES), resulting in the departure of 1,516 Greek fixed-line employees before year end. It is estimated that the net annualized cost savings resulting from this plan will total about €80mn, enhancing OTE's competitiveness and advancing its transformation. The implementation of the VES resulted in a one-off charge of €123mn in Q4'12. Reflecting this charge, the Group posted a €43.7mn net loss for the quarter. Excluding one-off expenses (voluntary retirement schemes, Q4'11 impairment at RomTelecom), the Group's adjusted net income stood at €54.7mn in the quarter, as compared to €71.9mn in Q4'11. For the full year, Group adjusted net income rose by 16.2% to €363.5mn from €312.9mn in 12M'11. 

Capital Expenditures amounted to €228.0mn in Q4'12, including outflows related to mobile spectrum licenses of €51.9mn in Romania and €7.2mn in Greece. Capital expenditures in Greek fixed-line, Romanian fixed-line, and mobile operations amounted to €70.1mn, €19.4mn and €126.7mn, respectively. Excluding mobile spectrum licenses, full-year adjusted CAPEX amounted to €494.2mn, down 20.1% from the corresponding 2011 level.

In Q4'12, the OTE Group generated Net Operating Cash Flow of €334.8mn. Excluding outflow of €128.1mn related to the Voluntary retirement Programs, Adjusted Net Operating Cash Flow rose by 12.0% to €462.9mn. The strong cash flow generation during the period reflects the €136.3mn improvement in working capital, largely due to lower accounts receivable, as well as lower interest and tax payments. Free Cash Flow excluding mobile spectrum licenses and Voluntary Retirement Program-related payments amounted to €294mn in Q4'12 or €819.1mn in 12M'12, significantly higher than in the prior year.

Reflecting solid cash flow generation, the Group's underlying net debt declined by nearly €1.0bn or 25.4% compared to December 31, 2011, passing below the €2.9bn mark. As of December 31, 2012, OTE held €6.7mn 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 Q4'12, the total Greek market (OTE active retail lines, Wholesale line rental connections and full LLU subscribers) lost 21k lines (Q3'12: -51.5k, Q2'12: -42.7k, Q1'12: -52.2k), the lowest net line disconnections since Q1'11. OTE fixed-line operations in Greece posted a net loss of 62.8k PSTN and ISDN retail connections compared to 107k net line losses in Q4'11, while the competition recorded 41.8k net additions in Q4'12, supported by seasonal offers.

In Q4'12, OTE achieved net additions of 32.7k retail broadband customers, or 47% of total net additions in the Greek market, bringing the total number of OTE subscribers to 1,179k. OTE's new competitive broadband offers again contributed to the overall growth of the country's broadband market, which has steadily picked up pace since Q2'12 and continued to grow in the face of adverse economic circumstances.

OTE's new brand positioning, focusing on "customer-centricity", benefited from the launch of its high-speed internet services (VDSL), with speeds of up to 50 Mbps, in late November 2012. An innovative suite of solutions aimed at helping small- and medium-sized businesses broaden their online presence, introduced in the prior quarter, had been adopted by over 6k customers by the end of the year, comforting OTE's positioning as a reliable technology partner in this key market segment. OTE's pipeline of products and services should keep the Company's profile highly visible in its target markets throughout 2013.

OTE's satellite TV service continued to attract new subscribers. In Q4'12, OTE added approximately 23k new TV subscribers, raising the total to about 120k as of end 2012. Enhanced sports and movie programming introduced in June, the richest HD content in the Greek market, and the switch-off of analog TV services in certain key regions should continue to fuel growth in subscriber numbers in coming quarters. During the quarter, OTE TV added two new movie channels to its offering, enabling subscribers to enjoy more than 500 movies a year.

SUMMARY FINANCIAL DATA

* Excluding impact of Voluntary Retirement Programs

Total Greek fixed-line Revenues declined by 12.7% in the quarter, extending the downtrend of previous quarters (Q3'12: -12.3%, Q2'12: -9.4%; Q1'12: -9.1%; Q4'11: -8.5%). In addition to continuing difficult economic conditions, affecting subscriber numbers, MTR cuts and migration to less expensive rate plans had a negative impact on ARPU levels. In addition, lower interconnection traffic affected international wholesale revenues in the quarter.

Total Greek fixed-line Operating Expenses, excluding depreciation, amortization and charges related to voluntary retirement programs, amounted to €289.7mn in Q4'12, a drop of 13.3% compared to €334.2mn in Q4'11. Total Personnel Expenses amounted to 28.1% of total revenues in Q4'12, down from 30.5% in the comparable quarter last year, mainly as a result of the new labor agreement reached in late September 2011 and other initiatives implemented in the past year.

2. Fixed Line Operations, Romania

SUMMARY FINANCIAL & ACCESS LINE DATA

 * Excluding impact of Restructuring Plans

In Q4'12, RomTelecom achieved consistent operating and financial performance despite lower revenues. In the quarter, wholesale revenues declined by 26.4%, following an 18% termination rate cut implemented by the Romanian regulatory authority in July. RomTelecom was able to minimize the impact of this factor on its EBITDA performance.

Compared to 2011 year end, the total number of RomTelecom broadband customers rose by nearly 5.3% at December 31, 2012, entirely due to organic subscriber acquisitions. Reflecting this, broadband penetration as a percentage of total RomTelecom voice connections stood at over 50% at year end, a percentage comparable to the Company's TV service penetration, underscoring RomTelecom's improved ability to defend its customer base. The number of TV subscribers was up 7.3% compared to 2011 year end, while TV revenues in Q4'12 were up 11.6% from the comparable 2011 quarter as customers continue to migrate towards higher-value propositions.

In the quarter, pro forma EBITDA increased by 23.0% compared to Q4'11, chiefly reflecting the ongoing implementation of cost-reduction initiatives as well as improving trends in the revenue mix. Total operating expenses, excluding depreciation, amortization and one-off costs, were down 15.4% in Q4'12. In 12M'12, total operating expenses, excluding depreciation, amortization and one-off costs, were down 9.5%, with Personnel expenses down 7%, extending the sharp declines achieved in the prior year. Depreciation & Amortization was down 91% compared to Q4'11, largely reflecting the impairment charge booked at the end of 2011.

3. Mobile Operations

SUMMARY FINANCIAL DATA

*Excluding impact of Restructuring Plan at Mobile Operations

As of December 31, 2012, the mobile operations of the OTE Group counted approximately 20.4 million customers, down slightly from the prior-year level. Despite depressed conditions and intense competition in each of the four markets in which it operates, the Cosmote Group defended its market position and significantly improved its EBITDA margin during the quarter.

MOBILE OPERATIONS, GREECE

As of the end of Q4'12, Cosmote provided mobile telephony services to 7.7 million customers in Greece, down 2.4% from December 31, 2011. The drop is entirely due to the elimination of double SIM cards by prepaid customers.

The 12.2% service revenue drop recorded by Cosmote Greece in Q4'12 largely reflects the latest round of regulator-mandated Mobile Termination Rate (MTR) cuts, implemented on October 16, 2012 (reduction from 3.60 to 2.30 Eurocents/minute) as well as earlier MTR cuts. As of January 1, 2013, the MTR has been reduced to 1.269 Eurocent/minute. In addition, revenues were negatively impacted by the prolonged economic crisis affecting consumer spending, and intensifying competition.

Cosmote became the first mobile operator in Greece to commercially launch 4G services based on the Long Term Evolution (LTE) technology, in November 2012, offering even faster Internet access to its customers. Furthermore, its continuous focus on mobile data services drove demand for smartphones, which accounted for about half of all its handset sales in Q4'12. As of 2012 year end, 4G LTE population coverage was available to more than 80% of the Athens metropolitan area and more than 90% of Thessaloniki area.

Despite the drop in revenue, continued increased efficiencies in its cost structure enabled Cosmote to further improve EBITDA margin in the quarter.

In 12M'12, blended AMOU decreased by 2.0% to 293.2 minutes, while blended ARPU for the same period was €14.6, down 5.4% from 2011, mainly reflecting lower ARPU in the postpaid segment.

MOBILE OPERATIONS, ROMANIA

As of the end of Q4'12, Cosmote Romania's total customer base stood at 6.3 million, of which 24.8% was postpaid. The number of business customers grew by 32% compared to Q4'11, 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 7% compared to Q4'11.

Service revenues declined by 8.9% compared to Q4'11 as a result of the two consecutive termination rate cuts implemented in March and September 2012. Cosmote Romania's EBITDA improved by 0.3% compared to Q4'11, partly reflecting the rationalization of the cost structure. EBITDA margin stood at 26.6%, as the company continues enhancing its operating efficiency in the face of intense competition.

FY'12 blended ARPU remained at the same level with the prior year, reflecting higher outgoing ARPU that offset the impact of lower mobile termination rates on incoming ARPU.

MOBILE OPERATIONS, BULGARIA

Globul's total customer base exceeded 4.5 million at 2012 year end, up 5.9% from the prior-year level, as the company's innovative voice and data solutions resulted in a solid increase in postpaid subscriber numbers. The subscriber base of Globul's hybrid fixed-telephony service continued to grow, reaching nearly 220k customers at the end of 2012. The number of mobile broadband subscribers (excluding M2M) more than doubled compared to 2011 year end.

In the quarter, Globul's service revenues dropped by 20.9% compared to Q4'11, chiefly reflecting lower termination rates imposed by the Regulatory Authority and a change in accounting treatment of early contract termination. Total revenue declined at a lower rate, reflecting a significant increase of Non-Service Revenue, mainly due to higher sales of handsets and increased smartphone penetration. National MTRs in Bulgaria have been reduced from 6.3 Eurocents/minute to 2.7 Eurocents/minute as of July 1, 2012. A further drop, to 2.2 Eurocents/minute, was implemented on January 1, 2013. During Q4'12, EBITDA reached €28.6mn, down by €10.7mn compared to Q4'11, out of which approximately €8mn is attributable to the negative impact of MTR cuts.

MOBILE OPERATIONS, ALBANIA

At 2012 year end, AMC's customer base comprised 1.9 million subscribers, up 3% compared to December 31, 2011, 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 42% increase in mobile data revenues for the full year.

Compared to Q4'11, revenues were negatively affected by aggressive pricing offers targeting both the prepaid segment and business customers, lower domestic interconnection tariffs imposed by the Regulatory Authority and adverse economic conditions.

Reflecting aggressive pricing competition, AMC's EBITDA margin dropped to 17.7% in Q4'12, despite ongoing efforts to optimize the organization's cost structure, that resulted in OPEX reduction of 15% compared to Q4'11. EBITDA was also negatively impacted by an one-off overdue debt provision. Adjusted EBITDA margin for this one-off effect should stand at 47.5%, compared to 38.9% in Q4'11.

4. Events of the Quarter

OTE Extends by One Year €500mn of Its Syndicated Bond Loan Facility

On November 9, 2012, OTE announced that it had exercised the one-year extension option embedded in its €900mn Syndicated Bond Loan RCF dated February 9, 2011, receiving extension consent from banks representing €500mn of the facility. On November 26, 2012, the transaction was concluded with the signing of the relevant documentation, with the €500mn extended balance to be repaid on February 11, 2014.

OTE's Subsidiary Globul Concludes Syndicated Loan Agreement

On December 20, 2012, Globul raised €153mn under a Syndicated Loan Agreement with a consortium of banks. The agreement provides banks the option to increase their commitments until the end of February 2013 up to a maximum total loan amount of €200mn. The loan is unsecured, has a tenor of 4 years with an amortizing repayment schedule and a margin of 5.50% p.a. over Euribor.

Bond Repurchases

During Q4'12, OTE PLC proceeded with partial repurchases of a total nominal amount of €162.1mn under the Notes due in August 2013, along with the payment of accrued interest. Following these repurchases, the outstanding nominal balance of the August 2013 Notes as of December 31, 2012, amounted to €1,007mn. In 12M'12, OTE PLC repurchased a total of €236mn under these Notes. 

Successful Completion Of OTE's Voluntary Exit Scheme

In November 2012, OTE launched a Voluntary Exit Scheme targeting Greek Fixed-line employees, which was successfully completed on December 31, 2012. The Scheme's initial target was significantly exceeded, as 1,516 employees accepted the incentives offered by the Company. OTE estimates that the net annualized cost savings coming from the VES will amount to approximately €80 million. OTE incurred the full cost of the VES (€191.8mn, including associated staff retirement indemnity costs), thereby entailing no additional burden for Greek state pension funds.As the major portion of the staff retirement indemnity had already been provided for in the financial statements of previous years, the final cost of the Voluntary Exit Scheme for OTE, charged in Q4'12 results, amounted to €123.0mn.

5. Subsequent Events

New Bond Issue & Tender Offer Under GMTN Program

On January 29, 2013, OTE announced its intention to issue new five-year fixed interest Notes under its €6.5bn Global Medium-Term Note Program. At the same time, OTE Plc announced a tender offer for its existing bond issues maturing in August 2013 and April 2014, at prices of 100% and 102% respectively. Following this announcement, on February 7, 2013, OTE PLC issued new €700mn, 5-year Fixed Rate Notes with an annual coupon of 7.875%, paid semi-annually. The issue was oversubscribed 2.7 times, with the demand set at an amount in excess of €1.9bn. Additionally, on February 13, 2013, OTE announced that following the completion of the tender offer, €106.2mn of the 2013 Notes and €92.5mn of the 2014 Notes, respectively, had been repurchased and cancelled. As a result, the outstanding nominal amount of August 2013 Notes and April 2014 Notes is €713.8mn and €407.5mn, respectively.

Agreement For The Sale Of Hellas Sat

On February 7, 2013, OTE announced the signing of an agreement to sell its 99.05% stake in Hellas Sat to Arabsat Cyprus Ltd, a 100%-owned subsidiary of Arab Satellite Communications Organization. OTE will receive total proceeds of approximately €208mn from this sale, representing 99.05% of:

a) the value of Hellas Sat amounting to €157mn and b) the cash held by Hellas Sat on the date of completion of the transaction, estimated at approximately €53mn. In addition, OTE will receive €7mn as dividends. The transaction is expected to be completed in Q2'13 after all necessary procedures have been finalized and is subject to approval by the competent authorities.

Private Bond Exchange Agreement

On January 16, 2013, OTE PLC concluded a private bond exchange agreement under its Global Medium-Term Note Program by which it exchanged €187mn of the August 2013 Notes with a new issue of €187.7mn Notes ("New Notes") maturing in February 2015. The repurchased €187mn August 2013 notes have been cancelled. The New Notes were consolidated with the existing €600mn Notes issued in February 2008 and maturing in February 2015, which have a current coupon of 7.25%.

OTE Repays €400mn Of Its Syndicated Bond Loan Facility

On February 11, 2013, OTE proceeded with the repayment of €400mn under the €900mn Revolving Credit Facility (Bond Loan) that OTE had signed on February 2011 with a consortium of banks. The remaining portion of nominal amount of €500mn, maturing on February 11, 2014, has been reclassified under short-term portion of long-term borrowings. The current outstanding balance of the loan is €490.1mn.

6. Outlook

In addition to the programmed impact of recent Mobile Termination Rate cuts across all of its markets, OTE expects its revenue base to remain under considerable pressure from challenging economic conditions and new competitive assaults throughout the year. To further mitigate the impact of revenue decline on its profitability and financial performance in 2013, OTE will benefit from cost-cutting measures already implemented, including its latest Voluntary Exit Scheme, and will continue to seek new cost-containment opportunities. OTE intends to continue innovating across the board to support its revenue streams, meet consumer demand for top-quality, cost-effective products and services, and maintain its leading brand positioning and technological edge in all countries in which it is active. 

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.

Apart from serving as a full service telecommunications group in the Greek telecoms market, OTE Group has also expanded during the last decade its geographical footprint throughout South East Europe, acquiring stake in the incumbent telecommunications company of Romania, and establishing mobile operations in Albania, Bulgaria, and Romania. At present, companies in which OTE Group has an equity interest employ more than 27,300 people in four countries, and our portfolio of solutions ranges from fixed and mobile telephony to Internet applications, satellite, maritime communications and consultancy services.

OTE shares are listed on the Athens Stock Exchange, and the London Stock Exchange (in the form of GDRs). Following their delisting from NYSE in September 2010, the company's ADRs trade in the US OTC market. OTE's American Depositary Receipts (ADR's) represent ½ ordinary share.

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 December 31, 2012 and comparative 2011

II. Consolidated Income Statements for the quarter and twelve months ended December 31, 2012 and comparative 2011

III. Consolidated Statement of Cash Flows for the quarter ended December 31, 2012, and comparative Q3'12, Q2'12, Q1'12, Q4'11

IV. Group Revenues for the quarter and twelve months ended December 31, 2012 and comparative 2011

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

VI. Mobile Operations

VII. Operational Highlights

VIII. EBITDA and Pro Forma EBITDA calculation

EXHIBIT I - CONSOLIDATED BALANCE SHEET

EXHIBIT II - CONSOLIDATED INCOME STATEMENT

EXHIBIT III - CONSOLIDATED STATEMENT OF CASH FLOWS

EXHIBIT IV - GROUP REVENUES

EXHIBIT V - SEGMENT REPORTING (12M 2012)

*Excluding impact of Voluntary Retirement Programs and Restructuring Plans

EXHIBIT V - SEGMENT REPORTING (12M 2011)

* Excluding impact of Voluntary Retirement Programs and Restructuring Plans

EXHIBIT VI- MOBILE OPERATIONS