Hellenic Telecommunications Organization S.A.

Ladies and gentlemen, thank you for standing by. I am your course call operator. Welcome and thank you for joining the conference call and live webcast to present and discuss the first quarter 2023 financial results. All participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Mr. Michael Tamas, Chairman and CEO, Mr. Babis Mazarakis, Chief Financial Officer, Mr. Panayiotis Gavrilidis, Chief Marketing Officer, Consumer Segment, and Mr. Vrikos Chassendis, Head of IR and M&A. Mr. Tamas, you may proceed.

Thank you. Good morning and good afternoon to all of you. The first quarter we reported earlier today enforced our confidence that we are implementing the right strategy in the face of developments. As you know, all along we have wagered our bank's proposition on the quality of networks we built and the services we offer, rather than competing on price alone. Even if vigilance will certainly be required more than ever, in 2023, the group's performance this quarter shows that we are on the right track and our execution is paying off. At group level, the slight drop in revenues we experienced this quarter was mainly due to the low-margin international wholesale traffic, as well as the comparable base in Romania. And I'll get back to what we're doing to address that in a minute. In Greece, on the other hand, international wholesale was the main headwind. But excluding what is largely a low-margin business, revenues were up, and we delivered solid performances through mobile and ICT. In retail fixed services, we successfully defended our market share and captured the bulk of broadband editions during the quarter. Our focus is squarely on upgrading our subscriber base to high-speed solutions, and this translated in further growth of fiber subscriber numbers in the quarter. On the cost side, we maintained and intensified our discipline across the board, Benefiting from last year's voluntary retirement schemes as well as from arrangements sheltering us from the most extreme variations in energy costs. As a result, EBITDA in our home market was up nearly 2% and very satisfying performance. The EBITDA margin reached 43.3% ahead of the levels recorded in the previous five quarters. Now let's look ahead to the rest of the year and how we can leverage our first quarter as we go forward. In Greece, we will continue to focus our top-line strategy on fiber mobile, coupled with most vigilance across the board. Together with the expansion of our fiber footprint, we will pursue intensive marketing efforts to continue raising our fiber-to-home utilization rate, which has been growing steadily and reached 18% as of the end of March, up 12% a year earlier. Mobile will leverage our 5G infrastructure and continue to push to convert users from pre- to post-paid services. Our focus is to retain our market share, focusing especially on the more value-generated segments of the market. In addition, Cosmotech's new businesses will continue to reinforce the aura and influence of the brand, like the box delivery service and the PAYC payment system, which has now reached over 100,000 users in a few months since it was launched. We will also carry on pushing ICT projects, which are valuable by themselves, but also contribute to the digitalization of our economy and create better conditions for growth. We have a strong pipeline of projects of valuable assignments, which should support this line of business going forward. The world of Romania, where our mobile subsidiary was impacted following This continuation of the MVNO service is provided after separation from its fixed arm. As you have seen, we announced last Tuesday that following the resignation of the previous CEO, Babis, in addition to his responsibilities of Group CEO, will take on duties of the CEO of Telecom Romania. Babis will intensify the focus to stabilize and improve the performance as well as to explore any strategic options. So in a year that we don't expect to be particularly easy, we are reassured by these solid first quarter results and are committed to great customer service, continuing to build a top-class infrastructure, controlling our costs. That's why we're confirming our outlook for the year. Our capex, which was down in the first quarter for seasonal reasons, should be stable in the full year as we accelerate fiber-to-home deployment. We also confirmed our shareholder remuneration level. On this note, I'll now ask Babis to review our performance in the quarter.

Thank you very much, Michael, and greetings to all of you from me as well. I'm proud and excited to take over the added duty of the CEO in Romania, and I look forward to getting this operation faster on a stabilization path. Let's now jump into our first quarter performance. This year, first quarter group revenues were down 2%, from the first quarter of 2022. In Greece, revenue was down less than 1%, primarily from international wholesale and, to a lesser extent, retail fixed services. In Romania, the 2% drop reflects the MVNO discontinuation following the sale of our fixed business the year before, and as well as lower mobile termination rates. Group-adjusted EBITDA after leases was just down 1%. The drop was entirely due to Romania, which had benefited from a sizable one of positive factors in the first quarter last year and experienced certain headwinds this year. In Greece, we achieved a strong operating profitability with EBDA margin at the high end of our historical record. This is due to our ability to control our cost base. All told, the group EBDA margin was 40.1%, up 40 basis points from the same quarter in 2022, despite the Romanian shortfall. Now turning to Greece, the resilience in revenues reflects the strong performance of mobile and ICT, while wholesale and fixed weighed on the total. Revenues from Greek retail fixed services were down 3.5% in the quarter, including data services, which it makes absolute sense to incorporate. Most of the decrease comes from voice and TV, while broadband was roughly unchanged. Overall, this reflects certain pricing adjustments, as well as lower demand for some legacy services. In TV, the growth in subscriber numbers continues. Now we are approaching 650,000 customers. It is mainly driven by our over-the-top service, which commands lower output. With excellent content, we are successfully preserving our share of the market, as well as our penetration of total households. As mentioned before, broadband revenues were stable, which represents an achievement if you consider that we are comparing to the last quarter before we started implementing a round of significant speed upgrades at no additional cost for the customer. This has frozen revenues that would normally have benefited from customers upgrading voluntarily, But most importantly, it also has the desired effect that of stabilizing our base. We added 15,000 customers in the quarter, pursuing the increase in penetration on total base, which now exceeds 86%, two points higher than a year ago. As you're aware of, we are totally focused on moving our customers to fiber, and the quarter marked another series of successful moves in this direction. Compared to the past two quarters, we more than doubled the number of fiber additions during the first three months of this year to 41,000. More than two-thirds of these additions, or 29,000, came from FTTH, bringing the total FTTH base to 166,000, way more than twice the number a year ago. Similarly, despite the ongoing expansion of our fiber to the home footprint, And despite the current lack of any government subsidy encouraging take-up, Fibre to the Home penetration reached 18% of homes passed, up from 12% a year ago. With Fibre playing an even larger role in our offers, speeds in excess of 100 Mbps represented now 45% of total retail subscriptions, at the end of the first quarter of this year, up from 28% a year earlier. As you see, we are holding our ground in a changing competitive landscape by leveraging our advanced infrastructure and top customer service offer. ICT had another strong quarter boosted by system solutions for private and public entities, including EU-sponsored projects. As a result, Other fixed revenues were up more than 12%. For the most part, the decline in wholesale revenues comes from international transit, but there's also some slight drop related to lower tariffs in domestic wholesale. Moving to mobile service revenues in Greece, this achieved another quarter of a very healthy growth, up nearly 3% this quarter, driven by increases in both postpaid and prepaid. In prepaid, we had a very solid quarter, validating our more-for-more strategy, notably higher top-up value bundles. Postpaid continued to benefit from the expansion of the base and very encouraging data monetization. Data KPIs are all pointing in the right direction, notably monthly data usage per subscriber up 67% year-on-year. We are actively pursuing the expansion of our 5G network reach, which should stretch to 90% of the population by the end of this year, and is already above that level in most of the country's major cities. Now let's turn to the other side of this quarter story in Greece, which is good cost control. Total operating expenses, including depreciation and amortization and one-offs, were down nearly 4%, in the first quarter, a sharp reversal from the trends last year, when our cost control initiatives ended up being neutralized by inflation and higher energy costs. This quarter, energy costs came down significantly, about 5 million euros, thanks to hedging and long-term sharply contracts. Energy, of course, remains a volatile element in our P&L, and our efforts are focusing now on stabilizing price for the future years even if this implies somewhat higher prices going forward. But debt provisions were also down as the higher rates of the pandemic period are proven overly conservative. Personal expenses declined more than 3% in the quarter, reflecting the benefits of last year's early retirement plans as we had anticipated. A new voluntary exit scheme is underway which should improve further our cost structure in 2023 and onwards. We have also finalized a new labor agreement with the Union, which provides visibility to our costs while eliminating a number of legacy bureaucratic salary structures. Important to say, employees at the lower salary echelons will benefit the most from the new agreement. All told, first quarter adjusted EBITDA after the least increase was up 1.6%, to nearly 319 million euros, resulting in a margin of 43.3%, which is up 110 basis points from the same quarter last year. Total revenues were down 12% in Romania, which is a very challenging market, of course, where we are facing competitors who are offering unlimited services for a couple of euros a month. In last year's first quarter, the Telecom Romania was still providing MVNO services to Orans following its acquisition of the fixed business. This service has been gradually discontinued. As a result, revenues were down sharply. Revenues were also affected by the mobile termination rate cuts imposed by the regulator. Now, starting this quarter, that is due to 2023, the comparison should become more favorable as the MVNO agreement subsides and there's only 2 million euros in Q2 last year, and very little after that. Total operating expenses, excluding depreciation and amortization, were down nearly 2% in the quarter, primarily due to lower interconnection costs, while device costs were up, as Telecom Romania was forced to align this strategy with those of its competitors. Energy costs were also higher as the government terminated the subsidized cap benefiting larger enterprises, leading to significantly higher tariffs throughout 2023. The impact in this first quarter alone is in the area of €2 million from this energy cost. As a result, Telecom Romania Mobile's adjusted EBITDA after leases was nearly €4 million in the quarter, compared to nearly 12 million in the same quarter last year. Important to note is that if we exclude the MVNO impact we discussed before, EBITDA would be down less than 3 million euros from last year level, reflecting just the aforementioned higher energy costs. There is not much to point out in the rest of the P&L. Since the interest expansion, income taxes were down by 4%, and net income was up nearly 5%. Turning to cash flow, adjusted capex was down 14% to €80 million versus last year. But as you know very well, the first quarter capex is often not representative of the full year outlays because of the seasonality. As we step up the pace of hybrid home deployment, the run rate should normalize starting this quarter. In line with the €640 million full year capex guidance, which we are fully confirming, Free cash flow after lease was up 2% to 226 million euros. We maintain our guidance of approximately 500 million euros for the full year. Finally, our shareholder remuneration guidance of 425 million euros is unchanged, with 250 million in dividend, payable in early July, and 175 million euros in share buyback, which is currently under execution. So, to recap, we are pleased with our healthy first quarter in Greece, underscoring the competitiveness that comes from offering great service on a state-of-the-art infrastructure. While we expect to face new challenges, we remain optimistic for the coming quarters. In Romania, the situation is definitely tougher, and we are awaiting all of our options there. On this note, Michael, Panagiotis and myself and our colleagues around the table are ready to take your questions. So, operator...