Hellenic Telecommunications Organization S.A.

Ladies and gentlemen, thank you for standing by. I am Gail, your course call operator. Welcome and thank you for joining the OTEC conference call and live webcast to present and discuss the second quarter 2023 financial results. At this time, I would like to turn the conference over to Mr. Michael Tomas, Chairman and CEO, Mr. Babis Mazarakis, Chief Financial Officer, and Mr. Evrico Charcedis, Head of IR and M&A. Mr. Tomas, you may proceed.

Good morning or good afternoon to all of you. This morning we reported a solid second quarter in line with our expectations, confirming our steady growth as we adapt successfully to the new competitive challenges in the Greek market. Greek service revenues, including retail fixed, data communications and mobile, were roughly unchanged in the quarter, an improvement compared to the past two quarters. This reflects continuing growth in mobile, from both postpaid and prepaid, and improving trends in fixed. This resilience is commendable in a situation where total market revenue per user has dropped. We're aware of our customers' needs towards their wallets and we'll continue to offer them the best value proposition. But we have built our reputation on the quality of our technology and our services. That is something that is confirmed in survey after survey and something we will not compromise. We're pleased to observe quarter after quarter The vast majority of our customers feel the same way. We will continue to work hard in this direction. Improving trends in broadband drive the stabilization of retail fixed services. Our broadband market share remains constant. The deployment of our fiber-to-the-home infrastructure is proceeding apace. We already reach more than every fifth line in Greece, and we have installed more than 80% of the country's total fiber-to-home lines, more than 80% of the country's total fiber-to-home lines. This is important to secure both our wholesale and retail market shares. Fiber-to-home penetration is also on the rise, and we are continuing to upgrade customers to higher broadband speeds. As a result, we account for more than 70% of all fiber-to-home subscribers in Greece. As you know, being first in capturing the 500 home subscriber is critical. In addition to the resilient retail services, strong performances in other revenue streams and notably in ICD services to businesses and public administration resulted in higher total revenues in Greece up to more than 2%. Greek EBITDA was also up by nearly 1%. A less favorable revenue mix is the main reason of a slower growth than in the top line. And some of that growth is attributable to lower margin business-to-business services and to international wholesale, while some higher margin wholesale revenues are down. Regarding our cost base, we had a sharp drop in payroll this quarter, part of which is permanent and part one-off. Overall, we are maintaining our strict cost discipline. We have also negotiated a large part of our energy supplies for next year. Obviously, at somewhat higher prices, it has the benefit of raising our visibility over future expenses. Looking ahead to the second half of the year, we should continue getting some tailwind from the positive economic situation in Greece. In this context, we expect similar trends to continue, thanks in particular to positive momentum in our mobile activities. Our advanced 5G networks and superior customer service should help us secure our share of the market. In fixed, we also expect current improving trends to endure as we pursue the rollout of 5G to the home network and promote its utilization. We have the right ingredients to encourage growth in broadband, and that should be further supported by government fiber subsidies, which we do not expect until the end of the year. ICT revenues should also remain substantial, reflecting strong demand from public and private sectors as Greece pursues its broad progress in digitalization. Though they carry lower margins, these projects are also appreciable from a strategic standpoint. The wholesale business is a more difficult forecast, but as other players build their fiber infrastructure in Greece, there is no doubt that part of our national wholesale revenue base will gradually decline. Finally, we are seeing further growth in the new businesses that carry the COSMOTE brand into neighboring territories. Our basic payment system is gaining traction, with total users now reaching 135,000. We run a tight ship and intend to continue doing so. We have been able to maintain a high level of profitability in an increasingly competitive environment by being vigilant and agile. and always adapting our cost base to future business conditions as we see them. For the remainder of the year, there are many moving parts, but we are prepared for all scenarios and we will continue investing in our systems and our brands for the future. So once again, we can confirm our full-year outlook. CAPEX stood a touch low, the first half mark. However, we expect to see a significant push, particularly in FTTH in the second half, which will bring the full year total at last year's level of €640 million. As of the test 2023 shareholder remuneration, we're also confirming, like we did last quarter, the numbers we indicated at the year-end results. And now I'll ask Babis to review our second quarter performance.

Thank you, Michael. Hello to all of you on our call. Second quarter group revenues were up 1%, reversing the trend of the first quarter. Revenues in Greece were up more than 2% as mobile, ICT and wholesale more than offset an erosion in parts of retail fixed services, which by the way was milder than in the prior three quarters. In Romania, at minus 11%, The drop in revenues was in line with Q1 and still reflects the discontinuation of the MVNO business following the sale of the fixed business in 2021, as well as mobile termination rate cuts and some promotional initiatives of previous quarters. Group-adjusted EBITDA after leases was down nearly 2%, reflecting the performance of Romania where, in addition to the factors I just mentioned, our mobile subsidiary incurred a sharp increase of energy costs. In Greece, EBITDA was up nearly 1%. So in Greece, as I pointed out, revenues were up across the board, apart from retail fixed services, which recorded the mildest drop of the past four quarters, at less than 4% or less than 3%, including data communications. This means that going forward, the comps will be possibly easier, already incorporating the impact of certain initiatives from last year. Once again, the bulk of the decrease comes from legacy voice. In TV, subscriber numbers were stable at close to 650,000 in a season when sports programming represents a lesser draw. Our resilient broadband revenues base is a testimony that our speed increases of last year have fully paid off. we added another 9,000 customers during the quarter, bringing penetration to the base to just short of 87%. Reflecting our focus on migrating customers from copper to fiber, we recorded 25,000 fiber additions in Q2, all from FTTH. In fact, FTTH additions numbered 28,000, resulting in a total FTTH subscriber base of 194,000. This is a year-on-year increase of more than 100,000, even though we are comparing with a period during which the market enjoyed the benefit of state subsidies to the final FTTH customer. Fiber to the home penetration at the end of the quarter reached 19% of home past, a sharp increase from the second quarter last year of 14%. As you see, we are holding our ground in a change in competitive landscape by leveraging our advanced infrastructure and top customer service offerings. Other fixed revenues were up nearly 18%. We had yet another excellent quarter in ICT with a solid pipeline which should continue supporting this business line ahead of us. A word now on wholesale revenues which were up in the quarter after a sharp fall in Q1. Most of this increase comes from low margin. international transit, while domestic wholesale declined as other players built their own fiber infrastructure. Greek mobile service revenues were up more than 2%, with both prepaid and postpaid contributing to the growth. Despite increased competitive pressures, all mobile trends are generally going to the right direction. Most importantly, we are preserving our customer base, particularly when it comes to postpaid. In prepaid, we've had good take-up for our summer offers. So, all in all, our more-for-more strategy combined with network superiority are working and continuing to attract customers and support profitable and sustainable growth. This is also evident in our positive data KPIs. Note that average monthly data usage exceeded 10 gigabytes per user this quarter, which is up 45%. Regarding our 5G network, we have exceeded 85% population coverage and should reach 90% by year-end, with Athens already close to 100% and other major metropolitan areas not far behind. Let's now turn to what we've done on the cost side in Greece. Total operating expenses, including depreciation and amortization and one-offs, excluding depreciation and amortization and one-offs, We are up nearly 4% in the quarter. Costs directly linked with the top line, including third-party fees, which are related to the jump in ICT revenues and interconnection costs, are mainly responsible for most of this increase, while we continue to exercise stringent cost control measures across the board. Personal expenses declined 10% this quarter. Part of this decline is baked in and is due to savings from our early retirement plans. And part of it is one-off due to the new labor agreement with the union which eliminated certain legacy benefits that had been provisioned in the past. On the energy side, we are working on securing higher visibility for part of our energy requirements in 2024, although inevitably at higher costs and already likely to affect the second half of the current year. And budget provisions were down again this quarter, as they were in Q1, reflecting a much improved collection record over the past several quarters. All told, first quarter adjusted EBITDA after leases in Greece were up almost 1% to €322 million, yielding a healthy margin at 40.9%. Turning now to Romania, where total revenues were down 11%, roughly in line with the drop in the first quarter of the year and for the same reasons. In addition to the cutthroat competitive environment, which demands more customer retention efforts, we are still dealing with the impacts of mobile termination rate cuts and the loss of the MVNO contract. The impact from the MVNO services should be almost nil from Q3 of this year and onwards. Total operating expenses, excluding depreciation and amortization and one-offs, were down more than 4% in the quarter, following the drop in revenues, notably due to lower interconnection and handset costs. The cost base was negatively affected by the increase in energy costs, up approximately 2 million euros, due to the removal of the price cap. As a result, Telecom Romania Mobile's adjusted BDA after leases was nearly 5 million euros in the quarter, down from close to 14 million in Q2 of last year. As far as the rest of the group P&L is concerned, it is mainly business-as-usual this quarter again. Easiness expense is down marginally, income taxes are slightly down, and net income is up nearly 5% as it was in the first quarter. Turning to cash flow, adjusted capex is down less than 1%, is back to a normative level this quarter after a sharp drop in Q1. As we intensify hybrid home deployment, and to meet our year-end targets. That's why we are confirming the full-year 640 million euro guidance for CAPEX. Frequency flow after lease was down 8% at 144 million euros, mainly on lower EBITDA in Romania. In the first six months, frequency flow is down just 2% at 370 million, and our full-year guidance remains unchanged at approximately 500 million euros. Neither are we changing our shareholder remuneration guidance of 425 million euros. The final dividend was paid out last month, and we are a third of the way in our 2023 share buyback program of 175 million euros. So, to conclude, the second quarter was robust and confirms the validity of our strategy in Greek fixed mobile in a reheated competitive landscape. In Romania, while we have to bear the adjustments from several largely external factors, we are steadily strengthening our subscriber base and driving some encouraging ARPU increases that should support a much improved outlook. On this note, Michael and myself and our colleagues around the table are ready to take your questions. Operator?