Hellenic Telecommunications Organization S.A.

Ladies and gentlemen, thank you for standing by. I am Gaili, your chorus call operator. Welcome and thank you for joining the OTEC conference call and live webcast to present and discuss the fourth 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 Matarakis, Chief Financial Officer, and Mr. Evrikos Chassidis, Head of IR and M&A. Mr. Tamas, you may now proceed.

Good morning or good afternoon. I'm pleased to be here with all of you again and to welcome you to OTEZ fourth quarter and full year 2023 results call. 2023 has been an interesting and somewhat surprising year for many, but not for us. When it started, we were prepared for the impact of the reshuffling of our competitive environment, and our readiness paid off quarter after quarter. We remain convinced that our most powerful competitive advantage is the quality of the infrastructure we have built over the past decade, and more, together with the passion for customer service that runs through our organizations. We did not deviate from these principles last year as competition became more intense. We had good ground, and I believe that the whole market benefited from our discipline and determination. Quarter after quarter, revenues from our Greek retail fixed services improved. Ending on a positive fourth quarter with solid performances, it brought violent TV. Mobile service revenues delivered strong performances over the year, and even more so if you strip our visitor revenues which were impacted by tariffs and negotiations. In the meantime, ICT revenues, which had been an important driver of growth in the first half, bounced back in the fourth quarter, as we had expected, after a temporary slowdown caused by the change in public administration following the country's elections. All told, we entered a year of intensifying competition in Greece, with revenues inevitably up a little over 1%, The commendable performance as we faced increased competition in fixed and mobile. Delays in ICD projects, lower visitor roaming tariffs, regulatory refusal of inflation-based adjustments, and deferred state subsidies to fixed line upgrades. The progress we have made in all relevant KPIs highlight the success of our efforts and supports our top-line growth. Set in a positive 2024 framework, now most of these headwinds have been eliminated. Starting with broadband, we had another significant rise in the number of subscribers during the year, and nearly 9 out of 10 of our Axis customers are now broadband users. Our high-speed base has also grown sharply, as is the number of our Fiber subscribers. As you know, fiber-to-home rollout has been a key priority for us in the recent past, and we have invested significantly to build fiber-to-home access. As of the end of the year, OTEA loan accounted for over 80% of the country's active fiber-to-home infrastructure, with more than 1.3 million homes passed. And where we lay fiber, demand follows even rises. We are closing in on 20% utilization rate, up sharply from the level one year ago, despite the huge increase in our footprint over the same timeframe. Capturing a majority of Fiber customers early on will support our future performance as the return is traditionally much lower. In the TV market, another key strategic area for us, we've also been adding customers attracted by the breadth and quality of our offering. In mobile, leveraging the top quality of our high-speed data networks, we are continuing to successfully convert customers from prepaid to postpaid. We enjoy a long-lasting competitive advantage in customer experience and network performance surveys. We have also taken revenue-enhancing measures, such as raising the minimum prepaid top-up amounts and eliminated the EBIT discount. This last move supports the fixed as well as the mobile revenue base. In Greece, we achieved higher EBITDA, both in the quarter and 2023 as a whole, with a solid full-year margin level of 41.6%. While a somewhat less favorable revenue mix impacted our margins, our costs remained well under control. So we have entered 2024 in good shape. Our competitive advantages, advanced infrastructure and RPE initiatives will enable us to extend our momentum. They should absorb the headwinds wholesale revenues and energy costs might represent. We expect our Greek operations to achieve further growth in 2024. In Romania, as we told you, we are considering all options regarding the future of this operation, including a disposal. The discussions we disclosed in late November are ongoing. We will keep you apprised of any new developments as it occurs. We have also announced a change in executive leadership of OTE. As you know, after 13 years as a CEO, I have decided not to solicit another mandate. We will talk more about this next quarter, but let me just state here that I couldn't be prouder of the work we have done together during this tenure. We have transformed OTE into a modern competitive telecommunications player, the country and its economy deserves. Our financial KPIs are amongst the best amongst European telecoms. I'm confident that Kostas Nebris, who has been designated to take my place, will bring OTE to new highs. I know I will be leaving this organization in July of 2024 in very good hands. It is because we are convinced our prospects are particularly bright that we have decided to maintain our investments in the future at a high level. and to raise the remuneration of our shareholders. In 2024, CAPEX should remain at or close to its 2023 level, as we pursue a rollout of hybrid infrastructure in particular. Free cash flow will also remain solid at 470 million euros, and despite the small drop there, we are proud to be able to increase our remuneration to our shareholders. We will be asking the next AGM to approve a total shareholder remuneration of €450 million, comprising of a 23% increase in the dividend. On that note, I will ask Babis to review our performance in the fourth quarter.

Thank you, Michael. And to everyone out there, hello and welcome to our call. We had a solid fourth quarter, providing a satisfactory ending to this complex year. Total group revenues in the quarter were up more than 5%, with both Greece and Romania contributing to the growth. In Greece, revenues were up precisely 5%, though the largest increases this quarter came from lower market revenue categories. Retail service revenues were up nicely in fixed as well as in mobile. In Romania, the top line increased more than 6%, boosted by one of revenues linked to an ICT project. The nearly 3% increase in group adjusted EBITDA after leases Slower than the top line in Greece reflects the mix of revenues in the quarter. In Greece, the PTA was up by 1.6%. In Romania, it was over €4 million, as compared to break-even in the same quarter last year. Let's start with Greece. Revenues from retail fixed services continued along the improving trends they had shown since the beginning of the year. and actually turned positive in the quarter, thanks to solid increases in broadband and particularly TV. Even considering the favorable comparison pace, underlying trends improved significantly. Once again, quality and customer recognition paid off, even at a highly competitive context. Broadband revenues were up over 2% and TV was up more than 5%. We added 13,000 broadband customers in the fourth quarter, raising broadband penetration over total base to nearly 88%. We are also signed up a record 35,000 additional fiber-to-the-home subscribers during the period, bringing the total fiber-to-the-home base to 251,000. This represents an 83% increase from the year earlier level. Achieved with no support from state subsidies, which have not been available for well over a year now. We are still anticipating that some form of incentive will be offered in the coming months to further boost the market. Regardless, we are pursuing our fiber-to-the-home rollout across the country and actively marketing fiber takes up to monetize our substantial technological investments. We exceeded 1.3 million homes passed by the end of 2023 and we are shooting for another half million homes in 2024. At year-end, Fibre to the Home Penetration had passed 19.5% of homes passed, a satisfactory increase in relative and absolute terms. Our focus on network quality, service availability, and customer confidence is a winning strategy. In particular, Fibre is driving very high customer satisfaction scores, which itself translates into chain rate that are about half those of the traditional copper-based subscribers. When it comes to TV, we ended 2023 with 678,000 customers, up 13,000 in the quarter and 36,000 or more than 5% during the year, driving the revenue uplift I mentioned before. We are continuing to invest in the programming of our customers' demand particularly with regard to sports content. Last quarter, we mentioned that the blip in other fixed revenues after a steady run of quarterly increases would be temporary, and we attributed it to the upshot of the Greek elections a few months earlier. We are now pleased to report that in the last quarter of the year, other revenues bounced back as we had expected, and we are up more than 11%. We have a solid pipeline of ICT projects, for public and private entities ahead of us. Wholesale revenues were up more than 4% in the quarter, largely from international transit. On the other hand, higher-margin domestic wholesale are and should continue to be impacted by the build-up of our competitors' own infrastructure. We had a very positive quarter in Green Mobile, with sharp acceleration in service revenues, up more than 4% in the quarter, despite the drop in visitors roaming. Momentum remains intense in prepaid as well as postpaid revenues, with revenues in both channels up materially. We are encouraged by the reaction of the prepaid base to our more-for-more packages and the removal of lower-value monthly recharges. In addition, our ongoing strategy to migrate customers from prepaid to postpaid continues to pay off and really highlights the tangible benefits we are getting out of our network leadership. In Q4, through conversion and customer acquisition, we added 43,000 users to our postpaid services for a total now of over 3.1 million subscribers. The considerable appeal of our offering is visible in both our data KPIs and customer satisfaction surveys. We are also ahead of our 5G population coverage targets and we are consistent in improving the quality and reliability of our technological solutions. So, all in all, we are pleased with the development of our brick-fixed and mobile operations in 2023, and we are quite confident in delivering another resilient performance in the current year. Total operating expenses, excluding depreciation and amortization, and warm-ups in Greece were up nearly 8% in the quarter. However, most of this increase in OPEX comes from direct costs primarily interconnectional devices, with structural costs were kept under control. We recorded a temporary increase in personnel costs in the quarter, but the underlying benefits from recent retirement programs are still there, and we expect a steady decline in costs to resume in the coming quarters. The full year numbers are more representative, with operating expenses excluding depreciation, amortization, and one-offs, up just Full-year personnel expenses were down 5% and budget provisions declined 30%. Energy costs were also down sharply, but we expect that items to bounce back in 2024 based on the forward contracts we negotiated. Adjusted EBITDA after the leases increased, totaled €337 million and was up 1.6%, yielding an EBITDA margin of 39.4%. In the full year, the union margin was up 10 base points to a healthy 41.6%. Now a few words about Romania. Total revenues were around 6% at our Romanian combined operations, totaling 78 million euros. However, this includes a 5 million runoff revenue linked to the completion of an ICT project recognized in the quarter. Revenues are still impacted by MTR cuts, mobile termination rate cuts, and the highly competitive environment in which we operate. In the full year, total TKRM revenues were down about 6%. Romania's total operating expenses, excluding depreciation and localization and one-offs, were down marginally in the quarter, reflecting cost discipline across the board, despite higher energy costs. Similarly, full-year OPEX rose less than 1%. Finally, Telecom Romania Mobiles, adjusted to BDA after leases, was a little over €4 million in this quarter and €17 million in the whole year. Now we go rapidly over the rest of the group PML as it's really business as usual. Financial income and expenses are continuing to come down, reflecting the drop in our outstanding debt and higher interest income on deposits. and this objective is to continue as we are not facing any refinancing deadline for another two and a half years. As for the cash flow statement, adjusted capex was down 4% in the fourth quarter to reach 621 million euros in the full year. This is right in line with the revised guidance we gave you at the end of Q3. Pre-cash flow of the lease was 104 million euros in the fourth quarter and for the full year, It came up to €501 million, spot on with our guidance. In addition to our 2024 shareholder remuneration policy that Michael discussed, we have also communicated our cash flow at CAPEX guidance for the full year. We expect a free cash flow in the neighbourhood of €470 million, roughly €70 million lower than in 2023. This difference has nothing to do with operational performance, but it is entirely due to income tax returning to a more normative level following a one-time tax credit last year. We will also continue investing in our infrastructure, mainly the additional half million houses we intend to pass this year, as we mentioned before. As a result, we are expecting CAPEX to be at or slightly below the 2023 level, in a range between 610 and 620 million euros. So, to conclude, we're quite pleased with our performance last year and quite positive and optimistic about our outlook as we enter 2024. On that note, Michael, myself, and our other colleagues around the table are ready to respond to your questions. Operator?