Hellenic Telecommunications Organization S.A.

Ladies and gentlemen, thank you for standing by. I am Gail, your chorus call operator. Welcome and thank you for joining the OTEC conference call and live webcast to present and discuss the first quarter 2024 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 Tzamas, Chairman and CEO, Mr. Babis Mazarakis, Chief Financial Officer, Mr. Panagiotis Gavrilidis, Chief Marketing Officer, Consumer Segmental Tech Group, and Mr. Evrikos Arcedis, Head of IR and M&A. Mr. Tzamas, you may proceed.

Thank you, operator. Good morning to all of you. Happy to welcome you to the Test First Quarter 2024 results call. This is my 54th consecutive quarterly call as a test CEO and it's my last one. I'm honored to have held this position since November 2010 and to have had the opportunity to talk with you and with the market repeatedly over all these years. Looking back at the past 13 and a half years, I essentially see three phases in the transformation we undertook together. In the first five years, our priority was to fix the basics and focus on growth. We set about to change the culture and to transform mindset and processes everywhere in the organization. We invested massively in technology, networks, people, and customer experience, developed or revitalized services, unified the brand. And we cleaned up our financials, cutting debt, and trimming our cost structure. By 2016, in a difficult environment, we have become a modern, high-performing, integrated, fixed mobile operator focusing on growth. In the second phase, our focus has been on simplification and digitalization of all internal processes and customer touchpoints. Our mobile app became the central interface with our clients. We outsourced all non-core activities. We built a lean and profitable growth model. By the end of this phase, three years ago or so, OTAE has become an efficient, agile digital services provider, leveraging state-of-the-art networks to offer superior customer experience. We are now well into the third phase of our evolution. OTAE is continuing to build its positions as a sustainable digital services provider with a positive impact on society and environment. Network superiority is a key element of our strategy, and our advanced deployment of the country's densest fiber-to-the-home infrastructure is a testimony to our commitment. Same thing with 5G mobile networks, where we operate far and away the most extensive coverage available nationwide. We've extended our brand territory in customer interactions with the successful launch of new digital services in financial services, insurance, food delivery. We are constantly gaining share in our markets. All told, over this period, this is a new tear that has emerged. In a highly responsible manner, we have reduced our personnel expenses by more than 50 percent. We have also applied the most stringent cost discipline in other areas as well. As a result, while being subjected to stressful external developments, we consistently delivered some of the highest EBITDA margins amongst European telcos. Over the same period, we have returned more than 3 billion euros to our shareholders in dividends and share buybacks, and our test market capitalization has doubled to nearly 6 billion euros. My last full year, 2023, has seen with intensifying competition. Our strong standing in the market has enabled us to come out ahead and improve our positions quarter after quarter. Now, almost halfway through 2024, we're in good shape for the coming periods. I'm proud of the work we have done together to get to where it is now. It has not always been straightforward, and I'm sure the next years will also bring the share of challenges. But the organization I will be handing over is in good operating and financial shape. It is designed for creating value for all its shareholders. A word on this first quarter before I turn the colt over to Babis, who will give you the more details. Illustrating the fundamentals I just discussed, it was a good period of steady growth in revenue and EBITDA, as well as operating KPIs. Taken together, fixed, and mobile, retail revenue growth was consistent. ICT posted another sharp increase. Our fiber deployment continued at a rapid pace, as did fiber to the home take-up. In other words, all signs are pointing in the right direction, and we confirmed our 2024 guidance and shareholder remuneration. Babis, up to you.

Thank you, Michael. Yes, it's been quite a ride. And hello to all of you out there, and welcome to this milestone call. As Michael noted, the beginning of this year has been solid on virtually all metrics. The quarter's total group revenues rose by an exceptional 9% on a very strong Greece top line. Romania was impacted by further cuts in mobile termination rates. Group adjusted BDA after leases was up a steady 1%, due once again to the mix of revenues during the quarter in Greece and to another contribution from Romania. starting with Greece, where revenues jumped more than 10%. Like last quarter, the bulk of the revenues in Greece is attributable to low-margin revenue categories, mainly ICT and international wholesale. Our retail revenues were also quite up, nicely, particularly if we look at fixed and mobile as a whole. Revenues from retail fixed services were basically unchanged from last year recording a steady improvement in underlying trends. While legacy voice services continue to decline, revenue from broadband and TV are moving in the right direction. In a context of secular contraction of the total access market, accentuated in the first quarter, we sustained and even extended our share of the retail fixed market. relying on our traditional strengths in network, technology and customer service. TV posted another very robust quarter with an increase in revenues of more than 6%. We posted another record quarter in terms of total FTTH subscriber additions at 36,000, raising the total FTTH base to 287,000. Once more, this 73% year-on-year jump didn't benefit from any form of government incentives to either connection or usage. We continue to expect a coupon program later in the year to give additional momentum to FTTH take-up and revenues. We maintained our lead in nationwide FTTH rollout moving closer to approximately 1.4 million homes passed at the end of Q1. By the end of the year, we are aiming for a total of nearly 1.8 million homes. FTTH utilization rate as a percentage of home passed by OTE reached 22% or 35% of OTE customers alone. These represent material improvements over the previous year and attest to our technical and customer service capabilities. Year-on-year, OTE's total number of Fiber subscribers was up 76,000 to not far from the 1.6 million users, accounting for about two-thirds of our total broadband base. Turning now to TV. We had 688,000 customers at the end of the first quarter, up 6% from the year earlier level, driving the revenue increase for this segment with a strong sales mix skewed towards better packages. A major highlight of the period, consolidating our content portfolio, was the renewal for the next three seasons of our premium UEFA League football competition rights. We are also continuing to work with all parties involved in the fight against pay TV piracy, which remains a brake on our growth. Other fixed revenues, poor students amplify their post-election catch-up and come back. In the first quarter, they jumped by nearly 50%. ICT projects, for their part, saw their revenue contribution rise by more than 56%, as public administration and private organizations continue to tap our expertise in network infrastructure, IT deployment, and cloud computing. While this exceptional pace of growth reflects the delays we experienced in 2023, our pipeline is solid, and we expect a double-digit upward trajectory to continue throughout this year. Wholesale revenues were also up sharply by nearly 20%, once again due to international transit while higher-margin domestic wholesale continued to shrink by almost 2 million euros. In Greek mobile, we had another very strong quarter. Service revenues were up more than 3%, fueled by continuing pre- to post-migration and the renewal of COSMOTES more-for-more contracts. Both prepaid and postpaid delivered positive performances, with a particular solid contribution from postpaid, as you can expect. But higher top-up values also had a positive impact on prepaid ARPU. Hence, the revenues were also up this quarter. Data usage is continuing to increase at a rapid pace. In the first quarter, it averaged 12 GB per user per month, a 39% increase compared to Q1 of 2023. This underlines the high quality of our networks, notably in 5G, in supporting customer experience together with growth of postpaid customer numbers and, of course, revenues. This quarter, we added 57,000 new postpaid users to a total of 3.2 million. The prepaid customer base was reduced on a mix of migration to postpaid and rationalization. Contact subscribers now account for 45% of the total mobile base. Finally, we are ahead of targets when it comes to blanketing the country with 5G coverage and we continue to score very high in terms of customer appreciation across the board. Looking at our fixed and mobile operations as a whole, we continue to be satisfied by our performance and competitive standing and remain confident in delivering solid full-year numbers. Total operating expenses, excluding depreciation and amortization, and one-offs in Greece, rose nearly 19%, largely reflecting the sharp higher contribution in the revenue mix this quarter from activities associated with direct cost consumption, like interconnection, handset sales, ICT, and FTTH-related costs were all up significantly while we were successful in keeping structural costs under control. In particular, personnel expenses were down this quarter, largely reflecting cost-saving achievement through recent retirement programs. Personal cost-containment efforts will be pursued throughout 2024. As we had anticipated, we recorded an increase in energy costs of approximately 5 million euros following the expiration at the end of 2023 of beneficial negotiated contracts. This is expected to persist throughout 2024, but our energy consumption should be reduced over time and future costs might be controlled through longer-term contracts. Adjusted EBITDA after least increase exceeded €323 million and was up 1.5%, resulting in a solid EBITDA margin of 39.8%. Total revenues from Romania mobile operations were down 4% from the first quarter last year. Mobile service revenues, for their part, were down nearly 19%, impacted by the MTRs and subsidies in prior periods. The Romania business was further impacted by another 50% mobile termination rate cut imposed at the new year. As a result, Romania generated EBITDA of €3 million in the quarter. In the rest of the group P&L, trends were widely consistent with prior periods. Net financial expenses continued to drop by 27% compared to the first quarter last year, as interest income more than doubled on higher interest rates, but does not represent a material item. I remind you once again that our financial debt is low and that we have no refinancing deadline scheduled for over the next two years. Moving now to cash flow, adjusted capex was up 47% in the first quarter at 118 million euros. In 2023, as I'm sure you remember, the timing of our capital expenditure had been pushed towards the back part of the year. We're confirming our 610 to 620 million full-year capex forecasts. overwhelmingly dedicated to the pursuit of the fiber-to-the-home rollout increase. Free cash flow after leases was €127 million, down from €226 million in the first quarter last year. The year-on-year drop reflects higher 2024 tax payments, as we have already communicated, as well as the seasonal capex acceleration. We are confirming our €470 million full-year free cash flow target. We also confirmed our 2024 shareholder remuneration guidance with a total envelope of €450 million. The €297 million cash dividend is subject to shareholder approval in June, and the €153 million share-buy-back programme is already undergoing. To conclude, the solid start to the year confirms to us in our confidence that we are on track, following the right strategy, offering the solutions that our customers desire, and we will deliver on our targets for the full year. And on this note, Michael, myself, and the other colleagues around the table are ready to take your questions. Operator?