Hellenic Telecommunications Organization S.A.

Ladies and gentlemen, thank you for standing by. I am Gahid, your course call operator. Welcome and thank you for joining the OTEC conference call and live webcast to present and discuss the second quarter and six months 2024 financial results. At this time, I would like to turn the conference over to Mr. Costas Nebis, CEO of OTEC Group, Mr. Babis Masarakis, Chief Financial Officer, Mr. Panagiotis Gavrilidis, Chief Marketing Officer, Consumer Segment of OTEC Group, and Mr. Evriko Serbis, Head of IR at NetMoney. Mr. NetMis, you may proceed.

Good morning and a warm welcome to our 2024 second quarter results call. As you might know, I have rejoined the OTE group effectively as of the 1st of July. Having said that, I'm very familiar with OTE having spent a decade in various roles, ending my tenure as Chief Commercial Officer for the consumer segment, a position held from 2016 to 2019. For the past slightly more than five years, I was the CEO of Croatian Telecom, a leading publicly traded Croatian operator, and a sister company of OTE within the Deutsche Telekom Group. As I took all my responsibilities in OTE after the end of the second quarter, I would let Babis, our CFO, go over the operating and financial highlights of the period. Instead, today, I would like to spend the next few minutes to provide you with a very early outline of how I conceived my new role in the group. First and foremost, I'm extremely honored and proud to have the opportunity to oversee the next chapter in our test history. Together with my team, our task is to build on the existing competitive edge and brand power to nurture and develop long-term sustainable growth. On this road, our first three growth levers are factors that we are very well familiar with. We will pursue the significant investments OPEC has been making in the past years in fiber, mobile networks, and pay TV. But our priority will be to accelerate the monetization of these investments. The initiatives we have announced in the past few weeks, including the fiber wholesale volume discount and pay TV content setting, are representative of the directions we want to take. In fiber to the home, the upcoming gigabit voucher should accelerate FTTH take-up and penetration in Greece. while the wholesale agreement on volume discounts should enable us to significantly improve the utilization of our infrastructure on a wholesale basis. In the pay TV market, our cross-supply agreement with NOVA will be instrumental in combating piracy and growing the whole market, as well as increasing tax revenues for the Greek state. This initiative share common characteristics. They are key neighbors for the development of the market in its entirety, not just follow-up, while also supporting the digitization of the country, which is critical for the society as a whole. And room for growth in these areas remains significant, as Greece still lacks behind many of its European peers in terms of fiber and pay TV as a percentage of broadband customers penetration. As for mobile, our third growth lever, the numbers we are reporting today clearly show that we remain on the right track and that our more for more strategy is paying off. We will continue to lead the market in service quality and in customer experience excellence. Recent awards attest to the superiority of our mobile network in the Greek market. Growth lever is the significant ICT pipeline we enjoy as a premier system integrator and digitization pioneer in the Greek market, driving the digitization while building long-term relationships with key public and private actors and sectors. Fifth, we will accelerate the transformation of our operating and production model, leveraging on simplification, automation, and digitization of the way we interact with our customers as well as the way we build, run, and operate our business internally. Physical channels load reductions, digitization of sales and service, NT and IT cloud transformation automation, as well as legacy retirement will be critical enablers of a far more efficient operating model. When all is said and done, Our vision for the next stage in OTEZ journey is to make it one of the best performing digital players in Europe, elevating Greece to the forefront of digitization in Europe, empowering and connecting our customers to enjoy better lives while fostering an inspiring workplace for our people to thrive. We have built and continue building incredibly solid foundations and the market still provides us with lots of headroom to grow. As in most metrics, great penetration of advanced digital technologies remain below the level prevailing in comparable economies. We intend to take advantage of these opportunities and believe that a far more competitive and regulatory playing field will make it possible for all parties to benefit. I'm looking forward to elaborating on our vision with you in the coming months as we find human strategic priorities and as we identify the right initiatives to deliver on our ambitions, full of optimism about what lies ahead of us. I have no doubt that OTE is today ideally positioned to continue creating value for its customers, for its shareholders, and for the Greek economy and society as a whole in the coming years. And with that, I will pass on the mic to Babis for an overview of the second quarter financial performance.

Thank you, Postas. The key characteristic of this second quarter is that it was much a replication of the first. In Greece, revenues were once again up, high single digit on strong mobile, TV, ICT, and wholesale, and EBITDA was up 1.5% in line with the Q1 increase. In Romania, top line and profitability were once again impacted by cuts in mobile termination rates and a generally challenging competitive landscape. All told, group revenues were up several percent due to the solid performance in Greece. Group adjusted EBITDA after leases was unchanged year on year as the resilient showing in Greece was offset by a negative contribution from Romania. As in the first quarter, Greek revenues from retail fixed services were stable compared to the year earlier level. Also, in line with earlier periods, the continuing good performance in TV and broadband was offset by the anticipated downturn in legacy voice. The TV uptrend should gain further momentum with the recent support content prosupply agreement that Costa discussed. Similarly, broadband should also accelerate next year supported by the coupon-subsidizing connections of at least 250 Mbps at up to €200 over two years. In Q2, we added 38,000 subscribers to our FETA service, a new record bringing the total base to 324,000. This represents a sharp increase, 68%. from a half-year level in 2023. OT accounts for over 75% of the FETH infrastructure in Greece. Our lead in rollout was maintained as we passed another 86,000 homes during the quarter, reaching nearly 1.5 million and well inside of our year-end 1.8 million targets. FTTH utilization rate reached 24% of homes passed, up 5 points in a year. We are pleased with this performance, which we view as a testament to our superiority of our solutions in terms of technology and customer services, but also as one of our spearheads driving growth in coming periods. Our total pay TV customer base was stable in the quarter, but up more than 6% year-on-year, with revenue up 7%. In addition to the cross-employee agreement, which should benefit the whole market, we expect the start of the UEFA Champions League, as well as other major Greek and international sports events, to support subscriptions in the second half of this year. Other fixed revenues rose nearly 30% in the quarter. ICT revenues continue to progress at a fast speed, up 33%, thanks to sustained demand for public and private actors for our network, IT, and cloud computing services. The backlog for the second half of the year is solid, and we expect double-digit growth in this area to continue throughout the year. Wholesale revenues were up by over 10%. As in earlier periods, the increase largely reflects higher international transit. Higher margin domestic wholesale revenues were lower, as competitors increasingly rely on their own infrastructure. Recent approval of volume discounts in the FTTH should enable OTE to defend this revenue stream going forward. Turning now to Greek Mobile, where we achieved a third consecutive quarter of significant in service revenues up nearly 4% entirely due to ARPU revenues while visitor revenues were flat. Our strategy relying on our support network is continuing to drive revenue growth, driving migration from prepaid to postpaid. But prepaid ARPU and revenues were also higher, propelled once again by the higher top-up values passed earlier this year that offer incremental value to subscribers. we expect service revenues to continue growing at about 3% for the balance of the year. The success of our MoFoMore offers and the reliability of our 5G network are also evidenced by the sharp increase in data usage, which reached 13.2 gigabytes per user per month, a year-on-year increase of nearly 28%. I can no longer state that our 5G population coverage continues to improve, since now we are very close to 100%. But what I can still say is that we continue to climb in customer satisfaction and recognition by outside organizations, and that this should further improve as we roll out the next generation 5G standalone technology. So all in all, our brick-fixed mobile operations continue to deliver a very robust top line, and we expect this performance to be upheld in the coming quarters. Total operating expenses, excluding depreciation and amortization, and one loss increase, were up nearly 12%, growing faster than the top line, once again due to the make-up of our revenue mix in the quarter. Interconnection and ICT-related costs were up sharply. Conversely, structural costs remained under control, with personnel expenses down 5% in the quarter, reflecting our continuing efficiency programs. Adjusted EBITDA after leases increase amounted to 327 million euros, up 1.5% in line with the Q1 increase. As a result, EBITDA margins stood at 38.6% and remained elevated. Conditions in Romania were once again tense and revenues from our mobile operations were down 4%. Mobile service revenues declined 17% on further cuts in mobile termination rate and harsh competitive conditions. Operations in Romania were also impacted by the state tax on revenues of approximately 1.3 million euros introduced in 2024. As a result, Romania's EBITDA was basically flat, zero in the quarter. Turning to the rest of the group EML, net financial expenses were down 16% year-on-year. As you know, our financial debt is particularly low, with no significant refinancing required in the next two years. Moving now to cash flow, adjusted capex at 156 million euros was down 6% in the quarter, mainly reflecting dynamic differences versus last year. We are confirming our 610 to 620 million full-year CAPEX forecasts, primarily related to the ongoing rollout of OTE's FDTH infrastructure in Greece. Fricas flow after leases was 121 million euros, down 60% from the second quarter of last year, as key parameters related to voluntary retirement schemes, which took place in the first half of 2024 versus the second half of last year. In addition, world capital needs were affected timely by the strong increase in ICT revenues. Nevertheless, we are confirming our 470 million euro free cash flow target for the full year. And finally, we are also confirming our 2024 shareholder remuneration guidance with a total envelope of 450 million euros or 95% of the generated free cash flow. The cash dividend portion of this has already been paid out while we are about halfway into our 153 million share buyback program for the year. To conclude, the quarter and first half have been largely in line with our expectations and forecast and provide us with a solid platform to deliver on our full year targets and commitments. Now with and our other colleagues on the table, we are ready to take your questions. Operator?