Hellenic Telecommuns Org

Ladies and gentlemen, thank you for standing by. I am Yota Yokoro's call operator. Welcome and thank you for joining the OTE conference call and live webcast to present and discuss the first quarter 2025 financial results. All participants will be in a 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. Costas Nebis, CEO, OTEC Group, Mr. Babis Mazarakis, Chief Financial Officer, Mr. Panagiotis Gavrilidis, Chief Marketing Officer, Consumer Segment, OTEC Group, and Mr. Evrikos Arsentis, Head of IR and M&A. Mr. Nebis, you may now proceed.

Thank you and good morning or good afternoon to all of you. Thank you for joining us today for OTEA's first quarter results for 2025. I'm pleased to report that we have made a solid start to the year 2025. Our first quarter results reflect the positive momentum we have been building as our strategy unfolds and we focus on accelerating our growth. In our home market, Greece, both revenues and EBITDA both showed increases year over year. with positive contribution across our core segments, mobile, TV, broadband and ICT. We are particularly encouraged by the sustained momentum in our mobile business. We continue to strengthen our market leadership, supported by solid trends in service revenues and postpaid customer growth. Our prepaid customers offer a substantial pool that we can grow from. At the same time, our efforts to enhance the prepaid offering are supporting the ARPU and long-term growth in the mobile business. In our fixed retail business, there are encouraging signs of stabilization this quarter after some period of decline. This improvement is fueled by strong adoption of fiber-to-the-home services supported by attractive fiber coupons available in the market. Continued investment in FTTH infrastructure remains central to our strategy, enabling ultra-fast, reliable broadband. Our newly launched fixed wireless services is expected to complement our broadband offering and support our performance in the coming months. It is important to be the first mover in high-speed broadband, and we are dedicating resources towards this direction that will secure our long-term performance. At the same time, our ICT segment posted another strong quarter on the back of our system solution business, supporting our B2B segment and the digital transformation of Greece's economy and public services. Our TV offering also delivered another strong quarter, achieving double-digit growth supported by our content partnership with Nova that drive both customer numbers and ARPU. This enriched offering continues to meet customer demand, while we look forward to the full implementation of the anti-piracy legislation approved earlier this year. Once in effect, this important regulatory step is expected to support markets' transition towards legitimate services benefiting both the industry and reinforcing OTE's position. Technological innovation remains a core pillar of our strategy. We continue to invest significantly in FTTH and 5G networks to deliver high-speed connectivity across the country. On the 5G front, we continue to advance our leadership by investing in 5G+, with COSMOTE operating the only commercially available 5G standalone network in Greece. Earlier this year, Greece was recognized as the leading country in Europe with the highest 5G standalone download speed a remarkable achievement that marks a significant step towards our vision to become Europe's leading digital telco, elevating risk to the forefront of digitization in Europe. In FTTH, we remain on track to pass 2.1 million homes by the end of this year, while network utilization continues to grow steadily, reflecting the strong customer demand both on the retail and wholesale fronts. On the back, of the wholesale partnership agreements with the key players in the market. These investments further solidify our network leadership, drive exceptional user experiences, and enhance customer loyalty, laying a strong foundation for long-term growth. Looking ahead, we reiterate our ambitious 2025 targets and remain focused on leveraging our core strengths to drive customer experience and sustainable value creation. With our strategic initiatives in place, we are taking decisive steps towards delivering long-term benefits for our customers, our people, and all our stakeholders. Before I hand over to Babis for a detailed review of our first quarter performance, I would like to share a few words on our new brand identity, COSMOTE Telecom, a major milestone that marks the beginning of an exciting new chapter for our company. By introducing the Telecom global brand, next to COSMOTE, we reinforce our position within a leading international group, enhancing our scale, visibility, and competitive edge in the Greek market. This strategic move strengthens our market presence, reinforces our commitment to innovation, and creates added value to our customers, our people, and of course, all our stakeholders. Last point from my side, and before Babis comes in, I would like to inform you regarding the disposal process of telecom mobile in Romania. Today, we have had another important step in the approval process since the Romanian Competition Authority published for consultation the remedies offered by Vodafone and Digi in the context of the transaction. Thank you for now, and Babis, the floor is yours.

Thank you, Costas, and welcome to everyone on the call, from me as well. Picking up the last point, of course, of the Romania, and before moving to the quarterly review, let me say a few words from the same process, which is an issue that has been a headwind for several quarters, and I know has been a black spot in our case. The disposal of TKRM progresses according to the projected timeline. Since this morning, the Romanian Competition Council published for presentation the commitments which were offered by the buyers and these commitments address the concerns that were expressed by the Competition Council. Therefore, this consultation will run for three weeks until June 2nd, and thereafter, we expect the Council to convene and issue the final decision, which most likely will pave the way to complete the disposal in the next couple of months. Now turning on our quarterly figures. On a group level, revenues remain relatively stable, as growth in Greece was almost offset by ongoing pressure in Romanian operations. Adjusted BDA after leases was up 1%, supported though by a solid 1.8% growth in Greek operations. Specifically for Greece, total revenues increased by 0.8% in the quarter driven by continued growth across mobile, TV, broadband, ICT services, which more than offset the continuing drop in wholesale revenues, while on the EBITDA front, we once again achieved solid growth of 1.0%, as I mentioned, for the last quarter. Adjusting for the impact of the sale of OTSAT last year, EBITDA growth would have been 1.9%, pretty close to our guidance for the whole year.

Excuse me, this is the operator. Please hold the line until we connect again. Thank you. Hello, please proceed.

Hello, this is Babis. I think I need to reiterate a little bit what I was saying in the past few minutes due to a technical problem. Apologies for that. So let me start again from the beginning. So as Kostas mentioned in his last point, after welcoming all of you in this call this afternoon, I would like to say a few things about also Romania. So the disposal of TGRM progresses according to the projected time plan. Since this morning, the Romanian Competition Council published for consultation the commitments offered by the buyers. Those commitments addressed the concerns that were expressed by the Competition Council. Therefore, the new process now is that this consultation will run for three weeks until June 2nd. And thereafter, we expect the Council to issue their final decision, paving, hopefully, the way to complete the disposal in the next couple of months. Now, turning to our quarterly figures. On a group level, revenues remained relatively stable. As growth increased, we are almost offset by ongoing pressure in Romania. Adjusted DPDA after leases was up 1% for the total LUTEC group, supported though by a solid 1.8% growth in Greek operations. Specifically for Greece, total revenues increased by 0.8% in the quarter, driven by continued growth across mobile, TV, broadband, and ICT services, which more than offset the continuing drop in wholesale revenues, while on the beta front, we once again achieved solid growth of 1.0%, as I mentioned. If we adjust the impact for the sale of OKSAT last year, EBITDA growth would have been 1.9%, pretty close to our guidance of 2% for the whole year. Therefore, we continue to sequentially accelerate, already achieving the strongest growth since end of 2022. It is a positive indicator that we are fully on track to reach our annual growth rates. Retail fixed services revenues were nearly stable in the quarter, and if we include the data communication stream, retail fixed showed a slight increase of 0.2%. This indicates clear signs of an improving trend and highlights the positive direction for our fixed business. The government coupons, along with continuous strength in TV, our fixed wireless access offering, and the continuous expansion of our fiber-to-the-home network, remain critical enablers of our future growth. Particularly our TV business delivered another strong quarter with revenues achieving double digit growth at 14% fueled by the full impact of the sports content agreement. Our customer base increased by 7% with a net gain of 8,000 new customers during the quarter. Moving now into our fiber to the home service, we once again delivered solid customer additions at 36,000, bringing our total FTTH base to 430,000, and this represents a 50% year-on-year jump. Our retail FTTH customers account for 18% of our overall broadband base, and this compares to just 12% a year ago. An increase that, combined with the wholesale uptake on our infrastructure, supports evidently the utilization of our network. Regarding the coupons in the market and after certain initial delays, we are now seeing a steady update driving faster customer migration. As of early this month, we had utilized over 37,000 vouchers connections. Supported by the ongoing expansion of our FTTH network and our wholesale agreements in place, our infrastructure is experiencing higher level of utilization. In the quarter, we reached 29% utilization rate, an increase of 7 percentage points year-on-year. During the quarter, we passed over 56,000 new homes to a total of 1.8 million, and we remain fully on track to reach our target of 2.1 million homes by the end of 2025. The remaining parts of fixed revenues, thus other revenues, were up 12% this quarter, with revenues from system solutions, our ICT business, recording a robust growth of 18%. Building on this momentum, we expect a double-digit upward trajectory to continue throughout the year. Now, wholesale. Revenues in wholesale were down nearly 5% in the quarter due to lower margin international transit traffic revenues, while the national wholesale streams was impacted as anticipated and in line with last year's trends, mainly by competitors' ongoing network build-outs. However, our existing wholesale agreements provide for increased wholesale volume for competition that allow us to partially mitigate the downside and further increase the utilization rate of our infrastructure. A word about the very low margin international traffic, the transit traffic revenues. Let me flag here that some of this will be gradually phased out over the course of the year, primarily related to voice traffic. As a rough indication, approximately 100 million euros will be gradually stripped out. However, there is a minimum impact, if any, on our profitability due to the very low margin of this business. This will provide a more stable combustion base once out of the way. Going back now to our mobile operations, we continue to see sustained momentum with service revenues maintaining their positive trajectory, increasing by 1.2% in the quarter. Towards the end of the first quarter, we introduced new pricing initiatives in the prepaid segment with the introduction of 15 euro top-up instead of 13, across our physical channels. This move is expected to enhance further ARPU while also supporting the ongoing successful migration from prepaid to postpaid plans. Our postpaid base continues to grow, recording a 6% decrease in the first quarter with 43,000 positive net additions driven by both conversion from prepaid and customer acquisition. We continue to capitalize on our leadership in network with our 5G and 5G plus coverage reaching over 90 and 70% respectively. Data usage was once more up, reaching 15.8 gigabytes per user per month, representing a 32% year-on-year increase. Let's now move to our operating expenses, which if we exclude depreciation and amortization and the one-off increase, This declined by 2.2 million euros in the quarter, despite higher revenues, as we remain focused on disciplined cost management across multiple areas. As already communicated in the past, we experienced a reduction in energy and at the same time, we continue to benefit on the personnel front from our voluntary exit schemes. While we are increasing spending in strategic areas and our commercial activities, our overall indirect costs declined by 1.6% in the quarter. As a result, adjusted EBITDA after leases increased, increased by 1.8% in the quarter, continuing the solid trends of previous quarter, and also maintaining a strong margin of 40.2%. Obviously, our guidance has been reiterated, which means that we are on track to reach a growth of around 2% increase for the full year of 2025. A few words about the prices in Romania. Total revenues were down 8% in the quarter, reaching €61 million. This drop was primarily driven by ongoing pressure in the post-paid segment, coupled with a decrease in handset revenues. Our operations in Romania continue to face hindrances, with the competitive landscape, particularly in the post-paid segment, to be intensified. Telecom Romania Mobiles' adjusted EBITDA after leases was mainly impacted by ongoing top-line pressure along with effect from the new tax or revenues introduced in Q2 of 2022. Let's now have a look at the rest of the group items. Depreciation was down by 4.3% in the quarter, primarily driven by lower amortization in Greece as a result of the reduced UEFA sports rights prices following the renewal of our contract. Finally, a few words on the cash flow statement. Adjusted capex was up nearly 7% in the quarter, largely reflecting investments for the FIBA's ongoing rollout, and higher capex related to TV sports content. Free cash flow after leases came in 97 million euros for the quarter, and while we benefited from lower income tax thanks to certain tax refunds, this was offset by increased working capital requirements, primarily driven by a mix of timing and purely temporary effects, mainly related to the increased weight of ICT in our revenues, which obviously we expect to normalize over the course of the year. On the liability side, the comparison is impacted by a lower pace last year due to different time of settlements. So as already released today, we reiterate our guidance for the free cash flow and the capex for the year, capex between 610 to 620 million euros, and our free cash flow target remains intact, stable at 460 million euros for the year. And without one operator, we are now available to provide any further clarification to questions. Thank you.

Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on the telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from the line of with Goldman Sachs. Please go ahead.

Hi. Good morning, everyone. My first question is on Greece mobile performance. So I was wondering if you have seen any change in mobile competitive intensity in Greece. You have also implemented some price increases on prepaid recently. So how sizable are those in percentage terms? And do you see scope to further increase mobile prices this year? And lastly, on mobile, how are you thinking about a potential new MVNO entrance in the Greek market? And just one more question on the guidance. I'm just wondering, do you see any risks to your almost 2 percent EBITDA growth guidance in Greece, and what would be kind of key upside and downside risks? Thank you.

Okay, this is Costa speaking. Let me try to answer your question. So, starting from the mobile service revenue, it is true that we see an ongoing positive development in our mobile service revenue, mainly as a result of our pre-to-post migrations. We have had a very, very strong quarter with net ads even above the forecast, sorry, above the Q4 numbers, so 43,000 versus 34. This to a great extent is also associated with the fact that we have increased the minimum top up in prepaid in the market, aiming to shift our customers. This was done in the physical channels. The intention behind this one is to shift our customers towards the digital channels, but for the ones who would still come to the physical channels to make the transition from pre to post easier. And this is clearly paying off. So we see a combination of both positive development on the prepaid ARPU side as a result of the minimum top-up denomination moving from €13 to €15, but we see also increasing inflows towards post-pay. The combination of this is making us feel far more optimistic about the following quarter during the course of the year when it comes to mobile service revenue development. This is on the overall service revenue of mobile. Now, when it comes to pricing, I mean, our strategy has been consistent. We are constantly monitoring the developments on the market. So our intention is to always offer value for money service to our customers and to justify our position in the market with our network superiority. So we have just recently made this prepaid top-up change. So nothing to comment beyond that at this point in time. We are pleased with how customers are developing and us offering more for more services, both in prepaid as well as towards post-pay once they migrate. And with regard to your question on MVNO, I mean, we had one MVNO launched recently in the market. It is a relatively small energy company called Volton. They introduced an MVNO running on top of Vodafone's network under the name of Horizon. I mean, it is relatively small in terms of scale of operators, so we have not seen a lot of successful MVNO attempts in the Greek market. Having said that, we always monitor and we rely on our comprehensive portfolio of services in order to better defend our position in the market. And if I got you right, with regards to your question about our EBDA guidance of 2%, we feel firmly that this is something we are going to deliver, also justified by the performance in Q1.

Great. Thank you very much.

The next question comes from the line of Thrasiotis Tamatis with Eurobank Equities. Please go ahead.

Yes. Hello there, and thank you very much for taking my questions. I have a few, and maybe we can address each question separately for clarity. So first one relates to Romania. You mentioned in your release that if Romania concludes successfully, and there was clearly a positive step, as you said this morning, that the proposed amount for shareholder remuneration will be adjusted accordingly to reflect the real impact on OTE cash flow. So what does this mean exactly, and what should investors expect for 2026? And I guess my question also relates to how this might be affected by potential spectrum outlays that you face in the next couple of years. Thank you.

Yes, as we have guided in the previous call, the previous quarter, in case that the sale in the next couple of months, as we expect, based on the developments today, then obviously we would calculate exactly what is the additional benefit versus the free cash flow that the guidance that we have issued. And therefore, we'll communicate accordingly the distribution of that extra amount. So that's consistent with what we said so far, because again, precisely to what we said so far, is that the current target of 460 million euros had assumed that Romania would be operating for the whole year. So this is the essence of the developments. And what happened today, just maybe pre-empting another question, is that the timetable was going through this consultation period that was lost today. And this marks another tick in the long box of steps that we have to go through in order to conclude the transaction. So that's, I think, for the biggest part of your question. Unless you have any other clarification, maybe we can move to your next points.

Yeah, just to make this very simple. So let's assume that the disposal moves... fast and you end up with a cash burn of 50 million rather than 70 million. Do you intend to distribute this 20 million swing, in essence, of free cash flow to shareholders?

Yes, that was the intention. But without mentioning numbers, because everything depends on the timing and the specific course of the development. But the intention is that one. Now, you also mentioned whether this is linked to Spectrum payments. Spectrum is due in 2027, so it doesn't play any role for decision this year. It's crystal clear that whatever upside there is, it will be distributed back to the shareholders.

Okay, great. And the second question has to do with the broadband trends. I'm just wondering, fixed broadband lines were slightly down in Q1 last Do you believe this just signals market saturation, or were there, you know, the temporary factors like the coupon timing, which you've been talking about impacting Q1? And, again, speaking about the coupon, how has the uptake evolved more recently, and how should we think about Q2 trends for fixed broadband? Do you think there can be a meaningful inflection in fixed broadband? retail fixed service revenues from Q2 onwards, or is this really a theme for the second half?

Let me take this one, Tamati, and I will start with the coupons. It is true that the coupons have been something that caused a lot of procedural issues in the beginning until we managed to get it right. Thanks God we have managed to get both coupons right. For me, they are both important, both the demand coupon towards the customers, but also the smart readiness coupon towards the infrastructure, the CapEx costs. Having said that, there were some implications in the first couple of months. So we had some procedural issues to address that ate up a lot of our salespeople time, which came at a cost. So we had a relatively slower start in the beginning of the year when it comes to the broadband net ads. To a certain extent, also the FTTH, which we managed to recover. So the good news is that we see broadband net ads turning back to the positive territory, starting from March, but also in April, and as we speak, year-to-date May. So we are really confident that the net ad performance in the remaining of the year will be clearly on the positive side. Don't forget that we have also introduced in the middle of... Q1, the fixed wireless access service, which so far has done it extremely well in the Greek market in order to address customers who do not have access to fiber yet and are relying on poor copper infrastructure. So the combination of us fixing some of the procedural issues when it comes to making the most out of the coupons and the FWA introduction has helped us a lot to turn around the trends in the last couple of months. And we are optimistic about what we expect until the end of this year.

That's fantastic. And just another, well, I'd say housekeeping question. On the P&L, on the tax rate, which looks unusually low, could you clarify the drivers behind this? Was it driven by one of factors and the same goals for the tax receipts in the cash flow statement, if you could elaborate on what these relate to, please. Thank you.

Yes, thank you for the question. The tax rate each quarter or in many quarters is usually influenced by some one of the moves that are happening. What happened in Q1 was a return from the state of roughly about 10 million euros in the P&L that lowered Temporarily, of course, the effective tax rate. So it's about 19% versus being around 22%, 23%, which is the normal one. So this is what stands in the P&L. And obviously, the tax returns in the cash flow reflect accordingly the movements in our tax give and take with the state.

Great. Thank you so much.

If I could add something, going back to the coupon topic, I think Babis commented already on the fact that we have already generated on the demand side towards the consumers roughly 40,000 coupons already. What is also important, I mean, I know that has been a popular question over the last few calls, is that we have managed to get up to a pace of roughly 10,000 coupons per month, which is going to lead us to 100,000-ish coupons. by the end of the year, which is very much in line with our expectations for year 2025. This is on the demand side, on the smart readiness coupons, the in-building wiring coupons. There, we have also managed to process more than 10,000 coupons already. And the important thing is that we have a monthly pace, which is really taking us to a number which we hope will land around 40,000. So just some further insights on the development of two very important levers, both for the top line as well as for us delivering our FTTH plan on our communicated capex.

Thank you very much, Rui. I appreciate it. Thank you.

The next question comes from the line of Karidis John with Deutsche Bank. Please go ahead.

Thank you. Good afternoon to you. I have two questions first, if I may, please. I mean, firstly, a very basic question. Might you know when the anti-piracy law will be implemented in full, for example, before or after the summer in time for the start of the football season or not? And then the second substantive question, I hope, has to do with competition from Inalan, but also PPC are promising big news in the second half of this year. So I'd really like to understand how effective your bundling strategy has been to date. So what proportion of your broadband customers take a second service? What proportion take a third service? And if I were one of those customers, what would I lose if I give that back to you and take broadband from a competitor and mobile from someone else?

Okay, let me take the first question. First of all, as far as the anti-parish law, the law is already adopted. What we are waiting is for a ministerial decision and a joint ministerial decision to be also signed. My guess would be that we should have it before the summer holidays in Greece, which is normally in August, so fingers crossed. It is a formality, but we have to go through this step. Now, as far as your question on competition is concerned, let me start with, you brought up two competitors, one is PPC and the other one is Alam. PPC so far, what we have seen is just some... small-scale, I would say, efforts to push their retail broadband-only products in the market without closed services, at least yet, through some telesales and door-to-door activities. But, I mean, they're addressing a small part of our customer base, and I have to be honest, we have not seen yet any effects on our customer base. So it's difficult for me to assess at this point in time before we see how, you know, their portfolio kind of goes into the market. As far as Inalan, we are also monitoring the development on the Inalan front. They have been doing some FTTH rollout here and there. They are also growing their base to a certain extent, but there are problems with the operator. With some base gains, I would not consider them material or something that would make us worry. What is important for both competitors is that You understand we have a far more comprehensive portfolio of services cutting across fixed, mobile, ATV, a number of value added services that we have in the meantime developed. So we feel strong enough in order to compete by leveraging on this portfolio as well as the expertise that we have built across all these years in the different verticals. Now, to address also your question, I mean, roughly 70% of our base is what we call consolidated base through the different fixed mobile convergent packages, and we're still growing this. So we feel that we have what it takes in order to effectively bounce off any competitor trying to get a bit of the market.

Thank you. And if I were part of that 70% and I chose to buy my services separately, what sort of financial hit would I take approximately?

It's not only the financial hit. It's a combination of a number of different levers. It's difficult to be quantified or answered in one number. A number of things which are connected and keeping the customers with us for many years now. It's not only PPC or Inalan, any of the other operators could easily go and address our customers selling one-leg products. But apparently, based on the fact that we have managed to keep 70% of our customers integrated, it means that we have the strength and the capabilities to do so. Fair enough. Thank you very much.

As a reminder, if you would like to ask a question, please press star and 1 on your telephone. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.

Okay, nothing to add from my side. Thank you for your attention, your questions and your interest in OTE. And we are clearly looking forward to our next discussion early August this time for our half-year results. Have a nice day.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for calling and have a good evening.