Hellenic Telecommuns Org

Ladies and gentlemen, thank you for standing by. I am Gailie, your course call operator. Welcome and thank you for joining Viotek conference call and live webcast to present and discuss the second quarter and six months 2026 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. Kostas Nebis, CEO, OTEC Group, Mr. Babis Mazarakis, Chief Financial Officer, Mr. Panayiotis Gavrilidis, Chief Marketing Officer, Consumer Segment, OTEC Group, and Mr. Evrikos Sarsentis, Head of IR and M&A. Mr. Nebis, you may proceed.

Thank you very much. And welcome, everyone. Thank you for joining us today for our quarter two results review of this financial year. Our first half performance demonstrates continued progress towards our strategic priorities and brings us closer to our 2026 growth ambition. Adjusting for the zero margin impact of the gradual wind down of the international wholesale business, our revenues continue to grow strongly. Our EBDA increased once again and accelerated slightly, supported by solid execution across core business and the ongoing transformation of our business model. This positive momentum is underpinned by the strength of our financial profile and market position. OTEL's recent upgrade to A- by Standard & Poor's global ratings, making us the only company in Greece rated in the A category. It is a clear recognition of our resilience and further strengths, confidence in our long-term prospects. Let me now turn to the operational drivers behind this performance. Starting with the fixed segment, where despite intense competitive dynamics, we remain in the positive territory, with sustained momentum across our FTTH, fixed wireless access, pay TV, and enhanced data communication services offered to our B2B customers. FTTH's adoption remains strong. We registered another quarter of record high customer additions, both in retail and wholesale. Demonstrating the growing utilization of our infrastructure. At the same time, we are making good progress with the advanced in-home connectivity solutions adoption, optimizing our customers' Wi-Fi experience at home and in the office, while further differentiating our offering against our competitors. We continue to expand our network and lead the market in fiber availability. both in urban areas and in semi-urban and rural regions through our UFPB deployment. This progress reinforces our broader vision of advancing Greece's digital transformation with measurements showing continual improvement in the country's fixed broadband speeds. Next to our FTTH, we are also particularly pleased with the ongoing momentum of our fixed wireless product lineup. Our 5G Wi-Fi Fixed Wireless Access Base has just crossed the 100,000 customers mark, addressing customer needs for higher speeds where FTTH is not yet available, allowing us to defend our broadband base against alternative technologies. In Pay TV, we once again delivered robust revenue growth, while also achieving positive customer additions in the quarter that typically makes a small contribution to the annual performance. Turning now to our mobile business, we sustained a positive trajectory driven by continuing strong customer migration from prepaid to postpaid plans and increasing adoption of higher value data services. As a result, overall base ARPU continues to increase. Once again, postpaid customer growth reached record levels with quarterly net additions at the highest in more than 17 years, while The still relatively high share of prepaid customers compared to the broader European market highlights further potential for future growth. Our long-standing commitment to network excellence continues to differentiate us in the market. Rookless recognition for our mobile network for the 10th consecutive year is a historic achievement and a testament to our sustained investments in network excellence. Importantly, according to Oukla, we are the only operator worldwide to have outperformed the competition for 10 consecutive years, consistently delivering superior experience to our customers. This distinction adds to eight major recognitions received during this year by leading industry benchmarks, including both Oukla and OpenSignal. Let me now say a few words about our ICT and system solution business. We have once again achieved strong double-digit growth in this quarter. As we move into the second half of the year, results will reflect the gradual termination of the RRF deployment cycle and a more demanding comparison base following last year's peak implementation phase. Nevertheless, we remain confident in delivering solid growth for the full year while building up a very solid pipeline for 2027. including both national and international projects where we are expanding our presence in new organizations like NATO, like the UN and the European Food Safety Authority among others allowing us to diversify a big part of our revenues. We are in parallel expanding our presence in high growth areas such as cloud, cyber security and AI having already introduced A new advanced cloud proposition including GPU as a service and implementing the first set of AI agents for procurement, finance, HR processes supporting our B2B customers in their AI transformation journey setting another growth foundation for the future. Data and AI are becoming an increasingly important part of our agenda and a key enabler of our internal transformation driving greater efficiencies. We are doubling down on the software development lifecycle, our network management, our customer service introducing conversational agents, the productivity of our frontliners with a number of AI agents, while progressively shifting our internal processes towards AI augmented solutions, with the ambition to evolve into a digital first and over time an AI native company. While at the same time, we are embedding AI into our commercial offerings, to deliver richer and more personalized customer experiences, strengthening our value proposition to support future growth and further differentiate us in the market. One of these initiatives is around our core network communication services like voice, bringing the AI deep into our core network. With initial trials and deployments of services like AI calling expected in the next few months We are laying the foundations for the reinvention, I would say, of the voice calling experience in an AI world. This broader transformation is also reflected in how we position ourselves in the market and how we bring the full strength of our group to Greece. This year, we are taking our brand transformation one step further, evolving from Cosmote Telecom to Telecom by leveraging the strength of the world's number one telco brand. We are strengthening our market presence and further differentiating ourselves versus the competition. Taken together, these results reflect the strength of our strategic direction and the quality of our execution. Our solid core performance, network excellence, digital and value-added services portfolio, and continued transformation of our operating model to unlock further cost efficiencies are the strengths that will continue to support our growth and our market leadership. Looking ahead, we remain firmly focused on our vision and committed to delivering superior value to our customers and shareholders while achieving our 2026 targets. Our priorities are clear to keep investing in the networks and platforms and digital capabilities that will define the next phase of growth for OTE, for our customers and for Greece's AI-ready economy. I will hand over to Babis now to provide more details on this last quarter.

Thank you, Kostas, and welcome to everyone, for me as well. Let me now take you through our financial performance of the quarter. Total revenues, adjusting for the anticipated phase-out of the international for-sale business, however, with zero margin effect, increased by 8% year-on-year, driven by strong system solutions, solid growth in mobile and resilient fixed retail business. Fixed retail service revenues, including data communications, increased by 1.4% year on year, driven by continued customer migration to FTTH alongside the solid performance of our TV and fixed wireless access businesses. Data communications continue to support the segment, benefiting from the growing adoption of next-generation connectivity solutions. In FTTH, Net additions reached a new high record of 62,000, bringing our customer base to 687,000. This now represents 29% of our broadband base, while continued customer migration and solid wholesale demand further increased the utilization of our network to 42%. We remain on track with our rollout, reaching now 2.2 million homes passed and targeting around 2.4 million by ERM. And these numbers are based on the view of home past with an active line and include the continued expansion of our UFV network, reaching now a footprint of a bit over 150,000 homes past and around 50,000 commercially available that should support FTTH adoption, particularly in rural and semi-rural areas. Fixed wireless access maintains its stock momentum with 19,000 net additions in the portal, bringing the total subscriber base to almost 120,000. As Kostas mentioned, the key element here is our advanced 5G Wi-Fi proposition that is based on our expanded 5G Plus network Exceeding, as we speak, 100,000 customers. Covering underserved areas, FWA continues to strengthen our broadband proposition, supporting growth and customer retention. Our pay-to-be businesses continued its solid momentum, delivering another quarter of strong revenue growth in the high single-digit range. Customer performance also remained encouraging With net additions, once again positive, plus 1,000, despite the seasonally softer quarter, as key sporting events concluded during the period. Stricter anti-piracy measures, the removal of the paid EV tax and high-quality content continue to drive growth in this segment. Turning now to our mobile business, service revenues continue to grow, increasing by 2.3% on the back of strong post-paid momentum and the going adoption of higher value propositions. As expected, the year-on-year growth rate reflects the normalization of last year's minimum prepaid recharge adjustment. Postpaid performance remained solid, delivering record net additions of 62,000 and a record 8% year-on-year subscriber growth. Continuing prepaid to postpaid migration, Together with the improving customer mix led to 3% increase in blended output. Mobile average data usage remained strong, reaching 21 GB per user per month, up 20% year-on-year. At the same time, 5G device penetration increased by 10% points, now to 50% of our active customer base, providing a solid foundation for the demand for higher value data services. A critical neighbor of our mobile growth continues to be our network leadership, which remains a key differentiator factor. Our 5G coverage now exceeds 99% and 5G plus coverage has reached approximately 84%. As Konstant pointed out, two days ago we achieved a historical acquisition for 10 years in a row for our network excellence. Other revenues, excluding data comps, increased by 31.2%, driven by another strong quarter in system solutions, increasing by 52.1% year-on-year, as demand remained robust across both public and private sectors. I believe Kostas provided a comprehensive view of this business performance and gave us strong confidence in the ability to deliver solid growth for the full year while building a robust pipeline for 2027 across both national and international projects. Turning now to wholesale. The revenue decline primarily reflects the planned and announced phase-out of zero-margin international transit activities, as already communicated also in our previous calls. The impact in the quarter was €60 million and will continue to weigh on revenues through 2026 and beginning of 2027. On the national side, Thank you very much. Adjusted TPTA after leases increased by 3% in the quarter, with margin improving above 40%, namely at 40.1%. This reflects continued service revenue growth, higher other operating income, mainly reflecting approximately 3 million from corporate sales, and ongoing cost efficiencies. Personal expenses continue to decline, mainly supported by voluntary exit schemes programs. Mining expenses were also down in the quarter by over 7%, normalizing as expected the seasonal increase we saw in the previous quarters. Our transformation program continues to deliver structural improvements as reflected in the declining ratio of indirect costs to service revenues down to 28% from 31% a year ago. At the same time, we continue to expand the use of our digital channels with e-sales, digital payments, and top-ups reaching 36%, 43%, and 53%, respectively. As a result, we remain firmly on track to deliver the 3% EBITDA growth of what we have guided so far for this year. Finally, let me touch on CapEx and Fricas Flow. CapEx spending amounts about 157 million euros, down 7.7% yearly, mainly deflecting lower TV content outflows in the quarter. We continue to expect full-year capital expenditure of approximately 600 million euros as we invest in our key strategic priorities, notably the expansion of our FTPH footprint and the rollout of our 5G standalone network. These investments will support both RFQPAs and FWA propositions. Pre-cash flow after leases amounted to 150 million in the quarter compared to 161 million a year ago. This year-on-year difference primarily reflects certain timing difference of income tax payments of the previous two quarters. The prior year quarter benefited from a one-off tax refund following the absorption of Cosmote in Tote, which was subsequently offset through high-end tax payments in the following period. We reiterate our fricasse flow guidance as we expect trends to unwind during the second half of the year. The important fricasse flow, as denied from our financial statements, is expected to be around 750 million euros and adjusting for one of items at between 570 to 580 million euros. At this point, operator, we are now available to take any further clarification questions. Thank you.

Ladies and gentlemen, at this time, we'll begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their 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 is from the line of Samatis Draziotis with EuroBank Equities. Please go ahead.

Yeah. Hello, Darren.

Thank you for taking my questions.

Just a couple, actually, if I may, please. Firstly, just wondering how you assess the strategic read-through for the Greek fixed market from the News around a potential JD between PPC and Vodafone and the extent to which you think this could lead to even higher competitive intensity in fiber wholesale or retail pricing over the coming quarters. and the second question has to do with the Spectrum renewal process. Is there an update on this timing, structure, any indication that the process could involve a new entrance? Thank you so much.

Thank you so much. Let me start with the first question with regards to this Cooperation, I mean, to our knowledge, what has happened is that the two players have signed a non-binding terms sheet, outlining the key principles of the creation of a potential 50-50 JV to the merger of the respective fiber companies. I mean, this is a transaction that, for sure, it is still subject to final agreement and the necessary regulatory approvals. We're commenting about the potential implications of it, even if we have not yet seen any slowdown in the pace of Vodafone migrating their customers to our FTTH infrastructure. To the contrary, we have had another record high net ads in our wholesale base. I mean, for sure, looking forward into the outer years, we would expect some additional pressure. Anastasios Kapenis, Grigoris Christopoulos It is still, I would say, too soon. We would have to wait for the final assessment verdict from the regulator. I think that we will be smarter around October, November this year, once the final list of participants, as well as the structure of the spectrum auction, will be finally decided.

That's very clear. Thank you so much.

The next question is from the line of Ajay Sonu with JP Morgan. Please go ahead.

Hi, guys. First question is around your retail fixed and mobile revenue growth. So it feels like net ads have been relatively stable. Obviously, the growth has slowed. It feels like maybe the pressure is coming on the ARPU side of things. So can you confirm that? And then also, where do you expect the growth of these two segments to fall within H2? And the second one was really around the EBITDA trajectory. Q2 had this one-off benefit from copper sales of 3 million. So are there more of these to come? And then I think if we exclude this, your EBITDA growth is maybe close to 2%. And then if I look forward into H2, you've got RFF revenues dropping off, maybe mobile and fixed growth is stabilizing. So what makes you confident on achieving that 3% EBITDA growth for the full year? Thank you.

Thank you, Jay. Let me start with the first one as far as mobile revenue developing this concert. First of all, we are very pleased that The post-paid base is growing very strongly. It is up 8% year-over-year with another very strong quarter of net ads. I mean, as we have indicated a number of times, the big lever is, of course, the pre-to-post migration. For every prepaid customer, we are migrating towards post-paid tariffs. We are increasing our ARPU by €5 to €6 these days. And still, we have less than 50% of our total base on post-pay, so a lot of room to grow further. Now, when it comes to this slowdown, we have already indicated that in the previous call, that with last year's prepaid minimum top-up effect failing away in Q2, We should expect to see some rationalization in the growth trends. Still, we are very much confident that we are going to close this year along the same levels of last year's growth.

Regarding the EBITDA, copper sales that you mentioned is not entirely a one-off item because it happens from port to quarter depending on the extraction of copper that we have from the ground. But apart from that one, We have to remind that it will bear the positive developments in our cost-cutting element that happened in the first quarter, where a sizable amount of our voluntary exit schemes has been implemented, not fully reflected in quarter two because it happened through the quarter, and we have a full carryover in the coming quarters. So the confidence for 3% comes, A, from the continuous performance of the top line along the lines of this quarter, plus the additional cost savings that we will enjoy have to because of the carryover of the optimization of the first quarter, and the gradual enjoyment of the first quarter Thank you very much. Thank you very much. I'm repeating that it's not totally one item, but it's recurring, not every quarter, but every other quarter, maybe on whenever the right stock of copper exists.

Yeah, I could add a bit on this one. We have had a lot of questions in the past with regards to RICT and assistance solution business performance. Even if you have indicated that we should expect a far more reasonable trajectory in the second half of the year as a result of a lot of RRF funded projects being materialized in the first half and part of last year, what I would like to highlight here is that we feel extremely confident looking ahead into 2027 and delivering another solid year based on this year's project pipeline that we have built. A combination of different things. One is the Greek public sector ongoing digitization project. The other thing that I don't want to go unnoticed is that we are expanding our international footprint with organizations like NATO. I mentioned that in my script before. Just to highlight something, we want a fixed data center contract for NATO at the level of 45 million euros. This is the total ticket of this project. This is just an indication. Thank you very much. Food Safety. So another strong pillar is us expanding our international food. Well, at the same time, we are expanding our presence in high growth areas, including cloud, cybersecurity, AI. I mentioned before that we have enriched our business cloud proposition, including traditional, but not only traditional, but also GPU-based workloads. We have implemented the first AI agents for some of our B2B customers. So we strongly believe that this is going to be a third pillar that will feed our growth in our B2B segment into the years to come. Just to highlight this one, vis-a-vis or complementary to what Bob stressed on the cost side for the second half of the year. Great. Very helpful. Thank you.

The next question is from the line of Sofia Rikicevic with Goldman Sachs. Please go ahead.

Hi. Good morning, everyone. Two questions for me. The first one is you said that you expect to lose incremental 50 million euros of wholesale revenues over the years from the potential PPC Vodafone DV versus your original wholesale loss expectations. So I'm just wondering, on top of that, how much of incremental loss could come from PPC Vodafone tie-up itself and is there an incremental capex needed to cover areas which were initially planned to be covered via Vodafone? So that's the first question and the second one is can you please provide us with your latest thoughts on PPC's competitive stance? Are you seeing any churn from their recent activity in the market? Thank you.

Okay, let me start with the second question first. So, PPC has been active for quite some time in the market now. Recently, they have also introduced the fixed voice services. I mean, for sure, we see some pressure, but I will not flag it with material effect on our numbers so far. I mean, the biggest, I would say, argument is our base performance. We managed to defend our broadband customer base during this quarter as well as in the previous quarter. with the biggest levers being for sure our FTTH network expansion and the progressive migration for customers there but also the strong performance of fixed wireless access service addressing areas where FTTH is not yet available. So far so good as far as the base is concerned. With regards to your question about the potential application of this PPC Vodafone partnership, I think I have addressed this one. So, as I said, we should expect once they set up this JV and it moves into operation, some extra pressure from Vodafone, potentially moving some of their customers, but the magnitude of it will come down to the level of their infrastructure over built-on to our infrastructure. This is difficult to project at this point in time.

Thank you.

The next question is from the line of Ioannis Nikokirakis with Alpha Finance. Please go ahead.

Thank you so much for taking my questions. I have a couple of questions on my side. I guess both have to do with competition going forward regarding your UFPD rollout in the new areas. Can you comment, if you may please, regarding any risks from competition either from PPC, joint venture as you mentioned, or Even so, from the Starlink, because I remember you commented the other time regarding the growth from FWA services and the competition from Starlink that you managed to link into it. And the second question is from the competition coming from the TV segment and regarding the recent news flow from there. I mean, I remember you have a sports agreement which is now expiring next year. Do you have any news on that? How are you going to proceed with the sports agreement? Thank you Ioannis.

Let me start with the first question. First of all, you mentioned Starlink and USBB. It is true that Starlink has been a big challenge for us for as long as we didn't have a product to accommodate our customers for increased speeds. I have to say that this has changed materially since February last year when we introduced our fixed wireless access product. We have managed to slow down substantially standings momentum. Indicatively during 2025, we estimate that they more than doubled or probably tripled their customer base. Now based on our monitoring, we see them growing by 10 to 20% subject to the month, which is to a great extent the result of RFX Wireless Access products, which, as I indicated, in less than one and a half years has managed to attract 100,000 customers who are solving their problems with a far better service, far superior experience. This is one thing. While at the same time, we are working on the expansion of our UFPB. We have already provided commercial services to slightly less than 60,000 households. This number we expect to go up to Thank you very much. As a reminder, if you would like to ask a question, please press star and one on your telephone.

As a final reminder, to register for a question, please press star and one 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.

Thank you, Belita, and thank you, everybody, for your participation, your questions, as well as your interest in the text. Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for calling and have a great afternoon.