Hellenic Telecommunications Organization : Announcement of Q3 2018 Results (Press Release)

OTE GROUP REPORTS 2018 THIRD QUARTER RESULTS

•  Group Adjusted EBITDA up 4.7%, driven by another very solid performance in Greece

•  Greece total Revenue up 1.9%, Adjusted EBITDA up 5.7%, fueled by:

  • o Double-digit growth in fixed broadband; strong mobile data and visitor revenues

  • o Disciplined cost control supported by digitalization and voluntary leave schemes

•  Romania performance still facing challenging environment, turnaround initiatives underway

•  Albania profitability continuing to recover

•  Ongoing investment in new technologies to generate sustained growth; Capex on track

•  Full-year Free Cash Flow guidance confirmed

(€ mn)

Q3 '18

Q3 '17

Change

9M '18

9M '17

Change

Revenues Adjusted EBITDA

991.5

991.2

0.0%

2,871.9

2,859.0

+0.5%

365.2

348.7

+4.7%

999.3

966.7

+3.4%

Adjusted EBITDA margin (%) Operating profit before financial and investing activities

36.8%

35.2%

+1.6pp

34.8%

33.8%

+1pp

172.4

120.6

+43.0%

377.0

335.4

+12.4%

Profit to owners of the parent Adj. Profit to owners of the parent Basic EPS (€)

119.3

52.4

+127.7%

207.3

119.9

+72.9%

107.5

76.5

+40.5%

203.7

155.6

+30.9%

0.2462

0.1072

+129.7%

0.4257

0.2453

+73.5%

Total Assets Adjusted Capex Adjusted Free Cash Flow Cash & Other financial assets Adjusted Net Debt

6,790.7

7,164.2

-5.2%

6,790.7

7,164.2

-5.2%

150.1

176.2

132.5

(28.1)

-14.8% -

485.7

584.2

236.1

10.5

-16.9% -

1,017.9

1,302.5

-21.9%

1,017.9

1,302.5

-21.9%

807.5

648.9

+24.4%

807.5

648.9

+24.4%

Note: The purpose and calculations of all 'Adjusted' data presented in this report are detailed in the Alternative Performance Measures Section. The Group has applied IFRS 15 and IFRS 9 using the cumulative effect method. Under this method, the comparative information for 2017 is not restated.

ATHENS, Greece - November 08, 2018 - Hellenic Telecommunications Organization SA

(ASE: HTO; OTC MARKET: HLTOY), the Greek full-service telecommunications provider, announced today consolidated results (prepared under IFRS) for the quarter ended September 30, 2018.

Commenting on OTE's 2018 third-quarter results, Michael Tsamaz, Chairman & CEO, noted: "We had another very good quarter in Greece, where both retail fixed and mobile services achieved solid revenue growth. In Greek fixed, we posted higher service revenues across the board, and notably in broadband, while mobile benefited from continued growth in data and a successful tourism season, boosting visitor revenues. The economic recovery gaining momentum in Greece is supportive. As a result, total revenues in our home country were up and EBITDA grew even higher, reflecting our ongoing initiatives to manage our cost base, and yielding a marked increase in margin. While we expect the positive momentum in fixed to continue, in mobile we anticipate more challenging comparisons in the coming quarters. In Romania, operating performance remained under pressure, across fixed as well as mobile services."

Mr. Tsamaz added: "Clearly, our customer experience is key in gaining and retaining the trust of our customers. But we owe our strong performance in Greece to the technological edge we have built over the years. In the current quarter, we are continuing to invest and we expect to finish the year near the level of Capex we have guided for. This will enable OTE to meet its cash flow and shareholder remuneration targets for the full year."

Outlook

OTE expects the positive trends of the first nine months of the year to continue in the fourth quarter, particularly in its domestic market. The recovering economic environment in Greece should provide a favorable background in fixed and mobile telecommunication services, with continuing growth expected in mobile data and broadband. However, a high base in the fourth quarter of last year is expected to make comparisons more demanding. The extended reach of advanced data networks, in both fixed and mobile, drives increased customer reliance on OTE services, supporting its revenue base. Encouraging operational progress is being made in Romania, in certain market segments; however, an assessment underway might lead to an increase in bad debt provisioning in coming quarters.

For the full year, management continues to expect adjusted Capex of approximately €700mn. Reflecting further cash generation improvements, OTE expects 2018 full-year reported FCF to reach approximately €260mn. This amount has already been paid out to shareholders pursuant to the shareholder remuneration policy announced earlier this year.

OTE GROUP HIGHLIGHTS

OTE Group's consolidated revenues totaled to €991.5mn in Q3'18, virtually unchanged compared to Q3'17, reflecting a €14.1mn increase in revenues in Greece, driven by strong mobile and fixed service revenues, and a €12.8mn decrease in Romania, impacted by weak fixed retail and wholesale revenues.

Total Operating Expenses, excluding depreciation, amortization, impairment and charges related to voluntary leave schemes, other restructuring costs and non-recurring litigations, amounted to €654.3mn in Q3'18, a 0.3% decrease compared to Q3'17. The decrease reflects disciplined cost management across the Group and the beneficial impact of recent voluntary leave schemes, resulting in a 2.3% decline in personnel costs, partly offset by an increase in bad debt provisions, chiefly arising from Romanian mobile operations.

In Q3'18, the Group's Adjusted EBITDA increased by 4.7% to €365.2m. In Greece, Adjusted EBITDA increased by 5.7%, yielding an Adjusted EBITDA margin of 42.5%. In Romania, Adjusted EBITDA dropped by 4.2%. In Albania, Adjusted EBITDA rose by 36.0%.

The Group reported Operating profit before financial and investing activities of €172.4mn, compared to €120.6mn in Q3'17. The increase in Operating profit reflects the improvement in Operating Expenses, gains from asset sales, lower cost of voluntary leave schemes in the quarter, and a decrease in depreciation and amortization.

The Group's Income Tax charge stood at €34.4mn in Q3'18, a drop of 18.7%, primarily reflecting a tax benefit from realized losses.

Adjusted Group profit after minority interests (excluding one-off items) increased by 40.5% to €107.5mn in Q3'18 compared to €76.5mn in Q3'17.

Adjusted Capital Expenditures amounted to €150.1mn in Q3'18, a 14.8% decline, or €26.1mn, with investments in Greece, Romania and Albania standing at €109.2mn, €38.7mn, and €2.2mn, respectively.

In Q3'18, the Group's adjusted Free Cash Flow was €132.5mn, a €160.6mn increase compared to Q3'17, reflecting improved Operating Cash Flow as well as lower Capex in the period.

The Group's adjusted Net Debt was €0.8bn at September 30, 2018, an increase of 24.4% compared to September 30, 2017. The Group's ratio of adjusted Net Debt to 12-month trailing adjusted EBITDA stood at 0.6x.

Per Country Figures (€ mn)

Excl. IFRS 15
Quarterly - Revenues	Q3 '18	Q3 '17	Change	Q3 '18	Change
Greece	754.4	740.3	+1.9%	753.9	+1.8%
Romania	226.7	239.5	-5.3%	225.9	-5.7%
Albania	17.7	18.0	-1.7%	17.7	-1.7%
Eliminations	(7.3)	(6.6)	+10.6%	(7.3)	+10.6%
OTE GROUP	991.5	991.2	0.0%	990.2	-0.1%

Excl. IFRS 15
YTD - Revenues	9M '18	9M '17	Change	9M '18	Change
Greece	2,151.2	2,123.2	+1.3%	2,149.8	+1.3%
Romania	691.0	705.7	-2.1%	689.2	-2.3%
Albania	50.7	50.9	-0.4%	50.7	-0.4%
Eliminations	(21.0)	(20.8)	+1.0%	(21.0)	+1.0%
OTE GROUP	2,871.9	2,859.0	+0.5%	2,868.7	+0.3%

Excl. IFRS 15
Adjusted EBITDA	Q3 '18	Q3 '17	Change	Q3 '18	Change
Greece	320.6	303.2	+5.7%	320.2	+5.6%
Margin (%)	42.5%	41.0%	+1.5pp	42.5%	+1.5 pp
Romania	41.2	43.0	-4.2%	38.0	-11.6%
Margin (%)	18.2%	18.0%	+0.2pp	16.8%	-1.2 pp
Albania	3.4	2.5	+36.0%	3.3	+32.0%
Margin (%)	19.2%	13.9%	+5.3pp	18.6%	+4.7 pp
OTE GROUP	365.2	348.7	+4.7%	361.5	+3.7%
Adj. EBITDA margin (%)	36.8%	35.2%	+1.6pp	36.5%	+1.3pp

Excl. IFRS 15
Adjusted EBITDA	9M '18	9M '17	Change	9M '18	Change
Greece	880.0	842.0	+4.5%	879.7	+4.5%
Margin (%)	40.9%	39.7%	+1.2pp	40.9%	+1.2pp
Romania	111.6	119.3	-6.5%	104.2	-12.7%
Margin (%)	16.2%	16.9%	-0.7pp	15.1%	-1.8pp
Albania	7.7	5.4	+42.6%	7.5	+38.9%
Margin (%)	15.2%	10.6%	+4.6pp	14.8%	+4.2pp
OTE GROUP	999.3	966.7	+3.4%	991.4	+2.6%
Adj. EBITDA margin (%)	34.8%	33.8%	+1pp	34.6%	+0.8pp

GREECE

Q3'18	Q3'17	y-o-y change	Q3'18 net adds
Fixed lines access	2,641,979	2,628,750	+0.5%	(4,331)
Broadband subscribers	1,857,388	1,716,188	+8.2%	24,510
of which fiber service*	482,653	311,107	+55.1%	33,854
TV subscribers	534,093	517,155	+3.3%	8,404
Mobile Subscribers	8,122,602	7,867,229	+3.2%	(38,718)

*Including VDSL, Vectoring & Super Vectoring

In Q3'18, the total Greek access market lost 7k lines, while OTE's fixed-line operations posted a net loss of 4k access lines.

OTE achieved another quarter of solid net additions in retail broadband customers, totaling 25k, to reach 1,857k. Penetration of OTE's high-speed fiber broadband service continued to make progress, with strong net additions of 34k in the quarter, supported by the expanding reach of the service and enabling OTE to steadily monetize its investments in infrastructure. At quarter end, OTE's fiber offer had been adopted by 483k subscribers reaching 26.0% of OTE's total retail broadband base. Demand for OTE's high-speed broadband service is continuing to grow at a rapid pace, fueling OTE's revenue growth. At September 30, OTE's total number of VDSL/Vectoring activated cabinets amounted to 13k, an increase of over 300 units in the quarter. Overall, the adoption of fiber services reached approximately 42% of eligible customers (OTE subscribers / households passed). During the quarter, OTE initiated the rollout of its FTTH network, which will accelerate in future quarters, within the Capex estimates previously communicated.

OTE also achieved a quarter of growth in its TV offering, with net additions totaling 8k. At September 30, 2018, the total number of COSMOTE TV subscribers amounted to 534k, a year-on-year increase of 3.3%.

Excl. IFRS 15

Quarterly Figures (€ mn)	Q3 '18	Q3 '17	Change	Q3 '18	Change
Revenues	754.4	740.3	+1.9%	753.9	+1.8%
Retail Fixed Services	232.7	226.9	+2.6%	233.8	+3.0%
Mobile Service Revenues	257.4	259.3	-0.7%	264.2	+1.9%
Wholesale Services	149.0	143.6	+3.8%	149.0	+3.8%
Other Revenues	115.3	110.5	+4.3%	106.9	-3.3%
Adjusted EBITDA	320.6	303.2	+5.7%	320.2	+5.6%
Adjusted EBITDA margin (%)	42.5%	41.0%	+1.5pp	42.5%	+1.5pp
YTD Figures (€ mn)	9M '18	9M '17	Change
Revenues	2,151.2	2,123.2	+1.3%
Retail Fixed Services	684.6	675.0	+1.4%
Mobile Service Revenues	703.9	705.6	-0.2%
Wholesale Services	422.5	417.5	+1.2%
Other Revenues	340.2	325.1	+4.6%
Adjusted EBITDA	880.0	842.0	+4.5%
Adjusted EBITDA margin (%)	40.9%	39.7%	+1.2pp

Excl. IFRS 15

9M '18	Change
2,149.8	+1.3%
687.3	+1.8%
724.4	+2.7%
422.4	+1.2%
315.7	-2.9%
879.7	+4.5%
40.9%	1.2pp

In Greece, total revenues increased by 1.9% to €754.4mn in Q3'18. The increase in revenues from retail fixed services was fueled by a double-digit rise in broadband. Following their rebound in Q2'18, wholesale revenues were up again in the third quarter.

Mobile Service revenues were down 0.7% in the third quarter, reflecting the adoption of IFRS 15; excludingthis factor, Mobile Service revenues were up by 1.9%. Mobile Service revenue growth was once again driven by the increase in data services in Q3'18, up 21%, while visitor revenues posted another quarter of sharp growth. The number of active users of the Company's mobile application passed the 2mn mark, an important milestone in terms of both customer relationship management and cost savings.

Total adjusted EBITDA in Greece was up in the quarter by 5.7%, at €320.6mn. At 42.5%, the adjusted EBITDA margin in Greece was up an impressive 150 basis points compared to the third quarter of 2017.

ROMANIA

Q3'18	Q3'17	y-o-y change	Q3'18 net adds
Voice * Broadband *	2,111,890 1,151,678	2,101,102 1,184,513	+0.5% -2.8%	14,955 (9,727)
TV subscribers	1,453,526	1,473,490	-1.4%	(9,456)
FMC customers	655,547	455,740	+43.8%	58,635
Mobile Subscribers	4,643,224	4,769,734	-2.7%	(38,068)

*Includes FMC

Excl. IFRS 15

Quarterly Figures (€ mn)	Q3 '18	Q3 '17	Change
Revenues	226.7	239.5	-5.3%
Retail Fixed Services	60.0	71.4	-16.0%
Mobile Service Revenues	82.0	85.2	-3.8%
Wholesale Services	24.5	34.2	-28.4%
Other Revenues	60.2	48.7	+23.6%
Adjusted EBITDA	41.2	43.0	-4.2%
Adjusted EBITDA margin (%)	18.2%	18.0%	+0.2pp
YTD Figures (€ mn)	9M '18	9M '17	Change	9M '18	Change
Revenues	691.0	705.7	-2.1%	689.2	-2.3%
Retail Fixed Services	188.4	218.6	-13.8%	192.9	-11.8%
Mobile Service Revenues	246.0	242.5	+1.4%	251.7	+3.8%
Wholesale Services	72.3	92.8	-22.1%	72.3	-22.1%
Other Revenues	184.3	151.8	+21.4%	172.3	+13.5%
Adjusted EBITDA	111.6	119.3	-6.5%	104.2	-12.7%
Adjusted EBITDA margin (%)	16.2%	16.9%	-0.7pp	15.1%	-1.8pp

Q3 '18	Change
225.9	-5.7%
61.0	-14.6%
84.2	-1.2%
24.5	-28.4%
56.2	+15.4%
38.0	-11.6%
16.8%	-1.2pp

Excl. IFRS 15

Total revenues from Romania were down 5.3% to €226.7mn in Q3'18. Revenues from Retail Fixed services were down 16.0%, or 14.6% excluding the IFRS 15 impact. Fixed voice revenues were down 25.2%, while broadband and TV revenues declined by 13.6% and 7.8%, respectively, driven by ARPU & customer erosion on the copper-based infrastructure and satellite TV.

Mobile Service revenues decreased by 3.8% at €82.0mn in Q3'18 or by 1.2% excluding the IFRS 15 impact. Total Revenues from FMC services increased by 30.7%, as the number of FMC subscribers rose by 44% year-on-year, to 656k at the end of Q3'18.

Telekom Romania Mobile's customer base totaled 4.6mn at the end of Q3'18, down 2.7% from the year-earlier level due to elimination of inactive customers in the prepaid segment. Of the total customer base, 36% were postpaid. The total number of business customers increased by 8.8% compared to Q3'17, reflecting the appeal of the Company's offers.