Hellenic Telecommunications Organization S A : OTE Group reports 2021 second quarter results

OTE GROUP REPORTS 2021 SECOND QUARTER RESULTS

Highlights:

• • Group revenues up 8.0% on strong Greek operations; Adj. EBITDA (AL) up 6.9%
  • Continuing recovery in Greece with positive performances across the board, helped by favorable comparison against pandemic-impacted Q2'20
    o 10% topline growth on service revenue momentum and higher handset sales o 7.4% increase in mobile service revenues, roaming rebounding
    o Dynamic operational trends-broadband supported by demand for higher speeds o Adj. EBITDA (AL) up 6.5%
• Improving trends in Romania Mobile; Adj. EBITDA (AL) up 26.4%
• €480mn shareholder return guidance for FY 2021 confirmed
• Conditional EU approval of Telekom Romania (Fixed) disposal granted

(€ mn)		Q2'21	Q2'20		Change		6M '21		6M '20	Change
		Revenues		827.5		766.1			+8.0%			1,615.4			1,563.4		+3.3%
		Adjusted EBITDA After Lease (AL)		310.4		290.4			+6.9%			611.6			586.9		+4.2%
		Margin %		37.5%		37.9%			-0.4pp			37.9%			37.5%		+0.4pp
	Operating profit before financial and	160.0	103.8	+54.1%	318.8	256.7	+24.2%
investing activities
Profit to owners of the parent	75.4	58.9	+28.0%	176.8	155.5	+13.7%
Adj. Profit to owners of the parent	106.5		99.0		+7.6%	207.9		195.9		+6.1%
Basic EPS (€)	0.1653	0.126	+31.2%	0.3865		0.3317	+16.5%
		Adjusted Capex		137.2		131.4			+4.4%			237.1			282.6		-16.1%
		Adjusted Free Cash Flow After Lease (AL)		162.8		178.8			-8.9%			325.6			286.5		+13.6%
	Free Cash Flow After Lease (AL)		157.4		127.5			+23.5%			273.9			234.0		+17.1%
	Free Cash Flow of Discontinued		17.3		(2.5)			-			26.4			21.4		+23.4%
		operations After Lease (AL)
Cash & Other financial assets	891.7	1,534.0		-41.9%	891.7	1,534.0	-41.9%
		Adjusted Net Debt (excluding leases)		445.6		453.2			-1.7%			445.6			453.2		-1.7%
		Adjusted Net Debt		786.7		847.7			-7.2%			786.7			847.7		-7.2%

Note: The purpose and calculations of all 'Adjusted' data are detailed in the Alternative Performance Measures Section.

Note: All figures (apart from Balance Sheet) adjusted to reflect only continuing operations; Telekom Romania (TKR) operations along with certain significant commercial transactions (MVNO agreement and handset sales) between TKR and Telekom Romania Mobile (TKRM) have been classified as held for sale and have been treated as discontinued operations.

ATHENS, Greece - August 05, 2021 - Hellenic Telecommunications Organization SA

(ASE: HTO; OTC MARKET: HLTOY), the Greek full-service telecommunications provider, announced today audited consolidated results (prepared under IFRS) for the quarter ended June 30, 2021.

Message from the Chairman & CEO, Michael Tsamaz:

"We achieved a strong second quarter in Greece, compared with a period last year that was severely impacted by the health crisis. We experienced positive momentum across all KPIs and revenue streams, including an early recovery in visitors roaming as travel gradually resumes. Operating trends also improved in Romania, where we received conditional approval for the disposal of our fixed operations. We delivered solid EBITDA improvements in both Romania and Greece, and a substantial increase in cash flow."

"The continuing recovery and modernization of the Greek economy, the quality of our technological infrastructure, our people expertise, and the positive trends in the year to date reinforce our confidence for 2021, as we stand well prepared for future challenges."

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Outlook

In the second quarter of the year, the negative impact of the pandemic gradually started to subside following the removal of lockdown measures, the easing of travel restrictions, and rapid vaccination progress. OTE Group is benefiting from revenue and profitability recovery in 2021 despite the risks associated with new COVID-19 variants.

The European Commission endorsed Greece's €30.5bn Recovery and Resilience Plan (RRF), an important step towards financing and supporting the implementation of crucial investments and reforms in the country and support economic growth in the coming years. OTE intends to leverage its expertise to support the digitalization of the country and provide it with the technological backbone that will accelerate its future growth.

OTE continues to benefit from its superior network, delivering faster speeds to its customers. Its highly competitive deployment of FTTC/H and 5G provides the required infrastructure tο offer enhanced services to customers and continue expanding.

For 2021, management expects Adjusted Group CAPEX of approximately €550mn and Adjusted Free Cash Flow of approximately €575mn. Reported Free Cash Flow should reach €480mn, which also represents the total Shareholder remuneration amount for 2021 (not including proceeds from the disposal of Telekom Romania operations), a 20% increase compared to the prior year.

In addition, during the period of implementation of the Shareholder Remuneration Policy (2018-2020), OTE generated an excess amount, on top of targeted shareholder distribution, of approximately €80mn, reflecting better-than-projected cash flow performance. Given the exceptional conditions of 2020 and 2021, Management has deemed prudent to retain this amount in the near term as a reserve against potential adverse impacts from the health crisis. In the coming year, assuming a normalization of the operating environment, Management anticipates guiding on the distribution of this excess amount, together with any surplus generated in 2021.

OTE GROUP HIGHLIGHTS

OTE Group is successfully executing its strategy aimed at expanding sustainable income-generating activities and expects to complete the disposal of its fixed operations in Romania in the coming months, following the recent approval by the European Commission, subject to certain conditions, of its agreement with Orange Romania.

OTE Group consolidated Revenues increased by 8.0% in Q2'21 to €827.5mn, reflecting the successful execution of its strategy, supported by the recovery from the COVID-19 crisis. In Greece, Revenues continued to rise for a third consecutive quarter and were up 9.6% to €758.7mn, as the authorities eased health restrictions during the quarter. In Romania, revenues from continuing operations posted an improving trend, down 5.6% at €74.7mn in the quarter, and are on track to meet targets in H2.

Total Operating Expenses, excluding depreciation, amortization, impairment, and charges related to restructuring costs (primarily voluntary leave schemes) and non-recurring litigation, amounted to €497.2mn in Q2'21, up 8.3% compared to Q2'20, mainly reflecting higher device costs consistent with the large increase in the corresponding revenue line, as well as certain provisions and additional expenses related to the separation of Romanian mobile and fixed operations. The Group continued to deliver significant savings in personnel costs resulting from the strategic transformation initiatives implemented in 2020.

Group Adjusted EBITDA (AL) rose 6.9% to €310.4mn, yielding a margin of 37.5%, on positive performance in both Greece and Romania. In Greece, Adjusted EBITDA (AL) improved sharply, up 6.5%, to €303.7mn, resulting in a 40.0% margin. Romania mobile operations recorded an Adjusted EBITDA (AL) of €6.7mn up 26.4% as a result of disciplined cost management.

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Group profit before tax amounted to €146.4mn in Q2'21, up 67.5% from Q2'20, mainly reflecting higher profitability in the quarter.

The Group recorded an Income Tax charge of €71.6mn in Q2'21, up from €29.5mn in Q2'20, reflecting the impact of the reduction in corporate income tax rate from 24% to 22% on the deferred tax asset base, as well as higher profitability in the quarter.

Adjusted Capital Expenditures amounted to €137.2mn in Q2'21, an increase of 4.4% from Q2'20. Investments in Greece and Romania mobile stood at €123.8mn and €13.4mn, respectively.

Group Adjusted Free Cash Flow after leases reached €162.8mn, while Free Cash Flow stood at €157.4mn, up €29.9mn year on year, mainly reflecting payments related to voluntary exit schemes in 2020.

The Group's Adjusted Net Debt stood at €786.7mn as of June 30, 2021, down 7.2% compared to June 30, 2020. The Group ratio of Adjusted Net Debt to 12-month Adjusted EBITDA (AL) stood at 0.6x.

Revenues (€mn)		Q2 '21		Q2 '20			Change			6M '21			6M '20			Change
Greece	758.7			692.3			+9.6%			1,475.7			1,399.1			+5.5%
Romania mobile	74.7			79.1			-5.6%			151.9			175.5			-13.4%
Eliminations	(5.9)		(5.3)		+11.3%		(12.2)		(11.2)		+8.9%
		OTE GROUP		827.5			766.1				+8.0%				1,615.4				1,563.4				+3.3%
	Adjusted EBITDA After
	Lease (AL) (€mn)		Q2 '21		Q2 '20			Change			6M'21			6M'20			Change
	Greece	303.7	285.1	+6.5%	602.0	573.4	+5.0%
	Margin (%)	40.0%	41.2%			-1.2pp	40.8%	41.0%			-0.2pp
	Romania mobile	6.7	5.3	+26.4%	9.6	13.5	-28.9%
	Margin (%)	9.0%	6.7%			+2.3pp	6.3%	7.7%			-1.4pp
		OTE GROUP		310.4			290.4			+6.9%			611.6			586.9				+4.2%
		Margin (%)		37.5%			37.9%				-0.4pp			37.9%			37.5%				+0.4pp

Note: Adjusted EBITDA (AL) is defined as Adjusted EBITDA deducting the Depreciation for the right-of-use assets and Interest expense on leases.

On June 9, 2021, the OTE Annual General Meeting of shareholders approved the election of new Board members, enhancing the Board's diversity in line with the Group's ambitions. Furthermore, OTE Group adopted new more ambitious environmental targets going forward, including a complete reliance on renewable energy for all its electrical power usage, climate neutrality first in its own operations by 2025, and then along the entire value chain by 2040 at the latest. With a view to addressing resource efficiency, the Group is committed to applying sustainable practices in managing 100% of technological waste by adopting the principles of circular economy.

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GREECE

Operational highlights:
			y-o-y	y-o-y	Q2'21
			net
	Q2'21	Q2'20	change	diff	adds
Fixed lines access	2,699,457	2,670,242	+1.1%	29,215	7,865
Broadband subscribers	2,203,809	2,080,113	+5.9%	123,696	27,989
of which Fiber service	1,056,210	840,383	+25.7%	215,827	51,078
TV subscribers	578,851	563,197	+2.8%	15,654	1,005
Mobile Subscribers	6,987,941	7,208,393	-3.1%	(220,452)	98,673
Postpaid	2,755,671	2,704,856	+1.9%	50,815	30,734
Prepaid	4,232,270	4,503,537	-6.0%	(271,267)	67,939

Fixed Segment:

OTE further expanded its fiber subscriber base in the quarter, with 51k net additions, raising the total number of fiber subscribers to 1,056k. The Company's successful speed-upgrade campaigns and investments, as well as accelerating demand for higher speeds, fueled another quarter the strong growth of OTE's fiber service.

Penetration of fiber broadband increased by 8 percentage points year-on-year and now stands at 48% of the fixed broadband subscriber base as a result of ongoing upgrades in the speed and quality of OTE's service. Customers continue to migrate to higher-speed FTTC/H offerings, and the share of subscribers using broadband speeds of 100Μbps or more has now reached 20% of all fiber connections, twice the proportion one year earlier.

OTE continues to expand its FTTH footprint to meet the constant increase in demand for high-speed services. OTE reached 388k homes passed in the first half of the year and is on track to pass the 550k mark this year. With more than one million customers still relying on copper infrastructure, the increasing availability of fiber services should support the Group's long-term growth.

As of June 30, 2021, the total number of TV subscribers stood at 579k, a year-on-year increase of 2.8%, as OTE continues to leverage its new OTT platform and attractive content portfolio. Following a long period of limited sports broadcasting as shops remained closed due to the pandemic restrictions, revenues have started to recover.

Mobile Segment:

In the second quarter, Cosmote's mobile customer base stood at 7.0mn customers, a 3.1% decrease compared to Q2'20 driven by the prepaid segment, while postpaid continued to grow. This is consistent with the company's strategy to migrate certain subscribers from prepaid to postpaid, by offering attractive entry- point postpaid data bundles.

Following the launch of its 5G service immediately following the spectrum auction in late 2020, OTE is rapidly expanding the coverage of its 5G service and has already reached its initial 2021 target. Population coverage in the country's two biggest cities, Athens and Thessaloniki, now exceeds 97% and 90%, respectively. OTE plans to provide 5G population coverage of 60% by the end of this year, and coverage of the nationwide highway system by 2023, while continuing to promote data usage over its superior 4G/4G+ network. The company recently announced 5G roaming agreement with 27 countries.

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Financial highlights:
(€ mn)		Q2 '21	Q2 '20		Change		6M '21		6M'20	Change
	Revenues		758.7		692.3			+9.6%			1,475.7			1,399.1		+5.5%
Retail Fixed Services	236.0		231.3		+2.0%		469.1		465.7		+0.7%
Mobile Service Revenues	233.9		217.7		+7.4%		455.5		440.1		+3.5%
Wholesale Services	146.6		138.2		+6.1%		282.5		276.2		+2.3%
Other Revenues	142.2		105.1		+35.3%		268.6		217.1		+23.7%
	Adjusted EBITDA (AL)		303.7		285.1			+6.5%			602.0			573.4		+5.0%
	margin (%)		40.0%		41.2%			-1.2pp			40.8%			41.0%		-0.2pp

In Greece, revenues posted sharp growth, up 9.6% to €758.7mn, as the negative effects from the pandemic started to subside. Positive momentum was evident across all revenue streams. Handset sales were up sharply in the quarter, largely reflecting a government-sponsored program subsidizing sales of tablets and laptops to students to advance digitalization.

Retail fixed service revenues were up 2.0%, supported by continuing momentum in broadband revenues. Demand for fiber services is expanding and fueling broadband growth, offsetting negative voice trends. Wholesale revenues were up 6.1% in the quarter, mainly due to increased international transit traffic and the growing base of fiber subscriptions by other operators.

In mobile, service revenues were back to growth, up 7.4%, as headwinds subsided when pandemic-related restrictions were gradually lifted from mid-May. Both the postpaid and prepaid segments achieved year-on- year increases, and roaming revenues are starting to rebound following the easing of travelling restrictions.

Other revenues recorded a substantial increase of 35.3% in the quarter, reflecting positive ICT momentum in addition to the growth in handset sales. ICT had another positive quarter, up 21% compared to Q2'20, as OTE leverages its experience in delivering large projects for private and public organizations. Recent projects include certain web and app solutions in the e-health sector. OTE's expertise and track record strengthen its prospects as a partner of choice for digitalization projects related to the EU RRF plan.

Total Adjusted EBITDA (AL) in Greece was up 6.5% in the quarter at €303.7mn, yielding a margin of 40.0%, compared to 41.2% in Q2'20, as higher service revenues and cost savings were partly offset by incremental costs related to certain provisions and expenses related to the disposal of Romanian fixed activities.

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