Annual Report 2007
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1 ANNUAL REPORT 2007 Personal thoughts and feelings of real people. A random moment of your life on a piece of paper. Drawings, forms and colors representing joy, anger, fullfilment, loneliness, silence, cries, anything. You need to express yourself and the urge you have to communicate. This is what makes our work worthwhile and this is the message of this report. You. THE ΟΤΕ GROUP WHO: STELIOS WHEN: SATURDAY WHERE: ATHENS WHO: VASSILIKI WHEN: ΤUESDAY WHERE: ΤΟΚIΟ WHO: MANOS WHEN: FRIDAY WHERE: ATHENS THE OTE GROUP 12 THE OTE GROUP ROMANIA SERBIA BULGARIA FYROM ALBANIA GREECE THE OTE GROUP 13 GREECE Fixed-line and mobile telephony Fixed-line subscribers: 5,854,000 ADSL subscribers: 825,000 Mobile telephony subscribers: 6,269,000 ROMANIA Shareholder Structure Fixed-line and mobile telephony May 15, 2008 Fixed-line subscribers: 3,035,000 35.3% ADSL subscribers: 360,000 International Institutional Investors Mobile telephony subscribers: 3,616,000 BULGARIA 28.0% Mobile telephony Hellenic State Subscribers: 3,873,000 20.0% ALBANIA Deutsche Telekom Mobile telephony Subscribers: 1,195,000 FYROM 9.8% Mobile telephony Greek Institutional Investors Subscribers: 593,000 6.8% Other Since 2006, the OTE Group owns 90% of GERMANOS S.A., the largest distributor of technology-related products in Southeast Europe with 769 stores. SERBIA Fixed-line and mobile telephony OTE owns 20% of Telekom Srbija THE OTE GROUP 14 GROUP STRUCTURE Fixed-Line Telephony Mobile Telephony OTE SA 100% ΟΤΕGLOBE Greece Greece Other Operations 100% ΟΤΕNET Greece 100% 54% Cosmote RomTelecom 100% ΟΤΕestate Greece Romania Greece AMC 82% 100% Globul 99% Hellas Sat Albania Bulgaria Greece Cosmofon 100% 70% Cosmote Romania 94% ΟΤΕSat-Maritel FYROM Romania Greece 90% Germanos 100% ΟΤΕplus S.E. Europe Greece 100% OTEAcademy Greece 61% CosmoONE Greece WHO: VASILIS WHEN: SUNDAY WHERE: ATHENS THE OTE GROUP 16 ΟΤΕ GROUP KEY FINANCIAL & OPERATIONAL HIGHLIGHTS (all amounts are in € mn unless otherwise stated) Operating Income before Depreciation and Amortization (OIBDA)* 1,971.5 2,167.0 2,240.8 05 06 07 * Excluding impact of OTE fixed-line Voluntary Retirement Program (provision of €939.6 mn in 2005, reversal of €49.8 mn in 2006, and €22.1 mn provision in 2007) and non-recurring gains related to Cosmote Romania in 2005 Net Income/ (Loss) (216.8) 574.6 662.6 05 06 07 Dividend per Share €0.00* €0.55 €0.75** 05 06 07 * There was no dividend distribution in 2005 ** Proposed dividend THE OTE GROUP 17 Revenue Breakdown by Region Key Operations Revenue Contribution (2007) (2007) 74.5% 50.0% Greece Fixed-line 35.6% Mobile telephony* 25.5% 14.4% Other countries Other operations * Germanos S.A. is included in Other operations THE OTE GROUP 18 OTE ADSL Subscribers (000) 155 488 825 05 06 07 Mobile Telephony Subscribers (000) Greece, Albania, Bulgaria, Romania, FYROM 8,204 11,177 15,546 05 06 07 OTE Employees 11,348 11,755 14,741 07 06 05 THE OTE GROUP 19 RomTelecom ADSL subscribers (000) 8 89 360 05 06 07 Net Income/ (Loss) per Share (€) (0.44) 1.17 1.35 05 06 07 RomTelecom Employees 12,257 12,512 13,078 06 07 05 THE OTE GROUP 20 OTE GROUP OPERATIONS THE ΟΤΕ GROUP Consisting of the parent company OTE S.A. and its subsidiaries, the Group offers fixed-line (voice, broadband, data and leased lines) and mobile telephony services in Greece and Romania, as well as mobile telephony services in Albania, Bulgaria and in the Former Yugoslav Republic of Macedonia (FYROM). The Group is also present in Serbia through its 20% stake in the country’s incumbent operator, Telekom Srbija. OTE Group is also involved in a range of activities in Greece, notably in real-estate, satellite telecommunications and professional training. FIXED-LINE OPERATIONS IN GREECE MOBILE TELEPHONY OPERATIONS IN GREECE AND ABROAD OTE (OTE S.A.) is the main provider of fixed-line services (voice, Cosmote, OTE Group’s mobile telephony operator, is the leading broadband, data and leased lines) in Greece. provider of mobile communications in Greece. The company also enjoys significant mobile telephony market shares in Albania, Strategy: Focused on broadband promotion, development of Bulgaria and FYROM, and is expanding rapidly in Romania. competitive products (focus on bundled services), adoption of a Cosmote also owns the largest distributor of technology-related dynamic tariff policy, investments in infrastructure and strong products in Southeast Europe, Germanos (Germanos S.A.) relationship with customers. Strategy: Aims to maintain its leading position in the Greek market and boost its profitability abroad. 51% Investments 44% OIBDA 43% Revenues 38% Revenues 37% OIBDA 27% Investments Note: The charts display the contribution of each segment in Group revenues, operating income before depreciation and amortization (OIBDA) and capital expenditure in 2007. THE OTE GROUP 21 FIXED-LINE OPERATIONS IN ROMANIA (ROMTELECOM) OTHER OPERATIONS IN GREECE AND ABROAD OTE owns 54% of RomTelecom, the main telecommunications In Greece, the Group is involved in a range of activities notably in operator in Romania, providing fixed-line services (voice, real-estate, satellite communications, and professional training. broadband, data and leased lines) and satellite TV services to the The Group is also present in Serbia through its 20% stake in the local market. country’s incumbent operator Telekom Srbija. Strategy: Focused on launching competitive products, Strategy: Aims to add value to the real-estate portfolio by strengthening its customer-oriented policy and increasing its establishing a real-estate investment company, and to develop market share in broadband and satellite TV services. synergies between the various companies of the Group. 19% Investments 13% OIBDA 12% Revenues 7% Revenues 5% OIBDA 3% Investments Note: The charts display the contribution of each segment in Group revenues, operating income before depreciation and amortization (OIBDA) and capital expenditure in 2007. THE OTE GROUP 22 2007 AT A GLANCE MERGERS, ACQUISITIONS AND SALES COMMERCIAL HIGHLIGHTS: FOCUS ON BROADBAND PROMOTION In March, OTE presents the highlights of its 3-year Business Plan (2007-2009) at an analyst-investor meeting in London. In June, OTE’s ADSL ports pass the one million mark, double the prior-year level. In May, the European Commission approves the Greek State’s contribution of €390 mn towards OTE’s pension fund, TAP-OTE, to In July, OTE’s successful package connx-talk is expanded, offering cover for the 2005-2006 voluntary retirement program. unlimited local and long distance calls 24 hours a day, 7 days week, combining voice services with broadband Internet connection In May, OTE resolves to absorb its ISP subsidiary OTENET. In speeds. this context, in December 2007 OTE holds 100% of OTENET’s share capital and the Board of Directors approves the launch of In July, OTE’s Educational Mobile Unit OTE on the Broadband-OTE the merger proccedures, via absorption, by OTE, which will be Broadband Services completes a road-show that had been launched concluded in 2008. in July 2006, travelling around 33 Greek cities to inform the public and promote broadband services. In June, the Greek State completes the sale of 52,446,092 common shares of OTE (corresponding to 10.7% of the company’s share In July, the OTE retail store network, ΟΤΕshops, create capital) to Greek and foreign qualified investors, by means of an conn-xperience, a dedicated area within the stores to allow accelerated book-building process. Following this, the Greek State’s customers to experience fast Internet access at real speeds and get stake in OTE’s share capital is reduced to 28.03%. acquainted with broadband services and conn-x applications. In November OTE makes a public offer to acquire the 32.2% In September, OTE launches the innovative, broadband e-Learning minority interests in the share capital of its subsidiary, COSMOTE, service School powered by conn-x which provides students with at a price of €26.25 per share. an opportunity to enhance their performance at school via a user-friendly, interactive broadband environment. In December, OTE completes the 100% sale of its subsidiary, InfOTE (printed and electronic directory services), to Rhone Capital LLC and Zarkona Trading Limited, for a total consideration of €300.2 mn. THE OTE GROUP 23 In December, OTE announces a reduced conn-x tariff plan, cutting prices by up to 44.5%, and introduces a new speed of up to 24 Mbps. In 2007, overall price reductions across the conn-x product range amounted to 30%-50%. ORGANIZATIONAL CHANGES In December, the General Division of Business and Residential Customers of OTE is separated into the Division of Corporate and Business Customers, and the Division of Residential Customers. The management of OTE proceeds with this organizational change in view of market competition levels, technological integration trends, increasing customer demands for state-of-the art products and services, and in line with common international practice. CORPORATE RESPONSIBILITY OTE’s 2006 Corporate Social Responsibility Report is certified in October according to the international “G3” standards of the Global Reporting Initiative (GRI) network. THE OTE GROUP 24 THE OTE GROUP 25 CONTENTS THE OTE GROUP OTHER OPERATIONS IN GREECE AND ABROAD Message from the Chairman 26 ΟΤΕestate 108 Hellas Sat 110 ΟΤΕ GROUP OPERATIONS OTESat-Maritel 114 Broadband Services 33 OTEplus 115 ΟΤΕNET 39 OTEAcademy 116 Traditional Fixed-Line Services 42 CosmoONE 118 Services for Telecom Operators 46 Telekom Srbija 119 International Telephony - ΟΤΕGLOBE 52 InfOTE 121 Investments in Fixed-Line 56 Regulatory Framework 62 FINANCIAL STATEMENTS Human Resources 64 Annual Financial Statements 127 Corporate Responsibility 68 Corporate Governance 72 Share Information 80 Mobile Telephony 82 Greece (Cosmote) 83 Albania (AMC) 88 Bulgaria (Globul) 90 FYROM (Cosmofon) 91 Romania (Cosmote Romania) 92 Germanos S.A.