Hellenic Telecommunications Organization S.A.

Michael Tsamaz - Chairman and Chief Executive Officer Babis Mazarakis - Chief Financial Officer Evrikos Sarsentis - Head of OTE Group Mergers, Acquisitions and Investor Relations

Stam Draziotis - Eurobank Equities Luis Prota - Morgan Stanley Vikram Karnany - UBS George Ierodiakonou - Citigroup Sameer Patel - Guggenheim Partners

Good morning and good afternoon to all of you. I’m pleased to welcome you to our call to which we will discuss our quarter results for the first quarter of 2015.

Let me begin with some brief comments on developments of OTE during the quarter. Then Babis Mazarakis, our Chief Financial Officer will review our performance and financials in more detail.

Zacharias Piperidis, our Chief Operating Officer, Babis and I will then take your questions. Our performance in the quarter showed some contrast between the solid performance in Greece and lateral pressure on international.

In Greece our combined fixed mobile revenues are up with another strong quarter from fixed line activities. In our international operations in Romania and Albania conversely were still feeling the pressure from termination of rate cuts.

Today we have centered our home markets, consumer sentiment were quite satisfied with the resilience of our performance confirming the path to stabilization will follow quarter-after-quarter last year. Greek fixed line operations posted a second consecutive quarter of revenue growth.

This top line performance extends the unbroken sequential quarterly improvement achieved for more than two years ago. While we saw a slight deterioration in lines connections both of us and for the market in general we had results broadband particularly we had good results particularly with VDSL on which have been heavily investing and consider our spare head for the future.

Growth in TV subscribers were slightly more subdued than in prior years, well that’s what we expected ahead of our introduction of used force programming in the second half particular Champions League Football. In Greek mobile the global service marked with the previous quarter but total revenues was nearly flat.

Since handset sales were up by 16.5 percentage points. Cosmote’s participation in the EU-funded digital solidarity program to provide subsidized hardware tablets or laptops, inter-connections and home training to beneficiaries, social dividend of 2014.

We had a particular strong increase in mobile revenues with worthy investments in the country's most expensive 4G coverage. In Romania as well as Albania where competitive environment remains intense our revenues would have been up where as not and for impact of termination rate cuts.

So all-in-all in this environment we recorded a moderate drop in total group revenues, this is highly encouraging sign for the full year assuming that there is no major deterioration in market conditions to the months ahead. We also improving consolidated EBITDA margin by 10 basis points compared to the first quarter of last year.

With seasonally strong 34.7% same-store ongoing cost margin discipline as well as the start reduction in interconnection costs coming from termination rate cuts. Total operating expenses excluding depreciation and one-off items were down 1.5% in the first quarter of the year.

They were unchanged in our fixed line operations and some internal reorganization led to the transfer to obtain our employees of the group subsidiaries. Despite this Greek fixed management deliver 120 basis points improvement in EBITDA margin compared with the first quarter of 2014 to 40% thanks to cost containment in other items.

We generated considerable cash in the quarter more than doubling operating cash flow and shirking from cash burn of €12 million in the first quarter of last year to a positive adjusted free cash flow of €53 in this year's first quarter. So at this stage in the year we are on track to meet our full year we're on track to meet our full year target of adjusted free cash flow of over €0.5 billion.

In order to convince the value add success business industry is to invest in the solution of our clients won. Our CapEx in the first quarter demonstrated commitment excluding spectrum CapEx was up nearly one-third in the quarter to almost €160 million, add to that another €68 million in payments for mobile spectrum largely in Greece but also in Albania, and you will have a better idea of this global technology and content we are putting into service for our customers.

Finally, a word on our full-market -- full year outlook. We have less essentially unchanged after one quarter.

Up to now we have seen no major signs that would lead us change our stand. Additional downward revisions of business to the forecast are obviously not a positive sign, but I think they reflected a period to-date, are in line to expectations for the coming months.

Our progress is clear, but is also a fragile expense as much as on our customers' perception on the future as other perceptional OTE services. So, we’ll remain particularly attentive in the next quarters.

We will be look out for opportunities to strengthen our customer relationships, as well as the vigilant way in controlling our cost and optimizing our investor spending. That sums up what I wanted to say for now, and I’ll ask Basis to take over before we take any questions.

Thank you, Michael. Good afternoon or good day to everyone on the call.

Group revenues were down 2.4% in the first quarter of 2015 extending the gradual improvement we have recorded in the past year. And once again the drop in revenue is entirely due to termination rate cuts.

This time in our international operations our tariff are now roughly stable. Excluding the lower termination rates we estimate that in the quarter consolidated group revenues would actually have been slightly up compared to the first quarter of 2014.

So top line stabilization is still I the menu particularly in Greece where it should remain so for the rest of the year. In Greek fixed line revenues were actually up by 0.3% or €372 million.

Revenues from retail fixed services were essentially flat compared to the first quarter of 2014 as TV services revenues jumped more than 20% and broadband by nearly 9% just about offsetting the 5% drop in voice revenues. In the first quarter we lost 27,000 retailers lines as the whole market record about 12,000 line disconnections.

Though this has led the determination from the fourth quarter presumably due to the uncertainties of prepaid in quarter one of this year it marks a definite softening compared to the average run rate in recent periods. Net broadband additions in the Greek market totaled 58,000 in the first quarter and dollar market share of new additions was a good 46%.

This is a fourth consecutive quarter where we secure a broadband market share in the high 40s validating our strategy of privatizing quality of service and network. Over half of our net additions in the quarter were about 50,000 new subscribers chose our high speed VDSL solutions.

In Pay TV we have added more than 13,000 new subscribers in the quarter to a total of 367,000 as at the end of March. We are expecting subscription numbers to pick up in the second half of the year as the Champions League Football programming rights comes online.

Let’s turn now to Greek mobile, with the service revenues down 4.9% this is a marginal deterioration compared to last quarter of 2014. The market was somewhat weaker than towards the end of the year of last year reflecting the drop in consumer spending.

And surprisingly the largest decline was in prepaid ARPU where sensitivity to consumer confidence is highest. Total revenues from Greek mobile were down just 0.3% in the first quarter the differential with the drop in service revenues this quarter primarily stems from an increase in sales of handsets and other hardware related to this and as Michael mentioned earlier COSMOTE’s participation in any new backed program promoting access to digital technology among lower income populations.

Capitalizing on our significant competitive advantage were in terms of 4G towers in the country COSMOTE achieved 14% increase in data handset service revenues in the quarter. Revenues from Telekom Romania’s fixed operations were down 5% in the first quarter.

Retail fixed services were down 6% single to the average drop experienced throughout the past year. Revenue from TV services we're up more than 9% reflecting a further increase in subscriber numbers and ARPU.

Broadband revenues were marginally down compared to the first quarter of last year in an increasingly competitive market environment and the voice revenues experienced a rate of decline similar to that of the previous quarter approximately 15%. The fixed mobile convergence offer launched a few quarters ago leveraging the telecom branch is continuing to work well and has attracted 88,000 customers at the end of March.

Revenues from ICT projects were up 22% from last year’s revenues. In wholesale Telekom Romania’s revenues were down 19% on lower termination rates and international traffic.

Staying in Romania service revenues from Telekom Romania mobile were once again down 17% precisely in line with the rate of revenue drop experienced limitation of the mobile termination rate cuts in April 2014. Again we estimate that excluding the rate cuts the service revenues would have been positive in the quarter.

Our underlying business is robust and we should start seeing positive indicators again once we parse the anniversary of the rate cuts though the market remains extremely competitive and the suites to split contracts will continue to impact numbers. The market is migrating from prepaid to postpaid and we are participating in this migration with our fixed mobile conversion offerings with prepaid customers down 5% and postpaid subscribers up by similar percentage.

We are also recording strong data revenues up nearly 30% this quarter. Our mobile operations in Albania recorded a 17% fall in service revenues in the first quarter.

Excluding the impact of NTR cuts the service revenues would have been marginally positive. Finally other group revenues rose by nearly 14% in the first quarter the main factor behind this increase corresponds to revenues received as part of a project funded by the European Union to develop broadband access in rural areas in Greece.

Let’s turn now to the rest of the quarter’s P&L. At the group level, the pro forma EBITDA amounted to €326 million and was down 2.2% from the first quarter of 2014.

As a result we achieved a 10 basis points improvement in EBITDA margin to 34.7%. In Greek fixed line operations EBITDA was up €5 million to €149 million and EBITDA margin rose 120 basis points to 40.0%.

Considering the further transfer of personnel from other group subsidiaries to OTE during the quarter leading to a typical increase in personnel expenses the improvement in EBITDA is further confirmation that our Greek fixed line operations continue improving quarter-after-quarter. The EBITDA margin in Greek mobile conversely was down 160 basis points to 24.2%.

As I noted earlier, revenues in the quarter benefited from the sale of handsets with lower margins than service revenues. Handset sales are now expected to return to normalized levels.

In Romania, for both fixed and mobile and in particular in Albania EBITDA and EBITDA margin was really impacted by the termination rate cuts. In addition in Romania fixed line operations we didn’t have any material disposals of non-operating assets in the quarter.

Total operating expenses excluding depreciation and amortization and one-offs for the first quarter declined by 1.5% to less than €631 million. Personnel expenses were down slightly in the quarter.

Greek fixed line personnel costs comprising the largest part of our group personnel expenses were down 3.1% despite additional cost of €3 million resulting from the transfer to OTE SA for the OTE PLUS and voice and employees starting this quarter. Group expenses other than personnel costs totaled 457 million and we are down 2% reflecting significant savings in marketing expense and commissions as well as sharply lower interconnection costs partially offset by higher bad debt provisions in our international operations.

Device costs were also up more than 10% reflecting the various programs in Greek fixed mobile that I mentioned together with increase ICT projects. The depreciation amortization terms for the quarter was nearly €201 million up 3% compared to the first quarter of 2014 and roughly stable sequentially.

Our traditional €14 million interest expenses was down 17% in the first quarter as a result of a debt reduction of the past year as a reduction of our 430 million 2015 euro bond in February. Net debt was roughly unchanged at €12.1 billion from the 2014 year-end level and down net debt to EBITDA ratio was also stable at 0.8 times.

However you need to keep in mind that our net debt was down 28% from each level to the end of March 2014. Since the beginning of the year we repaid a bond reaching maturity of nearly €450 million and proceeding with additional bond buybacks for another €28 million from our May 2016 euro bond.

As a result our cash position currently is slightly above €1 billion income tax are specially mention in this quarter at €41 million the 22% higher than in the same quarter last year. This is largely due to verification released by the Greek tax authorities change in the treatment of provision of bad debt regarding tax stability.

But in provisions are no longer recognized unless it cannot officially mitigate. Obviously in our case unpaid receivables are typically small amount taking individually a litigation would have makes sense so we are facing additional returns in our 2014 tax bill.

We already took a €9 million provision in the first quarter and might need to take another charge in the second quarter unless this decision which is convinced by us as well as the Greek utilities many retailers is reverse. Net income of minorities were €40 million in the first quarter adjusted for the additional tax charge I just mentioned in the restructuring costs net income would have been down just 6% to €54 million mainly reflecting the drop in EBITDA in the quarter.

Operating cash flow generations stood at €215 million up 96% compared to the first quarter of 2014 as a result of lower working capital, interest and income tax payment. Good work capital needs were reduced by €22 million compare to Q1 of 2014 while the increase in receivable does not reflect any worsening of collection as largely related to the rural and digital programs I talked to you before about, which were not present in these period.

On the absence of any external items income tax paid this quarter was significant lower compared to previous year, recall that last year's cash flow was better by €50 million tax payment related to capitalization of returns. In the quarter CapEx totaled €160 million excluding spectrum payments or €220 million where the payment for spectrum in Albania are added.

The increase compared to last year is largely due to last year's acquisition of TV contribute in Romania 4G, VDSL in Greece and Fiber To The Home in Romania. We reiterate our full year 2015 CapEx guidance of approximately €0.5 billion similar to last year.

As a result from a cash burn of €12 million in Q1 2014 we now posted adjusted free cash flow of €53 million. Here also we confirm our €0.5 billion free cash flow target for the full year.

This concludes my preliminary analysis of what has been a very good quarter from an operational financial point of view carried out rather testing circumstances. While we do not expect the environment to improve radically through the rest of this year.

We are in good shape to continue delivering solid performances particularly in our Greek business. Now Michael, Zac and myself are ready to answer any question you may have operator?

I have three questions I may please. First one has to do with the regulation in Greece, if you could update us regarding the regulatory landscape whether the regulator has been taking longer to approve your proposed tariff plans, whether your premium versus competitors has increased recently due to regulatory delays and whether there is any update regarding I guess the person will be put in-charge of the regulatory.

My second question has to do with Greek fixed costs, there has recently been some fresh reports talking about the potential new volume scheme that you might be under way. Could you tell us whether this is something you have been considering and if yes whether it might be of similar size of the last various that had taken place in 2013?

And last question has to do with Pay TV in Greece, I mean you briefly mentioned this earlier that Q-on-Q growth seems to have moderated a bit, I was just wondering whether this was in line with your expectations something that you are expecting and whether you should anticipate ramp up of TV additions ahead of the start of the next European season in the summer and I guess. I'm just wondering if this is case whether this will be driven by rising penetration of TV or may be migration of consumers from your other competitor.

Regarding regulation as you would know following us over the years in the previous year we had a clear improvement on the transparency and methodology of regulating committee. Currently we cannot comment on anything as we're expecting for the new Chairman of regulated committee to be appointed.

So waiting to see who the new Chairman will be and what would be his way of approach.

But in terms of any delays regarding the approval of recently proposed tariff plans that you have submitted is there any…

No we don’t have any problems. There is a matter of actions that have to be and decisions that have to be taken by the committee which have to do with the overall relation of broadband and for example the universal service something that it's still pending of the year.

There is not a decision we're paying for the whole bill and our competitors are having a free ride on this. Another example is regarding the regulation of factoring we're expecting there also be set there as well.

So there is number of things that have to be decided. But they are not only concerning us in general concern the country, the telecom space to the country.

So we're expecting for the new Chairman to be appointed and see how if he is going to approach particularly to us and we don’t have any negative commentary and concerns with same we had over the last year and half up to now know we had a clear improvement in terms of transparency and methodology on the handing. Now regarding the Greek fixed cost and particularly the voluntary exist scheme that you're asking we have been in discussions and we are making some calculations to see if there is an opportunity to launch another voluntary exit scheme.

We don’t have yet final position of this we cannot really comment I'll give you any detention risk one can say it's not going to be lower scale compared to the previous one we had. And on the Pay TV the achievements are what we have achieved so far is positive expectations positive, and yes we're expecting an increased momentum after the summer when the Champions League games will start.

And just two, I mean I am not sure if you want to comment on this. But just wondering basically if you believe that the increase of your TV subscriber base will come -- by both, okay.

By taking some customers from NOVA and also get some new customers as well.

Two questions please firstly on Greece and on the mobile space where service revenues have come down like 5% similar to previous quarter but total revenues were flattish which is a different trend on the previous quarter. So I guess that there has been some kind of positive handset sales evolution this quarter which I would like to understand what have happened there and whether this is something to continue or what are the dynamics in the market driving that?

And the second question is on -- one question that I also made in the past as well which is again on the privatization of telecom. And I was reading recently that the Romanian government is suggesting that they would prefer an IPO after the summer and what I just wanted to tell your folks on that whether you’ve think that you have dual track or maybe taking into account the macro instability in Greece now maybe it’s just OTE that has decided not to go for it and not the time to invest and rather time to reduce that further as a kind of contingency plan and therefore no time to buy the monitories there.

What are your thoughts on that please?

Regarding the mobile revenue service trends you correctly pointed out that following let’s say the escalation the declining trends in the previous two, three Qs, this Q we have the flattish let’s say service revenue trend, this is something that we see also this quarter. So what we could say that we do not see deterioration in terms of year-on-year trends.

However we have seen stop in terms of this positive development that we have seen in the last two Qs of 2014. So I would say that for the time being of course this depends on some of the macro developments.

We foresee a 3% to 5% decline in the Greek market for this year.

Regarding the privatization of home telecom, actually there has been much versus what we discussed in the previous quarter, the quarter project is still running under the auspicious of the Romanian government and they are still in the process of deciding what is the best way for them to privatize if they do so the minority stake and if this rate an IPO then it’s possible that we have to follow and of course we have those speculations now other than waiting for the Romania government to come up with say final decisions.

Babis second follow up on both, on the mobile question is there something justifying higher handsets revenue sales in the first quarter than in previous quarters, and on the second question the fact that the government is mentioning this on IPO has nothing to do with the intention of OTE of being keen to acquire the minorities?

Regarding your first question there is a newly funded digital solidarity program which stimulated the sales of handsets and tablet that was an one-off a fact that will affect mainly revenues and slightly EBITDA but this will not continue the rest of in the next Qs.

To your second point regarding the Rom telecom or the Telekom Romania privatization, again it’s a decision that lies with the Romanian government they want to run market oriented and quite a professional process so we are following according to this time table and of course end decision that or any direction that they would like to follow we will evaluate when the time comes. It’s doesn’t mean that we exclude or preclude any one of the options.

Just couple of questions, firstly on the cost reduction outlook you say that there would be additional initiatives that you would be taking to control OpEx. Could you maybe help us quantify in terms of amount of clearly and just help guide us in terms of what are those initiatives and what could be the time frame?

And deep further in terms of the IP transformation that you obviously with updating by 2018 have you give us any indication in terms of what could be the cost savings coming from that move? And secondly coming back to fixed line I know that’s been kind of a steady improvement that we have seen over here.

And it’s clearly by that regulatory easing as well and as you were kind of highlighting earlier that there would be still some pending decision. But how much of it has also been driven in the recent quarters by some price changes as well in the market.

I just wanted to understand has the competitors also changed prices in some of the mid end bundles in terms of the fixed line?

Regarding the IP transformation this is a plan that will last till the end of 2018 at this point in time we cannot disclose data regarding the cost savings because it’s the beginning of the program and we have to see the adoption and also the development speeds. However we could say that the main target is to optimize our service performance and also the experience of the customer of course targeting savings which at this point in time we cannot disclose.

Regarding the fixed fluctuations on bundling and pricing, these are not relevant with any let’s say regulatory moves. This has due to the volatility of the market and certain moves coming from our competitors and also from our side.

So nothing related with regulator.

But can I check in terms of pricing has there been any movement in prices in terms of bundle prices over the last few months or it’s been broadly stable in terms of the pricing environment?

Nothing that I would let’s say characterize as remarkable. There are always let’s say price movements but I wouldn’t say that there is let’s say kind of trend or something impressive that will change let’s say the rate of the market development.

Regarding your third question about costs, I think it’s also consistent in this quarter results that the costs are always under our attention and we try to conveying them and Michael Tsamaz Earlier talk about the exercise we do to see if there is a meaningful proposition for another long term retirement scheme and we are working on that. And also all the other lines that comprise the posts are possible under revision.

And the target is quarter-by-quarter to deliver good use on the cost side.

I’ve actually got two very quick questions on mobile, the first one in Romania you mentioned the impact of the NTR cuts and without them the growth still looks a bit healthy. But I was wondering as we face the NTR cuts from next quarter and fully phased out during the third quarter.

Should we expect the growth to be in the mid single digits starts the X-NTRs will imply or do you expect that to be underlying slowdown given the competitive intensity that we see in the market and any comment on how you expect the margin in Romania to progress based on that? And my second question on Greek mobile now there has been a meaningful improvement in the service revenue decline and I understand the macro has worked a bit against you in the first quarter.

Anything regarding the pricing environment worth mentioning have you see any moves from your competitors either positive or negative, there was some talk about the Vodafone making small adjustments on data pricing going down as voice pricing going up. Is that really coming through or we haven’t seen much yet.

Regarding your second question I would say that there are no specific impressive moves on the mobile pricing however these are contained on the bundling offers that they are giving. And that might be also the outcome of the acquisition of whole.

And the same trend comes also win. However I wouldn’t say that in terms of impact in the first Q it's the competitive setting that has both pricing both let's say revenues down I would say 70% the macro 30% competitive set up.

Regarding the comment about the MTR Turkey Romania, I think you are very right that in quarter two we would not have the base effect because of the mobile terminate rate cut. And that would mean that these compensation effect will be taken out and we expect the compulsion revenues to become much more favorable versus what it is now.

I can't give you specific percentage but given the fact we've done certain moves in the market that we think they work towards the direction stabilize revenues in the mobile round, we expect to see much better trends coming or starting from Q2 onwards. A comment about the overall margins in Romania let me say that last year we had for our decrease with the year we had change of ideal assets real-estate and cooperate was extracted due to our Fiber to the Home roll out.

And therefore will be very elaborative when you compare the EBITDA quarter-on-quarter in the coming periods of the year. In order to make sure and state articulate very clearly what is the organic or the recurring profitability versus the one-offs.

So these effects will be evident in the coming as of Q2 actually in all goods.

If I may ask one more question towards new currency, one of the proposals that appears to be coming out of the negotiation to unify the VAT rate increase. And in your case it may come down from 23% to let's say 18% to 20% not so much are on the percentages.

But do you expect prices on the packages to change to reflect the VAT changes or are they more likely to stay as they are today even if the VAT changes.

Regarding to what will happen we would appreciate if you told us, the final outcome the negotiations. Regarding the impact in any changes there will be no impact on the price.

Could you give us the split of TV subscriber in IP TV and fast life please the latest quarter was very interested 7,000.

Actually soon we're going to launch the hybrid solution which will make your question redundant. So far we have not disclosed this figure and this is our intention for the future.

From the next Q we are going to have hybrid subscriber. So we are going to continue report one single number.

Just a follow up on the issue you mentioned about bad debt provisions and task tax deductibility after the change of the low. Is there -- I know it's very difficult but is there any sort of guidance you can give us regarding the tax rate for the full year?

First of all on this subject as we said there is discussions were seeing to the relevant authorities for clarifications and proposed to make it less adverse effect that we discussed. And the way we handle the retail business not only us but also many other companies.

And other than that we expect that in a long-term the effective tax rate -- to traditionally we have been guiding around in the high 20 grows 32% and although there will be risk adjustment this year on rising rates I don’t expect that the effective tax rate will move substantially lower or higher because of these situations, of course other than the arise change in the tax rate. So there is hick up in this couple of quarters but out of that we expect to be rationalized.

And actually follow up on the question about the VAT in Greece, just to make sure I understand this correctly. Did you say that if the VAT goes down there will be no impact on the retail price is that what you said?

Actually that means that customer will not absorb the increase. Actually we are going to give the benefits to the customer.

I'm not sure if you heard me asking what the splits were between IP TV and satellite for the latest quarter TV subscriber numbers.

As I mentioned to you we intend to introduce soon into the Greek market the hybrid solution. So from now on we’re going to report a single number as we use to have in the past.

So all of our customers will be migrated to hybrid solution so IP and satellite would not we relevant in the next one or two Qs. So at this point we'll not the change the way that we report our customers which will be the total customer number.

And there is been some developments regarding Voicenet and that might potentially affect your non-borrowing being bid. Do you have any thoughts about that, that you could share with us?

The number case that we expressed in this last year, we have put it on hold. And this is whole because the current environments dictate that we are prudent and we don’t at this point of time further go down.

So no further use on what the time being.

We should like any color on what level of subscriber numbers you are aiming for by the year end. Because to your growth rate since quite impressive the slowdown rate is quite a lot more concerning and that’s not because you guided in bad job is just because the market is only so much big and you don’t control most of any way.

I would disagree regarding the control if you see in the last Q our competitors have added roughly say 3,000 customers, we have added 33 in the Q4 and in this Q we have a better team but let's wait for the results in order to see who is controlling the market. Regarding let's say the moderate as you mentioned growth this is aligned with our total year plan just to remind you in the previous years we are adding 100,000 customer per year and I cannot disclosed the end year number.

But having the assumption right and having it skewed Q3 and Q4 we have quite high expectations which I cannot disclosed.

Fine, I think their numbers are already out and they recently won the local rights which I think is quite a major backbone of core packages that people take up in Greece, so as far as just a big concern about that.

I would like to suggest to enjoy to-date markets with this let’s say real against [indiscernible] and yet the loan against bad debts and then you could see whether let’s say you can compare the two proposals and that was our intention when we bid for the targeted rates, and of course we expect the choices that the customers our competitors are having but we believe on our strategy and we believe that it will pay back.

So thank you very much. We’re looking forward to see you in three months.