Michael Tsamaz - Chairman and CEO Zacharias Piperidis - Chief Operating Officer Babis Mazarakis - Chief Financial Officer Evrikos Sarsentis - Head, OTE Group Mergers, Acquisitions and IR

Vikram Karnany - UBS Ivan Kim - VTB Capital Georgios Ierodiakonou - Citi Luis Prota - Morgan Stanley

Good morning or good afternoon to you all. I’m pleased to welcome you to our call, during which we will discuss OTEs results for the third quarter of 2015.

I will first comment on developments at OTE and then our markets in the third quarter. Then Babis Mazarakis, our Chief Financial Officer will review our performance and financials.

Zacharias Piperidis, our Chief Operating Officer, Babis and I will then take your questions. We continue to have a good performance in all key metrics, operational, as well as financial.

Customer numbers, service KPIs, as well as revenues, EBITDA and cash flow are in a good trend. Though we didn’t marked the positive Group revenue growth over the previous quarter due to the challengeable additions we had a very good topline performance in Q3.

In Greece, we are ripping the fruit of our investments in customer services and technological excellence in both fixed and mobile. We are pursuing these multiyear investment programs, which are the foundation of our resilience in these less favorable times.

I am particularly pleased with the performance of our retail fixed services up nearly 1% this quarter and for the first time additional revenues from broadband TVs significantly outpaced the Group invoice revenue. In TV, this reflects in part our acquisition of premium content, which has proven a successful strategy, but it is also largely due to the quality of our offering enabling us to offer a Dolby Stereo in a high-definition programming to our subscribers.

In the quarter, we added 36,000 in new TV subscriptions, three times of eight of the previous quarter to reach a total of 414,000 customers. Our share of broadband net additions also exited -- exceeded 68%, on part it was a record level recorded in Q2.

We also had more than 130,000 video cell customers at September 30th. On the flipside, we lost only 14,000 access lines in Q3 in a market that posted its second consecutive quarterly drop.

This enabled us to post the fourth consecutive quarter of growth in Greek fixed line revenues, verify once again the stabilization trend we have taken about for awhile now, despite tough market conditions. In Greek mobile, service revenues were down 3.3% in the quarter, about half the annual run rate we experienced in 2014, and extending a long trend of narrowing quarterly drops.

This performance was helped in part by the EU sponsored Digital Solidarity program which expires this month. With all of this factor the drop in service revenue would be in line with the previous period quite a few considering the development of the quarter in the Greek market particularly the capital controls imposed in July.

In Romania the situation has be more volatile, as we are not yet seeing the benefits of our recent investments in infrastructure. We believe that this will start to kick -- to kick in the later part of the next year.

We also expect further benefits to arise from correlated management of our fixed mobile operations from fixed-mobile convergent services. The contrast between our Greek and international EBITDA that was lagged last quarter was again pronounced this quarter.

In Greek fixed our pro forma EBITDA margin at 41.7% shows the first favorable impact operation, personnel cost saving effort. Greek mobile achieved the successful EBITDA margin of 39.6%.

Conversely, overall margin in our international operations was impacted by variety of factors, notably, the revenue mix in absence of real estate or corporate disposals in Romania. Overall, at Group level pro forma margin reached 36% under the circumstances good outcome.

We invested more than €150 million in the improvement of our infrastructure and customer experience in the quarter. Over the first nine months of the year, our CapEx is up 2% at the Group level.

Despite these continued investments and the impact of slower customer payments are on the period of uncertainty and cash restrictions experienced in the summer, we generated significant free cash flow in the period. Over the nine months, free cash flow is up more than 17%, an impressive achievement under the circumstances.

We are confirming that we should meet our 0.5 billion full year objectives for CapEx as well as for free cash flow assuming a continuation of current conditions in Greece. Before I say few words on our outlook for the fourth quarter, I would like to talk for a minute on two important recent events.

Two weeks ago we announced a major partnership with Coca-Cola Atlantic Bottling Company to build and run an advanced data center accessible by the 36,000 employees of this leading Coca-Cola bottler in 28 countries. With this cooperation gone after a demanding tender process, our ICD capabilities are recognized not just at the local level but on a regional or even global stage.

The second development I wish to highlight which should also benefit our future growth is an indication not only of Cosmote brand but all our customers facing activities in the Greek market announced a week ago. With the refresh look, the Cosmote logo will provide a specialty unified umbrella for all customer match points, retail channels, websites, mobile applications, single core center etcetera.

The single major step in the integration of our fixed mobile operations which will all benefit from the positive attributes a huge appeal of the Cosmote brand as well as great opportunities of economies of scale. Turning to the more immediate future, we don’t expect major changes in our operating environment in the fourth quarter.

On the glass side, growth in TV subscribers numbers and ARPU as well as broadband will support our Greek fixed line, but this might be offset mobile by the end of the one of factor I mentioned earlier and [indiscernible] announced in his remarks but not yet implemented. We will also put further pressure on disposable income and consumer spending.

Again, this mitigated background we tend to continue defending and growing our topline to boost our cash flow generation and sustain stability. At this point, I would like to turn over the phone to Babis.

Thank you, Michael. Good afternoon or good day to all of you.

Following on our first quarter of topline growth in many years, Group revenues were down 1.7% in the third quarter of 2015. This doesn’t mean that the total stabilization of the revenues we have been putting up out for a while has come to stall.

We believe that the underlying trends that drive destabilization are still very much at work. We are actually quite pleased by the resilience of our topline and more generally of our performance in what has been a very challenging quarter in our environment in Greece in particular.

As Michael just noted, work constitutes the core of our business in Greece that is retail service revenues in fixed and service revenues in mobile performed remarkably well under the circumstances. Mobile in Romania also posted positive topline improvements now that the anniversary of the mobile termination rate cuts has passed.

As we will see, the further decline in Romania fixed line revenue compared to last quarter is primarily related to wholesale, while trends in retail service revenues were roughly in line quarter on quarter. Greek fixed line revenues were up 0.2% to €377 million.

This is a fourth up quarter in a row so we have a full year of topline growth celebrate though not a calendar year. This time around and at least the benchmark we have 0.9% increase in revenues from retail fixed services as 10.2 million increase in broadband in TV revenues more than offset moderate drop in voice of 5% or €8.3 million.

The increase in broadband revenues at over 11% was not above the first half level, but growth in TV revenues accelerated at 35%. As anticipated, in addition to additional seasonal pickup our new football championship offering fewer TV subscriber numbers.

TV net additions totaled 36000 with many subscribers joining at the end of the quarter and not contributing to the growth in revenues over the full period. These connections for the whole Greek market totaled 16,000 lines, a deterioration compared to the second quarter indicative of the microeconomic pressure.

Of this total, OTE lost 14,000 lines bringing our line loss for the first three quarters of the year to 50,000 less than half the number of line disconnections in the first nine months of the previous year. Total broadband net additions in the Greek market continue to shrink for the third consecutive quarter amounting to 45,000 in the third quarter.

For the [indiscernible] OTE net additions of 31,000 were roughly in line with the average of the past five quarters since we introduced our double and triple play packages. This gave us once again a very strong market share of new additions of more 68%.

In Q3, we added 12,000 VDSL high-speeds subscribers for a total of €139,000. This represents 9% of our total broadband customer base and more significantly, a full 24% of the eligible base.

Thus, at the end of September, we had over 4.4 thousand VDSL cabinets in operations and this number continues to grow. The Greek fixed business also benefited from the good flow of ICT revenues, even before the Coca-Cola data center project that Michael mentioned before started to kick in.

In Greek mobile, total revenues were down 4%, a slight sequential deterioration. However, service revenues declined by only 3.3%, continuing the narrowing of the drop we have seen quarter after quarter for a few years.

Service revenues did get a boost from the EU-sponsored Digital Solidarity program with postpaid subscriber numbers growing by over 4% in the quarter. Taking away this factor, we would still have recorded a slight improvement in the rate of service revenues decline despite the difficult conditions and capital controls circulating in the market.

Prepaid subscriber numbers was a part we are mutually unchanged compared to Q3 last year. ARPU was down about 5% year-on-year in both pre and postpaid.

The drop in total voice revenues for the quarter was below 6%, unchanged from the prior quarter while data revenues were up another 20%, particularly reflecting digital solidarity subsidies. With smartphones now accounting for roughly one half of our base and with our leading 3G, 4G and 4G Plus network coverage, we expect data revenue growth to remain positive thought not at the same level as in recent quarters.

After a positive Q2, helped by seasonally higher wholesale traffic, revenue from Telekom Romania’s fixed operations were down more than 5% in the third quarter, roughly in line with a percentage drop positive in the first three months of the year. At about 8%, the drop in retail fixed services was unchanged compared to Q2.

However, TV services showed a marginal improvement in a market where competition is intensifying. The Telekom brand fixed-mobile offer performed extremely well, with a trebling of revenues this quarter.

Telekom Romania’s wholesale revenues were down nearly 10%. Going forward, we expect Telekom Romania revenues to start benefiting from the competitive edge it has just build with its fiber network, as well as from close integration with mobile.

Telekom Romania Mobile had its second quarter in a row of moderate revenue growth, now that the impact of MTR cuts is behind us. Service revenues were down less than 3% due to the Swiss contracts 15:08.

Mobile data revenues were up by only 15% in the quarter. Total revenues of 5% were also helped by the fixed-mobile convergence services I mentioned before.

In the quarter, Telekom Romania Mobile reported a 5% year-on-year growth in postpaid subscribers with ARPU up more than 2%, while the prepaid customers account was down 6% and the ARPU down 5%. Albania, as we had anticipated with a reversal year from MTR cuts, our mobile operations recorded a nice increase of service revenues, up more than 4%, the first positive performance since the first quarter of 2014.

Total revenues in Albania were up more than 3%. The revenues for the group was unchanged in the third quarter.

Let’s now move to the rest of your P&L for the quarter. Group pro forma EBITDA was down less than 6% to €350 million, while EBITDA margin dropped 1.6 percentage points to 36%.

As of quarter two, we have had some improvement in absolute, as well as in margin terms in Greek fixed-line and the resilient margin performance in Greek mobile. This was offset by the shortfall in Romanian fixed and by continued but significantly minor drops in Romanian and Albanian mobiles.

In Greek fixed-line, pro forma EBITDA was up 4.2% to €157 million, with margin up 160 basis points to 41.7%. Operating expenses excluding depreciation, amortization, impairments were down more than 1% at €224 million, with personnel expenses up about 5%, reflecting to the transfer to OTE of personnel from Other Group subsidiaries.

This was more than offset by a shaper drop in third-party fees. Overall, personnel expense and EBITDA started to benefit from the impact of the 600 employee early retirement plan that we carried out in the second quarter of this year.

Greek mobile EBITDA was down 5.4% on par with first two quarters of the year and EBITDA margin stood at 39.6%. In Romania, fixed-line pro forma EBITDA was down by nearly one-third to €24 million.

Last year, proceeds from disposal of copper and real estate had boosted the EBITDA. In the quarter, Telekom Romania fixed took a €12 million charge for an early retirement program, covering 435 employees.

Pro forma EBITDA in Romanian mobile was down just 4%, a far milder decline in the prior quarter yielding a margin of 24.4% still down year-over-year but improving sequentially for a second quarter in a row. We expect deficiencies from joint management of operations for Romania to start generating profitability improvement in the country in the coming quarter.

Finally, while pro forma EBITDA margin has been still far from each historical levels or even from each level one year ago, we have got the solid sequential improvement this quarter from 15.6% to 20.9%. Total group operating expenses excluding depreciation and amortization and one-offs in the third quarter were down slightly to €625 million with personnel expenses along down nearly 3% to €167 million.

Personnel expenses in Greek fixed line were done by €10 million or more than 10% from the second to the third quarter, largely reflecting the impact of the last voluntary retirement program. Group expenses other than personnel costs totaled €466 million and we are up less than 1% with some drops of 5% and 6% respectively in Greek fixed mobile operations.

The depreciation and amortization charge for the quarter was about €172 million, up nearly 2% from last year’s third quarter due to the higher TV content amortization. Interest expense was really cut in half in third quarter, dropping from €68 million to €56 million reflecting both a base effect with Q3 2014 figure.

Those burden by financial cost of more than €20 million related to the bond buybacks and 24% reduction in the group net debt to $1.1 billion through the end of the quarter, compared to the same date of last year. Net debt to EBITDA was unchanged from last quarter to 0.8 times.

Group income taxes in the third quarter were down sharply to less than €21 million. Q3 2015 was positively impacted by €29.4 million from the reassessment of the group’s deferred tax position due to the tax rate change in Greece from 26% to 29%.

After minorities, we recorded a consolidated net income of €78 million in the third quarter. Now operating cash flow generation €255 million in the quarter, down 15% from the third quarter of 2014, largely reflecting higher working capital requirements as customers increased, low down payments of their bills during the July bank holiday period.

Account receivables were up by €80 million in the quarter. This being said net operating cash flow for the nine months was up 7% to €685 million and under the economic scenarios substantially really we expect a full year improvement in operating cash flow.

CapEx for the quarter was €142 million. There was no spectrum payment in quarter three.

CapEx excluding spectrum is up by about 2% in the first nine months of the year, up €433 million, reflecting our continued investment in growth of our markets. Like last year, CapEx in the fourth quarter should be more limited.

So we should end the year with CapEx of approximately €100 million as we have consistently guided. Adjusted free cash flow totaled €93 million in the third quarter, down 27% primarily reflecting the drop in operating cash flow I just mentioned.

These as we expect our account receivable realization normalizes in the fourth quarter, we believe that we should end the year at or close to our stated target of €0.5 billion free cash flow for full year 2015. These concludes our prepared remarks.

Now, Michael, Zach and myself are now ready to answer your questions. Operator?

Thank you. I’ve got two questions.

First, on the Greek Mobile data, just wanted to check specifically, what were the factors that were driving the strong data growth in Q3 and why do you think the strong data revenue growth is not sustainable considering relatively still low smartphone penetration level in the country around 50% and also if you could clarify on the average data usage per customer. And secondly, in terms of IP transformation, I just want to understand what sort of OpEx cost reduction are you expecting from that move around IP transformation?

Thanks.

Regarding the uptake of the data, it has to do with two factors. The first one is gradual uptake of the usage together with certain moves that we have done on the pricing front, clarifying, let’s say, various factors and giving let say the control mechanism of customers in order to utilize data without the fear of exiting the levels of bundles.

This is one thing. And the second thing is the Digital Solidarity project which also gave some push in terms of connections.

Of course, we do not expect that this will continue in the same impressive way but definitely we are positive in terms of the developments of the data. Currently, we have usage which is close to 1.4 to 1.5 giga per customer which is quite high.

And as you mentioned, we have a 50% penetration on data. The reason why we’re not that optimistic in terms of quicker penetration levels from the terminals has to do with the subsidy levels and be up.

So we have to control to have a profit -- the controllable profit on our organization. So regarding the IP, the IP transformation is a project that of course its under the first step.

And it will last for -- let say, for the next three to four years. So actually what we’re expecting from the customer level is to improve the customer experience and this is the main purpose of executing this project.

All the other things which are related with the cost efficiencies will kick in gradually. So I cannot refer, let say, the specific size of the numbers that we expect.

Okay. Thank you.

Yeah. Good afternoon.

Two questions please from my side. Firstly, on your net leverage, it keeps falling, it’s now 0.8 times on debt to EBITDA.

So are you going to just continue reducing it to zero or there is a certain leverage target that you’d like to sort of keep or you have in mind? And then secondly, with regards to your nice working capital due to recent events, whether the amount there because of that?

And when do you expect to recover? Thank you.

Regarding the first question about the leverage ratio, actually stable for the past few quarters at around a little bit below 0.9, 0.8 times. This reflects the uses of cash for various reasons.

It goes to the EBITDA distribution it goes to the year and the one-time retirement scheme and the accelerated investment that we had in the first nine months, which as we consider from the results there are quite impressive results. And of course, in front of us we have also our debt maturity profile which has extended up until 2020.

And in the previous call, we have guided that depending on opportunity that may arise for various investments that might be also in acquiring valuable content for our TV franchise. And we feel that given the consideration of microeconomic environment that we are in leverage ratio of up to 1.5, 1.3, 1.5 times is what we feel safe.

And this is something that we have consistent in the past quarters. And regarding the working capital, we have seen as we mentioned deterioration in Q3, but in other words, expect I would say, because we had the capital controls and bank holidays for almost half of the quarter.

Right after there was a gradually recovery of the payment pattern and currently now that we are well into the Q4 that the payment pattern have been normalized, our budget levels are along the historical trends, not increasing materially. And given the fact that the economy or the economic climate has been stabilized and normalized, we expect full restore of the payment will be behavior of our customers within -- even within this year.

That’s why we say that despite the kick offs of quarter three we still are confident that we feel comfortable to deliver the guidance of free cash flow target of roughly at or close to €0.5 million.

Okay. Thank you.

Good afternoon. I have got two questions.

First one is around the VDSL rollout, which has shown on slide has been growth target for 2019, is it possible to guide us through how you expect that -- that phasing of that giving your experience so far with demand? And any impact on your comments or not from this process?

And my second question is more of a clarification around the TV revenues. You mentioned the solid growth in the third quarter.

I want to -- you also mentioned you added a lot of customers towards the end of the quarter? Do you mind just talking us through what to expect in the coming quarter?

Most specifically, exactly, which date did you raise the prices to €23 to €25 and was the growth there for accelerate or not in the fourth quarter? Thanks.

So, regarding VDSL rollout, as you understand, we are giving let’s say for implementation and for exploitation, cabinets in various, let’s say bundles. So it takes time from the time that we have them up and running till the time that we exploit them.

Sometime this creates, let’s say some seasonal effects related with implementation. However, the plan is steady and we followed for the last three years and this is our target for the future.

We are quite happy from the perception of customers and from the uptick. Almost one out of four eligible customers have both the services and overall they enjoy a very good customer experience there.

And we will continue in terms of investments. And of course, this has an impact, positive impact on the ARPU for the broadband.

Regarding TV, the new pricing scheme was applied on the 28th of August. So, you understand that the impact in this Q is small.

With the implementation to the whole base, we expect the ARPU of the TV to grow by more than 10%. And as we mentioned in the text, we expect that this growth will continue because we do believe in our product and so far, despite the crisis and the effects, the unexpected effect that we had, let’s say in the last two, three months, the evolution of the TV both customers and ARPU is according to the planning that we have done.

Okay. So, can I ask one follow-up clarification on CapEx?

This year is €1.5 billion. Could you keep it up €0.5 billion and reach this target that you said on VDSL and vectoring?

Yes, the guidance for this year is roughly €0.5 billion, And last year it was also €0.5 billion and next year, we expect to be about €0.5 billion and all the investments that are necessary for Greece, Romania and Albania in order to generate our revenue trajectory are included in these numbers.

Okay. Thank you.

Yes. Including VDSL.

Yes. Thank you.

Yeah, two questions please. First is on content.

You were mentioning that when ask about what leverage that you might be considering acquiring more content. And I know that, for instance, when you have been acquiring football and the Champions League that is included in the same package as the rest of the content and you have just increased prices to monetize that content.

So the question is, whether -- if you continue acquiring content, whether you will continue increasing the price of the TV package. Or you could go to some kind of more a small packages of content, say, one for football, one for movie or things that in order to monetize content without forcing people to pay very high ARPU levels?

And the second question is on the Coca-Cola project. I don’t know whether you could give us some order of magnitude of -- for how many years this is going to be there and what could be the revenue and EBITDA contribution?

Thank you.

So regarding your first question, we are always looking for say complementary content. However, so far we believe that we have, say, quite a strong lineup and this is reflected on the proposition and also on the perception of customers.

Our ARPU is approaching €20. So we do not expect, let’s say, to have major big moves.

However, we are always there, in case as we do believe there is something that can add value. In terms of the Coca-Cola project, I cannot be a bit look -- look more specific than, let’s say, the announcement that we have done.

As you know, it’s a 40-plus revenue project for the next five years, million -- sorry -- 40 million plus for the next five years. And we do expect that this project will have certainly say deals and further expansion related with this project, not only with the specific one but also giving us access also to other markets and putting us, let’s say, in the forefront of the ICD components which are also playing in the global arena.

Okay. Thank you.

Okay. Thank you very much.

Thank you, everyone. See you next time.