ECONOMY

OTE’s 3Q profit declines 84.2 percent, to 19.3 mln

OTE Telecom’s third-quarter results were worse than expected, prompting company Chairman and CEO Panagis Vourloumis to announce yesterday that he would propose scrapping the dividend for 2004. «We do not expect significant performance improvements in 2005, notably in view of recent regulatory decisions, while the implementation of our restructuring plan will entail important cash outlays,» Vourloumis said in a statement. «I will therefore propose to the board of directors to eliminate the payment of a dividend for 2004,» he added. OTE had paid a 0.35 euro dividend per share for 2003. The group’s consolidated net income in the third quarter – under US Generally Accepted Accounting Practices (GAAP) – was 19.3 million euros, a drop of 84.2 percent from the third quarter of 2003. Cumulatively, net income for the first nine months of 2004 stood at 112.4 million, a 66.2 percent drop over the same period in 2003. For the parent company alone, there was an operating loss of 23.8 million euros in the third quarter, compared to a profit of 125.5 million in the third quarter of 2003. For the nine months of 2004, operating profit stood at 55.8 million, an 86.3 percent fall from the 406.1 million profit posted during the same period in 2003. Third-quarter earnings before interest, tax, depreciation and amortization (EBITDA) fell 11.5 percent to 455.9 million euros. Group sales rose 6.8 percent to 1.369 billion euros. «The third quarter was another period of mixed results for OTE,» Vourloumis said. «On the positive side, OTE achieved a flawless technical performance during the recent Olympics, earning broad international recognition, which did not, however, translate into any material financial gain. Our mobile operators as well as RomTelecom continued to turn in strong performances, while OTEnet strengthened its position as the dominant Internet provider in Greece. These achievements were again overshadowed by the deterioration of our core Greek activities. While the rate of traffic erosion is slowing down and market share stabilizing, operating expenses rose sharply, and we continue to suffer from the lack of a coherent policy by the regulator, resulting in an unpredictable environment that is detrimental to the entire sector,» he added. OTE has complained of the «extremely low tariffs» it says telecoms regulator EETT has imposed for OTE’s fixed-line competitors to use its network. OTE also blamed part of its quarterly profit decline on a 21.3-million-euro provision related to the non-payment of a management fee due from Telecom Srbija. It owns 20 percent of the Serbian phone company. Despite the drop in profit, investors bought shares yesterday, driving the price 1.96 percent higher, to 12.30 euros. As analysts said, investors are looking forward to the success of Vourloumis’s restructuring plan for the company, which entails 6,000 job cuts in 2005, at a cost of about 1 billion euros.