CosmOTE growth slows

CosmOTE, Greece’s largest mobile phone company by users, reported a weaker-than-expected 19.6 percent rise in full-year profit yesterday, driven by continued growth in handset usage. CosmOTE, majority-owned by OTE, said 2004 group net profit rose to 302.5 million euros, with group earnings before interest, tax, depreciation and amortization (EBITDA) up 17.1 percent at 674.5 million. CosmOTE said its EBITDA margin was steady at 42.5 percent, with its net profit margin improving to 19.1 percent. Analysts in a recent Reuters poll had forecast on average a 25 percent increase in net profit to 315 million euros. «There was a slowdown in the fourth quarter, an expected outcome as in the previous two quarters CosmOTE saw an increase in traffic and revenues related to the Olympic Games,» said EFG Eurobank Securities analyst Costas Karagiorgos. «The mobile telephony market is headed for single-digit growth in Greece. Overall, results were slightly weaker as the market is maturing,» he said. CosmOTE, which reported under US GAAP, said group sales grew 17 percent to 1.587 billion euros last year, including a sum of about 13 million euros for the management of Globul in Bulgaria and Cosmofon in the Former Yugoslav Republic of Macedonia. «Group operating revenues for the period increased by 17 percent year-on-year, significantly higher than the respective growth rate of 13 percent for the full-year 2003,» CosmOTE said. «This is mainly driven by continuous, very strong growth in usage in Greece, combined with positive performance in the Albanian operations.» Higher usage Traffic volumes in Greece grew 28 percent year on year, with data revenue making up 11.3 percent of total revenue. Chief Financial Officer Elias Fotiadis told analysts during a conference call usage growth would continue to be the driver in 2005, but with a slower rate than in the past. «We believe usage and usage growth are still going to be the main growth drivers, even if less than this year,» he said, conceding that traffic volume growth of 28 percent in 2004 had declined from 33 percent in 2003. «This year there is going to be significant growth, but less than that (of 2004),» Fotiadis said. He noted that mobile traffic in Greece accounts for about 30 percent of all calls, compared with 40 percent in Europe, suggesting scope for growth. CosmOTE said its average revenue per user (blended ARPU) was 6.1 percent higher than in 2003 at 31.3 euros. Contract ARPU reached 56.1 euros, up 13.8 percent. CosmOTE’s total subscriber numbers in Greece, including prepaid and contract clients, reached 4.151 million, maintaining its top position in the domestic market. In Albania, the total customer base grew to 638,728. The group added a net 40,378 new contract and 193,959 new prepaid clients in 2004. Its annualized churn rate was 22.7 percent. Capital spending last year reached 218.3 million euros, including Olympic Games-related costs and investments in 3G, leading to a capital expenditure-to-sales ratio of 13.7 percent. The shares, up about 6 percent this year, closed down 2.58 percent at 15.08 euros. CosmOTE’s main competitors are Vodafone, TIM Hellas and Q-Telecom, a unit of Infoquest. (Reuters)

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