OTE quarterly profit down

Increased competition and non-recurring one-off gains hurt OTE’s third-quarter profit, but Greece’s largest telecom company expects its full buyout of mobile subsidiary Cosmote will boost future earnings. OTE said yesterday net profit fell 30.5 percent year-on-year to -155.5 million, in line with forecasts, as a one-off -50-million reversal of provisions last year was not repeated. The group is buying up the remaining shares it doesn’t already own in its profitable mobile arm Cosmote, seeking to offset a drop in fixed-line operations with growth in mobile telephony. «In the quarter, we achieved solid operating performances, characterized by continued strong growth in mobile and satisfactory resilience in fixed line,» OTE Chief Executive Panagis Vourloumis said in a statement. Group sales rose 9.7 percent to -1.63 billion, thanks mainly to Cosmote’s strong performance and increased sales from recently acquired retailer Germanos. Cosmote’s expansion into the Balkan region also boosted overall revenue while Germanos more than doubled its contribution of clients to about 540,000 in the quarter, the company said. OTE earlier this month offered to pay -26.25 for the 32.2 percent of Cosmote it didn’t already own, pursuing a full merger of operations. «The buyout of Cosmote minorities is EPS and cash flow enhancing for OTE. The full impact will be seen in 2008,» said analyst Costas Karagiorgos at EFG Eurobank Securities. Third-quarter operating income before depreciation and amortization dropped 9.6 percent to -613.2 million. OTE has also sought to offset falling fixed-line customers with an increase in broadband Internet revenue. At the end of September, OTE had about 756,000 ADSL customers, up about 82,000 from the previous quarter. The group estimates Greece’s fast Internet market will have about 1.1 million customers by the end of the year. OTE is aiming for about 800,000 of them. «The year 2007 is a transitional one for OTE. It looks like it will meet its targets despite growing competition in its fixed line segment,» Karagiorgos said. OTE’s shares have gained about 9 percent so far this year, slightly underperforming the Athens general index, which is up about 11 percent. The stock trades about 20.2 times 2007 earnings, on a par with European peers such as Deutsche Telekom, which trades about 21 times prospective earnings, but at a premium to Portugal Telecom, with a ratio of about 15, according to Reuters Estimates.