OTE income falls in Q1 due to costs, rivals

Telecoms operator Hellenic Telecommunications Organization (OTE) yesterday reported lower first-quarter net income, pulled down by a sharp jump in operating expenses, higher debts and losses at its Romanian subsidiary. Consolidated net income fell by 6.3 percent to 140.6 million euros, following a 7.8-percent rise in operating expenses. A higher wage bill, increased depreciation and amortization costs, bigger payments to mobile telephone operators and international operators contributed to the expenditure jump. Part of the costs also related to increased third-party fees, advertising campaigns and commissions to dealers. OTE saw its net financial cost balloon to 25.2 million euros from 10.6 million euros as a result of a rise in net financial debt and a first-quarter loss from RomTelecom in which it holds a 35-percent stake. Intersec telecoms analyst Constantinos Karitsos was less than happy with the result. «The figures are lower than I expected. They show that OTE is losing market share in fixed telephony services and revenues to mobile phone operators,» he said. He said the first-quarter results portend a «difficult year for OTE, in terms of revenues and profits.» Vassilis Vlastarakis, analyst at Contalexis Financial Services, has a more sanguine view of OTE’s first-quarter performance. He said the telecom operator’s decision to jack up the depreciation and amortization charge early in the year relieves it of a burden for the remainder of the year. OTE is unlikely to be troubled by the new entrants to the fixed telephony market, Vlastarakis said, noting the company will continue to dominate up to 2003. On the positive side, OTE said operating revenues soared by 8.9 percent to 1 billion euros, boosted by mobile phone subsidiary CosmOTE’s profit gains. Revenues from domestic telephony services were unchanged at 528 million euros, while international telephony income fell by 4.6 percent, as rivals ate into its market share. Earnings before interest, tax, depreciation and amortization (EBITDA) rose by 12.7 percent to 441.8 million euros, lifting the EBITDA margin to 43.3 percent. OTE’s overseas ventures reported mixed fortunes. Telecom Serbia, in which it holds a 20-percent stake, returned to the black with a 24.8-million-euro profit. Armentel, 90-percent owned by OTE, and RomTelecom, in contrast, had net losses of 0.8 million euros and 17 million euros respectively.