As filed with the Securities and Exchange Commission on June 30, 20097, 2010
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
Form 20-F
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Fiscal Year ended December 31, 20082009
 
Commission file number 1-14876
 
 
 
 
(COMPANY LOGO)(COMPANY LOGO)
(Exact Name of Registrant as Specified in its Articles)
Hellenic Telecommunications Organization S.A.
(Translation of Registrant’s Name into English)
 
Hellenic Republic
(Jurisdiction of Incorporation or Organization)
 
99 Kifissias Avenue
GR 15124 Amaroussion
Athens, Greece
(Address of Principal Executive Offices)
 
Mr. Dimitrios Tzelepis
Head, Investor Relations Department
Tel: +30 210 611 1574; Email: dtzelepis@ote.gr
99 Kifissias Avenue
GR 15124 Amaroussion, Athens, Greece
(Name, Telephone,E-mail and/or Facsimile number and Address of Company Contact Person)
 
 
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
   
Title of Each Class
 
Name of Each Exchange on Which Registered
American Depositary Shares, eachNew York Stock Exchange

representing one half of one Ordinary Share

Ordinary Shares nominal value €2.39 per share*		 New York Stock Exchange
 
 *  Listed on the New York Stock Exchange not for trading or quotation purposes, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.
Securities registered pursuant to Section 12(g) of the Act:
None
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
 
Indicate the number of outstanding shares of each of the Registrant’s classes of capital or common stock as of December 31, 2008.2009.
 
490,150,389 Ordinary Shares
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  Yes o     No þ
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No oþ
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
 
     
Large Accelerated Fileraccelerated filer þ
 Accelerated Filerfiler o Non-Accelerated Filer No
Non-accelerated filer o
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
     
U.S. GAAPo
 
International Financial Reporting Standards as issued
by the International Accounting Standards Boardþ
 
Othero
 
Indicate by check mark which financial statement item the Registrant has elected to follow. Item 17o     Item 18þ
 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).  Yes o     No þ
 

 
TABLE OF CONTENTS
 
       
ITEM 1
 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS  3 
ITEM 2
 OFFER STATISTICS AND EXPECTED TIMETABLE  3 
ITEM 3
 KEY INFORMATION  4 
3.A
 Selected Financial Data  4 
3.B
 Capitalization and Indebtedness  7 
3.C
 Reasons for the offer and use of proceeds  7 
3.D
 Risk factors  7 
ITEM 4
 INFORMATION ON THE COMPANY  1922 
4.A
 History and Development of the Company  2124 
4.B
 Business Overview  2326 
4.C
 Organizational Structure  8894 
4.D
 Property, Plant and Equipment  9096 
4.EITEM 4E
 Unresolved Staff CommentsUNRESOLVED STAFF COMMENTS  9196 
ITEM 5
 OPERATING AND FINANCIAL REVIEW AND PROSPECTS  9196 
5.A
 Operating Results  9196 
5.B
 Liquidity and Capital Resources  108117 
5.C
 Research and Development, Patents and Licenses  117126 
5.D
 Trend Information  118127 
5.E
 Off-Balance Sheet Arrangements  118127 
5.F
 Tabular Disclosure of Contractual Obligations  118127 
ITEM 6
 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES  118127 
6.A & C
 Directors, Board Practices and Senior Management  118127 
6.B
 Compensation  128138 
6.D
 Employees  130140 
6.E
 Share Ownership  135145 
ITEM 7
 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS  135145 
7.A
 Major Shareholders  135145 
7.B
 Related Party Transactions  140150 
7.C
 Interests of Experts and Counsel  140151 
ITEM 8
 FINANCIAL INFORMATION  141151 
8.A
 Consolidated Statements and Other Financial Information  141151 
8.B
 Significant Changes  141151 
ITEM 9
 THE OFFER AND LISTING  141151 
9.A
 Offer and Listing Details  141151 
9.B
 Plan of Distribution  142152 
9.C
 Markets  142152 
9.D
 Selling Shareholders  142152 
9.E
 Dilution  142152 
9.F
 Expenses of the Issue  143153 
ITEM 10
 ADDITIONAL INFORMATION  143153 
10.A
 Share Capital  143153 
10.B
 Our Articles of Incorporation  143153 
10.C
 Material Contracts  147157 
10.D
 Exchange Controls  147157 
10.E
 Taxation  147157 
10.F
 Dividends and Paying Agents  152163 
10.G
 Statement by Experts  152163 
10.H
 Documents on Display  152163 
10.I
 Subsidiary Information  152163 


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ITEM 11
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  152163 
ITEM 12
 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES  155167 
ITEM 13
 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES  155168 
ITEM 14
 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS  155169 
ITEM 15
 CONTROLS AND PROCEDURES  155169 
ITEM 16
 [RESERVED]  157170 
16.A
 Audit Committee Financial Expert  157170 
16.B
 Code of Ethics  157170 
16.C
 Principal Accountant Fees and Services  158171 
16.D
 Exemptions from the Listing Standards for Audit Committees  158172 
16.E
 Purchases of Equity Securities by the Issuer and Affiliated Purchasers  158172 
16.F
 Change in Registrant’s Certifying Accountant  159172 
16.G
 Corporate Governance  159172 
ITEM 17
 FINANCIAL STATEMENTS  160173 
ITEM 18
 FINANCIAL STATEMENTS  160173 
ITEM 19
 EXHIBITS  160173 
    
GLOSSARY OF TECHNICAL TERMS
  162175 
 EX-1.1
EX-4.1EX-3.1
 EX-12.1
 EX-12.2
 EX-13.1
 EX-13.2
EX-15.1


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PRESENTATION OF INFORMATION
 
We have prepared our consolidated financial statements as of and for the years ended December 31, 2006, 2007, 2008 and 20082009 in Euros in accordance with International Financial Reporting Standards(“IFRS”) as issued by the International Accounting Standards Board(“IASB”). Solely for your convenience, certain Euro or other currency amounts have been translated into U.S. Dollars. Unless otherwise indicated, Euro amounts have been translated into U.S. Dollars at the rate of Euro 1.00 to U.S. $1.3919,$1.2414, which was the noon buyingspot rate of the Euro for customs purposes,on May 24, 2010, as reported by the Federal Reserve Bank of New York on December 31, 2008.Bloomberg. We make no representation that these Euro amounts have been, or could have been, translated or converted into U.S. Dollar amounts on any particular date at the exchange rate indicated or any other rate.
 
Certain figures have been subject to rounding adjustments; accordingly, figures shown for the same category presented in different tables may vary slightly, and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.
 
Our consolidated financial statements and the notes thereto prepared in accordance with IFRS as issued by the IASB were audited: (i) in the case of the financial statements as of and for the years ended December 31, 2006 and 2007, by KPMG Certified Auditors A.E., an independent registered public accounting firm, and (ii) in the case of the financial statements as of and for the year ended December 31, 2008, by Ernst & Young (Hellas) Certified Auditors Accountants S.A., an independent registered public accounting firm.
• in the case of the financial statements for the year ended December 31, 2007, by KPMG Certified Auditors A.E., an independent registered public accounting firm; and
• in the case of the financial statements as of and for the years ended December 31, 2008 and 2009, by Ernst & Young (Hellas) Certified Auditors Accountants S.A., an independent registered public accounting firm.
 
As used in this annual report onForm 20-F (“(“Annual Report”):
 
 • “U.S. Dollars”,“U.S. $”or“$”means the lawful currency of the United States;
 
 • “Euro”, “€”or“Eurocents”means the common currency of Member States of the European Union participating in the third stage of European Monetary Union; and
 
 • “RON” or “Lei”means the lawful currency of the Republic of Romania;
 
 • “LEK”means the lawful currency of the Republic of Albania; and
 
 • “BGN”means the lawful currency of the Republic of Bulgaria.
 
Solely for your convenience, certain amounts in LEK and BGN have been translated into Euro. Unless otherwise indicated, LEK and BGN amounts have been translated into Euro at the rates of Euro 1.00 to LEK 124.206137.69 and Euro 1.00 to BGN 1.9563,1.9557, respectively, being the rates effective on December 31, 2008,2009, as published by Bloomberg.
 
All references to “us”, “we”, “OTE”, “OTE S.A.” or “our company” are to the Hellenic Telecommunications Organization S.A. All references to “OTE Group” or the “Group” are to OTEthe Hellenic Telecommunications Organization S.A. and its consolidated subsidiaries.
 
All references in this Annual Report to the “State” or the “Greek State” are to the Hellenic Republic and all references to the “government” are to the government of the Hellenic Republic. All references in this Annual Report to “Deutsche Telekom” are to Deutsche Telekom A.G., a company incorporated under the laws of the Federal Republic of Germany, a major shareholder of our company.
 
All references to the “EU” are to the European Union. All references in this Annual Report to “ADSs” are to the American Depositary Shares (each representing one half of one ordinary share of OTE), which are listed on the New York Stock Exchange and registered under Section 12(b) of the Securities Exchange Act of 1934, as amended (the“Exchange Act”).
 
All references to the “EETT” or the “Regulator” are to Ethniki Epitropi Tilepikinonion & Tahidromion, or the Greek National Telecommunications and Post Commission.
 
All references to the “Telecommunications Law” are to Greek Law 3421/3431/2006 and, where appropriate, applicable provisions of Greek Law 2867/2000, both of which regulate electronic communications in line with the


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current EU regulation of the sector. References to “our license” or the “License” are to the general license issued to us by the EETT in accordance with the Telecommunications Law. All references to “long-distance calls”, “traffic” or “tariffs” are to domestic long-distance calls, domestic traffic or domestic tariffs, respectively.


1

All references to the “Voluntary Retirement Scheme” are to a broad voluntary retirement program which we implemented commencing in June 2005, which has facilitated the early retirement of 4,7595,405 of our employees.employees, as of December 31, 2009.
 
All telephony charges described in this Annual Report exclude Greek value-added tax (“(“VAT”), which is similar to sales tax in the United States. As of April 1, 2005, value-added tax is imposed by the Greek tax authorities as a fixed percentage of sales of goods and services (currently at the rate of 19%)21% and expected to increase to 23% later in 2010). We believe that the recovery of VAT from customers qualifies as a deduction of VAT expenses incurred to the tax authorities based on sales.
 
All references to ICT are to information and communications technology, which includes the study, design, development, implementation, support or management of computer-based information systems, particularly network equipment, software applications and computer systems hardware.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
We may from time to time make written or oral forward-looking statements, including in this Annual Report, in other filings with the United States Securities and Exchange Commission(“SEC”), in reports to shareholders and in other communications. The statements relate to analyses and other information, which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. Examples of such forward-looking statements include, but are not limited to:
 
 • statements regarding our results of operations, financial condition, future economic performance and plans regarding our tariffs and pricing policies;
 
 • statements regarding our competitive position and statements regarding competition in the Greek telecommunications industry and in other countries where we have significant operations, and regarding the effect of such competition on our results of operations;
 
 • statements of our plans, objectives or goals, including those related to our products or services;
 
 • statements of assumptions;
 
 • statements regarding our ongoing or anticipated investment and expansion programs;
 
 • statements regarding new services or products and anticipated customer demand for these services or products;
 
 • statements regarding our cost reduction programs;
 
 • statements regarding the impact of government policies or initiatives in areas in which we conduct business on our investment plans, business, financial condition and operations;
 
 • statements regarding the potential impact of regulatory actions on our business, financial condition and operations; and
 
 • statements regarding the possible effects of determinations in litigation, investigations, contested regulatory proceedings and other disputes.
 
Words such as “believes”, “anticipates”, “aims”, “expects”, “intends”, “plans”, “seeks”, “will”, “could”, “may” and “projects” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
 
Such forward-looking statements are not guarantees of future performance by their very nature and involve inherent risks and uncertainties, both general and specific, and there are risks that the predictions, forecasts, projections and other forward-looking statements will not be achieved; therefore you should not place too much


2

reliance on them. If one or more of these materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those anticipated in this Annual Report. There are a number of important factors that could cause actual results and developments to differ materially from those expressed or implied in such forward-looking statements. These factors include, but are not limited to, the following:
 
 • risks and uncertainties relating to our international operations;
 
 • economic and political developments in the countries where we conduct operations, including as a result of the global economic downturn;
 
 • the effect of, and changes in, regulation and government policy;


2

 • the effects of competition and competitive activity resulting in changes in pricing and product offerings, higher customer acquisition costs, slower customer growth, or reduced customer retention;
 
 • regulatory developments, including changes to our permitted tariffs, the terms of access to our network, the terms of interconnection and other issues;
 
 • our ability to reduce costs and to realize synergies and productivity improvements;
 
 • loss of suppliers or disruption of supply chains;
 
 • our timely development and acceptance by the market of new products and services and our ability to secure the timely delivery of key products from suppliers;
 
 • the effects of technological changes in telecommunications and information technology and the possibility of rapid obsolescence of existing technology;
 
 • changes in the projected growth rates of the fixed and mobile telecommunications markets;
 
 • the possibility that new technologies and services will not perform according to expectations or that vendors’ performance will not meet our requirements;
 
 • the impact of legal, regulatory or other proceedings against us or our subsidiaries; and
 
 • our success at managing the foregoing and related risks.
 
The foregoing list of important factors is not exhaustive. When relying on forward-looking statements to make investment decisions, you should carefully consider the foregoing factors, as well as additional risks set forth in “3.D.“3.D Risk Factors” and such other matters as you may deem appropriate. Such forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise, or to advise you of any factors of which we are or may become aware.
 
PART I
 
ITEM 1  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
 
Not applicable.
 
ITEM 2  OFFER STATISTICS AND EXPECTED TIMETABLE
 
Not applicable.


3

ITEM 3  KEY INFORMATION
 
3.A Selected Financial Data
 
You should read the following information about us and our consolidated subsidiaries as of and for the years ended December 31, 2004, 2005, 2006, 2007, 2008 and 2008,2009, together with the consolidated financial statements, including the notes thereto, which are contained in this Annual Report and have been prepared in accordance with IFRS as issued by the IASB. The following selected financial data (other than “Dividend Information” and “Non-GAAP Financial Information”) has been derived from our consolidated financial statements, which: (i) in the case of the consolidated financial statements as of and for the year ended December 31, 2008, were audited by Ernst & Young (Hellas) Certified Auditors Accountants S.A., an independent registered public accounting firm; (ii) in the case of the consolidated financial statements as of and for the years ended December 31, 2006 and 2007 were audited by KPMG Certified Auditors A.E., an independent registered public accounting firm; and (iii) in the case of the consolidated financial statements as of, and for the years ended, December 31, 2004 and 2005, are not audited, but are provided for comparison purposes.
• in the case of the consolidated financial statements as of and for the years ended December 31, 2008 and 2009, were audited by Ernst & Young (Hellas) Certified Auditors Accountants S.A., an independent registered public accounting firm;
• in the case of the consolidated financial statements for the years ended December 31, 2006 and 2007 were audited by KPMG Certified Auditors A.E., an independent registered public accounting firm; and
• in the case of the consolidated financial statements as of and for the year ended December 31, 2005, were not audited, but are provided for comparison purposes.
For a more detailed discussion of our financial results, see “5. Operating and Financial Review and Prospects”.
 
                                                
 For the Year Ended December 31,  For the Year Ended December 31, 
 2004 2005 2006 2007 2008 2008  2005 2006 2007 2008 2009 2009 
 (Euro)
 (Euro)
 (Euro)
 (Euro)
 (Euro)
 (U.S. $)(1)
  (Euro)
 (Euro)
 (Euro)
 (Euro)
 (Euro)
 (U.S. $)(1)
 
 (Unaudited) (Unaudited) (Audited) (Audited) (Audited) (Unaudited)  (Unaudited) (Audited) (Audited) (Audited) (Audited) (Unaudited) 
 (Millions except shares and per share data)  (Millions except shares and per share data) 
Income Statement Data
                                                
Revenues:                                                
Domestic telephony(2)
  2,271.7   2,312.2   2,260.6   2,022.2   1,814.2   2,525.2   2,312.2   2,260.6   2,022.2   1,814.2   1,619.6   2,010.6 
International telephony(3)
  376.6   391.0   346.9   304.5   286.9   399.3   391.0   346.9   304.5   286.9   251.1   311.7 
Mobile telephony  1,555.6   1,752.2   1,975.8   2,210.0   2,470.8   3,439.1   1,752.2   1,975.8   2,210.0   2,470.8   2,396.2   2,974.6 
Other revenue(4)
  1,015.4   1,019.7   1,308.0   1,783.1   1,835.4   2,554.7   1,019.7   1,308.0   1,783.1   1,835.4   1,717.2   2,131.7 
                          
Total revenue
  5,219.3   5,475.1   5,891.3   6,319.8   6,407.3   8,918.3   5,475.1   5,891.3   6,319.8   6,407.3   5,984.1   7,428.6 
Total operating expenses  (4,605.2)  (5,451.1)  (4,803.0)  (5,272.9)  (5,349.6)  (7,446.1)  (5,451.1)  (4,803.0)  (5,272.9)  (5,349.6)  (4,983.2)  (6,186.1)
Operating income before financial activities  614.1   24.0   1,088.3   1,046.9   1,057.7   1,472.2   24.0   1,088.3   1,046.9   1,057.7   1,000.9   1,242.5 
Total profit (loss) from financial activities  (97.3)  (20.7)  (4.5)  107.9   (213.7)  (297.4)  (20.7)  (4.5)  107.9   (213.7)  (220.2)  (273.4)
                          
Profit before tax
  516.8   3.3   1,083.8   1,154.8   844.0   1,174.8   3.3   1,083.8   1,154.8   844.0   780.7   969.1 
Income tax  (222.5)  (19.8)  (353.0)  (381.8)  (246.2)  (342.7)  (19.8)  (353.0)  (381.8)  (246.2)  (410.0)  (509.0)
                          
Profit for the year(5)
  294.3   (16.5)  730.8   773.0   597.8   832.1   (16.5)  730.8   773.0   597.8   370.7   460.1 
                          
Attributable to:                                                
Shareholders of the parent  117.1   (216.8)  574.6   662.6   601.8   837.7 
Minority interests  177.2   200.3   156.2   110.4   (4.0)  (5.6)
Owners of the parent  (216.8)  574.6   662.6   601.8   374.0   464.2 
Non-controlling interests  200.3   156.2   110.4   (4.0)  (3.3)  (4.1)
Basic earnings per share(6)
  0.2389   (0.4424)  1.1723   1.3518   1.2278   1.7090   (0.4424)  1.1723   1.3518   1.2278   0.7630   0.9472 
Diluted earnings per share(6)
  0.2389   (0.4424)  1.1723   1.3518   1.2129   1.6882   (0.4424)  1.1723   1.3518   1.2129   0.7630   0.9472 
Weighted average number of shares outstanding  490,150,389   490,150,389   490,150,389   490,150,389   490,150,389   490,150,389   490,150,389.0   490,150,389.0   490,150,389.0   490,150,389.0   490,150,389.0     
Dividend Information
                                                
Dividends per share(7)
  0.35   0.0   0.55   0.75   0.75   1.04   0.00   0.55   0.75   0.75   0.19   0.24 
Dividends per American Depositary Share (in U.S. Dollars)(8)
  0.2139   0.0   0.3746   0.5905   N/A   N/A   0.0   0.3746   0.5905   0.5229   N/A   N/A 
Non-GAAP Financial Information (unaudited)
                                                
Operating income before depreciation and amortization(9)
  1,681.7   1,131.4   2,216.8   2,218.7   2,270.7   3,160.6 
Operating income before depreciation and amortization)(9)
  1,131.4   2,216.8   2,218.7   2,270.7   2,156.2   2,676.7 
Adjusted operating income before depreciation and amortization(9)
  1,710.6   2,071.0   2,167.0   2,240.8   2,320.9   3,230.5   2,071.0   2,167.0   2,240.8   2,320.9   2,125.9   2,639.1 
 


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 For the Year Ended December 31,  For the Year Ended December 31,
 2004 2005 2006 2007 2008 2008  2005 2006 2007 2008 2009 2009
 (Euro)
 (Euro)
 (Euro)
 (Euro)
 (Euro)
 (U.S. $)
  (Euro) (Euro) (Euro) (Euro) (Euro) (U.S. $)
 (Unaudited) (Unaudited) (Audited) (Audited) (Audited) (Unaudited)  (Unaudited) (Audited) (Audited) (Audited) (Audited) (Unaudited)
 (Millions)  (Millions)
Cash Flow Data
                                          
Total cash flows from operating activities  1,395.5   1,532.8   1,786.2   1,450.7   1,757.6   2,446.4   1,532.8   1,786.2   1,450.7   1,757.6   1,418.0   1,760.3 
Purchase of property, plant and equipment and intangible assets  (843.6)  (680.2)  (962.4)  (1,101.3)  (964.0)  (1,341.8)  (680.2)  (962.4)  (1,101.3)  (964.0)  (890.9)  (1,106.0)
Total cash flows used in investing activities  (831.5)  (877.5)  (2,308.1)  (2,780.2)  (1,806.0)  (2,513.8)  (877.5)  (2,308.1)  (2,780.2)  (1,806.0)  (958.6)  (1,190.0)
Total cash flows from financing activities  (295.0)  (13.4)  1,052.2   603.3   165.3   230.1 
Total cash flows from (used in) financing activities  (13.4)  1,052.2   603.3   165.3   (1,005.5)  (1,248.2)
 
                                                
 As of December 31,  As of December 31,
 2004 2005 2006 2007 2008 2008  2005 2006 2007 2008 2009 2009
 (Euro)
 (Euro)
 (Euro)
 (Euro)
 (Euro)
 (U.S. $)
  (Euro) (Euro) (Euro) (Euro) (Euro) (U.S. $)
 (Unaudited) (Unaudited) (Audited) (Audited) (Audited) (Unaudited)  (Unaudited) (Audited) (Audited) (Audited) (Audited) (Unaudited)
 (Millions)  (Millions)
Balance Sheet Data
                                          
Cash and cash equivalents at the end of the year  870.3   1,512.2   2,042.5   1,316.3   1,427.8   1,987.4   1,512.2   2,042.5   1,316.3   1,427.8   868.8   1,078.5 
Property, plant and equipment, net  6,909.7   6,739.6   6,583.5   6,371.4   5,872.8   8,174.4   6,739.6   6,583.5   6,371.4   5,872.8   5,625.1   6,983.0 
Telecommunications licenses  381.0   393.0   384.2   396.2   329.5   458.6   393.0   384.2   396.2   329.5   362.2   449.6 
Investments(10)
  221.3   159.3   158.7   158.4   156.6   218.0   159.3   158.7   158.4   156.6   157.0   194.9 
Total assets  10,445.7   11,107.6   12,715.3   11,699.2   11,425.2   15,902.7   11,107.6   12,715.3   11,699.2   11,425.2   10,294.0   12,779.0 
Total current liabilities  2,003.2   2,231.5   2,658.5   3,576.4   3,002.7   4,179.4   2,231.5   2,658.5   3,576.4   3,002.7   2,108.3   2,617.2 
Total non-current liabilities(11)
  3,611.1   4,362.7   5,168.1   5,068.2   6,249.3   8,698.4   4,362.7   5,168.1   5,068.2   6,249.3   6,236.0   7,741.4 
Total equity  4,831.4   4,513.4   4,888.7   3,054.6   2,173.2   3,024.9   4,513.4   4,888.7   3,054.6   2,173.2   1,949.7   2,420.4 
 
 
Notes:
 
(1)Solely for the convenience of the reader, Euro amounts have been translated into U.S. Dollars at the noon buyingspot rate on December 31, 2008May 24, 2010 of Euro 1.00 per U.S. $1.3919.$1.2414.
 
(2)Includes charges to customers on outgoing calls to subscribers of unaffiliated mobile telephony operators of approximately Euro 378.7 million in 2004, Euro 376.8 million in 2005, Euro 342.6 million in 2006, Euro 267.8 million in 2007 and Euro 224.6 million in 2008. Domestic telephony also includes revenues from monthly network service fees, revenues fromfixed-to-fixed andfixed-to-mobile calls and revenues from such services as operator assistance, connection and reconnection charges and paging services.
 
(3)Includes revenues from incoming and outgoing, traffic, gross of amounts charged by foreign telephony operators, and payments from the unaffiliated domestic mobile telephony operators to us for international calls. The respective revenues from our consolidated subsidiaries providing mobile services are eliminated upon consolidation.
 
(4)Includes telecard sales,revenues from prepaid cards, leased lines and data ATM telecommunications, services rendered, directoryprovision for services, interconnection charges, radio communications, audiotex, telex and telegraphy, internet services, asynchronous transfer mode(“ATM”),services/ADSL, integrated services digital network(“ISDN”), and sales of telecommunication equipment.equipment, collocation and local loop unbundling.
 
(5)In 2004, we wrote off an amount of Euro 24.8 million related to management fees and accrued interest as a result of the settlement of an arbitration relating to Telekom Srbija a.d. Profit for the year 2004 was positively affected by approximately Euro 77.0 million resulting from the decrease in the applicable tax rates in Greece and Romania in December 2004. In 2005, we recorded an accounting charge of Euro 939.6 million, representing the cost of the Voluntary Retirement Scheme. Furthermore, we recorded a total gain of Euro 23.8 million relating to the extinguishment of suppliers’ liabilities, in addition to dividends totaling Euro 19.4 million from Telekom Srbija and Eutelsat, gains totaling Euro 25.1 million from the sale of certainavailable-for-sale marketable equity securities, and a gain from the sale of our participation in Eutelsat. In 2006, we recorded an income of Euro 49.8 million resulting from the reduction of the estimated cost for 2005 of the Voluntary Retirement Scheme, offset by a provision of Euro 63.1 million taken in connection with the interest rate (which was below market rates) that we charged on a loan of Euro 180 million granted to the Auxiliary Fund in connection with the Voluntary Retirement Scheme. Furthermore, a gain of Euro 160.2 million was recorded from the sale of ArmenTel. Finally, dividends totaling Euro 21.6 million from Telekom Srbija and gains of Euro 10.2 million from the sale of certainavailable-for-sale securities affected thisthe year’s results. In 2007, we took a charge of Euro 22.1 million relating to the employees who participated in the early retirement program of 2007. In addition, in 2007, we recorded a pre-tax gain of Euro 244.7 million from the sale of INFOTE and received dividends totaling Euro 15.7 million from Telekom Srbija. In 2008, the Group took a charge of Euro 50.2 million relating to the employees who participated in RomTelecom S.A.’sRomTelecom’s and our early retirement programs of 2008 and we recorded a pre-tax gain of Euro 17.0 million from the sale of our investment in the Lofos-Palini real estate company. In addition, we received dividends totaling Euro 11.2 million from Telekom Srbija. In 2009, the Group’s profit for the year was affected by the costs of our and RomTelecom’s early retirement programs by a total amount of Euro 171.6 million, which was offset by Euro 201.9 million from the transfer of 4.0% of our share capital held by the Greek State to IKA-ETAM, resulting in a net gain of Euro 30.3 million. Furthermore, the 2009 income tax expense was affected by the new Law regarding a one-time special contribution of social responsibility of Euro 113.1 million, a tax on dividends of Euro 30.3 million and the result of OTE’s tax audit for the years2006-2008 of Euro 30.0 million. In addition, the Group recorded a pre-tax gain of Euro 23.6 million from the sale of its subsidiaries Cosmofon and Germanos Telecom AD Skopje and received dividends totalling Euro 9.3 million from Telekom Srbija.

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(6)Basic earnings per share are computed by dividing profit for the year attributable to the shareholdersowners of the parent by the weighted average number of shares outstanding during the relevant period. Diluted earnings per share isare computed by dividing profit for the year attributable to

5

the shareholdersowners of the parent by the weighted average number of shares outstanding during the year, adjusted for the impact of share-based payment.
 
(7)Amounts as approved by, or proposed to, the respective general assemblies of our shareholders to be distributed from each year’s statutory profit. A dividend of Euro 0.750.19 per share for the year 2008 was approved2009 will be proposed for approval by to our general assembly of June 24, 2009.16, 2010.
 
(8)Because each American Depositary Share represents one-half of one ordinary share, the dividend per share has been divided by two to show the historical dividends declared per American Depositary Share and translated, solely for convenience, into U.S. Dollars at the noon buying rates asspot rate reported by the Federal Reserve BankBloomberg as of New York on each dividend payment date, or on the following business day, if such date was not a business day in Greece or the United States. As a result, the U.S. Dollar amounts for the dividends to be paid with respect to the year 20082009 are not available, as these dividends have not yet been paid as at the date of this Annual Report. The noon buying rateThese rates may differ from the raterates used by the depositary to convert Euros to U.S. Dollars for the purpose of making payments to holders of ADSs.
 
(9)Non-GAAP measures.Operating income before depreciation and amortization and adjusted operating income before depreciation and amortizationamortization) are non-GAAP financial measures that help us to evaluate our core business’ operating results, before the effect of our investing and financing activities, and before the effect of depreciation and amortization (which is our most significant non-cash item) and to compare our performance with that of our peer group, which mainly consists of other European incumbent telecommunications operators. Further to the use of these non-GAAP financial measures, we also evaluate our performance and results based on operating income and profit for the year attributable to the shareholdersowners of the parent in order to take into consideration the effects of other recurring items such as interest income/expense, foreign exchange gains or losses, earnings/losses and impairments on equity-method investments, income taxes and minoritynon-controlling interests. You should not place undue reliance on these measures or consider them as alternatives to any other measure of performance under generally accepted accounting principles, as they may not be indicative of our historical operating results, nor are they meant to be predictive of our future results. Comparable measures, including EBITDA, are often calculated in different ways, can vary significantly depending upon accounting methods (particularly when acquisitions have occurred) or non-operating factors, and are used by different companies for different purposes, and therefore may not be comparable to similarly titled measures used by other companies. The following table provides a reconciliation of profit/loss for the year attributable to shareholdersthe owners of the parent to operating income before depreciation and amortization and adjusted operating income before depreciation and amortization.amortization (adjustments relate to the cost of our early retirement programs).
 
                                                
 2004 2005 2006 2007 2008 2008  2005 2006 2007 2008 2009 2009 
 (Euro) (Euro) (Euro) (Euro) (Euro) (U.S. $)  (Euro) (Euro) (Euro) (Euro) (Euro) (U.S. $) 
 (Millions) 
Profit/loss for the year attributable to shareholders of the parent
  117.1   (216.8)  574.6   662.6   601.8   837.7 
Profit/loss for the year attributable to owners of the parent
  (216.8)  574.6   662.6   601.8   374.0   464.3 
Plus:                                                
Depreciation and amortization  1,067.6   1,107.4   1,128.5   1,171.8   1,213.0   1,688.4   1,107.4   1,128.5   1,171.8   1,213.0   1,155.3   1,434.2 
Total profit/(loss) from financial activities(a)
  97.3   20.7   4.5   (107.9)  213.7   297.4   20.7   4.5   (107.9)  213.7   220.2   273.4 
Income taxes  222.5   19.8   353.0   381.8   246.2   342.7   19.8   353.0   381.8   246.2   410.0   509.0 
Minority interests  177.2   200.3   156.2   110.4   (4.0)  (5.6)
Non-controlling interests  200.3   156.2   110.4   (4.0)  (3.3)  (4.1)
                          
Operating income before depreciation and amortization  1,681.7   1,131.4   2,216.8   2,218.7   2,270.7   3,160.6   1,131.4   2,216.8   2,218.7   2,270.7   2,156.2   2,676.8 
Adjustments:                                                
Cost of early retirement programs(b)
  28.9   939.6   (49.8)  22.1   50.2   69.9   939.6   (49.8)  22.1   50.2   (30.3)  (37.6)
                          
Adjusted operating income before depreciation and amortization  1,710.6   2,071.0   2,167.0   2,240.8   2,320.9   3,230.5   2,071.0   2,167.0   2,240.8   2,320.9   2,125.9   2,639.2 
                          
 
 
Notes:
 
(a) Total profit/(loss) from financial activities includes interest expense, interest income, foreign exchange differences, write down of investments, gains/(loss) from sale of investments and dividend income.
 
(b) Adjustments relate to the cost of our early retirement programs and the Voluntary Retirement Scheme.
 
(10)Includes investments in the amount of Euro 170.6 million, Euro 155.1 million, Euro 155.1 million, Euro 155.1 million and Euro 155.1 million, as of December 31, 2004, 2005, 2006, 2007, 2008 and 2008, respectively,2009, in respect of our 20% interest in Telekom Srbija; and as of December 31, 2004, Euro 12.9 million in respect of investments in satellite organizations.Srbija.
 
(11)Net of current portion.


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Exchange Rate Data
 
The following table sets forth, for the periods indicated, the average, high, low and period-end exchange rates of the U.S. Dollar to the Euro.
 
                 
Period
 Average(1)  High  Low  Period-End 
 
2004  1.2478   1.3625   1.1801   1.3538 
2005  1.2400   1.3476   1.1667   1.1842 
2006  1.2661   1.3327   1.1860   1.3197 
2007  1.3797   1.4862   1.2904   1.4603 
2008  1.4726   1.6010   1.2446   1.3919 
2008 December  1.3511   1.4358   1.2634   1.3919 
2009 January(2)
  1.3276   1.3958   1.2826   1.2826 
2009 February(2)
  1.2805   1.3058   1.2565   1.2716 
2009 March(2)
  1.3049   1.3637   1.2543   1.3229 
2009 April(2)
  1.3204   1.3484   1.2930   1.3209 
2009 May(2)
  1.3666   1.4119   1.3257   1.4119 
June 15(2)
  1.4056   1.4291   1.3785   1.3785 
                 
Period
 Average High Low Period-End
 
2005(1)
  1.2400   1.3476   1.1667   1.1842 
2006(1)
  1.2661   1.3327   1.1860   1.3197 
2007(1)
  1.3797   1.4862   1.2904   1.4603 
2008(1)
  1.4726   1.6010   1.2446   1.3919 
2009(2)
  1.3944   1.5094   1.2543   1.4331 
2009 November(2)
  1.4914   1.5081   1.4686   1.4976 
2009 December(2)
  1.4572   1.5094   1.4275   1.4331 
2010 January(2)
  1.4280   1.4510   1.3889   1.3889 
2010 February(2)
  1.3682   1.3958   1.3521   1.3602 
2010 March(2)
  1.3574   1.3776   1.3303   1.3533 
2010 April(2)
  1.3390   1.3663   1.3161   1.3272 
2010 May(2)
  1.2544   1.3199   1.2185   1.2295 
 
 
Note:Notes:
 
(1)The average noon buying rates on the last business day of each month during the relevant year until and including 2008, as certified for customs purposes by the Federal Reserve Bank of New York.
 
(2)The spot rates for year 2009 and for each month during the relevant year according toare spot rates as reported by Bloomberg.
 
On June 15, 2009,4, 2010, the spot rate published by Bloomberg was U.S. Dollar 1.37851.2020 per Euro 1.00.
 
3.B   Capitalization and Indebtedness
 
Not applicable.
 
3.C   Reasons for the offerOffer and useUse of proceedsProceeds
 
Not applicable.
 
3.D   Risk factorsFactors
 
The risks described below are not the only risks facing our company. Additional risks not presently known to us or which we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The following discussion contains a number of forward-looking statements. Please refer to the section headed “Cautionary Statement Regarding Forward-Looking Statements”.
 
If we do not respond promptly and efficiently to increased competitive pressures, our market share in fixed-line services may decline further.
 
Since the liberalization of the Greek telecommunications market in 2001, we have faced, and continue to face, competitive pressures in domestic and international fixed-line services. As a result of the migration of certain of our customers to our competitors, we have experienced, and continue to experience, a gradual decline in our share of the Greek market for fixed-line services, in terms of both numbers of subscribers and voice traffic. We expect competition in the Greek telecommunications market to continue to intensify, as a result of a number of factors, including regulatory developments, our competitors improving their infrastructures and an evolving market landscape, due to proceeding consolidation and funding opportunities becoming available to certain of our competitors.
Over recent years, alternative fixed-line operators have been developing their own infrastructures based, mainly, on local loop unbundling and fiber optic networks and are becoming increasingly competitive in offering


7

Over recent years, alternative fixed-line operators providing retail services have increasingly relied on local loop unbundling for reaching their end customers and with respect to backbone services, they either rely on wholesale products provided by us, or increasingly deploy their own fiber optic infrastructure and networks, parts of which, in certain recent cases, they have also agreed to share. Alternative operators are becoming increasingly competitive in offering voice, broadband and data transmission,as well as value-added and bundled services, including double-play (voice and internet) and triple-play (voice, internet and IPTV), at higher access speeds and at competitive prices. The competitive market landscape continues to evolve with a number of recent developments includingand it changed substantially in 2009 following a number of mergers and acquisitions and strategic alliances between fixed-line and mobile operators. This has created strong market players with sufficient financial resources to compete with us on equal or better terms. In particular, in 2009, Vodafone Greece, subsidiary of one of the largest mobile groups worldwide, acquired an 18.5% interest in the share capital of Hellas OnLine, the second largest alternative fixed-line operator, and Tellas, one of our major competitors in fixed-line services, is the fixed-line business unit of Wind Hellas, which is also part of a major international telecommunications group, Weather Investments. Both Wind Hellas-Tellas and Vodafone with HOL promote combined fixed-line and mobile services. Furthermore, Forthnet, the largest alternative fixed-line operator in Greece, also has developed a competitive advantage following its acquisition of NetMed, operator ofNova, currently the only digital satellite TV platform and until recently the only subscription TV service in Greece with a strong market share. Forthnet promotes combined double play and Nova satellite pay TV (DTH) platform, by Forthnet, our competitor insubscriptions, offering significant discounts on the Greek fixed-line market, and the entry ofbundled product. Cyta Hellas, a subsidiary of the Cyprus Telecommunications Authority, inentered the Greek fixed-line telephony market. In addition, while larger operators try to create synergies by offering new converged servicesmarket in 2009 and invest in developing their own networks,has established a strong presence over the last two years. There are also a number of players with a smaller operators have ceased operations due to financial difficulties resultingmarket share, including, among others, On Telecom-Vivodi (formed after On Telecom acquired Vivodi), Net One — Algonet (formed from heightened competition.the merger of Net One with Algonet) and Cosmoline.
 
Competition has intensified andMoreover, the competitive market landscape is expected to further intensify, alsochanging due to a number of other factors, including the introduction of mobile broadband and the increasing offeroffers of combined mobile and fixed-line bundles by mobile operators, which we believe may form a significant part of mobile operators’ offerings in the future, while wefuture. We also expect that Information Communication Technology(“ICT”)ICT offerings (combined telecommunications and information technology services) to business customers are also expected to become an increasingly important part of telecommunications operators’ offerings in the mid-term future.
 
As our competitors expandconverge their customer base,business operations in fixed, mobile and broadband services they may benefit from a larger customer base, increasing economies of scale and opportunities for synergies which could enhance their ability to effectively compete with us in the Greek telecommunications market.
 
In addition, although mobile penetration in the Greek market has increased to levels estimated at over 150%180%, we continue to experience migration of mainly telephony traffic (and less of customers) from fixed to mobile,fixed-to-mobile, especially as mobile operators offer competitive products including bundles of minutes at attractive rates.
 
As a result of the above and other factors, our market shares in both business and residential market sectors may decline further over the next few years. We also expect to face increasing pressure to further reduce prices, further enhance the quality of our network, adopt more efficient technologies, improve the level of our services, reduce costs and promote customer satisfaction. If we do not respond to these pressures promptly and efficiently, our market share may decline more dramatically and we could experience a material adverse effect on our business, results of operations, financial condition and prospects.
 
Furthermore,Macroeconomic conditions in Greece and the globalfiscal position of the Greek State have deteriorated markedly and this could have a material adverse effect on our business, results of operations, financial condition and prospects.
The economy of Greece, where the great majority of our revenues are derived (70.0% in 2009, as compared to 70.2% in 2008 and 72.5% in 2007) and operations are located, deteriorated markedly starting as of late 2008, through 2009 and particularly in early 2010. In particular, GDP growth rate in Greece slowed down significantly in 2008 and 2009 and turned to negative growth rates as of early 2010 (according to Eurostat, Greek GDP for the first three months of 2010 experienced negative growth (contraction) of -2.3%).
In addition, starting from late 2008, and particularly as of late 2009 and in early 2010, the Greek State has reported a significant deterioration in the levels of budget deficit (of over 13% for 2009) and total public debt and


8

experienced a resulting significant increase in its cost of borrowing. Over this period, credit ratings assigned by major credit rating agencies to debt issued by the Greek State were downgraded repeatedly (with Standard & Poor’s current credit rating at BB+ with a negative outlook, below investment grade), and concerns were expressed in connection with the ability of the Greek State to refinance its maturing public debt with funds raised in the public debt markets. As a result, the cost for the Greek State of raising debt financing in the bond markets experienced a sharp increase over the period from October 2009 to April 2010. In April 2010, the European Union announced the establishment, in conjunction with the International Monetary Fund(“IMF”), of a package of financial support for the Greek State, contemplating availability of bilateral loans to be provided by EU countries and the IMF to the Greek State for three years starting in 2010. In May 2010, the Greek State applied for the activation of this package. At this point, the exact terms of the loan facilities available under the package are unclear; to date the Greek State has drawn down funds under these facilities, but it is also unclear what further amounts the Greek State may seek to draw-down in the future and when, or whether the fiscal measures adopted by the Greek State will have the expected results, or whether the Greek State will be required to adopt further restrictive fiscal measures.
As a result of the conditions described above, the Greek State has adopted, starting in late 2009 and in 2010, a range of fiscal measures, aimed at reducing State expenditure, including reductions in public investments and reductions in the income of employees in the public sector and pensions, and at increasing tax revenues, including significant increases in direct and indirect taxes, intended to improve the Greek State’s fiscal position. As it is unclear whether the fiscal measures adopted by the Greek State will have the expected results, if the Greek State is required to adopt further restrictive fiscal measures, this can have further adverse impact on prospects for economic slowdown has affected,growth and disposable income in Greece.
We expect that the impact of the deteriorating fiscal position of the Greek State and relevant fiscal measures can have a material adverse effect on macroeconomic conditions in Greece in the short- and medium-term, including negative prospects for Greek GDP growth and a material reduction of disposable income of pensioners and employees in large parts of the economy. In particular, the Greek State announced in May that it expects GDP in Greece to decline by approximately 4% in 2010. In addition, the restricted ability of Greek banks to provide business and retail financing at attractive terms, resulting from the current conditions, is expected to continue to affect,exacerbate these conditions.
We expect that the performance of economiesdeterioration in which we conduct our business, includingmacroeconomic conditions in Greece and the reduction in disposable income will have a material adverse effect on our business, as on one hand, corporate clients restrict technology and telecommunications spending, and on the other countrieshand, residential customers of telecommunications services, such as fixed-line and mobile telephony and internet, may also reduce spending for these services (which would negatively affect our revenues from these services), or may turn to lower price alternatives that may be offered by our competitors, which may adversely affect our market share. In the latter case, we may decide to respond to such pressures by reducing our rates for these services, in Southeastern Europe. Althoughorder to date Greece hasremain competitive, which would also negatively affect our revenues. However, we cannot assure you that the regulator (EETT) will permit us to reduce our rates for certain of our services in response to competitive pressures as we may deem appropriate, in which case we may experience a significant competitive disadvantage, which would exacerbate our market share losses. In addition, the applicable rate of VAT was raised from 19% to 21% in early 2010, and will further increase to 23% in July 2010. This can also have a material impact on our results of operations (both on our revenues and profits), as we expect it to result in a material increase in our tariffs, which could adversely affect our competitive position and market share, or, in the event we decide to absorb a part of the resulting increase, we expect it to have a material adverse effect on our profit margin.
In 2009, Law 3808/2009 imposed an extra-ordinary, one-time tax (contribution of social responsibility) on profitable Greek entities, calculated on their total net income for the fiscal year 2008. The respective charge in the Group’s income statement amounted to Euro 113.1 million. In May 2010, the Greek State announced the imposition of a special one-time lump-sum tax on net profits of corporate tax payers for the fiscal year 2009, which is expected to apply on our net income at the rate of 10%. We cannot assure you that the Greek State may not experienced negative ratesseek to impose further extraordinary taxes, or take other fiscal measures aimed at raising funds, which could have a material adverse effect on our financial results and financial condition.


9

Furthermore, we cannot assure you that further potential downgrades in the credit rating of economic growth, its growth rate has slowed down markedly, as has been the caseGreek State may not result in downgrades in our own credit rating (currently BBB- with other European economies. Negative ratesa stable outlook by Standard & Poor’s and Baa2 with a stable outlook by Moody’s), which could have an adverse impact on our borrowing cost and our financial expenses. See “5.B Liquidity and Capital Resources — Outstanding Debt Facilities”.
We expect that the impact of economic growth, or growth rates significantly lower than previous years, eitherdeteriorating macroeconomic conditions in Greece, orreductions in other countries in which we conduct our business, maydisposable income and the recent and potential future developments with respect to the fiscal position of the Greek State can have a material adverse effect on our business, results of operations, financial condition and prospects.
 
Regulatory and competitive pressures affect our ability to set competitive retail and wholesale tariffs, which may adversely affect our ability to compete effectively.
 
Under applicable laws, regulations and related EETT decisions, the EETT has the jurisdiction to assess our tariffsex-anteandex-post. Tariffs for certain categories of our services should be cost-based. With respect to these tariffs, the EETT uses our enterprise costing and profitability system(“ECOS”), in order to determine whether they reflect the cost of providing the relevant services. The EETT conducts an annual audit of our ECOS system through external auditors, other than those appointed to audit our financial statements. Based on the findings of this audit, the EETT may object to our application of ECOS and related cost methodologies in the calculation of our tariffs and may require us to make certain adjustments. These adjustments may also have retroactive effect, as has been the case some times in the past. We cannot assure you that future audits of our ECOS system will not result in further recommendations for changes to our costing methodologies and to our tariffs. Since 2007, we are required, under the EETT’s relevant decision notice, to produce financial statements showing accounting separation between our wholesale and retail businesses. Accounting separation requires the preparation of separate accounts for each of the different businesses, separately identifying and allocating the costs and revenues associated with each business. Such statements are prepared using both a fully-distributed current cost methodology and a long-run average incremental costing methodology and should be published annually.
 
In addition, with respect to tariffs that are not regulated on a cost basis, the EETT determines whether such tariffs allow alternative operators to realize sufficient profit margins and, to that effect, they are assessed using both data from our ECOS system and other methodologies approved by the EETT, such as the retail-minus pricing methodology, where the EETT requests data from relevant service operators and calculates a retail-minus price to


8

define wholesale tariffs based on proposed retail tariffs. However, the exact models used for the calculation of retail-minusretail margins for different services and bundled servicesservice bundles have not been made known to us and therefore we cannot predict with accuracy their effect on our tariffs. Currently, the EETT has published a consultation proposal for price control measures for retail services and service bundles (which may include a combination of regulated and unregulated products). We cannot predict the outcome of the consultation and whether new price control measures will allow us a greater pricing flexibility.
 
Regulatory limitations imposed on our ability to set tariffs often require us to charge tariffs which are higher or, in certain cases, significantly higher than those charged by our competitors for the same services, as our competitors are not subject to the same pricing constraints. Given that an important factor for the determination of our tariffs is our cost for providing the relevant services, we must make efforts to increase the efficiency of our operations, in order to reduce such costs, and therefore be able to reduce the cost-based tariffs we charge, in order to make them more competitive. Although we believe that in recent years the repercussions of this pricing disadvantage on the rate of decline of our market share were relatively limited, partly due to the perceived quality and reliability of our services by the market, we cannot assure you that, if we continue to be required to charge tariffs higher than those of the competition, our market share and our revenues will not be materially adversely affected, especially as our competitors improve the quality of their services.
 
The provision of certain mobile telephony services is regulated by the European Union. The mobile termination rates charged by our mobile operators in Greece, Bulgaria and Romania are subject to a glide path of phased reductions determined by each of the national telecommunications regulators. In addition, on May 7, 2009, the European Commission published a recommendation on the regulatory treatment of fixed and mobile termination rates, which would lead to significantly lower estimates of the cost of mobile phone termination services. The European Commission has also proposedIn June 2009, a new roaming regulation(“Roaming II”) came into force which would extendextends the existing regulationprice


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caps to wholesale and applyretail voice roaming charges put in place by the existing roaming regulation(“Roaming I”) and applies new price caps onto wholesale and retail short message services(“SMS”) roaming charges and onto wholesale roaming services for data services. This new regulation is currently being discussed by the European Commission, the European Council and the European Parliament.
 
If we cannot efficiently reduce the cost of providing our services and the level of our tariffs to be more competitive in a timely manner, we could experience a material adverse effect on our business, results of operations, financial condition and prospects.
 
The regulatory environment isfor telecommunications services remains complex and remains subject to change and interpretation. Our compliance with the regulations to which we are or may become subject may require us to expend substantial resources and may have a significant impact on our business decisions.
 
The provision of telecommunications services in Greece is subject to regulation based on European UnionEU legislation, competition law andex-ante sector-specific regulation relevantrelating to various issues, including numbering, licensing, tariffs, local loop unbundling, interconnection, leased lines and privacy issues. In addition, theThe Telecommunications Law currently in force for four years contemplates the enactment of a series of secondary legislation. While somelegislation, most of these arewhich has already in force, others, such asbeen adopted, but the joint ministerial decision on the procedures for granting rights of way, arewhich is critical to the deployment of new networks, has still not been completed. In certain cases, secondary legislation mayand regulatory remedies do not provide completereflect the current level of competition and accurate regulatory guidance and we may notcan be in a position to accurately predictburdensome, particularly regarding the regulatory treatment of certain of our actions, in particular with regard to our tariffs.conditions for tariff approval. Although experience with the regulation of competition in fixed-line voice telephonyservices in Greece has increased over recent years, the emergence and introduction of new technologies and new types of services andtogether with the lack of clear guidelines in their regulatory treatment has led and may lead in the future to a lack of clarity, at a national and European level, in certain cases, led, and may in the future lead, to a lack of clarity with respect to the regulatory framework governing the provision of such services. In addition, amendments to existing regulations have resulted in us utilizingbeing required to utilize substantial financial and human resources in order to comply with changing requirements and this maywe expect to continue to be bound by such obligations in the short- to medium-term future.
 
Furthermore, the European Commission has recently proposed certain significant amendments to the current regulatory framework. We also expect thatThe market analyses includedthat were initiated in 2009 based on the Relevant Markets Recommendation (a recommendation issued by the European Commission in November 2007 that designated seven electronic communications markets as candidates for potential regulatory intervention) will take placecontinue in 2009, which2010. These analyses may result in the cessation or amendmentintroduction of new remedies, such as duct access, and may result in certain existing regulatory remedies that affect our business.business being amended or no longer available. In addition, in December 2009, the European Commission approved significant amendments to the current regulatory framework, that must be transposed into national law by May 25, 2011. See “4.B Business Overview — Regulation — Telecommunications Services Regulation in Greece — European UnionEU Regulatory Framework”.


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As a result, of the above and other factors, it is sometimes difficult for us to accurately predict the exact manner in which new laws and regulations affecting our business will be interpretedand/or implemented by regulators or courts, the impact such regulations may have on our business, or the specific actions we may need to take, or the expenditure we may need to incur in order to comply.
 
Furthermore, as a provider of telecommunications services, we are also exposed to certain additional regulatory compliance costs, which range from our obligation to provide universal service to increased expenses relating to investments for the protection of customers’ privacy and personal data. See “4.B Business Overview — Regulation — Telecommunications Services Regulation — Telecommunications Framework in Greece”.
 
In addition to the substantial resources we may have to commit to comply with the regulations to which we are or may become subject, fines can be and have been imposed on us, if the relevant regulator rules that we do not comply with the applicable regulatory framework. Over recent years, the EETT has imposed a number of fines on us with respect to a number of our business activities, including both retail and wholesale services, certain of which have been for significant monetary amounts. See “4.B Business Overview — Legal Proceedings — Greece — Regulatory Matters”. We believe that in certain cases such regulatory remedies imposed on us did not fully take into account the current level of competition in the Greek telecommunications market, which has evolved significantly over recent years. Although these fines are subject to remedies before Greek administrative courts and we have so far, in a number of cases, succeeded in having certain of these fines either repealed or reduced, we have in recent years paid, or provided for significant amounts in our financial statements, in relation to fines imposed on us by the


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EETT and we cannot assure you that further fines will not be imposed on us in the future. In addition, regulatory remedies, including fines, that have been, or may be, imposed on us not only have a direct impact on our financial condition, but also impact our business decisions and strategy. The imposition of significant regulatory fines could have a material adverse effect on our business, results of operations, financial condition and prospects.
 
Failure to comply with regulatory requirements with respect to unbundling the local loop and providing wholesale leased lines, or competitive pressures arising from an increased number of unbundled local loop sites, could have a material adverse effect on our business, results of operations, financial condition and prospects.
 
We are obligedrequired to provide other Greek telecommunications operators with full and shared access to local loop services, distant and physical collocation and backhauling services, as well as wholesale leased line services upon their request. See “4.B.“4.B Business Overview — Other Services — Leased Lines” and “—“4.B Business Overview — Other Services — Local Loop Unbundling”, respectively. Responding to requests for the provision of such services, and especially access to local loop services and distant and physical collocation services, is a logistical process which requires us to devote significant managerial, technical and financial resources within an uncertain and evolving regulatory environment, in which we are exposed to increased regulatory and litigation risk. We cannot assure you that we will be in a position to respond effectively to requests for provision of access to local loop or wholesale leased lines (which may continue or increase in the future) in a timely manner. If we fail, or are considered to have failed, to effectively respond to such requests (especially if they are based on timely submitted annual forecasts), we may be deemed to be in violation of our obligations under the applicable legal and regulatory framework and, as a result, we could be exposed to regulatory action. This may include paying compensation for delayed provision of the relevant services, as well as the imposition of fines by the EETT or litigation by other operators. At times,Over recent years, alternative carriers have taken legal action against us before the EETT, civil or administrative courts, claiming that we have not complied with our obligations. Such actions were less frequent in 2009 than in previous years, mainly due to our improved performance in responding to relevant requests. See “4.B.“4.B Business Overview — Legal Proceedings”.
 
In addition, devoting increased human, technical and financial resources to responding to requests of this nature has resulted and may, in the future, result in the unavailability of such resources to support other activities of our Group. We cannot assure you that we will at all times be in a position to fully and timely satisfy the regulatory and logistical requirements imposed by new reference offers for unbundled access to the local loop and related services(“RUO”) issued by the EETT. In particular, during 2009 the EETT imposed additional obligations on us to provide duct access and access to dark fibre to alternative operators. On the other hand, as our competitors increase the number of unbundled local loop sites, they extend the scope of their coverage and may improve the quality of their products and services and potentially reduce their prices which could increaseand the competitive pressures on our products and services. If we failservices will increase. Our failure to comply with regulatory requirements with respect to local loop or leased lines, or to contend with competitive


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pressures arising from an increased number of unbundled local loop sites, these factors could have a material adverse effect on our business, results of operations, financial condition and prospects.
 
As alternative telecommunications operators extend their own networks, they are expected to improve the quality of their services and become more competitive.
 
A number of telecommunications operators in Greece, including both fixed-line and mobile operators, are currently in the process of developing and extending their own networks, while they expand their customer bases. In addition, certain of our competitors are receiving subsidies under government programs to develop regional network infrastructure. We expect that, as these operators continue to extend their networks by extending backbone network coverage and increasing the number of unbundled local loops, they may gradually improve the quality of their services, andas well as reduce their operating expenses,costs, as a result of them reducing their reduced reliance on leasing capacity from our network. As a result, they may become more competitive, both in terms of service quality and pricing. This could have a material adverse effect on our market share, or on our revenues and our profitability, any of which could have a material adverse effect on our business, results of operations, financial condition and prospects.


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Our revenues from the provision of wholesale services may decrease, as alternative telecommunications operators expand, and increase their reliance on, their own networks.
 
We derive a portion of our revenues and profits from the provision of wholesale services, includingwholesale leased lines, wholesale line rental and local loopinterconnection services, bitstream access and unbundling services, to other, mainly Greek, telecommunications services providers, including alternative fixed-line and mobile telecommunications operators. In recent years, we have experienced a shift in our revenues from wholesale services from bitstream, leased lines and interconnection, to local loop unbundling which has resulted in revenues from wholesale activities overall remaining relatively stable. A number of these providersalternative fixed-line and mobile telecommunications operators are currently in the process of extending and upgrading their own networks, while they increase their customer bases.bases increase. As these operators expanded and continue to extendexpand their own networks, we expect their reliance on and use of, our own network and, in particular, our wholesale services, especiallysuch as leased lines and wholesale broadband services, has decreased and we expect it to decrease and, therefore,continue to decrease. As a result, our revenues from the respective wholesale services have been and may continue to be adversely affected. In addition, potential consolidation of Greek fixed-line telecommunications operators may have a negative impact on our revenues from the provision of wholesale services, mainly due to increased efficiencies and economies of scale that may result from the consolidation of infrastructures of the relevant operators. Furthermore, new factors, such as the requirement for the provision ofto provide leased lines on a trunk terminating segments basis (as opposed to end-to-end)(while we are reintroducingpoint-to-point wholesale leased lines), may also negatively affect our revenues from the relevant wholesale services.services as this gives a higher pricing flexibility and choice to our competitors. Significant declines in the revenues we derive from wholesale services could have a material adverse effect on our business, results of operations, financial condition and prospects.
 
In addition, the Greek State has recently proposedannounced a plan to update its long-term project for the development of a fiber optic network connecting Greek households(“FTTH” or“Fiber-to-the-home”). TheBased on recent governmental announcements, the exact technical, financial and other parameters of this project are still under consideration.expected to change. At the same time, we are considering a number of technical options with respectplanning to developingdevelop our own fiber connection solutions. See “4.B Business Overview — Fixed-line Services — Greece — OTE — Fixed-line Network”. As a number of factors relating to the State’s FTTH project, including the cost of the project, the potential allocation of thisits cost and the work required for the project and its future impact on fixed-line competition in the Greek market, remain unclear, we cannot predict the impact of this project on our own investment plans, the development of Next Generation Access (NGA) infrastructure in Greece and fixed-line competition, and, therefore, we cannot assure you that it will not have a material adverse effect on our business, results of operations, financial condition and prospects.
 
Increased competition in wholesale services and financial difficulties our wholesale customers face could materially adversely affect our business, results of operations, financial condition and prospects.
 
Wholesale activities are subject to a significant degree of regulation, includingin particular with respect to the tariffs we charge for the relevant services. Our customers for wholesale services are mainly alternative providers of telecommunications services, which make, and are expected to continue to make, significant investments in developing their own infrastructure with a view to reducing their reliance on, and use of, our own network infrastructure. Certain of our customers for wholesale services also face increased competition and regulatory pressures, including with respect to the tariffs for the services they provide, combined with significant capital expenditure requirements, in order to develop their own networks.networks and a number of them are highly leveraged in order to fund their capital expenditure. Financial difficulties faced by these telecommunications providers already face, or may face in the future, especially exacerbated by the current deteriorating economic and financial conditions in Greece, may lead to increases in our bad debt provisions. In particular, three of the smaller alternative fixed-line operators in the Greek market ceased operations due to financial difficulties over recent months, which resulted in an increase to our relevant bad debt provisions. See “5.A Operating Results — Results of Operations for


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the Three Years ended December 31, 2008 — Operating Expenses — Other Operating Expenses”. We cannot assure you that we will not have to increase our provisions for bad debts relating to debts owed by alternative operators facing financial difficulties, especially in the event that macroeconomic conditions in Greece continue to decline.deteriorate. Loss of wholesale businessand/or potential financial difficulties faced by our wholesale customers could have a material adverse effect on our business, results of operations, financial condition and prospects.


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If we do not comply with certain applicable rules and regulations, the EETT may amend or revoke one or more of our licenses. Outside of Greece, we also face uncertain and changing regulatory restrictions in the countries where we operate.
 
We rely on a number of licenses in order to provide some of our fixed-line, mobile and other services. UnderIn Greece, the EETT may, under the Telecommunications Law, the EETT may amend or revoke our licenses, if we do not comply with certain applicable rules and regulations, or if we do not meet certain terms and conditions. Although ourOur license to provide fixed-linesfixed-line services in Greece does not have an expiry date, and we believe the possibility of its material adverse amendment or revocation is minimal, anyminimal. In addition, Cosmote’s 2G license for the GSM 1800 frequency band has a term of 25 years expiring on December 4, 2020, its 2G license for the GSM 900 frequency band has a term of 15 years, expiring on September 8, 2017, and its 3G license has a term of 20 years, expiring on August 5, 2021. Each of these licenses is subject to renewal by resolution of the EETT, according to the legislation in force at the time of the renewal, and we believe the possibility of its material adverse amendment or revocation is minimal. Any material adverse amendment or revocation of one or more of our licenses would restrict our ability to conduct business and would therefore have a material adverse effect on our business, results of operations, financial condition and prospects.
 
Outside of Greece, we also face uncertain and changing regulatory restrictions in the countries wherein which we operate. The telecommunications industry is highly regulated in all countries in which we operate. In some of these countries, regulation of the telecommunications sector falls within the competence of bodies that may not be able to act independently from the government and are subject to political pressures. See “— Political, economic, legal and regulatory uncertainties prevailing in many of the international markets in which we have invested, or plan to invest, could have a material adverse effect on our international investments”. We need licenses or similar permits to carry on our business in each of these countries. Our ability to establish new networks depends on obtaining appropriate licenses, which in some cases will require adopting and implementing new regulatory regimes. In some cases these licenses are subject to expiry dates.
Our ability to continue to provide services depends on our licenses remaining valid. In some cases these licenses have expiry dates. Although we have had favorable experience obtaining, maintaining and renewing licenses in the past,we cannot assure you that we will be able to obtain, maintain or renew licenses for our services on commercially viable terms in all jurisdictions wherein which we operate. The loss of one or more of our licenses, the imposition of substantial limitations upon our license terms, or any material changes in such license terms or in the regulatory environments in which we operate, could have a material adverse effect on our business, results of operations, financial condition and prospects.
 
We may be unable to implement new technologies and launch new products in a timely and cost-efficient manner or to penetrate new markets in a timely manner in response to technological advances, changing market conditions or customer requirements.
 
The telecommunications industry is subject to rapid technological changes. Advances in telecommunications and information technology have in the past created, and may in the future continue to create, alternatives to fixed-line transmission based on switching or may facilitate the provision of telecommunications services that circumvent conventional tariff structures. We expect that new products and technologies will continue to emerge and that existing products and technologies will further develop. Unexpected rapid changes in state-of-the-artmodern telecommunications equipment could render current telecommunications technologies obsolete in the future, which, in turn, could render our technologies, products or infrastructure obsolete. Although not yet fully realized, the current trend towards convergence of the telecommunications, broadcasting and information technology services may also affect further developments.
 
Changing technology intensifies competition for operators of fixed-line and mobile networks, including our company and Cosmote, as existing and new competitors developand/or adopt new or advanced technologies and compete in terms of service quality and pricing. We are already using, or plan to implement, several new technologies in our network and in our new service offerings. We cannot, however, be certain that we may continue to have cost-efficient access to know-how for suchstate-of-the-art technologies, or that we will be able to implement them as quickly, or as effectively as our competitors. Furthermore, as new technologies develop, difficulties in accessing such new technologies or competitive pressures may force us to implement these at a


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substantial cost. For example, plans by the Greek state


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State relating to the development of an FTTH network throughout Greece, or the increasing use ofIP-VPN connections for corporate customers and the continuously increasing demand for higher capacity over existing networks, resulting from the development and use of new applications requiring higher bandwidth, may result in additional investments or fundamental changes in the way in which, or the terms upon which, we compete. Furthermore, the increasing development of Wi-Fi local networks in public areas and the use of those networks by mobile users may have a negative impact on traffic over mobile networks and revenues of mobile operators. We cannot predict with accuracy the effect of technological changes on our business or on our ability to provide competitive services.
 
If we fail to timely and efficiently introduce our new products and services under evolving market conditions, to take advantage of the recent expansion and upgrade of our networkand/or to effectively respond to competition from new technologies, we could experience a material adverse effect on our business, results of operations, financial condition and prospects.
 
We continue to invest in upgrading and expanding our network in order to be able to offer a range of technologically advanced services, mainly in the broadband area. We are expanding our broadband coverage in our local access network and investing in infrastructure in order to deliver other services, including integrated voice, video and data and other multimedia services to our customers. Our commercial success with these services depends on a number of factors, including:
 
 • sufficient demand from our existing and potential customers to offset our past and anticipated investment in these services;
 
 • our success in identifying appropriate technologies that may allow us to respond efficiently to our customers’ needs and to our competitors’ alternative technologies and our ability to continue investing on an incremental basis with a view to securing increased capacity and better quality of service with our existing infrastructure;
 
 • our ability to compete effectively with other providers of these services;
 
 • our ability to timely reformulate our policies to conform to market conditions and needs; and
 
 • our ability to operate as a one-stop-shop, integrating telecommunications, hardware,and/or software services into a single offer, depending on different customer needs.
 
The absence of, or our failure in, any one or more of these factors, could materially adversely affect our business, results of operations, financial condition and prospects.
 
The Greek State and Deutsche Telekom, our two major shareholders, may have common interests or take common positions or actions that may not coincide or may conflict with the interests of other shareholders.
Deutsche Telekom and the Greek State are our two major shareholders, each holding voting power of 25.0%, plus one vote in our share capital as of the date of this Annual Report. In May 2008, Deutsche Telekom and the Greek State entered into a shareholders’ agreement, the provisions of which govern certain matters of corporate governance and the management of our company. See “7.A. Major Shareholders and Related Party Transactions”. As a result, Deutsche Telekom and the Greek State may have interests, take positions or take actions regarding a number of matters, including our business, strategy, investments, which may not coincide, or may conflict with, the interests of our other shareholders. These matters relate to decisions of our board of directors and resolutions of any general assembly of our shareholders, concerning, among other things, amendments related to appointments of directors, decisions with respect to mergers, business combinations, and acquisitions or dispositions of assets and dividend payouts.
The interests of Deutsche Telekom and the Greek State may conflict with each other and this may have a material adverse effect on our business, operations and financial performance.
 
On May 14, 2008, Deutsche Telekom and the Greek State entered into a shareholders’ agreement, the provisions of which govern certain matters of corporate governance and management of our company, including the size and composition of our Board of Directors, the party or parties responsible for nominating our Chairman, Managing Director, the establishment, composition and powers of committees of our Board of Directors, a requirement of a supermajority vote of our Board of Directors for certain matters and the preservation of veto rights


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of the Greek State with respect to certain corporate actions and business matters. This shareholders’ agreement also contains provisions relating to the voting of shares by the parties. For more details regarding this shareholders’ agreement, see “7.A.“7.A Major Shareholders and Related Party Transactions — Major Shareholders”. In the event that Deutsche Telekom and the Greek State disagree regarding the interpretationand/or implementation of the shareholders’ agreement, or their opinions with respect to matters of material importance regarding our strategy and management materially diverge, such disagreement or divergence of opinions could result in delay or a lack of clarity in the implementation of our strategies or investments, or conflict with, or deviate from, previously adopted and implemented strategies or investments. This could have a material adverse effect on our business, results of operations, financial condition and prospects.


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The Greek State and Deutsche Telekom, our two major shareholders, may have common interests or take common positions or actions that may not coincide or may conflict with the interests of other shareholders.
Deutsche Telekom and the Greek State are our two major shareholders, controlling voting rights of 30.0% and 20.0%, respectively, in our share capital as of the date of this Annual Report. In May 2008, Deutsche Telekom and the Greek State entered into a shareholders’ agreement, the provisions of which govern certain matters of corporate governance and the management of our company. See “7.A Major Shareholders and Related Party Transactions”. As a result, Deutsche Telekom and the Greek State may have interests, take positions or take actions regarding a number of matters, including our business, strategy, investments, which may not coincide, or may conflict with, the interests of our other shareholders. These matters relate to decisions of our board of directors and resolutions of any general assembly of our shareholders, concerning, among other things, amendments related to appointments of directors, decisions with respect to mergers, business combinations, and acquisitions or dispositions of assets and dividend payouts. In addition, we have been informed that in early 2010, the European Commission wrote to the Greek State requesting further information regarding the arrangements between Deutsche Telekom and the Greek State regarding the management of our Company (see “7.A Major Shareholders and Related Party Transactions — Major Shareholders”).
 
Political, economic, legal and regulatory uncertainties prevailing in many of the international markets outside Greece in which we have invested, or plan to invest, could have a material adverse effect on our international investments.
 
We have made equity investments in telecommunications operators and have acquired regulatory licenses to provide telecommunications services in a number of Southeastern European countries, including Romania, Albania Bulgaria and the Former Yugoslav Republic of Macedonia(“FYROM”).Bulgaria. See “4.A.“4.A History and Development of the Company” and “4.B.“4.B Business Overview”. The investmentsInvestments we have already made, and additional investments we may consider in the future, were or may be madelocated in countries that present a different, and in some cases greater, risk profile than that of the telecommunications sector in Greece. Relevant risks could include, but are not limited to:
 
 • unanticipated changes in the legal or regulatory environment and licensing requirements;
 
 • tariffs, taxes, price, wage and exchange controls and other trade barriers;
 
 • other restrictions on, or costs of, repatriation of profits or capital;
 
 • political and social instability;
 
 • significant economic volatility;
 
 • strong inflationary pressures; and
 
 • interest rate and exchange rate fluctuations.
 
The majority of Southeastern European countries where we have made investments are at varying stages of transition to a market economy. Consequently, they have experienced, or may experience, changes in their economies and their governmental policies that may affect our investments in these countries. Although these countries are at different stages of developing institutions and legal and regulatory systems characteristic of parliamentary democracies, including having recently become, or aspiring to soon become, Member States of the European Union, these institutions may not yet be as firmly established as they are in Western Europe. Similarly, the interpretation and procedural safeguards of the new legal and regulatory regimes in these countries are still developing and in certain cases existing laws and regulations may be applied inconsistently. In some circumstances, it may not be possible to obtain the legal remedies provided under those laws and regulations in a timely manner. As a result, we may face further uncertainty as to the performance of our international investments.
 
Recently, Southeastern European countries in which we have made investments have experienced negative rates of economic growth, or significantly slower growth rates, as compared to previous years. We expect that a significant deterioration in the macroeconomic environment in these still-developing countries may continue to deteriorate, which can have a material adverse impact on the operating and financial performance of our businesses in the respective markets. In


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addition, in recent years, certain of these countries have experienced high inflation, which may result in high interest rates, devaluations of local currencies and government controls on currency exchange rates or prices, any of which may affect our results. Currencies in certain of the countries in which we operate (other than Greece) have been subject to devaluations in certain cases in recent years and may suffer further devaluation, which could adversely affect the stated value of our shareholdings in entities in these jurisdictions, although certain of these currencies have recently appreciated against the Euro. All of these conditions in Southeastern Europe could have a material adverse effect on


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our international investments and, accordingly, on our business, results of operations, financial condition and prospects.
 
Potential disputes with major suppliers, or failure by such suppliers to perform their obligations, could cause us to incur significant cost overruns and delays in implementing our investment plans.
 
We rely on a number of suppliers to satisfy our requirements for telecommunications equipment. Our main suppliers of fixed-line network equipment include Nokia-Siemens, Alcatel-Lucent, Cisco, Ericsson and Ericsson.Huaweii. Nokia-Siemens, Ericsson, Huaweii and HuaweiiZTE are Cosmote’s main suppliers of equipment for its second generation(“2G”), 2.5G and third generation(“3G” or“UMTS”) networks. If we have significant disputes with our suppliers, or if our suppliers fail to perform their obligations to us, we may incur significant cost overruns and delays in implementing our investment plans. Shipments of equipment could also be delayed or we may be forced to seek alternative suppliers using procurement procedures approved by the European Union. Any of these developments could have a material adverse effect on our business, results of operations, financial condition and prospects.
 
We may be required to make additional contributions to IKA-ETAM in connection with the Voluntary Retirement Scheme which we commenced implementing in 2005, that significantly exceed our initial estimates.
On January 19, 2010, the Greek Minister of Labor and Social Security advised us that IKA-ETAM had incurred significant deficits attributable to the incorporation of the pension segment of TAP-OTE into IKA-ETAM as of August 1, 2008, as a result of our Voluntary Retirement Scheme, that further deficits were anticipated for 2010 and that we should contribute funds towards these deficits. In addition, on February 23, 2010, the Ministry formally advised us that it had estimated that IKA-ETAM had foregone contributions and pensions of approximately Euro 340.0 million, as a result of the Voluntary Retirement Scheme, and required that our relevant outstanding contributions which up to that point we paid on a monthly basis should be settled in full.
In March 2010, a Ministerial Decision was issued and published in the Government Gazette (FEK333/26/03/2010), requiring us to make a lump-sum payment by the last working day of September 2010, covering the additional financial burden incurred by the Pension Section of IKA-ETAM, the Auxiliary Insurance Sector for OTE personnel of TAYTEKO and the Medical Segment of TAYTEKO, resulting from our Voluntary Retirement Scheme (which the Ministry advised were up to approximately Euro 340.0 million). According to the same Ministerial Decision, the exact amount of this additional financial burden will be determined by an actuarial study to be performed by the Directorate of the Actuarial Studies of the State’s General Secretariat for Social Security in conjunction with the Directorate of Actuarial Studies and Statistics of IKA-ETAM, by August 31, 2010. See “5.A Operating Results — Recent Developments — Additional contributions to IKA-ETAM in connection with the Voluntary Retirement Scheme”.
Having examined the Ministry’s position, we believe that it is unsubstantiated, as we have fulfilled and continue to fulfill in their totality our financial obligations towards social security funds, paying all contributions, as they are due, both in the context of our ordinary course of business, as well as the ones related to the our voluntary retirement plans, in compliance with relevant laws, rules and regulations. On May 11, 2010, we filed an appeal against the relevant Ministerial Decision before the Administrative Court of First Instance of Athens, requesting the annulment of Article 3, on the grounds that it is in contravention of article 34 of L.3762/2009 and on May 15, 2010 we filed an appeal before the same court requesting the suspension of enforcement of this Ministerial Decision.
We cannot assure you as to the exact amount of the additional financial burden that will be determined by the actuarial study which is mandated to be performed, or that we will be successful in contesting the relevant provisions of the Ministerial Decision, or as to whether and what additional amount we may be eventually required to contribute to IKA-ETAM. As we have not recorded any relevant provision in our financial statements, if we are


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eventually required to contribute additional amounts to IKA-ETAM which materially exceed our initial estimates in connection with the cost of the Voluntary Retirement Scheme, this could have a material adverse effect on our business, results of operations, financial condition and prospects.
We have an active, union-represented work force, which has in the past gone on strike and may cause work stoppages.
 
Almost all of theour full-time employees of OTE S.A. are members of the OME-OTE labor union. OME-OTE is strong and influential within our company and has consistently opposed disposals of ownership interests in our company by the Greek State. In recent years, we have experienced a number of strikes, both on a nationwide basis and in specific geographic regions. These included 6 strikes in 2009, mainly relating to the closure of OTEShops, 16one-day strikes in 2008, mainly relating to the pension reform bill and the sale of an interest in our share capital to Deutsche Telekom by the Greek State and twoone-day nationwide strikes and 26one-day strikes in specific geographic regions in 2007 and five days of nationwide strikes in 2006.2007. In addition, since January 1, 2010, we have experienced twofour nationwideone-day nationwide strikes, and aone-day regional strike since January 1, 2009, mainly relating to employment issues.the fiscal measures recently adopted by the State. For more information, see “6.D.“6.D Employees — Relationship with the Union”. There can be no assurance that strikes or work stoppages or other industrial action will not have a material adverse effect on our business, results of operations, financial condition and prospects.
 
If we are unable to recruit and retain key personnel, our plans to maintain our positions in the fixed-line and mobile telecommunications markets and to expand and grow in the areas of internet, high-speed data and business telecommunications services could be impeded.
 
Competition for qualified personnel in the Greek telecommunications market is intense, and the costs of retaining such personnel have increased and may continue to increase. Recruiting specialized technical, commercial and information technology personnel is crucial to our future success and efficiency. Since 2006, following the enactment of Greek Law 3522/2006 and the adoption of our new Internal Personnel Regulation, we have implemented flexible recruitment procedures in order to recruit experienced and specialized personnel, for both entry level and managerial positions, with higher salaries and more attractive benefits. Potential failure to recruit experienced and specialized personnel and to retain necessary skilled personnel could significantly impede our plans to maintain our position in the fixed-line and mobile telephony services market and to expand and grow in the areas of internet, high-speed data and business telecommunications services, and could have a material adverse effect on our business, results of operations, financial condition and prospects.
 
Criminal investigations relating to improprieties in relation to the conduct of our business could have a material adverse effect on our business, results of operations, financial condition and prospects.
 
In 2007, the District Attorney of Athens undertook a preliminary investigation with respect to the propriety of the acquisition of Germanos S.A.(“Germanos”) by Cosmote, following allegations by a number of members of the Greek Parliament, belonging to the opposition party, claiming that the acquisition was not in the business interest of Cosmote. During the course of the preliminary investigation, the members of the Board of Directors of Cosmote at the time of the acquisition of Germanos were called and requested to submit explanations in connection with the case. Following the recent completion of the preliminary investigation, an investigating judge (thea formal criminal investigation was ordered in connection with the potential perpetration of the criminal offence of abuse of trust against seven former and current members of Cosmote’s Board of Directors. The 20th Investigating Judge of Athens)Athens, who was appointed in charge of a formalthe criminal investigation, in connection withhas ordered two accounting firms to produce an expert’s report, which was submitted to the potential


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perpetration of a number of criminal offences. To our knowledge, no specific criminal charges have been filed personally against members ofInvestigating Judge on March 17, 2010 and concluded that the Boards of Directors of OTE orprice paid by Cosmote or senior managers of our Group to date.
We cannot, however, assure you that an investigating judge may not file criminal charges against certain members of the Board of Directors of Cosmote at the time offor the acquisition of Germanos including current memberswas fair and that Cosmote did not suffer loss or damage as a result of our Boardsthe acquisition (rather the acquisition was to the corporate benefit of Directors or senior management.Cosmote).
 
In addition, Greek and German judicial authorities have been investigating allegations of bribery, money laundering and other criminal offences committed by employees of Siemens AG and a number of Greek government officials and other individuals, relating to the award of supply contracts to Siemens AG. In that connection a former senior executive of our Group was recentlylast year remanded in custody pending his trial for similar charges. Furthermore, at times, Greek judicial authorities have undertaken other criminal investigations with


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respect to alleged improprieties involving current or former members of our senior management. See “4.B Business Overview — Legal Proceedings — Greece — Other Proceedings — Criminal Proceedings”.
 
To the extent we have been, or may so be, requested, we have cooperated and intend to cooperate in relation to such investigations. In addition, we have taken and continue to take measures designed to ensure the appropriate conduct of our personnel, as well as to request information in order to investigate such allegations. Also in certain cases, we intend to pursue compensation for damages incurred as a result of illegal conduct. We cannot, however, give any assurances as to the outcome of such criminal investigations, including in connection with the potential filing of criminal charges or imposition of criminal convictions on former or current members of our Boards of Directors or senior management, or of related civil litigation. Potential filing of criminal charges, or imposition of criminal convictions, in relation to improprieties by our management and related civil litigation against our Group could adversely impact our reputation, our ability to conduct business in Greece or abroad and could result in a material adverse effect on our business, results of operations, financial conditions and prospects.
 
If we fail to operate IPTV services in a reliable, competitive and profitable fashion, our reputation and our market share, including voice and internet access services, may suffer.
 
In February 2009, we began offering IPTV (video over broadband) services to customers, initially in major urban centers, after commencing with a soft launch in the autumn of 2008. See “4.B Business Overview — Other Services — Other Telecommunications Services — IPTV”. As at December 31, 2009 we have historically been a telecommunications services providerhad 16,075 IPTV customers in 60 urban areas and do not have significant experiencehad signed exclusive deals with media, broadcasting or other related business activities,major European Leagues and international channels. However, as we cannot assure youexpect that wethere will be successful in establishing, managing and growing the new IPTV activities, including with respect to securing attractive or sufficient content. We may facea significant technical and execution difficulties and risks relating to the support of the new services by our network infrastructure, including with respect to ensuring the requisite access speeds to provide high-quality, uninterrupted IPTV services. In addition, we may face significant difficulties in connection with securing attractive content at commercially and economically acceptable terms. For example, we are still in the process of negotiating to acquire the rights to broadcast mostpercentage of the Greek free-to-air(“FTA”) television channels.
Furthermore,population that will not be able to receive IPTV service, we are also planning to launch a satellitePay-TV service (DTH) in 2010, through which we expect to expand the availability of ourPay-TV content to all households throughout Greece. A number of our competitors in the Greek market are already offering IPTV services, andwhile Forthnet, acquired NetMed,our fixed-line services competitor, operates Nova, the only active provider of DTH satellite servicesPay-TV service (DTH) in Greece, insince August 2008. We cannot assure you that we will operate and provide IPTV services in a timely and reliable fashion, including offering attractive content, as compared to our competitors. If we fail to do so, our reputation may suffer and our market share, including that for voice and internet access services, may decrease, as a number of our voice or internet access customers may turn to competitors providing more reliable, more attractive, or cheaper triple-play (voice, internet and IPTV) services. Furthermore, if we fail to grow our customer base for IPTV services in accordance with our expectations, we may not realize the expected benefits from our IPTV-related investments. In general, our failure to establish and operate IPTV services in a competitive and reliable fashion, could have a material adverse effect on our business, results of operations, financial condition and prospects.


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We do not insure all our assets and, accordingly, any material loss to our telecommunications property, plant and equipment could have a material adverse effect on our business, results of operations, financial condition and prospects.
We carry limited insurance coverage and do not insure most of our telecommunications property, plant and equipment or our head office building, although we do insure our material installations for damages and loss of revenues. Business interruptions due to force majeure in countries where we operate other than Greece, as well as labor disputes, strikes, earthquakes and adverse weather conditions, among other factors, could result in loss of revenues, or legal liabilities, or cost increases, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
 
Cosmote’s ability to continue to grow and maintain its market leading position is subject to certain factors that may be outside Cosmote’s control.
 
A significant portion of our revenues and profits are contributed by Cosmote’s Greek activities. Given high mobile penetration rates, subscriber numbers of all mobile operators, including Cosmote, can be expected to grow at a slower rate than in previous years.years or suffer a decline in revenues and profits. The continuation of Cosmote’s growth and the size of Cosmote’s future customer base will depend on a number of factors, some of which are outside of our or Cosmote’s control. Such factors include general economic conditions, the gross domestic product per capita in Greece and other markets in which we operate, developments in the regulatory environment and the application by the EETT of relevant legislation, the development of the GSM market and any rival technology for the provision of mobile telecommunications services, the development of 3G operations, the price of handsets and improvement in the quality and availability of fixed telephony as an alternative to mobile services in Greece.Greece and the competitive behavior of mobile operators. Any of these factors could materially adversely affect our business, results of operations, financial condition and prospects.


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Cosmote faces strong competition from other mobile telephony providers in Greece and in other markets in which it operates and may experience loss of market share or significant price pressures resulting from intensifying competition.
 
Competition for products and services in the Greek mobile telecommunications market remains intense. Each of Vodafone and Wind Hellas, Cosmote’s competitors in the Greek market, belong to large international groups and benefit from group-wide efficiencies in international operations in areas such as international roaming, marketing product offerings and procurement. Cosmote’s competitors may succeed in attracting some of its customers which could reduce Cosmote’s market share and have a material adverse effect on its business, results of operations.
operations, financial condition and prospects. Furthermore, as a result of intensifying competition, the Greek mobile market, as well as the other markets in which Cosmote operates, has recently experienced remarkable price pressures. These were focusedOur mobile subsidiaries in Albania, Romania and Bulgaria are also facing and are expected to continue to face similar competitive and pricing pressures in their respective markets, which could result in loss of their respective market shares, or adversely affect their operating and financial performance. Competitive pressures related particularly on pre-paidto prepaid mobile telephony products and services, as well as newly-introduced products combining fixed-line and mobile features. Heightened competitive pressures may also result in higher marketing, selling and distribution expenditure, as well as increased capital expenditure and, therefore, have a negative impact on profitability. In the future, there may also be new entrants to the Greek mobile market, which could result in further price pressures. In addition, furtherFurthermore, other factors, including new market conditions and trends or technologies may also affect the competitive landscape and increase competitive pressures having an impact on our financial and operating performance. For instance, the increasing development of Wi-Fi local networks in public areas and the use of those networks by mobile users may arise in relation to the introductionhave a negative impact on traffic over mobile networks and revenues of innovative, including not purely mobile products.operators. Loss of market share or significant price pressures resulting from intensifying competition could result in a material adverse effect on our business, results of operations, financial condition and prospects.
 
The acquisition and integration by Cosmote of new businesses may present certain difficulties that could have a material adverse effect on our business, results of operations, financial condition and prospects.
 
Cosmote has grown partially through a number of acquisitions. In 2006 and 2007, Cosmote acquired approximately 99%100.0% of Germanos, a Greek company principally engaged in the distribution and sale of telecommunication and digital technology products and services. See “4.B.“4.B Business Overview — Mobile Telephony Services — Greece — Cosmote — Germanos”. In addition, in October 2009, Cosmote acquired Telemobil S.A.(“Zapp”), a mobile operator in Romania, operating 3G and CDMA networks. The acquisition and integration by Cosmote of these businesses and any other businesses it may acquire in the future has presented, and may in the future present certain challenges for Cosmote, including, but not limited, to the following:
 
 • acquired businesses not delivering expected or appropriate returns;
 
 • difficulties in integrating and optimizing the use of managerial and operational resources;
 
 • potential disruptions of ongoing businesses and diversion of managerial resources;


17

 • difficulties in integrating technology or content and rights to products and properties and unanticipated expenses related to such integration; and
 
 • potential impairment of relationships with employees, customers and suppliers of our subsidiaries as a result of the integration of new businesses.
 
If Cosmote fails to integrate new businesses and control their activities or benefit from the relevant synergies and economies of scale it hopes to realize from this integration, this could have a negative effect on the value and performance of our investment in Cosmote, which could have a material adverse effect on our business, financial condition, results of operations and prospects.


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Cosmote’s ability to provide commercially viable telecommunications services depends upon its ability to interconnect in a cost-effective manner with the telecommunications networks of other operators.
 
Cosmote’s ability to provide commercially viable telecommunications services to meet the needs of its customers depends upon its ability to interconnect in a cost-effective manner with the telecommunications networks of other operators in order to complete calls between Cosmote customers and parties on the public fixed-line telephone networknetworks or other mobile telecommunications networks. Cosmote hasmaintains interconnection agreements with us as well asand with other operators of mobile network operators and with fixed-line operatorsnetworks in Greece and in other countries in which it operates, but has no control over the quality and timing of investment and maintenance activities conducted by suchthese operators, which may be necessary to provide Cosmote with interconnection services of acceptable quality interconnection services.quality. The failure of these operators to provide reliable and economic interconnection services to Cosmote, a reduction in the interconnection fees paid by these network operators to Cosmote, or an increase in the interconnection fee paid by Cosmote to these operators for delivering calls originating on Cosmote’s network, could have a material adverse effect on our investment in Cosmote and, consequently, on our business, financial condition, results of operations and prospects.
 
Perceived or actual health risks related to mobile telecommunications equipment and devices could adversely affect demand for our mobile telephony services or could lead to environmental or planning restrictions on the location of mobile base stations.
 
Media reports have suggested that there may be health risks associated with the effects of radio waves emitted by transmitter masts and mobile handsets. Research and studies are ongoing. Regardless of whether such research or studies establish a link between radio frequency emissions and health and despite the recent suggestions by authorized organizations such as World Health Organization(“WHO”), International Commission on Non-Ionizing Radiation Protection(“ICNIRP”) and Scientific Committee on Emerging and Newly Identified Health Risks(“SCENIHR”) that the limits of radio frequency emissions do not need to be lowered, these concerns over radio frequency emissions may result in significant restrictions on the location and operation of transmission facilities and antennae “base stations”, which could have a material adverse effect on our mobile telecommunications services business. Moreover, litigation initiated by local authorities and private persons regarding the removal of individual base stations for health reasons has been increasing, while, from time to time, proposals have been made by independent advocates for the general removal of base stations from inhabited areas. We can give no assurance that legislative bodies, regulators or private litigants will refrain from taking additional actions adverse to our business based on purported health related risks associated with radio frequency emissions, which actions may result in significant costs and could materially adversely affect the business, results of operations, financial condition and prospects of our mobile telecommunications services business.
 
Capacity limitations and network infrastructure faults of Cosmote could adversely affect the growth of its business which could, in turn, materially adversely affect our business, results of operations, financial condition and prospects.
 
The number of customers that can be served by Cosmote’s network is ultimately constrained by the spectrum allocated to Cosmote and is dependent on usage patterns and the quality and design of Cosmote’s network infrastructure. Any reduction in the availability or allocation of spectrum or capacity of Cosmote’s network could impede the growth of its business, which could have a material adverse effect on our business, results of operations, financial condition and prospects.


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ITEM 4  INFORMATION ON THE COMPANY
 
         
 4.A  History and Development of the Company21
4.BBusiness Overview23
STRATEGY  24 
 4.B  Improving the profitability of our fixed-line operations24
Growing our mobile telephony operations24
Strengthening the competitive position of RomTelecom25
MARKETING, SALES AND CUSTOMER CARE25
Marketing25
Sales and Distribution25
Customer CareBusiness Overview  26 
    FIXED-LINE SERVICESSTRATEGY  2627 
      Greece — OTE
Enhancing the operational performance and increasing the profitability of our fixed-lined telephony operations
  27 
         Retail servicesStrengthening and enhancing the profitability of our mobile telephony operations27
Wholesale services  28 
         Fixed-line NetworkStrengthening the competitive position of RomTelecom28
MARKETING, SALES AND CUSTOMER CARE  28 
         CompetitionMarketing28
Sales and Market Position in the Greek Fixed-line Telephony MarketDistribution29
Customer Care30
FIXED-LINE SERVICES  30 
      Pricing Methodology and Regulatory PositionGreece — OTE  30 
         Domestic Fixed-line TelephonyRetail services  31 
         International Fixed-line TelephonyWholesale services  3432 
         Internet Protocol (IP)Fixed-line Network32
Competition and Internet Access ServicesMarket Position in the Greek Fixed-line Telephony Market33
Pricing Methodology and Regulatory Position  35 
         Romania — RomTelecomDomestic Fixed-line Telephony  3836 
         Serbia — Telekom SrbijaInternational Fixed-line Telephony39
Internet Protocol (IP) and Internet Access Services  40 
    MOBILE TELEPHONY SERVICES41
  GreeceRomania — Cosmote41
Acquisition of the entire share capital of Cosmote42
Licenses42
StrategyRomTelecom  43 
      Products & ServicesSerbia — Telekom Srbija  4345 
    Distribution44
Interconnection44
Network46
Market Position & CompetitionMOBILE TELEPHONY SERVICES  47 
      RevenuesGreece — Cosmote  47 
         Volume/TrafficLicenses  4748 
         TariffsStrategy47
Germanos S.A.  49 
         Other SubsidiariesProducts and Joint Ventures of CosmoteServices49
Distribution  50 
         International Mobile OperationsNetwork  50 
         Albania — AMCMarket Position and Competition50
Bulgaria — Globul  51 
         Romania — Cosmote RomaniaRevenues51
Volume/Traffic51
Tariffs  52 
         FYROM — CosmofonInterconnection  53 
Germanos54
International Mobile Operations55
Albania — AMC55
Bulgaria — Globul56
Romania — Cosmote Romania57
FYROM — Cosmofon58


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    OTHER SERVICES54
  International Wholesale Telephony and Data Services — OTEGlobe54
Assets and Operations54
International Wholesale Telephony Services55
International Wholesale Data Capacity /IP Services55
Strategy55
Revenues56
  Interconnection Services56
  Leased Lines57
  Wholesale Line Rental57
  Wholesale ADSL58
  Local Loop Unbundling58
  Other Telecommunications Services  59 
      E-LineInternational Wholesale Telephony and Data Services — OTEGlobe  59 
         IPTV — Conn-X TVAssets and Operations59
International Wholesale Telephony Services  60 
         OTELink — TETRAInternational Wholesale Data Capacity /IP Services  60 
         Fixed Wireline Value-added ServicesStrategy60
Fixed Wireless Access Services60
Satellite Services  61 
         WiMAXRevenues  61 
      Telephone Directory and InformationInterconnection Services  61 
      Maritime Radio Communications (Olympia Radio)61
Telecards, Paging and Telegraphy Services61
Equipment SalesLeased Lines  62 
      Customer Contact Centers62
Other Services62
  Information Technology��63
  Other Group ActivitiesWholesale Line Rental  63 
      Turnkey Telecommunications Projects — Hellascom InternationalWholesale ADSL  63 
      Consultancy Services — OTEplusLocal Loop Unbundling  64 
      SatelliteOther Telecommunications Services — Hellas Sat64
Maritime Services — OTESAT Maritel A.E  65 
         Insurance Services — OTE Insurance AgencyEthernet Services65
INVESTMENT PROGRAM 2009/2010 — CAPITAL EXPENDITURE  65 
         GeneralTETRA  65 
         Domestic and International Fixed-line Network Upgrading Investments65
Transmission NetworkFixed Wireline Value-added Services  66 
         ADSL NetworkFixed Wireless Access Services  66 
         IP NetworkSatellite Services  66 
         Metro EthernetWiMAX  66 
         IPTVTelephone Directory and Information Services  66 
         Telephony Network and IP Multimedia SystemsMaritime Radio Communications (Olympia Radio)  6667 
         Network ManagementTelecards, Paging and OSSTelegraphy Services  67 
Equipment Sales67
Customer Contact Centers67
Other Services68
Information Technology68
Other Group Activities69
Turnkey Telecommunications Projects — Hellascom International69
Satellite Services — Hellas Sat70
Maritime and Satellite Services — OTESAT Maritel71
Consultancy Services — OTEplus71
Insurance Services — OTE Insurance Agency71
B2B eProcurement Services — CosmoOne Hellas Marketsite71
INVESTMENT PROGRAM 2010/2011 — CAPITAL EXPENDITURE71
General71
Domestic and International Fixed-line Network Upgrading Investments72
Transmission Network72
ADSL Network72
IP Network72
Metro Ethernet72
IPTV72
Telephony Network and IP Multimedia Systems72
Network Management and OSS72

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      Mobile Telephony Investments67
  Information Systems67
  Funding67
LEGAL PROCEEDINGS67
  Greece68
Regulatory Matters68
Other Proceedings70
Criminal Proceedings  73 
      RomaniaInformation Systems  7573 
      AlbaniaFunding73
LEGAL PROCEEDINGS73
Greece73
Regulatory Matters73
Other Proceedings  77 
         Bulgaria78
  Cosmote Romania78
REGULATIONCriminal Proceedings  79 
      Telecommunications Services Regulation in GreeceRomania  7980 
      OverviewAlbania  7982 
      European Union Regulatory FrameworkBulgaria  7982 
    Telecommunications Framework in Greece81
  Competition Law in GreeceREGULATION  83 
      Greek Capital MarketsTelecommunications Services Regulation in Greece  8483 
         Telecommunications Services Regulation in RomaniaOverview  8583 
         EU Regulatory obligations in the current regulatory frameworkFramework  8583 
         Other regulatory measuresTelecommunications Framework in Greece  8786 
      World Trade OrganizationCompetition Law in Greece  8889 
      International Telecommunications UnionGreek Capital Markets Regulation  88
4.COrganizational Structure8890 
      Significant SubsidiariesTelecommunications Services Regulation in Romania  8891 
         Regulatory obligations in the current regulatory framework91
Other regulatory measures92
World Trade Organization93
International Telecommunications Union93
4.COrganizational Structure94
Significant Subsidiaries94
Other Subsidiaries and Other Participations  8894 
 4.D  Property, Plant and Equipment  9096 
 4.E  Unresolved Staff Comments  9196 
 
4.A  History and Development of the Company
 
Hellenic Telecommunications Organization S.A., known as OTE or OTE S.A., was incorporated as asociété anonymein Athens, Greece, under the laws of the Hellenic Republic in 1949, pursuant to the provisions of Legislative Decree 1049/1949. We operate as asociété anonymesubject to the provisions of Law 2190/1920 (the“Greek Companies Law”)) and Law 3016/2002, as amended and supplemented by Law 3091/2002. Our registered office is located at 99 Kifissias Avenue, Amaroussion 15124, Athens, Greece. Our telephone number is +30 210 611 1000. Our agent for service of process in the United States is Puglisi and Associates, 850 Library Avenue, Suite 204, P.O. Box 885, Newark, Delaware 19711.
 
We are a full-service telecommunications group and the leading provider of fixed-line voice telephony and internet access services in Greece. We also provide mobile telecommunications services in Greece, through Cosmote, our wholly-owned subsidiary. In addition, we provide fixed-line voice telephony and internet access services in Romania and mobile telecommunications services in Albania, Bulgaria and Romania (and in FYROMthe Former Yugoslav Republic of Macedonia(“FYROM”) until May 2009).
 
As of the date of this Annual Report, eachDeutsche Telekom held 30.0% plus one share of our issued share capital and the Greek State and Deutsche Telekom held voting power16.0% of 25.0%, plus one vote, in our issued share capital.capital and controlled voting rights in respect of an additional 4.0% (such interest owned by IKA-ETAM, the Greek pension fund). See “7.A Major Shareholders and Related Party Transactions — Major Shareholders”.

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Significant milestones in the history of our business include the following:
 
 • In December 1995, we were granted the right to provide mobile telephony services in Greece using GSM 1800 technology; in October 1996, we established Cosmote to provide mobile telephony services and, in April 1997, we transferred our GSM 1800 license to Cosmote.
 
 • In May 1996, we established OTENET,OTENet, a majority-owned subsidiary, which developed from an internet service provider to offering a range of integratedIP-based voice and data telecommunications services, IT application development and hosting services using internet technologies.
 
 • In 1998, we acquired 35%35.0% of the share capital of RomTelecom S.A.(“RomTelecom”), the Romanian telecommunications operator, which in March 2003, we increased to 54.01%.
 
 • In August 2000, we established OTE International Solutions S.A.(“OTEGlobe”), our wholly-owned subsidiary responsible for the marketing and sales of our international wholesale voice and data services and the technical operation and commercial development of our international data/IP network.
 
 • On January 1, 2001, our exclusive right to provide fixed-line telephony services in Greece expired and the Greek fixed-line market was opened to competition.
 
 • In August 2001, Cosmote was awarded a license to provide 3G mobile telephony services, which it launched commercially in May 2004.
 
 • In August 2001, we established Hellas Sat Consortium Limited, our 99.05% satellite subsidiary which launched its own satellite, Hellas Sat-2, into orbit in May 2003.
 
 • In June 2003, we launched our asymmetrical digital subscriber line(“ADSL”) services.
 
 • In June 2005, we commenced implementing our Voluntary Retirement Scheme, which has facilitated the early retirement of 4,7595,405 of our employees.employees, as of December 31, 2009.
 
 • In July 2005, Cosmote subscribed for 70%70.0% of the share capital of S.C. Cosmote Romanian Mobile Telecommunications S.A.(“Cosmote Romania”), our mobile telephony subsidiary in Romania, through a share capital increase, andincrease; in December 2005, Cosmote Romania re-launched commercial operations.
• In the third quarter of 2005, we transferred to Cosmote the entire share capital of CosmoBulgaria Mobile EAD(“Globul”) and Cosmofon Mobile Telecommunications Services A.D. Skopje(“Cosmofon”) our(our mobile telephony subsidiaries in Bulgaria and the FYROM, respectively); in December 2005, Cosmote Romania re-launched commercial operations..
 
 • Over the course of 2006 and 2007, Cosmote acquired an interest of approximately 99%100.0% in Germanos, a Greek-based international wholesale and retail distributor of technology and telecommunications products, for a total purchase price of Euro 1.51.3 billion.
 
 • In November 2006, we sold our 90%90.0% interest in ArmenTel, the Armenian public telephony operator, to JSC Vimpel-Communications for the purchasea sales price of Euro 341.9 million.
 
 • In November 2007, we launched a tender offer for the acquisition of the entire share capital of our then majority-owned subsidiary, Cosmote. Since April 9, 2008, we have owned the entire share capital of Cosmote, which ceased trading on the Athens Exchange on April 1, 2008.
 
 • In December 2007, OTENET andtogether with OTENet we sold the entire share capital of INFOTE, our directory services subsidiary, to Rhone Capital LLC and Zarkona Trading Limited for the amountsales price of Euro 300.2 million.
 
 • Beginning in the summer of 2007, Marfin Investment Group Holdings S.A.(“MIG”), a Greek private equity fund, increased its interest in our share capital to reach a total of 20%20.0% in early 2008. On May 15, 2008, MIG transferred its 20%20.0% interest in our share capital to Deutsche Telekom.
 
 • On May 14, 2008, the Greek State and Deutsche Telekom signed a shareholders’ agreement relating to the governance of our Group and a share purchase agreement, pursuant to which the Greek State transferred a 3.03% interest in our share capital to Deutsche Telekom. As a result, the Greek State and Deutsche Telekom each currently holdsubsequently held 25.0% of our share capital, plus one share. The Shareholders’ Agreement and the


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Purchase Agreement were at the time of their signing subject to ratification by the Greek Parliament and


22

approval by other relevant authorities; the Greek Parliament subsequently ratified both agreements on June 18, 2008.
 
 • As of December 27, 2007, we acquired the entire share capital of OTENETOTENet and, on June 27, 2008, we merged with OTENET,OTENet, following which we integrated its business and employees.
• On February 6, 2009, certain changes to our Articles of Incorporation necessary for the complete implementation of the shareholders’ agreement between Deutsche Telekom and the Greek State were approved by the extraordinary general assembly of our shareholders.
• On March 5, 2009, Cosmote signed an agreement with the Albanian Ministry of Economy, Trade and Energy, representing the Albanian State, to acquire an additional 12.6% interest in the share capital of Albanian Mobile Communications Sh.a(“AMC”), for the price of Euro 48.2 million. Cosmote was the winning bidder in a public auction by the Albanian State for the sale of these shares. The transaction was completed and the transfer of shares took place on April 27, 2009.
 
 • On May 12, 2009, Cosmote and Germanos sold the entire share capital of Cosmofon, ourthe mobile subsidiary in FYROM, and Germanos Telecom AD Skopje to Telekom Slovenje for a consideration of Euro 190185.8 million.
• On July 31, 2009, the Greek State exercised a put option and sold 24,507,519 shares to Deutsche Telekom representing 5.0% of our share capital (this put option was granted to the Greek State under the share purchase agreement between Deutsche Telekom and the Greek State).
• On October 31, 2009, Cosmote completed the acquisition of the entire share capital of Zapp in Romania for the purchase price of Euro 67.5 million. Cosmote also assumed debt and other liabilities of Zapp of Euro 129.6 million, mainly concerning 3G and CDMA network roll out.
• On December 31, 2009, in accordance with the terms and provisions of a shareholders’ agreement between Cosmote and Mr. P. Germanos dated May 9, 2006, Cosmote acquired a 10.0% interest in Cosmoholding Cyprus Ltd, the parent company of Germanos, for a total amount of Euro 168.5 million.
 
4.B  Business Overview
 
We are a full-service telecommunications group and the leading provider of fixed-line voice telephony and internet access services in Greece. We are also the leader in providing mobile telecommunications services in Greece, through Cosmote, our wholly-owned subsidiary. In addition, we provide fixed-line voice telephony and internet access services in Romania and mobile telecommunications services in Albania, Bulgaria, and Romania (and in FYROM until May 2009).
 
Fixed-line services.  We provide local, long-distance and international fixed-line telecommunications services in Greece and Romania. We also offer internet access services and fully integratedIP-based telecommunications solutions. In addition, we offer a range of other telecommunications services, including value-added services, IN services, IT application development andIP-based hosting services, leased lines, public telephone services, operator assistance services, sales of equipment, directory services and satellite telecommunications.
 
As of December 31, 2008,2009, we had 4,110,1023,787,132 PSTN lines, 548,388517,369 ISDN BRA retail lines and 5,9715,677 ISDN PRA lines in service, compared to 4,509,5644,110,102 PSTN, 579,533548,388 ISDN BRA and 6,1855,971 ISDN PRA lines as of December 31, 2007.2008. As of December 31, 2008,2009, we had 864,0211,060,064 retail and 94,41352,714 wholesale customers for our broadband services in Greece.
 
Mobile services.  We offer mobile telephony services through Cosmote and its subsidiaries in Greece, Albania, Bulgaria and Romania (and in FYROM until May 2009):
 
 • in Greece, using GSM 900 and GSM 1800, and 3G and LMDS technology, through Cosmote, our wholly-owned subsidiary, which had 7,893,1449,217,507 mobile customers in Greece on December 31, 2008,2009, representing a market share of approximately 42%45.0% of contract and prepaid mobile customers;
 
 • in Albania, using GSM 900 and GSM 1800 technology, through AMC, in which Cosmote held an effective 82.45%95.0% interest as at December 31, 2008,2009, had 1,395,9891,908,987 mobile customers on December 31, 2008;2009;
 
 • in Bulgaria, using GSM 900 and GSM 1800, and 3G and LMDS technology, through Cosmote’s wholly-owned subsidiary, Globul, which had 4,096,9963,902,272 mobile customers in Bulgaria on December 31, 2008;2009; and
 
 • in Romania, using GSM 900 and GSM 1800 technology, through Cosmote’s 70%70.0% owned subsidiary, Cosmote Romania (in which OTEwe effectively ownsown an 86.20%86.2% interest), which had 5,894,0566,920,816 customers in Romania on December 31, 2008.2009, as well as using 3G and CDMA technologies through Cosmote’s newly acquired wholly-owned subsidiary, Zapp.


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Wholesale services.  We provide telecommunications services on a wholesale basis to other telecommunications providers and ISPs in Greece, including wholesale ADSL access services, interconnection services, leased lines, data telecommunications services and local loop unbundling.


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Capital expenditure.  Our capital expenditure program is currently mainly focused on:
 
 • mobile telecommunications services;
 
 • Internet Protocol services and broadband,
 
 • expanding our backbone network capacity using DWDM; and
 
 • network dimensioning to maintain quality.
 
For information about our capital expenditures, see “— Investment Program 2009/20102010/2011 — Capital Expenditure”.
 
STRATEGY
 
Our aim is to deliver increasing value to our shareholders, while improving the quality, value and valueprofitability of ourthe products and services we deliver to our customers. To this end, we seek to be the first choice of consumers in the markets in which we operate.
 
ImprovingEnhancing the operational performance and increasing the profitability of our fixed-line telephony operations
 
Our majormain strategic goal for our fixed-line telephony operations is to enhance their financialoperational performance in order to achieve profitability in line with our European peers. Our keyWe aim to accomplish this by implementing the following strategic objectives in this area are to:goals, while continuing our effort to derive benefits from synergies available within our Group:
 
 • continue to gradually upgradeIncreasing customer satisfaction:
• retain our network;retail market share and create new sources of revenues (IPTV, satellite TV, ICT/Systems Integration);
 
 • continue to differentiateimprove customer support for both retail and focus our productswholesale services, enhance after-sales service (for example rationalization and services by target customer segment, while designing, developing and promoting innovative ones;transformation of call centers);
 
 • focus on improving the quality of our services, in order to maintainoptimize distribution channels and improve residentialdevelop alternative sales channels; and business customer satisfaction;
• continue to improve and enhance the operational efficiency and effectiveness of critical functions, including our sales network, customer support, service delivery and project management;
 
 • further develop and expand our broadband-based offerings for residentialdifferentiated by customer segment.
• Gradually upgrading our network:
• gradually transform our network to NGN;
• enhance our network and business customers in bundles, including double-play (voiceIT platforms to support higher broadband speeds and internet)enable provision of new products; and triple-play (voice, internet and IPTV) to address market trends;
 
 • leverage our telecommunicationsexisting infrastructure to increase the profitability ofbetter address wholesale market.
• Improving competitiveness:
• continue with our wholesale business;cost control action plan (for example through certain strategic projects);
 
 • continue to focus on upgradingoptimize internal corporate procedures;
• develop workforce capabilities and optimizing our operating procedures with various means, including voluntary retirement programs in order to increase operating efficiency and reduce costs;motivation; and
 
 • continue to create policies and develop processes enabling us to more timely and efficiently comply with the evolvingensure fair regulatory framework.treatment.


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GrowingStrengthening and enhancing the profitability of our mobile telephony operations
 
Through Cosmote, we aim to maintain our leading position in the mobile telephony market in Greece and to strengthen our position in southeastern Europe. Our key strategic objectives in this area are:
 
 • in Greece, through Cosmote,Cosmote: to increase market share, maximize revenues and enhance profitability over the medium term through increased usage, customer growth, promotion of new services and focused commercial policies;
 
 • in Albania, through AMC:AMC to maintain its leading position in the market, to increase its post-paid customer base and limit the impact of increased regulation and competition.competition, while maintaining high profitability;
 
 • in Bulgaria, through Globul: to improve the company’s competitive position in the market and enhance cash generation; and
 
 • in Romania, through Cosmote Romania: to continue to increase the customer base and increase operating profitability.profitability, and, following the acquisition of Zapp, to offer mobile broadband services.


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Strengthening the competitive position of RomTelecom
 
Our main strategic focus with respect to our international fixed-line operations is to strengthen the competitive position of RomTelecom, our 54.01% subsidiary in Romania, as a provider of telephony, broadband and satellite television services. Our key strategic objectives in connection with RomTelecom are to:
 
 • defend our telephony customer base;
 
 • increase our revenues by expanding our market shares in broadband and television services;
 
 • provide reliable broadband services through existing ADSL technologies, as well as expand to more advanced technologies, including FTTH or VDSL, when economically feasible;
 
 • pilot and implement new platforms for IPTV services;
 
 • roll-out a CDMA network for fast and economic alternative dataand/or fixed wireless access solutions;
 
 • reduce operating expenses through a focus on efficiency; and
 
 • enhance capabilities to deliver quadruple-play services (voice, internet, IPTV and mobile telephony) together with Cosmote Romania.
 
MARKETING, SALES AND CUSTOMER CARE
 
Marketing
 
Our marketing strategy aims mainly at:
 
 • increasing broadband penetration;
 
 • defending our market share of fixed-line services;
 
 • maximizing our revenues from existing products and services;
 
 • developingincreasing our penetration of innovative products and marketing innovativeservices (including IPTV);
• strengthening the brand of our products and services; and
 
 • reinforcing product branding using an effective media mix.establishing a loyalty scheme to ensure that high-value, loyal customers are rewarded and low churn rates are achieved.
 
In 2008,2009, our business marketing efforts were focused mainly on combining television, radioadvertising activities, which included the re-branding of our business portfolio, the creation of business corners at OTEShops and print advertisingthe OTE Business website (www.otebusiness.gr), various campaigns including Conn-x @Work, OTE Business voice pack products and sales-relatedan OTE Business corporate campaign, and promotional material at OTEShops and other points of presence. In


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addition, we engaged in other promotional activities, including telemarketing direct mailbusiness and internet sales,corporate customer events, sponsorship of, and participation in, exhibitions and other activities.
We re-branded our business portfolio in order to maximize efficiency.reposition our business products and services, to promote convergence of communication (voice, internet and other services) and the quality of our business offerings, to strengthen our brand and to enhance the innovation and simplicity of the solutions we offer.
The objectives of our Conn-x @Work campaign were to achieve sales targets, to increase brand awareness, to increase market share and to provide greater information to customers, particularly in relation to prices, value-added services and new features.
Our OTE Business voice packs campaign launched a new suite of single and double play products for SMEs and was aimed at winning back customers as well as retaining existing customers in order to increase our market share.
Our OTE Business corporate campaign re-launched the re-branded “OTE Business” brand and was aimed at enhancing awareness of the OTE Business portfolio, promoting OTE Business’ ability to offer tailor-made solutions for ‘every business need’(“each company a different story”) and communicating innovation and customization.
We held customer events in order to build customer loyalty and to inform our clientele of products and services offered by the OTE Business portfolio. The events for business customers took place in carefully selected cities according to specific sales oriented criteria.
 
Sales and Distribution
 
OTEShops.  Our owned network of proprietary shops, branded “OTEShops”, offers a complete range of telecommunications products, including fixed-line telephony, broadband and internet accessIPTV products, as well as Cosmote’s mobile telephony products.
Our current OTEShop retail network consists of 228 outlets across Greece; 209 shops owned by us and 19 on In 2009, we implemented a franchise basis. In 2008, we commenced an effortprogram to optimize the geographical presence of our own retail network in Greece. As of December 31, 2009, our OTEShop retail network consisted of 225 outlets across Greece; 206 shops owned by us, 19 on a result, we have discontinued the operation of 98 underperforming OTEShopsfranchise basis and converted 61 OTEShops to customer service points. In the same year, we also completed the second phase of our renovation and rebranding project for our outlets, which aimed to conform the branding of OTEShops.
 
Cosmote and Germanos Shops.  Our products are also sold through Germanos retail shops, and, since April 2008, also through Cosmote stores. See “— Mobile Telephony Services — Greece-Cosmote — Distribution” and “— Germanos — Business of Germanos.” In 2009, we aim to focusfocused on increasing sales of fixed-line, and especially broadband-based products through Germanos and Cosmote shops.
 
Other Retailers and Distributors.  We also use other retailers and distributors, including the major retail chains in Greece, such as Plaisio, Multirama and Infoquest.making our product portfolio present in more than 500 points of sale.
 
Contact Centers.  We continue to transform our telephone contact centers into sales channels of increasing significance. We believe that this effort has already resulted in increasing sales and improving the quality of our customer care


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services. Sales through outbound telemarketing have been increasing, and cross- and up-selling through the number 134, which is our main inbound contact center, are also increasing. We are also developing special contact center teams focusing on customer retention and churn reduction, in order to reduce the rate of customer migration to competitors.
 
We have continued our efforts to merge and reorganize our dedicated call centers for business customers. We established a new contact center, OTEbusinessOTE Business Customer Service “13818”, to operateoperates both as a sales channel towards smallby performing telesales and medium enterprises(“SMEs”)direct marketing campaigns and to offeras a single point of contact for customer care services to all business customers.and support for the whole of the OTE Business customer base.
 
Electronic Channels.  “www.oteshop.gr” is our electronic sales channel for residential customers and small businesses. Part of our sales strategy is to increase the usage of our electronic channels by offering new electronic services such as “Mye-Bill” (electronic billing presentation and payment), and “Mye-Services” (online activation for phone services). We have also upgraded and enhanced “www.otebusiness.gr” to improve the promotion of OTE Business’ services and for greater interaction with OTE Business’ users.
 
Account Managers and External Sales Advisors.  Our corporate and business customers have been assigned dedicated key account managers who serve as a single point of contact for all their business needs. We continue to develop our customer-focused organization and operations by incorporating our external sales advisors are based atinto our OTEShops


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account management structure. This enables us to develop small and visit small SMEs in orderflexible sales teams to promote sales mainly of broadbandour products and Cosmote products.services to SMEs.
 
Customer Care
 
We have developed an extensive network of other contact centers for our customers, focusing on their after-sales support and needs. Our after-sales support channels mainly comprise:
 
OTEShops.  Our OTEShops also provide customerCustomer care and complaint management services.services are provided through our own retail network in Greece.
 
Contact Centers.  Our customer inbound technical support lines (numbers 121 and 1242 for residential and 1242business customers, and 13818 for business customers) are supported by our in-house call centers and operate on a daily basis.
Account Management.  Our corporate customers have been assigned dedicated key account managers who serve as a one-stop-shop for all their needs. We continue to extend account management to large, SMEs.develop call center services based on specific customer service level requirements. We provide call center services 24 hours a day, 365 days a year.
 
FIXED-LINE SERVICES
 
We provide fixed-line retail and wholesale telecommunications services in Greece through OTE and in Romania through RomTelecom Romania, in which we hold a 54.01% interest.
 
We also hold a 20%20.0% interest in Telekom Srbija a.d.(“Telekom Srbjia”Srbija”), which provides fixed-line and mobile telephony services in Serbia and in the Republic of Srpska in Bosnia and Herzegovina (throughthrough Telekom Srpska, in which Telekom Srbija holds a 65% interest)Srpske and in Montenegro through Mtel (in which Telekom Srbija holds a 51% interest).Mtel.
 
Our retail and business customers access our fixed-line transmission network to place local, long-distance and international calls. We offer a variety of tariff packages that generally consist of a monthly fixed payment for access to our network and a variable usage-based component.
 
Historically, fixed-line telephony has beenwas our primary business in terms of total revenues. See “5.A.“5.A Operating Results”. However, the contribution of fixed-line telecommunications services to our total consolidated revenues has declined over a number of years, principally as a result of the rapid growth of our mobile telephony operations, as well as due to the adverse impact on our Greek fixed-line revenues of competition, tariff reductions and discount plans. Our operating revenues from domestic and international fixed-line telephony services represented 32.8%31.3% of our consolidated revenues in 2008,2009, compared to 32.8% in 2008 and 36.8% in 2007, and 44.3% in 2006, while the contribution to our total consolidated revenues of other non-mobile services (including internet access, services rendered, as well as wholesale services, such as interconnection, leased lines and local loop unbundling) was 28.7% in 2009, as compared to 28.6% in 2008 as compared toand 28.2% in 2007 and 22.2% in 2006 and the contribution of mobile revenues to our total consolidated revenues was 40.0% in 2009, compared to 38.6% in 2008 compared toand 35.0% in 2007 and 33.5% in 2006.
2007. Revenues from ADSL services are classified in our financial statements under “Other Revenue”.


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Greece — OTE
 
We are the leading provider of fixed-line voice telephony and internet access services to residential and business customers and on a wholesale basis in Greece. We provide local, long-distance and international fixed-line telephony services, internet access, ISDN, high-speed data telecommunications, ADSL-based broadband services, value-added services, IN services,IP-based solutions,IP-VPN services, IPTV services, leased lines,connectivity services, system integration solutions which combine ICT, public telephone services, operator assistance and directory services, equipment sales of equipment, and satellite telecommunications services.


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The following table sets out certain key operating data regarding our fixed access lines in Greece as of December 31, 2006, 2007, 2008 and 2008:2009:
 
             
  As of December 31, 
  2006  2007  2008 
 
Number of PSTN access lines in service (in thousands)  4,778   4,509   4,110 
Number of ISDN BRA lines in service (in thousands)  598   580   548 
Number of ISDN PRA lines in service (in thousands)  6   6   6 
Active ADSL lines (retail) (in thousands)  234   475   864 
Active ADSL lines (wholesale) (in thousands)(1)
  236   334   94 
             
  As of December 31,
  2007 2008 2009
  (In thousands)
 
Number of PSTN access lines in service  4,509   4,110   3,787 
Number of ISDN BRA lines in service  580   548   517 
Number of ISDN PRA lines in service  6   6   6 
Active ADSL lines (retail)  475   864   1,060 
Active ADSL lines (wholesale)(1)
  334   94   53 
 
 
Notes:Note:
 
(1)Active lines of ADSL customers of alternative operators, supported by wholesale services provided by our company. Following our merger with OTENETOTENet in 2008, OTENET’sOTENet’s customers are included in the retail numbers for 2008, while, for previous years, OTENET’sOTENet’s customers are included in wholesale numbers.
 
As of December 31, 2008,2009, we had 4,110,1023,787,132 PSTN lines, 548,388517,369 ISDN BRA lines and 5,9715,677 ISDN PRA lines in service, compared to 4,509,5644,110,102 PSTN, 579,533548,388 ISDN BRA and 6,1855,971 ISDN PRA lines as of December 31, 2007.2008.
 
Retail servicesServices
During 2008, we restructured our operations in order to better align our organization and our fixed-line offerings in Greece to the requirements of different customer groups. In particular, we merged with OTENET, our subsidiary offering internet access andIP-based solutions, and incorporated its operations and offerings into our business. In the same year, we restructured our fixed-line operations along two general divisions, one focusing on residential customers and products and another focusing on enterprise and business services:
 
Residential Customers Division.  Our residential customers division focuses on improving our offerings to, and the overall customer experience of, our residential customers, including improving customer care and enhancing the range of our products and services, through the offering of bundled services and the offering of integrated or hybrid services, with a particular focus on ADSL-based products. The main categories of retail fixed-line telecommunications services we provide to residential customers are:
 
 • PSTN and ISDN access and traffic and value-added services;
 
 • ADSL (broadband) internet access and data services;
 
 • IPTV services;
 
 • IN services and premium rate services, including special interest chat lines and recordings;infotainment services; and
 
 • public telephone services.
 
Enterprise and Business Services Division.  Our Enterprise and Business Services division aims to maintain and strengthen our leading position in the market of corporate customers, and SMEs through the provision of innovativeDivision offers products, services and integrated telecomsolutions, combining network and IT solutions characterized by quality, flexibilityICT, with a focus on business customers’ satisfaction through efficient and reliable level of service.competitive sales channels and project implementation processes and effective customer support services. The main categories of fixed-line telecommunications services we provide to corporateenterprise and business customers are:
 
 • voice services including telephony and value-added services (PSTN, ISDN and IN services) and Voice over Internet Protocol services(“VoIP”);
• broadband access connectivity and transport services;
 
 • VPN Managed Network Services;and network management and operation services;


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 • Datasystem integration solutions which combine ICT, data center IT & businessand corporate application development services;services (includinge-banking, web services, portals and web sites); and
 
 • infrastructuretechnical support and customer care services.


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Wholesale servicesServices
 
We provide a range of wholesale services to Greek alternative fixed-line, mobile and other telecommunications operators, international telecommunications companies and other wholesale clients. The main categories of wholesale fixed-line telecommunications services we provide are:
 
 • interconnection;
 
 • leased lines;
 
 • ADSL;
 
 • local loop unbundling;
• Ethernet services; and
 
 • E-Line.wholesale line rental (WLR).
 
For more information regarding our wholesale services, see “4.B Business Overview — Other Services”.
 
Fixed-line Network
 
As the incumbent telecommunications services provider in Greece, we own and operate the most extensive fixed-line network in the country.
 
During 2008,2009, we continued to upgrade and expand our network and made significant investments aimed at improving its capacity and the quality of services we offer to our customers. Our key investments in network in 20082009 focused on the following areas:
 
 • further developing and upgrading our access network;
 
 • expanding and upgrading the capacity of our DWDM transmission network;
 
 • supporting and enhancing the provision of IPTV services;
 
 • integrating our IP access network;
 
 • integrating our service platforms;
 
 • upgrading our IP core distribution systems; and
 
 • upgrading Metro Ethernet.
 
Voice Network.  As of December 31, 2008,2009, we had 3,787,132 PSTN retail lines, 517,369 ISDN BRA retail lines and 5,677 ISDN PRA retail lines in service, compared to 4,110,102 PSTN, 548,388 ISDN BRA and 5,971 ISDN PRA lines, in service, compared to 4,509,564 PSTN, 579,533 ISDN BRA and 6,185 ISDN PRA lines, as of December 31, 2007.2008. In 2008, we installed new platforms that support the provision of number portability and ring-back tones(“RBT”) services. Our voice network also contains a Next Generation(“NGN”) component, comprised of voice gateways in 43 sites linked with digital switches, the IP network and one soft switch controller offering Voice over Internet Protocol(“VoIP”)VoIP services to the public sector (government) through the Sizefxis project, covering approximately 2,9824,300 points of the public sector throughout Greece, as of December 31, 2008.2009.
 
ADSL Network.  We continue to expand our ADSL network in line with demand. As of December 31, 2008,2009, our ADSL network comprised 1,410,1631,562,478 installed ADSL ports and 1,4201,501 points of presence(“PoP’s”PoP”), compared to 1,233,0341,410,163 ADSL ports and 1,297 PoP’s1,420 PoP at the end of 2007.2008.
 
Transmission Network.  We have been installing fiber optic cable to further improve the capability and increase the capacity of our trunk network in Greece. As of December 31, 2008,2009, we had a total of 26,04930,526 km of fiber optic cable installed (20,277(25,257 km core; 2,3662,435 km access; 3,4062,834 km submarine). Although our network is mainly based on fiber optic cables, in some cases where cable is not economical, such as in remote and rural areas, we deploy microwave links. The total number of Metro Ethernet points of presence in Greece was 300800 as of December 31, 2008.2009. Moreover, during 20082009 we installed 4813 new NG-SDH rings. Our core transmission network


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consists of eight12 DWDM rings, and through 20082009 we increased its capacity to further support increasing broadband traffic.


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IP Network.  Our IP Network consists of a core part and an access (edge) part. In 2006, we converged and enhanced the two networks then operated by our Group (by OTEus and OTENET,OTENet, respectively), thus creating the largest IP network in Greece. OTENETOTENet was in charge of operating our converged IP network until June 27, 2008, when we merged with OTENETOTENet and assumed management of the Group’s entire IP network.
 
Our Multi Protocol Label Switching(“MPLS”) based core network carries traffic generated by the broadband network, connects the BRAS to Internet Service Providers in Greece, carries the traffic of our NGN switching network and connects our edge networks. It consists of gigabit and terabit routers in seven sites, two of which are located in Athens. The routers from the other sites are connected to the two sites in Athens.
 
Our edge IP network providesIP-VPN services to corporate customers. Following the consolidation of the OTEour and OTENETOTENet’s networks in 2008, the total number of edge IP sites throughout Greece amounts to 108. These are now linked to the IP core network through the ATMEthernet network and we also expect to installwith Gigabit Ethernet links during 2009.links. Digital leased lines are used to provide access toIP-VPN services.
 
Operational Support Systems.  In the area of operational support systems we are working on two major projects, “Service Fulfillment”Service Fulfillment and “Service Assurance”,Service Assurance, with the goal to reduce operational costs and assure the quality of our broadband service offerings. As regards the “Service Fulfilment”Service Fulfillment project, relating to fulfillment of service orders, our Network Inventory and Service Activation SystemSystems are already operational and provide automated service fulfillment for broadband services. TheIn addition, the Service Assurance project, which is related to servicerelates quality and assurance to our services already provided, is currently under development. We expect ourThe Service Assurance infrastructure (fault, performance and service management) to coveralready covers our xDSL, Metro Ethernet and SDH networks, as well asnetwork domains for Fault, Performance and Service Management functions. The xDSL access services, Metro Ethernet connections, SDH leased-line connections and IP services(IP-VPN). are being monitored by service management applications. In 2010, we plan to includeIP-core network and to apply automated network discovery which will further utilize our Service Assurance platform.
 
International Fixed-Line Network.  Our international telephony traffic is currently routed through three international digital switches, two in Athens and one in Thessaloniki. These international switches are connected to international networks via submarine and terrestrial cables, as well as satellite links operated by our subsidiary, OTEGlobe. We hold rights to several international submarine cable systems and terrestrial networks of older and modern technologies. In particular, we own a DWDM/SDH international submarine cable, connecting Greece with Italy (Kokkini to Bari) and thereafter with other large terrestrial networks. As of April 1, 2007, OTEGlobe owns, manages and develops all our other international fixed network assets and cable infrastructure. See “—‘‘— Other Services — International Wholesale Telephony and Data Services — OTEGlobe”.
 
FTTH projects.NGA Projects.  The Greek State has announced an initiative to support an FTTH infrastructure network across Greece that is expected to provide an open passive optical network connecting an estimated two million homes and enterprises in Athens, Thessaloniki and 50 other cities throughout Greece. The network will be deployed within seven years, providing at least 100 Mbps for every user, and will be implemented through the Public and Private Sector Ventures (SDIT) Programme. Three different geographical regions will correspond to three different SDIT Programmes. The complete investment required has been estimated to be approximately Euro 2.1 billion. The State is expected to fund a percentage of the total investment, pending approval by the European Commission. In addition, government aid is expected for end-users in order to cover vertical wiring costs.
It is expected that the Greek State will submit the corresponding legal framework for public consultation sometime in 2009. According to the new project plan, the international call for tender will take place in 2010.
At the same time, weWe are currently considering the technical and economic aspects of our own fiber deployment plan. We are planning to adopt afiber-to-the-curb(“FTTC”) architecture, extending our fiber network to street cabinets situated close to our customers’ premises. We plan to develop installation of VDSL DSLAMs in street cabinets through 2010 and expect to gradually increase the total number of VDSL DSLAMs installed to the end of 2012. The aim of this Next Generation Access(“NGA”) network is to offer higher speeds to subscribers (for example, 50 Mbps download speed), by shortening loop-length.
In January 2010, the Greek Ministry of Infrastructure, Transport and Networks published a public consultation on the selection of a new advisor to propose a new strategy for the development of a financially and economically viable FTTHPoint-to-Point national access network (based on open-access architecture). It is expected that different deployment and funding models used worldwide will be studied and a proposal will be submitted again for public consultation. A final proposal is expected by the end of 2010. As a number of factors relating to the State’sthis FTTH project remain unclear, including the cost of the project, the potential allocation of this cost, the work required for the project and its future impact on fixed-line competition in the Greek market, we cannot accurately predict its effect on our plans to develop our own NGA solutions which include fiber-to-the-curb(“FTTC”), fiber-to-the-home/building(“FTTH/B”), FTTH or Point-to-Point, and its effect on competition in the Greek fixed-line market or on our business and financial condition.


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Competition and Market Position in the Greek Fixed-line Telephony Market
 
The Greek fixed-line telecommunications market is highly competitive. Since the liberalization of the market in 2001, and especially in recent years, we have gradually lost a significant part of our share of the Greek fixed-line


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telecommunications market to competitors, although we still remain the principal provider of fixed-line telephony services in Greece. As of December 31, 2008,2009, we had a total of approximately 4.664.27 million fixed lines in service out of a total of approximately 5.265.25 million lines in service in the Greek market. We aim to continue to defend our market share in fixed-line telephony, although we believe that it may decline further over the next few years. We have defended and aim to continue to develop and offer new products and services in order to enhance our revenues from fixed-line telecommunications services.
 
Over recent years, alternative fixed-line operators providing retail services have increasingly relied on local loop unbundling to reach their end customers and with respect to backbone services, they deploy their own fiber optic infrastructure and networks (which in some limited cases they may share), or rely on wholesale products provided by us.
Our main competitors include a number of fixed-line and mobile operators, such as Forthnet, Hellas OnLine, Vodafone, Tellas Wind, OnTelecoms, VivodiCyta and others, some of which are cooperating in order to provide integrated fixed and mobile solutions to the Greek market. System integrators are also seeking to work with telecommunications providers to develop ICT solutions. Alternative operators are becoming increasingly competitive in offering voice, broadband and data transmission, as well as mobile operators such as Vodafone, which has recently started offering fixed-line or hybrid products.value-added and bundled services. Most of our competitors offer a range of voice, broadband and double-play (voice and internet) products, either over unbundled local loops, or using our own network. In addition, certain of these operators have recently started offering IPTV services, as part of fixed-line bundles, combined with broadband internet and voice services (triple-play). Most at higher access speeds and at competitive prices.
The competitive market landscape continues to evolve with a number of recent developments, having changed substantially in 2008 and 2009 following a number of mergers, acquisitions and strategic alliances between fixed-line and mobile operators. This has created strong market players with sufficient financial resources to compete with us on equal or better terms. In particular, Vodafone Greece, a subsidiary of one of the largest mobile groups worldwide, acquired an 18.5% interest in the share capital of Hellas OnLine, the second largest alternative fixed-line operator, in 2009. In addition, Tellas, one of our major competitors in fixed-line services, is the fixed-line business unit of Wind Hellas, which is also part of a major international telecommunications group, Weather Investments. Both Wind Hellas-Tellas and Vodafone with HOL promote combined fixed-line and mobile services. Furthermore, Forthnet, the largest alternative fixed-line operator in Greece, also has developed a competitive advantage following its acquisition of Nova, currently the only digital satellite TV platform and until recently the only subscription TV service in Greece with a strong market share. Forthnet promotes combined double play and Nova subscriptions, offering significant discounts on the bundled product. Cyta Hellas, a subsidiary of the Cyprus Telecommunications Authority (CyTA), entered the Greek fixed-line telephony offermarket in 2009 and has since established a strong presence. There are also a number of players with a smaller market share, including, among others, On Telecom-Vivodi (formed after On Telecom acquired Vivodi), Net One — Algonet (formed from the merger of Net One with Algonet) and Cosmoline.
Our competitors pursue an aggressive market share acquisition strategy by focusing on differentiating their services at competitiveoffers based mainly on prices, which are, in many cases, much lower than ours, as they are not subject to the same regulatory constraints and pressures as we are with respect to the requirement for the cost-orientation of our tariffs. Despite significant competitive price pressures we have experienced over recent years, we have managed to contain the rate of our loss of share of the Greek fixed-line market mainly due to the strength of our brand and the perceived reliability of our services.
 
In the future, we expect competition in the market for fixed-line telephony services to be affected by such factors as:
 
 • the regulatory framework, including developments in Greek and European UnionEU regulation of telecommunications services and infrastructure;
 
 • market demand and trends;
 
 • our ability to price our products, services and servicesoffering in a competitive manner in view of relevant regulatory constraints and pressures, and our ability to increase our operating efficiency and effectiveness, in order to


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reduce the cost of providing these services, and, as a result, be allowed to reduce our cost-oriented tariffs for these services;
 • the financial condition of our competitors, the extent to which they have developed their respective proprietary networks and the quality, attractiveness and pricing of their products and offerings;
 
 • our ability to maintain and improve the quality and reliability of our products and services and to continue to improve the quality, efficiency and responsiveness of our customer care services;
 
 • our ability to offer attractive new or innovative products, including bundles of products, competitive offerings or hybrid, or integrated products;
 
 • the continuing effectiveness of our commercial policies, including the strength and effectiveness of our marketing efforts;
 
 • governmental decisions with regard to infrastructure projects, including fiber optic infrastructure; and
 
 • the performance of our investments.
 
Pricing Methodology and Regulatory Position
 
Our tariffs for fixed-line services in Greece are subject to approval by the EETT, which annually reviews such tariffs to confirm that they conform with the applicable regulatory framework and, in particular, with respect to considerations relating to our cost of providing the respective services.
 
Accounting separation is an accounting method by which non-discrimination is achieved by placing the retail arms of the incumbent and new entrants in the same position. In effect, accounting separation statements ensure that the prices paid for wholesale services and products by competitors and by the significant market power operator’s retail arm, are the same. A vertically integrated company is prevented from improperly allocating costs from its retail arm to its wholesale arm and from raising the prices of the wholesale products that are most likely to create competition at the retail level. To avoid the risk of price squeeze, accounting separation takes place at both the wholesale and the retail level.
In particular, with respect to retail services tariffs and offerings, we use fully distributed costing methodology, based on current cost data, while with respect to tariffs for wholesale services, such as interconnection and unbundled local


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loop services, our decisions are based on the long-run average incremental costing methodology, as applied to current cost data. All adjustments to tariffs require approval by the EETT, including any reductions to tariffs which had been previously approved by the EETT. See also “— Regulation — Telecommunications Services Regulation — European UnionEU Regulation”.
 
In order to ensure that we take into account applicable EETT requirements with respect to our tariffs, we form the tariff proposals that we submit to the EETT, including in our latest submission in 2009,2010, on the basis of the findings of the ECOS costing system, our internal system providing costing information with respect to services we offer. We operate the ECOS costing system internally, but its principles and methodology are audited and approved by the EETT on an ongoing basis, based on two-year cycles. In particular, the EETT conducts an annual audit of the ECOS system through external auditors, other than those auditing our financial statements. Based on the findings of this audit, the EETT may object to our application of ECOS and related cost methodologies in the calculation of our tariffs and may require us to make adjustments to our tariffs and the ECOS methodologies.
 
The audit of our ECOS2005-07 methodologies began in March 2007 and was completed in June 2007. The relevant EETT decision, which approved the costing methodology, was published in August 2007 with retroactive effect from January 1, 2007. The audit of the ECOS2006-08 methodologies began in December 2007 and was completed in April 2008, and the relevant decision was published on April 23, 2008. The audit of our ECOS2007-09 methodologies began in October 2008 and was completed in March 2009. The2009 and the relevant decision was published on May 6, 2009. The audit of ECOS2008-10 methodologies began in October 2009 and was completed in April 2010. With its decision in May 2010, the EETT approved new prices with retroactive effect as of January 1, 2010.


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Under applicable law, ECOS2009-11 costing methodologies will be submitted to the EETT one month after the approval of the annual financial statements by the General Assembly of our Shareholders. Our General Assembly of Shareholders is expected to be held on June 16, 2010.
 
We believe that the tariff policy we have pursued in recent years based on the results of the ECOS system has supported our effort to set our tariffs in compliance with EU and EETT regulations. In the future, we intend to continue to consider the requirements of the EETT with respect to our tariffs, in the context of applicable regulatory rules, competitive conditions in the Greek telecommunications market and our obligation to provide universal service at reasonable prices to all users.
 
Domestic Fixed-line Telephony
 
Domestic fixed-line telephony services include local and long-distance telephony services within a country (excluding calls to international destinations), provided by OTEus in Greece and by RomTelecom in Romania.
 
Revenues
 
Revenues from domestic fixed-line telephony services, including local and long-distance telephony services, accounted for 28.3%27.1% of our total consolidated operating revenues in 2008,2009 compared to 28.3% in 2008 and 32.0% in 2007 and 38.4% in 2006.2007. These services are provided by OTEus in Greece and by RomTelecom in Romania (and by ArmenTel in Armenia until November 2006, when ArmenTel was sold).Romania.
 
In 2009, 2008 and 2007, 43.9% 44.5% and 2006, 44.5%, 46.7% and 51.9%, respectively, of our revenues from domestic telephony services were derived from local and long-distance call charges. These amounts include charges to customers on outgoing calls to subscribers of unaffiliated mobile telephony operators, which accounted for approximately 12.4% of domestic telephony revenues in 2008, 13.3% in 2007 and 15.2% in 2006. (Effective February 1, 2003, we no longeroperators. We do not charge an interconnection feefees for calls placed from our network to subscribers of unaffiliated mobile operators).operators.
 
An additional 50.2%52.2%, 48.9%50.2% and 44.0%48.9% of our domestic telephony revenues in 2009, 2008 2007 and 2006,2007, respectively, were derived from monthly network service fees; while the remaining 5.3%3.9%, 4.5%5.3% and 4.1%4.5% of our domestic telephony revenues in 2009, 2008 2007 and 2006,2007, respectively, related to other domestic telephony charges such as operator assistance, extension lines, directory and various other services.


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Volume and Traffic
 
The following table provides information regarding our total domestic fixed-line traffic volume in Greece as of December 31, 2006, 2007, 2008 and 2008:2009:
 
                                                
 As of December 31,  As of December 31, 
 2006 % 2007 % 2008 %  2007 % 2008 % 2009 % 
   (Minutes in billions, except for percentages)  (Minutes in billions, except for percentages) 
Outgoing calls
                                                
Local calls  16.0   43.8%  14.8   45.8%  11.6   44.1%  14.8   45.8%  11.6   44.1%  9.3   40.9%
National Long-distance calls  1.8   4.9%  1.8   5.6%  1.9   7.2%  1.8   5.6%  1.9   7.2%  1.9   8.5%
Calls to internet service providers  8.2   22.5%  4.6   14.2%  2.4   9.1%  4.6   14.2%  2.4   9.1%  1.2   5.3%
Fixed-to-Mobile  1.8   4.9%  1.8   5.6%  1.7   6.5%  1.8   5.6%  1.7   6.5%  1.6   7.0%
Calls from OTE to other fixed networks  1.2   3.3%  1.3   4.0%  1.7   6.5%  1.3   4.0%  1.7   6.5%  2.1   9.4%
Special Calls  0.2   0.6%  0.2   0.6%  0.2   0.8%  0.2   0.6%  0.2   0.8%  0.1   0.4%
Incoming calls
                                                
Calls to OTE from Fixed & Mobile operators  7.3   20.0%  7.8   24.2%  6.8   25.8%  7.8   24.2%  6.8   25.8%  6.5   28.5%
                          
Total
  36.5   100.0%  32.3   100.0%  26.3   100.0%  32.3   100.0%  26.3   100.0%  22.7   100%
                          
 
Tariffs
 
Our revenues from domestic fixed-line voice telephony services are derived mainly from local andlong-distance call charges and monthly network service fees.


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Local calls.  Our tariff policy for local calls is based on per second billing, which applies after the first two minutes, and a minimum charge for each call. In addition, we apply four distinct charging periods (peak, off-peak, Saturday and Sunday).
 
The following table sets out the development of our domestic local telephony tariff structure (excluding VAT) in 2006, 2007, 2008 and 2008:2009:
 
                        
 2006(1) 2007 2008  2007 2008 2009
   (Euro)    (Euro)
Connection Charges  29.34   29.34   29.34   29.34   29.34   29.34 
Monthly rental charges  12.40   12.40   12.40   12.40   12.40   12.40 
Pulse charging (for the first 2 minutes)  0.026   0.026   0.026   0.026   0.026   0.026 
      (Eurocents)         (Eurocents)   
Charge per second (after the first 2 minutes)                     
Weekdays peak  0.043333   0.043333   0.043333   0.043333   0.043333   0.043333 
Saturdays/weekdays off-peak  0.041667   0.041667   0.041667   0.041667   0.041667   0.041667 
Sundays  0.040000   0.040000   0.040000   0.040000   0.040000   0.040000 
Note:
(1)As of April 3, 2006.
 
Long-distance calls.  Long-distance calls are those for which the nodal exchanges of the calling and receiving parties are located in different prefectures in Greece and the distance between the exchanges is more than 45 kilometers.
 
Except with respect to our flat-rate packages, our tariff policy for long-distance calls is generally based on per second billing with a minimum charge for each call. In addition, we apply four distinct charging periods (peak, off-peak, Saturday and Sunday). Per second billing applies after the first 25 and 28 seconds of each call during peak and off-peak/Saturday hours, respectively. On Sundays we apply local call charging.


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The following table shows our current domestic long-distance telephony tariff structure:
 
     
  (Euro)
 
Minimum charge per call(1)
    
First 25 seconds (weekdays peak hours)  0.026 
First 28 seconds (weekdays off-peak and Saturdays)  0.026 
 
     
  (Eurocents per second)
 
Charge per second    
Weekdays peak (after first 25 seconds)  0.103 
Weekdays off-peak and Saturdays  0.092 
 
 
Note:
 
(1)On Sundays local call tariffs apply.
 
Domesticfixed-to-mobile calls.  The following table shows the development of the tariff structure, excluding VAT, for calls made by our fixed-line customers to customers of the domestic mobile operators in 2006, 2007, 2008 and 2008:2009:
 
                                            
         June 1,
          Jan. 1,
  
   June 1(2) to
 Dec. 1(3) to
 Jan. 1(4)to
 2007(5) to
 Feb. 1(6) 2008 to
    June 1, 2007(2) to
 Feb. 1(3) 2008 to
 2009(4) to
 June 16, 2009(5) to
 Jan. 1(1) to May 31,
 Nov. 30,
 Dec. 31,
 May 31,
 Jan. 31,
 Dec. 31,
  Jan. 1(1) to May 31,
 Jan. 31,
 Dec. 31,
 June 15,
 Dec. 31,
Mobile Operator
 2006 2006 2006 2007 2008 2008  2007 2008 2008 2009 2009
   (Euro per minute)          (Euro per minute)
Cosmote  0.179   0.154   0.150   0.150   0.1393   0.1315   0.150   0.1393   0.1315   0.1113   0.1127 
Vodafone  0.179   0.154   0.150   0.150   0.1397   0.1317   0.150   0.1397   0.1317   0.1113   0.1127 
Wind Hellas  0.184   0.159   0.155   0.1585   0.1497   0.1367   0.1585   0.1497   0.1367   0.1113   0.1127 
Q-Telecom  0.229   0.204   0.20   0.1585   0.1497   0.1367   0.1585   0.1497   0.1367   0.1113   0.1127 
 
 
Notes:
 
(1)As of January 1, 2006, our retention fee is 0.034.
(2)Due to a reduction in the termination charge of mobile operators as of June 1, 2006.
(3)Our retention fee was reduced from Euro 0.034 to Euro 0.030 per minute as of December 1, 2006.
(4)As of January 1, 2007, we apply per second charging without a minimum call duration of 30 seconds, which has resulted in an increase in our retention fee from Euro 0.030 to Euro 0.0326 per minute. Moreover, termination fees of mobile operators were further reduced.


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(5)(2)Charging per second still applies, and the retention fee remains unchanged. New prices were introduced due to reductions in the termination fee.
 
(6)(3)Charging per second still applies, and the retention fee remains unchanged. New prices were introduced due to reductions in the termination fee of mobile operators as of February 1, 2008.
(4)Charging per second still applies, and the retention fee increased from Euro 0.0326 to Euro 0.0327 per minute, while the termination fee for all mobile operators was reduced to Euro 0.0786 per minute. New prices were introduced as of January 1, 2009.
(5)Charging per second still applies, and the termination fee remains unchanged. New prices were introduced due to the increase in the retention fee from Euro 0.0327 to Euro 0.0341 per minute.
 
Since 2004, pursuant to guidance issued by the EETT, we have gradually reduced our retention fee forfixed-to-mobile calls from Euro 0.04 per minute to Euro 0.03260.034 per minute (as of January 1, 2008)June 16, 2009). As of January 1, 2009, our retention fee is Euro 0.0327. Charging per second still applies. Following further reductions in the fees of mobile operators, domesticfixed-to-mobile calls to all domestic mobile operators are charged at Euro 0.11130.0965 per minute.minute (as of January 1, 2010).
 
Telephony packages.offers (packages).  We offer to our retailresidential and SOHO-small business customers a range of fixed-line telephony packages, including packages offering unlimited free calls, discount including:
• packages offering unlimited nationwide free calls (OTE Unlimited);
• discounted packages (OTE Discount Programs);
• packages offering prepaid minutes of calling time (OTE Flat Rates) to nationwide andfixed-to-mobile calls; and
• packages of bundled offerings, including monthly line rental fee, ADSL, internet connection, nationwide andfixed-to-mobile calls.
OTE Unlimited OTE Discount Programs and packages offering pre-paid bundles of minutes of calling time. These packagesOTE Flat Rate Programs are offered for an incrementaladditional monthly fee in addition to our monthly line rental charges. On the other hand, our bundled packages are offered for an aggregate monthly fee which includes both the monthly line rental charge and fees for other services included in the bundle (ADSL, internet connection and call time).
 
As of June 9, 2008, we offer three versionsunlimited national telephony packages (initially under the brand name “OTE Talk”):
• OTE unlimited anytime: nationwide calls on fixed-line networks;
• OTE unlimited evenings and weekends: nationwide calls during evenings and weekends on fixed-line networks; and
• OTE unlimited 1-2-3 favorite numbers: nationwide calls to 1, 2 and 3 numbers on our network.
For ADSL customers, we offer the above programs at a discounted monthly fee under the brandname “Conn-x Talk”.
As of our OTE-Talk packages: one withJuly 15 2009, we upgraded “OTE Talk” and “Conn-x Talk”: 60 free minutes per month forfixed-to-mobile calls were added at no additional charge for existing and new residential customers who have OTE Talk or Conn-x Talk programs, under the condition that they sign a6-month contract. At the same time we launched a new unlimited local and long-distance calls within and outside our network any time, a second with unlimited local and long-distance calls within and outside our network during nights and weekends, and a thirdpackage called “OTE Unlimited International” offering unlimited calls to upfixed-line numbers in 46 countries.
We also offer packages with prepaid minutes forfixed-to-mobile calls (of 30, 60, 120, 240 and 480 minutes). These packages have been offered at a reduced price since January 2010, due to three selected numbers within our network. In addition,national tariff reductions in prices forfixed-to-mobile calls.
Also, in collaboration with Cosmote we offer our ADSLa discount program called “OTE all in 1” for customers two packages including unlimited free localwith an OTE fixed-line, an OTE DSL line and long-distance calls withina Cosmote mobile contract. This program offers a 15% discount to the mobile contract and outside our network under the brand name Conn-X Talk. In particular,customer receives one monthly bill from us for all three services.


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version of Conn-X Talk offers free calls any time (every day, any time of the day) and a second version of Conn-X Talk offers free calls only during week nights and weekends.
Our Business Call and Business Call Premium discount packages are available to our business customers and provide discounts of up to 24% for local calls, up to 30% for long-distance calls and up to 35% and 18% for international calls for Business Call and Business Call Premium, respectively.
 
Since September 2009, we offer “OTE Business” packages (voice packages for SMEs), with different bundles of voice minutes (national andfixed-to-mobile) and ADSL products (Conn-x and Conn-x @work), allowing customers to choose from 11 different packages including value options, to bundle from 2 to 8 PSTN or ISDN BRA lines, to share monthly call minutes over the lines of the bundle and to receive one customer bill for all lines in the bundle.
On July 29, 2009, we launched two new programs for residential customers for a monthly fee that are bundled with the OTE monthly line rental charge: Nationwide 180’ offers 180 minutes on net and off net nationwide calls and Nationwide + Mobile 300’ offers 180 minutes on net and off net nationwide calls and 50 minutes offixed-to-mobile calls to all national mobile operators.
As of June 9, 2008October 7, 2009, we offer ourintroduced a double play package for residential customers prepaid packages of 120under the name “DP8” that includes Conn-x and 240 minutes (withinVoice. This program offers unlimited local and long-distance telephony inside and outside our network)network, bundled with the monthly line rental fee and ADSL internet connection at 8 Mbps.
As of local and long-distance calls. Furthermore,February 17, 2010, we offer ourintroduced a new program which offers residential customers, a prepaid package250 minutes of 480 minutes for domestic calls bothnational telephony within and outside our network. In addition, we offer our business customers prepaid packages providing a range of 500 up to 1,000 minutes per month for local calls within our network and 100 up50 minutes offixed-to-mobile to 500 minutes per month for long-distance calls within our network.
In addition to packagesall national mobile operators, bundled together with prepaid minutes for localthe monthly line rental fee and long-distance calls, we also offer packages of prepaid minutes for fixed-to-mobile calls (of 30, 60, 120, 240 and 480 minutes). Also, in collaboration with Cosmote we offer a discount program called “OTE all in 1” for customers with an OTE fixed line, an OTE DSL line and a Cosmote mobile contract. This program offers a 15% discount to the mobile contract and the customer receives one monthly bill from us for all three services.unlimited broadband connection at 8 Mbps.
 
International Fixed-line Telephony
 
We offer our customers international calling services on our fixed-line transmission network.
 
Revenues
 
Revenues from international fixed-line telephony services, accounted for 4.5%4.2% of our total consolidated operating revenues in 2008,2009, compared to 4.5% in 2008 and 4.8% in 2007 and 5.9% in 2006.2007. These services are provided by OTEus in Greece and by RomTelecom in Romania (and were provided by ArmenTel in Armenia until November 2006, when ArmenTel was sold).Romania.
 
In 2008,2009, from our total revenues from international fixed-line telephony services, 32.7%33.8% was derived from outgoing international traffic, 47.6%45.1% from dues from international operators for incoming and transit traffic and 19.7%21.1% from payments from unaffiliated mobile operators and alternative carriers.
 
We are party to bilateral settlement agreements with other international telecommunications operators. These agreements govern payments among telecommunications operators for settling incoming and transit traffic. Thus, revenues from international calls include payments from customers in Greece and from other telecommunications operators for incoming and transit traffic.
 
Volume and Traffic
 
International telecommunications traffic in Greece experiences seasonal fluctuations in demand, with peak outgoing traffic occurring in the summer and incoming traffic peaking during September and October.


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The following table sets out international traffic volume data, including outgoing calls originated by OTE retail, mobile networks and alternative fixed-line telephony operators in Greece, for the three years ended December 31, 2008:2009:
 
                        
 Year Ended December 31,  Year Ended December 31,
 2006 2007 2008  2007 2008 2009
 (Minutes in millions,
  (Minutes in millions,
 except for percentages)  except for percentages)
Outgoing calls
                     
OTE  438.2   506.3   361.5   506.3   361.5   332.0 
Other  389.6   417.6   536.6   417.6   536.6   537.4 
Total outgoing traffic
  827.8   923.9   898.1   923.9   898.1   869.4 
Growth (% per year)  2.6   11.6   (2.8)  11.6   (2.8)  (3.2)
Incoming calls
                     
OTE  589.7   514.5   551.8   514.5   551.8   639.2 
Other  251.1   303.8   346.0   303.8   346.0   420.3 
Total incoming traffic
  840.8   818.3   897.8   818.3   897.8   1,059.5 
Growth (% per year)  5.7   (2.7)  9.7   (2.7)  9.7   18.0 
 
Tariffs
 
Our charging policy for international calls is based on nine charging zones. The first zone comprises calls to Albania, the most popular destination for outgoing international traffic, for which we charge Euro 0.21 per minute for calls to fixed lines and Euro 0.25 per minute for calls to mobile lines; the second zone comprises calls to EU countries, for which we charge Euro 0.21 per minute for calls to fixed lines and Euro 0.28 per minute for calls for mobile lines. For all other zones the same tariffs apply for calls to both fixed and mobile, ranging from Euro 0.25 per minute for the cheapest zone, to Euro 4.00 per minute for the most expensive zone. We also offer special discount packages with reductions of up to 50% on international call rates, depending on the destination country, the time of the call and international traffic volume. In addition, we offer a new unlimited package called “OTE Unlimited International” which offers unlimited calls to fixed numbers in 46 countries.
 
Internet Protocol (IP) and Internet Access Services
 
We offer broadband (ADSL) anddial-up internet access andIP-related services to residential customers, andmainly under our Conn-x products, as well as ADSLIP-based telecommunications services, such asIP-VPN andIP-based connectivity and hosting services (for exampleIP-VPN) to corporate and business customers.
 
We own and operate an extensive broadband/ADSL network across Greece. OnAs of December 31, 2008,2009, we expanded our ADSL infrastructure to 1,4201,501 points of presence. We expect to expand our coverage further in line with demand. As broadband access is generally fast enough to support new applications, such as high quality video, we expect that broadband customers will use the internet more frequently and for longer periods of time than narrowband(dial-up) users. We have already launched new products, based on ADSL access, such as content portals, or IPVPNs over ADSL. We continue to introduce new broadband products to improve our ADSL-based portfolio.
 
Historically, IP services were provided primarily by our subsidiary, OTENET S.A.,OTENet which began commercial operations in 1997 and was the leading internet and IP services provider in Greece. On December 27, 2007 we acquired the entire share capital of OTENETOTENet by purchasing the minoritynon-controlling interests of an aggregate of 5.41% and on June 27, 2008, we merged with OTENET,OTENet, following which its business and employees were integrated with those of ours.
 
Market Position &and Competition
 
The development of the Greek ADSL market overall has depended on pricing of retail ADSL offers and the development of the wholesale ADSL market and the market for local loop unbundling. The market has grown


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significantly over recent years and continues to grow. According to the EETT, as of December 31, 2008,2009, there were 1,506,614 ADSL1,916,630 broadband lines in Greece, 99.6% of these were ADSL lines, representing an increase of 48.1%27%, as compared to 1,017,0001,506,614 ADSL lines as of


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December 31, 2007.2008. Despite, however, its strong growth in recent years, as of December 31, 2008,2009, ADSL had reached a penetration rate of just 13.4%17.02% of the Greek population, which is relatively low compared to other EU countries. We believe that this supports expectations for further growth of the ADSL market in the future. Such growth may, however, be negatively affected by adverse macroeconomic conditions.
 
Our competitors in the Greek internet market have invested and continue to invest in infrastructure, not only in the major urban centers, but throughout Greece, and, accordingly, we expect competition to continue to intensify. Our main competitors include a number of fixed-line operators, as well as mobile operators, such as Forthnet, Hellas OnLine, Vodafone, Tellas Wind, Cyta, OnTelecoms, Vivodi and others, most of which offer a range of voice, broadband and double-play (voice and internet) products, either through unbundled local loops, or using our own network, as well aswhile the synergy of fixed and mobile operators such as Vodafone, which has recently started offeringresulted in offerings of fixed-line or hybrid products in the Greek market.
 
Market growth has been primarily driven by price reductions and special offers by providers, as well as speed upgrades and offers of double-play services (voice and internet). An increase in marketing activity hasand the Information Society subsidy project in regions outside Attica have also affected market growth. Most of our competitors in the Greek ADSL market offer their services at competitive prices, which are, in many cases, much lower than ours, as they are not subject to the same regulatory constraints and pressures with respect to the requirements for cost-orientation of their tariffs, while their ability to lower their tariffs improves, as they continue to develop their own networks and reduce their dependence on our network for the provision of ADSL services, and therefore reduce their costs for providing these services.
 
Despite increasing competition in the Greek ADSL market in 20082009 and 2007,2008, we remain the leading provider in the Greek ADSL market and have increased our customer base significantlyto 1,060,064 retail customers as of December 31, 2009, as compared to 864,021 retail customers (including 28,373 former customersas of OTENET).December 31, 2008.
 
Residential Customers
 
Products and Services.  Conn-XConn-x is our main broadband product in the Greek market. Conn-XConn-x was first offered in 2004, as the first all-inclusive broadband solution in the Greek market, offering access, internet feed and equipment and, since then, has developed into the leading brand for broadband internet in Greece, helping to increase broadband penetration. We continue to develop our broadband products, offering a number of different packages of Conn-XConn-x for residential and business customers and new products based on ADSL access.
 
The OTENETOTENet portal, located athttp://www.otenet.gr, maintained its position among Greece’s top threeten information portals in 2008.2009. Itse-mail newsletter was widely distributed in Greece with more than one million recipients. In 2008,2009, we redesigned the OTENET portal enrichedotenet.gr homepage, sports section and newsletter and enhanced its content by adding new sections, relating to the automotive industryincluding maps and electronic gaming, enhancing other sections, including financial news, sports, weather and technology and updating its online translation tool and adding dictionaries.shopping.
 
Tariffs.  We form our pricing policies by considering market demand, competition and our own investment plans and profitability levels, with a view to addressing various different target groups, aiming to further increase profitability, while complying with applicable regulatory requirements.
 
As of February 1, 2007, we reduced our tariffs for retail ADSL access services by approximately 7% for the basic and medium speed packages and by 5% for the high-speed package and as of May 16, 2007, we introduced two new speed packages for retail ADSL access, each offering nominal download speed of 4 Mbps and 8 Mbps. At the same time, we further reduced by 0.7% our tariff for the basic speed package, by 5.4% for the medium speed package and by 25.6% for the high-speed package.
 
As of December 17, 2007, we introduced an additional package for retail customers, offering nominal download speed of up to 24 Mbps. The new package is available in Athens, Thessaloniki and major cities in Greece. Moreover, we upgraded, free of charge, all our customers with 768/192 Kbps connections to 1024/256 Kbps. As of the same date, we further reduced prices of the existing ADSL packages starting from 19.2% for the basic speed package, and up to 61.2% for the 8 Mbps package, for our retail customers.


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On May 12, 2009, we upgraded our ADSL access speeds throughout Greece, without any additional costs. All 1 Mbps connections were upgraded to 2 Mbps, and 4 Mbps connections to 8 Mbps. As of the same date, we further


36

reduced prices of the existing ADSL packages, by 15.4%, 16.4% and 6.7% for 2 Mbps, 8 Mbps and 24 Mbps respectively.
 
On April 12, 2010, we initiated a further automatic upgrade of 8 Mbps connections to “up to 24 Mbps” and simultaneously reduced the “up to 24 Mbps” package price by 2.9%.
The following table sets out our tariffs for retail ADSL access services since 20062007 through to the date of this Annual Report:
 
                                        
 ADSL Price Evolution (Conn-X)  ADSL Price Evolution (Conn-x)(1)
Date
 1 Mbps 2 Mbps 4 Mbps 8 Mbps Up to 24 Mbps  1 Mbps 2 Mbps 4 Mbps 8 Mbps Up to 24 Mbps
     (Euro)      (Euro)
December 31, 2006  25.90   39.90   —   —   — 
December 31, 2007  16.50   19.50   22.50   26.90   29.90   16.50   19.50   22.50   26.90   29.90 
December 31, 2008  16.50   19.50   22.50   26.90   29.90   16.50   19.50   22.50   26.90   29.90 
As of May 12, 2009  —   16.50   —   22.50   27.90 
December 31, 2009 until March 15, 2010  —   16.50   —   22.50   27.90 
From March 16, 2010 and as of May 14, 2010  —   16.78   —   —   22.88 
 
 
Note:
 
All prices shown above include VAT. Monthly rental of PSTN (Euro 14.8) or ISDN (Euro 18.9) lines is not included.
(1)All prices shown above include VAT. Monthly rental of PSTN (Euro 14.8) or ISDN (Euro 18.9) lines is not included. On March 15, 2010, VAT in Greece increased from 19.0% to 21.0%.
 
We also charge an optional installation fee of Euro 44.99 for modem and Set Top Box installation by our retail ADSL technicians, at the customer’s request.
 
IPTV — Conn-x TV
Since February 2009, we offer Conn-x TV, our IPTV service, which is now available as an add-on service to all users of Conn-x connections of 2 Mbps, 8 Mbps or 24 Mbps in 62 cities in Greece. Conn-x TV offers a linear program (47 broadcast channels), as well as Video on Demand services (on apay-per-view and subscription basis). We had initially soft-launched the service in October 2008 to 1,500 users in five major cities of Greece (Athens, Thessaloniki, Patras, Heraklion and Larissa). As at December 31, 2009, we had a total of 16,075 active Conn-x TV subscribers.
The main goals of the service are to retain customers and ISDN and PSTN connections, to increase the share of ADSL subscribers, as well as to increase revenues per customer. We intend to further develop and enhance the services of Conn-x TV during 2010, including a pilot launch of our new satellitePay-TV (DTH) service offering the same content as Conn-x TV. Tariffs for IPTV services are not subject to regulation, as is the case for tariffs for telecommunications services.
Content.  We have already secured and offer a broad range of content, including various national and international channels, including Disney, Fox, the Discovery Channel, the History Channel, and sports content, including rights to the German and Spanish football championship, and Video on Demand services.
Competition.  A number of our competitors in the Greek fixed-line market already offer IPTV services through their networks, including Hellas OnLine and OnTelecom, while Forthnet, though it does not currently offer IPTV services, is the sole shareholder of NetMed, the operator of Nova, currently the only active satellitePay-TV (DTH) service in Greece.
Enterprise and Business Customers
 
Our Enterprise and Business Services division aims to maintain and strengthen our leading position in the market of corporate customers and SMEs through the provision of innovative products, services and integrated telecom and IT solutions characterized by quality, flexibility and reliable level of service. The main categories of fixed-line telecommunications services we provide to corporateproduct portfolio for enterprise and business customers are:includes broadband and internet access services (ADSL, Conn-x @Work, Dedicated Internet Access, corporate mail), internet presence (domain names, web hosting packages and services), data center services (physical collocation), and connectivity services(IP-VPN, Ethernet).


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• Voice, ADSL Broadband Access Connectivity and Transport Services;
• VPN, Managed Network Services;
• Data center, IT & Business Application Development Services; and
• Infrastructure Support Services.
IP-VPN Services.  We currently offerIP-VPN(IP-based virtual private networks) services over a variety of access technologies. Customers may connect to manya number of different sites, or be connected with their partners via permanent connections (leased lines) at varying speeds that varyof up to 34 Mbps and may also get connected via telephony (PSTN/ISDN) and ADSL networks at speeds of up to 24 Mbps. A symmetrical high-bit-rate digital subscriber line(“SHDSL”)IP-VPN service (1, 2 and 4 Mbps) has been incorporated intoIP-VPN service portfolio in October 2008. Different types of classes of service(“CoS”) (Premium, Gold and Silver) are also supported inby our leased linesIP-VPN service. We plan to launchservices. In 2009, we enhanced ourIP-VPN service with new access types: Ethernet, SHDSL (plus supporting class of service), LMDS, new value-added services and new pricing schemes aligned with connectivity business strategy. During 2009, we designed an integrated IT platform covering order management, provisioning and billing for the wholeIP-VPN product family. As of April 2009, we also launched a VoIP service forIP-VPN customers in 2009.customers.
 
ManagedIn 2009, Conn-x @Work was upgraded at the speeds of 1 and 4 Mbps, while prices were reduced for speeds of 2 Mbps, 8 Mbps and 24 Mbps. In October 2009, we introduced a Conn-x @WorkIP-VPNstart-up(“MNS”) package which combines internet access and internet presence services are addressed mainly to large companies, connecting more than three sites, or establishing direct connections with partners, as well as to smaller enterprises,(web hosting and mail hosting) at a competitive price which usually utilize access or ADSL/SHDSL connections.is targeted at SME customers.
 
VoIP Services.In addition toApril 2009, we launched two OTE Business web portal packs, the “Corporate Site Packet” and the“e-shop Packet”, both offering VoIP (voice over IP) over ourIP-VPN service described above, we plan to provide VoIP over ADSL integrated within the Conn-X offer.web presence competitive solutions, targeting business and SME customers.
 
Dedicated Internet Access.Access (“DIA”).  We offer symmetrical access to the Internetinternet via leased lines or Ethernet (optical access) at speeds of up to 1 Gbps. In March 2009, we plan to modify the currentmodified this service and offeroffered it as a bundle with the access line. We also plan to offeroffered access over SHDSL and LMDS (wireless).
 
In 2009, new managed network services were developed forSubsidiaries & Joint VenturesIP-VPN and DIA and existing managed network services for ADSL access andIP-VPN were enhanced to support new access types.
 
Voicenet.Competition.  Voicenet isWe believe that we hold the leading position in the Greek market for telecommunications and integrated ICT services to corporate and business customers in Greece. However, we are facing strong competition from both fixed-line operators and IT system integrators, mainly in the form of significant pricing pressures, and despite the fact that we have been effectively defending our market share, we believe that pricing pressures may adversely affect our revenues from this market. In addition, we believe that the financial crisis and deteriorating macroeconomic conditions in Greece should have a provider of voice telephony over IP. Having investednegative impact on spending in network infrastructure, IT systemsthese areas by businesses and human resources andlarge corporate clients, while, with respect to the public sector, we expect that restrictions in public spending as a goal to enhance network quality, Voicenet offers its customers a package of IP services designed to meet modern business telecommunications needs for local, long-distance and international


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telephony as well as calls to mobile phones and internet services. With particular emphasis on corporate customers, Voicenet has gained a shareresult of the alternative telecommunications marketfiscal crisis should have a negative impact on spending in the broad public sector and had 3,116 business customers asespecially in significant growing areas of December 31, 2008. The majority of Voicenet’s corporate customers comprise companies that had switched from OTE to an alternative carrier, but returned to our Group. In May 2008, OTENET acquired the remaining minority interest (15.93%) from Sanyo Hellas Symetohiki S.A., reaching 100% interestinvestment in Voicenet.ICT, includinge-health ande-government projects.
 
Romania — RomTelecom
 
We hold a 54.01% interest in the share capital of RomTelecom, S.A., the incumbent fixed-line telephony services provider in Romania. Romania has a population of approximately 21.521.7 million and fixed-line penetration is currently approximately 20%24.1%, according to our estimates.the National Authority for Management and Regulation in Communication.
 
Business Overview.As of December 31, 2008,2009, RomTelecom had approximately 2,760,000 lines in service, as compared to approximately 2,975,000 lines in service as compared toof December 31, 2008 and approximately 3,035,000 lines in service on December 31, 2007 and approximately 3,403,346 lines in service in 2006.2007. On December 31, 2008,2009, all of RomTelecom’s lines were connected to digital exchanges.
 
RomTelecom served 650,669775,632 ADSL lines as at December 31, 2008,2009, as compared to 650,669 as of December 31, 2008 and 359,303 as at December 31, 2007. As the local market for broadband in Romania grows, a number of newly-introduced applications, such as IPTV, are expected to require higher capacity. RomTelecom is considering a number of options for serving increasing broadband traffic, including VDSL and fiber-to-the-home (FTTH),FTTH, which it may deploy depending on demand. As of December 31, 2009, RomTelecom served 2,323 VDSL customers.
 
InSince December 2006, RomTelecom launchedoffers a DTH (satellite TV) service under the commercial name ‘Dolce’. The number of customers of Dolce was 643,185883,799 as at December 31, 2008.2009.


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The following table shows RomTelecom’s revenues, operating income/(loss) and profit/(loss) for the three years endedA CDMA network based on a 410 MHz frequency network is currently being rolled out; it was commercially launched in April 2009. As of December 31, 2008, based on RomTelecom’s financial statements:
             
  Year Ended December 31, 
  2006  2007  2008 
  (Euro in millions) 
 
Revenues  894.3   872.4   870.4 
Operating income/(loss)  84.5   7.0   (37.5)
Profit/(loss)  55.5   (23.2)  (48.7)
Our share in RomTelecom’s profit/(loss)  30.0   (12.5)  (26.3)
The declining revenues2009, RomTelecom had 2,353 CDMA voice and 27,054 CDMA broadband customers despite the economic downturn and competition from fixed lines were partially offset by the increased number of data and broadband customers.mobile operators.
 
RomTelecom invests in new technologies in order to remain competitive, especially in view of intensifying competition as local competitors expand, and increasing demand for bandwith. In view of that, in cities where there is not yet a fiber and IP infrastructure, RomTelecom tests FTTH solutions commercially, with the goal of acquiring a critical mass of customers before making a significant investment, whereas for cities where the network is largely modernized, RomTelecom plans to deploy VSDL solutions that will provide a relatively lower bandwidth than FTTH, but of higher quality. A major driver for its broadband roll-out is to establish a large platform for IPTV delivery. Currently there are no significant providers of IPTV services in the Romanian market and media content may be a significant differentiating factor for growth in the market. There is continuous competition to acquire content that could be the most appealing to subscribers.
 
A CDMA networkThe following table shows RomTelecom’s revenues, operating income/(loss) and profit/(loss) for the three years ended December 31, 2009, based on the 410 MHz frequency network is currently being rolled out; it was commercially launched in April 2009.RomTelecom’s financial statements:
             
  Year Ended December 31,
  2007 2008 2009
  (Euro in millions)
 
Revenues  872.4   870.4   807.7 
Operating income/(loss)  7.0   (37.5)  (15.3)
Profit/(loss)  (23.2)  (48.7)  (34.6)
Our share in RomTelecom’s profit/(loss)  (12.5)  (26.3)  (18.7)
 
As at December 31, 2006, dividend distributionsThe economic downturn resulted in a significant decline in voice revenue for all segments and a decrease in volumes mainly generated by business customers. The declining revenues from Romania, if any,fixed lines were subject to a 10% withholding tax. RomTelecom did not pay any dividends until December 31, 2005. In 2006 it announcedpartially offset by the increased revenue resulting from an increase in the number of data and paid a pre-tax dividend distribution of Euro 99.6 million for the year 2005. broadband customers.
No dividend was declared or paid for the years 2007, 2008 and 2008.2009.
Competition.  The Romanian fixed-line telecommunications market is highly competitive, with high penetration of mobile and high speed broadband and low tariffs. Currently, the fixed-line market is affected by a number of trends, includingfixed-to-mobile substitution for voice and, to a certain extent, broadband, which has a significant negative impact on RomTelecom’s number of fixed-line customer base, and alternative fixed operators developing and running their own fixed-line networks. In fixed-line broadband, voice and IPTV, the main competitors are alternative operators, that started by providing CATV services and evolved to providing broadband, including UPC and RDS&RCS (owner of the brand Digi).
 
Regulatory matters and tariffs.  The provision of certain telephony services in Romania, including voice telephony, leased lines and telex and telegraphy services has been liberalized since January 1, 2003 and is regulated


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by the National Authority for Management and Regulation in Communication(“ANCOM”) (formerly the National Regulatory Authority for Communications).
 
In 1998, prior to the liberalization of the telecommunications market in Romania, the Romanian Governmentgovernment granted RomTelecom a license for the provision of fixed-line telephony services for a period of 15 years. The provisions of the 1998 license were renewed in 2003 for a term of ten years.
 
In late May 2007, RomTelecom implemented a new tariff scheme for residential customers to reduce the significant churn that affected its customer base and to increase network usage. For the first time, RomTelecom offered rental plans offering unlimitedon-net traffic and reduced the tariffs to certain international destinations (EU fixed networks and North America) by 55% and 41% during peak and off-peak times, respectively. Moreover, since September 2007, RomTelecom has offered its residential customers a package including unlimited free calls to fixed lines on all networks during off-peak times.
 
In 2008, ANCOM continued the market review process which began in 2007 and was intended to adjust regulation to the changing market environment. ANCOM has reviewed the interconnection regime with the two largest operators of fixed-line telephone networks, RomTelecom and RCS & RDS,&RDS (the alternative fixed-line operator


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with significant regional presence mainly in TV, under the brand Digi), and regulated the interconnection with 36 other fixed-line operators.
 
Regarding RomTelecom, ANCOM maintained the obligations imposed under the previous regulatory regime, including transparency, non-discrimination, accounting separation, access to use of specific elements of the network and the associated infrastructure, as well as the cost-orientation. The maximum average interconnection tariffs remained at 0.84 Eurocents/minute at local level, 0.97 Eurocents/minminute at regional level and1.06 Eurocents/minute at national level.
 
ANCOM also imposed the obligations of transparency, non-discrimination, granting access and permission to use specific elements of the network and the associated infrastructure, as well as tariff control on the other alternative operators of fixed-line telephone networks. ANCOM set up a glide path for cutting the current interconnection tariffs charged by the alternative operators down to the target level, in two stages, 1.15 Eurocents/minute until June 30, 2009 and after this date the tariffs will be reduced to 0.97 Eurocents/minute.minute after this date.
 
In 2008,2009, ANCOM submitted the draftissued decisions regarding the relevant markets for services of callmobile termination at mobile location for public consultation and the final decisions will be issuedrates, in 2009. ANCOMwhich it imposed additional obligations of transparency and non-discrimination through the publication of reference interconnection offers, as well as the cost-orientation obligation on all five mobile operators. Thus, the maximum tariffs for call termination on the networks of Cosmote and TelemobilZapp will decrease in three stages, according to the15-month glide path, until they are in line with the tariffs of Orange and Vodafone of 5.03 Eurocents/minute, as of July 1, 2010. Since it is a new entrant onin the mobile telephonetelephony market, RCS & RDS&RDS will be granted a longer glide path.path ending with a tariff of 5.67 Eurocents/minute, as of July 1, 2010.
 
In September 2008, ANCOM designated RomTelecom as the winner of a tender for the new wireless communications license in the 410-415/420-425 MHz frequency bands. The license was granted for a period of 10 years and enables RomTelecom to build, maintain and operate a mobile network for providing voice and data services. The first assessment of the geographic coverage assumed by RomTelecom will be undertaken by ANCOM on December 31, 2010 and the remaining two roll-out phases will take place on June 30, 2012 and December 31, 2013.
 
During 2009, ANCOM finalized the harmonization of numbering resources used at European level for Directory Enquiry services (118 xxx) and social services (116 xxx). After the allocation of the new numbering range, RomTelecom’s right to use its traditional short number for Directory Enquiry services ceased.
Background to the investment.  In 1998, we made an initial investment through our wholly-owned subsidiary, OTE International Investments, of U.S. $675 million to acquire 35%35.0% of the share capital of RomTelecom. In March 2003, by means of the recapitalization of outstanding debt and management fees due to us and a contribution of cash, we increased our interest in RomTelecom’s share capital to our current 54.01%. The balance of the share capital of RomTelecom is held substantially by the Romanian government.
 
In addition, in 2005, Cosmote contributed Euro 120 million in cash to Cosmote Romania as consideration for a 70%70.0% equity interest in its share capital, with RomTelecom retaining a 30%30.0% interest in Cosmote Romania. The Ministry of Communications and Information Technology of Romania(“MCIT”)is entitled to appoint one of the two board members that RomTelecom may appoint to Cosmote Romania’s board of directors. In December 2005, Cosmote Romania re-launched its commercial activities under the Cosmote brand name, and the term of its license was extended. See “— Mobile Telephony Services — International Mobile Operations — Cosmote Romania”


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below. Following a share capital increase in March 2008 through the issuance of 46,312,500 new shares of nominal value of 10 RON each, Cosmote and RomTelecom contributed Euro 87.5 million and Euro 37.5 million respectively to the share capital of Cosmote Romania, Seesee “— Mobile Telephony Services — International Mobile Operations — Cosmote Romania”.
 
Serbia — Telekom Srbija
 
We hold a 20%20.0% interest in the share capital of Telekom Srbija, the incumbent telecommunications operator in Serbia which until June 9, 2005 had a national monopoly in the provision of fixed-line telephony services. Telekom Srbija also provides mobile telecommunications services, as well as internet and IPTV services. We acquired our interest in Telekom Srbija in June 1997 for U.S. $287.0 million. The remaining 80%80.0% interest of Telekom Srbija’s share capital is held by PTT, a Serbian state-owned company, following its repurchase of a 29%29.0% interest from


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Telecom Italia. We present our investment in Telekom Srbija in our financial statements at its written-down value and have accounted for it under the cost method since July 1, 2003 because we have determined that we do not exercise significant influence over Telekom Srbija. In the years 2007, 2008 and 2009, we reassessed our position regarding our investment in Telekom Srbija, after taking into account the 80.0% ownership interest held by the Serbian government. Furthermore, since Telekom Srbija’s shares are not publicly traded and we do not have access to timely updated financial information required for a reliable measurement of our investment in Telekom Srbija, such investment is carried at cost, since we do not exercise significant influence.
 
Telekom Srbija also provides fixed-line and mobile telephony services in the Republic of Srpska in Bosnia and Herzegovina through Telekom Srpske. Telekom Srbija holds a 65.0% interest in Telekom Srpske, while the minority is held by a state-owned pension fund (10.0%) and other shareholders. Telekom Srbija acquired its interest in Telekom Srpske on June 18, 2007, following an international tender, for the price of Euro 646.0 million. On April 4, 2007, Telekom Srbija was awarded a mobile license and a Wimax license in Montenegro, following which it established its subsidiary Mtel, Podgorica Montenegro, in which Telekom Srbija holds a 51.0% interest and Telekom Srpske holds a 49.0% interest (which it acquired in February 2010).
Business overview.  As of December 31, 2009, Telekom Srbija as a group had a total of approximately 3.4 million access lines in service and 7.7 million mobile customers.
As of December 31, 2009, Telekom Srbija had 3.0 million access lines in service, approximately 97.0% of which were connected to digital exchanges, and 5.9 million mobile customers, approximately 77.0% of which were prepaid. On the same date, Telekom Srbija had reached 89.0% in mobile telephony coverage of Serbia’s population (including the region of Kosovo).
As of December 31, 2009, Telekom Srpske, which provides both fixed-line and mobile telephony services as well as internet and IPTV services in Bosnia and Herzegovina had approximately 0.4 million access lines in service, approximately 99.0% of which were connected to digital exchanges, and 1.2 million mobile customers, approximately 87.0% of which were prepaid. As of December 31, 2009, Telekom Srpske had reached 99.0% in mobile telephony coverage of the population of Republika Srpska.
As of December 31, 2009, Mtel, which provides primarily mobile telephony services in Montenegro, had approximately 0.6 million mobile customers, approximately 92.0% of which were prepaid.
In February 2010, Telekom Srbija formed a new subsidiary to engage in telecommunication equipment leasing activities and to construct and exploit the international transport network of Telekom Srbija. In addition, in December 2008, Telekom Srbija founded a new subsidiary, FiberNet, to engage in installation, utilization and maintenance of the optical and power cable along the railway Bar-Vrbnica in Montenegro, in a joint venture with the Railways of Montenegro.
Competition.  In January 2010, Telenor was granted the only other license for the public telecommunications networks and services for the territory of the Republic of Serbia. The license is valid for a period of ten years, while the provision of commercial services is required to commence within one year from the license issue date. The license issuance fee was Euro 1.05 million. Despite the introduction of a new fixed-line operator, Telekom Srbija still has no obligation under the current Law on Telecommunications to offer local loop unbundling services.
Regulatory matters.Since the expiration of its monopoly in June 2005, Telekom Srbija has been designated as an operator with significant market power and holds two non-exclusive licenses to provide a range of fixed-line telecommunications and related services for a term of 10 years (with a possibility of extension), and mobile telecommunications services. In accordance with the Serbian Law on Telecommunications, on June 1, 2006, Telekom Srbija submitted a request to the Republic Agency for Telecommunications(“RATEL”)to replace its license for fixed-line telephony services of 1997. On April 13, 2007, RATEL issued a new license to replace the previous one. This license is due to expire in June 2017. On March 16, 2007, RATEL issued a permit for the provision of internetInternet services and on March 11, 2008, issued a permit for IPTV services. Both permits are valid for five years. On April 4, 2007,In June 2009, Telekom Srbija was awarded a mobileone of two licenses issued for fixed wireless access to the public telecommunication networks and services(“CDMA”). The license is valid for a10-year period and a WiMaxprovision of commercial services commenced within six months from the license in Montenegro, following which, it established a subsidiary Mtel, Podgorica, Montenegro, in which Telekom Srbija holds an interest of 51%.
Following an international tender, Telekom Srbija acquired a 65% interest in the share capital of Telekom Srpske, Republic Srpska, Bosnia and Herzegovina for the price of Euro 646.0 million. The acquisition of these shares was completed on June 18, 2007, and from that date Telekom Srbija obtained control of the aforesaid subsidiary. The minority interest of 35% is held by a state-owned pension fund (10%), PIF Zepter Fund (5%), Restitution Fund (5%) and other shareholders (15%).
As of December 31, 2008, Telekom Srbija had 3.0 million access lines in service, approximately 96% of which were connected to digital exchanges, and 5.9 million mobile customers, approximately 80% of which were prepaid. As of December 31, 2008, Telekom Srbija had reached 97% in mobile telephony coverage of Serbia’s population (excluding the region of Kosovo).
As of December 31, 2008, Telekom Srbija’s subsidiary, Telekom Srpske, which provides both fixed and mobile telephony services in Bosnia and Herzegovina had approximately 0.4 million access lines in service, approximately 99% of which were connected to digital exchanges, and 1.1 million mobile customers, approximately 89% of which were prepaid. As of December 31, 2008, Telekom Srpske had reached 99% in mobile telephony coverage of the population of Republika Srpska.
As of December 31, 2008, another of Telekom Srbija’s subsidiaries, Mtel, which provides primarily mobile telephony services in Montenegro, had approximately 0.5 million mobile customers, approximately 92% of which were prepaid.
As of December 31, 2008, Telekom Srbija as a group had approximately 3.4 million access lines in service and 7.5 million mobile customers.
Telekom Srbija founded a new 100%-owned subsidiary, FiberNet, in December 2008, for the purpose of installation, utilization and maintenance of the optical and power cable along the railway Bar-Vrbnica in Montenegro, in a joint venture with the Railways of Montenegro.
In the years 2006, 2007 and 2008, we reassessed our position regarding our investment in Telekom Srbija, after taking into account the 80% ownership interest held by the Serbian Government, the fact that the roles of the Deputy General Director and the Chief Financial Officer appointed by us are largely administrative rather than executiveissue date.


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On March 26, 2009, the Communications Regulatory Agency of Bosnia and thatHerzegovina issued a license to Telekom Srpske for the two appointed board members cannot influence the boardprovision of mobile services in decisions and consequently concluded that our investment would continue to be accounted3G services for at cost since we do not exercise significant influence.a15-year period commencing on April 1, 2009.
 
MOBILE TELEPHONY SERVICES
 
Through our subsidiaries, we provide mobile telephony services to customers in Greece (through Cosmote), as well as in Albania (through AMC), Bulgaria (through Globul), Romania (through Cosmote Romania)Romania and, FYROM,since November 1, 2009, Zapp) and, until May 2009, FYROM (through Cosmofon). See “— International Mobile Operations”. As is the case for our fixed-line telecommunications services, Greece represents the most important market for our mobile operations.
 
In 2008,2009, Cosmote’s consolidated revenues and net income (including those of its international mobile services subsidiaries) were Euro 3,035.9 million and Euro 377.7 million, respectively, compared to Euro 3,261.7 million and Euro 470.6 million, respectively, compared to Euro 3,060.3 million and Euro 361.3 million, respectively, in 2007.2008.
 
Although the products available to our mobile customers vary from country to country, the following are the principal services and products provided:
 
 • Wireless voice telephony:  We offer a full range of wireless services with a variety of payment plans and packages, including payment on a contract and prepaid basis.
 
 • Enhanced calling features:  We offer a number of services with enhanced calling features, such as voicemail, call divert, call barring by the customer, call waiting, conference call, caller line identification and detailed monthly bill. Subscribers may receive a number of these services bundled with basic voice services or as optional supplements to their basic voice service.
 
 • Wireless data transmission:  We offer our customers the ability to use handsets for data transmission, including for SMS and MMS, which allow customers to send messages with images, photographs and sound. Subscribers may also receive selected information, such as news, sports, scores and stock quotes. We also provide wireless connectivity for devices such as laptops and Personal Digital Assistants(“PDAs”). Cosmote offers 3G services, video streaming and HSPA technology in Greece, Bulgaria and Bulgaria.Romania.
 
 • Wireless internet access:  This enables retail and corporate customers to send and receive emails, browse web pages, purchase goods and services ine-commerce transactions and use other data services. In February 2007 Cosmote was the first on the Greek marketcompany in Greece to offer integrated fixedlaunch high-speed mobile broadband ADSLservices and mobile communications services. Cosmotehas continued to expand and upgrade the availability of wireless internet services throughout the country.country, utilizing its 3G coverage. In 2008, Cosmote was2009, the first operator in Greecedeployment of HSPA and HSPA+ technologies permitted higher download speeds of up to offer wireless internet access (mobile broadband) at a maximum download speed of 7.2 Mbps through the HSPA technology.21.6 Mbps.
 
 • Corporate services:  We provide business solutions, including wireless infrastructure in offices, private networking and VPNs. VPNs enable companies to define a private numbering plan (closed usergroup) for users within a single organization and to use value-added applications, including short dialing, call barring and favorable pricing within the VPN group.
 
 • International roaming:  Wireless customers traveling abroad are able to make and receive calls while in the coverage area of a foreign operator’s mobile network and to be billed for this service by their home network operator.
 
 • Other value-added wireless services:  Cosmote offers Blackberry® email solutions to its corporate and individual customers in Greece. We also offer vehicle fleet management services to customers in Greece and abroad in cooperation with Spacenet. In addition, we offer several other value-added services, including ring tones and mobile portal.
 
Greece — Cosmote
 
Cosmote was established in 1996 and began commercial operations in April 1998. It is one of the three holders of 2G and 3G mobile telephonetelephony licenses and operators of mobile networks in Greece (the other two being Vodafone


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and Wind Hellas) in Greece.. In particular, it provides 2G mobile telecommunications services on the 1800 MHz and GSM 900 frequency bands, and 3G services over the segments of 2x15 MHz (paired) and 2x5 MHz (unpaired) on the 2.100 MHz band (see “— Licenses”). InAs of December 31, 2009, Cosmote had 9,217,507 active customers (defined as active for 12 months) in Greece, representing an estimated market share of approximately 45% of the total number of contract and prepaid mobile telephony customers in Greece (based on internal estimates) (see “— Market Position and Competition”).


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addition, Cosmote owns and operates our mobile operations in Albania, Bulgaria and Romania through its international subsidiaries AMC, Globul and Cosmote Romania and Zapp, respectively, and in FYROM through Cosmofon until May 2009. For a discussion of our mobile telephony operations outside of Greece, see “— International Mobile Operations”. Cosmote’s registered office is located at 44, Kifissias Avenue, Amaroussion, Athens, GR 15125 Greece.
 
Prior to 2008, Cosmote was listed on the Athens Exchange and we held the majority of its share capital (67.83%). In November 2007, we announced an all-cash voluntary public tender offer to acquire all of the shares of Cosmote that were not already owned by us and, as a result of the public tender offer and additional market purchases, as of February 6, 2008, we owned, directly or indirectly 98.59% of its share capital and voting rights. Subsequently, we exercised squeeze-out rights and acquired the remaining shares at the tender offer price, whereupon Cosmote’s shares ceased trading on, and de-listed from, the Athens Exchange. The total cost of our acquisition of the remaining 32.17% interest in Cosmote’s share capital was Euro 2.9 billion. We financed this acquisition partly through our own funds (Euro 0.8 billion) and partly through funds (Euro 2.1 billion) drawn under a short-term bridge facility which was subsequently refinanced by a Euro 2.1 billion bond issue under OTE plc’s Global Medium Term Note Program. See “5.B Liquidity and Capital Resources”.
Cosmote operates as a stand-alone company, with its own administrative, financial, marketing, billing and collection systems separate from those of OTE.ours. We cooperate with Cosmote in certain areas and provide each other with certain services on an arm’s length basis. In addition, we provide Cosmote with a limited number of our personnel, as well as distribution and maintenance services for Cosmote’s products and network, also on an arm’s length basis, and Cosmote leases certain transmission capacity from us. We also own and lease to Cosmote a large number of the base station sites that Cosmote requires for its network.
 
In September 2007, Mr. Panagis Vourloumis, the Chairman and Managing Director of OTE and Chairman of Cosmote, assumed the position of Managing Director of Cosmote. At the same time, Mr. Michael Tsamaz assumed the position of Deputy Managing Director of Cosmote.
As of December 31, 2008,2009, Cosmote’s share capital was Euro 157,899,931, divided into 335,957,300 ordinary shares, each with a nominal value of Euro 0.47. In addition, theThe general shareholders’ meeting of Cosmote, which was held on June 23, 2008,2009, approved a dividend distribution of Euro 0.730.84 per share for the fiscal year 2007.2008.
Acquisition of the entire share capital of Cosmote
On November 9, 2007 we announced an all-cash voluntary public tender offer to acquire all of the shares of Cosmote that were not already owned, directly or indirectly, by us. The acceptance period for the offering was from December 4, 2007 to January 29, 2008. As a result of the public tender offer and additional market purchases, as of February 6, 2008 we owned, directly or through a custodian, 331,228,491 shares, representing 98.59% of Cosmote’spaid-up share capital and voting rights. We exercised squeeze-out rights under Greek law to obtain the balance of the shares at the tender offer price, whereupon Cosmote’s shares ceased trading on, and the Hellenic Capital Market Commission(“HCMC”) approved their de-listing from, the Athens Exchange.
The total cost of our acquisition of the additional 32.17% interest in Cosmote’s share capital was Euro 2.9 billion. We financed this acquisition partly through our own funds (Euro 0.8 billion) and partly through funds (Euro 2.1 billion) drawn under a short-term bridge facility which was subsequently refinanced by a Euro 2.1 billion bond issue under OTE plc’s Global Medium Term Note Program. See “5. Operating and Financial Review and Prospects — Liquidity and Capital Resources”.
 
Licenses
 
Cosmote provides mobile telecommunications services in Greece on the 1800 MHz and GSM 900 frequency bands, according to the terms of its 2G licenses. Cosmote’s 2G license for the GSM 1800 frequency band has a term of 25 years, starting from November 29, 1995,expiring on December 4, 2020, while its 2G license for GSM 900 frequency band expireshas a term of 15 years, expiring on September 8, 2017. The licenses can be renewed pursuant to a resolution of the EETT. Cosmote’s current overall GSM spectrum entitlement for 2G services in Greece includes 2x30 MHz, while Vodafone is entitled to 2x30 MHz, and Wind Hellas is entitled to 2x25 MHz. In addition, there is an unallocated spectrum segment of 2x20 MHz on the 1800 MHz frequency band.
 
Since 2001, Cosmote holds one of the three 3G licenses (the other two being held by Vodafone and Wind Hellas) in respect of segments of 2x15 MHz (paired) and 2x5 MHz (unpaired). Cosmote’s 3G license has a term of twenty20 years starting from August 6, 2001 and expiring on August 5, 2021, subject to renewal by resolution of the EETT.2021. Cosmote commercially launched its 3G services in May 2004.
 
Cosmote also holds a fixed-wireless access license on the 25GHz frequency band, which is due to expire on December 10, 2015, subject to renewal2015.
These licenses can be renewed by a decisionresolution of the EETT.EETT, pursuant to the legislation in effect at the time of renewal.


4248

Strategy
 
Cosmote’s principal strategic objective remains to improve its financial performance and to further enhance its shareholder value. Cosmote remains focused on the following strategic priorities:
 
 • to further exploit its telecommunications and distribution network in Greece and abroad;
 
 • to benefit from the synergies with the Group by focusing on distribution and products in Greece and Romania;
 
 • to increase revenues from data and value-added services in Greece;Greece, Bulgaria and Romania;
 
 • to emphasize contract customers infocus on providing improved customer experience through all countries in which it operates;customer facing channels (sales networks and customer service);
 
 • to further exploit market dynamics and opportunitiesdevelop new revenue streams in the Southeastern European markets and usage growth;markets; and
 
 • to maximize profitability and free cash flow generation on group level through economies of scale and capital expenditure savings.
 
Cosmote’s strategic objectives in the various markets in which it operates are as follows:
 
 • in Greece: to increasemaintain its leading position in the market share, maximize revenues and enhance profitability over the medium term, through increased usage, customer growth, promotion of new services and focused commercial policies;
 
 • in Albania, through AMC: to maintain its leading position in the market to increase its post-paid customer base and limit the impact of increased regulation and competition;competition, while maintaining high profitability.
 
 • in Bulgaria, through Globul: to improve the company’s competitive position in the market and enhance cash generation; and
 
 • in Romania, through Cosmote Romania: to continue increasing its market share and operating profitability utilizing its mobile broadband infrastructure through the customer base, and increase operating profitability.acquisition of Zapp.
 
Products &and Services
 
Cosmote offers its contract and prepaid customers in Greece a range of 2G and 3G mobile telephony services including:
 
 • standard voice services and voice call services;
 
 • messaging services, such as SMS and MMS;
 
 • international and roaming services;
 
 • value-added services, such as voicemail, call diversion and caller identification(“CLIP”), ring tones, mobile portal;portal and video calling;
 
 • mobile internet browsing on the move through 3G, HSPA and GPRS and WLAN technologies; and
 
 • advanced value-added services using WAP, SIM microbrowser, voice recognition and GPRS technologies.
 
Through its 3G network, Cosmote offers mobile broadband nominal download speedservices using HSPAHSPA+ technology with (download)download speeds of up to 7.221.6 Mbps and upload speeds of up to 1.55.8 Mbps, through devices such as USB data cards for wireless connectivity. Since April 2008, Cosmote offers “Cosmote Internetfurther enhancing the value of its “Internet On the Go” data plans. In addition,Furthermore, in 2009, Cosmote has offeredlaunched the “Music Zone” service through which its customers two new post-paid products, based oncan download music from the “Home Zone” functionality, which allows the use of the mobile phone as a fixed-line phone when at home, giving customers the opportunity to make calls to other fixed lines in Greece at domestic call charges, including the new add-on service “Cosmote ONEphone” and the new economic package “Cosmote At Home”.
internet. Cosmote also offers several innovative packagesexpanded its smartphone device portfolio to include popular devices, such as the iphone 3G, Samsung Omnia II and bundles. Freeze allows customers three to 30 free minutes per call for an additional monthly fee, while Cosmokarta is a hybrid of post- and prepaid service. Cosmote also


43

offers prepaid services under alternative, targeted brands, including “Frog” and “Ciao”, targeting specific customer segments.
HTC Magic. In addition, Cosmote and Research In Motion(“RIM”)offers offer BlackBerry® services, an integrated wireless solution that enables customers to access information and communicate via a number of on-line applications, includinge-mail, SMS, the internet, organizer and corporate data. Cosmote has also introduced the Wireless Connect Card, an advanced data card“Traveller” service for roaming, which offers fastallows postpaid customers to use their bundled free minutes while roaming in several countries. In July 2009, Cosmote launched the new web portal


49

Cosmote MyAccount@Business, which permits Cosmote business customers to access to the internet,e-mailand corporate data applications through a portable personal computer, or laptop.pay their bills and manage their connections online.
 
Distribution
 
Cosmote currently distributes its services and products through the following distribution arrangements:
 
 • a network of commercial representatives/distributors;
 
 • 2422 Cosmote-branded stores, including 14two in Athens and three in Thessaloniki;
 
 • 228225 OTEShops throughout Greece;
 
 • 430 Germanos-branded stores, throughout Greece;
 
 • Cosmote’s corporate accounts sales forces; and
 
 • distributors of the Cosmokarta and WHATSUPprepaid packages, prepaid airtime cards and prepaid airtime electronic cards.
Network
Cosmote has an extensive mobile telecommunications network in Greece. It operates its network based on 2G GSM technology (which is currently the most widely adopted standard across the world) and 3G technology. The GSM system is system used mainly for voice and short messaging communication, providing a limited rate of packet data transmission which can accommodate a series of value-added services, such as multimedia messaging services, or MMS. The 3G system enables operators to provide a more comprehensive set of services besides voice, such as video telephony and high-speed packet data providing faster internet access and a wide variety of other data services. An operator of an existing 2G network must install additional infrastructure to facilitate the proper functioning of a 3G network at all levels. This additional infrastructure is often collocated with the 2G systems and utilizes common lines of interconnection among the various network sites. In 2003, Cosmote initiated the rollout of its 3G network fulfilling the requirements of the license granted by the EETT. Cosmote’s 3G network provides nationwide coverage, currently covering over 92.0% of the country’s population, including all cities, towns, highways and secondary roads, as well as all major tourist areas, thus exceeding the requirements under the relevant special license granted by the EETT.
Nokia-Siemens Networks is Cosmote’s principal equipment supplier and supplies the bulk of the equipment required to maintain and upgrade Cosmote’s 2G and 2.5G networks. The long-term framework contract in place with Nokia-Siemens Networks allows Cosmote and us to obtain the equipment we require at competitive prices and to avoid extended procurement and tender procedures for individual investments. Furthermore, Cosmote uses Ericsson as its main equipment supplier for its 3G network rollout and for its 2G network in Northern Greece. Cosmote has also appointed Nokia-Siemens Networks as its second supplier of 3G equipment.
Cosmote’s objective has been to cover more geographical areas in Greece than any of its competitors and to provide an extended range of roaming services and the best international coverage for customers. As of December 31, 2009, Cosmote provided coverage to 99.8% of the population of Greece with a geographic coverage of 97.0% of Greece’s mainland and 98.0% of its territorial waters.
In addition, Cosmote has implemented GPRS nationwide on its network, through which services including MyView, MMS, WAP, Blackberry® and internet access are supported. In 2006, Cosmote introduced HSPA technology in its 3G network, which enables 3G users to download packet data at broadband speeds. Since 2007, Cosmote has made available nationwide its HSPA technology-based broadband products and services supported by its 3.5G network with speeds that reach up to 7.2 Mbps. In addition, in 2009, Cosmote upgraded its network to HSPA+ technology, which currently allows for speeds up to 28.8 Mbps.
Cosmote’s network currently interconnects with our fixed-line network and those of other fixed-line operators in Greece, as well as with the three other mobile telephony networks operated in Greece by Vodafone, Wind Hellas and Q-Telecom.


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As of December 31, 2009, Cosmote had 458 roaming agreements with mobile telecommunications operators in 194 countries, of which 375 agreements in 176 countries were operational.
Market Position and Competition
As of December 31, 2009, Cosmote had 9,217,507 active customers (active for 12 months) in Greece, representing an estimated market share of approximately 45.0% of the total number of contract and prepaid mobile telephony customers in Greece (based on internal estimates), as compared to 7,893,144 active customers as of December 31, 2008. Cosmote’s customer numbers in Greece increased by 16.8% in 2009, as compared to 2008, as a result of the net addition of 70,365 contract customers and 1,253,998 prepaid customers. At the end of 2009, mobile penetration in Greece had exceeded 180.0%.
Based on its estimates, as of December 31, 2009, Cosmote was the leading provider of mobile telecommunications services to contract customers in Greece, with a total of 2,284,571 contract customers, compared to 2,214,206 contract customers as of December 31, 2008. Contract customers in general have greater loyalty and higher average monthly revenues per user than prepaid customers. Based on its estimates, Cosmote was also the leading provider of prepaid services in Greece with a total of 6,932,936 prepaid customers as of December 31, 2009, as compared to 5,678,938 prepaid customers as of December 31, 2008. As a result of newly-enacted laws, mobile operators are required to register in 2010 the users of prepaid SIM cards and erase the accounts of those who cannot be identified; as a result of this process, Cosmote expects that the number of active prepaid customers of both Cosmote and its competitors will decrease significantly by the end of 2010.
Cosmote’s main competitors in Greece are Vodafone and Wind Hellas, which both operate in the GSM 900 and GSM 1800 frequency bands and also provide 3G services. Wind Hellas is a subsidiary of the Weather group, an international mobile and fixed-line telecommunications group with operators in Italy, Greece and emerging markets.
Competition in mobile telecommunications is generally intense and relates to price, distribution, subscription options offered, offers of subsidized handsets, coverage, range of services offered, innovation and quality of service. In recent years, competition and price pressures have intensified, while a number of new factors may impact the mobile market, including combined offers of mobile and fixed-line services by mobile and fixed-line operators. Cosmote expects competition to intensify in 2010, mainly as a result of deteriorating economic conditions and pricing pressures, as well as the increasing offering of aggressively priced prepaid packages and of “voice bundle” or “unlimited” packages in the mobile market (packages offering an amount of, or unlimited, free call time for a flat fee). Cosmote has experienced and expects to continue to experience a migration of part of its contract customer base to such products, either on contract or prepaid basis. Such migration can have an adverse impact on average revenues derived from each customer (as customers tend to use more air time for a flat fee). In addition, the “glide path” imposed by the EETT (see under “— Tariffs” — Tariff Regulation” and “— Interconnection” below) also has resulted in a significant reduction in mobile rates. As a result of these and other factors, the average price per minute realized by Cosmote in 2009 declined by approximately 40.0%, as compared to 2008.
Revenues
In 2009, Cosmote’s revenues and net income on a stand-alone basis (representing its operating results in Greece) amounted to Euro 1,908.4 million and Euro 290.8 million, compared to Euro 1,843.1 million and Euro 410.7 million, respectively, in 2008.
Volume/Traffic
A total of approximately 20.9 billion minutes were distributed through Cosmote’s network in 2009, compared to 14.0 billion minutes in 2008, and 10.7 billion minutes in 2007, representing annual growth rates of 49.3% and 30.8%, respectively.


51

Tariffs
Cosmote has focused its efforts on offering its customers competitive and user-friendly tariff packages. In this regard, Cosmote has structured tariff packages intended to maximize value for money and promote loyalty.
Contract Pricing Schemes.  Cosmote pricing schemes for contract customers fall in the following main categories:
• Pay per use:  The customer is charged for the total outgoing traffic. The monthly fixed cost, if applicable, does not include any call minutes.
• Voice Bundles:  Cosmote offers its customers a wide variety of rate plans and voice additional elements. The pricing scheme consists of a monthly fixed cost (including minutes with no additional charge) and additional charges for outgoing calls above the bundled minutes. Cosmote offers contract bundled plans, incorporating single rate tariffs for calls to all networks and monthly “rollover” of unused free call minutes.
• Cost Control:  Cosmote offers a hybrid (contract and prepaid) product (“Kartosymvolaio”), with minimum consumption and cost control features.
• Family:  Cosmote offers its customers a “family pack” which allows them to create a flexible and economical family scheme, combining post-pay, hybrid and prepay members of a family, as well as one fixed-line number.
• Smart Play:  Cosmote recently introduced the option to combine mobile telephony, mobile internet and fixed-line number under one program, with a discount on monthly fees for each service.
Cosmote’s basic tariff structure for its contract customers does not distinguish between peak and off-peak calls, nor does it distinguish between local and long-distance calls within Greece. Additional tariffs based on the “Home Zone” functionality, such as “ONEphone”, allow the use of the mobile phone as a fixed-line phone when at home, giving customers the opportunity to make calls to fixed lines in Greece at domestic call charges. In October 2009, Cosmote introduced a new offering of unlimited communication. Depending on the selected plan, the “Unlimited” rate plans offer contract subscribers unlimited calls and messages (on a fair usage policy framework) to any other Cosmote subscriber, as well as to other national destinations. In September 2009, Cosmote introduced “My Way” tariff plans, offering contract customers the opportunity to use their monthly fee for calls, messages (SMS/MMS) and internet browsing based on their specific needs.
Cosmote offers corporate customers a selection of business tariff plans that include additional privileges and discount schemes.
Prepaid Pricing Schemes.  In 2009, Cosmote enhanced its prepaid offerings by introducing “Call Them All” for the leading prepaid brand “What’s Up”, which includes 1,000 minutes and 1,000 SMS to “What’s Up” customers at affordable rates. Additionally, Cosmote exclusively introduced the “Call Them All X-tension” service, offering “What’s Up” customers the convenience of communicating even after they have run out of credit. More specifically, the “Call Them All X-tension” service offers to all “What’s Up” customers 250 minutes of voice and video calls to other “What’s Up” users which are valid for seven days, subject to an activation cost of Euro 2.50.
Tariff Regulation.  Under the applicable EU regulatory framework, the European Commission issued a recommendation in November 2007 that designated seven electronic communications markets as candidates for potential regulatory intervention (the“Relevant Markets Recommendation”). These markets included one in the mobile sector, namely, the wholesale market for voice call termination on individual mobile networks. The Relevant Markets Recommendation replaced an earlier recommendation of February 2003, which had listed a total of 18 markets, including two additional mobile markets: the wholesale market for access and call origination on public mobile networks and the wholesale national market for international roaming on public mobile networks.
In November 2008, the EETT published the results of its latest analysis of the wholesale call termination market. The remedies imposed on Cosmote are described in “— Interconnection” below.


52

In May 2009, the European Commission published a Recommendation on the regulatory treatment of fixed and mobile termination rates which recommends a new costing methodology which would lead to significantly lower estimates of the cost of mobile call termination services.
In addition, under the terms of the Relevant Markets Recommendation, national regulatory authorities, including the EETT, were authorized to carry out analyses of additional specific markets where they believe that there is a lack of effective competition. In this context, the EETT announced in May 2008 that it is carrying out an analysis of the mobile telephony market. The EETT has not yet published the results of this analysis, but it may define an additional mobile market, which may then lead to the imposition of certain regulatory obligations on Greek mobile operators.
 
Interconnection
 
Under the applicable EU regulatory framework, the European Commission has designated a number of electronic communications markets as candidates for regulatory intervention, including the wholesale market for voice call termination on individual mobile networks.networks (EU Market No. 7 (previously No. 16)). The EETT published the conclusions of its latest analysis of this market in November 2008, and determined, among other things, that:
 
 • termination on each individual operator’s network constitutes a separate market, meaning that there are three separate markets for mobile voice call termination in Greece — the networks of Cosmote, Vodafone and Wind Hellas;
 
 • each operator holds significant market power in its respective market; and
 
 • a range of regulatory remedies should be imposed on each operator.
 
The regulatory remedies imposed are as follows:
 
 • cost-orientation, to be achieved through a “glide path” of phased reductions to the level of cost, as defined by a series of Long Run Incremental Cost(“LRIC”)models formulated by the EETT. The EETT’s decision in November 2008 defined the glide path, applicable equally to each operator, as follows: 7.86 Eurocents/min,minute, 6.24 Eurocents/minminute and 4.95 Eurocents/minminute as of January 1, 2009, 2010 and 2011, respectively;
 
 • provision of access;
 
 • transparency;
 
 • non-discrimination;
 
 • accounting separation (to be subject to a separate consultation exercise); and
 
 • publication of a Reference Interconnection Offer(“RIO”).


44

 
Cosmote maintains interconnection agreements with the two other providers of mobile telecommunications services in the Greek market (Vodafone and Wind Hellas). The following table sets out the interconnection fees charged to the other mobile operators by Cosmote (nominal prices, no VAT included):
 
   ��                                           
 From
 From
 From
 From
 From
    From
 From
 From
 From
    
 Oct. 1, 2004
 June 1, 2006
 Jan. 1, 2007
 June 1, 2007
 Feb. 1, 2008
    Jan. 1, 2007
 June 1, 2007
 Feb. 1, 2008
 Jan. 1, 2009
    
 to May 31,
 to Dec. 31,
 to May 31,
 to Jan. 31,
 to Dec 31,
 From
  to May 31,
 to Jan. 31,
 to Dec. 31,
 to Dec. 31,
 From
  
 2006(1) 2006(1) 2007 2008 2008 Jan. 1, 2009  2007 2008 2008 2009 Jan. 1, 2010  
     (Euro per minute)      (Euro per minute)
Mobile operator
                                          
Vodafone  0.1450   0.1200   0.1174   0.1067   0.0989   0.0786   0.1174   0.1067   0.0989   0.0786   0.0624    
Wind Hellas(2)(1)
  0.1450   0.1200   0.1174   0.1067   0.0989   0.0786   0.1174   0.1067   0.0989   0.0786   0.0624    
 
 
(1)Note:A minimum duration charge of 30 seconds applies.
(2)(1)The same tariffs also apply to Q-Telecom, which merged with Wind Hellas in January 2007.


53

 
The following table sets out the interconnection fees the other Greek mobile operators charge to Cosmote (nominal prices, no VAT included):
 
                                            
 From
 From
 From
 From
 From
    From
 From
 From
 From
  
 Oct. 1, 2004
 June 1, 2006
 Jan. 1, 2007
 June 1, 2007
 Feb. 1, 2008
    Jan. 1, 2007
 June 1, 2007
 Feb. 1, 2008
 Jan. 1, 2009
  
 to May 31,
 to Dec. 31,
 to May 31,
 to Jan. 31,
 to Dec. 31,
 From
  to May 31,
 to Jan. 31,
 to Dec. 31,
 to Dec. 31,
 From
 2006(1) 2006(1) 2007 2008 2008 Jan. 1 2009  2007 2008 2008 2009 Jan. 1, 2010
 (Euro per minute)    (Euro per minute)
Mobile operator
                                       
Vodafone  0.1450   0.1200   0.1174   0.1071   0.0991   0.0786   0.1174   0.1071   0.0991   0.0786   0.0624 
Wind Hellas(2)(1)
  0.1500   0.1250   0.1259   0.1171   0.1041   0.0786   0.1259   0.1171   0.1041   0.0786   0.0624 
Q-Telecom  0.1950   0.1700   —   —   —   — 
 
 
(1)Note:A minimum duration charge of 30 seconds applies.
(2)(1)As of January 2007, the same tariffs also apply to Q-Telecom, which merged with Wind Hellas in January 2007.
 
We handle Cosmote’s incoming and outgoing international traffic, under the terms of bilateral interconnection agreements. As of AprilMarch 30, 2009,2010, Cosmote has entered into interconnection agreements with OTEus and other alternative fixed-line operators as well as audiotex and directory service providers in Greece. The following table sets out the interconnection fees charged by Cosmote for calls originating from us and other Greek fixed-line operators and terminating on its network:
 
                         
  From
  From
  From
  From
  From
    
  Oct. 1, 2004
  June 1, 2006
  Jan. 1, 2007
  June 1, 2007
  Feb. 1, 2008
  From
 
  to May 31,
  to Dec. 31,
  to May 31,
  to Jan. 31,
  to Dec. 31,
  Jan. 1,
 
  2006(1)  2006(1)  2007  2008  2008  2009 
  (Euro per minute)    
 
Fixed Operator (OTE or other)  0.1450   0.1200   0.1174   0.1067   0.0989   0.0786 
                     
  From
 From
 From
 From
  
  Jan. 1, 2007
 June 1, 2007
 Feb. 1, 2008
 Jan. 1, 2009
  
  to May 31,
 to Jan. 31,
 to Dec. 31,
 to Dec. 31,
 From
  2007 2008 2008 2009 Jan. 1, 2010
  (Euro per minute)
 
Fixed Operator (OTE or other)  0.1174   0.1067   0.0989   0.0786   0.0624 
(1)A minimum duration charge of 30 seconds applies.
 
As of January 1, 2007, under the second stage of the glide path determined by the EETT, Cosmote applies per second charging from the first second for all calls from OTEour fixed-line network or from other fixed-line operators that terminate to the Cosmote network. As of February 1, 2008, Cosmote’s termination charges for these calls from OTE and other fixed-line operators have beenwere set at Euro 0.0989 per minute. Following the EETT’s revised termination rates cap, as of January 1, 2009, Cosmote’s termination charges for these calls from OTE and other fixed-line operatorswere set at Euro 0.0786 per minute. As of January 1, 2010, Cosmote’s termination charges for these calls have been set at Euro 0.07860.0624 per minute.


45

The following table sets out the interconnection fees that we charge to Cosmote, approved by the EETT in May 2008:2009:
 
                                
   Weekdays
        Weekdays
    
   00:00 to 08:00
        00:00 to 08:00
    
 Weekdays
 and 20:00
      Weekdays
 and 20:00
    
 08:00 to 20:00 to 00:00 Saturdays Sundays  08:00 to 20:00 to 00:00 Saturdays Sundays
 (Euro per minute)  (Euro per minute)
Local/minute  0.0052   0.0047   0.0047   0.0037   0.0048   0.0044   0.0044   0.0034 
Single transit/minute  0.0094   0.0087   0.0087   0.0069   0.0082   0.0076   0.0076   0.0060 
Double transit/minute  0.0121   0.0115   0.0115   0.0090   0.0107   0.0102   0.0102   0.0080 
 
The above charges had a retroactive effect fromas of January 1, 2008.
Network
Cosmote has an extensive mobile telecommunications network in Greece. Cosmote operates its network based on 2G GSM technology (which is currently the most widely adopted standard across the world) and on 3G technology. The GSM system is an efficient and high quality system used mainly for voice and short messaging communication. It also provides a limited rate of packet data transmission which can accommodate a series of value-added services, such as multimedia messaging services, or MMS. The 3G system enables operators to provide a more comprehensive set of services besides voice, such as video telephony and high-speed packet data providing faster internet access and a wide variety of other data services. An operator of an existing 2G network must install additional infrastructure to facilitate the proper functioning of a 3G network at all levels. This additional infrastructure is often collocated with the 2G systems and utilizes common lines of interconnection among the various network sites. In 2003, Cosmote initiated the rollout of its 3G network fulfilling the requirements of the license granted by the EETT. Cosmote’s 3G network provides nationwide coverage, currently covering over 88% of the country’s population, including all cities, highways and tourist areas, thus exceeding the requirements under the relevant special license granted by the EETT.
Nokia-Siemens Networks is Cosmote’s principal equipment supplier and supplies the bulk of the equipment required to maintain and upgrade Cosmote’s 2G and 2.5G networks. The long-term framework contract in place with Nokia-Siemens Networks allows Cosmote and us to obtain the equipment we require at competitive prices and to avoid extended procurement and tender procedures for individual investments. Furthermore, Cosmote uses Ericsson as its main equipment supplier for its 3G network rollout and for its 2G network in Northern Greece. Cosmote has also appointed Nokia-Siemens Networks as its second supplier of 3G equipment.
Cosmote’s objective has been to cover more geographical areas in Greece than any of its competitors and to provide an extended range of roaming services and the best international coverage for customers. As of December 31, 2008, Cosmote provided coverage to 99.8% of the population of Greece with a geographic coverage of 97.0% of Greece’s mainland and 98.0% of its territorial waters.
In addition, Cosmote has implemented GPRS nationwide on its network, through which services including MyView, MMS, WAP, Blackberry and internet access are supported. In 2006, Cosmote upgraded its 3G network to support HSPA technology, which enables 3G users to download packet data at broadband speeds. Since 2007, Cosmote has made available nationwide its HSPA technology-based broadband products and services supported by its 3.5G network with speeds that reach up to 7.2 Mbps.
Cosmote’s network currently interconnects with our fixed-line network and those of other fixed-line operators in Greece, as well as with the three other mobile telephony networks operated in Greece by Vodafone, Wind Hellas and Q-Telecom.
As of December 31, 2008, Cosmote had 452 roaming agreements with mobile telecommunications operators in 194 countries, of which 356 agreements in 170 countries were operational.


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Market Position & Competition
As of December 31, 2008, Cosmote had 7,893,144 active customers (active for 12 months) in Greece, representing an estimated market share of approximately 42% of the total number of contract and prepaid mobile telephony customers in Greece (based on internal estimates). Cosmote’s customer numbers in Greece increased by 26% from 2007 to 2008, as a result of the net addition of 174,749 contract customers and 1,449,768 prepaid customers. Mobile penetration in Greece has exceeded 150%.
Based on its estimates, as of December 31, 2008, Cosmote was the leading provider of mobile telecommunications services to contract customers in Greece, with a total of 2,214,206 contract customers. Contract customers in general have greater loyalty and higher average monthly revenues per user than prepaid customers. Based on its estimates, Cosmote was also the leading provider of prepaid services in Greece with a total of 5,678,938 prepaid customers as of December 31, 2008.
Cosmote’s main competitors in Greece are Vodafone and Wind Hellas, which both operate in the GSM 900 and GSM 1800 frequency bands and also provide 3G services. Until 2007, there was also a fourth mobile operator in the Greek market, Q-Telecom, which merged with Wind Hellas in January 2007.
Competition in mobile telecommunications is generally intense and relates to price, distribution, subscription options offered, offers of subsidized handsets, coverage, range of services offered, innovation and quality of service. In recent years, competition and price pressures have intensified, while a number of new factors may impact the mobile market, including offers of mobile and fixed-line services by mobile operators.
Revenues
In 2008, Cosmote’s revenues and net income on a stand-alone basis (representing its operating results in Greece) amounted to Euro 1,843.1 million and Euro 410.7 million, compared to Euro 1,735.9 million and Euro 339.2 million, respectively, in 2007.
Volume/Traffic
A total of approximately 14.0 billion minutes were distributed through Cosmote’s network in 2008, compared to 10.7 billion minutes in 2007, and 8.2 billion minutes in 2006, representing annual growth rates of 30.8% and 30.5%, respectively.
Tariffs
Cosmote has focused its efforts on offering its customers competitive and user-friendly tariff packages. In this regard, Cosmote has structured tariff packages intended to maximize usage and revenues per customer while controlling customer churn.
Contract Pricing Schemes.  Cosmote pricing schemes for contract customers fall in the following main categories:
• Pay per use:  The customer is charged for the total outgoing traffic. The monthly fixed cost, if applicable, does not include any call minutes.
• Voice Bundles:  Cosmote offers its customers a wide variety of rate plans and voice additional elements. The pricing scheme consists of a monthly fixed cost (including minutes with no additional charge) and additional charges for outgoing calls above the bundled minutes. Cosmote offers contract bundled plans, incorporating single rate tariffs for calls to all networks and monthly “rollover” of unused free call minutes.
• Cost Control:  Cosmote recently launched a hybrid (post-paid and prepaid) product (“Kartosymbolaio”), with minimum consumption and cost control features.
• Friends Unlimited:  Cosmote offers a series of voice bundles with unlimited usage to selectedon-net (Cosmote network) destinations. These tariff plans can also be combined with an additional feature offering unlimited SMS.


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• Family:  Cosmote offers its customers a “family pack” which allows them to create a flexible and economical family scheme, combining post pay, hybrid and prepay members of a family, as well as one fixed-line number.
Cosmote’s basic tariff structure for its contract customers does not distinguish between peak and off-peak calls, nor does it distinguish between local and long-distance calls within Greece. Additional tariffs based on the “Home Zone” functionality, such as “ONEphone”, allow the use of the mobile phone as a fixed-line phone when at home, giving customers the opportunity to make calls to fixed lines in Greece at domestic call charges.
Cosmote also offers its contract-customers standard GSM and 3G services and a range of value-added services at no additional monthly access fee.
Corporate customers are offered a selection of business tariff plans that include additional privileges and discount schemes.
Prepaid Pricing Schemes.  Cosmote’s Cosmokarta prepaid connection package includes initial calling time worth Euro 5 and a12-month renewed connection with Cosmote’stop-up cards offering calling in the range of Euro 3 to Euro 30. Customers that use the Cosmokarta “Pronomiaki”top-up card enjoy lower prices, equal to those applicable to contract customers, for both voice and SMS. During 2007, Cosmote offered, through WHATSUP, its prepaid brand targeting young customers, SMS bundles, and in November 2007 it lowered its charges for both voice and SMS usage for all of its WHATSUP customers. In 2008, Cosmote introduced a voice bundle offering 500“on-net” minutes and 500 SMS for Euro 5, to its WHATSUP customers.
During November 2007, Cosmote lowered the prices for Frog (Cosmote’s second brand prepaid product), for both voice and SMS.
Further price reductions and offers have been introduced for all prepaid products during 2008 and 2009.
In July 2008, Cosmote launched a new prepaid product, Ciao mobile, targeting specific population segments of Greece and offering beneficial tariff schemes for calls to fixed and mobile destinations in Albania.
Tariff Regulation.  Under the applicable EU regulatory framework, the European Commission issued a recommendation in November 2007 that designated seven electronic communications markets as candidates for potential regulatory intervention (the“Relevant Markets Recommendation”). These markets included one in the mobile sector, namely, the wholesale market for voice call termination on individual mobile networks. The Relevant Markets Recommendation replaced an earlier recommendation of February 2003, which had listed a total of 18 markets, including two additional mobile markets: the wholesale market for access and call origination on public mobile networks and the wholesale national market for international roaming on public mobile networks.
In November 2008, the EETT published the results of its latest analysis of the wholesale call termination market. The remedies imposed on Cosmote are described in “— Interconnection” above.
In June 2008, the European Commission published a draft recommendation on the regulatory treatment of fixed and mobile termination rates. The draft recommendation proposed a new costing methodology which would lead to significantly lower estimates of the cost of mobile call termination services. The European Commission published the final recommendation in May 2009.
In addition, under the terms of the Relevant Markets Recommendation, national regulatory authorities, including the EETT, were authorized to carry out analyses of additional specific markets where they believe that there is a lack of effective competition. In this context, the EETT announced in May 2008 that it is carrying out an analysis of the mobile telephony market. The EETT has not yet published the results of this analysis, but it may define an additional mobile market, which may then lead to the imposition of certain regulatory obligations on Greek mobile operators.
Furthermore, Cosmote’s wholesale and retail tariff for international roaming services within the EU are subject to Regulation (EC) No 717/2007 of June 27, 2007, which sets price caps on Cosmote’s wholesale and retail roaming tariffs (the“Roaming Regulation”). The Roaming Regulation, which became effective in July 2007, imposed caps on the maximum wholesale and retail charges which operators within the European Union may levy for the provision of voice roaming services. The Roaming Regulation has led to a reduction in Cosmote’s revenues from


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roaming services, though there have been some offsetting cost reductions, as Cosmote is now charged less by other European operators for wholesale roaming services. The European Commission has proposed a new roaming regulation(“Roaming II”), which would extend the existing Roaming Regulation and apply new caps on wholesale and retail SMS roaming charges and on wholesale charges for data services. The text of the Roaming II Regulation (which has not been formally published yet) has been adopted by the European Parliament and agreed with the Member States. Subject to the final agreement of the European Council, expected in June 2009, the Roaming II Regulation is due to come into force on July 1, 2009. We expect that this could have a further negative impact on our revenues from roaming.
 
Germanos S.A.
 
Over the course of 2006, Cosmote acquired, through its Cypriot subsidiary, Cosmoholding Cyprus Ltd.(“Cosmoholding Cyprus”), and on December 31, 2006 held, 99.03% of the share capital of Germanos, a Greek company that specializes principally in the sale of telecommunications products and services. In January 2007, Mr. Panos Germanos (Germanos’ previous major shareholder) acquired an interest of 10%10.0% in the share capital of Cosmoholding Cyprus through his wholly-owned holding company Microstar Ltd. (see below). As of December 31, 2009, Cosmoholding Cyprus acquired this 10.0% interest, previously owned by Mr. Panos Germanos. Currently, Cosmoholding Cyprus holds 100.0%99.998% of the share capital of Germanos.Germanos and the remaining 0.002%, representing 1,490 shares, is held by third persons as a result of these shares not being included in the squeeze out process which was completed on April 10, 2007 following a relevant takeover bid according to L. 3461/2006 (as in force at the


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relevant date). In 2006, Cosmote also acquired, again through Cosmoholding Cyprus, Mobilbeeep Telecommunications Limited Liability Company(“Mobilbeeep”), a commercial partner of Germanos.
 
Germanos was incorporated in 1989 as a“société anonyme” under Greek Law and its paid-in share capital amounts to Euro 29,600,892 and consists of 82,224,700 ordinary shares with a nominal value of Euro 0.36 each.
 
Business of Germanos.Germanos distributes telecommunications and digital technology products and services and owns and operates a network of shops specializing in these products. In particular, Germanos’ distribution and sales network distributes and sells on both a wholesale and retail basis a range of telecommunications products and services, including mobile telephony, fixed-line telephony and internet, as well as digital technology products and services, and also provides technical support services for a range of electronic appliances. Its activities cover Greece, Bulgaria Romania and FYROM, until May 2009.Romania. At the end of 2008,2009, Germanos operated 861819 stores in all of these countries.
 
We believe that the acquisition of Germanos provides Cosmote with an efficient retail network in fourthree of the fivefour countries in which it operates. With Germanos’ network of retail outlets in Greece, Bulgaria and Romania, Cosmote expects to further improve its position and expand its retail presence and further grow its business by directly addressing its customers through Germanos’ retail network and established brand. In addition, Cosmote expects to benefit from additional savings and synergies and reduced operational and market risks.
 
Acquisition of Germanos.In 2006, Cosmote acquired, through Cosmoholding Cyprus, its 100%100.0% subsidiary, a majority of interest in the outstanding shares of Germanos, which was then listed on the Athens Exchange. Cosmoholding Cyprus obtained the balance of the outstanding shares of Germanos through the exercise of squeeze-out rights in April 2007, and Germanos was delisted from the Athens Exchange in May 2007.
On Pursuant to the shareholders’ agreement between Cosmote and Mr. Panos Germanos, dated May 9, 2006, on January 15, 2007, Mr. Panos Germanos acquired a 10%10.0% interest in Cosmote’s subsidiary, Cosmoholding Cyprus, by subscribing for 100 common shares (Class B)(“Class B Shares”) for the total amount of Euro 144.5 million through his wholly-owned Cypriot holding company, Microstar Ltd. According to their terms, the Class B Shares are not entitled to dividend payments, return of capital, or any type of distribution, but are entitled to voting rights. The Class B Shares arewere redeemable by Cosmoholding Cyprus or by any person indicated by Cosmote on December 31, 2009 or, at the discretion of the owner of the shares, on December 31, 2011, at a price equal to the initial investment amount of Euro 144.5 million, plus interest and a bonus depending on the achievement of certain business targets until the date of redemption. In addition, theOn December 31, 2009, Cosmoholding Cyprus purchased these Class B Shares may be redeemed early upon request (i) of the owner of these shares, in case of change of control of Cosmote or OTE or (ii) of Cosmoholding Cyprus or the owner of these shares in case Cosmote decides to sell Cosmoholding Cyprus’s shares owned by it to third persons not controlled by it. We have recordedfrom Microstar Ltd. for the amount of Euro 160.3 million, which is168.5 million. This purchase took place by means of an increase of Cosmoholding Cyprus’s share capital in the sumnominal amount of Euro 144.5 million (representing100,000, with the initial investment) andissuance of 1,000 new shares of a nominal value of Euro 15.8 million (representing accrued interest), as other current liabilities100 each, fully subscribed by Cosmote for the amount of Euro 168.5 million. In 2010, Cosmoholding Cyprus intends to cancel its own shares in our consolidated financial statements, as we believe that the redemption of the Class B Shares is likely on December 31, 2009. Seeaccordance with Cypriot law. For more information see “5.A Operating Results — Certain Factors Affecting Operating Results


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— Acquisition of Germanos S.A.” Cosmote has guaranteed compliance of Cosmoholding Cyprus with its obligations under the purchase agreement, including its obligation to redeem the Class B Shares in accordance with their terms above, as discussed.
On June 4, 2007 and on January 9, 2008, following court approval, the share premium reserve of Cosmoholding Cyprus was reduced by Euro 144.5 million and Euro 136.9 million, respectively. These amounts were returned to Cosmote.
During 2007, Cosmoholding Cyprus paid a total of Euro 31.4 million for the acquisition of the remaining 0.97% of Germanos’ shares. In addition, on November 21, 2007, pursuant to the terms of the share purchase agreement to acquire Germanos, dated May 9, 2006, between Cosmote and Mr. Panos Germanos, Mr. Panos Germanos paid Euro 20.0 million back to Cosmoholding Cyprus as an adjustment to the initial purchase price.Results”.
 
Mobilbeeep Ltd.Other Subsidiaries.  Mobilbeeep is a company whosewholly-owned subsidiary of Cosmote and its main activity is trading in electric and electronic apparatus and equipment. Cosmote holds, through its subsidiary Cosmoholding Cyprus, 90% of Mobilbeeep’s capital, while Cosmoholding Cyprus holds directly 100% of Mobilbeeep’s capital.
E-Value. Germanos owns the entire share capital of a company named“E-Value Société Anonyme for Provision of Services Direct Marketing and of Support of Customers”, orE-Value.E-Value(“E-Value”).E-Value is engaged in the field of outsourced contact-center services. The company’s aim is to provide integrated, interactive and customizedone-to-one communication services, via telephone. In October 2009, Germanos, through its wholly-owned subsidiary,E-Value S.A., established“E-Value Debtors Awareness One Person Ltd.”, a company aiming to provide debt notification and related services.
 
Other Subsidiaries and Joint Ventures of Cosmote
CosmoONE.  We and Cosmote participate in CosmoONE Hellas Marketsite S.A.(“CosmoONE”), our consolidated subsidiary, which was formed to establish a Greek-based horizontal internet business-to-business portal. CosmoONE operates an electronic marketplace for the provision of business-to-businesse-commerce applications and services. CosmoONE facilitates on-line real-time transactions throughout the purchasing chain and runs auctions. As of December 31, 2008, each of OTE and Cosmote held 30.87% of CosmoONE’s share capital. CosmoONE also providese-supply chain products and services, and mobility services, based on GPS, internet and GPRS technologies.
Cosmo Megala Katastimata S.A.  Cosmote holds a 40.0% interest in Cosmo Megala Katastimata, a joint venture with Vicom Holdings S.A., the Greek licensee of Virgin trademarks. This joint venture operates a Greece-based mobile internet site for on-line sales of CDs, DVDs and other music products, products and services related to entertainment in general, and PCs, hardware and mobile telephone items, as well as the creation, processing and formation of different kinds of digital content (for example ring tones, logos and MMS) in order to provide such content through SMS and WAP or by other means on the internet or to telecommunications companies.
International Mobile Operations
 
Cosmote owns and operates our mobile operations in Albania, Bulgaria and Romania through its international subsidiaries AMC, Globul, Cosmote Romania and Telemobil, respectively, and Cosmofon in FYROM until May 2009.
 
Albania — AMC
 
Until April 2009,We hold through Cosmote held an effective 82.5%95.03% interest (directly and indirectly) in the share capital of AMC, itsour mobile telephony subsidiary in Albania, through COSMO-Holding Albania, Cosmote’s subsidiary, in whichAlbania. In particular, Cosmote holds 97%a direct interest of 12.58% in AMC and a 97.0% interest in its subsidiary Cosmo-Holding Albania (in which Telenor holds 3%the remaining 3.0%), which in turn holds 85%85.0% of the share capital of AMC. On April 24, 2009, Cosmote acquired a direct 12.58% interest in AMC from the Albanian state. The price, including acquisition costs, amounted to Euro 48.4 million. As the acquisition of


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the 12.58% interest resulted in Cosmote owning more than 90.0% of the share capital of AMC, Cosmote is required under Albanian law, if so requested, to purchase the shares owned by the minority shareholders. On June 22, 2009, minority shareholders representing approximately 2.3% (of a total of 2.5% outstanding minorities) of AMC’s share capital requested Cosmote to purchase their shares at the same price as paid by Cosmote to the Albanian state for the acquisition of the 12.58% interest on April 24, 2009. Cosmote is in the process of purchasing the outstanding 2.5% of minority shares of AMC and expects the cost of this purchase to amount up to approximately Euro 10.0 million.
 
Business and Operations.AMC’s network operates on the GSM 900 and GSM 1800 frequencies in the Albanian territory. As of December 31, 2009, AMC had 1,908,987 customers, representing an estimated market share of 45%, and reflecting an increase of 36.7%, compared to 1,395,989 customers as of December 31, 2008, which in turn represented an increase of 16.8%, as compared to 1,195,183 customers as of December 31, 2007. As of December 31, 2009, approximately 95% of AMC’s customers were prepaid.
The following table summarizes AMC’s revenues, operating income and profit for the three years ended December 31, 2009:
             
  For the Year Ended
  December 31,
  2007 2008 2009
  (Euro in millions)
 
Revenues  176.2   191.3   145.7 
Operating Income  84.6   100.3   61.8 
Profit  60.9   94.9   87.8 
Competition.  Vodafone and Eagle Mobil Sh.a., a wholly-owned subsidiary of Albtelecom, the incumbent telecommunications operator of Albania, which launched operations in March 2008, are currently AMC’s mobile competitors in operation in Albania. In June 2009, a fourth mobile license was granted to the company Mobile 4 A1 Sh.a, which is controlled by the PTT of Kosovo. The company has not yet launched commercial operations.
 
Licenses and regulatory matters.In the process of the privatization of Albtelecom, the Albanian Governmentgovernment offered Albtelecom the right to obtain a license for the provision of mobile telecommunications services on the GSM 900 and 1800 frequencies, on the condition that mobile services would be offered by a new company, wholly-owned by Albtelecom. The Turkish


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company Calik Energy and the Ministry of Economy, Trade and Energy acquired a 76% interest in Albtelecom in the second half of 2007.
 
AsIn September 2009, under the second phase of December 31, 2008,the ‘glide path’ imposed by the Albanian Telecoms Regulator (AKEP), AMC reduced its termination rate for incoming voice calls to 10.5 LEK/minute plus a fixed charge per call of LEK 0.315 (equivalent to an effective rate of about 8 Eurocents/minute). AMC’s retail tariffs for certain prepaid products are also subject to a price cap set by the AKEP. In addition, in June 2009, the AKEP notified AMC that it had 1,395,989 customers, representing an estimated market share of 48%, and reflecting an increase of 16.8%, comparedengaged consultants to 1,195,183 customers as of December 31, 2007, which in turn represented an increase of 20.7% in 2007, as compared to 990,279 customers as of December 31, 2006. As of December 31, 2008, approximately 93%develop a costing model that would form the basis for regulation of AMC’s customers were prepaid.termination rates in future years.
 
Following a decision on June 2008 by the Albanian Council of Ministers, as of September 1, 2008, AMC was required to apply for a new termination rate for national and international calls of 11.95 LEK (Euro 0.096) per minute, which should bewas reduced to 10.5 LEK (Euro 0.085) per minute as of September 1, 2009.
 
The following table summarizes AMC’s revenues, operating income and profit for the three years ended December 31, 2008:
             
  For the Year Ended December 31, 
  2006  2007  2008 
  (Euro in millions) 
 
Revenues  151.0   176.2   191.3 
Operating Income  66.0   84.6  ��100.3 
Profit  49.9   60.9   94.9 
On March 5, 2009, Cosmote signed an agreement withIn a decision published on April 7, 2010, the Albanian Ministry of Economy, Trade and Energy, representingRegulator, AKEP, amended the Albanian State,regulatory obligations applying to acquire an additional 12.6% interestAMC. Specifically, the current price caps which apply to AMC’s retail tariffs will be removed with effect from July 2010, but new wholesale obligations will be imposed, requiring AMC to give access to its network to other operators including MVNOs. The existing glide path applying to AMC’s MTRs remains in the share capital of AMC, for the price of Euro 48.2 million. Cosmote was the winning bidder in a public auction by the Albanian State for the sale of these shares. The transaction was completed and the transfer of shares took place on April 27, 2009.place.
 
Bulgaria — Globul
 
We own through Cosmote has owned the entire share capital of Globul, since August 2005.our mobile operator in Bulgaria. In January 2001, we were awarded the second GSM mobile telephony license in the Republic of Bulgaria for a price of U.S. $135.0 million. Wemillion and established Globul to hold our license and operate as a mobile telephony operator in Bulgaria.
network. Globul launched commercial activities on September 17, 2001.


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Business and Operations.  Globul’s network operates on the GSM 900 and GSM 1800 frequencies in Bulgaria. As of December 31, 2009, Globul had 3,902,272 customers in total, as compared to 4,096,996 as of December 31, 2008 and 3,872,922 as of December 31, 2007, representing a decline of 4.8% in 2009 and an increase of 5.8% in 2008. According to its own estimates, Globul’s market share as of December 31, 2009 was approximately 37%. Post-paid customers as of December 31, 2009 accounted for approximately 55% of Globul’s customer base.
The following table summarizes Globul’s revenues, operating income and profit for the three years ended December 31, 2009:
             
  For the Year Ended
  December 31,
  2007 2008 2009
  (Euro in millions)
 
Revenues  412.1   460.0   448.2 
Operating income  73.4   99.8   84.5 
Profit  53.2   83.2   67.7 
Competition.  M-Tel, the largest mobile operator in Bulgaria and Globul’s main competitor, was founded in March 1994 and launched commercial operations in September 1995. Currently, M-Tel is part of the Mobilkom Austria group. Globul’s other main competitor is Vivatel, the mobile telephony subsidiary of the Bulgarian Telecommunications Company(“BTC”), Bulgaria’s incumbent fixed-line telephony operator; Vivatel launched commercial operations in November 2005.
Licenses and regulatory matters.  In January 2001, we were awarded the second GSM mobile telephony license in the Republic of Bulgaria. Since 2002, Globul has also held a license for the construction, maintenance and use of a public telecommunications network for data transmission and the provision of public telecommunications services in Bulgaria, and later was awarded the right to use microwave frequencies and the right to provide leased lines. The telecommunications market in Bulgaria has been fully liberalized since January 1, 2003.
 
In 2005, Globul acquired two additional licenses for fixed-line services and a license for carrier selection in 2005.selection. The first license covers the construction and operation of a fixed-line telephony network and the provision of fixed-line voice telephony services and the second license allows fixed-line customers of the Bulgarian Telecommunications Company(“BTC”), Bulgaria’s incumbent fixed-line telephony operator,BTC to choose Globul as their carrier for national and international calls. In addition, on April 25, 2005, Globul was granted a 3G mobile license and in January 2007, an LMDS (fixed line) individualPoint-to-Multipoint type license with national coverage.
 
AsOn January 30, 2007, the CRC issued to BTC a license for carrying out communications through public telecommunications network from the mobile radio service from the type point to many points in the frequency of December 31, 2008, Globul had 4,096,996 customers26 GHz with national coverage. In August 2007, AIG Investments, through its member company AIG Capital Partners Inc., acquired a 90% interest in total, as compared to 3,872,922 asBTC from Viva Ventures Holding GmbH and certain minority shareholders, following the granting of December 31, 2007relevant European Union and 3,270,878 as of December 31, 2006, representing increases of 5.8% and 18.4% respectively. Globul’s estimated market share as of December 31, 2008 was approximately 38.1%. Post paid customers at the end of December 2008 accounted for approximately 51% of Globul’s customer base.other regulatory approvals.
 
On April 29, 2008, the Communications Regulation Commission, the regulatory authority of Bulgaria(“CRC”), announced its intention to grant licenses for the use of radio frequencies in the range of 1800 MHz. — 2 x 5 MHz. Following the announcement, a number of companies have submitted letters of intent with the CRC. Subsequently, the CRC announced a tender for granting the licenses at the starting price of BGN 38.0 million (Euro 19.4 million). The tender was abandoned as the sole bidder did not fulfill the requisite criteria.


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On January 30, 2007In March 2009, following a public consultation and notification to the European Commission, the CRC issuedannounced its final decision regarding the regulation of mobile termination rates. The CRC determined that the rates of all three mobile operators, including Globul, should be reduced in stages to the BTC an individual license for carrying out communications through public telecommunications network from the mobile radio service from the type point to many points in the frequency of 26 GHz with national coverage. In August 2007, AIG Investments, through its member company AIG Capital Partners Inc., acquired a 90% interest in BTC from Viva Ventures Holding GmbHreach, by July 2010, 0.13 BGN/minute (approximately 6.6 Eurocents/minute) at peak times and certain minority shareholders, following the granting of relevant European Union and0.11 BGN/minute (approximately 5.6 Eurocents/minute) at other regulatory approvals.times.
M-Tel, the largest mobile operator in Bulgaria and Globul’s main competitor, was founded in March 1994 and launched commercially in September 1995. Currently, M-Tel is part of the Mobilkom Austria group. Globul’s other main competitor is Vivatel, BTC’s mobile telephony subsidiary, which was launched in November 2005.
The following table summarizes Globul’s revenues, operating income and profit for the three years ended December 31, 2008:
             
  For the Year Ended December 31, 
  2006  2007  2008(1) 
  (Euro in millions) 
 
Revenues  342.3   412.1   460.0 
Operating income  53.3   73.4   99.8 
Profit  32.4   53.2   83.2 
 
Romania — Cosmote Romania
 
We own through Cosmote holds an interest of 70%70.0% in the share capital of Cosmote Romania. Cosmote Romania was incorporated by RomTelecom in Romania on January 15, 1999 and was initially named Cosmorom S.A.


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Cosmote Romania started operations in May 2000, but it subsequently suspended operations, to re-launchand re-launched operations in December 2005, and is currently one of the three GSM (2G) mobile telecommunications providers in Romania.2005.
 
In July 2005, Cosmote acquired a 70% interest in the share capital of Cosmote Romania after contributing Euro 120.0 million as cash consideration, with RomTelecom retaining a 30% interest in Cosmote Romania. In March 2008 the general meeting of shareholders of Cosmote Romania approved the increase of the company’s share capital by Euro 125.0 million, 70% of which (or Euro 87.5 million) was subscribed for by Cosmote and 30% (the equivalent in RON of Euro 37.5 million) by RomTelecom, the 30% minority shareholder of Cosmote Romania. The MCIT is entitled to appoint one of the two board members that RomTelecom may appoint to Cosmote Romania’s board of directors.
 
Business and Operations.  Cosmote Romania’s network operates on the GSM 900 and GSM 1800 frequencies in Romania. As of December 31, 2009, Cosmote Romania re-launched commercial activitieshad 6,920,816 customers, as compared to 5,894,056 as of December 31, 2008 and 3,616,274 as of December 31, 2007, representing increases of 17.4% and 63.0%, respectively. Cosmote Romania’s estimated market share as of December 31, 2009 was approximately 24%, with over 81% of its customer base being prepaid.
The following table summarizes Cosmote Romania’s revenues, operating losses and loss for the three years ended December 31, 2009:
             
  For the Year Ended
  December 31,
  2007 2008 2009
  (Euro in millions)
 
Revenues  155.6   311.0   423.2 
Operating losses  (88.3)  (52.8)  (22.1)
Loss  (118.4)  (111.3)  (57.9)
Competition.  Cosmote Romania is currently one of the three GSM mobile telecommunications providers in December 2005. ItsRomania and, since the completion of its acquisition of Zapp in October 2009 by Cosmote, also competes in the market for 3G services. It is facing strong competition from existing operators in Romania, including some subsidiaries of major international companies, including Vodafone and Orange for both 2G and 3G and RCS&RDS (a regional mobile and cable services operator) only for 3G.
Licenses and regulatory matters.  Cosmote Romania’s GSM license includes the right to use frequencies in both the GSM 900 and GSM 1800 MHz frequency bands and to extend its term to April 2014.
On October 31, 2009, Cosmote Romaniacompleted the acquisition (after obtaining the necessary approvals) of the entire share capital (minus one share) of the Romanian mobile operator, Zapp. Zapp, established in 1993, is facing strong competition from existing operatorsthe oldest mobile operator in Romania that are subsidiariesthe Romanian market and owns a CDMA license at 450 MHz and a 3G license at 2100 MHz and operates CDMA and UMTS networks. The consideration paid for the acquisition of major international companies.Zapp was Euro 67.5 million, while Cosmote assumed Zapp’s long-term liabilities amounting to Euro 129.6 million, mainly relating to the Zapp’s 3G license fees and the development of its 3G and CDMA network.
 
In July 2006,April 2009, following a public consultation and notification to the European Commission, the Romanian Telecommunications Regulator (ANCOM) published its final decision regarding the regulation of Cosmote Romania participated in a tender initiated by the Romanian General Inspectorate for Communications and Information Technology(“IGCT”) for the award of two 3G mobile licenses in Romania, but was not awarded a license.Zapp’s voice call termination rates. ANCOM determined that Cosmote Romania has appealed before the competent courts. The two 3G licenses were granted to the Romanian company RCS & RDS, a cable operator that launched operations in October 2007, and Zapp a wholly-owned subsidiary of Saudi Oger that used CDMA technologyshould reduce their termination rates in the 450 MHz frequency band. Zapp commercially launched the service in the second half of 2008.stages to reach, by July 2010, 5.03 Eurocents/minute (the rate currently charged by Vodafone and Orange).
 
The following table summarizes Cosmote Romania’s revenues, operating losses and loss for the three years ended December 31, 2008:
             
  For the Year Ended December 31, 
  2006  2007  2008 
  (Euro in millions) 
 
Revenues  43.8   155.6   311.0 
Operating losses  (93.7)  (88.3)  (52.8)
Loss  (91.6)  (118.4)  (111.3)


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As of December 31, 2008, Cosmote Romania had 5,894,056 customers, as comparedIn February 2010, Zapp offered a voluntary exit scheme to 3,616,274 as of December 31, 2007 and 1,225,603 as of December 31, 2006, representing increases of 63.0% and 195.1%, respectively. Cosmote Romania’s estimated market share as of December 31, 2008 was approximately 23%, with over 81%a number of its customer base being prepaid.employees, as part of its efforts to improve operational efficiency of the organization, which was largely accepted by its employees.
 
FYROM — Cosmofon
 
Until May 12, 2009, we held through Cosmote held the entire share capital of Cosmofon, a mobile telecommunications operator in FYROM, through its wholly-owned Dutch subsidiary, OTE MTS Holding B.V., which Cosmote acquired from us in August 2005.FYROM. On May 12, 2009, Cosmote sold the entire share capital of Cosmofon to Telekom Slovenije.


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Sale of Cosmofon.Following the acquisition by Deutsche Telekom of an interest of 25%25.0% in our share capital in 2008, and given that Deutsche Telekom, through its mobile subsidiaryT-Mobile Macedonia AD Skopje (held through Magyar Telecom and Maktel), already held a market share of approximately 60%60.0% in the mobile market of FYROM at that time, we and Deutsche Telekom agreed with the Competition Committee of FYROM that we would dispose of Cosmofon.
On March 30, 2009, following a tender procedure, Cosmote and Germanos each entered into a share purchase agreement with Telekom Slovenije for the sale of all the shares of Cosmofon and Germanos Telecom Skopje, (GTS), the exclusive distributor of Cosmofon, respectively, for the total purchase priceconsideration of Euro 190185.8 million. On May 12, 2009, the entire share capital of Cosmofon was transferred to Telekom Slovenije.
 
Business of Cosmofon.Cosmofon was awardedheld a mobile telephony license (the second license in FYROM) insince November 2001 for Euro 28.5 million (U.S. $25.0 million) and launched commercial operations on June 12, 2003. As of December 31, 2008, its network covered 86.8% of the territory and 99.6% of the population of FYROM. As of the same date, its customer base was 747,047 customers, as compared to 593,026 as of December 31, 2007 and 472,501 as of December 31, 2006, representing increases of 26.0% and 25.5% respectively. Cosmofon’s estimated market share as of December 31, 2008 was approximately 30%.
Maktel is FYROM’s incumbent fixed-line telecommunications operator and holds the first mobile telecommunications license in the country. As of January 1, 2005, Maktel’s monopoly in the markets for fixed-line telecommunications services and international voice traffic in FYROM was abolished and the relevant markets were liberalized.
On February 13, 2007, the regulatory authority of FYROM announced the grant of a third mobile license to Mobilkom Austria Aktiengesellschaft, the only participant in the relevant tender, for a license fee of Euro 10.0 million. Following the grant of this license, the third mobile telephony provider in FYROM, called VIP, launched operationsIn addition, on September 19, 2007.
On February 11, 2008 Cosmofon was granted (following a tender) a 3G license in FYROM for a price of approximately Euro 10.0 million and a term of ten years. On February 23, 2009 Cosmofon was granted, pursuant to a public tender, two WiMAX licenses for two regions in FYROM for a total price of approximately Euro 0.3 million and a term of ten years.
 
Following the adoption of changes in the Electronic Communication Law of FYROM, the previous license issued to Cosmofon for 2G was revoked in August 2008 and replaced by a new license with a term of 15 years.
The following table summarizes Cosmofon’s revenues, operating income/(loss) and profit/(loss) for the three years ended December 31, 2008:2007 and 2008 and for the period ended May 12, 2009:
 
          
     For the
             For the Year Ended
 Period
 For the Year Ended December 31,  December 31, Ended May 12,
 2006 2007 2008  2007 2008 2009
 (Euro in millions)  (Euro in millions)
Revenues  53.7   62.2   66.0   62.2   66.2   19.1 
Operating income/(loss)  (5.5)  2.8   1.6   2.8   1.7   (4.3)
Profit/(loss)  (8.0)  0.1   0.1   0.1   0.2   (6.2)


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OTHER SERVICES
 
International Wholesale Telephony and Data Services — OTEGlobe
 
Our wholly-owned subsidiary, OTEGlobe, provides international wholesale telephony services and international wholesale data capacity/IP services to telecommunication providers and to multinational companies with a particular focus on the region of Southeastern Europe.
 
Assets and Operations
 
OTEGlobe currently owns and operates the TransBalkan Network(“TBN”) and the GWEN two-way high capacity fiber optic networks extending from Greece to Western Europe, as well as an IP/MPLS(“MSP”) network with 14 PoPs in Western and Eastern Europe. In addition, OTEGlobe holds indefeasible rights of use(“IRU”) to various peripheral and transatlantic underwatersubmarine cables, international networks of fiber optic cables towards all neighboring countries and more than 150 interconnections.bilateral voice interconnections and more than 300 private and public IP peering. We believe that OTEGlobe currently serves approximately 70%the majority of the international broadband traffic originating from the Greek broadband market.market and a significant proportion of the broadband market in neighboring countries.
 
The following are the main operating assets of OTEGlobe.
 
GWEN.  The Greek Western Europe Network, operating under the commercial name GWEN, was the first of OTEGlobe’s two international transmission links; it was constructed in 2003 and came into commercial operation in 2004. The GWEN is a two-way, high capacity DWDH/SDH fiber optic network, connecting Greece to Western Europe through Italy. In 2008,2009, GWEN was upgraded to a capacity of 150 Gbps.400 Gbps (from a total of 160 Gbps in 2008). We plan to continue to upgrade the capacity of this submarine connection and our terrestrial linksnetwork in line with broadband growth and demand for IP transit capacity.
 
TBN.  OTEGlobe commercially launched the TBN, its multi-Gigabit DWDM/NG-SDH network, in November 2007. The TBN is a fully terrestrial fiber optic network extending from Greece to Germany along the Balkan Peninsula via Bulgaria, Romania and Austria. The TBN provides an alternative route for traffic to Western Europe, in parallel with the GWEN. The network currently has a capacity of 200400 Gbps and is fully


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redundant as of December 2008,and diverse to GWEN, and we expect to continue to upgrade it in line with broadband growth and demand for IP transit capacity. The TBN enhances the resiliency and the availability of our international network and helps improve the cost base of our international services.
 
IP/MPLS (MSP) network.  OTEGlobe’s international IP/MPLS network is a high capacity multi-service secure network, which provides uninterrupted operation and centralend-to-end monitoring. As of December 31, 2008,2009, it comprised a total of 14 PoPs, of which two network nodes were located in Athens, and the rest in Thessaloniki, London, Vienna, Bucharest, Nicosia, Sofia, Tirana, Skopje, Frankfurt, Milan, Paris, Amsterdam and Istanbul. This network is designed to be fully integrated with our national fixed-line network infrastructure and utilizes elements of our international fixed-line network, such as terrestrial and submarine fiber optic cable resources, to address the needs of other telecommunications carriers and multinational corporations. In 2008,2009, we upgraded the IP core, introducing dual vendor policy and terabit routers, in order to support increasing demand for capacity in Southeastern Europe.
 
IRU.  In addition to the above, OTEGlobe also holds indefeasible rights of use over international infrastructure and capacity owned or leased (either privately or as co-owners) on club cables, including on FLAG and SMW-3.
 
We transferred the ownership of the above assets to OTEGlobe, with retroactive effect from April 1, 2007, following approval of the relevant transfer by our general assembly of shareholders on June 21, 2007. The relevant resolution approved the transfer of international operations and network infrastructure with the exception of the Corfu-Bari submarine cable which remained in the ownership of OTE.our ownership.
 
In addition, OTEGlobe has deployed NGN SoftSwitch technology over its network. SoftSwitch became fully functional in 2008 and OTEGlobe continues to upgrade it. SoftSwitch is anIP-based technological solution (gradually replacing existing TDM-based solutions) which allows significant improvements in network management and monitoring efficiency, especially with respect to active management of least-cost routing.


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International Wholesale Telephony Services
 
In the field of international wholesale telephony services, OTEGlobe focuses, among other matters, on:
 
 • establishing agreements with international carriers for the routing of international traffic and for applicable accounting rates;
 
 • negotiating wholesale tariffs with mobile operators for incoming and outgoing international traffic through our network;
 
 • negotiating wholesale tariffs with domestic alternative carriers for routing their international traffic through our network; and
 
 • planning, engineering and operating our International Voice Network.
 
OTEGlobe has entered into agreements in relation to interconnection services, cost reduction and hubbing activities and the exchange of international traffic in a number of countries in the region, including in Bulgaria, Romania, Cyprus and Albania.
 
International Wholesale Data Capacity /IP Services
 
Through its proprietary international cable infrastructure, including the GWEN, the TBN and other infrastructure, OTEGlobe currently offers:
 
 • full,end-to-end, managed SDH digital circuits and wavelength (λ) capacity from Greece to London and other major European cities;
 
 • Ethernet transport services with speeds of up to 1 Gbps from Greece to Frankfurt and other major European cities;
• IRU for long-term leasing of international circuits; and
 
 • international private leased circuits (half circuits).


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OTEGlobe believes that its proprietary international cable infrastructure, combined with its proactive network monitoring and continuing support, offers both route diversity (through the use of two independent high-capacity networks, GWEN and TBN) and service continuity.
 
In addition, through its proprietary MPLS/IP network, OTEGlobe currently offers a range of services, including:
 
 • clear channel;
 
 • internet transit for carriers;
 
 • MPLS, VPN and Ethernet services; and
 
 • carrier-grade VoIP and voice trunking.
 
Strategy
 
OTEGlobe aims to increase sales from international wholesale telephony services in the region of Southeastern Europe particularly in hubbing services and to maximize utilization of its international cablenetwork infrastructure. It aims mainly to increase returns from the offering ofend-to-end wholesale services to the main telecom operators in Greece and in the broader Southeastern Europe region where our Group operates, as well as to further strengthen its position as the regional network bridge. OTEGlobe’s main strategic objectives are:
 
 • increasing its market share in the Southeastern European market and exploring opportunities in the markets of the Middle East;East and North Africa;
 
 • exploitingbenefitting from the increase of broadband penetrationuse and traffic in Greece, as well as demand for international VPN in the corporate market in Greece and the broader region, in order to maximize the use of TBN and increase revenues from its MSP platform;network capacity;
 
 • improving its profitability from international voice services with the use of new technologies such as NGN Soft Switch; and


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 • developing strategic partnerships and participating in infrastructure development projects in the region.region, in order to exploit new markets and create new revenue streams.
 
Revenues
 
The transfer of ownership of our international infrastructure assets to OTEGlobe, with effect from April 1, 2007, had a significant impact on OTEGlobe’s financial results. Prior to this transfer, the significant majority of OTEGlobe’s revenues were comprised of commissions relating to OTEGlobe’s management of these assets on OTE’s behalf, while following the transfer, a significant portion of OTEGlobe’s revenues are derived directly from the exploitation of these assets. As a result, the transfer had an impact on the comparability of OTEGlobe’s financial results for 2007 and 2006.
In 2008,2009, OTEGlobe’s revenues amounted to Euro 181.5207.2 million, compared to Euro 181.5 million in 2008 and Euro 167.6 million in 2007 and Euro 164.8 million in 2006.2007. OTEGlobe’s revenues and traffic volumes increased, despite the fact that international prices for the relevant services tended to decline in recent years, mainly due to intensifying competition. Earnings before tax and additional depreciation were Euro 4.8 million in 2009, compared to Euro 4.1 million in 2008 compared toand Euro 2.2 million in 2007 and Euro 9.5 million in 2006. In November 2008, OTEGlobe adjusted the useful life of three of its cable systems, an adjustment that resulted in additional depreciation for 2008 of Euro 33.7 million.2007.
 
Interconnection Services
 
We provide interconnection services to other fixed-line and mobile operators. Under the Greek regulatory regime for interconnection, with respect to calls placed from domestic fixed or mobile telephony networks to our network, we receive a call termination charge from the relevant domestic operator on the basis of a Reference Interconnection Offer made by us and approved by the EETT, which we record as revenues from interconnection charges. We also charge call collection and termination fees to other fixed telephony operators with which we have interconnection agreements.


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In May 2008, the EETT approved the following call collection and termination charges as cost-oriented for 2008:
                 
     Weekdays
       
  Weekdays
  00:00 to 08:00
       
  08:00 to 20:00  and 20:00 to 00:00  Saturdays  Sundays 
  (Euro per minute) 
 
Local/minute  0.0052   0.0047   0.0047   0.0037 
Single transit/minute  0.0094   0.0087   0.0087   0.0069 
Double transit/minute  0.0121   0.0115   0.0115   0.0090 
In May 2009, the EETT approved the following call collection and termination charges as cost-oriented for 2009, with retroactive effect as of January 1, 2009:
 
                 
    Weekdays
    
  Weekdays
 00:00 to 08:00
    
  08:00 to 20:00 and 20:00 to 00:00 Saturdays Sundays
  (Euro per minute)
 
Local/minute  0.0048   0.0044   0.0044   0.0034 
Single transit/minute  0.0082   0.0076   0.0076   0.0060 
Double transit/minute  0.0107   0.0102   0.0102   0.0080 
 
The aboveIn May 2010, the EETT approved the following call collection and termination charges haveas cost-oriented for 2010, with retroactive effect as of January 1, 2009.2010:
                 
    Weekdays
    
  Weekdays
 00:00 to 08:00
    
  08:00 to 20:00 and 20:00 to 00:00 Saturdays Sundays
  (Euro per minute)
 
Local/minute  0.0042   0.0038   0.0038   0.0030 
Single transit/minute  0.0071   0.0065   0.0065   0.0052 
Double transit/minute  0.0088   0.0080   0.0080   0.0072 
 
The Group’s revenues from interconnection services totaled Euro 88.9 million in 2009, compared to Euro 119.4 million in 2008 compared toand Euro 108.2 million in 2007 and Euro 96.8 million in 2006.2007. These amounts do not include revenues from interconnection fees for international calls originated by mobile operators of Euro 52.9 million in 2009, compared to Euro 56.5 million in 2008 compared toand Euro 49.6 million in 2007, and Euro 41.9 million in 2006, which are included in international revenues as payments from mobile operators. Our revenues from interconnection with Cosmote are eliminated upon consolidation.


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Leased Lines
 
Leased lines are telecommunications links between end points of equipment, allowing voice, data or image transmission depending on user requirements. Leased lines provide connections within a customer’s network and within our own network.
 
We provide analog and digital (ranging from 64 Kbps to 622 Mbps) leased lines services on a retail basis to corporate customers and public sector entities and on a wholesale basis to other telecommunications companies, including Greek fixed-line and mobile operators. Under the relevant European UnionEU directives and our licensing regime, we are required to ensure that leased lines offered to our customers and other telecommunications providers satisfy certain specified technical characteristics and that a minimum number of such lines are available.
 
We provide wholesale leased lines services, as well as retail leased lines services on an end-to-end basis and have provided wholesale leased lines services on an end-to-end basis to date.apoint-to-point basis. Through our information systems, we are able to calculatedefine network costs for each leased circuit by registering all leased lines and the network equipment that is part of suchwhich constitutes each circuit. We have included these costs in our ECOS2006-2008 methodologies, which we submitted
According to the EETT for audit, andreference offer, approved by the EETT approved in its decision of May 2008. In particular, in its decision of May 16, 2008, the EETT, based on the ECOS2006-2008 audit, set cost-oriented prices for wholesale Point-to-Point leased lines of up to 2 Mbps at a level higher by an average of 2.8%, and prices for interconnection links at a level lower by 1.3%. The price changes had a retroactive effect in the case of local interconnection links and in certain cases for end-to-end leased lines.
In addition, in March 2008, the EETT issued a decision approving, with modifications, the reference offer that we had previously submitted for wholesale leased lines. According to the new reference offer, we are now obligedrequired to provide wholesale leased lines on a terminating and trunk terminating segments basis, (EU markets No. 13 and 14), as opposed to offering them only on an end-to-endapoint-to-point basis, as has previously been the case to date. Bycase. Under the same decision, we are also obliged to make available the related facilities in our transmission network nodes, which are required for the delivery of these services.
As of December 2008, we began charging all previously existingpoint-to-point wholesale leased lines on a terminating and trunk segment basis. On December 9, 2009, we submitted a modified reference offer for wholesale leased lines, re-introducing as a service thepoint-to-point wholesale leased lines, as an alternative to offering the terminating and trunk segments of leased lines which we also make available, following relevant requests by the EETT and alternative operators. The relevant decision of the EETT is still pending. We expect that this will help alternative telecommunications operators to design and utilize their network and infrastructure more cost-effectively, which is expected to improve their cost base and competitiveness, while, on the other hand, it may also have an adverse impact on our revenues from the relevant wholesale services.


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We initially submitted trunk and terminating segment cost data based on FDC (fully distributed cost) methodology toOn July 23, 2009, the EETT in July 2008, and on October 14, 2008, the EETT issued a decision setting new cost-oriented prices regarding terminating and trunk segments of up to 155 Mbps. As of December 2008, we began charging all existing Point-to-Point wholesale leased lines accordingly. The EETT has set an18-month transition period, commencing from September 2008, for the complete technical adoption of the new service structure.
Withamended its decision of May 6, 2009 the EETTregarding approved cost-oriented prices for interconnection linkswholesale leased lines for 2009, leading to a price reduction of approximately 19.7%. The price change had a retroactive effect as of January 1, 2009. The submitted ECOS2007-2009 proposal recalculated the9% for terminating and trunk segment costs, based on LRIC (long-run incremental cost) methodology, but they have notsegments and to date beena reduction of 3.5% for interconnection links. With its decision in May 2010, the EETT approved new prices for wholesale leased lines services, which were reduced by the EETT. The EETT has accepted our proposal to apply the same prices asapproximately 12.7% for 2008.terminating and trunk segments and by 4.3% for interconnection links.
 
We expect the use of our wholesale leased line services and our revenues from these services to decrease with time, as alternative operators continue to develop their own networks and decrease their reliance on our network. With respect to retail leased line services, we have witnessed a gradual volume and revenue decrease and migration to other connectivity platforms, mainlyIP-VPN.
 
Wholesale Line Rental
 
Wholesale line rental allows alternative operators to rent our access lines, on a wholesale basis, to be accessed by their end customers. This service is used mainly in conjunction with carrier pre-selection services, serving customers of alternative operators which are located in areas not serviced by such operators’ unbundled local loops. These customers are not required to pay a monthly line service charge to us; we receive line rental fees from the operators.
 
In MayNovember 2008, the EETT issued a decision approving, with certain modifications, the reference offer we had previously submitted for wholesale line rental. Subsequently, in November 2008, EETT issued a decision setting wholesale line rental prices on a retail-minus basis. According to this pricing methodology, the EETT defines wholesale tariffs for a service by calculating a retail-minus, based on the proposed retail tariffs for the same service,


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using data provided by the relevant operators providing the retail services. In particular, the price of wholesale line rental was set 13.3% lower than the respective retail price, in the case of PSTN lines and 18.7% in the case of ISDN-BRA lines. Wholesale line rental service was officially launched on December 15, 2008. With its decision of May 2009, decision, the EETT revised the retail-minus factor, thus setting the price of WLR-PSTN lines and WLR-ISDN BRA lines 15.6% and 23.4%, respectively, lower than the respective retail price. Thisprice; this change iswas effective as of May 6, 2009. In May 2010, the EETT in its decision regarding our ECOS for the years2008-10 reviewed the retail-minus factors and set the relevant wholesale line rental prices, in particular setting the wholesale prices with respect to PSTN lines 13.7% lower than the respective retail prices and 20.1% lower than the respective retail prices with respect to ISDN-BRA lines.
In May 2009, we started receiving requests for WLR provisioning from the alternative operators. As of December 31, 2009, we provided 42,373 WLR-PSTN lines and 32 WLR-ISDN BRA lines.
 
Wholesale ADSL
 
We provide wholesale ADSL access to other operators over our extensive ADSL network across Greece, enabling them to provide ADSL access and high-speed internet access directly to the end customers.
We also provide ADSL link and the backhaul service in the ADSL wholesale market, andin order to hand over the ADSL traffic to ISPs and other operators over the interconnection link.operators. In particular, we provide two types of services: (i) ADSL access, comprised of an ADSL link, plus backhaul service through the ATM or Metro Ethernet network; and (ii) an interconnection link, consisting of an IP over ATM or Gigabit Ethernet connection to the broadband RAS that enables ISPs and other operators to provide high-speed internet access to their customers.
 
As of December 31, 2008,2009, we had 52,714 wholesale ADSL customers, compared to 94,413 wholesale ADSL customers as of December 31, 2008 (for the first time excluding, following our merger, the customers of OTENET), compared to 334,118 wholesale ADSL customers as of December 31, 2007 (including OTENET customers) and 236,200 wholesale ADSL customers as of December 31, 2006 (also including OTENET customers)OTENet). We expect the use of our wholesale ADSL services and our revenues from these services to continue to decrease, with time, as alternative operators continue to develop their own networks and decrease their reliance on our broadband network.
As of February 1, 2007, we reduced our tariffs for wholesale ADSL access services by approximately 7% for the basic and medium speed packages and by 5% for the high-speed package. As of May 16, 2007, we introduced two new speed packages for wholesale ADSL access, each offering nominal download speed of 4 and 8 Mbps. At the same time, we further reduced by 0.7% our tariff for the basic speed package, by 5.4% for the medium speed package and by 25.6% for the high-speed package. As of December 17, 2007, we introduced an additional package for wholesale customers, offering nominal download speed of up to 24 Mbps.
 
On April 12, 2010, we proceeded to the automatic upgrade of the 8 Mbps connections to “up to 24 Mbps”, with the reduction, at the same time, of the “up to 24 Mbps” package price by 2.9%. Prior to that, on May 12, 2009, we had upgraded our wholesale ADSL access speeds throughout Greece, without any additional costs. All 1Mbps connections were automatically upgraded to 2Mbps,2 Mbps, and 4 Mbps connections to 8Mbps.8 Mbps. As of the same date, we further reduced prices of the existing wholesale ADSL packages, by 15.4%, 16.4% and 6.7% for 2Mbps, 8Mbps8 Mbps and 24Mbps24 Mbps, respectively.


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We also offer other operators and ISPs scaled discounts for wholesale services based on the total amount of the six-month bill of service providers.
 
TheFollowing the second round of market analysis for the wholesale broadband access market, the EETT published a new decision on July 28, 2009, enforcing a cost-orientation obligation, to replace the previous retail-minus methodology and imposing a new wholesale bitstream access service (TYPE C) provided either at DSLAM level in areas where collocation is not technically feasible, or at our multiplexing node when DSLAM equipment is installed into the street cabinets. On October 15, 2009, we submitted an updated Reference Offer for our wholesale broadband services (RBO), which is currently pending under approval by the EETT. In addition, we have submitted cost-oriented prices for wholesale ADSL access in the context of the ECOS2008-10 audit which were approved in May 2010, leading to a reduction of 27.7% for our 2 Mbps package and 32.6% for our “up to 24Mbps” package. Prior to that, the EETT, with its decision of August 30, 2007, introducedhad imposed discounted cash flow costing methodology, which led to the specification of a nominal margin between our wholesale and retail ADSL prices. This nominal margin between our wholesale and retail ADSL prices remained unchanged at 20.8% during 2008 while with a recent decision of May 2009, which is effective as ofand was readjusted from 20.8% to 20.94% on May 12, 2009, the EETT revised this nominal margin to 20.94%.2009.
In December 2008, the EETT completed the second round of market analysis for the wholesale broadband access market and proceeded to a public consultation. In addition to the previously imposed regulatory obligations, the EETT proposed the introduction of new wholesale products and the imposition of a cost-orientation obligation, instead of the previous pricing control obligation based on retail-minus methodology.
 
Local Loop Unbundling
 
We provide full and shared local loop access services and distant and physical collocation services to other telecommunications service providers in Greece. As of December 2006,31, 2009, we had provided 42 physical collocations. In March 2007, we engaged Pantechniki, a Greek construction company,937,878 full and 49,423 shared access loops, as compared to provide services for the technical preparation of up to 110 locations throughout Greece in order to facilitate physical collocation for other


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telecommunications service providers. The cost of the work was borne by the telecommunications operators that were physically collocated in the relevant locations.
As of December 31, 2008, we had completed the technical preparation of a total of 152 locations throughout Greece (including 110 locations at which the relevant technical work was performed by Pantechniki).
Also, as of December 31, 2008, we provided 589,234 full and 56,890 shared access loops, as compared to 232,582 full and 41,509 shared access loops, as of December 31, 2007.2008.
As of December 31, 2009, we provided collocation services in 817 of our local exchanges. In addition,168 of these local exchanges we provided physical collocation and in the remaining 649 we provided distant collocation services. In comparison, as of December 31, 2008, we provided collocation services at 1,097in 266 local exchanges, of which in 152 we provided physical collocation sites (of which 726 were physical and 371 distant), compared to 748 collocation sites (of which 508 were physical and 240 distant) as of December 31, 2007.in 114 we provided distant collocation.
 
In the autumn of 2008 we entered a new agreement for the technical preparationThe services and delivery, beginning as of March 2009, of an additional upconditions to nine locations. We expect that the number of unbundled local loops, as well as the number of requests submitted for local loop unbundling, will continue to increase through 2009, but the rate of such increase may be lower than the rates of increase experienced in previous years, as the number of unbundled local loops already covers an increasing part of the population of Greece.
On April 4, 2007, the EETT issued a decision approving, with modifications, the reference offer we had submitted in September 2006 forprovide unbundled access to the local loop and related services are being specified in our(“Reference Unbundling Offer”,or “RUO”)“RUO”. This decision amended and further detailed the frameworkRUO provides details for the provision of unbundled access to the local loop and related services, including the manner and timing of providing such services and the consequences (including fines) of non-compliance. It regulates, among other matters, the right of alternative telecommunications operators to access and use space within our facilities at sites at which collocation has been provided, their right to request that we provide them with certain technical services at those sites, as well as the right to request access to backhaul services at our sites. The EETT has issued a number of decisions introducing modifications to the reference offers we have periodically submitted. We believe that certainconstant changes and a number of aspects of the newcurrent RUO are unduly onerous and have appealed before the Greek administrative courts against the application of certain of these provisions.
 
On March 5,During 2008, the EETT amended its decision of April 4, 2007, ruling on a number of issues, including clarifying the existing right of alternative telecommunications operators to install their own infrastructure (such as service cabinets) in our local exchanges and to operate connection and transmission services from these locations (backhauling) using their own wireless means. In addition, the decision was amended with respect to procedures for the provision of collocation, imposing upon us the obligation to provide to the operators additional types of collocation, including virtual collocation and co-mingling. During 2009, the EETT introduced additional changes relevant to the expansion of collocation space, resolutions for faults or disputes on specific local loops and cost allocations between collocated alternative providers.
 
In 2009, the EETT carried out a new market analysis for the wholesale (physical) network infrastructure access (including shared or fully unbundled access) at a fixed location market (EU market 4) and on July 28, 2009, the EETT issued a decision regulating, among other matters, the right of alternative operators to share our cable ducts between our local exchanges and street cabinets and to pass their own fiber cables. In case there is no duct availability, we are obliged to provide to the alternative operators our existing fiber cables (dark fiber). Under this decision, we were required to submit a new RUO including such services and on October 15, 2009, we submitted our modified reference offer, which is currently under public consultation.


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In March 2007, four Greek broadband service providers agreed to participate in a state-funded program established by Information Society S.A.(“Information Society”), a Greek State-funded information technology consulting firm, for the promotion of broadband services in regions where broadband services are underdeveloped. Information Society is an initiative supported by the European Union aimed at the creation of a single market in, and the liberalization of, the telecommunications sector. In Greece, Information Society constitutes part of an investment program within the Third European Community Support Framework 2000 — 2006. We do not participate in the Information Society program. The establishment of broadband infrastructure in remote areas under this program has led to increased requests for loop unbundling and collocation services from the participating operators, including in remote areas and under tight timetables. As of December 31, 2008,2009, we provided approximately 1,50044,000 local loops in 96626 distant collocation sites operating in the context of the Information Society Program.Program, compared to 1,500 local loops in 96 distant collocation sites in 2008.
 
Other Telecommunications Services
 
E-LineOTE Ethernet Services
 
In early 2007, we introduced theE-Line Metro Ethernet service (Point-to-Point(Point-to-Point andPoint-to-Multipoint), offered initially in the metropolitan areas of Athens and Thessaloniki to both retail and wholesale customers. This service offers a platform for deployment of data transport solutions over NGN networks. Ethernet has become the preferred medium for advanced services such as IP telephony, video streaming, media imaging and data storage, due to a number of factors including its low cost, reliability, ease of increasing bandwidth in small increments and interoperability with traditional broadband access technologies used over the wide area network.


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As of December 31, 2008, we had 125 wholesaleE-Line virtual circuits in service with a total bandwidth of 21.8 Gbps, compared to 78 virtual circuits with a total bandwidth of 8 Gbps on December 31, 2007. Also at the end of 2008, we had 111 retail Metro Ethernet virtual circuits in service with a total bandwidth of approximately 10 Gbps. During 2008, theE-Line service expanded and is now offered at many PoPs all over Greece. Moreover, as of July 2008, the service is also offered at a long-distance level (Wide Area Ethernet). In January 2009, we launched a new basic version ofE-Line service, a simpler version of the existingE-line Metro Ethernet (advanced) which allows a simpler and better utilization of this VLAN address pool.
 
IPTV — Conn-X TVIn order to optimize the benefits of the Ethernet network, as of January 1, 2010, we integrated all Ethernet services into one “OTE Ethernet” service. Moreover, as of the same date, we offer our integrated service at prices reduced by an average of 25.0%.
 
As of FebruaryDecember 31, 2009, we offer Conn-X TV,had 139 wholesale “OTE Ethernet” virtual circuits in service with a total bandwidth of 16.4 Gbps, compared to 125 virtual circuits with a total bandwidth of 21.8 Gbps as of December 31, 2008. The reduction in total bandwidth is due to the increased competition in Ethernet services provisioning and to the fact that alternative operators develop their own networks which reduces their reliance on our IPTV service, which is now available as a pay TV add-on service to all users of Conn-X connections of 8Mbps or 24Mbps in 17 cities in Greece. Conn-X TV offers a linear program (40 broadcast channels) as well as Video on Demand services (on apay-per-viewnetwork and subscription basis). We had initially soft-launched the service in October 2008 to 1,500 users in five major cities of Greece (Athens, Thessaloniki, Patras, Heraklion and Larissa).
The main goals of the service are to retain customers and ISDN and PSTN connections, to increase the share of ADSL subscribers, as well as to increase revenues per customer. We intend to further develop and enhance the services of Conn-X TV during the year. Tariffs for IPTV services are not subject to regulation, as is the case for tariffs for telecommunications services.
 
We have already securedAlso at the end of 2009, we had 101 retail Metro Ethernet virtual circuits in service with a total bandwidth of approximately 3.3 Gbps. During 2008, theE-Line service expanded and offer content, including various international thematic channels and major studios and are still in the process of negotiating to acquire the rights to broadcast most of the Greek free-to-air (FTA) television channels.
Ais now offered at a number of our competitors in the Greek fixed-line market already offer IPTV services through their networks, including Hellas OnLine, OnTelecoms and Vivodi, while Forthnet, though it does not currently offer IPTV services, is the sole shareholder of NetMed, the operator of Nova, the only DTH satellite TV platform inPoPs all over Greece.
 
OTELink — TETRA
 
We have developed OTELink,and are offering OTE TETRA Services (formerly known as OTElink-TETRA), a fully operational public access terrestrial trunked radio(“TETRA”) network. OTELink-TETRAnetwork that provides, among other services, (i) voice services, including group calls, individual calls, broadcast calls, emergency calls; and (ii) data services, including short data services(“SDS”), status messages and connection oriented packet data (28.8 Kbps). services:
• voice services, including group calls, individual calls, broadcast calls, emergency calls, calls to fixed and mobile telephone networks; and
• data services, including short data(“SDS”), and packet data (28.8 Kbps) services.
The system consists of a marinemobile switching office(“MSO”) in Athens and 8593 base stations installed around Greece to provide radio coverage. Almost half of those base stations are located in the AttikiAttica region. Moreover, there are two rapidly deployable mobile base stations for critical emergencycritical-emergency events. OTE isWe are the sole public TETRA provider in Greece covering major cities such as Athens, Thessaloniki, Patra, Volos, Kavala, Thiva, Pyrgos, the northern part of Crete (Hania to Agios Nicolaos), Thiva, Kavala and Corfu as well as the motorway Athens — Patra — Pyrgos and 60% of the motorway Athens-Thessaloniki-Kavala.Athens-Thessaloniki-Kavala highways. We provide TETRA terminals through a number of authorized suppliers. The


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markets served are diversified and include transportation (airports, harbors and metro), security companies, taxi, road assistance, ambulance services, the government and military, logistics centers and civilian.
 
Fixed Wireline Value-added Services
 
We offer a number of value-added services for PSTN and ISDN access lines, including CLIP, call identification restriction(“CLIR”), call barring, call waiting, call forwarding, three-party conference, SMS, RBT, Multimedia Information Service and four different levels of voicemail services.
 
Fixed Wireless Access Services
 
Since 2000, we hold two licenses to offer fixed wireless access services in Greece, one within the 3.5 GHz frequency band and the second within the 24.5 -— 26.5 GHz frequency band. Two more licenses were granted to other operators in addition to ours in 2001, for the 3.5 GHz frequency band, which is mainly used for voice telephony services. On the 24.5 — 26.5 GHz frequency band, which is mainly used for voice and local multipoint multimedia distribution services, the EETT granted four licenses in addition to ours. Following the transfer of our fixed wireless license on the 25 GHz frequency band to Cosmote, we still hold the fixed wireless access license on the 3.5 GHz frequency band, which we use to providePoint-to-Multipoint voice telephony services in rural areas. Until December 10, 2015, we also hold a fixed wireless access license on the 1.5 GHz frequency band (1,437.5 — 1,465.5 MHz and 1,486.5- 1,514.5 MHz ) for providingPoint-to-Multipoint voice telephony services in rural areas.


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Satellite Services
 
We currently own and operate 14 satellite earth stations (locatedtransmission antennas plus 20 TVRO (TV Receive Only) antennas installed in our two satellite teleports, Thermopylae“Nemea” and Nemea), two“Thermopylae”. The teleports are connected to International POPS, via protected fiber rings. Two of which arethe antennas serve our Inmarsat satellite earth stations covering the Indian and the East Atlantic Ocean regions,regions. We also own and anotheroperate Head-End Platforms for satellite and IPTV. We cover two thirds of which are transportable. Current satellite constellations used are Eutelsat, Intelsat, Telstar, NSS, Thaicom, Amos, AfricaSat, Hellas-Sat.the globe, from the east coast of America through the Asia-Pacific coast (up to half of New Zealand), using suitable Atlantic, European, African and Asian satellites. We provide a complete portfolio of services in satellite business with turnkey solutions for telecommunications, media, government, maritime industry and military markets. We offerPoint-to-Point connections, contribution/distribution and broadcasting services, uplink/downlink/turnaround services, TV broadcasting services, occasional broadcasting, international voice trunking and Inmarsat services. We also sell TT&C (Telemetry, Tracking and Control) maneuvering services to satellite operators, including our subsidiary, Hellas-Sat being one of them. We own and operate radio and television channels Head-End for satellite and terrestrial transmission.Hellas-Sat.
 
WiMAX
 
After successful trials that took placeThree pilot WiMAX network systems have been installed and are operating in 2008, we plan a small expansionthe areas of Thessaloniki, Mount Athos and the Attica region. In 2010, these systems are expected to the already installed WiMAX stations in targeted rural areas within 2009. Broadbandbecome commercially available, providing broadband data services (Internet and VPN) as well as voice services(“VoIP”) will become commercially available through these (VoIP), and there are also plans for their regional expansion. In 2009, we developed a customized WiMax solution for business customers in the industrial area of Sindos, Thessaloniki, and also developed procedures for deploying WiMAX systems.solutions in areas with limited broadband capabilities.
 
Telephone Directory and Information Services
 
Directory services.  “11888” is our directory enquiries service. The Greek market for directory enquiries was liberalized in 2005. 11888 remains the leading directory enquiry number despite intense competition, and total customer satisfaction with this service is very high, according to a recent customer survey.
 
INFOTE.  On December 19, 2007, we sold INFOTE, our then wholly-owned subsidiary, whose main activity was the provision of directory services in both printed and electronic form, including the Yellow Pages, Greek Yellow Pages andBusiness-to-Business directory services to Rhone Capital LLC and Zarkona Trading Limited. INFOTE, which now operates as “Greek Yellow Pages S.A.”, currently competes with our directory enquiries service.


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Maritime Radio Communications (Olympia Radio)
 
Olympia Radio Coast Station, our maritime radio communications network, provides the relevant services to the Greek State, in line with its obligation to secure human life at sea as required by international treaties (SOLAS 1974 &and IMO regulations, Global Maritime Distress and Safety System(“GMDSS”)). The Olympia Radio network consists of several base stations, transmitters and receivers in 40 coastal sites, comprises VHF, HF,comprising Very High Frequency (VHF), High Frequency (HF) and MFMedium Frequency (MF) technologies, providesproviding worldwide maritime communications (voice, data, fax,e-mail, facsimile, telex and telex)NAVTEX).
 
Telecards, Paging and Telegraphy Services
 
Telecards.  Telecards are chip-based prepaid cards used in all OTEof our payphones instead of coins. Telecards are sold to the public at a small premium above the tariff unit rate. We, in turn, pay ana 11% commission, on average, to resellers who sell telecards to the public.
 
The number of public telecard payphones as of the end of 20082009 in Greece was approximately 52,36050,500 compared to approximately 57,59852,360 as of the end of 2007.2008. This number includes approximately 17,55013,500 indoor telecard payphones leased to customers for private and public use throughout Greece. Apart from chip-based prepaid cards there are also scratch calling and internet prepaid cards.
 
Revenues from telecards were Euro 37.3 million, or 0.6% of total revenues, in 2009, compared to Euro 52.2 million, or 0.8% of total revenues, in 2008, compared toand Euro 76.2 million, or 1.2% of total revenues, in 2007, and Euro 100.6 million, or 1.7% of total revenues, in 2006.2007. Revenues from non-chip based prepaid cards are also included in these figures.
 
Paging Service.  Due to declining demand and usage of the paging service, we began withdrawing the service in 2008. We terminated the provision of the paging service in January 2009.
 
Telex and Telegraphy.  Telegraphies, as well as telex, are services with declining demand due to the successful application of other methods of communication. The aggregate revenues generated by these two services were Euro 4.2 million, or 0.1% of total revenues in 2009, compared to Euro 2.5 million, or 0.0% of total revenues, in 2008, compared toand Euro 3.53.0 million, or 0.1% of total revenues, in 2007, and Euro 3.6 million, or 0.1% of total revenues, in 2006. Although we do not expect profits from Telex service, we maintain it in order to serve our 1,500 existing customers.2007.


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Equipment Sales
 
Our retail network of stores in Greece provides a full range of telecommunications equipment for use with various types of services provided by our Group (fixed and mobile telephony and the internet), including advanced telecommunication devices such as video-telephones, Wi-Fi ADSL routers, modems, multi-mode® private-use call centers and mobile telephones.
 
We enhance and update our equipment product portfolio available at our stores in line with the various services offered by our Group and with client demand.
 
Revenues from telecommunications equipment sales to third parties were Euro 438.0 million, or 7.3% of our total revenues, in 2009, compared to Euro 617.2 million, or 9.6% of our total revenues, in 2008, compared toand Euro 679.8 million, or 10.8% of our total revenues, in 2007, and Euro 341.6 million, or 5.8% of our total revenues, in 2006.2007. See “— Mobile Telephony Services — Greece-Cosmote — Distribution” and “— Germanos — Business of Germanos.” A significant percentage of our revenues from equipment sales comprises sales of the Germanos retail network. Following its acquisition by Cosmote, Germanos ceased distributing the products of Cosmote’s mobile telephony competitors and as a result, its sales of telecommunications equipment decreased significantly in 2008 and 2009.
 
Customer Contact Centers
 
We seek to maintain and strengthen our relationship with our customers through continuously enhancing our web-enabled call centers in order to offer quality services and to increase our revenues. To that effect, we have created the following services, in order to respond to our customers’ needs:
 
 • “134”, our sales and customer service channel for residential and small business customers;


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 • “13818 OTEbusiness Customer Service”, provides both commercial customer care and technical support for enterprise and business customers;
 
 • “OTELINE”, our outbound telesales center, which offersone-to-one marketing for all of our products and services and customer programs;
 
 • “www.oteshop.gr”, our electronic shop, which had approximately two2.6 million visits and received approximately 26,00021,000 orders in 2008;2009;
 
 • “www.whitepages.gr”, our site for telephone directory services, which had 1315 million visits in 2008;2009;
 
 • “11888”, voice telephony directory services and entertainment information, which received approximately 35.733 million calls in 20082009 and achieved over 95%97% customer satisfaction based on survey evidence;
 
 • OTE Tele-Information, our voice portal, offering weather forecasts, airplane, ship, rail and bus schedules, hospital and pharmacy information and sports results, which received approximately 33.517 million calls in 2008;2009;
 
 • “1502”, our citizen service center;
 
 • “112”, the pan-European emergency call number;
 
 • www.otewholesale.gr, our electronic shop for wholesale services offered to other operators and ISPs; and
 
 • “1305”, our telecollections contact center.
 
Other Services
 
We offer a variety of other services to our customers, including maintenance and transfers of existing lines. Revenues from these other services amounted to Euro 116.4 million, or 1.9% of total revenues, in 2009, compared to Euro 120.4 million, or 1.9% of total revenues, in 2008, compared toand Euro 68.3 million, or 1.1% of total revenues, in 2007, and Euro 74.9 million, or 1.3% of total revenues, in 2006.2007. Revenues from these services also include revenues for similar services generated by our subsidiaries.
 
In accordance with regulatory requirements, we offer a number of wholesale services, including number portability and Friendly Network. Number portability allows end-users to retain their telephone number when switching to the network of another operator. Friendly Network, a service based on our IN structure, offers other operators rerouting information with respect to their calls to ported numbers and termination of these calls on other


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operators’ networks. We provide this service through automated information transfer and order execution processes.
 
In accordance with regulatory requirements, we are also obliged to offer two universal services, a Universal Telephone Directory and Directory Enquiry Services. These directory services include all mobile and fixed telephony customers. We published the first Universal Telephone Directory in 2004. Currently, our directory service covers the entire territory of Greece.
 
We have introduced a number of new services, includingalso offer video conferencing and three and four-digit telephone numbers and our broadband portal(www.zuper.gr) and plan to introduce a number of additional new services.
 
Information Technology
 
In 2008,2009, we continued to upgrade and expand our information systems and made significant investments aimed at improving the quality of the products and services we offer to our customers, and enhancing our internal business efficiency. Our key investments in information technology in 2009 include the following:
 
Support for products and services.  During 2008,2009, our internal IT functions supported the implementation and integration of products that rely heavily on IT, such asAll-in-one, IPTV double play and VoIP overvoice bundles andIP-VPN.
 
Wholesale Support Systems.  We launched a number of IT projects aimed at expanding our support of wholesale customers in accordance with reference offers approved by the EETT. These initiatives include wholesale line rental, wholesale leased lines, local loop unbundling, and collocation.


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Operational Support Systems.  We have expanded our Network Inventorynetwork inventory and Service Activationservice activation system to cover Metro Ethernet and IPTV. During 2009, it will be expanded to coverIP-VPN. In addition, in 2008, the new convergent mediation application implementation was completed.2010 we will implement satellite TV provisioning. In relation to service assurance, we implemented service quality management fore-Line andIP-VPN (leased lines to be implemented during 2010) as well as network trouble ticketing.
 
Customer Relationship Management.  We have completed a number of IT projects aimed at expanding our customer relationship management(“CRM”) capabilities in the areas of telemarketing, service level agreement management, and sales management and customer self-care (such ase-shelf-care, Electronic Bill Presentation & Payment) and plan further improvements in the customer ordering, customer segmentation and consolidation and services areas. In addition, our alternative sales channels,channel capabilities, such as the web and third party networks, were enabledexpanded and will be further enhanced with additional functionality and products.
 
Business Intelligence.  We have completed and continue to enhance a number of initiatives in the areas of MIS (financial and metric data),corporate performance management, customer insight, predictive analytics and monitoringcontinue to enhance our enterprise data warehouse infrastructure into new subject areas aiming to turn operational key performance indicators.data in insightful information.
Enterprise Management.  We have completed and continue to enhance a number of initiatives in the areas of fleet management,e-payments and human capital management.
 
Security Management.  We are currently implementingenhancing our log management framework and are streamlining our risk assessment methodologies. Our security policy framework will be upgraded by the end of 2010 and an identity management solution to manage access to IT resources and systems by bothsystem for the internal and external users.users will be launched during 2010.
 
IT infrastructure.  We continued to expand our IT infrastructure, in order to improve the security, performance and availability of our information systems, which, nowas of December 31, 2009, consist of 540630 physical servers with 242 TBytes (92 TBytes360 Tbytes (118 Tbytes more than last year)as at December 31, 2008) of online usable mass storage based on storage area network(“SAN”) architecture, 420 telecommunications routersarchitecture. Major components of our network infrastructure have been replaced/upgraded and 1650 Cisco switches, serving approximately 10,000 users at 565 remote sites. During 2008, we completed the implementation of a modern disaster recoveryWi-Fi services have been launched for our headquarters. Our new data center in order to assure business continuity inhas been delivered and the event thatrelocation from our primary data center fails. In the area ofold one will be completed by March 2010. IT service management we upgraded our internal IT help desk application and enhanced the end-user experience monitoring tool and our systems monitoring platform.platforms have also been upgraded.
 
Other Group Activities
 
Turnkey Telecommunications Projects — Hellascom International
 
Hellascom International, our 100%-owned subsidiary, was established in 1995 with the aim of executing telecommunications projects abroad.
 
Since its foundation, Hellascom has been active in the Balkans, Eastern Europe, the Middle East and Greece.


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In 2008,2009, Hellascom continued to execute construction projects on behalf of our Group, including:
 
 • supporting services for the restoration of cable damages, as well as for the construction of part of the new telephone connections/transfers and of ADSL and local loop cross connections in the distributors of the switches in Greece;
 
 • various structured cabling projects for private customers;
 
 • structured cabling projects on behalf of our Group;
 
 • development of cable networks and systems to corporate customers;
 
 • studies for the development of the urban network in addition to studies for backbone networks;
 
 • medical information systems for hospitals in the region of Thessalia, Greece;
 
 • new projects with our Group and also with customers of our Group; and
 
 • new projects from the public sector (development of broadband networks, supply and installation active and passive equipment).


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Consultancy Services — OTEplus
OTEplus Technical and Business Solutions S.A.(“OTEplus”) was established in 1987, as our consultancy subsidiary. As of February 8, 2007, we hold 100% of the share capital of OTEplus.
OTEplus focuses on new information and telecommunication technologies and management consulting. In 2008, it implemented projects for organizations and companies in the public and private sector, providing integrated consulting services on business and technical issues.
 
Satellite Services — Hellas Sat
 
We hold a 99.05% interest in Hellas Sat Consortium Limited(“HCL”), a company incorporated in Cyprus. HCL holds a 99.99% and OTEGlobe a 0.01% interest in Hellas Sat S.A.(“HSSA”), operating under the laws of Greece. Both companies are referred to in this Annual Report as Hellas Sat. Hellas Sat provides space segment capacity, telecommunications and broadcast services through its Hellas SatHellas-Sat 2 satellite.
 
Licenses.  In August 2001, the Greek Ministry of Transport and Communications executed a concession agreement with Hellas Sat and in November 2001 it granted to it an exclusive special operating license for the access and use of a geostationary orbital slot of 39 degrees east and the associated radiofrequencies, through the construction, launch, operation and commercial utilization of a satellite network consisting of at least two satellites. The concession agreement also requires Hellas Sat to make available to the Greek State three transponders on an ongoing basis and free of charge (the first two upon the launch of the first satellite and the third upon the launch of the second satellite), as part of the consideration for the granting of the license. Hellas Sat has made the first two transponders available to the Greek State. Hellas Sat has also been granted a similar license for the construction, orbit positioning and use of a satellite system by the Republic of Cyprus.
 
In July 2009, the Greek Ministry of the Interior executed a concession agreement with HSSA regarding the provision of high definitionPay-TV services via satellite to Greek citizens pursuant to a relevant license issued by the National Radio Telecommunications Council (NRTC) to HSSA, in connection with which, HSSA deposited a Performance Letter of Guarantee in the amount of Euro 1.8 million for the benefit of the Greek State. Furthermore, in February 2010, HSSA executed an agreement with OTE regarding the transfer of thisPay-TV License to OTE, subject to the following conditions:
• a request for the suspension of HSSA’s obligations arising out of thePay-TV License as well as the concession agreement is addressed by HSSA to both the National Radio Telecommunications Council (NTRC) and the Ministry of the Interior;
• a decision for the approval of the transfer of thePay-TV License requested by us is issued by the NRTC and any other competent authorities; and
• a new concession agreement regarding the provision of high definitionPay-TV services via satellite to the Greek citizens is executed between us and the Ministry of the Interior.
History and Operations.  Hellas Sat’s satellite, Hellas SatHellas-Sat 2, was launched in May 2003. It has two fixed antennae that provide pan-European coverage and two steerable antennae that provide coverage outside of Europe. The total cost of the Hellas Sat program was approximately Euro 172.0 million. Hellas Sat has not yet launched a second satellite.
 
Hellas Sat is currently covering, and providing services to customers, in over 30 countries in Europe, the Middle East and Southern Africa. The majority of Hellas Sat’s revenues is derived from Central and Eastern European markets and video/DTH services. For 2009, Hellas Sat expects to further increaseincreased its revenues from the Southern African region, the only region in which it still has available capacity.
 
In January 2006, HSSA launched a new satellite-based broadband service, “Hellas Satnet! Business”, offering high-speed reliable internet access to rural areas. In 2007, HSSA also offered other value-added services over its satellite broadband service, such as web hosting, web mail and VPN. In September 2008, HSSA launched the


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“Hellas “Hellas Satnet! Home” broadband service, which has much lower tariffs than the “Hellas Satnet! Business”, and mainly targets home users.
 
In 2008,2009, HCL had consolidated revenues of Euro 25.527.5 million and a consolidated profit after tax of Euro 1.86.2 million as compared to consolidated revenues of Euro 22.825.5 million and consolidated profit after tax of Euro 1.51.8 million in 2007.2008. Since HCL’s incorporation, OTEwe contributed initially U.S. $48.8 million and subsequently Euro 149.1 million to finance its share capital. On September 30, 2006, an amount of Euro 149.1 million, equal to the outstanding principal under the intra-group loan between OTEus and HCL, plus accrued interest as of the date of the agreement, was converted into share capital of HCL, which increased OTE’sour interest in its share capital to 99.05%.


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Hellas Sat is currently collaborating with the Greek State to update the concession agreement and Hellas Sat’s special operating license, in order to reflect developments in Hellas Sat S.A.’s business since 2001. In addition, HCL has concluded negotiations with the Republic of Cyprus with respect to the timing and manner of payment of an amount of up to U.S. $11 million, which the Republic of Cyprus claims is payable under the relevant license. The parties have agreed to a price of U.S. $5 million in cash, pursuant to a set payment schedule, and additional consideration of U.S. $6 million in the form of services. Furthermore, HCL will provide for free 600 annual two-way broadband internet services, including the necessary equipment and the satellite transmission of the TV channel and three radio programs of the state Cyprus Broadcasting Corporation.
 
Maritime and Satellite Services — OTESAT Maritel A.E
 
Our subsidiary OTESAT Maritel A.E. manages:
 
 • the provision of Inmarsat satellite services through our land earth station in Thermopylae as well as any other service provided by Inmarsat through its own stations(“Fleet Broadband”);
 
 • the agreements with other Inmarsat land earth station operators for the ocean regions not covered by our satellite teleports, as well as with providers for other satellite systems, such as Iridium and VSAT,VSAT; and
 
 • the whole range of satellite telecommunication and value-added services(“VAS”) portfolio and sales of relevant equipment for maritime, governmental and certain land mobile customers.
Consultancy Services — OTEplus
OTEplus Technical and Business Solutions S.A.(“OTEplus”) was established in 1987, as our consultancy subsidiary. As of February 8, 2007, we hold 100% of the share capital of OTEplus.
OTEplus focuses on new information and telecommunication technologies and management consulting. In 2009, it implemented projects for organizations and companies in the public and private sector, providing integrated consulting services on business and technical issues.
 
Insurance Services — OTE Insurance Agency
 
OTE Insurance Agency S.A., our wholly-owned subsidiary, was established in 1997, and operates as an insurance broker. It collaborates with large insurance companies, along with several international insurance brokers, located in Greece.
B2B eProcurement Services — CosmoOne Hellas Marketsite
We hold a 61.7% interest in CosmoOne, which was founded in 2000 (the minority is held by Greek banks). CosmoOne operates an electronic marketplace and providesbusiness-to-business (B2B) electronic commerce applications. Key services include internet auctions, procurement and channel procurement, invoicing, business intelligence and track and trace solutions.
 
INVESTMENT PROGRAM 2009/20102010/2011 — CAPITAL EXPENDITURE
 
General
 
Over the last year we have been investing in enhancing the capability of our telecommunications networks. Our capital expenditure program currently focuses on mobile services, Internet Protocol services and broadband, expanding backbone network capacity using DWDM and network dimensioning to maintain quality.
 
We expect our Group aggregate planned capital expenditure on network infrastructure for 20092010 to be approximately at the same levels as previous years. We regularly review our planned capital expenditures in order to be able to take advantage of the introduction of new technologies and to respond to changes in market conditions and customer demands.


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Domestic and International Fixed-line Network Upgrading Investments
 
The most significant part of our planned capital expenditure focuses on our new business areas, where we seek to upgrade our network infrastructure to better support broadband services.
The most significant part of our planned capital expenditure focuses on the transition of In that respect, we plan to transform our network to a unified, all-IP, NGN network, able to support all our existing, services as well as new, enhanced services. Therefore,We expect the major investment areas willto include the introduction of a NGNan NG Access Network, transport network expansion in the


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DWDM and IP core areas, and the introduction/development of IPTV, voice over broadband and multimedia services. The major investment areas in theour network are described below.
 
Transmission NetworkNetwork.
We plan  In order to expandaccommodate the increasing national and international traffic, we are constantly expanding our core transmission network, based on DWDM rings. New DWDM rings have been designed for the areas of Athens , Northern Greece and Crete, and are expected to be operational in2009-2010. Furthermore, aA WSS-based DWDM ring with a total capacity of 800 Gbps, interconnecting fiveIP-core PoPs, is expected to bewas completed in 2009. This high-capacityIn 2010, a new DWDM ring is intendedcovering Crete and two new metro DWDM rings in Thessaloniki and Patras are expected to accommodate increased national and international traffic.become operational. Existing DWDM rings are also being expandedenhanced in terms of capacity and number of nodes in order to cover increased national traffic needs. In parallel, a number of new regional NG-SDH rings are being deployed and existing ones are being upgraded.
The capacity of the international submarine link, connecting Greece withto Italy (Kokkini to Bari), will be increased by 70 Gbps.was upgraded to 230 Gbps in 2009.
 
ADSL NetworkIn parallel, we are expanding our regional NG-SDH network, deploying a number of new regional NG-SDH rings and upgrading existing ones.
 
ADSL Network.We plan to expandexpanded our ADSL network in 2009 to meet increasing demand for broadband services. We will continue the expansion of DSLAM PoPs and aim to increase their number to around 1,450about 1,630 within 2009.2010. In addition, a rollout project for ADSL ports is currently in progress, aiming to increaseincreased their number to around 1.551,562,478 million by the endas of December 31, 2009. Approximately 60%62% of these ADSL ports will beare served by Ethernet-based DSLAMs.
 
IP NetworkNetwork.
Ten  At the end of 2009, there were ten IP Core PoPs are in operation (in(one in each of Thessaloniki, Patras, Larissa, Heraklion, Tripoli, Ioannina, Kavala, Kozani and two in Athens). The Athens-Thessaloniki link is 10 Gbps, while all otherAll IP Core PoPs are connected to Athens with 2.5through 10 Gbps links. Core links and equipment at IP Core sites are doubled for protection. IP Core network carries broadband, Metro Ethernet,IP-VPN, and Sizefxis traffic. New terabit routers have replaced the existing gigabit ones in the two PoPs in Athens and in the PoPs of Thessaloniki and Patras. At the end of 2008,2009, 44 BRAS were operational. The developments in the IP Edge network mainly followed the expansion of the Sizefxis project and the demand forIP-VPN services.
 
Metro EthernetEthernet.
At the end of 2008,2009, there were 25 Ethernet Domains located at 15 Ethernet PoPs (Kolleti, Nyma, Marousi, Acropolis, Peristeri, Piraeus, Ermou, Ampelokipoi, Larissa, Tripoli, Patra, Iraklion, Ionnina, Kavala, Kozani). The total number of Metro Ethernet PoPs in Greece was 300800 at the end of 2008.2009.
 
IPTVIPTV.
The provision of IPTV services began with a soft launch in December 2008 (soft launch). In 2008, we provided2008. Since February 2009, IPTV services are available to all customers of Ethernet DSLAM PoPs in five bigthe cities (Athens,of Athens, Thessaloniki, Patras, Larissa,Patra, Larisa and Heraklion). AtIraklio, while at the end of 2009, we expect to provide IPTV services were provided at 56 new PoPs, most of which are capitals of prefectures. In the period2010-2011, IPTV services are expected to be available at all PoPs of 10 Gbps or 2.5 Gbps NG-SDH rings with Ethernet DSLAMs installed. In the future, we expect our network to support more IPTV services, such ascatch-up and nPVR/PVR.
 
Telephony Network &and IP Multimedia SystemsSystems.
Our capital expenditures for switching are minimal due to the complete digitalization of the network. In 2007, the study for the transition to an NGN network was finalized and a migration strategy according to market demand was proposed. The resulting NGN study suggests a ten-year network transformation plan. In 2008, the technical requirements for IMS were defined and detailed test cases were distributed to different vendors in order to participate in the proof of concept(“POC”) tests. These tests will taketook place in our labs during the first half of 2009 and will bewere part of the vendor selection process that should bewhich was completed byat the endbeginning of 2009.2010. The IMS network will be implemented as an overlay to the PSTN network and in the first phase will offer VoIP as second line over


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broadband connection and in the future VoIP as first line. Gradually the PSTN subscribers will be transferred to the IMS which will offer to them multimedia capabilities.
 
Network Management and OSSOSS.
In the following years, we will continue to place emphasis on integrating our various network management systems and expanding the unified network inventory system. We will also focus on support service management processes for broadband services andIP-VPNS through our Service Assurance OSS


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platforms. The network inventory covers our broadband network and supports the provision of broadband services. We expect theThe first versions of Fault, Performance and Service Management software, which are covered by the Service Assurance Project, to bebecame operational during 2009. We aretry to incorporate in the NMS/EMS all network elements that go in operation. We also continuing the consolidationcontinue our efforts for many of the existingto consolidate a few remaining NMS & EMS’s, whichand EMS as required and we expect this task to havebe completed by the end of 2010.
 
Mobile Telephony Investments
 
TheOur mobile telephony investment program includes mainly Cosmote’s continuouscontinuing investments in Romania to upgrade and enhance Cosmote Romania’s and Zapp’s network in both 2G and 3G technologies and gain market share. It also includes further investments in Cosmote’s other international subsidiaries (AMC and Globul) and network maintenance and upgrades in Greece, including further expansion of 2G and 3G and HSPA coverage and improvements in IT systems. See “— Mobile Telephony Services — Greece — Cosmote”).
 
Information Systems
 
Our capital investment program for information systems includes investments primarily aimed at:
 
• automatingend-to-end processes, designed to increase productivity and contain operating costs;
 • providing high quality IT services to both our internal users and end customers in order to support current, and obtain new, revenue sources, swift implementation of services, a high level of customer service and operational superiority over competition;
 
 • the development and operation of integratedretail and wholesale and retailintegrated services and solutions for our customers, with an emphasis on broadband added-value,services, value-added services, content and ICT services;ICT;
 
 • processingdistributing and making availabledeveloping an in-depth understanding of the information regarding our customers and theour operation of the company in order to support the decision-making process at all management levels;
 
 • expanding the implementation of our information systems in the areas of wholesale support systems, OSS, CRM, security, BI, service delivery platform(“SDP”), supply chain management and ERP; and
 
 • improving the infrastructure of our information systems.systems in order to continue providing high quality services and to ensure business continuity.
 
See “— Other Services — Information Technology”.
 
Funding
 
We and Cosmote expect to fund our respective capital expenditures and investments, for the most part, through internally generated funds, mainly cash from operating activities. Similarly, we expect that capital expenditures and investments by our other Greek subsidiaries will be self-financed. We expect our investment program for international operations for 20092010 to be largely self-financed or funded through project finance borrowings.
 
LEGAL PROCEEDINGS
 
We are party to various litigation proceedings and claims arising in the ordinary course of business. As of December 31, 2008,2009, we provided for a reserve of Euro 110.5109.8 million in relation to pending or threatened litigation and claims, the outcomes of which are reasonably subject to estimation. We do not expect that these proceedings, individually or in the aggregate, are likely to have a material adverse effect on our results of operations and cash flows. See also Note 3029 to our consolidated financial statements.


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Greece
 
Regulatory Matters
 
In May 2009, the EETT imposed on us a fine of Euro 2.0 million on us for allegedly exceeding the upper price limit of the retention fee for calls made by our subscribers to subscribers of a mobile network. We have appealed against this decision before the Administrative Court of Appeal, but the hearing of this case has not yet been scheduled. We also intend to seek the suspension of


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this decision before the Administrative Court of Appeal. The case was heard on May 13, 2010 and the Court’s decision is pending. A hearing for this case has also been scheduled for June 9, 2010.
 
In April 2009, the EETT imposed on us a fine of Euro 1.5 million on us for allegedly delaying the provision of the information requested from us for the purpose of cost control. We have appealed against this decision before the Administrative Court of Appeal butAppeal. The case was heard on October 15, 2009 and the hearing of this case has not yet been scheduled. We also intend to seek the suspension of thisCourt’s decision before the Administrative Court of Appeal.is pending.
 
In March 2009, the EETT imposed on us a fine of Euro 7.5 million on us for allegedly delaying the delivery of leased lines to Hellas on Line S.A. We have appealed against this decision before the Administrative Court of Appeal, butAppeal. Our appeal was heard on January 21, 2010 and the hearing of this case has not yet been scheduled. We also intend to seekCourt, with its decision, adjourned the suspension of this decision before the Administrative Court of Appeal.case.
 
In February 2009, the EETT imposed on us a fine of Euro 2.0 million for our alleged refusal to provide the information requested for the purpose of price squeezing control. We have appealed against this decision before the Administrative Court of Appeal, butAppeal. The case was heard on May 12, 2010 and the hearing of this case has not yet been scheduled. We also intend to seek the suspension of thisCourt’s decision before the Administrative Court of Appeal.is pending.
 
In July 2008, the EETT imposed on us a fine of Euro 9.0 million on us for alleged anti-competitive behavior against Tellas. We have appealed against this decision before the Administrative Court of Appeal. The hearing of this case has been adjourned untilwas heard on October 14, 2009.2009 and the Administrative Court of Appeal with its decision reduced the fine to Euro 5.7 million. We also intend to file a writ of cassation before the Council of State.
 
In July 2008, the EETT imposed on us a fine of Euro 2.0 million for our alleged refusal to provide information about the ADSL market. We have appealed against this decision before the Administrative Court of Appeal. The case was heard on May 13,Administrative Court of Appeal, with its decision of September 30, 2009, andreduced the decision is still pending.fine to Euro 100,000.
 
In October 2008, the EETT imposed on us a fine of Euro 11.0 million on us for alleged violations of legislation relating to the reference unbundling offer. We have appealed against this decision before the Administrative Court of Appeal. The hearing of this case has been adjourned untilwas heard on September 24, 2009.2009 and the Administrative Court of Appeal with its decision annulled the aforementioned fine.
 
In July 2007, the EETT imposed a fine on us of Euro 20.1 million on us for alleged abuse of our dominant position in the Greek broadband market. We have appealed against this decision before the Administrative Court of Appeal. The case was heard on October 15, 2008 and the Court’sAdministrative Court of Appeal with its decision on our appeal is still pending.reduced the fine to Euro 10.1 million. We filed a writ of cassation before the Council of State, but the hearing for this case has not yet been scheduled.
 
In July 2007, the EETT imposed on us a fine of Euro 4.0 million on us for alleged violations of legislation relating to our obligation to comply with EETT’s decisions about cost control with respect to tariff year 2003. We have appealed against this decision before the Administrative Court of Appeal. The case was heard on October 15, 2008 and the Court’sAdministrative Court of Appeal with its decision on our appeal is still pending.reduced the fine to Euro 2.5 million. We filed a writ of cassation before the Council of State, but the hearing has not yet been scheduled.
 
In addition, in July 2007, the EETT imposed on us a fine of Euro 1.25 million on us for alleged violations of legislation relating to the Reference Unbundling Offer. We have appealed against this decision before the Administrative Court of Appeal. The case was heard on March 18, 2009 and the Administrative Court of Appeal with its decision is pending.reduced the fine to Euro 0.5 million. We also intend to file a writ of cassation before the Council of State.
 
Furthermore, in October 2007, the EETT imposed on us a fine of Euro 3.0 million on us for alleged violations of legislation relating to the Reference Unbundling Offer. We have appealed against this decision before the Administrative Court of Appeal. TheAppeal and the case was heard on January 20, 2009 and2009. The payment of the fine has been suspended by a ruling of the Administrative Court of Appeal, pending the Court’s decision is pending.on our appeal.
 
On February 2, 2005, the EETT imposed on us a fine of Euro 2.0 million on us for alleged violations of legislation relating to competition in the provision of leased lines. On May 30, 2005, the EETT imposed an additional fine of Euro 1.5 million on us for allegedly delaying in providing access to the local loop. We have appealed against these decisions before the Council of State which, on January 30, 2007, referred the case to the Administrative Court of Appeal. The hearing of the first case was adjourned until December 9, 2009.8, 2010. The hearing of the second case has been adjourned untilwas heard on October 14, 2009.2009 and the decision is pending.


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On February 14, 2003, the EETT imposed fines of Euro 0.3 million on each of Cosmote and Vodafone in connection with the EETT’s decision of March 2002 designating them as organizations with significant market power (SMP) in the mobile market and also in connection with the obligations of SMP organizations regarding the interconnection which these organizations provide to third parties. On April 24, 2003, Cosmote appealed to the Council of State seeking annulment of this fine. The Council of State referred the case to the Administrative Court of Appeal (due to new legislation). The hearing has been postponed for October 14, 2009.case was heard on April 21, 2010 and the decision is pending.
 
In February 2003, the EETT issued another decision designating us, Cosmote and Vodafone as organizations with significant market power in the interconnection market in Greece pursuant to the Interconnection Directive. Cosmote appealed to the Council of State seeking annulment of the decision. The Council of State referredissued decision no. 1631/2009 according to which the case is referred to the Administrative Court of Appeal (due to new legislation). The issueplenary session of the Court’s decision is currently pending. Council of State which will decide on the constitutionality of this provision. The hearing has been postponed until December, 2010.
Organizations designated as having significant market power are subject, among other requirements, to the obligation under the Interconnection Directive to publish Reference Interconnection Offers. We have appealed against the decisions of the EETT concerning the Reference Interconnection Offers for 2002 and 2003 to the Council of State, and the hearings for both of these appeals have been postponed to December 1, 2009.
Following a complaint by the Minister of Development, the EETT held a hearing to investigate whether increases in SMS tariffs announced by Cosmote, Wind Hellas and Vodafone were contrary to the provisions of telecommunications laws and regulations and applicable competition legislation. The hearing was held on May 23, 2005. Because of changes in the EETT’s composition, another hearing was held on November 3, 2005, at which the EETT imposed a fine of Euro 1 million on each company for alleged anti-competitive behavior. Cosmote has appealed this decision before the Administrative Court of Appeal. In 2008, the Administrative Court of Appeal annulled the EETT decision and ruled that no breach of law occurred. EETT may appeal further before the Council of State against the decision of the Administrative Court of Appeal. Nevertheless EETT must refund the fine that Cosmote has paid as soon as the decision of the Administrative Court of Appeal is notified to EETT.until October 12, 2010.
 
The EETT imposed a fine of approximately Euro 0.2 million on us following a petition filed in March 1998 by Forthnet, a Greek internet provider, challenging our failure to provide Forthnet a single access number while providing such single access number to OTENET.OTENet. We have since provided Forthnet, and all the internet providers, with single access numbers and have filed an appeal for annulment of the fine to the Council of State.
The hearing of this appeal was adjourned to December 1, 2009. June 8, 2010.
In January 1999, Forthnet filed a claim in the Court of First Instance for approximately Euro 0.3 million in damages due to alleged tortioustortuous conduct, infringement of competition and telecommunications laws and discrimination in favor of OTENET.OTENet. The decision on this claim was postponed, pending the Council of State’s ruling on our appeal to annul the EETT fine. Forthnet brought the case again before the Court of First Instance and the case is pending.
 
Forthnet has also filed a claim against us for approximately Euro 26.7 million in damages in the Court of First Instance for loss of customers resulting from alleged discrimination by us in favor of OTENET.OTENet. The hearing for this claim, scheduled for April 19, 2007, was cancelled and a new hearing has been scheduled for January 28, 2010.2010, was cancelled.
 
On March 31, 2003, we adjusted our tariffs for leased lines and data telecommunications and introduced a discount package for our corporate customers. The EETT did not approve of our proposed tariffs for leased lines and data telecommunications. However, in the interest of promoting fair competition, the EETT permitted us to implement these new tariffs, notwithstanding that in the EETT’s view we did not provide sufficient evidence of their cost-orientation. If a third-party dispute were to arise regarding the cost-orientation of the new tariffs, we would be obliged to provide sufficient proof of cost-orientation. In a decision dated December 20, 2002, the EETT imposed a fine of Euro 1.5 million and required us to improve the leased lines costing system so that the total costs of leased lines (which are approved by the EETT) could be allocated to individual lines in a different way. Our appealWe have appealed against this decision before the Administrative Court of this decisionAppeal. The case was heard on November 11, 2008 beforeand the Administrative Court of Appeal andwith its decision reduced the Court’s decision is still pending.fine to Euro 0.1 million. We also intend to file a writ of cassation before the Council of State.
 
In late December 2003 and January 2004, the EETT issued a number of decisions imposing reduced tariffs for retail services and wholesale leased lines and mandating the use of current, rather than historic, cost bases, effecting a radical change in the methodology of cost allocation on which the average costs for retail and wholesale leased lines are calculated. The imposition of these lower tariffs had a material adverse effect on our revenues, as these


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lower tariffs remained in effect until November 2004, when the EETT approved higher tariffs based on data derived from our ECOS costing system. We have filed an appeal before the Council of State seeking suspension and annulment of these decisions. The hearing for the suspension of these decisions has not yet been scheduled, and the hearing for their annulment was adjourned to December 1, 2009.October 12, 2010.
 
On November 29, 2006, the EETT imposed a fine on us of Euro 3.0 million for a breach of provisions that regulate carrier pre-selection services. We have appealed this decision to the Administrative Court of Appeal. The


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case was heard on February 12, 2008 and the Administrative Court of Appeal with its decision reduced the fine to Euro 1.0 million. We filed a writ of cassation (appeal on legal grounds) before the Council of State and the hearing has not yet been scheduled.
 
On June 11, 2004, Vitals, Inc. and Victor Shtatnov brought a claim against Econophone S.A., Equant S.A. and us in a Philadelphia court, in the United States, for compensatory damages in excess of U.S. $50,000 plus interest. Plaintiffs’ complaints against Econophone were based on breach of contract, and against us on tortuous interference with the Vitals/Shtatnov and Econophone contracts by terminating Econophone’s access to telephone equipment, linesand/or switches. The defendant, Econophone S.A., has asserted several cross claims against us, including for breach of contract. We have filed motions for dismissal of the claim of plaintiffs Vitals, Inc. and Victor Shtatnov and the cross claim of defendant Econophone Hellas S.A. on grounds of lack of personal jurisdiction and lack of subject matter jurisdiction. The Court dismissed all claims against us. We have filed a counterclaim against Econophone for approximately Euro 7.2 million in unpaid fees. The hearing for this case before the Court of First Instance scheduled for October 8, 2009, was cancelled. We brought the case again before the Court of First Instance and a new hearing has been scheduled for February 2, 2012.
We filed a claim against Greek Telecom in the Court of First Instance for Euro 1.6 million in unpaid leased line fees. The case was heard on March 22, 2006 and the case was adjourned. We brought the case before the Court of First Instance and the hearing is scheduled for January 27, 2011. Subsequently, Greek Telecom filed a counterclaim against us for Euro 45.4 million in damages for alleged breach of contract arising out of our disconnection of telecommunications services. In addition, in February 2006, we filed an additional claim against Greek Telecom for Euro 13.6 million in unpaid fees. Both cases were heard on March 22, 2006, and all claims were dismissed. We and Greek Telecom have appealed the dismissal. Both appeals were heard on October 4, 2007 and were both dismissed. We brought our claim for unpaid fees in the amount of Euro 13.6 million before the Court of First Instance and the hearing of our case was adjourned until May 3, 2012.
In May 2009, Lannet filed a claim against us before the Court of First Instance for an aggregate amount of Euro 175.6 million, claiming restitution for our alleged illegal termination of services. The hearing of this case is scheduled for February 17, 2011.
Tellas filed a claim against us in the Court of First Instance for damages of Euro 4.3 million for losses due to alleged delays in deliveries of leased lines. Tellas filed another claim against us in the Court of First Instance for Euro 2.0 million in damages for our failure to enforce cost-oriented interconnection prices. The hearing for both these claims is scheduled for September 16, 2010.
Teledome S.A. filed five lawsuits against us before the Athens Court of First Instance, claiming an aggregate amount of Euro 8.1 million plus interest for alleged damages incurred by it as a result of our alleged delay in delivering to it leased lines and the application of non cost oriented interconnection charges by us.
The hearings of the above lawsuits were scheduled for various dates in 2007. The first lawsuit (Euro 1.6 million) was heard before the Court on June 6, 2007 and the hearing was postponed, the second lawsuit (Euro 1.0 million) was rejected, regarding the third lawsuit (Euro 0.3 million) the Court postponed the hearing, the fourth lawsuit (Euro 1.6 million) was heard on February 7, 2007 and the Court rejected it and for the fifth lawsuit (Euro 3.6 million) the Court ordered factual investigation. The investigator has already been appointed and the completion of the factual investigation is pending.
Furthermore, Teledome S.A. filed six lawsuits against us before the Athens Court of First Instance, claiming approximately Euro 11.1 million plus interest in damages, due to the suspension of its subscriber’s number portability and due to alleged breach of contractual obligations arising out of disconnection of telecommunication services. Two of Teledone’s lawsuits claiming Euro 4.6 million, were rejected by the Court. Teledome appealed the decision before the Court of Appeals, which rejected it on January 25, 2007. Teledome S.A. appealed against this adverse decision and its appeal was discussed on November 27, 2008 by the Court of Appeals and it was rejected. Teledome’s claim for Euro 0.9 million was also rejected by the Court. Teledome appealed against it and its appeal was heard on November 26, 2009. The outcome of this appeal is pending. The lawsuit of Euro 4.4 million was heard on March 6, 2008 and was rejected by the Court. Regarding the lawsuit of Euro 0.5 million, the Court ordered an expert’s opinion. The expert’s report was filed and after the hearing on December 9, 2009 before the same Court, the


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decision is pending. In relation to the lawsuit of Euro 0.6 million, the Court concluded that the claim up to an amount of Euro 0.3 million was valid. However, both of us and Teledome S.A. appealed against the decision, which was heard on December 4, 2008 and the Court accepted our appeal and rejected Teledome’s appeal.
Finally, Teledome S.A. filed a law suit against us and our CEO before the Athens Court of First Instance claiming Euro 54.1 million plus interest for damages for so called unlawful termination of its leased lines by us which allegedly resulted in Teledome S.A.’s bankruptcy. This claim was heard on March 18, 2009 and March 26, 2009. According to the Court’s decision, the hearing was postponed and Teledome S.A. is required to deposit a guarantee amounting to Euro 1.1 million for court expenses. Teledome S.A. has appealed against this decision before the Athens Multi Member Court of First Instance and the hearing for this case was adjourned until September 29, 2010. As a result of Teledome S.A.’s refusal to deposit a guarantee, we applied for the withdrawal of Teledome S.A.’s appeal, which was also adjourned until September 29, 2010.
Other Proceedings
 
On March 7, 2000, we entered into a memorandum of understanding with Alpha Digital Synthesis S.A. (a Greek company licensed to provide subscriber television services in Greece), and Greek Radio and Television Broadcasting S.A., orMay 14, 2002, ERT (the Greek publicly owned television and radio broadcaster) for the establishment of a joint venture in Greece that would operate as a subscriber television network supported by our digital platform. On January 3, 2002, Alpha Digital Synthesis S.A. filed a claim against us in the Court of First Instance, seeking Euro 55.5 million in damages for an alleged breach of the terms of this memorandum of understanding. In accordance with the terms of the memorandum of understanding, Alpha Digital Synthesis S.A. subsequently withdrew the claim and submitted a request for arbitration according to the Greek Civil Procedure Code on May 7, 2003 claiming approximately Euro 254.2 million. The arbitration court in 2006 ruled in favor of Alpha Digital Synthesis S.A. and awarded Euro 13.0 million. We filed an appeal before the Court of Appeals seeking annulment of this decision, which was heard on November 21, 2006 and was dismissed. We filed a writ of cassation (appeal on legal grounds) before the Supreme Court. The case was heard on May 19, 2008 and was dismissed.
In addition, on May 14, 2002, ERT filed a separate claim against us in the Court of First Instance, for Euro 42.9 million in damages for an alleged infringement of the terms of the samea memorandum of understanding.understanding entered into between us, Alpha Digital Synthesis S.A. and Greek Radio and Television Broadcasting S.A. (ERT) on March 7, 2000 for the establishment of a joint venture in Greece that would operate as a subscriber television network supported by our regional platform. The case was heard on April 21, 2005 and was referred to arbitration. ERT has not yet submitted a request for arbitration according to the rules of Greek civil procedure. In November 2003, ERT filed a lawsuit against us claiming Euro 1.5 million for restitution of moral damage, which will be heard by the Athens Multi-Member Court on June 3, 2010.
 
Based on a share purchase agreement dated December 11, 2001, we sold to Piraeus Financial Leasing S.A., a member of the Piraeus Bank group, our shares in our subsidiary OTE Leasing S.A., a licensed finance leasing company operating in Greece. After the share purchase agreement had been signed, OTE Leasing S.A. changed its name to, and merged with, Piraeus Financial Leasing S.A. Under the terms of the share purchase agreement, we undertook to reimburse Piraeus Financial Leasing S.A. for revenue shortfalls arising out of credit defaults of existing OTE Leasing S.A. customers for three years with respect to movable assets, and five and a half years with respect to immovable assets (such periods beginning upon execution of the share purchase agreement), up to a maximum amount of Euro 28.0 million, net of any collections where our rights were subrogated to Piraeus Financial Leasing S.A. The share purchase agreement provides the terms for this undertaking and for determination of eligible delinquent payment cases. In addition, where we have agreed to indemnify Piraeus Financial Leasing S.A. for the credit losses of OTE Leasing S.A., we shall be subrogated to the rights of Piraeus Financial Leasing S.A. and may pursue debtors independently to recover our payments. Piraeus Financial Leasing S.A. has served various notices on us, requesting payment of an aggregate amount of Euro 38.9 million with regard to unidentified credit losses. We have reviewed the matter with counsel and, to date, have reimbursed Piraeus Financial Leasing S.A. a total of approximately Euro 30.7 million in final settlement of 163 out of the 220 cases cited in these notices, while we have collected from debtors a total amount of approximately Euro 7.12 million. Fifty-seven claims remain outstanding, in respect of which the aggregate amount claimed by Piraeus Financial Leasing S.A. is approximately Euro 6.35 million, of which approximately Euro 3.2 million concern movable assets for which the three year period has expired and Euro 3.2 million concern immovable assets for which the five and a half year period has not expired. Piraeus Financial Leasing S.A. continues to claim the above amount of Euro 6.35 million and have sent us anout-of-court notice to that effect. With respect to 18 of the aforementioned 57 claims relating to finance leases, Piraeus Financial Leasing S.A has brought a claim against us for an amount of Euro 3.4 million. The case was set to go before the Athens Court of First Instance on February 26, 2009, but it was postponed until October 7, 2010.


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A series of rulings of the Athens Administrative Court of Appeal discharged us from liability for stamp duty, surcharges, penalties and interest amounting to approximately Euro 27.9 million assessed by the Greek tax authority for the period from 1982 to 1992. The tax authority appealed these findings to the Council of State, which on April 28, 2004 remanded the three cases to the Court of Appeals to be judged on the merits. The Court of Appeals, judging on the merits, upheld the decisions of the Athens Administrative Court of First Instance, which had held us liable for approximately Euro 11.9 million, which we have fully paid. We have appealed against these decisions before the Council of State to discharge all liability, and our appeal is still pending. The hearings have been scheduled for October 21, 2009.


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On June 11, 2004, Vitals, Inc. and Victor Shtatnov brought a claim against Econophone S.A., Equant S.A. and us in a Philadelphia court, in the United States, for compensatory damages in excess of U.S. $50,000 plus interest. Plaintiffs’ complaints against Econophone were based on breach of contract, and against us on tortious interference with the Vitals/Shtatnov and Econophone contracts by terminating Econophone’s access to telephone equipment, linesand/or switches. The defendant, Econophone S.A., has asserted several cross claims against us, including for breach of contract. We have filed motions for dismissal of the claim of plaintiffs Vitals, Inc. and Victor Shtatnov and the cross claim of defendant Econophone Hellas S.A. on grounds of lack of personal jurisdiction and lack of subject matter jurisdiction. The Court dismissed all claims against us. We have filed a counterclaim against Econophone for approximately Euro 7.2 million in unpaid fees. The hearing for this case before the Court of First Instance has been postponed to October 8, 2009.
We filed a claim against Greek Telecom in the Court of First Instance for Euro 1.6 million in unpaid leased line fees. The case was heard on March 22, 2006 and the case was adjourned. We brought the case before the Court of First Instance and the hearing is scheduled for January 27, 2011. Subsequently, Greek Telecom filed a counterclaim against us for Euro 45.4 million in damages for alleged breach of contract arising out of our disconnection of telecommunications services. In addition, in February 2006, we filed an additional claim against Greek Telecom for Euro 13.6 million in unpaid fees. Both cases were heard on March 22, 2006, and all claims were dismissed. We and Greek Telecom have appealed the dismissal. Both appeals were heard on October 4, 2007 and were both dismissed. We brought our claim for unpaid fees in the amount of Euro 13.6 million before the Court of First Instance and the hearing of our case is scheduled for March 4, 2010.
In May 2009, Lannet filed a claim against us before the Court of First Instance for an aggregate amount of Euro 175.6 million, claiming restitution for our alleged illegal termination of services. The hearing of this case is scheduled for February 17, 2011.
We have filed claims against two of our suppliers, Intracom S.A. and Siemens, in connection with disputes involving the supply of telecommunications equipment. In 1992 and 1993, we invited tenders for the supply of telecommunications equipment, and due to various delays in finalizing the outcome of such tenders and our urgent need for the equipment, we ordered and received equipment from Intracom and Siemens. We accepted and paid for the equipment on the understanding that, in the event the contracts were subsequently awarded to these suppliers and the contract price was lower than the price that was previously paid for the equipment, Intracom and Siemens would reimburse us for any such differential in free equipment and services. Tenders were in fact awarded to these suppliers, and the contract price was lower than the price at which the equipment had been supplied. We sought to reclaim the difference, which amounted to approximately Euro 29.8 million, and when Intracom and Siemens refused to reimburse this amount in free equipment and services, we filed two claims on September 26, 1994 against Intracom S.A and Siemens before the Athens Court of First Instance in the amount of Euro 15.5 million and 14.2 million respectively. The proceedings relating to Intracom S.A are in the stage of witness examination. The final hearing of the claim against Siemens took place on May 28, 2009 before the Athens Court of First Instance, following conclusion of the witness examination procedure. Neither case is expected to be concluded in the near future.
We are involved in four disputes before theThe Court of First Instance of Athens relating to franchise agreements for our retail telecommunications equipment outlets:
• Helias Koutsokostas & Company Limited Partnership filed a claim against us alleging Euro 7.9 million in damages. The hearing was initially scheduled for October 13, 2005 and rescheduled for February 21, 2008, in order to be heard in conjunction with a counterclaim that we filed against the plaintiff for Euro 0.7 million in damages. Both cases were adjourned.


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• K. Prinianakis S.A. filed a claim against us alleging Euro 10.9 million in damages. The hearing, initially scheduled for January 27, 2005, was adjourned twice and rescheduled for November 15, 2007. We terminated the franchise agreement and filed a counterclaim against K. Prinianakis S.A. for Euro 0.3 million in damages. The claim of K. Prinianakis S.A. was heard on November 15, 2007, and the Court partially accepted a claim up to Euro 60.5 thousand. Our claim was heard on November 13, 2008 and the decision is pending.
Regarding an earlier claim for unpaid invoices, in 2003, the Court of First Instance of Athens issued a decision holding K. Prinianakis S.A. liable for the full amount ofrejecting our claim, which K. Prinianakis S.A. appealed unsuccessfullyclaim. The Decision was officially served on December 7, 2005. A new hearing of the case was scheduled for December 12, 2007, but was cancelled. A new hearing date had been scheduled for May 13, 2009 but has now been adjourned untilus on February 10,17, 2010 and we filed an appeal on March 17, 2010.
 
• DEP Info Ltd. filed a claim against us, alleging Euro 6.8 million in damages. We filed a counterclaim against DEP Info Ltd. for Euro 1.7 million in damages. Both claims were heard on March 9, 2006, and the court rejected DEP Info Ltd’s claim in its entirety. DEP Info Ltd filed an appeal which was heard before the Athens Court of Appeals on January 24, 2008. The Court of Appeal rejected the appeal and claim in its entirety, and ordered further investigation in order to calculate the exact amount of our claim.
• Infoshop S.A. filed a claim against us alleging Euro 7.0 million in damages. A hearing scheduled for January 27, 2005 was adjourned and rescheduled for November 15, 2007. The claim was heard on November 13, 2008. The court issued its decision in June 2009, rejecting Infoshop S.A.’s claim.
Tellas has filed three claims against us in the Court of First Instance, for an aggregate of Euro 16.6 million in damages resulting from a breach of provisions that regulate carrier pre-selection services. These cases were heard on May 2, 2007, and they were all dismissed. Tellas filed an additional claim against us in the Court of First Instance for Euro 4.2 million in damages, also resulting from a breach of provisions that regulate carrier pre-selection services, which Tellas withdrew prior to the hearing that was scheduled for January 11, 2006.
Tellas also filed a claim against us in the Court of First Instance for damages of Euro 4.2 million for losses due to alleged delays in deliveries of leased lines. Tellas filed another claim against us in the Court of First Instance for Euro 2.0 million in damages for our failure to enforce cost-oriented interconnection prices. The hearing for both these claims is scheduled for September 16, 2010.
Teledome has filed a number of claims against us. Teledome filed two claims in the Court of First Instance for up to Euro 1.6 million each in damages for our failure to enforce interconnection prices for the years 2002 and 2003. The first case was heard on February 7, 2007, and was dismissed. The second case was heard on June 6, 2007 and the Court adjourned the case, but the hearing has not yet been scheduled. Teledome filed an additional claim against us in the Court of First Instance for damages of Euro 3.6 million from losses due to alleged delays in deliveries and for restitution in the provision of leased lines. This case was heard on February 28, 2007, and the Court ordered an expert’s opinion. Teledome filed two more claims against us in the Court of First Instance for an aggregate amount of Euro 4.6 million, for damages resulting from a breach of provisions that regulate carrier pre-selection services. Both of these claims were dismissed, on November 16 and December 7, 2005. Teledome appealed the dismissals, and the cases were heard before the Court of Appeal on January 25, 2007 and both appeals were dismissed. Teledome brought the case before the Court of Appeal again. Both cases were heard on November 27, 2008 and the decision is still pending. Teledome filed another claim against us in the Court of First Instance, for a total amount of Euro 4.4 million, claiming restitution for our illegal termination of services. The case was heard on March 6, 2008 and was dismissed. Teledome filed one more claim against us and our Chairman and Managing Director, Mr. Vourloumis, in the Court of First Instance for an aggregate amount of approximately Euro 54 million, claiming restitution for our illegal termination of services which allegedly caused her bankruptcy. The case was heard on March 18, 2009 and on March 26, 2009 and the decision is pending.
In November 2003, we were informed that the board of directors of the Pension Fund of the Personnel of Newspapers in Athens and Thessaloniki had made a decision that we would no longer be exempt from paying a social duty for advertising, which is a tax ranging from 16% to 21.5% of the price of all advertisements we place in newspapers, magazines, radio and television. On January 15, 2004, we appealed this decision. A hearing was held


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on September 27, 2004, in the Athens Administrative Court of First Instance. The court issued its decision in July 2005 discharging our obligation to pay the above-mentioned social duty. The Pension Fund of the Personnel of Newspapers in Athens and Thessaloniki and other journalists’ organizations have appealed the Court of First Instance’s decision to the Athens Administrative Court of Appeal. The case was heard on March 9, 2007, and on November 27, 2007 the Court of Appeal issued its decisions No. 4113/2007, No. 4114/2007 and No. 4115/2007 ruling that the No. 1831/16.10.03 decision of the Pension Fund of the Personnel of Newspapers in Athens and Thessaloniki, which was appealed on January 15, 2004, is unenforceable, and dismissed our appeal on these grounds. By virtue of Law 3470/2006, only public utilities that are majority-owned by the state will be exempt from liability for the above-mentioned taxes.
Timeapply Ltd.(“Timeapply”) has filed a claim against us in the Court of First Instance for Euro 17.3 million for restitution due to damage caused by alleged patent infringement, as a result of our sale and advertisement of a prepaid telephone card called “Promocard”. The case was heard on January 22, 2009 and the Court concluded that the case should be heard before a decision is pending.competent Court. The hearing was scheduled for April 14, 2010, when it was adjourned. In addition, Timeapply filed a claim against us in the Court of First Instance for Euro 68.4 million for alleged breach of a decision of the Court of First Instance granting an injunction prohibiting distribution of “Promocard”. The Court of First Instance rejected the claim and Timeapply filed an appeal, which was heard on May 12, 2009; a decision has not yet been issued.2009. The Court rejected the appeal.
 
Germanos is involved in certain disputes before the Court of First Instance of Athens relating to franchise agreements for Germanos’ chain of retail stores. All plaintiffsPlaintiffs filed these claims against Germanos for alleged infringements of certain terms of the franchising agreements, alleging in total approximately Euro 15.227.2 million in damages.damages, while two of them (former franchisees of Germanos) have also addressed complaints to the Greek Competition Committee, which on April 2010, initiated an investigation regarding Germanos’ franchise agreements; the investigation is ongoing and Germanos is cooperating with the Greek Competition Commission. The hearings willof the court cases before the Court of First Instance of Athens are scheduled to take place within 2009in 2010 and 2010,2011, except for one case thatwhich was heard in January 2009. By virtue of decision No 4414/2009 the decision of which is still pending.this case was rejected. In addition, a former commercial agent of Germanos filed a claim alleging Euro 1.1 million plus interest in damages resulting from a breach of provision of the airtime bonus due to the termination of Germanos contract with Vodafone S.A. The case was heard in April 2009 and by virtue of decision No 5679/2009 it was rejected. The former commercial partner of Germanos appealed the decisioncase. The appeal is still pending.to be heard in January 2011.
On May 12, 2010 Telecom Slovenije, which acquired Cosmofon from Cosmote, sent to Cosmote notice of claims relating to alleged breaches of warranties and indemnity provisions under the relevant share purchase agreement signed on March 30, 2009; these claims amount to approximately Euro 9.3 million. Cosmote considers these claims unsubstantiated and unfounded and intends to take necessary actions to oppose them.
 
On February 24, 2006, Fasma Advertising Technical and Commercial S.A. filed a claim against us in the Athens Court of First Instance for Euro 9.1 million plus interest for breach of certain terms of a supply contract. The hearing was scheduled for November 8, 2007. Fasma Advertising Technical and Commercial S.A. then filed a claim against us on September 6, 2007 before the same court, withdrawing its previous claim and claiming the amount of Euro 8.7 million plus interest. The hearing was set for November 8, 2007 and was adjourned until October 23, 2008. The case was heard on October 23, 2008. On May 14, 2009, the Court rejectedof first Instance issued its decisionNo 3186/2009 rejecting the claim. Fasma Advertising Technical and Commercial S.A. filed an appeal before the Athens Court of Appeals. The hearing is scheduled for October 7, 2010.
 
The Municipality of Thessaloniki imposed a series of fines against us, for the period from 1999 to 2007, in an aggregate amount of approximately Euro 15.0 million. We have appealed these fines before the competent administrative courts. The courts held in our favor for the year 2001, in the first and second instance. The Municipality of Thessaloniki has appealed these decisions to the Council of State. The hearings are still pending.


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In addition, a number of our employees and pensioners have filed various claims relating to compensation issues or other benefits.
 
The Greek tax authorities imposed a capital levy of Euro 14.0 million on OTE Estate, which appealed against this decision to the competent Administrative Courts of Athens on October 15, 2008. The hearing of the case is still pending.
Criminal Proceedings
 
Germanos acquisition case.In 2007, the District Attorney of Athens commenced a preliminary investigation with respect to the propriety of the acquisition of Germanos by Cosmote (see “4.B Business Overview — Mobile Telephony Services — Greece — Cosmote — Germanos S.A.”Germanos”) following the submission of a report by a number of members of the opposition party of the Greek Parliament, which claimed among other things that the acquisition was not in the business interest of Cosmote. During the course of the preliminary investigation, members of the board of directors of Cosmote at the time of the acquisition of Germanos were called and requested to submit explanations in connection with this case. Following the completion of the preliminary investigation, an investigating judge (the 20th Investigating Judge of Athens) was appointed to lead a formal criminal investigation in connection with the potential perpetration of offences. The investigating judge initiated criminal proceedings against the members of the board of directors of Cosmote at the time of the acquisition of Germanos, investigating alleged abuse of trust (“Apistia”). Upon conclusion of the criminal investigation, a decision will be made on whether an indictment is warranted. Four of the then members of the board of directors of Cosmote, Mr. Vourloumis,


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Mr. Apostolidis, Mr. Ioannidis and Mr. Mavrakis, are still members of the current board of Cosmote and three of them are senior executives of our Group. In addition, the investigating judge ordered the appointment of two independent accounting firms to conduct an expert investigation in order to assess whether the consideration for the acquisition of Germanos (of approximately Euro 1.5 billion for 99.03% of the share capital of Germanos) was reasonable in view of business judgment and internationally accepted and customary financial and contractual practices, and whether the acquisition resulted in financial detriment to Cosmote, and, in that event, to assess the amount of such detriment. To the extent we may so be requested, we intend to cooperatedetriment Cosmote has cooperated in relation to this investigation. The expert’s report prepared by the independent accounting firms was submitted to the Investigating Judge on March 17, 2010 and concluded that the price paid by Cosmote for the acquisition of Germanos was fair and that Cosmote did not suffer loss or damage as a result of the acquisition (rather the acquisition was to the corporate benefit of Cosmote).
 
In conjunction with the matter of the acquisition of Germanos by Cosmote, the Administrative Court of Appeal recently repealed a fine that had been imposed by the Greek Capital Markets Commission on Mr. Panos Germanos and other directors of Germanos in connection with alleged manipulation of the share price of Germanos prior to the time of the acquisition, judging that no manipulation had taken place.
 
Siemens AG case.The District Attorney of Athens has conducted a preliminary investigation in connection with allegations of bribery, money laundering and other criminal offences committed in Germany and Greece by employees of Siemens AG and a number of Greek government officials and other individuals, relating to the award of supply contracts to Siemens AG. In connection with the investigation, the District Attorney has investigated, among other matters, the propriety of, and allegations of criminal conduct in connection with, our framework contract 8002/1997 with Siemens AG, and various equipment orders pursuant to that framework contract in the period following its signing and up to 2004. Framework contract 8002/1997 was signed on December 12, 1997 and related to the supply to us by Siemens AG of equipment for the digitalization of our network. In connection with this preliminary investigation, we have provided to the investigating authorities certain documents requested. Following the conclusion of the preliminary investigation, criminal charges were filed and an investigating judge (the 4th Special Investigating Judge of Athens) was appointed to lead a formal criminal investigation. To the extent so requested, we have cooperated and intend to continue to cooperate with the competent authorities in relation to this investigation. We understandIt is understood that, as part of the same investigation, Mr. George Skarpelis, a former senior executive of our Group, was charged for certain criminal offences, including receipt of bribes, and that in May 2009 Mr. Skarpelis was remanded in custody pending his trial for the same charges.charges and was subsequently released. Mr. Skarpelis has served as our Delegate Managing Director from 1998 until 1999 and as our Deputy Managing Director from 1998, and Delegate Vice-Chairman from November 2000, until May 2004 when he left our Group.


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In connection with this criminal process, we have already taken the necessary legal action before the investigating judge in order to assert our civil rights with respect to any damages we may have incurred as a result of any criminal offences committed. As a result, we were recently permitted access to the file documents of the case, which we are in the process of reviewing.
 
In relation with the same criminal investigation, the District Attorney of Athens is conducting a preliminary investigation, concerning contracts with Siemens entered in 2006 for ArmenTel, the Armenian public telephony operator, in which we held an interest of 90% which we sold in November 2006.
In connection with the above matter, we have also, in a number of instances, applied to the Public Prosecutor of Munich, who has been conducting a criminal investigation on the Siemens AG matter, for permission to access the relevant files of the criminal investigation conducted by the German authorities into this matter, but our requests haveand on February 26, 2010, we were granted limited access to date been denied.the relevant files. In addition, we have requested Siemens AG to provide us with information and documents from its own files and investigations relating to the alleged offences, but our requests were denied. In July 2008, we filed a claim before German courts, requesting Siemens AG to disclose and produce relevant information and documents, including any that were provided to Greek judicial authorities for their investigations. The court hearing was adjourned, following our request, in order for us to evaluate the material received from the German authorities.
 
We intend to continue to cooperate with the competent authorities in relation to this investigation and to seek disclosure of relevant documents and information in order to investigate the matter. We also intend to seek compensation before Greek and German courts with respect to any damages we may have incurred as a result of illegal conduct by either third parties, or former and current employees of our Group.
 
Maintenance contracts case.Following the conclusion of a preliminary investigation, an investigating judge (the 2nd Investigating Judge of Athens) was appointed to lead a formal criminal investigation into the potential perpetration of offences in connection with the propriety of technical maintenance contracts of ours with three of our suppliers (Siemens, Intracom and Anco). In June 2009, the investigating judge initiated criminal proceedings against members of our Board of Directors and a member of our senior management serving at the time of signing of the relevant contracts, in 2004 and 2005, investigating alleged abuse of trust(“Apistia”). ThreeOn December 27, 2009, the District Attorney of these members,Athens submitted a proposal to the Judicial Council in relation to four of the defendants, including Mr. Vourloumis, Mr. Dimitriou,our CEO and Chairman of our Board, Mr. Tampourlos, are still members of oura current Board, whereas Mr. Ioannidis


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(member of our senior management) is currently C.E.O.Board and Chairman of our Audit Committee, Mr. Ioannidis, Managing Director of RomTelecom, and Mr. Bitros, a former member of our significant subsidiary. The investigationBoard. Consequently, the Judicial Council is expected to continue withissue either an exoneration order, or an order referring the involved individuals testifying in connection with the case. Upon conclusion of the criminal investigation, a decision will be made on whether an indictment is warranted.
To the extent so required by us, we have cooperated in relationdefendants to the above inquiries and provided information so requested, and intend to continue to do so in the future.trial.
 
Other cases. In addition to the above, we have been involved in a number of criminal investigations relating to matters in the ordinary course of our business.
 
Romania
 
On December 27, 2001, a fine of RON 7.8 million (approximately U.S. $2.3 million), was imposed on RomTelecom by the Romanian tax authority for unpaid profit taxes, VAT and penalties. This amount was determined based on the reclassification of certain expenses made by RomTelecom under a commercial contract with the company ArThema International for the processing of customer databases for printing telephone books as non-deductible expenses. In 2002, RomTelecom paid the full amount of the fine. Concurrently, a criminal investigation against the two former chief executive officers of RomTelecom was initiated in relation to this contract, but no criminal proceedings commenced. RomTelecom appealed the findings of the tax authority, but the Ministry of Public Finances adjourned the case pending outcome of the criminal investigation. RomTelecom’s appeals of the Ministry of Public Finances’ decision were rejected by the Court of Appeals and the High Court of Justice. Currently, the criminal investigation is still pending. Depending on the result of the criminal investigation, RomTelecom may be entitled to request reactivation of the civil proceedings.
In July 2006, the ANCOM, the Romanian regulator, imposed on Orange and Vodafone, the two major mobile operators in Romania, the gradual reduction, until 2009, of their interconnection tariffs. The two mobile operators appealed this decision before the courts. In order to protect its interests, RomTelecom joined the proceedings and became a party to this litigation supporting the position of ANCOM against Orange and Vodafone. Vodafone and Orange waived their actions filed against ANCOM and the court took note of this aspect on March 25, 2008, and June 25, 2008, respectively. The case is now closed.
In December 2006, the ANCOM amended its July 2006 decision on mobile interconnection tariffs with a result more favorable to Orange and Vodafone. Consequently, RomTelecom filed claims against the ANCOM, as well as Orange and Vodafone, seeking annulment and suspension of this decision. RomTelecom waived the claim filed against Vodafone and Orange and the court took note of this aspect on March 25, 2008 and June 19, 2008 respectively. The case is now closed.
 
In July 2006, the Competition Council launched an investigation involving RomTelecom, as well as the two large mobile operators, Orange and Vodafone, following a complaint filed by the alternative operator Netmaster in relation to alleged abuse of dominant position by these three large operators. Netmaster alleged that RomTelecom restricted its ability to terminate its customers’ calls in RomTelecom’s network and that RomTelecom delayed the increase of interconnection capacity Netmaster had requested without reasonable justification. The Competition Council will also review the matter of a potential agreement between RomTelecom, Orange and Vodafone to restrict Netmaster’s ability to develop its activities in the market. The Competition Council’s investigation is ongoing. In November 2009, a dawn raid by the Competition Council took place at RomTelecom’s premises and copies of some documents were taken. The Competition Council’s investigation is ongoing.
 
RomTelecom is involved in a dispute with certain individuals over the ownership of a plot of land located in Bucharest, next to Floreasca Lake, with a surface area of approximately 15,000 square meters. RomTelecom prevailed in the first instance in the Bucharest Tribunal, while the opponents won the first appeal in the Court of Appeals, which the High Court of Justice on March 9, 2007 overturned and remanded to the Court of Appeals for re-examination of all the evidence and consideration on the merits. The file is pending in the Court of Appeals in Bucharest. The case has been postponed pending the completion of the topographical survey. A technical expert was


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appointed to perform a topographical survey. The last hearing was on June 26, 2009. The Court of Appeals rejected RomTelecom’s appeal, based on the grounds that the Court cannot compare RomTelecom’s title of property with that of the defendant. We consider the decision of the Court of Appeals as being a refusal to judge our appeal. Therefore, due to the fact that the decision did not find favor with both parties, both parties submitted a second appeal to The High Court of Justice. The next hearing will be on June 4, 2010.
 
RomTelecom is involved in another dispute with a company called Dunarea International over the ownership of another plot of land located in Bucharest, next to Straulesti Lake, with a surface area of approximately 5,700 square meters and a building located on it. RomTelecom won the case in first instance and on appeal and took


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possession of the property. The opponent’s appeal is pending in the High Court of Justice. The Supreme Court rejected the second appeal and the decision remained final and irreversible in favor of RomTelecom.
As part of the “Knowledge Economy Project,” which involves providing internet services to schools, the MCIT allocated a large number of contracts to RomTelecom and Sysware. Orange filed an appeal with the Bucharest Court of Appeal challenging a lower court decision which enforced MCIT’s allocation. The Bucharest Court of Appeal made a ruling but referred a constitutional question, raised by Orange S.A., to the Constitutional Court. The constitutional question relates to the fee Orange owes for the annulment of the contract between RomTelecom and MCIT. The Constitutional Court decided in favor of RomTelecom, which means that Orange must either pay a significant fee or withdrawregistered its claim relating to the annulment of the contract. The hearing is set for September 8, 2009 and the main proceedings have been stayed pending the resolution of the constitutional question before the Constitutional Court. In connection with this case, the Court of Appeal rejected Orange’s request for the suspension of the contract. Orange has aexclusive right of appeal after the court issues its decision to the parties.
In June 2007, RomTelecom and Konstanza S.A. Atena(“Konstanza”) began mediation proceedings to amicably resolve Konstanza’s claim for Euro 8 million due to an alleged breach of contract by RomTelecom. Representatives from both companies met on July 9, 2007, but were unable to reach a settlement. Although Konstanza thereafter initiated court proceedings with the Bucharest Tribunal, Commercial Section VI, the trial was suspended on procedural grounds, and Konstanza has failed to comply with the procedural rules and to pay the required fees, which will resultproperty in the annulment of the proceedings unless Konstanza appeals within the specified time period. Konstanza submitted a clarification to the initialland register. The case regarding the payment of Euro 8.0 million resulting from the failure to perform obligations assumed under a civil work contract, and requested the Court to compel RomTelecom to execute the framework agreement, concluded in 2000, and consequently award to it construction works in the amount of Euro 20.6 million.
On May 23, 2008, the Bucharest Tribunal dismissed Konstanza’s claim. The decision issued by the Court remained final and irrevocable in favor of RomTelecom.was closed.
 
The Romanian tax authorities have audited RomTelecom for the period from July 2001 through December 2005 in relation to all direct and indirect taxes, except for local property taxes and custom duties. The audit was completed on March 25, 2008, and determined an additional tax liability of RON 64.3 million, inclusive of penalties, or approximately Euro 17.2 million. This amount was increased by approximately RON 4.5 million or approximately Euro 1.5 million in penalties due to late payment. RomTelecom has paid the additional taxes owed, but appealed certain elements of the audit and the penalties. The Romanian National Fiscal Agency rejected our administrative appeal and RomTelecom appealed to the Court of Appeal.
 
RomTelecom has filed an action against the Romanian National Fiscal Agency(“ANAF”) contesting the amount of RON 38.9 million established by the fiscal documents in relation to social security taxes and the method of profit tax and the relevant penalties. In the course of 2008, we paid all amounts contested in this case, in order to avoid any future penalties. The dispute is pending before the Bucharest Court of Appeals. The Court of Appeals has rejected RomTelecom’s appeal but the decision has not yet been issued. Once the decision is issued, RomTelecom will have a right of appeal. RomTelecom appealed against the decision of the High Court of Justice. On March 17, 2010, the High Court of Justice, by admitting in part RomTelecom’s appeal, has annulled, in part, two fiscal decisions issued by ANAF regarding the financial penalties for late payment, these being for “90% tax on profit” for income from rents in the amount of RON 12.4 million (approximately Euro 3.1 million). The decision is irrevocable. However, any one of the parties can make a special appeal against the decision. RomTelecom asked the High Court of Justice to make a supplementary pronouncement in the sense that ANAF is obliged to repay the above mentioned money to RomTelecom, as a result of the annulment, in part, of the two fiscal decisions issued by ANAF.
 
In 2008, the Romanian government awarded a national license for radio frequencies 410-415/420-425 to RomTelecom, which submitted an offer in the relevant tender process.
SC Vodafone Romania, Telemobil S.A., RCS&RDS, and Orange Romania brought a case before the Romanian courts requesting the suspension of enforcement of the relevant government decision (No. 61/2008) which awarded the license. Following that, RomTelecom filed an intervention request in relation to that case, in respect of its own interest and the interest of the Romanian Government. The court suspended the case but has since reopened it. After the case was reopened, the court rejected the petition of SC Vodafone Romania, Telemobil S.A., RCS&RDS, and Orange Romania, but the petitioners have a right of appeal.
 
In addition to the above suspension request, Vodafone applied to the Romanian courts requesting the annulment of the same government decision regarding the award of a national license for radio frequencies 410-415/420-425 to RomTelecom. In connection with this case, RomTelecom also filed an intervention request in respect of its own interest and the interest of the Romanian Government,government, requesting the court to cancel the action by


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Vodafone and to maintain the enforcement of the relevant government decision. The Bucharest Court of Appeals rejected the action brought by Vodafone and the other claimants. The claimants are entitled to appeal this decision. Vodafone appealed against the decision and the dispute is pending with the High Court of Justice.
 
In connection with the same government decision, Vodafone requested the court, in opposition with the ANC and RomTelecom, the cancellation of the National License for using radio frequencies in order to provide data network and mobile electronic communications services in frequency bands410-415 / 420-425 issued by the ANC for RomTelecom on September 23, 2008. TheOn February 16, 2010, the dispute is pending withwas suspended by the Bucharest Court of Appeals withuntil after the next hearing scheduled for September 8, 2009.litigation regarding the annulment of the government decision no. 61/2008.
 
On May 29, 2008, the General Council of Bucharest(“CGMB”) issued Decision No. 252 regarding the location in the underground of communication equipments. Pursuant to this decision, electronic communications operators are required to relocate their networks (underground and belowground) on the Netcity route or Netcity network neighbourhoodneighborhood only in spaces provided by Netcity, the Bucharest metropolitan optical fiber network for telecommunications. In addition, the same decision requires operators to provide the local authorities with certain


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information including plans, construction and authorizations, regarding the current electronic communications network. For the networks located without construction authorization, the penalty will be the cancellation of the networks. Moreover, it is established that the owners/managers of the infrastructure that allow the placement of electronic communications networksand/or the equipments belonging to persons who do not have constructions authorizations will be sanctioned. RomTelecom has already filed an administrative complaint against this decision, but it was rejected. The CGMB issued a new Decision outlining the methodology rules for the implementation of Decision No. 252/2008. The most important aspect of RomTelecom’s proposal, being the right to opt for RomTelecom’s network or the Netcity network, was included in the new Decision of the CGMB.
 
CGMB planned to issue, in the near future, the methodology rules for the implementation of DecisionNo. 252/2008. RomTelecom has sent its proposals regarding the amendment of these rules and some of them have already been accepted by the CGMB in the draft of the new decision. After the public consultation procedure, the most important of RomTelecom’s proposals — the right to opt between RomTelecom’s network and the Netcity network — has been included in the new decision of the CGMB. On the basis that the most important aspect of RomTelecom’s proposals, the “the right to opt”, was included in the new Decision, RomTelecom decided not to appeal against the Decision.
Cosmote Romania
In September 2008, Cosmote Romania challenged before the Romanian Courts the Fiscal Decision issued by the fiscal authorities, following the tax audit in 2007. The fiscal authorities considered that some of the expenses made by the company in the years 2004, 2005 and 2006, amounting to approximately Euro 5.8 million, should not have been deducted. On October 22, 2008, the Court decided to rule in favor of the plea of lack of competence for ruling on the Cosmote Romania claim, and it sent the case to be judged before the Court of Appeal, Section IX for Contradictory and Fiscal litigations. The next hearing is set for June 23, 2010.
 
Albania
 
On April 26, 2006, the regulatory authority of Albania (Electronic and Postal Communications Authority) issued decision No. 286/26.4.2006, designating AMC as an operator with significant market power in the call termination and mobile telephony markets for the period from May 1, 2006 to May 1, 2007. This requires AMC to provide the other operators with equal treatment and authorizes the regulatory authority to regulate this obligation as well as AMC’s call termination rates. AMC has accepted the designation as an operator with significant market power in the call termination market, but has appealed this designation in the mobile telephony market. The regulatory authority upheld this designation, which AMC has further appealed to the Tirana District Court.
On May 2, 2007 the regulatory authority issued decision No. 358/30.04.2007, extending the validity of the above-mentioned Decision No. 286/26.4.2006. AMC has challenged this decision unsuccessfully before the regulatory authority. In July 2007, AMC appealed to the Court of Tirana. Meanwhile, the regulatory authority issued Decision No. 396/18.09.2007, recalling the above-mentioned decision and designating AMC as an operator with significant market power in the call termination and mobile telephony markets for an undetermined period. On May 12, 2007, AMC filed a lawsuit in the Tirana District Court against the regulatory authority’s decision. The Tirana District Court rejected AMC’s claim. AMC then appealed this decision before the Appeals Court, which ruled in favor of AMC and remanded the case to the Tirana District Court for retrial. The preliminary hearing has already taken place and the first hearing took place on February 12, 2009. On May 4, 2009, the Tirana District Court issued a decision rejecting the claim of AMC and AMC appealed against this decision on May 22, 2009. The Court of Appeal will schedule a hearing date.
As of December 31, 2008,2009, the Albanian fixed telephony operator, Albtelecom, was found liable toowes AMC for an amount ofapproximately Euro 32.624.4 million for interconnection fees since January 2001 and termination of transit of rural operators’ traffic toterminated by Albtelecom. Albtelecom also owes AMC and for approximately Euro 7.2 million due to discrepancies in the measurements used to determineof interconnection fees. According to the terms of the interconnection agreement, disputeseventual differences between the parties are toshall be resolved throughsolved by arbitration beforein front of the International Chamber of Commerce in Paris.


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On December 12, 2005, the Albanian Competition Authority imposed a fine of approximately Euro 1.4 million (1% of the company’s turnover for 2004) on AMC for an alleged delay in responding to a request for information and provision of documents in connection with the conduct of an investigation. On January 4, 2006,14, 2010, AMC filed two petitions in the Tirana District Court against the Competition Authority seeking annulment of the decision requesting information and the commencement of the relevant investigation, as well as the decision imposing the fine, as the request for information had been timely dispatchedsubmitted to the Albanian Competition Authority. On July 7, 2006,International Chamber of Commerce a Request for Arbitration for a total claimed value of Euro 45.5 million, related to disputed amounts under the Tirana District Court rejected AMC’s petitions, and AMC appealed. The Appeals Court has annulled the decision of the Tirana District Court and ordered that the case be re-tried. The Albanian Competition Authority has also appealed against the decision of the Court of Appeal before the Supreme Court. The case is pending.2000 Interconnection Agreement.
In November 2008, AMC proceeded with a settlement with the Albanian tax authorities concerning a tax charge and penalties of approximately Euro 6.7 million imposed on it in 2007. AMC paid a settlement amount of approximately Euro 3.6 million, which had little impact on its financial results, as its financial reports included adequate provisions for tax obligations.
On November 9, 2007 the Albanian Competition Authority imposed on AMC a fine amounting to approximately Euro 1.7 million for an alleged abuse of their dominant position by charging unfair prices from 2004 to 2005. AMC considered the Albanian Competition Authority’s decision unfounded and appealed to the Tirana District Court in order to protect its legal rights. The Court rejected AMC’s claim. AMC plans to appeal the decision.
The Albanian association Albautor, which manages intellectual property rights of composers and musicians, has requested payment from AMC, as of the second half of 2006, in the amount of one euro per subscriber for the ringtones pre-installed in mobile phonesand/or downloaded by the subscribers through these mobile phones. In December 2007, AMC filed an administrative appeal with the Albanian Copyright Office. In April 2008, the Albanian Copyright Office rejected AMC’s administrative appeal and AMC has started civil proceedings against the Albanian Copyright Office for the revocation of the above decisions. The case is pending.
 
Bulgaria
 
On June 20, 2006, the CRC designated Globul as an operator with significant market power in the mobile telecommunications and services market. Pursuant to such designation and under applicable legislation, Globul is subject to obligations for the equal treatment of other operators, transparency and confidentiality. These obligations, confirmed by the competent courts, shall remain in force until new market analyses are carried out and new remedies are imposed in compliance with the Bulgarian Electronic Communications Act. Following market analysis in March 2009, CRC determined Globul, Mtel and BTC as having significant market power in the area of voice call termination on individual mobile networks and introduced the following remedies: glide-path on the rates for traffic termination in mobile networks,fixed-to-mobile andmobile-to-mobile wholesale termination rates symmetry. Globul has appealedsymmetry as well as obligations for non-discrimination, transparency, cost accounting and accounting separation. Globul’s appeal against the preliminary execution of such decision.
Cosmote Romaniadecision has been rejected. The court hearing was held on October 5, 2009, but a decision is still pending.
 
In July 2006,December 2009, Office 1, a former master agent of Globul, filed a claim against Globul requesting the boardpayment of directors of Cosmote Romania approved the company’s participation in a tender initiated by the IGCTapproximately Euro 2.0 million for alleged unpaid time, bonuses and other matters for the award of two 3G licenses in Romania, for a duration of 15 years, with a possibility of renewal for ten additional years, for an amount of U.S. $35 million each. On October 13, 2006, the IGCT announced the result of the selection process, in which Cosmote Romania was not awarded a license. On October 20, 2006, Cosmote Romania appealed to the IGCT and requested reconsideration of the above-mentioned decision, but its appeal was rejected. On November 6, 2006, Cosmote Romania further appealed before the competent courts requesting the cancellation of the procedure. At the first stage of trial in June 2008, the court dismissed the case as unfounded. In December 2008, Cosmote Romania submitted an appeal. At the first hearing scheduled for April 15, 2009, Telemobil submitted their statement of defense and the court has requested ANCOM to also submit their statement of defense. On June 24, 2009, Cosmote Romania’s claim was dismissed. The decision of the court has not yet been handed down.
In September 2008, Cosmote Romania challenged the fiscal decision issued by the fiscal authorities following the tax audit in 2007 before the Romanian Courts. The fiscal authorities determined that some of the expenses made by the company in the years 2004, 2005 and 2006, amounting to approximately Euro 5.8 million, should not haveperiod from


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been deducted for tax purposes. On October 22, 2008 the court ruledMay 2007 to September 2009. In addition, in favorMarch 2010, Office 1 filed a claim alleging termination of the pleaits master agency agreement due to Globul’s fault, claiming compensation of lack of jurisdiction to decide on Cosmote Romania’s claim, and sent the file for judgment to the Court of Appeal, Section IX for Contradictory and Fiscal litigations. The Court of Appeal set the first hearing in this file for March 18, 2009. At the hearing on March 18, 2009, the parties discussed the exception of lack of material jurisdiction. Such exception was rejected by the court and a new hearing was scheduled for April 15, 2009. On April 15, 2009, the parties discussed the evidence to be submitted, the court ruled postponed ruling on the interrogatory and the expert. In order that both parties acknowledge the written evidence submitted by each other, the court set a new hearing for May 27, 2009, at which hearing Cosmote requested the Court to accept the appointment of a fiscal expert and the interrogatory of the defendant as evidence. The Court ruled in favor of the appointment of a fiscal expert and also of a fiscal consultant by Cosmote to state its grounds, but rejected the claim for the interrogatory. Also the Court accepted the objectives for the expert as proposed by Cosmote and set the provisional fee for the independent expert appointed by the Court. At a hearing on June 24, 2009, Cosmote submitted the payment order attesting to the payment of the independent evaluator, a list of independent fiscal consultants, and the documents attesting to the capacity of the fiscal consultant appointed by Cosmote as its own expert.approximately 10.0 million Euro.
 
The Court selected the fiscal consultant to perform the independent evaluation from a list of independent fiscal consultants. The Court also acknowledged Cosmote’s payment of the fee and the documents of the consultant appointed by Cosmote. The next hearing is set for September 23, 2009. We expect to be summoned by the independent fiscal consultant to prepare the evaluation report before the next hearing.
REGULATION
 
Telecommunications Services Regulation in Greece
 
Overview
 
Pursuant to EU and Greek law, as ofsince January 1, 2001, the Greek telecommunications market ishas been open to competition. We are now operating within a competitive environment and are subject to the requirements of the Telecommunications Law and the supervision of the National Telecommunications and Post Commission, or the EETT.
 
The Greek telecommunications market is operating in accordance with EU regulations and under the framework of the World Trade Organization pursuant to the General Agreement on Trade in Services, discussed below. The global regulatory environment for telecommunications, including the regulatory framework in Greece, has been evolving rapidly in recent years and is expected to continue to evolve in the future.
 
European UnionEU Regulatory Framework
 
Greece is a Member State of the EUEuropean Union and, as such, is required to follow EU regulations and enact domestic legislation to give effect to European UnionEU legislation adopted in the form of directives and decisions. Regulations have general application, are binding in their entirety and are directly applicable to all Member States. Directives and decisions are binding on Member States, but each Member State is permitted to choose the form and method of implementation. Resolutions, recommendations and green papers of the EUEuropean Union are not legally binding but have political impact.
 
The Greek State’s ownership of a significant interest in our share capital does not contravene EU legislation. There is no Greek law or EU legislation currently in effect requiring the Greek State to reduce its ownership in our share capital at any future date.
 
Starting in 1990, the EUEuropean Union issued a series of directives, which led to the abolition of existing monopolies on, and permitted the competitive provision of, all telecommunications services. At the end of 1999, the European Commission initiated a review of the European Union’s electronic communications regulatory framework, which led in 2002 to the adoption of a new EU regulatory framework. In November 2009, the European Commission reviewed the EU regulatory framework comprisingof 2002, which is to be transposed into national law before May 25, 2011. The EU regulatory framework of 2002 comprises the following set of directives:
 
 • Directive 2002/19/EC on access to, and interconnection of, electronic communications networks and associated facilities (the“Access Directive”);


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 • Directive 2002/20/EC on the authorization of electronic communications networks and services (the“Authorization Directive”);
 
 • Directive 2002/21/EC on a common regulatory framework for electronic communications networks and services (the“Framework Directive”);
 
 • Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services (the“Universal Service Directive”);
 
 • Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in thee-commerce sector (the“Directive on Privacy and Electronic Communications”); and
 
 • Directive 2002/77/EC on competition in the markets for electronic networks and services.
 
In orderrelation to complement and support the above EU regulatory framework,mobile communications, the European Parliament and the Council have issued Regulation No. 717/2007 on roaming on public mobile telephone networks within the European Community, which amends the Framework Directive.EU.


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The new EU regulatory framework has also been supplemented by the European Commission with a number of decisions, recommendations and guidelines including the following:
• Decision No. 2002/676/EC on a regulatory framework for radio spectrum policy in the European Community (the“Radio Spectrum Decision”);
• Decision No. 2002/627/EC establishing the European Regulators Group for Electronic Communications Networks and Services;
• Recommendation C 497/11.02.2003 of the Commission for the identification of those product and service markets within the electronic communications sector, the characteristics of which may be such as to justify the imposition of regulatory obligations (the“Recommendation”); and
• Guidelines of the Commission for market analysis and the assessment of significant market power, according to article 15 of the Framework Directive (the“Guidelines”).
The abovementioned directives, recommendations and guidelines are intended to:
• establish the rights, responsibilities, decision making powers and procedures of national regulatory authorities and the European Commission; and
• identify specific policy objectives that national regulatory authorities must achieve in carrying out their responsibilities (namely promoting open and competitive European markets for telecommunications services, promoting the interests of European citizens and consolidating the EU’s internal market in a converging technological environment).
The new EU regulatory framework for electronic communications introduces a procedure by which national regulatory authorities may take certain measures, according to which, when a national regulatory authority (in the case of Greece, the EETT) concludes that a specific relevant market of products and services is not effectively competitive within a specific geographicgeographical area, it shall identifyidentifies entities with significant market power in that market and shall imposeimposes on suchthose entities appropriate specific regulatory obligations as provided for in the Access Directive and the Universal Services Directive.
In conducting this analysis of relevant markets, the national regulatory authority shall take into account EC Guidelines and the Recommendation, in collaboration, where appropriate, with national competition authorities.
 
The following is a list of other principal elements of the EU regulatory framework for electronic communications:
 
 • the establishment of a right of appeal against the decision of a national regulatory authority;
 
 • the establishment of a consultation and transparency mechanism regarding actions by national regulatory authorities;


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 • the encouragement of cooperation of national regulatory authorities with each other and with the European Commission;
 
 • the right of the European Commission to request a national regulatory authority to withdraw a measure where it concerns a decision of a relevant market that is different from those defined in the Recommendation, or the designation (or non-designation) of entities with significant market power,under certain circumstances; and where such decisions would create a barrier to the common market or would be incompatible with EU Law and, in particular, with the policy objectives that national regulatory authorities are supposed to follow;
 
 • the re-definition of the term “significant market power”, based on the concept of dominance, as defined in the case law of the Court of Justice and the Court of First Instance of the European Community regarding competition, to the effect that “an entity shall be deemed to have significant market power if, either individually or jointly with others, it enjoys a position equivalent to dominance, that is to say a position of economic strength affording it the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers”. Previously the term “significant market power” was defined primarily with reference to whether an entity had a market share over 25% in the relevant market.
 
The European Commission had to review the functioning of the directives that were part of the EU regulatory framework of 2003 for electronic communications by the end of July 2006, with the exception of thee-Privacy Directive which was due for review by the end of October 2006. In parallel, the Commission reviewed its recommendation listing relevant markets that are candidates forex anteregulation under the framework. The following list includes relevant designated markets in electronic communications at the retail and wholesale level:
Retail level:
1. Access to the public telephone network at a fixed location for residential and non-residential customers.
Wholesale level:
2. Call origination on the public telephone network provided at a fixed location. For the purposes of this Recommendation, call origination is currentlytaken to include call conveyance, delineated in such a way as to be consistent, in a national context, with the delineated boundaries for the market for call transit and for call termination on the public telephone network provided at a fixed location.
3. Call termination on individual public telephone networks provided at a fixed location. For the purposes of this Recommendation, call termination is taken to include call conveyance, delineated in such a way as to be consistent, in a national context, with the delineated boundaries for the market for call origination and the market for call transit on the public telephone network provided at a fixed location.
4. Wholesale (physical) network infrastructure access (including shared or fully unbundled access) at a fixed location.
5. Wholesale broadband access. This market comprises non-physical or virtual network access including “bit-stream” access at a fixed location. This market is situated downstream from the physical access covered by market 4 listed above, in that wholesale broadband access can be constructed using this input combined with other elements.
6. Wholesale terminating segments of leased lines, irrespective of the technology used to provide leased or dedicated capacity.
7. Voice call termination on individual mobile networks.


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The EU regulatory framework of 2009 was adopted by Parliament and the Council in its third reading in November 2009 and consists of the following:
• Directive 2009/140/EC of the European Parliament and of the Council of November 25, 2009 amending Directives 2002/21/EC on a common regulatory framework for electronic communications networks and services, 2002/19/EC on access to, and interconnection of, electronic communications networks and associated facilities, and 2002/20/EC on the authorization of electronic communications networks and services(“Better Regulation Directive”);
• Directive 2009/136/EC of the European Parliament and of the Council of November 25, 2009 amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services, Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws(“Citizens’ Rights’ Directive”); and
• Regulation (EC) No 1211/2009 of the European Parliament and of the Council of November 25, 2009 establishing the Body of European Regulators for Electronic Communications (BEREC) and the Office.
The scope of the revised regulatory framework does not change significantly. Certain aspects of terminal equipment are included in the processscope of amending the Universal Service Directive to improve access to services by disabled end-users (article 1(1) of the Framework Directive). Also, more detailed provisions on network integrity and security are included in the new Chapter IIIa of the Framework Directive.
The revised framework allows Member States regulatory frameworkauthorities to impose the sameex ante regulatory obligations on operators with Significant Market Power (“SMP”) at the wholesale level (currently access, transparency, non-discrimination, accounting separation, price control and has already amendedcost accounting (articles 9 — 13 of the recommendation onAccess Directive)) and introduces the number of relevant regulated markets. The package provides,inter alia, for the establishment of a new EU telecommunications authority, the introductionremedy of functional separation a review(article 13a of radio spectrum management and a range of consumer protection measures. The package was submittedthe Access Directive).
At the retail level, there are no changes to the European Parliament for a second reading. In a surprise move, on May 6, 2009,current non-exhaustive list of “appropriate” retail remedies: retail tariff regulation, no undue preference to specific end-users and not unreasonably bundled services (article 17 of the Universal Service Directive).
The principle continues to apply that Member States regulatory authorities can impose SMP obligations at the retail level only where wholesale obligations would not result in effective competition. However, the current reference to CS/CPS is withdrawn.
BEREC replaced the European Parliament blocked the proposed reform by rejecting an earlier compromise with Member States over the protectionRegulators Group (ERG) as a platform for regulatory authorities to ensure a consistent application of the rightsEU regulatory framework. Aside from providing advice to Parliament, the Commission and the Council on all matters regarding electronic communications, BEREC will be able to give non-binding opinions on draft measures of Internet users. the Commission.
The review is currently at a standstill. The discussionsERG will continue by means of negotiations betweento exist until the newly elected European Parliament and Member States. The negotiations are expected to take place in late September 2009. The fact thatERG Decision is repealed, but will no longer have a practical function.
Based on the EU regulatory framework review has not been finalized delays the publication of the European Commission policy documents on the deployment of next generation access networks and state aid rules, extending the period of regulatory uncertainty and relevant investment decisions.
A2002, a number of regulatory remedies have been imposed on OTEus following the first round of market analyses and significant market power assessmentassessments carried out by the EETT, the Greek NRA, during2005-2008. These market analyses have to be revised taking into consideration the fact that the Commission Recommendation of December 17, December 2007 reduced the list of relevant product and service markets from 18 to 7.
 
In 2009, two market analyses took place, according to Commission Recommendation of December 17, 2007 on relevant product and service markets within the electronic communications sector susceptible toex anteregulation in accordance with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services, Market 4 (wholesale physical network infrastructure access at a fixed location) and Market 5 (wholesale broadband access).
Changes in existing regulatory remedies and additional remedies were introduced. We expect that most thenew market analyses includedwill be carried out in 2010.


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In 2009, the Relevant Markets Recommendation will take placeEETT did not proceed to analyze the retail market, which was removed from the list of relevant markets, as in 2009. These market analyses are necessaryother European markets. This procedure is required in order forto remove excessive regulatory remedies that werein already competitive markets.
Cosmote’s voice call termination rates are subject to a price cap, which requires phased reductions in rates. This was imposed as a resultby the EETT in DecisionNo. 498/046/2008 published in November 2008.
Cosmote’s wholesale and retail tariffs for international roaming services within the European Union are subject to Regulation (EC) No 544/2009 of previous market analysisJune 18, 2009(“Roaming II”), which replaced the initial roaming Regulation(“Roaming I”), which had become effective in August 2007. The Roaming II Regulation extends the controls imposed by the Roaming I Regulation on the wholesale and significant market power assessment to be abolished. In addition, on February 17, 2009 EETT carried out a public consultationretail voice roaming tariffs which operators within the European Union may levy for wholesale access to the local loop for broadband andprovision of voice roaming services, and also applies new caps on wholesale broadband access.and retail SMS roaming charges and on wholesale charges for data services. The results of the consultationRegulation is applicable to Cosmote Greece, Cosmote Romania and the draft measures have not yet been announced to the European Commission.Globul.
 
Telecommunications Framework in Greece
 
Telecommunications services in Greece are governed by national, European and international regulatory frameworks. More specifically, national laws, presidential decrees, decisions by the Minister for Transport and Communications and other ministers, as well as decisions issued by independent administrative authorities (mainly EETT,the National Committee on Telecommunications and Posts(“EETT”), the Authority for the Assurance of Information and Communication Privacy and Security(“ADAE”), Hellenic Data Protection Authority(“DPADPA”)”) and the Greek National Council for Radio and Television(“NCRTV”)) form part of the national regulatory framework. European framework comprises EU Treaties, Regulations, Directives, Decisions, Recommendations and Communications, some of which will be directly applicable once adopted, while some have to be transposed into national laws. Last, there are international treaties (such as International Telecommunications Union(“ITU”) Regulations and Recommendations) which have been rationalized by the Greek State.


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In February 2006, the Greek Governmentgovernment published the new Law 3431/2006 governing “electronic communications”, which incorporates into Greek Law Directives 2002/19/EC, 2002/20EC, 2002/21/EC, 2002/22/EC and2002/77/EC.
 
Law 3431/2006 deals with issues relating to the jurisdiction and responsibilities of the EETT. It contains provisions about general authorization, which is needed for the provision of electronic communications services, as well as issues relating to the numbering plan, management of radio spectrum, relicensing of existing antennae installation of new antennae and subjects relating to satellite orbits.
 
In addition, it defines the characteristics of businesses with significant market power, the rights and obligations of electronic communications services providers, and the rights of customers and users of electronic communications services as well as the characteristics of universal service. The new Telecommunications Law regulates the right of public telephone services customers to use the same number when changing their electronic communications services providers.
 
In 2008, secondary legislation as foreseen in Law 3431/2006 was implemented. However,implemented, but there is still secondary legislation pending in the form of Ministerial Decisions.
 
In July 2008, the Greek Governmentgovernment published Law 3674 “Reinforcement of the institutional framework for the assurance of privacy of telephone communications and other provisions”, which aims to guarantee the secrecy of fixed and mobile telephony services; however, it does not target all forms of electronic communications. It upgrades existing regulations, or it expressly establishes obligations that are not clearly implied by existing legislation. It also imposes significant penalties (financial or imprisonment) and it extends the punishment for the violation of secrecy of telephone communications, by amending the Penal Code.
 
Additionally, in July 2008, the Ministry of Transport and Communications held a public consultation on a bill that would revise Law 3431/2006. Principally, the bill provides for the establishment of a National Observatory of Electromagnetic Fields, primarily in response to expressed public health concerns. In addition, it aims to amend a number of articles on the organization and administration of the EETT, the appeal procedure and spectrum management.


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The fundamental Law for the protection of the secrecy of mailing, for free correspondence or communication as well as the security of networks and information is Law 2225/94, as amended by Law 3115/2003 and other subsequent legislation.
 
During 2008, various laws related to consumer protection have been issued. More specifically,In August 2009, the government issued Law 3674/2008 (Official Gazette 136/A/July 10, 2008)3783 on “Identification of owners and users of mobile telephony equipment and other provisions”. ADAE issued Decision 52 “Recommendations for the “Enforcement of the Assurance of Information and Communication Privacy and Security”, EETTSecurity by electronic telecommunications services operators during the procedures of Declassification System in real time” and Decision 488/82/July 15, 2008 “Code of Conduct53 “Recommendations for the ProvisionAssurance of Electronic Communications ServicesInformation and Communication Privacy and Security by the competent Authorities during the procedures of Declassification System in real time”. Pursuant to Consumers” and ADAE Decision 2002/September 3, 2008 (Official Gazette 1898/B/September 17, 2008) for “Emergency calls management for information provision to authorities dealing with emergency situations”, further ensures consumers’ rights.
Current Europeanthe new EU regulatory framework, is under reform. The European Commission’s proposals for the review of the telecommunications framework are the result of two years of consultations with stakeholders, with national regulators and with users of telecommunications services. Once adopted, the revised rules must be incorporated into national law before taking effect. The European Commission expects the new framework is expected to be in place from 2010 onwards.
 
The Greek National Telecommunications and Post Commission, or EETT
 
The Telecommunications Law (Law 3431/2006 governing electronic communications) delegates to the EETT, in addition to its existing supervisory, advisory and rule-making competence, specific regulatory powers for the issuance of regulations with statutory force, published in the official Government Gazette.
 
Any person or entity may file a declaration of registration with the EETT for the provision of telecommunications services. A declaration of registration has the force of general authorization, unless the EETT objects within a specified time period on grounds of non-compliance with specific terms and conditions imposed by the Telecommunications Law and the rules and regulations adopted by the EETT.
 
Under the Telecommunications Law, the EETT is empowered to impose administrative sanctions on telecommunications services providers that infringe the provisions of applicable telecommunications laws and regulations. These administrative sanctions may only be imposed by means of a decision based on specific


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reasoning and pursuant to a hearing before the EETT. The sanctions may range from a mere caution to temporary or definite revocation of the violator’s license, as well as the imposition of fines.
 
We and other providers of telecommunications services may bring disputes before the EETT, arising out of the provision of such services. We may also appeal to the Greek administrative courts and the Council of State, the supreme administrative court in Greece, against decisions of the EETT.
 
By virtue of its statutory authorization under the Telecommunications Law, the EETT has to date issued a series of decisions regulating a range of issues relating to the Greek telecommunications market such as, among other things, licensing, numbering, frequencies and tariffs. The new regulatory framework has provided the EETT with more discretion, accompanied by enhanced cooperation with the European Commission and other regulatory authorities in the EU.


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Additionally, in 2009, the EETT issued a number of Decisions, the most important for us being:
Number
Title
Official Gazette
531/064/2009Approval of our amendments regarding Reference Offers for the provision of wholesale leased lines and the provision of partial circuits1552/B/28-7-2009
531/067/2009Amendment of the EETT Decision 451/010/2007 (“Approval of Code of Conduct for the provision of Multimedia Information Services”)1551/B/28-7-2009
528/075/2009Regulation for the definition of fees for rights of way and rights of use1375/B/10-7-2009
529/158/2009Decision on our pricing policy regarding wholesale leased lines services1489/B/23-7-2009
513/014/2009Amendment of the EETT Decision 390/3/13.6.2006 (“General Authorizations Regulation”)492/B/18-3-2009
506/037/2009Regulation for access and interconnection terms and provision requirements pursuant to articles 41, para3 and 42, para 3 of Law 3431/2006369/B/3-3-2009
531/065/2009Market definition for wholesale unbundled access (comprising full and shared access) in metallic loops and subloops, designated operators with significant market power and their regulatory obligations (second round of analysis)1550/B/28-7-2009
531/066/2009Market definition for wholesale broadband access, designated operators with significant market power and their regulatory obligations (second round of analysis)1549/B/28-7-2009
521/32/2009Regulation about terms of use of separate radiofrequencies or zones of radiofrequencies1010/28-5-2009
512/24/2009Amendment of the EETT Decision 406/22/11.10.2006 (“Regulation about terrestrial antennae building permit, pursuant to Law 3431/2006”)517/20-3-2009
 
Our License
 
General authorizations are required for engagement in all kinds of electronic communication activities pertaining to the provision of electronic communication networksand/or services, conforming to LawNo. 3431/2006 and the “Regulation on General Authorizations” (EETT DecisionNo. 390/3/31-6-06).
 
For a complete list of our licensed services, please refer to EETT’s website for the Registry of Electronic Communication Network and Service Providers:
 
http://www.eett.gr
 
The provision of an electronic communication networkand/or services under a general authorization regime may continue for as long as the legal entity submitting the registration declaration wishes. The EETT may impose a limitation only in extraordinary cases, based on a justified decision, pursuant to article 63 of Law No. 3431/2006.
 
Telecommunications Taxes
In July 2009, Law 3775/2009 was published in the Government Gazette. Article 33 of this law provides a new method for calculating telecommunications taxes. Telecommunications’ taxes are calculated as a percentage before imposing VAT according to the following:
• 12.0% for a monthly bill up to Euro 50;
• 15.0% for a monthly bill from Euro 50.01 to Euro 100;
• 18.0% for a monthly bill from Euro 100.01 to Euro 150; and
• 20.0% for a monthly bill from Euro 150.01 and above.
In July 2009, the Greek State carried out a public consultation on a draft law transposing Directive 2007/65/EC of the European Parliament and of the Council of December 11, 2007 amending Council Directive 89/552/EEC on


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the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities (the “AVMS Directive”) into national legislation, the results of which have not been made public yet.
Media Law
 
Law 3592/2007 aims to ensure plurality in briefing and the provision of information, the equal transmission of information and news, the quality level of programs, as well as the transparency and the healthy competition in the framework of media, incorporating Directives 2002/19/EC, 2002/20/EC, 2002/21/EC, 2002/22/EC and2002/77/EC.EC and supplements Law 2328/1995 (“Legal status of private television and local radio, regulation of issues related to radio and television market, miscellaneous provisions”).
 
The provisions of the above-mentioned lawLaw 3592/2007 regulate the following:
 
 • analog transmitted TV program;
 
 • digital terrestrial TV; and
 
 • TV services provision over broadband networks.
In July 2009, the Greek State carried out a public consultation on a draft law transposing the AVMS Directive into national legislation, the results of which have not been made public yet.
 
Competition Law in Greece
 
We are subject to the general EU and Greek competition laws and to special provisions, regulations and directives relating specifically to telecommunications.
 
The main principles of EU competition rules are stipulated in Articles 81 and 82 of the EC Treaty. These EU competition rules have the force of law in Member States and are therefore applicable to our operations in Greece. Article 81 prohibits collusive behavior between competitors that may affect trade between Member States and that restricts, or is intended to restrict, competition within the EU. Article 82 prohibits any abuse of a dominant market position within a substantial part of the EUEuropean Union that may affect trade between Member States. These rules are enforced by the European Commission in cooperation with the national competition authorities — in the case of Greece, the Competition Commission, together with the EETT with respect to the telecommunications sector. In addition, the Greek national courts have jurisdiction to determine violations of European UnionEU competition law.
 
The European Union has adopted further measures in order to protect competition in the telecommunications sector through the issuance of Directive 99/64/EC relating to the legal separation of the joint provision of telecommunications and cable television networks by a single operator. The new regulatory framework, which was introduced


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in 2002 and has subsequently been amended by Directive 2009/136/EC and Directive 2009/140/EC, includes Directives 2002/19/EC, 2002/20/EC, 2002/21/EC, 2002/22/EC and 2002/77/EC, regulating competition in the markets for electronic communications networks and services.
 
The basic provisions of Greek competition law are set out by Law 703/1977 for the “Control of Monopolies and Oligopolies and Protection of Free Competition”, as in effect, and referred to as the “Competition Law”. The regulatory framework of the aforementioned 2002 Directives has been integrated in Greek legislation by law 3431/2006. In relation to Directives 2009/136/EC and 2009/140/EC, Member States have the right to adopt and publish by May 25, 2011 the laws and regulations necessary to comply with the new regulatory framework.
 
The Competition Law prohibits collusive practices, including direct or indirect price fixing; restriction or control of production, distribution, technological development or investments, or market or supplies allocation; and the abuse of an undertaking’s dominant position or state of economic dependence. Such practices areeo ipsoprohibited, without the need for a decision of the competent administrative authority.
 
The exclusive or concurrent jurisdiction and competency of the Competition Commission and the EETT to apply and enforce the provisions of the Competition Law, which are not clearly defined in the relevant legislation, have not yet been determined by a competent court. The application of a fine on a percentage basis is calculated on the basis of the turnover of the undertaking concerned in the relevant sector, with up to 15% being permissible by


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law. However, even in the case of the highest fines imposed to date, the penalties imposed have represented only a portion of the maximum percentage allowed under the Competition Law.
 
In addition, the Greek administrative courts have jurisdiction over appeals lodged with respect to decisions of both of the above-mentioned administrative bodies.
 
Greek Capital Markets Regulation
 
The principal trading market for our shares is currently the Athens Exchange(“ATHEX”). In operation since 1880, the Athens Exchange was upgraded in May 2001 from emerging to developed market status by the Morgan Stanley Composite Index. Initially asociété anonymefully owned by the Hellenic Republic, on March 29, 2000 the Athens Exchange was transferred to a holding company, Hellenic Exchanges Holding S.A., which also then held a controlling share in the Athens Derivative Exchange and the Central Securities Depository. The Athens Exchange and the Athens Derivative Exchange merged in 2002. Hellenic Exchanges Holding S.A. has now been fully privatized, with several Greek banks and securities brokers each holding a substantial equity share, and its shares have been listed on the Athens Exchange since August 21, 2000. As of December 31, 2008, 2942009, 283 companies had their shares listed on the Athens Exchange and the aggregate market capitalization of all companies listed on the Athens Exchange was approximately Euro 68.2 billion.83.4 billion according to the 2009 annual report of the Hellenic Capital Market Commission. Transactions relating to shares listed on the Athens Exchange are carried out exclusively by its members, which are investment firms and credit institutions authorized to execute client orders. Greek legislation now allows remote members, meaning investment firms from other EU Member States that are not established, or do not have a physical presence, in Greece, to become members of the Athens Exchange. The Athens Exchange operates as a regulated market and is supervised by the HCMC, pursuant to Law 3606/2007.
 
The provision of investment (including brokerage) services by Greek legal entities is subject to licensing by the HCMC, an independent public entity operating under the supervision of the Ministry of Economy and Finance. The HCMC is also charged with supervision of all parties involved in the capital markets industry, including stock and derivative exchanges, investment firms, mutual funds management companies and listed companies. It also supervises the capital markets regulatory framework, established by a series of laws, a large proportion of which has transposed European UnionEU legislation, as well as regulations issued by itself and the Ministry of Economy and Finance. Thus, apart from licensing and supervisory authority, the HCMC is also a decision making body, whose main objective is to promote the establishment of sound conditions for the operation of the capital markets in Greece and to enhance public confidence in the quality of supervision and in market behavior. To this end, the HCMC is empowered to introduce legally binding rules, regulations and measures as well as to issue instructions and guidelines on compliance procedures applicable to all participants in the capital markets industry, including comprehensive codes of conduct, in order to set the general terms and conditions governing the organization and operation of Greek capital markets. Furthermore, the HCMC has the authority to impose administrative sanctions upon an infringement of capital markets law as well as to notify prosecutorial authorities in cases where it considers that securities fraud has been committed, since this is also punishable under criminal law.


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The obligations of an issuer of listed securities to disclose inside information and the notification requirements for trading by certain related persons in possession of inside information are regulated by Law 3340/2005 and DecisionNo. 3/347/12.7.2005 of the HCMC.
 
Under the aforementioned provisions, listed companies are under an obligation to timely inform the public of specific events or circumstances regarded as inside information, including any significant changes in an issuer’s business activity or any other company included in the consolidated financial statements of such issuer, takeover bids in accordance with existing legislation and any bankruptcy petitions or insolvency proceedings as well as other legal or judicial disputes that may significantly affect the financial situation and results of operations of such issuer.
 
All public statements regarding inside information must be disclosed through the Athens Exchange website and the company’s website, and should also be published on the ATHEX Daily Price Bulletin, in Greek and, if the company is listed abroad, as are we, in English. Listed companies are also under an obligation to inform the public and the HCMC of acquisitions or disposals of company shares by their major shareholders, directors, other senior officers and third parties related to these matters.


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Under the provisions of Law 3556/2007, which implemented Directive 2004/109/EC on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, listed companies must publish financial reports on a quarterly, half-yearly and annual basis.
 
The annual financial reports, prepared in accordance with IFRS, consist of the audited financial statements, a management report and certifications of the chairman of the board of directors, the managing director and a member of the board of directors of the issuer. Such certifications confirm, to the best knowledge of the certifying person, that (i) the financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer and its consolidated subsidiaries, taken as a whole and (ii) that the management report includes a fair review of the development and performance of the business and the position of the issuer and its consolidated subsidiaries, taken as a whole, together with a description of the principal risks and uncertainties that they face. The above information is also sent to the Athens Exchange, simultaneously on publication, in accordance with the relevant provisions of the ATHEX Rulebook.
 
Listed companies are also obliged under the provisions of Law 3016/2002 and DecisionNo. 5/204/14.11.2000, as amended, of the HCMC, to incorporate an adequate system of internal regulatory by-laws; to set up and operate an internal audit department, responsible for monitoring company’s operationscontrols including, among other things, monitoring of the continuous implementation of Internal Regulations and Articles of Incorporation, as well as regulations pertaining to the company; to set up and operate a shareholders’ relations department responsible for providing information to shareholders relating to distribution and payment of dividends, and information concerning the general meeting and relevant decisions; and to set up and operate an announcement department responsible for the announcement of all notices and statements pertaining to the company.
 
Telecommunications Services Regulation in Romania
 
Regulatory obligations in the current regulatory framework
 
The telecommunication market in Romania was fully liberalized on January 1, 2003. Romania began to transpose the new EU Regulatory framework into national Law in 2003 and began the process of implementation ahead of its accession to the European Union on January 1, 2007. In the field of economic regulation, the National Authority for Management and Regulation in Communication (“(“ANCOM,” formerly the National Regulatory Authority for Communications) is the regulator with the greatest direct impact on RomTelecom.
 
Based on prior market analyses, ANCOM has designated RomTelecom as having significant market power on most of the relevant markets in which it operates. As such, it is subject toex-anteregulation by EC RecommendationC 497/11.02.2003, resulting in a number of obligations with regard to both wholesale and retail activities; in particular, interconnection obligations for voice and for leased lines terminating segments; access obligations: full and shared access to local loop(“LLU”) and retail obligations for PSTN and ISDN access and calls.


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Interconnection obligations
 
In December 2002, RomTelecom was designated as having significant market power on the markets for call termination, call origination and transit. Based on this designation ANCOM has imposed specific requirements, including transparency, non-discrimination, cost orientation and accounting separation. Some of the specific obligations deriving from these requirements are to offer the interconnection services at national, regional and local levels for call termination, origination and switched transit at a fixed location; to offer the collocation service in relation with interconnection; to offer carrier selection and carrier pre-selection in all switches except in the case of technical restrictions; to publish an RIO; to publish yearly its own separate audited financial statements and to charge cost-oriented tariffs for interconnection services. In 2008, ANCOM reviewed the interconnection regime with RomTelecom, setting the maximum average interconnection tariffs at 0.84 Eurocents/minminute at the local level, 0.97 Eurocents/minminute at the regional level and 1.06 Eurocents/minminute at national level.level, while maintaining the other previously imposed obligations.
 
In 2009, ANCOM hasalso reviewed the markets for call origination and transit services and designated RomTelecom as an SMP operator in both markets. As a consequence, all previously imposed similarobligations including cost orientation, non-discrimination, transparency and accounting separation, have been maintained.


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Previously imposed obligations in relation to the provision of leased lines termination services, including cost orientation and accounting separation.separation, have been maintained.
 
Access obligations
 
Following a market review performed in 2003, RomTelecom has been designated as having significant market power on the market for unbundled access to the local loop. Based on this designation, the regulator ANCOM has imposedex-anteremedies including mandated access, transparency, non-discrimination, cost-orientation and accounting separation. Some of the specific obligations deriving from these remedies are to offer full and shared access to the local loop, including backhaul services; to publish an RUO; to publish yearly its own separate audited financial statements detailing the cost of provisioning the unbundled access and demonstrating compliance with the non-discrimination obligation; to charge cost-oriented tariffs for the services related to the provision of access to the local loops. The maximum tariffs established by ANCOM for the supply of the unbundled access to the local loop are Euro 8.37 monthly rent for full access and Euro 4.2 monthly rent for shared access.
 
In 2009, ANCOM started the process of market review for wholesale call origination and transit at fixed location, as well as wholesale access to the local loop and wholesale broadband (bitstream). In March 2010, ANCOM published the conclusions of its market analysis and submitted for consultation the draft decision for the market of wholesale physical network infrastructure access (including shared or fully unbundled access) at a fixed location. According to this market analysis, ANCOM considers that RomTelecom maintains its significant market power position on the market for wholesale physical network infrastructure access at fixed locations (based on the number of active fixed access lines) and that the regulation of wholesale access market (bitstream) is not necessary due to strong competition in the retail broadband market.
 
Retail obligations
 
Based on market analysis conducted during 2004, RomTelecom has been designated the significant market power and has specific regulatory obligationsoperator in the following retail markets:
• line rental and connections for business and residential customers;
• local calls originated by business/residential customers;
• long-distance calls originated by business/residential customers;
• international calls originated by business/residential customers;
• calls to mobile networks originated by business/residential customers.
access and calls markets. On May 28, 2007, ANCOM issued a decision regulatingimposing specific remedies in relation to retail access and call services, definingincluding price floors and price ceilings for the tariffs charged for these services as well as specific notification obligations.
Following a market review performed throughout 2009, ANCOM concluded in December 2009 that RomTelecom no longer holds significant power on any of services suppliedthe retail calls markets but continues to be the significant market power operator on the retail market for telephony access at fixed locations. Based on these findings, ANCOM has withdrawn all price related obligations previously imposed on the retail markets in which RomTelecom has been determined(including price cap and price floor obligations), notification obligations, as well as the accounting separation requirements related to haveretail markets. Based on the significant market power and establishingdesignation on the notification obligations.
In late May 2007,market for telephony access at fixed locations, ANCOM imposed on RomTelecom implemented a new tariff scheme for residentialthe obligations to provide at least one unbundled fixed telephony subscription to its customers to reduce the significant churn in its customer base and to increase network usage. Formaintain the first time, RomTelecom offered rental plans offering unlimitedon-net trafficavailability of carrier selection and reduced the tariffs to certain international destinations (EU fixed networks and North America) by 55% and 41% during peak and off-peak times, respectively. Moreover, since September 2007, RomTelecom has offered its residential customers a package including unlimited free calls to fixed lines on all networks during off-peak times.
ANCOM has investigated the compliance of these unlimited packages with the price cap regulation (including margin squeeze) and has not identified any compliance issues.


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In 2009, it is expected that ANCOM will review the retail markets of fixed telephonycarrier pre-selection services (access and calls). Until the review of retail markets is finalized, RomTelecom continues to be subject to regulation on all retail telephony markets, which imposes obligations regarding the minimum and maximum level of tariffs.for alternative operators.
 
Other regulatory measures
 
Call termination at mobile location
 
In April 2009, ANCOM issued final decisions on the designation of all the five mobile operators from Romania as providers with significant power on the market of mobile call termination on their own networks.
 
ANCOM imposed on all five mobile operators additional obligations of transparency and non-discrimination through the publication of RIOs, as well as the cost-orientation obligation. The level of the interconnection tariffs previously imposed on Orange and Vodafone, based on the calculation model elaborated during the period2004-2006, remains at 5.03 Eurocents/minute. The maximum tariffs for call termination on the networks of Cosmote and Zapp will decrease in three stages, according to the15-month glide path, until they are in line with the tariffs of Orange and Vodafone of 5.03 Eurocents/minute, as of July 1, 2010. Since it is a new entrant in the mobile telephony market, RCS&RDS will be granted a longer glide path with a tariff of 5.67 Eurocents/minute, as of July 1, 2010.


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Number portability
 
Number portability is a service that enables the telephony users to keep their telephone number when changing to another provider. Currently portability is possible only within the same category of numbers (fixed-fixed, mobile-mobile). The total number of customers that have taken advantage of number portability reached 70,000 at the beginning194,104 as of May,December 31, 2009, of which close to 20,00061,000 are fixed telephone numbers.
 
In compliance with regulatory obligations, RomTelecom finalized all the procedures required for the implementation of number portability by October 1, 2008, when the service became operational.
 
Mobile communication — CDMA license
 
In September 2008, ANCOM designated RomTelecom as the winner of a tender for the new wireless communications license in the 410-415/420-425 MHz frequency bands. The license was granted for a period of ten years and enables RomTelecom to build, maintain and operate a mobile network for providing voice and data services but also established coverage and minimum service provision requirements. The first assessment of the coverage and service provision was completed at the end of 2008 and concluded that RomTelecom complies with the obligations set out through the license. Subsequent assessments of geographic coverage assumed by RomTelecom will be undertaken by ANCOM on December 31, 2010, June 30, 2012 and December 31, 2013.
 
Data Retention
Law number 298/2008 (the“Data Retention Law”) entered into force on January 21, 2009. The Data Retention Law stipulates the information that telecommunications operators must retain for a maximum period of six months, regarding both voice and internet communications, and provides a timetable for implementation; January 2009 for telephony data and March 15, 2009 for Internet data. The Data Retention Law also stipulates that the costs required by the implementation be borne by the operators.
Pursuant to the Data Retention Law, upon 30 days from its entry into force the Ministry of Communication and Information Society was expected to elaborate the technical specifications for implementation, subject to government approval. Until now such technical specifications have not been adopted. RomTelecom intends to implement the requisite procedures for data retention after the publication of the technical specifications.
End user information
 
On May 14, 2009, the ANCOM decision number 77/2009 regarding the electronic communications operators’ obligations to inform end-users entered into force. According to the decision, RomTelecom has extensive obligations to inform its customers on the services it offers and on the tariffs it charges, including conditions for installation of telecommunications equipment, the terms of use of telephone services, contract terms or complaint settlement procedures.


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Pursuant to this decision, following the adoption of detailed technical specifications, ANCOM shall develop an interactive application to enable the users to perform tariff comparisons through an “interactive tariff guide”.
 
World Trade Organization
 
At the end of the Uruguay Round of negotiations in 1994, ministers of some 130 countries agreed to set up the World Trade Organization, or WTO, covering both trade in goods and, for the first time, services. The result was the General Agreement on Trade in Services, which includes the telecommunications sector.
 
During the same year, several Member States of the WTO started negotiations on an agreement for the liberalization of basic telecommunications services. On February 15, 1997, these negotiations resulted in the first multilateral agreement for the global telecommunications services market when 68 members of the WTO, including Greece, agreed to open their markets to competition in basic telecommunications services from specified dates. This agreement requires WTO members to allow foreign telecommunications service providers to offer their services in any member country as well as to buy shareholdings in telecommunications enterprises of that member country.
 
International Telecommunications Union
 
Greece is a member of the International Telecommunications Union, or ITU. The ITU is responsible for establishing the accounting and settlement regime under which member countries’ telecommunications organizations account to, and settle with, each other for the termination of international calls. The ITU is currently reconsidering the accounting rate regime to take into account developments in international telecommunications, which have resulted in disparities between the rates charged for the termination of international calls and the costs to the terminating operators of completing such calls. Nevertheless, certain member countries, including the United States, are pursuing unilateral changes to the accounting and settlement regime.


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4.C  Organizational Structure
 
We are the parent company of a group of subsidiaries operating in all aspects of telecommunications and related businesses, in Greece and abroad. Whereas in most cases we hold our interests in subsidiaries directly, in limited cases we do so through intermediary holding companies. Cosmote and RomTelecom are our only significant subsidiaries.
 
Significant Subsidiaries
 
As of December 31, 2008 and May 31, 2009, we held the entire share capital of Cosmote, a leading mobile telephony services provider in Greece incorporated in, and operating under the laws of Greece. See “4.B. Business Overview — Mobile Telephony Services — Greece — Cosmote”. We also held, as of December 31, 2008 and May 31, 2009, a 54.01% share interest in RomTelecom, a fixed telecommunications company incorporated under the laws of, and operating in, Romania. See “4.B. Business Overview — Fixed LineFixed-Line Services — International Fixed-Line Telephony — Romania — RomTelecom”.
 
Other Subsidiaries and Other Participations
 
The following table provides information relating to our other subsidiaries and other participations as of December 31, 20082009 and includes our direct participations, as well as our indirect participations through ownership interests held by our subsidiaries:
 
       
  Country of
 Equity
  
Name
 
Incorporation
 
Participation
 
Type of Business
 
OTE International Solutions S.A.(“OTEGlobe”)
 Greece 100.0% Wholesale telephony services
Voicenet S.AS.A.  Greece 100.0% Telecommunication services
OTE Estate S.A.(“OTE Estate”)
 Greece 100.0% Real estate


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Country of
Equity
Name
Incorporation
Participation
Type of Business
Hellascom International S.A.(“Hellascom”)
 Greece 100.0% Telecommunication servicesprojects
OTESAT-Maritel S.A.  Greece 94.08% Satellite and maritime
telecommunications services
OTE Insurance Agency S.A.(“OTE Insurance”)
 Greece 100.0% Insurance brokerage services
Multicom S.A.  Greece 50.0%(1) Internet and IT
CosmoONE Hellas Market Site S.A.  Greece 61.74%(2) E-commerce services
EDEKT — OTE S.A.  Greece 40.0% PensionAdministration of contribution to pension fund
OTE International Investments Limited Greece 100.0% Investment holding company
Albanian Mobile Communications Sh.a(“AMC”)
 Albania 82.45%95.03%(3) Mobile telecommunications
services
Trans Jordan Telecommunications Services Company Ltd.  Jordan 50.0%(4) Telephony Servicesservices provided
including telecards
Yemen Public Payphone Yemen Indirect37.5%(5) Payphone operator
Consulting Services/Local &operator/consulting services
OTE Investment Services S.A.  Greece 100.0%(6) Investment holding company
Hellas Sat Consortium Limited(“Hellas Sat”)
 Cyprus 99.05% Satellite communications
Hellas Sat S.A.  Greece 99.05% Satellite telecommunicationscommunications
OTE Plc United Kingdom 100.0% Financing services
CosmoBulgaria Mobile EAD(“Globul”)
 Bulgaria 100.0(7) Mobile telecommunications
services
Cosmofon Mobile Telecommunications Services A.D. Skopje(“Cosmofon”)
FYROM100.0%(7)Mobile telecommunications
services
OTE MTS Holding BVHolland100.0%(7)Investment Holding Company
S.C. Cosmote Romanian Mobile Telecommunications S.A.(“Cosmote Romania”)
Romania86.2%(8)Mobile telecommunications
services
HATWAVEHellenic-American Telecommunications Wave Ltd. 
Cyprus52.67%Holding company
OTEplus Technical and Business Solutions S.A.(“OTEplus”)
Greece100.0%Consulting Services
OTEplus Bulgaria EADBulgaria100.0%(9)Consulting Services
OTEplus Romania SRLRomania0%(10)Consulting Services
DIERGASIA Interim Employment S.A. Greece100.0%(11)Interim Employment Services
OTE ACADEMY S.A.(“OTE Academy”)
Greece100.0%Training Services
Cosmoholding Cyprus Ltd.(“Cosmoholding Cyprus”)
Cyprus90.0%(12)Investment holding company
Germanos S.A.(“Germanos”)
Greece90.0%(12)Retail services
E-Value S.A. 
Greece90.0%(13)Marketing services
Germanos Telecom Skopje S.A. FYROM90.0%(13)Retail services

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  Country of
 Equity
  
Name
 
Incorporation
 
Participation
 
Type of Business
 
S.C. Cosmote Romanian Mobile Telecommunications S.A.(“Cosmote Romania”)
Romania86.2%(8)Mobile telecommunications services
HATWAVEHellenic-American Telecommunications Wave Ltd. 
Cyprus52.67%Investment holding company
OTEplus Technical and Business Solutions S.A.(“OTEplus”)
Greece100.0%Consulting services
OTEplus Bulgaria EADBulgaria0%(9)Consulting services
DIERGASIA Interim Employment S.A. Greece100.0%(10)Interim employment services
OTE ACADEMY S.A.(“OTE Academy”)
Greece100.0%Training services
Germanos S.A.(“Germanos”)
Greece100.0%(11)Retail services
E-Value S.A. 
Greece100.0%(12)Marketing services
Germanos Telecom Romania S.A(“Germanos Romania”)
 Romania 90.0%100.0%(13)(12) Retail services
Sunlight Romania SRL — Filiala Romania 90.0%100.0%(13)(12) Retail services
Germanos Telecom Bulgaria A.D.  Bulgaria 90.0%100.0%(13)(12) Retail services
OTE PROPERTIESGreece100.0%(13)Real estate
Telekom SrbijaSerbia20.0%Public telephony operator — fixed and mobile telephony, ISP, multimedia services
Cosmoholding Romania Ltd. Cyprus100%(14)Investment holding company
Telemobil S.A.(“Zapp”)
Romania99.9%Mobile Telecommunication services
E-Value Debtors Awareness One Person Ltd.(“E-Value Ltd”)
Greece100%(15)Overdue accounts
Mobilbeeep Ltd.  Greece 90.0%100.0%(13)(16) Retail services
Cosmoholding Cyprus Ltd.(“Cosmoholding Cyprus”)
Cyprus100.0%(17)Investment holding company
Cosmo-Holding Albania S.A.(“CHA”)
 Greece 97.00%97.0% Investment Holding Companyholding company
OTE PROPERTIESCosmomegala Katastimata S.A.  Greece 100.0%40%(14)(1) Real Estate Public telephony
operator — fixed and mobile
telephony, ISP,
Telekom SrbijaSerbia20.0%multimediaProvision of services
 
 
Notes:
 
(1)Under liquidation.
 
(2)We and Cosmote each hold a 30.87% equity interest.
 
(3)Effective interest of 82.45%95.03% held through Cosmote and its 97% -owned subsidiary CHA.
 
(4)Under liquidation; we hold a direct interest of 40.0% and an indirect interest of 10.0% through Hellascom.
 
(5)Under liquidation; we hold a direct interest of 10.0% and an indirect interest of 27.5% through Hellascom and Trans Jordan Telecommunications Services Company Ltd, respectively.
 
(6)Subsidiary of OTE International Investments Limited.
 
(7)Our effective interest is 100% through Cosmote.
 
(8)Our effective interest is 86.2% (70.0% is owned by Cosmote and 30% is owned by RomTelecom).
 
(9)Under liquidation since January 2009, our effective interest is 100% (100% is owned by OTEplus).
(10)Was liquidated, dissolved and unregistered from the Commercial Registry of BucharestSofia on July 24, 2008.January 11, 2010. Our effective interest until that date was 100% (100% was owned by OTEplus).
 
(11)(10)Our effective interest is 100% (100% is owned by OTEplus).
 
(12)(11)We own these interests indirectly, through Cosmote.
 
(13)(12)These companies are owned by Germanos.
 
(14)(13)Subsidiary of OTE Estate.

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(14)Cosmoholding Romania Ltd was established on August 6, 2009 and by October 30, 2009 acquired Zapp. We own these interests indirectly through Cosmote.
(15)E-Value One Person Ltd was established byE-Value S.A. in October 2009.
(16)Subsidiary of Cosmoholding Cyprus.
(17)Cosmoholding Cyprus holds 99.998% of the share capital of Germanos, while the remaining 0.002%, or 1,490 shares, is held by minority shareholders (these shares were not included in the squeeze-out process which was completed on April 10, 2007).
 
4.D  Property, Plant and Equipment
 
Our subsidiary OTE Estate owns 2,2932,294 properties with an aggregate surface area of approximately 9.25 million square meters. Approximately 2,2582,259 buildings, with an aggregate surface area of approximately 1.14 million square meters, are located on 1,771 of those properties. Almost all of the property is free of encumbrances.
 
Our most significant property is our headquarters, a thirteen-story office building on Kifissias Avenue, north of the center of Athens, with an aggregate 84,043 square meters of surface area, of which approximately 58,100 square meters are built as office space.
 
The taxableobjective value of each of our thirty most significant properties exceeds Euro 3462.4 million.
 
The management, exploitation and development of our real estate assets is the responsibility of OTE Estate. OTE Estate has been the legal owner of these assets, including our Group headquarters, following transfer of legal ownership of these assets to it in 2001, following which OTEwe became a lessee of OTE Estate with respect to these assets. The relevant lease has been in effect since October 1, 2001 and is due to expire on September 30, 2013.
 
On a proprietary plot of land located in Taraboura, Patras, OTE Estate is building a new office and housing complex, which is expected to be leased partly to us. OTE Estate is responsible for the development of thesethis new office complexes.complex.
 
The value of OTE Estate valued itsEstate’s real estate portfolio which was estimated at Euro 1,859 million1.75 billion as of December 31, 2008.2009. In October 2008, OTE Estate established a real estate investment company (OTE Properties). The necessary license was granted by the HCMC in June 2008.

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On August 1, 2008 we and OTE Estate sold our 33.0% participation in the share capital of Lofos Pallini S.A., a real estate development company, to Reds S.A. for the amount of Euro 18.45 million.
 
4.E  Unresolved Staff Comments
 
Not applicable.
 
ITEM 5  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
You should read the following discussion along with our consolidated financial statements, including the notes thereto, that are included in thisForm 20-F. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the IASB.
 
5.A  Operating Results
 
Overview
 
We are a full-service telecommunications group and the leading provider of fixed-line voice telephony and internet access services in Greece. We provide local, long-distance and international fixed-line telecommunications services in Greece and Romania, and we offer mobile telephony services through Cosmote and its subsidiaries in Greece, Albania, Bulgaria, Romania and, until May 2009, in FYROM. We also offer internet access services and fully integratedIP-based telecommunications solutions, as well as IT application development andIP-based hosting services. In addition, we offer a range of other telecommunications services, including value-added services, Intelligent Network(“IN”)services, leased lines, public telephone services, operator assistance services, sales of equipment, directory services and satellite telecommunications. We also provide telecommunications services on a wholesale basis to other telecommunications providers and ISPs in Greece, including wholesale ADSL access services, interconnection services, leased lines, data telecommunications services and local loop unbundling.


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Domestic and international fixed-line telephony services accounted for a decreasing percentage of our revenues, together representing 32.8%, 36.8% and 44.3% of total revenues in 2008, 2007 and 2006, respectively (with domestic fixed-line telephony services accounting for the majority of these revenues). Revenues from mobile telephony services are the largest and increasing component of our total revenues since 2007, representing 38.6%40.0%, 35.0%38.6% and 33.5%35.0% of total revenues in 2009, 2008 and 2007, respectively. Domestic and 2006,international fixed-line telephony services accounted for the second largest percentage of our revenues, decreasing over recent years, together representing 31.3%, 32.8% and 36.8% of total revenues in 2009, 2008 and 2007, respectively while revenues(with domestic fixed-line telephony services accounting for the majority of these revenues). Revenues from other services, including, among other things, telecardprepaid cards sales, leased lines, interconnection and internet services have made up an increasing percentage of our revenues, accounting for 28.6%28.7%, 28.2%28.6% and 22.2%28.2% of total revenues in 2009, 2008 2007 and 2006,2007, respectively.
 
Segment Reporting
 
Our segments have been determined based on our Group’s legal structure, as Management reviews financial information reported separately by OTEus and our consolidated subsidiaries orsub-groups (such as the Cosmote group of subsidiaries) in the consolidation.. Using quantitative thresholds, OTE,we, the Cosmote group of subsidiaries and RomTelecom have been determined asto be reportable segments. Information about operating segments that do not constitute reportable segments, havehas been combined and disclosed in an “All Other” category. The accounting policies of the reportableoperating segments are the same as those followed for the preparation of our consolidated financial statements. We evaluate segment performance based on operating incomeprofit before depreciation, amortization and amortization,cost of early retirement program, operating incomeprofit and profit for the year. For an overview of our results on a segment basis, please see Note 27 to26 of our consolidated financial statements.
 
Certain Factors Affecting Operating Results
Acquisition of Zapp
On June 30, 2009, Cosmote, through Cosmoholding Romania Ltd., its newly-established wholly-owned subsidiary, signed a share purchase agreement for the acquisition of Zapp in Romania. The acquisition, which was subject, among other conditions, to the approval of the relevant Romanian authorities, was completed on October 31, 2009. The cash consideration paid for the acquisition of Zapp was Euro 67.5 million, while Cosmote assumed Zapp’s borrowings amounting to Euro 129.6 million, mainly relating to the development of Zapp’s 3G and CDMA network. Zaap was established in 1993 and holds licenses for CDMA services at 450 MHz and 3G at 2100 MHz, and operates respective networks.
Voluntary Retirement Scheme of L. 3762/2009
On May 15, 2009, the Law 3762/2009 was enacted providing that our employees who:
(i)  have submitted a written application to participate in the Voluntary Retirement Scheme, within the deadlines defined in par.2, article 74 of Law 3371/2005; and
(ii) do not submit an irrevocable application withdrawing the original application within one month from the enactment of that Law;
are considered to be retired based on the article 74 of Law 3371/2005 within three months from the expiration of the deadline defined in (ii) above. We will cover the cost that will arise from the employer’s and the employee’s contributions to IKA-ETAM (both for the sections of pensions and medical benefits) for the factitious time (or deemed time) recognized to these employees and also the pensions that IKA-ETAM’s pension section will be required to pay to these employees. We will also cover the cost that will arise from the employer’s and the employee’s contributions to TAYTEKO for the factitious time recognized to these employees, as well as the pensions that TAYTEKO (Auxiliary Insurance Sector for OTE Personnel) will be required to pay to these employees. In addition, we will cover the cost that will arise from the employer’s and the employee’s contributions to TAYTEKO (Health Insurance Sector for OTE Personnel) for the factitious time recognized to these employees. For the Lump Sum benefits that TAYTEKO will be required to pay to these employees, we will grant a long-term loan to TAYTEKO. An amount of Euro 152.0 million was charged to the income statement in relation to the Voluntary Retirement Scheme. For further details, see Note 18 of our consolidated financial statements for the year 2009.


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Acquisition of Shares in AMC
On April 27, 2009, Cosmote completed the acquisition of an additional 12.58% interest in its subsidiary AMC, held by the Albanian State, after obtaining the relevant approvals from the Albanian authorities. The cash consideration for the acquisition amounted to Euro 48.4 million. Following the acquisition, Cosmote owns directly, and indirectly through CHA (its 97%-owned subsidiary), a 95.0% interest in AMC. In addition, according to Albanian legislation, Cosmote is obliged to purchase the shares of the non-controlling interests, if they so request. On June 22, 2009, certain non-controlling interests representing approximately 2.3% of the share capital of AMC requested Cosmote to buy their shares at the same price as the price paid by Cosmote to the Albanian State for the acquisition of the 12.58% interest in April 2009. On this basis, the Group’s obligations relating to this 2.3% are estimated at Euro 10.0 million, which are recorded as a current liability in the financial statements. As a result of this obligation the Group consolidates its investment in AMC on the basis of a 100% interest. On April 27, 2010, Cosmote sent an offer letter on this basis to the non controlling interests.
Transfer of 4.0% of our Share Capital from the State to IKA-ETAM
On March 4, 2009, the State and IKA-ETAM, the Greek pension fund and successor entity in the rights and obligations of TAP-OTE, signed an agreement for the transfer by the State of 19,606,015 of our ordinary shares, representing 4% of our share capital, to IKA-ETAM for no cash consideration, in accordance with Law 3371/2005 and Law 3655/2008. The fair value of the transaction was set at Euro 10.30 per share (the closing price of our shares on the Athens Exchange on the date the transfer was signed). The total fair value of the transferred shares amounted to Euro 201.9 million which is included as a gain under the line item “Cost of early retirement program” in the Group’s income statement for the year 2009. In the same agreement IKA-ETAM agreed to exercise the voting rights pertaining to these shares the same way as the State exercises its own voting rights. For further details see Note 18 of our consolidated financial statements.
Special Contribution Law 3808/2009
Following the enactment of Law 3808/2009 enacted in December 2009, a special, one-time contribution of social responsibility was charged to Greek for-profit entities calculated on their total net income for the fiscal year 2008, based on a progressive scale, if it exceeded the amount of Euro 5.0 million. The respective charge in the Group’s 2009 income statement amounted to Euro 113.1 million and is included under the line item “Income tax expense” in our income statement.
Application of Early Retirement Programs
On January 28, 2009, we signed a Collective Labor Agreement with OME-OTE, the trade union of the employees of OTE, contemplating an early retirement program pursuant to which employees completing a number of years required for retirement by December 30, 2009, would be entitled to benefits in order to retire by that date at the latest. The deadline for receiving applications from eligible employees participating in this early retirement program was February 16, 2009. Applications were irrevocable. The cost of this early retirement program amounted to Euro 11.0 million which is included in the Group’s income statement for the year 2009. The 197 eligible participating employees left the Company by December 30, 2009.
On December 23, 2009, we approved an early retirement program pursuant to which employees completing the relevant number of years required for retirement by December 29, 2010, would be entitled to benefits in order to retire at the latest by December 30, 2010. The deadline for receiving applications from eligible employees participating in this early retirement program was January 15, 2010. The cost of this early retirement program, which we estimate to be approximately Euro 31.5 million, will be charged to the Group’s income statement for the year 2010.
Sale of Cosmofon and Germanos Telekom AD Skopje
As of December 31, 2008, Cosmofon was classified as held for sale in the consolidated statement of financial position. On March 30, 2009, we announced that an agreement was entered between Cosmote and Telekom Slovenije regarding the transfer to Telekom Slovenije of 100% of Cosmofon, through the sale of Cosmote’s wholly


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owned subsidiary, OTE MTS HOLDING B.V, as well as Germanos Telecom AD Skopje. The transaction was completed on May 12, 2009, following approval by the relevant governmental and regulatory authorities in Skopje. The results of Cosmofon and Germanos Telecom AD Skopje are included in the consolidated financial statements until May 12, 2009, the date we ceased to control those companies.
Acquisition of MICROSTAR Ltd’s Interest in Cosmoholding Cyprus
On January 15, 2007, Mr. Panos Germanos acquired through MICROSTAR Ltd, a Cypriot holding company controlled 100% by Mr. Germanos, a participation of 10% in the share capital of Cosmoholding Cyprus, a subsidiary of Cosmote, by subscribing to 100 registered Class B shares for a total amount of Euro 144.5 million. As a result, as of December 31, 2008, Cosmote’s participation in Cosmoholding Cyprus amounted to 90.0% and Cosmote’s indirect participation in Germanos, via Cosmoholding Cyprus, amounted to 90.0%. These shares were redeemable by Cosmoholding Cyprus or any other party indicated by Cosmote on December 31, 2009 or on December 31, 2011, if requested by the controlling shareholder, MICROSTAR Ltd, at a price which depends on the achievement of certain corporate targets before the purchase date. On December 31, 2009, Cosmote acquired MICROSTAR Ltd’s 10% interest in the share capital of Cosmoholding Cyprus for a total amount of Euro 168.5 million, reflecting the initial value plus accrued interest until that date.
 
Sale of INFOTE
 
In December 2007, we sold the entire share capital of INFOTE, our directory services subsidiary, to Rhone Capital LLC and Zarkona Trading Limited for the amount of Euro 300.2 million. INFOTE’s results are included in our consolidated financial statements until December 19, 2007, the date of its sale. We recognized a pre-tax gain of


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Euro 244.7 million from the sale in 2007. See “4.B Business Overview — Other Services — Other Telecommunications Services — Telephone Directory and Information Services”.
 
Acquisition of Cosmote minoritiesMinorities
 
On November 9, 2007, we announced an all-cash voluntary public tender offer to acquire all of the shares of Cosmote that were not already owned, directly or indirectly, by us, at an offer price of Euro 26.25 per share. In April 2008, we owned 100% of the share capital and voting rights of Cosmote. The total cost for the acquisition of the remaining shares in Cosmote’s outstanding share capital was Euro 2.9 billion (2.1 billion incurred in 2007 and 0.8 billion incurred in 2008). Because we already owned 67.83% of Cosmote’s paid up share capital, Cosmote’s results were included in our consolidated financial statements prior to the tender offer. See “4.B Business Overview — Mobile Telephony Services — Greece-Cosmote — Acquisition of the entire share capital of Cosmote”.
 
Acquisition of Germanos S.A.Recent Developments
Additional contributions to IKA-ETAM in connection with the Voluntary Retirement Scheme
 
OverOn January 19, 2010, the Greek Minister of Labor and Social Security addressed a letter to us indicating that IKA-ETAM had incurred significant deficits attributable to the incorporation of the pension segment of TAP-OTE into IKA-ETAM as of August 1, 2008, as a result of our Voluntary Retirement Scheme, and that further deficits were anticipated for 2010. The letter added that such deficits were up to that point covered primarily by the State and partially absorbed by IKA-ETAM, but that we should also contribute funds towards these deficits. We agreed with the Ministry to establish a committee to discuss these issues. On February 23, 2010, the Ministry formally advised us that it had estimated that IKA-ETAM had foregone contributions and pensions of approximately Euro 340.0 million, as a result of the Voluntary Retirement Scheme, and required that the relevant outstanding contributions which up to that point we paid on a monthly basis should be settled in full. On March 9, 2010, we responded to the specific issues raised by the Ministry and reiterated our belief that we fulfill our financial obligations arising from Law 3371/2005 and the relevant Ministerial Decision, and requested that the Ministry take action to address the pending matter of the issuance of the necessary decisions by pension funds, required to enable the participants of the voluntary retirement scheme under Law 3762/2009 to receive their pension entitlements.


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In March 2010, a Ministerial Decision was issued and published in the Government Gazette (FEK333/26/03/2010), requiring us to make a lump-sum payment by the last working day of September 2010, covering the additional financial burden incurred by the Pension Section of IKA-ETAM, the Auxiliary Insurance Sector for OTE personnel of TAYTEKO and the Medical Segment of TAYTEKO, resulting from our Voluntary Retirement Scheme (which the Minister advised were approximately Euro 340.0 million). According to the same Ministerial Decision, the exact amount of this additional financial burden will be determined by an actuarial study to be performed by the Directorate of the Actuarial Studies of the State’s General Secretariat for Social Security in conjunction with the Directorate of Actuarial Studies and Statistics of IKA-ETAM, by August 31, 2010.
Having examined the Ministry’s position, we believe that this position is unsubstantiated, as we have fulfilled and continue to fulfill in their totality our financial obligations towards social security funds, paying all contributions, as they are due, both in the context of its normal course of 2006, Cosmote acquired 99.03%business, as well as the ones related to the our voluntary retirement plans, in compliance with relevant laws, rules and regulations. We intend to appeal against this Ministerial Decision requesting the annulment the relevant provision and believe that there are valid grounds for its annulment. In view of the share capitalabove, we have not recorded any relevant provision in our financial statements.
Tax Audit of Germanos,OTE for the Fiscal Years 2006 to 2008
The tax audit of OTE for the fiscal years 2006 to 2008 was completed in May 2010 and the Greek tax authorities imposed on OTE additional taxes amounting to Euro 57.7 million, following which we accepted a Greek company principally engaged in the distribution and sale of telecommunication and digital technology products and services. Cosmote paid a pricepartial settlement for an amount of Euro 19 per share, and37.7 million. Based on the aggregate gross cash consideration for the acquisition was Euro 1.5 billion. Our consolidated financial statements and resultsfindings of operationsthis tax audit, we reassessed our income tax expense for the year ended December 31, 2006 consolidate2009 and an additional tax expense of Euro 6.3 million was required. As a result of the amount settled with the tax authorities and the additional estimate for the year ended December 31, 2009, less our previously established provision of Euro 14.0 million for the relevant open tax years, we took a charge of Euro 30.0 million on our income statement for the year ended December 31, 2009. The remaining Euro 20.0 million of taxes imposed relates to costs associated with our Voluntary Retirement Scheme and other early retirement programs. We have decided not to include this particular item in our partial settlement with the tax authorities and we intend to appeal against the tax authorities’ position before the Greek administrative courts. Pursuant to applicable laws, we will be required to pay an advance of approximately Euro 5.0 million (25% of the assessed taxes and penalties) in order to appeal, which will be reimbursed to us in the event of a favorable court decision. Based on our management’s assessment, we believe that there are good grounds that we will win this case in court. Please see Note 21 to our audited consolidated financial statements for more details regarding this matter and the results of Germanos astax audits of October 2, 2006. We acquiredour subsidiaries.
RomTelecom’s Restructuring Plan
By virtue of decisions by RomTelecom’s CEO, dated February and April 2010, RomTelecom announced the remaining 0.97%restructuring of specific departments within the share capitalcompany. In the first four months of Germanos in April 2007. In January 2007, Mr. Panos Germanos acquired2010, 550 employees voluntarily terminated their employment contracts and an interest of 10.0% of Class B Shares in Cosmote’s subsidiary, Cosmoholding Cyprus, through his wholly-owned holding company, Microstar Ltd., for a total amount of Euro 144.512.5 million, excluding interest, which is includedrepresenting the relative costs, will be charged in other current liabilities in our consolidated balance sheet asthe Group’s income statement of December 31, 2008. Microstar has the right to require Cosmoholding Cyprus to redeem these Class B Shares on either December 31, 2009, or December 31, 2011. We believe that this redemption is likely to take place on December 31, 2009 and therefore have classified the relevant amount under other current liabilities. See “4.B Business Overview — Mobile Telephony Services — Greece-Cosmote — Germanos”.2010.
 
Sale of ArmenTelZapp’s Restructuring Plan
 
On November 16, 2006, we sold our 90% interestA total of 350 employees of Zapp voluntarily terminated their employment contracts and an amount of Euro 2.6 million, representing the relative costs, will be charged in the share capitalGroup’s income statement of ArmenTel, the Armenian public telephony operator, to JSC Vimpel-Communications for a total purchase price (and cash proceeds) of Euro 341.9 million. In 2007, we received additional post-completion settlement proceeds for the sale of Euro 5.9 million. ArmenTel’s results are included in our consolidated financial statements until the date of its sale. We recognized a pre-tax gain of Euro 160.2 million from the sale in 2006.2010.
 
Recent developments
Sale of Cosmofon and Germanos Telekom AD Skopje
On March 30, 2009, following a tender procedure, each of Cosmote and Germanos entered into a share purchase agreement with Telekom Slovenije for the sale of all shares of Cosmofon and Germanos Telekom AD Skopje, respectively, for the aggregate sale price of Euro 190 million. The completion of the agreement took place on May 12, 2009.
Acquisition of shares in AMC
On March 5, 2009, Cosmote signed an agreement with the Albanian Ministry of Economy, Trade and Energy, representing the Albanian State, to acquire a 12.6% interest in the share capital of Cosmote’s subsidiary, AMC, for the price of Euro 48.2 million. Cosmote was the winning bidder in a public auction by the Albanian State for the sale of these shares. The conclusion of the transaction and the transfer of shares took place on April 27, 2009.


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Factors affectingAffecting our financial performanceFinancial Performance
 
Fixed-line customer baseCustomer Base and trafficTraffic
 
Fixed-line customer base.  Over recent years, our total number of PSTN and ISDN lines installed and in service has decreased, mainly as a result of competition from alternative fixed-line operators and the effect offixed-to-mobile substitution. On the other hand, the number of our ADSL lines in service has increased significantly, primarily as a result of the increase in the market for broadband services in Greece, as well as the inclusion of OTENET’sOTENet’s ADSL customers under our retail numbers foras of 2008 as(as opposed to them being included under wholesale for 2007 and 2006.2007).


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In parallel, the number of our wholesale ADSL lines in service increased in 2007, as compared to 2006, mainly as a result of the increase in the general market for broadband services in Greece, but decreased significantly in 2008, as compared to 2007, mainly as a result of an increase in the number of ADSL lines operated by alternative operators that are served by their own unbundled local loops (resulting from an increase in the rate of local loop unbundling over the last years) and secondarily due to the inclusion of OTENET’sOTENet’s ADSL customers under our retail numbers for 2008, as opposed to them being included under wholesale for 2007 and 2006.2007.
 
The following table sets out certain key operating data regarding our fixed-access lines in Greece as of December 31, 2006, 2007, 2008 and 2008:2009:
 
             
  As of December 31, 
  2006  2007  2008 
 
Number of PSTN access lines in service (in thousands)  4,778   4,509   4,110 
Number of ISDN BRA lines in service (in thousands)  598   580   548 
Number of ISDN PRA lines in service (in thousands)  6   6   6 
Active ADSL lines (retail) (in thousands)  234   475   864 
Active ADSL lines (wholesale) (in thousands)(1)
  236   334   94 
             
  As of December 31,
  2007 2008 2009
  (In thousands)
 
Number of PSTN access lines in service  4,509   4,110   3,787 
Number of ISDN BRA lines in service  580   548   517 
Number of ISDN PRA lines in service  6   6   6 
Active ADSL lines (retail)  475   864   1,060 
Active ADSL lines (wholesale)(1)
  334   94   53 
 
Notes:
Note:
 
(1)Active lines of ADSL customers of alternative operators, supported by wholesale services provided by our company. Following our merger with OTENETOTENet in 2008, OTENET’sOTENet’s customers are included in the retail numbers for 2008, while, for previous years, OTENET’sOTENet’s customers are included in wholesale numbers.
 
Fixed-line traffic.  The following table provides information regarding our total domestic fixed-line traffic volume in Greece as of December 31, 2006, 2007, 2008 and 2008:2009:
 
                                            
 As of December 31,  As of December 31,
 2006 % 2007 % 2008 %  2007 % 2008 % 2009 %
 (Minutes in billions, except for percentages)  (Minutes in billions, except for percentages)
Outgoing calls
                                          
Local calls  16.0   43.8%  14.8   45.8%  11.6   44.1%  14.8   45.8%  11.6   44.1%  9.3   40.9%
National Long-distance calls  1.8   4.9%  1.8   5.6%  1.9   7.2%  1.8   5.6%  1.9   7.2%  1.9   8.5%
Calls to internet service providers  8.2   22.5%  4.6   14.2%  2.4   9.1%  4.6   14.2%  2.4   9.1%  1.2   5.3%
Fixed-to-Mobile  1.8   4.9%  1.8   5.6%  1.7   6.5%  1.8   5.6%  1.7   6.5%  1.6   7.0%
Calls from OTE to other fixed networks  1.2   3.3%  1.3   4.0%  1.7   6.5%  1.3   4.0%  1.7   6.5%  2.1   9.4%
Special Calls  0.2   0.6%  0.2   0.6%  0.2   0.8%  0.2   0.6%  0.2   0.8%  0.1   0.4%
Incoming calls
                                          
Calls to OTE from Fixed & Mobile operators  7.3   20.0%  7.8   24.2%  6.8   25.8%  7.8   24.2%  6.8   25.8%  6.5   28.5%
                          
Total
  36.5   100.0%  32.3   100.0%  26.3   100.0%  32.3   100.0%  26.3   100.0%  22.7   100%
                          


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The following table sets out international traffic volume data, including outgoing calls originated by mobile and alternative fixed-line telephony operators in Greece for the three years ended December 31, 2008:2009:
 
                        
 Year Ended December 31,  Year Ended December 31, 
 2006 2007 2008  2007 2008 2009 
 (Minutes in millions, except for percentages)  (Minutes in millions, except
 
 for percentages) 
Outgoing
            
Outgoing calls
            
OTE  438.2   506.3   361.5   506.3   361.5   332.0 
Other  389.6   417.6   536.6   417.6   536.6   537.4 
              
Total outgoing traffic
  827.8   923.9   898.1   923.9   898.1   869.4 
Growth (% per year)  2.6   11.6   (2.8)  11.6   (2.8)  (3.2)
Incoming
            
Incoming calls
            
OTE  589.7   514.5   551.8   514.5   551.8   639.2 
Other  251.1   303.8   346.0   303.8   346.0   420.3 
              
Total incoming traffic
  840.8   818.3   897.8   818.3   897.8   1,059.5 
Growth (% per year)  5.7   (2.7)  9.7   (2.7)  9.7   18.0 
 
Mobile customer baseCustomer Base and trafficTraffic in Greece
 
Mobile customer base in Greece.  As of December 31, 2008,2009, Cosmote had 7,893,1449,217,507 active customers (active for 12 months) in Greece, representing an estimated market share of approximately 42%45% of the total number of contract and prepaid mobile telephony customers in Greece based(based on internal estimates.estimates), as compared to 7,893,144 active customers as of December 31, 2008. Cosmote’s customer numbers in Greece increased by 26% from 200716.8% in 2009, as compared to 2008, as a result of the net addition of 174,74970,365 contract customers and 1,449,7681,253,998 prepaid customers. At the end of 2009, mobile penetration in Greece had exceeded 180%.
 
Based on its estimates, as of December 31, 2009, Cosmote iswas the leading provider of mobile telecommunications services to contract customers in Greece, with a total of 2,284,571 contract customers, as compared to compared to 2,214,206 contract customers as of December 31, 2008. Contract customers are more attractive than prepaid customers to Cosmote because of theirin general have greater loyalty and higher average monthly revenues per user. As of December 31, 2008, Cosmote had 5,678,938user than prepaid customers in Greece.customers. Based on its estimates, Cosmote was also the leading provider of prepaid services in Greece with a total of 6,932,936 prepaid customers as of December 31, 2009, as compared to 5,678,938 prepaid customers foras of December 31, 2008. As a result of newly-enacted laws, mobile operators are required to register in 2010 the users of prepaid SIM cards and erase the accounts of those who cannot be identified; as a result of this process, Cosmote expects that the number of active prepaid customers of both Cosmote and its competitors will decrease significantly at the end of 2010.
 
Mobile traffic in Greece.  A total of approximately 14.020.9 billion minutes were distributed through Cosmote’s network in 2008,2009, compared to 14.0 billion minutes in 2008, and 10.7 billion minutes in 2007, and 8.2 billion minutes in 2006, representing annual growth rates of 30.8%49.3% and 30.5%30.8%, respectively.
 
Mobile customer base in other countries.  As of December 31, 2008,2009, we had the following numbers of customers in the countries in which we provided mobile services:
 
 • in Albania, AMC, Cosmote’s 82.5%95.03% indirectly-owned subsidiary, had 1,395,9891,908,987 mobile customers;
• in Bulgaria, Globul, Cosmote’s 100% directly-owned subsidiary, had 3,902,272 mobile customers; and
• in Romania, Cosmote Romania, Cosmote’s 70%-owned subsidiary, had 6,920,816 customers.
• in Bulgaria, Globul, Cosmote’s 100% directly-owned subsidiary, had 4,096,996 mobile customers;
• in Romania, Cosmote Romania, Cosmote’s 70%-owned subsidiary, had 5,894,056 customers; and
• in FYROM, Cosmofon, Cosmote’s then 100% owned subsidiary, had 747,047 mobile customers.
 
Competition and price pressuresPrice Pressures in the Greek fixed-line telecommunications marketFixed-line Telecommunications Market
 
Since its liberalization in 2001, the market for fixed-line telecommunications services in Greece has become increasingly competitive. We expect competition to continue to intensify as a result of, among other factors, an evolving market landscape, the introduction of new products and services, potential for new entrants, strategic alliances and shareholdings, regulatory developments, and competitive and funding opportunities available to


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certain of our existing competitors. Although certain of the alternative operators have recently ceased operations due to financial difficulties, other existing operators continue to grow their market shares. In addition, we expect to face additional competition in the area of IPTV services, which we recently commenced providing on a commercial basis.


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Prices for products and services offered to customers in the telecommunications market in Greece, especially with respect to broadband services, have decreased significantly in recent years. Increasing competitive pressures in the market both for telephony and broadband services and other factors could cause prices for our services to decline. In addition, regulatory limitations imposed on our ability to set tariffs often result in us being required to charge tariffs which are higher or, in certain cases, significantly higher than those charged by our competitors for the same services, as our competitors are not subject to the same pricing limitations. Given that an important factor for the determination of our tariffs is our cost for providing the relevant services, we must make efforts to increase the efficiency of our operations, in order to reduce such costs, and therefore be able to reduce the cost-based tariffs we charge, in order to make them more competitive.
 
Competition and price pressuresPrice Pressures in the Greek Mobile Telecommunications Market
Competition in the Greek mobile telecommunications market
Competition for products is generally intense and relates to price, distribution, subscription options offered, offers of subsidized handsets, coverage, range of services in the Greek mobile telecommunications market remains intense.offered, innovation and quality of service. Each of Vodafone and Wind Hellas, Cosmote’s competitors in the Greek market, belong to large international groups and benefit from group-wide efficiencies in international operations in areas such as international roaming, marketing and procurement. Cosmote’s competitors may succeed in attracting some of its customers, which could reduce Cosmote’s market share and have a material adverse effect on its results of operations.
 
Furthermore,In recent years, competition and price pressures have intensified, while a number of new factors may impact the mobile market, including combined offers of mobile and fixed-line services by mobile and fixed-line operators. Cosmote expects competition to intensify in 2010, mainly as a result of intensifying competition, the Greek mobile market has recently experienced remarkable price pressures. These were focused particularly on pre-paid mobile telephony products,deteriorating economic conditions and pricing pressures, as well as newly-introduced products combining fixed-linethe increasing offering of aggressively priced prepaid packages and mobile features. In the future, there may also be new entrantsof “voice bundle” or “unlimited” packages in the Greek mobile market which could result in further price pressures. In addition, further competitive pressures may arise in relation(packages offering an amount of, or unlimited, free call time for a flat fee). Cosmote has experienced and expects to the introductioncontinue to experience a migration of innovative, including not purely mobile, products. Losspart of market shareits contract customer base to such products, either on contract or significant price pressures resultingprepaid basis. Such migration can have an adverse impact on average revenues derived from intensifying competition could result ineach customer (as customers tend to use more air time for a material adverse effect on our business, results of operations, financial condition and prospects.
The provision of certain mobile telephony services is regulated by the EU. The mobile termination rates charged by our mobile operators in Greece, Bulgaria and Romania are subject to a glide path of phased reductions determined by each of the national telecommunications regulators.flat fee). In addition, the European Commission is considering measures that would affect“glide path” imposed by the regulatory treatmentEETT on Cosmote’s tariffs has also resulted in a significant reduction in mobile rates. As a result of fixedthese and mobile termination rates, which would leadother factors, the average price per minute realized by Cosmote in 2009 declined by approximately 40%, as compared to significantly lower estimates of the cost of mobile phone termination services, and new caps on wholesale and retail SMS roaming charges and on wholesale roaming services for data services.2008.
 
Evolution of the Greek Broadband marketMarket
 
UseTrends in the Greek ADSL market have been affected by pricing of broadband in Greeceretail ADSL offers and the development of the wholesale ADSL market and the market for local loop unbundling. The market has increasedgrown significantly inover recent years and is expectedcontinues to continuegrow. According to increase in the near future. AsEETT, as of December 31, 2008,2009, there were 1,916,630 broadband penetration reached approximately 14%lines in Greece, 99.6% of the Greek population,these were ADSL lines, representing an increase of 27%, as compared to the EU average1,506,614 ADSL lines as of 20.0% (Source: Observatory for the Greek Information Society Organization).December 31, 2008. Growth in the broadband market has benefitted our revenues from relevant services in recent years.
Despite, however, its strong growth in recent years, as of December 31, 2009, ADSL had reached a penetration rate of just 17.02% of the Greek population, which is relatively low compared to other EU countries. We believe that this supports expectations for further growth of the ADSL market in the future. However, adverse macroeconomic conditions currently prevailing in Greece can have a negative impact on the growth rate for such services in Greeceof the ADSL market. In addition, this growth rate may fall short of predictions foralso be negatively affected by a number of reasons,other factors, including traffic congestion, logistical difficulties relating to installation and use, lack of cost-effectiveness, inadequate development of the necessary infrastructure and regulatory complications. In addition, growth rates


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Pricing trends for retail ADSL products have been characterized by a number of the economies of Greece and Romania in which we provide such services are currently lower than in previous years and this may have an adverse impact on the growth rate of broadband services.
We are the leading providerfactors, including bundled offers of fixed-line voice, telephonyinternet and, internet access services in Greece. We provide local, long-distance and international fixed-line telephony services, internet access, ISDN, high-speed data telecommunications, ADSL-based broadband services, value-added services, IN services,IP-based solutions,IP-VPN services,some cases, IPTV services leased lines, public telephone services, operator assistanceor mobile products, and directory services, sales of equipment, and satellite telecommunications services.a general tendency for operators to offer increasing connection speeds at the same or, in certain cases, reduced tariffs.
 
Regulation of the Telecommunications Market in Greece and in other countriesOther Countries in which we operateOperate
 
The provision of telecommunications services in Greece is subject to regulation based on European UnionEU legislation, competition law and ex-ante sector-specific regulation relevantrelating to various issues, including numbering, licensing, tariffs, local loop unbundling, interconnection, leased lines and privacy issues. In addition, the


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The Telecommunications Law currently in force for four years contemplates the enactment of a series of ministerial decisions, a numbersecondary legislation, most of which have not yethas already been enacted, such asadopted, but the joint ministerial decision on the procedures for granting rights of way.way, which is critical to the deployment of new networks, has still not been completed. In certain cases, secondary legislation mayand regulatory remedies do not provide completereflect the current level of competition and accurate regulatory guidance and we may notcan be in a position to accurately predict regulatory treatment of certain of our actions, including, at times, our tariffs.burdensome, particularly regarding the conditions for tariff approval. Although experience with the regulation of competition in fixed-line voice telephonyservices in Greece has increased over recent years, the emergence and introduction of new technologies and new types of services andtogether with the lack of extensive experienceclear guidelines in their regulatory treatment has in certain cases, led and may lead in the future lead, to a lack of clarity, with respect toat a national and European level, in the regulatory framework governing the provision of such services. In addition, amendments to existing regulations have resulted in us utilizingbeing required to utilize substantial financial and human resources in order to comply with changing requirements and this maywe expect to continue to be bound by such obligations in the short- to medium-term future.
 
As a result, it is sometimes difficult for us to accurately predict the exact manner in which new laws and regulations affecting our business will be interpretedand/or implemented by regulators or courts, the impact such regulations may have on our business, or the specific actions we may need to take, or the expenditure we may need to incur in order to comply.
 
Furthermore, as a provider of telecommunications services, we are also exposed to certain additional regulatory compliance costs, which range from our obligation to provide universal service to increased expenses relating to investments for the protection of customers’ privacy and personal data, and cooperation with the authorities on a number of issues, including policing organized crime and international terrorism.data. See “4.B Business Overview — Regulation — Telecommunications Services Regulation — Telecommunications Framework in Greece.” Greece”.
In addition to the substantial resources we may have to commit to comply with the regulations to which we are or may become subject, fines can be and have been imposed on us, if the relevant regulator determinesrules that we do not comply with the applicable regulatory framework. Over recent years, the EETT has imposed a number of fines on us with respect to a number of our business activities, including both retail and wholesale services, certain of which have been for significant monetary amounts. See “4.B Business Overview — Legal Proceedings — Greece — Regulatory Matters”. We believe that in certain cases such regulatory remedies imposed on us did not fully take into account the current level of competition in the Greek telecommunications market, which has evolved significantly over recent years. Although these fines are subject to remedies before Greek administrative courts and we have so far, in a number of cases, succeeded in having certain of these fines either repealed or reduced, we have in recent years paid, or provided for significant amounts in our financial statements, in relation to fines imposed on us by the EETT and we cannot assure you that further fines will not be imposed on us in the future. In addition, regulatory remedies, including fines, that have been, or may be, imposed on us not only have a direct impact on our financial condition, but also impact our business decisions and strategy.
 
In addition, the provision of telecommunications services (fixed-line or mobile) in other countries in which we operate is also subject to regulations, in some case based on the principles set by EU regulations, regarding, among other things, numbering, licensing, competition, tariffs, local loop unbundling, interconnection and leased lines. In some of these countries there is currently very limited regulatory guidance as to the interpretation and implementation of applicable legislation and regulations.
 
New technologiesTechnologies and customer trendsCustomer Trends
 
We must accurately assess customer demand for our products and successfully expand our existing infrastructure, introduce new products and services or develop enhancements to and new features for existing products and services, on a continuing basis, in order to remain competitive and increase our revenues. The


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telecommunications business is subject to rapid and significant technological changes. Evolving technologies may result in unanticipated capital investments by us in order to remain competitive, either due to incompatibility with our existing systems or the possibility that our infrastructure becomes obsolete.


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Results of Operations for the Three Years ended December 31, 20082009
 
The following table sets forth, for each of the three years ended December 31, 2008,2009, selected consolidated income statement data in Euro and as a percentage of total revenues.
 
                                                
 2006 2007 2008  2007 2008 2009 
   % of
   % of
   % of
    % of
   % of
   % of
 
 Euro Revenues Euro Revenues Euro Revenues  Euro Revenues Euro Revenues Euro Revenues 
 (Millions, other than percentages)  (Millions, other than percentages) 
Revenues:
                        
Revenue:
                        
Domestic telephony(1)
  2,260.6   38.4   2,022.2   32.0   1,814.2   28.3   2,022.2   32.0   1,814.2   28.3   1,619.6   27.1 
International telephony(2)
  346.9   5.9   304.5   4.8   286.9   4.5   304.5   4.8   286.9   4.5   251.1   4.2 
Mobile telephony services  1,975.8   33.5   2,210.0   35.0   2,470.8   38.6 
Other revenues(3)
  1,308.0   22.2   1,783.1   28.2   1,835.4   28.6 
Mobile telephony  2,210.0   35.0   2,470.8   38.6   2,396.2   40.0 
Other revenue(3)
  1,783.1   28.2   1,835.4   28.6   1,717.2   28.7 
                          
Total revenues
  5,891.3   100.0   6,319.8   100.0   6,407.3   100.0 
Total revenue
  6,319.8   100.0   6,407.3   100.0   5,984.1   100.0 
Operating expenses:
                                                
Payroll and employee benefits  (1,154.5)  (19.6)  (1,149.0)  (18.2)  (1,168.4)  (18.2)  (1,149.0)  (18.2)  (1,168.4)  (18.2)  (1,190.8)  (19.9)
Provision for staff retirement indemnities and youth account  (87.1)  (1.5)  (92.3)  (1.5)  (112.6)  (1.8)  (92.3)  (1.5)  (112.6)  (1.8)  (95.5)  (1.6)
Cost of Early Retirement Program  49.8   0.8   (22.1)  (0.3)  (50.2)  (0.8)
Cost of early retirement program  (22.1)  (0.3)  (50.2)  (0.8)  30.3   0.5 
Charges from international operators  (208.8)  (3.5)  (216.4)  (3.4)  (201.0)  (3.1)  (182.7)  (2.9)  (173.9)  (2.7)  (184.0)  (3.1)
Charges from domestic operators  (720.9)  (12.2)  (655.3)  (10.4)  (642.3)  (10.0)  (655.3)  (10.4)  (642.3)  (10.0)  (516.3)  (8.6)
Depreciation and amortization  (1,128.5)  (19.2)  (1,171.8)  (18.5)  (1,213.0)  (18.9)  (1,171.8)  (18.5)  (1,213.0)  (18.9)  (1,155.3)  (19.3)
Cost of telecommunications equipment  (363.5)  (6.2)  (672.8)  (10.6)  (633.4)  (9.9)  (672.8)  (10.6)  (633.4)  (9.9)  (475.1)  (7.9)
Other operating expenses  (1,189.5)  (20.2)  (1,293.2)  (20.5)  (1,328.7)  (20.7)  (1,326.9)  (21.0)  (1,355.8)  (21.2)  (1,396.5)  (23.4)
                          
Total operating expenses
  (4,803.0)  (81.5)  (5,272.9)  (83.4)  (5,349.6)  (83.5)  (5,272.9)  (83.4)  (5,349.6)  (83.5)  (4,983.2)  (83.3)
                          
Operating income before financial activities
  1,088.3   18.5   1,046.9   16.6   1,057.7   16.5 
Operating profit before financial activities
  1,046.9   16.6   1,057.7   16.5   1,000.9   16.7 
Income/(expense) from financial activities:
                                                
Interest expense  (278.8)  (4.7)  (238.7)  (3.8)  (343.7)  (5.4)  (238.7)  (3.8)  (343.7)  (5.4)  (325.2)  (5.4)
Interest income  70.8   1.2   77.8   1.2   72.3   1.1   77.8   1.2   72.3   1.1   61.6   1.0 
Foreign exchange differences, net  4.2   0.1   (4.8)  (0.1)  11.8   0.2   (4.8)  (0.1)  11.8   0.2   10.2   0.2 
Gains from investments  176.3   3.0   256.8   4.1   33.7   0.5   256.8   4.1   33.7   0.5   23.6   0.4 
Dividend income  23.0   0.4   16.8   0.3   12.2   0.2   16.8   0.3   12.2   0.2   9.6   0.2 
                          
Total profit (loss) from financial activities
  (4.5)  (0.1)  107.9   1.7   (213.7)  (3.3)
Total profit/(loss) from financial activities
  107.9   1.7   (213.7)  (3.3)  (220.2)  (3.6)
                          
Profit before tax
  1,083.8   18.4   1,154.8   18.3   844.0   13.2   1,154.8   18.3   844.0   13.2   780.7   13.1 
Income taxes  (353.0)  (6.0)  (381.8)  (6.0)  (246.2)  (3.8)
Income tax expense  (381.8)  (6.0)  (246.2)  (3.8)  (410.0)  (6.9)
                          
Profit for the year(4)
  730.8   12.4   773.0   12.2   597.8   9.3   773.0   12.2   597.8   9.3   370.7   6.2 
                          
Attributable to:
                                                
Shareholders of the parent:
  574.6   9.8   662.6   10.5   601.8   9.4 
Minority interests:
�� 156.2   2.7   110.4   1.7   (4.0)  (0.1)
Owners of the parent:
  662.6   10.5   601.8   9.4   374.0   6.2 
Non-controlling interests:
  110.4   1.7   (4.0)  (0.1)  (3.3)  (0.1)
 
Notes:
Notes:
 
(1)Includes charges to customers on outgoing calls to subscribers of unaffiliated mobile telephony operators of approximately Euro 342.6 million in 2006, Euro 267.8 million in 2007 and Euro 224.6 million in 2008. Domestic telephony also includes revenuesrevenue from monthly network service fees, revenues fromfixed-to-fixed andfixed-to-mobile calls and revenues from such services as operator assistance, connection and reconnection charges and paging services.


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(2)Includes revenuesrevenue from incoming including transit, and outgoing, traffic, gross of amounts charged by foreign telephony operators, and payments from the unaffiliated domestic mobile telephony operators to us for international calls. The respective revenues from our consolidated subsidiaries providing mobile services are eliminated upon consolidation.
 
(3)Includes telecard sales,revenue from prepaid cards, leased lines and data ATM telecommunications, services rendered, directoryprovision for services, interconnection charges, radio communications, audiotex, telex and telegraphy, internet services, ATM,services/ADSL, ISDN, and sales of telecommunication equipment.equipment, collocation and local loop unbundling.
 
(4)In 2006, we recorded an income of Euro 49.8 million resulting from the reduction of the estimated cost for 2005 of the Voluntary Retirement Scheme, offset by a provision of Euro 63.1 million taken in connection with the interest rate (which was below market rates) that we charged on a loan of Euro 180 million granted to the Auxiliary Fund in connection with the Voluntary Retirement Scheme. Furthermore, a gain of Euro 160.2 million was recorded from the sale of ArmenTel. Finally, dividends totaling Euro 21.6 million from Telekom Srbija and gains of Euro 10.2 million from sale of certain available for sale securities affected this year’s results. In 2007, we took a charge of Euro 22.1 million relating to the employees who participated in the early retirement program of 2007. In addition, in 2007, we recorded a pre-tax gain of Euro 244.7 million from the sale of INFOTE and received dividends totaling Euro 15.7 million from Telekom Srbija. In 2008, the Group took a charge of Euro 50.2 million relating to the employees who participated in our and RomTelecom’s early retirement programs of 2008. Furthermore, we recorded a pre-tax gain of Euro 17.0 million from the sale of our investment in the Lofos-Palini real estate company. In addition, we received dividends totaling Euro 11.2 million from Telekom Srbija. In 2009, the Group’s profit for the year was affected by our and RomTelecom’s early retirement programs’ costs of Euro 171.6 million, which were offset by Euro 201.9 million from the transfer of 4.0% of our share capital held by the State to IKA-ETAM, resulting in a net gain of Euro 30.3 million. Furthermore, the 2009 income tax expense was affected by the new laws regarding a one-time special contribution of social responsibility (a charge of Euro 113.1 million), a tax on dividends (a charge of Euro 30.3 million) and the result of the tax audit in OTE for the years2006-2008 of Euro 30.0 million. In addition, the Group recorded a pre-tax gain of Euro 23.6 million from the sale of its subsidiaries Cosmofon and Germanos Telecom AD Skopje and received dividends totaling Euro 9.3 million from Telekom Srbija.
 
RevenuesRevenue
 
Revenues amounted to Euro 5,984.1 million in 2009, compared to Euro 6,407.3 million in 2008 compared toand Euro 6,319.8 million in 2007, and Euro 5,891.3 million in 2006, representing ayear-on-year increasesdecrease of 6.6% in revenues2009 and an increase of 1.4% in 2008. The decrease in 2009, as compared to 2008, was due to decreases in revenue across all the revenue categories, including domestic and 7.3%international telephony, mobile telephony and other revenues. The increase in 2007. These increases were2008, as compared to 2007, was due mainly to increased revenues from our mobile operations (both in Greece and abroad) and increases in other revenues, and werewas partially offset by decreasesa decrease in our revenues from domestic and international telephony,telephony. The contribution of each category to our total revenues is as follows:
 
 • Revenues derived from the provision of fixed-line domestic telephony represented 28.3%27.1% of our total revenues in 2008,2009, as compared to 28.3% in 2008 and 32.0% in 2007 and 38.4% in 2006;2007;
 
 • Revenues derived from the provision of fixed-line international telephony represented 4.5%4.2% of our total revenues in 2008,2009, as compared to 4.5% in 2008 and 4.8% in 2007 and 5.9% in 2006;2007;
 
 • Revenues from mobile telephony services represented 38.6%40.0% of our revenues in 2008,2009, as compared to 38.6% in 2008 and 35.0% in 2007 and 33.5% in 2006;2007; and
 
 • Other revenues represented 28.6%28.7% of our revenues in 2008,2009, as compared to 28.6% in 2008 and 28.2% in 2007 and 22.2% in 2006.2007.
 
In 2008, 69.1%2009, 70.0% of our revenues were generated by activities in Greece, as compared to 71.7%70.2% in 20072008 and 72.0%72.5% in 2006.2007. The decreases in percentage of revenues derived from operations in Greece in 20082009, as compared to 2007,2008 was mostly due to the increased contributions to our total revenues by Cosmote Romania and partially offset in 2007 by the sale of Cosmofon and Germanos Telekom AD Skopje, which reduced revenues outside Greece, while the decreases in 2008, as compared to 2006,2007, were mainly due to the increased contributions to our total revenues ofby Globul, Cosmofon, CosmoromCosmote Romania and AMC, each of which conducts its business outside Greece, partially offset in 2007 by the sale of ArmenTel, which reduced revenues outside Greece and the acquisition of Germanos, which increased revenues from Greece.
 
Domestic Telephony RevenuesRevenue
 
Domestic telephony services include services we provide in Greece and through RomTelecom in Romania and, until November 16, 2006, through ArmenTel in Armenia. As we disposed of ArmenTel on November 16, 2006, revenues from ArmenTel are included in our consolidated revenues until that date.Romania.
 
Revenues from domestic telephony include call charges for domestic (in-country) local and long-distance calls, monthly line rental charges, initial connection charges for new lines and other domestic telephony revenues. Local and long-distance calls include revenues from tariffs charged to customers on outgoing calls to both fixed-lines and customers of unaffiliated mobile telephony operators. Other domestic telephony includes revenues from operator assistance, connection charges and paging services. These revenues depend on, among other factors, the number of access lines in service, the number of new lines connected, call volumes and tariffs.


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The following table sets out the breakdown of revenues from domestic telephony services for each of the three years ended December 31, 2008,2009, including percentages for the year ended December 31, 2008,2009, attributable to local and long-distance calls, monthly network service fees and other domestic telephony revenues.
 
                                
 Year Ended December 31, % of Total
  Year Ended December 31, % of Total 
 2006 2007 2008 2008  2007 2008 2009 2009 
 (Euro in millions)    (Euro in millions)   
Domestic Telephony:
                                
Monthly network service fees  995.7   988.1   910.7   50.2%
Local and long-distance calls                
Fixed-to-fixed
  702.6   565.5   481.9       565.5   481.9   461.9   28.5%
Fixed-to-mobile
  470.2   378.3   325.3       378.3   325.3   249.5   15.4%
                
Local and long-distance calls(1)
  1,172.8   943.8   807.2   44.5%
Total local and long-distance calls  943.8   807.2   711.4   43.9%
Monthly network service fees  988.1   910.7   845.9   52.2%
Other  92.1   90.3   96.3   5.3%  90.3   96.3   62.3   3.9%
                  
Total domestic telephony services
  2,260.6   2,022.2   1,814.2   100.0%  2,022.2   1,814.2   1,619.6   100.0%
                  
Note:
(1)Includes charges to customers on outgoing calls to customers of unaffiliated mobile telephony operators of Euro 224.6 million in 2008, Euro 267.8 million in 2007 and Euro 342.6 million in 2006 (representing 12.4%, 13.3%, 15.2% and of domestic telephony revenues in 2008, 2007 and 2006, respectively). During the three-year period under review, we have not charged an interconnection fee for calls from our network to customers of unaffiliated mobile operators.
 
Revenues from domestic telephony services were Euro 1,619.6 million in 2009, Euro 1,814.2 million in 2008 and Euro 2,022.2 million in 2007, and Euro 2,260.6 millionrepresenting a decrease of 10.7% in 2006, representing2009, as compared to 2008 and a decrease of 10.3% in 2008, as compared to 2007 and a2007. The decrease of 10.5% in 2007, compared to 2006. Decreases in revenues from domestic telephony in 2008 as compared to 2007, and in 2007, as compared to 2006, were mainly due toover the periods under review was the result of decreases in revenues from local and long-distance calls and monthly network service fees. Tariffs for connection, monthly network servicefees; these were mainly due to gradual loss of markets share in terms of customers and per-second charges for calls to fixed lines remained unchanged overtraffic in these categories, the three years, although domestic telephony revenues were affected by a numberadverse impact of our offerings of bundles of free minutes for fixed fees. In addition, fixed-to-mobileflat fees, as well as reductions in applicable tariffs declined significantly over the three years discussed.forfixed-to-mobile calls. For more information regarding traffic and tariffs, see “4.B Business Overview — Fixed-Line Services — Greece — OTE — Domestic Fixed-Line Telephony”.
 
Local and long-distance calls.Revenues from local and long-distance calls were Euro 711.4 million in 2009, Euro 807.2 million in 2008 and Euro 943.8 million in 2007, and Euro 1,172.8 millionrepresenting a decrease of 11.9% in 2006, representing2009 compared to 2008, and a decrease of 14.5% in 2008 compared to 2007, and a decrease of 19.5% in 2007 compared to 2006. Theyear-on-year decreases in 2008 and 2007 were mainly due to decreasing traffic, primarily as a result of increased competitiondeclines in revenues from alternative carriers, which led to gradual loss of customerfixed-to-fixed and traffic market share for us, and fixed-to-mobile substitution, mainly in terms of traffic. Revenues calls.
In particular, revenues from fixed to mobilefixed-to-fixed calls (comprising part of local and long-distance calls) decreased to Euro 461.9 million in 2009, as compared to Euro 481.9 million in 2008 and Euro 565.5 million in 2007, representing decreases of 4.2% in 2009 and 14.8% in 2008. Theyear-on-year decreases in 2009 and 2008 were mainly due to a significant decline in local call traffic (while national long-distance traffic remained relatively stable), primarily as a result of gradual loss of customer and traffic market share, resulting from increased competition from alternative carriers, and also due tofixed-to-mobile substitution, and the adverse impact of offerings of bundles of free minutes for flat fees on our revenues per customer, despite the fact that tariffs remained unchanged over the periods under review.
Revenues fromfixed-to-mobile calls (also comprising part of local and long-distance calls) decreased to Euro 249.5 million in 2009, as compared to Euro 325.3 million in 2008 compared toand Euro 378.3 million in 2007, and Euro 470.2 million in 2006, representing decreases of 23.3% in 2009 and 14.0% in 2008 and 19.5% in 2007. The2008. Theseyear-on-year decreases in 2008 and in 2007 were primarily due to declines in tariffs charged for fixed-to-mobile calls and to decreasing traffic, mainly becauseas a result of loss of customer and traffic market share, toresulting from increased competition from alternative carriers.carriers, and alsofixed-to-mobile substitution, the adverse impact of offerings of bundles of free minutes for flat fees on our revenues per customer, as well as significant reductions in applicable tariffs over the periods under review.
 
Monthly network service fees.Revenues from monthly network service fees were Euro 845.9 million in 2009, Euro 910.7 million in 2008 and Euro 988.1 million in 2007, and Euro 995.7 millionrepresenting a decrease of 7.1% in 2006, representing2009 and a decrease of 7.8% in 2008 and a decrease of 0.8% in 2007.2008. Theyear-on-year decreases in 20082009 and 20072008 were mainly due to loss of market share in Greece (PSTN(our PSTN access lines in service in Greece decreased to 3.8 million in 2009, as compared to 4.1 million in 2008 as compared toand 4.5 million in 20072007) resulting from increasing competition and 4.8price pressures, and in Romania.


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Other.  Other represents various services related to domestic telephony. Revenue from other services were Euro 62.3 million in 2006)2009, Euro 96.3 million in 2008 and Euro 90.3 million in Romania, and the sale2007, representing a decrease of ArmenTel (with respect35.3% in 2009, mainly due to 2007, as compared to 2006).a decline in other services provided by RomTelecom.
 
International Telephony Revenues
 
Revenues from international telephony consist of amounts earned from outgoing international calls, reported gross of amounts payable to foreign telephony operators, and amounts earned from settlement charges for incoming and transit calls from foreign telephony operators routed through our fixed network in Greece and RomTelecom’s network in Romania and, until November 16, 2006, ArmenTel’s network in Armenia.Romania. Revenues from international telephony also include payments from unaffiliated mobile operators for international traffic generated from their networks and routed through our fixed networks in Greece and Romania. The respective revenues from our consolidated subsidiaries providing mobile telephony services are eliminated upon consolidation. Revenues for


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international services depend on the volume of traffic, the rates charged to customers for outgoing calls and international settlement rates charged by each counterparty under bilateral settlement agreements with foreign telephony operators for outgoing calls and incoming and transit calls.
 
The following table sets out a breakdown of revenues from international telephony services for each of the three years ended December 31, 2008,2009, including percentages for the year ended December 31, 2008,2009, attributable to international traffic, dues from international operators and dues from mobile and alternative operators.
 
                                
 Year Ended December 31, % of Total
  Year Ended December 31, % of Total
 
 2006 2007 2008 2008  2007 2008 2009 2009 
 (Euro in millions)    (Euro in millions)   
International Telephony:
                                
International traffic  132.3   108.1   93.8   32.7%  108.1   93.8   84.9   33.8%
Dues from international operators(1)
  172.7   146.8   136.6   47.6%  146.8   136.6   113.3   45.1%
Dues from mobile and alternative operators  41.9   49.6   56.5   19.7%  49.6   56.5   52.9   21.1%
                  
Total
  346.9   304.5   286.9   100.0%  304.5   286.9   251.1   100.0%
                  
 
Note:
Note:
(1)Represents revenues from payments by foreign operators before settlement of amounts due to them in respect of outgoing traffic, which are included in operating expenses as payments to international operators.
 
Revenues from international telephony were Euro 251.1 million in 2009, as compared to Euro 286.9 million in 2008 as compared toand Euro 304.5 million in 2007, and Euro 346.9 millionrepresenting a decrease of 12.5% in 2006, representing2009, as compared to 2008, and a decrease of 5.8% in 2008, as compared to 2007, and a decrease of 12.2% in 2007, compared to 2006, which were attributable to decreases in international traffic and dues from international operators, partially offset in 2008 by increasing dues from mobile operators. For more information regarding traffic and tariffs, see “4.B Business Overview — Fixed-Line Services — Greece — OTE — International Fixed-Line Telephony”.
 
Revenues from international traffic.Revenues from international traffic were Euro 84.9 million in 2009, as compared to Euro 93.8 million in 2008 as compared toand Euro 108.1 million in 2007, and Euro 132.3 millionrepresenting a decrease of 9.5% in 2006, representing2009, as compared to 2008, and a decrease of 13.2% in 2008, compared to 2007. The 9.5% decrease in 2009, as compared to 2007,2008, was mainly attributable to a significant decrease in international outgoing traffic originating from our network, from 361.5 million minutes in 2008 to 332.0 million minutes in 2009, and a decreasethe adverse impact of 18.3%offerings of bundles of free minutes for flat fees and discount packages on our revenues per customer, partially offset by an increase in 2007, compared to 2006.international outgoing traffic originating from networks of other operators in Greece. The 13.2% decrease in 2008, as compared to 2007, was mainly attributable to a significant decrease in international outgoing traffic originating from our company’s international traffic,network, from 506.3 million minutes in 2007, to 361.5 million minutes in 2008 and the adverse effect on revenuesimpact of special offersofferings of bundles of free minutes for flat fees and discount packages. The 18.3% decrease in 2007, as compared to 2006, was mainly attributable to the adverse effectpackages on our revenues of special offers and discount packages,per customer, partially offset by an increase in international traffic.outgoing traffic originating from networks of other operators in Greece.
 
Dues from international operators.Dues from international operators were Euro 113.3 million in 2009, as compared to Euro 136.6 million in 2008 as compared toand Euro 146.8 million in 2007, and Euro 172.7 millionrepresenting a decrease of 17.1% in 2006, representing2009,


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as compared to 2008, and a decrease of 6.9% in 2008, as compared to 2007, and a2007. The 17.1% decrease of 15.0% in 2007,2009, as compared to 2006.2008, was mainly attributable to declining tariffs and was partially offset by an 18.0% increase in incoming traffic from 897.8 million minutes in 2008, to 1,059.5 million minutes in 2009. The 6.9% decrease in 2008, as compared to 2007, was mainly attributable to declines indeclining tariffs and was partially offset by a 9.7% increase in incoming traffic from 818.3 million minutes in 2007, to 897.8 million minutes in 2008. The 15.0% decrease in 2007 was mainly attributable to declines in tariffs and a 2.7% decrease in incoming traffic from 840.8 million minutes in 2006, to 818.3 million minutes in 2007.
 
Dues from mobile and alternative operators.Dues from mobile and alternative operators (representing interconnection fees for international calls originated by mobile and alternative operators) were Euro 52.9 million, Euro 56.5 million and Euro 49.6 million in 2009, 2008 and Euro 41.9 million in 2008, 2007, and 2006, respectively, representing ayear-on-year decrease of 6.4% in 2009 and ayear-on-year increase of 13.9% in 2008 and ayear-on-year increase of 18.4%2008. The 6.4% decrease in 2007. These increases were2009 was mainly due to increasesdecreasing tariffs. The 13.9% increase in the respective2008 was mainly due to an increase in traffic.
 
Traffic volume for international telephony is measured in chargeable minutes. International telecommunications traffic in Greece experiences seasonal fluctuations in demand, with peak outgoing traffic occurring in the summer and peak incoming traffic during September and October.
 
Revenues from foreign operators with respect to incoming and transit traffic constituted 2.1%1.9%, 2.3%2.1% and 2.9%2.3% of total revenues and 47.6%45.1%, 48.2%47.6% and 49.8%48.2% of revenues from international telephony in 2009, 2008 2007 and 2006.2007. Although we record payments to and from operators on a gross basis, only net payments are received from or made to foreign operators. Payments to foreign operators with respect to such traffic are included in operating expenses. For the purpose of international settlements, amounts payable with respect to outgoing traffic and amounts receivable with respect to incoming and transit traffic to and from each country are generally expressed in Special


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Drawing Rights of the International Monetary Fund, which are customarily used for the settlement of international call revenues between foreign telephony operators. Settlements are generally made in U.S. Dollars every quarter.
 
Mobile Telephony Revenues
 
Revenues generated by mobile telephony services were Euro 2,396.2 million in 2009, Euro 2,470.8 million in 2008 and Euro 2,210.0 million in 2007, representing ayear-on-year decrease of 3.0% in 2009 and ayear-on-year increase of 11.8% in 2008. The decrease of 3.0% in 2009 was primarily attributable to lower termination rates imposed by regulators throughout the Group’s mobile operations and to the sale of Cosmofon in May 2009 (Cosmofon’s revenues for four months of 2009 (until May) were Euro 1,975.818.3 million, in 2006.as compared to Euro 61.3 million for the twelve months of 2008). Theyear-on-year increasesincrease in 2008 and 2007 of 11.8% and 11.9%, respectively, werewas primarily attributable to increases in mobile penetration and usage in Greece, Albania, Bulgaria, FYROM and Romania, partially offset by declining tariffs and the loss of revenues generated by mobile telephony services of ArmenTel, following its disposal in November 2006.Romania.
 
Cosmote-Greece.The contribution to our consolidated revenues generated by mobile telephony services of Cosmote’s Greek mobile operations was Euro 1,518.91,527.0 million in 2009, compared to Euro 1,586.7 million in 2008 and Euro 1,502.2 million in 2007, representing an decrease of 3.8% in 2009 compared to 2008, and a 5.6% increase in 2008 compared to Euro 1,453.2 million2007. For more information regarding Cosmote’s customer base, traffic and relevant tariffs, see “4.B Business Overview — Mobile Telephony Services — Greece — Cosmote”.
The decrease in 20072009, as compared to 2008, which was primarily attributable to a significant decline in tariffs and Euro 1,377.8 million in 2006, representingthe impact of offerings of bundles of free minutes for flat fees (in 2009 average price per minute declined by approximately 40%, as compared to 2008), was partially offset mainly by an increase of 4.5%in Cosmote’s contract and prepaid customer base and increased usage. The increase in 2008, as compared to 2007, and a 5.5% increase in 2007 compared to 2006. The increases in 2008 and 2007 werewas primarily attributable to an increase in itsCosmote’s contract and prepaid customer base and increased usage.usage, partially offset mainly by declining tariffs.
 
AMC-Albania.AMC’s contribution to our consolidated revenues generated by mobile telephony services was Euro 187.1132.9 million in 2009, Euro 172.6 million in 2008 and Euro 175.0164.4 million in 2007, representing a decrease of 23.0% in 2009, as compared to 2008 and a 4.9% increase in 2008, as compared to 2007. The decrease in 2009 was mainly due to the weakening of the Albanian currency against the Euro, 150.5 millionregulations affecting AMC’s wholesale and retail tariffs, lower international traffic and intense competition, partially offset by a 36.7% increase in 2006, representingthe customer base. The increase in 2008 was mainly due to an increase of 6.9% in 2008 compared to 2007 and a 16.3% increase in 2007 compared to 2006, mainly as a result of increases in its customer base of 16.8% and 20.7% in 2008 and 2007, respectively, as compared to the previous years, andyear, as well as to higher usage. For more information regarding customers and tariffs, see “4.B Business Overview — Mobile Telephony Services — Albania — AMC”.


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Globul-Bulgaria.Globul’s contribution to our consolidated revenues generated by mobile telephony services was Euro 420.2365.4 million in 2009, Euro 393.0 million in 2008 and Euro 376.7353.4 million in 2007, representing a decrease of 7.0% in 2009, as compared to 2008, and Euro 316.2 millionan 11.2% increase in 2006, representing2008, as compared to 2007. The decrease in 2009 was mainly due to a 4.8% reduction in Globul’s customer base in 2009, the impact of the economic crisis, intense competition and its impact on pricing and a reduction in interconnection rates. The increase in 2008 was mainly due to an increase of 11.5% in 2008 compared to 2007, and a 19.1% increase in 2007 compared to 2006, mainly as a result of increases in its customer base, of 5.8% in 2008 and 18.2% in 2007, respectively,Globul’s customer base, as compared to previous years,the year, as well as to higher usage. For more information regarding customers and higher usage.tariffs, see “4.B Business Overview — Mobile Telephony Services — Bulgaria — Globul”.
 
Cosmofon’s contribution to our consolidated revenues generated by mobile telephony services was Euro 61.3 million in 2008, Euro 57.7 million in 2007 and Euro 48.8 million in 2006, representing ayear-on-year increase of 6.2% in 2008 compared to 2007, and an 18.2% increase in 2007 compared to 2006. Cosmofon’s revenues increased mainly due to increases in its customer base.
Cosmote Romania.Cosmote Romania’s contribution to our consolidated revenues generated by mobile telephony services was Euro 283.3352.8 million in 2009, Euro 257.8 million in 2008 and Euro 147.4132.9 million in 2007, and Euro 35.2 million in 2006, representingyear-on-year increases of 92.2%36.8% in 20082009 and 318.8%94.0% in 2007.2008. Cosmote Romania’s revenues increased mainly due to increases in its customer base of 63%17.4% and 192.7%63.0% in 20082009 and 2007,2008, respectively, as compared to previous years. For more information regarding customers and tariffs, see “4.B Business Overview — Mobile Telephony Services — Romania — Cosmote Romania”.
 
ArmenTel’sCosmofon-FYROM.  Cosmofon’s contribution to our consolidated revenues generated by mobile telephony services was Euro 47.318.1 million in 2006 until November 16, 2006,2009 (until May 12, 2009 when ArmenTelthe company was sold.sold), Euro 60.7 million in 2008 and Euro 56.9 million in 2007.
 
Other Revenues
 
Other revenues include revenues from telecardprepaid cards, leased lines and data ATM telecommunications, ISDN, sales of telecommunications equipment, internet services/ADSL, collocation/local loop, Metro Ethernet and IP Core, provision for services, interconnection charges and miscellaneous (such as directory services, radio telecommunications, audiotex, telex and telegraphy leased lines and data telecommunications, ISDN, sales of telecommunications equipment, internet services, ATM, services rendered and interconnection charges.etc).


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The following table provides a detailed breakdown of other revenues for each of the three years ended December 31, 2008.2009.
 
                        
 Year Ended December 31,  Year Ended December 31, 
 2006 2007 2008  2007 2008 2009 
 (Euro in millions)  (Euro in millions) 
Prepaid cards  100.6   76.2   52.2   76.2   52.2   37.3 
Directory services  58.0   55.1   3.9 
Leased lines and data communications/ATM  245.8   272.1   336.6 
Integrated Services Digital Network  158.9   166.1   147.5 
Sales of telecommunications equipment  341.6   679.8   617.2 
Leased lines and data ATM communications  272.1   336.6   319.4 
Integrated Services Digital Network (ISDN)  166.1   147.5   141.7 
Sales of telecommunication equipment  679.8   617.2   438.0 
Internet services/ADSL  133.1   225.7   226.9   225.7   226.9   297.7 
Collocation / local loop  —   30.8   91.7 
Collocation /local loop  30.8   91.7   122.1 
Metro Ethernet and IP Core  4.2   11.0   23.6   11.0   23.6   31.9 
Services rendered  74.9   68.3   120.4 
Provision for services  68.3   120.4   116.4 
Interconnection charges  96.8   108.2   119.4   108.2   119.4   88.9 
Miscellaneous  94.1   89.8   96.0   144.9   99.9   123.8 
              
Total other revenues
  1,308.0   1,783.1   1,835.4   1,783.1   1,835.4   1,717.2 
              
 
Revenues from the usage of prepaid cards were Euro 52.2 millionTheyear-on-year decrease in 2008,other revenues in 2009, as compared to Euro 76.2 million2008, was primarily due to a significant decline in 2007,sales of telecommunications equipment, as well as declining interconnection charges and 100.6 million in 2006, representing a decrease of 31.5% in 2008, compared to 2007, and a decrease of 24.3% in 2007, as compared to 2006. Theyear-on-year decreases in 2008 and 2007 were mainly due to a general trend of declining revenues from the usage of prepaid cards, which was mainly attributable to thepartially offset by increasing revenues from internet services/ADSL. Theyear-on-year increase in mobile telephonyother revenues in 2008, as compared to 2007, was primarily due to increasing revenues from collocation/local loop services and leased lines and data ATM communications, partially offset by declining revenues from sales of telecommunications equipment and the usage and increased competition.of prepaid cards.
 
Revenues from the usage of prepaid cards were Euro 37.3 million in 2009, as compared to Euro 52.2 million in 2008, and 76.2 million in 2007, representing a decrease of 28.5% in 2009, compared to 2008, and a decrease of 31.5% in 2008, as compared to 2007.


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Revenues from leased lines and data ATM telecommunications were Euro 319.4 million in 2009, as compared to Euro 336.6 million in 2008 as compared toand Euro 272.1 million in 2007, and Euro 245.8 millionrepresenting a decrease of 5.1% in 2006, representing2009, as compared to 2008, and an increase of 23.7% in 2008, as compared to 2007 and an increase of 10.7% in 2007 compared to 2006.2007. Theyear-on-year increasesdecrease in 2009 was primarily attributable to lower tariffs imposed by the EETT and a decrease in the number of active circuits due to migration of customers to other (lower-yielding) services. Theyear-on-year increase in 2008 and 2007 werewas primarily attributable to increases in the number of circuits. See “4.B Business Overview — Other Services — Leased Lines”.
 
Revenues from ISDN were Euro 141.7 million in 2009, Euro 147.5 million in 2008 and Euro 166.1 million in 2007, and Euro 158.9 millionrepresenting a decrease of 3.9% in 2006, representing2009, as compared to 2008, and a decrease of 11.2% in 2008, as compared to 2007, and an increase of 4.5% in 2007, compared to 2006.2007. Theyear-on-year decreasedecreases in 2009 and 2008 waswere mainly attributable to losses of ISDN lines, due to competition. Theyear-on-year increase in 2007 was mainly attributable to the increasesdecreases in the number of basic and primary rate access customers and to increased tariffsour ISDN lines in the middle of 2006.service.
 
Revenues from sales of telecommunicationstelecommunication equipment were Euro 438.0 million in 2009, Euro 617.2 million in 2008 and Euro 679.8 million in 2007, and Euro 341.6 million in 2006, representing a decrease of 9.2%29.0% in 20082009, as compared to 20072008, and an increase of 99.0% in 2007 compared to 2006. Thea decrease of 9.2% in 2008, as compared to 2007, was mainly2007. The decreases in 2009 and 2008 were partly due to the fact thatdecline in revenues of Germanos, is not a dealerwhich shifted its activities and focus to servicing exclusively the strategy of Cosmote’s competitors and thereforeCosmote in an effort to maximize Group performance. In particular, the respectiveyear-on-year decrease in 2009 was primarily due to Germanos’ termination of wholesale sales of telecommunications equipment have decreased. Since October 2006,to other countries, the great majoritytermination of revenues from sales of telecommunications equipment comprise revenues from salesvouchers of telecommunications equipment at Germanos stores. As a result, themobile operators (other than Cosmote) and market conditions relating to handsets subsidies and offers. Theyear-on-year increasedecrease in 20072008 was primarily attributable to the full-year consolidationcontinuing impact of Germanos.the fact that, following its acquisition by Cosmote, Germanos ceased distributing the products of Cosmote’s mobile telephony competitors and hence, its sales of telecommunications equipment decreased significantly. See “4.B Business Overview — Other Telecommunications Services — Equipment Sales”.
 
Revenues from internet services/ADSL were Euro 297.7 million in 2009, Euro 226.9 million in 2008 and Euro 225.7 million in 2007, and Euro 133.1 millionrepresenting an increase of 31.2% in 2006, representing2009, as compared to 2008, and an increase of 0.5% in 2008, as compared to 2007,2007. The increase in 2009 was mainly attributable to continuing growth in the Greek broadband market and an increaseincreases in the number of 69.6%our ADSL customers, despite declines in 2007,the relevant tariffs. Revenues in 2008 were relatively stable as compared to 2006. The increase in 2008 was mainly2007, due to a continuing increase in the numbers of our ADSL customers and due to general growth in the ADSL market, growth, partiallybeing largely offset by tariff reductions and the effect of migration of previously wholesale ADSL customers to being served by unbundled local loops of our competitors, which led to a decline in our loss of wholesale ADSL revenues. The increase in 2007 was mainly attributable to the expansion of ADSL, reflected in significant growth in our ADSL customer baseFor more information regarding customers and the introductiontariffs, see “4.B Business Overview — Fixed-Line Services — Greece — OTE — Internet Protocol (IP) and promotion of new value-added services in 2007, partially offset, however, by significant decreases in tariffs for broadband services in 2007.Internet Access Services”.


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Revenues from collocation and local loop services were Euro 122.1 million in 2009, Euro 91.7 million in 2008 and Euro 30.8 million in 2007, and Euro nilrepresenting increases of 33.2% in 2006, representing an increase of2009, as compared to 2008 and 197.7% in 2008, as compared to 2007. We started offering this service in 2007, therefore we had no such revenues in 2006. TheThese increases in 2008 and 2007, as compared to previous years, were attributable to increasing unbundling activity over the increase in the number of demands byperiods under review, as alternative operators increased their demands for local loop unbundling and the subsequent increase in unbundling activity andwe subsequently increased the number of loops unbundled by us and delivered for use over these years.use. See “4.B Business Overview — Other Services — Local Loop Unbundling”.
 
Revenues from the provision of services rendered were Euro 116.4 million in 2009, Euro 120.4 million in 2008 and Euro 68.3 million in 2007, and Euro 74.9 millionrepresenting a decrease of 3.3% in 2006, representing2009, as compared to 2008, and an increase of 76.3% in 2008, as compared to 2007, and a decrease of 8.8%2007. There is no material change in 2007,2009 as compared to 2006. The2008, while the significant increase in 2008, as compared to 2007, was mainly attributable to the increased number of projects for services delivered to third parties, in contrast to 2007, when projects for services delivered to third parties were less than those in 2006.parties.
 
Revenues from interconnection charges were Euro 88.9 million in 2009, Euro 119.4 million in 2008 and Euro 108.2 million in 2007, representing a decrease of 25.5% in 2009, as compared to 2008, and Euro 96.8 million in 2006. Theyear-on-year increasesan increase of 10.4% in 2008, and 11.8% 2007 wereas compared to 2007. Theyear-on-year decrease of 25.5% in 2009 was mainly attributable to reductions in wholesale tariffs mandated by EETT in the second quarter of 2009 which had a retroactive effect as of the January 1, 2009. Theyear-on-year increase of 10.4% in 2008 was mainly attributable to an increase in traffic passing through alternative carriers’ networks.


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Operating Expenses
 
Total operating expenses were Euro 4,983.2 million in 2009, Euro 5,349.6 million in 2008 and Euro 5,272.9 million in 2007, and Euro 4,803.0 millionrepresenting a decrease of 6.8% in 2006, representing2009, as compared to 2008, and an increase of 1.5% in 2008 compared to 20072007. The following table sets forth, a breakdown of our operating expenses for each of the three years ended December 31, 2009, and as a percentage of our total operating expenses.
                         
  2007  2008  2009 
     % of
     % of
     % of
 
  Euro  total  Euro  total  Euro  total 
  (Millions, other than percentages) 
 
Operating expenses:
                        
Payroll and employee benefits  (1,149.0)  21.8   (1,168.4)  21.8   (1,190.8)  23.9 
Provision for staff retirement indemnities and youth account  (92.3)  1.7   (112.6)  2.1   (95.5)  1.9 
Cost of early retirement program  (22.1)  0.4   (50.2)  0.9   30.3   (0.6)
Charges from international operators  (182.7)  3.5   (173.9)  3.3   (184.0)  3.7 
Charges from domestic operators  (655.3)  12.4   (642.3)  12.0   (516.3)  10.4 
Depreciation and amortization  (1,171.8)  22.2   (1,213.0)  22.7   (1,155.3)  23.2 
Cost of telecommunications equipment  (672.8)  12.8   (633.4)  11.8   (475.1)  9.5 
Other operating expenses  (1,326.9)  25.2   (1,355.8)  25.4   (1,396.5)  28.0 
Total operating expenses
  (5,272.9)  100.0   (5,349.6)  100.0   (4,983.2)  100.0 
The 6.8% decrease in 2009, as compared to 2008, was mainly attributable to a decrease in cost of telecommunications equipment, a decrease in charges from domestic operators, a decrease in provision for staff retirement indemnities and youth account, a decrease in depreciation and amortization and a decrease in cost of early retirement program; these decreases were partially offset by an increase of 9.8% in 2007 compared to 2006.payroll and employee benefits, an increase in charges from international operators and increases in other operating expenses. The 1.5% increase in 2008, as compared to 2007, was mainly attributable to increased payroll expenses, increased provisions for staff retirement indemnities and the youth account and cost of early retirement programs, increased depreciation and amortization and increases in other operating expenses. The increaseexpenses, partially offset by a decrease in 2007 compared to 2006 was mainly attributable to the increased cost of telecommunications equipment and an increase in other operating expenses.telecommunication equipment.
 
Payroll and Employee Benefits
 
Payroll and employee benefits costs include payroll expenses, certain related benefits, employer contributions made to TAP-OTE and the Auxiliary Lump Sum Benefit Fund and the amortization of our advance to EDEKT-OTE.
 
Payroll and employee benefits costs were Euro 1,190.8 million in 2009, Euro 1,168.4 million in 2008 and Euro 1,149.0 million in 2007, and Euro 1,154.5 millionrepresenting an increase of 1.9% in 2006, representing2009, as compared to 2008, and an increase of 1.7% in 2008, as compared to 2007, and a decrease of 0.5% in 2007, as compared to 2006.
2007. Theyear-on-year increaseincreases in payroll and employeesemployee benefits costs in 2008, as compared to 2007, waswere mainly attributable to salary increases, partially offset by a decrease of 2.2% in the number of total employees of our Group. Theyear-on-year decrease in payroll and employee benefits costs in 2007, as compared to 2006, was mainly attributable to the effect of the Voluntary Retirement Scheme on payroll and employee benefits costs in 2006, partially offset by increases in wages for the personnel of OTE.
 
The Group’s total number of employees decreased to 32,864 as of December 31, 2009, as compared to 33,610 as of December 31, 2008 as compared toand 34,350 as of December 31, 2007, and 34,324representing a decrease of 2.2% in 2009, as of December 31, 2006, representingcompared to 2008, and a decrease of 2.2% in 2008, as compared to 2007, and an increase of 0.1% in 2007, as compared to 2006. Furthermore, a number of our employees retiring under Voluntary Retirement Scheme retired during the course of 2006. As a result, our payroll and employee benefits costs in 2006 included costs relating to those employees, which were not reflected any longer in 2007 and 2008. In particular, in 2006, 4,759 of our employees retired under the Voluntary Retirement Scheme, while we recruited 1,230 new employees in the same year.2007.
 
In 2008, we executed a new collective labor agreement with our trade union, OME-OTE, for the years 2008 and 2009, which contemplates further wage increases of 4.5% on average in 2008, as compared to 2007 (3.5% as of January 2008 and 3.0% as of September 2008), and 4.5% on average in 2009, as compared to 20072008 (3.0% as of January 2009 and 3.0% as of July 2009). In 2006, we executed an agreement with OME-OTE for
Payroll expenses exclude payroll costs relating to the years 2006construction of telecommunications plant and equipment, which are capitalized. Such expenses were Euro 68.5 million, Euro 79.9 million and Euro 77.6 million, in 2009, 2008 and 2007, which contemplated wage increases of 4.1% on average in 2006 and 4.3% on average in 2007. Both of these agreements apply only to employees of OTE and not employees of other entities of our Group.respectively.


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Pension contributions.Employer contributions to the historical TAP-OTE pension fund and other funds have represented a significant portion of our payroll and employee benefit expenses in recent years. In 2009, 2008 2007 and 20062007 we paid employer contributions to TAP-OTE and other funds of Euro 168.2174.1 million, Euro 157.8168.2 million and Euro 173.5157.8 million, respectively. For more information on TAP-OTE, see “6.D. Employees — Employee Insurance Funds.”
 
PursuantAccording to Law 1902/1990,2257/1994, we have been obligedwere liable to fund, beginning in 1990, TAP-OTE’scover the annual operating deficits. In connection with these requirements and pursuantdeficit of TAP-OTE up to a maximum amount of Euro 32.3 million, which could be adjusted per the Greek Consumer Price Index (CPI). According to Law 2768/1999, a special fund was formed with TAP-OTE using contributions from, among others, us, the Greek State and the Employee Auxiliary Pension Fund. In addition,incorporated on December 8, 1999, as a société anonyme under the name of EDEKT-OTE S.A. was also incorporated, in order to manage(“EDEKT”), for the investments of the fund. We hold an interest of 40% in EDEKT-OTE S.A. The purpose of this fund isadministering contributions to managebe made by us, the contributions mentioned above,State and the Auxiliary Pension Fund, in order to finance the TAP-OTE deficit.
deficit of TAP-OTE. The total required contributions of the State and the Auxiliary Pension Fund to EDEKT were set at Euro 264.1 million and Euro 410.9 million, respectively. Pursuant to Law 2937/2001, our aggregate funding commitmentcontribution was set at Euro 352.2 million, representing the equivalent ofto the net present value of our requiredten years’ contributions to TAP-OTE for the ten-year period from 2002 to 2011.(2002-2011). We paid this amount on August 3, 2001 and are amortizing it is being amortized over thisthe ten-year period.period; the annual amortization charge is Euro 35.2 million and it is included in “Payroll and employee benefits” in our consolidated income statement. Pursuant to Law 2843/2000, the Greek State is required to fund any further deficits incurred by TAP-OTE. We believe that our obligation tofund TAP-OTE’s annual operating deficits has expired accordingTAP-OTE are covered by the State.
Pursuant to Law 2768/1999.
As a result of the enactment of Law 3655/2008, (FEK 55 A/3.4.08) relating to the pension issue, the pension segment of TAP-OTE was incorporated into IKA-ETEAMIKA-ETAM (the main social security fund inof Greece) as of August 1, 2008, with a gradual reduction of contributions from TAP OTETAP-OTE to those of IKA,IKA-ETAM, which is expected to commence in 2013 and conclude in 2023 in three equal instalments.installments. At the same time, the medical segment of TAP-OTE as well as the two segments of the auxiliary fund (the Lump-Sum Payment segment and the Additional Pension segment), werewas incorporated as ofinto TAYTEKO from October 1, 2008, into TAYTEKO, a newly-established pension fund.2008. In conjunction with the new law, it is anticipated thatLaw 3655/2008, the shares of TAP OTEheld by TAP-OTE in the share capital of EDEKT-OTE S.A. will passEDEKT, were transferred to IKA-ETEAM fromIKA-ETAM as of the date this section is transferredthe pension segment of TAP-OTE was incorporated into IKA-ETAM. Furthermore, according to IKA-ETEAM. See Note 19(a) toLaw 3655/2008, the consolidated financial statements.
Payroll expenses exclude payroll costs relating todeficits of the construction of telecommunications plant and equipment,pension segments which are capitalized. Such expenses were Euro 79.9 million, Euro 77.6 million and Euro 77.5 million, in 2008, 2007 and 2006, respectively.incorporated into IKA-ETAM — will be covered by the State.
 
Provision for staff retirement indemnitiesStaff Retirement Indemnities and youth accountYouth Account
 
Staff retirement indemnity payments are required to be made under Greek labor law upon dismissal or retirement of an employee, with the amount paid depending on the length of service and salary of that employee. In the years ended December 31, 2008, 2007 and 2006 we recorded provisions of Euro 112.6 million, Euro 92.3 million and Euro 87.1 million, respectively, for staff retirement indemnities and youth account. Staff retirement indemnities relate to one-off lump-sum payments made to our employees upon retirement and the Youth Accountyouth account is a special benefit for the children of our employees, under which we provide a lump sum payment to such children generally when they reach the age of 25, or upon certain other events. In the years ended December 31, 2009, 2008 and 2007 we recorded provisions of Euro 95.5 million, Euro 112.6 million and Euro 92.3 million, respectively, for staff retirement indemnities and youth account. The components of the provision include current service costs, and interest costs on the benefit obligation. Reservesobligation, amortization of past service cost and amortization of unrecognized actuarial gains/losses. Provision for staff retirement indemnities and the Youth Accountyouth account are provided for on an accrual basis and are based uponon independent actuarial studies. Provisions
Provision for staff retirement indemnities and for the Youth Accountyouth account were Euro 50.0 million and Euro 45.5 million, respectively, in 2009, as compared to Euro 43.3 million and Euro 69.3 million, respectively, in 2008 compared toand Euro 44.8 million and Euro 47.5 million, respectively, in 2007 and2007. In 2009, the decrease of Euro 44.017.1 million, and Euro 43.1 million, respectively,or 15.2%, as compared to 2008, was largely attributable to a decrease in 2006.
the amortization of unrecognized actuarial losses. In 2008, the increase of Euro 20.3 million, or 22.0%, as compared to 2007, as well as the increase in 2007 of Euro 5.2 million, or 6.0%, over 2006, werewas largely attributable to an increase in the amortization of unrecognized actuarial losses. We reported provisions for staff retirement indemnities and youth account as a separate line item in ourFor further information, see Note 18 to the consolidated income statements for the first time in 2008.financial statements.
 
Cost of early retirement programEarly Retirement Program
 
In the years ended December 31, 2009, 2008 and 2007, wethe Group recognized a cost ofthe following in connection with its early retirement programprograms: a gain of Euro (30.3) million, a cost of Euro 50.2 million and Euro 22.1 million, respectively, compared to a benefit of Euro 49.8 million for the year ended


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December 31, 2006. The increase in the cost of early retirement program of Euro 28.1 million, in 2008, as compared to 2007, was largely attributable to the cost of RomTelecom’s early retirement program amounting to Euro 38.0 million, partially offset by a decrease in the cost of OTE’s relevant program, the cost of which was Euro 12.2 million in 2008, as compared to Euro 22.1 million in 2007. The increase of Euro 71.9 million in the cost of the early retirement program, to a cost of Euro 22.1 million, in 2007, as compared to a benefitrespectively. The Group’s operating expenses for the year 2009 include our and RomTelecom’s early retirement programs’ costs of Euro 49.8171.6 million, in 2006, was largely attributable towhich were offset by the partial reversal of the amountprovisions of Euro 49.8201.9 million, in 2006 of partas a result of the initially estimated cost fortransfer by the Greek State of 4.0% of our Voluntary Retirement Scheme (resulting from the finalizationshare capital to IKA-ETAM, which


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resulted in a net gain of the numberEuro 30.3 million. In 2008, operating expenses were charged with Euro 50.2 million relating to costs of participating employees)early retirement programs, consisting of RomTelecom’s early retirement program of Euro 38.0 million and the costour early retirement program of Euro 12.2 million. In 2007, operating expenses were charged with Euro 22.1 million relating to the cost of our other early retirement program in 2007.program. For further information, see Note 18 to the consolidated financial statements.
 
Charges from international operatorsInternational Operators
 
Charges from international operators consist predominantly of charges from foreign telephony operators for outgoing telephony traffic, and to a lesser extent charges from foreign operators with respect to telex, telegraphy and satellite activities. In general, operating expenses for international traffic move in parallel with revenues from international telephony, as they are both directly related to international traffic volume. Charges from international operators were 184.0 million in 2009, as compared to Euro 201.0173.9 million in 2008 and Euro 182.7 million in 2007, representing an increase of 5.8% in 2009, as compared to 2008, and a decrease of 4.8% in 2008, as compared to Euro 216.4 million in 2007 and Euro 208.8 million in 2006, representing a decrease of 7.1% in 2008 compared to 2007 and an increase of 3.6% in 2007, compared to 2006.2007. The decrease in 2008, as compared to 2007, was mainly due to decreased international traffic. The increase in 2007, as compared to 2006, was mainly due to increased international traffic.
 
Charges from domestic operatorsDomestic Operators
 
Operating expenses for charges from domestic operators were Euro 516.3 million in 2009, Euro 642.3 million in 2008 and Euro 655.3 million in 2007, and Euro 720.9 million in 2006, representing ayear-on-year decrease of 2.0%19.6% in 2009, as compared to 2008 and a decrease of 9.1% in 2007. The decrease2.0% in 2008 as compared to 2007, was2007. Theyear-on-year decreases in 2009 and in 2008, were mainly due to lower interconnection rates and decreased traffic forfixed-to-mobile calls. The decrease in 2007, as compared to 2006, was primarily due to decreased traffic for fixed-to-mobile calls.
 
Depreciation and amortizationAmortization
 
Depreciation and amortization was Euro 1,155.3 million in 2009, Euro 1,213.0 million in 2008 and Euro 1,171.8 million in 2007, and Euro 1,128.5 millionrepresenting ayear-on-year decrease of 4.8% in 2006, representing2009 and ayear-on-year increase of 3.5% in 2008. The decrease in depreciation and amortization expenses in 2009, as compared to 2008, was mainly due to the fact that certain assets were fully depreciated, and an increasedue to higher depreciation expense for the year 2008 as a result of 3.8% in 2007.the reduction of the estimated useful life of certain items of property, plant and equipment, and the increased depreciation of our mobile subsidiaries. The increase in depreciation and amortization expenses in 2008, as compared to 2007, was primarily attributable to the reduction of the estimated useful life of certain assets and the increaseda higher than usual depreciation of our mobile subsidiaries. The increase in depreciation and amortization expense in 2007,2008 as compared to 2006, was primarily attributable to increased depreciation expense incurred by Cosmote and its mobile subsidiaries and by RomTelecom, due to increased capital expenditure.described above.
 
Cost of telecommunications equipmentTelecommunications Equipment
 
Cost of telecommunications equipment was Euro 475.1 million in 2009, Euro 633.4 million in 2008 and Euro 672.8 million in 2007, and Euro 363.5 millionrepresenting a decrease of 25.0% in 2006, representing2009 compared to 2008 and a decrease of 5.9% in 2008 compared to 2007,2007. Theyear-on-year decreases in 2009 and an increase of 85.1% in 2007 compared to 2006. The decrease in 2008 compared to 2007 waswere in line with the decreaseddecline in revenues from sales of telecommunication equipment. The increase in 2007 wasequipment, mainly attributabledue to the fact that, following its acquisition by Cosmote, Germanos ceased distributing the products of Cosmote’s mobile telephony competitors and consolidationhence, its sales of Germanos as of October 2, 2006.telecommunications equipment decreased significantly.
 
Other operating expensesOperating Expenses
 
Other operating expenses were Euro 1,328.71,396.5 million in 2009, Euro 1,355.8 million in 2008 and Euro 1,293.21,326.9 million in 2007, and Euro 1,189.5 million in 2006, representing ayear-on-year increase of 2.7%3.0% in 20082009 and an increase of 8.7%2.2% in 2007.2008.
 
The increase in 2009 was mainly due to increased third-party fees, utilities, rents, taxes other than income tax and other expenses, partially offset by decreased cost of telecommunication materials, repair and maintenance, commissions to independent commercial distributors, provisions for doubtful accounts and other provisions. The increase in 2008 was mainly due to third-party fees, utilities, provisions for doubtful accounts and commissions to independent commercial distributors partially offset by decreased cost of telecommunication materials, repair and maintenance, other provisions, taxes other than income tax and other expenses. The increase in 2007 was primarily attributable to increased third-party fees, advertising and promotion costs, commissions to


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independent commercial distributors and taxes other than income tax, partially offset by decreased utilities, provision for doubtful accounts, other provisions and payments to audiotex providers.
The following table provides a detailed breakdown of other operating expenses for each of the three years ended December 31, 2008.2009.
 
                        
 Year Ended December 31,  Year Ended December 31, 
 2006 2007 2008  2007 2008 2009 
 (Euro in millions)  (Euro in millions) 
Third-party fees  173.7   183.5   208.4   183.5   208.4   234.2 
Cost of telecommunication materials, repair and maintenance  199.0   201.8   191.5   201.8   191.5   182.2 
Advertising and promotion costs  164.0   208.3   212.9   208.3   212.9   216.8 
Utilities  98.0   93.6   114.9   127.3   142.0   163.7 
Provision for doubtful accounts  97.9   88.0   119.8   88.0   119.8   107.0 
Other provisions  36.0   18.1   2.1   18.1   2.1   — 
Travel costs  17.6   18.9   18.1   18.9   18.1   18.0 
Commissions to independent commercial distributors  203.0   244.1   253.4   244.1   253.4   238.4 
Payments to Audiotex providers  17.1   14.3   8.7   14.3   8.7   9.5 
Rents  80.1   88.0   90.9   88.0   90.9   101.8 
Taxes, other than income tax  47.1   56.3   51.7   56.3   51.7   56.2 
Transportation costs  9.6   13.0   11.8   13.0   11.8   11.2 
Other  46.4   65.3   44.5   65.3   44.5   57.5 
              
  1,189.5   1,293.2   1,328.7   1,326.9   1,355.8   1,396.5 
              
 
Other operating expenses relating to third party fees were Euro 234.2 million in 2009, as compared to Euro 208.4 million in 2008 as compared toand Euro 183.5 million in 2007, and 173.7 million in 2006, representing increases of 12.4% in 2009, as compared to 2008 and 13.6% in 2008, as compared to 2007, and 5.6% in 2007, as compared to 2006.2007. These increases were mainly due to the increase in projects requiring the engagement of third-party advisors and specialists.
 
Other operating expenses relating to advertising and promotion costs were Euro 216.8 million in 2009, as compared to Euro 212.9 million in 2008 as compared toand Euro 208.3 million in 2007, and 164.0 million in 2006, representing increases of 1.8% in 2009, as compared to 2008 and 2.2% in 2008, as compared to 2007, and 27.0% in 2007, as compared to 2006.2007. These increases were mainly due to increased marketing and advertising activities in view of intensifying competition in our markets.
 
Provisions for doubtful accounts were Euro 107.0 million in 2009, as compared to Euro 119.8 million in 2008 as compared toand Euro 88.0 million in 2007, and 97.9 millionrepresenting a decrease of 10.7% in 2006, representing2009, as compared to 2008 and an increase of 36.1% in 2008, as compared to 2007, and a2007. The decrease of 10.1% in 2007,2009, as compared to 2006.2008, was mainly due to the improvements in our collection methods and processes, as well as due to higher provisions for 2008 as described below. The increase in 2008, as compared to 2007, was mainly due to increased bad debt resulting from thecertain Greek alternative fixed-line operators ceasing operations in 2008, whereas the decrease in 2007, as compared to 2006, was mainly due to effective bad debt management.2008.
 
Operating IncomeProfit before financial activitiesFinancial Activities
 
We realized operating incomeprofit before financial activities of Euro 1,000.9 million in 2009, as compared to Euro 1,057.7 million in 2008 and Euro 1,046.9 million in 2007, and Euro 1,088.3 million2007. The decrease of 5.4% in 2006.operating profit before financial activities in 2009, as compared to 2008, reflected the 6.6%year-on-year decrease in our operating revenues, partially offset by the 6.8% decrease in operating expenses. The increase of 1.0% in operating incomeprofit before financial activities in 2008, as compared to 2007, reflected a 1.4%year-on-year increase in operating revenues and a 1.5% increase in operating expenses. The decrease of 3.8% in operating income before financial activities in 2007, as compared to 2006, reflected a 7.3%year-on-year increase in operating revenues and a 9.8% increase in operating expenses.


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Income and expenseExpense from financial activitiesFinancial Activities
 
Total profit/(loss)Profit/(Loss) from financial activitiesFinancial Activities
 
Total profit/(loss) from financial activities was a loss of Euro 220.2 million in 2009, a loss of Euro 213.7 million in 2008 and a profit of Euro 107.9 million in 2007,2007. The following table provides a detailed breakdown of profit/(loss) from financial activities for each of the three years ended December 31, 2009.
             
  Year Ended December 31
  2007 2008 2009
  (Euro, in millions)
 
Income/(expense) from financial activities:
            
Interest expense  (238.7)  (343.7)  (325.2)
Interest income  77.8   72.3   61.6 
Foreign exchange differences, net  (4.8)  11.8   10.2 
Gains from investments  256.8   33.7   23.6 
Dividend income  16.8   12.2   9.6 
Total profit/(loss) from financial activities
  107.9   (213.7)  (220.2)
The increase in loss from financial activities in 2009, as compared to 2008, was primarily due to decreased interest income, gains from investments and a loss of Euro 4.5 million in 2006.dividend income, partially offset by decreased interest expense. The decrease in profit from financial activities in 2008, as compared to 2007,


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was primarily due to increased interest expense and lower gains from investments. The increase in profit from financial activities in 2007, as compared to 2006, was primarily due to lower interest expense and increased gain from investments.
 
Interest Expense
 
Interest expense was Euro 325.2 million in 2009, Euro 343.7 million in 2008 and Euro 238.7 million in 2007, and Euro 278.8 million in 2006.2007. The increasedecrease in interest expense in 2009, as compared to 2008, was primarily due to the decrease in the Group’s consolidated debt in 2009, while the increase in 2008, as compared to 2007, was primarily due to the increase in the Group’s debt forin 2008 in connection with the acquisition of Cosmote’s minorities. The decrease in interest expense in 2007,consolidated debt of the Group was Euro 5,421.9 million as at December 31, 2009, as compared to 2006, was primarily due to a total one-off net financial loss of Euro 706,047.7 million recorded in 2006 related to the loan that OTE granted to the OTE Auxiliary Pension Fund.and Euro 5,527.8 million as at December 31, 2008 and 2007, respectively.
 
Gains from investmentsInvestments
 
Gains from investments comprised earnings of Euro 23.6 million in 2009, Euro 33.7 million in 2008 and Euro 256.8 million in 20072007. In 2009, the whole amount of the gain from the sale of investments was derived from the sale of Cosmofon and Euro 176.3 million in 2006.Germanos Telecom AD Skopje (for further information, see Note 8 to the consolidated financial statements). In 2008, the gain onfrom the sale of investments of Euro 33.7 million included a pre-tax gain of Euro 17.0 million from the sale of our interest in LOFOS-PALINI, a real estate development company, at a sale price of Euro 18.4 million. In 2007, the gain onfrom the sale of investments of Euro 256.8 million included a pre-tax gain of Euro 244.7 million from the sale of our interest in INFOTE. In 2006, the gain on sale of investments of Euro 176.3 million included a pre-tax gain of Euro 160.2 million from the sale of our participating interest in ArmenTel.
 
Foreign Exchange Differences
 
Foreign exchange differences comprised a gain of Euro 10.2 million in 2009, a gain of Euro 11.8 million in 2008 and a loss of Euro 4.8 million in 2007 and a gain of Euro 4.2 million in 2006.2007. Foreign exchange differences in 2009, 2008 2007 and 20062007 were mainly attributable to the fluctuation of the Romanian Lei against the Euro.
 
Dividend Income
 
Dividend income primarily included dividends from Telekom Srbija in the amount of Euro 9.3 million for 2009, Euro 11.2 million for 2008 and Euro 15.7 million for 2007 and Euro 21.6 million for 2006.2007.


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Income Tax
 
Income tax expense of Euro 246.2410.0 million was charged in 2008,2009, compared to Euro 246.2 million in 2008 and Euro 381.8 million in 20072007.
The significant increase of 66.5% in 2009, as compared to 2008, was mainly due to the impact of Law3808/2009 (which came into effect in 2009) requiring a one-time special contribution of social responsibility and a tax on dividends (Law 3697/2008). The provisions taken in 2009 comprised a charge of Euro 353.0233.4 million in 2006.for current tax (including Euro 30.3 million tax on dividends), a charge of Euro 113.1 million with respect to theone-time special contribution of social responsibility mentioned above and the recognition of a deferred tax liability of Euro 33.5 million and the recognition of Euro 30.0 million as a result of the conclusion of the tax audit of OTE for the fiscal years2006-2008. The provisions taken in 2008 were the result ofcomprised a charge of Euro 311.7 million for current tax and the recognition of a deferred tax asset of Euro 65.5 million. The provisions taken in 2007 were the result ofcomprised a charge of Euro 341.5 million for current tax and the recognition of a deferred tax liability of Euro 40.3 million. The provisions taken in 2006 were the result of a charge of Euro 316.4 million for current tax and the recognition of a deferred tax liability of Euro 36.6 million.
 
Under Greek tax law, the statutory income tax rate was 25% for each of the yearyears ended December 31, 2009, 2008 25% for the year ended December 31, 2007, and 29% for the year ended December 31, 2006. The statutory income tax rate was reduced to 25% for the year ended December 31, 2007 and onwards, pursuant to Law 3296/2004.2007. In accordance with Law 3697/2008, the income tax rate in Greece for undistributed profits will gradually decrease as follows: 24% for 2010, 23% for 2011, 22% for 2012, 21% for 2013 and 20% for 2014 and onwards.onwards, while, as of 2010, profits distributed as dividends will be subject to a corporate income tax rate of 40%. The Group’s effective tax rates for each of the years ended December 31, 2009, 2008 and 2007 were 52.5%, 29.2% and 2006 were 29.2%33.1%, 33.1%respectively. Excluding the effect of the one time special contribution of social responsibility (under Law 3808/2009), the tax on dividends and 32.6% respectively.the effect of OTE’s tax audit, the effective tax rate for the year ended December 31, 2009 would have been 30.3%. The variations in these effective tax rates resulted primarily from non-taxable expenses that were not tax deductible and from the reduction in the statutory tax rate. See Note 22effect of changes to the consolidated financial statements.tax rate.
 
WeThe Group had net deferred tax assets of Euro 139.9 million as of December 31, 2009, Euro 170.1 million as of December 31, 2008 and Euro 94.6 million as of December 31, 2007.
The Group has established an adequate provision in respect of its unaudited tax years.


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For further information, see Note 21 to the consolidated financial statements.
Profit for the year attributableYear Attributable to shareholdersOwners of the parentParent
 
We realizedThe profit for the year attributable to the owners of the parent amounted to Euro 374.0 million in 2009, Euro 601.8 million in 2008 and Euro 662.6 million in 2007, and Euro 574.6 million in 2006. This representedrepresenting a decrease of 37.9% in profit2009 compared to 2008 and a decrease of 9.2% in 2008 compared to 2007 and an increase of 15.3% in 2007 compared to 2006.2007. Profit for the year as a percentage of operating revenues was 6.2% in 2009, compared to 9.4% in 2008 compared toand 10.5% in 2007 and 9.8% in 2006.2007.
 
The decrease in profit in 2009 compared to 2008 was primarily attributable to the decrease of 6.6% in revenues, which was partially offset by a 6.8% decrease in operating expenses, and the 66.5% increase in income tax expense for the reasons described above. The decrease in profit in 2008 compared to 2007 was primarily attributable to the increase of 1.5% in operating expenses, which was partially offset by a 1.4% increase in our revenues. Furthermore, profit for 2008 profit was affected by the decreased gain from the sale of investments and increased interest expense, which were partially offset by decreased taxes and decreased minoritynon-controlling interests. The increase in profit in 2007 compared to 2006 was primarily attributable to the 7.3% increase in our revenues, partially offset by a 9.8% increase in operating expenses.
 
5.B  Liquidity and Capital Resources
 
Liquidity
 
The following table provides a summary of cash flows for each of the three years ended December 31, 2008.2009.
 
             
  Year Ended December 31, 
  2006  2007  2008 
  (Euro in millions) 
 
Net cash provided by operating activities  1,786.2   1,450.7   1,757.6 
Net cash used in investing activities  (2,308.1)  (2,780.2)  (1,806.0)
Net cash provided by financing activities  1,052.2   603.3   165.3 
Net increase/(decrease) in cash and cash equivalents  530.3   (726.2)  116.9 
             
  Year Ended December 31,
  2007 2008 2009
  (Euro in millions)
 
Net cash flows from operating activities  1,450.7   1,757.6   1,418.0 
Net cash flows used in investing activities  (2,780.2)  (1,806.0)  (958.6)
Net cash flows from / (used in) financing activities  603.3   165.3   (1,005.5)
Net increase / (decrease) in cash and cash equivalents  (726.2)  116.9   (546.1)


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Our primary source of liquidity is cash generated from operations.
Cash flows from operating activities.  Net cash flows from operating activities were Euro 1,418.0 million in 2009, Euro 1,757.6 million in 2008 and Euro 1,450.7 million in 20072007. The 19.3% decrease in net cash flows from operating activities in 2009, as compared to 2008, was mainly attributable to increased payments for income taxes, interest and Euro 1,786.2 millionrelated expenses and early retirement programs, as well as to a decline in 2006.profits, partially offset by a lower increase in accounts receivable and a lower decrease in liabilities excluding borrowings. The 21.2% increase in net cash flows from operating activities in 2008, as compared to 2007, was mainly attributable to decreasedsignificant decreases in payments to suppliersfor early retirement programs and significantly decreased income tax payments. The decreasepayments, partially offset by a significant decline in net cash flows from operating activities in 2007 compared to 2006 was mainly attributable to increased payments to suppliers, increased tax paymentsprofits and increased interest payments.higher liabilities excluding borrowings.
 
Cash flows used in investing activities.Net cash flows used in investing activities was Euro 958.6 million in 2009, Euro 1,806.0 million in 2008 and Euro 2,780.2 million in 2007 and Euro 2,308.1 million2007. The 46.9% decrease in 2006. The majority of ournet cash flows used in investing activities in each year were related2009, as compared to 2008, was primarily due to, on one hand, a significant amount that was paid in 2008 for the acquisition of non-controlling interests and participation in subsidiaries’ share capital increase (particularly Cosmote in relation to the acquisition of its minorities), and on other hand, in 2009, a decline in expenditure relating to purchases of telecommunications property, plant and equipment and intangible assets, our network improvement programan increase in proceeds from disposal of subsidiaries, an increase in net proceeds from sales or maturity of financial assets (despite an increase in purchase of financial assets) and our international investment strategy, as well asan increase in loan proceeds relating to expenditures fordisposal of Cosmofon, partially offset by increased expenditure relating to the acquisition of additional shares in certaina subsidiary net of our subsidiaries (particularly Cosmote).
Net cash provided by financing activities was Euro 165.3 million in 2008, Euro 603.3 million in 2007 and Euro 1,052.2 million in 2006.(relating to the acquisition of Zapp). The 35.0% decrease in net cash provided by financingflows used in investing activities in 2008, as compared to 2007, was primarily dueattributable to a significant decline in expenses for the acquisition of non-controlling interests in subsidiaries’ share capital increase (particularly Cosmote in relation to the acquisition of its minorities), as well as a decline in expenditure relating to purchases of property, plant and equipment and intangible assets and a decline in loans granted in 2008, despite lower proceeds from disposal of subsidiaries and increased dividends paid and lower debt proceeds. The decrease in net cash provided by financing activities in 2007 comparedexpenditure relating to 2006 was primarily due to increased dividends paid.purchase of financial assets.
 
PurchasesIn particular, purchases of telecommunications property, plant and equipment and intangible assets were Euro 890.9 million in 2009, Euro 964.0 million in 2008 and Euro 1,101.3 million in 2007 and Euro 962.4 million in 2006.2007. The decrease in our Group capital expenditure in 2009, as compared to 2008, was mainly attributable to the lower capital expenditure of OTE and the Cosmotesub-group, partially offset by increased capital expenditure from RomTelecom. The decrease in our Group capital expenditure in 2008, as compared to 2007, was mainly attributable to lower capital expenditures in mobile operations in Greece and internationally, as well as decreased capital expenditures by RomTelecom.
Cash flows from/(used in) financing activities.  Net cash outflows from RomTelecom.financing activities was Euro 1,005.5 million in 2009, as compared to inflows of Euro 165.3 million in 2008 and Euro 603.3 million in 2007. The decrease in net cash flows from financing activities in 2009, as compared to 2008, was primarily a result of the absence of borrowing (proceeds from loans granted and issued) in 2009, despite the effect of a decrease in loan repayments. The decrease in net cash flows from financing activities in 2008, as compared to 2007 was primarily due to the effect of a significant increase in our Group capital expenditureloan repayments and increased dividends paid in 20072008, despite higher proceeds from loans, as compared to 2006 was mainly attributable to increased capital expenditure of Cosmote and its subsidiaries, additional network development at RomTelecom and the expansion of our ADSL services in Greece. We expect our Group’s aggregate planned capital expenditure on network infrastructure for 2009 to be approximately at the same levels as in previous years.2007.
 
Capital Resources
 
We employ a variety of financing sources to fund our operations and liquidity needs. The principal financial instruments we use are bonds, medium-term notes and committed credit facilities. We believe that our existing


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liquid assets, cash flows from operations, intragroup funding, available credit lines and ability to access the capital markets will be sufficient for us to meet our anticipated liquidity requirements during 2009.2010.
 
Sources of Funding
 
As ofat December 31, 2008, the2009, OTE Group had total debt under IFRS of Euro 5,421.9 million, as compared to Euro 6,047.7 million compared to total debt ofas at December 31, 2008 and Euro 5,527,8 million as ofat December 31, 2007 and Euro 4,590.5 million as of December 31, 2006.2007.


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The following table sets forth information with respect to the Group’s liabilities outstanding as of December 31, 2008.2009:
 
                        
 Amortized Cost
      Amortized Cost
     
Type of Loan
 
under IFRS
 
Interest Rate
 
Maturity Date
  under IFRS Interest Rate Maturity Date 
 (Euro in millions)      (Euro in millions)     
Global Medium Term Notes
(Euro 1,250 million)		  1,248.8   5%  2013   1,250.8   5.0%  2013 
Global Medium Term Notes
(Euro 900 million)		  891.5   4.625%  2016   892.5   4.625%  2016 
Global Medium Term Notes
(Euro 650 million)		  634.4   3.75%  2011   639.7   3.75%  2011 
Global Medium Term Notes
(Euro 600 million)		  599.3   EURIBOR + 0.28%  2009 
Global Medium Term Notes
(Euro 1,500 million)		  1,494.2   5.375%  2011   1,496.8   5.375%  2011 
Global Medium Term Notes
(Euro 600 million)		  596.3   6%  2015   596.7   6.0%  2015 
OTE Plc’s Syndicated Credit facility
(Term Loan)		  500.0   EURIBOR + 0.25%  2012   500.0   EURIBOR + 0.25%  Up to 2012 
European Investment Bank Loan  18.9   8.3%  2009 
Other bank loans (long-term)  59.2   Various   Various   42.1   Various   Various 
Short-term borrowings  5.1   Various   2009   3.3   Various   2010 
          
Total
  6,047.7           5,421.9         
 
Cash and cash equivalents and investments in government bonds, reachedamounted to Euro 1,537.5868.8 million as ofat December 31, 2008.2009, compared to Euro 1,427.8 million as at December 31, 2008 and Euro 1,316.3 million as at December 31, 2007.
 
For a discussion of funding and treasury policies, see “11. Quantitative and Qualitative disclosures about market risk”.
 
Outstanding debt facilitiesDebt Facilities
 
Our primary facility for debt financing is our Medium Term Note Program discussed below. The Group’s debt is analyzed in Note 17 and Note 20 to the consolidated financial statements.
MTN ProgrammeMedium Term Note Program
 
On November 7, 2001, our wholly-owned subsidiary, OTE Plc, established a Global Medium-Term Note ProgrammeProgram (the “MTN Programme”“MTN Program”) for the issuance of notes fully and unconditionally guaranteed by OTE.us. Notes may be interest-bearing or non-interest-bearing. Interest (if any) may accrue at a fixed or floating (or other variable) rate. In 2003, OTE Plc issuedThese notes are listed and traded on the Luxembourg Stock Exchange.
As of December 31, 2009, the total nominal value of the notes outstanding under the MTN Programme in two tranches. In August 2003, OTE Plc issuedGlobal Medium-Term Note Program was Euro 1.25 billion notes at a fixed rate of 5%, maturing in 2013.4,900.0 million and was comprised as follows:
 
In November 2005, following an exchange offer, OTE Plc issued an additional Euro 650.0 million in aggregate principal amount of notes under the MTN Programme in exchange for notes issued in 2000 under a Eurobond. The new MTN notes pay a fixed coupon of 3.75% and mature in 2011.
On November 21, 2006, OTE Plc issued Euro 900.0 million 4.625% fixed rate notes due 2016 and Euro 600.0 million floating rate notes due 2009, under the MTN Programme. These additional notes were issued mainly in order to refinance the bridge facility of Cosmote for the acquisition by Cosmote of Germanos and for general corporate purposes. The terms of these notes include a change-of-control clause.
• Euro 1,250.0 million notes (nominal value) at a fixed rate of 5.0%, issued in August 2003, maturing on August 5, 2013. As at December 31, 2009 the outstanding IFRS balance (being amortised cost) was Euro 1,250.8 million, as compared to Euro 1,248.8 million in 2008.
• Euro 650.0 million notes (nominal value) at a fixed rate of 3.75%, issued in November 2005, maturing on November 11, 2011. As at December 31, 2009 the outstanding IFRS balance (being amortised cost) was Euro 639.7 million, as compared to Euro 634.4 million in 2008.
• Euro 900.0 million notes (nominal value) at a fixed rate of 4.625%, issued in November 2006, maturing on May 20, 2016. As at December 31, 2009 the outstanding IFRS balance (being amortised cost) was Euro 892.5 million, as compared to Euro 891.5 million in 2008.
• Euro 1,500.0 million notes (nominal value) at a fixed rate of 5.375%, issued in February 2008, maturing on February 14, 2011. As at December 31, 2009 the outstanding IFRS balance (being amortised cost) was Euro 1,496.8 million, as compared to Euro 1,494.2 million in 2008. In May 2010, OTE Plc bought back


109119

Notes of a total nominal amount of Euro 56.0 million which have been cancelled. The outstanding nominal value of the Notes following cancellation is currently Euro 1,444.0 million.
• Euro 600.0 million notes at a fixed rate of 6.0%, issued in February 2008, maturing on February 12, 2015. As at December 31, 2009 the outstanding IFRS balance (being amortised cost) was Euro 596.7 million, as compared to Euro 596.3 million in 2008.
In addition to the above, a series of Floating Rate Notes (FRN) in the amount of Euro 600.0 million, issued on November 21, 2006, matured on November 21, 2009 and OTE Plc fully repaid this series. Prior to maturity, in May 2009, OTE Plc repurchased a nominal amount of Euro 28.1 million under the same series, the notes were cancelled therefore bringing the outstanding nominal balance of the series to Euro 571.9 million (being the amount repaid at maturity).
Change of Control andStep-up Clauses.  The Euro 900.0 million notes issued in November 2006 and the Euro 1,500.0 million and Euro 600.0 million notes issued in February 2008 include a change of control clause and astep-up clause triggered by changes in our credit rating.
In particular, the change of control clause, if triggered, requires OTE Plc to notify the noteholders, who can request the repayment of the notes within 45 days of the relevant notice. The change of control clause is triggered, if both of the following events occur:
 
(a) any person or persons acting in concert (other than the Hellenic Republic)State) at any time directly or indirectly comescome(s) to own or acquiresacquire(s) more than 50% of theour issued ordinary share capital or of theour voting rights of OTE S.A.rights; and
 
(b) as a consequence of (a), the rating previously assigned to the bondsnotes by any international rating agency is withdrawn or downgraded to BB+/Ba1 or their respective equivalents (non-investment grade), within a specific period and under specific terms and conditions.
 
Thestep-up clause is triggered by changes in our credit rating. In particular, the note coupon may increase by 1.25% in the event that:
(a) one or both of the two credit rating agencies (Moody’s and Standard and Poor’s) downgrades the rating to BB+ or Ba1 and under(sub-investment grade); or
(b) both Moody’s and Standard and Poor’s cease or are unable to perform our credit rating.
The coupon can increase once only during the entire term of the notes and only for the period our credit rating remains atsub-investment grade. As of the date of this “Annual Report”,Annual Report, neither of the change of control clause has not been triggered.
On June 21, 2007 our Board of Directors approved an increase ofand the maximum guarantee granted to OTE Plc for the MTN Programme from Euro 5.0 billion to Euro 6.5 billion.
On February 12, 2008, OTE Plc issued Euro 1.5 billion 5.375% fixed-rate notes due 2011 and Euro 600.0 million 6.0% fixed-rate notes due 2015 under the MTN Programme, to refinance the short-term bridge facility of Euro 2.1 billion, which was obtained in November 2007 in connection with the acquisition of the minority shares in Cosmote. The terms of the notes include astep-up clause according to the credit rating of OTE and a change-of-control clause applicable to OTE. The change-of-control provisions are similar to thosehas been triggered. See below under the notes issued in November 2006.“— Credit Rating”.
 
As of December 31, 2008, OTE Plc has issued notes under the MTN Programme amounting to a total of Euro 5.5 billion, which are fully and unconditionally guaranteed by us.
Syndicated Credit Facility
 
On September 2, 2005, OTE Plc signed a Euro 850.0 million syndicated credit facilitySyndicated Credit Facility with banks, guaranteed by us. The facility hadhas a five year term with an original termextension option of five years with two subsequent annual extension options1+1 year subject to the lenders’ consent, which were both exercised.consent. The facility consists of a Euro 500.0 million term loanTerm Loan with variable interest of three month Euribor plus margin (0.25%, as of December 31, 2009) and a Euro 350.0 million revolving credit facility.Revolving Credit Facility with Commitment fee as the facility has not been drawn (0.06750%, as of December 31, 2009). The loan bears a margin-adjustment clause“margin adjustment clause” whereby the margin is adjustable based on ourthe long-term credit rating.rating of OTE. The loan agreement includes a change-of-controlchange of control clause which is triggered when there is a change of control in OTE thatwhich will result in a credit ratingdowngrade in the credit-rating of OTE, or of the new legal entity, at a level lower than BBB/Baa2. In the case theevent this clause is triggered, OTE Plc is obliged to notify the lenders, whichbanks, who can request the immediate repayment of the loan. On September 6, 2005, OTE Plc drew Euro 500.0 million under the term loan.Term Loan. Up to December 31, 2008,2009, no draw-downs werehave been made underfrom the revolving credit facility.Revolving Credit Facility.
 
Further toAt OTE Plc’s request and following the lenders’banks’ consent, the maturity of the loan was extended as follows:
 
(a) Euro 25.8 million (term loan) and Euro 18.0 million (revolving credit facility) will mature in September 2010
(b) Euro 29.0 million (term loan) and Euro 20.3 million (revolving credit facility) will mature in September 2011 and
(c) Euro 445.2 million (term loan) and Euro 311.7 million (revolving credit facility) will mature in September 2012.
Based on the current credit rating of OTE, the margins are as follows: 0.25% for the term loan and 0.225% for the revolving credit facility.
Step-up provisions.  A lowering of our long-term senior unsecured debt ratings:
 • below Baa2 by Moody’s or below BBB by S&P would result in an increase in interest rates of 2.5 basis points, duefor Euro 25.8 million (Term Loan) and Euro 18.0 million (Revolving Credit Facility) tostep-up provisions in our Syndicated Facility with an aggregate principal amount of September 2010;
• for Euro 50029.0 million at December 31, 2008. We estimate that such astep-up would result in an increase of our interest expense by approximately(Term Loan) and Euro 0.120.3 million per annum.(Revolving Credit Facility) to September 2011; and
• for Euro 445.2 million (Term Loan) and Euro 311.7 million (Revolving Credit Facility) to September 2012.


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• below Baa3 by Moody’s or below BBB- by S&P would result in a 125 basis point increase in interest rates due tostep-up provisions on bonds with an aggregate principal amount of approximately Euro 2.1 billion at December 31, 2008. We estimate that such astep-up would result in an increase of our interest expense by approximately Euro 26.3 million per annum.
According to our current credit rating, the margin on the Term Loan is 0.25%.
 
Euro Commercial Paper ProgrammeOther facilities
 
Euro Commercial Paper Programme.On September 19, 2003, OTE Plc established a Euro commercial paperCommercial Paper programme under which it may issue Euro-denominated notes, fully and unconditionally guaranteed by us, up to a maximum amount of Euro 500.0 million with a maximum termtenor of one year. Notes may be interest-bearing or non-interest bearing. Interest (if any) may accrue at a fixed or floating rate. To date, we have not issued any notes under this program.
 
European Investment Bank LoansLoans.
This long-term loan was granted in 1995, iswas denominated in Euro, beared interest at an annual rate of 8.3% and its outstanding principal balance as of December 31, 2008 was Euro 18.9 million. It bears interest at an annual rate of 8.3% and is repayable in annual instalments untilIn July 2009.2009, we fully repaid this loan to the European Investment Bank.
 
Other Bank LoansLoans.
RomTelecom has obtained four long-term loans in various currencies, in anEuro and Korea Won, the outstanding aggregate principalbalance of which amount ofto Euro 54.842.1 million as of December 31, 2008. These loans bear interest at fixed rates ranging from 2.5% to 6.12%2009 (December 31, 2008: 54.8 million).
In 2005, Globul entered into a three-year credit facility The first of these is in Euro, it has an aggregate principal amountoutstanding balance of Euro 75.012.1 million, bears a fixed interest rate of 4.9956% and matures in 2012. The remaining three loans have outstanding balances of Euro 7.0 million, Euro 13.2 million and bearingEuro 9.8 million, are in Korean Won, bear a fixed interest at EURIBOR plus a marginrate of 1.25%. As of December 31, 2007, Globul had drawn loans under the facility4.20%, 2.50% and 2.50%, respectively, and mature in an aggregate amount of Euro 50.0 million, which were partially used to refinance short-term borrowings. The outstanding balance was fully repaid in 2008 via an intercompany loan from OTE Plc.
Bridge Facility Consortium Loan
On November 9, 2007, OTE Plc signed a short-term credit facility agreement for an amount of Euro 2.7 billion with a consortium of banks, under the full guarantee of OTE, to finance the acquisition of minority shares of Cosmote by OTE. The loan had a term of one year with an option for a three-month extension2014, 2018 and bore interest at EURIBOR, plus a margin adjustable on the basis of the long-term credit rating of OTE. Based on the credit rating of OTE prevailing in November 2007, the margin was set at 0.30%. This facility included standard restrictions and, among others, a change-of-control clause. As at December 31, 2007 OTE Plc had drawn Euro 1.5 billion under the facility. In early 2008, OTE Plc drew a further Euro 600.0 million under this facility. On February 12, 2008, under the MTN Programme, OTE Plc issued Euro 1.5 billion 5.375% fixed-rate notes due 2011 and Euro 600 million 6.0% fixed-rate notes due 2015, to refinance the short-term bridge facility. As a result outstanding balance was fully repaid in 2008.
For further information regarding the Group’s debt, see Notes 18 and 21 to the consolidated financial statements.2020, respectively.
 
Credit Rating
 
In January 2005,May 2010, Standard & Poor’s Ratings Services reviseddowngraded our outlook from stable to negative. In May 2006, Moody’s reaffirmed our rating of A3 with a stable outlook. In October 2006, Moody’s lowered our A3long-term corporate credit rating to BaalBBB- with a stable outlook. The Prime-2 rating foroutlook, while our short-term debt was affirmed. In October 2006 Standard & Poor’s affirmed our BBB+ andcorporate credit rating remained atA-2A-3. ratings for our respective long-term and short-term credit with a negative outlook. Finally,Previously, in May 2008, Moody’s had downgraded our Baa1 rating to Baa2 with a stable outlook, following the signing of a purchase agreement between the Greek State and Deutsche Telekom pursuant to which, the latter acquires a controlling interest in our share capital. See “7.A Major Shareholders and Related Party Transactions — Major Shareholders”. In December 2008, Standard & Poor’s downgraded our BBB+ rating to BBB, with a stable outlook, while the“A-2” short-term corporate credit rating was affirmed.


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Critical Accounting Estimates
 
The discussion and analysis of financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with IFRS, as issued by the IASB. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to legal contingencies, allowance for doubtful accounts, the estimated useful life of non financial assets, impairment of property, plant and equipment, impairment of goodwill and intangible assets, reserve for staff retirement indemnities and youth account, recognition of revenues and expenses and income taxes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions.
 
We discuss below certain key assumptions concerning the future and key sources of estimation uncertainty, that give rise to a significant risk of material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Legal contingenciesImpairment of Goodwill
 
WeThe Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows.


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Provision for Income Taxes
The provision for income taxes in accordance with IAS 12 “Income taxes”, are currently involvedthe amounts expected to be paid to the taxation authorities and includes provision for current income taxes reported and the potential additional tax that may be imposed as a result of audits by the taxation authorities. Group entities are subject to income taxes in various claimsjurisdictions and legal proceedings. Periodically, we review the status of each significant matter and assess potential financial exposure, based in part on the advice of legal counsel. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reliably estimated, we accrue a liability for the estimated loss. Significantmanagement judgment is required in bothdetermining provision for income taxes. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which the Group operates, or unpredicted results from the final determination of probabilityeach year’s liability by taxing authorities. These changes could have a significant impact on the Group’s financial position. Where the actual additional taxes payable are different from the amounts that were initially recorded, these differences will impact the income tax provisions in the period in which such a determination is made.
Deferred Tax Assets
Deferred income tax assets and liabilities have been provided for the tax effects of temporary differences between the carrying amount and tax base of such assets and liabilities, using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the determination as to whether an exposure is reasonably estimable. With respect to our retail customers,carry forward of unused tax credits and becauseunused losses can be utilized. The Group has considered future taxable income and followed ongoing feasible and prudent tax planning strategy in the assessment of uncertaintiesthe recoverability of deferred tax assets. The accounting estimate related to these matters, accruals are based only ondeferred tax assets requires management to make assumptions regarding the most accurate information available at the reporting date. As additional information becomes available, we reassess the potential liability related to pending claims and litigation and may revise assessmentstiming of future events, including the probability of an unfavorable outcomeexpected future taxable income and the related estimate of potential loss. Such revisions in the estimates of the potential liabilities could have a material impact on our consolidated financial position and results of operations.available tax planning opportunities.
 
Allowance for doubtful accountsDoubtful Trade Receivables
 
We establishThe Group establishes an allowance for doubtful accounts sufficient to cover reasonably estimable loss for these accounts. Because of the number of accounts, that we have, it is not practical to review the collectabilitycollectibility of each account; therefore, at each reporting date allan accounts receivable are assessed based on historical trends, statistical information, future expectations regarding suspended or cancelled customers, reactivation rates for suspended customers and collection rates for amounts due from cancelled customers. Other operators are examined and assessed on an individual basis. The balance of such allowance for doubtful accounts is adjusted by recording a charge to the consolidated income statement of the reporting period. Any amount written off with respect to customer account balances is charged against the existing allowance for doubtful accounts.
 
ImpairmentPost Retirement and Other Defined Benefit Plans
Staff retirement indemnities and youth account obligations are calculated at the discounted present value of the future retirement benefits and benefits to children of employees deemed to have accrued at year-end, based on the assumption that employees earn retirement and youth account benefits uniformly throughout the working period. Retirement and youth account obligations are calculated on the basis of financial and actuarial assumptions that require management to make assumptions regarding discount rates, pay increases, mortality and disability rates, retirement ages and other factors. Changes in these key assumptions can have a significant impact on the obligation and pension costs for the period. Net pension costs for the period consist of the present value of benefits earned in the year, interest costs on the benefits obligation, prior service costs and actuarial gains or losses. The staff retirement indemnities and youth account benefit obligations are not funded. Due to the long term nature of these defined benefit plans these assumptions are subject to a significant degree of uncertainty.
Estimating the Useful Life of Non-Financial Assets
The Group must estimate the useful life of property, plant and equipment and finite intangible assets recognized at acquisition, or as a result of a business combination. These estimates are revisited at least on an annual basis taking into account new developments and market conditions.


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Contingent Liabilities
The Group is currently involved in various claims and legal proceedings. Periodically, the Group reviews the status of each significant matter and assesses potential financial exposure, based in part on the advice of legal counsel. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reliably estimated, the Group recognizes a liability for the estimated loss. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. With respect to the retail customers, and because of uncertainties related to these matters, provisions are based only on the most accurate information available at the reporting date. As additional information becomes available, the Group reassesses the potential liability related to pending claims and litigation and may revise assessments of the probability of an unfavorable outcome and the related estimate of potential loss. Such revisions in the estimates of the potential liabilities could have a material impact on the Group’s financial position and results of operations.
Impairment of Property, Plant and Equipment
 
The determination of impairmentsimpairment of property, plant and equipment involves the use of estimates that include, but are not limited to, the cause, timing and amount of the impairment. Impairment is based on a large number of factors, such as changes in current competitive conditions, expectations of growth in the telecommunications industry, increased cost of capital, changes in the future availability of financing, technological obsolescence, discontinuance of services, current replacement costs, prices paid in comparable transactions and other changes in circumstances that indicate an impairment exists. The recoverable amount and the fair values areis typically determined using a discounted cash flow method which incorporates reasonable market participant assumptions. The identification of impairment indicators, as well as the estimation of future cash flows and the determination of fair values for assets (or groups of assets) require management to make significant judgments concerning the identification and validation of impairment indicators, expected cash flows, applicable discount rates, useful lives and residual values.


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Estimating the useful life of non-financial assetsCustomer Activation Fees
 
The Group must estimateInstallation and activation fees are received from new customers. These fees (and related directly attributable costs) are deferred and amortized over the useful lifeexpected duration of property, plant and equipment and intangible assets recognized at the acquisition date or as acustomer relationship. If management estimates of the duration of the customer relationship are revised, significant differences may result in the timing of a business combination. These estimates are revisited at least every balance sheet date taking into account new developments and market conditions.revenue for any period.
 
Impairment of goodwill and intangible assets
Goodwill:  After initial recognition, goodwill is measured at cost less any accumulated impairment losses. An impairment loss recognized for goodwill shall not be reversed in a subsequent period. Goodwill on acquisition of subsidiaries is presented as an intangible asset. The excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the business combination is recorded directly in the income statement. Goodwill on acquisition of associates is included in the carrying amount of the investment. The difference arising on the acquisition of a minority interest in a subsidiary, where control already exists, is recorded directly in equity.
Intangible Assets:  Intangible assets acquired separately are measured at cost, while those acquired from a business combination are measured at fair value on the date of acquisition. Subsequently, they are measured at that amount less accumulated amortization and accumulated impairment losses. The Group determines whether goodwill and intangible assets are impaired at least on an annual basis. This requires an estimation of the value in use of the cash generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows.
Reserve for Staff Retirement Indemnities and Youth Account
Staff Retirement Indemnities and Youth Account obligations are calculated at the discounted present value of the future retirement benefits and benefits to children of employees deemed to have accrued at year-end, based on the assumption that employees earn Retirement and Youth Account benefits uniformly throughout the working period. Retirement and Youth Account obligations are calculated on the basis of financial and actuarial assumptions that require management to make assumptions regarding discount rates, pay increases, mortality and disability rates, retirement ages and other factors, as detailed in the notes to our consolidated financial statements. Changes in these key assumptions can have a significant impact on the obligation and pension costs for the period. Net pension costs for the period consist of the present value of benefits earned in the year, interest costs on the benefits obligation, prior service costs and actuarial gains or losses. The Staff Retirement Indemnities and Youth Account benefit obligations are not funded.
Recognition of Revenues and Expenses
 
Fixed revenues primarily consist of connection charges, monthly network services fees, exchange network and facilities usage charges, other value added communication services fees, and sales of handsets and accessories. Revenues are recognized as follows:
 
Connection charges:  Connection charges for the fixed network are deferred and amortized to income over the average customer retention period. Connection costs, up to the amount of deferred connection fees are recognized over the average customer retention period. No connection fees are charged for mobile services.
 
Monthly network service fees:  Revenues related to the monthly network service fees are recognized in the month that the telecommunication service is provided.
 
Usage Chargescharges and VAS Fees:value added services fees:  Call fees consist of fees based on airtime and traffic generated by the caller, the destination of the call and the service utilized. Fees are based on traffic, usage of airtime or volume of data transmitted for value added communication services. Revenues for usage charges and value added communication services are recognized in the period when the services are provided.
Revenues from outgoing calls made by OTE’sour subscribers to subscribers of mobile telephony operators are presented at their gross amount in the income statement as the credit and collection risk remains solely with OTE.


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us. Interconnection fees formobile-to-mobile calls are recognized based on incoming traffic generated from other mobile operators’ networks. Unbilled revenues from the billing cycle date to the end of each period are estimated based on traffic.
Revenues from the sale of prepaid airtime cards and the prepaid airtime, net of discounts allowed, included in the Group’s prepaid services packages, are recognized based on usage. Such discounts represent the difference between the wholesale price of prepaid


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cards and boxes (consisting of handsets and prepaid airtime) to the Group’s master dealersMaster Dealers and the retail sale price to the ultimate customers. Unused airtime is included in “Deferred revenue” onin the balance sheet.statement of financial position. Upon the expiration of prepaid airtime cards, any unused airtime is recognized to income.
Airtime and acquisition commission costs due toin the Group’s master dealers for each subscriber acquired through their network are expensed as incurred.income statement. Commissions paid for each contract subscriber acquired by the master dealers as well as bonuses paid to master dealers in respect of contract subscribers who renew their annual contracts, are deferred and amortized as expenses over the contract period. Airtime commissions due to the Group’s master dealers for each subscriber acquired through their network are expensed as incurred.
 
Sales of telecommunication equipment:  Revenues from the sale of handsets and accessories, net of discounts allowed, are recognized at thepoint-of-sale, when the significant risks and rewards of ownership have passed to the buyer.
 
Revenues from dividends:Dividend income:  Revenues from dividends areDividend income is recognized when the right to receive payment is established with the approval for distribution by the general assemblyGeneral Assembly of shareholders.
 
Interest income:  Interest income is recognized as the interest accrues (using the effective interest method).
 
Revenues from construction projects:  Revenues from construction projects are recognized in accordance with the percentage of completion method.
 
Principal and agency relationship:In a principal and agency relationship, amounts collected by the agent on behalf of the principal do not result in increases in equity of the agent and thus, they are not revenues for the agent. Revenue for the agent is the amount of commission received by the principal. On the other hand, the principal’s revenues consist of the gross amounts described above and the commission paid to the agent is recognized as an expense.
 
Income taxes
We account for income taxes using the liability method in accordance with IAS 12 “Income Taxes”. Deferred income tax assets and liabilities have been provided for the tax effects of temporary differences between the carrying amount and tax base of such assets and liabilities, using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused losses can be utilized. We believe that we have considered future taxable income and followed ongoing feasible and prudent tax planning strategy in the assessment of the recoverability of deferred tax assets. The accounting estimate related to deferred tax assets requires us to make assumptions regarding the timing of future events, including the probability of expected future taxable income and available tax planning opportunities. In addition, Group entities are subject to income taxes in various jurisdictions and significant management judgment is required in determining provisions for income taxes (for the additional tax that may be imposed as a result of audits by the taxation authorities). Estimates of income taxes and the significant items giving rise to the deferred tax assets and liabilities are shown in Note 22 to the consolidated financial statements.
Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which we operate, our inability to generate sufficient future taxable income or unpredicted results from the final determination of each year’s liability by taxing authorities. These changes could have a significant impact on our financial position.
Recent and Newly IssuedNewly-Issued Accounting Pronouncements
 
ForThe financial statements have been prepared using accounting policies consistent with those of the previous year except for the adoption of the following new and amended IFRS and IFRIC interpretations which became effective for the accounting period beginning January 1, 2008, the Group adopted IFRIC 11 “IFRS 2 — Group and Treasury share transactions”, IFRIC 12 “Service Concession Arrangements”, IFRIC 14 “IAS 19 — The Limit on a2009:
• IFRIC 13 Customer Loyalty Programs effective July 1, 2008
• IFRIC 15 Agreements for the Construction of Real Estate effective January 1, 2009
• IFRIC 16 Hedges of a Net Investment in a Foreign Operation effective October 1, 2008
• IFRIC 9 Remeasurement of Embedded Derivatives (Amended) and IAS 39 Financial Instruments: Recognition and Measurement (Amended) effective for periods ending on or after June 30, 2009
• IFRS 1 First-time Adoption of International Financial Reporting Standards (Amended) and IAS 27 Consolidated and Separate Financial Statements (Amended) effective January 1, 2009
• IFRS 2 Share-based Payment: Vesting Conditions and Cancellations (Amended) effective January 1, 2009
• IFRS 8 Operating Segments effective January 1, 2009
• IFRS 7 Financial Instruments: Disclosures (Amended) effective January 1, 2009
• IAS 1 Presentation of Financial Statements (Revised) effective January 1, 2009
• IAS 32 Financial Instruments: Presentation (Amended) and IAS 1 Puttable Financial Instruments and Obligations Arising on Liquidation (Amended) effective January 1, 2009
• IAS 23 Borrowing Costs (Revised) effective January 1, 2009
• Improvements to IFRSs (May 2008)
• IFRIC 18 Transfers of Assets from Customers effective for transfers after July 1, 2009


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Defined Benefit Asset, Minimum Funding Requirements and their Interaction”, IAS 39 “Financial Instruments: Recognition and Measurement” and IFRS 7 “Financial Instruments: Disclosures; Reclassification of Financial Assets”.
The adoption of thesethe above new and amended IFRS and IFRIC interpretations and amendments did not have anyan impact on the financial statements. statements or performance of the Group, however the following had an impact on the presentation of or disclosures made in the financial statements as described below:
• IAS 1, “Presentation of Financial Statements” (Revised): The revised standard requires that the statement of changes in equity includes only transactions with owners; introduces a new statement of comprehensive income that combines all items of income and expense recognized in the income statement together with “other comprehensive income” (either in one single statement or in two linked statements); and requires the inclusion of a third column on the statement of financial position to present the effect of restatements of financial statements or retrospective application of a new accounting policy as at the beginning of the earliest comparative period. The Group made the necessary changes to the presentation of its financial statements in 2009 and elected to present two linked statements for the statement of comprehensive income.
• IFRS 7, “Financial Instruments:  Disclosures”: The amended standard requires additional disclosures about fair value measurement and liquidity risk. Fair value measurements related to items recorded at fair value are to be disclosed by the source of inputs, using a three-level hierarchy, by class, for all financial instruments recognized at fair value. In addition, reconciliation between the beginning and ending balance for level 3 fair value measurements is now required, as well as significant transfers between the levels in the fair value hierarchy. The amendments also clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used for liquidity management.
• IFRS 8, “Operating segments”:  IFRS 8 replaces IAS 14 “Segment reporting” and adopts a management approach to segment reporting. The Group concluded that the operating segments determined in accordance with IFRS 8 are the same as the business segments previously identified under IAS 14.
The following new and amended IFRS and IFRIC interpretations have been issued but are not effective for the financial year beginning January 1, 2008 and2009. They have not been early adopted byand the Group:Group is in the process of assessing their impact, if any, on the financial statements:
 
 • IFRIC 13, “Customer Loyalty Programmes”, effective for financial years beginning on or after July 1, 2008. This Interpretation requires customer loyalty award credits to be accounted for as a separate component of the sales transaction in which they are granted and therefore part of the fair value of the consideration received is allocated to the award credits and deferred over the period that the award credits are fulfilled. The Group does not expect that this interpretation will impact the financial statements.
• IFRIC 15, “Agreements for the Construction of Real Estate”, issued on July 3, 2008 and effective for financial years beginning on or after January 1, 2009 and is to be applied retrospectively. IFRIC 15 provides guidance on how to determine whether an agreement for the construction of real estate is within the scope of IAS 11 “Construction Contracts” or IAS 18 “Revenue” and, accordingly, when revenue from such construction should be recognized. The Group does not expect that this interpretation will impact the financial statements.
• IFRIC 16, “Hedges of a Net Investment in a Foreign Operation”, issued on July 3, 2008 and effective for financial years beginning on or after October 1, 2008 and is to be applied prospectively. IFRIC 16 clarifies three main issues, namely:
— A presentation currency does not create an exposure to which an entity may apply hedge accounting. Consequently, a parent entity may designate as a hedged risk only the foreign exchange differences arising from a difference between its own functional currency and that of its foreign operation.
— Hedging instrument(s) may be held by any entity or entities within the group.
— While IAS 39, “Financial Instruments: Recognition and Measurement”, must be applied to determine the amount that needs to be reclassified to profit or loss from the foreign currency translation reserve in respect of the hedging instrument, IAS 21 “The Effects of Changes in Foreign Exchange Rates” must be applied in respect of the hedged item.
The Group does not expect that this interpretation will impact the financial statements.
• IFRIC 17 “DistributionsDistributions of Non-cash Assets to Owners”,Owners:  This interpretation is effective for annual periods beginning on or after July 1, 2009. IFRIC 172009 with early application permitted. The interpretation provides guidance on how to account for non-cash distributions to owners. The interpretation clarifies when to recognize a liability, how to measure it and the following issues, namely:
— A dividend payable should be recognizedassociated assets, and when to derecognize the dividend is appropriately authorizedasset and is no longer at the discretion of the entity;liability.
 
 —• AnIFRIC 19 Extinguishing Financial Liabilities with Equity Instruments:  The interpretation is effective for annual periods beginning on or after July 1, 2010. This interpretation addresses the accounting treatment when there is a renegotiation between the entity should measureand the dividend payable atcreditor regarding the fair valueterms of a financial liability and the net assetscreditor agrees to be distributed;accept the entity’s equity instruments to settle the financial liability fully or partially. IFRIC 19 clarifies such equity instruments are “consideration paid” in accordance with paragraph 41 of IAS 39. As a result, the financial liability is derecognized and the equity instruments issued are treated as consideration paid to extinguish that financial liability.
 
 —• An entity should recognize the difference between the dividend paid and the carrying amount of the net assets distributed in profit or loss; and
— An entity must provide additional disclosures if the net assets being held for distribution to owners meet the definitionIFRIC 14 Prepayments of a discontinued operation.
IFRIC 17 applies to pro-rata distributions of non-cash assets except for common-control transactions. ItMinimum Funding Requirement (Amended):  The amendment is to be applied prospectively and earlier application is permitted. The Group is in the process of assessing the impact of this Interpretation.
• IFRIC 18, “Transfers of Assets from Customers”, effective for transfers of assets after July 1, 2009 and is to be applied prospectively. However, limited retrospective application is permitted. This interpretation is of particular relevance for the utility sector as it clarifies the accounting for agreements where an entity receives an item of property, plant and equipment (or cash to construct such an item) from a customer and this equipment in turn is used to connect a customer to the network or to provide ongoing access to supply of goods or services. The Group is in the process of assessing the impact of this interpretation.


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• IFRS 2, “Share-based Payments” (Amended), effective for annual periods beginning on or after January 1, 2009.2011. The purpose of this amendment clarifies two issues: the definition of “vesting condition”,was to permit entities to recognize as an asset some voluntary prepayments for minimum funding contributions. Earlier application is permitted and introducing the term “non-vesting condition” for conditions other than service conditions and performance conditions. It also clarifies that the same accounting treatment applies to awards that are effectively cancelled by either the entity or the counterparty. The Group does not expect that this interpretation will impact the financial statements.must be applied retrospectively.
 
 • IFRS 3 “Business Combinations”Business Combinations (Revised) and IAS 27 “ConsolidatedConsolidated and Separate Financial Statements”Statements (Amended),:  The revision and amendment is effective for annual periods beginning on or after July 1, 2009. A revised version of IFRS 3 Business Combinations and an amended version of IAS 27 “Consolidated and Separate Financial Statements” were issued by IASB on January 10, 2008. The revised IFRS 3 introduces a number of changes in the accounting for business combinations which will impactimpacts the amount of goodwill recognized, the reported results in the period that an acquisition occurs, and future reported results. Such changes include the expensing of acquisition-related costs and recognizing subsequent changes in fair value of contingent consideration in the profit or lossincome statement (rather than by adjusting goodwill). The amended IAS 27 requires that a change in ownership interest of a subsidiary is accounted for as an equity transaction. Therefore such a change will have no impact on goodwill, nor will it give raise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes introduced by IFRS 3 (Revised) and


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IAS 27 (Amendment) must be applied prospectively and will affect future acquisitions and transactions with minoritynon-controlling interests.
 • IFRS 8, “Operating Segments”,IAS 39 Financial Instruments:  Recognition and Measurement (Amended) — eligible hedged items:  The amendment is effective for annual periods beginning on or after January 1, 2009. IFRS 8 replaces IAS 14 “Segment reporting”. IFRS 8 adopts a management approach to segment reporting. The information reported would be that which management uses internally for evaluating the performance of operating segments and allocating resources to those segments. This information may be different from that reported in the balance sheet and income statement and entities will need to provide explanations and reconciliations of the differences. The Group does not expect that this interpretation will have a significant impact on the financial statements.
• IAS 1, “Presentation of Financial Statements” (Revised), effective for annual periods beginning on or after January 1, 2009. IAS 1 has been revised to enhance the usefulness of information presented in the financial statements. The main revisions are the requirement that the statement of changes in equity include only transactions with shareholders, the introduction of a new statement of comprehensive income that combines all items of income and expense recognized in profit or loss together with “other comprehensive income”, and the requirement to present restatements of financial statements or retrospective application of a new accounting policy as at the beginning of the earliest comparative period; i.e., a third column on the balance sheet. The Group will make the necessary changes to the presentation of its financial statements in 2009.
• IAS 32 and IAS 1, “Puttable Financial Instruments” (Amended), effective for annual periods beginning on or after January 1, 2009. The amendment to IAS 32 requires certain puttable financial instruments and obligations arising on liquidation to be classified as equity if certain criteria are met. The amendment to IAS 1 requires disclosure of certain information relating to puttable instruments classified as equity. The Group does not expect that this interpretation will have a significant impact on the financial statements.
• IAS 23, “Borrowing Costs” (Revised), effective for annual periods beginning on or after January 1, 2009. The benchmark treatment in the existing standard of expensing all borrowing costs to the income statement is eliminated in the case of qualifying assets. All borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset must be capitalized. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. The revised standard will not impact the Group’s financial statements given that interest is already capitalized.
• IAS 39 “Financial Instruments: Recognition and Measurement — Eligible Hedged Items” effective for financial years beginning on or after July 1, 2009. The amendment addresses the designation of a one-sided risk in a hedged item, and the designation of inflation as a hedged risk or portion in particular situations. It clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a


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financial instrument as hedged item. This also covers the designation of inflation as a hedged item. The Group has concluded that the amendment will have no impact on the financial positionrisk or performance of the Group, as the Group has not entered into any such hedges.
• Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards” and IAS 27 “Consolidated and Separate Financial Statements” effective for financial years beginning on or after January 1, 2009. The amendments to IFRS 1 allow an entity to determine the “cost” of investmentsportion in subsidiaries, jointly controlled entities or associates in its opening IFRS financial statements in accordance with IAS 27 or using a deemed cost. The amendment to IAS 27 requires all dividends from a subsidiary, jointly controlled entity or associate to be recognized in the income statement in the separate financial statements. The revision to IAS 27 will have to be applied prospectively. The new requirements affect only the parent’s separate financial statements and do not have an impact on the financial statements of the Group.particular situations.
 
 • IAS 39, “Financial Instruments: RecognitionIFRS 9 Financial Instruments — Phase 1 financial assets, classification and Measurement” and IFRIC 9, “Reassessment of embedded derivatives” (Amended), effective for annual periods ending on or after June 30, 2009. This amendment clarifies the accounting treatment of embedded derivatives for entities that make use of the reclassification amendment issued by the IASB in October 2008.measurement:  The reclassification amendment allows entities to reclassify particular financial instruments out of the “fair value through profit or loss” category in specific circumstances. These amendments to IFRIC 9 and IAS 39 clarify that on reclassification of a financial asset out of the “fair value through profit or loss” category, all embedded derivatives have to be assessed and, if necessary, separately accounted for in financial statements. The amendments apply retrospectively and are required to be applied. Adoption of these amendmentsnew standard is not expected to impact significantly the financial statements of the Group.
• IFRS 7, “Financial Instruments: Disclosures” (Amended), effective for annual periods beginning on or after January 1, 2009.2013. Phase 1 of this new IFRS introduces new requirements for classifying and measuring financial assets. Early adoption is permitted.
• IFRS 2 Group Cash-settled Share-based Payment Transactions (Amended):  The amendment requires fair value measurements tois effective for annual periods beginning on or after January 1, 2010. This amendment clarifies the accounting for group cash-settled share-based payment transactions and how such transactions should be disclosed byarranged in the source of inputs, using the following three-level hierarchy: (a) quoted prices (unadjusted) in active markets for identical assets and liabilities (“Level 1”). (b) inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (“Level 2”) (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (“Level 3”). This information must be given by class of financial instrument. The amendment also revises specified minimum liquidity risk disclosures. Adoption of this amendment is not expected to impact significantly theindividual financial statements of the Group.subsidiary.
• IAS 32 Classification on Rights Issues (Amended):  The amendment is effective for annual periods beginning on or after February 1, 2010. This amendment relates to the rights issues offered for a fixed amount of foreign currency which were treated as derivative liabilities by the existing standard. The amendment states that if certain criteria are met, these should be classified as equity regardless of the currency in which the exercise price is denominated. The amendment is to be applied retrospectively.
• IAS 24 Related Party Disclosures (Revised):  The revision is effective for annual periods beginning on or after January 1, 2011. This revision relates to the judgment which is required so as to assess whether a government and entities known to the reporting entity to be under the control of that government are considered a single customer. In assessing this, the reporting entity shall consider the extent of economic integration between those entities. Early application is permitted and adoption shall be applied retrospectively.
• IFRS 1 Additional Exemptions for First-time Adopters (Amended):  The amendment is effective for annual periods beginning on or after January 1, 2010.
• IFRS 1 Limited Exemption from Comparative IRFS 7 Disclosures for first time adopters (Amended):  The amendment is effective for annual periods beginning on or after July 1, 2010.
 
In May 2008April 2009 the IASB issued its firstsecond omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. These amendmentsThe effective dates of the improvements are effectivevarious and the earliest is for periodsthe financial year beginning on or after JanuaryJuly 1, 2009. Adoption
In May 2010 the IASB issued its third omnibus of these amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. The effective dates of the improvements are various and the earliest is not expected to impact significantlyfor the financial statements of the Group.year beginning on or after July 1, 2010.
 
5.C  Research and Development, Patents and Licenses
 
Research and Development
 
The primary aim of our research and development activities is to introduce new technologies and services to our network in a systematic and efficient manner, to examine and test new technologies and products and to maintain active testing grounds of the technologies we use in our network.
 
In previous years we have tested a number of technologies, including VoIP, NG-SDH, Metroethernet, WiMaxMetro-Ethernet, WiMAX and xDSL (SHDSL, ADSL2+FTTx (FTTC/VDSL and FTTB/H-GPON), VDSL2) to name a few,some of which we subsequently appliedimplemented and operated commercially throughoutthrough our network.
 
In 2010 and 2011, we expect to mainly focus on the following research and development projects:
 
 • Next Generation Access Network Architectures (NGA);


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 • Next Generation SDH technologies;
 
 • Security and Environmental Monitor of Outdoor Distributing Cabinets;


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 • IPTV servicesservices; and
 
 • IMS platform and next generation service creation platformsplatforms.
 
Our research and development division cooperates with Greek and European universities and research institutions on a range of research projects on state-of-the-artmodern technologies. We also participate in a number of research and development projects supported by the European Union.Union and we have also been involved in recent research activities, as the latter have been announced by the Greek Secretary General for Research and Technology. We are currently involved in the following European Union-fundedEU-funded projects:
 
 • REWIND (Relay based Wireless Network and standard) aims to develop a “smart” WiMAX repeater fully utilizing all advanced capabilities WiMAX offers;
 
 • FUTTONFUTON (Fiber Optic Networks for Distributed, Extendible Heterogeneous Radio Architectures and Service Provisioning) aims to develop a hybrid optical-wireless infrastructure to connect distributed antenna units to a centralized common processing unit(Radio-Over-Fiber); and
 
 • SELFnet (Self Management of Cognitive Future Internet Elements) aims to develop an innovative cognitive telecommunications network, facing the challenge for the development and exploitation of the future internet, whose infrastructure and applications can self-extend, self-improve, self-adjust and self-repair in real time.
 
5.D  Trend Information
 
Our business has been affected in recent years by a number of important trends. See “— Overview — Factors affecting our financial performance”.
 
5.E  Off-Balance Sheet Arrangements
 
We have no off-balance sheet arrangements, within the meaning of suchthe term as defined in Item 5.E ofForm 20-F.
 
5.F  Tabular Disclosure of Contractual Obligations
 
The following table sets forth the Group’s contractual obligations as of December 31, 2008.2009.
 
                                        
 Payments Due by Maturity at December 31, 2008  Payments Due by Maturity at December 31, 2009 
   Less Than
     More Than
    Less Than
     More Than
 
 Total 1 Year 1-3 Years 3-5 Years 5 Years  Total 1 Year 1-3 Years 3-5 Years 5 Years 
 (Euro in millions)  (Euro in millions) 
Total debt obligations  6,047.7   638.1   2,202.3   1,705.5   1,501.8   5,421.9   36.2   2,626.7   1,258.0   1,501.0 
Purchase obligations  149.7   149.3   0.3   0.1   —   369.2   259.0   26.2   26.2   57.8 
Operating lease obligations  644.0   113.5   121.6   118.0   290.9   612.9   107.5   152.1   151.7   201.6 
Other financial obligations  324.3   324.3   —   —   — 
Accrued interest payable  158.2   158.2   —   —   — 
                      
Total
  7,165.7   1,225.2   2,324.2   1,823.6   1,792.7   6,562.2   560.9   2,805.0   1,435.9   1,760.4 
                      
 
ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 
6.A  Directors, Board Practices and Senior Management
 
We are currently managed by our Board of Directors and Managing Director.


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Board of Directors
 
Our Articles of Incorporation provide that our Board of Directors may consist of 9 up to 11 members elected for three-year terms. Our Board of Directors has the authority to elect our executive officers, following internal consultations, while our shareholders, including major shareholders, such as the Greek State and Deutsche Telekom, are not entitled to directly appoint executive officers or employees. For a detailed description of our Articles of Incorporation and recent amendments to them, see “10.B Our Articles of Incorporation”.
 
Greek Law 3016/2002 on corporate governance has established a set of rules governing transparency of operation and avoidance of conflicts of interest for Greek corporations with shares listed on the Athens Exchange. It


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is intended to enhance and extend the regulatory framework on corporate conduct and governance and provides, among other things, that the boards of listed companies must be comprise of at least one-third “non-executive” directors, meaning they will not be involved in theday-to-day business affairs of the company. Among the “non-executive” members of the board, at least two must be “independent”, meaning persons who have neither significant shareholdings in, nor any other “relation of dependence” with, the Company or any companies affiliated with it. Appointment of independent members is not mandatory when there is explicit appointment and participation of members representing the minority of the shares in the board of directors. Our general assembly is solely responsible for appointing the requisite number of independent non-executive Directors, while our Board is responsible for delineating the capacities of Directors as executive or non-executive.
 
Our Board of Directors has the power to decide on any issue which does not fall within the exclusive competence of the general assembly. Matters that fall within the exclusive competence of the general assembly include increasing our authorized share capital in certain circumstances, approving our financial statements, paying dividends, authorizing the issuance of debt securities under certain circumstances, approving a merger, dissolution or reorganization in which we are involved and certain other matters specified in our Articles of Incorporation.
 
Pursuant to the Shareholders’ Agreement between the Greek State and Deutsche Telekom and the subsequent amendment of our Articles of Incorporation, the quorum required for a meeting of the Board of Directors is one half of all the Directors plus one, and the ordinary resolutions of the Board of Directors shall be adopted by a majority vote of the Directors present or represented at the meeting. In the event of a tie in the Board of Directors, the Chairman holds the casting vote, except for certain matters and except where an Executive Committee has been established. Each Director may represent only one Director. Resolutions of the Board of Directors on Special Matters (as these are stipulated in Article 8, paragraph 4 of our Articles of Incorporation) are adopted by a majority of seven of the members present or represented. The Board may delegate certain of its powers to the Directors, including the Managing Director, or to our executives, third parties or any committee comprised of these individuals, including the Executive Committee. In addition, the Shareholders’ Agreement between the Greek State and Deutsche Telekom also contains certain provisions regarding the election of our Chairman and Managing Director veto matters and other matters relating to the management of our Group. For further details, see “7.A Major Shareholders and Related Party Transactions — Agreements between the Greek State and Deutsche Telekom — The Shareholders’ Agreement”.
 
Our Directors are not entitled to any form of compensation upon termination of their appointment as members of the Board, for any reason.


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As of the date of this Annual Report, our Board of Directors was comprised as follows:
 
                     
Name
 
Position
  
Capacity
  
Appointed
  
Expiry
  
Age
 
 
Panagis Vourloumis  Chairman and   Executive   June 24, 2009   2012   72 
   Managing Director                 
Charalambos Dimitriou  Vice-chairman(1)  Non-executive   June 24, 2009   2012   53 
Panagiotis Tampourlos  Director   Independent   June 24, 2009   2012   57 
Hamid Akhavan-Malayeri  Director   Non-executive   June 24, 2009   2012   48 
Kevin Copp(2)
  Director   Executive   June 24, 2009   2012(2)  45 
Leonidas Evangelidis  Director   Independent   June 24, 2009   2012   74 
Konstantinos Michalos(2)
  Director   Independent   June 24, 2009   2012(2)  49 
Ioannis Benopoulos(2)
  Director   Independent   June 24, 2009   2012(2)  44 
Guido Kerkhoff(3)
  Director   Non-executive   June 24, 2009   2012(3)  42 
Iordanis Aivazis(4)
  Director   Executive   June 24, 2009   2012   59 
                     
Name
 
Position
 
Capacity
 
Appointed
 
Expiry
  
Age
 
 
Panagis Vourloumis  Chairman and
Managing Director		   Executive   June 24, 2009   2012   73 
Charalambos Dimitriou  Vice-chairman   Non-executive   June 24, 2009   2012   54 
Panagiotis Tampourlos  Director   Independent   June 24, 2009   2012   58 
Rainer Rathgeber(1)
  Director   Non-executive   February 19, 2010   2012   46 
Kevin Copp  Director   Executive   June 24, 2009   2012   46 
Leonidas Evangelidis  Director   Independent   June 24, 2009   2012   75 
Konstantinos Michalos  Director   Independent   June 24, 2009   2012   50 
Ioannis Benopoulos  Director   Independent   June 24, 2009   2012   45 
Guido Kerkhoff  Director   Non-executive   June 24, 2009   2012   43 
Iordanis Aivazis  Director   Executive   June 24, 2009   2012   60 
 
Note:
 
(1)Mr. DimitriouRathgeber was appointed Vice-Chairman on February 6, 2009.
(2)Mr. K. Copp, Mr. M. Walter, Mr. K. Michalos and Mr. I. Benopoulos were initially elected to the Board of Directors on February 6, 2009 to replace19, 2010. He replaced Mr. G. Tzovlas, Mr. G. Bitros, Mr. I. Gounaris and Mr. L. Korres, respectively, following their resignations, for the remainder of their office term, and in particular with respect to Mr. K. Copp, Mr. K. Mihalos and Mr. I. Benopoulos until the date of the 2010 ordinary general


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assembly. Mr. M. Walter resigned from the Board of Directors on June 4, 2009 and was not replaced by another member; therefore our Board of Directors now comprises ten members.
(3)Following the resignation of Dr. Karl Gerhard Eick on March 26, 2009, our Board of Directors elected Mr. Guido Kerkhoff to replace himHamid Akhavan-Malayeri for the remainder of his office term.
(4)Our General Assembly of Shareholders of June 24, 2009 resolved to appoint Mr. Iordanis Aivazis on our Board of Directors; Mrs. Xeni Skorini-Paparigopoulou resigned from the Board with effect as of the same date.term, following his resignation.
 
Panagis Vourloumis.  Mr. Vourloumis was born in 1937 and is a graduate of the London School of Economics. He headed the Southeast Asia division of the IFC (International Finance Corporation), where he worked from 1966 to 1973, was head of the Commercial Bank of Greece Group from 1979 to 1981, and was Chairman and CEO of Alpha Finance, Alpha Mutual Funds and Alpha Bank Romania, while at the same time serving as executive director of Alpha Bank, from 1988 to 2000. From 2000 to mid-2004, Mr. Vourloumis was chairman of the boards of Frigoglass and of the Aegean Baltic Bank. Since May 2004 he has served as our Chairman and Managing director, of OTE, and as of September 2007 he has served as Chairman (to date) and Managing Director (until June 23, 2009) of Cosmote. He has been president of the Association of Institutional Investors and a member of the boards of the Federation of Greek Industries and of many non-profit organizations. He is the author of the bookSocial Security Made Simpleand has written articles in the financial press. Mr. Vourloumis is 7273 years old.
 
Charalambos Dimitriou.  Mr. Dimitriou is a graduate of the University of Athens Law School and an attorney at law at the Supreme Court of Greece. He holds an LLM from the London School of Economics, specializing in EU law, international economic law and corporate law. He served as a lecturer with the London University College from 1982 to 1983. He has served1983, as legal counsel to the Minister of Economy and FinanceHellenic Republic on privatization from 2004 to 2009.2009 and as a member of the investment board of JEREMIE Greece. He has beenwas a member of the board of directors of the Agricultural Bank of Greece from 2004 to 2007 and has been a member of the board of directors of the New Economy Development Fund, fromsince 2009. He is founder and managing partner of the law firm C. & S. Dimitriou & Associates. Mr. Dimitriou is 5354 years old.
 
Panagiotis Tampourlos.  Mr. Tampourlos is a graduate of the Piraeus University of Economics and holds a Master’s degree in Business Administration from McGill University (Montreal, Canada). Since 1980, he has worked as a financial manager in various corporations, including Milchem International, Hilti S.A., American Express and ICI. From 1990 to 2003, he worked for Warner Lambert S.A., Pfizer Pharmaceuticals, where, prior to his departure, he held the position of Consumer Division CFO for Europe, the Middle East and Africa. From June 2003 until April 2004 he was our Chief Financial Officer for our Greek fixed-line operations. Since then he has served as financial director of the Frigoglass Group. Since June 2004 he has served as the Chairman of our Audit Committee, the Audit Committee financial expert and also a Board Member. Mr. Tampourlos is 5758 years old.
Hamid Akhavan-Malayeri.  Mr. Akhavan-Malayeri was born in 1961 and is a graduate of the California Institute of Technology(“CALTECH”). He holds a BSc in Electrical Engineering and Computer Science. He also holds an MSc from the Massachusetts Institute of Technology(“MIT”) in the same fields. Mr. Akhavan-Malayeri was appointed as a Member of the Board of Management of Deutsche Telekom, responsible for the mobile communication business area, on December 5, 2006. Additionally, in his role as chief executive officer ofT-Mobile International AG, he leads the management of the mobile communications companies in Western, Southern and Eastern Europe and also those European national companies that are present in both fixed and mobile communication areas. Mr. Akhavan-Malayeri served previously as Chief Technology and Information Officer on the Board of Management ofT-Mobile International and was also appointed Chief Technology and Information Officer of the Deutsche Telekom Group in September 2006. He has been working atT-Mobile International since 2001. Before that, he was Chief Technical Officer and Chief Information Officer at Teligent Inc., an international broadband fixed wireless access company, and held various positions at other technology companies.
 
Kevin Copp.  Mr. Copp was born in 1964 and holds a JDJuris Doctorate degree from Catholic University in Washington D.C. andD.C.and a BABachelor of Arts in Foreign Languages from West Chester University, Pennsylvania. He has been withpart of the Deutsche Telekom Group since 1995 and is currentlywhere he was most recently Senior Executive Vice President, Head of Mergers and Acquisitions of Deutsche Telekom responsible for the Group’s corporate development activities worldwide. Prior to that, he was Head of International Legal Affairs of Deutsche Telekom. Since August 2009, Mr. Copp has been OTE Group’s Chief Financial Officer.


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Konstantinos Michalos.  Mr. Michalos was born in 1960. He studied Finance and Political Science at the University of Essex in the United Kingdom and holds a postgraduate degree (MSc) in Financial Applications from London School of Economics and Political Science. He is President of the Athens Chamber of Commerce and


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Industry (“(“ACCI”ACCI”). Since 1988, he has been Chairman and CEO of the industrial exporting company SWAN S.A. based in Attica. From 1993 to 2005, he was an elected member of the Board of ACCI and from 1998 to 2002 he served as Treasurer at ACCI. During the period from 2004 to 2005, he served as Senior Adviser at the Ministry of Development. From 2005 to 2006, he was Secretary General of the Ministry of Economy and Finance. Since 2007, he has been an elected member of the Board of PPC S.A. (Public Power Corporation). Mr. Michalos is 50 years old.
 
Guido Kerkhoff.  Mr. Kerkhoff was born in 1967 and holds a degree in Business Administration. He began his career in the accounting department of VEW AG, where he worked from 1995 to 1996. He then moved on to Bertelsmann AG, where he held the position of Head of Projects and General Corporate Accounting and Controlling. Since April 2002, Mr. Kerkhoff has held various management positions in Deutsche Telekom’s Finance department and sincefrom mid-2006 he has beenuntil February 2009 was the Head of Deutsche Telekom Group Accounting and Controlling. On March 1, 2009, Mr. Kerkhoff was appointed Member of Deutsche Telekom’s Board of Management, responsible for South Eastern Europe. Mr. Kerkhoff is 43 years old.
 
Leonidas Evangelidis.  Mr. Evangelidis was born in 1935. He is a graduate of the Faculty of Law and Economics of the Aristotelian University of Thessaloniki. In 1961 he joined the Foreign Service and among others served as Ambassador of Greece in the Federal Republic of Germany between 1987 and 1990 and as Permanent Representative of Greece in the European Union from 1992 to 1993. During the period of 1995 to 2000 he held the position of Director General for the Common Foreign and Security Policy of the EUEuropean Union at the Council of the European Union. Between 2004 and 2006 he held the office of the Secretary General of the Ministry of Public Order and from 2006 to 2007 he was appointed President and CEO of the Center for Security Studies. He has also served as Chief of Cabinet of the Deputy Minister of Foreign Affairs.Mr. Evangelidis is 75 years old.
 
Ioannis V. Benopoulos.  Dr. Benopoulos was born in 1965 in Athens. He holds a BA cum laude in Economics from Clark University in Massachusetts and a PhD with distinction from Columbia University in New York, specializing in industrial organization, economic theory and economic strategy and development. In 1994, he established Coffee Connection SA, a company of coffee production and trading and for many years was the Chairman and CEO of the Group, which now manages the firmsbrands Coffeeway, Brazita, Street CafeCafé and Via Espresso. From 1999 to 2006 he was a member of the board of directors of SELPE (Hellenic Retail Business Association). From September 2006 to October 2007, he served as General Secretary offor Commerce at the Ministry of Development. From October 2007 to July 2008, he was Chairman and CEO of Olympic Airlines. From July 2008 to AprilMay 2009, he was chairmanChairman and chief executive officerCEO of Pantheon Airways and remained Chairman of Olympic Air until September 2009. Today he is presently the chairmanChairman and CEO of the board of directors.Coffee Connection S.A. Dr. Benopoulos is 45 years old.
 
Iordanis Aivazis:Aivazis.  Chief Operating Officer.  Mr. Aivazis holds a degree in Economics from Athens University, a Master of Arts in Marketing and Finance from Lancaster University, United Kingdom, as well as a Postgraduate Diploma in Industrial Economics from the same university. He speaks English and French in addition to his native Greek. After pursuing a career in banking he joined the OTE Group in February 2001. Since then he has been member of the Board of Directors and Executive Vice President of OTE International Investments. Since March 2003, he held the position of our Chief Officer for Group Financial Affairs and from April 2004 until June 2007 he served as our Chief Financial Officer. Since June 2007, he has served as our Chief Operating Officer, in charge of the divisions of Residential and Business Customers, National Wholesale Services, Technology Regions, IT and Finance. Mr. Aivazis is 5960 years old.
 
Rainer Rathgeber.  Mr. Rainer Rathgeber was born in 1964. Mr. Rathgeber holds a Master’s degree in Economics from the University in Passau, Germany. He has been a member of Cosmote’s Board of Directors since July 2009 and has been a member of the Deutsche Telekom Group since 2002. Mr. Rathgeber is currently the Senior Vice-President for Marketing in South Eastern Europe and for the area management of the OTE Group. Until September 2009 he held the position of CEO of Mobile Hrvatski as well as the position of COO Mobile of Telekom Hrvatski Board. Prior to joining the Deutsche Telekom Group, Mr. Rathgeber worked for prominent consulting firms, such as A.T. Kearney and Roland Berger in Germany and Latin America. Mr. Rathgeber is 46 years old.


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Corporate Governance
 
We adhere to the principles of corporate governance for Greek listed companies set forth in Law 3016/2002, as amended and in effect, Law 3340/2005 and Law 3556/2007 and HCMC decisionNo. 5/204/14.11.2000 (as currently in effect following amendments pursuant to its DecisionsNo. 3/348/2005 andNo. 7/372/2006). See also “4 B. Business Overview — Regulation — Greek Capital Markets Regulation”. Within this framework, we have implemented key principles of corporate governance relating to:
 
 • the composition of our Board of Directors;
 
 • transparency and disclosure of information; and
 
 • the protection of shareholders’ rights.


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The corporate governance rules applicable to us as a Greek corporation differ in many respects from the corporate governance standards applicable to domestic corporations in the United States that have securities listed on the New York Stock Exchange (“(“NYSE”NYSE”). Most notably, there are differences with respect to the proportion of directors required to be independent and the role, structure, composition and organization of the committees of the board of directors.
 
According to Greek Law 3016/2002, at least one third of our Directors must be non-executive and of these at least two must be independent. Of the 1110 members of our current Board, fivefour are independent. Independence of directors in Greece is supervised by the HCMC, which may impose sanctions in cases of violations of applicable law.
 
According to the NYSE corporate governance rules, companies listed on the NYSE must adopt and disclose corporate governance guidelines relating to director qualifications standards, responsibilities, access to management, compensation and various other matters. There are no similar requirements applicable to us under Greek law, and we have not adopted guidelines of this nature.
 
NYSE corporate governance rules stipulate that non-executive directors must meet at regularly scheduled meetings without management being present. There are no similar requirements applicable to us under Greek law, and our non-executive Directors do not ordinarily hold separate meetings.
 
Other differences are summarized as follows. Greek law does not require Greek companies to have a nominating/corporate governance committee. We do not have a remuneration committee as is contemplated under the rules of the NYSE, since this is not required under Greek law. Pursuant to Law 2190/1920, the Greek Companies Law, the compensation of our Directors is determined by the general assembly. We have, however, established a Compensation and Human Resources Committee, which is currently comprised of two non-executive Directors (Mr. Charalambos Dimitriou, President,Chairman, and Mr. Hamid Akhavan-Malayeri)Guido Kerkhoff) and one independent director (Mr. Ioannis Benopoulos) and is responsible for determining our human resource policies, including our remuneration and incentives policy. As required by the HCMC DecisionNo. 5/204/14.11.2000 the OTEand Law 3016/2002, our internal audit department reviews the legality of remuneration and benefits of our directors and senior managers, of OTE, within their capacity as officials of the OTE parent company.
 
According to Law 3016/2002 and HCMC decisionNo. 5/204/14.11.2000 as now in force, companies listed on the Athens Exchange are also required to establish and operate:
 
• an internal audit department responsible for monitoring of the company’s controls, including, among other things, monitoring of the continuous implementation of Internal Regulations and Articles of Incorporation, as well as regulations pertaining to the company;
• a shareholders’ relations department responsible for providing information to shareholders relating to distribution and payment of dividends, corporate actions and information concerning the general assembly of shareholders; and
• an announcement department responsible for the announcement of all notices and statements pertaining to the company.


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(i) an internal audit department responsible for monitoring of the company’s operations including, among other things, monitoring of the continuous implementation of Internal Regulations and Articles of Incorporation, as well as regulations pertaining to the company;
(ii) a shareholders’ relations department responsible for providing information to shareholders relating to distribution and payment of dividends, corporate actions and information concerning the general assembly of shareholders; and
(iii) an announcement department responsible for the announcement of all notices and statements pertaining to the company.
 
Audit Committee
 
Our Board of Directors established an Audit Committee in April 1999. It adopted an Audit Committee Charter (as an addendum to our Company’s Internal Regulations) in order to set out the main functions, responsibilities and composition of our Audit Committee, on May 24, 2004, and subsequently amended it on June 16, 2005 and on October 20, 2005. The primary purpose of our Audit Committee is to assist our Board of Directors in the exercise of its supervisory role and the satisfaction of its obligations towards shareholders, investors and others, particularly with respect to the financial reporting process, and, specifically, in connection with the following:
 
 • integrity of our financial statements;
 
 • adequacy of internal auditcontrol procedures and systems;
 
 • observance and adequacy of accounting and financial reporting processes;


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 • operation of internal audit department procedures;
 
 • evaluation of our external auditors, mainly referring to their independence, integrity, efficiencyadequacy and performance; and
 
 • observance of our legal and regulatory framework.
 
Our Audit Committee operates in accordance with regulations approved by our Board and consists of three independent and non-executive Directors in accordance with the requirements of the Exchange Act and NYSE regulations (and also in compliance with Greek Law 3016/2002 on corporate governance). The members of the Audit Committee are designated by our general assembly, according to Law 3693/2008 for an initial tenure of two years. At least one member of the Audit Committee, currently Mr. Tampourlos, is a financial expert.
 
Our Audit Committee holds at least four ordinary meetings each year and may also hold extraordinary meetings when deemed necessary. The Audit Committee meets quorum requirements when its Chairman and one additional member are present. In the event that such a quorum exists, the third member of the Audit Committee may be represented by the Chairman or the Audit Committee member that is present. Resolutions of the Audit Committee are adopted by an absolute majority of all of its members.
 
Our Audit Committee regulations are reviewed annually and, following recommendations by the Audit Committee, the Board approves any modifications.
 
Our Audit Committee is responsible, among other things, for:
 
 • examining and evaluating the efficiency and effectiveness of the internal audit procedurescontrol framework that we apply, including the adequacy of security and control of informational systems, and informing the Board of its conclusions regarding these matters;
 
 • discussing with management and our external auditors, our quarterly, semi-annual and annual financial statements prior to their publication;
 
 • evaluating the completeness and consistency of our financial statements, pursuant to the information that is known to its members;
 
 • examining, following the completion of the annual audit, the significant issues that have arisen during the audit, the results of the audit and any issues raised by the external auditors during the execution of their work;
 
 • advising our Board regarding the selection of external auditors;
 
 • examining the audit framework and methodology of the annual audit conducted by the external auditors, evaluating their performance and recommending to the Board their release from any liability to us with respect to the audit of our statutory financial statements;
 
 • pre-approving all services rendered by, and fees due to, the external auditors;
 
 • examining and evaluating the independence of the external auditors and suggesting to the Board measures to be taken in order to maintain their independence;


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 • supervising the internal audit functiondepartment and being mindful ofoverseeing the independent and effective function of the internal auditors, including, among other matters, examining and evaluating the formation proceduredevelopment of the activity programs of the internal audit’s organizational unitsannual audit plan and recommending theirits approval to the Board, monitoring the implementation of the annual activity programs of the internal audit’s organizational units,audit plan and evaluating the progress and effectiveness of the internal audit work;
 
 • designing, establishing and implementing procedures for the receipt, retention and treatment of complaints we receive regarding accounting, internal accounting controls or auditing matters, as well as the confidential, anonymous submission by our employees or third parties of concerns regarding questionable accounting or auditing matters. Our Audit Committee has adopted a complaints procedure in accordance withRule 10A-3 of the Exchange Act, according to which, such complaints may be submitted to the Audit Committee via a specific postal address;the Chief Compliance Officer function;


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 • examining, along with management and our external auditors, any exchange of information with the supervisory authorities, as well as any public reports and publications regarding critical issues relating to our financial statements; and
 
 • examining, along with our legal counsel, any legal issues that may significantly affect our financial statements or our compliance with the applicable statutory framework.
 
In order to carry out its duties, the Audit Committee, among other things:
 
 • may delegate to its members the exercise of particular competences facilitated bycompetences; for this purpose, the Audit committee may give to its members specific written authorizations;
 
 • may engage, following the approval of our Board, independent counsel and other advisers;
 
 • determines our obligation to provide the necessary funding for the performance of its tasks; and
 
 • has free access to all of our information and records.
 
As of the date of this Annual Report, the members of our Audit Committee are as follows: Panagiotis Tampourlos (Chairman), Ioannis Benopoulos and Leonidas Evangelidis. Our extraordinary general assembly of shareholders held on April 7,June 24, 2009 has determined that Mr. Tampourlos is an “audit committee financial expert”. See “16.A. Audit Committee Financial Expert”.
 
Compensation and Human Resources Committee
 
Our Board of Directors established our Compensation and Human Resources Committee in 2004. This Committee is appointed by our Board of Directors and consists of a minimum of three members, at least two of which are non-executive. The Chairman of the Committee is also appointed by the Board of Directors. The Committee’s main duties, as described in its Operations Regulation, include the following:
 
 • Determination of the principles of the company’s human resources policy, which will govern the decisions and actions of the management;
 
 • Definition of our company’s compensation and remuneration policy;
 
 • Approval of draft plans relating to compensation, benefits, stock options and bonuses;
 
 • Submitting proposals to the Board of Directors regarding compensation and benefits of the Managing Director;
 
 • Studying and assessing issues relating to our company’s human resources; and
 
 • Setting out principles of our corporate social responsibility policies.
 
The Compensation and Human Resources Committee submits proposals to the Board of Directors on matters relating to the responsibilities of the Committee. The Board of Directors either approves these proposals, or forwards them to the General Assembly of Shareholders, in the event these matters ought to be resolved by the Assembly. Accordingly, in 2008,2009, the Compensation and Human Resources Committee dealt with the following matters:bonus that


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should be paid to the Chairman and Managing Director for the fiscal year 2008, and his compensation for fiscal year 2009.
• The bonus that should be paid to the Chairman and Managing Director for the fiscal year 2007, and his compensation for fiscal year 2008; and
• The stock option plan offered to our executive officers/directors and its affiliates, in accordance with article 42e of Law 2190/1920.
 
The Committee meets at least twice a year and reports directly to the Board of Directors. From June 2005 until June 26, 2008, the Compensation and Human Resources Committee consisted of the following members: Mr. Iakovos Georganas (Chairman), Mr. Georgios Gerapetritis and Mr. Ilias Gounaris.


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From June 26, 2008 until February 6, 2009, the Compensation and Human Resources Committee consisted of the following members: Mr. Charalambos Dimitriou (Chairman), Mr. Hamid Akhavan-Malayeri and Mr. Ilias Gounaris.
 
As of February 20, 2009, pursuant to a new inaugural meeting,the date of this Annual Report, the Compensation and Human Resources Committee consists of the following members: Mr. Charalambos Dimitriou (Chairman), Mr. Hamid Akhavan-MalayeriIoannis Benopoulos and Mr. Ioannis Benopoulos.Guido Kerkhoff.
 
Compliance Department and Chief Compliance Officer
In June 2009, our Board of Directors resolved to establish an internal compliance department, reporting directly to the Board of Directors via the Audit Committee. The purpose of the compliance department is to monitor compliance across our Group and to receive, assess, and, if appropriate, investigate, alone or with other departments of our Group, complaints and whistleblowing cases of alleged breaches of laws and external or internal regulations and corporate misconduct, in a range of areas including corruption, bribery, inappropriate financial reporting, insider trading, misuse of personal data, embezzlement, fraud and theft, misuse of trade and business secrets and other matters.
The compliance department is headed by our Group Chief Compliance Officer, Aristodimos Dimitriadis, and is supervised by our Compliance Committee (comprised of the Chief Compliance Officer and representatives of a number of functions, including internal audit, legal, regulatory, human resources and security). We, Cosmote and RomTelecom, have separate compliance officers and compliance committees. Other companies of the Group have part-time Compliance Officers reporting to their CEO and ultimately to the Group Chief Compliance Officer. We are currently in the process of hiring additional qualified personnel and organizing appropriate procedures to support the operation of our compliance department.
Internal Audit Department
Our Internal Audit department is established to function independently, in an assurance and consulting role. It focuses on evaluating and improving the effectiveness of our risk management, control and governance processes. In particular, responsibilities of the Internal Audit department include:
• examining and evaluating the group’s system of internal controls;
• carrying out investigations of compliance issues;
• identifying risks and makes relevant recommendations to the management; and
• ensuring the uniform development and operation of Internal Audit departments within the Group companies
The Internal Audit department is headed by our Chief Internal Audit Officer, Maria Rontogianni, and is supervised by our Audit Committee in order to maintain its independence. Its operations are governed by its code of conduct.
Managing Director
 
Our Managing Director is Mr. Panagis Vourloumis. For a description of Mr. Vourloumis’ professional background and experience, see “6.A/C Directors, Board Practices and Senior Management — Board of Directors”.
 
The Managing Director is our highest ranking executive. The Managing Director is one of the 1110 members of our Board of Directors appointed by the general assembly, serves as an executive member of our Board and is elected to his position by our Board. The Managing Director has certain powers under our Articles of Incorporation and other powers delegated by our Board, including the authority to make proposals to our Board; to conclude contracts on behalf of the Board (and us) of up to a certain value as determined by our Board of Directors; to represent us before courts, public authorities and third parties; and to decide certain matters pertaining to personnel and our internal organization.


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Senior Management
 
The following is a list of our senior managers as at the date of this Annual Report, their current areas of responsibility and a brief description of their backgrounds.
 
       
Name
 
Position
 
Age
 
Panagis Vourloumis Chairman and Managing Director  7273 
Iordanis Aivazis Chief Operating Officer  5960
Kevin CoppGroup Chief Financial Officer46 
Yorgos Ioannidis Managing Director of RomTelecom  5960 
Michael Tsamaz Managing Director of Cosmote,
51
Managing Director of OTE Investment Services  50 
Elias Drakopoulos Chief Commercial Officer for Enterprise
and Business Services		  4546 
Panagiotis Sarantopoulos
Christos Katsaounis(1)
 Chief Commercial Officer for Residential Customers  5447 
Christini Spanoudaki
George Mavrakis(2)
 Chief Financial Officer  4946 
Maria Efthimerou Chief Technology Officer  5455 
Konstantinos Kappos Chief Information Officer  5355 
Andreas Karageorgos Chief Regional Officer  5758 
Loizos Kyzas(1)(3)
 Chief Human Resources Officer  5859 
Kosmas Liaros
Maria Rontogianni(4)
 Chief Internal Audit Officer  4637 
Christos Katsaounis
Panagiotis Sarandopoulos(5)
 Chief Officer of National Wholesale Services  4655 
Konstantinos Ploumpis Chief Regulatory Officer  4142 
Paraskevas Passias(2)(6)
 General Counsel  4344 
DinosAristodimos DimitriadisChief Compliance Officer45
Dino Andreou Chief Executive Officer of OTEGlobe  5253 
 
 
Notes:
 
(1)Mr. Katsaounis who has served as Chief Officer of National Wholesale Services from July 2007 until January 18, 2010, assumed the position of Chief Commercial Officer for Residential Customers.
(2)Mr. Mavrakis replaced Ms. Christini Spanoudaki in this position as of August 19, 2009.
(3)Mr. Kyzas replaced Mr. Tsatsanis in this position on April 27, 2009.
 
(2)(4)Mrs. Rontogianni replaced Mr. Kosmas Liaros in this position as of September 7, 2009.
(5)Mr. Sarandopoulos, Chief Commercial Officer for Residential Customers from December 2007 until January 18, 2010, assumed the position of Chief Officer of National Wholesale Services.
(6)Dr. Passias is General Counsel of OTE and his area of responsibility covers all legal matters excluding regulatory and competition affairs and legal matters of subsidiaries.
 
Panagis Vourloumis:  Our Chairman and Managing Director of OTE.Director. For a description of Mr. Vourloumis’ professional background and experience, see “— Board of Directors”.


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Iordanis Aivazis:  Chief Operating Officer. For a description of Mr. Aivazis’ professional background and experience, see “— Board of Directors”.
Kevin Copp:  Group Chief Financial Officer. For a description of Mr. Copp’s professional background and experience, see “— Board of Directors”.
 
Yorgos Ioannidis:  Managing Director of RomTelecom. Mr. Ioannidis obtained a BSc in electrical engineering from the Bosphorus University, Istanbul, Turkey in 1973, as well as an MSc from Lowell Technological Institute, Lowell, Massachusetts USA in 1975. He is also a member of the boards of directors of Cosmote and Cosmote Romania. He started his career in 1975 at OTE, where he worked as a telecommunications engineer at various posts in the Maintenance, Planning and Telematics Department. He left us in 1993 to join Vodafone as the Engineering Switching and Software Manager. In 1998, he moved to Cosmote as the Planning and Network Development Manager and then took up the position of General Technical Director at Cosmote. In June 2000, he


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became Managing Director of OTENET,OTENet, and in September 2004 he was appointed as our Chief Technical Officer of OTE.Officer. In February 2007, he left both of these positions to serve as Managing Director of RomTelecom. Mr. Ioannidis is 5960 years old.
 
Michael Tsamaz:  Managing Director of Cosmote. Mr. Michael Tsamaz joined the OTE Group in 2001 as Executive Vice President of OTE International Investments and since April 2006 he has been Managing Director of OTEGlobe. From September 2007 until June 2009, Mr. Tsamaz was the Deputy Managing Director of Cosmote. Prior to OTE, Mr. Tsamaz served as Commercial Director and later General Director of the Commercial and Administration Division of Vodafone Greece S.A. From 1991 to 1998 he worked for Philip Morris Europe S.A, where he consecutively held the positions of Marketing Director for Greece and Israel, Sales Director for Greece and Director of Sales Development for Eastern Europe. During his term at the OTE Group he has been a member of various boards of directors of OTE’s international subsidiaries. Mr. Tsamaz is 5051 years old.
 
Elias Drakopoulos:  Chief Commercial Officer in charge of our Enterprise and Business Services Division. Dr. Drakopoulos holds a BSc in electrical engineering from Aristotle University of Thessaloniki and a Masters Degree and PhD in telecommunications from Northwestern University in Evanston, Illinois, USA and postgraduate studies in business management and strategy in INSEAD, France. From 1989 to 1998, Mr. Drakopoulos held various managerial positions at AT&T, Bell Laboratories and Lucent Technologies in the United States, where he was responsible for design and techno-economical matters and in parallel, was an adjunct professor at the Illinois Institute of Technology and Northwestern University in the United States. In 1998, he was appointed Director of Network Planning in Lucent Technologies for Europe until 2001 and subsequently until January 2003 Vice President of Solutions, Business Development and Marketing for Europe. He joined OTENETOTENet as General Manager of Technology, Strategy and Development in February 2003 and in February 2007, he became Managing Director of OTENET.OTENet. He assumed the position of Chief Commercial Officer for Enterprise and Business Services on December 18, 2007. Dr. Drakopoulos is 4546 years old.
 
Christini Spanoudaki:Christos Katsaounis:  Chief Commercial Officer. Mr. Katsaounis holds a BSc in computer science from the University of Lowell, Massachusetts, U.S.A. Mr. Katsaounis joined us in January 2006 as head of the National Wholesale division. He is also Chairman of the Board of Directors of OTEGlobe. From 2001 until joining us, Mr. Katsaounis served as Senior Vice President of Operations at Net One (an alternativefixed-network operator). At the same time, he served as the Chairman from 2004 to 2005 and as a member of the board from 2003 to 2004 of the Hellenic Association of Licensed Operators. From 1998 until 2001, he worked with Vodafone, Greece (formerly Panafon) as Carrier Services Product Manager, while from 1995 until 1998 he was the International Carrier Services Manager for Greece and Cyprus of AT&T Communications Services. Prior to that, he worked for IT and telecommunications equipment and solutions vendors at such companies as Alcatel Business Systems Hellas. Mr. Katsaounis is 47 years old.
George Mavrakis:  Chief Financial Officer. Ms. SpanoudakiMr. Mavrakis holds a degree in financeeconomics from Leicester Polytechnic and business administrationholds a Masters degree in Financial and Business Economics from Essex University. Mr. Mavrakis joined the University of PiraeusOTE Group in 1997 and has studied Business Development with the University of Athens. From 1985 to 1990 she has workedsince held various senior positions in Strategy and Financial Planning, focusing on international investments. In June 2007, Mr. Mavrakis was appointed our Deputy Chief Financial Officer. Mr. Mavrakis was appointed as a business consultant in accounting and tax in Athens. From 1990 to 2000 she was appointedour Chief Financial Officer as of Alpha Finance — Alpha Ventures, the affiliates of Alpha Bank. From 2001 to early 2004 she worked as freelance financial consultant. In July 2004 she was appointed Deputy Chief Financial Officer of OTE. Since June 2007 she has held the position of Chief Financial Officer. In 2006 she was elected Vice President of OTEGlobe and member of the board of directors of OTE Investment Services S.A. In March 2009 she was elected President of the board of directors of OTEGlobe. Ms. SpanoudakiAugust 19, 2009. Mr. Mavrakis is 4946 years old.
 
Maria Efthimerou:  Chief Technology Officer. Ms. Efthimerou studied electrical engineering at the University of Patras and holds a Masters degree in Engineering-Electronics from Carleton University in Ottawa, Canada. She has worked with the research department of Thomson CSF in Orsay, France in 1982 as an MMIC research engineer and in 1987 joined OTE as a telecommunications engineer. In 1995, she joined Intracom, as a senior satellite telecommunications engineer until 1999 and subsequently as Deputy General Director of Research and Development. In 2000, she was appointed Manager of International Operations of OTEGlobe, and from 2005 to February 2007, she held the position of our Assistant General Manager of Technology of OTE before being appointed Chief Technology Officer. Ms. Efthimerou has many years of experience in the telecommunications field and has authored numerous scientific articles. Ms. Efthimerou is 5455 years old.
 
Konstantinos Kappos:  Chief Information Officer. Mr. Kappos holds a degree in economics from the Munich Technical University and a degree in mechanical and electrical engineering from the Athens National Technical


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University. Mr. Kappos has extensive experience in the management of large IT projects, both in Greece and abroad. Before joining us in March 2001, he worked for over six years with KANTOR, a leading international management consultants company based in Greece, as the director responsible for major consulting assignments in the areas of strategy, reorganization, process improvement, information technology and human resources. Prior to that, he had worked for nine years with Daimler-Benz Interservices (debis) in Germany as pre-sales Senior Consultant and Project Manager responsible for implementing IT solutions at well-known enterprises such as Mercedes-Benz, BMW, Deutsche Aerospace, MAN and Philips Telecommunications. He currently serves on the boards of OTEplus and, since 2005, HellasCom. In March 2001, he was appointed our Chief Information Officer of OTE.Officer. He speaks English and German. Mr. Kappos is 5355 years old.
 
Andreas Karageorgos:  Chief Regional Officer. Mr. Karageorgos holds degrees in electrical engineering and economics. He has worked with us in various technical divisions since 1977. He has extensive experience in sectors related to construction and maintenance of telecommunication infrastructure. He has served as director of the district of Korinth from 1997 to 2002 and regional manager of Peloponnisos from 2003 to 2004. He was appointed Chief Regional Officer in September 2004. Mr. Karageorgos is 5758 years old.
 
Loizos Kyzas:  Chief Human Resources Officer. MrMr. Kyzas joined us on April 27, 2009. He holds a BSc in Economics from the Athens University of Economics and Business Studies. He has significant experience in managing companies in thestart-up, change and development phases. From 2007, he held the position of HR, Organization and Operational Excellence Director for four countries (Greece, Cyprus, Albania and Malta) with Ericsson Hellas S.A., in parallel with his role as Director, Compensation and Benefits, in the Market Unit of Southeastern Europe consisting of 10 countries, including Greece and Italy. In addition, from 2002 until 2006, in his capacity as Head of Human Resources and Organization within Ericsson Hellas S.A., he took an active part in the creation, formation and development of the newly-established, at that time, Business Unit of Southeast Europe (BUSEE). Prior to working with Ericsson, from 1993 until 2001, he served as Human Resources Director with Panafon and the Panafon/Vodafone Group, as well as a member of board of directors of Panavox SA, a subsidiary of Panafon. Mr. Kyzas is 5859 years old.
 
Kosmas Liaros:Maria Rontogianni:  Chief Internal Audit Officer. Mr. LiarosMs. Rontogianni holds a Bachelor’s of Science degree in Public Accounting and Marketing from Fordham University, New York. Ms. Rontogianni has worked in the auditing profession in various industries and has held several roles including regulator and consultant positions for the past sixteen years. She started her career at the National Futures Association, a self-regulatory organization for the U.S. futures industry. Ms. Rontogianni then moved to the financial services industry, where she audited the emerging markets, foreign exchange and commodities businesses, as Vice President of J.P. Morgan and later for the Private Banking business administration fromof J.P. Morgan. Upon moving to Athens in late 2001, Ms. Rontogianni worked as a consultant for Arthur Andersen before assuming the Universityposition of Piraeus, Greece (1986), and an MBA degree in strategic planning and international business from the University of Bradford, United Kingdom (1987). He also holds a Certified Internal Auditor designation from the International Institute of Internal Auditors. He speaks fluent English. From 1990 until 1992, Mr. Liaros worked as an internal auditor at Latsis Group, while from 1992 until 2006 at Andersen and Ernst & Young at the Department of Internal Audit and Risk Management Services. He has been aLamda Development, SA (a member of the boardLatsis Group of directorscompanies) listed on the Athens Stock Exchange, specializing in the development, investment and management of real estate in Greece and South-Eastern Europe. Before joining us, Ms. Rontogianni was the Hellenic InstituteDirector of Internal AuditorsControls and has also participated in conferences as a speaker on internal auditRevenue Assurance at Wind Hellas Telecommunications, SA, where she headed the Internal Audit department and risk management topics.developed the procedures and tools necessary for Risk Management and Revenue Assurance monitoring. Since January 2007, Mr. LiarosSeptember 7, 2009, Ms. Rontogianni has held the position of our Chief Internal Audit Officer of OTE and Head of the Division for the Development of OTE Group Internal Audit. Mr. LiarosOfficer. Ms. Rontogianni is 46 years old.
Christos Katsaounis:  Chief Officer of National Wholesale Services. Mr. Katsaounis holds a BSc in computer science from the University of Lowell, Massachusetts, U.S.A. Mr. Katsaounis joined OTE in January 2006 as head of the wholesale division. He is also a member of the board of directors of OTEGlobe, the OTE subsidiary managing the international wholesale business. From 2001 until joining OTE, Mr. Katsaounis served as Senior Vice President of Operations at Net One (an alternativefixed-network operator). At the same time, he served as the Chairman from 2004 to 2005 and as a member of the board from 2003 to 2004 of the Hellenic Association of Licensed Operators. From 1998 until 2001, he worked with Vodafone, Greece (formerly Panafon) as Carrier Services Product Manager, while from 1995 until 1998 he was the International Carrier Services Manager for Greece and Cyprus of AT&T Communications Services. Prior to that, he worked for IT and telecommunications equipment and solutions vendors at such companies as Alcatel Business Systems Hellas. Mr. Katsaounis is 46 years old.
Konstantinos M. Ploumpis:  General Director of Regulatory Affairs. Mr. Ploumpis is a graduate of the Law School of the Athens University (1991) and holds a DEA in International and European Economic Law and a PhD in European and International Economic Law from the Université des Sciences Humaines de Lille II, in Lille, France. Mr. Ploumpis served as special Advisor to the French Ministry of Labor from 1994 to 1995, as well as Senior Legal Counsel and Head of Legal Services for Vodafone-Panafon from 1996 to 2004. He was also member of the


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Vodafone Group plc public policy and legal teams. He has been a guest speaker at numerous conferences and speaks fluent English, French and Italian. Mr. Ploumpis is 41 years old.
Paraskevas Passias:  General Counsel of OTE, excluding regulatory and competition affairs and legal issues of subsidiaries. Dr. Passias is a graduate of the Law School of the University of Athens and holds a masters degree in European Comparative Law, and a PhD in Civil and Commercial Law from the University of Hanover in Germany. Dr. Passias is a member of the Athens Bar and a solicitor of the Supreme Court of England and Wales. He has been working for the OTE Group since 1998. Before his appointment as our General Counsel in March 2006, Dr. Passias held a similar position with OTE International Investments. Dr. Passias is 43 years old.
Dinos Andreou:  Chief Executive Officer of OTEGlobe. Mr. Andreou holds the position of OTEGlobe’s CEO from October 8, 2007. He joined the company at itsstart-up in 2000 as Chief Financial Officer. Prior to OTEGlobe he had worked for four years as Financial Director for Global One Communications Hellas S.A. He started his career in 1989 in Coopers & Lybrand, working consecutively in the Athens branch and London headquarters. He holds a BSc in Mathematics with Operational Research and an MSc in Operational Research, from the University of London. Mr. Andreou is 5237 years old.
 
Panagiotis Sarantopoulos:  Chief Commercial Officer in charge of our Residential CustomersNational Wholesale Division. Mr. Sarantopoulos studied electrical engineering at the National Technical University of Athens and has extensive experience in the telecommunications and information technology market. In the past, he has worked for Hewlett Packard Hellas as a Sales Engineer and Sales Manager for Test and Measurement Solutions. He has also worked for our Group as a telecommunications engineer. From April 1990 until March 2001, he worked for the Quest Group, holding various managerial positions. In particular, from April 1997 until March 2001 he held the position of General Manager of Hellas on Line. In April 2001, Mr. Sarantopoulos joined OTENETOTENet as General Manager of Consumer Products and Services and then held the position of the Chief Commercial Officer until February 2007, when he moved to OTEus as Deputy Chief Technology Officer. SinceFrom December 2007 until January 2010, Mr. Sarantopoulos has served as Chief Commercial Officer for Residential Customers and SOHO. Since January 2010, Mr. Sarantopoulos is 54Chief Commercial Officer for the National Wholesale Division. Mr. Sarantopoulos is 55 years old.


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Konstantinos M. Ploumpis:  General Director of Regulatory Affairs. Mr. Ploumpis is a graduate of the Law School of the Athens University (1991) and holds a DEA in International and European Economic Law and a PhD in European and International Economic Law from the Université des Sciences Humaines de Lille II, in Lille, France. Mr. Ploumpis served as special Advisor to the French Ministry of Labor from 1994 to 1995, as well as Senior Legal Counsel and Head of Legal Services for Vodafone-Panafon from 1996 to 2004. He was also member of the Vodafone Group plc public policy and legal teams. He has been a guest speaker at numerous conferences and speaks fluent English, French and Italian. Mr. Ploumpis is 42 years old.
 
Mr. Kevin Copp,Paraskevas Passias:  Our General Counsel, excluding regulatory and competition affairs and legal issues of our subsidiaries. Dr. Passias is a graduate of the Law School of the University of Athens and holds a masters degree in European Comparative Law, and a PhD in Civil and Commercial Law from the University of Hanover in Germany. Dr. Passias is a member of the Athens Bar and a solicitor of the Supreme Court of England and Wales. He has been working for the OTE Group since 1998. Before his appointment as our BoardGeneral Counsel in March 2006, Dr. Passias held a similar position with OTE International Investments. Dr. Passias is 44 years old.
Aristodimos Dimitriadis:  Chief Compliance Officer. Mr. Dimitriadis holds a degree in Economics and Politics and a Masters degree from Kent University. Mr. Dimitriadis, has been the Head of Directors,Internal Audit of Cosmote since 2005 and the Head of Internal Audit and Compliance of Cosmote Group since 2009. Prior to his employment with Cosmote Group, Mr. Dimitriadis worked for many years in the banking sector, first at ABN AMRO and later at FBB-First Business Bank as Internal Audit Officer. Mr. Dimitriadis is expecteda Certified Internal Auditor, as well as a Certified Financial Services Auditor according to assumethe International Institute of Internal Auditors. Mr. Dimitriadis is 45 years old.
Dino Andreou:  Chief Executive Officer of OTEGlobe. Mr. Andreou holds the position of GroupOTEGlobe’s CEO from October 8, 2007. He joined the company at itsstart-up in 2000 as Chief Financial Officer (CFO),Officer. Prior to OTEGlobe he had worked for four years as Financial Director for Global One Communications Hellas S.A. He started his career in 1989 in Coopers & Lybrand, working consecutively in the Athens branch and London headquarters. He holds a BSc in Mathematics with Operational Research and an MSc in Operational Research, from the University of August 1, 2009.London. Mr. Andreou is 53 years old.
 
6.B  Compensation
 
Persons serving as members of our Board of Directors and senior managers during the year ended December 31, 20082009 received aggregate remuneration and bonuses from us and our subsidiaries of approximately Euro 8.38.8 million. The same persons also received certain benefits in kind (mainly the use of corporate automobiles).
 
In accordance with the bonus compensation plan adopted by the Board of Directors, the Managing Director is entitled to a bonus in addition to his base salary, which is linked to the achievement of our operational targets and the performance of our share price. Our senior managers are entitled to bonuses based on the achievement of operational targets in their respective areas of responsibility, according to a bonus compensation plan approved by the Managing Director. In addition, under our management stock option plan, our senior managers are granted a number of stock options on an annual basis. For more information regarding our management stock option plan, see below under “Management Stock Option Plan” and for information regarding the number of stock options held by our seniorssenior managers, see “Item 6.E Share Ownership”.
 
We have adopted an insurance policy covering the members of our Board of Directors and senior managers for liability arising from the exercise of their duties, powers and authorities. This insurance is provided by Ethniki AEEGA, ATE Asfalistiki S.A. and National Union Fire Insurance Company S.A.P.A. insurance companies and is renewable on an annual basis. The insurance premium we pay (Euro 1.2(approximately Euro 1.1 million) in connection with the policy constitutes additional remuneration for our Directors and senior managers under the Greek Companies Law2190/1920.


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Management Stock Option Plans
 
Our general assembly of shareholders of July 9, 2008 approved the replacement of theour previous management stock option plan by a new oneplan for a number of senior managers of our Group, including those of Cosmote and other subsidiaries, in accordance with Article 42e of the Greek Companies Law 2190/1920.
 
The following is a brief summary of the main terms of theour current management stock option plan (the“Option Plan”) as approved by our shareholders:
 
The Option Plan is expected to permitpermits our Board of Directors to grant option rights ((“Option Rights”)to eligible employees on an annual basis.basis until 2010. Upon their initial participation in the Option Plan, eligible employees become entitled to a number of initial option rights ((“Basic Option Rights”), while, in subsequent years, we expect the Board to also grantgrants further option rightsOption Rights to eligible employees ((“Additional Option Rights”)on an annual basis.
The Option Plan has replaced the previous management stock option plan of OTE (which was adopted in 2007) and the pre-existing management stock option plan of Cosmote. In particular, the Option Plan covers:
 
 • theour Managing Director, General Directors, Deputy General Directors, General Counsel, Directors and Deputy Directors of OTE;Directors;
 
 • the Managing Directors of OTE Globe, OTE Estate and RomTelecom;
 
 • the Chairman, Managing Director, Deputy Managing Director, Legal Counsel, Directors, Deputy Directors and heads of departments of Cosmote; and
 
 • key executives of subsidiaries of Cosmote.
 
The maximum number of Basic andand/or Additional Option Rights to be granted to each eligible employee will equal upcorrespond, according to the Grant Price, to between one to0.75 and five times such employee’s annual gross salary, depending on the employee’s seniority with the exception of OTEour Directors and Deputy Directors, whose basic rightsBasic Option Rights will amount to 20,000 and 10,000 respectively, while their Additional Rights will amount to 6,000 and 3,500 respectively. Basic option rights that were granted to our eligible employees of OTE in 2007 under theour 2007 management stock option plan of OTE and basic or additional option rights that were granted to eligible employees of Cosmote under the management stock option plan of Cosmote are replaced by an equal number of Basic or Additional Option Rights under the Option Plan.
 
Basic Option Rights vest in stages over a three-year period (40%, 30% and 30% upon the first, second and third anniversaries, respectively, of the date of their grant) and Additional Option Rights will vest in their entirety upon the third anniversary of their grant. Basic or Additional Option Rights that have not been converted into Vested Rights will be abolishedlost, if the eligible employee dies or s/he ceases to work for OTE.with us. Vesting of Option Rights is conditionedconditional upon the eligible employee having achieved the individual performance targets defined in the Option Plan.
 
Vested Option Rights may be exercised in whole or in part in April or October of each year. Following a modification to the Plan on July 10, 2009, Vested Option Rights derived from the vesting of Basic Option Rights may be exercised until October of the fifthseventh calendar year (instead of the fourth year, applicable before the modification of the Option Plan) from their grant and vested Option Rights derived from the vesting of Additional Option Rights may be exercised until October of the firstthird calendar year from(instead of the first year, before the modification) following the year of conversion.
 
For the first year, Option Rights were granted at a price equal to Euro 19.49 and for consecutive years rights are expected to be granted at a price equal to the average closing price of our shares in the Athens Exchange for September of the year of their grant (except for the first grant in 2009 when they will be granted.were granted at Euro 19.49). For the year 2010, the Grant Price was Euro 11.26. The exercise price will be equal to the grant price minus a discount of 10%, 15%, 20% or 25%, depending on the beneficiary’s seniority and subject to satisfaction of certain conditions, including whether our Group achieves certain group-wide targets, or Cosmote or weOTE achieve certain corporate targets (in relation to their respective eligible employees) and the individual eligible employee having achieved high individual performance targets as defined in the new plan.Option Plan. In the event these conditions are not satisfied, the exercise price will be equal to the grant price without a discount.


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The following table sets out information regarding the number of options outstanding under the Option Plan for the year 2008:2009:
 
                
 For the Year Ended
  For the Year Ended
 
 December 31, 2008  December 31, 2009 
   Weighted Average
    Weighted Average
 
 Number of Options Exercise Price  Number of Options Exercise Price 
Outstanding at the beginning of the year  3,440,290   15.20   6,008,060   15.66 
Granted  3,141,620   16.10   3,225,670   16.21 
Forfeited  (573,850)  15.26   (559,130)  16.23 
Exercised  0   0   —   — 
Expired at end of the year  0   0   —   — 
        
Outstanding at the end of the year  6,008,060   15.66   8,674,600   15.59 
        
Exercisable at the end of the year  2,315.920   15.14   4,485,370   15.05 
          
 
The maximum number of Option Rights that may be granted under the Option Plan corresponds to 15,500,000 of our shares, or 3.16% of our currently issued share capital. Our general assembly may suspend, cancel or amend the Option Plan at any time regarding non-vested Option Rights.
 
6.D  Employees
 
Group Employees.  As of December 31, 2008,2009, our Group, including all of our consolidated subsidiaries in Greece and other countries, (excluding Telekom Srbija), employed a total of 33,61032,864 employees, as compared to a total of approximately 34,35033,610 employees, (also excluding Telekom Srbija), as of December 31, 2007.2008.
 
As of December 31, 2008,2009, the total number of our Group’s employees included 12,05611,369 of our employees, 10,017 employees of OTE,RomTelecom and 9,652 employees of Cosmote, as compared to 12,056 of our employees, 10,344 employees of RomTelecom and 9,283 employees of Cosmote, as compared to 11,754 employees of OTE, 12,512 employees of RomTelecom and 8,425 employees of Cosmote, as of December 31, 2007.2008.
 
Employees of OTE.  The following table shows the number of the full-timeour employees of our company (excluding subsidiaries) by function as of December 31, 2007, 2008 2007 and 2006:2009:
 
                        
 As of December 31(1),  As of December 31(1), 
 2006 2007 2008  2007 2008 2009 
Administration  3,409   3,247   3,314   3,247   3,314   3,094 
Finance  653   626   609   626   609   594 
Technical  6,551   6,360   6,545   6,360   6,545   6,118 
Support Staff  752   732   701   732   701   652 
Specialists  298   295   304   295   304   303 
Other Staff  92   88   89   88   89   92 
Total Permanent Staff  11,755   11,348   11,562   11,348   11,562   10,853 
Personnel on temporary contracts  20   27   121 
Personnel previously with OTENET  —   379   373 
Part-time  27   121   147 
Personnel previously with OTENet  379   373   369 
       
Total
  11,775   11,754   12,056   11,754   12,056   11,369 
              
Change (%)
  (20.2)%  (0.2)%  2.6%  (0.2)%  2.6%  (5.7)%
              
Access lines in service per employee(2)
  523   497   446.7   497   446.7   439.1 
              
 
 
Notes:
 
(1)Includes our employees currently working with us or transferred or seconded to our subsidiaries.
 
(2)Includes OTEour fixed-line telephony network access lines in service (64kb equivalent) at the end of respective period. Also includes our employees currently working with us or seconded or transferred to our subsidiaries.
In 2009, OTE recruited 211 new employees, the great majority (187) of which were not external hires, but employees already on contracts (including some on temporary basis) with certain of our subsidiaries, who offered their services in our premises. These comprised 49 in engineering and technical positions, 7 in finance, 115 in


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In 2008, we recruited 1,037 new employees for our company, of which 307 in engineering and technical positions, 6 in finance, 213 in marketing, sales and administrative, 3804 employees previously with OTENETOTENet, 28 support staff and 128 support8 other staff. The majority of the new hirings were not external ones, but actually employees who had work contracts with OTE subsidiaries and offered their services in OTE premises. In the same year, a total of 326896 of our employees retired, of which 269197 retired under an early retirement scheme. In addition, we have decided to impose an annual recruitment target of 10050 employees for the years 20092010 to 2011.2012. We continue to place particular focus on restructuring our workforce and reducing headcount.
 
We pursue the following personnel policies in order to restructure, incentivize and optimize the efficiency of our workforce:
 
 • we continue to improve our performance appraisal process;
 
 • we focus our recruitment efforts on personnel with the necessary specialized and technical knowledge, mainly in the areas of telecommunications engineering, economics, finance and accounting, sales and marketing and information technology;
 
 • we are training our employees to function in a customer-oriented manner and in new technologies, having instituted several customer service training programs; in 2008, 6,2002009, 6,853 of our employees attended 645803 seminars on topics selected to improve the quality and efficiency of their performance;
• we are focusing on efficiently integrating the employees of OTENET, as our merger with OTENET was completed in June 27, 2008; and
 
 • we have streamlined our management structure, delegating decision-making responsibility to more junior levels in order to accelerate our response to customer demands.
 
Under existing Greek legislation, the legal status of our personnel is governed by the provisions of our Internal Personnel Regulation. Law 3522/2006, which was enacted in December 2006, gave effect to our new Internal Personnel Regulation, which addresses both matters relating to our employment relations as well as the legal status of our employees and general issues pertaining to personnel conduct. The provisions of Law 3522/2006 and our new Internal Personnel Regulation have enabled us to implement more flexible recruitment procedures in order to recruit experienced and specialized personnel, for both entry level and managerial positions, with higher salaries and more attractive benefits.
 
OTE S.A.’s employee headcount for regional operations as of December 31, 2007, 2008 and 20072009 was as shown in the following table:
 
Regional Departments
 
                        
 Number of Employees  Number of Employees 
 As of December 31,  As of December 31, 
 2006 2007 2008  2007 2008 2009 
Attica  1,923   1,876   2,045   1,876   2,043   1,910 
Northern Greece  2,038   1,958   1,996   1,958   1,996   1,880 
Southwestern Greece  1,600   1,561   1,601   1,561   1,601   1,533 
Crete and Islands  872   841   851   841   851   804 
Employees of our OTEShops/Sales Support in Greece  1,601   1,483   2,078   1,483   2,078   1,870 
Remainder of our employees (Athens)  3,741   4,035   3,485   4,035   3,487   3,372 
              
Total(1)
  11,775   11,754   12,056   11,754   12,056   11,369 
              
(1)The 2007 figures include 379 employees of OTENet. OTENet employees were integrated within OTE as of 2008.
 
As of December 31, 2008,2009, the average age of our employees of OTE was 44.5744.83 years, while the average number of years in service was 17.44.17.24.


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Early Retirement Plans
 
Over the last four years, a number of our employees have retired under our various early retirement plans, including the Voluntary Retirement Scheme of 2005. The effects of our early retirement plans and natural attrition, combined with our policies to recruit only specialized personnel, to retrain employees whose skills have become


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obsolete and to outsource certain activities currently undertaken by our personnel, have resulted in the number of our employees steadily decreasing over the past five years at an average annual rate of 6.6%6.55%.
 
For the year 2009,2010, we expect an additional approximately 630346 employees to retire under our early retirement plans. In 2009,2010, we aim to recruit up to 10050 new employees in order to cover personnel needs that arose as a result of our early retirement scheme and to improve our employee skill set, especially in new technologies and management.
 
Early retirement plans.  We operate a number of early retirement plans on an annual basis providing incentives for early retirement for our employees, pursuant to which a number of our employees have retired in recent years and are expected to retire in the foreseeable future. In particular, 269197 of our employees retired in 20082009 under our early retirement plans, compared to 269 in 2008 and 487 in 2007 and none in 2006.2007. During 2009, 1952010, 346 employees have applied forare expected to retire under this year’s early retirement.retirement scheme.
 
Voluntary Retirement Scheme.  In June 2005, we reached a collective agreement with OTEour employees on the proposed Voluntary Retirement Scheme, which was approved by Greek Law 3371/2005. In total, 4,7595,405 employees retired pursuant to the Voluntary Retirement Scheme (699 in the year 2005, and 4,060 in the year 2006)2006, 34 in the year 2008 and 612 in the year 2009).
 
Of 803 applications for participation in the Voluntary Retirement Scheme that were rejected by TAP-OTE for failing to satisfy the qualifying criteria, 630612 employees will retire duringretired on September 15, 2009, following an amendment in relevant lawsaccordance with Law 3371/2005 and in line with the provisions of the Law 3762/2009, as a result of which, we will have to incurincurred an additional cost. With respect tocost of Euro 152 million. In addition, as a result of the remaining 173voluntary retirement program, we recruited 211 new employees it has been decided that they do not satisfy the qualifying criteria for the Voluntary Retirement Scheme.in various fields in 2009.
 
Our total initially projected cost of Euro 1.1 billion with respect to our retirement schemes was subject to reduction, as Law 3371/2005 required the Greek State to contribute to TAP-OTE a number of shares representing 4%4.0% of our share capital, as participation in the cost of the schemes. The European Commission investigated the legality of this arrangement and, in May 2007, it announced that it had no objections to this contribution being made by the Greek State. Pursuant to the European Commission’s decision, the total contribution may not exceed the amount of Euro 390.4 million. In the first quarter of 2009, following thean agreement between the Greek Sate and IKAIKA-ETAM (pursuant to Law 3655/2008, the pension fund part of TAP-OTE and certain other pension funds were merged with IKA/ETEAM,IKA-ETAM, on August 1, 2008) the Greek State contributedtransferred to IKAIKA-ETAM the agreed number of shares having withheldrepresenting 4.0% of our share capital, and IKA-ETAM agreed to exercise the respective votes, andvoting rights pertaining to these shares in the same way as the Greek State exercises voting rights pertaining to its own shares in our share capital, while the respective liability of Euro 202.0201.9 million was reversed.
 
The significant majority of cash outflows for the Voluntary Retirement Scheme was incurred during the first two financial years of the Scheme, with the remaining balance to be incurred until 2012.
 
Employee Insurance Funds
 
On October 23, 2006, we entered into a loan agreement with the Employee Auxiliary Pension Fund up to Euro 180 million, at an interest rate of 0.29% in connection with the Voluntary Retirement Scheme. This loan is to be repaid in instalmentsinstallments commencing on October 1, 2008 and matures on September 1, 2027. On October 2007 an amendmentand on May 2008, two amendments to the loan agreement waswere signed, under which an additional amountamounts of Euro 8.0 million wasand Euro 1.3 million respectively, were advanced and the repayment schedule was updated. The total amount advanced as of December 31, 2007 was Euro 188.0 million and following a readjustment of 2008, the amount increased togranted is Euro 189.3 million.
 
The TAP-OTE fund was the principal personnel insurance fund for our employees and was divided into a pension division and a health division. Members of this fund also include employees of the Greek Railway Organization and the Greek Postal Services. Pursuant to Law 3655/2008, the pension fund part of TAP-OTE and certain other pension funds were merged with IKA/ETEAM,IKA-ETAM, the main social security fund in Greece, on August 1, 2008. The health care part of TAP-OTE was merged with TAYTEKO (a newly-established health care fund for employees of utilities companies). The pensions division pays all members who joined the fund prior to 1993 a pension equal to approximately 80% of the salary they received at the time of retirement. With respect to employees who joined as of 1993, IKA/ETAMIKA-ETAM pays a pension equal to 70% of the final salary after 35 years of service at the age


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age of 65. With respect to employees who joined us prior to 1993, our contributions are 25.0% and employee contributions are 11% of their salary, whereas for employees who joined us after 1993, our contributions are 13.3% and employee contributions are 6.7%. In accordance with Law 3655/2008, employees’ and employers’ contributions for TAP-OTE’s pension fund will gradually converge with those applicable for IKA/ETEAMIKA-ETAM (and are expected to gradually decrease), starting from 2013 and concluding in 2023.2023 in three equal installments. TAYTEKO provides hospital and pharmaceutical care on a daily basis. For all employees, our current contributions are 5.1% of salary, and employee contributions are 2.55% of salary plus 0.5% for each dependant of the employee.
 
Pursuant to Law 1902/1990,2257/1994, we were obliged to fund, beginning in 1990, TAP-OTE’s annual operating deficits. In connection with this and pursuant to Law 2768/1999, a special fund was formed with TAP-OTE using contributions from, among others, us, the Greek State and the Employee Auxiliary Pension Fund. In addition, asociété anonymeunder the name EDEKT-OTE S.A., in which we hold a 40% interest, was also incorporated, in order to manage the investments of the fund. The purpose of the fund is to manage the contribution mentioned above in order to finance the deficits of TAP-OTE.
 
Pursuant to Law 2937/2001, our funding commitment was set at Euro 352.2 million, representing the equivalent of the net present value of our required contributions to TAP-OTE for the ten-year period from 2002 to 2011. We paid this amount on August 3, 2001 and are amortizing it over this ten-year period. Pursuant to Law 2843/2000, the Greek State is required to fund any further deficits incurred by TAP-OTE. We believe that our obligation tofund TAP-OTE’s annual operating deficits has ceasedFurthermore, according to Law 2768/1999.3655/2008 (Article 2, par. 8), the deficits of the pension segments which were incorporated into IKA-ETAM are covered by the Greek State.
 
The Employee Auxiliary Pension Fund provides pensions equal to 20% remuneration after 30 years of service to employees who were members before 1993. Law 2084/92 set minimum contribution levels and maximum pensions after 35 years of service for new members from 1993 onwards. The Employee Auxiliary Pension Fund also provides a lump sum to our employees on retirement or in the case of death. Under Law 2084/92, the maximum sum to be granted under this plan is Euro 0.03 million for 35 years of service and is readjusted annually. Currently, our employees’ contributions are 4%.
 
The Employee Auxiliary Pension Fund is currently in surplus, but may operate in deficit in the future. We are not liable by law to cover any such deficit.
 
Staff Retirement Indemnities and Other Benefits
 
Under Greek labor law, all employees are entitled to termination payments in the event of dismissal or retirement. We offer additional benefits such as the Youth Account, which pays employees’ children a lump sum on marriage, entry into university or reaching a certain age. This benefit is funded by employee contributions, interest accrued on these contributions and our contributions. Our contributions may total up to ten average monthly salaries depending on the length of time for which employees make contributions to this account. The annual provisions and the related liability for such benefits are reflected in our financial statements at the present values of the estimated liability based on an independent actuarial study.
 
Relationship with the Union
 
The majority of our full-time employees are members of the OME-OTE trade union. We believe that our relations with our employees and with the OME-OTE union are good and expect this situation to continue in the future.
 
Our management works with the OME-OTE union to foster stable labor relations. Wage increases are set pursuant to our specific collective labor agreement within the framework and subject to the minimums set by a national collective labor agreement. Our specific collective labor agreement is usually for one or two-year terms. Negotiations between us and OME-OTE shall commence prior to the expiration of the current collective labor agreement and, once concluded, the new collective labor agreement will enter into effect immediately upon signing.
 
In 2008, we executed a collective labor agreement with our trade union, OME-OTE, for the years 2008 and 2009, which contemplates wage increases of 4.5% on average in 2008, as compared to 2007 (3.5% as of January 2008 and 3.0% as of September 2008) and 4.6% on average in 2009, as compared to 2007 (3.0% as of January 2009


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and 3.0% as of July 2009). In 2006, we executed an agreement with OME-OTE for the years 2006 and 2007, which


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contemplated wage increases of 4.1% on average in 2006 and 4.2% on average in 2007. Both of these agreements apply only to our employees of OTE and not employees of other entities of our Group.
 
On August 13, 2004, Cosmote and the union representing its employees signed a collective agreement governing terms of compensation and employment of its personnel. Since 2004, Cosmote and the union have signed two additional collective agreements on July 21, 2006 and on July 18, 2008 for the years 2006 to 2007 and 2008 to 2009 respectively.
 
In recent years, we have experienced a number of strikes, both on a nationwide basis and in specific geographic regions, including 6 strikes in 2009, mainly relating to the closure of OTEShops, 16one-day strikes in 2008 mainly relating to the pension reform bill and the sale by the Greek State of an interest in our share capital to Deutsche Telekom and twoone-day nationwide strikes and 26one-day strikes in specific geographic regions in 2007 and five days of nationwide strikes in 2006.2007. In addition, we have experienced twoone-day nationwidefour days of strikes and aone-day regional strike since January 1, 2009,2010, mainly relating to employment issues.the fiscal measures adopted by the Greek State.
 
Training — OTE Academy
 
OTE Academy was established in December 2004 and provides professional educational services to both OTE Group employees and the broader public and private sector. OTE Academy’s portfolio includes project management, information technology and management and communication skills. It designs and implements business training programs according to customer needs, following industry trends and incorporating international practices, covering such subjects as leadership, change management, performance management, personal development skills, project management, information technology, telecommunications and sales development.


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6.E  Share Ownership
 
The table below sets forth information on the shareholdings of the members of our Board of Directors and our senior managers mentioned in Item 6A/C, as at May 31, 2009.April 30, 2010:
 
            
     Number of OTE
            
 Number of OTE
 Number of OTE
 Shares Held by
  Number of OTE
 Number of OTE
  
Name
 Shares Held Options Held(1) Family Members  Shares Held Options Held(1)  
Panagis Vourloumis  0   129,400   0   0   368,295    
Iordanis Aivazis  0   107,710   0   0   140,356    
Charalambos Dimitriou  0   0   0   0   0    
Panagiotis Tampourlos  0   0   0   0   0    
Hamid Akhavan-Malayeri  0   0   0 
Kevin Copp  0   0   0   0   133,898    
Konstantinos Michalos  0   0   0   0   0    
Xeni Skorini-Paparigopoulou  0   0   227 
Ioannis Benopoulos  0   0    
Rainer Rathgeber  0   0    
Guido Kerkhoff  0   0   0   0   0    
Leonidas Evangelidis  0   0   0   0   0    
Yorgos Ioannidis  0   68,200   0   0   125,677    
Dinos Andreou  0   46,850   0   0   69,851    
Michael Tsamaz  0   154,040   0   0   211,350    
Elias Drakopoulos  0   72,310   0   0   96,214    
Christini Spanoudaki  0   62,930   0 
George Mavrakis  0   60,352    
Maria Efthimerou  0   59,830   0   0   79,505    
Konstantinos Kappos  3,136   65,110   0   3,136   85,493    
Andreas Karageorgos  35   62,180   0   35   81,063    
Loizos Kyzas  0   0   0   0   92,456    
Kosmas Liaros  0   60,820   0 
Maria Rontogianni  0   73,358    
Christos Katsaounis  300   56,840   0   300   75,097    
Konstantinos Ploumpis  3,800   56,020   0   0   75,304    
Paraskevas Passias  0   39,090   0   0   53,880    
Panagiotis Sarantopoulos  0   64,560   0   0   84,774    
Aristodimos Dimitriadis  0   0    
 
 
Notes:Note:
 
(1)The number of options listed have been granted under our existing 2008 management stock option plan (including vested and non-vested options).
 
The persons listed above collectively own less than 1.0% of all of our outstanding shares. For information on our stock option plans see “6.B. Compensation”.
 
ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
7.A  Major Shareholders
 
As of the date of this Annual Report, Deutsche Telekom holds 25.0%,shares and voting rights representing 30.0% plus one share of our issued share capital plus one vote, and the Greek State holdsowns 16.0% of our issued share capital and indirectly controls voting rights with respect to 25.0%an additional 4.0% of our issued share capital plus one vote,which is owned by IKA-ETAM, the largest pension fund in Greece (which is also owned by the Greek State).
On March 4, 2009, the Greek Sate and IKA-ETAM entered into an economic interest in 21.0%agreement (pursuant to Law 3655/2008, the pension fund part of TAP-OTE and certain other pension funds were merged with IKA-ETAM, on August 1, 2008) , pursuant to which the Greek State transferred to IKA-ETAM a number of shares representing 4.0% of our issuedshare


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capital, and IKA-ETAM agreed to exercise the voting rights pertaining to these shares in the same way as the Greek State exercises voting rights pertaining to its own shares in our share capital. See Exhibit 3.1 to this Annual Report.
 
On May 14, 2008 the Greek State and Deutsche Telekom signed a purchase agreement (the“Purchase AgreementAgreement””), pursuant to which the Greek State agreed to transfer an interest of approximately 3.03% in our share capital to Deutsche Telekom, to the effect that its interest would decrease to 25.0% of our share capital, plus one share. The transfer of this 3.03% interest was completed in November 2008.


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On May 15, 2008, Deutsche Telekom acquired from MIG 98,026,324 shares, representing 20%20.0% of our share capital, by means of a block trade on the Athens Exchange.
 
In addition, on May 14, 2008, the Greek State and Deutsche Telekom signed a shareholders agreement (the “Shareholders’ Agreement”) relating to the governance of our Group (see below for more details). The Shareholders’ Agreement and the Purchase Agreement were at the time of their signing subject to ratification by the Greek Parliament and approval by other relevant authorities; the Greek Parliament subsequently ratified both agreements on June 18, 2008.
 
In June 2007,Under the Purchase Agreement, the Greek State disposedwas granted two put options to sell 5% (first put option) and 10%, (second put option) respectively, of an interestshares. On July 31, 2009, as a result of 10.7% inthe exercise of the first put option, the Greek State sold to Deutsche Telekom 24,507,519 shares representing 5% of our share capital through an accelerated book-building process, following which its interest was reduced to 28.0%.capital.
 
All shares in our share capital, including those held by the Greek State and Deutsche Telekom, carry equal voting rights.
 
According to Law 3631/2008, the acquisition by any person, other than the Greek State, of voting rights representing more than 20%20.0% in the voting share capital of any Greek company which is considered to be of national strategic importance, currently has (or used to have) monopolistic character, and especially in the event that it owns, exploits or manages networks of national infrastructure, is subject to prior approval of the Greek InterministerialInter-Ministerial Committee for Privatizations in accordance with the provisions of Law 3049/2002.
 
Agreements between the Greek State and Deutsche Telekom
 
The Purchase Agreement
 
Pursuant to the Purchase Agreement dated May 14, 2008, and subject to its terms and conditions, the Greek State sold to Deutsche Telekom 14,865,886 of our shares, representing approximately 3.03% of our issued share capital and respective voting rights, at the price of Euro 2929.0 per share, or a total consideration of Euro 431,110,694, to Deutsche Telekom.431.1 million.
 
The acquisition was conditioned on the ratification of the Purchase Agreement and the Shareholders’ Agreement by the Greek Parliament, as well as applicable regulatory approvals, including clearance by the European Commission and any other relevant competition authorities (the “Governmental Approval Conditions”).authorities. The Greek Parliament ratified these agreements on June 18, 2008. The European Commission approved the acquisition under the EU Merger Regulation on October 2, 2008.
 
The acquisition was also conditioned on Deutsche Telekom acquiring a total of 107,671,713 shares, or approximately 22.0% of our share capital (which(such 107,671,713 shares includeincluded the 98,026,324 shares which it had already acquired from MIG, as described above), in addition to the 14,865,886 (or 3.03%) that were to be acquired from the Greek State. To that effect, Deutsche Telekom committed under the Purchase Agreement to the Greek State that, following ratification of the Purchase Agreement and the Shareholders’ Agreement by the Greek Parliament, it would acquire from the market 9,645,389 additional shares, representing approximately 2.0% of our issued share capital and voting rights, which it did.
 
The transfer of this 3.03% interest was completed in November 2008, followingafter requisite approvals having beenwere granted by all relevant competent national and international supervisory authorities.
 
Put Options.Under the Purchase Agreement, the Greek State holdsheld a put option to sell to Deutsche Telekom a number of our shares representing 5.0% of our share capital and respective voting rights at the price of Euro 27.50 per share. This put option becamewas agreed to become exercisable, whether in whole or in part, for a period beginning fromas of October 1, 2008 (assuming that the agreed acquisition by Deutsche Telekom of the interest of approximately 3.03% has occurred prior to that date) or from the


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date of the actual completion of such acquisition, if later, and expiringexpire one year after such completion. TheOn July 31, 2009, the Greek State exercised this put option and sold 24,507,519 shares to Deutsche Telekom representing 5.0% of our share capital at the price of Euro 27.50 per share.
In addition, the Greek State holds a furthersecond put option to sell to Deutsche Telekom an additional number of our shares representing 10.0% plus any portion of our shares that the Greek State has not sold to Deutsche Telekom pursuant to the first put option.share capital. This second put option is to becomebecame exercisable, in whole or in part, and in one or more tranches, for a period beginning oneas of November 2009 (one year from completion of the acquisition by Deutsche Telekom of the interest of approximately 3.03%) and endingis due to expire on December 31, December 2011. The price payable by Deutsche Telekom to acquire additional shares under this second put option isto be calculated based on the weighted average market price of our shares during certain trading days, plus a premium of 20%20.0% or 15%15.0%, depending on the date of the exercise of the option.


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The Shareholders’ Agreement
 
The Shareholders’ Agreement, dated May 14, 2008, contains several provisions of the type customary for an agreement among significant shareholders of a company, including the following.
 
Board of Directors.  For so long as the Greek State holds at least 15.0% of our voting rights, our Board of Directors shall consist of ten directors, of whom two shall be independent. Each of the Greek State and Deutsche Telekom shall have the right to nominate five directors, including one independent director. The two shareholders have agreed to consult each other in advance of any such nomination, but they will not be bound by each other’s position with respect to such nominations. The Board of Directors shall function in accordance with our existing Articles of Incorporation, except that with regard to certain matters (the“Veto MattersMatters””) (discussed below), a higher quorum of eight directors, and a positive vote of seven directors, is required, and at least two of such votes must be cast by directors elected upon nomination the Greek State. Where a quorum of eight directors is not achieved, a quorum of six directors and a positive vote of five directors is required and at least two of the positive votes must be cast by directors elected upon nomination by the Greek State.
 
In addition to nominating members of our Board of Directors, each of the Greek State and Deutsche Telekom will have the right to nominate and procure the election of two of the fourthree members of our Audit Committee.
 
Chairman and Managing Director.  The Shareholders’ Agreement provides that our current Chairman and Managing Director will be re-elected and continue to hold both these offices. In the future, if Deutsche Telekom no longer wishes such person to hold both these offices or such person resigns, the Greek State and Deutsche Telekom will consult with each other and agree on whether both offices should be held by one person. If the Greek State and Deutsche Telekom agree that one person shall hold both offices, Deutsche Telekom shall formally nominate such candidate and the Greek State shall procure that the directors elected upon its nomination, other than the independent director, vote in favor of the candidate. The Chairman and Managing Director shall have the rights and duties pursuant to the Greek Company Law and our Articles of Incorporation, except with regard to Veto Matters.
 
If the Greek State and Deutsche Telekom, in the future, are unable to agree that one person will hold the offices of Chairman and Managing Director, the role shall be divided between two persons and the Chairman will have no casting vote. The Greek State shall nominate the Chairman and Deutsche Telekom shall nominate the Managing Director, each in consultation with the other. Each of the two shareholders shall notify the other of their proposed candidate. If the candidate for either office is not acceptable to the other party, the proposing party shall propose a second and, if necessary, a third candidate. If none of three candidates is acceptable, the proposing party shall select a candidate from among the three previously proposed.
 
Executive Committee.  If the positions of Chairman and Managing Director are not filled by the same individual, at the request of the Managing Director, the Board of Directors shall establish a four-member executive committee (the“Executive CommitteeCommittee””). Each of the Greek State and Deutsche Telekom shall nominate two of their respective directors to be elected by our Board of Directors to serve on the Executive Committee and Deutsche Telekom shall select one of the directors elected upon its nomination to act as Executive Committee Chairman. In establishing the Executive Committee, the Board of Directors shall delegate its rights and duties to the Executive


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Committee, except in respect of Veto Matters. The Executive Committee shall adopt decisions by simple majority, and the Chairman of the Executive Committee shall have a casting vote.
 
Veto Matters.  The Greek State shall retain a veto right in relation to certain matters, such as the approval of our financial statements, a change in the scope of OTE and the OTE Group companies, which are engaged in core electronic communications services, beyond the activities set out in their articles of association, extraordinary dividends or share buybacks, the issuance of certain additional debt, significant acquisitions or disposals by OTEus or a company of the OTE Group that are equal to or exceed certain thresholds, any transactions with companies that are members of the Deutsche Telekom group that exceed certain thresholds, matters relating to Greek law3631/ 3631/2008 (discussed above) and changes to the OTEour name or, subject to certain timing limitations, brand. Veto Matters falling within the competencies of our Board of Directors generally require a quorum of eight directors, and a positive vote of seven directors, and at least two of such votes must be cast by directors elected upon nomination by the Greek State. In addition, the Greek State has a veto right in respect of Veto Matters relating to entities of the OTE Group.


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The scope of Veto Matters in relation to which the Greek State holds a veto right varies depending on the interest held at times by the Greek State in our share capital.
 
Changes in shareholdings.  At any time the Greek State holds less than 15% of our voting rights, and provided Deutsche Telekom holds at least 25% of our voting rights, our Board of Directors shall consist of 11 members, including two independent directors. The Greek State will have the right to nominate five directors and Deutsche Telekom shall have the right to nominate six directors. The two parties have agreed to consult with each other in advance of any such nomination, but will not be bound by each other’s position with respect to such nominations. The Board of Directors shall function in accordance with our existing Articles of Incorporation, although, with regard to Veto Matters, a higher quorum of eight directors, and a positive vote of seven directors, is required, and at least two of such votes must be cast by directors elected upon nomination by the Greek State. Where a quorum of eight directors is not achieved, a quorum of six directors and a positive vote of five directors is required, and at least two of such votes must be cast by directors elected upon nomination by the Greek State.
 
Irrespective of the percentage of shares held by the Greek State, at any time Deutsche Telekom holds less than 25% of the voting rights in OTE, the composition of the Board of Directors shall be as described in the paragraph above, except that the Greek State will nominate six Board members and Deutsche Telekom will nominate five, but each party will not be bound by the other’s position with respect to such nominations. In addition, the Greek State will be entitled to nominate one person or different persons to the office (or offices) of Chairman and Managing Director. Furthermore, at any time Deutsche Telekom holds less than 25% of our total voting rights, the Greek State shall have the right in most circumstances to terminate the Shareholders’ Agreement by notice to Deutsche Telekom, subject, in certain instances, to the right of Deutsche Telekom to restore the level of its shareholding to 25% or more.
 
The Shareholders’ Agreement shall remain in effect for as long as the Greek State holds at least 5.0% of our voting rights.
 
Exercise of voting rights.  The Greek State and Deutsche Telekom agree to exercise their voting rights (and to procure that the entities the voting rights of which are taken into account for the respective party will also exercise their voting rights) at any general assembly of OTE and procure that the directors elected upon their nomination (other than independent directors) will exercise their voting rights at the Board of Directors or the Executive Committee, as applicable, in a coordinated manner to implement the provisions of the Shareholders’ Agreement. This obligation does not apply:
 
(i) with regard to Veto Matters and certain other matters (for example the election of directors nominated by the Greek State) in which case the Greek State may exercise its voting rights at its discretion and Deutsche Telekom must exercise its voting rights to support the Greek State’s position in respect of the Veto Matters; and
 
(ii) in the event that the positions of the Managing Director and the Chairman are held by the same person, in which case the parties may exercise their voting rights at their discretion subject to the obligation of Deutsche Telekom to vote in respect of a Veto Matter, as described in (i) above.


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In any case, at our general assembly the Greek State will exercise its voting rights as proposed by Deutsche Telekom, except in respect of Veto Matters or matters upon which, pursuant to the terms of the Shareholders’ Agreement, the Greek State may vote at its discretion.
 
Standstill Period,Lock-ups and Rights of First Refusal.  Until December 31, 2011, Deutsche Telekom and members of the Deutsche Telekom group may not, subject to the put option arrangements contemplated in the Purchase Agreement and the right of first refusal of Deutsche Telekom discussed below, acquire voting rights in OTE through the purchase of our shares or otherwise without the Greek State’s consent, if the effect of such purchase would result in Deutsche Telekom’s total voting rights in OTE exceeding 25% plus one share of the total voting rights in OTE. These standstill arrangements cease if the Greek State’s voting rights in OTE fall below 20%, provided that the aggregate holding of the Greek State and Deutsche Telekom in OTE does not exceed 60% until the end of the standstill period, or such lower percentage that may be necessary to ensure the appropriate level of liquidity for the trading of our shares, as required by the Athens Exchange.


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The Shareholders’ Agreement prohibits Deutsche Telekom from transferring, or imposing any encumbrance on, any of its shares in OTE until December 31, 2011, subject to the right of first refusal of the Greek State. Furthermore, each of the Greek State and Deutsche Telekom has granted the other party a general right of first refusal in connection with a proposed transfer of shares or pre-emption rights in OTE at a price equal to the price offered by a bona fide third-party acquirer, or in a publicly marketed equity or rights offering, subject, in each case, to certain exemptions and price adjustments. Moreover, under the Shareholders’ Agreement, both parties are prohibited from disposing or encumbering its respective voting rights in OTE during the term of the Shareholders’ Agreement without the written consent of the other party, excluding disposals of voting rights where a transfer of our shares is permitted in accordance with the above.
 
Change of Control of Deutsche Telekom.  Upon effectiveness of the Shareholders’ Agreement, the Greek State shall have the right, upon a change of control of Deutsche Telekom to require Deutsche Telekom to sell to the former its shares in OTE at a price based on the average trading price of the shares at the time such change of control occurs. A change of control refers to one or more persons or entities, other than the Federal Republic of Germany (directly or indirectly), acquiring control of Deutsche Telekom (that is directly or indirectly having acquired 35% of the voting rights in Deutsche Telekom’s share capital), if that person does not meet certain requirements (set forth in article 11, paragraph 2 of Law 3631/2008), including being an electronic communications operator of similar size and standing as Deutsche Telekom in the European Union or the United States, or being ultimately owned by persons who are nationals or citizens of, or incorporated in, the European Union or the United States.
 
Human Resources.  Matters that fall outside the scope of article 12 of our Articles of Incorporation and will have a collective effect on employees, such as voluntary retirement or redundancy programs, will be subject to a consultation process. The Managing Director will create a full and detailed proposal to be presented to a group including himself, two employee representatives, two directors elected upon nomination by the Greek State and two directors elected upon nomination by Deutsche Telekom (including the Managing Director). This group will have a period of 15 business days to reach an agreement on the proposal. If no such agreement can be reached, the Managing Director will draft an amended proposal, to be decided upon by the same group within 10 business days. If no agreement can be reached on the amended proposal, the matter will be decided by either the Board of Directors or the Executive Committee, in accordance with the Shareholders’ Agreement.
 
Governance of Companies of the OTE Group.  When the board of directors of a company of the OTE Group comprises five or more members, then at least two of them will be appointed or elected, as applicable, upon nomination by the Greek State following consultation with Deutsche Telekom. Alternatively, when the board of directors of a company of the OTE Group comprises less than five members, then at least one of them shall be so appointed or elected, provided that, in any case, OTEwe shall have the right to appoint or elect a majority of directors.
 
In addition, the Greek State and Deutsche Telekom have agreed that the Veto Right shall also apply to certain of the Veto Matters relating to and passed at the level of the OTE Group of Companies.
 
Competition.  Throughout the term of the Shareholders’ Agreement, Deutsche Telekom and the Deutsche Telekom Group may not engage in any activity which would, directly or indirectly, compete with theour business of OTE in the Specified Territories (as defined below). In particular, neither Deutsche Telekom nor any member of its group shall


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establish or acquire, or acquire shares in, any material business that would, directly or indirectly, compete with the business of the OTE Group, with the exception of the international wholesale business and Deutsche Telekom’s existing operations in FYROM and Montenegro. A competing business is considered material if its revenues exceed Euro 25.0 million (or Euro 30.0 million in countries in which the OTE Group’s revenues, at the date of the Shareholders’ Agreement, exceed Euro 250.0 million). This clause shall not preclude members of the Deutsche Telekom Group from fulfilling contracts in existence at the date of signing of the Shareholders’ Agreement and providing services to multinational customers in Albania, Bulgaria, Greece, Romania and Serbia (the“Specified TerritoriesTerritories””) if the primary contractor is located outside of the Specified Territories and and:
(i) the portion of the services provided in the Specified Territories is less than 35% of the total contract value,value; or
(ii) OTE Group has been given the opportunity to make a competing offer on conditions at least as favorable as a local operator, unless the customer has specifically requested otherwise.
 
In case of a violation of these non-compete provisions, Deutsche Telekom shall consult with the Greek State in good faith regarding remedial action and implement any such action within six months. If, following the expiration


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of such six months, compliance with the non-compete provisions has not been achieved, the Greek State may require Deutsche Telekom to divest itself of the competing business to the extent necessary to achieve compliance. The non-compete provisions shall apply for as long as the Greek State holds at least 5.0% of our voting shares.
 
Amendments to our Articles of Incorporation
 
In January 2009, Deutsche Telekom submitted a request for a General Assembly of Shareholders in order for our Articles of Incorporation to be amended to reflect the terms of the Shareholders’ Agreement. Subsequently, the resolution of our General Assembly of Shareholders of February 6, 2009 amended our Articles of Association to reflect a number of changes. These include the following:
 
 • contemplating the possibility of the establishment of an Executive Committee;
 
 • contemplating our Board of Directors comprising of ten members, as opposed to the previous minimum of eleven members; and
 
 • contemplating that, in the event of a tie in the Board of Directors, the Chairman will hold the casting vote, except for certain matters and except in the event an Executive Committee has already been established.
 
The Greek State
 
The Greek State is our largest customer for telecommunications services. The commercial relationship between us, as supplier, and the Greek State and other state-owned enterprises, as customers, is conducted on a normal, arm’s length customer and supplier basis. We do not give the Greek State preferential customer treatment on the grounds that it is a major shareholder or a sovereign state. None of our obligations isare guaranteed by the Greek State. See also “7.B. Related Party Transactions”.
 
7.B  Related Party Transactions
 
We treat Deutsche Telekom (and its subsidiaries for 2009) as a related party.parties of the Group. Deutsche Telekom consolidates our results in its annual financial statements. See Note 2827 to our financial statements regarding our accounting treatmentdisclosures of related parties and related party transactions. The following table presents accounts receivable from, and accounts payable to, related parties (Deutsche Telekom) as of December 31, 2006, 2007, 2008 and 2008,2009, respectively:
 
                  
 December 31, December 31,
 2006 2007 2008 2007 2008 2009
 (Euro in millions) (Euro in millions)
Accounts receivable from related parties(1)
  0   0   6.5   0   6.5   10.1 
Accounts payable to related parties by our Group(1)
  0   0   7.5   0   7.5   6.4 
 
 
Notes:Note:
 
(1)Amounts relate to Deutsche Telekom.Telekom (and its subsidiaries for 2009).


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In addition, the Greek State is one of our largest customers and purchases services from us on an arm’s length basis. We deal with various departments and agencies of the Greek State as separate customers, and the provision of services to any one department or agency does not constitute a material part of our revenues. We enter into contracts to provide telecommunications services to the Greek State and its agencies and affiliates (including corporations owned, controlled by, or affiliated with, the Greek State) on an arm’s length basis in the ordinary course of our business.
 
7.C  Interests of Experts and Counsel
 
Not applicable.


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ITEM 8  FINANCIAL INFORMATION
 
8.A  Consolidated Statements and Other Financial Information
 
See “18. Financial Statements” for a list of financial statements filed with this Annual Report. See “4.B. Business Overview — Legal Proceedings” for a discussion of pending litigation proceedings.
 
8.B  Significant Changes
 
Not applicable.
 
ITEM 9  THE OFFER AND LISTING
 
9.A  Offer and Listing Details
 
The principal trading market for our shares is currently the Athens Exchange. The shares are also listed for trading on the free market segments of the Frankfurt Stock Exchange and the Berlin Stock Exchange. American Depositary Shares, each representing one-half of one share, are listed on the New York Stock Exchange under the symbol “OTE” and are also admitted to the Official List of the London Stock Exchange and quoted on the International Order Book. The American Depositary Shares are also listed for trading on the free market segment of the Munich Stock Exchange. The Bank of New York acts as depositary for the ADSs. On May 11, 2010, our Board of Directors resolved to pursue the delisting of the ADSs from the New York Stock Exchange and the deregistration and termination of our reporting obligations under the Exchange Act, to become effective within the second half of 2010. We intend to maintain an ADR program on a “Level I” basis in order to enable investors to trade ADSs in the United States in theover-the-counter (OTC) market.
 
As of May 31, 2009,28, 2010, 116 registered holders of ADSs in the United States held approximately 12.816.3 million ADSs, representing approximately 1.3%1.7% of our outstanding shares.


141151

The following tables set forth, for the years and periods indicated, the reported high and low quoted closing prices for our shares on the Athens Exchange and ADSs on the New York Stock Exchange, together with their respective average daily trading volumes.
 
                                                
 Athens Exchange NYSE  Athens Exchange NYSE
     Average Daily
     Average Daily
      Average Daily
     Average Daily
 High Low Trading Volume High Low Trading Volume(2)  High Low Trading Volume High Low Trading Volume(2)
 Price per share
   Price per ADS(1)
    Price per share (Euro)   Price per ADS(1) (U.S.$)  
 (Euro)   (U.S. $)   
2004  13.44   9.40   1,110,205   8.90   5.80   85,633 
2005  18.46   13.04   1,309,218   11.17   8.46   32,943   18.46   13.04   1,309,218   11.17   8.46   32,943 
2006  23.72   15.94   1,094,406   15.72   10.03   26,366   23.72   15.94   1,094,406   15.72   10.03   26,366 
2007  26.98   19.92   2,139,423   19.31   13.31   58,536   26.98   19.92   2,139,423   19.31   13.31   58,536 
2008  25.40   8.98   2,042,136   18.69   5.65   79,633   25.40   8.98   2,042,136   18.69   5.65   79,633 
2007
                        
First quarter  24.40   19.92   1,407,860   16.00   13.31   37,016 
Second quarter  23.90   20.46   2,222,491   16.15   13.80   70,359 
Third quarter  26.00   21.74   2,740,170   18.72   14.73   50,754 
Fourth quarter  26.98   23.30   2,180,270   19.31   16.56   75,069 
2009  13.14   9.84   1,300,818   9.70   6.14   54,434 
2008
                                          
First quarter  25.40   17.60   2,223,633   18.69   13.74   86,850   25.40   17.60   2,223,633   18.69   13.74   86,850 
Second quarter  20.60   15.56   3,186,304   15.89   11.71   95,503   20.60   15.56   3,186,304   15.89   11.71   95,503 
Third quarter  15.48   12.56   1,326,041   12.06   8.77   61,520   15.48   12.56   1,326,041   12.06   8.77   61,520 
Fourth quarter  12.92   8.98   1,506,027   9.22   5.65   74,997   12.92   8.98   1,506,027   9.22   5.65   74,997 
2009
                                          
First quarter  13.14   9.84   935,662   8.91   6.14   52,709 
Second quarter  12.58   10.90   1,367,781   8.71   7.16   51,221 
Third quarter  11.65   10.00   1,790,914   8.50   7.03   53,458 
Fourth quarter  12.71   10.01   1,233,488   9.70   7.35   60,219 
2010
                  
January  13.14   10.98   1,008,273   8.91   6.96   60,553   10.75   9.88   1,118,695   7.94   6.88   76,894 
February  11.02   9.84   891,784   7.62   6.14   43,370   9.99   8.56   1,282,696   6.97   5.90   406,148 
March  11.38   10.24   906,929   7.78   6.22   53,664   9.60   8.86   825,446   6.58   6.08   365,193 
April  12.58   10.93   1,253,219   8.38   7.16   40,231   9.19   7.80   1,385,265   6.23   5.34   572,123 
May  12.10   11.04   1,512,181   8.29   7.46   67,559   8.39   6.45   1,571,126   5.54   3.87   681,941 
June 15  12.34   11.58   1,956,813   8.71   8.17   59,499 
 
 
Notes:
 
(1)Each ADS represents one half of one share.
 
(2)Number of ADSs.
 
9.B  Plan of Distribution
 
Not applicable.
 
9.C  Markets
 
Our ordinary shares are listed on the New York Stock Exchange not for trading or quotation purposes, but only in connection with their registration pursuant to the requirements of the Securities and Exchange Commission.
 
9.D  Selling Shareholders
 
Not applicable.
 
9.E  Dilution
 
Not applicable.


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9.F  Expenses of the Issue
 
Not applicable.
 
ITEM 10  ADDITIONAL INFORMATION
 
10.A  Share Capital
 
Not applicable.
 
10.B  Our Articles of Incorporation
 
We operate as asociété anonymeunder Greek Law 2190/1920 as in effect, the Greek Companies Law, and we are registered with the Greek Register ofSociétés Anonymesunder registration number 347/06/B/86/10. Our corporate seat is in the Municipality of Amaroussion, Greece. According to our Articles, our company purposes, among others, include:
 
 • the establishment, management and operation of telecommunications infrastructure;
 
 • the development and provision of telecommunications services, including satellite telecommunications services;
 
 • the production, ownership, use and exploitation of telecommunications equipment and other assets; and
 
 • the development and use of new services based on technological advances in the areas of telecommunications, information technology, multimedia, internet, or other services we can provide through our own networks or through networks we may be granted access to.
 
Our extraordinary general assembly of shareholders of February 6, 2009 approved certain amendments to our Articles of Incorporation, in order to adapt it to the Shareholders’ Agreement, including matters relating to the description of authorities granted to third parties by the Board of Directors (Article 8), the election, composition and term of the Board of Directors (Article 9), the frequency and procedure of Board of Directors’ meetings (Article 10), and the powers of the Managing Director (Article 12). Article 8 paragraph 3c, as currently in force, provides that if the offices of the Chairman of our Board of Directors and our Managing Director are held by different persons, the Board of Directors, pursuant to a specific decision may establish a four-member Executive Committee. See “7.A Major Shareholders and Related Party Transactions — Major Shareholders — Agreements between the Greek State and Deutsche Telekom.”
 
In addition, our extraordinary general assembly of shareholders of April 7, 2009 approved further amendments to our Articles of Incorporation in accordance with the provisions of law 3604/2007, enabling Greek companies to simplify their Articles of Incorporation by omitting those provisions, which are clearly stated in Law 2190/1920 as now in force.
 
Board of Directors
 
In accordance with our Articles of Incorporation, it is prohibited for the members of our Board of Directors, as well as the Managing Director and any of our employees, to undertake or participate for their own account or for the account of third parties in any commercial activities similar to those included in our company purposes, or to act as directors of, be partners of, hold a substantial interest in the share capital of, or be employed by, companies whose corporate purposes are similar to ours. This prohibition may be waived under certain circumstances as provided in our Articles of Incorporation.
 
In addition, in accordance with our Articles of Incorporation and Greek Companies Law, our general assembly of shareholders has the power to set directors’ compensation. Loans or any form of credit provided by us to any member of our Board of Directors, or any form of guarantee granted by us in their favor, are prohibited and are absolutely void.


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Dividend Rights
 
Dividends may only be paid out of profits after the annual financial statements are approved by the general assembly. Before the payment of dividends, we are required to allocate at least 5% of such net profits to the formation of a legal reserve until this reserve equals at least one-third of our share capital. The ordinary reserve is distributable to shareholders only upon our liquidation and after satisfaction of all prior claims. According to our Articles of Incorporation and the Greek Companies Law, we are required to pay a minimum annual dividend equal to 35% of our net profits for the previous financial year. All of these amounts are currently based on IFRS financial statements. The distribution of the remainder of the net profits as well as any retained earnings from prior periods may be decided by the general assembly of shareholders with a quorum of holders of one- fifth of the outstanding shares and the affirmative vote of the absolute majority of the holders of the shares present or represented at this general meeting. If this quorum is not satisfied, there are no quorum requirements at the adjourned general meeting.
 
However, except in the case of a decrease in share capital, no distribution may be made to shareholders if the shareholders’ equity would become, as a result of the distribution, less than the amount of the share capital increased by theplus reserves the distribution of which is prohibited bythat are non-distributable under law.
 
The amount approved for distribution as dividend is required to be paid to shareholders within two months of the shareholders’ resolution approving our annual financial statements and declaring such dividend. Dividends not claimed by shareholders within five years are forfeited to the Greek State.
 
Voting Rights
 
All of our issued shares bear voting rights, in direct proportion to the number of shares held by each shareholder. As of 2006, following the adoption of Law 3522/2006, the Greek State’s equity interest in our voting securities may now be lower than one-third of our share capital.
 
General Assembly of Shareholders.
 
The annual general assembly is required to be held each year, within six months from the end of our financial year, in order to approve our annual statutory financial statements in accordance with IFRS as adopted by the EUEuropean Union and to discharge Board members and auditors from liability in respect of their tenure of office during such year. Extraordinary general assemblies may be convened by the Board when it considers that a meeting is necessary, or pursuant to the request of the holders of 5% or more of our paid-in share capital. In addition, the auditors are entitled to request the Chairman to convene an extraordinary general assembly within ten days of the notice of such request. Greek law requires that a notice of a general assembly be published in the Government Gazette Issue ofSociétés Anonymesand Limited Liability Companies, in a daily newspaper published in Athens and circulated nationwide, a daily financial newspaper and a local newspaper, at least 20 days before the date set for the assembly or 10 days before such date in the case of an adjourned assembly. Such notice must include the agenda, place, date and time for the general assembly. No notice is required if all shareholders are present or represented at the general assembly and no shareholder objects to the assembly taking place and to the adoption of resolutions at such assembly. No further notice is required for an adjourned general assembly if the initial notice refers to the place and time for such adjourned meeting.
 
Shareholders wishing to participate in the general assembly must block their shares through their stock broker and deposit with us a certificate issued by the Hellenic Exchanges S.A. at least five days before the date of the assembly. Shareholders entitled to participate in the general assembly may be represented by a legally authorized person. Unless otherwise specified by applicable law or in the Articles, the presence in person or by proxy of shareholders holding not less than 20% of the paid-in share capital is necessary for a quorum. If a quorum is not present at any general assembly, such general assembly is adjourned. There is no quorum requirement when an ordinary general assembly is reconvened, but only items which were on the agenda of the adjourned general assembly may be discussed and voted upon. Unless otherwise specified by applicable law or in the Articles, the voting majority required for a resolution proposed at a general assembly is the absolute majority of the shares represented at such general assembly. Shareholders present but abstaining from voting are considered present or represented for purposes of determining the requisite quorum and majority.


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Our Articles of Incorporation provide that minority shareholders’ rights are as set out in the Greek Companies Law (Law 2190/1920). Key minority shareholders’ rights include the following:
 
Any shareholder has the right to request from the Board particular information to the extent necessary to assess items on the agenda of the general assembly; the Board may refuse to give such information by providing a material reason for such refusal.
 
Shareholders holding at least 5% of the paid-in share capital have the right:
 
 • to request the Board to convene an extraordinary general assembly;
 
 • to request that the Board include additional items on the agenda, if such request is made at least 15 days prior to the date set for the general assembly;
 
 • to postpone only once the adoption of a resolution by the ordinary or extraordinary general assembly for all or certain items on the agenda;
 
 • to request that the Board, during an ordinary general assembly, provide information concerning any amounts paid within the last two years to our Directors or executive officers, as well as details of any financial benefit to these persons derived from any cause or contract between the company and these persons; the Board may refuse to give such information by providing a material reason for such refusal. Disputes over the Board’s grounds to refusing such information may be adjudicated by the competent court according to injunctive relief proceedings;
 
 • to request a vote of the holders of the shares present or represented at the meeting regarding any item on the agenda; and
 
 • to request that a competent court review our operations when it is believed that applicable laws, our Articles of Incorporation or resolutions of the general assembly are being violated.
 
Shareholders holding at least 20% of the paid-in share capital have the right:
 
 • to request that competent court review our operations, when it is believed that our affairs are not properly managed; and
 
 • to request from the Board particular informationinformaPtion on our company’s operations and financial condition. Disputes over the Board’s grounds to refuse such information may be adjudicated by the competent court according to injunctive relief proceedings.
 
Our Articles of Incorporation enumerated these rights of our company’s shareholders, granted under Law 2190/1920. However, our extraordinary general assembly held on April 7, 2009 amended the relevant sections of our Articles of Incorporation in accordance with the provisions of Law 3604/2007 (which amended Law 2190/1920 in certain respects), allowing Greek companies to omit from their Articles of Incorporation, those provisions expressed in Law 2190/1920 (such as minority rights).
 
Our Articles of Incorporation may be amended by a resolution of our general assembly.
 
Changes in Share Capital and Pre-emptive Rights
 
Our share capital may generally be increased pursuant to a resolution by the shareholders at a general assembly at which a quorum of holders of two-thirds of our share capital is present. If such a quorum is not achieved, the quorum requirement is reduced to half and then to one-fifth at the second and third adjourned assemblies, respectively.
 
In addition, our Articles grant authority to the Board to approve, an increase in our authorized share capital, by a two-thirds majority, or within a five-year period following an authorizing resolution of the general assembly. The amount of such an increase cannot exceed our initial paid-in share capital at our incorporation or our paid-in share capital as of the date of the general assembly’s authorizing resolution. However, if our capital reserves exceed one quarter of our paid-in share capital, then a capital increase will always require a resolution by our general assembly with an extraordinary quorum of two-thirds of the paid-in share capital. If such quorum is not achieved, the quorum


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requirement is reduced to one-half, and then to one-fifth, at the second and third adjourned assemblies, respectively, with the requisite voting majority being two thirds of the shares present at each such general assembly. See “— General Assembly of Shareholders”.
 
All share capital increases in cash, must first be offered to existing shareholders pro rata to their existing shareholdings, unless the pre-emptive rights of these shareholders have been waived. Pre-emptive rights may only be waived by a decision of holders of two thirds of the paid-in share capital present at a general assembly at which a quorum of two-thirds, which is reduced to one-half and one-fifth at the second and third adjourned assemblies, respectively, of the outstanding share capital is present. Pre-emptive rights for newly offered shares are transferable during the subscription period for the related offering and may be quoted on the Athens Exchange.
 
A resolution of the shareholders at a general assembly is also required for the reduction of our share capital. This resolution requires the approval of holders of two-thirds of the shares present or represented at a general assembly at which holders of two-thirds of the paid-in share capital are present or represented. This quorum requirement is reduced to one-half and one-fifth at the second and third adjourned assemblies, respectively.
 
Since 2002, the nominal value of our shares has been denominated in Euro and has been set at Euro 2.39.
 
Rights on Liquidation
 
A liquidation procedure involves our dissolution after expiry of our initial company term of one hundred years from December 27, 1996, or pursuant to a resolution of our general assembly taken by a quorum of at least two-thirds of our paid-in share capital present or represented at the meeting and a majority of holders of two-thirds of the shares present or represented at the general assembly, or in case of insolvency, or pursuant to a court order. In any case, the general assembly is competent to designate the liquidators. During the liquidation procedure, the general assembly continues to be entitled to all its rights under applicable law and the Articles of Incorporation.
 
If we are liquidated, assets remaining after payment of our debts, liquidation expenses and all of our remaining obligations will be distributed first to repay in full the nominal value of our share capital, and the surplus, if any, will be distributed pro rata among our shareholders in proportion to the nominal value of their interests in our share capital.
 
Form and Transfer of Shares
 
Dematerialization of our shares has been completed.
 
Settlement of Athens Exchange transactions on dematerialized shares takes place by means of book-entry transfers through each beneficial shareholder’s custodian. The settlement of transactions on dematerialized securities takes place through the facilities of the Hellenic Exchanges S.A. In respect of these securities, no material titles are issued, as they are registered with the Dematerialized Securities System, which is managed by the Hellenic Exchanges S.A., in book-entry form, as “electronic securities”, held for the respective holders by way of respective accounts.
 
The obligation to deliver the securities upon disposal and the claim to receive the securities upon purchase are satisfied by means of registrations in the respective accounts of the securities transferred, through either the member of the stock exchange that effects the transaction for the account holder of the account of the securities or through a bank acting as a custodian.
 
Upon request by the holder of the account, Hellenic Exchanges S.A issues certificates in respect of the securities registered in its accounts. It also issues certificates for the participation of the holder of the account in general meetings of shareholders of the respective companies. Under Law 3556/2007, which implemented Directive 2004/109/EC, when as a result of a transfer of shares listed on the Athens Exchange, such as our shares, a person acquires or disposes of shares in a company resulting in his or her interest in the voting rights of the company reaching, exceeding or falling below 5%, 10%, 15%, 20%, 25%, 1/3, 50% or 2/3, or upon any acquisition or disposal of voting shares of more than 3% by a person holding more than 10% of a company’s voting shares, this person is required to notify both the company and the HCMC of his or her resulting holdings in the share capital and the voting rights of the company within the next three days following this acquisition or disposal. In addition, under


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DecisionNo. 3/347/12.7.2005 of the HCMC, which implemented Directive 2004/72/EC, all transactions related to shares admitted to trading on a regulated market, or to derivatives or other financial instruments linked to them, conducted for the account of a person discharging managerial responsibilities for the issuer are notified to the issuer and the HCMC. Failure to make such notifications may result in the imposition of a fine of up to Euro 1,000,000.
 
Trading by companies in their own shares
 
Pursuant to Article 16 of Law 2190/1920, and under limited circumstances, companies such as us and our subsidiaries may acquire and hold their own shares. A resolution to repurchase our own shares is made by the general assembly and requires a quorum of shareholders and simple majority of votes. Such resolution of the general assembly sets out the terms and conditions for the acquisition of the shares and, more particularly, the maximum number of shares that can be acquired and the duration of the acquisition period, which cannot exceed twenty-four months. All voting rights attached to shares that the company or any third party holds in its own name on behalf of the company may not be exercised, and are not taken into account for purposes of determining the existence of a quorum.
 
Furthermore, under Article 15 of Law 3556/2007, when an issuer of shares admitted to trading on a regulated market acquires or disposes of its own shares, either directly or indirectly, the issuer must publicly disclose the transaction in its own shares if its holdings reach, exceed or fall below the thresholds of 5% or 10% of the voting rights in the issuer. The proportion shall be calculated on the basis of the total number of shares to which voting rights are attached. Such notification must be made as soon as possible, but in any case not later than two trading days following such acquisition or disposal.
 
Pursuant to Law 3340/2005 on Market Abuse, trading by companies in their own shares may constitute prohibited “market manipulation”, as defined therein, unless one falls within the scope of the safe harbor, under European Commission Regulation 2273/2003.
 
10.C  Material Contracts
 
Not applicable.
 
10.D  Exchange Controls
 
Greece has no exchange controls that would restrict the payment of dividends or other capital distributions to a non-resident holder of shares or American Depositary Shares. In addition, Greece has no restrictions that would affect the rights of non-resident holders of shares or American Depositary Shares to dispose of such shares or American Depositary Shares, or to receive the proceeds of such disposition outside Greece.
 
However, in order to transfer funds outside of Greece, foreign investors, depending on the intermediary bank’s practice, may be asked to produce the following certificates:
 
 • a certificate of a broker or other relevant person evidencing the sale of shares; and
 
 • a certificate as to the entitlement to the payment of dividends on shares.
 
Additional certificates may be required if the bank considers that the transfer needs further investigation as to money laundering.
 
10.E  Taxation
 
The following summary describes certain of the tax consequences of the ownership and disposition of shares and American Depositary Shares. It is not a complete description of all the possible tax consequences of such ownership and disposition.


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Greek Taxation
 
Introduction
 
The following is a summary of certain Greek tax considerations, which may be relevant to the ownership and disposition of shares. The summary does not purport to be, nor should it be relied upon as, a comprehensive description or analysis of all the tax considerations which may be relevant to a decision to own or dispose of our shares.
 
The summary is based on tax laws and regulations in effect in Greece on the date of this Annual Report, which are subject to change without notice. Holders of our shares should consult their own tax advisers as to the Greek or other tax consequences arising from the ownership and disposition of our shares, having regard to their particular circumstances.
 
Special one-time tax on net profits of corporates
In May 2010, the Greek State announced the imposition of a special one-time lump-sum tax on net profits of corporate tax payers for the fiscal year 2009, which is expected to apply to the net income on our Greek profitable entities at the rate of 10%. See Note 32 to the consolidated financial statements.
Taxation of Dividends
 
The net income ofsociétés anonymeshaving registered shares listed on the Athens Exchange is taxed at a flat rate of 25% (for the fiscal years 2008 and 2009). According to article 109 of Law 2238/1994, as now in effect, the net income of asociété anonyme24% for the fiscal year 2010 shall be taxed at a flat rate of 24%; for the fiscal year 2011, 23%; for the fiscal year 2012, 22%; for the fiscal year 2013, 21% and for the fiscal year 2014 and onwards, 20%.
According to article 54 par. 1 of law 2238/1994, as now in effect, a2010. A withholding tax of 10% is imposed on the payment of dividends on shares distributed by Greeksociétés anonymes.until December 31, 2010. A lower rate of withholding tax than the above 10% may be paid by persons or entities that are tax residents of a country that has signed a double taxation treaty with Greece.
 
Concerning the taxation ofsociétés anonymes’net income, tax law 3842/2010 introduces a new, dual system involving two separate corporate income tax rates for non-distributed and distributed profits ofsociétés anonymes. Non-distributed profits are taxed at a tax rate of 24% for profits arising in the accounting period commencing January 1, 2010, reduced annually by 1 percentage point until it reaches 20% by 2014. Distributed profits are taxed at a tax rate of 40%. No further withholding tax is imposed on dividends (the existing abovementioned 10% withholding tax is abolished for profits arising from balance sheets drafted from December 31, 2010 onwards). The new dual system applies to profits arising from balance sheets drafted from December 31, 2010 onwards.
The tax of 40% on distributed profits of the legal entities does not exhaust the tax liabilities of beneficiary individuals. The dividend amount is further taxed as personal income based on the progressive tax scale applicable to individuals, with a credit being provided for the corporate tax paid by the distributing legal entities, based on a certificate issued by the latter in the name of the individual.
Taxation of 40% on distributed profits of the legal entities exhausts the tax liability in case the beneficiaries are legal entities. In case such legal entities proceed to the distribution of profits, in which dividends from other legal entities are included, the corresponding part of tax already paid for those dividends is deducted from the 40% tax imposed on distributed profits.
Tax rate of 40% on distributed profits is also imposed in case of capitalization or distribution of profits of previous accounting periods.
Taxation of Capital Gains
 
Under article 38 of Law 2238/1994, as now in effect, capitalCapital gains resulting from the sale of listed securities that willare listed on the Athens Exchange and have been acquired until December 31, 2010 are exempt from income tax according to article 38 paragraphs 1 & 2 of law 2238/1994 as in force. (A transfer tax at the rate of 0.15% is imposed on the purchase price).
For shares that shall be acquired from January 1, 2010 and onwards are subject to2011 taxation shall be imposed at source at a tax rate of 20% or 10% tax. The above tax is levied on the seller of the shares.
Capitalcapital gains resultingreceived from the sale of shares listed on the Athens Exchange in case the sale of shares take place within three months or within twelve months from their acquisition respectively (short-term transactions). Thereafter, the capital gains derived from the sale of the relevant shares in case legal entities are booked in a


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special reserve account after the deduction of losses derived from similar transactions. In case of distribution or capitalization, capital gains are taxed at the tax rate of distributed profits by deducting the tax withheld.
In case of a foreign legal entity investor without a permanent establishment in Greece, withholding tax of 10% or 20% exhausts the tax liability.
It must be considered each time whether a basis for exemption of the foreign company from capital gains tax applies, based on an applicable Double Tax Treaty.
In case of application of taxation of capital gain, according to the aforementioned, the transaction duty of 0.15%, currently in force, shall not apply.
The same applies to sales of shares listed on a foreign stock exchange or other internationally recognized exchange.
For shares that shall be acquired from January 1, 2011 capital gains resulting from sale of securities that have been acquired prior to December 31, 2009 by enterprises maintaining double entry accounting recordsthan are not subject tolisted on the Athens Exchange are exempt from income tax provided that such gain is maintainedin case of the sale of shares after twelve months from their acquisition. Thereafter, the capital gains derived from the sale of the relevant shares are booked in a special reserve account inafter the accounting records.deduction of losses derived from similar transactions. In the case of distribution of the reserve or dissolution of the enterprise, thesecapitalization, capital gains are taxed according to the provisions regulating the above enterprise’s taxation at the timetax rate of distributed profits by deducting the distribution. In case that said enterprise does not maintaintax withheld. (A transfer levy at the above capital gains in a special reserve,rate of 0.15% is imposed on the capital gains shall be added to the enterprise’s gains for the current fiscal year and shall be taxed accordingly.
Capital gains earned by Greek and foreign natural persons, enterprises domiciled in Greece, and foreign enterprises, all of which are not obliged to maintain double entry accounting records in Greece, from the sale of listed securities that have been acquired prior to December 31, 2009 are exempt from taxation without the need to comply with any requirements.purchase price).
 
Transfer Taxes
 
A transfer taxlevy is imposed on transfers (through on exchange or off-exchange transactions or transactions through a multilateral trading facility) of Athens Exchange-listed securities acquired prior to January 1,December 31, 2010, at the rate of 0.15% of the purchase price. The taxlevy is borne by the seller and is charged by the Central Securities Depository to brokerage firms, who then in turn charge their clients. No transfer tax shall be levied on transfers of Athens Exchange listed securities that will take place regarding securities acquired from.from January 1, 2010.2011 in cases when the above capital gain tax is imposed.
 
In addition, a levy of 0.06%0.025% of the value of a transaction through ATHEX applies (which includes Central Securities Depository duties of 0.025% and Athens Exchange members’ duties of 0.035%).applies. In the case of off-exchange transactions, a levy (payable by each of the buyer and seller) of 0.04% or 0.1% (depending on whether a custodian is involved or not) of the value of the transaction is applied by the Central Securities Depository. Finally, a commission is paid to the brokers in the case of purchase or sale of listed shares.


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Stamp Duty
 
The issuance and transfer of shares as well as the payment of dividends on shares is exempt from stamp duty.
 
Inheritance or Succession Taxes
 
Inheritance or succession taxes are payable in Greece on shares of Greek domiciled companies either integrally at a rate from 0.6% to 1.2% for listed shares and 1.2% to 2.4% for unlisted shares or by a tax scale applied to the inheritance as a whole, depending on the degree of the relationship between the deceased and the beneficiary (Art. 29(3)29 of Law 2961/2001, as amended).
 
The taxable basis for stock exchange listed shares is prescribed in article 12 of Law 2961/2001.
 
Gift Tax (Donation Taxes)
 
A similar system of progressive taxation applies to the donation of listed shares.
 
Potential purchasers should consult their own tax advisers concerning the overall Greek tax (including Greek capital gains, inheritance or succession, and gift tax) consequences of the purchase, ownership and disposition of shares.


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United States Federal Income Taxation
 
The following is a summary of certain material U.S. federal income tax consequences of the ownership or disposition of shares or American Depositary Shares by a holder who is a beneficial owner of shares or American Depositary Shares that is:
 
 • a citizen of or an individual resident in the United States;
 
 • a corporation or certain other entities, created or organized in or under the laws of the United States or any state thereof (including the District of Columbia);
 
 • an estate whose income is subject to U.S. federal income taxation regardless of its source; or
 
 • a trust if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of the substantial decisions of such trust or the trust elects under U.S. Treasury Regulations to be treated as a U.S. person (a“U.S. HolderHolder””).
 
The following discussion does not purport to be a complete analysis of all potential tax considerations relevant to a decision to acquire and own shares or American Depositary Shares.
 
A ““Non-U.S. HolderHolder”” is any beneficial owner of shares or American Depositary Shares that is not a U.S. Holder. The summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a holder of shares or American Depositary Shares. In particular, this summary deals only with U.S. Holders that will hold shares or American Depositary Shares as capital assets (generally, property held for investment) within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended (the“CodeCode””) and does not address the tax treatment of special classes of U.S. Holders, such as financial institutions or banks, tax-exempt entities, Section 401 pension plans, insurance companies, persons holding shares or American Depositary Shares as part of a straddle, hedging, integrated, conversion, constructive sale or other risk reduction transaction, U.S. expatriates, grantor trusts, persons subject to the alternative minimum tax, dealers in securities or currencies, traders in securities that elect to mark to market or other persons that are required to mark to market their holdings, persons that own (or are deemed to own for United States tax purposes) 10% or more of our voting stock, persons that are residents of Greece for Greek tax purposes or that conduct a business or have a permanent establishment in Greece, persons that receive American Depositary Shares or shares through the exercise of employee stock options or otherwise as compensation, partnerships or other pass-through entities, real estate investment trusts, regulated investment companies and U.S. Holders whose “functional currency” (as defined in the Code) is not the U.S. Dollar, all of whom may be subject to U.S. federal income tax rules that differ significantly from those summarized below. In addition, this summary does not discuss any United States state, local ornon-U.S. tax considerations, or any U.S. federal tax considerations other than income tax considerations (for


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example, U.S. federal estate or gift tax or alternative minimum tax considerations). This summary is based upon current U.S. law as in effect on the date of this Annual Report, which is subject to change (possibly with retroactive effect), and in part upon representations of the Depositary and assumes that each obligation provided for in or otherwise contemplated by the Deposit Agreement and any related agreement will be performed in accordance with their respective terms.
 
Holders of shares or ADSs should consult their own tax advisers as to the consequences under U.S. federal, state, local and applicable foreign tax laws of the ownership and disposition of shares and American Depositary Shares.
 
U.S. Holders of American Depositary Shares will be treated for U.S. federal income tax purposes as owners of the shares underlying the American Depositary Shares. Accordingly, except as noted, the U.S. federal income tax consequences discussed below apply equally to U.S. Holders of American Depositary Shares and shares.
 
Dividends
 
The gross amount of any distributions made by us to a U.S. Holder will generally be subject to U.S. federal income tax as dividend income to the extent paid or deemed paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Such dividends will not be eligible for the dividends


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received deduction generally allowed to U.S. corporations with respect to dividends received from other U.S. corporations. To the extent that an amount received by a U.S. Holder exceeds its allocable share of our current and accumulated earnings and profits, such excess would, subject to the discussion below, be treated first as a tax-free return of capital which will reduce such U.S. Holder’s tax basis in his shares or American Depositary Shares and then, to the extent such distribution exceeds such U.S. Holder’s tax basis, it will be treated as capital gain.
 
Subject to applicable holding period and other limitations, the U.S. Dollar amount of dividends received on the shares or American Depositary Shares in taxable years beginning prior to January 1, 2011 by certain non-corporate U.S. Holders will be subject to taxation at a maximum rate of 15% if the dividends are “qualified dividends”. Dividends paid on the shares or the American Depositary Shares will be treated as qualified dividends if: (i) we are eligible for the benefits of a comprehensive income tax treaty with the United States that the IRS has approved for the purposes of the qualified dividend rules and (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company ((““PFIC”). Although we currently believe that distributions on the New Shares that are treated as dividends for U.S. federal income tax purposes should constitute qualified dividends, no assurance can be given that that will be the case. U.S. Holders should consult their tax advisors regarding the tax rate applicable to dividends received by them with respect to the shares or the American Depositary Shares, as well as the potential treatment of any loss on a disposition by them of shares or American Depositary Shares as long-term capital loss regardless of the U.S. Holders’ actual holding period for the shares or the American Depositary Shares.
 
We have not maintained and do not plan to maintain calculations of earnings and profits under U.S. federal income tax principles. Accordingly, it is unlikely that U.S. Holders will be able to establish whether a distribution by us is in excess of our and accumulated earnings and profits (as computed under U.S. federal income tax principles). If U.S. Holders are unable to establish that distributions are in excess of our earnings and profits as determined under U.S. federal income tax principles, any distribution by us may be treated as taxable in its entirety as a dividend to U.S. Holders for U.S. federal income tax purposes.
 
The gross amount of dividends paid in Euro will be included in the income of a U.S. Holder in a U.S. Dollar amount calculated by reference to the spot exchange rate in effect on the day the dividends are received by such holder (or, in the case of American Depositary Shares, by the Depositary), regardless of whether the payment is in fact converted into U.S. Dollars. If the Euro is converted into U.S. Dollars on the date of the receipt, the U.S. Holder generally would not be required to recognize any foreign currency gain or loss in respect of the receipt of Euro as dividends. A U.S. Holder will have a tax basis in any Euro distributed equal to their U.S. Dollar value on the date they are received by such holder (or, in the case of American Depositary Shares, by the Depositary). Any gain or loss recognized upon a disposition of Euro after the date of receipt will generally be ordinary income or loss and will generally be income from sources within the United States for foreign tax credit purposes. A U.S. Holder may be required specifically to disclose any loss from the disposition of foreign currency on its tax return under regulations


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on tax shelter transactions. Dividends will generally constitute foreign source income, and with certain exceptions, will constitute “passive category income”, or in the case of certain U.S. Holders, “general category income”.
 
Sale or Exchange of Shares or American Depositary Shares
 
Gain or loss realized by a U.S. Holder on the sale or other disposition of shares or American Depositary Shares will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between the U.S. Holder’s adjusted tax basis in the shares or American Depositary Shares and the amount realized on the disposition. Such gain or loss generally will be treated as long-term capital gain or loss if the shares or American Depositary Shares have been held for more than one year. Any such gain or loss realized will generally be treated as U.S. source gain or loss. In the case of a U.S. Holder who is an individual, capital gains are currently subject to federal income tax at preferential rates, which are set to expire for this year of taxpay as starting on or after January 1, 2011, if specified minimum holding periods are met. The deductibility of capital losses is subject to significant limitations.
 
The surrender of American Depositary Shares in exchange for shares (or vice versa) will not be a taxable event for U.S. federal income tax purposes and U.S. Holders will not recognize any gain or loss upon such a surrender.


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If a U.S. Holder receives any foreign currency on the sale of shares or American Depositary Shares, such U.S. Holder may recognize ordinary income or loss as a result of currency fluctuations between the date of the sale of shares or American Depositary Shares and the date the sale proceeds are converted into U.S. Dollars. As noted above, a U.S. Holder may be required specifically to disclose any loss from the disposition of foreign currency on its tax return under regulations on tax shelter transactions.
 
Passive Foreign Investment Company Considerations
 
We believe that we will not be treated as a PFIC for U.S. federal income tax purposes for the current taxable year and do not expect to become a PFIC in future years. However, because PFIC status is determined on an annual basis and because our income and assets and the nature of our activities may vary from time to time, we cannot assure U.S. Holders that we will not be considered a PFIC for any taxable year.
 
We would be a PFIC for U.S. federal income tax purposes in any taxable year if 75% or more of our gross income would be passive income, or on average at least 50% of the gross value of our assets is held for the production of, or produces, passive income. In making the above determination, we are treated as earning our proportionate share of any income and owning our proportionate share of any asset of any company in which we are considered to own, directly or indirectly, 25% or more of the shares by value. If we were considered a PFIC at any time when a U.S. Holder held the shares or the American Depositary Shares, we generally will continue to be treated as a PFIC with respect to that U.S. Holder, and the U.S. Holder will be subject to special rules with respect to (a) any gain realized on the disposition of the shares or the American Depositary Shares and (b) any “excess distribution” by us to the U.S. Holder in respect of the shares or the American Depositary Shares. Under the PFIC rules: (i) the gain or excess distribution would be allocated evenly over the U.S. Holder’s holding period for the shares or the American Depositary Shares, (ii) the amount allocated to the taxable year in which the gain or excess distribution was realized or to any year before we became a PFIC would be taxable as ordinary income and (iii) the amount allocated to each other taxable year would be subject to tax at the highest tax rate in effect in that year and an interest charge generally applicable to underpayments of tax would be imposed in respect of the tax attributable to each such year. A U.S. Holder may be able to avoid many of these adverse tax consequences if it may and does elect to mark the shares or the American Depositary Shares to market on an annual basis. U.S. Holders are urged to consult their tax advisors about the PFIC rules, including the advisability, procedure and timing of making a mark-to-market election and the U.S. Holder’s eligibility to file such an election (including whether the shares or the American Depositary Shares are treated as “publicly traded” for such purpose).
 
United States Information Reporting and Backup Withholding
 
A U.S. Holder may be subject to information reporting to the IRS and possible backup withholding with respect to dividends paid on, or proceeds of the sale or other disposition of, a share or American Depositary Share, unless such U.S. Holder is a corporation or comes within certain other categories of exempt recipients or provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise


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complies with applicable requirements of the backup withholding rules. Amounts withheld under these rules may be credited against the U.S. Holder’s U.S. federal income tax liability and a U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate IRS forms and furnishing any required information. A U.S. Holder who does not provide a correct taxpayer identification number may be subject to penalties imposed by the IRS.
 
Non-U.S. Holders generally will not be subject to information reporting or backup withholding with respect to dividends on shares or American Depositary Shares, unless payment is made through a paying agent (or office) in the United States or through certain U.S. related financial intermediaries. However,Non-U.S. Holders generally may be subject to information reporting and backup withholding with respect to the payment within the United States of dividends on shares or American Depositary Shares, unless suchnon-U.S. Holder provides a taxpayer identification number, certifies under penalties of perjury as to its foreign status, or otherwise establishes an exemption.


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Recently Enacted Legislation Affecting Disclosure Obligations for U.S. Individuals
Legislation was enacted on March 18, 2010, that generally imposes new U.S. return disclosure obligations (and related penalties for failure to disclose) on U.S. individuals that hold certain specified foreign financial assets. U.S. Holders are urged to consult with their own tax advisors regarding the possible implications of this recently enacted legislation on their investment in the American Depositary Shares or the shares.
 
10.F  Dividends and Paying Agents
 
Not applicable.
 
10.G  Statement by Experts
 
Not applicable.
 
10.H  Documents on Display
 
We are subject to the reporting requirements of the Exchange Act. In accordance with these requirements, we file Annual Reports onForm 20-F and provide other information through reports onForm 6-K filed with or furnished to the U.S. Securities and Exchange Commission. These materials, including this Annual Report and the exhibits thereto, may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC in the United States at1-800-SEC-0330. The SEC also maintains a World Wide Web site athttp://www.sec.gov that contains reports and information regarding registrants that file electronically with the SEC.
 
10.I  Subsidiary Information
 
See “4.C Organizational Structure”. Also see Note 1 to the consolidated financial statements.
 
ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Financial Instruments
 
Risk identification and risk management
 
We are exposed to market risks primarily from credit risk, movements in interest rates, exchange rates and changes in equity market prices associated with assets and liabilities.prices. Our Treasury, which is responsible for our funding strategy and asset and liability management, is operating as a service center and it seeks to minimize these market risks by selectively entering into derivative hedging transactions.risks. We regard effective market risk management as an important element of the treasury function. We do not enter into derivative contracts for trading or other speculative purposes. Our Treasury monitors regularly the level and value of current market risk exposures and informs the management. Other than the information presented below, there are no material limitations that cause the information presented to not fully reflect net market risk exposures.
 
For more information regarding interest rate, foreign exchange and credit risks facing our Group, see Note 3130 to our financial statements.


152163

Interest Rate Risk
 
We are exposed to risk from changes in interest rates, mainly in the Euro zone. We manage our interest rate risk by means of a combination of both fixed and floating rate borrowings and the use of interest rate swap agreements. Approximately Euro 1.20.5 billion (18.2%(9.3%) of our total debt as of December 31, 20082009 bore interest at floating rates, as a result of our derivative hedging activities.rates. The table below sets forth an analysis of our borrowings according to interest rate type.
 
                
 Year Ended December 31,  Year Ended December 31, 
 2008 2007  2008 2009 
 (Euro in millions)  (Euro in millions) 
Variable interest rate  1,099.3   2,647.2   1,099.3   503.3 
Fixed interest rate  4,948.4   2,880.6   4,948.4   4,918.6 
          
Total  6,047.7   5,527.8   6,047.7   5,421.9 
 
Interest Rate Swaps.  As of MayDecember 31, 2009, two interest rate swap agreements were outstanding, namely a floating-to-fixed swap with a notional amount of Euro 200.0 million entered into by Cosmote and a fixed-to-floating swap with a notional amount of Euro 65.0 million used by OTE Plc. Both derivatives qualify asAs a result of our derivative hedging investments.activities the percentage of our total external debt that bore interest at floating rates decreased to 6.8% (368.3 million).
 
The following table demonstrates sensitivity to a possible reasonable change in interest rates on our income statement and equity through the impact of our outstanding indebtedness, deposits and derivatives, based on an increase in interest rates of 100 basis points.
 
            
 Year Ended December 31, Year Ended December 31,
 2008 2007 2008 2009
 (Euro in millions) (Euro in millions)
Profit before tax  3.3   4.2   3.3   4.7 
Equity  3.0   —   3.0   — 
 
Liquidity Risk
 
Given the considerable capital expenditure requirements in the telecommunications industry, as well as the counterparty risk we face from customers and other service providers, we are subject to liquidity risk. To monitor liquidity risk, we prepare annual cash flows as part of preparing our annual budget and monthly rolling forecasts to ensure that we have sufficient cash reserves to service our financial obligations.


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The tabletables below presentspresent the maturities of our debt obligations as at December 31, 2008:2009 and 2008, respectively:
 
                                                                 
 Expected Maturity Date as at December 31, 2008  Expected Maturity Date as at December 31, 2009 
 Base
                  Base
                 
 Currency 2009 2010 2011 2012 2013 Thereafter Total Fair Value  Currency 2010 2011 2012 2013 2014 Thereafter Total Fair Value 
 (Euro in millions)  (Euro in millions) 
Long term Debt
                                  
Fixed Rate
                                  
Long term Debt:
                                  
Fixed Rate:
                                  
€650 million 3.75%
Nov 2011 bond		 Euro  —   —   634.4   —   —   —   634.4   604.2  Euro  —   639.7   —   —   —   —   639.7   657.0 
€1,250 million 5%
Aug 2013 bond		 Euro  —   —   —   —   1,248.8   —   1,248.8   1,158.5  Euro  —   —   —   1,250.8   —   —   1,250.8   1,284.1 
€900 million 4.625%
May 2016 bond		 Euro  —   —   —   —   —   891.5   891.5   758.3  Euro  —   —   —   —   —   892.5   892.5   892.5 
€1,500 million 5.375%
Feb 2011 bond		 Euro  —   —   1,494.2   —   —   —   1,494.2   1,466.3  Euro  —   1,496.8   —   —   —   —   1,496.8   1,545.0 
€600 million 6%
Feb 2015 bond		 Euro  —   —   —   —   —   596.3   596.3   562.7  Euro  —   —   —   —   —   596.7   596.7   638.3 
Loan from E.I.B.  Euro  18.9   —   —   —   —   —   18.9   18.9 
Other bank loans Various  14.7   11.2   7.8   7.8   3.7   14.0   59.2   59.2  Various  7.1   8.0   8.0   4.0   3.2   11.8   42.1   35.3 
Floating Rate
                                  
Floating Rate:
                                  
Syndicated loan facility Euro  —   25.8   29.0   445.2   —   —   500.0   500.0  Euro  25.8   29.0   445.2   —   —   —   500.0   500.0 
€600 million floating rate Nov 2009 note Euro  599.3   —   —   —   —   —   599.3   589.4 
Other bank loans Various  —   —   —   —   —   —   0.0   0.0  Various  —   —   —   —   —   —   —   — 
                 
Total long term debt
    632.9   37.0   2,165.4   453.0   1,252.5   1,501.8   6,042.6   5,717.5     32.9   2,173.5   453.2   1,254.8   3.2   1,501.0   5,418.6   5,552.2 
Short term Debt
                                                                    
Floating rate Euro  5.1   —   —   —   —   —   5.1   5.1  Euro  3.3   —   —   —   —   —   3.3   3.3 
                 
Total short term debt
    5.1   0.0   0.0   0.0   0.0   0.0   5.1   5.1     3.3   0.0   0.0   0.0   0.0   0.0   3.3   3.3 
                 
TOTAL
    36.2   2,173.5   453.2   1,254.8   3.2   1,501.0   5,421.9   5,555.5 
                 
 
                                   
  Expected Maturity Date as at December 31, 2008 
  Base
                        
  Currency 2009  2010  2011  2012  2013  Thereafter  Total  Fair Value 
  (Euro in millions) 
 
Long term Debt:
                                  
Fixed Rate:
                                  
€650 million 3.75%
Nov 2011 bond		 Euro  —   —   634.4   —   —   —   634.4   604.2 
€1,250 million 5%
Aug 2013 bond		 Euro  —   —   —   —   1,248.8   —   1,248.8   1,158.5 
€900 million 4.625%
May 2016 bond		 Euro  —   —   —   —   —   891.5   891.5   758.3 
€1,500 million 5.375%
Feb 2011 bond		 Euro  —   —   1,494.2   —   —   —   1,494.2   1,466.3 
€600 million 6%
Feb 2015 bond		 Euro  —   —   —   —   —   596.3   596.3   562.7 
Loan from E.I.B.  Euro  18.9   —   —   —   —   —   18.9   18.9 
Other bank loans Various  14.8   11.2   7.8   7.8   3.7   14.0   59.3   59.3 
Floating Rate:
                                  
Syndicated loan facility Euro  —   25.8   29.0   445.2   —   —   500.0   500.0 
€600 million floating rate Nov 2009 note Euro  599.3   —   —   —   —   —   599.3   589.5 
Other bank loans Various  —   —   —   —   —   —   0.0   0.0 
Total long term debt
    633.0   37.0   2,165.4   453.0   1,252.5   1,501.8   6,042.7   5,717.7 
Short term Debt
                                  
Floating rate Euro  5.1   —   —   —   —   —   5.1   5.1 
                                   
Total short term debt
    5.1   0.0   0.0   0.0   0.0   0.0   5.1   5.1 
                                   
TOTAL
    638.1   37.0   2,165.4   453.0   1,252.5   1,501.8   6,047.8   5,722.8 
                                   


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Foreign Exchange Rate Risk
Our foreign currency exposures are limited principally to our operations in the Balkans, a region in which our biggest operations are located in Romania, where telephony charges are pegged to the Euro providing a natural hedge. As a result, we are exposed to currency risk due to changes between functional currencies and other currencies. The main currencies within our Group are the Euro, RON (Romania) and the LEK (Albania). See Note 30 to our consolidated financial statements.
Key summary information for these countries is presented below:
Romania has been severely affected by the financial crisis and faces a deep recession (negative GDP growth for 2009 was 7.1% of GDP). The International Monetary Fund (IMF), present in the country since December 2008, recently approved an additional tranche of financial assistance of $3.32bn. GDP Growth is forecasted to recover by 1.5% in 2010. The Romanian Lei depreciated rapidly in early 2009, which was preceded by appreciation in the remainder of 2009, caused by the IMF/EU Agreement and an increasing risk aversion for some countries inSouth-East Europe, which redirected funds to Romania. However this appreciation has given rise to concern that it could damage competitiveness and undermine economic recovery. The forecast for 2010 is that the Central Bank will intervene if necessary to avert further Lei appreciation.
Bulgaria experiences a deepening economic slowdown (negative GDP growth for 2009 was 5.1% of GDP), with a return to positive growth not likely before the second half of 2010. The Bulgarian government announced that it will not apply for ERM II Entry during 2010, thus postponing the current schedule. The decision was triggered by the fact that fiscal data of the last two years had to be revised. The country also faces a current account deficit of 9.4% of GDP for 2009 and a larger external debt. This creates a risk that Bulgaria may require some financial assistance from the IMFand/or the EU. The real effective exchange rate of the BGN appreciated in 2009, due to the fall in the currencies of many of Bulgaria’s trade competitors, but it is expected to depreciate in 2010.
Albania experienced GDP growth (GDP growth for 2009 was 2.8%) which outperformed the region in 2009 and is expected to do so again in 2010. Nevertheless, the current account deficit rose to 12.1% of GDP due to a sharp decline in emigrant remittances. The exchange rate of the LEK depreciated sharply in 2009, by an annual average of 7.6% against the Euro, reflecting concern over Albania’s external imbalances and fiscal expansion in the first half of the year. Factors expected to support the LEK in 2010 include foreign-currency remittances and relatively high local currency interest rates, reflecting the Bank of Albania’s monetary policy. Therefore the LEK is expected to remain generally stable against the Euro in nominal terms over 2010.
 
Translation risk.  The assets and liabilities of group entities whose functional currency is not Euro are translated into Euros.
 
Transaction risk.  Foreign currency exposure arises in transactions that are denominated in different currencies from the entity’s functional currency.
 
Investment in foreign companies.  Foreign currency exposure arises from our equity investments in fixed and mobile telephony operations in certain Southeastern European countries.
 
Financings in foreign currency.  The majority of our debts are denominated in Euro, which has been our functional currency since January 2002. Of our total borrowings as of December 31, 2008, 99.5%2009, 99.4% is in Euro and 0.5%0.6% is non-Euro denominated.
Similarly, our cash investments are also primarily effected in Euro.
During As of December 31, 2009, Cosmote Romania had Euro 0.5 million loans payable to Cosmote (December 31, 2008 most Southeastern European countries have plunged into a recession. This led to high inflation, large external and increasing fiscal imbalances and sharp slowdown of real GDP growth, followed by devaluationsEuro 0.4 million) which are treated as part of the local currencies and government controls on currency exchange and prices.
Ournet investment of the foreign currency exposures are limited principally to our operationsoperation as settlement is neither planned, nor probable in the Balkans, a region in which our biggest operations are in Romania, where telephony charges are pegged to the Euro providing a natural hedge.
In Romania, over the last months of 2008 there was a sharp depreciation of currency of up to 20%, reaching a historic low in the first quarter of 2009. The Romanian central bank proceeded with rate cuts in an attempt to easeforeseeable future.


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inflation andSensitivity analysis.  The following table demonstrates sensitivity to stabilizea reasonably possible change in the functional currency exchange. Romania will receive Euro 11.8 billion this year of a Euro 20 billion international financing package led by the International Monetary Fund. Any further significant devaluationexchange rate, with all other variables held constant, of the Romanian Lei could adversely affectGroup’s profit before tax (due to changes in the statedfair value of our shareholdings.monetary assets and liabilities):
 
         
  Effect on Profit Before Tax
  2009 2009
  (Euro in million)
 
+10%  12.4   7.2 
−10%  (12.4)  (7.2)
In Bulgaria, the credit crisis led to larger external debt and current account deficit which require external assistance from the EU. Bulgaria is seeking fast entry into EU’s Exchange-Rate mechanism. The Bulgarian Lev is fixed to the Euro. However, high inflation and a strengthening of the Euro caused the real exchange rate of the Lev to appreciate sharply in 2008.
 
Credit Risk
 
We are exposed to credit risk through our customers, bank deposits and trade receivables. Due to the large number of customers and their diversification of the customer base, we consider that there is no concentration of credit risk with respect to these receivables. We believe that concentration of risk exists for amounts receivable from other telecommunication service providers, due to their relatively small number and the number of transactions we have with them. To reduce our exposure to this risk, in 20082009 we obtained bank guarantees in accordance with the EETT’s regulations. With regardWe also face counterparty risk related to our cash and cash equivalents,the exposures we have adoptedto various banks where we maintain our cash. Namely OTE Group cash is deposited mainly with foreign and local banks operating in Greece, Romania, Bulgaria, Albania and Cyprus. Due to the fact that the region we operate in has been affected by the financial crisis and that all Greek banks have been downgraded by the rating agencies reflecting concerns relating to the health of the Greek economy, the credit risk that the Group faces has significantly increased. We place deposits based on counterparty limits by credit rating and other criteria and monitor exposures and risks on a deposits policy whereby funds are only deposited with banks that have a specified minimum rating as to their creditworthiness, and we do not deposit more than 30% of available funds in any one bank.daily basis. Trade receivables, which include receivables from telecommunication operators, are the category with the higher credit risk. For this category, we assess the credit risk of our counterparties according to established policies and procedures and have made the appropriate provision for impairment. For more information on our trade receivables, see Note 1110 to our consolidated financial statements.
 
Equity Risks
 
We currently hold shares of Hellenic Exchanges Holding S.A., a listed company on the Athens Exchange, with a carrying cost of Euro 3.6 million as of December 31, 2008. In addition, we hold shares of Piraeus Bank, listed on the Athens Exchange, with a carrying cost of Euro 7.2 million as of December 31, 2008.The Group has limited exposure to equity risks.
 
ITEM 12  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 
12.A  Debt Securities
No applicable information.
12.B  Warrants and Rights
No applicable information.
12.C  Other Securities
No applicable information.
12.D  American Depositary Shares
Fees and Other Payments made by Holders of American Depositary Shares
The Bank of New York Mellon, as depositary, collects its fees for delivery and surrender of American Depositary Shares directly from investors depositing shares or surrendering American Depositary Shares for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductions from cash distributions


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or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
Persons depositing or withdrawing shares must pay:For:
U.S. $5.00 (or less) per 100 American Depositary Shares (or portion of 100 American Depositary Shares)•   Issuance of American Depositary Shares, including issuances resulting from a distribution of shares or rights or other property
•   Cancellation of American Depositary Shares for the purpose of withdrawal, including if the deposit agreement terminates (except for cancellations or withdrawals, if any, caused solely by the appointment and qualification of a successor depositary)
U.S. $0.02 (or less) per American Depositary Share•   Any cash distribution to registered holders of American Depositary Shares (except for distributions of cash dividends)
A fee equivalent to the fee that would be payable if securities distributed to holders of American Depositary Shares had been shares and the shares had been deposited for issuance of American Depositary Shares•   Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to registered holders of American Depositary Shares
Registration or transfer fees•   Transfer and registration of shares on our share (or the share register of the registrar or any securities depositary, including the Central Securities Depositary of the Athens Stock Exchange) register to or from the name of the depositary or its agent when American Depositary Shares are deposited or withdrawn
Expenses of the depositary•   Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)
•   Converting foreign currency to U.S. dollars
Taxes and other governmental charges the depositary or the custodian have to pay on any American Depositary Share or share underlying an American Depositary Share, for example, stock transfer taxes, stamp duty or withholding taxes•   As necessary
Any charges incurred by the depositary or its agents for servicing the deposited securities•   As necessary
We agree to pay the fees, reasonable expenses and out of pocket charges of the depositary and those of any registrar only in accordance with agreements in writing between us and the depositary from time to time. The depositary presents its statement for such charges and expenses to us once every three months. The charges and expenses of the custodian are for the sole account of the depositary. In the three years ended December 31, 2009, we did not receive any reimbursements from The Bank of New York Mellon, as depositary, with respect to expenses incurred that are related to the American Depositary Share program.
 
PART II
 
ITEM 13  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
 
No applicable information.


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ITEM 14  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 
No applicable information.
 
ITEM 15  CONTROLS AND PROCEDURES
 
(a) Disclosure Controls and Procedures
 
Our management, under the supervision and with the participation of the Managing Director and the Chief Financial Officer, evaluated the effectiveness of disclosure controls and procedures (as defined inRules 13a-15 and15d-15 under the Exchange Act as of December 31, 2008,2009, and, based on that evaluation, our Managing Director and Chief Financial Officer have concluded that our disclosure controls and procedures were effective, as of that date.
 
(b) Management’s Annual Report on Internal Control over Financial Reporting
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined inRules 13a-15 and15d-15 under the Securities Exchange Act) for our Company. Our internal


155

control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with applicable generally accepted accounting principles.
 
Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
 
Our management, with the participation of the Managing Director and the Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2008.2009. In making this assessment, management used the control criteria framework of the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission published in its report entitled Internal Control-Integrated Framework. Based on this assessment and those criteria, our Management concluded that our internal controls over financial reporting were effective as of December 31, 2008.2009.
 
(c) Attestation Report of the Registered Public Accounting Firm
 
Ernst & Young (Hellas) Certified Auditors Accountants S.A., an independent registered public accounting firm, as auditors of our consolidated financial statements for the year ended December 31, 2008,2009, has issued an attestation report on management’s effectiveness of our internal control over financial reporting as of December 31, 2008.2009. This report is included below.
 
Report of Independent Registered Public Accounting Firm
 
To the Board of Directors and Shareholders of Hellenic Telecommunications Organization S.A.
 
We have audited Hellenic Telecommunications Organization S.A.’s internal control over financial reporting as of December 31, 2008,2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Hellenic Telecommunications Organization S.A.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the


169

assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
 
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that


156

controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
In our opinion, Hellenic Telecommunications Organization S.A. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008,2009, based on the COSO criteria.
 
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetstatements of financial position of Hellenic Telecommunications Organization S.A. as of December 31, 2009 and 2008, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the year thentwo years in the period ended of Hellenic Telecommunications Organization S.A.December 31, 2009 and our report dated June 30, 2009,4, 2010, expressed an unqualified opinion thereon.
 
/s/ Ernst & Young (Hellas) Certified Auditors Accountants S.A.
 
June 30, 20094, 2010
Athens, Greece
 
(d) Changes in Internal Control over Financial Reporting
 
No change in our internal control over financial reporting occurred during the period covered by this Annual Report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
ITEM 16  [RESERVED]
 
16.A  Audit Committee Financial Expert
 
Our extraordinaryordinary general assembly of shareholders held on April 7,June 24, 2009 has determined that Panagiotis Tampourlos qualifies as an “audit committee financial expert”, as defined in Item 16A inForm 20-F. Mr. Tampourlos is also considered independent, as that term is defined inRule 10A-3 under the Exchange Act. For information concerning Mr. Tampourlos’ education and work experience, see “6.A/C. Directors, Board Practices and Senior Management — Board of Directors”.
 
16.B  Code of Ethics
 
In March 2004, we adopted a Code of Ethics and Business Conduct (the“Code of Ethics”) which is binding on the members of the Board of Directors, the executive managers and all employees of our company. Our Code of Ethics was reviewed and ratified by the Board of Directors in May 2006, and was supplemented with additional restrictions applying to the above-mentioned officers, especially persons with access to internal information about us.


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The Code of Ethics sets a minimum framework of standards to which our employees should adhere while exercising their business duties and responsibilities. These working standards are reasonably designed to deter wrongdoing and to promote:
 
 • compliance with the laws and the regulations of countries where we develop business activities;
 
 • reliability of information, reports and internal audits;
 
 • confidentiality of information, especially of a nature affecting share price and corporate reputation;
 
 • avoidance of conflicts between personal and professional interests;
 
 • non-discrimination against employees, customers and vendors and the avoidance of non-transparent agreements with competitors; and
 
 • accountability for adherence to the Code of Ethics.


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A copy of our Code of Ethics is available, free of charge, to any person upon request. To request a copy, please contact the General Director of Human Resources, Hellenic Telecommunications Organization S.A., 99 Kifissias Avenue, Amaroussion, GR 151 24, Athens, Greece.
 
16.C  Principal Accountant Fees and Services
 
The following table sets forth the aggregate fees we have paid to our independent auditors for specified services in 2006, 2007, 2008 and 20082009 (based on fees accrued in each relevant year):
 
                        
 KPMG Ernst & Young  KPMG Ernst & Young 
 2006 2007 2008  2007 2008 2009 
 (Euro in thousands)  (Euro in thousands) 
Audit fees  2,582   4,475   2,358   4,475   2,358   2,877 
Audit-Related Fees  168   599   374   599   374   78 
Tax Fees  55   6   13   6   13   40 
All Other Fees  —   —   — 
Other Fees  —   —   — 
       
Total Fees  2,805   5,080   2,745   5,080   2,745   2,995 
       
 
“Audit Fees”are the aggregate fees agreed with our independent auditors for professional services rendered by our external auditors for the audit of our annual consolidated financial statements, audit of our statutory (stand alone and consolidated) financial statements, the audit of the statutory financial statements of our subsidiaries and other services related to statutory and regulatory filings. Of the audit fees for 2007, an amount of Euro 800,000 related to additional billings with respect to the 2006 audit.
 
“Audit Related Fees”are the aggregate fees billed by our independent auditors for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees”. “Audit Related Fees” include consultations concerning financial accounting and reporting standards; internal control reviews and due diligence reviews.
 
“Tax Fees”are the aggregate fees billed by our independent auditors for professional services related to tax compliance, tax advice and tax planning. Such services include tax consultations and tax compliance reviews.
 
“Other Fees”are the aggregate fees billed by our independent auditors for products and services provided, other than Audit Fees, Audit Related Fees and Tax Fees. Such products and services include project management advisory services, compliance reviews of suppliers’ contracts and other advisory services relating to ethical standards and corporate governance matters.
 
An “Audit and Non-Audit Services Pre-Approval Policy and Procedures” was adopted by our Audit Committee and approved by our Board of Directors on May 24, 2004. It was subsequently amended and updated and was approved by our Board of Directors on November 28, 2006. This policy is intended to ensure the independence of the external auditors of our Group. This policy requires all services that may be rendered to us and our subsidiaries by the external auditors of our Group to be pre-approved by our Audit Committee and establishes the terms, the


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conditions and the procedures for such pre-approval. This pre-approval may be in the form of a general pre-approval or a pre-approval on acase-by-case basis. Our Audit Committee is regularly informed of the services and the fees relating to such services to be performed by the external auditors of our Group.
 
16.D  Exemptions from the Listing Standards for Audit Committees
 
We believe that no exemptions from the Listing Standards for Audit Committees apply.
 
16.E  Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 
We did not buy back any of our own shares in 20072009, 2008 and 2008.2007.
 
Our extraordinary general assembly of shareholders held on April 7, 2009, approved aour share buy-back program, of for OTE S.A., in accordance with Article 16 of Greek Law 2190/1920 for of up to 10%10.0% of our issued share capital, with the highest price set at Euro 30.0, and the minimum price set at Euro 3.0. The same General Assembly suspended the relevant resolution of our extraordinary general assembly of shareholders onof November 11, 2007.


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16.F  Change in Registrant’s Certifying Accountant
 
KPMG Certified Auditors A.E. (“(“KPMG”) was previously theour principal accountants and principal accountants for OTE SA and itsour subsidiaries. On June 26, 2008, we dismissed KPMG and engaged Ernst & Young (Hellas) Certified Auditors Accountants S.A. as our principal accountants forstarting as of the financial year ended December 31, 2008. The decision to change accountants was based upon recommendation of our Audit Committee (meeting held on June 19, 2008) to our Board of Directors and subsequent recommendation of our Board of Directors (meeting held on June 19, 2008) to theour General Assembly of Shareholders. On June 26, 2008, our General Assembly of Shareholders resolved to appoint Ernst & Young (Hellas) Certified Auditors Accountants S.A., an independent registered public accounting firm, as our independent auditors for the year ended December 31, 2008, terminating the engagement of KPMG for this role.
During Our annual report onForm 20-F for the two fiscal yearsyear ended December 31, 2007 and2008 (filed on June 30, 2009) included as Exhibit 15.1 a letter by KPMG, dated June 30, 2009, addressed to the subsequent interim period through June 26, 2008, there were: (1) no disagreements between KPMG and us on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreement if not resolved to their satisfaction would have caused them to make referenceSEC in connection with their opinion to the subject matter of the disagreement; (2) nor reportable events.
The audit reports of KPMG on the consolidated financial statements of our Group as of and for the fiscal years ended December 31, 2007 and 2006 did not contain any adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. The audit reports of KPMG on the effectiveness of internal control over financial reporting as of December 31, 2007 and 2006, did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.
A letter from KPMG is attached as Exhibit 15.1 to this Annual Report onForm 20-F.
Prior to June 26, 2008, the date that Ernst & Young (Hellas) Certified Auditors Accountants S.A. was retained as our principal independent accountants:
(i) We did not consult with Ernst & Young (Hellas) Certified Auditors Accountants S.A. regarding either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements;
(ii) Neither a written report nor oral advice was provided to us by Ernst & Young (Hellas) Certified Auditors Accountants S.A. that they concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue; and
(iii) We did not consult Ernst & Young (Hellas) Certified Auditors Accountants S.A. regarding any matter that was either the subject of a “disagreement” (as defined in Item 16F(a)(1)(iv) ofForm 20-F and the related instructions) or any of the reportable events set forth in Item 16F (a)(1)(v) ofForm 20-F.matter.
 
16.G  Corporate Governance
 
We are organized under the laws of the Hellenic Republic and our ADSs are listed on New York Stock Exchange and registered under Section 12(b) of the Exchange Act. We comply with Greek laws, applicable corporate governance requirements and corporate governance practice in Greece. For more information regarding how our corporate governance practices differ from those of a U.S. domestic issuer, see “6.A Directors, Board Practices and Senior Management — Corporate Governance”.


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PART III
 
ITEM 17  FINANCIAL STATEMENTS
 
Not applicable.
 
ITEM 18  FINANCIAL STATEMENTS
 
The following financial statements are filed as part of this Annual Report:
 
     
  Page
Index to the Consolidated Financial Statements
F-1 
Reports of Independent Registered Public Accounting FirmFirms
  F-2 
Consolidated Balance SheetsStatements of Financial Position
  F-4 
Consolidated Income Statements
  F-6 
Consolidated Statements of changesComprehensive Income
F-7
Consolidated Statements of Changes in Equity
  F-7F-8 
Consolidated Statements of Cash Flows
  F-8F-9 
Notes to the Consolidated Financial Statements
  F-9F-10 
 
ITEM 19  EXHIBITS
 
     
 1.1 Articles of Incorporation.
 4.1 Management Stock Option Plan of OTE S.A.; form of agreement.
 12.1 Certification of chief executive officer pursuant to 18 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 12.2 Certification of chief financial officer pursuant to 18 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 13.1 Certification of chief executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 13.2 Certification of chief financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 15.1 Letter by KPMG Certified Auditors A.E. dated June 30, 2009, addressed to the SEC provided in connection with Item 16.F.
     
 3.1 Agreement between the Greek State and IKA-ETAM regarding the transfer of shares representing 4.0% of the share capital of OTE S.A. and the exercise of voting rights with respect to these shares byIKA-ETAM.
 12.1 Certification of chief executive officer pursuant to 18 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 12.2 Certification of chief financial officer pursuant to 18 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 13.1 Certification of chief executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 13.2 Certification of chief financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


160173

SIGNATURES
 
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing onForm 20-F and has duly caused this Annual Report onForm 20-F to be signed on its behalf by the undersigned, thereunto duly authorized.
 
HELLENIC TELECOMMUNICATIONS
ORGANIZATION S.A.
 
 By: 
/s/  Panagis Vourloumis
Name:     Panagis Vourloumis
 Title: Chairman & Managing Director
 
Date: June 30, 20097, 2010


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GLOSSARY OF TECHNICAL TERMS
 
ADSL (Asymmetric Digital Subscriber Line):  ADSL is a technology that permits high-volume data transmission across traditional telephony networks (most commonly access to the internet) via paired copper cable (the most common type of telephone line found in buildings). With ADSL technology, customers have an “always on” access status (with no requirement todial-up) to the internet and the ability to download large files in seconds.
 
ATM (Asynchronous Transfer Mode):  Asynchronous transfer mode (ATM) is a broadband multiplexing technology that utilizes connected packets (ATM packets) to carry different types of traffic with guaranteed quality.
 
Backbone:  Fiber optic backbone network for long-distance and very high capacity transmission (see DWDM and SDH).
 
BRAS (Broadband Remote Access Server):  A network service that routes traffic to and from the digital subscriber line access multiplexers (DSLAM) on an internet service provider’s (ISP) network.
Broadband:  Transmission technology in which a single medium (wire) can carry several channels at once. Term used to describe high-speed networks (speeds of at least 2 Mbits/s).networks. We use several technologies in order to provide such data rates, such as HDSL, ADSL, ATM and SDH. These technologies have been developed to serve the different needs of customers according to quality and cost considerations.
BRAS (Broadband Remote Access Server):  A network service that routes traffic to and from the digital subscriber line access multiplexers (DSLAM) on an internet service provider’s (ISP) network.
CLIR (Call Identification Restriction):  A telephony intelligent network service that restricts transmission of the caller’s telephone number.
 
CDMA (Code Division Multiple Access):  The sharing of a radio channel by multiple users by share adding a unique code for each data signal that is being sent to and from each of the radio transceivers.
 
CLIP (Caller Identification):  At a minimum, the calling line identification includes a single calling party number; it may also include a second calling party number, a calling party subaddress, and redirecting number information. Calling line identification may not include any calling party number due to interworking, or because of an interaction with the CLIR supplementary service.
 
CLIR (Call Identification Restriction):  A telephony intelligent network service that restricts transmission of the caller’s telephone number.
Digital exchange (Switch):  A set of electronic devices which permit the switching of telecommunications lines with digital technology.
 
Double-play:  The provision of two broadbandtelephony services and high-speed internet access and television over a single broadband connection.
 
DSL (Digital Subscriber Line):  Technologies enabling the use of copper cables connecting subscribers of Public Switched Telephone Networks to complete broadband transfers of digital packets. See also the definition for ADSL.
 
DSLAM (Digital Subscriber Line Access Multiplier):  A network device usually located within a company central office, that multiplexes signals from several customer digital subscriber line (DSL) connections into a single high-speed line.
 
DTH (Direct-to-Home).  A satellite television signal transmitted directly to the home, rather than to a broadcast television station or to a cable television (CATV) provider for retransmission to the subscriber.
 
DWDM (Dense Wavelength Division Multiplexing):  A technology that enables ultra high-speed transfer of information on long-distance networks through the multiplexing of several wavelengths in a single optical fiber.
 
ECOS (Embedded Configurable Operating System):  An open source, configurable, portable and royalty-free embedded real-time operating system, designed for embedded systems development. It is targeted at high-volume applications in consumer electronics, telecommunications, automotive, and other applications.
 
FTTH (Fiber-to-the-home).:  The deployment of fiber optic network that extends to individual houses.
 
Gbps (Gigabits per second):  A data transfer speed measurement for high-speed networks, such as Gigabit Ethernet. When used to describe data transfer rates, a gigabit equals 1 billion bits.


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GHz (gigahertz):  Refers to frequencies in the billions of cycles per second range. Giga is the standard multiplier for 1 billion, and Hertz is the standard unit for measuring frequencies, expressed as cycles or occurrences per second.
 
Gigabit Ethernet:  A version of Ethernet (a local-area network (LAN) architecture developed by Xerox Corporation in cooperation with DEC and Intel in 1976), which supports data transfer rates of 1 Gigabit (1,000 megabits) per second.
 
GPRS technology (General Packet Radio Service):  A mobile data service available to users of GSM mobile telephones. GPRS data transfer is typically charged per megabyte of transferred data. GPRS can be utilized for services such as WAP access, SMS and MMS, but also for internet communication services such as email and web access.
 
GSM (Global System for Mobile):  European standard for digital mobile networks.
 
HSPA (High-Speed Packet Access):  A collection of two mobile telephony protocols — High-Speed Downlink Packet Access and High Speed Uplink Packet Access — that extend and improve the performance of existing Wideband Code Division Multiple Access protocols.
Hubbing:  The practice whereby an originating operator directs its international traffic to a country where low charges apply for forwarding to its ultimate destination in a third country. Such unconventional routing is done in order to minimize the originating operator’s costs for terminating international calls.
 
HSPA (High-Speed Packet Access):  A collection of two mobile telephony protocols — High-Speed Downlink Packet Access and High Speed Uplink Packet Access — that extend and improve the performance of existing Wideband Code Division Multiple Access protocols.
ICT (Information and Communications Technology):  Businessthe study, design, development, implementation, support or management of computer-based information systems, particularly software applications and computer hardware.
IMS (IP Multimedia Subsystem):  An architectural framework for offeringIP-based multimedia services. It is a core network technology solutions designed to improve efficiencythat can serve as a low-level foundation for technologies like VoIP, video calling, video sharing, and productivity through a blend of consulting, hardware, softwareinstant messaging, and connectivity.can be used for both mobile and fixed terminals.
 
IN (Intelligent Network):  Concept of network architecture aimed at facilitating the introduction of new services over basic services offered by the Public Switched Telephone Network. This principal lies on the installation of the service logic and data on a central computer, which manages the switches.
 
Internet Protocol (IP):  A connectionless protocol widely used for communicating data across a packet-switched network. It is one of the most important networking protocols in the Internet Protocol suite, hence it is integral to the operation of the Internet.
 
Intranet:  A local network that uses the same protocols and technology as the internet, but which relies on a private set of computers and is not open to all internet users. Examples include Intranets used by companies or by certain communities.
IMS (IP Multimedia Subsystem):  An architectural framework for offeringIP-based multimedia services. It is a core network technology that can serve as a low-level foundation for technologies like VoIP, video calling, video sharing, and instant messaging, and can be used for both mobile and fixed terminals.
 
IPTV (Internet Protocol Television):  The delivery of programming (television content) by video stream encoded as a series of IP packets.
 
IP-VPN (Internet Protocol Virtual Private Network):  A private communications network, enabled by use of the Internet Protocol, that is often used within a company, or by several different entities, to communicate over a public network.
 
ISDN (Integrated Service Digital Network):  An enhancement of PSTN (defined above) that allows the provisioning of additional voice, data and video services with transmission rates of 64 or 128 kbps (Basic Rate Access) or 2 Mbps (Primary Rate Access). Through the integration of voice and data in a single telephone line, with the Basic Rate ISDN, a customer can have two simultaneous connections (either voice or data, or mixed) over his telephone line. In addition, the ISDN technology can transfer data with transmission rates of up to 128 kbps, which is sufficient for services such as facsimile, internet surfing and teleconferencing. Public digital network allowing the transfer of different kinds of information at 64 Kbit/s: data, voice and video.


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ISP (Internet Service Provider):  A company that provides access to the internet. For a monthly fee, service providers usually provide a software package, username, password and access telephone number. Equipped with a modem, subscribers can then log on to the internet.


163

Kbit/s or Kilobit per second:  Thousands of bits transferred per second on a transmission network.
 
Kbps (Kilobits per second):  A measure of data transfer speed. Modems. One Kbps is one thousand bits per second.
LMDS (Local Multipoint Distribution Services):  A fixed wireless technology that operates in the 28 GHz band and offers line-of-sight coverage over distances up to 3-5 kilometers.
 
LAN (Local Area Network):  Local business or corporation networks enabling work stations or PCs of the same entity on the same site to be interconnected with other local networks on other sites and be linked to the public network.
LMDS (Local Multipoint Distribution Services):  A fixed wireless technology that operates in the 28 GHz band and offers line-of-sight coverage over distances up to 3-5 kilometers.
 
Local loop:  Section of the telephone network connecting the local telephone switch to individual subscribers’ homes.
 
Long-Distance Network:  Public or private network covering a very large geographic scope (national or international) enabling the connection of access networks or the interconnection of private broadband networks (LAN, MAN). See Backbones.
 
Mbps (megabits per second):  A measure of data transfer speed. A megabit is equal to one million bits.
 
MHz (megahertz):  Represents one million cycles per second. The speed of microprocessors, called the clock speed, is measured in megahertz.
 
MPLS (Multi Protocol Label Switching):  A protocol standard of the Internet Engineering Task Force (IETF), an international community open to operators and network designers whose goal is to coordinate the development of and resolve construction and protocol issues relating to the internet.. The MPLS protocol improves efficiency and network speed allowing routers to transfer information along pre-defined paths depending inon the level of quality required.
 
Multimedia Messaging Services (MMS):  Astore-and-forward method of transmitting graphics, video clips, sound files and short text messages over wireless networks using the WAP protocol.
 
Multiplexing:  Technique to simultaneously transfer several signals on a common transmission channel.
 
NGA (Next Generation Access):  A next generation access network that enables transmission rates much higher than the rates available today through the use of various technologies (e.g. FTTH).
 
NGN (Next Generation Networking):  A packet-based network able to provide services including Telecommunication Services and able to make use of multiple broadband, QoS-enabled transport technologies and in which service-related functions are independent from underlying transport-related technologies. It offers unrestricted access by users to different service providers. It supports generalized mobility which will allow consistent and ubiquitous provision of services to users.
 
NG-SDH (Next Generation Synchronous Digital Hierarchy):A set of Synchronous Digital Hierarchy (SDH) standards (such as the Link Capacity Adjustment and the Generic Framing Procedure standards) that enable efficient transport of packet-based data and facilitate fast/automatic provisioning of transport services in SDH networks.
 
Point-to-Point:  A connection between two endpoints.
Point-to-Multipoint:  A connection through multiple paths from a single location to multiple locations.
Point-to-Point:  A connection between two endpoints.
 
PSTN (Public Switched Telephone Network):  Voice transfer network consisting of handsets, subscriber lines, circuits and switches. Also used to access certain data services.
 
RAS (Remote Access Server):  Any combination of hardware and software to enable remote users or devices to connect to a server and access resources through a data network connection.


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SDH (Synchronous Digital Hierarchy):  Standard for very high-speed fiber optic transmission which enables the transport of packets of information at various speeds in a secure manner and ease their management.


164

SDS (Short Data Service):  Allows messages to be sent to individual subscribers or to a group through TETRA.
SHDSL (Symmetrical High-Bit-Rate Digital Subscriber Line):A form of Digital Subscriber Line (DSL) service that supports the same data rates for upstream and downstream traffic.
SIM (Subscriber Identity Module):  A component, usually in the form of a miniature smart-card, used to associate a mobile subscriber with a mobile network subscription.
SLA (Service Level Agreement):  A contract between an operator and the end-user which stipulates and commits the operator to a required level of service. An SLA contains a specified level of service, support options, enforcement or penalty provisions for services not provided, a guaranteed level of system performance as relates to downtime or uptime, a specified level of customer support and what software or hardware will be provided and for what fee.
 
SDS (Short Data Service):  Similar to the SMS service but allows messages to be sent to individual subscribers or to a group through TETRA.
SHDSL (Symmetrical High-Bit-Rate Digital Subscriber Line):A form of Digital Subscriber Line (DSL) service that supports the same data rates for upstream and downstream traffic.
SIM (Subscriber Identity Module):  A component, usually in the form of a miniature smart-card, used to associate a mobile subscriber with a mobile network subscription.
SMS (Short Message Service):  Two-way short message service.
 
Storage Area Network (SAN):  A high-speed subnetwork of shared storage devices. A storage device is a machine that contains nothing but a disk or disks for storing data.
 
Switches:  Telephone call management systems with three functions: Interconnection (between an incoming and outgoing connection), call management (completion and termination of calls) and administrative orders (billing, operation and maintenance).
Tbytes:  Terabytes. One terabyte equals 1,000,000,000,000 (1012) bytes.
 
TETRA (Trunked Mobile Radio Access):  A digital mobile radio network that aims to provide special radio communication services for use by professionals in large organizations or small companies. This network differs from GSM 1800 and it is based on a European standardized technology, currently deployed in most European countries. As a digital network, it provides advanced voice services (for example, for professionals talking in large groups or communicating through a company dispatcher) and data services (e.g., transmitting the location of a fleet of mobiles, downloading data files to mobiles, etc).
 
Triple-play:  The provision of two broadband services, high-speed internet access and television, and one narrowband service, telephone, over a single broadband connection.
 
TT&C (Telemetry, Tracking and Command)Control):  The subsystem that is used to position, monitor and maintain the orbit of a satellite.
 
UMTS (or 3G-third generation):  A third-generation technology in the context of mobile telephone standards. The services associated with 3G include wide-area wireless voice telephony and broadband wireless data, all in a mobile environment.
 
Unbundling:  The obligation for operator owners of local loops to provide to a third party operator pairs of bare copper wires. The third party operator compensates the operator owner for this use and installs its own transmission equipment at the end of the local loop to connect the subscribers with its own network. A housing of the equipment is also offered to third parties, in addition to the unbundling.
 
VoIP (Voice over Internet Protocol):  Transport of voice services using IP technology.
VDSL (Very High Bitrate DSL):  A next-generation Digital Subscriber Line (DSL) technology capable of supporting high bandwidth applications such as High-Definition TV (HDTV).
 
VDSL2:  Advanced standard of DSLVDSL broadband wireline communications technology that exploits the existing infrastructuretechnology.
VoIP (Voice over Internet Protocol):  Transport of copper wires that were originally deployed for conventional telephony services.voice services using IP technology.
 
VPN (Virtual Private Network):  A service that allows customers to have a closed/private/secure communication connection between certain users within the public network.
 
WAP (Wireless Access Point):  Collection of protocols and standards that enable communication and information applications to run efficiently on mobile devices.


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WDM (Wavelength Division Multiplexing):  See Dense Wavelength Division Multiplexing.


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Wi-Fi (Wireless Fidelity):  A term used for certain types of wireless local area network that comply with the specifications in the 802.11 family.
 
WiMaxWiMAX (Worldwide Interoperability for Microwave Access):A wireless digital communication system intended for wireless metropolitan area networks. It is used as an alternative technology to cable and DSL.
 
WLAN (Wireless Local-area Network):  A type of local-area network that uses high-frequency radio waves rather than wires for the communication between nodes.
 
WSS-basedWSS (Wavelength Selective Switching):  An optical device that directly routes different spectral components from an input port to the desired output ports without optoelectronic conversions.
 
xDSL: A term that refers collectively to all different types of DSL services.


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(OTE LOGO)
 
 
HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
 
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 20082009
IN ACCORDANCE WITH
INTERNATIONAL FINANCIAL REPORTING STANDARDS
as issued by the International Accounting Standards Board (“IASB”)
 
 
HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
REGISTRATION No S.A. 347/06/B/86/10
99 KIFFISIAS AVE — 151 24 MAROUSSI ATHENS, GREECE
 

 

 
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
     
  Page
 
Reports of Independent Registered Public Accounting Firms
  F-2 
Consolidated Balance SheetsStatement of Financial Position
  F-4 
Consolidated Income StatementsStatement
  F-6 
Consolidated StatementsStatement of Changes in EquityComprehensive Income
  F-7 
Consolidated StatementsStatement of Changes in Equity
F-8
Consolidated Statement of Cash Flows
  F-8F-9 
Notes to the Consolidated Financial Statements
  F-9F-10 


F-1

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young (Hellas) Certified Auditors Accountants S.A.(2009-2008)
 
To the Board of Directors and Shareholders of Hellenic Telecommunications Organization S.A.
 
We have audited the consolidated balance sheetstatements of financial position of Hellenic Telecommunications Organization S.A. (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the year then ended.two years in the period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.audits.
 
We conducted our auditaudits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit providesaudits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hellenic Telecommunications Organization S.A. at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the year thentwo years in the period ended December 31, 2009, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB).
 
We also have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Hellenic Telecommunications Organization S.A.’s internal control over financial reporting as of December 31, 2008,2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated June 30, 20094, 2010 expressed an unqualified opinion thereon.
 
/s/ Ernst & Young (Hellas) Certified Auditors Accountants S.A.
 
Athens, Greece
June 30, 2009
4, 2010


F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
KPMG Certified Auditors AE (2007)
To Shareholders and the Board of Directors of

Hellenic Telecommunications Organization S.A.:
 
We have audited the accompanying consolidated balance sheetstatements of income, comprehensive income, changes in equity and cash flows of Hellenic Telecommunications Organization S.A. and subsidiaries (the “Company”) as of December 31, 2007, andfor the related consolidated statements of income, changes in equity, and cash flows for each of the years in the two-year periodyear ended December 31, 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.audit.
 
We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit of consolidated financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall consolidated financial statement presentation. We believe that our audits provideaudit provides a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial positionresults of operations and cash flows of Hellenic Telecommunications Organization S.A. and subsidiaries as of December 31, 2007, andfor the results of their operations and their cash flows for each of the years in the two-year periodyear ended December 31, 2007, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB).
 
/s/ KPMG Certified Auditors AE
 
Athens, Greece
June 24, 2008


F-3

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
CONSOLIDATED BALANCE SHEETSSTATEMENT OF FINANCIAL POSITION
 
                        
   December 31,    December 31, 
 Notes 2008 2007  Notes 2009 2008 
 (Amounts in millions of Euro)  (Amounts in millions of Euro) 
ASSETS
ASSETS
ASSETS
Non-current assets
                        
Property, plant and equipment  4   5,872.8   6,371.4   4   5,625.1   5,872.8 
Goodwill  5   530.7   541.5   5   551.8   525.1 
Telecommunication licenses  6   329.5   396.2   6   362.2   329.5 
Other intangible assets  7   556.2   582.7   7   520.6   550.7 
Investments  8   156.6   158.4   8   157.0   156.6 
Loans and advances to pension funds  19   194.5   229.8   18   154.5   194.5 
Deferred tax assets  22   286.8   260.8   21   253.6   286.8 
Other non-current assets  10   120.7   95.9   9   127.3   120.7 
          
Total non-current assets
      8,047.8   8,636.7       7,752.1   8,036.7 
          
Current assets
                        
Inventories      201.3   201.7       229.1   201.3 
Trade receivables  11   1,194.2   1,172.0   10   1,153.0   1,194.2 
Other financial assets  13   135.9   81.2   11   35.4   135.9 
Other current assets  12   261.6   291.3   12   255.6   261.6 
Cash and cash equivalents  14   1,427.8   1,316.3   13   868.8   1,427.8 
          
Total current assets
      3,220.8   3,062.5       2,541.9   3,220.8 
          
Assets classified as held for sale  9   156.6   —   8   —   167.7 
          
TOTAL ASSETS
      11,425.2   11,699.2       10,294.0   11,425.2 
          
 
The accompanying notes form an integral part of these financial statements.


F-4

 
HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
 
CONSOLIDATED BALANCE SHEETSSTATEMENT OF FINANCIAL POSITION — (Continued)
 
                        
   December 31,    December 31, 
 Notes 2008 2007  Notes 2009 2008 
 (Amounts in millions of Euro)  (Amounts in millions of Euro) 
EQUITY AND LIABILITIES
EQUITY AND LIABILITIES
EQUITY AND LIABILITIES
Equity attributable to shareholders of the Company
            
Equity attributable to owners of the Parent
            
Share capital  15   1,171.5   1,171.5   14   1,171.5   1,171.5 
Share premium  15   497.9   485.9   14   505.1   497.9 
Statutory reserve  16   330.2   312.1   15   344.1   330.2 
Foreign exchange and other reserves      73.9   258.3   15   (53.3)  73.9 
Changes in minority interests  8   (3,315.2)  (2,533.8)
Changes in non-controlling interests  8   (3,321.5)  (3,315.2)
Retained earnings  16   2,553.6   2,337.5   15   2,546.1   2,553.6 
          
Total equity attributable to owners of the Parent
      1,192.0   1,311.9 
Non-controlling Interests      757.7   861.3 
      1,311.9   2,031.5      
Minority Interests
      861.3   1,023.1 
     
Total Equity
      2,173.2   3,054.6 
Total equity
      1,949.7   2,173.2 
          
Non-current liabilities
                        
Long-term borrowings  18   5,409.6   3,947.1   17   5,385.7   5,409.6 
Provision for staff retirement indemnities  19   254.9   230.3   18   266.5   254.9 
Cost of voluntary retirement scheme  19   107.2   217.5 
Provision for voluntary leave scheme  18   109.9   107.2 
Provision for youth account  19   286.3   273.5   18   282.3   286.3 
Deferred tax liabilities  22   116.7   166.2   21   113.7   116.7 
Other non-current liabilities  20   74.6   233.6   19   77.9   74.6 
          
Total non-current liabilities
      6,249.3   5,068.2       6,236.0   6,249.3 
          
Current liabilities
                        
Trade accounts payable      943.9   931.5       813.2   943.9 
Short-term borrowings  21   5.1   1,497.4   20   3.3   5.1 
Short-term portion of long-term borrowings  18   633.0   83.3   17   32.9   633.0 
Income tax  22   58.0   83.0 
Income tax payable      163.2   58.0 
Deferred revenue      228.4   189.2       256.6   228.4 
Cost of voluntary retirement scheme  19   275.8   200.2 
Provision for voluntary leave scheme  18   149.0   275.8 
Dividends payable  17   3.8   4.0   16   4.2   3.8 
Other current liabilities  23   838.2   587.8   22   685.9   838.2 
          
Total current liabilities
      2,986.2   3,576.4       2,108.3   2,986.2 
          
Liabilities directly associated with the assets classified as held for sale.  9   16.5   — 
Liabilities directly associated with the assets classified as held for sale  8   —   16.5 
          
TOTAL EQUITY AND LIABILITIES
      11,425.2   11,699.2       10,294.0   11,425.2 
          
 
The accompanying notes form an integral part of these financial statements.


F-5

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
CONSOLIDATED INCOME STATEMENT
 
CONSOLIDATED INCOME STATEMENTS
                                
   Year Ended December 31,    Year Ended December 31, 
 Notes 2008 2007 2006  Notes 2009 2008 2007 
 (Amounts in millions of Euro, except for the per share data)  (Amounts in millions of Euro except per share data) 
Revenue
                                
Domestic telephony  24   1,814.2   2,022.2   2,260.6   23   1,619.6   1,814.2   2,022.2 
International telephony  24   286.9   304.5   346.9   23   251.1   286.9   304.5 
Mobile telephony  24   2,470.8   2,210.0   1,975.8   23   2,396.2   2,470.8   2,210.0 
Other revenue  24   1,835.4   1,783.1   1,308.0   23   1,717.2   1,835.4   1,783.1 
              
Total revenue
      6,407.3   6,319.8   5,891.3       5,984.1   6,407.3   6,319.8 
              
Operating expenses
                                
Payroll and employee benefits      (1,168.4)  (1,149.0)  (1,154.5)      (1,190.8)  (1,168.4)  (1,149.0)
Provision for staff retirement indemnities and youth account  19   (112.6)  (92.3)  (87.1)  18   (95.5)  (112.6)  (92.3)
Cost of early retirement program  19   (50.2)  (22.1)  49.8   18   30.3   (50.2)  (22.1)
Charges from international operators      (201.0)  (216.4)  (208.8)      (184.0)  (173.9)  (182.7)
Charges from domestic operators      (642.3)  (655.3)  (720.9)      (516.3)  (642.3)  (655.3)
Depreciation and amortization      (1,213.0)  (1,171.8)  (1,128.5)      (1,155.3)  (1,213.0)  (1,171.8)
Cost of telecommunications equipment      (633.4)  (672.8)  (363.5)      (475.1)  (633.4)  (672.8)
Other operating expenses  25   (1,328.7)  (1,293.2)  (1,189.5)  24   (1,396.5)  (1,355.8)  (1,326.9)
              
Total operating expenses
      (5,349.6)  (5,272.9)  (4,803.0)      (4,983.2)  (5,349.6)  (5,272.9)
              
Operating income before financial activities
      1,057.7   1,046.9   1,088.3 
Operating profit before financial activities
      1,000.9   1,057.7   1,046.9 
              
Income and expense from financial activities
                                
Interest expense      (343.7)  (238.7)  (278.8)      (325.2)  (343.7)  (238.7)
Interest income      72.3   77.8   70.8       61.6   72.3   77.8 
Foreign exchange differences, net      11.8   (4.8)  4.2       10.2   11.8   (4.8)
Dividend income  8   12.2   16.8   23.0   8   9.6   12.2   16.8 
Gains from investments      33.7   256.8   176.3   8   23.6   33.7   256.8 
              
Total profit (loss) from financial activities
      (213.7)  107.9   (4.5)
Total profit /(loss) from financial activities
      (220.2)  (213.7)  107.9 
              
Profit before tax
      844.0   1,154.8   1,083.8       780.7   844.0   1,154.8 
Income tax
  22   (246.2)  (381.8)  (353.0)
Income tax expense
  21   (410.0)  (246.2)  (381.8)
              
Profit for the year
      597.8   773.0   730.8       370.7   597.8   773.0 
              
Attributable to:                                
Shareholders of the parent      601.8   662.6   574.6 
Minority interests      (4.0)  110.4   156.2 
Owners of the parent      374.0   601.8   662.6 
Non-controlling interests      (3.3)  (4.0)  110.4 
              
      597.8   773.0   730.8       370.7   597.8   773.0 
              
Basic earnings per share
  26   1.2278   1.3518   1.1723   25   0.7630   1.2278   1.3518 
              
Diluted earnings per share
  26   1.2129   1.3518   1.1723   25   0.7630   1.2129   1.3518 
              
 
The accompanying notes form an integral part of these financial statements.


F-6

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
                                         
  Attributable to Equity Holders of the Parent       
              Foreign
                
              Exchange
                
              and
  Changes in
             
  Share
  Share
  Treasury
  Statutory
  Other
  Minority
  Retained
     Minority
  Total
 
  Capital  Premium  Shares  Reserve  Reserves  Interests  Earnings  Total  Interest  Equity 
  (Amounts in millions of Euro) 
 
Balance as at December 31, 2005
  1,172.5   486.6   (5.9)  256.7   229.7   (238.8)  1,410.7   3,311.5   1,201.9   4,513.4 
                                         
Transfer to statutory reserve  —   —   —   26.6   —   —   (26.6)  —   —   — 
                                         
Treasury shares cancelled  (1.0)  (0.7)  5.9   —   —   —   (4.2)  —   —   — 
Dividends  —   —   —   —   —   —   —   —   (116.0)  (116.0)
Net change of participation in subsidiaries  —   —   —   —   —   (341.5)  18.8   (322.7)  (118.5)  (441.2)
Change in fair value ofavailable-for-sale financial assets
  —   —   —   —   10.6   —   —   10.6   —   10.6 
Foreign currency translation  —   —   —   —   90.8   —   —   90.8   100.3   191.1 
                                         
Net income and expense for the year recognized directly in equity  —   —   —   —   101.4   —   —   101.4   100.3   201.7 
                                         
Profit for the year  —   —   —   —   —   —   574.6   574.6   156.2   730.8 
                                         
Total income and expense for the year
  —   —   —   —   101.4   —   574.6   676.0   256.5   932.5 
                                         
Balance as at December 31, 2006
  1,171.5   485.9   —   283.3   331.1   (580.3)  1,973.3   3,664.8   1,223.9   4,888.7 
                                         
Balance as at December 31, 2006
  1,171.5   485.9   —   283.3   331.1   (580.3)  1,973.3   3,664.8   1,223.9   4,888.7 
                                         
Transfer to statutory reserve  —   —   —   28.8   —   —   (28.8)  —   —   — 
Dividends  —   —   —   —   —   —   (269.6)  (269.6)  (81.2)  (350.8)
Net change of participation in subsidiaries  —   —   —   —   —   (1,953.5)  —   (1,953.5)  (145.3)  (2,098.8)
Change in fair value ofavailable-for-sale financial assets
  —   —   —   —   9.8   —   —   9.8   —   9.8 
Foreign currency translation  —   —   —   —   (82.6)  —   —   (82.6)  (84.7)  (167.3)
                                         
Net income and expense for the year recognized directly in equity  —   —   —   —   (72.8)  —   —   (72.8)  (84.7)  (157.5)
                                         
Profit for the year  —   —   —   —   —   —   662.6   662.6   110.4   773.0 
                                         
Total income and expense for the year
  —   —   —   —   (72.8)  —   662.6   589.8   25.7   615.5 
                                         
Balance as at December 31, 2007
  1,171.5   485.9   —   312.1   258.3   (2,533.8)  2,337.5   2,031.5   1,023.1   3,054.6 
                                         
Balance as at December 31, 2007
  1,171.5   485.9   —   312.1   258.3   (2,533.8)  2,337.5   2,031.5   1,023.1   3,054.6 
      ��                                  
Transfer to statutory reserve  —   —   —   18.1   —   —   (18.1)  —   —   — 
Dividends  —   —   —   —   —   —   (367.6)  (367.6)  —   (367.6)
Share-based payment  —   12.0   —   —   —   —   —   12.0   —   12.0 
Net change of participation in subsidiaries  —   —   —   —   —   (781.4)  —   (781.4)  (65.8)  (847.2)
Change in fair value ofavailable-for-sale financial assets
  —   —   —   —   (34.8)  —   —   (34.8)  —   (34.8)
Net loss on cash flow hedge  —   —   —   —   (6.3)  —   —   (6.3)  —   (6.3)
Foreign currency translation  —   —   —   —   (143.3)  —   —   (143.3)  (92.0)  (235.3)
                                         
Net income and expense for the year recognized directly in equity  —   —   —   —   (184.4)  —   —   (184.4)  (92.0)  (276.4)
                                         
Profit for the year  —   —   —   —   —   —   601.8   601.8   (4.0)  597.8 
                                         
Total income and expense for the year
  —   —   —   —   (184.4)  —   601.8   417.4   (96.0)  321.4 
                                         
Balance as at December 31, 2008
  1,171.5   497.9   —   330.2   73.9   (3,315.2)  2,553.6   1,311.9   861.3   2,173.2 
                                         
             
  Year Ended December 31, 
  2009  2008  2007 
  (Amounts in millions of Euro) 
 
Profit for the year
  370.7   597.8   773.0 
Foreign currency translation  (178.4)  (235.3)  (167.3)
Net loss on cash flow hedge  (0.5)  (6.3)  — 
Fair value movement in available for sale financial assets  3.5   (34.8)  9.8 
Other comprehensive income / (loss) for the year
  (175.4)  (276.4)  (157.5)
             
Total comprehensive income for the year
  195.3   321.4   615.5 
             
Attributable to:
            
Owners of the parent  246.8   417.4   589.8 
Non-controlling interests  (51.5)  (96.0)  25.7 
             
   195.3   321.4   615.5 
             
 
The accompanying notes form an integral part of these financial statements.


F-7

 
HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
                 
     Year Ended December 31, 
  Notes  2008  2007  2006 
     (Amounts in millions of Euro) 
 
Cash Flows from Operating Activities
                
Profit before tax      844.0   1,154.8   1,083.8 
                 
Adjustments for:                
Depreciation and amortization      1,213.0   1,171.8   1,128.5 
Share-based payment  29   12.0   —   — 
Cost of early retirement program  19   50.2   22.1   (49.8)
Provision for staff retirement indemnities and youth account  19   112.6   92.3   87.1 
Other provisions      121.9   106.2   133.9 
Foreign exchange differences, net      (11.8)  4.8   (4.2)
Interest income      (72.3)  (77.8)  (70.8)
Dividend income, gains and impairment of investments      (45.9)  (273.6)  (199.3)
Release of EDEKT fund prepayment  19   35.2   35.2   35.2 
Interest expense      343.7   238.7   278.8 
Working capital adjustments:                
Decrease/ (increase) in inventories      (9.2)  (2.0)  (30.3)
Decrease/ (increase) in accounts receivable      (123.4)  (127.9)  75.8 
Decrease in liabilities (except bank liabilities)      (259.3)  (292.6)  (293.6)
Minus:                
Interest and related expenses paid      (212.9)  (216.4)  (178.5)
Income taxes paid      (240.2)  (384.9)  (210.4)
                 
Total Cash Flows from Operating Activities
      1,757.6   1,450.7   1,786.2 
                 
Cash Flows from Investing Activities
                
Acquisition of minority interest and participation in subsidiaries’ share capital increase      (849.4)  (2,119.0)  (1,672.2)
Purchase of financial assets      (138.0)  —   — 
Sale or maturity of financial assets      46.8   —   — 
Loans advanced      (1.3)  (121.6)  (66.4)
Proceeds from loans      —   —   20.3 
Other long term liabilities      —   144.5   — 
Purchase of property plant and equipment and intangible assets      (964.0)  (1,101.3)  (962.4)
Proceeds from sale of investments      24.0   352.8   316.2 
Interest received      66.7   52.1   42.8 
Dividends received      9.2   12.3   13.6 
                 
Total Cash Flows Used in Investing Activities
      (1,806.0)  (2,780.2)  (2,308.1)
                 
Cash Flows from Financing Activities
                
Proceeds from minority shareholders for their participation in subsidiaries’ share capital increase      16.9   12.6   12.0 
Proceeds from loans granted and issued      2,705.5   1,500.0   2,369.1 
Repayment of loans      (2,183.4)  (558.4)  (1,211.7)
Dividends paid to Company’s shareholders      (367.8)  (269.3)  (1.6)
Dividends paid to minority interests      (5.9)  (81.6)  (115.6)
                 
Total Cash Flows from Financing Activities
      165.3   603.3   1,052.2 
                 
Net increase/(decrease) in Cash and Cash Equivalents
      116.9   (726.2)  530.3 
                 
Cash and cash equivalents, at the beginning of the year
      1,316.3   2,042.5   1,512.2 
Net foreign exchange differences
      (3.5)  —   — 
Cash and Cash Equivalents classified as held for sale
  9   (1.9)  —   — 
                 
Cash and Cash Equivalents, at the end of the year
  14   1,427.8   1,316.3   2,042.5 
                 
                                     
  Attributed to Equity Holders of the Parent 
           Foreign
                
           Exchange
                
           and
  Changes in
             
  Share
  Share
  Statutory
  Other
  Non-Controlling
  Retained
     Non-Controlling
  Total
 
  Capital  Premium  Reserve  Reserves  Interests  Earnings  Total  Interest  Equity 
  (Amounts in millions of Euro) 
 
Balance as at January 1, 2007
  1,171.5   485.9   283.3   331.1   (580.3)  1,973.3   3,664.8   1,223.9   4,888.7 
                                     
Profit for the year  —   —   —   —   —   662.6   662.6   110.4   773.0 
Other comprehensive income / (loss)  —   —   —   (72.8)  —   —   (72.8)  (84.7)  (157.5)
Total comprehensive income / (loss)
  —   —   —   (72.8)  —   662.6   589.8   25.7   615.5 
Transfer to statutory reserve  —   —   28.8   —   —   (28.8)  —   —   — 
Dividends  —   —   —   —   —   (269.6)  (269.6)  (81.2)  (350.8)
Net change of participation in subsidiaries  —   —   —   —   (1,953.5)  —   (1,953.5)  (145.3)  (2,098.8)
                                     
Balance as at December 31, 2007
  1,171.5   485.9   312.1   258.3   (2,533.8)  2,337.5   2,031.5   1,023.1   3,054.6 
                                     
Balance as at January 1, 2008
  1,171.5   485.9   312.1   258.3   (2,533.8)  2,337.5   2,031.5   1,023.1   3,054.6 
Profit for the year  —   —   —   —   —   601.8   601.8   (4.0)  597.8 
Other comprehensive income / (loss)  —   —   —   (184.4)  —   —   (184.4)  (92.0)  (276.4)
                                     
Total comprehensive income / (loss)
  —   —   —   (184.4)  —   601.8   417.4   (96.0)  321.4 
                                     
Transfer to statutory reserve  —   —   18.1   —   —   (18.1)  —   —   — 
                                     
Dividends  —   —   —   —   —   (367.6)  (367.6)  —   (367.6)
Share-based payment  —   12.0   —   —   —   —   12.0   —   12.0 
Net change of participation in subsidiaries  —   —   —   —   (781.4)  —   (781.4)  (65.8)  (847.2)
Balance as at December 31, 2008
  1,171.5   497.9   330.2   73.9   (3,315.2)  2,553.6   1,311.9   861.3   2,173.2 
                                     
Balance as at January 1, 2009
  1,171.5   497.9   330.2   73.9   (3,315.2)  2,553.6   1,311.9   861.3   2,173.2 
                                     
Profit for the year  —   —   —   —   —   374.0   374.0   (3.3)  370.7 
Other comprehensive income / (loss)  —   —   —   (127.2)  —   —   (127.2)  (48.2)  (175.4)
Total comprehensive income / (loss)
  —   —   —   (127.2)  —   374.0   246.8   (51.5)  195.3 
Transfer to statutory reserve  —   —   13.9   —   —   (13.9)  —   —   — 
Dividends  —   —   —   —   —   (367.6)  (367.6)  —   (367.6)
Share-based payment  —   7.2   —   —   —   —   7.2   —   7.2 
Net change of participation in subsidiaries  —   —   —   —   (4.7)  —   (4.7)  (43.7)  (48.4)
Obligation to acquire non-controlling interests  —   —   —   —   (1.6)  —   (1.6)  (8.4)  (10.0)
                                     
Balance as at December 31, 2009
  1,171.5   505.1   344.1   (53.3)  (3,321.5)  2,546.1   1,192.0   757.7   1,949.7 
                                     
 
The accompanying notes form an integral part of these financial statements.


F-8

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
                 
     Year Ended December 31, 
  Notes  2009  2008  2007 
  (Amounts in millions of Euro) 
 
Cash Flows from Operating Activities
                
Profit before tax      780.7   844.0   1,154.8 
                 
Adjustments for:                
Depreciation and amortization      1,155.3   1,213.0   1,171.8 
Share-based payment  28   7.2   12.0   — 
Cost of early retirement program  18   (30.3)  50.2   22.1 
Provision for staff retirement indemnities and youth account  18   95.5   112.6   92.3 
Other provisions  24   —   2.1   18.1 
Provisions for doubtful accounts  24   107.0   119.8   88.0 
Foreign exchange differences, net      (10.2)  (11.8)  4.8 
Interest income      (61.6)  (72.3)  (77.8)
Dividend income, (gains)/losses and impairment of investments      (33.2)  (45.9)  (273.6)
Release of EDEKT fund prepayment  18   35.2   35.2   35.2 
Interest expense      325.2   343.7   238.7 
Working capital adjustments:                
Decrease/(increase) in inventories      (27.3)  (9.2)  (2.0)
Decrease/(increase) in accounts receivable      (75.7)  (123.4)  (127.9)
(Decrease)/increase in liabilities (except borrowings)      (72.1)  (91.7)  56.6 
Plus/(Minus):                
Payment for early retirement programs      (130.3)  (91.6)  (265.8)
Payment of staff retirement indemnities and youth account, net of employees’ contributions      (88.3)  (76.0)  (83.3)
Interest and related expenses paid      (276.4)  (212.9)  (216.4)
Income taxes paid      (299.3)  (240.2)  (384.9)
Settlement of receivables due from disposed subsidiaries  8   16.6   —   — 
                 
Net Cash Flows from Operating Activities
      1,418.0   1,757.6   1,450.7 
                 
Cash Flows from Investing Activities
                
Acquisition of non-controlling interest and participation in subsidiaries’ share capital increase  8   (48.4)  (849.4)  (2,119.0)
Acquisition of subsidiary net of cash acquired  8   (197.8)  —   — 
Purchase of financial assets  11   (308.0)  (138.0)  — 
Sale or maturity of financial assets  11   412.2   46.8   — 
Loans granted      —   (1.3)  (121.6)
Other long term liabilities      —   —   144.5 
Repayments of loans receivable      9.7   —   — 
Loans proceeds in conjunction with disposal of subsidiaries  8   78.5   —   — 
Purchase of property plant and equipment and intangible assets      (890.9)  (964.0)  (1,101.3)
Proceeds from disposal of subsidiaries  8   86.1   24.0   352.8 
Interest received      61.6   66.7   52.1 
Dividends received      6.9   9.2   12.3 
Return of capital invested in subsidiary      —   —   — 
Settlements of other current liabilities  22   (168.5)  —   — 
                 
Net Cash Flows from/(Used in) Investing Activities
      (958.6)  (1,806.0)  (2,780.2)
                 
Cash Flows from Financing Activities
                
Proceeds from non-controlling interests for their participation in subsidiaries’ share capital increase      —   16.9   12.6 
Proceeds from loans granted and issued      —   2,705.5   1,500.0 
Repayment of loans      (637.1)  (2,183.4)  (558.4)
Dividends paid to Company’s owners      (367.2)  (367.8)  (269.3)
Dividends paid to non-controlling interests      (1.2)  (5.9)  (81.6)
                 
Net Cash Flows from/(Used in) Financing Activities
      (1,005.5)  165.3   603.3 
                 
Net increase/(decrease) in Cash and Cash Equivalents
      (546.1)  116.9   (726.2)
                 
Cash and cash equivalents, at the beginning of the year
      1,427.8   1,316.3   2,042.5 
Net foreign exchange differences
      (14.8)  (3.5)  — 
Cash and Cash Equivalents classified as held for sale/disposed of
  8   1.9   (1.9)  — 
                 
Cash and Cash Equivalents, at the end of the year
  13   868.8   1,427.8   1,316.3 
                 
The accompanying notes form an integral part of these financial statements.


F-9

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
1.  CORPORATE INFORMATION
 
Hellenic Telecommunications Organization S.A. (“Company”, “OTE” or “OTE”“parent”), was incorporated as asociété anonymein Athens, Greece in 1949, and is listed in the Greek Register of SocieteSociétés Anonymes (M.A.E.) with the unique number (AP. MAE) 347/06/B/86/10.
The registered office is located at 99 Kifissias Avenue — 151 24 Maroussi Athens, Greece, and the website is www.ote.gr.
The Company is listed on the Athens Exchange and New York Stock Exchange.
 
OTE’s principleprincipal activities are the provision of telecommunications and related services.
Effective February 6, 2009, the financial statements are included in the consolidated financial statements of DEUTSCHE TELEKOM AG (full consolidation method), which has its registered office in Germany and holds a 30.00% plus one share interest in OTE as of December 31, 2009.
 
The OTE Group (“Group”) includes other than the parent Company, all the entities which OTE controls directly or indirectly.
 
The accompanyingAnnual Consolidated Financial Statements (“financial statements”) as atof December 31, 20082009 and the year then ended, were approved for issuance by the Board of Directors on June 22, 2009.4, 2010.
 
The total numbers of Group employees as at the currentof December 31, 2009 and previous two year ends2008 were as follows:
 
     
December 31, 2009
32,864 
December 31, 2008
  33,610 
December 31, 2007
  34,350 
December 31, 2006
34,324
 
The Group includesconsolidated financial statements include the financial statements of OTE and the following subsidiaries which OTE controls directly or indirectly controls:indirectly:
 
             
      Ownership Interest 
Company Name
 
Line of Business
 
Country
 31/12/2008  
31/12/2007
 
 
Direct ownership
            
•   COSMOTE MOBILE TELECOMMUNICATIONS S.A.
(“COSMOTE”)		 Mobile telecommunications services Greece  100.00%  90.72%
•   OTE INTERNATIONAL INVESTMENTS LTD Investment holding company Greece  100.00%  100.00%
•   HELLAS SAT CONSORTIUM LIMITED (“HELLAS-SAT”) Satellite communications Cyprus  99.05%  99.05%
•   COSMO-ONE HELLAS MARKET SITE S.A. (“COSMO-ONE”) E-commerce services Greece  61.74%  58.87%
•   OTENET S.A. (“OTENET”) Internet services Greece  —   100.00%
•   VOICENET S.A. (“VOICENET”) Telecommunications services Greece  100.00%  84.07%
•   HELLASCOM INTERNATIONAL S.A. (“HELLASCOM”) Telecommunication projects Greece  100.00%  100.00%
•   OTE PLC Financing services U.K.  100.00%  100.00%
•   OTE SAT-MARITEL S.A. (“OTE SAT — MARITEL”) Satellite telecommunications services Greece  94.08%  94.08%
•   OTE PLUS S.A (“OTE PLUS”) Consulting services Greece  100.00%  100.00%
•   OTE ESTATE S.A. (“OTE ESTATE”) Real estate Greece  100.00%  100.00%
•   OTE INTERNATIONAL SOLUTIONS S.A. (“OTE-GLOBE”) Wholesale telephony services Greece  100.00%  100.00%
             
      Group’s
      Ownership Interest
Company Name
 
Line of Business
 Country 2009 2008
 
COSMOTE MOBILE TELECOMMUNICATIONS S.A. (“COSMOTE”) Mobile telecommunications services Greece  100.00%  100.00%
OTE INTERNATIONAL INVESTMENTS LTD Investment holding company Cyprus  100.00%  100.00%
HELLAS SAT CONSORTIUM LIMITED (“HELLAS-SAT”) Satellite communications Cyprus  99.05%  99.05%
COSMO-ONE HELLAS MARKET SITE S.A. (“COSMO-ONE”) E-commerce services Greece  61.74%  61.74%
VOICENET S.A. (“VOICENET”) Telecommunications services Greece  100.00%  100.00%
HELLASCOM S.A. (“HELLASCOM”) Telecommunication projects Greece  100.00%  100.00%
OTE PLC Financing services U.K.  100.00%  100.00%
OTE SAT-MARITEL S.A. (“OTE SAT — MARITEL”) Satellite telecommunications services Greece  94.08%  94.08%
OTE PLUS S.A. (“OTE PLUS”) Consulting services Greece  100.00%  100.00%
OTE ESTATE S.A. (“OTE ESTATE”) Real estate Greece  100.00%  100.00%
OTE INTERNATIONAL SOLUTIONS S.A. (“OTE-GLOBE”) Wholesale telephony services Greece  100.00%  100.00%
HATWAVEHELLENIC-AMERICAN TELECOMMUNICATIONS WAVE LTD. (“HATWAVE”) Investment holding company Cyprus  52.67%  52.67%


F-9F-10

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
             
      Ownership Interest 
Company Name
 
Line of Business
 
Country
 31/12/2008  
31/12/2007
 
 
•   HATWAVE HELLENIC-AMERICAN TELECOMMUNICATIONS WAVE LTD. (“HATWAVE”) Investment holding company Cyprus  52.67%  52.67%
•   OTE INSURANCE AGENCY S.A. (“OTE INSURANCE”) Insurance brokerage services Greece  100.00%  100.00%
•   OTE ACADEMY S.A. (“OTE ACADEMY”) Training services Greece  100.00%  100.00%
Indirect ownership
            
•   ROMTELECOM S.A. (“ROMTELECOM”) Fixed line telephony services Romania  54.01%  54.01%
•   S.C. COSMOTE ROMANIAN MOBILE TELECOMMUNICATIONS S.A. (“COSMOTE ROMANIA”) Mobile telecommunications services Romania  86.20%  79.71%
•   OTE MTS HOLDING B.V. Investment holding company Holland  100.00%  90.72%
•   COSMOFON MOBILE TELECOMMUNICATIONS SERVICES A.D. — SKOPJE (“COSMOFON”) Mobile telecommunications services Skopje  100.00%  90.72%
•   COSMO BULGARIA MOBILE EAD (“GLOBUL”) Mobile telecommunications services Bulgaria  100.00%  90.72%
•   COSMO-HOLDING ALBANIA S.A. (“CHA”) Investment holding company Greece  97.00%  88.00%
•   ALBANIAN MOBILE COMMUNICATIONS Sh.a (“AMC”) Mobile telecommunications services Albania  82.45%  74.80%
•   COSMOHOLDING CYPRUS LTD (“COSMOHOLDING CYPRUS”) Investment holding company Cyprus  90.00%  81.65%
•   GERMANOS S.A. Retail services Greece  90.00%  81.65%
•   E-VALUE S.A. Marketing services Greece  90.00%  81.65%
•   GERMANOS TELECOM SKOPJE S.A. Retail services Skopje  90.00%  81.65%
•   GERMANOS TELECOM ROMANIA S.A. Retail services Romania  90.00%  81.64%
•   TEL SIM S.R.L Retail services Romania  —   81.65%
•   SUNLIGHT ROMANIA S.R.L.-FILIALA Retail services Romania  90.00%  81.64%
•   GERMANOS TELECOM BULGARIA A.D. Retail services Bulgaria  90.00%  81.65%
•   MOBILBEEEP LTD Retail services Greece  90.00%  81.65%
•   GRIGORIS MAVROMICHALIS & PARTNERS LTD Retail services Greece  —   80.82%
•   IOANNIS TSAPARAS & PARTNERS LTD Retail services Greece  —   41.64%
•   ALBATROS & PARTNERS LTD Retail services Greece  —   81.64%
•   OTENET CYPRUS LTD Investment holding company Cyprus  —   76.33%
•   OTENET TELECOMMUNICATIONS LTD Telecommunications services Greece  —   71.61%
•   OTE PROPERTIES Real estate Greece  100.00%  — 

F-10

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
             
      Ownership Interest 
Company Name
 
Line of Business
 
Country
 31/12/2008  
31/12/2007
 
 
•   HELLAS SAT S.A. Satellite communications Greece  99.05%  99.05%
•   OTE INVESTMENT SERVICES S. A. Investment holding company Greece  100.00%  100.00%
•   OTE PLUS BULGARIA Consulting services Bulgaria  100.00%  100.00%
•   OTE PLUS ROMANIA Consulting services Romania  —   100.00%
             
      Group’s
      Ownership Interest
Company Name
 
Line of Business
 Country 2009 2008
 
OTE INSURANCE AGENCY S.A. (“OTE INSURANCE”) Insurance brokerage services Greece  100.00%  100.00%
OTE ACADEMY S.A. (“OTE ACADEMY”) Training services Greece  100.00%  100.00%
ROMTELECOM S.A. (“ROMTELECOM”) Fixed line telephony services Romania  54.01%  54.01%
S.C. COSMOTE ROMANIAN MOBILE TELECOMMUNICATIONS S.A. (“COSMOTE ROMANIA”) Mobile telecommunications services Romania  86.20%  86.20%
OTE MTS HOLDING B.V. Investment holding company Holland  —   100.00%
COSMOFON MOBILE TELECOMMUNICATIONS SERVICES A.D. — SKOPJE (“COSMOFON”) Mobile telecommunications services Skopje  —   100.00%
COSMO BULGARIA MOBILE EAD (“GLOBUL”) Mobile telecommunications services Bulgaria  100.00%  100.00%
COSMO-HOLDING ALBANIA S.A. (“CHA”) Investment holding company Greece  97.00%  97.00%
ALBANIAN MOBILE COMMUNICATIONS Sh.a (“AMC”) Mobile telecommunications services Albania  95.03%  82.45%
COSMOHOLDING CYPRUS LTD (“COSMOHOLDING CYPRUS”) Investment holding company Cyprus  100.00%  90.00%
GERMANOS S.A. (“GERMANOS”) Retail services Greece  100.00%  90.00%
E-VALUE S.A.  Marketing Services Greece  100.00%  90.00%
GERMANOS TELECOM SKOPJE S.A.  Retail services Skopje  —   90.00%
GERMANOS TELECOM ROMANIA S.A.  Retail services Romania  100.00%  90.00%
SUNLIGHT ROMANIA S.R.L. FILIALA Retail services Romania  100.00%  90.00%
GERMANOS TELECOM BULGARIA A.D.  Retail services Bulgaria  100.00%  90.00%
MOBILBEEEP LTD Retail services Greece  100.00%  90.00%
OTE PROPERTIES Real estate Greece  100.00%  100.00%
HELLAS SAT S.A.  Satellite communications Greece  99.05%  99.05%
OTE INVESTMENT SERVICES S.A.  Investment holding company Greece  100.00%  100.00%
OTE PLUS BULGARIA Consulting services Bulgaria  100.00%  100.00%
COSMOHOLDING ROMANIA LTD Investment holding company Cyprus  100.00%  — 
TELEMOBIL S.A. (“ZAPP”) Mobile telecommunications services Romania  99.99%  — 
E-VALUE DEBTORS AWARENESS ONE PERSON LTD(“E-VALUE LTD”) Overdue accounts Greece  100.00%  — 
 
2.  BASIS OF PREPARATION
 
The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
 
The financial statements have been prepared on thea historical cost basis, except for financial assets at fair value through profit and loss,available-for-sale financial assets and derivative financial instruments which have been measured at fair values in accordance with IFRS. The carrying values of recognized assets and liabilities that are

F-11

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
hedged items in fair value hedges that would otherwise be carried at amortized cost, are adjusted to record changes in the fair values attributable to the risks that are being hedged.hedged in effective hedge relationships.
 
The financial statements are presented in millions of Euro, except when otherwise indicated.
 
Significant accounting judgments, estimates and assumptions:  assumptions
The preparation of the financial statements in accordance with IFRS requires management to make estimates and assumptions which mayjudgments that affect the applicationreported amount of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to legal contingencies, allowance for doubtful accounts, the accounting policiesestimated useful life of non financial assets, impairment of property, plant and the amounts recorded in the financial statements. Theseequipment, impairment of goodwill and intangible assets, reserve for staff retirement indemnities and youth account, recognition of revenues and expenses and income taxes. Management bases its estimates and assumptions are revised on an on-going basis and the impact of any revisions is recognized in the period they are incurred. These estimates and assumptions are based on existinghistorical experience and on various factors consideredother assumptions that are believed to be reasonable, under the current conditions. These estimates and assumptions areresults of which form the basisbases for decisions related tomaking judgments about the accountingcarrying value of assets and liabilities whichthat are not readily available from other sources. The actual finalActual results may differ from these estimates and these variations may have a significant impact on the financial statements.under different assumptions or conditions.
 
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheetreporting date, that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
 
Impairment of goodwill and non financial assets with indefinite useful lives:
 
The Group determines whether goodwill and non-financial assets with an indefinite useful life areis impaired at least on an annual basis. This requires an estimation of the value in use of the cash generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. Further details on impairment testing are disclosed in Note 5.
 
Provision for income taxes:taxes
 
The provision for income taxes in accordance with IAS 12 “Income taxes”, are the amounts expected to be paid to the taxation authorities and includes provision for current income taxes reported and the potential additional tax that may be imposed as a result of audits by the taxation authorities. Group entities are subject to income taxes in various jurisdictions and significant management judgment is required in determining provision for income taxes. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which the Group operates, or unpredicted results from the final determination of each year’s liability by taxing authorities. These changes could have a significant impact on the Group’s financial position. Where the actual additional taxes payable are different from the amounts that were initially recorded, these differences will impact the income tax and deferred tax provisions in the period in which such a determination is made. Further details are provided in Note 22.

F-11

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)21.
 
Deferred tax assets:assets
 
Deferred income tax assets and liabilities have been provided for the tax effects of temporary differences between the carrying amount and tax base of such assets and liabilities, using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused losses can be utilized. Significant management judgment is required to determineThe Group has considered future taxable income and followed ongoing feasible and prudent tax planning strategy in the amountassessment of the recoverability of deferred tax assets. The accounting estimate related to deferred tax assets that can be recognized, based uponrequires management to make assumptions regarding the likely timing and level


F-12

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of future events, including the probability of expected future taxable profits together with futureincome and available tax planning strategies.opportunities. Further details are provided in Note 22.21.
 
Allowance for doubtful trade receivables:receivables
 
The Group’s management periodically reassesses the adequacy of theGroup establishes an allowance for doubtful trade receivables in conjunctionaccounts sufficient to cover reasonably estimable loss for these accounts. Because of the number of accounts, it is not practical to review the collectibility of each account; therefore, at each reporting date accounts receivable are assessed based on historical trends, statistical information, future expectations regarding suspended or cancelled customers, reactivation rates for suspended customers and collection rates for amounts due from cancelled customers. Other operators are examined and assessed on an individual basis. The balance of such allowance for doubtful accounts is adjusted by recording a charge to the income statement of the reporting period. Any amount written off with its credit policy, taking intorespect to customer account historical data and recent developments.balances is charged against the existing allowance for doubtful accounts. Additional details are provided in Note 31.10 and Note 30.
 
Post retirement and other defined benefit plans:plans
 
The costStaff Retirement Indemnities and Youth Account obligations are calculated at the discounted present value of defined benefit plansthe future retirement benefits and benefits to children of employees deemed to have accrued at year-end, based on the assumption that employees earn Retirement and Youth Account benefits uniformly throughout the working period. Retirement and Youth Account obligations are determined usingcalculated on the basis of financial and actuarial valuations. The actuarial valuation involves making assumptions aboutthat require management to make assumptions regarding discount rates, future salarypay increases, mortality and disability rates, expected future inflation ratesretirement ages and GDP increases.other factors. Changes in these key assumptions can have a significant impact on the obligation and pension costs for the period. Net pension costs for the period consist of the present value of benefits earned in the year, interest costs on the benefits obligation, prior service costs and actuarial gains or losses. The Staff Retirement Indemnities and Youth Account benefit obligations are not funded. Due to the long term nature of these defined benefit plans these assumptions are subject to a significant degree of uncertainty. Further details are provided in Note 19.18.
 
Estimating the useful life of non financial assets:assets
 
The Group must estimate the useful life of property, plant and equipment and finite intangible assets recognized at acquisition or as a result of a business combination. These estimates are revisited at least every balance sheet dateon an annual basis taking into account new developments and market conditions.
 
Contingent liabilities:liabilities
 
The existenceGroup is currently involved in various claims and legal proceedings. Periodically, the Group reviews the status of contingenteach significant matter and assesses potential financial exposure, based in part on the advice of legal counsel. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reliably estimated, the Group recognizes a liability for the estimated loss. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. With respect to the retail customers, and because of uncertainties related to these matters, provisions are based only on the most accurate information available at the reporting date. As additional information becomes available, the Group reassesses the potential liability related to pending claims and litigation and may revise assessments of the probability of an unfavourable outcome and the related estimate of potential loss. Such revisions in the estimates of the potential liabilities could have a material impact on the Group’s financial position and results of operations.
Impairment of property, plant and equipment
The determination of impairment of property, plant and equipment involves the use of estimates that include, but are not limited to, the cause, timing and amount of the impairment. Impairment is based on a large number of


F-13

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
factors, such as changes in current competitive conditions, expectations of growth in the telecommunications industry, increased cost of capital, changes in the future availability of financing, technological obsolescence, discontinuance of services, current replacement costs, prices paid in comparable transactions and other changes in circumstances that indicate an impairment exists. The recoverable amount is typically determined using a discounted cash flow method which incorporates reasonable market participant assumptions. The identification of impairment indicators, as well as the estimation of future cash flows and the determination of fair values for assets (or groups of assets) require management to make assumptionssignificant judgments concerning the identification and judgmentsvalidation of impairment indicators, expected cash flows, applicable discount rates, useful lives and residual values.
Customer activation fees
Installation and activation fees are received from new customers. These fees (and related todirectly attributable costs) are deferred and amortized over the probabilityexpected duration of occurrencethe customer relationship. If management estimates of future events as well asthe duration of the customer relationship are revised, significant differences may result in the timing of revenue for any period.
New pronouncements and amendments
The following new and amended IFRS and IFRIC interpretations have been issued but are not effective for the financial year beginning January 1, 2009. They have not been early adopted and the Group is in the process of assessing their potential impact, if any, on the Group’s operations.financial statements:
• IFRIC 17 Distributions of Non-cash Assets to Owners:  This interpretation is effective for annual periods beginning on or after July 1, 2009 with early application permitted. The interpretation provides guidance on how to account for non-cash distributions to owners. The interpretation clarifies when to recognize a liability, how to measure it and the associated assets, and when to derecognize the asset and liability.
• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments:  The interpretation is effective for annual periods beginning on or after July 1, 2010. This interpretation addresses the accounting treatment when there is a renegotiation between the entity and the creditor regarding the terms of a financial liability and the creditor agrees to accept the entity’s equity instruments to settle the financial liability fully or partially. IFRIC 19 clarifies such equity instruments are “consideration paid” in accordance with paragraph 41 of IAS 39. As a result, the financial liability is derecognized and the equity instruments issued are treated as consideration paid to extinguish that financial liability.
• IFRIC 14 Prepayments of a Minimum Funding Requirement (Amended):  The amendment is effective for annual periods beginning on or after January 1, 2011. The purpose of this amendment was to permit entities to recognize as an asset some voluntary prepayments for minimum funding contributions. Earlier application is permitted and must be applied retrospectively.
• IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended):  The revision and amendment is effective for annual periods beginning on or after July 1, 2009. The revised IFRS 3 introduces a number of changes in the accounting for business combinations which impacts the amount of goodwill recognized, the reported results in the period that an acquisition occurs, and future reported results. Such changes include the expensing of acquisition-related costs and recognizing subsequent changes in fair value of contingent consideration in the income statement (rather than by adjusting goodwill). The amended IAS 27 requires that a change in ownership interest of a subsidiary is accounted for as an equity transaction. Therefore such a change will have no impact on goodwill, nor will it give raise to a gain or loss. Furthermore the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes introduced by IFRS 3 (Revised) and IAS 27 (Amendment) must be applied prospectively and will affect future acquisitions and transactions with non-controlling interests.


F-14

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
• IAS 39 Financial Instruments: Recognition and Measurement (Amended) — eligible hedged items:  The amendment is effective for annual periods beginning on or after July 1, 2009. The amendment clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as hedged item. This also covers the designation of inflation as a hedged risk or portion in particular situations.
• IFRS 9 Financial Instruments — Phase 1 financial assets, classification and measurement:  The new standard is effective for annual periods beginning on or after January 1, 2013. Phase 1 of this new IFRS introduces new requirements for classifying and measuring financial assets. Early adoption is permitted.
• IFRS 2 Group Cash-settled Share-based Payment Transactions (Amended):  The amendment is effective for annual periods beginning on or after January 1, 2010. This amendment clarifies the accounting for group cash-settled share-based payment transactions and how such transactions should be arranged in the individual financial statements of the subsidiary.
• IAS 32 Classification on Rights Issues (Amended):  The amendment is effective for annual periods beginning on or after February 1, 2010. This amendment relates to the rights issues offered for a fixed amount of foreign currency which were treated as derivative liabilities by the existing standard. The amendment states that if certain criteria are met, these should be classified as equity regardless of the currency in which the exercise price is denominated. The amendment is to be applied retrospectively.
• IAS 24 Related Party Disclosures (Revised):  The revision is effective for annual periods beginning on or after January 1, 2011. This revision relates to the judgment which is required so as to assess whether a government and entities known to the reporting entity to be under the control of that government are considered a single customer. In assessing this, the reporting entity shall consider the extent of economic integration between those entities. Early application is permitted and adoption shall be applied retrospectively.
• IFRS 1 Additional Exemptions for First-time Adopters (Amended):  The amendment is effective for annual periods beginning on or after January 1, 2010.
• IFRS 1 Limited Exemption from Comparative IRFS 7 Disclosures for first time adopters (Amended):  The amendment is effective for annual periods beginning on or after July 1, 2010.
• In April 2009 the IASB issued its second omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. The effective dates of the improvements are various and the earliest is for the financial year beginning on or after July 1, 2009.
• In May 2010 the IASB issued its third omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. The effective dates of the improvements are various and the earliest is for the financial year beginning on or after July 1, 2010.
 
3.  SIGNIFICANT ACCOUNTING POLICIES
 
The financial statements have been prepared using accounting policies consistent with those of the previous year except for the adoption of the following new and amended IFRS and IFRIC interpretations which became effective for the accounting period beginning January 1, 2008:2009:
 
 • IFRIC 11, “IFRS 2 — Group and Treasury Share Transactions”13, “Customer Loyalty Programs”,.  IFRIC 11 requires arrangements whereby an employee is granted options to buy equity shares, to be accounted for as equity-settled schemes by an entity even if the entity chooses or is required to buy those equity shares from another party, or the shareholders of the entity provide the equity instruments granted. The interpretation also extends to the way in which subsidiaries, in their separate financial statements, account for such schemes when their employees receive rights to equity instruments of the parent. This Interpretation is applicable to the Group, in connection with the accounting treatment in the subsidiaries individual financial statements, for options granted to their employees to buy equity shares of the Company. The accounting treatment followed by the Group is in line with the relevant provisions of the Interpretation. effective July 1, 2008
 
 • IFRIC 12, “Service Concession Arrangements”.  This Interpretation outlines an approach to account for contractual (service concession) arrangements arising from entities providing public services. It provides that the operator should not account15, “Agreements for the infrastructure as property, plant and equipment, but recognize a financial assetand/or an intangible asset. IFRIC 12 is not relevant to the Group.Construction of Real Estate”, effective January 1, 2009
 
 • IFRIC 14, “IAS 19 — The Limit on16, “Hedges of a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”.  IFRIC 14 provides guidance on how to assess the limit on the amount of surplusNet Investment in a definedForeign Operation”, effective October 1, 2008
• IFRIC 9, “Remeasurement of Embedded Derivatives (Amended) and IAS 39 Financial Instruments: Recognition and Measurement (Amended)”,effective for periods ending on or after June 30, 2009


F-12F-15

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
 • benefit scheme that can be recognized as an asset under IFRS 1, “First-time Adoption of International Financial Reporting Standards (Amended)”, and“IAS 19 Employee Benefits. It also explains how this limit, also referred27 Consolidated and Separate Financial Statements (Amended)”, effective January 1, 2009
• IFRS 2, “Share-based Payment:Vesting Conditions and Cancellations (Amended)”, effective January 1, 2009
• IFRS 8, “Operating Segments”, effective January 1, 2009
• IFRS 7, “Financial Instruments:Disclosures (Amended)”, effective January 1, 2009
• IAS 1, “Presentation of Financial Statements (Revised)”, effective January 1, 2009
• IAS 32, “Financial Instruments:Presentation (Amended) and IAS 1 Puttable Financial Instruments and Obligations Arising on Liquidation (Amended)”, effective January 1, 2009
• IAS 23, “Borrowing Costs (Revised)”, effective January 1, 2009
• Improvements to as the “asset ceiling test”IFRSs (May 2008)
• IFRIC 18, “Transfers of Assets from Customers”, may be influenced by a minimum funding requirement and aims to standardize current practice. This Interpretation has not had any impact on the Group’s financial position or performance as all defined benefit schemes are currently in deficit. effective for transfers after July 1, 2009
The adoption of the above new and amended IFRS and IFRIC interpretations did not have an impact on the financial statements or performance of the Group, however the following had an impact in the presentation or disclosures of the financial statements as described below:
 
 • IAS 39, “Financial Instruments: Recognition1, “Presentation of Financial Statements” (Revised),The revised standard requires that the statement of changes in equity includes only transactions with owners; introduces a new statement of comprehensive income that combines all items of income and Measurement”expense recognized in the income statement together with “other comprehensive income” (either in one single statement or in two linked statements); and requires the inclusion of a third column on the statement of financial position to present the effect of restatements of financial statements or retrospective application of a new accounting policy as at the beginning of the earliest comparative period. The Group made the necessary changes to the presentation of its financial statements in 2009 and elected to present two linked statements for the statement of comprehensive income.
• IFRS 7, “Financial Instruments: Disclosures; Reclassification of Financial Assets”Disclosures”,effective from July 1, 2008The amended standard requires additional disclosures about fair value measurement and cannot be applied retrospectivelyliquidity risk. Fair value measurements related to reporting periods before the effective date. The amendment to IAS 39 permits an entity to reclassify non-derivative financial assets (other than those designateditems recorded at fair value through profit or lossare to be disclosed by the entity upon initial recognition) outsource of inputs, using a three-level hierarchy, by class, for all financial instruments recognized at fair value. In addition, reconciliation between the beginning and ending balance for level 3 fair value measurements is now required, as well as significant transfers between the levels in the fair value through profit or loss (“FVTPL”) category in particular circumstances. The amendment also permits an entity to transfer from the available-for-sale category to the loans and receivables category a financial asset that would have met the definition of loans and receivables (if the financial asset had not been designated as available for sale), if the entity has the intention and ability to hold that financial asset for the foreseeable future.hierarchy. The amendments doalso clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used for liquidity management. The fair value measurement disclosures and the liquidity disclosures, which are not permit reclassification into FVTPL.significantly impacted by the amendment, are presented in note 30.
• IFRS 8, “Operating segments”, IFRS 8 replaces IAS 14 “Segment reporting” and adopts a management approach to segment reporting. The amendment toGroup concluded that the operating segments determined in accordance with IFRS 7 relates to8 are the same as the business segments previously identified under IAS 14. Additional disclosures required to financial assets that have been reclassified. This amendment has not had any impact on the Group’s financial position or performance.by IFRS 8 are shown in note 26.
 
The significant accounting policies applied for the preparation of the accompanying financial statements under IFRS are as follows:
 
1. Basis of Consolidation:Consolidation and Investments
 
(a) Subsidiaries:  The consolidated financial statements compriseare comprised of the financial statements of the Company and all subsidiaries controlled by the Company directly or indirectly. Control exists when the Company has the power to govern the financial and operating policies of the subsidiaries so as to obtain benefits from their activities. The financial statements of the subsidiaries are prepared as of the same reporting period as the parent company, using consistent accounting policies. Appropriate adjustments are made when necessary to ensure consistency in accounting policies used. All intercompany balances, transactions and any intercompany


F-16

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
profit or loss are eliminated in the consolidated financial statements. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. The acquisitionAn inter company loan to a foreign subsidiary for which settlement is neither planned nor likely to occur in the foreseeable future, is considered to be part of subsidiaries is accounted for using the purchase method of accountingnet investment in that measuresforeign operation. In the acquiree’s assetsconsolidated financial statements the foreign exchange gains and liabilities and contingent liabilities at their fair value at the date of acquisition.losses arising are recorded in other comprehensive income.
 
(b) Associates:  Associates are those entities in which the Group has significant influence upon, but not control over their financial and operating strategy. Significant influence is presumed to exist when the Group has the right to participate in the financial and operating policy decisions, without having the power to govern these policies. Investments in associates in which the Group has significant influence are accounted for using the equity method. Under this method the investment is carried at cost, and is adjusted to recognize the investor’s share of the earnings or losses of the investee from the date that significant influence commences until the date that significant influence ceases and also for changes in the investee’s net equity. Gains or losses from transactions with associates are eliminated to the extent of the interest in the associate. Dividends received from associates are eliminated against the carrying value of the investment. The associate’s value is adjusted for any accumulated impairment loss.
When the Group’s share of losses exceeds the carrying amount of the investment, the carrying amountvalue of the investment is reduced to nil and recognition of further losses is discontinued, except to the extent the Group has created obligations or has made payments on behalf of the associate.
 
Dividends receivedTransactions between companies under common control:  Transactions between companies under common control are excluded from associatesthe scope of IFRS 3. Therefore the Group (implementing the guidance of IAS 8 “Accounting policies, changes in accounting estimates and errors” for similar cases) accounts for such transactions using a method like “pooling of interests”. Based on this principle, the Group consolidates the book values of the combined entities (without revaluation to fair values). The financial statements of the Group or the new entity after the transaction are eliminated againstprepared on the carryingbasis as if the new structure was in effect since the beginning of the first period which is presented in the financial statements and consequently the comparative figures are adjusted. The difference between the purchase price and the book value of the investment.percentage of the net assets acquired is recognized directly in equity.
 
2. Financial Assets — Investments:  Investments:  Financial assets are initially measured at their fair value, which is normally the acquisition cost, plus, in the case of investments not at fair value through profit and loss, directly attributable transaction costs. Financial assets are classified as being at fair value through profit and loss, held to


F-13

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
maturity, or available-for-sale.available-for-sale as appropriate. The Group determines classification of its financial assets at initial recognition. Financial assets at fair value through profit or loss are measured at fair value and gains or losses are recognized in the income statement.Held-to-maturity investments are measured at amortized cost using the effective interest method and gains or losses through the amortization process are recognized in income. Available for salethe income statement.Available-for-sale financial assets are measured at fair value and gains or losses are recognized directly in equityother comprehensive income while upon sale or impairment gains or losses are recognized in the income statement. The fair values of quoted investments are based on quoted market bid prices. For investments where there is no quoted market price, fair value is determined using valuation techniques. Purchase or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place are recognized on the settlement date (i.e. the date that the asset is transferred or delivered to the Group).
 
Offsetting of financial assets and liabilities:liabilities:  Financial assets and liabilities are offset and the net amount is presented in the balance sheetstatement of financial position only when the Group has a legally enforceable right to set off the recognized amounts and intends to either to settle such asset and liability on a net basis or to realize the asset and settle the liability simultaneously.


F-17

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Impairment of financial assets:assets:  The Group assesses at each balance sheetreporting date, whether a financial asset or group of financial assets is impaired.impaired as follows:
 
(i) Assets held to maturity:maturity:  If there is objective evidence that an impairment loss on loans and receivablesinvestments carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The amount of the loss shall beis recognized in profit or loss.the income statement.
 
(ii) Available-for-sale financial assets:  assets:  If anavailable-for-sale asset is impaired, an amount comprising the difference between its acquisition cost (net of any principal payment and amortization) and its current fair value, less any impairment loss previously recognized in profit or lossthe income statement is transferred from equityother comprehensive income to the income statement. Reversals of impairment in respect of equity instruments classified asavailable-for-sale are not recognized in profit.the income statement. Reversals of impairment losses on debt instruments are reversed through profit or lossthe income statement if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss waslosses were recognized in profit or loss.the income statement.
 
Derecognition of financial assets:assets:  A financial asset (or, a part of a financial asset or part of a group of similar financial assets) is derecognized where:when:
 
 • Thethe rights to receive cash flows from the asset have expired;
 
 • the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or
 
 • the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the assets, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
 
Where the Group has transferred itstheir rights to receive cash flows from an asset and hashave neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset andor the maximum amount of consideration that the Group could be required to repay. Where continuing involvement takes the form of a writtenand/or purchase option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.


F-14

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Derecognition of financial liabilities:liabilities:  A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the income statement.
 
Non-current Assets Held for Sale:Sale:  The Group classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use.
 
The basic preconditions to classify a non-current asset (or a disposal group) as held for sale are that it must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets or groups and its sale must be highly probable. For the sale to be highly probable the appropriate level of management must be committed to a plan to sell the asset (or disposal group).


F-18

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Immediately before the initial classification of a non current asset (or a disposal group) as held for sale, the asset (or the assets and liabilities included in the disposal group) will beis measured in accordance with the applicable IFRS. Non current assets (or disposal group) classified as held for sale will beare measured at the lower of itstheir carrying amount and fair value less costs to sell and any possible resulting impairment losses will beare recognized in the income statement. Any subsequent increase in fair value will beis recognized, but not in excess of the cumulative impairment loss which was previously recognized.
 
While a non-current asset (or non-current assets that are included in a disposal group) is classified as held for sale it shouldis not be depreciated or amortized.
 
3. Foreign Currency Translation:  Translation:  OTE’s functional currency is the Euro. Transactions involving other currencies are translated into Euro at the exchange rates, ruling on the date of the transactions. At the balance sheetreporting date, monetary assets and liabilities, which are denominated in foreign currencies, are retranslated at the exchange rates at that date. Gains or losses resulting from foreign currency translation are recognized in income.the income statement.
 
Non-monetary items denominated in foreign currencies that are measured at historical cost are retranslatedtranslated at the exchange rate at the date of the initial transaction. Non-monetary items denominated in foreign currencies that are measured at fair value are retranslated at the exchange rates at the date that the fair value was determined. The foreign currency differences arising from part of gains or losses from the change ofin the fair value andof these items are recognized in the income statement or directly in equityother comprehensive income depending on the underlying monetary item. The
Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using the Group’s operations outside Greece is the local country’sfunctional currency. Assets and liabilities of operations outside Greece,these entities, including goodwill and the fair value adjustments to the carrying amounts of assets and liabilities arising from consolidation,on acquisition, are translated into Euro using exchange rates ruling at the balance sheetreporting date. Revenues and expenses are translated at the average exchange rates prevailing duringat the year.date of the transaction. All resulting foreign exchange differences are recognized as a separate component of shareholders’ equityin other comprehensive income and are recognized in the income statement on the disposal of the foreign entity.operation.
 
4. Goodwill:  AllGoodwill and business combinations are:  The acquisition of subsidiaries is accounted for using the purchase method.acquisition method of accounting that measures the acquiree’s assets and liabilities and contingent liabilities at their fair value at the date of acquisition. For business combinations occurring subsequent to the date of transition to IFRS, goodwill is the excess of the purchase price over the fair value of the net identifiable assets acquired. For business combinations occurring prior to the date of transition to IFRS, goodwill is recorded at the carrying value at the date of transition, based on previous GAAP. Goodwill is not amortized but is tested for impairment at least annually. Theannually and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount for each cash generating unit to which goodwill relates. Where the recoverable amount of the cash generating unit is less than the carrying amount an impairment testloss is a process required by IAS 36 “Impairment of assets”.recognized. Thus, after initial recognition, goodwill is measured at cost less any accumulated impairment losses. An impairment loss recognized for goodwill shallis not be reversed in a subsequent period. Goodwill on acquisition of subsidiaries is presented as an intangible asset. Negative goodwill on acquisition of subsidiaries is recorded directly in the income statement. Goodwill recognized on acquisition of associates is included in the carrying amount of the investment. The difference between the cost of acquisition and the non-controlling interest acquired, arising on the acquisition of a minority interestnon-controlling interests in a subsidiary where control already exists, is recorded directly in equity.


F-15

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued) When non-controlling interests are disposed of, but control is retained, any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the parent.
 
5. Property, Plant and Equipment:  Equipment:  Items of property, plant and equipment are measured at cost, net of subsidies received, plus interest costs incurred during periods of construction, less accumulated depreciation and any impairment in value. Any statutory revaluations based on Greek legislation, are reversed.
 
Subsidies are presented as a reduction of the cost of property, plant and equipment and are recognized in the income statement over the estimated life of the assets through reduced depreciation expense.


F-19

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Construction in progress is recorded as part of property, plant and equipment and depreciation on the self constructed assets commences when the asset is available for use. The cost of self-constructed assets includes the cost of materials, direct labor costs, relevant general overhead costs, as well as the cost relatingcosts. Investment supplies comprise of assets to asset retirement obligationsbe utilized in the period in which they are generated and to the extent that their fair value can be reasonably estimated.construction of assets.
 
The relevant asset retirement costs are capitalized as part of thepresent value of the property, plant and equipmentexpected retirement costs, for a relevant asset, is included in the cost of the respective asset if the recognition criteria for a provision are met and are depreciated accordingly.
 
Repairs and maintenance costs are expensed as incurred. The cost and related accumulated depreciation of assets retired or sold are removed from the corresponding accounts at the time of sale or retirement, and any gain or loss is included in the income statement.
 
Expenditure relating to the replacement of part of an item of property, plant and equipment is added to the carrying amount of the asset if it is probable that future economic benefits will flow to the Group and its cost can be measured reliably.reliably measured. All other expenditures are recognized in the income statement as incurred.
 
Investment property consists of all property held to earn rentals or for capital appreciation and not used in the production or for administrative purposes.
6. Depreciation:  Depreciation:  Depreciation is recognized on a straight-line basis over the estimated useful lives of property, plant and equipment, which are periodically reviewed. The estimated useful lives and the respective rates are as follows:
 
     
  Estimated
 Depreciation
  Useful Life Rates
 
Buildings — building installations 20-40 years 2.5%-5%
Telecommunication equipment and installations:    
•   Telephone exchange equipment 8-12 years 8-12.5%8.3%-12.5%
•   Radio relay stations 8 years 12.5%
•   Subscriber connections 10 years 10%
•   Local and International network 8-17 years 6-12.5%6%-12.5%
•   Other 5-10 years 10-20%10%-20%
Transportation equipment 5-8 years 12.5-20%12.5%-20%
Furniture and fixtures 3-5 years 20%-33%
 
7. Employee Benefits:
 
a) Defined Contribution Plans:  Plans:  Obligations for contributions to defined contribution plans are recognized as an expense as incurred. There are no legal or constructive obligations to pay any further amounts.
 
b) Defined Staff Benefit Plans:  Plans:  Obligations derived from defined staff benefit plans are calculated separately for each plan by estimating the amount of future benefits employees have earned in return for their service as of the balance sheetreporting date. These benefits are discounted to their present value after taking any adjustments for actuarial gains and losses and past service cost. The discount rate is the yield of Greek Governmenthigh quality European corporate bonds with maturity that approximates the term of the obligations. These obligations are calculated on the basis of financial and actuarial assumptions which are carried out by independent actuaries using the Projected Unit Credit Method. Net pension cost for the period is recognized in the income statement and consists of the present value of the accrued benefits, interest cost on the benefits obligation, prior service cost and actuarial gains or losses. For post employment plans, prior service costs are recognized on a straight-line basis over the average period until the benefits become vested. All actuarial gains or losses are recognisedrecognized during the average remaining working life of


F-16

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
active employees and are included in the service cost of the year, if the net cumulative unrecognized actuarial gains and losses at the beginningend of the year they don’t exceedprevious reporting period exceeded the 10% of the projectedpresent value of the defined benefit obligation.obligation at that date. For other long term benefits actuarial gains and losses and past service costs are recognized immediately. Contributions that are related to employees who retire under the voluntary retirement program are recognized when employees accept the offer and the amounts can be reasonably estimated.


F-20

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
8. Taxes:  Taxes:  Income taxes include current and deferred taxes. Current tax is measured on the taxable income for the year using enacted or substantively enacted tax rates at the balance sheet date.reporting date in the countries where the Group operates and generates taxable income.
 
Deferred taxes are provided on all temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax liabilities are recognized for all taxable temporary differences except:
 
 • where the deferred tax liability arises from the initial recognition of goodwill of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
 
 • in respect of taxable temporary differences associated with investment in subsidiarysubsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
 
Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized except:
 
 • where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of goodwill of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
 
 • in respect of taxable temporary differences associated with investment in subsidiarysubsidiaries and associates, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
 
Deferred tax is measured at the tax rates that are expected to apply in the year when the asset is realized or liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheetreporting date. The carrying amount of deferred tax assets is reviewed at each balance sheetreporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilized.
 
Income tax (current and deferred) relating to items recognized directly in equity is recognized directly in equity and not in the income statement.
 
9. Cash and Cash Equivalents:  Equivalents:  For purposes of the cash flow statement, time deposits and other highly liquid investments with original maturities of three months or less are considered to be cash and cash equivalents.
 
10. Advertising Expenses:  Expenses:  All advertising costs are expensed as incurred.
 
11. Research and Development Costs:  Costs:  Research and developmentcosts are expensed as incurred. Development costs which do not fulfill the criteria for recognition as an asset are expensed as incurred.
 
12. Recognition of Revenues and Expenses:  Expenses:  Fixed revenues primarily consist of connection charges, monthly network services fees, exchange network and facilities usage charges, other value added communication services fees, and sales of handsets and accessories. Revenues are recognized as follows:
 
 • Connection charges:charges:  Connection charges for the fixed network are deferred and amortized to income over the average customer retention period. Connection costs, up to the amount of deferred connection fees are recognized over the average customer retention period. No connection fees are charged for mobile services.


F-17

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 • Monthly network service fees:fees:  Revenues related to the monthly network service fees are recognized in the month that the telecommunication service is provided.


F-21

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 • Usage Charges and Value Added Services Fees:Fees:  Call fees consist of fees based on airtime and traffic generated by the caller, the destination of the call and the service utilized. Fees are based on traffic, usage of airtime or volume of data transmitted for value added communication services. Revenues for usage charges and value added communication services are recognized in the period when the services are provided.
 
Revenues from outgoing calls made by OTE’s subscribers to subscribers of mobile telephony operators are presented at their gross amount in the income statement as the credit and collection risk remains solely with OTE. Interconnection fees formobile-to-mobile calls are recognized based on incoming traffic generated from other mobile operators’ networks. Unbilled revenues from the billing cycle date to the end of each period are estimated based on traffic.
 
Revenues from the sale of prepaid airtime cards and the prepaid airtime, net of discounts allowed, included in the Group’s prepaid services packages, are recognized based on usage. Such discounts represent the difference between the wholesale price of prepaid cards and boxes (consisting of handsets and prepaid airtime) to the Group’s master dealersMaster Dealers and the retail sale price to the ultimate customers. Unused airtime is included in “Deferred revenue” onin the balance sheet.statement of financial position. Upon the expiration of prepaid airtime cards, any unused airtime is recognized to income.in the income statement.
 
Airtime and acquisition commission costs due to the Group’s master dealers for each subscriber acquired through their network are expensed as incurred. Commissions paid for each contract subscriber acquired by the master dealers as well as bonuses paid to master dealers in respect of contract subscribers who renew their annual contracts, are deferred and amortized as expenses over the contract period. Airtime commissions due to the Group’s master dealers for each subscriber acquired through their network are expensed as incurred.
 
 • Sales of telecommunication equipment:equipment:  Revenues from the sale of handsets and accessories, net of discounts allowed, are recognized at thepoint-of-sale, when the significant risks and rewards of ownership have passed to the buyer.
 
 • Revenues from dividends:Dividend income  Revenues from dividends are:  Dividend income is recognized when the right to receive payment is established with the approval for distribution by the General Assembly of shareholders.
 
 • Interest income:income:  Interest income is recognized as the interest accrues (using the effective interest method).
 
 • Revenues from construction projects:projects:  Revenues from construction projects are recognized in accordance with the percentage of completion method.
• Principal and agency relationship:  In a principal and agency relationship, amounts collected by the agent on behalf of the principal do not result in increases in equity of the agent and thus, they are not revenues for the agent. Revenue for the agent is the amount of commission received by the principal. On the other hand, the principal’s revenues consist of the gross amounts described above and the commission paid to the agent is recognized as an expense.
In a principal and agency relationship, amounts collected by the agent on behalf of the principal do not result in increases in equity of the agent and thus, they are not revenues for the agent. Revenue for the agent is the amount of commission received by the principal. On the other hand, the principal’s revenues consist of the gross amounts described above and the commission paid to the agent is recognized as an expense.
 
13. Earnings per Share:Share:  Basic earnings per share isare computed by dividing netthe profit for the year attributable to the Company’s shareholdersowners by the weighted average number of shares outstanding during each year. Diluted earnings per share isare computed by dividing netthe profit for the year attributable to the Company’s shareholdersowners by the weighted average number of shares outstanding during the year adjusted for the impact of share based payments.
 
14. Segment Reporting:Operating Segments  IAS 14 “Segment Reporting” sets criteria for the determination of the reportable business and geographical:  Operating segments of enterprises. Segments are determined based on the Group’s legal structure, as the Group’s chief operating decision makers review financial information separately reported by the Company and each of the consolidated subsidiaries or thesub-group included in the consolidation. The reportable segments are determined using the quantitative thresholds required by the respective Standard. Information for operating segments that do not constitute reportable segments is combined and disclosed in the “All Other” category. The accounting policies of the segments are the same with those followed for the preparation of the financial statements. EachManagement evaluates segment performance based on operating profit before depreciation, amortization and cost of early retirement program, operating profit and profit for the year.


F-18F-22

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
segment performance is evaluated based on operating profit before depreciation and amortization, operating income and profit for the year.
 
15. Dividends:Dividends:  Dividends declared to the shareholders are recognized and recorded as a liability in the period they are approved by the Shareholders General Assembly.
 
16. Non-Current Financial Assets:Assets:  Non-current financial assets are initially recorded at their fair value, less any transaction costs. Subsequent to the initial recognition, they are measured at amortized cost and the differences between that cost and the amount of receipt/payment are recognized in the income statement over the life of the asset using the effective interest rate method.
 
17. Share Capital Issuance Costs:Costs:  Share capital issuance costs, net of related deferred tax, are reflected as a deduction to Share Premium.
 
18. Treasury Shares:Shares:  Treasury shares consist of OTE’s own equity shares, which are reacquired and not cancelled. Treasury shares do not reduce the number of shares issued but reduce the number of shares in circulation. Treasury shares are recognized at cost as a deduction from equity. Upon derecognition, the cost of the treasury share reduces the Share Capital and Share Premium and any difference is charged to Retained Earnings.
 
19. Leases:Leases:  A lease that transfers substantially all of the rewards and risks incidental to ownership of the leased item is accounted for by the lessee as the acquisition of an asset and the incurrence of a liability, and by the lessor as a saleand/or provision of financing. Lease payments are apportioned between finance charges (interest), which are recognized in the income statement and a reduction of the lease liability. Finance charges are recognized directly as an expense. The asset capitalized at the commencement of a finance lease is recognisedrecognized at fair value of the leased property, or if lower, the present value of the minimum lease payments. Its carrying value is subsequently reduced by the accumulated depreciation and any impairment losses. If the lease does not transfer substantially all of the rewards and risks incidental to ownership of property, it is classified as an operating lease by the lessee and the rental payments are recognized as an expense as incurred.
 
20. Related Parties:Parties:  Related party transactions and balances are disclosed separately in the financial statements. Such related parties principally consiststatements based on the requirements of the Group’s principal owners and management or affiliates of the Group.IAS 24 “Related Party Disclosures”.
 
21. Telecommunication Licenses:Licenses:  Telecommunication licenses are recognized at cost and amortized over their useful life and they are reviewedassessed for impairment at least annually.
 
22. Materials and Supplies:Supplies:  Materials and supplies are measured at the lower of cost and net realizable value. The cost is based on the weighted average cost method. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. When there is any subsequent increase of the net realizable value of materials and suppliers that have been previously written-down, the amount of the write-down is reversed.
 
23. Trade Receivables and Allowance for Doubtful Trade Receivables:Accounts:  Trade receivables are initially recognized at their fair value which is equal to the transaction amount. Subsequently they are measured at fair value less an allowance for any probable uncollectible amounts. At each reporting and financial statements date, all trade receivables are either assessed individually for debtors such as other providers or collectively based on historical trends and statistical information and a provision for the probable and reasonably estimated loss for these accounts is recorded. The balance of such allowance for doubtful accounts is adjusted by recording a charge to the income statement at each reporting period. Any customer account balances written-off are charged against the existing allowance for doubtful accounts.
 
24. Other Intangible Assets:Assets:  Intangible assets acquired separately are measured at cost, while those acquired from a business combination are measured at fair value on the date of acquisition. Subsequently, they are measured at that amount less accumulated amortization and accumulated impairment losses. The useful lives of the intangible assets are assessed to be either definite or indefinite. Intangible assets with a finite useful life are amortized on a straight-line basis over their useful life. Amortization of intangible assets with a finite useful life begins when the asset is


F-19

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
available for use. Intangible assets with an indefinite useful life are not amortized but instead they are tested for impairment at least annually in accordance with IAS 36 “Impairment of assets”. The useful lives of intangible assets are reviewed on an annual basis, and adjustments, where applicable, are made prospectively. Intangible assets are assessed for impairment at least annually on an individual basis or on a cash generating unit basis.


F-23

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
25. Borrowing Costs:Costs:  Borrowing costs incurred duringdirectly attributable to the acquisition, construction or production of a qualifying asset that necessarily takes a substantial period of property, plant and equipment attributabletime to these assets,get ready for its intended use or sale are capitalized as part of the cost of thesethe respective assets. All other borrowing costs are recognized as an expenseexpensed in the income statement when incurred.period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
 
26. Borrowings:Borrowings:  All loans and borrowings are initially recognized at fair value, net of direct costs associated with the borrowing. After initial recognition, borrowings are measured at amortized cost using the effective interest rate method. Gains and losses are recognized in the income statement through the amortization process.
 
27. Provisions:Provisions:  Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are measured by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase of the provision due to the passage of time is recognized as a borrowing cost. Provisions are reviewed at each balance sheetreporting date, and if it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, they are reversed. Provisions are used only for expenditures for which they were originally recognized. No provisions are recognized for future operating losses. Contingent assets and contingent liabilities are not recognized. Provisions for restructuring are recognized when the Group has an approved, detailed and formal restructuring plan, which has either started to be implemented or has been publicly announced to those affected by it. Future operating costsContributions that are not provided for.related to employees, who retire under voluntary retirement programs, are recognized when employees accept the offer and the amounts can be reasonably estimated.
 
28. Impairment of Non- Financial Assets:Assets (excluding goodwill):  The carrying values of the Group’s non financial assets are tested for impairment, when there are indications that their carrying amount is not recoverable. In such cases, the recoverable amount is estimated and if the carrying amount of the asset exceeds its estimated recoverable amount, an impairment loss is recognized in the income statement. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. In measuring value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to that asset. If an asset does not generate cash flows individually, the recoverable amount is determined for the cash generating unit to which the asset belongs. At each reporting date the Group assesses whether there is an indication that an impairment loss recognized in prior periods may no longer exist. If any such indication exists, the Group estimates the recoverable amount of that asset and the impairment loss is reversed, increasing the carrying amount of the asset to its recoverable amount, to the extent that the recoverable amount does not exceed the carrying value of the asset that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
 
29. Share-based payment transactions:transactions:  Certain employees (including senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (“equity settled transactions”). The cost of equity settled transactions is measured by reference to the fair value of share-based compensation is recognized as an expense with a corresponding increase in equity.at the date on which they are granted. The fair value is determined at the grant date, using an appropriate pricing model, and is allocated over the period in which the conditions are fulfilled. Fair valueThe cost of equity settled transactions is measured based on generally accepted methods which take into accountrecognized, together with a corresponding increase to equity over the vesting period.
Where the terms and conditions (except market conditions) under which these rights haveof an equity settled transaction awards are modified, the minimum expense recognized is the expense as if terms had not been granted.modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the share based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.


F-24

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
For share-based payments, the amount expensed is revised to reflect the actual number of equity instruments that ultimately vest, except where the withdrawal of the right is due to the share prices so that vesting conditions were not met.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
30. Derivative Financial Instruments and Hedging Instruments:Instruments:  Derivative financial instruments include interest rate swaps, currency swaps and other derivative instruments.


F-20

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Derivatives for trading purposes:purposes:  Derivatives that do not qualify for hedging are considered as derivatives for trading purposes. Initially, these derivatives are recognized at their fair value (which is essentially the transaction cost) at the commencement date. Subsequent to the initial recognition, they are measured at fair value based on quoted market prices, if available, or based on valuation techniques such as discounted cash flows. These derivatives are classified as assets or liabilities depending on their fair value, with any changes recognized in the income statement.
 
Hedging:Hedging:  For hedge accounting purposes, hedges are classified either as Fair Value Hedges,fair value hedges, where the exposure to changes in the fair value of a recognized asset or liability is being hedged, or as a Cash Flow Hedge,cash flow hedge, where the exposure to variability in cash flows associated with a specifically identified risk which may be directly related to the recognized asset or liability. When hedge accounting is to be applied, at the inception of the hedge there is formal documentation which includes identification of the hedging instrument, the hedged item, the hedging relationship, the nature of the risk being hedged and the risk strategy.
 
In a Fair Value Hedge,fair value hedge, the gain or loss from re-measuring the hedging instrument at fair value is recognized in the income statement and the carrying amount of the hedged item is adjusted to fair value with respect to the risk being hedged and the fair value adjustment is recognized in the income statement.
 
In a cash flow hedge, the portion of the gain or loss arising from the fair value movement on the hedging instrument that is determined to be effective is recognized directly in equityother comprehensive income and the ineffective portion is recognized in the income statement.
 
31. Reclassifications:Reclassifications:  Certain reclassifications have been made to prior year balances to conform to current year classifications. Such reclassifications did not have any effect on prior period results. Further details of the nature and impact of these reclassifications are disclosed in Note 32. In addition certain reclassifications werehave been made within the Notes for comparability purposes. These reclassifications did not have any impact on the comparative financial statements’ netGroup’s equity or income statement.profit for the year. Further details of the nature of these reclassifications are disclosed in Note 31.
 
32. The following new and amended IFRS and IFRIC interpretations have beenFinancial Guarantee Contracts:  Financial guarantee contracts issued but are not effective for the financial year beginning January 1, 2008 and have not been early adopted by the Group:Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount recognized less cumulative amortization.
• IFRIC 13,“Customer Loyalty Programmes”, effective for financial years beginning on or after July 1, 2008. This Interpretation requires customer loyalty award credits to be accounted for as a separate component of the sales transaction in which they are granted and therefore part of the fair value of the consideration received is allocated to the award credits and deferred over the period that the award credits are fulfilled. The Group does not expect that this interpretation will impact the financial statements.
• IFRIC 15,“Agreements for the Construction of Real Estate”, issued on July 3, 2008 and effective for financial years beginning on or after January 1, 2009 and is to be applied retrospectively. IFRIC 15 provides guidance on how to determine whether an agreement for the construction of real estate is within the scope of IAS 11 ‘Construction Contracts’ or IAS 18 ‘Revenue’ and, accordingly, when revenue from such construction should be recognized. The Group does not expect that this interpretation will impact the financial statements.
• IFRIC 16,“Hedges of a Net Investment in a foreign operation”, issued on July 3, 2008 and effective for financial years beginning on or after October 1, 2008 and is to be applied prospectively. IFRIC 16 clarifies three main issues, namely:
• A presentation currency does not create an exposure to which an entity may apply hedge accounting. Consequently, a parent entity may designate as a hedged risk only the foreign exchange differences arising from a difference between its own functional currency and that of its foreign operation.
• Hedging instrument(s) may be held by any entity or entities within the group.


F-21F-25

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
• While IAS 39, ’Financial Instruments: Recognition and Measurement’, must be applied to determine the amount that needs to be reclassified to profit or loss from the foreign currency translation reserve in respect of the hedging instrument, IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ must be applied in respect of the hedged item.
The Group does not expect that this Interpretation will impact the financial statements.
• IFRIC 17,“Distributions of Non-cash Assets to Owners”, effective for annual periods beginning on or after July 1, 2009. IFRIC 17 clarifies the following issues, namely:
— a dividend payable should be recognized when the dividend is appropriately authorized and is no longer at the discretion of the entity;
— an entity should measure the dividend payable at the fair value of the net assets to be distributed;
— an entity should recognize the difference between the dividend paid and the carrying amount of the net assets distributed in profit or loss; and
— An entity to provide additional disclosures if the net assets being held for distribution to owners meet the definition of a discontinued operation.
IFRIC 17 applies to pro rata distributions of non-cash assets except for common control transactions. It is to be applied prospectively and earlier application is permitted. The Group is in the process of assessing the impact of this Interpretation.
• IFRIC 18,“Transfers of Assets from Customers”, effective for assets transferred on or after July 1, 2009 and is to be applied prospectively. However, limited retrospective application is permitted. This Interpretation is of particular relevance for the utility sector as it clarifies the accounting for agreements where an entity receives an item of Property Plant and Equipment (or cash to construct such an item) from a customer and this equipment in turn is used to connect a customer to the network or to provide ongoing access to supply of goods/services. The Group is in the process of assessing the impact of this Interpretation.
• IFRS 2,“Share-based Payments” (Amended), effective for annual periods beginning on or after January 1, 2009. The amendment clarifies two issues. The definition of ‘vesting condition’, introducing the term ‘non-vesting condition’ for conditions other than service conditions and performance conditions. It also clarifies that the same accounting treatment applies to awards that are effectively cancelled by either the entity or the counterparty. The Group does not expect that this Interpretation will impact the financial statements.
• IFRS 3,“Business Combinations” (Revised) and IAS 27, “Consolidated and Separate Financial Statements” (Amended), effective for annual periods beginning on or after July 1, 2009. A revised version of IFRS 3 Business Combinations and an amended version of IAS 27 “Consolidated and Separate Financial Statements” were issued by IASB on January 10, 2008. The revised IFRS 3 introduces a number of changes in the accounting for business combinations which will impact the amount of goodwill recognized, the reported results in the period that an acquisition occurs, and future reported results. Such changes include the expensing of acquisition-related costs and recognizing subsequent changes in fair value of contingent consideration in the profit or loss (rather than by adjusting goodwill). The amended IAS 27 requires that a change in ownership interest of a subsidiary while maintaining control is accounted for as an equity transaction. Therefore such a change will have no impact on goodwill, nor will it give raise to a gain or loss. Furthermore the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes introduced by IFRS 3 (Revised) and IAS 27 (Amendment) must be applied prospectively and will affect future acquisitions and transactions with minority interests.
• IFRS 8,“Operating Segments”, effective for annual periods beginning on or after January 1, 2009. IFRS 8 replaces IAS 14 ‘Segment reporting’. IFRS 8 adopts a management approach to segment reporting. The information reported would be that which management uses internally for evaluating the performance of


F-22

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
operating segments and allocating resources to those segments. This information may be different from that reported in the balance sheet and income statement and entities will need to provide explanations and reconciliations of the differences. The Group does not expect that this Interpretation will have a significant impact on the financial statements.
• IAS 1,“Presentation of Financial Statements” (Revised), effective for annual periods beginning on or after January 1, 2009. IAS 1 has been revised to enhance the usefulness of information presented in the financial statements. The main revisions are the requirement that the statement of changes in equity includes only transactions with shareholders; the introduction of a new statement of comprehensive income that combines all items of income and expense recognized in profit or loss together with “other comprehensive income”; and the requirement to present restatements of financial statements or retrospective application of a new accounting policy as at the beginning of the earliest comparative period, i.e. a third column on the balance sheet. The Group will make the necessary changes to the presentation of its financial statements in 2009.
• IAS 32 and IAS 1,“Puttable Financial Instruments” (Amended), effective for annual periods beginning on or after January 1, 2009. The amendment to IAS 32 requires certain puttable financial instruments and obligations arising on liquidation to be classified as equity if certain criteria are met. The amendment to IAS 1 requires disclosure of certain information relating to puttable instruments classified as equity. The Group does not expect that this Interpretation will have a significant impact on the financial statements.
• IAS 23, “Borrowing Costs” (Revised), effective for annual periods beginning on or after January 1, 2009. The benchmark treatment in the existing standard of expensing all borrowing costs to the income statement is eliminated in the case of qualifying assets. All borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset must be capitalized. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. The revised standard will not impact the Group’s financial statements given that interest is already capitalized.
• IAS 39 “Financial Instruments: Recognition and Measurement — Eligible Hedged Items”effective for financial years beginning on or after July 1, 2009. The amendment addresses the designation of a one-sided risk in a hedged item, and the designation of inflation as a hedged risk or portion in particular situations. It clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as hedged item. The Group has concluded that the amendment will have no impact on its financial position or performance, as it has not entered into any such hedges.
• Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards” and IAS 27 “Consolidated and Separate Financial Statements”effective for financial years beginning on or after January 1, 2009. The amendments to IFRS 1 allows an entity to determine the “cost” of investments in subsidiaries, jointly controlled entities or associates in its opening IFRS financial statements in accordance with IAS 27 or using a deemed cost. The amendment to IAS 27 requires all dividends from a subsidiary, jointly controlled entity or associate to be recognized in the income statement in the separate financial statements. The revision to IAS 27 will have to be applied prospectively. The new requirements affect only the parent’s separate financial statements and do not have an impact on the financial statements of the Group.
• IAS 39, “Financial Instruments: Recognition and Measurement” and IFRIC 9, “Reassessment of embedded derivatives” (Amended), effective for annual periods ending on or after June 30 2009. This amendment clarifies the accounting treatment of embedded derivatives for entities that make use of the Reclassification Amendment issued by the IASB in October 2008. The reclassification amendment allows entities to reclassify particular financial instruments out of the ‘fair value through profit or loss’ category in specific circumstances. These amendments to IFRIC 9 and IAS 39 clarify that on reclassification of a financial asset out of the ‘fair value through profit or loss’ category, all embedded derivatives have to be assessed and, if necessary, separately accounted for in financial statements. The amendments apply


F-23

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
retrospectively and are required to be applied. Adoption of these amendments is not expected to have a significant impact on the financial statements of the Group.
• IFRS 7, “Financial Instruments: Disclosures” (Amended), effective for annual periods beginning on or after January 1, 2009. The amendment requires fair value measurements to be disclosed by the source of inputs, using the following three-level hierarchy: a) Quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1), (b) Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2) and (c) Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). This information must be given by class of financial instrument. The amendment also revises specified minimum liquidity risk disclosures. Adoption of this amendment is not expected to have a significant impact on the financial statements of the Group.
In May 2008 the IASB issued its first omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. These amendments are effective for periods beginning on or after January 1, 2009.Adoption of these amendments is not expected to impact significantly the financial statements of the Group.
• IFRS 5, “Non-current Assets Held for Sale and Discontinued Operations” (Amended),The amendment clarifies that all of a subsidiary’s assets and liabilities are classified as held for sale, under IFRS 5, even when the entity will retain a non-controlling interest in the subsidiary after the sale.
• IFRS 7, “Financial Instruments: Disclosures” (Amended), this amendment removes the reference to ‘total interest income’ as a component of finance costs.
• IAS 1, “Presentation of Financial Statements” (Amended), This amendment clarifies that assets and liabilities classified as held for trading in accordance with IAS 39 Financial Instruments: Recognition and Measurement are not automatically classified as current in the balance sheet.
• IAS 8,“Accounting Policies, Changes in Accounting Estimates and Errors” (Amended),this amendment clarifies that only implementation guidance that is an integral part of an IFRS is mandatory when selecting accounting policies.
• IAS 10, “Events after the Reporting Period” (Amended),this amendment clarifies that dividends declared after the balance sheet date are not considered obligations.
• IAS 16, “Property, Plant and Equipment” (Amended),Items of property, plant and equipment held for rental that are routinely sold in the ordinary course of business after rental, are transferred to inventory when rental ceases and they are held for sale. Proceeds on sale are subsequently shown as revenue. IAS 7, “Statement of cash flows” is also revised, to require cash payments to manufacture or acquire such items to be classified as cash flows from operating activities. The cash receipts from rents and subsequent sales of such assets are also shown as cash flows from operating activities.
• IAS 18, “Revenue” (Amended),This amendment replaces the term ‘direct costs’ with ‘transaction costs’ as defined in IAS 39.
• IAS 19, “Employee Benefits” (Amended),This amendment:
— Revises the definition of ‘past service costs’
— Revises the definition of ‘return on plan assets’
— Revises the definition of ‘short-term’ and ‘other long term’ employee benefits


F-24

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
— Deletes the reference to the recognition of contingent liabilities to ensure consistency with IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”. IAS 37 does not allow for the recognition of contingent liabilities.
• IAS 20, “Accounting for Government Grants and Disclosure of Government Assistance” (Amended),Loans granted with no or low interest rates will not be exempt from the requirement to impute interest. Interest is to be imputed on loans granted with below-market interest rates, thereby being consistent with IAS 39. The difference between the amount received and the discounted amount is accounted for as a government grant.
• IAS 23, “Borrowing Costs” (Amended),The amendment revises the definition of borrowing costs to combine the types of items that are considered components of ‘borrowing costs’ into one — the interest expense calculated using the effective interest rate method as described in IAS 39.
• IAS 27 “Consolidated and Separate Financial Statements” (Amended),When a parent entity accounts for a subsidiary at fair value in accordance with IAS 39 in its separate financial statements, this treatment continues when the subsidiary is subsequently classified as held for sale.
• IAS 28, “Investment in Associates” (Amended),
— If an associate is accounted for at fair value in accordance with IAS 39 (as it is exempt from the requirements of IAS 28), only the requirement of IAS 28 to disclose the nature and extent of any significant restrictions on the ability of the associate to transfer funds to the entity in the form of cash or repayment of loans applies.
— An investment in an associate is a single asset for the purpose of conducting the impairment test — including any reversal of impairment. Therefore, any impairment is not separately allocated to the goodwill included in the investment balance. Any impairment is reversed if the recoverable amount of the associate increases.
• IAS 29, “Financial Reporting in Hyperinflationary Economies” (Amended),this amendment revises the reference to the exception to measure assets and liabilities at historical cost, such that it notes property, plant and equipment as being an example, rather than implying that it is a definitive list. No specific transition requirements have been stated as it is a clarification of the references rather than a change.
• IAS 31, “Interest in Joint ventures” (Amended),This amendment clarifies that if a joint venture is accounted for at fair value, in accordance with IAS 39 (as it is exempt from the requirements of IAS 31), only the requirements of IAS 31 to disclose the commitments of the venturer and the joint venture, as well as summary financial information about the assets, liabilities, income and expenses will apply. Early application is permitted.
• IAS 34, “Interim Financial Reporting” (Amended),this amendment clarifies that earnings per share is disclosed in interim financial reports if an entity is within the scope of IAS 33.
• IAS 36, “Impairment of assets” (Amended),This amendment clarifies that when discounted cash flows are used to estimate ‘fair value less costs to sell’, the same disclosure is required as when discounted cash flows are used to estimate ‘value in use’.
• IAS 38, “Intangible Assets” (Amended),
— Expenditure on advertising and promotional activities is recognized as an expense when the entity either has the right to access the goods or has received the services.
— Deletes references to there being rarely, if ever, persuasive evidence to support an amortization method for finite life intangible assets that results in a lower amount of accumulated amortization than under the straight-line method, thereby effectively allowing the use of the unit of production method.


F-25

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
— A prepayment may only be recognized in the event that payment has been made in advance to obtaining right of access to goods or receipt of services.
• IAS 39, “Financial instruments recognition and measurement” (Amended),
— Clarifies that changes in circumstances relating to derivatives — specifically derivatives designated or de-designated as hedging instruments after initial recognition — are not reclassifications.
— Removes the reference in IAS 39 to a ‘segment’ when determining whether an instrument qualifies as a hedge.
— Requires use of the revised effective interest rate (rather than the original effective interest rate) when remeasuring a debt instrument on the cessation of fair value hedge accounting.
• IAS 40, “Investment property” (Amended),
— Revises the scope (and the scope of IAS 16) such that property that is being constructed or developed for future use as an investment property is classified as investment property. If an entity is unable to determine the fair value of an investment property under construction, but expects to be able to determine its fair value on completion, the investment under construction will be measured at cost until such time as fair value can be determined or construction is complete. To be applied prospectively.
— Revises the conditions for a voluntary change in accounting policy to be consistent with IAS 8.
— Clarifies that the carrying amount of investment property held under lease is the valuation obtained increased by any recognized liability.


F-26

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
4.  PROPERTY, PLANT AND EQUIPMENT
 
Property, plant and equipment is analyzed as follows:
 
                                                              
         Furniture
                Furniture
       
     Telecommunication
 Transportation
 and
 Construction
 Investment
        Telecom
 Transportation
 and
 Construction
 Investment
   
 Land Buildings Equipment Means Fixtures in Progress Supplies Total  Land Buildings Equipment Means Fixtures in Progress Supplies Total 
31/12/2006
                                
Cost  48.5   941.2   12,083.1   56.5   490.5   628.0   207.9   14,455.7 
Accumulated depreciation  —   (304.4)  (7,186.2)  (43.7)  (337.9)  —   —   (7,872.2)
                 
Net book value 31/12/2006
  48.5   636.8   4,896.9   12.8   152.6   628.0   207.9   6,583.5 
                 
1/1/2007
                                
Net book value 1/1/2007  48.5   636.8   4,896.9   12.8   152.6   628.0   207.9   6,583.5 
Additions  1.3   51.7   1,085.0   14.2   54.9   906.6   130.4   2,244.1 
Disposal of subsidiary (cost)  (0.7)  —   (5.7)  —   (7.1)  (15.7)  —   (29.2)
Disposal of subsidiary (accumulated depreciation)  —   —   5.7   —   5.6   —   —   11.3 
Other adjustments  —   (3.0)  10.6   —   (10.6)  —   —   (3.0)
Disposal and transfers — cost  —   (3.9)  (173.0)  (8.6)  (14.9)  (1,030.4)  (166.1)  (1,396.9)
Disposals and transfers — accumulated depreciation  —   1.1   165.2   7.7   13.2   —   —   187.2 
Exchange differences — cost  (0.5)  (39.3)  (312.6)  (2.5)  (10.6)  (3.1)  (10.9)  (379.5)
Exchange differences — accumulated depreciation  —   22.1   208.0   2.4   7.3   —   —   239.8 
Depreciation charge for the year  —   (35.3)  (1,012.1)  (5.5)  (36.0)  —   —   (1,088.9)
Other accumulated depreciation adjustments  —   3.0   (8.0)  —   8.0   —   —   3.0 
                 
Net book value 31/12/2007
  48.6   633.2   4,860.0   20.5   162.4   485.4   161.3   6,371.4 
                 
31/12/2007
                                                                
Cost  48.6   946.7   12,687.4   59.6   502.2   485.4   161.3   14,891.2   48.6   946.7   12,687.4   59.6   502.2   485.4   161.3   14,891.2 
Accumulated depreciation  —   (313.5)  (7,827.4)  (39.1)  (339.8)  —   —   (8,519.8)  —   (313.5)  (7,827.4)  (39.1)  (339.8)  —   —   (8,519.8)
                                  
Net book value 31/12/2007
  48.6   633.2   4,860.0   20.5   162.4   485.4   161.3   6,371.4   48.6   633.2   4,860.0   20.5   162.4   485.4   161.3   6,371.4 
                                  
1/1/2008
                                
Net book value 1/1/2008  48.6   633.2   4,860.0   20.5   162.4   485.4   161.3   6,371.4 
Additions  2.4   26.9   812.5   5.6   30.7   383.3   84.0   1,345.4   2.4   26.9   812.5   5.6   30.7   383.3   84.0   1,345.4 
Held for sale (cost)  (0.3)  (4.1)  (150.5)  (0.5)  (11.9)  —   —   (167.3)
Held for sale (accumulated depreciation)  —   1.0   60.5   0.3   6.6   —   —   68.4 
Other adjustments  —   —   19.3   —   (19.3)  —   —   — 
Held for sale — cost  (0.3)  (4.1)  (150.5)  (0.5)  (11.9)  —   —   (167.3)
Held for sale — accumulated depreciation  —   1.0   60.5   0.3   6.6   —   —   68.4 
Other transfers — cost  —   —   19.3   —   (19.3)  —   —   — 
Disposal and transfers — cost  —��  (0.2)  (273.7)  (6.6)  (13.3)  (317.2)  (101.6)  (712.6)  —   (0.2)  (273.7)  (6.6)  (13.3)  (317.2)  (101.6)  (712.6)
Disposals and transfers — accumulated depreciation  —   4.0   267.7   6.0   14.0   —   —   291.7   —   4.0   267.7   6.0   14.0   —   —   291.7 
Exchange differences — cost  (0.6)  (55.8)  (449.8)  (3.7)  (16.0)  (17.2)  (6.9)  (550.0)  (0.6)  (55.8)  (449.8)  (3.7)  (16.0)  (17.2)  (6.9)  (550.0)
Exchange differences — accumulated depreciation  —   31.7   290.4   3.0   11.7   —   —   336.8   —   31.7   290.4   3.0   11.7   —   —   336.8 
Depreciation charge for the year  —   (34.3)  (1,028.2)  (7.0)  (41.5)  —   —   (1,111.0)  —   (34.3)  (1,028.2)  (7.0)  (41.5)  —   —   (1,111.0)
Other accumulated depreciation adjustments  —   —   (17.5)  —   17.5   —   —   — 
Other transfers — accumulated depreciation  —   —   (17.5)  —   17.5   —   —   — 
                                  
Net book value 31/12/2008
  50.1   602.4   4,390.7   17.6   140.9   534.3   136.8   5,872.8   50.1   602.4   4,390.7   17.6   140.9   534.3   136.8   5,872.8 
                                  
31/12/2008
                                                                
Cost  50.1   913.5   12,645.2   54.4   472.4   534.3   136.8   14,806.7   50.1   913.5   12,645.2   54.4   472.4   534.3   136.8   14,806.7 
Accumulated depreciation  —   (311.1)  (8,254.5)  (36.8)  (331.5)  —   —   (8,933.9)  —   (311.1)  (8,254.5)  (36.8)  (331.5)  —   —   (8,933.9)
                                  
Net book value 31/12/2008
  50.1   602.4   4,390.7   17.6   140.9   534.3   136.8   5,872.8   50.1   602.4   4,390.7   17.6   140.9   534.3   136.8   5,872.8 
                                  
Additions  —   49.4   654.4   5.0   23.8   431.2   55.9   1,219.7 
Acquisition of subsidiary — cost  0.1   1.8   63.4   1.0   0.6   16.5   —   83.4 
Disposal and transfers — cost  (1.0)  (0.1)  (136.1)  (7.6)  (12.3)  (447.0)  (84.9)  (689.0)
Disposals and transfers — accumulated depreciation  —   0.1   286.8   7.3   22.2   —   —   316.4 
Exchange differences — cost  (0.3)  (31.6)  (276.5)  (2.5)  (10.0)  (11.3)  (2.1)  (334.3)
Exchange differences — accumulated depreciation  —   18.1   167.5   1.9   7.4   —   —   194.9 
Depreciation charge for the year  —   (56.4)  (936.1)  (6.2)  (40.1)  —   —   (1,038.8)
                 
Net book value 31/12/2009
  48.9   583.7   4,214.1   16.5   132.5   523.7   105.7   5,625.1 
                 
31/12/2009
                                
Cost  48.9   933.0   12,950.4   50.3   474.5   523.7   105.7   15,086.5 
Accumulated depreciation  —   (349.3)  (8,736.3)  (33.8)  (342.0)  —   —   (9,461.4)
                 
Net book value 31/12/2009
  48.9   583.7   4,214.1   16.5   132.5   523.7   105.7   5,625.1 
                 


F-27

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The amount of borrowingBorrowing costs capitalized during fiscal yearsthe year ended December 31, 2009, 2008 2007 and 20062007 by the Group wasas part of the cost of qualifying assets amount to Euro 7.4,10.0, Euro 6.7 and Euro 5.2, respectively. The amounts were calculated based on an average rate of capitalization for the year ended December 31, 2009, 2008 and Euro 10.6,2007 of 5.9%, 5.4% and 2.4% respectively.
 
During 2008, OTE GLOBE revised its estimateFor the acquisition of the useful lifeassets above, the Group has received government grants in the past the unamortized amount of certain network infrastructure which resulted in an increased depreciation charge inat December 31, 2009 is Euro 22.9 (December 31, 2008 of Euro 33.7.34.2).
 
The depreciation charge for the year 2006ended December 31, 2007 was Euro 1,091.8.1,088.9.


F-26

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
5.  GOODWILL
 
Goodwill in the accompanying financial statements is analyzed as follows:
 
Carrying value 1/1/2007
540.8
Exchange differences0.7
Carrying value 31/12/2007
541.5
Carrying value 1/1/2008
541.5
Absorption of OTENET(10.1)
Exchange differences(0.7)
Carrying value 31/12/2008
530.7
         
  2009  2008 
 
Carrying value January 1
  525.1   541.5 
Absorption of OTENET  —   (10.1)
Foreign exchange differences  (6.8)  (0.7)
Acquisition of subsidiary (see Note 8)  33.5   — 
Transfer to assets held for sale  —   (5.6)
         
Carrying value December 31
  551.8   525.1 
         
 
The annual impairment testmovement of purchasedthe goodwill and the brand name (Note 7) was carried out having allocated goodwillits allocation to the followingeach cash generating units:unit is analyzed as follows:
 
• Greece
• Romania
• Bulgaria
• Albania
                 
     Foreign
       
     Exchange
  Acquisition of
    
Country
 2008  Differences  Subsidiary  2009 
 
Greece  376.6   —   —   376.6 
Albania  61.8   (6.3)  —   55.5 
Romania  26.4   (0.5)  33.5   59.4 
Bulgaria  60.3   —   —   60.3 
                 
Total
  525.1   (6.8)  33.5   551.8 
                 
 
The recoverable amount of the above cash generating units was determined using the value in use method. The value in use was determined based on the projected cash flows derived from the three year planplans approved by management. Thesemanagement, with these cash flows were then initially projected over ten years and then to infinity.
 
The basic assumptions used in determining the value in use of the cash generating units as atof December 31, 2008 is2009 are as follows:
 
                 
  Greece  Romania  Bulgaria  Albania 
 
Discount rate  8%  14.3%  12%  14.65%
Rate of increase of revenue  0.5-2%  38-3%(*)  2-5%  1-3%
EBITDA margin  42%  30-40%  42-43%  50-60%
                 
Assumptions
 Greece  Albania  Romania  Bulgaria 
 
Discount rate  9.05%  9.27%  10.76%  9.67%
Rate of increase/(decrease) of revenue  (0.15)%  1.95%  8.80%  3.60%
Operating profit before depreciation and amortization margin  37%-39%   53%-60%   16%-38%   32%-47% 
(*)There is a downward rate of change of revenue
 
For the projection of cash flows over abeyond ten yearyears period a growth rate of 2% was assumed for all cash generating units.
 
The following are the main assumptions used by management in projecting cash flows as part of the annual impairment test of goodwill and intangible assets with indefinite useful life:are the following:
 
 • Risk-free return:rate:  The risk free return used to determinerate was determined on the costbasis of capital wasexternal figures derived from the 10 year Greek government bond rate as at the year end. The risk free return was derived from equivalent sources in the other countries.relevant market of each country.


F-28

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 • Budgeted profit margin:  Budgeted operating profit and EBITDAoperating profit before depreciation and amortization were based on actual historical experience from the last few years adjusted to take into consideration expected variances in operating profitability.
 
The basic assumptions used are consistent with independent external sources of information.


F-27

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Based on the results of the impairment test as atof December 31, 2008,2009, no impairment losses were identified in the recorded amounts of goodwill or the brand name.goodwill.
 
6.  TELECOMMUNICATION LICENSES
 
Telecommunication licenses are analyzed as follows:
 
2007
Net book value 1/1/2007384.2
Additions59.8
Exchange differences, cost(4.0)
Amortization charge for the year(47.2)
Exchange differences, accumulated depreciation3.4
Net book value 31/12/2007396.2
31/12/2007
Cost567.0
Accumulated amortization(170.8)
Net book value 31/12/2007396.2
2008
Net book value 1/1/2008396.2
Additions17.5
Write-offs, cost(3.9)
Assets held for sale (cost)(39.2)
Assets held for sale (accumulated depreciation)8.0
Exchange differences, cost(10.4)
Amortization charge for the year(48.1)
Write-offs, accumulated depreciation3.8
Exchange differences, accumulated depreciation5.6
Net book value 31/12/2008329.5
31/12/2008
Cost531.0
Accumulated amortization(201.5)
Net book value 31/12/2008329.5
         
  2009  2008 
 
Net book value January 1  329.5   396.2 
Additions  —   17.5 
Acquisition of subsidiary (see Note 8)  73.4   — 
Transfer from other intangible assets, cost (see Note 7)  13.3   — 
Assets held for sale, cost  —   (39.2)
Assets held for sale, accumulated amortization  —   8.0 
Exchange differences, cost  (7.5)  (10.4)
Exchange differences, accumulated amortization  6.4   5.6 
Amortization charge for the year  (51.0)  (48.1)
Write-offs, cost  (1.9)  (3.9)
Write-offs, accumulated amortization  —   3.8 
         
Net book value December 31  362.2   329.5 
         
December 31
        
Cost  608.3   531.0 
Accumulated amortization  (246.1)  (201.5)
         
Net book value  362.2   329.5 
         
 
Telecommunication licenses comprise of licenses acquired primarily from the Group’s mobile operations, more specifically COSMOTE and GLOBUL.operations. These licenses are amortized on a straight line basis over their useful lives being between 1512 and 24 years.
 
The amortization charge for the year 2006ended December 31, 2007 was Euro 32.8.47.2.


F-29F-28

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
7.  OTHER INTANGIBLE ASSETS
 
The movement of other intangible assets is as follows:
         
  2009  2008 
 
Net book value January 1  550.7   582.7 
Additions  31.3   46.7 
Acquisition of subsidiary (see Note 8)  22.0   — 
Disposals, cost  (0.4)  (18.2)
Disposals, accumulated amortization  0.1   0.4 
Transfer to telecommunication licenses, cost (see Note 6)  (13.3)  — 
Exchange differences, cost  (8.1)  (8.4)
Exchange differences, accumulated amortization  3.8   6.9 
Amortization charge for the year  (65.5)  (53.9)
Transfer to assets held for sale  —   (5.5)
         
Net book value December 31  520.6   550.7 
         
December 31
        
Cost  713.0   681.1 
Accumulated amortization  (192.4)  (130.4)
         
Net book value  520.6   550.7 
         
Other intangible assets in the Group’s balance sheet comprisestatement of financial position are comprised mainly of the identifiable assets recognized as a result of the acquisition of GERMANOS during 2006. These identifiable assets recognized relate mainly to the brand name, but also include franchise agreements and customer relationships and computer software. The movement is as follows:
2007
Net book value 1/1/2007630.9
Additions22.8
Disposals, cost(30.5)
Exchange differences, cost(7.1)
Amortization charge for the year(35.7)
Exchange differences, accumulated depreciation1.6
Disposals, accumulated depreciation0.7
Net book value 31/12/2007582.7
31/12/2007
Cost666.5
Accumulated amortization(83.8)
Net book value 31/12/2007582.7
2008
Net book value 1/1/2008582.7
Additions46.7
Disposals, cost(18.2)
Exchange differences, cost(8.4)
Amortization charge for the year(53.9)
Exchange differences, accumulated depreciation6.9
Disposals, accumulated depreciation0.4
Net book value 31/12/2008556.2
31/12/2008
Cost686.6
Accumulated amortization(130.4)
Net book value 31/12/2008556.2
As described in Note 5, during 2008, the Group carried out an impairment test on the brand name from which no impairment losses were identified.
As referred to above, other intangible assets mainly relate to the brand name of Euro 417.3 which was initially determined to have an indefinite useful life. During the fourth quarter of 2008, the Group revised its estimate of the GERMANOS brand name’s useful life which it determined to be 15 years from the end of October 2008, the date of the reassessment. The related amortization of Euro 4.6 was charged to the 2009 and 2008 income statement amounted to Euro 27.6 and Euro 4.6 respectively, and the net book value of the brand as atof December 31, 2009 and 2008, amounted to Euro 412.7.


F-30

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.376.8 and Euro 407.2 respectively.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)The amortization charge for the year ended December 31, 2007 was Euro 35.7.
 
8.  INVESTMENTS
 
Investments are analyzed as follows:
 
                
 December 31,  December 31, 
 2008 2007  2009 2008 
TELEKOM SRBIJA  155.1   155.1   155.1   155.1 
Other  1.5   3.3   1.9   1.5 
          
Total
  157.0   156.6 
  156.6   158.4      
     
 
In 2007OTE has concluded that, primarily because of the 80% interest of the Serbian government, it does not exercise significant influence over TELEKOM SRBIJA. Furthermore, since TELEKOM SRBIJA’s shares are not publicly traded and 2008, OTE reassessed its position regardingdoes not have availability to timely updated financial information required for a reliable measurement of its investment in TELEKOM SRBIJA, taking into consideration the historical disputes on certain matters with the 80% shareholder, the Serbian Government, and the fact that the management roles with TELEKOM SRBIJA held by individuals appointed by OTE are largely administrative rather than decision making and that the two appointed board members cannot influence the board’s decisions and, consequently, concluded that itssuch investment in TELEKOM SRBIJA was to be continued to be accounted foris carried at cost, since OTE does not exercise significant influence.cost.


F-29

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The movementGroup’s dividend income is analyzed as follows:
             
  2009  2008  2007 
 
TELEKOM SRBIJA  9.3   11.2   15.7 
Other available for sale investments  0.3   1.0   1.1 
             
Total
  9.6   12.2   16.8 
             
Movement in other investments can beis analyzed as follows:
         
  2009  2008 
 
Balance at January 1  156.6   158.4 
Other movements  0.4   (1.8)
         
Balance at December 31
  157.0   156.6 
         
The following transactions occurred during the current year which impacted the Group’s participation in its subsidiaries:
AMC
On April 27, 2009 OTE announced that its 100% subsidiary COSMOTE completed the acquisition process of a 12.58% interest held by the Albanian State, in its subsidiary AMC after obtaining of the relevant approvals from the authorities in Albania. The cash consideration for the related acquisition amounted to Euro 48.4. The difference between the cost of acquisition and the non-controlling interest acquired of Euro 4.7 was recognized directly in equity (column “Changes in non-controlling interests”), as it relates to the acquisition of non-controlling interests in an entity where control already exists. Following the official conclusion of the transaction, COSMOTE owns directly or indirectly (through its 97% owned subsidiary CHA) a 95% interest in AMC, although the investment is consolidated on a 100% basis due to the put option described below held by the non controlling interests.
According to the Albanian legislation, COSMOTE is obliged to purchase the shares of the non-controlling interests, if they request it. On June 22, 2009, non-controlling interests representing approximately a 2.3% of the share capital (of a total 2.5%) communicated a relevant request to COSMOTE, in order to sell their shares at the same price paid to the Albanian State from COSMOTE for the acquisition of the additional 12.58% in April 2009. On April 27, 2010 COSMOTE sent an offer letter on this basis to the non controlling interests. Based on the above, COSMOTE’s relevant liability is estimated to amount to Euro 10.0 and is included in “Other current liabilities” (see Note 22).
COSMOFON AND GERMANOS TELECOM SKOPJE
As of December 31, 2008, COSMOFON was classified as held for sale in the statement of financial position. On March 30, 2009 OTE announced that the agreements between COSMOTE and Telekom Slovenije were signed in Athens regarding the transfer of 100% of COSMOFON, through the sale of COSMOTE’s wholly owned subsidiary, OTE MTS HOLDING B.V., as well as GERMANOS TELECOM AD SKOPJE (GTS) to Telekom Slovenije. The transaction was completed on May 12, 2009 following approval by the relevant governmental and regulatory authorities in Skopje. COSMOFON and GERMANOS TELECOM SKOPJE are included in the consolidated financial statements until the date the Group ceased to control those companies (May 12, 2009).


F-30

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents COSMOFON’s and GERMANOS TELECOM SKOPJE’s income statements for the year 2008 and for the period from January 1, 2009 to May 12, 2009:
                 
     Germanos
 
  Cosmofon  Telecom Skopje 
  1/1–12/5/2009  2008  1/1–12/5/2009  2008 
 
Revenue  19.1   66.2   2.5   9.8 
Total operating expenses  (23.4)  (64.5)  (2.9)  (11.2)
                 
Operating profit/(loss) before financial activities  (4.3)  1.7   (0.4)  (1.4)
                 
Financial activities  (1.9)  (1.5)  (0.1)  (0.2)
Profit/(Loss) before tax  (6.2)  0.2   (0.5)  (1.6)
Income tax expense  —   —   —   — 
                 
Profit/(Loss) for the period
  (6.2)  0.2   (0.5)  (1.6)
                 


F-31

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The assets and liabilities of COSMOFON and GERMANOS TELECOM SKOPJE at the date of disposal are as follows:
             
     Germanos
    
     Telecom
    
  Cosmofon  Skopje  Total 
 
 
ASSETS
Non-current assets
            
Property, plant and equipment  104.9   1.1   106.0 
Telecommunication licenses  30.4   0.3   30.7 
Other non-current assets  —   0.1   0.1 
             
Total
  135.3   1.5   136.8 
             
Current assets
            
Inventories  3.0   1.2   4.2 
Trade receivables  21.6   1.3   22.9 
Other current assets  5.2   0.3   5.5 
Cash and cash equivalents  1.9   —   1.9 
             
Total
  31.7   2.8   34.5 
             
Total assets
  167.0   4.3   171.3 
             
 
LIABILITIES
Non-current liabilities
            
Borrowings  33.2   2.0   35.2 
Other non-current liabilities  1.8   —   1.8 
Total
  35.0   2.0   37.0 
Current liabilities
            
Borrowings  42.1   —   42.1 
Trade accounts payable  16.7   5.3   22.0 
Other current liabilities  24.6   0.1   24.7 
Total
  83.4   5.4   88.8 
             
Total liabilities
  118.4   7.4   125.8 
             
Net assets disposed of
  48.6   (3.1)  45.5 
             
In the consolidated financial statements, the gain from the sale was determined as follows:
 
     
As at January 1, 2008Selling price  158.490.7 
Sale of investment in LOFOS PALLINI S.A. Disposal Expenses  (1.4)
Other movements(0.42.7)
     
As at December 31, 2008
Net proceeds from disposal
  156.688.0
Net assets disposed of(45.5)
Goodwill and other intangible assets write-off in group level(10.3)
Depreciation reversal for assets held for sale(8.6)
Total gain on sale of investment
23.6


F-32

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As part of the agreement, Telekom Slovenije undertook to settle COSMOFON’s and GERMANOS TELECOM SKOPJE intra-group liabilities. The total effect of the above transaction on the consolidated statement of cash flows is as follows:
Selling Price90.7
Less cash and cash equivalents disposed(1.9)
Less disposal expenses(2.7)
Net cash inflow from the sale of subsidiary
86.1
Loans proceeds in conjunction with disposal of subsidiaries78.5
Settlement of receivables due from disposed subsidiaries16.6
Total cash inflow from the sale of subsidiary
181.2 
     
 
On July 31, 2008, OTE announced the sale of its entire participation in the share capital of LOFOS PALLINI S.A. to REDS S.A. for a total consideration of Euro 18.4. A pre-tax gain of approximately Euro 17.0 was realized from this sale and is recorded in the line “Gains from investments” in the 2008 income statement.
The most significant developments of the year 2008 relating to acquisitions, establishments and disposals of the Group’s subsidiaries can be summarized as follows:
A.  Public offer for the acquisition of COSMOTE’s minority interests
On November 9, 2007, following the approval by the Board of Directors, OTE announced the submission of a Public Tender Offer for the acquisition of the outstanding common shares of COSMOTE for a price of Euro 26.25 (in absolute amount) per share.
As at December 31, 2007, OTE owned 303,725,198 shares, which represented approximately 90.72% of COSMOTE’s share capital and voting rights.
The tender offer’s acceptance period for the acquisition of COSMOTE’s shares ended on January 29, 2008. During January 2008 and with the submission of acceptance applications by 5,044 shareholders, OTE acquired 27,503,293 shares of COSMOTE representing 8.187% of COSMOTE’s share capital. As a result, on January 29, 2008, OTE held 331,228,491 shares representing 98.592% of COSMOTE’s share capital with the corresponding voting rights.
In accordance with Article 27 of Law 3461/2006 on February 27, 2008, OTE filed a request with the Hellenic Capital Market Commission seeking permission to exercise squeeze out rights on the remaining shares of COSMOTE at a price equal to that of the Public Offer, i.e. Euro 26.25 per share (in absolute amount) (Squeeze-Out Right). The remaining shareholders retained the right to sell their shares to the Proposing Party through the Athens Exchange within three months from the publication of the announcement (Sell-Out Right), which took place on January 31, 2008. After the end of the exercise period of the Squeeze-Out Rights and of the


F-31

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Sell-Out Rights, OTE began the procedure for the delisting of the COSMOTE’s shares from the Athens Exchange and Global Depository Receipts (GDRs) from the London Stock Exchange (L.S.E.).
Since April 9, 2008, following OTE’s Public Tender Offer for the acquisition of COSMOTE’s shares and after the completion of exercise of the Squeeze-Out Rights and of the Sell-Out Rights, OTE holds 335,957,300 COSMOTE shares, which represent 100% of the share capital and voting rights.
The total cost of the acquisition of the minority interests during 2008 was Euro 846.1. The difference arising from the acquisition of the above minority interests of Euro 780.3 was recognized directly in Equity in the financial statements (in the line “Net change of participation in subsidiaries”), as it relates to the acquisition of minority in an entity where control already exists.
On April 11, 2008, COSMOTE announced that pursuant to the decision of the Extraordinary General Assembly of its shareholders held on April 10, 2008, a request was submitted to the Hellenic Capital Market Commission, in accordance with par. 5 article 17 of Law 3371/2005, for the delisting of its shares from the Athens Exchange. The request was approved by the Hellenic Capital Market Commission.
B.  Acquisition of VOICENET’s minority interests
In May 2008, OTE acquired the remaining interest in its subsidiary VOICENET from SANYO HELLAS S.A., for a consideration of Euro 1.3. Following the acquisition, OTE owns 100% of VOICENET’s share capital and voting rights. The difference arising from the acquisition of the above minority interests of Euro 1.1 was recognized directly in Equity in the financial statements (in the line “Net change of participation in subsidiaries”), as it relates to the acquisition of minority in an entity where control already exists.
C.  SALE of OTENET Cyprus Ltd and OTENET Telecommunications Ltd
In May 2008, OTE announced the sale of the Group’s investment in OTENET CYPRUS LTD and OTENET TELECOMMUNICATIONS LTD, which operate in the telecommunication and internet services section, to Cyprus Trading Corporation Plc (CTC), for a total consideration of approximately Euro 3.9.
D.  Completion of OTENET’s merger with OTE by absorption
In May 2007, OTE’s management announced its decision to merge OTENET and absorb its business activities. The absorption was approved by the Board of Directors of OTE on December 18, 2007 and by OTENET’s Board of Directors on December 28, 2007. The date of the conversion balance sheet was set to be December 31, 2007. On March 19, 2008 OTE and its subsidiary OTENET signed a Draft Merger Agreement (“the Agreement”) whereby OTE would absorb OTENET. The above Agreement was approved by the Board of Directors of both parties and pursuant to article 7b of L. 2190/20 was deposited with the Greek Register of Societe Anonymes (M.A.E.). On June 27, 2008 the relevant Ministerial Decision which approved and concluded the procedure of OTENET’s absorption by its parent, was deposited with the Societe Anonymes Register of the Prefecture of Athens.
E.  Dissolution of OTEPLUS ROMANIA — Liquidation of OTEPLUS BULGARIA
OTE PLUS’ 100% subsidiary, OTE PLUS ROMANIA, which has its headquarters in Bucharest Romania and provides consulting services was dissolved within 2008. Similarly, OTE PLUS’s 100% subsidiary, OTE PLUS BULGARIA, has started liquidation proceedings.
F.  Amendment of OTE ESTATES’s Charter.
On December 18, 2008, the amendment to article 5 of OTE ESTATE’s charter was finalized following the decision by the General Assembly of Shareholders. After the amendment OTE Estate’s share capital was reduced


F-32

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
by Euro 102.2 as a result of a reduction in the nominal amount of the shares from Euro 2.93 to Euro 2.43 (absolute amounts).
G.  Incorporation of “OTE PROPERTIES — Real Estate Investment Company”
In April 2008, OTE’s subsidiary OTE ESTATE filed a request with the Hellenic Capital Market Commission for a license for the operation of a Real Estate Investment Company. The Hellenic Capital Market Commission with its decision of June 13, 2008 provided OTE ESTATE with this license of operation. The new company which was incorporated is a 100% subsidiary of OTE ESTATE with a share capital of Euro 30.0 which was fullypaid-up by OTE ESTATE during the year.
H.  Changes in investments in the COSMOTE Group.
a. On November 5, 2008, the absorption of TEL SIM S.R.L. by GERMANOS TELECOM ROMANIA S.A. was completed following the relevant decision by the appropriate authorities.
b. On October 13, 2008, the absorption of ALBATROS & PARTNERS LTD by GERMANOS was completed, the latter having previously acquired all of the former’s shares.
c. On December 16, 2008, the absorption of GRIGORIS MAVROMICHALIS & PARTNERS LTD by GERMANOS was completed the latter having previously acquired all of the formers’ shares.
d. On December 16, 2008, the sale of GERMANOS’s 51% holding in IOANNIS TSAPARAS & PARTNERS LTD was completed.
The total difference arising from the acquisition of minority interests in companies which the Group already controls and which have been recorded directly in equity can be analyzed as follows:
         
  For the Year Ended December 31, 
  2008  2007 
 
COSMOTE  3,132.2   2,351.9 
GERMANOS  171.7   171.7 
OTENET  12.3   12.3 
HELLASCOM  (3.3)  (3.3)
HELLAS-SAT  1.2   1.2 
VOICENET  1.1   — 
         
   3,315.2   2,533.8 
         
Dividend income is derived from the following entities:
             
  For the Year Ended
 
  December 31, 
  2008  2007  2006 
 
TELEKOM SRBIJA  11.2   15.7   21.6 
Other available for sale investments  1.0   1.1   1.4 
             
   12.2   16.8   23.0 
             


F-33

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
9.  ASSETS HELD FOR SALE
DEUTSCHE TELEKOM AG sought the approval from FYROM’s Competition Committee for its participation in OTE based on the shareholders agreement with the Greek Government. After the implementation of the shareholders agreement DEUTSCHE TELEKOM AG and OTE would have a combined holding of more than 90% of the local market share via their subsidiariesT-MOBILE Macedonia AD Skopje and COSMOFON, respectively. Accordingly, DEUTSCHE TELEKOM AG committed to the sale of COSMOFON.
On September 15, 2008, OTE publicly announced that it had appointed financial advisors for the sale of COSMOFON, which is a mobile telephony provider in Skopje. GERMANOS Telecom Skopje S.A (GTS), a subsidiary of GERMANOS will be sold together with COSMOFON, the impact of the sale of GERMANOS Telecom Skopje S.A (GTS) is insignificant.
Taking into account the provisions of IFRS 5, COSMOFON meets the criteria for classification as held for sale and, therefore, in the consolidated balance sheet as of December 31, 2008, COSMOFON’s assets and liabilities are presented separately from other assets and liabilities of the Group in the statement of financial position in the line items “Assets classified as held for sale” and in “Liabilities directly associated with the assets classified as held for sale”, respectively.
. The assets and liabilities of COSMOFON,analysis below is after the elimination of inter company balances as of December 31, 2008, are analyzed as follows:intercompany balances:
 
    
2008
 
 
ASSETS
Non-current assets
    
Property, plant and equipment  98.9 
Goodwill5.6
Telecommunication licenses  31.236.7 
     
Total non-current assets
  130.1141.2 
     
Current assets
    
Inventories  2.6 
Trade receivables  17.4 
Other current assets  4.6 
Cash and cash equivalents  1.9 
     
Total current assets
  26.5 
     
Assets classified as held for sale
  156.6167.7 
     
 
LIABILITIES
Trade accounts payable  10.2 
Deferred tax liability  1.6 
Other current liabilities  4.7 
     
Total liabilities
  16.5 
     
Liabilities directly associated with the assets classified as held for sale. sale
  16.5 
     
COSMOHOLDING ROMANIA LTD
On August 6, 2009, COSMOTE established its 100% subsidiary COSMOHOLDING ROMANIA LTD, a holding company incorporated in Cyprus whose aim was the acquisition of the Romanian mobile communication company, ZAPP.


F-34F-33

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Condensed income statements of COSMOFONZAPP
On July 1, 2009, OTE announced that its subsidiary COSMOTE (through its wholly owned subsidiary COSMOHOLDING ROMANIA LTD) had signed on June 30, 2009, a share purchase agreement for the periods presented are includedacquisition of ZAPP in Romania. The acquisition which was subject, among other conditions, to the table below for information purposes, amounts presented are beforeapproval of the elimination of inter company transactions:relevant Romanian authorities, was completed on October 31, 2009.
 
             
  For the Year Ended
 
  December 31, 
  2008  2007  2006 
 
Revenue  66.2   62.2   53.7 
Operating expenses  (64.5)  (59.4)  (59.2)
             
Operating income/(loss) before financial activities  1.7   2.8   (5.5)
             
Total profit (loss) from financial activities  (1.5)  (2.7)  (2.5)
             
Profit/(loss) before tax  0.2   0.1   (8.0)
Income tax  —   —   — 
             
Profit/(loss) for the year  0.2   0.1   (8.0)
             
The consideration paid for the acquisition of ZAPP was Euro 67.5, while COSMOTE undertook ZAPP’s borrowings amounting to Euro 129.6 mainly relating to the 3G and CDMA network development of this company. ZAPP was established in 1993 and has CDMA 450 MHz and 3G in 2100 MHz telecommunications licenses.
The values of the assets acquired and the liabilities assumed from the above mentioned transaction are as follows:
             
     Preliminary
    
  Book Value  Adjustments  Fair Value 
 
 
ASSETS
Non-current assets
            
Property, plant and equipment  83.4   —   83.4 
Telecommunication licenses (see Note 6)  21.0   52.4   73.4 
Intangible assets (see Note 7)  —   22.0   22.0 
Other non-current assets  0.3   —   0.3 
             
Total
  104.7   74.4   179.1 
             
Current assets
            
Inventories  2.1   —   2.1 
Trade receivables  2.4   —   2.4 
Other current assets  2.9   —   2.9 
Cash and cash equivalents  0.8   —   0.8 
             
Total
  8.2   —   8.2 
             
Total Assets
  112.9   74.4   187.3 
             
 
LIABILITIES
Non-current liabilities
            
Borrowings  122.4   —   122.4 
Other non-current liabilities  7.6   1.8   9.4 
             
Total
  130.0   1.8   131.8 
             
Current liabilities
            
Trade accounts payable  6.8   —   6.8 
Borrowings  7.2   —   7.2 
Other current liabilities  4.0   —   4.0 
             
Total
  18.0   —   18.0 
             
Total liabilities
  148.0   1.8   149.8 
             
Net assets acquired
  (35.1)  72.6   37.5 
             
Purchase price          67.5 
Expenses of acquisition          3.5 
             
Goodwill (see Note 5)
          33.5 
             


F-34

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The total effect of the above transaction on the consolidated statement of cash flows is as follows:
Purchase price67.5
Expenses of acquisition (paid)1.5
Less cash acquired(0.8)
68.2
Repayment of borrowings in conjunction with the acquisition129.6
Net cash outflow
197.8
The preliminary adjustment to intangible assets of Euro 22.0 relates to the recognition of this company’s customer base. The fair values analyzed above are based on a preliminary purchase price allocation.
E-VALUE LTD
In October 2009,E-VALUE S.A. founded the Greek companyE-VALUE LTD, the object of which is provision of services regarding overdue accounts.
Changes in non-controlling interests
The total difference arising from the acquisition of non-controlling interests in companies which the Group already controls and which have been recorded directly in equity are analyzed as follows:
         
  2009  2008 
 
COSMOTE  3,132.2   3,132.2 
GERMANOS  171.7   171.7 
OTENET  12.3   12.3 
HELLASCOM  (3.3)  (3.3)
HELLAS-SAT  1.2   1.2 
VOICENET  1.1   1.1 
AMC  6.3   — 
         
Total
  3,321.5   3,315.2 
         
 
10.9.  OTHER NON-CURRENT ASSETS
 
Other non-current assets are analyzed as follows:
 
                
 December 31,  December 31, 
 2008 2007  2009 2008 
Loans and advances to employees  65.1   46.5   82.8   65.1 
Deferred expenses (long-term)  29.6   38.6   21.9   29.6 
Other  26.0   10.8   22.6   26.0 
          
Total
  127.3   120.7 
  120.7   95.9      
     
 
Loans and advances to employees compriseare comprised mainly of loans granted to employees with service period exceeding 25 years against the accrued indemnity payable to them upon retirement. The effective interest rate on these loans is 1.79% for 2009 and 1.74% for fiscal year 2008 and 1.58% for fiscal year 2007.2008. The discount factor is the rate used for the actuarial valuation of staff leavingretirement indemnities which is 4.6% for 2009 and 5.5% for 2008 and 4.8% for 2007 (See Note 19)18).


F-35

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
11.10.  TRADE RECEIVABLES
 
Trade Receivablesreceivables are analyzed as follows:
 
                
 December 31,  December 31, 
 2008 2007  2009 2008 
Subscribers  1,855.5   1,666.8   1,737.8   1,855.5 
International traffic  144.1   205.1   85.5   144.1 
Unbilled revenues  82.0   91.6 
Unbilled revenue  99.2   82.0 
          
  2,081.6   1,963.5   1,922.5   2,081.6 
Less:
        
Less
        
Allowance for doubtful accounts  (887.4)  (791.5)  (769.5)  (887.4)
          
Total
  1,153.0   1,194.2 
  1,194.2   1,172.0      
     


F-35

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The movement in the allowance for doubtful accounts is as follows:
 
Balance at 1/1/2007(711.4)
Charge for the year(88.0)
Write-offs4.5
Exchange differences3.4
Balance at 31/12/2007
(791.5)
Balance at 1/1/2008(791.5)
Charge for the year(119.8)
Write-offs6.9
Exchange differences5.6
Reversal of provision5.0
Provision for trade receivables held for sale6.4
Balance at 31/12/2008
(887.4)
         
  2009  2008 
 
Balance at January 1  (887.4)  (791.5)
Charge for the year (see Note 24)  (107.0)  (119.8)
Write-offs  228.8   6.9 
Balance from newly acquired subsidiary  (7.7)  — 
Foreign exchange differences  2.9   5.6 
Reversal of provision  0.9   5.0 
Provision for trade receivables held for sale  —   6.4 
         
Balance at December 31
  (769.5)  (887.4)
         
 
As at December 31, 2008, theThe aging analysis of trade receivables is as follows:
 
         
  December 31, 
  2009  2008 
 
Not impaired and not past due  634.8   639.5 
Not impaired and past due:        
Less than 30 days  129.3   234.1 
Between 31 and 180 days  216.4   235.2 
More than 180 days  172.5   85.4 
         
Total
  1,153.0   1,194.2 
         


F-36

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
11.  2008
Not impaired and not past due617.9
Not impaired and past due:
•   Less than 30 days264.3
•   Between 31 and 180 days229.5
•   More than 180 days82.5
TotalOTHER FINANCIAL ASSETS
1,194.2
Other financial assets are analyzed as follows:
         
  December 31, 
  2009  2008 
 
Marketable securities:
        
Held to maturity — Bonds  8.1   112.2 
Held for trading — Bonds  3.2   3.1 
Available for sale — Shares  14.3   11.1 
Available for sale — Mutual funds  4.0   3.8 
Non — marketable securities:
        
Available for sale — Securities  5.8   5.7 
         
Total
  35.4   135.9 
         
The movement of other financial assets can be analyzed as follows:
         
  2009  2008 
 
Balance at January 1  135.9   81.2 
Additions  308.0   138.0 
Sales — maturities  (412.2)  (46.8)
Foreign exchange differences  (0.4)  (1.0)
Fair value adjustments  4.1   (35.5)
         
Balance at December 31
  35.4   135.9 
         
 
12.  OTHER CURRENT ASSETS
 
Other current assets are analyzed as follows:
 
                
 December 31,  December 31, 
 2008 2007  2009 2008 
Advances to pension funds, short-term portion (See Note 19)  35.2   35.2 
Short-term portion of loan to Auxiliary fund (See Note 19)  10.0   0.5 
Due from OTE Leasing customers (See Note 30)  25.4   23.0 
Advances to EDEKT, short-term portion (See Note 18)  35.2   35.2 
Loan to Auxiliary fund, short-term portion (See Note 18)  10.1   10.0 
Due from OTE Leasing customers (See Note 29)  25.6   25.4 
Loans and advances to employees  6.2   5.1   6.6   6.2 
VAT recoverable  22.5   25.2   5.0   22.5 
Other prepayments  59.0   78.4   59.9   59.0 
Deferred expenses  9.5   19.1   10.0   9.5 
Other  93.8   104.8   103.2   93.8 
          
Total
  255.6   261.6 
  261.6   291.3      
     


F-36F-37

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
13.OTHER FINANCIAL ASSETS
Other financial assets are analyzed as follows:
         
  December 31, 
  2008  2007 
 
Available-for-sale  26.2   56.0 
Held to maturity — Bonds  109.7   25.2 
         
   135.9   81.2 
         
Other financial assets comprise of shares listed on the Athens Exchange, which are classified as available-for-sale. In addition, other financial assets include Greek and German government bonds, which are classified as held to maturity.
14.  CASH AND CASH EQUIVALENTS
 
Cash and cash equivalents are analyzed as follows:
 
         
  December 31, 
  2008  2007 
 
Cash in hand  3.5   4.4 
Short-term bank deposits  1,426.2   1,311.9 
         
   1,429.7   1,316.3 
Held for sale  (1.9)  — 
         
   1,427.8   1,316.3 
         
         
  December 31, 
  2009  2008 
 
Cash in hand  3.1   3.5 
Short-term bank deposits  865.7   1,426.2 
         
   868.8   1,429.7 
         
Held for sale  —   (1.9)
         
Total
  868.8   1,427.8 
         
 
15.14.  SHARE CAPITAL — SHARE PREMIUM
 
OTE’s share capital as atof December 31, 2007 and 2008,2009, amounted to Euro 1,171.5, divided into 490,150,389 registered shares, with a nominal value of Euro 2.39 (absolute amount) per share and the respectiveshare. The share premium as atof December 31, 20082009 and 20072008 amounted to Euro 497.9505.1 and Euro 485.9, respectively.497.9, respectively, the increase (Euro 7.2) being the amount charged to the 2009 income statement under the Group’s share option plan (Note 28).
 
As of December 31, 2007, the Hellenic State’s direct participation was approximately 24.96% while together with D.E.K.A. S.A. its participation was 28.03%.
Ondescribed in Note 18 below, on March 17, 2008, MARFIN Investment Group announced that it had signed an agreement with DEUTSCHE TELEKOM AG for the sale of 98,026,324 shares for Euro 26.0 (absolute amount) per share, with a transaction deadline of May 7, 2008.
The above agreement was subject to the approval of the relevant request of DEUTSCHE TELEKOM AG by the Interministerial Privatization Committee of Greece, the approval of the Board of Directors of MARFIN Investment Group as well as the approval of the Executory and Supervisory Boards of DEUTSCHE TELEKOM AG.
On May 15, 2008, following the completion of the approvals referred to above, DEUTSCHE TELEKOM AG acquired from MARFIN Investment Group 19.999234%4, 2009 4% of OTE’s share capital which correspondsheld by the Hellenic State was transferred to 98,026,324 shares with corresponding voting rights.IKA-ETAM.
 
In due courseUnder the share purchase agreement between DEUTSCHE TELEKOM AG and after further acquisitionsthe Hellenic State, the later was granted two put options for an additional 5% (first put option) and 10% (second put option) of OTE’s shares through the Athens Exchange, DEUTSCHE TELEKOM AG’s participation in OTE’s share capital increased to 21.967% which corresponds to 107,671,713 shares with corresponding voting rights.


F-37

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
shares. On October 2, 2008, the European Committee announced the approval under the E.U. Merger RegulationJuly 31, 2009, as a result of the proposed acquisitionexercise of OTE by the German Telecommunications Organization DEUTSCHE TELEKOM AG. The Commission concluded that this transaction will not impede effective competition significantly.
15.  SHARE CAPITAL — SHARE PREMIUM
On October 15, 2008,first put option, the Hellenic Telecommunications and Post Commission (HTPC) completed its approvals’ procedure relatedState sold to DEUTSCHE TELEKOM AG’s participation in OTE’s share capital.
On November 5, 2008, DEUTSCHE TELEKOM AG acquired, through the Athens Exchange 14,865,88624,507,519 shares of OTE owned by the Greek State, representing 3.033%5% of OTE’ sits share capital with corresponding voting rights.
From December 31, 2008 onwards, and after the share transfer of 3.033% referred to above, DEUTSCHE TELEKOM AG’s participation in OTE’s share capital amounted to 25.0000004%, which corresponds to 122,537,599 shares with corresponding voting rights, while the Greek States holding (direct and indirect) amounted to 25.0000004%, which corresponds to 122,537,599 shares with corresponding voting rights.capital.
 
The following is an analysis of the ownership of OTE’s shares as atof December 31, 2008:2009:
 
                
Shareholder
 Number of Shares Percentage %  Number of Shares Percentage % 
Hellenic State  107,484,826   21.93%  63,371,292   12.93%
D.E.K.A. S.A. (indirect participation of the Hellenic State)  15,052,773   3.07%
D.E.K.A. S.A.   15,052,773   3.07%
IKA — ETAM (See Note 18)  19,606,016   4.00%
DEUTSCHE TELEKOM AG  122,537,599   25.00%  147,045,118   30.00%
Institutional Investors  207,995,902   42.44%  194,978,408   39.78%
Private Investors  37,079,289   7.56%  50,096,782   10.22%
          
Total
  490,150,389   100.00%  490,150,389   100.00%
          
 
16.15.  STATUTORY RESERVE — FOREIGN EXCHANGE AND OTHER RESERVES — RETAINED EARNINGS
 
Under Greek Corporate Law, entities are required to transfer on an annual basis a minimum of five percent of their annual profit for the year(after income taxes) to a statutory reserve, until such reserve equals one-third of the issued share capital. As atof December 31, 20082009 and 2007,2008, this reserve amounted to Euro 330.2344.1 and Euro 312.1330.2 respectively. This statutory reserve cannot be distributed to shareholders. Retained earnings include undistributed taxed profits as well as untaxed and specially taxed reserves which, upon distribution, will be subject to income tax.


F-38

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The analysis of foreign exchange and other reserves is as follows:
         
  December 31, 
  2009  2008 
 
Available for sale reserve  5.2   1.7 
Net loss on cash flow hedge  (6.8)  (6.3)
Foreign currency translation  (51.7)  78.5 
         
Balance at December 31
  (53.3)  73.9 
         
 
17.16.  DIVIDENDS
 
Under Greek Corporate Law, each year companies are required to distribute to their shareholdersowners dividends of at least 35% of profits which result from their accounting bookbooks and records (published financial statements), after allowing for the statutory reserve.reserve and income tax. However, companies can waive such dividend payment requirement with the unanimous consent of the 70% of their shareholders.owners.
 
On June 26, 2008,24, 2009, the General Assembly of OTE’s Shareholders approved the distribution of a dividend from the 20072008 profits of a total amount of Euro 367.6 or Euro 0.75 (in absolute amounts)amount) per share. Pursuant to Law3697/2008, dividends approved by General Meetings convened after January 1, 2009, are subject to 10% withholding tax which will be borne by the beneficiary, however, the related law provides for certain exceptions. The amount of dividends payable as atof December 31, 20082009 amounted to Euro 3.8.4.2 (December 31, 2008: Euro 3.8).
 
The Board of Directors of OTE will propose to the Annual General Assembly of the Shareholders the distribution of a dividend from the 20082009 profits of a total amount of Euro 367.693.1 or Euro 0.750.19 (in absolute amount) per share.
Pursuant to Law 3697/2008, from 2009 onwards all distributions of dividends will be subject to 10% withholding tax which will be borne by the beneficiary, however the related law provides for certain exemptions.


F-38

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
18.17.  LONG-TERM BORROWINGS
 
Long-term borrowings are analyzed as follows:
 
             
     December 31, 
     2008  2007 
 
 (a) Loan from European Investment Bank / Hellenic State  18.9   36.4 
 (b) Syndicated loans  500.0   500.0 
 (c) Global Medium-Term Note Programme  5,464.5   3,360.4 
 (d) Other bank loans  59.2   133.6 
             
    Total long-term debt  6,042.6   4,030.4 
    Short-term portion  (633.0)  (83.3)
             
    Long-term portion  5,409.6   3,947.1 
             
             
     December 31, 
     2009  2008 
 
 (a) Loan from European Investment Bank / Hellenic State  —   18.9 
 (b) Syndicated loans  500.0   500.0 
 (c) Global Medium-Term Note Program  4,876.5   5,464.5 
 (d) Other bank loans  42.1   59.2 
             
    Total long-term debt  5,418.6   6,042.6 
    Short-term portion  (32.9)  (633.0)
             
    Long-term portion  5,385.7   5,409.6 
             
 
(a)  LOAN FROM EUROPEAN INVESTMENT BANK/BANK / HELLENIC STATE
 
The long-termIn July 2009, OTE paid the last installment (Euro 18.9) of the loan to OTE byfrom the European Investment Bank / Hellenic State was granted in 1995, is denominated in ECU, bears interest at 8.30% and is repayable in annual installments through to 2009. During 2008, OTE paid Euro 17.5 (2007: Euro 16.1) of capital against the loan (the installment, including interest amounted to Euro 20.5). The last installment will be paid in July 2009 (Euro 18.9) and has been transferred to short-term portion of long-term borrowings.Bank.
 
(b)  SYNDICATED LOANS
 
On September 2, 2005, OTE PLC signed a Euro 850.0 Syndicated Credit Facility with banks, guaranteed by OTE. The facility has a five year term with an extension option of 1+1 year subject to lenders’ consent. The facility consists of: a) a Euro 500.0 Term Loan with variable interest of three month Euribor plus margin (as of December 31, 2009 0.25%) and b) a Euro 350.0 Revolving Credit Facility.Facility with inactivity fee as the facility


F-39

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
has not been utilized (as of December 31, 2009 0.06750%). The loan bears a “margin adjustment clause” whereby the margin is adjustable based on OTE’s long-term credit rating. The loan agreement includes a change of control clause which is triggered when there is a change of control in OTE which will result in a credit rating of OTE or the new legal entity at a level lower ofthan BBB/Baa2. In the case theevent this clause is triggered, OTE PLC is obliged to notify the banks, whichwho can request the immediate repayment of the loan. On September 6, 2005, OTE PLC drew Euro 500.0 under the Term Loan. Up to December 31, 2008,2009, no draw-downs have been made from the Revolving Credit Facility.
 
At OTE PLC’s request and following the banks’ consent, the maturity of the loan was extended as follows:
 
a) for Euro 25.8 (Term Loan) and Euro 18.0 (Revolving Credit Facility) to September 2010
 
b) for Euro 29.0 (Term Loan) and Euro 20.3 (Revolving Credit Facility) to September 2011 and
 
c) for Euro 445.2 (Term Loan) and Euro 311.7 (Revolving Credit Facility) to September 2012.
 
In May 2008, Moody’s down graded OTE’s long-term rating from Baa1 to Baa2. According to several terms included in the agreement between the Greek State and DEUTSCHE TELEKOM AG, the Greek State’s interest in OTE may potentially decrease below 20%. As a result, the Company’s support by the Greek State was downgraded to “low” from “average”. This modification resulted in the long-term rating being changed to Baa2. Since the Company’s underlying business fundamentals and financial strength remain unchanged, the rest of the factors used to assess the Company’s rating have remained unchanged.
The current credit rating of OTE, has resulted in an adjustment to the margin as follows: foron the Term Loan tois 0.25% and for the Revolving Credit Facility to 0.225%.


F-39

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
(c)  GLOBAL MEDIUM TERM NOTE PROGRAMMETERM-NOTE PROGRAM
 
OTE PLC has a Global Medium TermMedium-Term Note Program guaranteed by OTE, of Euro 6,500 with OTE as guarantor.
On February 12, 2008, OTE PLC completed the issuance of two bonds amounting to Euro 1,500.0 and Euro 600.0 under the Global Medium Term Note Programme, for the refinancing of the balance of the short-term loan which was obtained in November 2007 for the acquisition of COSMOTE’s shares by OTE.
 
As atof December 31, 2008, notes for a2009, the total nominal value of Euro 5,500.0the outstanding bonds under the Global Medium TermMedium-Term Note Programme were issued,Program was Euro 4,900.0 and is analyzed as follows:
 
(i) 
• Euro 1,250.0 notes (nominal value) at a fixed interest rate 5.0%, issued in August 2003, maturing on August 5, 2013.
(ii) Euro 650.0 notes at a fixed interest rate 3.75%, issued in November 2005 maturing on November 11, 2011.
(iii) Euro 900.0 notes at a fixed interest rate of 5.0%, issued in August 2003, maturing on August 5, 2013. As of December 31, 2009 the outstanding balance is Euro 1,250.8 (2008: Euro 1,248.8).
• Euro 650.0 notes (nominal value) at a fixed rate of 3.75%, issued in November 2005, maturing on November 11, 2011. As of December 31, 2009 the outstanding balance is Euro 639.7 (2008: Euro 634.4).
• Euro 900.0 notes (nominal value) at a fixed rate of 4.625%, issued in November 2006 maturing on May 20, 2016.
(iv) Euro 600.0 notes with a floating interest rate, issued in November 2006, maturing on May 20, 2016. As of December 31, 2009 the outstanding balance is Euro 892.5 (2008: Euro 891.5).
• Euro 1,500.0 notes (nominal value) at a fixed rate of 5.375%, issued in February 2008, maturing on February 14, 2011. As of December 31, 2009 the outstanding balance is Euro 1,496.8 (2008: Euro 1,494.2).
• Euro 600.0 notes at a fixed rate of 6.0%, issued in February 2008, maturing on February 12, 2015. As of December 31, 2009 the outstanding balance is Euro 596.7 (2008: Euro 596.3).
In May 2009, OTE PLC repurchased a nominal amount of Euro 28.1 under the Euro 600.0 Floating Rate Note (FRN), issued on November 21, 2006 and maturing on November 21, 2009.
(v) The notes were cancelled and therefore, the outstanding nominal balance of the aforementioned FRN amounted to Euro 1,500.0 notes issued in February 2008, maturing on February 14, 2011 with a fixed interest rate of 5.375% and
(vi) Euro 600.0 notes issued in February 2008, maturing on February 12, 2015, with a fixed interest rate of 6.0%.571.9. In November 2009, OTE PLC fully repaid this note.
 
These bonds are traded on the Luxembourg Stock Exchange.
 
The Euro 900.0 and Euro 600.0 bonds issued in November 2006 and the Euro 1,500.0 and Euro 600.0 bonds issued in February 2008 also include a change of control clause applicable to OTE which is triggered if both of the following events occur:
 
a) any person or persons acting in concert (other than the Hellenic Republic)State) at any time directly or indirectly come (s) to own or acquire (s) more than 50% of the issued ordinary share capital or of the voting rights of OTE, and
 
b) as a consequence of (a), the rating previously assigned to the bonds by any international rating agency is withdrawn or down gradeddowngraded to BB+/Ba1 or their respective equivalents (Sub-investment(non-investment grade), within a specific period and under specific terms and conditions.


F-40

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
In the event that the clause is triggered OTE PLC is obliged to notify the banks, whichbondholders, who can request (within 45 days) the repayment of the loan.
 
The terms of the abovementioned bonds (v)of Euro 1,500.0 and (vi)Euro 600.0 include astep-up clause triggered by changes in the credit rating of OTE (“step up clause”). The bond coupon may increase by 1.25% in the event that:
 
a) one or both of the two credit rating agencies (Moody’s and Standard and Poor’s) downgrades the rating to BB+, or Ba1 and under (sub-investment(sub-investment grade), or
 
b) both rating agencies (Moody’s and Standard and Poor’s) cease or are unable to perform the credit rating of OTE.
 
The coupon can increase once only during the whole bond duration and only for the period the credit rating of OTE remains atsub-investment grade.


F-40

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Derivatives
 
On July 21, 2008, OTE PLC entered into an interest rate swap with Goldman Sachs that has a notional offor Euro 65.0 and maturesmaturing on August 5, 2013. The swap has been designated as the hedging instrument in the Fair Valuefair value hedge of a portion of OTE PLC’s Euro 1,250.0 bond, which bears a fixed interest rate of 5.0% and matures in 2013. OTE PLC will receivereceives 5.0% annually from Goldman Sachsthe bank and pay three month Euribor less 0.05% every quarter. The gain from the change in the fair value of the swap has beenis recorded in the line “interest“Interest expense” and is offset by the loss from the change in fair value of the loan. Any ineffectiveness arising is immaterial. Themark-to-market value of the swap as of December 31, 2009 was Euro 7.4 positive for OTE PLC.
 
On October 1, 2008, the Group designated an existinga swap with a notional ofthat already existed from COSMOTE, for Euro 200.0 and which maturesmaturing on September 2, 2010 as the hedging instrument on Group level in a cash flow hedge offor the cashflowscash flows of a portion of athe syndicated loan of Euro 500.0 which bears a variable interest rate. The Group receives three month Euribor and pays a fixed rate of 3.671% on a quarterly basis. The effective portion ofFrom October 31, 2009 this swap does not meet the changecriteria for hedge accounting set out in fair value ofIAS 39. During the swap isyear ended December 31, 2009 a loss of Euro 6.3 and has been0.5 was recorded in equity, the ineffective portion of Euro 0.3 has been recorded in the income statement.other comprehensive income.
 
(d)  OTHER BANK LOANS
 
ROMTELECOM has obtained four long-term loans in Euro and Korea Won, the outstanding balance of which amount to Euro 54.842.1 as atof December 31, 2008. Of2009 (December 31, 2008: 54.8). The first of these is in Euro, it has an outstanding balance of Euro 12.1, bears a fixed interest rate of 4.9956% and matures in 2012. The remaining three loans two withhave outstanding balances of Euro 7.97.0, Euro 13.2, and Euro 16.1 are in Euro with fixed interest rates of 6.12% and 5.00% maturing in 2009 and 2012 respectively. The remaining three loans with outstanding balances of Euro 8.0, Euro 13.7 and Euro 9.19.8, are in Korean Won, withbear a fixed interest rate of 4.20%, 2.50% and 2.50% respectively and maturingmature in 2014, 2018 and 2020, respectively. During 2008,2009, ROMTELECOM repaid an amount of Euro 13.412.7 out of its long-term debt.
On May 10, 2005, GLOBUL entered into a credit facility agreement with Bank Austria, with a three year credit facility of Euro 75.0 maturing in 2008, bearing interest at Euribor + 1.25%. Draw-downs under the facility through to December 31, 2007 amounted to Euro 50.0. The outstanding balance was repaid in full during 2008 with proceeds from an inter company loan from OTE PLC.
E-VALUE, a GERMANOS subsidiary, entered into a credit facility of Euro 3.0 with EFG Eurobank, maturing in 2008 with a floating interest of EURIBOR + 0.55%. During 2008, the company refinanced this loan, with a new loan of Euro 2.0 maturing in 2010 and bearing a variable interest rate of Euribor + 0.90%. As at December 31, 2008, the balance outstanding was Euro 2.0.loans.
 
19.18.  PROVISIONS FOR PENSIONS, STAFF RETIREMENT INDEMNITIES AND OTHER EMPLOYEE BENEFITS
 
OTE employees are covered by various pension, medical and other benefit plans as summarized below:
 
Defined Contribution Plans:
 
(a)  Main Pension Fund (TAP-OTE):/IKA-ETAM
 
The TAP-OTE Fund, a multi-employer fund to which OTE contributes, iswas the main fund providing pension and medical benefits to OTE employees. The employees of the National Railway Company and the Greek Post Office are also members of this Fund.


F-41

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
According to Law 2257/1994, OTE was liable to cover the annual operating deficit of TAP-OTE up to a maximum amount of Euro 32.3, which could be adjusted with the Consumer Price Index. Pursuant to Greek legislation (Law 2768/1999), a fund was incorporated on December 8, 1999, as a société anonyme under the name of EDEKT-OTE S.A. (“EDEKT”), for the purpose of administering contributions to be made by OTE, the Hellenic State and the Auxiliary Pension Fund, in order to finance the TAP-OTE deficit. The Hellenic State’s and the Auxiliary Pension Fund’s contributions to EDEKT were set to Euro 264.1 and Euro 410.9, respectively. Pursuant to Law 2937/2001, OTE’s contribution was set at Euro 352.2, representing the equivalent to the net present value of


F-41

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ten (10) years’(2002-2011) contributions to TAP-OTE. This amount was paid on August 3, 2001 and is being amortized over the ten-year period, the annual amortization charge being Euro 35.2 and included in “Payroll and employee benefits”. Pursuant to Law 2843/2000, any deficits incurred by TAP-OTE are covered by the Hellenic State.
 
Pursuant to Law 3029/2002, the duration over which employers are obliged to cover the annual deficits of pension funds of employees will be determined by Ministerial Decision.
As a result of Law 3655/2008, (FEK 55 A/3.4.08) relating to the pension issue, the pension segment of TAP OTETAP-OTE was incorporated into IKA-ETEAMIKA-ETAM (the main social security of Greece) from August 1, 2008, with a gradual reduction of contributions from TAP OTETAP-OTE to those of IKA, which is expected to commence in 2013 and conclude in 2023 in three equal installments. At the same time, the Medicalmedical segment of TAP OTE as well as the two segments of the Auxillary fund (the Lump — Sum Payment segment and the Additional Pension segment) wereTAP-OTE was incorporated from October 1, 2008 into TAYTEKO.
In conjunction with the new Law, it is anticipated that the shares of TAP OTETAP-OTE in the share capital of EDEKT-OTE, will passEDEKT, are passed to IKA-ETEAMIKA-ETAM from the date this segment isSection was transferred to IKA-ETEAM.IKA-ETAM.
Furthermore, according to Law 3655/2008 (article 2, paragraph 8) the deficits of the pension segments which were incorporated into IKA-ETAM are covered by the Hellenic State.
 
(b)  Auxiliary Pension Fund:Fund/ TAYTEKO
 
(i) The Auxiliary Fund-Lump Sum segment provides members with a lump sum benefit upon retirement or death.
 
(ii) The Auxiliary Pension Benefit Fund provides to those members, who were members prior to 1993, with a pension of 20% of salary after 30 years service. Law 2084/92 has fixed minimum contributions and maximum benefits, after 35 years of service, for new entrants from 1993. As a result of Law 3655/2008, the two segments of the Auxiliary fund (the Lump — Sum Payment segment and the Additional Pension segment) were incorporated from October 1, 2008 into TAYTEKO.
 
Based on actuarial studies performed in prior years and on current estimations, these pension funds show (or will show in the future) increased deficits. OTE does not have a legal obligation to cover any future deficiencies of these funds and, according to management; neither does it voluntarily intend to cover such possible deficiencies. However, there can be no assurance that OTE will not be required (through regulatory arrangements) to make additional contributions in the future to cover operating deficits of these funds.


F-42

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Loans and advances to pension funds are analyzed as follows:
 
                
 December 31,  December 31, 
 2008 2007  2009 2008 
Loans and advances to:                
EDEKT  105.6   140.9   70.4   105.6 
Auxiliary Fund  2.6   4.0   2.4   2.6 
Interest bearing loan to Auxiliary Fund  131.5   120.6   127.0   131.5 
          
Total
  239.7   265.5   199.8   239.7 
Loans and advances to:                
EDEKT  35.2   35.2   35.2   35.2 
Auxiliary Fund  0.5   0.5   0.5   0.5 
Interest bearing loan to Auxiliary Fund  9.5   —   9.6   9.5 
          
Short-term portion
  45.2   35.7   45.3   45.2 
          
Long-term portion
  194.5   229.8   154.5   194.5 
          
 
Loans to pension funds are reflected in the financial statements at amortized cost, having been discounted, using appropriate Greek market rates, on initial recognition to their present values.


F-42

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Article Based on article 74 of Law3371/2005 and the provisions of the related Ministerial Decision, provided that OTE should grant an interest bearing loan to the Auxiliary Fund in order to cover the Lump Sum benefits upon retirement due to participants of the Voluntary Retirement Program.Leave Scheme. On October 23, 2006, the loan agreement was signed and its main terms are as follows: the total amount of the loan is up to Euro 180.0, which would be granted partially in accordance with the Fund’s needs, as determined by the above mentioned Law and the related Ministerial Decision. If the Lump Sum benefits exceeded the amount of Euro 180.0, OTE would grant the additional amount, which could not exceed the amount of Euro 10.0. In this case, the above mentioned agreement would be amended in order to include the final amount of the loan and to update the repayment schedule.
Following the above mentioned terms, on October 30, 2007 and on May 21, 2008 two amendments to the loan agreement were signed based on which additional amounts of Euro 8.0 and Euro 1.3 were granted and the repayment schedule was updated so that as atof December 31, 2008,2009, the total loan granted amounted to Euro 189.3. The loan is repayable in 21 years including a two year grace period, meaning that the repayment started on October 1, 2008 through monthly installments. The loan bears interest at 0.29%.
 
Defined Benefit Plans:
 
(a)  Provision for Staff Retirement Indemnities
 
Under Greek labor law, employees are entitled to termination payments in the event of dismissal or retirement with the amount of payment varying in relation to the employee’s compensation, length of service and manner of termination (dismissal or retirement). Employees who resign (except those with over fifteen years of service) or are dismissed with cause are not entitled to termination payments. The indemnity payable in case of retirement is equal to 40% of the amount which would be payable upon dismissal. In the case of OTE employees, the maximum amount is limited to a fixed amount (Euro 0.02 and is adjusted annually according to the inflation rate), plus 9 months salary. In practice, OTE employees receive the lesser amount between 100% of the maximum liability and Euro 0.02 plus 9 months’months salary. Employees with service exceeding 25 years are entitled to draw loans against the accrued indemnity payable to them upon retirement.
The provision for staff leavingretirement indemnity is reflected in the financial statements in accordance with IAS 19 “Employee Benefits” and is based on an independent actuarial study.


F-43

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The components of the staff retirement indemnity expense are as follows:
 
                        
 For the Year Ended December 31,  Year Ended December 31, 
 2008 2007 2006  2009 2008 2007 
Current service cost  18.4   18.7   18.9   19.0   18.4   18.7 
Interest cost on benefit obligation  15.5   14.5   16.5   20.2   15.5   14.5 
Amortization of past service cost  6.7   7.8   7.8   8.0   6.7   7.8 
Amortization of unrecognized actuarial loss  2.7   3.8   0.8   2.8   2.7   3.8 
              
Total
  50.0   43.3   44.8 
  43.3   44.8   44.0        
       


F-43

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Changes in the present value of the staff leavingretirement indemnities are as follows:
 
        
 December 31,         
 2008 2007  2009 2008 
Defined benefit obligation — beginning of the year  331.3   332.6   359.2   331.3 
Current service cost  18.4   18.7   19.0   18.4 
Interest cost  15.5   14.5   20.2   15.5 
Actuarial loss/(gain)  11.1   (23.1)  (2.3)  11.1 
Past service cost  2.5   4.1   0.7   2.5 
Foreign exchange differences  (0.8)  — 
Prior service cost arising during the year  0.2   — 
Benefits paid  (19.6)  (32.0)  (38.2)  (19.6)
Termination benefits based on Voluntary Leave Scheme  —   16.5 
          
Defined benefit obligation — end of the year  359.2   331.3   358.0   359.2 
Unrecognised actuarial losses  (55.3)  (44.3)
Unrecognised past service costs  (49.0)  (56.7)
Unrecognized actuarial losses  (50.3)  (55.3)
Unrecognized past service costs  (41.2)  (49.0)
          
Defined benefit liability — end of the year  254.9   230.3 
Liability in the statement of financial position
  266.5   254.9 
          
 
The assumptions underlying the actuarial valuation of the Companystaff retirement indemnities for the Group are as follows:
 
         
 For the Year Ended
            
 December 31,  Year Ended December 31, 
 2008 2007 2006  2009 2008 2007 
Discount rate  5.5%  4.8%  4.1%  4.6–9.5%  4.5–6.7%  4.8%
Assumed rate of future salary increases  6.5%  5.5%  5.5%  3.5–4.5%  2.5–6.5%  5.5%
 
(b)  Youth Account
 
The Youth Account provides OTE’s employees’ children a lump sum payment generally when they reach the age of 25. The lump sum payment is made up of employees’ contributions, interest thereon and OTE’s contributions which can reach up to a maximum 10 months’ salary of the total average salary of OTE employees depending on the number of years of contributions.
The provision for benefits under the Youth Account is based on an independent actuarial study. The total actuarial liability is split into two parts; one is treated as “post employment employee benefit” and the other as “other long-term employee benefit”. The part of the total Youth Account liability that is being classified as “other long-term employee benefit” relates to employees who will still be active employees at the time when their children will be eligible for the lump sum benefit. The remaining part of the liability is being classified as “post retirement employee benefit”.


F-44

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The amount of the Youth Account provision recognized in the income statement is as follows:
 
             
  For the Year Ended
 
  December 31, 
  2008  2007  2006 
 
Current service cost  19.9   21.8   21.9 
Interest cost on benefit obligation  11.8   11.8   10.0 
Amortization of unrecognized actuarial loss  31.8   10.7   8.0 
Amortization of past service cost  5.8   3.2   3.2 
             
   69.3   47.5   43.1 
             


F-44

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following is a reconciliation of the projected benefit obligation to the liability recorded for the Youth Account benefits:
         
  December 31, 
  2008  2007 
 
Projected benefit obligation at beginning of year  202.5   206.5 
Service cost-benefits earned during the year  19.9   21.8 
Interest cost on projected benefit obligation  11.8   11.8 
Amortization of unrecognized actuarial loss  31.8   10.7 
Amortization of past service cost  5.8   3.2 
Benefits paid  (56.2)  (51.5)
         
Projected benefit obligation at end of year  215.6   202.5 
Employee’s accumulated contributions  70.7   71.0 
         
   286.3   273.5 
         
             
  Year Ended December 31, 
  2009  2008  2007 
 
Current service cost  19.3   19.9   21.8 
Interest cost on benefit obligation  12.6   11.8   11.8 
Amortization of actuarial loss  11.3   31.8   10.7 
Amortization of past service cost  2.3   5.8   3.2 
             
Total
  45.5   69.3   47.5 
             
 
The reconciliation of the total defined benefit obligation regarding the Youth Account to the benefit liability is as follows:
 
                              
 December 31,  2009 2008
 2008 2007  Post
 Other
   Post
 Other Long
  
 Employment
 Long Term
   Employment
 Term
  
 Benefit Benefit Total Benefit Benefit Total
Projected benefit obligation — beginning of the year  194.4   83.3   277.7   200.5   85.9   286.4 
Service cost-benefits earned during the year  13.5   5.8   19.3   13.9   6.0   19.9 
Interest cost on projected benefit obligation  8.8   3.8   12.6   8.3   3.5   11.8 
Amortization of unrecognized actuarial loss  30.0   4.8   34.8   11.1   4.8   15.9 
Benefits paid  (39.7)  (10.4)  (50.1)  (39.4)  (16.9)  (56.3)
Projected benefit obligation — end of the year
  207.0   87.3   294.3   194.4   83.3   277.7 
Defined benefit obligation  277.7   286.4   207.0   87.3   294.3   194.4   83.3   277.7 
Unrecognised actuarial losses  (56.1)  (72.1)
Unrecognised past service costs  (6.0)  (11.8)
     
Unrecognized actuarial losses  (79.6)  —   (79.6)  (56.1)  —   (56.1)
Unrecognized past service costs  (3.7)  —   (3.7)  (6.0)  —   (6.0)
Benefit liability  215.6   202.5   123.7   87.3   211.0   132.3   83.3   215.6 
     
Employee’s accumulated contributions        71.3         70.7 
Liability in the statement of financial position
  123.7   87.3   282.3   132.3   83.3   286.3 
 
The assumptions underlying the actuarial valuation of the Youth Account are as follows:
 
            
 For the Year Ended
          
 December 31,  Year Ended December 31,
 2008 2007 2006  2009 2008 2007
Discount rate  5.0%   4.5%   4.0%   3.9%  5.0%  4.5%
Assumed rate of future salary increase  4.5%   4.5%   4.5% 
Assumed rate of future salary increases  4.5%  4.5%  4.5%
 
Voluntary Leave SchemeSchemes
 
On May 25, 2005, the management of OTE and OME-OTE (the personnel union body) signed a Collective Labor Agreement which stipulates the staff hiring procedures. In accordance with this agreement, all new recruits by OTE will be covered with indefinite service agreements.
The agreement became effective from the date the relevant law for the voluntary leave of OTE staff came into force.
 
The enactment of Article 74 of Law 3371/2005 (Government Gazette 178/14.7.2005) and the Collective Labor Agreement signed between OTE and OME-OTE on July 20, 2005, instituted the framework for the voluntary retirement scheme. Pursuant to this Law and the collective labor agreement, the voluntary retirement scheme was applicable to permanent employees who would complete the number of years of service required for retirement up to December 31, 2012 would be entitled to full pension and other benefits.
Employees that desired to come under the provisions of the above mentioned


F-45

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Law, with the decision of TAP OTE, such factitious time insured as the one required for the vesting of the retirement right was recognized. The same decision for the recognition of factitiousfictitious time was also taken by the Auxiliary Fund.


F-45

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The cost components of the voluntary leave are as follows:
 
 • The cost of employer’s and employees’ contributions to TAP-OTE for the period required for the employees to be entitled to pension
 
 • The amount of pensions TAP OTETAP-OTE will be required to prepay to these employees
 
 • The total cost of employer’s and employees’ contributions to the Auxiliary Fund for the period required for the employees to be entitled to pension
 
 • The amount of pensions the Auxiliary Fund will be required to prepay to these employees
 
 • The total cost of employees’ contributions to Auxiliary Fund for the Lump SumLump-Sum benefit
 
 • The total cost of bonuses based on the collective labor agreement signed on July 20, July 2005 and
 
 • The termination payments upon retirement of the employees (staff retirement indemnities).
 
Because of the periodical payments of the majority of the above mentioned costs (payments through to 2012), the nominal amounts of these liabilities were discounted toat their present values. The increase which resulted during 2008 due to the discounting of the provision from the passage of time amounted to Euro 8.1 (2007: Euro 12.3, 2006: Euro 26.8) and is included in the 2008 income statement under interest expense.
Based on the estimated period of payment, these obligations are classified as follows:
         
  December 31, 
  2008  2007 
 
Short-term portion of the provision for Voluntary Leave Scheme  275.8   200.2 
Long-term portion of the provision for Voluntary Leave Scheme  107.2   217.5 
         
Total
  383.0   417.7 
         
The movement of the provision for the cost of the Voluntary Leave Scheme is as follows:
Balance as of January 1, 20061,038.7
Payments during year 2006(337.6)
Adjustment due to re-estimation(49.8)
Adjustment due to time value of money26.8
Balance as of December 31, 2006
678.1
Balance as of January 1, 2007678.1
Payments during year 2007(256.2)
Adjustment due to re-estimation(16.5)
Adjustment due to time value of money12.3
Balance as of December 31, 2007
417.7
Balance as of January 1, 2008417.7
Payments during year 2008(42.8)
Adjustment due to time value of money8.1
Balance as of December 31, 2008
383.0
 
Based on the provisions of Law 3371/2005, the Greek State willwould contribute a 4% stake in OTE’s share capital to TAP-OTE for the portion of the total cost that relates to employer’s and employees’ contributions to TAP-OTE and to the amount of pensions TAP OTE willwould be required to prepay, subject to EU approval.
In May 2007, the European


F-46

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Commission by its relevant decision with reference number C 2/2006 (ex L405/2005) judged that the Greek State’s proposal to grant a 4% of its stake to TAP OTE, according to article 74 of L.3371/2005 was not against common market regulations as defined in article 87 paragraph 3. The total contribution of the Greek State to TAP OTE according to the above decision could not exceed the amount of Euro 390.4. The exact amount would depend on the timing and the procedures that willwould be followed by the GreekHellenic State for the implementation of the decision.
 
On February 27, March 4, 2009, the Hellenic State and IKA-ETAM (general successor of TAP-OTE) signed a transfer agreement of 19,606,015 ordinary shares held by the Hellenic State to IKA-ETAM without cash consideration. These shares represent 4% of OTE’s share capital, in accordance with articles 74 par. 4a of L.3371/2005 and articles 1 and 2 par. 4 and 5 of L3655/2008, in combination with the decision of May 10, 2007 of the European Community Committee (C 2/2206). The fair value of the transaction was set at Euro 10.30 in absolute amount (closing price of the OTE’s share on the Athens Exchange the date the transfer was signed) per share.
The above transfer is subject to the following terms:
• The Hellenic State retains the option to repurchase a part or the total of the transferred shares. This option can be exercised at any time, following a written declaration to IKA-ETAM, stating at a minimum the number of shares that will be repurchased and the time period, as one or a series of transactions.
• If IKA-ETAM, for any reason, decides to sell all or a part of the shares, it is obliged to communicate this intention in writing to the Hellenic State. The Hellenic State retains the right to repurchase part or the whole of the shares that IKA-ETAM intends to sell. To exercise this right, the Hellenic State must provide written notice of its intentions within one month from notification. If the Hellenic State does not wish to exercise its right or does not exercise its rights within one month, then IKA-ETAM can sell freely those shares.
• The Hellenic State has the exclusive obligation to repurchase the shares that IKA-ETAM intends to sell if the reason for the sale is to fund the pensions of the participants in OTE’s Voluntary Leave Scheme based on article 74 of L3371/2005. In this instance, IKA-ETAM must provide specific economic analysis that


F-46

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
evidences its inability to fulfill its obligation to disburse pensions to the above mentioned participants without the sale of the shares.
• In all the afore-mentioned cases (call optionand/or put option) the value of the total of the transferred shares will be calculated based on the closing price of the share of OTE at the signing date (i.e. Euro 10.30 (in absolute amount) per share).
• If IKA-ETAM sells the shares to a third party without complying with all the afore-mentioned terms, IKA-ETAM is obliged to pay to the Hellenic State an amount equal to 10 times the consideration received from the sale to the third party as a financial penalty and compensation which is agreed as fair.
• If OTE decides to increase its share capital with a preference right in favor of the existing owners, or issues convertible bonds and IKA-ETAM decides to exercise these rights, IKA-ETAM is required to inform the Hellenic State in writing. The Hellenic State retains the right to request IKA-ETAM to transfer, through an over the counter transaction, the additional shares obtained. In this case IKA-ETAM is obliged to transfer the shares obtained at the price obtained, otherwise it is obliged to pay compensation equal to 10 times the consideration invested for participating in the share capital increase and terms mentioned in the preceding paragraph will apply.
• IKA-ETAM undertakes to exercise its voting rights corresponding to the above shares, in coordination with the Hellenic State and has to instruct individuals who will be authorized to exercise the voting rights at any General Assembly of the OTE’s shareholders on its behalf in the same way the Hellenic State does. Otherwise, IKA-ETAM has to pay to the Hellenic State a penalty equal to the listed price of the transferred shares at the date of the General Assembly of the OTE’s shareholders as well as any other compensation for any consequential loss the Hellenic State suffers.
On May 15, 2009 the Law 3762/2009 was enacted providing the following:
• OTE’s employees who: (i) have submitted a written application to participate in the Voluntary Leave Scheme, within the deadlines defined in par.2, article 74 of Law 3371/2005 and, (ii) do not submit an irrevocable application within one (1) month from the law’s enactment that would recall the initial application submitted, are considered to be retired based on the article 74 of Law 3371/2005 within three (3) months from the expiration of the deadline described in ii) above.
• The cost that will arise from a) the employer’s and the employee’s contributions to IKA-ETAM (both for the sections of pensions and medical benefits) for the factitious time recognized to these employees and b) the pensions that IKA-ETAM’s pension section will be required to pay to these employees based on the above, will be covered by OTE.
• The cost that will arise from the employer’s and the employee’s contributions to TAYTEKO for the factitious time recognized to these employees as well as the pensions that TAYTEKO (Auxiliary Insurance Sector for OTE Personnel) will be required to pay to these employees based on the above, will be covered by OTE.
• The cost that will arise from the employer’s and the employee’s contributions to TAYTEKO (Health Insurance Sector for OTE Personnel) for the factitious time recognized to these employees, will be covered by OTE.
• For the Lump Sum benefits that TAYTEKO will be required to pay to these employees, OTE should grant a long-term loan to TAYTEKO.


F-47

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Based on the estimated period of payment, the provision relating to the Voluntary Leave Scheme is classified as follows:
         
  2009  2008 
 
Short-term portion  149.0   275.8 
Long-term portion  109.9   107.2 
         
Total
  258.9   383.0 
         
The movement of the provision for the cost of the Voluntary Leave Scheme is as follows:
         
  2009  2008 
 
Balance at January 1
  383.0   417.7 
Payments during the year  (96.1)  (42.8)
Release of liability due to transfer of 4% to IKA-ETAM  (201.9)  — 
Voluntary Leave Scheme cost  152.0   — 
Payments related to provision for staff retirement indemnities  (13.9)  — 
Adjustment due to time value of money  35.8   8.1 
         
Balance at December 31
  258.9   383.0 
         
On January 28, 2009, the management of OTE and OME-OTE (the employee’s union)personnel union body) signed a Collective Labor Agreement according to which employees who would complete the number of years required for retirement by December 29, 2008,30, 2009, would be entitled to benefits in order to retire by this date at the latest by December 30, 2008.latest. The deadline for the applications for participating in this Voluntary Schemeearly retirement program was due on March 21, 2008.February 16, 2009. Applications were irrevocable. The respective cost amounted to Euro 12.211.0 and is included in the line “Cost of early retirement program” in the 20082009 income statement. statement while the eligible employees left the Company until December 30, 2009.
On December 23, 2009, the management of OTE approved an early retirement program according to which employees who will complete the number of years required for retirement by December 29, 2010, would be entitled to benefits in order to retire by December 30, 2010. The deadline for the applications for participating in this early retirement program was January 15, 2010. For further information see Note 32.
In addition, included in the 20082009 Group’s income statement is an amount of Euro 8.6 (2008: Euro 38.0, 2007: nil) which is the cost of ROMTELECOM’s early retirement program and is included in the line “Cost of early retirement program”.
 
The table below describes the components included in the line “Cost of early retirement program” of the income statement relating to the Voluntary Leave Scheme and the early retirement programs described above:
             
  Year Ended December 31, 
  2009  2008  2007 
 
Release of liability due to transfer of 4% to IKA ETAM  201.9   —   — 
Voluntary Leave Scheme cost  (152.0)  —   — 
Other early retirement programs’ cost  (19.6)  (50.2)  (22.1)
             
Total
  30.3   (50.2)  (22.1)
             


F-48

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
20.19.  OTHER NON-CURRENT LIABILITIES
 
Other non-current liabilities are analyzed as follows:
 
                
 December 31,  December 31, 
 2008 2007  2009 2008 
Provision for employee’s contributions under early retirement programs  4.4   4.5 
Provision for employees’ contributions under early retirement programs  7.1   4.4 
Asset retirement obligation  5.9   5.5   8.5   5.9 
Provision for obligation of free units  37.0   36.9   36.1   37.0 
Deferred revenue (long-term)  18.0   28.8   8.0   18.0 
MICROSTAR (see Note 23)  —   153.3 
Unpaid balance of 3G license  6.9   — 
Derivative financial instrument  4.3   3.9 
Other  9.3   4.6   7.0   5.4 
          
Total
  77.9   74.6 
  74.6   233.6      
     
 
21.20.  SHORT-TERM BORROWINGS
 
The outstanding balance of short-term borrowings as of December 31, 20082009 for the Group amounted to Euro 5.1. The weighted average interest rates on short-term borrowings for the years ended December3.3 (December 31, 20082008: Euro 5.1), and 2007, was approximately 6.1% and 4.5% respectively. The outstanding balance of short-term loans is analyzed as follows:
 
 • On November 9, 2007, OTE PLC signed a short term credit facility agreement for an amountLoan ofE-VALUE S.A. of Euro 2,700.02.0, maturing on July 2010 with a consortiuman interest rate Euribor + 0.90%. The outstanding balance of banks, under the full guaranteethis loan as of OTE, for the financing of the acquisition of minority shares of COSMOTE by OTE. The loan had a tenor of 1 year with a3-month extension option and bears interest defined as Euribor plus a margin adjustable on the basis of the long-term credit rating of OTE. According to the current credit rating of OTE the margin was set at 0.30%. As at December 31, 2007, OTE PLC had drawn-down2009 amounts to Euro 1,500.0. The proceeds of the loan were lent to OTE through an intercompany loan of an equivalent amount, signed also on November 9, 2007, which included similar terms and conditions.
During 2008, a further Euro 600.0 was drawn down which was repaid together with the initial draw down of Euro 1,500.0 with the proceeds from the issue of two bonds under the Global Medium Term Note Programme (Note 18) of Euro 1,500.0 and Euro 600.0.
• OTE PLUS and its subsidiaries loans of2.0 (December 31, 2008: Euro 4.10.3).
 
 • VOICENET loansLoan of OTE PLUS with an outstanding balance as of December 31, 2009 amounting to Euro 0.71.3 (December 31, 2008: Euro 4.1).
 
 • E-VALUE loansLoan of VOICENET with an outstanding balance as of December 31, 2009 amounting to nil (December 31, 2008: Euro 0.30.7).


F-47

 
HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The weighted average interest rate of the short-term borrowings for the years ended December 31, 2009 and 2008, was approximately 2.8% and 6.1%, respectively.
 
22.21.  INCOME TAXES — DEFERRED TAXES
 
In accordance with the Greek tax regulations (Law 3296/2004), the income tax rate was 25% for 2007 and onwards. In accordance with article 19 of Law 3697/2008 the income tax rate will gradually reduce as follows: 24% for 2010, 23% for 2011, 22% for 2012, 21% for 2013 and 20% for 2014 and onwards.
 
Greek tax regulations and related clauses are subject to interpretation by the tax authorities and administrative courts of law.
 
Tax returns are filed annually but the profits or losses declared for tax purposes remain provisional until such time as the tax authorities examine the returns and the records of the tax payer and a final assessment is issued. Net operating losses which are tax deductible, can be carried forward against taxable profits for a period of five years from the year they are generated.
 
Under Greek tax regulations, an income tax advance calculation on each year’s current income tax liability is paid to the tax authorities. Such advance is then netted off with the following year’s income tax liability. Any excess advance amounts are refunded to the companies following a tax examination.


F-49

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The Company and its subsidiaries have not been audited by the tax authorities for the following years described below and, therefore, the tax liabilities for these open years have not been finalized:
 
   
Company
 
Open Tax Years
 
Direct ownership
•   OTE From 20062009
•   COSMOTE From 20062009
•   OTE INTERNATIONAL INVESTMENTS LTD From 2003
•   HELLAS SAT From 2008
•   COSMO-ONE From 2002
•   VOICENET From 2004
•   HELLASCOM From 2007
•   OTE PLC From 2005
•   OTE SAT-MARITEL From 2004
•   OTE PLUS From 20052008
•   OTE ESTATE From 20032008
•   OTE GLOBE From 2007
•   OTE INSURANCE From 20032007
•   OTE ACADEMY From 2007
•   HATWAVE From 1996
Indirect ownership
•   OTE INVESTMENTS SERVICES S.A.  From 2005
•   ROMTELECOM From 2006
•   AMC From 20062008
•   COSMOFONFrom 2001
•   GLOBUL From 2005
•   COSMOTE ROMANIA From 2007
•   GERMANOS From 20042008
•   E-VALUE S.A. 
 From 2003
•   GERMANOS TELECOM SKOPJE S.A. From 2008


F-48

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Company
Open Tax Years
•   GERMANOS TELECOM ROMANIA S.A.  From 2003
•   SUNLIGHT ROMANIA S.R.L. -FILIALA From 20032005
•   GERMANOS TELECOM BULGARIA A.D.  From 2005
•   MOBILBEEEP LTD From 2005
•   HELLAS SAT A.ES.A.  From 2008
•   OTE MTS HOLDING B.VFrom 2005
•   CHA From 2007
•   COSMO-HOLDING CYPRUS From 2006
•   REAL ESTATE INVESTMENT COMPANYCOSMOHOLDING ROMANIA LTDFrom 2009 (incorporation)
ZAPPFrom 2009
OTE PROPERTIES From 2008 (incorporation)
•   OTE PLUS BULGARIA Tax exempt
E-VALUE LTD
From 2009 (incorporation)
 
The tax audit of the Company for the fiscal years2002-2005 was completed in early 2008. The authorities imposed additional taxes and fines amounting to Euro 84.4 for fiscal years2002-2004 and reduced the 2005 tax losses carried forward which resulted to an increase of the 2006 taxable profits and a corresponding increase in taxes by Euro 6.4, after the recognition of the expenses in 2006 that were disallowed by the tax authorities in 2005. The Company had recognized a provision of Euro 42.0 in previous years. The difference of Euro 42.4 was charged to the 2007 income statement.
The tax examination of GERMANOS for the fiscal years2004-2007 is in progress, and is expected to be completed within 2009.
The tax audit of ROMTELECOM for the fiscal years2001-2005 was completed in March 2008. Additional taxes of Euro 20.2 were imposed, which were netted-off against the respective provision which had been established in previous years, with no impact to the 2008 income statement.
During 2008, the tax audit of OTE GLOBE for the fiscal years2002-2006 was completed. Additional taxes of Euro 0.6 were imposed, which were netted-off against the respective provision which had been established in previous years, with no impact to the 2008 income statement.
During 2008, the tax audit of OTE ESTATE for the fiscal years 2001 and 2002 was completed and, although the additional taxes due, amounted to Euro 15.3, this was subsequently revised downwards by the tax authorities, to Euro 7.9. In addition, the tax authorities imposed additional taxes of Euro 16.8 relating to the share capital increase in 2001 against which the company has set up a provision of Euro 10.3 which was charged to the 2008 income statement. The company has decided to file lawsuits against the tax authorities’ decision, before the Administrative Courts.
In December 2008, the tax audit of the Cypriot company OTE INTERNATIONAL INVESTMENTS LTD for the years1998-2002 was completed without any additional taxes being imposed.
The tax audit of OTE SAT — MARITEL for the fiscal years 2004 and 2005 is in progress and is expected to be completed within 2009.
During 2008, the tax audit of HELLAS SAT for the fiscal years 2002- 2007 was completed and additional taxes of Euro 0.5 were imposed.
During 2008, the tax audit for the fiscal years2004-2006 in COSMOTE ROMANIA was completed, without any additional taxes being imposed.
The tax audit ofE-VALUE S.A. for the fiscal years2003-2005 is in progress and is expected to be completed within 2009.
• The tax audit of the Company for the fiscal years2006-2008 was completed in early May 2010 and the tax authorities imposed additional taxes amounting to Euro 57.7. The Company has accepted a partial settlement for an amount of Euro 37.7. Furthermore, based on the findings of the tax audit, the Company has reassessed the income tax expense for the year 2009 and an additional tax expense of Euro 6.3 was required. The amount settled with the tax authorities, the additional estimate for 2009, less the previously established provision for open tax years of Euro 14.0 resulted in an amount of Euro 30.0 being charged to the

F-49
F-50

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2009 income statement. The remaining amount of taxes imposed (Euro 20.0) relate to costs associated with OTE’s Voluntary Leave Scheme and the early retirement programs. OTE decided not to include this particular item in the partial settlement and intends to appeal against the tax authorities’ position before the administrative courts. Based on the respective law, the Company will be required to pay an advance of approximately Euro 5.0 (25% of the assessed taxes and penalties) in order to appeal, which will be reimbursed to the Company in the event of a favorable court outcome. Based on the management’s assessment, OTE considers there are good grounds to believe that OTE will win this case in court.
• The tax audit of COSMOTE for the fiscal years2006-2008 was completed in May 2010, without any significant impact to the Group.
• The tax audit of OTE PLUS for the fiscal years2005-2007 was completed during 2009, without any impact to the Group.
• The tax audit of GERMANOS for the fiscal years2004-2007 was completed during 2009 without any impact to the Group, as the additional taxes imposed of approximately Euro 17.0 were payable by this company’s previous owner who paid the amounts due in March 2010.
• The tax audit of OTE ESTATE for the fiscal years 2003 — 2007 was completed during 2009, without any significant impact to the Group.
• The tax audit of OTE SAT — MARITEL for the fiscal years 2004 — 2006 was completed in June 2010, without any significant impact to the Group.
• The tax audit of AMC for fiscal years 2006 and 2007 was completed during 2009, without any impact to the Group.
• The tax audit ofE-VALUE S.A. for the fiscal years2003-2005 is in progress.
• The tax audit, being part of the liquidation process of OTE PLUS-BULGARIA was finalized on January 11, 2010, without any tax impact to the Group.
• ROMTELECOM is currently subject to a tax audit focusing in import transactions for the period2006-2009.
 
The major components of income tax expense for the years ended December 31, 2009, 2008 2007 and 20062007 are as follows:
 
            
 For the Year Ended
             
 December 31,  Year Ended December 31, 
 2008 2007 2006  2009 2008 2007 
Current income tax  311.7   341.5   316.4   263.4   311.7   341.5 
Special contribution (Law 3808/2009)  113.1   —   — 
Deferred income tax  (65.5)  40.3   36.6   33.5   (65.5)  40.3 
              
Total income tax  246.2   381.8   353.0   410.0   246.2   381.8 
              
Special contribution Law 3808/2009
Following the enactment of Law 3808/2009, a special, one time contribution of social responsibility was charged to the Greek profitable entities calculated on their total net income of the fiscal year 2008, if it exceeded the amount of Euro 5.0, based on a progressive scale.
Withholding Tax on dividends Law 3967/2008
Pursuant to Law 3697/2008, dividends approved by General Meetings convened after January 1, 2009, are subject to 10% withholding tax which will be borne by the beneficiary, however, the related law provides for certain exceptions.


F-51

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
A reconciliation between the income tax expense and the accounting profit multiplied by tax rates in force (2008:(2009: 25%, 2008: 25%, 2007:25%, 2006:29%) is as follows:
 
                        
 2008 2007 2006  2009 2008 2007 
Profit before tax  844.0   1,154.8   1,083.8   780.7   844.0   1,154.8 
Statutory tax rate  25%  25%  29%  25%  25%  25%
Tax at statutory rate  211.0   288.7   314.3   195.2   211.0   288.7 
Effect of different rates in different countries  11.8   16.5   (7.0)  (17.3)  (2.1)  16.5 
Effect of changes to tax rates  (9.8)  2.6   13.4   12.6   (9.7)  2.6 
Expenses non-deductible for tax purposes  21.9   16.0   29.2   29.9   36.6   16.0 
Losses from consolidated subsidiaries not decuctible  11.9   19.2   15.9 
Losses from consolidated subsidiaries not deductible  11.6   11.9   19.2 
Special contribution (Law 3808/2009)  113.1   —   — 
Tax on dividends (Law 3697/2008)  30.3   —   — 
Differences arising from tax audits  7.9   48.8   —   30.0   7.9   48.8 
Tax derived from the distribution of reserves and dividends  —   —   (10.0)
Untaxed reserve (Law 3299/2004)  (7.5)  (7.5)  —   —   (7.5)  (7.5)
Other  (1.0)  (2.5)  (2.8)  4.6   (1.9)  (2.5)
              
Income tax  246.2   381.8   353.0   410.0   246.2   381.8 
              


F-50F-52

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Deferred taxes are recognized on the temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts recognized for taxation purposes and are analyzed as follows:
 
                                    
 Balance Sheet Income Statement  Statement of Financial Position Income Statement 
 2008 2007 2008 2007  2009 2008 2009 2008 2007 
Deferred tax assets
                
Voluntary retirement scheme  95.6   106.8   (11.2)  (61.1)
Voluntary leave scheme  61.2   95.6   (34.4)  (11.2)  (61.1)
Staff retirement indemnities  42.8   51.0   (8.2)  5.7   46.6   42.8   3.8   (8.2)  5.7 
Youth Account  49.8   50.7   (0.9)  (0.9)  46.9   49.8   (2.9)  (0.9)  (0.9)
Employee benefits  44.9   44.4   0.5   5.3   22.1   44.9   (22.8)  0.5   5.3 
Property, plant and equipment  83.9   63.5   10.3   6.7   81.5   83.9   (2.4)  10.3   6.7 
Provisions  75.7   33.3   42.4   (16.4)  92.3   75.7   13.3   42.4   (16.4)
Carry forward tax losses  5.4   5.9   (0.5)  4.7   20.9   20.4   0.5   (0.5)  4.7 
Deferred income  7.9   8.6   (0.7)  (1.1)  8.3   5.4   2.9   (0.7)  (1.1)
Fair value adjustment on acquisition  53.9   56.3   (2.4)  (2.4)
Fair value adjustment on acquisitions  24.2   41.4   (17.2)  (2.4)  (2.4)
Other  14.1   24.0   (9.8)  (2.3)  22.0   14.1   7.9   (9.8)  (2.3)
          
  474.0   444.5         
Deferred tax asset (before offset)
  426.0   474.0             
Offset of deferred tax liabilities  (187.2)  (183.7)          (172.4)  (187.2)            
          
Deferred tax asset
  286.8   260.8         
Deferred tax asset (after offset)
  253.6   286.8             
          
Deferred tax liabilities
                
Deferred tax liabilities (before offset)
                    
Property, plant and equipment  (166.3)  (196.2)  29.9   3.9   (166.9)  (166.3)  (0.6)  29.9   3.9 
Capitalized interest  (27.1)  (33.7)  6.6   5.3   (22.1)  (27.1)  5.0   6.6   5.3 
Unbilled revenue  (5.6)  (0.2)  (5.4)  0.4   (0.2)  (5.6)  5.4   (5.4)  0.4 
Loan fees  (3.5)  (3.5)  —   (0.8)  (2.3)  (3.5)  1.2   —   (0.8)
Fair value adjustment on acquisition  (89.0)  (110.2)  21.2   3.7   (79.3)  (89.0)  9.7   21.2   3.7 
Other  (12.4)  (6.1)  (6.3)  9.0   (15.3)  (12.4)  (2.9)  (6.3)  9.0 
          
  (303.9)  (349.9)          (286.1)  (303.9)            
To be offset against deferred tax asset  187.2   183.7           172.4   187.2             
          
Deferred tax liabilities,
  (116.7)  (166.2)        
Deferred tax liabilities (after offset)
  (113.7)  (116.7)            
          
Deferred tax income/(expense)
          65.5   (40.3)          (33.5)  65.5   (40.3)
            
Deferred tax assets, net
  170.1   94.6           139.9   170.1             
          
 
The movement in deferred tax of the Group is as follows:
 
                
 2008 2007  2009 2008 
Deferred tax (net) — beginning of year  94.6   127.4 
Deferred tax (net) — beginning of the year  170.1   94.6 
Tax charged to the income statement  65.5   (40.3)  (33.5)  65.5 
Foreign exchange differences  10.0   7.5   3.3   10.0 
          
Deferred tax (net) — end of year  170.1   94.6 
Deferred tax (net) — end of the year
  139.9   170.1 
          


F-51F-53

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
COSMOTE ROMANIA has carried forward tax losses as of December 31, 2008 of Euro 181.6. AThe Group does not recognize deferred tax asset has not been recognised in respect of theseon the following accumulated tax losses due to the uncertainty of the timing of available taxable profits against which thethese losses could be offset. The accumulated tax losses expire as follows:
     
Year
 Amount 
 
2010  19.4 
2011  50.0 
2012  88.0 
2013  79.7 
2014 and onwards  16.1 
     
Total
  253.2 
     
 
23.22.  OTHER CURRENT LIABILITIES
 
Other current liabilities are analyzed as follows:
 
                
 December 31,  December 31, 
 2008 2007  2009 2008 
MICROSTAR (See Note 20)  160.3   — 
Amount due to MICROSTAR Ltd  —   160.3 
Employer contributions  63.6   74.3   60.4   63.6 
Payroll  34.0   27.5   36.3   34.0 
Other taxes — duties  102.4   79.5   111.9   102.4 
Interest payable  164.0   66.2   158.2   164.0 
Provision for employees contributions under early retirement programs  3.4   5.0 
Provision for employees’ contributions under early retirement programs  3.4   3.4 
Provisions for litigation and other liabilities  110.5   126.8   109.8   110.5 
Customer advances  55.6   40.4   46.9   55.6 
Liability of acquiring non-controlling interests (see Note 8)  10.0   — 
Other  144.4   168.1   149.0   144.4 
          
Total
  685.9   838.2 
  838.2   587.8      
     
 
On January 15, 2007, Mr. Panos Germanos acquired a participation of 10% in the share capital of COSMOTE’s subsidiary COSMOHOLDING CYPRUS, LTD, by subscribing to 100 registered shares (Class B) for a total amount of Euro 144.5, through the 100% controlled by him Cypriot holding company, MICROSTAR Ltd.Ltd which he controls. Therefore, as of December 31, 2007 and 2008, COSMOTE’s participation in COSMOHOLDING CYPRUS, LTD, amounted to 90.0%, and COSMOTE indirect participation in GERMANOS via COSMOHOLDING CYPRUS, LTD, amounted to 90.0%.
 
The Group consolidatesconsolidated COSMOHOLDING CYPRUS LTD, on a 100% basis since in accordance with the terms of the class B shares, the terms of whom are guaranteed by COSMOTE, do not have a right to a dividend, return of capital, profits or other form of distribution. These shares arewere redeemable by COSMOHOLDING CYPRUS LTD or any other party indicated by COSMOTE on December 31, 2009 or on December 31, 2011, if the controlling shareholder MICROSTAR LtdLtd. so chooses, at a price which depends on the achievement of certain corporate targets until the purchase date. In addition, the Class B shares could be prematurely purchased after the request (a) of the holder in the case of change of control of COSMOTE or OTE, or (b) if either COSMOHOLDING CYPRUS LTD or the holder in the case COSMOTE, decidesdecided to sell its stake in COSMOHOLDING CYPRUS to third parties not under its direct or indirect control.
 
As of December 31, 2008, COSMOHOLDING CYPRUS LTD held a 100% share in GERMANOS. The amount of Euro 144.5 plus Euro 15.8 which relatesrelated to accrued interest (total Euro 160.3) iswas presented in the consolidated balance sheet


F-54

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
statement of financial position under other current liabilities as it iswas estimated that these shares willwould be purchased by December 31, 2009, at a price depending on the achievement of specified targets.


F-52

 
HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)On December 31, 2009, COSMOTE acquired MICROSTAR Ltd’s interest in COSMOHOLDING CYPRUS (10% of the share capital) for a total amount of Euro 168.5.
 
The movement in the provision for litigation and other liabilities is as follows:
 
Balance 1/1/2008126.8
Addition during the year2.1
Utilized(10.9)
Unused amounts reversed(7.5)
Balance 31/12/2008
         
  2009  2008 
 
Balance at January 1  110.5   126.8 
Addition during the year (see Note 24)  —   2.1 
Foreign exchange differences  (0.1)  — 
Utilized  (0.6)  (10.9)
Unused amounts reversed  —   (7.5)
         
Balance at December 31
  109.8   110.5 
         


F-55

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
110.5
 
24.23.  REVENUE
 
Revenue is analyzed as follows:
 
               
    For the Year Ended December 31, 
    2008  2007  2006 
 
(i) Domestic Telephony            
  •   Monthly network service fees  910.7   988.1   995.7 
               
  •   Local and long-distance calls            
    — Fixed to fixed  481.9   565.5   702.6 
    — Fixed to mobile  325.3   378.3   470.2 
               
     807.2   943.8   1,172.8 
               
  •   Other  96.3   90.3   92.1 
               
     1,814.2   2,022.2   2,260.6 
               
(ii) International Telephony            
  •   International traffic  93.8   108.1   132.3 
  •   Dues from international operators  136.6   146.8   172.7 
  •   Dues from mobile operators  56.5   49.6   41.9 
               
     286.9   304.5   346.9 
               
(iii) Mobile Telephony  2,470.8   2,210.0   1,975.8 
               
(iv) Other revenue            
  •   Prepaid cards  52.2   76.2   100.6 
  •   Directories  3.9   55.1   58.0 
  •   Leased lines and Data ATM communications  336.6   272.1   245.8 
  •   Integrated Services Digital Network  147.5   166.1   158.9 
  •   Sales of telecommunication equipment  617.2   679.8   341.6 
  •   Internet/ADSL  226.9   225.7   133.1 
  •   Co-location/Local Loop  91.7   30.8   — 
  •   Metro Ethernet & IP CORE  23.6   11.0   4.2 
  •   Provision for services  120.4   68.3   74.9 
  •   Interconnection charges  119.4   108.2   96.8 
  •   Miscellaneous  96.0   89.8   94.1 
               
Total other revenue  1,835.4   1,783.1   1,308.0 
             
Total revenue
  6,407.3   6,319.8   5,891.3 
             
             
  Year Ended December 31, 
  2009  2008  2007 
 
Domestic Telephony            
Monthly network service fees  845.9   910.7   988.1 
             
Local and long-distance calls            
 — Fixed to fixed  461.9   481.9   565.5 
 — Fixed to mobile  249.5   325.3   378.3 
             
   711.4   807.2   943.8 
Other  62.3   96.3   90.3 
             
   1,619.6   1,814.2   2,022.2 
             
International Telephony            
International traffic  84.9   93.8   108.1 
Dues from international operators  113.3   136.6   146.8 
Dues from mobile operators  52.9   56.5   49.6 
             
   251.1   286.9   304.5 
             
Mobile Telephony  2,396.2   2,470.8   2,210.0 
             
Other Revenue            
Prepaid cards  37.3   52.2   76.2 
Leased lines and Data ATM communications  319.4   336.6   272.1 
Integrated Services Digital Network (ISDN)  141.7   147.5   166.1 
Sales of telecommunication equipment  438.0   617.2   679.8 
Internet/ADSL  297.7   226.9   225.7 
Co-location/Local Loop  122.1   91.7   30.8 
Metro Ethernet & IP CORE  31.9   23.6   11.0 
Provision for services  116.4   120.4   68.3 
Interconnection charges  88.9   119.4   108.2 
Miscellaneous  123.8   99.9   144.9 
             
   1,717.2   1,835.4   1,783.1 
             
Total Revenue
  5,984.1   6,407.3   6,319.8 
             


F-53F-56

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
25.24.  OTHER OPERATING EXPENSES
 
Other operating expenses are analyzed as follows:
 
            
 For the Year Ended December 31,             
 2008 2007 2006  2009 2008 2007 
Third party fees  208.4   183.5   173.7   234.2   208.4   183.5 
Cost of telecommunication materials, repairs and maintenance  191.5   201.8   199.0   182.2   191.5   201.8 
Advertising and promotion costs  212.9   208.3   164.0   216.8   212.9   208.3 
Utilities  114.9   93.6   98.0   163.7   142.0   127.3 
Provision for doubtful accounts  119.8   88.0   97.9 
Other provisions  2.1   18.1   36.0 
Provision for doubtful accounts (see Note 10)  107.0   119.8   88.0 
Other provisions (see Note 22)  —   2.1   18.1 
Travel costs  18.1   18.9   17.6   18.0   18.1   18.9 
Commissions to independent commercial distributors  253.4   244.1   203.0   238.4   253.4   244.1 
Payments to Audiotex providers  8.7   14.3   17.1   9.5   8.7   14.3 
Rents  90.9   88.0   80.1   101.8   90.9   88.0 
Taxes, other than income tax  51.7   56.3   47.1   56.2   51.7   56.3 
Transportation costs  11.8   13.0   9.6   11.2   11.8   13.0 
Other  44.5   65.3   46.4   57.5   44.5   65.3 
              
Total
  1,396.5   1,355.8   1,326.9 
  1,328.7   1,293.2   1,189.5        
       
 
26.25.  EARNINGS PER SHARE
 
Earnings per share (after income taxes,) are calculated by dividing the profit attributable to the shareholdersowners of the Company by the weighted average number of shares outstanding during the period, excluding the average number of own shares that the Company possessed during the period and including (for the diluted earnings per share) the number of shares corresponding toshare options outstanding at the stock option rights granted.end of the year that have a dilutive effect on earnings per share.
 
Earnings per share are analyzed as follows:
 
                        
 For the Year Ended December 31,  2009 2008 2007 
 2008 2007 2006 
Profit attributable to shareholders of the parent  601.8   662.6   574.6 
Profit attributable to owners of the parent  374.0   601.8   662.6 
Weighted average number of shares for basic earnings per share  490,150,389   490,150,389   490,150,389   490,150,389   490,150,389   490,150,389 
Share options  6,008,060   —   —   —   6,008,060   — 
              
Weighted average number of shares adjusted for the effect of dilutions  496,158,449   490,150,389   490,150,389   490,150,389   496,158,449   490,150,389 
              
Basic earnings per share  1.2278   1.3518   1.1723   0.7630   1.2278   1.3518 
Diluted earnings per share  1.2129   1.3518   1.1723   0.7630   1.2129   1.3518 
 
(Earnings per share are in absolute amounts)
 
For 2009 the outstanding options did not have a dilutive effect on earnings per share and, therefore, are not included in the earnings per share calculation.
27.26.  OPERATING SEGMENT INFORMATION
 
The following information is provided for the reportable segments, which are separately disclosed in the financial statements and which isare regularly reviewed by the Group’s chief operating decision makers.
Segments were determined based on the Group’s legal structure, as the Group’s chief operating decision makers review


F-57

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
financial information separately reported by the parent company (OTE) and each of the Group’s consolidated subsidiaries, or the sub groups included in the consolidation.
 
Using the quantitative thresholds OTE, COSMOTE GROUP and ROMTELECOM have been determined asto be reportable segments. Information about operating segments that do not constitute reportable segments has been combined and disclosed in an “All Other” category.


F-54

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. The types of services provided by the reportable segments are as follows:
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
• OTE is a provider of local, long-distance and international fixed-line voice telephony and internet access services in Greece.
• COSMOTE group is a provider of mobile telecommunications services in Greece, Albania, Bulgaria and Romania (and in FYROM until May 2009).
• ROMTELECOM is a provider of local, long-distance and international fixed-line voice telephony and internet access services in Romania.
 
Accounting policies of the operating segments are the same as those followed for the preparation of the financial statements. Management evaluates segment performance based on operating incomeprofit before depreciation, amortization and amortization,cost of early retirement program; operating incomeprofit and profit for the year.
 
Segment information and reconciliation to the Group’s consolidated figures are as follows:
 
                             
  OTE  Cosmote  Romtelecom  Other  Total  Eliminations  Group 
 
2008
                            
Revenue from external customers  2,362.1   3,064.5   850.5   130.2   6,407.3   —   6,407.3 
Intersegment revenue  227.6   197.2   19.3   252.5   696.6   (696.6)  — 
Interest income  36.3   29.9   16.2   308.4   390.8   (318.5)  72.3 
Interest expense  (194.8)  (145.8)  (7.6)  (301.3)  (649.5)  305.8   (343.7)
Depreciation and amortization  (465.0)  (416.6)  (253.6)  (77.9)  (1,213.1)  0.1   (1,213.0)
Dividend income  12.2   —   —   —   12.2   —   12.2 
Income tax expense  (83.2)  (148.5)  9.6   (24.1)  (246.2)  —   (246.2)
Operating income  312.2   725.6   —   21.6   1,059.4   (1.7)  1,057.7 
Profit for the year  363.3   470.6   (10.8)  20.9   844.0   (246.2)  597.8 
Investments  156.4   0.1   —   0.1   156.6   —   156.6 
Segment assets  8,873.0   4,806.2   1,873.2   7,742.3   23,294.7   (11,869.5)  11,425.2 
Segment liabilities  5,349.0   3,844.9   302.7   6,509.8   16,006.4   (6,754.4)  9,252.0 
Expenditures for segment assets  300.7   499.6   125.7   38.0   964.0   —   964.0 
2007
                            
Revenue from external customers  2,452.9   2,878.6   843.3   145.0   6,319.8   —   6,319.8 
Intersegment revenue  229.8   181.7   28.6   226.1   666.2   (666.2)  — 
Interest income  47.5   21.6   10.1   191.3   270.5   (192.7)  77.8 
Interest expense  (98.6)  (145.3)  (5.4)  (185.0)  (434.3)  195.6   (238.7)
Depreciation and amortization  (507.0)  (367.9)  (255.8)  (42.5)  (1,173.2)  1.4   (1,171.8)
Dividend income  16.8   —   —   —   16.8   —   16.8 
Income tax expense  (212.4)  (145.6)  (2.4)  (21.4)  (381.8)  —   (381.8)
Operating income  314.3   618.0   44.8   71.7   1,048.8   (1.9)  1,046.9 
Profit for the year  579.7   361.3   15.5   55.2   1,011.7   (238.7)  773.0 
Investments  157.8   —   —   0.6   158.4   —   158.4 
Segment assets  8,360.7   4,428.2   2,140.2   7,089.2   22,018.3   (10,319.1)  11,699.2 
Segment liabilities  4,811.7   3,680.3   376.2   5,749.6   14,617.8   (5,973.2)  8,644.6 
Expenditures for segment assets  297.0   564.5   207.2   32.6   1,101.3   —   1,101.3 
2006
                            
Revenue from external customers  2,488.7   2,212.6   877.2   312.8   5,891.3   —   5,891.3 
Intersegment revenue  225.8   169.7   17.6   182.4   595.5   (595.5)  — 
Interest income  45.7   18.2   13.5   134.5   211.9   (141.1)  70.8 
Interest expense  (199.2)  (75.0)  (8.5)  (139.7)  (422.4)  143.6   (278.8)
Depreciation and amortization  (528.0)  (318.9)  (217.5)  (67.7)  (1,132.1)  3.6   (1,128.5)
Dividend income  23.0   —   —   —   23.0   —   23.0 
Income tax expense  (124.6)  (159.8)  (16.3)  (52.3)  (353.0)  —   (353.0)
Operating income  312.1   557.5   120.8   95.5   1,085.9   2.4   1,088.3 
Profit for the year  531.2   360.5   91.6   77.1   1,060.4   (329.6)  730.8 
Investments  157.8   —   —   0.9   158.7   —   158.7 
Segment assets  6,801.4   4,688.1   2,299.4   6,147.5   19,936.4   (7,221.1)  12,715.3 
Segment liabilities  3,551.7   3,992.9   424.1   4,648.3   12,617.0   (4,790.4)  7,826.6 
Expenditures for segment assets  225.7   442.4   208.1   86.2   962.4   —   962.4 
                             
  OTE Cosmote Group Romtelecom Other Total Eliminations Group
 
2009
                            
Revenue from external customers  2,204.8   2,843.3   790.3   145.7   5,984.1   —   5,984.1 
Intersegment revenue  207.6   192.6   17.4   271.0   688.6   (688.6)  — 
Interest income  17.4   24.5   15.4   283.7   341.0   (279.4)  61.6 
Interest expense  (225.8)  (115.8)  (1.8)  (261.3)  (604.7)  279.5   (325.2)
Depreciation and amortization  (424.4)  (458.3)  (227.9)  (45.5)  (1,156.1)  0.8   (1,155.3)
Dividend income  9.6   —   —   —   9.6   —   9.6 
Income tax expense  (164.6)  (180.9)  (31.4)  (33.1)  (410.0)  —   (410.0)
Operating profit  306.5   611.9   24.6   58.5   1,001.5   (0.6)  1,000.9 
Profit for the year  247.5   377.7   (18.4)  49.6   656.4   (285.7)  370.7 
Operating profit before depreciation, amortization and cost of early retirement program  692.0   1,070.2   261.1   104.0   2,127.3   (1.4)  2,125.9 
Investments  156.4   0.4   —   0.2   157.0   —   157.0 
Segment assets  8,211.5   4,360.5   1,737.2   6,955.9   21,265.1   (10,971.1)  10,294.0 
Segment liabilities  4,797.0   3,438.0   261.3   5,766.7   14,263.0   (5,918.7)  8,344.3 
Expenditures for segment assets  272.6   399.2   187.2   31.9   890.9   —   890.9 
2008
                            
Revenue from external customers  2,362.1   3,064.5   850.5   130.2   6,407.3   —   6,407.3 
Intersegment revenue  227.6   197.2   19.3   252.5   696.6   (696.6)  — 
Interest income  36.3   29.9   16.2   308.4   390.8   (318.5)  72.3 
Interest expense  (194.8)  (145.8)  (7.6)  (301.3)  (649.5)  305.8   (343.7)
Depreciation and amortization  (465.0)  (416.6)  (253.6)  (77.9)  (1,213.1)  0.1   (1,213.0)
Dividend income  12.2   —   —   —   12.2   —   12.2 
Income tax expense  (83.2)  (148.5)  9.6   (24.1)  (246.2)  —   (246.2)
Operating profit  312.2   725.6   —   21.6   1,059.4   (1.7)  1,057.7 
Profit for the year  363.3   470.6   (10.8)  20.9   844.0   (246.2)  597.8 


F-55F-58

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                             
  OTE Cosmote Group Romtelecom Other Total Eliminations Group
 
Operating profit before depreciation, amortization and cost of early retirement program  789.4   1,142.2   291.6   99.5   2,322.7   (1.8)  2,320.9 
Investments  156.4   0.1   —   0.1   156.6   —   156.6 
Segment assets  8,873.0   4,806.2   1,873.2   7,742.3   23,294.7   (11,869.5)  11,425.2 
Segment liabilities  5,349.0   3,844.9   302.7   6,509.8   16,006.4   (6,754.4)  9,252.0 
Expenditures for segment assets  300.7   499.6   125.7   38.0   964.0   —   964.0 
2007
                            
Revenue from external customers  2,452.9   2,878.6   843.3   145.0   6,319.8   —   6,319.8 
Intersegment revenue  229.8   181.7   28.6   226.1   666.2   (666.2)  — 
Interest income  47.5   21.6   10.1   191.3   270.5   (192.7)  77.8 
Interest expense  (98.6)  (145.3)  (5.4)  (185.0)  (434.3)  195.6   (238.7)
Depreciation and amortization  (507.0)  (367.9)  (255.8)  (42.5)  (1,173.2)  1.4   (1,171.8)
Dividend income  16.8   —   —   —   16.8   —   16.8 
Income tax expense  (212.4)  (145.6)  (2.4)  (21.4)  (381.8)  —   (381.8)
Operating profit  314.3   618.0   44.8   71.7   1,048.8   (1.9)  1,046.9 
Profit for the year  579.7   361.3   15.5   55.2   1,011.7   (238.7)  773.0 
Operating profit before depreciation, amortization and cost of early retirement program  843.4   985.9   300.6   114.2   2,244.1   (3.3)  2,240.8 
Investments  157.8   —   —   0.6   158.4   —   158.4 
Segment assets  8,360.7   4,428.2   2,140.2   7,089.2   22,018.3   (10,319.1)  11,699.2 
Segment liabilities  4,811.7   3,680.3   376.2   5,749.6   14,617.8   (5,973.2)  8,644.6 
Expenditures for segment assets  297.0   564.5   207.2   32.6   1,101.3   —   1,101.3 
GEOGRAPHIC INFORMATION
Geographic information for the Group’s revenues from external customers and non — current assets is as follows:
                         
  Revenues from External Customers  Non – Current Assets 
  2009  2008  2007  2009  2008  2007 
 
Greece  4,189.6   4,498.3   4,582.1   4,075.5   4,161.9   4,558.2 
Albania  125.3   161.9   158.1   160.6   183.1   180.3 
Bulgaria  423.9   469.4   422.7   644.8   668.2   654.2 
Romania  1,206.4   1,188.2   1,072.8   2,083.7   2,022.8   2,259.4 
Other  38.9   89.5   84.1   95.1   242.1   239.7 
                         
Total
  5,984.1   6,407.3   6,319.8   7,059.7   7,278.1   7,891.8 
                         
The revenue information presented above is based on the location of the entity.
Non-current assets for this purpose consist of property, plant and equipment, goodwill, telecommunication licenses and other intangible assets.
 
28.27.  RELATED PARTY DISCLOSURES
 
The Group’s related parties have been identified based on the requirements of IAS 24 and comprise of the entities which have a significant influence on the Group, the members of the Board of Directors and the key management personnel.Related Party Disclosures.

F-59

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The Group purchases goods and services from these related parties, and provides services to them. Furthermore, OTE grants and receives loans to/from its subsidiaries, receives dividends and pays dividends.
 
ThePurchases and sales of the Group with related parties are analyzed as follows:
         
  2009 
  Group’s
  Group’s
 
  Sales  Purchases 
 
DEUTSCHE TELEKOM AG  10.6   8.4 
MAKEDONSKI TELEKOMMUNIKACII A.  0.6   0.7 
HT HRVATSKE  0.3   0.6 
COMBRIDGE  4.5   0.1 
DETEKON  —   0.6 
ORBITEL  —   0.5 
T-SYSTEMS  1.2   — 
T-Mobile Deutschland
  2.0   0.7 
T-Mobile Czech
  0.3   0.1 
T-Mobile UK
  0.8   0.4 
T-Mobile Austria
  0.2   0.1 
T-Mobile Netherlands
  0.4   0.1 
T-Mobile USA
  0.3   0.4 
T-Mobile Hungary
  0.1   0.1 
T-Mobile Macedonia
  0.2   0.1 
T-Mobile Hrvatska
  0.1   0.1 
PCT POLSKA TELEFONIA  0.4   — 
         
Total
  22.0   13.0 
         
There were no transactions between the Group and related parties during 2008 that are not eliminated in the consolidation.


F-60

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Amounts owed to and by the related parties as a result of the Group’s transactions with related parties for 2008them are analyzed as follows:
 
                 
  2008  2008 
  Amounts
  Amounts
     Purchases
 
  owed to
  owed by the
  Sales of
  of the
 
  the Group  Group  the Group  Group 
 
DEUTSCHE TELEKOM AG(*)
  6.5   7.5   7.6   4.3 
   ��             
  2009  2008 
  Amounts
  Amounts
  Amounts
  Amounts
 
  owed to
  owed by
  owed to
  owed by
 
  Group  Group  Group  Group 
 
DEUTSCHE TELEKOM AG.   6.9   —   6.5   7.5 
MAKEDOSNKI TELEKOMMUNIKACII A.   0.1   —   —   — 
DETEKON  —   0.1   —   — 
COMBRIDGE  0.6   —   —   — 
ORBITEL  —   0.1   —   — 
T-SYSTEMS  0.1   —   —   — 
T-Mobile Deutschland
  —   0.6   —   — 
T-Mobile Hungary
  0.1   0.2   —   — 
T-Mobile Czech
  0.1   0.2   —   — 
T-Mobile UK
  0.1   0.7   —   — 
T-Mobile Austria
  —   0.3   —   — 
T-Mobile Netherlands
  —   0.3   —   — 
T-Mobile USA
  1.9   3.8   —   — 
T-Mobile Macedonia
  0.2   0.1   —   — 
PCT POLSKA TELEFONIA  —   —   —   — 
                 
Total
  10.1   6.4   6.5   7.5 
                 
 
(*): Includes Group’s sales and purchases to and from DEUTSCHE TELEKOM AG for the second half of 2008, when the latter is considered to beOf the entities included in the above table, as of December 31, 2008 only DEUTSCHE TELEKOM AG was a related party of the former.
There are no Group’s transactions with related parties for 2007.party to the Group.
 
Key Management Personnel and those closely related to them are defined in accordance with IAS 24 “Related Party Disclosures”. Compensation includes all employee benefits (as defined in IAS 19 “Employee Benefits”) including employee benefits to which IFRS 2 “Share-based Payment” applies.
 
Fees paid to the members of the Board of Directors and OTE’s key management personnel for 2008 and 2007 amounted to Euro 4.75.0 million and Euro 3.54.7 million for the years 2009 and 2008, respectively.
 
808,620As of December 31, 2009, 999,230 options under OTE’s share based payment plan (Note 29) have been granted to the Company’s key management personnel.personnel as of December 31, 2009.
 
29.28.  SHARE OPTION PLAN
 
During the financial year 2008, a share option plan was offered to executives of OTE and its subsidiaries. In July 2008, the General Assembly of Shareholders introduced a plan to unify the OTE plan and the active Cosmote group plans.
INITIAL OTE SHARE OPTION PLAN
Based on OTE’s repeating General Assembly of Shareholders of April 3, 2007, the Board of Directors’ of December 20, 2007 approved the adoption of a management share option plan (the “Option Plan”) based on performance conditions for OTE’s management personnel and directors of subsidiaries.
The Option Plan permits the Board of Directors to grant Option Rights to eligible employees on an annual basis. Upon their initial participation in the Option Plan, eligible employees become entitled to a number of initial options (“Basic Option Rights”), while, in subsequent years, the Board of Directors may also grant to eligible employees further option (“Additional Option Rights”) on an annual basis.
Basic Option Rights vest in stages over a three-year period (40%, 30% and 30% upon the first, second and third anniversaries, respectively, on the commencement of the Plan), while Additional Option Rights vest 100%, upon the third anniversary of the commencement of the Plan. The options vest if the employee achieves its personal targets 50% of the department targets are achieved and EBITDA is above budget for the previous two years.
Each Option Right represents the right to one share. Beneficiaries may exercise vested Option Rights within the first four years from the vesting date of such rights for the first vested Option Rights under the Option Plan. The options may be exercised in January of each year following the vesting date except for the last exercise period which is December 2011.


F-56

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The exercise price of the options that vest during the first year (2008) will be equal to the average closing price of OTE’s shares in the second half of the year immediately preceding the date on which the Board of Directors recommended the Option Plan to the General Assembly of Shareholders for approval, being Euro 19.49 (absolute amount) being the average share price for the second half of 2006. The exercise price after the first year is the average price in the month prior to vesting.
INITIAL COSMOTE SHARE OPTION PLAN
COSMOTE had established a Management Share Option Plan for the purchase of COSMOTE’s shares at a discounted price. The Plan was approved by the resolution of the General Assemblies of Shareholders held on July 31, 2000 and September 6, 2000 and amended by the resolutions of the General Assemblies of Shareholders held on June 12, 2001, February 21, 2002, January 27, 2006 and February 28, 2007.
The Plan, provides that the Board of Directors would grant options to participants every year, which gradually (40% upon the completion of a year of the grant, 30% upon the completion of the second year and 30% upon the completion of the third year) would be converted to final grant for the acquisition of ordinary shares with an aggregate value of, at maximum, 1-5 times annual gross salaries, depending on the position and the company, provided that the participants continue to work efficiently for the company (Basic Option Rights). Further options may be granted by the Board of Directors to participants at the end of each year, for the acquisition of ordinary shares with an aggregate value of, at maximum, one annual gross salary, depending on the position, for the executives of the company in Greece and, at maximum, 0.75 annual gross salary for the subsidiaries’ executives abroad (Additional Option Rights). The Basic Option Rights granted to the Chairman of the company vest in full after one year. Additional Option Rights vest after 3 years.
Basic Option Rights, once vested, can be exercised in whole or in part until the fourth year from their grant, while the Additional Option Rights, once vested, can be exercised in whole or in part during their maturity year or the following year. Share options expire if the beneficiary leaves the company or is dismissed before the options vest, irrespective of their exercise date, or the individual performance of the beneficiary is assessed in the year that the stock option was granted (for 2007 and after) to be lower than a specified lead.
The total number of the COSMOTE shares, which may be acquired under this Plan or under any other ongoing plan, cannot exceed 5% of its share capital on a five-year period on a rotation basis, and, in any case, the maximum number of shares, which may be issued if the participants exercise their options, cannot exceed 10% of the number of shares existing at the time of the approval of the Plan.
OTE’s MODIFIED SHARE OPTION PLAN
On July 9, 2008, OTE held theOTE’s 56th Repeating 56th Ordinary General Assembly of Shareholders. During the meeting the shareholders approved the adoption of a Share Option Plan for executives of OTE and of other entities of the Company and affiliated companies, according toGroup, in accordance with article 42e of the Codified Law 2190/1920. In particular, thisThis plan replacesreplaced the pre-existing Share Option Plan of OTE and also includes COSMOTE’s management personnel and directors, due to the delisting of its shares from the Athens Exchange. BasicOTE. In addition, basic and additional share options already granted by COSMOTE in 2005, 2006 and 2007 based onunder COSMOTE’s existing planshare option plans were replaced by options ofon OTE’s shares under the modified plan.
In accordance with The reason for the approval byreplacement of the General AssemblyCOSMOTE plans was the delisting of Shareholders a discount is calculatedCOSMOTE’s shares from the Athens Exchange on April 1, 2008. The modification of the OTE Plan and the replacement of the COSMOTE plans took place on the exercise price, being Euro 19.49 (absolute amount). The discount depends on EBITDA of the Company and the Group. The discount varies from 0% to 20% for middle management and from 0% to 25% for top management.
The holders of the options may exercise them in the months of April and October of each year following vestingsame date.


F-57F-61

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The nature and the main terms of the Modified Share Option Plan are as follows:
• The Modified Share Option Plan is comprised of Basic options (i.e. those granted when a participant first enters the scheme) and Additional options (i.e. those granted on an annual basis to participants). The Share options are granted by the Board of Directors.
• Options under the Modified Share Option Plan are granted at a preferential price. For options granted for year 2009 the preferential price is Euro 19.49 (absolute number).
• The executives of the Group, to whom Share options are granted, may acquire the shares at the preferential grant price or at a discount (percentage) on the preferential grant price, depending on the executive’s hierarchical level at the time of exercising the Rights, and (i) the achievement of certain targets of both the entity employing them and the Group and (ii) high individual performance by the eligible executive.
• For top level management, the potential discount is 15%, 20% or 25% if the targets have been achieved (otherwise no discount) and for middle level management, the potential discount is 10%, 15% or 20% if the targets have been achieved (otherwise no discount).
The range of exercise prices of all the options granted assuming the minimum discount at least is achieved is Euro 11.96-16.57 (absolute number).
The Options vest as follows:
• The Basic options vest gradually (40% upon the completion of the year of the grant, 30% upon the completion of the second year and 30% upon the completion of the third year). Following a modification to the plan on July 10, 2009, Basic vested Rights may be exercised by the eligible executive in their entirety or partially during April and October of each calendar year following the vesting year (and up to October of the 7th calendar year (instead of the 4th) from the date of their grant).
• Following a modification to the plan on July 10, 2009 the Additional vested Rights may be exercised by the eligible executive in their entirety or partially during April and October of up to the 3rd calendar year (instead of the first calendar year) following the vesting year.
• In case the said vested Rights are not exercised within the aforementioned time frames they are lost. According to the terms of the plan, vesting of the options depends on the participant remaining in the service of the company. The total number of Stock Option Rights, which may be granted under the Modified Share Option Plan, cannot exceed 15,500,000 Rights, which corresponds to approximately 3.16% of OTE’s shares outstanding at the time of its approval.
 
The fair value of the options is reflected in the income statement during the vesting period. An amount of Euro 12.0 was charged to the Group’s income statement in 2008 and isThe amounts are recorded in the line “Payroll and employee benefits” with a corresponding entry in the Share Premium.Premium and are analyzed below:
             
  Year Ended December 31,
  2009 2008 2007
 
Expense arising from share-based payment transactions
  7.2   12.0   3.3 
             


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HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Further details of the plan are as follows:
 
         
  2008 
     Weighted
 
  Number of
  Average
 
  Options  Exercise Price 
 
Outstanding at the beginning of year
  3,440,290   15.20 
Granted
  3,141,620   16.10 
Forfeited
  (573,850)  15.26 
Exercised
  —   — 
Expired at end of year
  —   — 
         
Outstanding at end of year
  6,008,060   15.66 
         
Exercisable at end of year
  2,315,920   15.14 
         
                 
  2009  2008 
     Weighted
     Weighted
 
  Number of
  Average
  Number of
  Average
 
  Options  Exercise Price  Options  Exercise Price 
 
Outstanding at the beginning of the year  6,008,060   15.66   3,440,290   15.20 
Granted  3,225,670   16.21   3,141,620   16.10 
Forfeited  (559,130)  16.23   (573,850)  15.26 
Exercised  —   —   —   — 
Expired at the end of the year  —   —   —   — 
Outstanding at the end of the year  8,674,600   15.59   6,008,060   15.66 
Exercisable at the end of the year  4,485,370   15.05   2,315,920   15.14 
             
      Share Price at
  
Plan
 
Year of Issuance
 Options Granted Grant Date 
Comments
 
Plans of COSMOTE group Original grant dates range
from 27/10/05-31/10/07		  3,440,290   15.48  modified on 09/07/08 and on 10/07/09
2008 OTE plan 06/02/08  3,141,620   21.38  modified on 09/07/08 and on 10/07/09
2009 OTE plan 06/03/09  3,225,670   10.40  modified on 10/07/09
The weighted average remaining contractual term outstanding as of December 31, 2009 and 2008 is 3.9 years and 3.0 years, respectively.
The options granted in 2009 were measured at fair value at the date of grant. At the date of modification of July 10, 2009 the fair value of the plan before and after the modification was calculated. The modification increased the fair value of the options by increasing the exercise period, therefore, the difference (being the incremental fair value or the difference between the fair value of the modified plan and that of the original plan, both estimated as at the date of the modification) is attributed as an expense in the period from the modification date up to the vesting date.
 
The fair value wasvalues were determined by using a Monte Carlo simulation option pricing model taking into account the effects of early exercise. Key inputs and calculations results of the model are presented below:
 
2008
Weighted average share price21.38
Weighted average exercise price22.05
Weighted average expected volatility24%
Weighted average exercise period2.5 years
Weighted average risk free rate4.06%
Weighted average expected dividend0.75
Weighted average option value2.20
         
  2009 2008
 
Weighted average share price  10.40   21.38 
Weighted average exercise price  16.57   22.05 
Weighted average expected volatility  24.0%  24.0%
Weighted average exercise period  3.5 years   2.5 years 
Weighted average risk free rate  2.5%  4.1%
Weighted average expected dividend  0.75   0.75 
Weighted average option value  0.28   2.20 


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HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
The modification of the OTE plan increased the fair value of the options, the difference in the fair value of the original and replacement equity instruments is recognised as an expense from the modification date up to the vesting date. The incremental fair values of the modifications to the existing COSMOTE plans were not positive so the Group continues to account for these plans as if the modification has not happened.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
30.29.  LITIGATION AND CLAIMS — COMMITMENTS
 
(a)  The most significant outstanding legal cases as at December 31, 2008, were as follows:
A. Outstanding legal cases
The most significant outstanding legal cases as at December 31, 2009, are as follows:
 
(i) Civil proceedings
Lease agreements (OTE Leasing):  On December 11, 2001, OTE disposed of its wholly owned subsidiary, OTE Leasing, to Piraeus Financial Leasing S.A., a subsidiary of Piraeus Bank S.A. for a consideration of Euro 21.0. From the sale proceeds, Euro 5.9 was collected in cash and the balance of Euro 15.1 in the form of shares in Piraeus Bank S.A., based on their fair value at that date. As prescribed in the agreements signed for the sale of OTE Leasing, OTE is committed to indemnify Piraeus Financial Leasing S.A. up to an amount of approximately Euro 28.0, for possible losses to be incurred from the non-performance of lessees for contracts signed through to the date of sale of OTE Leasing. The conditions under which a lessee’s contract will be characterized as non-performing are described in detail in the sale agreements. OTE’s obligation is in force for a period between 3-5.5 years, depending on the nature of the lease contracts. On September 28, 2007, Piraeus Financial Leasing S.A filed a law suit against OTE, claiming Euro 3.4 from OTE. The hearing which had been scheduled for February 26, 2009 in the Athens Multi-Member Court was postponed until October 7, 2010.


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HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)postponed.
 
(ii) Alpha Digital Synthesis S.A.:  On May 7, 2003, Alpha Digital Synthesis S.A. submitted a request for arbitration according to the Greek Civil Procedure Code, claiming an amount of approximately Euro 254.2 plus interest for alleged damages incurred as a result of an alleged breach by OTE of the terms of a memorandum of understanding to provide subscribers television services. The Athens Arbitration Court in 2006 ruled in favor of Alpha Digital Synthesis S.A., and ordered OTE to pay an amount of approximately Euro 13.0. OTE’s appeal against this decision before the Athens Court of Appeals, was rejected and OTE paid the above amount plus interest. OTE appealed for conclusion of the decision before the Supreme Court which was also rejected.
(iii) Hellenic Radio and Television S.A. (“ERT”):  During May 2002, ERT filed a law suitlawsuit against OTE before the Athens Multi-Member Court, of First Instance, claiming an amount of Euro 42.9 plus interest for damages incurred by it as a result of an alleged infringement by OTE of the terms of a memorandum of understanding signed by the two parties. The Court judged in 2005 that the case should be referred to arbitration. To date ERT has not yet submitted a request for arbitration proceedings. In November 2003 ERT filed a law suitlawsuit against OTE claiming Euro 1.5 for alleged damages incurred by it due to a circuit cutrestitution of moral damage which will be heard by the Athens Multi-Member Court on June 3, 2010.
 
(iv) Forthnet S.A.:  In 2002, Forthnet S.A. filed a civil claim, claiming an amount of Euro 26.7 plus interest for damages incurred by it due to loss of customers as a result of OTE’s allegedly discriminatory policy in favor of OTENET. The hearing which was scheduled for April 19, 2007, was suspended and rescheduled for June 5, 2008 and was again suspended and rescheduled for January 28, 2010.2010, when was again suspended. Furthermore, Forthnet S.A. filed a lawsuit against OTE before the Athens Multi-Member Courtcourt of First Instance, claiming Euro 4.1 infor economic and moral damages, due to suspension of its subscriber’s number portability. The hearing scheduled for May 3, 2006 was suspended.
 
(v) Greek Telecom S.A.:  In 2004, Greek Telecom S.A. filed a lawsuit against OTE before the Athens Multi Member court of First Instance, Court, claiming Euro 45.4 plus interest in damages, due to alleged breach of contractual obligations arising out of disconnection of telecommunication services.services due to its outstanding debt. The hearing was held on March 22, 2006 and the Court by its decision rejected Greek Telecom S.A.’s claim. Greek Telecom S.A. appealed against this decision before the Athens Court of Appeals. The case was heard on October 4, 2007 and the claim was rejected.
 
(vi) Teledome S.A.:Teledome S.A. filed five lawsuits against OTE before the Athens Multi Member Court of First Instance, claiming an aggregate amount of Euro 8.1 plus interest for alleged damages incurred by it as a result of OTE’s delay in delivering to it leased lines and the application of non cost oriented interconnection charges by OTE. The hearings of the above lawsuits were scheduled for various dates in 2007. The first lawsuit (Euro 1.6) was heard before the Court on June 6, 2007 and the hearing was postponed, the second lawsuit (Euro 1.0) was rescheduled for September 17, 2008 and then rescheduled again for January 21, 2009,rejected, regarding the third lawsuit (Euro 0.3) the Court postponed the hearing, the fourth lawsuit (Euro 1.6) was heard on February 7, 2007 and the Court rejected it and for the fifth lawsuit (Euro 3.6) the Court ordered factual investigation. The investigator has already been appointed and the completion of the factual investigation is expected. Furthermore, Teledome S.A. filed six lawsuits against OTE before the Athens Multi Member Court of First Instance, claiming approximately Euro 11.1 plus interest in damages, due to suspension of its subscriber’s number portability and due to alleged breach of contractual obligations arising out of disconnection of


F-64

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
telecommunication services. For two lawsuits totalingof Euro 4.7,4.6, the Court rejected Teledome’s claims. Teledome appealed the decision before the Court of Appeals, which rejected them.it on January 25, 2007. Teledome S.A. appealed against this adverse decision and its appeal was discussed on November 27, 2008 by the Court of Appeals and it was rejected. A lawsuit of Euro 0.9 was rejected by the CourtsCourt on January 25, 2007. Teledome appealed against it and its appeal was heard on November 26, 2009. The outcome of this appeal is pending. The lawsuit of Euro 4.4 was heard on March 6, 2008 and was rejected by the court. Regarding the lawsuit of Euro 0.5, the CourtsCourt ordered factual investigation. The factual investigation was filed and after the hearing on December 9, 2009 at the same Court, the decision is pending. The lawsuit of Euro 0.6 was heard on September 26, 2007 and whichthe Court concluded that the claim up to an amount of Euro 0.3 was valid. However, both OTE and Teledome S.AS.A. have appealed against the decision, which appeal, was heard on December 4, 2008 and the court decision is pending.Court accepted OTE’s appeal and rejected Teledome’s appeal. Finally, Teledome filed a law suit against OTE to be heard bybefore the Athens Multi Member Court claiming Euro 54.054.1 plus interest for damages for so called unlawful termination of its leased lines by OTE which resulted in Teledome S.A’sS.A.’s bankruptcy. This claim was heard on March 18, 2009 and on March 26, 20092009. According to Court’s decision the hearing was postponed and Teledome S.A. is required to deposit a guarantee amounting Euro 1.1 for court expenses. Teledome S.A. has appealed against this decision and the decision is pending.


F-59

HELLENIC TELECOMMUNICATIONS ORGANIZATIONappeal will be heard before the Athens Multi Member of First Instance Court on September 29, 2010. Because of Teledome S.A.’s denial to deposit the guarantee, OTE applied for withdrawal of Teledome S.A.’s order, which will be heard on September 29, 2010.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(vii) Newsphone Hellas S.A.:Newsphone Hellas S.A. filed a lawsuit against OTE before the Athens Multi Member Court of First Instance, claiming an amount of Euro 7.2 plus interest for alleged damages incurred by it as a result of OTE’s refusal to include in its recorded message that directories information services, except from OTE, are also provided by Newsphone Hellas S.A. The hearing was held on May 17, 2006 and the Court rejected Newsphone Hellas S.A’s claims.
 
(viii) TELLAS S.A.:TELLAS S.A. filed four lawsuits against OTE before the Athens Multi Member Court of First Instance, claiming an aggregate amount of Euro 20.8 plus interest in damages due to suspension of its subscriber’s number portability. TELLAS S.A. resigned from the lawsuit of Euro 4.24.3 prior to the hearing while the hearings of the remaining lawsuits were heldheard on May 2, 2007 and rejected. TELLAS filed two new claims against OTE totaling Euro 6.26.3 for the triggering of penalty clauses for the loss suffered for the delayed delivery of leased lines and for claims relating to non compliance of OTE with costing obligations. The cases will be heard by the Athens Multi Member Court on September 16, 2010.
 
(ix) LAN-NET S.A.:LAN-NET S.A. filed two lawsuits against OTE before the Athens Multi Member Court of First Instance, claiming an aggregate amount of approximately Euro 2.2 plus interest in damages due to suspension of its subscriber’s number portability. The Court rejected the first lawsuit for the amount of Euro 1.5 andLAN-NET appealed. The appeal was heard on November 1, 2007 by the Court of Appeals and its decision is pending.was rejected. The second lawsuit of Euro 0.7 was heard on March 21, 2007 and was rejected by the Court. In May 2009,LAN-NET S.A. filed a claim against OTE before the Court of First Instance for an aggregate amount of Euro 175.6, claiming restitution for OTE’s alleged illegal termination of services. The hearing of this case is scheduled for February 17, 2011.
 
(x) ALGO-NET S.A.:  ALGO-NET S.A. filed two lawsuits against OTE before the Athens Multi Member Court of First Instance, claiming an aggregate amount of approximately Euro 0.9 plus interest in damages due to suspension of its subscriber’s number portability. The hearing of the first lawsuit for the amount of Euro 0.4 was held and the Court rejected the claim, while the hearing of the second lawsuit initially scheduled for February 8, 2006, has been suspended.
 
(xi) FASMA ADVERTISING TECHNICAL AND COMMERCIAL S.A.:FASMA ADVERTISING TECHNICAL AND COMMERCIAL S.A. filed a lawsuit against OTE before the Athens Multi Member Court of First Instance, claiming an aggregate amount of Euro 9.1 plus interest for breach of contract. The effort to settle the dispute outside the Court scheduled on May 24, 2007 failed and the hearing was scheduled for November 8, 2007. Subsequently, the company filed with the First Instance Multi Member CourtsCourt of First Instance a new lawsuit against OTE for Euro 8.7 plus interest withdrawing from theits previous lawsuit. The new effort ofout-of-court settlement, which was scheduled on September 27, 2007, failed again and the hearing by the Court, initially


F-65

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
scheduled for November 8, 2007 was rescheduled to October 23, 2008. On May 14, 2009,2008, when the Court rejected the claim.
(xii) Timeapply Ltd. (“Timeapply”) has filed a claim against OTE in the Court of First Instance for Euro 17.3 for restitution due to damage caused by alleged patent infringement, as a result of the sale and advertisement of a prepaid telephone card called “Promocard”. The case was heard on January 22, 2009 and a decision is pending. In addition, Timeapply filed a claim against OTE inwas issued rejecting the Court of First Instance for Euro 68.4 for alleged breach of a decision of the Court of First Instance granting an injunction prohibiting distribution of “Promocard”. The Court of First Instance rejected the claim and Timeapply filed an appeal, which was heard on May 12, 2009; a decision has not yet been issued.lawsuit.
 
(xiii) Franchisees lawsuits:
1. Helias Koutsokostas & Company Limited Partnership filed a lawsuit against OTE claiming alleged damages for an amount of Euro 7.9. OTE filed a lawsuit against this company before the Multi-Member court of First Instance Court for an amount for Euro 0.7. The hearing, initially scheduled for October 13,


F-60

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2005 was suspended and a new hearing was scheduled for February 21, 2008, but was adjourned. The applicant has not performed any action since then.
2. K. Prinianakis S.A. filed a lawsuit against OTE claiming Euro 10.9 in damages. The hearing ofcase was heard on November 15, 2007 heard the company’s claim whichand the Court partially accepted bythe claim for the amount of Euro 0.1. OTE filed a counterclaim against K. Prinianakis for an amount of Euro 0.3 in damages. This claim was heard on November 13, 2008 and the Court partially accepted it.
3. DEP INFO Limited filed a lawsuit against OTE claiming Euro 6.8 for damages. OTE has filed its own lawsuit against this company claiming Euro 1.7 in damages. Both hearings were held on March 9, 2006 and the court rejected DEP INFO Limited lawsuit, while it accepted OTE’s lawsuit. DEP INFO Limited filed an appeal against this decision which was heard on January 24, 2008 and the court rejected the company’s appeal and ordered a factual investigation for the accurate determination of OTE’s claim.
4. Infoshop S.A. filed a lawsuit against OTE claiming alleged damages for the amount of Euro 7.0. A hearing scheduled for November 15, 2007 was suspended and a new hearing was held onscheduled for November 13, 2008. The court issued its2008 and the decision in June 2009, rejecting Infoshop S.A.’sof the Court rejected the entire claim.
 
(xiv) Employees’ Claims:OTE’s current employees and pensioners have filed a number of lawsuits against OTE with a wide variety of claims.
 
(xv) PERIVALLON S.A.:  Perivallon S.A. filed a lawsuit before the Multi-Member First Instances Court requesting Euro 1.2 plus interest. The hearing was scheduled for March 28, 2007 and was suspended.
(xvi) EFG EUROBANK ERGASIAS S.A.:  EFG Eurobank Ergasias S.A. filed a lawsuit before the Multi-Member First Instance Court against OTE for Euro 5.9 plus interest for receivables pledged by Perivallon S.A. relating to a supply agreement with OTE. The effort for anout-of-court settlement which was scheduled on October 11, 2007 failed and the hearing before the Court was scheduled for December 11, 2008 but was suspended as EFG Eurobank Ergasias S.A resigned from the case.
(xvii) Payphones Duties:From 1999 to 2007, the Municipality of Thessaloniki charged OTE with duties and penalties of a total amount of Euro 15.0 for the installation and operation of payphones within the area of its responsibility. OTE strongly disputed the above assessments and filed appeals before the competent administrative courts and prepaid 40% of the above duties and penalties, amount that will be refunded to OTE if the outcome of that case will be favorable to the Company. The courts held in OTE’s favor for the year 2001 in the first and second instance. The Municipality of Thessaloniki has appealed these decisions tofiled appeals before the Council of State. The hearingsState, which are still pending. No duties and penalties have been charged for 2008 and 2009.
 
(xviii) Hellenic Telecommunications and Post Commission:  Timeapply Ltd:On July 26, 2007, the Hellenic Telecommunications & Post Commission (HTPC) imposed a series of fines on OTE, for a total amount of Euro 27.4. OTE  Timeapply Ltd, has filed lawsuits beforea claim against OTE in the Athens Administrative Court of Appeals against these decisions demanding their annulmentFirst Instance for Euro 17.3 for restitution due to damage caused by alleged patent infringement, as a result of our sale and advertisement of a prepaid telephone card called “Promocard”. The case was heard on January 22, 2009 and the hearingCourt concluded that it was not authorized to issue a decision. Timeapply Ltd came back with the claim which is scheduled to be heard on April 14, 2010. In addition, Timeapply filed a claim against OTE in the Court of First Instance for Euro 68.4 for alleged breach of a decision of the lawsuits was scheduled for various dates in 2008 and the related court decisions are pending. The payment of fines amounting to Euro 25.9 have been suspended by a ruling of the Administrative Court of Appeal, pending the Court’s decision on OTE’s appeal.First Instance granting an injunction prohibiting distribution of “Promocard”. The Athens Administrative Court of AppealsFirst Instance rejected the claim and Timeapply filed an appeal, which was heard on May 12, 2009 and a decision has partially accepted two of the OTE’s appeals reducing the related fines from Euro 1.5 to Euro 1.0. Against these decisions, OTE is going to appeal before the Supreme Court.not yet been issued.
 
On November 29, 2006, HTPC imposedKONSTANTZA S.A.:  KONSTANTZA S.A. filed a fine onclaim against OTE of total amount of Euro 3.0. OTE has filed an appeal before the Athens Court of AppealsFirst Instance alleging Euro 1.3 plus interest. The amicable resolution of the dispute which was scheduled for June 11, 2009 failed and the hearing is scheduled for March 18, 2010. The hearing was cancelled.
Athanasios Fekkas:  Athanasios Fekkas filed a claim against OTE before the Court of First Instance of Lamia alleging Euro 1.2 plus interest. The hearing was scheduled for February 20, 2009 but was adjourned for November 20, 2009 when the case was heard and a decision is pending.


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HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
THRAHERN CAPITAL Sarl and YELLOW PAGES S.A.:  In September 2009, THRAHERN CAPITAL Sarl (a foreign company) and the Greek registered company YELLOW PAGES S.A., filed a claim against OTE before the Multi Member Court of First Instance for an amount of Euro 60.5 for compensation and Euro 2.0 for restitution of moral damage. The hearing of this case was scheduled for June 2, 2011. On December 30, 2009, these two companies announced to OTE their resignation from the claim.
The most significant lawsuits and administrative disputes regarding COSMOTE and its subsidiaries, as of December 31, 2009 are the following:
COSMOTE
COSMOTE is a party to various lawsuits and administrative disputes the majority of which are related to the operation of base stations. The most significant other disputes are the following:
Hellenic Telecommunications and Post Commission (“HTPC”) has summoned COSMOTE as well as WIND (former TIM) and VODAFONE to a hearing on May 18, 2005, to investigate whether the announced increases on tariffs for the SMS service are contrary to the provisions of telecommunication law and law for the protection of free competition. The hearing was held on May 23, 2005 and a new hearing took place on November 3, 2005 due to the change of the members of HTPC. The HTPC issued the decision which imposed a fine of Euro 1.0 on each company (COSMOTE, WIND (former TIM) and VODAFONE) for concerted practice contrary to competition law. COSMOTE appealed against this decision before the Administrative Court of Appeals. The hearing initially scheduled for September 27, 2006, after postponements, was held on October 17, 2007 and a decision was issued which partially accepted it reducing the fineCOSMOTE’s appeal and annulled HTPC’s decision, saying that COSMOTE has not proceeded to Euro 1.0. OTEconcerted practice contrary to competition law. The HTPC has appealed against this decision before the Council of State and the hearing has not yet been scheduled.
On October 5, 2007, HTPC imposed a fine for a total amount of Euro 3.0. Against this decision OTE has filed an appeal demanding its annulment which was heard before the Athens Administrative Court of Appeals on January 20, 2009. The payment to the fine has been suspended by a ruling of the Athens Administrative Court of Appeals pending the court’s decision on OTE’s appeal.
On July 4, 2008, HTPC with its relevant decisions imposed a series of fines on OTE, aggregating to Euro 3.0, for alleged denial of providing information related to ADSL market control and supervision and for not providing data concerning the combined service “All in 1”. OTE appealed against these decisions before the Athens Administrative Court of Appeals requesting their annulment which appeal was however denied.


F-61

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.State.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)AMC
 
On July 25, 2008, HTPCDecember 12, 2005 the Albanian Competition Commission imposed a fine on OTEAMC of approximately Euro 1.4 (1% of the company’s turnover for an amount2004) on the grounds of Euro 9.0allegedly delaying a response to a request for alleged obstaclesinformation and provision of documents. On January 4, 2006 AMC filed two lawsuits before the Tirana District Court against the Competition Authority, demanding the annulment of the decision requesting information and opening of investigation procedure as well as of the decision imposing the fine, since the requested information had timely been dispatched to the business promotionCompetition Authority. On July 7, 2006, the Tirana District Court rejected the requests of AMC and AMC presented an appeal regarding the decision imposing the fine. The Appeal Court has annulled the decision of the “Double play” service by TELLAS S.A. (fixed telephony with fast Internet combination). OTETirana District Court and ordered that the case should be examined again. AMC has appealed against this decision beforealso submitted recourse to the Athens Administrative Court of Appeals.Supreme Court. The hearing of this case has been adjourned until October 14, 2009.is ongoing.
 
On October 3, 2008, HTPCNovember 9, 2007 the Albanian Competition Authority imposed to AMC a series of fines to OTEfine amounting to approximately Euro 11.0, alleging that OTE has only partially conformed with regard to its obligations relating to1.7 for an alleged breach of the Local Loop Unbundling (L.L.U). OTEcompetition legislation during the period2004-2005. AMC considers the Albanian Competition Authority’s decision unfounded and has appealed against this decision before the Athens AdministrativeCourts in order to protect its legal rights. Tirana District Court has ruled to reject AMC’s claim. AMC has appealed the said decision in front of Appeals.Tirana Appeal Court. The hearing of this case has been adjourned until September 24, 2009.is ongoing.
CRIMINAL PROCEEDINGS
 
(xix) Criminal proceedings Germanos — acquisition case.  In 2007, the District Attorney of Athens commenced a preliminary investigation with respect to the propriety of the acquisition of Germanos by CosmoteCOSMOTE following the submission of a report by a number of members of the opposition party of the Greek Parliament, which claimed among other things that the acquisition was not in the business interest of Cosmote.COSMOTE. During the course of the preliminary investigation, members of the board of directors of CosmoteCOSMOTE at the time of the acquisition of Germanos were called and requested to submit explanations in connection with this case. Following the completion of the preliminary


F-67

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
investigation, an investigating judge (the 20th Investigating Judge of Athens) was appointed to lead a formal criminal investigation in connection with the potential perpetration of offences. The investigating judge initiated criminal proceedings against the members of the board of directors of CosmoteCOSMOTE at the time of the acquisition of Germanos, investigating alleged abuse of trust (“Apistia”). Upon conclusion of the criminal investigation, a decision will be made on whether an indictment is warranted. Four of the then members of the board of directors of Cosmote,COSMOTE, are still members of the current board of CosmoteCOSMOTE and senior executives of the Group. In addition, the investigating judge ordered the appointment of two independent accounting firms to conduct an expert investigation in order to assess whether the consideration for the acquisition of Germanos (of approximately Euro 1.5 billion for 99.03% of the share capital of Germanos) was reasonable in view of business judgment and internationally accepted and customary financial and contractual practices, and whether the acquisition resulted in financial detriment to Cosmote,COSMOTE, and, in that event, to assess the amount of such detriment. ToAs part of the extent so be requested,investigation process, the Group intendsexpert’s report prepared by the independent accounting firms was submitted to cooperatethe Investigating Judge on March 17, 2010 and concluded that the price paid by COSMOTE for the acquisition of GERMANOS was fair and that COSMOTE did not suffer loss or damage as a result of the acquisition (rather the acquisition was to the corporate benefit of COSMOTE). In conjunction with the matter of the acquisition of GERMANOS by COSMOTE, the Administrative Court of Appeal recently repealed a fine that had been imposed by the Greek Capital Markets Commission on Mr. Panos Germanos and other directors of GERMANOS in relationconnection with alleged manipulation of the share price of GERMANOS prior to this investigation.the time of the acquisition, judging that no manipulation had taken place.
 
Siemens AG case.  The District Attorney of Athens has conducted a preliminary investigation in connection with allegations of bribery, money laundering and other criminal offences committed in Germany and Greece by employees of Siemens AG and a number of Greek government officials and other individuals, relating to the award of supply contracts to Siemens AG. In connection with the investigation, the District Attorney has investigated, among other matters, the propriety of, and allegations of criminal conduct in connection with, a framework contract 8002/1997 with Siemens AG, and various equipment orders pursuant to that framework contract in the period following its signing and up to 2004. Framework contract 8002/1997 was signed on December 12, 1997 and related to the supply to OTE by Siemens AG of equipment for the digitalization of the network. In connection with this preliminary investigation, the Company has provided to the investigating authorities certain documents requested. Following the conclusion of the preliminary investigation, criminal charges were filed and an investigating judge (the 4th Special Investigating Judge of Athens) was appointed to lead a formal criminal investigation. To the extent so requested, the Group has cooperated and intends to continue to cooperate with the competent authorities in relation to this investigation. The Group has also taken the necessary legal action before the investigating judge in order to assert the Group’s civil rights with respect to any damages the Group may have incurred as a result of any criminal offences committed. It is understood that, as part of the same investigation, a former senior executive of the Group, was charged for certain criminal offences, including receipt of bribes, and that in May 2009, was remanded in custody pending his trial for the same charges.charge, until September 2009 when he was released. In connection with the same matter, OTE has filed a claim against Siemens AG before German Courts. In relation with the same criminal investigation, the District Attorney of Athens is conducting a preliminary investigation, concerning contracts with Siemens entered in 2006 for ArmenTel, the Armenian public telephony operator, in which OTE held an interest of 90% which OTE sold in November 2006.
 
Maintenance contracts case.  Following the conclusion of a preliminary investigation on the matter, an investigating judge (the 2nd Investigating Judge of Athens) was appointed to lead a formal criminal investigation into the potential perpetration of offences in connection with the propriety of a technical maintenance contractscontract with three of OTE’s suppliers. In June 2009, the investigating judge initiated criminal proceedings against members of OTE’s Board of Directors and a member of OTE’s senior management serving at the time of signing of the relevant contracts,contract, in 2004 and 2005, investigating alleged abuse of trust (“Apistia”). Three of these members, are still members of the


F-62

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
current Board, whereas the member of OTE’s senior management is currently the C.E.O. of ROMTELECOM. The investigation is expected to continue with the involvedabove individuals testifyinghave by this time testified in connection with the case. Upon conclusion of the criminal investigation,case by filing defense briefs and a decision will be madeis expected on whether an indictment is warranted. On December 27, 2009, the District


F-68

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Attorney of Athens proposed to the Judicial Council that, among others, OTE’s CEO and the Chairman of OTE’s Audit Committee shall be heard before a court. This proposal is a procedural step. The GroupJudicial Council may cease the procedure, order further investigation or refer the case to a court hearing.
FINES OF HTPC AGAINST OTE S.A.:
On November 29, 2006, HTPC imposed a fine against OTE of total amount of Euro 3.0, due to violation of Number Portability Rules and Competition Rules. OTE has filed an appeal before the Athens Court of Appeals against this fine which partially accepted it reducing the fine to Euro 1.0. OTE has appealed against this decision before the Council of State.
On July 26, 2007 HTPC imposed a fine amounting Euro 20.1, for alleged abuse of its dominant position in broadband market in the form of margin squeeze. OTE has filed an appeal before the Athens Court of Appeals against this fine which was partially accepted reducing the fine to Euro 10.1. OTE has appealed against this decision before the Council of State.
On July 26, 2007, HTPC imposed a fine amounting Euro 4.0, for violations of the existing legislation concerning compliance with HTPC’s cost control decisions for the year 2003, having as proof wholesale leased lines (including interconnection leased lines). OTE has filed an appeal before the Athens Court of Appeals against this fine which partially accepted it reducing the fine to Euro 2.5. OTE has appealed against this decision before the Council of State.
On July 26, 2007, HTPC imposed a fine amounting Euro 1.0 for violations in the existing legislation concerning breaches in the obligation to pay penalties for delivery delays and repair of leased lines. OTE has filed an appeal before the Athens Court of Appeals against this fine which partially accepted it reducing the fine to Euro 0.7. OTE has appealed against this decision before the Council of State.
On July 26, 2007, HTPC imposed a fine amounting Euro 1.25, for non-compliance with regard to OTE’s obligations relating to the Local Loop Unbundling (L.L.U). OTE has filed an appeal before the Athens Court of Appeals against this fine which was heard on March 18, 2009, and a decision was issued reducing the fine to Euro 0.5. OTE has appealed against this decision before the Council of State.
On October 5, 2007, HTPC imposed a fine for a total amount of Euro 3.0 for alleged non-compliance with regard to OTE’s obligations relating to the Local Loop Unbundling (L.L.U). Against this decision OTE has filed an appeal demanding its annulment which was heard before the Athens Administrative Court of Appeals on January 20, 2009 and the decision is pending. The payment to the fine has been suspended by a ruling of the Athens Administrative Court of Appeals pending the court’s decision on OTE’s appeal.
On July 4, 2008, HTPC with its relevant decisions imposed a fine, aggregating to Euro 1.0, for alleged late and improper provision of necessary information related to the combined service ‘All in 1”. OTE appealed against these decisions before the Athens Administrative Court of Appeals requesting their annulment which appeal was accepted.
On July 4, 2008, HTPC imposed a fine, aggregating to Euro 2.0, for denial of providing information asked by HTPC. OTE has filed an appeal before the Athens Court of Appeals against this fine which partially accepted it reducing the fine to Euro 0.1.
On July 25, 2008, HTPC imposed a fine on OTE for an amount of Euro 9.0 for alleged obstacles to the business promotion of the “Double play” service by TELLAS S.A. (fixed telephony with fast Internet combination). OTE has filed an appeal against this decision before the Athens Administrative Court of Appeals which was partially accepted reducing the fine to Euro 5.7. OTE intends to appeal against this decision before the Council of State.
On October 3, 2008, HTPC imposed a series of fines to OTE amounting to approximately Euro 11.0, alleging that OTE has only partially conformed with regard to its obligations relating to the Local Loop Unbundling (L.L.U).


F-69

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
OTE appealed against this decision before the Athens Administrative Court of Appeal demanding its suspension, which was accepted by the Court.
On February 3, 2009, HTPC imposed a fine of Euro 2.0 to OTE, for the alleged refusal to provide the information requested for the purpose of price squeezing control over the price margins for voice telephony. OTE has appealed against this decision, before the Athens Administrative Court of Appeals. The appeal was heard on May 12, 2010 and the Court’s decision is pending.
On March 17, 2009, HTPC imposed a fine of Euro 7.0 to OTE for allegedly delayed delivery of lease lines to Hellas On Line S.A. OTE has appealed against this decision, before the Athens Administrative Court of Appeals. The appeal has been postponed and was heard on January 21, 2010, and the decision is pending.
On March 17, 2009, HTPC imposed a fine of Euro 0.5 to OTE for non-compliance with its decision of provisional measures, regarding the delivery of leased circuits to Hellas On Line S.A. OTE has appealed against this decision, before the Athens Administrative Court of Appeals and the appeal was heard on January 21, 2010, and the decision is pending.
On April 8, 2009, HTPC imposed a fine of Euro 1.5 to OTE for allegedly delaying the provision of information requested from OTE for the purpose of the cost audit. OTE has appealed against this decision, before the Athens Administrative Court of Appeals. On March 23, 2010 a decision was issued reducing the fine to Euro 1.0.
On May 5, 2009, HTPC imposed a fine of Euro 2.0 to OTE for violation of telecommunications law and specifically on the Company’s obligation, as a company with significant market power (SMP) in the relevant market, to maintain maximum price level at the retention fee for calls from subscribers of its network to subscribers of mobile network providers. OTE has appealed against this decision, before the Athens Administrative Court of Appeals. The appeal was heard on May 13, 2010 and the Court’s decision is pending. Similarly, the above mentioned decision was announced to OTE again and OTE has appealed against it, before the Athens Administrative Court of Appeals and the appeal will be heard on June 9, 2010.
OTE has made appropriate provisions in relation to litigations and claims, when it is probable an outflow of recourses will be required to settle the obligations and theyit can be reasonably estimated.
 
(b)B. Commitments
 
(i)  Capital commitments
Capital commitments
 
The capital commitments at the balance sheetreporting date which have not been recorded in the financial statements are as follows:
 
         
  December 31, 
  2008  2007 
 
Property, plant and equipment  149.7   169.0 
         
  December 31,
  2009 2008
 
Property, plant and equipment  369.2   149.7 
 
(ii) Operating commitments
 
Operating commitments at the balance sheetreporting date for rentals, rights of use, repair and maintenance services and other services which have not been recorded in the financial statements are as follows:
 
                
 December 31,  December 31,
 2008 2007  2009 2008
Up to 1 year  113.5   109.4   107.5   113.5 
1 to 5 years  239.6   300.5   303.8   239.6 
Over 5 years  290.9   334.1   201.6   290.9 


F-70

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
31.30.  FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
 
IFRS 7 “Financial Instruments: Disclosures” introduces additional disclosures in order to improve the quality of information provided in order to assesassess the importance of the financial instruments on the financial position of the Group. The Group is exposed to the following risks from the use of itstheir financial instruments:
 
1.a) Credit risk
 
2.b) Liquidity risk
 
3.c) Market risk


F-63

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The following tables comparetable compares the carrying amount of the Group’s financial instruments to their fair value:
 
                
 December 31,                 
 Carrying Amount Fair Value  Carrying Amount Fair Value
 2008 2007 2008 2007  2009 2008 2009 2008
Financial Assets
                            
Available-for-sale  26.2   56.0   26.2   56.0   24.1   20.6   24.1   20.6 
Held for trading  3.2   3.1   3.2   3.1 
Held to maturity  109.7   25.2   110.9   25.2   8.1   112.2   8.1   113.4 
Trade receivables  1,194.2   1,172.0   1,194.2   1,172.0   1,153.0   1,194.2   1,153.0   1,194.2 
Loan to Auxiliary Fund  134.1   124.6   120.7   124.6   129.4   134.1   132.3   120.7 
Other loans  71.3   51.6   71.3   51.6   89.4   71.3   89.4   71.3 
Cash and cash equivalents  1,427.8   1,316.3   1,427.8   1,316.3   868.8   1,427.8   868.8   1,427.8 
Derivative financial instruments  6.2   3.7   6.2   3.7   7.4   6.2   7.4   6.2 
Financial liabilities
                
Long term borrowings  5,409.6   3,947.1   5,094.3   3,834.4 
Short term borrowings  638.1   1,580.7   628.3   1,580.7 
Financial Liabilities
            
Long-term borrowings  5,385.7   5,409.6   5,520.0   5,094.3 
Short-term borrowings  36.2   638.1   35.5   628.3 
Trade accounts payable  943.9   931.5   943.9   931.5   813.2   943.9   813.2   943.9 
Derivative financial instruments  3.9   —   3.9   —   4.3   3.9   4.3   3.9 
 
The fair value of cash and cash equivalents, trade receivables and trade accounts payable approximate their carrying amounts. The fair value of quoted shares and bonds is based on price quotations at the balance sheetreporting date. The fair value of unlisted financial instruments is determined by discounting future cash flows.
 
a)  Credit risk
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuing technique:
Level 1:  quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2:  other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3:  techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
During the reporting period there were no transfers between level 1 and level 2 fair value measurement, and no transfers into and out of level 3 fair value measurement.


F-71

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As at December 31, 2009, the Group held the following financial instruments measured at fair value:
           
  Fair Value Fair Value
  2009 2008 Hierarchy
 
Financial Assets
          
Available-for-sale shares
  14.3   11.1  Level 1
Available-for-sale mutual funds
  4.0   3.8  Level 1
Available-for-sale securities
  5.8   5.7  Level 3
Held for trading bonds  3.2   3.1  Level 1
Other loans  89.4   71.3  Level 2
Derivative financial instruments  7.4   6.2  Level 2
Financial Liabilities
          
Derivative financial instruments  4.3   3.9  Level 2
a)  Credit risk
 
Credit risk is the risk of financial loss to the Group if athe counterparty fails to meet its contractual obligations.
 
Maximum exposure to credit risk at the reporting date to which the Group is exposed is the carrying value of financial assets.
 
Trade receivables could potentially adversely affect the liquidity of the Group. However, due to the large number of customers and their diversification of the customer base, there is no concentration of credit risk with respect to these receivables. Concentration of risk is considered to exist for amounts receivable from the other telecommunication service providers, due to their relatively small number and the high level of transactions they have with the Group. For this category the Group assesses the credit risk following the established policies and procedures and has made the appropriate provision for impairment (Note 10).
 
The Group has established specific credit policies under which customers are analyzed for creditworthiness and there is an effective management of receivables in place both before and after they become overdue and doubtful. In monitoring credit risk, customers are grouped according to their credit risk characteristics, aging profile and existence of previous financial difficulties. Customers that are characterized as doubtful are reassessed at each balance sheetreporting date for the estimated loss that is expected and an appropriate impairment allowance is established.
 
Cash and cash equivalents are considered to be exposed to a low level of credit risk. The Group has adopted a “deposits policy” whereby funds are only deposited with banks whichthat have a specified minimum rating by International Rating Agencies as to their creditworthiness; in addition, limits are set on the amounts deposited depending on the rating. To avoid concentrations of risks, the Group does not deposit more than 30% of available funds in any one bank.


F-64

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Financial instruments classified asavailable-for-sale include listed shares, mutual funds and other securities, while financial instruments held to maturity include government bonds and other securities. These twoThe financial asset categories are not considered to expose the Group to a significant credit risk.
 
Loans include loans to employees which are collected either through the payroll or are netted-off with their retirement indemnities (Notes 10,9, 12 and 19)18) and loans and advances to Auxiliary Pension Fund mainly due to the Voluntary Leave Scheme (Note 19)18). The above mentioned loans are not considered to expose the Group to a significant credit risk.


F-72

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
Trade receivables, which include receivables from telecommunication operators, is the category with the higher credit risk. For this category the Group assesses the credit risk following the established policies and procedures described above and has made the appropriate provision for impairment (Note 11).NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
b)  Liquidity risk
b)  Liquidity risk
 
Liquidity risk is the risk that the Group will not be able to meet itstheir financial obligations as they fall due. Liquidity risk is kept at low levels by ensuring that there is sufficient cash on demand and credit facilities to meet the financial obligations when due. The Group’s available cash as at December 31, 20082009 amounts to Euro 1,427.8,868.8, its loans amount to Euro 6,047.75,421.9 while the Group has a long-term credit (committed) line of Euro 350.0.
 
For the monitoring of liquidity risk, the Group prepares annual forecasted cash flows when drafting the annual budget and monthly rolling forecasts for three months’ cash flows, in order to ensure that it has sufficient cash reserves to service its financial obligations.
 
Below is an analysis of the undiscounted contractual payments of the Group:
 
                                        
 Less than 1 Year 1 to 2 Years 2 to 5 Years Over 5 Years Total  Less than 1 Year 1 to 2 Years 2 to 5 Years Over 5 Years Total 
December 31, 2008
                    
December 31, 2009
                    
Medium term bonds OTE PLC  872.3   245.1   3,925.4   1,696.9   6,739.7   245.1   2,395.1   1,607.9   1,619.3   5,867.4 
Syndicated loan OTE PLC  21.4   46.8   508.3   —   576.5   30.8   33.8   448.7   —   513.3 
Borrowings — Rom Telecom  16.8   8.2   21.5   15.1   61.6   8.4   9.1   16.9   12.6   47.0 
European Investment Bank  20.5   —   —   —   20.5 
Other borrowings  5.3   2.0   —   —   7.3 
Other Borrowings  3.3   —   —   —   3.3 
Trade accounts payable  943.9   —   —   —   943.9   813.2   —   —   —   813.2 
                      
Total
  1,100.8   2,438.0   2,073.5   1,631.9   7,244.2 
  1,880.2   302.1   4,455.2   1,712.0   8,349.5            
           
 
                                        
 Less than 1 Year 1 to 2 Years 2 to 5 Years Over 5 Years Total  Less than 1 Year 1 to 2 Years 2 to 5 Years Over 5 Years Total 
December 31, 2007
                    
December 31, 2008
                    
Medium term bonds OTE PLC  158.9   755.3   1,011.1   2,379.0   4,304.3   872.3   245.1   3,925.4   1,696.9   6,739.7 
Short term borrowings OTE PLC  1,514.0   —   —   —   1,514.0 
Syndicated loan OTE PLC  25.3   21.3   554.8   —   601.4   21.4   46.8   508.3   —   576.5 
Borrowings — Globul  50.9   —   —   —   50.9 
Borrowings — Rom Telecom  16.8   17.9   29.2   25.1   89.0   16.8   8.2   21.5   15.1   61.6 
European Investment Bank  20.5   20.5   —   —   41.0   20.5   —   —   —   20.5 
Other borrowings  5.4   —   —   —   5.4 
Other Borrowings  5.3   2.0   —   —   7.3 
Trade accounts payable  931.5   —   —   —   931.5   943.9   —   —   —   943.9 
                      
Total  2,723.3   815.0   1,595.1   2,404.1   7,537.5   1,880.2   302.1   4,455.2   1,712.0   8,349.5 
                      
 
The Group has excluded derivative financial instruments from the above analysis.


F-65

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
OTE has guaranteed its subsidiary’s, OTE PLC, borrowing as follows:
 
 • As at December 31, 2008:2009: Euro 6.0 billion.5,400.
 
 • As at December 31, 2007:2008: Euro 5.4 billion.6,000.
 
c)  Market risk
c)  Market risk
 
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s results orresult in fluctuations of the value of theirsthe Group’s financial instruments. The objective of market risk management is to manage and control exposure within acceptable levels.


F-73

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The individual risks that comprise market risk are described in further detail and the Group’s policies for managing them are as follows:
 
i)i.  Interest rate risk
 
Interest rate risk is the risk that payments for interest on loans fluctuate due to changes in interest rates. Interest rate risk mainly applies to long-term loans with variable interest rates.
 
The hedging of interest rate risk is managed through having a combination of fixed and floating rate borrowings as well as with the use of interest rate swap agreements.
 
As at December 31, 2008,2009, the ratio of fixed loans to floating loans for the Group was 91%/9% (2008: 81%/19%,(2007:52%/48%). The analysis of borrowings depending on theby type of the interest rate is as follows:
 
                
 December 31,  December 31, 
 2008 2007  2009 2008 
Variable interest rate  1,099.3   2,647.2   503.3   1,099.3 
Fixed rate interest rate  4,948.4   2,880.6 
Fixed interest rate  4,918.6   4,948.4 
          
TOTAL
  6,047.7   5,527.8   5,421.9   6,047.7 
          
 
The following tables demonstrate the sensitivity to a reasonable possible change in interest rates on loans, deposits and derivatives to the income statement and equity through the impact of loans, deposits and derivatives.equity.
 
Sensitivity to an interest rates increase of 100 basis points:1%:
 
       
Profit Before Tax Equity
2008 2007 2008 2007
 
3.3 4.2 3.0 —
         
  2009 2008
 
Profit before tax  4.7   3.3 
Equity  —   3.0 
 
If interest rates wouldwere to decrease by 100 basis points,1%, the impact would be similar and opposite to the analysis above.
 
ii)ii.  Foreign currency risk
 
Currency risk is the risk that the fair values or the cash flows of a financial instrument fluctuate due to foreign currency changes.
 
The Group operates in many Southeastern European countriesEurope and as a result is exposed to currency risk due to changes between the functional currencies and other currencies.
The main currencies within the Group isare the Euro, Ron (Romania) and the Lek (Albania). The following table below presentsdemonstrates the sensitivity to a reasonably possible change in the functional currency exchange rate, with all other variables held constant, of the Group’s foreign currency risk, beingprofit before tax (due to changes in the exposure to foreign (non functional) currencies which impact profitfair value of monetary assets and loss.liabilities):
 
         
  Effect on Profit Before Tax
Change in Functional Currency Exchange Rate
 2009 2008
 
+10%  12.4   7.2 
−10%  (12.4)  (7.2)
As of December 31, 2009, COSMOTE ROMANIA had Euro 500.0 loans payable to COSMOTE (December 31, 2008 Euro 400.0) which are treated as part of the net investment of the foreign operation as settlement is neither planned nor probable in the foreseeable future.


F-66F-74

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
                     
  Euro  Ron  LEK  WON  Total 
 
December 31, 2008
                    
Customers  1,135.0   41.2   18.0   —   1,194.2 
Borrowings  (5,986.6)  (30.2)  —   (30.9)  (6,047.7)
Trade accounts payable  (845.3)  (89.1)  (9.5)  —   (943.9)
Cash and cash equivalents  1,372.5   21.2   34.1   —   1,427.8 
                     
Total
  (4,324.4)  (56.9)  42.6   (30.9)  (4,369.6)
                     
                     
  Euro  Ron  LEK  WON  Total 
 
December 31, 2007
                    
Customers  1,083.6   39.2   49.2   —   1,172.0 
Borrowings  (5,449.4)  (36.0)  —   (42.4)  (5,527.8)
Trade accounts payable  (883.0)  (37.6)  (10.9)  —   (931.5)
Cash and cash equivalents  1,200.7   29.1   86.5   —   1,316.3 
                     
Total
  (4,048.1)  (5.3)  124.8   (42.4)  (3,971.0)
                     
The currency risk for the Group is not significant.
 
Capital Management
 
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratio in order to support its business and maximize shareholder value.
 
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
 
An important means of managing capital is the use of the gearing ratio (ratio of net debt to equity) which is monitored at a Group level. Net Debt includes interest bearing loans, less cash and cash equivalents and other financial assetsavailable-for-sale and held to maturity.assets.
 
The table below shows an increase in the gearing ratio in 20082009 compared to 20072008 due to an increasea decrease in borrowings used forcash and cash equivalents, as well as a reduction in equity due to foreign exchange losses and the acquisition of COSMOTE’s minoritynon-controlling interests as well as the reductionof AMC which was recorded in equity as the difference arising from the acquisition of minority interests was debited to equity (see Note 8):
         
  December 31, 
  2009  2008 
 
Net Debt        
Borrowings  5,421.9   6,047.7 
Cash and cash equivalents  (868.8)  (1,427.8)
Other financial assets  (35.4)  (135.9)
         
Net debt  4,517.7   4,484.0 
         
Equity  1,949.7   2,173.2 
         
Gearing ratio  2.32x  2.06x
         
31.  RECLASSIFICATIONS
In the consolidated statement of financial position as of December 31, 2008, amounts of Euro 5.6 which was included in “Goodwill” and Euro 5.5 which was included in “Other intangible assets”, have been reclassified to “Assets classified as held for sale” as they concern COSMOFON which was sold in May 2009.
In the consolidated income statement for the year ended December 31, 2008 and 2007, an amount of Euro 27.1 and Euro 33.7, respectively which was included in “Charges from international operators” was reclassified to “Other operating expenses”.
 
         
  December 31, 
  2008  2007 
 
Net debt        
Borrowings  6,047.7   5,527.8 
Cash and cash equivalents  (1,427.8)  (1,316.3)
Financial assetsavailable-for-sale and held to maturity
  (135.9)  (81.2)
         
Net debt  4,484.0   4,130.3 
         
Equity  2,173.2   3,054.6 
         
Gearing ratio  2.06x  1.35x
         
In the consolidated cash flow statements for the year ended December 31, 2008 and 2007, the amount reflected in “Other provisions” has been analyzed and reflected in “Provisions for doubtful accounts” and “Other Provisions”. In addition, the amount reflected in “(Decrease)/increase in liabilities (except borrowings)” has been analyzed and reflected in “Payment of early retirement programs”, “Payment of staff retirement indemnities and youth account, net of employees’ contributions” and “(Decrease) / increase in liabilities (except borrowings)”.
 
32.  RECLASSIFICATIONSEVENTS AFTER THE FINANCIAL POSITION DATE
 
In the balance sheet as ofThe most significant events after December 31, 2007, an amount2009 are as follows:
Stock option plan
On January 28, 2010, OTE’s Board of Euro 94.6, which resulted fromDirectors decided on and approved granting 1,259,078 Additional Options to the netting offexecutives of deferred tax assetsOTE and liabilities has been presentedits subsidiaries, 672,018 Basic Options to the executives of OTE and 333,780 Basic and 2,403,560 Additional Options to the executives of COSMOTE Group for comparability purposes with the balance sheet as at December 31, 2008 as follows: asset of Euro 260.8 and liability of Euro 166.2.year 2009.

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HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
InIKA-ETAM
By his letter dated January 19, 2010, the balance sheet asMinister of December 31, 2007, an amount of Euro 582.7 included in “Other non-current assets”, was related to intangible assetsLabor and Social Security informed OTE that IKA-ETAM has been reclassifiedincurred significant deficits attributable to the line item “Other intangible assets” for comparability purposes with the balance sheet as at December 31, 2008.
In the balance sheet at December 31, 2007, an amount of Euro 81.2 which was included in “Other Current Assets” has been reclassified to “Other Financial Assets” for comparability purposes with the balance sheet at December 31, 2008.
In the balance sheet at December 31, 2007, an amount of Euro 258.3 which was included in “Retained Earnings” has been reclassified to “Foreign Exchange and Other Reserves” for comparability purposes with the balance sheet at December 31, 2008. Accordingly, “Foreign Exchange and Other Reserves” are separately reflected in the statement of changes in equity for the year ended December 31, 2007.
In the income statements for the years ended December 31, 2007 and December 31, 2006, amounts of Euro 92.3 and Euro 87.1, respectively, which were included in “Payroll and Employee benefits” have been reclassified to “Provisions for Staff Retirement Indemnities and Youth Account” for comparability purposes with the income statement for the year ended December 31, 2008.
In the cash flow statements for the years ended December 31, 2007 and December 31, 2006, the amounts reflected in “Provisions” have been analyzed and reflected in “Provisions for Staff Retirement Indemnities and Youth Account” and “Other Provisions”. In addition, in the cash flow statements for the years ended December 31, 2007 and December 31, 2006, the amounts reflected in “Results from Investing Activities” have been analyzed and reflected in “Interest Income” and “Dividend Income, Gains and Impairment of Investments”.
33.  POST BALANCE SHEET EVENTS
The most significant post balance sheet events as of December 31, 2008 are as follows:
1. On February 6, 2009, the Extraordinary General Assembly of Shareholders took place, having been postponed from January 8, 2009. The following items were discussed and the amendments to the Articles of Incorporation were approved: article 8 (Board of Directors), article 9 (election, composition and termincorporation of the Boardpension segment of Directors), article 10 (gatheringTAP-OTE from August 1, 2008 into IKA-ETAM, and operation ofthat further deficits are also anticipated for 2010. In his letter the Board of Directors) and article 12 (Chairman).
2. On January 14, 2009, the tax authorities concluded their audit of OTE’s subsidiary, OTE PLUS without impact. The tax auditMinister further explained that such deficits are currently covered the open tax years 2005 to 2007.
3. On February 12, 2009, OTE announced that its 100% subsidiary COSMOTE, had acquired, after participating in an international competition, a further 12.6% of AMC. The holding was purchased from the Albanian State for Euro 48.2, Following the transaction COSMOTE’s holding in AMC, direct and indirect, via its 97% subsidiary COSMOHOLDING ALBANIA, was 95%. The transaction was completed on April 27, 2009 following approvalprimarily by the relevant authorities in Albania.
4. On January 28, 2009, OTE’s management and OME-OTE (the employee’s union) signed a Collective Labor Agreement according to which employees who will have completed the number of years of service required for retirement by December 30, 2009 will be entitled to benefits providing they leave by this date. Eligible employees should have submitted their irrevocable applications by February 16, 2009. The estimated total cost amounts to approximately Euro 11.0 and will be included in the 2009 income statement in the line item “Cost of early retirement program”.
5. On March 4, 2009, the Hellenic State and IKA-ETEAM (general successorpartially absorbed by IKA-ETAM, he indicated that OTE should also contribute funds towards these deficits and requested a meeting with OTE’s Chief Executive Officer in order to discuss the relevant issues. The meeting was held on January 26, 2010 where the two parties agreed to establish a committee to discuss the issues raised. A first meeting of TAP-OTE) signedthis committee took place on February 11, 2010 and OTE requested the Ministry of Labor and Social Security’s (“Ministry”) official positions in writing. On February 23, 2010, the Ministry formally advised OTE that as a transfer agreementresult of 19,606,015 ordinary shares heldthe Voluntary Leave Scheme it has estimated that IKA-ETAM has foregone contributions and pensions of approximately Euro 340.0. Furthermore, it also notes that the relevant outstanding contributions currently paid by OTE on a monthly basis, should be settled in full.
OTE examined the Ministry’s position, however, its view is that this position is unsubstantiated, given that OTE has fulfilled and continues to fulfil in their totality all the financial obligations it has towards all social security funds, paying all contributions, as they are due, both in the context of its normal course of business, as well as the ones related to the company’s voluntary retirement plans, strictly following all relevant laws, rules and regulations.
Therefore, in reply to the above mentioned letter, on March 9, 2010, OTE, in a letter to the Ministry, responded to all the specific issues included therein and reiterated its position that OTE fulfils in their totality all the financial obligations arising from L. 3371/2005 and the relevant Ministerial Decision, and requested that the Ministry address the pending issue regarding the issuance of the necessary decisions by the Hellenic Statepension funds, in order to IKA-ETEAM without cash consideration. These shares represent 4%enable the participants of OTE’s share capital,the voluntary leave scheme of L. 3762/2009 to receive their pension entitlements.
Based on article 3 of theF/10051/27177/2174 Ministerial Decision which was published in accordance withthe Government Gazette, the additional financial burden of the Pension Sector of IKA-ETAM, the Auxiliary Insurance Sector for OTE personnel of TAYTEKO and the Medical Segment of TAYTEKO as derives from articles 74 par. 4a2 and 4 of L.3371/the Collective Labor Agreement signed between OTE and OME-OTE on July 20, 2005, and articles 1 and 2 par. 4 and 5should be paid for by OTE in a lump-sum to the above sectors by the last working day of L3655/2008,September 2010. The amount of this additional financial burden will be determined by an actuarial study that will be performed by the Directorate of Actuarial Studies of the General Secretariat for Social Security in combinationconjunction with the decisionDirectorate of Actuarial Studies and Statistics of IKA-ETAM by August 31, 2010.
On May 10, 200711, 2010 OTE filed an appeal against this Ministerial Decision before the Administrative Court of First Instance of Athens, requesting the European Community Committee (C 2/2206). The fair valueannulment of article 3 as based on the transaction was set at Euro 10.30 (in absolute amount) (closing priceLegal Department’s assessment, it is in contravention of article 34 of L. 3762/2009 and consequently, there are valid grounds for the annulment of this article. On May 15, 2010 OTE also filed an appeal requesting the suspension of enforcement of this Ministerial Decision before the same Court.
As a result, and given that in OTE’s share at Athens Exchange,view, as referred to above, the dateMinistry’s position is unsubstantiated, OTE has not recorded any provision in the transferaccompanying financial statements.


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HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.New tax law
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
was signed) per share. The total fair valuenew Law 3842/23-4-2010 introduces two separate corporate income tax rates for distributed and undistributed profits of the transferred shares amounts to Euro 201.9 and will be credited to OTE’s 2009 results through the release of a related liability.
6. The tax audit of the Company for the open tax years 2006 and 2007 commenced on February 19, 2009 and is currently in progress.
7. On April 7, 2009, the Extraordinary General Meeting of Shareholders approved the following:
a. Amendments of certain paragraphs of the Articles of Incorporation.
b. A share buy back program of OTE in accordance with article 16 of the Law 2190/1920 of up to1/10 of the total OTE share capital, with the highest price set at Euro 30.0 (in absolute amount) and the minimum price set at Euro 3.0 (in absolute amount), with a concurrent suspension of the relevant decision of the Extraordinary Shareholders Meeting of OTE on November 8, 2007.
c. Appointment of the members of the Audit Committee, pursuant to article 37 of Law 3693/2008.
d. The replacement of the members of the Board of Directors who have resigned.
8. On February 3, 2009, HTPC imposed a fine of Euro 2.0 to OTE, for the alleged refusal to provide the information requested for the purpose of price squeezing control. OTE has appealed against this decision, before the Athens Administrative Court of Appeals but the hearing of the case has not yet been scheduled. OTE also intends to seek the suspension of this decision before the Athens Administrative Court of Appeals. On March 17, 2009, HTPC imposed a fine of Euro 7.5 to OTE for allegedly delayed delivery of lease lines to Hellas On Line S.A. OTE has appealed against this decision, before the Athens Administrative Court of Appeals but the hearing of the case has not yet been scheduled. OTE also intends to seek the suspension of this decision before the Athens Administrative Court of Appeals. On April 8, 2009, HTPC imposed a fine of Euro 1.5 to OTE for allegedly delaying the provision for the information requested from OTE for the purpose of the cost audit. OTE has appealed against this decision, before the Athens Administrative Court of Appeals but the hearing of the case has not yet been scheduled. OTE also intends to seek the suspension of this decision before the Athens Administrative Court of Appeals. In May 2009 HTPC imposed a fine of Euro 2.0 to OTE for allegedly exceeding the upper price limit of the retention fee for calls made by its subscribers to subscribers of a mobile network. OTE has appealed against this decision, before the Athens Administrative Court of Appeals but the hearing of the case has not yet been scheduled. OTE intends to appeal and seek the suspension of this decision before the Athens Administrative Court of Appeals.
9. On February 20, 2009 OTE’ s Board of Directors, decided on and approved the introduction of new beneficiaries to the existing Share Option Plan (Note 29), with the simultaneous granting of 1,107,780 Basic Options to them, of which 590,000 are to be granted to executives of OTE and 517,780 to executives of OTE’ s subsidiaries. Furthermore, the Board of Directors, decided on and approved the granting of 2,117,890 Additional Options to existing beneficiaries, of which 927,110 are to be granted to executives of OTE and 1,190,780 to executives of OTE’ s subsidiaries.
10. On March 30, 2009, OTE announced that the agreements between COSMOTE and Telekom Slovenije have been signed in Athens regarding the transfer of 100% of COSMOFON, through the sale of the 100% subsidiary of COSMOTE, OTE MTS HOLDING B.V., as well as GERMANOS TELECOM AD SKOPJE (GTS) to Telekom Slovinije. The total value of the transaction amounts to Euro 190. The transaction was completed on May 12, 2009 following approval by the relevant Skopje governmental and regulatory authorities.


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HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
11. On March 26, 2009 an amendment was submitted to a draft law of the Ministry of Employment and Social Security, according to which:legal entities. More specifically:
 
 • OTE’s employees who:Non-distributed profits are taxed at a tax rate of 24% (reduced annually by 1 percentage point until it reaches 20% by 2014)


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i) have submitted a written application to participate in the Voluntary Leave Scheme, within the deadlines defined in par.2, article 74 of L.3371/2005 and,HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
 
ii) do not submit an irrevocable application within one (1) month from the law’s enactment that would recall the initial application submitted,NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
are considered to be retired based on the article 74 of L. 3371/2005 within three (3) months from the expiration of the deadline described in ii) above.
 
 • The cost that will arise from a) the employer’s and the employee’s contributions to IKA-ETAM (both for the sectionsDistributed profits are taxed at a tax rate of pensions and medical benefits) for the factitious time recognized to these employees and b) the pensions that IKA-ETAM’s pension section will be required to pay to these employees based on the above, will be covered by OTE.40%.
 
 • The cost that will arise from the employer’s and the employee’s contributions to TEAYTEKO for the factitious time recognized to these employees as well as the pensions that TEAYTEKO (Auxiliary Insurance Sector for OTE Personnel) will be required to pay to these employees basedNo further withholding tax is imposed on the above, will be covered by OTE.
• The cost that will arise from the employer’s and the employee’s contributions to TEAYTEKO (Health Insurance Sector for OTE Personnel) for the factitious time recognized to these employees will be covered by OTE.
• For the Lump Sum benefits that TEAYTEKO will be required to pay to these employees, OTE should grant a long-term loan to TEAYTEKO.dividends.
 
The above-mentionednew tax law applies to profits arising from the fiscal year 2010 onwards or to the profits of previous accounting periods distributed after December 31, 2010. The distribution of profits of previous accounting periods within 2010 is still taxed under the current regime (i.e. withholding tax of 10% is applicable).
Taxation of 40% on distributed profits of the legal entities exhausts the tax liability in case the beneficiaries are legal entities.
In cases where such legal entities proceed to the distribution of profits, in which dividends from other legal entities are included, the part of tax already paid for those dividends is deducted from the 40% tax imposed on distributed profits.
Special Contribution for legal entities
According to the new Law 3845/2010 “Measures for the application of the support scheme of the Greek Economy by the Members of the Euro Zone and the International Monetary Fund” a special contribution is imposed on Greek profitable entities calculated on their total net income for the fiscal year 2009 based on a progressive scale up to 10% of their total net income. The contribution is estimated to approximately Euro 96.0, it will be charged in the 2010 consolidated income statement and will be paid within 2011. The Company is currently in the process of evaluating the possibility (after the payment of the above mentioned contribution) of requesting for refund an amount of approximately Euro 30.1 of such special contribution relating to dividend income derived from its subsidiaries’ 2008 profits, on which a special contribution has already been imposed based on the requirements of L. 3808/2009.
OTE PLC loans
In May 2010, OTE PLC proceeded with the buyback of bonds of a total nominal amount of Euro 56.0 under the Euro 1,500.0, 5.375% bond due on February 14, 2011. The notes have been cancelled. The total amount paid including accruals and premium amounts to Euro 57.7.
Restructuring plans
On December 23, 2009, the management of OTE approved an early retirement program according to which employees who will complete the number of years required for retirement by December 29, 2010, would be entitled to benefits in order to retire by December 30, 2010. The deadline for the applications for participating in this early retirement program was enacted in May 2009due on January 15, 2010. Approximately 340 employees will voluntarily terminate their employment contracts and the respective cost, which is not expectedamounted to exceed Euro 150,31.5, will be includedcharged in the 2009Group’s income statement.statement for the year 2010.
 
12. On June 24, 2009,By virtue of decisions by ROMTELECOM’s CEO, dated February and April 2010, ROMTELECOM announced the General Assemblyrestructuring of OTE’s shareholders approvedspecific departments within the distributioncompany. In the first four months of a dividend from the 2008 profits of a total2010, 550 employees voluntarily terminated their employment contracts and an amount of Euro 367.6 or12.5, representing the relative costs, will be charged in the Group’s income statement of 2010.
A total of 350 employees of ZAPP (COSMOTE’s subsidiary) voluntarily terminated their employment contracts and an amount of Euro 0.75 (in absolute amounts) per share.2.6, representing the relative costs, will be charged in the Group’s income statement of 2010.


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HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Telecom Slovenije notices of claims
On May 12, 2010 Telecom Slovenije, the purchaser of COSMOFON, sent to COSMOTE notices of claims relating to alleged breaches of warranties and indemnity provisions under the Share Purchase Agreement concluded on March 30, 2009, for an amount of approximately Euro 9.3. COSMOTE will take all necessary actions to oppose all unsubstantiated and unfounded claims.


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