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Title of Each Class | Name of Each Exchange on Which Registered | |
American Depositary Shares, each | New York Stock Exchange | |
representing one half of one Ordinary Share | ||
Ordinary Shares nominal value €2.39 per share* |
* | 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. |
Large Accelerated Filer þ | Accelerated Filer o | Non-Accelerated Filer No o |
U.S. GAAPo | International Financial Reporting Standards as issued by the International Accounting Standards Board þ | Other o |
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 152 | |||||||
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | 155 | |||||||
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 155 | |||||||
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 155 | |||||||
CONTROLS AND PROCEDURES | 155 | |||||||
[RESERVED] | 157 | |||||||
Audit Committee Financial Expert | 157 | |||||||
Code of Ethics | 157 | |||||||
Principal Accountant Fees and Services | 158 | |||||||
Exemptions from the Listing Standards for Audit Committees | 158 | |||||||
Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 158 | |||||||
Change in Registrant’s Certifying Accountant | 159 | |||||||
Corporate Governance | 159 | |||||||
FINANCIAL STATEMENTS | 160 | |||||||
FINANCIAL STATEMENTS | 160 | |||||||
EXHIBITS | 160 | |||||||
162 | ||||||||
EX-1.1 | ||||||||
EX-4.1 | ||||||||
EX-12.1 | ||||||||
EX-12.2 | ||||||||
EX-13.1 | ||||||||
EX-13.2 | ||||||||
EX-15.1 |
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• | “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. |
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• | 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. |
• | 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; |
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• | 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. |
ITEM 1 | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
ITEM 2 | OFFER STATISTICS AND EXPECTED TIMETABLE |
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ITEM 3 | KEY INFORMATION |
For the Year Ended December 31, | ||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2008 | |||||||||||||||||||
(Euro) | (Euro) | (Euro) | (Euro) | (Euro) | (U.S. $)(1) | |||||||||||||||||||
(Unaudited) | (Unaudited) | (Audited) | (Audited) | (Audited) | (Unaudited) | |||||||||||||||||||
(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 | ||||||||||||||||||
International telephony(3) | 376.6 | 391.0 | 346.9 | 304.5 | 286.9 | 399.3 | ||||||||||||||||||
Mobile telephony | 1,555.6 | 1,752.2 | 1,975.8 | 2,210.0 | 2,470.8 | 3,439.1 | ||||||||||||||||||
Other revenue(4) | 1,015.4 | 1,019.7 | 1,308.0 | 1,783.1 | 1,835.4 | 2,554.7 | ||||||||||||||||||
Total revenue | 5,219.3 | 5,475.1 | 5,891.3 | 6,319.8 | 6,407.3 | 8,918.3 | ||||||||||||||||||
Total operating expenses | (4,605.2 | ) | (5,451.1 | ) | (4,803.0 | ) | (5,272.9 | ) | (5,349.6 | ) | (7,446.1 | ) | ||||||||||||
Operating income before financial activities | 614.1 | 24.0 | 1,088.3 | 1,046.9 | 1,057.7 | 1,472.2 | ||||||||||||||||||
Total profit (loss) from financial activities | (97.3 | ) | (20.7 | ) | (4.5 | ) | 107.9 | (213.7 | ) | (297.4 | ) | |||||||||||||
Profit before tax | 516.8 | 3.3 | 1,083.8 | 1,154.8 | 844.0 | 1,174.8 | ||||||||||||||||||
Income tax | (222.5 | ) | (19.8 | ) | (353.0 | ) | (381.8 | ) | (246.2 | ) | (342.7 | ) | ||||||||||||
Profit for the year(5) | 294.3 | (16.5 | ) | 730.8 | 773.0 | 597.8 | 832.1 | |||||||||||||||||
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 | ) | ||||||||||||||||
Basic earnings per share(6) | 0.2389 | (0.4424 | ) | 1.1723 | 1.3518 | 1.2278 | 1.7090 | |||||||||||||||||
Diluted earnings per share(6) | 0.2389 | (0.4424 | ) | 1.1723 | 1.3518 | 1.2129 | 1.6882 | |||||||||||||||||
Weighted average number of shares outstanding | 490,150,389 | 490,150,389 | 490,150,389 | 490,150,389 | 490,150,389 | 490,150,389 | ||||||||||||||||||
Dividend Information | ||||||||||||||||||||||||
Dividends per share(7) | 0.35 | 0.0 | 0.55 | 0.75 | 0.75 | 1.04 | ||||||||||||||||||
Dividends per American Depositary Share (in U.S. Dollars)(8) | 0.2139 | 0.0 | 0.3746 | 0.5905 | 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 | ||||||||||||||||||
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 |
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For the Year Ended December 31, | ||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2008 | |||||||||||||||||||
(Euro) | (Euro) | (Euro) | (Euro) | (Euro) | (U.S. $) | |||||||||||||||||||
(Unaudited) | (Unaudited) | (Audited) | (Audited) | (Audited) | (Unaudited) | |||||||||||||||||||
(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 | ||||||||||||||||||
Purchase of property, plant and equipment and intangible assets | (843.6 | ) | (680.2 | ) | (962.4 | ) | (1,101.3 | ) | (964.0 | ) | (1,341.8 | ) | ||||||||||||
Total cash flows used in investing activities | (831.5 | ) | (877.5 | ) | (2,308.1 | ) | (2,780.2 | ) | (1,806.0 | ) | (2,513.8 | ) | ||||||||||||
Total cash flows from financing activities | (295.0 | ) | (13.4 | ) | 1,052.2 | 603.3 | 165.3 | 230.1 |
As of December 31, | ||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2008 | |||||||||||||||||||
(Euro) | (Euro) | (Euro) | (Euro) | (Euro) | (U.S. $) | |||||||||||||||||||
(Unaudited) | (Unaudited) | (Audited) | (Audited) | (Audited) | (Unaudited) | |||||||||||||||||||
(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 | ||||||||||||||||||
Property, plant and equipment, net | 6,909.7 | 6,739.6 | 6,583.5 | 6,371.4 | 5,872.8 | 8,174.4 | ||||||||||||||||||
Telecommunications licenses | 381.0 | 393.0 | 384.2 | 396.2 | 329.5 | 458.6 | ||||||||||||||||||
Investments(10) | 221.3 | 159.3 | 158.7 | 158.4 | 156.6 | 218.0 | ||||||||||||||||||
Total assets | 10,445.7 | 11,107.6 | 12,715.3 | 11,699.2 | 11,425.2 | 15,902.7 | ||||||||||||||||||
Total current liabilities | 2,003.2 | 2,231.5 | 2,658.5 | 3,576.4 | 3,002.7 | 4,179.4 | ||||||||||||||||||
Total non-current liabilities(11) | 3,611.1 | 4,362.7 | 5,168.1 | 5,068.2 | 6,249.3 | 8,698.4 | ||||||||||||||||||
Total equity | 4,831.4 | 4,513.4 | 4,888.7 | 3,054.6 | 2,173.2 | 3,024.9 |
(1) | Solely for the convenience of the reader, Euro amounts have been translated into U.S. Dollars at the noon buying rate on December 31, 2008 of Euro 1.00 per U.S. $1.3919. | |
(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 from fixed-to-fixed and fixed-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, leased lines, data telecommunications, services rendered, directory services, interconnection charges, radio communications, audiotex, telex and telegraphy, internet services, asynchronous transfer mode(“ATM”), integrated services digital network(“ISDN”) and sales of telecommunication equipment. | |
(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 certain available-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 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 RomTelecom S.A.’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. | |
(6) | Basic earnings per share are computed by dividing profit for the year attributable to the shareholders of the parent by the weighted average number of shares outstanding during the relevant period. Diluted earnings per share is computed by dividing profit for the year attributable to |
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the shareholders 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 0.75 per share for the year 2008 was approved by to our general assembly of June 24, 2009. | |
(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 as reported by the Federal Reserve Bank 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 2008 are not available, as these dividends have not yet been paid as at the date of this Annual Report. The noon buying rate may differ from the rate used by the depositary to convert Euros to U.S. Dollars for the purpose of making payments to holders of ADSs. | |
(9) | Operating income before depreciation and amortization and adjusted operating income before depreciation and amortization 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 shareholders 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 minority 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 shareholders of the parent to operating income before depreciation and amortization and adjusted operating income before depreciation and amortization. |
2004 | 2005 | 2006 | 2007 | 2008 | 2008 | |||||||||||||||||||
(Euro) | (Euro) | (Euro) | (Euro) | (Euro) | (U.S. $) | |||||||||||||||||||
Profit/loss for the year attributable to shareholders of the parent | 117.1 | (216.8 | ) | 574.6 | 662.6 | 601.8 | 837.7 | |||||||||||||||||
Plus: | ||||||||||||||||||||||||
Depreciation and amortization | 1,067.6 | 1,107.4 | 1,128.5 | 1,171.8 | 1,213.0 | 1,688.4 | ||||||||||||||||||
Total profit/(loss) from financial activities(a) | 97.3 | 20.7 | 4.5 | (107.9 | ) | 213.7 | 297.4 | |||||||||||||||||
Income taxes | 222.5 | 19.8 | 353.0 | 381.8 | 246.2 | 342.7 | ||||||||||||||||||
Minority interests | 177.2 | 200.3 | 156.2 | 110.4 | (4.0 | ) | (5.6 | ) | ||||||||||||||||
Operating income before depreciation and amortization | 1,681.7 | 1,131.4 | 2,216.8 | 2,218.7 | 2,270.7 | 3,160.6 | ||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Cost of early retirement programs(b) | 28.9 | 939.6 | (49.8 | ) | 22.1 | 50.2 | 69.9 | |||||||||||||||||
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 | ||||||||||||||||||
(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 and 2008, respectively, 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. | |
(11) | Net of current portion. |
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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 |
(1) | The average noon buying rates on the last business day of each month during the relevant year, as certified for customs purposes by the Federal Reserve Bank of New York. |
(2) | The spot rates for each month during the relevant year according to Bloomberg. |
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• | 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. |
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• | 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. |
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• | 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; |
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• | 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. |
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ITEM 4 | INFORMATION ON THE COMPANY |
4.A | History and Development of the Company | 21 | ||||||
4.B | Business Overview | 23 | ||||||
STRATEGY | 24 | |||||||
Improving the profitability of our fixed-line operations | 24 | |||||||
Growing our mobile telephony operations | 24 | |||||||
Strengthening the competitive position of RomTelecom | 25 | |||||||
MARKETING, SALES AND CUSTOMER CARE | 25 | |||||||
Marketing | 25 | |||||||
Sales and Distribution | 25 | |||||||
Customer Care | 26 | |||||||
FIXED-LINE SERVICES | 26 | |||||||
Greece — OTE | 27 | |||||||
Retail services | 27 | |||||||
Wholesale services | 28 | |||||||
Fixed-line Network | 28 | |||||||
Competition and Market Position in the Greek Fixed-line Telephony Market | 30 | |||||||
Pricing Methodology and Regulatory Position | 30 | |||||||
Domestic Fixed-line Telephony | 31 | |||||||
International Fixed-line Telephony | 34 | |||||||
Internet Protocol (IP) and Internet Access Services | 35 | |||||||
Romania — RomTelecom | 38 | |||||||
Serbia — Telekom Srbija | 40 | |||||||
MOBILE TELEPHONY SERVICES | 41 | |||||||
Greece — Cosmote | 41 | |||||||
Acquisition of the entire share capital of Cosmote | 42 | |||||||
Licenses | 42 | |||||||
Strategy | 43 | |||||||
Products & Services | 43 | |||||||
Distribution | 44 | |||||||
Interconnection | 44 | |||||||
Network | 46 | |||||||
Market Position & Competition | 47 | |||||||
Revenues | 47 | |||||||
Volume/Traffic | 47 | |||||||
Tariffs | 47 | |||||||
Germanos S.A. | 49 | |||||||
Other Subsidiaries and Joint Ventures of Cosmote | 50 | |||||||
International Mobile Operations | 50 | |||||||
Albania — AMC | 50 | |||||||
Bulgaria — Globul | 51 | |||||||
Romania — Cosmote Romania | 52 | |||||||
FYROM — Cosmofon | 53 |
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OTHER SERVICES | 54 | |||||||
International Wholesale Telephony and Data Services — OTEGlobe | 54 | |||||||
Assets and Operations | 54 | |||||||
International Wholesale Telephony Services | 55 | |||||||
International Wholesale Data Capacity /IP Services | 55 | |||||||
Strategy | 55 | |||||||
Revenues | 56 | |||||||
Interconnection Services | 56 | |||||||
Leased Lines | 57 | |||||||
Wholesale Line Rental | 57 | |||||||
Wholesale ADSL | 58 | |||||||
Local Loop Unbundling | 58 | |||||||
Other Telecommunications Services | 59 | |||||||
E-Line Services | 59 | |||||||
IPTV — Conn-X TV | 60 | |||||||
OTELink — TETRA | 60 | |||||||
Fixed Wireline Value-added Services | 60 | |||||||
Fixed Wireless Access Services | 60 | |||||||
Satellite Services | 61 | |||||||
WiMAX | 61 | |||||||
Telephone Directory and Information Services | 61 | |||||||
Maritime Radio Communications (Olympia Radio) | 61 | |||||||
Telecards, Paging and Telegraphy Services | 61 | |||||||
Equipment Sales | 62 | |||||||
Customer Contact Centers | 62 | |||||||
Other Services | 62 | |||||||
Information Technology | �� | 63 | ||||||
Other Group Activities | 63 | |||||||
Turnkey Telecommunications Projects — Hellascom International | 63 | |||||||
Consultancy Services — OTEplus | 64 | |||||||
Satellite Services — Hellas Sat | 64 | |||||||
Maritime Services — OTESAT Maritel A.E | 65 | |||||||
Insurance Services — OTE Insurance Agency | 65 | |||||||
INVESTMENT PROGRAM 2009/2010 — CAPITAL EXPENDITURE | 65 | |||||||
General | 65 | |||||||
Domestic and International Fixed-line Network Upgrading Investments | 65 | |||||||
Transmission Network | 66 | |||||||
ADSL Network | 66 | |||||||
IP Network | 66 | |||||||
Metro Ethernet | 66 | |||||||
IPTV | 66 | |||||||
Telephony Network and IP Multimedia Systems | 66 | |||||||
Network Management and OSS | 67 |
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Mobile Telephony Investments | 67 | |||||||
Information Systems | 67 | |||||||
Funding | 67 | |||||||
LEGAL PROCEEDINGS | 67 | |||||||
Greece | 68 | |||||||
Regulatory Matters | 68 | |||||||
Other Proceedings | 70 | |||||||
Criminal Proceedings | 73 | |||||||
Romania | 75 | |||||||
Albania | 77 | |||||||
Bulgaria | 78 | |||||||
Cosmote Romania | 78 | |||||||
REGULATION | 79 | |||||||
Telecommunications Services Regulation in Greece | 79 | |||||||
Overview | 79 | |||||||
European Union Regulatory Framework | 79 | |||||||
Telecommunications Framework in Greece | 81 | |||||||
Competition Law in Greece | 83 | |||||||
Greek Capital Markets Regulation | 84 | |||||||
Telecommunications Services Regulation in Romania | 85 | |||||||
Regulatory obligations in the current regulatory framework | 85 | |||||||
Other regulatory measures | 87 | |||||||
World Trade Organization | 88 | |||||||
International Telecommunications Union | 88 | |||||||
4.C | Organizational Structure | 88 | ||||||
Significant Subsidiaries | 88 | |||||||
Other Subsidiaries and Other Participations | 88 | |||||||
4.D | Property, Plant and Equipment | 90 | ||||||
4.E | Unresolved Staff Comments | 91 |
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• | 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, 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% 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 4,759 of our employees. | |
• | In July 2005, Cosmote subscribed for 70% 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, and 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 mobile telephony subsidiaries in Bulgaria and the FYROM, respectively); in December 2005, Cosmote Romania re-launched commercial operations. | |
• | Over the course of 2006, Cosmote acquired an interest of approximately 99% in Germanos, a Greek-based international wholesale and retail distributor of technology and telecommunications products, for a total purchase price of Euro 1.5 billion. | |
• | In November 2006, we sold our 90% interest in ArmenTel, the Armenian public telephony operator, to JSC Vimpel-Communications for the purchase 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 and 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. | |
• | 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% in early 2008. On May 15, 2008, MIG transferred its 20% 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 hold 25.0% of our share capital, plus one share. The Shareholders’ Agreement and the Purchase Agreement were at the time of their signing subject to ratification by the Greek Parliament and |
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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 OTENET and on June 27, 2008 we merged with 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, our mobile subsidiary in FYROM, and Germanos Telecom AD Skopje to Telekom Slovenje for a consideration of Euro 190 million. |
• | in Greece, using GSM 900 and GSM 1800, and 3G and LMDS technology, through Cosmote, our wholly-owned subsidiary, which had 7,893,144 mobile customers in Greece on December 31, 2008, representing a market share of approximately 42% 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% interest as at December 31, 2008, had 1,395,989 mobile customers on December 31, 2008; | |
• | in Bulgaria, using GSM 900 and GSM 1800, and 3G and LMDS technology, through Cosmote’s wholly-owned subsidiary, Globul, which had 4,096,996 mobile customers in Bulgaria on December 31, 2008; and | |
• | in Romania, using GSM 900 and GSM 1800 technology, through Cosmote’s 70% owned subsidiary, Cosmote Romania (in which OTE effectively owns an 86.20% interest), which had 5,894,056 customers in Romania on December 31, 2008. |
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• | mobile telecommunications services; | |
• | Internet Protocol services and broadband, | |
• | expanding our backbone network capacity using DWDM; and | |
• | network dimensioning to maintain quality. |
• | continue to gradually upgrade our network; | |
• | continue to differentiate and focus our products and services by target customer segment, while designing, developing and promoting innovative ones; | |
• | focus on improving the quality of our services, in order to maintain and improve residential 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 residential and business customers in bundles, including double-play (voice and internet) and triple-play (voice, internet and IPTV) to address market trends; | |
• | leverage our telecommunications infrastructure to increase the profitability of our wholesale business; | |
• | continue to focus on upgrading and optimizing our operating procedures with various means, including voluntary retirement programs in order to increase operating efficiency and reduce costs; and | |
• | continue to create policies and develop processes enabling us to more timely and efficiently comply with the evolving regulatory framework. |
• | in Greece through 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: to increase its post-paid customer base and limit the impact of increased regulation and competition. | |
• | 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. |
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• | 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. |
• | increasing broadband penetration; | |
• | defending our market share of fixed-line services; | |
• | maximizing our revenues from existing products and services; | |
• | developing and marketing innovative products and services; and | |
• | reinforcing product branding using an effective media mix. |
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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 |
(1) | Active lines of ADSL customers of alternative operators, supported by wholesale services provided by our company. Following our merger with OTENET in 2008, OTENET’s customers are included in the retail numbers for 2008, while, for previous years, OTENET’s customers are included in wholesale numbers. |
• | 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; and | |
• | public telephone services. |
• | Voice, broadband access connectivity and transport services; | |
• | VPN, Managed Network Services; |
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• | Data center, IT & business application development services; and | |
• | infrastructure support services. |
• | interconnection; | |
• | leased lines; | |
• | ADSL; | |
• | local loop unbundling; and | |
• | E-Line. |
• | 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. |
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• | the regulatory framework, including developments in Greek and European Union regulation of telecommunications services and infrastructure; | |
• | market demand and trends; | |
• | our ability to price our products and services 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 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, 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. |
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As of December 31, | ||||||||||||||||||||||||
2006 | % | 2007 | % | 2008 | % | |||||||||||||||||||
(Minutes in billions, except for percentages) | ||||||||||||||||||||||||
Outgoing calls | ||||||||||||||||||||||||
Local calls | 16.0 | 43.8 | % | 14.8 | 45.8 | % | 11.6 | 44.1 | % | |||||||||||||||
National Long-distance calls | 1.8 | 4.9 | % | 1.8 | 5.6 | % | 1.9 | 7.2 | % | |||||||||||||||
Calls to internet service providers | 8.2 | 22.5 | % | 4.6 | 14.2 | % | 2.4 | 9.1 | % | |||||||||||||||
Fixed-to-Mobile | 1.8 | 4.9 | % | 1.8 | 5.6 | % | 1.7 | 6.5 | % | |||||||||||||||
Calls from OTE to other fixed networks | 1.2 | 3.3 | % | 1.3 | 4.0 | % | 1.7 | 6.5 | % | |||||||||||||||
Special Calls | 0.2 | 0.6 | % | 0.2 | 0.6 | % | 0.2 | 0.8 | % | |||||||||||||||
Incoming calls | ||||||||||||||||||||||||
Calls to OTE from Fixed & Mobile operators | 7.3 | 20.0 | % | 7.8 | 24.2 | % | 6.8 | 25.8 | % | |||||||||||||||
Total | 36.5 | 100.0 | % | 32.3 | 100.0 | % | 26.3 | 100.0 | % | |||||||||||||||
2006(1) | 2007 | 2008 | ||||||||||
(Euro) | ||||||||||||
Connection Charges | 29.34 | 29.34 | 29.34 | |||||||||
Monthly rental charges | 12.40 | 12.40 | 12.40 | |||||||||
Pulse charging (for the first 2 minutes) | 0.026 | 0.026 | 0.026 | |||||||||
(Eurocents | ) | |||||||||||
Charge per second (after the first 2 minutes) | ||||||||||||
Weekdays peak | 0.043333 | 0.043333 | 0.043333 | |||||||||
Saturdays/weekdays off-peak | 0.041667 | 0.041667 | 0.041667 | |||||||||
Sundays | 0.040000 | 0.040000 | 0.040000 |
(1) | As of April 3, 2006. |
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(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 |
(1) | On Sundays local call tariffs apply. |
June 1, | ||||||||||||||||||||||||
June 1(2) to | Dec. 1(3) to | Jan. 1(4)to | 2007(5) to | Feb. 1(6) 2008 to | ||||||||||||||||||||
Jan. 1(1) to May 31, | Nov. 30, | Dec. 31, | May 31, | Jan. 31, | Dec. 31, | |||||||||||||||||||
Mobile Operator | 2006 | 2006 | 2006 | 2007 | 2008 | 2008 | ||||||||||||||||||
(Euro per minute) | ||||||||||||||||||||||||
Cosmote | 0.179 | 0.154 | 0.150 | 0.150 | 0.1393 | 0.1315 | ||||||||||||||||||
Vodafone | 0.179 | 0.154 | 0.150 | 0.150 | 0.1397 | 0.1317 | ||||||||||||||||||
Wind Hellas | 0.184 | 0.159 | 0.155 | 0.1585 | 0.1497 | 0.1367 | ||||||||||||||||||
Q-Telecom | 0.229 | 0.204 | 0.20 | 0.1585 | 0.1497 | 0.1367 |
(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. | |
(5) | Charging per second still applies, and the retention fee remains unchanged. New prices were introduced due to reductions in the termination fee. | |
(6) | 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. |
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Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(Minutes in millions, | ||||||||||||
except for percentages) | ||||||||||||
Outgoing calls | ||||||||||||
OTE | 438.2 | 506.3 | 361.5 | |||||||||
Other | 389.6 | 417.6 | 536.6 | |||||||||
Total outgoing traffic | 827.8 | 923.9 | 898.1 | |||||||||
Growth (% per year) | 2.6 | 11.6 | (2.8 | ) | ||||||||
Incoming calls | ||||||||||||
OTE | 589.7 | 514.5 | 551.8 | |||||||||
Other | 251.1 | 303.8 | 346.0 | |||||||||
Total incoming traffic | 840.8 | 818.3 | 897.8 | |||||||||
Growth (% per year) | 5.7 | (2.7 | ) | 9.7 |
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ADSL Price Evolution (Conn-X) | ||||||||||||||||||||
Date | 1 Mbps | 2 Mbps | 4 Mbps | 8 Mbps | Up to 24 Mbps | |||||||||||||||
(Euro) | ||||||||||||||||||||
December 31, 2006 | 25.90 | 39.90 | — | — | — | |||||||||||||||
December 31, 2007 | 16.50 | 19.50 | 22.50 | 26.90 | 29.90 | |||||||||||||||
December 31, 2008 | 16.50 | 19.50 | 22.50 | 26.90 | 29.90 | |||||||||||||||
As of May 12, 2009 | — | 16.50 | — | 22.50 | 27.90 |
• | Voice, ADSL Broadband Access Connectivity and Transport Services; | |
• | VPN, Managed Network Services; | |
• | Data center, IT & Business Application Development Services; and | |
• | Infrastructure Support Services. |
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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 | ) |
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• | 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 and Bulgaria. | |
• | 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 market to offer integrated fixed broadband ADSL and mobile communications services. Cosmote continued to expand and upgrade the availability of wireless internet services throughout the country. In 2008, Cosmote was the first operator in Greece to offer wireless internet access (mobile broadband) at a maximum download speed of 7.2 Mbps through the HSPA technology. | |
• | 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. |
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• | 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 in Greece; | |
• | to emphasize contract customers in all countries in which it operates; | |
• | to further exploit market dynamics and opportunities in the Southeastern European markets and usage growth; and | |
• | to maximize profitability and free cash flow generation on group level through economies of scale and capital expenditure savings. |
• | in Greece: 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: to increase its post-paid customer base and limit the impact of increased regulation and competition; | |
• | 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 the customer base, and increase operating profitability. |
• | 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; | |
• | 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. |
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• | a network of commercial representatives/distributors; | |
• | 24 Cosmote-branded stores, including 14 in Athens and three in Thessaloniki; | |
• | 228 OTEShops throughout Greece; | |
• | 430 Germanos-branded stores, throughout Greece; | |
• | Cosmote’s corporate accounts sales forces; and | |
• | distributors of the Cosmokarta and WHATSUP packages, prepaid airtime cards and prepaid airtime electronic cards. |
• | 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. |
• | 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. EETT’s decision in November 2008 defined the glide path, applicable equally to each operator, as follows: 7.86 Eurocents/min, 6.24 Eurocents/min and 4.95 Eurocents/min 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”). |
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�� | ||||||||||||||||||||||||
From | From | From | From | From | ||||||||||||||||||||
Oct. 1, 2004 | June 1, 2006 | Jan. 1, 2007 | June 1, 2007 | Feb. 1, 2008 | ||||||||||||||||||||
to May 31, | to Dec. 31, | to May 31, | to Jan. 31, | to Dec 31, | From | |||||||||||||||||||
2006(1) | 2006(1) | 2007 | 2008 | 2008 | Jan. 1, 2009 | |||||||||||||||||||
(Euro per minute) | ||||||||||||||||||||||||
Mobile operator | ||||||||||||||||||||||||
Vodafone | 0.1450 | 0.1200 | 0.1174 | 0.1067 | 0.0989 | 0.0786 | ||||||||||||||||||
Wind Hellas(2) | 0.1450 | 0.1200 | 0.1174 | 0.1067 | 0.0989 | 0.0786 |
(1) | A minimum duration charge of 30 seconds applies. | |
(2) | The same tariffs also apply to Q-Telecom, which merged with Wind Hellas in January 2007. |
From | From | From | From | From | ||||||||||||||||||||
Oct. 1, 2004 | June 1, 2006 | Jan. 1, 2007 | June 1, 2007 | Feb. 1, 2008 | ||||||||||||||||||||
to May 31, | to Dec. 31, | to May 31, | to Jan. 31, | to Dec. 31, | From | |||||||||||||||||||
2006(1) | 2006(1) | 2007 | 2008 | 2008 | Jan. 1 2009 | |||||||||||||||||||
(Euro per minute) | ||||||||||||||||||||||||
Mobile operator | ||||||||||||||||||||||||
Vodafone | 0.1450 | 0.1200 | 0.1174 | 0.1071 | 0.0991 | 0.0786 | ||||||||||||||||||
Wind Hellas(2) | 0.1500 | 0.1250 | 0.1259 | 0.1171 | 0.1041 | 0.0786 | ||||||||||||||||||
Q-Telecom | 0.1950 | 0.1700 | — | — | — | — |
(1) | A minimum duration charge of 30 seconds applies. | |
(2) | As of January 2007, the same tariffs also apply to Q-Telecom, which merged with Wind Hellas in January 2007. |
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 |
(1) | A minimum duration charge of 30 seconds applies. |
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Weekdays | ||||||||||||||||
00:00 to 08:00 | ||||||||||||||||
Weekdays | and 20:00 | |||||||||||||||
08:00 to 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 |
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• | 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. |
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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 |
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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 |
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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For the Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(Euro in millions) | ||||||||||||
Revenues | 53.7 | 62.2 | 66.0 | |||||||||
Operating income/(loss) | (5.5 | ) | 2.8 | 1.6 | ||||||||
Profit/(loss) | (8.0 | ) | 0.1 | 0.1 |
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• | 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. |
• | full, end-to-end, managed SDH digital circuits and wavelength (λ) capacity from Greece to London and other major European cities; | |
• | IRU for long-term leasing of international circuits; | |
• | international private leased circuits (half circuits). |
• | clear channel; | |
• | internet transit for carriers; | |
• | MPLS, VPN and Ethernet services; and | |
• | carrier-grade VoIP and voice trunking. |
• | increasing its market share in the Southeastern European market and exploring opportunities in the markets of the Middle East; | |
• | exploiting the increase of broadband penetration and traffic in Greece and the broader region in order to maximize the use of TBN and increase revenues from its MSP platform; | |
• | 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. |
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 |
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 |
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• | “134”, our sales and customer service channel for residential and small business customers; | |
• | “13818 OTEbusiness Customer Service”, provides both commercial customer care and technical support for enterprise and business customers; | |
• | “OTELINE”, our outbound telesales center, which offers one-to-one marketing for all of our products and services and customer programs; | |
• | “www.oteshop.gr”, our electronic shop, which had approximately two million visits and received approximately 26,000 orders in 2008; | |
• | “www.whitepages.gr”, our site for telephone directory services, which had 13 million visits in 2008; | |
• | “11888”, voice telephony directory services and entertainment information, which received approximately 35.7 million calls in 2008 and achieved over 95% 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 33.5 million calls in 2008; | |
• | “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. |
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• | 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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• | the provision of Inmarsat satellite services through our land earth station in Thermopylae, | |
• | 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, 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. |
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• | 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 of integrated wholesale and retail services and solutions for our customers, with an emphasis on broadband, added-value, content and ICT services; | |
• | processing and making available information regarding customers and the 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. |
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• | 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. |
• | 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. |
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• | 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. |
• | 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”). |
• | 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 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, 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. |
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• | analog transmitted TV program; | |
• | digital terrestrial TV; and | |
• | TV services provision over broadband networks. |
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• | 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. |
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Country of | Equity | |||||
Name | Incorporation | Participation | Type of Business | |||
OTE International Solutions S.A.(“OTEGlobe”) | Greece | 100.0% | Wholesale telephony services | |||
Voicenet S.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 services | |||
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% | Pension fund | |||
OTE International Investments Limited | Greece | 100.0% | Investment holding company | |||
Albanian Mobile Communications Sh.a(“AMC”) | Albania | 82.45%(3) | Mobile telecommunications services | |||
Trans Jordan Telecommunications Services Company Ltd. | Jordan | 50.0%(4) | Telephony Services provided including telecards | |||
Yemen Public Payphone | Yemen | Indirect(5) | Payphone operator Consulting Services/Local & | |||
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 telecommunications | |||
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”) | FYROM | 100.0%(7) | Mobile telecommunications services | |||
OTE MTS Holding BV | Holland | 100.0%(7) | Investment Holding Company | |||
S.C. Cosmote Romanian Mobile Telecommunications S.A.(“Cosmote Romania”) | Romania | 86.2%(8) | Mobile telecommunications services | |||
HATWAVEHellenic-American Telecommunications Wave Ltd. | Cyprus | 52.67% | Holding company | |||
OTEplus Technical and Business Solutions S.A.(“OTEplus”) | Greece | 100.0% | Consulting Services | |||
OTEplus Bulgaria EAD | Bulgaria | 100.0%(9) | Consulting Services | |||
OTEplus Romania SRL | Romania | 0%(10) | Consulting Services | |||
DIERGASIA Interim Employment S.A. | Greece | 100.0%(11) | Interim Employment Services | |||
OTE ACADEMY S.A.(“OTE Academy”) | Greece | 100.0% | Training Services | |||
Cosmoholding Cyprus Ltd.(“Cosmoholding Cyprus”) | Cyprus | 90.0%(12) | Investment holding company | |||
Germanos S.A.(“Germanos”) | Greece | 90.0%(12) | Retail services | |||
E-Value S.A. | Greece | 90.0%(13) | Marketing services | |||
Germanos Telecom Skopje S.A. | FYROM | 90.0%(13) | Retail services |
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Country of | Equity | |||||
Name | Incorporation | Participation | Type of Business | |||
Germanos Telecom Romania S.A(“Germanos Romania”) | Romania | 90.0%(13) | Retail services | |||
Sunlight Romania SRL — Filiala | Romania | 90.0%(13) | Retail services | |||
Germanos Telecom Bulgaria A.D. | Bulgaria | 90.0%(13) | Retail services | |||
Mobilbeeep Ltd. | Greece | 90.0%(13) | Retail services | |||
Cosmo-Holding Albania S.A.(“CHA”) | Greece | 97.00% | Investment Holding Company | |||
OTE PROPERTIES | Greece | 100.0%(14) | Real Estate Public telephony operator — fixed and mobile telephony, ISP, | |||
Telekom Srbija | Serbia | 20.0% | multimedia services |
(1) | Under liquidation. | |
(2) | We and Cosmote each hold a 30.87% equity interest. | |
(3) | Effective interest of 82.45% 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 Bucharest on July 24, 2008. Our effective interest until that date was 100% (100% was owned by OTEplus). | |
(11) | Our effective interest is 100% (100% is owned by OTEplus). | |
(12) | We own these interests indirectly, through Cosmote. | |
(13) | These companies are owned by Germanos. | |
(14) | Subsidiary of OTE Estate. |
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ITEM 5 | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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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 |
Notes: |
(1) | Active lines of ADSL customers of alternative operators, supported by wholesale services provided by our company. Following our merger with OTENET in 2008, OTENET’s customers are included in the retail numbers for 2008, while, for previous years, OTENET’s customers are included in wholesale numbers. |
As of December 31, | ||||||||||||||||||||||||
2006 | % | 2007 | % | 2008 | % | |||||||||||||||||||
(Minutes in billions, except for percentages) | ||||||||||||||||||||||||
Outgoing calls | ||||||||||||||||||||||||
Local calls | 16.0 | 43.8 | % | 14.8 | 45.8 | % | 11.6 | 44.1 | % | |||||||||||||||
National Long-distance calls | 1.8 | 4.9 | % | 1.8 | 5.6 | % | 1.9 | 7.2 | % | |||||||||||||||
Calls to internet service providers | 8.2 | 22.5 | % | 4.6 | 14.2 | % | 2.4 | 9.1 | % | |||||||||||||||
Fixed-to-Mobile | 1.8 | 4.9 | % | 1.8 | 5.6 | % | 1.7 | 6.5 | % | |||||||||||||||
Calls from OTE to other fixed networks | 1.2 | 3.3 | % | 1.3 | 4.0 | % | 1.7 | 6.5 | % | |||||||||||||||
Special Calls | 0.2 | 0.6 | % | 0.2 | 0.6 | % | 0.2 | 0.8 | % | |||||||||||||||
Incoming calls | ||||||||||||||||||||||||
Calls to OTE from Fixed & Mobile operators | 7.3 | 20.0 | % | 7.8 | 24.2 | % | 6.8 | 25.8 | % | |||||||||||||||
Total | 36.5 | 100.0 | % | 32.3 | 100.0 | % | 26.3 | 100.0 | % | |||||||||||||||
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Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(Minutes in millions, except for percentages) | ||||||||||||
Outgoing | ||||||||||||
OTE | 438.2 | 506.3 | 361.5 | |||||||||
Other | 389.6 | 417.6 | 536.6 | |||||||||
Total outgoing traffic | 827.8 | 923.9 | 898.1 | |||||||||
Growth (% per year) | 2.6 | 11.6 | (2.8 | ) | ||||||||
Incoming | ||||||||||||
OTE | 589.7 | 514.5 | 551.8 | |||||||||
Other | 251.1 | 303.8 | 346.0 | |||||||||
Total incoming traffic | 840.8 | 818.3 | 897.8 | |||||||||
Growth (% per year) | 5.7 | (2.7 | ) | 9.7 |
• | in Albania, AMC, Cosmote’s 82.5% indirectly-owned subsidiary, had 1,395,989 mobile customers; |
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2006 | 2007 | 2008 | ||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
Euro | Revenues | Euro | Revenues | Euro | Revenues | |||||||||||||||||||
(Millions, other than percentages) | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Domestic telephony(1) | 2,260.6 | 38.4 | 2,022.2 | 32.0 | 1,814.2 | 28.3 | ||||||||||||||||||
International telephony(2) | 346.9 | 5.9 | 304.5 | 4.8 | 286.9 | 4.5 | ||||||||||||||||||
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 | ||||||||||||||||||
Total revenues | 5,891.3 | 100.0 | 6,319.8 | 100.0 | 6,407.3 | 100.0 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Payroll and employee benefits | (1,154.5 | ) | (19.6 | ) | (1,149.0 | ) | (18.2 | ) | (1,168.4 | ) | (18.2 | ) | ||||||||||||
Provision for staff retirement indemnities and youth account | (87.1 | ) | (1.5 | ) | (92.3 | ) | (1.5 | ) | (112.6 | ) | (1.8 | ) | ||||||||||||
Cost of Early Retirement Program | 49.8 | 0.8 | (22.1 | ) | (0.3 | ) | (50.2 | ) | (0.8 | ) | ||||||||||||||
Charges from international operators | (208.8 | ) | (3.5 | ) | (216.4 | ) | (3.4 | ) | (201.0 | ) | (3.1 | ) | ||||||||||||
Charges from domestic operators | (720.9 | ) | (12.2 | ) | (655.3 | ) | (10.4 | ) | (642.3 | ) | (10.0 | ) | ||||||||||||
Depreciation and amortization | (1,128.5 | ) | (19.2 | ) | (1,171.8 | ) | (18.5 | ) | (1,213.0 | ) | (18.9 | ) | ||||||||||||
Cost of telecommunications equipment | (363.5 | ) | (6.2 | ) | (672.8 | ) | (10.6 | ) | (633.4 | ) | (9.9 | ) | ||||||||||||
Other operating expenses | (1,189.5 | ) | (20.2 | ) | (1,293.2 | ) | (20.5 | ) | (1,328.7 | ) | (20.7 | ) | ||||||||||||
Total operating expenses | (4,803.0 | ) | (81.5 | ) | (5,272.9 | ) | (83.4 | ) | (5,349.6 | ) | (83.5 | ) | ||||||||||||
Operating income before financial activities | 1,088.3 | 18.5 | 1,046.9 | 16.6 | 1,057.7 | 16.5 | ||||||||||||||||||
Income/(expense) from financial activities: | ||||||||||||||||||||||||
Interest expense | (278.8 | ) | (4.7 | ) | (238.7 | ) | (3.8 | ) | (343.7 | ) | (5.4 | ) | ||||||||||||
Interest income | 70.8 | 1.2 | 77.8 | 1.2 | 72.3 | 1.1 | ||||||||||||||||||
Foreign exchange differences, net | 4.2 | 0.1 | (4.8 | ) | (0.1 | ) | 11.8 | 0.2 | ||||||||||||||||
Gains from investments | 176.3 | 3.0 | 256.8 | 4.1 | 33.7 | 0.5 | ||||||||||||||||||
Dividend income | 23.0 | 0.4 | 16.8 | 0.3 | 12.2 | 0.2 | ||||||||||||||||||
Total profit (loss) from financial activities | (4.5 | ) | (0.1 | ) | 107.9 | 1.7 | (213.7 | ) | (3.3 | ) | ||||||||||||||
Profit before tax | 1,083.8 | 18.4 | 1,154.8 | 18.3 | 844.0 | 13.2 | ||||||||||||||||||
Income taxes | (353.0 | ) | (6.0 | ) | (381.8 | ) | (6.0 | ) | (246.2 | ) | (3.8 | ) | ||||||||||||
Profit for the year(4) | 730.8 | 12.4 | 773.0 | 12.2 | 597.8 | 9.3 | ||||||||||||||||||
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 | ) |
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 revenues from monthly network service fees, revenues from fixed-to-fixed and fixed-to-mobile calls and revenues from such services as operator assistance, connection and reconnection charges and paging services. |
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(2) | Includes revenues 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, leased lines, data telecommunications, services rendered, directory services, interconnection charges, radio communications, audiotex, telex and telegraphy, internet services, ATM, ISDN and sales of telecommunication equipment. | |
(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. |
• | Revenues derived from the provision of fixed-line domestic telephony represented 28.3% of our total revenues in 2008, compared to 32.0% in 2007 and 38.4% in 2006; | |
• | Revenues derived from the provision of fixed-line international telephony represented 4.5% of our total revenues in 2008, compared to 4.8% in 2007 and 5.9% in 2006; | |
• | Revenues from mobile telephony services represented 38.6% of our revenues in 2008, compared to 35.0% in 2007 and 33.5% in 2006; and | |
• | Other revenues represented 28.6% of our revenues in 2008, compared to 28.2% in 2007 and 22.2% in 2006. |
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Year Ended December 31, | % of Total | |||||||||||||||
2006 | 2007 | 2008 | 2008 | |||||||||||||
(Euro in millions) | ||||||||||||||||
Domestic Telephony: | ||||||||||||||||
Monthly network service fees | 995.7 | 988.1 | 910.7 | 50.2 | % | |||||||||||
Fixed-to-fixed | 702.6 | 565.5 | 481.9 | |||||||||||||
Fixed-to-mobile | 470.2 | 378.3 | 325.3 | |||||||||||||
Local and long-distance calls(1) | 1,172.8 | 943.8 | 807.2 | 44.5 | % | |||||||||||
Other | 92.1 | 90.3 | 96.3 | 5.3 | % | |||||||||||
Total domestic telephony services | 2,260.6 | 2,022.2 | 1,814.2 | 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. |
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Year Ended December 31, | % of Total | |||||||||||||||
2006 | 2007 | 2008 | 2008 | |||||||||||||
(Euro in millions) | ||||||||||||||||
International Telephony: | ||||||||||||||||
International traffic | 132.3 | 108.1 | 93.8 | 32.7 | % | |||||||||||
Dues from international operators(1) | 172.7 | 146.8 | 136.6 | 47.6 | % | |||||||||||
Dues from mobile and alternative operators | 41.9 | 49.6 | 56.5 | 19.7 | % | |||||||||||
Total | 346.9 | 304.5 | 286.9 | 100.0 | % | |||||||||||
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. |
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Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(Euro in millions) | ||||||||||||
Prepaid cards | 100.6 | 76.2 | 52.2 | |||||||||
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 | |||||||||
Internet services/ADSL | 133.1 | 225.7 | 226.9 | |||||||||
Collocation / local loop | — | 30.8 | 91.7 | |||||||||
Metro Ethernet and IP Core | 4.2 | 11.0 | 23.6 | |||||||||
Services rendered | 74.9 | 68.3 | 120.4 | |||||||||
Interconnection charges | 96.8 | 108.2 | 119.4 | |||||||||
Miscellaneous | 94.1 | 89.8 | 96.0 | |||||||||
Total other revenues | 1,308.0 | 1,783.1 | 1,835.4 | |||||||||
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Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(Euro in millions) | ||||||||||||
Third-party fees | 173.7 | 183.5 | 208.4 | |||||||||
Cost of telecommunication materials, repair and maintenance | 199.0 | 201.8 | 191.5 | |||||||||
Advertising and promotion costs | 164.0 | 208.3 | 212.9 | |||||||||
Utilities | 98.0 | 93.6 | 114.9 | |||||||||
Provision for doubtful accounts | 97.9 | 88.0 | 119.8 | |||||||||
Other provisions | 36.0 | 18.1 | 2.1 | |||||||||
Travel costs | 17.6 | 18.9 | 18.1 | |||||||||
Commissions to independent commercial distributors | 203.0 | 244.1 | 253.4 | |||||||||
Payments to Audiotex providers | 17.1 | 14.3 | 8.7 | |||||||||
Rents | 80.1 | 88.0 | 90.9 | |||||||||
Taxes, other than income tax | 47.1 | 56.3 | 51.7 | |||||||||
Transportation costs | 9.6 | 13.0 | 11.8 | |||||||||
Other | 46.4 | 65.3 | 44.5 | |||||||||
1,189.5 | 1,293.2 | 1,328.7 | ||||||||||
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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 |
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Amortized Cost | ||||||||||||
Type of Loan | under IFRS | Interest Rate | Maturity Date | |||||||||
(Euro in millions) | ||||||||||||
Global Medium Term Notes (Euro 1,250 million) | 1,248.8 | 5 | % | 2013 | ||||||||
Global Medium Term Notes (Euro 900 million) | 891.5 | 4.625 | % | 2016 | ||||||||
Global Medium Term Notes (Euro 650 million) | 634.4 | 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 | ||||||||
Global Medium Term Notes (Euro 600 million) | 596.3 | 6 | % | 2015 | ||||||||
OTE Plc’s Syndicated Credit facility (Term Loan) | 500.0 | EURIBOR + 0.25 | % | 2012 | ||||||||
European Investment Bank Loan | 18.9 | 8.3 | % | 2009 | ||||||||
Other bank loans (long-term) | 59.2 | Various | Various | |||||||||
Short-term borrowings | 5.1 | Various | 2009 | |||||||||
Total | 6,047.7 |
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• | below Baa2 by Moody’s or below BBB by S&P would result in an increase in interest rates of 2.5 basis points, due tostep-up provisions in our Syndicated Facility with an aggregate principal amount of Euro 500 million at December 31, 2008. We estimate that such astep-up would result in an increase of our interest expense by approximately Euro 0.1 million per annum. |
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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. |
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• | 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. |
• | 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 must provide additional disclosures if the net assets being held for distribution to owners meet the definition of a discontinued operation. |
• | 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. The amendment clarifies two issues: the definition of “vesting condition”, 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. | |
• | 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 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 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 a hedged item. The Group has concluded that the amendment will have no impact on the financial position 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 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 retrospectively and are required to be applied. Adoption of these amendments 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. 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”) (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 the financial statements of the Group. |
• | Next Generation Access Network Architectures | |
• | Next Generation SDH technologies; | |
• | Security and Environmental Monitor of Outdoor Distributing Cabinets; |
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• | IPTV services | |
• | IMS platform and next generation service creation platforms |
• | REWIND (Relay based Wireless Network and standard) aims to develop a “smart” WiMAX repeater fully utilizing all advanced capabilities WiMAX offers; | |
• | FUTTON (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 aims to develop an innovative cognitive telecommunications network whose infrastructure and applications can self-extend, self-improve, self-adjust and self-repair in real time. |
Payments Due by Maturity at December 31, 2008 | ||||||||||||||||||||
Less Than | More Than | |||||||||||||||||||
Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
(Euro in millions) | ||||||||||||||||||||
Total debt obligations | 6,047.7 | 638.1 | 2,202.3 | 1,705.5 | 1,501.8 | |||||||||||||||
Purchase obligations | 149.7 | 149.3 | 0.3 | 0.1 | — | |||||||||||||||
Operating lease obligations | 644.0 | 113.5 | 121.6 | 118.0 | 290.9 | |||||||||||||||
Other financial obligations | 324.3 | 324.3 | — | — | — | |||||||||||||||
Total | 7,165.7 | 1,225.2 | 2,324.2 | 1,823.6 | 1,792.7 | |||||||||||||||
ITEM 6 | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
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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 |
(1) | Mr. Dimitriou 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 replace 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 him 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. |
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• | the composition of our Board of Directors; | |
• | transparency and disclosure of information; and | |
• | the protection of shareholders’ rights. |
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• | integrity of our financial statements; | |
• | adequacy of internal audit procedures and systems; | |
• | observance and adequacy of accounting and financial reporting processes; |
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• | operation of internal audit procedures; | |
• | evaluation of our external auditors, mainly referring to their independence, integrity, efficiency and performance; and | |
• | observance of our legal and regulatory framework. |
• | examining and evaluating the efficiency and effectiveness of internal audit procedures 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; | |
• | supervising the internal audit function and being mindful of the independent and effective function of the internal auditors, including, among other matters, examining and evaluating the formation procedure of the activity programs of the internal audit’s organizational units and recommending their approval to the Board, monitoring the implementation of the annual activity programs of the internal audit’s organizational units, 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; |
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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. |
• | may delegate to its members the exercise of particular competences facilitated by 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. |
• | 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 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. |
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Name | Position | Age | ||||
Panagis Vourloumis | Chairman and Managing Director | 72 | ||||
Iordanis Aivazis | Chief Operating Officer | 59 | ||||
Yorgos Ioannidis | Managing Director of RomTelecom | 59 | ||||
Michael Tsamaz | Managing Director of Cosmote, Managing Director of OTE Investment Services | 50 | ||||
Elias Drakopoulos | Chief Commercial Officer for Enterprise and Business Services | 45 | ||||
Panagiotis Sarantopoulos | Chief Commercial Officer for Residential Customers | 54 | ||||
Christini Spanoudaki | Chief Financial Officer | 49 | ||||
Maria Efthimerou | Chief Technology Officer | 54 | ||||
Konstantinos Kappos | Chief Information Officer | 53 | ||||
Andreas Karageorgos | Chief Regional Officer | 57 | ||||
Loizos Kyzas(1) | Chief Human Resources Officer | 58 | ||||
Kosmas Liaros | Chief Internal Audit Officer | 46 | ||||
Christos Katsaounis | Chief Officer of National Wholesale Services | 46 | ||||
Konstantinos Ploumpis | Chief Regulatory Officer | 41 | ||||
Paraskevas Passias(2) | General Counsel | 43 | ||||
Dinos Andreou | Chief Executive Officer of OTEGlobe | 52 |
(1) | Mr. Kyzas replaced Mr. Tsatsanis in this position on April 27, 2009. | |
(2) | 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. |
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• | the Managing Director, General Directors, Deputy General Directors, General Counsel, Directors and Deputy Directors of OTE; | |
• | 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. |
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For the Year Ended | ||||||||
December 31, 2008 | ||||||||
Weighted Average | ||||||||
Number of Options | Exercise Price | |||||||
Outstanding at the beginning of the year | 3,440,290 | 15.20 | ||||||
Granted | 3,141,620 | 16.10 | ||||||
Forfeited | (573,850 | ) | 15.26 | |||||
Exercised | 0 | 0 | ||||||
Expired at end of the year | 0 | 0 | ||||||
Outstanding at the end of the year | 6,008,060 | 15.66 | ||||||
Exercisable at the end of the year | 2,315.920 | 15.14 | ||||||
As of December 31(1), | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
Administration | 3,409 | 3,247 | 3,314 | |||||||||
Finance | 653 | 626 | 609 | |||||||||
Technical | 6,551 | 6,360 | 6,545 | |||||||||
Support Staff | 752 | 732 | 701 | |||||||||
Specialists | 298 | 295 | 304 | |||||||||
Other Staff | 92 | 88 | 89 | |||||||||
Total Permanent Staff | 11,755 | 11,348 | 11,562 | |||||||||
Personnel on temporary contracts | 20 | 27 | 121 | |||||||||
Personnel previously with OTENET | — | 379 | 373 | |||||||||
Total | 11,775 | 11,754 | 12,056 | |||||||||
Change (%) | (20.2 | )% | (0.2 | )% | 2.6 | % | ||||||
Access lines in service per employee(2) | 523 | 497 | 446.7 | |||||||||
(1) | Includes our employees currently working with us or transferred or seconded to our subsidiaries. | |
(2) | Includes OTE 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. |
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• | 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, 6,200 of our employees attended 645 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. |
Number of Employees | ||||||||||||
As of December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
Attica | 1,923 | 1,876 | 2,045 | |||||||||
Northern Greece | 2,038 | 1,958 | 1,996 | |||||||||
Southwestern Greece | 1,600 | 1,561 | 1,601 | |||||||||
Crete and Islands | 872 | 841 | 851 | |||||||||
Employees of our OTEShops/Sales Support in Greece | 1,601 | 1,483 | 2,078 | |||||||||
Remainder of our employees (Athens) | 3,741 | 4,035 | 3,485 | |||||||||
Total | 11,775 | 11,754 | 12,056 | |||||||||
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Number of OTE | ||||||||||||
Number of OTE | Number of OTE | Shares Held by | ||||||||||
Name | Shares Held | Options Held(1) | Family Members | |||||||||
Panagis Vourloumis | 0 | 129,400 | 0 | |||||||||
Iordanis Aivazis | 0 | 107,710 | 0 | |||||||||
Charalambos Dimitriou | 0 | 0 | 0 | |||||||||
Panagiotis Tampourlos | 0 | 0 | 0 | |||||||||
Hamid Akhavan-Malayeri | 0 | 0 | 0 | |||||||||
Kevin Copp | 0 | 0 | 0 | |||||||||
Konstantinos Michalos | 0 | 0 | 0 | |||||||||
Xeni Skorini-Paparigopoulou | 0 | 0 | 227 | |||||||||
Guido Kerkhoff | 0 | 0 | 0 | |||||||||
Leonidas Evangelidis | 0 | 0 | 0 | |||||||||
Yorgos Ioannidis | 0 | 68,200 | 0 | |||||||||
Dinos Andreou | 0 | 46,850 | 0 | |||||||||
Michael Tsamaz | 0 | 154,040 | 0 | |||||||||
Elias Drakopoulos | 0 | 72,310 | 0 | |||||||||
Christini Spanoudaki | 0 | 62,930 | 0 | |||||||||
Maria Efthimerou | 0 | 59,830 | 0 | |||||||||
Konstantinos Kappos | 3,136 | 65,110 | 0 | |||||||||
Andreas Karageorgos | 35 | 62,180 | 0 | |||||||||
Loizos Kyzas | 0 | 0 | 0 | |||||||||
Kosmas Liaros | 0 | 60,820 | 0 | |||||||||
Christos Katsaounis | 300 | 56,840 | 0 | |||||||||
Konstantinos Ploumpis | 3,800 | 56,020 | 0 | |||||||||
Paraskevas Passias | 0 | 39,090 | 0 | |||||||||
Panagiotis Sarantopoulos | 0 | 64,560 | 0 |
(1) | The number of options listed have been granted under our existing 2008 management stock option plan (including vested and non-vested options). |
ITEM 7 | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
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• | 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. |
December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(Euro in millions) | ||||||||||||
Accounts receivable from related parties(1) | 0 | 0 | 6.5 | |||||||||
Accounts payable to related parties by our Group(1) | 0 | 0 | 7.5 |
(1) | Amounts relate to Deutsche Telekom. |
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ITEM 8 | FINANCIAL INFORMATION |
ITEM 9 | THE OFFER AND LISTING |
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Athens Exchange | NYSE | |||||||||||||||||||||||
Average Daily | Average Daily | |||||||||||||||||||||||
High | Low | Trading Volume | High | Low | Trading Volume(2) | |||||||||||||||||||
Price per share | Price per ADS(1) | |||||||||||||||||||||||
(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 | ||||||||||||||||||
2006 | 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 | ||||||||||||||||||
2008 | 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 | ||||||||||||||||||
2008 | ||||||||||||||||||||||||
First quarter | 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 | ||||||||||||||||||
Third quarter | 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 | ||||||||||||||||||
2009 | ||||||||||||||||||||||||
January | 13.14 | 10.98 | 1,008,273 | 8.91 | 6.96 | 60,553 | ||||||||||||||||||
February | 11.02 | 9.84 | 891,784 | 7.62 | 6.14 | 43,370 | ||||||||||||||||||
March | 11.38 | 10.24 | 906,929 | 7.78 | 6.22 | 53,664 | ||||||||||||||||||
April | 12.58 | 10.93 | 1,253,219 | 8.38 | 7.16 | 40,231 | ||||||||||||||||||
May | 12.10 | 11.04 | 1,512,181 | 8.29 | 7.46 | 67,559 | ||||||||||||||||||
June 15 | 12.34 | 11.58 | 1,956,813 | 8.71 | 8.17 | 59,499 |
(1) | Each ADS represents one half of one share. | |
(2) | Number of ADSs. |
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ITEM 10 | ADDITIONAL INFORMATION |
• | 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. |
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• | 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. |
• | 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 information 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. |
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• | 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. |
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• | 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. Holder”). |
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ITEM 11 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(Euro in millions) | ||||||||
Variable interest rate | 1,099.3 | 2,647.2 | ||||||
Fixed interest rate | 4,948.4 | 2,880.6 | ||||||
Total | 6,047.7 | 5,527.8 |
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(Euro in millions) | ||||||||
Profit before tax | 3.3 | 4.2 | ||||||
Equity | 3.0 | — |
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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 | 14.7 | 11.2 | 7.8 | 7.8 | 3.7 | 14.0 | 59.2 | 59.2 | |||||||||||||||||||||||||
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 | 589.4 | |||||||||||||||||||||||||
Other bank loans | Various | — | — | — | — | — | — | 0.0 | 0.0 | |||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||
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 |
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ITEM 12 | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
ITEM 13 | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
ITEM 14 | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
ITEM 15 | CONTROLS AND PROCEDURES |
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ITEM 16 | [RESERVED] |
• | 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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KPMG | Ernst & Young | |||||||||||
2006 | 2007 | 2008 | ||||||||||
(Euro in thousands) | ||||||||||||
Audit fees | 2,582 | 4,475 | 2,358 | |||||||||
Audit-Related Fees | 168 | 599 | 374 | |||||||||
Tax Fees | 55 | 6 | 13 | |||||||||
All Other Fees | — | — | — | |||||||||
Total Fees | 2,805 | 5,080 | 2,745 |
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ITEM 17 | FINANCIAL STATEMENTS |
ITEM 18 | FINANCIAL STATEMENTS |
Page | ||||
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F-8 | ||||
F-9 |
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. |
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ORGANIZATION S.A.
By: | /s/ Panagis Vourloumis |
Title: | Chairman & Managing Director |
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![(OTE LOGO)](https://capedge.com/proxy/20-F/0000950123-09-019075/u07086u0708601.gif)
AS OF DECEMBER 31, 2008
IN ACCORDANCE WITH
INTERNATIONAL FINANCIAL REPORTING STANDARDS
as issued by the International Accounting Standards Board (“IASB”)
REGISTRATION No S.A. 347/06/B/86/10
99 KIFFISIAS AVE — 151 24 MAROUSSI ATHENS, GREECE
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December 31, | ||||||||||||
Notes | 2008 | 2007 | ||||||||||
(Amounts in millions of Euro) | ||||||||||||
ASSETS | ||||||||||||
Non-current assets | ||||||||||||
Property, plant and equipment | 4 | 5,872.8 | 6,371.4 | |||||||||
Goodwill | 5 | 530.7 | 541.5 | |||||||||
Telecommunication licenses | 6 | 329.5 | 396.2 | |||||||||
Other intangible assets | 7 | 556.2 | 582.7 | |||||||||
Investments | 8 | 156.6 | 158.4 | |||||||||
Loans and advances to pension funds | 19 | 194.5 | 229.8 | |||||||||
Deferred tax assets | 22 | 286.8 | 260.8 | |||||||||
Other non-current assets | 10 | 120.7 | 95.9 | |||||||||
Total non-current assets | 8,047.8 | 8,636.7 | ||||||||||
Current assets | ||||||||||||
Inventories | 201.3 | 201.7 | ||||||||||
Trade receivables | 11 | 1,194.2 | 1,172.0 | |||||||||
Other financial assets | 13 | 135.9 | 81.2 | |||||||||
Other current assets | 12 | 261.6 | 291.3 | |||||||||
Cash and cash equivalents | 14 | 1,427.8 | 1,316.3 | |||||||||
Total current assets | 3,220.8 | 3,062.5 | ||||||||||
Assets classified as held for sale | 9 | 156.6 | — | |||||||||
TOTAL ASSETS | 11,425.2 | 11,699.2 | ||||||||||
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December 31, | ||||||||||||
Notes | 2008 | 2007 | ||||||||||
(Amounts in millions of Euro) | ||||||||||||
EQUITY AND LIABILITIES | ||||||||||||
Equity attributable to shareholders of the Company | ||||||||||||
Share capital | 15 | 1,171.5 | 1,171.5 | |||||||||
Share premium | 15 | 497.9 | 485.9 | |||||||||
Statutory reserve | 16 | 330.2 | 312.1 | |||||||||
Foreign exchange and other reserves | 73.9 | 258.3 | ||||||||||
Changes in minority interests | 8 | (3,315.2 | ) | (2,533.8 | ) | |||||||
Retained earnings | 16 | 2,553.6 | 2,337.5 | |||||||||
1,311.9 | 2,031.5 | |||||||||||
Minority Interests | 861.3 | 1,023.1 | ||||||||||
Total Equity | 2,173.2 | 3,054.6 | ||||||||||
Non-current liabilities | ||||||||||||
Long-term borrowings | 18 | 5,409.6 | 3,947.1 | |||||||||
Provision for staff retirement indemnities | 19 | 254.9 | 230.3 | |||||||||
Cost of voluntary retirement scheme | 19 | 107.2 | 217.5 | |||||||||
Provision for youth account | 19 | 286.3 | 273.5 | |||||||||
Deferred tax liabilities | 22 | 116.7 | 166.2 | |||||||||
Other non-current liabilities | 20 | 74.6 | 233.6 | |||||||||
Total non-current liabilities | 6,249.3 | 5,068.2 | ||||||||||
Current liabilities | ||||||||||||
Trade accounts payable | 943.9 | 931.5 | ||||||||||
Short-term borrowings | 21 | 5.1 | 1,497.4 | |||||||||
Short-term portion of long-term borrowings | 18 | 633.0 | 83.3 | |||||||||
Income tax | 22 | 58.0 | 83.0 | |||||||||
Deferred revenue | 228.4 | 189.2 | ||||||||||
Cost of voluntary retirement scheme | 19 | 275.8 | 200.2 | |||||||||
Dividends payable | 17 | 3.8 | 4.0 | |||||||||
Other current liabilities | 23 | 838.2 | 587.8 | |||||||||
Total current liabilities | 2,986.2 | 3,576.4 | ||||||||||
Liabilities directly associated with the assets classified as held for sale. | 9 | 16.5 | — | |||||||||
TOTAL EQUITY AND LIABILITIES | 11,425.2 | 11,699.2 | ||||||||||
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Year Ended December 31, | ||||||||||||||||
Notes | 2008 | 2007 | 2006 | |||||||||||||
(Amounts in millions of Euro, except for the per share data) | ||||||||||||||||
Revenue | ||||||||||||||||
Domestic telephony | 24 | 1,814.2 | 2,022.2 | 2,260.6 | ||||||||||||
International telephony | 24 | 286.9 | 304.5 | 346.9 | ||||||||||||
Mobile telephony | 24 | 2,470.8 | 2,210.0 | 1,975.8 | ||||||||||||
Other revenue | 24 | 1,835.4 | 1,783.1 | 1,308.0 | ||||||||||||
Total revenue | 6,407.3 | 6,319.8 | 5,891.3 | |||||||||||||
Operating expenses | ||||||||||||||||
Payroll and employee benefits | (1,168.4 | ) | (1,149.0 | ) | (1,154.5 | ) | ||||||||||
Provision for staff retirement indemnities and youth account | 19 | (112.6 | ) | (92.3 | ) | (87.1 | ) | |||||||||
Cost of early retirement program | 19 | (50.2 | ) | (22.1 | ) | 49.8 | ||||||||||
Charges from international operators | (201.0 | ) | (216.4 | ) | (208.8 | ) | ||||||||||
Charges from domestic operators | (642.3 | ) | (655.3 | ) | (720.9 | ) | ||||||||||
Depreciation and amortization | (1,213.0 | ) | (1,171.8 | ) | (1,128.5 | ) | ||||||||||
Cost of telecommunications equipment | (633.4 | ) | (672.8 | ) | (363.5 | ) | ||||||||||
Other operating expenses | 25 | (1,328.7 | ) | (1,293.2 | ) | (1,189.5 | ) | |||||||||
Total operating expenses | (5,349.6 | ) | (5,272.9 | ) | (4,803.0 | ) | ||||||||||
Operating income before financial activities | 1,057.7 | 1,046.9 | 1,088.3 | |||||||||||||
Income and expense from financial activities | ||||||||||||||||
Interest expense | (343.7 | ) | (238.7 | ) | (278.8 | ) | ||||||||||
Interest income | 72.3 | 77.8 | 70.8 | |||||||||||||
Foreign exchange differences, net | 11.8 | (4.8 | ) | 4.2 | ||||||||||||
Dividend income | 8 | 12.2 | 16.8 | 23.0 | ||||||||||||
Gains from investments | 33.7 | 256.8 | 176.3 | |||||||||||||
Total profit (loss) from financial activities | (213.7 | ) | 107.9 | (4.5 | ) | |||||||||||
Profit before tax | 844.0 | 1,154.8 | 1,083.8 | |||||||||||||
Income tax | 22 | (246.2 | ) | (381.8 | ) | (353.0 | ) | |||||||||
Profit for the year | 597.8 | 773.0 | 730.8 | |||||||||||||
Attributable to: | ||||||||||||||||
Shareholders of the parent | 601.8 | 662.6 | 574.6 | |||||||||||||
Minority interests | (4.0 | ) | 110.4 | 156.2 | ||||||||||||
597.8 | 773.0 | 730.8 | ||||||||||||||
Basic earnings per share | 26 | 1.2278 | 1.3518 | 1.1723 | ||||||||||||
Diluted earnings per share | 26 | 1.2129 | 1.3518 | 1.1723 | ||||||||||||
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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 | |||||||||||||||||||||||||||||
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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 | ||||||||||||
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1. | CORPORATE INFORMATION |
December 31, 2008 | 33,610 | |||
December 31, 2007 | 34,350 | |||
December 31, 2006 | 34,324 |
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 | % |
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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 | % | — |
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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 | % |
2. | BASIS OF PREPARATION |
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3. | SIGNIFICANT ACCOUNTING POLICIES |
• | IFRIC 11, “IFRS 2 — Group and Treasury Share Transactions”. 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. | |
• | 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 account 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. | |
• | IFRIC 14, “IAS 19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”. IFRIC 14 provides guidance on how to assess the limit on the amount of surplus in a defined |
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benefit scheme that can be recognized as an asset under IAS 19 Employee Benefits. It also explains how this limit, also referred to as the “asset ceiling test”, 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. |
• | IAS 39, “Financial Instruments: Recognition and Measurement” and IFRS 7 “Financial Instruments: Disclosures; Reclassification of Financial Assets”,effective from July 1, 2008 and cannot be applied retrospectively to reporting periods before the effective date. The amendment to IAS 39 permits an entity to reclassify non-derivative financial assets (other than those designated at fair value through profit or loss by the entity upon initial recognition) out of 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. The amendments do not permit reclassification into FVTPL. The amendment to IFRS 7 relates to the disclosures required to financial assets that have been reclassified. This amendment has not had any impact on the Group’s financial position or performance. |
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• | The 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. |
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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% | ||
• Radio relay stations | 8 years | 12.5% | ||
• Subscriber connections | 10 years | 10% | ||
• Local and International network | 8-17 years | 6-12.5% | ||
• Other | 5-10 years | 10-20% | ||
Transportation equipment | 5-8 years | 12.5-20% | ||
Furniture and fixtures | 3-5 years | 20%-33% |
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• | 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 subsidiary 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. |
• | 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 subsidiary and associates, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable and taxable profit will be available against which the temporary differences can be utilized. |
• | 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. |
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• | Monthly network service fees: Revenues related to the monthly network service fees are recognized in the month that the telecommunication service is provided. | |
• | Usage Charges and 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. |
• | Sales of telecommunication equipment: Revenues from the sale of handsets and accessories, net of discounts allowed, are recognized at the point-of-sale, when the significant risks and rewards of ownership have passed to the buyer. | |
• | Revenues from dividends: Revenues from dividends are recognized when the right to receive payment is established with the approval for distribution by the General 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. |
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• | 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. |
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• | 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. |
• | 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 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 |
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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 |
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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. |
• | 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 |
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— | 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. |
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— | 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. |
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4. | PROPERTY, PLANT AND EQUIPMENT |
Furniture | ||||||||||||||||||||||||||||||||
Telecommunication | Transportation | and | Construction | Investment | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||
Accumulated depreciation | — | (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 | ||||||||||||||||||||||||
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 | ||||||||||||||||||||||||
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 | ) | — | — | — | |||||||||||||||||||||||
Disposal and transfers — cost | — | �� | (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 | ||||||||||||||||||||||||
Exchange differences — cost | (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 | ||||||||||||||||||||||||
Depreciation charge for the year | — | (34.3 | ) | (1,028.2 | ) | (7.0 | ) | (41.5 | ) | — | — | (1,111.0 | ) | |||||||||||||||||||
Other accumulated depreciation adjustments | — | — | (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 | ||||||||||||||||||||||||
31/12/2008 | ||||||||||||||||||||||||||||||||
Cost | 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 | ) | |||||||||||||||||||
Net book value 31/12/2008 | 50.1 | 602.4 | 4,390.7 | 17.6 | 140.9 | 534.3 | 136.8 | 5,872.8 | ||||||||||||||||||||||||
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5. | GOODWILL |
Carrying value 1/1/2007 | 540.8 | |||
Exchange differences | 0.7 | |||
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 | |||
• | Greece | |
• | Romania | |
• | Bulgaria | |
• | Albania |
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 | % |
(*) | There is a downward rate of change of revenue |
• | Risk-free return: The risk free return used to determine the cost of capital was 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. |
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• | Budgeted profit margin: Budgeted operating profit and EBITDA were based on actual historical experience from the last few years adjusted to take into consideration expected variances in operating profitability. |
6. | TELECOMMUNICATION LICENSES |
2007 | ||||
Net book value 1/1/2007 | 384.2 | |||
Additions | 59.8 | |||
Exchange differences, cost | (4.0 | ) | ||
Amortization charge for the year | (47.2 | ) | ||
Exchange differences, accumulated depreciation | 3.4 | |||
Net book value 31/12/2007 | 396.2 | |||
31/12/2007 | ||||
Cost | 567.0 | |||
Accumulated amortization | (170.8 | ) | ||
Net book value 31/12/2007 | 396.2 | |||
2008 | ||||
Net book value 1/1/2008 | 396.2 | |||
Additions | 17.5 | |||
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 depreciation | 3.8 | |||
Exchange differences, accumulated depreciation | 5.6 | |||
Net book value 31/12/2008 | 329.5 | |||
31/12/2008 | ||||
Cost | 531.0 | |||
Accumulated amortization | (201.5 | ) | ||
Net book value 31/12/2008 | 329.5 | |||
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7. | OTHER INTANGIBLE ASSETS |
2007 | ||||
Net book value 1/1/2007 | 630.9 | |||
Additions | 22.8 | |||
Disposals, cost | (30.5 | ) | ||
Exchange differences, cost | (7.1 | ) | ||
Amortization charge for the year | (35.7 | ) | ||
Exchange differences, accumulated depreciation | 1.6 | |||
Disposals, accumulated depreciation | 0.7 | |||
Net book value 31/12/2007 | 582.7 | |||
31/12/2007 | ||||
Cost | 666.5 | |||
Accumulated amortization | (83.8 | ) | ||
Net book value 31/12/2007 | 582.7 | |||
2008 | ||||
Net book value 1/1/2008 | 582.7 | |||
Additions | 46.7 | |||
Disposals, cost | (18.2 | ) | ||
Exchange differences, cost | (8.4 | ) | ||
Amortization charge for the year | (53.9 | ) | ||
Exchange differences, accumulated depreciation | 6.9 | |||
Disposals, accumulated depreciation | 0.4 | |||
Net book value 31/12/2008 | 556.2 | |||
31/12/2008 | ||||
Cost | 686.6 | |||
Accumulated amortization | (130.4 | ) | ||
Net book value 31/12/2008 | 556.2 | |||
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8. | INVESTMENTS |
December 31, | ||||||||
2008 | 2007 | |||||||
TELEKOM SRBIJA | 155.1 | 155.1 | ||||||
Other | 1.5 | 3.3 | ||||||
156.6 | 158.4 | |||||||
As at January 1, 2008 | 158.4 | |||
Sale of investment in LOFOS PALLINI S.A. | (1.4 | ) | ||
Other movements | (0.4 | ) | ||
As at December 31, 2008 | 156.6 | |||
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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 | |||||||
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 | ||||||||||
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9. | ASSETS HELD FOR SALE |
ASSETS | ||||
Non-current assets | ||||
Property, plant and equipment | 98.9 | |||
Telecommunication licenses | 31.2 | |||
Total non-current assets | 130.1 | |||
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 | 156.6 | |||
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. | 16.5 | |||
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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 | ) | ||||||||
10. | OTHER NON-CURRENT ASSETS |
December 31, | ||||||||
2008 | 2007 | |||||||
Loans and advances to employees | 65.1 | 46.5 | ||||||
Deferred expenses (long-term) | 29.6 | 38.6 | ||||||
Other | 26.0 | 10.8 | ||||||
120.7 | 95.9 | |||||||
11. | TRADE RECEIVABLES |
December 31, | ||||||||
2008 | 2007 | |||||||
Subscribers | 1,855.5 | 1,666.8 | ||||||
International traffic | 144.1 | 205.1 | ||||||
Unbilled revenues | 82.0 | 91.6 | ||||||
2,081.6 | 1,963.5 | |||||||
Less: | ||||||||
Allowance for doubtful accounts | (887.4 | ) | (791.5 | ) | ||||
1,194.2 | 1,172.0 | |||||||
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Balance at 1/1/2007 | (711.4 | ) | ||
Charge for the year | (88.0 | ) | ||
Write-offs | 4.5 | |||
Exchange differences | 3.4 | |||
Balance at 31/12/2007 | (791.5 | ) | ||
Balance at 1/1/2008 | (791.5 | ) | ||
Charge for the year | (119.8 | ) | ||
Write-offs | 6.9 | |||
Exchange differences | 5.6 | |||
Reversal of provision | 5.0 | |||
Provision for trade receivables held for sale | 6.4 | |||
Balance at 31/12/2008 | (887.4 | ) | ||
2008 | ||||
Not impaired and not past due | 617.9 | |||
Not impaired and past due: | ||||
• Less than 30 days | 264.3 | |||
• Between 31 and 180 days | 229.5 | |||
• More than 180 days | 82.5 | |||
Total | 1,194.2 | |||
12. | OTHER CURRENT ASSETS |
December 31, | ||||||||
2008 | 2007 | |||||||
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 | ||||||
Loans and advances to employees | 6.2 | 5.1 | ||||||
VAT recoverable | 22.5 | 25.2 | ||||||
Other prepayments | 59.0 | 78.4 | ||||||
Deferred expenses | 9.5 | 19.1 | ||||||
Other | 93.8 | 104.8 | ||||||
261.6 | 291.3 | |||||||
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13. | OTHER FINANCIAL ASSETS |
December 31, | ||||||||
2008 | 2007 | |||||||
Available-for-sale | 26.2 | 56.0 | ||||||
Held to maturity — Bonds | 109.7 | 25.2 | ||||||
135.9 | 81.2 | |||||||
14. | CASH AND CASH EQUIVALENTS |
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 | |||||||
15. | SHARE CAPITAL — SHARE PREMIUM |
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15. | SHARE CAPITAL — SHARE PREMIUM |
Shareholder | Number of Shares | Percentage % | ||||||
Hellenic State | 107,484,826 | 21.93 | % | |||||
D.E.K.A. S.A. (indirect participation of the Hellenic State) | 15,052,773 | 3.07 | % | |||||
DEUTSCHE TELEKOM AG | 122,537,599 | 25.00 | % | |||||
Institutional Investors | 207,995,902 | 42.44 | % | |||||
Private Investors | 37,079,289 | 7.56 | % | |||||
Total | 490,150,389 | 100.00 | % | |||||
16. | STATUTORY RESERVE — RETAINED EARNINGS |
17. | DIVIDENDS |
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18. | LONG-TERM BORROWINGS |
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 | ||||||||||
(a) | LOAN FROM EUROPEAN INVESTMENT BANK/HELLENIC STATE |
(b) | SYNDICATED LOANS |
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(c) | GLOBAL MEDIUM TERM NOTE PROGRAMME |
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(d) | OTHER BANK LOANS |
19. | PROVISIONS FOR PENSIONS, STAFF RETIREMENT INDEMNITIES AND OTHER EMPLOYEE BENEFITS |
(a) | Main Pension Fund (TAP-OTE): |
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(b) | Auxiliary Pension Fund: |
December 31, | ||||||||
2008 | 2007 | |||||||
Loans and advances to: | ||||||||
EDEKT | 105.6 | 140.9 | ||||||
Auxiliary Fund | 2.6 | 4.0 | ||||||
Interest bearing loan to Auxiliary Fund | 131.5 | 120.6 | ||||||
Total | 239.7 | 265.5 | ||||||
Loans and advances to: | ||||||||
EDEKT | 35.2 | 35.2 | ||||||
Auxiliary Fund | 0.5 | 0.5 | ||||||
Interest bearing loan to Auxiliary Fund | 9.5 | — | ||||||
Short-term portion | 45.2 | 35.7 | ||||||
Long-term portion | 194.5 | 229.8 | ||||||
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(a) | Provision for Staff Retirement Indemnities |
For the Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Current service cost | 18.4 | 18.7 | 18.9 | |||||||||
Interest cost on benefit obligation | 15.5 | 14.5 | 16.5 | |||||||||
Amortization of past service cost | 6.7 | 7.8 | 7.8 | |||||||||
Amortization of unrecognized actuarial loss | 2.7 | 3.8 | 0.8 | |||||||||
43.3 | 44.8 | 44.0 | ||||||||||
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December 31, | ||||||||
2008 | 2007 | |||||||
Defined benefit obligation — beginning of the year | 331.3 | 332.6 | ||||||
Current service cost | 18.4 | 18.7 | ||||||
Interest cost | 15.5 | 14.5 | ||||||
Actuarial loss/(gain) | 11.1 | (23.1 | ) | |||||
Past service cost | 2.5 | 4.1 | ||||||
Benefits paid | (19.6 | ) | (32.0 | ) | ||||
Termination benefits based on Voluntary Leave Scheme | — | 16.5 | ||||||
Defined benefit obligation — end of the year | 359.2 | 331.3 | ||||||
Unrecognised actuarial losses | (55.3 | ) | (44.3 | ) | ||||
Unrecognised past service costs | (49.0 | ) | (56.7 | ) | ||||
Defined benefit liability — end of the year | 254.9 | 230.3 | ||||||
For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Discount rate | 5.5 | % | 4.8 | % | 4.1 | % | ||||||
Assumed rate of future salary increases | 6.5 | % | 5.5 | % | 5.5 | % |
(b) | Youth Account |
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 | ||||||||||
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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 | |||||||
December 31, | ||||||||
2008 | 2007 | |||||||
Defined benefit obligation | 277.7 | 286.4 | ||||||
Unrecognised actuarial losses | (56.1 | ) | (72.1 | ) | ||||
Unrecognised past service costs | (6.0 | ) | (11.8 | ) | ||||
Benefit liability | 215.6 | 202.5 | ||||||
For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Discount rate | 5.0% | 4.5% | 4.0% | |||||||||
Assumed rate of future salary increase | 4.5% | 4.5% | 4.5% |
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• | 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 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 Sum benefit, | |
• | The total cost of bonuses based on the collective labor agreement signed on 20 July 2005 and | |
• | The termination payments upon retirement of the employees (staff retirement indemnities). |
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 | ||||||
Balance as of January 1, 2006 | 1,038.7 | |||
Payments during year 2006 | (337.6 | ) | ||
Adjustment due to re-estimation | (49.8 | ) | ||
Adjustment due to time value of money | 26.8 | |||
Balance as of December 31, 2006 | 678.1 | |||
Balance as of January 1, 2007 | 678.1 | |||
Payments during year 2007 | (256.2 | ) | ||
Adjustment due to re-estimation | (16.5 | ) | ||
Adjustment due to time value of money | 12.3 | |||
Balance as of December 31, 2007 | 417.7 | |||
Balance as of January 1, 2008 | 417.7 | |||
Payments during year 2008 | (42.8 | ) | ||
Adjustment due to time value of money | 8.1 | |||
Balance as of December 31, 2008 | 383.0 | |||
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20. | OTHER NON-CURRENT LIABILITIES |
December 31, | ||||||||
2008 | 2007 | |||||||
Provision for employee’s contributions under early retirement programs | 4.4 | 4.5 | ||||||
Asset retirement obligation | 5.9 | 5.5 | ||||||
Provision for obligation of free units | 37.0 | 36.9 | ||||||
Deferred revenue (long-term) | 18.0 | 28.8 | ||||||
MICROSTAR (see Note 23) | — | 153.3 | ||||||
Other | 9.3 | 4.6 | ||||||
74.6 | 233.6 | |||||||
21. | SHORT-TERM BORROWINGS |
• | On November 9, 2007, OTE PLC signed a short term credit facility agreement for an amount of Euro 2,700.0 with a consortium of banks, under the full guarantee 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-down 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. |
• | OTE PLUS and its subsidiaries loans of Euro 4.1 | |
• | VOICENET loans of Euro 0.7 | |
• | E-VALUE loans of Euro 0.3 |
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22. | INCOME TAXES — DEFERRED TAXES |
Company | Open Tax Years | |
Direct ownership | ||
• OTE | From 2006 | |
• COSMOTE | From 2006 | |
• 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 2005 | |
• OTE ESTATE | From 2003 | |
• OTE GLOBE | From 2007 | |
• OTE INSURANCE | From 2003 | |
• OTE ACADEMY | From 2007 | |
• HATWAVE | From 1996 | |
Indirect ownership | ||
• OTE INVESTMENTS SERVICES S.A. | From 2005 | |
• ROMTELECOM | From 2006 | |
• AMC | From 2006 | |
• COSMOFON | From 2001 | |
• GLOBUL | From 2005 | |
• COSMOTE ROMANIA | From 2007 | |
• GERMANOS | From 2004 | |
• E-VALUE S.A. | From 2003 | |
• GERMANOS TELECOM SKOPJE S.A. | From 2008 |
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Company | Open Tax Years | |
• GERMANOS TELECOM ROMANIA S.A. | From 2003 | |
• SUNLIGHT ROMANIA S.R.L. -FILIALA | From 2003 | |
• GERMANOS TELECOM BULGARIA A.D. | From 2005 | |
• MOBILBEEEP LTD | From 2005 | |
• HELLAS SAT A.E | From 2008 | |
• OTE MTS HOLDING B.V | From 2005 | |
• CHA | From 2007 | |
• COSMO-HOLDING CYPRUS | From 2006 | |
• REAL ESTATE INVESTMENT COMPANY | From 2008 (incorporation) | |
• OTE PLUS BULGARIA | Tax exempt |
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For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Current income tax | 311.7 | 341.5 | 316.4 | |||||||||
Deferred income tax | (65.5 | ) | 40.3 | 36.6 | ||||||||
Total income tax | 246.2 | 381.8 | 353.0 | |||||||||
2008 | 2007 | 2006 | ||||||||||
Profit before tax | 844.0 | 1,154.8 | 1,083.8 | |||||||||
Statutory tax rate | 25 | % | 25 | % | 29 | % | ||||||
Tax at statutory rate | 211.0 | 288.7 | 314.3 | |||||||||
Effect of different rates in different countries | 11.8 | 16.5 | (7.0 | ) | ||||||||
Effect of changes to tax rates | (9.8 | ) | 2.6 | 13.4 | ||||||||
Expenses non-deductible for tax purposes | 21.9 | 16.0 | 29.2 | |||||||||
Losses from consolidated subsidiaries not decuctible | 11.9 | 19.2 | 15.9 | |||||||||
Differences arising from tax audits | 7.9 | 48.8 | — | |||||||||
Tax derived from the distribution of reserves and dividends | — | — | (10.0 | ) | ||||||||
Untaxed reserve (Law 3299/2004) | (7.5 | ) | (7.5 | ) | — | |||||||
Other | (1.0 | ) | (2.5 | ) | (2.8 | ) | ||||||
Income tax | 246.2 | 381.8 | 353.0 | |||||||||
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Balance Sheet | Income Statement | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Deferred tax assets | ||||||||||||||||
Voluntary retirement scheme | 95.6 | 106.8 | (11.2 | ) | (61.1 | ) | ||||||||||
Staff retirement indemnities | 42.8 | 51.0 | (8.2 | ) | 5.7 | |||||||||||
Youth Account | 49.8 | 50.7 | (0.9 | ) | (0.9 | ) | ||||||||||
Employee benefits | 44.9 | 44.4 | 0.5 | 5.3 | ||||||||||||
Property, plant and equipment | 83.9 | 63.5 | 10.3 | 6.7 | ||||||||||||
Provisions | 75.7 | 33.3 | 42.4 | (16.4 | ) | |||||||||||
Carry forward tax losses | 5.4 | 5.9 | (0.5 | ) | 4.7 | |||||||||||
Deferred income | 7.9 | 8.6 | (0.7 | ) | (1.1 | ) | ||||||||||
Fair value adjustment on acquisition | 53.9 | 56.3 | (2.4 | ) | (2.4 | ) | ||||||||||
Other | 14.1 | 24.0 | (9.8 | ) | (2.3 | ) | ||||||||||
474.0 | 444.5 | |||||||||||||||
Offset of deferred tax liabilities | (187.2 | ) | (183.7 | ) | ||||||||||||
Deferred tax asset | 286.8 | 260.8 | ||||||||||||||
Deferred tax liabilities | ||||||||||||||||
Property, plant and equipment | (166.3 | ) | (196.2 | ) | 29.9 | 3.9 | ||||||||||
Capitalized interest | (27.1 | ) | (33.7 | ) | 6.6 | 5.3 | ||||||||||
Unbilled revenue | (5.6 | ) | (0.2 | ) | (5.4 | ) | 0.4 | |||||||||
Loan fees | (3.5 | ) | (3.5 | ) | — | (0.8 | ) | |||||||||
Fair value adjustment on acquisition | (89.0 | ) | (110.2 | ) | 21.2 | 3.7 | ||||||||||
Other | (12.4 | ) | (6.1 | ) | (6.3 | ) | 9.0 | |||||||||
(303.9 | ) | (349.9 | ) | |||||||||||||
To be offset against deferred tax asset | 187.2 | 183.7 | ||||||||||||||
Deferred tax liabilities, | (116.7 | ) | (166.2 | ) | ||||||||||||
Deferred tax income/(expense) | 65.5 | (40.3 | ) | |||||||||||||
Deferred tax assets, net | 170.1 | 94.6 | ||||||||||||||
2008 | 2007 | |||||||
Deferred tax (net) — beginning of year | 94.6 | 127.4 | ||||||
Tax charged to the income statement | 65.5 | (40.3 | ) | |||||
Foreign exchange differences | 10.0 | 7.5 | ||||||
Deferred tax (net) — end of year | 170.1 | 94.6 | ||||||
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23. | OTHER CURRENT LIABILITIES |
December 31, | ||||||||
2008 | 2007 | |||||||
MICROSTAR (See Note 20) | 160.3 | — | ||||||
Employer contributions | 63.6 | 74.3 | ||||||
Payroll | 34.0 | 27.5 | ||||||
Other taxes — duties | 102.4 | 79.5 | ||||||
Interest payable | 164.0 | 66.2 | ||||||
Provision for employees contributions under early retirement programs | 3.4 | 5.0 | ||||||
Provisions for litigation and other liabilities | 110.5 | 126.8 | ||||||
Customer advances | 55.6 | 40.4 | ||||||
Other | 144.4 | 168.1 | ||||||
838.2 | 587.8 | |||||||
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Balance 1/1/2008 | 126.8 | |||
Addition during the year | 2.1 | |||
Utilized | (10.9 | ) | ||
Unused amounts reversed | (7.5 | ) | ||
Balance 31/12/2008 | 110.5 | |||
24. | REVENUE |
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 | |||||||||||
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25. | OTHER OPERATING EXPENSES |
For the Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Third party fees | 208.4 | 183.5 | 173.7 | |||||||||
Cost of telecommunication materials, repairs and maintenance | 191.5 | 201.8 | 199.0 | |||||||||
Advertising and promotion costs | 212.9 | 208.3 | 164.0 | |||||||||
Utilities | 114.9 | 93.6 | 98.0 | |||||||||
Provision for doubtful accounts | 119.8 | 88.0 | 97.9 | |||||||||
Other provisions | 2.1 | 18.1 | 36.0 | |||||||||
Travel costs | 18.1 | 18.9 | 17.6 | |||||||||
Commissions to independent commercial distributors | 253.4 | 244.1 | 203.0 | |||||||||
Payments to Audiotex providers | 8.7 | 14.3 | 17.1 | |||||||||
Rents | 90.9 | 88.0 | 80.1 | |||||||||
Taxes, other than income tax | 51.7 | 56.3 | 47.1 | |||||||||
Transportation costs | 11.8 | 13.0 | 9.6 | |||||||||
Other | 44.5 | 65.3 | 46.4 | |||||||||
1,328.7 | 1,293.2 | 1,189.5 | ||||||||||
26. | EARNINGS PER SHARE |
For the Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Profit attributable to shareholders of the parent | 601.8 | 662.6 | 574.6 | |||||||||
Weighted average number of shares for basic earnings per share | 490,150,389 | 490,150,389 | 490,150,389 | |||||||||
Share options | 6,008,060 | — | — | |||||||||
Weighted average number of shares adjusted for the effect of dilutions | 496,158,449 | 490,150,389 | 490,150,389 | |||||||||
Basic earnings per share | 1.2278 | 1.3518 | 1.1723 | |||||||||
Diluted earnings per share | 1.2129 | 1.3518 | 1.1723 |
27. | SEGMENT INFORMATION |
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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 |
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28. | RELATED PARTY DISCLOSURES |
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 |
(*) | : Includes Group’s sales and purchases to and from DEUTSCHE TELEKOM AG for the second half of 2008, when the latter is considered to be a related party of the former. |
29. | SHARE OPTION PLAN |
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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 | ||||||
2008 | ||||
Weighted average share price | 21.38 | |||
Weighted average exercise price | 22.05 | |||
Weighted average expected volatility | 24 | % | ||
Weighted average exercise period | 2.5 years | |||
Weighted average risk free rate | 4.06 | % | ||
Weighted average expected dividend | 0.75 | |||
Weighted average option value | 2.20 |
30. | LITIGATION AND CLAIMS — COMMITMENTS |
(a) | The most significant outstanding legal cases as at December 31, 2008, were as follows: |
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(i) | Capital commitments |
December 31, | ||||||||
2008 | 2007 | |||||||
Property, plant and equipment | 149.7 | 169.0 |
December 31, | ||||||||
2008 | 2007 | |||||||
Up to 1 year | 113.5 | 109.4 | ||||||
1 to 5 years | 239.6 | 300.5 | ||||||
Over 5 years | 290.9 | 334.1 |
31. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT |
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December 31, | ||||||||||||||||
Carrying Amount | Fair Value | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Financial Assets | ||||||||||||||||
Available-for-sale | 26.2 | 56.0 | 26.2 | 56.0 | ||||||||||||
Held to maturity | 109.7 | 25.2 | 110.9 | 25.2 | ||||||||||||
Trade receivables | 1,194.2 | 1,172.0 | 1,194.2 | 1,172.0 | ||||||||||||
Loan to Auxiliary Fund | 134.1 | 124.6 | 120.7 | 124.6 | ||||||||||||
Other loans | 71.3 | 51.6 | 71.3 | 51.6 | ||||||||||||
Cash and cash equivalents | 1,427.8 | 1,316.3 | 1,427.8 | 1,316.3 | ||||||||||||
Derivative financial instruments | 6.2 | 3.7 | 6.2 | 3.7 | ||||||||||||
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 | ||||||||||||
Trade accounts payable | 943.9 | 931.5 | 943.9 | 931.5 | ||||||||||||
Derivative financial instruments | 3.9 | — | 3.9 | — |
a) | Credit risk |
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b) | Liquidity risk |
Less than 1 Year | 1 to 2 Years | 2 to 5 Years | Over 5 Years | Total | ||||||||||||||||
December 31, 2008 | ||||||||||||||||||||
Medium term bonds OTE PLC | 872.3 | 245.1 | 3,925.4 | 1,696.9 | 6,739.7 | |||||||||||||||
Syndicated loan OTE PLC | 21.4 | 46.8 | 508.3 | — | 576.5 | |||||||||||||||
Borrowings — Rom Telecom | 16.8 | 8.2 | 21.5 | 15.1 | 61.6 | |||||||||||||||
European Investment Bank | 20.5 | — | — | — | 20.5 | |||||||||||||||
Other borrowings | 5.3 | 2.0 | — | — | 7.3 | |||||||||||||||
Trade accounts payable | 943.9 | — | — | — | 943.9 | |||||||||||||||
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 | ||||||||||||||||
December 31, 2007 | ||||||||||||||||||||
Medium term bonds OTE PLC | 158.9 | 755.3 | 1,011.1 | 2,379.0 | 4,304.3 | |||||||||||||||
Short term borrowings OTE PLC | 1,514.0 | — | — | — | 1,514.0 | |||||||||||||||
Syndicated loan OTE PLC | 25.3 | 21.3 | 554.8 | — | 601.4 | |||||||||||||||
Borrowings — Globul | 50.9 | — | — | — | 50.9 | |||||||||||||||
Borrowings — Rom Telecom | 16.8 | 17.9 | 29.2 | 25.1 | 89.0 | |||||||||||||||
European Investment Bank | 20.5 | 20.5 | — | — | 41.0 | |||||||||||||||
Other borrowings | 5.4 | — | — | — | 5.4 | |||||||||||||||
Trade accounts payable | 931.5 | — | — | — | 931.5 | |||||||||||||||
Total | 2,723.3 | 815.0 | 1,595.1 | 2,404.1 | 7,537.5 | |||||||||||||||
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• | As at December 31, 2008: Euro 6.0 billion. | |
• | As at December 31, 2007: Euro 5.4 billion. |
c) | Market risk |
December 31, | ||||||||
2008 | 2007 | |||||||
Variable interest rate | 1,099.3 | 2,647.2 | ||||||
Fixed rate interest rate | 4,948.4 | 2,880.6 | ||||||
TOTAL | 6,047.7 | 5,527.8 | ||||||
Profit Before Tax | Equity | |||||
2008 | 2007 | 2008 | 2007 | |||
3.3 | 4.2 | 3.0 | — |
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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 | ) | |||||||||||
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 | 2.06 | x | 1.35 | x | ||||
32. | RECLASSIFICATIONS |
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33. | POST BALANCE SHEET EVENTS |
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• | OTE’s employees who: |
• | 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 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 based 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. |
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