Washington, D.C. 20549
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Title of Each Class | Name of Each Exchange on Which Registered | |
American Depositary Shares, each representing | New York Stock Exchange | |
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 |
ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 3 | ||||
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE | 3 | ||||
ITEM 3. | KEY INFORMATION | 4 | ||||
3.A | Selected Financial Data | 4 | ||||
3.B | Capitalization and Indebtedness | 8 | ||||
3.C | Reasons for the offer and use of proceeds | 8 | ||||
3.D | Risk factors | 8 | ||||
ITEM 4. | INFORMATION ON THE COMPANY | 18 | ||||
4.A | History and Development of the Company | 18 | ||||
4.B | Business Overview | 19 | ||||
4.C | Organizational Structure | 79 | ||||
4.D | Property, Plant and Equipment | 81 | ||||
4.E | Unresolved Staff Comments | 82 | ||||
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS | 82 | ||||
5.A | Operating Results | 82 | ||||
5.B | Liquidity and Capital Resources | 94 | ||||
5.C | Research and Development, Patents and Licenses | 103 | ||||
5.D | Trend Information | 104 | ||||
5.E | Off-Balance Sheet Arrangements | 105 | ||||
5.F | Tabular Disclosure of Contractual Obligations | 105 | ||||
ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES | 106 | ||||
6.A /C | Directors, Board Practices and Senior Management | 106 | ||||
6.B | Compensation | 115 | ||||
6.D | Employees | 118 | ||||
6.E | Share Ownership | 123 | ||||
ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | 123 | ||||
7.A | Major Shareholders | 123 | ||||
7.B | Related Party Transactions | 128 | ||||
7.C | Interests of Experts and Counsel | 128 | ||||
ITEM 8. | FINANCIAL INFORMATION | 128 | ||||
8.A | Consolidated Statements and Other Financial Information | 128 | ||||
8.B | Significant Changes | 129 | ||||
ITEM 9. | THE OFFER AND LISTING | 129 | ||||
9.A | Listing and Market Details | 129 | ||||
9.B | Plan of Distribution | 130 | ||||
9.C | Markets | 130 | ||||
9.D | Selling Shareholders | 130 | ||||
9.E | Dilution | 130 | ||||
9.F | Expenses of the Issue | 130 | ||||
ITEM 10. | ADDITIONAL INFORMATION | 130 | ||||
10.A | Share Capital | 130 | ||||
10.B | Our Articles of Incorporation | 130 | ||||
10.C | Material Contracts | 134 | ||||
10.D | Exchange Controls | 134 | ||||
10.E | Taxation | 135 | ||||
10.F | Dividends and Paying Agents | 139 | ||||
10.G | Statement by Experts | 139 | ||||
10.H | Documents on Display | 139 | ||||
10.I | Subsidiary Information | 139 |
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ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 139 | ||||
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | 141 | ||||
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 141 | ||||
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 141 | ||||
ITEM 15. | CONTROLS AND PROCEDURES | 141 | ||||
ITEM 16. | [RESERVED] | 143 | ||||
16.A | Audit Committee Financial Expert | 143 | ||||
16.B | Code of Ethics | 143 | ||||
16.C | Principal Accountant Fees and Services | 143 | ||||
16.D | Exemptions from the Listing Standards for Audit Committees | 144 | ||||
16.E | Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 144 | ||||
ITEM 17. | FINANCIAL STATEMENTS | 145 | ||||
ITEM 18. | FINANCIAL STATEMENTS | 145 | ||||
ITEM 19. | EXHIBITS | 145 |
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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 | |
• | “Lei”or “RON”means the currency of the Republic of Romania. |
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• | statements regarding our results of operations, financial condition, future economic performance and plans to rebalance our tariffs; | |
• | 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 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 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; | |
• | the effect of, and changes in, regulation and government policy; | |
• | 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; |
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• | 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, | ||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | |||||||||||||||||||
(Euro) | (Euro) | (Euro) | (Euro) | (Euro) | (U.S. $)(1) | |||||||||||||||||||
(Millions except shares and per share data) | ||||||||||||||||||||||||
Income Statement Data | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Domestic telephony(2) | 2,349.5 | 2,262.9 | 2,308.1 | 2,256.7 | 2,019.1 | 2,948.5 | ||||||||||||||||||
International telephony(3) | 375.5 | 376.6 | 391.0 | 346.9 | 304.5 | 444.7 | ||||||||||||||||||
Mobile telephony services | 1,228.8 | 1,555.4 | 1,756.7 | 1,975.8 | 2,210.0 | 3,227.3 | ||||||||||||||||||
Other revenues(4) | 960.5 | 989.1 | 1,015.2 | 1,308.0 | 1,783.1 | 2,603.9 | ||||||||||||||||||
Total revenues | 4,914.3 | 5,184.0 | 5,471.0 | 5,887.4 | 6,316.7 | 9,224.4 | ||||||||||||||||||
Operating expenses | (3,895.4 | ) | (4,546.1 | ) | (5,473.4 | ) | (4,825.3 | ) | (5,278.2 | ) | (7,707.9 | ) | ||||||||||||
Operating income/(loss) | 1,018.9 | 637.9 | (2.4 | ) | 1,062.1 | 1,038.5 | 1,516.5 | |||||||||||||||||
Other income/(expense), net | (82.7 | ) | (112.1 | ) | (21.6 | ) | 68.8 | 118.8 | 173.5 | |||||||||||||||
Income/(loss) before income taxes and minority interests | 936.2 | 525.8 | (24.0 | ) | 1,130.9 | 1,157.3 | 1,690.0 | |||||||||||||||||
Income taxes | (377.9 | ) | (120.8 | ) | (32.5 | ) | (441.5 | ) | (388.3 | ) | (567.0 | ) | ||||||||||||
Income/(loss) before minority interests | 558.3 | 405.0 | (56.5 | ) | 689.4 | 769.0 | 1,123.0 | |||||||||||||||||
Minority interests | (147.1 | ) | (233.7 | ) | (235.4 | ) | (180.4 | ) | (131.4 | ) | (191.9 | ) | ||||||||||||
Net Income/(loss) before cumulative effect of accounting change | 411.2 | 171.3 | (291.9 | ) | 509.0 | 637.6 | 931.1 | |||||||||||||||||
Cumulative effect of accounting change for SFAS 142 (2002) and SFAS 143 (2003), net of income taxes | (0.5 | ) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |||||||||||||||||
Net income/(loss)(5) | 410.7 | 171.3 | (291.9 | ) | 509.0 | 637.6 | 931.1 | |||||||||||||||||
Earnings/(losses) per share(6) (basic & diluted) | 0.8 | 0.4 | (0.6 | ) | 1.0 | 1.3 | 1.9 | |||||||||||||||||
Weighted average number of shares outstanding | 490,241,524 | 490,150,389 | 490,150,389 | 490,150,389 | 490,150,389 | 490,150,389 | ||||||||||||||||||
Other Financial Data | ||||||||||||||||||||||||
Dividends per share(7) | 0.7 | 0.35 | 0.0 | 0.55 | 0.75 | 1.10 | ||||||||||||||||||
Dividends per American Depositary Share (in U.S. Dollars)(8) | 0.413 | 0.2139 | 0.0 | 0.3746 | N/A | N/A | ||||||||||||||||||
Operating margin (%)(9) | 20.7 | 12.3 | 0.0 | 18.0 | 16.4 | 16.4 | ||||||||||||||||||
Net income/(loss) margin (%)(10) | 8.4 | 3.3 | — | 8.6 | 10.1 | 10.1 | ||||||||||||||||||
Operating income before depreciation and amortization(11) | 1,928.6 | 1,661.0 | 1,051.5 | 2,155.6 | 2,177.1 | 3,179.2 | ||||||||||||||||||
Operating income before depreciation and amortization margin (%)(12) | 39.2 | 32.0 | 19.2 | 36.6 | 34.5 | 34.5 | ||||||||||||||||||
Ratio of earnings to fixed charges(13) | 6.3 | 3.9 | 0.9 | 6.2 | (4.5 | ) | (4.5 | ) |
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For the Year Ended December 31, | ||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | |||||||||||||||||||
(Euro) | (Euro) | (Euro) | (Euro) | (Euro) | (U.S. $)(1) | |||||||||||||||||||
(Millions) | ||||||||||||||||||||||||
Cash Flow Data | ||||||||||||||||||||||||
Net cash provided by operating activities | 1,356.1 | 1,380.9 | 1,584.5 | 1,781.8 | 1,392.7 | 2,033.8 | ||||||||||||||||||
Capital expenditure | (976.1 | ) | (843.6 | ) | (680.2 | ) | (962.4 | ) | (1,101.3 | ) | (1,608.2 | ) | ||||||||||||
Net cash used in investing activities | (909.5 | ) | (839.6 | ) | (926.7 | ) | (2,296.8 | ) | (2,723.0 | ) | 3,976.4 | |||||||||||||
Net cash provided by (used in) financing activities | (289.1 | ) | (275.5 | ) | (13.4 | ) | 1,052.2 | 603.3 | 881.0 |
As of December 31, | ||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | |||||||||||||||||||
(Euro) | (Euro) | (Euro) | (Euro) | (Euro) | (U.S. $)(1) | |||||||||||||||||||
(Millions) | ||||||||||||||||||||||||
Balance Sheet Data | ||||||||||||||||||||||||
Cash and cash equivalents | 601.3 | 870.3 | 1,512.2 | 2,042.5 | 1,316.3 | 1,922.2 | ||||||||||||||||||
Telecommunications property, plant and equipment, net | 6,873.4 | 6,736.4 | 6,475.9 | 6,335.6 | 6,224.7 | 9,089.8 | ||||||||||||||||||
Licenses, net | 402.4 | 380.0 | 380.6 | 375.3 | 439.4 | 641.6 | ||||||||||||||||||
Investments(14) | 202.2 | 188.0 | 159.4 | 158.7 | 158.4 | 231.3 | ||||||||||||||||||
Total assets | 10,424.9 | 10,262.4 | 10,868.9 | 12,871.8 | 14,121.7 | 20,621.9 | ||||||||||||||||||
Total current liabilities | 1,810.7 | 2,041.9 | 2,294.5 | 2,889.1 | 2,427.9 | 3,545.5 | ||||||||||||||||||
Total long-term liabilities(15) | 4,031.3 | 3,777.7 | 4,361.1 | 5,374.1 | 6,972.7 | 10,182.2 | ||||||||||||||||||
Total shareholders’ equity | 3,590.3 | 3,422.6 | 3,244.5 | 3,526.8 | 3,860.5 | 5,637.5 |
As of December 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | ||||||||||||||||
Operating Data (Greece only) | ||||||||||||||||||||
Telephony | ||||||||||||||||||||
Number of PSTN access lines in service (in thousands) | 5,200 | 5,079 | 4,928 | 4,778 | 4,509 | |||||||||||||||
Number of ISDN channels in services (in thousands) | 1,097 | 1,265 | 1,370 | 1,382 | 1,344 | |||||||||||||||
Total access lines in service (in thousands)(16) | 6,297 | 6,344 | 6,298 | 6,160 | 5,854 | |||||||||||||||
Outgoing international traffic (million minutes) | 835.1 | 834.1 | 806.9 | 827.8 | 923.9 | |||||||||||||||
Incoming international traffic (million minutes) | 792.5 | 791.1 | 795.3 | 840.8 | 818.3 | |||||||||||||||
Data | ||||||||||||||||||||
Active ADSL lines (retail) | 6,128 | 37,930 | 101,288 | 234,358 | 475,312 | |||||||||||||||
Active ADSL lines (wholesale)(17) | 760 | 5,902 | 50,188 | 236,200 | 334,118 |
(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, 2007 of Euro 1.00 per U.S. $1.4603. | |
(2) | Includes charges to customers on outgoing calls to subscribers of unaffiliated mobile telephony operators of approximately Euro 430.4 million in 2003, Euro 378.7 million in 2004, Euro 376.8 million in 2005, Euro 342.6 million in 2006 and Euro 267.8 million in 2007. Since February 1, 2003, we have paid the mobile operators a new interconnection fee for calls terminating on their networks and we no longer bill them an interconnection fee. Domestic telephony also includes revenues from monthly rental charges, 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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(3) | 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. | |
(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 2003, we sold our participating interest in Inmarsat Ventures plc. This sale resulted in a pre-tax gain of Euro 31.6 million in 2003. Furthermore, in 2003, upon conclusion of the new collective bargaining agreement, a reserve of Euro 54.6 million, (established prior to the tax effect (benefit) of Euro 19.1 million, to cover our obligation to make contributions to TAP-OTE) was reversed to income. 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 Telekom Srbija’s arbitration. Net income in 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, a total gain of Euro 23.8 million was recorded relating to the extinguishment of suppliers’ liabilities, in addition to dividends totalling Euro 19.4 million from Telekom Srbija and Eutelsat, gains totalling 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 a reduction in expense of Euro 9.5 million resulting from the reduction of the estimated cost for 2005 of the Voluntary Retirement Scheme, as the number of our employees who retired under the Scheme were 100 less than estimated, partially offset by a provision 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 164.0 million was recorded from the sale of ArmenTel. Finally, dividends totalling Euro 21.6 million from Telekom Srbija and gains of Euro 10.3 million from sale of certain available for sale securities affected this year’s results. In 2007, we took a provision of Euro 38.8 million in connection with the interest rate (which was below market rates) that we charged on the loan granted to the Auxiliary Fund in connection with the Voluntary Retirement Scheme. Furthermore we took a charge of Euro 22.1 million relating to the employees who participated in the early retirement program of 2007. Finally, a pre-tax gain of Euro 246.6 million was recorded from the sale of InfOTE, and dividends totaling Euro 15.7 million from Telekom Srbija also affected 2007 results. | |
(6) | Basic earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the relevant period. The number of shares granted under OTE’s previous stock option plans in 2003, 2004, 2005, 2006 and 2007 did not affect diluted earnings per share, since the exercise price of these options is equal to or less than the average price of our shares during the respective years. In 2005, these stock option plans were terminated. No shares were granted under these plans. | |
(7) | Amounts as approved by or proposed to the respective general assemblies of our shareholders to be distributed from each year’s statutory net income. The dividend of Euro 0.75 per share for the year 2007 will be proposed to our general assembly of June 26, 2008; it includes an amount of Euro 0.39 per share, a minimum dividend required under Greek law, which was reflected in our financial statements for the year 2007, with the balance to be reflected in our financial statements for the year 2008. | |
(8) | Because each American Depositary Share represents one-half of one ordinary share, the dividend per share has been divided by two to obtain 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 2007 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/(loss) as a percentage of total revenues. |
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(10) | Net income/(loss) as a percentage of total revenues. | |
(11) | Operating income before depreciation and amortization and the respective percentage margin is a non-GAAP financial measure that helps 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 this non-GAAP financial measure, we also evaluate our performance and results based on operating income and net income 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 this measure or consider it as an alternative to any other measure of performance under generally accepted accounting principles, as it may not be indicative of our historical operating results, nor is it 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 Net Income/(loss) to Operating income before depreciation and amortization. |
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | |||||||||||||||||||
(Euro) | (Euro) | (Euro) | (Euro) | (Euro) | (U.S. $)(1) | |||||||||||||||||||
(Millions) | ||||||||||||||||||||||||
Net income/(loss) | 410.7 | 171.3 | (291.9 | ) | 509.0 | 637.6 | 931.1 | |||||||||||||||||
Plus: | ||||||||||||||||||||||||
Depreciation and amortization | 909.7 | 1,023.1 | 1,053.9 | 1,093.5 | 1,138.6 | 1,662.7 | ||||||||||||||||||
Other income/(expense), net(a) | 82.7 | 112.1 | 21.6 | (68.8 | ) | (118.8 | ) | (173.5 | ) | |||||||||||||||
Income taxes | 377.9 | 120.8 | 32.5 | 441.5 | 388.3 | 567.0 | ||||||||||||||||||
Minority interests | 147.1 | 233.7 | 235.4 | 180.4 | 131.4 | 191.9 | ||||||||||||||||||
Cumulative effect of accounting change | 0.5 | — | — | — | — | — | ||||||||||||||||||
Operating income before depreciation and amortization | 1,928.6 | 1,661.0 | 1,051.5 | 2,155.6 | 2,177.1 | 3,179.2 | ||||||||||||||||||
(a) | Other income/(expense), net includes interest expense, interest income, net foreign exchange gains/(losses), write down of investments, earnings/(losses) from investments and gain/(loss) on sale of investments. |
(12) | Operating income before depreciation and amortization as a percentage of total revenues. | |
(13) | For the purpose of these ratios, “earnings” consist of income before income taxes, minority interests, income or loss from equity investments, amortization of capitalized interest and fixed charges. “Fixed charges” consist of interest expense (including capitalized interest) on all indebtedness. | |
(14) | Includes: |
• | as of December 31, 2003, 2004, 2005, 2006 and 2007, Euro 182.9 million, Euro 170.6 million, Euro 155.1 million, Euro 155.1 million and Euro 155.1 million, respectively, in respect of our 20% interest in Telekom Srbija; and | |
• | as of December 31, 2003, 2004, 2005, 2006 and 2007, Euro 12.9 million, Euro 12.9 million, Euro nil, Euro nil and Euro nil million respectively, in respect of investments in satellite organizations. |
(15) | Net of current portion. | |
(16) | Each ISDN channel is counted as the equivalent of one PSTN access line. | |
(17) | Active lines of ADSL customers of alternative operators, supported by wholesale services provided by our company. |
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Year or Month | Average(1) | High | Low | Period-End | ||||||||||||
2003 | 1.1411 | 1.2597 | 1.0361 | 1.2597 | ||||||||||||
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 | ||||||||||||
2007 December | 1.4559 | 1.4759 | 1.4344 | 1.4603 | ||||||||||||
2008 January | 1.4728 | 1.4877 | 1.4574 | 1.4841 | ||||||||||||
2008 February | 1.4759 | 1.5187 | 1.4495 | 1.5187 | ||||||||||||
2008 March | 1.5520 | 1.5805 | 1.5195 | 1.5805 | ||||||||||||
2008 April | 1.5754 | 1.6010 | 1.5568 | 1.5568 | ||||||||||||
2008 May | 1.5554 | 1.5784 | 1.5370 | 1.5560 |
(1) | The average noon buying rates on the last business day of each month during the relevant year. |
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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; and | |
• | our ability to timely reformulate our policies to conform to market conditions and 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; | |
• | 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 |
• | 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. As of December 27, 2007 we acquired the entire share capital of OTEnet by purchasing the minority interests of an aggregate of 5.41% from minority shareholders of OTEnet, and OTEnet is now in the process of merging with OTE, which is expected to be completed in June 2008. | |
• | In 1998, we acquired 35% of the share capital of RomTelecom, the Romanian telecommunications operator, which in March 2003, we increased to 54.01%. | |
• | In August 2000, we established 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. |
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• | 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 ADSL services. | |
• | In June 2005, we commenced implementing our Voluntary Retirement Scheme, which to date has facilitated the early retirement of 4,759 of our employees. | |
• | In July 2005, we transferred to Cosmote 70% of the share capital of Cosmote Romania, our mobile telephony subsidiary in Romania, and in the third quarter of 2005, we transferred to Cosmote the entire share capital of Globul and Cosmofon (our mobile telephony subsidiaries in Bulgaria and the Former Yugoslav Republic of Macedonia(“FYROM”), respectively); in December 2005, Cosmote Romania re-launched commercial operations. | |
• | Over the course of 2006, Cosmote acquired approximately 99% of Germanos S.A., 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 100% of Cosmote’s shares which ceased trading on the Athens Exchange on April 1, 2008. | |
• | In December 2007, we and OTEnet 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. | |
• | In August 2007 Marfin Investment Group Holdings S.A.(“MIG”), a Greek private equity fund, announced that it had acquired 5.3% of our share capital and on December 31, 2007 the same entity announced that it had increased its interest in our share capital to 18.89%. On February 4, 2008 MIG announced that its interest increased to 19.6%. | |
• | On May 15, 2008, MIG transferred its interest in our share capital of 19.99% to Deutsche Telekom. |
• | in Greece, using GSM 900 and GSM 1800, and 3G and LMDS technology, through Cosmote, our 100%-owned subsidiary, which had 6,286,627 mobile customers in Greece on December 31, 2007, representing a market share of approximately 38.6% of contract and prepaid mobile customers; |
19
• | in Albania, using GSM 900 and GSM 1800 technology, through Cosmote’s 82.45%-indirectly owned subsidiary, AMC, which had 1,195,183 mobile customers in Albania on December 31, 2007; | |
• | in Bulgaria, using GSM 900 and GSM 1800, and 3G and LMDS technology, through Cosmote’s 100%-owned subsidiary, Globul, which had 3,872,922 mobile customers in Bulgaria on December 31, 2007; | |
• | in FYROM, using GSM 900 technology, through Cosmote’s 100%-indirectly owned subsidiary Cosmofon, which had 593,026 mobile customers in FYROM on December 31, 2007; and | |
• | in Romania, using GSM 900 and GSM 1800 technology, through Cosmote’s 70%-owned subsidiary, Cosmote Romania, which had 3,616,274 customers in Romania on December 31, 2007. |
• | mobile telecommunications services; | |
• | broadband infrastructure in our access, transport and core network; | |
• | network simplification and optimization, particularly through implementing advantages offered by the internet Protocol(“IP”) features; | |
• | expansion of the capacity of our transmission network using Dense Wavelength Division Multiplexing(“DWDM”), in order to be able to satisfy increasing demand for high bandwidth services; and | |
• | consolidation of the various network management systems and centralizing the structure of our Network Operating Centers(“NOC”), in order to increase operating efficiency and savings. |
• | continue to gradually upgrade our network; | |
• | focus on and differentiate our products and services by target customer segment (residential and corporate); | |
• | 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 video or mobile) to address market trends; | |
• | expand ourIP-based offerings to corporate customers, focusing particularly on offering information and communication technology(ICT) solutions. | |
• | continue to improve our front-line sales and customer care offerings to increase customer satisfaction; | |
• | leverage our telecommunications infrastructure to expand and increase the profitability of our wholesale business; | |
• | continue to focus on upgrading and optimizing our operating procedures, in order to increase operating efficiency; and |
20
• | 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 maximize revenues and to further enhance profitability, through increased usage, reduction of churning, customer growth, promotion of new services and focused commercial policies; | |
• | in Albania, through AMC: to further enhance growth and increase its post-paid customer base; | |
• | in Bulgaria, through Globul: to further increase customer numbers and enhance profitability; | |
• | in FYROM, through Cosmofon: to increase the customer base; and | |
• | in Romania, through Cosmote Romania: to continue increasing the customer base and achieve operating profitability. |
• | sustain revenues by slowing the decline in usage of both traditional services and the number of lines, through launching new services, such as high-speed internet, and by introducing customer retention schemes with new offers (including, among other things, discounts and free minutes); | |
• | invest in completing network digitalization and upgrading network management, in order to introduce new revenue-enhancing value-added services (including broadband data services, virtual private networks(VPNs) and wholesale data products), particularly for corporate clients; | |
• | promote newly-introduced television and content services; | |
• | reduce operating expenses through focus on efficiency; | |
• | benefit from synergies and leverage our Group resources in the Romanian market by benefiting from our local presence through RomTelecom, Cosmote Romania and Germanos’ operations in Romania; and | |
• | continue to improve customers’ experiences with the service departments. |
• | increasing broadband penetration; | |
• | defending our market share of fixed-line services; | |
• | maximizing our revenues from existing products and services; and | |
• | developing and marketing innovative products and services. |
21
• | PSTN and ISDN access and traffic and value-added services; | |
• | ADSL (broadband) internet access and data services; | |
• | leased lines; | |
• | E-Line; | |
• | IP-based solutions andIP-VPN services; |
22
• | Intelligent Network (IN) services and premium rate services, including special interest chat lines and recordings; and | |
• | public telephone services. |
• | interconnection; | |
• | leased lines; | |
• | E-Line; | |
• | data telecommunications services; | |
• | ADSL; and | |
• | local loop unbundling. |
• | Residential customers department. Our residential customers department is expected to focus on improving our offerings to, and the overall customer experience of, our residential customers, including improving customer care and enhancing the range of our products and services, including through the offering of bundled servicesand/or the offering of integrated or hybrid services, with a particular focus on ADSL-based products. | |
• | Business customers department. Our business customers department is expected to focus on improving our offerings to our large corporate, business and government customers, as well as to small and medium enterprises (SMEs), with a particular focus on providing packaged, integrated and, in some cases, |
23
tailor-made, ICT solutions addressing the needs of particular business customers or customer segments and ongoing technical support. |
As of December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Operating Data (Greece only) | ||||||||||||
Telephony | ||||||||||||
Number of PSTN access lines in service (in thousands) | 4,928 | 4,778 | 4,509 | |||||||||
Number of ISDN channels in services (in thousands) | 1,370 | 1,382 | 1,344 | |||||||||
Total access lines in service (in thousands)(1) | 6,298 | 6,160 | 5,854 | |||||||||
Outgoing international traffic (million minutes) | 806.9 | 827.8 | 923.9 | |||||||||
Incoming international traffic (million minutes) | 795.3 | 840.8 | 818.3 | |||||||||
Data | ||||||||||||
Active ADSL lines (retail) (in thousands) | 101 | 234 | 475 | |||||||||
Active ADSL lines (wholesale) (in thousands)(2) | 50 | 236 | 334 |
(1) | Each ISDN channel is counted as the equivalent of one PSTN access line. | |
(2) | Active lines of ADSL customers of alternative operators, supported by OTE wholesale services. |
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25
• | the regulatory framework, including developments in Greek and European Union regulation of telecommunications services and infrastructure; | |
• | market demand and trends; | |
• | 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; | |
• | the continuing effectiveness of our commercial policies, including the strength and effectiveness of our marketing efforts and our overall ability to address increasing competition; | |
• | 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; and | |
• | our ability to offer attractive new or innovative products, including bundles of products or hybrid or integrated products. |
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27
2005(1) | 2006(2) | 2007 | ||||||||||
(Euro) | ||||||||||||
Connection Charges | 29.34 | 29.34 | 29.34 | |||||||||
Monthly rental charges | 11.90 | 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 August 1, 2005. | |
(2) | As of April 3, 2006. |
(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. |
Dec. 31, | June 1, | |||||||||||||||||||
2004(1) to | June 1(2) to | Dec 1(3) to | From Jan, 1, to | 2007(5) to | ||||||||||||||||
May 31, | Nov. 30, | Dec 31, | May 31, | January 31, | ||||||||||||||||
Mobile Operator | 2006 | 2006 | 2006 | 2007(4) | 2008 | |||||||||||||||
(Euro per minute) | ||||||||||||||||||||
Cosmote | 0.179 | 0.154 | 0.150 | 0.150 | 0.1393 | |||||||||||||||
Vodafone | 0.179 | 0.154 | 0.150 | 0.150 | 0.1397 | |||||||||||||||
Wind Hellas | 0.184 | 0.159 | 0.155 | 0.1585 | 0.1497 | |||||||||||||||
Q-Telecom | 0.229 | 0.204 | 0.20 | 0.1585 | 0.1497 |
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(1) | Our retention fee was reduced from Euro 0.04 to Euro 0.034 per minute as of December 31, 2004. | |
(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. |
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Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Euro (millions) | ||||||||||||
From total international traffic | 391.0 | 346.9 | 304.5 | |||||||||
From total outgoing international traffic | 150.5 | 132.3 | 108.1 | |||||||||
From third parties for incoming and transit traffic | 202.4 | 172.7 | 146.8 | |||||||||
From unaffiliated mobile operators | 38.1 | 41.9 | 49.6 |
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Outgoing: | ||||||||||||
Total outgoing traffic (millions of chargeable minutes) | 806.9 | 827.8 | 923.9 | |||||||||
Growth in outgoing traffic (% per year) | (3.26 | ) | 2.59 | 11.6 | ||||||||
Incoming: | ||||||||||||
Total incoming traffic (millions of chargeable minutes) | 795.3 | 840.8 | 818.3 | |||||||||
Growth in incoming traffic (% per year) | 0.53 | 5.72 | (2.68 | ) |
30
• | consulting on business continuity planning; information security and capacity planning; | |
• | network equipment and applications software supply; | |
• | project management; | |
• | network monitoring; and | |
• | managed services and maintenance contracts. |
• | domain names registration services; | |
• | web site hosting; | |
• | collocation and disaster recovery; | |
• | dedicated servers (lease of hosted equipment); | |
• | managed hosting services; and | |
• | streaming services (audio video streaming through the internet). |
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• | fixed fast internet services for business and residential customers; | |
• | managed network services for leased lines and VPN customers; and | |
• | monitoring and alerting services for co-location services. |
32
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
(Euro in millions) | ||||||||||||
Total Revenues | 925.7 | 891.0 | 868.7 | |||||||||
Operating Profit | 132.4 | 137.9 | 60.5 | |||||||||
Net Income | 237.9 | 102.3 | 23.5 | |||||||||
Our share in RomTelecom’s net income | 128.5 | 55.3 | 12.8 |
33
34
• | 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. |
35
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, HSDPA technology, including 3G i-mode® services 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. During 2007 Cosmote expanded and upgraded the availability of wireless internet services throughout the country. | |
• | 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. |
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37
• | 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 voice and 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 maximize revenues, through increased usage, customer growth, promotion of new services and focused commercial policies and to further enhance profitability; | |
• | in Albania, through AMC: to further enhance growth and increase its contract customer base; | |
• | in Bulgaria, through Globul: to further increase customer numbers and profit margins; | |
• | in FYROM, through Cosmofon: to increase its customer base; and | |
• | in Romania, through Cosmote Romania: to continue the rapid increase of the customer base, and achieve operating profitability on a full-year basis. |
• | standard voice services and voice call services; | |
• | messaging services, such as SMS and MMS; |
38
• | international and roaming services; | |
• | value-added services, such as voicemail, call diversion and caller identification(“CLIP”); | |
• | internet browsing on the move through 3G HSDPA, GPRS and WLAN technologies; | |
• | mobile internet services, including i-mode®; and | |
• | advanced value-added services using WAP, SIM microbrowser, voice recognition and GPRS technologies. |
• | a network of commercial representatives/distributors; | |
• | 24 Cosmote-branded stores, including 14 in Athens and three in Thessaloniki; | |
• | 383 OTEShops throughout Greece; | |
• | 417 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. |
39
• | 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 — being 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” pursuant to which each operator’s termination charges must be gradually reduced to the level of cost through three predetermined stages over a10-month period, each operator’s termination cost being determined by a series of Long Run Incremental Cost(“LRIC”) models formulated by the EETT; | |
• | provision of access; | |
• | transparency; | |
• | non-discrimination; | |
• | accounting separation (to be subject to a separate consultation exercise); and | |
• | publication of a Reference Interconnection Offer(“RIO”). |
From Oct. 1, | From June 1, | From Jan. 1, | From June 1, | From Feb. 1, | ||||||||||||||||
2004 to May 31, | 2006 to Dec. 31, | 2007 to May 31, | 2007 to Jan. 31, | 2008 to June 30, | ||||||||||||||||
2006(1) | 2006(1) | 2007 | 2008 | 2008 | ||||||||||||||||
(Euro per minute) | ||||||||||||||||||||
Mobile operator | ||||||||||||||||||||
Vodafone | 0.1450 | 0.1200 | ||||||||||||||||||
0.1174 | 0.1067 | 0.0989 | ||||||||||||||||||
Wind Hellas | 0.1450 | 0.1200 | 0.1174 | 0.1067 | 0.0989 | |||||||||||||||
Q-Telecom(2) | 0.1450 | 0.1200 | 0.1174 | 0.1067 | 0.0989 |
(1) | A minimum duration charge of 30 seconds applies. | |
(2) | Q-Telecom merged with Wind Hellas in January 2007. |
From Oct. 1, | From June 1, | From Jan. 1, | From June 1, | |||||||||||||||||
2004 to May 31, | 2006 to Dec. 31, | 2007 to May 31, | 2007 to Jan. 31, | From Feb. 1, | ||||||||||||||||
2006(1) | 2006 | 2007 | 2008 | 2008 | ||||||||||||||||
(Euro per minute) | ||||||||||||||||||||
Mobile operator | ||||||||||||||||||||
Vodafone | 0.1450 | 0.1200 | 0.1174 | 0.1071 | 0.0991 | |||||||||||||||
Wind Hellas | 0.1500 | 0.1250 | 0.1259 | 0.1171 | 0.1041 | |||||||||||||||
Q-Telecom(2) | 0.1950 | 0.1700 | 0.1259 | 0.1171 | 0.1041 |
(1) | A minimum duration charge of 30 seconds applies. | |
(2) | Q-Telecom merged with Wind Hellas in January 2007. |
40
From Oct. 1, | From June 1, | From Jan. 1, | From June 1, | From Feb. 1, | ||||||||||||||||
2004 to May 31, | 2006 to Dec. 31, | 2007 to May 31, | 2007 to Jan. 31, | 2008 to June 30, | ||||||||||||||||
2006(1) | 2006(1) | 2007 | 2008 | 2008 | ||||||||||||||||
(Euro per minute) | ||||||||||||||||||||
Fixed operator (OTE or other) | 0.1450 | 0.1200 | 0.1174 | 0.1067 | 0.0989 |
(1) | A minimum duration charge of 30 seconds applies. |
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 | 0.0048 | 0.0048 | 0.0037 | ||||||||||||
Single transit/minute | 0.0085 | 0.0079 | 0.0079 | 0.0062 | ||||||||||||
Double transit/minute | 0.0106 | 0.0100 | 0.0100 | 0.0079 |
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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 free 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 free minutes) and additional charges for outgoing calls above the free 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. | |
• | 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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44
45
For the Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
(Euro in millions) | ||||||||||||
AMC | ||||||||||||
Revenues | 137.6 | 151.0 | 176.2 | |||||||||
Operating Income | 60.0 | 66.0 | 84.6 | |||||||||
Net income | 41.5 | 49.9 | 60.9 | |||||||||
Net income attributed to our consolidated net income | 22.0 | 27.6 | 45.6 |
46
For the Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007(1) | ||||||||||
(Euro in millions) | ||||||||||||
Globul | ||||||||||||
Revenues | 274.1 | 342.3 | 412.1 | |||||||||
Operating income | 43.1 | 53.3 | 73.4 | |||||||||
Net income | 26.3 | 32.4 | 53.2 |
Note: |
(1) | As of December 31, 2007, Globul had 3,872,922 mobile customers in Bulgaria. |
47
For the Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
(Euro in millions) | ||||||||||||
Cosmofon | ||||||||||||
Revenues | 40.4 | 53.7 | 62.2 | |||||||||
Operating income/(loss) | (10.7 | ) | (5.5 | ) | 2.8 | |||||||
Net income/(loss) | (12.8 | ) | (8.0 | ) | 0.1 |
48
For the Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
(Euro in millions) | ||||||||||||
Cosmote Romania | ||||||||||||
Revenues | 8.0 | 43.8 | 155.6 | |||||||||
Operating income/(loss) | (41.1 | ) | (93.7 | ) | (88.3 | ) | ||||||
Net income/(loss) | 79.7 | (1) | (91.6 | ) | (118.4 | ) |
Note: |
(1) | Includes a gain of approximately Euro 119 million in connection with the extinguishment of suppliers’ liabilities relating to the settlement of relevant disputes in 2005. |
49
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 | 0.0048 | 0.0048 | 0.0037 | ||||||||||||
Single transit/minute | 0.0085 | 0.0079 | 0.0079 | 0.0062 | ||||||||||||
Double transit/minute | 0.0106 | 0.0100 | 0.0100 | 0.0079 |
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 |
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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 () capacity from Greece to London and other major European cities; | |
• | indefeasible rights of use (IRU) for long-term leasing of international circuits; | |
• | international private leased circuits (half circuits). |
51
• | international managed clear channel; | |
• | internet transit for carriers; | |
• | international managed MPLS and VPN services; and | |
• | wholesale 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 | |
• | developing strategic partnerships and participating in infrastructure development projects in the region. |
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53
ADSL Price Evolution (Conn-X) | ||||||||||||||||||||||||||||||||
Month | 384 Kbps | 512 Kbps | 768 Kbps | 1 Mbps | 2 Mbps | 4 Mbps | 8 Mbps | Up to 24 Mbps | ||||||||||||||||||||||||
(Euro) | ||||||||||||||||||||||||||||||||
January 2006 | 24.90 | 36.90 | — | 62.90 | — | — | — | — | ||||||||||||||||||||||||
March 2006 | 22.50 | 28.50 | — | 47.50 | — | — | — | — | ||||||||||||||||||||||||
August 2006 | 22.50 | 22.50 | — | 47.50 | — | — | — | — | ||||||||||||||||||||||||
November 2006 | — | — | 19.50 | 25.90 | 39.90 | — | — | — | ||||||||||||||||||||||||
February 2007 | — | — | 18.50 | 23.50 | 35.90 | — | — | — | ||||||||||||||||||||||||
May 2007 | — | — | 18.50 | 21.50 | 29.50 | 38.50 | 48.50 | — | ||||||||||||||||||||||||
December 2007 | — | — | — | 16.50 | 19.50 | 22.50 | 26.90 | 29.90 |
Notes: |
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• | constant bit rate(“CBR”), which is specified so that data is sent in a steady stream; this rate is appropriate for real-time applications requiring high quality of service, such as teleconference, and is analogous to a leased line; | |
• | real-time variable bit rate(“rt-VBR”), which is specified so that data is sent in bursts rather than in a steady stream; this rate is appropriate for real-time applications requiring a high quality of service, such as packetized voice and compressed video; |
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• | non-real-time-VBR, which is equivalent to rt-VBR, but appropriate for non-real-time applications requiring a lower quality of service; and | |
• | unspecified bit rate(“UBR”), which does not guarantee any throughput levels and is appropriate for non-real- time applications with no quality of service requirements, such as file transfers. |
57
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• | “134”, our sales and customer service channel for residential and small 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 18,500 orders in 2007; | |
• | “www.whitepages.gr”, our site for telephone directory services, which had 11 million visits in 2007; | |
• | “11888”, voice telephony directory services and entertainment information, which received approximately 45 million calls in 2007 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 68 million calls in 2007; | |
• | “1502”, our citizen service center; | |
• | “112”, the pan-European emergency call number; and | |
• | www.otewholesale.gr, our electronic shop for wholesale services offered to other operators and ISPs. |
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• | the GSM Network in FYROM for Cosmofon (completed December 2006) and the GSM network extension for ArmenTel (completed on November 16, 2006); | |
• | support to OTE for restoration of cable faults, implementation of new telephone connections and execution of structured cabling projects for OTE customers; and | |
• | medical information systems for hospitals in the region of Thessalia, Greece. |
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• | supporting and enhancing our new IT-intensive value-added services relating to broadband, IP and content; | |
• | improving the infrastructure of our information systems, including with the implementation of a new Data Center and Disaster Recovery site; and | |
• | expanding the implementation of our information systems in the areas of wholesale support systems, OSS, CRM, Security, BI, Service Delivery Platform (SDP) and ERP. |
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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. | |
• | 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, while our claim was adjourned until November 13, 2008. |
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• | 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’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 case is still pending. | |
• | 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 rescheduled for November 13, 2008. |
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• | Directive 2002/19/EC on access to, and interconnection of, electronic communications networks and associated facilities (the“Access Directive”); | |
• | 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 European Union’s internal market in a converging technological environment). |
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• | 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; | |
• | 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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• | the free provision of networks and electronic communications services, under the protection of public security, interests and health; | |
• | the development of free competition and equality; | |
• | the development of the internal market; | |
• | the development of users’ interests; and | |
• | the protection of users’ personal data. |
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• | to develop, install, use and manage any microwave multipoint distribution systems for radio and television signals; | |
• | to develop, install, use and manage any kind of transmission infrastructure for a cable television network; and | |
• | to provide cable television services, including the distribution of television programs via cable, which right had previously been granted exclusively to us and ERT, the Greek State television network. |
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Equity | |||||||||
Name | Country of Incorporation | Participation | Type of Business | ||||||
OTE International Solutions S.A.(“OTEGlobe”) | Greece | 100.0 | % | Wholesale telephony services | |||||
OTEnet S.A.(“OTEnet”) | Greece | 100.0 | % | Internet services | |||||
Voicenet S.A. | Greece | 84.07 | %(1) | Internet protocol services | |||||
OTE Estate S.A.(“OTE Estate”) | Greece | 100.0 | % | Real estate | |||||
Hellascom International S.A.(“Hellascom”) | Greece | 100.0 | % | Telecommunication services | |||||
OTESAT-Maritel S.A.(“OTESAT-Maritel”) | 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 | %(2) | Internet and IT |
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Equity | |||||||||
Name | Country of Incorporation | Participation | Type of Business | ||||||
Lofos Pallini S.A. | Greece | 33.0 | % | Project management | |||||
CosmoONE Hellas Market Site S.A.(“Cosmo one”) | Greece | 58.87 | %(3) | E-commerce services | |||||
EDEKT — OTE S.A. | Greece | 40.0 | % | Pension fund | |||||
OTE International Investments Limited | Cyprus | 100.0 | % | Investment holding company | |||||
Albanian Mobile Communications Sh.a(“AMC”) | Albania | 74.80 | %(4) | Mobile telecommunications services | |||||
Trans Jordan Telecommunications Services Company Ltd. | Jordan | 50.0 | %(5) | Telephony Services provided including telecards | |||||
Yemen Public Payphone | Yemen | indirect | (6) | Payphone operator | |||||
OTEnet Cyprus Ltd. | Cyprus | 76.33 | %(7) | Investment holding company | |||||
OTEnet Telecommunications ltd | Cyprus | 71.61 | %(8) | Telecommunication services | |||||
OTE Investment Services S.A. | Greece | 100.0 | %(9) | Consulting Services/Local & International investments | |||||
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 | 90.72 | (10) | Mobile telecommunications services | |||||
Cosmofon Mobile Telecommunications Services AD Skopje(“Cosmofon”) | Former Yugoslav Republic of Macedonia | 90.72 | %(10) | Mobile telecommunications services | |||||
OTE MTS Holding BV | Holland | 90.72 | %(10) | Investment Holding Company | |||||
Cosmote Romania S.A. (previously named Cosmorom)(“Cosmote Romania”) | Romania | 79.71 | %(11) | Mobile telecommunications services | |||||
HATWAVEHellenic-American Telecommunications Wave Ltd.(“Hatwave”) | Cyprus | 52.67 | % | Holding company | |||||
Telekom Srbija | Serbia | 20.0 | % | Public telephony operator — fixed and mobile telephony, ISP | |||||
OTEplus Technical and Business Solutions S.A.(“OTEplus”) | Greece | 100.0 | % | Consulting Services | |||||
OTEplus Bulgaria EAD | Bulgaria | 100.0 | %(12) | Consulting Services | |||||
OTEplus Romania SRL | Romania | 100.0 | %(13) | Consulting Services | |||||
DIERGASIA Interim Employment S.A. | Greece | 100.0 | %(14) | Interim Employment Services | |||||
OTE ACADEMY S.A.(“OTE Academy”) | Greece | 100.0 | % | Training Services | |||||
Cosmoholding Cyprus Ltd.(“Cosmoholding Cyprus”) | Cyprus | 81.65 | %(15) | Investment holding company |
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Equity | |||||||||
Name | Country of Incorporation | Participation | Type of Business | ||||||
Germanos S.A.(“Germanos”) | Greece | 81.65 | %(15) | Retail services | |||||
E-Value S.A. | Greece | 81.65 | %(16) | Services Company | |||||
Germanos Telecom S.A. — Skopje | Skopje | 81.65 | %(16) | Commerce | |||||
Germanos Telecom Romania S.A(“Germanos Romania”) | Romania | 81.64 | %(16) | Commerce | |||||
Sunlight Romania SRL — Filiala | Romania | 81.64 | %(16) | Commerce | |||||
Germanos Telecom Bulgaria AD | Bulgaria | 81.65 | %(16) | Commerce | |||||
Mobilbeeep Ltd. | Greece | 81.65 | %(16) | Commerce | |||||
Grigoris Mavromichalis and Partners Limited Company | Greece | 80.82 | %(16) | Commerce | |||||
Joannis Tsaparas and Partners Limited Company | Greece | 41.64 | %(16) | Commerce | |||||
TelSIM SRL | Romania | 81.65 | %(16) | Commerce | |||||
Cosmo-Holding Albania S.A.(“CHA”) | Albania | 88.00 | % | Investment Holding Company | |||||
Mobile Telecommunications ALBATROS and Partners Limited Company | Greece | 81.64 | % | Commerce |
(1) | An interest of 84.07% is indirectly owned through OTEnet S.A. | |
(2) | Under liquidation. | |
(3) | We and Cosmote each hold a 30.87% equity interest. | |
(4) | Effective interest of 74.80% held through Cosmote and its 97% -owned subsidiary CHA. | |
(5) | Under liquidation; we hold a direct interest of 40.0% and an indirect interest of 10.0% through Hellascom. | |
(6) | 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. | |
(7) | Our effective interest is 76.33% (60% is owned by OTEnet and 20% is owned by Germanos). | |
(8) | Our effective interest is 71.61%. | |
(9) | Subsidiary of OTE International Investments Limited. | |
(10) | Our effective interest is 90.72% through Cosmote. | |
(11) | Our effective interest is 79.71% (70.0% is owned by Cosmote and 30% is owned by RomTelecom). | |
(12) | Our effective interest is 100% (100% is owned by OTEplus). | |
(13) | Under liquidation since February 2007. Our effective interest is 100% (100% is owned by OTEplus). | |
(14) | Our effective interest is 100% (100% is owned by OTEplus). | |
(15) | We own these interests indirectly. | |
(16) | These companies are owned by Germanos. |
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ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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2005 | 2006 | 2007 | ||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
Euro | Revenues(1) | Euro | Revenues(1) | Euro | Revenues(1) | |||||||||||||||||||
(Euro in millions, other than percentage and operating data) | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Domestic telephony(2) | 2,308.1 | 42.2 | 2,256.7 | 38.3 | 2,019.1 | 32.0 | ||||||||||||||||||
International telephony(3) | 391.0 | 7.1 | 346.9 | 5.9 | 304.5 | 4.8 | ||||||||||||||||||
Mobile telephony services | 1,756.7 | 32.1 | 1,975.8 | 33.6 | 2,210.0 | 35.0 | ||||||||||||||||||
Other revenues(4) | 1,015.2 | 18.6 | 1,308.0 | 22.2 | 1,783.1 | 28.2 | ||||||||||||||||||
Total revenues | 5,471.0 | 100.0 | 5,887.4 | 100.0 | 6,316.7 | 100.0 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Payroll and employee benefits | (1,323.0 | ) | 24.2 | (1,260.8 | ) | 21.4 | (1,243.1 | ) | 19.7 | |||||||||||||||
Charges for Voluntary Retirement Scheme(5) | (939.6 | ) | 17.2 | 9.5 | 0.2 | (60.9 | ) | 1.0 | ||||||||||||||||
Charges from international operators | (217.9 | ) | 4.0 | (208.8 | ) | 3.6 | (216.4 | ) | 3.4 | |||||||||||||||
Charges from domestic operators | (665.5 | ) | 12.1 | (720.9 | ) | 12.2 | (655.3 | ) | 10.4 | |||||||||||||||
Depreciation and amortization | (1,053.9 | ) | 19.2 | (1,093.5 | ) | 18.6 | (1,138.6 | ) | 18.0 | |||||||||||||||
Extinguishment of liabilities(5) | 23.8 | 0.4 | — | — | — | — | ||||||||||||||||||
Cost of telecommunications equipment(6) | (180.7 | ) | 3.3 | (363.5 | ) | 6.2 | (672.8 | ) | 10.7 | |||||||||||||||
Other operating expenses(6) | (1,116.6 | ) | 20.4 | (1,187.3 | ) | 20.1 | (1,291.1 | ) | 20.4 | |||||||||||||||
Total operating expenses | (5,473.4 | ) | 100.0 | (4,825.3 | ) | 82.0 | (5,278.2 | ) | 83.6 | |||||||||||||||
Operating income | (2.4 | ) | 0.0 | 1,062.1 | 18.0 | 1,038.5 | 16.4 | |||||||||||||||||
Other income/(expense): | ||||||||||||||||||||||||
Interest expense | (164.5 | ) | 3.0 | (208.9 | ) | 3.5 | (230.9 | ) | 3.7 | |||||||||||||||
Interest income | 53.9 | 1.0 | 70.8 | 1.2 | 77.8 | 1.2 | ||||||||||||||||||
Foreign exchange gains | 41.2 | 0.7 | 14.6 | 0.2 | 10.6 | 0.2 | ||||||||||||||||||
Earnings/(losses) from investments(5) | 20.0 | 0.4 | 22.9 | 0.4 | 16.5 | 0.3 | ||||||||||||||||||
Gain on sale of investments(5) | 30.7 | 0.5 | 180.2 | 3.1 | 261.4 | 4.1 | ||||||||||||||||||
Other expense, net | (2.9 | ) | 0.0 | (10.8 | ) | 0.2 | (16.6 | ) | 0.3 | |||||||||||||||
(21.6 | ) | 0.4 | 68.8 | 1.2 | 118.8 | 1.9 | ||||||||||||||||||
Income/(loss) before income taxes and minority interests | (24.0 | ) | 0.4 | 1,130.9 | 19.2 | 1,157.3 | 18.3 | |||||||||||||||||
Income taxes | (32.5 | ) | 0.6 | (441.5 | ) | 7.5 | (388.3 | ) | 6.1 | |||||||||||||||
Income/(loss) before minority interests | (56.5 | ) | 1.0 | 689.4 | 11.7 | 769.0 | 12.2 | |||||||||||||||||
Minority interest | (235.4 | ) | 4.3 | (180.4 | ) | 3.1 | (131.4 | ) | 2.1 | |||||||||||||||
Net income/(loss) | (291.9 | ) | 5.3 | 509.0 | 8.6 | 637.6 | 10.1 |
2005 | 2006 | 2007 | ||||||||||
Operating Data:(7) | ||||||||||||
Number of PSTN access lines in service (in thousands) | 4,928 | 4,778 | 4,509 | |||||||||
Number of ISDN channels in service (in thousands) | 1,370 | 1,382 | 1,344 | |||||||||
Total access lines in service (in thousands)(8) | 6,298 | 6,160 | 5,854 | |||||||||
Lines connected to digital exchanges (% of number of access lines installed) | 100.0 | 100.0 | 100 | |||||||||
Outgoing international traffic (million minutes)(9) | 806.9 | 827.8 | 923.9 | |||||||||
Incoming international traffic (million minutes)(9) | 795.3 | 840.8 | 818.3 |
(1) | Refers to the percentage of total consolidated revenues. |
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(2) | Includes charges to customers on outgoing calls to customers of unaffiliated mobile telephony operators of approximately Euro 267.8 million in 2007, Euro 342.6 million in 2006 and Euro 376.8 million in 2005. Includes revenues from monthly rental charges, revenues from fixed-to-fixed and fixed-to-mobile calls and other revenues from domestic telephony services. | |
(3) | Includes revenues from incoming, including transit, and outgoing traffic, gross of amounts charged by foreign telephony operators, and payments we receive from unaffiliated domestic mobile telephony operators for international calls. The respective revenues from our consolidated subsidiaries providing mobile services are eliminated upon consolidation. | |
(4) | Includes telecard sales, leased lines and data telecommunications, services rendered, directory services, interconnection charges, radio telecommunications, audiotex, telex and telegraphy, internet services, ATM, ISDN and sales of telecommunication equipment. | |
(5) | In 2005, we took a charge of Euro 914.5 million, representing the cost of the Voluntary Retirement Scheme. Furthermore, a gain of Euro 23.8 million was recorded relating to the extinguishment of liabilities from suppliers, in addition to dividends totaling Euro 19.4 million from Telekom Srbija and Eutelsat and gains totaling Euro 25.1 million from the sale of certain available for sale marketable securities and from the sale of our participation in Eutelsat. In 2006, we recorded an amount of Euro 9.5 million as a reduction of the estimated cost of the Voluntary Retirement Program, as 100 fewer employees were actually participating in the program, partially offset by a provision 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 pre-tax gain of Euro 164.0 million was recorded from the sale of ArmenTel. Dividends totaling Euro 21.6 million from Telekom Srbija and gains of Euro 10.3 million from sale of certain available for sale securities affected this year’s results. In 2007, we took a provision of Euro 38.8 million in connection with the interest rate (which was below market rates) that we charged on the loan granted to the Auxiliary Fund in connection with the Voluntary Retirement Scheme. Furthermore we took a charge of Euro 22.1 million relating to the employees who participated in the early retirement program of 2007. Finally, a pre-tax gain of Euro 246.6 million was recorded from the sale of InfOTE, and dividends totaling Euro 15.7 million from Telekom Srbija also affected 2007 results. | |
(6) | In 2006, “Cost of telecommunications equipment” was reclassified from “Other operating expenses” as previously reported and is presented as a separate line item. Furthermore, amount of Euro 42.8 in 2005 were classified from “other operating expenses” to “charges from international operators.” | |
(7) | As of the end of the relevant period, unless otherwise indicated. For Greece only. | |
(8) | Each ISDN channel is counted as the equivalent of one PSTN access line. | |
(9) | For the relevant period. |
• | Revenues derived from the provision of fixed-line domestic telephony represented 32.0% of our total revenues in 2007, as compared to 38.3% in 2006 and 42.2% in 2005; | |
• | Revenues derived from the provision of fixed-line international telephony represented 4.8% of our total revenues in 2007, as compared to 5.9% in 2006 and 7.1% in 2005; | |
• | Revenues from mobile telephony services represented 35.0% of our revenues in 2007, compared to 33.6% in 2006 and 32.1% in 2005; and | |
• | Other revenues represented 28.2% of our revenues in 2007, compared to 22.2% in 2006 and 18.6% in 2005. |
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Year Ended December 31, | ||||||||||||||||
% of Total | ||||||||||||||||
2005 | 2006 | 2007 | 2007 | |||||||||||||
(Euro in millions, except percentages) | ||||||||||||||||
Domestic Telephony: | ||||||||||||||||
Call charges(1) | 1,274.8 | 1,172.8 | 943.8 | 46.7 | ||||||||||||
Monthly rental charges | 950.1 | 991.8 | 985.0 | 48.8 | ||||||||||||
Other | 83.2 | 92.1 | 90.3 | 4.5 | ||||||||||||
Total domestic telephony services | 2,308.1 | 2,256.7 | 2,019.1 | 100.0 |
(1) | Includes charges to customers on outgoing calls to customers of unaffiliated mobile telephony operators of Euro 267.8 million in 2007, Euro 342.6 million in 2006 and Euro 376.8 million in 2005 (representing 13.3%, 15.2% and 16.3% of domestic telephony revenues in 2007, 2006 and 2005, 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 | ||||||||||||||||
2005 | 2006 | 2007 | 2007 | |||||||||||||
(Euro in millions, except percentages) | ||||||||||||||||
Outgoing traffic | 150.5 | 132.3 | 108.1 | 35.5 | ||||||||||||
Incoming and transit traffic(1) | 202.4 | 172.7 | 146.8 | 48.2 | ||||||||||||
Payments from mobile operators | 38.1 | 41.9 | 49.6 | 16.3 | ||||||||||||
Total | 391.0 | 346.9 | 304.5 | 100.0 | ||||||||||||
(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, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Outgoing: | ||||||||||||
Total outgoing traffic (millions of minutes) | 806.9 | 827.8 | 923.9 | |||||||||
Growth in outgoing traffic (% per annum) | (3.26 | ) | 2.59 | 11.6 | ||||||||
Incoming: | ||||||||||||
Total incoming traffic (millions of minutes) | 795.3 | 840.8 | 818.3 | |||||||||
Growth in incoming traffic (% per annum) | 0.53 | 5.72 | (2.68 | ) |
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Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
(Euro in millions) | ||||||||||||
Prepaid cards | 126.6 | 100.6 | 76.2 | |||||||||
Directory services | 56.1 | 58.0 | 55.1 | |||||||||
Leased lines and data communications/ATM | 234.5 | 246.1 | 274.9 | |||||||||
ISDN | 141.4 | 158.9 | 166.1 | |||||||||
Sales of telecommunications equipment | 107.7 | 341.6 | 679.8 | |||||||||
Internet services/ADSL | 81.0 | 133.1 | 227.9 | |||||||||
Services rendered | 72.3 | 74.9 | 94.6 | |||||||||
Interconnection charges | 101.7 | 96.8 | 108.2 | |||||||||
Miscellaneous | 93.9 | 98.0 | 100.3 | |||||||||
Total other revenues | 1,015.2 | 1,308.0 | 1,783.1 | |||||||||
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Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
(Euro in millions) | ||||||||||||
Net cash provided by operating activities | 1,584.5 | 1,781.8 | 1,392.7 | |||||||||
Net cash used in investing activities | (926.7 | ) | (2,296.8 | ) | (2,723.0 | ) | ||||||
Net cash provided by/(used in) financing activities | (13.4 | ) | 1,052.2 | 603.3 | ||||||||
Effect of exchange rate changes on cash | (2.5 | ) | (6.9 | ) | (0.8 | ) | ||||||
Net increase/(decrease) in cash and cash equivalents | 641.9 | 530.3 | (726.2 | ) |
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Principal | Maturity | ||||||||||
Type of Loan | Amount | Interest Rate | Date | ||||||||
(Euro in millions) | |||||||||||
Global Medium Term Note (Euro 1,250 million) | 1,244.5 | 5 | % | 2013 | |||||||
Global Medium Term Note (Euro 900 million) | 893.5 | 4.625 | % | 2016 | |||||||
Global Medium Term Note (Euro 650 million) | 631.0 | 3.75 | % | 2011 | |||||||
Global Medium Term Note (Euro 600 million) | 600.0 | EURIBOR + 0.28 | % | 2009 | |||||||
OTE plc’s Syndicated Credit facility (Term Loan) | 500.0 | EURIBOR + 0.225 | % | 2012 | |||||||
European Investment Bank Loan | 36.4 | 8.3 | % | 2009 | |||||||
Bridge Facility Consortium Loan | 1,500.0 | EURIBOR + 0.30 | % | 2011 | |||||||
Other bank loans (long-term) | 133.7 | Various | Various | ||||||||
Short-term borrowings | 3.2 | Various | 2008 | ||||||||
Total | 5,542.3 |
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• | Connection charges: Connection charges for the fixed network are deferred and amortized to income over the estimated service life of a customer. No connection fees are charged for mobile services. | |
• | Domestic monthly network service fees: Revenues related to the monthly network service fees, net of credits and discounts, are recognized in the month that the telecommunication service is provided. Unearned revenues are included in “Deferred revenue” in the accompanying consolidated balance sheets. | |
• | Domestic local and long-distance calls: Revenues for local and long-distance calls are recognized based on traffic generated by the caller, the destination of the call and the service utilized based on the telephony tariffs. Unbilled revenues from the billing cycle date to the end of each period are estimated based on traffic. | |
• | International telephony revenues: International telephony revenues include outgoing, international calls which are reported gross of amounts payable by the Group to foreign telephony operators for termination of calls on their networks since the credit and collection risk remains solely with the Group. International telephony revenues also include incoming and transit traffic from foreign telephony operators routed through the Group’s fixed network as well as payments from mobile operators generated from their networks and routed through the Group’s fixed networks. International telephony revenues are recognized based on traffic generated by the caller at the telephony tariff international settlement rates under bilateral settlement agreements. | |
• | Mobile telephony: Mobile telephony fees consist of fees based on usage of airtime generated by the caller, the destination of the call and the service utilized. Revenues for usage charges are recognized in the period when the services are provided. Interconnection fees due from other mobile operators for mobile-to-mobile calls originating from their network are recognized based on incoming traffic and established interconnection rates. Unbilled revenues from the billing cycle date to the end of each period are estimated based on traffic. | |
• | Mobile telephony prepaid airtime cards: Revenues from prepaid airtime cards, net of discounts allowed, are recognized based on airtime usage. Unused airtime is included in “Deferred revenue” in the |
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accompanying consolidated balance sheets. All prepaid airtime cards have a contractual life of two years or less. The majority of deferred revenue from all categories of prepaid airtime cards is used within the following year. Upon the expiration of prepaid airtime cards, any unused airtime is recognized to income. |
• | Traditional prepaid cards: Revenues from traditional prepaid cards, net of discounts allowed, are recognized based on usage. Unused traffic is included in “Deferred revenue” in the accompanying consolidated balance sheets. All traditional prepaid cards have a contractual life of two years or less. The majority of deferred revenue from all categories of traditional prepaid cards is used within the following year. Upon the expiration of the traditional prepaid cards, any unused traffic is recognized as income. | |
• | Directories: Revenues from directory services consist of fees from advertising and are recognized in the period when the respective services are provided. | |
• | Radio communications: Revenues from radio communications are recognized based on traffic. | |
• | Audiotex: Audiotex revenues are recognized based on traffic. | |
• | Telex and telegraphy: Revenues from telex and telegraphy are recognized in the period when the services are provided. | |
• | Leased lines and data telecommunications: Revenues from leased lines and data telecommunications are recognized in the period when the services are provided. | |
• | Integrated Services Digital Network: Revenues related to the ISDN monthly rental charges, net of credits and discounts, are recognized in the month that the telecommunication service is provided. | |
• | Sales of telecommunication equipment: Revenues from the sale of telecommunications equipment consist mainly of handsets and accessories. Revenues, net of discounts, are recognized at point of sale. Handsets that are offered in mobile telephone packages have been determined to be revenue arrangements with multiple deliverables (such as handset sale and ongoing services). Total consideration received in these arrangements is allocated and measured using units of accounting within the arrangement based on relative fair values. | |
• | Internet Services: Revenues related to the monthly internet access charges, net of credits and discounts, are recognized in the month that the internet service is provided. | |
• | Asynchronous Transfer Mode (ATM): Revenues from asynchronous transfer mode services are recognized in the period when the services are provided. | |
• | Services rendered: Revenues are recognized in the period when the services are provided. | |
• | Interconnection charges: Interconnection charges represent call termination fees from domestic mobile operators and other domestic fixed-line operators. Interconnection fees are recognized based on traffic. |
• | Discounts, Commissions, Subsidies: Cosmote’s Master Dealer sales channel consists of a network of commercial representatives and distributors. Airtime and acquisition commission costs due to the Group’s Master Dealers for each customer acquired through their sales channel are expensed as incurred. Commissions paid for the renewal of each contract customer initially acquired by the Master Dealers as well as bonuses paid to Master Dealers in respect of contract customers who renew their annual contracts, are deferred and amortized to expense over the contract period. Bonuses for the achievement of mutually agreed targets and commissions based on revenues billed to each customer acquired by the Master Dealers are expensed as incurred. Discounts, representing the difference between the wholesale price of prepaid cards and boxes (consisting of handsets and prepaid airtime) to the Group’s Master Dealers, and the retail sale price to the ultimate customers, are deducted from the respective revenue. | |
• | Connection costs: Connection costs for the fixed network are deferred and amortized to expense over the estimated service life of a customer. |
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• | Advertising costs: Advertising costs are expensed as incurred. | |
• | Research and development costs: Research and development costs are expensed as incurred. | |
• | Charges from international and domestic operators: Charges from international and domestic operators are expensed as incurred. |
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• | Metropolitan Ethernet technologies and services; | |
• | Next Generation SDH technologies; | |
• | VDSL2 and fiber-to-the-building technologies; | |
• | Security and Environmental Monitor of Outdoor Distributing Cabinets; | |
• | Voice over IP for VPNs and Voice over xDSL; |
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• | IPTV; | |
• | IMS platform and next generation service enablers; | |
• | WiMAX and HSPA pilot network; and | |
• | Fixed and mobile integration technologies. |
• | DESEREC (Dependable Security by Enhanced Reconfigurability) aims to increase the dependability of critical open and interconnected information systems by a multi-disciplinary, coordinated effort; | |
• | REWIND (RElay based WIreless Network and standard) aims to develop a “smart” WiMAX repeater fully utilizing all advanced capabilities WiMAX offers; | |
• | FUTTON (Fibre 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. |
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Payments Due by Maturity at December 31, 2007 | ||||||||||||||||||||
Less Than | More Than | |||||||||||||||||||
Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
(Euro in millions) | ||||||||||||||||||||
Total Debt Obligations | 5,542.3 | 86.5 | 668.5 | 2,623.4 | 2,163.9 | |||||||||||||||
Purchase Obligations | 169.0 | 165.0 | 3.8 | 0.1 | 0.1 | |||||||||||||||
Operating Lease Obligations | 744.0 | 109.4 | 148.3 | 152.2 | 334.0 | |||||||||||||||
Unrecognized tax benefits | 78.3 | 73.3 | 5.0 | — | — | |||||||||||||||
Mandatorily redeemable shares | 144.5 | — | 144.5 | — | — | |||||||||||||||
Total | 6,678.1 | 434.2 | 970.1 | 2,775.7 | 2,498.0 | |||||||||||||||
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ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
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Name | Position | Capacity | Appointed | Expiry(1) | Age | |||||||||
Panagis Vourloumis | Chairman/ Managing Director | Executive | June 21, 2007 | 2010 | 71 | |||||||||
Iakovos G. Georganas | Vice-Chairman | Non-Executive | June 16, 2005 | 2008 | 76 | |||||||||
Panagiotis Tampourlos | Director | Independent | June 21, 2007 | 2010 | 56 | |||||||||
Nikos Stefanou | Director | Non-Executive | June 21, 2007 | 2010 | 46 | |||||||||
George Tzovlas | Director | Independent | June 21, 2007 | 2010 | 58 | |||||||||
Elias Gounaris | Director | Non-Executive | June 21, 2007 | 2010 | 67 | |||||||||
Xeni Skorini | Director | Independent | June 22, 2006 | 2009 | 67 | |||||||||
George C. Bitros | Director | Non-Executive | June 22, 2006 | 2009 | 68 | |||||||||
Charalambos Dimitriou | Director | Non-Executive | June 22, 2006 | 2009 | 52 | |||||||||
Theodore Veniamis | Director | Non-Executive | June 16, 2005 | 2008 | 58 | |||||||||
Georgios Gerapetritis | Director | Independent | June 16, 2005 | 2008 | 41 |
(1) | Each Director’s term expires on the date of the general assembly of the respective year of expiry. |
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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; | |
• | 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; |
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• | 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; | |
• | 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. |
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Name | Position | Age | ||||
Panagis Vourloumis(1) | Chairman and Managing Director, Managing Director of Cosmote | 71 | ||||
Iordanis Aivazis(2) | Chief Operating Officer | 58 | ||||
Yorgos Ioannidis(3) | Managing Director of RomTelecom | 58 | ||||
Michael Tsamaz(1) | Deputy Managing Director of Cosmote, Managing Director of OTE Investment Services | 49 | ||||
Elias Drakopoulos(4) | Managing Director of OTEnet, Chief Commercial Officer for Business Customers | 44 | ||||
Panagiotis Sarantopoulos(5) | Chief Commercial Officer for Residential Customers | 47 | ||||
Christini Spanoudaki(6) | Chief Financial Officer | 53 | ||||
Maria Efthimerou(7) | Chief Technology Officer | 52 | ||||
Konstantinos Kappos | Chief Information Officer | 56 | ||||
Andreas Karageorgos | Chief Regional Officer | 59 | ||||
Nikolaos Tsatsanis | Chief Human Resources Officer | 45 | ||||
Kosmas Liaros(8) | Chief Internal Audit Officer | 45 | ||||
Christos Katsaounis | Chief Officer of National Wholesale Services | 39 | ||||
Konstantinos Ploumpis | Chief Regulatory Officer | 42 | ||||
Paraskevas Passias | General Counsel(9) | 50 | ||||
Dinos Andreou(10) | Chief Executive Officer of OTEGlobe | 52 |
(1) | Mr. Vourloumis assumed the position of Managing Director of Cosmote on September 26, 2007, following the resignation of the previous Managing Director of Cosmote, Mr. Evangelos Martigopoulos. Mr. Tsamaz assumed the position of Deputy Managing Director of Cosmote on September 26, 2007. | |
(2) | In his capacity as Chief Operating Officer, Mr. Aivazis is in charge of the following divisions: Residential and Business Customers, National Wholesale Services, Technology, Regions, Information Technology and Finance. Mr. Aivazis assumed this position on June 8, 2007. | |
(3) | Mr. Ioannidis replaced James Hubley in this position on February 9, 2007. | |
(4) | Mr. Drakopoulos replaced Mr. Ioannidis as Managing Director of OTEnet on February 9, 2007 and assumed the position of Chief Commercial Officer for Business Customers on December 18, 2007. | |
(5) | Mr. Sarantopoulos assumed this position on December 18, 2007 | |
(6) | Mrs. Spanoudaki assumed this position on June 8, 2007. | |
(7) | Mrs. Efthimerou replaced Mr. Ioannidis in this position on February 9, 2007. | |
(8) | Mr. Liaros replaced Mr. Georgios Michos in this position on January 1, 2007. | |
(9) | Dr. Passias is General Counsel of OTE and his area of responsibility excludes regulatory and competition affairs and legal issues of subsidiaries. | |
(10) | Mr. Andreou replaced Mr. Tsamaz in this position on October 8, 2007. |
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Maximum Number of | Maximum Number of | |||||||
Basic Rights in the | Additional Rights in the | |||||||
Beneficiaries | First Three Years | First Three Years | ||||||
Managing Directors of Subsidiaries | 35,000 | 7,000 | ||||||
Directors | 18,000 | 4,500 | ||||||
Deputy Directors | 9,500 | 3,100 |
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As of December 31(1), | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Administration | 4,064 | 3,409 | 3,247 | |||||||||
Finance | 800 | 653 | 626 | |||||||||
Technical | 8,647 | 6,551 | 6,360 | |||||||||
Support Staff | 900 | 752 | 732 | |||||||||
Specialists | 328 | 298 | 295 | |||||||||
Other Staff | 92 | 88 | ||||||||||
Total Permanent Staff | 14,739 | 11,755 | 11,348 | |||||||||
Personnel on temporary contracts | 23 | 20 | 27 | |||||||||
Total | 14,762 | 11,775 | 11,375 | |||||||||
Change (%) | (9.5 | )% | (20.2 | )% | (3.5 | )% | ||||||
Access lines in service per employee(2) | 427 | 523 | 514 | |||||||||
(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 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 2007, 6,800 of our employees attended 540 seminars on topics selected to improve the quality and efficiency of their performance; | |
• | we are focusing on efficiently integrating the employees of OTEnet, while in the process of completing our merger with OTEnet (expected to take place within 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, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Attica | 2,409 | 1,923 | 1,876 | |||||||||
Northern Greece | 2,766 | 2,038 | 1,958 | |||||||||
Southern-Western Greece | 2,184 | 1,600 | 1,561 | |||||||||
Crete Islands | 1,050 | 872 | 841 | |||||||||
Employees of our OTEShops/Sales Support in Greek regions | 2,292 | 1,601 | 1,483 | |||||||||
Remainder of our employees (Athens) | 4,061 | 3,741 | 3,656 | |||||||||
Total | 14,762 | 11,775 | 11,375 | |||||||||
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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 | 99,000 | 0 | |||||||||
Iordanis Aivazis | 0 | 89,850 | 0 | |||||||||
Iakovos G. Georganas | 0 | 0 | 0 | |||||||||
Panagiotis Tampourlos | 0 | 0 | 0 | |||||||||
Nikos Stefanou | 340 | 0 | 0 | |||||||||
George Tzovlas | 0 | 0 | 0 | |||||||||
Elias Gounaris | 0 | 0 | 0 | |||||||||
Xeni Skorini | 0 | 0 | 227 | |||||||||
George C. Bitros | 0 | 0 | 0 | |||||||||
Charalambos Dimitriou | 0 | 0 | 0 | |||||||||
Theodore Veniamis | 0 | 0 | 0 | |||||||||
Georgios Gerapetritis | 0 | 0 | 0 | |||||||||
Yorgos Ioannidis | 0 | 35,000 | 0 | |||||||||
Dinos Andreou | 0 | 35,000 | 0 | |||||||||
Michael Tsamaz | 0 | 0 | 0 | |||||||||
Elias Drakopoulos | 0 | 59,260 | 0 | |||||||||
Christini Spanoudaki | 0 | 52,550 | 0 | |||||||||
Maria Efthimerou | 0 | 49,910 | 0 | |||||||||
Konstantinos Kappos | 136 | 54,300 | 0 | |||||||||
Andreas Karageorgos | 35 | 51,160 | 0 | |||||||||
Nikolaos Tsatsanis | 0 | 52,860 | 88 | |||||||||
Kosmas Liaros | 0 | 50,780 | 0 | |||||||||
Christos Katsaounis | 300 | 47,910 | 0 | |||||||||
Konstantinos Ploumpis | 0 | 46,770 | 0 | |||||||||
Paraskevas Passias | 0 | 30,510 | 0 | |||||||||
Panagiotis Sarantopoulos | 0 | 53,640 | 0 |
(1) | The number of options listed have been granted under our existing 2007 management stock option plan, but have not vested as of the date of this Annual Report. |
ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
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December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
(Euro in millions) | ||||||||||||
Accounts receivable from state entities and organizations | 106.8 | 228.3 | 230.1 | |||||||||
Total | 106.8 | 228.3 | 230.1 |
ITEM 8. | FINANCIAL INFORMATION |
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ITEM 9. | THE OFFER AND LISTING |
Athens Exchange | NYSE | |||||||||||||||||||||||
Average Daily | Average Daily | |||||||||||||||||||||||
High | Low | Trading Volume | High | Low | Trading Volume(2) | |||||||||||||||||||
Price per share (Euro) | Price per ADS(1) | |||||||||||||||||||||||
(U.S. $) | ||||||||||||||||||||||||
2003 | 11.64 | 8.40 | 1,110,817 | 7.80 | 4.67 | 73,648 | ||||||||||||||||||
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 | ||||||||||||||||||
2006 | ||||||||||||||||||||||||
First quarter | 19.04 | 17.60 | 1,181,272 | 11.65 | 10.58 | 24,768 | ||||||||||||||||||
Second quarter | 19.16 | 15.94 | 1,208,622 | 12.20 | 10.03 | 40,875 | ||||||||||||||||||
Third quarter | 19.94 | 16.32 | 837,909 | 12.68 | 10.37 | 17,170 | ||||||||||||||||||
Fourth quarter | 23.72 | 19.18 | 1,161,143 | 15.72 | 12.14 | 22,625 | ||||||||||||||||||
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 | ||||||||||||||||||||||||
January | 25.40 | 20.40 | 2,294,413 | 18.69 | 15.24 | 77,903 | ||||||||||||||||||
February | 22.00 | 18.46 | 1,906,679 | 15.94 | 13.89 | 78,244 | ||||||||||||||||||
March | 20.20 | 17.60 | 2,563,557 | 15.94 | 13.74 | 104,850 | ||||||||||||||||||
April | 19.16 | 18.00 | 1,444,988 | 15.34 | 14.34 | 77,801 | ||||||||||||||||||
May | 20.60 | 17.62 | 6,380,082 | 15.89 | 13.79 | 130,716 | ||||||||||||||||||
Through June 15 | 18.60 | 16.48 | 1,497,874 | 14.39 | 12.67 | 59,197 |
(1) | Each ADS represents one half of one share. | |
(2) | Number of ADSs. |
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• | 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 postpone only once the adoption of a resolution by the general assembly; | |
• | to request the Board to provide information concerning any amounts we paid within the last two years to our Directors, executive officers or other employees, as well as details of any contracts with these persons; | |
• | to request from the Board particular information in order to assess matters on the agenda of the general assembly; | |
• | to receive certain financial information about us, which the Board may refuse to give only by providing the reasons for such refusal; and | |
• | to request a competent court to review our operations when it is believed that applicable laws, our Articles or resolutions of the general assembly are being violated. |
• | merger or liquidation; | |
• | any increase or decrease in share capital, except if otherwise regulated by law or the Articles of Incorporation; | |
• | the issue of loans in the form of bonds; | |
• | any change in the method of distribution of profits; | |
• | any increase in shareholders’ obligations; | |
• | any amendment of the provisions setting forth the matters requiring a supermajority quorum and vote for approval; | |
• | a change in the special voting majority of the Board required for a decision to increase share capital; and | |
• | restrictions on, or abolition of, pre-emptive rights with respect to share capital increases with payment in cash or in kind. |
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10.C | Material Contracts |
10.D | Exchange Controls |
• | the certificate of a broker or other relevant person evidencing the purchase of shares; and | |
• | our certificate as to the entitlement to the payment of dividends on shares. |
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10.E | Taxation |
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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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10.F | Dividends and Paying Agents |
10.G | Statement by Experts |
10.H | Documents on Display |
10.I | Subsidiary Information |
ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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Expected Maturity Date as at December 31, 2007 | ||||||||||||||||||||||||||||||||||
Base | ||||||||||||||||||||||||||||||||||
Currency | 2008 | 2009 | 2010 | 2011 | 2012 | There-After | Total | Fair Value | ||||||||||||||||||||||||||
(Euro in millions) | ||||||||||||||||||||||||||||||||||
Long term Debt | ||||||||||||||||||||||||||||||||||
Fixed Rate | ||||||||||||||||||||||||||||||||||
€650 million 3.75% Nov 2011 bond | Euro | 631.0 | 631.0 | 595.5 | ||||||||||||||||||||||||||||||
€1,250 million 5% Aug 2013 bond | Euro | 1,244.5 | 1,244.5 | 1,211.8 | ||||||||||||||||||||||||||||||
€900 million 4.625% May 2016 bond | Euro | 893.5 | 893.5 | 823.4 | ||||||||||||||||||||||||||||||
Loan from E.I.B | Euro | 17.5 | 18.9 | 36.4 | 34.0 | |||||||||||||||||||||||||||||
Other bank loans | Various | 13.8 | 15.7 | 7.7 | 8.9 | 8.9 | 25.9 | 80.9 | 63.7 | |||||||||||||||||||||||||
Floating Rate Syndicated loan facility | Euro | 25.8 | 29.0 | 445.2 | 500.0 | 500.0 | ||||||||||||||||||||||||||||
€600 million floating rate Nov 2009 note | Euro | 600.0 | 600.0 | 600.0 | ||||||||||||||||||||||||||||||
Bridge Facility Consortium Loan | Euro | 1,500.0 | 1,500.0 | 1,500.0 | ||||||||||||||||||||||||||||||
Other bank loans | Various | 52.0 | 0.2 | 0.2 | 0.2 | 0.2 | 52.8 | 52.8 | ||||||||||||||||||||||||||
Total long term debt | 83.3 | 634.8 | 33.7 | 2,169.1 | 454.3 | 2,163.9 | 5,539.1 | 5,381.2 | ||||||||||||||||||||||||||
Short term Debt | ||||||||||||||||||||||||||||||||||
Floating rate | Euro | 3.2 | 3.2 | 3.2 | ||||||||||||||||||||||||||||||
Total short term debt | 3.2 | 3.2 | 3.2 |
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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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Hellenic Telecommunications Organization S.A.:
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ITEM 16. | [RESERVED] |
16.A | Audit Committee Financial Expert |
16.B | Code of Ethics |
• | 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. |
KPMG | ||||||||||||
Certified Auditors A.E | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Euro in thousands | ||||||||||||
Audit fees | 1,659 | 2,582 | 4,475 | |||||||||
Audit-Related Fees | 2 | 168 | 599 | |||||||||
Tax Fees | 31 | 55 | 6 | |||||||||
All Other Fees | — | — | — | |||||||||
Total Fees | 1,692 | 2,805 | 5,080 | |||||||||
143
16.D | Exemptions from the Listing Standards for Audit Committees |
16.E | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
144
ITEM 17. | FINANCIAL STATEMENTS |
ITEM 18. | FINANCIAL STATEMENTS |
Page | ||||
Index to the Consolidated Financial Statements | F-1 | |||
Report of Independent Registered Public Accounting Firm | F-2 | |||
Consolidated Balance Sheets as of December 31, 2006 and 2007 | F-3 | |||
Consolidated Statements of Operations for the years ended December 31, 2005, 2006 and 2007 | F-5 | |||
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2005, 2006 and 2007 | F-6 | |||
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007 | F-7 | |||
Notes to the Consolidated Financial Statements | F-8 |
ITEM 19. | EXHIBITS |
1 | .1 | Articles of Incorporation. | ||
3 | .1 | Share Purchase Agreement and Shareholders’ Agreement, each dated May 14, 2008, between the Greek State and Deutsche Telekom. | ||
4 | .1 | OTE Management Stock Option Plan of 2007; 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. |
145
ORGANIZATION S.A.
By: | /s/ Panagis Vourloumis |
Title: | Chairman & Managing Director |
146
147
148
149
150
Page | ||||
Report of Independent Registered Public Accounting Firm | F-2 | |||
Consolidated Balance Sheets as of December 31, 2006 and 2007 | F-3 | |||
Consolidated Statements of Operations for the years ended December 31, 2005, 2006 and 2007 | F-5 | |||
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2005, 2006 and 2007 | F-6 | |||
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007 | F-7 | |||
Notes to the Consolidated Financial Statements | F-8 |
F-1
F-2
December 31, | ||||||||||||
2006 | 2007 | |||||||||||
Notes | € | € | ||||||||||
Amounts in millions, except share and per share data | ||||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | 2 | (o) | 2,042.5 | 1,316.3 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of €254.4 and €256.3 as of December 31, 2006 and 2007, respectively | 3 | 932.6 | 941.9 | |||||||||
Due from related parties | 4 | 228.3 | 230.1 | |||||||||
Advances to pension funds | 15 | 35.7 | 35.7 | |||||||||
Loans and advances to employees | 15 | 2.6 | 5.1 | |||||||||
Available-for-sale marketable equity securities | 5 | 36.4 | 45.4 | |||||||||
Subsidies receivable | 7 | 2.9 | 2.9 | |||||||||
Materials and supplies | 2 | (e) | 204.6 | 201.2 | ||||||||
Deferred income taxes | 13 | 7.1 | 20.1 | |||||||||
Other current assets | 365.9 | 375.3 | ||||||||||
Total current assets | 3,858.6 | 3,174.0 | ||||||||||
Other assets: | ||||||||||||
Investments | 6 | 158.7 | 158.4 | |||||||||
Advances to pension funds | 15 | 188.1 | 237.1 | |||||||||
Loans and advances to employees, net of current portion | 15 | 30.3 | 46.5 | |||||||||
Other long-term assets | 117.1 | 101.9 | ||||||||||
Total other assets | 494.2 | 543.9 | ||||||||||
Telecommunication property, plant and equipment, net | 7 | 6,335.6 | 6,224.7 | |||||||||
Intangible assets: | ||||||||||||
Telecommunication licenses, net | 8 | 375.3 | 439.4 | |||||||||
Goodwill | 9 | 1,106.3 | 2,449.2 | |||||||||
Other intangible assets, net | 10 | 701.8 | 1,290.5 | |||||||||
Total intangible assets | 2,183.4 | 4,179.1 | ||||||||||
TOTAL ASSETS | 12,871.8 | 14,121.7 | ||||||||||
F-3
December 31, | ||||||||||||
2006 | 2007 | |||||||||||
Notes | € | € | ||||||||||
Amounts in millions, except share and per share data | ||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Short-term borrowings | 11 | 25.2 | 3.2 | |||||||||
Current maturities of long-term debt | 14 | 528.1 | 83.3 | |||||||||
Accounts payable | 945.5 | 943.7 | ||||||||||
Reserve for staff retirement indemnities | 15 | 6.8 | 5.7 | |||||||||
Reserve for voluntary retirement program | 15 | 316.7 | 202.8 | |||||||||
Reserve for Youth Account | 15 | 48.3 | 52.1 | |||||||||
Accrued and other liabilities | 12 | 500.6 | 575.7 | |||||||||
Deferred revenue | 193.1 | 187.4 | ||||||||||
Income taxes payable | 13 | 144.4 | 178.3 | |||||||||
Dividends payable | 18 | 180.4 | 195.7 | |||||||||
Total current liabilities | 2,889.1 | 2,427.9 | ||||||||||
Long-term liabilities: | ||||||||||||
Long-term debt, net of current maturities | 14 | 4,047.4 | 5,455.8 | |||||||||
Reserve for staff retirement indemnities | 15 | 328.7 | 332.7 | |||||||||
Reserve for voluntary retirement program | 15 | 372.8 | 224.9 | |||||||||
Reserve for Youth Account | 15 | 338.9 | 305.3 | |||||||||
Deferred income taxes | 13 | 186.7 | 411.2 | |||||||||
Other long-term liabilities | 99.6 | 242.8 | ||||||||||
Total long-term liabilities | 5,374.1 | 6,972.7 | ||||||||||
Minority interests | 1,081.8 | 860.6 | ||||||||||
Commitments and contingencies | 19 | |||||||||||
Shareholders’ equity: | ||||||||||||
Share capital, nominal value €2.39 each at December 31, 2006 and 2007, respectively (490,150,389 shares authorized, issued and outstanding at December 31, 2006 and 2007, respectively) | 16 | 1,171.5 | 1,171.5 | |||||||||
Paid-in surplus | 577.6 | 577.6 | ||||||||||
Legal reserve | 17 | 283.3 | 312.1 | |||||||||
Retained earnings | 1,747.2 | 2,071.3 | ||||||||||
Accumulated other comprehensive loss | 2 | (v) | (252.8 | ) | (272.0 | ) | ||||||
Total shareholders’ equity | 3,526.8 | 3,860.5 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 12,871.8 | 14,121.7 | ||||||||||
F-4
Year Ended December 31, | ||||||||||||||||
2005 | 2006 | 2007 | ||||||||||||||
Notes | € | € | € | |||||||||||||
Amounts in millions, except share and per share data | ||||||||||||||||
Revenues: | ||||||||||||||||
Domestic telephony | 22 | 2,308.1 | 2,256.7 | 2,019.1 | ||||||||||||
International telephony | 22 | 391.0 | 346.9 | 304.5 | ||||||||||||
Mobile telephony | 22 | 1,756.7 | 1,975.8 | 2,210.0 | ||||||||||||
Other revenues | 22 | 1,015.2 | 1,308.0 | 1,783.1 | ||||||||||||
Total revenues | 5,471.0 | 5,887.4 | 6,316.7 | |||||||||||||
Operating expenses: | ||||||||||||||||
Payroll and employee benefits | (1,323.0 | ) | (1,260.8 | ) | (1,243.1 | ) | ||||||||||
Charges for voluntary retirement program | 15 | (939.6 | ) | 9.5 | (60.9 | ) | ||||||||||
Charges from international operators | (217.9 | ) | (208.8 | ) | (216.4 | ) | ||||||||||
Charges from domestic operators | (665.5 | ) | (720.9 | ) | (655.3 | ) | ||||||||||
Depreciation and amortization | 7, 8, 10 | (1,053.9 | ) | (1,093.5 | ) | (1,138.6 | ) | |||||||||
Extinguishment of liabilities | 1 | (i) | 23.8 | — | — | |||||||||||
Cost of telecommunications equipment | (180.7 | ) | (363.5 | ) | (672.8 | ) | ||||||||||
Other operating expenses | 23 | (1,116.6 | ) | (1,187.3 | ) | (1,291.1 | ) | |||||||||
Total operating expenses | (5,473.4 | ) | (4,825.3 | ) | (5,278.2 | ) | ||||||||||
Operating income/(loss) | (2.4 | ) | 1,062.1 | 1,038.5 | ||||||||||||
Other income/(expense): | ||||||||||||||||
Interest expense | 14 | (164.5 | ) | (208.9 | ) | (230.9 | ) | |||||||||
Interest income | 53.9 | 70.8 | 77.8 | |||||||||||||
Foreign exchange gains | 2 | (d) | 41.2 | 14.6 | 10.6 | |||||||||||
Earnings from investments | 6 | 20.0 | 22.9 | 16.5 | ||||||||||||
Gain on sale of investments | 24 | 30.7 | 180.2 | 261.4 | ||||||||||||
Other expense, net | (2.9 | ) | (10.8 | ) | (16.6 | ) | ||||||||||
(21.6 | ) | 68.8 | 118.8 | |||||||||||||
Income/(loss) before provision for income taxes and minority interests | (24.0 | ) | 1,130.9 | 1,157.3 | ||||||||||||
Income taxes | 13 | (32.5 | ) | (441.5 | ) | (388.3 | ) | |||||||||
Income/(loss) before minority interests | (56.5 | ) | 689.4 | 769.0 | ||||||||||||
Minority interests | (235.4 | ) | (180.4 | ) | (131.4 | ) | ||||||||||
Net Income/(loss) | (291.9 | ) | 509.0 | 637.6 | ||||||||||||
Earnings/(losses) per share (basic and diluted) | 2 | (r) | (0.60 | ) | 1.04 | 1.30 | ||||||||||
Weighted average number of shares outstanding (basic and diluted) | 490,150,389 | 490,150,389 | 490,150,389 | |||||||||||||
F-5
Accumulated | ||||||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||||
Comprehensive | Share | Paid-in | Treasury | Legal | Retained | Comprehensive | ||||||||||||||||||||||||||||
Notes | Income/(Loss) | Capital | Surplus | Stock | Reserve | Earnings | Loss | Total | ||||||||||||||||||||||||||
Balance, December 31, 2004 | 1,174.1 | 487.5 | (15.1 | ) | 256.7 | 1,744.2 | (224.8 | ) | 3,422.6 | |||||||||||||||||||||||||
Net loss | (291.9 | ) | — | — | — | — | (291.9 | ) | — | (291.9 | ) | |||||||||||||||||||||||
Treasury stock cancelled | (1.6 | ) | (0.9 | ) | 9.2 | — | (6.7 | ) | — | 0.0 | ||||||||||||||||||||||||
Effect of transactions between companies under common control on minority interest | 1(i), 1(j), 1(k) | — | 91.7 | — | — | — | 91.7 | |||||||||||||||||||||||||||
Other comprehensive income/(loss): | ||||||||||||||||||||||||||||||||||
Unrealized gain from available for sale marketable equity securities, net of €0.7 tax | 2(v), 5 | 0.3 | — | — | — | — | — | 0.3 | 0.3 | |||||||||||||||||||||||||
Additional minimum liability for employee benefit plans, net of €0.6 tax | 3.7 | — | — | — | — | — | 3.7 | 3.7 | ||||||||||||||||||||||||||
Deferred tax on subsidiary’s statutory revaluation surplus | 2(v) | (2.5 | ) | — | — | — | — | — | (2.5 | ) | (2.5 | ) | ||||||||||||||||||||||
Foreign currency translation | 2(v) | 20.6 | — | — | — | — | — | 20.6 | 20.6 | |||||||||||||||||||||||||
Comprehensive income/(loss) | (269.8 | ) | ||||||||||||||||||||||||||||||||
Balance, December 31, 2005 | 1,172.5 | 578.3 | (5.9 | ) | 256.7 | 1,445.6 | (202.7 | ) | 3,244.5 | |||||||||||||||||||||||||
Net income | 509.0 | — | — | — | — | 509.0 | — | 509.0 | ||||||||||||||||||||||||||
Statutory minimum dividend | — | — | — | — | (176.6 | ) | — | (176.6 | ) | |||||||||||||||||||||||||
Transfer to legal reserve | 26.6 | (26.6 | ) | |||||||||||||||||||||||||||||||
Treasury stock cancelled | (1.0 | ) | (0.7 | ) | 5.9 | (4.2 | ) | — | 0.0 | |||||||||||||||||||||||||
Other comprehensive income/(loss): | ||||||||||||||||||||||||||||||||||
Unrealized gain from available for sale marketable equity securities, net of €2.6 tax | 2(v), 5 | 7.7 | — | — | — | — | — | 7.7 | 7.7 | |||||||||||||||||||||||||
Release of additional minimum liability for employee benefit plans, net of €6.8 tax | 2(v) | 20.5 | — | — | — | — | — | 20.5 | 20.5 | |||||||||||||||||||||||||
Cumulative effect of adoption of SFAS No. 158, net of €55.7 tax | 2(v) | — | — | — | — | — | (167.2 | ) | (167.2 | ) | ||||||||||||||||||||||||
Foreign currency translation | 2(v) | 88.9 | — | — | — | — | — | 88.9 | 88.9 | |||||||||||||||||||||||||
Comprehensive income/(loss) | 626.1 | |||||||||||||||||||||||||||||||||
Balance, December 31, 2006 | 1,171.5 | 577.6 | 0.0 | 283.3 | 1,747.2 | (252.8 | ) | 3,526.8 | ||||||||||||||||||||||||||
Net income | 637.6 | — | — | — | — | 637.6 | — | 637.6 | ||||||||||||||||||||||||||
Dividends | — | — | — | — | (284.7 | ) | — | (284.7 | ) | |||||||||||||||||||||||||
Transfer to legal reserve | — | — | — | 28.8 | (28.8 | ) | — | 0.0 | ||||||||||||||||||||||||||
Other comprehensive income/(loss): | ||||||||||||||||||||||||||||||||||
Unrealized gain from available for sale marketable equity securities, net of €2.0 tax | 2(v), 5 | 7.0 | — | — | — | — | — | 7.0 | 7.0 | |||||||||||||||||||||||||
Change in unrecognized prior service costs, net of €2.7 tax | 2(v) | 8.2 | — | — | — | — | — | 8.2 | 8.2 | |||||||||||||||||||||||||
Change in unrecognized actuarial loss, net of €11.8 tax | 2(v) | 34.0 | 34.0 | 34.0 | ||||||||||||||||||||||||||||||
Foreign currency translation | 2(v) | (68.4 | ) | — | — | — | — | — | (68.4 | ) | (68.4 | ) | ||||||||||||||||||||||
Comprehensive income/(loss) | 618.4 | |||||||||||||||||||||||||||||||||
Balance, December 31, 2007 | 1,171.5 | 577.6 | 0.0 | 312.1 | 2,071.3 | (272.0 | ) | 3,860.5 | ||||||||||||||||||||||||||
F-6
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
€ | € | € | ||||||||||
Amounts in millions | ||||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net income/(loss) | (291.9 | ) | 509.0 | 637.6 | ||||||||
Adjustments to reconcile to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 1,053.9 | 1,093.5 | 1,138.6 | |||||||||
Deferred income taxes | (189.0 | ) | 116.0 | 47.3 | ||||||||
Provision for doubtful accounts | 110.4 | 97.9 | 88.0 | |||||||||
Provision for staff retirement indemnities and youth account | 92.8 | 108.2 | 96.6 | |||||||||
Provision for voluntary retirement cost | 914.5 | (32.8 | ) | 22.1 | ||||||||
Discounting of long-term assets and long-term liabilities | — | 46.5 | 51.5 | |||||||||
Provision for litigation and claims | 47.8 | 35.9 | 18.1 | |||||||||
Extinguishment of liabilities | (23.8 | ) | — | — | ||||||||
Amortization of payments to pension funds | 35.2 | 35.2 | 35.2 | |||||||||
Minority interests | 235.4 | 180.4 | 131.4 | |||||||||
(Gain) on sale of investments | (30.7 | ) | (180.2 | ) | (261.4 | ) | ||||||
(Earnings)/Losses from investments | (20.0 | ) | (22.9 | ) | (16.5 | ) | ||||||
(Increase)/decrease, net of effects of acquisitions, in: | ||||||||||||
Accounts receivable | (64.6 | ) | 245.3 | (108.1 | ) | |||||||
Due from related parties | 21.5 | (121.5 | ) | (1.8 | ) | |||||||
Materials and supplies | 4.8 | (32.6 | ) | (2.2 | ) | |||||||
Other current assets | (76.2 | ) | (101.0 | ) | 46.0 | |||||||
Increase/(decrease), net of effects of acquisitions, in: | ||||||||||||
Accounts payable | (113.9 | ) | 154.7 | 15.3 | ||||||||
Accrued and other liabilities | (28.9 | ) | (53.2 | ) | (3.1 | ) | ||||||
Deferred revenue | (5.6 | ) | 21.3 | (5.7 | ) | |||||||
Income taxes payable | 7.4 | 72.5 | (78.7 | ) | ||||||||
Loans and advances to employees | (36.0 | ) | (28.8 | ) | (32.5 | ) | ||||||
Dividends received | 21.3 | 12.3 | 12.3 | |||||||||
Repayment of loans and advances to employees | 26.5 | 114.8 | 9.7 | |||||||||
Advances and payments to pension funds | — | (65.8 | ) | (121.6 | ) | |||||||
Payment of staff retirement indemnities and youth account, net of employees’ contributions | (101.7 | ) | (404.9 | ) | (335.1 | ) | ||||||
Other long-term receivables | (4.7 | ) | (18.0 | ) | 9.7 | |||||||
Net Cash provided by Operating Activities | 1,584.5 | 1,781.8 | 1,392.7 | |||||||||
Cash Flows from Investing Activities: | ||||||||||||
Capital expenditures | (647.3 | ) | (938.1 | ) | (1,051.4 | ) | ||||||
Telecommunications licenses fees | (32.9 | ) | (24.3 | ) | (49.9 | ) | ||||||
Payment for purchases of subsidiaries, net of cash acquired | (294.2 | ) | (1,672.2 | ) | (2,119.0 | ) | ||||||
Proceeds from sale of subsidiaries, net of cash disposed | — | 299.8 | 281.9 | |||||||||
Proceeds from mandatorily redeemable shares | — | — | 144.5 | |||||||||
Proceeds from investments | 47.7 | 38.0 | 70.9 | |||||||||
Net Cash used in Investing Activities | (926.7 | ) | (2,296.8 | ) | (2,723.0 | ) | ||||||
Cash Flows from Financing Activities: | ||||||||||||
Net change in short-term borrowings | (23.0 | ) | (9.7 | ) | (22.0 | ) | ||||||
Increase in long-term debt | 588.3 | 2,365.1 | 1,500.0 | |||||||||
Repayment of long-term debt | (399.4 | ) | (1,198.0 | ) | (536.4 | ) | ||||||
Proceeds from issuance of minority shareholders | 12.8 | 12.0 | 12.6 | |||||||||
Dividends paid | (2.0 | ) | (1.6 | ) | (269.3 | ) | ||||||
Dividends paid to minority shareholders | (190.1 | ) | (115.6 | ) | (81.6 | ) | ||||||
Net Cash provided by/(used in) Financing Activities | (13.4 | ) | 1,052.2 | 603.3 | ||||||||
Effect of exchange rate changes on cash | (2.5 | ) | (6.9 | ) | 0.8 | |||||||
Net increase/(decrease) in Cash and Cash Equivalents | 641.9 | 530.3 | (726.2 | ) | ||||||||
Cash and cash equivalents at beginning of year | 870.3 | 1,512.2 | 2,042.5 | |||||||||
Cash and Cash Equivalents at end of year | 1,512.2 | 2,042.5 | 1,316.3 | |||||||||
Supplemental disclosures of Cash Flow Information: | ||||||||||||
Cash paid for: | ||||||||||||
— interest, net of amounts capitalized | 195.1 | 178.5 | 216.4 | |||||||||
— income taxes | 229.5 | 210.4 | 384.9 | |||||||||
424.6 | 388.9 | 601.3 | ||||||||||
F-7
1. | COMPANY’S FORMATION AND OPERATIONS: |
Ownership Interest | ||||||||||
Company Name | Line of Business | 2006 | 2007 | |||||||
Direct ownership | ||||||||||
• COSMOTE MOBILE TELECOMMUNICATIONS S.A. (“Cosmote”) | Mobile telecommunications services | 67.00 | % | 90.72 | % | |||||
• OTE INTERNATIONAL INVESTMENTS LTD | Investment holding company | 100.00 | % | 100.00 | % | |||||
• OTE AUSTRIA HOLDING GMBH | Investment holding company | 100.00 | % | — | ||||||
• HELLAS SAT CONSORTIUM LIMITED (“Hellas Sat”) | Satellite communications | 99.05 | % | 99.05 | % | |||||
• COSMO-ONE HELLAS MARKET SITE S.A. (“COSMO-ONE”) | E-commerce services | 51.55 | % | 58.87 | % | |||||
• OTENET S.A. (“OTEnet”) | Internet services | 94.59 | % | 100.00 | % | |||||
• HELLASCOM INTERNATIONAL S.A. (“Hellascom”) | Telecommunication projects | 100.00 | % | 100.00 | % | |||||
• OTE PLC | Financing services | 100.00 | % | 100.00 | % | |||||
• OTE SAT-MARITEL S.A. (“OTE SAT — Maritel”) | Satellite telecommunications services | 94.08 | % | 94.08 | % | |||||
• OTE PLUS S.A. (“OTE Plus”) | Consulting services | 99.00 | % | 100.00 | % | |||||
• ESTATE S.A. (“OTE Estate”) | Real estate | 100.00 | % | 100.00 | % | |||||
• INFOTE S.A. (“InfOTE”) | Directory and information services | 100.00 | % | — | ||||||
• OTE INTERNATIONAL SOLUTIONS S.A. (“OTEGlobe”) | Wholesale telephony services | 100.00 | % | 100.00 | % | |||||
• HATWAVEHELLENIC-AMERICAN TELECOMMUNICATIONS WAVE LTD. (“Hatwave”) | Holding company | 52.67 | % | 52.67 | % | |||||
• OTE INSURANCE AGENCY S.A. (“OTE Insurance”) | Insurance brokerage services | 100.00 | % | 100.00 | % | |||||
• OTE ACADEMY S.A. (“OTE Academy”) | Training services | 100.00 | % | 100.00 | % |
F-8
Ownership Interest | ||||||||||
Company Name | Line of Business | 2006 | 2007 | |||||||
Indirect ownership | ||||||||||
• ROMTELECOM S.A. (“Romtelecom”) | Fixed line telephony services | 54.01 | % | 54.01 | % | |||||
• S.C. COSMOTE ROMANIAN MOBILE TELECOMMUNICATIONS S.A. (“COSMOTE ROMANIA”) | Mobile telecommunications services | 63.10 | % | 79.71 | % | |||||
• OTE MTS Holding B.V. | Investment holding company | 67.00 | % | 90.72 | % | |||||
• COSMOFON MOBILE TELECOMMUNICATIONS SERVICES A.D. — SKOPJE (“Cosmofon”) | Mobile telecommunications services | 67.00 | % | 90.72 | % | |||||
• COSMO BULGARIA MOBILE EAD (“Globul”) | Mobile telecommunications services | 67.00 | % | 90.72 | % | |||||
• COSMO-HOLDING ALBANIA S.A. (“CHA”) | Investment holding company | 64.99 | % | 88.00 | % | |||||
• ALBANIAN MOBILE COMMUNICATIONS Sh.a (“AMC”) | Mobile telecommunications services | 55.24 | % | 74.80 | % | |||||
• COSMO-HOLDING CYPRUS LTD(“Cosmoholding Cyprus”) | Investment holding company | 67.00 | % | 81.65 | % | |||||
• GERMANOS S.A. (“Germanos”) | Retail services | 66.35 | % | 81.65 | % |
F-9
Property, plant & equipment | 46.4 | |||
Intangible assets | 92.9 | |||
Licenses | 17.6 | |||
Other assets | 19.8 | |||
Total assets | 176.7 | |||
Debt | (15.2 | ) | ||
Deferred tax liability | (24.8 | ) | ||
Other liabilities | (24.3 | ) | ||
Total liabilities | (64.3 | ) | ||
Fair value of net assets acquired | 112.4 | |||
Goodwill on acquisition | 161.8 | |||
Total cash consideration | 274.2 | |||
Property, plant & equipment | 36.7 | |||
Intangible assets | 60.3 | |||
Licenses | 17.0 | |||
Other assets | 20.6 | |||
Total assets | 134.6 | |||
Debt | (14.6 | ) | ||
Deferred tax liability | (15.0 | ) | ||
Other liabilities | (36.9 | ) | ||
Total liabilities | (66.5 | ) | ||
Fair value of net assets acquired | 68.1 | |||
Goodwill on acquisition | 123.0 | |||
Total cash consideration | 191.1 | |||
F-10
Property, plant & equipment | 428.7 | |||
Intangible assets | 743.1 | |||
Licenses | 145.3 | |||
Other assets | 239.4 | |||
Total assets | 1,556.5 | |||
Debt | 634.9 | |||
Deferred tax liability | 161.1 | |||
Other liabilities | 173.0 | |||
Total liabilities | 969.0 | |||
Total cash consideration | 2,099.9 | |||
Fair value of net assets acquired | 587.5 | |||
Implied remaining goodwill | 1,512.4 | |||
Effect on previously recognized goodwill | (201.2 | ) | ||
Goodwill on acquisition | 1,311.2 | |||
F-11
F-12
Property, plant & equipment | 68.2 | |||
Intangible assets | 556.8 | |||
Other assets | 453.4 | |||
Total assets | 1,078.4 | |||
Debt | (2.7 | ) | ||
Deferred tax liability | (113.7 | ) | ||
Other liabilities | (154.5 | ) | ||
Total liabilities | (270.9 | ) | ||
Fair value of net assets acquired | 807.5 | |||
Goodwill on acquisition | 737.5 | |||
Total cash consideration | 1,545.0 | |||
F-13
Year Ended | ||||||||
1/1/2006- | December 31, | |||||||
16/11/2006 | 2005 | |||||||
Total revenues | 135.6 | 114.1 | ||||||
Operating expenses | (94.2 | ) | (73.3 | ) | ||||
Operating income before interest | 41.4 | 40.8 | ||||||
Interest income/(expense) | 0.2 | 5.9 | ||||||
Profit before tax | 41.6 | 46.7 | ||||||
Income Tax | (27.0 | ) | (4.9 | ) | ||||
Profit for the period | 14.6 | 41.8 | ||||||
F-14
ASSETS | ||||
Non current assets | 224.4 | |||
Cash and cash equivalents | 36.9 | |||
Other currents assets | 43.8 | |||
Total Assets | 305.1 | |||
LIABILITIES | ||||
Long-term liabilities | 23.0 | |||
Short-term liabilities | 86.1 | |||
Total Liabilities | 109.1 | |||
Net assets sold | 196.0 | |||
OTE’s share in Armentel’s net assets (90%) | 176.4 | |||
Selling Price | 341.9 | |||
Disposal expenses | (5.2 | ) | ||
OTE’s stake in Armentel’s net assets (90%) | (176.4 | ) | ||
Adjustments due to intercompany transactions | 3.7 | |||
Gain on sale of investment | 164.0 | |||
Year Ended | Year Ended | |||||||||||
1/1/2007- | December 31, | December 31, | ||||||||||
19/12/2007 | 2006 | 2005 | ||||||||||
Total revenues | 57.5 | 62.2 | 57.7 | |||||||||
Operating expenses | (40.7 | ) | (48.7 | ) | (42.7 | ) | ||||||
Operating income before interest | 16.8 | 13.5 | 15.0 | |||||||||
Interest income/(expense) | 0.3 | 0.2 | 0.4 | |||||||||
Profit before tax | 17.1 | 13.7 | 15.4 | |||||||||
Income Tax | (6.6 | ) | (4.6 | ) | (4.8 | ) | ||||||
Profit for the period | 10.5 | 9.1 | 10.6 | |||||||||
F-15
ASSETS | ||||
Non current assets | 29.0 | |||
Cash and cash equivalents | 12.9 | |||
Other currents assets | 25.2 | |||
Total Assets | 67.1 | |||
LIABILITIES | ||||
Long-term liabilities | 3.7 | |||
Short-term liabilities | 15.2 | |||
Total Liabilities | 18.9 | |||
Net assets sold | 48.2 | |||
OTE’s share in InfOTE’s net assets (100%) | 48.2 | |||
Selling Price | 300.2 | |||
Disposal expenses | (5.4 | ) | ||
OTE’s stake in InfOTE’s net assets (100%) | (48.2 | ) | ||
Gain on sale of investment | 246.6 | |||
2005 | 2006 | 2007 | ||||||||||
Revenues | 6,310.1 | 6,614.2 | 6,316.7 | |||||||||
Net income/(loss) | (242.8 | ) | 556.9 | 681.0 | ||||||||
Earnings/(losses) per share (basic and diluted) (in absolute figure) | (0.50 | ) | 1.14 | 1.39 |
F-16
F-17
2. | SIGNIFICANT ACCOUNTING POLICIES: |
F-18
F-19
Asset retirement obligations at December 31, 2004 | 4.2 | |||
Liability recognized in 2005 | 0.2 | |||
Accretion expense for the year | 0.1 | |||
Asset retirement obligations at December 31, 2005 | 4.5 | |||
Liability recognized in 2006 | 0.5 | |||
Accretion expense for the year | — | |||
Asset retirement obligations at December 31, 2006 | 5.0 | |||
Liability recognized in 2007 | 0.3 | |||
Accretion expense for the year | 0.2 | |||
Asset retirement obligations at December 31, 2007 | 5.5 | |||
F-20
Estimated | ||
Useful | ||
Classification | Life | |
Buildings | 20-40 Years | |
Telecommunication equipment and installations: | ||
• Telephone exchange equipment | 8-12 Years | |
• Radio relay stations | 8 Years | |
• Local and trunk network | 8-17 Years | |
• Other | 5-10 Years | |
Transportation equipment | 5-8 Years | |
Furniture and fixtures | 3-5 Years |
F-21
• | Connection charges: Connection charges for the fixed network are deferred and amortized to income over the estimated service life of a subscriber. No connection fees are charged for mobile services. | |
• | Domestic monthly network service fees: Revenues related to the monthly network service fees, net of credits and discounts are recognized in the month that the telecommunication service is provided. Unearned revenues are included in “Deferred revenue” in the accompanying consolidated balance sheets. | |
• | Domestic local and long distance calls: Revenues for local and long-distance calls are recognized based on traffic generated by the caller, the destination of the call and the service utilized based on the telephony tariffs. Unbilled revenues from the billing cycle date to the end of each period are estimated based on traffic. | |
• | International telephony revenues: International telephony revenues include outgoing, international calls which are reported gross of amounts payable by the Group to foreign telephony operators for termination of calls on their networks since the credit and collection risk remains solely with the Group. International telephony revenues also include incoming and transit traffic from foreign telephony operators routed through the Group’s fixed network as well as payments from mobile operators generated from their networks and routed through the Group’s fixed networks. International telephony revenues are recognized based on traffic generated by the caller at the telephony tariff international settlement rates under bilateral settlement agreements. | |
• | Mobile telephony: Mobile telephony fees consist of fees based on usage of airtime generated by the caller, the destination of the call and the service utilized. Revenues for usage charges are recognized in the period when the services are provided. Interconnection fees due from other mobile operators for mobile-to-mobile calls originating from their network are recognized based on incoming traffic and established interconnection rates. Unbilled revenues from the billing cycle date to the end of each period are estimated based on traffic. | |
• | Mobile telephony pre-paid airtime cards: Revenues from pre-paid airtime cards, net of discounts allowed, are recognized based on airtime’s usage. Unused airtime is included in “Deferred revenue” in the accompanying consolidated balance sheets. All pre-paid airtime cards have a contractual life of two years or less. The majority of deferred revenue from all categories of pre-paid airtime cards is used within the following year. Upon the expiration of pre-paid airtime cards, any unused airtime is recognized to income. | |
• | Traditional pre-paid cards: Revenues from traditional pre-paid cards, net of discounts allowed, are recognized based on usage. Unused traffic is included in “Deferred revenue” in the accompanying consolidated balance sheets. All traditional pre-paid cards have a contractual life of two years or less. The majority of deferred revenue from all categories of traditional pre-paid cards is used within the |
F-22
following year. Upon the expiration of the traditional pre-paid cards, any unused traffic is recognized to income. |
• | Directories: Revenues from directory services consist of fees from advertising and are recognized in the period when the respective services are provided. | |
• | Radio communications: Revenues from radio communications are recognized based on traffic. | |
• | Audiotex: Audiotex revenues are recognized based on traffic. | |
• | Telex and telegraphy: Revenues from telex and telegraphy are recognized in the period when the services are provided. | |
• | Leased lines and data telecommunications: Revenues from leased lines and data telecommunications are recognized in the period when the services are provided. | |
• | Integrated Services Digital Network: Revenues related to the monthly rental charges, net of credits and discounts, are recognized in the month that the telecommunication service is provided. | |
• | Sales of telecommunication equipment: Revenues from the sale of telecommunications equipment mainly consist of handsets and accessories. Revenues, net of discounts are recognized at point of sale. Handsets that are offered in mobile telephone packages have been determined to be revenue arrangements with multiple deliverables (i.e. handset sale and on-going services). Total consideration received in these arrangements is allocated and measured using units of accounting within the arrangement based on relative fair values. | |
• | Internet Services: Revenues related to the monthly internet access charges, net of credits and discounts, are recognized in the month when the service is provided. | |
• | Asynchronous Transfer Mode (ATM): Revenues from asynchronous transfer mode services are recognized in the period when the services are provided. | |
• | Services rendered: Revenues are recognized in the period when the services are provided. | |
• | Interconnection charges: Interconnection charges represent call termination fees from domestic mobile operators and other domestic fixed line operators. Interconnection fees are recognized based on traffic. |
• | Discounts, Commissions, Subsidies: Airtime and acquisition commission costs due to the Group’s Master Dealers for each subscriber acquired through their sales channel are expensed as incurred. Commissions paid for the renewal of each contract subscriber initially acquired by the Master Dealers as well as bonuses paid to Master Dealers in respect of contract subscribers who renew their annual contracts, are deferred and amortized to expense over the contract period. Bonuses for the achievement of mutually agreed targets and commissions based on revenues billed to each subscriber acquired by the Master Dealers are expensed as incurred. Discounts, representing the difference between the wholesale price of pre-paid cards and boxes (consisting of handsets and prepaid airtime) to the Group’s Master Dealers and the retail sale price to the ultimate customers are deducted from the respective revenue. | |
• | Connection costs: Connection costs for the fixed network are deferred and amortized to expense over the estimated service life of a subscriber. | |
• | Advertising Costs: Advertising costs are expensed as incurred. | |
• | Research and Development Costs: Research and development costs are expensed as incurred. | |
• | Charges from international and domestic operators: Charges from international and domestic operators are expensed as incurred. |
F-23
Year Ended | ||||
December 31, | ||||
2005 | ||||
Net Income/(Loss) as reported | (291.9 | ) | ||
Add: Stock-based employee compensation expense included in net income, net of tax | 1.1 | |||
Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of tax | (1.7 | ) | ||
Pro-forma Net Income/(Loss) | (292.5 | ) | ||
Losses per share — Basic and diluted (in absolute figure): | ||||
Basic and diluted — as reported | (0.60 | ) | ||
Basic and diluted — pro forma | (0.60 | ) |
F-24
December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Foreign currency translation | (7.4 | ) | 81.5 | 13.1 | ||||||||
Deferred tax liability on subsidiary’s statutory revaluation surplus | (187.2 | ) | (187.2 | ) | (187.2 | ) | ||||||
Unrealized gain from available for sale marketable equity securities, net of income taxes | 12.4 | 20.1 | 27.1 | |||||||||
Additional minimum liability for employee benefit plans, net of income taxes | (20.5 | ) | — | — | ||||||||
Change in employee benefit plans, net of income taxes | — | (167.2 | ) | (125.0 | ) | |||||||
(202.7 | ) | (252.8 | ) | (272.0 | ) | |||||||
December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Unrecognized prior service costs | — | 59.6 | 51.4 | |||||||||
Unrecognized actuarial loss | — | 107.6 | 73.6 | |||||||||
Total | — | 167.2 | 125.0 | |||||||||
F-25
F-26
F-27
3. | ACCOUNTS RECEIVABLE: |
December 31, | ||||||||
2006 | 2007 | |||||||
• Subscribers | 803.9 | 823.2 | ||||||
• International traffic | 201.2 | 205.1 | ||||||
• Other accounts receivable | 64.7 | 78.3 | ||||||
1,069.8 | 1,106.6 | |||||||
Less- Allowance for doubtful accounts | (254.4 | ) | (256.3 | ) | ||||
815.4 | 850.3 | |||||||
Accrued unbilled revenues | 117.2 | 91.6 | ||||||
932.6 | 941.9 | |||||||
Balance, | Balance from | Balance, | ||||||||||||||||||
Beginning of Year | Expensed | Disposed Subsidiary | Utilized | End of Year | ||||||||||||||||
2005 | 222.0 | 110.4 | — | (57.2 | ) | 275.2 | ||||||||||||||
2006 | 275.2 | 97.9 | (6.1 | ) | (112.6 | ) | 254.4 | |||||||||||||
2007 | 254.4 | 88.0 | — | (86.1 | ) | 256.3 |
4. | DUE FROM RELATED PARTIES: |
December 31, | ||||||||
2006 | 2007 | |||||||
Accounts receivable from State Entities and Organizations | 228.3 | 230.1 | ||||||
228.3 | 230.1 | |||||||
F-28
5. | AVAILABLE-FOR-SALE MARKETABLE EQUITY SECURITIES: |
December 31, | ||||||||
2006 | 2007 | |||||||
Cost, net of impairments | 7.9 | 7.9 | ||||||
Gross unrealized gain | 28.5 | 37.5 | ||||||
Fair value | 36.4 | 45.4 | ||||||
Balance, | Gross Unrealized | Gross Realized Gain | Balance, | |||||||||||||
Beginning of Year | Gain for the Year | in the Year | End of Year | |||||||||||||
2005 | 18.6 | 12.0 | (12.4 | ) | 18.2 | |||||||||||
2006 | 18.2 | 20.6 | (10.3 | ) | 28.5 | |||||||||||
2007 | 28.5 | 9.0 | — | 37.5 |
6. | INVESTMENTS: |
December 31, | ||||||||
2006 | 2007 | |||||||
Investment in Telekom Srbija a.d. (“Telekom Srbija”) | 155.1 | 155.1 | ||||||
Other investments | 3.6 | 3.3 | ||||||
158.7 | 158.4 | |||||||
F-29
• | Telekom Srbija would pay to OTE the loan, the respective stamp duty and part of the accrued interest, | |
• | All parties would waive their claims from each other, | |
• | A new shareholders’ agreement would be executed between OTE, Telekom Srbija and the Serbian PTT, under the terms of which OTE would not be prevented from participating in a potential sell of shares in a company to whom the mobile business of Telekom Srbija may have been transferred, such selling procedure being at the sole discretion of the Government of the Republic of Serbia. | |
• | OTE would be able to appoint the CFO and the Deputy General Director. | |
• | Consent of both parties would be required for various transactions (i.e. approval of budget, material change in the business, approval of transactions greater than a specific amount etc.). However, in the event that OTE withholds consent, the implementation of the transactions or resolvement of issues would not be prevented or postponed. |
F-30
7. | TELECOMMUNICATION PROPERTY, PLANT AND EQUIPMENT: |
December 31, | ||||||||
2006 | 2007 | |||||||
Land | 36.7 | 37.0 | ||||||
Buildings | 798.4 | 820.2 | ||||||
Telecommunication equipment and installations | 11,724.7 | 12,488.4 | ||||||
Investment supplies | 207.9 | 161.4 | ||||||
Transportation equipment | 58.8 | 63.9 | ||||||
Furniture and fixtures | 513.9 | 529.1 | ||||||
Construction in progress | 626.7 | 483.7 | ||||||
13,967.1 | 14,583.7 | |||||||
Accumulated depreciation | (7,631.5 | ) | (8,359.0 | ) | ||||
6,335.6 | 6,224.7 | |||||||
F-31
8. | TELECOMMUNICATION LICENSES: |
December 31, | ||||||||
2006 | 2007 | |||||||
OTE’s licenses | 6.2 | 6.2 | ||||||
Cosmote’s licenses | 269.4 | 330.5 | ||||||
Globul’s licenses | 167.1 | 169.7 | ||||||
Cosmofon’s licenses | 28.5 | 28.8 | ||||||
Romtelecom’s licenses | 4.0 | 49.1 | ||||||
Other licenses | 41.3 | 38.4 | ||||||
516.5 | 622.7 | |||||||
Accumulated amortization | (141.2 | ) | (183.3 | ) | ||||
375.3 | 439.4 | |||||||
F-32
F-33
9. | GOODWILL: |
December 31, | ||||||||
2006 | 2007 | |||||||
Cosmote Group | 1,093.0 | 2,430.3 | ||||||
OTEnet | 13.3 | 18.9 | ||||||
1,106.3 | 2,449.2 | |||||||
F-34
10. | OTHER INTANGIBLE ASSETS: |
December 31, | ||||||||
2006 | 2007 | |||||||
Indefinite life | ||||||||
Brand name | 471.1 | 667.4 | ||||||
Definite life | ||||||||
Customer relationships | 120.4 | 543.6 | ||||||
Franchise agreements | 65.7 | 64.5 | ||||||
Covenants not-to-compete and solicit | 54.8 | 57.5 | ||||||
Other | 27.7 | 27.7 | ||||||
268.6 | 693.3 | |||||||
Accumulated amortization | (37.9 | ) | (70.2 | ) | ||||
230.7 | 623.1 | |||||||
Total | 701.8 | 1,290.5 | ||||||
F-35
11. | SHORT-TERM BORROWINGS: |
• | Bridge Facility Consortium Loan: On November 9, 2007, OTE PLC signed a short term credit facility agreement for an amount of €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 has tenure 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 of December 31, 2007, OTE PLC had drawn-down €1,500.0. The loan agreement includes standard restrictions and among others, a Change of Control clause. This clause is triggered in case there is a change of control in OTE, and as a result of this change the credit rating of OTE or the surviving entity is downgraded below BBB/Baa2. In the event that this clause is triggered, OTE should proceed with mandatory prepayment of the loan. | |
• | OTE Plus and its subsidiaries draw-downs of €1.6 on its lines of credit. | |
• | OTEnet’s and its subsidiaries draw-downs of €1.6 on its lines of credit. |
12. | ACCRUED AND OTHER LIABILITIES: |
December 31, | ||||||||
2006 | 2007 | |||||||
Accrued social security contributions | 70.7 | 74.3 | ||||||
Accrued payroll | 11.5 | 27.5 | ||||||
Other taxes payable | 56.2 | 79.5 | ||||||
Accrued interest payable | 67.4 | 66.2 | ||||||
Reserve for pension contributions | 3.7 | 5.0 | ||||||
Reserve for litigation and claims | 121.3 | 126.8 | ||||||
Customer advances | 40.2 | 40.4 | ||||||
Derivative liability | 1.9 | — | ||||||
Other | 127.7 | 156.0 | ||||||
500.6 | 575.7 | |||||||
F-36
13. | INCOME TAXES: |
Balance at January 1, 2007 | 44.9 | |||
Additions based on current year tax positions | 33.4 | |||
Balance at December 31, 2007 | 78.3 |
F-37
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Current income taxes — Domestic operations | (188.1 | ) | (259.4 | ) | (303.1 | ) | ||||||
Current income taxes — Foreign operations | (33.4 | ) | (66.1 | ) | (37.9 | ) | ||||||
Total current income taxes | (221.5 | ) | (325.5 | ) | (341.0 | ) | ||||||
Deferred income taxes — Domestic operations | 199.5 | (125.4 | ) | (54.9 | ) | |||||||
Deferred income taxes — Foreign operations | (10.5 | ) | 9.4 | 7.6 | ||||||||
Total deferred income taxes | 189.0 | (116.0 | ) | (47.3 | ) | |||||||
Total provision for income taxes | (32.5 | ) | (441.5 | ) | (388.3 | ) | ||||||
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Income tax (expense)/ benefit at the statutory rate | 7.7 | (328.0 | ) | (289.3 | ) | |||||||
Additional tax assessments | (1.0 | ) | (27.8 | ) | (4.0 | ) | ||||||
Effect of change in statutory rates | (48.7 | ) | (12.2 | ) | 0.0 | |||||||
Tax on subsidiaries taxed at different rates | 28.7 | 22.8 | 14.4 | |||||||||
Tax on statutory reserves | — | (20.3 | ) | (7.5 | ) | |||||||
Disallowed expenses | (15.8 | ) | (44.3 | ) | (90.5 | ) | ||||||
Change in valuation allowance | (5.0 | ) | (27.4 | ) | (5.5 | ) | ||||||
Other | 1.6 | (4.3 | ) | (5.9 | ) | |||||||
Provision for income taxes | (32.5 | ) | (441.5 | ) | (388.3 | ) | ||||||
• | Greek tax rate: 32% in 2005, 29% in 2006, 25% in 2007 and onwards. | |
• | Romanian tax rate: 25% in 2004, 16% in 2005 and onwards. |
F-38
Balance, | ||||
December 31, | ||||
Year of Expiration | 2007 | |||
2008 | 67.4 | |||
2009 | 28.1 | |||
2010 | 2.6 | |||
2011 | 69.7 | |||
2012 | 83.5 | |||
Unlimited | 82.4 | |||
Total | 333.7 | |||
F-39
December 31, | ||||||||
2006 | 2007 | |||||||
Deferred tax asset | ||||||||
Write-down of cost investments | 28.5 | 28.5 | ||||||
Reserve for Staff Retirement Indemnities | 78.5 | 73.0 | ||||||
Reserve for Youth Account benefits | 79.0 | 70.3 | ||||||
Reserve for voluntary retirement program costs | 168.8 | 124.5 | ||||||
Reserve for litigation and claims | 27.8 | 26.2 | ||||||
Accrued and other liabilities | 12.8 | 9.8 | ||||||
Net operating losses carry forwards | 43.3 | 48.9 | ||||||
Expenses capitalized for statutory purposes | 3.7 | 1.8 | ||||||
Other | 9.1 | 9.6 | ||||||
Gross deferred tax asset | 451.5 | 392.6 | ||||||
Valuation allowance | (57.0 | ) | (62.5 | ) | ||||
Deferred Tax Asset | 394.5 | 330.1 | ||||||
Deferred tax liability | ||||||||
Property, plant and equipment | (82.1 | ) | (79.5 | ) | ||||
Untaxed reserves and investments | (333.3 | ) | (334.7 | ) | ||||
Intangible assets | (148.8 | ) | (299.6 | ) | ||||
Other | (9.9 | ) | (7.4 | ) | ||||
Deferred tax liability | (574.1 | ) | (721.2 | ) | ||||
Net deferred tax asset/(liability) | (179.6 | ) | (391.1 | ) | ||||
Classified on the consolidated balance sheet as follows: | ||||||||
Net current deferred tax asset/(liability) | 7.1 | 20.1 | ||||||
Net non-current deferred tax asset/(liability) | (186.7 | ) | (411.2 | ) | ||||
(179.6 | ) | (391.1 | ) | |||||
F-40
14. | LONG-TERM DEBT: |
December 31, | ||||||||||||
2006 | 2007 | |||||||||||
(a | ) | European Investment Bank | 52.5 | 36.4 | ||||||||
(b | ) | Syndicated loans | 500.0 | 500.0 | ||||||||
(c | ) | Bond €1,100 6.125% maturity February 2007 | 491.3 | — | ||||||||
(d | ) | Global Medium Term Note Program | 3,363.2 | 3,369.0 | ||||||||
(e | ) | Bridge Facility Consortium Loan | — | 1,500.0 | ||||||||
(f | ) | Other bank loans | 168.5 | 133.7 | ||||||||
Total long-term debt | 4,575.5 | 5,539.1 | ||||||||||
Less: Current maturities | (528.1 | ) | (83.3 | ) | ||||||||
Long-term portion | 4,047.4 | 5,455.8 | ||||||||||
Year | Amount | |||
2008 | 83.3 | |||
2009 | 634.8 | |||
2010 | 33.7 | |||
2011 | 2,169.1 | |||
2012 | 454.3 | |||
2013 and thereafter | 2,163.9 | |||
5,539.1 | ||||
(a) | EUROPEAN INVESTMENT BANK |
(b) | SYNDICATED LOANS |
December 31, | ||||||||
2006 | 2007 | |||||||
OTE PLC’s loans | 500.0 | 500.0 | ||||||
500.0 | 500.0 | |||||||
F-41
(c) | BOND €1,100 6.125% MATURITY FEBRUARY 2007 |
(d) | GLOBAL MEDIUM TERM NOTE PROGRAM |
December 31, | ||||||||||||||
2006 | 2007 | |||||||||||||
(i) | Bond €1,250, 5% due August 2013 | 1,243.7 | 1,244.5 | |||||||||||
(ii) | Bond €650, 3.75% due November 2011 | 626.6 | 631.0 | |||||||||||
(iii) | Bond €900, 4.625% due May 2016 | 892.9 | 893.5 | |||||||||||
(iv) | Bond €600, floating due November 2009 | 600.0 | 600.0 | |||||||||||
3,363.2 | 3,369.0 | |||||||||||||
F-42
(e) | BRIDGE FACILITY CONSORTIUM LOAN |
F-43
(f) | OTHER BANK LOANS |
December 31, | ||||||||
2006 | 2007 | |||||||
Romtelecom’s bank loans | 105.9 | 78.1 | ||||||
Globul’s bank loans | 59.7 | 50.0 | ||||||
Other bank loans | 2.9 | 5.6 | ||||||
168.5 | 133.7 | |||||||
15. | RESERVES FOR PENSIONS, STAFF RETIREMENT INDEMNITIES AND OTHER BENEFITS: |
(a) | Main Pension Fund (TAP-OTE): |
F-44
(b) | Auxiliary Pension Fund: |
F-45
December 31, | ||||||||
2006 | 2007 | |||||||
Payments and advances: | ||||||||
— EDEKT | 140.9 | 105.7 | ||||||
— Auxiliary Fund | 4.7 | 4.2 | ||||||
— Interest bearing loan to the Auxiliary Fund | 66.4 | 188.0 | ||||||
212.0 | 297.9 | |||||||
Less:unamortized discount based on imputed interest rates | ||||||||
— Auxiliary Fund | (0.6 | ) | (0.7 | ) | ||||
— Interest bearing loan to the Auxiliary Fund | (23.3 | ) | (60.1 | ) | ||||
Long-term portion | 188.1 | 237.1 | ||||||
December 31, | ||||||||
2006 | 2007 | |||||||
Payments and advances: | ||||||||
— EDEKT | 35.2 | 35.2 | ||||||
— Auxiliary Fund | 0.5 | 0.5 | ||||||
Short-term portion | 35.7 | 35.7 | ||||||
F-46
(a) | Reserve for Staff Retirement Indemnities |
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Service cost | 19.1 | 20.0 | 19.7 | |||||||||
Interest cost | 18.4 | 16.5 | 13.8 | |||||||||
Amortization of prior service costs | 15.1 | 7.8 | 7.8 | |||||||||
Amortization of actuarial loss | 2.6 | 0.8 | 2.7 | |||||||||
55.2 | 45.1 | 44.0 | ||||||||||
F-47
December 31, | ||||||||
2006 | 2007 | |||||||
Projected benefit obligation at beginning of year | 559.9 | 335.5 | ||||||
Service cost | 20.0 | 19.7 | ||||||
Interest cost | 16.5 | 13.8 | ||||||
Actuarial loss/(gain) | 1.6 | (15.2 | ) | |||||
Benefits paid | (262.5 | ) | (31.9 | ) | ||||
Projected benefit obligation at end of year | 335.5 | 321.9 | ||||||
Transfer from the Reserve for Voluntary Retirement Program | — | 16.5 | ||||||
Total projected benefit obligation | 335.5 | 338.4 | ||||||
Less: Current portion | (6.8 | ) | (5.7 | ) | ||||
Long-term portion of projected benefit obligation | 328.7 | 332.7 | ||||||
Accumulated benefit obligation | 219.2 | 239.7 | ||||||
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Discount rate | 3.73 | % | 4.11 | % | 4.83 | % | ||||||
Assumed rate of increase in future compensation levels | 5.50 | % | 5.50 | % | 5.50 | % |
Year | Amount | |||
2008 | 5.8 | |||
2009 | 4.6 | |||
2010 | 6.7 | |||
2011 | 20.1 | |||
2012 | 27.9 | |||
2013-2017 | 202.3 |
F-48
(b) | Reserve for Youth Account |
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Service cost | 20.9 | 21.9 | 21.8 | |||||||||
Interest cost | 10.2 | 10.0 | 11.8 | |||||||||
Amortization of actuarial gain | 6.5 | 8.0 | 7.3 | |||||||||
Amortization of prior service costs | — | 3.2 | 3.2 | |||||||||
Settlement cost | — | 20.0 | 8.5 | |||||||||
37.6 | 63.1 | 52.6 | ||||||||||
December 31, | ||||||||
2006 | 2007 | |||||||
Projected benefit obligation at beginning of year | 306.3 | 316.4 | ||||||
Service cost | 21.9 | 21.8 | ||||||
Interest cost | 10.0 | 11.8 | ||||||
Actuarial loss/(gains) | 27.2 | (12.2 | ) | |||||
Benefits paid | (49.0 | ) | (51.4 | ) | ||||
Projected benefit obligation at end of year | 316.4 | 286.4 | ||||||
Employee’s accumulated contributions | 70.8 | 71.0 | ||||||
Total reserve for Youth Account | 387.2 | 357.4 | ||||||
Less: Current portion | (48.3 | ) | (52.1 | ) | ||||
Long-term portion of reserve for Youth Account | 338.9 | 305.3 | ||||||
Accumulated benefit obligation | 257.1 | 241.9 | ||||||
F-49
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Discount rate | 3.57% | 4.04% | 4.54% | |||||||||
Assumed rate of increase in future compensation levels | 4.50% | 4.50% | 4.50% |
Year | Amount | |||
2008 | 53.1 | |||
2009 | 54.1 | |||
2010 | 52.6 | |||
2011 | 41.7 | |||
2012 | 26.3 | |||
2013-2017 | 127.6 |
F-50
• | The total cost of employer’s and employees’ contributions to TAP-OTE for the period required to the employees in order to be entitled to pension. | |
• | The amount of pensions TAP OTE will be required to prepay for these employees. | |
• | The total cost of employer’s and employees’ contributions to Auxiliary Fund for the period required to the employees in order to be entitled to pension. | |
• | The amount of pensions the Auxiliary Fund will be required to prepay for 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 July 20, 2005. | |
• | The termination payments upon retirement of the employees (staff retirement indemnities). |
Category of Obligation | Estimation 2005 | Estimation 2006 | ||||||
Total employer’s and employees’ contributions to | ||||||||
TAP-OTE & Auxiliary Fund | 232.2 | 223.5 | ||||||
Total pensions from TAP-OTE & Auxiliary Fund | 576.4 | 547.4 | ||||||
Total bonuses based on the collective labor agreement | 55.0 | 55.0 | ||||||
Total termination payments upon retirement (staff retirement indemnities) | 242.7 | 239.0 | ||||||
Total nominal cost of the Program | 1,106.3 | 1,064.9 | ||||||
Effect of discounting to present values | (67.6 | ) | (62.8 | ) | ||||
Discounted present value of the total obligation | 1,038.7 | 1,002.1 | ||||||
Minus already established reserves for staff retirement indemnities | (124.2 | ) | (120.4 | ) | ||||
Cost of Voluntary Retirement Program | 914.5 | 881.7 | ||||||
Cost of earlier voluntary retirement plan during the 1st half of 2005 | 25.1 | 25.1 | ||||||
Total cost of the Voluntary Retirement Program | 939.6 | 906.8 | ||||||
F-51
December 31, | ||||||||
2006 | 2007 | |||||||
Reserve for Voluntary Retirement Program (Short-term portion) | 316.7 | 202.8 | ||||||
Reserve for Voluntary Retirement Program (Long-term portion) | 372.8 | 224.9 | ||||||
Total | 689.5 | 427.7 | ||||||
2006 | 2007 | |||||||
Balance at the beginning of the year | 1,038.7 | 689.5 | ||||||
Payments made during the year | (337.6 | ) | (256.2 | ) | ||||
Adjustment due to re-estimation of the program’s cost | (32.8 | ) | — | |||||
Adjustment of discounted amount due to passage of time | 21.2 | 10.9 | ||||||
Transfer to the Reserve for Staff Retirement Indemnities | — | (16.5 | ) | |||||
Balance at the end of year | 689.5 | 427.7 | ||||||
Year | Amount | |||
2008 | 208.8 | |||
2009 | 120.6 | |||
2010 | 75.7 | |||
2011 | 39.0 | |||
2012 | 8.4 |
16. | SHARE CAPITAL: |
F-52
17. | LEGAL RESERVE: |
18. | DIVIDENDS: |
F-53
(a) | Litigation and Claims: |
F-54
F-55
F-56
(b) | Commitments: |
• | an amount per contract subscriber acquired by the Master Dealer that varies depending on the characteristics of each new subscriber. These amounts may be clawed back by Cosmote, with respect to customers who cancel within six months of activation. | |
• | a loyalty bonus in respect of contract subscribers who renew their annual contracts. | |
• | quarterly, semi-annual and annual bonuses if the Master Dealer achieves mutually agreed targets for number of contract subscribers connected to Cosmote’s network during the relevant periods. | |
• | a commission which ranges from 5% to 10% of the revenues billed by Cosmote to each contract subscriber acquired by a Master Dealer and its network of franchised independent distributors. |
Year | Amount | |||
2008 | 109.4 | |||
2009 | 74.9 | |||
2010 | 73.4 | |||
2011 | 75.0 | |||
2012 | 77.2 | |||
Thereafter | 334.1 | |||
744.0 | ||||
F-57
(c) | Contingencies and significant risks: |
20. | SHARE-BASED AWARDS: |
F-58
Basic Option | Additional Option | |||||||||||
Beneficiaries | Rights | Rights | ||||||||||
Managing Directors of Subsidiaries | 35,000 | 7,000 | ||||||||||
Directors | 18,000 | 4,500 | ||||||||||
Managers | 9,500 | 3,100 |
F-59
• | If the employment is terminated for any reason prior to the payment of the purchase price, unless the Board of Directors of Cosmote determines otherwise. If the employee dies after the options vest, his beneficiaries may exercise any unexercised options, based on and subject to certain provisions. | |
• | If a participant does not submit the written application for exercise within the time period defined, or does not pay in full the purchase price of shares within twenty (20) days following the increase of capital. |
F-60
F-61
Number of Shares | Weighted Average | |||||||
Subject to Option | Exercise Price (Euro) | |||||||
Outstanding at January 1, 2005 | 4,603,815 | 10.63 | ||||||
Granted during the period | 1,209,390 | 15.95 | ||||||
Exercised during the period | (1,288,250 | ) | 9.66 | |||||
Forfeited during the period | (128,300 | ) | 11.34 | |||||
Expired during the period | (51,070 | ) | 9.78 | |||||
Outstanding at December 31, 2005 | 4,345,585 | 12.37 | ||||||
Exercisable at December 31, 2005 | 1,093,508 | 9.41 | ||||||
Outstanding at January 1, 2006 | 4,345,585 | 12.37 | ||||||
Granted during the period | 1,079,580 | 18.84 | ||||||
Exercised during the period | (1,874,939 | ) | 11.10 | |||||
Forfeited during the period | (352,420 | ) | 13.15 | |||||
Expired during the period | (210,356 | ) | 10.02 | |||||
Outstanding at December 31, 2006 | 2,987,450 | 16.30 | ||||||
Exercisable at December 31, 2006 | 869,069 | 14.46 | ||||||
Outstanding at January 1, 2007 | 2,987,450 | 16.30 | ||||||
Granted during the period | 2,011,220 | 18.45 | ||||||
Exercised during the period | (1,175,100 | ) | 14.37 | |||||
Forfeited during the period | (662,450 | ) | 15.87 | |||||
Expired during the period | — | — | ||||||
Outstanding at December 31, 2007 | 3,161,120 | 17.38 | ||||||
Exercisable at December 31, 2007 | 3,966 | 16.01 |
F-62
First Plan (2000): | Dividend yield of 0.5%, annual standard deviation (volatility) of 37.00%, risk free interest rate of 5.00% and expected life of three years. | |
Second Plan (2001): | Dividend yield of 1.5%, annual standard deviation (volatility) of 28.8%, risk free interest rate of 5.00% and expected life of three years. | |
Third Plan (2002): | Dividend yield of 3.0%, annual standard deviation (volatility) of 25.20%, risk free interest rate of 5.00% and expected life of three years. | |
Fourth Plan (2003): | Dividend yield of 3.8%, annual standard deviation (volatility) of 24.30%, risk free interest rate of 5.00% and expected life of three years. | |
Fifth Plan (2004): | Dividend yield of 10.6%, annual standard deviation (volatility) of 23.70%, risk free interest rate of 5.00% and expected life of three years. | |
Sixth Plan (2005): | Dividend yield of 10.6%, annual standard deviation (volatility) of 22.10%, risk free interest rate of 5.00% and expected life of three years. | |
Seventh Plan (2006): | Dividend yield of 3.37%, annual standard deviation (volatility) of 24.79%, risk free interest rate of 3.97% and expected life of three years. | |
Eighth Plan (2007): | Dividend yield of 3.16%, annual standard deviation (volatility) of 24.27%, risk free interest rate of 3.98% and expected life of three years. |
Outstanding | Exercisable | |||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Aggregate | Average | |||||||||||||||||||||
Exercise Price | Remaining | Intrinsic | Exercise Price | |||||||||||||||||||||
Plan | Number | (€) | Contractual Life | Valve | Number | (€) | ||||||||||||||||||
Sixth | 359,840 | 15.95 | 1.82 | 5.7 | — | 15.95 | ||||||||||||||||||
Seventh | 790,060 | 18.84 | 2.82 | 14.9 | 3,966 | 16.01 | ||||||||||||||||||
Eighth | 2,011,220 | 18.45 | 3.82 | 37.9 | — | — | ||||||||||||||||||
Total | 3,161,120 | 17.38 | 58.5 | 3,966 | 16.01 | |||||||||||||||||||
21. | REPORTABLE SEGMENTS |
F-63
F-64
Adjustments & | ||||||||||||||||||||||||||||
Year ended December 31, 2007 | OTE | Cosmote Group | Romtelecom | All Other | Totals | Eliminations | Consolidated | |||||||||||||||||||||
Revenues from external customers | 2,393.7 | 2,878.5 | 840.1 | 204.4 | 6,316.7 | — | 6,316.7 | |||||||||||||||||||||
Intersegment Revenues | 263.2 | 181.7 | 28.6 | 269.4 | 742.9 | (742.9 | ) | — | ||||||||||||||||||||
Interest income | 47.1 | 21.6 | 10.1 | 201.5 | 280.3 | (202.5 | ) | 77.8 | ||||||||||||||||||||
Interest expense | (90.6 | ) | (145.3 | ) | (5.4 | ) | (195.0 | ) | (436.3 | ) | 205.4 | (230.9 | ) | |||||||||||||||
Depreciation and Amortization | (502.2 | ) | (367.7 | ) | (222.3 | ) | (47.3 | ) | (1,139.5 | ) | 0.9 | (1,138.6 | ) | |||||||||||||||
Earnings/(Losses) from investments | 16.5 | — | — | — | 16.5 | — | 16.5 | |||||||||||||||||||||
Income tax (expense)/benefit | (211.5 | ) | (147.6 | ) | (11.1 | ) | (18.1 | ) | (388.3 | ) | — | (388.3 | ) | |||||||||||||||
Operating income | 266.8 | 619.7 | 78.9 | 74.4 | 1,039.8 | (1.3 | ) | 1,038.5 | ||||||||||||||||||||
Net income | 540.8 | 356.9 | 42.0 | 60.3 | 1,000.0 | (362.4 | ) | 637.6 | ||||||||||||||||||||
Segment assets | 8,464.5 | 4,653.0 | 2,120.1 | 7,295.4 | 22,533.0 | (8,411.3 | ) | 14,121.7 | ||||||||||||||||||||
Expenditures for segment assets | 295.0 | 564.5 | 207.2 | 34.6 | 1,101.3 | — | 1,101.3 | |||||||||||||||||||||
Year ended December 31, 2006 | ||||||||||||||||||||||||||||
Revenues from external customers | 2,488.7 | 2,212.6 | 873.4 | 312.7 | 5,887.4 | — | 5,887.4 | |||||||||||||||||||||
Intersegment Revenues | 225.8 | 169.7 | 17.6 | 182.5 | 595.6 | (595.6 | ) | — | ||||||||||||||||||||
Interest income | 45.7 | 18.2 | 13.5 | 146.0 | 223.4 | (152.6 | ) | 70.8 | ||||||||||||||||||||
Interest expense | (130.5 | ) | (73.9 | ) | (8.5 | ) | (151.0 | ) | (363.9 | ) | 155.0 | (208.9 | ) | |||||||||||||||
Depreciation and Amortization | (528.0 | ) | (318.5 | ) | (182.7 | ) | (66.3 | ) | (1,095.5 | ) | 2.0 | (1,093.5 | ) | |||||||||||||||
Earnings/(Losses) from investments | 22.9 | — | — | — | 22.9 | — | 22.9 | |||||||||||||||||||||
Income tax (expense)/benefit | (187.8 | ) | (159.0 | ) | (22.2 | ) | (72.5 | ) | (441.5 | ) | — | (441.5 | ) | |||||||||||||||
Operating income | 251.7 | 556.2 | 156.2 | 97.4 | 1,061.5 | 0.6 | 1,062.1 | |||||||||||||||||||||
Net income | 476.3 | 362.4 | 120.6 | 91.2 | 1,050.5 | (541.5 | ) | 509.0 | ||||||||||||||||||||
Segment assets | 6,796.8 | 4,839.3 | 2,254.3 | 6,120.4 | 20,010.8 | (7,139.0 | ) | 12,871.8 | ||||||||||||||||||||
Expenditures for segment assets | 225.7 | 442.4 | 208.1 | 86.2 | 962.4 | — | 962.4 | |||||||||||||||||||||
Year ended December 31, 2005 | ||||||||||||||||||||||||||||
Revenues from external customers | 2,509.5 | 1,787.8 | 917.1 | 256.6 | 5,471.0 | — | 5,471.0 | |||||||||||||||||||||
Intersegment Revenues | 197.5 | 175.4 | 8.6 | 162.7 | 544.2 | (544.2 | ) | — | ||||||||||||||||||||
Interest income | 39.2 | 18.2 | 1.9 | 161.8 | 221.1 | (167.2 | ) | 53.9 | ||||||||||||||||||||
Interest expense | (130.1 | ) | (33.5 | ) | (14.7 | ) | (154.2 | ) | (332.5 | ) | 168.0 | (164.5 | ) | |||||||||||||||
Depreciation and Amortization | (542.6 | ) | (265.1 | ) | (190.0 | ) | (56.3 | ) | (1,054.0 | ) | 0.1 | (1,053.9 | ) | |||||||||||||||
Earnings/(Losses) from investments | 20.0 | — | — | — | 20.0 | — | 20.0 | |||||||||||||||||||||
Income tax (expense)/benefit | 195.3 | (166.6 | ) | (12.8 | ) | (48.4 | ) | (32.5 | ) | — | (32.5 | ) | ||||||||||||||||
Operating income/(loss) | (822.5 | ) | 517.3 | 174.5 | 126.3 | (4.4 | ) | 2.0 | (2.4 | ) | ||||||||||||||||||
Net income/(loss) | (236.5 | ) | 343.6 | 256.1 | 94.3 | 457.5 | (749.4 | ) | (291.9 | ) | ||||||||||||||||||
Segment assets | 7,227.0 | 2,460.4 | 2,138.6 | 5,063.1 | 16,889.1 | (6,020.2 | ) | 10,868.9 | ||||||||||||||||||||
Expenditures for segment assets | 209.5 | 259.3 | 92.0 | 119.4 | 680.2 | — | 680.2 |
F-65
Revenues | Long-lived Assets | |||||||||||||||||||||||
Country | 2005 | 2006 | 2007 | 2005 | 2006 | 2007 | ||||||||||||||||||
Greece | 3,988.4 | 4,239.4 | 4,530.7 | 4,403.6 | 5,560.8 | 6,913.3 | ||||||||||||||||||
Other countries | 1,482.6 | 1,648.0 | 1,786.0 | 2,849.9 | 2,958.2 | 3,490.6 | ||||||||||||||||||
5,471.0 | 5,887.4 | 6,316.7 | 7,253.5 | 8,519.0 | 10,403.9 | |||||||||||||||||||
F-66
22. | REVENUES: |
Year Ended December 31, | ||||||||||||||
2005 | 2006 | 2007 | ||||||||||||
(i) | Domestic Telephony | |||||||||||||
• Monthly network service fees | 950.1 | 991.8 | 985.0 | |||||||||||
• Local and long-distance calls | ||||||||||||||
— Fixed to fixed | 759.1 | 702.6 | 565.5 | |||||||||||
— Fixed to mobile | 515.7 | 470.2 | 378.3 | |||||||||||
1,274.8 | 1,172.8 | 943.8 | ||||||||||||
• Other | 83.2 | 92.1 | 90.3 | |||||||||||
2,308.1 | 2,256.7 | 2,019.1 | ||||||||||||
(ii) | International Telephony | |||||||||||||
• International traffic | 150.5 | 132.3 | 108.1 | |||||||||||
• Payments from international operators | 202.4 | 172.7 | 146.8 | |||||||||||
• Payments from mobile operators | 38.1 | 41.9 | 49.6 | |||||||||||
391.0 | 346.9 | 304.5 | ||||||||||||
(iii) | Mobile telephony | 1,756.7 | 1,975.8 | 2,210.0 | ||||||||||
(iv) | Other revenues | |||||||||||||
• Prepaid cards | 126.6 | 100.6 | 76.2 | |||||||||||
• Directories | 56.1 | 58.0 | 55.1 | |||||||||||
• Leased lines/Data communications/Asynchronous Transfer Mode | 234.5 | 246.1 | 274.9 | |||||||||||
• Integrated Services Digital Network | 141.4 | 158.9 | 166.1 | |||||||||||
• Sales of telecommunication equipment | 107.7 | 341.6 | 679.8 | |||||||||||
• Internet services | 81.0 | 133.1 | 227.9 | |||||||||||
• Services rendered | 72.3 | 74.9 | 94.6 | |||||||||||
• Interconnection charges | 101.7 | 96.8 | 108.2 | |||||||||||
• Miscellaneous | 93.9 | 98.0 | 100.3 | |||||||||||
1,015.2 | 1,308.0 | 1,783.1 | ||||||||||||
Total revenues | 5,471.0 | 5,887.4 | 6,316.7 | |||||||||||
F-67
23. | OTHER OPERATING EXPENSES: |
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Services and fees | 155.9 | 173.7 | 182.9 | |||||||||
Cost of telecommunication materials, repairs and maintenance | 206.8 | 198.0 | 200.6 | |||||||||
Advertising costs | 133.3 | 164.0 | 208.3 | |||||||||
Utilities | 101.0 | 98.0 | 93.6 | |||||||||
Provision for doubtful accounts | 110.4 | 97.9 | 88.0 | |||||||||
Provision for litigation and claims | 47.8 | 35.9 | 18.1 | |||||||||
Travel costs | 17.0 | 17.6 | 18.9 | |||||||||
Commissions to independent distributors | 166.9 | 203.0 | 243.4 | |||||||||
Payments to audiotex providers | 21.7 | 17.1 | 14.3 | |||||||||
Rent | 77.9 | 86.3 | 94.9 | |||||||||
Taxes, other than income taxes | 30.1 | 47.1 | 56.3 | |||||||||
Transportation | 7.0 | 9.6 | 13.0 | |||||||||
Other | 40.8 | 39.1 | 58.8 | |||||||||
Total other operating expenses | 1,116.6 | 1,187.3 | 1,291.1 | |||||||||
24. | GAIN ON SALE OF INVESTMENTS: |
Year Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Gain on sale of Armentel See Note 1(g) | — | 164.0 | 5.9 | |||||||||
Gain on sale of InfOTE See Note 1(h) | — | — | 246.6 | |||||||||
Gain on sale of satellite organizations (See Note 6) | 13.7 | — | — | |||||||||
Gain on sale of available-for-sale marketable securities (See Note 5) | 11.4 | 10.3 | — | |||||||||
Gain from issuance of Cosmote’s shares in excess of carrying value See Note 1(a) | 5.4 | 5.9 | 7.7 | |||||||||
Other | 0.2 | — | 1.2 | |||||||||
30.7 | 180.2 | 261.4 | ||||||||||
25. | FAIR VALUE OF FINANCIAL INSTRUMENTS: |
F-68
December 31, 2006 | December 31, 2007 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
Available-for-sale marketable equity securities | 36.4 | 36.4 | 45.4 | 45.4 | ||||||||||||
Long term debt at floating interest rates | 1,165.9 | 1,165.9 | 2,652.8 | 2,652.8 | ||||||||||||
Long term debt at fixed interest rates | 3,409.6 | 3,371.6 | 2,886.3 | 2,728.4 | ||||||||||||
4,575.5 | 4,537.5 | 5,539.1 | 5,381.2 | |||||||||||||
26. | SUBSEQUENT EVENTS: |
F-69
F-70