As filed with the Securities and Exchange Commission on June
7, 2010
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 20-F
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year ended December 31, 2009
Commission file number 1-14876
(Exact Name of Registrant as
Specified in its Articles)
Hellenic Telecommunications
Organization S.A.
(Translation of
Registrants Name into English)
Hellenic Republic
(Jurisdiction of Incorporation
or Organization)
99 Kifissias Avenue
GR 15124 Amaroussion
Athens, Greece
(Address of Principal Executive
Offices)
Mr. Dimitrios Tzelepis
Head, Investor Relations Department
Tel: +30 210 611 1574; Email: dtzelepis@ote.gr
99 Kifissias Avenue
GR 15124 Amaroussion, Athens, Greece
(Name, Telephone,
E-mail
and/or Facsimile number and Address of Company Contact
Person)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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American Depositary Shares, each
representing one half of one Ordinary Share
Ordinary Shares nominal value 2.39 per share*
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New York Stock Exchange
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*
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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.
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Securities registered pursuant to Section 12(g) of the
Act:
None
Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the
Registrants classes of capital or common stock as of
December 31, 2009.
490,150,389 Ordinary Shares
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
þ
No
o
If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934. Yes
o
No
þ
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes
o
No
þ
Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act.
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Large accelerated
filer
þ
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Accelerated
filer
o
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Non-accelerated
filer
o
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Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this
filing:
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U.S. GAAP
o
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International Financial Reporting Standards as
issued
by the International Accounting Standards Board
þ
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Other
o
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Indicate by check mark which financial statement item the
Registrant has elected to follow. Item 17
o
Item 18
þ
If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in
Rule 12b-2
of the Exchange
Act). Yes
o
No
þ
PRESENTATION
OF INFORMATION
We have prepared our consolidated financial statements as of and
for the years ended December 31, 2007, 2008 and 2009 in
Euros in accordance with International Financial Reporting
Standards
(IFRS)
as issued by the
International Accounting Standards Board
(IASB)
. Solely for your convenience, certain
Euro or other currency amounts have been translated into
U.S. Dollars. Unless otherwise indicated, Euro amounts have
been translated into U.S. Dollars at the rate of
Euro 1.00 to U.S. $1.2414, which was the spot rate of
the Euro on May 24, 2010, as reported by Bloomberg. We make
no representation that these Euro amounts have been, or could
have been, translated or converted into U.S. Dollar amounts
on any particular date at the exchange rate indicated or any
other rate.
Certain figures have been subject to rounding adjustments;
accordingly, figures shown for the same category presented in
different tables may vary slightly, and figures shown as totals
in certain tables may not be an arithmetic aggregation of the
figures which precede them.
Our consolidated financial statements and the notes thereto
prepared in accordance with IFRS as issued by the IASB were
audited:
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in the case of the financial statements for the year ended
December 31, 2007, by KPMG Certified Auditors A.E., an
independent registered public accounting firm; and
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in the case of the financial statements as of and for the years
ended December 31, 2008 and 2009, by Ernst &
Young (Hellas) Certified Auditors Accountants S.A., an
independent registered public accounting firm.
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As used in this annual report on
Form 20-F
(Annual Report)
:
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U.S. Dollars
,
U.S. $
or
$
means the lawful currency of the
United States;
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Euro,
or
Eurocents
means the common currency of Member
States of the European Union participating in the third stage of
European Monetary Union;
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RON or Lei
means the lawful
currency of the Republic of Romania;
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LEK
means the lawful currency of the Republic
of Albania; and
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BGN
means the lawful currency of the Republic
of Bulgaria.
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Solely for your convenience, certain amounts in LEK and BGN have
been translated into Euro. Unless otherwise indicated, LEK and
BGN amounts have been translated into Euro at the rates of
Euro 1.00 to LEK 137.69 and Euro 1.00 to BGN 1.9557,
respectively, being the rates effective on December 31,
2009, as published by Bloomberg.
All references to us, we,
OTE, OTE S.A. or our company
are to the Hellenic Telecommunications Organization S.A. All
references to OTE Group or the Group are
to the Hellenic Telecommunications Organization S.A. and its
consolidated subsidiaries.
All references in this Annual Report to the State or
the Greek State are to the Hellenic Republic and all
references to the government are to the government
of the Hellenic Republic. All references in this Annual Report
to Deutsche Telekom are to Deutsche Telekom A.G., a
company incorporated under the laws of the Federal Republic of
Germany, a major shareholder of our company.
All references to the EU are to the European Union.
All references in this Annual Report to ADSs are to
the American Depositary Shares (each representing one half of
one ordinary share of OTE), which are listed on the New York
Stock Exchange and registered under Section 12(b) of the
Securities Exchange Act of 1934, as amended (the
Exchange Act
).
All references to the EETT or the
Regulator are to Ethniki Epitropi
Tilepikinonion & Tahidromion, or the Greek National
Telecommunications and Post Commission.
All references to the Telecommunications Law are to
Greek Law 3431/2006 and, where appropriate, applicable
provisions of Greek Law 2867/2000, both of which regulate
electronic communications in line with the
1
current EU regulation of the sector. References to our
license or the License are to the general
license issued to us by the EETT in accordance with the
Telecommunications Law. All references to long-distance
calls, traffic or tariffs are to
domestic long-distance calls, domestic traffic or domestic
tariffs, respectively.
All references to the Voluntary Retirement Scheme
are to a broad voluntary retirement program which we implemented
commencing in June 2005, which has facilitated the early
retirement of 5,405 of our employees, as of December 31,
2009.
All telephony charges described in this Annual Report exclude
Greek value-added tax
(VAT)
, which is similar
to sales tax in the United States. As of April 1, 2005,
value-added tax is imposed by the Greek tax authorities as a
fixed percentage of sales of goods and services (currently at
the rate of 21% and expected to increase to 23% later in 2010).
We believe that the recovery of VAT from customers qualifies as
a deduction of VAT expenses incurred to the tax authorities
based on sales.
All references to ICT are to information and communications
technology, which includes the study, design, development,
implementation, support or management of computer-based
information systems, particularly network equipment, software
applications and computer systems hardware.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We may from time to time make written or oral forward-looking
statements, including in this Annual Report, in other filings
with the United States Securities and Exchange Commission
(SEC)
, in reports to shareholders and in
other communications. The statements relate to analyses and
other information, which are based on forecasts of future
results and estimates of amounts not yet determinable. These
statements also relate to our future prospects, developments and
business strategies. Examples of such forward-looking statements
include, but are not limited to:
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statements regarding our results of operations, financial
condition, future economic performance and plans regarding our
tariffs and pricing policies;
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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;
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statements of our plans, objectives or goals, including those
related to our products or services;
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statements of assumptions;
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statements regarding our ongoing or anticipated investment and
expansion programs;
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statements regarding new services or products and anticipated
customer demand for these services or products;
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statements regarding our cost reduction programs;
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statements regarding the impact of government policies or
initiatives in areas in which we conduct business on our
investment plans, business, financial condition and operations;
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statements regarding the potential impact of regulatory actions
on our business, financial condition and operations; and
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statements regarding the possible effects of determinations in
litigation, investigations, contested regulatory proceedings and
other disputes.
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Words such as believes, anticipates,
aims, expects, intends,
plans, seeks, will,
could, may and projects and
similar expressions are intended to identify forward-looking
statements but are not the exclusive means of identifying such
statements.
Such forward-looking statements are not guarantees of future
performance by their very nature and involve inherent risks and
uncertainties, both general and specific, and there are risks
that the predictions, forecasts, projections and other
forward-looking statements will not be achieved; therefore you
should not place too much
2
reliance on them. If one or more of these materialize, or should
underlying assumptions prove incorrect, actual results may
differ materially from those anticipated in this Annual Report.
There are a number of important factors that could cause actual
results and developments to differ materially from those
expressed or implied in such forward-looking statements. These
factors include, but are not limited to, the following:
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risks and uncertainties relating to our international operations;
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economic and political developments in the countries where we
conduct operations, including as a result of the global economic
downturn;
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the effect of, and changes in, regulation and government policy;
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the effects of competition and competitive activity resulting in
changes in pricing and product offerings, higher customer
acquisition costs, slower customer growth, or reduced customer
retention;
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regulatory developments, including changes to our permitted
tariffs, the terms of access to our network, the terms of
interconnection and other issues;
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our ability to reduce costs and to realize synergies and
productivity improvements;
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loss of suppliers or disruption of supply chains;
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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;
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changes in the projected growth rates of the fixed and mobile
telecommunications markets;
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the possibility that new technologies and services will not
perform according to expectations or that vendors
performance will not meet our requirements;
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the impact of legal, regulatory or other proceedings against us
or our subsidiaries; and
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our success at managing the foregoing and related risks.
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The foregoing list of important factors is not exhaustive. When
relying on forward-looking statements to make investment
decisions, you should carefully consider the foregoing factors,
as well as additional risks set forth in 3.D Risk
Factors and such other matters as you may deem
appropriate. Such forward-looking statements speak only as of
the date on which they are made, and we do not undertake any
obligation to update or revise any of them, whether as a result
of new information, future events or otherwise, or to advise you
of any factors of which we are or may become aware.
PART I
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ITEM 1
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IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
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Not applicable.
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ITEM 2
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OFFER
STATISTICS AND EXPECTED TIMETABLE
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Not applicable.
3
3.A Selected
Financial Data
You should read the following information about us and our
consolidated subsidiaries as of and for the years ended
December 31, 2005, 2006, 2007, 2008 and 2009, together with
the consolidated financial statements, including the notes
thereto, which are contained in this Annual Report and have been
prepared in accordance with IFRS as issued by the IASB. The
following selected financial data (other than Dividend
Information and Non-GAAP Financial
Information) has been derived from our consolidated
financial statements, which:
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in the case of the consolidated financial statements as of and
for the years ended December 31, 2008 and 2009, were
audited by Ernst & Young (Hellas) Certified Auditors
Accountants S.A., an independent registered public accounting
firm;
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in the case of the consolidated financial statements for the
years ended December 31, 2006 and 2007 were audited by KPMG
Certified Auditors A.E., an independent registered public
accounting firm; and
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in the case of the consolidated financial statements as of and
for the year ended December 31, 2005, were not audited, but
are provided for comparison purposes.
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For a more detailed discussion of our financial results, see
5. Operating and Financial Review and Prospects.
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For the Year Ended December 31,
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2005
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2006
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2007
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2008
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2009
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2009
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(Euro)
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(Euro)
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(Euro)
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(Euro)
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(Euro)
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(U.S.
$)
(1)
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(Unaudited)
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(Audited)
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(Audited)
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(Audited)
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(Audited)
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(Unaudited)
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(Millions except shares and per share data)
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Income Statement Data
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Revenues:
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Domestic
telephony
(2)
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2,312.2
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2,260.6
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2,022.2
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1,814.2
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1,619.6
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2,010.6
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International
telephony
(3)
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391.0
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346.9
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304.5
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286.9
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251.1
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311.7
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Mobile telephony
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1,752.2
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1,975.8
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2,210.0
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2,470.8
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2,396.2
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2,974.6
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Other
revenue
(4)
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1,019.7
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1,308.0
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1,783.1
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1,835.4
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1,717.2
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2,131.7
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Total revenue
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5,475.1
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5,891.3
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6,319.8
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6,407.3
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5,984.1
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7,428.6
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Total operating expenses
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(5,451.1
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)
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(4,803.0
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(5,272.9
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)
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(5,349.6
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(4,983.2
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(6,186.1
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Operating income before financial activities
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24.0
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1,088.3
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1,046.9
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1,057.7
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1,000.9
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1,242.5
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Total profit (loss) from financial activities
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(20.7
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(4.5
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)
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107.9
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(213.7
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)
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(220.2
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)
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(273.4
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Profit before tax
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3.3
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1,083.8
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1,154.8
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844.0
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780.7
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969.1
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Income tax
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(19.8
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)
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(353.0
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)
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(381.8
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)
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(246.2
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)
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(410.0
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)
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(509.0
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Profit for the
year
(5)
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(16.5
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)
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730.8
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773.0
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597.8
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370.7
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460.1
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Attributable to:
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Owners of the parent
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(216.8
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)
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574.6
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662.6
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601.8
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374.0
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464.2
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Non-controlling interests
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200.3
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156.2
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110.4
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(4.0
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)
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(3.3
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)
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(4.1
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)
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Basic earnings per
share
(6)
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(0.4424
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)
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1.1723
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1.3518
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1.2278
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0.7630
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0.9472
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Diluted earnings per
share
(6)
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(0.4424
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)
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1.1723
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1.3518
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1.2129
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0.7630
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0.9472
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Weighted average number of shares outstanding
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490,150,389.0
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490,150,389.0
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490,150,389.0
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490,150,389.0
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490,150,389.0
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Dividend Information
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Dividends per
share
(7)
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0.00
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0.55
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0.75
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0.75
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0.19
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0.24
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Dividends per American Depositary Share (in U.S.
Dollars)
(8)
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0.0
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0.3746
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0.5905
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0.5229
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N/A
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N/A
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Non-GAAP Financial Information (unaudited)
|
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Operating income before depreciation and
amortization)
(9)
|
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1,131.4
|
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2,216.8
|
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|
2,218.7
|
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2,270.7
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2,156.2
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2,676.7
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Adjusted operating income before depreciation and
amortization
(9)
|
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2,071.0
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|
2,167.0
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2,240.8
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2,320.9
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2,125.9
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2,639.1
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4
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For the Year Ended December 31,
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2005
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2006
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2007
|
|
2008
|
|
2009
|
|
2009
|
|
|
(Euro)
|
|
(Euro)
|
|
(Euro)
|
|
(Euro)
|
|
(Euro)
|
|
(U.S. $)
|
|
|
(Unaudited)
|
|
(Audited)
|
|
(Audited)
|
|
(Audited)
|
|
(Audited)
|
|
(Unaudited)
|
|
|
(Millions)
|
|
Cash Flow Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash flows from operating activities
|
|
|
1,532.8
|
|
|
|
1,786.2
|
|
|
|
1,450.7
|
|
|
|
1,757.6
|
|
|
|
1,418.0
|
|
|
|
1,760.3
|
|
Purchase of property, plant and equipment and intangible assets
|
|
|
(680.2
|
)
|
|
|
(962.4
|
)
|
|
|
(1,101.3
|
)
|
|
|
(964.0
|
)
|
|
|
(890.9
|
)
|
|
|
(1,106.0
|
)
|
Total cash flows used in investing activities
|
|
|
(877.5
|
)
|
|
|
(2,308.1
|
)
|
|
|
(2,780.2
|
)
|
|
|
(1,806.0
|
)
|
|
|
(958.6
|
)
|
|
|
(1,190.0
|
)
|
Total cash flows from (used in) financing activities
|
|
|
(13.4
|
)
|
|
|
1,052.2
|
|
|
|
603.3
|
|
|
|
165.3
|
|
|
|
(1,005.5
|
)
|
|
|
(1,248.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
|
(Euro)
|
|
(Euro)
|
|
(Euro)
|
|
(Euro)
|
|
(Euro)
|
|
(U.S. $)
|
|
|
(Unaudited)
|
|
(Audited)
|
|
(Audited)
|
|
(Audited)
|
|
(Audited)
|
|
(Unaudited)
|
|
|
(Millions)
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the year
|
|
|
1,512.2
|
|
|
|
2,042.5
|
|
|
|
1,316.3
|
|
|
|
1,427.8
|
|
|
|
868.8
|
|
|
|
1,078.5
|
|
Property, plant and equipment, net
|
|
|
6,739.6
|
|
|
|
6,583.5
|
|
|
|
6,371.4
|
|
|
|
5,872.8
|
|
|
|
5,625.1
|
|
|
|
6,983.0
|
|
Telecommunications licenses
|
|
|
393.0
|
|
|
|
384.2
|
|
|
|
396.2
|
|
|
|
329.5
|
|
|
|
362.2
|
|
|
|
449.6
|
|
Investments
(10)
|
|
|
159.3
|
|
|
|
158.7
|
|
|
|
158.4
|
|
|
|
156.6
|
|
|
|
157.0
|
|
|
|
194.9
|
|
Total assets
|
|
|
11,107.6
|
|
|
|
12,715.3
|
|
|
|
11,699.2
|
|
|
|
11,425.2
|
|
|
|
10,294.0
|
|
|
|
12,779.0
|
|
Total current liabilities
|
|
|
2,231.5
|
|
|
|
2,658.5
|
|
|
|
3,576.4
|
|
|
|
3,002.7
|
|
|
|
2,108.3
|
|
|
|
2,617.2
|
|
Total non-current
liabilities
(11)
|
|
|
4,362.7
|
|
|
|
5,168.1
|
|
|
|
5,068.2
|
|
|
|
6,249.3
|
|
|
|
6,236.0
|
|
|
|
7,741.4
|
|
Total equity
|
|
|
4,513.4
|
|
|
|
4,888.7
|
|
|
|
3,054.6
|
|
|
|
2,173.2
|
|
|
|
1,949.7
|
|
|
|
2,420.4
|
|
Notes:
|
|
|
(1)
|
|
Solely for the convenience of the
reader, Euro amounts have been translated into U.S. Dollars at
the spot rate on May 24, 2010 of Euro 1.00 per U.S. $1.2414.
|
|
(2)
|
|
Includes revenues from monthly
network service fees, revenues from
fixed-to-fixed
and
fixed-to-mobile
calls and revenues from such services as operator assistance,
connection and reconnection charges and paging services.
|
|
(3)
|
|
Includes revenues from incoming and
outgoing, traffic, gross of amounts charged by foreign telephony
operators, and payments from the unaffiliated domestic mobile
telephony operators to us for international calls. The
respective revenues from our consolidated subsidiaries providing
mobile services are eliminated upon consolidation.
|
|
(4)
|
|
Includes revenues from prepaid
cards, leased lines and data ATM telecommunications, provision
for services, interconnection charges, internet services/ADSL,
integrated services digital network
(ISDN),
sales of telecommunication equipment, collocation and local loop
unbundling.
|
|
(5)
|
|
In 2005, we recorded an accounting
charge of Euro 939.6 million, representing the cost of the
Voluntary Retirement Scheme. Furthermore, we recorded a total
gain of Euro 23.8 million relating to the extinguishment of
suppliers liabilities, in addition to dividends totaling
Euro 19.4 million from Telekom Srbija and Eutelsat,
gains totaling Euro 25.1 million from the sale of certain
available-for-sale
marketable equity securities, and a gain from the sale of our
participation in Eutelsat. In 2006, we recorded an income of
Euro 49.8 million resulting from the reduction of the
estimated cost for 2005 of the Voluntary Retirement Scheme,
offset by a provision of Euro 63.1 million taken in
connection with the interest rate (which was below market rates)
that we charged on a loan of Euro 180 million granted to
the Auxiliary Fund in connection with the Voluntary Retirement
Scheme. Furthermore, a gain of Euro 160.2 million was
recorded from the sale of ArmenTel. Finally, dividends totaling
Euro 21.6 million from Telekom Srbija and gains of Euro
10.2 million from the sale of certain
available-for-sale
securities affected the years results. In 2007, we took a
charge of Euro 22.1 million relating to the employees who
participated in the early retirement program of 2007. In
addition, in 2007, we recorded a pre-tax gain of Euro
244.7 million from the sale of INFOTE and received
dividends totaling Euro 15.7 million from Telekom Srbija.
In 2008, the Group took a charge of Euro 50.2 million
relating to the employees who participated in RomTelecoms
and our early retirement programs of 2008 and we recorded a
pre-tax gain of Euro 17.0 million from the sale of our
investment in the Lofos-Palini real estate company. In addition,
we received dividends totaling Euro 11.2 million from
Telekom Srbija. In 2009, the Groups profit for the year
was affected by the costs of our and RomTelecoms early
retirement programs by a total amount of Euro
171.6 million, which was offset by Euro 201.9 million
from the transfer of 4.0% of our share capital held by the Greek
State to IKA-ETAM, resulting in a net gain of Euro
30.3 million. Furthermore, the 2009 income tax expense was
affected by the new Law regarding a one-time special
contribution of social responsibility of Euro
113.1 million, a tax on dividends of Euro 30.3 million
and the result of OTEs tax audit for the years
2006-2008
of
Euro 30.0 million. In addition, the Group recorded a
pre-tax gain of Euro 23.6 million from the sale of its
subsidiaries Cosmofon and Germanos Telecom AD Skopje and
received dividends totalling Euro 9.3 million from Telekom
Srbija.
|
5
|
|
|
(6)
|
|
Basic earnings per share are
computed by dividing profit for the year attributable to the
owners of the parent by the weighted average number of shares
outstanding during the relevant period. Diluted earnings per
share are computed by dividing profit for the year attributable
to the owners of the parent by the weighted average number of
shares outstanding during the year, adjusted for the impact of
share-based payment.
|
|
(7)
|
|
Amounts as approved by, or proposed
to, the respective general assemblies of our shareholders to be
distributed from each years statutory profit. A dividend
of Euro 0.19 per share for the year 2009 will be proposed for
approval by our general assembly of June 16, 2010.
|
|
(8)
|
|
Because each American Depositary
Share represents one-half of one ordinary share, the dividend
per share has been divided by two to show the historical
dividends declared per American Depositary Share and translated,
solely for convenience, into U.S. Dollars at the spot rate
reported by Bloomberg as of 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
2009 are not available, as these dividends have not yet been
paid as at the date of this Annual Report. These rates may
differ from the rates used by the depositary to convert Euros to
U.S. Dollars for the purpose of making payments to holders of
ADSs.
|
|
(9)
|
|
Non-GAAP
measures.
Operating
income before depreciation and amortization and adjusted
operating income before depreciation and amortization) are
non-GAAP financial measures that help us to evaluate our core
business operating results, before the effect of our
investing and financing activities, and before the effect of
depreciation and amortization (which is our most significant
non-cash item) and to compare our performance with that of our
peer group, which mainly consists of other European incumbent
telecommunications operators. Further to the use of these
non-GAAP financial measures, we also evaluate our performance
and results based on operating income and profit for the year
attributable to the owners of the parent in order to take into
consideration the effects of other recurring items such as
interest income/expense, foreign exchange gains or losses,
earnings/losses and impairments on equity-method investments,
income taxes and non-controlling interests. You should not place
undue reliance on these measures or consider them as
alternatives to any other measure of performance under generally
accepted accounting principles, as they may not be indicative of
our historical operating results, nor are they meant to be
predictive of our future results. Comparable measures, including
EBITDA, are often calculated in different ways, can vary
significantly depending upon accounting methods (particularly
when acquisitions have occurred) or non-operating factors, and
are used by different companies for different purposes, and
therefore may not be comparable to similarly titled measures
used by other companies. The following table provides a
reconciliation of profit/loss for the year attributable to the
owners of the parent to operating income before depreciation and
amortization and adjusted operating income before depreciation
and amortization (adjustments relate to the cost of our early
retirement programs).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
|
(Euro)
|
|
|
(Euro)
|
|
|
(Euro)
|
|
|
(Euro)
|
|
|
(Euro)
|
|
|
(U.S. $)
|
|
|
|
(Millions)
|
|
|
Profit/loss for the year attributable to owners of the
parent
|
|
|
(216.8
|
)
|
|
|
574.6
|
|
|
|
662.6
|
|
|
|
601.8
|
|
|
|
374.0
|
|
|
|
464.3
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,107.4
|
|
|
|
1,128.5
|
|
|
|
1,171.8
|
|
|
|
1,213.0
|
|
|
|
1,155.3
|
|
|
|
1,434.2
|
|
Total profit/(loss) from financial
activities
(a)
|
|
|
20.7
|
|
|
|
4.5
|
|
|
|
(107.9
|
)
|
|
|
213.7
|
|
|
|
220.2
|
|
|
|
273.4
|
|
Income taxes
|
|
|
19.8
|
|
|
|
353.0
|
|
|
|
381.8
|
|
|
|
246.2
|
|
|
|
410.0
|
|
|
|
509.0
|
|
Non-controlling interests
|
|
|
200.3
|
|
|
|
156.2
|
|
|
|
110.4
|
|
|
|
(4.0
|
)
|
|
|
(3.3
|
)
|
|
|
(4.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income before depreciation and amortization
|
|
|
1,131.4
|
|
|
|
2,216.8
|
|
|
|
2,218.7
|
|
|
|
2,270.7
|
|
|
|
2,156.2
|
|
|
|
2,676.8
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of early retirement
programs
(b)
|
|
|
939.6
|
|
|
|
(49.8
|
)
|
|
|
22.1
|
|
|
|
50.2
|
|
|
|
(30.3
|
)
|
|
|
(37.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating income before depreciation and amortization
|
|
|
2,071.0
|
|
|
|
2,167.0
|
|
|
|
2,240.8
|
|
|
|
2,320.9
|
|
|
|
2,125.9
|
|
|
|
2,639.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
(a)
|
Total profit/(loss) from financial activities includes interest
expense, interest income, foreign exchange differences, write
down of investments, gains/(loss) from sale of investments and
dividend income.
|
|
(b)
|
Adjustments relate to the cost of our early retirement programs
and the Voluntary Retirement Scheme.
|
|
|
|
(10)
|
|
Includes investments in the amount
of Euro 155.1 million, as of December 31, 2005, 2006,
2007, 2008 and 2009, in respect of our 20% interest in Telekom
Srbija.
|
|
(11)
|
|
Net of current portion.
|
6
Exchange
Rate Data
The following table sets forth, for the periods indicated, the
average, high, low and period-end exchange rates of the
U.S. Dollar to the Euro.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Average
|
|
High
|
|
Low
|
|
Period-End
|
|
2005
(1)
|
|
|
1.2400
|
|
|
|
1.3476
|
|
|
|
1.1667
|
|
|
|
1.1842
|
|
2006
(1)
|
|
|
1.2661
|
|
|
|
1.3327
|
|
|
|
1.1860
|
|
|
|
1.3197
|
|
2007
(1)
|
|
|
1.3797
|
|
|
|
1.4862
|
|
|
|
1.2904
|
|
|
|
1.4603
|
|
2008
(1)
|
|
|
1.4726
|
|
|
|
1.6010
|
|
|
|
1.2446
|
|
|
|
1.3919
|
|
2009
(2)
|
|
|
1.3944
|
|
|
|
1.5094
|
|
|
|
1.2543
|
|
|
|
1.4331
|
|
2009 November
(2)
|
|
|
1.4914
|
|
|
|
1.5081
|
|
|
|
1.4686
|
|
|
|
1.4976
|
|
2009 December
(2)
|
|
|
1.4572
|
|
|
|
1.5094
|
|
|
|
1.4275
|
|
|
|
1.4331
|
|
2010 January
(2)
|
|
|
1.4280
|
|
|
|
1.4510
|
|
|
|
1.3889
|
|
|
|
1.3889
|
|
2010 February
(2)
|
|
|
1.3682
|
|
|
|
1.3958
|
|
|
|
1.3521
|
|
|
|
1.3602
|
|
2010 March
(2)
|
|
|
1.3574
|
|
|
|
1.3776
|
|
|
|
1.3303
|
|
|
|
1.3533
|
|
2010 April
(2)
|
|
|
1.3390
|
|
|
|
1.3663
|
|
|
|
1.3161
|
|
|
|
1.3272
|
|
2010 May
(2)
|
|
|
1.2544
|
|
|
|
1.3199
|
|
|
|
1.2185
|
|
|
|
1.2295
|
|
Notes:
|
|
|
(1)
|
|
The average noon buying rates on
the last business day of each year until and including 2008, as
certified for customs purposes by the Federal Reserve Bank of
New York.
|
|
(2)
|
|
The rates for year 2009 and for
each month are spot rates as reported by Bloomberg.
|
On June 4, 2010, the spot rate published by Bloomberg was
U.S. Dollar 1.2020 per Euro 1.00.
3.B
Capitalization and Indebtedness
Not applicable.
3.C
Reasons for the Offer and Use of Proceeds
Not applicable.
3.D
Risk Factors
The risks described below are not the only risks facing our
company. Additional risks not presently known to us or which we
currently deem immaterial may also impair our business
operations. Our business, financial condition or results of
operations could be materially adversely affected by any of
these risks. The following discussion contains a number of
forward-looking statements. Please refer to the section headed
Cautionary Statement Regarding Forward-Looking
Statements
.
If we
do not respond promptly and efficiently to increased competitive
pressures, our market share in fixed-line services may decline
further.
Since the liberalization of the Greek telecommunications market
in 2001, we have faced, and continue to face, competitive
pressures in domestic and international fixed-line services. As
a result of the migration of certain of our customers to our
competitors, we have experienced, and continue to experience, a
gradual decline in our share of the Greek market for fixed-line
services, in terms of both numbers of subscribers and voice
traffic. We expect competition in the Greek telecommunications
market to continue to intensify, as a result of a number of
factors, including regulatory developments, our competitors
improving their infrastructures and an evolving market
landscape, due to proceeding consolidation and funding
opportunities becoming available to certain of our competitors.
7
Over recent years, alternative fixed-line operators providing
retail services have increasingly relied on local loop
unbundling for reaching their end customers and with respect to
backbone services, they either rely on wholesale products
provided by us, or increasingly deploy their own fiber optic
infrastructure and networks, parts of which, in certain recent
cases, they have also agreed to share. Alternative operators are
becoming increasingly competitive in offering voice, broadband
and data transmission
,
as well as value-added and bundled
services, including double-play (voice and internet) and
triple-play (voice, internet and IPTV) at higher access speeds
and at competitive prices. The competitive market landscape
continues to evolve with a number of recent developments and it
changed substantially in 2009 following a number of mergers and
acquisitions and strategic alliances between fixed-line and
mobile operators. This has created strong market players with
sufficient financial resources to compete with us on equal or
better terms. In particular, in 2009, Vodafone Greece,
subsidiary of one of the largest mobile groups worldwide,
acquired an 18.5% interest in the share capital of Hellas
OnLine, the second largest alternative fixed-line operator, and
Tellas, one of our major competitors in fixed-line services, is
the fixed-line business unit of Wind Hellas, which is also part
of a major international telecommunications group, Weather
Investments. Both Wind Hellas-Tellas and Vodafone with HOL
promote combined fixed-line and mobile services. Furthermore,
Forthnet, the largest alternative fixed-line operator in Greece,
also has developed a competitive advantage following its
acquisition of Nova, currently the only digital satellite TV
platform and until recently the only subscription TV service in
Greece with a strong market share. Forthnet promotes combined
double play and Nova subscriptions, offering significant
discounts on the bundled product. Cyta Hellas, a subsidiary of
the Cyprus Telecommunications Authority, entered the Greek
fixed-line telephony market in 2009 and has established a strong
presence over the last two years. There are also a number of
players with a smaller market share, including, among others, On
Telecom-Vivodi (formed after On Telecom acquired Vivodi), Net
One Algonet (formed from the merger of Net One with
Algonet) and Cosmoline.
Moreover, the competitive market landscape is changing due to a
number of other factors, including the introduction of mobile
broadband and the increasing offers of combined mobile and
fixed-line bundles by mobile operators, which we believe may
form a significant part of mobile operators offerings in
the future. We also expect ICT offerings (combined
telecommunications and information technology services) to
business customers to become an increasingly important part of
telecommunications operators offerings in the mid-term
future.
As our competitors converge their business operations in fixed,
mobile and broadband services they may benefit from a larger
customer base, increasing economies of scale and opportunities
for synergies which could enhance their ability to effectively
compete with us in the Greek telecommunications market.
In addition, although mobile penetration in the Greek market has
increased to levels estimated at over 180%, we continue to
experience migration of mainly telephony traffic (and less of
customers) from
fixed-to-mobile,
especially as mobile operators offer competitive products
including bundles of minutes at attractive rates.
As a result of the above and other factors, our market shares in
both business and residential market sectors may decline further
over the next few years. We also expect to face increasing
pressure to further reduce prices, further enhance the quality
of our network, adopt more efficient technologies, improve the
level of our services, reduce costs and promote customer
satisfaction. If we do not respond to these pressures promptly
and efficiently, our market share may decline more dramatically
and we could experience a material adverse effect on our
business, results of operations, financial condition and
prospects.
Macroeconomic
conditions in Greece and the fiscal position of the Greek State
have deteriorated markedly and this could have a material
adverse effect on our business, results of operations, financial
condition and prospects.
The economy of Greece, where the great majority of our revenues
are derived (70.0% in 2009, as compared to 70.2% in 2008 and
72.5% in 2007) and operations are located, deteriorated
markedly starting as of late 2008, through 2009 and particularly
in early 2010. In particular, GDP growth rate in Greece slowed
down significantly in 2008 and 2009 and turned to negative
growth rates as of early 2010 (according to Eurostat, Greek GDP
for the first three months of 2010 experienced negative growth
(contraction) of -2.3%).
In addition, starting from late 2008, and particularly as of
late 2009 and in early 2010, the Greek State has reported a
significant deterioration in the levels of budget deficit (of
over 13% for 2009) and total public debt and
8
experienced a resulting significant increase in its cost of
borrowing. Over this period, credit ratings assigned by major
credit rating agencies to debt issued by the Greek State were
downgraded repeatedly (with Standard & Poors
current credit rating at BB+ with a negative outlook, below
investment grade), and concerns were expressed in connection
with the ability of the Greek State to refinance its maturing
public debt with funds raised in the public debt markets. As a
result, the cost for the Greek State of raising debt financing
in the bond markets experienced a sharp increase over the period
from October 2009 to April 2010. In April 2010, the European
Union announced the establishment, in conjunction with the
International Monetary Fund
(IMF)
, of a
package of financial support for the Greek State, contemplating
availability of bilateral loans to be provided by EU countries
and the IMF to the Greek State for three years starting in 2010.
In May 2010, the Greek State applied for the activation of this
package. At this point, the exact terms of the loan facilities
available under the package are unclear; to date the Greek State
has drawn down funds under these facilities, but it is also
unclear what further amounts the Greek State may seek to
draw-down in the future and when, or whether the fiscal measures
adopted by the Greek State will have the expected results, or
whether the Greek State will be required to adopt further
restrictive fiscal measures.
As a result of the conditions described above, the Greek State
has adopted, starting in late 2009 and in 2010, a range of
fiscal measures, aimed at reducing State expenditure, including
reductions in public investments and reductions in the income of
employees in the public sector and pensions, and at increasing
tax revenues, including significant increases in direct and
indirect taxes, intended to improve the Greek States
fiscal position. As it is unclear whether the fiscal measures
adopted by the Greek State will have the expected results, if
the Greek State is required to adopt further restrictive fiscal
measures, this can have further adverse impact on prospects for
economic growth and disposable income in Greece.
We expect that the impact of the deteriorating fiscal position
of the Greek State and relevant fiscal measures can have a
material adverse effect on macroeconomic conditions in Greece in
the short- and medium-term, including negative prospects for
Greek GDP growth and a material reduction of disposable income
of pensioners and employees in large parts of the economy. In
particular, the Greek State announced in May that it expects GDP
in Greece to decline by approximately 4% in 2010. In addition,
the restricted ability of Greek banks to provide business and
retail financing at attractive terms, resulting from the current
conditions, is expected to exacerbate these conditions.
We expect that the deterioration in macroeconomic conditions in
Greece and the reduction in disposable income will have a
material adverse effect on our business, as on one hand,
corporate clients restrict technology and telecommunications
spending, and on the other hand, residential customers of
telecommunications services, such as fixed-line and mobile
telephony and internet, may also reduce spending for these
services (which would negatively affect our revenues from these
services), or may turn to lower price alternatives that may be
offered by our competitors, which may adversely affect our
market share. In the latter case, we may decide to respond to
such pressures by reducing our rates for these services, in
order to remain competitive, which would also negatively affect
our revenues. However, we cannot assure you that the regulator
(EETT) will permit us to reduce our rates for certain of our
services in response to competitive pressures as we may deem
appropriate, in which case we may experience a significant
competitive disadvantage, which would exacerbate our market
share losses. In addition, the applicable rate of VAT was raised
from 19% to 21% in early 2010, and will further increase to 23%
in July 2010. This can also have a material impact on our
results of operations (both on our revenues and profits), as we
expect it to result in a material increase in our tariffs, which
could adversely affect our competitive position and market
share, or, in the event we decide to absorb a part of the
resulting increase, we expect it to have a material adverse
effect on our profit margin.
In 2009, Law 3808/2009 imposed an extra-ordinary, one-time tax
(contribution of social responsibility) on profitable Greek
entities, calculated on their total net income for the fiscal
year 2008. The respective charge in the Groups income
statement amounted to Euro 113.1 million. In May 2010,
the Greek State announced the imposition of a special one-time
lump-sum tax on net profits of corporate tax payers for the
fiscal year 2009, which is expected to apply on our net income
at the rate of 10%. We cannot assure you that the Greek State
may not seek to impose further extraordinary taxes, or take
other fiscal measures aimed at raising funds, which could have a
material adverse effect on our financial results and financial
condition.
9
Furthermore, we cannot assure you that further potential
downgrades in the credit rating of the Greek State may not
result in downgrades in our own credit rating (currently BBB-
with a stable outlook by Standard & Poors and
Baa2 with a stable outlook by Moodys), which could have an
adverse impact on our borrowing cost and our financial expenses.
See 5.B Liquidity and Capital Resources
Outstanding Debt Facilities.
We expect that the impact of deteriorating macroeconomic
conditions in Greece, reductions in disposable income and the
recent and potential future developments with respect to the
fiscal position of the Greek State can have a material adverse
effect on our business, results of operations, financial
condition and prospects.
Regulatory
and competitive pressures affect our ability to set competitive
retail and wholesale tariffs, which may adversely affect our
ability to compete effectively.
Under applicable laws, regulations and related EETT decisions,
the EETT has the jurisdiction to assess our tariffs
ex-ante
and
ex-post
. Tariffs for certain categories of our
services should be cost-based. With respect to these tariffs,
the EETT uses our enterprise costing and profitability system
(ECOS)
, in order to determine whether they
reflect the cost of providing the relevant services. The EETT
conducts an annual audit of our ECOS system through external
auditors, other than those appointed to audit our financial
statements. Based on the findings of this audit, the EETT may
object to our application of ECOS and related cost methodologies
in the calculation of our tariffs and may require us to make
certain adjustments. These adjustments may also have retroactive
effect, as has been the case some times in the past. We cannot
assure you that future audits of our ECOS system will not result
in further recommendations for changes to our costing
methodologies and to our tariffs. Since 2007, we are required,
under the EETTs relevant decision notice, to produce
financial statements showing accounting separation between our
wholesale and retail businesses. Accounting separation requires
the preparation of separate accounts for each of the different
businesses, separately identifying and allocating the costs and
revenues associated with each business. Such statements are
prepared using both a fully-distributed current cost methodology
and a long-run average incremental costing methodology and
should be published annually.
In addition, with respect to tariffs that are not regulated on a
cost basis, the EETT determines whether such tariffs allow
alternative operators to realize sufficient profit margins and,
to that effect, they are assessed using both data from our ECOS
system and other methodologies approved by the EETT, such as the
retail-minus pricing methodology, where the EETT requests data
from relevant service operators and calculates a retail-minus
price to define wholesale tariffs based on proposed retail
tariffs. However, the exact models used for the calculation of
retail margins for different services and service bundles have
not been made known to us and therefore we cannot predict with
accuracy their effect on our tariffs. Currently, the EETT has
published a consultation proposal for price control measures for
retail services and service bundles (which may include a
combination of regulated and unregulated products). We cannot
predict the outcome of the consultation and whether new price
control measures will allow us a greater pricing flexibility.
Regulatory limitations imposed on our ability to set tariffs
often require us to charge tariffs which are higher or, in
certain cases, significantly higher than those charged by our
competitors for the same services, as our competitors are not
subject to the same pricing constraints. Given that an important
factor for the determination of our tariffs is our cost for
providing the relevant services, we must make efforts to
increase the efficiency of our operations, in order to reduce
such costs, and therefore be able to reduce the cost-based
tariffs we charge, in order to make them more competitive.
Although we believe that in recent years the repercussions of
this pricing disadvantage on the rate of decline of our market
share were relatively limited, partly due to the perceived
quality and reliability of our services by the market, we cannot
assure you that, if we continue to be required to charge tariffs
higher than those of the competition, our market share and our
revenues will not be materially adversely affected, especially
as our competitors improve the quality of their services.
The provision of certain mobile telephony services is regulated
by the European Union. The mobile termination rates charged by
our mobile operators in Greece, Bulgaria and Romania are subject
to a glide path of phased reductions determined by each of the
national telecommunications regulators. In addition, on
May 7, 2009, the European Commission published a
recommendation on the regulatory treatment of fixed and mobile
termination rates, which would lead to significantly lower
estimates of the cost of mobile phone termination services. In
June 2009, a new roaming regulation
(Roaming
II)
came into force which extends the existing price
10
caps to wholesale and retail voice roaming charges put in place
by the existing roaming regulation
(Roaming
I)
and applies new price caps to wholesale and retail
short message services
(SMS
) roaming charges
and to wholesale roaming services for data services.
If we cannot efficiently reduce the cost of providing our
services and the level of our tariffs to be more competitive in
a timely manner, we could experience a material adverse effect
on our business, results of operations, financial condition and
prospects.
The
regulatory environment for telecommunications services remains
complex and subject to change and interpretation. Our compliance
with the regulations to which we are or may become subject may
require us to expend substantial resources and may have a
significant impact on our business decisions.
The provision of telecommunications services in Greece is
subject to regulation based on EU legislation, competition law
and sector-specific regulation relating to various issues,
including numbering, licensing, tariffs, local loop unbundling,
interconnection, leased lines and privacy issues. The
Telecommunications Law currently in force for four years
contemplates the enactment of a series of secondary legislation,
most of which has already been adopted, but the joint
ministerial decision on the procedures for granting rights of
way, which is critical to the deployment of new networks, has
still not been completed. In certain cases, secondary
legislation and regulatory remedies do not reflect the current
level of competition and can be burdensome, particularly
regarding the conditions for tariff approval. Although
experience with the regulation of fixed-line voice services in
Greece has increased over recent years, the emergence and
introduction of new technologies and new types of services
together with the lack of clear guidelines in their regulatory
treatment has led and may lead in the future to a lack of
clarity, at a national and European level, in the regulatory
framework governing the provision of such services. In addition,
amendments to existing regulations have resulted in us being
required to utilize substantial financial and human resources in
order to comply with changing requirements and we expect to
continue to be bound by such obligations in the short- to
medium-term future.
The market analyses that were initiated in 2009 based on the
Relevant Markets Recommendation (a recommendation issued by
the European Commission in November 2007 that designated seven
electronic communications markets as candidates for potential
regulatory intervention) will continue in 2010. These analyses
may result in the introduction of new remedies, such as duct
access, and may result in certain existing regulatory remedies
that affect our business being amended or no longer available.
In addition, in December 2009, the European Commission approved
significant amendments to the current regulatory framework, that
must be transposed into national law by May 25, 2011. See
4.B Business Overview Regulation
Telecommunications Services Regulation in Greece EU
Regulatory Framework.
As a result, it is sometimes difficult for us to accurately
predict the exact manner in which new laws and regulations
affecting our business will be interpreted
and/or
implemented by regulators or courts, the impact such regulations
may have on our business, or the specific actions we may need to
take, or the expenditure we may need to incur in order to comply.
Furthermore, as a provider of telecommunications services, we
are also exposed to certain additional regulatory compliance
costs, which range from our obligation to provide universal
service to increased expenses relating to investments for the
protection of customers privacy and personal data. See
4.B Business Overview Regulation
Telecommunications Services Regulation
Telecommunications Framework in Greece.
In addition to the substantial resources we may have to commit
to comply with the regulations to which we are or may become
subject, fines can be and have been imposed on us, if the
relevant regulator rules that we do not comply with the
applicable regulatory framework. Over recent years, the EETT has
imposed a number of fines on us with respect to a number of our
business activities, including both retail and wholesale
services, certain of which have been for significant monetary
amounts. See 4.B Business Overview Legal
Proceedings Greece Regulatory
Matters. We believe that in certain cases such regulatory
remedies imposed on us did not fully take into account the
current level of competition in the Greek telecommunications
market, which has evolved significantly over recent years.
Although these fines are subject to remedies before Greek
administrative courts and we have so far, in a number of cases,
succeeded in having certain of these fines either repealed or
reduced, we have in recent years paid, or provided for
significant amounts in our financial statements, in relation to
fines imposed on us by the
11
EETT and we cannot assure you that further fines will not be
imposed on us in the future. In addition, regulatory remedies,
including fines, that have been, or may be, imposed on us not
only have a direct impact on our financial condition, but also
impact our business decisions and strategy. The imposition of
significant regulatory fines could have a material adverse
effect on our business, results of operations, financial
condition and prospects.
Failure
to comply with regulatory requirements with respect to
unbundling the local loop and providing wholesale leased lines,
or competitive pressures arising from an increased number of
unbundled local loop sites, could have a material adverse effect
on our business, results of operations, financial condition and
prospects.
We are required to provide other Greek telecommunications
operators with full and shared access to local loop services,
distant and physical collocation and backhauling services, as
well as wholesale leased line services upon their request. See
4.B Business Overview Other
Services Leased Lines and 4.B Business
Overview Other Services Local Loop
Unbundling, respectively. Responding to requests for the
provision of such services, and especially access to local loop
services and distant and physical collocation services, is a
logistical process which requires us to devote significant
managerial, technical and financial resources within an
uncertain and evolving regulatory environment, in which we are
exposed to increased regulatory and litigation risk. We cannot
assure you that we will be in a position to respond effectively
to requests for provision of access to local loop or wholesale
leased lines (which may continue or increase in the future) in a
timely manner. If we fail, or are considered to have failed, to
effectively respond to such requests (especially if they are
based on timely submitted annual forecasts), we may be deemed to
be in violation of our obligations under the applicable legal
and regulatory framework and, as a result, we could be exposed
to regulatory action. This may include paying compensation for
delayed provision of the relevant services, as well as the
imposition of fines by the EETT or litigation by other
operators. Over recent years, alternative carriers have taken
legal action against us before the EETT, civil or administrative
courts, claiming that we have not complied with our obligations.
Such actions were less frequent in 2009 than in previous years,
mainly due to our improved performance in responding to relevant
requests. See 4.B Business Overview Legal
Proceedings.
In addition, devoting increased human, technical and financial
resources to responding to requests of this nature has resulted
and may, in the future, result in the unavailability of such
resources to support other activities of our Group. We cannot
assure you that we will at all times be in a position to fully
and timely satisfy the regulatory and logistical requirements
imposed by new reference offers for unbundled access to the
local loop and related services
(RUO)
issued
by the EETT. In particular, during 2009 the EETT imposed
additional obligations on us to provide duct access and access
to dark fibre to alternative operators. On the other hand, as
our competitors increase the number of unbundled local loop
sites, they extend the scope of their coverage and may improve
the quality of their products and services and potentially
reduce their prices and the competitive pressures on our
products and services will increase. Our failure to comply with
regulatory requirements with respect to local loop or leased
lines, or to contend with competitive pressures arising from an
increased number of unbundled local loop sites, could have a
material adverse effect on our business, results of operations,
financial condition and prospects.
As
alternative telecommunications operators extend their own
networks, they are expected to improve the quality of their
services and become more competitive.
A number of telecommunications operators in Greece, including
both fixed-line and mobile operators, are currently in the
process of developing and extending their own networks, while
they expand their customer bases. In addition, certain of our
competitors are receiving subsidies under government programs to
develop regional network infrastructure. We expect that, as
these operators continue to extend their networks by extending
backbone network coverage and increasing the number of unbundled
local loops, they may gradually improve the quality of their
services, as well as reduce their operating costs, as a result
of them reducing their reliance on leasing capacity from our
network. As a result, they may become more competitive, both in
terms of service quality and pricing. This could have a material
adverse effect on our market share, or on our revenues and our
profitability, any of which could have a material adverse effect
on our business, results of operations, financial condition and
prospects.
12
Our
revenues from the provision of wholesale services may decrease,
as alternative telecommunications operators expand, and increase
their reliance on, their own networks.
We derive a portion of our revenues and profits from the
provision of wholesale services, wholesale leased lines,
wholesale line rental and interconnection services, bitstream
access and unbundling services, to other, mainly Greek,
telecommunications services providers, including alternative
fixed-line and mobile telecommunications operators. In recent
years, we have experienced a shift in our revenues from
wholesale services from bitstream, leased lines and
interconnection, to local loop unbundling which has resulted in
revenues from wholesale activities overall remaining relatively
stable. A number of alternative fixed-line and mobile
telecommunications operators are currently in the process of
extending and upgrading their own networks, while their customer
bases increase. As these operators expanded and continue to
expand their own networks, their reliance on our network and, in
particular, our wholesale services, such as leased lines and
wholesale broadband services, has decreased and we expect it to
continue to decrease. As a result, our revenues from the
respective wholesale services have been and may continue to be
adversely affected. In addition, potential consolidation of
Greek fixed-line telecommunications operators may have a
negative impact on our revenues from the provision of wholesale
services, mainly due to increased efficiencies and economies of
scale that may result from the consolidation of infrastructures
of the relevant operators. Furthermore, new factors, such as the
requirement to provide leased lines on a trunk terminating
segments basis (while we are reintroducing
point-to-point
wholesale leased lines), may also negatively affect our revenues
from the relevant wholesale services as this gives a higher
pricing flexibility and choice to our competitors. Significant
declines in the revenues we derive from wholesale services could
have a material adverse effect on our business, results of
operations, financial condition and prospects.
In addition, the Greek State recently announced a plan to update
its long-term project for the development of a fiber optic
network connecting Greek households
(FTTH
or
Fiber-to-the-home)
.
Based on recent governmental announcements, the exact technical,
financial and other parameters of this project are expected to
change. At the same time, we are planning to develop our own
fiber solutions. See 4.B Business Overview
Fixed-line Services Greece
OTE Fixed-line Network. As a number of factors
relating to the States FTTH project, including the cost of
the project, the potential allocation of its cost and its future
impact on fixed-line competition in the Greek market, remain
unclear, we cannot predict the impact of this project on our own
investment plans, the development of Next Generation Access
(NGA) infrastructure in Greece and fixed-line competition, and,
therefore, we cannot assure you that it will not have a material
adverse effect on our business, results of operations, financial
condition and prospects.
Increased
competition in wholesale services and financial difficulties our
wholesale customers face could materially adversely affect our
business, results of operations, financial condition and
prospects.
Wholesale activities are subject to a significant degree of
regulation, in particular with respect to the tariffs we charge
for the relevant services. Our customers for wholesale services
are mainly alternative providers of telecommunications services,
which make, and are expected to continue to make, significant
investments in developing their own infrastructure with a view
to reducing their reliance on, and use of, our own network
infrastructure. Certain of our customers for wholesale services
also face increased competition with respect to the tariffs for
the services they provide, combined with significant capital
expenditure requirements, in order to develop their own networks
and a number of them are highly leveraged in order to fund their
capital expenditure. Financial difficulties these
telecommunications providers already face, or may face in the
future, especially exacerbated by the current deteriorating
economic and financial conditions in Greece, may lead to
increases in our bad debt provisions. We cannot assure you that
we will not have to increase our provisions for bad debts
relating to debts owed by alternative operators facing financial
difficulties, especially in the event that macroeconomic
conditions in Greece continue to deteriorate. Loss of wholesale
business
and/or
potential financial difficulties faced by our wholesale
customers could have a material adverse effect on our business,
results of operations, financial condition and prospects.
13
If we
do not comply with certain applicable rules and regulations, the
EETT may amend or revoke one or more of our licenses. Outside of
Greece, we also face uncertain and changing regulatory
restrictions in the countries where we operate.
We rely on a number of licenses in order to provide some of our
fixed-line, mobile and other services. In Greece, the EETT may,
under the Telecommunications Law, amend or revoke our licenses,
if we do not comply with certain applicable rules and
regulations, or if we do not meet certain terms and conditions.
Our license to provide fixed-line services in Greece does not
have an expiry date, and we believe the possibility of its
material adverse amendment or revocation is minimal. In
addition, Cosmotes 2G license for the GSM 1800 frequency
band has a term of 25 years expiring on December 4,
2020, its 2G license for the GSM 900 frequency band has a term
of 15 years, expiring on September 8, 2017, and its 3G
license has a term of 20 years, expiring on August 5,
2021. Each of these licenses is subject to renewal by resolution
of the EETT, according to the legislation in force at the time
of the renewal, and we believe the possibility of its material
adverse amendment or revocation is minimal. Any material adverse
amendment or revocation of one or more of our licenses would
restrict our ability to conduct business and would therefore
have a material adverse effect on our business, results of
operations, financial condition and prospects.
Outside of Greece, we also face uncertain and changing
regulatory restrictions in the countries in which we operate.
The telecommunications industry is highly regulated in all
countries in which we operate. In some of these countries,
regulation of the telecommunications sector falls within the
competence of bodies that may not be able to act independently
from the government and are subject to political pressures. See
Political, economic, legal and regulatory
uncertainties prevailing in many of the international markets in
which we have invested, or plan to invest, could have a material
adverse effect on our international investments. We need
licenses or similar permits to carry on our business in each of
these countries. Our ability to establish new networks depends
on obtaining appropriate licenses, which in some cases will
require adopting and implementing new regulatory regimes. In
some cases these licenses are subject to expiry dates.
Our ability to continue to provide services depends on our
licenses remaining valid. Although we have had favorable
experience obtaining, maintaining and renewing licenses in the
past
,
we cannot assure you that we will be able to
obtain, maintain or renew licenses for our services on
commercially viable terms in all jurisdictions in which we
operate. The loss of one or more of our licenses, the imposition
of substantial limitations upon our license terms, or any
material changes in such license terms or in the regulatory
environments in which we operate, could have a material adverse
effect on our business, results of operations, financial
condition and prospects.
We may
be unable to implement new technologies and launch new products
in a timely and cost-efficient manner or to penetrate new
markets in a timely manner in response to technological
advances, changing market conditions or customer
requirements.
The telecommunications industry is subject to rapid
technological changes. Advances in telecommunications and
information technology have in the past created, and may in the
future continue to create, alternatives to fixed-line
transmission based on switching or may facilitate the provision
of telecommunications services that circumvent conventional
tariff structures. We expect that new products and technologies
will continue to emerge and that existing products and
technologies will further develop. Unexpected rapid changes in
modern telecommunications equipment could render current
telecommunications technologies obsolete in the future, which,
in turn, could render our technologies, products or
infrastructure obsolete. Although not yet fully realized, the
current trend towards convergence of the telecommunications,
broadcasting and information technology services may also affect
further developments.
Changing technology intensifies competition for operators of
fixed-line and mobile networks, including our company and
Cosmote, as existing and new competitors develop
and/or
adopt
new or advanced technologies and compete in terms of service
quality and pricing. We are already using, or plan to implement,
several new technologies in our network and in our new service
offerings. We cannot, however, be certain that we may continue
to have cost-efficient access to know-how for such
state-of-the-art
technologies, or that we will be able to implement them as
quickly, or as effectively as our competitors. Furthermore, as
new technologies develop, difficulties in accessing such new
technologies or competitive pressures may force us to implement
these at a
14
substantial cost. For example, plans by the Greek State relating
to the development of an FTTH network throughout Greece, or the
increasing use of
IP-VPN
connections for corporate customers and the continuously
increasing demand for higher capacity over existing networks,
resulting from the development and use of new applications
requiring higher bandwidth, may result in additional investments
or fundamental changes in the way in which, or the terms upon
which, we compete. Furthermore, the increasing development of
Wi-Fi local networks in public areas and the use of those
networks by mobile users may have a negative impact on traffic
over mobile networks and revenues of mobile operators. We cannot
predict with accuracy the effect of technological changes on our
business or on our ability to provide competitive services.
If we fail to timely and efficiently introduce our new products
and services under evolving market conditions, to take advantage
of the recent expansion and upgrade of our network
and/or
to
effectively respond to competition from new technologies, we
could experience a material adverse effect on our business,
results of operations, financial condition and prospects.
We continue to invest in upgrading and expanding our network in
order to be able to offer a range of technologically advanced
services, mainly in the broadband area. We are expanding our
broadband coverage in our local access network and investing in
infrastructure in order to deliver other services, including
integrated voice, video and data and other multimedia services
to our customers. Our commercial success with these services
depends on a number of factors, including:
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sufficient demand from our existing and potential customers to
offset our past and anticipated investment in these services;
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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;
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our ability to compete effectively with other providers of these
services;
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our ability to timely reformulate our policies to conform to
market conditions and needs; and
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our ability to operate as a one-stop-shop, integrating
telecommunications, hardware,
and/or
software services into a single offer, depending on different
customer needs.
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The absence of, or our failure in, any one or more of these
factors, could materially adversely affect our business, results
of operations, financial condition and prospects.
The
interests of Deutsche Telekom and the Greek State may conflict
with each other and this may have a material adverse effect on
our business, operations and financial
performance.
On May 14, 2008, Deutsche Telekom and the Greek State
entered into a shareholders agreement, the provisions of
which govern certain matters of corporate governance and
management of our company, including the size and composition of
our Board of Directors, the party or parties responsible for
nominating our Chairman, Managing Director, the establishment,
composition and powers of committees of our Board of Directors,
a requirement of a supermajority vote of our Board of Directors
for certain matters and the preservation of veto rights of the
Greek State with respect to certain corporate actions and
business matters. This shareholders agreement also
contains provisions relating to the voting of shares by the
parties. For more details regarding this shareholders
agreement, see 7.A Major Shareholders and Related Party
Transactions Major Shareholders. In the event
that Deutsche Telekom and the Greek State disagree regarding the
interpretation
and/or
implementation of the shareholders agreement, or their
opinions with respect to matters of material importance
regarding our strategy and management materially diverge, such
disagreement or divergence of opinions could result in delay or
a lack of clarity in the implementation of our strategies or
investments, or conflict with, or deviate from, previously
adopted and implemented strategies or investments. This could
have a material adverse effect on our business, results of
operations, financial condition and prospects.
15
The
Greek State and Deutsche Telekom, our two major shareholders,
may have common interests or take common positions or actions
that may not coincide or may conflict with the interests of
other shareholders.
Deutsche Telekom and the Greek State are our two major
shareholders, controlling voting rights of 30.0% and 20.0%,
respectively, in our share capital as of the date of this Annual
Report. In May 2008, Deutsche Telekom and the Greek State
entered into a shareholders agreement, the provisions of
which govern certain matters of corporate governance and the
management of our company. See 7.A Major Shareholders and
Related Party Transactions. As a result, Deutsche Telekom
and the Greek State may have interests, take positions or take
actions regarding a number of matters, including our business,
strategy, investments, which may not coincide, or may conflict
with, the interests of our other shareholders. These matters
relate to decisions of our board of directors and resolutions of
any general assembly of our shareholders, concerning, among
other things, amendments related to appointments of directors,
decisions with respect to mergers, business combinations, and
acquisitions or dispositions of assets and dividend payouts. In
addition, we have been informed that in early 2010, the European
Commission wrote to the Greek State requesting further
information regarding the arrangements between Deutsche Telekom
and the Greek State regarding the management of our Company (see
7.A Major Shareholders and Related Party
Transactions Major Shareholders).
Political,
economic, legal and regulatory uncertainties prevailing in many
markets outside Greece in which we have invested, or plan to
invest, could have a material adverse effect on our
international investments.
We have made equity investments in telecommunications operators
and have acquired regulatory licenses to provide
telecommunications services in a number of Southeastern European
countries, including Romania, Albania and Bulgaria. See
4.A History and Development of the Company and
4.B Business Overview. Investments we have already
made, and additional investments we may consider in the future,
were or may be located in countries that present a different,
and in some cases greater, risk profile than that of the
telecommunications sector in Greece. Relevant risks could
include, but are not limited to:
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unanticipated changes in the legal or regulatory environment and
licensing requirements;
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tariffs, taxes, price, wage and exchange controls and other
trade barriers;
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other restrictions on, or costs of, repatriation of profits or
capital;
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political and social instability;
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significant economic volatility;
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strong inflationary pressures; and
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interest rate and exchange rate fluctuations.
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The majority of Southeastern European countries where we have
made investments are at varying stages of transition to a market
economy. Consequently, they have experienced, or may experience,
changes in their economies and their governmental policies that
may affect our investments in these countries. Although these
countries are at different stages of developing institutions and
legal and regulatory systems characteristic of parliamentary
democracies, including having recently become, or aspiring to
soon become, Member States of the European Union, these
institutions may not yet be as firmly established as they are in
Western Europe. Similarly, the interpretation and procedural
safeguards of the new legal and regulatory regimes in these
countries are still developing and in certain cases existing
laws and regulations may be applied inconsistently. In some
circumstances, it may not be possible to obtain the legal
remedies provided under those laws and regulations in a timely
manner. As a result, we may face further uncertainty as to the
performance of our international investments.
Recently, Southeastern European countries in which we have made
investments have experienced negative rates of economic growth,
or significantly slower growth rates, as compared to previous
years. We expect that the macroeconomic environment in these
still-developing countries may continue to deteriorate, which
can have a material adverse impact on the operating and
financial performance of our businesses in the respective
markets. In
16
addition, in recent years, certain of these countries have
experienced high inflation, which may result in high interest
rates, devaluations of local currencies and government controls
on currency exchange rates or prices, any of which may affect
our results. Currencies in certain of the countries in which we
operate (other than Greece) have been subject to devaluations in
certain cases in recent years and may suffer further
devaluation, which could adversely affect the stated value of
our shareholdings in entities in these jurisdictions, although
certain of these currencies have recently appreciated against
the Euro. All of these conditions in Southeastern Europe could
have a material adverse effect on our international investments
and, accordingly, on our business, results of operations,
financial condition and prospects.
Potential
disputes with major suppliers, or failure by such suppliers to
perform their obligations, could cause us to incur significant
cost overruns and delays in implementing our investment
plans.
We rely on a number of suppliers to satisfy our requirements for
telecommunications equipment. Our main suppliers of fixed-line
network equipment include Nokia-Siemens, Alcatel-Lucent, Cisco,
Ericsson and Huaweii. Nokia-Siemens, Ericsson, Huaweii and ZTE
are Cosmotes main suppliers of equipment for its second
generation
(2G)
, 2.5G and third generation
(3G
or
UMTS)
networks. If
we have significant disputes with our suppliers, or if our
suppliers fail to perform their obligations to us, we may incur
significant cost overruns and delays in implementing our
investment plans. Shipments of equipment could also be delayed
or we may be forced to seek alternative suppliers using
procurement procedures approved by the European Union. Any of
these developments could have a material adverse effect on our
business, results of operations, financial condition and
prospects.
We may
be required to make additional contributions to IKA-ETAM in
connection with the Voluntary Retirement Scheme which we
commenced implementing in 2005, that significantly exceed our
initial estimates.
On January 19, 2010, the Greek Minister of Labor and Social
Security advised us that IKA-ETAM had incurred significant
deficits attributable to the incorporation of the pension
segment of TAP-OTE into IKA-ETAM as of August 1, 2008, as a
result of our Voluntary Retirement Scheme, that further deficits
were anticipated for 2010 and that we should contribute funds
towards these deficits. In addition, on February 23, 2010,
the Ministry formally advised us that it had estimated that
IKA-ETAM had foregone contributions and pensions of
approximately Euro 340.0 million, as a result of the
Voluntary Retirement Scheme, and required that our relevant
outstanding contributions which up to that point we paid on a
monthly basis should be settled in full.
In March 2010, a Ministerial Decision was issued and published
in the Government Gazette (FEK
333/26/03/2010),
requiring us to make a lump-sum payment by the last working day
of September 2010, covering the additional financial burden
incurred by the Pension Section of IKA-ETAM, the Auxiliary
Insurance Sector for OTE personnel of TAYTEKO and the Medical
Segment of TAYTEKO, resulting from our Voluntary Retirement
Scheme (which the Ministry advised were up to approximately
Euro 340.0 million). According to the same Ministerial
Decision, the exact amount of this additional financial burden
will be determined by an actuarial study to be performed by the
Directorate of the Actuarial Studies of the States General
Secretariat for Social Security in conjunction with the
Directorate of Actuarial Studies and Statistics of IKA-ETAM, by
August 31, 2010. See 5.A Operating
Results Recent Developments Additional
contributions to IKA-ETAM in connection with the Voluntary
Retirement Scheme.
Having examined the Ministrys position, we believe that it
is unsubstantiated, as we have fulfilled and continue to fulfill
in their totality our financial obligations towards social
security funds, paying all contributions, as they are due, both
in the context of our ordinary course of business, as well as
the ones related to the our voluntary retirement plans, in
compliance with relevant laws, rules and regulations. On
May 11, 2010, we filed an appeal against the relevant
Ministerial Decision before the Administrative Court of First
Instance of Athens, requesting the annulment of Article 3,
on the grounds that it is in contravention of article 34 of
L.3762/2009 and on May 15, 2010 we filed an appeal before
the same court requesting the suspension of enforcement of this
Ministerial Decision.
We cannot assure you as to the exact amount of the additional
financial burden that will be determined by the actuarial study
which is mandated to be performed, or that we will be successful
in contesting the relevant provisions of the Ministerial
Decision, or as to whether and what additional amount we may be
eventually required to contribute to IKA-ETAM. As we have not
recorded any relevant provision in our financial statements, if
we are
17
eventually required to contribute additional amounts to IKA-ETAM
which materially exceed our initial estimates in connection with
the cost of the Voluntary Retirement Scheme, this could have a
material adverse effect on our business, results of operations,
financial condition and prospects.
We
have an active, union-represented work force, which has in the
past gone on strike and may cause work stoppages.
Almost all of our full-time employees are members of the OME-OTE
labor union. OME-OTE is strong and influential within our
company and has consistently opposed disposals of ownership
interests in our company by the Greek State. In recent years, we
have experienced a number of strikes, both on a nationwide basis
and in specific geographic regions. These included 6 strikes in
2009, mainly relating to the closure of OTEShops, 16
one-day
strikes in 2008, mainly relating to the pension reform bill and
the sale of an interest in our share capital to Deutsche Telekom
by the Greek State and two
one-day
nationwide strikes and 26
one-day
strikes in specific geographic regions in 2007. In addition,
since January 1, 2010, we have experienced four nationwide
one-day
strikes, mainly relating to the fiscal measures recently adopted
by the State. For more information, see 6.D
Employees Relationship with the Union. There
can be no assurance that strikes or work stoppages or other
industrial action will not have a material adverse effect on our
business, results of operations, financial condition and
prospects.
If we
are unable to recruit and retain key personnel, our plans to
maintain our positions in the fixed-line and mobile
telecommunications markets and to expand and grow in the areas
of internet, high-speed data and business telecommunications
services could be impeded.
Competition for qualified personnel in the Greek
telecommunications market is intense, and the costs of retaining
such personnel have increased and may continue to increase.
Recruiting specialized technical, commercial and information
technology personnel is crucial to our future success and
efficiency. Since 2006, following the enactment of Greek Law
3522/2006 and the adoption of our new Internal Personnel
Regulation, we have implemented flexible recruitment procedures
in order to recruit experienced and specialized personnel, for
both entry level and managerial positions, with higher salaries
and more attractive benefits. Potential failure to recruit
experienced and specialized personnel and to retain necessary
skilled personnel could significantly impede our plans to
maintain our position in the fixed-line and mobile telephony
services market and to expand and grow in the areas of internet,
high-speed data and business telecommunications services, and
could have a material adverse effect on our business, results of
operations, financial condition and prospects.
Criminal
investigations relating to improprieties in relation to the
conduct of our business could have a material adverse effect on
our business, results of operations, financial condition and
prospects.
In 2007, the District Attorney of Athens undertook a preliminary
investigation with respect to the propriety of the acquisition
of Germanos S.A.
(Germanos)
by Cosmote,
following allegations by a number of members of the Greek
Parliament, claiming that the acquisition was not in the
business interest of Cosmote. During the course of the
preliminary investigation, the members of the Board of Directors
of Cosmote at the time of the acquisition of Germanos were
called and requested to submit explanations in connection with
the case. Following the recent completion of the preliminary
investigation, a formal criminal investigation was ordered in
connection with the potential perpetration of the criminal
offence of abuse of trust against seven former and current
members of Cosmotes Board of Directors. The 20th
Investigating Judge of Athens, who was appointed in charge of
the criminal investigation, has ordered two accounting firms to
produce an experts report, which was submitted to the
Investigating Judge on March 17, 2010 and concluded that
the price paid by Cosmote for the acquisition of Germanos was
fair and that Cosmote did not suffer loss or damage as a result
of the acquisition (rather the acquisition was to the corporate
benefit of Cosmote).
In addition, Greek and German judicial authorities have been
investigating allegations of bribery, money laundering and other
criminal offences committed by employees of Siemens AG and a
number of Greek government officials and other individuals,
relating to the award of supply contracts to Siemens AG. In that
connection a former senior executive of our Group was last year
remanded in custody pending his trial for similar charges.
Furthermore, at times, Greek judicial authorities have
undertaken other criminal investigations with
18
respect to alleged improprieties involving current or former
members of our senior management. See 4.B Business
Overview Legal Proceedings
Greece Other Proceedings Criminal
Proceedings.
To the extent we have been, or may so be, requested, we have
cooperated and intend to cooperate in relation to such
investigations. In addition, we have taken and continue to take
measures designed to ensure the appropriate conduct of our
personnel, as well as to request information in order to
investigate such allegations. Also in certain cases, we intend
to pursue compensation for damages incurred as a result of
illegal conduct. We cannot, however, give any assurances as to
the outcome of such criminal investigations, including in
connection with the potential filing of criminal charges or
imposition of criminal convictions on former or current members
of our Boards of Directors or senior management, or of related
civil litigation. Potential filing of criminal charges, or
imposition of criminal convictions, in relation to improprieties
by our management and related civil litigation against our Group
could adversely impact our reputation, our ability to conduct
business in Greece or abroad and could result in a material
adverse effect on our business, results of operations, financial
conditions and prospects.
If we
fail to operate IPTV services in a reliable, competitive and
profitable fashion, our reputation and our market share,
including voice and internet access services, may
suffer.
In February 2009, we began offering IPTV (video over broadband)
services to customers, initially in major urban centers, after
commencing with a soft launch in the autumn of 2008. See
4.B Business Overview Other
Services Other Telecommunications
Services IPTV. As at December 31, 2009 we
had 16,075 IPTV customers in 60 urban areas and had signed
exclusive deals with major European Leagues and international
channels. However, as we expect that there will be a significant
percentage of the Greek population that will not be able to
receive IPTV service, we are also planning to launch a satellite
Pay-TV
service (DTH) in 2010, through which we expect to expand the
availability of our
Pay-TV
content to all households throughout Greece. A number of our
competitors in the Greek market are already offering IPTV
services, while Forthnet, our fixed-line services competitor,
operates Nova, the only active satellite
Pay-TV
service (DTH) in Greece, since August 2008. We cannot assure you
that we will operate and provide IPTV services in a timely and
reliable fashion, including offering attractive content, as
compared to our competitors. If we fail to do so, our reputation
may suffer and our market share, including that for voice and
internet access services, may decrease, as a number of our voice
or internet access customers may turn to competitors providing
more reliable, more attractive, or cheaper triple-play (voice,
internet and IPTV) services. Furthermore, if we fail to grow our
customer base for IPTV services in accordance with our
expectations, we may not realize the expected benefits from our
IPTV-related investments. In general, our failure to establish
and operate IPTV services in a competitive and reliable fashion,
could have a material adverse effect on our business, results of
operations, financial condition and prospects.
Cosmotes
ability to continue to grow and maintain its market leading
position is subject to certain factors that may be outside
Cosmotes control.
A significant portion of our revenues and profits are
contributed by Cosmotes Greek activities. Given high
mobile penetration rates, subscriber numbers of all mobile
operators, including Cosmote, can be expected to grow at a
slower rate than in previous years or suffer a decline in
revenues and profits. The continuation of Cosmotes growth
and the size of Cosmotes future customer base will depend
on a number of factors, some of which are outside of our or
Cosmotes control. Such factors include general economic
conditions, the gross domestic product per capita in Greece and
other markets in which we operate, developments in the
regulatory environment and the application by the EETT of
relevant legislation, the development of the GSM market and any
rival technology for the provision of mobile telecommunications
services, the development of 3G operations, the price of
handsets and improvement in the quality and availability of
fixed telephony as an alternative to mobile services in Greece
and the competitive behavior of mobile operators. Any of these
factors could materially adversely affect our business, results
of operations, financial condition and prospects.
19
Cosmote
faces strong competition from other mobile telephony providers
in Greece and in other markets in which it operates and may
experience loss of market share or significant price pressures
resulting from intensifying competition.
Competition for products and services in the Greek mobile
telecommunications market remains intense. Each of Vodafone and
Wind Hellas, Cosmotes competitors in the Greek market,
belong to large international groups and benefit from group-wide
efficiencies in international operations in areas such as
international roaming, marketing product offerings and
procurement. Cosmotes competitors may succeed in
attracting some of its customers which could reduce
Cosmotes market share and have a material adverse effect
on its business, results of operations, financial condition and
prospects. Furthermore, as a result of intensifying competition,
the Greek mobile market, as well as the other markets in which
Cosmote operates, has recently experienced remarkable price
pressures. Our mobile subsidiaries in Albania, Romania and
Bulgaria are also facing and are expected to continue to face
similar competitive and pricing pressures in their respective
markets, which could result in loss of their respective market
shares, or adversely affect their operating and financial
performance. Competitive pressures related particularly to
prepaid mobile telephony products and services, as well as
newly-introduced products combining fixed-line and mobile
features. Heightened competitive pressures may also result in
higher marketing, selling and distribution expenditure, as well
as increased capital expenditure and, therefore, have a negative
impact on profitability. In the future, there may also be new
entrants to the Greek mobile market, which could result in
further price pressures. Furthermore, other factors, including
new market conditions and trends or technologies may also affect
the competitive landscape and increase competitive pressures
having an impact on our financial and operating performance. For
instance, the increasing development of Wi-Fi local networks in
public areas and the use of those networks by mobile users may
have a negative impact on traffic over mobile networks and
revenues of mobile operators. Loss of market share or
significant price pressures resulting from intensifying
competition could result in a material adverse effect on our
business, results of operations, financial condition and
prospects.
The
acquisition and integration by Cosmote of new businesses may
present certain difficulties that could have a material adverse
effect on our business, results of operations, financial
condition and prospects.
Cosmote has grown partially through a number of acquisitions. In
2006 and 2007, Cosmote acquired approximately 100.0% of
Germanos, a Greek company principally engaged in the
distribution and sale of telecommunication and digital
technology products and services. See 4.B Business
Overview Mobile Telephony Services
Greece Cosmote Germanos. In
addition, in October 2009, Cosmote acquired Telemobil S.A.
(Zapp)
, a mobile operator in Romania,
operating 3G and CDMA networks. The acquisition and integration
by Cosmote of any other businesses it may acquire in the future
may present certain challenges for Cosmote, including, but not
limited, to the following:
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acquired businesses not delivering expected or appropriate
returns;
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difficulties in integrating and optimizing the use of managerial
and operational resources;
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potential disruptions of ongoing businesses and diversion of
managerial resources;
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difficulties in integrating technology or content and rights to
products and properties and unanticipated expenses related to
such integration; and
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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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If Cosmote fails to integrate new businesses and control their
activities or benefit from the relevant synergies and economies
of scale it hopes to realize from this integration, this could
have a negative effect on the value and performance of our
investment in Cosmote, which could have a material adverse
effect on our business, financial condition, results of
operations and prospects.
20
Cosmotes
ability to provide commercially viable telecommunications
services depends upon its ability to interconnect in a
cost-effective manner with the telecommunications networks of
other operators.
Cosmotes ability to provide commercially viable
telecommunications services to meet the needs of its customers
depends upon its ability to interconnect in a cost-effective
manner with the telecommunications networks of other operators
in order to complete calls between Cosmote customers and parties
on fixed-line networks or other mobile telecommunications
networks. Cosmote maintains interconnection agreements with us
and with other operators of mobile and fixed-line networks in
Greece and in other countries in which it operates, but has no
control over the quality and timing of investment and
maintenance activities conducted by these operators, which may
be necessary to provide Cosmote with interconnection services of
acceptable quality. The failure of these operators to provide
reliable and economic interconnection services to Cosmote, a
reduction in the interconnection fees paid by these network
operators to Cosmote, or an increase in the interconnection fee
paid by Cosmote to these operators for delivering calls
originating on Cosmotes network, could have a material
adverse effect on our investment in Cosmote and, consequently,
on our business, financial condition, results of operations and
prospects.
Perceived
or actual health risks related to mobile telecommunications
equipment and devices could adversely affect demand for our
mobile telephony services or could lead to environmental or
planning restrictions on the location of mobile base
stations.
Media reports have suggested that there may be health risks
associated with the effects of radio waves emitted by
transmitter masts and mobile handsets. Research and studies are
ongoing. Regardless of whether such research or studies
establish a link between radio frequency emissions and health
and despite the recent suggestions by authorized organizations
such as World Health Organization
(WHO)
,
International Commission on Non-Ionizing Radiation Protection
(ICNIRP)
and Scientific Committee on Emerging
and Newly Identified Health Risks
(SCENIHR)
that the limits of radio frequency emissions do not need to be
lowered, these concerns over radio frequency emissions may
result in significant restrictions on the location and operation
of transmission facilities and antennae base
stations, which could have a material adverse effect on
our mobile telecommunications services business. Moreover,
litigation initiated by local authorities and private persons
regarding the removal of individual base stations for health
reasons has been increasing, while, from time to time, proposals
have been made by independent advocates for the general removal
of base stations from inhabited areas. We can give no assurance
that legislative bodies, regulators or private litigants will
refrain from taking additional actions adverse to our business
based on purported health related risks associated with radio
frequency emissions, which actions may result in significant
costs and could materially adversely affect the business,
results of operations, financial condition and prospects of our
mobile telecommunications services business.
Capacity
limitations and network infrastructure faults of Cosmote could
adversely affect the growth of its business which could, in
turn, materially adversely affect our business, results of
operations, financial condition and prospects.
The number of customers that can be served by Cosmotes
network is ultimately constrained by the spectrum allocated to
Cosmote and is dependent on usage patterns and the quality and
design of Cosmotes network infrastructure. Any reduction
in the availability or allocation of spectrum or capacity of
Cosmotes network could impede the growth of its business,
which could have a material adverse effect on our business,
results of operations, financial condition and prospects.
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ITEM 4
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INFORMATION
ON THE COMPANY
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4.A History
and Development of the Company
Hellenic Telecommunications Organization S.A., known as OTE or
OTE S.A., was incorporated as a
société anonyme
in Athens, Greece, under the laws of the Hellenic Republic
in 1949, pursuant to the provisions of Legislative Decree
1049/1949. We operate as a
société anonyme
subject to the provisions of Law 2190/1920 (the
Greek Companies Law)
and Law 3016/2002, as
amended and supplemented by Law 3091/2002. Our registered office
is located at 99 Kifissias Avenue, Amaroussion 15124, Athens,
Greece. Our telephone number is +30 210 611 1000. Our agent for
service of process in the United States is Puglisi and
Associates, 850 Library Avenue, Suite 204,
P.O. Box 885, Newark, Delaware 19711.
We are a full-service telecommunications group and the leading
provider of fixed-line voice telephony and internet access
services in Greece. We also provide mobile telecommunications
services in Greece, through Cosmote, our wholly-owned
subsidiary. In addition, we provide fixed-line voice telephony
and internet access services in Romania and mobile
telecommunications services in Albania, Bulgaria and Romania
(and in the Former Yugoslav Republic of Macedonia
(FYROM)
until May 2009).
As of the date of this Annual Report, Deutsche Telekom held
30.0% plus one share of our issued share capital and the Greek
State held 16.0% of our issued share capital and controlled
voting rights in respect of an additional 4.0% (such interest
owned by IKA-ETAM, the Greek pension fund). See 7.A Major
Shareholders and Related Party Transactions Major
Shareholders.
24
Significant milestones in the history of our business include
the following:
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In December 1995, we were granted the right to provide mobile
telephony services in Greece using GSM 1800 technology; in
October 1996, we established Cosmote to provide mobile telephony
services and, in April 1997, we transferred our GSM 1800 license
to Cosmote.
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In May 1996, we established OTENet, a majority-owned subsidiary,
which developed from an internet service provider to offering a
range of integrated
IP-based
voice and data telecommunications services, IT application
development and hosting services using internet technologies.
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In 1998, we acquired 35.0% of the share capital of RomTelecom
S.A.
(RomTelecom)
, the Romanian
telecommunications operator, which in March 2003, we increased
to 54.01%.
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In August 2000, we established OTE International Solutions S.A.
(OTEGlobe)
, our wholly-owned subsidiary
responsible for the marketing and sales of our international
wholesale voice and data services and the technical operation
and commercial development of our international data/IP network.
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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.
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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.
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In June 2003, we launched our asymmetrical digital subscriber
line
(ADSL)
services.
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In June 2005, we commenced implementing our Voluntary Retirement
Scheme, which has facilitated the early retirement of 5,405 of
our employees, as of December 31, 2009.
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In July 2005, Cosmote subscribed for 70.0% of the share capital
of S.C. Cosmote Romanian Mobile Telecommunications S.A.
(Cosmote Romania)
, our mobile telephony
subsidiary in Romania, through a share capital increase; in
December 2005, Cosmote Romania re-launched commercial operations.
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In the third quarter of 2005, we transferred to Cosmote the
entire share capital of CosmoBulgaria Mobile EAD
(Globul)
and Cosmofon Mobile
Telecommunications Services A.D. Skopje
(Cosmofon)
(our mobile telephony subsidiaries
in Bulgaria and the FYROM, respectively).
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Over the course of 2006 and 2007, Cosmote acquired an interest
of approximately 100.0% in Germanos, a Greek-based international
wholesale and retail distributor of technology and
telecommunications products, for a total purchase price of
Euro 1.3 billion.
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In November 2006, we sold our 90.0% interest in ArmenTel, the
Armenian public telephony operator, to JSC Vimpel-Communications
for a sales price of Euro 341.9 million.
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In November 2007, we launched a tender offer for the acquisition
of the entire share capital of Cosmote. Since April 9,
2008, we have owned the entire share capital of Cosmote, which
ceased trading on the Athens Exchange on April 1, 2008.
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In December 2007, together with OTENet we sold the entire share
capital of INFOTE, our directory services subsidiary, to Rhone
Capital LLC and Zarkona Trading Limited for the sales price of
Euro 300.2 million.
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Beginning in the summer of 2007, Marfin Investment Group
Holdings S.A.
(MIG)
, a Greek private equity
fund, increased its interest in our share capital to 20.0% in
early 2008. On May 15, 2008, MIG transferred its 20.0%
interest in our share capital to Deutsche Telekom.
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On May 14, 2008, the Greek State and Deutsche Telekom
signed a shareholders agreement relating to the governance
of our Group and a share purchase agreement, pursuant to which
the Greek State transferred a 3.03% interest in our share
capital to Deutsche Telekom. As a result, the Greek State and
Deutsche Telekom each subsequently held 25.0% of our share
capital, plus one share. The Shareholders Agreement and
the
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25
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Purchase Agreement were at the time of their signing subject to
ratification by the Greek Parliament and approval by other
relevant authorities; the Greek Parliament subsequently ratified
both agreements on June 18, 2008.
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As of December 27, 2007, we acquired the entire share
capital of OTENet and, on June 27, 2008, we merged with
OTENet, following which we integrated its business and employees.
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On May 12, 2009, Cosmote and Germanos sold the entire share
capital of Cosmofon, the mobile subsidiary in FYROM, and
Germanos Telecom AD Skopje to Telekom Slovenje for a
consideration of Euro 185.8 million.
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On July 31, 2009, the Greek State exercised a put option
and sold 24,507,519 shares to Deutsche Telekom representing
5.0% of our share capital (this put option was granted to the
Greek State under the share purchase agreement between Deutsche
Telekom and the Greek State).
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On October 31, 2009, Cosmote completed the acquisition of
the entire share capital of Zapp in Romania for the purchase
price of Euro 67.5 million. Cosmote also assumed debt
and other liabilities of Zapp of Euro 129.6 million,
mainly concerning 3G and CDMA network roll out.
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On December 31, 2009, in accordance with the terms and
provisions of a shareholders agreement between Cosmote and
Mr. P. Germanos dated May 9, 2006, Cosmote acquired a
10.0% interest in Cosmoholding Cyprus Ltd, the parent company of
Germanos, for a total amount of Euro 168.5 million.
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4.B Business
Overview
We are a full-service telecommunications group and the leading
provider of fixed-line voice telephony and internet access
services in Greece. We are also the leader in providing mobile
telecommunications services in Greece, through Cosmote, our
wholly-owned subsidiary. In addition, we provide fixed-line
voice telephony and internet access services in Romania and
mobile telecommunications services in Albania, Bulgaria, and
Romania (and in FYROM until May 2009).
Fixed-line services.
We provide local,
long-distance and international fixed-line telecommunications
services in Greece and Romania. We also offer internet access
services and fully integrated
IP-based
telecommunications solutions. In addition, we offer a range of
other telecommunications services, including value-added
services, IN services, IT application development and
IP-based
hosting services, leased lines, public telephone services,
operator assistance services, sales of equipment, directory
services and satellite telecommunications.
As of December 31, 2009, we had 3,787,132 PSTN lines,
517,369 ISDN BRA retail lines and 5,677 ISDN PRA lines in
service, compared to 4,110,102 PSTN, 548,388 ISDN BRA and 5,971
ISDN PRA lines as of December 31, 2008. As of
December 31, 2009, we had 1,060,064 retail and 52,714
wholesale customers for our broadband services in Greece.
Mobile services.
We offer mobile telephony
services through Cosmote and its subsidiaries in Greece,
Albania, Bulgaria and Romania (and in FYROM until May 2009):
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in Greece, using GSM 900 and GSM 1800, and 3G and LMDS
technology, through Cosmote, our wholly-owned subsidiary, which
had 9,217,507 mobile customers in Greece on December 31,
2009, representing a market share of approximately 45.0% of
contract and prepaid mobile customers;
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in Albania, using GSM 900 and GSM 1800 technology, through AMC,
in which Cosmote held an effective 95.0% interest as at
December 31, 2009, had 1,908,987 mobile customers on
December 31, 2009;
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in Bulgaria, using GSM 900 and GSM 1800, and 3G and LMDS
technology, through Cosmotes wholly-owned subsidiary,
Globul, which had 3,902,272 mobile customers in Bulgaria on
December 31, 2009; and
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in Romania, using GSM 900 and GSM 1800 technology, through
Cosmotes 70.0% owned subsidiary, Cosmote Romania (in which
we effectively own an 86.2% interest), which had 6,920,816
customers in Romania on December 31, 2009, as well as using
3G and CDMA technologies through Cosmotes newly acquired
wholly-owned subsidiary, Zapp.
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26
Wholesale services.
We provide
telecommunications services on a wholesale basis to other
telecommunications providers and ISPs in Greece, including
wholesale ADSL access services, interconnection services, leased
lines, data telecommunications services and local loop
unbundling.
Capital expenditure.
Our capital expenditure
program is currently mainly focused on:
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mobile telecommunications services;
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Internet Protocol services and broadband,
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expanding our backbone network capacity using DWDM; and
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network dimensioning to maintain quality.
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For information about our capital expenditures, see
Investment Program
2010/2011
Capital Expenditure.
STRATEGY
Our aim is to deliver increasing value to our shareholders,
while improving the quality, value and profitability of the
products and services we deliver to our customers.
Enhancing
the operational performance and increasing the profitability of
our fixed-line telephony operations
Our main strategic goal for our fixed-line telephony operations
is to enhance operational performance in order to achieve
profitability in line with our European peers. We aim to
accomplish this by implementing the following strategic goals,
while continuing our effort to derive benefits from synergies
available within our Group:
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Increasing customer satisfaction:
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retain our retail market share and create new sources of
revenues (IPTV, satellite TV, ICT/Systems Integration);
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improve customer support for both retail and wholesale services,
enhance after-sales service (for example rationalization and
transformation of call centers);
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optimize distribution channels and develop alternative sales
channels; and
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further develop and expand our broadband-based offerings
differentiated by customer segment.
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Gradually upgrading our network:
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gradually transform our network to NGN;
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enhance our network and IT platforms to support higher broadband
speeds and enable provision of new products; and
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leverage existing infrastructure to better address wholesale
market.
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Improving competitiveness:
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continue with our cost control action plan (for example through
certain strategic projects);
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optimize internal corporate procedures;
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develop workforce capabilities and motivation; and
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ensure fair regulatory treatment.
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27
Strengthening
and enhancing the profitability of our mobile telephony
operations
Through Cosmote, we aim to maintain our leading position in the
mobile telephony market in Greece and to strengthen our position
in southeastern Europe. Our key strategic objectives in this
area are:
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in Greece, through Cosmote: to increase market share, maximize
revenues and enhance profitability over the medium term through
increased usage, customer growth, promotion of new services and
focused commercial policies;
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in Albania, through AMC to maintain its leading position in the
market, to increase its post-paid customer base and limit the
impact of increased regulation and competition, while
maintaining high profitability;
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in Bulgaria, through Globul: to improve the companys
competitive position in the market and enhance cash
generation; and
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in Romania, through Cosmote Romania: to continue to increase the
customer base and increase operating profitability, and,
following the acquisition of Zapp, to offer mobile broadband
services.
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Strengthening
the competitive position of RomTelecom
Our main strategic focus with respect to our international
fixed-line operations is to strengthen the competitive position
of RomTelecom, our 54.01% subsidiary in Romania, as a
provider of telephony, broadband and satellite television
services. Our key strategic objectives in connection with
RomTelecom are to:
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defend our telephony customer base;
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increase our revenues by expanding our market shares in
broadband and television services;
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provide reliable broadband services through existing ADSL
technologies, as well as expand to more advanced technologies,
including FTTH or VDSL, when economically feasible;
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pilot and implement new platforms for IPTV services;
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roll-out a CDMA network for fast and economic alternative data
and/or
fixed
wireless access solutions;
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reduce operating expenses through a focus on efficiency; and
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enhance capabilities to deliver quadruple-play services (voice,
internet, IPTV and mobile telephony) together with Cosmote
Romania.
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MARKETING,
SALES AND CUSTOMER CARE
Marketing
Our marketing strategy aims mainly at:
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increasing broadband penetration;
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defending our market share of fixed-line services;
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maximizing our revenues from existing products and services;
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increasing our penetration of innovative products and services
(including IPTV);
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strengthening the brand of our products and services; and
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establishing a loyalty scheme to ensure that high-value, loyal
customers are rewarded and low churn rates are achieved.
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In 2009, our business marketing efforts were focused mainly on
advertising activities, which included the re-branding of our
business portfolio, the creation of business corners at OTEShops
and the OTE Business website (www.otebusiness.gr), various
campaigns including Conn-x @Work, OTE Business voice pack
products and an OTE Business corporate campaign, and promotional
material at OTEShops and other points of presence. In
28
addition, we engaged in other promotional activities, including
business and corporate customer events, sponsorship of, and
participation in, exhibitions and other activities.
We re-branded our business portfolio in order to reposition our
business products and services, to promote convergence of
communication (voice, internet and other services) and the
quality of our business offerings, to strengthen our brand and
to enhance the innovation and simplicity of the solutions we
offer.
The objectives of our Conn-x @Work campaign were to achieve
sales targets, to increase brand awareness, to increase market
share and to provide greater information to customers,
particularly in relation to prices, value-added services and new
features.
Our OTE Business voice packs campaign launched a new suite of
single and double play products for SMEs and was aimed at
winning back customers as well as retaining existing customers
in order to increase our market share.
Our OTE Business corporate campaign re-launched the re-branded
OTE Business brand and was aimed at enhancing
awareness of the OTE Business portfolio, promoting OTE
Business ability to offer tailor-made solutions for
every business need
(each company a
different story)
and communicating innovation and
customization.
We held customer events in order to build customer loyalty and
to inform our clientele of products and services offered by the
OTE Business portfolio. The events for business customers took
place in carefully selected cities according to specific sales
oriented criteria.
Sales
and Distribution
OTEShops.
Our owned network of shops, branded
OTEShops, offers a complete range of
telecommunications products, including fixed-line telephony,
broadband and IPTV products, as well as Cosmotes mobile
telephony products. In 2009, we implemented a program to
optimize the geographical presence of our own retail network in
Greece. As of December 31, 2009, our OTEShop retail network
consisted of 225 outlets across Greece; 206 shops owned by us,
19 on a franchise basis and 61 service points.
Cosmote and Germanos Shops.
Our products are
also sold through Germanos retail shops, and, since April 2008,
also through Cosmote stores. See Mobile
Telephony Services Greece-Cosmote
Distribution and
Germanos Business of
Germanos. In 2009, we focused on increasing sales of
fixed-line, and especially broadband-based products through
Germanos and Cosmote shops.
Other Retailers and Distributors.
We also use
other retailers and distributors, including the major retail
chains in Greece, making our product portfolio present in more
than 500 points of sale.
Contact Centers.
We continue to transform our
telephone contact centers into sales channels of increasing
significance. We believe that this effort has already resulted
in increasing sales and improving the quality of our customer
care services. Sales through outbound telemarketing have been
increasing, and cross- and up-selling through the number 134,
which is our main inbound contact center, are also increasing.
We are also developing special contact center teams focusing on
customer retention and churn reduction, in order to reduce the
rate of customer migration to competitors.
OTE Business Customer Service 13818, operates both
as a sales channel by performing telesales and direct marketing
campaigns and as a single point of contact for customer care and
support for the whole of the OTE Business customer base.
Electronic
Channels.
www.oteshop.gr is our
electronic sales channel for residential customers and small
businesses. Part of our sales strategy is to increase the usage
of our electronic channels by offering new electronic services
such as My
e-Bill
(electronic billing presentation and payment) and My
e-Services
(online activation for phone services). We have also upgraded
and enhanced www.otebusiness.gr to improve the
promotion of OTE Business services and for greater
interaction with OTE Business users.
Account Managers and External Sales
Advisors.
Our corporate and business customers
have been assigned dedicated key account managers who serve as a
single point of contact for all their business needs. We
continue to develop our customer-focused organization and
operations by incorporating our external sales advisors into our
29
account management structure. This enables us to develop small
and flexible sales teams to promote our products and services to
SMEs.
Customer
Care
We have developed an extensive network of other contact centers
for our customers, focusing on their after-sales support and
needs. Our after-sales support channels mainly comprise:
OTEShops.
Customer care and complaint
management services are provided through our own retail network
in Greece.
Contact Centers.
Our customer inbound
technical support lines (numbers 121 and 1242 for residential
and business customers, and 13818 for business customers) are
supported by our in-house call centers and operate on a daily
basis. We continue to develop call center services based on
specific customer service level requirements. We provide call
center services 24 hours a day, 365 days a year.
FIXED-LINE
SERVICES
We provide fixed-line retail and wholesale telecommunications
services in Greece and in Romania through RomTelecom Romania, in
which we hold a 54.01% interest.
We also hold a 20.0% interest in Telekom Srbija a.d.
(Telekom Srbija)
, which provides fixed-line
and mobile telephony services in Serbia and in the Republic of
Srpska in Bosnia and Herzegovina through Telekom Srpske and in
Montenegro through Mtel.
Our retail and business customers access our fixed-line
transmission network to place local, long-distance and
international calls. We offer a variety of tariff packages that
generally consist of a monthly fixed payment for access to our
network and a variable usage-based component.
Historically, fixed-line telephony was our primary business in
terms of total revenues. See 5.A Operating Results.
However, the contribution of fixed-line telecommunications
services to our total consolidated revenues has declined over a
number of years, principally as a result of the rapid growth of
our mobile telephony operations, as well as due to the adverse
impact on our Greek fixed-line revenues of competition, tariff
reductions and discount plans. Our operating revenues from
domestic and international fixed-line telephony services
represented 31.3% of our consolidated revenues in 2009, compared
to 32.8% in 2008 and 36.8% in 2007, while the contribution to
our total consolidated revenues of other non-mobile services
(including internet access, services rendered, as well as
wholesale services, such as interconnection, leased lines and
local loop unbundling) was 28.7% in 2009, as compared to 28.6%
in 2008 and 28.2% in 2007 and the contribution of mobile
revenues to our total consolidated revenues was 40.0% in 2009,
compared to 38.6% in 2008 and 35.0% in 2007. Revenues from ADSL
services are classified in our financial statements under
Other Revenue.
Greece
OTE
We are the leading provider of fixed-line voice telephony and
internet access services to residential and business customers
and on a wholesale basis in Greece. We provide local,
long-distance and international fixed-line telephony services,
internet access, ISDN, high-speed data telecommunications,
ADSL-based broadband services, value-added services, IN
services,
IP-based
solutions,
IP-VPN
services, IPTV services, connectivity services, system
integration solutions which combine ICT, public telephone
services, operator assistance and directory services, equipment
sales and satellite telecommunications services.
30
The following table sets out certain key operating data
regarding our fixed access lines in Greece as of
December 31, 2007, 2008 and 2009:
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As of December 31,
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2007
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2008
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2009
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(In thousands)
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Number of PSTN access lines in service
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4,509
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4,110
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3,787
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Number of ISDN BRA lines in service
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580
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548
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517
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Number of ISDN PRA lines in service
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6
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6
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6
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Active ADSL lines (retail)
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475
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864
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1,060
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Active ADSL lines
(wholesale)
(1)
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334
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94
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53
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Note:
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(1)
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Active lines of ADSL customers of
alternative operators, supported by wholesale services provided
by our company. Following our merger with OTENet in 2008,
OTENets customers are included in the retail numbers for
2008, while, for previous years, OTENets customers are
included in wholesale numbers.
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As of December 31, 2009, we had 3,787,132 PSTN lines,
517,369 ISDN BRA lines and 5,677 ISDN PRA lines in service,
compared to 4,110,102 PSTN, 548,388 ISDN BRA and 5,971 ISDN PRA
lines as of December 31, 2008.
Retail
Services
Residential Customers Division.
Our
residential customers division focuses on improving our
offerings to, and the overall customer experience of, our
residential customers, including improving customer care and
enhancing the range of our products and services, through the
offering of bundled services and the offering of integrated or
hybrid services, with a particular focus on ADSL-based products.
The main categories of retail fixed-line telecommunications
services we provide to residential customers are:
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PSTN and ISDN access and traffic and value-added services;
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ADSL (broadband) internet access and data services;
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IPTV services;
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IN services and premium rate services, including infotainment
services; and
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public telephone services.
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Enterprise and Business Services Division.
Our
Enterprise and Business Services Division offers products,
services and integrated solutions, combining network and ICT,
with a focus on business customers satisfaction through
efficient and competitive sales channels and project
implementation processes and effective customer support
services. The main categories of fixed-line telecommunications
services we provide to enterprise and business customers are:
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voice services including telephony and value-added services
(PSTN, ISDN and IN services) and Voice over Internet Protocol
services
(VoIP)
;
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broadband access connectivity and transport services;
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VPN and network management and operation services;
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system integration solutions which combine ICT, data center and
corporate application services (including
e-banking,
web services, portals and web sites); and
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technical support and customer care services.
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31
Wholesale
Services
We provide a range of wholesale services to Greek alternative
fixed-line, mobile and other telecommunications operators,
international telecommunications companies and other wholesale
clients. The main categories of wholesale fixed-line
telecommunications services we provide are:
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interconnection;
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leased lines;
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ADSL;
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local loop unbundling;
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Ethernet services; and
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wholesale line rental (WLR).
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For more information regarding our wholesale services, see
4.B Business Overview Other Services.
Fixed-line
Network
As the incumbent telecommunications services provider in Greece,
we own and operate the most extensive fixed-line network in the
country.
During 2009, we continued to upgrade and expand our network and
made significant investments aimed at improving its capacity and
the quality of services we offer to our customers. Our key
investments in network in 2009 focused on the following areas:
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further developing and upgrading our access network;
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expanding and upgrading the capacity of our DWDM transmission
network;
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supporting and enhancing the provision of IPTV services;
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integrating our IP access network;
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integrating our service platforms;
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upgrading our IP core distribution systems; and
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upgrading Metro Ethernet.
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Voice Network.
As of December 31, 2009,
we had 3,787,132 PSTN retail lines, 517,369 ISDN BRA retail
lines and 5,677 ISDN PRA retail lines in service, compared to
4,110,102 PSTN, 548,388 ISDN BRA and 5,971 ISDN PRA lines, as of
December 31, 2008. In 2008, we installed new platforms that
support the provision of number portability and ring-back tones
(RBT)
services. Our voice network also
contains a Next Generation
(NGN)
component,
comprised of voice gateways in 43 sites linked with digital
switches, the IP network and one soft switch controller offering
VoIP services to the public sector (government) through the
Sizefxis project, covering approximately 4,300 points of the
public sector throughout Greece, as of December 31, 2009.
ADSL Network.
We continue to expand our ADSL
network in line with demand. As of December 31, 2009, our
ADSL network comprised 1,562,478 installed ADSL ports and 1,501
points of presence
(PoP)
, compared to
1,410,163 ADSL ports and 1,420 PoP at the end of 2008.
Transmission Network.
We have been installing
fiber optic cable to further improve the capability and increase
the capacity of our trunk network in Greece. As of
December 31, 2009, we had a total of 30,526 km of fiber
optic cable installed (25,257 km core; 2,435 km access; 2,834 km
submarine). Although our network is mainly based on fiber optic
cables, in some cases where cable is not economical, such as in
remote and rural areas, we deploy microwave links. The total
number of Metro Ethernet points of presence in Greece was 800 as
of December 31, 2009. Moreover, during 2009 we installed 13
new NG-SDH rings. Our core transmission network consists of 12
DWDM rings, and through 2009 we increased its capacity to
further support increasing broadband traffic.
32
IP Network.
Our IP Network consists of a core
part and an access (edge) part. In 2006, we converged and
enhanced the two networks then operated by our Group (by us and
OTENet, respectively), thus creating the largest IP network in
Greece. OTENet was in charge of operating our converged IP
network until June 27, 2008, when we merged with OTENet and
assumed management of the Groups entire IP network.
Our Multi Protocol Label Switching
(MPLS)
based core network carries traffic generated by the broadband
network, connects the BRAS to Internet Service Providers in
Greece, carries the traffic of our NGN switching network and
connects our edge networks. It consists of gigabit and terabit
routers in seven sites, two of which are located in Athens. The
routers from the other sites are connected to the two sites in
Athens.
Our edge IP network provides
IP-VPN
services to corporate customers. Following the consolidation of
our and OTENets networks in 2008, the total number of edge
IP sites throughout Greece amounts to 108. These are now linked
to the IP core network through the Ethernet network with Gigabit
Ethernet links. Digital leased lines are used to provide access
to
IP-VPN
services.
Operational Support Systems.
In the area of
operational support systems we are working on two major
projects, Service Fulfillment and Service Assurance, with the
goal to reduce operational costs and assure the quality of our
broadband service offerings. As regards the Service Fulfillment
project, relating to fulfillment of service orders, our Network
Inventory and Service Activation Systems are already operational
and provide automated service fulfillment for broadband
services. In addition, the Service Assurance project, which
relates quality and assurance to our services already provided,
is under development. The Service Assurance infrastructure
already covers our xDSL, Metro Ethernet and SDH network domains
for Fault, Performance and Service Management functions. The
xDSL access services, Metro Ethernet connections, SDH
leased-line connections and IP services
(IP-VPN)
are
being monitored by service management applications. In 2010, we
plan to include
IP-core
network and to apply automated network discovery which will
further utilize our Service Assurance platform.
International Fixed-Line Network.
Our
international telephony traffic is currently routed through
three international digital switches, two in Athens and one in
Thessaloniki. These international switches are connected to
international networks via submarine and terrestrial cables, as
well as satellite links operated by our subsidiary, OTEGlobe. We
hold rights to several international submarine cable systems and
terrestrial networks of older and modern technologies. In
particular, we own a DWDM/SDH international submarine cable,
connecting Greece with Italy (Kokkini to Bari) and thereafter
with other large terrestrial networks. As of April 1, 2007,
OTEGlobe owns, manages and develops all our other international
fixed network assets and cable infrastructure. See
Other Services International
Wholesale Telephony and Data Services OTEGlobe.
NGA Projects.
We are currently considering the
technical and economic aspects of our own fiber deployment plan.
We are planning to adopt a
fiber-to-the-curb
(FTTC)
architecture, extending our fiber
network to street cabinets situated close to our customers
premises. We plan to develop installation of VDSL DSLAMs in
street cabinets through 2010 and expect to gradually increase
the total number of VDSL DSLAMs installed to the end of 2012.
The aim of this Next Generation Access
(NGA)
network is to offer higher speeds to subscribers (for example,
50 Mbps download speed), by shortening loop-length.
In January 2010, the Greek Ministry of Infrastructure, Transport
and Networks published a public consultation on the selection of
a new advisor to propose a new strategy for the development of a
financially and economically viable FTTH
Point-to-Point
national access network (based on open-access architecture). It
is expected that different deployment and funding models used
worldwide will be studied and a proposal will be submitted again
for public consultation. A final proposal is expected by the end
of 2010. As a number of factors relating to this FTTH project
remain unclear, including the cost of the project, the potential
allocation of this cost, the work required for the project and
its future impact on fixed-line competition in the Greek market,
we cannot accurately predict its effect on our plans to develop
our own NGA solutions and its effect on competition in the Greek
fixed-line market or on our business and financial condition.
Competition
and Market Position in the Greek Fixed-line Telephony
Market
The Greek fixed-line telecommunications market is highly
competitive. Since the liberalization of the market in 2001, and
especially in recent years, we have gradually lost a significant
part of our share of the Greek fixed-line
33
telecommunications market to competitors, although we still
remain the principal provider of fixed-line telephony services
in Greece. As of December 31, 2009, we had a total of
approximately 4.27 million fixed lines in service out of a
total of approximately 5.25 million lines in service in the
Greek market. We aim to continue to defend our market share in
fixed-line telephony, although we believe that it may decline
further over the next few years. We have defended and aim to
continue to develop and offer new products and services in order
to enhance our revenues from fixed-line telecommunications
services.
Over recent years, alternative fixed-line operators providing
retail services have increasingly relied on local loop
unbundling to reach their end customers and with respect to
backbone services, they deploy their own fiber optic
infrastructure and networks (which in some limited cases they
may share), or rely on wholesale products provided by us.
Our main competitors include a number of fixed-line and mobile
operators, such as Forthnet, Hellas OnLine, Vodafone, Tellas
Wind, OnTelecoms, Cyta and others, some of which are cooperating
in order to provide integrated fixed and mobile solutions to the
Greek market. System integrators are also seeking to work with
telecommunications providers to develop ICT solutions.
Alternative operators are becoming increasingly competitive in
offering voice, broadband and data transmission
,
as well
as value-added and bundled services. Most of our competitors
offer a range of voice, broadband and double-play (voice and
internet) products, either over unbundled local loops, or using
our own network. In addition, certain of these operators have
recently started offering IPTV services, as part of fixed-line
bundles, combined with broadband internet and voice services
(triple-play) at higher access speeds and at competitive prices.
The competitive market landscape continues to evolve with a
number of recent developments, having changed substantially in
2008 and 2009 following a number of mergers, acquisitions and
strategic alliances between fixed-line and mobile operators.
This has created strong market players with sufficient financial
resources to compete with us on equal or better terms. In
particular, Vodafone Greece, a subsidiary of one of the largest
mobile groups worldwide, acquired an 18.5% interest in the share
capital of Hellas OnLine, the second largest alternative
fixed-line operator, in 2009. In addition, Tellas, one of our
major competitors in fixed-line services, is the fixed-line
business unit of Wind Hellas, which is also part of a major
international telecommunications group, Weather Investments.
Both Wind Hellas-Tellas and Vodafone with HOL promote combined
fixed-line and mobile services. Furthermore, Forthnet, the
largest alternative fixed-line operator in Greece, also has
developed a competitive advantage following its acquisition of
Nova, currently the only digital satellite TV platform and until
recently the only subscription TV service in Greece with a
strong market share. Forthnet promotes combined double play and
Nova subscriptions, offering significant discounts on the
bundled product. Cyta Hellas, a subsidiary of the Cyprus
Telecommunications Authority (CyTA), entered the Greek
fixed-line telephony market in 2009 and has since established a
strong presence. There are also a number of players with a
smaller market share, including, among others, On Telecom-Vivodi
(formed after On Telecom acquired Vivodi), Net One
Algonet (formed from the merger of Net One with Algonet) and
Cosmoline.
Our competitors pursue an aggressive market share acquisition
strategy by focusing on differentiating their offers based
mainly on prices, which are, in many cases, much lower than
ours, as they are not subject to the same regulatory constraints
and pressures as we are with respect to the requirement for the
cost-orientation of our tariffs. Despite significant competitive
price pressures we have experienced over recent years, we have
managed to contain the rate of our loss of share of the Greek
fixed-line market mainly due to the strength of our brand and
the perceived reliability of our services.
In the future, we expect competition in the market for
fixed-line telephony services to be affected by such factors as:
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the regulatory framework, including developments in Greek and EU
regulation of telecommunications services and infrastructure;
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market demand and trends;
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|
our ability to price our products, services and offering in a
competitive manner in view of relevant regulatory constraints
and pressures, and our ability to increase our operating
efficiency and effectiveness, in order to
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34
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|
reduce the cost of providing these services, and, as a result,
be allowed to reduce our cost-oriented tariffs for these
services;
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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;
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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;
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our ability to offer attractive new or innovative products,
including bundles of products, competitive offerings or hybrid,
or integrated products;
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the continuing effectiveness of our commercial policies,
including the strength and effectiveness of our marketing
efforts;
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governmental decisions with regard to infrastructure projects,
including fiber optic infrastructure; and
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the performance of our investments.
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Pricing
Methodology and Regulatory Position
Our tariffs for fixed-line services in Greece are subject to
approval by the EETT, which annually reviews such tariffs to
confirm that they conform with the applicable regulatory
framework and, in particular, with respect to considerations
relating to our cost of providing the respective services.
Accounting separation is an accounting method by which
non-discrimination is achieved by placing the retail arms of the
incumbent and new entrants in the same position. In effect,
accounting separation statements ensure that the prices paid for
wholesale services and products by competitors and by the
significant market power operators retail arm, are the
same. A vertically integrated company is prevented from
improperly allocating costs from its retail arm to its wholesale
arm and from raising the prices of the wholesale products that
are most likely to create competition at the retail level. To
avoid the risk of price squeeze, accounting separation takes
place at both the wholesale and the retail level.
In particular, with respect to retail services tariffs and
offerings, we use fully distributed costing methodology, based
on current cost data, while with respect to tariffs for
wholesale services, such as interconnection and unbundled local
loop services, our decisions are based on the long-run average
incremental costing methodology, as applied to current cost
data. All adjustments to tariffs require approval by the EETT,
including any reductions to tariffs which had been previously
approved by the EETT. See also
Regulation Telecommunications
Services Regulation EU Regulation.
In order to ensure that we take into account applicable EETT
requirements with respect to our tariffs, we form the tariff
proposals that we submit to the EETT, including in our latest
submission in 2010, on the basis of the findings of the ECOS
costing system, our internal system providing costing
information with respect to services we offer. We operate the
ECOS costing system internally, but its principles and
methodology are audited and approved by the EETT on an ongoing
basis, based on two-year cycles. In particular, the EETT
conducts an annual audit of the ECOS system through external
auditors, other than those auditing our financial statements.
Based on the findings of this audit, the EETT may object to our
application of ECOS and related cost methodologies in the
calculation of our tariffs and may require us to make
adjustments to our tariffs and the ECOS methodologies.
The audit of our ECOS
2005-07
methodologies began in March 2007 and was completed in June
2007. The relevant EETT decision, which approved the costing
methodology, was published in August 2007 with retroactive
effect from January 1, 2007. The audit of the ECOS
2006-08
methodologies began in December 2007 and was completed in April
2008, and the relevant decision was published on April 23,
2008. The audit of our ECOS
2007-09
methodologies began in October 2008 and was completed in March
2009 and the relevant decision was published on May 6,
2009. The audit of ECOS
2008-10
methodologies began in October 2009 and was completed in April
2010. With its decision in May 2010, the EETT approved new
prices with retroactive effect as of January 1, 2010.
35
Under applicable law, ECOS
2009-11
costing methodologies will be submitted to the EETT one month
after the approval of the annual financial statements by the
General Assembly of our Shareholders. Our General Assembly of
Shareholders is expected to be held on June 16, 2010.
We believe that the tariff policy we have pursued in recent
years based on the results of the ECOS system has supported our
effort to set our tariffs in compliance with EU and EETT
regulations. In the future, we intend to continue to consider
the requirements of the EETT with respect to our tariffs, in the
context of applicable regulatory rules, competitive conditions
in the Greek telecommunications market and our obligation to
provide universal service at reasonable prices to all users.
Domestic
Fixed-line Telephony
Domestic fixed-line telephony services include local and
long-distance telephony services within a country (excluding
calls to international destinations), provided by us in Greece
and by RomTelecom in Romania.
Revenues
Revenues from domestic fixed-line telephony services, including
local and long-distance telephony services, accounted for 27.1%
of our total consolidated operating revenues in 2009 compared to
28.3% in 2008 and 32.0% in 2007. These services are provided by
us in Greece and by RomTelecom in Romania.
In 2009, 2008 and 2007, 43.9% 44.5% and 46.7% respectively, of
our revenues from domestic telephony services were derived from
local and long-distance call charges. These amounts include
charges to customers on outgoing calls to subscribers of
unaffiliated mobile telephony operators. We do not charge
interconnection fees for calls placed from our network to
subscribers of unaffiliated mobile operators.
An additional 52.2%, 50.2% and 48.9% of our domestic telephony
revenues in 2009, 2008 and 2007, respectively, were derived from
monthly network service fees; while the remaining 3.9%, 5.3% and
4.5% of our domestic telephony revenues in 2009, 2008 and 2007,
respectively, related to other domestic telephony charges such
as operator assistance, extension lines, directory and various
other services.
Volume
and Traffic
The following table provides information regarding our total
domestic fixed-line traffic volume in Greece as of
December 31, 2007, 2008 and 2009:
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As of December 31,
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2007
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%
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2008
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%
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2009
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%
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|
(Minutes in billions, except for percentages)
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Outgoing calls
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Local calls
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14.8
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45.8
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%
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11.6
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44.1
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%
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|
9.3
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|
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40.9
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%
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National Long-distance calls
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1.8
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5.6
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%
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1.9
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7.2
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%
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1.9
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8.5
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%
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Calls to internet service providers
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4.6
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14.2
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%
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2.4
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9.1
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%
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1.2
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5.3
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%
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Fixed-to-Mobile
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1.8
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5.6
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%
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1.7
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6.5
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%
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1.6
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7.0
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%
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Calls from OTE to other fixed networks
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1.3
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4.0
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%
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1.7
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6.5
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%
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2.1
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9.4
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%
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Special Calls
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0.2
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0.6
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%
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0.2
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0.8
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%
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0.1
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0.4
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%
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Incoming calls
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Calls to OTE from Fixed & Mobile operators
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7.8
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24.2
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%
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6.8
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25.8
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%
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6.5
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|
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28.5
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%
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|
|
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Total
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32.3
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100.0
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%
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26.3
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100.0
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%
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22.7
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|
100
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%
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Tariffs
Our revenues from domestic fixed-line voice telephony services
are derived mainly from local and
long-distance
call charges and monthly network service fees.
36
Local calls.
Our tariff policy for local calls
is based on per second billing, which applies after the first
two minutes, and a minimum charge for each call. In addition, we
apply four distinct charging periods (peak, off-peak, Saturday
and Sunday).
The following table sets out the development of our domestic
local telephony tariff structure (excluding VAT) in 2007, 2008
and 2009:
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2007
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2008
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2009
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(Euro)
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Connection Charges
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29.34
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29.34
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29.34
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Monthly rental charges
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12.40
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12.40
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12.40
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Pulse charging (for the first 2 minutes)
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0.026
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|
0.026
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0.026
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(Eurocents
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)
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Charge per second (after the first 2 minutes)
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Weekdays peak
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0.043333
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0.043333
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0.043333
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Saturdays/weekdays off-peak
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0.041667
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0.041667
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0.041667
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|
Sundays
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0.040000
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0.040000
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0.040000
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Long-distance calls.
Long-distance calls are
those for which the nodal exchanges of the calling and receiving
parties are located in different prefectures in Greece and the
distance between the exchanges is more than 45 kilometers.
Except with respect to our flat-rate packages, our tariff policy
for long-distance calls is generally based on per second billing
with a minimum charge for each call. In addition, we apply four
distinct charging periods (peak, off-peak, Saturday and Sunday).
Per second billing applies after the first 25 and 28 seconds of
each call during peak and off-peak/Saturday hours, respectively.
On Sundays we apply local call charging.
The following table shows our current domestic long-distance
telephony tariff structure:
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(Euro)
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Minimum charge per
call
(1)
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First 25 seconds (weekdays peak hours)
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0.026
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First 28 seconds (weekdays off-peak and Saturdays)
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0.026
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(Eurocents per second)
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Charge per second
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Weekdays peak (after first 25 seconds)
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0.103
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Weekdays off-peak and Saturdays
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0.092
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Note:
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(1)
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On Sundays local call tariffs apply.
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Domestic
fixed-to-mobile
calls.
The following table shows the development
of the tariff structure, excluding VAT, for calls made by our
fixed-line customers to customers of the domestic mobile
operators in 2007, 2008 and 2009:
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Jan. 1,
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June 1,
2007
(2)
to
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Feb.
1
(3)
2008
to
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2009
(4)
to
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|
June 16,
2009
(5)
to
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Jan.
1
(1)
to
May 31,
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Jan. 31,
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Dec. 31,
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June 15,
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Dec. 31,
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Mobile Operator
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2007
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2008
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2008
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2009
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2009
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|
(Euro per minute)
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|
Cosmote
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0.150
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|
0.1393
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|
0.1315
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|
0.1113
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|
|
0.1127
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|
Vodafone
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|
|
0.150
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|
|
|
0.1397
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|
|
|
0.1317
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|
|
|
0.1113
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|
|
|
0.1127
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|
Wind Hellas
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|
|
0.1585
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|
|
|
0.1497
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|
|
|
0.1367
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|
|
|
0.1113
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|
|
|
0.1127
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|
Q-Telecom
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|
|
0.1585
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|
|
|
0.1497
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|
|
|
0.1367
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|
|
|
0.1113
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|
|
|
0.1127
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|
Notes:
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(1)
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|
As of January 1, 2007, we
apply per second charging without a minimum call duration of 30
seconds, which has resulted in an increase in our retention fee
from Euro 0.030 to Euro 0.0326 per minute. Moreover, termination
fees of mobile operators were further reduced.
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37
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(2)
|
|
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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|
(3)
|
|
Charging per second still applies,
and the retention fee remains unchanged. New prices were
introduced due to reductions in the termination fee of mobile
operators as of February 1, 2008.
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|
(4)
|
|
Charging per second still applies,
and the retention fee increased from Euro 0.0326 to Euro 0.0327
per minute, while the termination fee for all mobile operators
was reduced to Euro 0.0786 per minute. New prices were
introduced as of January 1, 2009.
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(5)
|
|
Charging per second still applies,
and the termination fee remains unchanged. New prices were
introduced due to the increase in the retention fee from Euro
0.0327 to Euro 0.0341 per minute.
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Since 2004, pursuant to guidance issued by the EETT, we have
gradually reduced our retention fee for
fixed-to-mobile
calls from Euro 0.04 per minute to Euro 0.034 per
minute (as of June 16, 2009). Charging per second still
applies. Following further reductions in the fees of mobile
operators, domestic
fixed-to-mobile
calls to all domestic mobile operators are charged at
Euro 0.0965 per minute (as of January 1, 2010).
Telephony offers (packages).
We offer to our
residential and SOHO-small business customers a range of
fixed-line telephony packages, including:
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|
packages offering unlimited nationwide free calls (OTE
Unlimited);
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|
|
discounted packages (OTE Discount Programs);
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|
|
packages offering prepaid minutes of calling time (OTE Flat
Rates) to nationwide and
fixed-to-mobile
calls; and
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|
packages of bundled offerings, including monthly line rental
fee, ADSL, internet connection, nationwide and
fixed-to-mobile
calls.
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OTE Unlimited OTE Discount Programs and OTE Flat Rate Programs
are offered for an additional monthly fee in addition to our
monthly line rental charges. On the other hand, our bundled
packages are offered for an aggregate monthly fee which includes
both the monthly line rental charge and fees for other services
included in the bundle (ADSL, internet connection and call time).
As of June 9, 2008, we offer three unlimited national
telephony packages (initially under the brand name OTE
Talk):
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OTE unlimited anytime: nationwide calls on fixed-line networks;
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|
OTE unlimited evenings and weekends: nationwide calls during
evenings and weekends on fixed-line networks; and
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|
OTE unlimited 1-2-3 favorite numbers: nationwide calls to 1, 2
and 3 numbers on our network.
|
For ADSL customers, we offer the above programs at a discounted
monthly fee under the brandname Conn-x Talk.
As of July 15 2009, we upgraded OTE Talk and
Conn-x Talk: 60 free minutes per month for
fixed-to-mobile
calls were added at no additional charge for existing and new
residential customers who have OTE Talk or Conn-x Talk programs,
under the condition that they sign a
6-month
contract. At the same time we launched a new unlimited package
called OTE Unlimited International offering
unlimited calls to fixed-line numbers in 46 countries.
We also offer packages with prepaid minutes for
fixed-to-mobile
calls (of 30, 60, 120, 240 and 480 minutes). These packages have
been offered at a reduced price since January 2010, due to
national tariff reductions in prices for
fixed-to-mobile
calls.
Also, in collaboration with Cosmote we offer a discount program
called OTE all in 1 for customers with an OTE
fixed-line, an OTE DSL line and a Cosmote mobile contract. This
program offers a 15% discount to the mobile contract and the
customer receives one monthly bill from us for all three
services.
38
Our Business Call and Business Call Premium discount packages
are available to our business customers and provide discounts of
up to 24% for local calls, up to 30% for long-distance calls and
up to 35% and 18% for international calls for Business Call and
Business Call Premium, respectively.
Since September 2009, we offer OTE Business packages
(voice packages for SMEs), with different bundles of voice
minutes (national and
fixed-to-mobile)
and ADSL products (Conn-x and Conn-x @work), allowing customers
to choose from 11 different packages including value options, to
bundle from 2 to 8 PSTN or ISDN BRA lines, to share monthly call
minutes over the lines of the bundle and to receive one customer
bill for all lines in the bundle.
On July 29, 2009, we launched two new programs for
residential customers for a monthly fee that are bundled with
the OTE monthly line rental charge: Nationwide 180 offers
180 minutes on net and off net nationwide calls and Nationwide +
Mobile 300 offers 180 minutes on net and off net
nationwide calls and 50 minutes of
fixed-to-mobile
calls to all national mobile operators.
As of October 7, 2009, we introduced a double play package
for residential customers under the name DP8 that
includes Conn-x and Voice. This program offers unlimited local
and long-distance telephony inside and outside our network,
bundled with the monthly line rental fee and ADSL internet
connection at 8 Mbps.
As of February 17, 2010, we introduced a new program which
offers residential customers, 250 minutes of national telephony
within and outside our network and 50 minutes of
fixed-to-mobile
to all national mobile operators, bundled together with the
monthly line rental fee and unlimited broadband connection at
8 Mbps.
International
Fixed-line Telephony
We offer our customers international calling services on our
fixed-line transmission network.
Revenues
Revenues from international fixed-line telephony services,
accounted for 4.2% of our total consolidated operating revenues
in 2009, compared to 4.5% in 2008 and 4.8% in 2007. These
services are provided by us in Greece and by RomTelecom in
Romania.
In 2009, from our total revenues from international fixed-line
telephony services, 33.8% was derived from outgoing
international traffic, 45.1% from dues from international
operators for incoming and transit traffic and 21.1% from
payments from unaffiliated mobile operators and alternative
carriers.
We are party to bilateral settlement agreements with other
international telecommunications operators. These agreements
govern payments among telecommunications operators for settling
incoming and transit traffic. Thus, revenues from international
calls include payments from customers in Greece and from other
telecommunications operators for incoming and transit traffic.
Volume
and Traffic
International telecommunications traffic in Greece experiences
seasonal fluctuations in demand, with peak outgoing traffic
occurring in the summer and incoming traffic peaking during
September and October.
39
The following table sets out international traffic volume data,
including outgoing calls originated by OTE retail, mobile
networks and alternative fixed-line telephony operators in
Greece, for the three years ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2007
|
|
2008
|
|
2009
|
|
|
(Minutes in millions,
|
|
|
except for percentages)
|
|
Outgoing calls
|
|
|
|
|
|
|
|
|
|
|
|
|
OTE
|
|
|
506.3
|
|
|
|
361.5
|
|
|
|
332.0
|
|
Other
|
|
|
417.6
|
|
|
|
536.6
|
|
|
|
537.4
|
|
Total outgoing traffic
|
|
|
923.9
|
|
|
|
898.1
|
|
|
|
869.4
|
|
Growth (% per year)
|
|
|
11.6
|
|
|
|
(2.8
|
)
|
|
|
(3.2
|
)
|
Incoming calls
|
|
|
|
|
|
|
|
|
|
|
|
|
OTE
|
|
|
514.5
|
|
|
|
551.8
|
|
|
|
639.2
|
|
Other
|
|
|
303.8
|
|
|
|
346.0
|
|
|
|
420.3
|
|
Total incoming traffic
|
|
|
818.3
|
|
|
|
897.8
|
|
|
|
1,059.5
|
|
Growth (% per year)
|
|
|
(2.7
|
)
|
|
|
9.7
|
|
|
|
18.0
|
|
Tariffs
Our charging policy for international calls is based on nine
charging zones. The first zone comprises calls to Albania, the
most popular destination for outgoing international traffic, for
which we charge Euro 0.21 per minute for calls to fixed
lines and Euro 0.25 per minute for calls to mobile lines;
the second zone comprises calls to EU countries, for which we
charge Euro 0.21 per minute for calls to fixed lines and
Euro 0.28 per minute for calls for mobile lines. For all
other zones the same tariffs apply for calls to both fixed and
mobile, ranging from Euro 0.25 per minute for the cheapest
zone, to Euro 4.00 per minute for the most expensive zone.
We also offer special discount packages with reductions of up to
50% on international call rates, depending on the destination
country, the time of the call and international traffic volume.
In addition, we offer a new unlimited package called OTE
Unlimited International which offers unlimited calls to
fixed numbers in 46 countries.
Internet
Protocol (IP) and Internet Access Services
We offer broadband (ADSL) and
dial-up
internet access and
IP-related
services to residential customers, mainly under our Conn-x
products, as well as ADSL and
IP-based
connectivity and hosting services (for example
IP-VPN)
to
corporate and business customers.
We own and operate an extensive broadband/ADSL network across
Greece. As of December 31, 2009, we expanded our ADSL
infrastructure to 1,501 points of presence. We expect to expand
our coverage further in line with demand. As broadband access is
generally fast enough to support new applications, such as high
quality video, we expect that broadband customers will use the
internet more frequently and for longer periods of time than
narrowband
(dial-up)
users. We have already launched new products, based on ADSL
access, such as content portals, or IPVPNs over ADSL. We
continue to introduce new broadband products to improve our
ADSL-based portfolio.
Historically, IP services were provided primarily by our
subsidiary, OTENet which began commercial operations in 1997 and
was the leading internet and IP services provider in Greece. On
December 27, 2007 we acquired the entire share capital of
OTENet by purchasing the non-controlling interests of an
aggregate of 5.41% and on June 27, 2008, we merged with
OTENet, following which its business and employees were
integrated with those of ours.
Market
Position and Competition
The development of the Greek ADSL market overall has depended on
pricing of retail ADSL offers and the development of the
wholesale ADSL market and the market for local loop unbundling.
The market has grown
40
significantly over recent years and continues to grow. According
to the EETT, as of December 31, 2009, there were 1,916,630
broadband lines in Greece, 99.6% of these were ADSL lines,
representing an increase of 27%, as compared to 1,506,614 ADSL
lines as of December 31, 2008. Despite, however, its strong
growth in recent years, as of December 31, 2009, ADSL had
reached a penetration rate of just 17.02% of the Greek
population, which is relatively low compared to other EU
countries. We believe that this supports expectations for
further growth of the ADSL market in the future. Such growth
may, however, be negatively affected by adverse macroeconomic
conditions.
Our competitors in the Greek internet market have invested and
continue to invest in infrastructure, not only in the major
urban centers, but throughout Greece, and, accordingly, we
expect competition to continue to intensify. Our main
competitors include a number of fixed-line operators, as well as
mobile operators, such as Forthnet, Hellas OnLine, Vodafone,
Tellas Wind, Cyta, OnTelecoms, Vivodi and others, most of which
offer a range of voice, broadband and double-play (voice and
internet) products, either through unbundled local loops, or
using our network, while the synergy of fixed and mobile
operators has resulted in offerings of fixed-line or hybrid
products in the Greek market.
Market growth has been primarily driven by price reductions and
special offers by providers, as well as speed upgrades and
offers of double-play services (voice and internet). An increase
in marketing activity and the Information Society subsidy
project in regions outside Attica have also affected market
growth. Most of our competitors in the Greek ADSL market offer
their services at competitive prices, which are, in many cases,
much lower than ours, as they are not subject to the same
regulatory constraints and pressures with respect to the
requirements for cost-orientation of their tariffs, while their
ability to lower their tariffs improves, as they continue to
develop their own networks and reduce their dependence on our
network for the provision of ADSL services, and therefore reduce
their costs for providing these services.
Despite increasing competition in the Greek ADSL market in 2009
and 2008, we remain the leading provider in the Greek ADSL
market and have increased our customer base to 1,060,064 retail
customers as of December 31, 2009, as compared to 864,021
retail customers as of December 31, 2008.
Residential
Customers
Products and Services.
Conn-x is our main
broadband product in the Greek market. Conn-x was first offered
in 2004, as the first all-inclusive broadband solution in the
Greek market, offering access, internet feed and equipment and,
since then, has developed into the leading brand for broadband
internet in Greece, helping to increase broadband penetration.
We continue to develop our broadband products, offering a number
of different packages of Conn-x for residential and business
customers based on ADSL access.
The OTENet portal, located at
http://www.otenet.gr,
maintained its position among Greeces top ten information
portals in 2009. Its
e-mail
newsletter was widely distributed in Greece with more than one
million recipients. In 2009, we redesigned the otenet.gr
homepage, sports section and newsletter and enhanced its content
by adding new sections, including maps and shopping.
Tariffs.
We form our pricing policies by
considering market demand, competition and our own investment
plans and profitability levels, with a view to addressing
various different target groups, aiming to further increase
profitability, while complying with applicable regulatory
requirements.
As of February 1, 2007, we reduced our tariffs for retail
ADSL access services by approximately 7% for the basic and
medium speed packages and by 5% for the high-speed package and
as of May 16, 2007, we introduced two new speed packages
for retail ADSL access, each offering nominal download speed of
4 Mbps and 8 Mbps. At the same time, we further
reduced by 0.7% our tariff for the basic speed package, by 5.4%
for the medium speed package and by 25.6% for the high-speed
package.
As of December 17, 2007, we introduced an additional
package for retail customers, offering nominal download speed of
up to 24 Mbps. The new package is available in Athens,
Thessaloniki and major cities in Greece. Moreover, we upgraded,
free of charge, all our customers with 768/192 Kbps connections
to 1024/256 Kbps. As of the same date, we further reduced prices
of the existing ADSL packages starting from 19.2% for the basic
speed package, and up to 61.2% for the 8 Mbps package, for
our retail customers.
41
On May 12, 2009, we upgraded our ADSL access speeds
throughout Greece, without any additional costs. All 1 Mbps
connections were upgraded to 2 Mbps, and 4 Mbps
connections to 8 Mbps. As of the same date, we further
reduced prices of the existing ADSL packages, by 15.4%, 16.4%
and 6.7% for 2 Mbps, 8 Mbps and 24 Mbps
respectively.
On April 12, 2010, we initiated a further automatic upgrade
of 8 Mbps connections to up to 24 Mbps and
simultaneously reduced the up to 24 Mbps
package price by 2.9%.
The following table sets out our tariffs for retail ADSL access
services since 2007 through to the date of this Annual Report:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADSL Price Evolution
(Conn-x)
(1)
|
Date
|
|
1 Mbps
|
|
2 Mbps
|
|
4 Mbps
|
|
8 Mbps
|
|
Up to 24 Mbps
|
|
|
(Euro)
|
|
December 31, 2007
|
|
|
16.50
|
|
|
|
19.50
|
|
|
|
22.50
|
|
|
|
26.90
|
|
|
|
29.90
|
|
December 31, 2008
|
|
|
16.50
|
|
|
|
19.50
|
|
|
|
22.50
|
|
|
|
26.90
|
|
|
|
29.90
|
|
December 31, 2009 until March 15, 2010
|
|
|
|
|
|
|
16.50
|
|
|
|
|
|
|
|
22.50
|
|
|
|
27.90
|
|
From March 16, 2010 and as of May 14, 2010
|
|
|
|
|
|
|
16.78
|
|
|
|
|
|
|
|
|
|
|
|
22.88
|
|
Note:
|
|
|
(1)
|
|
All prices shown above include VAT.
Monthly rental of PSTN (Euro 14.8) or ISDN (Euro 18.9) lines is
not included. On March 15, 2010, VAT in Greece increased
from 19.0% to 21.0%.
|
We also charge an optional installation fee of Euro 44.99
for modem and Set Top Box installation by our retail ADSL
technicians, at the customers request.
IPTV
Conn-x TV
Since February 2009, we offer Conn-x TV, our IPTV service, which
is now available as an add-on service to all users of Conn-x
connections of 2 Mbps, 8 Mbps or 24 Mbps in
62 cities in Greece. Conn-x TV offers a linear program (47
broadcast channels), as well as Video on Demand services (on a
pay-per-view
and subscription basis). We had initially soft-launched the
service in October 2008 to 1,500 users in five major cities of
Greece (Athens, Thessaloniki, Patras, Heraklion and Larissa). As
at December 31, 2009, we had a total of 16,075 active
Conn-x TV subscribers.
The main goals of the service are to retain customers and ISDN
and PSTN connections, to increase the share of ADSL subscribers,
as well as to increase revenues per customer. We intend to
further develop and enhance the services of Conn-x TV during
2010, including a pilot launch of our new satellite
Pay-TV
(DTH)
service offering the same content as Conn-x TV. Tariffs for IPTV
services are not subject to regulation, as is the case for
tariffs for telecommunications services.
Content.
We have already secured and offer a
broad range of content, including various national and
international channels, including Disney, Fox, the Discovery
Channel, the History Channel, and sports content, including
rights to the German and Spanish football championship, and
Video on Demand services.
Competition.
A number of our competitors in
the Greek fixed-line market already offer IPTV services through
their networks, including Hellas OnLine and OnTelecom, while
Forthnet, though it does not currently offer IPTV services, is
the sole shareholder of NetMed, the operator of Nova, currently
the only active satellite
Pay-TV
(DTH)
service in Greece.
Enterprise
and Business Customers
Our product portfolio for enterprise and business customers
includes broadband and internet access services (ADSL, Conn-x
@Work, Dedicated Internet Access, corporate mail), internet
presence (domain names, web hosting packages and services), data
center services (physical collocation), and connectivity
services
(IP-VPN,
Ethernet).
42
IP-VPN
Services.
We currently offer
IP-VPN
(IP-based
virtual private networks) services over a variety of access
technologies. Customers may connect to a number of different
sites, or be connected with their partners via permanent
connections (leased lines) at varying speeds of up to
34 Mbps and via telephony (PSTN/ISDN) and ADSL networks at
speeds of up to 24 Mbps. Different classes of service
(Premium, Gold and Silver) are also supported by our leased
lines
IP-VPN
services. In 2009, we enhanced our
IP-VPN
service with new access types: Ethernet, SHDSL (plus supporting
class of service), LMDS, new value-added services and new
pricing schemes aligned with connectivity business strategy.
During 2009, we designed an integrated IT platform covering
order management, provisioning and billing for the whole
IP-VPN
product family. As of April 2009, we also launched a VoIP
service for
IP-VPN
customers.
In 2009, Conn-x @Work was upgraded at the speeds of 1 and
4 Mbps, while prices were reduced for speeds of
2 Mbps, 8 Mbps and 24 Mbps. In October 2009, we
introduced a Conn-x @Work
start-up
package which combines internet access and internet presence
services (web hosting and mail hosting) at a competitive price
which is targeted at SME customers.
In April 2009, we launched two OTE Business web portal packs,
the Corporate Site Packet and the
e-shop
Packet, both offering web presence competitive solutions,
targeting business and SME customers.
Dedicated Internet Access
(DIA).
We offer symmetrical access to
the internet via leased lines or Ethernet (optical access) at
speeds of up to 1 Gbps. In March 2009, we modified this service
and offered it as a bundle with the access line. We also offered
access over SHDSL and LMDS (wireless).
In 2009, new managed network services were developed for
IP-VPN
and
DIA and existing managed network services for ADSL access and
IP-VPN
were
enhanced to support new access types.
Competition.
We believe that we hold the
leading position in the Greek market for telecommunications and
integrated ICT services to corporate and business customers in
Greece. However, we are facing strong competition from both
fixed-line operators and IT system integrators, mainly in the
form of significant pricing pressures, and despite the fact that
we have been effectively defending our market share, we believe
that pricing pressures may adversely affect our revenues from
this market. In addition, we believe that the financial crisis
and deteriorating macroeconomic conditions in Greece should have
a negative impact on spending in these areas by businesses and
large corporate clients, while, with respect to the public
sector, we expect that restrictions in public spending as a
result of the fiscal crisis should have a negative impact on
spending in the broad public sector and especially in
significant growing areas of investment in ICT, including
e-health
and
e-government
projects.
Romania
RomTelecom
We hold a 54.01% interest in the share capital of RomTelecom,
the incumbent fixed-line telephony services provider in Romania.
Romania has a population of approximately 21.7 million and
fixed-line penetration is currently approximately 24.1%,
according to the National Authority for Management and
Regulation in Communication.
Business Overview.
As of December 31,
2009, RomTelecom had approximately 2,760,000 lines in service,
as compared to approximately 2,975,000 lines in service as of
December 31, 2008 and approximately 3,035,000 lines in
service on December 31, 2007. On December 31, 2009,
all of RomTelecoms lines were connected to digital
exchanges.
RomTelecom served 775,632 ADSL lines as at December 31,
2009, as compared to 650,669 as of December 31, 2008 and
359,303 as at December 31, 2007. As the local market for
broadband in Romania grows, a number of newly-introduced
applications, such as IPTV, are expected to require higher
capacity. RomTelecom is considering a number of options for
serving increasing broadband traffic, including VDSL and FTTH,
which it may deploy depending on demand. As of December 31,
2009, RomTelecom served 2,323 VDSL customers.
Since December 2006, RomTelecom offers a DTH (satellite TV)
service under the commercial name Dolce. The number
of customers of Dolce was 883,799 as at December 31, 2009.
43
A CDMA network based on a 410 MHz frequency network is
currently being rolled out; it was commercially launched in
April 2009. As of December 31, 2009, RomTelecom had 2,353
CDMA voice and 27,054 CDMA broadband customers despite the
economic downturn and competition from mobile operators.
RomTelecom invests in new technologies in order to remain
competitive, especially in view of intensifying competition as
local competitors expand, and increasing demand for bandwith. In
view of that, in cities where there is not yet a fiber and IP
infrastructure, RomTelecom tests FTTH solutions commercially,
with the goal of acquiring a critical mass of customers before
making a significant investment, whereas for cities where the
network is largely modernized, RomTelecom plans to deploy VSDL
solutions that will provide a relatively lower bandwidth than
FTTH, but of higher quality. A major driver for its broadband
roll-out is to establish a large platform for IPTV delivery.
Currently there are no significant providers of IPTV services in
the Romanian market and media content may be a significant
differentiating factor for growth in the market. There is
continuous competition to acquire content that could be the most
appealing to subscribers.
The following table shows RomTelecoms revenues, operating
income/(loss) and profit/(loss) for the three years ended
December 31, 2009, based on RomTelecoms financial
statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2007
|
|
2008
|
|
2009
|
|
|
(Euro in millions)
|
|
Revenues
|
|
|
872.4
|
|
|
|
870.4
|
|
|
|
807.7
|
|
Operating income/(loss)
|
|
|
7.0
|
|
|
|
(37.5
|
)
|
|
|
(15.3
|
)
|
Profit/(loss)
|
|
|
(23.2
|
)
|
|
|
(48.7
|
)
|
|
|
(34.6
|
)
|
Our share in RomTelecoms profit/(loss)
|
|
|
(12.5
|
)
|
|
|
(26.3
|
)
|
|
|
(18.7
|
)
|
The economic downturn resulted in a significant decline in voice
revenue for all segments and a decrease in volumes mainly
generated by business customers. The declining revenues from
fixed lines were partially offset by the increased revenue
resulting from an increase in the number of data and broadband
customers.
No dividend was declared or paid for the years 2007, 2008 and
2009.
Competition.
The Romanian fixed-line
telecommunications market is highly competitive, with high
penetration of mobile and high speed broadband and low tariffs.
Currently, the fixed-line market is affected by a number of
trends, including
fixed-to-mobile
substitution for voice and, to a certain extent, broadband,
which has a significant negative impact on RomTelecoms
number of fixed-line customer base, and alternative fixed
operators developing and running their own fixed-line networks.
In fixed-line broadband, voice and IPTV, the main competitors
are alternative operators, that started by providing CATV
services and evolved to providing broadband, including UPC and
RDS&RCS (owner of the brand Digi).
Regulatory matters and tariffs.
The provision
of certain telephony services in Romania, including voice
telephony, leased lines and telex and telegraphy services has
been liberalized since January 1, 2003 and is regulated by
the National Authority for Management and Regulation in
Communication
(ANCOM)
(formerly the National
Regulatory Authority for Communications).
In 1998, prior to the liberalization of the telecommunications
market in Romania, the Romanian government granted RomTelecom a
license for the provision of fixed-line telephony services for a
period of 15 years. The provisions of the 1998 license were
renewed in 2003 for a term of ten years.
In late May 2007, RomTelecom implemented a new tariff scheme for
residential customers to reduce the significant churn that
affected its customer base and to increase network usage. For
the first time, RomTelecom offered rental plans offering
unlimited
on-net
traffic and reduced the tariffs to certain international
destinations (EU fixed networks and North America) by 55% and
41% during peak and off-peak times, respectively. Moreover,
since September 2007, RomTelecom has offered its residential
customers a package including unlimited free calls to fixed
lines on all networks during off-peak times.
In 2008, ANCOM continued the market review process which began
in 2007 and was intended to adjust regulation to the changing
market environment. ANCOM has reviewed the interconnection
regime with the two largest operators of fixed-line telephone
networks, RomTelecom and RCS&RDS (the alternative
fixed-line operator
44
with significant regional presence mainly in TV, under the brand
Digi), and regulated the interconnection with 36 other
fixed-line operators.
Regarding RomTelecom, ANCOM maintained the obligations imposed
under the previous regulatory regime, including transparency,
non-discrimination, accounting separation, access to use of
specific elements of the network and the associated
infrastructure, as well as the cost-orientation. The maximum
average interconnection tariffs remained at 0.84
Eurocents/minute at local level, 0.97 Eurocents/minute at
regional level and
1.06 Eurocents/minute
at national level.
ANCOM also imposed the obligations of transparency,
non-discrimination, granting access and permission to use
specific elements of the network and the associated
infrastructure, as well as tariff control on the other
alternative operators of fixed-line telephone networks. ANCOM
set up a glide path for cutting the current interconnection
tariffs charged by the alternative operators down to the target
level, in two stages, 1.15 Eurocents/minute until June 30,
2009 reduced to 0.97 Eurocents/minute after this date.
In 2009, ANCOM issued decisions regarding the markets for mobile
termination rates, in which it imposed additional obligations of
transparency and non-discrimination through the publication of
reference interconnection offers, as well as the
cost-orientation obligation on all five mobile operators. Thus,
the maximum tariffs for call termination on the networks of
Cosmote and Zapp will decrease in three stages, according to the
15-month
glide path, until they are in line with the tariffs of Orange
and Vodafone of 5.03 Eurocents/minute, as of July 1, 2010.
Since it is a new entrant in the mobile telephony market,
RCS&RDS will be granted a longer glide path ending with a
tariff of 5.67 Eurocents/minute, as of July 1, 2010.
In September 2008, ANCOM designated RomTelecom as the winner of
a tender for the new wireless communications license in the
410-415/420-425 MHz frequency bands. The license was
granted for a period of 10 years and enables RomTelecom to
build, maintain and operate a mobile network for providing voice
and data services. The first assessment of the geographic
coverage assumed by RomTelecom will be undertaken by ANCOM on
December 31, 2010 and the remaining two roll-out phases
will take place on June 30, 2012 and December 31, 2013.
During 2009, ANCOM finalized the harmonization of numbering
resources used at European level for Directory Enquiry services
(118 xxx) and social services (116 xxx). After the
allocation of the new numbering range, RomTelecoms right
to use its traditional short number for Directory Enquiry
services ceased.
Background to the investment.
In 1998, we made
an initial investment through our wholly-owned subsidiary, OTE
International Investments, of U.S. $675 million to
acquire 35.0% of the share capital of RomTelecom. In March 2003,
by means of the recapitalization of outstanding debt and
management fees due to us and a contribution of cash, we
increased our interest in RomTelecoms share capital to our
current 54.01%. The balance of the share capital of RomTelecom
is held substantially by the Romanian government.
In addition, in 2005, Cosmote contributed
Euro 120 million in cash to Cosmote Romania as
consideration for a 70.0% equity interest in its share capital,
with RomTelecom retaining a 30.0% interest in Cosmote Romania.
The Ministry of Communications and Information Technology of
Romania
(MCIT)
is entitled to appoint one of
the two board members that RomTelecom may appoint to Cosmote
Romanias board of directors. In December 2005, Cosmote
Romania re-launched its commercial activities under the Cosmote
brand name, and the term of its license was extended. See
Mobile Telephony Services
International Mobile Operations Cosmote
Romania below. Following a share capital increase in March
2008 through the issuance of 46,312,500 new shares of nominal
value of 10 RON each, Cosmote and RomTelecom contributed
Euro 87.5 million and Euro 37.5 million
respectively to the share capital of Cosmote Romania, see
Mobile Telephony Services
International Mobile Operations Cosmote
Romania.
Serbia
Telekom Srbija
We hold a 20.0% interest in the share capital of Telekom Srbija,
the incumbent telecommunications operator in Serbia which until
June 9, 2005 had a national monopoly in the provision of
fixed-line telephony services. Telekom Srbija also provides
mobile telecommunications services, as well as internet and IPTV
services. We acquired our interest in Telekom Srbija in June
1997 for U.S. $287.0 million. The remaining 80.0%
interest of Telekom Srbijas share capital is held by PTT,
a Serbian state-owned company, following its repurchase of a
29.0% interest from
45
Telecom Italia. We present our investment in Telekom Srbija in
our financial statements at its written-down value and have
accounted for it under the cost method since July 1, 2003
because we have determined that we do not exercise significant
influence over Telekom Srbija. In the years 2007, 2008 and 2009,
we reassessed our position regarding our investment in Telekom
Srbija, after taking into account the 80.0% ownership interest
held by the Serbian government. Furthermore, since Telekom
Srbijas shares are not publicly traded and we do not have
access to timely updated financial information required for a
reliable measurement of our investment in Telekom Srbija, such
investment is carried at cost, since we do not exercise
significant influence.
Telekom Srbija also provides fixed-line and mobile telephony
services in the Republic of Srpska in Bosnia and Herzegovina
through Telekom Srpske. Telekom Srbija holds a 65.0% interest in
Telekom Srpske, while the minority is held by a state-owned
pension fund (10.0%) and other shareholders. Telekom Srbija
acquired its interest in Telekom Srpske on June 18, 2007,
following an international tender, for the price of
Euro 646.0 million. On April 4, 2007, Telekom
Srbija was awarded a mobile license and a Wimax license in
Montenegro, following which it established its subsidiary Mtel,
Podgorica Montenegro, in which Telekom Srbija holds a 51.0%
interest and Telekom Srpske holds a 49.0% interest (which it
acquired in February 2010).
Business overview.
As of December 31,
2009, Telekom Srbija as a group had a total of approximately
3.4 million access lines in service and 7.7 million
mobile customers.
As of December 31, 2009, Telekom Srbija had
3.0 million access lines in service, approximately 97.0% of
which were connected to digital exchanges, and 5.9 million
mobile customers, approximately 77.0% of which were prepaid. On
the same date, Telekom Srbija had reached 89.0% in mobile
telephony coverage of Serbias population (including the
region of Kosovo).
As of December 31, 2009, Telekom Srpske, which provides
both fixed-line and mobile telephony services as well as
internet and IPTV services in Bosnia and Herzegovina had
approximately 0.4 million access lines in service,
approximately 99.0% of which were connected to digital
exchanges, and 1.2 million mobile customers, approximately
87.0% of which were prepaid. As of December 31, 2009,
Telekom Srpske had reached 99.0% in mobile telephony coverage of
the population of Republika Srpska.
As of December 31, 2009, Mtel, which provides primarily
mobile telephony services in Montenegro, had approximately
0.6 million mobile customers, approximately 92.0% of which
were prepaid.
In February 2010, Telekom Srbija formed a new subsidiary to
engage in telecommunication equipment leasing activities and to
construct and exploit the international transport network of
Telekom Srbija. In addition, in December 2008, Telekom Srbija
founded a new subsidiary, FiberNet, to engage in installation,
utilization and maintenance of the optical and power cable along
the railway Bar-Vrbnica in Montenegro, in a joint venture with
the Railways of Montenegro.
Competition.
In January 2010, Telenor was
granted the only other license for the public telecommunications
networks and services for the territory of the Republic of
Serbia. The license is valid for a period of ten years, while
the provision of commercial services is required to commence
within one year from the license issue date. The license
issuance fee was Euro 1.05 million. Despite the
introduction of a new fixed-line operator, Telekom Srbija still
has no obligation under the current Law on Telecommunications to
offer local loop unbundling services.
Regulatory matters.
Since the expiration of
its monopoly in June 2005, Telekom Srbija has been designated as
an operator with significant market power and holds two
non-exclusive licenses to provide a range of fixed-line
telecommunications and related services for a term of
10 years (with a possibility of extension), and mobile
telecommunications services. In accordance with the Serbian Law
on Telecommunications, on June 1, 2006, Telekom Srbija
submitted a request to the Republic Agency for
Telecommunications
(RATEL)
to replace its
license for fixed-line telephony services of 1997. On
April 13, 2007, RATEL issued a new license to replace the
previous one. This license is due to expire in June 2017. On
March 16, 2007, RATEL issued a permit for the provision of
Internet services and on March 11, 2008, issued a permit
for IPTV services. Both permits are valid for five years. In
June 2009, Telekom Srbija was awarded one of two licenses issued
for fixed wireless access to the public telecommunication
networks and services
(CDMA)
. The license is
valid for a
10-year
period and provision of commercial services commenced within six
months from the license issue date.
46
On March 26, 2009, the Communications Regulatory Agency of
Bosnia and Herzegovina issued a license to Telekom Srpske for
the provision of mobile services in 3G services for a
15-year
period commencing on April 1, 2009.
MOBILE
TELEPHONY SERVICES
Through our subsidiaries, we provide mobile telephony services
to customers in Greece (through Cosmote), as well as in Albania
(through AMC), Bulgaria (through Globul), Romania (through
Cosmote Romania and, since November 1, 2009, Zapp) and,
until May 2009, FYROM (through Cosmofon). See
International Mobile Operations. As is
the case for our fixed-line telecommunications services, Greece
represents the most important market for our mobile operations.
In 2009, Cosmotes consolidated revenues and net income
(including those of its international mobile services
subsidiaries) were Euro 3,035.9 million and
Euro 377.7 million, respectively, compared to
Euro 3,261.7 million and Euro 470.6 million,
respectively, in 2008.
Although the products available to our mobile customers vary
from country to country, the following are the principal
services and products provided:
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Wireless voice telephony:
We offer a full
range of wireless services with a variety of payment plans and
packages, including payment on a contract and prepaid basis.
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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.
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Wireless data transmission:
We offer our
customers the ability to use handsets for data transmission,
including for SMS and MMS, which allow customers to send
messages with images, photographs and sound. Subscribers may
also receive selected information, such as news, sports, scores
and stock quotes. We also provide wireless connectivity for
devices such as laptops and Personal Digital Assistants
(PDAs)
. Cosmote offers 3G services, video
streaming and HSPA technology in Greece, Bulgaria and Romania.
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Wireless internet access:
This enables retail
and corporate customers to send and receive emails, browse web
pages, purchase goods and services in
e-commerce
transactions and use other data services. Cosmote was the first
company in Greece to launch high-speed mobile broadband services
and has continued to expand and upgrade the availability of
wireless internet services throughout the country, utilizing its
3G coverage. In 2009, the deployment of HSPA and HSPA+
technologies permitted higher download speeds of up to
21.6 Mbps.
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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.
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International roaming:
Wireless customers
traveling abroad are able to make and receive calls while in the
coverage area of a foreign operators mobile network and to
be billed for this service by their home network operator.
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Other value-added wireless services:
Cosmote
offers
Blackberry
®
email solutions to its corporate and individual customers in
Greece. We also offer vehicle fleet management services to
customers in Greece and abroad in cooperation with Spacenet. In
addition, we offer several other value-added services, including
ring tones and mobile portal.
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Greece
Cosmote
Cosmote was established in 1996 and began commercial operations
in April 1998. It is one of the three holders of 2G and 3G
mobile telephony licenses and operators of mobile networks in
Greece (the other two being Vodafone
47
and Wind Hellas). In particular, it provides 2G mobile
telecommunications services on the 1800 MHz and GSM 900
frequency bands, and 3G services over the segments of
2x15 MHz (paired) and 2x5 MHz (unpaired) on the
2.100 MHz band (see Licenses). As
of December 31, 2009, Cosmote had 9,217,507 active
customers (defined as active for 12 months) in Greece,
representing an estimated market share of approximately 45% of
the total number of contract and prepaid mobile telephony
customers in Greece (based on internal estimates) (see
Market Position and Competition).
Cosmote owns and operates our mobile operations in Albania,
Bulgaria and Romania through its international subsidiaries AMC,
Globul and Cosmote Romania and Zapp, respectively, and in FYROM
through Cosmofon until May 2009. For a discussion of our mobile
telephony operations outside of Greece, see
International Mobile Operations.
Cosmotes registered office is located at 44, Kifissias
Avenue, Amaroussion, Athens, GR 15125 Greece.
Prior to 2008, Cosmote was listed on the Athens Exchange and we
held the majority of its share capital (67.83%). In November
2007, we announced an all-cash voluntary public tender offer to
acquire all of the shares of Cosmote that were not already owned
by us and, as a result of the public tender offer and additional
market purchases, as of February 6, 2008, we owned,
directly or indirectly 98.59% of its share capital and voting
rights. Subsequently, we exercised squeeze-out rights and
acquired the remaining shares at the tender offer price,
whereupon Cosmotes shares ceased trading on, and de-listed
from, the Athens Exchange. The total cost of our acquisition of
the remaining 32.17% interest in Cosmotes share capital
was Euro 2.9 billion. We financed this acquisition
partly through our own funds (Euro 0.8 billion) and partly
through funds (Euro 2.1 billion) drawn under a short-term
bridge facility which was subsequently refinanced by a
Euro 2.1 billion bond issue under OTE plcs
Global Medium Term Note Program. See 5.B Liquidity and
Capital Resources.
Cosmote operates as a stand-alone company, with its own
administrative, financial, marketing, billing and collection
systems separate from ours. We cooperate with Cosmote in certain
areas and provide each other with certain services on an
arms length basis. In addition, we provide Cosmote with a
limited number of our personnel, as well as distribution and
maintenance services for Cosmotes products and network,
also on an arms length basis, and Cosmote leases certain
transmission capacity from us. We also own and lease to Cosmote
a large number of the base station sites that Cosmote requires
for its network.
As of December 31, 2009, Cosmotes share capital was
Euro 157,899,931, divided into 335,957,300 ordinary shares,
each with a nominal value of Euro 0.47. The general
shareholders meeting of Cosmote, which was held on
June 23, 2009, approved a dividend distribution of
Euro 0.84 per share for the fiscal year 2008.
Licenses
Cosmote provides mobile telecommunications services in Greece on
the 1800 MHz and GSM 900 frequency bands, according to the
terms of its 2G licenses. Cosmotes 2G license for the GSM
1800 frequency band has a term of 25 years, expiring on
December 4, 2020, while its 2G license for GSM 900
frequency band has a term of 15 years, expiring on
September 8, 2017. Cosmotes current overall GSM
spectrum entitlement for 2G services in Greece includes
2x30 MHz, while Vodafone is entitled to 2x30 MHz, and
Wind Hellas is entitled to 2x25 MHz. In addition, there is
an unallocated spectrum segment of 2x20 MHz on the
1800 MHz frequency band.
Since 2001, Cosmote holds one of the three 3G licenses (the
other two being held by Vodafone and Wind Hellas) in respect of
segments of 2x15 MHz (paired) and 2x5 MHz (unpaired).
Cosmotes 3G license has a term of 20 years expiring
on August 5, 2021. Cosmote commercially launched its 3G
services in May 2004.
Cosmote also holds a fixed-wireless access license on the 25GHz
frequency band, which is due to expire on December 10, 2015.
These licenses can be renewed by resolution of the EETT,
pursuant to the legislation in effect at the time of renewal.
48
Strategy
Cosmotes principal strategic objective remains to improve
its financial performance and to further enhance shareholder
value. Cosmote remains focused on the following strategic
priorities:
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to further exploit its telecommunications and distribution
network in Greece and abroad;
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to benefit from the synergies with the Group by focusing on
distribution and products in Greece and Romania;
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to increase revenues from data and value-added services in
Greece, Bulgaria and Romania;
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to focus on providing improved customer experience through all
customer facing channels (sales networks and customer service);
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to further exploit market dynamics and develop new revenue
streams in the Southeastern European markets; and
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to maximize profitability and free cash flow generation on group
level through economies of scale and capital expenditure savings.
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Cosmotes strategic objectives in the various markets in
which it operates are as follows:
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in Greece: to maintain its leading position in the market and
enhance profitability through increased usage, customer growth,
promotion of new services and focused commercial policies;
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in Albania, through AMC: to maintain its leading position in the
market to increase its post-paid customer base and limit the
impact of increased regulation and competition, while
maintaining high profitability.
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in Bulgaria, through Globul: to improve the companys
competitive position in the market and enhance cash
generation; and
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in Romania, through Cosmote Romania: to continue increasing its
market share and operating profitability utilizing its mobile
broadband infrastructure through the acquisition of Zapp.
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Products
and Services
Cosmote offers its contract and prepaid customers in Greece a
range of 2G and 3G mobile telephony services including:
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standard voice services and voice call services;
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messaging services, such as SMS and MMS;
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international and roaming services;
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value-added services, such as voicemail, call diversion and
caller identification
(CLIP)
, ring tones,
mobile portal and video calling;
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mobile internet browsing on the move through 3G, HSPA and GPRS
technologies; and
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advanced value-added services using WAP, SIM microbrowser, voice
recognition and GPRS technologies.
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Through its 3G network, Cosmote offers mobile broadband services
using HSPA+ technology with download speeds of up to
21.6 Mbps and upload speeds of up to 5.8 Mbps, further
enhancing the value of its Internet On the Go data
plans. Furthermore, in 2009, Cosmote launched the Music
Zone service through which its customers can download
music from the internet. Cosmote also expanded its smartphone
device portfolio to include popular devices, such as the iphone
3G, Samsung Omnia II and HTC Magic. In addition, Cosmote
and Research In Motion
(RIM)
offer
BlackBerry
®
services, an integrated wireless solution that enables customers
to access information and communicate via a number of on-line
applications, including
e-mail,
SMS,
the internet, organizer and corporate data. Cosmote has also
introduced the Traveller service for roaming, which
allows postpaid customers to use their bundled free minutes
while roaming in several countries. In July 2009, Cosmote
launched the new web portal
49
Cosmote MyAccount@Business, which permits Cosmote business
customers to access and pay their bills and manage their
connections online.
Distribution
Cosmote currently distributes its services and products through
the following distribution arrangements:
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a network of commercial representatives/distributors;
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22 Cosmote-branded stores, including two in Athens and three in
Thessaloniki;
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225 OTEShops throughout Greece;
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430 Germanos-branded stores, throughout Greece;
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Cosmotes corporate accounts sales forces; and
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distributors of prepaid packages, prepaid airtime cards and
prepaid airtime electronic cards.
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Network
Cosmote has an extensive mobile telecommunications network in
Greece. It operates its network based on 2G GSM technology
(which is currently the most widely adopted standard across the
world) and 3G technology. The GSM system is system used mainly
for voice and short messaging communication, providing a limited
rate of packet data transmission which can accommodate a series
of value-added services, such as multimedia messaging services,
or MMS. The 3G system enables operators to provide a more
comprehensive set of services besides voice, such as video
telephony and high-speed packet data providing faster internet
access and a wide variety of other data services. An operator of
an existing 2G network must install additional infrastructure to
facilitate the proper functioning of a 3G network at all levels.
This additional infrastructure is often collocated with the 2G
systems and utilizes common lines of interconnection among the
various network sites. In 2003, Cosmote initiated the rollout of
its 3G network fulfilling the requirements of the license
granted by the EETT. Cosmotes 3G network provides
nationwide coverage, currently covering over 92.0% of the
countrys population, including all cities, towns, highways
and secondary roads, as well as all major tourist areas, thus
exceeding the requirements under the relevant special license
granted by the EETT.
Nokia-Siemens Networks is Cosmotes principal equipment
supplier and supplies the bulk of the equipment required to
maintain and upgrade Cosmotes 2G and 2.5G networks. The
long-term framework contract in place with Nokia-Siemens
Networks allows Cosmote and us to obtain the equipment we
require at competitive prices and to avoid extended procurement
and tender procedures for individual investments. Furthermore,
Cosmote uses Ericsson as its main equipment supplier for its 3G
network rollout and for its 2G network in Northern Greece.
Cosmote has also appointed Nokia-Siemens Networks as its second
supplier of 3G equipment.
Cosmotes objective has been to cover more geographical
areas in Greece than any of its competitors and to provide an
extended range of roaming services and the best international
coverage for customers. As of December 31, 2009, Cosmote
provided coverage to 99.8% of the population of Greece with a
geographic coverage of 97.0% of Greeces mainland and 98.0%
of its territorial waters.
In addition, Cosmote has implemented GPRS nationwide on its
network, through which services including MyView, MMS, WAP,
Blackberry
®
and internet access are supported. In 2006, Cosmote introduced
HSPA technology in its 3G network, which enables 3G users to
download packet data at broadband speeds. Since 2007, Cosmote
has made available nationwide its HSPA technology-based
broadband products and services supported by its 3.5G network
with speeds that reach up to 7.2 Mbps. In addition, in
2009, Cosmote upgraded its network to HSPA+ technology, which
currently allows for speeds up to 28.8 Mbps.
Cosmotes network currently interconnects with our
fixed-line network and those of other fixed-line operators in
Greece, as well as with the three other mobile telephony
networks operated in Greece by Vodafone, Wind Hellas and
Q-Telecom.
50
As of December 31, 2009, Cosmote had 458 roaming agreements
with mobile telecommunications operators in 194 countries, of
which 375 agreements in 176 countries were operational.
Market
Position and Competition
As of December 31, 2009, Cosmote had 9,217,507 active
customers (active for 12 months) in Greece, representing an
estimated market share of approximately 45.0% of the total
number of contract and prepaid mobile telephony customers in
Greece (based on internal estimates), as compared to 7,893,144
active customers as of December 31, 2008. Cosmotes
customer numbers in Greece increased by 16.8% in 2009, as
compared to 2008, as a result of the net addition of 70,365
contract customers and 1,253,998 prepaid customers. At the end
of 2009, mobile penetration in Greece had exceeded 180.0%.
Based on its estimates, as of December 31, 2009, Cosmote
was the leading provider of mobile telecommunications services
to contract customers in Greece, with a total of 2,284,571
contract customers, compared to 2,214,206 contract customers as
of December 31, 2008. Contract customers in general have
greater loyalty and higher average monthly revenues per user
than prepaid customers. Based on its estimates, Cosmote was also
the leading provider of prepaid services in Greece with a total
of 6,932,936 prepaid customers as of December 31, 2009, as
compared to 5,678,938 prepaid customers as of December 31,
2008. As a result of newly-enacted laws, mobile operators are
required to register in 2010 the users of prepaid SIM cards and
erase the accounts of those who cannot be identified; as a
result of this process, Cosmote expects that the number of
active prepaid customers of both Cosmote and its competitors
will decrease significantly by the end of 2010.
Cosmotes main competitors in Greece are Vodafone and Wind
Hellas, which both operate in the GSM 900 and GSM 1800 frequency
bands and also provide 3G services. Wind Hellas is a subsidiary
of the Weather group, an international mobile and fixed-line
telecommunications group with operators in Italy, Greece and
emerging markets.
Competition in mobile telecommunications is generally intense
and relates to price, distribution, subscription options
offered, offers of subsidized handsets, coverage, range of
services offered, innovation and quality of service. In recent
years, competition and price pressures have intensified, while a
number of new factors may impact the mobile market, including
combined offers of mobile and fixed-line services by mobile and
fixed-line operators. Cosmote expects competition to intensify
in 2010, mainly as a result of deteriorating economic conditions
and pricing pressures, as well as the increasing offering of
aggressively priced prepaid packages and of voice
bundle or unlimited packages in the mobile
market (packages offering an amount of, or unlimited, free call
time for a flat fee). Cosmote has experienced and expects to
continue to experience a migration of part of its contract
customer base to such products, either on contract or prepaid
basis. Such migration can have an adverse impact on average
revenues derived from each customer (as customers tend to use
more air time for a flat fee). In addition, the glide
path imposed by the EETT (see under
Tariffs Tariff
Regulation and Interconnection
below) also has resulted in a significant reduction in mobile
rates. As a result of these and other factors, the average price
per minute realized by Cosmote in 2009 declined by approximately
40.0%, as compared to 2008.
Revenues
In 2009, Cosmotes revenues and net income on a stand-alone
basis (representing its operating results in Greece) amounted to
Euro 1,908.4 million and Euro 290.8 million,
compared to Euro 1,843.1 million and
Euro 410.7 million, respectively, in 2008.
Volume/Traffic
A total of approximately 20.9 billion minutes were
distributed through Cosmotes network in 2009, compared to
14.0 billion minutes in 2008, and 10.7 billion minutes
in 2007, representing annual growth rates of 49.3% and 30.8%,
respectively.
51
Tariffs
Cosmote has focused its efforts on offering its customers
competitive and user-friendly tariff packages. In this regard,
Cosmote has structured tariff packages intended to maximize
value for money and promote loyalty.
Contract Pricing Schemes.
Cosmote pricing
schemes for contract customers fall in the following main
categories:
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Pay per use:
The customer is charged for the
total outgoing traffic. The monthly fixed cost, if applicable,
does not include any call minutes.
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Voice Bundles:
Cosmote offers its customers a
wide variety of rate plans and voice additional elements. The
pricing scheme consists of a monthly fixed cost (including
minutes with no additional charge) and additional charges for
outgoing calls above the bundled minutes. Cosmote offers
contract bundled plans, incorporating single rate tariffs for
calls to all networks and monthly rollover of unused
free call minutes.
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Cost Control:
Cosmote offers a hybrid
(contract and prepaid) product (Kartosymvolaio),
with minimum consumption and cost control features.
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Family:
Cosmote offers its customers a
family pack which allows them to create a flexible
and economical family scheme, combining post-pay, hybrid and
prepay members of a family, as well as one fixed-line number.
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Smart Play:
Cosmote recently introduced the
option to combine mobile telephony, mobile internet and
fixed-line number under one program, with a discount on monthly
fees for each service.
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Cosmotes basic tariff structure for its contract customers
does not distinguish between peak and off-peak calls, nor does
it distinguish between local and long-distance calls within
Greece. Additional tariffs based on the Home Zone
functionality, such as ONEphone, allow the use of
the mobile phone as a fixed-line phone when at home, giving
customers the opportunity to make calls to fixed lines in Greece
at domestic call charges. In October 2009, Cosmote introduced a
new offering of unlimited communication. Depending on the
selected plan, the Unlimited rate plans offer
contract subscribers unlimited calls and messages (on a fair
usage policy framework) to any other Cosmote subscriber, as well
as to other national destinations. In September 2009, Cosmote
introduced My Way tariff plans, offering contract
customers the opportunity to use their monthly fee for calls,
messages (SMS/MMS) and internet browsing based on their specific
needs.
Cosmote offers corporate customers a selection of business
tariff plans that include additional privileges and discount
schemes.
Prepaid Pricing Schemes.
In 2009, Cosmote
enhanced its prepaid offerings by introducing Call Them
All for the leading prepaid brand Whats
Up, which includes 1,000 minutes and 1,000 SMS to
Whats Up customers at affordable rates.
Additionally, Cosmote exclusively introduced the Call Them
All X-tension service, offering Whats Up
customers the convenience of communicating even after they have
run out of credit. More specifically, the Call Them All
X-tension service offers to all Whats Up
customers 250 minutes of voice and video calls to other
Whats Up users which are valid for seven days,
subject to an activation cost of Euro 2.50.
Tariff Regulation.
Under the applicable EU
regulatory framework, the European Commission issued a
recommendation in November 2007 that designated seven electronic
communications markets as candidates for potential regulatory
intervention (the
Relevant Markets
Recommendation
). These markets included one in the
mobile sector, namely, the wholesale market for voice call
termination on individual mobile networks. The Relevant Markets
Recommendation replaced an earlier recommendation of February
2003, which had listed a total of 18 markets, including two
additional mobile markets: the wholesale market for access and
call origination on public mobile networks and the wholesale
national market for international roaming on public mobile
networks.
In November 2008, the EETT published the results of its latest
analysis of the wholesale call termination market. The remedies
imposed on Cosmote are described in
Interconnection below.
52
In May 2009, the European Commission published a Recommendation
on the regulatory treatment of fixed and mobile termination
rates which recommends a new costing methodology which would
lead to significantly lower estimates of the cost of mobile call
termination services.
In addition, under the terms of the Relevant Markets
Recommendation, national regulatory authorities, including the
EETT, were authorized to carry out analyses of additional
specific markets where they believe that there is a lack of
effective competition. In this context, the EETT announced in
May 2008 that it is carrying out an analysis of the mobile
telephony market. The EETT has not yet published the results of
this analysis, but it may define an additional mobile market,
which may then lead to the imposition of certain regulatory
obligations on Greek mobile operators.
Interconnection
Under the applicable EU regulatory framework, the European
Commission has designated a number of electronic communications
markets as candidates for regulatory intervention, including the
wholesale market for voice call termination on individual mobile
networks (EU Market No. 7 (previously No. 16)). The
EETT published the conclusions of its latest analysis of this
market in November 2008, and determined, among other things,
that:
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termination on each individual operators network
constitutes a separate market, meaning that there are three
separate markets for mobile voice call termination in
Greece the networks of Cosmote, Vodafone and Wind
Hellas;
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each operator holds significant market power in its respective
market; and
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a range of regulatory remedies should be imposed on each
operator.
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The regulatory remedies imposed are as follows:
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cost-orientation, to be achieved through a glide
path of phased reductions to the level of cost, as defined
by a series of Long Run Incremental Cost
(LRIC)
models formulated by the EETT. The
EETTs decision in November 2008 defined the glide path,
applicable equally to each operator, as follows: 7.86
Eurocents/minute, 6.24 Eurocents/minute and 4.95
Eurocents/minute as of January 1, 2009, 2010 and 2011,
respectively;
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provision of access;
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transparency;
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non-discrimination;
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accounting separation (to be subject to a separate consultation
exercise); and
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publication of a Reference Interconnection Offer
(RIO)
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Cosmote maintains interconnection agreements with the two other
providers of mobile telecommunications services in the Greek
market (Vodafone and Wind Hellas). The following table sets out
the interconnection fees charged to the other mobile operators
by Cosmote (nominal prices, no VAT included):
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|
|
|
|
|
|
|
|
From
|
|
From
|
|
From
|
|
From
|
|
|
|
|
|
|
Jan. 1, 2007
|
|
June 1, 2007
|
|
Feb. 1, 2008
|
|
Jan. 1, 2009
|
|
|
|
|
|
|
to May 31,
|
|
to Jan. 31,
|
|
to Dec. 31,
|
|
to Dec. 31,
|
|
From
|
|
|
|
|
2007
|
|
2008
|
|
2008
|
|
2009
|
|
Jan. 1, 2010
|
|
|
|
|
(Euro per minute)
|
|
Mobile operator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vodafone
|
|
|
0.1174
|
|
|
|
0.1067
|
|
|
|
0.0989
|
|
|
|
0.0786
|
|
|
|
0.0624
|
|
|
|
|
|
Wind
Hellas
(1)
|
|
|
0.1174
|
|
|
|
0.1067
|
|
|
|
0.0989
|
|
|
|
0.0786
|
|
|
|
0.0624
|
|
|
|
|
|
|
|
|
(1)
|
|
The same tariffs also apply to
Q-Telecom, which merged with Wind Hellas in January 2007.
|
53
The following table sets out the interconnection fees the other
Greek mobile operators charge to Cosmote (nominal prices, no VAT
included):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
|
|
From
|
|
From
|
|
From
|
|
|
|
|
Jan. 1, 2007
|
|
June 1, 2007
|
|
Feb. 1, 2008
|
|
Jan. 1, 2009
|
|
|
|
|
to May 31,
|
|
to Jan. 31,
|
|
to Dec. 31,
|
|
to Dec. 31,
|
|
From
|
|
|
2007
|
|
2008
|
|
2008
|
|
2009
|
|
Jan. 1, 2010
|
|
|
(Euro per minute)
|
|
Mobile operator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vodafone
|
|
|
0.1174
|
|
|
|
0.1071
|
|
|
|
0.0991
|
|
|
|
0.0786
|
|
|
|
0.0624
|
|
Wind
Hellas
(1)
|
|
|
0.1259
|
|
|
|
0.1171
|
|
|
|
0.1041
|
|
|
|
0.0786
|
|
|
|
0.0624
|
|
|
|
|
(1)
|
|
As of January 2007, the same
tariffs also apply to Q-Telecom, which merged with Wind Hellas
in January 2007.
|
We handle Cosmotes incoming and outgoing international
traffic, under the terms of bilateral interconnection
agreements. As of March 30, 2010, Cosmote has entered into
interconnection agreements with us and other alternative
fixed-line operators as well as audiotex and directory service
providers in Greece. The following table sets out the
interconnection fees charged by Cosmote for calls originating
from us and other Greek fixed-line operators and terminating on
its network:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
|
|
From
|
|
From
|
|
From
|
|
|
|
|
Jan. 1, 2007
|
|
June 1, 2007
|
|
Feb. 1, 2008
|
|
Jan. 1, 2009
|
|
|
|
|
to May 31,
|
|
to Jan. 31,
|
|
to Dec. 31,
|
|
to Dec. 31,
|
|
From
|
|
|
2007
|
|
2008
|
|
2008
|
|
2009
|
|
Jan. 1, 2010
|
|
|
(Euro per minute)
|
|
Fixed Operator (OTE or other)
|
|
|
0.1174
|
|
|
|
0.1067
|
|
|
|
0.0989
|
|
|
|
0.0786
|
|
|
|
0.0624
|
|
As of January 1, 2007, under the second stage of the glide
path determined by the EETT, Cosmote applies per second charging
from the first second for all calls from our fixed-line network
or from other fixed-line operators that terminate to the Cosmote
network. As of February 1, 2008, Cosmotes termination
charges for these calls were set at Euro 0.0989 per minute.
Following the EETTs revised termination rates cap, as of
January 1, 2009, Cosmotes termination charges for
these calls were set at Euro 0.0786 per minute. As of
January 1, 2010, Cosmotes termination charges for
these calls have been set at Euro 0.0624 per minute.
The following table sets out the interconnection fees that we
charge to Cosmote, approved by the EETT in May 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
0.0048
|
|
|
|
0.0044
|
|
|
|
0.0044
|
|
|
|
0.0034
|
|
Single transit/minute
|
|
|
0.0082
|
|
|
|
0.0076
|
|
|
|
0.0076
|
|
|
|
0.0060
|
|
Double transit/minute
|
|
|
0.0107
|
|
|
|
0.0102
|
|
|
|
0.0102
|
|
|
|
0.0080
|
|
The above charges had a retroactive effect as of January 1,
2009.
Germanos
Over the course of 2006, Cosmote acquired, through its Cypriot
subsidiary, Cosmoholding Cyprus Ltd.
(Cosmoholding
Cyprus)
, and on December 31, 2006 held, 99.03% of
the share capital of Germanos, a Greek company that specializes
principally in the sale of telecommunications products and
services. In January 2007, Mr. Panos Germanos
(Germanos previous major shareholder) acquired an interest
of 10.0% in the share capital of Cosmoholding Cyprus through his
wholly-owned holding company Microstar Ltd. (see below). As of
December 31, 2009, Cosmoholding Cyprus acquired this 10.0%
interest, previously owned by Mr. Panos Germanos.
Currently, Cosmoholding Cyprus holds 99.998% of the share
capital of Germanos and the remaining 0.002%, representing
1,490 shares, is held by third persons as a result of these
shares not being included in the squeeze out process which was
completed on April 10, 2007 following a relevant takeover
bid according to L. 3461/2006 (as in force at the
54
relevant date). In 2006, Cosmote also acquired, through
Cosmoholding Cyprus, Mobilbeeep Telecommunications Limited
Liability Company
(Mobilbeeep)
, a commercial
partner of Germanos.
Germanos was incorporated in 1989 as a
société anonyme
under Greek Law and
its paid-in share capital amounts to Euro 29,600,892 and
consists of 82,224,700 ordinary shares with a nominal value of
Euro 0.36 each.
Germanos distributes telecommunications and digital technology
products and services and owns and operates a network of shops
specializing in these products. In particular, Germanos
distribution and sales network distributes and sells on both a
wholesale and retail basis a range of telecommunications
products and services, including mobile telephony, fixed-line
telephony and internet, as well as digital technology products
and services, and also provides technical support services for a
range of electronic appliances. Its activities cover Greece,
Bulgaria and Romania. At the end of 2009, Germanos operated 819
stores in all of these countries.
We believe that the acquisition of Germanos provides Cosmote
with an efficient retail network in three of the four countries
in which it operates. With Germanos network of retail
outlets in Greece, Bulgaria and Romania, Cosmote expects to
further improve its position and expand its retail presence and
further grow its business by directly addressing its customers
through Germanos retail network and established brand. In
addition, Cosmote expects to benefit from additional savings and
synergies and reduced operational and market risks.
In 2006, Cosmote acquired, through Cosmoholding Cyprus, its
100.0% subsidiary, a majority interest in the outstanding
shares of Germanos, which was then listed on the Athens
Exchange. Cosmoholding Cyprus obtained the balance of the
outstanding shares of Germanos through the exercise of
squeeze-out rights in April 2007, and Germanos was delisted from
the Athens Exchange in May 2007. Pursuant to the
shareholders agreement between Cosmote and Mr. Panos
Germanos, dated May 9, 2006, on January 15, 2007,
Mr. Panos Germanos acquired a 10.0% interest in
Cosmotes subsidiary, Cosmoholding Cyprus, by subscribing
for 100 common shares (Class B)
(Class B
Shares)
for Euro 144.5 million through his
wholly-owned company, Microstar Ltd. The Class B Shares
were redeemable by Cosmoholding Cyprus at a price equal to the
initial investment amount of Euro 144.5 million, plus
interest and a bonus depending on the achievement of certain
business targets until the date of redemption. On
December 31, 2009, Cosmoholding Cyprus purchased these
Class B Shares from Microstar Ltd. for the amount of
Euro 168.5 million. This purchase took place by means
of an increase of Cosmoholding Cypruss share capital in
the nominal amount of Euro 100,000, with the issuance of
1,000 new shares of a nominal value of Euro 100 each, fully
subscribed by Cosmote for the amount of
Euro 168.5 million. In 2010, Cosmoholding Cyprus
intends to cancel its own shares in accordance with Cypriot law.
For more information see 5.A Operating Results
Certain Factors Affecting Operating Results.
Other Subsidiaries.
Mobilbeeep is a
wholly-owned subsidiary of Cosmote and its main activity is
trading in electric and electronic apparatus and equipment.
Germanos owns the entire share capital of a company named
E-Value
Société Anonyme for Provision of Services Direct
Marketing and of Support of Customers
(E-Value)
.
E-Value
is
engaged in the field of outsourced contact-center services. The
companys aim is to provide integrated, interactive and
customized
one-to-one
communication services, via telephone. In October 2009,
Germanos, through its wholly-owned subsidiary,
E-Value
S.A., established
E-Value
Debtors Awareness One Person Ltd., a company aiming to
provide debt notification and related services.
International
Mobile Operations
Cosmote owns and operates our mobile operations in Albania,
Bulgaria and Romania through its international subsidiaries AMC,
Globul, Cosmote Romania and Telemobil, respectively, and
Cosmofon in FYROM until May 2009.
Albania
AMC
We hold through Cosmote an effective 95.03% interest (directly
and indirectly) in the share capital of AMC, our mobile
telephony subsidiary in Albania. In particular, Cosmote holds a
direct interest of 12.58% in AMC and a 97.0% interest in its
subsidiary Cosmo-Holding Albania (in which Telenor holds the
remaining 3.0%), which in turn holds 85.0% of the share capital
of AMC. On April 24, 2009, Cosmote acquired a direct 12.58%
interest in AMC from the Albanian state. The price, including
acquisition costs, amounted to Euro 48.4 million. As
the acquisition of
55
the 12.58% interest resulted in Cosmote owning more than 90.0%
of the share capital of AMC, Cosmote is required under Albanian
law, if so requested, to purchase the shares owned by the
minority shareholders. On June 22, 2009, minority
shareholders representing approximately 2.3% (of a total of
2.5% outstanding minorities) of AMCs share capital
requested Cosmote to purchase their shares at the same price as
paid by Cosmote to the Albanian state for the acquisition of the
12.58% interest on April 24, 2009. Cosmote is in the
process of purchasing the outstanding 2.5% of minority shares of
AMC and expects the cost of this purchase to amount up to
approximately Euro 10.0 million.
Business and Operations.
AMCs network
operates on the GSM 900 and GSM 1800 frequencies in the Albanian
territory. As of December 31, 2009, AMC had 1,908,987
customers, representing an estimated market share of 45%, and
reflecting an increase of 36.7%, compared to 1,395,989
customers as of December 31, 2008, which in turn
represented an increase of 16.8%, as compared to 1,195,183
customers as of December 31, 2007. As of December 31,
2009, approximately 95% of AMCs customers were prepaid.
The following table summarizes AMCs revenues, operating
income and profit for the three years ended December 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
December 31,
|
|
|
2007
|
|
2008
|
|
2009
|
|
|
(Euro in millions)
|
|
Revenues
|
|
|
176.2
|
|
|
|
191.3
|
|
|
|
145.7
|
|
Operating Income
|
|
|
84.6
|
|
|
|
100.3
|
|
|
|
61.8
|
|
Profit
|
|
|
60.9
|
|
|
|
94.9
|
|
|
|
87.8
|
|
Competition.
Vodafone and Eagle Mobil Sh.a., a
wholly-owned subsidiary of Albtelecom, the incumbent
telecommunications operator of Albania, which launched
operations in March 2008, are currently AMCs mobile
competitors in operation in Albania. In June 2009, a fourth
mobile license was granted to the company Mobile 4 A1 Sh.a,
which is controlled by the PTT of Kosovo. The company has not
yet launched commercial operations.
Licenses and regulatory matters.
In the
process of the privatization of Albtelecom, the Albanian
government offered Albtelecom the right to obtain a license for
the provision of mobile telecommunications services on the GSM
900 and 1800 frequencies, on the condition that mobile services
would be offered by a new company, wholly-owned by Albtelecom.
The Turkish company Calik Energy and the Ministry of Economy,
Trade and Energy acquired a 76% interest in Albtelecom in the
second half of 2007.
In September 2009, under the second phase of the glide
path imposed by the Albanian Telecoms Regulator (AKEP),
AMC reduced its termination rate for incoming voice calls to
10.5 LEK/minute plus a fixed charge per call of LEK 0.315
(equivalent to an effective rate of about 8 Eurocents/minute).
AMCs retail tariffs for certain prepaid products are also
subject to a price cap set by the AKEP. In addition, in June
2009, the AKEP notified AMC that it had engaged consultants to
develop a costing model that would form the basis for regulation
of AMCs termination rates in future years.
Following a decision on June 2008 by the Albanian Council of
Ministers, as of September 1, 2008, AMC was required to
apply for a new termination rate for national and international
calls of 11.95 LEK (Euro 0.096) per minute, which was reduced to
10.5 LEK (Euro 0.085) per minute as of September 1, 2009.
In a decision published on April 7, 2010, the Albanian
Regulator, AKEP, amended the regulatory obligations applying to
AMC. Specifically, the current price caps which apply to
AMCs retail tariffs will be removed with effect from July
2010, but new wholesale obligations will be imposed, requiring
AMC to give access to its network to other operators including
MVNOs. The existing glide path applying to AMCs MTRs
remains in place.
Bulgaria
Globul
We own through Cosmote the entire share capital of Globul, our
mobile operator in Bulgaria. In January 2001, we were awarded
the second GSM mobile telephony license in the Republic of
Bulgaria for a price of U.S. $135.0 million and
established Globul to hold our license and operate as a mobile
telephony network. Globul launched commercial activities on
September 17, 2001.
56
Business and Operations.
Globuls network
operates on the GSM 900 and GSM 1800 frequencies in Bulgaria. As
of December 31, 2009, Globul had 3,902,272 customers in
total, as compared to 4,096,996 as of December 31, 2008 and
3,872,922 as of December 31, 2007, representing a decline
of 4.8% in 2009 and an increase of 5.8% in 2008. According to
its own estimates, Globuls market share as of
December 31, 2009 was approximately 37%. Post-paid
customers as of December 31, 2009 accounted for
approximately 55% of Globuls customer base.
The following table summarizes Globuls revenues, operating
income and profit for the three years ended December 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
December 31,
|
|
|
2007
|
|
2008
|
|
2009
|
|
|
(Euro in millions)
|
|
Revenues
|
|
|
412.1
|
|
|
|
460.0
|
|
|
|
448.2
|
|
Operating income
|
|
|
73.4
|
|
|
|
99.8
|
|
|
|
84.5
|
|
Profit
|
|
|
53.2
|
|
|
|
83.2
|
|
|
|
67.7
|
|
Competition.
M-Tel, the largest mobile
operator in Bulgaria and Globuls main competitor, was
founded in March 1994 and launched commercial operations in
September 1995. Currently, M-Tel is part of the Mobilkom Austria
group. Globuls other main competitor is Vivatel, the
mobile telephony subsidiary of the Bulgarian Telecommunications
Company
(BTC)
, Bulgarias incumbent
fixed-line telephony operator; Vivatel launched commercial
operations in November 2005.
Licenses and regulatory matters.
In January
2001, we were awarded the second GSM mobile telephony license in
the Republic of Bulgaria. Since 2002, Globul has also held a
license for the construction, maintenance and use of a public
telecommunications network for data transmission and the
provision of public telecommunications services in Bulgaria, and
later was awarded the right to use microwave frequencies and the
right to provide leased lines. The telecommunications market in
Bulgaria has been fully liberalized since January 1, 2003.
In 2005, Globul acquired two additional licenses for fixed-line
services and a license for carrier selection. The first license
covers the construction and operation of a fixed-line telephony
network and the provision of fixed-line voice telephony services
and the second license allows fixed-line customers of BTC to
choose Globul as their carrier for national and international
calls. In addition, on April 25, 2005, Globul was granted a
3G mobile license and in January 2007, an LMDS (fixed line)
individual
Point-to-Multipoint
type license with national coverage.
On January 30, 2007, the CRC issued to BTC a license for
carrying out communications through public telecommunications
network from the mobile radio service from the type point to
many points in the frequency of 26 GHz with national
coverage. In August 2007, AIG Investments, through its member
company AIG Capital Partners Inc., acquired a 90% interest in
BTC from Viva Ventures Holding GmbH and certain minority
shareholders, following the granting of relevant European Union
and other regulatory approvals.
On April 29, 2008, the Communications
Regulation Commission, the regulatory authority of Bulgaria
(CRC)
, announced its intention to grant
licenses for the use of radio frequencies in the range of
1800 MHz. 2 x 5 MHz. Following the
announcement, a number of companies have submitted letters of
intent with the CRC. Subsequently, the CRC announced a tender
for granting the licenses at the starting price of BGN
38.0 million (Euro 19.4 million). The tender was
abandoned as the sole bidder did not fulfill the requisite
criteria.
In March 2009, following a public consultation and notification
to the European Commission, the CRC announced its final decision
regarding the regulation of mobile termination rates. The CRC
determined that the rates of all three mobile operators,
including Globul, should be reduced in stages to reach, by July
2010, 0.13 BGN/minute (approximately 6.6 Eurocents/minute) at
peak times and 0.11 BGN/minute (approximately 5.6
Eurocents/minute) at other times.
Romania
Cosmote Romania
We own through Cosmote an interest of 70.0% in the share capital
of Cosmote Romania. Cosmote Romania was incorporated by
RomTelecom in Romania on January 15, 1999 and was initially
named Cosmorom S.A.
57
Cosmote Romania started operations in May 2000, it subsequently
suspended operations, and re-launched operations in December
2005.
In July 2005, Cosmote acquired a 70% interest in the share
capital of Cosmote Romania after contributing
Euro 120.0 million as cash consideration, with
RomTelecom retaining a 30% interest in Cosmote Romania. In March
2008 the general meeting of shareholders of Cosmote Romania
approved the increase of the companys share capital by
Euro 125.0 million, 70% of which (or
Euro 87.5 million) was subscribed for by Cosmote and
30% (the equivalent in RON of Euro 37.5 million) by
RomTelecom, the 30% minority shareholder of Cosmote Romania. The
MCIT is entitled to appoint one of the two board members that
RomTelecom may appoint to Cosmote Romanias board of
directors.
Business and Operations.
Cosmote
Romanias network operates on the GSM 900 and GSM 1800
frequencies in Romania. As of December 31, 2009, Cosmote
Romania had 6,920,816 customers, as compared to 5,894,056 as of
December 31, 2008 and 3,616,274 as of December 31,
2007, representing increases of 17.4% and 63.0%, respectively.
Cosmote Romanias estimated market share as of
December 31, 2009 was approximately 24%, with over 81% of
its customer base being prepaid.
The following table summarizes Cosmote Romanias revenues,
operating losses and loss for the three years ended
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
December 31,
|
|
|
2007
|
|
2008
|
|
2009
|
|
|
(Euro in millions)
|
|
Revenues
|
|
|
155.6
|
|
|
|
311.0
|
|
|
|
423.2
|
|
Operating losses
|
|
|
(88.3
|
)
|
|
|
(52.8
|
)
|
|
|
(22.1
|
)
|
Loss
|
|
|
(118.4
|
)
|
|
|
(111.3
|
)
|
|
|
(57.9
|
)
|
Competition.
Cosmote Romania is currently one
of the three GSM mobile telecommunications providers in Romania
and, since the completion of its acquisition of Zapp in October
2009 by Cosmote, also competes in the market for 3G services. It
is facing strong competition from existing operators in Romania,
including some subsidiaries of major international companies,
including Vodafone and Orange for both 2G and 3G and
RCS&RDS (a regional mobile and cable services operator)
only for 3G.
Licenses and regulatory matters.
Cosmote
Romanias GSM license includes the right to use frequencies
in both the GSM 900 and GSM 1800 MHz frequency bands and to
extend its term to April 2014.
On October 31, 2009, Cosmote completed the acquisition
(after obtaining the necessary approvals) of the entire share
capital (minus one share) of the Romanian mobile operator, Zapp.
Zapp, established in 1993, is the oldest mobile operator in the
Romanian market and owns a CDMA license at 450 MHz and a 3G
license at 2100 MHz and operates CDMA and UMTS networks.
The consideration paid for the acquisition of Zapp was
Euro 67.5 million, while Cosmote assumed Zapps
long-term liabilities amounting to Euro 129.6 million,
mainly relating to the Zapps 3G license fees and the
development of its 3G and CDMA network.
In April 2009, following a public consultation and notification
to the European Commission, the Romanian Telecommunications
Regulator (ANCOM) published its final decision regarding the
regulation of Cosmote Romania and Zapps voice call
termination rates. ANCOM determined that Cosmote Romania and
Zapp should reduce their termination rates in stages to reach,
by July 2010, 5.03 Eurocents/minute (the rate currently charged
by Vodafone and Orange).
In February 2010, Zapp offered a voluntary exit scheme to a
number of its employees, as part of its efforts to improve
operational efficiency of the organization, which was largely
accepted by its employees.
FYROM
Cosmofon
Until May 12, 2009, we held through Cosmote the entire
share capital of Cosmofon, a mobile telecommunications operator
in FYROM. On May 12, 2009, Cosmote sold the entire share
capital of Cosmofon to Telekom Slovenije.
58
Following the acquisition by Deutsche Telekom of an interest of
25.0% in our share capital in 2008, and given that Deutsche
Telekom, through its mobile subsidiary
T-Mobile
Macedonia AD Skopje (held through Magyar Telecom and Maktel),
already held a market share of approximately 60.0% in the mobile
market of FYROM at that time, we and Deutsche Telekom agreed
with the Competition Committee of FYROM that we would dispose of
Cosmofon. On March 30, 2009, following a tender procedure,
Cosmote and Germanos each entered into a share purchase
agreement with Telekom Slovenije for the sale of all the shares
of Cosmofon and Germanos Telecom Skopje, the exclusive
distributor of Cosmofon, respectively, for the total
consideration of Euro 185.8 million. On May 12,
2009, the entire share capital of Cosmofon was transferred to
Telekom Slovenije.
Cosmofon held a mobile telephony license since November 2001 and
launched commercial operations on June 12, 2003. In
addition, on February 11, 2008 Cosmofon was granted
(following a tender) a 3G license in FYROM for a price of
approximately Euro 10.0 million and a term of ten
years. On February 23, 2009 Cosmofon was granted, pursuant
to a public tender, two WiMAX licenses for two regions in FYROM
for a total price of approximately Euro 0.3 million
and a term of ten years.
The following table summarizes Cosmofons revenues,
operating income/(loss) and profit/(loss) for the years ended
December 31, 2007 and 2008 and for the period ended
May 12, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
For the Year Ended
|
|
Period
|
|
|
December 31,
|
|
Ended May 12,
|
|
|
2007
|
|
2008
|
|
2009
|
|
|
(Euro in millions)
|
|
Revenues
|
|
|
62.2
|
|
|
|
66.2
|
|
|
|
19.1
|
|
Operating income/(loss)
|
|
|
2.8
|
|
|
|
1.7
|
|
|
|
(4.3
|
)
|
Profit/(loss)
|
|
|
0.1
|
|
|
|
0.2
|
|
|
|
(6.2
|
)
|
OTHER
SERVICES
International
Wholesale Telephony and Data Services
OTEGlobe
Our wholly-owned subsidiary, OTEGlobe, provides international
wholesale telephony services and international wholesale data
capacity/IP services to telecommunication providers and to
multinational companies with a particular focus on the region of
Southeastern Europe.
Assets
and Operations
OTEGlobe currently owns and operates the TransBalkan Network
(TBN)
and the GWEN two-way high capacity
fiber optic networks extending from Greece to Western Europe, as
well as an IP/MPLS
(MSP)
network with 14 PoPs
in Western and Eastern Europe. In addition, OTEGlobe holds
indefeasible rights of use
(IRU)
to various
peripheral and transatlantic submarine cables, international
networks of fiber optic cables towards all neighboring countries
and more than 150 bilateral voice interconnections and more than
300 private and public IP peering. We believe that OTEGlobe
currently serves the majority of the international broadband
traffic originating from the Greek broadband market and a
significant proportion of the broadband market in neighboring
countries.
The following are the main operating assets of OTEGlobe.
GWEN.
The Greek Western Europe Network,
operating under the commercial name GWEN, was the first of
OTEGlobes two international transmission links; it was
constructed in 2003 and came into commercial operation in 2004.
The GWEN is a two-way, high capacity DWDH/SDH fiber optic
network, connecting Greece to Western Europe through Italy. In
2009, GWEN was upgraded to a capacity of 400 Gbps (from a total
of 160 Gbps in 2008). We plan to continue to upgrade the
capacity of this network in line with broadband growth and
demand for IP transit capacity.
TBN.
OTEGlobe commercially launched the TBN,
its multi-Gigabit DWDM/NG-SDH network, in November 2007. The TBN
is a fully terrestrial fiber optic network extending from Greece
to Germany along the Balkan Peninsula via Bulgaria, Romania and
Austria. The TBN provides an alternative route for traffic to
Western Europe, in parallel with the GWEN. The network currently
has a capacity of 400 Gbps and is fully
59
redundant and diverse to GWEN, and we expect to continue to
upgrade it in line with broadband growth and demand for IP
transit capacity. The TBN enhances the resiliency and the
availability of our international network and helps improve the
cost base of our international services.
IP/MPLS (MSP) network.
OTEGlobes
international IP/MPLS network is a high capacity multi-service
secure network, which provides uninterrupted operation and
central
end-to-end
monitoring. As of December 31, 2009, it comprised a total
of 14 network nodes located in Athens, Thessaloniki, London,
Vienna, Bucharest, Nicosia, Sofia, Tirana, Skopje, Frankfurt,
Milan, Paris, Amsterdam and Istanbul. This network is designed
to be fully integrated with our national fixed-line network
infrastructure and utilizes elements of our international
fixed-line network, such as terrestrial and submarine fiber
optic cable resources, to address the needs of other
telecommunications carriers and multinational corporations. In
2009, we upgraded the IP core, introducing dual vendor policy
and terabit routers, in order to support increasing demand for
capacity in Southeastern Europe.
IRU.
In addition to the above, OTEGlobe also
holds indefeasible rights of use over international
infrastructure and capacity owned or leased (either privately or
as co-owners) on club cables, including on FLAG and SMW-3.
We transferred the ownership of the above assets to OTEGlobe,
with retroactive effect from April 1, 2007, following
approval of the relevant transfer by our general assembly of
shareholders on June 21, 2007. The relevant resolution
approved the transfer of international operations and network
infrastructure with the exception of the Corfu-Bari submarine
cable which remained in our ownership.
In addition, OTEGlobe has deployed NGN SoftSwitch technology
over its network. SoftSwitch became fully functional in 2008 and
OTEGlobe continues to upgrade it. SoftSwitch is an
IP-based
technological solution (gradually replacing existing TDM-based
solutions) which allows significant improvements in network
management and monitoring efficiency, especially with respect to
active management of least-cost routing.
International
Wholesale Telephony Services
In the field of international wholesale telephony services,
OTEGlobe focuses, among other matters, on:
|
|
|
|
|
establishing agreements with international carriers for the
routing of international traffic and for applicable accounting
rates;
|
|
|
|
negotiating wholesale tariffs with mobile operators for incoming
and outgoing international traffic through our network;
|
|
|
|
negotiating wholesale tariffs with domestic alternative carriers
for routing their international traffic through our
network; and
|
|
|
|
planning, engineering and operating our International Voice
Network.
|
OTEGlobe has entered into agreements in relation to
interconnection services, cost reduction and hubbing activities
and the exchange of international traffic in a number of
countries in the region, including in Bulgaria, Romania, Cyprus
and Albania.
International
Wholesale Data Capacity /IP Services
Through its proprietary international cable infrastructure,
including the GWEN, the TBN and other infrastructure, OTEGlobe
currently offers:
|
|
|
|
|
full,
end-to-end,
managed SDH digital circuits and wavelength (λ) capacity
from Greece to London and other major European cities;
|
|
|
|
Ethernet transport services with speeds of up to 1 Gbps from
Greece to Frankfurt and other major European cities;
|
|
|
|
IRU for long-term leasing of international circuits; and
|
|
|
|
international private leased circuits (half circuits).
|
60
OTEGlobe believes that its proprietary international cable
infrastructure, combined with its proactive network monitoring
and continuing support, offers both route diversity (through the
use of two independent high-capacity networks, GWEN and TBN) and
service continuity.
In addition, through its proprietary MPLS/IP network, OTEGlobe
currently offers a range of services, including:
|
|
|
|
|
clear channel;
|
|
|
|
internet transit for carriers;
|
|
|
|
MPLS, VPN and Ethernet services; and
|
|
|
|
carrier-grade VoIP and voice trunking.
|
Strategy
OTEGlobe aims to increase sales from international wholesale
telephony services in the region of Southeastern Europe
particularly in hubbing services and to maximize utilization of
its international network infrastructure. It aims mainly to
increase returns from the offering of
end-to-end
wholesale services to the main telecom operators in Greece and
in the broader Southeastern Europe region where our Group
operates, as well as to further strengthen its position as the
regional network bridge. OTEGlobes main strategic
objectives are:
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|
|
|
|
increasing its market share in the Southeastern European market
and exploring opportunities in the markets of the Middle East
and North Africa;
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|
|
|
benefitting from the increase of broadband use and traffic in
Greece, as well as demand for international VPN in the corporate
market in Greece and the broader region, to maximize use of its
network capacity;
|
|
|
|
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, in order to
exploit new markets and create new revenue streams.
|
Revenues
In 2009, OTEGlobes revenues amounted to
Euro 207.2 million, compared to
Euro 181.5 million in 2008 and
Euro 167.6 million in 2007. OTEGlobes revenues
and traffic volumes increased, despite the fact that
international prices for the relevant services tended to decline
in recent years, mainly due to intensifying competition.
Earnings before tax and additional depreciation were
Euro 4.8 million in 2009, compared to
Euro 4.1 million in 2008 and
Euro 2.2 million in 2007.
Interconnection
Services
We provide interconnection services to other fixed-line and
mobile operators. Under the Greek regulatory regime for
interconnection, with respect to calls placed from domestic
fixed or mobile telephony networks to our network, we receive a
call termination charge from the relevant domestic operator on
the basis of a Reference Interconnection Offer made by us and
approved by the EETT, which we record as revenues from
interconnection charges. We also charge call collection and
termination fees to other fixed telephony operators with which
we have interconnection agreements.
61
In May 2009, the EETT approved the following call collection and
termination charges as cost-oriented for 2009, with retroactive
effect as of January 1, 2009:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weekdays
|
|
|
|
|
|
|
Weekdays
|
|
00:00 to 08:00
|
|
|
|
|
|
|
08:00 to 20:00
|
|
and 20:00 to 00:00
|
|
Saturdays
|
|
Sundays
|
|
|
(Euro per minute)
|
|
Local/minute
|
|
|
0.0048
|
|
|
|
0.0044
|
|
|
|
0.0044
|
|
|
|
0.0034
|
|
Single transit/minute
|
|
|
0.0082
|
|
|
|
0.0076
|
|
|
|
0.0076
|
|
|
|
0.0060
|
|
Double transit/minute
|
|
|
0.0107
|
|
|
|
0.0102
|
|
|
|
0.0102
|
|
|
|
0.0080
|
|
In May 2010, the EETT approved the following call collection and
termination charges as cost-oriented for 2010, with retroactive
effect as of January 1, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weekdays
|
|
|
|
|
|
|
Weekdays
|
|
00:00 to 08:00
|
|
|
|
|
|
|
08:00 to 20:00
|
|
and 20:00 to 00:00
|
|
Saturdays
|
|
Sundays
|
|
|
(Euro per minute)
|
|
Local/minute
|
|
|
0.0042
|
|
|
|
0.0038
|
|
|
|
0.0038
|
|
|
|
0.0030
|
|
Single transit/minute
|
|
|
0.0071
|
|
|
|
0.0065
|
|
|
|
0.0065
|
|
|
|
0.0052
|
|
Double transit/minute
|
|
|
0.0088
|
|
|
|
0.0080
|
|
|
|
0.0080
|
|
|
|
0.0072
|
|
The Groups revenues from interconnection services totaled
Euro 88.9 million in 2009, compared to
Euro 119.4 million in 2008 and
Euro 108.2 million in 2007. These amounts do not
include revenues from interconnection fees for international
calls originated by mobile operators of
Euro 52.9 million in 2009, compared to
Euro 56.5 million in 2008 and
Euro 49.6 million in 2007, which are included in
international revenues as payments from mobile operators. Our
revenues from interconnection with Cosmote are eliminated upon
consolidation.
Leased
Lines
Leased lines are telecommunications links between end points of
equipment, allowing voice, data or image transmission depending
on user requirements. Leased lines provide connections within a
customers network and within our own network.
We provide analog and digital (ranging from 64 Kbps to
622 Mbps) leased lines services on a retail basis to
corporate customers and public sector entities and on a
wholesale basis to other telecommunications companies, including
Greek fixed-line and mobile operators. Under the relevant EU
directives and our licensing regime, we are required to ensure
that leased lines offered to our customers and other
telecommunications providers satisfy certain specified technical
characteristics and that a minimum number of such lines are
available.
We provide wholesale leased lines services, as well as retail
leased lines services on a
point-to-point
basis. Through our information systems, we are able to define
network costs for each leased circuit by registering all leased
lines and the network equipment which constitutes each circuit.
According to the reference offer, approved by the EETT in March
2008, we are required to provide wholesale leased lines on a
terminating and trunk segments basis, as opposed to offering
them on a
point-to-point
basis, as has previously been the case. Under the same decision,
we are also obliged to make available the related facilities in
our transmission network nodes, which are required for the
delivery of these services.
As of December 2008, we began charging all previously existing
point-to-point
wholesale leased lines on a terminating and trunk segment basis.
On December 9, 2009, we submitted a modified reference
offer for wholesale leased lines, re-introducing as a service
the
point-to-point
wholesale leased lines, as an alternative to offering the
terminating and trunk segments of leased lines which we also
make available, following relevant requests by the EETT and
alternative operators. The relevant decision of the EETT is
still pending. We expect that this will help alternative
telecommunications operators to design and utilize their network
and infrastructure more cost-effectively, which is expected to
improve their cost base and competitiveness, while, on the other
hand, it may also have an adverse impact on our revenues from
the relevant wholesale services.
62
On July 23, 2009, the EETT amended its decision of
May 6, 2009 regarding approved prices for wholesale leased
lines for 2009, leading to a reduction of 9% for terminating and
trunk segments and to a reduction of 3.5% for interconnection
links. With its decision in May 2010, the EETT approved new
prices for wholesale leased lines services, which were reduced
by approximately 12.7% for terminating and trunk segments and by
4.3% for interconnection links.
We expect the use of our wholesale leased line services and our
revenues from these services to decrease with time, as
alternative operators continue to develop their own networks and
decrease their reliance on our network. With respect to retail
leased line services, we have witnessed a gradual volume and
revenue decrease and migration to other connectivity platforms,
mainly
IP-VPN.
Wholesale
Line Rental
Wholesale line rental allows alternative operators to rent our
access lines, on a wholesale basis, to be accessed by their end
customers. This service is used mainly in conjunction with
carrier pre-selection services, serving customers of alternative
operators which are located in areas not serviced by such
operators unbundled local loops. These customers are not
required to pay a monthly line service charge to us; we receive
line rental fees from the operators.
In November 2008, the EETT issued a decision setting wholesale
line rental prices on a retail-minus basis. According to this
pricing methodology, the EETT defines wholesale tariffs for a
service by calculating a retail-minus, based on the proposed
retail tariffs for the same service, using data provided by the
relevant operators providing the retail services. In particular,
the price of wholesale line rental was set 13.3% lower than the
respective retail price, in the case of PSTN lines and 18.7% in
the case of ISDN-BRA lines. Wholesale line rental service was
officially launched on December 15, 2008. With its decision
of May 2009, the EETT revised the retail-minus factor, thus
setting the price of WLR-PSTN lines and WLR-ISDN BRA lines 15.6%
and 23.4%, respectively, lower than the respective retail price;
this change was effective as of May 6, 2009. In May 2010,
the EETT in its decision regarding our ECOS for the years
2008-10
reviewed the retail-minus factors and set the relevant wholesale
line rental prices, in particular setting the wholesale prices
with respect to PSTN lines 13.7% lower than the respective
retail prices and 20.1% lower than the respective retail prices
with respect to ISDN-BRA lines.
In May 2009, we started receiving requests for WLR provisioning
from the alternative operators. As of December 31, 2009, we
provided 42,373 WLR-PSTN lines and 32 WLR-ISDN BRA lines.
Wholesale
ADSL
We provide wholesale ADSL access to other operators over our
extensive ADSL network across Greece, enabling them to provide
ADSL access and high-speed internet access directly to the end
customers. We also provide ADSL link and the backhaul service in
the ADSL wholesale market, in order to hand over the ADSL
traffic to ISPs and other operators. In particular, we provide
two types of services: (i) ADSL access, comprised of an
ADSL link, plus backhaul service through the ATM or Metro
Ethernet network; and (ii) an interconnection link,
consisting of an IP over ATM or Gigabit Ethernet connection to
the broadband RAS that enables ISPs and other operators to
provide high-speed internet access to their customers.
As of December 31, 2009, we had 52,714 wholesale ADSL
customers, compared to 94,413 wholesale ADSL customers as of
December 31, 2008 (for the first time excluding, following
our merger, the customers of OTENet). We expect the use of our
wholesale ADSL services and our revenues from these services to
continue to decrease, as alternative operators continue to
develop their own networks and decrease their reliance on our
broadband network.
On April 12, 2010, we proceeded to the automatic upgrade of
the 8 Mbps connections to up to 24 Mbps,
with the reduction, at the same time, of the up to
24 Mbps package price by 2.9%. Prior to that, on
May 12, 2009, we had upgraded our wholesale ADSL access
speeds throughout Greece, without any additional costs. All
1Mbps connections were automatically upgraded to 2 Mbps,
and 4 Mbps connections to 8 Mbps. As of the same date,
we further reduced prices of the existing wholesale ADSL
packages, by 15.4%, 16.4% and 6.7% for 2Mbps, 8 Mbps and
24 Mbps, respectively.
63
We also offer other operators and ISPs scaled discounts for
wholesale services based on the total amount of the six-month
bill of service providers.
Following the second round of market analysis for the wholesale
broadband access market, the EETT published a new decision on
July 28, 2009, enforcing a cost-orientation obligation, to
replace the previous retail-minus methodology and imposing a new
wholesale bitstream access service (TYPE C) provided either
at DSLAM level in areas where collocation is not technically
feasible, or at our multiplexing node when DSLAM equipment is
installed into the street cabinets. On October 15, 2009, we
submitted an updated Reference Offer for our wholesale broadband
services (RBO), which is currently pending under approval by the
EETT. In addition, we have submitted cost-oriented prices for
wholesale ADSL access in the context of the ECOS
2008-10
audit which were approved in May 2010, leading to a reduction of
27.7% for our 2 Mbps package and 32.6% for our up to
24Mbps package. Prior to that, the EETT, with its decision
of August 30, 2007, had imposed discounted cash flow
costing methodology, which led to the specification of a nominal
margin between our wholesale and retail ADSL prices. This
nominal margin remained unchanged at 20.8% during 2008 and was
readjusted from 20.8% to 20.94% on May 12, 2009.
Local
Loop Unbundling
We provide full and shared local loop access services and
distant and physical collocation services to other
telecommunications service providers in Greece. As of
December 31, 2009, we provided 937,878 full and
49,423 shared access loops, as compared to 589,234 full and
56,890 shared access loops, as of December 31, 2008.
As of December 31, 2009, we provided collocation services
in 817 of our local exchanges. In 168 of these local exchanges
we provided physical collocation and in the remaining 649 we
provided distant collocation services. In comparison, as of
December 31, 2008, we provided collocation services in 266
local exchanges, of which in 152 we provided physical
collocation and in 114 we provided distant collocation.
The services and conditions to provide unbundled access to the
local loop and related services are being specified in our
Reference Unbundling Offer
, or
RUO
. RUO provides details for the provision
of unbundled access to the local loop and related services,
including the manner and timing of providing such services and
the consequences of non-compliance. It regulates, among other
matters, the right of alternative telecommunications operators
to access and use space within our facilities at sites at which
collocation has been provided, their right to request that we
provide them with certain technical services at those sites, as
well as the right to request access to backhaul services at our
sites. The EETT has issued a number of decisions introducing
modifications to the reference offers we have periodically
submitted. We believe that constant changes and a number of
aspects of the current RUO are unduly onerous and have appealed
before the Greek administrative courts against the application
of certain of these provisions.
During 2008, the EETT amended its decision of April 4,
2007, ruling on a number of issues, including clarifying the
existing right of alternative telecommunications operators to
install their own infrastructure (such as service cabinets) in
our local exchanges and to operate connection and transmission
services from these locations (backhauling) using their own
wireless means. In addition, the decision was amended with
respect to procedures for the provision of collocation, imposing
upon us the obligation to provide to the operators additional
types of collocation, including virtual collocation and
co-mingling. During 2009, the EETT introduced additional changes
relevant to the expansion of collocation space, resolutions for
faults or disputes on specific local loops and cost allocations
between collocated alternative providers.
In 2009, the EETT carried out a new market analysis for the
wholesale (physical) network infrastructure access (including
shared or fully unbundled access) at a fixed location market (EU
market 4) and on July 28, 2009, the EETT issued a
decision regulating, among other matters, the right of
alternative operators to share our cable ducts between our local
exchanges and street cabinets and to pass their own fiber
cables. In case there is no duct availability, we are obliged to
provide to the alternative operators our existing fiber cables
(dark fiber). Under this decision, we were required to submit a
new RUO including such services and on October 15, 2009, we
submitted our modified reference offer, which is currently under
public consultation.
64
In March 2007, four Greek broadband service providers agreed to
participate in a state-funded program established by Information
Society S.A.
(Information Society)
, a Greek
State-funded information technology consulting firm, for the
promotion of broadband services in regions where broadband
services are underdeveloped. Information Society is an
initiative supported by the European Union aimed at the creation
of a single market in, and the liberalization of, the
telecommunications sector. In Greece, Information Society
constitutes part of an investment program within the Third
European Community Support Framework 2000 2006. We
do not participate in the Information Society program. The
establishment of broadband infrastructure in remote areas under
this program has led to increased requests for loop unbundling
and collocation services from the participating operators,
including in remote areas and under tight timetables. As of
December 31, 2009, we provided approximately 44,000 local
loops in 626 distant collocation sites operating in the context
of the Information Society Program, compared to 1,500 local
loops in 96 distant collocation sites in 2008.
Other
Telecommunications Services
OTE
Ethernet Services
In early 2007, we introduced the
E-Line
Metro
Ethernet service
(Point-to-Point
and
Point-to-Multipoint),
offered initially in the metropolitan areas of Athens and
Thessaloniki to both retail and wholesale customers. This
service offers a platform for deployment of data transport
solutions over NGN networks. Ethernet has become the preferred
medium for advanced services such as IP telephony, video
streaming, media imaging and data storage, due to a number of
factors including its low cost, reliability, ease of increasing
bandwidth in small increments and interoperability with
traditional broadband access technologies used over the wide
area network. As of July 2008, the service is also offered at a
long-distance level (Wide Area Ethernet). In January 2009, we
launched a new basic version of
E-Line
service, a simpler version of the existing
E-line
Metro
Ethernet (advanced) which allows a simpler and better
utilization of this VLAN address pool.
In order to optimize the benefits of the Ethernet network, as of
January 1, 2010, we integrated all Ethernet services into
one OTE Ethernet service. Moreover, as of the same
date, we offer our integrated service at prices reduced by an
average of 25.0%.
As of December 31, 2009, we had 139 wholesale OTE
Ethernet virtual circuits in service with a total
bandwidth of 16.4 Gbps, compared to 125 virtual circuits with a
total bandwidth of 21.8 Gbps as of December 31, 2008. The
reduction in total bandwidth is due to the increased competition
in Ethernet services provisioning and to the fact that
alternative operators develop their own networks which reduces
their reliance on our network and services.
Also at the end of 2009, we had 101 retail Metro Ethernet
virtual circuits in service with a total bandwidth of
approximately 3.3 Gbps. During 2008, the
E-Line
service expanded and is now offered at a number of PoPs all over
Greece.
TETRA
We have developed and are offering OTE TETRA Services (formerly
known as OTElink-TETRA), a fully operational public access
terrestrial trunked radio
(TETRA)
network
that provides, among other services:
|
|
|
|
|
voice services, including group calls, individual calls,
broadcast calls, emergency calls, calls to fixed and mobile
telephone networks; and
|
|
|
|
data services, including short data
(SDS)
,
and packet data (28.8 Kbps) services.
|
The system consists of a mobile switching office
(MSO)
in Athens and 93 base stations
installed around Greece to provide radio coverage. Almost half
of those base stations are located in the Attica region.
Moreover, there are two rapidly deployable mobile base stations
for critical-emergency events. We are the sole public TETRA
provider in Greece covering major cities such as Athens,
Thessaloniki, Patra, Volos, Kavala, Thiva, Pyrgos, the northern
part of Crete (Hania to Agios Nicolaos) and Corfu as well as the
Athens Patra Pyrgos and
Athens-Thessaloniki-Kavala highways. We provide TETRA terminals
through a number of authorized suppliers. The
65
markets served are diversified and include transportation
(airports, harbors and metro), security companies, taxi, road
assistance, ambulance services, the government and military,
logistics centers and civilian.
Fixed
Wireline Value-added Services
We offer a number of value-added services for PSTN and ISDN
access lines, including CLIP, call identification restriction
(CLIR)
, call barring, call waiting, call
forwarding, three-party conference, SMS, RBT, Multimedia
Information Service and four different levels of voicemail
services.
Fixed
Wireless Access Services
Since 2000, we hold two licenses to offer fixed wireless access
services in Greece, one within the 3.5 GHz frequency band
and the second within the 24.5 26.5 GHz
frequency band. Two more licenses were granted to other
operators in addition to ours in 2001, for the 3.5 GHz
frequency band, which is mainly used for voice telephony
services. On the 24.5 26.5 GHz frequency band,
which is mainly used for voice and local multipoint multimedia
distribution services, the EETT granted four licenses in
addition to ours. Following the transfer of our fixed wireless
license on the 25 GHz frequency band to Cosmote, we still
hold the fixed wireless access license on the 3.5 GHz
frequency band, which we use to provide
Point-to-Multipoint
voice telephony services in rural areas. Until December 10,
2015, we also hold a fixed wireless access license on the
1.5 GHz frequency band (1,437.5 1,465.5 MHz and
1,486.5- 1,514.5 MHz ) for providing
Point-to-Multipoint
voice telephony services in rural areas.
Satellite
Services
We own and operate 14 satellite transmission antennas plus 20
TVRO (TV Receive Only) antennas installed in our two teleports,
Nemea and Thermopylae. The teleports are
connected to International POPS, via protected fiber rings. Two
of the antennas serve our Inmarsat satellite earth stations
covering the Indian and the East Atlantic Ocean regions. We also
own and operate Head-End Platforms for satellite and IPTV. We
cover two thirds of the globe, from the east coast of America
through the Asia-Pacific coast (up to half of New Zealand),
using suitable Atlantic, European, African and Asian satellites.
We provide a complete portfolio of services in satellite
business with turnkey solutions for telecommunications, media,
government, maritime industry and military markets. We offer
Point-to-Point
connections, contribution/distribution and broadcasting
services, uplink/downlink/turnaround services, TV broadcasting
services, occasional broadcasting, international voice trunking
and Inmarsat services. We also sell TT&C (Telemetry,
Tracking and Control) maneuvering services to satellite
operators, including our subsidiary, Hellas-Sat.
WiMAX
Three pilot WiMAX network systems have been installed and are
operating in the areas of Thessaloniki, Mount Athos and the
Attica region. In 2010, these systems are expected to become
commercially available, providing broadband data services
(Internet and VPN) as well as voice services (VoIP), and there
are also plans for their regional expansion. In 2009, we
developed a customized WiMax solution for business customers in
the industrial area of Sindos, Thessaloniki, and also developed
procedures for deploying WiMAX solutions in areas with limited
broadband capabilities.
Telephone
Directory and Information Services
Directory services.
11888 is our
directory enquiries service. 11888 remains the leading directory
enquiry number despite intense competition, and total customer
satisfaction with this service is very high, according to a
recent customer survey.
INFOTE.
On December 19, 2007, we sold
INFOTE, our then wholly-owned subsidiary, whose main activity
was the provision of directory services in both printed and
electronic form, including the Yellow Pages, Greek Yellow Pages
and
Business-to-Business
directory services to Rhone Capital LLC and Zarkona Trading
Limited. INFOTE, which now operates as Greek Yellow Pages
S.A., currently competes with our directory enquiries
service.
66
Maritime
Radio Communications (Olympia Radio)
Olympia Radio Coast Station, our maritime radio communications
network, provides the relevant services to the Greek State, in
line with its obligation to secure human life at sea as required
by international treaties (SOLAS 1974 and IMO regulations,
Global Maritime Distress and Safety System
(GMDSS
)). The Olympia Radio network consists
of several base stations, transmitters and receivers in 40
coastal sites, comprising Very High Frequency (VHF), High
Frequency (HF) and Medium Frequency (MF) technologies, providing
worldwide maritime communications (voice, data, fax,
e-mail,
facsimile, telex and NAVTEX).
Telecards,
Paging and Telegraphy Services
Telecards.
Telecards are chip-based prepaid
cards used in all of our payphones instead of coins. Telecards
are sold to the public at a small premium above the tariff unit
rate. We, in turn, pay a 11% commission, on average, to
resellers who sell telecards to the public.
The number of public telecard payphones as of the end of 2009 in
Greece was approximately 50,500 compared to approximately 52,360
as of the end of 2008. This number includes approximately 13,500
indoor telecard payphones leased to customers for private and
public use throughout Greece. Apart from chip-based prepaid
cards there are also scratch calling and internet prepaid cards.
Revenues from telecards were Euro 37.3 million, or
0.6% of total revenues, in 2009, compared to
Euro 52.2 million, or 0.8% of total revenues, in 2008,
and Euro 76.2 million, or 1.2% of total revenues, in
2007. Revenues from non-chip based prepaid cards are also
included in these figures.
Paging Service.
Due to declining demand and
usage of the paging service, we began withdrawing the service in
2008. We terminated the provision of the paging service in
January 2009.
Telex and Telegraphy.
Telegraphies, as well as
telex, are services with declining demand due to the successful
application of other methods of communication. The aggregate
revenues generated by these two services were
Euro 4.2 million, or 0.1% of total revenues in 2009,
compared to Euro 2.5 million, or 0.0% of total
revenues, in 2008, and Euro 3.0 million, or 0.1% of
total revenues, in 2007.
Equipment
Sales
Our retail network in Greece provides a full range of
telecommunications equipment for use with various types of
services provided by our Group (fixed and mobile telephony and
the internet), including advanced telecommunication devices such
as video-telephones, Wi-Fi ADSL routers, modems,
multi-mode
®
private-use call centers and mobile telephones.
We enhance and update our equipment product portfolio available
at our stores in line with the various services offered by our
Group and with client demand.
Revenues from telecommunications equipment sales to third
parties were Euro 438.0 million, or 7.3% of our total
revenues, in 2009, compared to Euro 617.2 million, or
9.6% of our total revenues, in 2008, and
Euro 679.8 million, or 10.8% of our total revenues, in
2007. See Mobile Telephony
Services Greece-Cosmote
Distribution and Germanos
Business of Germanos. A significant percentage of our
revenues from equipment sales comprises sales of the Germanos
retail network. Following its acquisition by Cosmote, Germanos
ceased distributing the products of Cosmotes mobile
telephony competitors and as a result, its sales of
telecommunications equipment decreased significantly in 2008 and
2009.
Customer
Contact Centers
We seek to maintain and strengthen our relationship with our
customers through continuously enhancing our web-enabled call
centers in order to offer quality services and to increase our
revenues. To that effect, we have created the following
services, in order to respond to our customers needs:
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134
, our sales and customer service channel
for residential and small business customers;
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13818 OTEbusiness Customer Service
, provides
both commercial customer care and technical support for
enterprise and business customers;
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OTELINE
, our outbound telesales center, which
offers
one-to-one
marketing for all of our products and services and customer
programs;
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www.oteshop.gr
, our electronic shop, which
had approximately 2.6 million visits and received
approximately 21,000 orders in 2009;
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www.whitepages.gr
, our site for telephone
directory services, which had 15 million visits in 2009;
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11888
, voice telephony directory services and
entertainment information, which received approximately
33 million calls in 2009 and achieved over 97% customer
satisfaction based on survey evidence;
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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 17 million calls in 2009;
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1502
, our citizen service center;
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112
, the pan-European emergency call number;
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www.otewholesale.gr
, our electronic shop for wholesale
services offered to other operators and ISPs; and
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1305
, our telecollections contact center.
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Other
Services
We offer a variety of other services to our customers, including
maintenance and transfers of existing lines. Revenues from these
other services amounted to Euro 116.4 million, or 1.9%
of total revenues, in 2009, compared to
Euro 120.4 million, or 1.9% of total revenues, in
2008, and Euro 68.3 million, or 1.1% of total
revenues, in 2007. Revenues from these services also include
revenues for similar services generated by our subsidiaries.
In accordance with regulatory requirements, we offer a number of
wholesale services, including number portability and Friendly
Network. Number portability allows end-users to retain their
telephone number when switching to the network of another
operator. Friendly Network, a service based on our IN structure,
offers other operators rerouting information with respect to
their calls to ported numbers and termination of these calls on
other operators networks. We provide this service through
automated information transfer and order execution processes.
In accordance with regulatory requirements, we are also obliged
to offer two universal services, a Universal Telephone Directory
and Directory Enquiry Services. These directory services include
all mobile and fixed telephony customers. We published the first
Universal Telephone Directory in 2004. Currently, our directory
service covers the entire territory of Greece.
We also offer video conferencing and three and four-digit
telephone numbers and plan to introduce a number of additional
new services.
Information
Technology
In 2009, we continued to upgrade and expand our information
systems and made significant investments aimed at improving the
quality of the products and services we offer to our customers,
and enhancing our internal business efficiency. Our key
investments in information technology include the following:
Support for products and services.
During
2009, our internal IT functions supported the implementation and
integration of products that rely heavily on IT, such as double
play and voice bundles and
IP-VPN.
Wholesale Support Systems.
We launched a
number of IT projects aimed at expanding our support of
wholesale customers in accordance with reference offers approved
by the EETT. These initiatives include wholesale line rental,
wholesale leased lines, local loop unbundling, and collocation.
68
Operational Support Systems.
We have expanded
our network inventory and service activation system to cover
IP-VPN.
In
2010 we will implement satellite TV provisioning. In relation to
service assurance, we implemented service quality management for
e-Line
and
IP-VPN
(leased lines to be implemented during 2010) as well as
network trouble ticketing.
Customer Relationship Management.
We have
completed a number of IT projects aimed at expanding our
customer relationship management
(CRM)
capabilities in the areas of telemarketing, service level
agreement management, sales management and customer self-care
(such as
e-shelf-care,
Electronic Bill Presentation & Payment) and plan
further improvements in the customer ordering, customer
segmentation and consolidation and services areas. In addition,
our alternative sales channel capabilities, such as the web and
third party networks, were expanded and will be further enhanced
with additional functionality and products.
Business Intelligence.
We have completed and
continue to enhance a number of initiatives in the areas of
corporate performance management, customer insight, predictive
analytics and continue to enhance our enterprise data warehouse
infrastructure into new subject areas aiming to turn operational
data in insightful information.
Enterprise Management.
We have completed and
continue to enhance a number of initiatives in the areas of
fleet management,
e-payments
and human capital management.
Security Management.
We are enhancing our log
management framework and are streamlining our risk assessment
methodologies. Our security policy framework will be upgraded by
the end of 2010 and an identity management system for the
internal users will be launched during 2010.
IT infrastructure.
We continued to expand our
IT infrastructure, in order to improve the security, performance
and availability of our information systems, which, as of
December 31, 2009, consist of 630 physical servers with 360
Tbytes (118 Tbytes more than as at December 31,
2008) of online usable mass storage based on storage area
network
(SAN)
architecture. Major components
of our network infrastructure have been replaced/upgraded and
Wi-Fi services have been launched for our headquarters. Our new
data center has been delivered and the relocation from our old
one will be completed by March 2010. IT service management and
systems monitoring platforms have also been upgraded.
Other
Group Activities
Turnkey
Telecommunications Projects Hellascom
International
Hellascom International, our 100%-owned subsidiary, was
established in 1995 with the aim of executing telecommunications
projects abroad.
Since its foundation, Hellascom has been active in the Balkans,
Eastern Europe, the Middle East and Greece.
In 2009, Hellascom continued to execute construction projects on
behalf of our Group, including:
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supporting services for the restoration of cable damages, as
well as for the construction of part of the new telephone
connections/transfers and of ADSL and local loop cross
connections in the distributors of the switches in Greece;
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various structured cabling projects for private customers;
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structured cabling projects on behalf of our Group;
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development of cable networks and systems to corporate customers;
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studies for the development of the urban network in addition to
studies for backbone networks;
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medical information systems for hospitals in the region of
Thessalia, Greece;
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new projects with our Group and also with customers of our
Group; and
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new projects from the public sector (development of broadband
networks, supply and installation active and passive equipment).
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69
Satellite
Services Hellas Sat
We hold a 99.05% interest in Hellas Sat Consortium Limited
(HCL)
, a company incorporated in Cyprus. HCL
holds a 99.99% and OTEGlobe a 0.01% interest in Hellas Sat S.A.
(HSSA)
, operating under the laws of Greece.
Both companies are referred to in this Annual Report as Hellas
Sat. Hellas Sat provides space segment capacity,
telecommunications and broadcast services through its Hellas-Sat
2 satellite.
Licenses.
In August 2001, the Greek Ministry
of Transport and Communications executed a concession agreement
with Hellas Sat and in November 2001 it granted to it an
exclusive special operating license for the access and use of a
geostationary orbital slot of 39 degrees east and the associated
radiofrequencies, through the construction, launch, operation
and commercial utilization of a satellite network consisting of
at least two satellites. The concession agreement also requires
Hellas Sat to make available to the Greek State three
transponders on an ongoing basis and free of charge (the first
two upon the launch of the first satellite and the third upon
the launch of the second satellite), as part of the
consideration for the granting of the license. Hellas Sat has
made the first two transponders available to the Greek State.
Hellas Sat has also been granted a similar license for the
construction, orbit positioning and use of a satellite system by
the Republic of Cyprus.
In July 2009, the Greek Ministry of the Interior executed a
concession agreement with HSSA regarding the provision of high
definition
Pay-TV
services via satellite to Greek citizens pursuant to a relevant
license issued by the National Radio Telecommunications Council
(NRTC) to HSSA, in connection with which, HSSA deposited a
Performance Letter of Guarantee in the amount of
Euro 1.8 million for the benefit of the Greek State.
Furthermore, in February 2010, HSSA executed an agreement with
OTE regarding the transfer of this
Pay-TV
License to OTE, subject to the following conditions:
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a request for the suspension of HSSAs obligations arising
out of the
Pay-TV
License as well as the concession agreement is addressed by HSSA
to both the National Radio Telecommunications Council (NTRC) and
the Ministry of the Interior;
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a decision for the approval of the transfer of the
Pay-TV
License requested by us is issued by the NRTC and any other
competent authorities; and
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a new concession agreement regarding the provision of high
definition
Pay-TV
services via satellite to the Greek citizens is executed between
us and the Ministry of the Interior.
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History and Operations.
Hellas Sats
satellite, Hellas-Sat 2, was launched in May 2003. It has two
fixed antennae that provide pan-European coverage and two
steerable antennae that provide coverage outside of Europe. The
total cost of the Hellas Sat program was approximately
Euro 172.0 million. Hellas Sat has not yet launched a
second satellite.
Hellas Sat is currently covering, and providing services to
customers, in over 30 countries in Europe, the Middle East and
Southern Africa. The majority of Hellas Sats revenues is
derived from Central and Eastern European markets and video/DTH
services. For 2009, Hellas Sat increased its revenues from the
Southern African region, the only region in which it still has
available capacity.
In January 2006, HSSA launched a new satellite-based broadband
service, Hellas Satnet! Business, offering
high-speed reliable internet access to rural areas. In 2007,
HSSA also offered other value-added services over its satellite
broadband service, such as web hosting, web mail and VPN. In
September 2008, HSSA launched the Hellas Satnet!
Home broadband service, which has much lower tariffs than
the Hellas Satnet! Business, and mainly targets home
users.
In 2009, HCL had consolidated revenues of
Euro 27.5 million and a consolidated profit after tax
of Euro 6.2 million as compared to consolidated
revenues of Euro 25.5 million and consolidated profit
after tax of Euro 1.8 million in 2008. Since
HCLs incorporation, we contributed initially
U.S. $48.8 million and subsequently
Euro 149.1 million to finance its share capital. On
September 30, 2006, an amount of
Euro 149.1 million, equal to the outstanding principal
under the intra-group loan between us and HCL, plus accrued
interest as of the date of the agreement, was converted into
share capital of HCL, which increased our interest in its share
capital to 99.05%.
70
Hellas Sat is currently collaborating with the Greek State to
update the concession agreement and Hellas Sats special
operating license, in order to reflect developments in Hellas
Sat S.A.s business since 2001. In addition, HCL has
concluded negotiations with the Republic of Cyprus with respect
to the timing and manner of payment of an amount of up to
U.S. $11 million, which the Republic of Cyprus claims
is payable under the relevant license. The parties have agreed
to a price of U.S. $5 million in cash, pursuant to a
set payment schedule, and additional consideration of
U.S. $6 million in the form of services. Furthermore,
HCL will provide for free 600 annual two-way broadband internet
services, including the necessary equipment and the satellite
transmission of the TV channel and three radio programs of the
state Cyprus Broadcasting Corporation.
Maritime
and Satellite Services OTESAT Maritel
Our subsidiary OTESAT Maritel A.E. manages:
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the provision of Inmarsat satellite services through our land
earth station in Thermopylae as well as any other service
provided by Inmarsat through its own stations
(Fleet
Broadband)
;
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the agreements with other Inmarsat land earth station operators
for the ocean regions not covered by our satellite teleports, as
well as with providers for other satellite systems, such as
Iridium and VSAT; and
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the whole range of satellite telecommunication and value-added
services
(VAS)
portfolio and sales of
relevant equipment for maritime, governmental and certain land
mobile customers.
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Consultancy
Services OTEplus
OTEplus Technical and Business Solutions S.A.
(OTEplus)
was established in 1987, as our
consultancy subsidiary. As of February 8, 2007, we hold
100% of the share capital of OTEplus.
OTEplus focuses on new information and telecommunication
technologies and management consulting. In 2009, it implemented
projects for organizations and companies in the public and
private sector, providing integrated consulting services on
business and technical issues.
Insurance
Services OTE Insurance Agency
OTE Insurance Agency S.A., our wholly-owned subsidiary, was
established in 1997, and operates as an insurance broker. It
collaborates with large insurance companies, along with several
international insurance brokers, located in Greece.
B2B
eProcurement Services CosmoOne Hellas
Marketsite
We hold a 61.7% interest in CosmoOne, which was founded in 2000
(the minority is held by Greek banks). CosmoOne operates an
electronic marketplace and provides
business-to-business
(B2B) electronic commerce applications. Key services include
internet auctions, procurement and channel procurement,
invoicing, business intelligence and track and trace solutions.
INVESTMENT
PROGRAM 2010/2011 CAPITAL EXPENDITURE
General
Over the last year we have been investing in enhancing the
capability of our telecommunications networks. Our capital
expenditure program currently focuses on mobile services,
Internet Protocol services and broadband, expanding backbone
network capacity using DWDM and network dimensioning to maintain
quality.
We expect our Group aggregate planned capital expenditure on
network infrastructure for 2010 to be approximately at the same
levels as previous years. We regularly review our planned
capital expenditures in order to be able to take advantage of
the introduction of new technologies and to respond to changes
in market conditions and customer demands.
71
Domestic
and International Fixed-line Network Upgrading
Investments
The most significant part of our planned capital expenditure
focuses on our new business areas, where we seek to upgrade our
network infrastructure to better support broadband services. In
that respect, we plan to transform our network to a unified,
all-IP, NGN network, able to support all our existing, as well
as new, enhanced services. We expect the major investment areas
to include the introduction of an NG Access Network, transport
network expansion in the DWDM and IP core areas, and the
introduction/development of IPTV, voice over broadband and
multimedia services. The major investment areas in our network
are described below.
Transmission Network.
In
order to accommodate the increasing national and international
traffic, we are constantly expanding our core transmission
network, based on DWDM rings. A WSS-based DWDM ring with a total
capacity of 800 Gbps, interconnecting five
IP-core
PoPs, was completed in 2009. In 2010, a new DWDM ring covering
Crete and two new metro DWDM rings in Thessaloniki and Patras
are expected to become operational. Existing DWDM rings are also
being enhanced in terms of capacity and number of nodes in order
to cover increased national traffic needs. The capacity of the
international submarine link, connecting Greece to Italy
(Kokkini to Bari), was upgraded to 230 Gbps in 2009.
In parallel, we are expanding our regional NG-SDH network,
deploying a number of new regional NG-SDH rings and upgrading
existing ones.
ADSL Network.
We expanded
our ADSL network in 2009 to meet increasing demand for broadband
services. We will continue the expansion of DSLAM PoPs and aim
to increase their number to about 1,630 within 2010. In
addition, a rollout project for ADSL ports increased their
number to 1,562,478 million as of December 31, 2009.
Approximately 62% of these ADSL ports are served by
Ethernet-based DSLAMs.
IP Network.
At the end of
2009, there were ten IP Core PoPs in operation (one in each of
Thessaloniki, Patras, Larissa, Heraklion, Tripoli, Ioannina,
Kavala, Kozani and two in Athens). All IP Core PoPs are
connected through 10 Gbps links. Core links at IP Core sites are
doubled for protection. IP Core network carries broadband, Metro
Ethernet,
IP-VPN,
and
Sizefxis traffic. New terabit routers have replaced the existing
gigabit ones in the two PoPs in Athens and in the PoPs of
Thessaloniki and Patras. At the end of 2009, 44 BRAS were
operational. The developments in the IP Edge network mainly
followed the expansion of the Sizefxis project and the demand
for
IP-VPN
services.
Metro Ethernet.
At the end
of 2009, there were 25 Ethernet Domains located at 15 Ethernet
PoPs (Kolleti, Nyma, Marousi, Acropolis, Peristeri, Piraeus,
Ermou, Ampelokipoi, Larissa, Tripoli, Patra, Iraklion, Ionnina,
Kavala, Kozani). The total number of Metro Ethernet PoPs in
Greece was 800 at the end of 2009.
IPTV.
The provision of IPTV
services began with a soft launch in December 2008. Since
February 2009, IPTV services are available to all customers of
Ethernet DSLAM PoPs in the cities of Athens, Thessaloniki,
Patra, Larisa and Iraklio, while at the end of 2009, IPTV
services were provided at 56 new PoPs, most of which are
capitals of prefectures. In the period
2010-2011,
IPTV services are expected to be available at all PoPs of 10
Gbps or 2.5 Gbps NG-SDH rings with Ethernet DSLAMs installed. In
the future, we expect our network to support more IPTV services,
such as
catch-up
and
nPVR/PVR.
Telephony Network and IP Multimedia
Systems.
Our capital expenditures for
switching are minimal due to the complete digitalization of the
network. In 2007, the study for the transition to an NGN network
was finalized and a migration strategy according to market
demand was proposed. The resulting NGN study suggests a ten-year
network transformation plan. In 2008, the technical requirements
for IMS were defined and detailed test cases were distributed to
different vendors in order to participate in the proof of
concept
(POC)
tests. These tests took place
in our labs during 2009 and were part of the vendor selection
process which was completed at the beginning of 2010. The IMS
network will be implemented as an overlay to the PSTN network
and in the first phase will offer VoIP as second line over
broadband connection and in the future VoIP as first line.
Gradually the PSTN subscribers will be transferred to the IMS
which will offer to them multimedia capabilities.
Network Management and
OSS.
In the following years, we will continue
to place emphasis on integrating our various network management
systems and expanding the unified network inventory system. We
will also focus on support service management processes for
broadband services and
IP-VPNS
through our Service Assurance OSS
72
platforms. The network inventory covers our broadband network
and supports the provision of broadband services. The first
versions of Fault, Performance and Service Management software,
which are covered by the Service Assurance Project, became
operational during 2009. We try to incorporate in the NMS/EMS
all network elements that go in operation. We also continue our
efforts to consolidate a few remaining NMS and EMS as required
and we expect this task to be completed by the end of 2010.
Mobile
Telephony Investments
Our mobile telephony investment program includes mainly
Cosmotes continuing investments in Romania to upgrade and
enhance Cosmote Romanias and Zapps network in both
2G and 3G technologies and gain market share. It also includes
further investments in Cosmotes other international
subsidiaries (AMC and Globul) and network maintenance and
upgrades in Greece, including further expansion of 2G and 3G and
HSPA coverage and improvements in IT systems. See
Mobile Telephony Services
Greece Cosmote).
Information
Systems
Our capital investment program for information systems includes
investments primarily aimed at:
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automating
end-to-end
processes, designed to increase productivity and contain
operating costs;
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providing high quality IT services to both our internal users
and end customers in order to support current, and obtain new,
revenue sources, swift implementation of services, a high level
of customer service and operational superiority over competition;
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the development and operation of retail and wholesale integrated
services and solutions for our customers, with an emphasis on
broadband services, value-added services, content and ICT;
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distributing and developing an in-depth understanding of the
information regarding our customers and our operation in order
to support the decision-making process at all management levels;
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expanding the implementation of our information systems in the
areas of wholesale support systems, OSS, CRM, security, BI,
service delivery platform
(SDP)
, supply chain
management and ERP; and
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improving the infrastructure of our information systems in order
to continue providing high quality services and to ensure
business continuity.
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See Other Services Information
Technology.
Funding
We and Cosmote expect to fund our respective capital
expenditures and investments, for the most part, through
internally generated funds, mainly cash from operating
activities. Similarly, we expect that capital expenditures and
investments by our other Greek subsidiaries will be
self-financed. We expect our investment program for
international operations for 2010 to be largely self-financed or
funded through project finance borrowings.
LEGAL
PROCEEDINGS
We are party to various litigation proceedings and claims
arising in the ordinary course of business. As of
December 31, 2009, we provided for a reserve of
Euro 109.8 million in relation to pending or
threatened litigation and claims, the outcomes of which are
reasonably subject to estimation. We do not expect that these
proceedings, individually or in the aggregate, are likely to
have a material adverse effect on our results of operations and
cash flows. See also Note 29 to our consolidated financial
statements.
Greece
Regulatory
Matters
In May 2009, the EETT imposed on us a fine of
Euro 2.0 million for allegedly exceeding the upper
price limit of the retention fee for calls made by our
subscribers to subscribers of a mobile network. We have appealed
against
73
this decision before the Administrative Court of Appeal. The
case was heard on May 13, 2010 and the Courts
decision is pending. A hearing for this case has also been
scheduled for June 9, 2010.
In April 2009, the EETT imposed on us a fine of
Euro 1.5 million for allegedly delaying the provision
of the information requested from us for the purpose of cost
control. We have appealed against this decision before the
Administrative Court of Appeal. The case was heard on
October 15, 2009 and the Courts decision is pending.
In March 2009, the EETT imposed on us a fine of
Euro 7.5 million for allegedly delaying the delivery
of leased lines to Hellas on Line S.A. We have appealed against
this decision before the Administrative Court of Appeal. Our
appeal was heard on January 21, 2010 and the Court, with
its decision, adjourned the case.
In February 2009, the EETT imposed on us a fine of
Euro 2.0 million for our alleged refusal to provide
the information requested for the purpose of price squeezing
control. We have appealed against this decision before the
Administrative Court of Appeal. The case was heard on
May 12, 2010 and the Courts decision is pending.
In July 2008, the EETT imposed on us a fine of
Euro 9.0 million for alleged anti-competitive behavior
against Tellas. We have appealed against this decision before
the Administrative Court of Appeal. The case was heard on
October 14, 2009 and the Administrative Court of Appeal
with its decision reduced the fine to
Euro 5.7 million. We also intend to file a writ of
cassation before the Council of State.
In July 2008, the EETT imposed on us a fine of
Euro 2.0 million for our alleged refusal to provide
information about the ADSL market. We have appealed against this
decision before the Administrative Court of Appeal. The
Administrative Court of Appeal, with its decision of
September 30, 2009, reduced the fine to Euro 100,000.
In October 2008, the EETT imposed on us a fine of
Euro 11.0 million for alleged violations of
legislation relating to the reference unbundling offer. We
appealed against this decision before the Administrative Court
of Appeal. The case was heard on September 24, 2009 and the
Administrative Court of Appeal with its decision annulled the
aforementioned fine.
In July 2007, the EETT imposed a fine on us of
Euro 20.1 million for alleged abuse of our dominant
position in the Greek broadband market. We have appealed against
this decision before the Administrative Court of Appeal. The
case was heard on October 15, 2008 and the Administrative
Court of Appeal with its decision reduced the fine to
Euro 10.1 million. We filed a writ of cassation before
the Council of State, but the hearing for this case has not yet
been scheduled.
In July 2007, the EETT imposed on us a fine of
Euro 4.0 million for alleged violations of legislation
relating to our obligation to comply with EETTs decisions
about cost control with respect to tariff year 2003. We have
appealed against this decision before the Administrative Court
of Appeal. The case was heard on October 15, 2008 and the
Administrative Court of Appeal with its decision reduced the
fine to Euro 2.5 million. We filed a writ of cassation
before the Council of State, but the hearing has not yet been
scheduled.
In addition, in July 2007, the EETT imposed on us a fine of
Euro 1.25 million for alleged violations of
legislation relating to the Reference Unbundling Offer. We have
appealed against this decision before the Administrative Court
of Appeal. The case was heard on March 18, 2009 and the
Administrative Court of Appeal with its decision reduced the
fine to Euro 0.5 million. We also intend to file a
writ of cassation before the Council of State.
Furthermore, in October 2007, the EETT imposed on us a fine of
Euro 3.0 million for alleged violations of legislation
relating to the Reference Unbundling Offer. We appealed against
this decision before the Administrative Court of Appeal and the
case was heard on January 20, 2009. The payment of the fine
has been suspended by a ruling of the Administrative Court of
Appeal, pending the Courts decision on our appeal.
On February 2, 2005, the EETT imposed on us a fine of
Euro 2.0 million for alleged violations of legislation
relating to competition in the provision of leased lines. On
May 30, 2005, the EETT imposed an additional fine of
Euro 1.5 million on us for allegedly delaying in
providing access to the local loop. We have appealed against
these decisions before the Council of State which, on
January 30, 2007, referred the case to the Administrative
Court of Appeal. The hearing of the first case was adjourned
until December 8, 2010. The second case was heard on
October 14, 2009 and the decision is pending.
74
On February 14, 2003, the EETT imposed fines of
Euro 0.3 million on each of Cosmote and Vodafone in
connection with the EETTs decision of March 2002
designating them as organizations with significant market power
(SMP) in the mobile market and also in connection with the
obligations of SMP organizations regarding the interconnection
which these organizations provide to third parties. On
April 24, 2003, Cosmote appealed to the Council of State
seeking annulment of this fine. The Council of State referred
the case to the Administrative Court of Appeal (due to new
legislation). The case was heard on April 21, 2010 and the
decision is pending.
In February 2003, the EETT issued another decision designating
us, Cosmote and Vodafone as organizations with significant
market power in the interconnection market in Greece pursuant to
the Interconnection Directive. Cosmote appealed to the Council
of State seeking annulment of the decision. The Council of State
issued decision no. 1631/2009 according to which the case
is referred to the plenary session of the Council of State which
will decide on the constitutionality of this provision. The
hearing has been postponed until December, 2010.
Organizations designated as having significant market power are
subject, among other requirements, to the obligation under the
Interconnection Directive to publish Reference Interconnection
Offers. We have appealed against the decisions of the EETT
concerning the Reference Interconnection Offers for 2002 and
2003 to the Council of State, and the hearings for both of these
appeals have been postponed until October 12, 2010.
The EETT imposed a fine of approximately
Euro 0.2 million on us following a petition filed in
March 1998 by Forthnet, a Greek internet provider, challenging
our failure to provide Forthnet a single access number while
providing such single access number to OTENet. We have since
provided Forthnet, and all the internet providers, with single
access numbers and have filed an appeal for annulment of the
fine to the Council of State. The hearing of this appeal was
adjourned to June 8, 2010.
In January 1999, Forthnet filed a claim in the Court of First
Instance for approximately Euro 0.3 million in damages
due to alleged tortuous conduct, infringement of competition and
telecommunications laws and discrimination in favor of OTENet.
The decision on this claim was postponed, pending the Council of
States ruling on our appeal to annul the EETT fine.
Forthnet brought the case again before the Court of First
Instance and the case is pending.
Forthnet has also filed a claim against us for approximately
Euro 26.7 million in damages in the Court of First
Instance for loss of customers resulting from alleged
discrimination by us in favor of OTENet. The hearing for this
claim, scheduled for January 28, 2010, was cancelled.
On March 31, 2003, we adjusted our tariffs for leased lines
and data telecommunications and introduced a discount package
for our corporate customers. The EETT did not approve of our
proposed tariffs for leased lines and data telecommunications.
However, in the interest of promoting fair competition, the EETT
permitted us to implement these new tariffs, notwithstanding
that in the EETTs view we did not provide sufficient
evidence of their cost-orientation. If a third-party dispute
were to arise regarding the cost-orientation of the new tariffs,
we would be obliged to provide sufficient proof of
cost-orientation. In a decision dated December 20, 2002,
the EETT imposed a fine of Euro 1.5 million and
required us to improve the leased lines costing system so that
the total costs of leased lines (which are approved by the EETT)
could be allocated to individual lines in a different way. We
have appealed against this decision before the Administrative
Court of Appeal. The case was heard on November 11, 2008
and the Administrative Court of Appeal with its decision reduced
the fine to Euro 0.1 million. We also intend to file a
writ of cassation before the Council of State.
In late December 2003 and January 2004, the EETT issued a number
of decisions imposing reduced tariffs for retail services and
wholesale leased lines and mandating the use of current, rather
than historic, cost bases, effecting a radical change in the
methodology of cost allocation on which the average costs for
retail and wholesale leased lines are calculated. The imposition
of these lower tariffs had a material adverse effect on our
revenues, as these lower tariffs remained in effect until
November 2004, when the EETT approved higher tariffs based on
data derived from our ECOS costing system. We have filed an
appeal before the Council of State seeking suspension and
annulment of these decisions. The hearing for the suspension of
these decisions has not yet been scheduled, and the hearing for
their annulment was adjourned to October 12, 2010.
On November 29, 2006, the EETT imposed a fine on us of
Euro 3.0 million for a breach of provisions that
regulate carrier pre-selection services. We have appealed this
decision to the Administrative Court of Appeal. The
75
case was heard on February 12, 2008 and the Administrative
Court of Appeal with its decision reduced the fine to
Euro 1.0 million. We filed a writ of cassation (appeal
on legal grounds) before the Council of State and the hearing
has not yet been scheduled.
On June 11, 2004, Vitals, Inc. and Victor Shtatnov brought
a claim against Econophone S.A., Equant S.A. and us in a
Philadelphia court, in the United States, for compensatory
damages in excess of U.S. $50,000 plus interest.
Plaintiffs complaints against Econophone were based on
breach of contract, and against us on tortuous interference with
the Vitals/Shtatnov and Econophone contracts by terminating
Econophones access to telephone equipment, lines
and/or
switches. The defendant, Econophone S.A., has asserted several
cross claims against us, including for breach of contract. We
have filed motions for dismissal of the claim of plaintiffs
Vitals, Inc. and Victor Shtatnov and the cross claim of
defendant Econophone Hellas S.A. on grounds of lack of personal
jurisdiction and lack of subject matter jurisdiction. The Court
dismissed all claims against us. We have filed a counterclaim
against Econophone for approximately Euro 7.2 million
in unpaid fees. The hearing for this case before the Court of
First Instance scheduled for October 8, 2009, was
cancelled. We brought the case again before the Court of First
Instance and a new hearing has been scheduled for
February 2, 2012.
We filed a claim against Greek Telecom in the Court of First
Instance for Euro 1.6 million in unpaid leased line
fees. The case was heard on March 22, 2006 and the case was
adjourned. We brought the case before the Court of First
Instance and the hearing is scheduled for January 27, 2011.
Subsequently, Greek Telecom filed a counterclaim against us for
Euro 45.4 million in damages for alleged breach of
contract arising out of our disconnection of telecommunications
services. In addition, in February 2006, we filed an additional
claim against Greek Telecom for Euro 13.6 million in
unpaid fees. Both cases were heard on March 22, 2006, and
all claims were dismissed. We and Greek Telecom have appealed
the dismissal. Both appeals were heard on October 4, 2007
and were both dismissed. We brought our claim for unpaid fees in
the amount of Euro 13.6 million before the Court of
First Instance and the hearing of our case was adjourned until
May 3, 2012.
In May 2009, Lannet filed a claim against us before the Court of
First Instance for an aggregate amount of
Euro 175.6 million, claiming restitution for our
alleged illegal termination of services. The hearing of this
case is scheduled for February 17, 2011.
Tellas filed a claim against us in the Court of First Instance
for damages of Euro 4.3 million for losses due to
alleged delays in deliveries of leased lines. Tellas filed
another claim against us in the Court of First Instance for
Euro 2.0 million in damages for our failure to enforce
cost-oriented interconnection prices. The hearing for both these
claims is scheduled for September 16, 2010.
Teledome S.A. filed five lawsuits against us before the Athens
Court of First Instance, claiming an aggregate amount of
Euro 8.1 million plus interest for alleged damages
incurred by it as a result of our alleged delay in delivering to
it leased lines and the application of non cost oriented
interconnection charges by us.
The hearings of the above lawsuits were scheduled for various
dates in 2007. The first lawsuit (Euro 1.6 million)
was heard before the Court on June 6, 2007 and the hearing
was postponed, the second lawsuit (Euro 1.0 million) was
rejected, regarding the third lawsuit (Euro 0.3 million)
the Court postponed the hearing, the fourth lawsuit (Euro
1.6 million) was heard on February 7, 2007 and the
Court rejected it and for the fifth lawsuit
(Euro 3.6 million) the Court ordered factual
investigation. The investigator has already been appointed and
the completion of the factual investigation is pending.
Furthermore, Teledome S.A. filed six lawsuits against us before
the Athens Court of First Instance, claiming approximately
Euro 11.1 million plus interest in damages, due to the
suspension of its subscribers number portability and due
to alleged breach of contractual obligations arising out of
disconnection of telecommunication services. Two of
Teledones lawsuits claiming Euro 4.6 million,
were rejected by the Court. Teledome appealed the decision
before the Court of Appeals, which rejected it on
January 25, 2007. Teledome S.A. appealed against this
adverse decision and its appeal was discussed on
November 27, 2008 by the Court of Appeals and it was
rejected. Teledomes claim for Euro 0.9 million
was also rejected by the Court. Teledome appealed against it and
its appeal was heard on November 26, 2009. The outcome of
this appeal is pending. The lawsuit of
Euro 4.4 million was heard on March 6, 2008 and
was rejected by the Court. Regarding the lawsuit of
Euro 0.5 million, the Court ordered an experts
opinion. The experts report was filed and after the
hearing on December 9, 2009 before the same Court, the
76
decision is pending. In relation to the lawsuit of
Euro 0.6 million, the Court concluded that the claim
up to an amount of Euro 0.3 million was valid.
However, both of us and Teledome S.A. appealed against the
decision, which was heard on December 4, 2008 and the Court
accepted our appeal and rejected Teledomes appeal.
Finally, Teledome S.A. filed a law suit against us and our CEO
before the Athens Court of First Instance claiming
Euro 54.1 million plus interest for damages for so
called unlawful termination of its leased lines by us which
allegedly resulted in Teledome S.A.s bankruptcy. This
claim was heard on March 18, 2009 and March 26, 2009.
According to the Courts decision, the hearing was
postponed and Teledome S.A. is required to deposit a guarantee
amounting to Euro 1.1 million for court expenses.
Teledome S.A. has appealed against this decision before the
Athens Multi Member Court of First Instance and the hearing for
this case was adjourned until September 29, 2010. As a
result of Teledome S.A.s refusal to deposit a guarantee,
we applied for the withdrawal of Teledome S.A.s appeal,
which was also adjourned until September 29, 2010.
Other
Proceedings
On May 14, 2002, ERT (the publicly owned television and
radio broadcaster) filed a claim against us in the Court of
First Instance, for Euro 42.9 million in damages for
an alleged infringement of the terms of a memorandum of
understanding entered into between us, Alpha Digital Synthesis
S.A. and Greek Radio and Television Broadcasting S.A. (ERT) on
March 7, 2000 for the establishment of a joint venture in
Greece that would operate as a subscriber television network
supported by our regional platform. The case was heard on
April 21, 2005 and was referred to arbitration. ERT has not
yet submitted a request for arbitration according to the rules
of Greek civil procedure. In November 2003, ERT filed a lawsuit
against us claiming Euro 1.5 million for restitution
of moral damage, which will be heard by the Athens Multi-Member
Court on June 3, 2010.
Based on a share purchase agreement dated December 11,
2001, we sold to Piraeus Financial Leasing S.A., a member of the
Piraeus Bank group, our shares in our subsidiary OTE Leasing
S.A., a licensed finance leasing company operating in Greece.
After the share purchase agreement had been signed, OTE Leasing
S.A. changed its name to, and merged with, Piraeus Financial
Leasing S.A. Under the terms of the share purchase agreement, we
undertook to reimburse Piraeus Financial Leasing S.A. for
revenue shortfalls arising out of credit defaults of existing
OTE Leasing S.A. customers for three years with respect to
movable assets, and five and a half years with respect to
immovable assets (such periods beginning upon execution of the
share purchase agreement), up to a maximum amount of
Euro 28.0 million, net of any collections where our
rights were subrogated to Piraeus Financial Leasing S.A. The
share purchase agreement provides the terms for this undertaking
and for determination of eligible delinquent payment cases. In
addition, where we have agreed to indemnify Piraeus Financial
Leasing S.A. for the credit losses of OTE Leasing S.A., we shall
be subrogated to the rights of Piraeus Financial Leasing S.A.
and may pursue debtors independently to recover our payments.
Piraeus Financial Leasing S.A. has served various notices on us,
requesting payment of an aggregate amount of
Euro 38.9 million with regard to unidentified credit
losses. We have reviewed the matter with counsel and, to date,
have reimbursed Piraeus Financial Leasing S.A. a total of
approximately Euro 30.7 million in final settlement of
163 out of the 220 cases cited in these notices, while we have
collected from debtors a total amount of approximately
Euro 7.12 million. Fifty-seven claims remain
outstanding, in respect of which the aggregate amount claimed by
Piraeus Financial Leasing S.A. is approximately
Euro 6.35 million, of which approximately
Euro 3.2 million concern movable assets for which the
three year period has expired and Euro 3.2 million
concern immovable assets for which the five and a half year
period has not expired. Piraeus Financial Leasing S.A. continues
to claim the above amount of Euro 6.35 million and
have sent us an
out-of-court
notice to that effect. With respect to 18 of the aforementioned
57 claims relating to finance leases, Piraeus Financial Leasing
S.A has brought a claim against us for an amount of
Euro 3.4 million. The case was set to go before the
Athens Court of First Instance on February 26, 2009, but it
was postponed until October 7, 2010.
A series of rulings of the Athens Administrative Court of Appeal
discharged us from liability for stamp duty, surcharges,
penalties and interest amounting to approximately
Euro 27.9 million assessed by the Greek tax authority
for the period from 1982 to 1992. The tax authority appealed
these findings to the Council of State, which on April 28,
2004 remanded the three cases to the Court of Appeals to be
judged on the merits. The Court of Appeals, judging on the
merits, upheld the decisions of the Athens Administrative Court
of First Instance, which had held us liable for approximately
Euro 11.9 million, which we have fully paid. We have
appealed against these decisions before the Council of State to
discharge all liability, and our appeal is still pending.
77
We have filed claims against two of our suppliers, Intracom S.A.
and Siemens, in connection with disputes involving the supply of
telecommunications equipment. In 1992 and 1993, we invited
tenders for the supply of telecommunications equipment, and due
to various delays in finalizing the outcome of such tenders and
our urgent need for the equipment, we ordered and received
equipment from Intracom and Siemens. We accepted and paid for
the equipment on the understanding that, in the event the
contracts were subsequently awarded to these suppliers and the
contract price was lower than the price that was previously paid
for the equipment, Intracom and Siemens would reimburse us for
any such differential in free equipment and services. Tenders
were in fact awarded to these suppliers, and the contract price
was lower than the price at which the equipment had been
supplied. We sought to reclaim the difference, which amounted to
approximately Euro 29.8 million, and when Intracom and
Siemens refused to reimburse this amount in free equipment and
services, we filed two claims on September 26, 1994 against
Intracom S.A and Siemens before the Athens Court of First
Instance in the amount of Euro 15.5 million and
14.2 million respectively. The proceedings relating to
Intracom S.A are in the stage of witness examination. The final
hearing of the claim against Siemens took place on May 28,
2009 before the Athens Court of First Instance, following
conclusion of the witness examination procedure. The Court
issued a decision rejecting our claim. The Decision was
officially served on us on February 17, 2010 and we filed
an appeal on March 17, 2010.
Timeapply Ltd.
(Timeapply)
has filed a claim
against us in the Court of First Instance for
Euro 17.3 million for restitution due to damage caused
by alleged patent infringement, as a result of our sale and
advertisement of a prepaid telephone card called
Promocard. The case was heard on January 22,
2009 and the Court concluded that the case should be heard
before a competent Court. The hearing was scheduled for
April 14, 2010, when it was adjourned. In addition,
Timeapply filed a claim against us in the Court of First
Instance for Euro 68.4 million for alleged breach of a
decision of the Court of First Instance granting an injunction
prohibiting distribution of Promocard. The Court of
First Instance rejected the claim and Timeapply filed an appeal,
which was heard on May 12, 2009. The Court rejected the
appeal.
Germanos is involved in certain disputes before the Court of
First Instance of Athens relating to franchise agreements for
Germanos chain of retail stores. Plaintiffs filed these
claims against Germanos for alleged infringements of certain
terms of the franchising agreements, alleging in total
approximately Euro 27.2 million in damages, while two
of them (former franchisees of Germanos) have also addressed
complaints to the Greek Competition Committee, which on April
2010, initiated an investigation regarding Germanos
franchise agreements; the investigation is ongoing and Germanos
is cooperating with the Greek Competition Commission. The
hearings of the court cases before the Court of First Instance
of Athens are scheduled to take place in 2010 and 2011, except
for one case which was heard in January 2009. By virtue of
decision No 4414/2009 this case was rejected. In addition, a
former commercial agent of Germanos filed a claim alleging
Euro 1.1 million plus interest in damages resulting
from a breach of provision of the airtime bonus due to the
termination of Germanos contract with Vodafone S.A. The case was
heard in April 2009 and by virtue of decision No 5679/2009 it
was rejected. The former commercial partner of Germanos appealed
the case. The appeal is to be heard in January 2011.
On May 12, 2010 Telecom Slovenije, which acquired Cosmofon
from Cosmote, sent to Cosmote notice of claims relating to
alleged breaches of warranties and indemnity provisions under
the relevant share purchase agreement signed on March 30,
2009; these claims amount to approximately
Euro 9.3 million. Cosmote considers these claims
unsubstantiated and unfounded and intends to take necessary
actions to oppose them.
On February 24, 2006, Fasma Advertising Technical and
Commercial S.A. filed a claim against us in the Athens Court of
First Instance for Euro 9.1 million plus interest for
breach of certain terms of a supply contract. The hearing was
scheduled for November 8, 2007. Fasma Advertising Technical
and Commercial S.A. then filed a claim against us on
September 6, 2007 before the same court, withdrawing its
previous claim and claiming the amount of
Euro 8.7 million plus interest. The hearing was set
for November 8, 2007 and was adjourned until
October 23, 2008. The case was heard on October 23,
2008. On May 14, 2009, the Court of first Instance issued
its decision
No 3186/2009
rejecting the claim. Fasma Advertising Technical and Commercial
S.A. filed an appeal before the Athens Court of Appeals. The
hearing is scheduled for October 7, 2010.
The Municipality of Thessaloniki imposed a series of fines
against us, for the period from 1999 to 2007, in an aggregate
amount of approximately Euro 15.0 million. We have
appealed these fines before the competent administrative courts.
The courts held in our favor for the year 2001, in the first and
second instance. The Municipality of Thessaloniki has appealed
these decisions to the Council of State. The hearings are still
pending.
78
In addition, a number of our employees and pensioners have filed
various claims relating to compensation issues or other benefits.
The Greek tax authorities imposed a capital levy of
Euro 14.0 million on OTE Estate, which appealed
against this decision to the competent Administrative Courts of
Athens on October 15, 2008. The hearing of the case is
still pending.
Criminal
Proceedings
Germanos acquisition case.
In 2007, the District Attorney
of Athens commenced a preliminary investigation with respect to
the propriety of the acquisition of Germanos by Cosmote (see
4.B Business Overview Mobile Telephony
Services Greece Cosmote
Germanos) following the submission of a report by a number
of members of the opposition party of the Greek Parliament,
which claimed among other things that the acquisition was not in
the business interest of Cosmote. During the course of the
preliminary investigation, members of the board of directors of
Cosmote at the time of the acquisition of Germanos were called
and requested to submit explanations in connection with this
case. Following the completion of the preliminary investigation,
an investigating judge (the 20th Investigating Judge of Athens)
was appointed to lead a formal criminal investigation in
connection with the potential perpetration of offences. The
investigating judge initiated criminal proceedings against the
members of the board of directors of Cosmote at the time of the
acquisition of Germanos, investigating alleged abuse of trust
(Apistia). Upon conclusion of the criminal
investigation, a decision will be made on whether an indictment
is warranted. Four of the then members of the board of directors
of Cosmote, Mr. Vourloumis, Mr. Apostolidis,
Mr. Ioannidis and Mr. Mavrakis, are still members of
the current board of Cosmote and three of them are senior
executives of our Group. In addition, the investigating judge
ordered the appointment of two independent accounting firms to
conduct an expert investigation in order to assess whether the
consideration for the acquisition of Germanos (of approximately
Euro 1.5 billion for 99.03% of the share capital of
Germanos) was reasonable in view of business judgment and
internationally accepted and customary financial and contractual
practices, and whether the acquisition resulted in financial
detriment to Cosmote, and, in that event, to assess the amount
of such detriment Cosmote has cooperated in relation to this
investigation. The experts report prepared by the
independent accounting firms was submitted to the Investigating
Judge on March 17, 2010 and concluded that the price paid
by Cosmote for the acquisition of Germanos was fair and that
Cosmote did not suffer loss or damage as a result of the
acquisition (rather the acquisition was to the corporate benefit
of Cosmote).
In conjunction with the matter of the acquisition of Germanos by
Cosmote, the Administrative Court of Appeal recently repealed a
fine that had been imposed by the Greek Capital Markets
Commission on Mr. Panos Germanos and other directors of
Germanos in connection with alleged manipulation of the share
price of Germanos prior to the time of the acquisition, judging
that no manipulation had taken place.
Siemens AG case.
The District Attorney of Athens has
conducted a preliminary investigation in connection with
allegations of bribery, money laundering and other criminal
offences committed in Germany and Greece by employees of Siemens
AG and a number of Greek government officials and other
individuals, relating to the award of supply contracts to
Siemens AG. In connection with the investigation, the District
Attorney has investigated, among other matters, the propriety
of, and allegations of criminal conduct in connection with, our
framework contract 8002/1997 with Siemens AG, and various
equipment orders pursuant to that framework contract in the
period following its signing and up to 2004. Framework contract
8002/1997 was signed on December 12, 1997 and related to
the supply to us by Siemens AG of equipment for the
digitalization of our network. In connection with this
preliminary investigation, we have provided to the investigating
authorities certain documents requested. Following the
conclusion of the preliminary investigation, criminal charges
were filed and an investigating judge (the 4th Special
Investigating Judge of Athens) was appointed to lead a formal
criminal investigation. To the extent so requested, we have
cooperated and intend to continue to cooperate with the
competent authorities in relation to this investigation. It is
understood that, as part of the same investigation,
Mr. George Skarpelis, a former senior executive of our
Group, was charged for certain criminal offences, including
receipt of bribes, and that in 2009 Mr. Skarpelis was
remanded in custody pending his trial for the same charges and
was subsequently released. Mr. Skarpelis has served as our
Delegate Managing Director from 1998 until 1999 and as our
Deputy Managing Director from 1998, and Delegate Vice-Chairman
from November 2000, until May 2004 when he left our Group.
79
In connection with this criminal process, we have already taken
the necessary legal action before the investigating judge in
order to assert our civil rights with respect to any damages we
may have incurred as a result of any criminal offences
committed. As a result, we were recently permitted access to the
file documents of the case, which we are in the process of
reviewing.
In relation with the same criminal investigation, the District
Attorney of Athens is conducting a preliminary investigation,
concerning contracts with Siemens entered in 2006 for ArmenTel,
the Armenian public telephony operator, in which we held an
interest of 90% which we sold in November 2006.
In connection with the above matter, we have also, in a number
of instances, applied to the Public Prosecutor of Munich, who
has been conducting a criminal investigation on the Siemens AG
matter, for permission to access the relevant files of the
criminal investigation conducted by the German authorities into
this matter, and on February 26, 2010, we were granted
limited access to the relevant files. In addition, we have
requested Siemens AG to provide us with information and
documents from its own files and investigations relating to the
alleged offences, but our requests were denied. In July 2008, we
filed a claim before German courts, requesting Siemens AG to
disclose and produce relevant information and documents,
including any that were provided to Greek judicial authorities
for their investigations. The court hearing was adjourned,
following our request, in order for us to evaluate the material
received from the German authorities.
We intend to continue to cooperate with the competent
authorities in relation to this investigation and to seek
disclosure of relevant documents and information in order to
investigate the matter. We also intend to seek compensation
before Greek and German courts with respect to any damages we
may have incurred as a result of illegal conduct by either third
parties, or former and current employees of our Group.
Maintenance contracts case.
Following the conclusion
of a preliminary investigation, an investigating judge (the 2nd
Investigating Judge of Athens) was appointed to lead a formal
criminal investigation into the potential perpetration of
offences in connection with the propriety of technical
maintenance contracts of ours with three of our suppliers
(Siemens, Intracom and Anco). In June 2009, the investigating
judge initiated criminal proceedings against members of our
Board of Directors and a member of our senior management serving
at the time of signing of the relevant contracts, in 2004 and
2005, investigating alleged abuse of trust
(Apistia)
. On December 27, 2009, the
District Attorney of Athens submitted a proposal to the Judicial
Council in relation to four of the defendants, including
Mr. Vourloumis, our CEO and Chairman of our Board,
Mr. Tampourlos, a current member of our Board and Chairman
of our Audit Committee, Mr. Ioannidis, Managing Director of
RomTelecom, and Mr. Bitros, a former member of our Board.
Consequently, the Judicial Council is expected to issue either
an exoneration order, or an order referring the defendants to
trial.
Other cases.
In addition to the above, we have been
involved in a number of criminal investigations relating to
matters in the ordinary course of our business.
Romania
RomTelecom
In July 2006, the Competition Council launched an investigation
involving RomTelecom, as well as the two large mobile operators,
Orange and Vodafone, following a complaint filed by the
alternative operator Netmaster in relation to alleged abuse of
dominant position by these three large operators. Netmaster
alleged that RomTelecom restricted its ability to terminate its
customers calls in RomTelecoms network and that
RomTelecom delayed the increase of interconnection capacity
Netmaster had requested without reasonable justification. The
Competition Council will also review the matter of a potential
agreement between RomTelecom, Orange and Vodafone to restrict
Netmasters ability to develop its activities in the
market. The Competition Councils investigation is ongoing.
In November 2009, a dawn raid by the Competition Council took
place at RomTelecoms premises and copies of some documents
were taken. The Competition Councils investigation is
ongoing.
RomTelecom is involved in a dispute with certain individuals
over the ownership of a plot of land located in Bucharest, next
to Floreasca Lake, with a surface area of approximately
15,000 square meters. RomTelecom prevailed in the first
instance in the Bucharest Tribunal, while the opponents won the
first appeal in the Court of Appeals, which the High Court of
Justice on March 9, 2007 overturned and remanded to the
Court of Appeals for re-examination of all the evidence and
consideration on the merits. The file is pending in the Court of
Appeals in Bucharest. The case has been postponed pending the
completion of the topographical survey. A technical expert was
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appointed to perform a topographical survey. The last hearing
was on June 26, 2009. The Court of Appeals rejected
RomTelecoms appeal, based on the grounds that the Court
cannot compare RomTelecoms title of property with that of
the defendant. We consider the decision of the Court of Appeals
as being a refusal to judge our appeal. Therefore, due to the
fact that the decision did not find favor with both parties,
both parties submitted a second appeal to The High Court of
Justice. The next hearing will be on June 4, 2010.
RomTelecom is involved in another dispute with a company called
Dunarea International over the ownership of another plot of land
located in Bucharest, next to Straulesti Lake, with a surface
area of approximately 5,700 square meters and a building
located on it. RomTelecom won the case in first instance and on
appeal and took possession of the property. The opponents
appeal is pending in the High Court of Justice. The Supreme
Court rejected the second appeal and the decision remained final
and irreversible in favor of RomTelecom. RomTelecom registered
its exclusive right of property in the land register. The case
was closed.
The Romanian tax authorities have audited RomTelecom for the
period from July 2001 through December 2005 in relation to all
direct and indirect taxes, except for local property taxes and
custom duties. The audit was completed on March 25, 2008,
and determined an additional tax liability of RON
64.3 million, inclusive of penalties, or approximately
Euro 17.2 million. This amount was increased by
approximately RON 4.5 million or approximately
Euro 1.5 million in penalties due to late payment.
RomTelecom has paid the additional taxes owed, but appealed
certain elements of the audit and the penalties. The Romanian
National Fiscal Agency rejected our administrative appeal and
RomTelecom appealed to the Court of Appeal.
RomTelecom has filed an action against the Romanian National
Fiscal Agency
(ANAF)
contesting the amount of
RON 38.9 million established by the fiscal documents in
relation to social security taxes and the method of profit tax
and the relevant penalties. In the course of 2008, we paid all
amounts contested in this case, in order to avoid any future
penalties. The dispute is pending before the Bucharest Court of
Appeals. The Court of Appeals has rejected RomTelecoms
appeal but the decision has not yet been issued. Once the
decision is issued, RomTelecom will have a right of appeal.
RomTelecom appealed against the decision of the High Court of
Justice. On March 17, 2010, the High Court of Justice, by
admitting in part RomTelecoms appeal, has annulled,
in part, two fiscal decisions issued by ANAF regarding the
financial penalties for late payment, these being for 90%
tax on profit for income from rents in the amount of RON
12.4 million (approximately Euro 3.1 million).
The decision is irrevocable. However, any one of the parties can
make a special appeal against the decision. RomTelecom asked the
High Court of Justice to make a supplementary pronouncement in
the sense that ANAF is obliged to repay the above mentioned
money to RomTelecom, as a result of the annulment, in part, of
the two fiscal decisions issued by ANAF.
In 2008, the Romanian government awarded a national license for
radio frequencies 410-415/420-425 to RomTelecom, which submitted
an offer in the relevant tender process.
In addition to the above suspension request, Vodafone applied to
the Romanian courts requesting the annulment of the same
government decision regarding the award of a national license
for radio frequencies 410-415/420-425 to RomTelecom. In
connection with this case, RomTelecom also filed an intervention
request in respect of its own interest and the interest of the
Romanian government, requesting the court to cancel the action
by Vodafone and to maintain the enforcement of the relevant
government decision. The Bucharest Court of Appeals rejected the
action brought by Vodafone and the other claimants. The
claimants are entitled to appeal this decision. Vodafone
appealed against the decision and the dispute is pending with
the High Court of Justice.
In connection with the same government decision, Vodafone
requested the court, in opposition with the ANC and RomTelecom,
the cancellation of the National License for using radio
frequencies in order to provide data network and mobile
electronic communications services in frequency bands
410-415 / 420-425
issued by the ANC for RomTelecom on September 23, 2008. On
February 16, 2010, the dispute was suspended by the Court
of Appeals until after the litigation regarding the annulment of
the government decision no. 61/2008.
On May 29, 2008, the General Council of Bucharest
(CGMB)
issued Decision No. 252 regarding
the location in the underground of communication equipments.
Pursuant to this decision, electronic communications operators
are required to relocate their networks (underground and
belowground) on the Netcity route or Netcity network
neighborhood only in spaces provided by Netcity, the Bucharest
metropolitan optical fiber network for telecommunications. In
addition, the same decision requires operators to provide the
local authorities with certain
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information including plans, construction and authorizations,
regarding the current electronic communications network. For the
networks located without construction authorization, the penalty
will be the cancellation of the networks. Moreover, it is
established that the owners/managers of the infrastructure that
allow the placement of electronic communications networks
and/or
the
equipments belonging to persons who do not have constructions
authorizations will be sanctioned. RomTelecom has already filed
an administrative complaint against this decision, but it was
rejected. The CGMB issued a new Decision outlining the
methodology rules for the implementation of Decision
No. 252/2008. The most important aspect of
RomTelecoms proposal, being the right to opt for
RomTelecoms network or the Netcity network, was included
in the new Decision of the CGMB.
CGMB planned to issue, in the near future, the methodology rules
for the implementation of Decision
No. 252/2008.
RomTelecom has sent its proposals regarding the amendment of
these rules and some of them have already been accepted by the
CGMB in the draft of the new decision. After the public
consultation procedure, the most important of RomTelecoms
proposals the right to opt between RomTelecoms
network and the Netcity network has been included in
the new decision of the CGMB. On the basis that the most
important aspect of RomTelecoms proposals, the the
right to opt, was included in the new Decision, RomTelecom
decided not to appeal against the Decision.
Cosmote
Romania
In September 2008, Cosmote Romania challenged before the
Romanian Courts the Fiscal Decision issued by the fiscal
authorities, following the tax audit in 2007. The fiscal
authorities considered that some of the expenses made by the
company in the years 2004, 2005 and 2006, amounting to
approximately Euro 5.8 million, should not have been
deducted. On October 22, 2008, the Court decided to rule in
favor of the plea of lack of competence for ruling on the
Cosmote Romania claim, and it sent the case to be judged before
the Court of Appeal, Section IX for Contradictory and
Fiscal litigations. The next hearing is set for June 23,
2010.
Albania
As of December 31, 2009, the Albanian fixed telephony
operator, Albtelecom, owes AMC approximately
Euro 24.4 million for interconnection fees since
January 2001 and transit of rural operators traffic
terminated by Albtelecom. Albtelecom also owes AMC approximately
Euro 7.2 million due to discrepancies in measurements
of interconnection fees. According to the terms of the
interconnection agreement, eventual differences between the
parties shall be solved by arbitration in front of the
International Chamber of Commerce in Paris. On January 14,
2010, AMC submitted to the International Chamber of Commerce a
Request for Arbitration for a total claimed value of
Euro 45.5 million, related to disputed amounts under
the 2000 Interconnection Agreement.
Bulgaria
On June 20, 2006, the CRC designated Globul as an operator
with significant market power in the mobile telecommunications
and services market. Pursuant to such designation and under
applicable legislation, Globul is subject to obligations for the
equal treatment of other operators, transparency and
confidentiality. These obligations, confirmed by the competent
courts, shall remain in force until new market analyses are
carried out and new remedies are imposed in compliance with the
Bulgarian Electronic Communications Act. Following market
analysis in March 2009, CRC determined Globul, Mtel and BTC as
having significant market power in the area of voice call
termination on individual mobile networks and introduced the
following remedies: glide-path on the rates for traffic
termination in mobile networks,
fixed-to-mobile
and
mobile-to-mobile
wholesale termination rates symmetry as well as obligations for
non-discrimination, transparency, cost accounting and accounting
separation. Globuls appeal against the preliminary
execution of such decision has been rejected. The court hearing
was held on October 5, 2009, but a decision is still
pending.
In December 2009, Office 1, a former master agent of Globul,
filed a claim against Globul requesting the payment of
approximately Euro 2.0 million for alleged unpaid
time, bonuses and other matters for the period from
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May 2007 to September 2009. In addition, in March 2010, Office 1
filed a claim alleging termination of its master agency
agreement due to Globuls fault, claiming compensation of
approximately 10.0 million Euro.
REGULATION
Telecommunications
Services Regulation in Greece
Overview
Pursuant to EU and Greek law, since January 1, 2001, the
Greek telecommunications market has been open to competition. We
are now operating within a competitive environment and are
subject to the requirements of the Telecommunications Law and
the supervision of the National Telecommunications and Post
Commission, or the EETT.
The Greek telecommunications market is operating in accordance
with EU regulations and under the framework of the World Trade
Organization pursuant to the General Agreement on Trade in
Services, discussed below. The global regulatory environment for
telecommunications, including the regulatory framework in
Greece, has been evolving rapidly in recent years and is
expected to continue to evolve in the future.
EU
Regulatory Framework
Greece is a Member State of the European Union and, as such, is
required to follow EU regulations and enact domestic legislation
to give effect to EU legislation adopted in the form of
directives and decisions. Regulations have general application,
are binding in their entirety and are directly applicable to all
Member States. Directives and decisions are binding on Member
States, but each Member State is permitted to choose the form
and method of implementation. Resolutions, recommendations and
green papers of the European Union are not legally binding but
have political impact.
The Greek States ownership of a significant interest in
our share capital does not contravene EU legislation. There is
no Greek law or EU legislation currently in effect requiring the
Greek State to reduce its ownership in our share capital at any
future date.
Starting in 1990, the European Union issued a series of
directives, which led to the abolition of existing monopolies
on, and permitted the competitive provision of, all
telecommunications services. At the end of 1999, the European
Commission initiated a review of the European Unions
electronic communications regulatory framework, which led in
2002 to the adoption of a new EU regulatory framework. In
November 2009, the European Commission reviewed the EU
regulatory framework of 2002, which is to be transposed into
national law before May 25, 2011. The EU regulatory
framework of 2002 comprises the following set of directives:
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Directive 2002/19/EC on access to, and interconnection of,
electronic communications networks and associated facilities
(the
Access Directive
);
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Directive 2002/20/EC on the authorization of electronic
communications networks and services (the
Authorization
Directive
);
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Directive 2002/21/EC on a common regulatory framework for
electronic communications networks and services (the
Framework Directive
);
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Directive 2002/22/EC on universal service and users rights
relating to electronic communications networks and services (the
Universal Service Directive
);
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Directive 2002/58/EC concerning the processing of personal data
and the protection of privacy in the
e-commerce
sector (the
Directive on Privacy and Electronic
Communications
); and
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Directive 2002/77/EC on competition in the markets for
electronic networks and services.
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In relation to mobile communications, the European Parliament
and the Council have issued Regulation No. 717/2007 on
roaming on public mobile networks within the EU.
83
The EU regulatory framework for electronic communications
introduces a procedure by which national regulatory authorities
may take certain measures, according to which, when a national
regulatory authority (in the case of Greece, the EETT) concludes
that a specific relevant market of products and services is not
effectively competitive within a specific geographical area, it
identifies entities with significant market power in that market
and imposes on those entities appropriate specific regulatory
obligations as provided for in the Access Directive and the
Universal Services Directive.
The following is a list of other principal elements of the EU
regulatory framework for electronic communications:
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the establishment of a right of appeal against the decision of a
national regulatory authority;
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the establishment of a consultation and transparency mechanism
regarding actions by national regulatory authorities;
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the encouragement of cooperation of national regulatory
authorities with each other and with the European Commission;
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the right of the European Commission to request a national
regulatory authority to withdraw a measure under certain
circumstances; and
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the re-definition of the term significant market
power.
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The European Commission had to review the functioning of the
directives that were part of the EU regulatory framework of 2003
for electronic communications by the end of July 2006, with the
exception of the
e-Privacy
Directive which was due for review by the end of October 2006.
In parallel, the Commission reviewed its recommendation listing
relevant markets that are candidates for
ex ante
regulation under the framework. The following list includes
relevant designated markets in electronic communications at the
retail and wholesale level:
Retail
level:
1. Access to the public telephone network at a fixed
location for residential and non-residential customers.
Wholesale
level:
2. Call origination on the public telephone network
provided at a fixed location. For the purposes of this
Recommendation, call origination is taken to include call
conveyance, delineated in such a way as to be consistent, in a
national context, with the delineated boundaries for the market
for call transit and for call termination on the public
telephone network provided at a fixed location.
3. Call termination on individual public telephone networks
provided at a fixed location. For the purposes of this
Recommendation, call termination is taken to include call
conveyance, delineated in such a way as to be consistent, in a
national context, with the delineated boundaries for the market
for call origination and the market for call transit on the
public telephone network provided at a fixed location.
4. Wholesale (physical) network infrastructure access
(including shared or fully unbundled access) at a fixed location.
5. Wholesale broadband access. This market comprises
non-physical or virtual network access including
bit-stream access at a fixed location. This market
is situated downstream from the physical access covered by
market 4 listed above, in that wholesale broadband access can be
constructed using this input combined with other elements.
6. Wholesale terminating segments of leased lines,
irrespective of the technology used to provide leased or
dedicated capacity.
7. Voice call termination on individual mobile networks.
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The EU regulatory framework of 2009 was adopted by Parliament
and the Council in its third reading in November 2009 and
consists of the following:
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Directive 2009/140/EC of the European Parliament and of the
Council of November 25, 2009 amending Directives 2002/21/EC
on a common regulatory framework for electronic communications
networks and services, 2002/19/EC on access to, and
interconnection of, electronic communications networks and
associated facilities, and 2002/20/EC on the authorization of
electronic communications networks and services
(Better
Regulation Directive
);
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Directive 2009/136/EC of the European Parliament and of the
Council of November 25, 2009 amending Directive 2002/22/EC
on universal service and users rights relating to
electronic communications networks and services, Directive
2002/58/EC concerning the processing of personal data and the
protection of privacy in the electronic communications sector
and Regulation (EC) No 2006/2004 on cooperation between national
authorities responsible for the enforcement of consumer
protection laws
(Citizens Rights
Directive)
; and
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Regulation (EC) No 1211/2009 of the European Parliament and of
the Council of November 25, 2009 establishing the Body of
European Regulators for Electronic Communications (BEREC) and
the Office.
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The scope of the revised regulatory framework does not change
significantly. Certain aspects of terminal equipment are
included in the scope of the Universal Service Directive to
improve access to services by disabled end-users
(article 1(1) of the Framework Directive). Also, more
detailed provisions on network integrity and security are
included in the new Chapter IIIa of the Framework Directive.
The revised framework allows Member States regulatory
authorities to impose the same
ex ante
regulatory
obligations on operators with Significant Market Power
(SMP) at the wholesale level (currently access,
transparency, non-discrimination, accounting separation, price
control and cost accounting (articles 9 13 of
the Access Directive)) and introduces the remedy of functional
separation (article 13a of the Access Directive).
At the retail level, there are no changes to the current
non-exhaustive list of appropriate retail remedies:
retail tariff regulation, no undue preference to specific
end-users and not unreasonably bundled services (article 17
of the Universal Service Directive).
The principle continues to apply that Member States regulatory
authorities can impose SMP obligations at the retail level only
where wholesale obligations would not result in effective
competition. However, the current reference to CS/CPS is
withdrawn.
BEREC replaced the European Regulators Group (ERG) as a platform
for regulatory authorities to ensure a consistent application of
the EU regulatory framework. Aside from providing advice to
Parliament, the Commission and the Council on all matters
regarding electronic communications, BEREC will be able to give
non-binding opinions on draft measures of the Commission.
The ERG will continue to exist until the ERG Decision is
repealed, but will no longer have a practical function.
Based on the EU regulatory framework of 2002, a number of
regulatory remedies have been imposed on us following the first
round of market analyses and significant market power
assessments carried out by the EETT, the Greek NRA, during
2005-2008.
These market analyses have to be revised taking into
consideration the fact that the Commission Recommendation of
December 17, 2007 reduced the list of relevant product and
service markets from 18 to 7.
In 2009, two market analyses took place, according to Commission
Recommendation of December 17, 2007 on relevant product and
service markets within the electronic communications sector
susceptible to
ex ante
regulation in accordance with
Directive 2002/21/EC of the European Parliament and of the
Council on a common regulatory framework for electronic
communications networks and services, Market 4 (wholesale
physical network infrastructure access at a fixed location) and
Market 5 (wholesale broadband access).
Changes in existing regulatory remedies and additional remedies
were introduced. We expect that new market analyses will be
carried out in 2010.
85
In 2009, the EETT did not proceed to analyze the retail market,
which was removed from the list of relevant markets, as in other
European markets. This procedure is required in order to remove
excessive regulatory remedies in already competitive markets.
Cosmotes voice call termination rates are subject to a
price cap, which requires phased reductions in rates. This was
imposed by the EETT in Decision
No. 498/046/2008
published in November 2008.
Cosmotes wholesale and retail tariffs for international
roaming services within the European Union are subject to
Regulation (EC) No 544/2009 of June 18, 2009
(Roaming II)
, which replaced the initial
roaming Regulation
(Roaming I)
, which had
become effective in August 2007. The Roaming II Regulation
extends the controls imposed by the Roaming I Regulation on the
wholesale and retail voice roaming tariffs which operators
within the European Union may levy for the provision of voice
roaming services, and also applies new caps on wholesale and
retail SMS roaming charges and on wholesale charges for data
services. The Regulation is applicable to Cosmote Greece,
Cosmote Romania and Globul.
Telecommunications
Framework in Greece
Telecommunications services in Greece are governed by national,
European and international regulatory frameworks. More
specifically, national laws, presidential decrees, decisions by
the Minister for Transport and Communications and other
ministers, as well as decisions issued by independent
administrative authorities (mainly the National Committee on
Telecommunications and Posts
(EETT)
, the
Authority for the Assurance of Information and Communication
Privacy and Security
(ADAE)
, Hellenic Data
Protection Authority
(DPA)
and the Greek
National Council for Radio and Television
(NCRTV)
) form part of the national regulatory
framework.
In February 2006, the government published the new Law 3431/2006
governing electronic communications, which
incorporates into Greek Law Directives 2002/19/EC, 2002/20EC,
2002/21/EC, 2002/22/EC and
2002/77/EC.
Law 3431/2006 deals with issues relating to the jurisdiction and
responsibilities of the EETT. It contains provisions about
general authorization, which is needed for the provision of
electronic communications services, as well as issues relating
to the numbering plan, management of radio spectrum, relicensing
of existing antennae installation of new antennae and subjects
relating to satellite orbits.
In addition, it defines the characteristics of businesses with
significant market power, the rights and obligations of
electronic communications services providers, and the rights of
customers and users of electronic communications services as
well as the characteristics of universal service. The new
Telecommunications Law regulates the right of public telephone
services customers to use the same number when changing their
electronic communications services providers.
In 2008, secondary legislation as foreseen in Law 3431/2006 was
implemented, but there is still secondary legislation pending in
the form of Ministerial Decisions.
In July 2008, the government published Law 3674
Reinforcement of the institutional framework for the
assurance of privacy of telephone communications and other
provisions, which aims to guarantee the secrecy of fixed
and mobile telephony services; however, it does not target all
forms of electronic communications. It upgrades existing
regulations, or it expressly establishes obligations that are
not clearly implied by existing legislation. It also imposes
significant penalties (financial or imprisonment) and it extends
the punishment for the violation of secrecy of telephone
communications, by amending the Penal Code.
Additionally, in July 2008, the Ministry of Transport and
Communications held a public consultation on a bill that would
revise Law 3431/2006. Principally, the bill provides for the
establishment of a National Observatory of Electromagnetic
Fields, primarily in response to expressed public health
concerns. In addition, it aims to amend a number of articles on
the organization and administration of the EETT, the appeal
procedure and spectrum management.
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The fundamental Law for the protection of the secrecy of
mailing, for free correspondence or communication as well as the
security of networks and information is Law 2225/94, as amended
by Law 3115/2003 and other subsequent legislation.
In August 2009, the government issued Law 3783 on
Identification of owners and users of mobile telephony
equipment and other provisions. ADAE issued Decision 52
Recommendations for the Assurance of Information and
Communication Privacy and Security by electronic
telecommunications services operators during the procedures of
Declassification System in real time and Decision 53
Recommendations for the Assurance of Information and
Communication Privacy and Security by the competent Authorities
during the procedures of Declassification System in real
time. Pursuant to the new EU regulatory framework, the
revised rules must be incorporated into national law before
taking effect. The new framework is expected to be in place from
2010 onwards.
The Greek
National Telecommunications and Post Commission, or
EETT
The Telecommunications Law (Law 3431/2006 governing electronic
communications) delegates to the EETT, in addition to its
existing supervisory, advisory and rule-making competence,
specific regulatory powers for the issuance of regulations with
statutory force, published in the official Government Gazette.
Any person or entity may file a declaration of registration with
the EETT for the provision of telecommunications services. A
declaration of registration has the force of general
authorization, unless the EETT objects within a specified time
period on grounds of non-compliance with specific terms and
conditions imposed by the Telecommunications Law and the rules
and regulations adopted by the EETT.
Under the Telecommunications Law, the EETT is empowered to
impose administrative sanctions on telecommunications services
providers that infringe the provisions of applicable
telecommunications laws and regulations. These administrative
sanctions may only be imposed by means of a decision based on
specific reasoning and pursuant to a hearing before the EETT.
The sanctions may range from a mere caution to temporary or
definite revocation of the violators license, as well as
the imposition of fines.
We and other providers of telecommunications services may bring
disputes before the EETT, arising out of the provision of such
services. We may also appeal to the Greek administrative courts
and the Council of State, the supreme administrative court in
Greece, against decisions of the EETT.
By virtue of its statutory authorization under the
Telecommunications Law, the EETT has to date issued a series of
decisions regulating a range of issues relating to the Greek
telecommunications market such as, among other things,
licensing, numbering, frequencies and tariffs. The new
regulatory framework has provided the EETT with more discretion,
accompanied by enhanced cooperation with the European Commission
and other regulatory authorities in the EU.
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Additionally, in 2009, the EETT issued a number of Decisions,
the most important for us being:
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Number
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Title
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Official Gazette
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531/064/2009
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Approval of our amendments regarding Reference Offers for the
provision of wholesale leased lines and the provision of partial
circuits
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1552/B/28-7-2009
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531/067/2009
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Amendment of the EETT Decision 451/010/2007 (Approval of
Code of Conduct for the provision of Multimedia Information
Services)
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1551/B/28-7-2009
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528/075/2009
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Regulation for the definition of fees for rights of way and
rights of use
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1375/B/10-7-2009
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529/158/2009
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Decision on our pricing policy regarding wholesale leased lines
services
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1489/B/23-7-2009
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513/014/2009
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Amendment of the EETT Decision 390/3/13.6.2006 (General
Authorizations Regulation)
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492/B/18-3-2009
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506/037/2009
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Regulation for access and interconnection terms and provision
requirements pursuant to articles 41, para3 and 42, para 3
of Law 3431/2006
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369/B/3-3-2009
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531/065/2009
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Market definition for wholesale unbundled access (comprising
full and shared access) in metallic loops and subloops,
designated operators with significant market power and their
regulatory obligations (second round of analysis)
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1550/B/28-7-2009
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531/066/2009
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Market definition for wholesale broadband access, designated
operators with significant market power and their regulatory
obligations (second round of analysis)
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1549/B/28-7-2009
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521/32/2009
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Regulation about terms of use of separate radiofrequencies or
zones of radiofrequencies
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1010/28-5-2009
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512/24/2009
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Amendment of the EETT Decision 406/22/11.10.2006
(Regulation about terrestrial antennae building permit,
pursuant to Law 3431/2006)
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517/20-3-2009
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Our
License
General authorizations are required for engagement in all kinds
of electronic communication activities pertaining to the
provision of electronic communication networks
and/or
services, conforming to Law
No. 3431/2006
and the Regulation on General Authorizations (EETT
Decision
No. 390/3/31-6-06).
For a complete list of our licensed services, please refer to
EETTs website for the Registry of Electronic Communication
Network and Service Providers:
http://www.eett.gr
The provision of an electronic communication network
and/or
services under a general authorization regime may continue for
as long as the legal entity submitting the registration
declaration wishes. The EETT may impose a limitation only in
extraordinary cases, based on a justified decision, pursuant to
article 63 of Law No. 3431/2006.
Telecommunications
Taxes
In July 2009, Law 3775/2009 was published in the Government
Gazette. Article 33 of this law provides a new method for
calculating telecommunications taxes. Telecommunications
taxes are calculated as a percentage before imposing VAT
according to the following:
|
|
|
|
|
12.0% for a monthly bill up to Euro 50;
|
|
|
|
15.0% for a monthly bill from Euro 50.01 to Euro 100;
|
|
|
|
18.0% for a monthly bill from Euro 100.01 to
Euro 150; and
|
|
|
|
20.0% for a monthly bill from Euro 150.01 and above.
|
In July 2009, the Greek State carried out a public consultation
on a draft law transposing Directive 2007/65/EC of the European
Parliament and of the Council of December 11, 2007 amending
Council Directive 89/552/EEC on
88
the coordination of certain provisions laid down by law,
regulation or administrative action in Member States concerning
the pursuit of television broadcasting activities (the
AVMS Directive) into national legislation, the
results of which have not been made public yet.
Media
Law
Law 3592/2007 aims to ensure plurality in briefing and the
provision of information, the equal transmission of information
and news, the quality level of programs, as well as the
transparency and the healthy competition in the framework of
media, incorporating Directives 2002/19/EC, 2002/20/EC,
2002/21/EC, 2002/22/EC and 2002/77/EC and supplements Law
2328/1995 (Legal status of private television and local
radio, regulation of issues related to radio and television
market, miscellaneous provisions).
The provisions of Law 3592/2007 regulate the following:
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analog transmitted TV program;
|
|
|
|
digital terrestrial TV; and
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TV services provision over broadband networks.
|
In July 2009, the Greek State carried out a public consultation
on a draft law transposing the AVMS Directive into national
legislation, the results of which have not been made public yet.
Competition
Law in Greece
We are subject to the general EU and Greek competition laws and
to special provisions, regulations and directives relating
specifically to telecommunications.
The main principles of EU competition rules are stipulated in
Articles 81 and 82 of the EC Treaty. These EU competition
rules have the force of law in Member States and are therefore
applicable to our operations in Greece. Article 81
prohibits collusive behavior between competitors that may affect
trade between Member States and that restricts, or is intended
to restrict, competition within the EU. Article 82
prohibits any abuse of a dominant market position within a
substantial part of the European Union that may affect trade
between Member States. These rules are enforced by the European
Commission in cooperation with the national competition
authorities in the case of Greece, the Competition
Commission, together with the EETT with respect to the
telecommunications sector. In addition, the Greek national
courts have jurisdiction to determine violations of EU
competition law.
The European Union has adopted further measures in order to
protect competition in the telecommunications sector through the
issuance of Directive 99/64/EC relating to the legal separation
of the joint provision of telecommunications and cable
television networks by a single operator. The new regulatory
framework, which was introduced in 2002 and has subsequently
been amended by Directive 2009/136/EC and Directive 2009/140/EC,
includes Directives 2002/19/EC, 2002/20/EC, 2002/21/EC,
2002/22/EC and 2002/77/EC, regulating competition in the markets
for electronic communications networks and services.
The basic provisions of Greek competition law are set out by Law
703/1977 for the Control of Monopolies and Oligopolies and
Protection of Free Competition, as in effect, and referred
to as the Competition Law. The regulatory framework
of the aforementioned 2002 Directives has been integrated in
Greek legislation by law 3431/2006. In relation to Directives
2009/136/EC and 2009/140/EC, Member States have the right to
adopt and publish by May 25, 2011 the laws and regulations
necessary to comply with the new regulatory framework.
The Competition Law prohibits collusive practices, including
direct or indirect price fixing; restriction or control of
production, distribution, technological development or
investments, or market or supplies allocation; and the abuse of
an undertakings dominant position or state of economic
dependence. Such practices are
eo ipso
prohibited,
without the need for a decision of the competent administrative
authority.
The exclusive or concurrent jurisdiction and competency of the
Competition Commission and the EETT to apply and enforce the
provisions of the Competition Law, which are not clearly defined
in the relevant legislation, have not yet been determined by a
competent court. The application of a fine on a percentage basis
is calculated on the basis of the turnover of the undertaking
concerned in the relevant sector, with up to 15% being
permissible by
89
law. However, even in the case of the highest fines imposed to
date, the penalties imposed have represented only a portion of
the maximum percentage allowed under the Competition Law.
In addition, the Greek administrative courts have jurisdiction
over appeals lodged with respect to decisions of both of the
above-mentioned administrative bodies.
Greek
Capital Markets Regulation
The principal trading market for our shares is currently the
Athens Exchange
(ATHEX)
. In operation since
1880, the Athens Exchange was upgraded in May 2001 from emerging
to developed market status by the Morgan Stanley Composite
Index. Initially a
société anonyme
fully owned
by the Hellenic Republic, on March 29, 2000 the Athens
Exchange was transferred to a holding company, Hellenic
Exchanges Holding S.A., which also then held a controlling share
in the Athens Derivative Exchange and the Central Securities
Depository. The Athens Exchange and the Athens Derivative
Exchange merged in 2002. Hellenic Exchanges Holding S.A. has now
been fully privatized, with several Greek banks and securities
brokers each holding a substantial equity share, and its shares
have been listed on the Athens Exchange since August 21,
2000. As of December 31, 2009, 283 companies had their
shares listed on the Athens Exchange and the aggregate market
capitalization of all companies listed on the Athens Exchange
was Euro 83.4 billion according to the 2009 annual
report of the Hellenic Capital Market Commission. Transactions
relating to shares listed on the Athens Exchange are carried out
exclusively by its members, which are investment firms and
credit institutions authorized to execute client orders. Greek
legislation now allows remote members, meaning investment firms
from other EU Member States that are not established, or do not
have a physical presence, in Greece, to become members of the
Athens Exchange. The Athens Exchange operates as a regulated
market and is supervised by the HCMC, pursuant to Law 3606/2007.
The provision of investment (including brokerage) services by
Greek legal entities is subject to licensing by the HCMC, an
independent public entity operating under the supervision of the
Ministry of Economy and Finance. The HCMC is also charged with
supervision of all parties involved in the capital markets
industry, including stock and derivative exchanges, investment
firms, mutual funds management companies and listed companies.
It also supervises the capital markets regulatory framework,
established by a series of laws, a large proportion of which has
transposed EU legislation, as well as regulations issued by
itself and the Ministry of Economy and Finance. Thus, apart from
licensing and supervisory authority, the HCMC is also a decision
making body, whose main objective is to promote the
establishment of sound conditions for the operation of the
capital markets in Greece and to enhance public confidence in
the quality of supervision and in market behavior. To this end,
the HCMC is empowered to introduce legally binding rules,
regulations and measures as well as to issue instructions and
guidelines on compliance procedures applicable to all
participants in the capital markets industry, including
comprehensive codes of conduct, in order to set the general
terms and conditions governing the organization and operation of
Greek capital markets. Furthermore, the HCMC has the authority
to impose administrative sanctions upon an infringement of
capital markets law as well as to notify prosecutorial
authorities in cases where it considers that securities fraud
has been committed, since this is also punishable under criminal
law.
The obligations of an issuer of listed securities to disclose
inside information and the notification requirements for trading
by certain related persons in possession of inside information
are regulated by Law 3340/2005 and Decision
No. 3/347/12.7.2005
of the HCMC.
Under the aforementioned provisions, listed companies are under
an obligation to timely inform the public of specific events or
circumstances regarded as inside information, including any
significant changes in an issuers business activity or any
other company included in the consolidated financial statements
of such issuer, takeover bids in accordance with existing
legislation and any bankruptcy petitions or insolvency
proceedings as well as other legal or judicial disputes that may
significantly affect the financial situation and results of
operations of such issuer.
All public statements regarding inside information must be
disclosed through the Athens Exchange website and the
companys website, and should also be published on the
ATHEX Daily Price Bulletin, in Greek and, if the company is
listed abroad, as are we, in English. Listed companies are also
under an obligation to inform the public and the HCMC of
acquisitions or disposals of company shares by their major
shareholders, directors, other senior officers and third parties
related to these matters.
90
Under the provisions of Law 3556/2007, which implemented
Directive 2004/109/EC on the harmonization of transparency
requirements in relation to information about issuers whose
securities are admitted to trading on a regulated market, listed
companies must publish financial reports on a quarterly,
half-yearly and annual basis.
The annual financial reports, prepared in accordance with IFRS,
consist of the audited financial statements, a management report
and certifications of the chairman of the board of directors,
the managing director and a member of the board of directors of
the issuer. Such certifications confirm, to the best knowledge
of the certifying person, that (i) the financial statements
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the issuer and its consolidated
subsidiaries, taken as a whole and (ii) that the management
report includes a fair review of the development and performance
of the business and the position of the issuer and its
consolidated subsidiaries, taken as a whole, together with a
description of the principal risks and uncertainties that they
face. The above information is also sent to the Athens Exchange,
simultaneously on publication, in accordance with the relevant
provisions of the ATHEX Rulebook.
Listed companies are also obliged under the provisions of Law
3016/2002 and Decision
No. 5/204/14.11.2000,
as amended, of the HCMC, to incorporate an adequate system of
internal regulatory by-laws; to set up and operate an internal
audit department, responsible for monitoring companys
controls including, among other things, monitoring of the
continuous implementation of Internal Regulations and Articles
of Incorporation, as well as regulations pertaining to the
company; to set up and operate a shareholders relations
department responsible for providing information to shareholders
relating to distribution and payment of dividends, and
information concerning the general meeting and relevant
decisions; and to set up and operate an announcement department
responsible for the announcement of all notices and statements
pertaining to the company.
Telecommunications
Services Regulation in Romania
Regulatory
obligations in the current regulatory framework
The telecommunication market in Romania was fully liberalized on
January 1, 2003. Romania began to transpose the new EU
Regulatory framework into national Law in 2003 and began the
process of implementation ahead of its accession to the European
Union on January 1, 2007. In the field of economic
regulation, the National Authority for Management and Regulation
in Communication
(ANCOM
, formerly the
National Regulatory Authority for Communications) is the
regulator with the greatest direct impact on RomTelecom.
Based on prior market analyses, ANCOM has designated RomTelecom
as having significant market power on most of the relevant
markets in which it operates. As such, it is subject to
ex-ante
regulation by EC Recommendation
C
497/11.02.2003
, resulting in a number of obligations with
regard to both wholesale and retail activities; in particular,
interconnection obligations for voice and for leased lines
terminating segments; access obligations: full and shared access
to local loop
(LLU)
and retail obligations
for PSTN and ISDN access and calls.
Interconnection
obligations
In December 2002, RomTelecom was designated as having
significant market power on the markets for call termination,
call origination and transit. Based on this designation ANCOM
has imposed specific requirements, including transparency,
non-discrimination, cost orientation and accounting separation.
Some of the specific obligations deriving from these
requirements are to offer the interconnection services at
national, regional and local levels for call termination,
origination and switched transit at a fixed location; to offer
the collocation service in relation with interconnection; to
offer carrier selection and carrier pre-selection in all
switches except in the case of technical restrictions; to
publish an RIO; to publish yearly its own separate audited
financial statements and to charge cost-oriented tariffs for
interconnection services. In 2008, ANCOM reviewed the
interconnection regime with RomTelecom, setting the maximum
average interconnection tariffs at 0.84 Eurocents/minute at the
local level, 0.97 Eurocents/minute at the regional level and
1.06 Eurocents/minute at national level, while maintaining the
other previously imposed obligations.
In 2009, ANCOM also reviewed the markets for call origination
and transit services and designated RomTelecom as an SMP
operator in both markets. As a consequence, all previously
imposed obligations including cost orientation,
non-discrimination, transparency and accounting separation, have
been maintained.
91
Previously imposed obligations in relation to the provision of
leased lines termination services, including cost orientation
and accounting separation, have been maintained.
Access
obligations
Following a market review performed in 2003, RomTelecom has been
designated as having significant market power on the market for
unbundled access to the local loop. Based on this designation,
the regulator ANCOM has imposed
ex-ante
remedies
including mandated access, transparency, non-discrimination,
cost-orientation and accounting separation. Some of the specific
obligations deriving from these remedies are to offer full and
shared access to the local loop, including backhaul services; to
publish an RUO; to publish yearly its own separate audited
financial statements detailing the cost of provisioning the
unbundled access and demonstrating compliance with the
non-discrimination obligation; to charge cost-oriented tariffs
for the services related to the provision of access to the local
loops. The maximum tariffs established by ANCOM for the supply
of the unbundled access to the local loop are
Euro 8.37 monthly rent for full access and
Euro 4.2 monthly rent for shared access.
In 2009, ANCOM started the process of market review for
wholesale call origination and transit at fixed location, as
well as wholesale access to the local loop and wholesale
broadband (bitstream). In March 2010, ANCOM published the
conclusions of its market analysis and submitted for
consultation the draft decision for the market of wholesale
physical network infrastructure access (including shared or
fully unbundled access) at a fixed location. According to this
market analysis, ANCOM considers that RomTelecom maintains its
significant market power position on the market for wholesale
physical network infrastructure access at fixed locations (based
on the number of active fixed access lines) and that the
regulation of wholesale access market (bitstream) is not
necessary due to strong competition in the retail broadband
market.
Retail
obligations
Based on market analysis conducted during 2004, RomTelecom has
been designated the significant market power operator in the
retail access and calls markets. On May 28, 2007, ANCOM
issued a decision imposing specific remedies in relation to
retail access and call services, including price floors and
price ceilings for the tariffs charged for these services as
well as specific notification obligations.
Following a market review performed throughout 2009, ANCOM
concluded in December 2009 that RomTelecom no longer holds
significant power on any of the retail calls markets but
continues to be the significant market power operator on the
retail market for telephony access at fixed locations. Based on
these findings, ANCOM has withdrawn all price related
obligations previously imposed on the retail markets (including
price cap and price floor obligations), notification
obligations, as well as the accounting separation requirements
related to retail markets. Based on the significant market power
designation on the market for telephony access at fixed
locations, ANCOM imposed on RomTelecom the obligations to
provide at least one unbundled fixed telephony subscription to
its customers and to maintain the availability of carrier
selection and carrier pre-selection services for alternative
operators.
Other
regulatory measures
Call
termination at mobile location
In April 2009, ANCOM issued final decisions on the designation
of all the five mobile operators from Romania as providers with
significant power on the market of mobile call termination on
their own networks.
ANCOM imposed on all five mobile operators additional
obligations of transparency and non-discrimination through the
publication of RIOs, as well as the cost-orientation obligation.
The level of the interconnection tariffs previously imposed on
Orange and Vodafone, based on the calculation model elaborated
during the period
2004-2006,
remains at 5.03 Eurocents/minute. The maximum tariffs for call
termination on the networks of Cosmote and Zapp will decrease in
three stages, according to the
15-month
glide path, until they are in line with the tariffs of Orange
and Vodafone of 5.03 Eurocents/minute, as of July 1, 2010.
Since it is a new entrant in the mobile telephony market,
RCS&RDS will be granted a longer glide path with a tariff
of 5.67 Eurocents/minute, as of July 1, 2010.
92
Number
portability
Number portability is a service that enables the telephony users
to keep their telephone number when changing to another
provider. Currently portability is possible only within the same
category of numbers (fixed-fixed, mobile-mobile). The total
number of customers that have taken advantage of number
portability reached 194,104 as of December 31, 2009, of
which close to 61,000 are fixed telephone numbers.
In compliance with regulatory obligations, RomTelecom finalized
all the procedures required for the implementation of number
portability by October 1, 2008, when the service became
operational.
Mobile
communication CDMA license
In September 2008, ANCOM designated RomTelecom as the winner of
a tender for the new wireless communications license in the
410-415/420-425 MHz frequency bands. The license was
granted for a period of ten years and enables RomTelecom to
build, maintain and operate a mobile network for providing voice
and data services but also established coverage and minimum
service provision requirements. The first assessment of the
coverage and service provision was completed at the end of 2008
and concluded that RomTelecom complies with the obligations set
out through the license. Subsequent assessments of geographic
coverage assumed by RomTelecom will be undertaken by ANCOM on
December 31, 2010, June 30, 2012 and December 31,
2013.
End user
information
On May 14, 2009, ANCOM decision number 77/2009 regarding
the electronic communications operators obligations to
inform end-users entered into force. According to the decision,
RomTelecom has extensive obligations to inform its customers on
the services it offers and on the tariffs it charges, including
conditions for installation of telecommunications equipment, the
terms of use of telephone services, contract terms or complaint
settlement procedures.
Pursuant to this decision, following the adoption of detailed
technical specifications, ANCOM shall develop an interactive
application to enable the users to perform tariff comparisons
through an interactive tariff guide.
World
Trade Organization
At the end of the Uruguay Round of negotiations in 1994,
ministers of some 130 countries agreed to set up the World Trade
Organization, or WTO, covering both trade in goods and, for the
first time, services. The result was the General Agreement on
Trade in Services, which includes the telecommunications sector.
During the same year, several Member States of the WTO started
negotiations on an agreement for the liberalization of basic
telecommunications services. On February 15, 1997, these
negotiations resulted in the first multilateral agreement for
the global telecommunications services market when 68 members of
the WTO, including Greece, agreed to open their markets to
competition in basic telecommunications services from specified
dates. This agreement requires WTO members to allow foreign
telecommunications service providers to offer their services in
any member country as well as to buy shareholdings in
telecommunications enterprises of that member country.
International
Telecommunications Union
Greece is a member of the International Telecommunications
Union, or ITU. The ITU is responsible for establishing the
accounting and settlement regime under which member
countries telecommunications organizations account to, and
settle with, each other for the termination of international
calls. The ITU is currently reconsidering the accounting rate
regime to take into account developments in international
telecommunications, which have resulted in disparities between
the rates charged for the termination of international calls and
the costs to the terminating operators of completing such calls.
Nevertheless, certain member countries, including the United
States, are pursuing unilateral changes to the accounting and
settlement regime.
93
4.C Organizational
Structure
We are the parent company of a group of subsidiaries operating
in all aspects of telecommunications and related businesses, in
Greece and abroad. Whereas in most cases we hold our interests
in subsidiaries directly, in limited cases we do so through
intermediary holding companies. Cosmote and RomTelecom are our
only significant subsidiaries.
Significant
Subsidiaries
As of December 31, 2009, we held the entire share capital
of Cosmote, a leading mobile telephony services provider in
Greece incorporated in, and operating under the laws of Greece.
See 4.B. Business Overview Mobile Telephony
Services Greece Cosmote. We also
held, as of December 31, 2009, a 54.01% share interest in
RomTelecom, a fixed telecommunications company incorporated
under the laws of, and operating in, Romania. See 4.B.
Business Overview Fixed-Line Services
International Fixed-Line Telephony
Romania RomTelecom.
Other
Subsidiaries and Other Participations
The following table provides information relating to our other
subsidiaries and other participations as of December 31,
2009 and includes our direct participations, as well as our
indirect participations through ownership interests held by our
subsidiaries:
|
|
|
|
|
|
|
|
|
Country of
|
|
Equity
|
|
|
Name
|
|
Incorporation
|
|
Participation
|
|
Type of Business
|
|
OTE International Solutions S.A.
(OTEGlobe)
|
|
Greece
|
|
100.0%
|
|
Wholesale telephony services
|
Voicenet S.A.
|
|
Greece
|
|
100.0%
|
|
Telecommunication services
|
OTE Estate S.A.
(OTE Estate)
|
|
Greece
|
|
100.0%
|
|
Real estate
|
Hellascom International S.A.
(Hellascom)
|
|
Greece
|
|
100.0%
|
|
Telecommunication projects
|
OTESAT-Maritel S.A.
|
|
Greece
|
|
94.08%
|
|
Satellite and maritime
telecommunications services
|
OTE Insurance Agency S.A.
(OTE Insurance)
|
|
Greece
|
|
100.0%
|
|
Insurance brokerage services
|
Multicom S.A.
|
|
Greece
|
|
50.0%
(1)
|
|
Internet and IT
|
CosmoONE Hellas Market Site S.A.
|
|
Greece
|
|
61.74%
(2)
|
|
E-commerce services
|
EDEKT OTE S.A.
|
|
Greece
|
|
40.0%
|
|
Administration of contribution to pension fund
|
OTE International Investments Limited
|
|
Greece
|
|
100.0%
|
|
Investment holding company
|
Albanian Mobile Communications Sh.a
(AMC)
|
|
Albania
|
|
95.03%
(3)
|
|
Mobile telecommunications services
|
Trans Jordan Telecommunications Services Company Ltd.
|
|
Jordan
|
|
50.0%
(4)
|
|
Telephony services provided including telecards
|
Yemen Public Payphone
|
|
Yemen
|
|
37.5%
(5)
|
|
Payphone operator/consulting services
|
OTE Investment Services S.A.
|
|
Greece
|
|
100.0%
(6)
|
|
Investment holding company
|
Hellas Sat Consortium Limited
(Hellas Sat)
|
|
Cyprus
|
|
99.05%
|
|
Satellite communications
|
Hellas Sat S.A.
|
|
Greece
|
|
99.05%
|
|
Satellite communications
|
OTE Plc
|
|
United Kingdom
|
|
100.0%
|
|
Financing services
|
CosmoBulgaria Mobile EAD
(Globul)
|
|
Bulgaria
|
|
100.0
(7)
|
|
Mobile telecommunications services
|
94
|
|
|
|
|
|
|
|
|
Country of
|
|
Equity
|
|
|
Name
|
|
Incorporation
|
|
Participation
|
|
Type of Business
|
|
S.C. Cosmote Romanian Mobile Telecommunications S.A.
(Cosmote Romania)
|
|
Romania
|
|
86.2%
(8)
|
|
Mobile telecommunications services
|
HATWAVE
Hellenic-American
Telecommunications Wave Ltd.
|
|
Cyprus
|
|
52.67%
|
|
Investment holding company
|
OTEplus Technical and Business Solutions S.A.
(OTEplus)
|
|
Greece
|
|
100.0%
|
|
Consulting services
|
OTEplus Bulgaria EAD
|
|
Bulgaria
|
|
0%
(9)
|
|
Consulting services
|
DIERGASIA Interim Employment S.A.
|
|
Greece
|
|
100.0%
(10)
|
|
Interim employment services
|
OTE ACADEMY S.A.
(OTE Academy)
|
|
Greece
|
|
100.0%
|
|
Training services
|
Germanos S.A.
(Germanos)
|
|
Greece
|
|
100.0%
(11)
|
|
Retail services
|
E-Value
S.A.
|
|
Greece
|
|
100.0%
(12)
|
|
Marketing services
|
Germanos Telecom Romania S.A
(Germanos
Romania)
|
|
Romania
|
|
100.0%
(12)
|
|
Retail services
|
Sunlight Romania SRL Filiala
|
|
Romania
|
|
100.0%
(12)
|
|
Retail services
|
Germanos Telecom Bulgaria A.D.
|
|
Bulgaria
|
|
100.0%
(12)
|
|
Retail services
|
OTE PROPERTIES
|
|
Greece
|
|
100.0%
(13)
|
|
Real estate
|
Telekom Srbija
|
|
Serbia
|
|
20.0%
|
|
Public telephony operator fixed and mobile
telephony, ISP, multimedia services
|
Cosmoholding Romania Ltd.
|
|
Cyprus
|
|
100%
(14)
|
|
Investment holding company
|
Telemobil S.A.
(Zapp)
|
|
Romania
|
|
99.9%
|
|
Mobile Telecommunication services
|
E-Value
Debtors Awareness One Person Ltd.
(E-Value
Ltd)
|
|
Greece
|
|
100%
(15)
|
|
Overdue accounts
|
Mobilbeeep Ltd.
|
|
Greece
|
|
100.0%
(16)
|
|
Retail services
|
Cosmoholding Cyprus Ltd.
(Cosmoholding Cyprus)
|
|
Cyprus
|
|
100.0%
(17)
|
|
Investment holding company
|
Cosmo-Holding Albania S.A.
(CHA)
|
|
Greece
|
|
97.0%
|
|
Investment holding company
|
Cosmomegala Katastimata S.A.
|
|
Greece
|
|
40%
(1)
|
|
Provision of services
|
Notes:
|
|
|
(1)
|
|
Under liquidation.
|
|
(2)
|
|
We and Cosmote each hold a 30.87%
equity interest.
|
|
(3)
|
|
Effective interest of 95.03% held
through Cosmote and its 97% -owned subsidiary CHA.
|
|
(4)
|
|
Under liquidation; we hold a direct
interest of 40.0% and an indirect interest of 10.0% through
Hellascom.
|
|
(5)
|
|
Under liquidation; we hold a direct
interest of 10.0% and an indirect interest of 27.5% through
Hellascom and Trans Jordan Telecommunications Services Company
Ltd, respectively.
|
|
(6)
|
|
Subsidiary of OTE International
Investments Limited.
|
|
(7)
|
|
Our effective interest is 100%
through Cosmote.
|
|
(8)
|
|
Our effective interest is 86.2%
(70.0% is owned by Cosmote and 30% is owned by RomTelecom).
|
|
(9)
|
|
Was liquidated, dissolved and
unregistered from the Commercial Registry of Sofia on
January 11, 2010. Our effective interest until that date
was 100% (100% owned by OTEplus).
|
|
(10)
|
|
Our effective interest is 100%
(100% is owned by OTEplus).
|
|
(11)
|
|
We own these interests indirectly,
through Cosmote.
|
|
(12)
|
|
These companies are owned by
Germanos.
|
|
(13)
|
|
Subsidiary of OTE Estate.
|
95
|
|
|
(14)
|
|
Cosmoholding Romania Ltd was
established on August 6, 2009 and by October 30, 2009
acquired Zapp. We own these interests indirectly through Cosmote.
|
|
(15)
|
|
E-Value
One Person Ltd was established by
E-Value
S.A.
in October 2009.
|
|
(16)
|
|
Subsidiary of Cosmoholding Cyprus.
|
|
(17)
|
|
Cosmoholding Cyprus holds 99.998%
of the share capital of Germanos, while the remaining 0.002%, or
1,490 shares, is held by minority shareholders (these
shares were not included in the squeeze-out process which was
completed on April 10, 2007).
|
4.D Property,
Plant and Equipment
Our subsidiary OTE Estate owns 2,294 properties with an
aggregate surface area of approximately 9.25 million square
meters. Approximately 2,259 buildings, with an aggregate surface
area of approximately 1.14 million square meters, are
located on 1,771 of those properties. Almost all of the property
is free of encumbrances.
Our most significant property is our headquarters, a
thirteen-story office building on Kifissias Avenue, north of the
center of Athens, with an aggregate 84,043 square meters of
surface area, of which approximately 58,100 square meters
are built as office space.
The objective value of our thirty most significant properties
exceeds Euro 462.4 million.
The management, exploitation and development of our real estate
assets is the responsibility of OTE Estate. OTE Estate has been
the legal owner of these assets, including our Group
headquarters, following transfer of legal ownership of these
assets to it in 2001, following which we became a lessee of OTE
Estate with respect to these assets. The relevant lease has been
in effect since October 1, 2001 and is due to expire on
September 30, 2013.
On a proprietary plot of land located in Taraboura, Patras, OTE
Estate is building a new office and housing complex, which is
expected to be leased partly to us. OTE Estate is responsible
for the development of this new complex.
The value of OTE Estates real estate portfolio was
estimated at Euro 1.75 billion as of December 31,
2009. In October 2008, OTE Estate established a real estate
investment company (OTE Properties). The necessary license was
granted by the HCMC in June 2008.
On August 1, 2008 we and OTE Estate sold our 33.0%
participation in the share capital of Lofos Pallini S.A., a real
estate development company, to Reds S.A. for the amount of
Euro 18.45 million.
4.E Unresolved
Staff Comments
Not applicable.
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|
ITEM 5
|
OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
|
You should read the following discussion along with our
consolidated financial statements, including the notes thereto,
that are included in this
Form 20-F.
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards, or
IFRS, as issued by the IASB.
5.A Operating
Results
Overview
We are a full-service telecommunications group and the leading
provider of fixed-line voice telephony and internet access
services in Greece. We provide local, long-distance and
international fixed-line telecommunications services in Greece
and Romania, and we offer mobile telephony services through
Cosmote and its subsidiaries in Greece, Albania, Bulgaria,
Romania and, until May 2009, in FYROM. We also offer internet
access services and fully integrated
IP-based
telecommunications solutions, as well as IT application
development and
IP-based
hosting services. In addition, we offer a range of other
telecommunications services, including value-added services,
Intelligent Network
(IN)
services, leased
lines, public telephone services, operator assistance services,
sales of equipment, and satellite telecommunications. We also
provide telecommunications services on a wholesale basis to
other telecommunications providers and ISPs in Greece, including
wholesale ADSL access services, interconnection services, leased
lines, data telecommunications services and local loop
unbundling.
96
Revenues from mobile telephony services are the largest and
increasing component of our total revenues since 2007,
representing 40.0%, 38.6% and 35.0% of total revenues in 2009,
2008 and 2007, respectively. Domestic and international
fixed-line telephony services accounted for the second largest
percentage of our revenues, decreasing over recent years,
together representing 31.3%, 32.8% and 36.8% of total revenues
in 2009, 2008 and 2007, respectively (with domestic fixed-line
telephony services accounting for the majority of these
revenues). Revenues from other services, including, among other
things, prepaid cards sales, leased lines, interconnection and
internet services have made up an increasing percentage of our
revenues, accounting for 28.7%, 28.6% and 28.2% of total
revenues in 2009, 2008 and 2007, respectively.
Segment
Reporting
Our segments have been determined based on our Groups
legal structure, as Management reviews financial information
reported separately by us and our consolidated subsidiaries or
sub-groups
(such as the Cosmote group of subsidiaries). Using quantitative
thresholds, we, the Cosmote group of subsidiaries and RomTelecom
have been determined to be reportable segments. Information
about operating segments that do not constitute reportable
segments, has been combined and disclosed in an All
Other category. The accounting policies of the operating
segments are the same as those followed for the preparation of
our consolidated financial statements. We evaluate segment
performance based on operating profit before depreciation,
amortization and cost of early retirement program, operating
profit and profit for the year. For an overview of our results
on a segment basis, see Note 26 of our consolidated
financial statements.
Certain
Factors Affecting Operating Results
Acquisition
of Zapp
On June 30, 2009, Cosmote, through Cosmoholding Romania
Ltd., its newly-established wholly-owned subsidiary, signed a
share purchase agreement for the acquisition of Zapp in Romania.
The acquisition, which was subject, among other conditions, to
the approval of the relevant Romanian authorities, was completed
on October 31, 2009. The cash consideration paid for the
acquisition of Zapp was Euro 67.5 million, while
Cosmote assumed Zapps borrowings amounting to
Euro 129.6 million, mainly relating to the development
of Zapps 3G and CDMA network. Zaap was established in 1993
and holds licenses for CDMA services at 450 MHz and 3G at
2100 MHz, and operates respective networks.
Voluntary
Retirement Scheme of L. 3762/2009
On May 15, 2009, the Law 3762/2009 was enacted providing
that our employees who:
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|
|
|
(i)
|
have submitted a written application to participate in the
Voluntary Retirement Scheme, within the deadlines defined in
par.2, article 74 of Law 3371/2005; and
|
|
|
(ii)
|
do not submit an irrevocable application withdrawing the
original application within one month from the enactment of that
Law;
|
are considered to be retired based on the article 74 of Law
3371/2005 within three months from the expiration of the
deadline defined in (ii) above. We will cover the cost that
will arise from the employers and the employees
contributions to IKA-ETAM (both for the sections of pensions and
medical benefits) for the factitious time (or deemed time)
recognized to these employees and also the pensions that
IKA-ETAMs pension section will be required to pay to these
employees. We will also cover the cost that will arise from the
employers and the employees contributions to TAYTEKO
for the factitious time recognized to these employees, as well
as the pensions that TAYTEKO (Auxiliary Insurance Sector for OTE
Personnel) will be required to pay to these employees. In
addition, we will cover the cost that will arise from the
employers and the employees contributions to TAYTEKO
(Health Insurance Sector for OTE Personnel) for the factitious
time recognized to these employees. For the Lump Sum benefits
that TAYTEKO will be required to pay to these employees, we will
grant a long-term loan to TAYTEKO. An amount of
Euro 152.0 million was charged to the income statement
in relation to the Voluntary Retirement Scheme. For further
details, see Note 18 of our consolidated financial
statements for the year 2009.
97
Acquisition
of Shares in AMC
On April 27, 2009, Cosmote completed the acquisition of an
additional 12.58% interest in its subsidiary AMC, held by the
Albanian State, after obtaining the relevant approvals from the
Albanian authorities. The cash consideration for the acquisition
amounted to Euro 48.4 million. Following the
acquisition, Cosmote owns directly, and indirectly through CHA
(its 97%-owned subsidiary), a 95.0% interest in AMC. In
addition, according to Albanian legislation, Cosmote is obliged
to purchase the shares of the non-controlling interests, if they
so request. On June 22, 2009, certain non-controlling
interests representing approximately 2.3% of the share capital
of AMC requested Cosmote to buy their shares at the same price
as the price paid by Cosmote to the Albanian State for the
acquisition of the 12.58% interest in April 2009. On this basis,
the Groups obligations relating to this 2.3% are estimated
at Euro 10.0 million, which are recorded as a current
liability in the financial statements. As a result of this
obligation the Group consolidates its investment in AMC on the
basis of a 100% interest. On April 27, 2010, Cosmote sent
an offer letter on this basis to the non controlling interests.
Transfer
of 4.0% of our Share Capital from the State to
IKA-ETAM
On March 4, 2009, the State and IKA-ETAM, the Greek pension
fund and successor entity in the rights and obligations of
TAP-OTE, signed an agreement for the transfer by the State of
19,606,015 of our ordinary shares, representing 4% of our share
capital, to IKA-ETAM for no cash consideration, in accordance
with Law 3371/2005 and Law 3655/2008. The fair value of the
transaction was set at Euro 10.30 per share (the closing
price of our shares on the Athens Exchange on the date the
transfer was signed). The total fair value of the transferred
shares amounted to Euro 201.9 million which is
included as a gain under the line item Cost of early
retirement program in the Groups income statement
for the year 2009. In the same agreement IKA-ETAM agreed to
exercise the voting rights pertaining to these shares the same
way as the State exercises its own voting rights. For further
details see Note 18 of our consolidated financial
statements.
Special
Contribution Law 3808/2009
Following the enactment of Law 3808/2009 enacted in December
2009, a special, one-time contribution of social responsibility
was charged to Greek for-profit entities calculated on their
total net income for the fiscal year 2008, based on a
progressive scale, if it exceeded the amount of
Euro 5.0 million. The respective charge in the
Groups 2009 income statement amounted to
Euro 113.1 million and is included under the line item
Income tax expense in our income statement.
Application
of Early Retirement Programs
On January 28, 2009, we signed a Collective Labor Agreement
with OME-OTE, the trade union of the employees of OTE,
contemplating an early retirement program pursuant to which
employees completing a number of years required for retirement
by December 30, 2009, would be entitled to benefits in
order to retire by that date at the latest. The deadline for
receiving applications from eligible employees participating in
this early retirement program was February 16, 2009.
Applications were irrevocable. The cost of this early retirement
program amounted to Euro 11.0 million which is
included in the Groups income statement for the year 2009.
The 197 eligible participating employees left the Company by
December 30, 2009.
On December 23, 2009, we approved an early retirement
program pursuant to which employees completing the relevant
number of years required for retirement by December 29,
2010, would be entitled to benefits in order to retire at the
latest by December 30, 2010. The deadline for receiving
applications from eligible employees participating in this early
retirement program was January 15, 2010. The cost of this
early retirement program, which we estimate to be approximately
Euro 31.5 million, will be charged to the Groups
income statement for the year 2010.
Sale of
Cosmofon and Germanos Telekom AD Skopje
As of December 31, 2008, Cosmofon was classified as held
for sale in the consolidated statement of financial position. On
March 30, 2009, we announced that an agreement was entered
between Cosmote and Telekom Slovenije regarding the transfer to
Telekom Slovenije of 100% of Cosmofon, through the sale of
Cosmotes wholly
98
owned subsidiary, OTE MTS HOLDING B.V, as well as Germanos
Telecom AD Skopje. The transaction was completed on May 12,
2009, following approval by the relevant governmental and
regulatory authorities in Skopje. The results of Cosmofon and
Germanos Telecom AD Skopje are included in the consolidated
financial statements until May 12, 2009, the date we ceased
to control those companies.
Acquisition
of MICROSTAR Ltds Interest in Cosmoholding
Cyprus
On January 15, 2007, Mr. Panos Germanos acquired
through MICROSTAR Ltd, a Cypriot holding company controlled 100%
by Mr. Germanos, a participation of 10% in the share
capital of Cosmoholding Cyprus, a subsidiary of Cosmote, by
subscribing to 100 registered Class B shares for a total
amount of Euro 144.5 million. As a result, as of
December 31, 2008, Cosmotes participation in
Cosmoholding Cyprus amounted to 90.0% and Cosmotes
indirect participation in Germanos, via Cosmoholding Cyprus,
amounted to 90.0%. These shares were redeemable by Cosmoholding
Cyprus or any other party indicated by Cosmote on
December 31, 2009 or on December 31, 2011, if
requested by the controlling shareholder, MICROSTAR Ltd, at a
price which depends on the achievement of certain corporate
targets before the purchase date. On December 31, 2009,
Cosmote acquired MICROSTAR Ltds 10% interest in the share
capital of Cosmoholding Cyprus for a total amount of
Euro 168.5 million, reflecting the initial value plus
accrued interest until that date.
Sale of
INFOTE
In December 2007, we sold the entire share capital of INFOTE,
our directory services subsidiary, to Rhone Capital LLC and
Zarkona Trading Limited for the amount of
Euro 300.2 million. INFOTEs results are included
in our consolidated financial statements until December 19,
2007, the date of its sale. We recognized a pre-tax gain of
Euro 244.7 million from the sale in 2007. See
4.B Business Overview Other
Services Other Telecommunications
Services Telephone Directory and Information
Services.
Acquisition
of Cosmote Minorities
On November 9, 2007, we announced an all-cash voluntary
public tender offer to acquire all of the shares of Cosmote that
were not already owned, directly or indirectly, by us, at an
offer price of Euro 26.25 per share. In April 2008, we
owned 100% of the share capital and voting rights of Cosmote.
The total cost for the acquisition of the remaining shares in
Cosmotes outstanding share capital was
Euro 2.9 billion (2.1 billion incurred in 2007
and 0.8 billion incurred in 2008). Because we already owned
67.83% of Cosmotes paid up share capital, Cosmotes
results were included in our consolidated financial statements
prior to the tender offer. See 4.B Business
Overview Mobile Telephony Services
Greece-Cosmote Acquisition of the entire share
capital of Cosmote.
Recent
Developments
Additional
contributions to IKA-ETAM in connection with the Voluntary
Retirement Scheme
On January 19, 2010, the Greek Minister of Labor and Social
Security addressed a letter to us indicating that IKA-ETAM had
incurred significant deficits attributable to the incorporation
of the pension segment of TAP-OTE into IKA-ETAM as of
August 1, 2008, as a result of our Voluntary Retirement
Scheme, and that further deficits were anticipated for 2010. The
letter added that such deficits were up to that point covered
primarily by the State and partially absorbed by IKA-ETAM, but
that we should also contribute funds towards these deficits. We
agreed with the Ministry to establish a committee to discuss
these issues. On February 23, 2010, the Ministry formally
advised us that it had estimated that IKA-ETAM had foregone
contributions and pensions of approximately
Euro 340.0 million, as a result of the Voluntary
Retirement Scheme, and required that the relevant outstanding
contributions which up to that point we paid on a monthly basis
should be settled in full. On March 9, 2010, we responded
to the specific issues raised by the Ministry and reiterated our
belief that we fulfill our financial obligations arising from
Law 3371/2005 and the relevant Ministerial Decision, and
requested that the Ministry take action to address the pending
matter of the issuance of the necessary decisions by pension
funds, required to enable the participants of the voluntary
retirement scheme under Law 3762/2009 to receive their pension
entitlements.
99
In March 2010, a Ministerial Decision was issued and published
in the Government Gazette (FEK
333/26/03/2010),
requiring us to make a lump-sum payment by the last working day
of September 2010, covering the additional financial burden
incurred by the Pension Section of IKA-ETAM, the Auxiliary
Insurance Sector for OTE personnel of TAYTEKO and the Medical
Segment of TAYTEKO, resulting from our Voluntary Retirement
Scheme (which the Minister advised were approximately
Euro 340.0 million). According to the same Ministerial
Decision, the exact amount of this additional financial burden
will be determined by an actuarial study to be performed by the
Directorate of the Actuarial Studies of the States General
Secretariat for Social Security in conjunction with the
Directorate of Actuarial Studies and Statistics of IKA-ETAM, by
August 31, 2010.
Having examined the Ministrys position, we believe that
this position is unsubstantiated, as we have fulfilled and
continue to fulfill in their totality our financial obligations
towards social security funds, paying all contributions, as they
are due, both in the context of its normal course of business,
as well as the ones related to the our voluntary retirement
plans, in compliance with relevant laws, rules and regulations.
We intend to appeal against this Ministerial Decision requesting
the annulment the relevant provision and believe that there are
valid grounds for its annulment. In view of the above, we have
not recorded any relevant provision in our financial statements.
Tax Audit
of OTE for the Fiscal Years 2006 to 2008
The tax audit of OTE for the fiscal years 2006 to 2008 was
completed in May 2010 and the Greek tax authorities imposed on
OTE additional taxes amounting to Euro 57.7 million,
following which we accepted a partial settlement for an amount
of Euro 37.7 million. Based on the findings of this
tax audit, we reassessed our income tax expense for the year
ended December 31, 2009 and an additional tax expense of
Euro 6.3 million was required. As a result of the
amount settled with the tax authorities and the additional
estimate for the year ended December 31, 2009, less our
previously established provision of Euro 14.0 million
for the relevant open tax years, we took a charge of
Euro 30.0 million on our income statement for the year
ended December 31, 2009. The remaining
Euro 20.0 million of taxes imposed relates to costs
associated with our Voluntary Retirement Scheme and other early
retirement programs. We have decided not to include this
particular item in our partial settlement with the tax
authorities and we intend to appeal against the tax
authorities position before the Greek administrative
courts. Pursuant to applicable laws, we will be required to pay
an advance of approximately Euro 5.0 million (25% of
the assessed taxes and penalties) in order to appeal, which will
be reimbursed to us in the event of a favorable court decision.
Based on our managements assessment, we believe that there
are good grounds that we will win this case in court. Please see
Note 21 to our audited consolidated financial statements
for more details regarding this matter and the results of tax
audits of our subsidiaries.
RomTelecoms
Restructuring Plan
By virtue of decisions by RomTelecoms CEO, dated February
and April 2010, RomTelecom announced the restructuring of
specific departments within the company. In the first four
months of 2010, 550 employees voluntarily terminated their
employment contracts and an amount of
Euro 12.5 million, representing the relative costs,
will be charged in the Groups income statement of 2010.
Zapps
Restructuring Plan
A total of 350 employees of Zapp voluntarily terminated
their employment contracts and an amount of
Euro 2.6 million, representing the relative costs,
will be charged in the Groups income statement of 2010.
Factors
Affecting our Financial Performance
Fixed-line
Customer Base and Traffic
Fixed-line customer base.
Over recent years,
our total number of PSTN and ISDN lines installed and in service
has decreased, mainly as a result of competition from
alternative fixed-line operators and the effect of
fixed-to-mobile
substitution. On the other hand, the number of our ADSL lines in
service has increased significantly, primarily as a result of
the increase in the market for broadband services in Greece, as
well as the inclusion of OTENets ADSL customers under our
retail numbers as of 2008 (as opposed to them being included
under wholesale for 2007).
100
In parallel, the number of our wholesale ADSL lines in service
decreased significantly in 2008, as compared to 2007, mainly as
a result of an increase in the number of ADSL lines operated by
alternative operators that are served by their own unbundled
local loops (resulting from an increase in the rate of local
loop unbundling over the last years) and secondarily due to the
inclusion of OTENets ADSL customers under our retail
numbers for 2008, as opposed to them being included under
wholesale for 2007.
The following table sets out certain key operating data
regarding our fixed-access lines in Greece as of
December 31, 2007, 2008 and 2009:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2007
|
|
2008
|
|
2009
|
|
|
(In thousands)
|
|
Number of PSTN access lines in service
|
|
|
4,509
|
|
|
|
4,110
|
|
|
|
3,787
|
|
Number of ISDN BRA lines in service
|
|
|
580
|
|
|
|
548
|
|
|
|
517
|
|
Number of ISDN PRA lines in service
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
Active ADSL lines (retail)
|
|
|
475
|
|
|
|
864
|
|
|
|
1,060
|
|
Active ADSL lines
(wholesale)
(1)
|
|
|
334
|
|
|
|
94
|
|
|
|
53
|
|
Note:
|
|
|
(1)
|
|
Active lines of ADSL customers of
alternative operators, supported by wholesale services provided
by our company. Following our merger with OTENet in 2008,
OTENets customers are included in the retail numbers for
2008, while, for previous years, OTENets customers are
included in wholesale numbers.
|
Fixed-line traffic.
The following table
provides information regarding our total domestic fixed-line
traffic volume in Greece as of December 31, 2007, 2008 and
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2007
|
|
%
|
|
2008
|
|
%
|
|
2009
|
|
%
|
|
|
(Minutes in billions, except for percentages)
|
|
Outgoing calls
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local calls
|
|
|
14.8
|
|
|
|
45.8
|
%
|
|
|
11.6
|
|
|
|
44.1
|
%
|
|
|
9.3
|
|
|
|
40.9
|
%
|
National Long-distance calls
|
|
|
1.8
|
|
|
|
5.6
|
%
|
|
|
1.9
|
|
|
|
7.2
|
%
|
|
|
1.9
|
|
|
|
8.5
|
%
|
Calls to internet service providers
|
|
|
4.6
|
|
|
|
14.2
|
%
|
|
|
2.4
|
|
|
|
9.1
|
%
|
|
|
1.2
|
|
|
|
5.3
|
%
|
Fixed-to-Mobile
|
|
|
1.8
|
|
|
|
5.6
|
%
|
|
|
1.7
|
|
|
|
6.5
|
%
|
|
|
1.6
|
|
|
|
7.0
|
%
|
Calls from OTE to other fixed networks
|
|
|
1.3
|
|
|
|
4.0
|
%
|
|
|
1.7
|
|
|
|
6.5
|
%
|
|
|
2.1
|
|
|
|
9.4
|
%
|
Special Calls
|
|
|
0.2
|
|
|
|
0.6
|
%
|
|
|
0.2
|
|
|
|
0.8
|
%
|
|
|
0.1
|
|
|
|
0.4
|
%
|
Incoming calls
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calls to OTE from Fixed & Mobile operators
|
|
|
7.8
|
|
|
|
24.2
|
%
|
|
|
6.8
|
|
|
|
25.8
|
%
|
|
|
6.5
|
|
|
|
28.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
32.3
|
|
|
|
100.0
|
%
|
|
|
26.3
|
|
|
|
100.0
|
%
|
|
|
22.7
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
The following table sets out international traffic volume data,
including outgoing calls originated by mobile and alternative
fixed-line telephony operators in Greece for the three years
ended December 31, 2009:
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|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(Minutes in millions, except
|
|
|
|
for percentages)
|
|
|
Outgoing calls
|
|
|
|
|
|
|
|
|
|
|
|
|
OTE
|
|
|
506.3
|
|
|
|
361.5
|
|
|
|
332.0
|
|
Other
|
|
|
417.6
|
|
|
|
536.6
|
|
|
|
537.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total outgoing traffic
|
|
|
923.9
|
|
|
|
898.1
|
|
|
|
869.4
|
|
Growth (% per year)
|
|
|
11.6
|
|
|
|
(2.8
|
)
|
|
|
(3.2
|
)
|
Incoming calls
|
|
|
|
|
|
|
|
|
|
|
|
|
OTE
|
|
|
514.5
|
|
|
|
551.8
|
|
|
|
639.2
|
|
Other
|
|
|
303.8
|
|
|
|
346.0
|
|
|
|
420.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total incoming traffic
|
|
|
818.3
|
|
|
|
897.8
|
|
|
|
1,059.5
|
|
Growth (% per year)
|
|
|
(2.7
|
)
|
|
|
9.7
|
|
|
|
18.0
|
|
Mobile
Customer Base and Traffic in Greece
Mobile customer base in Greece.
As of
December 31, 2009, Cosmote had 9,217,507 active customers
(active for 12 months) in Greece, representing an estimated
market share of approximately 45% of the total number of
contract and prepaid mobile telephony customers in Greece (based
on internal estimates), as compared to 7,893,144 active
customers as of December 31, 2008. Cosmotes customer
numbers in Greece increased by 16.8% in 2009, as compared to
2008, as a result of the net addition of 70,365 contract
customers and 1,253,998 prepaid customers. At the end of 2009,
mobile penetration in Greece had exceeded 180%.
Based on its estimates, as of December 31, 2009, Cosmote
was the leading provider of mobile telecommunications services
to contract customers in Greece, with a total of 2,284,571
contract customers, as compared to compared to 2,214,206
contract customers as of December 31, 2008. Contract
customers in general have greater loyalty and higher average
monthly revenues per user than prepaid customers. Based on its
estimates, Cosmote was also the leading provider of prepaid
services in Greece with a total of 6,932,936 prepaid customers
as of December 31, 2009, as compared to 5,678,938 prepaid
customers as of December 31, 2008. As a result of
newly-enacted laws, mobile operators are required to register in
2010 the users of prepaid SIM cards and erase the accounts of
those who cannot be identified; as a result of this process,
Cosmote expects that the number of active prepaid customers of
both Cosmote and its competitors will decrease significantly at
the end of 2010.
Mobile traffic in Greece.
A total of
approximately 20.9 billion minutes were distributed through
Cosmotes network in 2009, compared to 14.0 billion
minutes in 2008, and 10.7 billion minutes in 2007,
representing annual growth rates of 49.3% and 30.8%,
respectively.
Mobile customer base in other countries.
As of
December 31, 2009, we had the following numbers of
customers in the countries in which we provided mobile services:
|
|
|
|
|
in Albania, AMC, Cosmotes 95.03% indirectly-owned
subsidiary, had 1,908,987 mobile customers;
|
|
|
|
in Bulgaria, Globul, Cosmotes 100% directly-owned
subsidiary, had 3,902,272 mobile customers; and
|
|
|
|
in Romania, Cosmote Romania, Cosmotes 70%-owned
subsidiary, had 6,920,816 customers.
|
Competition
and Price Pressures in the Greek Fixed-line Telecommunications
Market
Since its liberalization in 2001, the market for fixed-line
telecommunications services in Greece has become increasingly
competitive. We expect competition to continue to intensify as a
result of, among other factors, an evolving market landscape,
the introduction of new products and services, potential for new
entrants, strategic alliances and shareholdings, regulatory
developments, and competitive and funding opportunities
available to
102
certain of our existing competitors. Although certain of the
alternative operators have recently ceased operations due to
financial difficulties, other existing operators continue to
grow their market shares. In addition, we expect to face
additional competition in the area of IPTV services, which we
recently commenced providing on a commercial basis.
Prices for products and services offered to customers in the
telecommunications market in Greece, especially with respect to
broadband services, have decreased significantly in recent
years. Increasing competitive pressures in the market both for
telephony and broadband services and other factors could cause
prices for our services to decline. In addition, regulatory
limitations imposed on our ability to set tariffs often result
in us being required to charge tariffs which are higher or, in
certain cases, significantly higher than those charged by our
competitors for the same services, as our competitors are not
subject to the same pricing limitations. Given that an important
factor for the determination of our tariffs is our cost for
providing the relevant services, we must make efforts to
increase the efficiency of our operations, in order to reduce
such costs, and therefore be able to reduce the cost-based
tariffs we charge, in order to make them more competitive.
Competition
and Price Pressures in the Greek Mobile Telecommunications
Market
Competition in the Greek mobile telecommunications market is
generally intense and relates to price, distribution,
subscription options offered, offers of subsidized handsets,
coverage, range of services offered, innovation and quality of
service. Each of Vodafone and Wind Hellas, Cosmotes
competitors in the Greek market, belong to large international
groups and benefit from group-wide efficiencies in international
operations in areas such as international roaming, marketing and
procurement. Cosmotes competitors may succeed in
attracting some of its customers, which could reduce
Cosmotes market share and have a material adverse effect
on its results of operations.
In recent years, competition and price pressures have
intensified, while a number of new factors may impact the mobile
market, including combined offers of mobile and fixed-line
services by mobile and fixed-line operators. Cosmote expects
competition to intensify in 2010, mainly as a result of
deteriorating economic conditions and pricing pressures, as well
as the increasing offering of aggressively priced prepaid
packages and of voice bundle or
unlimited packages in the mobile market (packages
offering an amount of, or unlimited, free call time for a flat
fee). Cosmote has experienced and expects to continue to
experience a migration of part of its contract customer base to
such products, either on contract or prepaid basis. Such
migration can have an adverse impact on average revenues derived
from each customer (as customers tend to use more air time for a
flat fee). In addition, the glide path imposed by
the EETT on Cosmotes tariffs has also resulted in a
significant reduction in mobile rates. As a result of these and
other factors, the average price per minute realized by Cosmote
in 2009 declined by approximately 40%, as compared to 2008.
Evolution
of the Greek Broadband Market
Trends in the Greek ADSL market have been affected by pricing of
retail ADSL offers and the development of the wholesale ADSL
market and the market for local loop unbundling. The market has
grown significantly over recent years and continues to grow.
According to the EETT, as of December 31, 2009, there were
1,916,630 broadband lines in Greece, 99.6% of these were ADSL
lines, representing an increase of 27%, as compared to 1,506,614
ADSL lines as of December 31, 2008. Growth in the broadband
market has benefitted our revenues from relevant services in
recent years.
Despite, however, its strong growth in recent years, as of
December 31, 2009, ADSL had reached a penetration rate of
just 17.02% of the Greek population, which is relatively low
compared to other EU countries. We believe that this supports
expectations for further growth of the ADSL market in the
future. However, adverse macroeconomic conditions currently
prevailing in Greece can have a negative impact on the growth
rate of the ADSL market. In addition, this growth rate may also
be negatively affected by a number of other factors, including
traffic congestion, logistical difficulties relating to
installation and use, lack of cost-effectiveness, inadequate
development of the necessary infrastructure and regulatory
complications.
103
Pricing trends for retail ADSL products have been characterized
by a number of factors, including bundled offers of fixed-line
voice, internet and, in some cases, IPTV services or mobile
products, and a general tendency for operators to offer
increasing connection speeds at the same or, in certain cases,
reduced tariffs.
Regulation
of the Telecommunications Market in Greece and in Other
Countries in which we Operate
The provision of telecommunications services in Greece is
subject to regulation based on EU legislation, competition law
and sector-specific regulation relating to various issues,
including numbering, licensing, tariffs, local loop unbundling,
interconnection, leased lines and privacy issues. The
Telecommunications Law currently in force for four years
contemplates the enactment of a series of secondary legislation,
most of which has already been adopted, but the joint
ministerial decision on the procedures for granting rights of
way, which is critical to the deployment of new networks, has
still not been completed. In certain cases, secondary
legislation and regulatory remedies do not reflect the current
level of competition and can be burdensome, particularly
regarding the conditions for tariff approval. Although
experience with the regulation of fixed-line voice services in
Greece has increased over recent years, the emergence and
introduction of new technologies and new types of services
together with the lack of clear guidelines in their regulatory
treatment has led and may lead in the future to a lack of
clarity, at a national and European level, in the regulatory
framework governing the provision of such services. In addition,
amendments to existing regulations have resulted in us being
required to utilize substantial financial and human resources in
order to comply with changing requirements and we expect to
continue to be bound by such obligations in the short- to
medium-term future.
As a result, it is sometimes difficult for us to accurately
predict the exact manner in which new laws and regulations
affecting our business will be interpreted
and/or
implemented by regulators or courts, the impact such regulations
may have on our business, or the specific actions we may need to
take, or the expenditure we may need to incur in order to comply.
Furthermore, as a provider of telecommunications services, we
are also exposed to certain additional regulatory compliance
costs, which range from our obligation to provide universal
service to increased expenses relating to investments for the
protection of customers privacy and personal data. See
4.B Business Overview Regulation
Telecommunications Services Regulation
Telecommunications Framework in Greece.
In addition to the substantial resources we may have to commit
to comply with the regulations to which we are or may become
subject, fines can be and have been imposed on us, if the
relevant regulator rules that we do not comply with the
applicable regulatory framework. Over recent years, the EETT has
imposed a number of fines on us with respect to a number of our
business activities, including both retail and wholesale
services, certain of which have been for significant monetary
amounts. See 4.B Business Overview Legal
Proceedings Greece Regulatory
Matters. We believe that in certain cases such regulatory
remedies imposed on us did not fully take into account the
current level of competition in the Greek telecommunications
market, which has evolved significantly over recent years.
Although these fines are subject to remedies before Greek
administrative courts and we have so far, in a number of cases,
succeeded in having certain of these fines either repealed or
reduced, we have in recent years paid, or provided for
significant amounts in our financial statements, in relation to
fines imposed on us by the EETT and we cannot assure you that
further fines will not be imposed on us in the future. In
addition, regulatory remedies, including fines, that have been,
or may be, imposed on us not only have a direct impact on our
financial condition, but also impact our business decisions and
strategy.
In addition, the provision of telecommunications services
(fixed-line or mobile) in other countries in which we operate is
also subject to regulations, in some case based on the
principles set by EU regulations, regarding, among other things,
numbering, licensing, competition, tariffs, local loop
unbundling, interconnection and leased lines. In some of these
countries there is currently very limited regulatory guidance as
to the interpretation and implementation of applicable
legislation and regulations.
New
Technologies and Customer Trends
We must accurately assess customer demand for our products and
successfully expand our existing infrastructure, introduce new
products and services or develop enhancements to and new
features for existing products and services, on a continuing
basis, in order to remain competitive and increase our revenues.
The
104
telecommunications business is subject to rapid and significant
technological changes. Evolving technologies may result in
unanticipated capital investments by us in order to remain
competitive, either due to incompatibility with our existing
systems or the possibility that our infrastructure becomes
obsolete.
Results
of Operations for the Three Years ended December 31,
2009
The following table sets forth, for each of the three years
ended December 31, 2009, selected consolidated income
statement data in Euro and as a percentage of total revenues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
Euro
|
|
|
Revenues
|
|
|
Euro
|
|
|
Revenues
|
|
|
Euro
|
|
|
Revenues
|
|
|
|
(Millions, other than percentages)
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
telephony
(1)
|
|
|
2,022.2
|
|
|
|
32.0
|
|
|
|
1,814.2
|
|
|
|
28.3
|
|
|
|
1,619.6
|
|
|
|
27.1
|
|
International
telephony
(2)
|
|
|
304.5
|
|
|
|
4.8
|
|
|
|
286.9
|
|
|
|
4.5
|
|
|
|
251.1
|
|
|
|
4.2
|
|
Mobile telephony
|
|
|
2,210.0
|
|
|
|
35.0
|
|
|
|
2,470.8
|
|
|
|
38.6
|
|
|
|
2,396.2
|
|
|
|
40.0
|
|
Other
revenue
(3)
|
|
|
1,783.1
|
|
|
|
28.2
|
|
|
|
1,835.4
|
|
|
|
28.6
|
|
|
|
1,717.2
|
|
|
|
28.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
6,319.8
|
|
|
|
100.0
|
|
|
|
6,407.3
|
|
|
|
100.0
|
|
|
|
5,984.1
|
|
|
|
100.0
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll and employee benefits
|
|
|
(1,149.0
|
)
|
|
|
(18.2
|
)
|
|
|
(1,168.4
|
)
|
|
|
(18.2
|
)
|
|
|
(1,190.8
|
)
|
|
|
(19.9
|
)
|
Provision for staff retirement indemnities and youth account
|
|
|
(92.3
|
)
|
|
|
(1.5
|
)
|
|
|
(112.6
|
)
|
|
|
(1.8
|
)
|
|
|
(95.5
|
)
|
|
|
(1.6
|
)
|
Cost of early retirement program
|
|
|
(22.1
|
)
|
|
|
(0.3
|
)
|
|
|
(50.2
|
)
|
|
|
(0.8
|
)
|
|
|
30.3
|
|
|
|
0.5
|
|
Charges from international operators
|
|
|
(182.7
|
)
|
|
|
(2.9
|
)
|
|
|
(173.9
|
)
|
|
|
(2.7
|
)
|
|
|
(184.0
|
)
|
|
|
(3.1
|
)
|
Charges from domestic operators
|
|
|
(655.3
|
)
|
|
|
(10.4
|
)
|
|
|
(642.3
|
)
|
|
|
(10.0
|
)
|
|
|
(516.3
|
)
|
|
|
(8.6
|
)
|
Depreciation and amortization
|
|
|
(1,171.8
|
)
|
|
|
(18.5
|
)
|
|
|
(1,213.0
|
)
|
|
|
(18.9
|
)
|
|
|
(1,155.3
|
)
|
|
|
(19.3
|
)
|
Cost of telecommunications equipment
|
|
|
(672.8
|
)
|
|
|
(10.6
|
)
|
|
|
(633.4
|
)
|
|
|
(9.9
|
)
|
|
|
(475.1
|
)
|
|
|
(7.9
|
)
|
Other operating expenses
|
|
|
(1,326.9
|
)
|
|
|
(21.0
|
)
|
|
|
(1,355.8
|
)
|
|
|
(21.2
|
)
|
|
|
(1,396.5
|
)
|
|
|
(23.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
(5,272.9
|
)
|
|
|
(83.4
|
)
|
|
|
(5,349.6
|
)
|
|
|
(83.5
|
)
|
|
|
(4,983.2
|
)
|
|
|
(83.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before financial activities
|
|
|
1,046.9
|
|
|
|
16.6
|
|
|
|
1,057.7
|
|
|
|
16.5
|
|
|
|
1,000.9
|
|
|
|
16.7
|
|
Income/(expense) from financial activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(238.7
|
)
|
|
|
(3.8
|
)
|
|
|
(343.7
|
)
|
|
|
(5.4
|
)
|
|
|
(325.2
|
)
|
|
|
(5.4
|
)
|
Interest income
|
|
|
77.8
|
|
|
|
1.2
|
|
|
|
72.3
|
|
|
|
1.1
|
|
|
|
61.6
|
|
|
|
1.0
|
|
Foreign exchange differences, net
|
|
|
(4.8
|
)
|
|
|
(0.1
|
)
|
|
|
11.8
|
|
|
|
0.2
|
|
|
|
10.2
|
|
|
|
0.2
|
|
Gains from investments
|
|
|
256.8
|
|
|
|
4.1
|
|
|
|
33.7
|
|
|
|
0.5
|
|
|
|
23.6
|
|
|
|
0.4
|
|
Dividend income
|
|
|
16.8
|
|
|
|
0.3
|
|
|
|
12.2
|
|
|
|
0.2
|
|
|
|
9.6
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total profit/(loss) from financial activities
|
|
|
107.9
|
|
|
|
1.7
|
|
|
|
(213.7
|
)
|
|
|
(3.3
|
)
|
|
|
(220.2
|
)
|
|
|
(3.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax
|
|
|
1,154.8
|
|
|
|
18.3
|
|
|
|
844.0
|
|
|
|
13.2
|
|
|
|
780.7
|
|
|
|
13.1
|
|
Income tax expense
|
|
|
(381.8
|
)
|
|
|
(6.0
|
)
|
|
|
(246.2
|
)
|
|
|
(3.8
|
)
|
|
|
(410.0
|
)
|
|
|
(6.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the
year
(4)
|
|
|
773.0
|
|
|
|
12.2
|
|
|
|
597.8
|
|
|
|
9.3
|
|
|
|
370.7
|
|
|
|
6.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the parent:
|
|
|
662.6
|
|
|
|
10.5
|
|
|
|
601.8
|
|
|
|
9.4
|
|
|
|
374.0
|
|
|
|
6.2
|
|
Non-controlling interests:
|
|
|
110.4
|
|
|
|
1.7
|
|
|
|
(4.0
|
)
|
|
|
(0.1
|
)
|
|
|
(3.3
|
)
|
|
|
(0.1
|
)
|
Notes:
|
|
|
(1)
|
|
Includes revenue from monthly
network service fees, revenues from
fixed-to-fixed
and
fixed-to-mobile
calls and revenues from such services as operator assistance,
connection and reconnection charges and paging services.
|
105
|
|
|
(2)
|
|
Includes revenue from incoming
including transit, and outgoing, traffic, gross of amounts
charged by foreign telephony operators, and payments from the
unaffiliated domestic mobile telephony operators to us for
international calls. The respective revenues from our
consolidated subsidiaries providing mobile services are
eliminated upon consolidation.
|
|
(3)
|
|
Includes revenue from prepaid
cards, leased lines and data ATM telecommunications, provision
for services, interconnection charges, internet services/ADSL,
ISDN, sales of telecommunication equipment, collocation and
local loop unbundling.
|
|
(4)
|
|
In 2007, we took a charge of Euro
22.1 million relating to the employees who participated in
the early retirement program of 2007. In addition, in 2007, we
recorded a pre-tax gain of Euro 244.7 million from the sale
of INFOTE and received dividends totaling Euro 15.7 million
from Telekom Srbija. In 2008, the Group took a charge of Euro
50.2 million relating to the employees who participated in
our and RomTelecoms early retirement programs of 2008.
Furthermore, we recorded a pre-tax gain of Euro
17.0 million from the sale of our investment in the
Lofos-Palini real estate company. In addition, we received
dividends totaling Euro 11.2 million from Telekom Srbija.
In 2009, the Groups profit for the year was affected by
our and RomTelecoms early retirement programs costs
of Euro 171.6 million, which were offset by Euro
201.9 million from the transfer of 4.0% of our share
capital held by the State to IKA-ETAM, resulting in a net gain
of Euro 30.3 million. Furthermore, the 2009 income tax
expense was affected by the new laws regarding a one-time
special contribution of social responsibility (a charge of Euro
113.1 million), a tax on dividends (a charge of Euro
30.3 million) and the result of the tax audit in OTE for
the years
2006-2008
of
Euro 30.0 million. In addition, the Group recorded a
pre-tax gain of Euro 23.6 million from the sale of its
subsidiaries Cosmofon and Germanos Telecom AD Skopje and
received dividends totaling Euro 9.3 million from Telekom
Srbija.
|
Revenue
Revenues amounted to Euro 5,984.1 million in 2009,
compared to Euro 6,407.3 million in 2008 and
Euro 6,319.8 million in 2007, representing a
year-on-year
decrease of 6.6% in 2009 and an increase of 1.4% in 2008. The
decrease in 2009, as compared to 2008, was due to decreases in
revenue across all the revenue categories, including domestic
and international telephony, mobile telephony and other
revenues. The increase in 2008, as compared to 2007, was due
mainly to increased revenues from our mobile operations (both in
Greece and abroad) and increases in other revenues, and was
partially offset by a decrease in our revenues from domestic and
international telephony. The contribution of each category to
our total revenues is as follows:
|
|
|
|
|
Revenues derived from the provision of fixed-line domestic
telephony represented 27.1% of our total revenues in 2009, as
compared to 28.3% in 2008 and 32.0% in 2007;
|
|
|
|
Revenues derived from the provision of fixed-line international
telephony represented 4.2% of our total revenues in 2009, as
compared to 4.5% in 2008 and 4.8% in 2007;
|
|
|
|
Revenues from mobile telephony services represented 40.0% of our
revenues in 2009, as compared to 38.6% in 2008 and 35.0% in
2007; and
|
|
|
|
Other revenues represented 28.7% of our revenues in 2009, as
compared to 28.6% in 2008 and 28.2% in 2007.
|
In 2009, 70.0% of our revenues were generated by activities in
Greece, as compared to 70.2% in 2008 and 72.5% in 2007. The
decreases in percentage of revenues derived from operations in
Greece in 2009, as compared to 2008 was mostly due to the
increased contributions to our total revenues by Cosmote Romania
and partially offset in 2007 by the sale of Cosmofon and
Germanos Telekom AD Skopje, which reduced revenues outside
Greece, while the decreases in 2008, as compared to 2007, were
mainly due to the increased contributions to our total revenues
by Globul, Cosmote Romania and AMC, each of which conducts its
business outside Greece.
Domestic
Telephony Revenue
Domestic telephony services include services we provide in
Greece and through RomTelecom in Romania.
Revenues from domestic telephony include call charges for
domestic (in-country) local and long-distance calls, monthly
line rental charges, initial connection charges for new lines
and other domestic telephony revenues. Local and long-distance
calls include revenues from tariffs charged to customers on
outgoing calls to both fixed-lines and customers of unaffiliated
mobile telephony operators. Other domestic telephony includes
revenues from operator assistance, connection charges and paging
services. These revenues depend on, among other factors, the
number of access lines in service, the number of new lines
connected, call volumes and tariffs.
106
The following table sets out the breakdown of revenues from
domestic telephony services for each of the three years ended
December 31, 2009, including percentages for the year ended
December 31, 2009, attributable to local and long-distance
calls, monthly network service fees and other domestic telephony
revenues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
% of Total
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
|
(Euro in millions)
|
|
|
|
|
|
Domestic Telephony:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local and long-distance calls
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-to-fixed
|
|
|
565.5
|
|
|
|
481.9
|
|
|
|
461.9
|
|
|
|
28.5
|
%
|
Fixed-to-mobile
|
|
|
378.3
|
|
|
|
325.3
|
|
|
|
249.5
|
|
|
|
15.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total local and long-distance calls
|
|
|
943.8
|
|
|
|
807.2
|
|
|
|
711.4
|
|
|
|
43.9
|
%
|
Monthly network service fees
|
|
|
988.1
|
|
|
|
910.7
|
|
|
|
845.9
|
|
|
|
52.2
|
%
|
Other
|
|
|
90.3
|
|
|
|
96.3
|
|
|
|
62.3
|
|
|
|
3.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total domestic telephony services
|
|
|
2,022.2
|
|
|
|
1,814.2
|
|
|
|
1,619.6
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from domestic telephony services were
Euro 1,619.6 million in 2009,
Euro 1,814.2 million in 2008 and
Euro 2,022.2 million in 2007, representing a decrease
of 10.7% in 2009, as compared to 2008 and a decrease of 10.3% in
2008, as compared to 2007. The decrease in revenues from
domestic telephony over the periods under review was the result
of decreases in revenues from local and long-distance calls and
monthly network service fees; these were mainly due to gradual
loss of markets share in terms of customers and traffic in these
categories, the adverse impact of offerings of bundles of free
minutes for flat fees, as well as reductions in applicable
tariffs for
fixed-to-mobile
calls. For more information regarding traffic and tariffs, see
4.B Business Overview Fixed-Line
Services Greece OTE Domestic
Fixed-Line Telephony.
Local and long-distance calls.
Revenues from
local and long-distance calls were Euro 711.4 million
in 2009, Euro 807.2 million in 2008 and
Euro 943.8 million in 2007, representing a decrease of
11.9% in 2009 compared to 2008, and a decrease of 14.5% in 2008
compared to 2007, due to declines in revenues from
fixed-to-fixed
and
fixed-to-mobile
calls.
In particular, revenues from
fixed-to-fixed
calls (comprising part of local and long-distance calls)
decreased to Euro 461.9 million in 2009, as compared
to Euro 481.9 million in 2008 and
Euro 565.5 million in 2007, representing decreases of
4.2% in 2009 and 14.8% in 2008. The
year-on-year
decreases in 2009 and 2008 were mainly due to a significant
decline in local call traffic (while national long-distance
traffic remained relatively stable), primarily as a result of
gradual loss of customer and traffic market share, resulting
from increased competition from alternative carriers, and also
due to
fixed-to-mobile
substitution, and the adverse impact of offerings of bundles of
free minutes for flat fees on our revenues per customer, despite
the fact that tariffs remained unchanged over the periods under
review.
Revenues from
fixed-to-mobile
calls (also comprising part of local and long-distance calls)
decreased to Euro 249.5 million in 2009, as compared
to Euro 325.3 million in 2008 and
Euro 378.3 million in 2007, representing decreases of
23.3% in 2009 and 14.0% in 2008. These
year-on-year
decreases were primarily due to decreasing traffic, mainly as a
result of loss of customer and traffic market share, resulting
from increased competition from alternative carriers, and also
fixed-to-mobile
substitution, the adverse impact of offerings of bundles of free
minutes for flat fees on our revenues per customer, as well as
significant reductions in applicable tariffs over the periods
under review.
Monthly network service fees.
Revenues from
monthly network service fees were Euro 845.9 million
in 2009, Euro 910.7 million in 2008 and
Euro 988.1 million in 2007, representing a decrease of
7.1% in 2009 and a decrease of 7.8% in 2008. The
year-on-year
decreases in 2009 and 2008 were mainly due to loss of market
share in Greece (our PSTN access lines in service in Greece
decreased to 3.8 million in 2009, as compared to
4.1 million in 2008 and 4.5 million in
2007) resulting from increasing competition and price
pressures, and in Romania.
107
Other.
Other represents various services
related to domestic telephony. Revenue from other services were
Euro 62.3 million in 2009, Euro 96.3 million
in 2008 and Euro 90.3 million in 2007, representing a
decrease of 35.3% in 2009, mainly due to a decline in other
services provided by RomTelecom.
International
Telephony Revenues
Revenues from international telephony consist of amounts earned
from outgoing international calls, reported gross of amounts
payable to foreign telephony operators, and amounts earned from
settlement charges for incoming and transit calls from foreign
telephony operators routed through our fixed network in Greece
and RomTelecoms network in Romania. Revenues from
international telephony also include payments from unaffiliated
mobile operators for international traffic generated from their
networks and routed through our fixed networks in Greece and
Romania. The respective revenues from our consolidated
subsidiaries providing mobile telephony services are eliminated
upon consolidation. Revenues for international services depend
on the volume of traffic, the rates charged to customers for
outgoing calls and international settlement rates charged by
each counterparty under bilateral settlement agreements with
foreign telephony operators for outgoing calls and incoming and
transit calls.
The following table sets out a breakdown of revenues from
international telephony services for each of the three years
ended December 31, 2009, including percentages for the year
ended December 31, 2009, attributable to international
traffic, dues from international operators and dues from mobile
and alternative operators.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
% of Total
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
|
(Euro in millions)
|
|
|
|
|
|
International Telephony:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International traffic
|
|
|
108.1
|
|
|
|
93.8
|
|
|
|
84.9
|
|
|
|
33.8
|
%
|
Dues from international
operators
(1)
|
|
|
146.8
|
|
|
|
136.6
|
|
|
|
113.3
|
|
|
|
45.1
|
%
|
Dues from mobile and alternative operators
|
|
|
49.6
|
|
|
|
56.5
|
|
|
|
52.9
|
|
|
|
21.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
304.5
|
|
|
|
286.9
|
|
|
|
251.1
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
|
|
|
|
|
(1)
|
|
Represents revenues from payments
by foreign operators before settlement of amounts due to them in
respect of outgoing traffic, which are included in operating
expenses as payments to international operators.
|
Revenues from international telephony were
Euro 251.1 million in 2009, as compared to
Euro 286.9 million in 2008 and
Euro 304.5 million in 2007, representing a decrease of
12.5% in 2009, as compared to 2008, and a decrease of 5.8% in
2008, as compared to 2007, which were attributable to decreases
in international traffic and dues from international operators,
partially offset in 2008 by increasing dues from mobile
operators. For more information regarding traffic and tariffs,
see 4.B Business Overview Fixed-Line
Services Greece OTE
International Fixed-Line Telephony.
Revenues from international traffic.
Revenues
from international traffic were Euro 84.9 million in
2009, as compared to Euro 93.8 million in 2008 and
Euro 108.1 million in 2007, representing a decrease of
9.5% in 2009, as compared to 2008, and a decrease of 13.2% in
2008, compared to 2007. The 9.5% decrease in 2009, as compared
to 2008, was mainly attributable to a significant decrease in
international outgoing traffic originating from our network,
from 361.5 million minutes in 2008 to 332.0 million
minutes in 2009, and the adverse impact of offerings of bundles
of free minutes for flat fees and discount packages on our
revenues per customer, partially offset by an increase in
international outgoing traffic originating from networks of
other operators in Greece. The 13.2% decrease in 2008, as
compared to 2007, was mainly attributable to a significant
decrease in international outgoing traffic originating from our
network, from 506.3 million minutes in 2007, to
361.5 million minutes in 2008 and the adverse impact of
offerings of bundles of free minutes for flat fees and discount
packages on our revenues per customer, partially offset by an
increase in international outgoing traffic originating from
networks of other operators in Greece.
Dues from international operators.
Dues from
international operators were Euro 113.3 million in
2009, as compared to Euro 136.6 million in 2008 and
Euro 146.8 million in 2007, representing a decrease of
17.1% in 2009,
108
as compared to 2008, and a decrease of 6.9% in 2008, as compared
to 2007. The 17.1% decrease in 2009, as compared to 2008, was
mainly attributable to declining tariffs and was partially
offset by an 18.0% increase in incoming traffic from
897.8 million minutes in 2008, to 1,059.5 million
minutes in 2009. The 6.9% decrease in 2008, as compared to 2007,
was mainly attributable to declining tariffs and was partially
offset by a 9.7% increase in incoming traffic from
818.3 million minutes in 2007, to 897.8 million
minutes in 2008.
Dues from mobile and alternative
operators.
Dues from mobile and alternative
operators (representing interconnection fees for international
calls originated by mobile and alternative operators) were
Euro 52.9 million, Euro 56.5 million and
Euro 49.6 million in 2009, 2008 and 2007,
respectively, representing a
year-on-year
decrease of 6.4% in 2009 and a
year-on-year
increase of 13.9% in 2008. The 6.4% decrease in 2009 was mainly
due to decreasing tariffs. The 13.9% increase in 2008 was mainly
due to an increase in traffic.
Traffic volume for international telephony is measured in
chargeable minutes. International telecommunications traffic in
Greece experiences seasonal fluctuations in demand, with peak
outgoing traffic occurring in the summer and peak incoming
traffic during September and October.
Revenues from foreign operators with respect to incoming and
transit traffic constituted 1.9%, 2.1% and 2.3% of total
revenues and 45.1%, 47.6% and 48.2% of revenues from
international telephony in 2009, 2008 and 2007. Although we
record payments to and from operators on a gross basis, only net
payments are received from or made to foreign operators.
Payments to foreign operators with respect to such traffic are
included in operating expenses. For the purpose of international
settlements, amounts payable with respect to outgoing traffic
and amounts receivable with respect to incoming and transit
traffic to and from each country are generally expressed in
Special Drawing Rights of the International Monetary Fund, which
are customarily used for the settlement of international call
revenues between foreign telephony operators. Settlements are
generally made in U.S. Dollars every quarter.
Mobile
Telephony Revenues
Revenues generated by mobile telephony services were
Euro 2,396.2 million in 2009,
Euro 2,470.8 million in 2008 and
Euro 2,210.0 million in 2007, representing a
year-on-year
decrease of 3.0% in 2009 and a
year-on-year
increase of 11.8% in 2008. The decrease of 3.0% in 2009 was
primarily attributable to lower termination rates imposed by
regulators throughout the Groups mobile operations and to
the sale of Cosmofon in May 2009 (Cosmofons revenues for
four months of 2009 (until May) were
Euro 18.3 million, as compared to
Euro 61.3 million for the twelve months of 2008). The
year-on-year
increase in 2008 of 11.8% was primarily attributable to
increases in mobile penetration and usage in Greece, Albania,
Bulgaria, FYROM and Romania.
Cosmote-Greece.
The contribution to our
consolidated revenues generated by mobile telephony services of
Cosmotes Greek mobile operations was
Euro 1,527.0 million in 2009, compared to
Euro 1,586.7 million in 2008 and
Euro 1,502.2 million in 2007, representing an decrease
of 3.8% in 2009 compared to 2008, and a 5.6% increase in 2008
compared to 2007. For more information regarding Cosmotes
customer base, traffic and relevant tariffs, see 4.B
Business Overview Mobile Telephony
Services Greece Cosmote.
The decrease in 2009, as compared to 2008, which was primarily
attributable to a significant decline in tariffs and the impact
of offerings of bundles of free minutes for flat fees (in 2009
average price per minute declined by approximately 40%, as
compared to 2008), was partially offset mainly by an increase in
Cosmotes contract and prepaid customer base and increased
usage. The increase in 2008, as compared to 2007, was primarily
attributable to an increase in Cosmotes contract and
prepaid customer base and increased usage, partially offset
mainly by declining tariffs.
AMC-Albania.
AMCs contribution to our
consolidated revenues generated by mobile telephony services was
Euro 132.9 million in 2009,
Euro 172.6 million in 2008 and
Euro 164.4 million in 2007, representing a decrease of
23.0% in 2009, as compared to 2008 and a 4.9% increase in 2008,
as compared to 2007. The decrease in 2009 was mainly due to the
weakening of the Albanian currency against the Euro, regulations
affecting AMCs wholesale and retail tariffs, lower
international traffic and intense competition, partially offset
by a 36.7% increase in the customer base. The increase in 2008
was mainly due to an increase in its customer base of 16.8% as
compared to the previous year, as well as to higher usage. For
more information regarding customers and tariffs, see 4.B
Business Overview Mobile Telephony
Services Albania AMC.
109
Globul-Bulgaria.
Globuls contribution to
our consolidated revenues generated by mobile telephony services
was Euro 365.4 million in 2009,
Euro 393.0 million in 2008 and
Euro 353.4 million in 2007, representing a decrease of
7.0% in 2009, as compared to 2008, and an 11.2% increase in
2008, as compared to 2007. The decrease in 2009 was mainly due
to a 4.8% reduction in Globuls customer base in 2009, the
impact of the economic crisis, intense competition and its
impact on pricing and a reduction in interconnection rates. The
increase in 2008 was mainly due to an increase of 5.8% in
Globuls customer base, as compared to previous the year,
as well as to higher usage. For more information regarding
customers and tariffs, see 4.B Business
Overview Mobile Telephony Services
Bulgaria Globul.
Cosmote Romania.
Cosmote Romanias
contribution to our consolidated revenues generated by mobile
telephony services was Euro 352.8 million in 2009,
Euro 257.8 million in 2008 and
Euro 132.9 million in 2007, representing
year-on-year
increases of 36.8% in 2009 and 94.0% in 2008. Cosmote
Romanias revenues increased mainly due to increases in its
customer base of 17.4% and 63.0% in 2009 and 2008, respectively,
as compared to previous years. For more information regarding
customers and tariffs, see 4.B Business
Overview Mobile Telephony Services
Romania Cosmote Romania.
Cosmofon-FYROM.
Cosmofons contribution
to our consolidated revenues generated by mobile telephony
services was Euro
18.1
million in 2009 (until
May 12, 2009 when the company was sold),
Euro 60.7 million in 2008 and
Euro 56.9 million in 2007.
Other
Revenues
Other revenues include revenues from prepaid cards, leased lines
and data ATM telecommunications, ISDN, sales of
telecommunications equipment, internet services/ADSL,
collocation/local loop, Metro Ethernet and IP Core, provision
for services, interconnection charges and miscellaneous (such as
directory services, radio telecommunications, audiotex, telex
and telegraphy etc).
The following table provides a detailed breakdown of other
revenues for each of the three years ended December 31,
2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(Euro in millions)
|
|
|
Prepaid cards
|
|
|
76.2
|
|
|
|
52.2
|
|
|
|
37.3
|
|
Leased lines and data ATM communications
|
|
|
272.1
|
|
|
|
336.6
|
|
|
|
319.4
|
|
Integrated Services Digital Network (ISDN)
|
|
|
166.1
|
|
|
|
147.5
|
|
|
|
141.7
|
|
Sales of telecommunication equipment
|
|
|
679.8
|
|
|
|
617.2
|
|
|
|
438.0
|
|
Internet services/ADSL
|
|
|
225.7
|
|
|
|
226.9
|
|
|
|
297.7
|
|
Collocation /local loop
|
|
|
30.8
|
|
|
|
91.7
|
|
|
|
122.1
|
|
Metro Ethernet and IP Core
|
|
|
11.0
|
|
|
|
23.6
|
|
|
|
31.9
|
|
Provision for services
|
|
|
68.3
|
|
|
|
120.4
|
|
|
|
116.4
|
|
Interconnection charges
|
|
|
108.2
|
|
|
|
119.4
|
|
|
|
88.9
|
|
Miscellaneous
|
|
|
144.9
|
|
|
|
99.9
|
|
|
|
123.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other revenues
|
|
|
1,783.1
|
|
|
|
1,835.4
|
|
|
|
1,717.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
year-on-year
decrease in other revenues in 2009, as compared to 2008, was
primarily due to a significant decline in sales of
telecommunications equipment, as well as declining
interconnection charges and a general trend of declining
revenues from the usage of prepaid cards, partially offset by
increasing revenues from internet services/ADSL. The
year-on-year
increase in other revenues in 2008, as compared to 2007, was
primarily due to increasing revenues from collocation/local loop
services and leased lines and data ATM communications, partially
offset by declining revenues from sales of telecommunications
equipment and the usage of prepaid cards.
Revenues from the usage of prepaid cards were
Euro 37.3 million in 2009, as compared to
Euro 52.2 million in 2008, and 76.2 million in
2007, representing a decrease of 28.5% in 2009, compared to
2008, and a decrease of 31.5% in 2008, as compared to 2007.
110
Revenues from leased lines and data ATM telecommunications were
Euro 319.4 million in 2009, as compared to
Euro 336.6 million in 2008 and
Euro 272.1 million in 2007, representing a decrease of
5.1% in 2009, as compared to 2008, and an increase of 23.7% in
2008, as compared to 2007. The
year-on-year
decrease in 2009 was primarily attributable to lower tariffs
imposed by the EETT and a decrease in the number of active
circuits due to migration of customers to other (lower-yielding)
services. The
year-on-year
increase in 2008 was primarily attributable to increases in the
number of circuits. See 4.B Business Overview
Other Services Leased Lines.
Revenues from ISDN were Euro 141.7 million in 2009,
Euro 147.5 million in 2008 and
Euro 166.1 million in 2007, representing a decrease of
3.9% in 2009, as compared to 2008, and a decrease of 11.2% in
2008, as compared to 2007. The
year-on-year
decreases in 2009 and 2008 were mainly attributable to decreases
in the number of our ISDN lines in service.
Revenues from sales of telecommunication equipment were
Euro 438.0 million in 2009,
Euro 617.2 million in 2008 and
Euro 679.8 million in 2007, representing a decrease of
29.0% in 2009, as compared to 2008, and a decrease of 9.2% in
2008, as compared to 2007. The decreases in 2009 and 2008 were
partly due to the decline in revenues of Germanos, which shifted
its activities and focus to servicing exclusively the strategy
of Cosmote in an effort to maximize Group performance. In
particular, the
year-on-year
decrease in 2009 was primarily due to Germanos termination
of wholesale sales of equipment to other countries, the
termination of sales of vouchers of mobile operators (other than
Cosmote) and market conditions relating to handsets subsidies
and offers. The
year-on-year
decrease in 2008 was primarily attributable to the continuing
impact of the fact that, following its acquisition by Cosmote,
Germanos ceased distributing the products of Cosmotes
mobile telephony competitors and hence, its sales of
telecommunications equipment decreased significantly. See
4.B Business Overview Other Telecommunications
Services Equipment Sales.
Revenues from internet services/ADSL were
Euro 297.7 million in 2009,
Euro 226.9 million in 2008 and
Euro 225.7 million in 2007, representing an increase
of 31.2% in 2009, as compared to 2008, and an increase of 0.5%
in 2008, as compared to 2007. The increase in 2009 was mainly
attributable to continuing growth in the Greek broadband market
and increases in the number of our ADSL customers, despite
declines in the relevant tariffs. Revenues in 2008 were
relatively stable as compared to 2007, due to a continuing
increase in the numbers of our ADSL customers and due to general
growth in the ADSL market, being largely offset by tariff
reductions and the effect of migration of previously wholesale
ADSL customers to being served by unbundled local loops of our
competitors, which led to a decline in our wholesale ADSL
revenues. For more information regarding customers and tariffs,
see 4.B Business Overview Fixed-Line
Services Greece OTE Internet
Protocol (IP) and Internet Access Services.
Revenues from collocation and local loop services were
Euro 122.1 million in 2009,
Euro 91.7 million in 2008 and
Euro 30.8 million in 2007, representing increases of
33.2% in 2009, as compared to 2008 and 197.7% in 2008, as
compared to 2007. These increases were attributable to
increasing unbundling activity over the periods under review, as
alternative operators increased their demands for local loop
unbundling and we subsequently increased the number of loops
unbundled by us and delivered for use. See 4.B Business
Overview Other Services Local Loop
Unbundling.
Revenues from the provision of services were
Euro 116.4 million in 2009,
Euro 120.4 million in 2008 and
Euro 68.3 million in 2007, representing a decrease of
3.3% in 2009, as compared to 2008, and an increase of 76.3% in
2008, as compared to 2007. There is no material change in 2009
as compared to 2008, while the significant increase in 2008, as
compared to 2007, was mainly attributable to the increased
number of projects for services delivered to third parties.
Revenues from interconnection charges were
Euro 88.9 million in 2009,
Euro 119.4 million in 2008 and
Euro 108.2 million in 2007, representing a decrease of
25.5% in 2009, as compared to 2008, and an increase of 10.4% in
2008, as compared to 2007. The
year-on-year
decrease of 25.5% in 2009 was mainly attributable to reductions
in wholesale tariffs mandated by EETT in the second quarter of
2009 which had a retroactive effect as of the January 1,
2009. The
year-on-year
increase of 10.4% in 2008 was mainly attributable to an increase
in traffic through alternative carriers networks.
111
Operating
Expenses
Total operating expenses were Euro 4,983.2 million in
2009, Euro 5,349.6 million in 2008 and
Euro 5,272.9 million in 2007, representing a decrease
of 6.8% in 2009, as compared to 2008, and an increase of 1.5% in
2008 compared to 2007. The following table sets forth, a
breakdown of our operating expenses for each of the three years
ended December 31, 2009, and as a percentage of our total
operating expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
Euro
|
|
|
total
|
|
|
Euro
|
|
|
total
|
|
|
Euro
|
|
|
total
|
|
|
|
(Millions, other than percentages)
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll and employee benefits
|
|
|
(1,149.0
|
)
|
|
|
21.8
|
|
|
|
(1,168.4
|
)
|
|
|
21.8
|
|
|
|
(1,190.8
|
)
|
|
|
23.9
|
|
Provision for staff retirement indemnities and youth account
|
|
|
(92.3
|
)
|
|
|
1.7
|
|
|
|
(112.6
|
)
|
|
|
2.1
|
|
|
|
(95.5
|
)
|
|
|
1.9
|
|
Cost of early retirement program
|
|
|
(22.1
|
)
|
|
|
0.4
|
|
|
|
(50.2
|
)
|
|
|
0.9
|
|
|
|
30.3
|
|
|
|
(0.6
|
)
|
Charges from international operators
|
|
|
(182.7
|
)
|
|
|
3.5
|
|
|
|
(173.9
|
)
|
|
|
3.3
|
|
|
|
(184.0
|
)
|
|
|
3.7
|
|
Charges from domestic operators
|
|
|
(655.3
|
)
|
|
|
12.4
|
|
|
|
(642.3
|
)
|
|
|
12.0
|
|
|
|
(516.3
|
)
|
|
|
10.4
|
|
Depreciation and amortization
|
|
|
(1,171.8
|
)
|
|
|
22.2
|
|
|
|
(1,213.0
|
)
|
|
|
22.7
|
|
|
|
(1,155.3
|
)
|
|
|
23.2
|
|
Cost of telecommunications equipment
|
|
|
(672.8
|
)
|
|
|
12.8
|
|
|
|
(633.4
|
)
|
|
|
11.8
|
|
|
|
(475.1
|
)
|
|
|
9.5
|
|
Other operating expenses
|
|
|
(1,326.9
|
)
|
|
|
25.2
|
|
|
|
(1,355.8
|
)
|
|
|
25.4
|
|
|
|
(1,396.5
|
)
|
|
|
28.0
|
|
Total operating expenses
|
|
|
(5,272.9
|
)
|
|
|
100.0
|
|
|
|
(5,349.6
|
)
|
|
|
100.0
|
|
|
|
(4,983.2
|
)
|
|
|
100.0
|
|
The 6.8% decrease in 2009, as compared to 2008, was mainly
attributable to a decrease in cost of telecommunications
equipment, a decrease in charges from domestic operators, a
decrease in provision for staff retirement indemnities and youth
account, a decrease in depreciation and amortization and a
decrease in cost of early retirement program; these decreases
were partially offset by an increase in payroll and employee
benefits, an increase in charges from international operators
and increases in other operating expenses. The 1.5% increase in
2008, as compared to 2007, was mainly attributable to increased
payroll expenses, increased provisions for staff retirement
indemnities and the youth account and cost of early retirement
programs, increased depreciation and amortization and increases
in other operating expenses, partially offset by a decrease in
cost of telecommunication equipment.
Payroll
and Employee Benefits
Payroll and employee benefits costs include payroll expenses,
certain related benefits, employer contributions made to TAP-OTE
and the Auxiliary Lump Sum Benefit Fund and the amortization of
our advance to EDEKT-OTE.
Payroll and employee benefits costs were
Euro 1,190.8 million in 2009,
Euro 1,168.4 million in 2008 and
Euro 1,149.0 million in 2007, representing an increase
of 1.9% in 2009, as compared to 2008, and an increase of 1.7% in
2008, as compared to 2007. The
year-on-year
increases in payroll and employee benefits were mainly
attributable to salary increases, partially offset by a decrease
in the number of total employees of our Group.
The Groups total number of employees decreased to 32,864
as of December 31, 2009, as compared to 33,610 as of
December 31, 2008 and 34,350 as of December 31, 2007,
representing a decrease of 2.2% in 2009, as compared to 2008,
and a decrease of 2.2% in 2008, as compared to 2007.
In 2008, we executed a new collective labor agreement with our
trade union, OME-OTE, for the years 2008 and 2009, which
contemplates wage increases of 4.5% on average in 2008, as
compared to 2007 (3.5% as of January 2008 and 3.0% as of
September 2008), and 4.5% on average in 2009, as compared to
2008 (3.0% as of January 2009 and 3.0% as of July 2009).
Payroll expenses exclude payroll costs relating to the
construction of telecommunications plant and equipment, which
are capitalized. Such expenses were Euro 68.5 million,
Euro 79.9 million and Euro 77.6 million, in
2009, 2008 and 2007, respectively.
112
Pension contributions.
Employer contributions
to the historical TAP-OTE pension fund and other funds have
represented a significant portion of our payroll and employee
benefit expenses in recent years. In 2009, 2008 and 2007 we paid
employer contributions to TAP-OTE and other funds of
Euro 174.1 million, Euro 168.2 million and
Euro 157.8 million, respectively. For more information
on TAP-OTE, see 6.D. Employees Employee
Insurance Funds.
According to Law 2257/1994, we were liable to cover the annual
operating deficit of TAP-OTE up to a maximum amount of
Euro 32.3 million, which could be adjusted per the
Greek Consumer Price Index (CPI). According to Law 2768/1999, a
fund was incorporated on December 8, 1999, as a
société anonyme under the name of EDEKT-OTE S.A.
(
EDEKT
), for the purpose of administering
contributions to be made by us, the State and the Auxiliary
Pension Fund, in order to finance the deficit of TAP-OTE. The
total required contributions of the State and the Auxiliary
Pension Fund to EDEKT were set at Euro 264.1 million
and Euro 410.9 million, respectively. Pursuant to Law
2937/2001, our contribution was set at
Euro 352.2 million, representing the equivalent to the
net present value of ten years contributions to TAP-OTE
(2002-2011).
We paid this amount on August 3, 2001 and it is being
amortized over the ten-year period; the annual amortization
charge is Euro 35.2 million and it is included in
Payroll and employee benefits in our consolidated
income statement. Pursuant to Law 2843/2000, any deficits
incurred by TAP-OTE are covered by the State.
Pursuant to Law 3655/2008, the pension segment of TAP-OTE was
incorporated into IKA-ETAM (the main social security fund of
Greece) as of August 1, 2008, with a gradual reduction of
contributions from TAP-OTE to those of IKA-ETAM, which is
expected to commence in 2013 and conclude in 2023 in three equal
installments. At the same time, the medical segment of TAP-OTE
was incorporated into TAYTEKO from October 1, 2008. In
conjunction with Law 3655/2008, the shares held by TAP-OTE in
the share capital of EDEKT, were transferred to IKA-ETAM as of
the date the pension segment of TAP-OTE was incorporated into
IKA-ETAM. Furthermore, according to Law 3655/2008, the deficits
of the pension segments which were incorporated into
IKA-ETAM will be covered by the State.
Provision
for Staff Retirement Indemnities and Youth Account
Staff retirement indemnity payments are required to be made
under Greek labor law upon dismissal or retirement of an
employee, with the amount paid depending on the length of
service and salary of that employee. Staff retirement
indemnities relate to one-off lump-sum payments made to our
employees upon retirement and the youth account is a special
benefit for the children of our employees, under which we
provide a lump sum payment to such children generally when they
reach the age of 25, or upon certain other events. In the years
ended December 31, 2009, 2008 and 2007 we recorded
provisions of Euro 95.5 million,
Euro 112.6 million and Euro 92.3 million,
respectively, for staff retirement indemnities and youth
account. The components of the provision include current service
costs, interest costs on the benefit obligation, amortization of
past service cost and amortization of unrecognized actuarial
gains/losses. Provision for staff retirement indemnities and the
youth account are provided for on an accrual basis and are based
on independent actuarial studies.
Provision for staff retirement indemnities and for the youth
account were Euro 50.0 million and
Euro 45.5 million, respectively, in 2009, as compared
to Euro 43.3 million and Euro 69.3 million,
respectively, in 2008 and Euro 44.8 million and
Euro 47.5 million, respectively, in 2007. In 2009, the
decrease of Euro 17.1 million, or 15.2%, as compared
to 2008, was largely attributable to a decrease in the
amortization of unrecognized actuarial losses. In 2008, the
increase of Euro 20.3 million, or 22.0%, as compared
to 2007, was largely attributable to an increase in the
amortization of unrecognized actuarial losses. For further
information, see Note 18 to the consolidated financial
statements.
Cost of
Early Retirement Program
In the years ended December 31, 2009, 2008 and 2007, the
Group recognized the following in connection with its early
retirement programs: a gain of Euro (30.3) million, a cost
of Euro 50.2 million and a cost of
Euro 22.1 million, respectively. The Groups
operating expenses for the year 2009 include our and
RomTelecoms early retirement programs costs of
Euro 171.6 million, which were offset by the partial
reversal of provisions of Euro 201.9 million, as a
result of the transfer by the Greek State of 4.0% of our share
capital to IKA-ETAM, which
113
resulted in a net gain of Euro 30.3 million. In 2008,
operating expenses were charged with Euro 50.2 million
relating to costs of early retirement programs, consisting of
RomTelecoms early retirement program of
Euro 38.0 million and our early retirement program of
Euro 12.2 million. In 2007, operating expenses were
charged with Euro 22.1 million relating to the cost of
our early retirement program. For further information, see
Note 18 to the consolidated financial statements.
Charges
from International Operators
Charges from international operators consist predominantly of
charges from foreign telephony operators for outgoing telephony
traffic, and to a lesser extent charges from foreign operators
with respect to telex, telegraphy and satellite activities. In
general, operating expenses for international traffic move in
parallel with revenues from international telephony, as they are
both directly related to international traffic volume. Charges
from international operators were 184.0 million in 2009, as
compared to Euro 173.9 million in 2008 and
Euro 182.7 million in 2007, representing an increase
of 5.8% in 2009, as compared to 2008, and a decrease of 4.8% in
2008, as compared to 2007. The decrease in 2008, as compared to
2007, was mainly due to decreased international traffic.
Charges
from Domestic Operators
Operating expenses for charges from domestic operators were
Euro 516.3 million in 2009,
Euro 642.3 million in 2008 and
Euro 655.3 million in 2007, representing a
year-on-year
decrease of 19.6% in 2009, as compared to 2008 and a decrease of
2.0% in 2008 as compared to 2007. The
year-on-year
decreases in 2009 and in 2008, were mainly due to lower
interconnection rates and decreased traffic for
fixed-to-mobile
calls.
Depreciation
and Amortization
Depreciation and amortization was Euro 1,155.3 million
in 2009, Euro 1,213.0 million in 2008 and
Euro 1,171.8 million in 2007, representing a
year-on-year
decrease of 4.8% in 2009 and a
year-on-year
increase of 3.5% in 2008. The decrease in depreciation and
amortization expenses in 2009, as compared to 2008, was mainly
due to the fact that certain assets were fully depreciated, and
due to higher depreciation expense for the year 2008 as a result
of the reduction of the estimated useful life of certain items
of property, plant and equipment, and the increased depreciation
of our mobile subsidiaries. The increase in depreciation and
amortization expenses in 2008, as compared to 2007, was
primarily attributable to a higher than usual depreciation
expense in 2008 as described above.
Cost of
Telecommunications Equipment
Cost of telecommunications equipment was
Euro 475.1 million in 2009,
Euro 633.4 million in 2008 and
Euro 672.8 million in 2007, representing a decrease of
25.0% in 2009 compared to 2008 and a decrease of 5.9% in 2008
compared to 2007. The
year-on-year
decreases in 2009 and in 2008 were in line with the decline in
revenues from sales of telecommunication equipment, mainly due
to the fact that, following its acquisition by Cosmote, Germanos
ceased distributing the products of Cosmotes mobile
telephony competitors and hence, its sales of telecommunications
equipment decreased significantly.
Other
Operating Expenses
Other operating expenses were Euro 1,396.5 million in
2009, Euro 1,355.8 million in 2008 and
Euro 1,326.9 million in 2007, representing a
year-on-year
increase of 3.0% in 2009 and an increase of 2.2% in 2008.
The increase in 2009 was mainly due to increased third-party
fees, utilities, rents, taxes other than income tax and other
expenses, partially offset by decreased cost of
telecommunication materials, repair and maintenance, commissions
to independent commercial distributors, provisions for doubtful
accounts and other provisions. The increase in 2008 was mainly
due to third-party fees, utilities, provisions for doubtful
accounts and commissions to independent commercial distributors
partially offset by decreased cost of telecommunication
materials, repair and maintenance, other provisions, taxes other
than income tax and other expenses.
114
The following table provides a detailed breakdown of other
operating expenses for each of the three years ended
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(Euro in millions)
|
|
|
Third-party fees
|
|
|
183.5
|
|
|
|
208.4
|
|
|
|
234.2
|
|
Cost of telecommunication materials, repair and maintenance
|
|
|
201.8
|
|
|
|
191.5
|
|
|
|
182.2
|
|
Advertising and promotion costs
|
|
|
208.3
|
|
|
|
212.9
|
|
|
|
216.8
|
|
Utilities
|
|
|
127.3
|
|
|
|
142.0
|
|
|
|
163.7
|
|
Provision for doubtful accounts
|
|
|
88.0
|
|
|
|
119.8
|
|
|
|
107.0
|
|
Other provisions
|
|
|
18.1
|
|
|
|
2.1
|
|
|
|
|
|
Travel costs
|
|
|
18.9
|
|
|
|
18.1
|
|
|
|
18.0
|
|
Commissions to independent commercial distributors
|
|
|
244.1
|
|
|
|
253.4
|
|
|
|
238.4
|
|
Payments to Audiotex providers
|
|
|
14.3
|
|
|
|
8.7
|
|
|
|
9.5
|
|
Rents
|
|
|
88.0
|
|
|
|
90.9
|
|
|
|
101.8
|
|
Taxes, other than income tax
|
|
|
56.3
|
|
|
|
51.7
|
|
|
|
56.2
|
|
Transportation costs
|
|
|
13.0
|
|
|
|
11.8
|
|
|
|
11.2
|
|
Other
|
|
|
65.3
|
|
|
|
44.5
|
|
|
|
57.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,326.9
|
|
|
|
1,355.8
|
|
|
|
1,396.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating expenses relating to third party fees were
Euro 234.2 million in 2009, as compared to
Euro 208.4 million in 2008 and
Euro 183.5 million in 2007, representing increases of
12.4% in 2009, as compared to 2008 and 13.6% in 2008, as
compared to 2007. These increases were mainly due to the
increase in projects requiring the engagement of third-party
advisors and specialists.
Other operating expenses relating to advertising and promotion
costs were Euro 216.8 million in 2009, as compared to
Euro 212.9 million in 2008 and
Euro 208.3 million in 2007, representing increases of
1.8% in 2009, as compared to 2008 and 2.2% in 2008, as compared
to 2007. These increases were mainly due to increased marketing
and advertising activities in view of intensifying competition
in our markets.
Provisions for doubtful accounts were
Euro 107.0 million in 2009, as compared to
Euro 119.8 million in 2008 and
Euro 88.0 million in 2007, representing a decrease of
10.7% in 2009, as compared to 2008 and an increase of 36.1% in
2008, as compared to 2007. The decrease in 2009, as compared to
2008, was mainly due to the improvements in our collection
methods and processes, as well as due to higher provisions for
2008 as described below. The increase in 2008, as compared to
2007, was mainly due to increased bad debt resulting from
certain Greek alternative fixed-line operators ceasing
operations in 2008.
Operating
Profit before Financial Activities
We realized operating profit before financial activities of
Euro 1,000.9 million in 2009, as compared to
Euro 1,057.7 million in 2008 and
Euro 1,046.9 million in 2007. The decrease of 5.4% in
operating profit before financial activities in 2009, as
compared to 2008, reflected the 6.6%
year-on-year
decrease in our operating revenues, partially offset by the 6.8%
decrease in operating expenses. The increase of 1.0% in
operating profit before financial activities in 2008, as
compared to 2007, reflected a 1.4%
year-on-year
increase in operating revenues and a 1.5% increase in operating
expenses.
115
Income
and Expense from Financial Activities
Total
Profit/(Loss) from Financial Activities
Total profit/(loss) from financial activities was a loss of
Euro 220.2 million in 2009, a loss of
Euro 213.7 million in 2008 and a profit of
Euro 107.9 million in 2007. The following table
provides a detailed breakdown of profit/(loss) from financial
activities for each of the three years ended December 31,
2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
|
2007
|
|
2008
|
|
2009
|
|
|
(Euro, in millions)
|
|
Income/(expense) from financial activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(238.7
|
)
|
|
|
(343.7
|
)
|
|
|
(325.2
|
)
|
Interest income
|
|
|
77.8
|
|
|
|
72.3
|
|
|
|
61.6
|
|
Foreign exchange differences, net
|
|
|
(4.8
|
)
|
|
|
11.8
|
|
|
|
10.2
|
|
Gains from investments
|
|
|
256.8
|
|
|
|
33.7
|
|
|
|
23.6
|
|
Dividend income
|
|
|
16.8
|
|
|
|
12.2
|
|
|
|
9.6
|
|
Total profit/(loss) from financial activities
|
|
|
107.9
|
|
|
|
(213.7
|
)
|
|
|
(220.2
|
)
|
The increase in loss from financial activities in 2009, as
compared to 2008, was primarily due to decreased interest
income, gains from investments and dividend income, partially
offset by decreased interest expense. The decrease in profit
from financial activities in 2008, as compared to 2007, was
primarily due to increased interest expense and lower gains from
investments.
Interest
Expense
Interest expense was Euro 325.2 million in 2009,
Euro 343.7 million in 2008 and
Euro 238.7 million in 2007. The decrease in interest
expense in 2009, as compared to 2008, was primarily due to the
decrease in the Groups consolidated debt in 2009, while
the increase in 2008, as compared to 2007, was primarily due to
the increase in the Groups debt in 2008 in connection with
the acquisition of Cosmotes minorities. The consolidated
debt of the Group was Euro 5,421.9 million as at
December 31, 2009, as compared to
Euro 6,047.7 million and
Euro 5,527.8 million as at December 31, 2008 and
2007, respectively.
Gains
from Investments
Gains from investments comprised earnings of
Euro 23.6 million in 2009, Euro 33.7 million
in 2008 and Euro 256.8 million in 2007. In 2009, the
whole amount of the gain from the sale of investments was
derived from the sale of Cosmofon and Germanos Telecom AD Skopje
(for further information, see Note 8 to the consolidated
financial statements). In 2008, the gain from the sale of
investments of Euro 33.7 million included a pre-tax
gain of Euro 17.0 million from the sale of our
interest in LOFOS-PALINI, a real estate development company, at
a sale price of Euro 18.4 million. In 2007, the gain
from the sale of investments of Euro 256.8 million
included a pre-tax gain of Euro 244.7 million from the
sale of our interest in INFOTE.
Foreign
Exchange Differences
Foreign exchange differences comprised a gain of
Euro 10.2 million in 2009, a gain of
Euro 11.8 million in 2008 and a loss of
Euro 4.8 million in 2007. Foreign exchange differences
in 2009, 2008 and 2007 were mainly attributable to the
fluctuation of the Romanian Lei against the Euro.
Dividend
Income
Dividend income primarily included dividends from Telekom Srbija
of Euro 9.3 million for 2009,
Euro 11.2 million for 2008 and
Euro 15.7 million for 2007.
116
Income
Tax
Income tax expense of Euro 410.0 million was charged
in 2009, compared to Euro 246.2 million in 2008 and
Euro 381.8 million in 2007.
The significant increase of 66.5% in 2009, as compared to 2008,
was mainly due to the impact of Law
3808/2009
(which came into effect in 2009) requiring a one-time
special contribution of social responsibility and a tax on
dividends (Law 3697/2008). The provisions taken in 2009
comprised a charge of Euro 233.4 million for current
tax (including Euro 30.3 million tax on dividends), a
charge of Euro 113.1 million with respect to the
one-time
special contribution of social responsibility mentioned above
and the recognition of a deferred tax liability of
Euro 33.5 million and the recognition of
Euro 30.0 million as a result of the conclusion of the
tax audit of OTE for the fiscal years
2006-2008.
The provisions taken in 2008 comprised a charge of
Euro 311.7 million for current tax and the recognition
of a deferred tax asset of Euro 65.5 million. The
provisions taken in 2007 comprised a charge of
Euro 341.5 million for current tax and the recognition
of a deferred tax liability of Euro 40.3 million.
Under Greek tax law, the statutory income tax rate was 25% for
each of the years ended December 31, 2009, 2008 and 2007.
In accordance with Law 3697/2008, the income tax rate in Greece
for undistributed profits will gradually decrease as follows:
24% for 2010, 23% for 2011, 22% for 2012, 21% for 2013 and 20%
for 2014 onwards, while, as of 2010, profits distributed as
dividends will be subject to a corporate income tax rate of 40%.
The Groups effective tax rates for each of the years ended
December 31, 2009, 2008 and 2007 were 52.5%, 29.2% and
33.1%, respectively. Excluding the effect of the one time
special contribution of social responsibility (under Law
3808/2009), the tax on dividends and the effect of OTEs
tax audit, the effective tax rate for the year ended
December 31, 2009 would have been 30.3%. The variations in
these effective tax rates resulted primarily from non-taxable
expenses that were not tax deductible and from the effect of
changes to the tax rate.
The Group had net deferred tax assets of
Euro 139.9 million as of December 31, 2009,
Euro 170.1 million as of December 31, 2008 and
Euro 94.6 million as of December 31, 2007. The
Group has established an adequate provision in respect of its
unaudited tax years.
For further information, see Note 21 to the consolidated
financial statements.
Profit
for the Year Attributable to Owners of the Parent
The profit for the year attributable to the owners of the parent
amounted to Euro 374.0 million in 2009,
Euro 601.8 million in 2008 and
Euro 662.6 million in 2007, representing a decrease of
37.9% in 2009 compared to 2008 and a decrease of 9.2% in 2008
compared to 2007. Profit for the year as a percentage of
revenues was 6.2% in 2009, compared to 9.4% in 2008 and 10.5% in
2007.
The decrease in profit in 2009 compared to 2008 was primarily
attributable to the decrease of 6.6% in revenues, which was
partially offset by a 6.8% decrease in operating expenses, and
the 66.5% increase in income tax expense for the reasons
described above. The decrease in profit in 2008 compared to 2007
was primarily attributable to the increase of 1.5% in operating
expenses, which was partially offset by a 1.4% increase in our
revenues. Furthermore, profit for 2008 was affected by the
decreased gain from the sale of investments and increased
interest expense, which were partially offset by decreased taxes
and decreased non-controlling interests.
5.B Liquidity
and Capital Resources
Liquidity
The following table provides a summary of cash flows for each of
the three years ended December 31, 2009.
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
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2007
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|
2008
|
|
2009
|
|
|
(Euro in millions)
|
|
Net cash flows from operating activities
|
|
|
1,450.7
|
|
|
|
1,757.6
|
|
|
|
1,418.0
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|
Net cash flows used in investing activities
|
|
|
(2,780.2
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)
|
|
|
(1,806.0
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)
|
|
|
(958.6
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)
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Net cash flows from / (used in) financing activities
|
|
|
603.3
|
|
|
|
165.3
|
|
|
|
(1,005.5
|
)
|
Net increase / (decrease) in cash and cash equivalents
|
|
|
(726.2
|
)
|
|
|
116.9
|
|
|
|
(546.1
|
)
|
117
Our primary source of liquidity is cash generated from
operations.
Cash flows from operating activities.
Net cash
flows from operating activities were
Euro 1,418.0 million in 2009,
Euro 1,757.6 million in 2008 and
Euro 1,450.7 million in 2007. The 19.3% decrease in
net cash flows from operating activities in 2009, as compared to
2008, was mainly attributable to increased payments for income
taxes, interest and related expenses and early retirement
programs, as well as to a decline in profits, partially offset
by a lower increase in accounts receivable and a lower decrease
in liabilities excluding borrowings. The 21.2% increase in net
cash flows from operating activities in 2008, as compared to
2007, was mainly attributable to significant decreases in
payments for early retirement programs and income tax payments,
partially offset by a significant decline in profits and higher
liabilities excluding borrowings.
Cash flows used in investing activities.
Net
cash flows used in investing activities was
Euro 958.6 million in 2009,
Euro 1,806.0 million in 2008 and
Euro 2,780.2 million in 2007. The 46.9% decrease in
net cash flows used in investing activities in 2009, as compared
to 2008, was primarily due to, on one hand, a significant amount
that was paid in 2008 for the acquisition of non-controlling
interests and participation in subsidiaries share capital
increase (particularly Cosmote in relation to the acquisition of
its minorities), and on other hand, in 2009, a decline in
expenditure relating to purchases of property, plant and
equipment and intangible assets, an increase in proceeds from
disposal of subsidiaries, an increase in net proceeds from sales
or maturity of financial assets (despite an increase in purchase
of financial assets) and an increase in loan proceeds relating
to disposal of Cosmofon, partially offset by increased
expenditure relating to the acquisition of a subsidiary net of
cash (relating to the acquisition of Zapp). The 35.0% decrease
in net cash flows used in investing activities in 2008, as
compared to 2007, was primarily attributable to a significant
decline in expenses for the acquisition of non-controlling
interests in subsidiaries share capital increase
(particularly Cosmote in relation to the acquisition of its
minorities), as well as a decline in expenditure relating to
purchases of property, plant and equipment and intangible assets
and a decline in loans granted in 2008, despite lower proceeds
from disposal of subsidiaries and increased expenditure relating
to purchase of financial assets.
In particular, purchases of property, plant and equipment and
intangible assets were Euro 890.9 million in 2009,
Euro 964.0 million in 2008 and
Euro 1,101.3 million in 2007. The decrease in our
Group capital expenditure in 2009, as compared to 2008, was
mainly attributable to the lower capital expenditure of OTE and
the Cosmote
sub-group,
partially offset by increased capital expenditure from
RomTelecom. The decrease in our Group capital expenditure in
2008, as compared to 2007, was mainly attributable to lower
capital expenditures in mobile operations in Greece and
internationally, as well as decreased capital expenditures by
RomTelecom.
Cash flows from/(used in) financing
activities.
Net cash outflows from financing
activities was Euro 1,005.5 million in 2009, as
compared to inflows of Euro 165.3 million in 2008 and
Euro 603.3 million in 2007. The decrease in net cash
flows from financing activities in 2009, as compared to 2008,
was primarily a result of the absence of borrowing (proceeds
from loans granted and issued) in 2009, despite the effect of a
decrease in loan repayments. The decrease in net cash flows from
financing activities in 2008, as compared to 2007 was primarily
due to the effect of a significant increase in loan repayments
and increased dividends paid in 2008, despite higher proceeds
from loans, as compared to 2007.
Capital
Resources
We employ a variety of financing sources to fund our operations
and liquidity needs. The principal financial instruments we use
are bonds, medium-term notes and committed credit facilities. We
believe that our existing liquid assets, cash flows from
operations, intragroup funding, available credit lines and
ability to access the capital markets will be sufficient for us
to meet our anticipated liquidity requirements during 2010.
Sources
of Funding
As at December 31, 2009, OTE Group had total debt under
IFRS of Euro 5,421.9 million, as compared to
Euro 6,047.7 million as at December 31, 2008 and
Euro 5,527,8 million as at December 31, 2007.
118
The following table sets forth information with respect to the
Groups liabilities outstanding as of December 31,
2009:
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|
Amortized Cost
|
|
|
|
|
|
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|
Type of Loan
|
|
under IFRS
|
|
|
Interest Rate
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|
|
Maturity Date
|
|
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|
(Euro in millions)
|
|
|
|
|
|
|
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|
Global Medium Term Notes
(Euro 1,250 million)
|
|
|
1,250.8
|
|
|
|
5.0
|
%
|
|
|
2013
|
|
Global Medium Term Notes
(Euro 900 million)
|
|
|
892.5
|
|
|
|
4.625
|
%
|
|
|
2016
|
|
Global Medium Term Notes
(Euro 650 million)
|
|
|
639.7
|
|
|
|
3.75
|
%
|
|
|
2011
|
|
Global Medium Term Notes
(Euro 1,500 million)
|
|
|
1,496.8
|
|
|
|
5.375
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%
|
|
|
2011
|
|
Global Medium Term Notes
(Euro 600 million)
|
|
|
596.7
|
|
|
|
6.0
|
%
|
|
|
2015
|
|
OTE Plcs Syndicated Credit facility
(Term Loan)
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|
|
500.0
|
|
|
|
EURIBOR + 0.25
|
%
|
|
|
Up to 2012
|
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Other bank loans (long-term)
|
|
|
42.1
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|
|
Various
|
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|
|
Various
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|
Short-term borrowings
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|
|
3.3
|
|
|
|
Various
|
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|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total
|
|
|
5,421.9
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents amounted to
Euro 868.8 million as at December 31, 2009,
compared to Euro 1,427.8 million as at
December 31, 2008 and Euro 1,316.3 million as at
December 31, 2007.
For a discussion of funding and treasury policies, see 11.
Quantitative and Qualitative disclosures about market risk.
Outstanding
Debt Facilities
Our primary facility for debt financing is our Medium Term Note
Program discussed below. The Groups debt is analyzed in
Note 17 and Note 20 to the consolidated financial
statements.
Medium
Term Note Program
On November 7, 2001, our wholly-owned subsidiary, OTE Plc,
established a Global Medium-Term Note Program (the
MTN
Program
) for the issuance of notes fully and
unconditionally guaranteed by us. Notes may be interest-bearing
or non-interest-bearing. Interest (if any) may accrue at a fixed
or floating (or other variable) rate. These notes are listed and
traded on the Luxembourg Stock Exchange.
As of December 31, 2009, the total nominal value of the
notes outstanding under the Global Medium-Term Note Program was
Euro 4,900.0 million and was comprised as follows:
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Euro 1,250.0 million notes (nominal value) at a fixed rate
of 5.0%, issued in August 2003, maturing on August 5, 2013.
As at December 31, 2009 the outstanding IFRS balance (being
amortised cost) was Euro 1,250.8 million, as compared
to Euro 1,248.8 million in 2008.
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|
Euro 650.0 million notes (nominal value) at a fixed rate of
3.75%, issued in November 2005, maturing on November 11,
2011. As at December 31, 2009 the outstanding IFRS balance
(being amortised cost) was Euro 639.7 million, as
compared to Euro 634.4 million in 2008.
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Euro 900.0 million notes (nominal value) at a fixed rate of
4.625%, issued in November 2006, maturing on May 20, 2016.
As at December 31, 2009 the outstanding IFRS balance (being
amortised cost) was Euro 892.5 million, as compared to
Euro 891.5 million in 2008.
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Euro 1,500.0 million notes (nominal value) at a fixed rate
of 5.375%, issued in February 2008, maturing on
February 14, 2011. As at December 31, 2009 the
outstanding IFRS balance (being amortised cost) was
Euro 1,496.8 million, as compared to
Euro 1,494.2 million in 2008. In May 2010, OTE Plc
bought back
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119
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|
|
Notes of a total nominal amount of Euro 56.0 million
which have been cancelled. The outstanding nominal value of the
Notes following cancellation is currently
Euro 1,444.0 million.
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|
|
|
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|
Euro 600.0 million notes at a fixed rate of 6.0%, issued in
February 2008, maturing on February 12, 2015. As at
December 31, 2009 the outstanding IFRS balance (being
amortised cost) was Euro 596.7 million, as compared to
Euro 596.3 million in 2008.
|
In addition to the above, a series of Floating Rate Notes (FRN)
in the amount of Euro 600.0 million, issued on
November 21, 2006, matured on November 21, 2009 and
OTE Plc fully repaid this series. Prior to maturity, in May
2009, OTE Plc repurchased a nominal amount of
Euro 28.1 million under the same series, the notes
were cancelled therefore bringing the outstanding nominal
balance of the series to Euro 571.9 million (being the
amount repaid at maturity).
Change of Control and
Step-up
Clauses.
The Euro 900.0 million notes
issued in November 2006 and the Euro 1,500.0 million
and Euro 600.0 million notes issued in February 2008
include a change of control clause and a
step-up
clause triggered by changes in our credit rating.
In particular, the change of control clause, if triggered,
requires OTE Plc to notify the noteholders, who can request the
repayment of the notes within 45 days of the relevant
notice. The change of control clause is triggered, if both of
the following events occur:
(a) any person or persons acting in concert (other than the
State) at any time directly or indirectly come(s) to own or
acquire(s) more than 50% of our issued ordinary share capital or
of our voting rights; and
(b) as a consequence of (a), the rating previously assigned
to the notes by any international rating agency is withdrawn or
downgraded to BB+/Ba1 or their respective equivalents
(non-investment grade), within a specific period and under
specific terms and conditions.
The
step-up
clause is triggered by changes in our credit rating. In
particular, the note coupon may increase by 1.25% in the event
that:
(a) one or both of the two credit rating agencies
(Moodys and Standard and Poors) downgrades the
rating to BB+ or Ba1 and under
(sub-investment
grade); or
(b) both Moodys and Standard and Poors cease or
are unable to perform our credit rating.
The coupon can increase once only during the entire term of the
notes and only for the period our credit rating remains at
sub-investment
grade. As of the date of this Annual Report, neither of the
change of control clause and the
step-up
clause has been triggered. See below under Credit
Rating.
Syndicated
Credit Facility
On September 2, 2005, OTE Plc signed a
Euro 850.0 million Syndicated Credit Facility with
banks, guaranteed by us. The facility has a five year term with
an extension option of 1+1 year subject to the
lenders consent. The facility consists of a
Euro 500.0 million Term Loan with variable interest of
three month Euribor plus margin (0.25%, as of December 31,
2009) and a Euro 350.0 million Revolving Credit
Facility with Commitment fee as the facility has not been drawn
(0.06750%, as of December 31, 2009). The loan bears a
margin adjustment clause whereby the margin is
adjustable based on the long-term credit rating of OTE. The loan
agreement includes a change of control clause which is triggered
when there is a change of control in OTE which will result in a
downgrade in the credit-rating of OTE, or of the new legal
entity, at a level lower than BBB/Baa2. In the event this clause
is triggered, OTE Plc is obliged to notify the banks, who can
request the immediate repayment of the loan. On
September 6, 2005, OTE Plc drew
Euro 500.0 million under the Term Loan. Up to
December 31, 2009, no draw-downs have been made from the
Revolving Credit Facility.
At OTE Plcs request and following the banks consent,
the maturity of the loan was extended as follows:
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|
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|
|
for Euro 25.8 million (Term Loan) and
Euro 18.0 million (Revolving Credit Facility) to
September 2010;
|
|
|
|
for Euro 29.0 million (Term Loan) and
Euro 20.3 million (Revolving Credit Facility) to
September 2011; and
|
|
|
|
for Euro 445.2 million (Term Loan) and
Euro 311.7 million (Revolving Credit Facility) to
September 2012.
|
120
According to our current credit rating, the margin on the Term
Loan is 0.25%.
Other
facilities
Euro Commercial Paper Programme.
On
September 19, 2003, OTE Plc established a Euro Commercial
Paper programme under which it may issue Euro-denominated notes,
fully and unconditionally guaranteed by us, up to a maximum
amount of Euro 500.0 million with a maximum tenor of
one year. Notes may be interest-bearing or non-interest bearing.
Interest (if any) may accrue at a fixed or floating rate. To
date, we have not issued any notes under this program.
European Investment Bank Loans.
This long-term
loan was granted in 1995, was denominated in Euro, beared
interest at an annual rate of 8.3% and its outstanding principal
balance as of December 31, 2008 was
Euro 18.9 million. In July 2009, we fully repaid this
loan to the European Investment Bank.
Other Bank Loans.
RomTelecom has obtained four
long-term loans in Euro and Korea Won, the outstanding balance
of which amount to Euro 42.1 million as of
December 31, 2009 (December 31, 2008:
54.8 million). The first of these is in Euro, it has an
outstanding balance of Euro 12.1 million, bears a
fixed interest rate of 4.9956% and matures in 2012. The
remaining three loans have outstanding balances of
Euro 7.0 million, Euro 13.2 million and
Euro 9.8 million, are in Korean Won, bear a fixed
interest rate of 4.20%, 2.50% and 2.50%, respectively, and
mature in 2014, 2018 and 2020, respectively.
Credit
Rating
In May 2010, Standard & Poors downgraded our
long-term corporate credit rating to BBB- with stable outlook,
while our short-term corporate credit rating remained at
A-3.
Previously, in May 2008, Moodys had downgraded our Baa1
rating to Baa2 with a stable outlook, following the signing of a
purchase agreement between the Greek State and Deutsche Telekom
pursuant to which, the latter acquires a controlling interest in
our share capital. See 7.A Major Shareholders and Related
Party Transactions Major Shareholders.
Critical
Accounting Estimates
The discussion and analysis of financial condition and results
of operations are based upon the consolidated financial
statements, which have been prepared in accordance with IFRS, as
issued by the IASB. The preparation of these financial
statements requires management to make estimates and judgments
that affect the reported amount of assets, liabilities, revenues
and expenses and related disclosures of contingent assets and
liabilities. On an ongoing basis, management evaluates its
estimates, including those related to legal contingencies,
allowance for doubtful accounts, the estimated useful life of
non financial assets, impairment of property, plant and
equipment, impairment of goodwill and intangible assets, reserve
for staff retirement indemnities and youth account, recognition
of revenues and expenses and income taxes. Management bases its
estimates on historical experience and on various other
assumptions that are believed to be reasonable, the results of
which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily available
from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
We discuss below certain key assumptions concerning the future
and key sources of estimation uncertainty, that give rise to a
significant risk of material adjustment to the carrying amounts
of assets and liabilities within the next financial year.
Impairment
of Goodwill
The Group determines whether goodwill is impaired at least on an
annual basis. This requires an estimation of the value in use of
the cash generating units to which the goodwill is allocated.
Estimating the value in use requires the Group to make an
estimate of the expected future cash flows from the cash
generating unit and also to choose a suitable discount rate in
order to calculate the present value of those cash flows.
121
Provision
for Income Taxes
The provision for income taxes in accordance with IAS 12
Income taxes, are the amounts expected to be paid to
the taxation authorities and includes provision for current
income taxes reported and the potential additional tax that may
be imposed as a result of audits by the taxation authorities.
Group entities are subject to income taxes in various
jurisdictions and significant management judgment is required in
determining provision for income taxes. Actual income taxes
could vary from these estimates due to future changes in income
tax law, significant changes in the jurisdictions in which the
Group operates, or unpredicted results from the final
determination of each years liability by taxing
authorities. These changes could have a significant impact on
the Groups financial position. Where the actual additional
taxes payable are different from the amounts that were initially
recorded, these differences will impact the income tax
provisions in the period in which such a determination is made.
Deferred
Tax Assets
Deferred income tax assets and liabilities have been provided
for the tax effects of temporary differences between the
carrying amount and tax base of such assets and liabilities,
using enacted tax rates in effect in the years in which the
differences are expected to reverse. Deferred tax assets are
recognized for all deductible temporary differences, carry
forward of unused tax credits and unused tax losses, to the
extent that it is probable that taxable profit will be available
against which the deductible temporary differences and the carry
forward of unused tax credits and unused losses can be utilized.
The Group has considered future taxable income and followed
ongoing feasible and prudent tax planning strategy in the
assessment of the recoverability of deferred tax assets. The
accounting estimate related to deferred tax assets requires
management to make assumptions regarding the timing of future
events, including the probability of expected future taxable
income and available tax planning opportunities.
Allowance
for Doubtful Trade Receivables
The Group establishes an allowance for doubtful accounts
sufficient to cover reasonably estimable loss for these
accounts. Because of the number of accounts, it is not practical
to review the collectibility of each account; therefore, at each
reporting date an accounts receivable are assessed based on
historical trends, statistical information, future expectations
regarding suspended or cancelled customers, reactivation rates
for suspended customers and collection rates for amounts due
from cancelled customers. Other operators are examined and
assessed on an individual basis. The balance of such allowance
for doubtful accounts is adjusted by recording a charge to the
income statement of the reporting period. Any amount written off
with respect to customer account balances is charged against the
existing allowance for doubtful accounts.
Post
Retirement and Other Defined Benefit Plans
Staff retirement indemnities and youth account obligations are
calculated at the discounted present value of the future
retirement benefits and benefits to children of employees deemed
to have accrued at year-end, based on the assumption that
employees earn retirement and youth account benefits uniformly
throughout the working period. Retirement and youth account
obligations are calculated on the basis of financial and
actuarial assumptions that require management to make
assumptions regarding discount rates, pay increases, mortality
and disability rates, retirement ages and other factors. Changes
in these key assumptions can have a significant impact on the
obligation and pension costs for the period. Net pension costs
for the period consist of the present value of benefits earned
in the year, interest costs on the benefits obligation, prior
service costs and actuarial gains or losses. The staff
retirement indemnities and youth account benefit obligations are
not funded. Due to the long term nature of these defined benefit
plans these assumptions are subject to a significant degree of
uncertainty.
Estimating
the Useful Life of Non-Financial Assets
The Group must estimate the useful life of property, plant and
equipment and finite intangible assets recognized at
acquisition, or as a result of a business combination. These
estimates are revisited at least on an annual basis taking into
account new developments and market conditions.
122
Contingent
Liabilities
The Group is currently involved in various claims and legal
proceedings. Periodically, the Group reviews the status of each
significant matter and assesses potential financial exposure,
based in part on the advice of legal counsel. If the potential
loss from any claim or legal proceeding is considered probable
and the amount can be reliably estimated, the Group recognizes a
liability for the estimated loss. Significant judgment is
required in both the determination of probability and the
determination as to whether an exposure is reasonably estimable.
With respect to the retail customers, and because of
uncertainties related to these matters, provisions are based
only on the most accurate information available at the reporting
date. As additional information becomes available, the Group
reassesses the potential liability related to pending claims and
litigation and may revise assessments of the probability of an
unfavorable outcome and the related estimate of potential loss.
Such revisions in the estimates of the potential liabilities
could have a material impact on the Groups financial
position and results of operations.
Impairment
of Property, Plant and Equipment
The determination of impairment of property, plant and equipment
involves the use of estimates that include, but are not limited
to, the cause, timing and amount of the impairment. Impairment
is based on a large number of factors, such as changes in
current competitive conditions, expectations of growth in the
telecommunications industry, increased cost of capital, changes
in the future availability of financing, technological
obsolescence, discontinuance of services, current replacement
costs, prices paid in comparable transactions and other changes
in circumstances that indicate impairment exists. The
recoverable amount is typically determined using a discounted
cash flow method which incorporates reasonable market
participant assumptions. The identification of impairment
indicators, as well as the estimation of future cash flows and
the determination of fair values for assets (or groups of
assets) require management to make significant judgments
concerning the identification and validation of impairment
indicators, expected cash flows, applicable discount rates,
useful lives and residual values.
Customer
Activation Fees
Installation and activation fees are received from new
customers. These fees (and related directly attributable costs)
are deferred and amortized over the expected duration of the
customer relationship. If management estimates of the duration
of the customer relationship are revised, significant
differences may result in the timing of revenue for any period.
Recognition
of Revenues and Expenses
Fixed revenues primarily consist of connection charges, monthly
network services fees, exchange network and facilities usage
charges, other value added communication services fees, and
sales of handsets and accessories. Revenues are recognized as
follows:
Connection charges:
Connection charges for the
fixed network are deferred and amortized to income over the
average customer retention period. Connection costs, up to the
amount of deferred connection fees are recognized over the
average customer retention period. No connection fees are
charged for mobile services.
Monthly network service fees:
Revenues related
to the monthly network service fees are recognized in the month
that the telecommunication service is provided.
Usage charges and value added services
fees:
Call fees consist of fees based on airtime
and traffic generated by the caller, the destination of the call
and the service utilized. Fees are based on traffic, usage of
airtime or volume of data transmitted for value added
communication services. Revenues for usage charges and value
added communication services are recognized in the period when
the services are provided. Revenues from outgoing calls made by
our subscribers to subscribers of mobile telephony operators are
presented at their gross amount in the income statement as the
credit and collection risk remains solely with us.
Interconnection fees for
mobile-to-mobile
calls are recognized based on incoming traffic generated from
other mobile operators networks. Unbilled revenues from
the billing cycle date to the end of each period are estimated
based on traffic. Revenues from the sale of prepaid airtime
cards and the prepaid airtime, net of discounts allowed,
included in the Groups prepaid services packages, are
recognized based on usage. Such discounts represent the
difference between the wholesale price of prepaid
123
cards and boxes (consisting of handsets and prepaid airtime) to
the Groups Master Dealers and the retail sale price to the
ultimate customers. Unused airtime is included in Deferred
revenue in the statement of financial position. Upon the
expiration of prepaid airtime cards, any unused airtime is
recognized in the income statement. Commissions paid for each
contract subscriber acquired by the master dealers as well as
bonuses paid to master dealers in respect of contract
subscribers who renew their annual contracts, are deferred and
amortized as expenses over the contract period. Airtime
commissions due to the Groups master dealers for each
subscriber acquired through their network are expensed as
incurred.
Sales of telecommunication equipment:
Revenues
from the sale of handsets and accessories, net of discounts
allowed, are recognized at the
point-of-sale,
when the significant risks and rewards of ownership have passed
to the buyer.
Dividend income:
Dividend income is recognized
when the right to receive payment is established with the
approval for distribution by the General Assembly of
shareholders.
Interest income:
Interest income is recognized
as the interest accrues (using the effective interest method).
Revenues from construction projects:
Revenues
from construction projects are recognized in accordance with the
percentage of completion method.
Principal and agency relationship:
In a
principal and agency relationship, amounts collected by the
agent on behalf of the principal do not result in increases in
equity of the agent and thus, they are not revenues for the
agent. Revenue for the agent is the amount of commission
received by the principal. On the other hand, the
principals revenues consist of the gross amounts described
above and the commission paid to the agent is recognized as an
expense.
Recent
and Newly-Issued Accounting Pronouncements
The financial statements have been prepared using accounting
policies consistent with those of the previous year except for
the adoption of the following new and amended IFRS and IFRIC
interpretations which became effective for the accounting period
beginning January 1, 2009:
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IFRIC 13 Customer Loyalty Programs effective July 1, 2008
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IFRIC 15 Agreements for the Construction of Real Estate
effective January 1, 2009
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IFRIC 16 Hedges of a Net Investment in a Foreign Operation
effective October 1, 2008
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IFRIC 9 Remeasurement of Embedded Derivatives (Amended) and IAS
39 Financial Instruments: Recognition and Measurement (Amended)
effective for periods ending on or after June 30, 2009
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IFRS 1 First-time Adoption of International Financial Reporting
Standards (Amended) and IAS 27 Consolidated and Separate
Financial Statements (Amended) effective January 1, 2009
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IFRS 2 Share-based Payment: Vesting Conditions and
Cancellations (Amended) effective January 1, 2009
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IFRS 8 Operating Segments effective January 1, 2009
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IFRS 7 Financial Instruments: Disclosures (Amended) effective
January 1, 2009
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IAS 1 Presentation of Financial Statements (Revised) effective
January 1, 2009
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IAS 32 Financial Instruments: Presentation (Amended) and IAS 1
Puttable Financial Instruments and Obligations Arising on
Liquidation (Amended) effective January 1, 2009
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IAS 23 Borrowing Costs (Revised) effective January 1, 2009
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Improvements to IFRSs (May 2008)
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IFRIC 18 Transfers of Assets from Customers effective for
transfers after July 1, 2009
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124
The adoption of the above new and amended IFRS and IFRIC
interpretations did not have an impact on the financial
statements or performance of the Group, however the following
had an impact on the presentation of or disclosures made in the
financial statements as described below:
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IAS 1, Presentation of Financial Statements
(Revised)
: The revised standard requires that the statement
of changes in equity includes only transactions with owners;
introduces a new statement of comprehensive income that combines
all items of income and expense recognized in the income
statement together with other comprehensive income
(either in one single statement or in two linked statements);
and requires the inclusion of a third column on the statement of
financial position to present the effect of restatements of
financial statements or retrospective application of a new
accounting policy as at the beginning of the earliest
comparative period. The Group made the necessary changes to the
presentation of its financial statements in 2009 and elected to
present two linked statements for the statement of comprehensive
income.
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IFRS 7, Financial
Instruments: Disclosures
: The amended
standard requires additional disclosures about fair value
measurement and liquidity risk. Fair value measurements related
to items recorded at fair value are to be disclosed by the
source of inputs, using a three-level hierarchy, by class, for
all financial instruments recognized at fair value. In addition,
reconciliation between the beginning and ending balance for
level 3 fair value measurements is now required, as well as
significant transfers between the levels in the fair value
hierarchy. The amendments also clarify the requirements for
liquidity risk disclosures with respect to derivative
transactions and assets used for liquidity management.
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IFRS 8, Operating segments:
IFRS 8
replaces IAS 14 Segment reporting and adopts a
management approach to segment reporting. The Group concluded
that the operating segments determined in accordance with IFRS 8
are the same as the business segments previously identified
under IAS 14.
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The following new and amended IFRS and IFRIC interpretations
have been issued but are not effective for the financial year
beginning January 1, 2009. They have not been early adopted
and the Group is in the process of assessing their impact, if
any, on the financial statements:
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IFRIC 17 Distributions of Non-cash Assets to
Owners:
This interpretation is effective for
annual periods beginning on or after July 1, 2009 with
early application permitted. The interpretation provides
guidance on how to account for non-cash distributions to owners.
The interpretation clarifies when to recognize a liability, how
to measure it and the associated assets, and when to derecognize
the asset and liability.
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IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments
: The interpretation is effective for
annual periods beginning on or after July 1, 2010. This
interpretation addresses the accounting treatment when there is
a renegotiation between the entity and the creditor regarding
the terms of a financial liability and the creditor agrees to
accept the entitys equity instruments to settle the
financial liability fully or partially. IFRIC 19 clarifies such
equity instruments are consideration paid in
accordance with paragraph 41 of IAS 39. As a result, the
financial liability is derecognized and the equity instruments
issued are treated as consideration paid to extinguish that
financial liability.
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IFRIC 14 Prepayments of a Minimum Funding Requirement
(Amended)
: The amendment is effective for annual
periods beginning on or after January 1, 2011. The purpose
of this amendment was to permit entities to recognize as an
asset some voluntary prepayments for minimum funding
contributions. Earlier application is permitted and must be
applied retrospectively.
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IFRS 3 Business Combinations (Revised) and IAS 27
Consolidated and Separate Financial Statements
(Amended)
: The revision and amendment is
effective for annual periods beginning on or after July 1,
2009. The revised IFRS 3 introduces a number of changes in the
accounting for business combinations which impacts the amount of
goodwill recognized, the reported results in the period that an
acquisition occurs, and future reported results. Such changes
include the expensing of acquisition-related costs and
recognizing subsequent changes in fair value of contingent
consideration in the income statement (rather than by adjusting
goodwill). The amended IAS 27 requires that a change in
ownership interest of a subsidiary is accounted for as an equity
transaction. Therefore such a change will have no impact on
goodwill, nor will it give raise to a gain or loss. Furthermore,
the amended standard changes the accounting for losses incurred
by the subsidiary as well as the loss of control of a
subsidiary. The changes introduced by IFRS 3 (Revised) and
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125
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IAS 27 (Amendment) must be applied prospectively and will affect
future acquisitions and transactions with non-controlling
interests.
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IAS 39 Financial Instruments: Recognition and
Measurement (Amended) eligible hedged
items
: The amendment is effective for annual
periods beginning on or after July 1, 2009. The amendment
clarifies that an entity is permitted to designate a portion of
the fair value changes or cash flow variability of a financial
instrument as hedged item. This also covers the designation of
inflation as a hedged risk or portion in particular situations.
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IFRS 9 Financial Instruments Phase 1 financial
assets, classification and measurement
: The new
standard is effective for annual periods beginning on or after
January 1, 2013. Phase 1 of this new IFRS introduces new
requirements for classifying and measuring financial assets.
Early adoption is permitted.
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IFRS 2 Group Cash-settled Share-based Payment Transactions
(Amended)
: The amendment is effective for annual
periods beginning on or after January 1, 2010. This
amendment clarifies the accounting for group cash-settled
share-based payment transactions and how such transactions
should be arranged in the individual financial statements of the
subsidiary.
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IAS 32 Classification on Rights Issues
(Amended):
The amendment is effective for annual
periods beginning on or after February 1, 2010. This
amendment relates to the rights issues offered for a fixed
amount of foreign currency which were treated as derivative
liabilities by the existing standard. The amendment states that
if certain criteria are met, these should be classified as
equity regardless of the currency in which the exercise price is
denominated. The amendment is to be applied retrospectively.
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IAS 24 Related Party Disclosures
(Revised):
The revision is effective for annual
periods beginning on or after January 1, 2011. This
revision relates to the judgment which is required so as to
assess whether a government and entities known to the reporting
entity to be under the control of that government are considered
a single customer. In assessing this, the reporting entity shall
consider the extent of economic integration between those
entities. Early application is permitted and adoption shall be
applied retrospectively.
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IFRS 1 Additional Exemptions for First-time Adopters
(Amended)
: The amendment is effective for annual
periods beginning on or after January 1, 2010.
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IFRS 1 Limited Exemption from Comparative IRFS 7 Disclosures
for first time adopters (Amended)
: The amendment
is effective for annual periods beginning on or after
July 1, 2010.
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In April 2009 the IASB issued its second omnibus of amendments
to its standards, primarily with a view to removing
inconsistencies and clarifying wording. The effective dates of
the improvements are various and the earliest is for the
financial year beginning on or after July 1, 2009.
In May 2010 the IASB issued its third omnibus of amendments to
its standards, primarily with a view to removing inconsistencies
and clarifying wording. The effective dates of the improvements
are various and the earliest is for the financial year beginning
on or after July 1, 2010.
5.C Research
and Development, Patents and Licenses
Research
and Development
The primary aim of our research and development activities is to
introduce new technologies and services to our network in a
systematic and efficient manner, to examine and test new
technologies and products and to maintain active testing grounds
of the technologies we use in our network.
In previous years we have tested a number of technologies,
including VoIP, NG-SDH, Metro-Ethernet, WiMAX and FTTx
(FTTC/VDSL and FTTB/H-GPON), some of which we subsequently
implemented and operated commercially through our network.
In 2010 and 2011, we expect to mainly focus on the following
research and development projects:
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Next Generation Access Network Architectures (NGA);
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126
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Next Generation SDH technologies;
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Security and Environmental Monitor of Outdoor Distributing
Cabinets;
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IPTV services; and
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IMS platform and next generation service creation platforms.
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Our research and development division cooperates with Greek and
European universities and research institutions on a range of
research projects on modern technologies. We also participate in
a number of research and development projects supported by the
European Union and we have also been involved in recent research
activities, as the latter have been announced by the Greek
Secretary General for Research and Technology. We are currently
involved in the following EU-funded projects:
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REWIND (Relay based Wireless Network and standard) aims to
develop a smart WiMAX repeater fully utilizing all
advanced capabilities WiMAX offers;
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FUTON (Fiber Optic Networks for Distributed, Extendible
Heterogeneous Radio Architectures and Service Provisioning) aims
to develop a hybrid optical-wireless infrastructure to connect
distributed antenna units to a centralized common processing
unit
(Radio-Over-Fiber); and
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SELFnet (Self Management of Cognitive Future Internet Elements)
aims to develop an innovative cognitive telecommunications
network, facing the challenge for the development and
exploitation of the future internet, whose infrastructure and
applications can self-extend, self-improve, self-adjust and
self-repair in real time.
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5.D Trend
Information
Our business has been affected in recent years by a number of
important trends. See Overview
Factors affecting our financial performance.
5.E Off-Balance
Sheet Arrangements
We have no off-balance sheet arrangements, within the meaning of
the term as defined in Item 5.E of
Form 20-F.
5.F Tabular
Disclosure of Contractual Obligations
The following table sets forth the Groups contractual
obligations as of December 31, 2009.
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Payments Due by Maturity at December 31, 2009
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Less Than
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More Than
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Total
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1 Year
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1-3 Years
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3-5 Years
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5 Years
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(Euro in millions)
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Total debt obligations
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5,421.9
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36.2
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2,626.7
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1,258.0
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1,501.0
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Purchase obligations
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369.2
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259.0
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26.2
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26.2
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57.8
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Operating lease obligations
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612.9
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107.5
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152.1
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151.7
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201.6
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Accrued interest payable
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158.2
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158.2
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Total
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6,562.2
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560.9
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2,805.0
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1,435.9
|
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1,760.4
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ITEM 6
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DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES
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6.A Directors,
Board Practices and Senior Management
We are currently managed by our Board of Directors and Managing
Director.
127
Board of
Directors
Our Articles of Incorporation provide that our Board of
Directors may consist of 9 up to 11 members elected for
three-year terms. Our Board of Directors has the authority to
elect our executive officers, following internal consultations,
while our shareholders, including major shareholders, such as
the Greek State and Deutsche Telekom, are not entitled to
directly appoint executive officers or employees. For a detailed
description of our Articles of Incorporation and recent
amendments to them, see 10.B Our Articles of
Incorporation.
Greek Law 3016/2002 on corporate governance has established a
set of rules governing transparency of operation and avoidance
of conflicts of interest for Greek corporations with shares
listed on the Athens Exchange. It is intended to enhance and
extend the regulatory framework on corporate conduct and
governance and provides, among other things, that the boards of
listed companies must be comprise of at least one-third
non-executive directors, meaning they will not be
involved in the
day-to-day
business affairs of the company. Among the
non-executive members of the board, at least two
must be independent, meaning persons who have
neither significant shareholdings in, nor any other
relation of dependence with, the Company or any
companies affiliated with it. Appointment of independent members
is not mandatory when there is explicit appointment and
participation of members representing the minority of the shares
in the board of directors. Our general assembly is solely
responsible for appointing the requisite number of independent
non-executive Directors, while our Board is responsible for
delineating the capacities of Directors as executive or
non-executive.
Our Board of Directors has the power to decide on any issue
which does not fall within the exclusive competence of the
general assembly. Matters that fall within the exclusive
competence of the general assembly include increasing our
authorized share capital in certain circumstances, approving our
financial statements, paying dividends, authorizing the issuance
of debt securities under certain circumstances, approving a
merger, dissolution or reorganization in which we are involved
and certain other matters specified in our Articles of
Incorporation.
Pursuant to the Shareholders Agreement between the Greek
State and Deutsche Telekom and the subsequent amendment of our
Articles of Incorporation, the quorum required for a meeting of
the Board of Directors is one half of all the Directors plus
one, and the ordinary resolutions of the Board of Directors
shall be adopted by a majority vote of the Directors present or
represented at the meeting. In the event of a tie in the Board
of Directors, the Chairman holds the casting vote, except for
certain matters and except where an Executive Committee has been
established. Each Director may represent only one Director.
Resolutions of the Board of Directors on Special Matters (as
these are stipulated in Article 8, paragraph 4 of our
Articles of Incorporation) are adopted by a majority of seven of
the members present or represented. The Board may delegate
certain of its powers to the Directors, including the Managing
Director, or to our executives, third parties or any committee
comprised of these individuals, including the Executive
Committee. In addition, the Shareholders Agreement between
the Greek State and Deutsche Telekom also contains certain
provisions regarding the election of our Chairman and Managing
Director veto matters and other matters relating to the
management of our Group. For further details, see 7.A
Major Shareholders and Related Party Transactions
Agreements between the Greek State and Deutsche
Telekom The Shareholders Agreement.
Our Directors are not entitled to any form of compensation upon
termination of their appointment as members of the Board, for
any reason.
128
As of the date of this Annual Report, our Board of Directors was
comprised as follows:
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Name
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Position
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Capacity
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Appointed
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Expiry
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Age
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Panagis Vourloumis
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Chairman and
Managing Director
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Executive
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June 24, 2009
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2012
|
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|
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73
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Charalambos Dimitriou
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Vice-chairman
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Non-executive
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June 24, 2009
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2012
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54
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Panagiotis Tampourlos
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Director
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Independent
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June 24, 2009
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2012
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58
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Rainer
Rathgeber
(1)
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Director
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Non-executive
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February 19, 2010
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2012
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46
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Kevin Copp
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Director
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Executive
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June 24, 2009
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2012
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46
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Leonidas Evangelidis
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Director
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Independent
|
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June 24, 2009
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2012
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|
|
75
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Konstantinos Michalos
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Director
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Independent
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June 24, 2009
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2012
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50
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Ioannis Benopoulos
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Director
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Independent
|
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June 24, 2009
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2012
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45
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Guido Kerkhoff
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Director
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Non-executive
|
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June 24, 2009
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2012
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43
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Iordanis Aivazis
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Director
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Executive
|
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June 24, 2009
|
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2012
|
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60
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Note:
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(1)
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Mr. Rathgeber was elected to
the Board of Directors on February 19, 2010. He replaced
Mr. Hamid Akhavan-Malayeri for the remainder of his office
term, following his resignation.
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Panagis Vourloumis.
Mr. Vourloumis was
born in 1937 and is a graduate of the London School of
Economics. He headed the Southeast Asia division of the IFC
(International Finance Corporation), where he worked from 1966
to 1973, was head of the Commercial Bank of Greece Group from
1979 to 1981, and was Chairman and CEO of Alpha Finance, Alpha
Mutual Funds and Alpha Bank Romania, while at the same time
serving as executive director of Alpha Bank, from 1988 to 2000.
From 2000 to mid-2004, Mr. Vourloumis was chairman of the
boards of Frigoglass and of the Aegean Baltic Bank. Since May
2004 he has served as our Chairman and Managing director, and as
of September 2007 he has served as Chairman (to date) and
Managing Director (until June 23, 2009) of Cosmote. He
has been president of the Association of Institutional Investors
and a member of the boards of the Federation of Greek Industries
and of many non-profit organizations. He is the author of the
book
Social Security Made Simple
and has written articles
in the financial press. Mr. Vourloumis is 73 years old.
Charalambos Dimitriou.
Mr. Dimitriou is a
graduate of the University of Athens Law School and an attorney
at law at the Supreme Court of Greece. He holds an LLM from the
London School of Economics, specializing in EU law,
international economic law and corporate law. He served as a
lecturer with the London University College from 1982 to 1983,
as legal counsel to the Hellenic Republic on privatization from
2004 to 2009 and as a member of the investment board of JEREMIE
Greece. He was a member of the board of directors of the
Agricultural Bank of Greece from 2004 to 2007 and has been a
member of the board of directors of the New Economy Development
Fund, since 2009. He is founder and managing partner of the law
firm C. & S. Dimitriou & Associates.
Mr. Dimitriou is 54 years old.
Panagiotis Tampourlos.
Mr. Tampourlos is
a graduate of the Piraeus University of Economics and holds a
Masters degree in Business Administration from McGill
University (Montreal, Canada). Since 1980, he has worked as a
financial manager in various corporations, including Milchem
International, Hilti S.A., American Express and ICI. From 1990
to 2003, he worked for Warner Lambert S.A., Pfizer
Pharmaceuticals, where, prior to his departure, he held the
position of Consumer Division CFO for Europe, the Middle
East and Africa. From June 2003 until April 2004 he was our
Chief Financial Officer for our Greek fixed-line operations.
Since then he has served as financial director of the Frigoglass
Group. Since June 2004 he has served as the Chairman of our
Audit Committee, the Audit Committee financial expert and also a
Board Member. Mr. Tampourlos is 58 years old.
Kevin Copp.
Mr. Copp was born in 1964 and
holds a Juris Doctorate degree from Catholic University in
Washington D.C.and a Bachelor of Arts in Foreign Languages from
West Chester University, Pennsylvania. He has been part of the
Deutsche Telekom Group since 1995 where he was most recently
Senior Executive Vice President, Head of Mergers and
Acquisitions of Deutsche Telekom responsible for the
Groups corporate development activities worldwide. Prior
to that, he was Head of International Legal Affairs of Deutsche
Telekom. Since August 2009, Mr. Copp has been OTE
Groups Chief Financial Officer.
129
Konstantinos Michalos.
Mr. Michalos was
born in 1960. He studied Finance and Political Science at the
University of Essex in the United Kingdom and holds a
postgraduate degree (MSc) in Financial Applications from London
School of Economics and Political Science. He is President of
the Athens Chamber of Commerce and Industry
(
ACCI
). Since 1988, he has been Chairman and
CEO of the industrial exporting company SWAN S.A. based in
Attica. From 1993 to 2005, he was an elected member of the Board
of ACCI and from 1998 to 2002 he served as Treasurer at ACCI.
During the period from 2004 to 2005, he served as Senior Adviser
at the Ministry of Development. From 2005 to 2006, he was
Secretary General of the Ministry of Economy and Finance. Since
2007, he has been an elected member of the Board of PPC S.A.
(Public Power Corporation). Mr. Michalos is 50 years
old.
Guido Kerkhoff.
Mr. Kerkhoff was born in
1967 and holds a degree in Business Administration. He began his
career in the accounting department of VEW AG, where he worked
from 1995 to 1996. He then moved on to Bertelsmann AG, where he
held the position of Head of Projects and General Corporate
Accounting and Controlling. Since April 2002, Mr. Kerkhoff
has held various management positions in Deutsche Telekoms
Finance department and from mid-2006 until February 2009 was the
Head of Deutsche Telekom Group Accounting and Controlling. On
March 1, 2009, Mr. Kerkhoff was appointed Member of
Deutsche Telekoms Board of Management, responsible for
South Eastern Europe. Mr. Kerkhoff is 43 years old.
Leonidas Evangelidis.
Mr. Evangelidis was
born in 1935. He is a graduate of the Faculty of Law and
Economics of the Aristotelian University of Thessaloniki. In
1961 he joined the Foreign Service and among others served as
Ambassador of Greece in the Federal Republic of Germany between
1987 and 1990 and as Permanent Representative of Greece in the
European Union from 1992 to 1993. During the period of 1995 to
2000 he held the position of Director General for the Common
Foreign and Security Policy of the European Union at the Council
of the European Union. Between 2004 and 2006 he held the office
of the Secretary General of the Ministry of Public Order and
from 2006 to 2007 he was appointed President and CEO of the
Center for Security Studies. Mr. Evangelidis is
75 years old.
Ioannis Benopoulos.
Dr. Benopoulos was
born in 1965 in Athens. He holds a BA cum laude in Economics
from Clark University in Massachusetts and a PhD with
distinction from Columbia University in New York, specializing
in industrial organization, economic theory and economic
strategy and development. In 1994, he established Coffee
Connection SA, a company of coffee production and trading and
for many years was the Chairman and CEO of the Group, which now
manages the brands Coffeeway, Brazita, Street Café and Via
Espresso. From 1999 to 2006 he was a member of the board of
directors of SELPE (Hellenic Retail Business Association). From
September 2006 to October 2007, he served as General Secretary
for Commerce at the Ministry of Development. From October 2007
to July 2008, he was Chairman and CEO of Olympic Airlines. From
July 2008 to May 2009, he was Chairman and CEO of Pantheon
Airways and remained Chairman of Olympic Air until September
2009. Today he is Chairman and CEO of Coffee Connection S.A.
Dr. Benopoulos is 45 years old.
Iordanis Aivazis.
Mr. Aivazis holds a
degree in Economics from Athens University, a Master of Arts in
Marketing and Finance from Lancaster University, United Kingdom,
as well as a Postgraduate Diploma in Industrial Economics from
the same university. He speaks English and French in addition to
his native Greek. After pursuing a career in banking he joined
the OTE Group in February 2001. Since then he has been member of
the Board of Directors and Executive Vice President of OTE
International Investments. Since March 2003, he held the
position of our Chief Officer for Group Financial Affairs and
from April 2004 until June 2007 he served as our Chief Financial
Officer. Since June 2007, he has served as our Chief Operating
Officer, in charge of the divisions of Residential and Business
Customers, National Wholesale Services, Technology Regions, IT
and Finance. Mr. Aivazis is 60 years old.
Rainer Rathgeber.
Mr. Rainer Rathgeber
was born in 1964. Mr. Rathgeber holds a Masters
degree in Economics from the University in Passau, Germany. He
has been a member of Cosmotes Board of Directors since
July 2009 and has been a member of the Deutsche Telekom Group
since 2002. Mr. Rathgeber is currently the Senior
Vice-President for Marketing in South Eastern Europe and for the
area management of the OTE Group. Until September 2009 he held
the position of CEO of Mobile Hrvatski as well as the position
of COO Mobile of Telekom Hrvatski Board. Prior to joining the
Deutsche Telekom Group, Mr. Rathgeber worked for prominent
consulting firms, such as A.T. Kearney and Roland Berger in
Germany and Latin America. Mr. Rathgeber is 46 years
old.
130
Corporate
Governance
We adhere to the principles of corporate governance for Greek
listed companies set forth in Law 3016/2002, as amended and in
effect, Law 3340/2005 and Law 3556/2007 and HCMC decision
No. 5/204/14.11.2000
(as currently in effect following amendments pursuant to its
Decisions
No. 3/348/2005
and
No. 7/372/2006).
See also 4 B. Business Overview
Regulation Greek Capital Markets Regulation.
Within this framework, we have implemented key principles of
corporate governance relating to:
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the composition of our Board of Directors;
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transparency and disclosure of information; and
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the protection of shareholders rights.
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The corporate governance rules applicable to us as a Greek
corporation differ in many respects from the corporate
governance standards applicable to domestic corporations in the
United States that have securities listed on the New York Stock
Exchange (
NYSE
). Most notably, there are
differences with respect to the proportion of directors required
to be independent and the role, structure, composition and
organization of the committees of the board of directors.
According to Greek Law 3016/2002, at least one third of our
Directors must be non-executive and of these at least two must
be independent. Of the 10 members of our current Board, four are
independent. Independence of directors in Greece is supervised
by the HCMC, which may impose sanctions in cases of violations
of applicable law.
According to the NYSE corporate governance rules, companies
listed on the NYSE must adopt and disclose corporate governance
guidelines relating to director qualifications standards,
responsibilities, access to management, compensation and various
other matters. There are no similar requirements applicable to
us under Greek law, and we have not adopted guidelines of this
nature.
NYSE corporate governance rules stipulate that non-executive
directors must meet at regularly scheduled meetings without
management being present. There are no similar requirements
applicable to us under Greek law, and our non-executive
Directors do not ordinarily hold separate meetings.
Other differences are summarized as follows. Greek law does not
require Greek companies to have a nominating/corporate
governance committee. We do not have a remuneration committee as
is contemplated under the rules of the NYSE, since this is not
required under Greek law. Pursuant to Law 2190/1920, the Greek
Companies Law, the compensation of our Directors is determined
by the general assembly. We have, however, established a
Compensation and Human Resources Committee, which is currently
comprised of two non-executive Directors (Mr. Charalambos
Dimitriou, Chairman, and Mr. Guido Kerkhoff) and one
independent director (Mr. Ioannis Benopoulos) and is
responsible for determining our human resource policies,
including our remuneration and incentives policy. As required by
the HCMC Decision
No. 5/204/14.11.2000
and Law 3016/2002, our internal audit department reviews the
legality of remuneration and benefits of our directors and
senior managers, within their capacity as officials of the OTE
parent company.
According to Law 3016/2002 and HCMC decision
No. 5/204/14.11.2000
as now in force, companies listed on the Athens Exchange are
also required to establish and operate:
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an internal audit department responsible for monitoring of the
companys controls, including, among other things,
monitoring of the continuous implementation of Internal
Regulations and Articles of Incorporation, as well as
regulations pertaining to the company;
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a shareholders relations department responsible for
providing information to shareholders relating to distribution
and payment of dividends, corporate actions and information
concerning the general assembly of shareholders; and
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an announcement department responsible for the announcement of
all notices and statements pertaining to the company.
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131
Audit
Committee
Our Board of Directors established an Audit Committee in April
1999. It adopted an Audit Committee Charter (as an addendum to
our Companys Internal Regulations) in order to set out the
main functions, responsibilities and composition of our Audit
Committee, on May 24, 2004, and subsequently amended it on
June 16, 2005 and on October 20, 2005. The primary
purpose of our Audit Committee is to assist our Board of
Directors in the exercise of its supervisory role and the
satisfaction of its obligations towards shareholders, investors
and others, particularly with respect to the financial reporting
process, and, specifically, in connection with the following:
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integrity of our financial statements;
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adequacy of internal control procedures and systems;
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observance and adequacy of accounting and financial reporting
processes;
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operation of internal audit department procedures;
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evaluation of our external auditors, mainly referring to their
independence, integrity, adequacy and performance; and
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observance of our legal and regulatory framework.
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Our Audit Committee operates in accordance with regulations
approved by our Board and consists of three independent and
non-executive Directors in accordance with the requirements of
the Exchange Act and NYSE regulations (and also in compliance
with Greek Law 3016/2002 on corporate governance). The members
of the Audit Committee are designated by our general assembly,
according to Law 3693/2008 for an initial tenure of two years.
At least one member of the Audit Committee, currently
Mr. Tampourlos, is a financial expert.
Our Audit Committee holds at least four ordinary meetings each
year and may also hold extraordinary meetings when deemed
necessary. The Audit Committee meets quorum requirements when
its Chairman and one additional member are present. In the event
that such a quorum exists, the third member of the Audit
Committee may be represented by the Chairman or the Audit
Committee member that is present. Resolutions of the Audit
Committee are adopted by an absolute majority of all of its
members.
Our Audit Committee regulations are reviewed annually and,
following recommendations by the Audit Committee, the Board
approves any modifications.
Our Audit Committee is responsible, among other things, for:
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examining and evaluating the efficiency and effectiveness of the
internal control framework that we apply, including the adequacy
of security and control of informational systems, and informing
the Board of its conclusions regarding these matters;
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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;
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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;
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advising our Board regarding the selection of external auditors;
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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;
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pre-approving all services rendered by, and fees due to, the
external auditors;
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examining and evaluating the independence of the external
auditors and suggesting to the Board measures to be taken in
order to maintain their independence;
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132
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supervising the internal audit department and overseeing the
independent and effective function of the internal auditors,
including, among other matters, examining and evaluating the
development of the annual audit plan and recommending its
approval to the Board, monitoring the implementation of the
annual audit plan and evaluating the progress and effectiveness
of the internal audit work;
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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 with
Rule 10A-3
of the Exchange Act, according to which, such complaints may be
submitted to the Audit Committee via the Chief Compliance
Officer function;
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examining, along with management and our external auditors, any
exchange of information with the supervisory authorities, as
well as any public reports and publications regarding critical
issues relating to our financial statements; and
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examining, along with our legal counsel, any legal issues that
may significantly affect our financial statements or our
compliance with the applicable statutory framework.
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In order to carry out its duties, the Audit Committee, among
other things:
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may delegate to its members the exercise of particular
competences; for this purpose, the Audit committee may give to
its members specific written authorizations;
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may engage, following the approval of our Board, independent
counsel and other advisers;
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determines our obligation to provide the necessary funding for
the performance of its tasks; and
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has free access to all of our information and records.
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As of the date of this Annual Report, the members of our Audit
Committee are as follows: Panagiotis Tampourlos (Chairman),
Ioannis Benopoulos and Leonidas Evangelidis. Our extraordinary
general assembly of shareholders held on June 24, 2009
determined that Mr. Tampourlos is an audit committee
financial expert. See 16.A. Audit Committee
Financial Expert.
Compensation
and Human Resources Committee
Our Board of Directors established our Compensation and Human
Resources Committee in 2004. This Committee is appointed by our
Board of Directors and consists of a minimum of three members,
at least two of which are non-executive. The Chairman of the
Committee is also appointed by the Board of Directors. The
Committees main duties, as described in its Operations
Regulation, include the following:
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Determination of the principles of the companys human
resources policy, which will govern the decisions and actions of
the management;
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Definition of our companys compensation and remuneration
policy;
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Approval of draft plans relating to compensation, benefits,
stock options and bonuses;
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Submitting proposals to the Board of Directors regarding
compensation and benefits of the Managing Director;
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Studying and assessing issues relating to our companys
human resources; and
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Setting out principles of our corporate social responsibility
policies.
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The Compensation and Human Resources Committee submits proposals
to the Board of Directors on matters relating to the
responsibilities of the Committee. The Board of Directors either
approves these proposals, or forwards them to the General
Assembly of Shareholders, in the event these matters ought to be
resolved by the Assembly. Accordingly, in 2009, the Compensation
and Human Resources Committee dealt with the bonus that
133
should be paid to the Chairman and Managing Director for the
fiscal year 2008, and his compensation for fiscal year 2009.
The Committee meets at least twice a year and reports directly
to the Board of Directors.
As of the date of this Annual Report, the Compensation and Human
Resources Committee consists of the following members:
Mr. Charalambos Dimitriou (Chairman), Mr. Ioannis
Benopoulos and Mr. Guido Kerkhoff.
Compliance
Department and Chief Compliance Officer
In June 2009, our Board of Directors resolved to establish an
internal compliance department, reporting directly to the Board
of Directors via the Audit Committee. The purpose of the
compliance department is to monitor compliance across our Group
and to receive, assess, and, if appropriate, investigate, alone
or with other departments of our Group, complaints and
whistleblowing cases of alleged breaches of laws and external or
internal regulations and corporate misconduct, in a range of
areas including corruption, bribery, inappropriate financial
reporting, insider trading, misuse of personal data,
embezzlement, fraud and theft, misuse of trade and business
secrets and other matters.
The compliance department is headed by our Group Chief
Compliance Officer, Aristodimos Dimitriadis, and is supervised
by our Compliance Committee (comprised of the Chief Compliance
Officer and representatives of a number of functions, including
internal audit, legal, regulatory, human resources and
security). We, Cosmote and RomTelecom, have separate compliance
officers and compliance committees. Other companies of the Group
have part-time Compliance Officers reporting to their CEO and
ultimately to the Group Chief Compliance Officer. We are
currently in the process of hiring additional qualified
personnel and organizing appropriate procedures to support the
operation of our compliance department.
Internal
Audit Department
Our Internal Audit department is established to function
independently, in an assurance and consulting role. It focuses
on evaluating and improving the effectiveness of our risk
management, control and governance processes. In particular,
responsibilities of the Internal Audit department include:
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examining and evaluating the groups system of internal
controls;
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carrying out investigations of compliance issues;
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identifying risks and makes relevant recommendations to the
management; and
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ensuring the uniform development and operation of Internal Audit
departments within the Group companies
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The Internal Audit department is headed by our Chief Internal
Audit Officer, Maria Rontogianni, and is supervised by our Audit
Committee in order to maintain its independence. Its operations
are governed by its code of conduct.
Managing
Director
Our Managing Director is Mr. Panagis Vourloumis. For a
description of Mr. Vourloumis professional background
and experience, see 6.A/C Directors, Board Practices and
Senior Management Board of Directors.
The Managing Director is our highest ranking executive. The
Managing Director is one of the 10 members of our Board of
Directors appointed by the general assembly, serves as an
executive member of our Board and is elected to his position by
our Board. The Managing Director has certain powers under our
Articles of Incorporation and other powers delegated by our
Board, including the authority to make proposals to our Board;
to conclude contracts on behalf of the Board (and us) of up to a
certain value as determined by our Board of Directors; to
represent us before courts, public authorities and third
parties; and to decide certain matters pertaining to personnel
and our internal organization.
134
Senior
Management
The following is a list of our senior managers as at the date of
this Annual Report, their current areas of responsibility and a
brief description of their backgrounds.
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Name
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Position
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Age
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Panagis Vourloumis
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Chairman and Managing Director
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73
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Iordanis Aivazis
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Chief Operating Officer
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60
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Kevin Copp
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Group Chief Financial Officer
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46
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Yorgos Ioannidis
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Managing Director of RomTelecom
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60
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Michael Tsamaz
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Managing Director of Cosmote,
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51
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Managing Director of OTE Investment Services
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Elias Drakopoulos
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Chief Commercial Officer for Enterprise and Business Services
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46
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Christos
Katsaounis
(1)
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Chief Commercial Officer for Residential Customers
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47
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George
Mavrakis
(2)
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Chief Financial Officer
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46
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Maria Efthimerou
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Chief Technology Officer
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55
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Konstantinos Kappos
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Chief Information Officer
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55
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Andreas Karageorgos
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Chief Regional Officer
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58
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Loizos
Kyzas
(3)
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Chief Human Resources Officer
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59
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Maria
Rontogianni
(4)
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Chief Internal Audit Officer
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37
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Panagiotis
Sarandopoulos
(5)
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Chief Officer of National Wholesale Services
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55
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Konstantinos Ploumpis
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Chief Regulatory Officer
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42
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Paraskevas
Passias
(6)
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General Counsel
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44
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Aristodimos Dimitriadis
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Chief Compliance Officer
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45
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Dino Andreou
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Chief Executive Officer of OTEGlobe
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Notes:
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(1)
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Mr. Katsaounis who has served
as Chief Officer of National Wholesale Services from July 2007
until January 18, 2010, assumed the position of Chief
Commercial Officer for Residential Customers.
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(2)
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Mr. Mavrakis replaced
Ms. Christini Spanoudaki in this position as of
August 19, 2009.
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(3)
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Mr. Kyzas replaced
Mr. Tsatsanis in this position on April 27, 2009.
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(4)
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Mrs. Rontogianni replaced
Mr. Kosmas Liaros in this position as of September 7,
2009.
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(5)
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Mr. Sarandopoulos, Chief
Commercial Officer for Residential Customers from December 2007
until January 18, 2010, assumed the position of Chief
Officer of National Wholesale Services.
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(6)
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Dr. Passias is General Counsel
of OTE and his area of responsibility covers all legal matters
excluding regulatory and competition affairs and legal matters
of subsidiaries.
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Panagis Vourloumis:
Our Chairman and Managing
Director. For a description of Mr. Vourloumis
professional background and experience, see
Board of Directors.
Iordanis Aivazis:
Chief Operating Officer. For
a description of Mr. Aivazis professional background
and experience, see Board of Directors.
Kevin Copp:
Group Chief Financial Officer. For
a description of Mr. Copps professional background
and experience, see Board of Directors.
Yorgos Ioannidis:
Managing Director of
RomTelecom. Mr. Ioannidis obtained a BSc in electrical
engineering from the Bosphorus University, Istanbul, Turkey in
1973, as well as an MSc from Lowell Technological Institute,
Lowell, Massachusetts USA in 1975. He is also a member of the
boards of directors of Cosmote and Cosmote Romania. He started
his career in 1975 at OTE, where he worked as a
telecommunications engineer at various posts in the Maintenance,
Planning and Telematics Department. He left us in 1993 to join
Vodafone as the Engineering Switching and Software Manager. In
1998, he moved to Cosmote as the Planning and Network
Development Manager and then took up the position of General
Technical Director at Cosmote. In June 2000, he
135
became Managing Director of OTENet, and in September 2004 he was
appointed as our Chief Technical Officer. In February 2007, he
left both of these positions to serve as Managing Director of
RomTelecom. Mr. Ioannidis is 60 years old.
Michael Tsamaz:
Managing Director of Cosmote.
Mr. Michael Tsamaz joined the OTE Group in 2001 as
Executive Vice President of OTE International Investments and
since April 2006 he has been Managing Director of OTEGlobe. From
September 2007 until June 2009, Mr. Tsamaz was the Deputy
Managing Director of Cosmote. Prior to OTE, Mr. Tsamaz
served as Commercial Director and later General Director of the
Commercial and Administration Division of Vodafone Greece S.A.
From 1991 to 1998 he worked for Philip Morris Europe S.A, where
he consecutively held the positions of Marketing Director for
Greece and Israel, Sales Director for Greece and Director of
Sales Development for Eastern Europe. During his term at the OTE
Group he has been a member of various boards of directors of
OTEs international subsidiaries. Mr. Tsamaz is
51 years old.
Elias Drakopoulos:
Chief Commercial Officer in
charge of our Enterprise and Business Services Division.
Dr. Drakopoulos holds a BSc in electrical engineering from
Aristotle University of Thessaloniki and a Masters Degree and
PhD in telecommunications from Northwestern University in
Evanston, Illinois, USA and postgraduate studies in business
management and strategy in INSEAD, France. From 1989 to 1998,
Mr. Drakopoulos held various managerial positions at
AT&T, Bell Laboratories and Lucent Technologies in the
United States, where he was responsible for design and
techno-economical matters and in parallel, was an adjunct
professor at the Illinois Institute of Technology and
Northwestern University in the United States. In 1998, he was
appointed Director of Network Planning in Lucent Technologies
for Europe until 2001 and subsequently until January 2003 Vice
President of Solutions, Business Development and Marketing for
Europe. He joined OTENet as General Manager of Technology,
Strategy and Development in February 2003 and in February 2007,
he became Managing Director of OTENet. He assumed the position
of Chief Commercial Officer for Enterprise and Business Services
on December 18, 2007. Dr. Drakopoulos is 46 years
old.
Christos Katsaounis:
Chief Commercial Officer.
Mr. Katsaounis holds a BSc in computer science from the
University of Lowell, Massachusetts, U.S.A. Mr. Katsaounis
joined us in January 2006 as head of the National Wholesale
division. He is also Chairman of the Board of Directors of
OTEGlobe. From 2001 until joining us, Mr. Katsaounis served
as Senior Vice President of Operations at Net One (an
alternative
fixed-network
operator). At the same time, he served as the Chairman from 2004
to 2005 and as a member of the board from 2003 to 2004 of the
Hellenic Association of Licensed Operators. From 1998 until
2001, he worked with Vodafone, Greece (formerly Panafon) as
Carrier Services Product Manager, while from 1995 until 1998 he
was the International Carrier Services Manager for Greece and
Cyprus of AT&T Communications Services. Prior to that, he
worked for IT and telecommunications equipment and solutions
vendors at such companies as Alcatel Business Systems Hellas.
Mr. Katsaounis is 47 years old.
George Mavrakis:
Chief Financial Officer.
Mr. Mavrakis holds a degree in economics from Leicester
Polytechnic and holds a Masters degree in Financial and Business
Economics from Essex University. Mr. Mavrakis joined the
OTE Group in 1997 and has since held various senior positions in
Strategy and Financial Planning, focusing on international
investments. In June 2007, Mr. Mavrakis was appointed our
Deputy Chief Financial Officer. Mr. Mavrakis was appointed
as our Chief Financial Officer as of August 19, 2009.
Mr. Mavrakis is 46 years old.
Maria Efthimerou:
Chief Technology Officer.
Ms. Efthimerou studied electrical engineering at the
University of Patras and holds a Masters degree in
Engineering-Electronics from Carleton University in Ottawa,
Canada. She has worked with the research department of Thomson
CSF in Orsay, France in 1982 as an MMIC research engineer and in
1987 joined OTE as a telecommunications engineer. In 1995, she
joined Intracom, as a senior satellite telecommunications
engineer until 1999 and subsequently as Deputy General Director
of Research and Development. In 2000, she was appointed Manager
of International Operations of OTEGlobe, and from 2005 to
February 2007, she held the position of our Assistant General
Manager of Technology before being appointed Chief Technology
Officer. Ms. Efthimerou has many years of experience in the
telecommunications field and has authored numerous scientific
articles. Ms. Efthimerou is 55 years old.
Konstantinos Kappos:
Chief Information
Officer. Mr. Kappos holds a degree in economics from the
Munich Technical University and a degree in mechanical and
electrical engineering from the Athens National Technical
136
University. Mr. Kappos has extensive experience in the
management of large IT projects, both in Greece and abroad.
Before joining us in March 2001, he worked for over six years
with KANTOR, a leading international management consultants
company based in Greece, as the director responsible for major
consulting assignments in the areas of strategy, reorganization,
process improvement, information technology and human resources.
Prior to that, he had worked for nine years with Daimler-Benz
Interservices (debis) in Germany as pre-sales Senior Consultant
and Project Manager responsible for implementing IT solutions at
well-known enterprises such as Mercedes-Benz, BMW, Deutsche
Aerospace, MAN and Philips Telecommunications. He currently
serves on the boards of OTEplus and, since 2005, HellasCom. In
March 2001, he was appointed our Chief Information Officer. He
speaks English and German. Mr. Kappos is 55 years old.
Andreas Karageorgos:
Chief Regional Officer.
Mr. Karageorgos holds degrees in electrical engineering and
economics. He has worked with us in various technical divisions
since 1977. He has extensive experience in sectors related to
construction and maintenance of telecommunication
infrastructure. He has served as director of the district of
Korinth from 1997 to 2002 and regional manager of Peloponnisos
from 2003 to 2004. He was appointed Chief Regional Officer in
September 2004. Mr. Karageorgos is 58 years old.
Loizos Kyzas:
Chief Human Resources Officer.
Mr. Kyzas joined us on April 27, 2009. He holds a BSc
in Economics from the Athens University of Economics and
Business Studies. He has significant experience in managing
companies in the
start-up,
change and development phases. From 2007, he held the position
of HR, Organization and Operational Excellence Director for four
countries (Greece, Cyprus, Albania and Malta) with Ericsson
Hellas S.A., in parallel with his role as Director, Compensation
and Benefits, in the Market Unit of Southeastern Europe
consisting of 10 countries, including Greece and Italy. In
addition, from 2002 until 2006, in his capacity as Head of Human
Resources and Organization within Ericsson Hellas S.A., he took
an active part in the creation, formation and development of the
newly-established, at that time, Business Unit of Southeast
Europe (BUSEE). Prior to working with Ericsson, from 1993 until
2001, he served as Human Resources Director with Panafon and the
Panafon/Vodafone Group, as well as a member of board of
directors of Panavox SA, a subsidiary of Panafon. Mr. Kyzas
is 59 years old.
Maria Rontogianni:
Chief Internal Audit
Officer. Ms. Rontogianni holds a Bachelors of Science
degree in Public Accounting and Marketing from Fordham
University, New York. Ms. Rontogianni has worked in the
auditing profession in various industries and has held several
roles including regulator and consultant positions for the past
sixteen years. She started her career at the National Futures
Association, a self-regulatory organization for the
U.S. futures industry. Ms. Rontogianni then moved to
the financial services industry, where she audited the emerging
markets, foreign exchange and commodities businesses, as Vice
President of J.P. Morgan and later for the Private Banking
business of J.P. Morgan. Upon moving to Athens in late
2001, Ms. Rontogianni worked as a consultant for Arthur
Andersen before assuming the position of Internal Auditor at
Lamda Development, SA (a member of the Latsis Group of
companies) listed on the Athens Stock Exchange, specializing in
the development, investment and management of real estate in
Greece and South-Eastern Europe. Before joining us,
Ms. Rontogianni was the Director of Internal Controls and
Revenue Assurance at Wind Hellas Telecommunications, SA, where
she headed the Internal Audit department and developed the
procedures and tools necessary for Risk Management and Revenue
Assurance monitoring. Since September 7, 2009,
Ms. Rontogianni has held the position of our Chief Internal
Audit Officer. Ms. Rontogianni is 37 years old.
Panagiotis Sarantopoulos:
Chief Commercial
Officer in charge of our National Wholesale Division.
Mr. Sarantopoulos studied electrical engineering at the
National Technical University of Athens and has extensive
experience in the telecommunications and information technology
market. In the past, he has worked for Hewlett Packard Hellas as
a Sales Engineer and Sales Manager for Test and Measurement
Solutions. He has also worked for our Group as a
telecommunications engineer. From April 1990 until March 2001,
he worked for the Quest Group, holding various managerial
positions. In particular, from April 1997 until March 2001 he
held the position of General Manager of Hellas on Line. In April
2001, Mr. Sarantopoulos joined OTENet as General Manager of
Consumer Products and Services and then held the position of the
Chief Commercial Officer until February 2007, when he moved to
us as Deputy Chief Technology Officer. From December 2007 until
January 2010, Mr. Sarantopoulos has served as Chief
Commercial Officer for Residential Customers and SOHO. Since
January 2010, Mr. Sarantopoulos is Chief Commercial Officer
for the National Wholesale Division. Mr. Sarantopoulos is
55 years old.
137
Konstantinos M. Ploumpis:
General Director of
Regulatory Affairs. Mr. Ploumpis is a graduate of the Law
School of the Athens University (1991) and holds a DEA in
International and European Economic Law and a PhD in European
and International Economic Law from the Université des
Sciences Humaines de Lille II, in Lille, France.
Mr. Ploumpis served as special Advisor to the French
Ministry of Labor from 1994 to 1995, as well as Senior Legal
Counsel and Head of Legal Services for Vodafone-Panafon from
1996 to 2004. He was also member of the Vodafone Group plc
public policy and legal teams. He has been a guest speaker at
numerous conferences and speaks fluent English, French and
Italian. Mr. Ploumpis is 42 years old.
Paraskevas Passias:
Our General Counsel,
excluding regulatory and competition affairs and legal issues of
our subsidiaries. Dr. Passias is a graduate of the Law
School of the University of Athens and holds a masters degree in
European Comparative Law, and a PhD in Civil and Commercial Law
from the University of Hanover in Germany. Dr. Passias is a
member of the Athens Bar and a solicitor of the Supreme Court of
England and Wales. He has been working for the OTE Group since
1998. Before his appointment as our General Counsel in March
2006, Dr. Passias held a similar position with OTE
International Investments. Dr. Passias is 44 years old.
Aristodimos Dimitriadis:
Chief Compliance
Officer. Mr. Dimitriadis holds a degree in Economics and
Politics and a Masters degree from Kent University.
Mr. Dimitriadis, has been the Head of Internal Audit of
Cosmote since 2005 and the Head of Internal Audit and Compliance
of Cosmote Group since 2009. Prior to his employment with
Cosmote Group, Mr. Dimitriadis worked for many years in the
banking sector, first at ABN AMRO and later at FBB-First
Business Bank as Internal Audit Officer. Mr. Dimitriadis is
a Certified Internal Auditor, as well as a Certified Financial
Services Auditor according to the International Institute of
Internal Auditors. Mr. Dimitriadis is 45 years old.
Dino Andreou:
Chief Executive Officer of
OTEGlobe. Mr. Andreou holds the position of OTEGlobes
CEO from October 8, 2007. He joined the company at its
start-up
in
2000 as Chief Financial Officer. Prior to OTEGlobe he had worked
for four years as Financial Director for Global One
Communications Hellas S.A. He started his career in 1989 in
Coopers & Lybrand, working consecutively in the Athens
branch and London headquarters. He holds a BSc in Mathematics
with Operational Research and an MSc in Operational Research,
from the University of London. Mr. Andreou is 53 years
old.
6.B Compensation
Persons serving as members of our Board of Directors and senior
managers during the year ended December 31, 2009 received
aggregate remuneration and bonuses from us and our subsidiaries
of approximately Euro 8.8 million. The same persons
also received certain benefits in kind (mainly the use of
corporate automobiles).
In accordance with the bonus compensation plan adopted by the
Board of Directors, the Managing Director is entitled to a bonus
in addition to his base salary, which is linked to the
achievement of our operational targets and the performance of
our share price. Our senior managers are entitled to bonuses
based on the achievement of operational targets in their
respective areas of responsibility, according to a bonus
compensation plan approved by the Managing Director. In
addition, under our management stock option plan, our senior
managers are granted a number of stock options on an annual
basis. For more information regarding our management stock
option plan, see below under Management Stock Option
Plan and for information regarding the number of stock
options held by our senior managers, see Item 6.E
Share Ownership.
We have adopted an insurance policy covering the members of our
Board of Directors and senior managers for liability arising
from the exercise of their duties, powers and authorities. This
insurance is provided by Ethniki AEEGA, ATE Asfalistiki S.A. and
National Union Fire Insurance Company P.A. insurance companies
and is renewable on an annual basis. The insurance premium we
pay (approximately Euro 1.1 million) in connection
with the policy constitutes additional remuneration for our
Directors and senior managers under the Greek Companies Law
2190/1920.
138
Management
Stock Option Plans
Our general assembly of shareholders of July 9, 2008
approved the replacement of our previous management stock option
plan by a new plan for a number of senior managers of our Group,
including those of Cosmote and other subsidiaries, in accordance
with Article 42e of the Greek Companies Law 2190/1920.
The following is a brief summary of the main terms of our
current management stock option plan (the
Option
Plan
) as approved by our shareholders:
The Option Plan permits our Board of Directors to grant option
rights (
Option Rights
) to eligible employees
on an annual basis until 2010. Upon their initial participation
in the Option Plan, eligible employees become entitled to a
number of initial option rights (
Basic Option
Rights
), while, in subsequent years, the Board grants
further Option Rights to eligible employees (
Additional
Option Rights
) on an annual basis. In particular, the
Option Plan covers:
|
|
|
|
|
our Managing Director, General Directors, Deputy General
Directors, General Counsel, Directors and Deputy Directors;
|
|
|
|
the Managing Directors of OTE Globe, OTE Estate and RomTelecom;
|
|
|
|
the Chairman, Managing Director, Deputy Managing Director, Legal
Counsel, Directors, Deputy Directors and heads of departments of
Cosmote; and
|
|
|
|
key executives of subsidiaries of Cosmote.
|
The maximum number of Basic
and/or
Additional Option Rights to be granted to each eligible employee
will correspond, according to the Grant Price, to between 0.75
and five times such employees annual gross salary,
depending on the employees seniority with the exception of
our Directors and Deputy Directors, whose Basic Option Rights
will amount to 20,000 and 10,000 respectively, while their
Additional Rights will amount to 6,000 and 3,500 respectively.
Basic option rights that were granted to our eligible employees
in 2007 under our 2007 management stock option plan and basic or
additional option rights that were granted to eligible employees
of Cosmote under the management stock option plan of Cosmote are
replaced by an equal number of Basic or Additional Option Rights
under the Option Plan.
Basic Option Rights vest in stages over a three-year period
(40%, 30% and 30% upon the first, second and third
anniversaries, respectively, of the date of their grant) and
Additional Option Rights will vest in their entirety upon the
third anniversary of their grant. Basic or Additional Option
Rights that have not been converted into Vested Rights will be
lost, if the eligible employee dies or ceases to work with us.
Vesting of Option Rights is conditional upon the eligible
employee having achieved the individual performance targets
defined in the Option Plan.
Vested Option Rights may be exercised in whole or in part in
April or October of each year. Following a modification to the
Plan on July 10, 2009, Vested Option Rights derived from
the vesting of Basic Option Rights may be exercised until
October of the seventh calendar year (instead of the fourth
year, applicable before the modification of the Option Plan)
from their grant and vested Option Rights derived from the
vesting of Additional Option Rights may be exercised until
October of the third calendar year (instead of the first year,
before the modification) following the year of conversion.
Option Rights are granted at a price equal to the average
closing price of our shares in the Athens Exchange for September
of the year of their grant (except for the first grant in 2009
when they were granted at Euro 19.49). For the year 2010,
the Grant Price was Euro 11.26. The exercise price will be
equal to the grant price minus a discount of 10%, 15%, 20% or
25%, depending on the beneficiarys seniority and subject
to satisfaction of certain conditions, including whether our
Group achieves certain group-wide targets, or Cosmote or OTE
achieve certain corporate targets and the individual eligible
employee having achieved high individual performance targets as
defined in the Option Plan. In the event these conditions are
not satisfied, the exercise price will be equal to the grant
price without a discount.
139
The following table sets out information regarding the number of
options outstanding under the Option Plan for the year 2009:
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Number of Options
|
|
|
Exercise Price
|
|
|
Outstanding at the beginning of the year
|
|
|
6,008,060
|
|
|
|
15.66
|
|
Granted
|
|
|
3,225,670
|
|
|
|
16.21
|
|
Forfeited
|
|
|
(559,130
|
)
|
|
|
16.23
|
|
Exercised
|
|
|
|
|
|
|
|
|
Expired at end of the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at the end of the year
|
|
|
8,674,600
|
|
|
|
15.59
|
|
|
|
|
|
|
|
|
|
|
Exercisable at the end of the year
|
|
|
4,485,370
|
|
|
|
15.05
|
|
|
|
|
|
|
|
|
|
|
The maximum number of Option Rights that may be granted under
the Option Plan corresponds to 15,500,000 of our shares, or
3.16% of our currently issued share capital. Our general
assembly may suspend, cancel or amend the Option Plan at any
time regarding non-vested Option Rights.
6.D Employees
Group Employees.
As of December 31, 2009,
our Group, including all of our consolidated subsidiaries in
Greece and other countries, employed a total of
32,864 employees, as compared to a total of approximately
33,610 employees, as of December 31, 2008.
As of December 31, 2009, the total number of our
Groups employees included 11,369 of our employees,
10,017 employees of RomTelecom and 9,652 employees of
Cosmote, as compared to 12,056 of our employees,
10,344 employees of RomTelecom and 9,283 employees of
Cosmote, as of December 31, 2008.
Employees of OTE.
The following table shows
the number of our employees by function as of December 31,
2007, 2008 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December
31
(1)
,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Administration
|
|
|
3,247
|
|
|
|
3,314
|
|
|
|
3,094
|
|
Finance
|
|
|
626
|
|
|
|
609
|
|
|
|
594
|
|
Technical
|
|
|
6,360
|
|
|
|
6,545
|
|
|
|
6,118
|
|
Support Staff
|
|
|
732
|
|
|
|
701
|
|
|
|
652
|
|
Specialists
|
|
|
295
|
|
|
|
304
|
|
|
|
303
|
|
Other Staff
|
|
|
88
|
|
|
|
89
|
|
|
|
92
|
|
Total Permanent Staff
|
|
|
11,348
|
|
|
|
11,562
|
|
|
|
10,853
|
|
Part-time
|
|
|
27
|
|
|
|
121
|
|
|
|
147
|
|
Personnel previously with OTENet
|
|
|
379
|
|
|
|
373
|
|
|
|
369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,754
|
|
|
|
12,056
|
|
|
|
11,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change (%)
|
|
|
(0.2
|
)%
|
|
|
2.6
|
%
|
|
|
(5.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Access lines in service per
employee
(2)
|
|
|
497
|
|
|
|
446.7
|
|
|
|
439.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
|
(1)
|
|
Includes our employees currently
working with us or transferred or seconded to our subsidiaries.
|
|
(2)
|
|
Includes our fixed-line telephony
network access lines in service (64kb equivalent) at the end of
respective period. Also includes our employees currently working
with us or seconded or transferred to our subsidiaries.
|
In 2009, OTE recruited 211 new employees, the great majority
(187) of which were not external hires, but employees
already on contracts (including some on temporary basis) with
certain of our subsidiaries, who offered their services in our
premises. These comprised 49 in engineering and technical
positions, 7 in finance, 115 in
140
marketing, sales and administrative, 4 employees previously
with OTENet, 28 support staff and 8 other staff. In the same
year, a total of 896 of our employees retired, of which 197
retired under an early retirement scheme. In addition, we have
decided to impose an annual recruitment target of
50 employees for the years 2010 to 2012. We continue to
place particular focus on restructuring our workforce and
reducing headcount.
We pursue the following personnel policies in order to
restructure, incentivize and optimize the efficiency of our
workforce:
|
|
|
|
|
we continue to improve our performance appraisal process;
|
|
|
|
we focus our recruitment efforts on personnel with the necessary
specialized and technical knowledge, mainly in the areas of
telecommunications engineering, economics, finance and
accounting, sales and marketing and information technology;
|
|
|
|
we are training our employees to function in a customer-oriented
manner and in new technologies, having instituted several
customer service training programs; in 2009, 6,853 of our
employees attended 803 seminars on topics selected to improve
the quality and efficiency of their performance; and
|
|
|
|
we have streamlined our management structure, delegating
decision-making responsibility to more junior levels in order to
accelerate our response to customer demands.
|
Under existing Greek legislation, the legal status of our
personnel is governed by the provisions of our Internal
Personnel Regulation. Law 3522/2006, which was enacted in
December 2006, gave effect to our new Internal Personnel
Regulation, which addresses both matters relating to our
employment relations as well as the legal status of our
employees and general issues pertaining to personnel conduct.
The provisions of Law 3522/2006 and our new Internal Personnel
Regulation have enabled us to implement more flexible
recruitment procedures in order to recruit experienced and
specialized personnel, for both entry level and managerial
positions, with higher salaries and more attractive benefits.
OTE S.A.s employee headcount for regional operations as of
December 31, 2007, 2008 and 2009 was as shown in the
following table:
Regional
Departments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Employees
|
|
|
|
As of December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Attica
|
|
|
1,876
|
|
|
|
2,043
|
|
|
|
1,910
|
|
Northern Greece
|
|
|
1,958
|
|
|
|
1,996
|
|
|
|
1,880
|
|
Southwestern Greece
|
|
|
1,561
|
|
|
|
1,601
|
|
|
|
1,533
|
|
Crete and Islands
|
|
|
841
|
|
|
|
851
|
|
|
|
804
|
|
Employees of our OTEShops/Sales Support in Greece
|
|
|
1,483
|
|
|
|
2,078
|
|
|
|
1,870
|
|
Remainder of our employees (Athens)
|
|
|
4,035
|
|
|
|
3,487
|
|
|
|
3,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(1)
|
|
|
11,754
|
|
|
|
12,056
|
|
|
|
11,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The 2007 figures include
379 employees of OTENet. OTENet employees were integrated
within OTE as of 2008.
|
As of December 31, 2009, the average age of our employees
was 44.83 years, while the average number of years in
service was 17.24.
Early
Retirement Plans
Over the last four years, a number of our employees have retired
under our various early retirement plans, including the
Voluntary Retirement Scheme of 2005. The effects of our early
retirement plans and natural attrition, combined with our
policies to recruit only specialized personnel, to retrain
employees whose skills have become
141
obsolete and to outsource certain activities currently
undertaken by our personnel, have resulted in the number of our
employees steadily decreasing over the past five years at an
average annual rate of 6.55%.
For the year 2010, we expect an additional approximately
346 employees to retire under our early retirement plans.
In 2010, we aim to recruit up to 50 new employees in order to
cover personnel needs that arose as a result of our early
retirement scheme and to improve our employee skill set,
especially in new technologies and management.
Early retirement plans.
We operate a number of
early retirement plans on an annual basis providing incentives
for early retirement for our employees, pursuant to which a
number of our employees have retired in recent years and are
expected to retire in the foreseeable future. In particular, 197
of our employees retired in 2009 under our early retirement
plans, compared to 269 in 2008 and 487 in 2007. During 2010,
346 employees are expected to retire under this years
early retirement scheme.
Voluntary Retirement Scheme.
In June 2005, we
reached a collective agreement with our employees on the
proposed Voluntary Retirement Scheme, which was approved by
Greek Law 3371/2005. In total, 5,405 employees retired
pursuant to the Voluntary Retirement Scheme (699 in the year
2005, 4,060 in the year 2006, 34 in the year 2008 and 612 in the
year 2009).
Of 803 applications for participation in the Voluntary
Retirement Scheme that were rejected by TAP-OTE for failing to
satisfy the qualifying criteria, 612 employees retired on
September 15, 2009, in accordance with Law 3371/2005 and in
line with the provisions of the Law 3762/2009, as a result of
which, we will have incurred an additional cost of
Euro 152 million. In addition, as a result of the
voluntary retirement program, we recruited 211 new employees in
various fields in 2009.
Our total initially projected cost of Euro 1.1 billion
with respect to our retirement schemes was subject to reduction,
as Law 3371/2005 required the Greek State to contribute to
TAP-OTE a number of shares representing 4.0% of our share
capital, as participation in the cost of the schemes. The
European Commission investigated the legality of this
arrangement and, in May 2007, it announced that it had no
objections to this contribution being made by the Greek State.
Pursuant to the European Commissions decision, the total
contribution may not exceed the amount of
Euro 390.4 million. In the first quarter of 2009,
following an agreement between the Greek Sate and IKA-ETAM
(pursuant to Law 3655/2008, the pension fund part of TAP-OTE and
certain other pension funds were merged with IKA-ETAM, on
August 1, 2008) the Greek State transferred to
IKA-ETAM the agreed number of shares representing 4.0% of our
share capital, and IKA-ETAM agreed to exercise the voting rights
pertaining to these shares in the same way as the Greek State
exercises voting rights pertaining to its own shares in our
share capital, while the respective liability of
Euro 201.9 million was reversed.
The significant majority of cash outflows for the Voluntary
Retirement Scheme was incurred during the first two financial
years of the Scheme, with the remaining balance to be incurred
until 2012.
Employee
Insurance Funds
On October 23, 2006, we entered into a loan agreement with
the Employee Auxiliary Pension Fund up to
Euro 180 million, at an interest rate of 0.29% in
connection with the Voluntary Retirement Scheme. This loan is to
be repaid in installments commencing on October 1, 2008 and
matures on September 1, 2027. On October 2007 and on May
2008, two amendments to the loan agreement were signed, under
which additional amounts of Euro 8.0 million and
Euro 1.3 million respectively, were advanced and the
repayment schedule was updated. The total amount granted is
Euro 189.3 million.
The TAP-OTE fund was the principal personnel insurance fund for
our employees and was divided into a pension division and a
health division. Members of this fund also include employees of
the Greek Railway Organization and the Greek Postal Services.
Pursuant to Law 3655/2008, the pension fund part of TAP-OTE and
certain other pension funds were merged with IKA-ETAM, the main
social security fund in Greece, on August 1, 2008. The
health care part of TAP-OTE was merged with TAYTEKO (a
newly-established health care fund for employees of utilities
companies). The pensions division pays all members who joined
the fund prior to 1993 a pension equal to approximately 80% of
the salary they received at the time of retirement. With respect
to employees who joined as of 1993, IKA-ETAM pays a pension
equal to 70% of the final salary after 35 years of service
at the
142
age of 65. With respect to employees who joined us prior to
1993, our contributions are 25.0% and employee contributions are
11% of their salary, whereas for employees who joined us after
1993, our contributions are 13.3% and employee contributions are
6.7%. In accordance with Law 3655/2008, employees and
employers contributions for TAP-OTEs pension fund
will gradually converge with those applicable for IKA-ETAM (and
are expected to gradually decrease), starting from 2013 and
concluding in 2023 in three equal installments. TAYTEKO provides
hospital and pharmaceutical care on a daily basis. For all
employees, our current contributions are 5.1% of salary, and
employee contributions are 2.55% of salary plus 0.5% for each
dependant of the employee.
Pursuant to Law 2257/1994, we were obliged to fund, beginning in
1990, TAP-OTEs annual operating deficits. In connection
with this and pursuant to Law 2768/1999, a special fund was
formed with TAP-OTE using contributions from, among others, us,
the Greek State and the Employee Auxiliary Pension Fund. In
addition, a
société anonyme
under the name
EDEKT-OTE S.A., in which we hold a 40% interest, was also
incorporated, in order to manage the investments of the fund.
The purpose of the fund is to manage the contribution mentioned
above in order to finance the deficits of TAP-OTE.
Pursuant to Law 2937/2001, our funding commitment was set at
Euro 352.2 million, representing the equivalent of the
net present value of our required contributions to TAP-OTE for
the ten-year period from 2002 to 2011. We paid this amount on
August 3, 2001 and are amortizing it over this ten-year
period. Pursuant to Law 2843/2000, the Greek State is required
to fund any further deficits incurred by TAP-OTE. Furthermore,
according to Law 3655/2008 (Article 2, par. 8), the
deficits of the pension segments which were incorporated into
IKA-ETAM are covered by the Greek State.
The Employee Auxiliary Pension Fund provides pensions equal to
20% remuneration after 30 years of service to employees who
were members before 1993. Law 2084/92 set minimum contribution
levels and maximum pensions after 35 years of service for
new members from 1993 onwards. The Employee Auxiliary Pension
Fund also provides a lump sum to our employees on retirement or
in the case of death. Under Law 2084/92, the maximum sum to be
granted under this plan is Euro 0.03 million for
35 years of service and is readjusted annually. Currently,
our employees contributions are 4%.
The Employee Auxiliary Pension Fund is currently in surplus, but
may operate in deficit in the future. We are not liable by law
to cover any such deficit.
Staff
Retirement Indemnities and Other Benefits
Under Greek labor law, all employees are entitled to termination
payments in the event of dismissal or retirement. We offer
additional benefits such as the Youth Account, which pays
employees children a lump sum on marriage, entry into
university or reaching a certain age. This benefit is funded by
employee contributions, interest accrued on these contributions
and our contributions. Our contributions may total up to ten
average monthly salaries depending on the length of time for
which employees make contributions to this account. The annual
provisions and the related liability for such benefits are
reflected in our financial statements at the present values of
the estimated liability based on an independent actuarial study.
Relationship
with the Union
The majority of our full-time employees are members of the
OME-OTE trade union. We believe that our relations with our
employees and with the OME-OTE union are good and expect this
situation to continue in the future.
Our management works with the OME-OTE union to foster stable
labor relations. Wage increases are set pursuant to our specific
collective labor agreement within the framework and subject to
the minimums set by a national collective labor agreement. Our
specific collective labor agreement is usually for one or
two-year terms. Negotiations between us and OME-OTE shall
commence prior to the expiration of the current collective labor
agreement and, once concluded, the new collective labor
agreement will enter into effect immediately upon signing.
In 2008, we executed a collective labor agreement with our trade
union, OME-OTE, for the years 2008 and 2009, which contemplates
wage increases of 4.5% on average in 2008, as compared to 2007
(3.5% as of January 2008 and 3.0% as of September 2008) and
4.6% on average in 2009, as compared to 2007 (3.0% as of January
2009
143
and 3.0% as of July 2009). In 2006, we executed an agreement
with OME-OTE for the years 2006 and 2007, which contemplated
wage increases of 4.1% on average in 2006 and 4.2% on average in
2007. Both of these agreements apply only to our employees and
not employees of other entities of our Group.
On August 13, 2004, Cosmote and the union representing its
employees signed a collective agreement governing terms of
compensation and employment of its personnel. Since 2004,
Cosmote and the union have signed two additional collective
agreements on July 21, 2006 and on July 18, 2008 for
the years 2006 to 2007 and 2008 to 2009 respectively.
In recent years, we have experienced a number of strikes, both
on a nationwide basis and in specific geographic regions,
including 6 strikes in 2009, mainly relating to the closure of
OTEShops, 16
one-day
strikes in 2008 mainly relating to the pension reform bill and
the sale by the Greek State of an interest in our share capital
to Deutsche Telekom and two
one-day
nationwide strikes and 26
one-day
strikes in specific geographic regions in 2007. In addition, we
have experienced four days of strikes since January 1,
2010, mainly relating to the fiscal measures adopted by the
Greek State.
Training
OTE Academy
OTE Academy was established in December 2004 and provides
professional educational services to both OTE Group employees
and the broader public and private sector. OTE Academys
portfolio includes project management, information technology
and management and communication skills. It designs and
implements business training programs according to customer
needs, following industry trends and incorporating international
practices, covering such subjects as leadership, change
management, performance management, personal development skills,
project management, information technology, telecommunications
and sales development.
144
6.E Share
Ownership
The table below sets forth information on the shareholdings of
the members of our Board of Directors and our senior managers
mentioned in Item 6A/C, as at April 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of OTE
|
|
Number of OTE
|
|
|
Name
|
|
Shares Held
|
|
Options
Held
(1)
|
|
|
|
Panagis Vourloumis
|
|
|
0
|
|
|
|
368,295
|
|
|
|
|
|
Iordanis Aivazis
|
|
|
0
|
|
|
|
140,356
|
|
|
|
|
|
Charalambos Dimitriou
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
Panagiotis Tampourlos
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
Kevin Copp
|
|
|
0
|
|
|
|
133,898
|
|
|
|
|
|
Konstantinos Michalos
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
Ioannis Benopoulos
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
Rainer Rathgeber
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
Guido Kerkhoff
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
Leonidas Evangelidis
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
Yorgos Ioannidis
|
|
|
0
|
|
|
|
125,677
|
|
|
|
|
|
Dinos Andreou
|
|
|
0
|
|
|
|
69,851
|
|
|
|
|
|
Michael Tsamaz
|
|
|
0
|
|
|
|
211,350
|
|
|
|
|
|
Elias Drakopoulos
|
|
|
0
|
|
|
|
96,214
|
|
|
|
|
|
George Mavrakis
|
|
|
0
|
|
|
|
60,352
|
|
|
|
|
|
Maria Efthimerou
|
|
|
0
|
|
|
|
79,505
|
|
|
|
|
|
Konstantinos Kappos
|
|
|
3,136
|
|
|
|
85,493
|
|
|
|
|
|
Andreas Karageorgos
|
|
|
35
|
|
|
|
81,063
|
|
|
|
|
|
Loizos Kyzas
|
|
|
0
|
|
|
|
92,456
|
|
|
|
|
|
Maria Rontogianni
|
|
|
0
|
|
|
|
73,358
|
|
|
|
|
|
Christos Katsaounis
|
|
|
300
|
|
|
|
75,097
|
|
|
|
|
|
Konstantinos Ploumpis
|
|
|
0
|
|
|
|
75,304
|
|
|
|
|
|
Paraskevas Passias
|
|
|
0
|
|
|
|
53,880
|
|
|
|
|
|
Panagiotis Sarantopoulos
|
|
|
0
|
|
|
|
84,774
|
|
|
|
|
|
Aristodimos Dimitriadis
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
Note:
|
|
|
(1)
|
|
The number of options listed have
been granted under our existing management stock option plan
(including vested and non-vested options).
|
The persons listed above collectively own less than 1.0% of all
of our outstanding shares. For information on our stock option
plans see 6.B. Compensation.
|
|
ITEM 7
|
MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
7.A Major
Shareholders
As of the date of this Annual Report, Deutsche Telekom holds
shares and voting rights representing 30.0% plus one share of
our issued share capital and the Greek State owns 16.0% of our
issued share capital and indirectly controls voting rights with
respect to an additional 4.0% of our share capital which is
owned by IKA-ETAM, the largest pension fund in Greece (which is
also owned by the Greek State).
On March 4, 2009, the Greek Sate and IKA-ETAM entered into
an agreement (pursuant to Law 3655/2008, the pension fund part
of TAP-OTE and certain other pension funds were merged with
IKA-ETAM, on August 1, 2008) , pursuant to which the Greek
State transferred to IKA-ETAM a number of shares representing
4.0% of our share
145
capital, and IKA-ETAM agreed to exercise the voting rights
pertaining to these shares in the same way as the Greek State
exercises voting rights pertaining to its own shares in our
share capital. See Exhibit 3.1 to this Annual Report.
On May 14, 2008 the Greek State and Deutsche Telekom signed
a purchase agreement (the
Purchase
Agreement
), pursuant to which the Greek State agreed
to transfer an interest of approximately 3.03% in our share
capital to Deutsche Telekom, to the effect that its interest
would decrease to 25.0% of our share capital, plus one share.
The transfer of this 3.03% interest was completed in November
2008. On May 15, 2008, Deutsche Telekom acquired from MIG
98,026,324 shares, representing 20.0% of our share capital,
by means of a block trade on the Athens Exchange.
In addition, on May 14, 2008, the Greek State and Deutsche
Telekom signed a shareholders agreement (the
Shareholders Agreement) relating to the
governance of our Group (see below for more details). The
Shareholders Agreement and the Purchase Agreement were at
the time of their signing subject to ratification by the Greek
Parliament and approval by other relevant authorities; the Greek
Parliament subsequently ratified both agreements on
June 18, 2008.
Under the Purchase Agreement, the Greek State was granted two
put options to sell 5% (first put option) and 10%, (second put
option) respectively, of shares. On July 31, 2009, as a
result of the exercise of the first put option, the Greek State
sold to Deutsche Telekom 24,507,519 shares representing 5%
of our share capital.
All shares in our share capital, including those held by the
Greek State and Deutsche Telekom, carry equal voting rights.
According to Law 3631/2008, the acquisition by any person, other
than the Greek State, of voting rights representing more than
20.0% in the voting share capital of any Greek company which is
considered to be of national strategic importance, currently has
(or used to have) monopolistic character, and especially in the
event that it owns, exploits or manages networks of national
infrastructure, is subject to prior approval of the Greek
Inter-Ministerial Committee for Privatizations in accordance
with the provisions of Law 3049/2002.
Agreements
between the Greek State and Deutsche Telekom
The
Purchase Agreement
Pursuant to the Purchase Agreement dated May 14, 2008, the
Greek State sold to Deutsche Telekom 14,865,886 of our shares,
representing approximately 3.03% of our issued share capital and
respective voting rights, at the price of Euro 29.0 per
share, or a total consideration of Euro 431.1 million.
The acquisition was conditioned on the ratification of the
Purchase Agreement and the Shareholders Agreement by the
Greek Parliament, as well as applicable regulatory approvals,
including clearance by the European Commission and any other
relevant competition authorities. The Greek Parliament ratified
these agreements on June 18, 2008. The European Commission
approved the acquisition under the EU Merger Regulation on
October 2, 2008.
The acquisition was also conditioned on Deutsche Telekom
acquiring a total of 107,671,713 shares, or approximately
22.0% of our share capital (such 107,671,713 shares
included the 98,026,324 shares which it had already
acquired from MIG, as described above), in addition to the
14,865,886 (or 3.03%) that were to be acquired from the Greek
State. To that effect, Deutsche Telekom committed under the
Purchase Agreement to the Greek State that, following
ratification of the Purchase Agreement and the
Shareholders Agreement by the Greek Parliament, it would
acquire from the market 9,645,389 additional shares,
representing approximately 2.0% of our issued share capital and
voting rights, which it did.
The transfer of this 3.03% interest was completed in November
2008, after requisite approvals were granted by relevant
competent national and international authorities.
Put Options.
Under the Purchase Agreement, the
Greek State held a put option to sell to Deutsche Telekom a
number of our shares representing 5.0% of our share capital and
respective voting rights at the price of Euro 27.50 per
share. This put option was agreed to become exercisable, as of
October 1, 2008 (assuming that the agreed acquisition by
Deutsche Telekom of the interest of approximately 3.03% has
occurred prior to that date) or from the
146
date of the actual completion of such acquisition, if later, and
expire one year after such completion. On July 31, 2009,
the Greek State exercised this put option and sold
24,507,519 shares to Deutsche Telekom representing 5.0% of
our share capital at the price of Euro 27.50 per share.
In addition, the Greek State holds a second put option to sell
to Deutsche Telekom an additional number of our shares
representing 10.0% of our share capital. This second put option
became exercisable, in whole or in part, and in one or more
tranches, as of November 2009 (one year from completion of the
acquisition by Deutsche Telekom of the interest of 3.03%) and is
due to expire on December 31, 2011. The price payable by
Deutsche Telekom to acquire additional shares under this second
put option to be calculated based on the weighted average market
price of our shares during certain trading days, plus a premium
of 20.0% or 15.0%, depending on the date of the exercise of the
option.
The
Shareholders Agreement
The Shareholders Agreement, dated May 14, 2008,
contains several provisions of the type customary for an
agreement among significant shareholders of a company, including
the following.
Board of Directors.
For so long as the Greek
State holds at least 15.0% of our voting rights, our Board of
Directors shall consist of ten directors, of whom two shall be
independent. Each of the Greek State and Deutsche Telekom shall
have the right to nominate five directors, including one
independent director. The two shareholders have agreed to
consult each other in advance of any such nomination, but they
will not be bound by each others position with respect to
such nominations. The Board of Directors shall function in
accordance with our existing Articles of Incorporation, except
that with regard to certain matters (the
Veto
Matters
) (discussed below), a higher quorum of eight
directors, and a positive vote of seven directors, is required,
and at least two of such votes must be cast by directors elected
upon nomination the Greek State. Where a quorum of eight
directors is not achieved, a quorum of six directors and a
positive vote of five directors is required and at least two of
the positive votes must be cast by directors elected upon
nomination by the Greek State.
In addition to nominating members of our Board of Directors,
each of the Greek State and Deutsche Telekom will have the right
to nominate and procure the election of two of the three members
of our Audit Committee.
Chairman and Managing Director.
The
Shareholders Agreement provides that our current Chairman
and Managing Director will be re-elected and continue to hold
both these offices. In the future, if Deutsche Telekom no longer
wishes such person to hold both these offices or such person
resigns, the Greek State and Deutsche Telekom will consult with
each other and agree on whether both offices should be held by
one person. If the Greek State and Deutsche Telekom agree that
one person shall hold both offices, Deutsche Telekom shall
formally nominate such candidate and the Greek State shall
procure that the directors elected upon its nomination, other
than the independent director, vote in favor of the candidate.
The Chairman and Managing Director shall have the rights and
duties pursuant to the Greek Company Law and our Articles of
Incorporation, except with regard to Veto Matters.
If the Greek State and Deutsche Telekom, in the future, are
unable to agree that one person will hold the offices of
Chairman and Managing Director, the role shall be divided
between two persons and the Chairman will have no casting vote.
The Greek State shall nominate the Chairman and Deutsche Telekom
shall nominate the Managing Director, each in consultation with
the other. Each of the two shareholders shall notify the other
of their proposed candidate. If the candidate for either office
is not acceptable to the other party, the proposing party shall
propose a second and, if necessary, a third candidate. If none
of three candidates is acceptable, the proposing party shall
select a candidate from among the three previously proposed.
Executive Committee.
If the positions of
Chairman and Managing Director are not filled by the same
individual, at the request of the Managing Director, the Board
of Directors shall establish a four-member executive committee
(the
Executive Committee
). Each of the Greek
State and Deutsche Telekom shall nominate two of their
respective directors to be elected by our Board of Directors to
serve on the Executive Committee and Deutsche Telekom shall
select one of the directors elected upon its nomination to act
as Executive Committee Chairman. In establishing the Executive
Committee, the Board of Directors shall delegate its rights and
duties to the Executive
147
Committee, except in respect of Veto Matters. The Executive
Committee shall adopt decisions by simple majority, and the
Chairman of the Executive Committee shall have a casting vote.
Veto Matters.
The Greek State shall retain a
veto right in relation to certain matters, such as the approval
of our financial statements, a change in the scope of OTE and
the OTE Group companies, which are engaged in core electronic
communications services, beyond the activities set out in their
articles of association, extraordinary dividends or share
buybacks, the issuance of certain additional debt, significant
acquisitions or disposals by us or a company of the OTE Group
that are equal to or exceed certain thresholds, any transactions
with companies that are members of the Deutsche Telekom group
that exceed certain thresholds, matters relating to Greek law
3631/2008 (discussed above) and changes to our name or, subject
to certain timing limitations, brand. Veto Matters falling
within the competencies of our Board of Directors generally
require a quorum of eight directors, and a positive vote of
seven directors, and at least two of such votes must be cast by
directors elected upon nomination by the Greek State. In
addition, the Greek State has a veto right in respect of Veto
Matters relating to entities of the OTE Group. The scope of Veto
Matters in relation to which the Greek State holds a veto right
varies depending on the interest held at times by the Greek
State in our share capital.
Changes in shareholdings.
At any time the
Greek State holds less than 15% of our voting rights, and
provided Deutsche Telekom holds at least 25% of our voting
rights, our Board of Directors shall consist of 11 members,
including two independent directors. The Greek State will have
the right to nominate five directors and Deutsche Telekom shall
have the right to nominate six directors. The two parties have
agreed to consult with each other in advance of any such
nomination, but will not be bound by each others position
with respect to such nominations. The Board of Directors shall
function in accordance with our existing Articles of
Incorporation, although, with regard to Veto Matters, a higher
quorum of eight directors, and a positive vote of seven
directors, is required, and at least two of such votes must be
cast by directors elected upon nomination by the Greek State.
Where a quorum of eight directors is not achieved, a quorum of
six directors and a positive vote of five directors is required,
and at least two of such votes must be cast by directors elected
upon nomination by the Greek State.
Irrespective of the percentage of shares held by the Greek
State, at any time Deutsche Telekom holds less than 25% of the
voting rights in OTE, the composition of the Board of Directors
shall be as described in the paragraph above, except that the
Greek State will nominate six Board members and Deutsche Telekom
will nominate five, but each party will not be bound by the
others position with respect to such nominations. In
addition, the Greek State will be entitled to nominate one
person or different persons to the office (or offices) of
Chairman and Managing Director. Furthermore, at any time
Deutsche Telekom holds less than 25% of our total voting rights,
the Greek State shall have the right in most circumstances to
terminate the Shareholders Agreement by notice to Deutsche
Telekom, subject, in certain instances, to the right of Deutsche
Telekom to restore the level of its shareholding to 25% or more.
The Shareholders Agreement shall remain in effect for as
long as the Greek State holds at least 5.0% of our voting rights.
Exercise of voting rights.
The Greek State and
Deutsche Telekom agree to exercise their voting rights (and to
procure that the entities the voting rights of which are taken
into account for the respective party will also exercise their
voting rights) at any general assembly of OTE and procure that
the directors elected upon their nomination (other than
independent directors) will exercise their voting rights at the
Board of Directors or the Executive Committee, as applicable, in
a coordinated manner to implement the provisions of the
Shareholders Agreement. This obligation does not apply:
(i) with regard to Veto Matters and certain other matters
(for example the election of directors nominated by the Greek
State) in which case the Greek State may exercise its voting
rights at its discretion and Deutsche Telekom must exercise its
voting rights to support the Greek States position in
respect of the Veto Matters; and
(ii) in the event that the positions of the Managing
Director and the Chairman are held by the same person, in which
case the parties may exercise their voting rights at their
discretion subject to the obligation of Deutsche Telekom to vote
in respect of a Veto Matter, as described in (i) above.
148
In any case, at our general assembly the Greek State will
exercise its voting rights as proposed by Deutsche Telekom,
except in respect of Veto Matters or matters upon which,
pursuant to the terms of the Shareholders Agreement, the
Greek State may vote at its discretion.
Standstill Period,
Lock-ups
and
Rights of First Refusal.
Until December 31,
2011, Deutsche Telekom and members of the Deutsche Telekom group
may not, subject to the put option arrangements contemplated in
the Purchase Agreement and the right of first refusal of
Deutsche Telekom discussed below, acquire voting rights in OTE
through the purchase of our shares or otherwise without the
Greek States consent, if the effect of such purchase would
result in Deutsche Telekoms total voting rights in OTE
exceeding 25% plus one share of the total voting rights in OTE.
These standstill arrangements cease if the Greek States
voting rights in OTE fall below 20%, provided that the aggregate
holding of the Greek State and Deutsche Telekom in OTE does not
exceed 60% until the end of the standstill period, or such lower
percentage that may be necessary to ensure the appropriate level
of liquidity for the trading of our shares, as required by the
Athens Exchange.
The Shareholders Agreement prohibits Deutsche Telekom from
transferring, or imposing any encumbrance on, any of its shares
in OTE until December 31, 2011, subject to the right of
first refusal of the Greek State. Furthermore, each of the Greek
State and Deutsche Telekom has granted the other party a general
right of first refusal in connection with a proposed transfer of
shares or pre-emption rights in OTE at a price equal to the
price offered by a bona fide third-party acquirer, or in a
publicly marketed equity or rights offering, subject, in each
case, to certain exemptions and price adjustments. Moreover,
under the Shareholders Agreement, both parties are
prohibited from disposing or encumbering its respective voting
rights in OTE during the term of the Shareholders
Agreement without the written consent of the other party,
excluding disposals of voting rights where a transfer of our
shares is permitted in accordance with the above.
Change of Control of Deutsche Telekom.
Upon
effectiveness of the Shareholders Agreement, the Greek
State shall have the right, upon a change of control of Deutsche
Telekom to require Deutsche Telekom to sell to the former its
shares in OTE at a price based on the average trading price of
the shares at the time such change of control occurs. A change
of control refers to one or more persons or entities, other than
the Federal Republic of Germany (directly or indirectly),
acquiring control of Deutsche Telekom (that is directly or
indirectly having acquired 35% of the voting rights in Deutsche
Telekoms share capital), if that person does not meet
certain requirements (set forth in article 11,
paragraph 2 of Law 3631/2008), including being an
electronic communications operator of similar size and standing
as Deutsche Telekom in the European Union or the United States,
or being ultimately owned by persons who are nationals or
citizens of, or incorporated in, the European Union or the
United States.
Human Resources.
Matters that fall outside the
scope of article 12 of our Articles of Incorporation and
will have a collective effect on employees, such as voluntary
retirement or redundancy programs, will be subject to a
consultation process. The Managing Director will create a full
and detailed proposal to be presented to a group including
himself, two employee representatives, two directors elected
upon nomination by the Greek State and two directors elected
upon nomination by Deutsche Telekom (including the Managing
Director). This group will have a period of 15 business days to
reach an agreement on the proposal. If no such agreement can be
reached, the Managing Director will draft an amended proposal,
to be decided upon by the same group within 10 business days. If
no agreement can be reached on the amended proposal, the matter
will be decided by either the Board of Directors or the
Executive Committee, in accordance with the Shareholders
Agreement.
Governance of Companies of the OTE Group.
When
the board of directors of a company of the OTE Group comprises
five or more members, then at least two of them will be
appointed or elected, as applicable, upon nomination by the
Greek State following consultation with Deutsche Telekom.
Alternatively, when the board of directors of a company of the
OTE Group comprises less than five members, then at least one of
them shall be so appointed or elected, provided that, in any
case, we shall have the right to appoint or elect a majority of
directors.
In addition, the Greek State and Deutsche Telekom have agreed
that the Veto Right shall also apply to certain of the Veto
Matters relating to and passed at the level of the OTE Group of
Companies.
Competition.
Throughout the term of the
Shareholders Agreement, Deutsche Telekom and the Deutsche
Telekom Group may not engage in any activity which would,
directly or indirectly, compete with our business in the
Specified Territories (as defined below). In particular, neither
Deutsche Telekom nor any member of its group shall
149
establish or acquire, or acquire shares in, any material
business that would, directly or indirectly, compete with the
business of the OTE Group, with the exception of the
international wholesale business and Deutsche Telekoms
existing operations in FYROM and Montenegro. A competing
business is considered material if its revenues exceed
Euro 25.0 million (or Euro 30.0 million in
countries in which the OTE Groups revenues, at the date of
the Shareholders Agreement, exceed
Euro 250.0 million). This clause shall not preclude
members of the Deutsche Telekom Group from fulfilling contracts
in existence at the date of signing of the Shareholders
Agreement and providing services to multinational customers in
Albania, Bulgaria, Greece, Romania and Serbia (the
Specified Territories
) if the primary
contractor is located outside of the Specified Territories and:
(i) the portion of the services provided in the Specified
Territories is less than 35% of the total contract value; or
(ii) OTE Group has been given the opportunity to make a
competing offer on conditions at least as favorable as a local
operator, unless the customer has specifically requested
otherwise.
In case of a violation of these non-compete provisions, Deutsche
Telekom shall consult with the Greek State in good faith
regarding remedial action and implement any such action within
six months. If, following the expiration of such six months,
compliance with the non-compete provisions has not been
achieved, the Greek State may require Deutsche Telekom to divest
itself of the competing business to the extent necessary to
achieve compliance. The non-compete provisions shall apply for
as long as the Greek State holds at least 5.0% of our voting
shares.
Amendments
to our Articles of Incorporation
In January 2009, Deutsche Telekom submitted a request for a
General Assembly of Shareholders in order for our Articles of
Incorporation to be amended to reflect the terms of the
Shareholders Agreement. Subsequently, the resolution of
our General Assembly of Shareholders of February 6, 2009
amended our Articles of Association to reflect a number of
changes. These include the following:
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contemplating the possibility of the establishment of an
Executive Committee;
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contemplating our Board of Directors comprising of ten members,
as opposed to the previous minimum of eleven members; and
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contemplating that, in the event of a tie in the Board of
Directors, the Chairman will hold the casting vote, except for
certain matters and except in the event an Executive Committee
has already been established.
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The Greek
State
The Greek State is our largest customer for telecommunications
services. The commercial relationship between us, as supplier,
and the Greek State and other state-owned enterprises, as
customers, is conducted on a normal, arms length customer
and supplier basis. We do not give the Greek State preferential
customer treatment on the grounds that it is a major shareholder
or a sovereign state. None of our obligations are guaranteed by
the Greek State. See also 7.B. Related Party
Transactions.
7.B Related
Party Transactions
We treat Deutsche Telekom (and its subsidiaries for
2009) as related parties of the Group. Deutsche Telekom
consolidates our results in its annual financial statements. See
Note 27 to our financial statements regarding our
disclosures of related parties and related party transactions.
The following table presents accounts receivable from, and
accounts payable to, related parties (Deutsche Telekom) as of
December 31, 2007, 2008 and 2009, respectively:
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December 31,
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2007
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2008
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2009
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(Euro in millions)
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Accounts receivable from related
parties
(1)
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0
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6.5
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10.1
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Accounts payable to related parties by our
Group
(1)
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0
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7.5
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6.4
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Note:
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(1)
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Amounts relate to Deutsche Telekom
(and its subsidiaries for 2009).
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150
In addition, the Greek State is one of our largest customers and
purchases services from us on an arms length basis. We
deal with various departments and agencies of the Greek State as
separate customers, and the provision of services to any one
department or agency does not constitute a material part of our
revenues. We enter into contracts to provide telecommunications
services to the Greek State and its agencies and affiliates
(including corporations owned, controlled by, or affiliated
with, the Greek State) on an arms length basis in the
ordinary course of our business.
7.C Interests
of Experts and Counsel
Not applicable.
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ITEM 8
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FINANCIAL
INFORMATION
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8.A Consolidated
Statements and Other Financial Information
See 18. Financial Statements for a list of financial
statements filed with this Annual Report. See 4.B.
Business Overview Legal Proceedings for a
discussion of pending litigation proceedings.
8.B Significant
Changes
Not applicable.
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ITEM 9
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THE
OFFER AND LISTING
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9.A Offer
and Listing Details
The principal trading market for our shares is currently the
Athens Exchange. The shares are also listed for trading on the
free market segments of the Frankfurt Stock Exchange and the
Berlin Stock Exchange. American Depositary Shares, each
representing one-half of one share, are listed on the New York
Stock Exchange under the symbol OTE and are also
admitted to the Official List of the London Stock Exchange and
quoted on the International Order Book. The American Depositary
Shares are also listed for trading on the free market segment of
the Munich Stock Exchange. The Bank of New York acts as
depositary for the ADSs. On May 11, 2010, our Board of
Directors resolved to pursue the delisting of the ADSs from the
New York Stock Exchange and the deregistration and termination
of our reporting obligations under the Exchange Act, to become
effective within the second half of 2010. We intend to maintain
an ADR program on a Level I basis in order to
enable investors to trade ADSs in the United States in the
over-the-counter
(OTC) market.
As of May 28, 2010, 116 registered holders of ADSs in the
United States held approximately 16.3 million ADSs,
representing approximately 1.7% of our outstanding shares.
151
The following tables set forth, for the years and periods
indicated, the reported high and low quoted closing prices for
our shares on the Athens Exchange and ADSs on the New York Stock
Exchange, together with their respective average daily trading
volumes.
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Athens Exchange
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NYSE
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Average Daily
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Average Daily
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High
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Low
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Trading Volume
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High
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Low
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Trading
Volume
(2)
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Price per share (Euro)
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Price per
ADS
(1)
(U.S.$)
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2005
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18.46
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13.04
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1,309,218
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11.17
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8.46
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32,943
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2006
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23.72
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15.94
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1,094,406
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15.72
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10.03
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26,366
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2007
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26.98
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19.92
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2,139,423
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19.31
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13.31
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58,536
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2008
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25.40
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8.98
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2,042,136
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18.69
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5.65
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79,633
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2009
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13.14
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9.84
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1,300,818
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9.70
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6.14
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54,434
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2008
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First quarter
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25.40
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17.60
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2,223,633
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18.69
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13.74
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86,850
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Second quarter
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20.60
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15.56
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3,186,304
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15.89
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11.71
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95,503
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Third quarter
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15.48
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12.56
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1,326,041
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12.06
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8.77
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61,520
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Fourth quarter
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12.92
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8.98
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1,506,027
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9.22
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5.65
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74,997
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2009
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First quarter
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13.14
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9.84
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935,662
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8.91
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6.14
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52,709
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Second quarter
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12.58
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10.90
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1,367,781
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8.71
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7.16
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51,221
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Third quarter
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11.65
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10.00
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1,790,914
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8.50
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7.03
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53,458
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Fourth quarter
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12.71
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10.01
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1,233,488
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9.70
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7.35
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60,219
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2010
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January
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10.75
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9.88
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1,118,695
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7.94
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6.88
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76,894
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February
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9.99
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8.56
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1,282,696
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6.97
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5.90
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406,148
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March
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9.60
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8.86
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825,446
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6.58
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6.08
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365,193
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April
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9.19
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7.80
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1,385,265
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6.23
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5.34
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572,123
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May
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8.39
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6.45
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1,571,126
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5.54
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3.87
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681,941
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Notes:
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(1)
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Each ADS represents one half of one
share.
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(2)
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Number of ADSs.
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9.B Plan
of Distribution
Not applicable.
9.C Markets
Our ordinary shares are listed on the New York Stock Exchange
not for trading or quotation purposes, but only in connection
with their registration pursuant to the requirements of the
Securities and Exchange Commission.
9.D Selling
Shareholders
Not applicable.
9.E Dilution
Not applicable.
152
9.F Expenses
of the Issue
Not applicable.
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ITEM 10
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ADDITIONAL
INFORMATION
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10.A Share
Capital
Not applicable.
10.B Our
Articles of Incorporation
We operate as a
société anonyme
under Greek Law
2190/1920 as in effect, the Greek Companies Law, and we are
registered with the Greek Register of
Sociétés
Anonymes
under registration number 347/06/B/86/10. Our
corporate seat is in the Municipality of Amaroussion, Greece.
According to our Articles, our company purposes, among others,
include:
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the establishment, management and operation of
telecommunications infrastructure;
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the development and provision of telecommunications services,
including satellite telecommunications services;
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the production, ownership, use and exploitation of
telecommunications equipment and other assets; and
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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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Our extraordinary general assembly of shareholders of
February 6, 2009 approved certain amendments to our
Articles of Incorporation, in order to adapt it to the
Shareholders Agreement, including matters relating to the
description of authorities granted to third parties by the Board
of Directors (Article 8), the election, composition and
term of the Board of Directors (Article 9), the frequency
and procedure of Board of Directors meetings
(Article 10), and the powers of the Managing Director
(Article 12). Article 8 paragraph 3c, as
currently in force, provides that if the offices of the Chairman
of our Board of Directors and our Managing Director are held by
different persons, the Board of Directors, pursuant to a
specific decision may establish a four-member Executive
Committee. See 7.A Major Shareholders and Related Party
Transactions Major Shareholders
Agreements between the Greek State and Deutsche Telekom.
In addition, our extraordinary general assembly of shareholders
of April 7, 2009 approved further amendments to our
Articles of Incorporation in accordance with the provisions of
law 3604/2007, enabling Greek companies to simplify their
Articles of Incorporation by omitting those provisions, which
are clearly stated in Law 2190/1920 as now in force.
Board
of Directors
In accordance with our Articles of Incorporation, it is
prohibited for the members of our Board of Directors, as well as
the Managing Director and any of our employees, to undertake or
participate for their own account or for the account of third
parties in any commercial activities similar to those included
in our company purposes, or to act as directors of, be partners
of, hold a substantial interest in the share capital of, or be
employed by, companies whose corporate purposes are similar to
ours. This prohibition may be waived under certain circumstances
as provided in our Articles of Incorporation.
In addition, in accordance with our Articles of Incorporation
and Greek Companies Law, our general assembly of shareholders
has the power to set directors compensation. Loans or any
form of credit provided by us to any member of our Board of
Directors, or any form of guarantee granted by us in their
favor, are prohibited and are absolutely void.
153
Dividend
Rights
Dividends may only be paid out of profits after the annual
financial statements are approved by the general assembly.
Before the payment of dividends, we are required to allocate at
least 5% of such net profits to the formation of a legal reserve
until this reserve equals at least one-third of our share
capital. The ordinary reserve is distributable to shareholders
only upon our liquidation and after satisfaction of all prior
claims. According to our Articles of Incorporation and the Greek
Companies Law, we are required to pay a minimum annual dividend
equal to 35% of our net profits for the previous financial year.
All of these amounts are currently based on IFRS financial
statements. The distribution of the remainder of the net profits
as well as any retained earnings from prior periods may be
decided by the general assembly of shareholders with a quorum of
holders of one- fifth of the outstanding shares and the
affirmative vote of the absolute majority of the holders of the
shares present or represented at this general meeting. If this
quorum is not satisfied, there are no quorum requirements at the
adjourned general meeting.
However, except in the case of a decrease in share capital, no
distribution may be made to shareholders if the
shareholders equity would become, as a result of the
distribution, less than the amount of the share capital plus
reserves that are non-distributable under law.
The amount approved for distribution as dividend is required to
be paid to shareholders within two months of the
shareholders resolution approving our annual financial
statements and declaring such dividend. Dividends not claimed by
shareholders within five years are forfeited to the Greek State.
Voting
Rights
All of our issued shares bear voting rights, in direct
proportion to the number of shares held by each shareholder. As
of 2006, following the adoption of Law 3522/2006, the Greek
States equity interest in our voting securities may now be
lower than one-third of our share capital.
General
Assembly of Shareholders.
The annual general assembly is required to be held each year,
within six months from the end of our financial year, in order
to approve our annual statutory financial statements in
accordance with IFRS as adopted by the European Union and to
discharge Board members and auditors from liability in respect
of their tenure of office during such year. Extraordinary
general assemblies may be convened by the Board when it
considers that a meeting is necessary, or pursuant to the
request of the holders of 5% or more of our paid-in share
capital. In addition, the auditors are entitled to request the
Chairman to convene an extraordinary general assembly within ten
days of the notice of such request. Greek law requires that a
notice of a general assembly be published in the Government
Gazette Issue of
Sociétés Anonymes
and Limited
Liability Companies, in a daily newspaper published in Athens
and circulated nationwide, a daily financial newspaper and a
local newspaper, at least 20 days before the date set for
the assembly or 10 days before such date in the case of an
adjourned assembly. Such notice must include the agenda, place,
date and time for the general assembly. No notice is required if
all shareholders are present or represented at the general
assembly and no shareholder objects to the assembly taking place
and to the adoption of resolutions at such assembly. No further
notice is required for an adjourned general assembly if the
initial notice refers to the place and time for such adjourned
meeting.
Shareholders wishing to participate in the general assembly must
block their shares through their stock broker and deposit with
us a certificate issued by the Hellenic Exchanges S.A. at least
five days before the date of the assembly. Shareholders entitled
to participate in the general assembly may be represented by a
legally authorized person. Unless otherwise specified by
applicable law or in the Articles, the presence in person or by
proxy of shareholders holding not less than 20% of the paid-in
share capital is necessary for a quorum. If a quorum is not
present at any general assembly, such general assembly is
adjourned. There is no quorum requirement when an ordinary
general assembly is reconvened, but only items which were on the
agenda of the adjourned general assembly may be discussed and
voted upon. Unless otherwise specified by applicable law or in
the Articles, the voting majority required for a resolution
proposed at a general assembly is the absolute majority of the
shares represented at such general assembly. Shareholders
present but abstaining from voting are considered present or
represented for purposes of determining the requisite quorum and
majority.
154
Our Articles of Incorporation provide that minority
shareholders rights are as set out in the Greek Companies
Law (Law 2190/1920). Key minority shareholders rights
include the following:
Any shareholder has the right to request from the Board
particular information to the extent necessary to assess items
on the agenda of the general assembly; the Board may refuse to
give such information by providing a material reason for such
refusal.
Shareholders holding at least 5% of the paid-in share capital
have the right:
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to request the Board to convene an extraordinary general
assembly;
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to request that the Board include additional items on the
agenda, if such request is made at least 15 days prior to
the date set for the general assembly;
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to postpone only once the adoption of a resolution by the
ordinary or extraordinary general assembly for all or certain
items on the agenda;
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to request that the Board, during an ordinary general assembly,
provide information concerning any amounts paid within the last
two years to our Directors or executive officers, as well as
details of any financial benefit to these persons derived from
any cause or contract between the company and these persons; the
Board may refuse to give such information by providing a
material reason for such refusal. Disputes over the Boards
grounds to refusing such information may be adjudicated by the
competent court according to injunctive relief proceedings;
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to request a vote of the holders of the shares present or
represented at the meeting regarding any item on the
agenda; and
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to request that a competent court review our operations when it
is believed that applicable laws, our Articles of Incorporation
or resolutions of the general assembly are being violated.
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Shareholders holding at least 20% of the paid-in share capital
have the right:
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to request that competent court review our operations, when it
is believed that our affairs are not properly managed; and
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to request from the Board particular informaPtion on our
companys operations and financial condition. Disputes over
the Boards grounds to refuse such information may be
adjudicated by the competent court according to injunctive
relief proceedings.
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Our Articles of Incorporation enumerated these rights of our
companys shareholders, granted under Law 2190/1920.
However, our extraordinary general assembly held on
April 7, 2009 amended the relevant sections of our Articles
of Incorporation in accordance with the provisions of Law
3604/2007 (which amended Law 2190/1920 in certain respects),
allowing Greek companies to omit from their Articles of
Incorporation, those provisions expressed in Law 2190/1920 (such
as minority rights).
Our Articles of Incorporation may be amended by a resolution of
our general assembly.
Changes
in Share Capital and Pre-emptive Rights
Our share capital may generally be increased pursuant to a
resolution by the shareholders at a general assembly at which a
quorum of holders of two-thirds of our share capital is present.
If such a quorum is not achieved, the quorum requirement is
reduced to half and then to one-fifth at the second and third
adjourned assemblies, respectively.
In addition, our Articles grant authority to the Board to
approve, an increase in our authorized share capital, by a
two-thirds majority, or within a five-year period following an
authorizing resolution of the general assembly. The amount of
such an increase cannot exceed our initial paid-in share capital
at our incorporation or our paid-in share capital as of the date
of the general assemblys authorizing resolution. However,
if our capital reserves exceed one quarter of our paid-in share
capital, then a capital increase will always require a
resolution by our general assembly with an extraordinary quorum
of two-thirds of the paid-in share capital. If such quorum is
not achieved, the quorum
155
requirement is reduced to one-half, and then to one-fifth, at
the second and third adjourned assemblies, respectively, with
the requisite voting majority being two thirds of the shares
present at each such general assembly. See
General Assembly of Shareholders.
All share capital increases in cash, must first be offered to
existing shareholders pro rata to their existing shareholdings,
unless the pre-emptive rights of these shareholders have been
waived. Pre-emptive rights may only be waived by a decision of
holders of two thirds of the paid-in share capital present at a
general assembly at which a quorum of two-thirds, which is
reduced to one-half and one-fifth at the second and third
adjourned assemblies, respectively, of the outstanding share
capital is present. Pre-emptive rights for newly offered shares
are transferable during the subscription period for the related
offering and may be quoted on the Athens Exchange.
A resolution of the shareholders at a general assembly is also
required for the reduction of our share capital. This resolution
requires the approval of holders of two-thirds of the shares
present or represented at a general assembly at which holders of
two-thirds of the paid-in share capital are present or
represented. This quorum requirement is reduced to one-half and
one-fifth at the second and third adjourned assemblies,
respectively.
Since 2002, the nominal value of our shares has been denominated
in Euro and has been set at Euro 2.39.
Rights
on Liquidation
A liquidation procedure involves our dissolution after expiry of
our initial company term of one hundred years from
December 27, 1996, or pursuant to a resolution of our
general assembly taken by a quorum of at least two-thirds of our
paid-in share capital present or represented at the meeting and
a majority of holders of two-thirds of the shares present or
represented at the general assembly, or in case of insolvency,
or pursuant to a court order. In any case, the general assembly
is competent to designate the liquidators. During the
liquidation procedure, the general assembly continues to be
entitled to all its rights under applicable law and the Articles
of Incorporation.
If we are liquidated, assets remaining after payment of our
debts, liquidation expenses and all of our remaining obligations
will be distributed first to repay in full the nominal value of
our share capital, and the surplus, if any, will be distributed
pro rata among our shareholders in proportion to the nominal
value of their interests in our share capital.
Form
and Transfer of Shares
Dematerialization of our shares has been completed.
Settlement of Athens Exchange transactions on dematerialized
shares takes place by means of book-entry transfers through each
beneficial shareholders custodian. The settlement of
transactions on dematerialized securities takes place through
the facilities of the Hellenic Exchanges S.A. In respect of
these securities, no material titles are issued, as they are
registered with the Dematerialized Securities System, which is
managed by the Hellenic Exchanges S.A., in book-entry form, as
electronic securities, held for the respective
holders by way of respective accounts.
The obligation to deliver the securities upon disposal and the
claim to receive the securities upon purchase are satisfied by
means of registrations in the respective accounts of the
securities transferred, through either the member of the stock
exchange that effects the transaction for the account holder of
the account of the securities or through a bank acting as a
custodian.
Upon request by the holder of the account, Hellenic Exchanges
S.A issues certificates in respect of the securities registered
in its accounts. It also issues certificates for the
participation of the holder of the account in general meetings
of shareholders of the respective companies. Under Law
3556/2007, which implemented Directive 2004/109/EC, when as a
result of a transfer of shares listed on the Athens Exchange,
such as our shares, a person acquires or disposes of shares in a
company resulting in his or her interest in the voting rights of
the company reaching, exceeding or falling below 5%, 10%, 15%,
20%, 25%, 1/3, 50% or 2/3, or upon any acquisition or disposal
of voting shares of more than 3% by a person holding more than
10% of a companys voting shares, this person is required
to notify both the company and the HCMC of his or her resulting
holdings in the share capital and the voting rights of the
company within the next three days following this acquisition or
disposal. In addition, under
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Decision
No. 3/347/12.7.2005
of the HCMC, which implemented Directive 2004/72/EC, all
transactions related to shares admitted to trading on a
regulated market, or to derivatives or other financial
instruments linked to them, conducted for the account of a
person discharging managerial responsibilities for the issuer
are notified to the issuer and the HCMC. Failure to make such
notifications may result in the imposition of a fine of up to
Euro 1,000,000.
Trading
by companies in their own shares
Pursuant to Article 16 of Law 2190/1920, and under limited
circumstances, companies such as us and our subsidiaries may
acquire and hold their own shares. A resolution to repurchase
our own shares is made by the general assembly and requires a
quorum of shareholders and simple majority of votes. Such
resolution of the general assembly sets out the terms and
conditions for the acquisition of the shares and, more
particularly, the maximum number of shares that can be acquired
and the duration of the acquisition period, which cannot exceed
twenty-four months. All voting rights attached to shares that
the company or any third party holds in its own name on behalf
of the company may not be exercised, and are not taken into
account for purposes of determining the existence of a quorum.
Furthermore, under Article 15 of Law 3556/2007, when an
issuer of shares admitted to trading on a regulated market
acquires or disposes of its own shares, either directly or
indirectly, the issuer must publicly disclose the transaction in
its own shares if its holdings reach, exceed or fall below the
thresholds of 5% or 10% of the voting rights in the issuer. The
proportion shall be calculated on the basis of the total number
of shares to which voting rights are attached. Such notification
must be made as soon as possible, but in any case not later than
two trading days following such acquisition or disposal.
Pursuant to Law 3340/2005 on Market Abuse, trading by companies
in their own shares may constitute prohibited market
manipulation, as defined therein, unless one falls within
the scope of the safe harbor, under European Commission
Regulation 2273/2003.
10.C Material
Contracts
Not applicable.
10.D Exchange
Controls
Greece has no exchange controls that would restrict the payment
of dividends or other capital distributions to a non-resident
holder of shares or American Depositary Shares. In addition,
Greece has no restrictions that would affect the rights of
non-resident holders of shares or American Depositary Shares to
dispose of such shares or American Depositary Shares, or to
receive the proceeds of such disposition outside Greece.
However, in order to transfer funds outside of Greece, foreign
investors, depending on the intermediary banks practice,
may be asked to produce the following certificates:
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a certificate of a broker or other relevant person evidencing
the sale of shares; and
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a certificate as to the entitlement to the payment of dividends
on shares.
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Additional certificates may be required if the bank considers
that the transfer needs further investigation as to money
laundering.
10.E Taxation
The following summary describes certain of the tax consequences
of the ownership and disposition of shares and American
Depositary Shares. It is not a complete description of all the
possible tax consequences of such ownership and disposition.
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Greek
Taxation
Introduction
The following is a summary of certain Greek tax considerations,
which may be relevant to the ownership and disposition of
shares. The summary does not purport to be, nor should it be
relied upon as, a comprehensive description or analysis of all
the tax considerations which may be relevant to a decision to
own or dispose of our shares.
The summary is based on tax laws and regulations in effect in
Greece on the date of this Annual Report, which are subject to
change without notice. Holders of our shares should consult
their own tax advisers as to the Greek or other tax consequences
arising from the ownership and disposition of our shares, having
regard to their particular circumstances.
Special
one-time tax on net profits of corporates
In May 2010, the Greek State announced the imposition of a
special one-time lump-sum tax on net profits of corporate tax
payers for the fiscal year 2009, which is expected to apply to
the net income on our Greek profitable entities at the rate of
10%. See Note 32 to the consolidated financial statements.
Taxation
of Dividends
The net income of
sociétés anonymes
is taxed at
a flat rate of 24% for the fiscal year 2010. A withholding tax
of 10% is imposed on the payment of dividends on shares
distributed by Greek
sociétés anonymes
until
December 31, 2010. A lower rate of withholding tax than the
above 10% may be paid by persons or entities that are tax
residents of a country that has signed a double taxation treaty
with Greece.
Concerning the taxation of
sociétés anonymes
net income, tax law 3842/2010 introduces a new, dual system
involving two separate corporate income tax rates for
non-distributed and distributed profits of
sociétés
anonymes
. Non-distributed profits are taxed at a tax rate of
24% for profits arising in the accounting period commencing
January 1, 2010, reduced annually by 1 percentage
point until it reaches 20% by 2014. Distributed profits are
taxed at a tax rate of 40%. No further withholding tax is
imposed on dividends (the existing abovementioned 10%
withholding tax is abolished for profits arising from balance
sheets drafted from December 31, 2010 onwards). The new
dual system applies to profits arising from balance sheets
drafted from December 31, 2010 onwards.
The tax of 40% on distributed profits of the legal entities does
not exhaust the tax liabilities of beneficiary individuals. The
dividend amount is further taxed as personal income based on the
progressive tax scale applicable to individuals, with a credit
being provided for the corporate tax paid by the distributing
legal entities, based on a certificate issued by the latter in
the name of the individual.
Taxation of 40% on distributed profits of the legal entities
exhausts the tax liability in case the beneficiaries are legal
entities. In case such legal entities proceed to the
distribution of profits, in which dividends from other legal
entities are included, the corresponding part of tax already
paid for those dividends is deducted from the 40% tax imposed on
distributed profits.
Tax rate of 40% on distributed profits is also imposed in case
of capitalization or distribution of profits of previous
accounting periods.
Taxation
of Capital Gains
Capital gains resulting from sale of securities that are listed
on the Athens Exchange and have been acquired until
December 31, 2010 are exempt from income tax according to
article 38 paragraphs 1 & 2 of law 2238/1994 as
in force. (A transfer tax at the rate of 0.15% is imposed on the
purchase price).
For shares that shall be acquired from January 1, 2011
taxation shall be imposed at source at a tax rate of 20% or 10%
of the capital gains received from the sale of shares listed on
the Athens Exchange in case the sale of shares take place within
three months or within twelve months from their acquisition
respectively (short-term transactions). Thereafter, the capital
gains derived from the sale of the relevant shares in case legal
entities are booked in a
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special reserve account after the deduction of losses derived
from similar transactions. In case of distribution or
capitalization, capital gains are taxed at the tax rate of
distributed profits by deducting the tax withheld.
In case of a foreign legal entity investor without a permanent
establishment in Greece, withholding tax of 10% or 20% exhausts
the tax liability.
It must be considered each time whether a basis for exemption of
the foreign company from capital gains tax applies, based on an
applicable Double Tax Treaty.
In case of application of taxation of capital gain, according to
the aforementioned, the transaction duty of 0.15%, currently in
force, shall not apply.
The same applies to sales of shares listed on a foreign stock
exchange or other internationally recognized exchange.
For shares that shall be acquired from January 1, 2011
capital gains resulting from sale of securities than are listed
on the Athens Exchange are exempt from income tax in case of the
sale of shares after twelve months from their acquisition.
Thereafter, the capital gains derived from the sale of the
relevant shares are booked in a special reserve account after
the deduction of losses derived from similar transactions. In
case of distribution or capitalization, capital gains are taxed
at the tax rate of distributed profits by deducting the tax
withheld. (A transfer levy at the rate of 0.15% is imposed
on the purchase price).
Transfer
Taxes
A transfer levy is imposed on transfers (through on exchange or
off-exchange transactions or transactions through a multilateral
trading facility) of Athens Exchange-listed securities acquired
prior December 31, 2010, at the rate of 0.15% of the
purchase price. The levy is borne by the seller and is charged
by the Central Securities Depository to brokerage firms, who
then in turn charge their clients. No transfer tax shall be
levied on transfers of Athens Exchange listed securities that
will take place regarding securities acquired from
January 1, 2011 in cases when the above capital gain tax is
imposed.
In addition, a levy of 0.025% of the value of a transaction
through ATHEX applies. In the case of off-exchange transactions,
a levy (payable by each of the buyer and seller) of 0.04% or
0.1% (depending on whether a custodian is involved or not) of
the value of the transaction is applied by the Central
Securities Depository. Finally, a commission is paid to the
brokers in the case of purchase or sale of listed shares.
Stamp
Duty
The issuance and transfer of shares as well as the payment of
dividends on shares is exempt from stamp duty.
Inheritance
or Succession Taxes
Inheritance or succession taxes are payable in Greece on shares
of Greek domiciled companies by a tax scale applied to the
inheritance as a whole, depending on the degree of the
relationship between the deceased and the beneficiary (Art. 29
of Law 2961/2001, as amended).
The taxable basis for stock exchange listed shares is prescribed
in article 12 of Law 2961/2001.
Gift
Tax (Donation Taxes)
A similar system of progressive taxation applies to the donation
of listed shares.
Potential purchasers should consult their own tax advisers
concerning the overall Greek tax (including Greek capital gains,
inheritance or succession, and gift tax) consequences of the
purchase, ownership and disposition of shares.
159
United
States Federal Income Taxation
The following is a summary of certain material U.S. federal
income tax consequences of the ownership or disposition of
shares or American Depositary Shares by a holder who is a
beneficial owner of shares or American Depositary Shares that is:
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a citizen of or an individual resident in the United States;
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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);
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an estate whose income is subject to U.S. federal income
taxation regardless of its source; or
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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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The following discussion does not purport to be a complete
analysis of all potential tax considerations relevant to a
decision to acquire and own shares or American Depositary Shares.
A
Non-U.S. Holder
is any beneficial owner of shares or American Depositary Shares
that is not a U.S. Holder. The summary does not purport to
be a comprehensive description of all of the tax considerations
that may be relevant to a holder of shares or American
Depositary Shares. In particular, this summary deals only with
U.S. Holders that will hold shares or American Depositary
Shares as capital assets (generally, property held for
investment) within the meaning of Section 1221 of the
U.S. Internal Revenue Code of 1986, as amended (the
Code
) and does not address the tax treatment
of special classes of U.S. Holders, such as financial
institutions or banks, tax-exempt entities, Section 401
pension plans, insurance companies, persons holding shares or
American Depositary Shares as part of a straddle, hedging,
integrated, conversion, constructive sale or other risk
reduction transaction, U.S. expatriates, grantor trusts,
persons subject to the alternative minimum tax, dealers in
securities or currencies, traders in securities that elect to
mark to market or other persons that are required to mark to
market their holdings, persons that own (or are deemed to own
for United States tax purposes) 10% or more of our voting stock,
persons that are residents of Greece for Greek tax purposes or
that conduct a business or have a permanent establishment in
Greece, persons that receive American Depositary Shares or
shares through the exercise of employee stock options or
otherwise as compensation, partnerships or other pass-through
entities, real estate investment trusts, regulated investment
companies and U.S. Holders whose functional
currency (as defined in the Code) is not the
U.S. Dollar, all of whom may be subject to
U.S. federal income tax rules that differ significantly
from those summarized below. In addition, this summary does not
discuss any United States state, local or
non-U.S. tax
considerations, or any U.S. federal tax considerations
other than income tax considerations (for example,
U.S. federal estate or gift tax or alternative minimum tax
considerations). This summary is based upon current
U.S. law as in effect on the date of this Annual Report,
which is subject to change (possibly with retroactive effect),
and in part upon representations of the Depositary and assumes
that each obligation provided for in or otherwise contemplated
by the Deposit Agreement and any related agreement will be
performed in accordance with their respective terms.
Holders
of shares or ADSs should consult their own tax advisers as to
the consequences under U.S. federal, state, local and applicable
foreign tax laws of the ownership and disposition of shares and
American Depositary Shares.
U.S. Holders of American Depositary Shares will be treated
for U.S. federal income tax purposes as owners of the
shares underlying the American Depositary Shares. Accordingly,
except as noted, the U.S. federal income tax consequences
discussed below apply equally to U.S. Holders of American
Depositary Shares and shares.
Dividends
The gross amount of any distributions made by us to a
U.S. Holder will generally be subject to U.S. federal
income tax as dividend income to the extent paid or deemed paid
out of our current or accumulated earnings and profits, as
determined under U.S. federal income tax principles. Such
dividends will not be eligible for the dividends
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received deduction generally allowed to U.S. corporations
with respect to dividends received from other
U.S. corporations. To the extent that an amount received by
a U.S. Holder exceeds its allocable share of our current
and accumulated earnings and profits, such excess would, subject
to the discussion below, be treated first as a tax-free return
of capital which will reduce such U.S. Holders tax
basis in his shares or American Depositary Shares and then, to
the extent such distribution exceeds such
U.S. Holders tax basis, it will be treated as capital
gain.
Subject to applicable holding period and other limitations, the
U.S. Dollar amount of dividends received on the shares or
American Depositary Shares in taxable years beginning prior to
January 1, 2011 by certain non-corporate U.S. Holders
will be subject to taxation at a maximum rate of 15% if the
dividends are qualified dividends. Dividends paid on
the shares or the American Depositary Shares will be treated as
qualified dividends if: (i) we are eligible for the
benefits of a comprehensive income tax treaty with the United
States that the IRS has approved for the purposes of the
qualified dividend rules and (ii) we were not, in the year
prior to the year in which the dividend was paid, and are not,
in the year in which the dividend is paid, a passive foreign
investment company (
PFIC
). Although we
currently believe that distributions on the New Shares that are
treated as dividends for U.S. federal income tax purposes
should constitute qualified dividends, no assurance can be given
that that will be the case. U.S. Holders should consult
their tax advisors regarding the tax rate applicable to
dividends received by them with respect to the shares or the
American Depositary Shares, as well as the potential treatment
of any loss on a disposition by them of shares or American
Depositary Shares as long-term capital loss regardless of the
U.S. Holders actual holding period for the shares or
the American Depositary Shares.
We have not maintained and do not plan to maintain calculations
of earnings and profits under U.S. federal income tax
principles. Accordingly, it is unlikely that U.S. Holders
will be able to establish whether a distribution by us is in
excess of our and accumulated earnings and profits (as computed
under U.S. federal income tax principles). If
U.S. Holders are unable to establish that distributions are
in excess of our earnings and profits as determined under
U.S. federal income tax principles, any distribution by us
may be treated as taxable in its entirety as a dividend to
U.S. Holders for U.S. federal income tax purposes.
The gross amount of dividends paid in Euro will be included in
the income of a U.S. Holder in a U.S. Dollar amount
calculated by reference to the spot exchange rate in effect on
the day the dividends are received by such holder (or, in the
case of American Depositary Shares, by the Depositary),
regardless of whether the payment is in fact converted into
U.S. Dollars. If the Euro is converted into
U.S. Dollars on the date of the receipt, the
U.S. Holder generally would not be required to recognize
any foreign currency gain or loss in respect of the receipt of
Euro as dividends. A U.S. Holder will have a tax basis in
any Euro distributed equal to their U.S. Dollar value on
the date they are received by such holder (or, in the case of
American Depositary Shares, by the Depositary). Any gain or loss
recognized upon a disposition of Euro after the date of receipt
will generally be ordinary income or loss and will generally be
income from sources within the United States for foreign tax
credit purposes. A U.S. Holder may be required specifically
to disclose any loss from the disposition of foreign currency on
its tax return under regulations on tax shelter transactions.
Dividends will generally constitute foreign source income, and
with certain exceptions, will constitute passive category
income, or in the case of certain U.S. Holders,
general category income.
Sale or
Exchange of Shares or American Depositary Shares
Gain or loss realized by a U.S. Holder on the sale or other
disposition of shares or American Depositary Shares will be
subject to U.S. federal income taxation as capital gain or
loss in an amount equal to the difference between the
U.S. Holders adjusted tax basis in the shares or
American Depositary Shares and the amount realized on the
disposition. Such gain or loss generally will be treated as
long-term capital gain or loss if the shares or American
Depositary Shares have been held for more than one year. Any
such gain or loss realized will generally be treated as
U.S. source gain or loss. In the case of a U.S. Holder
who is an individual, capital gains are currently subject to
federal income tax at preferential rates, which are set to
expire for this year of taxpay as starting on or after
January 1, 2011, if specified minimum holding periods are
met. The deductibility of capital losses is subject to
significant limitations.
The surrender of American Depositary Shares in exchange for
shares (or vice versa) will not be a taxable event for
U.S. federal income tax purposes and U.S. Holders will
not recognize any gain or loss upon such a surrender.
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If a U.S. Holder receives any foreign currency on the sale
of shares or American Depositary Shares, such U.S. Holder
may recognize ordinary income or loss as a result of currency
fluctuations between the date of the sale of shares or American
Depositary Shares and the date the sale proceeds are converted
into U.S. Dollars. As noted above, a U.S. Holder may
be required specifically to disclose any loss from the
disposition of foreign currency on its tax return under
regulations on tax shelter transactions.
Passive
Foreign Investment Company Considerations
We believe that we will not be treated as a PFIC for
U.S. federal income tax purposes for the current taxable
year and do not expect to become a PFIC in future years.
However, because PFIC status is determined on an annual basis
and because our income and assets and the nature of our
activities may vary from time to time, we cannot assure
U.S. Holders that we will not be considered a PFIC for any
taxable year.
We would be a PFIC for U.S. federal income tax purposes in
any taxable year if 75% or more of our gross income would be
passive income, or on average at least 50% of the gross value of
our assets is held for the production of, or produces, passive
income. In making the above determination, we are treated as
earning our proportionate share of any income and owning our
proportionate share of any asset of any company in which we are
considered to own, directly or indirectly, 25% or more of the
shares by value. If we were considered a PFIC at any time when a
U.S. Holder held the shares or the American Depositary
Shares, we generally will continue to be treated as a PFIC with
respect to that U.S. Holder, and the U.S. Holder will
be subject to special rules with respect to (a) any gain
realized on the disposition of the shares or the American
Depositary Shares and (b) any excess
distribution by us to the U.S. Holder in respect of
the shares or the American Depositary Shares. Under the PFIC
rules: (i) the gain or excess distribution would be
allocated evenly over the U.S. Holders holding period
for the shares or the American Depositary Shares, (ii) the
amount allocated to the taxable year in which the gain or excess
distribution was realized or to any year before we became a PFIC
would be taxable as ordinary income and (iii) the amount
allocated to each other taxable year would be subject to tax at
the highest tax rate in effect in that year and an interest
charge generally applicable to underpayments of tax would be
imposed in respect of the tax attributable to each such year. A
U.S. Holder may be able to avoid many of these adverse tax
consequences if it may and does elect to mark the shares or the
American Depositary Shares to market on an annual basis.
U.S. Holders are urged to consult their tax advisors about
the PFIC rules, including the advisability, procedure and timing
of making a mark-to-market election and the
U.S. Holders eligibility to file such an election
(including whether the shares or the American Depositary Shares
are treated as publicly traded for such purpose).
United
States Information Reporting and Backup Withholding
A U.S. Holder may be subject to information reporting to
the IRS and possible backup withholding with respect to
dividends paid on, or proceeds of the sale or other disposition
of, a share or American Depositary Share, unless such
U.S. Holder is a corporation or comes within certain other
categories of exempt recipients or provides a taxpayer
identification number, certifies as to no loss of exemption from
backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. Amounts withheld
under these rules may be credited against the
U.S. Holders U.S. federal income tax liability
and a U.S. Holder may obtain a refund of any excess amounts
withheld under the backup withholding rules by filing the
appropriate IRS forms and furnishing any required information. A
U.S. Holder who does not provide a correct taxpayer
identification number may be subject to penalties imposed by the
IRS.
Non-U.S. Holders
generally will not be subject to information reporting or backup
withholding with respect to dividends on shares or American
Depositary Shares, unless payment is made through a paying agent
(or office) in the United States or through certain
U.S. related financial intermediaries. However,
Non-U.S. Holders
generally may be subject to information reporting and backup
withholding with respect to the payment within the
United States of dividends on shares or American Depositary
Shares, unless such
non-U.S. Holder
provides a taxpayer identification number, certifies under
penalties of perjury as to its foreign status, or otherwise
establishes an exemption.
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Recently
Enacted Legislation Affecting Disclosure Obligations for U.S.
Individuals
Legislation was enacted on March 18, 2010, that generally
imposes new U.S. return disclosure obligations (and related
penalties for failure to disclose) on U.S. individuals that
hold certain specified foreign financial assets.
U.S. Holders are urged to consult with their own tax
advisors regarding the possible implications of this recently
enacted legislation on their investment in the American
Depositary Shares or the shares.
10.F Dividends
and Paying Agents
Not applicable.
10.G Statement
by Experts
Not applicable.
10.H Documents
on Display
We are subject to the reporting requirements of the Exchange
Act. In accordance with these requirements, we file Annual
Reports on
Form 20-F
and provide other information through reports on
Form 6-K
filed with or furnished to the U.S. Securities and Exchange
Commission. These materials, including this Annual Report and
the exhibits thereto, may be inspected and copied at the
SECs Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549. The public may obtain
information on the operation of the SECs Public Reference
Room by calling the SEC in the United States at
1-800-SEC-0330.
The SEC also maintains a World Wide Web site at
http://www.sec.gov
that contains reports and information regarding registrants that
file electronically with the SEC.
10.I Subsidiary
Information
See 4.C Organizational Structure. Also see
Note 1 to the consolidated financial statements.
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ITEM 11
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Financial
Instruments
Risk
identification and risk management
We are exposed to market risks primarily from credit risk,
movements in interest rates, exchange rates and changes in
equity market prices. Our Treasury, which is responsible for our
funding strategy and asset and liability management, is
operating as a service center and it seeks to minimize these
market risks. We regard effective market risk management as an
important element of the treasury function. We do not enter into
derivative contracts for trading or other speculative purposes.
Our Treasury monitors regularly the level and value of current
market risk exposures and informs the management. Other than the
information presented below, there are no material limitations
that cause the information presented to not fully reflect net
market risk exposures.
For more information regarding interest rate, foreign exchange
and credit risks facing our Group, see Note 30 to our
financial statements.
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Interest
Rate Risk
We are exposed to risk from changes in interest rates, mainly in
the Euro zone. We manage our interest rate risk by means of a
combination of both fixed and floating rate borrowings and the
use of interest rate swap agreements. Approximately
Euro 0.5 billion (9.3%) of our total debt as of
December 31, 2009 bore interest at floating rates. The
table below sets forth an analysis of our borrowings according
to interest rate type.
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Year Ended December 31,
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2008
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2009
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(Euro in millions)
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Variable interest rate
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1,099.3
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503.3
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Fixed interest rate
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4,948.4
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4,918.6
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Total
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6,047.7
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5,421.9
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Interest Rate Swaps.
As of December 31,
2009, two interest rate swap agreements were outstanding, namely
a floating-to-fixed swap with a notional amount of
Euro 200.0 million entered into by Cosmote and a
fixed-to-floating swap with a notional amount of
Euro 65.0 million used by OTE Plc. As a result of our
derivative hedging activities the percentage of our total
external debt that bore interest at floating rates decreased to
6.8% (368.3 million).
The following table demonstrates sensitivity to a possible
reasonable change in interest rates on our income statement and
equity through the impact of our outstanding indebtedness,
deposits and derivatives, based on an increase in interest rates
of 100 basis points.
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Year Ended December 31,
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2008
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2009
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(Euro in millions)
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Profit before tax
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3.3
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4.7
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Equity
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3.0
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Liquidity
Risk
Given the considerable capital expenditure requirements in the
telecommunications industry, as well as the counterparty risk we
face from customers and other service providers, we are subject
to liquidity risk. To monitor liquidity risk, we prepare annual
cash flows as part of preparing our annual budget and monthly
rolling forecasts to ensure that we have sufficient cash
reserves to service our financial obligations.
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The tables below present the maturities of our debt obligations
as at December 31, 2009 and 2008, respectively:
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|
|
|
Expected Maturity Date as at December 31, 2009
|
|
|
|
Base
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
Thereafter
|
|
|
Total
|
|
|
Fair Value
|
|
|
|
(Euro in millions)
|
|
|
Long term Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
650 million 3.75%
Nov 2011 bond
|
|
Euro
|
|
|
|
|
|
|
639.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
639.7
|
|
|
|
657.0
|
|
1,250 million 5%
Aug 2013 bond
|
|
Euro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,250.8
|
|
|
|
|
|
|
|
|
|
|
|
1,250.8
|
|
|
|
1,284.1
|
|
900 million 4.625%
May 2016 bond
|
|
Euro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
892.5
|
|
|
|
892.5
|
|
|
|
892.5
|
|
1,500 million 5.375%
Feb 2011 bond
|
|
Euro
|
|
|
|
|
|
|
1,496.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,496.8
|
|
|
|
1,545.0
|
|
600 million 6%
Feb 2015 bond
|
|
Euro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
596.7
|
|
|
|
596.7
|
|
|
|
638.3
|
|
Other bank loans
|
|
Various
|
|
|
7.1
|
|
|
|
8.0
|
|
|
|
8.0
|
|
|
|
4.0
|
|
|
|
3.2
|
|
|
|
11.8
|
|
|
|
42.1
|
|
|
|
35.3
|
|
Floating Rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated loan facility
|
|
Euro
|
|
|
25.8
|
|
|
|
29.0
|
|
|
|
445.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500.0
|
|
|
|
500.0
|
|
Other bank loans
|
|
Various
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long term debt
|
|
|
|
|
32.9
|
|
|
|
2,173.5
|
|
|
|
453.2
|
|
|
|
1,254.8
|
|
|
|
3.2
|
|
|
|
1,501.0
|
|
|
|
5,418.6
|
|
|
|
5,552.2
|
|
Short term Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating rate
|
|
Euro
|
|
|
3.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.3
|
|
|
|
3.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short term debt
|
|
|
|
|
3.3
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
3.3
|
|
|
|
3.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
36.2
|
|
|
|
2,173.5
|
|
|
|
453.2
|
|
|
|
1,254.8
|
|
|
|
3.2
|
|
|
|
1,501.0
|
|
|
|
5,421.9
|
|
|
|
5,555.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected Maturity Date as at December 31, 2008
|
|
|
|
Base
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Thereafter
|
|
|
Total
|
|
|
Fair Value
|
|
|
|
(Euro in millions)
|
|
|
Long term Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
650 million 3.75%
Nov 2011 bond
|
|
Euro
|
|
|
|
|
|
|
|
|
|
|
634.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
634.4
|
|
|
|
604.2
|
|
1,250 million 5%
Aug 2013 bond
|
|
Euro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,248.8
|
|
|
|
|
|
|
|
1,248.8
|
|
|
|
1,158.5
|
|
900 million 4.625%
May 2016 bond
|
|
Euro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
891.5
|
|
|
|
891.5
|
|
|
|
758.3
|
|
1,500 million 5.375%
Feb 2011 bond
|
|
Euro
|
|
|
|
|
|
|
|
|
|
|
1,494.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,494.2
|
|
|
|
1,466.3
|
|
600 million 6%
Feb 2015 bond
|
|
Euro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
596.3
|
|
|
|
596.3
|
|
|
|
562.7
|
|
Loan from E.I.B.
|
|
Euro
|
|
|
18.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.9
|
|
|
|
18.9
|
|
Other bank loans
|
|
Various
|
|
|
14.8
|
|
|
|
11.2
|
|
|
|
7.8
|
|
|
|
7.8
|
|
|
|
3.7
|
|
|
|
14.0
|
|
|
|
59.3
|
|
|
|
59.3
|
|
Floating Rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated loan facility
|
|
Euro
|
|
|
|
|
|
|
25.8
|
|
|
|
29.0
|
|
|
|
445.2
|
|
|
|
|
|
|
|
|
|
|
|
500.0
|
|
|
|
500.0
|
|
600 million floating rate Nov 2009 note
|
|
Euro
|
|
|
599.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
599.3
|
|
|
|
589.5
|
|
Other bank loans
|
|
Various
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0
|
|
|
|
0.0
|
|
Total long term debt
|
|
|
|
|
633.0
|
|
|
|
37.0
|
|
|
|
2,165.4
|
|
|
|
453.0
|
|
|
|
1,252.5
|
|
|
|
1,501.8
|
|
|
|
6,042.7
|
|
|
|
5,717.7
|
|
Short term Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating rate
|
|
Euro
|
|
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.1
|
|
|
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short term debt
|
|
|
|
|
5.1
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
5.1
|
|
|
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
638.1
|
|
|
|
37.0
|
|
|
|
2,165.4
|
|
|
|
453.0
|
|
|
|
1,252.5
|
|
|
|
1,501.8
|
|
|
|
6,047.8
|
|
|
|
5,722.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165
Foreign
Exchange Rate Risk
Our foreign currency exposures are limited principally to our
operations in the Balkans, a region in which our biggest
operations are located in Romania, where telephony charges are
pegged to the Euro providing a natural hedge. As a result, we
are exposed to currency risk due to changes between functional
currencies and other currencies. The main currencies within our
Group are the Euro, RON (Romania) and the LEK (Albania). See
Note 30 to our consolidated financial statements.
Key summary information for these countries is presented below:
Romania has been severely affected by the financial crisis and
faces a deep recession (negative GDP growth for 2009 was 7.1% of
GDP). The International Monetary Fund (IMF), present in the
country since December 2008, recently approved an additional
tranche of financial assistance of $3.32bn. GDP Growth is
forecasted to recover by 1.5% in 2010. The Romanian Lei
depreciated rapidly in early 2009, which was preceded by
appreciation in the remainder of 2009, caused by the IMF/EU
Agreement and an increasing risk aversion for some countries in
South-East
Europe, which redirected funds to Romania. However this
appreciation has given rise to concern that it could damage
competitiveness and undermine economic recovery. The forecast
for 2010 is that the Central Bank will intervene if necessary to
avert further Lei appreciation.
Bulgaria experiences a deepening economic slowdown (negative GDP
growth for 2009 was 5.1% of GDP), with a return to positive
growth not likely before the second half of 2010. The Bulgarian
government announced that it will not apply for ERM II Entry
during 2010, thus postponing the current schedule. The decision
was triggered by the fact that fiscal data of the last two years
had to be revised. The country also faces a current account
deficit of 9.4% of GDP for 2009 and a larger external debt. This
creates a risk that Bulgaria may require some financial
assistance from the IMF
and/or
the
EU. The real effective exchange rate of the BGN appreciated in
2009, due to the fall in the currencies of many of
Bulgarias trade competitors, but it is expected to
depreciate in 2010.
Albania experienced GDP growth (GDP growth for 2009 was 2.8%)
which outperformed the region in 2009 and is expected to do so
again in 2010. Nevertheless, the current account deficit rose to
12.1% of GDP due to a sharp decline in emigrant remittances. The
exchange rate of the LEK depreciated sharply in 2009, by an
annual average of 7.6% against the Euro, reflecting concern over
Albanias external imbalances and fiscal expansion in the
first half of the year. Factors expected to support the LEK in
2010 include foreign-currency remittances and relatively high
local currency interest rates, reflecting the Bank of
Albanias monetary policy. Therefore the LEK is expected to
remain generally stable against the Euro in nominal terms over
2010.
Translation risk.
The assets and liabilities
of group entities whose functional currency is not Euro are
translated into Euros.
Transaction risk.
Foreign currency exposure
arises in transactions that are denominated in different
currencies from the entitys functional currency.
Investment in foreign companies.
Foreign
currency exposure arises from our equity investments in fixed
and mobile telephony operations in certain Southeastern European
countries.
Financings in foreign currency.
The majority
of our debts are denominated in Euro, which has been our
functional currency since January 2002. Of our total borrowings
as of December 31, 2009, 99.4% is in Euro and 0.6% is
non-Euro denominated. Similarly, our cash investments are also
primarily effected in Euro. As of December 31, 2009,
Cosmote Romania had Euro 0.5 million loans payable to
Cosmote (December 31, 2008 Euro 0.4 million)
which are treated as part of the net investment of the foreign
operation as settlement is neither planned, nor probable in the
foreseeable future.
166
Sensitivity analysis.
The following table
demonstrates sensitivity to a reasonably possible change in the
functional currency exchange rate, with all other variables held
constant, of the Groups profit before tax (due to changes
in the fair value of monetary assets and liabilities):
|
|
|
|
|
|
|
|
|
|
|
Effect on Profit Before Tax
|
|
|
2009
|
|
2009
|
|
|
(Euro in million)
|
|
+10%
|
|
|
12.4
|
|
|
|
7.2
|
|
−10%
|
|
|
(12.4
|
)
|
|
|
(7.2
|
)
|
Credit
Risk
We are exposed to credit risk through our customers, bank
deposits and trade receivables. Due to the large number of
customers and their diversification of the customer base, we
consider that there is no concentration of credit risk with
respect to these receivables. We believe that concentration of
risk exists for amounts receivable from other telecommunication
service providers, due to their relatively small number and the
number of transactions we have with them. To reduce our exposure
to this risk, in 2009 we obtained bank guarantees in accordance
with the EETTs regulations. We also face counterparty risk
related to the exposures we have to various banks where we
maintain our cash. Namely OTE Group cash is deposited mainly
with foreign and local banks operating in Greece, Romania,
Bulgaria, Albania and Cyprus. Due to the fact that the region we
operate in has been affected by the financial crisis and that
all Greek banks have been downgraded by the rating agencies
reflecting concerns relating to the health of the Greek economy,
the credit risk that the Group faces has significantly
increased. We place deposits based on counterparty limits by
credit rating and other criteria and monitor exposures and risks
on a daily basis. Trade receivables, which include receivables
from telecommunication operators, are the category with the
higher credit risk. For this category, we assess the credit risk
of our counterparties according to established policies and
procedures and have made the appropriate provision for
impairment. For more information on our trade receivables, see
Note 10 to our consolidated financial statements.
Equity
Risks
The Group has limited exposure to equity risks.
|
|
ITEM 12
|
DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES
|
12.A Debt
Securities
No applicable information.
12.B Warrants
and Rights
No applicable information.
12.C Other
Securities
No applicable information.
12.D American
Depositary Shares
Fees
and Other Payments made by Holders of American Depositary
Shares
The Bank of New York Mellon, as depositary, collects its fees
for delivery and surrender of American Depositary Shares
directly from investors depositing shares or surrendering
American Depositary Shares for the purpose of withdrawal or from
intermediaries acting for them. The depositary collects fees for
making distributions to investors by deducting those fees from
the amounts distributed or by selling a portion of distributable
property to pay the fees. The depositary may collect its annual
fee for depositary services by deductions from cash
distributions
167
or by directly billing investors or by charging the book-entry
system accounts of participants acting for them. The depositary
may generally refuse to provide fee-attracting services until
its fees for those services are paid.
|
|
|
Persons depositing or withdrawing shares must pay:
|
|
For:
|
|
U.S. $5.00 (or less) per 100 American Depositary Shares (or
portion of 100 American Depositary Shares)
|
|
Issuance of American Depositary Shares,
including issuances resulting from a distribution of shares or
rights or other property
|
|
|
Cancellation of American Depositary
Shares for the purpose of withdrawal, including if the deposit
agreement terminates (except for cancellations or withdrawals,
if any, caused solely by the appointment and qualification of a
successor depositary)
|
|
|
|
U.S. $0.02 (or less) per American Depositary Share
|
|
Any cash distribution to registered
holders of American Depositary Shares (except for distributions
of cash dividends)
|
|
|
|
A fee equivalent to the fee that would be payable if securities
distributed to holders of American Depositary Shares had been
shares and the shares had been deposited for issuance of
American Depositary Shares
|
|
Distribution of securities distributed
to holders of deposited securities which are distributed by the
depositary to registered holders of American Depositary Shares
|
|
|
|
Registration or transfer fees
|
|
Transfer and registration of shares on
our share (or the share register of the registrar or any
securities depositary, including the Central Securities
Depositary of the Athens Stock Exchange) register to or from the
name of the depositary or its agent when American Depositary
Shares are deposited or withdrawn
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|
Expenses of the depositary
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Cable, telex and facsimile transmissions
(when expressly provided in the deposit agreement)
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|
Converting foreign currency to U.S.
dollars
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|
Taxes and other governmental charges the depositary or the
custodian have to pay on any American Depositary Share or share
underlying an American Depositary Share, for example, stock
transfer taxes, stamp duty or withholding taxes
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As necessary
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Any charges incurred by the depositary or its agents for
servicing the deposited securities
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As necessary
|
We agree to pay the fees, reasonable expenses and out of pocket
charges of the depositary and those of any registrar only in
accordance with agreements in writing between us and the
depositary from time to time. The depositary presents its
statement for such charges and expenses to us once every three
months. The charges and expenses of the custodian are for the
sole account of the depositary. In the three years ended
December 31, 2009, we did not receive any reimbursements
from The Bank of New York Mellon, as depositary, with respect to
expenses incurred that are related to the American Depositary
Share program.
PART II
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ITEM 13
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DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES
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No applicable information.
168
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ITEM 14
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MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
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No applicable information.
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ITEM 15
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CONTROLS
AND PROCEDURES
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(a) Disclosure Controls and Procedures
Our management, under the supervision and with the participation
of the Managing Director and the Chief Financial Officer,
evaluated the effectiveness of disclosure controls and
procedures (as defined in
Rules 13a-15
and
15d-15
under the Exchange Act as of December 31, 2009, and, based
on that evaluation, our Managing Director and Chief Financial
Officer have concluded that our disclosure controls and
procedures were effective, as of that date.
(b) Managements Annual Report on Internal Control
over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined
in
Rules 13a-15
and
15d-15
under the Securities Exchange Act) for our Company. Our internal
control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with applicable generally
accepted accounting principles.
Our management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only
reasonable assurance of achieving their objectives and
management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Our management, with the participation of the Managing Director
and the Chief Financial Officer, assessed the effectiveness of
our internal control over financial reporting as of
December 31, 2009. In making this assessment, management
used the control criteria framework of the Committee of
Sponsoring Organizations (COSO) of the Treadway
Commission published in its report entitled Internal
Control-Integrated Framework. Based on this assessment and those
criteria, our Management concluded that our internal controls
over financial reporting were effective as of December 31,
2009.
(c) Attestation Report of the Registered Public Accounting
Firm
Ernst & Young (Hellas) Certified Auditors Accountants
S.A., an independent registered public accounting firm, as
auditors of our consolidated financial statements for the year
ended December 31, 2009, has issued an attestation report
on managements effectiveness of our internal control over
financial reporting as of December 31, 2009. This report is
included below.
Report
of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Hellenic
Telecommunications Organization S.A.
We have audited Hellenic Telecommunications Organization
S.A.s internal control over financial reporting as of
December 31, 2009, based on criteria established in
Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(the COSO criteria). Hellenic Telecommunications Organization
S.A.s management is responsible for maintaining effective
internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying
Managements Annual Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion
on the companys internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the
169
assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Hellenic Telecommunications Organization S.A.
maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2009, based on
the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated statements of financial position of Hellenic
Telecommunications Organization S.A. as of December 31,
2009 and 2008, and the related consolidated statements of
income, comprehensive income, changes in equity and cash flows
for each of the two years in the period ended December 31,
2009 and our report dated June 4, 2010, expressed an
unqualified opinion thereon.
/s/ Ernst & Young (Hellas) Certified Auditors
Accountants S.A.
June 4, 2010
Athens, Greece
(d) Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting
occurred during the period covered by this Annual Report that
has materially affected, or is reasonably likely to materially
affect, the Companys internal control over financial
reporting.
16.A Audit
Committee Financial Expert
Our ordinary general assembly of shareholders held on
June 24, 2009 determined that Panagiotis Tampourlos
qualifies as an audit committee financial expert, as
defined in Item 16A in
Form 20-F.
Mr. Tampourlos is also considered independent, as that term
is defined in
Rule 10A-3
under the Exchange Act. For information concerning
Mr. Tampourlos education and work experience, see
6.A/C. Directors, Board Practices and Senior
Management Board of Directors.
16.B Code
of Ethics
In March 2004, we adopted a Code of Ethics and Business Conduct
(the
Code of Ethics
) which is binding on the
members of the Board of Directors, the executive managers and
all employees of our company. Our Code of Ethics was reviewed
and ratified by the Board of Directors in May 2006, and was
supplemented with additional restrictions applying to the
above-mentioned officers, especially persons with access to
internal information about us.
170
The Code of Ethics sets a minimum framework of standards to
which our employees should adhere while exercising their
business duties and responsibilities. These working standards
are reasonably designed to deter wrongdoing and to promote:
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compliance with the laws and the regulations of countries where
we develop business activities;
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reliability of information, reports and internal audits;
|
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|
confidentiality of information, especially of a nature affecting
share price and corporate reputation;
|
|
|
|
avoidance of conflicts between personal and professional
interests;
|
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|
|
non-discrimination against employees, customers and vendors and
the avoidance of non-transparent agreements with competitors; and
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|
accountability for adherence to the Code of Ethics.
|
A copy of our Code of Ethics is available, free of charge, to
any person upon request. To request a copy, please contact the
General Director of Human Resources, Hellenic Telecommunications
Organization S.A., 99 Kifissias Avenue, Amaroussion, GR 151 24,
Athens, Greece.
16.C Principal
Accountant Fees and Services
The following table sets forth the aggregate fees we have paid
to our independent auditors for specified services in 2007, 2008
and 2009 (based on fees accrued in each relevant year):
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KPMG
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Ernst & Young
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2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(Euro in thousands)
|
|
|
Audit fees
|
|
|
4,475
|
|
|
|
2,358
|
|
|
|
2,877
|
|
Audit-Related Fees
|
|
|
599
|
|
|
|
374
|
|
|
|
78
|
|
Tax Fees
|
|
|
6
|
|
|
|
13
|
|
|
|
40
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|
Other Fees
|
|
|
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|
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Total Fees
|
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5,080
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2,745
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|
|
|
2,995
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|
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Audit Fees
are the aggregate fees agreed with
our independent auditors for professional services rendered by
our external auditors for the audit of our annual consolidated
financial statements, audit of our statutory (stand alone and
consolidated) financial statements, the audit of the statutory
financial statements of our subsidiaries and other services
related to statutory and regulatory filings. Of the audit fees
for 2007, an amount of Euro 800,000 related to additional
billings with respect to the 2006 audit.
Audit Related Fees
are the aggregate fees
billed by our independent auditors for assurance and related
services that are reasonably related to the performance of the
audit or review of our financial statements and are not reported
under Audit Fees. Audit Related Fees
include consultations concerning financial accounting and
reporting standards; internal control reviews and due diligence
reviews.
Tax Fees
are the aggregate fees billed by our
independent auditors for professional services related to tax
compliance, tax advice and tax planning. Such services include
tax consultations and tax compliance reviews.
Other Fees
are the aggregate fees billed by
our independent auditors for products and services provided,
other than Audit Fees, Audit Related Fees and Tax Fees. Such
products and services include project management advisory
services, compliance reviews of suppliers contracts and
other advisory services relating to ethical standards and
corporate governance matters.
An Audit and Non-Audit Services Pre-Approval Policy and
Procedures was adopted by our Audit Committee and approved
by our Board of Directors on May 24, 2004. It was
subsequently amended and updated and was approved by our Board
of Directors on November 28, 2006. This policy is intended
to ensure the independence of the external auditors of our
Group. This policy requires all services that may be rendered to
us and our subsidiaries by the external auditors of our Group to
be pre-approved by our Audit Committee and establishes the
terms, the
171
conditions and the procedures for such pre-approval. This
pre-approval may be in the form of a general pre-approval or a
pre-approval on a
case-by-case
basis. Our Audit Committee is regularly informed of the services
and the fees relating to such services to be performed by the
external auditors of our Group.
16.D Exemptions
from the Listing Standards for Audit Committees
We believe that no exemptions from the Listing Standards for
Audit Committees apply.
16.E Purchases
of Equity Securities by the Issuer and Affiliated
Purchasers
We did not buy back any of our own shares in 2009, 2008 and 2007.
Our extraordinary general assembly of shareholders held on
April 7, 2009, approved our share buy-back program, in
accordance with Article 16 of Greek Law 2190/1920 for of up
to 10.0% of our issued share capital, with the highest price set
at Euro 30.0, and the minimum price set at Euro 3.0.
The same General Assembly suspended the relevant resolution of
our extraordinary general assembly of shareholders of
November 11, 2007.
16.F Change
in Registrants Certifying Accountant
KPMG Certified Auditors A.E.
(KPMG
) was
previously our principal accountants and principal accountants
for our subsidiaries. On June 26, 2008, we dismissed KPMG
and engaged Ernst & Young (Hellas) Certified Auditors
Accountants S.A. as our principal accountants starting as of the
financial year ended December 31, 2008. The decision to
change accountants was based upon recommendation of our Audit
Committee (meeting held on June 19, 2008) to our Board
of Directors and subsequent recommendation of our Board of
Directors (meeting held on June 19, 2008) to our
General Assembly of Shareholders. On June 26, 2008, our
General Assembly of Shareholders resolved to appoint
Ernst & Young (Hellas) Certified Auditors Accountants
S.A., an independent registered public accounting firm, as our
independent auditors for the year ended December 31, 2008,
terminating the engagement of KPMG for this role. Our annual
report on
Form 20-F
for the year ended December 31, 2008 (filed on
June 30, 2009) included as Exhibit 15.1 a letter
by KPMG, dated June 30, 2009, addressed to the SEC in
connection with this matter.
16.G Corporate
Governance
We are organized under the laws of the Hellenic Republic and our
ADSs are listed on New York Stock Exchange and registered under
Section 12(b) of the Exchange Act. We comply with Greek
laws, applicable corporate governance requirements and corporate
governance practice in Greece. For more information regarding
how our corporate governance practices differ from those of a
U.S. domestic issuer, see 6.A Directors, Board
Practices and Senior Management Corporate
Governance.
172
PART III
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ITEM 17
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FINANCIAL
STATEMENTS
|
Not applicable.
|
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ITEM 18
|
FINANCIAL
STATEMENTS
|
The following financial statements are filed as part of this
Annual Report:
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Page
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F-2
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F-4
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F-6
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F-7
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F-8
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F-9
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F-10
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3
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.1
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Agreement between the Greek State and IKA-ETAM regarding the
transfer of shares representing 4.0% of the share capital of OTE
S.A. and the exercise of voting rights with respect to these
shares by
IKA-ETAM.
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12
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.1
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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.
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12
|
.2
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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.
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13
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.1
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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.
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13
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.2
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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.
|
173
SIGNATURES
Pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, the registrant certifies that
it meets all of the requirements for filing on
Form 20-F
and has duly caused this Annual Report on
Form 20-F
to be signed on its behalf by the undersigned, thereunto duly
authorized.
HELLENIC TELECOMMUNICATIONS
ORGANIZATION S.A.
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By:
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/s/
Panagis
Vourloumis
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Name: Panagis Vourloumis
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Title:
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Chairman & Managing Director
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Date: June 7, 2010
174
GLOSSARY
OF TECHNICAL TERMS
ADSL (Asymmetric Digital Subscriber
Line):
ADSL is a technology that permits
high-volume data transmission across traditional telephony
networks (most commonly access to the internet) via paired
copper cable (the most common type of telephone line found in
buildings). With ADSL technology, customers have an always
on access status (with no requirement to
dial-up)
to
the internet and the ability to download large files in seconds.
ATM (Asynchronous Transfer Mode):
Asynchronous
transfer mode is a broadband multiplexing technology that
utilizes connected packets (ATM packets) to carry different
types of traffic with guaranteed quality.
Backbone:
Fiber optic backbone network for
long-distance and very high capacity transmission (see DWDM and
SDH).
BRAS (Broadband Remote Access Server):
A
network service that routes traffic to and from the digital
subscriber line access multiplexers (DSLAM) on an internet
service providers (ISP) network.
Broadband:
Transmission technology in which a
single medium (wire) can carry several channels at once. Term
used to describe high-speed networks. We use several
technologies in order to provide such data rates, such as HDSL,
ADSL, ATM and SDH. These technologies have been developed to
serve the different needs of customers according to quality and
cost considerations.
CDMA (Code Division Multiple Access):
The
sharing of a radio channel by multiple users by share adding a
unique code for each data signal that is being sent to and from
each of the radio transceivers.
CLIP (Caller Identification):
At a minimum,
the calling line identification includes a single calling party
number; it may also include a second calling party number, a
calling party subaddress, and redirecting number information.
Calling line identification may not include any calling party
number due to interworking, or because of an interaction with
the CLIR supplementary service.
CLIR (Call Identification Restriction):
A
telephony intelligent network service that restricts
transmission of the callers telephone number.
Digital exchange (Switch):
A set of electronic
devices which permit the switching of telecommunications lines
with digital technology.
Double-play:
The provision of telephony
services and high-speed internet access over a single broadband
connection.
DSL (Digital Subscriber Line):
Technologies
enabling the use of copper cables connecting subscribers of
Public Switched Telephone Networks to complete broadband
transfers of digital packets. See also the definition for ADSL.
DSLAM (Digital Subscriber Line Access
Multiplier):
A network device usually located
within a company central office, that multiplexes signals from
several customer digital subscriber line (DSL) connections into
a single high-speed line.
DTH (Direct-to-Home).
A satellite television
signal transmitted directly to the home, rather than to a
broadcast television station or to a cable television (CATV)
provider for retransmission to the subscriber.
DWDM (Dense Wavelength
Division Multiplexing):
A technology that
enables ultra high-speed transfer of information on
long-distance networks through the multiplexing of several
wavelengths in a single optical fiber.
ECOS (Embedded Configurable Operating
System):
An open source, configurable, portable
and royalty-free embedded real-time operating system, designed
for embedded systems development. It is targeted at high-volume
applications in consumer electronics, telecommunications,
automotive, and other applications.
FTTH (Fiber-to-the-home):
The deployment of
fiber optic network that extends to individual houses.
Gbps (Gigabits per second):
A data transfer
speed measurement for high-speed networks, such as Gigabit
Ethernet. When used to describe data transfer rates, a gigabit
equals 1 billion bits.
175
GHz (gigahertz):
Refers to frequencies in the
billions of cycles per second range. Giga is the standard
multiplier for 1 billion, and Hertz is the standard unit
for measuring frequencies, expressed as cycles or occurrences
per second.
Gigabit Ethernet:
A version of Ethernet (a
local-area network (LAN) architecture developed by Xerox
Corporation in cooperation with DEC and Intel in 1976), which
supports data transfer rates of 1 Gigabit (1,000 megabits) per
second.
GPRS technology (General Packet Radio
Service):
A mobile data service available to
users of GSM mobile telephones. GPRS data transfer is typically
charged per megabyte of transferred data. GPRS can be utilized
for services such as WAP access, SMS and MMS, but also for
internet communication services such as email and web access.
GSM (Global System for Mobile):
European
standard for digital mobile networks.
HSPA (High-Speed Packet Access):
A collection
of two mobile telephony protocols High-Speed
Downlink Packet Access and High Speed Uplink Packet
Access that extend and improve the performance of
existing Wideband Code Division Multiple Access protocols.
Hubbing:
The practice whereby an originating
operator directs its international traffic to a country where
low charges apply for forwarding to its ultimate destination in
a third country. Such unconventional routing is done in order to
minimize the originating operators costs for terminating
international calls.
ICT (Information and Communications
Technology):
the study, design, development,
implementation, support or management of computer-based
information systems, particularly software applications and
computer hardware.
IMS (IP Multimedia Subsystem):
An
architectural framework for offering
IP-based
multimedia services. It is a core network technology that can
serve as a low-level foundation for technologies like VoIP,
video calling, video sharing, and instant messaging, and can be
used for both mobile and fixed terminals.
IN (Intelligent Network):
Concept of network
architecture aimed at facilitating the introduction of new
services over basic services offered by the Public Switched
Telephone Network. This principal lies on the installation of
the service logic and data on a central computer, which manages
the switches.
Internet Protocol (IP):
A connectionless
protocol widely used for communicating data across a
packet-switched network. It is one of the most important
networking protocols in the Internet Protocol suite, hence it is
integral to the operation of the Internet.
Intranet:
A local network that uses the same
protocols and technology as the internet, but which relies on a
private set of computers and is not open to all internet users.
Examples include Intranets used by companies or by certain
communities.
IPTV (Internet Protocol Television):
The
delivery of programming (television content) by video stream
encoded as a series of IP packets.
IP-VPN
(Internet Protocol Virtual Private Network):
A
private communications network, enabled by use of the Internet
Protocol, that is often used within a company, or by several
different entities, to communicate over a public network.
ISDN (Integrated Service Digital Network):
An
enhancement of PSTN (defined above) that allows the provisioning
of additional voice, data and video services with transmission
rates of 64 or 128 kbps (Basic Rate Access) or 2 Mbps
(Primary Rate Access). Through the integration of voice and data
in a single telephone line, with the Basic Rate ISDN, a customer
can have two simultaneous connections (either voice or data, or
mixed) over his telephone line. In addition, the ISDN technology
can transfer data with transmission rates of up to 128 kbps,
which is sufficient for services such as facsimile, internet
surfing and teleconferencing. Public digital network allowing
the transfer of different kinds of information at 64 Kbit/s:
data, voice and video.
176
ISP (Internet Service Provider):
A company
that provides access to the internet. For a monthly fee, service
providers usually provide a software package, username, password
and access telephone number. Equipped with a modem, subscribers
can then log on to the internet.
Kbit/s or Kilobit per second:
Thousands of
bits transferred per second on a transmission network.
Kbps (Kilobits per second):
A measure of data
transfer speed. One Kbps is one thousand bits per second.
LAN (Local Area Network
): Local business or
corporation networks enabling work stations or PCs of the same
entity on the same site to be interconnected with other local
networks on other sites and be linked to the public network.
LMDS (Local Multipoint Distribution
Services):
A fixed wireless technology that
operates in the 28 GHz band and offers line-of-sight
coverage over distances up to 3-5 kilometers.
Local loop:
Section of the telephone network
connecting the local telephone switch to individual
subscribers homes.
Long-Distance Network:
Public or private
network covering a very large geographic scope (national or
international) enabling the connection of access networks or the
interconnection of private broadband networks (LAN, MAN). See
Backbones.
Mbps (megabits per second):
A measure of data
transfer speed. A megabit is equal to one million bits.
MHz (megahertz):
Represents one million cycles
per second. The speed of microprocessors, called the clock
speed, is measured in megahertz.
MPLS (Multi Protocol Label Switching):
A
protocol standard of the Internet Engineering Task Force (IETF).
The MPLS protocol improves efficiency and network speed allowing
routers to transfer information along pre-defined paths
depending on the level of quality required.
Multimedia Messaging Services (MMS):
A
store-and-forward
method of transmitting graphics, video clips, sound files and
short text messages over wireless networks using the WAP
protocol.
Multiplexing:
Technique to simultaneously
transfer several signals on a common transmission channel.
NGA (Next Generation Access):
A next
generation access network that enables transmission rates much
higher than the rates available today through the use of various
technologies (e.g. FTTH).
NGN (Next Generation Networking):
A
packet-based network able to provide services including
Telecommunication Services and able to make use of multiple
broadband, QoS-enabled transport technologies and in which
service-related functions are independent from underlying
transport-related technologies. It offers unrestricted access by
users to different service providers. It supports generalized
mobility which will allow consistent and ubiquitous provision of
services to users.
NG-SDH (Next Generation Synchronous Digital Hierarchy):
A
set of Synchronous Digital Hierarchy (SDH) standards (such as
the Link Capacity Adjustment and the Generic Framing Procedure
standards) that enable efficient transport of packet-based data
and facilitate fast/automatic provisioning of transport services
in SDH networks.
Point-to-Multipoint:
A connection through
multiple paths from a single location to multiple locations.
Point-to-Point:
A connection between two
endpoints.
PSTN (Public Switched Telephone
Network):
Voice transfer network consisting of
handsets, subscriber lines, circuits and switches. Also used to
access certain data services.
RAS (Remote Access Server):
Any combination of
hardware and software to enable remote users or devices to
connect to a server and access resources through a data network
connection.
177
SDH (Synchronous Digital Hierarchy):
Standard
for very high-speed fiber optic transmission which enables the
transport of packets of information at various speeds in a
secure manner and ease their management.
SDS (Short Data Service):
Allows messages to
be sent to individual subscribers or to a group through TETRA.
SHDSL (Symmetrical High-Bit-Rate Digital Subscriber Line):
A form of Digital Subscriber Line (DSL) service that
supports the same data rates for upstream and downstream traffic.
SIM (Subscriber Identity Module):
A component,
usually in the form of a miniature smart-card, used to associate
a mobile subscriber with a mobile network subscription.
SLA (Service Level Agreement):
A contract
between an operator and the end-user which stipulates and
commits the operator to a required level of service. An SLA
contains a specified level of service, support options,
enforcement or penalty provisions for services not provided, a
guaranteed level of system performance as relates to downtime or
uptime, a specified level of customer support and what software
or hardware will be provided and for what fee.
SMS (Short Message Service):
Two-way short
message service.
Storage Area Network (SAN):
A high-speed
subnetwork of shared storage devices. A storage device is a
machine that contains nothing but a disk or disks for storing
data.
Tbytes:
Terabytes. One terabyte equals
1,000,000,000,000
(10
12
) bytes.
TETRA (Trunked Mobile Radio Access):
A digital
mobile radio network that aims to provide special radio
communication services for use by professionals in large
organizations or small companies. This network differs from GSM
1800 and it is based on a European standardized technology,
currently deployed in most European countries. As a digital
network, it provides advanced voice services (for example, for
professionals talking in large groups or communicating through a
company dispatcher) and data services (e.g., transmitting the
location of a fleet of mobiles, downloading data files to
mobiles, etc).
Triple-play:
The provision of two broadband
services, high-speed internet access and television, and one
narrowband service, telephone, over a single broadband
connection.
TT&C (Telemetry, Tracking and
Control):
The subsystem that is used to position,
monitor and maintain the orbit of a satellite.
UMTS (or 3G-third generation):
A
third-generation technology in the context of mobile telephone
standards. The services associated with 3G include wide-area
wireless voice telephony and broadband wireless data, all in a
mobile environment.
Unbundling:
The obligation for operator owners
of local loops to provide to a third party operator pairs of
bare copper wires. The third party operator compensates the
operator owner for this use and installs its own transmission
equipment at the end of the local loop to connect the
subscribers with its own network. A housing of the equipment is
also offered to third parties, in addition to the unbundling.
VDSL (Very High Bitrate DSL):
A
next-generation Digital Subscriber Line (DSL) technology capable
of supporting high bandwidth applications such as
High-Definition TV (HDTV).
VDSL2:
Advanced standard of VDSL broadband
wireline communications technology.
VoIP (Voice over Internet Protocol):
Transport
of voice services using IP technology.
VPN (Virtual Private Network):
A service that
allows customers to have a closed/private/secure communication
connection between certain users within the public network.
WAP (Wireless Access Point):
Collection of
protocols and standards that enable communication and
information applications to run efficiently on mobile devices.
WDM (Wavelength
Division Multiplexing):
See Dense Wavelength
Division Multiplexing.
178
Wi-Fi (Wireless Fidelity):
A term used for
certain types of wireless local area network that comply with
the specifications in the 802.11 family.
WiMAX (Worldwide Interoperability for Microwave Access):
A wireless digital communication system intended for
wireless metropolitan area networks. It is used as an
alternative technology to cable and DSL.
WLAN (Wireless Local-area Network):
A type of
local-area network that uses high-frequency radio waves rather
than wires for the communication between nodes.
WSS (Wavelength Selective Switching):
An
optical device that directly routes different spectral
components from an input port to the desired output ports
without optoelectronic conversions.
xDSL
: A term that refers collectively to all different
types of DSL services.
179
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
ANNUAL
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009
IN ACCORDANCE WITH
INTERNATIONAL FINANCIAL REPORTING STANDARDS
as issued by the International Accounting Standards Board
(IASB)
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
REGISTRATION No S.A. 347/06/B/86/10
99 KIFFISIAS AVE 151 24 MAROUSSI ATHENS,
GREECE
INDEX TO
THE CONSOLIDATED FINANCIAL STATEMENTS
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Page
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F-2
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F-4
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F-6
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F-7
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F-8
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F-9
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F-10
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F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young (Hellas) Certified Auditors Accountants
S.A.
(2009-2008)
To the Board of Directors and Shareholders of Hellenic
Telecommunications Organization S.A.
We have audited the consolidated statements of financial
position of Hellenic Telecommunications Organization S.A. as of
December 31, 2009 and 2008, and the related consolidated
statements of income, comprehensive income, changes in equity
and cash flows for each of the two years in the period ended
December 31, 2009. These consolidated financial statements
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Hellenic Telecommunications
Organization S.A. at December 31, 2009 and 2008, and the
consolidated results of its operations and its cash flows for
each of the two years in the period ended December 31,
2009, in conformity with International Financial Reporting
Standards as issued by the International Accounting Standards
Board (IASB).
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Hellenic Telecommunications Organization S.A.s internal
control over financial reporting as of December 31, 2009,
based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) and our report dated June 4,
2010 expressed an unqualified opinion thereon.
/s/ Ernst & Young (Hellas) Certified Auditors
Accountants S.A.
Athens, Greece
June 4, 2010
F-2
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG
Certified Auditors AE (2007)
To Shareholders and the Board of Directors of
Hellenic Telecommunications Organization S.A.:
We have audited the accompanying consolidated statements of
income, comprehensive income, changes in equity and cash flows
of Hellenic Telecommunications Organization S.A. and
subsidiaries (the Company) for the year ended
December 31, 2007. These consolidated financial statements
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit of
consolidated financial statements includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
consolidated financial statements, assessing the accounting
principles used and significant estimates made by management,
and evaluating the overall consolidated financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated results of operations and cash flows of Hellenic
Telecommunications Organization S.A. and subsidiaries for the
year ended December 31, 2007, in conformity with
International Financial Reporting Standards as issued by the
International Accounting Standards Board (IASB).
/s/ KPMG Certified Auditors AE
Athens, Greece
June 24, 2008
F-3
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
Notes
|
|
|
2009
|
|
|
2008
|
|
|
|
(Amounts in millions of Euro)
|
|
|
ASSETS
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
4
|
|
|
|
5,625.1
|
|
|
|
5,872.8
|
|
Goodwill
|
|
|
5
|
|
|
|
551.8
|
|
|
|
525.1
|
|
Telecommunication licenses
|
|
|
6
|
|
|
|
362.2
|
|
|
|
329.5
|
|
Other intangible assets
|
|
|
7
|
|
|
|
520.6
|
|
|
|
550.7
|
|
Investments
|
|
|
8
|
|
|
|
157.0
|
|
|
|
156.6
|
|
Loans and advances to pension funds
|
|
|
18
|
|
|
|
154.5
|
|
|
|
194.5
|
|
Deferred tax assets
|
|
|
21
|
|
|
|
253.6
|
|
|
|
286.8
|
|
Other non-current assets
|
|
|
9
|
|
|
|
127.3
|
|
|
|
120.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
|
|
|
|
7,752.1
|
|
|
|
8,036.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
|
|
|
|
229.1
|
|
|
|
201.3
|
|
Trade receivables
|
|
|
10
|
|
|
|
1,153.0
|
|
|
|
1,194.2
|
|
Other financial assets
|
|
|
11
|
|
|
|
35.4
|
|
|
|
135.9
|
|
Other current assets
|
|
|
12
|
|
|
|
255.6
|
|
|
|
261.6
|
|
Cash and cash equivalents
|
|
|
13
|
|
|
|
868.8
|
|
|
|
1,427.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
2,541.9
|
|
|
|
3,220.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets classified as held for sale
|
|
|
8
|
|
|
|
|
|
|
|
167.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
10,294.0
|
|
|
|
11,425.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these financial
statements.
F-4
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
CONSOLIDATED
STATEMENT OF FINANCIAL
POSITION (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
Notes
|
|
|
2009
|
|
|
2008
|
|
|
|
(Amounts in millions of Euro)
|
|
|
EQUITY AND LIABILITIES
|
Equity attributable to owners of the Parent
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
14
|
|
|
|
1,171.5
|
|
|
|
1,171.5
|
|
Share premium
|
|
|
14
|
|
|
|
505.1
|
|
|
|
497.9
|
|
Statutory reserve
|
|
|
15
|
|
|
|
344.1
|
|
|
|
330.2
|
|
Foreign exchange and other reserves
|
|
|
15
|
|
|
|
(53.3
|
)
|
|
|
73.9
|
|
Changes in non-controlling interests
|
|
|
8
|
|
|
|
(3,321.5
|
)
|
|
|
(3,315.2
|
)
|
Retained earnings
|
|
|
15
|
|
|
|
2,546.1
|
|
|
|
2,553.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity attributable to owners of the Parent
|
|
|
|
|
|
|
1,192.0
|
|
|
|
1,311.9
|
|
Non-controlling Interests
|
|
|
|
|
|
|
757.7
|
|
|
|
861.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
|
|
1,949.7
|
|
|
|
2,173.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term borrowings
|
|
|
17
|
|
|
|
5,385.7
|
|
|
|
5,409.6
|
|
Provision for staff retirement indemnities
|
|
|
18
|
|
|
|
266.5
|
|
|
|
254.9
|
|
Provision for voluntary leave scheme
|
|
|
18
|
|
|
|
109.9
|
|
|
|
107.2
|
|
Provision for youth account
|
|
|
18
|
|
|
|
282.3
|
|
|
|
286.3
|
|
Deferred tax liabilities
|
|
|
21
|
|
|
|
113.7
|
|
|
|
116.7
|
|
Other non-current liabilities
|
|
|
19
|
|
|
|
77.9
|
|
|
|
74.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
|
|
|
|
6,236.0
|
|
|
|
6,249.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
|
|
|
|
|
813.2
|
|
|
|
943.9
|
|
Short-term borrowings
|
|
|
20
|
|
|
|
3.3
|
|
|
|
5.1
|
|
Short-term portion of long-term borrowings
|
|
|
17
|
|
|
|
32.9
|
|
|
|
633.0
|
|
Income tax payable
|
|
|
|
|
|
|
163.2
|
|
|
|
58.0
|
|
Deferred revenue
|
|
|
|
|
|
|
256.6
|
|
|
|
228.4
|
|
Provision for voluntary leave scheme
|
|
|
18
|
|
|
|
149.0
|
|
|
|
275.8
|
|
Dividends payable
|
|
|
16
|
|
|
|
4.2
|
|
|
|
3.8
|
|
Other current liabilities
|
|
|
22
|
|
|
|
685.9
|
|
|
|
838.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
2,108.3
|
|
|
|
2,986.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities directly associated with the assets classified as
held for sale
|
|
|
8
|
|
|
|
|
|
|
|
16.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EQUITY AND LIABILITIES
|
|
|
|
|
|
|
10,294.0
|
|
|
|
11,425.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these financial
statements.
F-5
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
CONSOLIDATED
INCOME STATEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Notes
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Amounts in millions of Euro except per share data)
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic telephony
|
|
|
23
|
|
|
|
1,619.6
|
|
|
|
1,814.2
|
|
|
|
2,022.2
|
|
International telephony
|
|
|
23
|
|
|
|
251.1
|
|
|
|
286.9
|
|
|
|
304.5
|
|
Mobile telephony
|
|
|
23
|
|
|
|
2,396.2
|
|
|
|
2,470.8
|
|
|
|
2,210.0
|
|
Other revenue
|
|
|
23
|
|
|
|
1,717.2
|
|
|
|
1,835.4
|
|
|
|
1,783.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
|
|
|
|
5,984.1
|
|
|
|
6,407.3
|
|
|
|
6,319.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll and employee benefits
|
|
|
|
|
|
|
(1,190.8
|
)
|
|
|
(1,168.4
|
)
|
|
|
(1,149.0
|
)
|
Provision for staff retirement indemnities and youth account
|
|
|
18
|
|
|
|
(95.5
|
)
|
|
|
(112.6
|
)
|
|
|
(92.3
|
)
|
Cost of early retirement program
|
|
|
18
|
|
|
|
30.3
|
|
|
|
(50.2
|
)
|
|
|
(22.1
|
)
|
Charges from international operators
|
|
|
|
|
|
|
(184.0
|
)
|
|
|
(173.9
|
)
|
|
|
(182.7
|
)
|
Charges from domestic operators
|
|
|
|
|
|
|
(516.3
|
)
|
|
|
(642.3
|
)
|
|
|
(655.3
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
(1,155.3
|
)
|
|
|
(1,213.0
|
)
|
|
|
(1,171.8
|
)
|
Cost of telecommunications equipment
|
|
|
|
|
|
|
(475.1
|
)
|
|
|
(633.4
|
)
|
|
|
(672.8
|
)
|
Other operating expenses
|
|
|
24
|
|
|
|
(1,396.5
|
)
|
|
|
(1,355.8
|
)
|
|
|
(1,326.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
|
|
|
|
(4,983.2
|
)
|
|
|
(5,349.6
|
)
|
|
|
(5,272.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before financial activities
|
|
|
|
|
|
|
1,000.9
|
|
|
|
1,057.7
|
|
|
|
1,046.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income and expense from financial activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
(325.2
|
)
|
|
|
(343.7
|
)
|
|
|
(238.7
|
)
|
Interest income
|
|
|
|
|
|
|
61.6
|
|
|
|
72.3
|
|
|
|
77.8
|
|
Foreign exchange differences, net
|
|
|
|
|
|
|
10.2
|
|
|
|
11.8
|
|
|
|
(4.8
|
)
|
Dividend income
|
|
|
8
|
|
|
|
9.6
|
|
|
|
12.2
|
|
|
|
16.8
|
|
Gains from investments
|
|
|
8
|
|
|
|
23.6
|
|
|
|
33.7
|
|
|
|
256.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total profit /(loss) from financial activities
|
|
|
|
|
|
|
(220.2
|
)
|
|
|
(213.7
|
)
|
|
|
107.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax
|
|
|
|
|
|
|
780.7
|
|
|
|
844.0
|
|
|
|
1,154.8
|
|
Income tax expense
|
|
|
21
|
|
|
|
(410.0
|
)
|
|
|
(246.2
|
)
|
|
|
(381.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
|
|
|
|
370.7
|
|
|
|
597.8
|
|
|
|
773.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
|
|
|
|
|
374.0
|
|
|
|
601.8
|
|
|
|
662.6
|
|
Non-controlling interests
|
|
|
|
|
|
|
(3.3
|
)
|
|
|
(4.0
|
)
|
|
|
110.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
370.7
|
|
|
|
597.8
|
|
|
|
773.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
25
|
|
|
|
0.7630
|
|
|
|
1.2278
|
|
|
|
1.3518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
25
|
|
|
|
0.7630
|
|
|
|
1.2129
|
|
|
|
1.3518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these financial
statements.
F-6
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Amounts in millions of Euro)
|
|
|
Profit for the year
|
|
|
370.7
|
|
|
|
597.8
|
|
|
|
773.0
|
|
Foreign currency translation
|
|
|
(178.4
|
)
|
|
|
(235.3
|
)
|
|
|
(167.3
|
)
|
Net loss on cash flow hedge
|
|
|
(0.5
|
)
|
|
|
(6.3
|
)
|
|
|
|
|
Fair value movement in available for sale financial assets
|
|
|
3.5
|
|
|
|
(34.8
|
)
|
|
|
9.8
|
|
Other comprehensive income / (loss) for the year
|
|
|
(175.4
|
)
|
|
|
(276.4
|
)
|
|
|
(157.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year
|
|
|
195.3
|
|
|
|
321.4
|
|
|
|
615.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
|
246.8
|
|
|
|
417.4
|
|
|
|
589.8
|
|
Non-controlling interests
|
|
|
(51.5
|
)
|
|
|
(96.0
|
)
|
|
|
25.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195.3
|
|
|
|
321.4
|
|
|
|
615.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these financial
statements.
F-7
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributed to Equity Holders of the Parent
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
Changes in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
|
|
|
Share
|
|
|
Statutory
|
|
|
Other
|
|
|
Non-Controlling
|
|
|
Retained
|
|
|
|
|
|
Non-Controlling
|
|
|
Total
|
|
|
|
Capital
|
|
|
Premium
|
|
|
Reserve
|
|
|
Reserves
|
|
|
Interests
|
|
|
Earnings
|
|
|
Total
|
|
|
Interest
|
|
|
Equity
|
|
|
|
(Amounts in millions of Euro)
|
|
|
Balance as at January 1, 2007
|
|
|
1,171.5
|
|
|
|
485.9
|
|
|
|
283.3
|
|
|
|
331.1
|
|
|
|
(580.3
|
)
|
|
|
1,973.3
|
|
|
|
3,664.8
|
|
|
|
1,223.9
|
|
|
|
4,888.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
662.6
|
|
|
|
662.6
|
|
|
|
110.4
|
|
|
|
773.0
|
|
Other comprehensive income / (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(72.8
|
)
|
|
|
|
|
|
|
|
|
|
|
(72.8
|
)
|
|
|
(84.7
|
)
|
|
|
(157.5
|
)
|
Total comprehensive income / (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(72.8
|
)
|
|
|
|
|
|
|
662.6
|
|
|
|
589.8
|
|
|
|
25.7
|
|
|
|
615.5
|
|
Transfer to statutory reserve
|
|
|
|
|
|
|
|
|
|
|
28.8
|
|
|
|
|
|
|
|
|
|
|
|
(28.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(269.6
|
)
|
|
|
(269.6
|
)
|
|
|
(81.2
|
)
|
|
|
(350.8
|
)
|
Net change of participation in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,953.5
|
)
|
|
|
|
|
|
|
(1,953.5
|
)
|
|
|
(145.3
|
)
|
|
|
(2,098.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2007
|
|
|
1,171.5
|
|
|
|
485.9
|
|
|
|
312.1
|
|
|
|
258.3
|
|
|
|
(2,533.8
|
)
|
|
|
2,337.5
|
|
|
|
2,031.5
|
|
|
|
1,023.1
|
|
|
|
3,054.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 1, 2008
|
|
|
1,171.5
|
|
|
|
485.9
|
|
|
|
312.1
|
|
|
|
258.3
|
|
|
|
(2,533.8
|
)
|
|
|
2,337.5
|
|
|
|
2,031.5
|
|
|
|
1,023.1
|
|
|
|
3,054.6
|
|
Profit for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
601.8
|
|
|
|
601.8
|
|
|
|
(4.0
|
)
|
|
|
597.8
|
|
Other comprehensive income / (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(184.4
|
)
|
|
|
|
|
|
|
|
|
|
|
(184.4
|
)
|
|
|
(92.0
|
)
|
|
|
(276.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income / (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(184.4
|
)
|
|
|
|
|
|
|
601.8
|
|
|
|
417.4
|
|
|
|
(96.0
|
)
|
|
|
321.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer to statutory reserve
|
|
|
|
|
|
|
|
|
|
|
18.1
|
|
|
|
|
|
|
|
|
|
|
|
(18.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(367.6
|
)
|
|
|
(367.6
|
)
|
|
|
|
|
|
|
(367.6
|
)
|
Share-based payment
|
|
|
|
|
|
|
12.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.0
|
|
|
|
|
|
|
|
12.0
|
|
Net change of participation in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(781.4
|
)
|
|
|
|
|
|
|
(781.4
|
)
|
|
|
(65.8
|
)
|
|
|
(847.2
|
)
|
Balance as at December 31, 2008
|
|
|
1,171.5
|
|
|
|
497.9
|
|
|
|
330.2
|
|
|
|
73.9
|
|
|
|
(3,315.2
|
)
|
|
|
2,553.6
|
|
|
|
1,311.9
|
|
|
|
861.3
|
|
|
|
2,173.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 1, 2009
|
|
|
1,171.5
|
|
|
|
497.9
|
|
|
|
330.2
|
|
|
|
73.9
|
|
|
|
(3,315.2
|
)
|
|
|
2,553.6
|
|
|
|
1,311.9
|
|
|
|
861.3
|
|
|
|
2,173.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
374.0
|
|
|
|
374.0
|
|
|
|
(3.3
|
)
|
|
|
370.7
|
|
Other comprehensive income / (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(127.2
|
)
|
|
|
|
|
|
|
|
|
|
|
(127.2
|
)
|
|
|
(48.2
|
)
|
|
|
(175.4
|
)
|
Total comprehensive income / (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(127.2
|
)
|
|
|
|
|
|
|
374.0
|
|
|
|
246.8
|
|
|
|
(51.5
|
)
|
|
|
195.3
|
|
Transfer to statutory reserve
|
|
|
|
|
|
|
|
|
|
|
13.9
|
|
|
|
|
|
|
|
|
|
|
|
(13.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(367.6
|
)
|
|
|
(367.6
|
)
|
|
|
|
|
|
|
(367.6
|
)
|
Share-based payment
|
|
|
|
|
|
|
7.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.2
|
|
|
|
|
|
|
|
7.2
|
|
Net change of participation in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4.7
|
)
|
|
|
|
|
|
|
(4.7
|
)
|
|
|
(43.7
|
)
|
|
|
(48.4
|
)
|
Obligation to acquire non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.6
|
)
|
|
|
|
|
|
|
(1.6
|
)
|
|
|
(8.4
|
)
|
|
|
(10.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2009
|
|
|
1,171.5
|
|
|
|
505.1
|
|
|
|
344.1
|
|
|
|
(53.3
|
)
|
|
|
(3,321.5
|
)
|
|
|
2,546.1
|
|
|
|
1,192.0
|
|
|
|
757.7
|
|
|
|
1,949.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these financial
statements.
F-8
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Notes
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Amounts in millions of Euro)
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax
|
|
|
|
|
|
|
780.7
|
|
|
|
844.0
|
|
|
|
1,154.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
1,155.3
|
|
|
|
1,213.0
|
|
|
|
1,171.8
|
|
Share-based payment
|
|
|
28
|
|
|
|
7.2
|
|
|
|
12.0
|
|
|
|
|
|
Cost of early retirement program
|
|
|
18
|
|
|
|
(30.3
|
)
|
|
|
50.2
|
|
|
|
22.1
|
|
Provision for staff retirement indemnities and youth account
|
|
|
18
|
|
|
|
95.5
|
|
|
|
112.6
|
|
|
|
92.3
|
|
Other provisions
|
|
|
24
|
|
|
|
|
|
|
|
2.1
|
|
|
|
18.1
|
|
Provisions for doubtful accounts
|
|
|
24
|
|
|
|
107.0
|
|
|
|
119.8
|
|
|
|
88.0
|
|
Foreign exchange differences, net
|
|
|
|
|
|
|
(10.2
|
)
|
|
|
(11.8
|
)
|
|
|
4.8
|
|
Interest income
|
|
|
|
|
|
|
(61.6
|
)
|
|
|
(72.3
|
)
|
|
|
(77.8
|
)
|
Dividend income, (gains)/losses and impairment of investments
|
|
|
|
|
|
|
(33.2
|
)
|
|
|
(45.9
|
)
|
|
|
(273.6
|
)
|
Release of EDEKT fund prepayment
|
|
|
18
|
|
|
|
35.2
|
|
|
|
35.2
|
|
|
|
35.2
|
|
Interest expense
|
|
|
|
|
|
|
325.2
|
|
|
|
343.7
|
|
|
|
238.7
|
|
Working capital adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease/(increase) in inventories
|
|
|
|
|
|
|
(27.3
|
)
|
|
|
(9.2
|
)
|
|
|
(2.0
|
)
|
Decrease/(increase) in accounts receivable
|
|
|
|
|
|
|
(75.7
|
)
|
|
|
(123.4
|
)
|
|
|
(127.9
|
)
|
(Decrease)/increase in liabilities (except borrowings)
|
|
|
|
|
|
|
(72.1
|
)
|
|
|
(91.7
|
)
|
|
|
56.6
|
|
Plus/(Minus):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment for early retirement programs
|
|
|
|
|
|
|
(130.3
|
)
|
|
|
(91.6
|
)
|
|
|
(265.8
|
)
|
Payment of staff retirement indemnities and youth account, net
of employees contributions
|
|
|
|
|
|
|
(88.3
|
)
|
|
|
(76.0
|
)
|
|
|
(83.3
|
)
|
Interest and related expenses paid
|
|
|
|
|
|
|
(276.4
|
)
|
|
|
(212.9
|
)
|
|
|
(216.4
|
)
|
Income taxes paid
|
|
|
|
|
|
|
(299.3
|
)
|
|
|
(240.2
|
)
|
|
|
(384.9
|
)
|
Settlement of receivables due from disposed subsidiaries
|
|
|
8
|
|
|
|
16.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from Operating Activities
|
|
|
|
|
|
|
1,418.0
|
|
|
|
1,757.6
|
|
|
|
1,450.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of non-controlling interest and participation in
subsidiaries share capital increase
|
|
|
8
|
|
|
|
(48.4
|
)
|
|
|
(849.4
|
)
|
|
|
(2,119.0
|
)
|
Acquisition of subsidiary net of cash acquired
|
|
|
8
|
|
|
|
(197.8
|
)
|
|
|
|
|
|
|
|
|
Purchase of financial assets
|
|
|
11
|
|
|
|
(308.0
|
)
|
|
|
(138.0
|
)
|
|
|
|
|
Sale or maturity of financial assets
|
|
|
11
|
|
|
|
412.2
|
|
|
|
46.8
|
|
|
|
|
|
Loans granted
|
|
|
|
|
|
|
|
|
|
|
(1.3
|
)
|
|
|
(121.6
|
)
|
Other long term liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144.5
|
|
Repayments of loans receivable
|
|
|
|
|
|
|
9.7
|
|
|
|
|
|
|
|
|
|
Loans proceeds in conjunction with disposal of subsidiaries
|
|
|
8
|
|
|
|
78.5
|
|
|
|
|
|
|
|
|
|
Purchase of property plant and equipment and intangible assets
|
|
|
|
|
|
|
(890.9
|
)
|
|
|
(964.0
|
)
|
|
|
(1,101.3
|
)
|
Proceeds from disposal of subsidiaries
|
|
|
8
|
|
|
|
86.1
|
|
|
|
24.0
|
|
|
|
352.8
|
|
Interest received
|
|
|
|
|
|
|
61.6
|
|
|
|
66.7
|
|
|
|
52.1
|
|
Dividends received
|
|
|
|
|
|
|
6.9
|
|
|
|
9.2
|
|
|
|
12.3
|
|
Return of capital invested in subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements of other current liabilities
|
|
|
22
|
|
|
|
(168.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from/(Used in) Investing Activities
|
|
|
|
|
|
|
(958.6
|
)
|
|
|
(1,806.0
|
)
|
|
|
(2,780.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from non-controlling interests for their participation
in subsidiaries share capital increase
|
|
|
|
|
|
|
|
|
|
|
16.9
|
|
|
|
12.6
|
|
Proceeds from loans granted and issued
|
|
|
|
|
|
|
|
|
|
|
2,705.5
|
|
|
|
1,500.0
|
|
Repayment of loans
|
|
|
|
|
|
|
(637.1
|
)
|
|
|
(2,183.4
|
)
|
|
|
(558.4
|
)
|
Dividends paid to Companys owners
|
|
|
|
|
|
|
(367.2
|
)
|
|
|
(367.8
|
)
|
|
|
(269.3
|
)
|
Dividends paid to non-controlling interests
|
|
|
|
|
|
|
(1.2
|
)
|
|
|
(5.9
|
)
|
|
|
(81.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from/(Used in) Financing Activities
|
|
|
|
|
|
|
(1,005.5
|
)
|
|
|
165.3
|
|
|
|
603.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in Cash and Cash Equivalents
|
|
|
|
|
|
|
(546.1
|
)
|
|
|
116.9
|
|
|
|
(726.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, at the beginning of the year
|
|
|
|
|
|
|
1,427.8
|
|
|
|
1,316.3
|
|
|
|
2,042.5
|
|
Net foreign exchange differences
|
|
|
|
|
|
|
(14.8
|
)
|
|
|
(3.5
|
)
|
|
|
|
|
Cash and Cash Equivalents classified as held for
sale/disposed of
|
|
|
8
|
|
|
|
1.9
|
|
|
|
(1.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, at the end of the year
|
|
|
13
|
|
|
|
868.8
|
|
|
|
1,427.8
|
|
|
|
1,316.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these financial
statements.
F-9
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
Hellenic Telecommunications Organization S.A.
(Company, OTE or parent),
was incorporated as a société anonyme in Athens,
Greece in 1949, and is listed in the Greek Register of
Sociétés Anonymes (M.A.E.) with the unique number (AP.
MAE) 347/06/B/86/10. The registered office is located at 99
Kifissias Avenue 151 24 Maroussi Athens, Greece, and
the website is www.ote.gr. The Company is listed on the Athens
Exchange and New York Stock Exchange.
OTEs principal activities are the provision of
telecommunications and related services.
Effective February 6, 2009, the financial statements are
included in the consolidated financial statements of DEUTSCHE
TELEKOM AG (full consolidation method), which has its registered
office in Germany and holds a 30.00% plus one share interest in
OTE as of December 31, 2009.
The OTE Group (Group) includes other than the parent
Company, all the entities which OTE controls directly or
indirectly.
The Annual Consolidated Financial Statements (financial
statements) as of December 31, 2009 and the year then
ended, were approved for issuance by the Board of Directors on
June 4, 2010.
The total numbers of Group employees as of December 31,
2009 and 2008 were as follows:
|
|
|
|
|
|
December 31, 2009
|
|
|
32,864
|
|
December 31, 2008
|
|
|
33,610
|
|
December 31, 2007
|
|
|
34,350
|
|
The consolidated financial statements include the financial
statements of OTE and the following subsidiaries which OTE
controls directly or indirectly:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Groups
|
|
|
|
|
|
|
Ownership Interest
|
Company Name
|
|
Line of Business
|
|
Country
|
|
2009
|
|
2008
|
|
COSMOTE MOBILE TELECOMMUNICATIONS S.A. (COSMOTE)
|
|
Mobile telecommunications services
|
|
Greece
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
OTE INTERNATIONAL INVESTMENTS LTD
|
|
Investment holding company
|
|
Cyprus
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
HELLAS SAT CONSORTIUM LIMITED (HELLAS-SAT)
|
|
Satellite communications
|
|
Cyprus
|
|
|
99.05
|
%
|
|
|
99.05
|
%
|
COSMO-ONE HELLAS MARKET SITE S.A. (COSMO-ONE)
|
|
E-commerce services
|
|
Greece
|
|
|
61.74
|
%
|
|
|
61.74
|
%
|
VOICENET S.A. (VOICENET)
|
|
Telecommunications services
|
|
Greece
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
HELLASCOM S.A. (HELLASCOM)
|
|
Telecommunication projects
|
|
Greece
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
OTE PLC
|
|
Financing services
|
|
U.K.
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
OTE SAT-MARITEL S.A. (OTE SAT MARITEL)
|
|
Satellite telecommunications services
|
|
Greece
|
|
|
94.08
|
%
|
|
|
94.08
|
%
|
OTE PLUS S.A. (OTE PLUS)
|
|
Consulting services
|
|
Greece
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
OTE ESTATE S.A. (OTE ESTATE)
|
|
Real estate
|
|
Greece
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
OTE INTERNATIONAL SOLUTIONS S.A. (OTE-GLOBE)
|
|
Wholesale telephony services
|
|
Greece
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
HATWAVE
HELLENIC-AMERICAN
TELECOMMUNICATIONS WAVE LTD. (HATWAVE)
|
|
Investment holding company
|
|
Cyprus
|
|
|
52.67
|
%
|
|
|
52.67
|
%
|
F-10
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Groups
|
|
|
|
|
|
|
Ownership Interest
|
Company Name
|
|
Line of Business
|
|
Country
|
|
2009
|
|
2008
|
|
OTE INSURANCE AGENCY S.A. (OTE INSURANCE)
|
|
Insurance brokerage services
|
|
Greece
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
OTE ACADEMY S.A. (OTE ACADEMY)
|
|
Training services
|
|
Greece
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
ROMTELECOM S.A. (ROMTELECOM)
|
|
Fixed line telephony services
|
|
Romania
|
|
|
54.01
|
%
|
|
|
54.01
|
%
|
S.C. COSMOTE ROMANIAN MOBILE TELECOMMUNICATIONS S.A.
(COSMOTE ROMANIA)
|
|
Mobile telecommunications services
|
|
Romania
|
|
|
86.20
|
%
|
|
|
86.20
|
%
|
OTE MTS HOLDING B.V.
|
|
Investment holding company
|
|
Holland
|
|
|
|
|
|
|
100.00
|
%
|
COSMOFON MOBILE TELECOMMUNICATIONS SERVICES A.D.
SKOPJE (COSMOFON)
|
|
Mobile telecommunications services
|
|
Skopje
|
|
|
|
|
|
|
100.00
|
%
|
COSMO BULGARIA MOBILE EAD (GLOBUL)
|
|
Mobile telecommunications services
|
|
Bulgaria
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
COSMO-HOLDING ALBANIA S.A. (CHA)
|
|
Investment holding company
|
|
Greece
|
|
|
97.00
|
%
|
|
|
97.00
|
%
|
ALBANIAN MOBILE COMMUNICATIONS Sh.a (AMC)
|
|
Mobile telecommunications services
|
|
Albania
|
|
|
95.03
|
%
|
|
|
82.45
|
%
|
COSMOHOLDING CYPRUS LTD (COSMOHOLDING CYPRUS)
|
|
Investment holding company
|
|
Cyprus
|
|
|
100.00
|
%
|
|
|
90.00
|
%
|
GERMANOS S.A. (GERMANOS)
|
|
Retail services
|
|
Greece
|
|
|
100.00
|
%
|
|
|
90.00
|
%
|
E-VALUE
S.A.
|
|
Marketing Services
|
|
Greece
|
|
|
100.00
|
%
|
|
|
90.00
|
%
|
GERMANOS TELECOM SKOPJE S.A.
|
|
Retail services
|
|
Skopje
|
|
|
|
|
|
|
90.00
|
%
|
GERMANOS TELECOM ROMANIA S.A.
|
|
Retail services
|
|
Romania
|
|
|
100.00
|
%
|
|
|
90.00
|
%
|
SUNLIGHT ROMANIA S.R.L. FILIALA
|
|
Retail services
|
|
Romania
|
|
|
100.00
|
%
|
|
|
90.00
|
%
|
GERMANOS TELECOM BULGARIA A.D.
|
|
Retail services
|
|
Bulgaria
|
|
|
100.00
|
%
|
|
|
90.00
|
%
|
MOBILBEEEP LTD
|
|
Retail services
|
|
Greece
|
|
|
100.00
|
%
|
|
|
90.00
|
%
|
OTE PROPERTIES
|
|
Real estate
|
|
Greece
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
HELLAS SAT S.A.
|
|
Satellite communications
|
|
Greece
|
|
|
99.05
|
%
|
|
|
99.05
|
%
|
OTE INVESTMENT SERVICES S.A.
|
|
Investment holding company
|
|
Greece
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
OTE PLUS BULGARIA
|
|
Consulting services
|
|
Bulgaria
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
COSMOHOLDING ROMANIA LTD
|
|
Investment holding company
|
|
Cyprus
|
|
|
100.00
|
%
|
|
|
|
|
TELEMOBIL S.A. (ZAPP)
|
|
Mobile telecommunications services
|
|
Romania
|
|
|
99.99
|
%
|
|
|
|
|
E-VALUE
DEBTORS AWARENESS ONE PERSON LTD
(E-VALUE
LTD)
|
|
Overdue accounts
|
|
Greece
|
|
|
100.00
|
%
|
|
|
|
|
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board
(IASB).
The financial statements have been prepared on a historical cost
basis, except for financial assets at fair value through profit
and loss,
available-for-sale
financial assets and derivative financial instruments which have
been measured at fair values in accordance with IFRS. The
carrying values of recognized assets and liabilities that are
F-11
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
hedged items in fair value hedges that would otherwise be
carried at amortized cost, are adjusted to record changes in the
fair values attributable to the risks that are being hedged in
effective hedge relationships.
The financial statements are presented in millions of Euro,
except when otherwise indicated.
Significant
accounting judgments, estimates and
assumptions
The preparation of the financial statements requires management
to make estimates and judgments that affect the reported amount
of assets, liabilities, revenues and expenses and related
disclosures of contingent assets and liabilities. On an ongoing
basis, management evaluates its estimates, including those
related to legal contingencies, allowance for doubtful accounts,
the estimated useful life of non financial assets, impairment of
property, plant and equipment, impairment of goodwill and
intangible assets, reserve for staff retirement indemnities and
youth account, recognition of revenues and expenses and income
taxes. Management bases its estimates on historical experience
and on various other assumptions that are believed to be
reasonable, the results of which form the bases for making
judgments about the carrying value of assets and liabilities
that are not readily available from other sources. Actual
results may differ from these estimates under different
assumptions or conditions.
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are discussed below:
Impairment
of goodwill
The Group determines whether goodwill is impaired at least on an
annual basis. This requires an estimation of the value in use of
the cash generating units to which the goodwill is allocated.
Estimating the value in use requires the Group to make an
estimate of the expected future cash flows from the cash
generating unit and also to choose a suitable discount rate in
order to calculate the present value of those cash flows.
Further details on impairment testing are disclosed in
Note 5.
Provision
for income taxes
The provision for income taxes in accordance with IAS 12
Income taxes, are the amounts expected to be paid to
the taxation authorities and includes provision for current
income taxes reported and the potential additional tax that may
be imposed as a result of audits by the taxation authorities.
Group entities are subject to income taxes in various
jurisdictions and significant management judgment is required in
determining provision for income taxes. Actual income taxes
could vary from these estimates due to future changes in income
tax law, significant changes in the jurisdictions in which the
Group operates, or unpredicted results from the final
determination of each years liability by taxing
authorities. These changes could have a significant impact on
the Groups financial position. Where the actual additional
taxes payable are different from the amounts that were initially
recorded, these differences will impact the income tax
provisions in the period in which such a determination is made.
Further details are provided in Note 21.
Deferred
tax assets
Deferred income tax assets and liabilities have been provided
for the tax effects of temporary differences between the
carrying amount and tax base of such assets and liabilities,
using enacted tax rates in effect in the years in which the
differences are expected to reverse. Deferred tax assets are
recognized for all deductible temporary differences, carry
forward of unused tax credits and unused tax losses, to the
extent that it is probable that taxable profit will be available
against which the deductible temporary differences and the carry
forward of unused tax credits and unused losses can be utilized.
The Group has considered future taxable income and followed
ongoing feasible and prudent tax planning strategy in the
assessment of the recoverability of deferred tax assets. The
accounting estimate related to deferred tax assets requires
management to make assumptions regarding the timing
F-12
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
of future events, including the probability of expected future
taxable income and available tax planning opportunities. Further
details are provided in Note 21.
Allowance
for doubtful trade receivables
The Group establishes an allowance for doubtful accounts
sufficient to cover reasonably estimable loss for these
accounts. Because of the number of accounts, it is not practical
to review the collectibility of each account; therefore, at each
reporting date accounts receivable are assessed based on
historical trends, statistical information, future expectations
regarding suspended or cancelled customers, reactivation rates
for suspended customers and collection rates for amounts due
from cancelled customers. Other operators are examined and
assessed on an individual basis. The balance of such allowance
for doubtful accounts is adjusted by recording a charge to the
income statement of the reporting period. Any amount written off
with respect to customer account balances is charged against the
existing allowance for doubtful accounts. Additional details are
provided in Note 10 and Note 30.
Post
retirement and other defined benefit plans
Staff Retirement Indemnities and Youth Account obligations are
calculated at the discounted present value of the future
retirement benefits and benefits to children of employees deemed
to have accrued at year-end, based on the assumption that
employees earn Retirement and Youth Account benefits uniformly
throughout the working period. Retirement and Youth Account
obligations are calculated on the basis of financial and
actuarial assumptions that require management to make
assumptions regarding discount rates, pay increases, mortality
and disability rates, retirement ages and other factors. Changes
in these key assumptions can have a significant impact on the
obligation and pension costs for the period. Net pension costs
for the period consist of the present value of benefits earned
in the year, interest costs on the benefits obligation, prior
service costs and actuarial gains or losses. The Staff
Retirement Indemnities and Youth Account benefit obligations are
not funded. Due to the long term nature of these defined benefit
plans these assumptions are subject to a significant degree of
uncertainty. Further details are provided in Note 18.
Estimating
the useful life of non financial assets
The Group must estimate the useful life of property, plant and
equipment and finite intangible assets recognized at acquisition
or as a result of a business combination. These estimates are
revisited at least on an annual basis taking into account new
developments and market conditions.
Contingent
liabilities
The Group is currently involved in various claims and legal
proceedings. Periodically, the Group reviews the status of each
significant matter and assesses potential financial exposure,
based in part on the advice of legal counsel. If the potential
loss from any claim or legal proceeding is considered probable
and the amount can be reliably estimated, the Group recognizes a
liability for the estimated loss. Significant judgment is
required in both the determination of probability and the
determination as to whether an exposure is reasonably estimable.
With respect to the retail customers, and because of
uncertainties related to these matters, provisions are based
only on the most accurate information available at the reporting
date. As additional information becomes available, the Group
reassesses the potential liability related to pending claims and
litigation and may revise assessments of the probability of an
unfavourable outcome and the related estimate of potential loss.
Such revisions in the estimates of the potential liabilities
could have a material impact on the Groups financial
position and results of operations.
Impairment
of property, plant and equipment
The determination of impairment of property, plant and equipment
involves the use of estimates that include, but are not limited
to, the cause, timing and amount of the impairment. Impairment
is based on a large number of
F-13
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
factors, such as changes in current competitive conditions,
expectations of growth in the telecommunications industry,
increased cost of capital, changes in the future availability of
financing, technological obsolescence, discontinuance of
services, current replacement costs, prices paid in comparable
transactions and other changes in circumstances that indicate an
impairment exists. The recoverable amount is typically
determined using a discounted cash flow method which
incorporates reasonable market participant assumptions. The
identification of impairment indicators, as well as the
estimation of future cash flows and the determination of fair
values for assets (or groups of assets) require management to
make significant judgments concerning the identification and
validation of impairment indicators, expected cash flows,
applicable discount rates, useful lives and residual values.
Customer
activation fees
Installation and activation fees are received from new
customers. These fees (and related directly attributable costs)
are deferred and amortized over the expected duration of the
customer relationship. If management estimates of the duration
of the customer relationship are revised, significant
differences may result in the timing of revenue for any period.
New
pronouncements and amendments
The following new and amended IFRS and IFRIC interpretations
have been issued but are not effective for the financial year
beginning January 1, 2009. They have not been early adopted
and the Group is in the process of assessing their impact, if
any, on the financial statements:
|
|
|
|
|
IFRIC 17 Distributions of Non-cash Assets to
Owners:
This interpretation is effective for
annual periods beginning on or after July 1, 2009 with
early application permitted. The interpretation provides
guidance on how to account for non-cash distributions to owners.
The interpretation clarifies when to recognize a liability, how
to measure it and the associated assets, and when to derecognize
the asset and liability.
|
|
|
|
IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments:
The interpretation is effective for
annual periods beginning on or after July 1, 2010. This
interpretation addresses the accounting treatment when there is
a renegotiation between the entity and the creditor regarding
the terms of a financial liability and the creditor agrees to
accept the entitys equity instruments to settle the
financial liability fully or partially. IFRIC 19 clarifies such
equity instruments are consideration paid in
accordance with paragraph 41 of IAS 39. As a result, the
financial liability is derecognized and the equity instruments
issued are treated as consideration paid to extinguish that
financial liability.
|
|
|
|
IFRIC 14 Prepayments of a Minimum Funding Requirement
(Amended):
The amendment is effective for annual
periods beginning on or after January 1, 2011. The purpose
of this amendment was to permit entities to recognize as an
asset some voluntary prepayments for minimum funding
contributions. Earlier application is permitted and must be
applied retrospectively.
|
|
|
|
IFRS 3 Business Combinations (Revised) and IAS 27
Consolidated and Separate Financial Statements
(Amended):
The revision and amendment is
effective for annual periods beginning on or after July 1,
2009. The revised IFRS 3 introduces a number of changes in the
accounting for business combinations which impacts the amount of
goodwill recognized, the reported results in the period that an
acquisition occurs, and future reported results. Such changes
include the expensing of acquisition-related costs and
recognizing subsequent changes in fair value of contingent
consideration in the income statement (rather than by adjusting
goodwill). The amended IAS 27 requires that a change in
ownership interest of a subsidiary is accounted for as an equity
transaction. Therefore such a change will have no impact on
goodwill, nor will it give raise to a gain or loss. Furthermore
the amended standard changes the accounting for losses incurred
by the subsidiary as well as the loss of control of a
subsidiary. The changes introduced by IFRS 3 (Revised) and IAS
27 (Amendment) must be applied prospectively and will affect
future acquisitions and transactions with non-controlling
interests.
|
F-14
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
IAS 39 Financial Instruments: Recognition and Measurement
(Amended) eligible hedged items:
The
amendment is effective for annual periods beginning on or after
July 1, 2009. The amendment clarifies that an entity is
permitted to designate a portion of the fair value changes or
cash flow variability of a financial instrument as hedged item.
This also covers the designation of inflation as a hedged risk
or portion in particular situations.
|
|
|
|
IFRS 9 Financial Instruments Phase 1 financial
assets, classification and measurement:
The new
standard is effective for annual periods beginning on or after
January 1, 2013. Phase 1 of this new IFRS introduces new
requirements for classifying and measuring financial assets.
Early adoption is permitted.
|
|
|
|
IFRS 2 Group Cash-settled Share-based Payment Transactions
(Amended):
The amendment is effective for annual
periods beginning on or after January 1, 2010. This
amendment clarifies the accounting for group cash-settled
share-based payment transactions and how such transactions
should be arranged in the individual financial statements of the
subsidiary.
|
|
|
|
IAS 32 Classification on Rights Issues
(Amended):
The amendment is effective for annual
periods beginning on or after February 1, 2010. This
amendment relates to the rights issues offered for a fixed
amount of foreign currency which were treated as derivative
liabilities by the existing standard. The amendment states that
if certain criteria are met, these should be classified as
equity regardless of the currency in which the exercise price is
denominated. The amendment is to be applied retrospectively.
|
|
|
|
IAS 24 Related Party Disclosures
(Revised):
The revision is effective for annual
periods beginning on or after January 1, 2011. This
revision relates to the judgment which is required so as to
assess whether a government and entities known to the reporting
entity to be under the control of that government are considered
a single customer. In assessing this, the reporting entity shall
consider the extent of economic integration between those
entities. Early application is permitted and adoption shall be
applied retrospectively.
|
|
|
|
IFRS 1 Additional Exemptions for First-time Adopters
(Amended):
The amendment is effective for annual
periods beginning on or after January 1, 2010.
|
|
|
|
IFRS 1 Limited Exemption from Comparative IRFS 7 Disclosures
for first time adopters (Amended):
The amendment
is effective for annual periods beginning on or after
July 1, 2010.
|
|
|
|
In April 2009 the IASB issued its second omnibus of amendments
to its standards, primarily with a view to removing
inconsistencies and clarifying wording. The effective dates of
the improvements are various and the earliest is for the
financial year beginning on or after July 1, 2009.
|
|
|
|
In May 2010 the IASB issued its third omnibus of amendments to
its standards, primarily with a view to removing inconsistencies
and clarifying wording. The effective dates of the improvements
are various and the earliest is for the financial year beginning
on or after July 1, 2010.
|
|
|
3.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
The financial statements have been prepared using accounting
policies consistent with those of the previous year except for
the adoption of the following new and amended IFRS and IFRIC
interpretations which became effective for the accounting period
beginning January 1, 2009:
|
|
|
|
|
IFRIC 13, Customer Loyalty Programs,
effective July 1, 2008
|
|
|
|
IFRIC 15, Agreements for the Construction of Real
Estate,
effective January 1, 2009
|
|
|
|
IFRIC 16, Hedges of a Net Investment in a Foreign
Operation,
effective October 1, 2008
|
|
|
|
IFRIC 9, Remeasurement of Embedded Derivatives
(Amended) and IAS 39 Financial Instruments: Recognition and
Measurement (Amended),
effective for periods ending on
or after June 30, 2009
|
F-15
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
IFRS 1, First-time Adoption of International Financial
Reporting Standards (Amended),
and
IAS 27
Consolidated and Separate Financial Statements
(Amended),
effective January 1, 2009
|
|
|
|
IFRS 2, Share-based Payment:
Vesting
Conditions and Cancellations (Amended),
effective
January 1, 2009
|
|
|
|
IFRS 8, Operating Segments,
effective
January 1, 2009
|
|
|
|
IFRS 7, Financial Instruments:
Disclosures
(Amended),
effective January 1, 2009
|
|
|
|
IAS 1, Presentation of Financial Statements
(Revised),
effective January 1, 2009
|
|
|
|
IAS 32, Financial Instruments:
Presentation
(Amended) and IAS 1 Puttable Financial Instruments and
Obligations Arising on Liquidation (Amended),
effective January 1, 2009
|
|
|
|
I
AS 23, Borrowing Costs (Revised),
effective
January 1, 2009
|
|
|
|
Improvements to IFRSs (May 2008)
|
|
|
|
IFRIC 18, Transfers of Assets from Customers,
effective for transfers after July 1, 2009
|
The adoption of the above new and amended IFRS and IFRIC
interpretations did not have an impact on the financial
statements or performance of the Group, however the following
had an impact in the presentation or disclosures of the
financial statements as described below:
|
|
|
|
|
IAS 1, Presentation of Financial Statements
(Revised),
The revised standard requires that the statement
of changes in equity includes only transactions with owners;
introduces a new statement of comprehensive income that combines
all items of income and expense recognized in the income
statement together with other comprehensive income
(either in one single statement or in two linked statements);
and requires the inclusion of a third column on the statement of
financial position to present the effect of restatements of
financial statements or retrospective application of a new
accounting policy as at the beginning of the earliest
comparative period. The Group made the necessary changes to the
presentation of its financial statements in 2009 and elected to
present two linked statements for the statement of comprehensive
income.
|
|
|
|
IFRS 7, Financial Instruments: Disclosures,
The amended standard requires additional disclosures about
fair value measurement and liquidity risk. Fair value
measurements related to items recorded at fair value are to be
disclosed by the source of inputs, using a three-level
hierarchy, by class, for all financial instruments recognized at
fair value. In addition, reconciliation between the beginning
and ending balance for level 3 fair value measurements is
now required, as well as significant transfers between the
levels in the fair value hierarchy. The amendments also clarify
the requirements for liquidity risk disclosures with respect to
derivative transactions and assets used for liquidity
management. The fair value measurement disclosures and the
liquidity disclosures, which are not significantly impacted by
the amendment, are presented in note 30.
|
|
|
|
IFRS 8, Operating segments,
IFRS 8 replaces
IAS 14 Segment reporting and adopts a management
approach to segment reporting. The Group concluded that the
operating segments determined in accordance with IFRS 8 are the
same as the business segments previously identified under IAS
14. Additional disclosures required by IFRS 8 are shown in
note 26.
|
The significant accounting policies applied for the preparation
of the financial statements are as follows:
1.
Basis of Consolidation and Investments
Subsidiaries
: The consolidated financial
statements are comprised of the financial statements of the
Company and all subsidiaries controlled by the Company directly
or indirectly. Control exists when the Company has the power to
govern the financial and operating policies of the subsidiaries
so as to obtain benefits from their activities. The financial
statements of the subsidiaries are prepared as of the same
reporting period as the parent company, using consistent
accounting policies. All intercompany balances, transactions and
any intercompany
F-16
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
profit or loss are eliminated in the consolidated financial
statements. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group and cease to be
consolidated from the date on which control is transferred out
of the Group. An inter company loan to a foreign subsidiary for
which settlement is neither planned nor likely to occur in the
foreseeable future, is considered to be part of the net
investment in that foreign operation. In the consolidated
financial statements the foreign exchange gains and losses
arising are recorded in other comprehensive income.
Associates
: Associates are those entities in
which the Group has significant influence upon, but not control
over their financial and operating strategy. Significant
influence is presumed to exist when the Group has the right to
participate in the financial and operating policy decisions,
without having the power to govern these policies. Investments
in associates in which the Group has significant influence are
accounted for using the equity method. Under this method the
investment is carried at cost, and is adjusted to recognize the
investors share of the earnings or losses of the investee
from the date that significant influence commences until the
date that significant influence ceases and also for changes in
the investees net equity. Gains or losses from
transactions with associates are eliminated to the extent of the
interest in the associate. Dividends received from associates
are eliminated against the carrying value of the investment. The
associates value is adjusted for any accumulated
impairment loss. When the Groups share of losses exceeds
the carrying amount of the investment, the carrying value of the
investment is reduced to nil and recognition of further losses
is discontinued, except to the extent the Group has created
obligations or has made payments on behalf of the associate.
Transactions between companies under common
control
: Transactions between companies under
common control are excluded from the scope of IFRS 3. Therefore
the Group (implementing the guidance of IAS 8 Accounting
policies, changes in accounting estimates and errors for
similar cases) accounts for such transactions using a method
like pooling of interests. Based on this principle,
the Group consolidates the book values of the combined entities
(without revaluation to fair values). The financial statements
of the Group or the new entity after the transaction are
prepared on the basis as if the new structure was in effect
since the beginning of the first period which is presented in
the financial statements and consequently the comparative
figures are adjusted. The difference between the purchase price
and the book value of the percentage of the net assets acquired
is recognized directly in equity.
2.
Financial Assets
Investments
: Financial assets are initially
measured at their fair value, which is normally the acquisition
cost, plus, in the case of investments not at fair value through
profit and loss, directly attributable transaction costs.
Financial assets are classified as being at fair value through
profit and loss, held to maturity, or
available-for-sale
as appropriate. The Group determines classification of its
financial assets at initial recognition. Financial assets at
fair value through profit or loss are measured at fair value and
gains or losses are recognized in the income statement.
Held-to-maturity
investments are measured at amortized cost using the effective
interest method and gains or losses through the amortization
process are recognized in the income statement.
Available-for-sale
financial assets are measured at fair value and gains or losses
are recognized directly in other comprehensive income while upon
sale or impairment gains or losses are recognized in the income
statement. The fair values of quoted investments are based on
quoted market bid prices. For investments where there is no
quoted market price, fair value is determined using valuation
techniques. Purchase or sales of financial assets that require
delivery of assets within a time frame established by regulation
or convention in the market place are recognized on the
settlement date (i.e. the date that the asset is transferred or
delivered to the Group).
Offsetting of financial assets and
liabilities
: Financial assets and liabilities are
offset and the net amount is presented in the statement of
financial position only when the Group has a legally enforceable
right to set off the recognized amounts and intends either to
settle such asset and liability on a net basis or to realize the
asset and settle the liability simultaneously.
F-17
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Impairment of financial assets
: The Group
assesses at each reporting date, whether a financial asset or
group of financial assets is impaired as follows:
(i)
Assets held to maturity
: If there is
objective evidence that an impairment loss on investments
carried at amortized cost has been incurred, the amount of the
loss is measured as the difference between the assets
carrying amount and the present value of estimated future cash
flows (excluding future credit losses that have not been
incurred) discounted at the financial assets original
effective interest rate (i.e. the effective interest rate
computed at initial recognition). The amount of the loss is
recognized in the income statement.
(ii)
Available-for-sale
financial assets
: If an
available-for-sale
asset is impaired, an amount comprising the difference between
its acquisition cost (net of any principal payment and
amortization) and its current fair value, less any impairment
loss previously recognized in the income statement is
transferred from other comprehensive income to the income
statement. Reversals of impairment in respect of equity
instruments classified as
available-for-sale
are not recognized in the income statement. Reversals of
impairment losses on debt instruments are reversed through the
income statement if the increase in fair value of the instrument
can be objectively related to an event occurring after the
impairment losses were recognized in the income statement.
Derecognition of financial assets
: A financial
asset (or, a part of a financial asset or part of a group of
similar financial assets) is derecognized when:
|
|
|
|
|
the rights to receive cash flows from the asset have expired;
|
|
|
|
the Group retains the right to receive cash flows from the
asset, but has assumed an obligation to pay them in full without
material delay to a third party under a pass-through
arrangement; or
|
|
|
|
the Group has transferred its rights to receive cash flows from
the asset and either (a) has transferred substantially all
the risks and rewards of the assets, or (b) has neither
transferred nor retained substantially all the risks and rewards
of the asset, but has transferred control of the asset.
|
Where the Group has transferred their rights to receive cash
flows from an asset and have neither transferred nor retained
substantially all the risks and rewards of the asset nor
transferred control of the asset, the asset is recognized to the
extent of the Groups continuing involvement in the asset.
Continuing involvement that takes the form of a guarantee over
the transferred asset is measured at the lower of the original
carrying amount of the asset or the maximum amount of
consideration that the Group could be required to repay. Where
continuing involvement takes the form of a written
and/or
purchase option (including a cash-settled option or similar
provision) on the transferred asset, the extent of the
Groups continuing involvement is the amount of the
transferred asset that the Group may repurchase, except that in
the case of a written put option (including a cash-settled
option or similar provision) on an asset measured at fair value,
the extent of the Groups continuing involvement is limited
to the lower of the fair value of the transferred asset and the
option exercise price.
Derecognition of financial liabilities
: A
financial liability is derecognized when the obligation under
the liability is discharged or cancelled or expired. Where an
existing financial liability is replaced by another from the
same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange
or modification is treated as a derecognition of the original
liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognized in
the income statement.
Non-current Assets Held for Sale
: The Group
classifies a non-current asset (or disposal group) as held for
sale if its carrying amount will be recovered principally
through a sale transaction rather than through continuing use.
The basic preconditions to classify a non-current asset (or a
disposal group) as held for sale are that it must be available
for immediate sale in its present condition subject only to
terms that are usual and customary for sales of such assets or
groups and its sale must be highly probable. For the sale to be
highly probable the appropriate level of management must be
committed to a plan to sell the asset (or disposal group).
F-18
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Immediately before the initial classification of a non current
asset (or a disposal group) as held for sale, the asset (or the
assets and liabilities included in the disposal group) is
measured in accordance with the applicable IFRS. Non current
assets (or disposal group) classified as held for sale are
measured at the lower of their carrying amount and fair value
less costs to sell and any possible resulting impairment losses
are recognized in the income statement. Any subsequent increase
in fair value is recognized, but not in excess of the cumulative
impairment loss which was previously recognized.
While a non-current asset (or non-current assets that are
included in a disposal group) is classified as held for sale it
is not depreciated or amortized.
3.
Foreign Currency
Translation
: OTEs functional currency is
the Euro. Transactions involving other currencies are translated
into Euro at the exchange rates, ruling on the date of the
transactions. At the reporting date, monetary assets and
liabilities, which are denominated in foreign currencies, are
retranslated at the exchange rates at that date. Gains or losses
resulting from foreign currency translation are recognized in
the income statement.
Non-monetary items denominated in foreign currencies that are
measured at historical cost are translated at the exchange rate
at the date of the initial transaction. Non-monetary items
denominated in foreign currencies that are measured at fair
value are retranslated at the exchange rates at the date that
the fair value was determined. The foreign currency differences
arising from the change in the fair value of these items are
recognized in the income statement or directly in other
comprehensive income depending on the underlying item.
Each entity in the Group determines its own functional currency
and items included in the financial statements of each entity
are measured using the functional currency. Assets and
liabilities of these entities, including goodwill and the fair
value adjustments to the carrying amounts of assets and
liabilities arising on acquisition, are translated into Euro
using exchange rates ruling at the reporting date. Revenues and
expenses are translated at rates prevailing at the date of the
transaction. All resulting foreign exchange differences are
recognized in other comprehensive income and are recognized in
the income statement on the disposal of the foreign operation.
4.
Goodwill and business
combinations
: The acquisition of subsidiaries is
accounted for using the acquisition method of accounting that
measures the acquirees assets and liabilities and
contingent liabilities at their fair value at the date of
acquisition. For business combinations occurring subsequent to
the date of transition to IFRS, goodwill is the excess of the
purchase price over the fair value of the net identifiable
assets acquired. For business combinations occurring prior to
the date of transition to IFRS, goodwill is recorded at the
carrying value at the date of transition, based on previous
GAAP. Goodwill is not amortized but is tested for impairment at
least annually and when circumstances indicate that the carrying
value may be impaired. Impairment is determined for goodwill by
assessing the recoverable amount for each cash generating unit
to which goodwill relates. Where the recoverable amount of the
cash generating unit is less than the carrying amount an
impairment loss is recognized. Thus, after initial recognition,
goodwill is measured at cost less any accumulated impairment
losses. An impairment loss recognized for goodwill is not
reversed in a subsequent period. Goodwill on acquisition of
subsidiaries is presented as an intangible asset. Negative
goodwill on acquisition of subsidiaries is recorded directly in
the income statement. Goodwill recognized on acquisition of
associates is included in the carrying amount of the investment.
The difference between the cost of acquisition and the
non-controlling interest acquired, arising on the acquisition of
non-controlling interests in a subsidiary where control already
exists, is recorded directly in equity. When non-controlling
interests are disposed of, but control is retained, any
difference between the amount by which the non-controlling
interests are adjusted and the fair value of the consideration
paid or received is recognized directly in equity and attributed
to the owners of the parent.
5.
Property, Plant and Equipment
: Items
of property, plant and equipment are measured at cost, net of
subsidies received, plus interest costs incurred during periods
of construction, less accumulated depreciation and any
impairment in value.
Subsidies are presented as a reduction of the cost of property,
plant and equipment and are recognized in the income statement
over the estimated life of the assets through reduced
depreciation expense.
F-19
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Construction in progress is recorded as part of property, plant
and equipment and depreciation on the self constructed assets
commences when the asset is available for use. The cost of
self-constructed assets includes the cost of materials, direct
labor costs, relevant general overhead costs. Investment
supplies comprise of assets to be utilized in the construction
of assets.
The present value of the expected retirement costs, for a
relevant asset, is included in the cost of the respective asset
if the recognition criteria for a provision are met and are
depreciated accordingly.
Repairs and maintenance costs are expensed as incurred. The cost
and related accumulated depreciation of assets retired or sold
are removed from the corresponding accounts at the time of sale
or retirement, and any gain or loss is included in the income
statement.
Expenditure relating to the replacement of part of an item of
property, plant and equipment is added to the carrying amount of
the asset if it is probable that future economic benefits will
flow to the Group and its cost can be reliably measured. All
other expenditures are recognized in the income statement as
incurred.
Investment property consists of all property held to earn
rentals or for capital appreciation and not used in the
production or for administrative purposes.
6.
Depreciation
: Depreciation is
recognized on a straight-line basis over the estimated useful
lives of property, plant and equipment, which are periodically
reviewed. The estimated useful lives and the respective rates
are as follows:
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Estimated
|
|
Depreciation
|
|
|
Useful Life
|
|
Rates
|
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Buildings building installations
|
|
20-40 years
|
|
2.5%-5%
|
Telecommunication equipment and installations:
|
|
|
|
|
Telephone exchange equipment
|
|
8-12 years
|
|
8.3%-12.5%
|
Radio relay stations
|
|
8 years
|
|
12.5%
|
Subscriber connections
|
|
10 years
|
|
10%
|
Local and International network
|
|
8-17 years
|
|
6%-12.5%
|
Other
|
|
5-10 years
|
|
10%-20%
|
Transportation equipment
|
|
5-8 years
|
|
12.5%-20%
|
Furniture and fixtures
|
|
3-5 years
|
|
20%-33%
|
7.
Employee Benefits:
Defined Contribution Plans
: Obligations for
contributions to defined contribution plans are recognized as an
expense as incurred. There are no legal or constructive
obligations to pay any further amounts.
Defined Benefit Plans
: Obligations derived
from defined benefit plans are calculated separately for each
plan by estimating the amount of future benefits employees have
earned in return for their service as of the reporting date.
These benefits are discounted to their present value after
taking any adjustments for actuarial gains and losses and past
service cost. The discount rate is the yield of high quality
European corporate bonds with maturity that approximates the
term of the obligations. These obligations are calculated on the
basis of financial and actuarial assumptions which are carried
out by independent actuaries using the Projected Unit Credit
Method. Net pension cost for the period is recognized in the
income statement and consists of the present value of the
accrued benefits, interest cost on the benefits obligation,
prior service cost and actuarial gains or losses. For post
employment plans, prior service costs are recognized on a
straight-line basis over the average period until the benefits
become vested. All actuarial gains or losses are recognized
during the average remaining working life of active employees
and are included in the service cost of the year, if the net
cumulative unrecognized actuarial gains and losses at the end of
the previous reporting period exceeded the 10% of the present
value of the defined benefit obligation at that date. For other
long term benefits actuarial gains and losses and past service
costs are recognized immediately.
F-20
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
8.
Taxes
: Income taxes include current
and deferred taxes. Current tax is measured on the taxable
income for the year using enacted or substantively enacted tax
rates at the reporting date in the countries where the Group
operates and generates taxable income.
Deferred taxes are provided on all temporary differences arising
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes.
Deferred tax liabilities are recognized for all taxable
temporary differences except:
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where the deferred tax liability arises from the initial
recognition of goodwill of an asset or liability in a
transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor
taxable profit or loss; and
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|
in respect of taxable temporary differences associated with
investment in subsidiaries and associates, where the timing of
the reversal of the temporary differences can be controlled and
it is probable that the temporary differences will not reverse
in the foreseeable future.
|
Deferred tax assets are recognized for all deductible temporary
differences, carry forward of unused tax credits and unused tax
losses, to the extent that is probable that taxable profit will
be available against which the deductible temporary differences
and the carry forward of unused tax credits and unused tax
losses can be utilized except:
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|
|
where the deferred tax asset relating to the deductible
temporary differences arises from the initial recognition of
goodwill of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or
loss; and
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|
in respect of taxable temporary differences associated with
investment in subsidiaries and associates, deferred tax assets
are recognized only to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and
taxable profit will be available against which the temporary
differences can be utilized.
|
Deferred tax is measured at the tax rates that are expected to
apply in the year when the asset is realized or liability is
settled based on tax rates (and tax laws) that have been enacted
or substantively enacted at the reporting date. The carrying
amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or
part of the deferred tax asset to be utilized.
Income tax (current and deferred) relating to items recognized
directly in equity is recognized directly in equity and not in
the income statement.
9.
Cash and Cash Equivalents
: For
purposes of the cash flow statement, time deposits and other
highly liquid investments with original maturities of three
months or less are considered to be cash and cash equivalents.
10.
Advertising Expenses
: All advertising
costs are expensed as incurred.
11.
Research and Development
Costs
: Research costs are expensed as incurred.
Development costs which do not fulfill the criteria for
recognition as an asset are expensed as incurred.
12.
Recognition of Revenues and
Expenses
: Fixed revenues primarily consist of
connection charges, monthly network services fees, exchange
network and facilities usage charges, other value added
communication services fees, and sales of handsets and
accessories. Revenues are recognized as follows:
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|
|
Connection charges
: Connection charges for the
fixed network are deferred and amortized to income over the
average customer retention period. Connection costs, up to the
amount of deferred connection fees are recognized over the
average customer retention period. No connection fees are
charged for mobile services.
|
|
|
|
Monthly network service fees
: Revenues related
to the monthly network service fees are recognized in the month
that the telecommunication service is provided.
|
F-21
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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|
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Usage Charges and Value Added Services
Fees
: Call fees consist of fees based on airtime
and traffic generated by the caller, the destination of the call
and the service utilized. Fees are based on traffic, usage of
airtime or volume of data transmitted for value added
communication services. Revenues for usage charges and value
added communication services are recognized in the period when
the services are provided.
|
Revenues from outgoing calls made by OTEs subscribers to
subscribers of mobile telephony operators are presented at their
gross amount in the income statement as the credit and
collection risk remains solely with OTE. Interconnection fees
for
mobile-to-mobile
calls are recognized based on incoming traffic generated from
other mobile operators networks. Unbilled revenues from
the billing cycle date to the end of each period are estimated
based on traffic.
Revenues from the sale of prepaid airtime cards and the prepaid
airtime, net of discounts allowed, included in the Groups
prepaid services packages, are recognized based on usage. Such
discounts represent the difference between the wholesale price
of prepaid cards and boxes (consisting of handsets and prepaid
airtime) to the Groups Master Dealers and the retail sale
price to the ultimate customers. Unused airtime is included in
Deferred revenue in the statement of financial
position. Upon the expiration of prepaid airtime cards, any
unused airtime is recognized in the income statement.
Commissions paid for each contract subscriber acquired by the
master dealers as well as bonuses paid to master dealers in
respect of contract subscribers who renew their annual
contracts, are deferred and amortized as expenses over the
contract period. Airtime commissions due to the Groups
master dealers for each subscriber acquired through their
network are expensed as incurred.
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|
|
|
|
Sales of telecommunication equipment
: Revenues
from the sale of handsets and accessories, net of discounts
allowed, are recognized at the
point-of-sale,
when the significant risks and rewards of ownership have passed
to the buyer.
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|
|
Dividend income
: Dividend income is recognized
when the right to receive payment is established with the
approval for distribution by the General Assembly of
shareholders.
|
|
|
|
Interest income
: Interest income is recognized
as the interest accrues (using the effective interest method).
|
|
|
|
Revenues from construction projects
: Revenues
from construction projects are recognized in accordance with the
percentage of completion method.
|
|
|
|
Principal and agency relationship
: In a
principal and agency relationship, amounts collected by the
agent on behalf of the principal do not result in increases in
equity of the agent and thus, they are not revenues for the
agent. Revenue for the agent is the amount of commission
received by the principal. On the other hand, the
principals revenues consist of the gross amounts described
above and the commission paid to the agent is recognized as an
expense.
|
13.
Earnings per Share
: Basic earnings
per share are computed by dividing the profit for the year
attributable to the Companys owners by the weighted
average number of shares outstanding during each year. Diluted
earnings per share are computed by dividing the profit for the
year attributable to the Companys owners by the weighted
average number of shares outstanding during the year adjusted
for the impact of share based payments.
14.
Operating Segments
: Operating
segments are determined based on the Groups legal
structure, as the Groups chief operating decision makers
review financial information separately reported by the Company
and each of the consolidated subsidiaries or the
sub-group
included in the consolidation. The reportable segments are
determined using the quantitative thresholds required by the
respective Standard. Information for operating segments that do
not constitute reportable segments is combined and disclosed in
the All Other category. The accounting policies of
the segments are the same with those followed for the
preparation of the financial statements. Management evaluates
segment performance based on operating profit before
depreciation, amortization and cost of early retirement program,
operating profit and profit for the year.
F-22
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
15.
Dividends
: Dividends declared to the
shareholders are recognized and recorded as a liability in the
period they are approved by the Shareholders General Assembly.
16.
Non-Current Financial
Assets
: Non-current financial assets are
initially recorded at their fair value, less any transaction
costs. Subsequent to the initial recognition, they are measured
at amortized cost and the differences between that cost and the
amount of receipt/payment are recognized in the income statement
over the life of the asset using the effective interest rate
method.
17.
Share Capital Issuance Costs
: Share
capital issuance costs, net of related tax, are reflected as a
deduction to Share Premium.
18.
Treasury Shares
: Treasury shares
consist of OTEs own equity shares, which are reacquired
and not cancelled. Treasury shares do not reduce the number of
shares issued but reduce the number of shares in circulation.
Treasury shares are recognized at cost as a deduction from
equity. Upon derecognition, the cost of the treasury share
reduces the Share Capital and Share Premium and any difference
is charged to Retained Earnings.
19.
Leases
: A lease that transfers
substantially all of the rewards and risks incidental to
ownership of the leased item is accounted for by the lessee as
the acquisition of an asset and the incurrence of a liability,
and by the lessor as a sale
and/or
provision of financing. Lease payments are apportioned between
finance charges (interest) and a reduction of the lease
liability. Finance charges are recognized directly as an
expense. The asset capitalized at the commencement of a finance
lease is recognized at fair value of the leased property, or if
lower, the present value of the minimum lease payments. Its
carrying value is subsequently reduced by the accumulated
depreciation and any impairment losses. If the lease does not
transfer substantially all of the rewards and risks incidental
to ownership of property, it is classified as an operating lease
by the lessee and the rental payments are recognized as an
expense as incurred.
20.
Related Parties
: Related party
transactions and balances are disclosed separately in the
financial statements based on the requirements of IAS 24
Related Party Disclosures.
21.
Telecommunication
Licenses
: Telecommunication licenses are
recognized at cost and amortized over their useful life and they
are assessed for impairment at least annually.
22.
Materials and Supplies
: Materials and
supplies are measured at the lower of cost and net realizable
value. The cost is based on the weighted average cost method.
Net realizable value is the estimated selling price in the
ordinary course of business, less estimated costs of completion
and the estimated costs necessary to make the sale. When there
is any subsequent increase of the net realizable value of
materials and suppliers that have been previously written-down,
the amount of the write-down is reversed.
23.
Trade Receivables and Allowance for Doubtful
Accounts
: Trade receivables are initially
recognized at their fair value which is equal to the transaction
amount. Subsequently they are measured at fair value less an
allowance for any probable uncollectible amounts. At each
reporting date, trade receivables are either assessed
individually for debtors such as other providers or collectively
based on historical trends and statistical information and a
provision for the probable and reasonably estimated loss for
these accounts is recorded. The balance of such allowance for
doubtful accounts is adjusted by recording a charge to the
income statement at each reporting period. Any customer account
balances written-off are charged against the existing allowance
for doubtful accounts.
24.
Other Intangible Assets
: Intangible
assets acquired separately are measured at cost, while those
acquired from a business combination are measured at fair value
on the date of acquisition. Subsequently, they are measured at
that amount less accumulated amortization and accumulated
impairment losses. The useful lives of the intangible assets are
assessed to be either definite or indefinite. Intangible assets
with a finite useful life are amortized on a straight-line basis
over their useful life. Amortization of intangible assets with a
finite useful life begins when the asset is available for use.
The useful lives of intangible assets are reviewed on an annual
basis, and adjustments, where applicable, are made prospectively.
F-23
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
25.
Borrowing Costs
: Borrowing costs
directly attributable to the acquisition, construction or
production of a qualifying asset that necessarily takes a
substantial period of time to get ready for its intended use or
sale are capitalized as part of the cost of the respective
assets. All other borrowing costs are expensed in the period
they occur. Borrowing costs consist of interest and other costs
that an entity incurs in connection with the borrowing of funds.
26.
Borrowings
: All loans and borrowings
are initially recognized at fair value, net of direct costs
associated with the borrowing. After initial recognition,
borrowings are measured at amortized cost using the effective
interest rate method. Gains and losses are recognized in the
income statement through the amortization process.
27.
Provisions
: Provisions are recognized
when the Group has a present obligation (legal or constructive)
as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount
of the obligation. If the effect of the time value of money is
material, provisions are measured by discounting the expected
future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to
the liability. Where discounting is used, the increase of the
provision due to the passage of time is recognized as a
borrowing cost. Provisions are reviewed at each reporting date,
and if it is no longer probable that an outflow of resources
embodying economic benefits will be required to settle the
obligation, they are reversed. Provisions are used only for
expenditures for which they were originally recognized. No
provisions are recognized for future operating losses.
Contingent assets and contingent liabilities are not recognized.
Provisions for restructuring are recognized when the Group has
an approved, detailed and formal restructuring plan, which has
either started to be implemented or has been publicly announced
to those affected by it. Contributions that are related to
employees, who retire under voluntary retirement programs, are
recognized when employees accept the offer and the amounts can
be reasonably estimated.
28.
Impairment of Non- Financial Assets (excluding
goodwill)
: The carrying values of the
Groups non financial assets are tested for impairment,
when there are indications that their carrying amount is not
recoverable. In such cases, the recoverable amount is estimated
and if the carrying amount of the asset exceeds its estimated
recoverable amount, an impairment loss is recognized in the
income statement. The recoverable amount of an asset is the
higher of its fair value less costs to sell and its value in
use. In measuring value in use, estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of
money and the risks specific to that asset. If an asset does not
generate cash flows individually, the recoverable amount is
determined for the cash generating unit to which the asset
belongs. At each reporting date the Group assesses whether there
is an indication that an impairment loss recognized in prior
periods may no longer exist. If any such indication exists, the
Group estimates the recoverable amount of that asset and the
impairment loss is reversed, increasing the carrying amount of
the asset to its recoverable amount, to the extent that the
recoverable amount does not exceed the carrying value of the
asset that would have been determined (net of amortization or
depreciation) had no impairment loss been recognized for the
asset in prior years.
29.
Share-based payment
transactions
: Certain employees (including senior
executives) of the Group receive remuneration in the form of
share-based payment transactions, whereby employees render
services as consideration for equity instruments (equity
settled transactions). The cost of equity settled
transactions is measured by reference to the fair value at the
date on which they are granted. The fair value is determined at
the grant date, using an appropriate pricing model, and is
allocated over the period in which the conditions are fulfilled.
The cost of equity settled transactions is recognized, together
with a corresponding increase to equity over the vesting period.
Where the terms of an equity settled transaction awards are
modified, the minimum expense recognized is the expense as if
terms had not been modified, if the original terms of the award
are met. An additional expense is recognized for any
modification that increases the total fair value of the share
based payment transaction, or is otherwise beneficial to the
employee as measured at the date of modification.
F-24
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
30.
Derivative Financial Instruments and Hedging
Instruments
: Derivative financial instruments
include interest rate swaps, currency swaps and other derivative
instruments.
Derivatives for trading purposes
: Derivatives
that do not qualify for hedging are considered as derivatives
for trading purposes. Initially, these derivatives are
recognized at their fair value (which is essentially the
transaction cost) at the commencement date. Subsequent to the
initial recognition, they are measured at fair value based on
quoted market prices, if available, or based on valuation
techniques such as discounted cash flows. These derivatives are
classified as assets or liabilities depending on their fair
value, with any changes recognized in the income statement.
Hedging
: For hedge accounting purposes, hedges
are classified either as fair value hedges, where the exposure
to changes in the fair value of a recognized asset or liability
is being hedged, or as a cash flow hedge, where the exposure to
variability in cash flows associated with a specifically
identified risk which may be directly related to the recognized
asset or liability. When hedge accounting is applied, at the
inception of the hedge there is formal documentation which
includes identification of the hedging instrument, the hedged
item, the hedging relationship, the nature of the risk being
hedged and the risk strategy.
In a fair value hedge, the gain or loss from re-measuring the
hedging instrument at fair value is recognized in the income
statement and the carrying amount of the hedged item is adjusted
to fair value with respect to the risk being hedged and the fair
value adjustment is recognized in the income statement.
In a cash flow hedge, the portion of the gain or loss arising
from the fair value movement on the hedging instrument that is
determined to be effective is recognized directly in other
comprehensive income and the ineffective portion is recognized
in the income statement.
31.
Reclassifications
: Certain
reclassifications have been made to prior year balances to
conform to current year classifications. In addition certain
reclassifications have been made within the Notes for
comparability purposes. These reclassifications did not have any
impact on the Groups equity or profit for the year.
Further details of the nature of these reclassifications are
disclosed in Note 31.
32.
Financial Guarantee
Contracts
: Financial guarantee contracts issued
by the Group are those contracts that require a payment to be
made to reimburse the holder for a loss it incurs because the
specified debtor fails to make a payment when due in accordance
with the terms of a debt instrument. Financial guarantee
contracts are recognized initially as a liability at fair value,
adjusted for transaction costs that are directly attributable to
the issuance of the guarantee. Subsequently, the liability is
measured at the higher of the best estimate of the expenditure
required to settle the present obligation at the reporting date
and the amount recognized less cumulative amortization.
F-25
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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4.
|
PROPERTY,
PLANT AND EQUIPMENT
|
Property, plant and equipment is analyzed as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
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Furniture
|
|
|
|
|
|
|
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|
|
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|
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Telecom
|
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Transportation
|
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and
|
|
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Construction
|
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Investment
|
|
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|
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Land
|
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Buildings
|
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Equipment
|
|
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Means
|
|
|
Fixtures
|
|
|
in Progress
|
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Supplies
|
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Total
|
|
|
31/12/2007
|
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|
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Cost
|
|
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48.6
|
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|
|
946.7
|
|
|
|
12,687.4
|
|
|
|
59.6
|
|
|
|
502.2
|
|
|
|
485.4
|
|
|
|
161.3
|
|
|
|
14,891.2
|
|
Accumulated depreciation
|
|
|
|
|
|
|
(313.5
|
)
|
|
|
(7,827.4
|
)
|
|
|
(39.1
|
)
|
|
|
(339.8
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,519.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value 31/12/2007
|
|
|
48.6
|
|
|
|
633.2
|
|
|
|
4,860.0
|
|
|
|
20.5
|
|
|
|
162.4
|
|
|
|
485.4
|
|
|
|
161.3
|
|
|
|
6,371.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
2.4
|
|
|
|
26.9
|
|
|
|
812.5
|
|
|
|
5.6
|
|
|
|
30.7
|
|
|
|
383.3
|
|
|
|
84.0
|
|
|
|
1,345.4
|
|
Held for sale cost
|
|
|
(0.3
|
)
|
|
|
(4.1
|
)
|
|
|
(150.5
|
)
|
|
|
(0.5
|
)
|
|
|
(11.9
|
)
|
|
|
|
|
|
|
|
|
|
|
(167.3
|
)
|
Held for sale accumulated depreciation
|
|
|
|
|
|
|
1.0
|
|
|
|
60.5
|
|
|
|
0.3
|
|
|
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
68.4
|
|
Other transfers cost
|
|
|
|
|
|
|
|
|
|
|
19.3
|
|
|
|
|
|
|
|
(19.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposal and transfers cost
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
(273.7
|
)
|
|
|
(6.6
|
)
|
|
|
(13.3
|
)
|
|
|
(317.2
|
)
|
|
|
(101.6
|
)
|
|
|
(712.6
|
)
|
Disposals and transfers accumulated depreciation
|
|
|
|
|
|
|
4.0
|
|
|
|
267.7
|
|
|
|
6.0
|
|
|
|
14.0
|
|
|
|
|
|
|
|
|
|
|
|
291.7
|
|
Exchange differences cost
|
|
|
(0.6
|
)
|
|
|
(55.8
|
)
|
|
|
(449.8
|
)
|
|
|
(3.7
|
)
|
|
|
(16.0
|
)
|
|
|
(17.2
|
)
|
|
|
(6.9
|
)
|
|
|
(550.0
|
)
|
Exchange differences accumulated depreciation
|
|
|
|
|
|
|
31.7
|
|
|
|
290.4
|
|
|
|
3.0
|
|
|
|
11.7
|
|
|
|
|
|
|
|
|
|
|
|
336.8
|
|
Depreciation charge for the year
|
|
|
|
|
|
|
(34.3
|
)
|
|
|
(1,028.2
|
)
|
|
|
(7.0
|
)
|
|
|
(41.5
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,111.0
|
)
|
Other transfers accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
(17.5
|
)
|
|
|
|
|
|
|
17.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value 31/12/2008
|
|
|
50.1
|
|
|
|
602.4
|
|
|
|
4,390.7
|
|
|
|
17.6
|
|
|
|
140.9
|
|
|
|
534.3
|
|
|
|
136.8
|
|
|
|
5,872.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31/12/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
50.1
|
|
|
|
913.5
|
|
|
|
12,645.2
|
|
|
|
54.4
|
|
|
|
472.4
|
|
|
|
534.3
|
|
|
|
136.8
|
|
|
|
14,806.7
|
|
Accumulated depreciation
|
|
|
|
|
|
|
(311.1
|
)
|
|
|
(8,254.5
|
)
|
|
|
(36.8
|
)
|
|
|
(331.5
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,933.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value 31/12/2008
|
|
|
50.1
|
|
|
|
602.4
|
|
|
|
4,390.7
|
|
|
|
17.6
|
|
|
|
140.9
|
|
|
|
534.3
|
|
|
|
136.8
|
|
|
|
5,872.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
49.4
|
|
|
|
654.4
|
|
|
|
5.0
|
|
|
|
23.8
|
|
|
|
431.2
|
|
|
|
55.9
|
|
|
|
1,219.7
|
|
Acquisition of subsidiary cost
|
|
|
0.1
|
|
|
|
1.8
|
|
|
|
63.4
|
|
|
|
1.0
|
|
|
|
0.6
|
|
|
|
16.5
|
|
|
|
|
|
|
|
83.4
|
|
Disposal and transfers cost
|
|
|
(1.0
|
)
|
|
|
(0.1
|
)
|
|
|
(136.1
|
)
|
|
|
(7.6
|
)
|
|
|
(12.3
|
)
|
|
|
(447.0
|
)
|
|
|
(84.9
|
)
|
|
|
(689.0
|
)
|
Disposals and transfers accumulated depreciation
|
|
|
|
|
|
|
0.1
|
|
|
|
286.8
|
|
|
|
7.3
|
|
|
|
22.2
|
|
|
|
|
|
|
|
|
|
|
|
316.4
|
|
Exchange differences cost
|
|
|
(0.3
|
)
|
|
|
(31.6
|
)
|
|
|
(276.5
|
)
|
|
|
(2.5
|
)
|
|
|
(10.0
|
)
|
|
|
(11.3
|
)
|
|
|
(2.1
|
)
|
|
|
(334.3
|
)
|
Exchange differences accumulated depreciation
|
|
|
|
|
|
|
18.1
|
|
|
|
167.5
|
|
|
|
1.9
|
|
|
|
7.4
|
|
|
|
|
|
|
|
|
|
|
|
194.9
|
|
Depreciation charge for the year
|
|
|
|
|
|
|
(56.4
|
)
|
|
|
(936.1
|
)
|
|
|
(6.2
|
)
|
|
|
(40.1
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,038.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value 31/12/2009
|
|
|
48.9
|
|
|
|
583.7
|
|
|
|
4,214.1
|
|
|
|
16.5
|
|
|
|
132.5
|
|
|
|
523.7
|
|
|
|
105.7
|
|
|
|
5,625.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
48.9
|
|
|
|
933.0
|
|
|
|
12,950.4
|
|
|
|
50.3
|
|
|
|
474.5
|
|
|
|
523.7
|
|
|
|
105.7
|
|
|
|
15,086.5
|
|
Accumulated depreciation
|
|
|
|
|
|
|
(349.3
|
)
|
|
|
(8,736.3
|
)
|
|
|
(33.8
|
)
|
|
|
(342.0
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,461.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value 31/12/2009
|
|
|
48.9
|
|
|
|
583.7
|
|
|
|
4,214.1
|
|
|
|
16.5
|
|
|
|
132.5
|
|
|
|
523.7
|
|
|
|
105.7
|
|
|
|
5,625.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing costs capitalized during the year ended
December 31, 2009, 2008 and 2007 by the Group as part of
the cost of qualifying assets amount to Euro 10.0,
Euro 6.7 and Euro 5.2, respectively. The amounts were
calculated based on an average rate of capitalization for the
year ended December 31, 2009, 2008 and 2007 of 5.9%, 5.4%
and 2.4% respectively.
For the acquisition of the assets above, the Group has received
government grants in the past the unamortized amount of which at
December 31, 2009 is Euro 22.9 (December 31, 2008
Euro 34.2).
The depreciation charge for the year ended December 31,
2007 was Euro 1,088.9.
F-26
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Goodwill is analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Carrying value January 1
|
|
|
525.1
|
|
|
|
541.5
|
|
Absorption of OTENET
|
|
|
|
|
|
|
(10.1
|
)
|
Foreign exchange differences
|
|
|
(6.8
|
)
|
|
|
(0.7
|
)
|
Acquisition of subsidiary (see Note 8)
|
|
|
33.5
|
|
|
|
|
|
Transfer to assets held for sale
|
|
|
|
|
|
|
(5.6
|
)
|
|
|
|
|
|
|
|
|
|
Carrying value December 31
|
|
|
551.8
|
|
|
|
525.1
|
|
|
|
|
|
|
|
|
|
|
The movement of the goodwill and its allocation to each cash
generating unit is analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
|
|
|
Acquisition of
|
|
|
|
|
Country
|
|
2008
|
|
|
Differences
|
|
|
Subsidiary
|
|
|
2009
|
|
|
Greece
|
|
|
376.6
|
|
|
|
|
|
|
|
|
|
|
|
376.6
|
|
Albania
|
|
|
61.8
|
|
|
|
(6.3
|
)
|
|
|
|
|
|
|
55.5
|
|
Romania
|
|
|
26.4
|
|
|
|
(0.5
|
)
|
|
|
33.5
|
|
|
|
59.4
|
|
Bulgaria
|
|
|
60.3
|
|
|
|
|
|
|
|
|
|
|
|
60.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
525.1
|
|
|
|
(6.8
|
)
|
|
|
33.5
|
|
|
|
551.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The recoverable amount of the above cash generating units was
determined using the value in use method. The value in use was
determined based on the projected cash flows derived from three
year plans approved by management, with these cash flows
initially projected over ten years and then to infinity.
The basic assumptions used in determining the value in use of
the cash generating units as of December 31, 2009 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions
|
|
Greece
|
|
|
Albania
|
|
|
Romania
|
|
|
Bulgaria
|
|
|
Discount rate
|
|
|
9.05
|
%
|
|
|
9.27
|
%
|
|
|
10.76
|
%
|
|
|
9.67
|
%
|
Rate of increase/(decrease) of revenue
|
|
|
(0.15
|
)%
|
|
|
1.95
|
%
|
|
|
8.80
|
%
|
|
|
3.60
|
%
|
Operating profit before depreciation and amortization margin
|
|
|
37%-39%
|
|
|
|
53%-60%
|
|
|
|
16%-38%
|
|
|
|
32%-47%
|
|
For the projection of cash flows beyond ten years period a
growth rate of 2% was assumed for all cash generating units.
The main assumptions used by management in projecting cash flows
as part of the annual impairment test of goodwill are the
following:
|
|
|
|
|
Risk-free rate:
The risk free rate was
determined on the basis of external figures derived from the
relevant market of each country.
|
|
|
|
Budgeted profit margin:
Budgeted operating
profit and operating profit before depreciation and amortization
were based on actual historical experience from the last few
years adjusted to take into consideration expected variances in
operating profitability.
|
The basic assumptions used are consistent with independent
external sources of information.
F-27
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Based on the results of the impairment test as of
December 31, 2009, no impairment losses were identified in
the recorded amounts of goodwill.
|
|
6.
|
TELECOMMUNICATION
LICENSES
|
Telecommunication licenses are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Net book value January 1
|
|
|
329.5
|
|
|
|
396.2
|
|
Additions
|
|
|
|
|
|
|
17.5
|
|
Acquisition of subsidiary (see Note 8)
|
|
|
73.4
|
|
|
|
|
|
Transfer from other intangible assets, cost (see Note 7)
|
|
|
13.3
|
|
|
|
|
|
Assets held for sale, cost
|
|
|
|
|
|
|
(39.2
|
)
|
Assets held for sale, accumulated amortization
|
|
|
|
|
|
|
8.0
|
|
Exchange differences, cost
|
|
|
(7.5
|
)
|
|
|
(10.4
|
)
|
Exchange differences, accumulated amortization
|
|
|
6.4
|
|
|
|
5.6
|
|
Amortization charge for the year
|
|
|
(51.0
|
)
|
|
|
(48.1
|
)
|
Write-offs, cost
|
|
|
(1.9
|
)
|
|
|
(3.9
|
)
|
Write-offs, accumulated amortization
|
|
|
|
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
Net book value December 31
|
|
|
362.2
|
|
|
|
329.5
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
|
|
|
|
|
Cost
|
|
|
608.3
|
|
|
|
531.0
|
|
Accumulated amortization
|
|
|
(246.1
|
)
|
|
|
(201.5
|
)
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
362.2
|
|
|
|
329.5
|
|
|
|
|
|
|
|
|
|
|
Telecommunication licenses comprise of licenses acquired
primarily from the Groups mobile operations. These
licenses are amortized on a straight line basis over their
useful lives being between 12 and 24 years.
The amortization charge for the year ended December 31,
2007 was Euro 47.2.
F-28
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
7.
|
OTHER
INTANGIBLE ASSETS
|
The movement of other intangible assets is as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Net book value January 1
|
|
|
550.7
|
|
|
|
582.7
|
|
Additions
|
|
|
31.3
|
|
|
|
46.7
|
|
Acquisition of subsidiary (see Note 8)
|
|
|
22.0
|
|
|
|
|
|
Disposals, cost
|
|
|
(0.4
|
)
|
|
|
(18.2
|
)
|
Disposals, accumulated amortization
|
|
|
0.1
|
|
|
|
0.4
|
|
Transfer to telecommunication licenses, cost (see Note 6)
|
|
|
(13.3
|
)
|
|
|
|
|
Exchange differences, cost
|
|
|
(8.1
|
)
|
|
|
(8.4
|
)
|
Exchange differences, accumulated amortization
|
|
|
3.8
|
|
|
|
6.9
|
|
Amortization charge for the year
|
|
|
(65.5
|
)
|
|
|
(53.9
|
)
|
Transfer to assets held for sale
|
|
|
|
|
|
|
(5.5
|
)
|
|
|
|
|
|
|
|
|
|
Net book value December 31
|
|
|
520.6
|
|
|
|
550.7
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
|
|
|
|
|
Cost
|
|
|
713.0
|
|
|
|
681.1
|
|
Accumulated amortization
|
|
|
(192.4
|
)
|
|
|
(130.4
|
)
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
520.6
|
|
|
|
550.7
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets in the Groups statement of
financial position are comprised mainly of the identifiable
assets recognized as a result of the acquisition of GERMANOS
during 2006. These identifiable assets recognized relate mainly
to the brand name, but also include franchise agreements and
customer relationships and computer software. The brand name was
initially determined to have an indefinite useful life. During
the fourth quarter of 2008, the Group revised its estimate of
the GERMANOS brand names useful life which it determined
to be 15 years from the end of October 2008, the date of
the reassessment. The related amortization charged to the 2009
and 2008 income statement amounted to Euro 27.6 and
Euro 4.6 respectively, and the net book value of the brand
as of December 31, 2009 and 2008, amounted to
Euro 376.8 and Euro 407.2 respectively.
The amortization charge for the year ended December 31,
2007 was Euro 35.7.
Investments are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
TELEKOM SRBIJA
|
|
|
155.1
|
|
|
|
155.1
|
|
Other
|
|
|
1.9
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
157.0
|
|
|
|
156.6
|
|
|
|
|
|
|
|
|
|
|
OTE has concluded that, primarily because of the 80% interest of
the Serbian government, it does not exercise significant
influence over TELEKOM SRBIJA. Furthermore, since TELEKOM
SRBIJAs shares are not publicly traded and OTE does not
have availability to timely updated financial information
required for a reliable measurement of its investment in TELEKOM
SRBIJA, such investment is carried at cost.
F-29
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Groups dividend income is analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
TELEKOM SRBIJA
|
|
|
9.3
|
|
|
|
11.2
|
|
|
|
15.7
|
|
Other available for sale investments
|
|
|
0.3
|
|
|
|
1.0
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9.6
|
|
|
|
12.2
|
|
|
|
16.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Movement in other investments is analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Balance at January 1
|
|
|
156.6
|
|
|
|
158.4
|
|
Other movements
|
|
|
0.4
|
|
|
|
(1.8
|
)
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
|
157.0
|
|
|
|
156.6
|
|
|
|
|
|
|
|
|
|
|
The following transactions occurred during the current year
which impacted the Groups participation in its
subsidiaries:
AMC
On April 27, 2009 OTE announced that its
100% subsidiary COSMOTE completed the acquisition process
of a 12.58% interest held by the Albanian State, in its
subsidiary AMC after obtaining of the relevant approvals from
the authorities in Albania. The cash consideration for the
related acquisition amounted to Euro 48.4. The difference
between the cost of acquisition and the non-controlling interest
acquired of Euro 4.7 was recognized directly in equity
(column Changes in non-controlling interests), as it
relates to the acquisition of non-controlling interests in an
entity where control already exists. Following the official
conclusion of the transaction, COSMOTE owns directly or
indirectly (through its 97% owned subsidiary CHA) a 95% interest
in AMC, although the investment is consolidated on a 100% basis
due to the put option described below held by the non
controlling interests.
According to the Albanian legislation, COSMOTE is obliged to
purchase the shares of the non-controlling interests, if they
request it. On June 22, 2009, non-controlling interests
representing approximately a 2.3% of the share capital (of a
total 2.5%) communicated a relevant request to COSMOTE, in order
to sell their shares at the same price paid to the Albanian
State from COSMOTE for the acquisition of the additional 12.58%
in April 2009. On April 27, 2010 COSMOTE sent an offer
letter on this basis to the non controlling interests. Based on
the above, COSMOTEs relevant liability is estimated to
amount to Euro 10.0 and is included in Other current
liabilities (see Note 22).
COSMOFON
AND GERMANOS TELECOM SKOPJE
As of December 31, 2008, COSMOFON was classified as held
for sale in the statement of financial position. On
March 30, 2009 OTE announced that the agreements between
COSMOTE and Telekom Slovenije were signed in Athens regarding
the transfer of 100% of COSMOFON, through the sale of
COSMOTEs wholly owned subsidiary, OTE MTS HOLDING B.V., as
well as GERMANOS TELECOM AD SKOPJE (GTS) to Telekom Slovenije.
The transaction was completed on May 12, 2009 following
approval by the relevant governmental and regulatory authorities
in Skopje. COSMOFON and GERMANOS TELECOM SKOPJE are included in
the consolidated financial statements until the date the Group
ceased to control those companies (May 12, 2009).
F-30
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table presents COSMOFONs and GERMANOS
TELECOM SKOPJEs income statements for the year 2008 and
for the period from January 1, 2009 to May 12, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germanos
|
|
|
|
Cosmofon
|
|
|
Telecom Skopje
|
|
|
|
1/112/5/2009
|
|
|
2008
|
|
|
1/112/5/2009
|
|
|
2008
|
|
|
Revenue
|
|
|
19.1
|
|
|
|
66.2
|
|
|
|
2.5
|
|
|
|
9.8
|
|
Total operating expenses
|
|
|
(23.4
|
)
|
|
|
(64.5
|
)
|
|
|
(2.9
|
)
|
|
|
(11.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss) before financial activities
|
|
|
(4.3
|
)
|
|
|
1.7
|
|
|
|
(0.4
|
)
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial activities
|
|
|
(1.9
|
)
|
|
|
(1.5
|
)
|
|
|
(0.1
|
)
|
|
|
(0.2
|
)
|
Profit/(Loss) before tax
|
|
|
(6.2
|
)
|
|
|
0.2
|
|
|
|
(0.5
|
)
|
|
|
(1.6
|
)
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) for the period
|
|
|
(6.2
|
)
|
|
|
0.2
|
|
|
|
(0.5
|
)
|
|
|
(1.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-31
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The assets and liabilities of COSMOFON and GERMANOS TELECOM
SKOPJE at the date of disposal are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germanos
|
|
|
|
|
|
|
|
|
|
Telecom
|
|
|
|
|
|
|
Cosmofon
|
|
|
Skopje
|
|
|
Total
|
|
|
|
ASSETS
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
104.9
|
|
|
|
1.1
|
|
|
|
106.0
|
|
Telecommunication licenses
|
|
|
30.4
|
|
|
|
0.3
|
|
|
|
30.7
|
|
Other non-current assets
|
|
|
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
135.3
|
|
|
|
1.5
|
|
|
|
136.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
3.0
|
|
|
|
1.2
|
|
|
|
4.2
|
|
Trade receivables
|
|
|
21.6
|
|
|
|
1.3
|
|
|
|
22.9
|
|
Other current assets
|
|
|
5.2
|
|
|
|
0.3
|
|
|
|
5.5
|
|
Cash and cash equivalents
|
|
|
1.9
|
|
|
|
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
31.7
|
|
|
|
2.8
|
|
|
|
34.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
167.0
|
|
|
|
4.3
|
|
|
|
171.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
33.2
|
|
|
|
2.0
|
|
|
|
35.2
|
|
Other non-current liabilities
|
|
|
1.8
|
|
|
|
|
|
|
|
1.8
|
|
Total
|
|
|
35.0
|
|
|
|
2.0
|
|
|
|
37.0
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
42.1
|
|
|
|
|
|
|
|
42.1
|
|
Trade accounts payable
|
|
|
16.7
|
|
|
|
5.3
|
|
|
|
22.0
|
|
Other current liabilities
|
|
|
24.6
|
|
|
|
0.1
|
|
|
|
24.7
|
|
Total
|
|
|
83.4
|
|
|
|
5.4
|
|
|
|
88.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
118.4
|
|
|
|
7.4
|
|
|
|
125.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets disposed of
|
|
|
48.6
|
|
|
|
(3.1
|
)
|
|
|
45.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the consolidated financial statements, the gain from the sale
was determined as follows:
|
|
|
|
|
Selling price
|
|
|
90.7
|
|
Disposal Expenses
|
|
|
(2.7
|
)
|
|
|
|
|
|
Net proceeds from disposal
|
|
|
88.0
|
|
|
|
|
|
|
Net assets disposed of
|
|
|
(45.5
|
)
|
Goodwill and other intangible assets write-off in group level
|
|
|
(10.3
|
)
|
Depreciation reversal for assets held for sale
|
|
|
(8.6
|
)
|
|
|
|
|
|
Total gain on sale of investment
|
|
|
23.6
|
|
|
|
|
|
|
F-32
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As part of the agreement, Telekom Slovenije undertook to settle
COSMOFONs and GERMANOS TELECOM SKOPJE intra-group
liabilities. The total effect of the above transaction on the
consolidated statement of cash flows is as follows:
|
|
|
|
|
Selling Price
|
|
|
90.7
|
|
Less cash and cash equivalents disposed
|
|
|
(1.9
|
)
|
Less disposal expenses
|
|
|
(2.7
|
)
|
|
|
|
|
|
Net cash inflow from the sale of subsidiary
|
|
|
86.1
|
|
|
|
|
|
|
Loans proceeds in conjunction with disposal of subsidiaries
|
|
|
78.5
|
|
Settlement of receivables due from disposed subsidiaries
|
|
|
16.6
|
|
|
|
|
|
|
Total cash inflow from the sale of subsidiary
|
|
|
181.2
|
|
|
|
|
|
|
In the financial statements as of December 31, 2008,
COSMOFONs assets and liabilities are presented separately
from other assets and liabilities of the Group in the statement
of financial position in the line items Assets classified
as held for sale and Liabilities directly associated
with the assets classified as held for sale. The analysis
below is after the elimination of intercompany balances:
|
|
|
|
|
|
|
2008
|
|
|
|
ASSETS
|
Non-current assets
|
|
|
|
|
Property, plant and equipment
|
|
|
98.9
|
|
Goodwill
|
|
|
5.6
|
|
Telecommunication licenses
|
|
|
36.7
|
|
|
|
|
|
|
Total non-current assets
|
|
|
141.2
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
Inventories
|
|
|
2.6
|
|
Trade receivables
|
|
|
17.4
|
|
Other current assets
|
|
|
4.6
|
|
Cash and cash equivalents
|
|
|
1.9
|
|
|
|
|
|
|
Total current assets
|
|
|
26.5
|
|
|
|
|
|
|
Assets classified as held for sale
|
|
|
167.7
|
|
|
|
|
|
|
|
LIABILITIES
|
Trade accounts payable
|
|
|
10.2
|
|
Deferred tax liability
|
|
|
1.6
|
|
Other current liabilities
|
|
|
4.7
|
|
|
|
|
|
|
Total liabilities
|
|
|
16.5
|
|
|
|
|
|
|
Liabilities directly associated with the assets classified as
held for sale
|
|
|
16.5
|
|
|
|
|
|
|
COSMOHOLDING
ROMANIA LTD
On August 6, 2009, COSMOTE established its
100% subsidiary COSMOHOLDING ROMANIA LTD, a holding company
incorporated in Cyprus whose aim was the acquisition of the
Romanian mobile communication company, ZAPP.
F-33
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
ZAPP
On July 1, 2009, OTE announced that its subsidiary COSMOTE
(through its wholly owned subsidiary COSMOHOLDING ROMANIA LTD)
had signed on June 30, 2009, a share purchase agreement for
the acquisition of ZAPP in Romania. The acquisition which was
subject, among other conditions, to the approval of the relevant
Romanian authorities, was completed on October 31, 2009.
The consideration paid for the acquisition of ZAPP was
Euro 67.5, while COSMOTE undertook ZAPPs borrowings
amounting to Euro 129.6 mainly relating to the 3G and CDMA
network development of this company. ZAPP was established in
1993 and has CDMA 450 MHz and 3G in 2100 MHz
telecommunications licenses.
The values of the assets acquired and the liabilities assumed
from the above mentioned transaction are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preliminary
|
|
|
|
|
|
|
Book Value
|
|
|
Adjustments
|
|
|
Fair Value
|
|
|
|
ASSETS
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
83.4
|
|
|
|
|
|
|
|
83.4
|
|
Telecommunication licenses (see Note 6)
|
|
|
21.0
|
|
|
|
52.4
|
|
|
|
73.4
|
|
Intangible assets (see Note 7)
|
|
|
|
|
|
|
22.0
|
|
|
|
22.0
|
|
Other non-current assets
|
|
|
0.3
|
|
|
|
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
104.7
|
|
|
|
74.4
|
|
|
|
179.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
2.1
|
|
|
|
|
|
|
|
2.1
|
|
Trade receivables
|
|
|
2.4
|
|
|
|
|
|
|
|
2.4
|
|
Other current assets
|
|
|
2.9
|
|
|
|
|
|
|
|
2.9
|
|
Cash and cash equivalents
|
|
|
0.8
|
|
|
|
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8.2
|
|
|
|
|
|
|
|
8.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
112.9
|
|
|
|
74.4
|
|
|
|
187.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
122.4
|
|
|
|
|
|
|
|
122.4
|
|
Other non-current liabilities
|
|
|
7.6
|
|
|
|
1.8
|
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
130.0
|
|
|
|
1.8
|
|
|
|
131.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
|
6.8
|
|
|
|
|
|
|
|
6.8
|
|
Borrowings
|
|
|
7.2
|
|
|
|
|
|
|
|
7.2
|
|
Other current liabilities
|
|
|
4.0
|
|
|
|
|
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
18.0
|
|
|
|
|
|
|
|
18.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
148.0
|
|
|
|
1.8
|
|
|
|
149.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
(35.1
|
)
|
|
|
72.6
|
|
|
|
37.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase price
|
|
|
|
|
|
|
|
|
|
|
67.5
|
|
Expenses of acquisition
|
|
|
|
|
|
|
|
|
|
|
3.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill (see Note 5)
|
|
|
|
|
|
|
|
|
|
|
33.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-34
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The total effect of the above transaction on the consolidated
statement of cash flows is as follows:
|
|
|
|
|
Purchase price
|
|
|
67.5
|
|
Expenses of acquisition (paid)
|
|
|
1.5
|
|
Less cash acquired
|
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
68.2
|
|
|
|
|
|
|
Repayment of borrowings in conjunction with the acquisition
|
|
|
129.6
|
|
|
|
|
|
|
Net cash outflow
|
|
|
197.8
|
|
|
|
|
|
|
The preliminary adjustment to intangible assets of
Euro 22.0 relates to the recognition of this companys
customer base. The fair values analyzed above are based on a
preliminary purchase price allocation.
E-VALUE
LTD
In October 2009,
E-VALUE
S.A.
founded the Greek company
E-VALUE
LTD,
the object of which is provision of services regarding overdue
accounts.
Changes in non-controlling interests
The total difference arising from the acquisition of
non-controlling interests in companies which the Group already
controls and which have been recorded directly in equity are
analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
COSMOTE
|
|
|
3,132.2
|
|
|
|
3,132.2
|
|
GERMANOS
|
|
|
171.7
|
|
|
|
171.7
|
|
OTENET
|
|
|
12.3
|
|
|
|
12.3
|
|
HELLASCOM
|
|
|
(3.3
|
)
|
|
|
(3.3
|
)
|
HELLAS-SAT
|
|
|
1.2
|
|
|
|
1.2
|
|
VOICENET
|
|
|
1.1
|
|
|
|
1.1
|
|
AMC
|
|
|
6.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,321.5
|
|
|
|
3,315.2
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
OTHER
NON-CURRENT ASSETS
|
Other non-current assets are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Loans and advances to employees
|
|
|
82.8
|
|
|
|
65.1
|
|
Deferred expenses (long-term)
|
|
|
21.9
|
|
|
|
29.6
|
|
Other
|
|
|
22.6
|
|
|
|
26.0
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
127.3
|
|
|
|
120.7
|
|
|
|
|
|
|
|
|
|
|
Loans and advances to employees are comprised mainly of loans
granted to employees with service period exceeding 25 years
against the accrued indemnity payable to them upon retirement.
The effective interest rate on these loans is 1.79% for 2009 and
1.74% for 2008. The discount factor is the rate used for the
actuarial valuation of staff retirement indemnities which is
4.6% for 2009 and 5.5% for 2008 (See Note 18).
F-35
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Trade receivables are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Subscribers
|
|
|
1,737.8
|
|
|
|
1,855.5
|
|
International traffic
|
|
|
85.5
|
|
|
|
144.1
|
|
Unbilled revenue
|
|
|
99.2
|
|
|
|
82.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,922.5
|
|
|
|
2,081.6
|
|
Less
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
|
(769.5
|
)
|
|
|
(887.4
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,153.0
|
|
|
|
1,194.2
|
|
|
|
|
|
|
|
|
|
|
The movement in the allowance for doubtful accounts is as
follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Balance at January 1
|
|
|
(887.4
|
)
|
|
|
(791.5
|
)
|
Charge for the year (see Note 24)
|
|
|
(107.0
|
)
|
|
|
(119.8
|
)
|
Write-offs
|
|
|
228.8
|
|
|
|
6.9
|
|
Balance from newly acquired subsidiary
|
|
|
(7.7
|
)
|
|
|
|
|
Foreign exchange differences
|
|
|
2.9
|
|
|
|
5.6
|
|
Reversal of provision
|
|
|
0.9
|
|
|
|
5.0
|
|
Provision for trade receivables held for sale
|
|
|
|
|
|
|
6.4
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
|
(769.5
|
)
|
|
|
(887.4
|
)
|
|
|
|
|
|
|
|
|
|
The aging analysis of trade receivables is as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Not impaired and not past due
|
|
|
634.8
|
|
|
|
639.5
|
|
Not impaired and past due:
|
|
|
|
|
|
|
|
|
Less than 30 days
|
|
|
129.3
|
|
|
|
234.1
|
|
Between 31 and 180 days
|
|
|
216.4
|
|
|
|
235.2
|
|
More than 180 days
|
|
|
172.5
|
|
|
|
85.4
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,153.0
|
|
|
|
1,194.2
|
|
|
|
|
|
|
|
|
|
|
F-36
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
11.
|
OTHER
FINANCIAL ASSETS
|
Other financial assets are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
Held to maturity Bonds
|
|
|
8.1
|
|
|
|
112.2
|
|
Held for trading Bonds
|
|
|
3.2
|
|
|
|
3.1
|
|
Available for sale Shares
|
|
|
14.3
|
|
|
|
11.1
|
|
Available for sale Mutual funds
|
|
|
4.0
|
|
|
|
3.8
|
|
Non marketable securities:
|
|
|
|
|
|
|
|
|
Available for sale Securities
|
|
|
5.8
|
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
35.4
|
|
|
|
135.9
|
|
|
|
|
|
|
|
|
|
|
The movement of other financial assets can be analyzed as
follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Balance at January 1
|
|
|
135.9
|
|
|
|
81.2
|
|
Additions
|
|
|
308.0
|
|
|
|
138.0
|
|
Sales maturities
|
|
|
(412.2
|
)
|
|
|
(46.8
|
)
|
Foreign exchange differences
|
|
|
(0.4
|
)
|
|
|
(1.0
|
)
|
Fair value adjustments
|
|
|
4.1
|
|
|
|
(35.5
|
)
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
|
35.4
|
|
|
|
135.9
|
|
|
|
|
|
|
|
|
|
|
Other current assets are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Advances to EDEKT, short-term portion (See Note 18)
|
|
|
35.2
|
|
|
|
35.2
|
|
Loan to Auxiliary fund, short-term portion (See Note 18)
|
|
|
10.1
|
|
|
|
10.0
|
|
Due from OTE Leasing customers (See Note 29)
|
|
|
25.6
|
|
|
|
25.4
|
|
Loans and advances to employees
|
|
|
6.6
|
|
|
|
6.2
|
|
VAT recoverable
|
|
|
5.0
|
|
|
|
22.5
|
|
Other prepayments
|
|
|
59.9
|
|
|
|
59.0
|
|
Deferred expenses
|
|
|
10.0
|
|
|
|
9.5
|
|
Other
|
|
|
103.2
|
|
|
|
93.8
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
255.6
|
|
|
|
261.6
|
|
|
|
|
|
|
|
|
|
|
F-37
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
13.
|
CASH AND
CASH EQUIVALENTS
|
Cash and cash equivalents are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash in hand
|
|
|
3.1
|
|
|
|
3.5
|
|
Short-term bank deposits
|
|
|
865.7
|
|
|
|
1,426.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
868.8
|
|
|
|
1,429.7
|
|
|
|
|
|
|
|
|
|
|
Held for sale
|
|
|
|
|
|
|
(1.9
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
868.8
|
|
|
|
1,427.8
|
|
|
|
|
|
|
|
|
|
|
|
|
14.
|
SHARE
CAPITAL SHARE PREMIUM
|
OTEs share capital as of December 31, 2009, amounted
to Euro 1,171.5, divided into 490,150,389 registered
shares, with a nominal value of Euro 2.39 (absolute amount)
per share. The share premium as of December 31, 2009 and
2008 amounted to Euro 505.1 and Euro 497.9,
respectively, the increase (Euro 7.2) being the amount charged
to the 2009 income statement under the Groups share option
plan (Note 28).
As described in Note 18 below, on March 4, 2009 4% of
OTEs share capital held by the Hellenic State was
transferred to IKA-ETAM.
Under the share purchase agreement between DEUTSCHE TELEKOM AG
and the Hellenic State, the later was granted two put options
for an additional 5% (first put option) and 10% (second put
option) of OTEs shares. On July 31, 2009, as a result
of the exercise of the first put option, the Hellenic State sold
to DEUTSCHE TELEKOM AG 24,507,519 shares of OTE
representing 5% of its share capital.
The following is an analysis of the ownership of OTEs
shares as of December 31, 2009:
|
|
|
|
|
|
|
|
|
Shareholder
|
|
Number of Shares
|
|
|
Percentage %
|
|
|
Hellenic State
|
|
|
63,371,292
|
|
|
|
12.93
|
%
|
D.E.K.A. S.A.
|
|
|
15,052,773
|
|
|
|
3.07
|
%
|
IKA ETAM (See Note 18)
|
|
|
19,606,016
|
|
|
|
4.00
|
%
|
DEUTSCHE TELEKOM AG
|
|
|
147,045,118
|
|
|
|
30.00
|
%
|
Institutional Investors
|
|
|
194,978,408
|
|
|
|
39.78
|
%
|
Private Investors
|
|
|
50,096,782
|
|
|
|
10.22
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
490,150,389
|
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
15.
|
STATUTORY
RESERVE FOREIGN EXCHANGE AND OTHER
RESERVES RETAINED EARNINGS
|
Under Greek Corporate Law, entities are required to transfer on
an annual basis a minimum of five percent of their annual profit
(after income taxes) to a statutory reserve, until such reserve
equals one-third of the issued share capital. As of
December 31, 2009 and 2008, this reserve amounted to
Euro 344.1 and Euro 330.2 respectively. This statutory
reserve cannot be distributed to shareholders. Retained earnings
include undistributed taxed profits as well as untaxed and
specially taxed reserves which, upon distribution, will be
subject to income tax.
F-38
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The analysis of foreign exchange and other reserves is as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Available for sale reserve
|
|
|
5.2
|
|
|
|
1.7
|
|
Net loss on cash flow hedge
|
|
|
(6.8
|
)
|
|
|
(6.3
|
)
|
Foreign currency translation
|
|
|
(51.7
|
)
|
|
|
78.5
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
|
(53.3
|
)
|
|
|
73.9
|
|
|
|
|
|
|
|
|
|
|
Under Greek Corporate Law, each year companies are required to
distribute to their owners dividends of at least 35% of profits
which result from their accounting books and records (published
financial statements), after allowing for the statutory reserve
and income tax. However, companies can waive such dividend
payment with the consent of the 70% of their owners.
On June 24, 2009, the General Assembly of OTEs
Shareholders approved the distribution of a dividend from 2008
profits of a total amount of Euro 367.6 or Euro 0.75
(in absolute amount) per share. Pursuant to Law
3697/2008,
dividends approved by General Meetings convened after
January 1, 2009, are subject to 10% withholding tax which
will be borne by the beneficiary, however, the related law
provides for certain exceptions. The amount of dividends payable
as of December 31, 2009 amounted to Euro 4.2
(December 31, 2008: Euro 3.8).
The Board of Directors of OTE will propose to the Annual General
Assembly of the Shareholders the distribution of a dividend from
the 2009 profits of a total amount of Euro 93.1 or
Euro 0.19 (in absolute amount) per share.
Long-term borrowings are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(a
|
)
|
|
Loan from European Investment Bank / Hellenic State
|
|
|
|
|
|
|
18.9
|
|
|
(b
|
)
|
|
Syndicated loans
|
|
|
500.0
|
|
|
|
500.0
|
|
|
(c
|
)
|
|
Global Medium-Term Note Program
|
|
|
4,876.5
|
|
|
|
5,464.5
|
|
|
(d
|
)
|
|
Other bank loans
|
|
|
42.1
|
|
|
|
59.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
5,418.6
|
|
|
|
6,042.6
|
|
|
|
|
|
Short-term portion
|
|
|
(32.9
|
)
|
|
|
(633.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
|
5,385.7
|
|
|
|
5,409.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
LOAN
FROM EUROPEAN INVESTMENT BANK / HELLENIC STATE
|
In July 2009, OTE paid the last installment (Euro 18.9) of the
loan from the European Investment Bank.
On September 2, 2005, OTE PLC signed a Euro 850.0
Syndicated Credit Facility with banks, guaranteed by OTE. The
facility has a five year term with an extension option of
1+1 year subject to lenders consent. The facility
consists of: a) a Euro 500.0 Term Loan with variable
interest of three month Euribor plus margin (as of
December 31, 2009 0.25%) and b) a Euro 350.0
Revolving Credit Facility with inactivity fee as the facility
F-39
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
has not been utilized (as of December 31, 2009 0.06750%).
The loan bears a margin adjustment clause whereby
the margin is adjustable based on OTEs long-term credit
rating. The loan agreement includes a change of control clause
which is triggered when there is a change of control in OTE
which will result in a credit rating of OTE or the new legal
entity at a level lower than BBB/Baa2. In the event this clause
is triggered, OTE PLC is obliged to notify the banks, who can
request the immediate repayment of the loan. On
September 6, 2005, OTE PLC drew Euro 500.0 under the
Term Loan. Up to December 31, 2009, no draw-downs have been
made from the Revolving Credit Facility.
At OTE PLCs request and following the banks consent,
the maturity of the loan was extended as follows:
a) for Euro 25.8 (Term Loan) and Euro 18.0
(Revolving Credit Facility) to September 2010
b) for Euro 29.0 (Term Loan) and Euro 20.3
(Revolving Credit Facility) to September 2011 and
c) for Euro 445.2 (Term Loan) and Euro 311.7
(Revolving Credit Facility) to September 2012.
According to the current credit rating of OTE, the margin on the
Term Loan is 0.25%.
|
|
(c)
|
GLOBAL
MEDIUM TERM-NOTE PROGRAM
|
OTE PLC has a Global Medium-Term Note Program guaranteed by OTE.
As of December 31, 2009, the total nominal value of the
outstanding bonds under the Global Medium-Term Note Program was
Euro 4,900.0 and is analyzed as follows:
|
|
|
|
|
Euro 1,250.0 notes (nominal value) at a fixed rate of 5.0%,
issued in August 2003, maturing on August 5, 2013. As of
December 31, 2009 the outstanding balance is
Euro 1,250.8 (2008: Euro 1,248.8).
|
|
|
|
Euro 650.0 notes (nominal value) at a fixed rate of 3.75%,
issued in November 2005, maturing on November 11, 2011. As
of December 31, 2009 the outstanding balance is
Euro 639.7 (2008: Euro 634.4).
|
|
|
|
Euro 900.0 notes (nominal value) at a fixed rate of 4.625%,
issued in November 2006, maturing on May 20, 2016. As of
December 31, 2009 the outstanding balance is
Euro 892.5 (2008: Euro 891.5).
|
|
|
|
Euro 1,500.0 notes (nominal value) at a fixed rate of 5.375%,
issued in February 2008, maturing on February 14, 2011. As
of December 31, 2009 the outstanding balance is
Euro 1,496.8 (2008: Euro 1,494.2).
|
|
|
|
Euro 600.0 notes at a fixed rate of 6.0%, issued in February
2008, maturing on February 12, 2015. As of
December 31, 2009 the outstanding balance is
Euro 596.7 (2008: Euro 596.3).
|
In May 2009, OTE PLC repurchased a nominal amount of
Euro 28.1 under the Euro 600.0 Floating Rate Note
(FRN), issued on November 21, 2006 and maturing on
November 21, 2009. The notes were cancelled and therefore,
the outstanding nominal balance of the aforementioned FRN
amounted to Euro 571.9. In November 2009, OTE PLC fully
repaid this note.
These bonds are traded on the Luxembourg Stock Exchange.
The Euro 900.0 bonds issued in November 2006 and the
Euro 1,500.0 and Euro 600.0 bonds issued in February
2008 include a change of control clause applicable to OTE which
is triggered if both of the following events occur:
a) any person or persons acting in concert (other than the
Hellenic State) at any time directly or indirectly come
(s) to own or acquire (s) more than 50% of the issued
ordinary share capital or of the voting rights of OTE, and
b) as a consequence of (a), the rating previously assigned
to the bonds by any international rating agency is withdrawn or
downgraded to BB+/Ba1 or their respective equivalents
(non-investment grade), within a specific period and under
specific terms and conditions.
F-40
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In the event that the clause is triggered OTE PLC is obliged to
notify the bondholders, who can request (within 45 days)
the repayment of the loan.
The terms of the abovementioned bonds of Euro 1,500.0 and
Euro 600.0 include a
step-up
clause triggered by changes in the credit rating of OTE
(step up clause). The bond coupon may increase by
1.25% in the event that:
a) one or both of the two credit rating agencies
(Moodys and Standard and Poors) downgrades the
rating to BB+ or Ba1 and under
(sub-investment
grade), or
b) both rating agencies (Moodys and Standard and
Poors) cease or are unable to perform the credit rating of
OTE.
The coupon can increase once only during the whole bond duration
and only for the period the credit rating of OTE remains at
sub-investment
grade.
Derivatives
On July 21, 2008, OTE PLC entered into an interest rate
swap for Euro 65.0 maturing on August 5, 2013. The
swap has been designated as the hedging instrument in the fair
value hedge of a portion of OTE PLCs Euro 1,250.0
bond, which bears a fixed rate of 5.0% and matures in 2013. OTE
PLC receives 5.0% annually from the bank and pay three month
Euribor less 0.05% every quarter. The gain from the change in
the fair value of the swap is recorded in the line
Interest expense and is offset by the loss from the
change in fair value of the loan. Any ineffectiveness arising is
immaterial. The
mark-to-market
value of the swap as of December 31, 2009 was Euro 7.4
positive for OTE PLC.
On October 1, 2008, the Group designated a swap that
already existed from COSMOTE, for Euro 200.0 maturing on
September 2, 2010 as the hedging instrument on Group level
in a cash flow hedge for the cash flows of a portion of the
syndicated loan of Euro 500.0 which bears a variable
interest rate. The Group receives three month Euribor and pays a
fixed rate of 3.671% on a quarterly basis. From October 31,
2009 this swap does not meet the criteria for hedge accounting
set out in IAS 39. During the year ended December 31, 2009
a loss of Euro 0.5 was recorded in other comprehensive
income.
ROMTELECOM has obtained four long-term loans in Euro and Korea
Won, the outstanding balance of which amount to Euro 42.1
as of December 31, 2009 (December 31, 2008: 54.8). The
first of these is in Euro, it has an outstanding balance of
Euro 12.1, bears a fixed interest rate of 4.9956% and
matures in 2012. The remaining three loans have outstanding
balances of Euro 7.0, Euro 13.2, and Euro 9.8,
are in Korean Won, bear a fixed interest rate of 4.20%, 2.50%
and 2.50% respectively and mature in 2014, 2018 and 2020,
respectively. During 2009, ROMTELECOM repaid an amount of
Euro 12.7 out of its long-term loans.
|
|
18.
|
PROVISIONS
FOR PENSIONS, STAFF RETIREMENT INDEMNITIES AND OTHER EMPLOYEE
BENEFITS
|
OTE employees are covered by various pension, medical and other
benefit plans as summarized below:
Defined
Contribution Plans:
|
|
(a)
|
Main
Pension Fund (TAP-OTE)/IKA-ETAM
|
The TAP-OTE Fund, a multi-employer fund to which OTE
contributes, was the main fund providing pension and medical
benefits to OTE employees. The employees of the National Railway
Company and the Greek Post Office are also members of this Fund.
F-41
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
According to Law 2257/1994, OTE was liable to cover the annual
operating deficit of TAP-OTE up to a maximum amount of
Euro 32.3, which could be adjusted with the Consumer Price
Index. Pursuant to Greek legislation (Law 2768/1999), a fund was
incorporated on December 8, 1999, as a société
anonyme under the name of EDEKT-OTE S.A. (EDEKT),
for the purpose of administering contributions to be made by
OTE, the Hellenic State and the Auxiliary Pension Fund, in order
to finance the TAP-OTE deficit. The Hellenic States and
the Auxiliary Pension Funds contributions to EDEKT were
set to Euro 264.1 and Euro 410.9, respectively.
Pursuant to Law 2937/2001, OTEs contribution was set at
Euro 352.2, representing the equivalent to the net present
value of ten (10) years
(2002-2011)
contributions to TAP-OTE. This amount was paid on August 3,
2001 and is being amortized over the ten-year period, the annual
amortization charge being Euro 35.2 and included in
Payroll and employee benefits. Pursuant to Law
2843/2000, any deficits incurred by TAP-OTE are covered by the
Hellenic State.
As a result of Law 3655/2008, the pension segment of TAP-OTE was
incorporated into IKA-ETAM (the main social security of Greece)
from August 1, 2008, with a gradual reduction of
contributions from TAP-OTE to those of IKA, which is expected to
commence in 2013 and conclude in 2023 in three equal
installments. At the same time, the medical segment of TAP-OTE
was incorporated from October 1, 2008 into TAYTEKO. In
conjunction with the new Law, the shares of TAP-OTE in the share
capital of EDEKT, are passed to IKA-ETAM from the date this
Section was transferred to IKA-ETAM.
Furthermore, according to Law 3655/2008 (article 2,
paragraph 8) the deficits of the pension segments
which were incorporated into IKA-ETAM are covered by the
Hellenic State.
|
|
(b)
|
Auxiliary
Pension Fund/ TAYTEKO
|
The Auxiliary Fund-Lump Sum segment provides members with a lump
sum benefit upon retirement or death.
The Auxiliary Pension Benefit Fund provides to those members,
who were members prior to 1993, with a pension of 20% of salary
after 30 years service. Law 2084/92 has fixed minimum
contributions and maximum benefits, after 35 years of
service, for new entrants from 1993. As a result of Law
3655/2008, the two segments of the Auxiliary fund (the
Lump Sum Payment segment and the Additional Pension
segment) were incorporated from October 1, 2008 into
TAYTEKO.
Based on actuarial studies performed in prior years and on
current estimations, these pension funds show (or will show in
the future) increased deficits. OTE does not have a legal
obligation to cover any future deficiencies of these funds and,
according to management; neither does it voluntarily intend to
cover such possible deficiencies. However, there can be no
assurance that OTE will not be required (through regulatory
arrangements) to make additional contributions in the future to
cover operating deficits of these funds.
F-42
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Loans and advances to pension funds are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Loans and advances to:
|
|
|
|
|
|
|
|
|
EDEKT
|
|
|
70.4
|
|
|
|
105.6
|
|
Auxiliary Fund
|
|
|
2.4
|
|
|
|
2.6
|
|
Interest bearing loan to Auxiliary Fund
|
|
|
127.0
|
|
|
|
131.5
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
199.8
|
|
|
|
239.7
|
|
Loans and advances to:
|
|
|
|
|
|
|
|
|
EDEKT
|
|
|
35.2
|
|
|
|
35.2
|
|
Auxiliary Fund
|
|
|
0.5
|
|
|
|
0.5
|
|
Interest bearing loan to Auxiliary Fund
|
|
|
9.6
|
|
|
|
9.5
|
|
|
|
|
|
|
|
|
|
|
Short-term portion
|
|
|
45.3
|
|
|
|
45.2
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
|
154.5
|
|
|
|
194.5
|
|
|
|
|
|
|
|
|
|
|
Loans to pension funds are reflected in the financial statements
at amortized cost, having been discounted, using appropriate
Greek market rates, on initial recognition to their present
values. Based on article 74 of Law
3371/2005
and the provisions of the related Ministerial Decision, OTE
should grant an interest bearing loan to the Auxiliary Fund in
order to cover the Lump Sum benefits due to participants of the
Voluntary Leave Scheme. On October 23, 2006, the loan
agreement was signed and its main terms are as follows: the
total amount of the loan is up to Euro 180.0, which would
be granted partially in accordance with the Funds needs,
as determined by the above mentioned Law and the related
Ministerial Decision. If the Lump Sum benefits exceeded the
amount of Euro 180.0, OTE would grant the additional
amount, which could not exceed the amount of Euro 10.0. In
this case, the above mentioned agreement would be amended in
order to include the final amount of the loan and to update the
repayment schedule.
Following the above mentioned terms, on October 30, 2007
and on May 21, 2008 two amendments to the loan agreement
were signed based on which additional amounts of Euro 8.0
and Euro 1.3 were granted and the repayment schedule was
updated so that as of December 31, 2009, the total loan
granted amounted to Euro 189.3. The loan is repayable in
21 years including a two year grace period, meaning that
the repayment started on October 1, 2008 through monthly
installments. The loan bears interest at 0.29%.
Defined
Benefit Plans:
|
|
(a)
|
Provision
for Staff Retirement Indemnities
|
Under Greek labor law, employees are entitled to termination
payments in the event of dismissal or retirement with the amount
of payment varying in relation to the employees
compensation, length of service and manner of termination
(dismissal or retirement). Employees who resign (except those
with over fifteen years of service) or are dismissed with cause
are not entitled to termination payments. The indemnity payable
in case of retirement is equal to 40% of the amount which would
be payable upon dismissal. In the case of OTE employees, the
maximum amount is limited to a fixed amount (Euro 0.02 and is
adjusted annually according to the inflation rate), plus
9 months salary. In practice, OTE employees receive the
lesser amount between 100% of the maximum liability and
Euro 0.02 plus 9 months salary. Employees with service
exceeding 25 years are entitled to draw loans against the
indemnity payable to them upon retirement. The provision for
staff retirement indemnity is reflected in the financial
statements in accordance with IAS 19 Employee
Benefits and is based on an independent actuarial study.
F-43
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The components of the staff retirement indemnity expense are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current service cost
|
|
|
19.0
|
|
|
|
18.4
|
|
|
|
18.7
|
|
Interest cost on benefit obligation
|
|
|
20.2
|
|
|
|
15.5
|
|
|
|
14.5
|
|
Amortization of past service cost
|
|
|
8.0
|
|
|
|
6.7
|
|
|
|
7.8
|
|
Amortization of unrecognized actuarial loss
|
|
|
2.8
|
|
|
|
2.7
|
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
50.0
|
|
|
|
43.3
|
|
|
|
44.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in the present value of the staff retirement indemnities
are as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Defined benefit obligation beginning of the year
|
|
|
359.2
|
|
|
|
331.3
|
|
Current service cost
|
|
|
19.0
|
|
|
|
18.4
|
|
Interest cost
|
|
|
20.2
|
|
|
|
15.5
|
|
Actuarial loss/(gain)
|
|
|
(2.3
|
)
|
|
|
11.1
|
|
Past service cost
|
|
|
0.7
|
|
|
|
2.5
|
|
Foreign exchange differences
|
|
|
(0.8
|
)
|
|
|
|
|
Prior service cost arising during the year
|
|
|
0.2
|
|
|
|
|
|
Benefits paid
|
|
|
(38.2
|
)
|
|
|
(19.6
|
)
|
|
|
|
|
|
|
|
|
|
Defined benefit obligation end of the year
|
|
|
358.0
|
|
|
|
359.2
|
|
Unrecognized actuarial losses
|
|
|
(50.3
|
)
|
|
|
(55.3
|
)
|
Unrecognized past service costs
|
|
|
(41.2
|
)
|
|
|
(49.0
|
)
|
|
|
|
|
|
|
|
|
|
Liability in the statement of financial position
|
|
|
266.5
|
|
|
|
254.9
|
|
|
|
|
|
|
|
|
|
|
The assumptions underlying the actuarial valuation of the staff
retirement indemnities for the Group are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Discount rate
|
|
|
4.69.5
|
%
|
|
|
4.56.7
|
%
|
|
|
4.8
|
%
|
Assumed rate of future salary increases
|
|
|
3.54.5
|
%
|
|
|
2.56.5
|
%
|
|
|
5.5
|
%
|
The Youth Account provides OTEs employees children a
lump sum payment generally when they reach the age of 25. The
lump sum payment is made up of employees contributions,
interest thereon and OTEs contributions which can reach up
to a maximum 10 months salary of the total average
salary of OTE employees depending on the number of years of
contributions. The provision for benefits under the Youth
Account is based on an independent actuarial study. The total
actuarial liability is split into two parts; one is treated as
post employment employee benefit and the other as
other long-term employee benefit. The part of the
total Youth Account liability that is being classified as
other long-term employee benefit relates to
employees who will still be active employees at the time when
their children will be eligible for the lump sum benefit. The
remaining part of the liability is being classified as
post retirement employee benefit.
F-44
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The amount of the Youth Account provision recognized in the
income statement is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current service cost
|
|
|
19.3
|
|
|
|
19.9
|
|
|
|
21.8
|
|
Interest cost on benefit obligation
|
|
|
12.6
|
|
|
|
11.8
|
|
|
|
11.8
|
|
Amortization of actuarial loss
|
|
|
11.3
|
|
|
|
31.8
|
|
|
|
10.7
|
|
Amortization of past service cost
|
|
|
2.3
|
|
|
|
5.8
|
|
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
45.5
|
|
|
|
69.3
|
|
|
|
47.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reconciliation of the total defined benefit obligation
regarding the Youth Account to the benefit liability is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
Post
|
|
Other
|
|
|
|
Post
|
|
Other Long
|
|
|
|
|
Employment
|
|
Long Term
|
|
|
|
Employment
|
|
Term
|
|
|
|
|
Benefit
|
|
Benefit
|
|
Total
|
|
Benefit
|
|
Benefit
|
|
Total
|
|
Projected benefit obligation beginning of the year
|
|
|
194.4
|
|
|
|
83.3
|
|
|
|
277.7
|
|
|
|
200.5
|
|
|
|
85.9
|
|
|
|
286.4
|
|
Service cost-benefits earned during the year
|
|
|
13.5
|
|
|
|
5.8
|
|
|
|
19.3
|
|
|
|
13.9
|
|
|
|
6.0
|
|
|
|
19.9
|
|
Interest cost on projected benefit obligation
|
|
|
8.8
|
|
|
|
3.8
|
|
|
|
12.6
|
|
|
|
8.3
|
|
|
|
3.5
|
|
|
|
11.8
|
|
Amortization of unrecognized actuarial loss
|
|
|
30.0
|
|
|
|
4.8
|
|
|
|
34.8
|
|
|
|
11.1
|
|
|
|
4.8
|
|
|
|
15.9
|
|
Benefits paid
|
|
|
(39.7
|
)
|
|
|
(10.4
|
)
|
|
|
(50.1
|
)
|
|
|
(39.4
|
)
|
|
|
(16.9
|
)
|
|
|
(56.3
|
)
|
Projected benefit obligation end of the year
|
|
|
207.0
|
|
|
|
87.3
|
|
|
|
294.3
|
|
|
|
194.4
|
|
|
|
83.3
|
|
|
|
277.7
|
|
Defined benefit obligation
|
|
|
207.0
|
|
|
|
87.3
|
|
|
|
294.3
|
|
|
|
194.4
|
|
|
|
83.3
|
|
|
|
277.7
|
|
Unrecognized actuarial losses
|
|
|
(79.6
|
)
|
|
|
|
|
|
|
(79.6
|
)
|
|
|
(56.1
|
)
|
|
|
|
|
|
|
(56.1
|
)
|
Unrecognized past service costs
|
|
|
(3.7
|
)
|
|
|
|
|
|
|
(3.7
|
)
|
|
|
(6.0
|
)
|
|
|
|
|
|
|
(6.0
|
)
|
Benefit liability
|
|
|
123.7
|
|
|
|
87.3
|
|
|
|
211.0
|
|
|
|
132.3
|
|
|
|
83.3
|
|
|
|
215.6
|
|
Employees accumulated contributions
|
|
|
|
|
|
|
|
|
|
|
71.3
|
|
|
|
|
|
|
|
|
|
|
|
70.7
|
|
Liability in the statement of financial position
|
|
|
123.7
|
|
|
|
87.3
|
|
|
|
282.3
|
|
|
|
132.3
|
|
|
|
83.3
|
|
|
|
286.3
|
|
The assumptions underlying the actuarial valuation of the Youth
Account are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
Discount rate
|
|
|
3.9
|
%
|
|
|
5.0
|
%
|
|
|
4.5
|
%
|
Assumed rate of future salary increases
|
|
|
4.5
|
%
|
|
|
4.5
|
%
|
|
|
4.5
|
%
|
Voluntary
Leave Schemes
On May 25, 2005, the management of OTE and OME-OTE (the
personnel union body) signed a Collective Labor Agreement which
stipulates the staff hiring procedures. In accordance with this
agreement, all new recruits by OTE will be covered with
indefinite service agreements. The agreement became effective
from the date the relevant law for the voluntary leave of OTE
staff came into force.
The enactment of Article 74 of Law 3371/2005 and the
Collective Labor Agreement signed between OTE and OME-OTE on
July 20, 2005, instituted the framework for the voluntary
retirement scheme. Pursuant to this Law and the collective labor
agreement, the voluntary retirement scheme was applicable to
permanent employees who would complete the number of years of
service required for retirement up to December 31, 2012
would be entitled to full pension and other benefits. Employees
that desired to come under the provisions of the above mentioned
F-45
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Law, with the decision of TAP OTE, such factitious time insured
as the one required for the vesting of the retirement right was
recognized. The same decision for the recognition of fictitious
time was also taken by the Auxiliary Fund.
The cost components of the voluntary leave are as follows:
|
|
|
|
|
The cost of employers and employees contributions to
TAP-OTE for the period required for the employees to be entitled
to pension
|
|
|
|
The amount of pensions TAP-OTE will be required to prepay to
these employees
|
|
|
|
The total cost of employers and employees
contributions to the Auxiliary Fund for the period required for
the employees to be entitled to pension
|
|
|
|
The amount of pensions the Auxiliary Fund will be required to
prepay to these employees
|
|
|
|
The total cost of employees contributions to Auxiliary
Fund for the Lump-Sum benefit
|
|
|
|
The total cost of bonuses based on the collective labor
agreement signed on July 20, 2005 and
|
|
|
|
The termination payments upon retirement of the employees (staff
retirement indemnities).
|
Because of the periodical payments of the majority of the above
mentioned costs (payments through to 2012), the nominal amounts
of these liabilities were discounted at their present values.
Based on the provisions of Law 3371/2005, the Greek State would
contribute a 4% stake in OTEs share capital to TAP-OTE for
the portion of the total cost that relates to employers
and employees contributions to TAP-OTE and to the amount
of pensions TAP OTE would be required to prepay, subject to EU
approval.
In May 2007, the European Commission by its relevant decision
with reference number C 2/2006 (ex L
405/2005)
judged that the Greek States proposal to grant 4% of its
stake to TAP OTE, according to article 74 of L.3371/2005
was not against common market regulations as defined in
article 87 paragraph 3. The total contribution of the
Greek State to TAP OTE according to the above decision could not
exceed the amount of Euro 390.4. The exact amount would
depend on the timing and the procedures that would be followed
by the Hellenic State for the implementation of the decision.
On March 4, 2009, the Hellenic State and IKA-ETAM (general
successor of TAP-OTE) signed a transfer agreement of 19,606,015
ordinary shares held by the Hellenic State to IKA-ETAM without
cash consideration. These shares represent 4% of OTEs
share capital, in accordance with articles 74 par. 4a
of L.3371/2005 and articles 1 and 2 par. 4 and 5 of
L3655/2008, in combination with the decision of May 10,
2007 of the European Community Committee (C 2/2206). The fair
value of the transaction was set at Euro 10.30 in absolute
amount (closing price of the OTEs share on the Athens
Exchange the date the transfer was signed) per share.
The above transfer is subject to the following terms:
|
|
|
|
|
The Hellenic State retains the option to repurchase a part or
the total of the transferred shares. This option can be
exercised at any time, following a written declaration to
IKA-ETAM, stating at a minimum the number of shares that will be
repurchased and the time period, as one or a series of
transactions.
|
|
|
|
If IKA-ETAM, for any reason, decides to sell all or a part of
the shares, it is obliged to communicate this intention in
writing to the Hellenic State. The Hellenic State retains the
right to repurchase part or the whole of the shares that
IKA-ETAM intends to sell. To exercise this right, the Hellenic
State must provide written notice of its intentions within one
month from notification. If the Hellenic State does not wish to
exercise its right or does not exercise its rights within one
month, then IKA-ETAM can sell freely those shares.
|
|
|
|
The Hellenic State has the exclusive obligation to repurchase
the shares that IKA-ETAM intends to sell if the reason for the
sale is to fund the pensions of the participants in OTEs
Voluntary Leave Scheme based on article 74 of L3371/2005.
In this instance, IKA-ETAM must provide specific economic
analysis that
|
F-46
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
evidences its inability to fulfill its obligation to disburse
pensions to the above mentioned participants without the sale of
the shares.
|
|
|
|
|
|
In all the afore-mentioned cases (call option
and/or
put
option) the value of the total of the transferred shares will be
calculated based on the closing price of the share of OTE at the
signing date (i.e. Euro 10.30 (in absolute amount) per
share).
|
|
|
|
If IKA-ETAM sells the shares to a third party without complying
with all the afore-mentioned terms, IKA-ETAM is obliged to pay
to the Hellenic State an amount equal to 10 times the
consideration received from the sale to the third party as a
financial penalty and compensation which is agreed as fair.
|
|
|
|
If OTE decides to increase its share capital with a preference
right in favor of the existing owners, or issues convertible
bonds and IKA-ETAM decides to exercise these rights, IKA-ETAM is
required to inform the Hellenic State in writing. The Hellenic
State retains the right to request IKA-ETAM to transfer, through
an over the counter transaction, the additional shares obtained.
In this case IKA-ETAM is obliged to transfer the shares obtained
at the price obtained, otherwise it is obliged to pay
compensation equal to 10 times the consideration invested for
participating in the share capital increase and terms mentioned
in the preceding paragraph will apply.
|
|
|
|
IKA-ETAM undertakes to exercise its voting rights corresponding
to the above shares, in coordination with the Hellenic State and
has to instruct individuals who will be authorized to exercise
the voting rights at any General Assembly of the OTEs
shareholders on its behalf in the same way the Hellenic State
does. Otherwise, IKA-ETAM has to pay to the Hellenic State a
penalty equal to the listed price of the transferred shares at
the date of the General Assembly of the OTEs shareholders
as well as any other compensation for any consequential loss the
Hellenic State suffers.
|
On May 15, 2009 the Law 3762/2009 was enacted providing the
following:
|
|
|
|
|
OTEs employees who: (i) have submitted a written
application to participate in the Voluntary Leave Scheme, within
the deadlines defined in par.2, article 74 of Law 3371/2005
and, (ii) do not submit an irrevocable application within
one (1) month from the laws enactment that would
recall the initial application submitted, are considered to be
retired based on the article 74 of Law 3371/2005 within
three (3) months from the expiration of the deadline
described in ii) above.
|
|
|
|
The cost that will arise from a) the employers and
the employees contributions to IKA-ETAM (both for the
sections of pensions and medical benefits) for the factitious
time recognized to these employees and b) the pensions that
IKA-ETAMs pension section will be required to pay to these
employees based on the above, will be covered by OTE.
|
|
|
|
The cost that will arise from the employers and the
employees contributions to TAYTEKO for the factitious time
recognized to these employees as well as the pensions that
TAYTEKO (Auxiliary Insurance Sector for OTE Personnel) will be
required to pay to these employees based on the above, will be
covered by OTE.
|
|
|
|
The cost that will arise from the employers and the
employees contributions to TAYTEKO (Health Insurance
Sector for OTE Personnel) for the factitious time recognized to
these employees, will be covered by OTE.
|
|
|
|
For the Lump Sum benefits that TAYTEKO will be required to pay
to these employees, OTE should grant a long-term loan to TAYTEKO.
|
F-47
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Based on the estimated period of payment, the provision relating
to the Voluntary Leave Scheme is classified as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Short-term portion
|
|
|
149.0
|
|
|
|
275.8
|
|
Long-term portion
|
|
|
109.9
|
|
|
|
107.2
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
258.9
|
|
|
|
383.0
|
|
|
|
|
|
|
|
|
|
|
The movement of the provision for the cost of the Voluntary
Leave Scheme is as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Balance at January 1
|
|
|
383.0
|
|
|
|
417.7
|
|
Payments during the year
|
|
|
(96.1
|
)
|
|
|
(42.8
|
)
|
Release of liability due to transfer of 4% to IKA-ETAM
|
|
|
(201.9
|
)
|
|
|
|
|
Voluntary Leave Scheme cost
|
|
|
152.0
|
|
|
|
|
|
Payments related to provision for staff retirement indemnities
|
|
|
(13.9
|
)
|
|
|
|
|
Adjustment due to time value of money
|
|
|
35.8
|
|
|
|
8.1
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
|
258.9
|
|
|
|
383.0
|
|
|
|
|
|
|
|
|
|
|
On January 28, 2009, the management of OTE and OME-OTE (the
personnel union body) signed a Collective Labor Agreement
according to which employees who would complete the number of
years required for retirement by December 30, 2009, would
be entitled to benefits in order to retire by this date at the
latest. The deadline for the applications for participating in
this early retirement program was due on February 16, 2009.
Applications were irrevocable. The respective cost amounted to
Euro 11.0 and is included in the line Cost of early
retirement program in the 2009 income statement while the
eligible employees left the Company until December 30, 2009.
On December 23, 2009, the management of OTE approved an
early retirement program according to which employees who will
complete the number of years required for retirement by
December 29, 2010, would be entitled to benefits in order
to retire by December 30, 2010. The deadline for the
applications for participating in this early retirement program
was January 15, 2010. For further information see
Note 32.
In addition, included in the 2009 Groups income statement
is an amount of Euro 8.6 (2008: Euro 38.0, 2007: nil)
which is the cost of ROMTELECOMs early retirement program
and is included in the line Cost of early retirement
program.
The table below describes the components included in the line
Cost of early retirement program of the income
statement relating to the Voluntary Leave Scheme and the early
retirement programs described above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Release of liability due to transfer of 4% to IKA ETAM
|
|
|
201.9
|
|
|
|
|
|
|
|
|
|
Voluntary Leave Scheme cost
|
|
|
(152.0
|
)
|
|
|
|
|
|
|
|
|
Other early retirement programs cost
|
|
|
(19.6
|
)
|
|
|
(50.2
|
)
|
|
|
(22.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
30.3
|
|
|
|
(50.2
|
)
|
|
|
(22.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-48
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
19.
|
OTHER
NON-CURRENT LIABILITIES
|
Other non-current liabilities are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Provision for employees contributions under early
retirement programs
|
|
|
7.1
|
|
|
|
4.4
|
|
Asset retirement obligation
|
|
|
8.5
|
|
|
|
5.9
|
|
Provision for obligation of free units
|
|
|
36.1
|
|
|
|
37.0
|
|
Deferred revenue (long-term)
|
|
|
8.0
|
|
|
|
18.0
|
|
Unpaid balance of 3G license
|
|
|
6.9
|
|
|
|
|
|
Derivative financial instrument
|
|
|
4.3
|
|
|
|
3.9
|
|
Other
|
|
|
7.0
|
|
|
|
5.4
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
77.9
|
|
|
|
74.6
|
|
|
|
|
|
|
|
|
|
|
|
|
20.
|
SHORT-TERM
BORROWINGS
|
The outstanding balance of short-term borrowings as of
December 31, 2009 for the Group amounted to Euro 3.3
(December 31, 2008: Euro 5.1), and is analyzed as
follows:
|
|
|
|
|
Loan of
E-VALUE
S.A.
of Euro 2.0, maturing on July 2010 with an interest rate
Euribor + 0.90%. The outstanding balance of this loan as of
December 31, 2009 amounts to Euro 2.0
(December 31, 2008: Euro 0.3).
|
|
|
|
Loan of OTE PLUS with an outstanding balance as of
December 31, 2009 amounting to Euro 1.3
(December 31, 2008: Euro 4.1).
|
|
|
|
Loan of VOICENET with an outstanding balance as of
December 31, 2009 amounting to nil (December 31, 2008:
Euro 0.7).
|
The weighted average interest rate of the short-term borrowings
for the years ended December 31, 2009 and 2008, was
approximately 2.8% and 6.1%, respectively.
|
|
21.
|
INCOME
TAXES DEFERRED TAXES
|
In accordance with the Greek tax regulations (Law 3296/2004),
the income tax rate was 25% for 2007 onwards. In accordance with
article 19 of Law 3697/2008 the income tax rate will
gradually reduce as follows: 24% for 2010, 23% for 2011, 22% for
2012, 21% for 2013 and 20% for 2014 onwards.
Greek tax regulations and related clauses are subject to
interpretation by the tax authorities and administrative courts
of law.
Tax returns are filed annually but the profits or losses
declared for tax purposes remain provisional until such time as
the tax authorities examine the returns and the records of the
tax payer and a final assessment is issued. Net operating losses
which are tax deductible, can be carried forward against taxable
profits for a period of five years from the year they are
generated.
Under Greek tax regulations, an income tax advance calculation
on each years current income tax liability is paid to the
tax authorities. Such advance is then netted off with the
following years income tax liability. Any excess advance
amounts are refunded to the companies following a tax
examination.
F-49
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company and its subsidiaries have not been audited by the
tax authorities for the years described below and, therefore,
the tax liabilities for these open years have not been finalized:
|
|
|
Company
|
|
Open Tax Years
|
|
OTE
|
|
From 2009
|
COSMOTE
|
|
From 2009
|
OTE INTERNATIONAL INVESTMENTS LTD
|
|
From 2003
|
HELLAS SAT
|
|
From 2008
|
COSMO-ONE
|
|
From 2002
|
VOICENET
|
|
From 2004
|
HELLASCOM
|
|
From 2007
|
OTE PLC
|
|
From 2005
|
OTE SAT-MARITEL
|
|
From 2004
|
OTE PLUS
|
|
From 2008
|
OTE ESTATE
|
|
From 2008
|
OTE GLOBE
|
|
From 2007
|
OTE INSURANCE
|
|
From 2007
|
OTE ACADEMY
|
|
From 2007
|
HATWAVE
|
|
From 1996
|
OTE INVESTMENTS SERVICES S.A.
|
|
From 2005
|
ROMTELECOM
|
|
From 2006
|
AMC
|
|
From 2008
|
GLOBUL
|
|
From 2005
|
COSMOTE ROMANIA
|
|
From 2007
|
GERMANOS
|
|
From 2008
|
E-VALUE
S.A.
|
|
From 2003
|
GERMANOS TELECOM ROMANIA S.A.
|
|
From 2003
|
SUNLIGHT ROMANIA S.R.L. -FILIALA
|
|
From 2005
|
GERMANOS TELECOM BULGARIA A.D.
|
|
From 2005
|
MOBILBEEEP LTD
|
|
From 2005
|
HELLAS SAT S.A.
|
|
From 2008
|
CHA
|
|
From 2007
|
COSMO-HOLDING CYPRUS
|
|
From 2006
|
COSMOHOLDING ROMANIA LTD
|
|
From 2009 (incorporation)
|
ZAPP
|
|
From 2009
|
OTE PROPERTIES
|
|
From 2008 (incorporation)
|
OTE PLUS BULGARIA
|
|
Tax exempt
|
E-VALUE
LTD
|
|
From 2009 (incorporation)
|
|
|
|
|
|
The tax audit of the Company for the fiscal years
2006-2008
was completed in early May 2010 and the tax authorities imposed
additional taxes amounting to Euro 57.7. The Company has
accepted a partial settlement for an amount of Euro 37.7.
Furthermore, based on the findings of the tax audit, the Company
has reassessed the income tax expense for the year 2009 and an
additional tax expense of Euro 6.3 was required. The amount
settled with the tax authorities, the additional estimate for
2009, less the previously established provision for open tax
years of Euro 14.0 resulted in an amount of Euro 30.0
being charged to the
|
F-50
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
2009 income statement. The remaining amount of taxes imposed
(Euro 20.0) relate to costs associated with OTEs Voluntary
Leave Scheme and the early retirement programs. OTE decided not
to include this particular item in the partial settlement and
intends to appeal against the tax authorities position
before the administrative courts. Based on the respective law,
the Company will be required to pay an advance of approximately
Euro 5.0 (25% of the assessed taxes and penalties) in order
to appeal, which will be reimbursed to the Company in the event
of a favorable court outcome. Based on the managements
assessment, OTE considers there are good grounds to believe that
OTE will win this case in court.
|
|
|
|
|
|
The tax audit of COSMOTE for the fiscal years
2006-2008
was completed in May 2010, without any significant impact to the
Group.
|
|
|
|
The tax audit of OTE PLUS for the fiscal years
2005-2007
was completed during 2009, without any impact to the Group.
|
|
|
|
The tax audit of GERMANOS for the fiscal years
2004-2007
was completed during 2009 without any impact to the Group, as
the additional taxes imposed of approximately Euro 17.0
were payable by this companys previous owner who paid the
amounts due in March 2010.
|
|
|
|
The tax audit of OTE ESTATE for the fiscal years
2003 2007 was completed during 2009, without any
significant impact to the Group.
|
|
|
|
The tax audit of OTE SAT MARITEL for the fiscal
years 2004 2006 was completed in June 2010, without
any significant impact to the Group.
|
|
|
|
The tax audit of AMC for fiscal years 2006 and 2007 was
completed during 2009, without any impact to the Group.
|
|
|
|
The tax audit of
E-VALUE
S.A.
for the fiscal years
2003-2005
is
in progress.
|
|
|
|
The tax audit, being part of the liquidation process of OTE
PLUS-BULGARIA was finalized on January 11, 2010, without
any tax impact to the Group.
|
|
|
|
ROMTELECOM is currently subject to a tax audit focusing in
import transactions for the period
2006-2009.
|
The major components of income tax expense for the years ended
December 31, 2009, 2008 and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current income tax
|
|
|
263.4
|
|
|
|
311.7
|
|
|
|
341.5
|
|
Special contribution (Law 3808/2009)
|
|
|
113.1
|
|
|
|
|
|
|
|
|
|
Deferred income tax
|
|
|
33.5
|
|
|
|
(65.5
|
)
|
|
|
40.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax
|
|
|
410.0
|
|
|
|
246.2
|
|
|
|
381.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special contribution Law 3808/2009
Following the enactment of Law 3808/2009, a special, one time
contribution of social responsibility was charged to the Greek
profitable entities calculated on their total net income of the
fiscal year 2008, if it exceeded the amount of Euro 5.0,
based on a progressive scale.
Withholding Tax on dividends Law 3967/2008
Pursuant to Law 3697/2008, dividends approved by General
Meetings convened after January 1, 2009, are subject to 10%
withholding tax which will be borne by the beneficiary, however,
the related law provides for certain exceptions.
F-51
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A reconciliation between the income tax expense and the
accounting profit multiplied by tax rates in force (2009: 25%,
2008: 25%, 2007: 25%) is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Profit before tax
|
|
|
780.7
|
|
|
|
844.0
|
|
|
|
1,154.8
|
|
Statutory tax rate
|
|
|
25
|
%
|
|
|
25
|
%
|
|
|
25
|
%
|
Tax at statutory rate
|
|
|
195.2
|
|
|
|
211.0
|
|
|
|
288.7
|
|
Effect of different rates in different countries
|
|
|
(17.3
|
)
|
|
|
(2.1
|
)
|
|
|
16.5
|
|
Effect of changes to tax rates
|
|
|
12.6
|
|
|
|
(9.7
|
)
|
|
|
2.6
|
|
Expenses non-deductible for tax purposes
|
|
|
29.9
|
|
|
|
36.6
|
|
|
|
16.0
|
|
Losses from consolidated subsidiaries not deductible
|
|
|
11.6
|
|
|
|
11.9
|
|
|
|
19.2
|
|
Special contribution (Law 3808/2009)
|
|
|
113.1
|
|
|
|
|
|
|
|
|
|
Tax on dividends (Law 3697/2008)
|
|
|
30.3
|
|
|
|
|
|
|
|
|
|
Differences arising from tax audits
|
|
|
30.0
|
|
|
|
7.9
|
|
|
|
48.8
|
|
Untaxed reserve (Law 3299/2004)
|
|
|
|
|
|
|
(7.5
|
)
|
|
|
(7.5
|
)
|
Other
|
|
|
4.6
|
|
|
|
(1.9
|
)
|
|
|
(2.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
|
410.0
|
|
|
|
246.2
|
|
|
|
381.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-52
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred taxes are recognized on the temporary differences
arising between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts recognized for
taxation purposes and are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Financial Position
|
|
|
Income Statement
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Voluntary leave scheme
|
|
|
61.2
|
|
|
|
95.6
|
|
|
|
(34.4
|
)
|
|
|
(11.2
|
)
|
|
|
(61.1
|
)
|
Staff retirement indemnities
|
|
|
46.6
|
|
|
|
42.8
|
|
|
|
3.8
|
|
|
|
(8.2
|
)
|
|
|
5.7
|
|
Youth Account
|
|
|
46.9
|
|
|
|
49.8
|
|
|
|
(2.9
|
)
|
|
|
(0.9
|
)
|
|
|
(0.9
|
)
|
Employee benefits
|
|
|
22.1
|
|
|
|
44.9
|
|
|
|
(22.8
|
)
|
|
|
0.5
|
|
|
|
5.3
|
|
Property, plant and equipment
|
|
|
81.5
|
|
|
|
83.9
|
|
|
|
(2.4
|
)
|
|
|
10.3
|
|
|
|
6.7
|
|
Provisions
|
|
|
92.3
|
|
|
|
75.7
|
|
|
|
13.3
|
|
|
|
42.4
|
|
|
|
(16.4
|
)
|
Carry forward tax losses
|
|
|
20.9
|
|
|
|
20.4
|
|
|
|
0.5
|
|
|
|
(0.5
|
)
|
|
|
4.7
|
|
Deferred income
|
|
|
8.3
|
|
|
|
5.4
|
|
|
|
2.9
|
|
|
|
(0.7
|
)
|
|
|
(1.1
|
)
|
Fair value adjustment on acquisitions
|
|
|
24.2
|
|
|
|
41.4
|
|
|
|
(17.2
|
)
|
|
|
(2.4
|
)
|
|
|
(2.4
|
)
|
Other
|
|
|
22.0
|
|
|
|
14.1
|
|
|
|
7.9
|
|
|
|
(9.8
|
)
|
|
|
(2.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset (before offset)
|
|
|
426.0
|
|
|
|
474.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offset of deferred tax liabilities
|
|
|
(172.4
|
)
|
|
|
(187.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset (after offset)
|
|
|
253.6
|
|
|
|
286.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities (before offset)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
(166.9
|
)
|
|
|
(166.3
|
)
|
|
|
(0.6
|
)
|
|
|
29.9
|
|
|
|
3.9
|
|
Capitalized interest
|
|
|
(22.1
|
)
|
|
|
(27.1
|
)
|
|
|
5.0
|
|
|
|
6.6
|
|
|
|
5.3
|
|
Unbilled revenue
|
|
|
(0.2
|
)
|
|
|
(5.6
|
)
|
|
|
5.4
|
|
|
|
(5.4
|
)
|
|
|
0.4
|
|
Loan fees
|
|
|
(2.3
|
)
|
|
|
(3.5
|
)
|
|
|
1.2
|
|
|
|
|
|
|
|
(0.8
|
)
|
Fair value adjustment on acquisition
|
|
|
(79.3
|
)
|
|
|
(89.0
|
)
|
|
|
9.7
|
|
|
|
21.2
|
|
|
|
3.7
|
|
Other
|
|
|
(15.3
|
)
|
|
|
(12.4
|
)
|
|
|
(2.9
|
)
|
|
|
(6.3
|
)
|
|
|
9.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(286.1
|
)
|
|
|
(303.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
To be offset against deferred tax asset
|
|
|
172.4
|
|
|
|
187.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities (after offset)
|
|
|
(113.7
|
)
|
|
|
(116.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax income/(expense)
|
|
|
|
|
|
|
|
|
|
|
(33.5
|
)
|
|
|
65.5
|
|
|
|
(40.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets, net
|
|
|
139.9
|
|
|
|
170.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The movement in deferred tax of the Group is as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred tax (net) beginning of the year
|
|
|
170.1
|
|
|
|
94.6
|
|
Tax charged to the income statement
|
|
|
(33.5
|
)
|
|
|
65.5
|
|
Foreign exchange differences
|
|
|
3.3
|
|
|
|
10.0
|
|
|
|
|
|
|
|
|
|
|
Deferred tax (net) end of the year
|
|
|
139.9
|
|
|
|
170.1
|
|
|
|
|
|
|
|
|
|
|
F-53
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Group does not recognize deferred tax asset on the following
accumulated tax losses due to the uncertainty of the timing of
available taxable profits against which these losses could be
offset. The accumulated tax losses expire as follows:
|
|
|
|
|
Year
|
|
Amount
|
|
|
2010
|
|
|
19.4
|
|
2011
|
|
|
50.0
|
|
2012
|
|
|
88.0
|
|
2013
|
|
|
79.7
|
|
2014 and onwards
|
|
|
16.1
|
|
|
|
|
|
|
Total
|
|
|
253.2
|
|
|
|
|
|
|
|
|
22.
|
OTHER
CURRENT LIABILITIES
|
Other current liabilities are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Amount due to MICROSTAR Ltd
|
|
|
|
|
|
|
160.3
|
|
Employer contributions
|
|
|
60.4
|
|
|
|
63.6
|
|
Payroll
|
|
|
36.3
|
|
|
|
34.0
|
|
Other taxes duties
|
|
|
111.9
|
|
|
|
102.4
|
|
Interest payable
|
|
|
158.2
|
|
|
|
164.0
|
|
Provision for employees contributions under early
retirement programs
|
|
|
3.4
|
|
|
|
3.4
|
|
Provisions for litigation and other liabilities
|
|
|
109.8
|
|
|
|
110.5
|
|
Customer advances
|
|
|
46.9
|
|
|
|
55.6
|
|
Liability of acquiring non-controlling interests (see
Note 8)
|
|
|
10.0
|
|
|
|
|
|
Other
|
|
|
149.0
|
|
|
|
144.4
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
685.9
|
|
|
|
838.2
|
|
|
|
|
|
|
|
|
|
|
On January 15, 2007, Mr. Panos Germanos acquired a
participation of 10% in the share capital of COSMOTEs
subsidiary COSMOHOLDING CYPRUS, by subscribing to 100 registered
shares (Class B) for a total amount of
Euro 144.5, through the Cypriot holding company, MICROSTAR
Ltd which he controls. Therefore, as of December 31, 2008,
COSMOTEs participation in COSMOHOLDING CYPRUS, amounted to
90.0%, and COSMOTE indirect participation in GERMANOS via
COSMOHOLDING CYPRUS, amounted to 90.0%.
The Group consolidated COSMOHOLDING CYPRUS on a 100% basis since
the class B shares, the terms of whom are guaranteed by
COSMOTE, do not have a right to a dividend, return of capital,
profits or other form of distribution. These shares were
redeemable by COSMOHOLDING CYPRUS or any other party indicated
by COSMOTE on December 31, 2009 or on December 31,
2011, if the controlling shareholder MICROSTAR Ltd. so chooses,
at a price which depends on the achievement of certain corporate
targets until the purchase date. In addition, the Class B
shares could be prematurely purchased after the request
(a) of the holder in the case of change of control of
COSMOTE or OTE, or (b) if either COSMOHOLDING CYPRUS or the
holder in the case COSMOTE, decided to sell its stake in
COSMOHOLDING CYPRUS to third parties not under its direct or
indirect control.
As of December 31, 2008, COSMOHOLDING CYPRUS held a 100%
share in GERMANOS. The amount of Euro 144.5 plus
Euro 15.8 which related to accrued interest (total
Euro 160.3) was presented in the consolidated
F-54
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
statement of financial position under other current liabilities
as it was estimated that these shares would be purchased by
December 31, 2009, at a price depending on the achievement
of specified targets.
On December 31, 2009, COSMOTE acquired MICROSTAR Ltds
interest in COSMOHOLDING CYPRUS (10% of the share capital) for a
total amount of Euro 168.5.
The movement in the provision for litigation and other
liabilities is as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Balance at January 1
|
|
|
110.5
|
|
|
|
126.8
|
|
Addition during the year (see Note 24)
|
|
|
|
|
|
|
2.1
|
|
Foreign exchange differences
|
|
|
(0.1
|
)
|
|
|
|
|
Utilized
|
|
|
(0.6
|
)
|
|
|
(10.9
|
)
|
Unused amounts reversed
|
|
|
|
|
|
|
(7.5
|
)
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
|
109.8
|
|
|
|
110.5
|
|
|
|
|
|
|
|
|
|
|
F-55
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Revenue is analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Domestic Telephony
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly network service fees
|
|
|
845.9
|
|
|
|
910.7
|
|
|
|
988.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local and long-distance calls
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed to fixed
|
|
|
461.9
|
|
|
|
481.9
|
|
|
|
565.5
|
|
Fixed to mobile
|
|
|
249.5
|
|
|
|
325.3
|
|
|
|
378.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
711.4
|
|
|
|
807.2
|
|
|
|
943.8
|
|
Other
|
|
|
62.3
|
|
|
|
96.3
|
|
|
|
90.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,619.6
|
|
|
|
1,814.2
|
|
|
|
2,022.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Telephony
|
|
|
|
|
|
|
|
|
|
|
|
|
International traffic
|
|
|
84.9
|
|
|
|
93.8
|
|
|
|
108.1
|
|
Dues from international operators
|
|
|
113.3
|
|
|
|
136.6
|
|
|
|
146.8
|
|
Dues from mobile operators
|
|
|
52.9
|
|
|
|
56.5
|
|
|
|
49.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
251.1
|
|
|
|
286.9
|
|
|
|
304.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile Telephony
|
|
|
2,396.2
|
|
|
|
2,470.8
|
|
|
|
2,210.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid cards
|
|
|
37.3
|
|
|
|
52.2
|
|
|
|
76.2
|
|
Leased lines and Data ATM communications
|
|
|
319.4
|
|
|
|
336.6
|
|
|
|
272.1
|
|
Integrated Services Digital Network (ISDN)
|
|
|
141.7
|
|
|
|
147.5
|
|
|
|
166.1
|
|
Sales of telecommunication equipment
|
|
|
438.0
|
|
|
|
617.2
|
|
|
|
679.8
|
|
Internet/ADSL
|
|
|
297.7
|
|
|
|
226.9
|
|
|
|
225.7
|
|
Co-location/Local Loop
|
|
|
122.1
|
|
|
|
91.7
|
|
|
|
30.8
|
|
Metro Ethernet & IP CORE
|
|
|
31.9
|
|
|
|
23.6
|
|
|
|
11.0
|
|
Provision for services
|
|
|
116.4
|
|
|
|
120.4
|
|
|
|
68.3
|
|
Interconnection charges
|
|
|
88.9
|
|
|
|
119.4
|
|
|
|
108.2
|
|
Miscellaneous
|
|
|
123.8
|
|
|
|
99.9
|
|
|
|
144.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,717.2
|
|
|
|
1,835.4
|
|
|
|
1,783.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
|
5,984.1
|
|
|
|
6,407.3
|
|
|
|
6,319.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-56
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
24.
|
OTHER
OPERATING EXPENSES
|
Other operating expenses are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Third party fees
|
|
|
234.2
|
|
|
|
208.4
|
|
|
|
183.5
|
|
Cost of telecommunication materials, repairs and maintenance
|
|
|
182.2
|
|
|
|
191.5
|
|
|
|
201.8
|
|
Advertising and promotion costs
|
|
|
216.8
|
|
|
|
212.9
|
|
|
|
208.3
|
|
Utilities
|
|
|
163.7
|
|
|
|
142.0
|
|
|
|
127.3
|
|
Provision for doubtful accounts (see Note 10)
|
|
|
107.0
|
|
|
|
119.8
|
|
|
|
88.0
|
|
Other provisions (see Note 22)
|
|
|
|
|
|
|
2.1
|
|
|
|
18.1
|
|
Travel costs
|
|
|
18.0
|
|
|
|
18.1
|
|
|
|
18.9
|
|
Commissions to independent commercial distributors
|
|
|
238.4
|
|
|
|
253.4
|
|
|
|
244.1
|
|
Payments to Audiotex providers
|
|
|
9.5
|
|
|
|
8.7
|
|
|
|
14.3
|
|
Rents
|
|
|
101.8
|
|
|
|
90.9
|
|
|
|
88.0
|
|
Taxes, other than income tax
|
|
|
56.2
|
|
|
|
51.7
|
|
|
|
56.3
|
|
Transportation costs
|
|
|
11.2
|
|
|
|
11.8
|
|
|
|
13.0
|
|
Other
|
|
|
57.5
|
|
|
|
44.5
|
|
|
|
65.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,396.5
|
|
|
|
1,355.8
|
|
|
|
1,326.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (after income taxes,) are calculated by
dividing the profit attributable to the owners of the Company by
the weighted average number of shares outstanding during the
period, excluding the average number of own shares that the
Company possessed during the period and including (for the
diluted earnings per share) the number of share options
outstanding at the end of the year that have a dilutive effect
on earnings per share.
Earnings per share are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Profit attributable to owners of the parent
|
|
|
374.0
|
|
|
|
601.8
|
|
|
|
662.6
|
|
Weighted average number of shares for basic earnings per share
|
|
|
490,150,389
|
|
|
|
490,150,389
|
|
|
|
490,150,389
|
|
Share options
|
|
|
|
|
|
|
6,008,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares adjusted for the effect of
dilutions
|
|
|
490,150,389
|
|
|
|
496,158,449
|
|
|
|
490,150,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
0.7630
|
|
|
|
1.2278
|
|
|
|
1.3518
|
|
Diluted earnings per share
|
|
|
0.7630
|
|
|
|
1.2129
|
|
|
|
1.3518
|
|
(Earnings per share are in absolute amounts)
For 2009 the outstanding options did not have a dilutive effect
on earnings per share and, therefore, are not included in the
earnings per share calculation.
|
|
26.
|
OPERATING
SEGMENT INFORMATION
|
The following information is provided for the reportable
segments, which are separately disclosed in the financial
statements and which are regularly reviewed by the Groups
chief operating decision makers. Segments were determined based
on the Groups legal structure, as the Groups chief
operating decision makers review
F-57
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
financial information separately reported by the parent company
(OTE) and each of the Groups consolidated subsidiaries, or
the sub groups included in the consolidation.
Using the quantitative thresholds OTE, COSMOTE GROUP and
ROMTELECOM have been determined to be reportable segments.
Information about operating segments that do not constitute
reportable segments has been combined and disclosed in an
All Other category. The types of services provided
by the reportable segments are as follows:
|
|
|
|
|
OTE is a provider of local, long-distance and international
fixed-line voice telephony and internet access services in
Greece.
|
|
|
|
COSMOTE group is a provider of mobile telecommunications
services in Greece, Albania, Bulgaria and Romania (and in FYROM
until May 2009).
|
|
|
|
ROMTELECOM is a provider of local, long-distance and
international fixed-line voice telephony and internet access
services in Romania.
|
Accounting policies of the operating segments are the same as
those followed for the preparation of the financial statements.
Management evaluates segment performance based on operating
profit before depreciation, amortization and cost of early
retirement program; operating profit and profit for the year.
Segment information and reconciliation to the Groups
consolidated figures are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTE
|
|
Cosmote Group
|
|
Romtelecom
|
|
Other
|
|
Total
|
|
Eliminations
|
|
Group
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
|
2,204.8
|
|
|
|
2,843.3
|
|
|
|
790.3
|
|
|
|
145.7
|
|
|
|
5,984.1
|
|
|
|
|
|
|
|
5,984.1
|
|
Intersegment revenue
|
|
|
207.6
|
|
|
|
192.6
|
|
|
|
17.4
|
|
|
|
271.0
|
|
|
|
688.6
|
|
|
|
(688.6
|
)
|
|
|
|
|
Interest income
|
|
|
17.4
|
|
|
|
24.5
|
|
|
|
15.4
|
|
|
|
283.7
|
|
|
|
341.0
|
|
|
|
(279.4
|
)
|
|
|
61.6
|
|
Interest expense
|
|
|
(225.8
|
)
|
|
|
(115.8
|
)
|
|
|
(1.8
|
)
|
|
|
(261.3
|
)
|
|
|
(604.7
|
)
|
|
|
279.5
|
|
|
|
(325.2
|
)
|
Depreciation and amortization
|
|
|
(424.4
|
)
|
|
|
(458.3
|
)
|
|
|
(227.9
|
)
|
|
|
(45.5
|
)
|
|
|
(1,156.1
|
)
|
|
|
0.8
|
|
|
|
(1,155.3
|
)
|
Dividend income
|
|
|
9.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.6
|
|
|
|
|
|
|
|
9.6
|
|
Income tax expense
|
|
|
(164.6
|
)
|
|
|
(180.9
|
)
|
|
|
(31.4
|
)
|
|
|
(33.1
|
)
|
|
|
(410.0
|
)
|
|
|
|
|
|
|
(410.0
|
)
|
Operating profit
|
|
|
306.5
|
|
|
|
611.9
|
|
|
|
24.6
|
|
|
|
58.5
|
|
|
|
1,001.5
|
|
|
|
(0.6
|
)
|
|
|
1,000.9
|
|
Profit for the year
|
|
|
247.5
|
|
|
|
377.7
|
|
|
|
(18.4
|
)
|
|
|
49.6
|
|
|
|
656.4
|
|
|
|
(285.7
|
)
|
|
|
370.7
|
|
Operating profit before depreciation, amortization and cost of
early retirement program
|
|
|
692.0
|
|
|
|
1,070.2
|
|
|
|
261.1
|
|
|
|
104.0
|
|
|
|
2,127.3
|
|
|
|
(1.4
|
)
|
|
|
2,125.9
|
|
Investments
|
|
|
156.4
|
|
|
|
0.4
|
|
|
|
|
|
|
|
0.2
|
|
|
|
157.0
|
|
|
|
|
|
|
|
157.0
|
|
Segment assets
|
|
|
8,211.5
|
|
|
|
4,360.5
|
|
|
|
1,737.2
|
|
|
|
6,955.9
|
|
|
|
21,265.1
|
|
|
|
(10,971.1
|
)
|
|
|
10,294.0
|
|
Segment liabilities
|
|
|
4,797.0
|
|
|
|
3,438.0
|
|
|
|
261.3
|
|
|
|
5,766.7
|
|
|
|
14,263.0
|
|
|
|
(5,918.7
|
)
|
|
|
8,344.3
|
|
Expenditures for segment assets
|
|
|
272.6
|
|
|
|
399.2
|
|
|
|
187.2
|
|
|
|
31.9
|
|
|
|
890.9
|
|
|
|
|
|
|
|
890.9
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
|
2,362.1
|
|
|
|
3,064.5
|
|
|
|
850.5
|
|
|
|
130.2
|
|
|
|
6,407.3
|
|
|
|
|
|
|
|
6,407.3
|
|
Intersegment revenue
|
|
|
227.6
|
|
|
|
197.2
|
|
|
|
19.3
|
|
|
|
252.5
|
|
|
|
696.6
|
|
|
|
(696.6
|
)
|
|
|
|
|
Interest income
|
|
|
36.3
|
|
|
|
29.9
|
|
|
|
16.2
|
|
|
|
308.4
|
|
|
|
390.8
|
|
|
|
(318.5
|
)
|
|
|
72.3
|
|
Interest expense
|
|
|
(194.8
|
)
|
|
|
(145.8
|
)
|
|
|
(7.6
|
)
|
|
|
(301.3
|
)
|
|
|
(649.5
|
)
|
|
|
305.8
|
|
|
|
(343.7
|
)
|
Depreciation and amortization
|
|
|
(465.0
|
)
|
|
|
(416.6
|
)
|
|
|
(253.6
|
)
|
|
|
(77.9
|
)
|
|
|
(1,213.1
|
)
|
|
|
0.1
|
|
|
|
(1,213.0
|
)
|
Dividend income
|
|
|
12.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.2
|
|
|
|
|
|
|
|
12.2
|
|
Income tax expense
|
|
|
(83.2
|
)
|
|
|
(148.5
|
)
|
|
|
9.6
|
|
|
|
(24.1
|
)
|
|
|
(246.2
|
)
|
|
|
|
|
|
|
(246.2
|
)
|
Operating profit
|
|
|
312.2
|
|
|
|
725.6
|
|
|
|
|
|
|
|
21.6
|
|
|
|
1,059.4
|
|
|
|
(1.7
|
)
|
|
|
1,057.7
|
|
Profit for the year
|
|
|
363.3
|
|
|
|
470.6
|
|
|
|
(10.8
|
)
|
|
|
20.9
|
|
|
|
844.0
|
|
|
|
(246.2
|
)
|
|
|
597.8
|
|
F-58
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTE
|
|
Cosmote Group
|
|
Romtelecom
|
|
Other
|
|
Total
|
|
Eliminations
|
|
Group
|
|
Operating profit before depreciation, amortization and cost of
early retirement program
|
|
|
789.4
|
|
|
|
1,142.2
|
|
|
|
291.6
|
|
|
|
99.5
|
|
|
|
2,322.7
|
|
|
|
(1.8
|
)
|
|
|
2,320.9
|
|
Investments
|
|
|
156.4
|
|
|
|
0.1
|
|
|
|
|
|
|
|
0.1
|
|
|
|
156.6
|
|
|
|
|
|
|
|
156.6
|
|
Segment assets
|
|
|
8,873.0
|
|
|
|
4,806.2
|
|
|
|
1,873.2
|
|
|
|
7,742.3
|
|
|
|
23,294.7
|
|
|
|
(11,869.5
|
)
|
|
|
11,425.2
|
|
Segment liabilities
|
|
|
5,349.0
|
|
|
|
3,844.9
|
|
|
|
302.7
|
|
|
|
6,509.8
|
|
|
|
16,006.4
|
|
|
|
(6,754.4
|
)
|
|
|
9,252.0
|
|
Expenditures for segment assets
|
|
|
300.7
|
|
|
|
499.6
|
|
|
|
125.7
|
|
|
|
38.0
|
|
|
|
964.0
|
|
|
|
|
|
|
|
964.0
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
|
2,452.9
|
|
|
|
2,878.6
|
|
|
|
843.3
|
|
|
|
145.0
|
|
|
|
6,319.8
|
|
|
|
|
|
|
|
6,319.8
|
|
Intersegment revenue
|
|
|
229.8
|
|
|
|
181.7
|
|
|
|
28.6
|
|
|
|
226.1
|
|
|
|
666.2
|
|
|
|
(666.2
|
)
|
|
|
|
|
Interest income
|
|
|
47.5
|
|
|
|
21.6
|
|
|
|
10.1
|
|
|
|
191.3
|
|
|
|
270.5
|
|
|
|
(192.7
|
)
|
|
|
77.8
|
|
Interest expense
|
|
|
(98.6
|
)
|
|
|
(145.3
|
)
|
|
|
(5.4
|
)
|
|
|
(185.0
|
)
|
|
|
(434.3
|
)
|
|
|
195.6
|
|
|
|
(238.7
|
)
|
Depreciation and amortization
|
|
|
(507.0
|
)
|
|
|
(367.9
|
)
|
|
|
(255.8
|
)
|
|
|
(42.5
|
)
|
|
|
(1,173.2
|
)
|
|
|
1.4
|
|
|
|
(1,171.8
|
)
|
Dividend income
|
|
|
16.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.8
|
|
|
|
|
|
|
|
16.8
|
|
Income tax expense
|
|
|
(212.4
|
)
|
|
|
(145.6
|
)
|
|
|
(2.4
|
)
|
|
|
(21.4
|
)
|
|
|
(381.8
|
)
|
|
|
|
|
|
|
(381.8
|
)
|
Operating profit
|
|
|
314.3
|
|
|
|
618.0
|
|
|
|
44.8
|
|
|
|
71.7
|
|
|
|
1,048.8
|
|
|
|
(1.9
|
)
|
|
|
1,046.9
|
|
Profit for the year
|
|
|
579.7
|
|
|
|
361.3
|
|
|
|
15.5
|
|
|
|
55.2
|
|
|
|
1,011.7
|
|
|
|
(238.7
|
)
|
|
|
773.0
|
|
Operating profit before depreciation, amortization and cost of
early retirement program
|
|
|
843.4
|
|
|
|
985.9
|
|
|
|
300.6
|
|
|
|
114.2
|
|
|
|
2,244.1
|
|
|
|
(3.3
|
)
|
|
|
2,240.8
|
|
Investments
|
|
|
157.8
|
|
|
|
|
|
|
|
|
|
|
|
0.6
|
|
|
|
158.4
|
|
|
|
|
|
|
|
158.4
|
|
Segment assets
|
|
|
8,360.7
|
|
|
|
4,428.2
|
|
|
|
2,140.2
|
|
|
|
7,089.2
|
|
|
|
22,018.3
|
|
|
|
(10,319.1
|
)
|
|
|
11,699.2
|
|
Segment liabilities
|
|
|
4,811.7
|
|
|
|
3,680.3
|
|
|
|
376.2
|
|
|
|
5,749.6
|
|
|
|
14,617.8
|
|
|
|
(5,973.2
|
)
|
|
|
8,644.6
|
|
Expenditures for segment assets
|
|
|
297.0
|
|
|
|
564.5
|
|
|
|
207.2
|
|
|
|
32.6
|
|
|
|
1,101.3
|
|
|
|
|
|
|
|
1,101.3
|
|
GEOGRAPHIC
INFORMATION
Geographic information for the Groups revenues from
external customers and non current assets is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from External Customers
|
|
|
Non Current Assets
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Greece
|
|
|
4,189.6
|
|
|
|
4,498.3
|
|
|
|
4,582.1
|
|
|
|
4,075.5
|
|
|
|
4,161.9
|
|
|
|
4,558.2
|
|
Albania
|
|
|
125.3
|
|
|
|
161.9
|
|
|
|
158.1
|
|
|
|
160.6
|
|
|
|
183.1
|
|
|
|
180.3
|
|
Bulgaria
|
|
|
423.9
|
|
|
|
469.4
|
|
|
|
422.7
|
|
|
|
644.8
|
|
|
|
668.2
|
|
|
|
654.2
|
|
Romania
|
|
|
1,206.4
|
|
|
|
1,188.2
|
|
|
|
1,072.8
|
|
|
|
2,083.7
|
|
|
|
2,022.8
|
|
|
|
2,259.4
|
|
Other
|
|
|
38.9
|
|
|
|
89.5
|
|
|
|
84.1
|
|
|
|
95.1
|
|
|
|
242.1
|
|
|
|
239.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,984.1
|
|
|
|
6,407.3
|
|
|
|
6,319.8
|
|
|
|
7,059.7
|
|
|
|
7,278.1
|
|
|
|
7,891.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The revenue information presented above is based on the location
of the entity.
Non-current assets for this purpose consist of property, plant
and equipment, goodwill, telecommunication licenses and other
intangible assets.
|
|
27.
|
RELATED
PARTY DISCLOSURES
|
The Groups related parties have been identified based on
the requirements of IAS 24 Related Party Disclosures.
F-59
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Group purchases goods and services from these related
parties, and provides services to them. Furthermore, OTE grants
and receives loans to/from its subsidiaries, receives dividends
and pays dividends.
Purchases and sales of the Group with related parties are
analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
Groups
|
|
|
Groups
|
|
|
|
Sales
|
|
|
Purchases
|
|
|
DEUTSCHE TELEKOM AG
|
|
|
10.6
|
|
|
|
8.4
|
|
MAKEDONSKI TELEKOMMUNIKACII A.
|
|
|
0.6
|
|
|
|
0.7
|
|
HT HRVATSKE
|
|
|
0.3
|
|
|
|
0.6
|
|
COMBRIDGE
|
|
|
4.5
|
|
|
|
0.1
|
|
DETEKON
|
|
|
|
|
|
|
0.6
|
|
ORBITEL
|
|
|
|
|
|
|
0.5
|
|
T-SYSTEMS
|
|
|
1.2
|
|
|
|
|
|
T-Mobile
Deutschland
|
|
|
2.0
|
|
|
|
0.7
|
|
T-Mobile
Czech
|
|
|
0.3
|
|
|
|
0.1
|
|
T-Mobile
UK
|
|
|
0.8
|
|
|
|
0.4
|
|
T-Mobile
Austria
|
|
|
0.2
|
|
|
|
0.1
|
|
T-Mobile
Netherlands
|
|
|
0.4
|
|
|
|
0.1
|
|
T-Mobile
USA
|
|
|
0.3
|
|
|
|
0.4
|
|
T-Mobile
Hungary
|
|
|
0.1
|
|
|
|
0.1
|
|
T-Mobile
Macedonia
|
|
|
0.2
|
|
|
|
0.1
|
|
T-Mobile
Hrvatska
|
|
|
0.1
|
|
|
|
0.1
|
|
PCT POLSKA TELEFONIA
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
22.0
|
|
|
|
13.0
|
|
|
|
|
|
|
|
|
|
|
There were no transactions between the Group and related parties
during 2008 that are not eliminated in the consolidation.
F-60
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Amounts owed to and by the related parties as a result of the
Groups transactions with them are analyzed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Amounts
|
|
|
Amounts
|
|
|
Amounts
|
|
|
Amounts
|
|
|
|
owed to
|
|
|
owed by
|
|
|
owed to
|
|
|
owed by
|
|
|
|
Group
|
|
|
Group
|
|
|
Group
|
|
|
Group
|
|
|
DEUTSCHE TELEKOM AG.
|
|
|
6.9
|
|
|
|
|
|
|
|
6.5
|
|
|
|
7.5
|
|
MAKEDOSNKI TELEKOMMUNIKACII A.
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DETEKON
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
COMBRIDGE
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORBITEL
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
T-SYSTEMS
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T-Mobile
Deutschland
|
|
|
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
T-Mobile
Hungary
|
|
|
0.1
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
T-Mobile
Czech
|
|
|
0.1
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
T-Mobile
UK
|
|
|
0.1
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
T-Mobile
Austria
|
|
|
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
T-Mobile
Netherlands
|
|
|
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
T-Mobile
USA
|
|
|
1.9
|
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
T-Mobile
Macedonia
|
|
|
0.2
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
PCT POLSKA TELEFONIA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10.1
|
|
|
|
6.4
|
|
|
|
6.5
|
|
|
|
7.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the entities included in the above table, as of
December 31, 2008 only DEUTSCHE TELEKOM AG was a related
party to the Group.
Key Management Personnel and those closely related to them are
defined in accordance with IAS 24 Related Party
Disclosures. Compensation includes all employee benefits
(as defined in IAS 19 Employee Benefits) including
employee benefits to which IFRS 2 Share-based
Payment applies.
Fees to the members of the Board of Directors and OTEs key
management personnel amounted to Euro 5.0 million and
Euro 4.7 million for the years 2009 and 2008,
respectively.
As of December 31, 2009, 999,230 options under OTEs
share based payment plan have been granted to the key management
personnel as of December 31, 2009.
On July 9, 2008, OTEs 56th Repeating Ordinary General
Assembly approved the adoption of a Share Option Plan for
executives of OTE and of other entities of the Group, in
accordance with article 42e of the Codified Law 2190/1920.
This plan replaced the pre-existing Share Option Plan of OTE. In
addition, basic and additional share options already granted by
COSMOTE in 2005, 2006 and 2007 under COSMOTEs existing
share option plans were replaced by options on OTEs shares
under the modified plan. The reason for the replacement of the
COSMOTE plans was the delisting of COSMOTEs shares from
the Athens Exchange on April 1, 2008. The modification of
the OTE Plan and the replacement of the COSMOTE plans took place
on the same date.
F-61
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The nature and the main terms of the Modified Share Option Plan
are as follows:
|
|
|
|
|
The Modified Share Option Plan is comprised of Basic options
(i.e. those granted when a participant first enters the scheme)
and Additional options (i.e. those granted on an annual basis to
participants). The Share options are granted by the Board of
Directors.
|
|
|
|
Options under the Modified Share Option Plan are granted at a
preferential price. For options granted for year 2009 the
preferential price is Euro 19.49 (absolute number).
|
|
|
|
The executives of the Group, to whom Share options are granted,
may acquire the shares at the preferential grant price or at a
discount (percentage) on the preferential grant price, depending
on the executives hierarchical level at the time of
exercising the Rights, and (i) the achievement of certain
targets of both the entity employing them and the Group and
(ii) high individual performance by the eligible executive.
|
|
|
|
For top level management, the potential discount is 15%, 20% or
25% if the targets have been achieved (otherwise no discount)
and for middle level management, the potential discount is 10%,
15% or 20% if the targets have been achieved (otherwise no
discount).
|
The range of exercise prices of all the options granted assuming
the minimum discount at least is achieved is
Euro 11.96-16.57 (absolute number).
The Options vest as follows:
|
|
|
|
|
The Basic options vest gradually (40% upon the completion of the
year of the grant, 30% upon the completion of the second year
and 30% upon the completion of the third year). Following a
modification to the plan on July 10, 2009, Basic vested
Rights may be exercised by the eligible executive in their
entirety or partially during April and October of each calendar
year following the vesting year (and up to October of the
7th calendar year (instead of the 4th) from the date of
their grant).
|
|
|
|
Following a modification to the plan on July 10, 2009 the
Additional vested Rights may be exercised by the eligible
executive in their entirety or partially during April and
October of up to the
3
rd
calendar year (instead of the first calendar year) following the
vesting year.
|
|
|
|
In case the said vested Rights are not exercised within the
aforementioned time frames they are lost. According to the terms
of the plan, vesting of the options depends on the participant
remaining in the service of the company. The total number of
Stock Option Rights, which may be granted under the Modified
Share Option Plan, cannot exceed 15,500,000 Rights, which
corresponds to approximately 3.16% of OTEs shares
outstanding at the time of its approval.
|
The fair value of the options is reflected in the income
statement during the vesting period. The amounts are recorded in
the line Payroll and employee benefits with a
corresponding entry in the Share Premium and are analyzed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
Expense arising from share-based payment transactions
|
|
|
7.2
|
|
|
|
12.0
|
|
|
|
3.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-62
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Further details of the plan are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average
|
|
|
Number of
|
|
|
Average
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Outstanding at the beginning of the year
|
|
|
6,008,060
|
|
|
|
15.66
|
|
|
|
3,440,290
|
|
|
|
15.20
|
|
Granted
|
|
|
3,225,670
|
|
|
|
16.21
|
|
|
|
3,141,620
|
|
|
|
16.10
|
|
Forfeited
|
|
|
(559,130
|
)
|
|
|
16.23
|
|
|
|
(573,850
|
)
|
|
|
15.26
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired at the end of the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at the end of the year
|
|
|
8,674,600
|
|
|
|
15.59
|
|
|
|
6,008,060
|
|
|
|
15.66
|
|
Exercisable at the end of the year
|
|
|
4,485,370
|
|
|
|
15.05
|
|
|
|
2,315,920
|
|
|
|
15.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Price at
|
|
|
Plan
|
|
Year of Issuance
|
|
Options Granted
|
|
Grant Date
|
|
Comments
|
|
Plans of COSMOTE group
|
|
Original grant dates range
from 27/10/05-31/10/07
|
|
|
3,440,290
|
|
|
|
15.48
|
|
|
modified on 09/07/08 and on 10/07/09
|
2008 OTE plan
|
|
06/02/08
|
|
|
3,141,620
|
|
|
|
21.38
|
|
|
modified on 09/07/08 and on 10/07/09
|
2009 OTE plan
|
|
06/03/09
|
|
|
3,225,670
|
|
|
|
10.40
|
|
|
modified on 10/07/09
|
The weighted average remaining contractual term outstanding as
of December 31, 2009 and 2008 is 3.9 years and
3.0 years, respectively.
The options granted in 2009 were measured at fair value at the
date of grant. At the date of modification of July 10, 2009
the fair value of the plan before and after the modification was
calculated. The modification increased the fair value of the
options by increasing the exercise period, therefore, the
difference (being the incremental fair value or the difference
between the fair value of the modified plan and that of the
original plan, both estimated as at the date of the
modification) is attributed as an expense in the period from the
modification date up to the vesting date.
The fair values were determined by using a Monte Carlo
simulation option pricing model taking into account the effects
of early exercise. Key inputs and calculations results of the
model are presented below:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
Weighted average share price
|
|
|
10.40
|
|
|
|
21.38
|
|
Weighted average exercise price
|
|
|
16.57
|
|
|
|
22.05
|
|
Weighted average expected volatility
|
|
|
24.0
|
%
|
|
|
24.0
|
%
|
Weighted average exercise period
|
|
|
3.5 years
|
|
|
|
2.5 years
|
|
Weighted average risk free rate
|
|
|
2.5
|
%
|
|
|
4.1
|
%
|
Weighted average expected dividend
|
|
|
0.75
|
|
|
|
0.75
|
|
Weighted average option value
|
|
|
0.28
|
|
|
|
2.20
|
|
F-63
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
29.
|
LITIGATION
AND CLAIMS COMMITMENTS
|
A. Outstanding
legal cases
The most significant outstanding legal cases as at
December 31, 2009, are as follows:
Civil
proceedings
Lease agreements (OTE Leasing):
On
December 11, 2001, OTE disposed of its wholly owned
subsidiary, OTE Leasing, to Piraeus Financial Leasing S.A., a
subsidiary of Piraeus Bank S.A. for a consideration of
Euro 21.0. From the sale proceeds, Euro 5.9 was
collected in cash and the balance of Euro 15.1 in the form
of shares in Piraeus Bank S.A., based on their fair value at
that date. As prescribed in the agreements signed for the sale
of OTE Leasing, OTE is committed to indemnify Piraeus Financial
Leasing S.A. up to an amount of approximately Euro 28.0,
for possible losses to be incurred from the non-performance of
lessees for contracts signed through to the date of sale of OTE
Leasing. The conditions under which a lessees contract
will be characterized as non-performing are described in detail
in the sale agreements. OTEs obligation is in force for a
period between 3-5.5 years, depending on the nature of the
lease contracts. On September 28, 2007, Piraeus Financial
Leasing S.A filed a law suit against OTE, claiming Euro 3.4
from OTE. The hearing which had been scheduled for
February 26, 2009 in the Athens Multi-Member Court was
postponed.
Hellenic Radio and Television S.A.
(ERT):
During May 2002, ERT filed a
lawsuit against OTE before the Athens Multi-Member Court,
claiming an amount of Euro 42.9 plus interest for damages
incurred by it as a result of an alleged infringement by OTE of
the terms of a memorandum of understanding signed by the two
parties. The Court judged in 2005 that the case should be
referred to arbitration. To date ERT has not yet submitted a
request for arbitration proceedings. In November 2003 ERT filed
a lawsuit against OTE claiming Euro 1.5 for restitution of
moral damage which will be heard by the Athens Multi-Member
Court on June 3, 2010.
Forthnet S.A.:
In 2002, Forthnet S.A. filed a
civil claim, claiming an amount of Euro 26.7 plus interest
for damages incurred by it due to loss of customers as a result
of OTEs allegedly discriminatory policy in favor of
OTENET. The hearing which was scheduled for April 19, 2007,
was suspended and rescheduled for June 5, 2008 and was
again suspended and rescheduled for January 28, 2010, when
was again suspended. Furthermore, Forthnet S.A. filed a lawsuit
against OTE before the Athens Multi-Member court of First
Instance, claiming Euro 4.1 for economic and moral damages,
due to suspension of its subscribers number portability.
The hearing scheduled for May 3, 2006 was suspended.
Greek Telecom S.A.:
In 2004, Greek Telecom
S.A. filed a lawsuit against OTE before the Athens Multi Member
court of First Instance, claiming Euro 45.4 plus interest
in damages, due to alleged breach of contractual obligations
arising out of disconnection of telecommunication services due
to its outstanding debt. The hearing was held on March 22,
2006 and the Court by its decision rejected Greek Telecom
S.A.s claim. Greek Telecom S.A. appealed against this
decision before the Athens Court of Appeals. The case was heard
on October 4, 2007 and the claim was rejected.
Teledome S.A.:
Teledome S.A. filed five
lawsuits against OTE before the Athens Multi Member Court of
First Instance, claiming an aggregate amount of Euro 8.1
plus interest for alleged damages incurred by it as a result of
OTEs delay in delivering to it leased lines and the
application of non cost oriented interconnection charges by OTE.
The hearings of the above lawsuits were scheduled for various
dates in 2007. The first lawsuit (Euro 1.6) was heard before the
Court on June 6, 2007 and the hearing was postponed, the
second lawsuit (Euro 1.0) was rejected, regarding the third
lawsuit (Euro 0.3) the Court postponed the hearing, the fourth
lawsuit (Euro 1.6) was heard on February 7, 2007 and the
Court rejected it and for the fifth lawsuit (Euro 3.6) the Court
ordered factual investigation. The investigator has already been
appointed and the completion of the factual investigation is
expected. Furthermore, Teledome S.A. filed six lawsuits against
OTE before the Athens Multi Member Court of First Instance,
claiming approximately Euro 11.1 plus interest in damages,
due to suspension of its subscribers number portability
and due to alleged breach of contractual obligations arising out
of disconnection of
F-64
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
telecommunication services. For two lawsuits of Euro 4.6,
the Court rejected Teledomes claims. Teledome appealed the
decision before the Court of Appeals, which rejected it on
January 25, 2007. Teledome S.A. appealed against this
adverse decision and its appeal was discussed on
November 27, 2008 by the Court of Appeals and it was
rejected. A lawsuit of Euro 0.9 was rejected by the Court
on January 25, 2007. Teledome appealed against it and its
appeal was heard on November 26, 2009. The outcome of this
appeal is pending. The lawsuit of Euro 4.4 was heard on
March 6, 2008 and was rejected by the court. Regarding the
lawsuit of Euro 0.5, the Court ordered factual
investigation. The factual investigation was filed and after the
hearing on December 9, 2009 at the same Court, the decision
is pending. The lawsuit of Euro 0.6 was heard on
September 26, 2007 and the Court concluded that the claim
up to an amount of Euro 0.3 was valid. However, both OTE
and Teledome S.A. have appealed against the decision, which
appeal, was heard on December 4, 2008 and the Court
accepted OTEs appeal and rejected Teledomes appeal.
Finally, Teledome filed a law suit against OTE before the Athens
Multi Member Court claiming Euro 54.1 plus interest for
damages for so called unlawful termination of its leased lines
by OTE which resulted in Teledome S.A.s bankruptcy. This
claim was heard on March 18, 2009 and March 26, 2009.
According to Courts decision the hearing was postponed and
Teledome S.A. is required to deposit a guarantee amounting
Euro 1.1 for court expenses. Teledome S.A. has appealed
against this decision and the appeal will be heard before the
Athens Multi Member of First Instance Court on
September 29, 2010. Because of Teledome S.A.s denial
to deposit the guarantee, OTE applied for withdrawal of Teledome
S.A.s order, which will be heard on September 29,
2010.
Newsphone Hellas S.A.:
Newsphone Hellas S.A.
filed a lawsuit against OTE before the Athens Multi Member Court
of First Instance, claiming an amount of Euro 7.2 plus
interest for alleged damages incurred by it as a result of
OTEs refusal to include in its recorded message that
directories information services, except from OTE, are also
provided by Newsphone Hellas S.A. The hearing was held on
May 17, 2006 and the Court rejected Newsphone Hellas
S.As claims.
TELLAS S.A.:
TELLAS S.A. filed four lawsuits
against OTE before the Athens Multi Member Court of First
Instance, claiming an aggregate amount of Euro 20.8 plus
interest in damages due to suspension of its subscribers
number portability. TELLAS S.A. resigned from the lawsuit of
Euro 4.3 prior to the hearing while the hearings of the
remaining lawsuits were heard on May 2, 2007 and rejected.
TELLAS filed two new claims against OTE totaling Euro 6.3
for the triggering of penalty clauses for the loss suffered for
the delayed delivery of leased lines and for claims relating to
non compliance of OTE with costing obligations. The cases will
be heard by the Athens Multi Member Court on September 16,
2010.
LAN-NET
S.A.:
LAN-NET
S.A. filed two lawsuits against OTE before the Athens Multi
Member Court of First Instance, claiming an aggregate amount of
approximately Euro 2.2 plus interest in damages due to
suspension of its subscribers number portability. The
Court rejected the first lawsuit for the amount of Euro 1.5
and
LAN-NET
appealed. The appeal was heard on November 1, 2007 by the
Court of Appeals and was rejected. The second lawsuit of
Euro 0.7 was heard on March 21, 2007 and was rejected
by the Court. In May 2009,
LAN-NET
filed a claim against OTE before the Court of First Instance for
an aggregate amount of Euro 175.6, claiming restitution for
alleged illegal termination of services. The hearing of this
case is scheduled for February 17, 2011.
ALGO-NET
S.A.:
ALGO-NET
S.A. filed two lawsuits against OTE before the Athens Multi
Member Court of First Instance, claiming an aggregate amount of
approximately Euro 0.9 plus interest in damages due to
suspension of its subscribers number portability. The
hearing of the first lawsuit for the amount of Euro 0.4 was
held and the Court rejected the claim, while the hearing of the
second lawsuit initially scheduled for February 8, 2006,
has been suspended.
FASMA ADVERTISING TECHNICAL AND COMMERCIAL
S.A.:
FASMA ADVERTISING TECHNICAL AND COMMERCIAL
S.A. filed a lawsuit against OTE before the Athens Multi Member
Court of First Instance, claiming an aggregate amount of
Euro 9.1 plus interest for breach of contract. The hearing
was scheduled for November 8, 2007. Subsequently, the
company filed with the Multi Member Court of First Instance a
new lawsuit against OTE for Euro 8.7 plus interest
withdrawing its previous lawsuit. The hearing by the Court,
initially
F-65
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
scheduled for November 8, 2007 was rescheduled to
October 23, 2008, when the case was heard and a decision
was issued rejecting the lawsuit.
Franchisees
lawsuits:
1. Helias Koutsokostas & Company Limited
Partnership filed a lawsuit against OTE claiming alleged damages
for an amount of Euro 7.9. OTE filed a lawsuit against this
company before the Multi-Member court of First Instance for an
amount for Euro 0.7. The hearing, initially scheduled for
October 13, 2005 was suspended and a new hearing was
scheduled for February 21, 2008, but was adjourned. The
applicant has not performed any action since then.
2. K. Prinianakis S.A. filed a lawsuit against OTE claiming
Euro 10.9 in damages. The case was heard on
November 15, 2007 and the Court partially accepted the
claim for the amount of Euro 0.1. OTE filed a counterclaim
against K. Prinianakis for an amount of Euro 0.3 in
damages. This claim was heard on November 13, 2008 and the
Court partially accepted it.
3. DEP INFO Limited filed a lawsuit against OTE claiming
Euro 6.8 for damages. OTE has filed its own lawsuit against
this company claiming Euro 1.7 in damages. Both hearings
were held on March 9, 2006 and the court rejected DEP INFO
Limited lawsuit, while it accepted OTEs lawsuit. DEP INFO
Limited filed an appeal against this decision which was heard on
January 24, 2008 and the court rejected the companys
appeal and ordered a factual investigation for the accurate
determination of OTEs claim.
4. Infoshop S.A. filed a lawsuit against OTE claiming
alleged damages for the amount of Euro 7.0. A hearing
scheduled for November 15, 2007 was suspended and a new
hearing was scheduled for November 13, 2008 and the
decision of the Court rejected the entire claim.
Employees Claims:
OTEs current
employees and pensioners have filed a number of lawsuits against
OTE with a wide variety of claims.
Payphones Duties:
From 1999 to 2007, the
Municipality of Thessaloniki charged OTE with duties and
penalties of a total amount of Euro 15.0 for the
installation and operation of payphones within the area of its
responsibility. OTE strongly disputed the above assessments and
filed appeals before the competent administrative courts and
prepaid 40% of the above duties and penalties, amount that will
be refunded to OTE if the outcome of that case will be favorable
to the Company. The courts held in OTEs favor for the year
2001 in the first and second instance. The Municipality of
Thessaloniki has filed appeals before the Council of State,
which are pending. No duties and penalties have been charged for
2008 and 2009.
Timeapply Ltd:
Timeapply Ltd, has filed a
claim against OTE in the Court of First Instance for
Euro 17.3 for restitution due to damage caused by alleged
patent infringement, as a result of our sale and advertisement
of a prepaid telephone card called Promocard. The
case was heard on January 22, 2009 and the Court concluded
that it was not authorized to issue a decision. Timeapply Ltd
came back with the claim which is scheduled to be heard on
April 14, 2010. In addition, Timeapply filed a claim
against OTE in the Court of First Instance for Euro 68.4
for alleged breach of a decision of the Court of First Instance
granting an injunction prohibiting distribution of
Promocard. The Court of First Instance rejected the
claim and Timeapply filed an appeal, which was heard on
May 12, 2009 and a decision has not yet been issued.
KONSTANTZA S.A.:
KONSTANTZA S.A. filed a claim
against OTE before the Athens Court of First Instance alleging
Euro 1.3 plus interest. The amicable resolution of the
dispute which was scheduled for June 11, 2009 failed and
the hearing is scheduled for March 18, 2010. The hearing
was cancelled.
Athanasios Fekkas:
Athanasios Fekkas filed a
claim against OTE before the Court of First Instance of Lamia
alleging Euro 1.2 plus interest. The hearing was scheduled
for February 20, 2009 but was adjourned for
November 20, 2009 when the case was heard and a decision is
pending.
F-66
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
THRAHERN CAPITAL Sarl and YELLOW PAGES
S.A.:
In September 2009, THRAHERN CAPITAL Sarl (a
foreign company) and the Greek registered company YELLOW PAGES
S.A., filed a claim against OTE before the Multi Member Court of
First Instance for an amount of Euro 60.5 for compensation
and Euro 2.0 for restitution of moral damage. The hearing
of this case was scheduled for June 2, 2011. On
December 30, 2009, these two companies announced to OTE
their resignation from the claim.
The most significant lawsuits and administrative disputes
regarding COSMOTE and its subsidiaries, as of December 31,
2009 are the following:
COSMOTE
COSMOTE is a party to various lawsuits and administrative
disputes the majority of which are related to the operation of
base stations. The most significant other disputes are the
following:
Hellenic Telecommunications and Post Commission
(HTPC) has summoned COSMOTE as well as WIND (former
TIM) and VODAFONE to a hearing on May 18, 2005, to
investigate whether the announced increases on tariffs for the
SMS service are contrary to the provisions of telecommunication
law and law for the protection of free competition. The hearing
was held on May 23, 2005 and a new hearing took place on
November 3, 2005 due to the change of the members of HTPC.
The HTPC issued the decision which imposed a fine of
Euro 1.0 on each company (COSMOTE, WIND (former TIM) and
VODAFONE) for concerted practice contrary to competition law.
COSMOTE appealed against this decision before the Administrative
Court of Appeals. The hearing initially scheduled for
September 27, 2006, after postponements, was held on
October 17, 2007 and a decision was issued which accepted
COSMOTEs appeal and annulled HTPCs decision, saying
that COSMOTE has not proceeded to concerted practice contrary to
competition law. The HTPC has appealed against this decision
before the Council of State.
AMC
On December 12, 2005 the Albanian Competition Commission
imposed a fine on AMC of approximately Euro 1.4 (1% of the
companys turnover for 2004) on the grounds of
allegedly delaying a response to a request for information and
provision of documents. On January 4, 2006 AMC filed
two lawsuits before the Tirana District Court against the
Competition Authority, demanding the annulment of the decision
requesting information and opening of investigation procedure as
well as of the decision imposing the fine, since the requested
information had timely been dispatched to the Competition
Authority. On July 7, 2006, the Tirana District Court
rejected the requests of AMC and AMC presented an appeal
regarding the decision imposing the fine. The Appeal Court has
annulled the decision of the Tirana District Court and ordered
that the case should be examined again. AMC has also submitted
recourse to the Supreme Court. The case is ongoing.
On November 9, 2007 the Albanian Competition Authority
imposed to AMC a fine amounting to approximately Euro 1.7
for an alleged breach of the competition legislation during the
period
2004-2005.
AMC considers the Albanian Competition Authoritys decision
unfounded and has appealed before the Courts in order to protect
its legal rights. Tirana District Court has ruled to reject
AMCs claim. AMC has appealed the said decision in front of
Tirana Appeal Court. The case is ongoing.
CRIMINAL
PROCEEDINGS
Germanos acquisition case.
In 2007, the
District Attorney of Athens commenced a preliminary
investigation with respect to the propriety of the acquisition
of Germanos by COSMOTE following the submission of a report by a
number of members of the opposition party of the Greek
Parliament, which claimed among other things that the
acquisition was not in the business interest of COSMOTE. During
the course of the preliminary investigation, members of the
board of directors of COSMOTE at the time of the acquisition of
Germanos were called and requested to submit explanations in
connection with this case. Following the completion of the
preliminary
F-67
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
investigation, an investigating judge (the
20th Investigating Judge of Athens) was appointed to lead a
formal criminal investigation in connection with the potential
perpetration of offences. The investigating judge initiated
criminal proceedings against the members of the board of
directors of COSMOTE at the time of the acquisition of Germanos,
investigating alleged abuse of trust (Apistia). Upon
conclusion of the criminal investigation, a decision will be
made on whether an indictment is warranted. Four of the then
members of the board of directors of COSMOTE, are still members
of the current board of COSMOTE and senior executives of the
Group. In addition, the investigating judge ordered the
appointment of two independent accounting firms to conduct an
expert investigation in order to assess whether the
consideration for the acquisition of Germanos (of approximately
Euro 1.5 billion for 99.03% of the share capital of
Germanos) was reasonable in view of business judgment and
internationally accepted and customary financial and contractual
practices, and whether the acquisition resulted in financial
detriment to COSMOTE, and, in that event, to assess the amount
of such detriment. As part of the investigation process, the
experts report prepared by the independent accounting
firms was submitted to the Investigating Judge on March 17,
2010 and concluded that the price paid by COSMOTE for the
acquisition of GERMANOS was fair and that COSMOTE did not suffer
loss or damage as a result of the acquisition (rather the
acquisition was to the corporate benefit of COSMOTE). In
conjunction with the matter of the acquisition of GERMANOS by
COSMOTE, the Administrative Court of Appeal recently repealed a
fine that had been imposed by the Greek Capital Markets
Commission on Mr. Panos Germanos and other directors of
GERMANOS in connection with alleged manipulation of the share
price of GERMANOS prior to the time of the acquisition, judging
that no manipulation had taken place.
Siemens AG case.
The District Attorney of
Athens has conducted a preliminary investigation in connection
with allegations of bribery, money laundering and other criminal
offences committed in Germany and Greece by employees of Siemens
AG and a number of Greek government officials and other
individuals, relating to the award of supply contracts to
Siemens AG. In connection with the investigation, the District
Attorney has investigated, among other matters, the propriety
of, and allegations of criminal conduct in connection with, a
framework contract 8002/1997 with Siemens AG, and various
equipment orders pursuant to that framework contract in the
period following its signing and up to 2004. Framework contract
8002/1997 was signed on December 12, 1997 and related to
the supply to OTE by Siemens AG of equipment for the
digitalization of the network. In connection with this
preliminary investigation, the Company has provided to the
investigating authorities certain documents requested. Following
the conclusion of the preliminary investigation, criminal
charges were filed and an investigating judge was appointed to
lead a formal criminal investigation. To the extent so
requested, the Group has cooperated and intends to continue to
cooperate with the competent authorities in relation to this
investigation. The Group has also taken the necessary legal
action before the investigating judge in order to assert the
Groups civil rights with respect to any damages the Group
may have incurred as a result of any criminal offences
committed. It is understood that, as part of the same
investigation, a former senior executive of the Group, was
charged for certain criminal offences, including receipt of
bribes, and that in May 2009, was remanded in custody pending
his trial for the same charge, until September 2009 when he was
released. In connection with the same matter, OTE has filed a
claim against Siemens AG before German Courts. In relation with
the same criminal investigation, the District Attorney of Athens
is conducting a preliminary investigation, concerning contracts
with Siemens entered in 2006 for ArmenTel, the Armenian public
telephony operator, in which OTE held an interest of 90% which
OTE sold in November 2006.
Maintenance contracts case.
Following the
conclusion of a preliminary investigation on the matter, an
investigating judge (the 2nd Investigating Judge of Athens)
was appointed to lead a formal criminal investigation into the
potential perpetration of offences in connection with the
propriety of a technical maintenance contract with three of
OTEs suppliers. In June 2009, the investigating judge
initiated criminal proceedings against members of OTEs
Board of Directors and a member of OTEs senior management
serving at the time of signing of the relevant contract, in 2004
and 2005, investigating alleged abuse of trust
(Apistia). Three of these members, are still members
of the current Board, whereas the member of OTEs senior
management is currently the C.E.O. of ROMTELECOM. The above
individuals have by this time testified in connection with the
case by filing defense briefs and a decision is expected on
whether an indictment is warranted. On December 27, 2009,
the District
F-68
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Attorney of Athens proposed to the Judicial Council that, among
others, OTEs CEO and the Chairman of OTEs Audit
Committee shall be heard before a court. This proposal is a
procedural step. The Judicial Council may cease the procedure,
order further investigation or refer the case to a court hearing.
FINES
OF HTPC AGAINST OTE S.A.:
On November 29, 2006, HTPC imposed a fine against OTE of
total amount of Euro 3.0, due to violation of Number
Portability Rules and Competition Rules. OTE has filed an appeal
before the Athens Court of Appeals against this fine which
partially accepted it reducing the fine to Euro 1.0. OTE
has appealed against this decision before the Council of State.
On July 26, 2007 HTPC imposed a fine amounting
Euro 20.1, for alleged abuse of its dominant position in
broadband market in the form of margin squeeze. OTE has filed an
appeal before the Athens Court of Appeals against this fine
which was partially accepted reducing the fine to
Euro 10.1. OTE has appealed against this decision before
the Council of State.
On July 26, 2007, HTPC imposed a fine amounting
Euro 4.0, for violations of the existing legislation
concerning compliance with HTPCs cost control decisions
for the year 2003, having as proof wholesale leased lines
(including interconnection leased lines). OTE has filed an
appeal before the Athens Court of Appeals against this fine
which partially accepted it reducing the fine to Euro 2.5.
OTE has appealed against this decision before the Council of
State.
On July 26, 2007, HTPC imposed a fine amounting
Euro 1.0 for violations in the existing legislation
concerning breaches in the obligation to pay penalties for
delivery delays and repair of leased lines. OTE has filed an
appeal before the Athens Court of Appeals against this fine
which partially accepted it reducing the fine to Euro 0.7.
OTE has appealed against this decision before the Council of
State.
On July 26, 2007, HTPC imposed a fine amounting
Euro 1.25, for non-compliance with regard to OTEs
obligations relating to the Local Loop Unbundling (L.L.U). OTE
has filed an appeal before the Athens Court of Appeals against
this fine which was heard on March 18, 2009, and a decision
was issued reducing the fine to Euro 0.5. OTE has appealed
against this decision before the Council of State.
On October 5, 2007, HTPC imposed a fine for a total amount
of Euro 3.0 for alleged non-compliance with regard to
OTEs obligations relating to the Local Loop Unbundling
(L.L.U). Against this decision OTE has filed an appeal demanding
its annulment which was heard before the Athens Administrative
Court of Appeals on January 20, 2009 and the decision is
pending. The payment to the fine has been suspended by a ruling
of the Athens Administrative Court of Appeals pending the
courts decision on OTEs appeal.
On July 4, 2008, HTPC with its relevant decisions imposed a
fine, aggregating to Euro 1.0, for alleged late and
improper provision of necessary information related to the
combined service All in 1. OTE appealed against
these decisions before the Athens Administrative Court of
Appeals requesting their annulment which appeal was accepted.
On July 4, 2008, HTPC imposed a fine, aggregating to
Euro 2.0, for denial of providing information asked by
HTPC. OTE has filed an appeal before the Athens Court of Appeals
against this fine which partially accepted it reducing the fine
to Euro 0.1.
On July 25, 2008, HTPC imposed a fine on OTE for an amount
of Euro 9.0 for alleged obstacles to the business promotion
of the Double play service by TELLAS S.A. (fixed
telephony with fast Internet combination). OTE has filed an
appeal against this decision before the Athens Administrative
Court of Appeals which was partially accepted reducing the fine
to Euro 5.7. OTE intends to appeal against this decision
before the Council of State.
On October 3, 2008, HTPC imposed a series of fines to OTE
amounting to approximately Euro 11.0, alleging that OTE has
only partially conformed with regard to its obligations relating
to the Local Loop Unbundling (L.L.U).
F-69
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
OTE appealed against this decision before the Athens
Administrative Court of Appeal demanding its suspension, which
was accepted by the Court.
On February 3, 2009, HTPC imposed a fine of Euro 2.0
to OTE, for the alleged refusal to provide the information
requested for the purpose of price squeezing control over the
price margins for voice telephony. OTE has appealed against this
decision, before the Athens Administrative Court of Appeals. The
appeal was heard on May 12, 2010 and the Courts
decision is pending.
On March 17, 2009, HTPC imposed a fine of Euro 7.0 to
OTE for allegedly delayed delivery of lease lines to Hellas On
Line S.A. OTE has appealed against this decision, before the
Athens Administrative Court of Appeals. The appeal has been
postponed and was heard on January 21, 2010, and the
decision is pending.
On March 17, 2009, HTPC imposed a fine of Euro 0.5 to
OTE for non-compliance with its decision of provisional
measures, regarding the delivery of leased circuits to Hellas On
Line S.A. OTE has appealed against this decision, before the
Athens Administrative Court of Appeals and the appeal was heard
on January 21, 2010, and the decision is pending.
On April 8, 2009, HTPC imposed a fine of Euro 1.5 to
OTE for allegedly delaying the provision of information
requested from OTE for the purpose of the cost audit. OTE has
appealed against this decision, before the Athens Administrative
Court of Appeals. On March 23, 2010 a decision was issued
reducing the fine to Euro 1.0.
On May 5, 2009, HTPC imposed a fine of Euro 2.0 to OTE
for violation of telecommunications law and specifically on the
Companys obligation, as a company with significant market
power (SMP) in the relevant market, to maintain maximum price
level at the retention fee for calls from subscribers of its
network to subscribers of mobile network providers. OTE has
appealed against this decision, before the Athens Administrative
Court of Appeals. The appeal was heard on May 13, 2010 and
the Courts decision is pending. Similarly, the above
mentioned decision was announced to OTE again and OTE has
appealed against it, before the Athens Administrative Court of
Appeals and the appeal will be heard on June 9, 2010.
OTE has made appropriate provisions in relation to litigations
and claims, when it is probable an outflow of recourses will be
required to settle the obligations and it can be reasonably
estimated.
B. Commitments
Capital
commitments
The capital commitments at the reporting date which have not
been recorded in the financial statements are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
Property, plant and equipment
|
|
|
369.2
|
|
|
|
149.7
|
|
Operating
commitments
Operating commitments at the reporting date for rentals, rights
of use, repair and maintenance services and other services which
have not been recorded in the financial statements are as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
Up to 1 year
|
|
|
107.5
|
|
|
|
113.5
|
|
1 to 5 years
|
|
|
303.8
|
|
|
|
239.6
|
|
Over 5 years
|
|
|
201.6
|
|
|
|
290.9
|
|
F-70
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
30.
|
FINANCIAL
INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
|
IFRS 7 Financial Instruments: Disclosures introduces
additional disclosures in order to improve the quality of
information provided in order to assess the importance of the
financial instruments on the financial position of the Group.
The Group is exposed to the following risks from the use of
their financial instruments:
a) Credit risk
b) Liquidity risk
c) Market risk
The following table compares the carrying amount of the
Groups financial instruments to their fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Amount
|
|
Fair Value
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
24.1
|
|
|
|
20.6
|
|
|
|
24.1
|
|
|
|
20.6
|
|
Held for trading
|
|
|
3.2
|
|
|
|
3.1
|
|
|
|
3.2
|
|
|
|
3.1
|
|
Held to maturity
|
|
|
8.1
|
|
|
|
112.2
|
|
|
|
8.1
|
|
|
|
113.4
|
|
Trade receivables
|
|
|
1,153.0
|
|
|
|
1,194.2
|
|
|
|
1,153.0
|
|
|
|
1,194.2
|
|
Loan to Auxiliary Fund
|
|
|
129.4
|
|
|
|
134.1
|
|
|
|
132.3
|
|
|
|
120.7
|
|
Other loans
|
|
|
89.4
|
|
|
|
71.3
|
|
|
|
89.4
|
|
|
|
71.3
|
|
Cash and cash equivalents
|
|
|
868.8
|
|
|
|
1,427.8
|
|
|
|
868.8
|
|
|
|
1,427.8
|
|
Derivative financial instruments
|
|
|
7.4
|
|
|
|
6.2
|
|
|
|
7.4
|
|
|
|
6.2
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term borrowings
|
|
|
5,385.7
|
|
|
|
5,409.6
|
|
|
|
5,520.0
|
|
|
|
5,094.3
|
|
Short-term borrowings
|
|
|
36.2
|
|
|
|
638.1
|
|
|
|
35.5
|
|
|
|
628.3
|
|
Trade accounts payable
|
|
|
813.2
|
|
|
|
943.9
|
|
|
|
813.2
|
|
|
|
943.9
|
|
Derivative financial instruments
|
|
|
4.3
|
|
|
|
3.9
|
|
|
|
4.3
|
|
|
|
3.9
|
|
The fair value of cash and cash equivalents, trade receivables
and trade accounts payable approximate their carrying amounts.
The fair value of quoted shares and bonds is based on price
quotations at the reporting date. The fair value of unlisted
financial instruments is determined by discounting future cash
flows.
Fair
value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuing
technique:
Level 1:
quoted (unadjusted) prices in
active markets for identical assets or liabilities.
Level 2:
other techniques for which all
inputs which have a significant effect on the recorded fair
value are observable, either directly or indirectly.
Level 3:
techniques which use inputs
which have a significant effect on the recorded fair value that
are not based on observable market data.
During the reporting period there were no transfers between
level 1 and level 2 fair value measurement, and no
transfers into and out of level 3 fair value measurement.
F-71
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As at December 31, 2009, the Group held the following
financial instruments measured at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Fair Value
|
|
|
2009
|
|
2008
|
|
Hierarchy
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
shares
|
|
|
14.3
|
|
|
|
11.1
|
|
|
Level 1
|
Available-for-sale
mutual funds
|
|
|
4.0
|
|
|
|
3.8
|
|
|
Level 1
|
Available-for-sale
securities
|
|
|
5.8
|
|
|
|
5.7
|
|
|
Level 3
|
Held for trading bonds
|
|
|
3.2
|
|
|
|
3.1
|
|
|
Level 1
|
Other loans
|
|
|
89.4
|
|
|
|
71.3
|
|
|
Level 2
|
Derivative financial instruments
|
|
|
7.4
|
|
|
|
6.2
|
|
|
Level 2
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
|
4.3
|
|
|
|
3.9
|
|
|
Level 2
|
a) Credit
risk
Credit risk is the risk of financial loss to the Group if the
counterparty fails to meet its contractual obligations.
Maximum exposure to credit risk at the reporting date to which
the Group is exposed is the carrying value of financial assets.
Trade receivables could potentially adversely affect the
liquidity of the Group. However, due to the large number of
customers and their diversification of the customer base, there
is no concentration of credit risk with respect to these
receivables. Concentration of risk is considered to exist for
amounts receivable from the other telecommunication service
providers, due to their relatively small number and the high
level of transactions they have with the Group. For this
category the Group assesses the credit risk following the
established policies and procedures and has made the appropriate
provision for impairment (Note 10).
The Group has established specific credit policies under which
customers are analyzed for creditworthiness and there is an
effective management of receivables in place both before and
after they become overdue and doubtful. In monitoring credit
risk, customers are grouped according to their credit risk
characteristics, aging profile and existence of previous
financial difficulties. Customers that are characterized as
doubtful are reassessed at each reporting date for the estimated
loss that is expected and an appropriate impairment allowance is
established.
Cash and cash equivalents are considered to be exposed to a low
level of credit risk. The Group has adopted a deposits
policy whereby funds are only deposited with banks that
have a specified minimum rating by International Rating Agencies
as to their creditworthiness; in addition, limits are set on the
amounts deposited depending on the rating. To avoid
concentrations of risks, the Group does not deposit more than
30% of available funds in any one bank.
Financial instruments classified as
available-for-sale
include listed shares, mutual funds and other securities, while
financial instruments held to maturity include government bonds
and other securities. The financial asset categories are not
considered to expose the Group to a significant credit risk.
Loans include loans to employees which are collected either
through the payroll or are netted-off with their retirement
indemnities (Notes 9, 12 and 18) and loans and
advances to Auxiliary Pension Fund mainly due to the Voluntary
Leave Scheme (Note 18). The above mentioned loans are not
considered to expose the Group to a significant credit risk.
F-72
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
b) Liquidity
risk
Liquidity risk is the risk that the Group will not be able to
meet their financial obligations as they fall due. Liquidity
risk is kept at low levels by ensuring that there is sufficient
cash on demand and credit facilities to meet the financial
obligations when due. The Groups available cash as at
December 31, 2009 amounts to Euro 868.8, its loans
amount to Euro 5,421.9 while the Group has a long-term
credit (committed) line of Euro 350.0.
For the monitoring of liquidity risk, the Group prepares annual
forecasted cash flows when drafting the annual budget and
monthly rolling forecasts for three months cash flows, in
order to ensure that it has sufficient cash reserves to service
its financial obligations.
Below is an analysis of the undiscounted contractual payments of
the Group:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 1 Year
|
|
|
1 to 2 Years
|
|
|
2 to 5 Years
|
|
|
Over 5 Years
|
|
|
Total
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medium term bonds OTE PLC
|
|
|
245.1
|
|
|
|
2,395.1
|
|
|
|
1,607.9
|
|
|
|
1,619.3
|
|
|
|
5,867.4
|
|
Syndicated loan OTE PLC
|
|
|
30.8
|
|
|
|
33.8
|
|
|
|
448.7
|
|
|
|
|
|
|
|
513.3
|
|
Borrowings Rom Telecom
|
|
|
8.4
|
|
|
|
9.1
|
|
|
|
16.9
|
|
|
|
12.6
|
|
|
|
47.0
|
|
Other Borrowings
|
|
|
3.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.3
|
|
Trade accounts payable
|
|
|
813.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
813.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,100.8
|
|
|
|
2,438.0
|
|
|
|
2,073.5
|
|
|
|
1,631.9
|
|
|
|
7,244.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 1 Year
|
|
|
1 to 2 Years
|
|
|
2 to 5 Years
|
|
|
Over 5 Years
|
|
|
Total
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medium term bonds OTE PLC
|
|
|
872.3
|
|
|
|
245.1
|
|
|
|
3,925.4
|
|
|
|
1,696.9
|
|
|
|
6,739.7
|
|
Syndicated loan OTE PLC
|
|
|
21.4
|
|
|
|
46.8
|
|
|
|
508.3
|
|
|
|
|
|
|
|
576.5
|
|
Borrowings Rom Telecom
|
|
|
16.8
|
|
|
|
8.2
|
|
|
|
21.5
|
|
|
|
15.1
|
|
|
|
61.6
|
|
European Investment Bank
|
|
|
20.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20.5
|
|
Other Borrowings
|
|
|
5.3
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
7.3
|
|
Trade accounts payable
|
|
|
943.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
943.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,880.2
|
|
|
|
302.1
|
|
|
|
4,455.2
|
|
|
|
1,712.0
|
|
|
|
8,349.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group has excluded derivative financial instruments from the
above analysis.
OTE has guaranteed its subsidiarys, OTE PLC, borrowing as
follows:
|
|
|
|
|
As at December 31, 2009: Euro 5,400.
|
|
|
|
As at December 31, 2008: Euro 6,000.
|
c) Market
risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices will
result in fluctuations of the value of the Groups
financial instruments. The objective of market risk management
is to manage and control exposure within acceptable levels.
F-73
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The individual risks that comprise market risk are described in
further detail and the Groups policies for managing them
are as follows:
i. Interest
rate risk
Interest rate risk is the risk that payments for interest on
loans fluctuate due to changes in interest rates. Interest rate
risk mainly applies to long-term loans with variable interest
rates.
The hedging of interest rate risk is managed through having a
combination of fixed and floating rate borrowings as well as
with the use of interest rate swap agreements.
As at December 31, 2009, the ratio of fixed loans to
floating loans for the Group was 91%/9% (2008: 81%/19%). The
analysis of borrowings by type of the interest rate is as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Variable interest rate
|
|
|
503.3
|
|
|
|
1,099.3
|
|
Fixed interest rate
|
|
|
4,918.6
|
|
|
|
4,948.4
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
5,421.9
|
|
|
|
6,047.7
|
|
|
|
|
|
|
|
|
|
|
The following tables demonstrate the sensitivity to a reasonable
possible change in interest rates on loans, deposits and
derivatives to the income statement and equity.
Sensitivity to an interest rates increase of 1%:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
Profit before tax
|
|
|
4.7
|
|
|
|
3.3
|
|
Equity
|
|
|
|
|
|
|
3.0
|
|
If interest rates were to decrease by 1%, the impact would be
similar and opposite to the analysis above.
ii. Foreign
currency risk
Currency risk is the risk that the fair values or the cash flows
of a financial instrument fluctuate due to foreign currency
changes.
The Group operates in Southeastern Europe and as a result is
exposed to currency risk due to changes between the functional
currencies and other currencies. The main currencies within the
Group are the Euro, Ron (Romania) and the Lek (Albania). The
following table demonstrates the sensitivity to a reasonably
possible change in the functional currency exchange rate, with
all other variables held constant, of the Groups profit
before tax (due to changes in the fair value of monetary assets
and liabilities):
|
|
|
|
|
|
|
|
|
|
|
Effect on Profit Before Tax
|
Change in Functional Currency Exchange Rate
|
|
2009
|
|
2008
|
|
+10%
|
|
|
12.4
|
|
|
|
7.2
|
|
−10%
|
|
|
(12.4
|
)
|
|
|
(7.2
|
)
|
As of December 31, 2009, COSMOTE ROMANIA had
Euro 500.0 loans payable to COSMOTE (December 31, 2008
Euro 400.0) which are treated as part of the net investment
of the foreign operation as settlement is neither planned nor
probable in the foreseeable future.
F-74
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Capital
Management
The primary objective of the Groups capital management is
to ensure that it maintains a strong credit rating and healthy
capital ratio in order to support its business and maximize
shareholder value.
The Group manages its capital structure and makes adjustments to
it, in light of changes in economic conditions. To maintain or
adjust the capital structure, the Group may adjust the dividend
payment to shareholders, return capital to shareholders or issue
new shares.
An important means of managing capital is the use of the gearing
ratio (ratio of net debt to equity) which is monitored at a
Group level. Net Debt includes interest bearing loans, less cash
and cash equivalents and other financial assets.
The table below shows an increase in the gearing ratio in 2009
compared to 2008 due to a decrease in cash and cash equivalents,
as well as a reduction in equity due to foreign exchange losses
and the acquisition of non-controlling interests of AMC which
was recorded in equity (see Note 8):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Net Debt
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
5,421.9
|
|
|
|
6,047.7
|
|
Cash and cash equivalents
|
|
|
(868.8
|
)
|
|
|
(1,427.8
|
)
|
Other financial assets
|
|
|
(35.4
|
)
|
|
|
(135.9
|
)
|
|
|
|
|
|
|
|
|
|
Net debt
|
|
|
4,517.7
|
|
|
|
4,484.0
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
1,949.7
|
|
|
|
2,173.2
|
|
|
|
|
|
|
|
|
|
|
Gearing ratio
|
|
|
2.32
|
x
|
|
|
2.06
|
x
|
|
|
|
|
|
|
|
|
|
In the consolidated statement of financial position as of
December 31, 2008, amounts of Euro 5.6 which was
included in Goodwill and Euro 5.5 which was
included in Other intangible assets, have been
reclassified to Assets classified as held for sale
as they concern COSMOFON which was sold in May 2009.
In the consolidated income statement for the year ended December
31, 2008 and 2007, an amount of Euro 27.1 and
Euro 33.7, respectively which was included in Charges
from international operators was reclassified to
Other operating expenses.
In the consolidated cash flow statements for the year ended
December 31, 2008 and 2007, the amount reflected in
Other provisions has been analyzed and reflected in
Provisions for doubtful accounts and Other
Provisions. In addition, the amount reflected in
(Decrease)/increase in liabilities (except
borrowings) has been analyzed and reflected in
Payment of early retirement programs, Payment
of staff retirement indemnities and youth account, net of
employees contributions and
(Decrease) / increase in liabilities (except
borrowings).
|
|
32.
|
EVENTS
AFTER THE FINANCIAL POSITION DATE
|
The most significant events after December 31, 2009 are as
follows:
Stock
option plan
On January 28, 2010, OTEs Board of Directors decided
on and approved granting 1,259,078 Additional Options to the
executives of OTE and its subsidiaries, 672,018 Basic Options to
the executives of OTE and 333,780 Basic and 2,403,560 Additional
Options to the executives of COSMOTE Group for the year 2009.
F-75
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
IKA-ETAM
By his letter dated January 19, 2010, the Minister of Labor
and Social Security informed OTE that IKA-ETAM has incurred
significant deficits attributable to the incorporation of the
pension segment of TAP-OTE from August 1, 2008 into
IKA-ETAM, and that further deficits are also anticipated for
2010. In his letter the Minister further explained that such
deficits are currently covered primarily by the Hellenic State
and partially absorbed by IKA-ETAM, he indicated that OTE should
also contribute funds towards these deficits and requested a
meeting with OTEs Chief Executive Officer in order to
discuss the relevant issues. The meeting was held on
January 26, 2010 where the two parties agreed to establish
a committee to discuss the issues raised. A first meeting of
this committee took place on February 11, 2010 and OTE
requested the Ministry of Labor and Social Securitys
(Ministry) official positions in writing. On
February 23, 2010, the Ministry formally advised OTE that
as a result of the Voluntary Leave Scheme it has estimated that
IKA-ETAM has foregone contributions and pensions of
approximately Euro 340.0. Furthermore, it also notes that
the relevant outstanding contributions currently paid by OTE on
a monthly basis, should be settled in full.
OTE examined the Ministrys position, however, its view is
that this position is unsubstantiated, given that OTE has
fulfilled and continues to fulfil in their totality all the
financial obligations it has towards all social security funds,
paying all contributions, as they are due, both in the context
of its normal course of business, as well as the ones related to
the companys voluntary retirement plans, strictly
following all relevant laws, rules and regulations.
Therefore, in reply to the above mentioned letter, on
March 9, 2010, OTE, in a letter to the Ministry, responded
to all the specific issues included therein and reiterated its
position that OTE fulfils in their totality all the financial
obligations arising from L. 3371/2005 and the relevant
Ministerial Decision, and requested that the Ministry address
the pending issue regarding the issuance of the necessary
decisions by the pension funds, in order to enable the
participants of the voluntary leave scheme of L. 3762/2009 to
receive their pension entitlements.
Based on article 3 of the
F/10051/27177/2174
Ministerial Decision which was published in the Government
Gazette, the additional financial burden of the Pension Sector
of IKA-ETAM, the Auxiliary Insurance Sector for OTE personnel of
TAYTEKO and the Medical Segment of TAYTEKO as derives from
articles 2 and 4 of the Collective Labor Agreement signed
between OTE and OME-OTE on July 20, 2005, should be paid
for by OTE in a lump-sum to the above sectors by the last
working day of September 2010. The amount of this additional
financial burden will be determined by an actuarial study that
will be performed by the Directorate of Actuarial Studies of the
General Secretariat for Social Security in conjunction with the
Directorate of Actuarial Studies and Statistics of IKA-ETAM by
August 31, 2010.
On May 11, 2010 OTE filed an appeal against this
Ministerial Decision before the Administrative Court of First
Instance of Athens, requesting the annulment of article 3
as based on the Legal Departments assessment, it is in
contravention of article 34 of L. 3762/2009 and
consequently, there are valid grounds for the annulment of this
article. On May 15, 2010 OTE also filed an appeal
requesting the suspension of enforcement of this Ministerial
Decision before the same Court.
As a result, and given that in OTEs view, as referred to
above, the Ministrys position is unsubstantiated, OTE has
not recorded any provision in the accompanying financial
statements.
New
tax law
The new Law 3842/23-4-2010 introduces two separate corporate
income tax rates for distributed and undistributed profits of
legal entities. More specifically:
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Non-distributed profits are taxed at a tax rate of 24% (reduced
annually by 1 percentage point until it reaches 20% by 2014)
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F-76
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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Distributed profits are taxed at a tax rate of 40%.
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No further withholding tax is imposed on dividends.
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The new tax law applies to profits arising from the fiscal year
2010 onwards or to the profits of previous accounting periods
distributed after December 31, 2010. The distribution of
profits of previous accounting periods within 2010 is still
taxed under the current regime (i.e. withholding tax of 10% is
applicable).
Taxation of 40% on distributed profits of the legal entities
exhausts the tax liability in case the beneficiaries are legal
entities.
In cases where such legal entities proceed to the distribution
of profits, in which dividends from other legal entities are
included, the part of tax already paid for those dividends is
deducted from the 40% tax imposed on distributed profits.
Special
Contribution for legal entities
According to the new Law 3845/2010 Measures for the
application of the support scheme of the Greek Economy by the
Members of the Euro Zone and the International Monetary
Fund a special contribution is imposed on Greek profitable
entities calculated on their total net income for the fiscal
year 2009 based on a progressive scale up to 10% of their total
net income. The contribution is estimated to approximately Euro
96.0, it will be charged in the 2010 consolidated income
statement and will be paid within 2011. The Company is currently
in the process of evaluating the possibility (after the payment
of the above mentioned contribution) of requesting for refund an
amount of approximately Euro 30.1 of such special contribution
relating to dividend income derived from its subsidiaries
2008 profits, on which a special contribution has already been
imposed based on the requirements of L. 3808/2009.
OTE
PLC loans
In May 2010, OTE PLC proceeded with the buyback of bonds of a
total nominal amount of Euro 56.0 under the
Euro 1,500.0, 5.375% bond due on February 14, 2011.
The notes have been cancelled. The total amount paid including
accruals and premium amounts to Euro 57.7.
Restructuring
plans
On December 23, 2009, the management of OTE approved an
early retirement program according to which employees who will
complete the number of years required for retirement by
December 29, 2010, would be entitled to benefits in order
to retire by December 30, 2010. The deadline for the
applications for participating in this early retirement program
was due on January 15, 2010. Approximately
340 employees will voluntarily terminate their employment
contracts and the respective cost, amounted to Euro 31.5,
will be charged in the Groups income statement for the
year 2010.
By virtue of decisions by ROMTELECOMs CEO, dated February
and April 2010, ROMTELECOM announced the restructuring of
specific departments within the company. In the first four
months of 2010, 550 employees voluntarily terminated their
employment contracts and an amount of Euro 12.5,
representing the relative costs, will be charged in the
Groups income statement of 2010.
A total of 350 employees of ZAPP (COSMOTEs
subsidiary) voluntarily terminated their employment contracts
and an amount of Euro 2.6, representing the relative costs,
will be charged in the Groups income statement of 2010.
F-77
HELLENIC
TELECOMMUNICATIONS ORGANIZATION S.A.
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Telecom
Slovenije notices of claims
On May 12, 2010 Telecom Slovenije, the purchaser of
COSMOFON, sent to COSMOTE notices of claims relating to alleged
breaches of warranties and indemnity provisions under the Share
Purchase Agreement concluded on March 30, 2009, for an
amount of approximately Euro 9.3. COSMOTE will take all
necessary actions to oppose all unsubstantiated and unfounded
claims.
F-78
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