EUR 150.00 For Business Accounts Only

OTE (Hellenic Telecoms) | First thoughts: numbers as expected, GR EBITDAaL +1.8%

Q1 group EBITDAaL +1% yoy, as expected; little to get excited about – Q1 results broadly matched expectations, reflecting a stable but rather unexciting performance. Group revenues were rather muted (flat yoy) at €879m, with Greece +0.8% driven by resilient mobile (+1.2%), 2-digit growth in Pay TV, and robust ICT (>10%), offset by lower wholesale, a marginal drop in retail fixed and a drag from Romania (-8% yoy). At EBITDAaL level, Greece delivered +1.8% growth to €329m, aided by payroll efficiencies and lower energy costs. Group EBITDAaL growth was diluted to just +1% (€329m, a bit lower than consensus) with Romania having zero contribution. Adj. net profit came in at €149m (+10% yoy), eclipsing estimates thanks to a lower tax rate (19%), while FCF retreated to €97m (€127m in Q1’24), weighed down by seasonally higher WC needs and capex. Post the buyback executed in the quarter, net debt declined by €82m qoq to €308m. Overall, Q1 was broadly in sync with consensus/our expectations, with mgt confirming 2025 guidance of 2% EBITDAaL growth in Greece (and FCF of €460m).

Romania update: still stuck in regulatory review – No major updates have been offered on Romania. The competition authority continues to review the disposal on our understanding, with a potential decision likely in the summer. We understand the baseline scenario still assumes the transaction closes by year-end. As a reminder, management’s €460m FCF guidance includes a full-year Romania contribution, which it estimates dilutes underlying FCF by c€70m. If the deal closes, OTE stands to benefit from a €100m+ tax shield, though as we have flagged before, this will likely be used to pre-fund upcoming spectrum costs (€120–150m in 2027–28), limiting near-term distribution upside.

Rally driven by rerating, rather than earnings momentum – OTE shares have gained 11% since Liberation Day, strongly outperforming the EU telco sector (-1%) and trailing only Telecom Italia (+16%). The move reflects a flight to quality and a reallocation to European assets, with Greek defensives (Jumbo, AIA, OPAP) also up 7–13% in the same period. Contributing factors include OTE's resilience in a potential downturn and the broader support from lower rates, given the sector's bond proxy appeal. That said, we caveat that peer Q1 earnings have shown robust EBITDA growth (>5%), with Tele2 up 6%, KPN 5%, and Telia 7%. In contrast, OTE's rally stems largely from rerating, with Q1 EBITDA growth ex-Romania at just c2%, lacking the profit momentum seen elsewhere.

Valuation – Following the latest move, OTE currently trades at c7-8% 2025-26e FCF yield, which is similar to the valuation of the broad EU telecom space. More importantly, several EU peers offer higher shareholder FCF distribution coverage, including DT, TKA, Telefonica, BT and Orange. The relative EV/EBITDA gap has also narrowed materially after OTE’s recent re-rating, with the stock now at c5.4x EV/EBITDA for