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OTE (Hellenic Telecoms) | First thoughts: numbers as expected, total shareholder remuneration just a tad higher

Q4 EBITDAaL +2.8% yoy, as expected, on easy comps – OTE has reported Q4 in sync with our expectations, with Q4 EBITDAaL finally inflecting (+2.8% following -1.5% in 9M23) bringing an end to the 3-quarter streak of negative yoy growth. This was driven by sequentially improved core trends (with GR fixed standing out, with retail revenues 1.2% following -3% in 9M23), better ICT due to phasing and an easy comp (with the yoy swing in Romania contributing c1.2pps to Q4 EBITDA growth). Overall, Q4 revenues settled at €930m, +5.1% yoy while adj. EBITDAaL came in at €341m, +2.8% yoy in line with our number. For the full year, revenues shaped at €3,469m (+0.4% yoy) while adj. EBITDAaL amounted to €1,342.5m, -0.4% yoy. Adj. net profit settled at €563m, +4% yoy. Cash flow generation was healthy in line with guidance at €501m in FY23, also helped by somewhat lower (vs the initial guidance) capex (which shaped at €621m). Net debt retreated further to €389m from €469m in December 2022 (excl. leases).

Total remuneration in 2024 increased yoy, but not overly generous at €450m (+6% yoy) – Following €425m paid to shareholders out of FY23 cash flow, OTE mgt announced a higher figure for 2024, at €450m. This will comprise a €153m buyback (-13% yoy) and a €297m cash DPS (€0.71, +23% yoy). The c6% yoy increase in the overall remuneration ought to have been widely anticipated, but the magnitude of the rise is rather small to move the needle in our view. OTE has traditionally taken a prudent approach to cash returns due to the volatility of the tax bill, but we struggle to understand why FCF payout is 95% and not 100%, especially given the under leveraged balance sheet. The cash return policy looks overly conservative to us, especially considering that net debt has actually fallen by €131m in the last 2 years. Overall, the news about the cash return is rather neutral in our view and not likely to drive a re-rating of the shares. This is especially true considering that: 1) there are other Greek non-financials with higher cash returns on offer (e.g. OPAP, Jumbo); 2) several other Telcos also offer FCFE yield in the high single digits or higher (e.g. DT, BT).

2024e: a year of growth, albeit