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OTE (Hellenic Telecoms) | First thoughts: tepid group Q2 weighed down by Romania, but GR EBITDAaL +2%

Q2 group EBITDAaL +0.6% yoy, a bit softer than expected due to Romania (RO); GR growth in sync with FY25 guidance – Q2 group adj. numbers look a tad below our forecasts, with the underlying pattern remaining largely unchanged: strong mobile (service rev. +3.2%), tepid but positive retail fixed (+0.6%), and RO weighing on group metrics (EBITDAaL loss €4.6m). Overall, group sales rose 0.3% yoy to €913m, with GR +1.1%. GR EBITDAaL advanced 2% to €333m, in sync with mgt FY guidance, while group EBITDAaL grew by a mere 0.6% to €329m (below EEe €332m) due to continued dilution from RO. Reported net profit was affected by a (yet another) €40m write-off in RO, as well as by a higher tax rate, thus leading reported net profit down 36% yoy to €81m. Mgt reiterates the main elements of the guidance including FCF (€460m), capex (€610-620m) and EBITDAaL growth in Greece (+2%). Overall, the print looks in sync with FY estimates, but momentum looks subdued especially when compared to Q2 EBITDA growth delivered by other EU telco peers (e.g. KPN, VOD, Orange, ELisa, Telia 4-5%).

RO sale positive news but no clear read-through for the size of the related extra cash return – The disposal of RO was approved on 29th July by the Romanian Competition Council. Several market participants (mainly sell-side) seem to be alluding to €40-50m sale proceeds, of which c65% (€0.06-0.08/share) are likely to be available for distribution (given the experience of the sale of RO fixed). In our view, this amount may be on the optimistic side, as the asset has seen multiple rounds of impairments (BV likely €100m tax shield post-sale in 2026, but we caveat that part of this windfall is likely to be absorbed by upcoming spectrum obligations (€120–150m in 2027–28), thus limiting the 2026 special distribution uplift.

Operating trends – Mobile performance (+3.2%) strengthened sequentially, helped by post-paid migration and the €2 hike in prepaid top-up at physical points, supporting ARPU uplift and store-based upselling. In fixed, BB net adds turned positive (+6K), aided by the recently launched FWA service, while Pay-TV saw 2-digit revenue growth. This supported a 0.6% yoy increase in fixed retail revenues — still muted but better than the -0.2% in Q1. FTTH migration continues to deliver opex benefits, helping offset higher marketing, with personnel savings also continuing unfettered (-3.7% yoy).

Valuation – OTE has moved from strong outperformance vs EU telcos in April–May to relative underperformance during May–June. More recently, the shares have bounced a bit in the light of the news regarding the sale of Romania, an event set to mark the end to the material cash burn, thus reinforcing visibility around OTE’s FCF generating capacity (>€500-550m on our estimates). The current valuation, at c5x 2025e EBITDA and c8% FCF yield, is a c10-15% discount to EU telcos, warranted in our view by the more tepid growth profile (c2% EBITDA growth vs mid-single digit for EU telcos).