EUR 200.00 For Business Accounts Only

OTE (Hellenic Telecoms) | Riding the HALO rotation; thesis mainly yield-based though

Profit acceleration in 2026 on mobile strength and self-help – Following an in-line FY25 with EBITDAaL up 2% yoy, mgt has guided for c3% growth in 2026. Momentum rests on two pillars: resilient mobile (pre-to-post migration, “more-for-more” pricing and CPI indexation; we model c+3%) and targeted efficiency across network and customer care, increasingly AI-enabled, alongside flat energy costs and personnel savings. By contrast, retail fixed is likely to stay subdued; we cap growth at c1%, as competitive intensity is set to remain elevated partly offsetting rising FTTH penetration and PayTV growth. With all these in mind, we have lifted slightly our EBITDAaL estimates (c1%) for FY26-27e.

… coupled with increasing cash returns – Mgt amended the shareholder remuneration policy, now basing cash returns on actual FCF generation. As such, it announced a €532m distribution (c7.5% yield) for CY 2026 (based on 2025 performance), comprising €355m divi (€0.877 DPS) and €177m buyback. Looking ahead, the EBITDAaL acceleration feeds directly into a firmer FCF profile and, by extension, higher shareholder returns. With capex anchored near €600m (peak level), we see underlying FCF settling at €570–600m over the next few years, equivalent to c40% of EBITDAaL. As FCF migrates toward the upper end of that range, we see scope for distributions to rise to c€570m in 2027e (c8% yield). Importantly, spectrum-related cash timing effects should not derail this path as Romania-related tax savings will be ring-fenced from this year’s elevated FCF to fund 2027–28 spectrum payments. Overall, OTE’s equity case is increasingly anchored in a visible and gradually rising cash return profile.

A word on competition in fixed – In Greek fixed, PPC has emerged as an infrastructure-based challenger, combining accelerating rollout with visibly lower fibre pricing. Our bundle benchmarking confirms that PPC is materially cheaper, however early take-up remains limited, suggesting that price alone has not yet been translated into material share shift. Although PPC’s rollout targets are ambitious, execution and conversion remain the key variables. In our view, structural protection lies with OTE, supported by >70% bundling penetration and inherently higher switching friction. We therefore expect OTE to defend selectively in overlapping clusters, preserving headline tariffs and overall ladder integrity rather than engaging in broad-based repricing.

Valuation: HALO support, thesis mostly yield though – OTE has rerated materially in the last few months, in tandem with EU telcos. The initial leg of the repricing reflected a structural growth step-up among fibre-owning incumbents (improving ROIC), alongside renewed optimism around EU-backed mobile consolidation. More recently, the HALO theme — Heavy Assets, Low Obsolescence — has added another layer of support, as investors rotate toward tangible infrastructure assets. Against this background, we have recalibrated our valuation (blended DCF and multiples) raising our PT to €17.8, now valuing OTE at c5x 1yr fwd EV/EBITDA (in line with the current multiple), a modest discount to European telcos, which we consider warranted given its structurally lower growth profile and more limited re-rating optionality. That said, the c7–8% visible cash yield leaves the equity largely de-risked, and positions the stock as a credible income vehicle for yield-oriented investors.