Financial results for the three months ended March 31, 2004
Group operating revenues during the first quarter of 2004 amounted to ? 358.4 mil, up 21% y-o-y, mainly driven by continuous, very strong growth in usage (Greek operations), combined with positive performance in the Albanian operations. COSMOTE's group EBITDA margin stood at 42.65% while group earnings amounted to 68.3 mil euros (+ 27.1% y-o-y), with net income margin at 19.0%. Free Cash Flow reached 108.6 mil euros with Net Debt subsequently decreasing to 83.5 mil euros.
Total group operating revenues for the period under review increased by 20.6% to reach 358.4 million euros (including approximately 3.6 mil euros accounted for the management of Globul and COSMOFON).
The overall revenue increase mainly reflects a 25.5% increase in the total airtime and 'monthly service fees' revenues (resulting from the 20.9% increase in airtime revenues, combined with the 40.4% increase in monthly service fees revenues, that include airtime revenue incorporated in the bundled packages) and a 17.2% increase in interconnection revenues. Revenues from telecommunications services increased by 19.8% during the period under review, representing approximately 97% of total revenues (marginall y diluted by the participation of the revenues accounted for the management of the two mobile assets in Bulgaria & FYROM).
The key driver behind the healthy revenue growth is the considerable increase in COSMOTE's (domestic operations: GREECE) traffic volumes that during the three months ended March 31, 2004 increased by approximately 42% y-o-y. The significant tariff cuts (on average -25%) effected in late 2002 & early 2003 with the introduction of the bundled packages were offset by the aforementioned continuous traffic increase, solid proof of ongoing positive usage elasticity.
Data revenues (which include SMS, MMS, and other 'soft data' revenues from Value Added Services) represent approximately 12.5% of total telecommunication revenues and 12.8% of domestic operations. The Company has recorded to date over 350,000 MMS users that currently send on average around 26,000 MMS per day.
Roaming revenues grew y-o-y by 50%, accounting for 1.1% of total consolidated revenues, from 0.9% a year ago. During the first quarter of the year, the Company signed fourteen (14) additional roaming agreements that at the end of Q1-04 amounted to 321 in 155 countries (7 more countries compared to FY-03).
More importantly, consolidated profitability was sustained at high levels, with EBITDA reaching 152.9 mil euros, and EBITDA margin at 42.65%. The marginal decrease in the group EBITDA margin (0.1 p.p.) compared to one year ago is attributed to the dilution of AMC's EBITDA margin by 1.4 p.p. (57.6% from 59.0% in Q1-03, due to the increased interconnection charges in Albania).
Furthermore Greek operations EBITDA reached 137.4 million euros representing a 22.1% y-o-y growth, higher than the respective revenue growth. As a result domestic EBITDA margin improved to 41.4% from 41% compared to a year ago, underlining the fact that domestic operational results remain sound and represent the key contributor to the Company's future performance.
Group Earnings amounted to 68.3 mil euros, up 27.1% y-o-y with consolidated Net Income margin in Q1-04 increasing by one (1) percentage point to 19%. Earnings reaffirm the sustained strong operational and financial performance evidenced in the local market. Domestic operations earnings grew by 26.6%, to reach 62 mil euros, with net income margin at 18.7%, while AMC's earnings grew by 16.9% to reach 8.2 mil euros, with net income at 30.2%.
Following the Board of Directors decision, published in the Greek GAAP Audited Financial Statements (as at 6th May 2004) full dividend for the year 2003 is proposed to amount to 165.6 mil euros, from 115.6 mil euros in 2002, while DPS stands at 50 eurocents (from 35 eurocents in 2002).
Finally, Free Cash Flow at the end of the first quarter of year 2004 reached euros 108.6 mil, reflecting the Company's enhanced cash flow generating capability and efficient working capital management. As a result Net Debt decreased significantly to 83.5 mil euros, -60.4% lower than at the end of 2003.
Net Debt
Consolidated Capital Expenditures during the period under review amounted to approximately 49.1 mil euros, leading to a CAPEX/Sales ratio of 13.7%. Capex includes 37.8 mil euros of 2G, 2.5G & Olympic Games Capex (Greek operations), 9.7 mil euros of 3G Capex and finally 1.6 mil euros were invested in AMC (Albania).
Blended AMOU during Q1-04 has increased by 26% (y-o-y) to reach 121 min. This is driven by the continuous quarterly strong growth in contract AMOU that at the end of Q1-04 was 65 minutes higher compared to a year ago (36% increase). This strong positive trend, an evolution of the trend that started in 2002 and was continually enhanced on a quarterly basis throughout 2003, once again underlines the fact that voice usage represents the key growth driver in the Greek mobile market.
COSMOTE blended ARPU for the period under review (at 29.2 euros) was 6.2% higher compared to a year ago, positively affected by the increase in contract ARPU that at the end of Q1-04 was the highest ever recorded, at 51.7 euros (+16.7% y-o-y). The impact of this significant increase has offset the aforementioned tariff cuts (-25% approximately) and the dilution effect from the higher proportion of prepaid customers in the total customer base (60.2% compared to 57% at the end of Q1-03).
COSMOTE operates in 4 countries of the Southeastern European region: through direct ownership in Greece & in Albania and, since January 2003, through management contracts, in Bulgaria and FYROM (Macedonia).
It is underlined that the Greek mobile market has reached very high penetration levels.
During the first quarter of 2004 COSMOTE added 106,465 net new additions (102,182 new prepaid customers and 4,283 new contracts). Contract customers at the end of Q1-04 reached 1,600,135 or 39.8% of total while prepaid customers during the same period amounted 2,423,340 or 60.2% of total. It is also expected that the Company has sustained the majority of the total contract customers market in Greece.
COSMOTE's annualized churn rate, for Q1-04 stood at 19.5%, lower than FY 2003 levels, (~20.5%). It is noted that of this churn the majority is due to internal contract churn.
During the same period, AMC added 23,130 net new customers, reaching a total of 615,934 customers. Globul during the first quarter of 2004 added 145,087 net new additions. Of these 104,385 (or 72% of total) were new prepaid customers and 40,702 (or 28% of total) were contract. Total customers during the period exceeded 1,14 million, increasing more than 104% y-o-y. COSMOFON had 27,205 net new additions of which 24,480 were prepaid, with its customer base surpassing 111,000.
During the three months ended March 31, 2004 AMC contributed approximately 7.5% to the Company's consolidated revenues and 10.2% to COSMOTE group EBITDA. AMC's revenues at the end of the first quarter of 2004 were 9.3% higher compared to the previous period (Q1-03) reaching 27 million euros (in local currency revenue increase was ~3.2%). As already mentioned (in previous results announcements), the Albanian mobile market is considered to have entered a stability phase, under the current market conditions (i.e. penetration is the highest in all Balkan countries, achieved in the fastest time).
AMC's EBITDA at the end of Q1-04 reached approximately 15.5 mil euros, resulting in an EBITDA margin of 57.6%, maintained at very high levels (margin has stabilised around 57% level, in all previous quarters of 2003, due to the increased interconnection charges introduced in Albania a year ago).
Finally Net Income during Q1-04 stood at 8.2 mil euros, almost 17% higher than Q1-03, resulting in an improved Net Income margin of 30.2% compared to 28.3% in Q1-03.