H1 2005 results
Group operating revenues during the first half of 2005 amounted to ? 791.2 mil, up by 5.04% y-o-y, continuing to be driven by higher usage in Greece and the ongoing strong performance of the Albanian operations, despite the Greek interconnection rate cuts. COSMOTE's group EBITDA rose by 7.7% y-o-y, with EBITDA margin reaching 43.7%, up by 1.1 percentage points since H1 2004. Group Net Income increased by 9.1% y-o-y with net income margin reaching 20.04%.
Total group operating revenues for the period under review increased by 5.0% to euros 791.2 million. The revenue increase reflects the 8.6% rise in revenues of airtime, monthly fees, SMS and data services that more than outweighed the 4.9% reduction in interconnection revenues resulting from the interconnection tariff cuts that took place in October 2004. Bundled packages continue to be the most attractive market proposition, reflected in the 35.2% increase in monthly fees. During Q2 2005, COSMOTE introduced a new range of bundled packages, increasing its market competitiveness and at the same time encouraging users to move to higher bundles. This initiative has been very successful, establishing COSMOTE once again as the price leader in the Greek mobile market, with positive results in customer take-up.
Traffic volumes (domestic operations: GREECE) during the six months ended June 30, 2005 increased by 15% y-o-y, as a result of higher usage, new subscribers and the sustained positive momentum in the take up of bundled packages.
Data revenues (which include SMS, MMS, i-mode? and other 'soft data' revenues from Value Added Services) represent 11% of total consolidated telecommunication revenues and 12% of domestic operations telecommunication revenues. Data revenues are so far primarily constituted of SMS revenues, which peaked in 2004. Increasingly, i-mode? and other data services are attracting new users, as new offerings are added, more handsets become available, pricing becomes more competitive and the subscriber base becomes more accustomed with the service. i-mode? market acceptance at this early stage is promising and has put COSMOTE at the forefront of new data service offerings.
Roaming revenues grew y-o-y by 4.3%, accounting for 1.8% of total consolidated revenues. At the end of H1-05 the Company had signed 383 roaming agreements in 181 countries. In addition, since the launch of i-mode (in June 2004) the Company has signed 73 GPRS roaming agreements in 38 countries.
Group EBITDA increased by 7.7%, reaching euros 345.7 mil while the EBITDA margin was sustained at 43.7%, the same as in the first quarter, compared to 42.6% one year ago. The 1.1 p.p. EBITDA margin increase is a result of efforts for improved overall cost management that led to total operating expenses increasing y-o-y at a lower rate (3.1%) than the respective revenue increase of 5.0%. Greek operations EBITDA reached ? 307.8 mil increasing by 6.2% y-o-y. Notably, the domestic EBITDA margin improved to 42.2% c ompared to 41.5% one year ago.
COSMOTE continues its efforts to manage costs more efficiently as operations mature and improve the EBITDA margin in all the markets it operates overtime. Group net Earnings amounted to euros 158.6 mil, up 9.1% y-o-y with consolidated Net Income margin in H1-05 exceeding for the first time the 20% mark, to reach 20.04%, positively affected by the reduction of the corporate tax rate by 3 p.p. in 2005. Domestic operations earnings grew by 11.9%, while net income margin stood at 20.4%. Net income growth in Greece was constrained by higher depreciation charges (+15.1%), due to the commencement of 3G assets depreciation (including the amortization of the 3G license) since late Q2 2004.
Consolidated Capital Expenditure during the period under review amounted to euros 36.3 mil, including euros 32.1 mil of Capex for the Greek operations and ? 4.2 mil invested in AMC (Albania). Capital expenditure requirements in Q2 continued to be limited, partly due to the re-deployment of Olympic Games related infrastructure. Though capital expenditure is likely to accelerate in the remaining half of the year, lower equipment prices and reduced overall requirements are likely to lead to lower Capex for 2005 than o riginally anticipated. Free cash flow at the end of the first half of 2005 stood at euros -70 mil following the exceptional payment to shareholders of euros 0.90 per share (total euro 299 million) in March. As a result Net Debt for the period was ? 153 million. During Q3, COSMOTE has planned the issuance of up to euro 1 billion bonds in total (including Euro 490 million that have been issued in July), to finance the acquisitions in Romania, Bulgaria and FYROM (total Euro 610 million) and refinance the outstanding credit facility of eur o 347 million. Going forward, given that all operations, except COSMOROM, are expected to be cash flow positive in 2006, the net debt to EBITDA ratio is estimated to decline from its 2005 peak, excluding any new initiatives.
On June 16th 2005, the 8th Annual General Shareholders' Meeting approved the distribution of the remaining annual dividend for the year 2004 amounting to ? 189.5 mil, increased by 14% y-o-y, resulting in a DPS of euros 0.57 (in addition to the euros 0.90 per share distributed in March 2005) from euros 0.50 for the year 2003. Blended AMOU during H1-05 increased by 7.1% (y-o-y) to 135 min. This is driven by the continuous growth in contract AMOU that at the end of H1-05 was 25 minutes higher compared to a year ago (9.8% increase). Τhe strong positive trend evident on a quarterly basis throughout 2003 and 2004 continued in Η1-05, underlining the fact that voice usage still represents the key growth driver in the Greek mobile market, as AMOU in Greece continues to lag the European average.
COSMOTE blended ARPU for the period under review (at euros 29.2) was 3.9% lower compared to a year ago, reflecting the interconnection rates cuts and lower SMS revenues.
The customer base of COSMOTE's consolidated companies at the end of H1-2005 stood at:
COSMOTE (Greece) AMC (Albania)
Total Prepaid 2,687,224 712,301
Total Contract 1,692,293 18,485
Total Customer base 4,379,517 730,786
During the second quarter of 2005 COSMOTE added 31,418 net new contract additions and 117,151 net new prepaid additions in Greece reaffirming its leading position in the Greek mobile market. During the first half, COSMOTE added 56,063 net new contract subscribers and 172,107 net new prepaid subscribers in Greece, reaching a market share of 37.6%. COSMOTE?s annualized churn rate for H1-05 was 21.6%.
During the six months ended June 30 2005, AMC contributed approximately 8.1% to consolidated revenues and 11.1% to group EBITDA.AMC's revenues at the end of the first half of 2005 were 15.6% higher compared to a year ago, reaching ? 64.1 mil (in local currency revenue increase was 12.1%). Both the EBITDA margin and the net income margin improved further during Q2 2005, compared to Q1, from 59.1% to 60.1% and from 30.7% to 31.6% respectively. As a result, the EBITDA margin for the first half increased to 59.6% and the net profit margin to 31.2%.