Greek OTE warns of tough times ahead

Radical cost-cutting measures drove OTE’s second-quarter net income up by 65%, to €104.5 million ($128.6 million), compared with the same period last year, as the Greek telecoms incumbent warned of tough times ahead.

The operator is facing challenging economic conditions as Europe’s financial crisis rumbles on, and its revenue decline of 5.2%, to €1.1 billion, was less than some commentators had feared.

Radical cost-cutting measures drove OTE’s second-quarter net income up by 65%, to €104.5 million ($128.6 million), compared with the same period last year, as the Greek telecoms incumbent warned of tough times ahead.

The operator is facing challenging economic conditions as Europe’s financial crisis rumbles on, and its revenue decline of 5.2%, to €1.1 billion, was less than some commentators had feared.

By slashing operating expenses to €781.3 million, from €851.6 million in the second quarter of 2011, OTE was able to report some success at the bottom line. But its own austerity program included a 13% reduction in staff costs.

OTE has also cautioned investors about its future prospects. “For the second half of the year, we do not foresee any material improvement in the operating environment of the markets in which the Group operates,” said Michael Tsamaz, OTE’s chairman and chief executive, in a statement. “The challenging economic conditions in Greece and the anticipated cuts in the interconnection rates in most of our markets will adversely impact our financial performance. However, we are determined to continue defending our market position, further reduce our costs and strengthening our financial position.”

One positive sign was a slight increase in the number of Greek broadband customers, up 19,000 in the quarter to 1.1 million connections, following four consecutive quarters of net disconnections.

Even so, the company has been reducing prices to prevent customer defections, and is powerless to halt the decline in its fixed-line voice business. Overall fixed-line revenues in Greece slid by 9.4% year on year to €422.1 million.

Its Greek mobile operation reported a 1.6% year-on-year increase in customer numbers, to 7.9 million, but saw revenues drop by 6.6%, to €387 million, due mainly to a sharp fall in the sales of handsets.

OTE is also struggling in some of the other European markets where it operates. Revenues at its fixed-line business in Romania were down by 5.9%, to €156.3 million, compared with the second quarter of 2011, largely because of a regulatory decision to slash termination rates.

Adverse regulation also hit the company’s Romanian mobile operation, where a 3% fall in service revenues was blamed entirely on interconnection rate cuts introduced in March this year.