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Ladies and gentlemen, thank you for standing by. I am Gaily, your Chorus Call operator. Welcome, and thank you for joining the OTE conference call and live webcast to present and discuss the second quarter and 6 months 2021 financial results. [Operator Instructions] And the conference is being recorded. [Operator Instructions]
At this time, I would like to turn the conference over to Mr. Michael Tsamaz, Chairman and CEO; Mr. Babis Mazarakis, Chief Financial Officer; Mr. Panayiotis Gabrielides, Chief Marketing Officer, Consumer segment; and Mr. Evrikos Sarsentis, Head of IR and M&A. Mr. Tsamaz, you may proceed.
Good morning, and good afternoon to all of you, and welcome to the second quarter 2021 earnings call. In Greece, we had a good second quarter. This is due in relative terms as we are comparing ourselves to what turned out to be the most depressed period of the pandemic. But it is also true, in absolute terms, with solid performances and positive indicators across all our business lines, as Babis will review later.
We're continuing to reap the benefits of our competitive edge on the technological and service front and from growing demand on faster broadband services. Our 5G rollout is ahead of schedule, and we raised our coverage targets. We are also on track with our dynamic fiber-to-home deployment schedule. Our networks and infrastructure are best-in-class. In terms of TV content, we're aggressively defending our positions. Our customer apps are consistently ranked at the top and are now, far and away, our customers preferred medium to interact with us.
While still far from the 2019 levels, tourism is starting to pick up, and we hope to regain some of the ground lost last year in visitor roaming revenues. In our home market, the first half of 2021 was clearly a sweet spot, and we are working on all elements that are under our control to preserve and strengthen our market leadership. We should also leverage our position as a key player in the digitalization of the Greek economy, which will now accelerate with the support of the European recovery fund. We are market leaders in ICT projects, and we're in a good position to benefit from expanding demand in this segment as well.
However, we are fully aware that we operate in a highly competitive environment, which is likely to become even more so, and we cannot afford to rest on our laurels. We are preserving our top line. We are continuing to work hard day after day to optimize our cost structure and strengthen our cash generation.
In Romania, our mobile business is gradually moving closer to stabilization following its separation from fixed. Last week, the transaction was conditionally approved by the European authorities, subject to the disposal by Telekom Romania fixed of its 30% stake in mobile operations. We are committed to acquiring this stake which will allow us to fully control [ TKRM ]. The consideration for this 30% is currently estimated for a cash [ short ] of EUR 60 million, comprising about EUR 33 million in share of enterprise value and another EUR 27 million in cash reserves and working capital adjustments. This transaction is anticipated to be completed by early September, followed by the overall sale of the TKR to Orange as soon as the separation between the fixed and mobile unit has been completed.
In summary, we are pleased with our top line performance in Greece and with the progress we are making in Romania. Our EBITDA is up materially in the quarter and 6 months. We are confirming our cash flow guidance for the full year, supporting our substantial shareholder remuneration targets. And now Babis will review for you our performance in the second quarter.
Thank you, Michael. Hello to all of you, and thank you for being on the call with us today. We are reporting yet another solid quarter. Of course, our performance was helped in part by comparison with the period most affected by the COVID-19 pandemic last year. But even if we look at it on a 2-year basis, we are pleased with our performance as it underscores our resilience and ability to rapidly make a full recovery.
This is particularly true in Greece, where both our top line performance and our underlying profitability are back to strong levels. For each part, our Romanian mobile operation is showing encouraging signs of progress, though it will take a little longer to get to where we want to be following the separation from fixed line activities. I remind you that pending closing, which we'll continue to expect in the second half now that the regulatory hurdles have been cleared, these activities are accounted for as discontinued operations.
Now starting at the group level, total revenues were up 8% or more than EUR 61 million compared to the same quarter last year. While this reflects a more normal operating environment compared to 2020, this is also the result of growing demand for fiber and the general faster broadband across the board. Looking back 2 years, revenue in Greece is up more than 5% compared to the second quarter of 2019.
Group adjusted EBITDA after leases rose by 6.9% to over EUR 310 million in the second quarter. Part of the increase, about EUR 10 million, reflects the low base in last quarter's -- in last year's quarter due to COVID. Roaming bounced back from very low levels last year, and we did not offer material discounts to customers this quarter, [ unlike the ] last year. Excluding this impact, EBITDA would be up approximately 3%.
Looking back 2 years, Greece is up close to 5% compared to the second quarter of 2019. The strong performance is also the result of all the successful work we have been doing to structurally reduce our cost base. Looking at Greece now, total revenues of EUR 759 million were up 9.6% with total fixed revenues up more than 5% and mobile jumping 16% in the second quarter. Excluding higher handset sales prompted by state subsidies to enhance digitalization, Greek revenues were up 6.5%.
Retail fixed revenues were up 2% this quarter. Growth in broadband continued to accelerate, with revenue up 8.2%. We added another 51,000 fiber subscribers in the quarter, raising the total to well over 1 million users. In terms of speed, we are also gaining ground with connections of 400 mbps or more, now accounting for fully 20% of all subscriptions, double the percentage in the second quarter last year. The demand for higher speed combined with the quality and the liability of our broadband services are definite strengths as we face the prospect of intensified competition, particularly at the low end of the market.
We still have over 1 million subscribers on copper that we gradually upgrade to fiber service as the infrastructure reach expands and thus demand growth in more remote parts of the country. Our FTTH rollout is progressing rapidly and according to plans. Having installed more than 70% of all FTTH lines across the country, we are far underway the largest fiber network provider and view this as an important competitive edge.
Turning to TV, revenues returned to growth after 6 quarters of lower year-on-year sales. Revenues were up nearly 5% as cafe, shops and other businesses reopened their doors in early May, and we no longer have to offer rebates and support. The TV segment is also supported by the success of our over-the-top solution, though, as you were aware, this comes with some ARPU dilution. Total number of TV subscribers was up nearly 3% from the second quarter of '20 to 579,000 with all the growth coming from the OTT service. We expect TV's revenues to stabilize in the full year and are competing aggressively to protect and expand our sports content portfolio. This week, we announced the acquisition of the Italian Football League rights, while negotiations with certain Greek League clubs are making good progress.
The business segment continued to perform well. ICT revenues were up 21% this quarter, largely driven by digital initiatives in support of public entities, some related to solutions developed in the health sector. In particular, our expertise was tapped to assist in handling COVID-19 latest situations as well as deploying applications and platforms helping people access their health records. B2B should continue to provide an important source of revenues from public and private entities as the country steps up the pace of its digital transformation. Revenues from wholesale were up 6% on higher international transit traffic as well as increasing adoption of fiber services by other operators.
Now Greek mobile service revenues were up 7.4%, a jump driven by significant increases across all segments of the business, starting with strong prepaid. As in fixed, our more-for-more strategy is paying off and strengthening our competitive differentiation on pricing. As we prepare for increased competition, our top quality services in terms of technology and customer relationships should support our performance, but we remain vigilant. Prepaid revenues were up double digits in Q2 as the higher value bundles continue to make headways and postpaid revenues turned positive after 4 quarters of downtrend on favorable reception of our more-for-more plans.
Revenues from digital roaming nearly tripled in the quarter but from a very low base. They are still approximately 40% below the relevant 2019 level for Q2. We expect to see some improvement in trends in the third quarter and visitor revenues and numbers are currently picking up, but the 2-year shortfall is expected to remain sizable. In 5G, launched late last year, we met our full year target of 50% population coverage, [ with half the time ], and we have now raised our year-end objective to 60%. Major cities and some of the islands are now fully covered.
Intensifying the trend started in Q1, revenue from handset sales rose sharply this quarter, up 74%. This is primarily due to government subsidies designed to help students buy laptops and tablets. As you would expect, margins on these sales are low, but they are expected to produce somewhat higher service revenues over the years.
Increased operating expenses, excluding depreciation and amortization and one-offs, amounted to EUR 439 million in the second quarter, up [ nearly ] 12% compared to same period last year. More than half of this increase comes from the higher device and ICT delivery costs directly related to the handset sales I just discussed. The balance reflects provisions and costs we incurred in Greece in relation to the separation and disposal of Romanian fixed operations. Personnel expenses continued to date downward trend, down more than 7% or EUR 9 million compared to the same quarter last year.
Second quarter adjusted EBITDA after leases in Greece was up 6.5% to approximately EUR 304 million. This quarter's EBITDA margin was at 40%, and that was down 120 basis points, largely reflecting the higher handset sales and device costs during the period. Now turning to Romania.
Total revenues were down less than 6% from the comparable figure in the second quarter of 2020. And this is an improvement in trends versus the previous quarter. Service revenues exceeded EUR 54 million, a drop of 6%, entirely attributable to the connection prepaid while postpaid is growing. The company's share of the prepaid market is stable and the company is taking actions to improve its distribution, which should pay off in the future in a market that remains extremely competitive.
Our mobile business in Romania is also pursuing the strategy of migrating subscribers from prepaid to postpaid. All told, we expect to stabilize the customer base by the fourth quarter of the year and stabilizing revenues a little bit later. At about EUR 64 million, operating expenses, excluding depreciation and amortization and one-offs, were down about 11% in the quarter. Once the separation from fixed is completed, mobile business will intensify its transformation efforts relying on the new IT stack and increasingly digitalizing operations.
Telekom Romania Mobile generated adjusted EBITDA after leases of EUR 6.7 million, a [ soft ] sequential improvement, and an increase of more than 26% compared to the same quarter last year. EBITDA improvement continued quarter after quarter and is expected to be up significantly in 2022.
Now turning to the rest of the group profit and loss, operating expenses, excluding depreciation and amortization and one-offs, was EUR 497 million, up 8% compared to the second quarter of 2020. Excluding higher device costs, provisions and one-offs, the drop in operating expenses would have been roughly commensurate with the performance in the first quarter. Group adjusted EBITDA after leases was EUR 310 million, up nearly 7%, reflecting improved performances in both countries. Depreciation was up 8% in the quarter and we resumed depreciation of sports content which have been suspended last year due to COVID.
Interest expense of less than EUR 12 million was down 26% compared to last year on lower total debt and cost of debt. Recent [ note ] issues should help this trend to continue. At EUR 72 million, income taxes were up sharply. This is entirely due to the drop in corporate tax -- income tax rate in Greece from 24% to 22%, which led us to reevaluate our deferred tax assets.
Turning to the cash flow statement. Adjusted CapEx was EUR 137 million, up 4% from the same quarter last year, reflecting its exceptionally low level in the first quarter due to timing differences. First half adjusted CapEx is down 16%, but we stand by our EUR 550 million CapEx guidance for the full year, with TV content being skewed towards the second half.
Adjusted free cash flow after lease was EUR 163 million, down 9% year-on-year as we confirm our full year guidance at around EUR 575 million. Reported free cash flow was EUR 157 million in the quarter when we had the small voluntary exit program of about 60 people. Full year reported free cash flow of EUR 480 million remains our goal, supporting fully our 2021 shareholder remuneration target. In addition, as you have seen in our press release, we have accumulated approximately EUR 80 million, 8-0, in excess free cash flow over the past 3 fiscal years. While this is ultimately intended to be distributed, we've decided to take a conservative stance in the short term because of the remaining uncertainties linked to the progress of the pandemic and its impact on our customers.
So all in all, we had a solid quarter 2 of 2020, helped by comparison with the trough of the pandemic last year. While we face efforts by certain competitors to boost subscriber numbers, we will continue to focus on upgrading our customers and leveraging our infrastructure. We are working hard on all levers under our control to deliver on our guidance.
On this note, Michael, Panayiotis and me, as well as our colleagues around the table, are ready to take your questions. Operator?
[Operator Instructions] The first question is from the line of Patrick, Maurice with Barclays.
A couple of just number questions from me and then a bigger picture one, please. Could you just give us the roaming revenue number for the second quarter, please? That's number one. And then the second question is, you talked about provisions for the Romania fixed operation in Greece. How big was that? So just 2 numbers questions. And then a bigger picture question, please, on the EU recovery fund. You make reference in the presentation prepared remarks about the opportunity that comes from the European recovery fund. I'd love to hear some thoughts just in terms of how quickly you think that will come through, and the extent to which that will be avoided CapEx for vouchers or actually boosting net in revenues as well.
Yes. On the roaming revenues, the absolute number for Q2 was EUR 6 million, EUR 6 million. That's for quarter 2. And that was roughly about 40% lower than the equivalent quarter of 2019, just to get a sense versus the normal year, which was 2019, and it's higher 3x almost versus what was last -- in the quarter 2 of 2020.
On the provision, it is a mixture of mainly provisions expenses that we are taking in order -- provisions and expenses we are booking in order to separate the 2 businesses in Romania, which accounts for the biggest part of this number. And also, certain other provisions for various cases here and there, legal and other cases, that have one-off character. On the third question, which is the RRF?
Regarding the recovery fund, as you probably know, approximately EUR 6 billion out of this fund will be allocated to the digital transformation ministry. So this EUR 6 billion is going to be allocated to projects that will aim to digitalize the state administration. Now considering our experience and our performance all these years, in the past 3 years in the ICT sector, we're very well placed in -- competitive-wise to have a considerable pie out of these projects.
So now regarding your question when -- how quickly this is going to start, what I can tell you now is that the ministry is already working on it, and we expect the first tenders to go public at the last quarter of the year. Definitely, most of them or probably quite a few of them will go on during the year of 2022.
Great. Can I just check with you that provision number? That was EUR 20 million in total, wasn't it?
Sorry?
Sorry, can you please repeat?
So the size of the provision which was for the separation of Romania?
Yes, [ that was ] the number, yes.
The next question is from the line of Ierodiaconou, Georgios with Citigroup.
The first one is just a clarification, something Babis said during the introductory remarks. You mentioned EUR 60 million cost for the stake in the -- the minority stake in Romania. I just wanted to check with you if there's any estimate of other kind of costs you may incur just to get an idea of what amount of dividend we could expect, and then a confirmation whether you still intend to return the proceeds in the form of a special dividend.
The second question I've got is on the TV side. And I just wanted to get your views on a couple of things. There's been a lot of press speculation about Premier League rights, but also about the rights of the Superliga. So I just wanted to hear from you how you're thinking maybe whether you're pivoting some of your investments in football.
And then linked to that also, there's been recently some talks regarding the piracy element in Greek Pay TV. There were some numbers going out in the press between 300,000 and 500,000 subscribers. And I'm just curious if those are numbers that you think are credible and whether you expect to see any progress on that front. And then a very quick final clarification around EUR 80 million potential additional returns. I'm just wondering if you have any views as to how you intend to return this, whether it's more as a one-off buyback. Or any thoughts around the form of distribution.
Thanks fot the questions, so let me take one by one. EUR 60 million is the price we pay to buy the 30% that currently is owned by the fixed business. This is the cost element of that transaction. So this -- there are no other expenses for this particular transaction. As I mentioned, there are other expenses we are incurring in order to deliver the various steps of separation of the 2 companies, which I just quoted in the speech and the previous question. And these are picking up in the past quarter, a little bit of the running quarter and are part of the necessary steps we end to take in order to fulfill our obligation for the separation of the 2 companies.
And obviously, these expenses are cash expenses. So that will be taken out from the final proceeds that will be, of course, finalized when the closing accounts will happen. So you have to bear with us a couple of more months in order to reach the final amount that we will be distributing. Whatever the amount will be, this will be distributed right after. We want to say right after, after we get all the governance approvals that are needed. So it's in probably, I would say, Q1 '22 or end of Q4 '21. I mean that's a little bit of timing there.
On the -- take the -- [ comments ] about the EUR 80 million, which was the surplus of the previous years. As we mentioned also in the full year results of where we presented the 2020 year results, this accumulation is temporarily held back against the -- any adverse positions that may come up from pandemic. The more it's smoothing out, then we plan to distribute this in the coming probably periods. When I say periods, in the coming 1 or 2 years.
On the piracy part, there has been a lot of efforts from our side to take appropriate legislation in order to reduce and subside this type of phenomenon, which is not healthy at all, because it's not only that we are losing the relevant revenues, but also it hinders the producers of the content. And also it hinders the taxes that normally a state would have collected. So it's a multidimensional problem. And we are taking a lot of I would say healthy actions and healthy discussions in order to have legislation that will allow this phenomenon to be resolved.
Actually, I could say that the amendment that was made to the recent legislation was passed satisfactory. We will see this in action.
And there was also a question about the TV content. TV content is quite important for our case, and we are [ possibly the client ] clearly to make sure that the offering -- the sports offering is completed. Last year, we -- as you know, we renewed this Champions League, which is #1 in all the preferences. And this year, we are, as we mentioned, also in discussions to -- with certain clubs from the Super League, the Greek Super League in order to broadcast the games. These are ongoing discussions.
On the Premier League, we do have the rights for 1 more year. And that is there. The new competition was won by kind of intermediary agent. And obviously, there will be discussions there to see what are the potential opportunities to continue with this one. But these are cases that will be evolving in the coming months.
But even when we have to -- what's important to note here is that even if we don't get the Premier League rights, the broadcasting for Premier League for year '23, we will be broadcasting it during this coming year, '22. And at the same time, we will be broadcasting at least 3 of the major Greek teams. So we are entering to the big championship broadcasting rights as well. We already have agreements with Panathinaikos, AEK and OFI. So what we could say is that during this coming year, we have a very good position in terms of content and competitive-wise.
The next question is from the line of Kim, Ivan with Xtellus Capital.
Just a quick question on the national MVNO by Forthnet. So yes, there are would speculations of trying to remove...
Mr. Kim, I apologize. Can you hear me? Can you please speak a little closer to your microphone? Your sound is not coming through very well.
So is this better?
Yes, it's better. Please go ahead. Thank you.
Sorry, so my question was about the MVNO by Forthnet, I don't know whether, I don't know, you expect them to come out fairly soon and maybe this year and what sort of impact on pricing you'd expect from them based on the potentially [ on their ] deal with Vodafone for wholesale, that's one. And then secondly, on Premier League rights, from what I understand, the auction there will be fairly soon. So what sort of price inflation you'd expect there and whether it can have any impact on your profitability?
Sorry, we could not really make out clearly what your questions were. One question was about some -- the MVNO, Forthnet and the agreement between Forthnet and Vodafone. The other question was about some rights, but what rights?
Premier League.
Okay. Premier League rights? These 2 questions? That's all?
That's right, yes.
Okay. As I said earlier, the Premier League rights, we participated in the tender. We -- apparently, the one who gave the highest is a blocker. So we don't know how the blocker is going to deal with it. If you're going to come to sell the rights to any interested parties or part of the rights, the whole rights, we don't know yet. But as I said earlier, for this coming year, we still have the broadcasting rights of Premier League. The tender that took place was for the 3 years after the -- this next season. So it was for the year '23-'24. So for this coming year, we are very well positioned having the Premier League rights and at the same time, having agreed with at least Greek football teams for broadcasting games.
And regarding the MVNO agreement, okay, you -- it was announced, there was an agreement between Forthnet and Vodafone regarding the MVNO services. However, as you know, there are probably -- there's probably other effects that may come in to be realized that this agreement will not have any effect.
The next question is from the line of Raciborski, Piotr with Wood & Co.
I have 3 questions. Firstly, could you please repeat what are your estimates regarding the total expenses related to this Romania segment separation that will be excluded from the proceeds from Telekom Romania sale?
And the second and third question?
Okay. Sure. Yes, so the second question is about roaming impact on your second quarter results. Could you please quantify was nominal year-on-year impact on the EBITDA? And what do you expect this impact to be in third quarter this year? And my third question is regarding the excess dividend that you've guided for along with this quarter results. Will this EUR 80 million be paid this year or next year '22?
Okay. Regarding the proceeds from Romania, we have been guiding that from the final amount that we will collect upon the closing of the deal, what will be taken out, obviously, the price we paid to buy the 30% plus the expenses and other provisions that we are going to make in order to be able to separate the businesses. As I said, in the quarter 2, we have booked a little bit over EUR 20 million for these expenses, and we are going to continue with the necessary ones, but the big part is there. So as I mentioned, please bear with us when we closed the deal to calculate the exact amount that will be distributed. Now these amounts will be distributed, will be done so most likely, as we said, either to the end of Q4 of this year or Q1 next year, depending upon the appropriate approvals and the timing of closing, of course.
For the second question, which was about the roaming effect, the roaming effect for Q2 '21 versus Q2 of '20 was about EUR 5 million better. And this includes the elements of both the visitor roaming and also our roamers that are traveling abroad, our customer base. And the delta between the 2 quarters year-on-year, it was EUR 5 million. So this is obviously an improvement that, I think I mentioned before, that the level of the roaming in Q2 was 40% below the level we experienced in Q2 2019, so just to put the full picture.
Obviously, we expect also in August and a little bit of September to experience higher revenues versus last year. Since the numbers of visitors in the country are more than what they were at least for August last year. Now the excess amount that I mentioned before, this is -- had been retained against the adverse conditions. And as we move on and we see the stabilization of the situation, this amount will be distributed in the next couple of years, starting 2022.
[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
Thank you for being on this call and for your questions and interest in OTE. I look forward -- we look forward to our next discussion in early November for our third quarter results. In the meantime, I wish all you a pleasant summer, particularly if you will be spending some time here in Greece. Have a nice day.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephones. Thank you for calling, and have a good afternoon.