Hellenic Telecommunications Organization SA

ATHEX:HTO

Earnings Call Transcript 2023-Q2

[Operator]

Ladies and gentlemen, thank you for standing by. I am Geilis, your Chorus Call operator. Welcome, and thank you for joining the OTE conference call and live webcast to present and discuss the second quarter 2023 financial results. [Operator Instructions] Conference is being recorded. The presentation will be followed by a question-and-answer session. [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; and Mr. Evrikos Sarsentis, Head of IR and M&A. Mr. Tsamaz, you may proceed.

[Michael Tsamaz, Chairman and CEO]

Good morning or good afternoon to all of you. This morning, we reported a solid second quarter in line with our expectations, conserving our steady growth as we adapt successfully to the new competitive challenges in the big market. Grid service revenues, including retail fixed data communications and mobile were roughly unchanged in the quarter, an improvement compared to the past 2 quarters. This reflects continued growth in mobile from both postpaid and prepaid and improving trends in fixed. This reliance is commendable. In a situation where total market revenue per user has dropped. We’re well aware of our customers’ needs towards and wallets and will continue to offer them the best value position. But we have built our reputation and the quality of work holding our services. That is something that is confirmed as a way after survey and something we will not compromise. We’re pleased to observe quarter after quarter. The vast majority of our customers feel the same way. We will continue to work hard in this direction.

Improving trends in broadband drives the stabilization of retail fixed services. Our broadband market share remained constant. The deployment of our fiber-to-the-home infrastructure is proceeding at pace. We already reached more than every fifth line in Greece, and we have installed more than 80% of the country’s total fiber to home lines, more than 80% of the company’s store fiber home lines. This is important to secure both our wholesale and retail market shares. Fiber-to-home penetration is also on the rise, and we are continuing to upgrade customers to higher broadband speeds. As a result, we account for more than 70% of all fiber-to-the-home subscribers in Greece. As you know, being first in capturing the fiber-to-the-home subscriber is critical. In addition to the resilient retail services, strong performances in other revenue streams and notably in ICT services to businesses and public administration resulted in higher total revenues in Greece up to more than 2%. Greek EBITDA was also up by nearly 1%.

A less favorable revenue mix is the main sort of a slower growth than the top line. And some of that growth is attributable to lower margin business-to-business services and to international wholesale, while some higher margin cost revenues are down. Regarding our cost base, we had a sharp drop in payroll this quarter, part of which is permanent and part one-off. Overall, we are maintaining our strict cost. We’ve also negotiated a large part of our energy supplies for next year. Obviously, a somewhat higher price tariffs, it has the benefit of raising our visibility of future expenses. Looking ahead to the second half of the year, we should continue getting some tailwinds, so the positive economic situation increased. In this context, we expect Sinatra to continue, thanks in particular to positive momentum in our mobile activities. Our advanced 5G networks and superior customer service should help us secure our share of the market.

In fixed, we also expect current intent as we pursue the rollout of fiber the home network and promote its utilization. We have the right ingredients to encourage growth in broadband, and that should be further supported by government fiber subsidies, which we don’t expect until the end of the year. ICT revenues to those who remain substance, reflecting strong demand from public and private sectors as Chris pursues its progress in digitalization. So in any lower margins, these projects are also appreciable from a strategic standpoint. The wholesale business is what difficult forecast, but there’s other players in the fiber infrastructure in Greece. There is no doubt the part of our national wholesale revenue base with last decline. Finally, we’re seeing further growth in the new businesses that carry the COSMOTE brand to neighboring territories. Our payment system is gaining traction with total users now reaching 135,000. We run it sheet and intend to continue doing so.

We have been able to maintain a high level of profitability in an increasingly competitive environment by being digital and agile and always adapting our cost base to future business conditions as we see them. For the remainder of the year, -- there are many moving parts, but we are prepared for all scenarios, and we will continue investing in our systems and in our brands for the future. So once again, we can confirm our full year outlook. CapEx still a touch low the first half mark. However, we expect to see a significant push, particularly in FTTH in the second half, which will bring the full year turnover of last year -- at last year’s level of €640 million. As our test 2023 shareholder reiteration, we’re also confirming like we did last quarter, the numbers we indicated at the year-end results. And now I’ll ask Babis to review our second quarter performance.

[Babis Mazarakis, CFO]

Thank you, Michael. Hello to all of you on our call. Second quarter group revenues were up 1%, reversing the trend of the first quarter. Revenues in Breeze were up more than 2% as mobile ICT and wholesale more than offset an erosion in parts of retail fixed services, which, by the way, was milder than in the prior 3 quarters. In Romania, at minus 11%, the Dropy revenue was in line with Q1 and still reflects the discontinuation of the MVNO business following the sale of the fixed business in 2021 as well as mobile termination rate cuts and some promotional initiatives of previous quarters. Group adjusted EBITDA of leases was down nearly 2%, reflecting the performance of Romania, where in addition to the factors I just mentioned, our mobile subsidiary incurred a serve increase of finance costs. In Greece, EBITDA was up nearly 1%. So increase, as I pointed out, revenues were up across the board, apart from some retail fixed services, which recorded the mines drop over the past 4 quarters at less than 4% or less than 3%, including data communications.

This means that going forward, the comps will be possibly easier already incorporating the impact of certain initiatives from last year. Once again, the bulk of the decrease comes from legacy voice. In TV, subscriber numbers were stable at close to 650,000 in the season 1 sports programming represents a lesser draw. Our resilient broadband revenue base is a testimony that our speed increases of last year have fully paid off. We added another 9,000 customers during the quarter, breaking penetration of soda base to just sort of 87%. Reflecting our focus on migrating customers from copper to fiber, we recorded 25,000 fiberadditions in Q2, all from FTTH. In fact, FTTH at this year’s number 28,000, resulting in the total FTA subscriber base of 194,000. This is a year-on-year increase of more than 100,000 even though we are comparing with a period during which the market enjoyed the benefit of state subsidies to the final FTA’s customer. FiberHome penetration at the end of the quarter reached 19% of Compass, a sharp increase from the second quarter last year of 14%.

As you see, we are holding our ground in a changing competing landscape by leveraging our advanced infrastructure and top customer service offerings. Other fixed revenues were up nearly 18%. We have yet another excellent quarter in ICT with a solid pipeline, which should continue supporting this business line ahead of us. A word now on conti revenues, which were up in the quarter after a sharp fall in Q1. Most of this increase comes from low margin international transit, while domestic wholesale declined as other players build their own fiber infrastructure. Greek Mobile Service revenues were up more than 2% with both prepaid and postpaid contributing to the growth. Despite increased competitive pressures, all mobile trends are generally going to the right direction. Most importantly, we are preserving our customer base, particularly when it comes to postpaid. In prepaid, we’ve had a good take-up for our summer offers. So all in all, our more for more strategy combined with the network superiority are working and continuing to attract customers and support profitable and sustainable growth.

This is also evident in our positive data KPIs. Note that the average monthly users, data users exceeded 10 gigabytes per user this quarter, which is up 45%. Regarding our 5G network, we have exceeded 85% population coverage and should reach 90% by year-end with Athens already close to 100% in other major metropolitan areas not far behind. Let’s now turn to what we’ve done on the cost side in Greece. Total operating expenses, including depreciation and amortization and one-offs, excluding depreciation and amortization and one-offs, were up nearly 4% in the quarter. Cost directly linked with the top line, including third-party fees, which are related to the jump in ICT revenues and the connection costs as are mainly responsible for most of this increase, while we continue to exercise stringent cost of drawing measures across the board. Personnel expenses declined 10% this quarter. Part of this decline is baked in and is due to savings from our edit retirement plans. And part of it is one-off due to the new labor agreement with the union, which eliminated certain legacy benefits that have been provisioned in the past.

On the energy side, we are working on securing higher visibility for part of our energies requirements starting 2024 although inevitably a higher costing already likely to affect the second half of the current year. In bodes provisions were down again this quarter as they were in Q1, reflecting a much improved collection record over the past several quarters. All told, first quarter adjusted EBITDA after leases increased were up almost 10% to €322 million, using a salt margin at 40.9%. Turning now to Romania, where total revenues were down 11%, roughly in line with the drop in the first quarter of the year and for the same reasons. In addition to the cut-to-competitive environment, which demands more customer retention efforts, we are still dealing with the impact of mobile domination rate cuts and the loss of the MVNO collar. The impact from the MVNO services should be almost net from Q3 of this year and onwards. Total operating expenses, excluding depreciation and amortization and one-offs, were down more than 4% in the quarter following the drop in revenues, notably due to lower connection and handset costs.

The cost base was negatively affected by the increase in energy costs, up approximately €2 million due to the more of the price cap. As a result, telekom Romania mobile adjusted EBITDA after leases was nearly €5 million in the quarter, down from close to $14 million in Q2 of last year. As far as the rest of the group P&L is concerned, it is mainly business as usual this quarter again. Eastern expense is down marginally. Income taxes are slightly down and the net income is up nearly 5% as it was in the first quarter. Turning to cash flow. Adjusted CapEx is down less than 1%, is back to a normative level this quarter after a sharp drop in Q1 as we intensify fiber-the-home deployment and to meet our year-end targets. That’s why we are confirming the full year €640 million guidance for CapEx. Free cash flow of a lease was down 8% at €144 million, mainly on lower EBITDA in Romania. In the first 6 months, free cash flow is down just 2% at €370 million, and our full year guidance remains unchanged at approximately €500 million. Neither are we changing our shareholder remuneration guidance of €425 million.

The final dividend was paid out last month, and we are 1/3 of the way in our 2023 share buyback program of €175 million. So to conclude, the second quarter was robust and confirms the validity of our strategy in leitmobile in a herd obedience. In Romania, while we have to bear the adjustments from several large external factors, we are steadily strengthening our subscriber base and driving some encouraging ARPU increases that should support a much improved outlook. On this note, Michael, myself and our colleagues are on the table, are ready to take your questions. Operator?

[Operator]

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] The first question is from the line of Stamatios Draziotis with Eurobank Equities.

[Stamatios Draziotis, Eurobank Equities]

So a couple from my side, please. Firstly, I was just a bit surprised that in your press release, you are mentioning that you expect similar trends in the second half of the year. I’m just saying that because you also said the comparator in H2, given you were citing quite substantial year-on-year EBITDA growth in the first half of the year. And especially for fixed line, you’ll be lapping 5% revenue declines in registered in H2 last year. So just wondering what exactly is that similar trends mean how should we interpret this? And my second question relates to this public consultation regarding the prospect of indexation of tariffs. Just wondering how does this go? Have you discussed further the matter with government officials, especially as there has been a new finance minister taking over since July. Do you feel the government is positive to the idea of inflation index to retail price hikes at some point in the next few quarters. So these are my questions.

[Michael Tsamaz, Chairman and CEO]

Yes, thank you for the questions. And let me take your first question, which is the trends in half 2. I can say that we are quite consistent in our message is that as we were also in Q1 in the release of Q1 results, that the direction of the various segments of our business is earning as we were expecting, meaning that we know that there is the pressure on the fixed side. We know that we see that our commercial offerings and customer experience in mobile drives keeps driving the mobile, which is something that we all expect to continue in the second half. But obviously, this has to do with the reaction in the market and the competitive pressure. It’s indeed that fixed, we expect to have more favorablecomparables in -- towards the end of the year, Q3 and Q4, mainly because of -- we will be comparing ourselves with quarters that are -- had some -- the first stages of the competitive challenges.

On the other side, the main revenue drivers we were very explicit as is the ICT rate, which is obviously at a much lower margin than the other one than the other lines. And also, we are, as we said, losing the national wholesale revenue naturally because of migration of lines to the own networks of the other operators as they develop their own network. So this trend, we are expecting to continue in the coming next quarters. Also under the assumption that competitive environment will not get worse possible it gets better, it’s better, it’s good, but it will not get worse. So I think we are consistent with renting n half 2. And it also remains to be seen to be realized in the market. in the various segments. Also for the cost cutting, we are continuing along the rationalization, as we have discussed also in determining our numbers. There is elements of the expenses line that are increasing because of the top line increase, like ICT and consents and the rest traffic with the connection port. So this also are affected there. That’s why we confirm our cash flow generation for the year because we see the trajectory of all these trends more or less been fully in line with what we had also discussed in Q1.

[Babis Mazarakis, CFO]

And furthermore, regarding to your question on the CPI within the contract period of the customer, the consultations that have been taking place in the past weeks. What we have said, this is that, okay, it’s -- the consultation was related to the fact that the Greek regulatory code, let’s say, on how -- whether company should -- will be allowed to force price increases based on inflation during the contract period or not, is not in line with the European directives. So the aim was -- the discussion was how to implement the European directives. In fact, we’re quite different pared to all other EU countries of this. So No. The government officials have stated that they are not in favor of changing at or in complying with the European directors. They refer to lead status as it is. Now what we can say this is that just keep in mind that in recent years, the inflation increases the European have was quite high. recently, you had more 9% inflation.

And if we look at the basket of consumers, which of consumed items, which constitute the, let’s say, the inflation index. We will see that the only service that did not have any increases in this basket over the year was the telecom services. In fact, contrary to all the items that are included in the basket, which were increased by approximately an average of 9% as it is published by the statistical Bureau of Greece. The telecom services were declining by 2.44% -- so in fact, we were the only industry that had the reduction in our prices instead of increasing our prices. Now this is an effect which has influenced our industry. It has been absorbed in many ways by our onset by the initiatives that we have undertaken. The entries that in the last 3 years, we had to face increases in all our cost lines because of introductional inflation. Okay. As far as our company goes, you have seen our results. We have -- we managed to offset these increases by reducing our costs by reducing our exposure, let’s say, to various activities which were not really -- which we thought we could stop in order to be able to offset any increases that we have had in the inflation.

So, so far, despite the fact that we had the high inflation, we reman quite well to contain our cost base and defend our bottom line. So for the future, it’s not something that a cost cut the cost of that. It’s just something that we cannot live with. We will manage with a situation as it is under this status. In fact, keep in mind that various -- if a company wants to manage its costs, probably it has to look into the various promotions that they offer and probably all discounts or whatever can -- so there are many -- quite a few measures that a company can take in order to manage effects that may have some inflation.

[Stamatios Draziotis, Eurobank Equities]

That’s very clear. And just to clarify, so the government effectively has totally ruled out in the station. So we have not just hit the pause button just...

[Michael Tsamaz, Chairman and CEO]

No... We don’t have a total rule out as you stated. It’s just -- the question was on the consultation was whether there should be a ratio to the European directive or not. So this is something which is not going to happen for the time as far as said.

[Operator]

The next question is from the line of Patrick Maurice with Barclays.

[Patrick Maurice, Barclays]

So I just come from my side, please. During the call, you made a few comments around wholesale loss. And I think the point you were trying to make was, as others build of fiber infrastructure in that presumably, you’re talking about Vodafone and Wind Hellas that you’ll see lower wholesale revenues. I just wonder if you could expand a bit on that in terms of how big is that wholesale revenue you expect to lose? How quickly you think you’ll lose it? And what sort of magnitude or drivers should we think about in terms of the size of that? And just on the second question, you made the observation in your prepared remarks around the fiber penetration. And you talked about how the penetration rate has been going up significantly since last year. On the first earnings call, so our first quarter call, you talked about how some of the more mature cohorts around sort of 50% penetration now. Just curious to understand it, that sort of shape of penetration is changing if you’re still seeing the same level of take-up in the new cohorts as you drive fiber further for the base.

[Michael Tsamaz, Chairman and CEO]

Thank you for the questions. On the wholesale revenues are made of 2 distinct, let’s say, sources. One is national traffic, which was a minimum margin because it’s basically a trading business. And the national wholesale, which is -- which has a good margin because it’s service offered in the local market. So the comment was that while the national traffic, due to its nature of being a trading one is represents some, I would say, fixing values in terms of quarters. This quarter, we had an increase in growth on versus the even quarter of last year. And therefore, the wholesale, that’s something that we have also reiterated in the previous quarters. There is, let’s say, a natural decline of the -- of these revenues in the area of €2 million this quarter, which comes from the reduction of the amount of lines that we settled to the other operators since some of them, they are migrating into their own network.

It’s not something that is new. It’s been there and it’s something that also works in the economics. Regarding the fiber to the home, I think that what we reported this 90% of utilization we have reported in June, is the overall dividing just the customer total customers divided by total home pass. Obviously, since the expansion of the network around much faster than the take-up of the service because that’s the massive rollout that we are doing. The utilization number is also bearing this impact. The 50%, which still holds is for the areas where we pass the fiber to the home 3 years ago. And we continue to see this gradually being a bit achieved as we progress in the time. And we also expect that, let’s say, on a going case, Boeing concern after we completed the newer, the total utilization will certainly reach those levels, if not exceeded them because it will be the main network that we a out in the market at a time.

[Patrick Maurice, Barclays]

Just as a quick follow-up, side. So you talked about a €2 million decline this quarter as other operations migrated to our networks. How much of that sort of current pool of wholesale revenues that’s applicable that way, so we can understand maybe on a 3- or 5-year view what sort of decline we can see, please?

[Michael Tsamaz, Chairman and CEO]

The total pool as we show in the accounts is about €200 million.

[Operator]

The next question is from the line of Osman Memisoglu, Ambrosia Capital.

[Osman Memisoglu, Ambrosia Capital]

Just Q1 is on my side. First, following up on is just to clarify, this is €2 million quarter in the figure, I guess, we should assume for the foreseeable future? That’s the first one. Then I see you have a relatively sharp increase on depreciation this quarter. I just wanted to check if that’s the new figure to work with or if there’s any one-offs that we should consider? And the final one on my side regarding the fiber coupons and the outlook for them and any color on timing?

[Michael Tsamaz, Chairman and CEO]

For the questions, this is something on the wholesale. Yes, that’s the rate that we foresee because it’s a kind of steady part on the wholesale. On the D&A, yes, has increased. This is due to the -- it’s a one-off because we consolidated some of our seatholders building into one. So we have to depreciate the remaining part of the one that sees to be serviced. And regarding fiber coupon, this is something that has been worked postatith the government, and we expect this to come live towards the end of the year, maybe beginning of 2024.

[Osman Memisoglu, Ambrosia Capital]

Okay. So it’s not in your ‘23 numbers I mean the guidance you shared doesn’t really assume any benefits from this, right?

[Michael Tsamaz, Chairman and CEO]

No, no, no. It will be mostly -- even if it comes to 2023, it will be towards the end of the year. So it’s mainly a 24 gain.

[Operator]

The next question is from the line of Georgios Ierodiaconou with Citigroup.

[Georgios Ierodiaconou, Citigroup]

The first one is on energy. Earlier above is, you mentioned the fact that you’ve now hedged beyond 2023, perhaps a slightly higher rates. Do you want to just give us a summary of how much you hear in the coming years? And maybe if you can give us a bit of an idea of the financial impact. Now we should expect? My second question is on CapEx. And you mentioned the fact that the run rate should accelerate in the second half as you build more FTTH and or maybe a bit early to talk about 2024. But I would be interested to hear from you if -- what other drivers are over a bit higher or lower over the course of next year? And then final question I had was around pricing moves. You mentioned more for more in the presentation, particularly mobile. If you can you give us any idea in terms of the timing of when you are thinking of making some of these changes to our tariff plans. And if I could ask one other thing is around the voucher program for fixed broadband, whether there is any update on that at all.

[Michael Tsamaz, Chairman and CEO]

So let’s start with the energy part. I think if I can also repeat a little bit of what we said in the speech, we -- for 2024, actually at the end of 2023, we will be over with our 2-year previous deals that we had, which was done basically at lower rates than the market because it was done earlier in 2021. So now we are in in the deal for 2024 at favorable rates, but bestly higher than 23 because the difference is in the energy prices has been evident. The effect in 2024 on the energy bill percent is going to be increased versus 23%. However, the other savings that we are enjoying from the other lines like the rest of the transformation will cover this increase. So that’s for the energy part. On the CapEx, it’s also to have a more intense CapEx spend in half 2 because all the works that are being done will take some time before they are completed.

So the elements of have to will be higher versus the elements of CAF-1. And this is something because we are -- as we get the license in the the-of constructing the new areas. This also accelerates a little bit the timing of the additional home passed. Overall, this doesn’t mean increase in CapEx at all. It means that shifting between the 2 halves of the year. And for ‘24, we stay in line with what we have discussed in the previous periods that ‘23 and ‘24 will be basically the 2 years with pets CapEx because it’s 2 years that actually we aspire to have almost close to 800,000 compassed in the 2 years combined. So therefore, we don’t change any of our initial guidance here and the direction. On the other pricing -- I think the non-pricing moves, they are actually more for more, as you said, it’s value-driven propositions to our customer base, which we are continuing, we are doing.

So it’s not something that will be done Utnegaard done. And it’s been intensified with campaigns like pre to post migration and more and more as we also expand our 5G network over the country. So this continues this basically is what drives the results of the mobile business. Obviously, that’s not an eternal gain, but it has room to go as the rollout of the 5G network offers a new opportunity to increase the data usage, as we have seen, which, by the way, in Q2 reached a record high for Q2 at 10 gigabytes per customer per month, which is what actually we are leveraging on in order to gain a little bit of outlook. And if I got correctly, the last question was about the FTTH coupon, which as -- we said it’s something that it’s being under consultation. It’s something that is the benefit of the society and the digitalization of the country. So we expect this to be an active on time in order to be in place towards the end of the year or maybe beginning of 2024. That will be for fiber home to the customer. upon will be subsidizing the price of fiber the whole for the final customer.

[Georgios Ierodiaconou, Citigroup]

Follow up with a clarification on the Cavex phasing. You mentioned that 2024 should be the peak. Should we expect a similar number in ‘24? Or do you see a risk because of insertional pressures that maybe it needs to be a bit higher than ‘23.

[Michael Tsamaz, Chairman and CEO]

No, we don’t foresee a higher CapEx in ‘24 versus ‘23. It’s -- when the time comes, because the CapEx is not only for fiber-to-the-home. It has other elements as 5G and TV CapEx. So all of this, we need some more time to see how they will be baked into 2024. But overall, we don’t foresee an increase versus the previous discussion we had that 2024 would not be higher than 2023. But we just -- the case will be fine-tuned as we know the specific elements of the CapEx during the year.

[Operator]

We have a follow-up question from the line of Osman Memisoglu with Ambrosia Capital.

[Osman Memisoglu, Ambrosia Capital]

Yes. Just following up on Romania, Shall we assume this around €5 million EBITDA to be now the steady state? If you could elaborate on the EBITDA outlook in general and performance there would be helpful. And maybe some color on the latest competitive dynamics. I mean it started here, but curious to hear what you’re seeing on the ground late if there are any changes to either side.

[Michael Tsamaz, Chairman and CEO]

So on the competitive front, I think the Romanian market has been always been very competitive. Sometimes crossing maybe the line of rational, but... So okay. So let me start with the question first, which is for the EBITDA. And then we talk about the competitive environment in Greece. So in Romania, our EBITDA in Q2 was better than Q1 a bit denoting 2 things. One is the continuous effort to stabilize and increase actually the customer base in contract, which as it is evident in our numbers, it’s increasing. Despite the heavy promotions and heavy subsidization from the overall market. And also the continuous transformation of the cost side after what we have experienced following the breakup of the 2 companies, the old fixed and the mobile. So this is our aspiration in the next couple of quarters. will see not only this €5 million use, but maybe more quarter-by-quarter, which will be the signature that what we are doing in the market is in the company is producing some early sign results of stabilization.

On the competitive environment in Greece, it’s the same. I mean it continues to be very challenging with a lot of commercial offerings that are spreading around in mobile and fit. Our approach there has not changed. So we approach the mobile part by offering to our customers a peer value through our network and the coverage we have in the speed in our network, which as we saw in the numbers, it’s appreciated since not only increase it with our customer base, especially the postpaid one but also the mobile revenues. On the fixed line, were fixed TV segment, where competitive pressures and more attuned with more aggressive offerings. We are holding up our customer base. We are increasing the broadband pace. Obviously, on the revenue side, because of the ARPU dilution in an effort to hold up the customer base, we are comparing ourselves with Q1 and Q2 of 2022 when the coupon, the fiber the-on subsidy that we talked before was in place. Therefore, it was a much more favorable condition at that time. And as we said, as we move forward, we will expect to see that more positive comparables with -- in fixed because we would start converting ourselves with quarters where some of these combined pressures were evident.

[Operator]

The next question is from our webcast participant, Raciborski, he has 3 questions.

[Piotr Raciborski, Wood & Company Financial Services]

And I quote, why have other operating costs increase so considerably year-on-year in second quarter ‘23? What were the main drivers? This is the first question. The second question is, why has adjusted EBITDA increase was flat year-on-year in second quarter ‘23 despite year-on-year increase in sales and all the cost optimization incentives. Why has adjusted EBITDA in Romania improved versus first quarter ‘23? And the third question by Mr. Raciborski , do you expect telecom services prices to decrease again in 2023?

[Michael Tsamaz, Chairman and CEO]

So starting with the first one about the operating costs, I guess, this is for Brice. I think the main part there is the direct cost for the ICT programs, which, as we said, was the main driver of this quarter. And the equivalent cost is booked in the other operating expenses. That’s the biggest part of it that explains this difference. The second question, why has adjusted EBITDA increased flat in Q2. It was not flat. It was a 1% increase. Again, the composition of the sales, where we had basically our better performance in mobile covered fully the drop in the fixed. So that was the good news. And then the remaining increase in sales, which was the ICT, the handsets and the international traffic were lower margin. And the optimization incentives are evident in the cost lines, and they are helping delivering not only the growth we see in Q2 because of the seasonality between the 2 quarters, but also on the 6 months.

And the EBITDA in this quarter in Q2 versus Q1, again, I think we would describe before it’s a combination quarter-by-quarter of the improvement on the ARPU revenues on the service revenues following the stabilization in the little decrease of the postpaid business and also the continuous driving of transformation. The third question was, do you expect the conserves price to decrease again in 2023? I think this question might be related to Romania to Greece, if it is to breeze this has do with the competitive environment. So it’s not a decrease in prices, but it’s kind of overall offerings in the market which continue in 2023, we expect to be to prevail also for the second half. And if the question was for Romania for the telecom prices, there are also the offerings are continuously reflecting the pressure in the ARPU. So there is no further decrease, but it’s just a continuation of the same competitive environment.

[Operator]

The next question is from the line of Dusan Beta with web. How many are the active PC users? And what is their average spending? What are the next plans for Pastis year?

[Michael Tsamaz, Chairman and CEO]

The current basic users are in the area of 35,000 active users, which is reflecting the take-up of the service month by month. Now regarding the plans, obviously, we are working on new features to be launched and please bear with us in the coming quarters. You will see some more news for new services that will be launched.

[Operator]

And last question from our webcast participants from Anne Morris with Telco Titans. Are you still exploring strategic options for Telekom Romania Mobile Communications -- do you intend to retain this business long term?

[Michael Tsamaz, Chairman and CEO]

On this point, I will be consistent with our messages also from the last quarter. We have doing -- we are doing 2 things in Romania. The main thing is to stabilize the business because even if we want to pursue strategic activities, we need to have a performing asset, which is what we are trying to do. While at the same time, we are open -- we are exploring indeed an strategic that comes by. But this doesn’t mean that we put on hold the competitive activities in our company in order to win in the market.

[Operator]

[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.

[Michael Tsamaz, Chairman and CEO]

Thank you all for your attention. Questions interest in an -- so pleased with our performances in the second quarter and first half. We’re confident in our prospects for the rest of the year. We will work hard to deliver our commitments. On this note, I wish you a nice summer and look forward to our third quarter conference call at the beginning of November. Thank you, everyone, again, and have a nice day.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good evening.