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Hello. Good afternoon. Thank you for standing by, ladies and gentlemen, and welcome to the OTE conference call on the third quarter 2018 financial results under IFRS. We have with us, Mr. Michael Tsamaz, Chief -- Chairman and CEO; Mr. Babis Mazarakis, Chief Financial Officer; Mr. Kostas Nebis, Chief Commercial Officer Consumer Segment; and Mr. Evrikos Sarsentis, Head of IR and M&A. [Operator Instructions] I must advise you this conference is being recorded today.
And we now pass the floor to Mr. Michael Tsamaz. Please go ahead, sir.
Good morning and good afternoon to all of you. Welcome to our quarterly results conference call. In the third quarter of 2018, OTE had a very good performance in Greece, where both fixed retail and Mobile Service revenues were solid. The situation was more difficult in Romania where the performance was poor, and we're making changes and taking initiatives to stabilize our operations in the coming year.
Before asking Babis to review our performance and financials in some detail, I would like to make some brief remarks on the quarter and our outlook for the full year. And of course, with our colleagues around the table, we will have plenty of time for your questions.
Overall, we're pleased with our results in the third quarter. While total group revenues were roughly stable, adjusted EBITDA was comfortably higher than in any recent quarter. As a result, the group EBITDA margin at 36.8% was at its highest level since the third quarter of 2014. This is entirely due to our performance in Greece, where a EUR 14 million increase in the top line resulted in a jump of more than EUR 70 million in EBITDA.
Let's take a closer look at what moved our performance increase. Revenues from Greek Retail Fixed Services were up 2.6%, more than double the growth rate in the previous year -- previous quarter. This is a result of double-digit growth in broadband, a satisfactory performance in TV and, for the first time in years, stable voice. These numbers reflect strong performance indicators, which are the direct outcome of our strategic investments in top technologies and networks.
We added 25,000 new broadband subscribers in the quarter, now more than 70% of all our access customers subscribe to one or other of our broadband offers. It's a satisfactory milestone but one that leaves us plenty of headroom to continue growing within our access base. And our access base itself as well as our access market share have been very stable over the past few quarters.
Pick up of our fastest speed solutions is continuing to grow at good pace. Nearly 42% of all eligible customers are now users of our fiber solutions, with 47% of our fiber subscribers enjoying speeds in excess of 50 mega bps. This represents a huge increase both sequentially and year-over-year. Our 100 and 200 mega bps speeds are also gaining traction at the top end of the market and now account for about 3% of the subscriber base, having grown 1 percentage point each quarter since launch. All in all, this is supported broadband RPU and represents a key driver of our fixed revenue growth.
We're also growing the addressable market with the continued rollout of our fiber network. As of the end of the quarter, we were just short of 13,000 commercially available cabinets mark, but we are stepping up the pace in the fourth quarter as we expect to finish the year with almost 15,000 cabinets installed and a significant increase in the number of those that are ready for commercial use. This will essentially complete our FTTC investments. As you know, our next step is to invest in Fiber-to-the-Home in selected areas and further upgrade our network. This will continue driving the growth of our broadband subscriber base and revenues.
As we have anticipated, after a slight contraction in Q2, we returned to growth in TV subscriber numbers, currency standing at 3.3% higher versus same quarter last year, with many of them attracted by our exclusive sports content. And we expect this moderate positive trend to continue.
In Greek Mobile, we also had a strong quarter. Like-for-like service revenues, before IFRS 15, were up nearly 2% as a result of visitor revenue growth, you remember that our visitor revenues had risen sharply during the 2017 tourist season as new European directives on roaming kicked in for the first time. Visitor revenues were up another EUR 6 million or more than 28% in this year's third quarter.
Data revenues, further apart, continue their progress and were over the EUR 80 million mark in the quarter, now accounting for over 30% of our mobile service revenue. Data traffic was up sharply by nearly 50% as our customers took advantage of the add-ons we offered during the summer months, while they spend more time outdoors or away from home.
We are also growing our digital ecosystem. First of all, penetration were up, has reached another milestone as we passed the 2 million active user mark. But we're also expanding into other areas with the recent launches of an online take-out food delivery service and online insurance brokerage offer. While each of these initiatives is currently of relatively modest size, together, they should create a tight customer ecosystem and have a meaningful impact on longer-term performance.
Some of the factors that helped us achieve such a strong Q3, particularly mobile, will not be present in the final quarterly year. Last year's Q4 provides a high baseline, as Babis will detail. But we are confident in underlying performance in Greece, and if the economic recovery underway continues to gain strength, we should be able to progress along these favorable trends.
We are firmly on track to meet our guidance for the full year. CapEx is traditionally higher in the fourth quarter, and we continue to expect the full year number to be around EUR 700 million. Adjusted free cash flow is up sharply in the first 9 months of the year, and we expect to reach our free cash flow targets for the full year. This means the current year's shareholder remuneration of approximately EUR 260 million is secured.
To conclude my remarks, I would like to say that we are in a relatively good position, probably the best we've had in a decade, and that we are cautiously optimistic about the future. Even if we were coming against a strong comparison base, if we can afford to be confident, it's because we have put in place the infrastructure and the teams that can provide to our clients the quality of service they demand.
Now let me turn the call over to Babis for a review of the quarter. Babis?
Thank you, good day to all of you, and allow me to add my welcome. Good revenues in the third quarter of 2018, total nearly EUR 992 million, up very slightly from the same quarter in 2017. This operating stability masks an increase of nearly 2% in Greece, driven by service revenue from the Fixed and Mobile, offset by a 5% decline across-the-board in Romania. Revenues in Albania were down marginally. The OTE Group's adjusted EBITDA amounted to EUR 365 million, a sharp improvement of 4.7% from the level in Q3 last year and our best quarterly performance over the past few years. As a result, group adjusted EBITDA in the first 9 months of the year was just shy of EUR 1 billion, up 3.4% versus the comparable period in 2017. And as Michael noted before, the group's 36.8% EBITDA margin in the quarter represented the highest level in 4 years.
All above were achieved against pretty high comparisons in the third quarter last year, notably in Greek Mobile where service revenues and EBITDA have started benefiting from domestic pick up and growth in visitor revenues. While a number of internal and external factors should moderate our comparative performance in the fourth quarter and next year, we believe that the fundamental trends are here to stay, and that we should increasingly be able to monetize the important investment programs underway.
Let's look now at this performance by country, starting with Greece. Revenues in Greece were up nearly 2% to over EUR 754 million with top line improvements across all key areas. In like-for-like terms, excluding the impact of IFRS 15, revenues from Retail Fixed Services were up 3% and Mobile Service revenues rose 1.9% due to visitors' roaming. This is notable acceleration in Fixed and a robust performance in Mobile adding to the positive indications we have started seeing since the middle of last year. We had also positive performances in ICT revenues and particularly in wholesale this quarter.
Zooming a bit on Retail Fixed Services, all indicators were in the green this quarter. Broadband revenues were up nearly 11%; voice revenues were stabilized after multiple periods of erosion, confirming the inflection point we flagged on earlier calls; and TV revenues, before IFRS 15, were up marginally, reversing the trend of previous quarters. We lost about 4,000 net access lines in the quarter, while the total Greek market was down 7,000 lines from the prior year quarter, leaving our market share unchanged. While we don't expect voice revenues to continue to grow, we seem to be finally reaching a point of stabilization in this area. More importantly, we added 20,000 new broadband connections in the third quarter, once again accounting for all the growth in the Greek market. Penetration of our Fixed customer base was now past the 70% mark, as Michael told you, and we expected to continue climbing at a steady pace until we reach saturation.
We also added another 74,000 subscribers in our fiber services this quarter for a total of 483,000. Our demand for high-speed broadband continues unabated, benefiting ARPU.
After a few slow quarters, growth in our TV subscriber base returned to growth in Q3, with net adds totaling 8,000. Similarly, as I said earlier, TV revenues were up on a like-for-like basis. We expect this trend to endure and are working on sustaining growth in the customer base.
Greek Mobile service revenues were down slightly in reported terms, but up nearly 2% excluding the impact of IFRS 15. These doesn't quite match the 4% increase in the previous quarters, but as we warned you, when we reported last quarter, the positive trends that are continuing are weighing down somewhat by comparisons with the growing numbers we started experiencing in the second half of the last year.
Mobile Service revenues turned positive in the second quarter last year, but growth started in the earnest over the summer, driven by our targeted balancing across prepaid and postpaid segments and the spectacular growth in visitors' revenues over the tourist season. Once again, mobile data revenues were up remarkably in the quarter on an increase of nearly 50% in data traffic. Data now account for more than 1/3 of outgoing retail revenues, reflecting the ever-improving penetration of smart phones, now 67% of the active base, and the continued growth in the base of active users.
Keeping in mind last year's strong base, we expect stable performance in Retail revenues for the fourth quarter. In visitors' revenues, we anticipate a drop. As you remember, provisional investments have positively impacted Q4 last year. This being said, we are pleased with the sales of our mobile business and more generally in our retail business in Greece, and believe that we'll continue to benefit from our investments in best-in-class infrastructure and customer satisfaction.
Wholesale revenues were up close to 4% this quarter, once again due to international transit traffic of OTEGLOBE. Total Greek operating expenses, excluding depreciation and amortization and one-offs, amounted to EUR 455 million, flat sequentially and down 1% compared to the same quarter of last year. Personnel costs were down 4% reflecting the benefits of our voluntary retirement plans.
Higher revenues and lower OpEx translated into a 5.7% increase in total adjusted EBITDA in Greece at EUR 321 million. In the 9 months, adjusted Greek EBITDA is up 4.5%. As for the Greek EBITDA margin, it was up 150 basis points in the quarter and 120 basis points in the year-to-date to 42.5% and 40.9%, respectively. Of course, we are pleased with these performances.
In Romania, total combined revenues were down more than 5% to EUR 227 million. Before IFRS 15, revenues from Retail Fixed Services were down nearly 15%, while Mobile Service revenues is lift total of over 1%. Wholesale revenues were down 28% on lower international transit and other revenues were up 15%, somewhat mitigating the overall drop.
Revenues from the FMC convergence service offered by the fixed-line operations continued to grow, though at a slower pace. Growth in subscriber numbers, on the other hand, picked up pace with nearly 59,000 net additions in the quarter to a total of 656,000. FMC performance helped partially offset further deteriorations in Fixed Retail services as well as negative performance from pure mobile operations.
Our Romanian operations are working on a number of initiatives to turn around the performance and strengthen the competitive position, leveraging their combined fixed-mobile presence as well as their strong foothold in rural areas. Additionally, the focus is on raising utilization of the extensive Fiber-to-the-Home footprint through wholesale agreements, reduces the [ service availability ] dependency on national 4G roaming agreement and rebalancing its fixed retail offerings. However, in mobile, and to a lesser extent in Fixed, the Romania subscribers need to continue streamlining their customer rosters. This has already resulted in a significant decrease in budget and might require additional provisioning in the future.
Total operating expenses, excluding depreciation, amortization and one-offs in Romania, were up just 2%, driven mainly by the increase in direct costs that stood higher by approximately EUR 7 million. Under a new finance team, all operations in the country are adopting this cost base to negative top line development. As a result of a more than doubling in other operating income attributable to sales of real estate assets, total EBITDA in Romania was down just 4% in the quarter. Adjusted EBITDA margin in Romania was up 20 basis points at 18.2%.
In Albania, Mobile Service revenues were essentially unchanged as 24% increase in data revenues offset lower voice. Thanks to good cost discipline, total operating expenses, excluding depreciation, amortization and one-offs, were down nearly 8% in Albania. Subsequently, EBITDA was up 32% in the quarter. The adjusted EBITDA margin stood at 19.2% in the second quarter, an increase of 530 basis points, as the stabilization with the country's performance yields increasingly positive results.
Let's now turn to the rest of our consolidated group financials. Q3 consolidated group adjusted EBITDA totaled EUR 365 million and was up 4.7% fueled by the self improvement in Greek operations. Total group operating expenses, excluding depreciation, amortization and one-offs, were EUR 654 million, down 0.3% with group-wide personnel expenses down by more than 2%. Unchanged from last quarter, total depreciation, amortization amounted to EUR 187 million in Q3 and was down more than 5% from the same quarter of last year. Net financial expenses at less than EUR 18 million were down more nearly 44% entirely due to the decrease in interest expenses following our recent transactions.
As in the previous quarter, and for the same reason, that is tax benefit in Greek Mobile on realized losses, income taxes were lower than usual. At approximately EUR 34 million, they were down nearly 19% from Q3 last year. We expect a final tax benefit along the same lines in the last quarter of the year. With lower depreciation, financial expense and income taxes, group adjusted net income rose sharply in Q3 to over EUR 108 million, an increase of more than 40%.
CapEx, excluding spectrum, amounted to EUR 150 million down 15% from the third quarter last year. We have reiterated our guidance of about EUR 700 million for the full year, as we expect the usual final quarter bump in cash CapEx. We had adjusted free cash flow of EUR 133 million in the quarter versus negative free cash flow of EUR 28 million in the third quarter of last year. Year-to-date, reported free cash flow totals EUR 161 million, and we are firmly on track to reach our target of approximately EUR 260 million for the full year.
So Q3 was a good quarter, and we are in good shape for the balance of the year and beyond as far as our Greek operations are concerned. But as we are coming up against some pretty tough comparisons, and we are faced with challenging conditions in Romania, we feel disabled to stick to our current guidance. That concludes my remarks.
Michael, myself and our colleagues are around the table and are now ready to take your questions.
[Operator Instructions] We will now take our first question.
It's Luis Prota from Morgan Stanley. Three questions, if I may, please. First is, you were mentioning something on the voice revenues improving in Greece. I wonder if you could elaborate a bit more on the reasons behind that and how sustainable that is. And then two questions for Romania. You were mentioning as well asset sales this quarter. If you could quantify that and whether this is a one-off or something we should expect to be happening in future quarters as well? And finally, on the bad debt commentary on Romania as well, you were mentioning something in your introductory remarks, but I couldn't get it well, why is this -- what is in nature of this, and what is the order of magnitude, please?
Okay, let me take the second and third question about Romania. As we clearly flagged out in our communication, there was a substantial amount of real estate sales in the past quarter in the magnitude of EUR 15 million that booked in EBITDA and supported the probability of this quarter. Given the legacy of the company and the rather extensive real estate portfolio, from what we have demonstrated in the past, there has been real estate sales almost in every quarter, sometimes a bit higher than other quarters, but this is something that we'll continue to see in the coming quarters as well, although the size of it will not be as high as in the previous quarter which was exceptional. On the whole bad debt treatment, what we were saying is that the following the quite substantially aggressive commercial policy and presence in the past quarters, and also some ad hoc schedules to collect money from big ICT projects, that was one big ICT and it was an isolated case. We are reassessing the amount of bad debt that we should book for the year. We've taken the obvious in Q3. That is why it's a bit higher in quarter 3 than quarter 3 of 2017. And the final assessment will be done in Q4 when we'll have final conclusive amount that possibly now I am not in a position to say because we are still assessing and exploring how much of that would be. In any sense, that is given the size of OTE Group, that is not going to be quite material. But as I said, we'll be able to conclude on that one in our next communication.
And with regards to your question about the fixed voice revenue, I would say, as Babis already mentioned, the stabilization that we see over the last quarter is a result of the stabilization in our access base. So we are keeping our base intact, which is reflected in fairly stable fixed-line revenues.
We will now take our next question.
It's Maurice from Barclays. Couple of questions for me, please. The first one is just on the phasing of mobile roaming revenues, many of the Northern European companies are talking about the elasticity impacts of higher revenue fees visibly going to yourselves. Should that continue to be a tailwind in 2019? If I understand correctly, you said it was about EUR 6 million, I think, this period. Is it still going to remain a tailwind next year? And then, the second question is, in Greece, I think you said you were cautiously optimistic on the revenue outlook. Is there any reason why the OpEx can't keep falling next year as well? You've shown solid cost discipline for many years, but is there any reason why you shouldn't still see further cost efficiencies in 2019? And if I could just one, one very small one. In Romania, I see there's 2 EBITDA growth numbers. One is a minus 4%, but on the IFRS 15 basis it's minus 12%. Is that all to do with the real estate?
On the roaming front, I think you said it very correctly. We are experiencing substantial tailwind this year where we see this increase. That comes on top of a strong Q3 in 2017 when it was actually the first quarter where we had the full Roam Like at Home situation in the country. It's going to continue until 2019, not to this magnitude. There might be some more a bit of an increase, but I think we have seen the biggest part of the benefit that we enjoy as a net importer of traffic or exporter of service, however you take it. And I think we have seen all the benefits up to now. There might be some more marginal growth next year. In the Greek OpEx, the consistent message is that we are continuously driving the cost efficiencies. The main -- one of the main vehicles we had also in the past was the voluntary retirement schemes, the benefits of which, I think, are obvious in our communication today and they are driving the costs down. In the future, of course, we will continue with voluntary retirement schemes, but -- albeit at a much less applicable audience because of the maturity of the employee/audience. But also we will hope to reinforce our cost savings with the effect of various digitalization programs that we are implementing, namely the most obvious ones, which are the e-sales, e-bill and e-touch with our services. And so to the extent that these are successful, we believe they will be successful, they will be flowing in our numbers in the future. And Romania, I think the question was about the real estate impact. Also we should be quite careful when we see the tables, sometimes the IFRS 15 implementation this year distorts some quarter's numbers when we compare with 2017 when we didn't have the IFRS 15 impact. So like-for-like the EBITDA went down by 4%, as I said before assisted or at least holding up the loss due to the real estate sale that we effectuated in the previous quarter.
We'll now take our next question.
This is Stam Draziotis from Eurobank Equities. Just a couple of questions from my side, please. Firstly, on domestic mobile, your Q3 performance seems to have been quite strong, especially on the margin front. Could you just elaborate a bit on what drove the substantial margin expansion in Q3 because the profit increase is actually disproportionate to the EBITDA growth? So that's my first question. Secondly on the -- if you could elaborate a bit on the competitive dynamics in the Greek Pay-TV market. I am just wondering have you seen any disruption from the bundles launched recently by your competitors based on your Pay-TV competitors' wholesale offer. And lastly, just a technical follow-up on provisions. Just to make sure I understand correctly, the presentation of your cash flow statement. You're now including working capital, the noncash adjustment related to provisions, which was previously shown separately. Is that right?
I'll start from number 3. Yes. The answer is yes, we have included it. Now on the first part of the margins, that's a [ lighter ] comment because you picked up correctly the margins in mobile, but I think the margins in the whole Greek operations, they are reflecting the very good growth of revenues. And also, there are elements of the revenues increase like roaming that translated almost 100% to EBITDA. So to -- in this quarter where we have this good track of revenue reach and EBITDA reach revenues, that works positively for the margin. So there's nothing specific to the mobile, just the wider expansion of our margins, thanks to the service revenue growth. I will leave Pay-TV to Kostas.
With regards to Pay-TV, I would say, to the quarter, what we have seen is going back to growth in the quarter with 8,000 net adds as a result of our sports content and the fully exclusive UEFA Champions League rights. So we expect some moderate growth looking forward in Pay-TV in numbers from revenues over the next quarter leveraging on our portfolio. And there's fairly still low penetration of Pay-TV into our base.
Just a follow-up on Greek Mobile, again, the reason I am asking is because the consolidated revenues were up EUR 9 million and EBITDA has increased EUR 16 million, so there must be an effect, which does not have to do with revenues?
As I said, the good quantity of revenues is coming from service revenues. It translated to a big extent in the EBITDA. At the same time, as we are -- as it is shown in the account, there are also some, I would say, efficiency that savings that are flowing into the margins, and they reduce also the expenses when we had to compare with the previous year. Also since -- between the quarters, as you know, we work with accruals, and towards the end of the year, we are actualizing the actual expenses. Let's say, there are corrections from quarter-to-quarter, so one should look mostly also on the -- when we are looking at the margins, we should look also at the year-to-date numbers, which are a much better reflection of the trend.
There are no further questions at this time. We do have a next question.
It's Mau Messina from Citi. So I have 2 questions on Romania, please. So first one is regarding the provisions, whether they're going to have any impact of cash next year, and whether that is going to impact the dividend? And second question is on the trends in Romania, whether they are worse than you anticipated? And what do you think is going to happen with Fixed there?
Thank you for the questions. On your first point, no, there's going to be no material impact on cash. These are provisions that needs to be taken. Secondly, on the wider performance in Romania, I think we have been repeatedly communicating that it's a challenging environment. On this environment, we are doing consistent steps to improve the commercial competitiveness. Let me remind since you brought up the point that the FMC offers as well as the strong mobile adoption of our lineup that we launched a year ago, the [ netliberare 2 ], they have been working towards the right direction. But of course, from quarter to quarter, there are reactions in the market, and one should look, again, here the multiple quarters trend rather than as related quarter. We expect that -- I think we said also in the previous quarter that this quarter, next quarter, and maybe the first quarter of 2019 are going to be tough quarters. And thereafter, we all think and we are working towards the assumptions that whatever we have been doing so far in the commercial front will start to pay out. So we continue to implement our strategy on the FMC and the strong mobile while, at the same time, we are just quarter-on-quarter depending on how the market reacts.
Thank you. There are no further questions coming through on the line.
So thank you very much, everyone. And we will see -- we look forward to the next quarter results. Bye, everyone. Operator, thank you.
Thank you. Thank you for participating. You may now disconnect.