Hellenic Telecommunications Organization SA

ATHEX:HTO

Earnings Call Transcript 2020-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. I am Gelly, your Chorus Call operator. Welcome, and thank you for joining the OTE conference call on the third Quarter 2020 financial results under IFRS. We have with us today, 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. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Michael Tsamaz. Mr. Tsamaz, you may proceed.

[Michael Tsamaz, executive]

Thank you, operator. Good morning, and good afternoon to all of you. I'm pleased to welcome you to our third quarter 2020 earnings call. I hope you and your loved ones are safe and healthy. The past few weeks have been a period of momentous developments, marking the culmination of several amounts of intense efforts. Our initiatives will support our future performance in coming periods and confirm our commitment to our shareholders.

Let me start with a few words about the third quarter. Today, we reported a very resilient set of numbers across our businesses. As we had expected, a sharp reduction in the number of tourists visiting our country during the summer vacations was one of the factors impacting our Greek mobile activities. But thanks to broadband and ICT projects, in particular, we are showing pretty stable revenues in the quarter and the year-to-date. I'm proud of the work everyone at OTE has done to achieve this. I want to acknowledge their contribution and determination here. Thanks to anticipation and vigilance at every level. Our top line resilience is translated into solid profitability.

Group adjusted EBITDA was up in the quarter and 9 months. Our cash flow generation was also solid. Confirming our full year target and the shareholder remuneration that is back to it. We're entering a new period of uncertainty. Last week, the Greek authorities announced another series of lockdown measures. We're all well prepared to face the situation, but also conscious that it is another hard blow to the Greek economy, which will impact our clients and ourselves. Babis will guide you through the details of our performance this quarter and discuss our outlook and guidance for the full year.

But before giving him the phone, I'd like to discuss the 2 recent developments that should intensify and accelerate our transformation plans. First, earlier this week, we announced the sale of our stake in Romanian fixed line operations to Orange, reflecting our strategic decision to focus on the fastest-growing and most cash generative segments of our business. Other new -- under its new ownership, Telekom Romania, will be better able to succeed in this highly competitive market, where we are retaining a presence through Telekom Romania mobile. We expect the transaction to close in the second half of next year, following which we will distribute the next proceeds to our shareholders. I want to thank the management team and all the people in Telekom Romania for a great collaboration over the years and wish them well during the transition in the future.

Second, we have gathered much closer to launching a new stage of our transformation trajectory as our Board approved the outsourcing of 3 business segments through autonomous entities within the group to carry out our activities in these key areas: customer services, retail shops and technical field operations. These segments will be spun off in early 2021, respectively, the Cosmote e-value contact center, Germanos industrial and commercial and Cosmote technical solutions. About 5,000 current employees will be transferred to these organizations. This move will rationalize our operational structure and business specialization. It should enhance our efficiency and flexibility in these 3 sectors, enabling them to develop commercial strategies, resource management policies and sales processes that better attuned to the needs of their respective customers. It will also facilitate the offering of services to third parties outside the group in such areas as call centers or provision of technical expertise in telecoms and IT. In return, it will empower a linear business structure without past legacies to better address the needs of our customers.

In conjunction with this move, before the end of the year, we're implementing another voluntary retirement program, targeting up to 600 employees. Together with the people who have already taken early retirement this year, this brings a total of 2020 to 1,100, leading to annualized savings of approximately EUR 50 million. We’re confident that this new chapter of our transformation story fundamentally strengthens our positions in the current environment and beyond, positions but also benefit from the substantial investments we are continuing to make to fiber to the home IT infrastructure and now in the current 5G spectrum auction. All this, while maintaining a clear and growing shareholder remuneration policy.

And now let me turn the call over to Babis, who will take you through the results in the quarter. Babis?

[Charalampos Mazarakis, executive]

Thank you, Michael. My turn to welcome you all, and thank you for attending this call. I hope you and yours are doing well and staying safe wherever you’re working from. Now our third quarter as we expected and the previewed in August, it was impacted by the absence of tourists in our markets as a result of COVID-19 pandemic. All in all, however, we managed a pretty resilient top line and maintained a high level of profitability despite the rough weather we are navigating in.

Let's start with the group revenues. In the third quarter, revenues accounted to EUR 1.004 billion, down just 0.8% from the third quarter of last year. That's a drop of less than EUR 8 million year-on-year. Considering that visitors roaming revenues increase were down nearly EUR 13 million. We are able to make up for this dip through higher revenues in other areas. Adjusted EBITDA after leases totaled EUR 376 million in the third quarter, a year-on-year comparison increase of 0.9%, yielding a margin of 37.5%, up 60 basis points compared to the third quarter of last year. It's worth noting here that in the first 9 months of the year, group revenues are essentially unchanged, and group adjusted EBITDA, comfortably exceeding EUR 1 billion and is up 2%.

Let's now have a closer look at Greece. Here, total revenues were EUR 763 million, down 1.1%. The drop is entirely attributable to mobile, down about 6%. Total revenues in fixed were up 2.5%. Revenues from Greek retail fixed services were unchanged in the quarter. Once again, our performance in broadband was solid as we achieved another increase of nearly 6% in revenues, continuing to benefit from strong demand for higher reliability, high speed connections.

In fiber, we added nearly 46,000 new subscribers to our base for a total of over 886,000. We have consistently added over 40,000 fiber subscribers each quarter for over a year now. Speeds in excess of 100 mega bps are rapidly gaining acceptance and now account for 12% of the total, and we expect this trend to gain further traction as we expand our fiber-to-the-home infrastructure.

Revenues from pay-TV were down about 4% in the quarter, a notable improvement compared to the prior quarter's decline resulting from COVID. Subscriber numbers were roughly unchanged sequentially with growing demand for our recently launched over-the-top media services. We had another good quarter in ICT, with revenues up 14% year-on-year. We are continuing to see strong demand from both private and public sector organizations. OTE was selected for an important digital signature project, and there are many other e-government opportunities going forward revolving around the simplification and unification of citizen ID codes, which we will play an active role in.

In Greek Mobile, we have the service revenues totaled EUR 244 million, down just over 8%, narrowed somewhat compared to Q2. About 60% of this drop in mobile service revenues or nearly EUR 13 million comes from visitor roaming, which traditionally peaks in third quarter when tourists [ is in full shrink ]. In Q3 last year, we have had over EUR 27 million in visitors roaming, most of which flows directly to EBITDA. This being said, we were expecting an even steeper decline in tourist and entry this year, and the impact from this revenue stream should be far milder this quarter and in early 2021 when tourism is less of a factor.

If we exclude visitors roaming, mobile service revenues were down less than 4%. Both pre and postpaid segments were impacted by European and domestic regulatory changes. Excluding the impact of these changes on a retail basis, service revenues would have been down 2.5% in the quarter compared to a 4.5% decline in Q2, marking therefore a sequential improvement. If we also exclude the own roaming, which was down by EUR 2 million, then the underlying service revenues, mobile service revenues will have been flat rest of last year.

Prepaid revenues, which had been impacted in the second quarter by the lockdown and promotions we ran to help our customers recovered sharply in Q3. They were down just 0.5% in the quarter, with improving trends month after month and the positive performance in September. We are actively working on our bundles to support this rebound. We have not seen a similar improvement in postpaid, where revenues are down over 3%, same as in the prior quarter. Part of this, an amount in this area of EUR 2 million is due to outbound roaming, as we said, particularly in the business segment as our customers have naturally cut down on travel. And part of the drop reflects the slowdown in migration for prepaid, which had been an important growth driver in the past. Still, we're encouraged by the continuing improvement in the B2C segment, where our more for more strategy is paying off.

Data remains the engine of our growth and the traffic, number of active users, smartphone penetration and all other KPIs continue to show sharp progression. Now the average monthly data usage per subscriber reached 4.4 gigabytes, a 45% increase compared to the third quarter of 2019. Revenues from wholesale were up again this quarter, reflecting the growing reliance from fiber. In the coming quarters, as I mentioned, our Greek mobile operations will not be penalized by the lack of tourists, and we still have some work to do regarding our customer base, but we expect the positive trends in prepaid to continue and postpaid to gradually stabilize.

Facing a heated competitive environment, we have a top quality network and a very attractive offerings for all customer segments and needs. We don't need to remind that the 5G spectrum auction is on and the auction should be decided before the end of the year. And on the spectrum payment, we've been cared in 2020. In Greece, as a whole, operating expenses, excluding depreciation, amortization and one-offs amounted to EUR 421 million in the third quarter, up year-on-year by less than 1%.

Personnel expenses were also up less than 1%, reflecting seasonalization of relevant expenses. Third-party fees and services were up in the quarter as a result of the sharp increase in ICT revenues. The launch of new mobile rate plans in early July and campaigns delayed since Q2 resulted in higher marketing expenses. Taking all of that into account, adjusted EBITDA after leases increased totaled EUR 326 million in the quarter, down 3.3%, and the margin of 42.7% was down 100 basis points. In absolute terms, EBITDA was down a little over EUR 11 million. In other words, without the hit from visitors roaming during the summer, EBITDA for the quarter 3 would have been positive year-on-year.

Let's move to Romania now. First of all, I want to indicate that the disposal of our fixed operations was agreed only a few days ago, and so they are included in our numbers for the quarter. They will be treated as activities held for disposal, and therefore consolidated under IFRS 5, starting in the fourth quarter. Overall, total revenues in the country were essentially unchanged at EUR 244 million. They largely benefited from wholesale revenues and one-off adjustments related to contract treatment in prior periods. Conversely, service revenues continued to show the impact of COVID-19, while we experienced delays in [ ST ] projects, which have been a significant contributor to revenues in Q3 last year.

Broadband revenues were once again the bright spot in retail fixed services, with an acceleration in the growth rate at nearly 12%. That did not offset continuing erosion in voice and TV. Altogether, retail fixed services generated revenues of EUR 54 million, a drop of less than 5% and the marked sequential improvement. The number of subscribers to the FMC solution grew double digits and associated revenues were up year-over-year. Thanks to growth in wholesale and data communications, total revenues from the Romanian fixed business were up year-on-year. So where total revenues from home mobile, despite the fall in mobile service revenues as the COVID-19 impact continued during the summer months. At about EUR 72 million, they were down more than 10%. The decline in revenues is partly attributable to visitors roaming, lower outgoing revenues in both prepaid and postpaid and lower mobile termination rates.

KPIs from the Romania mobile are supportive, subscriber numbers are solid, and we are continuously improving network coverage, so we are quite confident. We anticipate that the Telekom Romania mobile, once separated from its sister company, will enjoy increased capacity available to its network and will become a more agile operator with strengthened performance. Telekom Romania is continuing to work on its cost reduction programs, though it is clear that the most ambitious structural moves are now behind us, particularly on the personnel front.

In the quarter, operating expenses, excluding depreciation and amortization and one-offs in the country, were down nearly 5% with personnel costs down close to 19%. As a result, adjusted EBITDA after leases in Romania jumped more than 40% to over EUR 50 million with an EBITDA margin up 590 basis points from an admittedly low base to 20.6% with additional support from one-off adjustments and real estate disposals. Cash flow generation was also solid.

Now let's have a look at the rest of the P&L. Starting from group adjusted EBITDA after leases, which, as I mentioned before, stood at EUR 376 million with EBITDA margin up 60 basis points. Group operating expenses, excluding depreciation, amortization and one-offs, was a little over EUR 611 million and decrease -- a decrease of more than 1% from the Q3 2019 levels. Group personnel costs at EUR 133 million pursued the downward trend with a further drop of 3%. While bad debt provisions were higher, nearly all major fixed cost items were down.

Group depreciation and amortization totaled EUR 288 million, reflecting additional impairments related to Romanian operations. Interest expenses of EUR 14 million was down 45%. On lower cost of debt and the reduction in debt outstanding notably following the repayment of our EUR 700 million bond at the beginning of Q3. This repayment will support our cash flow generation in 2021. Adjusted net debt, excluding leases of EUR 649 million at September 30, was down just over 16% from 1 year earlier.

Going back to the P&L, mainly reflecting the increase in depreciation and amortization and impairment that we discussed earlier, earnings before taxes were nearly halved at EUR 87 million. However, we had negative income taxes of EUR 57 million in the quarter due to the deferred tax -- taxation related to the losses from the sale of Telekom Romania, totaling EUR 107 million. Adjusted net income totaled EUR 149 million in the quarter, an increase of nearly 19% compared to the previous years.

Let's turn briefly now to the cash flow statement. CapEx was EUR 117 million this quarter, down 12% from the same quarter last year. In the first 9 months of 2020, CapEx is down about EUR 52 million or 11% to a total of EUR 435 million. But we are sticking to our CapEx guidance at EUR 600 million for the full year as the fourth quarter seem to catch-up of projects that slipped in earlier periods. We do not expect the new restrictions being put in place these days to impact our ability to deploy CapEx in the fourth quarter. And while we are on the subject of CapEx forecast, we expect spectrum and voluntary retirement outlays of about EUR 260 million to hit our accounts before the end of the year.

Adjusted free cash flow was EUR 130 million in the quarter. In the first 9 months at EUR 447 million, it was up nearly 36%. For its part, reported free cash flow totaled EUR 360 million in the first 9 months. This means that after 9 months, we are already above our guidance of EUR 350 million full year target. However, if you take into account the EUR 260 million spectrum and the retirement payments due in Q4, you have a pretty good idea of the reported free cash flow we expect to generate in Q4. By the way, that means that we are also confirming in full our expected shareholder remuneration for 2020.

Now let's conclude with a few words on outlook and guidance. First of all, like most other European countries, Greece is in the midst of new restrictions due to the resurgence of COVID-19, while for the reason mentioned earlier and notably the limited contribution from tourists with the window, we don't expect a material direct hit in the short term. There's no doubt that it represents another blow to the Greek economy, so we need to be cautious in our assumptions. If we exclude the COVID-19 impact as a caveat, we expect most revenue streams to continue improving gradually going ahead and also next year. We are not only continuing our cost reduction programs, we are actually accelerating and intensifying them as implementation of our restructuring demonstrates. We are in good shape to absorb any temporary impediments we might encounter and to continue investing to our future. This concludes my remarks.

Michael and myself and Panos Gabrielides, our CCO, and the other colleagues are on the table are now ready to take your questions. Operator?

[Operator]

The first question is from the line of Draziotis, Stamatios with Eurobank Equities.

[Stamatios Draziotis, analyst]

A few from my side, please. Firstly, what would be a reasonable estimate in terms of special dividends for shareholders out of the Romanian proceeds. And I guess, related to that is obviously, what sort of restructuring costs and expenses you anticipate to incur prior to the completion of the disposal in order to separate the 2 businesses?

Secondly, also on Romania. Just wondering what have the free cash flow performance of the Romanian mobile operations being in the last couple of years, please?

And thirdly, also in the operations. Could you tell us what you've been seeing since October in terms of mobile performance in Greece? How have postpaid and prepaid performed? Any changes in customer behavior, especially in the light of the curfew and the new restrictions being enforced by the government, please?

[Charalampos Mazarakis, executive]

Thank you for the question. Let me start with the first leg, which is the proceeds from the disposal of fixed business in Romania. As we very clearly said, the net proceeds at the end of the day, and this will only be detected at completion, which we said we are expecting in half 2 of 2021, will be distributed to the shareholders. Obviously, we all know the -- where we start from, I mean, the headline price that we have agreed brings to EUR 268 million, which is the 54% of the agreed total enterprise value of EUR 497 million. And from that one, we will need to extract -- to subtract the expenses and the adjustment, the provisions that will be determined through the -- this process between signing and closing.

So obviously, we cannot -- at this point in time, we cannot estimate what this number will be. But that is a mechanism similar to what also we had done when we sold the Albanian operations. We need to wait until the end of the actual completion in order to determine the exact amount that OTE will receive from the purchaser. And after all the adjustments, and that will be distributed to the shareholders for special dividend. So to wait a little bit. [ Alba deal ], we complete the transactions.

The free cash flow in Romania. In the past couple of years, I mean, in the previous years, there has been from negative to almost flat 0. However, in the past 2 years with the intensive restructuring that we were doing and the prioritization of the business, we had a positive free cash flow. I think the number was EUR 20 million last year, and it's about EUR 30 million to date. And this reflects the order restructurings that -- and this, of course, for the total country, both the fits and mobile. And this reflects all the restructuring and the improvements we've done in the operations in the past couple of years.

Regarding the mobile piece in the months October and November, Mr. Gabrielides will comment. But overall, we have seen gradual recovery in those months. But Panos, if you want to offer some more comments.

[Panayiotis Gabrielides, executive]

Yes, this is true. We've seen clear signs of recovery, especially in prepaid that was severely hit during the last lockdown. But as Babis said before, this happened before the new lockdown. We cannot really know how long this will last and what -- how strict the measures will be? Definitely, we are expecting some impact on prepaid mainly. But overall, the trend, the organic trend was -- has turned positive.

[Stamatios Draziotis, analyst]

Okay. That's very helpful. And may I ask just a last question on free cash flow. I know it's too soon and there are many moving parts, but given you probably have reasonable degree of visibility on financial costs and on CapEx. And I guess, to some extent, on profitability, assuming a normal year for roaming, that is. Could you give us an indication as to what you may be targeting in terms of adjusted free cash flow next year?

[Charalampos Mazarakis, executive]

[ So wouldn't be ] a little bit wait until the next time that we discuss, part of the -- what we will discuss in Q4 results, possibly our official guidance given at that point of time. And also, we need to see the closing parameters of this year in order to be able to commit, as always, to a number that we would not miss.

[Operator]

The next question is from the line of Arbuzov, Roman with JPMorgan. Mr. Arbuzov, we cannot hear you. Can you hear us?

[Roman Arbuzov, analyst]

Yes. I’m very sorry I had my phone on mute. Hopefully, you can hear me now.

[Operator]

We can.

[Roman Arbuzov, analyst]

I will just follow-up on Romania, firstly. What happens to Romania Mobile, do you think, going forward, given that the fixed part is going and the market is becoming more convergent. So I guess, strategically, it's not an asset that is well placed. And there is also 5G spectrum auction is coming up in Romania. So how do you think about the future of the Romania Mobile assets, please? That will be helpful.

Secondly, maybe I'll just follow-up and ask another way on -- of what Panos or [ Stamatios ] was asking. In terms of the free cash flow, given that you expect CapEx to potentially be up next year, do you think you can offset it through other cash flow supportive measures? And do you think it's possible for you to grow your free cash flow next year? Or do you think it will be down because of CapEx going up?

[Charalampos Mazarakis, executive]

Thank you for the questions. Let me take the first leg, which is Telekom Romania Mobile going forward. Obviously, it's a cautious decision that we are -- we have agreed to dispose the fixed part and keep the mobile part because this is the market, let's say, evolution. I must say that the mobile part is in very good standing. We have completed the 4G rollout. So in terms of coverage and capacity, we are well placed. And also, with the departure of the FMC customers that will follow the fixed -- the new fixed owner, sizable capacity of our network will be freed. So that will be evidenced and also very prominent in the customer experience and also will offer us the opportunity to continue our current commercial policy, along simple, agile and quite, I would say, focused offerings in terms of the netliberare domain, which is the contract connections with almost unlimited data consumption.

And yes, admittedly, the market is challenging and very competitive as it has always been. But also, we are well placed to maintain our market share, and if possible, to keep growing it. As also communicated in our announcement about the sale of the fixed part, while we are -- as always, we have been doing, while we are focusing on strengthening the operational performance of mobile, we still keep looking for Germany in our strategic reconsiderations in order to make sure that we have -- we do the best for all stakeholders, including the shareholders. So it's going to be a gain that will start developing in the coming quarters.

Your first leg, which is the free cash flow generation of next year, I mean, in the COVID-19, let's say, free environment, then obviously, we have some elements in next year that will work in our favor. For example, the roaming revenues, which this year, as you can see, we are already down in Q3, almost EUR 21 million versus 2019. So in a more, let's say, less restrictive travel wise environment, we hope that some of this will come back. CapEx wise, we’ll continue to do -- to invest in our strategic choices, which is fiber to the home and 5G plus and 5G. So CapEx, as we've always said, is around -- in the area of EUR 600 million as this year. But it might be a little bit higher, a little bit lower in the coming years. Next year, it might be a little bit higher. However, also, we have less cost for our debt because of the new issuances that we had last year and this year, and it's going to be well placed.

So overall, the direction is that we expect our free cash flow to increase. All these dynamics point out. And let's also don't forget that next year, we will have a good tailwind, I would say, from the restructuring efforts that we did this year and will reduce the cost of next year as well. So if you put all this in equation, the plus are more than the minuses. And therefore, the trajectory is that our free cash flow will increase. Obviously, the specific targets, as I mentioned before, will be communicated in our next session, where we announced Q4 results.

[Roman Arbuzov, analyst]

Babis, can I ask just a quick follow-up on the restructuring. So when is it -- when will it be visible in the financials, please, the -- sort of the Q4 leg of it? When is that visible in a number?

[Charalampos Mazarakis, executive]

As Mr. Tsamaz pointed out in his speech, I mean, we are executing it as we speak. So the cost will be a sub cost this quarter in Q4. And the voluntary [ time ] will be effective towards the end of this year. So starting off the first quarter or the first quarter of next year, it will be visible in the numbers.

[Operator]

The next question comes from the line of Giannoulis, Dimitris with ResearchGreece.

[Dimitris Giannoulis, analyst]

Following up from the last question about the voluntary retirement costs cash wise in Q4. Should we expect any amount to flow in the last quarter of this year cash wise? And the other question is on Romania, has there been any change in the carrying values of the Romanian businesses compared to Q2, especially after the impairment that was taken in this quarter, in the last quarter? Because if I look at the minorities in the balance sheet, quarter-on-quarter, there has been a slight increase. So how does that reconcile with the impairment? And more specifically, are you comfortable with the valuation, the carrying value of the mobile business in Romania, which in the first half was the direct stake at least the 70% was valued at EUR 210 million?

[Charalampos Mazarakis, executive]

Thank you for the questions. To your first leg, regarding the voluntary retirement scheme, yes, the -- if you’re are following that, we did a bid mid part, half of it has happened in Q2. And it's already done. The second one will be done in Q4. And so the payments will be most likely happening in this quarter, in Q4. Maybe there are some tails that will fall in 2021, but most likely will be not. But this is how it will be done. I mean all the posts will be most probably done by the end of the year.

Regarding the current values of Romania, that's a technical question. So the direction is that following the agreement that we had with the buyer for -- with Orange for -- to buy the fixed business. Obviously, according to the IFRS, we had to revalue the -- we have to compare our current value versus the tangible proof of the market that discussed. So therefore, also on the mobile part, since we are keeping it, we had also to valuate against the forecast and the going forward model that we have. And the combination of the 2 resulted in impairment that was booked in Q3. And this is the number that you see in your -- in the accounts.

Following this impairment, the carrying value of both mobile and fixed, now they are reflecting actually the fixed, of course, much more pronouncedly. They are reflecting real values that the market is giving -- is offering. So it's quite credible, especially for the fixed. And therefore, for the time being, that is the bookings. And yes, with these standings, we feel that the carrying value now in our books after the impairments reflect the value of this -- the value and use of these 2 businesses.

[Dimitris Giannoulis, analyst]

Okay. So just to be -- to clarify that, so would you say the carrying value of the mobile business is higher Q-on-Q now after the revaluation or lower?

[Charalampos Mazarakis, executive]

The mobile business has suffered impairment. So currently, the value of -- the current value of the mobile business is around a little bit below [ EUR 180 million ] after the impairment. This is the equity value. And that's important to note. And with that one, it reflects the current view.

[Dimitris Giannoulis, analyst]

Okay. And just a last one, if I may. Have you witnessed any important significant changes in the competitive landscape increase at all during the last quarter?

[Charalampos Mazarakis, executive]

In Greece, the environment has not changed. I mean the whole market, as always, we state is quite competitive in Greece in every front. All the [ 3 ] players, we are fighting day-by-day for the benefits of our customers, and this hasn't changed. Obviously, during the Q2, where we had the COVID-19, a little bit the activity was subdued, by definition, but right after it was -- it came back to the normal cases, as expected.

[Operator]

The next question comes from the line of Ierodiaconou, George with Citigroup.

[Georgios Ierodiaconou, analyst]

It's just a few follow-ups, if you don't mind. The first ones are on the cost cutting for next year. And Babis, I know you mentioned at the beginning that you said that the run rate cost savings around EUR 50 million. I just wanted to check if that's what we should expect for 2021? Or is that the run rate of both plans put together, which partially have been -- have already accrued during 2020. So basically, just to get an idea of the cost saving phase in between the 2 years is that possible?

The second one is around the weakness in postpaid. Is it possible to give us a bit of an idea of what's driving it? What are you seeing subsequently? And whether the lockdown could have an effect also on postpaid or whether that's not really something you should be not concerned?

And then the final question around roaming in 2021. I just wanted to understand a bit how some of the roaming agreements work? Because my understanding is there are some minimum commitments. So tourism -- the event that tourism rebounds a bit, but not materially, does that mean possible new revenues may actually be down or flat just because there were some minimum commitments in 2020 kind of helped the overall level. Those were my questions.

[Charalampos Mazarakis, executive]

Thank you, George. And let's take it one by one. On the first leg, it was said that this whole voluntary retirement scheme actually is expected to save a little bit over EUR 50 million, namely 50 -- around EUR 54 million, EUR 55 million. With 1,100 -- 1,150 people that will be participating, a little bit higher than expected. And this is the run rate. Half of it will be realized at the end of the year, so it has no effect into 2020, so all will be '21. And half of it was realized half year 2020, so it will have -- half of the half will also benefited 2021. So out of the -- to cut the long story short, out of the EUR 55 million, we expect that the reduction in 2021 will be around EUR 40 million versus 2020.

On the roaming agreement, you said the question, the roaming agreement and the roaming revenues for us being part of a big group also has to do with the wider agreements in terms of trading that we do as part of the Deutsche Telekom Group. So therefore, with all these arrangements, the real driver is the volume, how many people we have and from which destination they are coming from, from which place they are coming, whether they are EU countries or non-EU because the agreement there is different. So I guess if you're referring to that one. And the agreements and the rates we charge are for those that are in EU -- obey to the EU regulation directives, whereas for the non-EU, it's a little bit of a bilateral agreement in terms of charging. Always within the wider frame agreement of our group. So how much roaming are we going to have next year? It will depend on 2 things. One is, how many visitors we will have and what is the mixture of EU and non-EU. And we said before, the estimate is that if we have a much quiet summer in terms of COVID, then we expect this number to go up, the roaming revenues to go up next year. How much? It will depend again or it will depend heavily on the arrivals.

On the postpaid segment, maybe Mr. Gabrielides can give you the proceeds.

[Panayiotis Gabrielides, executive]

Yes. Look, the impact of the COVID situation and restricted mobility on postpaid is, obviously, not so significant as in prepaid as most of the revenue comes from monthly fees. Nevertheless, there is a small chunk of revenue coming from usage, which is affected whenever we have the situation. I would say that impact on postpaid is -- if there is an impact, would be more long-term as we've seen in other situations. Because of the overall economic problems that we may see in the following months or next year, which affects the balance between prepaid and postpaid.

[Georgios Ierodiaconou, analyst]

The rate in Q3 was driven by any specific segment or corporate?

[Charalampos Mazarakis, executive]

Sorry, George, can you repeat because the line was not that clear.

[Georgios Ierodiaconou, analyst]

Yes. The weakness in postpaid on -- during the third quarter, was there any specific segment that was responsible for this? Is it B2B or B2C that has the most volatility?

[Charalampos Mazarakis, executive]

It was -- it had the elements that are unique to B2C to B2B and also to both. I mean the service revenue for the postpaid was affected, as we said, by the own roaming. First of all, those customers of ours that didn't travel. This is mainly predominantly B2B, but also some is B2C. We had a little bit of -- especially in July and a little bit of August, we had the prepaid. Being recovering, yes, but still a little bit behind last year. This is mostly B2C. And we have the termination rates with both.

And also, we had another item, which is mostly B2C, which is the premium SMS, which was this short digit SMSs, which was regulated and that mainly hit B2C. So it's not -- there's no one formula that you can separate them. So it's a little bit of both segments affected. But all -- the good thing is that all of them -- the good thing the population is at for all of them, it was mostly external factors that affected not something that is not working with our commercial performance because MTRs, the short codes, the own roaming and even the prepaid because of the lockdown, all these are due to the difficult times we are living in.

[Operator]

The next question comes from the line of Patrick, Maurice with Barclays Investment Bank.

[Maurice Patrick, analyst]

Maurice here from Barclays. Apologies if the questions have been asked, but I've been on the mobile. So the call has been dropping off, I think, does in the U.K. So 2 questions from my side. On the towers, so with Vantage Towers been merging with Wind, you obviously have a large competing tower company. Maybe that could offer you cheaper access to towers than your own towers. So I guess your thoughts, big picture on how your own towers going forward and maybe use of the other tower company given it's supposed to be independent? And then on fiber, could you just articulate how much fiber you expect your rollout of fiber to the home, your rollout in 2021, please?

[Charalampos Mazarakis, executive]

First of all, on towers, this is an initiative of 2 competitors, and we need to see how this develop. Obviously, we are always examining strategic options, but this is something that we don't see as much to do. Because our network is already out there, and it's also starting being gradually translated in a way that can -- that we can move on to the 5G deployment pretty quickly. So yes, we are always open to ideas, but there are certain things that we cannot wait, we can't rely on and we need to go on.

On the fiber, we are rolling fiber despite all these cases of delays from -- due to the COVID that we had in the beginning of the year. We have secured in our CapEx every year, the amount that will allow us to rollout about -- to the path around 300,000 homes every year. This is the path that we need to do. That's in a good -- if everything goes well, and hopefully, we'll not have any delays in the -- especially in the beginning of the year, either by the weather or by the delays in the COVID. So this is what is in 2021.

[Maurice Patrick, analyst]

Great. And is it still the intention that -- for fiber to the home, your rollout regionally, so you'll do part of Greece and Vodafone and Wind will do their parts and you'll have reciprocal use of each of the network? Is that still the plan?

[Charalampos Mazarakis, executive]

Yes. We have a very targeted rollout, namely 2 areas, first of all, that the traditional fiber technology like vectoring or VDSL is not technically feasible. And we expect to rollout to these specific areas, which are around our local exchanges, by the way, by the mid of 2022. So we have still very targeted place to go. This is areas where the VDSL assignment technology isn't working for technical reasons. And this is our areas, let's call them that way. And other than that, we are also filling in the spots in the areas where we have allocated the VDSL rollout and the vectoring rollout. Even in these areas, in some cases, it's -- VDSL is not possible to be done for technical reasons. And we are also filling in these gaps with fiber to the home. So it's very targeted. And for these areas, it's a transition from the ADSL directly to fiber to the home. So it's -- that's why it's commercially attractive, and we are focusing on these areas, first of all.

[Operator]

The next question comes from the line of Ng, Clara with JPMorgan.

[Chai Lin Ng, analyst]

Two questions, please. So the first is, what's the EBITDA of the fixed unit that you guys have sold? And how much EBITDA will be left post the fixed sale? Because there is this MVNO arrangement between the 2 arms? And then the second question would be, because the fixed arm used to own about 30% of the mobile unit, so what is the effective ownership that OTE has of the mobile unit after the fixed part is sold?

[Charalampos Mazarakis, executive]

Thank you for the question. Starting from the second leg, which is the ownership. Directly, OTE has 70% and then 30% is owned by TKR by the fixed part. So currently, effectively, we have 86.2% of the mobile. Now following the sale of the fixed part, obviously, we will have a little bit of paradox there that one competitor will hold 30% to another competitor. So usually, in these cases, this -- all this becomes ring-fenced and basically is moot. And we have the arrangements to continue enjoying the 86.2% ownership in economic terms, even after the sale through the arrangement of the ring-fenced ownership. But that's a scenario that is in case that this 30% is not sold or is not being required to be disposed of from the regulators. So it's something that we are in a position to conclude now, but these are the scenarios.

Regarding the EBITDA and the profitability of the fixed business. For us, it's -- right now, of course, in Q4, in Q3 of this year, we report the entire pack. So the EBITDA with -- for both companies is in this reported possibly and integrated on the graded part. Starting off next quarter, we'll be reporting the mobile-only without the -- and we make it clear, what is the EBITDA without the MVNO revenues that mobile has from fixed. So the picture of what is left behind in terms of EBITDA will be evident in the next quarter. And here, I can say that roughly the trajectory and the assumption for TKR -- for the mobile part is of a stand-alone EBITDA of about EUR 40 million. That's for the mobile on a stand-alone basis.

[Operator]

[Operator Instructions] We have a follow-up question from the line of Draziotis, Stamatios with Eurobank Equities.

[Stamatios Draziotis, analyst]

Yes. Just a very quick follow-up on the -- on the free cash flow question for next year. So just to make sure I understood correctly. So what you said is that this year your target was and remains actually EUR 610 million adjusted free cash flow. And you basically said that next year, the tailwinds from higher roaming, assuming this is indeed the case and we have normalization regarding the COVID situation. So the tailwind from roaming financial expenses and cost savings will most likely offset any additional amount in CapEx. Is that correct?

[Charalampos Mazarakis, executive]

You said it better than I did.

[Operator]

The next question is a follow-up question from Grigoriou, George with Pantelakis Securities.

[George Grigoriou, analyst]

Sorry, it's a bit late now as well. One last question regarding competition in Greece. When do you think -- what do you see is going to happen with Nova now that's got new owners and I believe that in December, the auction of the Champions League football rights are coming up again?

[Michael Tsamaz, executive]

Thank you for the question. I mean the auction was always there and the football was always there. So nothing changes in our planning. We are facing this auction similarly to any other content auction. And we will be competitive in order to support our offerings. So nothing changed actually.

[Operator]

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, executive]

We have plenty of work to do in the coming quarter to finalize the disposal of our Romanian fixed business and to execute the important transformation moves that are underway. We look forward to giving you a progress report in February. In the meantime, we wish you the best and stay healthy. Take care all of you.