Hellenic Telecommunications Organization SA

ATHEX:HTO

Earnings Call Analysis

Company Maintains Growth Amidst Challenges

The company gained 35,000 new customers transitioning from prepaid to postpaid, leveraging its superior network performance. It boasts a leading 90% 5G coverage, surpassing its year-end target, and has reduced operating expenses in Greece by approximately 4%, thanks in part to a 7% drop in personnel costs from voluntary retirement programs. Adjusted EBITDA grew marginally by 0.7% to EUR 348 million, while the EBITDA margin increased to 42.9%. In Romania, however, revenue dipped by 7% due to tough competition and regulatory changes. Despite higher marketing and maintenance costs, the company confirmed its full year free cash flow guidance at approximately EUR 500 million.

Delivering a Robust Performance Amidst Intensifying Competition

OTE's Q3 2023 earnings call paints a picture of resilience and careful strategy execution in the face of heightening competition, especially in the Greek market. The company's focus has been on enriching and upgrading content, investing in infrastructure, improving service quality, and pursuing customer excellence, while also keeping a tight rein on costs. This strategy has allowed OTE to not only defend but also to enhance market positions across key strategic areas, such as broadband, fiber-to-home (FTTH), TV, and postpaid mobile telephony. Service revenues remained nearly unchanged, thanks to growing contributions from TV and broadband offerings. Despite temporary halts in ICT revenue growth due to recent parliamentary elections and natural disasters, there's a strong belief that this segment will regain momentum quickly.

Building on a Strong Base

The earnings call provided a glimpse into the various components driving the company's performance. Greek retail revenues showed signs of strength, particularly in broadband and TV services. Notably, OTE's broadband revenue growth has resumed positively after previous quarters' slowdown. The company's FTTH infrastructure continues to achieve higher penetration and lower churn rates. With 17,000 new TV subscribers in the quarter and a continuing crackdown on piracy, OTE's total FTTH base now stands impressively close to double the level from a year earlier. The company has already achieved 90% 5G network coverage, outpacing competitors and securing technological advantage. OTE's disciplined approach to expenses, along with reductions in personnel costs thanks to voluntary retirement programs, has resulted in nearly a 4% decrease in total operating expenses. The company has seen an uptick in margins, with the third-quarter adjusted EBITDA after leases increasing and an improved margin of 42.9%.

Strategic Investments and Shareholder Remuneration

Despite slight adjustments, OTE confirmed a robust free cash flow guidance of approximately EUR 500 million for the full year and a slightly reduced CapEx guidance of EUR 620 million, due in part to delays caused by severe weather. The company has also progressed well in its share buyback program, reaching 88% of its EUR 175 million target for 2023. With firm investments shaping a promising 2024, shareholders have seen a full dividend payout of EUR 250 million for the year.

Marketing Spend and Competitive Dynamics

OTE is actively responding to competitive pressures by modifying discounts, bolstering prepaid offerings, and maintaining a high marketing profile, with marketing costs increasing by approximately EUR 5 million year-over-year in Q3. However, the company did not disclose whether this elevated spending represents a new norm or a temporary measure to counteract competitive attacks.

Facing External Factors and Looking Ahead

External challenges such as natural disasters and political changes have temporarily impacted revenues, particularly in ICT. OTE is adjusting to these shaping factors and expecting a brighter outlook as ICT revenue growth has already shown signs of recovery since October. As the company prepares for 2024, the management conveyed confidence in achieving full-year targets despite not operating in an easy environment. The company will remain vigilant on its expenditure, including marketing spend, as they navigate the competitive landscape and strategize towards the next fiscal year.

Earnings Call Transcript 2023-Q3

[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 third quarter 2023 financial results.

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, executive]

Good morning to all of you, and welcome to OTE's Third Quarter 2023 call. We are making continuing progress in most of the activities and services on which we are building our future top line growth and profitability. So despite the market reaction, as we will explain, we delivered a robust quarterly performance. I'm more than ever convinced that we're taking the right path whenever we decided to enrich content, to upgrade content, upgrade speeds, invest in our infrastructure, improve service quality and customer excellence, support the visibility and reputation of our brand and while we control our cost base without compromising any of these imperatives.

Our results continue to show that the strategy is paying off, offsetting any temporary pressures we face from time to time. As we had anticipated, competition in the Greek market has been intensifying over the recent quarters. In this context, we not only defended our positions, but also added new customers in all key strategic areas, such as broadband, fiber-to-home, TV and postpaid, mobile telephony. These customers who recognize the value of our brand proposition are the keys to our future success.

As in the prior quarter, Greek service revenues, including retail fixed and Mobile Service revenues were virtually unchanged. The mix, however, is slightly different and more encouraging as a contribution of both TV and broadband to revenue growth was positive, confirming the improving trend in fixed. The performance of the broadband is starting to recover as last year's speed upgrades cemented customer loyalty in our market positions. We have now resumed top line growth following 3 quarters of slowdown. We're also continuing to make progress in the deployment of our fiber-to-the-home infrastructure and this is rewarded by higher penetration and lower churn.

Similarly, our focus of the most popular TV programming is also paying off. Current industry-wide efforts to stave off piracy, to support our top line in this segment. Piracy is a real plague and an obstacle to getting appropriate returns on the significant investments we make.

This quarter, ICT revenue growth marked what we think is a temporarily halt, what we think is a temporary halt. As you know, public sector contract constitute the bulk of our ICT revenue stream. Greece recently had parliamentary elections, and while there was no change in the majority, it's quite normal for a new administration to review ongoing programs.

In addition, as you also know, between floods and fires this summer in Greece had more than its fair share of natural disasters. As a result, some public funds were redirected to more immediate priorities. But the digitalization of the country's public infrastructure is a fundamental requisite that the market anticipates. And we are confident that the ICT revenue team will gradually retrieve all its momentum, as you have already witnessed since the end of the quarter.

Mobile also deliver top line growth, but at a more subdued pace than in previous quarters. This moderation is primarily due to visitor roaming, while roaming volume was up during the peak third tourism season, tariffs offered to international operators were lowered. Excluding visitor roaming, Mobile service revenue growth was only slightly below earlier periods, confirming our trajectory in both prepaid and postpaid and creating the foundations for ongoing growth in the coming quarters.

We're also pursuing our investments in advanced 5G networks and coverage where we enjoy significant competitive advantage. Overall, we are satisfied with mobile revenue trends, with our ability to resist direct competitive attacks on our business and to upsell our subscriber base. And recently, we took new initiatives aimed at further strengthening mobile performance in coming quarters.

EBITDA in Greece is up in the quarter and in the 9 months, and we're reporting a substantial margin. Our costs are under control and our personnel expenses continue to benefit from past recent retirement plans. Conversely, we have increased our spending where it is needed, notably to support our market position in this heated competitive moment.

Having entered this final quarter in good order, we have confirmed our full year free cash flow free cash flow guidance of approximately EUR 500 million, however, reduced slightly our CapEx guidance to EUR 620 million, taking into consideration some delays in TV content payments as well as some minor deferrals in fiber to the home deployment due to the harsh weather conditions Greece experienced.

We can confirm our shareholder remuneration targets for the year as the full dividend of EUR 250 million has been paid out. And we are 88% of the way in our 2023 share buyback program totaling approximately EUR 175 million. We will spend the remaining few weeks of the year firming up our investments in the future and making sure conditions are in place for a successful 2024.

With that, I will ask Babis to review our third quarter performance. Babis?

[Charalampos Mazarakis, executive]

Thank you, Michael, and welcome to everyone on the call from me as well. So yes, overall, this was a rather solid third quarter [ with ] the underlying numbers we reported and especially the positive trends that Michael touched upon. Total group revenues were down nearly 3%, but this consolidated picture is a result of many different moving pieces. In Greece, revenues were down a little over 2%, but the bulk of the drop was due to wholesale and the temporary delay in ICT invoicing while Mobile Service revenues and retail fixed services proved very, very resilient. In Romania, revenues dropped 7%, a sequential improvement largely due to an easier operation as MVNO revenues are no longer boosting the 2022 base.

Group adjusted EBITDA after leases was down less than EUR 6 million or less than 2% so [ wider ] than the previous revenue decline. In Greece, EBITDA was up once again by nearly 1%, yielding a strong margin. Conversely, Romania EBITDA margins were down. So let's first focus on Greece, where retail revenues were solid with positive broadband and TV, a testimony to the strength and customer appeal of our services.

Our revenue from retail fixed services posted a very limited drop of less than 1% as we're witnessing a recovery of some key services. Both broadband and TV turned positive in the quarter, while legacy voice experienced a much softer decline than in previous periods, partly helped by easier comps. In the quarter, we added 17,000 TV subscribers, bringing the total count to over 665,000. This represents our strongest quarterly addition since late 2021. It benefited from the appeal of our content, supported by favorable development in sports as a number of major Greek teams progress in the European competitions.

In addition, our TV activity was helped by the concerted track down on piracy as Michael mentioned, contracted with other operators and the Greek authorities. We are hoping that the enforcement of existing new regulation will continue to support this segment. We resumed our positive broadband revenue growth, for the first time, since we implemented last year's complementary speed increases, which worked as planned in securing customer loyalty. Having now passed the first anniversary, we are hopeful that the top line growth recorded this quarter will continue and gain strength.

All told, we added another 4,000 broadband customers in the third quarter, and our penetration on total base now exceeds 87%. In the quarter, we added another 22,000 FTTH subscribers, resulting in a total FTTH base of 216,000, not far from double the level a year earlier. This continued growth has been occurring for 1 year now without the help from [ stating ] these incentives to the final FTTH customers. A new government scheme that will support vertical wiring in buildings will hopefully be followed by more direct subsidies to utilization later in 2024.

As of September 30, our FTTH penetration stood at above 19% of homes passed. We are targeting over 1.3 million homes passed at the end of the year and are working hard to continue achieving further increases in utilization rate as well. Notably, FTTH utilization among subscribers exceeds 30%.

Other revenues were down less than 5% in the quarter. This mainly reflects the temporary pause in ICT revenues in the wake of the quick parliamentary elections in late June. As you know, many of our ICT projects are in the public sector and some that we had won and are to be implemented have been postponed by the new administration. We are absolutely confident that we will rapidly catch up with the normal flow of the business and expect other revenues to recover for the full year yet certainly, the timing delay will have an impact on the receivable from ICT projects. Other revenues were also impacted by a drop in handset sales compared to the period last year when they were held by state subsidized sales and tablets and laptops.

Wholesale revenues were down less than 6% in the quarter from both low-margin international transit and domestic wholesale. Greek Mobile Service revenues were up in the quarter. The slowdown in the growth rate is entirely due to lower visitor roaming revenues in the all-important third quarter, while both prepaid and postpaid revenues were up. Apart from this factor, I want to reiterate our total satisfaction with the positive momentum we are possibly recording in our Greek Mobile operations.

This quarter once again, we successfully strengthened our postpaid base with the addition of 35,000 new customers due to conversation from prepaid to postpaid in and ongoing new customer acquisition, supported by superior network performance. We are continuing to expand our 5G network to maintain our technological edge. We already boast 90% of [ relation ] coverage which was our year-end target. And coverage already exceeds this level in many of the country's major cities. These levels are considerably higher than what our competitors offer.

Facing inflationary pressures in our cost, we are adjusting some of the discounts we have offered in the past while also adding further value to our prepaid propositions, while continuing to work to furthering our cost base. In Greece, total operating expenses, excluding depreciation and amortization and one-offs were down close to 4% this quarter. In large part, this is due to a sharp 7% drop in personnel costs. It set the result of the voluntary retirement programs we implemented in the first half of the year. We are on full track to deliver the annual savings we had anticipated from the execution of this specific program. We also benefited from a significant reduction in bad debt provisions aligned with our current track record in terms of collections.

Finally, our energy costs were down materially. Conversely, maintenance and marketing costs were up in the quarter. The former, maintenance, is primarily due to maintenance of our IT platforms and software and the impairment of the natural disasters while the increase in marketing reflects the need for us to maintain a high profile and visibility in an active competitive environment. So first quarter adjusted EBITDA after lease increased was EUR 348 million, up 0.7%. The EBITDA margin was 42.9%, up 130 basis points.

Turning now to Romania, where total revenues were down 7% at EUR 71 million, a minor drop after 3 quarters of double-digit declines. A number of negative factors persist, namely the mobile termination rate cuts and an environment that is not getting any less competitive. For that part, total operating expenses, excluding D&A, depreciation and amortization and one-offs were up nearly 10% this quarter as the comparable quarter last year had benefited from a series of various reversals of provisions. All told, Telekom Romania Mobile adjusted EBITDA after leases came short of EUR 5 million this quarter as compared to nearly EUR 13 million in the same quarter last year.

Turning to the rest of the group P&L. Once again, there is not a whole lot to focus on. Variations of [ heavy ] material went over the 9 months since the beginning of the year, net income is exactly in line with the same period in 2022. Then to cash flow, adjusted CapEx is up 3% in the quarter and 2% down for the 9-month period due to the exceptional low level in the first quarter.

This should even out in the last 3 months of the year as we pursue aggressively our investment in fiber to the home. However, due to the shifts in the cadence of auction and consequently, payments of TV content rates, we have reduced our full year adjusted CapEx guidance from EUR 640 million to EUR 620 million, implying the fourth quarter outflow in the neighborhood of EUR 190 million.

Free cash flow after lease stood at EUR 27 million, mainly reflecting higher income taxes, which was about EUR 95 million in the quarter. In the first 9 months, free cash flow totaled EUR 397 million, and we are absolutely confirming our full year guidance at approximately EUR 500 million.

So in short, we are satisfied with where we are at this stage in the economic and competitive context. While we are definitely not operating in an easy environment, the systems and trust in the strategy we have developed over the years have put us in good shape to defend and even strengthen our positions. We are confident in achieving our full year targets and leaning forward to discussing our 2024 prospects when we will report our full year numbers in February.

On that point, Michael, Panayiotis and myself and the other colleagues are on the table, are ready to take your questions. Operator?

[Operator]

The first question is from the line of Patrick Morris with Barclays.

[Maurice Patrick, analyst]

A couple of questions for me, please. The first one on the competitive environment. During your prepared remarks, you made quite a few comments about heated markets and the fact you increased sales and marketing spend. So could you provide some more color around what's causing that increase in the -- in that market heat, the competition? That would be very helpful.

Second question, again, you talked about the discounting of wholesale roaming which impacted Mobile Service revenues. I wondered if you could give some indication of what -- was that you being proactive just because of that wholesale roaming fee? Or was it because of the risk of losing it to other operators? Why did you make that step?

[Michael Tsamaz, executive]

Okay, regarding the competitive environment. As we presented to you at the beginning of the year, the results of the first quarter and so far the results of the last quarter of last year, we faced competitive situation in the Greek market, which was, I would say, for the last 3 years, probably unprecedented by some of our competitors -- by one of our competitors. They sliced the prices in most of the services, even down to minus 50% compared to our prices. And this price war was topped up by various 2-, 3-month or 4-month promotional incentives.

What you can see and what we can tell now is that, first of all, our commercial teams, along with the rest did not lose their, I would say, calm. They were very thorough in studying the competitive moves, the reaction of the markets, the customer, let's say, perception regarding all these price initiatives that were being promoted by our competitors. And they designed the strategic initiatives that we will take in order to respond to these various competitive initiatives.

What I can say now is that, we have two main priorities. One was, above all, we had to defend and secure the customer experience we have been offering, we have been offering to our customers. And not only just defend it at the same levels, but even increase and improve the customer experience because we believe that the customer experience we offer justifies the premium value to the customers' perception and eyes. That was one.

And secondly, we did not move to slice prices or to jeopardize, let's say, the revenue per user that we had, but rather launch various market initiatives, that we're offering more services and thus, the opportunity for our customers to get more services and be upgraded on the services and thus have been upgraded in terms of pricing.

All these initiatives have paid back. And what we can see now, especially -- what we see now in Greece is a quite satisfactory result. And the level we have managed to perform and defend, the course, let's say, of commercial development over the year is -- it makes us very happy.

Panayiotis, do you want to add something on this?

[Panayiotis Gabrielides, executive]

Okay. I would say that not only we have not lost any market shares on our customer base, but to the contrary, we have developed market shares. And we've done this by protecting our customer base and without destroying the value of the base. And this is something that as you, Michael and Babis commented before, we will start seeing in the following months.

And I mean, it's impressive that even the main frontier of this price was mobile market. And in the mobile market, we are growing our postpaid base, and we are growing our revenue. So this is something very important to conclude out of this competitive situation.

[Maurice Patrick, analyst]

On the roaming?

[Charalampos Mazarakis, executive]

On the roaming revenues, the [ numbers ] are as follows. This year, we're going to hit the highest roaming revenues ever, even higher than 2019. And it's only compared with 2022, which was a year of -- let's say, the first year after the COVID crisis. And as a result, during the international negotiations and during the competitiveness that exists in the national market for routing the customers or reaching agreements in order to route the customers to our networks, it's a market practice. From time to time, you need to offer a little bit of better terms.

And here, we're talking about EUR 2 million on a total revenue of EUR 50 million. It's about 3% to 4% discount. So it's not -- it has nothing to do with the amount of customers. Actually, the amount of customers -- the number of customers we have been serving this year is higher than last year. But this comes with more intense negotiation with the home countries in the home networks. And in order to secure the traffic, we are negotiating the discounts in the area of 3% to 4%. So there is nothing structural on the roaming hygiene, just these necessary marketing moves that needs to be done in order to secure the traffic.

[Maurice Patrick, analyst]

Great. And a very quick follow-up, could you quantify the increase in the marketing spend that you've made? I mean was it -- are we talking billions of euros?

[Charalampos Mazarakis, executive]

You mean the, for quarter 3? Yes, that was in the area of EUR 5 million.

[Operator]

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

[Stamatios Draziotis, analyst]

Actually three, if I may, please. Firstly, just effectively following up from the previous questions, mainly regarding Greek fixed. You are basically lapping a full year of declines. There was some sequential improvement to this quarter, as you said. But we are still in negative territory on a year-on-year basis. So just wondering when do you feel it's reasonable to expect this segment to inflect? That's my first question.

Secondly, just on the free cash flow guidance. Just wondering, there was this small downward revision on CapEx due to timing issues as you said, yet the free cash flow guidance remains unchanged. Just wondering what makes you take this conservative approach. Does this relate with a potentially weaker operating cash generation profile in Romania versus what you had anticipated maybe?

And lastly, on energy costs, you said they were down significantly this quarter. Maybe if you could provide some granularity for next year given the hedges in place, please.

[Charalampos Mazarakis, executive]

Let me start with the Greek fixed. I think you described it very well. There has been a sequential improvement. As we have also mentioned in previous quarters, as of September, October, we are comparing ourselves with the months of 2022, where at least the competitive heated environment was present at least in the fixed side and the -- a little bit in the mobile, which was heated up again in the beginning of 2023.

So what we see here is totally consistent with what have described in previous quarters, where we said that gradually, we will be seeing our improvement. And we are seeing that this improvement will be further pronounced, I would say, in quarter 4 where we expect for some months to also hit flattish revenues at least versus a year ago on the fixed service revenue.

On the free cash flow, let me clarify because -- thank you for the question because it's quite transparent. First of all, there's no any hygiene problem in the cash flow generation. There are two timing effects which happened independently and without being connected.

The first one is, as we've said very clearly, the TV content auctions that inevitably will drive the payments to 2024. That's -- this is the main reason for the lowering the CapEx guidance. Now the worry whether this will impair the 2024 cash flows is not valid because, at the same time, as we explained in the previous description, ICT projects that were about to be implemented and paid, now basically, the whole ICT has been moved by quarter, let's say. So therefore, ICT revenues that were about to be cast in, in quarter 4 -- in quarter 3 and quarter 4 will be moving by 1 quarter.

The combination of all of this, plus some other minor capital adjustments is leading to an overall balancing out of the two items. So yes, we have a plus 20, minus 20 this year, and we have a minus 20, plus 20 of next year. So -- and where we will communicate the cash flow guidance for the 2024 in February will make absolutely and crystal clear this combination of the two offsetting factors. So these are the main drivers behind the cash flow. And as in total, in this kind of rounding, that's why the total free cash flow guidance remains unchanged.

On the energy cost, the reason why we are dropping when we were comparing versus last year is because of the previous, let's say, agreements we had, which expired at the end of 2023, and of course, they were reflecting the price at the time that these were constructed. So in 2024, although we have gained some very good agreements, apparently, these are not at the level of 2023. Therefore, there's going to be an increase in the overall energy bill, the size of which we are waiting to see and quantify based on the forecasted consumption as well.

But this one is not having [indiscernible]. And with all the rest of the saving programs that we are implementing, we expect to -- to the biggest extent, to offset this increase in the energy for next year and basically have an indirect cost, indirect costs that will be flattish, meaning that the rise in the energy cost because of the agreed prices will be offset it by all the other savings that are contemplated.

[Operator]

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

[Georgios Ierodiaconou, analyst]

I've got a few follow-ups, please. Firstly, on the competitive environment, you did mention I think the past term at some point when describing it. So I'm just curious if you can kind of update us on what you've seen in recent months. I noticed one of the more disruptive players, as you mentioned earlier, has reduced some of the promotional activity. Is that something that's more broader? Is that something you may follow as well? Any updates on this would be very useful.

And also, my second question is more around the cash flow profile for next year. I know that, Babis, you mentioned there's EUR 20 million headwind of receivables and benefit on CapEx that may reverse next year. Should we then expect CapEx to trend higher next year as a result? Any clarity on that would be very useful.

And then a final question is around the ICT revenue comment. You did suggest that already in the fourth quarter, it seems to be improving. I'm just curious whether, based on your understanding of the various projects, if there should be growth also going into 2024 or whether the overall picture should be more balanced.

[Michael Tsamaz, executive]

Regarding the promotional activities of competitors, I cannot comment. They have their own commercial or strategic programs. As I said to you earlier, at the beginning of the year, we developed commercial plan with the aim to defend customer experience and defend also the value that we're getting from our customers.

So this plan works. We follow our plan. This plan is multi-facet in many aspects. It has various initiatives on all the services that we offer to our customers. So we have our own plan and we -- just look at it, we observe what competitors are doing, but our plan pays off and we are quite happy with it.

So when -- promotions always have time limits. So -- but I cannot go into the mind of the commercial teams of competitors to know whether their promotion will last 1 month or a year or whatever. What I know is, however, that our marketing people are quite efficient in what they propose to the market and to our customers and it works.

[Charalampos Mazarakis, executive]

Okay. Now for the next two questions. On the cash flow, I think it rates well as a kind of transparency with this move on the funded CapEx and the receivables. So very consistent with what we have already been communicating, the previous, current level of this year, the EUR 640 million, we always said that this is the peak. I mean even in the next year, in 2024, we are not aspiring to see higher CapEx on that one since these 2 years, actually, they are the peak of our rollout.

So now whether it will be the exact number, so there's not any increase in the CapEx. It just might be a shifting. But before commenting what will be the level of next year, we also need to see the various planning activities, which we are currently doing. And that will be very clearly communicated in our Q4 results. So there will be no surprises because of this move.

On the ICT, yes, there was -- it was clear that Q3 was not -- it was impacted by these timing issues. I can only say that already as of October, when you compare October '23 to October '22, some of these projects now that we have postponed to be received are now in the track of being received. So therefore, although I cannot comment on the Q4 numbers, I can say clearly that there is an impressive increase on the ICT revenues in October, which hopefully will follow in the coming months as well, since some of the projects that we are being postponed will be accumulated to be received in Q4.

For 2024, we'll also see a strong year of ICT because the digitalization of the country continues. Those projects are not stopping. I would say that they are intensifying actually, because of the demand of the society to have the digitalization of the economy. And therefore, we also see a further increase in the system or the ICT revenues in 2024. So this is the picture for ICT.

[Georgios Ierodiaconou, analyst]

If I could ask one follow-up on the companion environment. You mentioned earlier the EUR 5 million increase in marketing spend year-on-year in the third quarter. I was curious if this is a new norm. Do you intend to potentially keep increasing the marketing spend or whether it was a temporary period of improving NPS? Just curious whether it's a structural shift or a temporary one.

[Michael Tsamaz, executive]

Well, if we tell you how well we will do the marketing spend, our competitors will hear about -- will hear it also, and I would say this would not be wise. Sorry for this.

[Charalampos Mazarakis, executive]

And the other thing we do here is -- this is totally discretionary. So it depends on the conditions. Yes.

[Operator]

The next question is from the line of [indiscernible] with Ambrosia Capital.

[Unknown Analyst]

A couple on my side, please. On the wholesale revenues performance, could you give a bit more color? Was it -- I'm guessing it was the lower margin, but any color on the outlook, particularly on the higher-margin business of the wholesale revenues, how that's evolving? That would be helpful. That's the first one.

Second one is in Romania, the EBITDA has been just slightly below EUR 5 million for the last 3 quarters. Is this the new trend now? How do you see that evolving?

And finally, on a more structural angle, leverage continues to come down. Any color on capital allocation, shareholder remuneration for next year would be helpful.

[Michael Tsamaz, executive]

Okay. Thank you for the questions. So let's go one by one. On the wholesale part, there are two pieces. One is international one, which is low margin, and it's basically the competition of -- for the national trading and [ hub-ing ]. That was -- this has -- we have observed also in the past that discuss rather erratic behavior depending on the situation and the conditions in the market. For this particular quarter, we had EUR 5 million less revenues versus the equivalent quarter of last year.

If we look at it at the 9 months, we are flat, so -- because some other, quarters we are up and down.

Now on the other one, which is the national wholesale, I think we have always been -- commented that there is a natural decline of this revenue stream, because -- obviously, mainly because of the moving of lines for [ distributing ] the network as they also develop the fiber-to-the-home network. So this is in the area of EUR 25 million. But -- and it's a trend that is not different versus the previous quarters.

In Romania, I think quarter 3 is hopefully, the last quarter where we have this comparison effects. And I can remind that the quarter 4 of last year was almost 0 EBITDA. And because there were still some -- the aftermath of the fixed mobile separation and the stabilization of the business. The current EBITDA level is almost EUR 5 million, it's something that we expect to be the base and then growing from there.

And without being able to comment on Q4, because that will be commented later on, we can say that these trends are the -- where we start growing from. And with the comparison effects being now sorted down we were expected to see a much more operationally-correct comparison quarter-by-quarter starting from the next quarter.

The other thing about Romania is that despite the fixed competition, we are growing our contract customer base. which is the one that builds the significant ARPU revenues. And we have -- although the market is quite competitive, we have specific proposition to the customers, which secured this growth, and they can say that also Q4 will be similar like this.

On the capital structure remuneration, I think that at this point of time, we can defer this discussion for February when as usually, we'll announce our remuneration policy for next year for 2024. And that will be the forum where we can discuss what will be the next frame of the remuneration.

[Operator]

We have a follow-up question from Mr. Ierodiaconou, Georgios with Citi.

[Georgios Ierodiaconou, analyst]

Maybe one last follow-up for me. It's around some of the initiatives you've taken with the billing. And I think you also raised top-up levels for prepaid. Do you mind just giving us a summary of these initiatives and whether they're already active in the fourth quarter? How long will it take before we see impact on your financials, please?

[Charalampos Mazarakis, executive]

These initiatives have been announced, of course. And because of the time frame that it takes to be flowed into our billing cycles. I think that safe assumption is to assume that this will be impacted. It's not impacting the numbers as of December. So obviously, not present in Q3. And in Q4, it will capture about 1/3 of the quarter.

[Operator]

There are no more audio questions at this point. We'll now move on to our webcast participants. And their written questions.

The next question is from Raciborski, Piotr from Wood & Coal. And I quote, "do you expect to increase telecom services prices in 2024 estimates? How probable is that the regular tour will allow Greek telecoms to implement inflation-linked price adjustments?"

[Michael Tsamaz, executive]

Okay. As we mentioned last quarter, no, we don't have any plans to increase the -- based on inflation, the existing contracts of our customers. However, what will happen with new contracts, this is something which is free, and it depends on the market conditions. It's a decision we'll have to take when the new contracts are being signed.

[Operator]

Thank you. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to OTE management for any closing comments. Thank you.

[Michael Tsamaz, executive]

Thank you for your attention, questions and interest in OTE. We are pleased with our resilient performances, in the year-to-date, are confident in our ability to meet our full year commitments. We look forward to our full year meeting next February when we will discuss our prospects and guidance for 2024.

Have a nice day. Thank you very much, operator.