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TABLE OF CONTENTS
I. STATEMENTS OF MEMBERS OF THE BOARD OF DIRECTORS
II. ANNUAL REPORT OF THE BOARD OF DIRECTORS
III. AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS
IV. ANNUAL FINANCIAL STATEMENTS
3
I. STATEMENTS OF MEMBERS OF THE BOARD OF DIRECTORS
STATEMENTS OF MEMBERS OF THE BOARD OF DIRECTORS
(In accordance with article 4 par. 2 of Law 3556/2007)
4
The members of the Board of Directors of HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.:
1. Michael Tsamaz, Chairman and Managing Director
2. Eelco Blok, Vice Chairman of the Board of Directors
3. Charalampos Mazarakis, Board Member
We confirm that to the best of our knowledge:
a. The Annual Financial Statements (Consolidated and Separate) of the HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. for the period January 1, 2022 to December 31, 2022, which have been prepared in accordance with the applicable accounting standards, provide a true and fair view of the assets and liabilities, the owners’ equity and the results of the HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. as well as of the companies included in the consolidation taken as a whole; and
b. The Annual Report of the Board of Directors provides a true and fair view of the development, performance and the financial position of the HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. and of the companies included in the consolidation taken as a whole, including the description of the principal risks and uncertainties they are facing.
Maroussi, February 2 2 , 20 2 3
Chairman
& Managing Director
Vice Chairman of the BoD
Board Member
Michael Tsamaz
Eelco Blok
Charalampos Mazarakis
The two members of the Board of Directors, who have signed the above statements, have been authorized to do so in accordance with the decision of the Company’s Board of Directors of February 22, 2023.
5
II. ANNUAL REPORT OF THE BOARD OF DIRECTORS
6
TABLE OF CONTENTS
A. FINANCIAL AND OPERATIONAL HIGHLIGHTS OF 2022
B. OBJECTIVES AND STRATEGY
C. SIGNIFICANT EVENTS OF THE YEAR 2022
D. RISKS AND UNCERTAINTIES FOR THE NEXT YEAR
E. NON FINANCIAL REPORT
F. CORPORATE GOVERNANCE STATEMENT
G. MATERIAL TRANSACTIONS WITH RELATED PARTIES
H. CASES OF CONFLICT OF INTEREST AND AGREEMENTS OF THE FISCAL YEAR 2022 WHICH FALL UNDER
ARTICLE 99 OF LAW Ν.4548/2018 (RELATED PARTY TRANSACTIONS)
I. SIGNIFICANT EVENTS AFTER THE YEAR END
J. INFORMATION REGARDING ACQUIRED OWN SHARES IN ACCORDANCE WITH THE PROVISIONS OF
ARTICLE 50 PARAGRAPH 2 OF LAW 4548/2018
K. INFORMATION ACCORDING TO ARTICLE 4 par.7 OF LAW 3556/2007
L. ALTERNATIVE PERFORMANCE MEASURES (APMs)
ANNUAL REPORT OF THE BOARD OF DIRECTORS
7
This report of the Board of Directors of the HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (hereinafter referred to as “OTE” or the “Company”) has been published on the Company’s website under the European Single Electronic Format – «ESEF», in accordance with the provisions of Law 3556/2007. The content of this report has been prepared in accordance with the provisions of Articles 150-154 of Law 4548/2018, Article 4 of Law 3556/2007 of articles 1-24 of Law 4706/2020 and Article 2 of Decision 8/754/14.04.2016 of the Board of Directors of the Hellenic Capital Market Commission and refers to the Annual Financial Statements (Consolidated and Separate) as of December 31, 2022, and the year then ended. The OTE Group (the “Group”) apart from the Company also includes subsidiaries over which OTE has direct or indirect control. The Consolidated and Separate Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (E.U.).
This report includes the actual depiction of the progress and performance of the Company's business and its financial position, for the period from January 1, 2022 to December 31, 2022, its objectives and its strategy, the significant events which took place in 2022, as well as the most significant events following the year end. The report also contains a description of the main risks and uncertainties for the next year, the non-financial report, the Corporate Governance statement, the material transactions with the Company’s and the Group’s related parties, any cases of conflict of interest and agreements of the fiscal year 2022 which fall under article 99 of law ν.4548/2018 (related party transaction) and additional information as required by applicable law.
OTE’s Financial Statements (consolidated and company statements), Auditor’s Report on the Financial Statements and the Annual Report of the Board of Directors of OTE S.A may be found on the following link:
https://www.cosmote.gr/cs/otegroup/en/oikonomikes_katastaseis_omilou_ote_kai_ae.html
Furthermore, the Financial Statements and the Auditors’ Reports on the Financial Statements of the OTE Group consolidated companies that are not listed on the stock exchange (in accordance with Capital Markets Board of Director’s decision 8/754/14.04.2016) may be found on the following link:
https://www.cosmote.gr/cs/otegroup/en/oikonomikes_katastaseis_etairiwn_omilou.html
The amounts in this report are presented in millions of Euro, except per share figures and elsewhere when otherwise indicated.
A. FINANCIAL AND OPERATIONAL HIGHLIGHTS OF 2022
Group Revenues
202 2
202 1
Change
Greece
3,155.4
3,046.1
+3.6%
Romania mobile
306.4
315.5
-2.9%
Eliminations
(6.5)
(25.3)
-74.3%
OTE GROUP
3,455.3
3,336.3
+3.6%
Group Adjusted EBITDA After Lease (AL)
202 2
202 1
Change
Greece
1,310.0
1,265.4
+3.5%
Margin (%)
41.5%
41.5%
0pp
Romania mobile
38.0
30.5
+24.6%
Margin (%)
12.4%
9.7%
+2.7pp
OTE GROUP
1,348.0
1,295.9
+4.0%
Margin (% )
39.0%
38.8%
+0.2pp
Note 1: The purpose and calculations of all ‘Adjusted’ data are detailed in the
L. Alternative Performance Measures Section
.
Note 2 :
Changes in accounting policies ,
see Note 2 Consolidated Financial Statements
Note 3: All figures in 2021 adjusted to reflect only continuing operations; TELEKOM ROMANIA operations along with certain significant commercial transactions (MVNO agreement and handset sales) that existed between TELEKOM ROMANIA and TELEKOM ROMANIA MOBILE until the completion of the sale of TELEKOM ROMANIA have been treated as discontinued operations. The sale was concluded on September 30, 2021 .
OTE Group’s consolidated revenues totaled Euro 3,455.3 in 2022, up 3.6% compared to prior year, on positive momentum in Greece.
In Greece, total revenues posted a solid increase of 3.6% to Euro 3,155.4, benefiting from the positive performances in Mobile, ICT, TV and Broadband. Total service revenues were up 1.2%, supported by ongoing investments in network infrastructure and customer experience, while ICT segment recorded a solid growth of 26.4%.
In Romania mobile, total revenues reached Euro 306.4 in 2022, down 2.9% compared to prior year, largely affected by significant drops in mobile termination rates (MTR).
ANNUAL REPORT OF THE BOARD OF DIRECTORS
8
Total Group Operating Expenses, excluding depreciation, amortization, impairment and charges related to voluntary leave schemes and other restructuring costs amounted to Euro 2,035.1 in 2022, up 3.6% compared to 2021, mainly reflecting higher topline activity and the rise in energy costs caused by the current crisis.
The Group’s Adjusted EBITDA After Lease (AL) amounted to Euro 1,348.0 up 4.0%, yielding a margin of 39.0% compared to 38.8% in 2021, on positive performances in both Greece and Romania. In Greece, Adjusted EBITDA After Lease (AL) increased by 3.5% to Euro 1,310.0, resulting in a margin of 41.5%, mainly due to higher top-line performance. Romania Mobile achieved a significant increase in Adjusted EBITDA After Lease (AL), up 24.6% to Euro 38.0 compared to Euro 30.5 in 2021, mainly reflecting cost- containment initiatives implemented throughout the year.
Group expenses for depreciation, amortization and impairment stood at Euro 795.1, compared to Euro 667.6 in 2021. During 2022, an impairment test was performed for TELEKOM ROMANIA MOBILE with respect to its carrying value. As a result of the impairment test, an impairment loss of Euro 115.9 was charged in the 2022 consolidated income statement and is included in “Depreciation, amortization and impairment” line (details in Note 9 of the Annual Financial Statements).
The Group reported Operating profit before financial and investing activities of Euro 590.5, compared to Euro 812.3 in 2021. The decrease of 27.3% reflects the aforementioned impairment in Romania as well as a Euro 133.5 reversal of a provision in 2021, related to OTE’s pension fund for voluntary leave schemes of past years.
Interest and related expenses stood at Euro 39.9, down 11.3%, mainly reflecting the favorable evolution in average cost of debt.
The Group’s income tax expense stood at Euro 166.2 in 2022, decreased compared to 2021, following lower profit before tax. In the respective period of 2021, the Group had also recorded the negative impact on the deferred tax asset base resulting from the corporate income tax rate reduction from 24% to 22%.
Adjusted Profit from continuing operations (attributable to owners of the parent) stood at Euro 540.7 in 2022 an increase of 9.8%, compared to Euro 492.4 in the same period of 2021.
In 2022, Adjusted Free Cash Flow After Lease (AL) stood at Euro 654.2 up 10.9% compared to 2021, while reported Free Cash Flow stood at Euro 597.1 up 23.8%, mainly reflecting lower income tax paid, higher profitability, working capital improvements, and lower payments for voluntary exit schemes.
The Group’s Net Debt stood at Euro 726.7 at December 31, 2022, down 7.0% compared to December 31, 2021. The Group’s ratio of Net Debt to Adjusted EBITDA (AL) stood at 0.5x. Repayment during 2022 of a maturing Euro 374.6, 2.375% bond, together with refinancing at lower rates, led to a decrease in OTE’s weighted average interest rate compared to 2021. As OTE’s next significant bond maturity is due in September 2026, the Group has little medium-term exposure to the global rise in interest rates.
Shareholder Remuneration Policy
On February 22, 2023, the Board of Directors of OTE revised its Shareholders Remuneration Policy, as follows:
“Provided the external and the macroeconomic environment remain stable, the Company intends to distribute to its shareholders, through a combination of dividend payout and Share Buyback Programs (whereby acquired shares will be cancelled), between 70% and 100% of net free cash flow generated every year. Starting from 2023, the cash dividend will account for at least 50% of total shareholder remuneration and the remaining part will be allocated to share buybacks.”
“The Board will examine the use of any cash flow reserves which may be accumulated in the medium term, together with past surpluses.”
“The implementation of the revised Shareholder Remuneration Policy will start in 2023 and will take into account the net free cash flow projections for the current year, i.e. 2023, as the basis for calculating the aggregate shareholder payout. In the same way, the Remuneration Policy will be applied in the forthcoming years, i.e. the basis for calculating total shareholder remuneration in 2024 will take into account the projections of net free cash flow for 2024 and so on.”
Based on the current projection for 2023, the net free cash flow is estimated to reach approximately the amount of Euro 500. The total Shareholder Remuneration amount (dividends and share buybacks) will reach approximately Euro 425.
For the part of the Shareholder remuneration corresponding to dividend distribution, it is proposed that a dividend of Euro 0.5765 per share or a total amount of Euro 250 be distributed. It is noted that the amount of Euro 0.5765 per share (a) exceeds the minimum dividend payable as required by article 161 of Law 4548/2018 and (b) corresponds to 433,664,596 shares into which the share capital of the Company is divided.
It is noted that own shares owned by the Company at the ex-dividend date are not entitled to dividend. Therefore, the dividend that will be approved by General Shareholders Meeting that will take place in 2023 corresponding to such own shares, will increase the dividend payable to the other shareholders according to the law.
ANNUAL REPORT OF THE BOARD OF DIRECTORS
9
It is further noted that, the remaining amount, i.e. approximately Euro 175 (amount to vary within a 2% range depending on market conditions and execution) or c.41% of the total amount to be allocated under the Shareholders Remuneration for 2023, will be allocated for the buyback of Company’s shares under the existing Share Buyback Program.
This proposed distribution is subject to the provisions of law 4548/2018 and the current tax legislation.
GREECE
Total revenues from Greek operations totaled Euro 3,155.4, an increase of 3.6% compared to 2021, reflecting positive performances in mobile, ICT, broadband and TV segment.
Fixed Retail Service revenues decreased by 1.8%, largely reflecting a planned switch by certain customers from traditional voice services to data communications. Broadband revenues continue to grow, though at a slower pace, mainly reflecting the impact of the Company’s initiative to upgrade broadband speeds, further enhancing customer loyalty. The TV segment retained its positive trajectory, reflecting investments in superior sports content.
Mobile Service revenues were up 4.3%, supported by solid recovery in visitor revenues, up 48%, exceeding pre-pandemic levels. Excluding the contribution from roaming, service revenues would have been up approximately 2%-3% on positive performance in both postpaid and prepaid, reflecting the successful execution of COSMOTE’s more-for-more strategy, as well as the higher number of subscribers.
Revenues from the wholesale business in Greece were up 0.8%, reflecting higher international transit traffic revenues and total market acceleration in fiber adoption. Other revenues increased by 14.4% reflecting a sharp 31.9% increase in system solutions, as OTE leverages its experience in delivering large projects for private and public organizations.
Adjusted EBITDA After Lease (AL) in Greece increased by 3.5% reaching Euro 1,310.0, reflecting solid revenue increases and savings in certain costs areas.
Financial Data
202 2
202 1
Change
Revenues
3,155.4
3,046.1
+ 3.6%
Retail Fixed Services
933.4
950.8
-1.8%
Mobile Service Revenues
986.4
945.7
+4.3%
Wholesale Services
590.3
585.6
+0.8%
Other Revenues
645.3
564.0
+14.4%
Adjusted EBITDA After Lease (AL)
1,310.0
1,265.4
+3.5%
Margin (%)
41.5%
41.5%
+0pp
Operational Data
202 2
202 1
Change
Fixed-line business:
Fixed lines access
2,701,453
2,715,939
-0.5%
Broadband subscribers
2,318,241
2,255,703
+2.8%
…of which Fiber Service
1,448,224
1,148,871
+26.1%
TV subscribers
642,687
624,195
+3.0%
Mobile business:
Mobile subscribers
7,370,105
7,098,290
+3.8%
Postpaid
2,949,844
2,818,426
+4.7%
Prepaid
4,420,261
4,279,864
+3.3%
It is estimated that total revenues in the Greek telecom market, fixed and mobile, expanded by approximately 3% in 2022 compared with 2021. In a challenging and competitive environment, the Group maintained and strengthened its leadership market position while sustaining a solid adjusted EBITDA After Lease (AL) margin at 41.5%.
ANNUAL REPORT OF THE BOARD OF DIRECTORS
10
In 2022, in Greece:
• COSMOTE pursued major investments in its 5G network in whole Greek territory, where in certain areas the maximum network speeds reach or exceed 1Gbps. At the end of 2022, COSMOTE has already exceeded 80% outdoor population coverage, confirming its position as a clear front-runner in 5G roll-out, while aiming for 90% population coverage by 2023 year end.
• The Company provided Fiber to the Home (FTTH) infrastructure and guaranteed higher Internet speeds to 911K homes and businesses at the end of 2022. Moreover, the Group pursues its major investment in optical fiber networks, targeting to exceed 3 million homes and businesses with FTTH infrastructure by 2027. In 2023, OTE aims at speeding up its FTTH deployment to reach approximately 1.4 million homes and businesses by year end.
• OTE Group, consistent with its vision to be leading digital services provider, entered the digital payments market by launching the new smartphone application ’payzy by COSMOTE’. Payzy operates through COSMOTE Payments subsidiary company and provides to its users plenty of electronic transactions through their smartphone. Taking into consideration that digital wallets services are not fully developed in Greece, the Company believes that payzy has significant potential in the coming years.
• Consistent with its strategy to invest in enhanced customer experience, COSMOTE further developed significant new capabilities in its mobile application, which enable its customers to rely on a single digital interface to manage their accounts in a convenient and user-friendly way. By year end, COSMOTE had 3.9 million active mobile app users, achieving 94% penetration in its active base, a critical accomplishment in improving overall customer experience and enabling cost savings.
• The Company maintained its Business-to-Business (B2B) leadership position with 26.4% revenue growth in ICT. The Group acts as a major Systems Integrator for businesses and the public sector, providing state-of-the-art technology solutions.
In total revenues from fixed business, OTE Group in Greece achieved a solid 3.1% revenue growth rate, as it managed to:
• Protect its access base of 2.7 million customers, leveraging its customer-centric strategy and creating value by fulfilling the needs of households and businesses.
• Capitalize on its extended NGA/FTTH footprint as well as commercial promotion campaigns, and the number of its high speed (FTTx) broadband customers reached 1,448K at the end of 2022, while penetration in its total broadband base reached 62.5%, compared to 50.9% a year earlier. The share of subscribers using broadband speeds of 100Μbps or higher stood at 44% of fiber connections at the end of 2022, compared to 25% one year earlier, boosted by the doubling of speeds Company’s initiative. The FTTH subscriber base stood at 137k, while utilization on homes passed stood at 16%, compared to 11% one year earlier, reflecting the increasing network availability and active sales efforts.
• Expand its PAY-TV base to 643K subscribers, achieving a 3% year-on-year increase in total number of customers and delivering a high single digit growth in 2022. Consistent with its strategy to invest and offer superior TV content to its customers, the Company leverages its streaming platform and enriched content portfolio, targeting to maintain its leading market position.
• Win and implement major complex ICT projects, which combine the convergence of Telecommunications and Systems Integration. The Company continues to implement projects aiming at the digital transformation of the Public Sector, such as the National Employee Digital Card, the digital map, the national telemedicine network of health sector, the digitization of Hellenic Parliament Library’s archives and the digital promotion of the recent cultural heritage of the Holy Pantocrator Monastery of Mount Athos in the culture sector, contracts of major customers for Microsoft services and products, and also for the private sector (e.g. Next Generation Contact Center & Cloud Services at Coca Cola Hellenic, Customer Relationship Management (CRM) System at Philip Morris CRM, Cloud Services at Stavros Niarchos Foundation, Agents Portal at Hellenic General Insurance Company, WiFi Network at National Bank, high-speed network infrastructures at the One&Only luxury hotels and the Astir Palace Hotel Marina) as well as in the utilities sector (e.g. CRM and billing systems, telematics services, Managed Network & Security Services, critical infrastructure support networks-IP MPLS, Cyber Security Services).
In mobile, the Group maintained its leading market position:
• Service revenue increased by 4.3%, as a result of network leadership and successful implementation of its more-for-
more strategy in both postpaid and prepaid.
• Reflecting focus on 5G investments, enabled by increased smartphones penetration, data active internet users uptake increased by 2 percentage points compared to last year, achieving 75% penetration in active base. COSMOTE targets to leverage the growth of data consumption, its rapid launch of 5G services and its network superiority to further strengthen its position going forward.
ANNUAL REPORT OF THE BOARD OF DIRECTORS
11
ROMANIA MOBILE
Financial Data
2022
2021
Change
Revenues
306.4
315.5
-2.9%
Mobile Service Revenues
203.0
221.8
-8.5%
Other Revenues
103.4
93.7
+10.4%
Adjusted EBITDA After Lease (AL)
38.0
30.5
+24.6%
Margin (%)
12.4%
9.7%
+2.7pp
Operational Data
2022
2021
Change
Mobile subscribers
4,165,629
3,690,607
+12.9%
Postpaid
1,854,272
1,734,675
+6.9%
Prepaid
2,311,357
1,955,932
+18.2%
In 2022, Telekom Romania Mobile revenues totaled Euro 306.4, down 2.9% compared to 2021, largely reflecting the sharp drop in mobile termination rates (MTR) and a one-off ICT project recorded in 2021. Mobile service revenues were down 8.5% to Euro 203.0, mainly due MTR, which were reduced by 8% on July 1, 2021 and another 21% at the start of 2022, as well as specific offerings privileging retention initiatives. Other revenues were up 10.4%, reaching Euro 103.4 as the increase in handsets revenues more than offset the drop recorded due to the ICT project in 2021.
The total customer base continued to grow throughout 2022, reflecting a 6.9% year-on-year increase in postpaid segment and a significant increase of 18.2% in the prepaid resulting from certain promotional activities.
In 2022 the Company achieved a strong increase in Adjusted EBITDA (AL), up 24.6% to Euro 38.0, reflecting the company’s strategy as a mobile-only entity and its ongoing focus on cost-containment efforts. The Adjusted EBITDA (AL) margin stood at 12.4%, compared to 9.7% in 2021.
B. OBJECTIVES AND STRATEGY
Management’s continuous goal for OTE Group, is to remain the market leader and pioneer, a modern, high-performance Digital Leader who offers best customer experience based on its technological superiority.
More specifically, the aspiration of OTE Group is to:
• Remain the undisputable market leader in Fixed, Mobile and Convergent markets
• Safeguard its leading position in Broadband (both Fixed and Mobile), ICT and Pay-TV services in the Greek market
• Further grow in adjacent markets (COSMOTE Insurance, BOX, COSMOTE Payments) and enter new ones, capitalizing on its strong digital capabilities
• Deliver best services to customers, leveraging on the technological superiority of its Next Generation Networks (FTTH, 4G+/ 5G)
• Offer superior customer experience, utilizing modern digital channels (App, COSMOTE NEO, etc.)
• Advance with the transformation of its own operating model towards a leaner and more agile structure, capitalizing on digital transformation and the flexibility of its new spin-off subsidiaries
• Be the best place to work in the Greek market, develop its personnel and attract digital talents
• Increase the value of its shareholders
• Maximize synergies as a member of Deutsche Telekom Group
• Have a positive impact on the society and the environment, by mitigating climate change and promoting circular economy and digital inclusion.
Key objectives of 2023
OTE remains committed to sustainable and profitable growth. For 2023, the Group besides achieving the annual business targets will also seek to enable its long-term evolution. Special focus will be put on the execution of its accelerated FTTH plan, the advancement of its Digital Transformation plan (for Customer-facing and intra-Company processes), the continuous enhancement
ANNUAL REPORT OF THE BOARD OF DIRECTORS
12
of Customer Experience, the transformation towards a leaner, more flexible and agile operating model, as well as the operationalization of Group synergies within the Deutsche Telekom Group.
Key Strategic pillars and actions for 2023:
Outlook for 2023
In 2023, OTE expects to operate in an intensely competitive environment. However, due to its superior brand attributes, notably its best-in-class fixed and mobile networks and recognized customer excellence, and to its financial resources, OTE is confident that it will successfully defend its market positions regardless of short-term pressure.
To consolidate its leadership and further heighten its competitive advantage, notably with the most demanding members of its customer community, OTE intends to pursue its investment strategy, with particular focus on its FTTH infrastructure, 5G network, and digitalization of all customer touchpoints. In addition, OTE will continue to expand in adjacent services complementing its offering and leveraging its brand image and customer relationships, notably the Payzy payment platform launched in late 2022 and the Box food delivery service.
OTE acts as a major Systems Integrator for businesses and the public sector in Greece and the EU, providing state-of-the-art technology solutions, and anticipates growing its ICT business in the coming years, supported by ongoing deployment of the Recovery and Resilience Plan.
OTE expects to generate Free Cash Flow of approximately Euro 500 in 2023, reflecting higher income tax payments, lower financial expenses, stable Capex, and ongoing improvements in operational performance. In 2022, Free Cash Flow had been positively impacted by a one-off tax benefit, resulting in significantly lower tax payments. 2023 Group CAPEX should remain stable, at approximately Euro 640, as the company pursues the deployment of its FTTH infrastructure.
Total 2023 Shareholder Remuneration is targeted at approximately Euro 425, corresponding to a proposed Euro 250 cash dividend (Euro 0.5765 per share) and a share buyback program of approximately Euro 175.
Technology Superiority
Best Customer Experience
Revenue Transformation
Lead in Core Business
Digitalization, Simplification and Cost Optimization
Growth Mindset and Culture
• Accelerate FTTH Optical Fiber Networks deployment • Expand coverage and introduce new capabilities in 5G network • Construct optical network for UFBB project
• Digital Transformation @Customer: o Omni-channel o Extended functionalities in apps o Service enhancements in sales and fault management processes • Push Online Sales • Load Reduction in front- line • Digital predictive maintenance @Network
• ICT projects o Public & Private sectors; EU projects o Cloud solutions o IoT - Smart Cities - Verticals • Develop non-core digital services COSMOTE Insurance, BOX, Payzy by COSMOTE Payments
• Leverage COSMOTE brand superiority • Upgrade customers’ speeds in Fixed Broadband and offer more data on Mobile • Enhance converged FMC propositions • Develop COSMOTE TV OTT • Wholesale Fiber Monetization
• Lean, efficient and agile operating model; introduction of Agile methodology • Digital Transformation @Company and @Network • Cost efficiency programs • Synergies with Deutsche Telekom Group
• Introduction and evaluation of new working models (Agile, Work from home) • Re-skilling / Upskilling in new digital skills of employees • Establish a culture of growth and innovation • Continue to drive ESG activities in order to achieve targets • Adopting policies for improving equality, diversity, and inclusion in our workplace
Sustainable Business
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13
C. SIGNIFICANT EVENTS OF THE YEAR 2022
CANCELLATION OF OWN SHARES AND NEW SHARE BUYBACK PROGRAM
The Extraordinary General Shareholders’ Meeting of January 18, 2022 approved in accordance with article 49 of Law 4548/2018, the cancellation of 8,638,512 own shares along with the reduction of the Company’s share capital by Euro 24,446,988.96 (absolute amount) (equivalent to the above number of own shares multiplied by the nominal value of the Company’s share, i.e. Euro 2.83 (absolute amount)) and the amendment of Article 5 (“Share Capital”) of the Company’s Articles of Incorporation.
The Company acquired these shares during the period from May 1, 2021 to November 30, 2021, at an average price of Euro 15.28 per share within the framework of the Own Share Buyback Program as approved by the General Shareholders’ Meeting on February 20, 2020 (hereafter the ‘2020-2022 Program’). Following notification to the Corporate Actions Committee of the Athens Stock Exchange and consummation of other legal and regulatory procedures, the aforementioned shares were canceled and delisted from the Athens Stock Exchange (ATHEX) as of February 22, 2022, when trading of the aforementioned shares on the ATHEX has ceased.
Furthermore, the Extraordinary General Shareholders’ Meeting of January 18, 2022 approved a new Share Buyback Program for a period of 24 months, covering up to 10% of the Company’s share capital, at a price range between Euro 1.0 and Euro 30.0 per share (hereafter the 2022-2024 Program).
The Annual General Shareholders’ Meeting of May 25, 2022 approved in accordance with article 49 of Law 4548/2018, the cancellation of 5,617,282 own shares along with the reduction of the Company’s share capital by Euro 15,896,908.06 (absolute amount) (equivalent to the above number of own shares multiplied by the nominal value of the Company’s share, i.e. Euro 2.83 (absolute amount)) and the amendment of Article 5 (“Share Capital”) of the Company’s Articles of Incorporation.
The Company acquired these shares during the period from December 1, 2021 to March 31, 2022, and specifically the Company acquired 3,749,040 own shares during the period from December 1, 2021 to February 18, 2022, at an average price of Euro 16.75 per share within the framework of the 2020-2022 Program. Moreover the Company acquired 1,868,242 own shares during the period from February 24, 2022 to March 31, 2022 at an average price of Euro 16.77 per share within the framework of the 2022-2024 Program. Following notification to the Corporate Actions Committee of the Athens Stock Exchange and consummation of other legal and regulatory procedures, the aforementioned shares were canceled and delisted from the Athens Stock Exchange (ATHEX) as of July 12, 2022, when trading of the aforementioned shares on the ATHEX has ceased.
The Extraordinary General Shareholders’ Meeting of November 1, 2022 approved in accordance with article 49 of Law 4548/2018, the cancellation of 8,818,730 own shares along with the reduction of the Company’s share capital by Euro 24,957,005.90 (absolute amount) (equivalent to the above number of own shares multiplied by the nominal value of the Company’s share, i.e. Euro 2.83 (absolute amount)) and the amendment of Article 5 (“Share Capital”) of the Company’s Articles of Incorporation.
The Company acquired these shares during the period from April 1, 2022 to September 30, 2022, at an average price of Euro 16.57 per share within the framework of the 2022-2024 Program. Following notification to the Corporate Actions Committee of the Athens Stock Exchange and consummation of other legal and regulatory procedures, the aforementioned shares were canceled and delisted from the Athens Stock Exchange (ATHEX) as of November 29, 2022, when trading of the aforementioned shares on the ATHEX has ceased.
During the first year of the Buyback Program, which has been approved by the Extraordinary General Shareholder’s Meeting on January 18, 2022 and particularly during the period between February 24, 2022 and December 7, 2022, where the purchases were completed, 15,440,064 own shares per share were acquired, at an average execution price of Euro 16.22 (absolute amount) per share.
REVISED SHAREHOLDERS REMUNERATION POLICY
On February 23, 2022, the Board of Directors of OTE, approved the revised
Shareholder Remuneration Policy
as follows:
Provided the external and the macroeconomic environment remain stable, the Company intends to distribute to its shareholders, through a combination of dividend payout and Share Buyback Programs (whereby acquired shares will be cancelled), between
70% and 100% of net free cash flow generated every year. In the coming years, the total shareholders remuneration payout will be split by 50% between dividends and share buybacks.
The Board will examine the use of any cash flow reserves which may be accumulated in the medium term, together with past surpluses.
The implementation of the revised Shareholder Remuneration Policy started in 2022 and will take into account the net free cash flow projections for the current year, i.e. 2022, as the basis for calculating the aggregate shareholder payout. In the same way,
ANNUAL REPORT OF THE BOARD OF DIRECTORS
14
the Remuneration Policy will be applied in the forthcoming years, i.e. the basis for calculating total shareholders' remuneration in 2023 will take into account the projections of net free cash flow for 2023 and so on.
On May 25, 2022, the Annual General Meeting of Shareholders approved the distribution of a dividend of Euro 0.558 per share outstanding (or Euro 0.571033 adjusted for own shares outstanding as of the ex-dividend date) which was paid out on July 7, 2022. The total dividend payout, i.e.Euro 250, represents 50% of the total amount allocated under the 2022 Revised Shareholder Remuneration Policy. The remaining amount, i.e approximately Euro 252 has been allocated to the buyback of Company shares under the new Share Buyback Program, as approved by the Extraordinary General Shareholder Meeting of January 18, 2022.
The dividend corresponding to treasury shares owned by the Company until the ex-dividend date in the context of Share Buyback Program increased the amount of the dividend paid to other shareholders.
REVISED OUTLOOK ON OTE BY STANDARD & POOR’S
On May 12, 2022 Standard and Poor's upgraded its outlook on OTE to positive from stable and affirmed its credit rating on the Company at 'BBB’.
ISSUANCE OF A NEW BOND UNDER THE GLOBAL MEDIUM-TERM NOTE (GMTN) PROGRAMME OF OTE PLC
On June 16, 2022, OTE PLC issued a Euro 150.0 bond due June 2023, with yield of 0.666% per annum, fully subscribed by DEUTSCHE TELEKOM AG. The new bond was issued by OTE PLC and guaranteed by ΟΤΕ S.A. under the existing GMTN Programme. The proceeds were used for the refinancing of part of the Euro 374.6 OTE PLC bond, due July 2022.
EURO 150.0 BANK LOAN OF OTE WITH THE EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT (EBRD), WITH THE USE OF LOAN FUNDS FROM THE NATIONAL RECOVERY AND RESILIENCE FACILITY ‘GREECE 2.0’, FINANCED BY THE EUROPEAN UNION
On July 7, 2022, OTE signed a Euro 150.0 loan agreement with the EBRD. The loan has an eight-year tenor with repayment at maturity and bears a total blended fixed interest rate of 1.561% per annum. Its purpose is the financing of a project related to part of the rollout of OTE’s Fiber to the Home (FTTH) network, amounting to total Euro 187.5. Out of the Euro 150.0 loan amount, Euro 93.8 are financed by the European Union's Recovery and Resilience Facility, channeled through the Greek Ministry of Finance, while Euro 56.2 are financed by the EBRD. Euro 37.5 of the project will be covered by OTE’s own funds.
On July 13, 2022, OTE proceeded with the drawdown of the full amount under the Euro 150.0 EBRD Loan.
REPAYMENT OF BOND UNDER THE GLOBAL MEDIUM-TERM NOTE (GMTN) PROGRAMM E OF OTE PLC
On July 18, 2022, OTE PLC repaid at maturity the Euro 400.0 fixed rate bond, with outstanding balance Euro 374.6, issued under its Global Medium Term Note Programme on July 18, 2018.
EXTENSION FOR 2 YEARS OF THE REVOLVING CREDIT FACILITY WITH NATIONAL BANK OF GREECE AND ALPHA BANK SA FOR A COMMITTED AMOUNT OF EURO 100.0
On July 22, 2022, OTE extended for 2 years the existing from July 24, 2020, Euro 200.0 Bond Loan Agreement, in the form of a committed Revolving Credit Facility, with the syndication of National Bank of Greece and Alpha Bank SA, along with a simultaneous reduction of the committed amount to Euro 100.0.
No drawdown has taken place up to the date of approval of this annual financial report.
COSMOTE - PAYMENT OF PRINCIPAL INSTALLMENT UNDER THE EURO 150.0 TERM LOAN WITH EUROPEAN INVESTMENT BANK (EIB)
On January 24 and on July 25, 2022, COSMOTE paid principal installments of total Euro 23.1 under the term loan with EIB, along with the accrued interest.
SALE OF COSMO-ONE
On July 25, 2022, the Group completed the sale of COSMO-ONE through the transfer of its 61.74% stake in SOFT ONE TECHNOLOGIES S.A. for a total consideration of Euro 2.0.
FINES OF DPA AND ADAE AGAINST COSMOTE AND OTE
In January 2022, DPA imposed fines on COSMOTE and OTE amounting to Euro 6.0 and Euro 3.3, respectively, related to an unauthorized file export from COSMOTE’s system, as a result of a cyber-attack. On June 22, 2022, a decision of ADAE was served to COSMOTE imposing a fine of Euro 3.2 for infringements of Regulation for the Assurance of Confidentiality in Electronic Communications.
SPIN OFF OF FACILITY AND SPACE MANAGEMENT BUSINESS SECTOR
In May 2022, the Boards of Directors of OTE and COSMOTE approved the initiation of a demerger through the spin-off of a separate business sector of OTE and COSMOTE, namely Facility and Space Management and its absorption by the OTE Group subsidiary, “OTE ESTATE SOCIÉTÉ ANONYME”.
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15
Following completion of several legal proceedings the spin-offs were consummated on December 1, 2022, with the registration in the General Commercial Registry (GE.MI.) of the Authorities’ decisions approving the foregoing transactions as well as the amendment of the absorbing company’s Articles of Incorporation.
MERGER OF OTE INTERNATIONAL SOLUTIONS SINGLE MEMBER S.A. (OTE GLOBE)
In July 2022, the Boards of Directors of OTE and OTE GLOBE approved the initiation of the merger procedure by absorption of 100% subsidiary company OTE GLOBE by its parent company OTE SA. The companies’ Boards of Directors approved the Draft Merger Agreement between OTE and OTE GLOBE in October 2022.
Already after the end of the fiscal year 2022, specifically on January 2, 2023, the merger was completed with the registration in the General Commercial Register of the decision of the competent authority that approved the merger.
BOARD OF DIRECTORS
On November 11, 2022, the Hellenic Telecommunications Organization S.A. (OTE S.A. or Company) announced that the Board of Directors, following a proposal of the Remuneration and Nomination Committee, appointed as new non-executive members of the Board of Directors Mr. Daniel Daub and Ms. Melinda Szabo, in replacement of the resigned non-executive members Mr. Robert Hauber and Mr. Rodrigo Diel, accordingly.
On November 25, 2022, the Board of Directors, following a proposal of the Remuneration and Nomination Committee, appointed Mr. Konstantinos Gkravas as new independent non-executive member of the Board, in replacement of the resigned, effective as of November 14, 2022, independent member Ms. Catherine De Dorlodot, for the period until the next General Meeting of the Company’s Shareholders.
Following the above, the composition of the Company’s Board of Directors is as follows:
1. Mr. Michail Tsamaz, Chairman and CEO, Ε xecutive member
2. Mr. Eelco Blok, Vice-Chairman, Independent Non-executive member
3. Mr. Daniel Daub, Non-executive member
4. Ms. Melinda Szabo, Non-executive member
5. Ms. Kyra Orth, Non-executive member
6. Ms. Yvette M. Dominique Leroy, Non-executive member
7. Mr. Dimitrios Georgoutsos, Independent Non-executive member
8. Mr. Konstantinos Gkravas, Independent Non-executive member
9. Mr. Grigorios Zarifopoulos, Non-executive member
10. Mr. Charalampos Mazarakis, Executive member
The term of the Board of Directors’ members lasts until the Ordinary General Shareholders’ Meeting which will take place the year 2024 (except from the term of Mr. Konstantinos Gkravas which, as mentioned herein above, lasts until the next General Shareholders’ Meeting). Furthermore, the Board of Directors appointed Mr. K. Gkravas, in his capacity as an independent non- executive member of the Board, as a member of the Board’s Committees, namely the Audit Committee and the Remuneration and Nomination Committee.
The composition of the Audit Committee, following its formation into a body corporate, is as follows: Mr. Eelco Blok (Vice-Chairman of the Board ̶ Independent Non-executive member, Chairman), Mr. Dimitrios Georgoutsos (Ιndependent non-executive member of the Board, Member) and Mr. Konstantinos Gkravas (Ιndependent non-executive member of the Board, Member). The term of the members of the Audit Committee is identical with their term as members of the Board of Directors.
The composition of the Remuneration & Nomination Committee is as follows: Mr. Eelco Blok (Vice-Chairman of the Board ̶ ̶ Independent Non-executive member, Chairman), Ms. Kyra Orth (Non-executive member of the Board, Member) and Mr. Konstantinos Gkravas (Ιndependent non-executive member of the Board, Member). The term of the members of the Remuneration & Nomination Committee is identical with their term as members of the Board of Directors.
ANNUAL REPORT OF THE BOARD OF DIRECTORS
16
D. RISKS AND UNCERTAINTIES FOR THE NEXT YEAR
OTE Group has developed and applies an Enterprise Risk Management System, which is certified as per ISO 31000:2018, and supports Management in its strategic decision-making, in order to safeguard its smooth operation and future corporate success. This is achieved by identifying, evaluating, communicating and addressing enterprise risks, including sustainability and conflicts of interest risks, utilizing all strategic and operational risk mitigation, and monitoring relevant measures taken by the Group, in order to avoid risks and seize future opportunities.
In 2022, OTE Group conducted a materiality analysis taking into account the double materiality perspective and in accordance with the Group's unified Enterprise Risk Management methodology, according to best practices. Key issues were identified with the participation of the OTE Group's Senior Management and the company’s stakeholders, considering relevant risks and opportunities, as well as positive and negative impacts related to the material issues. The materiality analysis constitutes an important component of the stakeholder dialogue and the process of understanding stakeholders’ expectations. The materiality analysis results are used in the Group's planning actions and operations strategic planning. Furthermore, the material issues are included in the company’ risk map. More information in the section
Materiality Analysis
.
The Board of Directors and the Management of OTE Group continually assess the possible impact of any changes in the macroeconomic and financial environment in the countries where the Group operates, so as to ensure that all necessary actions and measures are taken in order to minimize any impact on the Group’s operations. Based on its current assessment, it has concluded that no additional impairment provisions are required with respect to the Group’s financial and non-financial assets as of December 31, 2022.
Information regarding the Enterprise Risk Management System is included in Section
F. Corporate Governance Statement
(“C.
Internal Control System”)
into the Annual Financial Report.
https://www.cosmote.gr/cs/otegroup/en/oikonomikes_katastaseis_
etairiwn_omilou.html
Pandemic Crisis; COVID-19
In the first half of 2022, the COVID-19 pandemic fluctuated, showing an aggravation in the beginning of the year and a reduction in May and June 2022, while, the ever-increasing vaccination coverage among the population was a protection shield. During the first four months of 2022, an increase in the number of coronavirus cases was observed due to the wide spread of mutations of the Omicron strain of SARS-CoV-2, which began during the previous Christmas period. Therefore, the implementation of restrictive measures in Greece continued, for the protection of the population against the pandemic. The second half of 2022 was characterized by the gradual lifting of restrictive measures, returning to normality. Towards the end of the year, COVID-19 status seems to be passing into the endemic phase, via combination of vaccination, antiviral drugs, widespread circulation of tests and immunity (due to previous illness). In full compliance with the orders of the State, OTE Group of Companies continued to implement and develop its targeted action plan, aiming at ensuring the health of its employees and the uninterrupted continuity of its operation. The official measures were gradually lifted from mid-May 2022, with the reduction of the percentage of employees who work remotely. Since then, teleworking is no longer considered as a measure against the pandemic. OTE Group, however, throughout the semester maintained a higher percentage of teleworking than required. Today the percentage of teleworking in the Group amounts to 20%.
Frontline units (stores and field technicians) were still working at full capacity, and Logistics/Warehouse employees work on shifts. Regarding the confirmed cases of COVID - 19, the company implemented an updated protocol, based on legislation, for the quarantine and isolation of employees and followed specific recommendations in accordance with the National Public Health Organization (NPHO). Throughout the pandemic, the Company continually acts based on the instructions and decisions of all relevant bodies, respecting the requirements and the action plan adopted by the Greek authorities.
Hence, the Company continued to use all the digital channels and took all the necessary precautionary measures, concerning remote work scheme, operational modification of stores in high exposure regions, provision of healthcare supplies, provision of specialized Personal Protective Equipment (PPEs) for technicians and activation of direct communication which could be used by all the employees for consultation on health issues and psychological support (for more information, please refer to section “Health and Safety in the workplace” below).
Despite the particularly increased daily data traffic in fixed and mobile networks, OTE’s networks continued responding to the higher demand. Moreover, the Company’s risk assessments on potential stock shortages of devices/equipment were not verified.
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17
Macroeconomic conditions in Greece
Currently prevailing economic risks arising globally, as a result of sharply rising interest rates, energy market turbulence driving upwards prices for raw materials, as well as severe geopolitical tensions have negatively affected macroeconomic conditions globally, including Greece.
Management continually assesses the possible impact of any changes in the macroeconomic and financial environment in Greece taking into consideration global economic developments, so as to ensure that all necessary measures are taken in order to minimize any impact on the Group’s Greek operations. Rising inflation and increased energy prices have affected Group’s financial and operational performance. Management is closely monitoring macroeconomic developments and financial outlook in order to mitigate uncertainties and risks.
Based on its current assessment, it has concluded that no additional impairment provisions are required with respect to the Group’s financial and non-financial assets as of December 31, 202 2 .
Risk from the Russian invasion of Ukraine
The Group has no operational exposure in Ukraine and Russia. However, the geopolitical uncertainty has resulted in higher inflation and increased volatility in the energy market affecting the general economic environment, which is likely to continue. Furthermore, there is an increased risk from the disruption in the global supply chain.
Financial Risks
The below stated risks are significantly affected by the macroeconomic and financial environment in Greece.
a) Credit risk
Credit risk is the risk of financial loss to the Group and the Company if a counterparty fails to meet its contractual obligations.
The carrying value of financial assets at each reporting date is the maximum credit risk to which the Group and the Company are exposed in respect of the relevant assets.
Financial instruments classified as fair value through profit or loss include mutual funds. These financial asset s are not considered to expose the Group and the Company to a significant credit risk.
Defaulted payments of trade receivables could potentially adversely affect the liquidity of the Group and the Company. However, due to the large number of customers and the diversification of the customer base, there is no concentration of credit risk with respect to these receivables. Concentration of risk is however considered to exist for amounts receivable from other telecommunication service providers, due to their relatively small number and the high volume of transactions they have with the Group and the Company. For this category the Group and the Company assess the credit risk following the established policies and procedures and recognizes the appropriate provision for impairment.
The Group and the Company have established specific credit policies under which customers are analyzed for creditworthiness and there is an effective management of receivables in place both before and after they become overdue and doubtful. In monitoring credit risk, customers are grouped according to their business group, their credit risk characteristics, aging profile and existence of previous financial difficulties, also adjusted for forward-looking factors specific to the customers and the economic environment .
Group’s cash and cash equivalents are mainly invested in highly rated counterparties and with a very short term tenor.
Loans include loans to employees, which are collected either through the payroll or are netted-off with their retirement indemnities, and loans to the pension fund related to prior years voluntary leave schemes. The latter loans are exposed to credit risk related to the debt servicing capacity of the pension fund.
Impairment of financial assets
The Group and the Company have the following types of financial assets that are subject to the expected credit loss model:
• Trade receivables
• Contract assets
• Lease receivables
• Loans to group companies
• Loans to pension funds
• Loans and advances to employees
• Other financial assets.
ANNUAL REPORT OF THE BOARD OF DIRECTORS
18
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified loss was immaterial.
The Group applies the IFRS 9 simplified approach to measure expected credit losses using a lifetime expected loss allowance for all trade receivables, contract assets and lease receivables.
The following tables demonstrate the credit risk exposure on gross carrying amount of trade receivables and contract assets for the Group and the Company:
GROUP (simplified approach)
December 31,2022
Performing
Underperforming
Non-Performing
Total
Trade receivables
527.1
59.7
403.6
990.4
Contract assets
49.6
-
7.6
57.2
TOTAL
576.7
59.7
411.2
1,047.6
GROUP (simplified approach)
December 31,2021
Performing
Underperforming
Non-Performing
Total
Trade receivables
544.9
72.8
711.6
1,329.3
Contract assets
34.6
-
6.7
41.3
TOTAL
579.5
72.8
718.3
1,370.6
COMPANY (simplified approach)
December 31,2022
Performing
Underperforming
Non-Performing
Total
Trade receivables
340.0
36.1
207.9
584.0
Contract assets
6.1
-
-
6.1
TOTAL
346.1
36.1
207.9
590.1
COMPANY (simplified approach)
December 31,2021
Performing
Underperforming
Non-Performing
Total
Trade receivables
339.2
37.4
372.1
748.7
Contract assets
3.4
-
-
3.4
TOTAL
342.6
37.4
372.1
752.1
Trade receivables balances as of December 31, 2022 are stated after the write-offs of Euro 350.6 for the Group and Euro 182.1 for the Company, respectively.
The major part of the outstanding balance of lease receivables for the Group and the Company are considered as performing.
The remaining financial assets of the Group are considered to have low credit risk, therefore the Group applies the IFRS 9 general approach and the loss allowance was limited to 12 months expected losses. The outstanding balances of these financial assets are considered as performing.
Financial assets which have a low risk of default and a strong capacity to meet contractual cash flows are considered as performing, while financial assets for which there is a significant increase in credit risk since initial recognition but there is no objective evidence of a credit loss event are treated as underperforming. Non-performing financial assets are those that have objective evidence of impairment at the reporting date and there is limited expectation of recovery.
The split of trade receivables and contract assets within the above categories and the assessment of whether there has been an increase in credit risk on a Group level is assessed based on each Group entity’s best estimates taking into account its specific facts and circumstances
b) Liquidity risk
Liquidity risk is the risk that the Group or the Company will not be able to meet their financial obligations as they fall due. Liquidity risk is kept at low levels by ensuring that there is sufficient cash on demand and / or credit facilities to meet the financial obligations falling due in the next 12 months. The Group’s and the Company’s cash and cash equivalents as at December 31, 2022 amount to Euro 590.1 and Euro 163.7 respectively and their short-term borrowings and their short-term portion of long- term borrowings amount to Euro 173.1 and Euro 96.5, respectively.
ANNUAL REPORT OF THE BOARD OF DIRECTORS
19
For the monitoring of the liquidity risk, the Group prepares cash flows forecasts on a frequent basis.
Further details on liquidity risk are included in the Annual Financial Statements,
Note 30: Financial instruments and financial risk
management.
c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will result in fluctuations of the value of the Group’s and the Company’s financial instruments. The objective of market risk management is to manage and control exposure within acceptable levels.
The individual risks that comprise market risk and the Group’s and the Company’s policies for managing them are described below:
i. Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in the interest rates.
Further details on interest rate risk are included in the Annual Financial Statements,
Note 30: Financial instruments and financial
risk management.
ii. Foreign currency risk
Currency risk is the risk that the fair values of the cash flows of a financial instrument fluctuate due to foreign currency changes.
The Group operates in Greece and Romania and as a result is exposed to currency risk due to changes between the functional currencies and other currencies. The main currencies within the Group are the Euro and the Ron (Romania).
Foreign currency risks that do not affect the Group’s cash flows (i.e. the risks resulting from the translation of foreign operations financial statements into the Group’s reporting currency) are generally not hedged.
The following table demonstrates the sensitivity to a reasonably possible change in the functional currency exchange rate, with all other variables held constant, of the Group’s profit before tax (due to changes in the fair value of monetary assets and liabilities):
Effect on profit before tax
Change in currency exchange rate expressed in functional currency
2022
2021
+ 10%
5.0
5.7
- 10%
(5.0)
(5.7)
Capital Management
The primary objective of the Group’s and the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratio in order to support its business plans and maximize shareholder value.
The Group and the Company manage their capital structure and make adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group and the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
An important means of managing capital is the use of the gearing ratio (ratio of net debt to equity) which is monitored at Group and Company level. Net debt includes interest bearing loans and notes, long-term and short-term lease liabilities as well as other financial liabilities, less cash and cash equivalents.
December 31
GROUP
2022
2021
Long-term borrowings
881.5
753.7
Short-term borrowings
150.0
-
Short-term portion of long-term borrowings
23.1
397.3
Lease liabilities (long-term portion)
182.1
189.2
Lease liabilities (short-term portion)
76.1
71.7
Financial liabilities related to wallets
4.0
-
Cash and cash equivalents
(590.1)
(630.7)
Net debt
726.7
781.2
Total equity
1,848.9
1,972.2
Gearing ratio
0.39x
0.40x
ANNUAL REPORT OF THE BOARD OF DIRECTORS
20
December 31
COMPANY
2022
2021
Long-term borrowings
846.9
797.6
Short-term borrowings
40.0
-
Short-term portion of long-term borrowings
56.5
374.2
Lease liabilities (long-term portion)
103.7
126.5
Lease liabilities (short-term portion)
34.2
25.3
Cash and cash equivalents
(163.7)
(274.0)
Net debt
917.6
1,049.6
Total equity
3,228.3
3,198.6
Gearing ratio
0.28x
0.33x
d) Other risks
In OTE Group, Risk Assessment is a structured process for the identification, analysis, evaluation and treatment of enterprise risks, in order to ensure better informed decision-making by the Company’s competent bodies regarding the management of risks, their mitigation measures, as well as the monitoring of the implementation of the measures. Within this framework, operational, strategic, regulatory, financial, legal and compliance risks are being assessed and monitored. A significant mitigation measure is the transfer of risk to third parties (e.g., insurance companies), through multinational and local insurance contracts, which protect the Company to an extent, from operational risks that are insurable.
Additional tax burdens
In the previous years, the Greek State adopted a range of fiscal measures which aimed at increasing public tax revenues which materially affected the Group’s and the Company’s income statement. According to Law 4799/2021 that was published in May 2021, the corporate income tax rate was reduced to 22% from year 2021 onwards, whereas from January 1, 2020, the withholding tax rate on dividends was also reduced from 10% to 5%. Still, given the fiscal position of the Greek State in previous years, it cannot be excluded that fiscal measures may be taken in the future, which could have a material adverse effect on the Group’s and the Company’s financial condition.
Potential impairment losses
In conjunction with the conditions in many markets in which the Group has invested, the Group faces challenges regarding the financial outlook of some of its subsidiaries. In this respect, impairment losses may incur relating to these subsidiaries’ assets.
Additional contributions to pension funds
Based on actuarial studies performed in prior years and on current estimations, the pension funds show (or will show in the future) increasing deficits. OTE does not have a legal obligation to cover any future deficiencies of these funds and, according to management, neither does it voluntarily intend to cover such possible deficiencies. However, there can be no assurance that OTE will not be required (through regulatory arrangements) to make additional contributions in the future to cover operating deficits of these funds
Regulatory framework
The regulatory obligations and the competitive pressure have an impact on OTE’s ability to apply competitive pricing at retail and wholesale level and they may have a negative effect on OTE’s ability to compete effectively. According to the legal and the regulatory framework in force, the Hellenic Telecommunications and Post Committee (“HTPC”) has designated OTE as having Significant Market Power (SMP) in the relevant wholesale markets and controls its pricing policy on material segments of the wholesale and retail level. Price control regulatory obligations require OTE to set often higher retail prices than its competitors for the same services.
Critical infrastructure failure
For all telecom operators, the Information and Communication Technologies (ICT) infrastructure is considered as the backbone of their operations. Given the variety and diversity of contemporary services provided by all telecom operators, the complexity of the ICT infrastructure and the interdependencies between various network nodes and service platforms, are unprecedented. Thus, technical infrastructure outages, due to either external factors (e.g. earthquake, flooding, etc.) or internal factors (e.g. power and air-conditioning outages, human error, etc.) cannot be ruled out. Consequently, service disruptions might appear that could result in potential revenue losses, increased rehabilitation and/or potential customer compensation costs, and consequential effects on customer base and Company’s reputation.
OTE Group, in order to ensure the seamless continuation of its business operation, has already established processes, Continuity & Recovery plans as a robust Business Continuity Management System demands and has been certified by ISO 22301:2019. In this context, recovery programs for both the telecommunications network and the IT infrastructure are already in place. Business
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Continuity Department OTE Group, in cooperation with Network Automation, Security and Operations Support Department Fixed & Mobile and IT Architecture Department OTE Group test and rehearse the recoverability and operability of the critical business processes. The resilience of the telecommunications network has been further enhanced through the gradual introduction of new technologies.
Furthermore, power availability at critical sites is constantly monitored and enhanced. Two of the main Network and IT Data Centers were awarded with a “Tier III-category certification” by the Uptime Institute. Improvement works of Electro-Mechanical infrastructure (“Dual Feed” project) of network critical infrastructure sites took place.
Uninterrupted provision, to DT Group, of Value Added services is safeguarded by critical infrastructure’s high availability along with application switch over or diversion to alternative Data Center.
Information security
Being faithful to the commitment of adapting swiftly to the evolving needs of the new digital era, OTE Group places emphasis on new strategy and business models, utilizes digital capabilities to the benefit of its customers, employees, partners and suppliers, and continuously innovates, providing a wide range of services and cutting-edge technology, such as 5G, Fiber to the Home and digital wallets.
The increasing degree of digitalization and interconnectedness in our society, along with the rising number of cyber-attacks at global level, introduced new, more complex challenges to companies and paved the way for a significant change in mindset regarding institutional and regulatory approach to cybersecurity. OTE Group provides a wide range of products and services, including integrated ICT solutions, to well-established customers and public organizations, keeping cybersecurity at the forefront. The Company embraces a holistic approach to cybersecurity, balancing the need to protect itself from cyber risks and ensure that right levels of protection are in place with the need for business innovation.
To maintain a high level of security throughout its network and information systems, OTE Group Information Security and Telecommunication Fraud Prevention Division delivers a resilient security strategy, demonstrating its commitment and the key actions it takes to stay ahead of the cyber threat landscape. By taking a risk-based approach to cybersecurity, the Division establishes and implements the required set of security policies, procedures and practices, oversees their implementation, builds robust security mechanisms, secure and reliable systems and infrastructure, and evaluates their operating effectiveness (e.g. via periodic system audits). In addition, the Cyber Defense Center of the Division collects and analyzes data from corporate systems on a 24/7 basis, in order to timely detect security incidents (e.g. cyber-attacks) and respond effectively.
Ensuring security of network and information systems is always one of OTE Group’s top priorities. It is more than just an obligation to meet statutory and regulatory requirements; it is also part of the Company’s culture and enhances its competitive advantage in maintaining the trust of its customers, partners and suppliers.
Data Protection
The Company collects, stores and uses personal data, in the ordinary course of its operations, and protects them according to the data protection legislation and the Binding Corporate Rules Privacy (BCRP) for the protection of personal rights in the handling of personal data within the Group, which have been adopted by the BoD of the Company. Although technical and organizational measures are implemented to protect personal data, measures may fail and certain personal data may be lost as a result of human error or technological failure or otherwise be used inappropriately. Data breach by the Company or one of its partners or suppliers may result in fines, reputational harm and subscriber churn and could have a material adverse effect on the business and its financial condition.
Data protection is one of OTE Group’s top priorities; it’s more than just an obligation to meet legal and regulatory requirements, it’s also an integral part of the Company’s culture. In this context, OTE Group has established the Data Privacy unit OTE Group, headed by the Data Protection Officer, who is operationally supervised by the Audit Committee.
Technical and organizational measures implemented by the Company include, inter alia, measures to prevent unauthorized persons from accessing data processing systems, measures to ensure the confidentiality of data at rest and in transit (e.g. encryption, pseudonymization), measures to ensure that personal data processed by third parties / contractors are processed only in accordance with the Company’s instructions, as well as periodic employee awareness and training activities.
Climate protection
Climate change is a global environmental issue, the impacts of which affect the whole range of economic activities as well as numerous other aspects of life on the planet and could lead to emerging risks, due to its severe and long-term impact.
Aiming at climate change mitigation, EU has set its target the reduction of Greenhouse Gas (GHG) emissions by at least 55% by 2030, compared to 1990 levels and to become climate neutral by 2050 (European Green Deal). Both targets are legally binding with the adoption of the EU Climate Law.
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The European Commission released (2021) a series of legislative proposals (Fit for 55) setting out how it intends to achieve its climate targets. Moreover, the EU Taxonomy Regulation and its delegated acts define criteria for determining whether an economic activity qualifies as environmentally sustainable for the purposes of establishing the degree to which investing in it is also environmentally sustainable.
Following along these lines, Greece has put into force the Greek Climate Law (May 2022) that aims to provide the framework for Greece to also achieve an 80% reduction by 2040 on the way to a net-zero emissions target by 2050.
Tackling climate change is an essential element of OTE Group's environmental strategy and one of OTE Group's strategic priorities for sustainable development. With a view to achieve climate neutrality, OTE Group plans and implements actions to reduce greenhouse gas emissions throughout its value chain, uses Renewable Energy Sources and increases energy efficiency.
OTE Group is committed to participate fully towards the achievement of the DT Group wide net zero targets:
• 100% use of Renewable Energy Sources for electricity consumption from 2021 onwards.
• Net-zero GHG emissions from energy consumption (scope 1 and scope 2 emissions) by 2025 (up to 95% reduction of emissions from energy consumption by 2025 compared with 2017 and neutralization of the residual emissions).
• 25% reduction of indirect emissions (scope 3) per customer by 2030 compared with 2017 (base year).
• Net-zero carbon footprint (scope 1, 2 and 3) by 2040 at the latest
Energy consumption is a major source of GHG emissions in OTE Group contributing to climate change (and air pollution), and affects the operational cost of OTE Group, which is also directly related to the regulated charges of the national electricity transmission and distribution system, and may also be influenced by:
• Increases due to the fees / levies / burdens imposed on the electricity generation sector in the context of the EU emissions trading scheme (indirect regulatory risk).
• Stricter environmental regulations with mandatory provisions (e.g., energy audits of activities, heating / cooling systems, etc.).
• Increases in fossil fuel prices.
In addition, low environmental performance could affect the Group’s reputation and market share, as surveys indicate that climate change is a matter of concern for stakeholders, while investors seek to engage with companies that have an effective environmental policy in place.
On the long term, telecommunications infrastructure could be affected by extreme weather events (physical impacts) and there could be impacts on network operation and the availability of the telecommunication services provided.
At the same time, the enabling role of Information and Communication Technology (ICT) in tackling climate change generates opportunities for the further development of OTE Group.
Taking into consideration all the above, OTE Group:
• Prepares GHG emissions inventories on an annual basis covering all its activities across the value chain (scope #1, #2 και #3)
• Reduces greenhouse gas emissions to the extent technically and economically feasible. The emissions that cannot be reduced will be neutralized by means of high-quality compensation and carbon capture projects in accordance with the established framework.
• Implements energy conservation measures across its activities (telecom network, data centers, buildings) with emphasis on the fixed and mobile telecom network.
• Makes use of Renewable Energy Sources to cover by 100% its electricity consumption.
• Invests in the electrification of vehicles’ fleet, considering the maturity of the market and the technology, as well as the availability of vehicle charging infrastructure.
• Addresses the electricity consumption of broadband equipment by participating, voluntarily, in the "Code of Conduct for Broadband Equipment".
• Implements a certified Business Continuity Management System to prevent and promptly deal with situations that may affect the operation of the telecommunications network and the uninterrupted provision of telecommunications services.
Supply chain
OTE Group believes that the diffusion of key values and standards in the supply chain is an important feature of responsible business conduct.
The development and maintenance of a value-added supply chain for the Group, with economic, environmental and socially responsible methods and practices, in line with the Group's vision, is a continuous target for improvement.
However, there are risks that may potentially cause business operational failures, revenue losses, reputational damage as a result of third party/vendor actions (environmental damages, inadequate working conditions, child labor, fraud, etc.).
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In order to mitigate these risks arising from suppliers, OTE Group has adopted and implements the following:
• The OTE Group Supplier Code of Conduct, which is uploaded on the corporate website and is accessible by suppliers. The acceptance of the Code is a prerequisite in order for a prospective supplier to enroll at the Suppliers’ Portal and also for signing a contract or other agreement (the adherence to the Code is a contractual obligation). Moreover, the supplier must bind its contractors (and/or subcontractors) to the principles of the Supplier Code of Conduct insofar as they are involved in providing deliverables under the contract.
• The OTE Group Code of Human Rights and Social Principles, which is uploaded on the corporate website and in the Supplier Portal, is accessible by the suppliers, customers and the rest of the stakeholders of the Group. ΟΤΕ Group extends the Code’s principles to its suppliers and requires from them to respect and apply them throughout their operations and business relationships.
• An anti-corruption clause which is included both into the General Order Terms and also as a term in contracts with suppliers. As noted in the above mentioned clause, among others, the supplier and supplier’s sub-contractors have the obligation to adhere, in the context of the agreement, to the principles and values (Rules) that are outlined in the “
OTE
Group Code of Conduct
” , in the “ OTE Group
Supplier Code of Conduct
” and in the “
OTE Group Code of Human Rights and
Social Principles
” (i.e. the adherence to the Rules is a contractual obligation).
• Procedures for reviewing and evaluating suppliers and partners (such as a pre-contractual integrity check and evaluation of prospective suppliers and partners) according to the Compliance criteria. These criteria include anti-bribery or anti- money laundering law infringement, negative publicity regarding the supplier, as well as checking whether the supplier or partner is included in DT Non-Compliant List / NCL, which includes the legal entities and the natural persons that have been blacklisted in the published international Sanction Lists of European Union, United Nations, OFAC etc.
Also, during the Compliance evaluation of the prospective suppliers/companies, information is sought regarding the potential conflicts of interest derived from a relationship between the owner of the company or the BoD’ s members of the company with Politically Expose Persons (PEPs) or other OTE Group business partners and members of Management.
• Specific communication channels (e.g. emails: whistleblowing@ote.gr or tellmecompliance@ote.gr, regular post and telephone line) has been established to enable everyone to submit reports concerning possible violations of legal obligations or internal policies and regulations. It is also possible to file a report anonymously via the Electronic Compliance Form.
• Communication/awareness, periodically, to our suppliers regarding the OTE Group Principles, the OTE Group Compliance Management System and the related to suppliers’ Codes, as well as their contractual obligation to adhere to these principles throughout our business cooperation.
• An annual suppliers’ evaluation that includes sustainability issues. Moreover, the Group takes into account the results of Deutsche Telekom's assessments and audits for each joint vendor in the framework of the /Eco Vadis/self-assessments and JAC (Joint Audit Cooperation).
Moreover, suppliers are one of the primary stakeholder groups identified by OTE Group (see
Stakeholder Dialogue Section
), which,
amongst others, are invited to participate in the Materiality Analysis. Specifically, through an online questionnaire they submit their view by rating each issue regarding the level of impact of the Group on the economy, the society and the environment. More information in the
Materiality Analysis
section.
Health risks related to Electromagnetic fields (EMF)
The potential health effects of man-made sources of electromagnetic radiation fields (EMF) have attracted particular attention in recent years. For this reason, international scientific organizations have established safe limits of exposure to non-ionizing (EMF) radiation and a relevant legislative framework has been developed.
Research carried out and evaluated by the World Health Organization does not show any correlation between health and impact of electromagnetic emissions from telecommunication stations operating below the established EMF exposure safety limits. Furthermore according to measurements by independent organizations, the values of EMF attributed to telecommunications base stations, contribute less than 30% of the total electromagnetic background in the residential areas. The electromagnetic field levels in all OTE Group base stations comply with the limits recommended by the World Health Organization and the International Commission for the Protection of the Non Ionizing Radiation Protection (ICNIRP), as well as with the limits set by law 4635/2019, which are at 60-70% of the ICNIRP limits [establishing the limits, the scientific community has set a safety factor of fifty (50), considering that some population groups may be more vulnerable] at free public access points. In general, OTE Group’s policy is based on the application of the Precautionary Principle, which incorporates also the principles of Transparency, Information, Participation and Promotion of Science, for all its products and services.
In 2020, ICNIRP published the new guidelines for protection against exposure to electromagnetic radiation. According to ICNIRP's new international guidelines, after more than 20 years of research, the security of mobile networks is confirmed for everyone, including children, when the recommended exposure limits are met. ICNIRP notes that: "The most important thing for people to remember is that 5G technologies will not be able to cause harm when these new guidelines are adhered to”.
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Health and Safety in the workplace
Multiple work – related risk factors are considered to be hazardous for the Health and Safety of employees, especially for the technical staff (such as Field, Net and PCP technicians; linemen; electricians; refrigerants; warehouse personnel; etc.). An unsafe working environment, may burden the Company with compensation liabilities and other legal costs, while hurting the Company’s reputation and business continuity.
The evaluation of work - related risks and hazards and their consequences, conducted by Health & Safety Business Unit, has revealed that the category of employees who is exposed to the most significant hazards is the technical staff. These hazards could be the following:
1. Improper use of Personal Protective Equipments (“PPE”) Correct use aims to reduce the severity of injuries.
2. Underground work, which is performed for the purposes of repair or maintenance of equipment. An underground construction site is a narrow space with stagnant (dirty) water, and it could be a source of infections, especially if the worker does not use his of PPEs properly.
3. Work on poles, can also lead to accidents, especially if the worker uses his PPEs improperly or not at all.
4. Use of ladders, which have been located wrongly, for repair or maintenance purposes.
5. Improper or unsafe use of hand tools, which are used during work.
6. Non – continuous implementation of the guidelines for safe works, which are communicated in multiple ways for each individual work.
7. Domestic Animal attacks (such as dogs)
OTE guarantees that the technical staff is always equipped with the proper PPEs. The PPEs have been chosen according to specifications, are state of the art, certified and audited for its integrity and their expiry date. Moreover, they are renewed according to the standards defined by legislation. The Company is conducting continuous and repeated trainings for the technical staff; in order all the workers to be informed and aware for the hazards in the workplace. All training programs are being updated and enriched with new techniques and information if needed; in order to maintain the interest of employees in attending them. In 2022, the live webinars on safe work at height using a portable ladder continued and a new live webinar was created on the topic of safe work using hand tools. In addition to seminars and webinars, employees also receive regular training and guidelines from the responsible Safety Engineer of the sites. Finally, all safe work instructions are uploaded to the Company’s intranet, as well as updated instructions, which each employee can refer to at any time.
Regarding call center and store employees, the health and safety risks could be:
• Musculoskeletal strain, as a result of repetitive movements and non - ergonomic posture (sitting position or standing) during the work.
• Eye problems such as visual fatigue and disorders, as a result of insufficient lighting / reflections / large contrast of brilliance in the workspace.
• Improper response to emergencies such as fire or earthquake.
The Company ensures that its staff remains always informed about the risks arising in the workplace and the prevention measures taken for risks’ elimination.
As for the prevention of visual fatigue and eye problems, employees are examined when they are hired and periodically by the occupational physicians of the Company.
Regarding the employees’ response to emergencies, multiple and continuous trainings are organized by Health and Safety Unit and implemented by the responsible Safety Engineer of each site, nation widely. Among others, the trainings include evacuation exercises and updated information for good practices. Moreover, each site has its own Incident Response Team which consists of members – employees of the site, who are specially educated and have the proper equipment, so as in case of emergency (e.g. fire, earthquake) to evacuate the workspace promptly and safely. In 2022, firefighting trainings were organized in collaboration with the Navy and the Fire Service, in which the leaders and members of the Incident Response Teams participated. Firefighting training accompanied by theoretical evacuation drill took place at the stores of GERMANOS Company, aimed at the awareness of all store employees. A specialized questionnaire was distributed to all the store employees after the training, in order to certify the understanding of the knowledge they received about the evacuation process and the response in the emergency of fire.
Apart from the customized actions, all OTE Group employees are covered by private health insurance contracts, compensation programs for health issues, and have occupational physicians at their disposal.
In 2022, demands regarding the COVID-19 pandemic remained high also, and the Company, through the Health & Safety unit, responded promptly. More specifically, the Company continued to ensure all the necessary means and conditions for protection against the spread of the virus applying special instructions which are communicated to all the employees via the intranet and
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direct e-mails. The intranet of the Company is always up-to-date with information on both the general topics of COVID-19, as well as specific instructions for employees in retail stores, call centers, field technicians and subsidiaries.
In addition, employees have, individually, continuous and immediate access to the medical information on preventive protection measures, through a variety of communication channels (emergency telephone line for communication with the Occupational Physicians’ team, communication via e-mail exclusively for questions regarding the pandemic and 24/7 telephone line for psychological support). Furthermore the company's medical unit continued to manage positive cases and their contacts, in accordance with the updated COVID-19 management protocol. In addition to the instructions of the new protocol which provides 5 days of quarantine for positive cases and return to work, the company's Medical Team contacts the employee on the fifth day and if he still has a positive diagnostic test, his quarantine is extended and he returns to work when he has a negative test, in order the protection of his colleagues to be ensured as well.
Attempting to return in a state of normalcy, Health and Safety Unit enriched the topics of its digital actions, beyond the narrow subject of COVID-19. In fact, some actions were conducted with live participation of the employees; always in absolute compliance with the protection guidelines.
• Concerning safety : Live Webinars on safe work at height and safe use of hand tools were conducted. Firefight training awareness events (mentioned above) with live participation were also conducted.
• Concerning health: the Health & Safety Business Unit organized Webinars regarding International Days; such as Women in Menopause, Asthma, Smoking, Hypertension preventing spread of COVID-19, monkey pox and a breast cancer awareness; for the purpose of sensitivity and information. In addition, a new series of actions took place called “Health Days” (consisting of medical checkup by the medical team, sugar, cholesterol and blood pressure measurements, examination by a cardiologist (via electrocardiogram), consulting by psychologists for selfcare tips and sleep better tips, lipometry/oxidative stress measurements by nutritionists and stress relief sessions.
• Concerning mental health & balance : the Health & Safety Business Unit continued to conduct the live webinars for the Workplace Management Crises in collaboration with specialized partners. A new live webinar on dealing with violence and harassment was also organized during the first half of 2022. These live webinars are aimed at self-improvement and maintaining work-life balance.
• Concerning well-being : The “Coach” digital platform launched in 2021 continued to operate and be available 24/7, while at the same time all sports activities (basketball, football, running team, etc.) were restarted. Additional, actions for healthy eating, with useful advice from a chef and a nutritionist, individual sessions with nutritionists and wellness actions were also organized with physical participation. In addition, a new live webinar on nutrition and psychology was conducted as well.
• Concerning the social impact : One (1) round of voluntary blood donation was conducted, respecting all the required health and safety measures for the participants.
For Health and Safety Unit, the participation of the employees to the units’ actions was important, as well as their satisfaction. This magnitude was reflected in the evaluation questionnaires, that the employees completed after the end of each action. Evaluation questionnaires were widely used in 2022 and their large amount leads to safe conclusions regarding to the employees’ satisfaction, which in most cases approaches 100%. All the comments collected help the unit to develop and improve actions.
Despite this, the pandemic is still part of our daily life, and the Company, through the Health and Safety unit, fully aligns with the official instructions of the State, adapting properly its operational functions. OTE continuously ensures the compliance with all instructions and protocols; aiming at protecting all employees and their families as well as customers and the wider community, while at the same time tries to restore normalcy through the actions provided to its employees.
Compliance, Corruption, Bribery, Human Rights and Digital Ethics’ risks
Compliance stands for a solid commitment to the principles of integrity, transparency, justice, professionalism, team spirit, and of respect to the rules, principles which are essential to govern the functions of the Company.
Compliance violations (e.g. fraud, corruption, bribery, embezzlement, theft, money laundering, falsification of financial statements, unfair competition, workplace discrimination, human rights violations and any misconduct which could harm the Company's reputation, or any attempts to conceal the above) which are committed either within the Company or outside the Company involving business partners (e.g. customers, suppliers or distributors) who are doing business with the Company, could have an adverse impact on the Company’s financial position and reputation and might lead to fines, sanctions and limitations in business operations. We note that the OTE Group companies take all the required measures in order to ensure that the whistle-blowers who report incidents of misconduct by providing accurate information that is plausible, will be protected from any retaliation resulting in personal, professional or financial damage.
In order to avoid risks of non-compliance with the legislation in force as well as other legal consequences for the Company and its Employees, the Management has adopted and implemented a Compliance Management System (CMS), in the framework of
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which the Management has also adopted a Whistleblowing Process (“Tell Me”) and the relevant
communication channels
, in
which a communication channel for the violations of human rights is included.
Moreover, in the context of the System’s implementation, OTE Group Codes and Compliance Policies have been adopted in order to cover important operations and procedures of the Company, including, inter alia, the Code of Conduct, the Code of Human Rights and Social Principles, the Diversity, Equity and Inclusion Policy, the Supplier Code of Conduct, the Policy on Avoiding Corruption and other Conflicts of Interest, the Anti-Fraud Policy, the Policy on Accepting and Granting of Benefits, the Donation Policy, the Sponsoring Policy, the Policy on Anti-Trust Law, the Policy on Insider Trading, the Prevention and Combatting Violence and Harassment in the Workplace Policy and the Digital Ethics Guidelines on Artificial Intelligence.
Failing to adopt and implement adequate and robust processes that prevent corruption, bribery, and human rights issues violation can result in harming OTE Group’s reputation, thus possibly subsequently affecting its financial position as well as its employees’ commitment and loyalty. Therefore, OTE Group recognizes corruption, bribery, human rights and digital ethics violations as an emerging risk, given the uptake of domestic and international regulation on these issues. As such, OTE Group has established effective policies and procedures (such as whistleblower procedures) for the prevention, identification and handling of possible cases.
Critical Enterprise Contracts and Business Resilience
Associated advances and continuous changes in technology make telecommunications services even more critical for small, medium and large businesses (e.g. cloud, mobile, fixed technologies and solutions). This market segment requests from telecom providers a higher level of customer service in order to support these advanced and personalized solutions. Competition is focused mostly on innovative services and it depends heavily on the ability to deliver products and services in a reliable and timely manner.
OTE Group aims to ensure the maintenance and improvement of existing networks and installations, upgrade existing systems and adapt new technologies, in a manner that minimizes business interruption and contributes to business resilience, in order to provide customers with high quality and innovative services. In addition, OTE Group has adopted and implemented proactive and reactive mitigation measures in order to ensure the continuation of operations. A failure to deliver these high-value and complex services on a continuous and uninterrupted basis may lead to revenue reduction and increase of restoration costs (e.g. ICT disruptions, Network and IT infrastructure failures, etc.). Each of these events might have an adverse impact on the level of customer experience and satisfaction as well as on the company’s reputation.
E. NON FINANCIAL REPORT
OTE Group uses technology and its capabilities to create a better world for all. At the same time, it enhances its sustainable entrepreneurship, while, contributing to the economy, the society and the environment.
OTE Group’s vision is to be the leading sustainable digital service provider. Sustainability is a key priority, and it is integrated into the Group’s business strategy and operations.
Responsible Business
OTE Group operates responsibly throughout its value chain, aiming to stand as an example. In this framework, it applies and develops procedures, policies, tools, systems and mechanisms to manage issues regarding risks and compliance, ethical business practices, human rights, business continuity, security and data privacy, as well as responsible procurement and supply chain.
Employees
OTE Group provides a sustainable, efficient and technologically advanced working environment promoting fair employment practices. It fosters a culture of growth, recognizes high productivity and offers equal and unlimited opportunities for development, while utilizing the potential of technology in education. The vision for an equal society for all and the values of Equality, Diversity and Inclusion, shape the Group's human resources policies and actions, contributing to the company’s vision to create a better world for all. The Group encourages collaboration, open communication and the creation of a culture of innovation and growth, while putting in the center of its actions customer experience excellence. At the same time, the health, safety and well-being of its people remain a non-negotiable value for OTE Group. For this reason, it acts proactively, demonstrating competent reflexes, in order to quickly activate flexible response mechanisms in times of disruption.
Customers
Customer experience, in every touch point with the company, their service and satisfaction are key priorities for OTE Group. The Group connects people, within a world of unlimited digital possibilities, aiming to increase everyone’s quality of life. Through the Group's networks and technological infrastructure, people can communicate and be entertained, while its digital products and services make their everyday life simpler and easier. OTE Group is the largest investor in new technologies and infrastructure in Greece and the largest technology company in the country. At the same time, it develops innovative products and services, which contribute to the sustainable development, with environmental and social benefits for all .
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Society
ΟΤΕ Group contributes to the development of digital skills of people of all ages, providing equal access to new technologies for all. OTE Group aims to make technology accessible to all, so as to reduce the digital divide and to gain equal access to the opportunities of the digital era. It conducts various social contribution and corporate volunteering initiatives, aiming to support vulnerable social groups, children, education, local communities, entrepreneurship, culture and sports.
Climate and Environment
The Group aims for financial growth in accordance with environmental responsibility in all aspects of its performance. The most important objectives of the Group’s environmental strategy, is its contribution to tackling climate change (such as energy and emissions’ management) and the continuous integration of the circular economy principles into its activities. The targets seek to minimize the environmental impact of its activities, on the development and provision of products and services, which allow the enhancement of productivity and protection of the environment in other sectors of economic activity and on informing and raising awareness for its stakeholders.
Sustainability Strategical Priorities
OTE Group’s efforts, actions and commitments on sustainability issues focus on four strategic priorities, aligned with these of Deutsche Telekom Group:
• Climate Neutrality: Reducing CO2 emissions from own operations and across the value chain usage of Renewable Energy Sources and increasing energy efficiency.
• Circular Economy throughout the Value Chain: Conserving natural resources and promoting circular economy principles throughout the value chain.
• Inclusion & Equal Opportunities in the workplace : The Group’s corporate culture and daily practices promote the values of Diversity, Equity & Inclusion.
• Digital Society for All: Decisive contribution of OTE Group to Greece’s digital transformation, while ensuring equal participation in the digital world for all.
In this context, OTE Group’s short, medium and long- term key commitments are the following:
• Climate Neutrality
OTE Group contributes to Deutsche Telekom Group’s climate change targets:
- Net Zero for direct and indirect energy consumption (scope 1 & scope 2), including up to 95% reduction by 2025, compared to 2017.
- 100% Renewable electricity, from 2021 onwards.
- 25% Emission reduction per customer for value chains emissions (scope 3) by 2030, compared to 2017.
- Net Zero emissions across the value chain (scope 1, 2 and 3) by 2040.
• Circular Economy
- Zero ICT 1 waste to landfill (2022 onwards).
- Collection of ~ 400,000 pcs of mobile devices through take back schemes 2 from 2022 to 2024.
- CPEs’ take back schemes: retain sustainable management 2022 onwards.
- Sustainable packaging of: (a) Own branded newly launched CPEs (by mid 2022) & (b) 3rd Party connected devices in 2025.
- 25% paper reduction (2020-2023) 3
- Zeroplastic: retain single use plastic culture 4 in major buildings in Greece.
• Inclusion & Equal Opportunities in the Workplace 5
- At least 30% women at top and senior managers’ positions 6 by 2024.
• Digital Society
- Impact ~15 mil. peoples’ lives through digital inclusion initiatives by 2024 (from 2021).
OTE Groups annual performance on the commitments and actions implemented for their achievement, as well as additional sustainability commitments will be presented in the
2022 OTE Group Integrated Report.
Notes:
1. Waste generated from telecom & retail network, buildings and datacenters
2. Smartphones, Mobile Phones, Fixed Phones (wired and cordless), Notebooks/Laptops, Tablets, Wearables, Chargers/Powerbanks & Accessories
3. Commitment refers to ΟΤΕ , COSMOTE, CTS, COSMOTE E-Value, GERMANOS
4. Plastic bottles, cups, straws, food containers & single use cutleries
5. Commitment refers to ΟΤΕ , COSMOTE, GERMANOS, CTS, COSMOTE E-Value, ΟΤΕ Academy
6. Directors, Ex. Directors, Chief Officers
ANNUAL REPORT OF THE BOARD OF DIRECTORS
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Business model
The OTE Group business model aims to create value for its stakeholders, such as its shareholders, employees and customers, and for society overall, while seeking to protect the environment. The Group continuously improves its products and services, offers the required new job opportunities, cooperates with a large number of suppliers, pays taxes to the state and contributes to society. In addition, it provides equal opportunities, facilitates access of vulnerable social groups to the digital world and takes measures to reduce its environmental footprint. At the same time, its products and services help customers reduce their environmental impact.
The Group’s efficient operation and high competitiveness lead to positive economic results, a fact that allows it to reinvest in the business so as to create more value for all its stakeholders in the short, medium and long term. At the same time, through its products and services, OTE Group helps its customers to reduce their environmental footprint.
Sustainability Governance
The governance structure, through which sustainability issues are embedded in the key business processes, is reflected in the current OTE Group Sustainability Policy.
The OTE Board of Directors (BoD) represents OTE’s interests in sustainability issues regarding the entire Group and is responsible for its sustainability performance. Specifically, among others, the BoD approves the Sustainability strategy, approves Group-wide sustainability policies in response to important sustainability/ESG issues and significant strategic actions, monitors the Group’s sustainability/ESG performance and the relevant risk management, identifies the Company’s stakeholders, depending on its characteristics and strategy, and understands their collective interests and how they interact with its strategy. Binds and monitors the executive administration on matters relating to new technologies and environmental issues. Approves the annual Integrated Report. In this context, the BoD is regularly informed on sustainability issues. Indicatively, in 2022, the BoD was updated on the strategy, priorities, commitments, performance, strategic actions, important current and future requirements, as well as on the materiality assessment and its results. All of the above, along with the rest of the provisions of the Sustainability Policy, also contribute to the understanding of the stakeholders’ priorities and expectation, so as they are taken into account by the BoD when discussing and making relevant decisions.
The BoD has tasked the Chairman and CEO, the Company’s supreme executive body, to ensure the Group’s commitment to sustainability. The CEO of OTE proposes the Group’s Sustainability strategy to the BoD and its amendments, proposes Group-wide sustainability policies in response to important sustainability/ ESG issues and significant strategic actions for submission to the BoD for approval, proposes to the BoD the annual Integrated Report, as well as the content of other publicly available sustainability/ESG reports- when required (eg non-financial report), oversees the implementation of the sustainability strategy and the Group’s sustainability/ESG performance, and the overall sustainability/ESG issues for informing the BoD.
The Executive Director Corporate Communications & Sustainability OTE Group designs and contributes to the implementation and further development of the OTE Group's sustainability strategy and environmental strategy. Develops and implements measures to incorporate sustainability/ESG into the Group’s business strategy, procedures and activities, as well as cooperates with the
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29
competent executives to efficiently implement the sustainability strategy and embed ESG criteria into the Group's operation and activities. Contributes to the identification of material sustainability issues, as well as collaborates and informs OTE’s competent executives and- where applicable- executives from affiliate companies of the Group.
The Group Executives must integrate sustainability and the ESG criteria in their areas of responsibility and the OTE Group subsidiaries shall integrate sustainability and ESG criteria into their business strategy, operations and activities. They are required to implement OTE Group’s sustainability strategy, adhere to relevant standards and meet the Group’s sustainability/ESG requirements and targets, at a corporate individual level.
OTE Group's Sustainability Team consists of representatives from several companies’ business units. The Head of the team is the Executive Director Corporate Communications & Sustainability OTE Group. The objectives of the sustainability team, among others, are the alignment of all the Company’s business units and affiliates of the Group with the Group’s sustainability strategy, the dissemination of the sustainability strategy and actions to the various business units of OTE and to the affiliates of the OTE Group, as well as the improvement of the Group’s sustainability/ ESG performance.
Organization Structure
OTE Group Sustainability Policy
The OTE Group Sustainability Policy sets out OTE and its affiliates companies’ management approach on sustainability issues, as well as the areas which are impacted by relevant OTE Group requirements. This Policy defines the framework of the overall action plan implemented by the Group, taking into consideration current and future economic, social and environmental conditions, priorities and challenges. It lays out the sustainability governance structure within the Group by specifying the areas of responsibility and individual tasks and forms of cooperation among the Group’s relevant sustainability bodies. The OTE Group Sustainability Policy was adopted in 2015, and was amended in 2022, in order to reflect the current national and international regulations, priorities and stakeholder’s expectations concerning sustainability issues.
Systems and Policies
The Group has established and applies a Compliance Management System (CMS) and a Risk Management System (RMS). In this context, relevant Codes, Policies and Processes have been adopted, defining the Group’s approach to issues related to Compliance, Enterprise Risk Management, Human Rights and Sustainable Development. Both Systems are certified in accordance with relevant ISO standards.
In 2022:
a) 1. The following Codes/Policies of corporate code of conduct, Compliance and Enterprise Risk Management were amended at OTE Group level:
• The OTE Group Code of Conduct
• The Policy on Concluding Transactions with Related Parties
• The Risk Appetite Statement
2. The following were also adopted:
• The ΟΤΕ Group Policy on the Prevention and Combatting Violence and Harassment in the Workplace
• The Digital Ethics Guidelines on Artificial Intelligence OTE Group
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b) 41 training courses regarding topics related to Compliance, Risk Management and Human Rights issues were held.
c) Awareness Campaigns were carried out, in all OTE Group companies, on several topics, such as the Submission of Compliance Statements, the OTE Group Guiding Principles, the International Anti-Corruption Day, the International Fraud Awareness Week , the Adoption of the OTE Group Policy on the Prevention and Combatting Violence and Harassment in the Workplace , as well as the International Human Rights Day. At the same time, the Group’s risk culture was enhanced via awareness-raising actions (i.e. meetings, workshops/trainings).
d) Compliance Management System (CMS) Assessments regarding the existence and the effectiveness of Compliance controls were conducted at OTE Group companies and a series of actions for the enhancement of CMS were drafted.
e) The annual Compliance Risk Assessment was conducted at OTE Group companies. A relevant Compliance Measure Plan will be implemented in 2023.
Information regarding the Compliance Management System and the Risk Management System is included in the following
section
F. Corporate Governance Statement (“C. “Internal Control System”)
.
Integrated Management System
The Integrated Management System (IMS) implemented at OTE Group in Greece is based on a Corporate Process Model and is supported by representatives from various business units throughout OTE Group subsidiaries. Top Management’s commitment is also reflected in OTE Group’s Policy on the Integrated Management System.
The certified management systems at OTE Group, are presented in the table below.
Company/ Standard
OTE
COSMOTE
Cosmote Technical Services
GERMANOS
COSMOTE e-Value
ΟΤΕ Globe*
OTE Academy*
Telekom Romania
Mobile Communications *
Integrated Management System, as per PAS99
√
√
√
√
-
-
-
-
Quality Management System, as per ISO 9001
√
√
√
√
√
-
√
√
Environmental Management System, as per ISO 14001
√
√
√
√
-
-
-
√
Occupational Health & Safety Management System, as per ISO 45001
√
√
√
√
√
-
-
√
Information Security Management System, as per ISO 27001
√
√
√
√
√
-
-
√
Privacy Information Management System as per ISO 27701
√
√
√
√
-
-
-
-
Business Continuity Management System, as per ISO 22301
√
√
√
√
√
-
-
√
Information Technology - Service Management, as per ISO 20000-1
√
√
-
-
-
-
-
-
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31
Company/ Standard
OTE
COSMOTE
Cosmote Technical Services
GERMANOS
COSMOTE e-Value
ΟΤΕ Globe*
OTE Academy*
Telekom Romania
Mobile Communications *
Energy Management System, as per ISO 50001
√
√
-
-
-
-
-
-
Risk Management System, as per ISO 31000
√
√
√
√
√
-
-
√
Anti-bribery Management System, as per ISO 37001
√
√
√
√
√
-
-
√
Compliance Management System, as per ISO 37301
√
√
√
√
√
-
-
√
Whistleblowing Management System, as per ISO 37002
√
√
√
√
√
-
-
-
Road Traffic Safety Management System, as per ISO 39001
√
√
-
-
-
-
-
-
Educational Organizations Management System, as per ISO 21001
-
-
-
√
-
-
-
-
General Requirements for the Competence of Testing and Calibration Laboratories, as per ISO 17025
-
√
-
-
-
-
-
-
System of Principles and Good Practice Guidelines for the Distribution of Medical Devices
√
√
-
√
-
-
-
-
National Industrial Security Certification (ΕΚΒΑ)
√
√
√
-
-
-
-
-
* OTE Globe, OTE Academy & Telekom Romania Mobile Communications are not included in the Integrated Management System
Furthermore, for OTE and COSMOTE, ISAE 3402 Type 2 Report (‘Assurance reports on controls at a service organization’) and ISAE 3000 Type 2 Report ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’ are being issued by international auditing company in accordance with International Standard on Assurance Engagements ο f the International Auditing and Assurance Standards Board. These reports relate to the design and operational effectiveness of controls and the respective control environment of ICT services delivered to customers.
Sustainable Procurement & Supply Chain
OTE Group believes that the diffusion of key values and standards in the supply chain is an important feature of responsible business conduct. The development and maintenance of a value-added supply chain for the Group, with economic, environmental and socially responsible methods and practices, in line with the Group's vision, is a continuous target for improvement. Regarding the above, among other things, the acceptance of the OTE Group Suppliers Code of Conduct is a prerequisite in order for a prospective supplier to enroll at the Suppliers’ Portal, while compliance with the Principles of the Code is a basic obligation of the Supplier based on their respective contract or other agreement with OTE Group. In fact, the supplier must ensure that these
ANNUAL REPORT OF THE BOARD OF DIRECTORS
32
Principles are applied throughout the supply chain, binding to such compliance their contractors (and/or subcontractors) insofar as the latter are involved in providing deliverables under a contract between the supplier and OTE Group. Moreover, OTE Group has incorporated a Special Anti-corruption clause of each of its contracts with suppliers, the requirement for the alignment of the latter with the OTE Group Code of Human Rights and Social Principles and expects them to respect and apply its principles throughout their operations and business relationships. Moreover, procedures for reviewing and evaluating suppliers and partners are applied, according to the Compliance criteria. Specific communication channels have been established to enable everyone to submit information concerning possible violations of the law or internal policies and regulations. At the same time, suppliers are evaluated on an annual basis, on sustainability issues, amongst others.
More information on the Supply Chain is presented in the section
D. RISKS AND UNCERTAINTIES FOR THE NEXT YEAR
(other risk).
Stakeholder Dialogue
OTE Group recognizes that its stakeholders have a direct impact and influence on its sustainable development and is engaged with their representatives without exclusions and discrimination. OTE Group has identified 9 primary stakeholder groups as presented as follows:
• Shareholders, Bondholders, Investors and Analysts
• Customers and prospective customers
• Business
• Organizations of Science, Research and Education
• Media
• Employees, prospective employees and their representatives
• Suppliers
• NGOs and interest groups
• State / Government agencies
As part of its sustainability management approach, OTE Group has established strong communication channels with all stakeholders to actively engage with them, understand their expectations and help shape the Group’s Sustainability Policy. The communication channels and frequency of communication with stakeholders are adapted according to the group of stakeholders and their needs, in order to ensure effective communication and response from OTE Group. In this context, the Group has established a three-tier engagement framework as part of its stakeholder dialogue, whereby three different methods of communication, i.e. Participation, Dialogue and Information, are employed depending on the type of stakeholder and the specificities of the issues that are most relevant to them.
In this context, the OTE Group participates in numerous sustainability- related committees and working groups, such as: participation in Greece Country Council of the Sustainable Markets Initiative (SMI), in the Women in Business (WIB) Committee of the Hellenic-American Chamber of Commerce, in the Board of Directors of CSR Hellas, in the Circular Economy Committee of the Hellenic-American Chamber of Commerce. In addition, OTE Group companies actively participate in organisations and are informed on the sustainability and ESG trends and developments. In 2022, OTE Group companies maintained their voluntary participation in a number of national, European and national bodies and organizations of strategic importance, such as the Hellenic Network for Corporate Social Responsibility (CSR Hellas), the Global Compact Network Hellas (GCNH) and the Greek Diversity Charter.
The stakeholders’ feedback is considered by the relevant operational bodies, including the Board of Directors, for the formulation of strategy, commitments and actions, and it is also utilized as an input in the Group’s materiality analysis process. In this framework, the outcomes of the stakeholder dialogue contribute to the implementation of strategic actions and to the validation and improvement of the sustainability strategy of the OTE Group, which is approved by the OTE’s Board of Directors, as defined in the OTE Group Sustainability Policy.
Materiality Analysis
The OTE Group companies identify the most important issues of their sustainable development through the “Analysis of material issues” carried out in accordance with the Group's unified Enterprise Risk Management methodology.
In 2022, OTE Group conducted a materiality analysis taking into account the double materiality perspective through the participation of OTE Group's Senior Management and the engagement of its stakeholders and as a result identified key issues, considering relevant risks and opportunities, as well as positive and negative impacts related to the material issues. The Compliance Risk Assessment process was integrated into the materiality analysis process. OTE Group has merged its sustainability, compliance and risk management procedures, developing a holistic approach, according to best practices.
In 2022, the materiality analysis was conducted in the following two dimensions (i.e."double materiality"):
- The "internal impact materiality”: Assessing the impact of the selected issues on the Group's operations and sustainability performance ("internal" impact, including financial parameters)
- The "external impact materiality”: Assessing the impact of the issues on the economy, society and the environment ("external" impact), including their impacts on human rights
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33
This process follows international trends and best practices while also takes into consideration the European Sustainability Reporting Standards (ESRSs), referred in the European Directive 2022/2464 regarding corporate sustainability reporting, Corporate Sustainability Reporting Directive – CSRD.
Senior Management members took part in the evaluation by assessing the likelihood of occurrence and the impact of all the listed issues for OTE Group (internal impact materiality), as well as by prioritizing the issues based on their level of impact to the economy, the environment and society -including impacts on human rights (external impact materiality), in the next 2-3 years. In addition, the aforementioned stakeholder groups
( in the Stakeholder Dialogue section
) were invited to submit their view by rating each
issue regarding the level (degree) of impact of the Group on the economy, the society and the environment (using a 5-grade scale) through an online questionnaire.
The issues were categorized in respect to their significance using the a) impact on the economy, environment and society, as recognized by OTE Senior Management and stakeholders, and b) the impact on the Group’s operations and sustainability performance, as identified by the Group’s Senior Management. The materiality analysis results were validated by the OTE Group Senior Management and all available data were evaluated to be used in the Group's operations planning and strategy. The key issues and their handling / mitigation were included in its risk map (see section "
Risks and uncertainties for the next year
" ).
The matrix below presents the outcome of the analysis and the identified material issues (i.e. the 9 issues above the “significant” threshold) for OTE Group.
1. Energy, Emissions and Climate Change
2. Circular Economy
3. Biodiversity
4. Water Management
5. Electromagnetic Field (EMF) Safety and Management
6. Fair Employment and Employee Management
7. Employee Training and Skills Development
8. Employee Health, Safety and Wellness
9. Community Engagement and Impact
10. Sustainable Products and Services for a Digital Society
11. Safe and Responsible Products and Services
12. Customer Communication and Satisfaction
13. Economic Performance and Impact
14. Governance and Management
15. Risk Management and Business Continuity
16. Ethical Business Practices
17. Human Rights Management
18. Data Security and Privacy
19. Responsible Procurement and Supply Chain
The issues above, have been selected after a diligent consideration of various sources such as the Compliance Risk Assessment, previous materiality analysis results, sector issues, applicable ESG/ sustainability standards etc. In the preliminary due diligence process the Group identified indicative risks and opportunities, potential and actual impacts on the environment, economy, people and society connected with its own activities (operations, products, services) and business relationships across its operations and value chain, to the applicable extent. More information will be presented in the
2022 OTE Group Integrated Report
, in which all
E n v i r o n m e n t a l i s s u e s
S o c i a l i s s u e s
G o v e r n a n c e i s s u e s
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34
the 19 issues will be covered, with special focus on the 9 issues identified as the most material (i.e. significant and most significant issues in the matrix above).
Indicative Indices for 2022
In the following table, the indicative performance indicators for 2022 are depicted. The indicators have been selected taking into account the sustainability reporting guidelines of the Global Reporting Initiative.
Indices:
OTE
ΟΤΕ Group 1
Employees covered by collective bargaining agreements (%) 2
9 8
97
Women employees (%)
39 3
41 4
Fatalities (number of employees) 5
0
0
Number of employees injured 6
5
74
Court convictions for corruption against the company or its employees in relation to their professional activities (number of convictions)
0
0
Social contribution (€) 7
1 , 275 , 018
3,685,922
Electricity consumption (GWh) 8
19 6 . 34
524.65
Direct and indirect (location-based) CO 2 emissions from energy (t)
76 ,3 7 0
200,469
Direct and indirect (market-based) CO 2 emissions from energy (t)
3, 13 4
15,211
Recycling of mobile devices (t)
0.98
25.02
EMF measurements (number of measurements) 9
0
27
Suppliers evaluated (% of the annual procurement value) 10
8 8
90 11
1 Data refer to the companies OTE, COSMOTE, GERMANOS, CTS, OTE Globe, OTE Academy, COSMOTE e-Value, and Telekom Romania Mobile Communications, which contribute approximately to 99% of OTE Group consolidated revenues, as presented in the section A
. Financial and Operational Highlights o
f 2022 .
2 Refers to employees covered by Companies Collective Bargaining Agreements.
3 The percentage refers to 980 women who are regularly employed by OTE.
4 The percentage refers to 4,351 women, who are regularly employed by OTE, COSMOTE, GERMANOS, CTS, OTE Globe, OTE Academy, COSMOTE e-Value, and Telekom Mobile Communications, which contribute about 99% of the consolidated income of OTE Group as presented in section
A. Financial and Operational
Highlights of 2022.
5 Fatal work accidents do not contain incidents from strictly natural causes.
6 Fatal work accidents and accidents that took place while arriving to/leaving from work are included. Incidents from strictly natural causes are excluded.
7 Including financial and in-kind contribution.
8 Energy consumption is calculated based on energy consumption records per installation for OTE, COSMOTE, GERMANOS, CTS, OTE Globe, OTE Academy and COSMOTE e-Value, and energy consumption expenditure records per installation for Telekom Romania Mobile Communications.
9 . Ad hoc measurements conducted by independent institutions or national authorities and own laboratories. 10 The percentage refers to the annual volume of supplies that was evaluated to the annual volume of supplies corresponding to suppliers that meet the criteria of the evaluation based on the company’s process. Suppliers to be evaluated are selected on the basis of purchase orders issued within a 12-month period. For 2022, the selection of suppliers for evaluation was based on all purchase orders issued between 1/10/2020 - 30/9/2021. All suppliers: (a) with purchase orders worth more than Euro 2,0 million, (b) providing important types of supply (i.e. products and services that have a significant effect on the products and services provided to customers) worth over Euro 500,000, (c) of products / services related to OTE Group Integrated Management System, are evaluated. In addition, the Group evaluates certain suppliers who did not meet the above criteria but were proposed for evaluation by OTE Group Managers. Supplies related to intercompany transactions, commissions to merchants, interconnection & roaming expenses, sponsorships as well as donations are excluded.
11 Data refer to the companies OTE, COSMOTE, GERMANOS, CTS, COSMOTE e-Value and Telekom Romania Mobile Communications.
The data above are collected through an internal online database, which is a Web-based IT Tool for data collection, storage, management and reporting, ensuring standardized and well-structured data collection process. An appropriate workflow has been implemented in the database to ensure the validity and accuracy of the imported data. Some of the key benefits of the database are that it is a single, centralized, automated and integrated system, which contributes to the optimized collection process (efficiency, transparency), the increased data reliability, the reduced calculation errors, and ensures the four-eyes principle.
In addition to the online database, the Group applies best practices regarding the controls related to ensuring the quality and reliability of sustainability data, such as the segregation of duties and the "four eyes" principle, in the files and texts of the Reports, through a series of approvals by the relevant executives. Finally, the Group ensures the assurance - by an independent external auditor - of the content of the Integrated Report and selected elements of the Non-Financial Statement.
Detailed information about the Group's approach and the performance of its companies will be presented in the 2022 OTE Group Integrated Report (June 2023).
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35
Taxonomy Related-Disclosures
The scope of the EU Taxonomy Regulation ( ΕΕ ) 2020/852 (“Regulation” or “EU Taxonomy”) is to establish a common set of criteria for determining whether an economic activity qualifies as environmentally sustainable.
It aims to create common criteria and understanding on sustainable activities and investments in view of the EU Green Deal and the targets/ goals set. The Taxonomy Regulation is a key component of the European Commission's action plan to redirect capital flows towards a more sustainable economy. In 2021, the first taxonomy environmental targets "climate change mitigation" and "climate change adaptation" were supported by relevant criteria in the EU legislation. In July 2022, further criteria for specific forms of energy production were added.
The EU Taxonomy is a classification system for environmentally sustainable economic activities. Currently, criteria have been established for the environmental goals of climate change mitigation and adaptation. The Regulation, among others, defines specific reporting requirements and this section provides information for OTE Group activities according to these requirements. The below consolidated disclosures are provided for the purposes of the simplified reporting requirements pursuant to Art. 10 (2) of the Art. 8 Delegated Act (Commission Delegated Regulation (EU) 2021/2178).
According to the Taxonomy Regulation, the first step is to identify the taxonomy-eligible economic activities of a company. These are activities that are covered by the EU Taxonomy and thus potentially contribute significantly to achieving the environmental objectives. As a second step, these activities must be assessed for their taxonomy alignment. An eligible economic activity is considered taxonomy-aligned if it meets the technical screening criteria set out in Annexes I and II of Delegated Regulation (EU) 2021/2139. Specifically, to be considered taxonomy-aligned, an activity makes a substantial contribution to at least one of the environmental objectives, while also doing no significant harm to any other environmental objectives and meeting the Minimum Safeguards set out in the Taxonomy Regulation (EU) 2019/2088, which require, in particular, compliance with human and labour rights.
OTE Group offers a wide range of services: fixed and mobile telephony, broadband services, pay television and integrated ICT solutions. In this context, regarding the Group’s core business, two of the economic activities currently listed in the EU taxonomy are relevant (taxonomy-eligible) for the environmental objective "climate change mitigation" (Annex I of Delegated Regulation (EU) 2021/2139) due to its affiliation with the information and telecommunications sector:
• Data processing, hosting and related activities (8.1)
• Data- driven solutions for GHG emissions reductions (8.2)
Economic activities that contribute significantly to the environmental objective "climate change adaptation" were not identified for the financial year 2022.
The EU Taxonomy does not yet include criteria related to the economic activity "provision and operation of a network infrastructure for telecommunications". Consequently, the essential part of the Group’s business model is not yet covered by the taxonomy, so that it cannot present the majority of its core business as taxonomy- eligible aligned. Therefore, there are also no suitable EU taxonomy criteria with which the Group could identify its contribution to climate protection in the area of network infrastructure as taxonomy aligned.
On the other hand, the EU taxonomy lists cross-cutting activities outside our core business that are relevant to the Group’s general business infrastructure, such as fleet management. The “Transport by motorbikes, passenger cars and light commercial vehicles (6.5) “cross-cutting activity for the environmental objective "climate change mitigation" is relevant for OTE Group.
The following table provides an overview of OTE Group’s taxonomy-aligned economic activities for the reporting year 2022, breaking down both absolute values and their respective percentage share of total Group turnover, capital expenditure and operating expenditures.
Procedure for determining taxonomy eligibility and alignment
In determining the taxonomy eligibility of economic activities with which the Group generates revenues, all the companies of OTE Group are considered. As cross-cutting activities are very broad, only those activities exceeding the threshold of 0.5 % of the Group's capital expenditure or 0.5 % of its operating expenditure were included here. The exception is activity 6.5, as in the context of the OTE Group’s climate-related commitments, seeks its fleet transformation to increase electrification. For all taxonomy- eligible activities, we look at Group level, hence the alignment followed this trend. Climate risks are managed centrally at Group level. Moreover, the Group ensures compliance with minimum safeguards through a Group-wide management system.
In order to avoid significant impacts on the environmental objective "climate change adaptation", the taxonomy alignment assessment requires an analysis of potential physical climate risks for all aforementioned economic activities. As part of the Groups "Business Continuity Management", its critical infrastructure is regularly examined for physical climate risks and takes
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36
climate adaptation measures to minimise any such risks. In the near future, the scenario-based climate risk analysis is planned to be implemented and it will be integrated into the “Business Continuity Management”.
Minimum safeguards require a management system to comply with the OECD Guidelines for Multinational Enterprises and UN Guiding Principles on Business and Human Rights, including the declaration on Fundamental Principles and Rights at Work of the International Labour Organisation (ILO), the eight fundamental conventions of the ILO and the International Bill of Human Rights. The OTE Group is explicitly committed to adhere to the aforementioned principles and fulfil its human rights due diligence obligation, which derives from the UN Guiding Principles on Business and Human Rights; risk assessment that covers the Group is performed and with which it monitors compliance with social and environmental standards. To this end, suppliers are obligated to comply with the OTE Group Supplier Code of Conduct, OTE Group Code of Conduct and OTE Group Code on Human Rights and Social Principles.
The Group also maintains a constant dialogue with employee representatives and trade unions. To avoid corruption and ensure fair competition, the Group has an extensive Compliance Management System (CMS). The Compliance Management System, which mainly focuses on prevention measures, addresses the compliance of all - employees and Management - with current legislation, the Code of Conduct and internal Policies. The key elements of the CMS are:
• the prevention of misconduct in parallel with compliance with the policies provided for by the CMS. In this way, both the Group and its employees are protected from any legal consequences due to misconduct, while the reputational risks of the Group are reduced.
• the detection of compliance violations and the response to them. In order to provide the ability of reporting any violations of Policies, regulations and the legislation in force, the Company has established the relevant
communication channels .
The Compliance Management System is certified with
ISO 37001:2016
(Anti-Bribery Management Systems) and
ISO
37301:2021
(Compliance Management Systems) by an independent certification body.
You can read more about minimum safeguards in the sections
D. RISKS AND UNCERTAINTIES FOR THE NEXT YEAR
(“Supply
Chain” & “Compliance, Corruption, Bribery and Human Rights’ risks”),
D. Board of Directors and Committees that consist of
members of the Board of Directors – Remuneration of the Board Members/ Remuneration of executive Board Members - Other
administrative, managerial or supervising corporate bodies or committees
(“1.10 (I) Management of conflicts of interest
situations), (II) Management of transactions with related parties, ( ΙΙΙ ) Education Policy, (IV) Suitability Policy”),
E. NON FINANCIAL
REPORT
(“Systems & Policies”),
F. CORPORATE GOVERNANCE STATEMENT
(“C. “Internal Control System”), as well as in the
Integrated Report 2022, which will be published in June 2023.
Economic activities relevant to turnover
The taxonomy-eligible economic activity “Data processing, hosting and related activities” (8.1) covers the "Storage, manipulation, management, movement, control, display, switching, interchange, transmission or processing of data through data centres, including edge computing”. In addition to data centre spaces under the Group’s care, partial spaces of external providers ("operated on co-locations") were also included in the evaluation.
To be considered taxonomy-aligned, data centres must comply with the European Code of Conduct for Data Centre Energy Efficiency. In addition, the Global Warming Potential of the the cooling agents used must not exceed the value of 675 kgCO2e. The OTE Group has not signed the Code of Conduct for Data Centre Energy Efficiency, even though it follows the practices that derive from the Code in its Data Centers. Concerning the cooling infrastructure, the Group follows the EU regulation on fluorinated greenhouse gases, but refrigerants with global warming potential GWP value that exceeds the limit of 675 kgCO2e are used. For aligning with the taxonomy, major air condition system renovation is required which could be considered in case of site renovation in the future.
The solutions and products of the Group which, according to the provisions of the EU taxonomy, are "predominantly aimed at the provision of data and analytics enabling GHG emission reductions”, are assigned to the economic activity "Data-driven solutions for GHG emissions reductions " (8.2). These are solutions and products that have a clear potential to save CO2 emissions on the user side. Within the Group-wide business activities, the following taxonomy-eligible services were identified:
• Web and video conferencing (saving travel-related CO2 emissions).
• Workplace and cloud solutions (increasing energy efficiency through improved server utilization)
• IoT/mobility solutions (saving CO2 emissions through route optimization)
As proof of the taxonomy alignment of the solutions, the technical screening criteria require a life cycle analysis. This analysis must demonstrate that the solution causes "significantly fewer greenhouse gas emissions" over the entire life cycle than comparable solutions available on the market whose greenhouse gas balance is considered "best in class". The technical screening criteria do not specify a concrete threshold for "significant" greenhouse gas savings measured against the alternative solution. Since greenhouse gas balances of specific solutions offered on the market were not available on the market for competitive reasons, a relevant examination was not possible nor practical.
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37
Cross-cutting activities
OTE Group leases and operates vehicles fleet, mainly consisting of passenger cars and light commercial vehicles. These kind of functions are identified to fall within the economic activity of "Transport by motorbikes, passenger cars and commercial vehicles" (activity 6.5). Moving forward to reach OTE Group’s climate related commitments, it implements activities that contribute to the EU environmental objective of Climate Change Mitigation, whilst ensures that the same activities will not do significantly harm to any of the other environmental objectives and goals defined. OTE Group conducts a comprehensive plan for the transformation of its fleet vehicles towards sustainability, consistent with sectoral and national adaptation plans and strategies in the areas of vehicle electrification and charging infrastructures. In this context, at every vehicle tender we pursue, we request the procurement of a significant proportion of low and zero direct (tailpipe) CO2 emissions vehicles, such as chargeable hybrid electric vehicles (plug-in hybrid, PHEV) and battery electric vehicles (BEV) being powered by electricity from renewable energy sources.
Calculation of the taxonomy KPIs
For the year under review, the total values of the Group on which the calculation according to the EU taxonomy is based amounted to Euro 3.5 billion for turnover, Euro 0.7 billion for capital expenditure and Euro 2.1 billion for operating expenditure. The turnover according to the EU taxonomy corresponds to the turnover in the consolidated profit and loss account. The relevant capital expenditure was determined on the basis of the consolidated balance sheet and results from the sum of additions and changes in the scope of consolidation of property, plant and equipment, intangible assets (excluding goodwill) and rights of use. In accordance with the regulations of the EU taxonomy, the information on capital expenditure is not part of a capital expenditure plan. Relevant operating expenses are defined by EU taxonomy as expenses for research and development, building refurbishment, short-term lease, maintenance and repair and other direct expenses relating to the day-to-day servicing of assets of property, plant and equipment. They are reported in the consolidated income statement as operating expenses.
The data/information on turnover, capital expenditure and operating expenditure shown below as taxonomy-eligible or taxonomy aligned are directly allocated to the operation of data centres in accordance with the economic activity 8.1. or with the provision of ICT solutions according to economic activity 8.2. at product Group level. No turnover was generated with the cross-cutting activity 6.5.
The taxonomy-eligible turnover for economic activity 8.1 can be transparently and unambiguously allocated to the operation of specific data centres by means of a suitable key. The key is calculated from the number of network components operated at each data centre location in relation to the total number of components used in the Data Processing business segment. Capital expenditure with a clear reference to a data centre is allocated directly to that data centre.
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*Yes: for cases criteria are set in the EU Taxonomy
The Group determined the Taxonomy-eligible KPIs in accordance with the legal requirements and describe its accounting policy in this regard as follows:
Turnover KPI: The proportion of Taxonomy-eligible economic activities in the total turnover has been calculated as the part of net turnover derived from services associated with Taxonomy-eligible economic activities (numerator) divided by the net turnover (denominator), both for the financial year 2022. The denominator of the turnover KPI is based on the consolidated net turnover in accordance with IAS 1.82(a). Specifically, the total amount of OTE Group’s Turnover can be reconciled with “Total revenues” in the
Income Statements (Consolidated and Separate)
section of the Annual Financial Statements (Consolidated and Separate).
Capex KPI: It is defined as Taxonomy-eligible Capex (numerator) divided by total Capex (denominator). Total Capex consists of additions to tangible and intangible assets during the financial year, before depreciation, amortisation and any re-measurements, including those resulting from revaluations and impairments. It includes additions to tangible and intangible assets, right-of-use assets and additions resulting from business combinations.
The total amount of Capital Expenditure is determined based on the Consolidated Balance Sheet and result from the sum of the following key items in the “Notes to the annual financial statements as of December 31, 2022 and for the year then ended”: The line “Additions and transfers” including the line “Disposals and transfers -cost” of categories “Construction in progress” and
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“Investment supplies” of
“Property, plant and equipment”
(Note 4), and the line “Additions”
“Leases”
(Note 5),
“Telecommunication licenses”
(Note 7), and
“Other intangible assets”
(Note 8).
Opex KPI: This KPI is defined as Taxonomy-eligible Opex (numerator) divided by total Opex (denominator). The EU taxonomy's definition of relevant operating expenditures includes expenses for research and development, building refurbishment, short-term lease, maintenance and repair and other direct expenses relating to the day-to-day servicing of assets of property, plant and equipment. The related cost items can be found in various line items in the Income Statements (Consolidated and Separate) section of the Annual Financial Statements (Consolidated and Separate).
The total amount of OTE Group’s Operating Expenditures is presented as “Total operating expenses before depreciation, amortization and impairment” in the
Income Statements (Consolidated and Separate)
section of the Annual Financial Statements
(Consolidated and Separate). The accounting policies related to the compilation of the table above are presented in the Note 3
“Significant Accounting Policies”
of the Annual Financial Statements (Consolidated and Separate) as of December 31, 2022. The
financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (EU). The Group uses various information systems and internal control checks to ensure a comprehensive accounting framework for revenue recognition. Revenue from contracts with customers is recognized when control of the goods or services is transferred to the customer at an amount that reflects the consideration to which the Group or the Company expects to be entitled in exchange for those goods or services.
Since the EU taxonomy does not yet adequately cover the Group’s core business, concerning telecom network operation, an aggregated view of the taxonomy eligibility of all economic activities results in only a small taxonomy-eligible proportion of turnover (0.7 %), capital expenditure (2.7 %) and operating expenditure (1.0%) for OTE Group for the 2022 financial year as well.
The largest proportion of taxonomy-eligible turnover is accounted for by economic activity 8.2 “Data-driven solutions for GHG emissions reductions". In relation to the relevant Group total turnover, the taxonomy eligible turnover of the 8.2 “Data-driven solutions for GHG emissions reductions data processing and hosting” amounts to 0.5%. In second place with 0.2 % turnover is the taxonomy-eligible turnover of the economic activity 8.1 " Data processing, hosting and related activities ".
The largest proportion of taxonomy-eligible operating expenses is accounted for by economic activity “Data processing, hosting and related activities" (8.1), which amounts to 0.6% of the Group’s total operating expenses. In second place with 0.5 % operating expenditure is the taxonomy eligible operating expenditure for economic activity 8.2 " Data-driven solutions for GHG emissions reductions”.
As 6.5 “Transport by motorbikes, passenger cars and light commercial vehicles” is a cross-cutting activity and not part of OTE Group’s core business, it doesn’t generate turnover, while the percentage of the taxonomy eligible capital expenditure amounts to 1.4%. Moreover, the taxonomy eligible capital expenditure for the 8.1 “Data processing, hosting and related activities” amount to 1.2% of total capital expenditure.
In the 2022 financial year, there was no taxonomy-aligned proportion of turnover, capital expenditure and operating expenditure of the Group’s taxonomy eligible economic activities.
F. CORPORATE GOVERNANCE STATEMENT
This Statement covers all of the principles and practices adopted by the Company in order to ensure its efficiency, the interests of shareholders and all other interested parties.
The structure of this Corporate Governance Statement, having taken into account art. 152 of Law 4548/2018, art. 1-24 of Law 4706/2020 and the 2021 Hellenic Corporate Governance Code (see below), focuses on the following topics:
Α . Statement of compliance with Corporate Governance Code
Β . Deviations from the Corporate Governance Code and explanations
C. Internal Control System
D. Board of Directors and Committees that consist of members of the Board of Directors – Remuneration of the Board Members/
Compensation of executive Board Members - Other administrative, managerial or supervising corporate bodies or committees
Ε . General Meeting and Shareholders’ Rights
F. Diversity policy with respect to the administrative, managerial and oversight bodies corporate
By strengthening its procedures and structures, the Company ensures not only compliance with the regulatory framework, but also the development of corporate culture, based on the values of business ethics and on the protection of interests of the shareholders and other stakeholders.
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As a company with financial instruments admitted to trading on the Athens Exchange, the Company duly complies with the legislation in force including Law 4706/2020 on corporate governance.
In compliance with article 17 of Law 4706/2020 and Decision 2/905/03-03-2021 of the Board of Directors of the Hellenic Capital Market Commission, regarding the obligation of companies with securities listed on a regulated market to adopt and implement a corporate governance code issued by a highly recognized organization, OTE’s Board of Directors adopted, as of 17-07-2021, the 2021 Hellenic Corporate Governance Code (HCGC) issued by the Hellenic Corporate Governance Council (HCGC) in 2021.
The principles and practices followed by the Company are reflected in the Articles of Incorporation 1 , the Internal Regulation of Operations, the OTE Group Code of Conduct 2 and in other regulations and/or policies of the Company regulating its operations as
described here below.
A. Statement of compliance with the Corporate Governance Code
As of 17-7-2021, the Company implements the 2021 Hellenic Corporate Governance Code (HCGC) of the Hellenic Corporate Governance Council (HCGC), which can be found on the website
https://www.cosmote.gr/otegroup_company/investor_relations/corporate%20governance/eng/kwdikas_etairikis_diakivernisis
_EN.pdf
B. Deviations from the Corporate Governance Code and explanations
On February 22, 2023, the following are mentioned as deviations:
1. In relation to the special practice of EKED which provides for the gradual replacement of the members of the Board of Directors, the following should be said: The practice followed by the General Meeting of the Shareholders is that the term of office of the members of the Board of Directors begins and ends at the same time. The aforementioned practice has been successfully implemented, without raising an issue of lack of administration (Part A, Second Section, par. 2.3.2 of HCGC).
2. In relation to the special practice of the HCGC, which provides that both the individual and the Company’s performance should be taken into account regarding the remuneration of the members of the Board of Directors, the following should be said: In accordance with the Company’s policies in force, the executive members of the Board of Directors and the senior executives of the Company share a common set of goals, which is fully aligned with the strategy of the Company and covers
both financial and quality objectives (such as the customer’s experience, the employees’ satisfaction etc.). In this context, the variable remuneration of the executive members of the Board of Directors is directly related to the level of achievement of the aforesaid objectives. (Part A, Second Section, paragraph 2.4.5 of HCGC).
3. In relation to the special practices of the HCGC which provides that the Remuneration and Nominations Committee has the primary role in the planning and preparation of a succession plan for the members of the Board of Directors, of the Chief Executive Officer (CEO) and of the senior executives of the Company, the following should be said: the issue of succession of the BoD members, the CEO and the senior executives of the Company is the responsibility of the Remuneration and Nominations Committee. With regard to the CEO and the senior executives of the Company, in December 2022 the Committee adopted “OTE Succession Plan Process for the Managing Director and the CxOs” according to which the respective Succession Plan and the list of successors of the CEO and each of the Company's top managers (Chief Officers/CxOs) are formed. This process will run for the first time in the first half of 2023. With respect to the succession of the members of the Board of Directors, in case there is a need to replace one or more members of the Board of Directors, the Remuneration and Nominations Committee is activated to find suitable candidates in accordance with the Company’s Suitability Policy and the procedure set out in the Rules of Operation of the Committee (Part A, Second Section, par.2.3.1, 2.3.3., 3.3.8. (third case) of HCGC).
1
https :// www . cosmote . gr / otegroup _ company / investor _ relations / corporate %20 governance /% CE %9 F % CE % A 4% CE %95_ ARTICLES _ OF _ INCOR
PORATION _ EGM _01112022_ en . pdf
2
https :// www . cosmote . gr / otegroup _ company / about _ us / otegroup / corporate _ governance / OTEGroup _ CodeOfConduct 2017_14 p _ A 4_ EN _ web .
pdf
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C. Internal Control System
The Company adopts and implements a corporate governance System, according to the provisions of the legislation in force, by taking into consideration the size, the nature, the range and the complexity of its activities. Among the other elements included in the corporate governance System is a sufficient and effective Internal Control System, including the risk management and compliance systems and the internal audit unit (see analytical description below under I, II, III and IV).
“Internal Control System” is defined as «the set of internal control mechanisms and procedures including risk management, internal audit and compliance that covers on a continuous basis every activity of the Company and contributes to its secure and efficient operation».
The Company applies an Internal Control System (hereinafter ICS) that covers its activities and contributes to its secure and effective operation. This system is based on the internationally recognized COSO framework (Committee of Sponsoring Organizations of the Treadway Commission).
Ι . Compliance Management System
Compliance of a company with the legal and regulatory framework is an essential obligation for responsible operation and a priority for the Management. Ensuring Company’s compliance with applicable laws and regulations and bearing zero tolerance for corruption and bribery stands for OTE’s solid commitment to the principles of integrity, transparency, fairness, professionalism, team spirit and respect for the rules; principles which are essential to govern the operation of the Group.
In this context, OTE as a Société Anonyme with securities listed on a regulated market, complies also with current legislation on corporate governance, incorporating regulations and compliance practices into its operations.
The main target of compliance is the introduction and application of appropriate and updated policies and procedures in order to achieve promptly the full and continuous compliance of the company to the respective from time to time applicable regulatory framework and have at any time a complete overview of the degree of achievement of the said target.
OTE Group has developed and applies, since May 2009, a
Compliance Management System
(CMS), regarding the compliance of
all (personnel and management) with the legislation in force and with internal policies, aiming at avoiding risks of non-compliance with the legislation in force and other legal consequences for the Company and personnel – employees, executives and management. The effective implementation of the Compliance Management System safeguards the Company, Company’s employees’, customers’, suppliers’, partners’ and shareholders’ interests.
The key elements of the CMS are:
a) the prevention of misconduct along with compliance with the policies, in order for the Company and its employees to be protected from legal consequences due to misconduct. Additionally, the CMS contributes to reducing reputational risks for the Company and the Group. Prevention is achieved mainly through:
• the development of Compliance Policies and Procedures for OTE Group Companies.
• employees’ training, aiming to inform them about the risks of corruption, fraud, misuse of personal data, manipulation of financial statements, disclosure of inside business information, etc.
• the conduct of a Compliance Risk Assessment annually, in cooperation with the business units, aiming at the identification and assessment of important risks and at the determination of necessary actions and measures for risks’ controlling and mitigation.
• the communication channels that have been developed, so that employees can submit questions regarding the implementation of the Policies and the legislation, in case they are uncertain as to how they should handle issues that come up in their daily work.
b) the detection of compliance violations, the investigation thereat and the proposal of remedies and measures deemed necessary. In order to provide the possibility of filing a tip–off regarding violations of policies, regulations and of the legislation in force, the Company has established the Whistleblowing Policy and the relevant communication channels which are available on corporate website in order for employees or/and third parties (e.g. customers, suppliers, partners etc.) to report (eponymously or anonymously) inappropriate conduct or potential violations of company policies, regulations, and legislation in force.
In the framework of the CMS, specific Policies/Codes have been adopted by the Company and Group-wide describing the principles and rules that apply to OTE Group and specific procedures are followed. Specifically, among others, the following Policies/Codes have been adopted:
• OTE Regulation of Operations
• COSMOTE Regulation of Operations
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• OTE Group Code of Conduct
• OTE Group Supplier Code of Conduct
• OTE Group Code of Human Rights and Social Principles
• OTE Group Diversity, Equity and Inclusion Policy
• OTE Group Code of Ethics for Senior Financial Officers
• Binding Corporate Rules Privacy (BCRP)
• OTE Group Whistleblowing Policy
• OTE Group Anti-Fraud Policy
• OTE Policy on Insider Trading
• COSMOTE Policy on Insider Trading
• OTE Group Policy on Avoiding Corruption and other Conflicts of Interest
• OTE Group Policy on Accepting and Granting of Benefits
• OTE Group Donation Policy
• OTE Group Sponsoring Policy
• OTE Group Event Policy
• OTE Group Policy on Avoiding Sexual Harassment within OTE Group
• OTE Group Policy on Anti-Trust Law
• OTE Group Policy on Employee Relations within OTE Group
• OTE Group Sustainability Policy
• OTE Group Policy on Concluding Transactions with Related Parties
• OTE Group Policy on the Prevention and Combating Violence and Harassment in the Workplace
• OTE Group Digital Ethics Guidelines on Artificial Intelligence
The CMS has been certified for OTE, COSMOTE, COSMOTE TECHNICAL SERVICES (CTS), COSMOTE E- VALUE, GERMANOS and TELEKOM ROMANIA MOBILE according to the international standards ISO 37001:2016 (Anti-Bribery Management Systems) and ISO 37301:2021 (Compliance Management Systems), by independent Certification Bodies. Also, the whistleblowing management system (part of the CMS) applied at OTE, COSMOTE, CTS, COSMOTE E-VALUE, GERMANOS has been attested according to the international standard ISO 37002:2021 (Whistleblowing Management Systems), by an independent Certification Body. Moreover, in 2021 OTE & COSMOTE were certified according to Assurance Standard 980 for the Compliance Management System (CMS) on Anti-Corruption they operate. These certificates confirm that the Group, in its day-to-day business, complies with current legislation, its Code of Conduct and its internal Policies.
Compliance Unit is responsible for the planning and adoption of the CMS System.
The effectiveness and the efficiency of the CMS are being supervised by the OTE Group Compliance, Enterprise Risks and Corporate Governance Committee, the Audit Committee and the Board of Directors.
I Ι . Enterprise Risk Management System
According to the EU Directive 2006/43/EC as currently in force following its amendment by the EU Directive 2014/56/EU of the European Parliament and of the Council of April 16, 2014 on statutory audits of annual accounts and consolidated accounts (the latter was incorporated in national law 4449/2017 on statutory audit of annual and interim consolidated financial statements), the European Organizations FERMA (Federation of European Risk Management Associations) and ECIIA (European Confederation of Institutes of Internal Auditing) introduced a guidance about monitoring the effectiveness of Internal Control and Risk Management Systems, namely the “Three lines model”. Part of this model, in the Second line in particular, is the business unit coming under the Executive Director Compliance, Enterprise Risk Management and Insurance OTE Group, which is responsible for the continuous development of the Early Warning, Compliance and Risk Management Systems, as well as adopting and applying standards to all Group companies, methodically and consistently. Its key goal is to safeguard the existence and long-term corporate success of the OTE Group companies.
Furthermore, according to Law 4706/2020 on corporate governance, the Corporate Governance System includes, inter alia, a sufficient and effective Internal Control System (ICS), including Risk Management and Compliance Management Systems. Moreover, the Decision No. 1/891/30.9.2020 of the Hellenic Capital Market Commission’s BOD (“HCMC BoD”), as amended by Decision no. 2/917/17.6.2021 of the HCMC BoD, which concerns the Assessment of the Internal Control System, defines, inter alia, the conducting of periodic (i.e., every three years) or ad hoc evaluations of the Internal Control System, including the area of Risk Management. The evaluation of Risk Management includes the review of the Risk Identification and Risk Assessment process, the Risk Response process and the Risk Monitoring process. More specifically, the review focuses on i. the role and operation of the Risk Management Committee, ii. the work and responsibilities of the Risk Management Unit, iii. the implementation of appropriate and effective Policies, Procedures and Tools (e.g., the maintenance of risk records - "risk registers") to identify, analyze, control, manage and monitor enterprise risks. It is noted that the first evaluation of the ICS has to be completed
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by 31st March 2023 with reference date the 31st December 2022 and reference period as of the effective date of article 14 of Law 4706/2020 (i.e. as of 17-07-2021). [ For more information regarding the first evaluation of the ICS of OTE S.A. and of its primary subsidiaries, please see below Section
V. Results of the process of the evaluation of the Internal Control System (ICS) and
of the Corporate Governance System (CGS) of OTE S.A. for the period 17-07-2021 until 31-12-2022, in accordance with article
14, par. 3 (j) and par. 4 of L. 4706/2020 and the relevant decisions of the Board of Directors of the Hellenic Capital Market
Commission.
]
Under this framework, OTE Group has developed and applies an
Enterprise Risk Management System
that supports Management
in strategic decision-making, through the identification, evaluation, communication and management of enterprise risks, including all strategic, operational mitigation monitoring measures used in risk management.
In the framework of the OTE Group ERM System, the following Policies have been adopted:
• Enterprise Risk and Insurance Management Policy
• Risk Appetite Statement
The OTE Group ERM System is based on the COSO ERM Framework and the ELOT ISO 31000:2018 "Risk Management - Guidelines" Standard, while its main objective is to safeguard the smooth operation and the future corporate success of OTE Group. The OTE Group ERM System is certified according to the aforementioned ISO 31000 Standard, in Greece for OTE, COSMOTE, COSMOTE Technical Services, GERMANOS and COSMOTE e-Value and in Romania for TELEKOM ROMANIA MOBILE .
In this context, the OTE Group ERM System defines the strategy for monitoring, response and management of enterprise risks, in order to:
- Ensure that existing OTE Group risks are systematically identified, analyzed and evaluated and that information relevant to risks and corresponding opportunities is promptly communicated to the competent decision-making bodies.
- Record the OTE Group response to risk identification, analysis, communication and management, as well as evaluating mitigating alternatives.
In the direction of mitigation of risks and to the extent possible and economically viable, OTE Group takes out insurance cover for insurable corporate risks. Taking out insurance cover is an essential option for risk transfer to third parties for the purpose of protecting the Group’s financial position.
It is noted that OTE INSURANCE S.A. – a subsidiary of OTE S.A. – acts as an insurance broker for Group insurance management. It develops and implements solutions for the Group’s operational risks using the appropriate insurance tools.
- Establish tolerance limits (thresholds) for each level of risk assessment and evaluation. In case these limits are exceeded, relevant reporting takes place.
- Implement a common methodology across the OTE Group Business Units and Subsidiary Companies for the identification, evaluation and management of enterprise risks.
In OTE Group, Risk Assessment is a structured process for risk identification, analysis, evaluation and management of enterprise risks, in order to ensure better informed decision making by the company’s competent bodies and that appropriate mitigation has been developed to address these risks and monitor the implementation of relevant measures. In this context, a common Risk Assessment methodology is being applied to all risk assessments that are being performed by business units, with specific criteria for risk evaluation and assessment, in accordance with the requirements of the Standard ISO 31000 and based on the uni fied ERM OTE Group methodology. The results of all individual risk assessments performed by business units and Group subsidiaries are included in the OTE Group Corporate Risk Register, for the systematic analysis and monitoring of enterprise risks.
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The OTE Group Risk Management Culture is illustrated in the following figure:
The Enterprise Risk Management (ERM) Department OTE Group monitors, facilitates and supports the implementation of effective risk management practices. The tasks of risk managers include the reporting and monitoring of the overall situation in the Group risk portfolio, as well as compliance with the OTE Group ERM methodology in all business units and group subsidiaries. In addition, OTE Group ERM is responsible for the maintenance and continuous monitoring of the OTE Group Corporate Risk Register, which is the central repository of all Group risks.
OTE Group ERM submits, through the Executive Director Compliance, Enterprise Risk Management and Insurance OTE Group, at least four (4) times a year or ad hoc when necessary, the OTE Group Enterprise Risk Management Report to the OTE Group Compliance, Enterprise Risks and Corporate Governance Committee for its review, regarding the completeness, accuracy and precision of the “OTE Group Top Risks Heat Map” content, and then its submission to the competent corporate bodies, namely the OTE Audit Committee and the OTE Board of Directors. The OTE Group Enterprise Risk Management Report, after thorough assessment and relevant consolidation, includes business units and Group subsidiaries reports, and provides a detailed description and review of corporate risks in the reporting period. Specifically, the report includes the risk description and any new developments, the probability of occurrence and the financial impact in case of the risk’s occurrence, the respective risk owner(s), the responsible mitigation owner(s), as well as the status concerning the mitigation measures taken to address the risk.
III. Internal Audit unit
The purpose of the Internal Audit Department (hereinafter “Internal Audit Department”) is to monitor and improve the Company’s operations and policies regarding the Internal Control System, which consists of the total set of audit mechanisms and processes covering in a continuous basis every activity conducted by OTE and contributes to its safe and efficient operation. In this context, the Internal Audit Department provides independent, objective assurance and consulting services designed to add value and improve the operations of the Company and of the consolidated subsidiaries of OTE Group. The Internal Audit Department helps the Group accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management, and control processes.
The operation of the Internal Audit Department is governed by the applicable legislation, taking into account the Hellenic Corporate Governance Code, which has been adopted and implemented by the Company, as well as by the mandatory elements of the International Professional Practices Framework of The Institute of Internal Auditors.
Internal Audit is an independent organizational function within the Company, supervised by the Audit Committee. The Internal Audit Head is appointed by decision of the Board of Directors, following a proposal of the Audit Committee and is a sufficiently qualified and experienced individual under a full-time and exclusive employment, personally and functionally independent and objective when performing the relevant internal audit duties.
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The Audit Committee, within the framework of the supervision of the Internal Audit Department, exercises the powers and responsibilities stipulated in the applicable legislation and in its Regulation of Operations.
The business units of the Internal Audit Department are established by decision of the competent corporate officer upon the recommendation of the Internal Audit Head with the consent of the Audit Committee.
The Internal Audit Head will have unrestricted access to, and communicate and interact directly with, the Board of Directors and the Audit Committee of the Company, including in private meetings without management present. Moreover, the Internal Audit Head has access to any organizational unit of the Company and receives any data or information required to fulfil the respective duties.
Furthermore, the Internal Audit Department is authorized to:
• Have full, free, and unrestricted access to all functions, records, property, and personnel pertinent to carrying out any audit engagement, subject to accountability for confidentiality and safeguarding of records and information.
• Allocate resources, set frequencies, select subjects, determine scopes of work, apply techniques required to accomplish audit objectives, and issue reports.
• Obtain assistance from the necessary personnel of the Group, as well as other specialized services from within or outside the Group, in order to complete the engagement.
The Internal Audit Head will confirm to the Audit Committee, at least annually, the organizational independence of the Internal Audit Department.
As defined by the respective legislation, the Internal Audit Department has the duties and responsibilities to:
a) Review, audit and evaluate the implementation of Company’s Regulation of Operations and the Internal Control System (mainly over the: i. adequacy and correctness of financial and non-financial reports, ii. risk management, iii. compliance and iv. corporate governance code adapted by the Company), the quality assurance mechanisms, the corporate governance mechanisms, as well as the adherence to commitments included in Company’s prospectus and business plans regarding the use of funds raised from the stock market.
b) Issue internal audit reports towards the audited units, including issues referring to the previous paragraph (a), the relevant risks and the proposed improvement actions, if any. These internal audit reports include the auditees’ perspectives, the agreed management actions (if any) or the management’s acceptance of risk in cases for which no action is agreed, the audit scope limitations (if any), the final audit proposal and the level of implementation of the agreed management actions. The relevant reports are submitted quarterly to the Audit Committee.
c) Submit to the Audit Committee, on a quarterly basis, reports which include the most significant issues and the relevant proposals regarding the activities derive from (a) and (b) above. The Audit Committee submits and presents these reports together with its comments to the Board of Directors.
More specifically, the Internal Audit Department is responsible to:
• Draft the internal audit annual audit plan which is submitted to the Audit Committee for approval, along with any amendments thereto. In preparing the plan, priority is given to the issues identified during risk assessment.
• Implement the annual audit plan.
• Define the scope of the audits (on the plan) and the resources required for their execution, as well as apply the appropriate methodology to complete the annual audit plan with proficiency and due professional care.
• Ensure quality, accuracy and timely submission of audit reports to management.
• Issue written audit reports to management with regard to:
o The degree of compliance with various procedures.
o The sufficiency, operation and effectiveness of control points and the compliance with the provisions of laws governing its operation.
o The degree of implementation of management’s guidelines and decisions.
• Evaluate the adequacy and effectiveness of the Company’s existing Internal Control System (ICS) and make recommendations for potential improvements in the audit procedures, instituting new forms of control or adopt remedial measures if and when so required, in order to ensure the smooth and safe operation of the Company.
• Ensure that recommendations made by Internal Audit Department are implemented by conducting follow up audits to ascertain whether previous recommendations made to address or correct weaknesses or gaps have been adopted and to what degree, based on a timeline provided by the Company’s management.
• Investigate potential cases of fraud and immediately inform the Company's management.
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• Develop and implement a quality assurance program for Internal Audit Department’s activities in accordance with applicable standards.
The Internal Audit Department will maintain a quality assurance and improvement program that covers all aspects of the Internal Audit Department. The program will include an evaluation of the Internal Audit Department’s conformance with the law and the Standards and an evaluation of whether internal auditors apply The IIA’s Code of Ethics. The program will also assess the efficiency and effectiveness of the Internal Audit Department and identify opportunities for improvement.
Internal Audit’s operations are described in the Internal Audit Regulation of Operations which describes in detail, inter alia, the purpose of the Internal Audit unit, its organizational structure, the rights, duties and responsibilities, the internal auditing standards etc.
The Internal Audit Regulation of Operations is approved, enters into force and is amended by decision of the Board of Directors, upon recommendation of the Audit Committee.
The Internal Audit Head evaluates the sufficiency of the content of the Regulation of Operations and proposes to the Audit Committee any amendments or additions deemed necessary, in order to constantly ensure and enable the achievement of the Internal Audit Department’s objectives.
IV. Other Internal control mechanisms and procedures
OTE Group has established a standardized process for documenting and evaluating the drafting of financial information. The scope of this process is defined based on certain materiality levels (both quantitative and qualitative) to ensure that financial reporting risks are appropriately identified and assessed and internal control are designed and applied on a continuous basis by the management and the personnel. The process contains two types of controls: a) “Basic Principles” that provide the basic safeguards for financial reporting, compliance and operations and b) “Transaction level controls” that are focused on financial reporting risks.
Corporate Governance best principles and practices are embedded in the process which contributes to the effective and secure operation of the Company. Management tests and evaluates the internal control annually and provides a written assurance of the effectiveness of the system.
Other internal control mechanisms and procedures include the ones related to Company’s control environment (i.e. the structures, policies and procedures that provide the basis for the development of an effective ICS as it provides the framework and structure for achieving the fundamental objectives of the ICS), the control mechanisms related to the prevention, detection and suppression of conflict of interest situations, to segregation of duties, to governance and security of Information Systems, to management and protection of personal data, to management of tip offs sent to the Company, to concluding transactions with related parties, as well as control mechanisms related to information and communication (the procedure of the development of the financial and non-financial information, as well as the procedures on critical internal and external communication of the Company).
The Board of Directors reviewed the Company’s top risks, as well as its Internal Control System.
Furthermore, there are mechanisms that support the evaluations and review of the ICS performed by the Board of Directors. Indicatively, the Audit Committee, the OTE Group Compliance, Enterprise Risks and Corporate Governance Committee (OTE Group GRC Committee), as well as the Remuneration & Nomination Committee.
V. Results of the process of the evaluation of the Internal Control System (ICS) and of the Corporate Governance System (CGS) of OTE S.A. for the period 17-07-2021 until 31-12-2022, in accordance with article 14, par. 3 (j) and par. 4 of L. 4706/2020 and the relevant decisions of the Board of Directors of the Hellenic Capital Market Commission
The Company, by decision of its Board of Directors, assigned to Grant Thornton S.A. the project "Assessment of the Internal Control System (ICS)’s adequacy and effectiveness", of the Company ΟΤΕ S.A. and its significant subsidiaries, COSMOTE - MOBILE TELECOMMUNICATIONS SINGLE MEMBER S.A., GERMANOS - PUBLIC LIMITED LIABILITY INDUSTRIAL AND COMMERCIAL COMPANY OF ELECTRICAL AND TELECOMMUNICATION MATERIAL, COSMOTE E-VALUE CONTACT CENTER SERVICES SOCIETE ANONYME, OTE INTERNATIONAL SOLUTIONS S.A., OTE ESTATE SOCIETE ANONYME, COSMOTE TECHNICAL SERVICES S.A. and TELEKOM ROMANIA MOBILE COMMUNICATIONS S.A., with reference date 31/12/2022, in accordance with the provisions of c. i of para. 3 and para. 4 of article 14 of Law 4706/2020 and Decision 1/891/30.09.2020 of the Board of Directors of the Hellenic Capital Market Commission, as in force (the "Regulatory Framework").
The Opinion of the Independent Assessor, Athina Moustaki, Certified Public Accountant with SOEL reg. number 28871 and Partner at Grant Thornton, which is included in the final assessment report on the adequacy and effectiveness of the ICS dated 20/02/2023 states the following:
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" Based on the procedures performed as described above in the paragraph "Scope of Engagement", as well as the evidence obtained, regarding the assessment of the adequacy and effectiveness of the ICS of the Company and its significant subsidiaries, as at December 31, 2022, nothing has come to our attention that causes us to believe that something could be identified as a material weakness of the Company's ICS and its significant subsidiaries, in accordance with the Regulatory Framework."
In addition, the Board of Directors, with the same decision as above, assigned to Grant Thornton the project "Assessment of the adequacy and effectiveness of the Corporate Governance (“CGS”) of the Company OTE S.A.” with reference date of 31/12/2022 in accordance with the provisions of article 4 par.1 of Law 4706/2020.
According to Grant Thornton's report regarding the work carried out to assess the adequacy and effectiveness of the CGS, the following are stated:
“The Company has adopted and implements a plain, adequate, and effective Corporate Governance System considering the size, nature, scope and complexity of its activities and which includes everything provided for by the current legislation and relevant international best practices.”
These results constitute one more confirmation that the Company is in constant compliance with the current legislative and regulatory framework governing the Internal Control System and Corporate Governance System and that it always adopts international best practices to ensure the lawful and orderly operation towards achieving the sustainable development strategy of the OTE Group.
D. Board of Directors and Committees that consist of members of the Board of Directors – Remuneration of the Board Members/
Remuneration of executive Board Members - Other administrative, managerial or supervising corporate bodies or committees
1. Board of Directors (Suitability Policy of the members - Role - Composition - Operation)
1.1. The Board of Directors is the top administrative body of the Company. Its aim is to safeguard the general interests of the Company and ensure its operational efficiency.
The Suitability Policy of the members of the Board of Directors of the Company was prepared by the Board of Directors, following a proposal of the Remuneration and Nomination Committee, and approved by the Ordinary General Meeting of Shareholders of 09-06-2021, according to article 3 of Law 4706/2020 for the corporate governance and the Circular of the Hellenic Capital Market Commission no. 60/18.9.2020 ("Guidelines for the Suitability Policy of article 3 of L.4706/2020"), and was subsequently amended by decision of the General Meeting of Shareholders of 18-01-2022, following a proposal by the above competent bodies.
The Policy includes all the principles and criteria that are applied during the selection, replacement and renewal of the term of the members of the Board of Directors of the Company, in the context of the evaluation of individual and collective suitability and aims to ensure quality staffing, effective operation and fulfillment of the role of the Board of Directors, based on the general strategy and business pursuits of the Company, aiming at promoting the corporate interest.
The monitoring of the implementation of the Policy is a responsibility of the Board of Directors. The Remuneration and Nomination Committee, the Internal Audit unit as well as the organizational units related to the subject (such as Human Resources and / or Compliance and / or Legal Affairs) can provide an effective contribution in forming and monitoring the implementation of the Policy Suitability. The Company monitors the effectiveness of the Policy and conducts its periodic evaluation every three (3) years or when significant events or changes take place. The Remuneration and Nomination Committee also monitors the implementation of the Policy and recommends to the Board of Directors its amendment and the review of its planning and implementation, where and when appropriate.
1.2. Pursuant to the provisions of the Articles of Incorporation, as in force:
The Board of Directors consists of ten (10) members, following a resolution of the General Meeting of May 15, 2017 for the amendment of the relevant article of the Company’s Articles of Incorporation. The members, which may be or not shareholders of the Company, are distinguished in executive and non-executive members; at least three (3) of the members of the Board must be independent. Each gender is represented on the Board of Directors at a rate of at least 25% of all its members. The members are elected by the General Meeting of shareholders, which also appoints the independent members, serving for a three (3) year term. Their term terminates at the completion of the Annual General Meeting of Shareholders of the year in which the three-year term has already been completed. The members can always be reelected and can be revoked any time by the General Meeting. In the event of resignation, death or any other reason of one or more than one members prior to the expiration of their term, the Board shall, with at least five (5) of the remaining members, present or represented, either elect substitute(s) for the remaining term of service of the member(s) being replaced and under the same capacity of executive, non-executive or independent members or, in case the number of the remaining Directors exceeds half of the members that existed before these events happened, continue the management of the business affairs and the representation of the Company without electing such substitute(s). If a member is elected from the Board of Directors in replacement of an independent member, then the elected member has to be independent as well. Any such election(s) are announced at the next General Meeting (Annual or extraordinary), which can replace the elected
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members, even if a relevant item has not been included in the agenda of said General Meeting. The actions of the replacing Directors, thus elected, are valid even if their election is not approved at the General Shareholders Meeting .
1.3. Composition of the Board of Directors during 2022
The members of the Board of Directors from 1/1/2022 until 31/12/2022 appear at the following table, as well as the capacity of each member as Executive, Non-Executive or Independent, as they were designated by the General Meeting of Shareholders or the Board of Directors:
The changes to the composition of the Board of Directors during 2022 and until February 22, 2023 are summarized as follows:
• On 10/11/2022 the Board of Directors elected Mr. Daniel Daub and Mrs. Melinda Szabo as new Non-Executive members in replacement of the resigned members Mr. Robert Hauber and Mr. Rodrigo Diehl. Mr. Daub and Mrs. Szabo were elected for the remainder of the tenure of the members they replaced, namely until the date of the Annual General Meeting of the Shareholders of the year 2024.
• On 25/11/2022 the Board of Directors elected Mr. Konstantinos Gkravas as new independent non-executive member in replacement of the resigned – as of 14/11/2022 – independent non-executive member Mrs. Catherine de Dorlodot, with term lasting until the next General Shareholders’ Meeting.
Name
Capacity
Date of appointment
and any
re-appointment
End of Term
Michael Tsamaz
Chairman and CEO, Executive member
Appointment 3/11/2010
Re-appointment 9/6/2021 (the most recent)
20 24
Eelco Blok
Vice-Chairman, Independent Non- Executive member
Appointment 12/6/2019
Re-appointment 9/6/2021
20 24
Daniel Daub
Non-Executive member
Appointment 10/11/2022
2024
Dominique Leroy
Non-Executive member
Appointment 9/11/2020
Re-appointment 9/6/2021
202 4
Kyra Orth
Non-Executive member
Appointment 12/6/2018
Re-appointment 9/6/2021
202 4
Melinda Szabo
Non-Executive member
Appointment 10/11/2022
202 4
Dimitrios Georgoutsos
Independent Non-Executive member
Appointment 10/9/2019
Re-appointment 9/6/2021
202 4
Konstantinos Gkravas
Independent Non-Executive member
Appointment 25/11/2022
Until next GSM
Grigorios Zarifopoulos
Non-Executive member
Appointment 9/6/2021
202 4
Charalampos Mazarakis
Executive member
Appointment 19/7/2012
Re-appointment 9/6/2021 (the most recent)
202 4
Rodrigo Diehl
Non-Executive member
Appointment 14/ 10 /2021
10/11/2022
Robert Hauber
Non-Executive member
Appointment 12/4/2017
Re-appointment 9/6/2021
10/11/2022
Catherine de Dorlodot
Independent Non-Executive member
Appointment 9/6/2021
14/11/2022
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The CV’s of those who served as members of the Board of Directors during the financial year 2022 and until February 22, 2023 appear here below; furthermore the CV’s of the current members of the Board of Directors may be found on the Company’s website:
https://www.cosmote.gr/cs/otegroup/en/cv_ote.html
Michael Tsamaz Chairman and Managing Director, Executive Member
Mr. Michael Tsamaz heads OTE Group, the largest telecommunications provider in Greece and SE Europe, since November 2010. Under his leadership, OTE has been implementing a multilayered operational and financial restructuring strategy achieving its transformation from former Greek telecoms state monopoly into an efficient, integrated operator. He also leads OTE's mobile arm, COSMOTE, since 2007. COSMOTE, market leader in Greece, is today one of the best performing mobile operators in Europe.
Since 2001, Michael Tsamaz held several senior roles within OTE, overseeing the course of its international investments and served as CEO and BoD member for a number of OTE and COSMOTE international subsidiaries. He also served as BoD member of EE, UK. Mr. Tsamaz has been also Chairman of the Board of TELEKOM ROMANIA. Prior to his tenure at OTE Group, he held high ranking positions in Marketing, Sales and General Management for multinational companies such as Vodafone and Philip Morris.
Mr. Tsamaz holds a degree in Business Administration from the University of New Brunswick, Canada.
Eelco Blok Vice Chairman, Independent Non-executive member
Mr. Eelco Blok has almost 35 years’ telecommunications experience at Dutch-based landline and mobile telecommunications company, KPN, where he was CEO for seven years until April 2018.
He started his career in Finance at KPN before becoming responsible for several businesses including Carrier Services, Corporate Networks and Network Operations.
In 2006, he was appointed as member of the KPN Board of Management, where he was consecutively responsible for the Fixed Division, Business Market – Wholesale - Operations and Mobile International. He was appointed CEO in April 2011.
From 2011 to 2017, Mr. Blok was co-chairman of the Dutch National Cyber Security Council, an advisory body of the Dutch government. He was also a Director for the international association GSMA from 2017 to April 2018.
He is a member of the Supervisory Board of VolkerWessels and Fairphone, non-executive Director of Telstra, Advisor of Reggeborgh, IFM Investors/GlasFaserPlus and Glow Financial Services.
Mr. Blok received a graduate degree in Business Administration from Erasmus University Rotterdam and holds a Master in management from the University of Technology Delft and the Erasmus University Rotterdam .
Daniel Daub , Non-executive member
Since August 2022, Daniel Daub is Senior Vice President Finance & Performance Management Europe in Deutsche Telekom.
Daniel Daub has over 20 years of experience in the international telecommunication sector. After graduating from WHU – Otto Beisheim School of Management in Germany with a MBA he joined Deutsche Telekom in the corporate finance department.
After being Vice President for Sales Planning and Reporting for 3.5 years at T-Mobile Germany, he joined T-Mobile Austria in 2009 as Senior Vice President in Channel Development and Service, followed by being Senior Vice President in Consumer Sales and Service. In 2014 he returned to the German Telekom Headquarter and took over the role of Vice President in Equity and Innovation Controlling. From November 2017 until August 2022, he was a member of the Management Board and Chief Financial Officer (CFO) of Hrvatski Telekom in Croatia.
Dominique Leroy , Non-executive member
Since November 2020, Dominique Leroy is a member of the Board of Management of Deutsche Telekom AG, responsible for the Board Area Europe.
Dominique Leroy has over 30 years of experience in the consumer goods and telecommunication sector. She started her career at Unilever where her last position was Managing Director for Belgium and Luxembourg. In 2011 she joined Proximus where she quickly became Head of the Consumer Market and held the position of CEO from 2014 till 2019. During this time, she managed to turn around the company with a continuous growth phase and a strong customer experience focus. In 2020, she was Advisor to Bain & Company.
Dominique Leroy has more than 10 years of Board experience, having been Board Member at Lotus Bakeries, Proximus, BICS, Royal Ahold Delhaize. She is currently Board Member at Compagnie de Saint-Gobain and T-Mobile US.
She holds a Master’s in industrial engineering and Management from the Solvay Business School in Brussels .
Kyra Orth, Non-executive member
Mrs. Kyra Orth studied Law at the University of Augsburg and at the University at Bonn. She holds a Master degree in Law (Second State Law Examination). She serves Deutsche Telekom for 26 years as a senior human resources executive in several management positions. Before her career with Deutsche Telekom she worked for Bosch-Siemens Household Appliances (BSH) in the legal department.
Since July 2021 she assumed the position of Senior Vice President HR Europe of Deutsche Telekom AG and reports directly to the Boardmember Europe of Deutsche Telekom. From 2013 to June 2021 she held the position of Senior Vice President Top Executive Management of Deutsche Telekom AG. From April 2003 to December 2013 she served as Senior Vice President Group Executive Management at Deutsche Telekom AG and was a Member of the Compensation Committee of T-Mobile US, USA.
In addition to her role she is Member of the Supervisory Board of T-Systems International GmbH and Chairwoman of the Supervisory Board of T-Mobile Austria GmbH.
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Melinda Szabo, Non-executive member
Melinda Szabó is Senior Vice President B2C Commercial Growth Europe at Deutsche Telekom since September 2022.
Melinda Szabó (born in 1971) graduated in 1994 as marketing economist and earned her an MBA degree in 2007 from Webster University and Szent István College.
She has started her career in market research, then she joined Westel900 in 1999 where she filled several key managerial positions in the B2C segment. From 2008 she was responsible for both mobile and fixed B2C segment and was appointed to Marketing Director in 2010. In 2009 she became a member of the Board of MobiMak at Montenegro and held this position until 2012.
She joined Vodafone Hungary in 2015, where she was a Head of Marketing for B2B segment, from 2016 she was appointed to become Head of SMB Sales and Marketing.
In July 2018, Melinda Szabó was appointed Chief Commercial Officer Residential Services at Magyar Telekom and as of January 1, 2020 she became a Chief Commercial Officer of Magyar Telekom responsible for both B2C and Soho/SMB segments.
Dimitrios Georgoutsos, Independent Non-executive member
Mr. Dimitris Georgoutsos is Professor of Finance at the Athens University of Economics and Business. He has taught at the Trinity College of the University of Cambridge and the University of Essex, and has worked as an economist in the Bank of Greece. He has been a consultant in portfolio investment companies and employed in the Ministry of Finance as a member of a working group on taxation of financial instruments and stability of the banking sector. He has been an elected Council member at the Athens University of Economics and Business during 2013-2016. He specializes in the areas of Financial Risk Management and International Finance. He has published more than 30 articles in international academic journals and two books on Taxation of Financial Instruments and on Bank Management.
Mr. Georgoutsos is a graduate of the University of Athens (B.A. in Economics), the London School of Economics (M.Sc. in Economics) and the University of Essex (Ph.D. in Economic s).
Konstantinos Gkravas , Independent Non-executive member
Mr. Konstantinos Gkravas is a capital markets professional and an academic fellow at the Department of Economics of the Athens University of Economics and Business (AUEB). He was appointed to teach at the Postgraduate Program of the Department of Banking and Financial Management of the University of Piraeus (academic year 2021-22) and since 2015 he is a visiting lecturer at the Hellenic Air Force Command and Staff College.
He holds a PhD from the Department of History and Philosophy of Science of the National and Kapodistrian University of Athens, in the field of Global Political Economy, Central Banks and Monetary History. He has also received a 5-year diploma in Chemical Engineering from the National Technical University of Athens (NTUA), a 2-year full-time Master in Business Administration (MBA) from the AUEB and the Erasmus University Rotterdam (with distinction), and a Master of Science (MSc) in Mathematical Economics from the NTUA. He also holds the professional certification of Xetra equity trader from the Frankfurt Stock Exchange (Deutsche Boerse) and he is a certified Derivatives Market Maker/Trader from the Athens Derivatives Exchange (ADEX) and a certified Market Analyst and Portfolio Manager (Bank of Greece).
He has nearly 20 years’ experience in the banking and financial sector, particularly in the field of global markets and investment management. He has almost 10 years’ experience as a lecturer in professional certification training programs for banking executives and professionals, having constantly achieved an exceptional rating according to the electronic evaluation system of the respective programs.
He has been regularly publishing opinion articles in the greek and foreign press, including several opinion letters to the Financial Times editor; one of them, in response to a global debate on the future of economics, was selected for publication by the FT among more than 300 responds. He has also published several articles in greek and foreign academic journals.
Mr. Gkravas is the author of the book “Economic War and Monetary Peace. The Greek Great Depression” (foreword by Mr. Yannis Stournaras, Governor of the Bank of Greece), published (in Greek) in July 2019 by I. Sideris Publications, and the co-author of the book “Central Banks. A Short Introduction”, published (in Greek) in November 2021 by Papadopoulos Publishing.
In January 2020, he was elected as a non-executive member of the Board of Directors (BoD) of Cosmote .
Grigorios Zarifopoulos, Non-executive member
Mr. Grigoris Zarifopoulos is the former Deputy Minister of Digital Governance of the Hellenic Republic, responsible for digital strategy and foreign direct investment in digital technology.
Before joining the Greek Government, Mr. Zarifopoulos was Google’s Regional Director for Southeast Europe and Google's CEO for Greece, Bulgaria, Cyprus and Malta. Prior to Google, Mr. Zarifopoulos held the position of General Manager of Gap for Greece, Cyprus and the Balkan countries. He has also worked for IKEA Greece, McKinsey & Company management consulting firm in London and Athens, and Seagate Technology, the disk drive manufacturer in California, USA. He is currently advising companies on business strategy and digital transformation.
Mr. Zarifopoulos holds a Bachelor of Engineering degree in Mechanical Engineering from Imperial College-University of London, a Master of Science degree in Mechanical Engineering from Stanford University and a Master in Business Administration (MBA) from Kellogg School of Management-Northwestern University.
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Charalampos Mazarakis, Executive Member
Mr. Charalampos Mazarakis, has over 27 years of professional experience, chiefly in senior management positions in Greece and abroad. Before joining OTE Group, in July 2012, as OTE Group General Financial Director, he was Group Chief Financial Officer (CFO) of the National Bank of Greece, and from 2008 until 2010 Group Chief Financial Officer (CFO) and Member of the Group Executive Committee of TITAN Cement Company. Mr. Mazarakis served in various executive positions in Vodafone Group: Group Finance Director and BoD Member in Greece (1999-2006), CEO in Hungary (2006-2007), Chief Operating Officer and BoD Vice- Chairman (2007-2008). He held the position of Finance Director and Member of the BoD at Georgia Pacific-Delica in Greece (1997-1999), while prior to that, he worked as Financial Analysis Manager at Procter & Gamble, first in Athens and then as Financial Analysis Group Manager at the European Centre in Brussels.
Mr. Mazarakis holds a Bachelor's degree in Business Administration from the University of Piraeus (with distinction) and an MBA from the Fisher College of Business at The Ohio State University (Wielder Scholar), where he held the post of Teaching Assistant in Finance. He has been ranked among the 30 most distinguished Finance Managers of Europe under the age of 40 (CFO Europe magazine, 2002 ).
Rodrigo Diehl , Non-executive member (until 10-11-2022)
Mr. Rodrigo Diehl, is currently CEO at Magenta Telekom (formerly T-Mobile Austria). He was SVP Commercial Growth B2C Europe, responsible for the international consumer segment of Deutsche Telekom Europe from March 2021 until October 2022.
He is Argentinean with German roots and can look back on a professional career of more than 20 years in the telecommunications and IT industry. From 2016 to 2021, he worked for the telecommunications company Millicom, first as Executive Vice President and Chief Strategy Officer and then as CEO of the Panama subsidiary Tigo. Prior to that, he was a partner at the management consultancy McKinsey.
He graduated (BA) with honors from the University of Buenos Aires and holds an MBA from Harvard Business School.
Robert Hauber, Non-executive member (until 10-11-2022)
Dr. Robert Hauber studied at the University of Stuttgart, University of Mainz and at the University of Massachusetts. He holds a Master degree (Dipl. Kfm.) and a doctoral degree (Dr.) - both in business administration. He has served Deutsche Telekom since twenty one years as a senior finance executive in several management positions. Before his career with Deutsche Telekom he worked for Hewlett Packard, Procter & Gamble and DaimlerChrysler, where he was involved in the merger between Daimler-Benz & Chrysler.
During 2011-2016 he was Chief Financial Officer, Vice Chairman of the Executive Management Board and Member of the Board of Directors of Slovak Telekom. From July 2016 to July 2022, Dr. Robert Hauber served as CFO/Senior Vice President and Head of Performance Management of the Segment Europe. In August 2022 he took over the position of Senior Vice President Group Controlling at Deutsche Telekom AG. In addition to this role he is the Chairman of the Board of Directors of Magyar Telekom and Member of the Board of Directors of Deutsche Telekom Europe Holding .
Catherine de Dorlodot, Independent Non-executive member (until 14-11-2022)
Mrs. Catherine de Dorlodot has been a senior advisor accompanying organizations worldwide through GOVERN&LAW (www.governlaw.com), a boutique ethics and law firm composed of business executives promoting Integrity, Good Governance and Better Law, where she led the pillar Governance until July 2022. She also co-founded the Whistleblowing center (www.whistleblowing.center), "from human voice to business choice", offering whistleblowing expertise grounded in the legal, risk, audit, cyber-security and business experience.
Catherine de Dorlodot has over 22 years of experience in the telecomunication sector. She started her career as lawyer in Washington DC and Brussels. In 1996, she joined Proximus where she moved up to Legal Director, Internal Audit Director and finally held the position of Director Carrier and Wholesale Solutions from 2016 till 2018. During this time, she managed to turn around the division with a double-digit growth in customer and employee satisfaction, logically leading to a revenue growth.
Catherine de Dorlodot has an extensive Board experience, having been Board Member at Telindus International, Proximus subsidiaries and small and large non-profit organisations, including Board Coaching to Excellence, a network of directors promoting good governance in Belgian SME's through collective intelligence.
She holds a Master’s in Law from UCLouvain in Belgium.
In addition, the CV of the Company’s Secretary of the Board of Directors, Mr. Konstantinos Vogiatzis, is provided here below:
Konstantinos Vogiatzis - Secretary of the Company’s Board of Directors
Mr. Konstantinos Vogiatzis has been working in the OTE Group since June 1998. From February 1999 he performs the duties of the Secretary of the Board of Directors of COSMOTE and other subsidiaries of the Group. In parallel with his duties as Secretary of the Board of Directors of COSMOTE and other subsidiaries, from June 1998 until June 2010 was the COSMOTE responsible for Roaming Agreements (retail and wholesale). From 1991 to 1996 he worked as a freelancer in various major Marine companies in New York. From 1/1/2017 he assumed the duties of the Secretary of the Board of Directors of OTE Group. Mr. Vogiatzis holds a Bachelor of Arts in Political Science and History and a Master of Arts in Government and Politics from St. John’s University in New York.
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The members of the Board of Directors have notified the Company on the following professional engagements (including significant non-executive commitments in companies or non-profit organizations/foundations).
MEMBERS
CORPORATE NAME
PROFESSIONAL ENGAGEMENT
COSMOTE - MOBILE TELECOMMUNICATIONS SINGLE MEMBER S.A.
CEO and Chairman of the BoD
COSMOTE TV PRODUCTIONS
CEO and Chairman of the BoD
OTE INTERNATIONAL SOLUTIONS SINGLE MEMBER S.A. ( ΟΤΕ GLOBE)
Vice-Chairman of the BoD (until 31/12/2022)
OTE ACADEMY
Chairman of the BoD (since 15/11/2022)
GREEK-AMERICAN COMMERCIAL CHAMBER
BoD member
SEV (HELLENIC FEDERATION OF ENTERPRISES)
BoD member (as OTEGLOBE representative until 31/12/2022, as OTE ACADEMY representative since January 2023)
Michael Tsamaz
ALBA Executive Development and Applied Research in Business Administration (non-profit Association)
BoD member
REGGEBORGH
Advisor
TELSTRA
Non-Executive Director
SIGNIFY
Member of the Supervisory Board (until May 2022)
ROYAL VOLKER WESSELS
Member of the Supervisory Board
FAIRPHONE
Member of the Supervisory Board
EB@Work B.V.
Owner/Director
IFM Investors/GlasFaserPlus
Board Advisor (since March 2022)
Eelco Blok
GLOW FINANCIAL SERVICES
Board Advisor (since May 2022)
DEUTSCHE TELEKOM AG
Senior Vice President Finance & Performance Management Europe
DEUTSCHE TELEKOM SERVICES EUROPE SE
Member of Supervisory Board
CRNOGORSKI TELEKOM
BoD member
STRATOSPHERIC PLATFORMS (UK) Limited
BoD member
STRATOSPHERIC PLATFORMS Limited (Isle of Man)
BoD member (until 30/11/2022)
HYDROGEN AIRCRAFT SERVICES Limited (UK)
BoD member (until 30/11/2022)
Daniel Daub
Deutsche Telekom Europe Holding GmbH
BoD member (as of January 2023)
DEUTSCHE TELEKOM AG
Member of the Board of Management for Europe
Compagnie de Saint-Gobain
BoD Member and Member of the Remuneration & Nomination Committee
Ergon Capital
Member of the Advisory Committee
GSMA
BoD Member and Member of the Audit Committee
T-MOBILE US
BoD Member and Member of the Nominating & Corporate Governance Committee
Dominique Leroy
T-MOBILE POLSKA
Chairwoman of the Supervisory Board
DEUTSCHE TELEKOM AG
SVP HR Europe
T-SYSTEMS INTERNATIONAL GMBH
Member of the Supervisory Board
Kyra Orth
T-MOBILE AUSTRIA GMBH
Chairwoman of the Supervisory Board
DEUTSCHE TELEKOM AG
Senior Vice President B2C Commercial Growth Europe
MAGYAR TELEKOM Nyrt
BoD Member
Melinda Szabo
UNICEF
BoD Member
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53
MEMBERS
CORPORATE NAME
PROFESSIONAL ENGAGEMENT
Dimitrios Georgoutsos
Athens University of Economics and Business
Professor
Konstantinos Gkravas
COSMOTE - MOBILE TELECOMMUNICATIONS SINGLE MEMBER S.A.
BoD Member
Grigoris Zarifopoulos & CO L.P.
Owner
Attica Bank
BoD Member (independent) and Chairman of the “Committee for the Nomination of BoD members and Remuneration” (since 24/3/2022)
Grigorios Zarifopoulos
Oliver Wyman
Partner and Co-head of the Greek office (since 18/1/2023)
COSMOTE - MOBILE TELECOMMUNICATIONS SINGLE MEMBER S.A.
BoD Member
TELEKOM ROMANIA ΜΟ BILE COMMUNICATIONS S.A.
Chairman of the BoD
OTE- ESTATE
Chairman of the BoD
OTE PLC
BoD Member
GERMANOS S.A.
BoD Member
E-VALUE INTERNATIONAL S.A.
Chairman of the BoD
COSMOTE PAYMENTS SINGLE MEMBER S.A.
BoD Member
COSMOTE TV PRODUCTIONS
BoD Member
COSMOTE TECHNICAL SOLUTIONS S.A.
BoD Member
Charalampos Mazarakis
TAIL WIND Shipping Company
Chairman of the BoD-Executive member
DEUTSCHE TELEKOM AG
SVP Commercial Growth B2C Europe (until October 2022)
TELEKOM ROMANIA ΜΟ BILE COMMUNICATIONS S.A.
BoD Member
T-MOBILE CZECH REPUBLIC A.S.
BoD Member (until 30 / 9 / 2022)
TELEKOM DEUTSCHLAND GMBH
Supervisory Board Member (as of 1/10/2022)
T-MOBILE INTERNATIONAL AUSTRIA GMBH
Managing Director (as of 3/10/2022)
T-MOBILE AUSTRIA HOLDING GMBH
Managing Director (as of 5 / 10 / 2022)
Rodrigo Diehl
T-MOBILE AUSTRIA GMBH
Managing Director (as of 13 / 10 / 2022)
DEUTSCHE TELEKOM AG
CFO/Senior Vice President and Head of Performance Management of the Segment Europe (until August 2022), Senior Vice President Group Controlling (since August 2022)
DEUTSCHE TELEKOM EUROPE HOLDING
BoD Member
DEUTSCHE TELEKOM SHARED SERVICES EUROPE GMBH
BoD Member
MAGYAR TELEKOM
Chairman of the Board of Directors
Robert Hauber
BuyIn SA/NV
BoD Member
Finance Committee Member (since August 2022)
GOVERN&LAW
Senior Advisor (until 25/7/2022)
Catherine de Dorlodot
C4Right SRL
Founder & CEO (since 11/4/2022)
None of the Members of the Board of Directors of the Company (executive, non-executive and independent non-executive) holds a position on February 22, 2023, in Boards of Directors of more than five (5) listed companies and companies not affiliated with the Company, in total.
The Board of Directors, following a review of the fulfillment of the legal conditions for the designation of its non-executive members Mr. E. Blok, Mr. D. Georgoutsos and Mr. K. Gkravas as independent, ascertains that they maintain their independence on February 22, 2023 according to article 9 of Law 4706/2020.
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The members of the Board of Directors on December 31, 2022, held shares of OTE as follows:
Michael Tsamaz
350,000
Εelco Blok
-
Daniel Daub
-
Dominique Leroy
-
Kyra Orth
-
Melinda Szabo
-
Dimitrios Georgoutsos
-
Konstantinos Gkravas
-
Grigorios Zarifopoulos
-
Charalampos Mazarakis
-
1.4 . Powers of the Board of Directors, of the Chairman and of the Independent Vice-Chairman – Effectiveness evaluation
The Board of Directors , according to the Company’s Articles of Incorporation 3 and as part of its responsibilities:
• Convenes Annual or Extraordinary General Meetings of shareholders and proposes on their agenda.
• Prepares and approves the Company’s annual financial reports and submits them to the General Meeting of shareholders.
• Approves the Company’s strategy and decides upon the establishment of subsidiaries or upon the Company’s participation in the share capital of other companies (domestic or foreign) as well as the establishment of branches or offices (domestic or foreign).
• Is informed systematically on the course of the Company’s business and the implementation of its plan with a view to protecting the Company’s broader interests.
• Decides upon share capital increases through the issuance of new shares and convertible bonds, following the authorization granted by the General Meeting of shareholders.
• Decides upon the issue of convertible or exchangeable bonds.
The Board of Directors may delegate its powers to its members, Company’s executives, third parties or Committees, determining the extent of such delegation, indicatively on the following, matters:
• financial issues,
• related to subscribers, subscribers’ complaints – requests,
• related to labour law, health and safety of the Company’s employees, who are employed by the Company on any kind of contractual or project basis,
• related to personal data of the Company’s personnel, on intellectual property matters in case intellectual property rights are infringed by creation of archives, saving, processing, transmitting or distribution of works of intellectual property without the permission of the creators through IT systems owned or used by the Company,
• related to compliance with personal data legislation and privacy of communications,
• related to compliance with market police orders regarding the products and/or services of the Company,
• related to the products and/or services of the Company and/or third parties provided through the Company’s network,
• related to compliance with fire brigade legislation or with police orders or with any administrative order concerning the operation of the Company’s shops and infrastructure, technical or not.
Finally, beyond the provisions of the law, the Articles of Incorporation provide for special matters, which cannot be further delegated as the decisions on these matters should necessarily be taken by the Board of Directors, with the required majority and quorum, as provided in the Articles of Incorporation.
The Chairman of the Board of Directors is responsible for the operation of the Board. In particular, the Chairman convenes the meetings of the Board of Directors, sets the agenda and chairs such meetings, coordinates the works of the Board of Directors, ensures that the minutes of the BoD meetings are kept, signs the minutes, issues copies or excerpts thereof and includes certain items in the agenda following a relevant request by the Independent Non-Executive Vice Chairman or two (2) members of the Board of Directors. The Chairman also signs the annual financial statements of the Company. In other respects the Chairman has
3
https :// www . cosmote . gr / otegroup _ company / investor _ relations / corporate %20 governance /% CE %9 F % CE % A 4% CE %95_ ARTICLES _ OF _ INCOR
PORATION _ EGM _01112022_ en . pdf
BOARD MEMBERS
ΟΤΕ SHARES
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55
the same rights and obligations as any other member of the Board of Directors, as well as those explicitly prescribed in Law, the Articles of Incorporation and the Regulation of Operations of the Board of Directors.
The Independent Non-Executive Vice Chairman of the Board replaces the Chairman in case of absence or impediment, in relation exclusively to his non-executive duties as Chairman of the Board of Directors (since the Chairman has executive duties exclusively in the context of his capacity as Chief Executive Officer), co-ordinates the co-operation between the non-executive and executive members of the Board of Directors and their effective communication, chairs the meetings of the non-executive members of the Board of Directors (without the presence of the executive members) whereby the performance of the executive members of the Board of Directors is evaluated, chairs the evaluation procedure of the Chairman by the Board of Directors, in collaboration with the Remuneration and Nomination Committee, and is at the disposal of the shareholders of the Company for meetings with them for corporate governance issues. The Independent Non-Executive Vice Chairman may also request the Chairman to include certain items in the agenda of the Board of Directors’ meetings.
The Board of Directors shall meet whenever deemed necessary or upon request to the Chairman by at least two (2) members. Without prejudice to the relevant articles of the Articles of Incorporation on specific quorums and majorities on special matters, the Board of Directors is in quorum and convenes validly when half-plus-one of its members are present; nevertheless, the number of members present should not be less than three (3). Resolutions are reached by simple majority, unless otherwise provided by the legislation in force or by the Company’s Articles of Incorporation.
The Board of Directors evaluates at least annually its effectiveness, the fulfillment of its duties as well as its Committees, a process headed by the Remuneration and Nomination Committee, which may entrust its support to this project to an independent body. In this context, the Remuneration and Nomination Committee of the Company assigned (January 2023) to the consulting company "Grant Thornton Business Solutions S.A.", which refers to the Remuneration and Nomination Committee, the task of providing advisory support to the Remuneration and Nomination Committee for the collective and individual evaluation of the Board of Directors of OTE S.A., including the evaluation of the Chairman and the Independent Vice-Chairman of the Board of Directors, the Secretary of the Board of Directors as well as the evaluation of the Committees of the Board of Directors, including the evaluation of the Chairman of each Committee, for the year 2022. The evaluation process, which in particular will be carried out through questionnaires, is in progress and is expected to be completed within the first quarter of 2023, with the relevant decisions taken by the Board, taking into account any findings and corrective actions. It is noted that for the above assignment to the consulting company, the established procedures of the Company are applied. Finally, it is noted that the respective evaluation process of the Board of Directors and its Committees for the year 2021 was completed within the first quarter of 2022 with the support of the consulting company "Grant Thornton Business Solutions S.A." without any material deficiencies.
1.5 . The Regulation of Operations of the Board of Directors , which has been approved by the Board of Directors, regulates the details of the procedure followed on convening, meeting and deciding.
Concisely, according to the above Regulation, taking also into consideration the Articles of Incorporation, the Chairman is elected by the Board members and may also hold the position of the Managing Director (or Chief Executive Officer- CEO), however in this case, the Board of Directors appoints a Vice-Chairman from the non-executive members.
Today, Mr. Michael Tsamaz, e xecutive member of the Board of Directors, has been assigned the duties of Chairman and CEO . The Vice-Chairman, Mr. Eelco Blok, is one of the Independent non-executive members of the Board of Directors by decision of the 69 th Annual General Meeting of Shareholders.
1.6 . During 2022 the Board of Directors held twenty two (22) meetings [including nine (9) minutes that were approved and signed via circulation in accordance with the provisions of paragraph 1, Article 94 of L. 4548/2018, as well as one (1) meeting that was held without the presence of its executive members, namely Mr. M. Tsamaz and Mr. Ch. Mazarakis]. In principle, the Board of Directors meets once a month.
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The attendance of each member of the Board of Directors during 2022, as per the above mentioned, appears in the following table:
* including the minutes for their election
1.7. In accordance with the business practice, apart from the initial information that is provided to the new members of the Board of Directors after their election, the members of the Board of Directors are briefed on issues related to the Company, during the meetings of the Board of Directors or after the discussion of the items of the agenda, as well as whenever there is a need for an update through communication between the Chairman and the members (by relevant information memos).
Also, the Members are informed by the Executive Director Compliance, ERM and Insurance OTE Group business unit:
a. with the OTE Group Compliance Report on information about the planning and effectiveness of the operation of the Compliance Management System and the activities in its framework, including any deficiencies as well as for important compliance cases (cases/complaints) that come to the attention of the Company,
b. with the OTE Group Enterprise Risk Management Report on information about the overview of corporate risks that have been identified as important (evaluation, risk assessment, need for measures, characterization of risk trends, early warning function), the operation of the Enterprise Risk Management System as well as the activities carried out in its framework.
Furthermore, the members of the Board of Directors are informed by the Head of the Internal Audit business unit on issues under his competencies (here below under Part G “Internal control and risk management systems of the Company in relation to financial reporting process)” and the Data Protection Officer of OTE Group with respect to matters falling with the responsibility thereof.
Regarding the transactions of the Company and its subsidiaries with related parties, the approved by the Board of Directors "Policy for concluding transactions with related parties" has been applied from 01-01-2019 to the Company and its subsidiaries, as amended and in force as of 01-07-2022. According to it, the members of the Board of Directors are informed on a semi-annual basis by the Audit Committee, which is responsible for confirming the assessment of a transaction as "ordinary" or not, an assessment that is made by the Company's business units.
1.8 . Board of Directors members’ remuneration for their participation in the BoD meetings for year 2022
The 70 th Annual General Meeting of the Company’s shareholders -held on May 25, 2022- has determined that no change should be conferred upon the Directors’ remuneration for their participation in the meetings of the Board of Directors as compared to the remuneration applied on December 31, 2021, i.e. Euro 4,800 (absolute amount) gross per month, regardless of the number of meetings. The same General Meeting also pre-approved the payment of this amount until the Annual General Meeting of Shareholders that will be held within the year 2023 and will proceed to their final determination.
The gross amount mentioned hereinabove:
i) Shall be subject to all lawful taxes (income tax, special solidarity levy, social security levy), as stipulated by the law from time to time and taking into account for their calculation the maximum amounts set by law.
ii) Shall not change in the event of amendment in the tax legislation or/ and in the social security legislation. In this case, the payable net amount may change accordingly.
Name
NUMBER OF MEETINGS
DURING THE TERM
NUMBER OF MEETINGS BEING PRESENT
NUMBER OF MEETINGS BEING REPRESENTED
Michael Tsamaz
22
21
-
Eelco Blok
22
21
1
Daniel Daub
4*
3
-
Dominique Leroy
22
16
6
Kyra Orth
22
20
2
Melinda Szabo
4*
3
-
Dimitrios Georgoutsos
22
22
-
Grigorios Zarifopoulos
22
21
1
Konstantinos Gkravas
3*
3
-
Charalampos Mazarakis
22
21
-
Rodrigo Diehl
18
16
2
Robert Hauber
18
12
6
Catherine de Dorlodot
19
18
1
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Moreover, by resolution of the said General Meeting of the Company’s shareholders, the Company covers:
A. the travel/ sojourn expenses of the members of the Board of Directors for their attendance at the meetings of the Board and its Committees, from and to the country of their permanent residence, provided that are not covered by their employers, as follows:
In the event of air transportation, the Company assumes the fare of “business class” ticket for flights with duration of more than four hours and the fare of “economy class” ticket for flights with duration of less than four hours.
The Company assumes the sojourn expenses, at the place where the meetings are held, for up to two overnight stays per transfer.
B. the travel/sojourn expenses of the members of the Board of Directors for their attendance at the meetings of the Board and its Committees, from and to the place of their permanent residence, provided that it is within the country but outside the prefecture of the Company’s seat at a distance of more than one hundred and fifty (150) kilometers, and provided that these expenses are not covered by their employers, as follows:
In the event of air transportation, the Company assumes the fare of an "economy class" ticket.
The Company assumes t he sojourn expenses of the abovementioned members, at the place where the meetings are held, for one overnight stay per travel.
In case the members of the Board of Directors are employed with the Company, they receive the compensation provided under their employment contract and are not eligible to the remuneration paid to the other members of the Board of Directors for the participation to the meetings of the Board of Directors.
It is noted that the 68 th Annual General Meeting of OTE shareholders of June 24, 2020 approved the Remuneration Policy for the members of the Board of Directors (executive and non-executive, including the independent non-executive members) valid until 31-12-2023 (unless during this period the General Meeting decides to amend it or there is a substantial change in the conditions under which it was drawn up), in accordance with articles 110-111 of Law 4548/2018. The 70 th Annual General Meeting of OTE shareholders of May 25, 2022, has already approved the revision of the Remuneration Policy for the members of the Board of Directors .
Regarding the compensation of the members of the Board of Directors for their participation in the meetings of the Committees of the Board of Directors for the year 2022, see below paragraph 2.1 (Audit Committee) and 2.2 (Remuneration and Nomination Committee). With regard to the remuneration of the executive members of the Board of Directors for the year 2022, see below in paragraph 1.9. Τhe current remuneration policy may be found on the following link:
https://www.cosmote.gr/otegroup_company/about_us/otegroup/corporate_governance/board_of_directors/Remuneration_po
licy.pdf
. The Remuneration Report for 2022 will be posted after its approval by the Annual General Meeting of Shareholders.
1.9. Compensation of executive Members of the Board of Directors for year 2022
Ι . GENERAL INFORMATION
For t he executive members of the Board of Directors (Managing Director and OTE Group Chief Financial Officer), and in line with the Remuneration Policy for the members of the Board of Directors, the following are implemented:
• The compensation and benefits policies of the Company for the level of the positions held by the above members of the Board of Directors, and
• The terms and conditions of their individual agreements (that have been approved by the General Meeting of the Company’s shareholders). It is noted that with regards to agreement of the Managing Director, the expiration date is June 30 th , 2024 , whereas the employment agreement of OTE Group Chief Financial Officer is of indefinite time.
Compensation and benefits policies
The compensation structure for the executive members of the Board of Directors includes a fixed part and a variable part, as
follows:
• The Annual Base Salary,
• The Annual Variable Reward which is mainly linked to the corporate performance within the year, and
• Voluntary Benefits (in the form of additional fringe benefits or long-term compensation elements) always according to the level of the positions in the organizational structure of the Company, the respective Company policies and terms and conditions of their individual agreements.
In particular:
The Annual Base Salary is the fixed part of the compensation of the executive members of the Board of Directors, which is defined
in their individual contracts following the approval of the General Meeting of the Company’s shareholders, and taking into consideration the level of their position in the organizational structure, as well as the market (salary) data for positions of comparable level.
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The variable part of the annual compensation of the executive members of the Board of Directors is the Annual Variable Reward
(annual performance bonus or annual short term incentive or special performance bonus) which is related to the set targets, for all levels of employees including the levels of the positions of the executives in the organizational structure of the Company. The Annual Variable Reward is provided to the Executive Members of the BoD, for the attainment of predefined quantitative and qualitative targets which are related to the performance of the Company, of OTE Group and/or of DT Group, and to the strategic corporate targets. Indicative performance criteria are the revenues, the EBITDA (financial targets), success factors related to specific products or services, the change management, the modernization / transformation of the Company, the loyalty / satisfaction of the customers and of the employees, the performance on climate related goals (e.g., energy consumption and reduction of CO2 emissions), the compliance with the guiding principles of corporate behavior and of leadership principles and other.
The relationship between the fixed and variable part of compensation is defined in the individual agreements of the executive members of the Board of Directors, with the fixed salaries constituting the largest part of the total (annual) compensation.
• According to the agreement of the Managing Director for the on target achievement (100%) of the predefined targets, the Annual Variable Reward (or Annual Short Term Incentive), starting with the payment for 2017 and thereafter, is calculated as a percentage of the Annual Total Target Cash for the achievement of targets [defined as the sum of the Annual Basic Salary plus the Total Annual Variable Reward for the Achievement of the Targets [(for target achievement at 100% - On Target)]. More specifically, the percentage of the Annual Variable Reward for the Achievement of the Targets (100% -On Target) is defined at a level of 37.58% and the Annual Basic Salary at a level of 62.42% of the Annual Total Target Cash (for 100% - On Target achievement). The maximum Annual Reward for the achievement of the predefined targets at a level of 150% or higher, could reach the 150% of 37.58% of the Annual Total Target Cash.
• According to the employment agreement of the OTE Group Chief Financial Officer, as in force for the year 2022, for on target achievement of the corporate targets (100%), t he Annual Targeted Cash comprise of two parts: the Annual Base Salary and the Annual on Target Short Term Incentive that follow the standard proportion 65%-35%, respectively. For the achievement of the predefined targets at 150% level or higher the proportion of Annual Base Salary and Short-term incentive stands at 55%-45%, respectively.
Both for the Managing Director as well as the OTE Group Chief Financial Officer, any payment in relation to the above variable pay elements is approved by the Remuneration and Nomination Committee, the Board of Directors, and the General Meeting of the Company’s shareholders.
It is noted that, according to a decision of the Board of Directors (June 2019), non-executive members of the Board meet, chaired by the non-executive Vice President of the Board, without the presence of executive members, in order to evaluate the performance of the executive members and to determine their remuneration, following a recommendation from the Remuneration and Nomination Committee.
In relation to the fringe benefits, the said executive members of the Board of Directors are covered by private health insurance plan (including their dependents), for life and disability, they participate in a private pension plan, use company car (with the respective coverages), and corporate mobile and fixed telephony programs, Internet and COSMOTE TV. They also have the opportunity to participate in the savings program for their children (Youth Account), as well as to participate in the Solidarity Fund, for providing financial support to the employees.
II. In relation to the Managing Director (MD), his contract provides for his participation in a rolling Long term Incentive Plan, in a
Share Matching Plan as well as in the Incentive Plan “Game Changer” for the 4-year period 2022-2025.
More explicitly, in relation to the plans in force for the year 2022:
A. Long term Incentive Plan
In December 2014, the extraordinary General Meeting of the Company’s shareholders approved the amendment of the agreement of the Managing Director, among others, regarding the implementation of the Long Term Incentive Plan with effect from 01.01.2015. In particular:
The Managing Director participates starting from 2015 hereinafter in a rolling long term (four-year) incentive plan (Long term Incentive – LTI), which is linked to phantom shares.
The Long-Term Incentive (LTI) is an international global rolling incentive program for Deutsche Telekom Group executives and the participating Group companies. Its purpose is to enhance willingness of executives to take on entrepreneurial responsibility and, consequently, to increase the value of the Group and its subsidiaries in the medium-long term. Each program has a four-year horizon and is associated with achieving targets for specific success parameters, either financial or related to the Group's sustainability. The targets are set by the DTAG Supervisory Board and approved by the DTAG Board of Directors.
The underlying amount for the MD’s participation, is calculated on the basis of the MD’s Total Target Cash (defined as the sum of gross Annual Base Salary plus the Annual Short Term Incentive for the on-target achievement of the predefined annual targets)
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and is set at 33.33% of the MD’s Total Target Cash of the current year. The relevant amount shall be converted at the beginning of each 4-year LTI into phantom Deutsche Telekom AG (DT) shares (phantom DT’s shares) on the basis of the DT share price in the XETRA trading system (Basic Number of phantom shares). The Basic Number of phantom shares granted to the MD, corresponds to 100% achievement. Each year of the 4-year plan corresponds to ¼ of the Basic Number of phantom shares. Depending on the level of achievement of the targets for the success parameters annually (between 0% and 150%), the Annual Result for that year is defined. Phantom shares also receive dividends if dividends are paid to DT shareholders.
Following the end of the last year of each 4-year plan, the Board of Directors of Deutsche Telekom AG determines the final level of achievement of each year's plan targets. The competent bodies or committees of the Participating companies , including the Company, make the necessary decisions for their companies.
At the end of the total 4-year plan term of each plan, the four binding Annual Results plus the dividends granted (if any) are added together. The resulting total number of phantom shares is converted into a cash amount which is paid out to the Managing Director through payroll. The share price used as the basis for said conversion is determined on the basis of a specific reference period.
Based on the foregoing,
• The long term (4-year) incentive plan (LTI) that was initiated in 201 8 and in which the Managing Director participated, has been completed in December 20 21 . The cash amount that corresponds to the total number of phantom shares for the whole 4-year period 201 8 -20 21 , was paid out to the Managing Director in June 202 2 , after approval by the competent corporate bodies ( the Remuneration and Nomination Committee, the Board of Directors, and the General Meeting of the Company’s shareholders).
• The long term (4-year) incentive plan (LTI) that was initiated in 201 9 and in which the Managing Director participated, has been completed in December 202 2 . The cash amount that corresponds to the total number of phantom shares for the whole 4-year period 201 9 -202 2 , will be paid out to the Managing Director during 202 3 , after approval by the competent corporate bodies ( the Remuneration and Nomination Committee, the Board of Directors, and the General Meeting of the Company’s shareholders).
• Similarly, long-term (4-year) Incentive Programs (LTI) have been launched in 20 20 , 20 21 and 202 2 in which the Managing Director participates, which will be completed in December 202 3 , 202 4 and 202 5 , respectively. The resulting variable amount will be paid within the years 202 4 , 202 5 and 202 6 , respectively, after the approval of the relevant corporate bodies.
B. Share Matching Plan
In December 2014, in the framework of the previously mentioned approval by the extraordinary General Meeting of the Company’s shareholders of the amendment of the agreement of the Managing Director, certain amendments were made, among others, regarding the implementation of the Share Matching Plan with effect from 01.01.2015. It is noted that:
For the year 2018, in the framework of the Share Matching Plans that started during the referred year, the Managing Director has undertaken the obligation to invest in DT shares, a total amount corresponding to 33.3% of the actually gross Annual Performance Bonus (or Short Term Incentive Plan) paid up to the Managing Director for the respective previous year (Private Investment Obligation). It is noted that the calculated Private Investment Obligation is effected from the net Annual Performance Bonus sum paid to the Managing Director. It is noted that these shares will be held by the Managing Director for a period of four (4) years (Lock Up Period) from the respective date of purchase. At the end of the respective Lock Up Period, the Managing Director will be granted, for free, one additional share for each share that he bought under the Private Investment Obligation. The lock up period for the DT shares that the Managing Director bought during 2018 in the framework of Private Investment Obligation was concluded in 2022. Following approval by the competent corporate bodies, the Managing Director was granted the free matched shares that correspond to his Private Investment Obligation of year 2018 within 2022.
C. Moreover, on December 19, 2018, the extraordinary General Meeting of the Company’s shareholders approved the amendment of the contract of the Managing Director regarding, among others, the following points:
C1. In relation to the Share Matching Plans started the year 2019 onwards, the Private Investment Obligation of the Managing Director in DT shares is defined at 10% (instead of 33.3%) of his actually paid gross Short Term Incentive for the precedent year. On top of the Private Investment Obligation, the Managing Director has the right, at his discretion, to perform a Private Voluntary Investment in DT shares. In any case, the maximum annual investment of the Managing Director in DT shares, including both the Private Investment Obligation and the Private Voluntary Investment, is defined at 50% of the actually paid gross Short Term Incentive for the precedent year.
During 2023, following the approval by the competent corporate bodies, the Managing Director will be granted the free matched shares that correspond to his Private Investment Obligation and his Private Voluntary Investment of year 2019 .
C2. Moreover, the Managing Director participated in the incentive scheme “Repeated Performance Incentive”/“RPI”, a four-year plan which honors repeated, extraordinary collective performance, measured by the overachievement of the specific target/KPI “EBITDA unadjusted”. The four-year period of the specific plan began in 2018 ( the year of eligibility for the plan 2018-2021) and ended in 2021.
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For the year 2021, Repeated Performance Incentive has been approved for the Managing Director by the competent corporate bodies ( the Remuneration and Nomination Committee, the Board of Directors, and the General Meeting of the Company’s shareholders) within 2022 and was paid out during 2022.
D. On May 25, 2022, the ordinary General Meeting of the Company’s shareholders approved the amendment of the contract of the Managing Director regarding, among others, the following points:
For the year 2022 onwards, the Managing Director has the right to participate in the new incentive plan “Game Changer”, which is a four-year plan. The scope of this plan is to provide incentives and rewards to senior executives for their contribution to the recurring, exceptional collective performance, based on specific challenging targets, aiming at their retention. The performance parameters are the profitability and improvements in customer centricity of OTE Group. The four-year term of the plan begun in 2022 and ends in 2025.
During 2023, following the approval by the competent corporate bodies, the Managing Director will receive the amount corresponding to the first year of the plan “Game Changer” (2022), provided that the associated to the said plan relevant targets for the year 2022 will have been achieved at the acceptable level.
III. Regarding the OTE Group Chief Financial Officer :
The General Meeting of the Company’s shareholders of June 12, 2015, following a relevant resolution of the Company’s Board of Directors, has approved the amendment of the employment agreement of the OTE Group Chief Financial Officer with the Company, in order for new rolling long term compensation programs, which are valid for 2015 (and henceforth, subject to the approval of the competent bodies of DTAG and OTE S.A.) for other executives of similar position levels, to be implemented also for the OTE Group Chief Financial Officer. In particular:
A. Long term Incentive Plan
A1. From the year 2015 started a long (4-year) incentive program (LTI), connected with phantom shares of DTAG and in which the executive was entitled to take part, if the result of the assessment of the annual individual performance of the employee for the previous year (2014) was level 3 (namely, fully meets all role expectations and grows with the role), 4 (namely, often exceeds role expectations) or 5 (namely, always exceeds role expectations by far) according to the Performance Evaluation Process.
The amount taken as the basis for employee participation (grant value), depends on the Total Target Cash (comprising of the Annual Base Salary and the Annual on Target Short Term Incentive, that is the Short (annual) Term Incentive for on target achievement of the collective targets (100%) and of an individual performance rating level “3”) and is defined at 30% of the Total Target Cash of the OTE Group Chief Financial Officer of the current year. The relevant amount is converted at the beginning of the 4-year Long Term Incentive Program (LTI) in phantom shares of Deutsche Telekom AG (DT) (phantom DT's shares) based on the price the share of DT in the trading system XETRA (Basic Number).
The Basic Number of phantom shares is associated with four equally weighted success parameters of DT and / or Group DT. The target values of success parameters are defined at the beginning of the 4-year plan term. An interim value shall be determined for each annual tranche. The parameters of success reach levels (target achievement corridors) between 0 percent and 150 percent. The Basic Number of phantom DT shares to be granted to the OTE Group Chief Financial Officer corresponds to target achievement of 100 percent. The annual level of target achievement will be determined at the end of each year by DT and approved by the OTE Board of Directors. This level of target achievement will be multiplied on a proportional basis to the Base Number phantom shares granted to OTE Group Chief Financial Officer (25 per cent of the Basic Number per year). The number of phantom shares calculated with this method will then become final for OTE Group Chief Financial Officer as the final binding result for the specific year ("Annual Result").
At the end of the whole 4-year program, the four binding Annual Results will be added together including any dividends in case of dividends granting to DT shareholders. The sum of total phantom shares will be converted into cash, which will be paid through payroll to OTE Group Chief Financial Officer. The share price used as the basis for the conversion will be determined in a particular reporting period.
Based on the foregoing:
• The long term (4-year) incentive plan (LTI) that was initiated in 2018 and in which OTE Group Chief Financial Officer participates, has been completed in December 2021. The cash sum that corresponds to the total number of phantom shares for the whole 4-year period 2018-2021, was paid out to OTE Group Chief Financial Officer in June 2022, after approval by the competent corporate bodies ( the Remuneration and Nomination Committee, the Board of Directors, and the General Meeting of the Company’s shareholders).
A2. On November 7, 2018 the Board of Directors of the Company, as well as the extraordinary General Meeting of the Company’s shareholders in December 19, 2018 (since it was attached to the amendment contract of the Managing Director), approved the amended terms and conditions of the Long term Incentive plan (LTI) for the year 2019 and onwards. Among others, these terms
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include that the eligibility of the Executives for their participation in the plan is decoupled from their individual performance evaluation for the previous year, and from now on it is only connected with the achievement level of the corporate collective (common) targets and the Executives’ Management Group.
• The long term (4-year) incentive plan (LTI) that was initiated in 2019 and in which OTE Group Chief Financial Officer participates, has been completed in December 2022 . The cash sum that corresponds to the total number of phantom shares for the whole 4-year period 2019 - 2022 , will be paid out to OTE Group Chief Financial Officer during 2023, following the approval by the competent corporate bodies ( the Remuneration and Nomination Committee, the Board of Directors, and the General Meeting of the Company’s shareholders).
• Similarly, long-term (4-year) Incentive Programs (LTI s have been launched in 2020 , 2021 and 2022 in which the Chief Financial Officer of OTE Group participates, which will be completed in December 2023, 2024 and 2025, respectively. The resulting variable amount will be paid within the years 2024, 2025 and 2026, respectively, following the approval of the relevant corporate bodies.
B. Share Matching Plan
B1. The Share Matching Plan (SMP) in which OTE Group Financial Officer participates as of 01.01.2015, is a long term (four year) plan based on DTAG shares. The SMP program is a global, Group-wide compensation instrument of Deutsche Telekom Group. The scope of the SMP program is to enhance the willingness of executives for corporate responsibility, and therefore, the increase in shareholder value in the medium-long term.
In this frame, OTE Group Chief Financial Officer is entitled to participate in the Share Matching Plan (SMP) which is a voluntary benefit, and the executive’s participation is a voluntary, if the evaluation result of the annual individual performance of the previous year is level 3, 4 or 5, according to the Performance Evaluation Process. OTE Group Chief Financial Officer is entitled to invest in shares of DTAG, an amount corresponding at least of 10% and a maximum of one third (33.3%) of the above mentioned gross amount of Short Term Incentive which will have been paid for the previous year 2014 (Voluntary Private Investment). The Voluntary Private Investment is calculated on the gross amount of the Short Term Incentive which will have been actually paid to OTE Group Chief Financial Officer for the previous year and it is performed out of the net payable amount, which, whenever necessary, is rounded upwards in order that an integer number of DTAG shares are purchased.
OTE Group Chief Financial Officer undertakes not to liquidate, sell, dispose, etc. the above shares for four (4) years from the date of purchase (Closed Period). At the end of the closed period, OTE Group Chief Financial Officer will receive free matched shares of DTAG, based on the formula: 1 free share to 1 (1 : 1) , or 2 (1:2) or 3 (1:3) DTAG shares acquired under the Voluntary Private Investment, according to the level of his individual annual performance (level « 5 » , « 4 » , or « 3 », respectively).
The above are valid for the Share Matching Plans (SMP) that started during the years 2015-2018 and in which the OTE Group Financial Officer participated.
Based on the foregoing:
• The Share Matching Plan that was initiated in 2018 and in which the OTE Group Financial Officer participated, has been completed in June 2022. The free DT shares that corresponded to the investment for the whole 4-year period 6/2018- 6/2022, have been granted to the OTE Group Financial Officer during July 2022, after approval by the competent corporate bodies .
B2. On November 7, 2018 the Board of Directors of the Company, as well as the extraordinary General Meeting of the Company’s shareholders in December 19, 2018 (since the SMP 2019 was attached to the amendment contract of the Managing Director), approved the amended terms and conditions of the Share Matching Plan (SMP) for the year 2019 and onwards. Among others, the terms include that (1) the eligibility of the Executives for their participation in the plan is decoupled from their individual performance evaluation for the previous year, and from now on it is only connected with the Executives’ Management Group, (2) the amount of the personal investment is set between one tenth (10%) (minimum amount) and one half (50%) (maximum amount) of the target (100%) amount of the Short Term Incentive (STI) of the previous year, and (3) the matching ratio between the shares purchased as part of the personal investment and the free matching shares is amended and from now on it is linked only with the Executives’ Management Group. For the OTE Group Financial Officer, the Matching Ratio of the free matched shares for the shares that are purchased in the framework of the voluntary private investment has been defined at 1:1 (one to one).
• For the year 2019, under the respective Share Matching Plan that began this year, the Chief Financial Officer of OTE Group invested in DT shares, part of the Gross Annual Short Term Incentive in the framework of the voluntary private investment and in accordance with the terms of each plan. At the end of the Lock-up Period (in 2023), the Chief Financial Officer of OTE Group will receive one DT share free of charge for each share bought, following the approval by the competent corporate bodies .
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C. Spot Bonus
In December 2017 the Variable Payment Policy for Exceptional Individual Performance (Spot Bonus) was approved by OTE Board of Directors, with effect from 2018 onwards, aiming at rewarding exceptional individual performance and achievements. OTE Group Financial Officer is among the eligible executives for participation in the plan. For the year 2022, there were no proposals submitted for Spot Bonus payment to Company executives of the Management Group 1 (MG1), to which the role of the OTE Group Financial Officer has been allocated
D. Repeated Performance Incentive
On November 7, 2018 the Board of Directors of the Company, approved, among others, the introduction of the incentive scheme “Repeated Performance Incentive” /”RPI”, which is a four-year plan which honored repeated, extraordinary collective performance, measured by the overachievement of the specific target/KPI “EBITDA unadjusted”. OTE Group Financial Officer was among the eligible executives for participation in the plan. The four-year period of the specific plan began in 2018 ( the year of eligibility for the plan 2018-2021) and ended in 2021.
For the year 2021, Repeated Performance Incentive has been approved for the OTE Group Financial Officer by the competent corporate bodies ( the Remuneration and Nomination Committee, the Board of Directors, and the General Meeting of the Company’s shareholders) within 2022, and was paid out during 2022.
E . O n December 18 th , 2020 (meeting no 3129, item 7 th ), the Board of Directors of OTE S.A., approved the payment of an
extraordinary variable reward (as Project Bonus), exclusively associated with the sale process of Telekom Romania (TKR) to
executives and other experts/specialists of OTE SA and COSMOTE SA in Greece, which will have significantly contribute to the completion of TKR sale project. The payment was approved to be made, following the completion of the sale process of TKR, based on the level of achievement of specific success parameters and depending on the specific categorization of the participants. OTE Group Chief Financial Officer was among the eligible executives of OTE SA – COSMOTE SA in Greece. Provided that the sale process of TKR has been completed in October 2021, the respective payment of this extraordinary variable reward to the OTE Group Chief Financial Officer was implemented within 2022, after the appropriate relative approvals by the competent corporate bodies .
F. For the year 2022 onwards, the OTE Group Chief Financial Officer has the right to participate in the new incentive plan “Game
Changer”, which is a four-year plan. The scope of this plan is to provide incentives and rewards to senior executives for their
contribution to the recurring, exceptional collective performance, based on specific challenging targets, aiming at their retention. The performance parameters are the profitability and improvements in customer centricity of OTE Group.
During 2023, following the approval by the competent corporate bodies, the OTE Group Chief Financial Officer will receive the amount corresponding to the first year of the plan “Game Changer” (2022), provided that the associated to the said plan relevant targets for the year 2022 will have been achieved at the acceptable level.
G. At the Annual General Meeting of Shareholders that will take place in 2023 to approve the results of fiscal year 2022, the
Board of Directors' Remuneration Report for the remuneration paid in fiscal year 2022, will be submitted in accordance with
Article 112 of Law 4548/2018 and the Remuneration Policy.
1.10 (I) Management of conflicts of interest situations
The “Policy on Avoiding Corruption and other Conflicts of Interest, which the Company has adopted by decision of its Board of Directors, sets out that the Board members (executive, non-executive and independent non-executive) as well as any other person assigned with competences by the Board must take special care to avoid the occurrence of conflicts of interest, manage corporate affairs in order to promote the corporate interest, act independently and have a duty of loyalty to the Company.
In this context they:
a) are prohibited from pursuing their own interests when those are contrary to the Company's interests
b) must timely and adequately disclose to the other Board members:
ba) their own interests that may arise from Company transactions within their remit, as well as any other conflict between their own interests and those of the Company or affiliated companies thereof arising from the performance of their duties.
bb) any conflict between the Company’s interests and those of their close family members.
An adequate disclosure in the above cases (ba) and (bb) is considered to be one that includes a description of both the transaction and the own interests.
c) must maintain strict confidentiality regarding corporate affairs and Company secrets, which became known to them due to their capacity as Board Members.
d) must refrain from carrying out, on their own account or on behalf of third parties, actions that fall under the Company's purposes, without the authorization of the General Meeting of shareholders.
In the same context, the Board members shall disclose to the Board any participation in boards or other administrative bodies of other legal persons - entities of any character and object, as well as any other relationship and/or activity that they consider to be in conflict or may be in conflict with the Company’s interests.
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Candidates shall disclose their professional commitments of any kind to other companies, as well as to non-profit entities, before taking up their positions at the Board of the Company.
The Board shall ensure the effective management of any conflict of interest between its members and the Company and the protection of confidentiality of critical information that may affect Company’s share price, image, operation and competitiveness.
The Board of Directors confirms to the General Meeting the fulfilment of the requirements of the candidates’ independence that the BoD proposes for election, following a relevant proposal by the Remuneration & Nomination Committee to the Board of Directors and the conduct by the Company of at least an integrity check and a search in publicly accessible sources.
Moreover, the candidate independent non-executive Board members of the Company, prior to their election by the General Meeting of Shareholders, submit to the Chairman of the Company’s Board of Directors a solemn statement that they fulfill the requirements of independence and undertake the responsibility to immediately inform the Board of Directors, by submitting a new solemn statement, in case of any change of data regarding their person or the persons of their close family environment. Finally, they submit a solemn statement that has not been issued within one (1) year before or after their election respectively a final court decision of conviction that acknowledges their fault for a listed or for a non-listed societe anonyme ’ s damages due to intercompany transactions.
The fulfilment of the legal requirements as to the classification of a member of the Board of Directors as an independent member is reviewed by the Board of Directors at least on an annual basis per fiscal year, and in any case prior to the publication of the annual financial report which includes the relevant assertion. In case that during the review of the fulfilment of the said requirements or in case that at any time it is ascertained that the requirements are not fulfilled any more as to an independent non-executive member, the Board of Directors proceeds with what is necessary for the replacement thereof.
The Company ensures that the members of the Boards of Directors and the CEO of OTE S.A. sign, on the day of their appointment and on an annual basis, Solemn Statements, by which they assume towards the Company responsibilities which derive from the application of the provisions of legislation governing the company as a Société Anonyme or companies with financial instruments admitted to trading on a regulated market as well as from the principles of good Corporate Governance, in accordance with the relevant provisions of the Regulation of Operations.
The members of the Board of Directors must immediately notify the Company of any change in their suitability conditions or in previous Solemn Statements made, including the issuance of a final court decision that acknowledges their fault for a listed or for a non-listed societe anonyme ’ s damages due to intercompany transactions.
Also, the Board of Directors’ Members as well as the Senior Financial Officers of the Company and the Group submit, on an annual basis, Statements regarding their knowledge and implementation of the current Code of Ethics for OTE Group Senior Financial Officers.
Moreover, the Company’s Regulation of Operations provides for a procedure on the monitoring of a) the economic activities and transactions of the members of the Board of Directors and the persons carrying out managerial duties, with significant customers, domestic providers or suppliers of the Company, and b) their transactions (as well as the transactions of persons closely associated to the above mentioned persons) related to the Company’s or Company’s affiliated companies shares or debt instruments, on derivatives or other financial instruments linked to them, in accordance with Law 4706/2020 and Regulation 596/2014 of the European Parliament and of the Council.
In addition, there are provisions regarding the avoidance and the management by the Company of conflicts of interest situations in the Policies which are applied in the framework of operation of the Compliance Management System of OTE Group, such as the “OTE Group Code of Conduct”, the “ OTE Group Policy on Accepting and Granting of Benefits” and the “Policy on Insider Trading”.
(II) Management of transactions with related parties
As of January 1, 2019, Law 4548/2018 includes certain provisions in relation to the transparency and oversight of transactions with affiliated entities (articles 99-101). Within this framework, OTE Group adopted the “Policy on concluding transactions with related parties”, which describes the method with which the Company handles issues regarding transactions with Related Parties.
Moreover, regarding transactions with related parties, the Company’s Board of Directors has adopted the "OTE Group Transfer Pricing Regulation", which defines the required internal procedures for the implementation and adherence to rules for the pricing and documenting of the intercompany transactions of the OTE Group companies and their affiliated companies. The Regulation sets the framework of procedures to be followed and the compliance with this Regulation is subject to internal and external audits. Responsible for the implementation of this Regulation are the business units in charge for tax issues and the units responsible for the drawing up of contracts with affiliated companies. Within the framework of the legislation in force, OTE Group companies through their corporate bodies, adopt this Regulation, in order for the relevant procedure of documentation and adherence to be followed.
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( ΙΙΙ ) Education Policy
The Company, by decision of its Board of Directors, has adopted the “Education Policy for the members of the Board of Directors, the key management personnel, as well as the other executives of OTE S.A., especially those involved in internal audit, risk management, compliance and IT systems”.
The Policy sets out the procedure followed by the Company for the induction training of the members of the Board of Directors and the other executives as mentioned above, as well as for the coverage of their educational needs.
(IV) Suitability Policy
As mentioned above, a “Suitability Policy for the Members of the Board of Directors of OTE S.A”, has been adopted by the Company . The Policy defines all the principles and criteria applied during the selection, replacement and renewal of the term of office of the members of the Board of Directors in the framework of the evaluation of the individual and collective suitability. The Policy aims at ensuring the adequate staffing, efficient operation and fulfillment of the role of the Board based on the Company’s strategy and business goals in order to promote the corporate interest. In that context, the purpose of the Policy is, among others, to secure that the Board consists of fit and proper members who will ensure a sound administration for the benefit of the Company and all stakeholders.
More information regarding this Policy are included at the sections concerning the “Remuneration & Nomination Committee” and the “Diversity policy with respect to the administrative, managerial and oversight bodies corporate”.
2. Board of Directors’ Committees – Composition – Responsibilities - Remuneration – Evaluation of effectiveness
Two Committees operate in the Company, whose members are exclusively members of the Board of Directors. These are the Audit Committee and the Remuneration & Nomination Committee.
In particular:
2.1. The Audit Committee
The Audit Committee in accordance with the provisions of Article 44 of the Law 4449/2017 (Government Gazette A 7/24.01.2017 “Mandatory audit of the annual separate and consolidated financial statements, state oversight over the auditory profession and other provisions”), as in force, and following a resolution of the 69 th Annual General Meeting of the Company’s Shareholders held on June 9, 2021, is a Committee of the Board of Directors, which consists exclusively of members of the Board of Directors, whose term is the same as their term of office in the Board of Directors. The Audit Committee consists of three (3) members which in their entirety are Independent members of the Board of Directors. The members of the Audit Committee in their entirety have sufficient knowledge in the field of electronic communications, in which the Company mainly operates, whereas at least one member that has also proven knowledge and experience in accounting /auditing is always present at the meetings of the Committee which pertain to the approval of the financial statements.
The Audit Committee during 2022 consisted of the following members:
• Until 14/11/2022: Mr. Eelco Blok (Chairman of the Committee – Vice-Chairman of the BoD, Independent Non-executive BoD member), Mr. Dimitrios Georgoutsos (Member of the Committee - Independent Non-executive BoD member) and Mrs. Catherine de Dorlodot (Member of the Committee - Independent Non-executive BoD member) .
• Since 25/11/2022: Mr. Eelco Blok (Chairman of the Committee – Vice-Chairman of the BoD, Independent Non-executive BoD member), Mr. Dimitrios Georgoutsos (Member of the Committee - Independent Non-executive BoD member) and Mr. Konstantinos Gkravas (Member of the Committee - Independent Non-executive BoD member) .
For the fiscal year 2022, the 70 th Annual General Meeting of the Company’s shareholders held on May 25, 2022, resolved that no change should be conferred upon the remuneration of the Chairman and the members of the Committee for their participation in the Committee meetings as compared to the remuneration given for the fiscal year 2021, i.e. as follows:
(a) Chairman : Euro 2,700 (absolute amount) gross per meeting.
(b) Members : Euro 2,200 (absolute amount) gross per meeting.
The gross amounts mentioned herein above :
i) Shall be subject to all lawful taxes (income tax, special solidarity and social security levies) as stipulated by the law from time to time and taking into account for their calculation the maximum amounts set by law.
ii) Shall not change in the event of amendment in the tax legislation and/or in the social security legislation. In this case, the payable, net amount may change accordingly.
The Audit Committee, according to the Regulation of its Operation 4 , holds at least four (4) meetings every year.
4
https :// www . cosmote . gr / otegroup _ company / investor _ relations / corporate %20 governance / AUDIT _ COMMITTEE _ REGULATIONS _ EN . pdf
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The attendance of the Chairman and the members of the Audit Committee in the Committee meetings during 2022, which were fourteen (14) meetings in total, appears in the following table:
Name
NUMBER OF MEETINGS
DURING THE TERM
NUMBER OF MEETINGS BEING PRESENT
NUMBER OF MEETINGS BEING REPRESENTED
Eelco Blok
14
14
-
Dimitrios Georgoutsos
14
14
-
Konstantinos Gkravas
2
2
-
Catherine de Dorlodot
12
12
-
The framework for the operation of the Audit Committee is described in the Audit Committee Regulations, which have been approved by the Board of Directors and are amended by the Board of Directors at any time following a recommendation by the Audit Committee.
In brief, the objective of the Audit Committee is to support the Company’s Board of Directors in the exercise of the latter’s supervisory authorities and the fulfillment of the latter’s obligations towards shareholders, the investment community and third parties, especially with regard to the financial reporting process.
In 2022, the Audit Committee dealt with issues , summarized as follows :
• Monitoring and appraisal of the adequacy, effectiveness and efficiency of the policies, procedures and safety nets in relation to both the Internal Audit System and the assessment of the risk management in relation to financial reporting.
• Approval and monitoring of the Company’s Internal Audit business unit activities.
• Approval and monitoring of the activities of the Compliance, Enterprise Risk Management and Insurance business unit.
• Monitoring and evaluation of the process of compiling financial information, as well as of the statutory auditors’ services.
• Assessment of the accuracy and consistency of the Financial Statements.
• Assurance of the statutory auditors’ independence, in relation to the services provided by the latter to the companies of the OTE Group and approval of the budget for the statutory auditors’ fees for the fiscal year 2022 .
• Confirmation on whether the conditions for the assessment made by the competent Business Units for intended transactions of the Company with related parties as “ordinary”, are fulfilled, based on the information provided to the Committee by the competent Business Units which are responsible for providing complete and accurate information to the Committee.
• Approval and oversight of activity of the Data Protection Officer of OTE Group.
• Provision of information to the Board of Directors and submission of proposals on issues falling within the context of the Committee’s responsibilities.
Furthermore, within the context mentioned above, in 2022 the Audit Committee, dealt with the review and assessment of the completeness, accuracy and precision of the Periodic OTE Group Compliance Reports - which include, among others, information on the handling and the results thereof, of complaints and accusations – as well as the OTE Group Enterprise Risk Management Reports. The OTE Group Compliance Reports and the OTE Group Enterprise Risk Management Reports are submitted at first to the OTE Group Compliance, Enterprise Risks and Corporate Governance Committee, which reviews and assesses these Reports, and, subsequently, to the competent corporate bodies, i.e. the Audit Committee and the Board of Directors.
The Audit Committee has a frequent communication with the Internal Audit during the course of its operations. In this context, the Head of the Internal Audit business unit is invited and participates in most of the meetings of the Audit Committee, submits the annual plan of audits and periodic Reports for the implementation thereof.
In order to safeguard the independence of the certified auditors, which under the law falls within the responsibilities of the Audit Committee, the Board of Directors has adopted by a decision the "Policy on Commissioning the Services of Auditors". This Policy regulates the procedures of the Company and all companies of the Group which the Company controls and consolidates, with respect to the assignment of services to certified public accountants in accordance with applicable law. In particular, this Policy sets out the non-audit services which are allowed and those which are prohibited to be provided, the assignment and approval procedure for the provision of the allowed non-audit services, the maximum fees for such services and the monitoring of the Policy’s implementation.
The certified public accountants are invited and participate in the meetings of the Audit Committee at the planning stage of the statutory audit and its implementation, as well as when the semi-annual and annual separate and consolidated financial statements are reviewed. Moreover, they participate in meetings of the Audit Committee without the Company management being present.
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2.2. Remuneration and Nomination Committee
The Remuneration and Nomination Committee is a committee of the Board of Directors which was established in July 2021, in accordance with Law 4706/2020 on corporate governance and the Hellenic Corporate Governance Code 2021, following a decision of the Board of Directors of the Company for the unification of its two separate -until then- committees (namely, the Compensation & Human Resources Committee that was established in 2004 and the BoD Nomination Committee that was established in 2019) in a joint committee and delegating to this joint Committee both the responsibilities provided for in the legislation in force for the remuneration committee and those provided for the nomination committee.
The Remuneration and Nomination Committee has three members and consists exclusively of non-executive members of the Board of Directors, in their majority independent.
The Chairman and the members of the Committee are appointed by the Company’s Board of Directors.
The purpose of the Remuneration and Nomination Committee is to provide support and assistance to the Board in its duties regarding:
• The remuneration of Board members and key management personnel of the Company, especially the head of the internal audit unit.
• Ensuring the adequate staffing and the appropriate succession and continuity of the Board in order to effectively fulfill its role for the benefit of the Company and all stakeholders.
The particular responsibilities of the Committee and the relevant procedures for the fulfilment of its aforementioned purpose, are described in its Regulation of Operations. 5
Τ he Remuneration and Nomination Committee during 2022 consisted of the following members:
• Until 14/11/2022: Mr. Eelco Blok (Chairman of the Committee – Vice-Chairman of the BoD, Independent Non-executive BoD member), Mrs. Catherine de Dorlodot (Member of the Committee - Independent Non-executive BoD member) and Mrs. Kyra Orth (Member of the Committee - Non-Executive BoD member).
• Since 25/11/2022: Mr. Eelco Blok (Chairman of the Committee – Vice-Chairman of the BoD, Independent Non-executive BoD member), Mrs. Kyra Orth (Member of the Committee - Non-Executive BoD member) and Mr. Konstantinos Gkravas (Member of the Committee - Independent Non-executive BoD member).
For the fiscal year 2022 the 70 th Annual General Meeting of the Company’s shareholders held on May 25, 2022, resolved that no change should be conferred upon the remuneration of the Chairman and the members of the Committee for their participation in the Committee meetings as compared to the remuneration given for the fiscal year 2021, i.e. the amount of Euro 1,100 (absolute amount) gross per meeting.
The gross amount mentioned hereinabove :
i) Shall be subject to all lawful taxes (income tax, special solidarity and social security levies) as stipulated by the law from time to time and taking into account for their calculation the maximum amounts set by law.
ii) Shall not change in the event of amendment in the tax legislation and/or in the social security legislation. In this case, the payable, net amount may change accordingly.
The Committee meets whenever it is deemed necessary by its Chairman or following a proposal of any member to its Chairman and in any case at least once a year.
The attendance of the Chairman and the members of the Remuneration and Nomination Committee in the Committee meetings during 2022, which were eleven (11) meetings in total, appears in the following table:
Name
NUMBER OF MEETINGS
DURING THE TERM
NUMBER OF MEETINGS BEING PRESENT
NUMBER OF MEETINGS BEING REPRESENTED
Eelco Blok
11
11
-
Kyra Orth
11
10
1
Konstantinos Gkravas
1
1
-
Catherine de Dorlodot
9
8
1
Within the framework of its responsibilities, the Committee during 2022 dealt with issues summarized as follows :
• Approval of the process for the formation of the Succession Plan for the Managing Director and the senior executives of OTE S.A. (i.e. the Chief Executive Officers / CxOs).
5
https://www.cosmote.gr/otegroup_company/investor_relations/corporate%20governance/gr/HR_COMMITTEE_2022_EN.pdf
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• Overview of the Results of the process of (a) Self-Assessment of the Board of Directors and (b) Evaluation of the Effectiveness of the Board of Directors and its Committees, following the decision taken by the Committee in December 2021 to entrust an external consultant with the task of providing advisory support in the Committee regarding the assessment in question (for the year 2021) – Information to the Board of Directors.
• Procedure for finding candidates to replace two non-executive members of the Board of Directors / Submission of a proposal to the Board of Directors regarding suitable candidates to fill the above positions.
• Procedure for finding a candidate/candidates to replace an independent non-executive member of the Board of Directors, of the Audit Committee and of the Remuneration and Nomination Committee. / Assignment of the task for his/their assessment to an external consultant / Submission of a proposal to the Board of Directors regarding the suitable candidate to fill the position of the independent non-executive member of the Board of Directors who will also be a member of the Audit Committee and the Remuneration and Nomination Committee.
• Submission of proposals to the Board of Directors, inter alia, on issues of remuneration of the executive members of the Board of Directors and other executives (such as Head of Internal Audit, Head of Compliance).
• Submission of a proposal to the Board of Directors for the revision of the Remuneration Policy for the members of the Board of Directors, in accordance with articles 110-111 of Law 4548/2018, and respective amendment of the agreement of the Managing Director, executive member of the Board of Directors, which the Board of Directors subsequently submitted for discussion to the 70 th Annual General Meeting of Shareholders of 25-5-2022.
• Examination of the annual Remuneration Report which the Board of Directors subsequently submitted for discussion to the 70 th Annual General Meeting of Shareholders of 25-5-2022 in accordance with article 112 of law 4548/2018.
2.3. For the evaluation of the Committees of the Board of Directors see par. 1.4. above.
3. Other administrative, managerial or supervising corporate bodies or committees
3.1. OTE Group Management Meeting
By resolution of the Chairman of the Board of Directors and Managing Director, the OTE Group Management Meeting has been established and operates with primary mission to coordinate and ensure the necessary cohesion in the Company and its affiliated companies, the resolution of material issues regarding the current management and the examination and decision on any other matter entrusted to the Meeting either from the Board of Directors or the Managing Director of the Company. The Meeting takes place weekly, it is chaired by the Managing Director or his Deputy appointed by his decision.
The following executives participate in the Meeting, except for the Managing Director : the Legal Counsel - OTE Group Chief Legal and Regulatory Affairs Officer, the OTE Group Chief Financial Officer, the OTE Group Chief Information Technology Officer, the OTE Group Chief Human Resources Officer, the OTE Group Chief Technology and Operations Officer, the OTE Group Chief Strategy, Transformation and Wholesale Officer, the OTE Group Chief Marketing Officer Consumer Segment, the OTE Group Chief Commercial Officer Business Segment, the OTE Group Chief Customer Operations Officer, the Executive Director Corporate Communications & Sustainability OTE Group and the Executive Director B.U. COSMOTE TV.
Furthermore, in the Management Meeting participate, without voting rights, on a case by case basis, executives of the Group or third parties, depending on the issue under discussion and following an invitation of the Chairman of the Board. The Management Meeting operates in accordance with the Managing Director’s decision for its formation and operation.
3.2. The CV’s of the senior executives of the Company during the financial year 2022 and until February 22, 2023, appear here below. Furthermore, may be found on the Company’s website:
https://www.cosmote.gr/cs/otegroup/en/do_ote.html
George Athanasopoulos, OTE Group Chief Information Technology Officer
Mr. George Athanasopoulos is Chief Information Officer at OTE Group. Mr. Athanasopoulos joined OTE Group in 2002, as OTE Investments Information Systems Executive Director, while since September 2006 he held the position of Operations Executive Director in OTE Globe. Since October 2007, he has also been COSMOTE's Operations & IT Systems General Director. Before joining OTE Group, Mr. Athanasopoulos worked for Atos Origin as SE Europe Sales Support Regional Manager as well as for Vodafone Greece, as Deputy Manager for Business Systems.
Mr. Athanasopoulos holds a B.Sc. in Economics from the University of Athens (1991) and an M.Sc. in Computing from Cardiff University, UK (1993).
Panayiotis Gabrielides, Chief Marketing Officer Consumer Segment OTE Group
Mr. Panayiotis Gabrielides has more than 15 years of experience in Telecommunications and Marketing. He joined COSMOTE in 2003 and since then has taken various management positions in Consumer Marketing of fixed and mobile products and services. Prior to joining OTE Group, Mr. Gabrielides has worked as a Sales Executive in the Financial Information Systems industry, namely in the multinational companies Reuters and Dow Jones Markets.
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Mr. Gabrielides holds a degree in Computer Engineering and Informatics from the University of Patras. In addition, he holds a Master of Science (MSc) degree in Data Communications, Networks and Distributed Systems from the University of London (UCL).
Stefanos Theocharopoulos, OTE Group Chief Technology & Operations Officer
Mr. Stefanos Theocharopoulos joined OTE Group in 2002. Ι n April 2013, he assumed the newly-established position of OTE Group Chief Technology & Operations Officer. He was CEO of COSMOTE Romania since January 2008 and of Romtelecom since July 2011. He has also held the position of OTEGlobe Business Development Executive Director, OTE Investment Services Executive Technology Director, as well as BoD member in a number of OTE Group subsidiaries. Mr. Theocharopoulos holds a BEng in Electronic Engineering from Sussex University as well as an M.Sc. in Mobile & Satellite Communications from the University of Westminster.
Ioannis Konstantinidis, OTE Group Chief Strategy, Transformation & Wholesale Officer
Mr. Ioannis Konstantinidis has been OTE Group Chief Strategy, Transformation & Wholesale Officer since November 2015, having served as Chief Strategic Planning & Transformation Officer since June 2011. From 2000 until 2011 he held various senior managerial positions at OTEGlobe, among which the latest was the position of the Chief Operating Officer, responsible for all commercial and technology development and operations of the company. Today, besides his tasks at OTE, he is the Chairman of the Board of Directors of OTE Rural North & South, member of the Board of Directors of OTEestate and was Chairman of the Board of Directors of OTEGlobe until its merging and absorption by the parent company OTE S.A.
He holds a degree in Electrical & Computer Engineering from the National Technical University of Athens, and master in Business Administration (mini-MBA). He is also certified in Finance/CFO program from London Business School.
Charalampos Mazarakis, OTE Group Chief Financial Officer
Mr. Mazarakis has over 27 years of professional experience, chiefly in senior management positions in Greece and abroad. Before joining OTE Group, in July 2012, as OTE Group Chief Financial Officer, he was Group Chief Financial Officer (CFO) of the National Bank of Greece, and from 2008 until 2010 Group Chief Financial Officer (CFO) and Member of the Group Executive Committee of TITAN Group.
Mr. Mazarakis served in various executive positions in Vodafone Group: Group Finance Director and BoD Member in Greece (1999-2006), CEO in Hungary (2006-2007), Chief Operating Officer and BoD Vice-Chairman (2007-2008). He held the position of Finance Director and Member of the BoD at Georgia Pacific-Delica in Greece (1997-1999), while prior to that, he worked as Financial Analysis Manager at Procter & Gamble, first in Athens and then as Financial Analysis Group Manager at the European Headquarters in Brussels, Belgium.
Mr. Mazarakis holds a Bachelor's degree in Business Administration from the University of Piraeus (with distinction) and an MBA from the Fisher College of Business at The Ohio State University (Wielder Scholar), where he held the post of Teaching Assistant in Finance. He has been ranked among the 30 most distinguished Finance Managers of Europe under the age of 40 (CFO Europe magazine, 2002).
Eirini Nikolaidi, General Counsel - OTE Group Chief Legal and Regulatory Affairs Officer
Ms. Eirini Nikolaidi is the General Counsel and Chief Officer for Legal & Regulatory Affairs of OTE Group and joined the Group in 1996.
Ms. Nikolaidi is a member of the Executive Committees of OTE and COSMOTE, member of the Board of Directors of GERMANOS and Telekom Romania Mobile Communications, and member of the Supervisory Board and the Audit Committee of the Deutsche Telekom AG subsidiary in Croatia, Hrvatski Telekom d.d.
She holds a law degree from the University of Athens, as well as a master's degree (LLM) in International Business Law from the University of London (UCL), where she specialized, among others, in international finance and international trade law. She is a telecommunications expert and member of the Athens Bar Association.
Elena Papadopoulou, OTE Group Chief Human Resources Officer
Ms. Papapadopoulou has been OTE Group Chief Human Resources Officer since March 2015, having served as OTE Group Human Resources General Director since December 2011. She has been COSMOTE Human Resources General Director since 2008, while in October 2008, she had assumed the position of Human Resources Director of the company. Prior to joining COSMOTE, Ms. Papadopoulou had worked in the Financial Division of Shell Hellas S.A., wherefrom she transitioned to Kraft Foods International as Human Resources Manager. Over the following ten years she was Human Resources Director and member of the Management team of Mercedes Benz Hellas, P.N. Gerolymatos and Praktiker Hellas of the Metro Group.
Athanasios Stratos, Chief Customer Operations Officer OTE Group
Athanasios (Tom) Stratos is the CEO of Cosmote e-Value in Greece (from 2009) and e-Value International in Romania. His visionary attitude, steadfast commitment to excellence and his perspective of having the customer at the heart of every decision, have led to the remarkable growth of the company under his leadership. He serves also as Chief Customer Operations Officer (CCOO) of OTE Group and as President & CEO Germanos – a pivotal member in leading the organization strategies through change, transformation, turnaround and growth. He joined the Group in 1998 and since then has occupied several senior managerial positions. Mr. Stratos has extensive experience in commercial, Sales and Service in the telecoms sector and Business Process Outsourcing, having worked in large companies in Greece and Canada.
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Mr. Stratos holds a degree in Business Administration from Ryerson University in Toronto, Canada.
Grigoris Christopoulos, OTE Group Chief Commercial Officer Business Segment
Grigoris Christopoulos brings with him more than 20 years of experience in Telecommunications and Sales. He joined OTE Group of companies in 2000 as a Sales Network Deputy Director at COSMOTE S.A. In the following years, Grigoris held various management positions, including Executive Sales Director at COSMOTE S.A., and Executive Sales Director Fixed & Mobile. In his previous position as Business Sales & Marketing Executive Director Fixed & Mobile, he accounted for the B2B strategic planning and implementation, as well as the transformation and consolidation of Fixed, Mobile and ICT convergence.
Mr. Christopoulos holds a B.Sc. in Electrical Engineering from the Technical University of Patras, Greece.
Deppie Tzimea, Executive Director Corporate Communications & Sustainability OTE Group
Deppie Tzimea is the OTE Group Corporate Communications & Sustainability Executive Director. She has been a member of the OTE Group’s executive committee since 2001, when she joined the company as Director of Corporate Communications of the Group, reporting directly to the Chairman and CEO. Ms Tzimea oversaw the transformation of OTE's image into an extrovert and innovative customer-centric company, both internally and externally. She has contributed significantly to the integration of sustainability to the Group’s business strategy, which led OTE Group to become one of the leading companies in the field of sustainable development, contributing to the economy, society and the environment. She was responsible for all OTE Group communications during the 2004 Olympic Games in Athens and has thorough knowledge and experience in all areas of communications including change management, crisis communications and advertising.
Before joining OTE, she held various senior executive positions in Marketing and Corporate Communications in the telecommunications industry (1995-2001). Prior to that, she was a Group Account Director at Adel Saatchi & Saatchi handling 18 national and international accounts.
Ms Tzimea, member of Chartered Institute of Public Relations (CIPR), holds a postgraduate degree in Communications and Public Relations from Stirling University and is a Political Sciences & Public Law graduate from the University of Athens Law School. She has completed her training on “High Impact Leadership” in Columbia Business School and on “Exponentially growing technologies” in Singularity University.
Dimitris Michalakis, Executive Director COSMOTE TV
Mr. Dimitris Michalakis is COSMOTE TV Business Unit Executive Director at OTE Group since April 2013. He first joined COSMOTE TV in March 2012, as Commercial Director. Previously, he held various positions in OTE Group, as Product Management & Marketing Director of OTEGlobe (beginning 2006) and Marketing Manager of OTE International (May 2002). Prior to OTE Group, Mr. Michalakis was at Telestet as Product Manager. He began his career at Philip Morris Hellas Marketing and Sales units.
Mr. Michalakis holds an MBA from the ALBA Business School and an MSc in Marketing & Communication from the Athens University of Economics and Business.
COSMOTE TV is OTE Group's pay TV service, currently holding the leading position in Greece, with 640, 000 subscribers. COSMOTE TV is a fully blown broadcasting unit, packaging premium exclusive content through 15 COSMOTE branded channels (CINEMA, SPORT, HISTORY) and offering its linear and on demand services through DTH, IPTV and OTT .
Konstantinos Vasilopoulos, Executive Director Internal Auditor OTE Group
Mr. Konstantinos Vasilopoulos holds the position of Executive Director Internal Audit OTE Group since June 2016. He has served at OTE Group since 2004 and from 2007 until 2016 he held the position of Accounting Director. Before joining OTE Group, he worked as external auditor for the audit firm Arthur Andersen (1997-2002) and as Finance Manager at ELYSEE S.A. of Syngelidis Group (2002-2004). Mr. Vasilopoulos holds a degree in Finance and Banking Management from the University of Piraeus.
Aristodimos Dimitriadis, Executive Director Compliance, ERM & Insurance OTE Group
Mr. Aristodimos Dimitriadis assumed the position of Executive Director Compliance, ERM & Insurance OTE Group in November 2012. He has been a member of the executive team of Cosmote since 2005 and was Head of Internal Audit and Compliance for the COSMOTE Group. Prior to his employment with COSMOTE Group, he worked at KPMG and for many years in the banking sector, first at ABN AMRO and later at FBB-First Business Bank as Internal Audit Officer. He holds a BA in Economics and Politics and an MBA from Kent University, UK. He is a Certified Internal Auditor (CIA), a Certified Financial Services Auditor (CFSA), Certified in Risk Management Assurance (CRMA) from the International Institute of Internal Auditors, Certified in Risk & Information Systems Control (CRISK), as well as a Certified Fraud Examiner (CFE) from Association of Certified Fraud Examiners. He also holds (ICA) International Advanced Certificate in Compliance & Financial Crime.
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3.3 The senior executives of the Company on December 31, 2022, held shares of the Company as follows:
SENIOR EXECUTIVES
ΟΤΕ SHARES
George Athanasopoulos
-
Panayiotis Gabrielides
-
Stefanos Theocharopoulos
30,000
Ioannis Konstantinidis
10
Charalampos Mazarakis
-
Eirini Nikolaidi
-
Elena Papadopoulou
-
Athanasios Stratos
1,600
Grigoris Christopoulos
-
Deppie Tzimea
6,000
Dimitris Michalakis
-
Konstantinos Vasilopoulos
6,000
Aristodimos Dimitriadis
15,130
3.4 OTE Group Compliance, Enterprise Risks and Corporate Governance Committee
By resolution of the Chairman of the Board of Directors and CEO, the OTE Group Compliance, Enterprise Risks and Corporate Governance Committee (GRC Committee) has been established with primary mission the support, the review and monitoring of the implementation of the Compliance and Risk Management Systems (CMS and RMS) and issues of Corporate Governance at OTE Group level.
In the aforementioned context, the Committee supports the competent executives of the Company on Compliance, Enterprise Risks and Corporate Governance issues, as well as on Human Rights issues, considers any relevant issues arising and proposes the issuance of relevant decisions and the adoption of relevant measures.
Indicatively, the Committee designates the strategic issues regarding Corporate Governance, Compliance, Enterprise Risks and Human Rights, keeping abreast of international best practices, monitors and reviews the implementation of programs for the effective operation of the Compliance Management (CMS), Enterprise Risk Management (RMS) and Corporate Governance Systems, as well as for the development of the Action Plan on Human Rights issues, supports business units in their risk analysis, ensuring efficient communication between employees and Management about the implementation of the RMS and CMS Programs. In addition, the Committee proposes the appropriate measures/procedures and policies to the competent corporate bodies to be approved on the issues of its competences and supports the design of the implementation of these measures. The Committee reviews the reports and the results of Compliance and Enterprise Risks procedures, assesses the completeness, accuracy and precision of the reports that are being submitted to the competent corporate bodies and submits, in its discretion, briefings/reports to the competent corporate bodies regarding Compliance, Enterprise Risks, Corporate Governance and Human Rights issues.
Members of the Committee are the Executive Director Compliance, Enterprise Risk Management and Insurance OTE Group (Committee’s Chairman), the General Counsel - Chief Legal and Regulatory Affairs Officer OTE Group, the Chief Financial Officer OTE Group, the Chief Human Resources Officer OTE Group, the Chief Information Technology Officer OTE Group, the Executive Director Internal Audit OTE Group (without voting rights), the Executive Director Corporate Communications & Sustainability OTE Group, the Executive Director Business Security and Continuity OTE Group, the Mergers, Acquisitions & Investor Relations Director OTE Group and the Data Privacy Officer (DPO) OTE Group. The Committee’s meetings may also attend, following the Chairman’s invitation, other persons, officials or third parties, extraordinarily and without voting rights, if their presence is considered to be necessary for the discussion of the agenda items.
The Committee operates in accordance with the CEO’s decision for its formation and operation and its Regulation of Operations, which is approved by the same decision.
3.5. Managing Director
The Company’s Managing Director, is appointed by the Board of Directors, following the election by the General Meeting as a member of the Board. He is the chief executive officer of the Company, heads all the departments of the Company, directs their work, adopts the necessary decisions within the context of the provisions governing the operation of the Company, of the programs, the budgets and strategic plans approved by the Board. The Board of Directors at its discretion may delegate to the Managing Director, the authority and power, at his discretion to decide and represent the Company, either in person or by proxy on any matter pertaining to administration of the Company affairs other than: (i) the matters reserved to the General Meeting of the Shareholders or the Board of Directors as provided by Law 4548/2018 any other applicable legislation and the Company’s Articles of Incorporation and (ii) the Special Matters pursuant Article 8 paragraph 4 of the Company’s Articles of Incorporation.
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The Managing Director represents the Company in courts, extrajudicial proceedings and before every Authority for every act, be it under his own authority or the authority of the Board of Directors, acting in person or by granting proxy rights to third persons to represent the Company.
E. General Meeting and Shareholders’ Rights
1. General Meeting - Operation and Powers
According to Article 15 of the Company’s Articles of Incorporation, the General Meeting of shareholders is the foremost body of the Company and has the right to resolve upon all matters concerning the Company unless otherwise specified in the Articles of Incorporation. Every fully paid-up share carries one vote at any General Meeting.
The General Meeting of shareholders is convened by the Board of Directors pursuant to the provisions of the Law and meets mandatorily at the registered office of the Company, or the region of another municipality within the prefecture of the Company’s registered office, or another municipality neighboring the Company’s registered office or in the region of the municipality where the Stock Exchange is located where its shares have been admitted to trading. Under article 18 of the Company’s Articles of Incorporation, the Board of Directors may decide that the General Meeting will not convene physically, but exclusively through the shareholders’ participation by distance, via electronic means, in accordance with the legal provisions.
The General Shareholders Meeting is convened annually once every financial year, the latest by the tenth (10 th ) day of the ninth (9 th ) month as of the end of the financial year. Additionally, the Board of Directors may call an extra Annual General Shareholders’ Meeting anytime when deemed advisable. Furthermore, the Board of Directors has the obligation to call a General Meeting by the deadline and under the conditions of art. 119 par. 4 of Law 4548/2018 (i.e. if the total assets of the Company falls below ½ of the share capital). The same obligation have the auditors, in case the Board of Directors fail to call a General Meeting by the deadline stipulated by law.
The invitation of the Annual or extra Annual General Meeting of shareholders is drawn up and published pursuant to the legal provisions in force.
The General Meeting is in quorum and convenes validly on the issues of the agenda when at least twenty (20%) percent of its paid-in share capital is represented. In the event that such quorum is not reached during the first convocation a new repeated Meeting is held within twenty (20) days. The repeated Meeting is in quorum and convenes validly with the same agenda items, irrespectively of the percentage of the paid in share capital represented. The resolutions of the General Meeting are adopted upon an absolute majority of the votes represented at the Meeting.
Exceptionally, according to Article 20 of the Articles of Incorporation, the General Meeting is in quorum and convenes validly only if two thirds (2/3) of the paid-in share capital are represented, with respect to the following matters:
(a) Merger or dissolution of the Company.
(b) Increase or decrease of the share capital, with the exception of cases which are governed by different provisions under the law or the present Articles of Incorporation.
(c) Issuance of bond loans convertible to shares.
(d) Amendment of the manner of distribution of profits.
(e) Increase of the liability of shareholders.
(f) Limitation or cancellation of the preemption rights of existing shareholders in the event of increases of share capital in cash or contributions in kind.
(g) Amendment of the special majority of the Board of Directors provided in Article 6 paragraph 1 of the Articles of Incorporation (share capital increase and issuance of a bond loan by decision of the Board of Directors taken by a two-thirds majority of following relevant resolution of the General Meeting).
(h) Amendment of same Article 20 of the Company’s Articles of Incorporation.
For the foregoing items, if a quorum of 2/3 is not reached at the first meeting, a repetitive meeting is called within twenty (20) days as of the first meeting. The repetitive meeting is in quorum if 1/5 of the paid-up share capital is represented thereat.
The resolutions on the above issues are adopted upon a majority of two thirds (2/3) of the votes represented at the meeting.
2. Participation of the Shareholders in the General Meeting
2.1. The terms and time limits for the participation of the shareholders in the General Meeting and the exercise of the voting rights are determined by the applicable legislation, i.e. Article 124 of Law 4548/2018 in combination with Article 14 of Law 4569/2018.
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Specifically:
• Α ny natural person or legal entity, is entitled to participate in the General Meeting provided that he is a shareholder on the Record Date, i.e. at the beginning of the fifth (5 th ) day before the date of the initial meeting of the General Meeting.
• In case of an adjourned or repetitive meeting, the deadlines as set out in law (Article 124 of Law 4548/2018) apply.
• The shareholder capacity may be proved by any lawful means and in particular on the basis of information that the Company receives by the central securities depository ( ATHEXCSD ) if it provides shareholders’ registration services or through the intermediaries in any other case.
• The identification of the shareholder for his participation in the General Meeting and t he exercise of the above rights does not require blocking of shares or any other similar processes that would restrict the possibility of sale and transfer of shares during the period between the Record Date and the date of meeting of the General Meeting.
Also the shareholders’ rights before the General Meeting are prescribed by applicable legislation, in particular Article 123 of Law 4548/2018. More specifically, according to Article 123 paragraphs 3, 4 and 5 of Law 4548/2018, the Company is obliged to post on its website as of the date of publication of the invitation for the General Meeting until the date of the General Meeting, apart from the said invitation including information required by law (Article 121 paragraph 4 of Law 4548/2018, i.e. among others, information relating to the procedure of voting by proxy, as well as information regarding the exercise of minority rights of Article 141 paragraphs 2, 3, 6 and 7 of Law 4548/2018), the forms of appointment and revocation of a proxy, draft resolutions for the agenda items and total number of shares and voting rights attaching thereto on the day of the invitation. If the online access to the documents for the appointment/ revocation of a proxy is impossible for technical reasons, the Company notes on its website the way a shareholder may acquire such documents in hard copies and sends those for free to any requesting shareholder.
2.2. The Shareholder may participate and vote in the General Meeting in person or by proxy, according to the provisions of the applicable legislation (Articles 124 and 128 of law 4548/2018). The appointment and the revocation of the appointment or replacement of a proxy shall be made in writing and shall be notified to the Company at least 48 hours before the initial General Meeting (Article 128 paragraph 4 of Law 4548/2018). A shareholder non-complying with said deadline shall participate at the General Meeting, unless the General Meeting refuses such participation for a major reason and justifies such refusal.
The proxy votes according to the shareholder’s instructions, if such exist, however in case of the proxy’s not complying with the instructions received, such non-compliance does not affect the validity of the General Meeting resolutions even if the proxy’s vote was crucial for achieving majority.
The proxy is obliged to disclose to the Company, before the commencement of the General Meeting, any fact which might be useful to the shareholders in assessing whether the proxy might pursue any interest other than the interest of the represented shareholder (Article 128 of Law 4548/2018) .
2.3. Under article 18 of the Company’s Articles of Incorporation, the shareholders may participate by distance at the voting of the General Meeting to be conducted before the meeting, particularly by mail or through electronic means, according to a procedure stipulated by a decision of the Board of Directors and pursuant to the provisions of law.
Additionally, the shareholders may participate at the General Meeting by distance in real time, by audiovisual or other electronic means, without them being present at the place of the General Meeting. The procedure is decided by the Board of Directors pursuant to the provisions of law.
3. Minority Shareholders’ Rights
Minority shareholders’ rights and the exercise thereof are governed by applicable legislation, i.e. by Law 4548/2018 (particularly articles 141, 142 and 144).
4. Decisions of the General Meeting of the shareholders of OTE S.A. for important issues, during 2022
Apart from the annual agenda of the Ordinary General Meeting, such as approval of the Financial Statements, appointment of certified auditors etc., the General Meeting of the shareholders of OTE S.A. in the year 2022, among other decisions,
• approved the cancellation of own shares and the corresponding reduction of the share capital of the Company,
• approved the Remuneration Report of the Members of the BoD for the fiscal year 2021,
• pre-approved the payment of remuneration to the members of the Board of Directors and its Committees for the fiscal year 2022,
• granted a special permission for the drafting of contracts in accordance with the provisions of articles 97 par.3, 99 par. 1, 2 and 100 par.2 of L.4548/2018,
• approved a new 24-month term Own Share Buy Back Program, in accordance with the article 49 of Law 4548/2018, as part (i.e. apart from dividend distribution) of the Shareholders’ Remuneration Policy,
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• approved the amendment of articles 2 (Object), 9 (Election, Composition and Term of the Board of Directors), 10 (Incorporation and Operation of the Board of Directors) and 14 (NonCompetition) of the Company's Articles of Incorporation,
• approved the revision of the Suitability Policy for the members of the Board of Directors of OTE S.A.,
• approved the Draft Demergers Agreement through Spin-Off of OTE S.A.’s business sector Facility and Space Management and its absorption by the OTE Group company, OTE ESTATE SOCIETE ANONYME, in accordance with articles 54 par.3, 57 par.2, 58-73 and 83-87 of L.4601/2019, L.4548/2018 & article 52 of L.4172/2013, with Accounting Statement dated 30/6/2022,
• approved the revision of the Remuneration Policy for the members of the Board of Directors of OTE S.A. and the respective amendment of the agreement of the Managing Director and
• granted a permission to the Members of the Board of Directors and the Officers of the Company in order to participate in boards of directors or in the management of OTE Group Companies that pursue same or similar objectives, in accordance with article 98 par. 1 of Law 4548/2018 and article 14 of the Company’s Articles of Incorporation.
• Finally, the Ordinary General Meeting was also informed regarding (i) the Report of the ΟΤΕ Audit Committee for the year 2021, (ii) the cases of conflict of interest and contracts of 2021 falling within article 99 of Law 4548/2018 (transactions with related parties), according to article 97 par.1, point (b) of Law 4548/2018, as well as (iii) the Report of the independent members of the Board of Directors to the General Meeting of Shareholders according to article 9 par.5 of Law 4706/2020.
F. Diversity policy with respect to the administrative, managerial and oversight bodies corporate
For OTE Group, the respect of diversity, that includes the core dimensions of gender identity and gender expression, age, nationality, social and ethnic origin, social status, disability, religion and beliefs, political opinion, property, skills, sexual orientation and sexual identity, aims to contribute significantly to OTE Group’s business success through recognition, appreciation, integration into business environment and utilization of individual diversity of our stakeholders.
For the respect and the defense of the above values, the Company adopted (in August 2021) and applies to all employees and the management of OTE and of the rest companies of OTE Group, the “
OTE Group Diversity, Equity and Inclusion Policy
” (the
Policy), which defines the commitment of OTE Group to the above values. In this context, the Policy also applies and is implemented by the members of the Board of Directors of OTE., for whom it includes separate provisions in accordance with Law 4706/2020 on corporate governance, the Circular No. 60/18-09-2020 issued by the Hellenic Capital Market Commission and the Hellenic Corporate Governance Code 2021.
In particular, the Policy, inter alia, includes a reference on specific quantitative representation targets per gender to the Board of Directors of the Company (at least 25%) as well as a statement that the diversity criteria apply, in addition to the members of the Board of Directors, also to the top and senior managers with specific representation goals per gender (30%), as well as timelines for achieving them (3 years).
It is noted that references to the diversity of the members of the Board of Directors are also included in the current “
Suitability
Policy for the members of the Board of Directors of OTE S.A.
”, aiming at promoting an appropriate level of diversity in the Board
and create a diverse group of members, in order to ensure, through a wide range of qualifications and skills when selecting Board members, pluralism and variety of views and experiences, aiming at right business decisions.
At the end of 2022, 31% of the Company’s medium and upper level managers were women; the respective percentage in the high upper level managers was 22% and in OTE Group Management Board 21%.
The age of the medium and upper level managers was between 29 and 65 years (average age 47,9 years), of the high upper level managers between 47 and 59 years (average age 53.6 years) and of the members of OTE Group Management Board between 49 and 66 years (average age 56,8 years).
With respect to the professional and educational background, the medium and upper level managers are University graduates or above in a percentage of 82%, while in the high upper level managers and members of OTE Group Management Board the respective percentage is 91% and 100%. With respect to the professional background, the members of OTE Group Management Board have many years of experience in their field and in their majority have prior experience in major /multinational firms in Greece and abroad. A significant percentage of the medium and upper level managers come from the market, while high is the percentage of managers that have evolved within the Group.
In December 31, 2021, 30% of the Board of Directors is comprised by women (3 in total of 10 members). However, as per the age of the members of the Board of Directors, they range between 47 and 66 years of age with an average age of 56,6 years. As per their educational background all Board members hold University degrees either from Greek or from foreign Universities and the majority hold post-graduate degrees or/and doctoral degrees, in a variety of fields (financial, technology, business
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administration, legal, marketing, etc.). Finally, all the Board members have professional experience, either from their engagement in the market (private and international companies), or from public sector or academic positions.
G. MATERIAL TRANSACTIONS WITH RELATED PARTIES
OTE’s related parties have been identified based on the requirements of IAS 24 “Related Party Disclosures”.
The Group includes all entities which OTE controls, either directly or indirectly. Transactions and balances between companies in the Group are eliminated on consolidation.
DEUTSCHE TELEKOM AG is a 50 .9 % shareholder of OTE and consolidates OTE using the full consolidation method. Therefore, all companies included in the DEUTSCHE TELEKOM group are also considered related parties.
The Company purchases goods and services from these related parties, provides services and delivers goods to them. Furthermore, OTE grants and receives loans to and from these related parties and also receives and pays dividends.
OTE’s sales and purchases with related parties are analyzed as follows:
2022
2021
Sales ΟΤΕ
Purchases ΟΤΕ
Sales ΟΤΕ
Purchases ΟΤΕ
COSMOTE Group - Greece
64.4
147.5
61.4
151.5
COSMOTE TV PRODUCTIONS
-
6.5
-
6.5
COSMO-ONE (until the date of the disposal)
-
0.2
0.1
0.5
OTESAT-MARITEL
0.3
0.3
0.5
0.1
CTS
0.4
155.1
0.5
151.9
COSMOTE PAYMENTS
-
4.6
-
0.6
COSMOTE GLOBAL SOLUTIONS N.V.
-
2.4
-
0.4
ΟΤΕ ESTATE
0.2
1.7
0.2
0.3
OTE GLOBE
8.3
39.1
8.1
36.9
OTE ACADEMY
-
2.9
-
3.3
TELEKOM ROMANIA (until the date of the disposal)
-
-
0.1
0.2
TELEKOM ROMANIA MOBILE
2.2
1.4
3.0
2.4
OTE RURAL NORTH
3.3
4.5
2.7
3.7
OTE RURAL SOUTH
4.4
6.4
3.6
5.5
DEUTSCHE TELEKOM group of companies (except for OTE Group)
3.6
9.4
8.6
7.3
TOTAL
87.1
382.0
88.8
371.1
Purchases of OTE from CTS include network construction services amounting to Euro 19.6 for 2022 (2021: Euro 18.2).
Purchases of OTE from related parties do not include an amount of Euro 3 6 . 8 related to lease expenses (20 21 : Euro 35 . 6 ).
The Group’s sales and purchases with related parties which are not eliminated in the consolidation are analyzed as follows:
2022
2021
Group’s sales
Group’s purchases
Group’s sales
Group’s purchases
DEUTSCHE TELEKOM group of companies (except for OTE Group)
23.4
31.3
35.6
51.6
TOTAL
23.4
31.3
35.6
51.6
For the year 2021, Group’s sales and purchases include an amount of Euro 4.6 and Euro 18.4, respectively, related to discontinued operations.
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OTE’s other operating income with its related parties is analyzed as follows:
Other operating income OTE
2022
2021
COSMOTE Group - Greece
16.3
15.2
CTS
10.1
10.1
ΟΤΕ ESTATE
-
0.3
OTE ACADEMY
0.3
0.2
OTE GLOBE
0.8
0.1
DEUTSCHE TELEKOM group of companies (except for OTE Group)
-
0.1
TOTAL
27.5
26.0
The Group’s other operating income with its related parties which is not eliminated in the consolidation is analyzed as follows:
Group’s other operating income
2022
2021
DEUTSCHE TELEKOM group of companies (except for OTE Group)
-
0.1
TOTAL
-
0.1
ΟΤΕ’s financial activities with its related parties, which comprise interest on loans granted and received are analyzed as follows:
2022
2021
Finance income OTE
Finance expense OTE
Finance income OTE
Finance expense OTE
OTE PLC
-
12.4
-
18.3
COSMOTE Group - Greece
0.1
-
0.1
-
OTE RURAL NORTH
0.1
-
0.1
-
OTE RURAL SOUTH
0.6
-
0.4
-
TOTAL
0.8
12.4
0.6
18.3
OTE’s dividend income from its related parties is analyzed as follows:
Dividend income OTE
2022
2021
COSMOTE
360.0
180.0
OTE INSURANCE
-
0.5
OTESAT-MARITEL
0.5
-
OTE ESTATE
-
20.4
OTE GLOBE
10.0
-
OTE PLC
25.0
-
TOTAL
395.5
200.9
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76
Amounts owed to and by the related parties as a result of OTE’s transactions with them, including dividends are analyzed as follows:
31/12/2022
31/12/2021
Amounts owed to ΟΤΕ
Amounts owed by ΟΤΕ
Amounts owed to ΟΤΕ
Amounts owed by ΟΤΕ
COSMOTE Group - Greece
45.4
146.4
77.4
162.5
TELEKOM ROMANIA MOBILE
0.6
2.0
0.1
4.0
COSMOTE TV PRODUCTIONS
-
1.3
-
1.7
COSMO-ONE
-
-
-
0.1
OTESAT-MARITEL
4.1
-
4.5
-
CTS
13.9
35.2
13.2
33.1
COSMOTE PAYMENTS
1.9
1.4
0.5
0.2
COSMOTE GLOBAL SOLUTIONS N.V.
0.1
1.9
-
0.4
ΟΤΕ ESTATE
2.6
0.5
1.8
0.5
OTE GLOBE
2.4
12.4
2.6
10.3
OTE ACADEMY
0.1
0.8
0.1
0.6
OTE RURAL NORTH
0.9
-
0.9
0.1
OTE RURAL SOUTH
1.2
-
1.0
0.1
DEUTSCHE TELEKOM group of companies (except for OTE Group)
1.8
3.2
2.9
6.1
TOTAL
75.0
205.1
105.0
219.7
As of December 31, 202 1 , amounts owed to OTE by COSMOTE Group – Greece include dividend receivable of Euro 40.0.
OTE’s lease liabilities to related parties are analyzed as follows:
01/01/2022
31/12/2022
Lease liabilities, opening balance
Lease payments
New Contracts / Contract Modifications
Interest expense
Lease liabilities, ending balance
OTE ESTATE
138.0
(26.6)
5.1
4.9
121.4
COSMOTE Group - Greece
0.2
(5.6)
11.2
0.2
6.0
OTE RURAL NORTH
0.8
(0.4)
0.1
-
0.5
OTE RURAL SOUTH
1.7
(0.9)
-
0.1
0.9
TOTAL
140.7
(33.5)
16.4
5.2
128.8
In addition, the Company’s depreciation includes depreciation charge for the right-of-use assets in relation to lease agreements with related parties amounting to Euro 32.1 (2021: Euro 31.3) .
Amounts owed to and by the related parties as a result of the Group’s transactions with them, which are not eliminated in the consolidation, are analyzed as follows:
31/12/2022
31/12/2021
Amounts owed to Group
Amounts owed by Group
Amounts owed to Group
Amounts owed by Group
DEUTSCHE TELEKOM group of companies (except for OTE Group)
5.7
503.1
8.5
348.4
TOTAL
5.7
503.1
8.5
348.4
Amounts owed by Group to DEUTSCHE TELEKOM group as of December 31, 2022 include an amount of Euro 450.0 (nominal amount) related to Notes issued by OTE PLC (Note 19) and subscribed partially or in full by DEUTSCHE TELEKOM AG (December 31, 2021: Euro 300.0 nominal amount). Interest expenses for year 2022 for the above Notes amount to Euro 2.8 (2021: Euro 2.5).
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Amounts owed to and by OTE relating to loans granted and received, are analyzed as follows:
31/12/2022
31/12/2021
Amounts owed to ΟΤΕ
Amounts owed by ΟΤΕ
Amounts owed to ΟΤΕ
Amounts owed by ΟΤΕ
OTE PLC
-
795.8
-
1,178.1
OTE RURAL NORTH
6.1
-
6.1
-
OTE RURAL SOUTH
4.0
-
8.5
-
TOTAL
10.1
795.8
14.6
1,178.1
Amounts owed by OTE to OTE PLC relating to loans include interest payable amounting to Euro 2.4 ( December 31, 20 21 : Euro 6 . 3 ) .
Amounts owed to OTE by OTE RURAL NORTH and OTE RURAL SOUTH relating to loans include interest receivable amounting to Euro 0.1 as of December 31, 2022 (December 31, 2021 : Euro 0.1).
Key Management Personnel and those closely related to them are defined as related parties in accordance with IAS 24 “Related Party Disclosures”. Key management compensation comprises salaries and other short term benefits, termination benefits, post- employment benefits and other long term benefits (as defined in IAS 19 “Employee Benefits”) and share based payments (as defined in IFRS 2 “Share-based Payment”).
Fees to the members of the Board of Directors and OTE’s key management personnel amounted to Euro 12.4 and Euro 11.9 for the years 2022 and 2021, respectively.
The main transactions between the Group companies are described below:
ΟΤΕ GLOBE
OTE GLOBE provides international telephony services on behalf of OTE to international providers and invoices OTE with its fees. OTE GLOBE invoices OTE, and OTE invoices OTE GLOBE for the telecommunication traffic which passes through international networks of OTE GLOBE or international telephone networks of OTE as the case may be. In addition, the two entities have commercial transactions in relation to leased lines.
OTE ESTATE
OTE ESTATE earns income from leasing of buildings to OTE and its subsidiaries.
COSMOTE TV PRODUCTIONS
COSMOTE TV PRODUCTIONS invoices OTE for TV related services.
OTESAT-MARITEL
OTE sells electronic equipment and provides administrative services to ΟTESAT-MARITEL, while ΟTESAT-MARITEL sells satellite telecommunications equipment to OTE and provides INMARSAT satellite services.
CTS
CTS provides services of technical field operations to OTE and its subsidiaries. ΟΤΕ invoices CTS for the provision of shared services.
COSMOTE Group
ΟΤΕ invoices COSMOTE Group (COSMOTE) for leased lines. COSMOTE Group invoices OTE with commissions in relation to sales made through the commercial channels of COSMOTE Group (GERMANOS). COSMOTE Group (COSMOTE E-VALUE) provides customer care and support services to OTE. OTE and COSMOTE Group (COSMOTE) have income and expenses for interconnection depending to which of the two entities’ network the calls terminate, including international telephony traffic which passes through the two networks. OTE and COSMOTE Group have also revenues and expenses for other shared services, depending which of the entities provides the services.
OTE ACADEMY
OTE ACADEMY provides training services to the employees of OTE and its subsidiaries.
OTE PLC
ΟΤΕ PLC grants / receives loans to / from ΟΤΕ and its subsidiaries.
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OTE RURAL NORTH
OTE invoices OTE RURAL NORTH for broadband infrastructure development and has granted loans to this entity. OTE RURAL NORTH provides wholesale broadband network services to OTE.
OTE RURAL SOUTH
OTE invoices OTE RURAL SOUTH for broadband infrastructure development and has granted loans to this entity. OTE RURAL SOUTH provides wholesale broadband network services to OTE.
COSMOTE PAYMENTS
COSMOTE PAYMENTS invoices OTE and its subsidiaries for payment services for transactions performed through their commercial channels. OTE and its subsidiaries provide support services to COSMOTE PAYMENTS.
COSMOTE GLOBAL SOLUTIONS N.V.
COSMOTE GLOBAL SOLUTIONS N.V. invoices OTE for subcontracting services related to ICT projects. OTE invoices COSMOTE GLOBAL SOLUTIONS N.V. for shared services.
DEUTSCHE TELEKOM group of companies (except for OTE Group)
The Group has income and expenses which arise from transactions concerning incoming, outgoing and transit traffic to and from the network of the companies that belong to DEUTSCHE TELEKOM group of companies (except for OTE Group), as well as other shared services.
H. CASES OF CONFLICT OF INTEREST AND AGREEMENTS OF THE FISCAL YEAR 2022 WHICH FALL UNDER ARTICLE 99 OF LAW Ν.4548/2018 (RELATED PARTY TRANSACTIONS)
1. Issues of the agenda of the Board of Directors of the Company, within the fiscal year 202 2 , on which members of the Board of Directors abstained because these issues concerned them personally (conflict of interest):
S/N
MEETING
ITEM NUMBER
ITEM TITLE
BoD MEMBER WHO ABSTAINED
Item 4.Α
Approval of the achievement level: (A) of the (specific) collective targets related to the Short Term Incentive (STI) for the year 2021, and (B) of the related to the Repeated Performance Incentive (RPI) target for the year 2021, for the executive members of the Board of Directors and the Executives of OTE Group in Greece (that belong to the Management Groups MG1-MG3 and are eligible for participation)
EXECUTIVE MEMBERS:
Μ . Τ samaz
Ch. Μ azarakis
Item 4.Β
Implementation of the Agreements of the executive members of the Board of Directors of OTE S.A. (Managing Director and OTE Group Chief Financial Officer): Definition (a) of 2021 Short Term Incentive (STI), (b) of 2021 Repeated Performance Incentive (RPI) and (c) of the payment amount of extraordinary variably incentive for the sale of the subsidiary company Telekom Romania (TKR) in Romania (Project Bonus) to OTE Group Chief Financial Officer
EXECUTIVE MEMBERS:
Μ . Τ samaz
Ch. Μ azarakis
1.
3155/17-3-2022
Item 5
Approval of the achievement of the annual individual targets for the year 2021 for the Managing Director of OTE S.A., executive member of the OTE S.A. Board of Directors
EXECUTIVE MEMBERS:
Μ . Τ samaz
Ch. Μ azarakis
2.
3156/12-4-2022*
* The meeting was attended exclusively
Item 1
Long Term Incentive 2018 Plan (LTI2018) - Approval of the total annual targets’ achievement of all four years of LTI 2018 plan (for the executive members of OTE Board of Directors and
EXECUTIVE MEMBERS:
Μ . Τ samaz
Ch. Μ azarakis
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S/N
MEETING
ITEM NUMBER
ITEM TITLE
BoD MEMBER WHO ABSTAINED
the executives of the OTE Group who participated in LTI 2018)
Item 2
Long Term Incentive 2018 Plan (LTI 2018) and Share Matching Plan 2018 (SMP 2018) – Approval of the payment variable amounts of LTI 2018 and the grant of the free DTAG shares of SMP 2018 for the executive members of OTE Board of Directors (Managing Director and Chief Financial Officer ΟΤΕ Group)
EXECUTIVE MEMBERS:
Μ . Τ samaz
Ch. Μ azarakis
Item 3
Definition of the 2022 (specific) corporate targets for the Short Term Incentive (STI) for the year 2022 (for the executive members of the OTE S.A. Board of Directors and the executives of OTE Group who belong to management groups MG1- MG3)
EXECUTIVE MEMBERS:
Μ . Τ samaz
Ch. Μ azarakis
Item 4
Approval (a) of the amendment of the "Spot Bonus" and (b) of the adoption of the "Game Changer" incentive plan for the years 2022-2025 for (specific / selected) ΟΤΕ Group Executives
EXECUTIVE MEMBERS:
Μ . Τ samaz
Ch. Μ azarakis
by non - executive members of the Board of Directors , including independent members , to discuss the items mentioned in the adjacent column, in their area of responsibility for overseeing executive members , including monitoring and controlling their performance
Item 5
Definition of the annual individual targets for the year 2022 of the Managing Director of OTE S.A.
EXECUTIVE MEMBERS:
Μ . Τ samaz
Ch. Μ azarakis
3.
3157/12-4-2022
Item 3.3
Granting of special permission, according to articles 97 par.3, 99 par.1, 2 and 100 par.2 of Law 4548/2018 for the continuation for the period 31.12.2022 until 31.12.2023 of the insurance coverage of Directors and Officers of OTE S.A. and its affiliated companies, against liabilities incurred in the exercise of their competences, duties and powers
All BoD Members abstained and the issue was submitted to the General Meeting of the Shareholders to decide upon
2. Issues of the agenda of the Board of Directors within the fiscal year 2022 that concern agreements that fall under article 99 (Transparency and monitoring of the related party transactions) of Law 4548/2018:
2.1. Meeting 3157/12-4-2022 (Item 3.3) for the approval of the continuation of D&O insurance (“ Granting of special permission, according to articles 97 par.3, 99 par.1, 2 and 100 par.2 of Law 4548/2018 for the continuation for the period 31.12.2022 until 31.12.2023 of the insurance coverage of Directors and Officers of OTE S.A. and its affiliated companies, against liabilities incurred in the exercise of their competences, duties and powers” ) . It is noted that at the OTE BoD meeting held on the above mentioned issue, all BoD members (executive and non- executive) abstained from the discussion and voting because the issue concerned them personally. For this reason, the issue was submitted to the Ordinary General Meeting of the Shareholders of OTE to decide upon. The permission that was granted by the General Meeting of the Shareholders of OTE on the above mentioned issue was announced to General Commercial Registry (G Ε . ΜΙ .) on 16.6.2022 along with the relevant Assessment Report of the audit firm “Grant Thornton S.A. Chartered Accountants and Management Consultants” as to whether the above mentioned transaction was fair and reasonable for the Company and its shareholders who are not a related party.
2.2. Meeting 3168/9-11-2022 (Item 3) for the approval of the conclusion of agreements between companies of the OTE Group and companies of the Deutsche Telekom AG Group [“ Grant of a special permission, pursuant to article 99 of Law 4548/2018, for the conclusion of: (i) the separate services agreements (“Service Arrangements”) between OTE S.A. ( ΟΤΕ ) and Deutsche Telekom AG (DTAG) for the provision by the latter of specific services for the year 2023, under the approved “Framework Cooperation and Service Agreement”, and (ii) the respective transactions for the year 2023 between companies of OTE Group (COSMOTE and Telekom Romania Mobile Communications S.A.) and Deutsche Telekom AG (DTAG) and/or Telekom Deutschland GmbH (TD GmbH)” ] . It is noted that the permission that was granted by the OTE BoD for this issue was announced to G.E.MI. on 8-12-2022 along with the relevant Assessment Reports of the audit firm “Grant Thornton S.A. Chartered Accountants and Management Consultants” as to whether the above mentioned transactions were fair and reasonable for the Company and its shareholders who are not a related party. On 22.12.2022, the BoD
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announced to General Commercial Registry (G Ε . ΜΙ .) its confirmation, pursuant to article 101 par. 2 of Law 4548/2018 , for the inactive lapse of the 10-day period deadline which is provided for in article 100 par. 3 of said Law, for the exercise by shareholders of the Company of the right to convene a General Meeting for said issue.
I. SIGNIFICANT EVENTS AFTER THE YEAR END
COSMOTE - PAYMENT OF PRINCIPAL INSTALLMENT UNDER THE EURO 150.0 TERM LOAN WITH EUROPEAN INVESTMENT BANK (EIB)
On January 23, 2023, COSMOTE paid principal installment of Euro 11.5 under the term loan with EIB, along with the accrued interest.
MERGER OF OTE GLOBE AND OTE
Οn January 2, 2023, the merger with the absorption of OTE GLOBE by OTE was completed.
SHAREHOLDERS REMUNARATION POLICY
On February 22, 2023, the Board of Directors of OTE, revised its
Shareholders Remuneration Policy
as described in section
A.
FINANCIAL AND OPERATIONAL HIGHLIGHTS OF 2022
J. INFORMATION REGARDING ACQUIRED OWN SHARES IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE 50 PARAGRAPH 2 OF LAW 4548/2018
• The Extraordinary General Shareholders’ Meeting of February 20, 2020, approved an Own Share Buyback Program, with the aim to cancel them, of a 24-month term (hereinafter the “2020-2022 Buyback Program”), in the context of the Shareholders Remuneration Policy, approved by the Company’s Board of Directors, and for the partial implementation thereof (i.e. on top of dividend distribution).
• During the first year of the 2020-2022 Buyback Program and particularly during the period between March 4, 2020 and January 20, 2021, 11,387,932 own shares of a nominal value of Euro 2.83 per share were acquired, at an average execution price of Euro 12.20 per share. These shares were cancelled following approval of the Extraordinary Shareholders’ General Meeting held on 04.12.2020 and the Ordinary Shareholders’ General Meeting held on 09.06.2021, along with a corresponding reduction of its share capital and a subsequent amendment of article 5 of the Company’s Articles of Incorporation ( “Share Capital” ) to reflect said reduction.
• During the second year of the 2020-2022 Buyback Program and particularly during the period between March 5, 2021 and February 18, 2022, 14,435,076 own shares of a nominal value of Euro 2.83 per share were acquired, at an average execution price of Euro 15.43 per share. These shares were cancelled following approval of the Ordinary Shareholders’ General Meeting held on 09.06.2021, the Extraordinary Shareholders’ General Meeting held on 18.01.2022 and the Ordinary Shareholders’ General Meeting held on 25.05.2022, along with a corresponding reduction of its share capital and a subsequent amendment of article 5 of the Company’s Articles of Incorporation ( “Share Capital” ) to reflect said reduction.
• The Extraordinary General Shareholders’ Meeting of January 18, 2022, approved an Own Share Buyback Program, with the aim to cancel them, of a 24-month term (hereinafter the “2022-2024 Buyback Program”), in the context of the Shareholders Remuneration Policy, approved by the Company’s Board of Directors, and for the partial implementation thereof (i.e. on top of dividend distribution).
• During the first year of the 2022-2024 Buyback Program and particularly during the period between February 24, 2022 and December 07, 2022 15,440,064 own shares of a nominal value of Euro 2.83 per share were acquired, at an average execution price of Euro 16.22 per share. More specific:
1. During the period from February 24, 2022 to March 31, 2022 the Company acquired 1,868,242 own shares
2. During the period from April 1, 2022 to September 30, 2022 the Company acquired 8,818,730 own shares
3. During the period from October 1, 2022 to December 7, 2022 the Company acquired 4,753,092 own shares
• The Annual General Shareholders’ Meeting of May 25, 2022 approved in accordance with article 49 of Law 4548/2018, the cancellation of 5,617,282 own shares along with the reduction of the Company’s share capital by Euro 15,896,908.06
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(absolute amount) (equivalent to the above number of own shares multiplied by the nominal value of the Company’s share, i.e. Euro 2.83) and the amendment of Article 5 (“Share Capital”) of the Company’s Articles of Incorporation. More specific:
1. During the period from December 1, 2021 to February 18, 2022 the Company acquired 3,749,040 own shares at an average execution price of Euro 16.75 (absolute amount) per share within the framework of the Share Buyback Program as approved by the General Shareholders’ Meeting on February 20, 2020 (the 2020-2022 Program)
2. During the period from February 24, 2022 to March 31, 2022 the Company acquired 1,868,242 own shares at an average execution price of Euro 16.77 per share within the framework of the Share Buyback Program as approved by the General Shareholders’ Meeting on January 18, 2022 (the 2022-2024 Program)
• Following notification to the Corporate Actions Committee of the ATHEX and completion of lawful procedures, the aforementioned shares were canceled and delisted from the ATHEX on July 12, 2022, when trading of the aforementioned shares on the ATHEX has ceased.
• The Extraordinary General Shareholders’ Meeting of November 1, 2022 approved in accordance with article 49 of Law 4548/2018, the cancellation of 8,818,730 own shares along with the reduction of the Company’s share capital by Euro 24,957,005.90 (absolute amount) (equivalent to the above number of own shares multiplied by the nominal value of the Company’s share, i.e. Euro 2.83 (absolute amount)) and the amendment of Article 5 (“Share Capital”) of the Company’s Articles of Incorporation. More specific:
o During the period from April 1, 2022 to September 30, 2022 the Company acquired 8,818,730 own shares at an average execution price of Euro 16.57 per share within the framework of the Share Buyback Program as approved by the General Shareholders’ Meeting on January 18, 2022 (the 2022-2024 Program)
• Following notification to the Corporate Actions Committee of the ATHEX and completion of lawful procedures, the aforementioned shares were canceled and delisted from the ATHEX on November 29, 2022, when trading of the aforementioned shares on the ATHEX has ceased.
• On February 22, 2023, the Company holds 4,753,092 own shares, with a nominal value of Euro 2.83 per share, which represent 1.10% of the Company’s share capital.
K. INFORMATION ACCORDING TO ARTICLE 4 par.7 OF LAW 3556/2007
(a) Share capital structure
According to the Company’s share registry as of December 31, 2022 the Company’s ownership was as follows:
Shareholders as of December 31, 2022
Number of shares
Percentage %
DEUTSCHE TELEKOM AG
220,567,676
50.9%
Hellenic State
4,901,507
1.1%
e-E.F.K.A.*
26,617,844
6.1%
Free float
176,824,477
40.8%
Treasury shares
4,753,092
1.1%
TOTAL
433,664,596
100.0%
* The stake of e-E.F.K.A includes 19,606,015 shares transferred by Hellenic Republic in 2009 (section (
c) Significant direct or indirect
investments).
All of the Company’s shares are common, registered with voting rights and there are no special shareholder categories. The Company’s shares are listed (dematerialized) on the Athens Exchange under the High Capitalization category. Until September 19, 2010, OTE ADRs (American Depositary Receipts) were also listed in the New York Stock Exchange. Following OTE’s delisting from NYSE, OTE ADRs now trade in the US OTC (Over the Counter) market. OTE Global Depositary Receipts (GDRs) are also listed on London Stock Exchange.
Each share incorporates all rights and obligations as these derive from the Law 4548/2018 and the Company’s Articles of Incorporation, the provisions of which, regarding the year in question, are in line with the provisions of the Law. Each share carries one vote in any General Meeting.
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82
The allocation of the Company’s net profits is being executed as provided by Law and the Company’s Articles of Incorporation.
The General Meeting of shareholders maintains all its rights during liquidation. Shareholder’s liability is limited to the nominal value of shares that they have in their possession. Shareholders’ rights are the ones determined by the provisions of the law (i.e. Law 4548/2018).
(b) Restrictions in the transfer of the Company’s shares
The Company’s shares are intangible and freely traded on the Athens Exchange and are transferred according to the Law.
According to Article 49 par.1 of Law 4706/2020, the independent non-executive members of the Company’s Board of Directors cannot, inter alia, possess directly or indirectly, both at their appointment, and during their term, a percentage of voting rights more than 0.5% of the paid-in share capital.
Under Article 19 of Regulation 596/2014 of the European Parliament and of the Council (as well as under the Commission Delegated Regulation 2016/522 and the Commission Implementing Regulation 2016/523), persons discharging managerial responsibilities as well as persons closely associated with them, are obliged to disclose their transactions relating to the Company’s shares οr debt instruments, or to derivatives or other financial instruments linked to them, conducted, directly or indirectly, for their own account, once a total amount of Euro 5,000 (absolute amount) has been reached in a calendar year (without netting).
The change of control may be subject to approval by the Competition Authorities in accordance with European and Greek merger control provisions.
(c) Significant direct or indirect investments
Significant ownership in the Company’s share capital as of December 31, 2022, according to Law 3556/2007 as amended and in force, is as follows:
1. According to the notification of the May 31, 2018 (according to the provisions of Articles 9 to 11Α of Law 3556/2007) by Hellenic Republic and Deutsche Telekom A.G. towards the Company, the Hellenic Republic held on such date directly 4,901,507 common registered shares of the Company with corresponding voting rights and indirectly, through the Digital Unified Social Insurance Fund (e-E.F.K.A.), 19,606,015 common registered shares of the Company with corresponding voting rights. DEUTSCHE TELEKOM A.G. held 220,567,676 shares of OTE with the corresponding voting rights.
2. According to the notification of the December 6, 2022 (according to the provisions of Articles 9 to 11Α of Law 3556/2007) by Deutsche Telekom A.G. towards the Company, Deutsche Telekom A.G held 220,567,676 common registered shares of OTE with the corresponding voting rights on such date. On December 31, 2022, 220,567,676 corresponded to 50.86% of OTE’s share capital and voting rights (or 51.42% excluding voting rights attached to own shares which under Greek Law are suspended).
3. The 4,901,507 shares of OTE that the Hellenic Republic held on December 31, 2022 corresponded to 1.13% of OTE’s share capital and voting rights ( or 1.14% excluding voting rights attached to own shares which under Greek Law are suspended).
4. In respect to e-E.F.K.A. participation:
4.1. By virtue of an agreement dated March 4, 2009 between the Hellenic Republic and the "Social Security Fund- Single Employees Insurance Fund” (hereinafter “IKA-ETAM”), the Hellenic Republic transferred to IKA-ETAM 19,606,015 common registered shares of OTE with corresponding voting rights, which represent at that time a percentage of 4.0% of OTE’s share capital or 4.52% of OTE’s share capital and the corresponding voting rights at December 31, 2022.
4.2. Under the foregoing agreement between the Hellenic Republic and IKA-ETAM, the latter undertakes the obligation to exercise in the Annual General Shareholders’ Meetings the voting rights attaching to the shares owned by it, in the same way as the Hellenic Republic exercises them, providing a relevant mandate to the persons authorized, (hence it is obliged to coordinate with the Hellenic Republic when exercising these voting rights). Following the incorporation of IKA-ETAM into the Digital Unified Social Insurance Institution (e-E.F.K.A.) and pursuant to Law 4387/2016 (Article 70), the above shares have now been transferred to e-E.F.K.A. the latter being the universal successor of IKA-ETAM and the e-E.F.K.A. has been automatically subrogated to the rights and obligations of IKA-ETAM, therefore to the rights and obligations arising from the above agreement between the Hellenic Republic and IKA-ETAM.
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4.3. Following the incorporation to e-E.F.K.A. of other social security institutions and the cancellation of own shares, the percentage of direct participation of e-E.F.K.A. in the Company as of December 31, 2022 amounts to 6.14% of OTE’s share capital and voting rights ( or 6.21% excluding voting rights attached to own shares which under Greek Law are suspended).
5. The foreign entity named Massachusetts Financial Services Company (MFS), according to its latests disclosures on June 25, 2021 and on January 13, 2022, to OTE S.A. pursuant to Law 3556/2007, notified that (a) on June 23, 2021, held indirectly a percentage of 5.00% of the share capital of OTE S.A., which corresponded to 23,018,353 shares and same number of voting rights and (b) on January 11, 2022 held indirectly a percentage of 4.97% of the share capital of OTE S.A., which corresponded to 22,707,496 shares and same number of voting rights.
6. As of December 31, 2022, the Company is not aware of any other Shareholder with significant direct or indirect investments in its paid-up share capital with the respective voting rights according to Law 3556/2007.
(d) Owners of shares that offer special control rights
There are no issued shares of the Company that offer special control rights.
(e) Restrictions on voting rights - Deadlines in exercising relating rights
There are no restrictions on voting rights according to the Company’s Articles of Incorporation. Regarding restrictions deriving indirectly from shareholders agreements see below under paragraph (f).
(f) Shareholder agreements for restrictions in the transfer of shares or in exercising of voting rights
A. On May 14, 2008, an agreement was signed between the shareholders of Hellenic Republic and DEUTSCHE TELEKOM A.G., which was ratified by Law 3676/2008. This agreement, as in force following its amendment on October 10, 2016, ratified by law 4429/2016, has been amended by virtue of an agreement between the Hellenic Republic, DEUTSCHE TELEKOM AG and the HRADF dated November 2, 2016, which has been approved by the decision with no. 259 of the Inter-Ministerial Committee of Restructurings and Privatizations. This agreement between the Hellenic Republic, DEUTSCHE TELEKOM AG and the HRADF provides for restrictions in the transfer of shares as well as in the exercise of voting rights regarding the shares held by the signatories of this agreement.
B. Following the completion, on May 30, 2018, of the sale of 24,507,520 common shares with corresponding voting rights from HRADF to Deutsche Telekom A.G. representing at that time 5% of the Company’s share capital with corresponding voting rights and the elimination of HRADF’s ownership in the Company’s share capital, HRADF has ceased, as of such date, to be a party and is no longer bound to said agreement.
C. The transfer agreement dated March 4, 2009 and signed between the Hellenic Republic and IKA-ETAM, provides for restrictions on the transfer of shares (call option held by the Hellenic Republic, put option held by IKA-ETAM and right of first refusal of the Hellenic Republic). Also, the same agreement provides for restrictions on the exercise of voting shares held by IKA-ETAM incorporated in the shares transferred to it. In particular, it provides the obligation of IKA-ETAM to exercise in the Annual General Shareholders’ Meetings the voting rights incorpotated in the shares it holds, in the same way with Hellenic Republic (therefore in coordination with the latter). Following the incorporation of IKA-ETAM into the Digital Unified Social Insurance Institution (e- E . F . K . A . ) and pursuant to Law 4387/2016 (Article 70), the above shares have now been transferred to e-E . F . Κ . A ., the latter being the universal successor of IKA-ETAM and the e-E . F . K . A . has automatic ally been subrogated to the rights and obligations of IKA-ETAM, therefore also to the rights and obligations arising from the above agreement between the Greek State and IKA- ETAM.
(g) Rules of appointment and replacement of members of the Board of Directors and amendment of the Company’s Articles of
Incorporation if they differ from the provisions of Law 4548/2018
According to the provisions in the Articles of Incorporation, the Board of Directors consists of ten (10) members and are elected by the General Meeting. The term of each Board member is three years and their service term commences on the day of the member’s election by the General Meeting and terminates on the Annual General Meeting of the year when the three years from their election are completed.
In case of resignation, death or for any reason occurs derogation of one or more members before the end of their term, the remaining members of the Board of Directors, either elect – provided that at least five (5) members are present or represented- one or more replacements, or, in case the number of the remaining Directors exceeds half of the members that existed before these events happened, they continue to exercise the management or the representation of the Company, without having elected one or more replacements. If someone is elected by the Board of Directors as temporary member in someone else’s position, this
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election is announced at the next General Meeting (regular or extraordinary), which has the authorization to replace the elected members even if this issue has not been included in the agenda of this General Meeting.
The members of the Board of Directors may always be re-elected and can be revoked anytime by the General Meeting of shareholders.
As per the Company’s Articles of Incorporation, the amendment of article 20 thereof, dealing with items requiring increased quorum and majority percentages under applicable law, requires the same increased quorum/majority percentages (article 20, paragraph 1 point h of the Articles of Incorporation).
(h) Authority of the Board of Directors or some of its members for the issuance of new shares/share buy backs according to Law
4548/2018.
In accordance with article 6 of the Company’s Articles of Incorporation, the General Meeting of shareholders, by virtue of a resolution may delegate to the Board of Directors the power to decide, by a majority of two thirds (2/3) of its members and within five (5) years from the date of the relevant resolution, on:
I. The increase of the share capital with the issuance of new shares. The amount of the increase may not exceed three times the amount of the share capital existing on the date of the delegation to the Board of Directors of the relevant power to increase the share capital.
II. The issuance of convertible bonds, up to an amount not exceeding three times the share capital existing on the date of the delegation to the Board of Directors of the relevant power to increase the share capital. After the exercise of the conversion rights, the share capital of the Company shall increase up to the amount provided for in the terms of the bond loan.
The above authorities of the Board of Directors may be renewed by the General Meeting for a period not exceeding five (5) years for each renewal.
There are no resolutions of the General Meeting of shareholders in force for the concession of the above authorities to the Board of Directors.
Following a resolution of the General Meeting of shareholders and pursuant to the regulations that are in force, the Company may acquire own shares corresponding to a maximum of 10% of its paid-up share capital. Such resolutions of the General Meeting are implemented by decisions either of the Board of Directors’ or of the persons in which the Board of Directors has delegated such powers.
More detailed information regarding own shares having been acquired by the Company are provided above at respective Chapter J bearing title “INFORMATION REGARDING ACQUIRED OWN SHARES IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE 50 paragraph 2 OF LAW 4548/2018”
(i) Significant Group’s agreements that are in force and are amended/ terminated upon a change in control applicable to OTE or
a Group subsidiary
DEBT - CREDIT FACILITIES
The Group has entered into various credit facilities in which a change of control clause applicable to OTE or a Group subsidiary is included. If the clause is activated, the relevant company must proceed with certain actions in line with what is contractually stipulated.
The wording of the specific clause in each contract is as follows:
Global Medium-Term Note Programme
OTE PLC has established a Global Medium-Term Note (“GMTN”) Programme, guaranteed by OTE. The bond that is issued under the GMTN Programme, is traded in the secondary market and is listed in the Luxembourg Stock Exchange is the following:
• Euro 500.0 due 2026 Bond
Change of control clauses
The above Bond includes a change of control clause applicable to OTE which is triggered if an entity other than (i) DEUTSCHE TELEKOM AG, (ii) DEUTSCHE TELEKOM AG together with the Hellenic Republic, any of its agencies or instrumentalities or any entity directly or indirectly controlled by the Hellenic Republic or any of its agencies or instrumentalities, or (iii) any
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telecommunications operator (other than DEUTSCHE TELEKOM AG) with credit rating equivalent or better than the credit rating of DEUTSCHE TELEKOM AG, gains the power to direct the management and policies of OTE, whether through voting rights, by contract or otherwise.
In the event that the change of control clause is triggered, OTE PLC shall promptly give written notice to the bond holders, who in turn shall have the option within 45 days to require OTE PLC to redeem the bond (put option), at their principal amounts together with accrued interest.
Bank Loans
Euro 150.0 bilateral term loan with the European Investment Bank (EIB)
On July 10, 2017, COSMOTE signed, with the guarantee of OTE, the Euro 150.0 bilateral term loan with EIB. The EIB loan was fully drawn on January 23, 2018, has a tenor of 7 years with semi-annual repayment schedule and bears fixed interest rate of 2.805%. The outstanding balance of the EIB Loan as of December 31, 2022 was Euro 57.7.
Euro 150.0 Bank Loan of OTE with the European Bank for Reconstruction and Development (EBRD), with the use of loan funds
from the National Recovery and Resilience Facility ‘Greece 2.0’, financed by the European Union
On July 7, 2022, OTE signed a Euro 150.0 loan agreement with the EBRD. The loan has an eight-year tenor with repayment at maturity and bears a total blended fixed interest rate of 1.561%. Out of the Euro 150.0 loan amount, Euro 93.8 are financed by the European Union's Recovery and Resilience Facility, channeled through the Greek Ministry of Finance, while Euro 56.2 are financed by the EBRD.
On July 13, 2022, OTE proceeded with the drawdown of the full amount under the Euro 150.0 EBRD Loan.
Euro 100.0 Revolving Credit Facility with National Bank of Greece and Alpha Bank SA
On July 24, 2020, OTE signed a Bond Loan Agreement, in the form of a committed revolving credit facility, with the syndication of National Bank of Greece and Alpha Bank SA, of Euro 200.0 in total and tenor of 2 years.
On July 22, 2022, OTE extended for 2 years the existing facility, along with a simultaneous reduction of the committed amount to Euro 100.0.
No drawdown had taken place up to December 31, 2022.
Change of Control Clauses
The above Bank Loans include a change of control clause applicable to OTE which is triggered if an entity other than (a) DEUTSCHE TELEKOM AG, (b) DEUTSCHE TELEKOM AG together with the Hellenic Republic, any of its agencies or instrumentalities or any entity directly or indirectly controlled by the Hellenic Republic or any of its agencies or instrumentalities, or (c) any telecommunications operator (other than DEUTSCHE TELEKOM AG) with credit rating equivalent or better than the credit rating of DEUTSCHE TELEKOM AG, gains the power to direct the management and policies of OTE, whether through voting rights, by contract or otherwise. In the EBRD loan, the bank retains the right to determine at its sole discretion, for the purposes of this specific clause, that such telecommunications operator is not eligible as its counterparty.
In addition, the EIB Loan includes a change of control applicable to COSMOTE, which is triggered if OTE (the Guarantor) ceases to control COSMOTE (the Borrower).
In the event that the clause is triggered in the Euro 150.0 bilateral term loan with EIB and in the Euro 150.0 Bank Loan with EBRD, the banks may at their option, by notice to COSMOTE or OTE, respectively, require the prepayment of the whole or any portion of the loans.
In the event that the clause is triggered in the Euro 100.0 revolving credit facility, each bank may exercise its option to request mandatory prepayment of the outstanding bonds and cancellation of commitments.
Credit Facilities for Bank Guarantees
OTE and COSMOTE have signed credit facilities for the issuance of Bank Guarantees with international banks.
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Change of Control Clauses
These Credit Facilities include change of control clauses which are similar to the change of control clause of the bank loans, and which are applicable to OTE and/or COSMOTE. If the clause is triggered, OTE and/or COSMOTE must proceed with repayment of any outstanding amounts under the relevant Credit Facility and provide cash cover for all guarantees issued under the relevant Credit Facility and OTE/COSMOTE’s relevant entitlement to utilize the respective Credit Facilities will cease.
OTE’S CREDIT EVALUATION
OTE’s credit rating as of December 31, 2022 was ΒBB by Standard & Poor's.
ΟΤΕ – PROCUREMENT
1) a. Service Agreement (Project Term Sheet) for the IT Services provided by Deutsche Telekom IT GmbH for the new accounting
standard (IFRS 15 Central Engine Solution) as a part of the already concluded Framework Agreement (Project Service Agreement-
PSA) with T-Systems International GmbH (T-Systems) for the provision of IT services (IT /licensing and related interconnection services) by T-Systems International GmbH.
According to the PSA, the terms of which also apply to the Service Agreement, the right of immediate termination for good cause, e.g. change of control, infringement of intellectual property rights of a third party, shall remain unaffected. For the avoidance of doubt, change of control shall be understood to mean a change in the majority equity ownership or the voting majority of the other Party, either directly or indirectly, from the control currently existing at the time of execution of this Agreement.
b. Service Agreement (Project Term Sheet) for the provision of IT Services (INA) between OTE SA and Deutsche Telekom IT GmbH
as a part of the already concluded Framework Agreement (Project Service Agreement- PSA) with T-Systems International GmbH (T-Systems) for the provision of IT services (IT /licensing and related interconnection services) by T-Systems International GmbH.
According to the PSA the right of immediate termination for good cause, e.g. change of control, infringement of intellectual property rights of a third party, shall remain unaffected. For the avoidance of doubt, change of control shall be understood to mean a change in the majority equity ownership or the voting majority of the other Party, either directly or indirectly, from the control currently existing at the time of execution of this Agreement.
2) Service Agreement (Project Term Sheet) between T-Systems Hungary Ltd and OTE S.A. for the provision of Seamless
Communication services through Cisco HCS Cloud Platform (SCPH).
This Project Term Sheet is a part of the already concluded Framework Agreement (Project Service Agreement- PSA) with T-Systems Hungary Ltd for the provision of communication and IT services.
According to the PSA, the terms of which also apply to the Service Agreement, the right of immediate termination for good cause, e.g. change of control, infringement of intellectual property rights of a third party, shall remain unaffected. For the avoidance of doubt, change of control shall be understood to mean a change in the majority equity ownership or the voting majority of the other Party, either directly or indirectly, from the control currently existing at the time of execution of this Agreement.
3) Service Arrangement concerning the provision of IP Multimedia Subsystem (IMS) Shared Service Centre (SSC) Development
and Support Services for Voice Over XX (VoXX) Multi-Media Telephony (MMTel) Application Server (AS), Media Resources Function
(MRF), Authentication Proxy (AP), IP Short Message Gate Way (IP SMGW), NetAct and CAM under the Framework Cooperation and
Service Agreement between OTE and Deutsche Telekom Pan-Net S.R.O.(Pan-net Slovakia):
(a) Within the frame of this agreement, change of control means that Deutsche Telekom AG no longer Controls the Service Provider and/or the Service Receiver. Control means the ability of Deutsche Telekom AG to exert, directly or indirectly, a controlling influence (by means of ownership, majority of voting right, contractual arrangement or otherwise) over an entity or person.
(b) In no event a change of control shall be considered as a basis to terminate the agreement. In such a case the parties will promptly inform each other about any change of control and will establish a transitional period of not more than 12 months on the terms of this agreement for the performing of the services described in the Service Arrangements.
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4) Service Agreement between the company of DT Group under the name «Hrvatski Telekom d.d» (HT) and OTE for the provision
of software services through interconnection with NEC Business Marketplace platform and relevant platform support services, in
order business customers of OTE to order Microsoft Office 365 products (Cloud Office)
According to the Agreement each Party shall be entitled to terminate this Agreement with immediate effect in case of change of control or infringement of intellectual property rights of a third party. For the avoidance of doubt, change of control shall be understood to mean a change in the majority equity ownership or the voting majority of the other Party, either directly or indirectly, from the control currently existing at the time of execution of the Agreement.
5) Agreement on Intercompany Provision of Products and Services for the operation and maintenance service of SAP FC
consolidation tool between OTE S.A. and DT Accounting GmbH (“DTA”)
Either Party shall have the right to terminate the Agreement for good cause at any point during its term. In particular, good cause shall be deemed to exist, if shares of one of the Parties are transferred to third parties and this results in a change of control of this Party and/or DTAG is no longer the sole controlling company of the Contractor (DTA) or/and a shareholder of the Customer (OTE) of at least 40% (change of control). In this case a 1-month- prior notice shall be necessary with effect from the end of a given calendar month.
6) Service Arrangement- schedule to the framework cooperation and service agreement between T- Mobile Polska (TMPL) and
OTE S.A. concerning the provision of services by one of the parties to the other regarding digital and cloud services Hub services
According to the above agreement, change of control means a situation in which DTAG for whatever reason loses the ability to exert, directly or indirectly, a controlling influence (by means of majority ownership, majority of voting rights, contractual arrangement or otherwise) over T-Mobile Polska or OTE S.A..
In the event of a Change Of Control, this Agreement shall terminate automatically unless the Parties have, negotiating in good faith, agreed on continuing the Service provision for a transitional period under this Agreement.
7) Agreement on Intercompany Provision of Products and Services within the framework of shared services between OTE S.A and
DEUTSCHE Telekom Services Europe GmbH from 1-1-2018 and for an indefinite period
According to art. 14.3, if shares of one of the Parties are transferred to third parties and/or the ownership of shares in one of the parties changes and/or DTAG is no longer the sole controlling company of the Contractor or/and a shareholder of OTE of at least 40% (change of control). In this case a 6 month prior notice shall be necessary with effect from the end of a given calendar month.
COSMOTE- PROCUREMENT
1) Service Agreement (Project Term Sheet) for the IT Services provided by Deutsche Telekom IT GmbH for the new accounting
standard (IFRS 15 Central Engine Solution) as a part of the already concluded Framework Agreement (Project Service Agreement-
PSA) with T-Systems International GmbH (T-Systems) for the provision of IT services (IT /licensing and related interconnection services) by T-Systems International GmbH.
According to the PSA, the terms of which also apply to the Service Agreement, the right of immediate termination for good cause, e.g. change of control, infringement of intellectual property rights of a third party, shall remain unaffected. For the avoidance of doubt, change of control shall be understood to mean a change in the majority equity ownership or the voting majority of the other Party, either directly or indirectly, from the control currently existing at the time of execution of this Agreement.
2) Pan-net Service Agreement between COSMOTE Mobile Telecommunications Single Member SA, as the service provider, and
Deutsche Telekom Pan-Net Greece EPE, as service receiver, under which the following Service Arrangements (SAs) are in place:
(a) SA on infrastructure services (co-location and smart hands services) and (b) SA on human resources services
According to the definitions and Article 14 of the Pan-net Service Agreement: “ In no event a change of control shall trigger a good cause for termination according to paragraph 14 (2). If (i) the Service Provider terminates this Agreement according to paragraph 14 (2), and (ii) a Change of Control has occurred within a timeframe of one year before the termination, and (iii) the services rendered by the Service Provider will last less than six months after the termination, the Parties shall agree on a reasonable transition period for provision of services which last at least 6 and no longer than 12 months beginning from the date of termination of this Agreement under (i) above. The terms of this Agreement for performing providing the Services shall remain in force during the transition period.”
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3) Service Change Agreements to Pan Net VoXX Framework Agreement regarding the provisioning of (a) the VoXX MRF License
extension in 2021 (1.90mio subs and 2.16mio subs), (b) the VoXX CR Cosmote Greece Camel Online Charging and (c) the VoXX
CR Cosmote Greece HomeZone support between DTEH Holding GmbH as Service Provider and COSMOTE Mobile Communications
Single- Member S.A as Service Receiver
According to the Pan Net VoXX Framework Agreement:
Change of Control means DTAG holds, directly or indirectly: (i) less than fifty per cent (<50%) of the capital and/or voting rights of the Service Provider or (ii) less than forty per cent (<40%) of the capital and/or voting rights of the Service Receiver.
In no event a Change of Control shall be considered as a basis to terminate the Agreement. In such a case the Parties will promptly inform each other about any Change of Control and will establish a transitional period of not more than 12 months on the Terms of this Agreement, unless otherwise provided for in Customer Facing Service Arrangements for the performing of the Services described in the latter.
4 ) Framework Agreement between COSMOTE and Deutsche Telekom Pan-Net Greece EPE for the provision by COSMOTE of
services regarding Multi Value Added Services (“mVAS”)
( a) Within the frame of this agreement, change of control means “a change in the majority equity ownership or the voting majority of COSMOTE and/or Deutsche Telekom Pan-Net Greece EPE, either directly or indirectly, from the control currently existing at the time of execution of this Agreement”.
(b) In no event a change of control shall be considered as a basis to terminate the agreement. In such a case, the parties will promptly inform each other about any change of control and will establish a transitional period of not more than 12 months on the terms of this agreement for the performing of the services (as described in the Service Arrangements).
5) Service Change Agreements to Pan Net mVAS Framework Agreement regarding the provisioning of: (a) the mVAS CR163
Integration of new Cloud vMSS with CoGr mVAS SMSC + MMSC, (b) the mVAS CR176 Cosmote Greece IPSMGW Capacity
expansion and (c) the mVAS CR181 Cosmote Greece SMS Diameter AVPs Changes, by DTEH to COSMOTE Mobile
Telecommunications Single-Member S.A.
According to the definitions and Article 17 of the Agreement: “In no event a Change of Control shall be considered as a basis to terminate the Agreement. In such a case, the Parties will promptly inform each other about any Change of Control and will establish a transitional period of not more than 12 months on the terms of this Agreement for the performing of the Services (described in the Customer Facing Service Arrangement).”
6) Framework Cooperation and Service Agreement between COSMOTE, as the service provider, and Deutsche Telekom Pan-Net
Greece EPE, as the service receiver, for the provision of colocation in the frame of VoXX services
According to the definitions and Article 16: “In no event a Change of Control shall be considered as a basis to terminate the Agreement. In such a case, the Parties will promptly inform each other about any Change of Control and will establish a transitional period of not more than 12 months on the terms of this Agreement for the performing of the Services described in the Service Arrangements.”
7) Agreement on Intercompany Provision of Products and Services within the framework of shared services between COSMOTE
and DEUTSCHE Telekom Services Europe GmbH from 1-1-2018 and for an indefinite period
According to art. 14 par. 2 and 3, The agreement can be terminated for the first time by giving six months’ notice with effect from the end of the calendar year 2018. After this period, it can be terminated by giving six months’ notice with effect from the end of a given calendar year. This shall be without prejudice to the right to terminate the agreement with immediate effect for good cause. In particular, good cause shall be deemed to exist : … if shares of one of the Parties are transferred to third parties and/or the ownership of shares in one of the parties changes and/or DTAG is no longer the sole controlling company of the Contractor or/and a shareholder of the Customer of at least 40% (change of control). In this case, a 6 month prior notice shall be necessary with effect from the end of a given calendar month.
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8) Annex 5.4 “Service Arrangement regarding EAN Engineering Services Center” to expand the scope of services and subsequently
amend the remuneration, Annex 5.5 “Service Arrangement regarding Supplier SLA Consultation & Support Services”, Annex 5.6
“IP & Transport Infrastructure Services Center” and Annex 5.7 “NT Strategy & Technology Innovation Competence Center” under
the Framework Cooperation and Service Agreement concerning the Transport Technology & Certification Center / Provision of
Services to DTAG by COSMOTE
According to the above agreement, the right of immediate termination for good cause, e.g. change of control, infringement of intellectual property rights of a third party, remains unaffected hereby. For the avoidance of doubt, change of control shall be understood to mean a change in the majority equity ownership or the voting majority of the other Party, either directly or indirectly, from the control currently existing at the time of execution of this Agreement.
9) Service Arrangement (CIT Franchise Model for SD Voice) under the Framework Cooperation and Service Agreement between
DTEH and COSMOTE concerning the provision of Services by one of the Parties (the “Service Provider”)
to the other (the “Service Receiver”)
Change of Control: means a situation in which DTAG for whatever reason loses the ability to exert, directly or indirectly, a controlling influence (by means of majority ownership, majority of voting rights, contractual arrangement or otherwise) over the Service Provider and/or of the Service Receiver.
In no event, a Change of Control shall trigger a good cause for termination according to Section 15 (2). If (i) the Service Provider terminates this Agreement according to Section 15 (2) and (ii) a Change of Control has occurred (iii) the Services rendered by the Service Provider will last less than 6 (six) months after the termination, the Parties shall agree on a reasonable transition period for provision of Services which shall last at least 6 (six) and no longer than 12 (twelve) months as of the date of termination according to Section 15 (2) or following the completion of the change of control. The terms of this Agreement for performing the Services shall remain as described in the Service Arrangement during the transition period.
10) Supplementary Agreement No. 2 to the Project Service Agreement for the Traffic Control System (“TCS”) between Telekom
Deutschland GmbH and Cosmote
According to article 15 of the PSA, the right of immediate termination for good cause, e.g., change of control, infringement of intellectual property rights of a third party, shall remain unaffected. For the avoidance of doubt, change of control shall be understood to mean a change in the majority equity ownership or the voting majority of either Party, either directly either indirectly, from the control currently existing at the time of execution of this Agreement.
11) COOPERATION AND SERVICE AGREEMENT between “COSMOTE Mobile Telecommunications Single Member S.A.” and
“Deutsche Telekom AG” concerning the Provision of Services in Connection with TRI*M Customer Loyalty Survey 2021
According to art. 13 (3) “The right of immediate termination for good cause, e.g. change of control, infringement of intellectual property rights of a third party, remains unaffected hereby. For the avoidance of doubt, change of control shall be understood to mean a change in the majority equity ownership or the voting majority of the other Party, either directly or indirectly, from the control currently existing at the time of execution of this Agreement”.
INSURANCE AGREEMENTS
1) Directors and Officers Insurance Liability Policy (D&O Contract)
OTE SA has concluded with AIG Europe Limited a Directors and Officers Insurance Liability Policy (D&O Contract), which contains, inter alia, a “change of control” clause. In case that such an incident occurs, this shall constitute “risk increase”, and hence the insurance cover provided under the said Policy will apply only to claims raised against Directors and Officers prior to the effective date of the “change of control”.
2) All Risks Property Damage and Business Interruption Insurance Policy
OTE SA (policyholder) has concluded with ALLIANZ Hellas Insurance Company S.A. an All Risks Property Damage and Business Interruption Insurance Policy (hereinafter the “Policy”), providing coverage for OTE SA and all majority owned subsidiaries in Greece included in the consolidated balance sheet of OTE S.A.. It is noted that the “Policy” is part of an international program, which consists of a Master Policy and Local Policies in the countries forming part of the program. A cancellation of the Master Policy also applies to this Policy.
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3) OTE SA has concluded with HDI Global SE an Insurance Liability Policy (hereinafter the “Policy”), providing coverage for liability
due to arise as a result of potential bodily injury or material damage caused to third parties. It is noted that in accordance with the Policy’s definitions, as “additional insured” companies are defined all OTE SA’s subsidiaries in which OTE SA holds directly or indirectly at least 50% of the voting rights or is responsible for managing their business affairs. These facts constitute criterion for the continuation of the provision of the insurance coverage to OTE SA’s subsidiaries under the Policy and in case they cease to exist, this will result in the cease of the insurance coverage provided to the subsidiaries under the Policy.
In addition, the Policy includes a “change in the system of ownership or control by the insured” clause. In particular, if such an incident occurs, then coverage by the Policy will not be provided for third party claims raised for the first time after such “change” has taken place.
COMMERCIAL AGREEMENTS
OTE or OTE Group companies have entered into various commercial agreements, in which a change of control clause applicable to OTE or OTE Group companies is included. The most significant of them are the following:
• Agreements with UEFA for the rights of Champions League and Europa League 2021 – 2024 championships (including new
UEFA Europa Conference League)
OTE concluded agreements with UEFA for the rights of Champions League, Europa League and the new Europa Conference League 2021 - 2024 championships. In case of a substantial change in the direct or indirect ownership or control of OTE which in the reasonable opinion of UEFA adversely affects the ability of OTE to perform its obligations under the agreements or is detrimental to the interests of UEFA, UEFA may terminate the agreements with immediate effect.
• Agreement (Broadcast rights agreement) with ATP Media Operations Limited (ATP Media) for the acquisition of
championships rights ATP Masters 1000 and ATP Finals 2021 - 2023
OTE concluded an agreement with ATP Media Operations Limited (ATP Media) for the acquisition of rights of ATP Masters 1000 and ATP Finals 2021 - 2023 championships. In case of a change of control of OTE, ATP Media Operations Limited (ATP Media) may terminate the agreement.
• Agreement (Broadcast rights agreement) with ATP Tour INC. (ATP) and ATP Media Operations Limited (ATP Media) for the
acquisition of tennis championships rights ATP 500, ATP 250 Pool, Next Gen ATP Finals and ATP World Tour Magazine show
2021 - 2023
OTE concluded an agreement with ATP Tour INC. (ATP) and ATP Media Operations Limited (ATP Media) for the acquisition of rights of ATP 500, ATP 250 Pool, Next Gen ATP Finals and ATP World Tour Magazine show 2021 - 2023 tennis championship. In case of a change of control of OTE, ATP may terminate the agreement.
• Agreement (Distribution agreement) with NBA Properties Inc. (NBAP) for the acquisition of NBA (National Basketball
Association) rights 2021 -2023
OTE concluded an agreement with NBAP for the acquisition of rights of NBA Seasons 2021 until 2023 (with NBAP’s unilateral extension option for 2024 and 2025). Any change in the controlling ownership or effective management control of Distributor will be deemed an assignment requiring NBAP's prior written consent and in case of noncompliance will be void.
• Agreement (Channel Distribution Agreement) with BBC Studios Distribution Limited for the distribution of the channel BBC
Earth
OTE concluded an agreement with BBC Studios Distribution Limited for the distribution of the channel BBC Earth until 30-9-2023. In case of a material change in the business or in the ownership of OTE or any person or company otherwise assumes control of OTE and in the reasonable opinion of BBC Studios Distribution Limited such change shall adversely affect the business or reputation of BBC Studios Distribution Limited or the Channel(s), BBC Studios Distribution Limited may terminate the agreement.
• Agreement (Output License Agreement for Pay TV and SVOD rights) with BBC Studios Distribution Limited
OTE concluded an agreement with BBC Studios Distribution Limited for the acquisition of media rights (Output License Agreement for Pay TV and SVOD rights) until 30-9-2024. BBCS shall have the right to terminate all or part of this agreement with immediate effect, in the event that there is a material change in the ownership [meaning that any person (excluding current shareholders as at the date of this agreement) acquires in aggregate more than 50% of shares of OTE or otherwise assumes control of OTE] of OTE and in the reasonable opinion of BBCS such change shall adversely affect the business or reputation of BBCS.
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• Agreement (Channel Distribution Agreement) with Viasat World Limited for the distribution of the channels VIASAT EXPLORE
SD and VIASAT NATURE SD and HD
OTE concluded an agreement with Viasat World Limited for the distribution of the channels VIASAT EXPLORE SD and VIASAT NATURE SD and HD for 2020 - 2023. Ι n case of a change of control of OTE, Viasat may terminate the agreement.
• Agreement (Output license agreement for Pay TV and SVOD rights) with Paramount Pictures International Limited (PPIL), CBS
International Television B.V. (CINBV), WVI Films B.V, (WVI), CBS Broadcast International B.V. (CBI), CBS-CSI International B.V.
(CBS-CSI) and Showtime Distribution B.V. (Showtime)
OTE concluded an agreement with Paramount Pictures International Limited (PPIL), CBS International Television B.V. (CINBV), WVI Films B.V, (WVI), CBS Broadcast International B.V. (CBI), CBS-CSI International B.V. (CBS-CSI) and Showtime Distribution B.V. (Showtime) (herein collectively “Licensor”) for the acquisition of media rights for Pay TV and SVOD services until 31-7-2025. Licensor may, at its option, terminate this agreement in the event of a business combination or a change of control of OTE or the licensed service.
• Agreement (Channels License Agreement) with Walt Disney Company Limited for the acquisition of media rights for the
Disney Channels, Fox, Fox Life, National Geographic, National Geographic Wild, Baby TV, Disney Channel and Disney Junior
OTE concluded an agreement with Walt Disney Company Limited for the acquisition of media rights of the Disney Channels (Fox, Fox Life, National Geographic, National Geographic Wild, Baby TV, Disney Channel and Disney Junior) until 31-1-2024, with the option for one (1) year renewal, until 31-1-2025. In case of a change of control of OTE, Disney may terminate the agreement.
• Agreement (Transactional Video-on-Demand and Pay-per-View License Agreement) with Walt Disney Company Limited
OTE concluded an agreement with Walt Disney Company Limited for the acquisition of media rights until 30-9-2023. Ι n case of a change of control of OTE, Disney may terminate the agreement.
• Agreement (Pay TV Package License Agreement) with Walt Disney Company Italia
OTE concluded an agreement with Walt Disney Company Italia for the acquisition of media rights until 31-10-2023. Ι n case of a change of control of OTE, Disney may terminate the agreement.
OTE, following a Public Open International Tender by “Information Society S.A.” (KTP SA), was selected as a Private Partnership (PP) for the Project "Development of Broadband Infrastructure in Rural “White” Areas" of Greek Territory and Infrastructure Exploitation and Development Services via Public Private Partnership" at zones 1 and 3. In accordance with the tender requirements, OTE established the special purpose company (SPV) “OTE RURAL NORTH”, which signed with KTP SA a partnership contract regarding the implementation of the above project at zone 1 and the special purpose company (SPV) “OTE RURAL SOUTH”, which signed with KTP SA a partnership contract regarding the implementation of the above project at zone 3. Both partnership contracts contain a term according to which the written consent of KTP SA is required for a change in each of these SPV shareholding structure. In case of shares transfer or for any other act by which the rights of vote are transferred, the written consent of KTP SA is required.
• Agreement with CCBMS (on behalf of the Coca-Cola group in Europe)
In 2015, ΟΤΕ has concluded a significant services agreement with CCBMS Gmbh (on behalf of the Coca-Cola group in Europe) concerning the provision by OTE of outsourced Data Center services to the Coca-Cola group until 30-09-2024 . This agreement includes terms according to which the client (CCBMS Gmbh) has the right to terminate the agreement in the event of a change of control of OTE.
• Agreement with CCBMS Gmbh (on behalf of Coca –Cola group in Europe)
Ιn 2017, ΟΤΕ has concluded an agreement with CCBMS Gmbh concerning the provision by OTE of “First Level IT Support Services” to the Coca-Cola group for 5 years. This agreement includes terms according to which the client (CCBMS Gmbh) has the right to terminate the agreement in the event of a change of control of OTE. The total estimated fee amounts to Euro 11,000,000 (absolute amount).
• Agreement with T- Mobile Austria
Ιn 2017, ΟΤΕ has concluded an agreement with T- Mobile Austria concerning the provision of ICT “Central onEmail Collaboration Services” by OTE for 5 years. The client has the right to terminate the agreement in the event of a change of control of OTE.
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• Agreement with T-Mobile Netherlands (1)
Ιn 2017, ΟΤΕ succeeded Cosmote in the contract, with T- Mobile Netherlands concerning the provision of ICT “BSCS Managed Services (Layer 1 – 4)” by ΟΤΕ until August 31, 2020. The client has the right to terminate the agreement in the event of a change of control of OTE unless such change of control takes place within the DT Group.
• Agreement with T-Mobile Netherlands (2)
Ιn 2017, ΟΤΕ has concluded an agreement with T-Mobile Netherlands for the provision of “ERP Operations Services” until 30/06/2022. The total estimated fee amounts to Euro 1,900,000 (absolute amount). The client has the right to terminate the agreement in the event of a change of control of OTE unless such change of control takes place within DT Group.
OTHER AGREEMENTS
Pursuant to the procurement procedures of European agencies and organizations, OTE S.A has been awarded with the contracts listed below, all providing that contracting authority has the right to terminate the contract any time, if a change to the contractor’s legal, financial, technical, organizational or ownership situation is likely to substantially affect the implementation the contract.
• The framework service contract dated as of 20-6-2019, concluded with the EUROPEAN PATENT ORGANIZATION , for the provision of Μanaged Service of the Operations Control Centre of EPO for a five year term, for a maximum budgeted fee of Euro 7,578,673 (absolute amount).
• The framework service contract dated as of 22-5-2019, concluded with the EUROPEAN SECURITIES AND MARKET ORGANIZATION , for the provision of Μanaged Network Services for a five year term, for a maximum budgeted fee of Euro 4,500,000 (absolute amount). OTE participates via an association of companies with SWORD S.A, by a share of 90%.
• The framework service contract dated as of 23-01-2020, concluded with the EUROPEAN CHEMICALS AGENCY , for the provision of Managed IT workplace services, against a maximum budgeted fee of Euro 2,750,000 (absolute amount) for a two-years (2) term.
• The framework service contract dated as of 17-07-2020, concluded with the EUROPEAN CHEMICALS AGENCY , for the provision of consultancy/advisory services based on Microsoft products and technologies, against a maximum budgeted fee of Euro 7,600,000 (absolute amount) for a two-years (2) term.
• The framework service contract dated as of 17-12-2020, concluded with the EUROPEAN PATENT ORGANIZATION , for the provision of IT Operational services from 17-12-2020 until 31-10-2025.
• The framework service contract dated as of 03-12-2020, concluded with the EUROPEAN MEDICINES AGENCY , for the provision of external services for IT Infrastructure Administration, Security Implementation and End User Equipment and Software Management, against a maximum budgeted fee of Euro 6,100,000 (absolute amount) for a two-years (2) term. OTE S.A participates in this contract as a member of the association of companies “OTE A.E. - ARHS Development S.A. – ALTIA Consultores S.A.” with a 50 %.
• The framework service contract dated as of 26-11-2020 concluded with EUROPEAN BORDER AND COAST GARD AGENCY (FRONTEX) , for the provision services for development, consultancy and support of information systems under Time and Means conditions, against a maximum budgeted fee of Euro 34,000,000 (absolute amount) for a two-years (2) term. OTE S.A participates in this contract as a member of the association of companies “OTE A.E. – FINCONS S.P.A.” with 75 %.
• The framework service contract dated as of 13-11-2020, concluded with the EUROPEAN PATENT ORGANIZATION , for the provision of technical consultancy advice and support services in the area of IT from 13-11-2020 until 31-10-2025.
• Τhe amendment of the contract dated as of 06-02-2020 concluded with ATHENS INTERNATIONAL AIRPORT (AIA) regarding the extension of the contract from 11-10-2017 for the project "AUTOMATED BORDER CONTROL SYSTEM AND GATES” with a price of Euro 676,423 (absolute amount) for three (3) years term, includes the condition that the contract can be terminated by AIA in case of any change of shares regarding the control / ownership of OTE SA.
• The framework service contract dated as of 14-6-2021, concluded with the EUROPEAN COMMISSION , for the provision of networking, network security, audio and video telecommunication solutions as well as the provision of relevant maintenance against a maximum budgeted fee of Euro 639,475,000 (absolute amount) for a twelve-year (12) term. OTE S.A participates in this contract as a member of the association of companies “OTE A.E. – Uni Systems Information Technology Systems Commercial SMSA – Cancom Public BV/SRL” with 50%.
• The amendment dated as of 31.08.2021 of the framework service contract dated as of 22-1-2020, concluded with the EUROPEAN CHEMICALS AGENCY , for the provision of Managed IT workplace services, against a maximum budgeted fee of Euro 3,150,000 (absolute amount) for a two-year (2) term.
• The framework service contract dated as of 28-7-2021, concluded with the EUROPEAN PATENT ORGANIZATION , for the provision of standard ICT hardware and related standard services for a five year (5) term. The financial consideration is determined on a case-by-case basis, with each individual assignment of services - supply.
• The framework agreement from 19-10-2022, with the European Investment Bank , for the provision of external personnel and services for the maintenance, support, development, implementation of packages and specific information systems at the EIB against a maximum budgeted fee of Euro 8,500,000 (absolute amount) for a four - year (4) term. OTE S.A
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participates in this contract as a member of the association of companies "OTE A.E. – ARHS developments S.A.", with a percentage of 50%.
• The framework agreement from 10-05-2022, with " Enel Green Power Hellas S.A." and "Wind Parks Anatolis - Prinias Single Member S.A." , for the provision of Services and Supply of Equipment regarding the "Cisco Network Infrastructure" against a maximum budgeted fee of Euro 116,000.00 (absolute amount) for a two – year (2) term.
• The framework agreement from 16-06-2022, with " Enel Green Power Hellas S.A." and "Wind Parks Anatolis - Prinias Single Member S.A." , for the provision of Services and Supply of Equipment regarding the "Fortinet Security Infrastructure" against a maximum budgeted fee of Euro 325,000.00 (absolute amount) for a three – year (3) term.
OTE SUBSIDIARIES
OTESAT-Maritel
There is a “change of control” clause included in the main Agreements which have been signed between OTESAT-Maritel and Inmarsat for INMARSAT Satellite Products and services. According to this term, Inmarsat have the right to terminate the agreement in case of change of shares control of OTESAT-Maritel. These are Agreements where OTESAT-Maritel is enable to resell Inmarsat “Fleet Xpress” and “Fleet Broadband” products and services. These Agreements have been signed on November 7, 2016 and July 1, 2017, respectively and in their terms and conditions it is not included a total fee amount for services/ products, but only a price list according to its prices OTESAT-Maritel can resell such Inmarsat services and products to OTESAT-Maritel’s customers. Α “change of control” clause included in an Agreement which has been signed between OTESAT-Maritel and Inmarsat that regards a new version of the necessary equipment for the provision of Inmarsat ‘s Fleet Xpress service. This Agreement has been signed on June 7, 2018. A change of control” clause is also included in the 23-12-2020 Inmarsat Agreement for the provision of “government” services.
There is a “change of control” clause included in the Agreement, which has been signed οn February 11, 2019 between OTESAT- Maritel and Orolia B.V., which is a supplier of bridge equipment. According to this Orolia B.V. reserves the right to terminate the Agreement in case of change of OTESAT-Maritel’s shares control change. Same clause exists also in an agreement between OTESAT-Maritel and Cobham Satcom.
TELEKOM ROMANIA MOBILE
• Brand License Agreement dated 30th September 2014 between DT – Telekom Romania Mobile
Scope of the Agreement: DT granted to TKR/TKRM/ the limited, non-exclusive, personal, non-transferable and royalty-bearing license to use the Licensed Trademarks for the Licensed Services and the Licensed Products in the Territory.
All above agreements include the below change of control clause:
“Each Party may terminate this Agreement for cause with immediate effect at any time by giving written notice if:
(A) the Licensor ceases to have a dominating shareholder's position, with regard to the Licensee in accordance with Section 17 AktG or in accordance with the applicable national laws granting no less protection to the Licensor;”
• Telekom Romania Mobile contract with Accenture for the IT outsourcing services dated 30th May 2020
Client may terminate this Agreement in whole but not in part in case of a Change of Control of Accenture whereby the party acquiring Control is a competitor of the Client, has a low credit rating, does not meet Client’s compliance criteria for its suppliers or would negatively affect the reputation of Client, and provided such notice is sent within two (2) months after the Change of Control has been announced.
(j) Compensating agreements with Board of Directors members or personnel in case of resignation/unfair dismissal or service employment termination due to a public offer
The Company has not entered into any agreements with the members of the Board of Directors or its personnel to compensate these persons, in case they are forced to resign or dismissed unfairly or their services or employment are terminated due to a public offer for the acquisition of its shares.
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L. ALTERNATIVE PERFORMANCE MEASURES (APMs)
The Group uses certain Alternative Performance Measures (“APMs”) in making financial, operating and planning decisions as well as in evaluating and reporting its performance. APMs provide additional insights and understanding to the Group’s underlying performance, financial condition and cash flow. APMs and the respective adjusted measures are calculated by using the directly reconcilable amounts from Financial Statements of the Group and the below items as well, that due to their nature impacting comparability. As these costs or payments are of significant size and of irregular timing, it is a common industry practice to be excluded for the calculation of the APMs and the adjusted figures in order to facilitate comparability with industry peers and facilitate the user to obtain a better understanding of the Group’s performance achieved from ongoing activity. The APMs should be read in conjunction with and do not replace by any means the directly reconcilable IFRS line items.
1. Costs or payments related to Voluntary Leave Schemes
Costs or payments related to Voluntary Leave Schemes comprise the exit incentives provided to employees and the contributions to the social security fund to exit/retire employees before conventional retirement age. These costs are included within the income statement as well as within the cash flow statement lines “costs related to voluntary leave schemes” and “payment for voluntary leave schemes”, respectively.
2. Costs or payments related to other restructuring plans
Other restructuring costs comprise non-ongoing activity related costs arising from significant changes in the way the Group conducts business. These costs are mainly related to the Group’s portfolio management restructuring.
3. Spectrum acquisition payments
Spectrum payments comprise the amounts paid to acquire rights (licenses) through auctions run by the National Regulator to transmit signals over specific bands of the electromagnetic spectrum.
Net Debt
Net Debt is used to evaluate the Group’s capital structure and leverage. Net Debt is defined as short-term borrowings plus long- term borrowings plus short-term portion of long-term borrowings plus other financial liabilities less cash and cash equivalents. Following the adoption of IFRS 16 financial liabilities related to leases are included in the calculation of net debt from 2019 onwards.
OTE Group
31/12/2022
31/12/202 1
Long-term borrowings
881.5
753.7
Short-term portion of long-term borrowings
23.1
397.3
Short-term borrowings
150.0
-
Lease liabilities (long-term portion)
182.1
189.2
Lease liabilities (short-term portion)
76.1
71.7
Financial liabilities related to wallets
4.0
-
Cash and cash equivalents
(590.1)
(630.7)
Net Debt
726.7
7 81 . 2
EBITDA - Adjusted EBITDA - Adjusted EBITDA After Lease (AL)
• EBITDA is derived directly from the Financial Statements of the Group, line “Operating profit before financial and investing activities, depreciation, amortization and impairment” of the Income Statement. EBITDA is defined as total revenues plus other operating income less total operating expenses before depreciation, amortization and impairment. EBITDA is intended to provide useful information to analyze the Group’s operating performance.
• Adjusted EBITDA is calculated by excluding the impact of costs related to voluntary leave schemes, and other restructuring costs.
• Adjusted EBITDA After Lease (AL): Following the adoption of IFRS 16 related to leases, it is a common industry practice to use the EBITDA After Lease (AL) or Adjusted EBITDA After Lease (AL) in order to facilitate comparability with industry peers and historical comparison as well. Adjusted EBITDA (AL) is defined as Adjusted EBITDA deducting the depreciation and interest expense related to leases.
EBITDA, Adjusted EBITDA and Adjusted EBITDA (AL) margin (%) is defined as the respective EBITDA divided by total revenues.
D e f i n i t i o n s a n d r e c o n c i l i a t i o n s o f A l t e r n a t i v e P e r f o r m a n c e M e a s u r e s ( “ A P M s ” )
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95
OTE GROUP
GREECE
ROMANIA
2022
2021
2022
2021
2022
2021
Total r evenues
3,455.3
3,336.3
3,155.4
3,046.1
306.4
315.5
Other o perating i ncome
10.5
9.2
7.8
6.2
2.7
3.5
Total operating expenses before depreciation, amortization and impairment
(2,080.2)
(1,865.6)
(1,836.8)
(1,619.8)
(249.9)
(271.5)
EBITDA
1,385.6
1,479.9
1,326.4
1,432.5
59.2
47.5
margin %
40.1%
44.4%
42.0%
47.0%
19.3%
15.1%
Costs related to voluntary leave schemes
39.4
(121.8)
38.7
(122.6)
0.7
0.8
Other restructuring costs
5.7
23.6
5.2
20.2
0.5
3.4
Adjusted EBITDA
1,430.7
1,381.7
1,370.3
1,330.1
60.4
51.7
margin %
41.4%
41.4%
43.4%
43.7%
19.7%
16.4%
Depreciation of lessee use rights to leased assets
(74.0)
(70.4)
(53.5)
(51.1)
(20.5)
(19.4)
Interest expense on leases
(8.7)
(15.4)
(6.8)
(13.6)
(1.9)
(1.8)
Adjusted EBITDA (AL)
1,348.0
1,295.9
1,310.0
1,265.4
38.0
30.5
margin %
39.0%
38.8%
41.5%
41.5%
12.4%
9.7%
Capital expenditure (Capex) and Adjusted Capex
Capital expenditure is derived directly from the Financial Statements of the Group, line “Purchase of property, plant and equipment and intangible assets” of the Cash Flow Statement. The Group uses Capex to ensure that the cash spending is in line with its overall strategy for the use of cash. Adjusted Capex is defined as Capex excluding
spectrum payments
.
OTE Group
2022
2021
Purchase of property plant and equipment and intangible assets – Capex
(639.5)
(586.0)
Spectrum Payments
1.2
27.0
Adjusted CAPEX
(638.3)
(559.0)
Free Cash Flow (FCF)- Free Cash Flow After Lease (AL) – Adjusted FCF After Lease (AL)
• Free Cash Flow is defined as net cash flows from operating activities, after payments for purchase of property plant and equipment and intangible assets (Capex) and adding the interest received. Free Cash Flow After Lease (AL) is defined as Free Cash Flow after lease repayments.
• Adjusted FCF After Lease (AL) facilitates comparability of Cash Flow generation with industry peers and discussions with the investment analyst community and debt rating agencies. It is calculated by excluding from the Free Cash Flow After Lease (AL)
spectrum payments
,
payments for voluntary leave schemes
and payments for
other restructuring costs.
FCF After Lease (AL) and Adjusted FCF After Lease (AL) are intended to measure the cash generation from the Group’s business activities while facilitate the understanding the Group’s cash generating performance as well as availability for debt repayment, dividend distribution and own reserves.
OTE Group
2022
2021
Net cash flows from operating activities
1,317.2
1,224.2
Minus: Net cash flows from operating activities of discontinued operations
-
86.7
Purchase of property, plant, equipment & intangible assets
(639.5)
(586.0)
Interest received
2.7
1.0
Free Cash Flow
680.4
552.5
Lease repayments
(83.3)
(70.0)
Free Cash Flow After Lease (AL)
597.1
482.5
Payment for voluntary leave schemes
45.6
56.3
Payment for other restructuring costs
10.3
24.3
Spectrum payments
1.2
27.0
Adjusted Free Cash Flow After Lease (AL)
654.2
590.1
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96
Adjusted Profit to owners of the parent
Adjusted Profit for the period attributable to owners of the parent is intended to provide useful information to analyze the Group’s net profitability excluding the impact of significant non-recurring or irregularly recorded items in order to facilitate comparability with previous ongoing performance. For the respective period of 2022 and the comparable period of 2021 the impact of the following items were taken into account: costs related to voluntary leave schemes, other restructuring costs, (gains)/losses from disposal of subsidiary, net impact from impairments and write offs and the effect of changes to income tax rate.
OTE Group
2022
2021
Profit to owners of the Parent from continuing operations (reported)
388.6
487.0
Costs related to voluntary leave schemes
30.8
(94.9)
Other restructuring costs
5.6
23.1
(Gains)/losses from disposal of subsidiary
(0.2)
50.9
Net Impact from Impairments and Write offs
115.9
-
Effect due to change in the income tax rates
-
26.3
Adjusted Profit to owners of the parent
540.7
492.4
Maroussi, February 22, 2023
Michael Tsamaz Charalampos Mazarakis
Chairman and Managing Director Board Member
97
IV. AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS
98
TRANSLATION FROM THE ORIGINAL IN THE GREEK LANGUAGE
Independent Auditor’s Report
To the Shareholders of the company HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
Report on the Audit of the Separate and Consolidated Financial Statement s
Opinion
We have audited the accompanying separate and consolidated financial statements of the company HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (the Company), which comprise the separate and consolidated statement of financial position as of December 31, 2022, and the s eparate and consolidated income statements and statements of comprehensive income, changes in equity and cash flows for the year then ended, as well as a summary of significant accounting policies and other explanatory notes.
In our opinion, the accompanying separate and consolidated financial statem ents present fairly, in all material respects, the financial position of the company HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. and its subsidiaries (the Group) as of December 31, 2022, and of their f inancial performance and their cash flows for the year then ended in accordance with International Financial Reporting Stand ards as endorsed by the European Union.
Basis for opinion
We conducted our audit in accordance with the International Standards on Auditing (IS As) as they have been transposed in Greek Legislation. Our responsibilities unde r those standards are described in the “Auditor’s responsibilities for the audit of the separate and consolidated financial statements” section of our report. During our audit, we remained independent of the Company and the G roup, in accordance with the International Ethics
Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) as transposed in Greek legislation and the ethical requirements relevant to the au dit of the separate and consolidated financial statements
in Greece. We have fulfilled our responsibilities in accordance with the provisions of the currently enacted law and the requirements of the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment , were of most significance in our audit of the separate and the consolidated financial statements of the audite d year. These matters and the related risks of
material misstatement were addressed in the context of our audit of the separ ate and the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provid e a separate opinion on these matters.
Deloitte Certified Public Accountants S.A. 3a Fragkokklisias & Granikou str. Marousi Athens GR 151-25 Greece Tel: +30 210 6781 100 www.deloitte.gr
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Key audit matter of the Company & the Group
How the key audit matter was addressed
Revenue Recognition
For the year ended 31 December 2022, the Group’s a nd the Company’s total revenues amounted to € 3.455,3 million and € 1.613,3 million respectively (2021: Group € 3.336,3 million, Company: € 1.577,9 million).
Revenue from contracts with customers is recognized when control of the goods or services is transferred to the customer at an amount that reflects the consideration to which the Group or the Company expects to be entitled in exchange for those goods or services.
Due to the volume of transactions, the variety of offered services, products and pricelists, the complexity of information systems, as well as the significant judgments and estimates of Management in connection with the application of IFRS 15 “Revenue from Contracts with Customers”, we consider that revenue recognition is a
key audit matter.
Management discloses the accounting policy and other information related to revenue recognition in the Note 3.26 of the separate and consolidated financial statements .
Our audit approach was based on audit risk and includes, inter alia, the performance of the following procedures:
• We evaluated the compliance of the revenue recognition policies and methodology adopted by the Group in relation to recognition of revenue from contracts with customers with the
provisions of IFRS 15.
• We evaluated the design and operating effectiveness of the internal controls applied by Management in relation to recognition of revenue from contracts with customers.
• We evaluated the design and the operating effectiveness of the internal controls related to the information systems supporting significant revenue streams. In this context, we evaluated logical access management and change management performed on the information systems.
• We performed substantive analytical procedures by developing expectations of recorded revenues through consideration of data such as the
number of subscribers and the approved
pricelists of products and services.
• Additionally, on a sample basis, we performed tests of details on issued bills, customer contracts and collections from customers in order to confirm the accuracy of recorded revenue.
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Key audit matter of the Company
How the key audit matter was addressed
Assessment of impairment of the Investment in the subsidiary Telekom Romania Mobile Communications
As at 31 December 2022, the separate financial statements include Investments in subsidiaries and other entities amounting to a total of € 3.105,1 million (31 December 2021: € 3.158,8 million), out of which an amount of € 96 million (31 December 2021: € 178,6 million) concerns the investment of the Company in the subsidiary Telekom Romania Mobile Communications.
In the context of IAS 36 “Impairment of Assets”, the Company assesses the existence of impairment indicators for its investments and tests for impairment by comparing their carrying amount with their recoverable amount. This assessment is based on significant judgments, assumptions and estimates of the Company’s Management in relation to the future cash flows and the expected operating profit, the discount rate and the current and future market conditions. Based on this assessment, impairment indicators were identified for the carrying amount of the investment in the subsidiary Telekom Romania Mobile Communications as at 31 December 2022.
As a result of the impairment test performed on the carrying amount of the investment in Telekom Romania Mobile Communications, impairment losses amounting
to € 82,5 million were recognized in the separate
financial statements. Due to the amount of the abovementioned investment and the impairment loss recognized and considering the high degree of
subjectivity of Management’s assumptions and the significant judgments and estimates used for the determination of the recoverable amount, we consider that the assessment of the impairment of the investmen t in Telekom Romania Mobile Communications is a key audit matter.
The Group discloses the accounting policies related to
the impairment testing of investments, as well as the significant judgments, estimates and assumptions used
by Management in Notes 3.8 and 9 of the separate financial statements.
Our audit approach was based on audit risk and includes, inter alia, the performance of the following procedures:
• We assessed the design and implementation of the internal controls related to the impairment testing of the carrying amount of subsidiaries, as well as to the recognition and measurement of potential impairment of the carrying value of investments in subsidiaries.
• We assessed the policies, the methodology and the procedures adopted by the Company with respect to the assessment of the existence or not of impairment indications for the carrying value
of the investments in subsidiaries, as well as regarding the impairment testing on the carrying value of investments for which such indications exist.
• For the investment in Telekom Romania Mobile Communications, for which the Company identified impairment indications and performed an impairment test, we evaluated whether the methodology used for the determination of the recoverable amount has been applied appropriately. Furthermore, with the support of our internal specialist, we assessed the model used for the determination of the recoverable amount, as well as the reasonableness of Management’s significant assumptions and judgments (such as future cash flows, expected operating profit, discount rate).
• Moreover, we assessed the adequacy of the relevant disclosures in the separate financial statements.
101
Other matter
The financial statements of the company for the year ended D ecember 31, 2021 were audited by another auditor
who expressed an unmodified opinion on those statements on February 23 , 2022.
Other Information
Management is responsible for the other information. The other informat ion is included in the Board of Directors’ Report, reference to which is made in the “Report on other Legal and R egulatory Requirements” section, in the Declaration of the Board of Directors members and in any other information which is either required by Law or the Company optionally incorporated, in the Annual Report required by Law 355 6/2007, but does not include the
financial statements and our auditor’s report thereon.
Our opinion on the separate and consolidated financial statements d oes not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the separate and consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materi ally inconsistent with the
separate and consolidated financial statements or our knowledge obtained durin g the audit, or otherwise appears to be materially misstated. If, based on the procedures perf ormed, we conclude that there is a material misstatement therein, we are required to communicate this matter. We have nothing to report in this respect.
Responsibilities of management and those charged with governance for the separate and consolidated financial statements
Management is responsible for the preparation and fair pres entation of the separate and consolidated financial statements in accordance with International Financial Reporting Standards, as end orsed by the European Union, and for such internal control as management determines is necessary to enab le the preparation of separate and consolidated financial statements that are free from material misstate ment, whether due to fraud or error.
In preparing the separate and consolidated financial statements , management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern principle of accounting unless management either inten ds to liquidate the Company or the Group or to cease operations, or has no realistic alternative but to do so.
The Audit Committee (art. 44 of Law 4449/2017) of the Compan y is responsible for overseeing the Company’s and
the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the separate and con solidated financial statements
Our objectives are to obtain reasonable assurance about whe ther the separate and the consolidated financial statements as a whole are free from material misstatement, whe ther due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high leve l of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs, as they have been transposed in Greek Legislation, will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence t he economic decisions of users
taken on the basis of these separate and consolidated financial statem ents.
As part of an audit in accordance with ISAs as they have been transposed in Greek Legislation, we exercise
professional judgment and maintain professional skepticism throughout the audit.
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We also:
• Identify and assess the risks of material misstatement of the separate and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a b asis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resu lting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expres sing an opinion on the effectiveness of the Company’s and the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reason ableness of accounting estimates and related disclosures made by Management.
• Conclude on the appropriateness of Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and the Group’s ability to continue as a going concern. If we con clude that
a material uncertainty exists, we are required to draw attent ion in our auditor’s report to the related
disclosures in the separate and consolidated financial statements or , if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Compan y and the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the s eparate and consolidated financial statements, including the disclosures, and whether the separate a nd consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the f inancial information of the entities or business activities within the Group to express an opinion on the separate and con solidated financial statements. We are responsible for the direction, supervision and performance of the audit of the Company and the Group. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant def iciencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and whe re applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the audite d year end and are therefore the key audit matters.
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Report on Other Legal and Regulatory Requirements
1) Board of Directors’ Report
Taking into consideration that Management is responsible for the preparation of the Board of Directors’ Report which also includes the Corporate Governance Statement, according to the p rovisions of paragraph 5 of article
2 (part B) of Greek Law 4336/2015, we note the f ollowing:
a) The Board of Directors’ Report includes the Corporate Governance State ment which provides the information required by article 152 of Greek Law 4548/20 18.
b) In our opinion the Board of Directors’ Report has been prepared in accordance w ith the applicable legal requirements of articles 150-151 and 153-154 and of p aragraph 1 (cases c’ and d’) of article 152 of Greek Law 4548/2018 and its content is consistent with the accompanyin g separate and consolidated financial statements for the year ended December 31, 202 2.
c) Based on the knowledge we obtained during our audit about the Company HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. and its environment, we have not identified any materia l inconsistencies in the Board of Directors’ Report.
2) Additional Report to the Audit Committee
Our audit opinion on the accompanying separate and the consolidate d financial statements is consistent with
the supplementary report to the Audit Committee referre d to in article 11 of EU Regulation 537/2014.
3) Non-Audit Services
We have not provided to the Company and the Group any prohibited n on-audit services referred to in article 5
of EU Regulation No 537/2014.
The allowed non-audit services provided to the Company and the G roup during the year ended 31 December 2022 have been disclosed in Note 32 to the accompanying separate and con solidated financial statements.
4) Appointment
We were appointed as statutory auditors for the first time by the Gen eral Assembly of shareholders of the Company on 25 May 2022.
5) Operations’ Regulation
The Company has an Operations’ Regulation in accordance with the content prescribe d by the provisions of article 14 of Greek Law 4706/2020.
6) Assurance Report on European Single Electronic Format reporting
We have examined the digital files of the Company HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. that were prepared in accordance with the European Single Electronic Format (ESEF) defi ned by the Commission Delegated EU Regulation 2019/815, as amended by EU Regulation 202 0/1989 (hereinafter “ESEF Regulation”), which include the separate and consolidated financial statements of t he Company and the Group for the year ended 31 December 2022 in XHTML format (ELPUFM0XZRZO4LFXW404-2022 -12-31-en.xhtml) as well as the specified XBRL file (ELPUFM0XZRZO4LFXW404-2022-12-31-en.zip) with the appropriate t agging on these consolidated financial statements, including the other explanatory notes (Notes t o the financial statements).
104
Regulatory Framework
The ESEF digital files are prepared in accordance with the ESEF Regulation, and the Inte rpretation Announcement 2020/C 379/01 of the European Commission dated 10 November 202 0, as provided by Greek Law 3556/2007 and
the relevant announcements of the Hellenic Capital Marke t Commission and the Athens Stock Exchange (hereinafter the “ESEF Regulatory Framework”). In summary this Framework includes, inter alia, the following requirements:
• Annual financial statements shall be prepared in XHTML format
• With regard to the consolidated financial statements prepared in accordance with t he International Financial Reporting Standards, the financial information included in the State ment of Total Comprehensive Income, in
the Statement of Financial Position, in the Statement of Changes in Equity and in the S tatement of Cash Flows shall be tagged with XBRL mark-up (“XBRL tags” and “block tag”) in ac cordance with ESEF Taxonomy, as
currently in force. The technical specifications of ESEF, including the related taxonomy, are included in ESEF Regulatory Technical Standards.
The requirements prescribed by the ESEF Regulatory Framework in force constitute a ppropriate criteria for the purpose of expressing a conclusion that provides reasonable assura nce.
Responsibilities of Management and Those Charged with Governance
Management is responsible for the preparation and submission of the separate and consolidated financial
statements of the Company and the Group for the year ended 3 1 December 2022, in accordance with the requirements set by the ESEF Regulatory Framework and for such internal con trols as Management determines are necessary to enable the preparation of the digital files that are free from material misstatement, whether due to
fraud or error.
Auditor’s responsibilities
Our responsibility is to design and carry out these assurance proced ures in accordance with the Decision 214/4/11-
02-2022 of the board of Hellenic Accounting and Auditing Oversight Board (HAASOB) and the “G uidelines in
connection with the procedures and the assurance repor t of the certified auditors on the ESEF report of Issuers with securities listed on a regulated market in Greece” dated 14/02/20 22 as issued by the Institute of Certified Public Accountants (the “ESEF Guidelines”) in order to obtain reasonable assurance about w hether the separate and consolidated financial statements of the Company and the Group that were p repared by Management in accordance with ESEF, comply in all material respects with the ESEF Regulatory Framework, as currently in force.
Our work was conducted in compliance with the International Ethics Stand ards Board for Accountants’ Code of
Ethics for Professional Accountants (IESBA Code), as incorporated into the Greek legislation and m oreover, we have complied with the ethical requirements related to inde pendence, in accordance with Greek Law 4449/2017 an d EU Regulation No 537/2014.
The assurance work carried out is limited to the items included in the ES Ε F Guidelines and has been carried out in accordance with the International Standard on Assurance Engagements 300 0 “Assurance engagements other than audits or review of historical financial information”. Reasonable assurance is a high level of assurance but is not a guarantee that this work will always detect a material misstatement relate d to non-compliance with the
requirements of ESEF Regulatory Framework.
This document has been prepared by Deloitte Certified Public Accountants Societe Anonyme.
Deloitte Certified Public Accountants Societe Anonyme, a Greek company, registered in Greece with registered number 0001223601000 and its registered office at Marousi, Attica, 3a Fragkokklisias & Granikou str., 151 25, is one of the Deloitte Central Mediterranean S.r.l. (“DCM”) countries. DCM, a company limited by guarantee registered in Italy with registered number 09599600963 and its registered office at Via Tortona no. 25, 20144, Milan, Italy is one of the Deloitte NSE LLP geographies. Deloitte NSE LLP is a UK limited liability partnership and member firm of DTTL, a UK private company limited by guarantee.
DTTL and each of its member firms are legally separate and independent entities. DTTL, Deloitte NSE LLP and Deloitte Central Mediterranean S.r.l. do not provide services to clients. Please see
www.deloitte.com/about
to learn more about our global network of member firms.
105
Conclusion
Based on the procedures performed and the evidence obtaine d, we conclude that the separate and the consolidated financial statements of the Company and the Group for the year end ed 31 December 2022 prepared in XHTML
format (ELPUFM0XZRZO4LFXW404-2022-12-31-en.xhtml) as well as the XBRL file (ELPUFM0XZRZO4LFXW404-2022-
12-31-en.zip) with the appropriate tagging on the abovementioned consolidated financial statements, including the other explanatory notes are prepared, in all material respects, in accordance with the requirements of ESEF
Regulatory Framework.
Athens, 22 February 2023
The Certified Public Accountant
Paris Efthymiades
Reg. No. SOEL: 18171
Deloitte Certified Public Accountants S.A.
3a Fragokklisias & Granikou str., 151 25 Marousi
Reg. No. SOEL: E. 120
106
V. ANNUAL FINANCIAL STATEMENTS
H H E E L L L L E E N N I I C C T T E E L L E E C C O O M M M M U U N N I I C C A A T T I I O O N N S S O O R R G G A A N N I I Z Z A A T T I I O O N N S S . . A A . .
ANNUAL FINANCIAL STATEMENTS (CONSOLIDATED AND SEPARATE)
AS OF DECEMBER 31, 2022
IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS
as adopted by the European Union
(TRANSLATED FROM THE GREEK ORIGINAL)
The Annual Financial Statements presented on pages 109-181, were approved by the Board of Directors on February 22, 2023 and are signed by:
Chairman
& Managing Director
Board Member
& OTE Group
Chief Financial Officer
Executive Director
Financial Operations
OTE Group
Accounting Director
Michael Tsamaz
Charalampos Mazarakis
George Mavrakis
Anastasios Kapenis
HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.
REGISTRATION No 001037501000
99, KIFISSIAS AVE–151 24 MAROUSSI ATHENS, GREECE
TABLE OF CONTENTS
PAGE
ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
STATEMENTS OF FINANCIAL POSITION (CONSOLIDATED AND SEPARATE) ................................................................................109
INCOME STATEMENTS (CONSOLIDATED AND SEPARATE) ...........................................................................................................110
STATEMENTS OF COMPREHENSIVE INCOME (CONSOLIDATED AND SEPARATE) ......................................................................111
STATEMENT OF CHANGES IN EQUITY (CONSOLIDATED) ..............................................................................................................112
STATEMENT OF CHANGES IN EQUITY (SEPARATE) .......................................................................................................................113
STATEMENTS OF CASH FLOWS (CONSOLIDATED AND SEPARATE) .............................................................................................114
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
1. CORPORATE INFORMATION ...................................................................................................................................................115
2. BASIS OF PREPARATION ........................................................................................................................................................116
3. SIGNIFICANT ACCOUNTING POLICIES ...................................................................................................................................121
4. PROPERTY, PLANT AND EQUIPMENT ....................................................................................................................................133
5. LEASES ....................................................................................................................................................................................135
6. GOODWILL ...............................................................................................................................................................................137
7. TELECOMMUNICATION LICENSES ........................................................................................................................................138
8. OTHER INTANGIBLE ASSETS .................................................................................................................................................139
9. INVESTMENTS .........................................................................................................................................................................141
10. OTHER NON-CURRENT ASSETS .............................................................................................................................................144
11. INVENTORIES ..........................................................................................................................................................................144
12. TRADE RECEIVABLES .............................................................................................................................................................145
13. OTHER FINANCIAL ASSETS ....................................................................................................................................................145
14. OTHER CURRENT ASSETS .....................................................................................................................................................146
15. CASH AND CASH EQUIVALENTS ............................................................................................................................................146
16. SHARE CAPITAL – SHARE PREMIUM – TREASURY SHARES ..............................................................................................146
17. STATUTORY RESERVE – FOREIGN EXCHANGE AND OTHER RESERVES - RETAINED EARNINGS ...................................147
18. DIVIDENDS ..............................................................................................................................................................................148
19. LONG-TERM AND SHORT–TERM BORROWINGS .................................................................................................................149
20. PROVISIONS FOR PENSIONS, STAFF RETIREMENT INDEMNITIES AND OTHER EMPLOYEE BENEFITS .........................152
21. OTHER NON-CURRENT LIABILITIES .......................................................................................................................................157
22. CONTRACT BALANCES ...........................................................................................................................................................157
23. INCOME TAXES – DEFERRED TAXES ....................................................................................................................................158
24. OTHER CURRENT LIABILITIES ................................................................................................................................................162
25. OTHER OPERATING INCOME .................................................................................................................................................163
26. EARNINGS PER SHARE ..........................................................................................................................................................163
27. OPERATING SEGMENT INFORMATION .................................................................................................................................164
28. RELATED PARTY DISCLOSURES ............................................................................................................................................167
29. LITIGATION AND CLAIMS – COMMITMENTS ........................................................................................................................171
30. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT .....................................................................................174
31. RECLASSIFICATIONS ..............................................................................................................................................................180
32. AUDIT AND OTHER FEES ........................................................................................................................................................180
33. EVENTS AFTER THE FINANCIAL POSITION DATE .................................................................................................................181
ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 20 22 AND FOR THE YEAR THEN ENDED
The accompanying notes on pages 115-181 form an integral part of these financial statements. 109
STATEMENTS OF FINANCIAL POSITION (CONSOLIDATED AND SEPARATE)
GROUP
COMPANY
(Amounts in millions of Euro)
Notes
2022
2021
2022
2021
ASSETS
Non-current assets
Property, plant and equipment
4
2,081.1
2,080.3
1,323.5
1,250.2
Right-of-use assets
5
266.6
264.7
132.6
150.2
Goodwill
6
376.6
376.6
-
-
Telecommunication licenses
7
296.1
348.9
2.4
1.7
Other intangible assets
8
335.1
387.7
242.9
275.5
Investments
9
0.1
0.1
3,105.1
3,158.8
Loans to pension funds
20
64.7
68.6
64.7
68.6
Deferred tax assets
23
178.2
197.9
4.7
22.7
Contract costs
22
30.2
24.3
10.8
9.8
Other non-current assets
10
75.3
75.9
45.5
45.8
Total non-current assets
3,704.0
3,825.0
4,932.2
4,983.3
Current assets
Inventories
11
54.0
38.0
11.6
5.0
Trade receivables
12
471.2
504.4
296.3
304.1
Other financial assets
13
4.8
5.6
2.8
3.0
Contract assets
22
49.6
34.6
6.1
3.4
Other current assets
14
123.7
176.9
75.8
164.8
Restricted cash
1.8
1.8
-
-
Cash and cash equivalents
15
590.1
630.7
163.7
274.0
Total current assets
1,295.2
1,392.0
556.3
754.3
TOTAL ASSETS
4,999.2
5,217.0
5,488.5
5,737.6
EQUITY AND LIABILITIES
Equity attributable to owners of the Parent
Share capital
16
1,227.3
1,292.6
1,227.3
1,292.6
Share premium
16
438.9
462.6
438.9
462.6
Treasury shares
16
(73.5)
(157.1)
(73.5)
(157.1)
Statutory reserve
17
440.7
440.7
440.7
440.7
Foreign exchange and other reserves
17
(138.8)
(168.6)
(20.5)
(32.8)
Changes in non-controlling interests
(3,314.1)
(3,314.1)
-
-
Retained earnings
17
3,267.9
3,414.4
1,215.4
1,192.6
Total equity attributable to owners of the Parent
1,848.4
1,970.5
3,228.3
3,198.6
Non-controlling interests
9
0.5
1.7
-
-
Total equity
1,848.9
1,972.2
3,228.3
3,198.6
Non-current liabilities
Long-term borrowings
19
881.5
753.7
846.9
797.6
Provision for staff retirement indemnities
20
96.7
139.9
33.4
50.8
Provision for youth account
20
86.1
98.4
86.1
98.4
Contract liabilities
22
40.8
33.2
48.9
48.2
Lease liabilities
5
182.1
189.2
103.7
126.5
Deferred tax liabilities
23
0.4
3.3
-
-
Other non-current liabilities
21
55.7
89.3
73.7
115.8
Total non-current liabilities
1,343.3
1,307.0
1,192.7
1,237.3
Current liabilities
Trade accounts payable
874.0
818.5
489.5
468.2
Short-term borrowings
19
150.0
-
40.0
-
Short-term portion of long-term borrowings
19
23.1
397.3
56.5
374.2
Income tax payable
23
92.3
44.0
39.4
7.9
Contract liabilities
22
136.1
132.5
83.0
85.4
Lease liabilities
5
76.1
71.7
34.2
25.3
Dividends payable
18
2.4
2.3
2.4
2.3
Other current liabilities
24
453.0
471.5
322.5
338.4
Total current liabilities
1,807.0
1,937.8
1,067.5
1,301.7
TOTAL EQUITY AND LIABILITIES
4,999.2
5,217.0
5,488.5
5,737.6
ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 20 22 AND FOR THE YEAR THEN ENDED
1 In light of the IFRS Interpretations Committee’s agenda decision published in May 2022, principal vs agent assessment was revised, resulting in changes in the recognition of gross vs. net revenues. Prior-year comparatives were adjusted retrospectively. See Note 2.
The accompanying notes on pages 115-181 form an integral part of these financial statements. 110
INCOME STATEMENTS (CONSOLIDATED AND SEPARATE)
GROUP
COMPANY
(Amounts in millions of Euro except per share data)
Notes
2022
2021 1
2022
2021 1
Revenue
Fixed business:
Retail services revenues
933.4
950.8
930.0
948.2
Wholesale services revenues
590.2
585.3
345.1
339.6
Other revenues
342.6
270.0
282.9
241.6
Total revenues from fixed business
1,866.2
1,806.1
1,558.0
1,529.4
Mobile business:
Service revenues
1,189.0
1,164.1
-
-
Handset revenues
283.8
270.1
2.1
1.7
Other revenues
29.6
24.3
-
-
Total revenues from mobile business
1,502.4
1,458.5
2.1
1.7
Miscellaneous other revenues
86.7
71.7
53.2
46.8
Total revenues
3,455.3
3,336.3
1,613.3
1,577.9
Other operating income
25
10.5
9.2
32.1
28.9
Operating expenses
Interconnection and roaming costs
(442.7)
(441.4)
(87.5)
(85.1)
Provision for expected credit losses
12
(48.0)
(67.6)
(25.2)
(26.0)
Personnel costs
(442.3)
(430.6)
(90.4)
(91.2)
Costs related to voluntary leave schemes
20
(39.4)
121.8
(10.7)
129.9
Commission costs
(82.6)
(85.0)
(56.8)
(47.4)
Merchandise costs
(358.7)
(311.3)
(55.0)
(44.2)
Maintenance and repairs
(77.5)
(74.1)
(38.7)
(38.8)
Marketing
(69.9)
(66.0)
(22.1)
(18.9)
Other operating expenses, out of which:
(519.1)
(511.4)
(517.8)
(536.3)
Facility and other lease related costs
(122.1)
(107.7)
(71.1)
(62.6)
Third party fees and services
(219.1)
(172.4)
(360.6)
(338.9)
Other taxes and regulatory charges
(68.3)
(73.6)
(26.0)
(33.6)
Construction cost network
(0.4)
(0.2)
-
-
Other sundry operating expenses
(109.2)
(157.5)
(60.1)
(101.2)
Total operating expenses before depreciation, amortization and impairment
(2,080.2)
(1,865.6)
(904.2)
(758.0)
Operating profit before financial and investing activities, depreciation, amortization and impairment
1,385.6
1,479.9
741.2
848.8
Depreciation, amortization and impairment
4,5,7,8,9
(795.1)
(667.6)
(383.7)
(364.8)
Operating profit before financial and investing activities
590.5
812.3
357.5
484.0
Income and expense from financial and investing activities
Interest and related expenses
(39.9)
(45.0)
(27.0)
(30.9)
Interest income
2.7
1.0
1.3
1.1
Foreign exchange differences, net
1.6
1.5
0.3
1.7
Dividend income
9
-
-
395.5
200.9
Gains / (losses) from investments and other financial assets - Impairment
9,10,13
-
(50.4)
(82.3)
42.5
Total profit / (loss) from financial and investing activities
(35.6)
(92.9)
287.8
215.3
Profit before tax
554.9
719.4
645.3
699.3
Income tax
23
(166.2)
(233.6)
(87.5)
(135.6)
Profit for the year from continuing operations
388.7
485.8
557.8
563.7
Profit from discontinued operations
-
103.9
-
-
Profit for the year
388.7
589.7
557.8
563.7
Attributable to:
Owners of the parent
388.6
557.6
557.8
563.7
From continuing operations
388.6
487.0
557.8
563.7
From discontinued operations
-
70.6
-
-
Non-controlling interests
0.1
32.1
-
-
Profit for the year
388.7
589.7
557.8
563.7
Earnings per share attributable to owners of the parent from continuing operations
Basic earnings per share
26
0.8873
1.0720
-
-
Diluted earnings per share
26
0.8873
1.0720
-
-
Total basic earnings per share attributable to owners of the parent
26
0.8873
1.2274
-
-
ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 20 22 AND FOR THE YEAR THEN ENDED
The accompanying notes on pages 115-181 form an integral part of these financial statements. 111
STATEMENTS OF COMPREHENSIVE INCOME (CONSOLIDATED AND SEPARATE)
GROUP
COMPANY
(Amounts in millions of Euro)
Notes
2022
2021
2022
2021
Profit for the year
388.7
589.7
557.8
563.7
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss
Actuarial gains / (losses)
20
39.0
(6.2)
15.8
(5.2)
Deferred taxes on actuarial gains / (losses)
(8.5)
1.3
(3.5)
1.1
Deferred taxes on actuarial gains / (losses) due to change in tax rate
-
(0.8)
-
(0.8)
Total items that will not be reclassified subsequently to profit or loss
30.5
(5.7)
12.3
(4.9)
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
(0.7)
(4.2)
-
-
Total items that may be reclassified subsequently to profit or loss
(0.7)
(4.2)
-
-
Reclassification of foreign currency translation reserve related to operations disposed
-
41.9
-
-
Other comprehensive income / (loss) for the year
29.8
32.0
12.3
(4.9)
Total comprehensive income for the year
418.5
621.7
570.1
558.8
Attributable to:
Owners of the parent
418.4
590.6
570.1
558.8
Non-controlling interests
0.1
31.1
-
-
418.5
621.7
570.1
558.8
Total comprehensive income attributable to owners of the parent arises from:
Continuing operations
418.4
520.7
570.1
558.8
Discontinued operations
-
69.9
-
-
418.4
590.6
570.1
558.8
ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 202 2 AND FOR THE YEAR THEN ENDED
The accompanying notes on pages 115-181 form an integral part of these financial statements. 112
STATEMENT OF CHANGES IN EQUITY (CONSOLIDATED)
Attributed to equity holders of the parent
(Amounts in millions of Euro)
Share capital
Share premium
Treasury shares
Statutory reserve
Foreign exchange and other reserves
Changes in non- controlling interests
Retained earnings
Total
Non-controlling interests
Total equity
Balance as at January 1, 2021
1,330.6
476.4
(132.2)
440.7
(201.6)
(3,314.1)
3,396.0
1,995.8
144.0
2,139.8
Profit for the year
-
-
-
-
-
-
557.6
557.6
32.1
589.7
Other comprehensive income / (loss)
-
-
-
-
33.0
-
-
33.0
(1.0)
32.0
Total comprehensive income
-
-
-
-
33.0
-
557.6
590.6
31.1
621.7
Cancellation of treasury shares
(38.0)
(13.6)
168.1
-
-
-
(116.5)
-
-
-
Net change of participation in subsidiaries
-
-
-
-
-
-
3.5
3.5
(173.4)
(169.9)
Dividend distribution
-
-
-
-
-
-
(426.2)
(426.2)
-
(426.2)
Acquisition of treasury shares
-
-
(193.0)
-
-
-
-
(193.0)
-
(193.0)
Share option plans
-
(0.2)
-
-
-
-
-
(0.2)
-
(0.2)
Balance as at December 31, 2021
1,292.6
462.6
(157.1)
440.7
(168.6)
(3,314.1)
3,414.4
1,970.5
1.7
1,972.2
Balance as at January 1, 2022
1,292.6
462.6
(157.1)
440.7
(168.6)
(3,314.1)
3,414.4
1,970.5
1.7
1,972.2
Profit for the year
-
-
-
-
-
-
388.6
388.6
0.1
388.7
Other comprehensive income
-
-
-
-
29.8
-
-
29.8
-
29.8
Total comprehensive income
-
-
-
-
29.8
-
388.6
418.4
0.1
418.5
Cancellation of treasury shares (Note 16)
(65.3)
(23.3)
373.6
-
-
-
(285.0)
-
-
-
Expenses related to subsidiary’s share capital increase
-
-
-
-
-
-
(0.1)
(0.1)
-
(0.1)
Subsidiary's share capital reduction (Note 9)
-
-
-
-
-
-
-
-
(0.8)
(0.8)
Sale of subsidiary (Note 9)
-
-
-
-
-
-
-
-
(0.5)
(0.5)
Dividend distribution (Note 18)
-
-
-
-
-
-
(250.0)
(250.0)
-
(250.0)
Acquisition of treasury shares (Note 16)
-
-
(290.0)
-
-
-
-
(290.0)
-
(290.0)
Share option plans
-
(0.4)
-
-
-
-
-
(0.4)
-
(0.4)
Balance as at December 31, 2022
1,227.3
438.9
(73.5)
440.7
(138.8)
(3,314.1)
3,267.9
1,848.4
0.5
1,848.9
ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 202 2 AND FOR THE YEAR THEN ENDED
The accompanying notes on pages 115-181 form an integral part of these financial statements. 113
STATEMENT OF CHANGES IN EQUITY (SEPARATE)
(Amounts in millions of Euro)
Share capital
Share premium
Treasury shares
Statutory reserve
Foreign exchange and other reserves
Retained earnings
Total equity
Balance as at January 1, 2021
1,330.6
476.4
(132.2)
440.7
(27.9)
1,171.6
3,259.2
Profit for the year
-
-
-
-
-
563.7
563.7
Other comprehensive income / (loss)
-
-
-
-
(4.9)
-
(4.9)
Total comprehensive income / (loss)
-
-
-
-
(4.9)
563.7
558.8
Cancellation of treasury shares
(38.0)
(13.6)
168.1
-
-
(116.5)
-
Dividend distribution
-
-
-
-
-
(426.2)
(426.2)
Acquisition of treasury shares
-
-
(193.0)
-
-
-
(193.0)
Share option plans
-
(0.2)
-
-
-
-
(0.2)
Balance as at December 31, 2021
1,292.6
462.6
(157.1)
440.7
(32.8)
1,192.6
3,198.6
Balance as at January 1, 2022
1,292.6
462.6
(157.1)
440.7
(32.8)
1,192.6
3,198.6
Profit for the year
-
-
-
-
-
557.8
557.8
Other comprehensive income
-
-
-
-
12.3
-
12.3
Total comprehensive income
-
-
-
-
12.3
557.8
570.1
Cancellation of treasury shares (Note 16)
(65.3)
(23.3)
373.6
-
-
(285.0)
-
Dividend distribution (Note 18)
-
-
-
-
-
(250.0)
(250.0)
Acquisition of treasury shares (Note 16)
-
-
(290.0)
-
-
-
(290.0)
Share option plans
-
(0.4)
-
-
-
-
(0.4)
Balance as at December 31, 2022
1,227.3
438.9
(73.5)
440.7
(20.5)
1,215.4
3,228.3
ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 20 22 AND FOR THE YEAR THEN ENDED
The accompanying notes on pages 115-181 form an integral part of these financial statements. 114
STATEMENTS OF CASH FLOWS (CONSOLIDATED AND SEPARATE)
GROUP
COMPANY
(Amounts in millions of Euro)
Notes
2022
2021
2022
2021
Cash flows from operating activities
Profit before tax
554.9
719.4
645.3
699.3
Adjustments for:
Depreciation, amortization and impairment
4,5,7,8,9
795.1
667.6
383.7
364.8
Costs related to voluntary leave schemes
20
39.4
(121.8)
10.7
(129.9)
Provision for staff retirement indemnities
20
3.9
(5.0)
1.5
5.6
Provision for youth account
20
(0.9)
(1.7)
(0.9)
(1.7)
Foreign exchange differences, net
(1.6)
(1.5)
(0.3)
(1.7)
Interest income
(2.7)
(1.0)
(1.3)
(1.1)
Dividend income
9
-
-
(395.5)
(200.9)
(Gains) / losses from investments and other financial assets – Impairment
9,10,13
-
50.4
82.3
(42.5)
Interest and related expenses
39.9
45.0
27.0
30.9
Working capital adjustments:
Decrease / (increase) in inventories
(16.0)
(11.3)
(6.6)
(1.7)
Decrease / (increase) in receivables
18.7
(66.6)
11.0
(71.0)
(Decrease) / increase in liabilities (except borrowings)
45.6
89.2
(1.5)
64.0
Plus /(Minus):
Payment for voluntary leave schemes
20
(45.6)
(56.3)
(14.5)
(44.6)
Payment of staff retirement indemnities and youth account, net of employees' contributions
20
(9.2)
(10.3)
(8.6)
(9.7)
Interest and related expenses paid (except leases)
(24.9)
(27.7)
(21.7)
(24.0)
Interest paid for leases
5
(8.7)
(15.4)
(5.6)
(6.4)
Income tax paid
(70.7)
(115.5)
(5.0)
(7.3)
Net cash flows from operating activities of discontinued operations
-
86.7
-
-
Net cash flows from operating activities
1,317.2
1,224.2
700.0
622.1
Cash flows from investing activities
Return of capital invested in subsidiary
9
-
-
0.7
1.0
Investment in subsidiaries
9
-
-
(29.5)
(61.9)
Sale or maturity of financial assets
13
0.7
0.3
-
-
Purchase of financial assets
10
(0.6)
-
(0.6)
-
Repayment of loans receivable
20
7.2
7.2
7.2
7.2
Repayment of loans granted to subsidiary
10
-
-
4.5
-
Purchase of property, plant and equipment and intangible assets
(639.5)
(586.0)
(414.8)
(317.5)
Proceeds / (payments) related to disposal of subsidiaries / investments
9
(8.3)
288.3
(9.1)
288.3
Cash and cash equivalents of subsidiaries disposed
9
(0.7)
(89.3)
-
-
Movement in restricted cash
-
0.5
-
-
Interest received
2.7
1.0
1.3
1.1
Dividends received
28
-
-
435.5
311.8
Net cash flows from investing activities of discontinued operations
-
(57.5)
-
-
Net cash flows from / (used in) investing activities
(638.5)
(435.5)
(4.8)
230.0
Cash flows from financing activities
Acquisition of treasury shares
16
(293.6)
(190.3)
(293.6)
(190.3)
Subsidiary's share capital reduction to minority shareholders
9
(0.8)
-
-
-
Expenses related to subsidiary's share capital increase
9
(0.1)
-
-
-
Proceeds from loans
19
300.0
350.0
190.0
451.5
Repayment of loans
19
(397.7)
(404.4)
(419.6)
(446.2)
Lease repayments
5
(83.3)
(70.0)
(32.1)
(37.2)
Financial liabilities related to wallets
24
4.0
-
-
-
Dividends paid to Company’s owners
18
(249.9)
(426.1)
(249.9)
(426.0)
Net cash flows from financing activities of discontinued operations
-
(5.7)
-
-
Net cash flows used in financing activities
(721.4)
(746.5)
(805.2)
(648.2)
Net increase / (decrease) in cash and cash equivalents
(42.7)
42.2
(110.0)
203.9
Cash and cash equivalents, at the beginning of the year
630.7
516.2
274.0
105.5
Net foreign exchange differences
2.1
(1.0)
1.1
-
Transfer to spin-off activities
9
-
-
(1.4)
(35.4)
Cash and cash equivalents of disposal group classified as held for sale
-
73.3
-
-
Cash and cash equivalents, at the end of the year
15
590.1
630.7
163.7
274.0
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
115
1. CORPORATE INFORMATION
Hellenic Telecommunications Organization S.A. (“Company”, “OTE” or “parent”), was incorporated as a société anonyme in Athens, Greece in 1949, and is listed in the Greek General Commercial Registry ( Γ . Ε . ΜΗ .) with the unique number 001037501000. The registered office is located at 99 Kifissias Avenue – 151 24 Maroussi Athens, Greece , and the website is
www.cosmote.gr
. The
Company is listed on the Athens Exchange. Until September 19, 2010, OTE ADRs (American Depositary Receipts) were also listed on the New York Stock Exchange. Following OTE’s delisting from NYSE, OTE ADRs now trade in the US OTC (Over the Counter) market. OTE GDRs (Global Depositary Receipts) are also listed on the London Stock Exchange.
OTE’s principal activities are the provision of telecommunications and related services.
Effective from February 6, 2009, the financial statements are included in the consolidated financial statements of DEUTSCHE TELEKOM AG (full consolidation method), which has its registered office in Germany and as of December 31, 2022 holds a 50 . 9% interest in OTE (Note 16).
The OTE Group (“Group”) includes other than the parent Company, all the entities which OTE controls directly or indirectly. The financial statements of the consolidated non-listed entities, which cumulatively represent more than 3.0% of the consolidated total revenues, or consolidated total assets, or consolidated total net profit excluding non-controlling interest, will be available, upon respective approvals, in the parent Company’s website,
https://www.cosmote.gr/cs/otegroup/en/oikonomikes_katastaseis_ etairiwn_omilou.html
.
The Annual Consolidated and Separate Financial Statements (“financial statements”) as of December 31, 2022 and for the year then ended, were approved for issuance by the Board of Directors on February 22, 2023, and are subject to the final approval of OTE’s General Assembly.
The total numbers of Group and Company employees as of December 31, 2022 and 2021 is as follows:
GROUP
COMPANY
December 31, 2022
11,020
2,510
December 31, 2021
11,453
2,557
The consolidated financial statements include the financial statements of OTE and the following subsidiaries which OTE controls directly or indirectly:
GROUP's OWNERSHIP INTEREST
ENTITY NAME
LINE OF BUSINESS
COUNTRY
2022
2021
COSMOTE MOBILE TELECOMMUNICATIONS SINGLE MEMBER S.A. (“COSMOTE”)
Mobile telecommunications services
Greece
100.00%
100.00%
COSMO-ONE HELLAS MARKET SITE S.A. (“COSMO- ONE”)
E-commerce services
Greece
-
61.74%
OTE PLC
Financing services
U.K.
100.00%
100.00%
OTESAT-MARITEL S.A. (“OTESAT-MARITEL”)
Satellite telecommunications services
Greece
94.09%
94.09%
COSMOTE TECHNICAL SERVICES S.A. ("CTS")
Technical support services
Greece
100.00%
100.00%
ΟΤΕ ESTATE S.A. (“ΟΤΕ ESTATE”)
Real estate
Greece
100.00%
100.00%
OTE INTERNATIONAL SOLUTIONS SINGLE MEMBER S.A. (“OTE GLOBE”)
Wholesale telephony services
Greece
100.00%
100.00%
OTE INSURANCE AGENCY S.A. (“OTE INSURANCE”)
Insurance brokerage services
Greece
100.00%
100.00%
ΟΤΕ ACADEMY S.A. (“OTE ACADEMY”)
Training services
Greece
100.00%
100.00%
TELEKOM ROMANIA MOBILE COMMUNICATIONS S.A. (“TELEKOM ROMANIA MOBILE”)
Mobile telecommunications services
Romania
100.00%
100.00%
GERMANOS S.A. (“GERMANOS”)
Retail services
Greece
100.00%
100.00%
COSMOTE E-VALUE
Marketing services
Greece
100.00%
100.00%
MOBILBEEEP LTD
Retail services
Greece
100.00%
100.00%
COSMOTE TV PRODUCTIONS
TV productions and services
Greece
100.00%
100.00%
E-VALUE DEBTORS NOTIFICATION ONE PERSON LTD (“E-VALUE LTD”)
Overdue accounts management
Greece
100.00%
100.00%
COSMOHOLDING INTERNATIONAL B.V.
Investment holding entity
Netherlands
100.00%
100.00%
E-VALUE INTERNATIONAL S.A.
Marketing services
Romania
100.00%
100.00%
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
116
GROUP's OWNERSHIP INTEREST
ENTITY NAME
LINE OF BUSINESS
COUNTRY
2022
2021
OTE RURAL NORTH SPECIAL PURPOSE DEVELOPMENT AND MANAGEMENT OF BROADBAND INFRASTRUCTURE S.A. (“OTE RURAL NORTH”)
Wholesale broadband and infrastructure services
Greece
100.00%
100.00%
OTE RURAL SOUTH SPECIAL PURPOSE DEVELOPMENT AND MANAGEMENT OF BROADBAND INFRASTRUCTURE S.A. (“OTE RURAL SOUTH ”)
Wholesale broadband and infrastructure services
Greece
100.00%
100.00%
UltrafastOTE SINGLE MEMBER SOCIETE ANONYME
S.P.V. (“UltrafastOTE”)
Wholesale broadband and infrastructure services
Greece
100.00%
-
COSMOTE PAYMENTS - ELECTRONIC MONEY SERVICES SINGLE MEMBER S.A. (“COSMOTE PAYMENTS”)
Electronic money services
Greece
100.00%
100.00%
COSMOTE GLOBAL SOLUTIONS N.V.
ICT services
Belgium
100.00%
100.00%
ESTABLISHMENT OF UltrafastOTE
On April 14, 2022, UltrafastOTE SINGLE MEMBER SOCIETE ANONYME S.P.V. (“UltrafastOTE”) was established with a share capital of Euro 15.0. The entity is wholly owned by OTE and its purpose is the development of network infrastructure and provision of wholesale broadband services in the framework of a service concession arrangement between public and private sectors for the implementation of the project "Ultra-Fast Broadband Infrastructure".
AGREEMENT FOR THE SALE OF COSMO-ONE
On July 25, 2022, the Group completed the sale of COSMO-ONE through the transfer of its 61.74% stake to SOFT ONE TECHNOLOGIES S.A. for a total consideration of Euro 2.0 (Note 9).
MERGER THROUGH ABSORPTION OF OTE GLOBE
In July 2022, OTE Board of Directors approved the merger by absorption of its wholly owned subsidiary, OTE GLOBE. The transaction was completed on January 2, 2023 upon registration in the General Commercial Registry (Γ.Ε.ΜΗ.).
2. BASIS OF PREPARATION
The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”).
The financial statements have been prepared on a historical cost basis, except for financial assets at fair value through profit or loss, which have been measured at fair values in accordance with IFRS.
The financial statements have been prepared based on a going concern basis.
The financial statements are presented in millions of Euro, except when otherwise indicated.
Significant accounting judgments, estimates and assumptions
The preparation of the financial statements requires management to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities included in the financial statements. On an ongoing basis, management evaluates its estimates and judgements, including those related to legal contingencies, allowance for expected credit losses, the estimated useful life of non-financial assets, impairment of property, plant and equipment, impairment of goodwill, impairment of intangible assets, impairment of investments, reserve for staff retirement indemnities and youth account, recognition of revenues and expenses and income taxes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the bases for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The key estimates and assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. Further details on impairment testing are disclosed in Note 6.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
117
Provision for income taxes
The provision for income taxes in accordance with IAS 12 “Income taxes”, are the amounts expected to be paid to the taxation authorities and includes provision for current income taxes reported and the potential additional tax that may be imposed as a result of audits by the taxation authorities. Group entities are subject to income taxes in various jurisdictions and significant management judgment is required in determining provision for income taxes. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which the Group and the Company operate, or unpredicted results from the final determination of each year’s liability by tax authorities. These changes could have a significant impact on the Group’s and the Company’s financial position. Where the actual additional taxes payable are different from the amounts that were initially recorded, these differences will impact the income tax and deferred tax provisions in the period in which such a determination is made. Further details are provided in Note 23.
Deferred tax assets and liabilities
Deferred income tax assets and liabilities have been provided for the tax effects of temporary differences between the carrying amount and tax base of such assets and liabilities, using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused losses can be utilized. The Group and the Company have considered future taxable income and followed ongoing feasible and prudent tax planning strategy in the assessment of the recoverability of deferred tax assets. The accounting estimate related to deferred tax assets requires management to make assumptions regarding the timing of future events, including the probability of expected future taxable income and available tax planning opportunities. Further details are provided in Note 23.
Provision for expected credit losses of trade receivables and contract assets
The Group and the Company apply the IFRS 9 simplified approach to measure expected credit losses using a lifetime expected loss allowance for all trade receivables and contract assets.
The Group and the Company establish allowance for expected credit losses sufficient to cover reasonably estimable loss for these accounts. Because of the number of accounts, it is not practical to review the collectability of each account; therefore, at each reporting date all accounts receivable are assessed based on historical trends, statistical information, future expectations regarding suspended or cancelled customers, reactivation rates for suspended or cancelled customers and collection rates for amounts due from cancelled customers. Domestic and international operators are examined and assessed on an individual basis. The balance of such allowance for expected credit losses is adjusted by recording a charge to the income statement of the reporting period. Any amount written off with respect to customer account balances is charged against the existing allowance for expected credit losses. Additional details are provided in Note 12 and Note 30.
Post retirement and other defined benefit plans
Staff Retirement Indemnities and Youth Account obligations are calculated at the discounted present value of the future retirement benefits and benefits to children of employees deemed to have accrued at year-end. Retirement and Youth Account obligations are calculated on the basis of financial and actuarial assumptions that require management to make assumptions regarding discount rates, pay increases, withdrawal rates, mortality and disability rates, retirement ages and other factors. Changes in these key assumptions can have a significant impact on the obligation and pension costs for the period. Net pension costs for the period consist of the present value of benefits earned in the year, interest costs on the benefits obligation, prior service costs and actuarial gains or losses. The Staff Retirement Indemnities and Youth Account benefit obligations are not funded. Due to the long term nature of these defined benefit plans, these assumptions are subject to a significant degree of uncertainty. Further details are provided in Note 20.
Estimating the useful life of non-financial assets
The Group and the Company must estimate the useful life of property, plant and equipment and intangible assets recognized at acquisition or as a result of a business combination. These estimates are revisited at least on an annual basis taking into account new developments and market conditions.
Contingent liabilities and provisions
The Group and the Company are currently involved in various claims and legal proceedings. Periodically, the Group and the Company review the status of each significant matter and assess potential financial exposure, based on the advice of legal counsel. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reliably estimated, the Group and the Company recognize a provision for the estimated loss. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. As additional information becomes available, the Group and the Company reassess the potential liability related to pending claims and litigation and may revise assessments of the probability of an unfavorable outcome and the related estimate of potential loss. Such revisions in the estimates of the potential liabilities could have a material impact on the Group’s or the Company’s financial position and results of operations.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
118
Impairment of property, plant and equipment
The determination of impairment of property, plant and equipment involves the use of estimates that include, but are not limited to, the cause, timing and amount of the impairment. Impairment is based on a large number of factors, such as changes in current competitive conditions, expectations of growth in the telecommunications industry, increased cost of capital, the future availability of financing, technological obsolescence, discontinuance of services, current replacement costs, prices paid in comparable transactions and other changes in circumstances that indicate an impairment exists. The recoverable amount is typically determined using a discounted cash flow method. The identification of impairment indicators, as well as the estimation of future cash flows and the determination of fair values for assets (or groups of assets) require management to make significant judgments concerning the identification and validation of impairment indicators, expected cash flows, applicable discount rates, useful lives and residual values.
Determining the lease term of contracts with renewal and termination options – Accounting by lessee
The Group and the Company determine the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group and the Company have certain lease contracts that include extension and termination options and apply judgement in evaluating whether it is reasonably certain to exercise or not to exercise the option to renew or terminate the lease. For this purpose, all relevant factors that create an economic incentive to exercise either the renewal or termination are considered. After the commencement date, the Group and the Company reassess the lease term if there is a significant event or change in circumstances that are within their control and affect their ability to exercise or not to exercise the option to renew or to terminate a lease (e.g. construction of significant leasehold improvements or significant customization to the leased asset, ability to replace the leased assets without significant cost or business disruption). Additional details are provided in Note 5.
Leases - Estimating the incremental borrowing rate
The Group and the Company cannot readily determine the interest rate implicit in the lease, therefore, they use the Group’s incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.
The Group’s IBR is determined by using maturity-related risk-free interest rates which are increased with the Group’s derived credit spread and adjusted with a liquidity risk premium. Therefore, the Group estimates the IBR using observable inputs where available and make certain estimations and adjustments where no observable inputs are available.
New standards, amendments to standards and interpretations: Certain new standards, amendments to standards and interpretations have been issued that are mandatory for periods beginning on or after January 1, 2022.
Standards and Interpretations effective for the current financial year
• IAS 16 (Amendment) “ Property, plant and equipment – Proceeds before intended use ”: The amendment prohibits an entity from deducting from the cost of an item of property, plant and equipment any proceeds received from selling items produced while the entity is preparing the asset for its intended use. It also requires entities to separately disclose the amounts of proceeds and costs relating to such items produced that are not an output of the entity’s ordinary activities.
• IAS 37 (Amendment) “ Onerous contracts – Cost of fulfilling a contract ” : The amendment clarifies that ‘costs to fulfil a contract’ comprise the incremental costs of fulfilling that contract and an allocation of other costs that relate directly to fulfilling contracts. The amendment also clarifies that, before a separate provision for an onerous contract is established, an entity recognises any impairment loss that has occurred on assets used in fulfilling the contract, rather than on assets dedicated to that contract.
• IFRS 3 (Amendment) “ Reference to the Conceptual Framework ” : The amendment updated the standard to refer to the 2018 Conceptual Framework for Financial Reporting, in order to determine what constitutes an asset or a liability in a business combination. In addition, an exception was added for some types of liabilities and contingent liabilities acquired in a business combination. Finally, it is clarified that the acquirer should not recognise contingent assets, as defined in IAS 37, at the acquisition date.
• IFRS 16 (Amendment) “ Covid-19-Related rent concessions ” : The amendment extends the application period of the practical expedient in relation to rent concessions by one year to cover rental concessions that reduce leases due only on or before June 30, 2022.
• Annual Improvements to IFRS Standards 2018–2020 :
• IFRS 9 “Financial instruments” : The amendment addresses which fees should be included in the 10% test for derecognition of financial liabilities. Costs or fees could be paid to either third parties or the lender. Under the amendment, costs or fees paid to third parties will not be included in the 10% test.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
119
• IFRS 16 “Leases” : The amendment removed the illustration of payments from the lessor relating to leasehold improvements in Illustrative Example 13 of the standard in order to remove any potential confusion about the treatment of lease incentives.
Standards and Interpretations effective for subsequent periods
A number of new standards and amendments to standards and interpretations are effective for subsequent periods and have not been applied in preparing these consolidated and separate financial statements. The Group is currently investigating the impact of the new standards and amendments on its financial statements.
• IAS 1 (Amendments) “Presentation of Financial Statements” and IFRS Practice Statement 2 “Disclosure of Accounting policies” (effective for annual periods beginning on or after January 1, 2023): The amendments require companies to disclose their material accounting policy information and provide guidance on how to apply the concept of materiality to accounting policy disclosures.
• IAS 8 (Amendments) “Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates” (effective for annual periods beginning on or after January, 1 2023): The amendments clarify how companies should distinguish changes in accounting policies from changes in accounting estimates.
• IΑS 12 (Amendments) “Deferred tax related to Assets and Liabilities arising from a Single Transaction” (effective for annual periods beginning on or after January 1, 2023): The amendments require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. This will typically apply to transactions such as leases for the lessee and decommissioning obligations.
• IFRS 17 “Insurance contracts” and Amendments to IFRS 17 (effective for annual periods beginning on or after January 1, 2023): IFRS 17 has been issued in May 2017 and, along with the amendments to IFRS 17 issued in June 2020, supersedes IFRS 4. IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the Standard and its objective is to ensure that an entity provides relevant information that faithfully represents those contracts. The new standard solves the comparison problems created by IFRS 4 by requiring all insurance contracts to be accounted for in a consistent manner. Insurance obligations will be accounted for using current values instead of historical cost.
• IFRS 17 (Amendment) “Initial Application of IFRS 17 and IFRS 9 – Comparative Information” (effective for annual periods beginning on or after January 1, 2023): The amendment is a transition option relating to comparative information about financial assets presented on initial application of IFRS 17. The amendment is aimed at helping entities to avoid temporary accounting mismatches between financial assets and insurance contract liabilities, and therefore improve the usefulness of comparative information for users of financial statements.
• IAS 1 (Amendment) “Classification of liabilities as current or non-current” (effective for annual periods beginning on or after January 1, 2024): The amendment clarifies that liabilities are classified as either current or non-current depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date. The amendment also clarifies what IAS 1 means when it refers to the ‘settlement’ of a liability. The amendment has not yet been endorsed by the EU .
• IAS 1 (Amendment) “Non-Current Liabilities with Covenants” (effective for annual periods beginning on or after January 1, 2024): The amendments specify that only covenants that an entity is required to comply with on or before the end of the reporting period affect the entity’s right to defer settlement of a liability for at least twelve months after the reporting date (and therefore must be considered in assessing the classification of the liability as current or non-current). Such covenants affect whether the right exists at the end of the reporting period, even if compliance with the covenant is assessed only after the reporting date. The right to defer settlement is not affected if an entity only has to comply with a covenant after the reporting period. However, if the entity’s right to defer settlement of a liability is subject to the entity complying with covenants within twelve months after the reporting period, an entity discloses information that enables users of financial statements to understand the risk of the liabilities becoming repayable within twelve months after the reporting period. The amendment has not yet been endorsed by the EU.
• IFRS 16 (Amendment) “Lease Liability in a Sale and Leaseback” (effective for annual periods beginning on or after January 1, 2024): The amendments add subsequent measurement requirements for sale and leaseback transactions that satisfy the requirements in IFRS 15 “Revenue from Contracts with Customers” to be accounted for as a sale. The amendments require the seller-lessee to determine “lease payments” or “revised lease payments” such that the seller- lessee does not recognize a gain or loss that relates to the right of use retained by the seller-lessee, after the commencement date. The amendment has not yet been endorsed by the EU.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
120
Changes in accounting policies
Gross vs. Net Disclosure - Change in principal/agent consideration
In cases where the Group is in an intermediary position between a supplier and a customer, it must be assessed whether the Group itself supplies the relevant product or provides the service requested by the customer as a principal or merely acts as an agent for the supplier. The outcome determines whether OTE Group can recognize revenue on a gross basis (as a principal) or net of the costs incurred to the supplier, i.e., only in the amount of the remaining margin (as an agent). The determining factor is control over the specified good or service. Depending on the facts and circumstances, the specified good that a company controls as principal may also be a right to the third party’s good or service. For the Group, the question arises particularly in the case of branded digital products (e.g., streaming services, software licenses, cloud-based software as a service) provided by and purchased from third parties and sold to customers as part of its product portfolio.
Under the Group’s previous interpretation, for considering itself to be principal it was sufficient it obtains from the supplier a contractual, enforceable right to purchase the supplier’s predefined products “on demand” at any time at predefined prices and to resell them to customers in its own name and for its own account at a price determined at its own discretion. In light of the IFRS Interpretations Committee’s agenda decision published in May 2022 on transactions involving the commercial resale of software, the Group has changed its accounting practices with respect to distinguishing between gross and net revenues, effective from the start of the third quarter of 2022. In the context of the change in policy, the Group determines that it only acts as a principal and thus recognizes revenues on a gross basis in the aforementioned cases if the customer does not enter into any contractual relationship with the third-party supplier, the Group bears primary responsibility for product acceptance and customer support, and is in a position to set the price for the customer.
The change has primarily affected the areas of digital services (mainly licenses in ICT projects and content arrangements via telecom services), purchased from third parties and sold to customers as part of the Group’s product portfolio.
Compared to the previous accounting policy, this revision has led to a decrease in revenue as well as operating expenses of the Group and the Company. For the Group, revenues and operating expenses have been decreased by an amount of Euro 29.5 each for the year 2022 and Euro 32.0 for the year 2021, while for the Company, the effect for the year 2022 amounts to Euro 20.3 and Euro 22.8 for the year 2021, respectively. The change has no impact on the “Operating profit before financial and investing activities, depreciation, amortization and impairment” and the “Profit of the year”.
Prior-year comparatives were adjusted retrospectively. More specifically, the impact in the Income Statements of 2021 for the Group and the Company is presented below:
GROUP
COMPANY
(Amounts in millions of Euro)
2021 (before restatement)
Adjustments
2021 restated
2021 (before restatement)
Adjustments
2021 restated
Revenue
Other revenues
293.9
23.9
270.0
264.4
22.8
241.6
Total revenues from fixed business
1,830.0
23.9
1,806.1
1,552.2
22.8
1,529.4
Service revenues
1,172.2
8.1
1,164.1
-
-
-
Total revenues from mobile business
1,466.6
8.1
1,458.5
1.7
-
1.7
Total revenues
3,368.3
32.0
3,336.3
1,600.7
22.8
1,577.9
Interconnection and roaming costs
(447.1)
(5.7)
(441.4)
(89.2)
(4.1)
(85.1)
Merchandise costs
(325.0)
(13.7)
(311.3)
(57.9)
(13.7)
(44.2)
Other operating expenses, out of which:
Third party fees and services
(177.6)
(5.2)
(172.4)
(343.1)
(4.2)
(338.9)
Other sundry operating expenses
(164.9)
(7.4)
(157.5)
(102.0)
(0.8)
(101.2)
Total operating expenses before depreciation, amortization and impairment
(1,897.6)
(32.0)
(1,865.6)
(780.8)
(22.8)
(758.0)
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
121
3. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied for the preparation of the financial statements are as follows:
1. Basis of Consolidation and Investments
Subsidiaries
The consolidated financial statements are comprised of the financial statements of the Company and all subsidiaries controlled by the Company directly or indirectly. Control exists when the Group is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognized in accordance with IFRS 9 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.
The financial statements of the subsidiaries are prepared as of the same reporting period as the parent company, using consistent accounting policies. All intercompany balances, transactions and any intercompany profit or loss are eliminated in the consolidated financial statements.
Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in change of control are accounted for as equity transactions. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interest are also recorded in equity. In the consolidated statement of financial position an amount of Euro 3,314.1 has been recognized at the acquisition date of non- controlling interest.
Disposal of subsidiaries
When the Group disposes of or ceases to have control or any retained interest in the subsidiary, it is remeasured to its fair value at the date of disposal or when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that subsidiary are reclassified to profit or loss.
Associates
Associates are those entities in which the Group has significant influence upon, but not control over their financial and operating strategy, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates in which the Group has significant influence are accounted for using the equity method of accounting. Under this method , the investment is initially recognized at cost and is adjusted to recognize the investor’s share of the profit or loss after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition.
The Group’s share of post-acquisition profit or loss is recognized in the income statement and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income.
Gains or losses from transactions with associates are eliminated to the extent of the interest in the associate. Dividends received from associates are eliminated against the carrying value of the investment. The associate’s value is adjusted for any accumulated impairment loss. When the Group’s share of losses exceeds the carrying amount of the investment, the carrying value of the investment is reduced to nil and recognition of further losses is discontinued, except to the extent the Group has created obligations or has made payments on behalf of the associate.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
122
Transactions between companies under common control
Transactions between companies under common control are excluded from the scope of IFRS 3. Therefore the Group (implementing the guidance of IAS 8 “Accounting policies, changes in accounting estimates and errors” for similar cases) accounts for such transactions using a method like “predecessor accounting”. Based on this principle, the Group consolidates the book values of the combined entities (without revaluation to fair values). The financial statements of the Group or the new entity after the transaction are prepared on the basis as if the new structure was in effect since the beginning of the first period which is presented in the financial statements and consequently the comparative figures are adjusted. The difference between the purchase price and the book value of the percentage of the net assets acquired is recognized directly in equity.
In the separate financial statements, investments in subsidiaries and associates are accounted for at cost adjusted for any impairment where necessary.
2. Foreign Currency Translation
OTE’s functional and presentation currency is the Euro. Transactions involving other currencies are translated into Euro at the exchange rates, ruling on the date of the transactions. At the reporting date, monetary assets and liabilities, which are denominated in foreign currencies, are retranslated at the exchange rates at that date. Gains or losses resulting from foreign currency translation are recognized in the income statement.
Non-monetary items denominated in foreign currencies that are measured at historical cost are translated at the exchange rate at the date of the initial transaction. Non-monetary items denominated in foreign currencies that are measured at fair value are retranslated at the exchange rates at the date that the fair value was determined. The foreign currency differences arising from the change in the fair value of these items are recognized in the income statement or directly in other comprehensive income depending on the underlying item.
Items included in the financial statements of each of the Group entities are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). Assets and liabilities of entities that have a functional currency different from the presentation currency, including goodwill and the fair value adjustments to the carrying amounts of assets and liabilities arising on acquisition, are translated into Euro using exchange rates ruling at the reporting date. Revenues and expenses are translated at rates prevailing at the date of the transaction. All resulting foreign exchange differences are recognized in other comprehensive income and are reclassified in the income statement on the disposal of the foreign operation.
3. Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the aggregate of the consideration transferred, the amount recognized for non-controlling interests and the acquisition date fair value of any previous equity interest held over the fair value of the identifiable net assets acquired. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in the income statement.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognized immediately as an expense and is not subsequently reversed.
4. Telecommunication licenses
Telecommunication licenses are recognized at historical cost. These licenses have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method over their useful life, being between 1 and 25 years.
5. Other intangible assets
Intangible assets acquired separately are recognized at historical cost, while those acquired from a business combination are recognized at fair value on the date of acquisition. Subsequently, they are carried at cost less accumulated amortization and accumulated impairment losses. All intangible assets have a finite useful life and are amortized on a straight-line basis over their useful life. The useful life of intangible assets is reviewed on an annual basis, and adjustments, where applicable, are made prospectively.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
123
The main categories of intangible assets are as follows:
Brand name : Recognized on acquisition of GERMANOS group during 2006. The brand name was initially determined to have an indefinite useful life. During 2008, the useful life was reassessed and it was determined to be 15 years from the end of October 2008.
Franchise agreements : Recognized on acquisition of GERMANOS group. These agreements have a useful economic life of 20 years.
Software: The useful economic life is 1 to 10 years.
TV broadcasting rights : The useful economic life is 1 to 4 years.
Concession rights : 15 years and 18 years (Note 3, paragraph 31).
6. Property, Plant and Equipment
Items of property, plant and equipment are measured at historical cost, net of subsidies received, plus interest costs incurred during periods of construction, less accumulated depreciation and any impairment in value.
Subsidies are presented as a reduction of the cost of property, plant and equipment and are recognized in the income statement over the estimated life of the assets through reduced depreciation expense.
Construction in progress is recorded as part of property, plant and equipment and depreciation on the self constructed assets commences when the asset is available for use. The cost of self-constructed assets includes the cost of materials, direct labor costs, borrowing costs capitalized and relevant general overhead costs. Investment supplies comprise of assets to be utilized in the construction of assets.
The present value of the expected retirement costs, for a relevant asset, is included in the cost of the respective asset if the recognition criteria for a provision are met and are depreciated accordingly.
Repairs and maintenance costs are expensed as incurred. The cost and related accumulated depreciation of assets retired or sold are removed from the corresponding accounts at the time of sale or retirement, and any gain or loss is recognized in the income statement.
When significant parts of the property, plant and equipment are required to be replaced at intervals, the Group recognizes such parts as individual assets with specific useful lives and depreciation.
Investment property consists of all property held to earn rentals or for capital appreciation and not used in the production or for administrative purposes . Investment property is measured using the cost model.
Depreciation is recognized on a straight-line basis over the estimated useful lives of property, plant and equipment, which are periodically reviewed. The estimated useful lives and the respective rates are as follows:
Estimated Useful Life
Depreciation Rates
Buildings – building installations
1 - 50 years
2.0% – 100.0%
Telecommunication equipment and installations:
Telecommunications line network
8 – 36 years
2.8% – 12.5%
Switching equipment
3 – 10 years
10.0% – 33.3%
Transmission equipment
4 – 10 years
10.0% – 25.0%
Broadband distribution network
2.5 – 8 years
12.5% – 40.0%
Radio equipment
5 – 10 years
10.0% – 20.0%
Other telecommunications equipment
4 – 15 years
6.7% – 25.0%
Miscellaneous other technical equipment and machinery
1 – 16 years
6.3% – 100.0%
Network buildings
10 – 18 years
5.6% – 10.0%
Transportation means
2 – 10 years
10.0% – 50.0%
Fixtures and furniture
1 – 1 0 years
10 . 0 % – 100.0%
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
124
7. Non- current Assets Held for Sale
The Group classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use, and a sale is considered highly probable. Immediately before the initial classification of a non-current asset (or a disposal group) as held for sale, the asset (or the assets and liabilities included in the disposal group) is measured in accordance with the applicable IFRS. Non-current assets (or disposal group) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell and any possible resulting impairment losses are recognized in the income statement. Any subsequent increase in fair value is recognized, but not in excess of the cumulative impairment loss which was previously recognized. While a non-current asset (or non-current assets that are included in a disposal group) is classified as held for sale, it is not depreciated or amortized.
Discontinued operations are excluded from the results of continuing operations and are presented separately as a single amount in the income statement.
8. Impairment of Non - Financial Assets (excluding goodwill)
The carrying values of the Group’s or the Company’s non-financial assets are tested for impairment, when there are indications that their carrying amount is not recoverable. In such cases, the recoverable amount is estimated and if the carrying amount of the asset exceeds its estimated recoverable amount, an impairment loss is recognized in the income statement. The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. In measuring value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to that asset. If an asset does not generate cash flows individually, the recoverable amount is determined for the cash generating unit to which the asset belongs. At each reporting date the Group and the Company assess whether there is an indication that an impairment loss recognized in prior periods may no longer exist. If any such indication exists, the Group and the Company estimate the recoverable amount of that asset and the impairment loss is reversed, increasing the carrying amount of the asset to its recoverable amount, to the extent that the recoverable amount does not exceed the carrying value of the asset that would have been determined (net of amortization or depreciation), if no impairment loss had been recognized for the asset in prior years.
9. Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Initial recognition and subsequent measurement of financial assets
The financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVPL). The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the business model within which the financial asset is held .
With the exception of trade receivables, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables are initially measured at the transaction price determined under IFRS 15 “Revenue from contracts with customers”.
In order for a financial asset to be classified and measured at amortised cost or fair value through other comprehensive income, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI criterion and is performed at an instrument level.
For the purpose of subsequent measurement, financial assets are classified in three categories:
- Financial assets at amortised cost (debt instruments)
- Financial assets at fair value through other comprehensive income
- Financial assets at fair value through profit or loss.
The Group and the Company hold no assets at fair value through other comprehensive income as of December 31, 2022.
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired. This category includes all financial assets of the Group, except for the investments in mutual funds which are measured at fair value through profit or loss (FVPL).
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognized in the income statement. Gains or losses arising from changes in the fair value are recognized in the income statement within “Gains / (losses) from investments and other financial assets - Impairment”.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
125
The fair values of quoted investments are based on quoted market bid prices. For investments where there is no quoted market price, fair value is determined using valuation techniques, unless the range of reasonable fair value estimates is significant and the probabilities of the various estimates cannot be reasonably assessed, where the entity is precluded from measuring these investments at fair value. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place are recognized on the settlement date (i.e. the date that the asset is transferred or delivered to the Group or the Company).
Impairment of financial assets
The Group and the Company assess at each reporting date, whether a financial asset or group of financial assets is impaired and recognize, if necessary, an allowance for Expected Credit Losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate.
ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables, contract assets and lease receivable the Group and the Company apply a simplified approach in calculating ECLs. Therefore, the Group and the Company do not track changes in credit risk, but instead recognize a loss allowance based on lifetime ECLs at each reporting date .
To measure the expected credit loss in relation to trade receivables, the Group has established a provision matrix relying on aging analysis, which is based on the Group’s historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. Further details on trade receivable are disclosed in Note 3, paragraph 13.
The expected credit loss in relation to contract assets, is measured based on the expected early contract termination rate, the penalty for early termination and its collectability rate.
For all other Group’s financial assets at amortized cost, the general approach is applied. These assets are considered to have low credit risk and any loss allowance is therefore limited to 12 months’ expected losses.
Derecognition of financial assets
A financial asset (or, a part of a financial asset or part of a group of similar financial assets) is derecognized when:
• the rights to receive cash flows from the asset have expired;
• the Group or the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or
• the Group or the Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the assets, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group or the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognize the transferred asset to the extent of its continuing involvement. In that case, the Group or the Company also recognize an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group or the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
Initial recognition and subsequent measurement of financial liabilities
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. For the purpose of subsequent measurement, financial liabilities are classified as financial liabilities at amortised cost or financial liabilities at fair value through profit or loss .
Derecognition of financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability. The difference in the respective carrying amounts is recognized in the income statement.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
126
Offsetting of financial assets and liabilities
Financial assets and liabilities are offset and the net amount is presented in the statement of financial position only when the Group or the Company has a legally enforceable right to set off the recognized amounts and intends either to settle such asset and liability on a net basis or to realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.
10. Derivative Financial Instruments and Hedging Instruments
Derivative financial instruments include interest rate swaps, currency swaps and other derivative instruments.
Derivatives and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value based on quoted market prices, if available, or based on valuation techniques such as discounted cash flows. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
For hedge accounting purposes, hedges are classified either as fair value hedges, where the exposure to changes in the fair value of a recognized asset or liability is being hedged, or as a cash flow hedge, where the exposure to variability in cash flows associated with a specifically identified risk which may be directly related to the recognized asset or liability is being hedged. When hedge accounting is applied, at the inception of the hedge there is formal documentation which includes identification of the hedging instrument, the hedged item, the hedging relationship, the nature of the risk being hedged and the risk strategy.
In a fair value hedge, the change in the fair value of a hedging instrument is recognized in the income statement. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the income statement.
In a cash flow hedge, the effective portion of the gain or loss on the hedging instrument is recognized in other comprehensive income in a cash flow hedge reserve, while any ineffective portion is recognized immediately in the income statement. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.
11. Financial Guarantee Contracts
Financial guarantee contracts issued by the Group or the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of the loss allowance determined in accordance with IFRS 9 “Financial Instruments” and the amount initially recognized less, where appropriate, the cumulative amount of income recognized in accordance with the principles of IFRS 15 “Revenue from contracts with customers”.
12. Inventories
Inventories are measured at the lower of cost and net realizable value. The cost is based on the weighted average cost method, where the average is calculated at the end of the period. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. When there is any subsequent increase of the net realizable value of inventories that have been previously written-down, the amount of the write- down is reversed.
13. Trade Receivables and Allowance for Expected Credit Losses
A receivable represents the Group’s or the Company’s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Trade receivables are initially recognized at their fair value which is equal to the transaction amount. Subsequently they are measured at amortized cost, less an allowance for expected credit losses (ECLs) based on lifetime ECLs at each reporting period. At each reporting date, trade receivables are either assessed individually for debtors such as other providers or collectively based on historical trends, statistical information and forward looking factors and a provision for the probable and reasonably estimated loss for these accounts is recorded. The balance of such allowance for expected credit losses is adjusted by recording a charge to the income statement at each reporting period. Any customer account balances written-off are charged against the existing allowance for expected credit losses.
14. Cash and Cash Equivalents - Restricted Cash
Cash and cash equivalents in the statement of financial position comprise cash in hand and short-term bank deposits with a maturity of up to three months at initial recognition.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
127
For the purposes of the cash flow statement, time deposits are considered to be cash and cash equivalents. Restricted cash is cash not available for immediate use. Such cash cannot be used by a company until a certain point or event in the future. In cases when restricted cash is expected to be used within one year after the reporting date, it is classified as a current asset. However, if restricted cash is not expected to be used within one year after the reporting date, it is classified as a non-current asset. Restricted cash is not included in line “Cash and cash equivalents”.
15. Current and Deferred Income Tax
Income tax for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
Current income tax is measured on the taxable income for the year using enacted or substantively enacted tax rates at the reporting date in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided on all temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases.
Deferred tax liabilities are recognized for all taxable temporary differences except:
• where the deferred tax liability arises from the initial recognition of goodwill of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
• in respect of temporary differences associated with investment in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized except:
• where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of goodwill of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
• in respect of temporary differences associated with investment in subsidiaries and associates, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
Deferred tax is measured at the tax rates that are expected to apply in the year when the asset is realized or liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilized.
16. Share Capital
Ordinary shares are classified as equity. Share capital issuance costs, net of related tax, are reflected as a deduction from Share Premium.
17. Treasury Shares
Treasury shares consist of OTE’s own equity shares, which are reacquired and not cancelled. Treasury shares do not reduce the number of shares issued but reduce the number of shares in circulation. Treasury shares are recognized at cost as a deduction from equity. Upon derecognition, the cost of the treasury share reduces the Share Capital and Share Premium and any difference is charged to Retained Earnings.
18. Leases
The Group assesses at contract inception whether a contract is, or contains, a lease . A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Accounting by lessee
The Group applies a single recognition and measurement approach for all leases (including short-term leases and leases of low- value assets). The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
128
i. Right-of-use assets
The Group and the Company recognize right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful life of the assets.
If ownership of the leased asset is transferred to the Group or the Company at the end of the lease term or its cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The Group and the Company have lease contracts for land and buildings (used as offices, retail shops, network sites), telecom equipment and machinery, vehicles and other equipment used in their operations. The lease contracts may contain both lease and non-lease components. The Group has elected not to separate non-lease components from lease components, and instead to account for each lease component and any associated non-lease components as a single combined lease component.
The right-of-use assets are also subject to impairment, as described in the accounting policy “8. Impairment of Non - Financial Assets (excluding goodwill)”.
ii. Lease liabilities
At the commencement date of the lease, the Group and the Company recognize lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group or the Company and payments of penalties for terminating the lease, if the lease term reflects the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group and the Company use the Group’s incremental borrowing rate because the interest rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced through the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a reassessment or modification of the lease contract.
Accounting by lessor
Leases in which the lessor does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. When assets are leased out under an operating lease, the asset is included in the statement of financial position based on the nature of the asset. Lease income on operating leases is recognized over the term of the lease on a straight-line basis.
A lease that transfers substantially all of the risks and rewards incidental to ownership of the leased item is classified as finance lease.
The lessor in a finance lease derecognizes the leased asset and recognizes a receivable in the amount of the net investment in the lease. The lease receivable is discounted using the effective interest method and the carrying amount is adjusted accordingly. Lease receivable is increased to reflect the accretion of interest and reduced through the lease proceeds made.
Subleases
When the Group is the intermediate lessor in a sublease agreement it classifies the sublease as finance lease or operating lease by reference to the right-of-use asset arising from the head lease and account for the head lease and the sublease as two different contracts. When the sublease is classified as finance lease, the right-of-use asset related to the head lease is derecognized and a lease receivable is recognized.
Several lease contracts for retail shops are subleased by the Group to third parties and most of them have been classified as finance leases, taking into consideration the lease term of the sublease in relation to the respective lease term of the head lease.
Details for the Group’s and the Company’s leases are included in Note 5.
19. Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period in which they incur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
129
20. Borrowings
All loans and borrowings are initially recognized at fair value, net of direct costs associated with the borrowing. After initial recognition, borrowings are measured at amortized cost. Gains and losses are recognized in the income statement over the period of the borrowings using the effective interest method.
21. Provisions
Provisions are recognized when the Group or the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are measured by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase of the provision due to the passage of time is recognized as a borrowing cost. Provisions are reviewed at each reporting date, and if it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, they are reversed. Provisions are used only for expenditures for which they were originally recognized. No provisions are recognized for future operating losses. Contingent assets and contingent liabilities are not recognized.
22. Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.
23. Employee Benefits
The Group operates various post-employment schemes including both defined contribution and defined benefit plans and other long-term benefit plans. For a description of the various plans refer to Note 20.
Defined Contribution Plans
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay any further amounts if the fund does not hold sufficient assets to pay benefits relating to service in the current and prior periods. Obligations for contributions to defined contribution plans are recognized as an expense as incurred.
Defined Benefit Plans
A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period. These obligations are calculated annually by independent actuaries using the Projected Unit Credit Method. The discount rate used is the yield of high quality European corporate bonds with maturity that approximates the term of the related obligation.
The current service cost of the defined benefit plan, recognized in the income statement in personnel costs, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes, curtailments and settlements. Past service costs are recognized immediately in the income statement. Actuarial gains or losses are recognized directly in other comprehensive income in the period in which they occur and are not reclassified to income statement in a subsequent period.
Other long-term employee benefits
The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans with the exception of the actuarial gains and losses being recognized in the income statement. These obligations are valued annually by independent actuaries.
Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognizes costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
130
24. Marketing
All marketing costs are expensed as incurred.
25. Research and Development Costs
Research costs are expensed as incurred. Development costs which do not fulfil the criteria for recognition as an asset are expensed as incurred.
26. Revenue from Contracts with Customers
Revenue from contracts with customers is recognized when control of the goods or services is transferred to the customer at an amount that reflects the consideration to which the Group or the Company expects to be entitled in exchange for those goods or services.
The Group is in the business of providing telecommunication services. Revenues from telecommunication services primarily consist of network services fees, connection fees, usage charges and sales of handsets and accessories.
The Group recognises revenue from fixed and mobile network services over time because the customer simultaneously receives and consumes the benefits provided by the Group. Revenues from connection fees, which generally do not meet the criteria to be recognized as a separate performance obligation, are recognized over the contract period.
Revenues from the sale of telecommunication equipment (e.g. mobile handsets and accessories) are recognized at a point in time, upon delivery of the equipment as it generally constitutes separate performance obligation.
The services and the telecommunication equipment are sold on their own in separately identified contracts with customers or together as a bundled package of goods and services. Where the contracts include multiple performance obligations, the transaction price is allocated to each performance obligation based on the stand-alone selling prices. Each performance obligation is accounted for separately. The Group uses the portfolio approach to combine contracts for the purposes of revenue recognition, rather than to account for each contract separately.
In the case of multiple-element arrangements with subsidized products delivered in advance ( e.g., mobile contract bundled together with the sale of handset) , revenues from the subsidized product delivered in advance are recognized upon delivery (at a point in time), while revenues from the provision of services are recognized over the period in which the services are rendered.
When the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, the Group presents the contract as a contract asset, excluding any amounts presented as a receivable. A contract asset is the Group’s right to consideration in exchange for goods or services that the entity has transferred to a customer.
Contract assets will be typically recovered between 12 to 24-month service contracts period which defines the normal operating cycle and is also frequently used at the Group. As a result, any contract asset recognized under a multiple-element arrangement will be also recovered in the entity’s normal operating cycle and is presented as current in the statement of financial position.
Contract assets’ development for the Group is essentially the result of:
• the earlier recognition of revenues in the case of multiple-element arrangements with subsidized products delivered in advance, based on these components’ relative stand-alone selling price within the contract,
• subsidized installation fees which are treated as separate performance obligation and therefore, the Group allocated the total consideration to each performance obligation of the contract (in proportion to its stand-alone selling price),
• in the case of sales through dealers, of contracts with subsidized products (or services) that are delivered in advance (e.g. mobile telephony contract plus handset), the subsidy cost to dealers is recognized against service revenues during the relative contract period.
The incremental costs of obtaining or fulfilling a contract are recognized as an asset when incurred and expensed over the period in which the corresponding benefit is received. These capitalized contract costs share characteristics of an intangible asset as they mainly represent acquisition costs of customer relationships. Therefore, the Group concluded to present, in accordance with the treatment of other fixed assets, all capitalized contract costs as non-current in the statement of financial position.
In general, incremental costs of obtaining or fulfilling a contract at Group level refer to:
• sales commissions to third-party dealers (indirect distribution channel),
• sales commissions to employees (direct distribution channel) and
• costs incurred to fulfil performance obligations under a contract once it is obtained, but before transferring goods or services to the customer.
Amortizations of contract costs are respectively presented as operating expenses in the income statement, i.e. either as “commission costs”, “personnel costs” or “other sundry operating expenses”.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
131
When customer pays consideration, or the Group has a right to an amount of consideration that is unconditional, before the Group transfers a good or service to the customer, the Group presents the contract as a contract liability when the payment is made or the payment is due (whichever is earlier). For the Group, contract liabilities are primarily the result of access fees charged to the customer in advance, unused airtime, contract liabilities from network Indefeasible Rights of Use (IRUs) and contract liabilities’ balances for connection fees. Some of the Group’s contract liabilities will be settled within a “regular” 12 to 24-month service contract and are also tied to a defined operating cycle. However, other might be settled over a period exceeding the “regular” 12 to 24-month service contract term. Therefore, the Group has concluded that the more prudent approach is to present:
• the amount of Contract liabilities expected to be settled within 12 months as current and
• the amount of Contract liabilities expected to be settled after more than 12 months as non-current.
27. Earnings per Share
Basic earnings per share are computed by dividing the profit for the year attributable to owners of the parent by the weighted average number of shares outstanding during each year. The weighted average number of ordinary shares outstanding during the year is the number of ordinary shares outstanding at the beginning of the year, adjusted by the number of ordinary shares bought back or issued during the year multiplied by a time-weighting factor. Diluted earnings per share are computed by dividing the profit for the year attributable to owners of the parent by the weighted average number of shares outstanding during the year adjusted for the impact of share-based payments.
28. Operating Segments
Operating segments are determined based on the Group’s legal structure and business activities, in line with the review performed by the Group’s chief operating decision makers. The reportable segments are determined using the quantitative thresholds required by IFRS 8. Information for operating segments that do not constitute reportable segments is combined and disclosed in the “Other” category. The accounting policies of the segments are the same with those followed for the preparation of the financial statements. Management evaluates segment performance based on (a) Operating profit before financial and investing activities, depreciation, amortization and impairment, (b) operating profit / (loss) before financial and investing activities and (c) profit / (loss) for the year.
29. Dividend distribution
Dividends declared to the shareholders are recognized as a liability in the period they are approved by the General Assembly of shareholders.
30. Share-Based Payment Transactions
Certain employees (including senior executives) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (“equity settled transactions”). The cost of equity settled transactions is measured by reference to the fair value at the date on which they are granted. The fair value is determined at the grant date, using an appropriate pricing model, and is allocated over the period in which the conditions are fulfilled. The cost of equity settled transactions is recognized, together with a corresponding increase to equity over the vesting period.
Where the terms of an equity settled transaction awards are modified, the minimum expense recognized is the expense as if terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the share based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.
31. Service concession arrangements
The Group’s service concession arrangements relate to the assignment of the development and operation of public broadband networks (the “Concessions”) by a public sector entity (the “Grantor”). Each concession relates to a specified area in Greece and Romania and is undertaken by Group’s subsidiaries (the “Operator(s)”) which have been separately granted for each concessions. The Grantor specifies the services that can be offered by the Group and the pricing of those services is regulated. The Grantor also controls the broadband network infrastructure which must be returned to the Grantor at the end of the arrangement. The operating period in Greece and Romania is 15 and 18 years, respectively.
Under this arrangement the Group recognises an intangible asset and a financial asset.
Intangible asset
The intangible asset corresponds to the right granted by the Grantor to the Operator to charge the telecommunication providers for using the infrastructure. It is included within “Other intangible assets”. Concession assets are capitalized on the basis of the cost of capital expenditure incurred in respect of the concession, net of subsidies received from the Grantor and including borrowing costs on qualifying capital expenditure. Subsequent to initial recognition, concession assets are measured at cost less accumulated amortization and impairment losses. Concession assets are amortized over their estimated useful life which is the concession period during which they are available for use.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
132
Financial asset (Guaranteed receipt from Grantor)
The financial asset is recognized to the extent of an unconditional right to receive cash from or at the direction of the Grantor for the development of the infrastructure. Financial assets resulting from the concession are recorded in the consolidated statement of financial position under “Other current assets”. Financial assets recognized as a result of the concession are measured at fair value upon initial recognition. Subsequent to initial recognition they are accounted for at amortized cost in accordance with IFRS 9 “Financial instruments”.
Construction or upgrade of a public service infrastructure
Revenues from construction contracts are recognized over time using the input method in accordance with IFRS 15 “Revenue from contracts with customers”. The Group measures the progress towards completion of the promised performance obligations on the basis of the percentage of total costs incurred at the reporting date.
The construction cost is recognized in the income statement under “Construction cost network” while the respective revenue is included in “Miscellaneous other revenues”.
Operation services
After the construction period, revenue from the operation of the infrastructure is recognized in accordance with the relevant standards, depending on the nature of the good or service provided.
Contractual obligations to maintain and restore the infrastructure
After the construction period, the contractual obligations to maintain or restore the infrastructure is accounted for in accordance with IAS 37 “Provisions, contingent liabilities and contingent assets”.
32. Reclassifications
Certain reclassifications have been made to prior year balances to conform to current year classifications. In addition certain reclassifications have been made within the Notes for comparability purposes. These reclassifications did not have any impact on the Group‘s or the Company’s equity or income statement. Further details of the nature of these reclassifications are disclosed in Note 31.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
133
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is analyzed as follows:
GROUP
LAND
BUILDINGS
TELECOM EQUIPMENT
FIXTURES, FURNITURE, TRANSPORTATION
CONSTRUCTION IN PROGRESS
INVESTMENT SUPPLIES
TOTAL
31/12/2020
Cost
39.9
666.5
10,898.0
438.5
165.8
36.7
12,245.4
Accumulated depreciation
(7.7)
(554.5)
(9,240.4)
(382.2)
-
-
(10,184.8)
Net book value 31/12/2020
32.2
112.0
1,657.6
56.3
165.8
36.7
2,060.6
Additions and transfers
-
5.5
331.3
13.3
272.7
70.7
693.5
Disposals and transfers - cost
-
(2.5)
(702.6)
(3.5)
(248.6)
(60.7)
(1,017.9)
Disposals - accumulated depreciation
-
2.5
702.0
3.5
-
-
708.0
Exchange differences - cost
-
(0.1)
(14.8)
(0.1)
(0.3)
-
(15.3)
Exchange differences - accumulated depreciation
-
0.1
13.4
0.1
-
-
13.6
Reallocation of impairment
(1.6)
1.6
-
-
-
-
-
Depreciation charge for the year - impairment
-
(18.7)
(324.5)
(17.9)
-
(1.1)
(362.2)
Net book value 31/12/2021
30.6
100.4
1,662.4
51.7
189.6
45.6
2,080.3
31/12/2021
Cost
39.9
669.4
10,511.9
448.2
189.6
45.6
11,904.6
Accumulated depreciation
(9.3)
(569.0)
(8,849.5)
(396.5)
-
-
(9,824.3)
Net book value 31/12/2021
30.6
100.4
1,662.4
51.7
189.6
45.6
2,080.3
Additions and transfers
-
50.1
339.1
16.5
304.6
106.1
816.4
Disposals and transfers - cost
-
(0.9)
(214.3)
(4.1)
(286.4)
(85.9)
(591.6)
Disposals - accumulated depreciation
-
0.9
214.3
4.0
-
-
219.2
Exchange differences - cost
-
-
0.3
-
-
-
0.3
Exchange differences - accumulated depreciation
-
-
(0.2)
-
-
-
(0.2)
Depreciation charge for the year - impairment
-
(16.2)
(394.1)
(18.6)
(10.6)
(3.8)
(443.3)
Sale of subsidiary - cost
-
-
-
(1.3)
-
-
(1.3)
Sale of subsidiary - accumulated amortization
-
-
-
1.3
-
-
1.3
Net book value 31/12/2022
30.6
134.3
1,607.5
49.5
197.2
62.0
2,081.1
31/12/2022
Cost
39.9
718.6
10,637.0
459.3
197.2
62.0
12,114.0
Accumulated depreciation
(9.3)
(584.3)
(9,029.5)
(409.8)
-
-
(10,032.9)
Net book value 31/12/2022
30.6
134.3
1,607.5
49.5
197.2
62.0
2,081.1
There are no restrictions on title on property, plant and equipment.
An impairment test was performed in TELEKOM ROMANIA MOBILE in 2022, since there were indications, based on its financial and operating performance, that the carrying value exceeds the recoverable amount. The key assumptions used in determining the value in use of this cash generating unit are described in Note 9.
As a result of the impairment test, an impairment loss on the property, plant and equipment of TELEKOM ROMANIA MOBILE amounting to Euro 84.3, was charged in the 2022 consolidated income statement and is included in the line “Depreciation, amortization and impairment”.
Property, plant and equipment includes investment property of Euro 17.0 as of December 31, 2022 (December 31, 2021: Euro 17.7), the fair value of which amounts to Euro 191.3 (December 31, 2021: Euro 176.7). The fair value of the investment property is based on valuation performed by an accredited independent valuer and the valuation methods and assumptions used, to a significant extent, are not based on observable market data (Level 3 of IFRS 13 - Fair value hierarchy).
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
134
Borrowing costs capitalized during the year ended December 31, 2022 and 2021 by the Group as part of the cost of qualifying assets amount to Euro 1.6 and Euro 2.2, respectively. The amounts were calculated based on an average rate of capitalization which was 1.3% and 1.5% for the year ended December 31, 2022 and 2021, respectively.
COMPANY
BUILDINGS
TELECOM EQUIPMENT
FIXTURES, FURNITURE, TRANSPORTATION
CONSTRUCTION IN PROGRESS
INVESTMENT SUPPLIES
TOTAL
31/12/2020
Cost
115.3
7,198.8
133.0
65.8
36.7
7,549.6
Accumulated depreciation
(85.5)
(6,108.5)
(105.3)
-
-
(6,299.3)
Net book value 31/12/2020
29.8
1,090.3
27.7
65.8
36.7
1,250.3
Spin-off - cost
(21.1)
(47.4)
(17.6)
-
-
(86.1)
Spin-off - accumulated depreciation
20.2
43.5
16.0
-
-
79.7
Additions and transfers
3.2
175.0
4.5
102.6
70.7
356.0
Disposals and transfers - cost
-
(618.1)
(0.5)
(112.7)
(60.7)
(792.0)
Disposals - accumulated depreciation
-
618.1
0.5
-
-
618.6
Depreciation charge for the year - impairment
(3.9)
(164.7)
(6.6)
-
(1.1)
(176.3)
Net book value 31/12/2021
28.2
1,096.7
24.0
55.7
45.6
1,250.2
31/12/2021
Cost
97.4
6,708.3
119.4
55.7
45.6
7,026.4
Accumulated depreciation
(69.2)
(5,611.6)
(95.4)
-
-
(5,776.2)
Net book value 31/12/2021
28.2
1,096.7
24.0
55.7
45.6
1,250.2
Spin-off - cost
-
-
(0.1)
-
-
(0.1)
Spin-off - accumulated depreciation
-
-
0.1
-
-
0.1
Additions and transfers
1.4
190.7
3.4
136.4
106.1
438.0
Disposals and transfers - cost
(0.1)
(70.6)
(0.2)
(100.4)
(85.9)
(257.2)
Disposals - accumulated depreciation
0.1
70.6
0.2
-
-
70.9
Depreciation charge for the year - impairment
(3.6)
(164.1)
(6.9)
-
(3.8)
(178.4)
Net book value 31/12/2022
26.0
1,123.3
20.5
91.7
62.0
1,323.5
31/12/2022
Cost
98.7
6,828.4
122.5
91.7
62.0
7,203.3
Accumulated depreciation
(72.7)
(5,705.1)
(102.0)
-
-
(5,879.8)
Net book value 31/12/2022
26.0
1,123.3
20.5
91.7
62.0
1,323.5
There are no restrictions on title on property, plant and equipment.
Borrowing costs capitalized during the year ended December 31, 2022 and 2021 by OTE as part of the cost of qualifying assets amount to Euro 1.6 and Euro 2.2, respectively. The amounts were calculated based on an average rate of capitalization which was 1.3% and 1.5% for the year ended December 31, 2022 and 2021, respectively.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
135
5. LEASES
Right-of-use assets are analyzed as follows:
GROUP
LAND AND BUILDINGS
TELECOM EQUIPMENT AND MACHINERY
TRANSPORTATION AND OTHER EQUIPMENT
TOTAL
31/12/2020
Cost
400.1
66.3
32.4
498.8
Accumulated depreciation
(104.6)
(14.7)
(17.4)
(136.7)
Net book value 31/12/2020
295.5
51.6
15.0
362.1
Additions
61.4
4.6
12.1
78.1
Reductions - cost
(108.0)
(0.7)
(3.7)
(112.4)
Reductions - accumulated depreciation
5.5
0.3
2.2
8.0
Exchange differences - cost
(1.3)
-
-
(1.3)
Exchange differences - accumulated depreciation
0.6
-
-
0.6
Depreciation charge for the year
(55.9)
(6.2)
(8.3)
(70.4)
Net book value 31/12/2021
197.8
49.6
17.3
264.7
31/12/2021
Cost
352.2
70.2
40.8
463.2
Accumulated depreciation
(154.4)
(20.6)
(23.5)
(198.5)
Net book value 31/12/2021
197.8
49.6
17.3
264.7
Additions
60.3
8.9
10.5
79.7
Reductions - cost
(9.9)
(6.4)
(5.9)
(22.2)
Reductions - accumulated depreciation
7.0
6.4
5.1
18.5
Depreciation charge for the year
(60.4)
(5.4)
(8.2)
(74.0)
Sale of subsidiary - cost
-
-
(0.1)
(0.1)
Net book value 31/12/2022
194.8
53.1
18.7
266.6
31/12/2022
Cost
402.6
72.7
45.3
520.6
Accumulated depreciation
(207.8)
(19.6)
(26.6)
(254.0)
Net book value 31/12/2022
194.8
53.1
18.7
266.6
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
136
COMPANY
LAND AND BUILDINGS
TELECOM EQUIPMENT AND MACHINERY
TRANSPORTATION AND OTHER EQUIPMENT
TOTAL
31/12/2020
Cost
287.8
19.2
22.8
329.8
Accumulated depreciation
(74.2)
(8.4)
(11.7)
(94.3)
Net book value 31/12/2020
213.6
10.8
11.1
235.5
Spin-off - cost
(54.1)
-
(15.5)
(69.6)
Spin-off - accumulated depreciation
9.7
-
7.5
17.2
Additions
0.8
2.0
2.9
5.7
Reductions - cost
(2.8)
-
(0.7)
(3.5)
Reductions - accumulated depreciation
0.2
-
0.6
0.8
Depreciation charge for the year
(31.2)
(3.2)
(1.5)
(35.9)
Net book value 31/12/2021
136.2
9.6
4.4
150.2
31/12/2021
Cost
231.7
21.2
9.5
262.4
Accumulated depreciation
(95.5)
(11.6)
(5.1)
(112.2)
Net book value 31/12/2021
136.2
9.6
4.4
150.2
Spin-off - cost
-
-
(0.1)
(0.1)
Additions
17.2
0.2
1.2
18.6
Reductions - cost
(0.3)
(6.2)
(3.1)
(9.6)
Reductions - accumulated depreciation
0.3
6.2
2.8
9.3
Depreciation charge for the year
(32.1)
(2.2)
(1.5)
(35.8)
Net book value 31/12/2022
121.3
7.6
3.7
132.6
31/12/2022
Cost
248.6
15.2
7.5
271.3
Accumulated depreciation
(127.3)
(7.6)
(3.8)
(138.7)
Net book value 31/12/2022
121.3
7.6
3.7
132.6
The Company’s depreciation charge for the year includes an amount of Euro 32.1 (2021: Euro 31.3) in relation to lease agreements with related parties.
The consolidated and separate statement of financial position includes the following amounts related to lease liabilities:
GROUP
COMPANY
2022
2021
2022
2021
Lease liabilities (long-term portion)
182.1
189.2
103.7
126.5
Lease liabilities (short-term portion)
76.1
71.7
34.2
25.3
Total lease liabilities
258.2
260.9
137.9
151.8
The Group’s and the Company’s interest expense on lease liabilities amounts to Euro 8.7 (20 21 : Euro 15.4) and Euro 5.6 (2021: Euro 6.4), respectively. The Company’s interest expense includes an amount of Euro 5.2 (20 21 : Euro 6.0) in relation to interest expense on lease liabilities to related parties.
The Group’s and the Company’s total cash outflows for leases in 2022 amount to Euro 92.0 (20 21 : Euro 85.4 ) and Euro 37.7 (20 21 : Euro 43 .6 ) , respectively.
The maturity analysis of lease liabilities is analyzed in Note 30.
The Group and the Company have certain lease contracts that include extension options. Most of these options have not been included in the lease liability because it is not reasonably certain that the leases will be extended .
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
137
Subleases – Lease receivables
There are several sublease arrangements, where the Group acts as intermediate lessor and these agreements have been classified as finance leases. The relevant amount for these subleases recognized as finance leases was Euro 5.5 for the year 2022 (20 21 : Euro 4.6 ) .
The long-term portion of finance lease receivables for the Group and the Company is included in the line “Other non-current assets”, while the short-term portion is included in the line “Other current assets”.
Finance lease receivables are analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Lease receivables (long-term portion)
15.3
15.2
0.1
0.2
Lease receivables (short-term portion)
4.3
3.9
0.1
0.2
Total lease receivables
19.6
19.1
0.2
0.4
Interest revenue on finance lease receivables amounts to Euro 0.8 for the Group (2021: Euro 0.8) and Euro nil for the Company (2021: Euro nil).
6. GOODWILL
Goodwill as of December 31, 2022 amounted to Euro 376.6 (December 31, 2021: Euro 376.6).
Goodwill relates to the mobile telecommunication business of the Group in Greece, defined as the cash generating unit (COSMOTE Group - Greece) for which impairment testing is performed.
The recoverable amount of the cash generating unit COSMOTE Group - Greece is determined using the value in use method. The value in use is determined based on the projected cash flows derived from four years updated plan approved by management, with these cash flows initially projected over ten years and then to perpetuity.
The ten years’ planning horizon selected, reflects the assumptions for short- to medium-term market developments and is selected to achieve a steady state in the business outlook that is necessary for calculating the perpetual annuity. This steady state can only be established based on this planning horizon, in particular due to long investment cycles in the telecommunication industry and the investments planned and expected in the long run to acquire and extend the rights of spectrum use.
For the projection of cash flows beyond a ten years period, a growth rate of 1% was assumed (December 31, 2021: 1%).
The key assumptions used by management in projecting cash flows as part of the impairment test of goodwill are the following:
• Risk-free rate: The risk free rate was determined on the basis of external figures derived from the relevant active market of the country.
• Budgeted profit margin: Budgeted operating profit before financial and investing activities and operating profit before financial and investing activities, depreciation, amortization and impairment were based on actual historical experience from the last few years adjusted to take into consideration expected variances in operating profitability.
The basic assumptions used are consistent with independent external sources of information.
The basic assumptions used in determining the value in use of the COSMOTE Group- Greece, taking also into consideration the current market conditions, are as follows:
Assumptions
2022
2021
Discount rate, weighted average
7.6%
5.9%
Average rate of revenue increase
0.7%
0.0%
Operating profit before financial and investing activities, depreciation, amortization and impairment, margin (10 years’ range)
38.9% - 43.1%
40.9% - 43.5%
Based on the result of the impairment test as of December 31, 2022, no impairment losses were identified in the recorded amount of goodwill for COSMOTE Group - Greece.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
138
As of December 31, 2022, the recoverable amount for this cash generating unit when compared to the respective carrying value indicates that significant headroom exists and any material change in the assumptions used would not result in the reduction of the carrying value of goodwill.
If the growth rate for the projection of cash flows beyond ten years period assumed in the impairment test was 0.5% lower, the recoverable amount for this cash generating unit when compared to the respective carrying value, would indicate that significant headroom exists. If the discount rate assumed in the impairment test was 1.0% higher, the recoverable amount for this cash generating unit when compared to the respective carrying value, would indicate that significant headroom exists.
7. TELECOMMUNICATION LICENSES
Telecommunication licenses comprise of licenses acquired primarily for the Group’s mobile operations.
The movement of telecommunication licenses is as follows:
GROUP
2022
2021
January 1
Cost
1,046.7
1,026.3
Accumulated amortization
(697.8)
(665.3)
Net book value January 1
348.9
361.0
Additions
1.2
25.0
Exchange differences, cost
0.1
(4.6)
Exchange differences, accumulated amortization
(0.1)
4.6
Amortization charge for the year - impairment
(53.6)
(37.1)
Write-offs, cost
(1.9)
-
Write-offs, accumulated amortization
1.5
-
Net book value December 31
296.1
348.9
December 31
Cost
1,046.1
1,046.7
Accumulated amortization
(750.0)
(697.8)
Net book value December 31
296.1
348.9
As a result of the impairment test performed in TELEKOM ROMANIA MOBILE, an impairment loss on the telecommunication licenses of Euro 19.0, was charged in the 2022 consolidated income statement and is included in the line “Depreciation, amortization and impairment”. The key assumptions used in determining the value in use of the cash generating unit are described in Note 9.
COMPANY
2022
2021
January 1
Cost
13.1
13.1
Accumulated amortization
(11.4)
(10.6)
Net book value January 1
1.7
2.5
Additions
1.2
-
Amortization charge for the year
(0.5)
(0.8)
Net book value December 31
2.4
1.7
December 31
Cost
14.3
13.1
Accumulated amortization
(11.9)
(11.4)
Net book value December 31
2.4
1.7
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
139
8. OTHER INTANGIBLE ASSETS
Other intangible assets are analyzed as follows:
GROUP
SOFTWARE
TV RIGHTS
BRAND NAME
OTHER
TOTAL
31/12/2020
Cost
1,068.3
421.5
314.7
124.8
1,929.3
Accumulated amortization
(923.9)
(239.8)
(255.3)
(102.3)
(1,521.3)
Net book value 31/12/2020
144.4
181.7
59.4
22.5
408.0
Additions and transfers
91.7
85.5
-
0.5
177.7
Disposals and write-offs, cost
(4.5)
(137.7)
-
-
(142.2)
Disposals and write-offs, accumulated amortization
4.5
137.7
-
-
142.2
Exchange differences, cost
(0.6)
-
-
0.1
(0.5)
Exchange differences, accumulated amortization
0.5
-
-
(0.1)
0.4
Amortization charge for the year - impairment
(67.3)
(106.0)
(21.0)
(3.6)
(197.9)
Net book value 31/12/2021
168.7
161.2
38.4
19.4
387.7
Cost
1,154.9
369.3
314.7
125.4
1,964.3
Accumulated amortization
(986.2)
(208.1)
(276.3)
(106.0)
(1,576.6)
Net book value 31/12/2021
168.7
161.2
38.4
19.4
387.7
Additions
73.8
97.4
-
0.8
172.0
Disposals and write-offs, cost
(13.4)
(64.7)
-
-
(78.1)
Disposals and write-offs, accumulated amortization
13.1
64.7
-
-
77.8
Amortization charge for the year - impairment
(77.5)
(122.1)
(20.9)
(3.7)
(224.2)
Sale of subsidiary, cost
(8.3)
-
-
-
(8.3)
Sale of subsidiary, accumulated amortization
8.2
-
-
-
8.2
Net book value 31/12/2022
164.6
136.5
17.5
16.5
335.1
Cost
1,207.0
402.0
314.7
126.2
2,049.9
Accumulated amortization
(1,042.4)
(265.5)
(297.2)
(109.7)
(1,714.8)
Net book value 31/12/2022
164.6
136.5
17.5
16.5
335.1
As a result of the impairment test performed in TELEKOM ROMANIA MOBILE, an impairment loss on the software of Euro 12.6 was charged in the 2022 consolidated income statement and is included in the line “Depreciation, amortization and impairment”. The key assumptions used in determining the value in use of the cash generating unit are described in Note 9.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
140
COMPANY
SOFTWARE
TV RIGHTS
TOTAL
31/12/2020
Cost
546.2
421.5
967.7
Accumulated amortization
(445.6)
(239.8)
(685.4)
Net book value 31/12/2020
100.6
181.7
282.3
Spin-off, cost
(13.7)
-
(13.7)
Spin-off, accumulated depreciation
10.0
-
10.0
Additions and transfers
63.2
85.5
148.7
Disposals and write-offs, cost
-
(137.7)
(137.7)
Disposals and write-offs, accumulated amortization
-
137.7
137.7
Amortization charge for the year
(45.8)
(106.0)
(151.8)
Net book value 31/12/2021
114.3
161.2
275.5
31/12/2021
Cost
595.7
369.3
965.0
Accumulated amortization
(481.4)
(208.1)
(689.5)
Net book value 31/12/2021
114.3
161.2
275.5
Spin-off, cost
(0.2)
-
(0.2)
Spin-off, accumulated depreciation
0.1
-
0.1
Additions
39.1
97.4
136.5
Disposals and write-offs, cost
(0.5)
(64.7)
(65.2)
Disposals and write-offs, accumulated amortization
0.5
64.7
65.2
Amortization charge for the year
(46.9)
(122.1)
(169.0)
Net book value 31/12/2022
106.4
136.5
242.9
Cost
634.1
402.0
1,036.1
Accumulated amortization
(527.7)
(265.5)
(793.2)
Net book value 31/12/2022
106.4
136.5
242.9
There are no intangible assets with indefinite useful life as of December 31, 2022 and 2021.
TV PRODUCTIONS ELIGIBLE FOR GOVERNMENT GRANTS
By the decision No. ΥΨηΔ 13/05/2022 - Α.Π.18258 ΕΞ 2022 of the Minister of Digital Policy, Telecommunications and Media (in relation to Chapter D of law 4487/2017), the investment plan titled "ETEROS EGO - S3/NEMESIS" was approved, as eligible for government grant. The total budget of the eligible expenditure (after the submitted amendment) amounts to Euro 1,120,000 (absolute amount).
Based on the application No. ΠΣΚΕ Ψ2ΠΟΕ-0529762 to the Ministry of Digital Policy, Communications and Information (in relation to Chapter D of law 4487/2017), the investment plan titled "KRITIKOS POLEMOS - I POLIORKIA TOU HANDAKA" was submitted for approval, as eligible for government grant. The total budget of the eligible expenditure amounts to Euro 164,800 (absolute amount).
Based on the application No. ΠΣΚΕ Ψ2ΠΟΕ-0529761 to the Ministry of Digital Policy, Communications and Information (in relation to Chapter D of law 4487/2017), the investment plan titled "I GRAMVOUSSA TON PIRATON” was submitted for approval, as eligible for government grant. The total budget of the eligible expenditure amounts to Euro 159,200 (absolute amount).
Based on the application No. ΠΣΚΕ Ψ2ΠΟΕ-0532518 to the Ministry of Digital Policy, Communications and Information (in relation to Chapter D of law 4487/2017), the investment plan titled "I AVRA TIS PROEDRIKIS FROURAS" was submitted for approval, as eligible for government grant. The total budget of the eligible expenditure amounts to Euro 80,000 (absolute amount).
Based on the application No. ΠΣΚΕ Ψ2ΠΟΕ-0533632 to the Ministry of Digital Policy, Communications and Information (in relation to Chapter D of law 4487/2017), the investment plan titled "UNDERWATER CAVES" was submitted for approval, as eligible for government grant. The total budget of the eligible expenditure amounts to Euro 72,000 (absolute amount).
Based on the application No. ΠΣΚΕ Ψ2ΠΟΕ-0543126 to the Ministry of Digital Policy, Communications and Information (in relation to Chapter D of law 4487/2017), the investment plan titled "17 KLOSTES" was submitted for approval, as eligible for government grant. The total budget of the eligible expenditure amounts to Euro 1,229,080.94 (absolute amount).
The government grants represent 40% of the total eligible expenditure budget, amounting to Euro 448,000 (absolute amount) for the investment plan titled "ETEROS EGO - S3/NEMESIS" and, subject to approval, Euro 65,920 (absolute amount) for the investment plan titled "KRITIKOS POLEMOS - I POLIORKIA TOU HANDAKA", Euro 63,680 (absolute amount) for the investment
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
141
plan titled "I GRAMVOUSSA TON PIRATON”, Euro 32,000 (absolute amount) for the investment plan titled "I AVRA TIS PROEDRIKIS FROURAS", Euro 28,800 (absolute amount) for the investment plan titled "UNDERWATER CAVES" and Euro 491,632.37 (absolute amount) for the investment plan titled "17 KLOSTES".
The amount of the government grants will be fully determined after the implementation of the investment plans and the completion of the audit of the investment plans.
9. INVESTMENTS
Investments are analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
(a) Investments in subsidiaries
-
-
3,105.0
3,158.7
(b) Other investments
0.1
0.1
0.1
0.1
TOTAL
0.1
0.1
3,105.1
3,158.8
(a) Company’s investments in subsidiaries are analyzed as follows:
COMPANY
OTE’s direct ownership interest
Country of incorporation
2022
2021
COSMOTE
100.00%
Greece
2,763.2
2,763.3
COSMOTE PAYMENTS
100.00%
Greece
18.9
4.4
COSMOTE TV PRODUCTIONS
100.00%
Greece
3.8
3.8
COSMO-ONE
30.87%
Greece
-
0.5
OTE SAT- MARITEL
94.08%
Greece
4.6
4.6
OTE PLC
100.00%
U.K.
0.1
0.1
CTS
85.54%
Greece
12.8
12.8
ΟΤΕ ESTATE
100.00%
Greece
72.6
72.6
OTE GLOBE
100.00%
Greece
102.2
102.2
OTE INSURANCE
99.90%
Greece
0.1
0.1
OTE ACADEMY
100.00%
Greece
3.2
3.2
OTE RURAL NORTH
100.00%
Greece
1.8
1.8
OTE RURAL SOUTH
100.00%
Greece
2.2
2.2
UltrafastOTE
100.00%
Greece
15.0
-
GERMANOS
4.39%
Greece
6.4
6.4
COSMOTE E-VALUE
7.17%
Greece
2.1
2.1
TELEKOM ROMANIA MOBILE
100.00%
Romania
96.0
178.6
TOTAL
3,105.0
3,158.7
The accumulated impairment losses for TELEKOM ROMANIA MOBILE , COSMOTE, OTE ACADEMY and OTESAT-MARITEL as of December 31, 202 2 amount to Euro 762.9, Euro 752.6, Euro 9.2 and Euro 0.5, respectively.
DIVIDEND INCOME
The Company’s dividend income is analyzed as follows:
COMPANY
2022
2021
COSMOTE
360.0
180.0
OTE INSURANCE
-
0.5
OTE SAT- MARITEL
0.5
-
OTE ESTATE
-
20.4
OTE PLC
25.0
-
OTE GLOBE
10.0
-
TOTAL
395.5
200.9
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
142
The movement of Company’s investments in subsidiaries is as follows:
COMPANY
2022
Carrying value January 1
3,158.7
Impairment of investment in TELEKOM ROMANIA MOBILE
(82.5)
Establishment of UltrafastOTE
15.0
Share capital increase of COSMOTE PAYMENTS
14.5
Sale of COSMO-ONE
(0.5)
Change due to share option plans - COSMOTE
(0.1)
Change due to share option plans - TELEKOM ROMANIA MOBILE
(0.1)
Carrying value December 31
3,105.0
IMPAIRMENT OF COMPANY’S INVESTMENT IN TELEKOM ROMANIA MOBILE
Taking into consideration the current and projected market conditions, as well as, the current and projected financial and operating performance, there were indications that the carrying value of the Company’s investment in TELEKOM ROMANIA MOBILE exceeded the recoverable amount. In this respect, a value in use impairment test was performed.
The value in use is determined based on the projected cash flows derived from four years business plan approved by management, with these cash flows initially projected over ten years and then to perpetuity.
The ten years’ planning horizon selected, reflects the assumptions for short- to medium-term market developments and is selected to achieve a steady state in the business outlook that is necessary for calculating the perpetual annuity. This steady state can only be established based on this planning horizon, in particular due to long investment cycles in the telecommunication industry and the investments planned and expected in the long run to acquire and extend the rights of spectrum use.
For the projection of cash flows beyond a ten years period, a growth rate of 1% was assumed for this cash generating unit.
The key assumptions used by management in projecting cash flows as part of the impairment test are the following:
• Risk-free rate: The risk free rate was determined on the basis of external figures derived from the relevant market of the country.
• Budgeted profit margin: Budgeted operating profit before financial and investing activities and operating profit before financial and investing activities, depreciation, amortization and impairment were based on actual historical experience from the last few years adjusted to take into consideration expected variances in operating profitability.
• Budgeted investments to revenue ratio: Budgeted purchase of property plant and equipment and intangible assets to total revenues, ratio, was based on actual historical performance adjusted to take into consideration expected variances in market and business requirements.
The key assumptions used are consistent with independent external sources of information.
The impairment test was performed based on the following assumptions:
Assumptions – TELEKOM ROMANIA MOBILE
2022
Discount rate, weighted average
9.5%
Average rate of revenues increase
2.6%
Operating profit before financial and investing activities, depreciation, amortization and impairment, margin (10 years’ range)
18.5% - 27.8%
Purchase of property plant and equipment and intangible assets before spectrum, to total revenues (10 years’ range)
12.1% - 12.5%
Operating profit before financial and investing activities, depreciation, amortization and impairment, margin, terminal value
26.1%
Purchase of property plant and equipment and intangible assets before spectrum, to total revenues, terminal value
12.5%
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
143
As a result of the impairment test, the carrying value of OTE’s investment in TELEKOM ROMANIA MOBILE was adjusted and an impairment loss of Euro 82 .5 was recognized in the separate income statement and is included in the line “Gains / (losses) from investments and other financial assets – Impairment”.
The carrying value of OTE’s investment in TELEKOM ROMANIA MOBILE includes an amount of Euro 55.0, related to dividend by the subsidiary not yet cashed in, which management considers to be part of the investment in TELEKOM ROMANIA MOBILE.
IMPAIRMENT OF THE GROUP CARRYING VALUE OF TELEKOM ROMANIA MOBILE
As a result of the value in use impairment test, the recoverable amount for TELEKOM ROMANIA MOBILE equals to Euro 121.0 (before dividend distribution towards OTE), while the carrying value before the impairment amounted to Euro 236.9. Consequently, total impairment losses amounting to Euro 115.9 were recognized in the consolidated income statement and are included in the line “Depreciation, amortization and impairment”. The allocation of the total impairment charges is analyzed as follows:
GROUP - TELEKOM ROMANIA MOBILE
2022
Property, plant and equipment (Note 4)
84.3
Telecommunication licenses (Note 7)
19.0
Other intangible assets (Note 8)
12.6
TOTAL
115.9
ESTABLISHMENT OF UltrafastOTE
On April 14, 2022, UltrafastOTE SINGLE MEMBER SOCIETE ANONYME S.P.V. (“UltrafastOTE”) was established with a share capital of Euro 15.0. The entity is wholly owned by OTE and its purpose is the development of network infrastructure and provision of wholesale broadband services in the framework of a service concession arrangement between public and private sectors for the implementation of the project "Ultra-Fast Broadband Infrastructure".
SHARE CAPITAL INCREASE IN COSMOTE PAYMENTS
In September 2022, the Board of Directors of OTE and the Extraordinary General Meeting of Shareholders of COSMOTE PAYMENTS respectively, approved the share capital increase of COSMOTE PAYMENTS for an amount of Euro 14.5.
SHARE CAPITAL REDUCTION AND AGREEMENT FOR THE SALE OF COSMO-ONE
The General Assembly of COSMO-ONE decided the share capital reduction of the entity for an amount of Euro 2.2. The transaction was executed in July 2022, when all legal procedures had been completed and the respective amount attributable to OTE was Euro 0.7. The amount attributable to minority shareholders was Euro 0.8.
On July 25, 2022, the Group completed the sale of COSMO-ONE through the transfer of its 61.74% stake to SOFT ONE TECHNOLOGIES S.A. for a total consideration of Euro 2.0.
For the Group, the result from the sale (before tax) in the consolidated income statement amounted to a gain of Euro 0.2 and the net inflow in the consolidated statement of cash flows amounted to Euro 1.5.
For the Company, the result from the sale (before tax) in the separate income statement amounted to a gain of Euro 0.5 and the net inflow in the separate statement of cash flows amounted to Euro 0.7.
AGREEMENT FOR THE SALE OF TELEKOM ROMANIA
On September 30, 2021, the sale to Orange Romania of the shares held by the Group to TELEKOM ROMANIA, was completed. The contract provided for the possibility of adjusting the purchase price based on the completion accounts of TELEKOM ROMANIA as of September 30, 2021 and agreed levels of cash and working capital. In July 2022, a settlement agreement was signed with regards to the completion accounts and an amount of Euro 9.0 was disbursed by OTE to Orange Romania (Note 29).
Moreover, during the year 2022, expenses amounting to Euro 0.8 were paid in relation to the sale of TELEKOM ROMANIA.
AGREEMENT FOR THE SPIN-OFF OF THE FACILITY AND SPACE MANAGEMENT BUSINESS SECTOR
On November 1, 2022 the Extraordinary General Meetings of Shareholders of OTE and COSMOTE approved the Draft Demergers Agreement through spin-off of the business sectors of facility and space management and their absorption by the Group’s subsidiary, OTE ESTATE.
The spin-off procedure was completed on December 1, 2022 upon registration in the General Commercial Registry ( Γ . Ε . ΜΗ .). In the context of the spin-off process, the shareholders’ equity structure of OTE ESTATE has slightly changed, with no effect on the Group’s ownership interest.
Following the completion of the process, the assets and liabilities of the sectors, as they have been formed on December 1, 2022, were transferred from OTE and COSMOTE to OTE ESTATE.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
144
MERGER THROUGH ABSORPTION OF OTE GLOBE
In July 2022, OTE Board of Directors approved the merger by absorption of its wholly owned subsidiary, OTE GLOBE. The transaction was completed on January 2, 2023 upon registration in the General Commercial Registry (Γ.Ε.ΜΗ.).
NON-CONTROLLING INTERESTS
Following the completion of the sale of COSMO-ONE, the Group’s non-controlling interests amount to Euro 0.5 as of December 31, 2022 (December 31, 2021: Euro 1.7).
10. OTHER NON-CURRENT ASSETS
Other non-current assets are analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Loans to employees
27.3
34.6
6.1
8.3
Guarantees
7.6
6.9
0.3
0.3
Loans to group companies (Note 28)
-
-
10.0
14.5
Long-term receivables from ICT projects
22.9
17.1
22.9
17.1
Other receivables from related parties (Note 28)
-
-
5.6
5.4
Lease receivables (Note 5)
15.3
15.2
0.1
0.2
Investments in mutual funds
0.5
-
0.5
-
Other
1.7
2.1
-
-
TOTAL
75.3
75.9
45.5
45.8
Loans to employees are comprised mainly of loans to employees with service period exceeding 25 years against the accrued indemnity payable to them upon retirement, granted by the Company and by the Group (for employees transferred due to spin-off process implemented in 2021, entitled to the benefit). The interest rate on these loans is 0.48% and 0.65% for 2022 and 2021, respectively.
In relation to line “Investments in mutual funds”, a loss amounting to Euro 0.1 arising from change in the fair value was recognized in the consolidated and separate income statement within “Gains / (losses) from investments and other financial assets - Impairment”.
11. INVENTORIES
Inventories are analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Merchandise
52.2
36.2
11.0
4.4
Other materials
1.8
1.8
0.6
0.6
TOTAL
54.0
38.0
11.6
5.0
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
145
12. TRADE RECEIVABLES
Trade receivables are analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Subscribers / Customers
853.2
1,190.1
449.4
624.5
Due from related parties (Note 28)
5.6
8.2
67.1
57.9
Unbilled revenue
131.6
131.0
67.5
66.3
990.4
1,329.3
584.0
748.7
Less:
Provision for expected credit losses
(519.2)
(824.9)
(287.7)
(444.6)
TOTAL
471.2
504.4
296.3
304.1
The movement in the provision for expected credit losses is as follows:
GROUP
COMPANY
2022
2021
2022
2021
Balance at January 1
(824.9)
(812.3)
(444.6)
(427.9)
Charge for the year
(44.8)
(64.9)
(25.2)
(26.0)
Write-offs
350.6
51.5
182.1
9.3
Foreign exchange differences
(0.1)
0.8
-
-
Balance at December 31
(519.2)
(824.9)
(287.7)
(444.6)
The write-offs relate to long outstanding receivables which were fully provided for in prior years.
In 2022, for the Group, the consolidated income statement line “Provision for expected credit losses” includes also charges related to the impairment of contract assets, amounted to Euro 3.2 (2021: Euro 2.7).
The aging analysis of trade receivables is as follows:
GROUP
COMPANY
2022
2021
2022
2021
Not impaired and not past due
405.8
421.4
271.8
274.3
Not impaired and past due:
Up to 30 days
38.7
40.7
12.9
13.1
Between 31 and 180 days
16.5
27.2
8.0
10.8
Between 181 and 360 days
4.5
7.4
3.4
4.7
More than 360 days
5.7
7.7
0.2
1.2
TOTAL
471.2
504.4
296.3
304.1
13. OTHER FINANCIAL ASSETS
Other financial assets are analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Financial assets at fair value through profit or loss
4.8
5.6
2.8
3.0
4.8
5.6
2.8
3.0
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
146
The movement of other financial assets is analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Balance at January 1
5.6
5.4
3.0
2.8
Sale or maturity of financial assets
(0.7)
(0.3)
-
-
Fair value adjustments through profit or loss
(0.1)
0.5
(0.2)
0.2
Balance at December 31
4.8
5.6
2.8
3.0
14. OTHER CURRENT ASSETS
Other current assets are analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Loans to Auxiliary fund, short-term portion (Note 20)
7.1
7.0
7.1
7.0
Due from ΟΤΕ Leasing customers
25.5
25.5
25.5
25.5
Loans and advances to employees
2.1
2.8
1.0
1.2
Income tax receivable (Note 23)
2.8
41.8
-
36.7
Other prepayments
32.5
50.2
17.8
29.5
Receivable from dividends (Note 28)
-
-
-
40.0
Guaranteed receipt from Grantor (Financial asset model)
-
0.5
-
-
Other receivables from taxes not relating to income tax
15.3
14.8
1.8
2.0
Other receivables from related parties (Note 28)
0.1
0.3
2.3
1.8
Lease receivables (Note 5)
4.3
3.9
0.1
0.2
Other
34.0
30.1
20.2
20.9
TOTAL
123.7
176.9
75.8
164.8
15. CASH AND CASH EQUIVALENTS
Cash and cash equivalents are analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Cash in hand
6.2
6.1
4.1
4.1
Short-term bank deposits
583.9
624.6
159.6
269.9
TOTAL
590.1
630.7
163.7
274.0
16. SHARE CAPITAL – SHARE PREMIUM – TREASURY SHARES
The Extraordinary General Shareholders’ Meeting on January 18, 2022 approved the cancellation of 8,638,512 own shares, together with corresponding reduction of the Company’s share capital by Euro 24.4. On February 17, 2022, following notification to the Corporate Actions Committee of the Athens Stock Exchange and the completion of other legal and regulatory procedures, the aforementioned 8,638,512 shares were cancelled and delisted from the Athens Stock Exchange effective from February 22, 2022.
The Ordinary General Meeting of Shareholders of May 25, 2022 approved the cancellation of 5,617,282 treasury shares, acquired during the period from December 1, 2021 to March 31, 2022, together with the corresponding reduction in the Company’s share capital of Euro 15.9. On July 7, 2022, following notification to the Corporate Actions Committee of the Athens Stock Exchange and the completion of other legal and regulatory procedures, the aforementioned 5,617,282 shares were cancelled and delisted from the Athens Stock Exchange effective from July 12, 2022.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
147
The Extraordinary General Shareholders’ Meeting of November 1, 2022 approved the cancellation of 8,818,730 treasury shares, acquired during the period from April 1, 2022 to September 30, 2022, together with the corresponding reduction in the Company’s share capital of Euro 25.0. On November 24, 2022, following notification to the Corporate Actions Committee of the Athens Stock Exchange and the completion of other legal and regulatory procedures, the aforementioned 8,818,730 shares were cancelled and delisted from the Athens Stock Exchange effective from November 29, 2022.
Following the above cancellations of treasury shares, OTE’s share capital as of December 31, 2022 amounted to Euro 1,227.3 (December 31, 2021: Euro 1,292.6) divided into 433,664,596 registered shares, with a nominal value of Euro 2.83 (absolute amount) per share.
Furthermore, as a result of the aforementioned cancellations of treasury shares, a reduction of Euro 23.3 and Euro 285.0 was recognized in share premium and retained earnings, respectively.
The share premium as of December 31, 2022 amounted to Euro 438.9 (December 31, 2021: Euro 462.6).
Within the framework of the Share Buyback Program, during the period from January 1, 2022 to December 31, 2022 OTE acquired 17,665,444 treasury shares amounting to Euro 290.0.
The following is an analysis of the ownership of OTE’s shares as of December 31, 2022:
Shareholder
Number of shares
Percentage %
DEUTSCHE TELEKOM AG
220,567,676
50.9%
Hellenic State
4,901,507
1.1%
e-E.F.K.A.
26,617,844
6.1%
Free float
176,824,477
40.8%
Treasury shares
4,753,092
1.1%
TOTAL
433,664,596
100.0%
The stake of e-E.F.K.A includes 19,606,015 shares transferred by Hellenic State in 2009.
The movement of the treasury shares is presented in the table below:
Number of shares
Amount
Treasury shares as at January 1, 2022
10,162,172
157.1
Treasury shares acquired during the year
17,665,444
290.0
Cancellation of treasury shares
(23,074,524)
(373.6)
Treasury shares as at December 31, 2022
4,753,092
73.5
17. STATUTORY RESERVE – FOREIGN EXCHANGE AND OTHER RESERVES - RETAINED EARNINGS
Under Greek Corporate Law, entities are required to transfer on an annual basis a minimum of five percent of their annual profit (after income taxes) to a statutory reserve, until such reserve equals one-third of the issued share capital. As of December 31, 2022 and 2021, statutory reserve amounted to Euro 440.7.
On December 31, 2022, as a result of the share capital reduction due to cancellations of treasury shares in years 2019, 2020, 2021 and 2022, the statutory reserve exceeds one-third of the issued share capital.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
148
The analysis of foreign exchange and other reserves is as follows:
GROUP
COMPANY
2022
2021
2022
2021
Foreign currency translation
(133.8)
(133.1)
-
-
Cumulative amount of actuarial losses recognized in equity
(12.0)
(51.0)
(31.7)
(47.5)
Deferred taxes on cumulative amount of actuarial losses recognized in equity
7.0
15.5
11.2
14.7
TOTAL
(138.8)
(168.6)
(20.5)
(32.8)
Retained earnings include undistributed taxed profits as well as untaxed and specially taxed reserves which, upon distribution, will be subject to income tax. The retained earnings for the Group and the Company as of December 31, 2022 amounted to Euro 3,267.9 and Euro 1,215.4, respectively (December 31, 2021: Euro 3,414.4 and Euro 1,192.6, respectively).
18. DIVIDENDS
On May 25, 2022, the Ordinary General Assembly of OTE’s Shareholders approved the distribution of dividend of a total amount of Euro 250.0 or Euro 0.558 (in absolute amount) per share (or Euro 0.571033 adjusted for own shares outstanding as of the ex-dividend date).
The amount of dividends payable for the Group and the Company as of December 31, 202 2 amounted to Euro 2.4 (December 31, 2021: Euro 2.3).
On February 22, 2023, the Board of Directors approved the revised Shareholders Remuneration Policy. The Policy has been defined as follows:
Provided the external and the macroeconomic environment remain stable, the Company intends to distribute to its shareholders, through a combination of dividend payout and Share Buyback Programs (whereby acquired shares will be cancelled), between 70% and 100% of net free cash flow generated every year.
Starting from 2023, the cash dividend will account for at least 50% of total shareholder remuneration and the remaining part will be allocated to share buybacks.
The Board will examine the use of any cash flow reserves which may be accumulated in the medium term, together with past surpluses.
Under the Shareholders Remuneration for 2023 and based on the current projection for 2023, the net free cash flow is estimated to reach approximately the amount of Euro 500.0. The total shareholder remuneration payout (dividends and share buybacks) will reach approximately Euro 425.0.
For the part of the Shareholder remuneration corresponding to dividend distribution, it is proposed that a dividend of Euro 0.5765 (in absolute amount) per share or a total amount of Euro 250.0 . It is noted that the amount of Euro 0.5765 (in absolute amount) per share corresponds to 433,664,596 shares into which the share capital of the Company is divided.
It is noted that own shares owned by the Company at the ex-dividend date are not entitled to dividend. Therefore, the dividend that will be approved by General Shareholders Meeting that will take place in 2023 corresponding to such own shares, will increase the dividend payable to the other shareholders according to the law.
It is further noted that, the remaining amount, i.e. approximately Euro 175.0 (amount to vary within a 2% range depending on market conditions and execution) or approximately 41% of the total amount to be allocated under the shareholders remuneration for 2023, will be used for the buyback of Company’s shares.
This proposed distribution is subject to the provisions of law 4548/2018 and the current tax legislation.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
149
19. LONG-TERM AND SHORT–TERM BORROWINGS
LONG – TERM BORROWINGS
GROUP
Long-term borrowings are analyzed as follows:
GROUP
2022
2021
a) Bank loans
207.7
80.7
b) Global Medium-Term Note Programme ("GMTN") of OTE PLC
696.9
1,070.3
Total long-term debt
904.6
1,151.0
Short-term portion of long-term debt
(23.1)
(397.3)
Long-term borrowings
881.5
753.7
(a) Bank Loans
Euro 150.0 bilateral term loan of COSMOTE with the European Investment Bank (EIB)
On July 10, 2017 COSMOTE signed, with the guarantee of OTE, the Euro 150.0 bilateral term loan with EIB. The EIB loan was fully drawn on January 23, 2018, has a tenor of 7 years with semi-annual repayment schedule and bears fixed interest rate of 2.805%. The outstanding balance of the EIB Loan as of December 31, 2022 was Euro 57.7.
Euro 150.0 bank loan of OTE with the European Bank for Reconstruction and Development (EBRD), with the use of loan funds from the National Recovery and Resilience Facility ‘Greece 2.0’, financed by the European Union
On July 7, 2022, OTE signed a Euro 150.0 loan agreement with the EBRD. The loan has an eight-year tenor with repayment at maturity and bears a total blended fixed interest rate of 1.561%. Out of the Euro 150.0 loan amount, Euro 93.8 are financed by the European Union's Recovery and Resilience Facility, channeled through the Greek Ministry of Finance, while Euro 56.2 are financed by the EBRD.
On July 13, 2022, OTE proceeded with the drawdown of the full amount under the Euro 150.0 EBRD Loan.
Euro 100.0 revolving credit facility with National Bank of Greece (“NBG”) and Alpha Bank SA (“Alpha”)
On July 24, 2020, OTE signed a Bond Loan Agreement, in the form of a committed Revolving Credit Facility, with the syndication of National Bank of Greece and Alpha Bank SA, of Euro 200.0 in total and tenor of 2 years.
On July 22, 2022, OTE extended for 2 years the existing facility, along with a simultaneous reduction of the committed amount to Euro 100.0.
No drawdown had taken place up to December 31, 2022.
Change of Control Clauses
The above bank loans include a change of control clause applicable to OTE which is triggered if an entity other than (i) DEUTSCHE TELEKOM AG, (ii) DEUTSCHE TELEKOM AG together with the Hellenic Republic, any of its agencies or instrumentalities or any entity directly or indirectly controlled by the Hellenic Republic or any of its agencies or instrumentalities, or (iii) any telecommunications operator (other than DEUTSCHE TELEKOM AG) with credit rating equivalent or better than the credit rating of DEUTSCHE TELEKOM AG, gains the power to direct the management and policies of OTE, whether through voting rights, by contract or otherwise. In the EBRD loan, the bank can determine, for the purposes of this specific clause, whether such telecommunications operator is eligible as its counterparty.
In addition, the EIB Loan includes a change of control applicable to COSMOTE which is triggered if OTE (the Guarantor) ceases to control COSMOTE (the Borrower).
In the event that the clause is triggered in the Euro 150.0 bilateral term loan with EIB and in the Euro 150.0 Bank Loan with EBRD, the banks may at their option, by notice to COSMOTE or OTE respectively, require the prepayment of the whole or any portion of the loans.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
150
In the event that the clause is triggered in the Euro 100.0 revolving credit facility, each bank may exercise its option to request mandatory prepayment of the outstanding bonds and cancellation of commitments.
Financial Covenants
The above Bank Loans include two financial covenants based on loan specific definitions, tested on a semi-annual basis at Group level, namely:
(a) The ratio of consolidated operating profit before financial and investing activities, depreciation, amortization and impairment and costs related to voluntary leave schemes (“consolidated pro-forma EBITDA”) to consolidated net interest expense should not be less than 4.5:1 at all times, and
(b) The ratio of consolidated net debt to consolidated pro-forma EBITDA should not be more than 2.5:1 at all times.
In the EIB Loan, the above covenants apply also at COSMOTE level, on an annual basis.
(b) Global Medium Term-Note Programme
OTE PLC has established a Global Medium-Term Note (“GMTN”) Programme, guaranteed by OTE. The bonds that are issued under the GMTN Programme and traded in the secondary market, are listed in the Luxembourg Stock Exchange.
Repayment of Bond under the Global Medium-Term Note Programme
On July 18, 2022, OTE PLC repaid at maturity the Euro 400.0 Bond, with outstanding balance Euro 374.6, issued under its Global Medium Term Note Programme on July 18, 2018.
Change of control clauses
The bonds issued under the Global - Medium Term Note Programme and listed in the Luxembourg Stock Exchange include a change of control clause applicable to OTE which is triggered if an entity other than (i) DEUTSCHE TELEKOM AG, (ii) DEUTSCHE TELEKOM AG together with the Hellenic Republic, any of its agencies or instrumentalities or any entity directly or indirectly controlled by the Hellenic Republic or any of its agencies or instrumentalities, or (iii) any telecommunications operator (other than DEUTSCHE TELEKOM AG) with credit rating equivalent or better than the credit rating of DEUTSCHE TELEKOM AG, gains the power to direct the management and policies of OTE, whether through voting rights, by contract or otherwise.
In the event that the change of control clause is triggered, OTE PLC shall promptly give written notice to the bond holders who in turn shall have the option within 45 days to require OTE PLC to redeem the bonds (put option), at their principal amounts together with accrued interest.
The analysis of the Group’s long-term debt is as follows:
2021
2022
Description
Rate
Maturity
Outstanding nominal value
Book value
New loans
Repayments/
Prepayments
Amortization of expenses
Outstanding nominal value
Book value
a) Bank loans
EIB loan Euro 150.0
2.805%
23/01/2025
80.8
80.7
-
(23.1)
0.1
57.7
57.7
EBRD loan Euro 93.8
0.770%
05/07/2030
-
-
93.8
-
-
93.8
93.8
EBRD loan Euro 56.2
2.880%
05/07/2030
-
-
56.2
-
-
56.2
56.2
b) Global Medium-Term Note Programme of OTE PLC
Euro 400.0 bond loan
2.375%
18/07/2022
374.6
374.2
-
(374.6)
0.4
-
-
Euro 500.0 bond loan
0.875%
24/09/2026
500.0
496.1
-
-
0.8
500.0
496.9
Euro 200.0 bond loan
0.627%
12/05/2028
200.0
200.0
-
-
-
200.0
200.0
1,155.4
1,151.0
150.0
(397.7)
1.3
907.7
904.6
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
151
DEUTSCHE TELEKOM AG participated on September 2019 in the issuance of the Euro 500.0 Notes by OTE PLC under the GMTN Programme, covering a nominal amount of Euro 100.0 out of the total amount.
The Euro 200.0 7-year Bond which was issued on May 14, 2021 by OTE PLC under the GMTN Programme, was fully subscribed by DEUTSCHE TELEKOM AG.
For the Group, as of December 31, 2022, the short-term portion of long term debt amounts to Euro 23.1 related to EIB loan (December 31, 20 21: Euro 397.3 consisting of Euro 23.1 related to the EIB loan and of Euro 374.2 related to OTE PLC Bond) .
Cost of debt
The weighted average cost of debt of the Group’s borrowings in Euro, for the years ended December 31, 2022 and December 31, 2021 was approximately 1.4% and 1.6%, respectively.
COMPANY
COMPANY
2022
2021
a) Bank loans
150.0
-
b) Intragroup loans
753.4
1,171.8
Total long-term debt
903.4
1,171.8
Short-term portion of long-term borrowings
(56.5)
(374.2)
Long-term borrowings
846.9
797.6
The outstanding balance of intragroup loans for the Company refers to loans granted by OTE PLC.
The analysis of the Company’s long-term debt is as follows:
2021
2022
Description
Maturity
Outstanding nominal value
Book value
New loans
Repayments/ Prepayments
Amortization of expenses
Outstanding nominal value
Book value
a) Bank loans
EBRD loan Euro 93.8
05/07/2030
-
-
93.8
-
-
93.8
93.8
EBRD loan Euro 56.2
05/07/2030
-
-
56.2
-
-
56.2
56.2
b) Intragroup loans (OTE PLC)
Euro 400.0 bond loan
18/07/2022
374.6
374.2
-
(374.6)
0.4
-
-
Euro 101.5 bond loan
15/06/2023
101.5
101.5
-
(45.0)
-
56.5
56.5
Euro 500.0 bond loan
24/09/2026
500.0
496.1
-
-
0.8
500.0
496.9
Euro 200.0 bond loan
12/05/2028
200.0
200.0
-
-
-
200.0
200.0
1,176.1
1,171.8
150.0
(419.6)
1.2
906.5
903.4
For the Company, as of December 31, 202 2 , the short-term portion of long term borrowings amounts to Euro 56.5 (December 31, 20 21: Euro 374.2).
SHORT – TERM BORROWINGS
GROUP
The Group’s outstanding balance of short-term borrowings as of December 31, 2022 amounted to Euro 150.0 (December 31, 2021: Euro nil), relating to Euro 150.0 Bond of OTE PLC.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
152
The analysis of short- term borrowings is as follows:
2021
2022
Description
Maturity date
Book value
New loans
Repayments/ Prepayments
Book value
Global Medium-Term Note Programme of OTE PLC
Euro 150.0 bond loan
08/06/2023
-
150.0
-
150.0
-
150.0
-
150.0
The Euro 150.0 Bond which was issued on June 16, 2022 by OTE PLC under the GMTN Programme was fully subscribed by DEUTSCHE TELEKOM AG.
COMPANY
The outstanding balance of short-term borrowings as of December 31, 2022 for the Company amounted to Euro 40.0 (December 31, 2021: Euro nil) .
The analysis of short- term borrowings is as follows:
2021
2022
Description
Maturity date
Book value
New loans
Repayments/ Prepayments
Book value
Intragroup loans (OTE PLC)
Euro 40.0 bond loan
20/06/2023
-
40.0
-
40.0
-
40.0
-
40.0
The Company’s short-term loan refers to a bond loan subscribed by OTE PLC.
20. PROVISIONS FOR PENSIONS, STAFF RETIREMENT INDEMNITIES AND OTHER EMPLOYEE BENEFITS
OTE employees are covered by various pension, medical and other benefit plans as summarized below:
Defined Contribution Plans:
(a) Main pension fund
The TAP-OTE Fund, was the main fund providing pension and medical benefits to OTE employees. Pursuant to law 2843/2000, any deficits incurred by TAP-OTE are covered by the Greek State.
As a result of law 3655/2008, the pension segment of TAP-OTE was incorporated into IKA-ETAM (the main social security of Greece) from August 1, 2008, with a gradual reduction of contributions from TAP-OTE to those of IKA, which commenced in 2013 and was concluded in 2022 in equal installments per year. At the same time, the medical segment of TAP-OTE was incorporated from October 1, 2008 into TAYTEKO.
Furthermore, according to law 3655/2008 (article 2, paragraph 8) the deficits of the pension segments which were incorporated into IKA-ETA Μ are covered by the Greek State.
Finally, as a result of law 4387/2016 (article 53) IKA-ETAM was incorporated from January 1, 2017 into E.F.K.A. (later renamed as e-E.F.K.A), with a gradual reduction of the pension segments contributions (article 38, paragraph 4), which commenced in January 1, 2017 and was concluded in January 1, 2020 in equal installments per year.
Employer’s contributions to pension funds for the year 2022 amounted to Euro 71.4 for the Group and Euro 21.9 for the Company (2021: Euro 72.7 and Euro 21.2, respectively) and are included in “Personnel costs” in the income statement.
(b) Auxiliary pension fund
The Auxiliary Fund Lump-Sum Payment segment provides members with a lump-sum benefit upon retirement or death. Law 2084/1992 has fixed minimum contributions and maximum benefits, after 35 years of service, for new entrants from 1993. As
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
153
a result of law 3655/2008, the two segments of the Auxiliary fund (the Lump – Sum Payment segment and the Additional Pension segment) were incorporated from October 1, 2008 into TAYTEKO.
Furthermore, as a result of law 4052/2012 (article 36, paragraph 1), the Additional Pension segment was incorporated into ETEA.
Subsequently, as a result of law 4387/2016 (articles 74 and 75) ETEA was renamed as ETEAEP and the Lump-Sum Payment segment of TAYTEKO was incorporated from May 12, 2016 into ETEAEP.
Finally, based on law 4670/2020 (article 1) the ETEAEP (the Additional Pension segment and the Lump – Sum Payment segment) was incorporated from March 1, 2020 into e-E.F.K.A..
OTE does not have a legal obligation to cover any future deficiencies of these funds and, according to management, neither does it voluntarily intend to cover such possible deficiencies.
Loans to pension funds
Loans to pension funds are analyzed as follows:
GROUP and COMPANY
2022
2021
Interest bearing loan to Auxiliary Pension Fund (law 3371/2005)
61.6
65.5
Interest-free loan to Auxiliary Pension Fund (law 3762/2009)
10.2
10.1
TOTAL
71.8
75.6
Short-term portion (Note 14)
7.1
7.0
Long-term portion
64.7
68.6
Loans to pension funds are reflected in the financial statements at amortized cost, having been discounted, using appropriate Greek market rates, on initial recognition to their present values.
Based on law 3371/2005 and the provisions of the related Ministerial Decision, OTE should grant an interest bearing loan to the Auxiliary Pension Fund in order to cover the Lump-Sum payments due to participants of the 2005 voluntary leave scheme. The total amount granted was Euro 189.3, repayable in 21 years including a two year grace period, meaning that the repayment started on October 1, 2008 through monthly installments. In 2015, due to liquidity problems of Auxiliary Pension Fund, an agreement was reached resulting in an extension of the loan maturity for 7 years. The loan bears contractual interest at 0.29%. At the date of the contractual commitment and after the restructuring, the loan was discounted to its present value. During 2022, an amount of Euro 2.6 was unwinded (2021: Euro 2.7).
Furthermore, based on law 3762/2009, OTE was required to grant an interest-free long-term loan to the Auxiliary Pension Fund for the Lump-Sum payments due to participants of the 2009 voluntary leave scheme. The respective loan agreement was signed in June 2010 for a nominal amount of Euro 30.0, being an interest free loan with duration of 22 years. In 2015, due to liquidity problems of Auxiliary Pension Fund, an agreement was reached resulting in an extension of the loan maturity for 3.8 years. At the date of the contractual commitment and after the restructuring, the loan was discounted to its present value. During 2022, an amount of Euro 0.8 was unwinded (2021: Euro 0.8).
These loans are exposed to credit risk related to the debt servicing capacity of the pension fund.
Defined Benefit Plans
(a) Provision for Staff Retirement Indemnities
Under Greek labor law, employees are entitled to termination payments in the event of dismissal or retirement with the amount of payment varying in relation to the employee's compensation, length of service and manner of termination (dismissal or retirement). Employees who resign (except those who resign with the consent of the employer, either with over fifteen years of service or when they meet the age limit set by the insurance fund) or are dismissed due to criminal offence are not entitled to termination payments. The indemnity payable in case of retirement is equal to 40% of the amount which would be payable upon dismissal. Since March 2018, based on the new Collective Labor Agreement (“CLA”) for OTE employees, the benefit to be provided on retirement is calculated as follows:
a) For employees who joined OTE prior to June 10, 1999, the indemnity is equal to the lesser amount between 100% of the maximum liability and Euro 0.03 (annually adjusted according to the inflation rate) plus 9 months’ salary.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
154
b) For employees who joined OTE from June 10, 1999 until July 14, 2005, the indemnity is equal to the lesser amount between 100% of the maximum liability and Euro 0.03 (annually adjusted according to the inflation rate) plus 7 months’ salary.
c) For employees who joined OTE from July 15, 2005, the indemnity payable will be equal to 40% of the amount payable upon dismissal as provided in law 4093/2012.
Employees with service period exceeding 25 years are entitled to draw loans against the indemnity payable to them upon retirement.
In the last quarter of 2021, new CLAs were signed for the employees of the Group’s subsidiaries COSMOTE E-VALUE, GERMANOS and CTS, amending, among others, the indemnity payable in case of retirement.
According to the new CLAs, for employees transferred from OTE in the frame of the spin-off process implemented in 2021, who had joined OTE prior to June 10, 1999 and had reached 25 years of service as of October 31, 2021, the benefit to be provided on retirement is equal to the lesser amount between 100% of the maximum liability and Euro 0.03 (annually adjusted according to the inflation rate) plus 9 months’ salary. In case that the indemnity payable according to legal provisions prevails, the legal indemnity is provided. For the rest of employees, the indemnity payable will be equal to 40% of the amount payable upon dismissal as provided in law 4093/2012.
The provision for staff retirement indemnity is reflected in the financial statements in accordance with IAS 19 “Employee Benefits” and is based on an independent actuarial study.
In May 2021, an agenda decision was published by the IFRIC in relation to IAS 19 “employee benefits” and more specifically to how the applicable principles and requirements in IFRS Standards apply on attributing benefits to periods of service based on a specific fact pattern of a defined benefit plan.
IFRIC concluded that, for the defined benefit plan with the fact pattern illustrated in the agenda decision, the entity attributes retirement benefit to each year in which an employee renders service, in the last years of the period in which the retirement benefit is capped (16 years of service), until the retirement age.
Following the publication of the IFRIC agenda decision, a Technical Committee was established in Greece between the Institute of Certified Public Accountants in Greece (SOEL) and qualified actuaries to form a consultation paper that would examine the prevalent benefit practices in the Greek market and would be used as a basis for applying the specific decision in Greece.
The main outcome of the Technical Committee’s guidelines is that the Greek market provides for a variety of benefit practices that may diverge from the fact pattern illustrated in the IFRIC agenda decision, since benefit payments may be provided in other cases of exit, apart from normal retirement.
The Group indemnities' policy provides for a fact pattern that differs from that assumed in the IFRIC agenda decision. According to the Technical Committee's consultation paper, in these cases benefits are attributed over the first years of employment until the period when the retirement benefit is capped.
The amount of the staff retirement indemnity expense recognized in the consolidated and separate income statement is analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Current service cost
3.9
4.3
1.5
1.6
Change in benefit (CLAs)
-
(13.3)
-
-
Recognition of past service cost, settlement, curtailment
-
4.0
-
4.0
Income statement effect recorded in “Personnel costs”
3.9
(5.0)
1.5
5.6
Income statement effect recorded in “Interest and related expenses”
1.5
1.2
0.5
0.3
Total effect in income statement
5.4
(3.8)
2.0
5.9
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
155
Changes in the defined benefit obligation for staff retirement indemnities are as follows:
GROUP
COMPANY
2022
2021
2022
2021
Defined benefit obligation - beginning of the year
139.9
145.7
50.8
120.1
Current service cost
3.9
4.3
1.5
1.6
Change in benefit (CLAs)
-
(13.3)
-
-
Recognition of past service cost, settlement, curtailment
-
4.0
-
4.0
Interest cost
1.5
1.2
0.5
0.3
Actuarial (gains) / losses
(38.0)
3.6
(14.8)
2.6
Usage of provision for voluntary leave schemes participants
(9.6)
(4.4)
(3.6)
(1.5)
Benefits paid
(0.8)
(1.2)
(0.2)
(0.6)
Spin-off
-
-
(0.8)
(75.7)
Sale of subsidiary
(0.2)
-
-
-
Defined benefit obligation - end of the year
96.7
139.9
33.4
50.8
The underlying assumptions of the actuarial valuation of the staff retirement indemnities for the Group and the Company are analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Discount rate
4.02% - 9.0%
1.02% - 3.8%
4.13%
1.1 %
Assumed rate of future salary changes
1.0% - 2.8%
0.0% - 2.0%
2023: 1.5%
2024+: 1.0%
0.0%-1.0%
Inflation rate
2.0% - 4.0%
1.5% - 2.5%
2023-2024: 2.3%
2025+: 2.0%
1.5%
If the discount rate used in the valuation was 1% higher, then the defined benefit obligation for staff retirement indemnities for the Group and the Company would decrease by about 10.5% and 11.6%, respectively. If the discount rate used in the valuation was 1% lower, then the defined benefit obligation for staff retirement indemnities for the Group and the Company would increase by about 12.3% and 13.6%, respectively. If the rate for salary increases was 0.5% higher, then the defined benefit obligation for staff retirement indemnities for the Group and the Company would increase by about 5.9% and 6.7%, respectively. If the rate for salary increases was 0.5% lower, then the defined benefit obligation for staff retirement indemnities for the Group and the Company would decrease by about 5.5% and 6.2%, respectively. The average duration of the liability in respect of the staff retirement indemnities for the Group as at the valuation date is equal to 11.0 years and for the Company is equal to 11.3 years. The benefit payments expected to take place in 2023 for the Group and the Company amount to Euro 1.4 and Euro 0.3, respectively.
(b) Youth account
The youth account provides OTE’s employees' children a lump-sum payment generally when they reach the age of 25. The lump- sum payment is made up of employees' contributions, interest thereon and OTE's contribution which for the period up to November 6, 2011 can reach up to an amount of 10 times the maximum between the average salary of OTE employees or the result of 86 times the daily wage salary of the unskilled worker, depending on the number of years of contributions. For the period after November 7, 2011, following the amendment of the program, OTE’s contribution can reach up to an amount of 3 times the maximum between the average salary of OTE employees or the result of 86 times the daily wage salary of the unskilled worker depending on the number of years of the employee’s contributions and the amount of these contributions. The provision for benefits under the youth account is based on an independent actuarial study. The total actuarial liability is split into two parts: one is treated as “post employment employee benefit” and the other as “other long-term employee benefit”. The part of the total youth account liability that is being classified as “other long-term employee benefit” relates to employees who will still be active employees of the Company at the time when their children will be eligible for the lump-sum benefit. The remaining part of the liability is being classified as “post employment benefit”.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
156
The amount of the youth account expense recognized in the consolidated and separate income statement is analyzed as follows:
2022
2021
GROUP and COMPANY
Post employment benefit
Other long- term benefit
TOTAL
Post employment benefit
Other long- term benefit
TOTAL
Current service cost
0.6
0.5
1.1
1.1
1.1
2.2
Recognition of past service cost, settlement, curtailment
-
-
-
(2.3)
-
(2.3)
Actuarial gains
-
(2.0)
(2.0)
-
(1.6)
(1.6)
Income statement effect recorded in “Personnel costs”
0.6
(1.5)
(0.9)
(1.2)
(0.5)
(1.7)
Income statement effect recorded in “Interest and related expenses”
0.4
-
0.4
0.1
-
0.1
Total effect in income statement
1.0
(1.5)
(0.5)
(1.1)
(0.5)
(1.6)
Changes in the defined benefit obligation regarding the youth account are as follows:
2022
2021
GROUP and COMPANY
Post employment benefit
Other long- term benefit
TOTAL
Post employment benefit
Other long- term benefit
TOTAL
Defined benefit obligation - beginning of the year
41.6
6.8
48.4
36.9
19.6
56.5
Current service cost
0.6
0.5
1.1
1.1
1.1
2.2
Recognition of past service cost, settlement, curtailment
-
-
-
(2.3)
-
(2.3)
Interest cost
0.4
-
0.4
0.1
-
0.1
Transfer due to spin-off
-
-
-
9.7
(9.7)
-
Actuarial (gains) / losses
(1.0)
(2.0)
(3.0)
2.6
(1.6)
1.0
Benefits paid
(8.0)
(0.4)
(8.4)
(6.5)
(2.6)
(9.1)
Defined benefit obligation - end of the year
33.6
4.9
38.5
41.6
6.8
48.4
Employee’s accumulated contributions
47.6
50.0
Provision for youth account
86.1
98.4
The underlying assumptions of the actuarial valuation of the youth account are as follows:
GROUP and COMPANY
2022
2021
Discount rate
3.96%
0.67%
Assumed rate of future salary changes
2023: 1.5%
2024+: 1.0%
0.0%-1.0%
Inflation rate
2023-2024: 2.3%
2025+: 2.0%
1.5%
If the discount rate used in the valuation was 1% higher, then the defined benefit obligation for youth account would decrease by about 3.6%. If the discount rate used in the valuation was 1% lower, then the defined benefit obligation for youth account would increase by about 3.9%. If the rate for salary increases was 0.5% higher, then the defined benefit obligation for youth account would increase by about 1.5%. If the rate for salary increases was 0.5% lower, then the defined benefit obligation for youth account would decrease by about 1.5%. The average duration of the liability in respect of the youth account as at the valuation date is equal to 4.8 years. The benefit payments expected to take place in 2023 for the Company amount to Euro 7.9.
Risks
The above mentioned plans are unfunded and therefore no plan assets exist and hence asset volatility or similar risks (e.g. low returns, asset concentration etc.) do not exist. The risks associated with the existing plans relate to the actuarial assumptions that are used in determining the liability, that must be reflected in the financial statements, and comprise potential changes in bond yields, which determine the discount rate, and assumptions relating to the inflation rate, employees’ withdrawal rate and the rate of future salary increase that may affect the future cash flows of the plans.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
157
Voluntary leave schemes
OTE voluntary leave schemes
In 2022, OTE implemented voluntary leave schemes, the respective cost of which amounted to Euro 10.7 (2021: Euro 3.6).
Group voluntary leave schemes
In 2022, Group segments applied voluntary leave schemes, the total cost of which is as follows:
GROUP
2022
2021
OTE
10.7
3.6
COSMOTE Group - Greece
12.9
2.8
TELEKOM ROMANIA MOBILE
0.7
0.8
OTHER
15.1
4.5
Costs related to voluntary leave schemes
39.4
11.7
Reversal of provision - IKA ETAM case (OTE)
-
(133.5)
Total effect from voluntary leave schemes
39.4
(121.8)
Amounts paid during 2022, in relation to voluntary leave schemes were Euro 45.6 for the Group and Euro 14.5 for the Company (2021: Euro 56.3 and Euro 44.6, respectively).
21. OTHER NON-CURRENT LIABILITIES
Other non-current liabilities are analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Asset retirement obligation
13.3
11.0
-
-
Deferred revenue
1.3
1.8
1.3
1.8
Long-term liabilities to related parties (Note 28)
-
-
39.9
45.3
Liability for TV broadcasting rights
27.0
63.0
27.0
63.0
Other
14.1
13.5
5.5
5.7
TOTAL
55.7
89.3
73.7
115.8
For the Company, long-term liabilities to related parties consist of lease network agreements in which the Company acts as lessor.
22. CONTRACT BALANCES
The following table provides information about contract costs, contract assets and contract liabilities from contracts with customers:
GROUP
COMPANY
2022
2021
2022
2021
Contract costs (short-term portion)
19.6
19.1
6.9
6.0
Contract costs (long-term portion)
10.6
5.2
3.9
3.8
Total contract costs
30.2
24.3
10.8
9.8
Contract assets (short-term portion)
21.2
19.3
4.3
2.2
Contract assets (long-term portion)
28.4
15.3
1.8
1.2
Total contract assets
49.6
34.6
6.1
3.4
Total assets
79.8
58.9
16.9
13.2
Contract liabilities (short-term portion)
136.1
132.5
83.0
85.4
Contract liabilities (long-term portion)
40.8
33.2
48.9
48.2
Total liabilities
176.9
165.7
131.9
133.6
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
158
The revenue recognized in the current reporting period that was included in the contract liability balance at the beginning of the period amounts to Euro 132.5 for the Group and Euro 85.4 for the Company.
The part of the transaction allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the current reporting period and will be recognized as revenues in the future periods (2023 and onwards) amounts to Euro 176.9 for the Group and Euro 131.9 for the Company.
23. INCOME TAXES – DEFERRED TAXES
According to law 4799/2021, the corporate income tax rate in Greece is reduced from 24% to 22% for fiscal years 2021 onwards.
The corporate income tax rate in Romania is 16%.
From January 1, 2014 and onwards, intragroup dividends distributed within the EU are exempt from both income tax, as well as withholding tax provided that, among other conditions, the parent entity holds a minimum participation of 10% for at least two consecutive years.
Based on law 4646/2019 as amended by law 4876/2021, from January 01, 2020, the capital gains from the sale of shares of companies established in EU countries will be exempt from income tax in Greece, provided that the seller holds a minimum participation of 10% for at least two consecutive years.
Greek tax regulations and related clauses are subject to interpretation by the tax authorities and administrative courts of law. Tax returns are filed annually. The profits or losses declared for tax purposes remain provisional until the tax authorities examine the returns and the records of the taxpayer and a final assessment is issued. In accordance with the Greek tax legislation (article 36 of law 4174/2013) in force and the respective Ministerial Decisions issued, the Greek tax authorities may impose additional taxes and penalties following a tax audit, within the applicable statute of limitations which in principle is five years as from the end of the following fiscal year within which the relevant tax return should have been submitted. Based on the above, the right of the tax authorities to impose additional income taxes for the fiscal years up to 2016 (inclusive) is considered in principle and under the general rules as time-barred.
From the financial year 2011 and onwards, the tax returns are subject to the Tax compliance report process (as described below).
Net operating losses which are tax deductible, can be carried forward against taxable profits for a period of five years from the year they are generated.
Under Greek tax regulations, an 80% income tax advance calculated on each year’s current income tax liability is paid to the tax authorities. Such advance is then netted off with the following year’s income tax liability. Any excess advance amounts are refunded to the companies following a tax examination.
Tax compliance report
From the financial year 2011 and onwards, Greek Société Anonyme and Limited Liability Companies that are required to prepare audited statutory financial statements are subject to the “Tax compliance report” process as provided for by paragraph 5 of Article 82 of law 2238/1994 and article 65a of law 4174/2013. This “Tax compliance report” is issued by the same statutory auditor or audit firm that issues the audit opinion on the statutory financial statements. Upon completion of the tax audit, the statutory auditor or audit firm issues to the entity a "Tax compliance report" which is subsequently submitted electronically to the Ministry of Finance, by the statutory auditor or audit firm.
For the Greek companies of the Group that are subject to the above process, the “Tax compliance report” for the years 2011 till 202 1 , has been issued and submitted with no substantial adjustments with respect to the tax expense and corresponding tax provision as reflected in the respective annual financial statements.
It is noted that based on the tax legislation in force (Circular POL 1006/2016), the companies that have obtained a “Tax compliance report” without any reservations for infringements of the tax law, are not exempt from tax audit. In effect, the tax authorities retain the right to audit them within the applicable statute of limitations as described above.
The tax audit for the financial year 202 2 is being performed by Deloitte Certified Public Accountants S.A.. Upon completion of the tax audit, management does not expect that significant additional tax liabilities will arise, in excess of those provided for and disclosed in the financial statements.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
159
Unaudited tax years
Taking into account the “Tax compliance report” described above (where applicable), the table below presents the years for which the tax audit has not been performed / completed:
ENTITY
Open Tax Years
OTE
2022
COSMOTE
2022
OTE PLC
2019 - 2022
OTESAT-MARITEL
2022
CTS
2022
ΟΤΕ ESTATE
2022
OTE GLOBE
2022
OTE INSURANCE
2022
OTE ACADEMY
2022
COSMOTE TV PRODUCTIONS
2022
TELEKOM ROMANIA MOBILE
2017 - 2022
GERMANOS
2022
COSMOTE E-VALUE
2022
MOBILBEEEP LTD
2017 - 2022
E-VALUE LTD
2022
COSMOHOLDING INTERNATIONAL B.V.
2014 - 2022
E-VALUE INTERNATIONAL S.A.
2016 - 2022
OTE RURAL NORTH
2016 - 2017, 2022
OTE RURAL SOUTH
2016 - 2017, 2022
COSMOTE PAYMENTS
2018 - 2022
COSMOTE GLOBAL SOLUTIONS S.A.
2018 - 2022
• Within 2022 OTE received a tax audit notification (temporary audit), due to the fact that the submission of Corporate Income Tax return of 2021, resulted to a credit amount of Euro 35.0. The tax authorities have approved the refund of this amount and within January 2023 the whole amount has been collected by OTE.
• Within 2022 OTE RURAL NORTH and OTE RURAL SOUTH received a tax audit notification for years 2016 and 2017. The audit is in progress.
• Within 2020 COSMOTE received a tax audit notification for year 2018. The audit is in progress.
• TELEMOBIL S.A. (ZAPP), GERMANOS TELECOM ROMANIA S.A. and SUNLIGHT ROMANIA S.R.L FILIALA were absorbed in 2017 by TELEKOM ROMANIA MOBILE. The companies have not been audited for 2016 and 2017.
The Group and the Company have established provisions for open tax cases or unaudited years.
The major components of income tax expense for the years ended December 31, 2022 and 2021 are as follows:
GROUP
COMPANY
2022
2021
2022
2021
Current income tax
158.0
73.5
73.2
(4.8)
Deferred income tax
8.2
133.8
14.3
127.6
Deferred income tax – Effect due to change in the income tax rates
-
26.3
-
12.8
Total income tax expense
166.2
233.6
87.5
135.6
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
160
A reconciliation between the income tax expense and the accounting profit before tax multiplied by tax rates in force in Greece (2022: 22%, 2021: 22%) is as follows:
GROUP
COMPANY
2022
2021
2022
2021
Profit before tax
554.9
719.4
645.3
699.3
Statutory tax rate
22%
22%
22%
22%
Tax at statutory rate
122.1
158.3
142.0
153.8
Non-taxable and specially taxed income
-
-
(81.5)
(44.2)
Effect of different tax rates in foreign countries
6.5
-
-
-
Effect of changes to tax rates
-
26.3
-
12.8
Expenses non-deductible for tax purposes
16.2
34.6
8.9
21.5
Impairment loss in investments
-
-
18.1
-
Taxable dividends from subsidiaries (non EU)
5.5
-
-
-
Losses in relation to investments for which no deferred tax asset was previously recognized
-
1.0
-
1.0
Reversal of impairment due to sale of investment
-
-
-
(9.3)
Reclassification of foreign currency translation reserve
-
9.2
-
-
Tax losses and other items for which no deferred tax asset is recognized
15.8
-
-
-
Other
0.1
4.2
-
-
Income tax
166.2
233.6
87.5
135.6
Income tax payable for the Group and the Company as of December 31, 2022 amounted to Euro 92.3 and Euro 39.4, respectively (December 31, 2021: Euro 44.0 and Euro 7.9, respectively).
Income tax receivable for the Group and the Company as of December 31, 2022 amounted to Euro 2.8 and Euro nil, respectively (December 31, 2021: Euro 41.8 and Euro 36.7, respectively) and is recorded under “Other current assets” (Note 14).
In 2022, the Company in accordance with the law 3905/2010, formed a non-taxable reserve of Euro 173,673.46 (absolute amount) which relates to the Company’s obligation to invest in cinema film production.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
161
Deferred taxes are analyzed as follows:
Statement of financial position
Income statement
GROUP
2022
2021
2022
2021
Voluntary leave schemes
1.6
2.0
(0.4)
(32.9)
Staff retirement indemnities
21.1
30.4
(0.9)
(4.2)
Youth account
8.4
10.7
(2.1)
(3.1)
Employee benefits
7.7
7.5
0.2
(2.0)
Property, plant and equipment / Leases
117.9
115.5
2.4
(7.7)
Provisions
76.0
78.8
(2.8)
(14.9)
Tax losses
26.9
29.9
(3.0)
(0.4)
Deferred income
17.0
16.3
0.7
(0.8)
Loss in investment to subsidiary
-
2.0
(2.0)
(105.0)
Other
9.6
10.5
(0.9)
(1.5)
Deferred tax asset (before offset)
286.2
303.6
Offset of deferred tax liabilities
(108.0)
(105.7)
Deferred tax asset (after offset)
178.2
197.9
Property, plant and equipment
(72.6)
(66.1)
(6.5)
3.3
Capitalized interest
(7.7)
(8.5)
0.8
1.7
Fair value adjustment on acquisition of subsidiaries
(7.4)
(12.8)
5.4
6.9
Other
(20.7)
(21.6)
0.9
0.5
Deferred tax liabilities (before offset)
(108.4)
(109.0)
To be offset against deferred tax asset
108.0
105.7
Deferred tax liabilities (after offset)
(0.4)
(3.3)
Deferred tax expense
(8.2)
(160.1)
Deferred tax assets, net
177.8
194.6
A deferred tax asset has been recognized to the Group, for tax losses that are related to the Group’s entities in Romania (mainly from interest expenses deductible in future years) and Greece, respectively. Based on management's assessment, this deferred tax asset will be fully realized in the future, considering the future expected performance of these operations.
Statement of financial position
Income statement
COMPANY
2022
2021
Spin-off process
2022
2021
Voluntary leave schemes
1.5
1.9
-
(0.4)
(32.8)
Staff retirement indemnities
7.0
10.8
(0.2)
(0.3)
0.4
Youth account
8.4
10.7
-
(2.1)
(3.1)
Employee benefits
6.5
6.9
(0.4)
(1.6)
Leases
2.4
2.3
-
0.1
0.2
Provisions
56.8
57.9
-
(1.1)
(5.5)
Tax losses
-
4.2
-
(4.2)
4.2
Deferred income
2.2
2.1
-
0.1
-
Loss in investment to subsidiary
-
2.0
-
(2.0)
(105.0)
Deferred tax assets (before offset)
84.8
98.8
(0.2)
Offset of deferred tax liabilities
(80.1)
(76.1)
-
Deferred tax assets (after offset)
4.7
22.7
(0.2)
Property, plant and equipment
(62.1)
(57.7)
-
(4.4)
2.2
Capitalized interest
(7.7)
(8.5)
-
0.8
1.7
Other
(10.3)
(9.9)
-
(0.4)
(1.1)
Deferred tax liabilities (before offset)
(80.1)
(76.1)
-
Το be offset against deferred tax assets
80.1
76.1
Deferred tax liabilities (after offset)
-
-
(0.2)
Deferred tax expense
(14.3)
(140.4)
Deferred tax assets, net
4.7
22.7
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
162
The movement in deferred tax of the Group and the Company is as follows:
GROUP
COMPANY
2022
2021
2022
2021
Deferred tax asset (net) – beginning of the year
194.6
354.2
22.7
185.4
Deferred tax charged to the income statement
(8.2)
(160.1)
(14.3)
(140.4)
Deferred tax through other comprehensive income
(8.5)
0.5
(3.5)
0.3
Spin-off
-
-
(0.2)
(22.6)
Sale of subsidiary
(0.1)
-
-
-
Deferred tax asset (net) - end of the year
177.8
194.6
4.7
22.7
The recoverability of deferred tax is analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Deferred tax assets (before offset):
After more than 12 months
252.0
261.7
67.9
77.0
Within 12 months
34.2
41.9
16.9
21.8
Deferred tax liabilities (before offset):
After more than 12 months
(89.3)
(90.7)
(72.9)
(69.4)
Within 12 months
(19.1)
(18.3)
(7.2)
(6.7)
Deferred tax asset (net)
177.8
194.6
4.7
22.7
The Group does not recognize deferred tax asset on the following accumulated tax losses of its entities, due to the uncertainty of the timing of available taxable profits against which these losses could be offset. The accumulated tax losses expire as follows:
GROUP
Amount
2023
0.2
2024
0.8
2025
0.4
2026
-
After 2027
12.5
TOTAL
13.9
24. OTHER CURRENT LIABILITIES
Other current liabilities are analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Employer contributions
18.2
18.2
5.3
5.3
Liabilities to employees
70.0
58.2
24.1
20.4
Other taxes - duties
73.8
59.5
27.9
26.9
Interest payable
4.5
7.3
3.6
6.6
Provisions for litigation and other risks
156.6
187.3
137.4
146.8
Deferred revenue
3.2
5.4
5.9
6.4
Provisions related to the disposal of assets / subsidiaries
88.2
97.2
88.0
97.2
Financial liabilities related to wallets
4.0
-
-
-
Other
34.5
38.4
30.3
28.8
TOTAL
453.0
471.5
322.5
338.4
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
163
The movement in the provision for litigation and other risks is as follows:
a) provision for litigation:
GROUP
COMPANY
2022
2021
2022
2021
Balance at January 1
176.0
145.6
138.3
106.1
Addition during the year
25.6
41.2
19.5
38.0
Utilized
(17.9)
(4.8)
(7.4)
(2.8)
Unused amounts reversed
(37.7)
(6.0)
(21.9)
(3.0)
Balance at December 31
146.0
176.0
128.5
138.3
b) provision for other risks:
GROUP
COMPANY
2022
2021
2022
2021
Balance at January 1
11.3
15.1
8.5
12.4
Addition during the year
3.4
1.0
2.4
-
Utilized
(4.1)
(4.8)
(2.0)
(3.9)
Balance at December 31
10.6
11.3
8.9
8.5
25. OTHER OPERATING INCOME
Other operating income is analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Gain from disposal of property, plant and equipment and materials
3.4
0.4
3.3
0.1
Income from subsidies
1.4
2.7
0.6
1.5
Income from related parties (Note 28)
-
0.1
27.5
26.0
Other
5.7
6.0
0.7
1.3
TOTAL
10.5
9.2
32.1
28.9
26. EARNINGS PER SHARE
Earnings per share (after income taxes) are calculated by dividing the profit attributable to the owners of the parent by the weighted average number of ordinary shares outstanding during the year. The weighted average number of ordinary shares outstanding during the year is the number of ordinary shares outstanding at the beginning of the period, adjusted by the number of ordinary shares bought back or issued during the period multiplied by a time-weighting factor. The time-weighting factor is the number of days that the shares are outstanding as a proportion of the total number of days in the period. Diluted earnings per share incorporates stock options (if any) for which the average share price for the year is in excess of the exercise price of the stock option and which create a dilutive effect. As of December 31, 2022 and 2021 there was no dilution effect.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
164
Earnings per share are analyzed as follows:
GROUP
2022
2021
Profit attributable to owners of the parent
388.6
557.6
Profit for the year from continuing operations (attributable to owners of the parent)
388.6
487.0
Profit for the year from discontinued operations (attributable to owners of the parent)
-
70.6
Weighted average number of shares for basic earnings per share
437,978,102
454,298,720
Weighted average number of shares adjusted for the effect of dilutions
437,978,102
454,298,720
Basic earnings per share
0.8873
1.2274
From continuing operations
0.8873
1.0720
From discontinued operations
-
0.1554
Diluted earnings per share
0.8873
1.2274
From continuing operations
0.8873
1.0720
From discontinued operations
-
0.1554
( Earnings per share are in absolute amounts)
27. OPERATING SEGMENT INFORMATION
The following information is provided for the reportable segments, which are separately disclosed in the financial statements and which are regularly reviewed by the Group’s chief operating decision makers. Segments were determined based on the Group’s legal structure and business activities.
Using quantitative thresholds OTE, COSMOTE Group – Greece and TELEKOM ROMANIA MOBILE have been determined to be reportable segments. Information about operating segments that do not constitute reportable segments has been combined and disclosed in an “Other” category. This category comprises all the other operations of the Group, the most material of which relate to the Group's real estate subsidiary, OTE ESTATE, the Group’s international carrier, OTE GLOBE, the Group's financing subsidiary, OTE PLC, as well as the Group’s technical field operations subsidiary, CTS. The types of services provided by the reportable segments are as follows:
• OTE is a provider of fixed-line services, internet access services, ICT services and TV services in Greece.
• COSMOTE Group is a provider of mobile telecommunications, retail operations (shops) and customer services.
• TELEKOM ROMANIA MOBILE is a provider of mobile telecommunications services in Romania.
Accounting policies of the operating segments are the same as those followed for the preparation of the financial statements. Intersegment revenues are generally reported at values that approximate third-party selling prices. Management evaluates segment performance based on operating profit before financial and investing activities, depreciation, amortization and impairment; operating profit / (loss) before financial and investing activities and profit / (loss) for the year.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
165
Segment information and reconciliation to the Group’s consolidated figures are as follows:
2022
OTE
COSMOTE Group – Greece
TELEKOM ROMANIA MOBILE
OTHER
TOTAL
Elim.
GROUP
Retail services revenues (fixed business)
928.8
4.6
-
-
933.4
-
933.4
Service revenues (mobile business)
-
986.2
202.8
-
1,189.0
-
1,189.0
Revenue from the sale of goods and merchandise
4.6
212.2
73.5
4.5
294.8
-
294.8
Revenues from the use of assets
146.2
-
2.5
3.8
152.5
-
152.5
Other revenues
450.2
62.4
27.3
345.7
885.6
-
885.6
External revenue
1,529.8
1,265.4
306.1
354.0
3,455.3
-
3,455.3
Intersegment revenue
83.5
158.5
0.3
294.5
536.8
(536.8)
-
Total revenue
1,613.3
1,423.9
306.4
648.5
3,992.1
(536.8)
3,455.3
Operating profit before financial and investing activities, depreciation, amortization and impairment
741.2
570.4
59.2
74.6
1,445.4
(59.8)
1,385.6
Depreciation, amortization and impairment
(383.7)
(256.6)
(163.7)
(43.6)
(847.6)
52.5
(795.1)
Operating profit / (loss) before financial and investing activities
357.5
313.8
(104.5)
31.0
597.8
(7.3)
590.5
Dividend income
395.5
-
-
-
395.5
(395.5)
-
Interest income
1.3
0.5
1.6
13.3
16.7
(14.0)
2.7
Interest and related expenses
(27.0)
(13.5)
(5.2)
(18.0)
(63.7)
23.8
(39.9)
Income tax
(87.5)
(69.6)
-
(8.8)
(165.9)
(0.3)
(166.2)
Profit / (loss) for the year
557.8
232.6
(108.1)
18.5
700.8
(312.1)
388.7
Purchase of property, plant and equipment and intangible assets
414.8
143.3
40.0
41.4
639.5
-
639.5
2022
OTE
COSMOTE Group – Greece
TELEKOM ROMANIA MOBILE
OTHER
TOTAL
Elim.
GROUP
Segment assets
2,383.5
2,177.1
325.2
1,680.2
6,566.0
(1,566.8)
4,999.2
Segment liabilities
2,260.2
1,031.5
204.2
1,221.2
4,717.1
(1,566.8)
3,150.3
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
166
2021
OTE
COSMOTE Group – Greece
TELEKOM ROMANIA MOBILE
OTHER
TOTAL
Elim.
GROUP
Retail services revenues (fixed business)
946.9
3.9
-
-
950.8
-
950.8
Service revenues (mobile business)
-
945.4
218.7
-
1,164.1
-
1,164.1
Revenue from the sale of goods and merchandise
4.4
212.7
59.1
3.0
279.2
-
279.2
Revenues from the use of assets
158.5
-
2.3
3.2
164.0
-
164.0
Other revenues
387.9
37.1
21.2
332.0
778.2
-
778.2
External revenue
1,497.7
1,199.1
301.3
338.2
3,336.3
-
3,336.3
Revenues from discontinued operations
0.1
2.5
14.0
0.4
17.0
(17.0)
-
Intersegment revenue
80.1
159.7
0.2
273.9
513.9
(513.9)
-
Total revenues
1,577.9
1,361.3
315.5
612.5
3,867.2
(530.9)
3,336.3
Operating profit before financial and investing activities, depreciation, amortization and impairment
848.8
560.3
47.5
88.3
1,544.9
(65.0)
1,479.9
Depreciation, amortization and impairment
(364.8)
(275.1)
(42.3)
(42.4)
(724.6)
57.0
(667.6)
Operating profit / (loss) before financial and investing activities
484.0
285.2
5.2
45.9
820.3
(8.0)
812.3
Dividend income
200.9
-
-
-
200.9
(200.9)
-
Interest income
1.1
0.3
0.2
18.6
20.2
(19.2)
1.0
Interest and related expenses
(30.9)
(20.6)
(3.4)
(20.4)
(75.3)
30.3
(45.0)
Income tax
(135.6)
(71.9)
(7.9)
(17.8)
(233.2)
(0.4)
(233.6)
Profit / (loss) for the year from continuing operations
563.7
193.7
(7.5)
27.3
777.2
(291.4)
485.8
Purchase of property, plant and equipment and intangible assets
317.5
169.6
69.2
29.7
586.0
-
586.0
2021
OTE
COSMOTE Group – Greece
TELEKOM ROMANIA MOBILE
OTHER
TOTAL
Elim.
GROUP
Segment assets
2,578.9
2,173.3
436.1
1,868.1
7,056.4
(1,839.4)
5,217.0
Segment liabilities
2,539.0
910.4
206.4
1,428.4
5,084.2
(1,839.4)
3,244.8
Transactions between the segments are eliminated in the context of consolidation and the eliminated amounts are included in the column eliminations. The segment assets shown in “Other” include loans and interest receivable by OTE PLC of an amount of Euro 951.8 (2021: Euro 1,183.5) which is eliminated at Group level.
GEOGRAPHIC INFORMATION
Geographic information for the Group’s revenues and operating profit before financial and investing activities, depreciation, amortization and impairment is as follows:
2022
GREECE
ROMANIA
Elim.
TOTAL
Total revenues
3,155.4
306.4
(6.5)
3,455.3
Operating profit before financial and investing activities, depreciation, amortization and impairment
1,326.4
59.2
-
1,385.6
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
167
2021
GREECE
ROMANIA
Elim.
TOTAL
Total revenues
3,046.1
315.5
(25.3)
3,336.3
Operating profit before financial and investing activities, depreciation, amortization and impairment
1,432.5
47.5
(0.1)
1,479.9
28. RELATED PARTY DISCLOSURES
OTE’s related parties have been identified based on the requirements of IAS 24 “Related Party Disclosures”.
The Group includes all entities which OTE controls, either directly or indirectly (Note 1). Transactions and balances between companies in the Group are eliminated on consolidation.
DEUTSCHE TELEKOM AG is a 50 .9 % shareholder of OTE and consolidates OTE using the full consolidation method. Therefore, all companies included in the DEUTSCHE TELEKOM group are also considered related parties.
The Company purchases goods and services from these related parties, provides services and delivers goods to them. Furthermore, OTE grants and receives loans to and from these related parties and also receives and pays dividends.
OTE’s sales and purchases with related parties are analyzed as follows:
2022
2021
Sales ΟΤΕ
Purchases ΟΤΕ
Sales ΟΤΕ
Purchases ΟΤΕ
COSMOTE Group - Greece
64.4
147.5
61.4
151.5
COSMOTE TV PRODUCTIONS
-
6.5
-
6.5
COSMO-ONE (until the date of the disposal)
-
0.2
0.1
0.5
OTESAT-MARITEL
0.3
0.3
0.5
0.1
CTS
0.4
155.1
0.5
151.9
COSMOTE PAYMENTS
-
4.6
-
0.6
COSMOTE GLOBAL SOLUTIONS N.V.
-
2.4
-
0.4
ΟΤΕ ESTATE
0.2
1.7
0.2
0.3
OTE GLOBE
8.3
39.1
8.1
36.9
OTE ACADEMY
-
2.9
-
3.3
TELEKOM ROMANIA (until the date of the disposal)
-
-
0.1
0.2
TELEKOM ROMANIA MOBILE
2.2
1.4
3.0
2.4
OTE RURAL NORTH
3.3
4.5
2.7
3.7
OTE RURAL SOUTH
4.4
6.4
3.6
5.5
DEUTSCHE TELEKOM group of companies (except for OTE Group)
3.6
9.4
8.6
7.3
TOTAL
87.1
382.0
88.8
371.1
Purchases of OTE from CTS include network construction services amounting to Euro 19.6 for 2022 (2021: Euro 18.2).
Purchases of OTE from related parties do not include an amount of Euro 3 6 . 8 related to lease expenses (20 21 : Euro 35 . 6 ).
The Group’s sales and purchases with related parties which are not eliminated in the consolidation are analyzed as follows:
2022
2021
Group’s sales
Group’s purchases
Group’s sales
Group’s purchases
DEUTSCHE TELEKOM group of companies (except for OTE Group)
23.4
31.3
35.6
51.6
TOTAL
23.4
31.3
35.6
51.6
For the year 2021, Group’s sales and purchases include an amount of Euro 4.6 and Euro 18.4, respectively, related to discontinued operations.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
168
OTE’s other operating income with its related parties is analyzed as follows:
Other operating income OTE
2022
2021
COSMOTE Group - Greece
16.3
15.2
CTS
10.1
10.1
ΟΤΕ ESTATE
-
0.3
OTE ACADEMY
0.3
0.2
OTE GLOBE
0.8
0.1
DEUTSCHE TELEKOM group of companies (except for OTE Group)
-
0.1
TOTAL
27.5
26.0
The Group’s other operating income with its related parties which is not eliminated in the consolidation is analyzed as follows:
Group’s other operating income
2022
2021
DEUTSCHE TELEKOM group of companies (except for OTE Group)
-
0.1
TOTAL
-
0.1
ΟΤΕ’s financial activities with its related parties, which comprise interest on loans granted and received are analyzed as follows:
2022
2021
Finance income OTE
Finance expense OTE
Finance income OTE
Finance expense OTE
OTE PLC
-
12.4
-
18.3
COSMOTE Group - Greece
0.1
-
0.1
-
OTE RURAL NORTH
0.1
-
0.1
-
OTE RURAL SOUTH
0.6
-
0.4
-
TOTAL
0.8
12.4
0.6
18.3
OTE’s dividend income from its related parties is analyzed as follows:
Dividend income OTE
2022
2021
COSMOTE
360.0
180.0
OTE INSURANCE
-
0.5
OTESAT-MARITEL
0.5
-
OTE ESTATE
-
20.4
OTE GLOBE
10.0
-
OTE PLC
25.0
-
TOTAL
395.5
200.9
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
169
Amounts owed to and by the related parties as a result of OTE’s transactions with them, including dividends are analyzed as follows:
31/12/2022
31/12/2021
Amounts owed to ΟΤΕ
Amounts owed by ΟΤΕ
Amounts owed to ΟΤΕ
Amounts owed by ΟΤΕ
COSMOTE Group - Greece
45.4
146.4
77.4
162.5
TELEKOM ROMANIA MOBILE
0.6
2.0
0.1
4.0
COSMOTE TV PRODUCTIONS
-
1.3
-
1.7
COSMO-ONE
-
-
-
0.1
OTESAT-MARITEL
4.1
-
4.5
-
CTS
13.9
35.2
13.2
33.1
COSMOTE PAYMENTS
1.9
1.4
0.5
0.2
COSMOTE GLOBAL SOLUTIONS N.V.
0.1
1.9
-
0.4
ΟΤΕ ESTATE
2.6
0.5
1.8
0.5
OTE GLOBE
2.4
12.4
2.6
10.3
OTE ACADEMY
0.1
0.8
0.1
0.6
OTE RURAL NORTH
0.9
-
0.9
0.1
OTE RURAL SOUTH
1.2
-
1.0
0.1
DEUTSCHE TELEKOM group of companies (except for OTE Group)
1.8
3.2
2.9
6.1
TOTAL
75.0
205.1
105.0
219.7
As of December 31, 202 1 , amounts owed to OTE by COSMOTE Group – Greece include dividend receivable of Euro 40.0.
OTE’s lease liabilities to related parties are analyzed as follows:
01/01/2022
31/12/2022
Lease liabilities, opening balance
Lease payments
New Contracts / Contract Modifications
Interest expense
Lease liabilities, ending balance
OTE ESTATE
138.0
(26.6)
5.1
4.9
121.4
COSMOTE Group - Greece
0.2
(5.6)
11.2
0.2
6.0
OTE RURAL NORTH
0.8
(0.4)
0.1
-
0.5
OTE RURAL SOUTH
1.7
(0.9)
-
0.1
0.9
TOTAL
140.7
(33.5)
16.4
5.2
128.8
In addition, the Company’s depreciation includes depreciation charge for the right-of-use assets in relation to lease agreements with related parties amounting to Euro 32.1 (2021: Euro 31.3) .
Amounts owed to and by the related parties as a result of the Group’s transactions with them, which are not eliminated in the consolidation, are analyzed as follows:
31/12/2022
31/12/2021
Amounts owed to Group
Amounts owed by Group
Amounts owed to Group
Amounts owed by Group
DEUTSCHE TELEKOM group of companies (except for OTE Group)
5.7
503.1
8.5
348.4
TOTAL
5.7
503.1
8.5
348.4
Amounts owed by Group to DEUTSCHE TELEKOM group as of December 31, 2022 include an amount of Euro 450.0 (nominal amount) related to Notes issued by OTE PLC (Note 19) and subscribed partially or in full by DEUTSCHE TELEKOM AG (December 31, 2021: Euro 300.0 nominal amount). Interest expenses for year 2022 for the above Notes amount to Euro 2.8 (2021: Euro 2.5).
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
170
Amounts owed to and by OTE relating to loans granted and received, are analyzed as follows:
31/12/2022
31/12/2021
Amounts owed to ΟΤΕ
Amounts owed by ΟΤΕ
Amounts owed to ΟΤΕ
Amounts owed by ΟΤΕ
OTE PLC
-
795.8
-
1,178.1
OTE RURAL NORTH
6.1
-
6.1
-
OTE RURAL SOUTH
4.0
-
8.5
-
TOTAL
10.1
795.8
14.6
1,178.1
Amounts owed by OTE to OTE PLC relating to loans include interest payable amounting to Euro 2.4 ( December 31, 20 21 : Euro 6 . 3 ) .
Amounts owed to OTE by OTE RURAL NORTH and OTE RURAL SOUTH relating to loans include interest receivable amounting to Euro 0.1 as of December 31, 2022 (December 31, 2021 : Euro 0.1).
Key Management Personnel and those closely related to them are defined as related parties in accordance with IAS 24 “Related Party Disclosures”. Key management compensation comprises salaries and other short term benefits, termination benefits, post- employment benefits and other long term benefits (as defined in IAS 19 “Employee Benefits”) and share based payments (as defined in IFRS 2 “Share-based Payment”).
Fees to the members of the Board of Directors and OTE’s key management personnel amounted to Euro 12.4 and Euro 11.9 for the years 2022 and 2021, respectively.
The main transactions between the Group companies are described below:
ΟΤΕ GLOBE
OTE GLOBE provides international telephony services on behalf of OTE to international providers and invoices OTE with its fees. OTE GLOBE invoices OTE, and OTE invoices OTE GLOBE for the telecommunication traffic which passes through international networks of OTE GLOBE or international telephone networks of OTE as the case may be. In addition, the two entities have commercial transactions in relation to leased lines.
OTE ESTATE
OTE ESTATE earns income from leasing of buildings to OTE and its subsidiaries.
COSMOTE TV PRODUCTIONS
COSMOTE TV PRODUCTIONS invoices OTE for TV related services.
OTESAT-MARITEL
OTE sells electronic equipment and provides administrative services to ΟTESAT-MARITEL, while ΟTESAT-MARITEL sells satellite telecommunications equipment to OTE and provides INMARSAT satellite services.
CTS
CTS provides services of technical field operations to OTE and its subsidiaries. ΟΤΕ invoices CTS for the provision of shared services.
COSMOTE Group
ΟΤΕ invoices COSMOTE Group (COSMOTE) for leased lines. COSMOTE Group invoices OTE with commissions in relation to sales made through the commercial channels of COSMOTE Group (GERMANOS). COSMOTE Group (COSMOTE E-VALUE) provides customer care and support services to OTE. OTE and COSMOTE Group (COSMOTE) have income and expenses for interconnection depending to which of the two entities’ network the calls terminate, including international telephony traffic which passes through the two networks. OTE and COSMOTE Group have also revenues and expenses for other shared services, depending which of the entities provides the services.
OTE ACADEMY
OTE ACADEMY provides training services to the employees of OTE and its subsidiaries.
OTE PLC
ΟΤΕ PLC grants / receives loans to / from ΟΤΕ and its subsidiaries.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
171
OTE RURAL NORTH
OTE invoices OTE RURAL NORTH for broadband infrastructure development and has granted loans to this entity. OTE RURAL NORTH provides wholesale broadband network services to OTE.
OTE RURAL SOUTH
OTE invoices OTE RURAL SOUTH for broadband infrastructure development and has granted loans to this entity. OTE RURAL SOUTH provides wholesale broadband network services to OTE.
COSMOTE PAYMENTS
COSMOTE PAYMENTS invoices OTE and its subsidiaries for payment services for transactions performed through their commercial channels. OTE and its subsidiaries provide support services to COSMOTE PAYMENTS.
COSMOTE GLOBAL SOLUTIONS N.V.
COSMOTE GLOBAL SOLUTIONS N.V. invoices OTE for subcontracting services related to ICT projects. OTE invoices COSMOTE GLOBAL SOLUTIONS N.V. for shared services.
DEUTSCHE TELEKOM group of companies (except for OTE Group)
The Group has income and expenses which arise from transactions concerning incoming, outgoing and transit traffic to and from the network of the companies that belong to DEUTSCHE TELEKOM group of companies (except for OTE Group), as well as other shared services.
29. LITIGATION AND CLAIMS – COMMITMENTS
Α. OUTSTANDING LEGAL CASES
The Group and the Company have made appropriate provisions in relation to litigations and claims, when it is probable that an outflow of recourses will be required to settle the obligations and the respective amount can be reliably estimated.
The most significant outstanding legal cases as at December 31, 2022, are as follows:
OTE
Employees’ Claims: ΟΤΕ ’s current and former employees have filed a number of lawsuits against OTE with a wide variety of claims. Provisions have been recorded in the financial statements based on management’s best estimate of the amount of the probable future outflow to settle the present obligation.
Fines of HTPC against OTE (over Euro 0.5 ): HTPC has imposed various fines on OTE (an initial amount Euro 12.3 reduced through appeals to an amount of Euro 4.1) with a wide variety of thematic claims, as part of the Company’s routine activity. OTE has appealed for the annulment of these fines.
Payphones Duties: In prior years, the Municipality of Thessaloniki based on municipal legislation, has charged OTE with duties and penalties for the installation and operation of payphones within the common areas of its responsibility. Decisions are still pending for fees of approximately Euro 2.4 imposed by the Municipality of Thessaloniki in the years 2006 and 2007.
Franchisees lawsuits: Evros Telecommunications S.A. filed a lawsuit against OTE claiming an amount of Euro 2.0 for alleged damages and customer base compensation. The case was heard on May 10, 2017 and was rejected by the Court. Evros Telecommunications S.A. filed an appeal against the Court’s decision, whose hearing date has been set for April 27 , 202 3.
WIND, VODAFONE, CYTA, NEWSPHONE and FORTHNET filed against the decisions of HTPC concerning the allocation of the net cost of universal service for the years 2010 and 2011. With these decisions of HTPC, the total cost for the universal service has been determined for the years 2010 and 2011 at an amount of Euro 46.8, out of which Euro 29.8 relates to OTE. OTE intervened in favor of the validity of HTPC's decisions in the abovementioned trials, and all decisions issued thereafter rejected the appeals of the opposing parties. VODAFONE appealed before the Council of State against the above decisions of the Athens Administrative Court of Appeal.
WIND and VODAFONE filed appeals against the decisions of HTPC concerning the allocation of the net cost of universal service for the years 2012 until 2016. With these decisions of HTPC, the total cost for the universal service has been determined for the years 2012 until 2016 at an amount of Euro 36.8, out of which Euro 23.1 relates to OTE. OTE intervened in favor of HTPC requesting the rejection of the appeals.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
172
OTE had been summoned to a hearing before HTPC on September 21, 2020 for alleged breach of telecommunication and competition law, regarding delays in activation of local loops and fault repair for the period from November 2016 to November 2018. The hearing is grounded on a technical report issued by HTPC and complaints of WIND, VODAFONE and FORTHNET. The hearing took place on September 19, 2022 and the decision is pending.
Orange Romania: On September 30, 2021, the sale to Orange Romania of the shares held by the Group to TELEKOM ROMANIA, was completed. The contract provided for the possibility of adjusting the purchase price based on the completion accounts of TELEKOM ROMANIA as of September 30, 2021 and agreed levels of cash and working capital. On December 24, 2021 Orange Romania informed OTE that according to the completion accounts, the purchase price for the transferred shares of TELEKOM ROMANIA should be reduced by Euro 24.0 approximately. On July 20, 2022, a settlement agreement was signed with Orange Romania for the disbursement by OTE of an amount of Euro 9.0 with regards to the completion accounts. The disbursement took place in August 2022. In the framework of the sale contract, Orange Romania notified OTE with regards to new claims for additional potential compensations. Management believes that adequate provisions have been recorded in the financial statements in relation to these and future claims regarding this transaction.
COSMOTE
Unauthorized file export from COSMOTE’s system : On September 8, 2020 an unauthorized file export from COSMOTE’s system was detected, as a result of a cyber-attack. In January 2022, Hellenic Data Protection Authority (“DPA”) imposed fines on COSMOTE and OTE amounting to Euro 6.0 and Euro 3.3, respectively. On March 28, 2022, an application for the annulment of the decision of DPA was filed by COSMOTE and OTE before the Council of State. The hearing has been set, following postponement, for May 16, 2023. On June 22, 2022, the decision of Hellenic Authority for Communication Security and Privacy (“ADAE”) was served to COSMOTE imposing a fine of Euro 3.2. On September 20, 2022 COSMOTE filled an appeal against the decision of ADAE before the competent Administrative Courts.
Fines of HTPC against COSMOTE (over Euro 0.5): HTPC has imposed various fines on COSMOTE (an initial amount Euro 7.2 reduced through appeals to an amount of Euro 3.8) with a wide variety of thematic claims, as part of the Company’s routine activity. COSMOTE has appealed for the annulment of these fines.
GERMANOS
GERMANOS is a party, to certain lawsuits filed by former franchisees (franchisees of the GERMANOS chain of stores and its agents) regarding the issues of these partnerships as well as for other cases with a total amount of Euro 21.3. The hearings of these cases are scheduled until 2024.
In 2017 a former franchisee of the chain GERMANOS stores and a close related to him person, filed lawsuits against GERMANOS and COSMOTE of a total amount of Euro 32.5, out of which an amount of Euro 5.0 related to material and consequential damage for alleged breach of competition law, unconventional behaviour under the commercial cooperation and tort and an amount of Euro 27.5 related to non-material damage. The hearing took place on February 8, 2018 and the Court decision which was issued, rejected one of the filed lawsuits, accepted the other with regard to claims stemming from the commercial cooperation and awarded to the former franchisee the amount of Euro 60,000 (absolute amount) plus interest. Against this decision an appeal was filled by the opponent, whose hearing date has been set, following postponements, for March 9, 2023.
HELLENIC COMPETITION COMMISSION (“HCC”): On December 30, 2014, HCC imposed a fine of Euro 10.3 to GERMANOS for breaching Article 1 of Law 3959/2011 and Article 101 of Treaty on the Functioning of the EU, during period 1990 to 2012, in relation to the franchise system GERMANOS and the related contracts with franchisees. GERMANOS appealed to the Administrative Court of Appeal of Athens for the annulment of the decision. The Administrative Court of Appeal partially upheld the appeal and annulled the decision of the HCC regarding the fine, because the fine was imposed cumulatively and not calculated individual for each infringement, and reverted the case to the HCC in order to calculate the fine separately for each infringement. GERMANOS raised an appeal before the Council of State whose hearing was scheduled, following postponements for September 25, 2019, whereupon the Court referred the hearing of the case in front of another Section of the Council of State. The hearing date, following postponements, has been set for May 9, 2022, when it took place, and the decision is pending. In October 2016, GERMANOS was informed of the new decision of the HCC which imposed a fine separately for each violation, namely an amount of Euro 6.2 for designation of resale prices, an amount of Euro 3.1 for prohibition of cross-supplies between distributors - franchisees and an amount of Euro 1.0 for imposing non-competition clause after the expiration of the contracts (in total an amount of Euro 10.3). Against the above decision of the HCC, GERMANOS appealed to the Athens Administrative Court of Appeals and the hearing is determined following postponements, to December 12, 2023.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
173
CRIMINAL PROCEEDINGS
OTE
SIEMENS case . Within the framework of the ongoing criminal proceedings for the SIEMENS case in Greece [allegations for criminal offenses in respect of the conclusion of the Framework Agreement 8002/1997 with SIEMENS S.A. and Siemens Teleindustries S.A. (now UNIFY S.A.) for the digitalization of the network of OTE] the Five Member Athens Court of Criminal Appeals, issued its decision, according to which a former Minister of Transportation and Communication, was convicted to 5 years imprisonment for the crime of money laundering from criminal activity committed repeatedly and as a profession, i.e. the laundering of money obtained from passive bribery committed. The court decided that the penalty will be bailed out and the former minister will pay the total amount of Euro 140,000 (absolute amount) in 32 installments. A former SIEMENS employee (also being a defendant in the below second case) has been convicted to 11 years of imprisonment for the crime of bribery and money laundering. The penalty was suspended because he filed an appeal before the Supreme Court.
Although OTE was not a civil party in the appeal trial, the court decided that the amount of Euro 230,000 (absolute amount) in the former minister’s bank account that had been freezed, will be paid to OTE (after the issuance of the decision of the Supreme Court).
Furthermore, the trial of 64 in total, defendants (including 14 former executives of OTE for the crime of passive bribery and the crime of money laundering) that has already started on November 27, 2015 before the Three Member Athens Court of Criminal Appeals was concluded. OTE participated in the trial as a civil party requesting compensation for moral damages suffered as a result of the abovementioned offenses.
According to the provisions of the new Penal Code, being in effect from July 1, 2019, the court on November 19, 2019 and on December 2, 2019, decided the following:
The criminal prosecution ceased for all the defendants due to the statute of limitation, with regard to the crimes of active and passive bribery and for participation to active and passive bribery.
Furthermore, according to the court’s decision, with regard to defendants - former OTE executives/employees:
• six of the defendants were found guilty for money laundering (convicted to 10-15 years of imprisonment),
• for five of the defendants, the criminal prosecution ceased due to the statute of limitations additionally for the crime of money laundering,
• for two of the defendants, the criminal prosecution ceased due to death and finally,
• one of the defendants was found innocent.
Even though OTE had attended the trial of the first instance as a civil party, on May 30, 2022 the Court of Second Instance decided to discard OTE on formal grounds. After several hearings, on September 26, 2022 the Five-Member Criminal Court of Appeal issued a decision, according to which all the defendants were acquitted because the criminal prosecution ceased due to the statute of limitations or because they were found not-guilty.
The court did not rule on the issue of the frozen bank accounts imposed by the court of first instance.
Furthermore, OTE's appeal against the first-instance decision, on the grounds that the seized assets of the defendants should have been paid to OTE, was set to be discussed on November 7, 2022 before the Five-Member Court of Criminal Appeals. In the same trial, the matter of confiscation of the frozen bank accounts imposed by the Court of First Instance would be decided. The trial was postponed until January 16, 2023 and again until September 20, 2023 in order for the above-mentioned decision of the Court of Second Instance to be finalized by then.
OTE has also filed a lawsuit for damages before German Courts and the case is still pending.
B. COMMITMENTS
Capital commitments
Capital commitments for the acquisition of property, plant and equipment and intangible assets are analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Up to 1 year
123.9
111.1
84.5
69.0
1 to 5 years
12.1
29.0
12.1
29.0
TOTAL
136.0
140.1
96.6
98.0
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
174
Other operating commitments
Other operating commitments for repair and maintenance services and other services are analyzed as follows:
GROUP
COMPANY
2022
2021
2022
2021
Up to 1 year
286.5
266.1
145.3
205.7
1 to 5 years
64.1
51.5
64.1
51.5
Over 5 years
3.7
4.1
6.2
6.5
TOTAL
354.3
321.7
215.6
263.7
30. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
Fair value and fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuing technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
During the year there were no transfers between level 1 and level 2 fair value measurement, and no transfers into and out of level 3 fair value measurement.
The following tables compare the carrying amount of the Group’s and the Company’s financial instruments that are carried at amortized cost to their fair value:
Carrying Amount
Fair value
GROUP
2022
2021
2022
2021
Financial Assets
Trade receivables
471.2
504.4
471.2
504.4
Loans to pension funds
71.8
75.6
81.4
104.2
Loans and advances to employees
29.4
37.4
29.4
37.4
Guarantees
7.6
6.9
7.6
6.9
Guaranteed receipt from Grantor (Financial asset model)
-
0.5
-
0.5
Restricted cash
1.8
1.8
1.8
1.8
Cash and cash equivalents
590.1
630.7
590.1
630.7
Financial Liabilities
Long-term borrowings
881.5
753.7
784.9
776.0
Short-term borrowings
150.0
-
148.8
-
Short-term portion of long-term borrowings
23.1
397.3
23.0
403.8
Lease liabilities
258.2
260.9
258.2
260.9
Trade accounts payable
874.0
818.5
874.0
818.5
Interest payable
4.5
7.3
4.5
7.3
Financial liabilities related to wallets
4.0
-
4.0
-
Liability for TV broadcasting rights (long-term)
27.0
63.0
27.0
63.0
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
175
Carrying Amount
Fair value
COMPANY
2022
2021
2022
2021
Financial Assets
Trade receivables
296.3
304.1
296.3
304.1
Loans to pension funds
71.8
75.6
81.4
104.2
Loans and advances to employees
7.1
9.5
7.1
9.5
Guarantees
0.3
0.3
0.3
0.3
Other receivables from related parties
7.9
47.2
7.9
47.2
Loans to group companies
10.0
14.5
9.4
16.5
Cash and cash equivalents
163.7
274.0
163.7
274.0
Financial Liabilities
Long-term borrowings
846.9
797.6
751.2
818.7
Short-term borrowings
40.0
-
39.7
-
Short-term portion of long-term borrowings
56.5
374.2
55.9
380.0
Lease liabilities
137.9
151.8
137.9
151.8
Trade accounts payable
489.5
468.2
489.5
468.2
Interest payable
3.6
6.6
3.6
6.6
Liability for TV broadcasting rights (long-term)
27.0
63.0
27.0
63.0
The fair values of loans to pension funds, loans to group companies, long-term borrowings and short-term borrowings are based on either quoted (unadjusted) prices or on cash flows discounted using either direct or indirect observable inputs. The fair value of the remaining financial assets and financial liabilities approximate their carrying amounts.
As at December 31, 2022, the Group and the Company held the following financial instruments measured at fair value:
Fair value
GROUP
2022
2021
Fair value hierarchy
Financial Assets
Investments in mutual funds
4.7
5.1
Level 1
Investments in mutual funds
0.1
0.5
Level 3
Investment in mutual fund (long-term)
0.5
-
Level 3
Fair value
COMPANY
2022
2021
Fair value hierarchy
Financial Assets
Investments in mutual funds
2.8
3.0
Level 1
Investment in mutual fund (long-term)
0.5
-
Level 3
FINANCIAL RISK MANAGEMENT
Macroeconomic conditions in Greece
Currently prevailing economic risks arising globally, as a result of sharply rising interest rates, energy market turbulence driving upwards prices for raw materials, as well as severe geopolitical tensions have negatively affected macroeconomic conditions globally, including Greece.
Management continually assesses the possible impact of any changes in the macroeconomic and financial environment in Greece taking into consideration global economic developments, so as to ensure that all necessary measures are taken in order to minimize any impact on the Group’s Greek operations. Rising inflation and increased energy prices have affected Group’s financial and operational performance. Management is closely monitoring macroeconomic developments and financial outlook in order to mitigate uncertainties and risks.
Based on its current assessment, it has concluded that no additional impairment provisions are required with respect to the Group’s financial and non-financial assets as of December 31, 202 2 .
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
176
Risk from the Russian invasion of Ukraine
The Group has no operational exposure in Ukraine and Russia. However, the geopolitical uncertainty has resulted in higher inflation and increased volatility in the energy market affecting the general economic environment, which is likely to continue. Furthermore, there is an increased risk from the disruption in the global supply chain.
Risk from the coronavirus (COVID-19)
The pandemic continues to have implications for the global economy and for society. Although the pandemic has only had a limited negative impact on the telecommunications sector so far, if the global pandemic were to re-escalate, it could lead to prolonged and increased supply-side shortages. Based on experience so far, management expects the coronavirus pandemic to only impact Group business to a limited extent going forward.
Financial Risks
The below stated risks are significantly affected by the macroeconomic and financial environment in Greece.
a) Credit risk
Credit risk is the risk of financial loss to the Group and the Company if a counterparty fails to meet its contractual obligations.
The carrying value of financial assets at each reporting date is the maximum credit risk to which the Group and the Company are exposed in respect of the relevant assets.
Financial instruments classified as fair value through profit or loss include mutual funds. These financial asset s are not considered to expose the Group and the Company to a significant credit risk.
Defaulted payments of trade receivables could potentially adversely affect the liquidity of the Group and the Company. However, due to the large number of customers and the diversification of the customer base, there is no concentration of credit risk with respect to these receivables. Concentration of risk is however considered to exist for amounts receivable from other telecommunication service providers, due to their relatively small number and the high volume of transactions they have with the Group and the Company. For this category the Group and the Company assess the credit risk following the established policies and procedures and recognizes the appropriate provision for impairment.
The Group and the Company have established specific credit policies under which customers are analyzed for creditworthiness and there is an effective management of receivables in place both before and after they become overdue and doubtful. In monitoring credit risk, customers are grouped according to their business group, their credit risk characteristics, aging profile and existence of previous financial difficulties, also adjusted for forward-looking factors specific to the customers and the economic environment .
Group’s cash and cash equivalents are mainly invested in highly rated counterparties and with a very short term tenor.
Loans include loans to employees, which are collected either through the payroll or are netted-off with their retirement indemnities, and loans to the pension fund related to prior years voluntary leave schemes. The latter loans are exposed to credit risk related to the debt servicing capacity of the pension fund.
Impairment of financial assets
The Group and the Company have the following types of financial assets that are subject to the expected credit loss model:
• Trade receivables
• Contract assets
• Lease receivables
• Loans to group companies
• Loans to pension funds
• Loans and advances to employees
• Other financial assets.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified loss was immaterial.
The Group applies the IFRS 9 simplified approach to measure expected credit losses using a lifetime expected loss allowance for all trade receivables, contract assets and lease receivables.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
177
The following tables demonstrate the credit risk exposure on gross carrying amount of trade receivables and contract assets for the Group and the Company:
GROUP (simplified approach)
December 31,2022
Performing
Underperforming
Non-Performing
Total
Trade receivables
527.1
59.7
403.6
990.4
Contract assets
49.6
-
7.6
57.2
TOTAL
576.7
59.7
411.2
1,047.6
GROUP (simplified approach)
December 31,2021
Performing
Underperforming
Non-Performing
Total
Trade receivables
544.9
72.8
711.6
1,329.3
Contract assets
34.6
-
6.7
41.3
TOTAL
579.5
72.8
718.3
1,370.6
COMPANY (simplified approach)
December 31,2022
Performing
Underperforming
Non-Performing
Total
Trade receivables
340.0
36.1
207.9
584.0
Contract assets
6.1
-
-
6.1
TOTAL
346.1
36.1
207.9
590.1
COMPANY (simplified approach)
December 31,2021
Performing
Underperforming
Non-Performing
Total
Trade receivables
339.2
37.4
372.1
748.7
Contract assets
3.4
-
-
3.4
TOTAL
342.6
37.4
372.1
752.1
Trade receivables balances as of December 31, 2022 are stated after the write-offs of Euro 350.6 for the Group and Euro 182.1 for the Company, respectively.
The major part of the outstanding balance of lease receivables for the Group and the Company are considered as performing.
The remaining financial assets of the Group are considered to have low credit risk, therefore the Group applies the IFRS 9 general approach and the loss allowance was limited to 12 months expected losses. The outstanding balances of these financial assets are considered as performing.
Financial assets which have a low risk of default and a strong capacity to meet contractual cash flows are considered as performing, while financial assets for which there is a significant increase in credit risk since initial recognition but there is no objective evidence of a credit loss event are treated as underperforming. Non-performing financial assets are those that have objective evidence of impairment at the reporting date and there is limited expectation of recovery.
The split of trade receivables and contract assets within the above categories and the assessment of whether there has been an increase in credit risk on a Group level is assessed based on each Group entity’s best estimates taking into account its specific facts and circumstances.
b) Liquidity risk
Liquidity risk is the risk that the Group or the Company will not be able to meet their financial obligations as they fall due. Liquidity risk is kept at low levels by ensuring that there is sufficient cash on demand and / or credit facilities to meet the financial obligations falling due in the next 12 months. The Group’s and the Company’s cash and cash equivalents as at December 31, 2022 amount to Euro 590.1 and Euro 163.7 respectively and their short-term borrowings and their short-term portion of long- term borrowings amount to Euro 173.1 and Euro 96.5, respectively.
For the monitoring of the liquidity risk, the Group prepares cash flows forecasts on a frequent basis.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
178
The analysis of the undiscounted contractual payments (including debt principal and interest payments) of the financial liabilities of the Group and the Company is as follows:
GROUP
December 31,2022
Less than 1 year
1 to 2 years
2 to 5 years
Over 5 years
Total
Global Medium-Term Note Programme (GMTN)
156.6
5.6
512.5
201.3
876.0
Bank loan (EIB) COSMOTE
24.5
23.9
11.7
-
60.1
Bank loan (EBRD) OTE
2.4
2.4
7.1
157.1
169.0
NBG/Alpha credit line
0.3
0.3
-
-
0.6
Lease liabilities
83.0
64.1
85.8
50.3
283.2
Trade accounts payable and long-term liability for TV broadcasting rights
874.0
27.7
0.7
-
902.4
TOTAL
1,140.8
124.0
617.8
408.7
2,291.3
December 31,2021
Less than 1 year
1 to 2 years
2 to 5 years
Over 5 years
Total
Global Medium-Term Note Programme (GMTN)
389.1
5.6
516.9
202.5
1,114.1
Bank loan (EIB) COSMOTE
25.2
24.5
35.6
-
85.3
NBG/Alpha credit line
0.6
-
-
-
0.6
Lease liabilities
78.9
74.5
87.3
44.6
285.3
Trade accounts payable and long-term liability for TV broadcasting rights
818.5
46.8
20.4
-
885.7
TOTAL
1,312.3
151.4
660.2
247.1
2,371.0
Guarantees
ΟΤΕ has guaranteed the borrowings of its subsidiary, OTE PLC as follows:
• As of December 31, 202 2 : Euro 951.9
• As of December 31, 202 1 : Euro 1,1 81 . 5 .
COMPANY
December 31,2022
Less than 1 year
1 to 2 years
2 to 5 years
Over 5 Years
Total
Intragroup loans (ΟΤΕ PLC)
102.9
5.9
513.0
201.3
823.1
Bank loan (EBRD) OTE
2.4
2.4
7.1
157.1
169.0
NBG/Alpha credit line
0.3
0.3
-
-
0.6
Lease liabilities
38.9
32.4
76.1
2.9
150.3
Trade accounts payable and long-term liability for TV broadcasting rights
489.5
27.7
0.7
-
517.9
TOTAL
634.0
68.7
596.9
361.3
1,660.9
December 31,2021
Less than 1 year
1 to 2 years
2 to 5 years
Over 5 Years
Total
Intragroup loans (ΟΤΕ PLC)
389.7
107.5
517.6
202.6
1,217.4
NBG/Alpha credit line
0.6
-
-
-
0.6
Lease liabilities
30.4
31.4
90.1
16.1
168.0
Trade accounts payable and long-term liability for TV broadcasting rights
468.2
46.8
20.4
-
535.4
TOTAL
888.9
185.7
628.1
218.7
1,921.4
c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will result in fluctuations of the value of the Group’s and the Company’s financial instruments. The objective of market risk management is to manage and control exposure within acceptable levels.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
179
The individual risks that comprise market risk and the Group’s and the Company’s policies for managing them are described below:
i. Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in the interest rates.
The Group and the Company have no floating interest-rate borrowing.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on loans and deposits to the income statement.
Effect on profit before tax
GROUP
COMPANY
2022
2021
2022
2021
Increase by 100 basis points
3.0
3.2
0.8
1.4
Decrease by 100 basis points
(3.0)
(3.2)
(0.8)
(1.4)
The impact presented in the above tables is based on the following considerations :
a) The total debt of the Group and the Company bears fixed interest rates, thus the Group and the Company are not sensitive to potential changes in interest rates on loans.
b) Deposit rates are assumed to increase / decrease by 50.0% of the respective nominal interest rate change.
Therefore, an increase by 100 basis points in nominal interest rates is assumed to increase deposit rates by only 50 basis points and similarly a decrease by 100 basis points in nominal interest rates is assumed to reduce deposit rates by only 50 basis points.
Effect on profit before tax of 2021 for the Group and the Company has been adjusted accordingly in order to conform to the updated considerations.
ii. Foreign currency risk
Currency risk is the risk that the fair values of the cash flows of a financial instrument fluctuate due to foreign currency changes.
The Group operates in Greece and Romania and as a result is exposed to currency risk due to changes between the functional currencies and other currencies. The main currencies within the Group are the Euro and the Ron (Romania).
Foreign currency risks that do not affect the Group’s cash flows (i.e. the risks resulting from the translation of foreign operations financial statements into the Group’s reporting currency) are generally not hedged.
The following table demonstrates the sensitivity to a reasonably possible change in the functional currency exchange rate, with all other variables held constant, of the Group’s profit before tax (due to changes in the fair value of monetary assets and liabilities):
Effect on profit before tax
Change in currency exchange rate expressed in functional currency
2022
2021
+ 10%
5.0
5.7
- 10%
(5.0)
(5.7)
Capital Management
The primary objective of the Group’s and the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratio in order to support its business plans and maximize shareholder value.
The Group and the Company manage their capital structure and make adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group and the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
180
An important means of managing capital is the use of the gearing ratio (ratio of net debt to equity) which is monitored at Group and Company level. Net debt includes interest bearing loans and notes, long-term and short-term lease liabilities as well as other financial liabilities, less cash and cash equivalents.
December 31
GROUP
2022
2021
Long-term borrowings
881.5
753.7
Short-term borrowings
150.0
-
Short-term portion of long-term borrowings
23.1
397.3
Lease liabilities (long-term portion)
182.1
189.2
Lease liabilities (short-term portion)
76.1
71.7
Financial liabilities related to wallets
4.0
-
Cash and cash equivalents
(590.1)
(630.7)
Net debt
726.7
781.2
Total equity
1,848.9
1,972.2
Gearing ratio
0.39x
0.40x
December 31
COMPANY
2022
2021
Long-term borrowings
846.9
797.6
Short-term borrowings
40.0
-
Short-term portion of long-term borrowings
56.5
374.2
Lease liabilities (long-term portion)
103.7
126.5
Lease liabilities (short-term portion)
34.2
25.3
Cash and cash equivalents
(163.7)
(274.0)
Net debt
917.6
1,049.6
Total equity
3,228.3
3,198.6
Gearing ratio
0.28x
0.33x
31. RECLASSIFICATIONS
In the consolidated and separate statement of financial position of 2021, presented as comparative amounts in these financial statements, an amount of Euro 14.1 and Euro 8.7 for the Group and the Company respectively, has been reclassified from “Other current liabilities” to “Contract liabilities (short term portion)” for better presentation and in order to make it comparable to the presentation of the corresponding amounts in the consolidated and separate statement of financial position for the current year.
32. AUDIT AND OTHER FEES
Audit and other fees concerning the Deloitte and PricewaterhouseCoopers network for 2022 and 2021 respectively, are analyzed as follows:
GROUP
COMPANY
(Absolute amounts)
2022
2021
2022
2021
Fees for auditing services
1,416,700
1,453,150
495,800
522,000
Audit fees for the Tax compliance report
613,300
702,100
243,700
276,000
Other assurance services
42,500
33,000
16,500
8,000
Other fees
9,700
45,000
9,700
36,000
Total fees
2,082,200
2,233,250
765,700
842,000
NOTES TO THE ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2022 AND FOR THE YEAR THEN ENDED
181
Specifically, audit and other fees to Deloitte network in Greece and PricewaterhouseCoopers network in Greece (and not to the other Deloitte and PricewaterhouseCoopers network offices) are analyzed as follows:
Deloitte Network Greece
PricewaterhouseCoopers Network Greece
(Absolute amounts)
2022
2021
Fees for auditing services
1,106,950
1,071,500
Audit fees for the Tax compliance report
613,300
702,100
Other assurance services
42,500
33,000
Other fees
9,700
45,000
Total fees
1,772,450
1,851,600
33. EVENTS AFTER THE FINANCIAL POSITION DATE
The most significant events after December 31, 2022 are as follows:
OTE
Revised Shareholders Remuneration Policy
On February 22, 2023, the Board of Directors approved the revised shareholders remuneration policy (Note 18).
Merger through absorption of OTE GLOBE
In July 2022, OTE Board of Directors approved the merger by absorption of its wholly owned subsidiary, OTE GLOBE. The transaction was completed on January 2, 2023 upon registration in the General Commercial Registry (Γ.Ε.ΜΗ.).
COSMOTE
Payment of principal installment under the Euro 150.0 term loan with EIB
On January 23, 2023, COSMOTE paid principal installment of Euro 11.5 under the term loan with EIB.