TIM Hellas 2004 Financial Results

TIM Hellas 2004 Financial Results

    Business Editors/Financial Editors

    ATHENS, Greece--(BUSINESS WIRE)--Feb. 17, 2005--

TOTAL OPERATING REVENUES GREW 3.9% TO REACH EUR 839.8 MILLION EBITDA AT EUR 243.6 MILLION, MARGIN AT 31.0% OF SERVICE REVENUES NET INCOME AT EUR 78.8 MILLION

STABLE DIVIDEND OF EUR 0.10 PER SHARE PROPOSED

    TIM Hellas Telecommunications SA (NASDAQ: TIMHY; Amsterdam: TIMHY), today announced full year 2004 financial and customer results.

    Financial Performance

    Total operating revenues increased by 3.9% to EUR 839.8 million up from EUR 808.5 million in 2003, despite the approximate 31 % year-on-year decrease in fixed-to-mobile interconnection tariffs. Service revenues grew by 3.1% year-on-year to EUR 785.5 million, up from EUR 761.9 million in 2003.
    The increase seen in the company's total operating revenues was primarily sustained by:

--	Higher monthly fee revenues that increased 29.6% year on year, deriving from the continued uptake of our bundled-minutes based packages;
--	Increasing mobile-to-mobile interconnection revenues (up 34.6% year-on-year inclusive of SMS interconnection), resulting mainly from increased traffic;
--	Higher handset sales (up 16.5% year-on-year) that reached EUR 54.3 million, as a result of increased sales of high-end "innovative" terminals through the company's direct distribution channel of "TIM" stores that accounted for around 77% of total handsets sold in 2004.

    EBITDA (operating income before depreciation & amortization) for 2004 declined to EUR 243.6 million, compared with EUR 275.7 million in 2003, mainly affected by the much lower contribution from fixed-to-mobile interconnection, as well as the following one-off costs:

    -- The significant re-branding related expenses totaling EUR 17.9
    million

    -- The extra EUR 5.4 million Mobitel case related costs; as well
    as

    -- The EUR 1.7 million compensation expense related to the
    company's share capital increase following the exercise of its
    stock option plan in November 2004.

    Consequently, the EBITDA margin on total revenues came in at 29.0% in 2004, versus 34.1% in 2003, or 31.0% of service revenues versus 36.2% last year.
    Excluding the re-branding effect, the stock option plan related compensation expense, as well as the extra provision related to the Mobitel case, "Adjusted" EBITDA would have reached EUR 268.7 million, translating to an "Adjusted" EBITDA margin on total revenues of 32.0%, or 34.2% on service revenues.
    Cost of sales and services provided was EUR 385.6 million for the year, representing 49.1% of service revenues, compared to last year's level of 43.5%. This rise was mainly due to increased mobile-to-mobile interconnection charges-- up 34.6% year-on-year primarily as a result of increased call volumes, as well as to the introduction of SMS interconnection payments among the Greek operators in April 2004.
    Selling, General and Administrative expenses were EUR 327.9 million in 2004, versus EUR 303.1 million last year. These expenses represented 41.7% of service revenues in the year, up from 39.8% in 2003, mainly as a result of the aforementioned one-off expenses.
    In 2004, operating income was EUR 121.1 million or 15.4% of service revenues, versus EUR 166.9 million in 2003, also affected by higher depreciation and amortization expenses stemming from the continuous increase in the company's fixed assets, as well as the commencement of UMTS license amortization in the beginning of 2004 that accounted for EUR 8.0 million in the period.
    The company's earnings before taxes for the year were EUR 111.1 million, representing 14.1% of service revenues, versus EUR 156.1 million in 2003.
    Despite the decline in the earnings before taxes, TIM Hellas recorded a net income of EUR 78.8 million, versus EUR 91.6 million in 2003, supported by a 49.1% drop in income taxes as a result of the eligibility of the Mobitel case related payment as a tax deductible item, as well as a lower provision for deferred income taxes due to a significant decline in the corporate nominal tax rate in Greece, from 2005 onwards.
    The company's Board of Directors has proposed a dividend of EUR 0.10 per share-- stable versus 2003, pending approval by the Annual General Assembly, despite of a net income level lower than last year.
    Cash flow from operations came in at EUR 145.6 million in the period, financing capital expenditures of EUR 141.3 million, and resulting in positive levered free cash flow generation of EUR 4.3 million. However, if we were to exclude the EUR 48.4 million cash outflow for the one-off payments related to the Mobitel case and re-branding campaign, adjusted cash flow from operations would have been EUR 194.0 million, translating into a positive levered free cash flow of EUR 52.7 million.
    The company's net financial debt dropped marginally to EUR 165.9 million, versus EUR 167.3 million at the end of 2003.
    The results are un-audited and based on US Generally Accepted Accounting Principles (US GAAP).

    Customer Results

    At year-end 2004, TIM Hellas' customer base dropped to a lower level than that seen at the end 2003, with total customers coming in at 2,323,866, mainly due to an overall lower prepaid customer base and as a result of increased competition in the mature Greek mobile market. At the end of December, TIM Hellas' customer base was composed of 65.4% prepaid customers and 34.6% of contract subscribers.
    During 2004, the company strengthened its retention of high-value customers, illustrated by the increase in usage: TIM Hellas' total traffic minutes grew by 13.9% during 2004 to 3,087 million minutes, while average monthly traffic per customer (Blended AMOU) increased by approximately 25.5% to 106.4 minutes in 2004, versus 84.8 minutes in the previous year. More specifically, contract AMOU rose by 18.8% to 238.7 minutes and prepaid AMOU grew to 39.7 minutes, up 12.4% versus last year.
    Consequently, blended ARPU increased by 13.7% to EUR 27.1, supported by a rise both in contract ARPU that grew by 6.6% to EUR 49.9 in the period, as well as in prepaid ARPU that reached EUR 13.0, up 6.7 % year-on-year.
    "2004 was a challenging year for TIM Hellas. Increasing competitive and regulatory pressure in combination with company-specific strategic initiatives-- that though sound, strained this year's results-- led to an erosion in business margins and overall profitability," stated Mr. Socrat es Kominakis, TIM Hellas' Chief Executive Officer. "Nonetheless, we will shift our full focus and resources to return TIM Hellas to the solid profitability levels seen in the past years."

    TIM HELLAS TELECOMMUNICATIONS S.A.
    BALANCE SHEETS
    AS OF DECEMBER 31, 2003 (AUDITED) AND 2004 (UNAUDITED)
    AMOUNTS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)

December 31, 2003 2004 2004 ---------------- ----------------------- ASSETS Euro Euro U.S. $(1) ------------------------------ ------------- ------------ ----------

CURRENT ASSETS Cash and cash equivalents 66,769 14,084 19,067 Accounts receivable, net of allowance for doubtful accounts of EUR 44,590 as of December 31, 2003 and EUR 34,663 as of December 31, 2004 132,191 107,048 144,922 Amounts due from related companies 2,570 2,539 3,437 Inventories, net 8,783 8,601 11,644 Deferred income taxes 10,396 8,276 11,203 Other current assets 8,493 9,583 12,973 ------------- ------------ ----------

Total current assets 229,202 150,131 203,246 ------------- ------------ ----------

OTHER ASSETS Other 2,597 3,441 4,659 ------------- ------------ ---------- 2,597 3,441 4,659 ------------- ------------ ----------

PROPERTY, PLANT AND EQUIPMENT Cost 1,024,199 1,151,970 1,559,537 Less: Accumulated depreciation (455,628) (546,486) (739,832) ------------- ------------ ---------- 568,571 605,484 819,705 ------------- ------------ ----------

DISTRIBUTION NETWORK Cost 29,347 29,347 39,730 Less: Accumulated amortization (14,673) (17,609) (23,838) ------------- ------------ ---------- 14,674 11,738 15,892 ------------- ------------ ----------

LICENSES Cost 267,694 267,694 362,404 Less: Accumulated amortization (56,410) (71,463) (96,747) ------------- ------------ ---------- 211,284 196,231 265,657 ------------- ------------ ----------

------------- ------------ ---------- TOTAL ASSETS 1,026,328 967,025 1,309,159 ============= ============ ==========

    (1) Exchange rate used for the convenience translation of the December 31, 2004 balances: U.S. $ 1.3538 per EUR 1.00.

    TIM HELLAS TELECOMMUNICATIONS S.A.
    BALANCE SHEETS
    AS OF DECEMBER 31, 2003 (AUDITED) AND 2004 (UNAUDITED)
    AMOUNTS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)

December 31, 2003 2004 2004 ------------------ ---------------------- Euro Euro U.S. $(1) ------------ ---------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY -----------------------------

CURRENT LIABILITIES Accounts payable 168,215 138,433 187,410 Short-term debt due to related companies - 20,000 27,076 Current maturities of long- term debt 74,067 - - Amounts due to related companies 17,416 13,104 17,740 Taxes other than income 5,452 1,148 1,555 Income taxes payable 44,546 20,358 27,562 Deferred revenue 22,788 19,244 26,053 Current portion of capital lease obligations 991 717 970 Other current liabilities 14,303 36,582 49,524 Liability for asset retirement obligation S/T 486 1,052 1,425 ------------ ---------- ----------- Total current liabilities 348,264 250,638 339,315 ------------ ---------- -----------

LONG-TERM LIABILITIES Long-term debt, net of current maturities 100,000 100,000 135,380 Long term debt due to related companies 60,000 60,000 81,228 Staff retirement indemnities 1,688 2,252 3,049 Deferred income taxes 21,721 17, 526 23,727 Other long-term liabilities 38,692 25,954 35,135 Capital lease obligations, less current portion 6,903 6,186 8,375 Liability for asset retirement obligation L/T 9,644 10,277 13,914 ------------ ---------- ----------- 238,648 222,195 300,808 ------------ ---------- -----------

------------ ---------- ----------- COMMITMENTS AND CONTINGENCIES 37,897 14,047 19,017 ------------ ---------- -----------

SHAREHOLDERS' EQUITY Common Stock par value EUR 1.52 December 31, 2003 & EUR 1.53 December 31, 2004 (Shares authorized, issued and outstanding 83,193,220 in December 31, 2003 and 83,876,720 in December 31, 2004) 127,287 128,331 173,735 Additional paid-in capital 71,186 78,244 105,927 Retained earnings and statutory reserves 203,046 273,570 370,357 ------------ ---------- ----------- Total shareholders' equity 401,519 480,145 650,019 ------------ ---------- -----------

------------ ---------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,026,328 967,025 1,309,159 ============ ========== ===========

    (1) Exchange rate used for the convenience translation of the December 31, 2004 balances: U.S. $ 1.3538 per EUR 1.00

    TIM HELLAS TELECOMMUNICATIONS S.A.
    STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2003 (AUDITED) AND 2004 (UNAUDITED)
    AMOUNTS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)

Year ended December 31, ---------------------------------------- 2003 2004 2004 Euro Euro U.S. $(1) ------------- ------------ ------------ Operating revenues: Revenues from telecommunication services 761,934 785,545 1,063,470 Sales of handsets and accessories 46,606 54,289 73,496 ------------- ------------ ------------ Total operating revenues 808,540 839,834 1,136,966 ------------- ------------ ------------

Cost of sales and services provided: Cost of services provided (254,570) (313,173) (423,975) Cost of sales of handsets and accessories (76,850) (72,408) (98,026) ------------- ------------ ------------ Total cost of sales and services provided (331,420 ) (385,581) (522,001) ------------- ------------ ------------

Gross profit 477,120 454,253 614,965

Provision for doubtful accounts (7,100) (5,290) (7,162) Selling, general and administrative expenses (303,137) (327,897) (443,906) ------------- ------------ ------------

Operating income 166,883 121,066 163,897 ------------- ------------ ------------

Interest and other financial income / (expense), net:

Interest expense (12,234) (9,403) (12,729) Interest income 1,193 918 1,243 Other financial expense, net 223 (1,443) (1,954) ------------- ------------ ------------ (10,818) (9,928) (13,440) ------------- ------------ ------------

Income before taxes 156,065 111,138 150,457

Provision for income taxes (63,446) (32,295) (43,721)

Net Income before cumulative effect of change in accounting principle, net of tax 92,619 78,843 106,736

Cumulative effect of change in accounting principle, net of tax of EUR 588 (1,000) - -

--------------------------------------- Net income 91,619 78,843 106,736 ============= ============ ============

Amounts per common share :

Income before cumulative effect of change in accounting principle 1.11 0.95 1.28

Cumulative effect of change in accounting principle, net of tax (0.01) - -

Net income per share - basic and diluted 1.10 0.95 1.2 8 ============= ============ ============

Weighted average shares outstanding- basic and diluted 83,193,220 83,239,907 83,239,907 ============= ============ ============

    (1) Exchange rate used for the convenience translation of the December 31, 2004 balances: U.S. $ 1.3538 per EUR 1.00

    TIM HELLAS TELECOMMUNICATIONS S.A.
    STATEMENTS OF CASH FLOW FOR THE YEARS ENDED DECEMBER 31, 2003 (AUDITED) AND 2004 (UNAUDITED)
    AMOUNTS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)

Year ended December 31, --------------------------------- 2003 2004 2004 Euro Euro U.S. $(1) ----------- ---------- ---------- Cash Flows from Operating Activities: Net income 91,619 78,843 106,736 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 108,781 122,576 165,944 Deferred income taxes 7,626 (2,075) (2,808) Provision for staff retirement indemnities 471 605 819 Provision for commitments and contingencies 2,500 6,585 8,915 Provision for doubtful accounts 7,100 5,290 7,162 Provision for asset retirement obligation 312 542 733 Losses / (gains) on disposal of assets - 548 742 Cumulative effect of change in accounting principle, net of tax 1,000 - - Compensation Expenses for Stock Option Plan - 1,725 2,335

Changes in operating assets and liabilities: Accounts receivable (11,308) 19,853 26,877 Inventories (1,068) 182 247 Other current assets (2,858) (1,904) (2,576) Account payable 12,825 (29,853) (40,414) Income taxes payable 4,038 (24,188) (32,745) Deferred revenue and other current liabilities 8,878 (2,660) (3,604) Commitments and Contingencies - (30,435) (41,203) Net Cash provided by Operating Activities 229,916 14 5,634 197,160 ----------- ---------- ----------

Cash Flows from Investing Activities: Capital expenditures (137,579) (141,329) (191,332) ----------- ---------- ---------- Net Cash used in Investing Activities (137,579) (141,329) (191,332 ) ----------- ---------- ----------

Cash Flows from Financing Activities: Proceeds from issuing stock - 6,377 8,634 Net Proceeds from short-term borrowings due to related companies - 20,000 27,076 Repayment of long-term debt (48,000) (74,067) (100,272) Net movement in capital lease obligations (4,830) (981) (1,329) Payment of dividends (8,319) (8,319) (11,262) ----------- ---------- ---------- Net Cash used in Financing Activities (61,149) (56,990) (77,153) ----------- ---------- ---------- Net increase/ (decrease) in cash and cash equivalents 31,188 (52,685) (71,325) Cash and cash equivalents at beginning of the year 35,581 66,769 90,392 ----------- ---------- ---------- Cash and cash equivalents at end of the year 66,769 14,084 19,067 =========== ========== ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for: - Interest, net of amounts capitalized 10,917 6,876 9,309 - Income taxes 47,035 58,456 79,138 ----------- ---------- ---------- 57,952 65,332 88,447 =========== ========== ==========

    (1) Exchange rate used for the convenience translation of the December 31, 2004 balances: U.S. $ 1.3538 per EUR 1.00.

    TIM HELLAS TELECOMMUNICATIONS S.A.
    ANALYSIS OF OPERATING REVENUES AND EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2003 (AUDITED) AND 2004 (UNAUDITED)
    AMOUNTS IN THOUSANDS

Year ended December 31, ----------------------- 2003 2004 ----------- ---------- EUR EUR A. OPERATING REVENUES Monthly service fees 102,281 132,542 ----------- ---------- Airtime revenues: Outgoing calls 164,211 165,351 Incoming calls from fixed line networks 123,473 84,423 Incoming calls from other mobile operators' network 119,397 150,807 Incoming SMS from other mobile operators' network - 9,942 Prepaid airtime cards 153,292 147,296 Roaming revenues from Company's customers 15,028 17,233 Roaming revenues from customers of international GSM network operators 36,955 38,273 Data communications & messages 42,684 35,247 Other 4,613 4,431 ----------- ---------- Total revenues from telecommunication services 761,934 785,545 ----------- ----------

Operating revenues from equipment sales 46,606 54,289

----------- ---------- Total operating revenues 808,540 839,834 =========== ========== B. COST OF SALES AND SERVICES PROVIDED Interconnection charges from fixed line operators 20,726 18,314 Interconnection charges from other mobile operators 118,380 159,383 Depreciation 65,175 77,786 Roaming charges from international GSM network operators 13,342 15,591 Payroll 14,611 16,394 Leased lines 2,970 3,072 Utilities 4,672 5,574 SIM cards 3,210 2,767 Installations' rentals 11,484 14,292 ----------- ---------- Total cost of services provided 254,570 313,173 Cost of sales of handsets and accessories 76,850 72,408 Total cost of sales & services provided 331,420 385,581 =========== ========== C. SELLING, GENERAL & ADMINISTRATIVE EXPENSES Commissions to dealers 103,724 100,485 Management fees 15,349 15,151 Advertising expenses 17,155 31,811 Payroll 34,161 35,733 Depreciation & Amortization 43,606 44,790 Repairs & maintenance 30,015 32,261 Consultancy and other third party fees 18,013 19,941 Provision for litigation and claims 2,500 6,585 Utilities 8,855 8,248 Rentals 13,726 9,946 Other 16,033 22,946 ----------- ---------- Total selling, general & administrative expenses 303,137 327,897 =========== ==========

    - END -

--30--SM/lo*

CONTACT: TIM Hellas Telecommunications S.A. Rania Bilalaki, +30 210 615 8585 ir@tim.com.gr www.tim.com.gr/en/ir.cfm

KEYWORD: GREECE INTERNATIONAL EUROPE INDUSTRY KEYWORD: BANKING TELECOMMUNICATIONS EARNINGS SOURCE: TIM Hellas Telecommunications S.A.

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