Executives
Dimitris Tzelepis – Head, IR
Michael Tsamaz – Chairman and Managing Director
Babis Mazarakis – CFO
Analysts
Dimitri Kallianiotis – Citi
David Levenson – JCP
Daniel Morris – JP Morgan
Luca Orsini – One Investments
Maura Garbero – One Investments
Stam Draziotis – Eurobank Equities
Hellenic Telecom Organization S.A. (HLTOY.PK) Q4 2012 Earnings Call February 28, 2013 10:00 AM ET
Operator
Thank you for standing by, ladies and gentlemen, and welcome to the OTE Conference Call on the Fourth Quarter and Full Year 2012 Financial Results under IFRS. We have with us Mr. Michael Tsamaz, Chairman and CEO; Mr. Zacharias Piperidis, OTE Group Chief Operating Officer; Mr. Babis Mazarakis, OTE Group Chief Financial Officer; and Mr. Dimitris Tzelepis, Head of Investor Relations.
(Operator Instructions) I must advise you that this conference call is being recorded today, Thursday, February 28, 2013.
We now pass the floor to Mr. Dimitris Tzelepis. Please go ahead, sir.
Dimitris Tzelepis
Thank you. Good afternoon, ladies and gentlemen, and good morning to the U.S. participants. I would like to welcome you to the OTE Fourth quarter 2012 results conference call. During the conference, we will review the quarterly performance, and we’ll also leave enough time to discuss any issues you may wish to cover.
I remind you that any forward-looking statements we might make during this presentation or our answers to your questions are subject to the usual risks and uncertainties inherent in such situations.
Now, let me hand over the call to our CEO, Mr. Michael Tsamaz.
Michael Tsamaz
Thank you, Dimitris. Good morning or good afternoon to all of you. We’re glad to be with you today to discuss the developments of the quarter of 2012, and of 2012 in general. We have been busy since our last call and we have achieved a lot in the past few months. This doesn’t mean we’re out of the woods, but we’re much better and safe, which would help us face these challenges we see for 2013.
Let me start with a brief summary of our recent accomplishment. We completed the voluntary exit scheme that we had launched on the day of our last call. We told you then that it was targeting approximately 1,700 Greek fixed-line employees, and we’re hoping to attract 1,200. In the end, more than 1,500 people took our offer and left before the end of the year. This means that on an annualized basis, we expect to have net savings of about €80 million from that program alone. The qualitative benefits as it will enable us to upgrade the skillset of our workforce. And again I want to emphasize that the cost of this program has been carried entirely by us with no participation from the Greek State and no demand on its special funds.
Over the full year, we’ve generated free cash flow of over €800 million and unchanged operation cash flow of over €1.3 billion, and we’ve cut down our net debt by €1 billion. Our EBITDA margin has improved by a full percentage point to 34.5% in the full year. As we told you, we early February signed an agreement to sell Hellas Sat, proceeds of €208 million for this asset which should be received in the second quarter. Regarding the disposal of GLOBUL, the process is currently ongoing, but certainly our original refinancing moves have mitigated the debt repayment risk. We’re looking into the situation in order to ensure that as always we optimize interest for the group and of its shareholders.
We will range you through the details of our refinancing as well. But let me just say here that we have completely redesigned our debt profile since last summer. This was done through a series of loan extensions, borrowings at subsidiary level, bond repurchases and exchanges. We culminated with a five year, €700 million fixed rate notes reached on February 7, the issue was 2.7 times oversubscribed. We’re particularly proud of this side of investment confidence and recognizing the hard work we have put in a day in the digital past years.
Now, let’s take a look at our operations where we also having some sources of construction. In the fourth quarter our total group revenues dropped by just over 9% and considerable part of this drop is due to the cumulative effect of mobile to national rate caps in all our markets. We estimated that in the quarter, MTR cuts account for nearly two thirds of the revenue loss of our mobile operations. For the full year revenues were down 7% and again a sizeable portion of this due to regulatory rate cuts. Of course the balance of the drop is due to the tough macro environment we face. However, if you consider the total consumer spending in Greece was down 9% or so, we are doing fine and we believe we’re continuing to resist better than our competitors.
The improving underlying trends we pointed out last quarter are still at work, but have been obscured a little by more aggressive competitive moves as we got into the year-end promotions.
In Greek the broadband for example, the third quarter in the row we had a very positive performance. We finished here with a set of net additions of nearly 40% while in 2011 we had lost subscribers. Nine losses in the total Greek voice market, it was the smallest it has been in a while. And ours were relatively stable in spite of the competitor’s offer of all you can eat service at economical price.
Our TV offers is also doing well, cash flow satisfaction is improving as accounted we provide it represents particularly good value for money. So we are confident that our efforts positioning the other brand – our position in the other brand are paying off. It is in that environment that we launched our VDSL high speed Internet solution in the market, within a matter of days we had sold 6,000 connections.
Romtelecom saw an acceleration of it revenue drop in the fourth quarter, all due to termination rate cuts, excluding this factor, the drop has been roughly in line with previous quarters. Romtelecom has continued to focus on rolling out cost effective services to retain the RPU of its worse customers. For example with hybrid fiber copper TV solutions. As a result, retailer revenues dropped only moderately but there is no doubt that we need to remain particularly vigilant in this market. In the mobile finally the MTR cuts in Greece, Romania, and Bulgaria took a big bite out of our revenues and will continue to do so. From what we can tell this has not weakened our market positions. We expect competition to remain intense or even intensify. As we have done in the past, we started already to actively defend our competitiveness.
In the last quarter of the year, we also reached another important stage in our cost cutting actions with relevant operating expenses down more than 10% before we got any benefits of the voluntary exit scheme. We’re proud of our achievement in adding a full percentage point of EBITDA margin in the full year thanks to the approximately €600 million of annual cost we have taken out of the realization over the past two years.
We will need cost discipline we can get to face the challenges we except in 2015. The termination rate rates cuts will save approximately €200 million from our revenue base this year compared to 2012. On the macroeconomic front consumer spending is expected to remain extremely depressed in Greece throughout the year.
On the competitive front as I said we don’t expect the other players to stay put. And on the regulatory front in Greece we are still waiting for the authority to come out with a model that has not penalized our investment in infrastructure. With good momentum on both marketing and cost cutting fronts and much improved financial structure, we are ready to face these challenges. With this I’m going to ask Babis to give you a bit more details on our financials.
Babis Mazarakis
Thank you, Michael, and welcome to all of you. Group revenues were down a bit lower 9% in the fourth quarter, a slightly smaller drop than that in the previous quarter, but a stable decline than in the first half of the year.
As you know by now, the deteriorating trend is largely if not exclusively due to termination rate cuts, passed on to consumers in our three large markets. Therefore there is the effect in revenues in both our mobile and fixed line operations. Though with different impact on the profitability of the various businesses as we would have seen.
Excluding the direct impact of regulatory caps, as in Q3, we estimate that revenues would be down in the mid single-digits at group level in the most units. In view of the difficult economic situations of our markets and the general erosion of telecom revenues across Europe and what we can see of our great competitors top line results, we are generally satisfied with the resiliency of our sales performers in the quarter and in the full year.
Once again, we experienced steeper revenues erosion in Greece than in our international operations reflecting the worst economic conditions in our home market.
In Greek fixed line revenues were down 12.7%, roughly in line with the previous quarter. By segment, the trends we are also very much in line with Q3, 2012, apart from a sub-drop in fixed mobile revenues due to the termination rate cuts.
ARPU remains under pressure as consumers continue to watch their spending. We lost 63,000 lines in the quarter, while our competitors added 42,000 lines. As you’ll recall, our basic carriers had added only 305,000 lines in Q3 but given the offer some of the competitors had to make to achieve these numbers, we don’t see this sustainable.
This is why it is important that we continue to compete on quality, service, and innovation rather than price and to stick in our position as the leading technology partner in the market. Extending the huge process we have made in broadband since the introduction of our competitive double play offers at the end of the first half 2012, we’ve posted another excellent quarter. We added nearly 33,000 subscribers in Q4, just short of the previous quarter’s performance. As alternative carriers did better than in Q3, this gives us a wallet share of net market additions, but still a very respectable 47%.
For the full year, we’ve gone from a net loss of subscribers in 2011 to a 40% share of net additions in 2012. As Michael pointed out, we had already installed 6,000 VDSL connections at the end of the year with many times pent-up demand, but we’re going to satisfy quite soon. In TV services, we added 23,000 subscribers in the quarter far and away our best quarterly gain ever. Thanks to our new satellite TV offering, we’ve just about doubled our total subscriber base to nearly 120,000 customers over the year.
Our offer is very attractive with more high definition channels than our main competitor. Additionally, we’re continuously enriching our content, for example, among others we can mention the acquisition of the broadcasting rights of the U.K. Premier League in Greece for the next three-year period.
Romtelecom’s deteriorating performance in the quarter compared to prior periods relatively reflects the steep growth in each of the connection revenues as a result of termination of rate cuts. By contrast, Romtelecom’s retail revenues were down just 3%, both in the quarter and in the full-year. The fact that the bulk of the revenue decline come from the wholesale services explains why it has had no major impact on profitability.
Once again, Romtelecom recorded good double-digit growth in broadband and television services offsetting part of the continuing drop in voice which now accounts for list, the half of all retailer revenues of the company.
Turning to mobile, total revenues were down 11.3% in the quarter, pretty much the same percentage decline as in Q3. For the full-year, total mobile revenues were down 6.5%. Interest rate in the sharp contrast between a stable first-half and then later decline in the second-half of the year as the termination rate cuts began eating into our revenues. With the exception for Albania, the trends were similar in all three of our major markets.
In Greece, COSMOTE’s revenues were down by more than 11% in the quarter with a drop of over 12% in service revenues. Close to how this decline comes from the mobile termination rate cuts and the burdens from lower ARPU as consumers are refraining from using their phones or switch to cheaper purchases including migration from postpaid to prepaid. We continue to strengthen our leadership in mobile data with a rollout of our 4G LTE network with extensive coverage of the country’s mainframe metropolitan areas in particular. Let me remind you that another termination rate cut down to €1.269 per minute to pay from January 1st of 2015. Total revenue from all the national mobile operators were down 10.6% in the fourth quarter due to the rate cut in Bulgaria and Romania.
The COSMOTE Romania delivering 9% drop in service revenues reflect the full impact of the second mobile termination rate cut of the year which was primarily in September. COSMOTE Romania did 18,000 postpaid subscribers in the quarter as it continues to target the business market and to streamline its prepaid portfolio.
In Bulgaria, GLOBUL service revenues were down 21% mainly due to the domestic and international termination rate cuts. Total revenues were down at the lower rate reflecting the significant increase of non-service revenues mainly due to higher sales accounted and the increase the month for penetration. As a result, full year total revenues declined by 8.5% despite a 12% drop in service revenues.
Finally, in Albania, the revenues were roughly unchanged in the quarter with service revenues down by less than 1% confirming the improving trend that the company has recorded quarter-over-quarter throughout the year. Other revenues were up nearly 9% this quarter reflecting higher evolution data revenue at OTEGLOBE level despite the challenging market conditions.
So all-in-all, we’re satisfied that we’ve done everything we could to continue the impact of the rate cuts on our top line and thankfully that we have taken preventive measures to the rest of the P&L from taking the direct hit from the revenue drop. So, the group’s to pro forma EBITDA margin goes up 70 basis point to 34.7% in the quarter. For the full year our pro forma EBITDA dropped by just €75 million on a revenue decline of €358 million meaning that we are able to observe nearly 80% of the impact of the revenue transferred before it hit our EBITDA line. As a result we gained a full percentage point in pro forma EBITDA margin for the year up to 35.4%. That was achieved despite the final termination rate cuts had a much bigger impact proportionately on EBITDA that on revenues. On the group level, on a full year basis we estimated the rate cuts will reduce about €79 million from our revenues and €58 million from consolidated EBITDA.
In the fourth quarter, total group expenses excluding depreciation and amortization and one-offs were down 10.5%, or roughly the same trend as in Q3 and almost twice the rate of cost reduction we had achieved in the first half of the year. Looking at the full year, these expenses were down 8.4% at the group level with such drops in each of the major operations and a particularly some drop in excess of 11% in Greek fixed-line.
Group personnel expenses were down nearly €120 million on a full year basis virtually all of the saving comes from Greek fixed-line. With another €23 million drop in other operating expenses in the fourth quarter that line is down 4% or €52 million on a full year basis despite higher TV content cost in Romania and Greece.
In addition, we did get some benefit from termination rate cuts in the form of lower payments to other operators. The voluntary exit schemes that show more than 1.5 thousand Greek fixed line employees leaving the company was into our P&L in the fourth quarter of 2012. Total cost including retirement indemnity was a €192 million. However, a large part of that indemnity has been provided for in other periods, therefore the expense charge in 2012 was a €123 million.
Depreciation and amortization was down nearly 54% in the fourth quarter. This drop is due to the fact that as you remember Romtelecom had taken an exceptional impairment charge in the fourth quarter of 2011.
Compared to the average of the first three quarters of 2012, depreciation and amortization was up about €20 million in the fourth quarter reflecting accelerated depreciation offset when assets increase. This was partly offset by the continued reduction in CapEx. Interest expenses were -it was down 25% in the quarter, down to €60 million, and down 14% in the year to €249 million, mainly due to the reduction in total group debt
Income tax expense in the fourth quarter was €6 million with a reported loss before tax of €35 million due to the cost of the voluntary exit scheme. For the full-year income taxes amounted to €108 million and the effective tax rate was 17.6%. If we exclude the Telekom Srbija with capital gain and related taxes the full-year 2012 effective tax rate was 24% From 2015 the nominal corporate tax rate in Greece will increase from 20% to 26%. However, we don’t expect that to have a significant effect on our cash flow while it’ll have a positive €50 million P&L effect in Q1 2015 coming from the remeasurement of our deferred tax position.
Finally, net income attributable to OTE adjusted for the voluntary exit scheme cost and other exceptional items was €55 million, bringing total of our net income for the year to €364 million, up 16% compared to full year of 2011.
Turning now to the balance sheet of the Group, the Group’s underlying net debt went down further by €106 million in the quarter. And at the end of the year, it was below €2.9 billion, a decline of 25% or close to €1 billion during the last 12 months. This reflects the proceeds from the sale of our stake in Telekom Srbija, lower CapEx and our continuous strong cash generation.
Our cash position at the end of 2012 was €1.2 billion. Looking at cash flow, our net operating cash flow excluding voluntary exit program payment rose 12% to €463 million in the fourth quarter leaving the full year adjusted cash flow from operations roughly flat at €1.3 billion despite the sharp drop in revenues. Much of the improvement comes from regional management of Peloponnisos which led to significant reduction in the working capital. Though adjusted capital expenditure was up in the fourth quarter, contrasting with the first nine months of the year that was mainly due to seasonality.
We finished the year with a 20% decline in adjusted CapEx, down to €494 million or 10.6% of sales. If we include the payment of spectrum licensees, reported CapEx remains at a very, at a record low level of around 11.8% of sales. As a result of all the above, the adjusted free cash flow for the year was €819 million, up 16% compared to 2011.
To conclude, I would like to elaborate that beating out the finance inductions, since we last spoke and now our debt structure and maturity profile as we now stand. As we recorded in the fourth quarter of 2012, we negotiated a one year extension through February 2014, of €500 million out of our €900 million for the voluntary facility. GLOBUL raised €153 million through a syndicated loan maturing over 40 years.
And finally we brought in the upper market some of our August 2013 notes corresponding to nominal amount of roughly €162 million. Since the beginning of 2013 we have changed €187 million of August 2013 notes for new notes maturing in February 2015 which we’re consolidating on the existing €600 million note issue maturing on the same date. Then we issued the benchmark fixed rate bond of €700 million which matures in February 2018. And a few days later we repurchased and consult through tender part of our August 2013 and April 2014 notes reducing the nominal amount of these two issues to €714 million and €408 million respectively. Finally, on February 11, we repaid the €400 million portion of our €900 million revolving credit facility, that had been extended to next February.
So following the series of transactions we have significantly rebalanced our obligations giving us a flexibility we need to pursue our recovery, intensity our turnaround and invest in the future of all of our business lines. And with this I have covered what I want to tell you. And before the Q&A session and Michael, Zach and myself are now ready to answer your questions. Operator.
Question-and-Answer Session
Operator
Thank you. We will now begin the question and answer session. (Operator Instructions) And your first question today comes from the line of Dimitri Kallianiotis from Citi. Please ask your question.
Dimitri Kallianiotis – Citi
Good afternoon. I have three questions please. The first one is on regarding what you mentioned on the VDSL, talking about a very strong pickup. Based on this good initial appetite from customers, I want to ask you what sort of population coverage do you target with VDSL, if we say, by the end of 2013? Also regarding CapEx, how much do you expect to spend to roll out VDSL and if we therefore should expect an increase in CapEx this year in Greek fixed? And regarding wholesale of VDSL if you could tell us how much do you charge, would you charge the other operators to use VDSL, on fee based, how much of the days compared to unbundling your local package.
My second question is regarding OpEx. You’ve done a great job last year again in terms of cutting OpEx, in mobile, if you think there’s still a lot of scope to cut OpEx, and if therefore you would be in a position to keep margins relatively stable in mobile for 2013. And my last question is coming back to when you mentioned about GLOBUL, obviously GLOBUL used to be seen as a cost for the OTE Group before the Greek crisis. Now that you’ve done – you made very good progress in terms of refinancing I wanted if, as management, if you would be prepared to reconsider the sale of GLOBUL now that you’re not – you’re not necessarily a full seller? So your view there would be – would be greatly appreciated. Thank you.
Michael Tsamaz
So, starting from the VDSL, as you mentioned that the initial phase of the implementation was quite successful, we managed to have 6,000 connections in the first 80 days, and I can say that the number now exceeds 18,000 today, so there is a healthy adoption from a customer base. Regarding the potential cover up so far with VDSL offering, we are targeting roughly 20% of our base for the end of the year. Of course this has to do with – also with regulatory approvals because as you know we have gained – we’ve – we have an approval till May that will leave the network as it is till that point, and later on we may have an approval for the potential implementation and expansion of the network. So, of course this is our intention, but this has to be also – this has also to pass the regulator desk.
Regarding the wholesale prices what I would tell you is that there was a lot of criticism regarding the wholesale prices before the launch. A lot of competitors were mentioning that with these wholesale prices, they could not even sell without loss. The situation right now is that they are selling their 50 mega bps offering at the price where we offer the 35 mega bps, and that’s all that the wholesale prices could also leave margin for them.
Babis Mazarakis
Let me make a few comments on CapEx. Dimitri, you asked what our intention regarding CapEx in the year to come in relation to VDSL. As I’ve told you in the past what is happening in Greece is a paradox. On one hand we have a country which goes through very difficult times financially and on the other hand, we have so called (inaudible) independent regulation authority which stops the progress of the country. Why would I say this? There is a lot that has been said on the fiber and on the fiber to the home or the fiber to the curve and in general on the development of telecoms in Europe in relation with digital agenda and on the development of telecoms in Greece. The current regulatory cost model penalizes a company which is willing to invest on VDSL.
So whether we will spend more CapEx or not, it depends on how the regulation is going to be in Greece. Currently the regulation stops as from investing more. Because if we increase our investments on VDSL then because of the cost model that our regulatory is using, we will be forced to increase our prices and if we are forced to increase our prices that’s another paradox. In this country everyone talks about reducing the cost of services in Greece the model of the regulator, enforces the increase of services.
Just think of this, as we said earlier, last year we spent approximately €500 million in investments, in capital investments. More than €300 million of this amount was allocated for Greece mobile and fixed. I don’t think there is any other company increase or other thing there has been another – any other company increase investing so much money in this country. We’re the only one, not to talk about our competitors which I don’t think any of the competitive companies, or the alternative carriers or others are investing anywhere close to this amount.
So future investments depend on the regulation, if the regulator continues with the same hostile regulation I guessed as, then you should not expect much uptick on this.
Now, regarding the OpEx on mobile Michael.
Michael Tsamaz
Currently, I can see that our attention on the – on cutting OpEx not only on the fixed line, but also on the other businesses. It was evident in the numbers that we just announced and I just pick up for lease the fact that only our mobile businesses – they had pro forma revenue decline of 6.5%, nevertheless the EBIDA margin goes up 1.5%. So, that – 1.5% is points. So that indicates a fact that although we – we’ve been cutting costs on the fixed lines which were – they were coming from higher base, the effort continues also on the mobile business as well. So, that’s almost there.
Let me also add regarding the OpEx that the effort of course will continue in 2015 where we’ve entered the year with the positive effect from the voluntary exit scheme, and I’d like here to remind that the costs in 2013 we’d benefit for about €80 million because of the implementation of the voluntary exit scheme. So, short answers to your question is that, attention to our course is everywhere. The numbers I’m talking about these and we’ll continue the effort in 2013 as well.
Babis Mazarakis
Regarding GLOBUL. As we mentioned in our narrative, the – the problem we had for refinancing mostly has solved. So, we’ve to think the process that we have for GLOBUL has not stopped, its continues. However, we have to rethink the situation and consider the situation and decide based on the best of the shareholders’ interest. Next question.
Dimitri Kallianiotis – Citi
Thank you.
Dimitris Tzelepis
You’re welcome, Dimitri.
Operator
Your next question comes from the line of David Levenson of JCP. Please ask your question.
David Levenson – JCP
Thank you. My question was on the facility maturing at February 14, I wanted to know if you had plans for facility in terms maybe relating to push maturity or refinancing? In terms of GLOBUL, just a follow up question. In case you would be down the way, what’s the timing of a of closing? We will understand from the press that second round of bid has been received already?
Michael Tsamaz
Regarding – let me start from your first question. Regarding the revolving credit line that we just repaid, that was done in early February, that was €400 million. As we said the, the other piece of the old facility €500 has been extended for one year in 2014 and we have – we say we have plenty of time till then to discuss with the syndicate banks, and if we think that there is a good opportunity to further roll it over, we’ll do it. So, it’s – it’s an action that would be – that will attract our attention in the coming months.
Regarding the timing of GLOBUL, in case that it goes on, that is as we’ve communicated in previous instances. We expect closing by the end of 2015 of course.
David Levenson – JCP
Thank you.
Operator
Your next question comes to the line of Andy (inaudible). Please ask your question.
Unidentified Analyst
Hi, guys. I’ve got two questions. The first one was just on the quick mobile market. I just wanted to give a bit more detail when you talk about you seen a potential increase in competition at the end of the year we are going in to Q1. Could you give a bit more detail about where the competition is coming from? Is it the win to Vodafone? What exactly they’ve been doing? And do you think it’s correlated to obviously to the determination rate cut?
And then the second question was, it was a broader question. I know you haven’t given any detailed guidance for 2013. I was wondering whether you think – given the good momentum coming out of 2012, you think there could be an improvement in revenue in EBITDA declines in 2013 for you? Thanks.
Michael Tsamaz
Regarding the competitive dynamics, we have noticed that in many markets where we have a steep decline on the MTRs usually these are the trigger for seven let’s say most awards the tariff in restructuring. This is the case in Greece. It’s somewhat something let’s say unique and of course we are prepared let say to operate in this environment as we have done in the past. So, of course – it – there will be some changes in the market, but I wouldn’t expect that this will be something let’s say out of control.
Babis Mazarakis
Now regarding the second question, in 2013 I think it was clear in the speech that we are navigating in a very challenging environment. On top of the west company in the market, we have the full effect of the last piece of the cuts in the mobile termination rates. Michael earlier said that we see that in 2013 we will see somewhat like €200 million of revenues going out of the picture because of the termination rate cuts and this is going to be something that will crystallize gradually. Now other than that, the – I think it was clear in our speech that we are investing in improving our competitiveness both in broadband and TV on the fixed business in Greece.
We’ve seen nice numbers and nice progression in Romtelecom on the same front. And in the mobile sector of course other than the termination rate cut effect in Greece, it’s natural to expect a further decrease in the revenues because of the crisis, in the contraction of disposable of the people. Of course we cannot give a specific numbers attached to those, but this is our guidance of how we are going to 2015. And of course I think I mentioned before in the operations, we have some pluses, some positive signs which is the continuation of our OpEx induction program which as I said will be boosted by the effect of the voluntary exit scheme.
Unidentified Analyst
Okay. Thank you.
Dimitris Tzelepis
Thank you. Next question please.
Operator
Thank you. Your next question comes from the line of Daniel Morris of JP Morgan. Please ask your question.
Daniel Morris – JP Morgan
Sure. Thanks for taking the question. I just wanted to ask about the timing of the Hellas Sat deconsolidation. Will you take that out of the EBITDA in Q1 and treat it as earnings from discontinued and also in regards to that, I think we’ve got a number of about €23 million of EBITDA implied by the exit multiple, but what’s the margin of revenue contribution there? Thank you.
Babis Mazarakis
Regarding the deconsolidation from our numbers, as you know, we are running the period of approvals. We expect these approvals to be obtained before we announce our Q1 results. So we expect to see the consolidation of (inaudible) from our Q1 2013 numbers, but of course that would be the appropriate adjustments in order to be able to compare apples to apples. You’re right that in our announcement we guided that the implied EBITDA was around €22.5 million, that was the EBITDA of a lash out in previous year. And then by nature this business works with very, very high margins. It’s very high CapEx with very high margin. So, this €22 million were produced on €30 million of EBITDA roughly. Sorry, it’s a €30 million revenues. So we have a kind of EBITDA margin of about 70%.
Daniel Morris – JP Morgan
Okay, very, very thanks. And then you’re also kind of implying this quite a high CapEx number coming out as well?
Babis Mazarakis
Well, the high CapEx number, we assume that it doesn’t over year. It’s a – when you come to replace the central light.
Daniel Morris – JP Morgan
Okay.
Babis Mazarakis
So the CapEx number will not be adjusted.
Daniel Morris – JP Morgan
Perfect. That’s very clear. Thanks.
Operator
Your next question comes from the line of Luca Orsini of One Investments. Please ask your question.
Luca Orsini – One Investments
When you give the number of the mobile termination rate, you said that on the top line is €200 million. Can you also tell us what is the savings that you’re obtaining from that.
Babis Mazarakis
I should make sure that the number is conveyed there. We said that in 2013 we expect that the last wave of the termination rate cuts will reduce revenues by roughly €200 million, that’s the one number, that out of our revenues. Now, the expected number in EBITDA is of course depends on the traffic situation is expected to be about between 30% and 35% of that. So, we expect to see an EBITDA impact if I take the midpoint of about €65 million. This is the numbers for 2013 versus 2012.
Luca Orsini – One Investments
Okay. Thank you. And moving subject, in terms of tariffs and competition on tariff, with reduction in mobile termination rates should encourage all-you-can-eat tariff also across networks because the cost of mobile termination rate becomes negligible and plus a zero sum gain for the largest operator. Are you seeing that? Are you planning to do something to that? Are you seeing the competition doing that? Give us some color on this?
Michael Tsamaz
This is already happening in the Greek market just before, let’s say, the application of the glide path. We had offers from last April towards old net destinations which have been intensified through the end of the year. So, it’s not something that we expect to – let’s say to explode, but definitely we have also to adjust our portfolio in a way that will put us let’s say in a competitive position, but this is not something that will start, let’s say just in – in the first Q, it has already been there for the last two, three quarters.
Luca Orsini – One Investments
In anticipation. Okay. And – and on the broadband offering, are you seeing your – do you think you can do something to reduce the differential between you and the alternative carriers, the price differential?
Michael Tsamaz
What we can do and as you see we believe that we do it successfully is to control our cost base. Based on this, we expect the regulator to give us let’s say the room to further reduce our premium which is our intention, but of course this is not a 100% on us.
Luca Orsini – One Investments
When is the next conversation with the regulator?
Michael Tsamaz
It will be around May.
Luca Orsini – One Investments
Okay. Thank you.
Operator
(Operator instructions). You have another question from the line of Luca Orsini of One Investments. Please ask your question.
Maura Garbero – One Investments
Hello, it’s actually Maura Garbero here with Luca. I’d just like to go back to the previous question on your cost base and savings and renegotiation with regulator based on your actual cost base what sort of improvement are you trying to achieve, because for example, you say that in 2012 when the regulator allowed you to reduce your tariff, the premium versus competition move down from a 60% to 20%. What are you expecting now?
Michael Tsamaz
Okay, This is Michael. You just asked a very logical question. Why do (inaudible) reduces its costs, then inheritably the prices will drop. One expect that once the company invests again in the largest customer base, then the prices will drop. Unfortunately we cannot answer to you this question because it’s not in our hands. We have a regular who is very hostile, not only against – our company, but it’s against the development of this country. Next question please.
Operator
Your next question comes from the line of (inaudible). Please ask your question.
Unidentified Analyst
Hi, good afternoon guys. Just one quick question on where you hold cash? Obviously the macro risk with Greece has subside to a degree, which flow this reason why you have sold and some more of your sovereign debt. What are you doing with regards to the cash that is generated in Romania, are you holding in Romania or in Greece?
Michael Tsamaz
Well, the specific example you mentioned, this cash had in the Romania in the mixture of local and foreign banks and this is a situation in the other countries as well. Not those at the amount of cash that we posted in 2012 has already been used by €400 million, which was the repayment of the €400 million trans that was left from the previous revolving credit facility.
Unidentified Analyst
Okay. So can you just how much money do you – do you holding in Romania please?
Babis Mazarakis
€200 million – it’s roughly €200 million.
Unidentified Analyst
Okay. And one last question. You have seated the €153 million in Bulgaria mobile issuance. Are you looking at any further issuance of that kind?
Babis Mazarakis
Yes. We are always exploring ideas of a smart debt raising and that meets a situation of specific subsidiaries and we may see similar actions, for example in Romania or in Albania. It’s something that we cannot exclude.
Unidentified Analyst
Okay. And are you able to give rough idea of how much CapEx you are going to do this year or not?
Babis Mazarakis
In 2015 given the current situation, you should expect to see CapEx of broadly similar size of 2012.
Unidentified Analyst
Okay. And just coming back on the competitive environment in Greece, ideally I wanted to hear more with regard to what Vodafone and it’s doing, and how that’s affecting you?
Michael Tsamaz
We have seen similar moves in the last three or four years. The question is how intensive could it – will prove to be. They have made some offers in the last couple of months. We do not expect that this environment will last let’s say for the whole 2013. So, we have seen this turmoil in the market and we expect that it will have another let’s say round due to the triggering from the MTRs, but we don’t believe that this is something let’s say that will influence in a big, great, let’s say the market that we have in front of us.
Babis Mazarakis
Price wars usually go against there was weaken cash flow. History in Greece also has shown that anytime our industry has entered into price war, there was who are not strong enough in cash flow lost.
Unidentified Analyst
Thanks for your time.
Dimitris Tzelepis
You’re welcome. Next question please.
Operator
Your next question comes from the line of Stam Draziotis of Eurobank Equities. Please ask your question.
Stam Draziotis – Eurobank Equities
Yes, hi there. Just a couple of quick ones please. Firstly, if you could comment on the work you’ve been doing on the working capital, which was actually surprisingly strong in Q4 in my view and to what extent we should expect further working capital efficiencies in the coming quarter? And also if we could have some guidance on the depreciation charge for 2013, please.
Michael Tsamaz
Well, let me start up with the working capital. I think we’ve been persistent in our previous communications since summer that working capital was a focused item and we were expecting to see improvements. Now, Q4 posted significant improvement in the – or decrease in the working capital needs that came mainly from receivables and a bit from payables. To that, we had achieved – partially of course, from collection of receivables from the Greek state that started to gain towards their payments. And we had a reversal of loans given to employees which was – something that was offset with the severance payments of those people that took the voluntary exit scheme. And probably the biggest part of that was the intensified collection efforts of the last, let’s say six months of the broad sense in Q4.
Now, going forward as you know we cannot reduce working capital by that amount every quarter, but we expect further improvement in 2013, that of course, not to the same magnitude and the lateral to have in mind that the Q1 is usually is seasonally not so good in terms of working capital because of seasonality, but overall in 2013 we expect further improvement in working capital.
On the D&A, the depreciation and amortization, if we take the rate of first – of the four quarters of the previous year and we still report any impairments that we took, then you will have the base rate for the quarter in 2013. It may be that lower because CapEx has been reduced over the past two years, but overall for motoring purposes I think that the average of the four quarters excluding impairment is a good guidance.
Stam Draziotis – Eurobank Equities
That’s very helpful. Thanks.
Dimitris Tzelepis
Thank you.
Operator
Your next question comes from the line of Sameer Patel of (inaudible). Please ask your question.
Unidentified Analyst
Hi, sorry. Just a quick follow up. What’s happening with (inaudible) real estate? Are there any plans to share to divest significant sums of noncommercial real estate you have on your books? On note you said, you shared about €100 million quarter-on-quarter?
Michael Tsamaz
Well there are no specific plans for the real estate property for 2013. Market situation does not actually qualify extensive disposal or development of real estate. So, we don’t expect something important to come out of it. It’s a matter of – on a what we do is, we managed to keep the possible – the various possible tendency rate for those that we are able to arrive to third party. In the course to reduce our cost by relocating our people from third party biddings into ours. So, you should expect something very fancy next year.
Unidentified Analyst
Thanks.
Michael Tsamaz
Thank you.
Operator
You have a question from the line of Luca Orsini of One Investments. Please ask your question.
Luca Orsini – One Investments
Just a clarity – sorry to intervene again. Just a clarification, you said D&A was – do we have to take as a guidance for 2013 the fourth quarter which is as more a step-up on the previous quarter, is that correct?
Michael Tsamaz
No, I said, what I said is if you look the run rate of the previous four quarters and you draw an average, this is the guidance for next year. It’s not quarter four, but it’s the average of all quarters excluding of course any impairments that we have highlighted.
Luca Orsini – One Investments
And how much is the impairment?
Michael Tsamaz
Well, I have it update it offline because I don’t have the number in front of me but we’ll take it offline.
Luca Orsini – One Investments
Okay. Thank you. Thank you very much and sorry for making so many questions.
Michael Tsamaz
That’s okay.
Operator
There are no further questions at this time. Please continue gentlemen.
Michael Tsamaz
Okay. Thank you very much.
Dimitris Tzelepis
Thank you. We can close.
Michael Tsamaz
Thank you. Bye-bye.
Operator
That does conclude our conference for today. Thank you for participating, you may now all disconnect.
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