This is our BoP Greek equities briefing. We have not made many changes compared to our semi-annual one in July: we downgraded Alpha and Helex; and upgraded Eurobank. Plus, we re-visited GEK, reiterating OI and replacing its soon-to-be-delisted RES subsidiary, Terna Energy.

’If you cannot explain it simply, then you do not understand it well enough.’’ Testing ourselves, we share our understanding of each Greek investment case we cover within a few lines.
Conclusions: Our base case scenario is materializing, i.e., Mitsotakis administration renewing its mandate and Greece avoiding a recession. Equities have re-rated and are +36% YTD, so now…

What’s new? Q1 revenues/EBITDA(L)/net income stood at -2%/0%/+4% yoy. Results failed to improve our visibility on the investment case. It is positive that cash flow guidance was reiterated at E500m (and E425m remuneration). The same goes for competition hardening going forward. Q1 numbers do not reflect the impact from the 8%-26% price cuts last February, given the gradual re-pricing of the customer base. It is positive OTE is not losing market share, with postpaid subs and BB lines up qoq.

What’s new? The rather rhetorical question we raised a month ago was answered today. Q4/FY 2022 results announced came in line with our estimates in EBITDA(L) terms, but FY 2023 projected cash flow and remuneration policy are weaker compared to 2022 and our own expectations. OTE expects cash flow to go down this year (from E600m in 2022) with shareholders pocketing E425m, or E75m less than 2022, via a E250m/E175m cash dividend/buy-back combination.
Strike #3 it is. In our research note on Jan 17 (‘’Strike No. 3?’’) we described rising interest rates as Strike #1; the lower payout and changed dividend/buyback mix as Strike #2; and intensifying competition from Nova/Wind as potentially Strike #3 for the valuation of OTE. Today, the Greek incumbent attributed its -E100m/-17% lower yoy cash flow guidance to (inter alia) higher tax and flat capex. But also said it ‘expects to operate in an intensely competitive environment’.

What’s new? We are concerned with Nova-Wind’s more-aggressive-than-expected commercial policy announced on Jan 11 and the potential ARPU/EBITDA impact on OTE. The dividend & share buyback for 2023 is not necessarily at risk thanks to OTE dividend-intended cash buffers. But 2023-2024 EBITDA could be, as we doubt OTE will let subscribers go. In the end, Nova’s zero margin/cash burning strategy could backfire, but the market damage will be done, nevertheless.
This time is different, or isn’t it? Wind has always been cheaper than OTE. What changes now is a) Nova and United group, owned by private equity BC Partners; b) the new tariffs are even cheaper than before and are backed up by an aggressive marketing campaign. As Greek residents, we confirm that Nova-Wind marketing ads are everywhere; c) Nova-Wind seems willing to sacrifice the entire EBITDA margin to add volume.