My fellow shareholders,
For OTE, 2019 has been a successful year in every respect. Our operations went from strength to strength, validating the strategy we have steadfastly implemented for a decade, in the midst of turbulence and challenging market conditions. And it has been a year of far-reaching strategic thinking, as we define the way we are going to operate in the future.
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Our strengths were evidenced by a number of metrics. To name a few, Greek fixed retail service revenues were up more than 2 percent, OTE broadband subscriptions increased nearly 6 percent over the year, while the number of our fiber subscribers jumped 40 percent to 740 thousand, 90 percent of them on speeds of 50 Mbps or more. Mobile service revenues rose 3 percent, and for the first time, data accounted for more than one third of the total, as data traffic was up 65 percent in the year. As per user data consumption moves closer and closer to European averages, our investment in networks, which are handling smoothly ever-increasing volumes, is clearly paying off.
On the financial side, we delivered robust profitability throughout the year. 2019 Group EBITDA margin was 34.9%, and 41.5% in Greece alone.
Free cash flow generation was also strong, up 57% to 420 million euros, supporting our clear shareholder remuneration policy.
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Our 2019 achievements mark the culmination of a decade of transformation for OTE, from an old-fashioned incumbent to a modern, high-performing technology company, which has embraced digitalization to offer superior customer experience and boost the efficiency of its operations.
In 2010, we were losing fixed-line customers at an alarming rate, even our mobile revenues were on a downward trend, and with over 4 billion euros in net debt, two and a half times our EBITDA, we were lacking resources to turn the tide, just as the Greek economy was entering the worst crisis in its history. In my first message as head of OTE, for the 2010 annual report, I listed the factors weighing on our performance. As many of them, starting with the Greek economy, were clearly beyond our control, we focused on those —our operations and our culture.
The only way forward was to treat the crisis as an opportunity and rebuild OTE from the ground up. We adopted a decisive turnaround strategy based on six pillars—technological superiority; industry-leading customer experience; enhanced leadership in core business; new revenue streams; operational and cost optimization; and human resources aligned to the new realities of the marketplace. We disposed of non-core assets, rationalized personnel costs, and changed our culture to become a truly customer-centric organization under a single brand, Cosmote.
Most important, we invested massively in next-generation networks, around 5 billion euros in Greece alone during the past decade, becoming far and away the largest investor in infrastructure in our home market, responsible for 60% of the total. These investments were instrumental not only in our own success, but also for the country to overcome the troubled period and prepare for the digital era.
By the middle of the decade, well ahead of the market, we set a new strategic goal–the digital transformation of our organization to propel us into the future. Digitalization is an ongoing process with a profound impact on the way we work and serve our customers, but also in how we generate our revenues and manage our costs.
Over the 2010-2019 period and during the Greek crisis we managed to safeguard our EBITDA margin, while our net debt-to-EBITDA ratio was slashed, to reach 0.5 times at the end of last year. Personnel costs were halved, as the company allocated one billion euros to voluntary exit schemes that enhanced its flexibility in a socially responsible manner, and paved the way for the recruitment of new tech-savvy people. And in the decade our shareholders benefited from a substantial improvement in the OTE share price and the implementation of a generous shareholder remuneration policy.
Our transformation turned us into a modern technology company focusing on sustainable growth, the clear market leader in fixed and mobile telecommunications, broadband, ICT and pay-TV that puts customer first, with a host of new products and services complementing our core offering improving its experience at every touchpoint, generating new revenue streams and strengthening our brand.
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So, we entered 2020 and this new decade with unprecedented momentum. Having reached a new collective labor agreement, benefitting our staff and enabling us to create a more agile organization, we are well equipped to serve evolving customer needs and redefine whole new ways to operate, more flexible, more efficient.
But the year did not start as we expected. The first COVID-19 case in Greece was diagnosed in late February. The strict measures swiftly adopted by the government, have kept the number of fatalities per capita among the lowest in Europe.
At OTE, our priority shifted to preserving the wellbeing of our employees, customers and partners and ensuring the seamless operations of our telecommunications networks and services, a vital asset for everyone—for the government and local authorities, for businesses and individuals, and for society at large.
I am proud to say that the large network infrastructure we have built over the past years has performed flawlessly, handling an unexpected explosion of traffic in both voice and data. At the same time, the pandemic has sped up OTE’s ongoing transformation into a fully digital organization, and this trend is irreversible—the health crisis accelerated the transfer of customer interactions to our websites and smartphone apps, and fundamentally changed the way we work, as 80% of our people in Greece have been working remotely. We will apply the lessons of this period, and we will share them with our customers, to accelerate their own digital transformation.
Our overall contribution during the pandemic, through numerous initiatives benefitting the national healthcare system, the state, our customers and society at large, amounted to 12 million euros. I want to express my gratitude and congratulations to all the OTE people who made these achievements possible and kept OTE running at full capacity during this difficult period.
The effects of the pandemic are sure to impact our top-line performance in 2020, but our priority is to maintain our profitability and cash flow generation, and to meet our full-year objectives. While we expect some delays in their implementation, we are also keeping our investment plans unchanged, in 5G, in fiber-to-the-home, and in our new ventures, such as gaming and payments.
Handling the Covid-19 crisis is one thing and preparing for the future is another. At OTE, we have a clear vision for the next decade, to turn OTE into a telco of the future, and a concrete strategy to achieve it.
Customers are the first pillar of our strategy, as we strive to develop and roll out the products and services that will meet their digital needs, today and tomorrow, and as we digitalize all our interactions with them.
Our second pillar consists in building the best infrastructure available, the networks that will make communications fast, seamless, and reliable, and bring our customers the contents they want. Fiber-to-the-home and 5G are crucial in this respect.
Finally, and this is our third pillar, we are scrutinizing every facet of our organization to figure out how to do things better, faster, and in a more cost-efficient manner. In this context, we are looking at transforming our key customer-facing functions—field technicians; customer care; and retail shops—in separate, wholly owned entities within the OTE family. They will have the autonomy and agility they need to strengthen their competitive advantage and exploit new revenue streams. Our board of directors recently approved a concrete plan for these spinoffs, marking another step in this direction.
This new journey we have commenced to build the telco of the future will affect our customers, employees, and partners. It is also fundamental to further solidify Greece’s transition to the digital age and complete its recovery from the economic crisis of the past decade. OTE is eager, and proud, to contribute actively to the technological component of this rebound, and to the country’s new vision for itself.
Transformation is in our DNA. We believe and invest in constant change as the means to overcome any disruption and create the digital OTE of the next decade.
The confirmation of our guidance for 2020 reflects our clear vision and absolute confidence in our strategy to deliver excellence in customer relationships, state-of-the-art networks, and efficient, agile operations.
I thank you for your trust and support.
Michael Tsamaz
OTE Group Chairman & CEO