Annual Report 2003

Transcription

Annual Report 2003

COSMOTE_EXOFYLLA_final
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44, Kifissias Ave., 151 25 Maroussi, Athens, GR, www.cosmote.gr
Annual Report 2003
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Dear Shareholders,
OTE’s largest and most profitable subsidiary, COSMOTE, with its consistent and strong financial performance, reinforces the Group’s
financial results through significant value creation, while at the same time it represents one of its key growth drivers. For its
outstanding year-on-year outperformance, COSMOTE today is considered in comparison to its peers a model company in its sector,
not only by Greek but also by international standards.
COSMOTE’s international strategic partnerships, its successful presence in South-Eastern Europe, its leading position in the Greek
market and its achievement in placing itself among the most efficient European mobile operators, its technological innovation and
its international distinction as "Company of the Year 2003" for Greece by "The Banker" publication, provide a sense of the
potential and dynamics of the Company.
COSMOTE’s exceptional financial performance together with the evident customer loyalty it enjoys, offer further evidence to the
Company’s future prospects and reaffirm its successful and consistent strategy.
During 2004, COSMOTE, member of the OTE–COSMOTE-OTEnet Olympic Consortium, will be called upon to successfully meet all
mobile telephony requirements during the Athens 2004 Olympic Games. Its success in this endeavor and the application -for the
first time ever on such a broad scale- of advanced mobile telephony services will introduce COSMOTE into a new era of
technological innovation and advancement.
I believe that during 2004 the Company will continue, as it has consistently done up to now, to deliver on its targets and meet
expectations.
Panagis Vourloumis
Chairman of the Board of Directors
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Dear Shareholders,
During 2003, COSMOTE, effectively met all challenges, fulfilled the strategic goals it had set and secured strategic agreements that
will play an important role with respect to its future prosperity. COSMOTE’s successful track record is the result of a systematic and
collective effort as well as the dedication of all its employees to a common vision and a conscious choice to remain at the forefront.
Consistent with an exceptional financial performance COSMOTE during 2003 posted revenue growth rates and profitability margins
well above the European average, that rightly rank the Company among the leading mobile operators in Europe. COSMOTE’s
outstanding track record, as evidenced in its double-digit growth rates, high profitability and strong cash flows prove the
Company’s ability to enhance value creation and increase returns, and provide testament of the future prospects that lie ahead.
During 2003 and for the third consecutive year COSMOTE maintained its leading position in the Greek mobile market both overall
as well as in the contract segment, facts that enhance our optimism for the successful adoption of the new and innovative valueadded services the Company aims to launch and the further increase of voice service usage.
During 2003, COSMOTE’s subsidiary in Albania, AMC, OTE Group’s most profitable investment, retained its high profitability
margins contributing positively to the Company’s consolidated financial results. Under COSMOTE's management, COSMOFON and
Globul, OTE Group’s mobile assets in FYROM and Bulgaria also posted exceptional results. COSMOTE’s very successful presence in
South-Eastern Europe prove the Company's ability to select, based on strict return criteria, financially sound investments as well as
its in depth knowledge of the competitive environment of the specific region.
With a proven track record in developing innovative value added services for its customers in 2003 COSMOTE signed a strategic
partnership agreement with the leading mobile operator in Japan, NTT DoCoMo for the exclusive launch of i-mode®, the world’s
most popular mobile Internet service. NTT DoCoMo with more than 47 million subscribers is a world leading mobile
telecommunications company that provides a wide range of advanced mobile telephony multimedia services. i-mode® offers access
to Internet and e-mail services for over 40 million subscribers in Japan and more than 2 million in the rest of the world. We expect
that the introduction of i-mode in Greece will revolutionise wireless Internet services through the mobile phone while provide the
Company with multiple benefits from becoming a member of an important international alliance.
A leader in technological innovation and taking full advantage of its superior quality network, COSMOTE during 2003 developed
the necessary telecommunications infrastructure with the aim to provide a wide spectrum of technologically advanced next
generation services within 2004.
As a Grand Sponsor of the ATHENS 2004 Olympic Games and taking into consideration the fundamental role of mobile telephony,
mainly due to the high penetration and usage of mobile telephony on a global scale, as well as the convergence of technologies,
COSMOTE during the past year upgraded its telecommunications network in order to create an integrated (2G, 2,5G and 3G)
network of "Olympic" proportions able to cover the increased needs for mobile communications during the Games. The Olympic
Sponsorship is a unique business opportunity for COSMOTE to present its technological achievements and at the same time gain
international exposure and enhance its image and reputation on a worldwide level.
Finally, during 2003 and consistently since the beginning of its commercial operations, COSMOTE took a series of initiatives aiming
to increase returns to society by focusing on improving the quality of living for our disadvantages fellow citizens, on safekeeping
the environment as well as aiding underdeveloped Greek regions.
COSMOTE’s 2003 financial and operational performance in all countries of presence, once again reaffirms our commitment to meet
and exceed the targets we set. Despite a challenging environment and increased competition we remain consistent in delivering on
high profitability and increasing cash generation. 2003 was a year of preparation for a demanding and very exciting year, full of
new developments for COSMOTE including the Company's involvement in the ATHENS 2004 summer Olympic Games, 3rd
Generation services, and the i-mode® service launch. For 2004 we remain dedicated in realizing our key strategic objective that is to
continue to lead the way on all fronts, quality services, innovation, high profitability and enhanced returns to our shareholders.
Evangelos Martigopoulos
Managing Director
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SELECTED CONSOLIDATED FINANCIAL DATA
Amounts in:
(except share and per share data)
Euro
Million
2002
1,201.3
472.2
729.1
380.6
361.7
235.3
229.3
2003
1,357.2
555.9
801.4
414.3
408.8
258.9
252.9
0.70
0.77
330,047,910
330,129,312
BALANCE SHEET DATA
Current assets
Non-current assets
Fixed assets/license, net
Total Assets
229.6
7.9
1,073.8
1,380.9
379.0
6.7
1,101.6
1,557.0
Current liabilities
Long-Term Debt
Other long-term liabilities
Minority interests
Share capital
Paid in surplus
Retained earnings
Total Liabilities and Shareholders Equity
277.7
333.7
70.3
16.9
155.1
153.6
360.8
1,380.9
296.9
276.5
136.5
23.0
155.2
157.4
486.7
1,557.0
CASH FLOW DATA
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by/ (used in) financing activities
Net increase/(decrease) in cash
Cash at beginning of year
Cash at the end of year
318.2
(279.7)
(53.2)
(15.3)
31.4
16.1
448.1
(182.1)
(125.5)
140.6
16.1
156.7
INCOME STATEMENT DATA
Total operating revenues
Total cost of sales and services provided
Gross profit
Operating income
Income before provision for income taxes and minority interests
Income before minority interest
Net income
Net income per share
Weighted average number of shares outstanding
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THE KEY MILESTONES IN THE
COMPANY’S EVOLUTION
04/1998 COSMOTE commences commercial operations.
07/2001 COSMOTE was granted a Special License for UMTS.
12/1998 Launch of COSMOKARTA prepaid service. The Company's
12/2001 The Company's customer base reaches 2.95 million, with a
customer base reaches 300,000 representing an estimated 14.5%
market share of approximately 37%. AMC's customer base
market share.
1st qr./99 COSMOTE is net income and EBITDA positive, after less than one
year from the beginning of its commercial operations.
11/1999 Network coverage reaches 97% of the Greek population.
12/1999 The Company's customer base reaches 1 million.
1st qr./00 COSMOTE has the largest number of contract subscribers among
the three mobile operators in Greece. Since then the Company
has maintained leadership in the contract market segment.
exceeds 273 thousands.
02/2002 Transfer to COSMOTE of OTE's Fixed Wireless Access license
(LMDS) at 25 GHz.
03/2002 COSMOTE's customer base exceeds 3.075 million in the Greek
market, reaching a 37.3% market share. AMC's subscribers
exceeds 302 thousands.
06/2002 The Company's customer base reaches 3.21 million, with a
market share of 37.6%.
2nd qr./00 COSMOTE becomes the second mobile operator in Greece (by
07/2002 COSMOTE is awarded GSM 900 spectrum (2x5 MHz) and
total number of customers), with more than 1.5 million
becomes a dual band operator. COSMOTE lowers interconnection
customers, representing an estimated 31.4% market share.
08/2000 The Company expands its operations abroad with the acquisition
of 85% of the Albanian Mobile Communications company
(through its 97% owned subsidiary COSMO-HOLDING ALBANIA).
09/2000 Launch of MYCOSMOS mobile portal, an umbrella of value-added
services.
10/2000 Listing of the Company's shares on the Athens and London Stock
Exchanges.
12/2000 COSMOTE's customer base exceeds 2 million, with a market share
of approximately 35%. During year 2000, EBITDA margin reaches
30% (compared to 22% in year 1999).
02/2001 The Company through a consortium between COSMOTE-OTE√∆∂net, is declared as Grand National Sponsor of the Olympic
Games "ATHENS 2004" in the telecommunications sector.
1st qr./01 Nationwide installation of GPRS network and commercial launch
of GPRS services.
05/2001 Launch of the new prepaid product WHAT'S UP and offering of
Chat services to all customers.
rates for fixed line calls terminating on its network.
09/2002 The Company launched commercially an integrated MMS
offering.
10/2002 COSMOTE's customer base exceeds 3.36 million. COSMOTE
assumes management of OTE's mobile assets Globul and MTS.
12/2002 The Company's customer base reaches 3.51 million. AMC's
customer base exceeds 501 thousands, with a market share of
approximately 59%.
COSMOTE's full year 2002 total revenues exceed 1,201 million
and EBITDA margin reaches 43.3%.
market. AMC's subscribers exceeds 538 thousands.
market, reaching a 37.2% market share. AMC's subscribers
exceeds 560 thousands. COSMOTE begins its 3G network
deployment pursuant to its license requirements and COSMOFON
its commercial operations in FYROM. COSMOTE launches its
innovative portal service "MyCosmos View".
11/2003 COSMOTE formed an exclusive strategic partnership agreement
06/2001 Launch of unique Voice portal services under MYCOSMOS (based
with NTT DoCoMo to offer i-mode® services. COSMOTE's
on voice recognition technology). COSMOTE becomes the market
customer base exceeds 4 million in the Greek market. AMC's
leader in the Greek market and its customer base exceeds 2.5
million, with an estimated market share of approximately 36.5%.
During the first half of year 2001, EBITDA margin reached 43%.
subscribers exceeds 560 thousands.
02/2004 COSMOTE's full year 2003 total revenues exceed 1,357 million
and EBITDA margin reaches 42.45% one of the highest in Europe.
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Chapter 1
INFORMATION ON DRAFTING OF ANNUAL REPORT ............................................................................................... 7
Chapter 2
GENERAL INFORMATION ON COSMOTE ............................................................................................................... 11
2.1 Overview of the Company ................................................................................................................................... 12
2.2 Telecommunication Licenses ................................................................................................................................. 14
2.3 New EU Telecommunications Regulatory Framework ............................................................................................ 17
2.4 Share Capital ........................................................................................................................................................ 19
2.5 Share price performance ...................................................................................................................................... 22
2.6 Shareholders ....................................................................................................................................................... 25
2.6.1 Shareholders Agreement .......................................................................................................................... 26
2.6.2 TELENOR B-INVEST AS .............................................................................................................................. 29
Chapter 3
MANAGEMENT - CORPORATE GOVERNANCE ...................................................................................................... 31
3.1 Organisation chart ............................................................................................................................................... 33
3.2 Board of Directors ................................................................................................................................................ 34
3.2.1 Remuneration Committee .......................................................................................................................... 37
3.2.2 Audit Committee ...................................................................................................................................... 37
3.2.3 Internal Audit Department.......................................................................................................................... 38
3.3 Management & Audit Committees ..................................................................................................................... 39
3.3.1 Executive Committee ................................................................................................................................. 39
3.3.2 Extended Executive Committee................................................................................................................... 40
3.4 Investor Relations.................................................................................................................................................. 42
Chapter 4
BUSINESS OF COSMOTE ......................................................................................................................................... 45
4.1 Services and Products ........................................................................................................................................... 46
4.1.1 Contract Services ........................................................................................................................................ 46
4.1.2 Prepaid Services .......................................................................................................................................... 48
4.1.3 MyCosmos (mobile portal) & Value Added Services .................................................................................... 49
4.1.4 Other Services ........................................................................................................................................... 53
4.2 International Roaming........................................................................................................................................... 54
4.3 Customers ........................................................................................................................................................... 54
4.4 Churn .................................................................................................................................................................. 55
4.5 Distribution network ............................................................................................................................................. 56
4.6 Corporate communication ................................................................................................................................... 58
4.7 Telecommunications network .............................................................................................................................. 60
4.8 Commercial Agreements....................................................................................................................................... 61
4.8.1 Interconnection Agreements ................................................................................................................... 61
4.8.2 Agreements with NTT DoCoMo for i-mode in Greece............................................................................ 66
4.8.3 Agreements with other Suppliers............................................................................................................ 67
4.8.4 Agreements with Third-parties ................................................................................................................ 67
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CONTENTS 2003
4.9 Property ............................................................................................................................................................... 67
4.10 Employees ......................................................................................................................................................... 71
4.10.1 Management Share Option Plan ............................................................................................................ 72
4.11 Management of OTE’s Mobile Assets: Globul & COSMOFON .............................................................................. 74
Chapter 5
COSMOTE AND THE "ATHENS 2004" OLYMPIC SPONSORSHIP ........................................................................... 77
5.1 Olympic "Technical, Organisational And Educational" Activities .......................................................................... 78
5.2 Olympic "Commercial And Communication" Activities ........................................................................................ 81
Chapter 6
COSMOTE’S QUALITY MANAGEMENT SYSTEMS .................................................................................................. 85
Chapter 7
COSMOTE AND SOCIAL RESPONSIBILITY (Our CSR Program) .............................................................................. 89
Chapter 8
COSMOTE GROUP OF COMPANIES ........................................................................................................................ 95
8.1 COSMO – HOLDING ALBANIA ............................................................................................................................. 96
8.2 ALBANIAN MOBILE COMMUNICATIONS .............................................................................................................. 98
8.3 CosmoONE HELLAS MARKET SITE ...................................................................................................................... 100
8.4 COSMO – MEGALA KATASTIMATA. ................................................................................................................... 104
8.5 Other Participations........................................................................................................................................... 107
Chapter 9
SUMMARY DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................. 109
9.1 Financial Review .............................................................................................................................................. 110
9.1.1 Summary Consolidated Financial Results ................................................................................................ 110
9.1.2 Summary Stand Alone Albanian Mobile Communications Results ............................................................ 113
9.2 Operating Review ............................................................................................................................................ 114
9.2.1 COSMOTE (Greece) .............................................................................................................................. 114
9.2.2 Greek Cellular Market ............................................................................................................................ 116
9.3 Capital Expenditure Plan .................................................................................................................................. 116
Chapter 10
STRATEGY AND PROSPECTS .................................................................................................................................. 119
10.1 COSMOTE’s Key Strategic Objectives ............................................................................................................... 120
10.2 Targets of the COSMOTE group of Companies ................................................................................................ 122
FINANCIAL REPORT
CONSOLIDATED REPORT AND ACCOUNTS ............................................................................................................ 4
AMC REPORT AND ACCOUNTS ......................................................................................................................... 41
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CHAPTER 1
Information on drafting of the annual report and the
auditors of the company
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Information on drafting of the Annual Report and the
Auditors of the Company
1. The drafting and distribution of this Annual Report is in accordance with the provisions of Decision 5/204/14.11.2000 of
the Hellenic Capital Market Commission Board of Directors, governing all Greek listed companies, and the respective
provisions of the UK Listing Authority governing GDRs.
2. The Company's financial accounts are prepared in accordance with US Generally Accepted Accounting Principles (US
GAAP), and have been audited by ERNST & YOUNG.
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INFORMATION ON DRAFTING OF THE ANNUAL REPORT AND THE AUDITORS OF THE COMPANY
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CHAPTER 2
General Information on COSMOTE
2.1 Overview of the Company
2.2 Telecommunication Licences
2.3 New EU Regulator Framework for Electronic Communication
2.4 Share Capital
2.5 Share Price Performance
2.6 Shareholders
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General Information on COSMOTE
2.1 Overview of the Company
"COSMOTE" was incorporated under Law 2190/1920 in October 1996 under the name "Cellular Operating System
of Mobile Telecommunications S.A.", by the Hellenic Telecommunications Organisation S.A. (OTE S.A.) with
ownership of 99.99% and the Hellenic Advisory Telecommunications and Postal Organisation S.A. (E.S.T.T.O, the
current title is "TEMAGON") with ownership of 0.01%. Its registered office is located in the municipality of Athens
(15, Stadiou Street, GR 105 61), and its central administration is in Maroussi (44, Kifissias Avenue, GR 151 25, Phone
number: 210 6177777). The Company is registered at the Register for Société Anonymes of the Greek Ministry of
Development, under number 36581/06/B/96/102 and its duration was originally set for fifty years.
The Company was renamed, following the resolution of the Annual General Meeting that was held on June 2, 1999,
and its current title is "COSMOTE Mobile Telecommunications S.A.". The Company uses the brand name
"COSMOTE".
The objects of the Company according to article 4 of its Articles of Association are as follows:
1. The installation, operation, maintenance, exploitation, management and development of mobile telephony
systems and generally of electronic communications systems, hereinafter referred to as "systems", locally,
nationally and internationally.
2. The supply and distribution of equipment used in Greece or abroad in connection with the systems.
3. The design, development, production, supply, use, sale, rental, lease, financial leasing and maintenance of
telecommunications - equipment systems and the assumption of any activity related to mobile and electronic
communications.
4. The installation and operation of units for the support of the systems in Greece or abroad.
5. The development, exploitation, management and offer of mobile electronic communications services and related
value added services in Greece or abroad through the systems.
6. The acquisition of property or rights of use or exploitation by purchase, lease or otherwise and the right to dispose
or impose charges on (I) telecommunications equipment and means of offering telecommunications services and
(II) mobile or fixed assets or other rights, regardless of their location.
7. The representation and distribution in Greece and abroad of: a) products and services related to the systems and b)
products and services related to the electronic communications generally.
8. The design, development, production and sale or other disposition of electronic commerce applications and the
provision of electronic commerce services and any other activity related to electronic commerce.
9. The provision, distribution and sale (marketing) of any kind of product that will advertise and promote the Olympic
Games of Athens 2004 as well as the products and services of the Company.
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GENERAL INFORMATION ON COSMOTE
10. The management and business administration of legal entities of any type, which act in the field of mobile and
electronic communications in Greece or abroad.
11. The provision of consulting and training services, concerning the planning, installation and operation of
telecommunications systems as well as consulting and training services concerning the management and business
administration of legal entities of any type, which act in the field of mobile communications in Greece or abroad.
12. The provision, to legal entities of any type which act in the field of mobile communications in Greece or abroad,
of services with respect to their operations.
13. The production and exploitation of software developed by the Company with respect to telecommunications.
14. The development, management, exploitation and provision of services related to the maintenance and repair of
handsets and systems for mobile telecommunications and electronic communications generally.
15. The design, development, management, exploitation and provision of services related to any activity concerning
commercial transactions (e.g. purchases, supplies, orders, payments of any kind of products and services) through
handsets and electronic communications systems.
The Company's object in general includes the undertaking of any activity related to wireless, mobile and electronic
communications, including activities in the fields of electronics and data processing.
In furtherance of its objects, the Company is entitled:
◗ To conclude all kinds of contracts or agreements with natural or legal persons, including companies, public and
private legal entities and Greek or international government agencies,
◗ To establish all kinds of companies or to participate in companies or joint-ventures or businesses of any form, Greek
or foreign, having the same or similar objects or promoting the Company's objects in any way.
◗ To establish branch offices, agencies, offices or representations, anywhere in Greece or abroad.
◗ To represent Greek or foreign commercial companies related to the Company’s objects.
◗ To offer technical or consulting services to Greek or foreign persons or legal entities.
◗ To train manpower for employment in the Company or the companies or joint-ventures in which it participates and
to make available operational or scientific or training personnel to third persons.
◗ To conclude loans for itself, to accept personal or other guarantees, to undertake obligations, to issue drafts, bills of
exchange, cheques, bonds or other securities or documents of title on behalf of the Company and to give
insurance.
◗ To undertake any related commercial or other activity and effect any legal action or transaction directly or indirectly
related to the fulfilment of the Company’s objects.
The Company’s objects, as described above, have been approved by resolutions adopted by the Shareholders of the
Company at General Meetings on 31.7.2000, 21.02.2002, 31.10.2002 and 03.06.2003.
The objects of the Company fall within the field of "Telecommunications" under code number 624.0, under the
classification of financial activities (STACOD 91) adopted by the National Statistical Service of Greece (ESYE).
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Judical and other Legal Proceedings
1. There are no pending legal proceedings against the Company or any companies that are controlled by the
Company as Shareholder, that are expected to have a material impact on the financial situation of COSMOTE and
its affiliates.
2. The Company is a party to judicial and administrative disputes, the majority of which concern the operation of
base stations. These disputes arose during the current financial year.
3. In 2003 TIM and VODAFONE filed two petitions against COSMOTE before the National Regulatory Authority
(National Telecommunications and Post Commission- NTPC), referring to an arbitration that would resolve the
dispute regarding the interconnection fees of the above companies and COSMOTE. In October 2003 the dispute
was settled and subsequently TIM and VODAFONE withdrew their petitions.
4. The Company has filed a petition of annulment before the Council of State, against the resolution of NTPC
number 275/72B/07.02.2003, pursuant to which the Company was nominated as an Organization with Significant
Market Power (SMP) in the national interconnection market. The relevant application is pending.
5. For a discussion of the material disputes concerning "Albanian Mobile Communications (AMC), an Albanian
company owned by COSMOTE (with a percentage of 85%), see section 8.2 of this Annual Report.
2.2 Telecommunication Licenses
The Company's provision of telecommunications services within Greece is governed by the terms of Law 2867/2000
(the "Telecommunications Law"), and by presidential decrees, ministerial resolutions and resolutions of the National
Telecommunications and Post Commission (the ‘NTPC’) which implement the Telecommunications Law and
harmonise Greek Law with applicable EU Telecommunications Law. The Company operates in accordance with the
conditions stipulated in its Licenses and, in this respect, is supervised by the NTPC, which is responsible for the
regulation and supervision of the telecommunications market in Greece. The Ministry of Transport and
Communications (the "Ministry") is responsible for establishing telecommunications policy, promulgating related
regulations and legislation.
According to the Telecommunications Law, the General Licenses Regulation and the Special Licenses Regulation,
telecommunications activities in Greece may be exercised under a regime of General or Special Licenses, depending
on the activity. General Licenses are obtained after the lapse of 15 days from the submission to the NTPC of a
Declaration of Registration, pursuant to which the applicant declares the commencement of one or more
telecommunications activities. Special Licenses are issued by the NTPC according to a specific procedure, described in
the Telecommunications Law and the Special Licenses Regulation. Special Licenses concern: a) the installation of
telecommunications networks, where access to places of public use and/or public or private property is required, and
b) the provision of telecommunications services which require the use of Scarce Resources, such as radio frequencies,
positions in synchronous orbit and numbers from the National Numbering Plan.
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Special Licenses may not be transferred without the prior consent of the NTPC. In addition, any sub-license or other
arrangement for the joint use of a Special License or change in the share capital structure of a holder of a Special
License, which could result in a direct or indirect change of its control, is prohibited without the prior consent of the
NTPC. Also, any transfer of shares, through one or more transactions, which in aggregate represents more than 2%
of the paid in share capital of the holder of the Special License, must be notified to the NTPC within 15 days of its
effectiveness.
COSMOTE holds the following Telecommunication Licenses:
I. Special License for Second Generation Mobile Communications (2G)-Additional Radiofrequency
Spectrum EGSM-Provisional Grant of Radiofrequency Spectrum for the Olympic Games 2004
COSMOTE provides mobile telecommunications services in Greece in the 1800 MHz frequency band, according to the
terms of its 2G License. The 2G License was initially granted to OTE as follows: OTE was authorised by Article 14 of
Presidential Decree 437/1995 to develop and provide mobile telecommunications services in Greece, including
personal communications services through GSM 1800 technology. The Ministry issued resolution 92093/1995, which
granted OTE the right to use the frequency bands 1760-1785 MHz and 1855-1880 MHz. OTE's right to develop and
provide personal communications services using GSM 1800 technology was transferred to COSMOTE pursuant to
Law 2465/97 by way of a contribution in kind by OTE, valued at 16,346,823,305 GRD. The 2G License has a duration
of 25 years starting from November 29, 1995 and can be renewed pursuant to a resolution of the NTPC.
In December 2001 the NTPC harmonised all 2G Special Licenses including COSMOTE’s, pursuant to which its
resolution number 240/1/28.12.2001 was issued and published in the Official Gazette No 142 /B/12.02.2002 Société
Anonymes and Limited Liability Companies Issue.
In August 2002, following a tender by NTPC for the award of EGSM RadioFrequency Spectrum for the provision of
2G Public Mobile Communication Services, the Company was granted for a period of 15 years the right to use the
frequency 2x5 MHz at the EGSM band (885-890 MHz and 930-935 MHz), (NTPC resolution number
261/138/28.8.2002).
Following, the award of the above additional EGSM Spectrum to the Company, the aforementioned resolution of
NTPC under the number 240/1/2001 in connection with the Company's 2G License was amended. The total price of
acquiring the additional EGSM Spectrum amounted to 38,160,591.00 euro, which was paid at the time of the award
of the Spectrum.
In October 2003, following the completion of the invitation procedures from NTPC to all Mobile Operators, for the
provisional Grant of Radiofrequency Spectrum DCS 1800 for the coverage of the needs of the Olympic Games 2004,
and after the filing of COSMOTE's application, COSMOTE was granted the right to use, solely for the period from
10.06.2004 to 30.09.2004, the frequency bands 1710-1715 MHz and 1805-1810 MHz of the DCS 1800 Spectrum
(2x5 MHz) (NTPC resolution number 294/56/2003). The relevant Spectrum can only be used in Attica. The total price
of acquiring the provisional Spectrum amounted to 344,000 euro.
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II. Special License for Third Generation Mobile Communications (3G or UMTS)
In August 2001, following a tender by NTPC for the granting of 2G and 3G Licenses, the Company was granted,
pursuant to the NTPC resolution number 226/1/6.8.2001, a 3G Special License. In this respect, the Company was
assigned exclusive use of the 2 Ã 15 MHz paired spectrum and 2 Ã 5 MHz non-paired spectrum. Specifically the
following radio frequency sections were assigned to COSMOTE: 1950.3 – 1965.3 MHz, 2140.3 – 2155.3 MHz and
1905.1 – 1910.1 MHz. The total price for acquiring the 3G Special License amounted to 161,408,657 euro (55 billion
GRD), 70% of which was paid at the time of the award of the License, while the remaining 30% will be paid in three
annual equal instalments starting from December 2005. The 3G Special License has a duration of twenty years
starting from August 6, 2001 (until 5 August 2021) and can be renewed by an NTPC resolution. According to the 3G
Special License, the Company is required to provide:
a) coverage of at least 25% of the population of Greece by December 2003 (by 31.12.2003, the Company had
achieved 29% coverage of the population of Greece),
b) coverage of the Olympic Games facilities and all the areas where related activities will take place within Attica and
of the main road arteries that lead to the above areas that are located within Attica by June 2004; and
c) coverage of at least 50% of the population of Greece by December 2006.
The above requirements need to be achieved for packet switched services at a transmission rate in natural level of at
least 144kbps for the downlink and 64kbps for the up-link.
III. Fixed Wireless Access Special License (LMDS)
In May 2002 the NTPC authorised, under its 248/65/15.3.2002 resolution, the transfer of OTE’s 25GHz Fixed Wireless
Access Special License to COSMOTE. As a result the Company was assigned a radio frequency section of 24969 –
25025 MHz and 25977 – 26033 MHz1. The price that the Company paid to OTE for the transfer of the above Special
License was 9,535,000 euro, including goodwill resulting from OTE since December 2000 (payment date of this
Special License). This transfer was approved by COSMOTE’s Extraordinary General Meeting, which was held on
February 21, 2002. The Fixed Wireless Access Special License will expire on December 10, 2015 subject to renewal
pursuant to an NTPC resolution. According to the Fixed Wireless Access Special License, the Company undertakes the
responsibility to install, operate, maintain and use the necessary equipment so that it can provide radio coverage to a
minimum of 20% of the population of Greece by December 2002, as well as fulfil any request made by users for the
provision of Fixed Public Telephone Services and the provision of Broadband Network Services. COSMOTE has fulfilled
its coverage requirements.
IV. Special License for Wireless Lan Services (W-Lan)
πn October 2002, following an application of the Company to NTPC, according to the Special Licenses Regulation,
pursuant to the NTPC resolution number 271/18/30.10.2002, the Company was granted a Special License for the use
1
16
|
√∆∂ maintained its 3.5 GHz Fixed Wireless Access License.
010_029_COSMOTE 18-06-04 12:15 ™ÂÏ›‰·17
of spectrum zone 2,4 GHz and the provision of W-Lan Public Mobile Communications Services. According to the
above Special License the Company has the right to provide W-Lan Public Mobile Communications Services to public
places (hot spots) with data transmission equipment operating in the 2,4 GHz band and spread spectrum techniques,
fully compliant with the ETSI EN 300 328 technical standard. This Special License has a duration of 15 years and can
be renewed pursuant to a resolution of NTPC.
COSMOTE is currently evaluating the most efficient way of combining W-LAN technology (which is limited to hot
spots) with COSMOTE's Wireless Access Technologies (GPRS, 3G), in order to provide widespread internet and
intranet access. Hot spots include convention centres, hotels, airports and other public places, such as many
restaurants and café.
V. General Licenses
The Company also holds General Licenses for the exercise of the following telecommunications activities:
◗ Capacity Leasing and Virtual Private Network (VPN) services (Class A0201 and ∞0202)
◗ Data transmission services (Class ∞03)
◗ E – mail (Class ∞0401)
◗ Network operation for Closed User Groups, including the provision of general telecommunications services and
voice transmission (Class ∞0602)
◗ Network access services (Class ∞0604)
◗ Internet access services (Class ∞0701)
◗ Voice telephony services, via, in whole or in part, a network owned or managed without the right to access
numbers from the National Numbering Plan (Class ∞1001)
◗ Audiotex (Class ∞1102)
2.3 New EU Regulatory Framework for Electronic Communications
The international framework for electronic communications has rapidly evolved during the last few years. In this
respect, the European Parliament and Council have issued a set of new directives and decisions, including the
following:
a) Directive 2002/19/EC «on access to and interconnection of electronic communications networks and associated
facilities» (Access Directive),
b) Directive 2002/20/EC «on the authorisation of electronic communications network and services» (Authorisation
Directive),
c) Directive 2002/21/EC «on a common regulatory framework for electronic communications network and services»
(Framework Directive),
d) Directive 2002/22/EC «on universal service and users’ rights relating to electronic communications networks and
1
| 17
√
010_029_COSMOTE 18-06-04 12:15 ™ÂÏ›‰·18
services» (Universal Service Directive),
e) Directive 2002/58/EC «concerning the processing of personal data and the protection of privacy in the electronic
commerce sector» (Directive on Privacy and Electronic Communications),
f) Directive 2002/77/EC «on competition in the markets for electronic networks and services»,
g) Decision 2002/676/EC «on a regulatory framework for radio spectrum policy in the European Community» (Radio
Spectrum Decision),
h) Decision 2002/627/EC «establishing the European Regulators Group for Electronic Communications Networks and
Services»,
i) Recommendation C 497/11.02.2003 of the Commission «on Relevant Product and Service Markets within the
electronic communications sector susceptible to ex-ante regulation in accordance with Directive 2002/21EC of the
European Parliament and of the Council on a common regulatory framework for electronic communications
networks and services» (the Recommendation) and
j) Guidelines of the Commission for market analysis and the assessment of significant market power, according to
article 15 of the Framework Directive (the Guidelines).
This regulatory framework is the result of the procedure that the European Committee initiated in 1999 for the
review of the European Telecommunications Regulatory Framework (Review 1999).
The new EU regulatory framework for electronic communications introduced a procedure pursuant to which National
Regulatory Authorities (in Greece the NTPC), which conclude that a market for electronic communications products
and services is not effectively competitive within a specific geographic area, shall identify undertakings with significant
market power and impose on such undertakings appropriate specific regulatory obligations provided for in the Access
and Universal Services Directives.
National Regulatory Authorities, in carrying out this analysis of relevant markets, shall take the utmost account of the
Guidelines and the Recommendation of the European Commission, in collaboration, where appropriate, with relevant
national competition authorities.
Some other main aspects of the new EU regulatory framework for Electronic Communications are:
a) The establishment of a right of appeal against the decision of a National Regulatory Authority,
b) The establishment of a consultation and transparency mechanism regarding the taking of measures by the
National Regulatory Authorities,
c) The encouragement of the cooperation of the National Regulatory Authorities with each other and with the
European Commission,
d) The right of the European Commission to request that a National Regulatory Authority should withdraw any
definition of a relevant market if such definition differs from the definition included in the Recommendation, or any
designation of a company as an entity with significant market power, where such designation would create a barrier
to the common market or would be incompatible with Community Law and in particular the policy objectives that
National Regulatory Authorities should follow.
18
|
010_029_COSMOTE 18-06-04 12:15 ™ÂÏ›‰·19
e) A new definition of to the term "significant market power" which was previously defined primarily by reference to
whether a undertaking had a market share over 25% in the relevant market, but is now based on the concept of
dominance, as defined in the case law of the Court of Justice and the Court of First Instance of the European
Communities regarding competition. More specifically, under the current EU regulations, «an undertaking shall be
deemed to have significant market power if, either individually or jointly with others, it enjoys a position equivalent
to dominance, that is to say a position of economic strength affording it the power to behave to an appreciable
extent independently of competitor and customers».
f) In the Commission's Recommendation a range of relevant markets is defined, such as retail markets and wholesale
markets. In the mobile sector the following wholesale markets are defined:
◗ Access and call origination on public mobile telephone networks
◗ Voice call termination on individual mobile networks
◗ The wholesale national market for international roaming on public mobile networks.
The European Commission set a deadline for the implementation of its regulatory framework, and all member states
were required to adopt national legislation implementing the first four Directives (Access Directive, Authorisation
Directive, Framework Directive and Universal Service Directive) by July 24, 2003 and the Data Protection Directive by
October 31, 2003. Greece has not met the deadline and has not implemented the new framework so far. Thus, the
European Commission has started infringement proceedings against Greece. The case is pending.
2.4 Share Capital
The share capital of the Company was formed as follows:
At the establishment of the Company, the initial share capital was created by depositing 1,200,000,000 (one billion
two hundred million) Greek Drachmas in cash from the founders of the Company and issuing 1,200,000 (one million
two hundred thousand) registered shares with a nominal value of one thousand (1,000) Greek Drachmas each,
according to article 31 of the initial Statutes of the Company (Official Gazette No.6719/3.10.1996 Sociétés
Anonymes and Limited Liability Companies Issue).
By resolution of the Extraordinary General Meeting of the shareholders of the Company (dated 18.12.1996) which
was published in the Official Gazette No.1095/12.03.1997 Sociétés Anonymes and Limited Liability Companies Issue,
the share capital was increased by an amount of 28,800,000,000 (twenty eight billion eight hundred million) Greek
Drachmas through the issuance of 28,800,000 (twenty eight million eight hundred thousand) nominal shares with
nominal value of one thousand (1,000) Greek Drachmas each (Official Gazette No.1095/12.3.1997 Sociétés
Anonymes and Limited Liability Companies Issue). Thus, the Company's share capital amounted to thirty billion
(30,000,000,000) Greek Drachmas and consisted of 30,000,000 registered shares, with nominal value 1,000 Greek
Drachmas per share.
| 19
010_029_COSMOTE 18-06-04 12:15 ™ÂÏ›‰·20
By resolution of the Extraordinary General Meeting of the shareholders of the Company (dated 21.3.1997), which
was published in the Official Gazette No.1765/24.04.1997 Sociétés Anonymes and Limited Liability Companies Issue,
the share capital was increased by an amount of 20,000,000,000 (twenty billion) Greek Drachmas through the
issuance of 20,000,000 (twenty million) registered shares with nominal value of one thousand (1,000) Greek
Drachmas each, in exchange for a) a contribution in kind of the license for the operation of DCS 1800 mobile
telephony network in Greece that was transferred (contributed) by the "ORGANISATION OF GREEK
TELECOMMUNICATIONS S.A." to the Company by virtue of article 15 of Law No 2465/1997 at a value of
16,346,823,305 (sixteen billion three hundred and forty six million eight hundred and twenty three thousand three
hundred and five) Greek Drachmas and b) a cash contribution of 3,653,176,695 (three billion six hundred and fifty
three million one hundred and seventy six hundred and ninety five) Greek Drachmas.
was published in the Official Gazette No.7496/09.08.2000 and 9167/05.10.2000 Sociétés Anonymes and Limited
Liability Companies Issue, it was decided that the nominal value of the shares be decreased, with a simultaneous
increase of their total number, by 6,25 times, so that the nominal value of each share became 160 GRD. By the same
resolution, the share capital of the Company was increased by an amount of two billion eight hundred million GRD
(2,800,000,000 GRD) through the issuance for cash of seventeen million five hundred thousand (17,500,000)
registered shares with a nominal value of one hundred sixty GRD (160) each. These new shares were offered through
a contemporaneous public offering and private placement at an offer price amounting to 3,200 GRD (9.39 euro)
each (excluding 387,660 shares which were offered to the employees of the Company, at an offer price of 2,560
GRD per share, i.e. a 20% discount). The balance resulting from the above par issuance of new shares was credited
to the Company’s "Reserve account above par". Thus, the Company's share capital amounted to 52,800,000,000
Greek Drachmas and consisted of 330,000,000 registered shares, with nominal value 160 Greek Drachmas per share.
By resolution of the Ordinary General Meeting of the shareholders of the Company (dated 12.06.2001), which was
published in the Official Gazette No. 5242/29.06.2001 Sociétés Anonymes and Limited Liability Companies Issue, the
share capital was increased by an amount of fifty million three hundred and twenty five thousand GRD (50,325,000
GRD) through the capitalization of reserves from the issuance of shares above par with a simultaneous increase in the
nominal value of each share from one hundred and sixty GRD (160) to one hundred and sixty GRD plus one
thousand five hundred and twenty five parts of the Drachma (160.1525). At the same time, the company also
stated its share capital and the nominal value of each share in euros. Thus , the Company's share capital amounted
to 52,850,325,000 Greek Drachmas or 155,100.00 euro and consisted of 330,000,000 registered shares, with
nominal value 160.1525 Greek Drachmas or 0.47 euro per share.
was published in the Official Gazette No. 2233/27.03.2002 Sociétés Anonymes and Limited Liability Companies Issue,
article 5 of the Articles of Association was amended, in accordance with the resolution of Board of Directors Meeting
No 115/21.12.2001 (item 3) under which, according to article 13 par. 9 of C.L. 2190/1920, the share capital was
20
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010_029_COSMOTE 18-06-04 12:15 ™ÂÏ›‰·21
increased by twenty six thousand two hundred and fifty eight euro and ninety euro cents (26,278.90 euro) through
the issuance of fifty five thousand eight hundred and seventy (55,870)1 ordinary shares of a nominal value of forty
seven euro cents (0.47 euro) each and the expression of the share capital in euro only.
By resolution No 139/14.01.2003 of the Board of Directors, the partial deposit of the Share Capital increase was
certified, i.e. the amount of thirty nine thousand one hundred and twenty seven euro and fifty eurocents (39,127.50
euro), as it was decided by the Board of Directors resolution No 138 at the Meeting of 19.12.2002 (item 7) and
pursuant to the provision of article 13a of C.L. 2190/1920. Specifically, the share capital of the Company was
increased by an amount of 39,127.50 euro through the issue of 83,250 nominal shares1 of nominal value of 0.47
euro each. One of the items on the agenda of the Annual General Meeting of the Company, which took place on
June 3, 2003, was the harmonization of article 5 of the Articles of the Association with the above resolution of BoD.
By resolution No 162/13.01.2004 of the Board of Directors, the full deposit of the Share Capital increase was
certified as it was decided by the Board of Directors resolution No 161/23.12.2003 (item 3) and pursuant to the
provision of article 13a of C.L. 2190/1920. Specifically, the share capital of the Company was increased by an amount
of 493,091.10 euro through the issuance of 1,049,130 nominal shares1 of nominal value 0.47 euro each. One of the
items on the agenda of the next Annual General Meeting of the Company, will be the harmonization of article 5 of
the Articles of the Association with the above resolution of BoD.
Following all of the above, the share capital of the Company amounts to one hundred and fifty five million six
hundred and fifty eight thousand four hundred and seventy seven euro and fifty Eurocents (155,658,477.50 euro)
and is divided into three hundred and thirty-one million one hundred and eighty eight thousand two hundred and
fifty (331,188,250) shares of a nominal value of 0.47 euro each.
1
This increase of share capital is decided by the Board of Directors following the exercise of Stock Options for the purchase
of shares by the entitled persons of the Stock Option Plan without amendment of the Articles of Association of the
Company.
| 21
010_029_COSMOTE 18-06-04 12:15 ™ÂÏ›‰·22
The table below presents, certain information regarding the evolution of the Company’s share capital:
THE COMPANY’S SHARE CAPITAL
Method of Increase
Date of
General
Meeting
Amount of
Share
Capital
Increase
Offer
Price
Paid in
Cash
Capitalisation of
reserves and
contribution in
kind
(in GRD)
Incorporation
1,200,000,000
1,000
1,200,000,000
18.12.1996
28,800,000,000
1,000
21.03.1997
20,000,000,000
1,000
31.07.2000
Total Share
Capital
Nominal
Value per
Share
Number of
Shares
(in GRD)
(in GRD)
(in GRD)
(in GRD)
0
1,200,000,000
1,000
1,200,000
28,800,000,000
-
30,000,000,000
1,000
30,000,000
3,653,176,695
16,346,823,305
STOCK SPLIT
3,200*
50,000,000,000
1,000
50,000,000
50,000,000,000
160
312,500,000
52,800,000,000
160
330,000,000
31.07.2000
2,800,000,000
12.06.2001
Increase in the nominal value of the Company’s shares together with an expression in ∂UR
12.06.2001
50,325,000
-
-
(in EURO)
21.02.2002
21.02.2002
50,325,000
(in EURO)
Expression of the Company’s share capital in EUR
26,258.90
14.01.2003
39,127.50
23.12.2003
493,091.10
8.24
8.24
8.24 & 8.96
& 9.78**
52,850,325,000 160.1525 GRD
330,000,000
(in EURO)
(in EURO)
(in EURO)
155,100,000.00
0.47
330,000,000
26,258.90
-
155,126,258.90
0.47
330,055,870
39,127.50
-
155,165,386.40
0.47
330,139,120
493,091.10
-
155,658,477.50
0.47
331,188,250
155,658,477.50
0.47
TOTAL
331,188,250
* Excluding 387,660 shares that were offered through a private placement to the employees of the Company, at an offer price of 2,560 GRD per share
(i.e.20% discount on 3,200 GRD).
** This increase of share capital was approved by the Board of Directors following the exercise of Stock Options for the purchase of shares by the entitled persons under
the Stock Option Plan. The 1,049,130 new ordinary shares were distributed as follows i) 935,720 shares at an offer price of 8.24 euro per share, ii) 23,850 shares at
an offer price of 9.78 euro per share and iii) 89,560 shares at an offer price of 8.96 euro per share.
2.5 Share Price Performance
COSMOTE’s shares started trading on the Athens and London Stock Exchanges on October 12, 2000, through a
Combined Offering (consisted of the International Offering and the Greek offering), of existing shares and shares
from the Company’s share capital increase. The Company’s shares are also trading on the London Stock Exchanges in
the form of GDSs.
The following table includes the closing price of COSMOTE's share, the ASE Telecoms Index and the Athens General
Index at the last trading day of each month from January 2003 until March 31, 2004, the total volume of shares
traded per month and the respective turnover per month.
22
|
010_029_COSMOTE 18-06-04 12:15 ™ÂÏ›‰·23
Turnover per
Total Volume
month
traded per
(euro thousand)
month
Date
31
28
31
30
30
30
31
29
30
31
28
31
30
27
31
Jan. 2003
Feb. 2003
Mar. 2003
Apr. 2003
May 2003
June 2003
July 2003
Aug. 2003
Sep. 2003
Oct. 2003
Nov. 2003
Dec. 2003
Jan. 2004
Feb. 2004
Mar. 2004
53,524
20,739
21,385
306,399
77,881
68,721
66,528
49,942
63,667
43,781
45,910
48,093
85,601
553,140
227,343
5,575,741
2,197,203
2,297,559
33,310,932
8,402,252
7,361,921
6,822,438
4,661,695
6,223,435
4,305,770
4,439,091
4,493,876
7,428,070
45,304,882
17,575,112
Closing
Price
(euro)
Closing
Price ASE
Telecoms
Index
ASE Telecoms
Index
Turnover per
month
(euro million)
Closing
Price
Athens
General
Index
9.46
9.46
8.92
9.28
9.16
9.28
10.20
10.38
9.98
9.88
10.36
10.76
11.70
13.16
12.70
835.27
777.74
710.51
788.14
752.92
817.34
877.12
858.41
813.90
816.26
846.88
874.48
955.70
999.66
943.11
409.40
332.18
338.42
586.14
337.07
487.03
428.13
348.88
369.72
247.09
592.74
675.28
782.15
899.17
546.85
1,683.59
1,614.06
1,467.30
1,691.52
1,707.54
1,892.04
2,158.64
2,210.57
2,019.76
2,121.06
2,170.05
2,263.58
2,432.58
2,451.50
2,370.65
Athens
General Index
Turnover per
month
(euro million)
1,483.81
1,194.77
1,399.52
1,992.39
2,304.18
3,991.01
4,777.59
3,706.68
3,271.31
4,071.23
3,503.25
3,240.46
4,309.98
3,456.14
3,330.32
The following graph demonstrates the share price performance (in euro) and the respective turnover (in thousands
euro) of COSMOTE’s shares from the beginning of year 2003 until March 31, 2004.
COSMOTE (ú)
Turnover (ú 000s)
40.000
14
35.000
13
30.000
12
25.000
11
20.000
10
15.000
9
10.000
31/0
3/04
29/0
2/04
31/0
1/04
31/1
2/03
30/1
1/03
31/1
0/03
30/0
9/03
31/0
8/03
31/0
7/03
30/0
6/03
31/0
5/03
30/0
4/03
31/0
3/03
7
28/0
2/03
0
31/0
1/03
8
31/1
2/02
5.000
| 23
010_029_COSMOTE 18-06-04 12:15 ™ÂÏ›‰·24
During the same period, COSMOTE’s share price performance, compared to the performance of the Athens Stock
Exchange General Index, was as follows:
Athens General
14
2.800
13
2.600
12
2.400
2.200
11
2.000
10
1.800
9
1.600
31/0
3/04
2/04
29/0
1/04
31/0
2/03
31/1
1/03
30/1
0/03
31/1
9/03
30/0
31/0
8/03
7/03
6/03
31/0
5/03
30/0
31/0
30/0
2/03
31/0
28/0
31/0
31/1
4/03
1.200
3/03
7
1/03
1.400
2/02
8
Finally, COSMOTE’s share price performance compared to the performance of the European
Wireless Index (rebased), is portrayed at the next graph:
COSMOTE
European Wireless Index
150
140
130
120
110
100
90
24
|
31/0
3/04
29/0
2/04
1/04
31/0
31/1
2/03
30/1
1/03
0/03
31/1
30/0
9/03
31/0
8/03
31/0
7/03
6/03
30/0
31/0
5/03
4/03
30/0
3/03
31/0
2/03
28/0
31/0
1/03
31/1
2/02
80
Athens General Index
COSMOTE
COSMOTE (ú)
010_029_COSMOTE 18-06-04 12:15 ™ÂÏ›‰·25
During the period from 1.1.2003 to 31.3.2004 COSMOTE's stock outperformed the ASE Telecoms and the FTSE
E300 Telecommunication Services Indices by 19.9% and 15.1% respectively. This performance ranks COSMOTE's
stock among the most stable and profitable stocks in the mobile telecommunications sector across Europe.
As of March 31, 2004 COSMOTE is included in the ASE General Index (with a weight of 6.73%), the ASE Telecoms
Index (with a weight of 41.46%) and in the FTSE/ASE 20 large cap ("blue chip") index (with a weight of 4.71%
approximately). In addition the Company is included in fifteen different sectoral and total market indices (BE500, FTSE
E300, DJ STOXX etc.). COSMOTE’s market capitalisation as of 31.3.2004 was 4,206 million euro.
2.6 Shareholders
The Company’s shareholding structure, according to the share registry as of December 31, 2003 was the following:
Shareholder
# of shares
(%)
OTE S.A.
194,623,760
58.95%
Telenor B- Invest
29,705,255
9.00%
WR Com Enterprises Ltd
23,204,370
7.03%
Free Float
82,605,735
25.02%
330,139,120
100.00%
TOTAL
As mentioned above (paragraph 2.4 of this annual report), on 12.12.2003, the Board of Directors took a decision to
increase the Company's share capital by 493,091.101 euro. As a result, COSMOTE’s paid in share capital, on
30.01.2004 amounted to 155,658,477.50 euro and consisted of 331,188,250 ordinary registered shares (with a
nominal value of 0.47 euro per share). The Company’s shareholding structure as of 30.01.2004 was the following:
Shareholder
# of shares
(%)
OTE S.A.
194,623,760
58.77%
Telenor B- Invest
29,705,255
8.97%
22,765,750
6.87%
Free Float
84,093,485
25.39%
331,188,250
100.00%
TOTAL
1
Through a cash payment and by issuing 1,049,130 new shares, due to the exercise of stock options
| 25
010_029_COSMOTE 18-06-04 12:15 ™ÂÏ›‰·26
On February 26th, 2004 Telenor B-Invest announced the sale of its 29,705,255 million shares, thus exiting from
COSMOTE's share capital. As a consequence, the Company’s shareholding structure as of 04.03.2004 was the
following:
Shareholder
# of shares
(%)
OTE S.A.
194,623,760
58.77%
22,765,750
6.87%
Free Float
113,798,740
34.36%
TOTAL
331,188,250
100.00%
In addition, the shareholder of COSMOTE, Fidelity Management & Research Company, which is an institutional
investor, informed the Company and the Athens Stock Exchange that on 27.02.2004 its stake in COSMOTE's share
capital was 5.49%1.
COSMOTE is not aware of any other shareholder, who has a direct or indirect interest in 3% or more of COSMOTE’s
paid in share capital.
As of March 31, 2004 the Company’s personnel, including directors and executive officers, held shares representing
less than 0.13% of COSMOTE’s share capital. The respective interest held by directors and executive officers
amounted to 0.08%.
Simultaneously, following the request of COSMOONE HELLAS MARKET SITE S.A. (CosmoONE), in the share capital of
which COSMOTE participates and in accordance with the provisions of the Presidential Decree 82/96 (Naming of
share of Greek Société Anonymes, which take part to the procedures of undertaking of projects or procurement of
public sector or any other legal entities of the public sector), COSMOTE went on to the procedure of naming its
shareholders, defining the name of the individuals (natural persons) as required in par. 3 of article 1 of the Presidential
Decree 82/96. Allowing for this, COSMOTE has invited its Shareholders, which are Greek Société Anonymes to
comply with the provisions of the above-mentioned Presidential Decree, simultaneously informing them that their
possible non-compliance with the relevant obligations would entail the deprivation of their participation and voting
rights to the General Meeting of the Company and any kind of their property rights as shareholders (e.g. receive
dividend).
2.6.1. √∆∂ Group (Hellenic Telecommunications Organization S.A.)
The Hellenic Telecommunications Organization S.A. (OTE), incorporated in 1949, is a full service telecommunications
group, operating as a Société Anonyme under Greek law.
The company’s shares are listed on the Athens Stock Exchange, London Stock Exchange and New York Stock
Exchange.
Under European Union and Greek law, OTE had the exclusive right until 31 December 2000 to install, operate and
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According to the Law, there is an obligation to publicly disclose all holdings exceeding 5% of share capital
010_029_COSMOTE 18-06-04 12:15 ™ÂÏ›‰·27
commercially exploit the Greek public fixed telecommunications network and to provide public switched voice
telephony services. To meet the challenges of a competitive environment and to ensure that OTE remains the leading
provider of public switched voice telephony in Greece following liberalisation of the market for these services on 1
January 2001, the company has heavily invested in enhancing the capability of its network to offer an expanding
range of products.
As the leading provider of public switched voice telephony in Greece, OTE provides local, long distance and
international communication services to Greek and foreign businesses, consumers and government agencies. In
addition, OTE offers its customers a range of technologically advanced services including mobile telephony through
COSMOTE, internet access through its subsidiary OTEnet, ISDN connections, high-speed data communications, ADSL
connections, etc., as well as traditional services, such as leased lines, maritime and satellite communications, sales of
equipment, telecards and directories. The company also undertakes the construction of telecommunication
infrastructure projects in Greece and abroad.
OTE offers a wide range of services and products covering the needs of its customers. These are offered, directly,
swiftly and easily through the company’s outlets and the Internet. OTE’s services and products are continually
enriched and upgraded, following the latest developments in the field of telecommunications worldwide, which
results in maximization of value to end users.
In March 2003, OTE concluded the acquisition of a 54.01% interest in Romtelecom through OTE International and an
internal restructuring program was launched aiming at reducing operating expenses and improving the quality of the
offered services. In June 2003, Cosmofon launched its commercial operations in the Former Yugoslav Republic of
Macedonia.
In May 2003, Hellas Sat Consortium successfully launched its own satellite into orbit which has two fixed antennae
through which it is expected to provide pan-European coverage and two flexible antennae providing coverage
outside Europe.
The joint-venture "OTE-COSMOTE-OTEnet" is the Grand Sponsor for the Telecommunications Sector of the Athens
2004 Olympic Games. The Athens Organising Committee ("ATHOC") appointed the "OTE-COSMOTE-OTEnet" joint
venture to provide ATHOC with telecommunications services relating to the Athens 2004 Olympic Games. The
sponsorship in total, amounts to 58.6 million euro split equally between cash and Value in Kind. The benefits which
are expected to accrue to the participants in the joint venture include the increased revenues which will be generated
during the Athens 2004 Olympic Games and the fact that most of the new telecommunications infrastructure which
is being installed for the Athens 2004 Olympic Games will be used after the Games to meet the increased needs of
the liberalised Greek telecommunications market, thereby contributing to the modernisation of our group of
companies.
OTE is currently among the leading group of companies in Greece and among the top ten telecommunications
companies in Europe. It has a large number of subsidiaries in Greece and abroad which are mainly active in the wider
field of communications. Apart from Greece, OTE is present in various markets in South Eastern Europe, while it has
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010_029_COSMOTE 18-06-04 12:15 ™ÂÏ›‰·28
exited from its investments in the Middle East and is currently re-evaluating its existing investment in Armenia.
OTE’s share capital amounts to 1,204,689,535.61 euro and consists of 504,054,199 registered shares with a nominal
value of 2.39 euro each. According to the company’s Shares’ Registry, OTE’s shareholders as of 31 March 2004, were
the following:
Shareholder
%
Hellenic Republic
33.761%
Hellenic Exchangeable Finance
10.649%
Hellenic Finance No S.C.A.
2.970%
DEKA S.A.
0.017%
Other (Domestic – International)
Total
52.603%
100.0%
Its Board of Directors carries out OTE's management, which determines the Company’s strategy and development
policies and monitors and supervises its property management. The Board of Directors consists of fifteen members,
appointed for a period of five years. The Board of Directors up to 19.4.2004 consisted of the following members:
Name
Antonacopoulos Eleftherios
Skarpelis Georgios
Aggelou Lazaros
Argyropoulos Georgios
Veniamis Theodoros
Floudas Spyridon
Georganas Iakovos
Georgantopoulos Michalis
Mandila Lana
Panas Stavros
Papakonstantinou Georgios
Sachalos Ioannis
Spanos Christos
Tamvakakis Apostolos
Tamvakakis Phaedon – Theodoros
Position
Chairman, Managing Director
Vice Chairman
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
OTE's Board of Directors by its resolution dated 19.04.2004 appointed Mr. Panagis Vourloumis as its new member, in
replacement of Mr. Spyridon Floudas, who resigned. In the next Board of Directors meeting on 5.5.2004, Mr. Panagis
Vourloumis was appointed as the new Chairman and CEO of OTE. OTE's Board of Directors on 12.5.2004 appointed
Mr. Iakovos Georganas, a member of the Board, as Executive Vice-President in replacement of Mr. George Skarpelis.
The Board also approved the appointment of Mr. Nicholas Stefanou as its new member, in replacement of Mr.
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George Skarpelis, who tendered his resignation.
As a consequence, OTE's Board of Directors as of 12.5.2004 consisted of the following members:
Name
Vourloumis Panagis
Georganas Iakovos
Aggelou Lazaros
Antonacopoulos Eleftherios
Argyropoulos Georgios
Georgantopoulos Michalis
Mandila Lana
Panas Stavros
Papakonstantinou Georgios
Sachalos Ioannis
Spanos Christos
Stefanou Nicholas
Tamvakakis Apostolos
Tamvakakis Phaedon – Theodoros
Veniamis Theodoros
Position
Chairman, Managing Director
Vice Chairman
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
2.6.2 TELENOR B-INVEST AS
Until 26.02.2004, the second largest shareholder of the Company was the holding company TELENOR B-INVEST AS,
having its registered office in Oslo, Norway, which, based on its strategic decision to withdraw from companies in
which it does not own a controlling percentage, gradually sold the total amount of its participation to the share
capital of COSMOTE (29.705.255 shares on 30.04.2003 and some further shares 29.705.255 on 26.02.2004).
TELENOR B-INVEST AS is a holding company, having its registered office in Oslo, Norway and subsidiary of the
Norwegian TELENOR Group of companies. The objective of the company according to its article of association is the
development and investments in telecommunications practices through direct or indirect participation in worldwide
telecommunication companies.
Companies with activities in all fields of mobile activities, telecommunications as well as research and development of
new telecommunications networks and practices, conveyance of electronic data, cable TV and other
telecommunication products are included in the Norwegian TELENOR Group of companies.
In the mobile phone sector, the TELENOR Group of companies, through its subsidiaries, excluding Norway has
presence in 9 countries with the mobile phone sector contributing a percentage of over 25% of the total profit of
the Group. In Norway TELENOR holds a leading position in this sector with a share of 57% (at the end of 2003) with
34.8 million subscribers at the end of 2003, compared to the end of 2002 when it had 26 million subscribers.
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030_043_COSMOTE 18-06-04 12:17 ™ÂÏ›‰·30
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030_043_COSMOTE 18-06-04 12:17 ™ÂÏ›‰·31
CHAPTER 3
Management - Corporate Governance
3.1 Organisation Chart
3.2 Board of Directors
3.3 Management
3.4 Communication with Shareholders Investor Relations
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030_043_COSMOTE 18-06-04 12:17 ™ÂÏ›‰·32
Management - Corporate Governance
The Company places great emphasis on proper Corporate Governance and has established a set of internal
regulations, principles and monitoring and control mechanisms in order to ensure that the Company is managed in
accordance with the interests of its Stakeholders, that is all those who have a legitimate interest in the activities of
the Company. Through the application of these corporate governance principles, the Company aims to build trust
between shareholders and management and to divide powers and responsibilities between shareholders and
management as effectively as possible.
Finally, in compliance with the decisions of the Hellenic Capital Market Commission and the Law on Corporate
Governance (3016/2002), in October 2003 the Company prepared and adopted the Internal Regulation Manual of
the Company.
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MANAGEMENT - CORPORATE GOVERNANCE
3.1 Organisation Chart
AUDIT COMMITTEE
(consists of 3 members of BoD)
BOARD OF DIRECTORS
REMUNERATION COMMITTEE
(consists of 3 members of BoD)
INTERNAL AUDIT
DEPARTMENT
MANAGING DIRECTOR
∂XECUTIVE COMMITTEE
(MANAGING DIRECTOR, GENERAL MANAGERS,
LEGAL COUNSEL
COMPETION, LEGAL &
REGULATORY AFFAIRS DIVISION
LEGAL COUNSEL)
EXTENDED EXECUTIVE COMMITTEE
(consists of Executive Committee of Greece, Chief Commercial Officer,
Chief Technical Officer & Managing Directors AMC, GLOBUL, COSMOFON)
TECHNICAL DIVISION
FINANCIAL DIVISION
COMMERCIAL DIVISION
PRODUCTS SERVISE &
MARKETING DIVISION
NETWORK OPERATION
DEPARTMENT
ACCOUNTING DEPARTMENT
SALES NETWORK
DEPARTMENT
MARKETING DEPARTMENT
SWITCHING & NETWORK
MANAGEMENT
DEPARTMENT
TREASURY DEPARTMENT
CORPORATE SALES
DEPARTMENT
PRODUCTS & SERVICES
DEPARTMENT
CONSTRUCTIONS
DEPARTMENT
FINANCIAL PLANNING
DEPARTMENT
CUSTOMER SERVICE
DEPARTMENT
OLYMPIC GAMES
‘ATHENS 2004’
SPONSORSHIP DEPARTMENT
RADIONETWORKS
DEPARTMENT
INVESTOR RELATIONS
DEPARTMENT
NETWORK MAINTENANCE
DEPARTMENT
HUMAN RESOURCES,
ORGANISATION & QUALITY
DEPARTMENT
QUALITY
DEPARTMENT
MEDIA RELATIONS
DEPARTMENT
CORPORATE
ANNOUNCEMENTS
SHAREHOLDERS
SERVICES
IT DEPARTMENT
CONTRACTS, PURCHASING
& PROJECT MANAGEMENT
DEPARTMENT
INTERNATIONAL
OPERATIONS PURCHASING
DEPARTMENT
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030_043_COSMOTE 18-06-04 12:17 ™ÂÏ›‰·34
3.2 Board of Directors
The Company’s Board of Directors comprises nine (9) members who serve three-year terms, each term is
automatically extended until the first Ordinary General Meeting, after its expiry, which decides on the election of the
new members of the Board of Directors.
As a company listed on the Stock Exchange, COSMOTE is governed by the Greek law 3016/2002 concerning
Corporate Governance, as amended by law 3091/2002, according to which the Board of Directors comprises
executive and non-executive members. The number of executive members of the Board of Directors should not be
less than 1/3 of the total number of members. In addition, at least two of the non-executive members must be
independent, according to Greek Corporate Governance Law.
Based on the above, by its resolution dated 14.05.2004 the Board of Directors was formed into a body as follows:
Panagis Vourloumis, Chairman, Chairman and Managing Director of OTE since May 2003
Arve Johansen, Vice Chairman, Senior Executive Vice President of Telenor since 1999
Evangelos Martigopoulos, Managing Director, Managing Director of COSMOTE since June 2000
Yorgos Ioannidis, Director, Managing Director of OTENet since June 2000
Yiannis Sarantitis1, Director, lawyer
George Skarpelis, Director
Christos Economou, Director, Secretary of International Relations of OME-OTE (the OTE trade union) and a Member
of the Steering Committee for Social Affairs of the European Commission
Konstantinos Apostolides, Director, Independent, Vice Chairman of Chipita International
Georgios Papavasilopoulos, Director, Independent, Professor at the Athens University
Details of the current members of the Company’s Board of Directors are set out below:
Panagis Vourloumis
Mr. Vourloumis was born in 1937 and is a graduate of the London School of Economics. He headed the South-East
Asia division of the IFC (International Finance Corporation) from 1966 to 1973, was head of the Commercial Bank of
Greece Group from 1979 to 1981, and was Chairman and CEO of ALPHA Finance, ALPHA Mutual Funds and ALPHA
BANK ROMANIA, while at the same time serving as Executive Director of ALPHA BANK, from 1988 to 2000. Since
2000, Mr. Vourloumis has been Chairman of FRIGOGLASS and the AEGEAN BALTIC BANK.
Arve Johansen
Arve Johansen has been Senior Executive Vice President of Telenor since 1999 and Chief Executive Officer of Telenor
Mobile Communications since 2000. Mr. Johansen joined the Telenor Group in 1989 and has held a number of
positions, including Managing Director and Chief Executive Officer of Telenor International. Prior to joining the
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Mr. Ioannis Sarantitis is son of Mr. Vassilios Sarantitis, that holds an indirect shareholding interest in COSMOTE
(through WR Com Enterprises Ltd)
030_043_COSMOTE 18-06-04 12:17 ™ÂÏ›‰·35
Telenor Group, Mr. Johansen was employed by EB Telecom (currently Ericsson Norway) as a divisional manager and by
the Norwegian Institute of Technology as a research engineer. Mr. Johansen received a Master of Science in electrical
engineering (telecommunications) from The Norwegian Institute of Technology and has participated in the
Program for Management Development at the Harvard Business School.
Mr. Martigopoulos has been the Managing Director of COSMOTE since June 2000. Between March 1998 and
February 2000, Mr. Martigopoulos was Sales and Marketing Director of COSMOTE. In February 2000, he assumed
the functions of General Commercial Manager of COSMOTE. Prior to that, he was Sales Manager at Databank,
syNET and NCR Hellas, as well as Sales Account Manager at Digital. He has also worked as a Systems and
Communications Analyst at Bull. Mr. Martigopoulos holds a M.Sc. in Power Electronics from Brunel University,
England and a B.Sc. in Electronics from the University of London, England.
Yorgos Ioannidis
Mr. Ioannidis is head of the IP Business Unit of Group OTE since July 2002. On June, 2000 he was assigned to be the
Managing Director of OTEnet. Previous to that he was the Engineering Director of COSMOTE, and from January to
June 2000 he was the General Technical Manager of COSMOTE. Before joining COSMOTE and since January 1993 he
worked at Panafon S.A, as the Engineering Switching and Software Manager. From 1975 until 1992 he was working
as a Telecommunications Engineer at OTE at various posts in the Maintenance, Planning and Telematics Departments.
From 1988 until December 1992, he also worked as Private Consultant providing training and consultancy services to
different companies and institutions in the fields of business voice and data communications. Mr. Ioannidis obtained a
B.Sc. as an Electrical Engineer from the Bosphorus University, Istanbul, Turkey as well as a M.Sc. from Lowell
Technological Institute, Lowell, Mass. U.S.A.
George Skarpelis
Mr. Skarpelis has been employed by OTE since 1968. Since November 2000 he is the Executive Vice Chairman of OTE
and the Chairman of OTE-INTERNATIONAL-INVESTMENTS. Since 2000, he has been also Chairman of Romtelecom
and Chairman of the Board of Directors of OTEnet. Since April 1998 Mr. Skarpelis has been Deputy Managing
Director of OTE and since December 1998 has been member of the Board of Directors of OTE. Also, from December
1998 until January 1999 he was Acting Managing Director of OTE. In addition, he was a member of the OTE's Board
of Directors during the periods 1985-1988 and 1992-1993. During the period 1995-1998 he was General Manager
of Telecommunications Systems and during 1993-1994 was consultant to the General Manager for Investments and
International Relations. At the same time, he was Chairman and CEO of Helltelca from 1988 until 1999 and he has
served on the Board of Directors for various other companies such as D.E.P.A (National Gas Company) from 19931997, HELLASCOM INTERNATIONAL S.A from 1995 till May 2000, COSMOTE. Mr. Skarpelis is an engineer graduate
of the National Technical University of Athens.
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030_043_COSMOTE 18-06-04 12:17 ™ÂÏ›‰·36
Yiannis Sarantitis
Mr. Sarantitis is a lawyer. He has been a member of Sarantitis & Partners law firm since 1994. His field of expertise is
Commercial & Corporate, as well as Stock Exchange Law. Mr. Sarantitis holds a law degree from the University of
Athens and an LL.B. from Buckingham University, England.
Constantine Apostolides
Mr. Apostolides is the Vice Chairman of Chipita International S.A. since 1993. Between 1990 and 1993, he was
Managing Director of Eurohellenic Investment Company, a private equity firm. From 1978 to 1990 he was employed
by Olayan Group in Athens. The Olayan Group is a Saudi-Arabia-based private, international, industrial and
investment Group. In 1975 he joined Credit Suisse First Boston in London where he was principally involved in
corporate finance. Mr. Apostolides holds a bachelor’s degree in Chemistry from the University of Surrey and an M.Sc.
in Business Studies from the University of London.
George Papavassilopoulos
Mr. Papavassilopoulos joined the Department of Electrical Engineering-Systems of the University of Southern
California as an Assistant Professor in 1979 and was later promoted to Associate and Full Professor with tenure. In
2000 he joined the Department of Electrical and Computer Engineering of the National Technical University of
Athens as Full Professor. His main research interests are in Game Theory, Control and Optimization Algorithms. He is
also interested in applications in Networks, Energy Policy, Economics and Bioengineering. In the broad areas of
control and optimization, he has dealt with a broad diversity of theoretical and applied problems dealing with game
theory, optimization algorithms, parallel and distributed computing, and nonlinear control. Mr. Papavassilopoulos
received the Diploma in Mechanical and Electrical Engineering from the National Technical University of Athens and
the M.Sc. and Ph.D. degrees in Electrical Engineering from the University of Illinois at Urbana Champaign.
The current term of each member of the Board of Directors ends on 8 June, 2006.
The Managing Director represents the Company before the Courts, as well as any other judicial and public authority,
and is authorized to bind the Company and execute on behalf of the Company contracts of any kind up to
2,100,000 euro.
The total aggregate remuneration paid to the members of the Board of Directors in 2003 was 86,800 euro. The only
Board Member who is paid a monthly salary is the Managing Director, Mr. Evangelos Martigopoulos, whose
payments and other benefits received in 2003 amounted to 457,500 euro including his performance bonus. The
General Meeting of Shareholders has approved the Managing Director's remuneration package.
The total aggregate remuneration paid to the members of Board of Directors for their duties performed for or on
behalf of affiliates of COSMOTE for the year ended December 31, 2003 was approximately 4,200 euro.
None of the members of the Board of Directors of the Company has ever been charged with immoral deeds or
financial crimes or been involved in legal proceedings which concern bankruptcy, criminal offences or restrictions on
their professional, commercial or entrepreneurial activities, stock exchange transactions, including acting as a financial
advisor, a director of a bank or insurance companies or a stock exchange executive.
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None of the members of the Board of Directors are related by blood or marriage. All the members of the Board of
Directors, except Johansen Arve, and all executive officers are of Greek nationality. The postal address of the Board of
Directors is the principal offices of the Company: 44 Kiffisias Avenue, 151 25 Marousi, Athens.
3.2.1. Remuneration Committee
The Board of Directors has established the Remuneration Committee and Nomination Committee composed by three
non-executive members of the Board. This Committee also includes the Managing Director and the head of the
Human Resources, Organisation and Quality Department, neither whom has voting rights. The objective of the
Committee is to prepare and submit to the Board of Directors recommendations regarding the remuneration policy
of the Company, as well as the approval of the nomination of the General Managers following a proposal of the
Managing Director.
3.2.2. Audit Committee
In April 2002, by decision of the Company’s Board of Directors, an Audit Committee was formed to assist the Board
of Directors in the performance of its duties regarding matters of internal audit and to ensure transparency in
corporate activities.
The Audit Committee consists of three non-executive members of the Board of Directors who possess the necessary
knowledge and experience and are appointed by the Board of Directors, while the Managing Director, the Internal
Audit Director and the Legal Counsel attend the meetings without voting rights. Other executive officers may attend
at the Committee’s request.
The Audit Committee’s main responsibilities are:
◗ To assess the adequacy and effectiveness of the internal control systems of the Company and the monitoring of the
Internal Audit Division’s work, Emphasing matters of independence, the quality and scope of audits and generally
the effectiveness of its work.
◗ To advise on the selection of the external auditors.
◗ To assure the Board that the Company is in compliance with the regulatory framework.
◗ To carry out an independent review of the annual and semi-annual financial statements and other significant
financial information to be disclosed or submitted to authorities.
◗ To facilitate communication between the Board, Management, the Internal Audit Division and the external auditors
of the Company.
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030_043_COSMOTE 18-06-04 12:17 ™ÂÏ›‰·38
3.2.3. Internal Audit Department
The Internal Audit Division’s object is the assessment of the adequacy and the effectiveness of the internal control
systems of the Company, as well as the monitoring of the Company's compliance with the internal procedures and
obligations arising from the existing legal and regulatory framework.
The Internal Audit Division’s main responsibilities are:
◗ To monitor the application and continual compliance with the Internal Regulation Manual and Articles of
Association of the Company, as well as the Greek Companies Law and the applicable Stock Exchange regulations.
◗ To confirm the Company's compliance with the obligations under Decision 5/204/14.11.2000 of the BoD of the
Hellenic Capital Market Commission and Law 3016/2002.
◗ To conduct regular and exceptional controls aiming at the administration and prevention of dangers related to the
activities of the Company.
◗ To audit and co-ordinate activities related to the security of data and the Company's network, as well as the taking
of precautions to prevent fraud and deception.
◗ To assess the adequacy of the internal control systems of the Company.
◗ The preparation and submission of written reports to Management regarding:
- The Company's compliance with the various procedures applicable to its units and activities,
- The adequacy of existing internal control procedures,
- The Company's compliance with the provisions of applicable laws and regulations,
- The level of implementation of the guidelines of Management.
- To assess the internal control systems of affiliated companies and the monitoring of the relevant internal control
services.
◗ To provide detailed information to the Audit Committee and the Board of Directors periodically and at least once
every three months concerning (a) the completion of the internal audit on a quarterly basis (b) the on-going
progress of the internal audit work (c) proposals, and the exent of their implementation, which aim to improve the
audited sectors of the Company and (e) possible conflicts of interests of the members of the Board of Directors or
the directors of the Company revealed during the audit work
◗ To cooperate with the Internal Audit Division of the OTE Group.
◗ All other responsibilities provided by law.
The Director of the Internal Audit Department is Mr. Spyridon Mavrogalos.
Details of Mr Mavrogalos are set out below:
Spyridon Mavrogalos - Internal Audit Director
Mr. Mavrogalos, joined COSMOTE as Director of Internal Audit in April 2002. He is a Certified Chartered Accountant.
Prior to joining COSMOTE, he worked for six years at EFG Eurobank Ergasias in a number of positions, including head
of Integration Office, Head of Market & Operational Risk Management and Audit Manager. He has also worked as an
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030_043_COSMOTE 18-06-04 12:17 ™ÂÏ›‰·39
Auditor at ABN AMRO Bank and KPMG. Mr. Mavrogalos holds an MBA in Financial Studies from Nottingham
University of England and a B.Sc. in Business Administration in Computer Information Systems from Deree College.
3.3 Management
3.3.1. Executive Committee
Following a decision of the Managing Director of the Company, an Executive Committee was established. This
Committee supports the Managing Director and is responsible for preparing proposals, taking decisions and ensuring
their effective implementation, with the objective of delivering the Company’s business plans and goals. The
Committee consists of the Heads of the General Departments and of the Legal Department of the Company.
Details for the members of the Executive Committee are set out below:
Evangelos Martigopoulos, Managing Director (see above-unit 3.2)
Elias Fotiadis, Chief Financial Officer
Mr. Fotiadis is the Chief Financial Officer of COSMOTE since it commenced commercial operations. Prior to his current
position he was Chief Financial Officer and Member of the Board of KINO S.A., and, prior to that, Chief Financial
Officer at J.N.Leoussis S.A., a conglomerate of advertising and marketing companies, a Financial Consultant and an
Auditor/Consultant with Price Waterhouse. Mr. Fotiadis has a B.A. in Economics and Government from Essex
University, England and has a Post-graduate Diploma in Economics from the University of Surrey, England.
Ioannis Kyriakakis, General Technical Director
Mr. Kyriakakis is the General Technical Director of COSMOTE since January 2003. He started his career in OTE in 1973
and in 1996 he joined COSMOTE, where in 2000 was appointed Switching and Network Management Director. In
November 2001 he became General Technical Director of ROMTELECOM and retained this position till December
2002. Mr. Kyriakakis holds a B.Sc. in Physics from University of Thessaloniki, Greece and a M.Sc. in Electronic Physics
from the Postgraduate Department of the University of Thessaloniki.
Konstantinos Liamidis, General Commercial Director
Mr. Liamidis joined COSMOTE as Deputy Commercial Director at the time of its incorporation in October 1996. In the
beginning of 2000 he was appointed Retail Network Sales Director. As of May 2003 Mr. Liamidis became General
Commercial Director. Prior to joining COSMOTE, he started his career in OTE and later on became an executive in the
Commercial Department of the Organisation. He holds a B.Sc. in Physics and Mathematics from the University of
Ioannina, Greece.
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030_043_COSMOTE 18-06-04 12:18 ™ÂÏ›‰·40
Damian Charalambidis, General Products, Services & Marketing Director
Mr. Charalambidis joined COSMOTE as Product and Services Director in February 1998. In the middle of year 2002 he
became Products, Services & Marketing Director. In May 2003 he was appointed General Products, Services &
Marketing Director. His carrier started in 1991 as a Development Engineer in the Research and Development Division
of INTRACOM (Telecommunication & Informatics Industry) and continued as a Product Manager in the Marketing
Division of the same company. Since 1994, he has participated in many seminars in the field of telecommunications
and mobile telephony, as a speaker. He holds a B.Sc. in Electrical Electronic Engineering from the Technical University
of Liverpool and a M.Sc. in Digital Electronics and Microprocessors from the University of UMIST in Great Britain.
Irini Nikolaidi, Legal Counsel, Competition and Legal Affairs Director
Ms. Nikolaidi, joined COSMOTE as its Legal Counsel at the time of its incorporation in October 1996. Before that she
had served at OTE and private law firms as an expert in telecommunications and company law, with a focus on
mobile telephony projects. Ms. Nikolaidi obtained a law degree from the University of Athens, Greece as well as a
Master Degree (LL.M.) in International Business Law from the University of London (UCL), England, where she
specialised, among other subjects, in International Finance and International Trade Law.
The total aggregate remuneration paid to the above-mentioned officers of the Company (other than the Managing
Director, whose remuneration is described in ¨ 3.2 of this Annual Report) for their duties for the year 2003 was
938,200 euro. Such remuneration includes provision for annual performance bonuses of up to 3 monthly salaries, as
approved by a General Meeting of Shareholders.
None of the members of the Board of Directors of the Company has ever been charged with immoral deeds or
financial crimes or been involved in legal proceedings which concern bankruptcy, criminal offence or restrictions on
their professional, commercial or entrepreneurial activities, stock exchange transactions, including acting as a financial
advisor, a director of a bank or insurance companies or a stock exchange executive.
None of the members of the Board of Directors are related by blood or marriage. All the members of the Board of
Directors, except Johansen Arve, and all executive officers are of Greek nationality. The postal address of the Board of
Directors is the principal offices of the Company: 44 Kiffisias Avenue, 151 25 Marousi, Athens.
3.3.2. Extended Executive Committee
Pursuant to a decision of the Managing Director, the Extended Executive Committee was established, which is
charged with oversight of the Albanian subsidiary of the Company "AMC" and the mobile telephony companies
abroad ("Globul" and "COSMOFON") whose management has been assigned to COSMOTE through management
contacts with OTE and OTE INTERNATIONAL.
The Extended Executive Committee consists of the members of the Executive Committee of the Company, the
Managing Directors of "AMC", "Globul" and "COSMOFON", Mr. Stefanos Oktapodas, Mr. Nikolaos Tsolas (who
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030_043_COSMOTE 18-06-04 12:18 ™ÂÏ›‰·41
participates in the committee as well as acting as Chief Technical Officer of the COSMOTE) and Mr. Nikolaos
Avgerinos, respectively, and the Chief Commercial Officer of the Company, Mr. Megaklis Stoukidis.
Details for the members of the Extended Executive Committee are set out below:
Nikolaos Tsolas, Chief Technology Officer Globul’s CEO
Mr. Tsolas was appointed Chief Executive Officer of the Bulgarian mobile operation, GloBul in December 2002. At the
same time he is the Chief Technology Officer of COSMOTE group. His main responsibilities cover the co-ordination of
technical issues in the foreign markets that COSMOTE is activated. In June 2000 he became General Manager of
Network and Services at COSMOTE. Prior to joining COSMOTE, he was Executive Director of Network Development
and Operations at STET Hellas. Mr. Tsolas has also served as Director of Communications at Commercial Capital,
Director of Services and Product Development at STET Hellas, Systems Engineer at Siemens AG, Munich, Germany
and Member of Technical Staff in the New Services Division at AT&T Bell Laboratories, New Jersey, USA. Mr. Tsolas
holds a B.Sc. in Mathematics from the University of Ioannina, Greece, an M.Sc. in Mathematics from the State
University of New York, Oswego, NY, USA, and an M.Sc. and a Ph.D. in Electrical Engineering and Computer Science
from the University of California at Berkeley, USA.
Stefanos Oktapodas, AMC’ s Managing Director
Mr. Oktapodas has been the Managing Director of AMC since August 2002. Between September 2000 and August
2002, Mr. Oktapodas was General Manager of AMC. In July 1999 he held the position of Financial Services Deputy
Director of COSMOTE. Prior to joining COSMOTE, he was Financial Manager of TVX Hellas, as well as Managing
Director of Hickson Hellas. He has also worked as Accounting Manager at NN and ABN in Holland. Mr. Oktapodas
holds a B.Sc. from ASOEE and continued his financial studies in Holland.
Nikolaos Avgerinos, COSMOFON’ s Managing Director
Mr. Avgerinos has been the Managing Director of COSMOFON since February 2003. Between March 2001 and
February 2003, Mr. Avgerinos was Managing Director of GLOBUL. Prior to that, he was Operations Director of
Panafon. At the same time, he was appointed as Operations Director during the establishment of Vodafone in Egypt
for almost two years. Mr. Avgerinos holds a Ph.D. in Electrical Engineering from the University of Sallford, UK.
Megaklis Stoukidis, Chief Commercial Officer
Mr. Stoukidis has been Chief Commercial Officer of COSMOTE group since May 2003. His main responsibilities cover
the co-ordination of commercial issues in the foreign markets that COSMOTE is activated. In August 2000 he became
General Commercial Manager of COSMOTE. Prior to joining COSMOTE, Mr. Stoukidis was the Director for
Communications Devices Division for Greece and the Balkans at Siemens AG. He has also served as Marketing
Accounts Manager at Panafon, Marketing Manager for the General Business Unit at IBM Hellas and Staff Engineer at
Foster-Miller Inc. Mr. Stoukidis holds a B.Sc. in Electrical-Mechanical Engineering from the National Technical
University of Athens, Greece and a M.Sc. in Engineering Management from Northeastern University of Boston,
United States.
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3.4 Communication with Shareholders - Investor Relations
The mission of the Investor Relations department is to effectively manage the demand for the Company's stock in
order to maximize its performance. To deliver this mission COSMOTE's Investor Relations department (IR) activities
focus on establishing, maintaining and fostering strong relationships between the Company and the investor
community, through the effective co-ordination of the interface between COSMOTE, its external associates and the
market. This basically includes:
◗ Monitoring of current and potential retail & institutional investor base
◗ Coordination of the interface between the company, its external associates and the market (Capital Markets &
Exchange committees, Analysts, Institutional & Retail Investors, the Financial media &Press, etc)
◗ Benchmarking / review of telecom trends (across Europe and globally)
◗ Report creation / comparisons with peer groups and
◗ Stock performance monitoring.
Furthermore the Investor Relations department is responsible to provide management with a comprehensive picture
of the developments in the international and local capital markets and is also accountable to identify trends in the
international investment community, in order to enable the most effective marketing of COSMOTE’s shares.
Since the Company’s shares are trading on both the Athens and London Stock Exchanges, COSMOTE's Investor
Relations’ tasks are targeted towards ensuring the equal treatment of all shareholders through the provision of
equivalent information, simultaneously, to both markets.
The Investor Relations tasks also include the equal servicing of all shareholders (retail & institutional, local &
international) so that they may all exercise their rights according to the Company's Articles of Association and the
Law. Among other things, Investor Relations inform shareholders of meetings, which they are entitled to attend,
distribute circulars, and publish notices with information on the payment of dividends and the issuance of new
shares. The Investor Relations department is comprised of two units:
◗ Share Registry & Retail Investors Servicing (1 coordinator, 1 assistant)
◗ Corporate Disclosure & Analysis, staffed by 2 senior analysts.
The department is headed by Mrs. Myrella Ioannidou, COSMOTE's Investor Relations Director. Mrs. Ioannidou, has
been Investor Relations Officer of COSMOTE since August 2000. Prior to joining COSMOTE, Mrs. Ioannidou worked
in a similar position at VODAFONE (Panafon). She has also worked as a Business Analyst at OTE responsible for the
company’s international offerings, Alpha Bank and Ernst & Young. Mrs. Ioannidou holds a B.A. in Business
Administration, Systems Analysis and Operational Research from the University of Athens, Greece and a M.Sc. in
Information Systems and Telecommunications from the London School of Economics, England.
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CHAPTER 4
Business of COSMOTE
4.1
Services and Products
4.2
International Roaming
4.3
Customers
4.4
Churn
4.5
Distribution Network
4.6
Corporate Communication
4.7
Telecommunications Network
4.8
Commercial Agreements
4.9
Property
4.10
Employees
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Business of COSMOTE
4.1 Services and Products
The Company's principal business is the provision of a complete range of mobile telecommunications services
including contract and pre-paid services, international dialing and roaming, value added services, including voicemail
("VMS"), short message services ("SMS"), multimedia messaging service ("MMS")call diversion, caller identification
("CLI"), as well as a variety of advanced value added services using WAP, SIM microbrowser, Voice Recognition and
GPRS technologies. In April 2003 the Company first launched video MMS services, thus enhancing its MMS offering
(launched in September 2002)and in June 2003 the Company expanded its very successful MyCosmos services
portfolio by introducing its new and innovative service, MYCOSMOSview that includes a structured service menu
with simple functionality, combining exciting color graphics and allowing easy and immediate access with the touch
of just one key. Since November 2003 COSMOTE has formed an exclusive strategic partnership agreement with NTT
DoCoMo, under which COSMOTE was licensed to launch i-mode®, the world’s most popular mobile service, in
Greece1. The service launch is targeted to precede the Athens 2004 Olympic Games, for which COSMOTE is a Grand
National Sponsor.
As of December 2003, COSMOTE’s network covered over 99.6% of the population of Greece, 93.6% of its mainland
and islands and approximately 96.7% of its territorial waters.
4.1.1 Contract Services
During 2003 COSMOTE has sustained its position as the leading provider of mobile telecommunications services to
contract subscribers in Greece with a total of 1,595,852 contract subscribers as of December 31, 20032. The
Company offers its contract subscribers standard GSM services and a selection of value added services (e.g. VMS, CLI,
SMS, MMS) at no additional monthly access fee. The Company (until November 2002) offered its services to contract
subscribers on the basis of two programs, the first with a minimum contract duration of twelve months and a
monthly access fee of 10.27 euro, and the second with no limitation on contract duration and a monthly access fee
of 7.33 euro. Both tariff plans have the same airtime traffic charges for outgoing calls based on seconds of use, plus
roaming charges when customers use the service outside Greece. In November 2002, COSMOTE enriched its contract
tariff plans by launching a wide range of bundled contract packages in order to meet the needs of all its customers
that include cheaper airtime for all calls regardless of terminating network, that is paid in advance within the
respective monthly access fee (bundled minutes).
1
COSMOTE will offer its i-mode service over its 2.5G GPRS network and 3G UMTS network, with DoCoMo providing its
know-how, technology and patents. In addition, COSMOTE and DoCoMo will cooperate on the introduction of i-mode
services in other markets where COSMOTE either maintains subsidiaries (AMC in Albania) or manages operations (Globul in
Bulgaria, and COSMOFON in Macedonia).
2
Based on publicly available figures released by TIM (STET) Hellas and Q-Telecom and analysts forecasts regarding
VODAFONE (Greece), as this data has not been published.
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BUSINESS OF COSMOTE
COSMOTE's basic tariff structure does not distinguish between peak and off-peak calls, nor does it distinguish
between local and long distance calls within Greece. International calls made by COSMOTE customers are charged at
the applicable OTE rate plus the applicable COSMOTE per second airtime charge provided for in the relevant
package.
Consistent with its policy "the more you talk, the less you pay", COSMOTE introduced lower ‘on-net’ calls a for all
COSMOTE originating calls that terminate within the OTE group or to other fixed line operators. The new concept
behind the Company’s tariff plans (‘on-net’ and ‘off-net’ call distinction) is to offer even more affordable services,
thus further increasing usage, and profitability and encouraging customer loyalty.
Corporate Services
The Company, as part of its strategy of increasing revenues from, and numbers of, corporate subscribers established
programs with special reduced tariffs and special features applicable exclusively to corporate subscribers. As corporate
customers are regarded the business and companies that are subscribed to the COSMOTE BUSINESS Corporate
Programmes and Services. The basic characteristics of these tariffs are:
◗ A minimum of 3 subscriptions per corporate customer (according to a new plan activated since May 2003);
◗ A low monthly access fee per subscription; simple and easy to understand tariffs;
◗ Bundled minutes for all national calls included with the introduction of the new Bundled COSMOTE BUSINESS
VALUE 240 package, offered in May 2003;
◗ Bundled minutes for all inter-company calls, included in the new Bundled COSMOTE BUSINESS 45, 90, 120, offered
in October 2003.
◗ Handset subsidy depending on number of subscriptions; and
◗ Handset renewal subsidy program, offered after 12 months, depending on usage.
Value Added Services to Corporate Subscribers
In addition the Company, as part of its strategy to increase revenues from corporate customers, offers a number of
value-added services, tailored to the corporate sector. COSMOTE believes that there is significant opportunity for
growth in the corporate sector of the market and intends to continue to focus on such customers. The services that
are offered to the corporate customers are:
Virtual Private Network (offered since April 2000): VPNs allow companies to define a private numbering plan
(closed user group) for users within an organisation. Short dialing, call barring and favorable pricing are provided for
users within the VPN group.
Wireless Office (offered exclusively by COSMOTE since April 2000): The wireless office service is basically a mini GSM
system within the customer’s premises, installed by the Company. For an additional monthly fee, wireless office
provides enhanced coverage within the subscriber’s office or plant and calls to and from a handset can be routed
through the company’s network as if the call were being made from or received on a desk telephone, with no extra
charge. This service plays a key role in enhancing corporate clients’ loyalty.
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LMDS: COSMOTE acquired a Fixed Wireless Access Special License (LMDS) in 2002 and has installed and operates an
autonomous fixed wireless access network (for both business and own purposes). By commercially exploiting its
LMDS network, COSMOTE provides an integrated service portfolio to its corporate customers. The first services
offered through LMDS are Direct Access and Leased Lines, which not only provide COSMOTE with additional
revenues but also reinforce corporate customer loyalty. In addition, the Company aims to further exploit the LMDS
network by connecting GSM and UMTS base stations, in high-density areas. COSMOTE has already installed base
stations (LMDS hubs) in Athens, while in Thessaloniki the installation of base stations is in its final phase thus
achieving geographical coverage of the two largest cities in Greece. In COSMOTE’s immediate plans, is the extension
of coverage to other major cities of the country.
Leased Lines: The service provides connectivity to corporate customers for voice, data or fax calls through a private
telecommunication network provided by COSMOTE. The "Leased Lines" service is offered for a fixed monthly fee
independently of the number and the duration of the calls.
Office on the Move: The range of services offered through Office on the Move has been designed for companies
that wish to provide their executives with the flexibility to work efficiently even when being away from their office.
The services included are:
◗ COSMOTE GPRS Internet provides an easy, fast and reliable Internet connection via mobile phone, laptop and PDA.
◗ COSMOTE GPRS Intranet provides an easy, fast and reliable corporate Intranet connection for access to all major
corporate software and databases
◗ COSMOTE Data & Fax enables dependable data and fax transmissions via mobile phone, laptop and PDA.
◗ MOBILE Fax Mail allows the storage of fax messages on the mobile phone voice mail.
◗ MYCOSMOS E-Mail that offers a personal mailbox for sending and receiving e-mails through mobile phone and
Internet.
Fleet Management: This service which is being offered since the beginning of 2003 in co-operation with SPACENET,
is targeted to organisations and companies that own a fleet of vehicles and wish to manage it efficiently, both in
Greece and abroad.
4.1.2 Pre-Paid Services
In December 1998, the Company introduced its pre-paid service under the brand name "COSMOKARTA". In addition
in May 2001 the Company started offering the ‘WHAT’S UP?" pre-paid product. As of December 31, 2003,
COSMOTE had 2,321,158 pre-paid customers (representing 59.3% of the total COSMOTE customer base compared
to 55.8% one year ago) It is noted that, as of December 31, 2002, COSMOTE sustained the second position with
respect to the pre-paid telephony segment in Greece with an estimated market share of 34.2%1.
1
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Based on publicly available figures released by TIM (STET) Hellas and Q-Telecom and analysts forecasts regarding
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BUSINESS OF COSMOTE
COSMOKARTA
This was the first pre-paid product offered by COSMOTE, tailored to mainly address
customers’ voice use needs. In addition to the standard offering and in order to reward
its COSMOKARTA customers, the Company introduced for the first time in the Greek
market an innovative "Bonus" scheme involving a scaled credit, i.e. the offering of additional free airtime, depending
on usage. Furthermore since January 2004, the Company first launched a a new loyalty BONUS scheme for incoming
calls also, that offers additional free airtime, depending on the number of incoming calls received by the
COSMOKARTA user.
"WHAT’S UP?"
In May 2001 COSMOTE launched a new breakthrough pre-paid product under the name
"WHAT’S UP?» This new innovative product is mainly addressed to youngsters but also to all
other customers that choose to principally communicate through the use of SMS (short text
messages). The "WHAT’S UP?" product offers exclusive privileges such as step down billing
regarding SMS charging, a CHAT service for easy and swift communication, free call identification and immediate
activation with the first call. In addition the product offers all the existing services of COSMOTE’s main pre-paid
product, COSMO∫∞R∆∞, that include: Voice mail, Automatic Roaming for incoming calls and SMSs, MYCOSMOS
mobile portal services. COSMOKARTA and "WHAT’S UP?" customers do not sign any contracts; neither pay monthly
access fees and or receive monthly bills.
The COSMOKARTA or WHAT’S UP packages include a SIM card and pre-paid airtime and are offered with or without
a handset. COSMOTE pre-paid customers can renew their airtime by purchasing new airtime cards through
COSMOTE’s extensive distribution network (the points of sales for the COSMOKARTA product amount to more than
10,000. COSMOTE facilitates its customers even further by allowing them to renew their pre-paid airtime through
phone banking and through ALPHA Bank’s nationwide ATM network.
It is noted that COSMOTE pre-paid services have a positive impact on the Company’s financial performance and more
specifically on the EBITDA margin, due to the fewer administrative resources that are consumed, the elimination of
subsidies and the fact that pre-paid customers do not generate bad debt.
4.1.3 "MyCosmos" mobile portal
COSMOTE was the first mobile operator in Greece to launch an integrated mobile
portal, under the brand name MyCosmos (in September 2000). The portal offers to
all COSMOTE subscribers an umbrella of value added mobile Internet services
related to entertainment, communication, information, financial transactions, etc
that is easily accessible.
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With the application of cutting edge technology, COSMOTE’s MyCosmos portal can be accessed through various
ways, allowing customers to choose the way they are more familiar with and depending on the technology
supported by their handset.
MyCosmos services:
As of January 2003, COSMOTE started providing a new comprehensive range of value added services, through which
the Company’s customers, contract or prepaid, can access their favorite songs through their mobile handsets. Beat
Box, the new service by COSMOTE allows users to virtually do anything with a song, offering the following options:
◗ Dedicating Songs: Through the service COSMOTE customers can select a song from a wide range fit for any
occasion (seasons greetings, birthdays, love, for sports funs etc), record a personal message and send it to the
mobile or fixed line phone number of their choice.
◗ Selecting Ringtones: Customers can select ringtones from a hit list and download them onto their handsets or
send them to any other COSMOTE mobile phone.
◗ Listening to Songs: Customers can listen to different types of songs (rock, folk, dance hits etc) through their
handsets.
◗ Ordering CDs: In co-operation with e-shop VirginMega.gr, Beat Box provides information on how to order the
music CD with the song of the customer's choice. Moreover, VirginMega.gr undertakes to post the CD to the
customer's address for a small fee, if the customer wishes to purchase it.
Beat Box utilises the advanced IVR (Interactive Voice Response) technology and access is through dialling 1414.
COSMOTE customers can also receive information on the service content through WAP or by visiting the company's
website (www.cosmote.gr).
In February 2003 COSMOTE started offering "News in Foreign Languages", a new value-added service through
which its customers can receive the latest news in the Albanian and Russian language.
The new service is offered in co-operation with the Macedonian Press Agency and covers news from Greece, Albania
and Russia. Each news brief is two minutes long and is renewed twice daily on weekdays and once during the
weekend.
In addition in February 2003, COSMOTE announced its MMS interconnection capability with Vodafone – Panafon
and TIM Hellas in order to allow COSMOTE customers to exchange multimedia messages with the networks of the
aforementioned operators.
In April 2003 COSMOTE was the first to commercially launch video MMS applications in the Greek market, which
combine image and sound with motion, thus further extending its services portfolio.
This new COSMOTE messaging service allows the Company’s customers to exchange their own short personal videos,
simply by sending an MMS from a video MMS enabled handset. In addition, COSMOTE is the first in the Greek
market to launch exclusive video services, through its "MyCosmos" portal. More specifically, in collaboration with
Antenna TV, COSMOTE offers infotainment services, such as viewing short music videos of popular Greek and
international artists (e.g. Simply Red) or viewing the artists’ personal messages.
In June 2003, COSMOTE expanded its very successful MyCosmos services portfolio by introducing its new and
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BUSINESS OF COSMOTE
innovative service, MYCOSMOSview.
With MYCOSMOSview, COSMOTE customers can have easy and fast access to an integrated range of technologically
advanced and sophisticated services, in a user-friendly environment.
The new MYCOSMOSview includes a structured service menu with simple functionality that combines exciting color
graphics and allows easy and immediate access with the touch of just one key.
The MYCOSMOSview menu includes the following service categories:
1. New: All the newly launched COSMOTE services, i.e. video services.
2. Ringtones & Logos: The very popular ringtones, wallpapers, screensavers etc.
3. Mobile Fun: All the entertaining services such as the humorous "Arcas" comic strip, greetings cards, quiz games
etc.
4. Sports: Sport related services such as alerts regarding important sporting events and developments, i.e. headlines,
results and news.
5. Contact: All news related services, Stock Market Online.
6. Mail & Chat: Communication through email or Chat.
7. Travel: Athens Int'l Airport On-line flight info, weather forecasts, ferryboat schedules.
8. Astrology: Star sign predictions, Chinese Horoscope, Tarot cards etc.
9. Entertainment Guide: Movies, theatre, TV guide, cultural events.
In order to achieve easy access to the new service offered, COSMOTE has released the MyCosmos View NOKIA 3650
handset that has been developed by NOKIA, especially for COSMOTE. The above mentioned handset has WAP, GPRS
and MMS functions already installed as well as the shortcut key to MyCosmos View main page and bookmarks to
the most popular services. Access to MYCOSMOSview is also possible via 23 handsets of various manufacturers.
Consistent with its customer centric philosophy of simple and competitive tariffs, COSMOTE offers MYCOSMOSview
without GPRS monthly access fee and for an initial trial period WAP browsing over GPRS free of charge, thus
charging customers only with the cost of the service they chose to download. MYCOSMOSview is constantly
enriched with new innovative services in collaboration with the best available content providers.
JAVA GAMES: In October 2003, COSMOTE launched on MYCOSMOSview its new service category "GAMES"
including exciting games in color that offer impressive graphics and sound, such as X-men, Nemesis, Top Gun,
Blackjack, Rayman Bowling etc.
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i-mode®
In November 2003, NTT DoCoMo, Inc., Japan’s leading mobile communications provider, and
COSMOTE Mobile Telecommunications S.A., the leading mobile operator in Greece, announced
that they formed an exclusive strategic partnership agreement under which DoCoMo is licensing
COSMOTE to launch i-mode, the world’s most popular mobile service, in Greece.
The two leading mobile operators have signed an agreement, under which COSMOTE will offer its i-mode service
over its 2.5G GPRS network and 3G UMTS network, with DoCoMo providing its know-how, technology and patents.
The service launch will be targeted to precede the Athens 2004 Olympic Games, for which COSMOTE is a Grand
National Sponsor.
In addition, COSMOTE and DoCoMo will cooperate on the introduction of i-mode services in other markets where
COSMOTE either maintains subsidiaries (AMC in Albania) or manages operations (Globul in Bulgaria, and
COSMOFON in Macedonia).
The agreement with COSMOTE in Greece marks DoCoMo’s eighth partnership for i-mode service. COSMOTE joins an
international i-mode alliance that includes E-Plus Mobilfunk GmbH & Co. KG (Germany), KPN Mobile N.V.
(Netherlands), KG Telecom (Taiwan), BASE N.V./S.A (Belgium), Bouygues Telecom S.A. (France), Telefonica Moviles
Espana (Spain), and Wind Telecomunicazioni SpA (Italy).
With the launch of i-mode services, COSMOTE customers will enjoy a totally new experience that includes:
◗ Access to internet services with a large variety of content on their mobile phones
◗ Choice among a wide range of innovative, multifunctional handsets developed specially for i-mode partners around
the world.
i-mode, first launched in 1999 in Japan, is the world’s leading mobile internet service. i-mode provides subscribers
with access to rich content, e-mail, and applications entirely through their mobile handsets. Content providers and
businesses can provide a wide variety of services via i-mode, an open platform based on de facto internet standards.
i-mode is used by more than 40 million subscribers in Japan today, about one third of the Japanese population.
Launched in a number of markets throughout Europe and Asia since 2002, i-mode services outside of Japan now
total more than two million subscribers.
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BUSINESS OF COSMOTE
4.1.4 Other Services
In addition, COSMOTE offers the following value added services:
Upgraded Voicemail: COSMOTE ’s voicemail services were upgraded in December 2003 to allow callers to listen
and modify their voice message before terminating their call, or leave a voice message to any COSMOTE customer
without having to previously initiate a call.
Lost Call Notification Service: COSMO∆∂ exclusively offers the ability to obtain both Lost Call Notification Service
and Voice Mail Service at the same time, ensuring that no calls are missed. Therefore, when the customers' mobile
phone are switched off, out of coverage or busy, they receive notification through SMS from the Lost Call
Notification Service regarding the lost calls and or they might hear a voice message left on their Voice Mail. If the
Voice Mail Service has not been activated, Lost Call Notification is only active when the mobile phone is switched off
or out of coverage.
Prepaid Roaming Services: In August of 2003, COSMOTE started offering full roaming services to its prepaid
customers. More specifically, allowing all prepaid customers to make, outgoing calls and send SMSs, in addition to
receiving incoming calls and SMSs.
During 2004 COSMOTE will be offering Olympic Games related services. More specifically, it will be offering a wide
range of content related to the Olympic Games and the Greek Olympic medalists sponsored by OTE and COSMOTE.
COSMOTE customers will be able to receive information related to the athletes' track record and achievements,
download their pictures and pictures of the mascots "Phevos & Athena". These services will be further enriched with
new and exciting content until the completion of the Olympic Games.
3rd Generation Services
During year 2003 COSMOTE initiated the 3G network rollout fulfilling the requirements of the license granted by
EETT. The 3G network will allow the provision of services such as:
◗ Video Calling (64Kbps UL/64Kbps DL) a service through which customers can see the person they are talking to
while making a call, in real time.
◗ Video Streaming (64Kbps UL/128 Kbps DL) a service that allows customers to enjoy lengthy videos of unique quality
and at high speed.
◗ Internet browsing / Intranet access (64Kbps UL/384Kbps DL).
In December 2003, COSMOTE started its first corporate 3G pilot program in order to test and provide the above
mentioned services. The first 100 users that participated were COSMOTE employees.
Third Party Services
πn addition to the aforementioned services, COSMOTE offers its customers access to third party services, through
SMS, in cooperation various content providers.
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4.2 International Roaming
International roaming enables a mobile phone user to make and receive calls using a foreign country's GSM network
while paying the home GSM provider for the calls. As of December 31, 2003, the Company had 307 roaming
agreements with mobile telecommunications operators in 148 countries, of which 252 agreements in 123 countries
were operational. The Company regularly reviews opportunities to enter into agreements with other mobile
operators with the purpose to expand its international roaming capabilities, in order to service its own customers'
requirements for international roaming, and to enable it to capture an increased share of the roaming traffic
originating from tourists and business travelers from abroad.
The Company provides this service to all its contract customers. Since the first quarter of 2001 the Company’s
prepaid customers can also receive calls and SMSs and as of August 2003 they can make outgoing calls while
roaming abroad. As of December 31, 2003, this service was offered to the Company’s prepaid customers in 11
countries (15 networks). As of December 2002, contract customers of foreign networks that roam over COSMOTE's
network have access to the Virtual Home Environment service (VHE) that enables the roamer to use a number of
value added services offered by his foreign network (i.e. customer service, answering machine, etc.) by dialing a home
short code. Roamers are charged on a per 30 seconds basis at the rate of 0.164 euro, plus the applicable PSTN
charges, if calling a destination abroad, depending on the country, plus their network’s mark-up. COSMOTE
customers while roaming are charged for incoming calls according to the international call charges of COSMOTE.
Greece hosts over 10 million tourists and business travelers each year. In 2003, such visitors made over 96 million
roaming calls, using the COSMOTE network. Roaming calls made by visitors in Greece and COSMOTE customers
roaming outside Greece represented approximately 3.2% of the Company's total revenues in 2003. COSMOTE
expects its roaming revenues to further increase due to higher expected usage, the service availability to all pre-paid
customers in more countries, the provision of GPRS roaming services and the availability of MMS roaming to the
Company's contract customers.
4.3 Customers
Since the introduction of mobile telecommunications services in Greece in 1993, the market has sustained a rapid
annual rate of growth. During year 2003 COSMOTE added 410,672 new net additions, bringing the Company’s total
customer base, at the end of December 2003, to 3,917,010 with an estimated market share of over 37.5% based on
management estimates and publicly available information. Total number of customers in the Greek mobile market at
the end of December 2003 is not available since VODAFONE (Hellas) has not announced its total number of
customers. Total number of customers in the Greek mobile market as of September 30, 2003 was 10,876,544
(according to publicly available information released by Vodafone of 3,782,737 total customers, STET Hellas of
2,752,495 total customers and Q-Telecom of 289,764 total customers, for the nine months of 2003) implying a
market penetration1 of 99.8%.
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BUSINESS OF COSMOTE
Management believes that providing customers with a single, direct point of contact with the Company, rather than
through independent service providers, allows the Company's customer care personnel to develop a stronger
relationship between customers and the Company. The Company currently has two call centres that operate for 24
hours a day, seven days a week and handle approximately 50,000 calls daily. The highly skilled multi-lingual customer
service staff is able to handle all incoming calls in different languages. As part of its ongoing commitment to
customer service, the Company has established specific contact groups to target corporate accounts, new accounts
and sales. The establishment of a specific contact group for corporate customers is one of COSMOTE's strategic
initiatives to target corporate customers.
4.4 Churn
Churn refers to total disconnections of customers that take place either involuntarily (e.g. due to lack of payment), or
voluntarily (e.g. due to termination of contract). Also, the number of customers that disconnect from a certain
package or program in order to reconnect to a new COSMOTE package or program is included in the reported churn
rate per period. Based on this, the Company’s rate of churn during 2003 was approximately 20.5%. It is noted that
of this churn over 70% is due to internal2 contract churn.
The Company has put in place a number of measures to limit voluntary churn. These measures include a reduction in
monthly access charges and a handset subsidy depending on the level of usage as loyalty bonuses on the renewal of
contracts. In addition, the Company has established a churn group specifically for the purpose of limiting churn rates.
The Company also uses information technology systems to understand, monitor and control voluntary churn by
focusing marketing resources on customer retention. To date, the Company believes that it has been successful in
retaining customers who have expressed a wish to disconnect voluntarily through applying customer service resources
to address their complaints and to provide an improved service. The Company provides incentives to its distributors to
reduce churn by paying them Connection Bonuses, which take into account customer disconnections during the
relevant period.
In the context of minimising the level of involuntary churn, the Company seeks to persuade its customers to pay by
credit or debit card thereby improving collection times and reducing the potential for bad debt problems to arise.
New deactivation policy
As of October 1, 2003 COSMOTE (Greece) applied a new deactivation policy with respect to scratch card validity time
of its prepaid customers. More specifically based on the new policy, prepaid customers are deactivated following a
period of 12+1 months instead of 12+6 months, which applied previously1. As a result 226,777 prepaid customers
1
Market penetration is the percentage of customers of the four operators within the Greek population at the end of the
relevant period. Following results of the population census held on March 18, 2001, the population for Greece is 10.9
million inhabitants.
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044_075_COSMOTE 18-06-04 12:22 ™ÂÏ›‰·56
were deactivated. This, combined with the 88,232 net new prepaid additions and the 4,007 net new contract
additions of Q4-03, lead to COSMOTE’s total customer’s base amounting to 3,917,010 at the end of 2003.
4.5 Distribution Network
The Company distributes its services and products through an extended distribution network comprised as follows:
◗ A Master Dealer network consisting of six exclusive and two non-exclusive master dealers and five smaller
distributors (together, the "Master Dealers").
◗ Twelve COSMOTE branded stores, seven in Athens, three in Thessaloniki, one in Heraklion, Crete and one in Patra;
◗ COSMOTE's corporate accounts sales forces; and
◗ Three distributors of the COSMOKARTA and WHAT'S UP packages and pre-paid airtime cards: Elgeka S.A.
("Elgeka"), the Greek Post Office and ALPHA COPY.
Distribution Network
The Master Dealers, directly and through their network of independent dealers, operate a network of approximately
2,000 points of sale throughout Greece, the majority of which are located in major cities. The Master Dealers act as
the commercial agents of COSMOTE in the distribution of its contract and pre-paid services for the payment of
commissions pursuant to distribution agreements and as the distributor for boosting COSMOKARTA and WHAT’S UP.
The six exclusive Master Dealers are: OTE, Altcom S.A. ("Altcom"), S. Benroubi S.A. ("Benroubi Net"), Klimaphone
S.A. ("Klimaphone"), Sanyocom S.A. ("Sanyocom") and SpacePhone S.A. ("SpacePhone").
The Company has also entered intotwo non-exclusive agency agreements with Germanos Batteries S.A.
("Germanos"), whereby Germanos agreed to distribute the Company's products and services through its chain of
300 stores operating in specialized retailing in the telecom and small consumers electronics area, and with Plaisio
Computers S.A. ("Plaisio") which distributes COSMOTE's products and services through its chain of 15 stores.
COSMOTE has also entered into agreements with five smaller distributors: "Valuenet S.A"(a distributor of OTEnet's
services), "OTE SAT-Maritel" (a subsidiary of OTE that provides telecommunications services to the marine industry),
"Eurobank Cards S.A." (a credit card provider and a subsidiary of EFG Eurobank Ergasias, a Greek bank), "ONE WAY
– Commercial & Industrial Company of IT and Telecommunications Limited" (a chain of stores with digital products
specialising in information technology and telecommunications offerings) and "Carrefour" Super Market chain in
Greece.
1
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The new prepaid deactivation policy eliminates the 6-month period in which prepaid customers could receive only incoming
calls but retains the 12-month scratch card validity period, after which outgoing calls are barred. A 1-month period is
added, during which customers can be unbarred, if they activate a new scratch card.
044_075_COSMOTE 18-06-04 12:22 ™ÂÏ›‰·57
BUSINESS OF COSMOTE
The following table sets out the number of outlets distributing COSMOTE's services as of December 31, 2003.
Distributors
Number of Outlets
OTE
450
Altcom
250
Germanos
300
Klimaphone
50
Benroubi Net Phone
55
Plaisio
15
Sanyocom
SpacePhone
Others (Maritel, Valuenet, Eurobank Cards, Oneway, Carrefour-Marinopoulos)
Total
300
350
250
2,020*
™‡ÓÔÏÔ
2020*
(*) Points of sale of pre-paid products and services are not included
The Company pays each Master Dealer a series of bonuses, like an airtime bonus based on monthly airtime revenues
generated by each contract subscriber the Master Dealer acquires for COSMOTE, a connection bonus payable for
each new corporate contract acquired by the relevant Master Dealer, a safe payment bonus payable where the new
contract subscriber agrees to pay his bill by credit or debit card; and annual, semi-annual and quarterly bonuses
payable if the relevant Master Dealer achieves prescribed targets for numbers of new contract subscribers connected
to the COSMOTE network during the relevant periods. These bonuses are designed in part to maintain the loyalty of
the Company's Master Dealer network and to encourage them to contribute to the promotion of COSMOTE’s
services.
The Master Dealers, with the exception of Germanos, Plaisio, Carrefour and ONE WAY, are prohibited by the terms of
their distribution agreements from selling any other mobile telecommunications service but may and do engage in
other businesses such as the sale of other electronic goods.
COSMOTE Branded Stores
The Company operates the following twelve COSMOTE branded stores; seven in Athens, three in Thessaloniki, one in
Heraklion Crete and one in Patra:
1. ∫ifissias 44, Maroussi
7. Gregoriou Lampraki 140, Piraeus
2. µenizelou 15, Thessaloniki
8. Acharnon 434, Athens
3. ∂thnikis Antistaseos 7, ∫alamaria Thessalonikis
9. Dikaiosinis 67-69, Heraklion Crete
4. ªarinou Antipa 90, ¡ew Herakleio Attikis
10. Ermou 4 & Ag. Andreou 48, Patra
5. Lazaraki 8, Glyfada
11. Tsimiski 109, Thessaloniki
6. Panepistimiou 41, Athens
12. Stournari 39, Athens
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These branded stores provide both sales and customer support services, such as payment collection, basic handset
repairs and billing claims reception. They also provide the Company with a valuable promotional vehicle for increasing
brand awareness of the Company's services and products as well as providing the Company with marketing
information intelligence. COSMOTE plans to open ten more branded stores before the end of 2004.
COSMOTE's Corporate Accounts Sales Force: The Company's corporate accounts sales force focuses on
marketing the Company's services to corporate customers. Approximately 70 people are employed in the corporate
accounts sales force. The number of account managers is expected to increase by approximately 10 people by the
end of 2004.
Elgeka and the Greek Post Office: Elgeka is a distribution company and acts as a distributor of COSMOKARTA and
‘WHAT’S UP?’ pre-paid airtime cards through approximately 10,000 kiosks and small shops. These kiosks and shops
are located in large and small population centres thereby providing convenient outlets for pre-paid customers to
purchase additional units for use in topping up COSMOKARTA and ‘WHAT’S UP?’ cards. Also COSMOKARTA and
‘WHAT’S UP?’ range of products are distributed by the Greek Post Office through approximately 800 branches and
by ALPHA COPY through 89 branches throughout Greece.
4.6 Corporate Communication
Today COSMOTE's brand name is associated with innovation, quality and reliability, a concrete image and result of
the Company’s high quality customer care and human centric philosophy, enhancing its ability to exploit future
opportunities and meet all challenges.
As a means for maintaining and strengthening its corporate image and reputation, during 2003, COSMOTE
developed and executed an integrated corporate communications programme, that among others included corporate
advertising campaigns, products & services promotional activities as well as relationship building with critical publics
such as the Media and the Investor community.
In order to promote its products and services and at the same time highlight its ability to exceed the expectations of
its stakeholders, COSMOTE launched a number of communication campaigns that included TV and radio advertising,
press placements and outdoor billboards. Aiming to promote the Company’s technological aspect, during 2003
emphasis was placed on the advertising of the successful MyCosmos services portfolio, as well as the innovative
MYCOSMOSview icon menu and its services. With the slogan "Leading the way", the Company’s main corporate
advertising campaign was focused on showcasing COSMOTE’s ability to lead on all fronts. The advertising campaigns
were supported by various promotional activities aimed at further endorsing public awareness of the Company’s
products and services. The 2003 promotional campaigns, launched in certain cases were in cooperation with
commercial partners and focused on the prepaid market segment.
COSMOTE during 2003 continued to invest in both manpower and time in order to maintain and reinforce its twoway, mutually constructive relations with the Media, a very important critical public that has great influence on public
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opinion. To this end COSMOTE communicated its activities through corporate announcements, organized press
conferences, special presentations and events, achieving the best possible representation of the Company by all
channels of the Media, the Press, radio and television networks and the Internet.
Further enhancing its corporate image and reputation COSMOTE reinforced its overall communication through its
Corporate Social Responsibility and Sponsorships programmes, while it participated in a number of commercial
exhibitions and fairs such as the International Exhibition of Salonica.
COSMOTE’s successful commercial and communication strategy, its leading market position together with its
sustained high profitability, increasing shareholder returns and efficient investments, and last but not least its social
involvement have contributed positively in enhancing COSMOTE’s reputation abroad. Further boosting its brand
recognition and awareness beyond Greek borders, the Company has entered into a strategic agreement with
Japanese NTT DoCoMo for the exclusive launch of i-mode, the world’s most innovative and popular wireless Internet
services. This agreement, through which COSMOTE becomes a member of an international strategic alliance, in
conjunction with the opportunities arising from the ATHENS 2004 Olympic Games sponsorship, will have a
substantial positive impact on the Company’s profile and reputation on a global scale.
Moreover and in the framework of the expansion of its presence abroad, during 2003 COSMOTE initiated the
renewal and redesigning of its corporate web portal with the aim to utilize it as a dynamic and efficient
communications tool addressing all critical publics worldwide while promoting the Company’s vision, values, products
and services. Taking advantage of the the Internet as one of the most important means of mass communication and
information, COSMOTE’s new online presence is intended to become a model of functionality, design and content ,
facilitating the communication with all target groups thus strengthening the public’s trust in the Company.
COSMOTE also invests in its relations with its shareholders and the rest of the investor community, both in Greece
and abroad, keeping them up to date with all the Company’s developments. The Company’s comprehensive investor
relations programme for 2003 included corporate announcements to shareholders and respective authorities, road
shows and conference calls on a regular basis. Moreover, during 2003 COSMOTE participated in various important
international business and financial conferences.
The association of the COSMOTE brand, namely with innovation, quality and reliability, are significant competitive
advantages in a competitive environment such as the mobile sector. For these qualities COSMOTE was awarded
"Company Ôf the Year 2003" for Greece by the internationally acclaimed Financial Times business publication, "The
Banker". COSMOTE received the international distinction in the inaugural "Company Awards 2003" after assessment
of key criteria such as financial performance, application of new technologies, potential for revenue and profitability
in its home market and globally, corporate governance and corporate social responsibility. Amongst "The Banker"
awarded companies were enterprises with important international business activity like Volkswagen (Germany),
Telecom Italia (Italy), Portugal Telecom (Portugal), Hutchison Whampoa (Hong Kong), Toshiba (Japan) and Samsung
(South Korea). The Banker award proves the degree of trust credited to COSMOTE by the international business
community and reaffirms the Company’s successful corporate communication strategy.
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4.7 Telecommunications Network
Quality and geographic coverage of the network are key factors for the success in the distribution of mobile
telecommunications services. COSMOTE has constructed a high capacity network covering over 99.6% of the Greek
population, 93.6% of the Greek mainland and islands and 96.7% of Greece's territorial waters as of December 31,
2003. The Company currently has extended 2nd Generation (2G) as well as 2.5 Generation networks with significant
capacity on the basis of the 2 x 25 MHz allocated to it in the 1800 MHz frequency band, and the 2 x 15 MHz paired
(FDD) and 5 MHz non-paired (TDD) spectrum and the 2 x 5 MHz allocated to it in the 900 MHz spectrum acquired in
July 2002.
In August 2001, following a tender of the NTPC, the Company was granted a 3rd Generation Special License. In this
respect, the Company was assigned for exclusive use 2 Ã 15 MHz paired spectrum and 2 Ã 5 MHz non-paired
spectrum. Additionally, in 2002 COSMOTE acquired a 25GHz Fixed Wireless Access Special License from OTE, coupled
with fixed assets that helped the company to roll-out a 12 base stations network in Athens and fulfill the license's
requirements. In 2004, additional fixed assets that had already been obtained by OTE for the exploitation of the
Special License will be transferred to COSMOTE and be utilized to further develop its network in Athens and roll-out
the network in Thessaloniki.
The basic elements of COSMOTE's GSM 900/1800 network are its BTSs which house radio transmission and
reception equipment to perform signal processing activities. As of December 31, 2003, the Company's network was
made up of 2,700 BTSs linked to 59 BSCs. At the end of year 2003, COSMOTE leased 1,200 sites for these BTSs
from OTE. Cellular traffic is collected from a number of BTSs and routed to a BSC. The BSCs allocate radio channels
among BTSs, manage intra-BSC handoffs among the BTSs and interface with the mobile switching centres ("MSCs").
Each BSC is controlled by an MSC, which is connected to other MSCs in the network as well as to other fixed or
mobile telecommunications networks. During year 2003 COSMOTE initiated the 3G network rollout fulfilling the
requirements of the license granted by NTPC (EETT). The basic elements of the new network are its BTSs (Node BTSs),
which contain radio transmission and reception equipment.
As of December 31, 2003 there were 15 MSCs in COSMOTE's network. MSCs also control the billing of calls and
allow mobile telephone users to move freely from cell to cell while continuing their calls. Connections between BTSs,
BSCs and MSCs consist of transmission lines, including fiber optic cables, copper cables and microwave links. The
Company is gradually, in specific cases regarding certain parts of Greece, replacing the use of leased lines by its own
microwave network. The Company's network is interconnected with OTE's PSTN in Athens, Thessaloniki (through
which international traffic is also routed) Patras, Larissa and Heraklion, and with the networks of VODAFONE (Hellas)
and TIM (Hellas) in the same cities. COSMOTE's network is also interconnected with the mobile and PSTN networks
of Q-TELECOM in Athens and Thessaloniki and with the network of Tellas in the same cities. Finally, COSMOTE's
network is interconnected with the network of Telepassport in Athens, Thessaloniki and Patras and with the
networks of FORTHNET and ACN in Athens. The Company co-locates its equipment sites with the other mobile and
fixed operators where local conditions make this practical and cost effective.
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BUSINESS OF COSMOTE
The operation of BTSs is subject to receipt of required permits from the Ministry and local planning authorities.
Spectrum availability is limited and is allocated by the NTPC (EETT). The Company currently optimises its existing
spectrum allocation by adding more BTSs in combination with existing technology such as cell splitting, software
feature optimisation, frequency reuse and cell sectoring. In order to avoid capacity constraints the Company has
started employing microcells, while a number of additional measures, such as frequency hopping, could be used in
the future to achieve clearer frequency utilisation and higher capacity.
COSMOTE has developed a comprehensive process to monitor the performance of its network on a continuous basis.
The network performance indicators are monitored and evaluated on a national and regional basis by using
advanced, real time information systems to collect relevant data continuously from all the network elements and
takes proactive measures to address any shortcomings in network performance.
COSMOTE's investment plan is designed to expand its network capacity in response to existing and projected
customer demand for new advanced value added services and to position the Company for third generation UMTS
technology.
The Company is developing its network coverage by building additional BTSs, BSCs and MSCs and other network
elements. In this respect it plans in year 2004, to install approximately 160 additional BTSs, five (5) new BSCs and one
(1) MSC and to expand the capacity of 250 existing BTSs. In 2004 COSMOTE plans also to extend its GPRS network
with a new SGSN centre increasing the network's customer capacity. The Company offers nation-wide GPRS
commercial services since the first quarter of year 2001. Furthermore, during year 2004 COSMOTE plans to install
approximately 350 BTSs and 1 new RNC for the development of its 3G network.
4.8. Commercial Agreements
COSMOTE has entered into commercial agreements with its principal shareholder, OTE, as well as with other
suppliers and associates.
4.8.1. Interconnection Agreements
COSMOTE concludes interconnection agreements with fixed line network operators and other mobile
telecommunications network operators, as well as the holders of Special Licenses for the provision of telephony
services.
Interconnection Agreements are governed by the Telecommunications Law 2867/2000 and Directive 97/33/EC of the
European Parliament and the European Council on interconnection in telecommunications, which is incorporated into
Greek Law pursuant to the Presidential Decree 156/99as currently in force. In the process of the review of the
regulatory framework of the European Union concerning telecommunications (Review 1999), the Directive on Access
and Interconnection (Directive 2002/19/EC on Access) was published on April 24, 2002 in the Official Journal of the
European Community, replacing the Directive 97/33/EC. The new Directive set July 24, 2003 as the last date for the
implementation of related national legislation by State Members.
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The Greek Republic has not yet implemented the laws required by the above Directive. The European Commission
opened infringement proceedings against eight Member States (among them the Greek Republic) in October 2003.
The proceeding is pending.
In the meantime, NTPC has started a procedure to define the relevant markets. NTPC has concluded a public
consultation regarding the definition of a mobile call termination market and an analysis of the level of competition
in this market. NTPC concluded that each separate mobile network constituted a single market and that each
separate mobile company in Greece holds Significant Market Power (SMP) in the relevant market.
Subsequently, NTPC published a consultation document regarding the imposition of regulatory remedies in the
mobile call termination market measures which proposed various measures including the imposition of a requirement
for cost orientation on SMP operators and a three-year convergence period of termination charges with cost (Glide
Path).
NTPC has engaged an external consulting company to develop an LRIC cost model, for costing the call termination
services of the mobile companies, with a view to using the results in the possible imposition of cost orientation on
SMP companies. The above procedures could lead to a decrease in the mobile call termination charges of mobile
companies in Greece.
With respect to this issue, there are also two relevant decisions of NTPC.
In particular, pursuant to the decision of NTPC dated 15 March, 2002 the Company and VODAFONE were nominated
as Organisations with Significant Market Power (SMP) in the telecommunications market. Pursuant to the decision
dated 14 March, 2003, NTPC nominated COSMOTE, VODAFONE and TIM (STET-Hellas) as operators with Significant
Market Power (SMP) in the mobile market. In a recent explanatory note, NTPC has stated that possible obligations for
operators with Significant Market Power in the mobile market are the following:
1. Each operator must charge a single fee for all calls terminating on its network, irrespective of whether the
originating network is fixed or mobile.
2. The termination fee on a per minute basis must be lower than the lowest "on-net"1 retail tariff offered by each
provider of mobile telecommunications services.
3. Discount policies must be transparent and non discriminatory.
Furthermore, pursuant to the resolution of NTPC number 257/72B/07.02.2003, which was published in Official
Gazette No 148/B/12.2.2003 Sociétés Anonymes and Limited Liability Companies Issue, COSMOTE, VODAFONE and
OTE were nominated as Organisations with Significant Market Power (SMP) in the interconnection market. The
Company has filed an application before the Council of State for the annulment of this resolution. The case is
pending.
1
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Calls that are initiated and terminated on the same network.
044_075_COSMOTE 18-06-04 12:22 ™ÂÏ›‰·63
BUSINESS OF COSMOTE
According to Directive 97/33/EC on Interconnection in telecommunications, which was incorporated into Greek Law
pursuant to Presidential Decree 165/99, as currently in force, Organisations with Significant Market Power (SMP) in
the interconnection market are obliged among other things:
◗ To follow the principles of transparency and cost orientation in interconnection charges.
◗ To prove that charges are derived from actual costs, including a reasonable rate of return on investment. NTPC may
request an organization to provide full justification for its interconnection charges, and where appropriate to require
charges to be adjusted.
◗ To meet all reasonable requests for access to their network.
◗ To follow the principle of non-discrimination with regard to interconnection offered to others.
◗ To apply similar conditions in similar circumstances to interconnected organisations providing similar services.
Interconnection Agreement with fixed networks
The Company and OTE are parties to an interconnection agreement dated April 9, 1998, concerning the
interconnection of calls originating on the PSTN network owned and operated by OTE or the GSM 1800 network of
the Company and terminating on COSMOTE’s or OTE’s network, as the case may be. The term of the
Interconnection Agreement is 10 years, expiring in 2008. Both parties have the right to terminate the Interconnection
Agreement for substantial breach of its terms, if the breach remains unremedied for one month after written notice
of such breach is received by the other party.
Furthermore, up to 31 March, 2004 the Company had entered into interconnection agreements with QUEST
WIRELESS, FORTHNET, and TELLAS, which have been all granted, an individual license for Fixed Wireless Access, and
with ACN, TELEPASSPORT and LANNET, whereas COSMOTE was in the process of negotiating similar agreements
with other holders of individual licenses.
Also, international traffic originating from or terminating or COSMOTE's network is routed through OTE according to
the interconnection agreement signed between OTE and COSMOTE.
Interconnection Agreements with the other three mobile operators
The Company entered into Interconnection Agreements with the three other providers of mobile telecommunications
services in Greece (VODAFONE, TIM (STET-Hellas) and QUEST WIRELESS) on December 12, 1997, December 13, 1997
and May, 2002 respectively.
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Main Agreements with OTE
Interconnection Agreement with OTE (see above)
Leased Circuits Agreements
As of December 31, 2003, COSMOTE had entered into agreements with OTE to lease approximately 3,266 OTE
circuits. The Leased Circuits Agreements are for an indefinite period with a minimum term of 6 months. COSMOTE
can terminate a Leased Circuit Agreement at any time after the expiration of the minimum term by giving seven
days' written notice. The Leased Circuit Agreements can be terminated by OTE in case of emergency. OTE is
responsible for the maintenance of the leased circuits.
Under the Leased Circuit Agreements, COSMOTE pays OTE connection fees as well as monthly rent for the use of its
circuits, in each case, at rates determined unilaterally by OTE from time to time, plus the relevant VAT. Greek law
governs the Leased Circuits Agreements and the parties submit to the jurisdiction of the competent courts of Athens
in connection with disputes between them.
Framework Agreement for the Secondment of Personnel and Leasing of Property
On September 22, 1997, OTE and COSMOTE entered into a framework agreement for the secondment of personnel
to COSMOTE and the lease of OTE's premises to COSMOTE for the operation of its business. The Framework
Agreement is open-ended and has no fixed or minimum term.
OTE Site Leases
At December 31, 2003, OTE and COSMOTE were party to 1,165 lease agreements regarding OTE sites for the
installation of COSMOTE’s equipment for terms of nine to twelve years. Both parties pay equal amounts of stamp
duty. COSMOTE has the right to terminate a Site Lease Agreement at any time by giving one month's notice. The
Site Lease Agreements are subject to Greek law and the parties submit to the jurisdiction of the competent courts of
Athens.
BTS Maintenance Agreement
COSMOTE has entered into a BTS Maintenance Agreement with OTE, the terms of which were approved by the
Extraordinary General Meeting of the Shareholders of COSMOTE held in Athens on 21 February, 2002. This
Agreement which was valid until 31 December, 2003, was renewed for a period of six months upon the same terms.
Under this BTS Maintenance Agreement, COSMOTE pays OTE fixed sums for its services as maintenance contractor
and for repairs performed, depending on the location of the BTS and the nature and severity of the problem. The BTS
Maintenance Agreement is subject to Greek law and the parties are submitted to the jurisdiction of the competent
courts of Athens in connection with any disputes between them.
Agreement for the transfer of Special License for Fixed Wireless Access (LMDS)
The Ordinary General Meeting of the Shareholders of the Company (dated 3 June, 2003) approved the transfer from
OTE to the Company of fixed equipment for the development of the network for the exploitation of the Special
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BUSINESS OF COSMOTE
License for Fixed Wireless Access (LMDS). The transferred equipment was valued at 4,092,642 euro, in accordance
with article 10 of C.L.2190/1920 concerning Societe Anonymes companies by the Committee created pursuant to
article 9 of such law. Equipment valued at 4,562,099 euro plus VAT, has already been transferred to COSMOTE by
OTE, pursuant to a separate agreement dated November 22, 2002 between OTE and COSMOTE, which was
approved by the Extraordinary General Meeting dated 21 February, 2002.
Management Agreement with OTE and OTE INTERNATIONAL
In October 2002, COSMOTE, OTE and OTE INTERNATIONAL entered into an agreement pursuant to which COSMOTE
assumed management responsibility for two of OTE's mobile assets, namely COSMO BULGARIA MOBILE (Globul) and
COSMOFON (formerly "MTS Mobile Telecommunications Services AD-Skopje" in the Former Yugoslav Republic of
Macedonia).
COSMOTE undertook the following responsibilities pursuant to this agreement:
◗ Financial, technical, commercial and operational management of, as well as the provision of legal and regulatory
support for, Globul and COSMOFON whereas the management of issues relating to ownership, financing and
relationships with the governmental bodies having jurisdiction over these companies is delegated to OTE
INTERNATIONAL.
◗ Where specifically requested and after a special agreement, management support on an ad hoc basis for all other
international mobile subsidiaries of OTE.
The term of the agreement expires on December 31, 2004 and shall be renewed automatically for one year, unless a
party to the agreement objects to the renewal at least two months' prior to its expiration. A party, for a cause upon
giving three months' notice, can terminate the management agreement.
COSMOTE's fees under this agreement comprise two elements:
1. The reimbursement of the actual operating costs incurred by COSMOTE in managing Globul and COSMOFON (and
possibly from managing other OTE mobile subsidiaries), excluding amortisation and financing costs, and
supplemented by a profit mark-up.
2. An annual performance payment reflecting value creation in these companies, determined as a percentage of the
revenue of the companies, conditional on the achievement of specific EBITDA targets as defined in the relevant
business plans.
COSMOTE's fees for ad hoc projects conducted for other mobile telephony subsidiaries of OTE are agreed on a caseby-case basis.
OTE Master Dealer Agreement
COSMOTE and OTE are parties to a master dealer agreement dated May 25, 1998, pursuant to which OTE is obliged
to promote and distribute COSMOTE's services. The OTE Master Dealer Agreement may be renewed on an annual
basis thereafter. Under the terms and conditions of the agreement, OTE is allowed to delegate the performance of its
obligations to promote and distribute COSMOTE's services to sub-dealers chosen by OTE, although the respective
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044_075_COSMOTE 18-06-04 12:22 ™ÂÏ›‰·66
sub-dealership agreements must be approved by COSMOTE. This agreement also gives COSMOTE the right to act as
a contracting party under similar agreements with other commercial distributors. Furthermore, COSMOTE promotes
and distributes its products and services through its dealers: ALTCOM, GERMANOS, KLIMAPHONE, SANYOCOM,
SPACEPHONE, S. BENROUBI, PLAISIO COMPUTERS, ONE WAY, CARRERFOUR-MARINOPOULOS, VALUENET, MARITEL
and EUROBANK CARDS.
COSMOTE has assigned the distribution of prepaid services to the company "ELGEKA", to the Greek Post Office and
to the company "ALPHA COPY".
Other agreements with OTE
In addition, COSMOTE has signed with OTE (and other associates) agreements for the bill printing, enveloping and
collection of bills to COSMOTE's contract subscribers.
COSMOTE estimates that all the terms of the aforementioned agreements with OTE are just and fair.
All the aforementioned agreements have been approved by COSMOTE’s General Meetings, according to article 23a
of law 2190/1920, except for the interconnection agreements and the leased circuits agreements, which represent
standard commercial agreements based on OTE’s published tariffs used for all similar agreements with leased circuits
and interconnection customers, and thus constitute day to day transactions not requiring approval by COSMOTE.
Furthermore, the Company does business with other affiliates. Thus, the General Meeting of the Shareholders of
COSMOTE (on 3 June, 2003) approved the essential terms of the commercial co-operation with OTENET, for the
promotion of OTENET's products and services by COSMOTE, in exchange for commission. COSMOTE has also signed
an agreement with OTENET for access to the Internet.
The Company has concluded two agreements with "COSMO-MEGALA KATASTIMATA SAA" for the provision of Ring
Tones & Logos and MMS through SMS/STK/WAP. Both of the above agreements are valid until 31 May, 2005 and
their terms have been approved by the General Meetings of the Shareholders of the company "COSMO-MEGALA
KATASTIMATA SAA".
In December 2001, COSMOTE signed a management agreement with AMC. The agreement is for an indefinite
period and valid from 1 January, 2002. Either of the companies can terminate the relevant agreement by giving one
month’s prior written notice. The Management agreement is subject to Greek law and the parties submit to the
jurisdiction of the competent courts of Athens.
According to the Chapter 4 -Part B of the Internal Regulation Manual of the Company, the condensed list of the
transactions of the Company with its affiliates is included to the ANNEX of the Financial Reports for 2003.
4.8.2 Agreement with NTT DoCoMo for i-mode in Greece
On November 7, 2003, COSMOTE entered into an agreement with NTT DoCoMo, Inc., Japan’s leading mobile
communications provider, under which DoCoMo has licensed COSMOTE to launch i-mode, the world’s most popular
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mobile service, in Greece.
Under the above-mentioned agreement, COSMOTE will offer its i-mode service over its 2.5G GPRS network and 3G
UMTS network, with DoCoMo providing its know-how, technology and patents.
Through the i-mode, COSMOTE customers will have access to Internet services with a large variety of content on
their mobile phones, including e-mail, and will be able to choose among a wide range of innovative, multifunctional
handsets developed specially for i-mode partners around the world.
In addition, COSMOTE and DoCoMo will cooperate on the introduction of i-mode services in other markets where
COSMOTE either maintains subsidiaries (AMC in Albania) or manages operations (Globul in Bulgaria and COSMOFON
in Macedonia).
4.8.3. Agreements with other Suppliers
The Company's network utilises standard equipment that is available from a limited number of suppliers. The
Company's major GSM 1800 infrastructure contractor is Nokia which (together with its affiliates) supplies the
Company with MSCs, BSCs and BTSs, operations support systems and cross connect systems equipment. In July
1997, COSMOTE entered into an agreement, which was amended in January 2000, in March 2001, in February 2002
and in June 2003, with Nokia for the supply of GSM 1800 transmission and other equipment and services. In August
1999, the Company entered into a purchase agreement with Ericsson for the supply of network infrastructure
equipment and related services for the Company’s network in the northern part of Greece. Simultaneously, in June
2003, following the completion of a tender procedure, the Board of Directors of COSMOTE selected Ericsson as
principal contractor for the first phase of development of its 3G Network through the end of 2004. COSMOTE also
purchases additional network elements such as a pre-paid platform (Logica), a billing and customer care system (Atos
Origin, former SchlumbergerSema), the Enterprise Resource Planning System (Oracle Hellas), an Interconnection Billing
System (Amdocs), a Billing Mediation System (Ericsson), a Datawarehouse System (Hewlett Packard), a Fraud
Detection System (Hewlett Packard), a Collection Management Systems (Amdocs) and other Value Added Services
Platforms.
4.8.4 Agreements with third-parties
Furthermore, COSMOTE has entered into agreements with a number of third parties in order to provide its
subscribers with access to services offered by such third parties (through different services, see above chapter 3 of the
present).In these cases COSMOTE provides a percentage of the revenues to its third-party counterpart.
4.9 Property
Intellectual Property
COSMOTE owns thirty trademarks registered in its name with the Greek Ministry of Commerce, which are used in
connection with the marketing and sale of its services and products. The Company has applied to register a further
nine trademarks with the Greek Ministry of Commerce. COSMOTE owns two community trademarks and has applied
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to the Office for Harmonisation in the Internal Market, in Alicante, Spain, for six additional community trademarks.
COSMOTE also owns seven domain names.
Buildings and Sites
COSMOTE leases its headquarters (including a COSMOTE branded store) which occupies 5,351 m2 over five floors at
44 Kifissias Avenue, Athens pursuant to a nine year lease entered into in November 1997, which may be renewed
unilaterally by COSMOTE for a further six years. COSMOTE leases the premises for its COSMOTE branded stores in
Athens and Thessaloniki. It also leases substantially all the sites where its mobile telecommunications network
equipment is installed. During year 2001 the Company had 1,088 of its sites leased from OTE and 1,136 of its sites
leased by third parties.
Telecommunications Equipment
As of December 31, 2003 the Company operated the following telecommunications equipment:
◗ 2,700 BTSs (all over Greece)
◗ 59 BSCs, of which 15 are based in Athens, 4 in Thessaloniki, 3 in Patras, 2 in Kavala, 2 in Livadia and 2 in Siros,
while 1 BSC is based in each of the remaining thirty-one (31) largest cities in Greece.
◗ 15 MSCs, of which 8 are located in Athens, 3 in Thessaloniki, 2 in Patras, 1 in Heraklion and in Larisa respectively.
◗ 52 3G Node-Bs
◗ 2 RNC
◗ 1 MSS
◗ 2 MGW
◗ 1 SGSN and 1 GGSN
◗ 83 Transcoders placed at MSC sites
◗ 12 LMDS Base Stations
◗ 1,850 low capacity unprotected PDH links
◗ 350 medium capacity protected PDH links
◗ 37 high capacity protected SDH links
◗ 41 SDH multiplexers
◗ 180 PDH multiplexers
The Company’s fixed assets are free of mortgages, prenotices and other liens.
Encumbrances
There are no contractual encumbrances on the network or other equipment of the Company.
Guarantees
COSMOTE has issued its corporate guarantees, without giving a Bank Letter of Guarantee, in favour of its related
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company Albanian Mobile Communications (AMC) in respect of two agreements, signed between AMC and NOKIA,
regarding the provision of equipment and services, of an amount of 30,000,000 euro and 10,000,000 euro
respectively.
COSMOTE has provided ALPHA BANK S.A. with a Letter of Comfort supporting AMC in connection with the
fulfilment of its obligations under a Loan Agreement of an amount of 31,000,000 euro.
Moreover, two joint Letters of Comfort have been provided by OTE and COSMOTE to AGROTIKI BANK and ALPHA
BANK, supporting "CosmoONE HELLAS MARKET SITE AE", in the capital of which OTE and COSMOTE participate
with a percentage of 26% each (in total 52%). These Joint Letters have been provided in respect of two Loan
Agreements for 1,000,000 euro and 1,760,821.72 euro respectively between CosmoONE and each one of the
abovementioned banks , assuring the Banks that OTE and COSMOTE shall not decrease their total participation in
the share capital of CosmoONE.
Regarding the Bank Letters of Guarantee provided by COSMOTE in favour of the National Telecommunications and
Post Commission, for the fulfilment of its obligations under the Special Telecommunications Licenses granted to
COSMOTE, it is noted that the following Bank Letters of Guarantee are in effect:
1. Bank Letter of Guarantee for the amount of 5,135,821 euro for the fulfilment by COSMOTE of its obligations
under the Special Licence for Third Generation Mobile Communications.
2. Bank Letter of Guarantee for the amount of 146,735 euro for the fulfilment by COSMOTE of its obligations under
the Fixed Wireless Access Special Licence.
3. Bank Letter of Guarantee for the amount of 220,000 euro for the fulfilment by COSMOTE of its obligations under
the Special License for 2G Mobile Telecommunications regarding the spectrum DCS 1800.
4. Bank Letter of Guarantee for the amount of 293,470 euro for the fulfilment by COSMOTE of its obligations arising
from the granting to COSMOTE of radio spectrum in the EGSM900 frequency band.
Information Technology
COSMOTE relies on IT Systems for the accelerated deployment and efficient operation of its network ands services
infrastructure, the provision of effective customer services and the smooth and efficient operation of its internal
business. The Company's main IT Systems are briefly described below:
BILLING AND CUSTOMER CARE SYSTEMS: The necessary functions for supporting billing and customer
administration activities are provided by the Business Support and Control System ("BSCS"). BSCS is a client-server
billing and customer administration system developed by LHS, presently named Atos Origin, for the
telecommunications industry. COSMOTE has recently upgraded the system to the latest version (from v5.21 to v8),
aiming at providing advanced services to its customers and supporting the handling and real time rating of 3G-based
services along with the upgraded Billing Mediation System. During billing, BSCS summarises customer account and
service data, calculates charges, discounts and taxes and generates the necessary bill data that are provided to the
customers.
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BILLING MEDIATION SYSTEM: COSMOTE has recently upgraded its Billing Mediation System (BMP) aiming at
processing and correlating the billing records and usage data from the Company's 3G network ensuring the rating
and billing of service usage. BMP is an Ericsson product.
PROVISIONING SYSTEM: This system (InstantLink) is responsible for the activation, de-activation and the real-time
change of customers' network products and services. COSMOTE has recently upgraded this system in order to
support 3G products and services. InstantLink is developed by Comptel and provided as an integrated solution
offering by NOKIA under the name SAFIR.
MOBILE NUMBER PORTABILITY HANDLING SYSTEM: COSMOTE has developed internally the Mobile Number
Portability Handling System (MNP system), in order to support the number portability processes. The system handles
centrally all number portability applications (port-in and port-out), communicates with the National Number
Portability Database (NRDBP) and the respective COSMOTE Information Systems and updates the COSMOTE's
network number portability database ensuring the correct calls' routing from COSMOTE's network to the other fixed
and mobile networks.
SALES AND MARKETING SYSTEMS: The Company has a number of IT Systems designed to assist the sales and
marketing functions:
◗ Commission Handling System ("CHS"): CHS is a system for calculating and processing dealer commissions
developed by Intrasoft for COSMOTE.
◗ Application Request and Activation System: COSMOTE developed with the help of LogicDIS (former Information
Dynamics) the e-POS system in order to automate the customer acquisition and activation processes.
◗ Customer Service Systems: The Company has implemented an electronic subscriber document management system
for the collection and filing of all customer application documentation, supporting documents needed at activation
time, bill images and faxes sent by customers. The system has been developed by on the Filenet platform.
◗ Fraud Management System: In order to protect its customers from unauthorised use, the Company has
implemented the HPFMS, HP Fraud Management System, developed by HP (former name CFMS by Compaq).
◗ Collections Handling System: The Company has implemented a collections handling system, provided by Amdocs,
aiming at providing timely and effective communication and customer-care to the Company's customers.
PARTNER RELATIONSHIP MANAGEMENT SYSTEM: Since the end of 2003 COSMOTE has activated the Partner
Relationship Management System (PRM), provided by Amdocs, which supports all basic operations for the billing and
handling of the collaborating providers.
ENTERPRISE RESOURCE PLANNING: COSMOTE is in the process of replacing the current ERP system from the IFS
Telecom by IFS to ORACLE APPLICATIONS by ORACLE. Provisions have been taken in order the new ERP system to
match the company’s requirements and ways of working, covering all the main business processes including
accounting, suppliers, customer orders, invoicing and consolidation of branches and Human Resources management.
INTRANET: The Company has developed internally an Employees’ Corporate Portal ("Intranet") where all the
corporate announcements, phone directory, organisation chart and procedures may be found.
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NETWORK STATIONS MANAGEMENT: COSMOTE has developed internally the ‘x-Site’ system that manages
network elements installation and network status reporting. COSMOTE's x-Site system supports all processes related
to network maintenance and will be integrated with the new Oracle ERP solution.
4.10 Employees
The number of COSMOTE’s employees (including outside contractors and personnel on secondment from OTE) for
the last two years was:
Average number of Employees
2002
2003
COSMOTE
1,658
1,889
68
61
1,726
1,950
2002
2003
OTE
TOTAL
The above employees were occupied in the following sectors:
SECTOR
Administration (including Legal, HR, Quality etc.)
146
105
Financial
313
331
Commercial
800
901
Technical
467
519
1,726
1,950
Products & Services1
94
TOTAL
SECTORS 2003
Administration
Financial
Commercial
Techcical
Products & Services
Total payroll expenses in year 2003 amounted to 63 million euro compared to 54 million euro in the previous year.
1
Products, Services & Marketing General Division was created in 2003. The employees that make up this Division were included
in the other respective sectors in 2002.
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Bonus Scheme
At the extraordinary general meeting held on July 31, 2000, the shareholders approved the adoption by COSMOTE
of a bonus scheme for the payment of annual bonuses to the Company's employees. Pursuant to the terms of this
scheme, the Managing Director shall be authorised to award bonuses to COSMOTE's employees provided COSMOTE
has achieved its budgetary targets and provided the employee has met performance conditions in accordance with
COSMOTE's system for the appraisal of employees. Bonuses shall not exceed three times monthly salaries for senior
personnel and two times monthly salaries for the other personnel. The Managing Director was authorised to make
such bonus awards from year 2000 onwards.
4.10.1 Management Share Option Plan
The Company has established a Management Share Option Plan for the purchase of Company shares. The Chairman,
Managing Director, Legal Counsel, General Managers, Directors, Deputy Directors and Heads of Departments are
eligible to participate in this Plan. The Plan was approved by resolution of the General Meeting held on 6 September
2000 and amended by resolutions of the General Meetings held on 12 June,2001 and 21 February, 2002. Eligible
persons are entitled to options in respect of ordinary shares with an aggregate value of between two and five times
their respective annual gross salaries, depending on their position (Basic Options). Further grants of options may be
made by the Board of Directors to participants at the end of each year in respect of ordinary shares with an
aggregate value equal to their respective annual gross salary (Additional Options). In the framework of the law and
the Company's Articles of Association, the Company reserves the right to choose the procedure to be followed for
the granting of shares to eligible persons (i.e. by increase of the Company's share capital according to article 13 par.
9 of C.L. 2190/20, by an undertaking by the Company of its own shares. The Exercise Price for acquiring shares is
defined as follows:
a) The exercise price payable for each ordinary share under options granted at the time of the establishment of the
Management Incentive Plan was 10% below the bottom end of the range for the Offer Price during the
Company’s IPO (i.e. 8.24 euro per share).
b) The exercise price for the purchase of ordinary shares under options granted on subsequent occasions by the Board
of Directors will be the average closing price of the shares for the month preceding the grant of options,
determined by reference to the Daily Bulletin of the ASE. The same exercise price will be valid for Additional
Options as well.
The aggregate number of ordinary shares which may be issued in any five year period pursuant to the Management
Incentive Plan and all other share option schemes or employee share schemes (if any) adopted by COSMOTE may not
exceed 5% of COSMOTE's share capital and, in any event, may not exceed 10% of the existing shares of the
Company.
Basic Options vestover three years, as follows: 40% after one year from the date of their grant, 30% after two years
and 30% after three years1.
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The Basic Options granted to the Chairman vest in full after one year.
Additional Options vest after three years.
Basic Options, once vested, can be exercised in whole or in part until the fourth year from their grant, while the
Additional Options, once vested, can be exercised in whole or in part during their maturity year or the year after.
Share options expire if the beneficiary leaves the Company or is fired before the options vest, irrespective of their
exercise date.
The following options have been granted under the Management Share Option Plan:
(A) in 2000, the Board of Directors approved grants of Basic Options to 40 managers (including the Chairman of the
Board) for the purchase of an aggregate of 1,187,010 shares of the Company at the price of 2,808 GRD or 8.24
euro per share;
(B) in 2001 the Board of Directors approved grants of: i) Basic Options to 114 Officers (primarily Department Directors
who were included in the Plan after its expansion by resolution of the General Meeting held on June 12, 2001 for
the purchase of an aggregate of 950,390 shares of the Company, at the price of 9.78 euro per share and ii)
Additional Options to 38 Officers for the purchase of 296,920 shares of the Company, at the price of 9.78 euro
per share.
(C) in 2002, the Board of Directors approved grants of: i) Basic Options to 27 Officers (including the Chairman of the
Board) for the purchase of an aggregate of 350,370 shares of the Company, at the price of 8.96 euro per share
and ii) Additional Options to 145 Officers for the purchase of an aggregate of 833,765 shares of the Company, at
the price of 8.96 euro per share; and
(D) in 2003, the Board of Directors approved grants of: i) Basic Options to 38 Officers for the purchase of an
aggregate of 303,780 shares of the Company, at the price of 10.228 euro per share and ii) Additional Options to
168 Officers for the purchase of an aggregate of 1,009,070 shares of the Company, at the price of 10.228 euro
per share.
Pursuant to the abovementioned, and following the exercise of the relevant options, the following shares have been
issued:
a) In February 2002, 55,870 new shares.
b) In February 2003, 83,250 new shares.
c) In January 2004, 1,049,130 new shares.
757,570 share options granted under the plant have matured and have not been exercised yet.
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4.11 Management of OTE’s Mobile Assets: Globul & COSMOFON
Globul
COSMOTE since the beginning of 2003 manages Globul, OTE’s 100% owned mobile subsidiary in Bulgaria. For the
year ended December 31, 2003, operating revenues of Globul amounted to 99.4 mil euro, up 114% y-o-y. This was
the result of airtime revenues growing by 167%, monthly fees growing by 60%, SMS revenues by 95% and roaming
revenues by 313%. The company’s target to break even on EBITDA level was successfully reached and exceeded with
EBITDA reaching 10.1 million euro and EBITDA margin 10.2%. The key driver behind the healthy revenue growth was
mainly the increased customer base that grew by 115% y-o-y, reaching more than 1 million customers and expanded
coverage offered by Globul’s network, in combination with stable AMOU (usage) of prepaid services and constantly
increasing AMOU (usage) of contract (especially business) customers. Penetration in Bulgaria at the end of 2003 is
estimated at 40%.
COSMOFON
In June 2003 and in just 5 months under COSMOTE's management, COSMOFON, OTE’s 100% owned mobile
subsidiary, launched its commercial operations as the second mobile operator in FYROM. COSMOFON during 2003
succeeded in positioning itself very competitively on all offerings at launch, including tariffs and introduced price
scaling and per second billing, an advantage that continues to remain unique to COSMOFON. This, coupled with the
rollout of a nationwide network in record time, (based on COSMOTE's know-how & experience), was the prime
contributor to the successful start of the company. Another differentiating factor, which contributed significantly, was
the use of independent distributors versus competition’s practice to sell mainly through own network. At the end of
2003 COSMOFON numbered 6 own shops and a total of approximately 1,000 points of sale. At year-end the
company’s revenues amounted to 6.7 mil euro.
New Additions & Total Number of Customers in Clobul & Cosmofon
Globul during the last quarter of 2003 added 197,452 net new additions. Of these 134,233 (or 68% of total) were
new prepaid customers and 63,219 (or 32% of total) were contract. Total customers during the period exceeded 1
million, increasing more than 115% y-o-y. COSMOFON added 33,099 net new additions of which 31,234 were
prepaid, with its customer base surpassing 84,000.
Globul1 (Bulgaria)
COSMOFON1 (FYROM)
Total Prepaid
629,588
79,811
Total Contract
373,809
4,552
1,003,397
84,363
q-o-q: 64.6%
Q4 2003
Total Customer base
Customer base growth (y-o-y)
115.3%
Both companies’ operational and financial targets substantially exceeded the initial planning made by COSMOTE and
as a whole the Company received 12.4 mil euro for the management of these two mobile assets.
1
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CHAPTER 5
COSMOTE and the “Athens 2004” Olympic Sponsorship
5.1 Olympic “Technical, organisational and
Educational” Activities
5.2 Olympic “Commercial and
Communication” Activities
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COSMOTE & THE "ATHENS 2004" OLYMPIC SPONSORSHIP
Since 2001, COSMOTE, being part of the OTE – COSMOTE – OTEnet consortium, actively participates in the
organisation of the Athens 2004 Olympic Games. COSMOTE is a Grand National Sponsor of mobile
telecommunications, a title that conveys the highest level of participation in the Athens Olympic Games National
Sponsorship Programme.
COSMOTE’s sponsorship consists of the provision - to the Athens 2004 Olympic Games Organising Committee
(ATHOC) - of voice and data mobile telephony services during the preparation phase and the duration of the Olympic
and the Special Olympic Games.
The Olympic Sponsorship offsets specific benefits for COSMOTE including, among others, the right to use ATHOC’s
ATHENS 2004 intangible assets i.e. the signs and the logo, access to the hospitality program and accreditation rights
during the Olympic period.
COSMOTE recognised the operational challenges that stem from such a project and proceeded in the creation of a
comprehensive operational plan for the 2001 – 2004 period focusing on guaranteeing the flawless
telecommunications coverage of the Games.
The Olympic Sponsorship operational plan’s initial phase was completed in 2002. In 2003 its further reapplication was
continued and enriched with additional tasks and actions relating to legal, organisational, technical, commercial,
communicational and educational issues as well as the ever-important security-related issues.
5.1 Olympic “Technical, Organisational and Educational” Activities
In the framework of Olympic Sponsorship, COSMOTE has carried out a set of crucial projects, namely:
The COSMOTE Olympic Network
COSMOTE immediately after having undertaken the Olympic Sponsorship, initiated the required planning process for
the development of its Olympic Network, based on the specifications prescribed by ATHOC.
COSMOTE proceeded in the expansion of its high-standards extensive network, already in operation, in order to
create the Olympic Network. The project’s budget was almost 50 million EURO; an amount which was invested on
top of other budgeted investments for the further expansion and development of the Company‘s existing
telecommunications network. It should be noted that the additional investment in necessary telecommunications
equipment for the Olympic Network is scheduled to be partly reused beyond the Athens Olympic Games 2004.
COSMOTE has taken into consideration all the essential factors in its planning and development of the Olympic
Network, in order to meet the increased mobile telecommunications requirements during the Olympic Games
according to the specifications given by ATHOC. Thus, the Company’s Olympic Network - in the region of Attica and
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COSMOTE AND THE “ATHENS 2004” OLYMPIC SPONSORSHIP
in the other 4 Olympic cities - is capable to cover the telecommunication needs of a region the size of Peloponnesus
(an area of more than 21,500 sq km). The relevant planning is focusing on achieving a grade of service surpassing the
level of 99%, a value which is internationally considered to be extremely high. Furthermore, the Company has been
supplied and is installing significant additional telecommunications equipment (transceivers, specific transmitters etc.),
aiming at a 33% increase of the existing equipment in the region of Attica.
COSMOTE is totally prompt in its undertaken obligations to ATHOC and carries them out within the preset timeplans.
However, in the scope of providing first-rate telecommunications services to the thousands of visitors, COSMOTE,
beyond its contractual obligations, enhances its network in other regions apart from the Olympic venues, where large
population concentration is forecasted. COSMOTE has also taken the necessary steps for the creation of alternative
routes throughout its entire network, having already included an additional mobile switching center (MSC) for
additional safety. Moreover, it has carried out telecommunications network integrity reviews and is intensifying its
preparations for the handling of extraneous situations.
Telecommunications Command Center - TCC
At the beginning of 2003, COSMOTE commenced, in collaboration with OTE, the preparation for the organisation
and operation of the Olympic Telecommunications Command Center. The center’s main function is the supervision
and management of the Olympic Network prior but mainly during the Olympic and Special Olympic Games, as well
as the seamless briefing, through frequent reports, of COSMOTE’s Network Management Center and ATHOC.
The role of Venue Telecommunications Manager - VTM
In 2003, COSMOTE introduced in its operational structure the role of the Venue Telecommunications Manager
(VTM). The adoption of this institution has proven exceptionally successful and beneficial to all aspects of COSMOTE’s
Olympic preparation.
During the preparation phase, VTMs coordinate all activities and are responsible for the radio network setup in the
installations of their given jurisdiction. They maintain constant communication and close collaboration with the
relevant bodies, the OTE VTMs and ATHOC in order to facilitate the Company’s work in the run-up to the Olympics.
During the Olympic Games, the VTM will constitute the main hub between COSMOTE and ATHOC and will attend to
all technical issues relating every installation where COSMOTE is present.
Sport Test Events
The Sport Test Events are the main testing ground for the Olympic Games. They are taking place so as to offer a
training and familiarisation platform for all teams responsible for installations and all the parameters and technology
systems testing relating to the operation of the Games.
COSMOTE‘s participation in those events proved exceptionally important, since it enabled the company to acquire
invaluable experience pertaining the Olympic Games.
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Up to now, COSMOTE’s network has performed exceptionally well during all Sport Test Events in 2002 and 2003. In
the most recent events that took place between October 2003 and February 2004, the Company’s network operated
with a success rate of 99,7%, fulfilling nearly 3,5 million call requests that took place within and around the sports
venues.
Olympic Games Security & Safety
In 2002, COSMOTE initiated the establishment of a "protection mechanism" for the Company and its human
resources with a clear objective to safeguard its network integrity.
In 2003, the Company proceeded to evaluate and record the basic threats and dangers in view of the Olympic
Games.
At the same time, COSMOTE completed its pre-emptive actions plan for the avoidance of perceived dangers and
began its planning for network operational recovery in case of any unforeseen incidents.
During the same year, COSMOTE commenced its close collaboration with the Olympic Games Security Directorate
(DAOA) and the Ministry of Public Order for the optimal co-ordination on security during the Games.
Human Resources
Based on the Company’s forecasted functions and activities during the Olympic Games, COSMOTE completed 90% within 2003- of its Human Resources Planning. This is a complex process that includes identification of requirements,
recording and description of job roles per operational segment and the characterisation of job positions during the
Olympic period.
Olympic Training
The important task of Olympic Education was also undertaken in 2003 for COSMOTE’s Human Resources as a whole,
aiming at the staff’s sensitivisation for active participation throughout the Olympic preparation period and during the
Games.
Moreover, the Olympic Training provided specialised Olympic knowledge to all those who will actively participate or
contribute in the Company’s work during the Olympic Games.
The Olympic Preparation organisation
The complexity of the whole project, in combination with the breadth of actions which involve the entire Company,
directly or indirectly dictated the need for adopting a consistent Project Management model and the formation of
trans-managerial project teams.
The whole Olympic project is overseen by the Office for Project Handling and Sponsorship Management of the
Olympic Games. COSMOTE also installed the Microsoft Project Server 2002 software, through which all 51 main
Olympic projects are being monitored, aiming at the optimal organisation of the Office, optimised monitoring and
consistent project time planning.
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5.2 Olympic “Commercial and Communication” Activities
Olympic Games Corporate Sales Group
COSMOTE recognises the importance of attracting corporate customers from the international and Greek Olympic
environment. Thus, in 2003 it created the Olympic Games Corporate Sales Group, which comprises a separate
operational unit within the COSMOTE Corporate Clients Sales Department (¢ÈÂ‡ı˘ÓÛË ¶ˆÏ‹ÛÂˆÓ ∂Ù·ÈÚÈÎÒÓ
¶ÂÏ·ÙÒÓ COSMOTE). The team also actively participates in the Telecommunications Consortium’s (OTE - COSMOTE –
OTEnet) Booking and Business Office (BBO), and its objective is the complete and effective provision of
telecommunications services:
◗ To ATHOC and its customers (i.e. accredited media) who will use the special Rate Card products and services.
◗ To other legal entities from abroad, who belong to the wider Olympic environment and intend to use the Company
products and services throughout their stay in Greece during the Olympic Games.
Up to now, COSMOTE has approached and attracted a large number from both of the above-mentioned categories.
Commercial activities
COSMOTE extended and intensified its commercial activities in 2003 seeking to achieve significant business benefits.
In this context, during the first quarter of the year, COSMOTE continued its joint promotional activities with Samsung
(International Olympic Sponsor), while the beginning of the summer season was signalled by the COSMOKARTA
package launch which was accompanied by a disposable KODAK fun camera and additional free talk time.
Subsequently, COSMOTE made commercially available a series of 11 "collector" pre-paid cards which depict Greek
Olympic champions in their important athletic moments.
COSMOTE also held a promotional activity focussing on text messages (SMS) in October 2003 lasting 6 months while
in December 2003, the Company made commercially available the new COSMOTE 2004 billing package that offers
2004 minutes of free talk time for one year and free SMS and MMS.
Prestige Promotional energies
In 2003 two promotional activities that were initiated the previous year were carried on with unique success.
Namely, the "Compete Well" competition was continued and more than 20,000 subscribers took part. Furthermore,
the "Athlopolis" campaign - in collaboration with OTE - continued its tour in further 33 Greek cities attracting more
than 160,000 visitors.
Internal communication
COSMOTE organised various activities throughout 2003 in order to motivate its staff regarding the Olympic Games.
One of the most successful initiatives was the annual "Compete Well" competition which is taking place
simultaneously with the equivalent one for subscribers and the "Athlopinelies" competition for COSMOTE staff’s
children.
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Olympic Communication
In 2003, the principle axes of COSMOTE’s Olympic communications were the mediation and communication of the
company’s Olympic Sponsorship and the enhancement of its image and reputation. The continuing sponsorship of
athletes was promoted through a special advertising campaign, while the attendance of certain athletes in the World
Track Championship in Paris provided wide exposure to the media.
In November 2003, COSMOTE and OTE created four (4) advertising spots in the context of corporate Olympic
communication. The advertising campaign showcases the work undertaken for the creation of a new
telecommunication infrastructure.
Finally, COSMOTE bid farewell to 2003 and welcomed the Olympic year 2004 with a new corporate film announcing
its "presence" at the preparation efforts for the Olympic Games’ Big Moment.
Olympic Hospitality
The Company enjoys exclusive privileges as a Sponsor and has the option to pre-purchase a preset number of
Olympic tickets that can be offered to its chosen associates, customers, strategic partners etc. Moreover, COSMOTE
may offer these tickets through the arrangement of a full Hospitality programme for the publics mentioned above.
Such a programme may include a simple attendance to a sport event and may be extended to a comprehensive
hospitality program that can include, inter alia, accommodation at Olympic hotels, hospitality, transport and the
provision of tickets for attendance at specific sports events.
COSMOTE is regarding Olympic Hospitality as a unique opportunity to promote its sponsorship and overall corporate
profile and to tighten its relations with specific groups (publics - objectives) with mutual benefit. Thus, in 2003, in
collaboration with OTE, it accomplished to step towards the final phase of the realisation of a uniform and targeted
Olympic Hospitality programme.
COSMOTE’s Image as an Olympic Sponsor
Since the beginning of its sponsorship, COSMOTE monitors systematically, via quantitative and qualitative research,
the effect of its Olympic Sponsorship on its corporate image.
The conclusions of its continuous research are especially encouraging since COSMOTE:
i) is amongst the 3 most recognisable Olympic Games Sponsors since 2002 (taking also into account the latest
estimations in November 2003)
ii) strengthens important corporate values connected with its commercial brand through this Sponsorship and finally
iii) is widely considered "as the modern manifestation of Greece that makes all Greeks feel proud of".
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CHAPTER 6
COSMOTE’s Quality Management Systems
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COSMOTE’s Quality Management Systems
Loyal to its values and objectives, and focused on satisfying its customer's needs and realizing its vision to "remain
one of the five best mobile operators in Europe", COSMOTE plans, develops, implements and continuously improves
its Quality Management System throughout all the spectrum of its activities.
Since the beginning of its operations, COSMOTE's aspiration has been to apply quality management throughout the
organization and promote awareness among customers, shareholders, associates as well as society in general.
The Company, by implementing the principals of "Continuous Improvement", has unified and upgraded its Quality
Systems according to ISO 9001:2000, resulting in the official certification of the new unified System by EL.O.T.
(Hellenic Organisation For Standardisation). The following business units are included so far:
"Initial activation & servicing of COSMOKARTA clients, provision of directory inquiries catalogue services (131).
Subscription & complaints / churn / handset renewal programs management for COSMOTE clients. Purchasing
Division of COSMOTE. Design, realization, operation / maintenance of the network and operation / maintenance of
the service systems of COSMOTE".
COSMOTE has commenced the development of the Quality Management System, according to ISO 9001:2000, in
the Commercial and Marketing units, with special emphasis on the level of service rendered in the exclusive
COSMOTE shops network, as well as on those units that develop the new technologies to be implemented.
Furthermore, COSMOTE has already begun the documentation phase of Management Systems regarding:
◗ Environmental issues according to ISO 14001, which will certify COSMOTE's sensitivity regarding environmental
issues as stated in all aspects of its activities,
◗ Health & Safety issues according to ISO 1801, which will substantiate the company's faith in its human resources as
stated through the preservation of a healthy and safe working environment for all its employees.
COSMOTE is planning the implementation of:
◗ The "Commitment to Excellence" phase as defined by EFQM Excellence Model,
◗ Corporate Social Responsibility according to the principals of EFQM once the final version is published. In addition,
apart from complying with EFQM principals, COSMOTE actively supports various Social Responsibility initiatives that
concern its core activities as well as special social programs and charity works. The matters of Social Responsibility
are already considered to be part of the company’s culture and policy.
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COSMOTE’S QUALITY MANAGEMENT SYSTEMS
In addition, COSMOTE is intensifying a Continuous Quality Monitoring on services rendered to its customers. The
company has a well-organised network, voice, system and coverage quality monitoring system, which has been
continuously optimised over the last years.
In the fields mentioned and through the use of KPI's (Key Performance Indicators) the company has a full and
accurate picture of its offered services, thus being able to intervene instantly where and whenever needed by
applying either reparative, but mainly preventive actions. COSMOTE is planning to expand the use of KPI’s
throughout the whole company.
COSMOTE's steps towards further quality improvement are being expanded to the company's international
activities, contributing to the development and implementation of Quality Management Systems. Thereby, COSMOTE
ensures their excellent implementation as well as co-operation, amongst the foreign affiliate companies themselves
and with COSMOTE, resulting in the rendering of high level services.
The Quality Management Systems help COSMOTE in its effort to reach its objectives, to create and maintain a stable
and strong competitive advantage and to meet the challenges to come, such as the coverage of the ATHENS 2004
Olympic Games.
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CHAPTER 7
COSMOTE & Social Responsibility (our CSR program)
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COSMOTE & Social Responsibility (our CSR program)
Since the beginning of its commercial operations, COSMOTE has been involved in a number of social activities,
demonstrating that making a contribution to society is an integral part of its corporate philosophy. Today, as the
leading mobile operator in Greece – and among of the best operators in Europe, in terms of financial performance
and returns – the Company remains committed to maintaining a responsible and active role in the community, and
has thus developed its corporate programme entitled "Participation: Increased Social Responsibility". COSMOTE’s
social role is evident throughout all of its business activities, in reaffirming the Company’s conviction that social
responsibility goes hand in hand with sustainable development.
Telecommunications Network
COSMOTE has developed its telecommunications network, so as to make the invaluable benefits of communication
available even in the most remote parts of the country. With the aim of making mobile telephony accessible to
everyone in every corner of Greece, COSMOTE has made a significant capital investment in base stations, even in
geographically isolated regions with small populations, without taking into consideration any financial benefits.
The company follows the same philosophy in the other countries of the Balkans where it operates. An example of
this is that while faced with adverse conditions in local infrastructure upon the development of its network in
Albania, Bulgaria and the Former Yugoslav Republic of Macedonia, COSMOTE intervenes with projects such as the
development or improvement of the roads, and the supplying electricity to entire regions.
As a Grand National Sponsor of the ATHENS 2004 Olympic Games, the Company has undertaken the challenge of
meeting the increased mobile telephony needs during the Games in the most effective way possible. COSMOTE’s
"Olympic" network has already been successfully tested during the Sports Events.
Finally, during 2003, in instances where assistance was required, COSMOTE helped to locate and rescue people in
danger, thanks to the high degree of dedication and expertise of its workforce and its superb, state-of-the-art
telecommunications network.
Products & Services
The Company follows the same philosophy, concentrating on social benefits, in the services it provides to its
customers, apart of the services offered to its entire customer base. COSMOTE designs and implements mobile
services in order to meet the needs of special social groups. An example is the programme exclusively designed and
developed for the hearing-impaired, which offers text messaging at a reduced rate.
In addition, the Company offers free access to the SOS 1056 helpline created by the non-profit children's
organisation, "The Child’s Smile" to offer psychological support to children suffering from health problems, financial
difficulties, or other problems.
Human Resources
COSMOTE offers its employees, its most valuable resource, a modern working environment, with equal rights and
opportunities for all, which meets even the most demanding standards.
COSMOTE’s employees set a fine example of social awareness, participating readily in Company’s various initiatives
such as blood donations and recycling programmes.
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∏ ™Àªª∂∆√Ã∏
COSMOTE
& SOCIAL
∆∏™RESPONSIBILITY
COSMOTE ™∆∏¡
(OUR
∫√π¡ø¡π∞
CSR PROGRAM)
Sponsorship Programme
During 2003, COSMOTE, having as a vision that a better world can become a reality by embracing social
responsibility allocated a significant part of its revenues for the implementation of its extensive social contribution
programme which includes initiatives aiming to improve the quality of living.
The Company’s social activity covers the entire spectrum of everyday life, focusing on Social Care, Education, Culture
and Environment.
The company also sponsors conferences on Corporate Social Responsibility, such the 14th Annual Conference of the
Association of Chief Executive Officers, entitled: "The next step in management: Social Responsibility, Trust &
Competitive Advantage". COSMOTE also supported the conference organised by the Hellenic-American Chamber of
Commerce, "Corporate Social Responsibility: Building Responsible Companies", where it presented the corporate
programme "Participation", an integral part of its business strategy and operations. Finally, the Company sponsored
the award for the Social Messages Category at the Ermis Awards run by the Association of Advertising &
Communications Companies. This activity is indicative of the Company’s philosophy that supports every effort of
corporate responsibility and aims at the cultivation of social awareness.
Social Care
From the beginning of its commercial operations, COSMOTE has focussed its efforts on children in need.
As such, for the fourth consecutive year, the company has given part of its revenues from New Year’s Eve text
messaging to four organisations that provide care and support to children. In 2003, the institutions that benefited
were "Open Arms", "Care", "Flame" and the "Spastics Society". They were chosen for the excellent work they do
in providing essential help to children and adults inflicted with illnesses and other disabilities. For yet another year,
COSMOTE instead of purchasing Corporate Christmas gifts, it donated the respective funds to charity. In 2003, the
recipient was "The Child’s Smile".
At Christmas time, COSMOTE representatives visited the Paidon Children’s Hospital at bringing seasonal cheer and
gifts to the children.
In addition, the Company was involved in the restoration of the Oncological Clinic at the Kyriakou Children’s
Hospital, a project of vital importance initiated by the children's "Open Arms" institution which will provide hospital
care of the highest standards to sick children.
COSMOTE’s concern extended as far as the remote island of Lipsi, where the company contributed to the
reformation of the island’s health centre. This important project provided the islanders with immediate, on-the-spot
health care.
Finally, in partnership with "Open Arms", the Company contributed to the creation of the nursery school on the
remote island of Psara, to offer education to pre-school children.
By contributing funds for a special edition of the magazine Salve written in Braille, the Company viably provides
support for the needs of the sight-impaired. Similarly, the Company, among others, was involved in the planning
stage of the third-generation mobile telephony pilot programme for the hearing-impaired and the development of a
simultaneous visual contact service.
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Focusing on people in need, COSMOTE is participating in programmes such as "Hermes – Accessible Choice",
created by the Athens Chamber of Commerce and Industry, that facilitates the accessibility of COSMOTE shops
throughout Greece and improves the lives of people with disabilities and mobility problems. This measure is
considered more than necessary, given the fact that according to figures from the Ministry of the Environment, 50%
of the entire population encounter problems of accessibility, especially if people with permanent disabilities, people
with temporary disabilities, the elderly, pregnant women and small children are added to the list.
COSMOTE understands how important it is to protect the health of people in remote parts of the country, and for
four years has run a preventive medicine campaign in partnership with the "Open Arms" institution.
Campaigns realised in 2003 in Thrace, the islands of the north-eastern Aegean and the remote islands of the
Dodecanese have been particularly successful and warmly welcomed by the local population. Participation this year
was higher than ever, reaching 100% of nursery and primary school children and almost 60% of high school students
and adults. The programme included preventive health checks, health information and raising awareness for parents
and teachers. In addition, several events were organised for the children’s entertainment.
It is worth noting that between 1998 and 2003, during the campaigns, more than 18,000 people were examined
and inoculated, and several were found to have serious health problems that were successfully treated by the
doctors.
Demonstrating a practical interest in culture and in local communities often forgotten, the company contributed to
the organisation of the Yiannis Kotsiras concert in Santorini. The proceeds went towards the building of the open-air
theatre at Oia, and the creation of a new boat route from Oia to Thirasia making the communication of the few
inhabitants of the small island easier.
For COSMOTE, the protection of our cultural heritage and the sharing of knowledge are issues of vital importance.
As such, it supported the Korgialeniou Library in Kefallonia, a long-standing beneficial organisation for the local
community, in order to ensure its continued operation, after facing financial exhaustion due to cuts in government
funding.
Education
For the second consecutive year, thanks to "COSMOTE Scholarships", 10 young people from all over the country –
first year undergraduate students of Greek universities – were awarded scholarship for their studies. "COSMOTE
Scholarships" is an institution that promotes the cause of education, putting in action the company’s strong interest
in the country’s rural regions.
Ten first-year students were each awarded a scholarship of 12,000 euro, while another 16 candidates who excelled in
their studies received honorary distinctions accompanied by the amount of 1,000 euro.
COSMOTE Scholarships are granted to less privileged students from remote regions with a low birth rate or rural
areas hit by domestic migration. The impressive number of applications received by the Company proves the great
impact of the programme on the country’s young people. It is an important initiative that COSMOTE is committed to
support in the future.
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∏ ™Àªª∂∆√Ã∏
COSMOTE
& SOCIAL
∆∏™RESPONSIBILITY
COSMOTE ™∆∏¡
(OUR
∫√π¡ø¡π∞
CSR PROGRAM)
In 2003, as in previous years, COSMOTE helped improve the country’s education system by donating computers and
other equipment to dozens of schools, principally in rural areas.
Environment
This year was the fourth consecutive year that COSMOTE, in the framework of activities focusing on the protection
of the environment, sponsored two programmes developed by the Hellenic Ministry of the Environment: ‘Clean Seas
and Shores’, and ‘Rivers and Lakes of our Country’. The main aims of these two programmes are to protect water
resources and inform and raise awareness on environmental issues. COSMOTE has created a special information hotline providing the statistics on the cleanliness of the coastal regions in every part of Greece.
Furthermore, in an effort to safeguard the environment’s natural resources, COSMOTE has also implemented an
extensive internal company programme to recycle large quantities of paper and ink.
Finally, COSMOTE sponsored "Photocommunication", a competition run by the Athens Urban Transport
Organisation, which attempted make the youth of Athens become more familiar with public transport and
encourage them to use it more often, thus improving traffic conditions in cities.
Culture
For the second year running, COSMOTE sponsored celebrations in the Old Town of Xanthi, which are an established
and successful part of the cultural activities for the year in Macedonia and Thrace.
In addition, the company was the main sponsor behind the establishment of the Archaeological Museum of Kifisia,
which houses superb findings from the surrounding area of north Attica.
Between January and July 2003, COSMOTE supported the Greek Presidency of the European Union, which improved
the country’s international profile and was a showcase for the Company’s technology. COSMOTE provided
technological know-how to meet the telecommunications needs during the six-month duration of the Greek
Presidency, along with advanced products and services in the field of mobile telephony.
During 2003, COSMOTE also implemented its social programme, showing that in terms of social responsibility, the
company is able to achieve the goals it sets. The Company’s continuing growth and leading role in the international
business arena can only increase the sense of responsibility and contribution for our social environment.
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CHAPTER 8
COSMOTE group of companies
(Subsidiaries and Associated)
8.1
COSMO-HOLDING ALBANIA
8.2
ALBANIAN MOBILE COMMUNICATIONS (AMC)
8.3
COSMO-ONE HELLAS MARKET SITE S.A.
8.4
COSMO-ª∂°∞§∞ ∫∞∆∞™∆∏ª∞∆∞ S.A.
8.5
OTHER PARTICIPATIONS
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COSMOTE group of companies (Subsidiaries and Associated)
COSMOTE
COSMO-HOLDING
ALBANIA: 97%
CosmoONE HELLAS
MARKET SITE: 26%
COSMO-MEGALA
KATASTIMATA: 40%
ALBANIAN MOBILE
COMMUNICATIONS: 85%
8.1 Cosmo-Holding Albania
"Cosmo-Holding Albania Société Anonyme", which operates under the brand name "Cosmo-Holding Albania"
("CHA"), was incorporated as a holding company on July 14, 2000. Its registered office is at 44, Kifissias Avenue,
Maroussi, Attiki, Greece. The duration of the company is 50 years.
Its initial capital, which was fully paid, was 16 billion GRD with a nominal value of 10,000 GRD per share, represented
by 1,600,000 shares. In February 2001, the company’s share capital was increased by 16.2 billion GRD to 32.2 billion
GRD represented by 3,220,000 shares with a nominal value of 10,000 GRD each. In June 2002, the share capital was
further increased by 3,260,000 GRD to 32,203,260,250 GRD with a simultaneous increase of the nominal value of
each share from 10,000 GRD to 10,001.013 GRD to reflect the restatement of the share capital and the nominal
value per share in euro. CHA’s fully paid share capital in Euros is currently 94,507,000 euro represented by 3,220,000
shares with a nominal value of 29.35 euro each.
The current shareholders of CHA are as follows:
Shareholder
COSMOTE
Nymber of Shares
%
3,123,400
97.0%
96,600
3.0%
3,220,000
100.0%
Telenor Mobile
Communication A.S.
TOTAL
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COSMOTE GROUP OF COMPANIES (SUBSIDIARIES AND ASSOCIATED)
The members of CHA’s Board of Directors, each of whom has been elected for a three year term, expiring on 9 June,
2005, are:
Chairman and Managing Director
Elias Fotiadis
Vice Chairman
Megaklis Stoukidis
Director
Nikolaos Tsolas
Director
Irini Nikolaidi
Director
In August 2000, COSMOTE acquired from the Albanian Ministry of Public Economy and Privatisation, through CHA,
85% of the share capital of AMC, for a purchase price of 85.6 million USD. AMC holds a license to operate a 900
network in Albania. The purchase price for the shares of AMC was payable in two instalments: the first instalment of
42.8 million USD was paid on August 22, 2000, and the second instalment was paid on February 20, 2001, through
the capital increase of CHA.
COSMOTE also funded its participation in the share capital increase of CHA (February 2001) through the net
proceeds of the Combined Offering.
The third audited financial statements of COSMO-HOLDING ALBANIA refer to the period ended December 31, 2003.
The table below presents the key financial data of CHA for years December 31, 2002 and 2003:
(euro, thousands)
Current assets
Non-current assets
Fixed assets, net
Total assets
Current liabilities
Debt
Other long term liabilities
Share capital
Paid in surplus
Retained earnings / (accumulated deficit)
Total liabilities and shareholders Equity
Operating expenses
EBITDA
Net loss (after taxes)
2002
869
16,868
69,673
87,410
2003
636
93,572
0
94,208
750
0
9,864
94,507
0
(17,711)
87,410
420
0
13,922
94,507
0
(14,641)
94,208
0
(26)
(26)
(3,487)
0
(16)
(16)
3,070
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8.2 Albanian Mobile Communications sh.a (AMC)
"ALBANIAN MOBILE COMMUNICATIONS Sh.a" (AMC) has its registered office in Tirana at Rruga Gjergj Legisi,
Laprake, Albania.
AMC’s share capital is Leke 813,822,000 represented by 813,822 shares with a nominal value of 1,000 Leke per
share. Prior to the acquisition of 85% of the share capital of AMC by CHA, AMC was 100% owned by the Albanian
Ministry of Public Economy and Privatisation. The current shareholders of AMC are as follows:
Shareholder
Nymber of Shares
%
691,749
85.0%
Albanian Ministry of Public
Economy and Privatisation(1)
122,073
15.0%
TOTAL
813,822
100.0%
(1) The Albanian Ministry of Public Economy and Privatisation has decided, according to the privatization law for
AMC, to transfer 2.38% of the outstanding shares held by it to employees of AMC in exchange of the shadow
shares that the employees hold.
On 31 December, 2003 AMC had 309 employees.
AMC is managed by its Supervisory Council and Board of Directors. The Supervisory Council consists of three
members: Ioannis Kyriakakis, President, Megaklis Stoukidis, Vice President and Mr. Ilias Duka, who represented AMC’s
employees. The Supervisory Council elects the Board of Directors, the members of which currently are as follows:
Elias Fotiadis
Stefanos Oktapodas
President
Vice President
Managing Director
Nikolaos Tsolas
Director
Irini Nikolaidi
Director
AMC which has conducted operations since 1996, was the sole provider of mobile telecommunications in Albania
until February 2001, a second mobile license in Albania was awarded to Vodafone pursuant to an international
tender Vodafone commenced operation of its network in Albania in August 2001. Today AMC’s network operates in
the GSM 900 as well as the DCS1800 frequencies. Furthermore, within the framework of the privatisation of
Albtelecom, the Albanian fixed telephony company, the Albanian Government granted to Albtelecom in accordance
with the Law 9127/29-7-2003 the right to obtain a third license for the provision of mobile telecommunications
services in the 900 and 1800 Mhz frequencies, under the condition that the mobile telecommunications services will
be offered by a new company, wholly owned by Albtelecom. The Telecommunications Regulatory Entity ("TRE") has
granted this third license to the 100%-owned subsidiary of Albtelecom, "IGO Mobile Sha".
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In June 2002, following the request of the TRE, the Network Destination Code ("NDC") was changed from 038 to
068. During 2002 AMC started the "Data Transmission Network Planning" project which today gives the capability
to its customers to transfer data through AMC’s network. Furthermore, in January 2003, following a resolution
(130/30.1.2003) by the TRE, AMC was granted a license to operate an LMDS network.
As at 31December, 2003, the customer base of AMC was 18% higher than a year earlier with 592,804 customers
(compared to 501,147 at the end of 2002). AMC’s estimated market share was 55% at end 2003. Of these
customers, 578,787 (97.6% of the customer base) were prepaid and the rest (14,017) were contract customers.
In December 2001 a management contract for the provision of consulting services (technical, commercial, legal
financial etc.) was signed between COSMOTE and AMC. The contract is for an indefinite duration and can be
terminated with a one (1) month’s notice by either party. Greek law governs the contract and the courts of Athens
will settle any dispute for this contract.
The following table presents summary financial information, extracted from the relevant audited financial statements
of AMC prepared in accordance with US GAAP, for AMC as at and/or the years ended December 31, 2002 and
2003:
(euro, million)
Turnover
2002
20031
101,309
106,817
Functional Expenses
33,593
45,714
Earnings before taxes, interests, amortizations (EBITDA)
67,716
61,103
% on Turnover
66.8%
57.2%
Amortizations
15,383
18,079
Earnings before taxes and interests
52,333
43,023
Net Profit
29,084
32,333
% on Turnover
28.7%
30.3%
The Albanian Government has requested that AMC distribute dividends to it in the amount of 3,600,000 euro for
the period from 01.01.2000 until 22.08.2000 (date of the acquisition of 85% of AMC by CHA) by the General
Meeting of the Shareholders of AMC held on 31.5.2001 decided not to distribute such dividends. AMC has obtained
an opinion of its legal counsel that this decision of the General Meeting of AMC regarding the non-distribution of
dividends is valid. The Albanian Government through the "Directorate of the Biggest TaxPayers" levied a tax on AMC
in the amount of 88 million Leke (approximately 630,000 euro) in respect of the claimed dividends. AMC appealed to
the Albanian Court of Appeal, which ruled to accept AMC’s claim. The Albanian Government has made a further
appeal to the High Court. The case is still pending.
1
Converted in euro at the average leke/ euro exchange rate during 2003 of 1 leke = 0,007271 euro
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In 2003, AMC participating in the consolidated turnover of the Company by 7.9% and in the consolidated EBITDA
margin by 10.6%. The turnover of AMC was 5.4% higher in 2003, than in 2002, and exceeded 106.8 million euro,
while AMC’s profits (as represented in the local currency) increased 9.6% year-on-year. The Albanian market appears
stable given that the penetration of mobile telephony is one of the highest in the Balkans, excluding Greece.
Furthermore, the appropriation cost remained relatively low for 2003 and, as a result, EBITDA remained high at over
61.1 mil euro. Moreover, despite intense competition in the Albanian market in 2003, AMC achieved an EBITDA
margin of 57.2%, one of the highest among European mobile telephony companies. The EBITDA margin was
negatively affected by the imposition of call termination charges between the two mobile telecommunications
companies at the beginning of 2003. AMC’s growth is also reflected in its high net profit margin, which exceeded
30.3% in 2003, compared to 28.7% in 2002.
AMC distributes its products through a network of shops and dealers of five major distributors that covers Albania.
In 2002, AMC started the operation of its own first shop and as at the end of 2003, had opened two additional
shops exclusively selling AMC’s products.
The penetration of mobile telephony in Albania increased further during 2003 and is currently estimated at
approximately 34%, as compared to the stagnant 7% penetration of fixed telephony in the country. The planning for
the development of the telecommunications network of AMC has been completed, resulting in the upgrade and
improvement of the network, so that by the end of 2003 coverage reached approximately 80% of Albania
geographically and approximately 90% of the population. The further development of the network will principally
cover capacity needs, given that nationwide geographical coverage has nearly been achieved.
In February 2004, the Court of Appeals of Albania ruled that AMC must pay an indemnity of 66,549,000 Leke
(approximately 512,000 euro) for the violation of certain property rights of a third party property, even if AMC had
legally leased this property from the competent Forest Service. This decision is currently enforceable, but AMC has
filed a petition of appeal to the High Court.
8.3 COSMO-ONE Hellas Market Site S.A.
COSMO-ONE Hellas Market Site S.A. ("CosmoONE") was founded by COSMOTE and DIENEKIS PLIROFORIKI in June,
2000 (FEK 4263/12.06.2003). The corporate name of the company is "COSMO-ONE HELLAS MARKET SITE S.A." FOR
THE PROVISIONING OF E-COMMERCE SERVICES and it operates under the brand name CosmoONE. Effective
16.04.2004 its registered offices relocated from Ag. Paraskevi to N. Iraklio Attikis. The duration of the company is 50
years.
The legal object of CosmoONE is the establishment and provision of B2B e-commerce services. CosmoONE uses the
software of the American company COMMERCE ONE, according to which CosmoONE has established and operates
a horizontal market place offering electronic sales, purchasing and e-auction services.
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The main object of CosmoONE is e-procurement, which it realises through its e-market place (www.marketsite.gr),
utilizing two basic purchase scenarios - purchases through an electronic price list and purchase through e-auctions.
Electronic price lists permit users to easily find the product or service needed. An organization that wants to purchase
products at the lowest possible price or sell reserves can contact CosmoONE, which "hosts" an e-auction according
to the wishes of the buyer or the seller, respectively.
CosmoONE’s target is to simplify, through its services, the commercial exchange process between companies and to
minimise the costs relating to procurements and orders, in order to make e-commerce easily accessible to every
company, irrespective of its sector and size, by adding value to the participants.
The initial share capital of CosmoONE was 300,000,000 GRD, with 80% owned by the Company and 20% by
DIENEKIS PLIROFORIKI. In October 2000, the share capital increased to 2 billion GRD. In March 2001, the General
Meeting of the Shareholders approved a further increase of the share capital to 2.5 billion GRD. In June 2002 the
General Meeting of the Shareholders decreased the share capital and the nominal value of the shares due to their
restatement in euro.
In June 2003, the General Meeting of the Shareholders approved the decrease of the share capital further to
3,700,000 euro and the nominal value per share from 2.93 euro to 1.45 euro. Finally, in April 2004,in order to
improve CosmoONE’s equity ratio as required by law, the General Meeting of the Shareholders approved the increase
of the share capital by 1,766,100 euro through the issuance for cash of 1,218,000 new shares, with nominal value
1.45 euro per share, which were issued at a price above par of 2.50 euro per share. The final date for the deposit of
the amount of increase expires on 07.06.2004. Today, the share capital of the company amounts to 3,625,000 euro
represented by 2,500,000 nominal shares, with a nominal value of 1.45 euro each.
OTE acquired its interest in the share capital of CosmoONE in September 2000, while Alpha Bank and National Bank
of Greece acquired interests in the capital increase effected in March 2001.
The Shareholder’s Agreement signed on March 2001 among the company’s shareholders, has the following main
provisions:
◗ Alpha Bank, National Bank of Greece and DIHNEKES PLIROFORIKI S.A. were not permitted to transfer their shares
to a third party (other than an affiliated company) prior to June 6, 2003 without the approval of COSMOTE and
OTE after June 6, 2003 COSMOTE and OTE have a right of first refusal regarding the sale of shares of CosmoONE
owned by Alpha Bank, National Bank of Greece and DIHNEKES Plirophoriki S.A.
◗ Each one of Alpha Bank, National Bank of Greece and DIHNEKES PLIROFORIKI S.A., has the right to appoint one
member to the Board of Directors, for as long as it owns 10% of CosmoONE’s share capital.
◗ In case vertical companies from various sectors wish to participate in CosmoONE, the percentage holding of
COSMOTE will be reduced pro rata.
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As of today, the shareholders of CosmoONE are as follows:
Name of Shareholder
Shares
Number
%
COSMOTE
650,000
26
OTE
650,000
26
DIHNEKES PLIROFORIKI
450,000
18
Alpha Bank
375,000
15
National Bank of Greece
Total
375,000
15
2,500,000
100
The company’s Board of Directors serves a three year term and consists of the following nine Directors (30.04.2002):
George Ioannidis
Evangelos Rizos
Chairman
Vice Chairman
Director1
Elias Fotiadis
Director
Efthimios Papapostolou
Director
George Georgitsis
Director2
Epaminondas Gardelis
Director
Sotiris Lyssandrou
Director3
Charalambos Papanagiotou
Director4
The General Manager of CosmoONE is Mr. Athanassios Petmezas.
As at December 31, 2003, CosmoONE employed 29 people.
CosmoONE started commercial operations in December 2000. Among its clients, there are significant companies,
acting as both buyers and sellers, from the services, industry, information technology and commerce sectors.
During 2003, the total value of transactions through CosmoONE’s electronic market was 308,000,000 euro. From
the launch of e-commerce operations, in January 2001, until now, over 600,000,000 euro of commercial transactions
have been conducted. The number of transactions completed in 2003 was 39% higher than in 2002.
1
Mr. Rizos is the member of the Board of Directors appointed by DIENEKIS
Mr Georgitsis was appointed as member of Board of Directors at 11.4.2003, to in replace Mr. Kouvatsos, who resigned
3
Mr. Lyssandrou is the member of the Board of Directors appointed by the NATIONAL BANK OF GREECE
4
Mr. Parlitsis is the member of the Board of Directors appointed by ALPHA BANK
2
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During 2003, CosmoONE conducted 188 auctions reflecting an increase of 96% as compared to 2002, on behalf of
more than 1,050 participants. Customers requesting that CosmoONE host auctions on their behalf realized savings
averaging 22%.
By the end of 2003, more than 400 companies had made use of the capabilities of e-commerce through the
products and services of CosmoONE.
CosmoONE is planning to introduce value added services, such as the capability of electronic monitoring of the price
lists, means of shipment and insurance, connectivity with the global commercial network of COMMERCE ONE and
sourcing services in the near future.
The company's third financial year ended as at 31.12.2003.
The following table presents summary financial information, for CosmoONE for the years ended December 31, 2002
and 2003:
(euro, thousands)
Current assets
Non-current assets
2002
2003
456
390
109
150
Fixed assets, net
4,137
2,693
Total assets
4,702
3,233
Current liabilities
2,269
2,752
Debt
Share capital
Retained earnings / (accumulated deficit)
0
0
136
175
7,337
3,637
(5,040)
(3,331)
4,702
3,233
1,393
1,803
(2,149)
(1,930)
Operating expenses
EBITDA
(756)
(127)
(2,961)
(1,992)
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8.4 COSMO-MEGALA KATASTIMATA S.A.
"COSMO-MEGALA KATASTIMATA S.A. OF LP AND MUSIC PRODUCTS E-COMMERCE" was incorporated in Greece
on September 8, 2000 and operates under the brand name "COSMO-MEGALA KATASTIMATA S.A.". Its registered
address is located at Halandri, Attiki, Greece. The duration of the company is 50 years.
COSMO-MEGALA KATASTIMATA’s initial share capital was 200 million GRD represented by 20,000 shares with a
nominal value of 10,000 GRD per share. In June 2002, the share capital was increased to 20,250 GRD with a
simultaneous increase in the nominal value per share from 10,000 GRD to 10,001.013 GRD reflecting the
restatement of the share capital in euros. The current share capital expressed in euro is 587,000 euro represented by
20,000 shares with a nominal value of 29.35 euro each. Transfers of shares requires the consent of the General
Meeting of the Shareholders. The table below sets forth the shareholders of COSMO-MEGALA KATASTIMATA:
Shareholder
Number of Shares
Vivere Entertainement1
COSMOTE
%
12,000
60%
8,000
40%
TOTAL
20,000
Successor to the founding shareholder "MEGALA KATASTIMATA SA".
100%
1
The objects of COSMO-MEGALA KATASTIMATA S.A. according to the resolution of the General Meeting of
Shareholders on 17.06.2003 are:
a. The e-commerce of music products and services, related to music and sound (i.e. LP, tapes, CD, etc.) and
entertainment in general, PCs and their software and hardware, as well as telephony products.
b. The establishment and processing of a digital software and its technical characteristics, such as ringtones and
logos, MMS and every type of documents, of multiple types of mobile devices and their promotion by e-mail or
internet or mobile telecommunications companies.
COSMO-MEGALA KATASTIMATA S.A. is a joint venture between COSMOTE and "VIVERE SA" which is the successor
to "MEGALA KATASTIMATA", the Greek licensee of Virgin trademarks.
The company’s Articles of Association provide that, for so long as the shareholding of COSMOTE in COSMOMEGALA KATASTIMATA is at least 8%, COSMOTE has the right to appoint two members to the Board of Directors
(including the Vice-Chairman).
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The company’s Board of Directors, which serves a three year term, consists of the following:
Konstantinos Piladakis
Elias Fotiadis1
Panagiotis Kalkalos
Chairman
Vice Chairman
Director
Stavros Piladakis
Director
Konstantinos Papanastasiou
Director
Sotirios Mitsidis
Director
1
Irini Nikolaidi
1
Director
Mr. Fotiadis and Ms. Nikolaidi are the two members of the Board appointed by COSMOTE.
Moreover, the following matters, in order to be decided upon, require the approval of COSMOTE:
i. The appointment of the General Manager,
ii. The approval of contracts falling under article 23a of C.L. 2190/1920,
iii. The assumption of any commitment above sixty thousand euro (60,000 euro), or the purchase of merchandise
under contracts licensed by COSMO-MEGALA KATASTIMATA S.A., for amounts above one hundred twenty
thousand euro (120,000 euro), the withdrawal or deposit, collection and issue of bank orders, issuance and
endorsement of cheques and promissory notes of over one hundred twenty thousand euro (120,000 euro),
iv. The increase of the share capital through the issuance of new shares or a convertible loan.
On 31 December 2003 the General Manager of the company was Mrs. Efthimia Psilia. At the end of 2003 the
company employed three people.
The company commenced commercial activities in November 2000, in the field of e-commerce and has constructed
an electronic store for the sale of music. This shop (www.virginmega.gr), which is a website for music news and the
purchase of CDs and DVDs, opened commercially on December 12, 2000 and is considered as a leader in the
purchasing and distribution of such products in the Greek market.
The table below presents the key financial data of COSMO-MEGALA KATASTIMATA S.A. for third fiscal period.
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The following table presents summary financial information, for COSMO-MEGALA KATASTIMATA S.A. for the years
ended December 31, 2002 and 2003:
(euro, thousands)
2002
2003
Current assets
1,857
2,884
Non-current assets
10
10
129
111
Total assets
1,996
3,005
Current liabilities
1,360
2,307
Fixed assets, net
Debt
0
0
0
0
587
587
Share capital
Paid in surplus
37
85
Retained earnings
10
24
1,996
3,005
1,802
1,941
Operating expenses
430
486
EBITDA
1,372
1,455
1,016
962
COSMO-MEGALA KATASTIMATA S.A. has its own website www.virginmega.gr. The company, with its successful
presence to the above sectors managed to attract a significant number of consumers that purchase by using ecommerce service.
COSMO-MEGALA KATASTIMATA designed and developed, in collaboration with COSMOTE, the services Ringtones,
Logos, MMS (Wallpapers, Screensavers, Themes and Polyphonic ringtones) of MyCosmos, which has experienced
commercial success since its launch. Furthermore, the company is responsible for the content of its website
www.virginmega.gr.
COSMO-MEGALA KATASTIMATA intends to upgrade its services and introduce new products and services to become
the leader in Greece in e-commerce of music and other related products. COSMO-MEGALA KATASTIMATA’s strategy
is based on the development of innovative services and products, as well as the provision of high-quality customer
service.
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8.5 Other Participations
In September 2003, COSMOTE participated in the tender by the Republic of Cyprus for the granting of a second
mobile telecommunications license in Cyprus. COSMOTE participated in this tender through the Cypriot company,
COSMOTE TELECOMMUNICATIONS (CYPRUS) LIMITED (COSMOTE CYPRUS), in which COSMOTE held 65% of the
share capital. °∂ƒª∞¡√™ ∞µ∂∂ and CYPRUS TRADING CORPORATION LTD each own 17.5% of the share capital of
COSMOTE CYPRUS. The current paid up share capital of COSMOTE CYPRUS is 100,000 CYP represented by 100,000
nominal shares with a nominal value of 1 CYP each.
COSMOTE CYPRUS decided to withdraw from the tender, considering that according to its business plan for this
specific investment any further participation in the next bidder rounds would be unprofitable. In April 2003,
COSMOTE started planning its withdrawal from COSMOTE CYPRUS. Following this, the latter changed its corporate
name.
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CHAPTER 9
Summary Discussion and Analysis of Financial
Condition and Results of Operations
9.1 Summary Consolidated Financial Results
9.2 Operating Review
9.3 Capital Expenditure Plan
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Summary Discussion and Analysis of Financial Condition and
Results of Operations
9.1 Financial Review
The following summary discussion and analysis of COSMOTE's financial condition and results of operations is based
upon and should be read in conjunction with the Company's U.S. GAAP financial statements for each of the two
years ended December 31, 2002 and 2003, which have been audited by Ernst & Young S.A., independent public
accountants.
9.1.1 Summary Consolidated Financial Results
COSMOTE reports consolidated financial results (for the twelve months ended December 31, on a yearly basis).
Consolidated financial results included the financial results of AMC1 (Albanian Mobile Communications sh.a).
CONSOLIDATED RESULTS FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 2002 AND 2003 (US GAAP)
Amounts in euro (‘000),
Except per share data
2002
2003
Revenues
1,201,328
1,357,241
Of which telecom revenues
1,173,805
1,316,996
EBITDA
520,419
576,001
EBITDA Margin
43.3%
42.4%
EBT 361,675
408,786
13.0%
Net Income (after taxes)
235,322
258,854
Net Income (after minority interests)
229,316
252,876
Net Income Margin
19.1%
18.6%
Earnings per Share (euro)
0.695
0.766
Weighted average number of
Shares outstanding
330,047,910
330,129,312
% change
13.0%
12.2%
10.7%
10.0%
10.3%
9.9%
Group operating revenues for the period under review amounted to 1,357.2 mil euro, up 13% y-o-y, mainly driven by
continually enhanced usage in Greek operations, combined with stable performance in the Albanian operations.
Within a challenging competitive market and despite ongoing regulatory changes (that do not allow for a direct
comparison y-o-y2), COSMOTE's group EBITDA margin stood at 42.4%.
1
Consolidated results also include COSMO-HOLDING ALBANIA, section 8.1 of this Annual Report. More details on AMC in
section 9.1.2 and 8.2 of this Annual Report.
2
Namely: Higher M2M termination charges in Greece, introduction of M2M charges in Albania, change in OTE’s accounting
policy regarding F2M revenues.
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SUMMARY DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Group Earnings amounted to 252.9 mil euro (+ 10.3% y-o-y), with net income margin at 18.6%. It is also noted that
group free cash flow was almost 10 times higher than FCF at the end of 2002 and reached 140.6 mil euro (post full
2002 dividend payment of 115.6 mil euro in cash). Net Debt stood at 211.2 mil euro significantly lower than 9m-03
and FY-02 (305.4 mil euro and 361.3 mil euro respectively).
Total group operating revenues for the year ended December 31, 2003 increased by 13% to reach 1,357.2 million
euro (including approximately 12 mil euro for the management of Globul and COSMOFON). Excluding the change in
OTE’s accounting policy regarding Fixed to Mobile revenues (that are recorded net instead of gross since the end of
Q1-03), y-o-y group operating revenue growth at the end of 2003 would have been approximately 16%. The overall
revenue increase mainly reflects the 13.8% increase in airtime revenues, the 21.2% increase in monthly service fees,
the 7.4% increase in SMS revenues, the 35% increase in roaming revenues and the 5.5% increase in interconnection
revenues. Revenues from telecommunications services increased by 12% during the period under review, representing
approximately 97% of total revenues.
The key driver behind the healthy revenue growth is the significant increase in COSMOTE's (domestic operations:
GREECE) traffic volumes that during the twelve months ended December 31, 2003 increased by approximately 34%
y-o-y.
The significant tariff cuts (on average -25%) effected with the introduction of the bundled packages were offset by
the aforementioned traffic increase, evidence of ongoing positive usage elasticity. As a result COSMOTE’s (domestic)
revenues grew by 13.4% with airtime revenues increasing by 16.5%.
In addition data revenues (which include SMS, MMS, and other "soft data" revenues from Value Added Services)
represent approximately 12%1 of total telecommunication revenues and 12.6% of domestic operations revenues. The
Company has (since launch) recorded over 270,000 MMS users that currently send on average around 25,000 MMS
per day.
Roaming revenues grew y-o-y by 35%, accounting for 3.2% of total consolidated revenues, from 2.6% a year ago.
Up to the end of December 2003 the Company has signed 307 roaming agreements in 148 countries.
ARPU & AMOU data (non-consolidated results: GREECE standalone)
AMOU, blended (min)
AMOU, contract (min)
ARPU, blended (euro)
ARPU, contract (euro)
1
FY-02
Q1-03
H1-03
9m-03
FY-03
98
96
101
108
113
169
180
191
205
213
30
27.5
28.0
29.1
29.5
46.7
44.3
46.4
48.9
49.3
Data revenues amount to 160.5 mil euro (139.1 mil euro from SMS)
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Blended AMOU1 during FY-03 has increased by 15.3% (y-o-y) to reach 113 min. This is driven by the continuous
quarterly strong growth in contract AMOU that at the end of FY-03 was 44 minutes higher compared to a year ago
(26% increase). This strong positive trend, a continuation of the trend that started in 2002 and was enhanced on a
quarterly basis throughout 2003, once again underpins the fact that voice usage represents the key growth driver in
the Greek mobile market.
COSMOTE blended ARPU2 for the period under review (at 29.5 euro) was slightly lower compared to a year ago,
absorbing:
◗ The significant tariff cuts (-25% approximately)
◗ The dilution effect from the higher proportion of prepaid customers in the total customer base (~59.3% compared
to ~55.8% at the end of FY-02) and
◗ The change in OTE's F2M accounting policy (-0.75 euro effect on blended ARPU)
Blended ARPU was positively affected by the increase in contract ARPU that at end of FY-03 was 49.3 euro (+5.6%
y-o-y).
Contract ARPU during the fourth quarter (Q4-03) reached 50.5 euro as a result of the aforementioned continuing
quarterly contract AMOU increase that to a large extent has offset the recent tariff rebalancing and the lower fixed
to mobile interconnection charges.
As previously mentioned consolidated profitability was sustained at high levels, with EBITDA reaching 576.0 mil euro,
and EBITDA margin at 42.4%. The small decrease in the group EBITDA margin (0.9 p.p.) compared to one year ago is
attributed to the dilution of AMC’s EBITDA margin by 9.6 p.p. (57.2% from 66.8% in FY-02, due to the introduction
of mobile to mobile termination charges), that was almost fully offset by strict and efficient cost control.
Furthermore Greek operations EBITDA reached 515.2 million euro representing a 13.8% y-o-y growth. As a result
domestic EBITDA margin reached 41.2% (excluding the effect of M2M: 48.2%), underlining the fact that domestic
operational results remain strong and represent a solid foundation going forward.
Group Earnings amounted to 252.9 mil euro, up 10.3% y-o-y, despite the normalisation of the effective tax rate at
36.6% from 34.9% in 2002. Earnings per share increased by 9.9% and therefore EPS3 during the period under review
was 0.766 euro up from 0.695 euro a year ago. Consolidated Net Income margin in FY-03 stood at 18.6%.
Domestic operations earnings grew by 10%, to reach 230.2 euro mil, with net income margin at 18.4%. Greek
operations earnings reaffirm the sustained strong operational and financial performance evidenced in the local
market.
1
AMOU: Average monthly minutes of use per customer
ARPU: Average monthly revenue per customer
3
Number of shares outstanding in FY-03: 330,139,120 from 330,055,870 in FY-02.
2
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Finally, Free Cash Flow1 at the end of FY-03 reached 140.6 mil euro, almost 10 times higher than the 2002 FCF,
reflecting the Company’s enhanced cash flow generating capability and efficient working capital management
(resulting in Cash at the end of 2003 of 156.7 mil euro).
Consequently Net Debt stood at 211 mil euro, -41.5% lower than last year. It is reminded that in Q3-03 the full
dividend amount for year 2002 (approx. 115.7 mil euro, or ~50% pay-out ratio) was paid in cash.
9.1.2 Albanian Mobile Communications sh.a (AMC)
COSMOTE has been consolidating its majority owned subsidiary in Albania since year 2000. During the twelve
months ended December 31, 2003 AMC contributed approximately 7.9% to the Company’s consolidated revenues
and 10.6% to COSMOTE group EBITDA.
SUMMARY FINANCIAL RESULTS FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 2003 AND 2002 (US GAAP)
AMC STAND ALONE
Amounts in euro (‘000)
Operating expenses
EBITDA
EBITDA margin
Depreciation
EBIT (Operating Income)
Net Income (after taxes)
Net Income margin
20022
20033
101,309
106,817
5.4%
33,593
45,714
36.1%
67,716
61,103
-9.8%
66.8%
57.2%
15,383
18,079
17.5%
52,333
43,023
-17.8%
29,084
32,333
11.2%
28.7%
30.3%
% change
AMC’s revenues during the twelve months of 2003 were 5.4% higher compared to the previous period (FY-02)
reaching 106.7 million euro. In addition, the company's revenue increase, as expressed in the local currency, was
approximately 10%. As mentioned before, under the current market conditions, the Albanian mobile market is
considered to have entered a stability phase (since penetration is the highest in all Balkan countries, achieved in the
fastest time).
At the end of December 2003 AMC’s customer base reached 592,804 customers (representing an increase of 18.3%
on an annual basis). Of these customers the vast majority (97.6%) are prepaid customers that have no bad debt and
high profitability margins.
1
Free cash flow is after Capex, interest, taxes and dividends.
Average exchange rate for 2002: 1 leke = 0.007558
3
Average exchange rate for 2003: 1 leke = 0.007271
2
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Evolution of AMC customer base
2002
2003
Customers % of total
Customers % of total
Contract
14,465
2.9%
14,017
2.4%
Prepaid
486,682
97.1%
578,787
97.6%
Total
501,147
100.0%
592,804
100.0%
It is also noted that mobile telephony penetration in Albania, at the end of year 2003, is estimated around 34%
compared to 7% fixed telephony penetration and less than 27% mobile penetration in year 2002.
Furthermore, most of the company’s network plans have been completed, resulting in the continuous enhancement
and upgrading of AMC’s network that at the end of year 2003 covered approximately 80% of the country.
AMC's EBITDA at the end of FY-03 reached approximately 61.1 mil euro, resulting in an EBITDA margin of 57.2% still
at very high levels. The Albanian company's EBITDA is adversely affected by the M2M termination rates that started
being officially charged from the beginning of 2003. Finally Net Income margin during FY-03 improved to 30.3%
compared to 28.7% in 2002.
9.2 Operating Review
9.2.1 COSMOTE (GREECE standalone)
The following selected non-financial operating data has been prepared by the Company based on Company data and
publicly available information. The following table illustrates the evolution of COSMOTE’s customer base and relevant
market penetration of mobile telecommunications in Greece for the period 2002-2003.
COSMOTE total number of customers, beginning of period
COSMOTE total new additions for the period
COSMOTE total number of customers, end of period
Number of Contract customers
Number of pre-paid customers
% change (total number of customers)
Churn rate
Total number of customers in the Greek mobile market1
COSMOTE market share2
COSMOTE penetration in the Greek mobile market
Penetration1
1
31/12/2002
2,943,532
562,806
3,506,338
1,551,441
1,954,897
19%
21.5%
9,314,260
37.6%
32.2%
85.5%
31/12/2003
3,506,338
410,672
3,917,010
1,595,852
2,321,158
12%
20.5%
n/d
n/d
35.9%
n/d
Total number of customers in the Greek mobile market at the end of December 2003 is not available since VODAFONE (Hellas)
has not announced its total number of customers. Total number of customers in the Greek mobile market as of September
30, 2003 was 10,876,544 implying a market penetration of 99.8%.
2
COSMOTE's total customer base, at the end of September 2003 was 4,051,548 representing an estimated market share of 37.3%.
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SUBSCRIBERS: As of December 31, 2003 COSMOTE’s customer base stood at 3,917,010. The company continued
to dominate the contract customers segment with approximately 45% market share.
During the twelve months of 2003 COSMOTE’s total net new additions were 410,672 customers. Of these, 11% or
44,411 were contract net additions and 89% or 366,261 were pre-paid net additions. Overall, during these twelve
months of year 2003, it is estimated that COSMOTE attracted the majority of total net new additions in the pre-paid
market segment.
As a result active contract customers at the end of December 2003 reached 1,595,852 increasing by 2.9% compared
to one year ago, while active prepaid customers during the same period amounted to 2,321,158, 18.7% more than
December 2002. The overall split between COSMOTE’s contract and prepaid customers at the end of year 2003 was
40.7% - 59.3% respectively.
COSMOTE’s churn rate during 2003 stood at 20.5% (compared to 21.5% for the full year 2002), which is below the
average European rate. It is noted that of this churn approximately 70% is due to internal contract churn as well as
prepaid churn to the new ‘what’s up?’ product.
NEW SERVICES: Consistent with its customer-oriented strategy of providing simple, comprehensive and competitive
services, accessible by all its customers, COSMOTE launched commercially in June 2003, its new and innovative
service, MYCOSMOSview, expanding its very successful MyCosmos services portfolio. With MYCOSMOSview,
COSMOTE customers can have easy and fast access to an integrated range of technologically advanced and
sophisticated services, in a user-friendly environment. The new MYCOSMOSview includes a structured service menu
with simple functionality that combines exciting color graphics and allows easy and immediate access with the touch
of just one key. The MYCOSMOSview menu includes 9 service categories: New, Ringtones & Logos, Mobile Fun,
Sports, Information, Mail & Chat, Travel, Astrology and an Entertainment Guide.
In addition, in April 2003, COSMOTE was the first to commercially launch video MMS applications in the Greek
market, which combine image and sound with motion, thus further extending its services portfolio.
COSMOTE consistent with its key strategic aim to continue providing exciting and innovative services to all its
customers while keeping track of all the new technological developments, announced in November 2003 a very
significant collaboration. COSMOTE and NTT DoCoMo, Inc., Japan’s leading mobile communications provider, signed
an exclusive strategic partnership agreement under which DoCoMo is licensing COSMOTE to launch i-mode‚, the
world’s most popular mobile service, in Greece. Under the terms of the agreement, COSMOTE will offer its i-mode
service over its 2.5G GPRS network and 3G UMTS network, with DoCoMo providing its know-how, technology and
patents. The service launch will be targeted to precede the ATHENS 2004 Olympic Games, for which COSMOTE is a
Grand National Sponsor. In addition, COSMOTE and DoCoMo will cooperate on the introduction of i-mode services
in other markets where COSMOTE either maintains subsidiaries (AMC in Albania) or manages operations (Globul in
Bulgaria, and COSMOFON in Macedonia).
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9.2.2 Greek Cellular Market
Based on publicly available information released by the three mobile operators, COSMOTE, VODAFONE (Greece), TIM
(Greece), and Q-Telecom the evolution of the Greek cellular market during year 2003 is portrayed in the following
table:
CUMULATIVE CUSTOMERS AS AT DECEMBER 31, 2003
Operator
Total Contract customers
Total Prepaid customers
Total Customers
COSMOTE
1,595,852
2,321,158
3,917,010
n/d
n/d
n/d
TIM (Greece)
817,914
1,584,863
2,402,777
Q-Telecom
30,347
336,189
366,536
VODAFONE (Greece)
9.3 Capital Expenditure Plan
Capital Expenditures 2002-2003
The mobile communications industry is highly capital intensive, requiring significant capital to construct mobile
telecommunications networks. The capital requirements of COSMOTE's network are determined by the nature and
the area of coverage desired, the number of customers served in an area, the expected call traffic and the desired
quality of service. Network construction costs are mainly related to the number of cells in the service area, the
number of radio channels in the cells and the switching equipment required.
Since the beginning of its operations and until the end of year 2003, the Company (on a consolidated basis) has
invested close to 1.43 billion euro resulting in a superior network with nationwide coverage and superior quality,
providing a wide range of mobile telephony services.
In year 2002 consolidated capital expenditures amounted to 256 million euro. In year 2003 consolidated capital
expenditures amounted to 184 million euro. More specifically, during year 2003 COSMOTE invested approximately
172 million euro in Greece, out of which, an investment of 130 million euro was related to the installation of new
telecommunication equipment (BTSs, MSCs etc). Additionally, an amount of approximately 15 million euro was
invested for the initial rollout of the Company's 3G network. Finally, during year 2003, COSMOTE invested
approximately 12 million euro for the capacity expansion of AMC's network. The Company’s investments during year
2003 were financed mainly by cash generated by the Company’s operating activities.
Capital Expenditure Plan for 2004-2005
During the next two years, the Company plans to invest approximately 306 million euro (on a consolidated basis) for
upgrading and enhancing its current network, excluding the cost of developing a 3G network and/or regional and
domestic acquisitions, joint ventures or other equity investments. More specifically COSMOTE's planned consolidated
investments will include the installation of new BTSs, BSCs and MSCs with the purpose of increasing coverage and
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capacity and improving the service quality of its existing 2 and 2.5G networks. Included in the aforementioned
amount is an investment of 27 million euro to be incurred in 2004 for the preparation of the Company for the
Athens 2004 Olympic Games. The majority of this investment will be reused in other locations after the end of the
Olympic Games. It is noted that COSMOTE's subsidiary in Albania, AMC, plans to invest approximately 18 million
euro and 10 million euro in years 2004 and 2005 respectively. Also, according to the Company's business plan and its
3G license requirements, COSMOTE develops a 3G network preparing itself for providing new advanced 3G-based
products and services. An investment of around 27 million euro and 50 million euro in years 2004 and 2005
respectively is planned for the development of COSMOTE's 3G network. At the same time the Company plans to
develop a range of new value-added services aiming at contributing to COSMOTE’s profitable growth. Over the next
two years, COSMOTE's working capital and capital expenditure requirements will depend on a number of factors
including the rate at which it builds out its network (both voice and data network infrastructure), expenditure on
pilot projects, research and development and the expansion of its marketing and distribution capabilities.
The majority of planned investments will relate, in both years, to telecommunications equipment costs in both
Greece and Albania. It is expected that the aforementioned capital expenditures will be financed by the Company’s
own generated funds (mainly through cash from operating activities).
COSMOTE's strategy involves the expansion of its activities through selective investments. COSMOTE intends to
pursue these investments on an opportunistic basis, although it does not currently have any such investment
commitments or understandings except as described under chapter 8 of this document.
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CHAPTER 10
Strategy and Prospects
10.1 COSMOTE’s Key Strategic Objectivies
10.2 ∆argets of the COSMOTE Groups of Companies
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STRATEGY AND PROSPECTS
10.1 COSMOTE’s ∫ey Strategic Objectives
During 2003, COSMOTE maintained its strong –above the European sector average– financial performance &
enhanced its services & products portfolio aiming at creating new revenue streams. The Company’s strategic target in
the next years is to further exploit potential profitable opportunities in the developing South Eastern European mobile
market, in order to establish its position as the leading mobile telecommunications player in the region and sustain its
ranking as one of the best five operators in the sector in Europe.
According to reports published by distinguished international investment firms, the average usage of mobile
telecommunications in Europe is still exceeding the respective Greek average, a fact which confirms COSMOTE’s
anticipations that there is room for further growth, both for the Company and the Greek mobile market overall.
COSMOTE plans to continue its balanced growth strategy, with the aim to continuously increase its revenues and
profitability. The Company’s EBITDA margin for year 2003, stood at approximately 42.4%, thus classifying COSMOTE
among the first positions relative to its European peers.
To achieve its vision, the Company will continue to apply its successful customer-oriented strategy, and focus on the
following objectives:
◗ Sustain leadership in market share and profitability
◗ Enhance voice usage, stimulate value added services and increase their revenue contribution
◗ Continue offering innovative services and promote i-mode
◗ Establish a model 'work-place' organization, in terms of quality and efficiency
◗ Differentiated from competition on all fronts
◗ Pursue new investments that meet strict return criteria
◗ Exploit opportunities arising from "ATHENS 2004" Olympic Games sponsorship
◗ Optimize capital structure and increase returns to shareholders
While defending its core values:
◗ COSMOTE's human resources is its most valuable asset
◗ Everyone's contribution is essential to COSMOTE's future growth
◗ Advancement and Reward
◗ Credibility and Transparency
◗ Continuous effort for improvement
◗ Exchange of knowledge
◗ Rational use of resources
◗ Customer centric approach on all fronts
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For 2004 the Company’s strategy focuses on three main areas:
◗ ATHENS 2004 OLYMPIC GAMES
◗ i-mode® services
◗ 3G services
ATHENS 2004 OLYMPIC GAMES: As a Grand Sponsor of the ATHENS 2004 Olympic Games and taking into
consideration the fundamental role of mobile telephony, mainly due to the high penetration and usage of mobile
telephony on a global scale, as well as the convergence of technologies, COSMOTE during the past year upgraded its
telecommunications network in order to create an integrated (2G, 2,5G and 3G) network of "Olympic" proportions
able to cover the increased needs for mobile communications during the Games. The Olympic Sponsorship is a
unique business opportunity for COSMOTE to present its technological achievements and at the same time gain
international exposure and enhance its image and reputation on a worldwide level.
i-mode®: With a proven track record in developing innovative value added services for its customers in 2003
COSMOTE signed a strategic partnership agreement with the leading mobile operator in Japan, NTT DoCoMo for the
exclusive launch of i-mode®, the world’s most popular mobile Internet service. NTT DoCoMo with more than 47
million subscribers is a world leading mobile telecommunications company that provides a wide range of advanced
mobile telephony multimedia services. i-mode® offers access to Internet and e-mail services for over 41 million
subscribers in Japan and more than 2 million in the rest of the world. We expect that the introduction of i-mode in
Greece will revolutionise wireless Internet services through the mobile phone while provide the Company with
multiple benefits from becoming a member of an important international alliance.
3G SERVICES: COSMOTE is taking advantage of the potential and capabilities of its 3G network in order to offer to
its customers a wide range of 3G services including video streaming, a service that allows them to enjoy lengthy
videos of unique quality and at high speed and video calling, a service through which COSMOTE customers can see
the person they are talking to while making a call, in real time. COSMOTE's 3G network deployment, besides
introducing new services, allows the Company to upgrade existing services. More specifically:
◗ Faster Internet browsing, with speed up to 384 kbps (10 time faster than GPRS), a capability especially useful to
COSMOTE corporate customers.
◗ Multimedia Messaging Service (MMS) and access to WAP web pages at a higher speed and with richer content.
COSMOTE has consistently targeted to meet its customers needs by providing innovative, user friendly, high quality
services. By providing 3G services aims to give its customers, both retail and business, a new user experience that
includes a range of fresh and exciting content, with greater capacities, at significantly faster rates.
SERVICES RELATED TO THE "ATHENS 2004" OLYMPIC GAMES: Within 2004, COSMOTE as the Grand National
Sponsor of the ATHENS 2004 Olympic Games, will be introducing new Olympic Games related services. More
specifically, it plans includes in its value added services portfolio a wide range of content related to the Olympic
Games and the Greek Olympic medalists sponsored by OTE and COSMOTE. COSMOTE customers will be able to
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receive information related to the athletes' track record and achievements, download their pictures and pictures of
the mascots "Phevos & Athena", get the exclusive interview of 200m Olympic Gold medalist, Kostas Kenteris and
read about his accomplishments and future plans. Committed to make technologically advanced services accessible
to all its customers while pursuing one of its key strategic objectives, that is to stimulate value added services and
increase their contribution in total operating revenues. COSMOTE until the completion of the Olympic Games aims to
further enrich the Olympic Games related services by adding new and exciting offerings.
PREPAID SERVICES: COSMOTE plans to enrich its prepaid offerings with special services aiming to increase usage
and enhance customer loyalty. Thus, the Company will further expand its existing loyalty bonus schemes and
introduce new flexible ways of recharging scratch cards.
"MyCosmos" SERVICES: The Company plans to upgrade the services it provides through its mobile portal,
emphasising in the development and usage of innovative entertainment and communication services.
SPECIAL SERVICES FOR ROAMERS: The Company plans to provide within 2004, more services especially designed
for the needs of visiting roamers. The commercial availablity of GPRS roaming will assist in the increase roaming
revenues and attract new roaming visitors. In addition a pilot 3G roaming service will be made available in cooperation with selected foreign mobile operators.
THIRD PARTY SERVICES: COSMOTE will continue to provide its customers with access to third party content
through SMS and will further collaborate with third parties with the purpose of covering their needs.
COSMOTE, with the aim of providing its customers with quick and easy access from their mobile phone to content
provided by third parties, is constantly monitoring market needs and proceeding, when necessary, to improvements
and expansions of its infrastructure.
CORPORATE SERVICES: Trying to meet the growing needs of its corporate clientele, COSMOTE is constantly
designing and offering new innovative services, aiming to the fuller coverage of their needs, the increase of their
productivity, and control of their operating expenses, ensuring, thus, even more important benefits for the
companies.
In this framework, the Company plans to promote and further enrich the access services to the Intranet and the
Internet by exploiting the 3G network it is developing and through the evolution and availability of new handsets.
Always focusing on the needs of its corporate customers and by constantly using cutting edge technology COSMOTE
aims to consolidate and further extend its already significant position in the corporate market sector.
10.2 Targets of the COSMOTE groups of Companies
Furthermore COSMOTE’s growth at a consolidated level, will be supported by the positive development of its
affiliated companies, as described below:
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Albanian Mobile Communications
During year 2003, AMC’s management successfully attained the targets set out in the company’s business plan for
the year, succeeding in further expanding customer base despite the competitive environment, since the operation of
a second mobile operator in Albania had already concluded its second year of operation.
Having concluded its basic telecommunications network throughout Albania, AMC is focusing its strategy for the
near future in other sectors. The company’s basic priority for year 2004 is the reinforcement of its distribution
network in the regions of the country, so as to increase the point of sales for its products and services and at the
same time offer new services achieving even higher market penetration.
With the purpose of attracting new customers and sustain its current customer base as well as increasing its
revenues, AMC aims to launch new services. AMC believes that the current level of familiarity of the Albanian users
with mobile services makes the offering of new services commercially viable. In addition, AMC emphasises in
corporate clients through the provision of specialised services and competitive programmes.
Finally, with its social awareness being one of its main advantages, AMC will continue to carry out its Social
Responsibility Programme consistently, in the framework of the relevant programme of its mother company. In line to
COSMOTE’s Scholarship Programme, the company will continue to grant the AMC SCHOLARSHIPS, while further
enhancing its relations with local communities through support of social welfare organisations and the mounting of
cultural activities. It is noted that AMC has already adopted an orphanage and a foundation for children with
encephalic paralysis. Additionally, AMC is aligning its efforts along with COSMOTE and participates in the Olympic
Games Sponsorship Programme by being the main sponsor of the Albanian Olympic Committee. AMC is also the
main sponsor of the Albanian Soccer team for the European Football Championship in 2006.
Special emphasis will be given to the personnel of the company both through the continuous training and
development and through the improvement of the working environment. Having already effected important
deliverables in these two sectors, AMC has accomplished a high level of personnel loyalty, with personnel consisting
in its vast majority of native workers. AMC's priority for 2004 is the establishment of an efficient appraisal and
human resources development programme as part of the Human Resources Management programme that was
launched in 2003.
AMC is established, in the consciousness of the Albanians, as the largest privately owned company of the country, a
sound organisation for the employment of personnel, a contributor to the country’s events and the national
economy and as an entity of technological advancement. The aforementioned, combined with the low penetration
of fixed telephony in the country, stand in favour of AMC sustaining a satisfactory financial performance to the
benefit of the mother company COSMOTE, but mainly to the benefit of its personnel, customers and the social
group in which the company operates in. To this front, an important development is the distribution of dividend for
year 2002 decided by AMC's Annual General Meeting (dated 24/3/2004) amounted to 2.356 million LEK.
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CosmoONE MARKET SITE HELLAS
CosmoONE (www.cosmo-one.gr) is the leading Greek company in commercial e-business. The company develops and
provides e-commerce services between businesses and especially to provide specialised services in the sector of eProcurement, targeting at the increase of its customers’ profitability, through the reduction of their procurement cost.
Since the beginning of 2001, CosmoONE offers its customers the ability to procure supplies using catalogues,
through its www.b2bmarketsite.gr electronic marketplace. This service aims to reduce procedural cost, reduce time
and monitoring of a company’s procurement system, it is offered through the Internet and does not require the
acquisition of specific software by the transacting parties. Every procurement service is adjusted to the clients’
procedures and can be integrated to its ERP systems.
Since mid 2001, CosmoONE also offers its customers an electronic auctions’ service, through a dedicated hub for
online B2B Auctions, with the aim to reduce their cost for the supply of products and services. Through electronic
auctions, every company or organisation wishing to buy products of the lowest possible price or sell products or
inventories, can contact CosmoONE and the company "hosts" and executes the clients’ auction according to its
specific needs and scenario, whether the client is a buyer or a seller respectively.
The total value of the transactions through the electronic marketplace for 2003 amounted to 308 million euro, thus
increasing by 32% compared to the previous year. Additionally, a 27.5 million euro value of goods was auctioned
online in 188 auctions, bringing up to 22% average savings to the originators. The growth rate for auctions in year
2003 compared to 2002 stood at 96%, a fact which proves the growing interest of companies for the advantages
stemming from this particular form of business negotiations. By the end of 2003 more than 1,050 companies had
used CosmoONE's infrastructure and services for their e-business needs.
The future plans of the company include, amongst others, activities with large organisations, such as the Chamber of
Commerce, as well as offering of new services in combination with products from other companies.
COSMO-MEGALA KATASTIMATA
COSMO-MEGALA KATASTIMATA’s scope of business is to sell through the Internet CD, DVD, CD-ROMs and other
music products offered by the licensee of the Virgin trade mark in Greece ("VIVERE S.A.").
COSMO-MEGALA KATASTIMATA already operates in the Internet Business to Consumer area through the creation of
www.virginmega.gr, while at the same time it plans to also offer m-commerce services. Through the aforementioned
activities, COSMO-MEGALA KATASTIMATA has already attracted a large number of consumers who carry out their
shopping through Internet.
Furthermore, the company in cooperation with COSMOTE has designed and implemented the "Ringtones" and
"Logos" service that is offered under the "MyCosmos" mobile portal, and since launch, has been very successful. In
addition it provides and promotes these services through the web pages of the www.virginmega.gr site.
The target of the company is to enrich the aforementioned service portfolio with new products and services especially
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targeted to the youth market. The company’s plans include the provision of services based on picture & voice
messages and the continuous enrichment of these multimedia messages services, so as to become the leading
company in the field of music products and other similar products. COSMO-MEGALA KATASTIMATA’s strategy in
order to achieve its targets is based on continuous growth and expansion through the development of new
innovative services & products and the provision of high quality Customer Service.
Consistent with an exceptional financial performance, COSMOTE during 2003 posted revenue growth
rates and profitability margins well above the European average, that rightly rank the Company among
the leading mobile operators in Europe. COSMOTE’s outstanding track record, as evidenced in its doubledigit growth rates, high profitability and strong cash flows prove the Company’s ability to enhance value
creation and increase returns, and provide testament of the future prospects that lie ahead.
During 2003, COSMOTE, effectively met all challenges, fulfilled the strategic goals it had set and secured
strategic agreements that will play an important role with respect to its future prosperity. COSMOTE’s
successful track record is the result of a systematic and collective effort as well as the dedication of all its
employees to a common vision and a conscious choice to remain at the forefront. The Company's
management aims to sustain this performance and remains committed to its core values of advancement
and reward, credibility and transparency, continuous effort for improvement, exchange of knowledge and
distinguishes its human resources as is its most valuable asset.
During 2003 COSMOTE’s financial and operational performance in all countries of presence, once again
reaffirms our commitment to meet and exceed the targets we set. Despite a challenging environment and
increased competition we remain consistent in delivering on high profitability and high returns to our
shareholders. 2003 was a year of preparation for a demanding and very exciting year ahead, full of new
developments for COSMOTE, including the ATHENS 2004 summer Olympic Games, 3rd Generation
services, and the i-mode® service launch. For 2004 we remain dedicated in realizing our key strategic
objective, that is to continue to lead the way on all fronts, quality services, innovation, high profitability
and increasing cash generation".
From the beginning of 2003 up until the end of the first quarter of 2004, in a period characterised by
volatility both in the local as well as in international markets, especially in the field of
telecommunications, the Company’s share price outperformed the ASE Telecoms Index by 19.9% and the
European Wireless Telecom Index, by approximately 15.1% thus placing COSMOTE among the companies
with the most stable stock performance in the telecommunications sector on a pan–European level.
COSMOTE will continue its successful path, with the aim to continually set ambitious targets while at the
same time keep on creating superior value for its shareholders. Its vision remains to continue to rank
among the top five mobile operators in Europe both in terms of profitability and as well as returns.
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Tel.: 210 680 0706
COSMOTE_EXOFYLLA_final
21-06-04
14:30
™ÂÏ›‰·1
44, Kifissias Ave., 151 25 Maroussi, Athens, GR, www.cosmote.gr
Annual Report 2003

Annual Report 2003

Transcription

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