Fiber And 5G Expansion Will Support Long Term Telecom And ICT Prospects

Catalysts

About Hellenic Telecommunications Organization

Hellenic Telecommunications Organization is a leading Greek integrated telecom and ICT provider offering fixed, mobile, broadband, Pay TV and digital solutions to households, businesses and public sector entities.

What are the underlying business or industry changes driving this perspective?

• Accelerating fiber to the home adoption, supported by regulation that phases out legacy FTTC in fiber-ready buildings and by subsidized rural projects, may support higher broadband ARPU and better network utilization, which in turn supports monetization of past CapEx.
• Nationwide 5G and 5G stand alone coverage above 99% of the population, combined with pre to postpaid migration and larger data bundles, positions the mobile business to benefit from CPI-linked price adjustments and ongoing data usage trends.
• Robust ICT and system solutions demand, including double digit growth in digital transformation projects for government, education and European agencies, is shifting the mix toward higher value, stickier services that can offset lower margin wholesale and device revenues and support EBITDA.
• Expanding Pay TV penetration supported by strengthened antipiracy enforcement and the scheduled removal of the special tax in 2026 may help TV revenues and content monetization, with a positive contribution to both top line and operating margin.
• Exit from the Romanian market and a disciplined CapEx envelope around EUR 600 million per year, alongside rising free cash flow guidance from Greek operations, increase financial flexibility for shareholder distributions and spectrum funding while maintaining investment capacity.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Hellenic Telecommunications Organization's revenue will decrease by 1.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 15.6% today to 17.5% in 3 years time.
• Analysts expect earnings to reach €615.4 million (and earnings per share of €1.66) by about December 2028, up from €568.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 15.1x on those 2028 earnings, up from 11.9x today. This future PE is greater than the current PE for the GB Telecom industry at 11.9x.
• Analysts expect the number of shares outstanding to decline by 1.34% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.9%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The planned acceleration of FTTH adoption, supported by regulation that phases out copper and FTTC in fiber ready buildings and by subsidized rural ultrafast broadband projects, could drive structurally higher broadband ARPU and network utilization than the market currently discounts, lifting revenue and operating margins.
• Broad based price and mix improvements in Mobile, including continued migration from prepaid to higher value postpaid plans, larger data bundles, CPI linked tariff adjustments and strong 5G usage growth, may sustain service revenue growth near or above current levels for longer, boosting earnings growth.
• The ICT and systems solutions franchise, which is already delivering double digit and near 38% quarterly growth with projects for Greek public sector, education and European agencies, could scale into a much larger, higher value revenue pool than expected, improving group revenue diversification and EBITDA margin resilience.
• Rising Pay TV penetration supported by antipiracy enforcement, ongoing double digit TV revenue growth and removal of the 10 percent special tax in 2026, combined with convergent bundles and energy partnerships, may increase customer lifetime value and reduce churn, supporting stronger revenue and net profit than implied by a flat share price.
• Disciplined CapEx around EUR 600 million per year focused on fiber and fixed wireless access, together with the Romanian exit, higher recurring free cash flow guidance from Greek operations around EUR 530 million and potential tax benefits that can fund spectrum without stressing the balance sheet, could enable faster growth in dividends and shareholder returns, supporting a higher equity valuation and price to earnings multiple.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of €18.71 for Hellenic Telecommunications Organization based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €23.0, and the most bearish reporting a price target of just €16.0.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be €3.5 billion, earnings will come to €615.4 million, and it would be trading on a PE ratio of 15.1x, assuming you use a discount rate of 8.9%.
  
• Given the current share price of €17.06, the analyst price target of €18.71 is 8.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.