1 ANNUAL REPORT 2007

and the urge you have to

communicate.

This is what makes our work

worthwhile and this is the

message of this report. You.

THE OTE GROUP

GREECE

Fixed-line and mobile telephony Fixed-line subscribers: 5,854,000 ADSL subscribers: 825,000

Mobile telephony subscribers: 6,269,000

ROMANIA

Fixed-line and mobile telephony Fixed-line subscribers: 3,035,000 ADSL subscribers: 360,000

Mobile telephony subscribers: 3,616,000

BULGARIA Mobile telephony Subscribers: 3,873,000 ALBANIA Mobile telephony Subscribers: 1,195,000 FYROM Mobile telephony Subscribers: 593,000

Since 2006, the OTE Group owns 90% of GERMANOS S.A., the largest distributor of technology-related products in Southeast Europe with 769 stores.

SERBIA

Fixed-line and mobile telephony OTE owns 20% of Telekom Srbija

6.8% Other 9.8%

Greek Institutional Investors 20.0%

Deutsche Telekom 28.0% Hellenic State

35.3%

International Institutional Investors Shareholder Structure

70% 90% 100%

GROUP

STRUCTURE

KEY FINANCIAL &

OPERATIONAL

HIGHLIGHTS

Dividend per Share

07 06 05 662.6 574.6 (216.8) Net Income/ (Loss)

07 06 05 2,240.8 2,167.0 1,971.5 (all amounts are in € mn unless otherwise stated)

Operating Income before Depreciation and Amortization (OIBDA)*

* Excluding impact of OTE fixed-line Voluntary Retirement Program (provision of €939.6 mn in 2005, reversal of €49.8 mn in 2006, and €22.1 mn provision in 2007) and non-recurring gains related to Cosmote Romania in 2005

* Germanos S.A. is included in Other operations 25.5% Other countries 35.6% Mobile telephony* 14.4% Other operations 74.5% Greece Fixed-line50.0% Revenue Breakdown by Region

(2007)

Key Operations Revenue Contribution (2007)

07 06 05 825 488 155 OTE ADSL Subscribers (000)

07 06 05 15,546 11,177 8,204 Mobile Telephony Subscribers (000)

Greece, Albania, Bulgaria, Romania, FYROM

07 06 05 14,741 11,755

11,348 OTE Employees

07 06 05 360 89 8

RomTelecom ADSL subscribers (000)

07 06 05 12,25712,512 13,078 RomTelecom Employees 07 06 05 1.35 1.17 (0.44)

OTE GROUP

OPERATIONS

THE ΟΤΕ GROUP

Consisting of the parent company OTE S.A. and its subsidiaries, the Group offers fixed-line (voice, broadband, data and leased lines) and mobile telephony services in Greece and Romania, as well as mobile telephony services in Albania, Bulgaria and in the Former Yugoslav Republic of Macedonia (FYROM). The Group is also present in Serbia through its 20% stake in the country’s incumbent operator, Telekom Srbija. OTE Group is also involved in a range of activities in Greece, notably in real-estate, satellite telecommunications and professional training.

FIXED-LINE OPERATIONS IN GREECE

OTE (OTE S.A.) is the main provider of fixed-line services (voice, broadband, data and leased lines) in Greece.

Strategy: Focused on broadband promotion, development of competitive products (focus on bundled services), adoption of a dynamic tariff policy, investments in infrastructure and strong relationship with customers.

MOBILE TELEPHONY OPERATIONS IN GREECE AND ABROAD Cosmote, OTE Group’s mobile telephony operator, is the leading provider of mobile communications in Greece. The company also enjoys significant mobile telephony market shares in Albania, Bulgaria and FYROM, and is expanding rapidly in Romania. Cosmote also owns the largest distributor of technology-related products in Southeast Europe, Germanos (Germanos S.A.)

Strategy: Aims to maintain its leading position in the Greek market and boost its profitability abroad.

38% Revenues 37% OIBDA 27% Investments 51% Investments 44% OIBDA 43% Revenues

Note: The charts display the contribution of each segment in Group revenues, operating income before depreciation and amortization (OIBDA) and capital expenditure in 2007.

FIXED-LINE OPERATIONS IN ROMANIA (ROMTELECOM) OTE owns 54% of RomTelecom, the main telecommunications operator in Romania, providing fixed-line services (voice, broadband, data and leased lines) and satellite TV services to the local market.

Strategy: Focused on launching competitive products, strengthening its customer-oriented policy and increasing its market share in broadband and satellite TV services.

19% Investments 12% Revenues 13% OIBDA 7% Revenues 5% OIBDA 3% Investments

OTHER OPERATIONS IN GREECE AND ABROAD

In Greece, the Group is involved in a range of activities notably in real-estate, satellite communications, and professional training. The Group is also present in Serbia through its 20% stake in the country’s incumbent operator Telekom Srbija.

Strategy: Aims to add value to the real-estate portfolio by establishing a real-estate investment company, and to develop synergies between the various companies of the Group.

COMMERCIAL HIGHLIGHTS: FOCUS ON BROADBAND PROMOTION

In June, OTE’s ADSL ports pass the one million mark, double the prior-year level.

In July, OTE’s successful package connx-talk is expanded, offering unlimited local and long distance calls 24 hours a day, 7 days week, combining voice services with broadband Internet connection speeds.

In July, OTE’s Educational Mobile Unit OTE on the Broadband-OTE Broadband Services completes a road-show that had been launched in July 2006, travelling around 33 Greek cities to inform the public and promote broadband services.

In July, the OTE retail store network, ΟΤΕshops, create conn-xperience, a dedicated area within the stores to allow customers to experience fast Internet access at real speeds and get acquainted with broadband services and conn-x applications. In September, OTE launches the innovative, broadband e-Learning service School powered by conn-x which provides students with an opportunity to enhance their performance at school via a user-friendly, interactive broadband environment.

2007

AT A GLANCE

MERGERS, ACQUISITIONS AND SALES

In March, OTE presents the highlights of its 3-year Business Plan (2007-2009) at an analyst-investor meeting in London.

In May, the European Commission approves the Greek State’s contribution of €390 mn towards OTE’s pension fund, TAP-OTE, to cover for the 2005-2006 voluntary retirement program.

In May, OTE resolves to absorb its ISP subsidiary OTENET. In this context, in December 2007 OTE holds 100% of OTENET’s share capital and the Board of Directors approves the launch of the merger proccedures, via absorption, by OTE, which will be concluded in 2008.

In June, the Greek State completes the sale of 52,446,092 common shares of OTE (corresponding to 10.7% of the company’s share capital) to Greek and foreign qualified investors, by means of an accelerated book-building process. Following this, the Greek State’s stake in OTE’s share capital is reduced to 28.03%.

In November OTE makes a public offer to acquire the 32.2% minority interests in the share capital of its subsidiary, COSMOTE, at a price of €26.25 per share.

In December, OTE completes the 100% sale of its subsidiary, InfOTE (printed and electronic directory services), to Rhone Capital LLC and Zarkona Trading Limited, for a total consideration of €300.2 mn.

In December, OTE announces a reduced conn-x tariff plan, cutting prices by up to 44.5%, and introduces a new speed of up to 24 Mbps. In 2007, overall price reductions across the conn-x product range amounted to 30%-50%.

ORGANIZATIONAL CHANGES

In December, the General Division of Business and Residential Customers of OTE is separated into the Division of Corporate and Business Customers, and the Division of Residential Customers. The management of OTE proceeds with this organizational change in view of market competition levels, technological integration trends, increasing customer demands for state-of-the art products and services, and in line with common international practice. CORPORATE RESPONSIBILITY

OTE’s 2006 Corporate Social Responsibility Report is certified in October according to the international “G3” standards of the Global Reporting Initiative (GRI) network.

THE OTE GROUP

Message from the Chairman 26

ΟΤΕ GROUP OPERATIONS

Broadband Services 33

ΟΤΕNET 39

Traditional Fixed-Line Services 42 Services for Telecom Operators 46 International Telephony - ΟΤΕGLOBE 52

Investments in Fixed-Line 56 Regulatory Framework 62 Human Resources 64 Corporate Responsibility 68 Corporate Governance 72 Share Information 80 Mobile Telephony 82 Greece (Cosmote) 83 Albania (AMC) 88 Bulgaria (Globul) 90 FYROM (Cosmofon) 91

Romania (Cosmote Romania) 92

Germanos S.A. 94

RomTelecom 98

OTHER OPERATIONS IN GREECE AND ABROAD

ΟΤΕestate 108 Hellas Sat 110 OTESat-Maritel 114 OTEplus 115 OTEAcademy 116 CosmoONE 118 Telekom Srbija 119 InfOTE 121 FINANCIAL STATEMENTS

MESSAGE FROM

THE CHAIRMAN

In 2007 OTE SA’s net income increased by 8.5%, to €576.5 mn, compared to €531.2 mn in 2006. Operating income before depreciation and amortization climbed from €790.3 mn or 29.1% of revenues in 2006, to €835.0 mn or 31.4% of revenues in 2007. Consolidated net income increased by 15.3% to €662.6 mn, compared to €574.6 mn in 2006, while operating income before depreciation and amortization was €2,240.8 mn, or 35.5% of revenues, compared to €2,167.0 mn, or 36.8% of revenues, in 2006. Reflecting this financial performance, which met and in many cases exceeded our Group Business Plan targets, we are proposing a dividend of €0.75 per share, compared to €0.55 for 2006. In 2007, we continued the reorganization of the Group which begun in 2005 and aims at strengthening OTE against heightening competition and increasing regulatory pressure. In this context, we launched last year the buyout of Cosmote minorities and the absorption of OTENET by OTE, both of which were completed in early 2008. These organizational changes will result in notable cost savings as we better exploit synergies across Group companies. In addition, late last year, we sold INFOTE, the Group’s directory subsidiary, generating a net gain of €174 mn.

In Greek fixed-line telephony, we focused our efforts last year on optimizing and expanding our broadband network. The number of ADSL connections sold at the end of the year amounted to 825,000 compared to 488,000 at 2006 year end, while installed connections went from 764,000 to 1,232,000 over the same period. Unbundled Local Loops in operation jumped from only 19,000 at the end of 2006 to 274,000 one year later. OTE was also able to boost ADSL access speeds and lower tariffs. The digital gap between Greece and European averages is continuously narrowing and, based on the rate of growth Greece is currently witnessing, it is expected to disappear in a few years. While at the beginning of 2007 the number of OTE local exchanges with physical collocation services was only 31, at the end of the year it had reached 146.

In 2007 we focused our efforts on cost reduction. The scope in this area is limited, however, because labour laws applying to OTE decouple compensation from productivity. As I have stated several times in the past, the employment regime of OTE had been established at a time when the company was a monopoly. The deregulation of the telecommunications market requires the alignment of OTE’s working standards with those of its competitors. With regard to human resources, in 2007 OTE implemented, for the second year, an evaluation system for executives as well as a new evaluation system for all other OTE personnel, both of which are based on transparency and objectivity.

The absorption of OTENET and the establishment of a separate General Directorate for large corporate customers were also aimed at enhancing OTE’s performance and potential against tough competition. The pilot offering of IPTV services continued successfully, with a target to launch commercial operations in 2008. The potential collaboration of Hellas Sat with a major international satellite operator is being assessed.

Cosmote remained the most dynamic and profitable member of the Group. Thanks to the addition of the Germanos retail network, Cosmote was able to capture a growing share of revenues and to consolidate its leadership in the mobile market of Southeast Europe. The key challenge is Cosmote Romania where the company is rapidly gaining market share in the face of tough competition. In late 2007 Romtelecom managed to contain customer churn though it is still early to judge whether this will be a permanent trend. We are encouraged by the successful take-up of the company’s broadband and satellite TV offering.

In 2007, revenues generated outside of Greece were 26% of the total, up from 23% in the prior year. Fixed and mobile telephony accounted for 50% and 36% of total revenues, respectively, compared to 56% and 34% in 2006. The contribution to total Group revenues from other operations, which make up the balance, was higher in 2007, reflecting the full-year consolidation of Germanos. A major problem remains the reluctance of the Regulator to see that to survive in telecoms a company needs critical mass and that the Greek market is too small to support the fragmentation which EETT has encouraged for years. It is a historic mistake at the expense of all concerned and of the economy of the country. Saturation in mobile telephony and technological change are leading the big mobile companies to market products directly competitive to fixed telephony. At the same time the Regulator stops OTE from defending itself by developing similar products. We shall continue our efforts to prove that the telecom market in Greece is now fully competitive and regulatory intervention hinders its smooth functioning.

Developments that originated in late 2007 and are being completed in the first half of 2008 are speeding up the transformation of the Group.

I am referring principally to two major changes. One, which I already mentioned, is the buy out of the Cosmote minorities which is now a 100% OTE subsidiary but retains its corporate autonomy. OTE’s intention to proceed with this move had been known to the market for a long time and is considered very beneficial for the prospects of the Group.

The other change is that Deutsche Telekom, one of Europe’s leading incumbent telecommunications operators, has become a significant shareholder in OTE alongside the Greek State. This is a very positive development, guaranteeing that OTE will continue to be managed with professionalism, unburdened by interferences irrelevant to the interests of its shareholders, employees and customers.

2007 was an intense year for OTE. In the second half, management and senior executives spent a great deal of time on issues which had little to do with OTE’s main business objectives. Despite this it is a sign of the Group’s vigour that the hard work and diligence of all employees at all levels enabled us to meet our objectives and to build the foundations for continuing improvement.

Panagis Vourloumis

Chairman of the Board of Directors Chief Executive Officer of OTE SA

SERVICES

Impressive growth as a result of reduced prices and high ADSL

access speeds

MARKET TRENDS

2007 could be heralded as the “Year of Broadband” characterized by key developments in the broadband market. During the year, OTE proceeded with the launch of new, higher ADSL access speeds, reduced the tariff plan for conn-x services and focused on developing its infrastructure further by increasing ADSL points of presence in the telecommunications network. In addition, OTE introduced new types of voice services in its broadband Internet packages, aiming to respond to growing market demands for specialised bundled products.

As a result, the Greek broadband market continued to grow at an impressive rate, reflecting the growth in retail broadband connections sold by OTE, in wholesale connections provided by OTE and distributed by alternative operators, and also the increase of unbundled local loop connections from alternative operators. Alternative operators expanded their products and services portfolios, adding bundled x-play packages combining voice,

broadband Internet, IPTV and mobile telephony with traditional voice and Internet services. They also adopted competitive pricing policies, targeted specific client categories and offered integrated solutions to companies and individuals.

OTE’s market share in retail ADSL remained above 50%, at the end of 2007, despite the rapid growth of Local Loop Unbundling (LLU). At the end of 2007, the number of broadband subscribers sold in Greece doubled, exceeding 1.13 million at year end. Broadband penetration levels reached 10%, thus approaching the European average.

The chart displays the evolution of the sold OTE ADSL and LLU connections in Greece during the period 2004-2007.

According to the World Broadband Statistics survey for 2007, published by Point Topic, Greece ranked 7th in the world amongst the countries with the fastest-growing number of broadband subscribers, with an annual increase rate of approximately 120%.

2007 2006 2005 2004 10.2% 4.6% 1.5% 0.4% Broadband Population Penetration

(Total ADSL & LLU lines)

+217% +121% +247% 2006 2005 2004 2007 825 ΟΤΕ ADSL 310 LLU 25 LLU 7 LLU 3 LLU 488 ΟΤΕ ADSL 44 ΟΤΕ ADSL 155 ΟΤΕ ADSL OTE ADSL and LLU Subscribers (000 lines)

2007

DEVELOPMENT AND PROMOTION OF BROADBAND SERVICES

The joint effort of the State, through its initiatives as part of the European “Information Society” (EU Strategy for Information and Communication Technologies, “i2010”) and the domestic “Digital Strategy 2006-2013” and OTE (with a series of dynamic initiatives in the fields of IT and broadband Internet) in 2007, led to a rapid growth of broadband services in the country.

OTE focused on launching competitive products and services and further developing its infrastructure across the country (as a means to respond to rapidly increasing demands for broadband services) through the increase of Internet access speeds and the launch of public awareness campaigns highlighting the benefits of broadband services.

With regards to its infrastructure, OTE made considerable investments, during 2007, in the ADSL network (especially in rural areas) and as a result broadband services were available at the end of the year in most areas of the country. Today, about 95% of all fixed-line connections in Greece have access to broadband services. By the end of 2007, OTE had installed more than 1.2 million ports on the ADSL network, realizing also the target of 1,300 points

2005 1.400 1.200 1.000 800 600 400 200 0

ADSL Points of Presence (PoP) Installed ADSL Ports (000 Ports) 2005 2006 2006 2007 Points of Presence

Attica Region Attica Region Other Regions Other Regions

Total Number of Ports 1.400 1.200 1.000 800 600 400 200 0

of presence throughout the country. Out of the 1.2 million ADSL ports, about 660,000 have been installed outside the Attica region. As part of its strategy to promote broadband services, OTE’s initiatives in 2007 included the countrywide broadband road-show OTE on the Broadband – OTE Broadband Services, aimed at raising public awareness of the benefits of broadband services (which was organised for a second year by OTE) and the

conn-xperience, an application, that was set up at the OTEshops to allow customers to familiarize themselves with broadband and conn-x services. Taking part in a project organized by the National Research and Technology Network and contributing to the efforts of the State to promote broadband penetration, the company awarded more than 12,500 first-year, top university students with €500 credit towards the purchase of a portable computer combined with a six-month free Conn-X 768 Home subscription (through its OTEShop network). In addition, the company also offered free 2 Gbps Internet connection of OTE’s network with the National Research and Technology network. Free conn-x subscriptions were also offered to 4,500 top university students.

the new conn-x view service that allows for remote area surveillance and entertainment by establishing user-communities for data sharing (video, images, etc). During the same year, the company offered a new value-added service VPN Class of Service (CoS) for permanent IP VPN connections, which allows for the segmentation of total connection capacity and the provision of services at different quality levels. OTE also introduced an innovative broadband e-Learning service School Powered by conn-x which provides students with the opportunity to enhance their performance at school via a user-friendly interactive broadband environment.

Moreover, during 2007, the company upgraded the quality of its services by underpinning pre- and post-sale customer support, achieving thereby a higher degree of customer satisfaction and loyalty for conn-x products and services.

In 2008 the company anticipates the launch of IPTV services, which will facilitate the broadcast of television programs through broadband connections, enhance co-operation with content providers (that will expand consumer options) and finally allow for the development of bundled products (combining voice, fast Internet and television), as part of OTE’s strategy to provide double and triple play services.

PRODUCTS AND SERVICES

In 2007, OTE enriched its broadband product conn-x with new nominal speed packages and specialized services. The company proceeded with the upgrade of 1 Mbps and 2 Mbps speeds, and offered new access speeds of 4 Mbps, 8 Mbps and 24 Mbps. Apart from faster data transfer, the new higher speeds also allow for the provision of advanced broadband services that call for greater network capacity.

The conn-x talk plan (combining fast Internet connection with voice services and unlimited local and long distance calls on certain days and hours) was supplemented by the new conn-x talk 24/7 package, allowing for unlimited local and long distance calls 24 hours a day, 7 days a week. In January 2007, OTE also introduced

1024/256 2048/256 Dec 06 Dec 07 768/192 1024/256 2048/256 4096/256 8192/384 24756/1024 OTE ADSL Access Speeds

45 Monthly Fee (€) DEC . 06 JAN. 07 FEB. 07 MAR. 07 APR. 07 MA Y. 07 JUNE. 07 JUL Y. 07 AUG. 07 SEPT . 07 OCT . 07 NO V. 07 DEC . 07 JAN. 08 15 20 25 24Μb 8Μb 4Μb 2Μb 1Μb <1Μb 30 35 40 PRICING POLICY

Contributing to the further increase of broadband penetration levels in Greece, OTE reduced its monthly tariffs for ADSL connections and conn-x onDSL Home packages through three consecutive price cuts during 2007, representing an overall tariff reduction, for current speeds, of 30%-50%.

The graph displays the price evolution of OTE broadband packages during the period 2006-2008

ΟΤΕNET

Enhancing OTE Group’s positioning in the broadband market

2007 is considered a milestone year with regards to the Group’s broadband Internet offerings. OTE’s decision to absorb its subsidiary OTENET, which enjoys a strong position in the ISP and broadband Internet markets, signals the realization of the Group’s vision for a single, dynamic and competitive positioning in the broadband market.

This development allows the Group to respond effectively to technological trends and other key developments in the broadband, fixed-line and/or mobile telephony market. Technological

convergence trends coupled with the demand for integrated telecommunication services through a single operator, call for the merger of competences of different companies or different divisions within a company (operating in the same field) into a single, unified and integrated instrument of strategy and services.

OTE Group’s efficiency and competitiveness are thus significantly enhanced by this merger as this introduces a new reality for the broadband Internet operations of the parent company and also establishes a single point of contact and support for broadband Internet customers. Following the absorption of OTENET by OTE, the OTENET brand name will continue to be used for Internet services. In this context, during 2007, OTENET focused on the alignment of its operations and service practices with those of OTE. The aim was to seamlessly incorporate its portfolio of services within those of OTE and to further increase competitiveness. The company was also engaged in further developing its integrated IT and telecommunication services for businesses and focused on the consolidation of its position in the respective market. At the same time, emphasis was placed on projects that will add value to OTE in due time. These projects relate either to new products and services or changes in processes that will ultimately enhance service quality and reduce operating costs.

OTENET’s services, which are now part of OTE’s commercial portfolio, mainly cover:

• Internet access services

• Networking and Virtual Private Network services ( IP MPLS VPN, VPDN)

• Integrated telecom and IT business solutions (surveillance, network management and support, equipment, systems and applications services and also procurement/ customization installation/equipment support)

• Application development and operation services for websites and Internet portals

• Data Center and systems and applications hosting services As part of OTE’s fixed-line commercial strategy, in 2007, ΟΤΕNET offered the following products and services:

• New ADSL packages with new speeds (4Mbps/256Κbps, 8Mbps/384Κbps, 16Mbps/384Κbps)

• New Internet access products via Leased Lines at speeds of 5, 10, 20 and 34Mbps

• Surveillance and management services (managed services) for IP MPLS VPN with reporting potential through specially designed web applications

• Pilot run of IPTV service: design of technical solution, installation and customization of technological infrastructure, customization, control, provision and technical support of television and Video On Demand services for pilot users in the Attica region.

• Development and operation of Internet portals, with general content, such as otenet.gr with the impressive number of visitors of more than 1 million per month, as well as Internet portals with specific content, such as travel.gr, 2x4.gr, zuper.gr.

In 2008 OTENET also completed a significant number of projects for business customers as part of its integrated IT and telecommunications solutions portfolio.

In 2008 OTE will focus on the implementation of all necessary procedures for the smooth completion of OTENET’s absorption, fully incorporating OTENET’s services in those of OTE and transfering OTENET’s client base to the mother company.

In 2007, OTENET’s revenues amounted to €127.8 mn, up 16% from the 2006 level, whereas operating income before depreciation and amortization amounted to €10 mn.

TRADITIONAL

FIXED-LINE

SERVICES

New products and services for a highly competitive market

MARKET TRENDS

In 2007 the telecommunications market was marked by dramatic changes. The trend but also the need for consolidation significantly altered the telecommunications landscape. Alternative operators acquired other companies and formed strategic alliances in order to establish stronger ventures that will be able to withstand competition, both at infrastructure and service level, which will also corner greater market shares in fixed-line across all types of services.

At the same time, infrastructure-related investments by alternative operators also grew significantly compared to the previous year, leading to a sharp rise in the number of unbundled Local Loops. During the year, new, competitive products, offering unlimited calls were introduced in the fixed-line market and the broadband market continued to grow at a fast pace (encouraged by the introduction of higher DSL connection speeds).

The fixed-to-mobile substitution rate remained unchanged in 2007, since mobile operators offered products that combined fixed and mobile telephony, either by using alternative operators’ infrastructure or via the provision of fixed-line services through mobile GSM networks. However, given the powerful brand names and the increased capabilities of mobile operators with regards

to the development, promotion and distribution of products, their involvement in the fixed-line market strongly intensifies competition.

With regards to sales and distribution networks, new acquisitions and co-operations emerged amongst the various operators in the market, with certain alternative operators focused on setting up their own stores and with a significant expansion of the mobile operators’ sales network.

Competition in 2008 intensified through the introduction of new bundled products that combine voice, broadband Internet, IPTV and mobile telephony services. Today it is evident that the Greek fixed-line market has entered a more competitive phase, characterized by the presence of stronger alternative operators, an increase of investments in Local Loop Unbundling and the introduction of new bundled products and services (double play, triple play) as a result of increased broadband penetration.

OTE’s strategy and response to these challenges is strongly oriented towards sustained growth, the development and launch of innovative bundled products that combine fixed telephony and broadband Internet services, as well as the optimization of sales and customer-support networks.

FIXED-LINE

SERVICES

business and residential customers with new flat-rate voice plans. Three attractive ΟΤΕ talk programs were offered to residential customers: OTE Talk 24/7 for unlimited local and long-distance calls, 24 hours a day, 7 days a week, OTΕ Talk Evenings and Weekends for unlimited local and long-distance calls on weekday evenings (20:00-08:00) and weekends, and ΟΤΕ Talk 1,2,3 for unlimited local and long-distance calls to 1 and up to 3 fixed-line numbers designated by the subscriber (within ΟΤΕ’s network). Moreover, the new OTE mobile service, offers customer calls from fixed to mobile numbers at a lower cost. The OTE Mobile programs follow the mobile telephony pricing model, offering pre-paid talk time for calls to domestic mobile numbers. OTE presented four new OTE mobile programs: OTE mobile 30, OTE mobile 60, OTE mobile 120 and OTE mobile 240. OTE Mobile programs may be combined with all other existing OTE plans.

In order to address specialized customer needs, the company launched the Katexochin program targeting residential customers who own a country home. This specific program offers a telephone connection, which is in operation for a total period of six months (four months during the summer, one month at Christmas and one month at Easter).

In 2007, OTE also added new information categories to its directory enquiries service line, 11888. Today the 11888 line provides not only fixed number directory services, but also mobile number directory services and also handles content enquiries (such as contact details of travel agencies, hotels, emergency pharmacies and hospitals, restaurants, and provides information regarding events in Athens, Thessaloniki, Patra etc.,and various types of businesses). The 11888 line has been accessible from all mobile phones since August 2007. OTE SMS, a short text messaging service, was also launched in 2007, offering customers the opportunity to send and receive SMS from/to both an OTE fixed-line and mobile phone.

The following products had continuing success in 2007: • OTEPILOGES package, offering significantly lower rates

for phone calls to selected local, long-distance and mobile numbers, as well as for international calls to selected countries

• Smart Fixed Telephone package, offering services such as caller identification, call-waiting, call-diversion, call completion on busy lines and an enhanced package of voice-mail services.

• Pre-paid phone cards with €4 and €10 talk time (with additional free talk time of €1), the Chronokarta range of pre-paid cards with €6, €13 and €25 talk time (with additional free talk time of €0.36, €0.25 and €0.55 respectively) for domestic and international calls from any fixed-line number, OTEkarta for local, long-distance and international calls to mobile numbers from any phone, and the pre-paid talk time card ALLO OTE that offers reduced rates for calls to selected Balkan, Eastern European, Asian and African countries.

• The 65+ program that supports retired people over the age of 65, offering them free local and long-distance calls at no extra cost with each bimonthly bill.

• The Student Pack package that is aimed at University and College students offering them €4 of free time for Internet access and long-distance calls.

In 2007, OTE also added the new OTEbusiness plus Advantage program to its sevice portfolio for business customers, which addresses both large corporate clients or small business customers with large call volumes, offering tiered discounts on local, long-distance and international calls.

OTE’s specialized customer-service centers include the following: • “134”, customer service and sales call center, comprising

4 Call Centres with 200 workstations, fitted with state-of-the-art equipment • www.oteshop.gr, electronic store • OTELINE call center for outbound Telemarketing services • “1502”, call center for the issue of citizenship related certificates • European emergency number 112 • “121”, for technical fault reporting • Service center for people with hearing disabilities • OTEAlert center for residential and business alerts • Operator service for national, international calls as well as international directory enquiries, “129-139” • National and international Telegrams center, “136” In relation to its customer service traffic and quality evaluation, in 2007, OTE recorded the following customer service statistics: Customer Service Centers Number of Calls/Visits 2007 134 Customer service and Sales Call Center > 4.9 milion calls Average 134 response time 22 sec 134 customer satisfaction rate 95.1% Online store: www.oteshop.gr 1.9 milion visits oteshop.gr customer satisfaction rate 91.3% The performance of OTE’s Call Centers and oteshop.gr, in 2007, exceeded all expectations, as 40% of the calls led to sales of products and services, while customer satisfaction levels reached 95%.

OTE’s targets for 2008 with regards to its customer service include: • A 20% increase in calls that are handled by the Call Centers

(> 9 million inbound and outbound calls) • Upgrade of technological equipment of “134”

• Development of Web Self Care applications on oteshop.gr • Sustainability of high levels of customer satisfaction RETAIL DISTRIBUTION NETWORK

ΟΤΕ Shops

OTE’s retail distribution network comprises 364 stores (OTEshops) throughout Greece. Of this total, 127 have received ISO 9001:2000 certification and 19 are franchise shops. OTEshops recorded an increased number of customer visits in 2007, as evidenced by the collection of 27 million and a total of 4.35 million OTE and Cosmote bills respectively.

In 2007 the company focused on the optimization of the geographical distribution of OTE shops, the upgrade of their operation and the maximization of synergies with the Germanos retail distribution network, in order to meet the needs of customers across the country.

Germanos Stores

OTE Group’s recent acquisition of the retail distribution network Germanos (which specialises in telephony and technology-related products) with 410 stores in Greece (as at December 2007), has significantly enhanced OTE Group’s distribution network and is expected to contribute considerably in the distribution of new bundled products that will be introduced in the market in the years to come. The Germanos stores recorded an increased number of customer visits in 2007 which reached 12.5 million, posting an 8% increase compared to 2006 and evidencing the appeal that the Germanos network enjoys in the market.

The OTE Group remains focused on building a single, unified retail distribution network through the merging of current individual distribution networks (OTE, Germanos, Cosmote).

CUSTOMER CARE Call Centers

OTE’s Call Centers, which operate in four key areas, comprise of 1,000 workstations and handle customer requests from all over the country. The call centers are ISO 9001:2000 certified, employ highly trained personnel and operate state-of-the-art equipment, whilst ΟΤΕ’s Customer Care team (134, telemarketing, 121, 11888, OTEshop.gr) is backed by CRM applications.

SERVICES

FOR TELECOM

OPERATORS

Accelerating growth rate of Local Loop Unbundling services

In 2007, the market of services for telecom operators grew dramatically. This was the outcome of considerable investments in infrastructure which were implemented by OTE, boosting not only the take up of Local Loop Unbundling (LLU) and related services (Co-location and Transmission Services), but also the offering of specialized products and services from all operators. The increasing growth rate of Local Loop Unbundling intensified competition for OTE and other operators providing retail services, as well as for the rest of operators with privately owned infrastructure and alternative network services such as Ethernet, ADSL and wireless broadband access services.

There are 43 fixed-line and mobile telephony providers operating within the Greek telecommunications market today, of which, 19 are interconnected with OTE’s network, while another 16 operators offer services via Local Loop Unbundling. Potential mergers or acquisitions of telecom operators, the upgrade of their network infrastructure, as well as the entry of mobile operators in the fixed-line market are expected to transform the market landscape even further.

INTEGRATED SERVICES FOR TELECOM OPERATORS OTE develops and provides services and integrated solutions to telecom operators. Specifically, OTE offers the following services: • Broadband

• Local Loop Unbundling • Data Transmission

• Voice and Network Interconnection • Value-added Services

Aiming to enhance its service portfolio and develop new offerings, in 2007, OTE proceeded with the following:

• Increase of ADSL speeds up to 24 Mbps

• Design and development of broadband access services that address telecom operators’ need for infrastructure that will accommodate technology convergence and triple-play services

• Upgrade of the “Integrated Central Connection to the ADSL Network” (O.K.SY.A II service) up to 10 Gigabit Ethernet • Offering of fast data-transfer services, such as IP Backbone

and Metropolitan Ethernet

• Offering of Co-location and Local Loop Unbundling services as well as all related facilities to 152 Local Exchange Offices of OTE throughout the country

• Development and offering of E.L.X.I.S SDH services for the transfer of data from co-location areas to operators’ premises

• Development of capacity provision services of 622 Mbps (STM-4), 2,5 Gbps (STM-16) and 10 Gbps (STM-64), through the model of “Rights of Use” that refers to long-term occupancy of increased capacities, depending on the needs of the operator

• Activation of access to OTE’s Call Centre “11888” for mobile telephony users as part of the networks’ interconnectivity potential

• Offering of new SMS services via the interconnection of OTE’s network with mobile networks

• Offering of networks interconnection services, called “Imi-Zevksis”

• Establishment of a single Fault Report Center for all operators, operating on a 24/7 basis

• Planning of wholesale services upgrade, as part of the SLA provision

• Commercial operation of the Universal Directory Service that offers directory enquiry services on fixed and mobile numbers

• Publication of 19 volumes of the Integrated Telephone Directory to respond to directory enquiries for fixed-line and mobile telephony throughout the country

• Activation of electronic filing systems for Local Loop Unbundling, ADSL and Carrier Pre-selection requests • Upgrade of the www.otewholesale.gr website, aiming to

provide consistent information and promote OTE services • Development and implementation of marketing plans to

LOCAL LOOP UNBUNDLING (LLU) SERVICES

The highly increased uptake of Local Loop Unbundling services in 2007 contributed to the faster penetration of broadband services and the rapid growth of the number of broadband subscribers, which surpassed the 1 million mark.

Operators’ requests for access via Local Loop Unbundling increased significantly during the year. As a result, by the end of 2007, more than 232,000 loops were fully unbundled and 41,500 loops partially unbundled by OTE, compared to 12,000 and 7,000, respectively, in 2006. 62% Full unbundling 85% Full unbundling 38% Partial unbundling 15% Partial unbundling 07 06 05 310 25 7 LLU (000 lines) 2006 2007

In 2007, demand for services relating to LLU, such as

Co-location and Transmission services, also grew significantly. OTE provided Remote Co-location services in 87 local exchanges, while the number of Remote Co-location service agreements amounted to 240, compared to less than 180 in 2006. At the same time, in 2007, 508 Physical Co-location services became effective in 146 local exchanges, compared to 90 Co-location agreements made available in 31 exchanges in 2006.

ADSL FOR TELECOM OPERATORS

Wholesale ADSL connections exceeded 222,000, compared to 159,000 in 2006, posting an increase of 40%. Total capacity of the Integrated Central Connection to the ADSL Network (O.K.SY.A) reached 24 Gbps, compared to 21 Gbps in 2006.

WHOLESALE LEASED LINES AND DATA SERVICES

The total number of leased line circuits in 2007 reached 13,400, down by 2.9% from the previous year’s figure of 13,800. Of these lines, interconnection leased line circuits amounted to 7,238, compared to 7,561 at the end of 2006. Demand for high-capacity lines and Backhaul SDH and Metro Ethernet networks increased. INTERCONNECTION SERVICES

With regard to interconnection services for telephone networks, alternative operators’ traffic volume terminating at OTE’s network increased by over 5%, reaching 5.8 billion minutes in 2007, compared to less than 5.5 billion in 2006. Mobile operators’ traffic volume terminating at OTE’s network increased by almost 6%, reaching 1.99 billion minutes in 2007, as opposed to 1.87 billion in 2006. Origination and transit traffic minutes decreased by more than 5%, reaching 6.4 billion minutes in 2007, compared to 6.8 billion in 2006.

During the second half of the year, customers migration from the Carrier Pre-Selection service (CPS) to bundling services, increased considerably, along with the amount of portable geographic numbers. 90 Physical co-location agreements 508 Physical co-location agreements 146 ΟΤΕ exchanges 31 ΟΤΕ exchanges 2006 2007

HIGH GROWTH RATES

In 2007, revenues from wholesale services increased by 32%, as presented below: +32% 2006 2005 2007 283.3 214.2 193.6 Wholesale Revenues (€ mn)* +11%

* Each year displays the total revenues from Interconnection/ Roaming/ Termination/ Leased Lines, Wholesale ADSL/ LLU/ Co-location

Wholesale Revenue Breakdown 2007

41.3% Interconnection/ Roaming

/ Termination 27.5% Wholesale leased lines

21.9% Wholesale ADSL

9.3% LLU

QUALITY ASSURANCE FOR CUSTOMER SERVICES

OTE consistently monitors the Greek telecommunications market throughout the year in order to identify market trends, record the increasing needs of customers, create individual customer profiles and enhance the overall customer service system.

The implementation of the Wholesale CRM (W-CRM) system has enhanced OTE’s efficiency with regards to the management and support of services, as well as the company’s product offering to alternative operators. Customer service quality has greatly improved through the electronic filing, monitoring and processing of requests for Local Loop Unbundling, Co-location, ADSL connections, number portability and Carrier Pre-selection services. Focused on managing relationships with alternative operators effectively and handling their requests in the most efficient manner, OTE issues statistics and reports for ADSL, Carrier Pre-selection services and Local Loop Unbundling products, and places special emphasis on post-sale support.

The capacity and data transfer market is expected to grow significantly in 2008, chiefly due to the soaring growth rate of broadband services (offered by fixed-line and mobile operators). The transition to Local Loop Unbundling services is expected to continue, as a result of operators’ initiatives to provide products and services based on their own infrastructure.

In 2008, OTE aims to:

• Leverage on its infrastructure and on the implementation of new technologies

• Offer high quality services that respond to the needs of fixed-line and mobile telephony operators in an environment that promotes the convergence of markets • Adopt a customer-oriented policy which places strong

INTERNATIONAL

TELEPHONY

ΟΤΕ GLOBE

Enhancing international telephony’s network infrastructure in

Southeast Europe

Capitalising on its strategic location and advanced infrastructure, OTEGLOBE is considered the Group’s “Network-Bridge” connecting the Middle East with Europe through the Balkans. The company offers integrated international wholesale telephony services in Greece and abroad, and caters for the increased demands for broadband services in the region.

OTEGLOBE, which launched its commercial operations in October 2000, offers a wide range of integrated interconnection, data, capacity and voice services via its three privately owned networks: the Multiple Service International Platform MPLS/IP (MSP), and the two, super-high speed, fiber-optic networks, based on DWDM/SDH technology, GWEN and Transbalkan (TBN).

The largest volume of broadband and inbound/outbound voice traffic between Southeast Europe and the rest of the world is carried through OTEGLOBE’s networks.

OTEGLOBE operates in a market where continuously increasing broadband penetration levels call for significant investments in infrastructure. Coupled with fierce competition, these investments inevitably bring voice, data and capacity services prices down year on year. Whilst international wholesale voice services (fixed and mobile) continue to pool most of the sales volume, the uptake of data services (mainly the global Internet Feed service) seems to be growing rapidly as well.

Within this environment, OTEGLOBE enjoys the competitive advantage of owning two independent networks in Southeast Europe. This path diversity guarantees the non-stop operation of OTEGLOBE’s networks, since, asides from being independent, TBN and GWEN may function as back up of one to the other. By virtue of the multi-gigabit capacity that both TBN and GWEN provide, OTEGLOBE owns the most comprehensive network infrastructure in the region. The operation of two networks allows OTEGLOBE to offer maximum network availability at an optimal price.

International Wholesale Hubbing

One-stop shopping service that offers high-quality and low-cost routing of telephony traffic to all international destinations

International Wholesale VoIP

Inexpensive solutions for international IP traffic transfer

International Wholesale Inbound

Traffic termination, through the most extensive network in the country, for international telecommunication companies

Other Voice services

International Wholesale Freephone, International Wholesale Signaling and Roaming, Home Country Direct and International ISDN

KEY DEVELOPMENTS IN 2007

Control of OTE’s International Cable Systems

2007 was a key year for OTEGLOBE. Through a corporate spin-off and a share capital increase, OTE’s International centers and Cable Systems operation was passed on to OTEGLOBE. As a result, the company now manages the total assets and agreements relating to international centers, such as the international cable infrastructure, international IP network, MSP network, license agreements for the use of the INTEC-ITU pricing system and the relevant international agreements. Through this development, OTEGLOBE has also, in essence, aligned its operations management model with that of other European operators who have adopted a similar vertical organization approach, aiming to respond to the needs of two distinct telecommunications markets, those of retail and international wholesale. In control of the international telephony infrastructure, OTEGLOBE may now transact more effectively with the Group’s local and foreign competitors and manage the quality of its services more effectively.

The Transbalkan Network (TBN)

OTEGLOBE’s Transbalkan Network (TBN), whose operation was commenced in November 2007, covers the increased demand for broadband services in the Balkan region. Transbalkan Network spans from Greece to Frankfurt through Central Europe and the Balkans, with transmission rates from 34 Mbps to 10 Gbps. It is an exclusively terrestrial network, the only one in Greece connecting the Middle East with Europe through the Balkans, following a geographical route to Western Europe which differs from that of the current, private, super-high speed network GWEN, which passes through Italy. These two distinct, super-high speed routes guarantee an unobstructed flow of services, since both networks complement each other. Through the Transbalkan Network, OTEGLOBE provides connectivity with the IP MPLS (MSP) platform and the GWEN network, high reliability, COMMERCIAL ACTIVITIES

OTEGLOBE offers a broad portfolio of innovative, world-class telecommunication services based on its networks and its strategic alliances with operators worldwide. OTEGLOBE offers three types of services:

• International Data Services via the International Network IP/MPLS

Data/IP Services for Businesses

Integrated business end-to-end interconnection solutions (International Managed Clear Channel, Frame Relay, MPLS VPN, Ethernet, Managed CPE), complemented with guarantees (SLAs) for installation time, damage repair, high quality and availability of service.

Data Services for Operators

Internet Transit for Carriers (for global Internet routing), GPRS Roaming Exchange (for global GPRS roaming traffic of mobile operators), Ethernet for alternative operator networks (Ethernet Transport) and business networks (Ethernet VPN).

• International (wholesale) capacity services for operators via private cable infrastructure

Based on OTEGLOBE’s GWEN and TBN fiber-optic network infrastructure, international capacity services (International Full Circuit SDH Services - IFCS) provide full international digital circuits from certain points in Greece to key telecommunication centers in Europe, such as London, Frankfurt, Paris, Amsterdam, Brussels, Milan, Zurich etc.

All services available via the GWEN network include end-to-end and fully protected interconnection solutions, such as E3 / DS3, STM-1, STM-4, STM-16, STM-64 and 10 Giga Ethernet, fully protected SDH interconnection from Greece to the 11 GWEN PoPs in Western Europe or in other European cities, and Wavelength services at 10 Gpbs (STM-64/10 Giga Ethernet interfaces).

International capacity services include the international leased-line service (International Private Leased Circuit - IPLC), a traditional solution for the provision of high quality capacity on a half-circuit basis, available in capacities from 64 kbps to 155 Mbps, via cables worldwide.

• International telephony services for international wholesale operators and Greek fixed-line and mobile telephony operators

competitive prices due to the privately owned infrastructure and customer care services on a 24/7 basis. The network will be expanded with new nodes and upgraded operations, and will stay fully protected until the end of 2008.

OTHER DEVELOPMENTS IN 2007

In 2007 OTEGLOBE incorporated Soft Switch NGN technology in its MPLS/IP international network, increased the backbone capacity of MPLS/IP by 75% (28 Gbps from 16 Gbps) and raised the GWEN network capacity to 80 Gbps. Aiming to continuously improve the quality of its services, OTEGLOBE introduced new management systems, such as CRM, Flexible Billing, etc. Finally, OTEGLOBE’s share capital was increased by €30 mn, as part of the company’s new investment plan financing.

2008 OUTLOOK

OTEGLOBE’s targets for 2008 involve a revenues increase from alternative and international operators, as well as from domestic and foreign mobile operators (generating new sources of income for the Group), the consolidation of the company’s position as a network bridge, connecting the Middle East with Europe through the Balkans, and the expansion of its strategic alliances (so as to participate in infrastructure development projects in the region and support OTE Group’s business plans in the region). OTEGLOBE will also continue to pursue the maximization of its international cable infrastructure uptake. In 2008, the company will also place special emphasis on the provision of Internet Transit over Ethernet, introduce new voice services based on the new generation technology Softswitch and will target, jointly with OTE, business customers with international connection needs through the MSP platform (IP MPLS technology) that offers advanced IP services. As far as the financial performance of OTEGLOBE is concerned, 2007 was a successful year in terms of voice and data service sales. Pursuant to the recent agreement with OTE, however, and due to the absorption of OTE’s International Telephony and Infrastructure segment by OTEGLOBE, 2007 figures are not comparable with those of 2006. Total revenues in 2007 reached €165 mn with revenues from voice over MPLS services, that OTEGLOBE exclusively offers, climbing to €50 mn. Operating income before depreciation and amortization amounted to €14 mn.

INVESTMENTS

IN FIXED-LINE

Upgrading the network and enhancing broadband

and Local Loop infrastructure

The rapid expansion of broadband services, along with the increased demand for network technologies that facilitate the provision of bundled services, underline the necessity of access networks’ transformation and the upgrade of transmission systems and backbone network architecture.

The transformation of access networks poses a significant challenge for telecommunication companies. For this reason, since 2006, OTE has been upgrading and transforming its infrastructure and developing a broadband platform that will support technology convergence and allow for the provision of new bundled services.

The gradual transformation of the TDM network into a Next Generation Network (NGN) along with the further expansion of broadband services, remain the key priorities of OTE’s 2006-2008 planning and investment program. Next Generation Networks are based on TISPAN IMS architecture that allows for, amongst other things, fixed-line and mobile telephony convergence. Transition to next generation networks is underlined by the need for greater bandwidth availability, as well as the need for super-high speed networks, limiting thereby or replacing copper loops with fiber optic cables.

FIXED-LINE NETWORK INFRASTRUCTURE AND QUALITY OTE’s fixed-line network consists of approximately 2,400 exchanges. The installed capacity of OTE’s exchanges, as of 31 December 2007, stood at 5.9 million PSTN lines, 668,000 ISDN BRA lines and around 10,000 PRA lines.

In 2007, network quality indicators were as follows:

2006 2007 Fault frequency per year (per 100 connections) 13 12 Unsuccessful calls rate 2.6% 1.6% Ratio of faults repaired within one working day 78.6% 85.4% Response time for voice mail services 15 sec 15 sec Response time for directory enquiries 15 sec 20 sec Fixed-line operations are also supported by data-transfer networks such as:

The ΑΤΜ (HELLASTREAM) Network, a data package transfer network based on ATM technology, with 47 points of presence all over Greece. Through the ΑΤΜ network, customers are provided with Cell Relay circuits at 2 Mbps-155 Mbps and Frame Relay up to 2 Mbps. The ATM network also carries broadband traffic from ATM DSLAMs.

The Digital Leased-Lines Network (HELLASCOM Service), with 12,608 nodes installed, serves 15,886 active circuits. This network provides digital leased circuits of nX64 Kbps up to 2 Mbps. IP ACCESS

The ΙΡ Access Network consists of 82 points of presence across the country and supports services such as: IP VPNs, IP Transit, VoIP VPNs, Central Connection to the ADSL Network (O.K.SY.A) and Dial-Up Internet access. Aiming to ensure the efficient operation of the ADSL network in 2006, the network was supported with BRAS technology and, as a result, points of presence climbed from 12 to 15. The number of systems that correspond to these PoPs grew from 30 to 37.

IP BACKBONE

OTE’s IP Backbone Network consists of 7 points of presence within and outside Athens. Network nodes are connected via nX10 Gbps, 2.5 Gbps or nX622 Mbps circuits. The network supports all broadband and IP services offered by OTE.

The technology and network architecture required to respond to these needs (FTTx) are part of the Next Generation Access Network’s (NGA) features, making therefore the development of NGA

networks a key target for the company.

Specific projects, related to the transformation of the network, which were launched in 2007 include the following:

• Implementation of a pilot offering of IPTV and VoD (Voice on Demand) services

• Expansion of the Metro Ethernet infrastructure in all major Greek cities and provision of symmetric leased-line circuits through optic access points on the Metro Ethernet (Ε-Line) network

• Completion of the evaluation process of three pilot WiMax systems (two of which are in the Attica region) aiming to provide broadband access services in areas where cable network access is not available or requires a long connection wire that doesn’t allow for sufficient speeds • Preparation of a study relating to the transformation of

OTE’s network, especially with regards to the design of IMS-NGN architecture and Next Generation Access (NGA)

issues

In 2008, OTE is planning to:

• Install and customize IPTV services in five major cities (Athens, Thessaloniki, Patra, Larisa, Iraklio) so as to provide television, VoD and other value-added services

• Expand availability of Metro Ethernet and other related services, such as IP VPN

• Offer VoIP services over OTE’s broadband networks (initially over the ADSL network), in order to provide additional fixed-line numbers to all interested ADSL customers • Employ the WiΜΑΧ network for the provision of broadband

services in remote areas where broadband connection via OTE’s cable network is impossible

• Upgrade the IP backbone network by installing Terabit routers at major PoPs (Points of Presence) in Athens, Thessaloniki and Patra in order to provide broadband services.

ΙP-NGN NETWORK

A total of 43 points of presence are equipped with IP-NGN infrastructure with Media Gateways and also one Softswitch and eight Sip Servers. IP-NGN equipment currently supports the provision of VoIP services as part of the state-sponsored “SYZEFXIS” project.

ETHERNET

By December 31, 2007, the Metro Ethernet network had 209 points of presence throughout the country compared to 87 in 2006. Metro Ethernet offers broadband Internet and leased-line (E-Line) services. Key network features include high voice, data and image transfer capabilities, high data transfer speeds (up to 10 Gbps) and high network availability.

The provision of Metro Ethernet services as an integrated product started in May 2007. Indicative products and services based on IP and Ethernet include:

• IP VPNs • IP Transit • VoIP VPNs • E-Line (Layer 2 VPNs) • Integrated Central ADSL Connection • Dial-Up Internet Access ADSL

In 2007, OTE reinforced its presence in the ADSL market, raising the number of installed ADSL ports from 760,000 at the end of 2006, to 1.1 million in 2007. The service is now available countrywide, with 1,300 points of presence and more than 3,300 DSLAMs, covering areas with less than 500 telephone connections. Broadband Internet services and VoIP services (as of the beginning of 2008 and onwards) are provided through DSLAMs. IPTV services will also be available in 2008, through Ethernet DSLAMS.

LOCAL LOOP

By the end of 2007, there were 274,000 local loops, compared to 19,000 in 2006, fully or partially unbundled as well as 146 physical Co-locations in OTE’s local exchanges and 87 remote Co-locations.

WIRELESS ACCESS

By the end of the year, there were 167 wireless multi-point narrow band systems (Point-to-MultiPoint) installed in the 1.5 GHz, 2.5 GHz and 3.5 GHz bands. In 2008, three pilot WiMAX systems are expected to become fully operational, offering broadband data (Internet, VPN) and voice (VoIP) services. In addition, there are plans for 20 new WiMAX systems to be installed throughout the country.

REGULATORY

FRAMEWORK

Intense regulatory activity as part of the implementation of

electronic communications regulation

REGULATORY FRAMEWORK

Law 3431/2006 defines the regulatory framework for electronic communications and networks in Greece, as well as the operation and responsibilities of the National Regulatory Authority (Hellenic Telecommunications and Post Commission – EETT). Policy-making procedures, implemented by EETT for market protection, expansion and increasing competition levels include conducting hearings and consultations, regulatory and restraining measures and fines.

REGULATORY MARKET DEVELOPMENTS IN 2007

Key developments in the telecommunications market in 2007 include the increased alternative operator activity with regards to voice and broadband infrastructure, via the Local Loop, as well as the launch of fixed-line service offerings by mobile operators. During the year, mobile telephony operators entered the fixed-line market, offering competitive bundled products that combine fixed-line, mobile and/or broadband access services. These

product offerings do not imply technological convergence. They are in fact based on the utilization of OTE’s mobile telephony network and wholesale products, such as Local Loop Unbundling, Carrier Pre-selection, etc., for the provision of bundled services. This has led to stronger competition from operators that are not ‘newcomers’ in the market.

At the same time, ‘traditional’ alternative fixed-line operators gained access to 152 physical co-location areas that cover 85% of OTE’s local exchanges, and increased their market share significantly through product offerings to OTE’s subscribers. EETT amended the relevant Reference Offer in 2008, thus raising standards with regards to OTE’s infrastructure and wholesale services.

OTE’s viewpoint is that a fully competitive market, consisting of companies keen to invest in their infrastructure, has a positive effect on consumers as well as companies that operate in the market. Further more, OTE consistently responds to the

obligations and requirements set by the regulatory authorities and State institutions, regarding customers and alternative providers. Nevertheless, current developments are shaping a competitive environment that little resembles that of the early years of deregulation, stirring up discussions on the status of the existing regulatory framework, Its capacity to adapt to the latest trends, and thus underlining the necessity for regulatory certainty, legal security and consumer rights protection. On this basis, OTE aims to put forward and defend its standpoint (before regulatory authorities, national, European and international bodies) on issues that refer to the following:

• Enhancement of the company’s competitive position through the reduction of regulatory obligations in markets where the desired level of competition appears to have been achieved • Protecting new technology investments against excessive

regulation or regulatory interference

• Compliance with the obligations relating to OTE’s status as Universal Service provider and intention to minimise costs incurred by these obligations

• Assurance of consistency in regulatory intervention • Protection of consumer rights

• Assurance of personal data and communications confidentiality

REGULATORY ISSUES IN 2007

The main regulatory issues with which the company was involved in 2007 were the revision and approval of OTE’s Reference Offer for Local Loop Unbundling and all relevant issues (co-location etc.), issues relating to wholesale broadband access, the revision of the Reference Interconnection Offer (RIO), the approval of various tariff plans by EETT and finally the undermined consumer confidence incurred by certain alternative operator promotional practices.

The company also followed closely all regulatory developments at a European level, regarding the development of Next Generation Access networks and the relevant implications for the regulatory environment, as well as European Commission’s proposal on the amendment of the European Framework, regulatory interventions and their effect. OTE has proposed amendments to EU’s proposal concerning the new regulatory framework.

Furthermore, during 2007, OTE provided input in the following EETT consultations:

• Public consultation for the provision of Universal Service obligation

• Public consultation for the quality indicators of electronic communication services

• Public consultation for the terms of General Licenses that govern the provision of voice services, VoIP and/or Voice-over-Internet Services, web access services and

consumer protection issues

• Public consultation to set the tariffs for wholesale broadband access, etc.

2008: CHALLENGES

The key regulatory issues on OTE’s strategic agenda for 2008 include the protection of company’s investments in new technologies (such as Next Generation Access Networks) against excessive regulation or interference, the review of European Commission’s proposal on the amendment of the European Framework by means of introducing ‘functional separation’ as a regulatory remedy. OTE also monitors Greek State’s initiatives with regards to the future Fiber Τo Τhe Home (FTTH) project, which is part of the State’s strategic plan to develop broadband infrastructure. Finally, OTE will also be aiming for a reduction of its regulatory obligations in markets where the desired level of competition appears to have been reached.

HUMAN

RESOURCES

2006 VOLUNTARY RETIREMENT PROGRAM: REVIEW On the basis of the Voluntary Retirement Program, which was completed in 2006, 4,759 employees decided to leave the company (699 in 2005 and 4,060 in 2006). The program’s total cash cost has been allocated in the fiscal years 2005-2012. In 2007, the cost related to pension fund contributions and benefits for retiring employees amounted to €219.8 mn, while payroll savings (including an annual 4% raise) reached €215.1 mn. The qualitative impact of the plan’s execution involves a drop in the average age of OTE employees, the potential ability to identify and recruit new talents, and the ability to restructure the company.

SIGNIFICANT HEADCOUNT REDUCTION

In 2007, OTE’s headcount declined by 3.5% compared to 2006, reaching 11,348 employees. This staff reduction reflects the normal retirement of 161 employees and the early retirement of 487 employees through an employee exit plan with Incentives, which was enacted in February.

Following the completion of the 2006 Voluntary Retirement Program and the recruitment of 241 new employees, the average age of OTE’s employees dropped to 45 years. The age mix of OTE employees, in 2007, was as follows: OTE Employees 56% 35-49 age 29% 50-65 age 15% 20-34 age OTE Employees Age Mix

2007 2007 2006 2005 14,741 11,755 11,348

Building an integrated system for the development and

management of human resources