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CASE FOR FINANCIAL STATEMENT

ANALYSIS

REPORT 001

HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A.

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Contents

I) General Information about OTE page

II) SWOT Analysis page 6

III) Balance sheet analysis page 7

IV) Cash flow analysis page 10

V) Income statement analysis page 1

VI) Stock price decrease in 00 (reasons) page 14

General Information about O.T.E

The Hellenic Telecommunications Organization S.A. was incorporated as a societe anonyme under the laws of the Hellenic Republic in 14, pursuant to the provisions of Law No. 104/104. The company is now operating as a societe anonyme subject to the provisions of Law No. 10/10 on the operation of societe anonymes and Law N. 7/001. The Company was the exclusive provider of public switched voice telephony in Greece and have provided local, long distance and international communication services to Greek and foreign businesses, consumers and governmental agencies. With effect from January 1, 001, the period of exclusivity in the provision of public switched voice telephony services expired and the market is now open to competition. Within the framework of the competition regulations and the European Union policy objectives, OTE' s effort is to maintain its position as the dominant provider in the Greek telecommunications market, by exploiting the enhanced capabilities of its network and restructuring its tariffs, as well as expanding the range of its services and remaining actively involved in high - growth business areas.

In December 15, OTE was granted the right to provide mobile telephony services throughout Greece using DCS 1800 technology. In October 16, COSMOTE was established, to provide mobile telephony services and the DCS 1800 licence was transferred to COSMOTE in April 17. In May 17, following an international tender, a 0% interest in COSMOTE was sold to a subsidiary of TELENOR A.S., the leading Norwegian telecommunications company, for an aggregate purchase price of Drs. 6 billion. COSMOTE began commercial operation in April 18. In October 000, COSMOTE completed an initial public offering pursuant to which its shares were listed in the Athens Stock Exchange and its Global Depositary Shares were listed in the London Stock Exchange. Following the offering, OTE' s interest in COSMOTE is 58.8% and TELENOR's interest is 18%.

Through OTEnet, OTE' s 80.% - owned subsidiary which is the leading Internet Service Provider in Greece, the Company has expanded its offerings to include Internet Protocol (IP) based products, services and applications. OTEnet offers Internet access to residential and business customers, IP telecommunication services as well as e-business and content services.

OTE has also made certain equity investments in public telephony operators in countries with cultural, economic or historical ties to Greece. In June 17, OTE purchased a 0% stake in Telekom Srbija, the public telephony operator in Serbia, for a total of DM 675 million (approximately Drs. 106 billion or US$ 87 million). In March 18, OTE invested US$ 14.5 million for a 0% equity stake in ArmenTel, the Armenian public telephony operator, and in December 18, OTE purchased a 5% interest in Romtelecom, the Romanian public telephony operator, for US$ 675 million (approximately Drs. 18 billion). In August 000, a consortium of COMSOTE and TELENOR acquired an interest of 85% in the share capital of Albanian Mobile Communications (AMC), the state-owned Albanian mobile telephony company for a purchase price of US$ 85.6 million. In January 001, OTE acquired a GSM-00 license in Bulgaria for a price of US$ 15 million and established Cosmo Bulgaria Mobile under the trade name Globul. In November 001, OTE acquired the second mobile telephony license in the Former Yugoslavian Republic of Macedonia (FYROM), for a price of US$ 5 million, and established Mobile Telecommunication Services AD (MTS).

Following OTE' s initial public offering in 16, its shares were listed and began trading on the Athens Stock Exchange in April 16. In June 17, together its second offering of shares in the Athens Stock Exchange, OTE proceeded to an international offering of its Global Depository Shares, following which the shares were listed and began trading on the London Stock Exchange. As a result of this offering, the Greek State's interest in the Company's issued share capital was reduced to approximately 75.1%. In November 18, following the third offering of shares in the Athens Stock Exchange, the Company's American Depository Shares (ADS) were listed and began trading in the New York Stock Exchange. The American Depository Receipts (ADR) constitute the certificates for the American Depository Shares (ADS). The American Depository Shares (ADS) represent OTE shares held by the Depository Bank (Bank of New York), which issues American Depository Receipts, pursuant to the Depository Agreement between the Company, the Depository Bank and the relevant ADR holders. Each American Depository Receipt (ADR) represents the number of American Depository Shares stated on it, while each ADS is equal to ½ of OTE share or the option for the same number of shares. The American Depository Shares are negotiated in US Dollars. The American Depository Shares have been included in the official list at the London Stock Exchange (LSE) and can be traded through the Automated International Securities and Exchange System (SEAQ International) at the London Stock Exchange. They are also traded at the New York Stock Exchange (NYSE). As a result of this offering, the Greek State's interest in OTE' s issued capital share was reduced to approximately 65.1%. In June 1, OTE proceeded to a fourth offering of shares in the Athens Stock Exchange and the second registered global offering of American Depository Shares at the New York Stock Exchange, which resulted to a further reduction in the Greek State's ownership interest in the Company's issued share capital to approximately 51%. In Summer 001, in order to reduce its interest in the OTE' s issued capital share, the Greek State opted to issue a Bond Loan for Euro 1 billion, exchangeable to OTE shares. As a result, in August 001, the Greek State's interest in the Company's issued share capital was reduced to approximately 4%.

On June 5, 001, OTE' s general assembly of shareholders approved the dual currency denomination of the share capital, namely that of the Greek Drachma and of the Euro, in accordance with the provisions of Law 84/000. The nominal value of OTE's shares was set at Drs. 750 (rounded) and Euro .0 and accordingly, our share capital decreased by Drs. 176 million with an equal increase in paid-in surplus.

On September 4, 001, the extraordinary general assembly of shareholders decided upon the amendment or abolition. These amendments mainly refer to the participation of the Greek State in OTE and its Board of Directors, and was considered necessary, following the ratification of Law 84/000 which granted to the Greek State the option to transfer more than 51% of OTE 's issued share capital. Furthermore, following the completion of the issue of bonds convertible to OTE shares, the Greek State is no longer the single owner of the majority of OTE' s issued share capital.

Before evaluating the financial statements let's make a S.W.O.T analysis.

Strengths Strong domestic operations. Management is overall well respected, but some investors may question the government's influence on management.(see below under threats)

Weaknesses Greek Internet penetration is still low at 1 %(source IDC) although this would also represent an opportunity. The next lowest penetration in the EU is Italy at 4 %. The ITU estimates that Greece had 0.64 million personal computers in 1; only 6 % of the population. This compares with an EU average of over 5 %. If these statistics do not improve, then OTE is likely to stay slightly behind the curve in terms of data applications.

- Government influence has been shown to be significant at the latest EGM. A clear example of the exerting power over management was the replacement of CEO Nikos Manassis. Although the new CEO, Eleftherios Antonacopoulos is also well respected in the business community, he has no telecommunications background, and investors will probably wonder about the reason of replacement.

Opportunities - Developing the broadband opportunities in the Greek market. This is particulary attractive as there is no competition from cable companies.

- Developing the foreign businesses. Most of OTE' s foreign subsidiaries and associates operate in emerging markets with significant growth potential. Fixed and mobile penetration levels in Armenia, Albania, Romania, Serbia and Bulgaria are far below the Greek level.

Threats - Government attempts to influence OTE's investment strategy. It is discussed in the Greek press that the government is thought to be pushing for the acquisition of a majority stake in BTC for other than pure business reasons.

- OTE' s foreign assets operate in emerging economies, often ex-communist countries with higher level of political risk, economic and currency risk.. The currency risk is very serious, as OTE experienced the devaluation of several currencies in countries it has invested (Romania, Serbia, Armenia).

Balance sheet analysis

As we can see in the balance sheet there is an over 50% decrease in cash and cash equivalents. As a result total current assets decline about 5 %. On the other hand they have managed to show an increase in Total assets. Other assets helped to achieve this!!! As you can see there is an increase of about 1600 % on advances to EDEKT OTE, TAP OTE and auxiliary funds. Also there is a 700 % increase in Telecommunication licenses. As you see it was very easy for OTE's management to show an increase of about 10 % in total assets. Concerning liabilities its obvious that there is an increase of all components and as a result we have an 5 % increase inand an 7.5 % increase of TOTAL LIABILITIES AND SHAREHOLDERS EQUITY. The current ratio of OTE is 0.5. The acid test ratio equals 0.6. Both of these ratios suggest a tight liquidity situation at OTE. We also found a total debt to equity ratio of about 1.8 which is a very good result as the sector's average for 001 was about .5. This is the strong part of OTE's balance sheet as there are no out of the ordinary changes in its liabilities and shareholders equity. On the other hand the great changes of assets (that are previously mentioned) should make as little suspicious about the accuracy of this balance sheet.

CASH FLOW ANALYSIS

The statement of cash flows reports cash receipts and cash payments by operating , financing , and investing activities-the primary business activities of a company.

OTE has a strong cash flow position. Strong free cash flow. Free cash flow , defined as EBITDA-capex, reached a trough in 000, although was still a respectable 41 million euros. We expect it to increase until 00. However , it is worth pointing out that the net change in cash was negative in 001 (-771million). We expect this to turn positive again in the future (00) , although acquisitions would significantly alter this picture. In 00 this is likely to remain negative due to the cash outflow , with a likely 450million euro investment in RomTelecom (00million of equity , 50million of debt).

OTE's strengths are clearly its cash flow characteristics, which we seem to be undervalued. The free cash flow is currently mainly generated by the domestic fixed-line business, while mobile cash flow has turned positive in 001 and is expected to continue to show strong growth. We predict positive free cash flow from 00 onwards. However , this does not include the 40 million euros payment in RomTelecom. (investing activity).

Summary Cash Flow Statement (in m.euros)

1 000 001

Net cash provided by O.Activ. 884 886

Cash used in Inv.Activ. -57 -80 -1,14

Cash provided by Fin. Activ. -64 750 -44

Effect of exchange rate changes 1 1

Net increase(decrease)in cash equivalents -80 744 -771

We assume that the Net debt will decrease again in the future, probably in 00.

INCOME STATEMENT ANALYSIS

After all this we should think what caused the diving of OTE's stock price in 00.At December of 001 the price was 18.60 EUROS and on the 6th of December 00 its value is 10.50 EUROS. There are many reasons for this diving. The analysis that we have made previously gives some of the main reasons. Another reason is the economic situation worldwide. Stock markets were affected very much by the bankruptcy of large corporations such as ENRON and WorldCom. Also the events of the 11th of December 001 caused instability worldwide and people felt insecure. All these affected the worldwide economy which is in a period of recession. At last the foreign investors don't feel confidence about the results of OTE's investment in Rumania. The investors were afraid about the reactions of the Rumanian people to the firings of personel as well as to the increase in prices that OTE's management has decided. Also Cosmorom (daughter company of RomTelecom) needs millions of dollars to cover its debts. As a result of all this negative climate about OTE' s investment in Rumania OTE said that its long-sought deal to raise its stake in the Romanian fixed-line operator was on hold due to unspecified regulatory complications. OTE did not provide further details. All these factors contribute to OTE's stock price diving. On the other hand we believe that in the near future OTE's stock price will be increased.. The present value reflects the bad management decisions (RomTelecom) and the general situation in global economy. As a result OTE is undervalued. The facts that OTE is a monopoly in cable networks, that fixed-line interconnection rates are only slightly above the European average (not huge cuts in prices are foreseen) and that fixed line telecommunication is almost inexistent (government helps, only leased lines) make us believe that OTE will be trusted by investors and its price will go up in 00. After all 10.50 EUROS for a stock is a great opportunity for future profits.

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