In the second quarter of 2005, RomTelecom posted revenues of € 232.4 million, up 16.4% from revenues of € 199.6 million in the same period last year. The increase is primarily due to positive evolution of rental, interconnection and leased lines and data services.

Revenues from monthly rental fees increased by 38%, primarily reflecting the February 2005 and June 2004 tariff rebalancing rounds.

Wholesale revenues rose by 21% in the quarter, reflecting a 56% gain in wholesale traffic, a natural consequence of the upward trend characterizing the Romanian telecommunications market.

Retail traffic decreased in comparison to the second quarter of 2004 due to mobile substitution and heightened competition from alternative carriers.

Conversely, tariff rebalancing resulted in an increase in international traffic for residential customers.

Operating income before depreciation and amortization as a percentage of revenues rose to 42.6% in the second quarter of 2005, as compared to 31.7% in the second quarter of 2004, as a result of increased revenues.

Total operating expenses before amortization and depreciation dropped by 2% during the second quarter of 2005, compared to the same period of 2004.

Despite the drop in personnel expenses by 13%, operating expenses before depreciation and amortization remained roughly at the same level as in the second quarter of 2004, mainly due to increased interconnection expenses and expenses related to other services (Universal Service fees, advertising expenses, consulting, etc.).

Interconnection expenses rose by 7.9% as a result of increased traffic.

In the second quarter of 2005, RomTelecom achieved a significant improvement in profitability, posting net income of € 57.6 million, resulting in net profit margin of 24.8%, compared to 4.7% in the second quarter of 2004.

RomTelecom’s management is pursuing the implementation of its Transformation Plan:

• Efficiency improved from 240 Lines per employee at the end of 2004, to 275 Lines per employee at the end of the second quarter of 2005, an increase of 14.5%.

• Headcount was reduced to 15,242 by the end of June 2005 from 18,083 at December 31, 2004.

• Implementation of several projects is proceeding according to plan, including development of a new central billing system, which became operational in July 2005, and deployment of a financial e-business system. Operational and network services improvements are driven by several key projects, including replacement of manual switches which is almost completed, further reduction of operating expenses, and provision of modern services like ADSL, which was launched for both residential and business customers.

OTE, through its wholly owned subsidiary OTE International Investments Ltd, holds a 54.01% interest in RomTelecom S.A., the incumbent telecommunications operator in Romania.

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