Exchangeable Bond Offering

In the context of its on going strategy of reducing the Greek State's participation in Hellenic Telecommunications Organisation S.A. (?OTE?), the Ministry of Finance of the Hellenic Republic announced today the launch of an ?750 million bond (the ?Exchangeable Bond?) exchangeable into shares of OTE (approximately 8%) currently held by the Hellenic Republic. The Joint Global Co-ordinators have an option to increase the size of the Exchangeable Bond offering by up to ?100 million.

The Issuer of the Exchangeable Bond will be a Luxembourg special purpose vehicle. The OTE shares underlying the Exchangeable Bonds will be transferred to the Issuer and subject to a pledge to a Trustee which will be registered with the Greek Central Securities Depositary S.A. Votes attaching to these shares will be voted by the Trustee of the Exchangeable Bond in accordance with the instructions of the bondholders.

The Exchangeable Bonds will mature in August 2005 and will pay an annual coupon of 2%. The Exchangeable Bond offering is expected to price later this week following a brief period of bookbuilding.

Corporate Governance

Following completion of the Exchangeable Bond offering, the voting interest of the Hellenic Republic in OTE will fall below 50%. This will enable OTE to implement significant changes to its corporate structure, which are possible following the approval yesterday by the Greek Parliament of a law relating to representation of the Greek State on boards of companies in which the State holds less than a 50% interest. The overall objective of this law is to bring the corporate governance arrangements of such entities in line with general corporate law. One effect of this law will be that OTE's Chairman and Managing Director will be elected by OTE's Board instead of being directly appointed by the Greek State.

OTE proposes to convene an extraordinary general meeting within the next few days for early September at which it will propose amendments to its Articles of Association including a provision to the effect that all direct appointments to the Board by the Greek State will cease. Following this extraordinary general meeting, the Greek State will procure that its nominees will resign from the Board. The Government and OTE wish to see the number of independent directors on OTE's Board increase following these changes.

OTE and Hellenic Republic finalise arrangements for OTE's Pension Fund

OTE announces that a draft legislative amendment has been tabled to the Greek Parliament which sets out the terms on which OTE will make contributions to its staff pension fund, TAP-OTE.

Under the terms of the draft law:

• OTE will make a payment of GRD120 billion to EDEKT-OTE, (a company incorporated to manage funds contributed in order to finance the deficit of TAP-OTE), as a prepayment of its obligations to cover the annual deficit of TAP-OTE for a period of ten years starting from 1 January 2001. Subject to the provisions set out below, OTE will have no further obligation to cover any deficits of TAP-OTE until December 2010.
  
• OTE will set off against amounts due to it by TAP-OTE a number of amounts which the draft law recognizes as obligations of OTE to TAP-OTE.
  
• In future, OTE will bear the incremental actuarial burden generated by employees who retire early from OTE.

Background

Pursuant to a Greek Law enacted in 1994 in order to facilitate OTE's privatisation, OTE's obligation to cover the annual deficit of TAP-OTE was capped at a level of GRD11billion per annum, subject to indexation in accordance with inflation. Payments were made on this basis in respect of the years 1996 to 1998.

In early 1999, a further law (Law 2768/99) was passed permitting OTE to make a prepayment in respect of its future obligations to TAP-OTE. This prepayment was to be made to EDEKT-OTE, which did not commence operations until January 2001.

Set-off of amounts owed by, and to, OTE

In 2000 and 2001 to date, OTE has made payments totaling GRD28.1 billion to TAP-OTE in excess of the amounts paid pursuant to the 1994 Law. This sum of GRD28.1 billion is accounted for by OTE as a receivable.

The draft law requires OTE to set off against this sum of GRD28.1 billion a number of amounts which the draft law recognize as obligations of OTE to TAP-OTE. The overall impact on OTE's income statement of the charges if the draft law is enacted as tabled before the Greek Parliament will be an extraordinary provision of up to GRD35.5 billion in 2001.

Lump Sum payment to EDEKT-OTE

By 1 August 2001, OTE will make a payment of GRD120 billion to EDEKT-OTE pursuant to the 1999 law. This payment will relieve OTE of the obligation to make any further contributions to the pension fund (except for employees taking voluntary early retirement - see below) from January 2001 until December 2010. The sum of GRD120 billion will be amortized over the next ten years.

Voluntary early retirement

In recent years, OTE has undertaken an extensive voluntary early retirement exercise in order to reduce the size and average age of its workforce. Until now, the additional costs to the pension fund of pension payments to early retirees has been met entirely by TAP-OTE and has not increased OTE's obligation to contribute to the fund. Both OTE and the Greek State have recognized that the situation is not equitable and, in future, OTE has agreed to make a full contribution towards the additional pension costs of early retirees. This agreement does not effect pension costs in respect of employees who have already taken early retirement. The additional amount which OTE will be required to contribute in respect of current OTE employees eligible for early retirement under Greek employment regulation and who have elected to retire early between July and December 2001 is expected to be around GRD10 billion.

Agreed Amendments to draft Law

The management of OTE have held extensive negotiations with the Greek State in the past few days and have reached an agreement with the Greek State to include certain modifications to the draft law, which in the view of OTE's management, would limit the total impact of the above changes (including set offs and effect of voluntary retirements) to approximately GRD30 billion in 2001.

Changes to OTE's corporate structure

The draft law referred to above facilitates the restructuring of OTE in accordance with internationally accepted standards, by allowing greater flexibility for OTE to benefit from tax exemptions relating to its corporate reorganization. The draft law also provides flexibility in connection with the procedural requirements and conditions for implementing its Greek reorganization and facilitates intra-group asset transfers required as part of the process.

OTE's comments

Commenting on the above arrangements, OTE's Chairman and Managing Director, Mr. Nikos Manasis said: ?This is a comprehensive package of changes to the relationship between OTE and the Greek State, which are triggered by the proposed fall in the Greek State's voting interest in OTE below 50% for the first time. These changes provide us with greater clarity with respect to our corporate governance, greater flexibility in adapting to a new corporate structure, and certainty relating to our obligations for any pension fund deficit. Overall, I am satisfied that these changes reflect very satisfactory progress in OTE's move to the private sector?.

Further enquiries to: The Ministry of Finance of the Hellenic Republic Mr Francis Dassyras: + 30 1 3701 821 OTE Mr George Rallis: +30 1 611 5888