Bloomberg News

Magyar Telekom Downgraded to ‘Hold’ at Erste as Economy Worsens

June 17, 2009

Magyar Telekom Nyrt., the former Hungarian phone monopoly owned by Deutsche Telekom AG, was lowered to “hold” from “accumulate” by Erste Bank AG, which said the deteriorating economy will curb revenue.

“Hungary is the worst-hit by the recession” among the countries represented in Erste’s central and eastern European telecom coverage, Vienna-based analyst Vera Sutedja wrote in a note to clients today. “It is obvious that the economy has worsened since the company prepared its 2009 outlook.”

Government plans to cut expenditure and increase valued- added tax will curb household disposable income, Sutedja said in the note, saying she expects the company to downgrade its 2009 outlook as further deterioration in the economy will result in a steeper revenue decline.

Magyar Telekom said May 7 that revenue this year will probably fall 1 percent, while earnings before interest, tax, depreciation and amortization will drop no more than 2 percent. Sutedja reduced her 2009 and 2010 earnings estimates by 6 percent and 10 percent respectively and cut the share-price estimate to 625 forint from 635 forint.

Magyar Telekom fell as much as 12 forint, or 2 percent, to 594, and traded at 600 forint at 1:13 p.m. in Budapest.

Earlier this week, UBS AG downgraded Magyar Telekom to “sell” and Bank of America Corp.-Merrill Lynch & Co. renewed coverage with an “underperform” recommendation.

To contact the reporter on this story: Edith Balazs in Budapest at

To contact the editor responsible for this story: David Merritt at

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