Magyar Telekom Nyrt., Hungary’s former phone monopoly, now controlled by Deutsche Telekom AG, expects a decline in revenue to “turn around” by next year as the economic recovery in central and eastern Europe strengthens.
“We’re on a good path to turning around the group’s revenue by 2012,” as the products and services introduced by the company are performing well, Chief Financial Officer Thilo Kusch said at a press conference today.
The Budapest-based company, which has subsidiaries in Macedonia and Montenegro, saw its profit suffer as the economic recession in the region put pressure on households’ disposable income and a special industry tax in Hungary hit the bottom line.
Magyar Telekom’s first-quarter net income declined 7.8 percent to 15.2 billion forint ($83 million), the company said earlier today. That exceeded the average estimate of 11.9 billion forint of six analysts surveyed by Bloomberg.
Revenue declined 3.3 percent in the period while earnings before interest, taxes, depreciation and amortization fell 7.7 percent to 53.2 billion forint from a year earlier. When adjusted for a special industry tax and costs related to an internal investigation and headcount reduction, Ebitda rose 3.8 percent to 61.5 billion forint.
“The main reason for being optimistic is that the company managed to actually increase its underlying Ebitda,” Igor Muller, a Prague-based analyst at Wood & Co. brokerage, wrote in a note to clients today.
Magyar Telekom shares rose as much as 1.4 percent to 566 forint today and were trading at 561 forint at 10:45 a.m. while the benchmark BUX index retreated 0.7 percent.
“Putting the one-offs and the tax effect aside, the underlying performance improved and the rate of revenue decline stabilized compared to the previous quarters,” Vera Sutedja, an analyst at Erste Group AG (EBS) in Vienna wrote in a note today. Erste upgraded the stock to “accumulate” from “hold” and raised the price target to 640 forint from 600 forint in light of the results.
“We’re gaining market share but it seems that the overall market is not performing as well as we had hoped,” which is a reason the company maintained its earnings guidance for the year, Kusch said.
The company forecasts an Ebita decline of 4 percent to 6 percent this year, excluding the effects of the special industry tax. Revenue may drop 3 percent to 5 percent from last year’s levels and capital expenditure may be 5 percent lower than in 2010.
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