Bloomberg News

Magyar Telekom Advances Most in 16 Months on EU Tax Move

September 29, 2011

(Updates with government comment, closing prices, from second paragraph.)

Sept. 29 (Bloomberg) -- Magyar Telekom Nyrt., Hungary’s former phone monopoly controlled by Deutsche Telekom AG, rose the most in 16 months after the European Commission told Hungary to end a special tax on the telecommunications sector.

The shares rose as much as 7 percent and gained 4.9 percent to 495 forint as of the 5 p.m. end of trade in Budapest, the biggest jump on a closing basis since May 10, 2010 and paring losses for the quarter to 16 percent. Traders bought and sold 6.7 million Magyar Telekom shares today, more than five times the three-month average.

The European Commission called on Hungary today to abolish the tax on telecommunication operators, saying it is illegal under EU rules as the revenue is used for the government’s central budget and not for meeting the specific costs of regulating the industry.

“If the telco tax really ceased to exist, Magyar Telekom is deeply undervalued,” Attila Gyurcsik, an analyst at Concorde Securities in Budapest, wrote in a note to clients. “The news is very positive for Magyar Telekom.”

Prime Minister Viktor Orban’s government sees “no reason” to end the special levy and stands ready to face legal challenges, Peter Szijjarto, the prime minister’s spokesman, said in a statement today in response to the EU request.

“We have to note the high uncertainty regarding the tax issue,” including on the outcome of a potential court case, analysts at Erste Group Bank AG including Jozsef Miro in Budapest wrote in a research report.

--Editors: Linda Shen, Peter Branton

To contact the reporter on this story: Andras Gergely in Budapest at agergely@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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