(Updates with KBC analyst comment, share price starting in first paragraph.)
Nov. 2 (Bloomberg) -- Magyar Telekom Nyrt., Hungary’s former phone monopoly, was started with a “sell” recommendation at KBC Securities as economic growth slows and the nation risks losing its investment-grade credit rating.
KBC issued a fair value estimate of 460 forint for the shares of Magyar Telekom, which is controlled by Deutsche Telekom AG, KBC analysts Piotr Janik and Gergely Palffy wrote in an e-mailed report. The shares dropped 2.9 percent to 498 forint as of 1:56 p.m. in Budapest.
“The tangible risk of Hungary’s sovereign debt rating being cut to junk and the continuous slowdown in GDP growth hit demand for telecoms services,” the KBC analysts, based in Warsaw and Budapest, respectively, wrote in a research report today.
Hungary faces a “real threat” of a ratings downgrade to junk, Economy Minister Gyorgy Matolcsy told Heti Valasz newspaper in an interview last week. The country has the lowest investment-grade ranking by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings.
Economic growth may slow to 0.6 percent next year, compared with the Cabinet’s 2012 budget draft assumption of 1.5 percent, central bank President Andras Simor told lawmakers last month.
“A weaker-than-expected macro environment going forward would likely hit the demand for telecommunication services and result in lower retail prices and higher customer retention costs,” the KBC analysts wrote.
--Editors: James M. Gomez, Stephen Kirkland
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