TDC’s share price falls on revision of 2003 outlook

27 Feb 2003

Danish incumbent TDC [TDC.CO] has reported a 1.1% year-on-year decline in revenues in 2002 to DKK53.48 billion (EUR7.2 billion), but pre-tax profit increased by 36.9% to DKK4.01 billion and EBITDA grew 11.2% to DKK14.31 billion. The company’s EBITDA margin rose to 28% from 25%. Its TDC Tele Danmark division, which mainly comprises domestic fixed line voice and data operations and integrated solutions, saw turnover fall by 3.4% to DKK18.8 billion; revenues from domestic operations fell by 5% but still accounted for the lion’s share at DKK17.67 billion, while international revenues rose by 32.5% to DKK1.13 billion. EBITDA at TDC Tele Danmark fell 12.8% to DKK6.02 billion. At the end of 2002 the division had 3.3 million domestic fixed line customers, including retail and wholesale PSTN and ISDN customers and users of its Duét limited mobility service, down from 3.4 million at the start of the year.

The weak performance of the TDC Tele Danmark unit was offset in part by TDC Mobile International and TDC Switzerland. TDC Mobile International witnessed a 7.5% fall in turnover to DKK16.26 billion, but EBITDA grew by a sizeable 38.4% to DKK3.23 billion on the back of subscriber growth; the cellco added reported 51,000 net additions in 2002 taking its customer base to 1.7 million. Revenues at TDC Switzerland grew by 14.9% to DKK8.93 billion and the unit turned an EBITDA deficit of DKK77 million in 2001 into DKK1.27 billion profit in 2002.

Nonetheless, declining profits in its home market led TDC to revise its expectations for 2003, cutting its EBITDA outlook for the year to DKK14.8 billion from DKK15.1 billion. It also amended its net sales forecast from DKK54.5 billion to DKK52.6 billion, but left net income unchanged at DKK1.9 billion. Analysts have expressed concern that predictions for the current year have been lowered so soon after they were made – TDC published its original forecast for 2003 in November last year – and as a result the company’s stock fell by 6.7% yesterday closing at DKK161.5.