Cesky profits drop 23.2% in 1H

25 Jul 2005

The Czech Republic’s dominant fixed line operator Cesky Telecom reported a 23.2% drop in net profits to CZK2.6 billion (USD104.17 million) for the first half of 2005, on the back of a 3.6% fall in consolidated revenues to CZK30 billion. The telco’s mobile arm Eurotel Prague posted sales of CZK14.6 billion, unchanged year-on-year, while gross profits slipped 7% to CZK6.7 billion. Cesky’s chief financial officer Juraj Sedivy said the results reflected a gradual migration from voice to broadband and data services in the fixed line segment. Mr Sedivy went on to say that in the second quarter Telecom’s performance was adversely affected by one-time charges such as reserves for potential fines paid to the antitrust commission, compensation paid to a rival, and for special bonuses and golden handshakes. The market greeted the announcement coolly, with many predicting a drop in the company’s share price in the short term as Cesky struggles to maintain market share. According to Patria analyst Tomas Gatek: ‘In the rest of the year, revenues from fixed lines will continue to drop, income from mobile networks will stagnate and the share of revenues from data services will grow’.

At the end of June 2005 Cesky had 3.25 million main lines in service, down 4% year-on-year, while total revenues from fixed line service dipped 8% to CZK16.1 billion. Turnover from voice calls slumped 25% to CZK4.1 billion, although the falls were partly offset by a 26% rise in sales of internet and data services to CZK2.2 billion. The telco ended June with 163,000 ADSL users, having added 63,000 new accounts during the first six months of the year. The telco hopes that by the end of 2006 data services will balance the drop in traditional voice services, with Sedivy adding that the introduction of lower tariffs in May this year should cushion the impact of declining popularity in landline calls.

Eurotel Prague added 192,000 new numbers in 1H 2005, ending the period with 4.42 million registered SIM cards. The operator is using a new methodology and bases its figure on those cards recharged during the last 13-month period. Despite the subscriber gains, mobile revenues fell 4% to CZK5.6 billion and monthly ARPU dipped CZK25 to CZK503 per month. On a brighter note, income from SMS, MMS and mobile internet services rose 18% to CZK2.2 billion, and overall traffic was up 5%.

Czech Republic, O2 Czech Republic (incl. CETIN)