MTel reports 73% fall in Q2 profit on lower sales, new taxes and provisions

4 Aug 2011

Hungarian incumbent operator Magyar Telekom (MTel) has reported a 72.6% drop in net profits for the second quarter ended 30 June 2011, on the back of falling revenues, a new tax and one-time provisions. MTel booked consolidated net income of HUF4.4 billion (USD23.33 million), compared with HUF15.94 billion for the corresponding period of 2010, although it narrowly beat analyst forecasts of profit of HUF4 billion in a poll conducted by local business news website portfolio.hu. Revenues in the April-June period dipped 4.6% year-on-year to HUF143.57 billion, undermined by falling sales at its fixed and mobile operations, and lower returns from its system integration and information technology segments. MTel incurred one-time provisions of HUF10.60 billion in the second quarter of this year, as well as a further HUF6.30 billion for the government’s new telecoms tax. Stripping out the special items, the company’s underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) margin rose to 43% in Q2 from 42% in the same period of 2010, due to the telco’s tight cost controls.

MTel chairman and chief executive officer Christopher Mattheisen says his firm will continue to focus on hitting the high end of its 2011 target range. ‘We maintain our guidance for an underlying EBITDA decline of 4-6% for 2011, although we now expect this decline to be towards the more optimistic end of this range,’ he said. ‘Our revenue target of a 3-5% decline and CAPEX reduction target of approximately 5% remain unchanged,’ he added. Nevertheless, the company issued a caveat, warning that Hungary’s weak economic climate would limit household disposable income in 2H11, while costs, such as employee-related expenses, are expected to rise.

Hungary, Magyar Telekom