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MTel swings into the red on tax, impairment charges

23 Feb 2012

Hungary’s dominant telecom services provider Magyar Telekom (MTel), backed by German giant Deutsche Telekom, reported a full year loss in 2011 as tax charges and an impairment charge relating to its Macedonian operation – arising from a reassessment of ‘fair value’ – pushed 4Q11 losses to HUF40.3 billion (USD185 million). Reuters quotes the Hungarian firm as saying: ‘The main reason for the impairment is a 15%-25% reduction in the ten-year revenue growth plans of the Macedonia segment prepared in 2011, compared to the plans prepared a year before’. Industry analysts had expected MTel to book a fourth-quarter loss of around HUF8.9 billion on the back of an ongoing contracts investigation and the negative impact of a government-imposed telecoms tax in Hungary. In November last year MTel announced it would book a HUF15 billion charge in Q4 related to changes in the country’s corporate tax code.

The operator’s FY2011 net loss stood at HUF7.50 billion, reversing net income of HUF7.48 billion in the year-earlier period. The 2011 results were further hampered by a 2% decline in revenue to HUF598 billion – although this marginally exceeded MTel’s own forecast for a 3%-5% drop in turnover, aided by a 1.6% year-on-year rise in fourth-quarter revenue to HUF159 billion as higher sales of fixed line, systems integration and IT services offset a modest decline in mobile revenues. Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) dropped 1.3% y-o-y, it said.

In fiscal 2012, MTel is forecasting further erosion in its core profitability due to the weakness of the Hungarian economy and as new, low-margin business segments have an adverse impact on its bottom line. The firm’s CEO Christopher Mattheisen said he expects FY2012 revenues to be ‘in the range of flat to a maximum decline of 2% year-on-year’, while, ‘underlying EBITDA is expected to deteriorate by 4%-6% in 2012.’ The operator’s capital expenditure for the current year is broadly in line with 2011 CAPEX ‘to support our ongoing network modernisation and internal projects to improve efficiency,’ he added.

Hungary, Magyar Telekom

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