Telefonica O2 CR’s Q1 profits slump on competition and regulator-led price cuts

15 May 2014

Fixed and mobile operator Telefonica O2 Czech Republic, now majority owned by the billionaire Petr Kellner, reported net income of CZK558 million (USD28 million) for the first three months of the year, down sharply from the CZK1.05 billion it booked in the year-earlier period. The company blamed the slump in profits on competition and ‘regulatory pressures’, which it says drove down sales at its mobile division. Consolidated group revenue fell 10% to CZK10.8 billion, while operating income before depreciation and amortisation (OIBDA) fell 16% year-on-year to CZK3.45 billion. In a conference call with analysts, Telefonica chief executive officer Luis Malvido said that the company may fail to meet its target to decelerate a decline in revenue for FY2014, noting that whilst it expects an ‘improvement in the trend’ in the remaining three quarters of this year, it will struggle to offset the impact of its results in Q1.

Petr Kellner’s PPF Group agreed a deal to acquire a controlling stake in Telefonica O2 CR for about USD3.4 billion from Spain’s Telefonica in November 2013, returning it to Czech ownership after eight years. The Czech entrepreneur is looking to revive the telecoms operator, which has been damaged recently by intensifying competition in the local market and falling prices for mobile phone calls. On 19 May, shareholders at Telefonica O2 CR will vote on a plan to change the name of the company to O2 Czech Republic. The operator will hold another meeting in June to vote on 2013 profit distribution, Malvido said.

Czech Republic, O2 Czech Republic (incl. CETIN)