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MTel cuts costs, but financial loss, taxes hit earnings

Second-quarter net income of blue chip Magyar Telekom (MTel) dropped 2.6% year-on-year to HUF 13.4 billion as financial losses and a higher tax bill countered cost cuts, state news agency MTI reported, citing an earnings report released late Wednesday.

Revenues fell 4.1% to HUF 160.8 bln. Mobile revenue edged up 1.8% to HUF 84.9 bln, while fixed-line revenue increased 3.1% to HUF 52.7 bln. However, system integration and IT revenue plunged 30.1% to HUF 23.2 bln on lower sales volume and a high base.

Direct costs fell 9.3% to HUF 68.1 bln, outpacing the drop in revenue. Indirect costs were also down a sharp 15.6% at HUF 35.7 bln.

EBITDA rose 13.4% to HUF 56.9 bln and operating profit was up 17.0% at HUF 24.8 bln. Earnings per share came to around HUF 13 for the period.

MTel confirmed earlier guidance for a "slight decline" in revenues for the full year. EBITDA is seen "increasing at 1-2%." CAPEX, excluding spectrum license fees, is set to remain "broadly stable," while free cash flow is expected to increase "about 5%."

The dividend on this yearʼs earnings could be HUF 27 per share, according to the guidance.

MTel had non-current liabilities of HUF 294.5 bln at the end of June, up 47.1% from the end of December as the result of the adoption of IFRS 16, which recognizes lease liabilities, MTI noted.