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Corporate tax cut lifts Magyar Telekom profits in Q4

Telco

press release

Magyar Telekom booked after-tax profit of HUF 20.5 billion in Q4 – five times the amount in the base period – as it reaped the benefits of Hungary’s reduced corporate tax rate, news agency MTI reported based on an earnings report released late Wednesday. The board said it would propose payment of a dividend of HUF 25 per share on 2016 earnings to shareholders.

MTel noted that the government’s reduction of the corporate tax rate from 19% to a flat 9% from the start of 2017 had cut its deferred tax liabilities by HUF 16.8 bln in Q4 2016.

Revenue fell 13% to HUF 158.8 bln. Direct costs of sales declined at an even faster rate, dropping 28% to HUF 59.2 bln. Gross profit edged down 2% to HUF 99.6 bln. For the full year, MTelʼs after-tax profit rose 81% to HUF 57.2 bln. Revenue fell 8% to HUF 602.7 bln, but the fall in deferred tax liabilities, as well as a drop in payroll costs, supported the bottom line.

CEO Christopher Mattheisen said MTel faces “several competitive and regulatory risks to growth,” citing the expected entry of peer Digi onto the mobile market, further cuts in EU roaming rates and the ongoing obligation to register prepaid mobile subscriptions. He also noted increasingly competitive regional triple-play offers on the fixed line market, intensified by the rollout of optical networks by Digi and UPC, another market player.

“As an integrated operator, we believe that we are well positioned to address these challenges in Hungary in terms of maximizing the telecommunications share of the household spending wallet by further expansion of our 4Play Magenta 1 subscriber base, a bundled offering that largely differentiates us from our competitors,” he added.

MTel changed its guidance for 2017 revenue from HUF 560-570 bln to “around HUF 560 bln,” and for EBITDA from HUF 181-185 bln to “around 182 bln.” MTel put guidance for the dividend on 2017 earnings at HUF 25 per share.

MTel board to propose HUF 25 dividend

The telco said its board would propose to shareholders the payment of a dividend of HUF 25 per share on 2016 earnings at its annual general meeting on April 7.

MTelʼs dividend policy aims to maintain a net debt ratio in the 30-40% range, while taking into account the group’s future financial position, the statement noted.  The board proposes May 12, 2017 as the record date of the dividend payment. 

The company paid a HUF 15 per-share dividend on 2015 earnings.

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