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Higher costs drag MTel earnings lower in first quarter

Telco

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First-quarter after-tax profit of Magyar Telekom dropped 58% year-on-year to HUF 4.0 billion as costs outpaced revenue growth, an earnings report released late Wednesday shows, as reported by state news agency MTI.

Revenues increased 6% to HUF 158.9 bln. Mobile revenue climbed 8% to HUF 84.9 bln, lifted by equipment sales and data traffic. Fixed-line revenue edged up 2% to HUF 52.7 bln.

Direct costs increased by 12% to HUF 66.8 bln. Operating profit fell 20% to HUF 12.6 bln.

MTel had non-current liabilities of HUF 291.4 bln at the end of March, up 46% from the end of December, as the result of the adoption of IFRS 16 reporting standards, which recognize leasing liabilities.

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" compared to last yearʼs HUF 92 bln, while free cash flow is expected to increase by "about 5%" over HUF 68 bln.

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

Speaking on Thursday, MTel CFO János Szabó said management believes all of their plans for 2019 for every one of the firmʼs markets can be carried out. Szabó reaffirmed that stated targets for this year remained unchanged after publishing of the earnings report.

The CFO said that while there was no major change in market conditions in Q1, the company is prepared for stronger competition and new entries into the market. System integration and IT revenues will be affected by the emergence of a strong market player, which could also reduce their market share on the public procurement segment, he added.

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