MTelekom's 2013 Q1 net income fell by 87% on taxes, utility prices

Telco

Magyar Telekom's first-quarter net income fell 87pc to HUF 1.7bn from the same period a year earlier as margins narrowed and the telco booked the full-year payment of a new tax on utilities lines.

Magyar Telekom's consolidated IFRs report, published early Wednesday, shows revenue rose 6.8pc to HUF 156.6bn, lifted by unconventional activities, such as sales of energy and IT equipment. But total operating costs climbed 18.2pc to HUF 143.2bn, causing operating profit to narrow 45.8pc to HUF 14.2bn. Magyar Telekom noted that it booked HUF 7.3bn on the new utilities line tax in Q1, the amount it must pay for the full year.
Magyar Telekom has maintained or raised its market positions in all segment compared to 2012 Q1. The breakdown of revenue shows mobile turnover edged down 0.5pc to HUF 73.2bn and fixed line revenue fell 2.5pc to HUF 54.0bn, but revenue from system integration and IT activities rose 20.2pc to HUF 14.0bn and revenue from energy services jumped 157.5pc to HUF 15.3bn. However, the latter is deteriorated by government-driven lowering of energy prices, and the growth was achieved through dynamically increasing client numbers, financial deputy CEO János Szabó said on a press conference on Wednesday.
CEO Christopher Mattheisen acknowledged the contribution of non-core activities to growth in a statement attached to the report but said the company's strategy, "based on retention and cross-selling, is appropriate for the challenging environment that we currently operate in". He said the company expects the retail energy business to generate "at least HUF 40bn" of revenue in 2013, but conceded that "regulatory changes" effective from the start of the year "led to a negative energy margin".
According to Szabó, the flat income target for 2013 is still realistic, just like the goal of 4-7% decline in EBITDA for the full year, but the latter is more challenging. Changes in the composition of income moving toward services with lower EBITDA-content and the unpredictable macro-environment makes sticking to predictions hard, Szabó added.
Magyar Telekom's CAPEX climbed 29.5pc to HUF 16.7bn on the back of billing system investments and the seasonal changes in expenditures. "Q1 has always an increased emphasis in every segment regarding customer acquisition and market share gaining. Also, we spent more in the first three months of the year on assets and marketing," Szabó explained. The CAPEX-target for year 2013 is a 5% decrease.
Magyar Telekom had total assets of HUF 1,076.7bn on March 31, 2013. Net debt was practically flat compared to a year earlier at HUF 282.9bn, giving the company a debt-to-equity ratio of 35.2pc.

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