Telekom profit plunges on narrowing margin, utilities line tax

Magyar Telekom's first-quarter net income fell 87% to HUF 1.7 billion 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. Analysts polled by Portfolio.hu had put the company's bottom line at HUF 4.4 billion for the period. Magyar Telekom's consolidated IFRs report, published early Wednesday, shows revenue rose 6.8% to HUF 156.6 billion, lifted by unconventional activities, such as sales of energy and IT equipment. But total operating costs climbed 18.2% to HUF 143.2 billion, causing operating profit to narrow 45.8% to HUF 14.2 billion. Magyar Telekom noted that it booked HUF 7.3 billion on the new utilities line tax in Q1, the amount it must pay for the full year. The breakdown of revenue shows mobile turnover edged down 0.5% to HUF 73.2 billion and fixed line revenue fell 2.5% to HUF 54.0 billion, but revenue from system integration and IT activities rose 20.2% to HUF 14.0 billion and revenue from energy services jumped 157.5% to HUF 15.3 billion. CEO Christopher Mattheisen acknowledged the contribution of non-core activities to growth in 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 40 billion" of revenue in 2013, but conceded that “regulatory changes” effective from the start of the year “led to a negative energy margin.”