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Crisis tax puts MTel in red at operating level

A crisis tax on telcos put market leader Magyar Telekom in the red at operating level in Q4, but a negative income tax put the bottom line in the black, the company’s consolidated IFRS report for the period shows.

MTel had net income of HUF 7.5 billion in Q4, down 26.5% from the same period a year earlier.

Analysts polled by Portfolio.hu earlier estimated the company had a HUF 9.6 billion loss in Q4.

Earnings per share came to a little more than HUF 7 as against HUF 9.78 in Q4 2009.

Q4 EBITDA fell to HUF 26.0 billion from HUF 46.8 billion a year earlier and EBITDA rose to HUF 57.3 billion from HUF 56.4 billion, excluding the crisis tax and one-off items.

Revenue was down 3.9% at HUF 157.0 billion. Total operating expenses rose 11.1% to HUF 158.7 billion. Of total expenses, costs directly related to revenue fell at about the same rate as revenues did, dropping 3.4% to HUF 44.9 billion, but “other operating expenses” shot up 62.1% to HUF 61.2 billion because of a crisis tax on telcos introduced in 2010.

MTel's liability on the tax was HUF 27.0 billion, booked in Q4, but the tax advance payment during the quarter came to HUF 27.7 billion.

The tax gave MTel a HUF 620 million loss at operating level as against an operating profit of HUF 21.1 billion in Q4 of the previous year.

The bottom line was further hit by a HUF 6.6 billion financial loss, albeit less than the HUF 7.1 billion loss in Q4 2009.

MTel had a pre-tax loss of HUF 7.3 billion but a negative income tax of HUF 17.0 billion put the company in the black.

MTel noted that deferred taxes fell as the corporate tax rate is set to fall to 10% from 19% from 2013 and current taxes were lower because of the elimination of the solidarity tax in 2010.

In a breakdown of revenue, MTel said fixed line turnover fell 5.1% to HUF 63.5 billion in Q4. Within the fixed line segment, retail voice turnover was down 15.6% at HUF 25.5 billion and internet turnover was practically flat at HUF 13.5 billion, but TV turnover climbed 12.9% to HUF 7.6 billion.

Mobile revenue dipped 2.2% to HUF 81.1 billion and system integration revenue fell 8.2% to HUF 12.4 billion.

For the full year, MTel's net income fell 17.1% to HUF 64.4 billion as revenue fell but costs were flat because of the crisis tax.

Full-year EPS fell to HUF 61.83 from HUF 74.54 in 2009.

Revenue was down 5.3% at HUF 609.6 billion. Fixed line revenue fell 8.9% to HUF 249.6 billion and mobile revenue dipped 3.3% to HUF 315.2 billion, but system integration and IT revenue inched up 2.0% to HUF 44.8 billion. Voice revenue fell in Hungary, Macedonia and Montenegro. Data turnover in Hungary was also down but Hungarian revenue from TV, mobile internet, system integration and IT services grew. The strengthening of the forint adversely affected revenue from the foreign units. The sale of the Bulgarian unit Orbitel in January 2010 resulted in a HUF 2.4 billion revenue shortfall in 2010.

Operating expenses rose just 0.2% to HUF 500.9 billion. Costs related directly to revenue were down 2.0% at HUF 157.4 billion and payroll costs fell 7.9% to HUF 93.9 billion, but other operating costs were up 9.9% at HUF 148.8 billion because of the crisis tax.

MTel booked a HUF 2.3 billion cost related to an ongoing investigation of questionable contracts signed at its foreign units.

MTel's financial loss narrowed 14.3% to HUF 28.1 billion because of lower interest rates and lower debt.

Operating profit was down 23.8% or about HUF 35 billion at HUF 112.1 billion.

Pre-tax profit slid 26.5% to HUF 84.0 billion.

MTel paid just HUF 6.6 billion in corporate profit tax, down 68.6% from the previous year.

Chairman-CEO Christopher Mattheisen noted that the 5.3% drop in revenue and the 5.5% fall in EBITDA, excluding the crisis tax and other one-off items, were under the earlier forecast falls of 6-8% and 7-9%, respectively.

The adjusted EBITDA fell to HUF 248.3 billion. The unadjusted EBITDA fell 14.5% to HUF 213 billion

Capital expenditure came to HUF 91.8 billion, down HUF 10.1 billion from 2009.

MTel had total assets of HUF 1,109.0 billion on December 31, 2010, down 4.9% from twelve months earlier. Total equity fell 1.8% to HUF 594.7 billion. Equity of the owners of the parent fell 1.3% to HUF 531.5 billion.

Non-current liabilities were down 17.1% at HUF 267.5 billion. MTel said its net debt ratio reached 32.7% at the end of the 2010. Net debt rose HUF 20 billion in twelve months to HUF 289.4 billion at the end of 2010 as the total dividend payment exceeded the free cash flow level.

Mattheisen projected MTel's revenue would fall 3-5% and EBITDA, excluding special influences and the crisis tax, would drop 4-6% in 2011. The company wants to cut CAPEX by 5%, he added.