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Magyar Telekom profits fall as revenue drops

Second-quarter net income of Magyar Telekom fell 31.1% to HUF 15.9 billion from the same period a year.

Earlier as revenue fell because of a decline in voice turnover and a cut in centrally-regulated termination fees, the company's consolidated IFRS report for the period published on Thursday shows. Citing a planned reduction of government spending on IT and telecom services, MTel cut its revenue and EBITDA target for the year.

Net income was under the HUF 17.3 billion estimate by analysts in a poll by

Revenue fell 6.6% to HUF 150.5 billion during the period. At the same time, total operating costs also fell 6.6% to HUF 114.3 billion. Operating profit was down 9.4% at HUF 36.6 billion partly because of a drop in “other operating income”.

Earning per share fell to HUF 15.31 in Q2 from HUF 22.22 a year earlier.

Revenue from fixed line services dipped 10.6% to HUF 61.6 billion in the second quarter and mobile revenue slipped 4.4% to HUF 78.3 billion, but system integration and IT revenue inched up 2.3% to HUF 10.6 billion.

Revenue at Magyar Telekom's Macedonian unit fell 8.7% to HUF 19.6 billion in Q2 and revenue at the unit in Montenegro slipped 10.3% to HUF 7.8 billion.

Net financial expenses rose 4.8% to HUF 5.8 billion in Q2. Pre-tax profit was down 11.8% at HUF 30.8 billion.

Total comprehensive income was helped by a HUF 16.4 billion forex gain on operations at its foreign units, compared to a HUF 30.1 billion loss in the same period a year earlier.

First-half net income fell 27.5% to HUF 32.4 billion from the same period a year earlier, also dropping on falling revenue and a narrowing margin.

H1 earning per share fell to HUF 31.11 from HUF 42.90 a year earlier.

Revenue was down 7.1% at HUF 297.8 billion but costs fell at a slower rate, dipping 5.7% to HUF 228.4 billion. Operating profit was down 12.5% at HUF 70.1 billion.

Fixed line revenue dropped 11.3% to HUF 124.0 billion, mobile revenue was down 4.0% at HUF 152.4 billion and system integration and IT revenue also inched down in H1, by 2.3% to HUF 21.4 billion.

Net financial expenses fell 6.4% to HUF 14.3 billion. Pre-tax profit fell 13.8% to HUF 55.8 billion.

The bottom line was lifted by a HUF 12.3 billion forex gain, up from a HUF 6.4 billion gain in the same period a year earlier.

H1 EBITDA declined by 8.8% to HUF 119.5  billion, with an EBITDA margin of 40.1%. Underlying EBITDA, which excludes investigation-related costs, as well as severance payments and accruals (HUF 1.5 billion in H1 2010 against HUF 1.0 billion a year earlier), decreased by 9.9%. Underlying EBITDA margin fell to 41.1% from 42.3%.

The cost of an ongoing investigation of questionable contracts signed at Magyar Telekom's foreign units years earlier came to HUF 1.4 billion in H1, down from HUF 3.6 billion in the same period a year earlier.

Capital expenditures came to HUF 36.2 billion in the first half, down from HUF 23.2 billion in H1 2009.

Magyar Telekom had total assets of HUF 1,143.7 billion on June 30, 2010. Net assets came to HUF 573.7 billion. Non current liabilities reached HUF 303.8 billion.

Magyar Telekom said its net debt fell to HUF 297.1 billion at the end of June from HUF 311.9 billion twelve months earlier. The company's net debt ratio reached 34.1%.

Magyar Telekom CEO Christopher Mattheisen said the company cut its EBITDA and revenue targets for 2010 because of a government plan to cut spending on national asset management, including IT and telecommunications services, by HUF 20 billion. As a result of the requested price allowances, they expect a potential negative impact of around HUF 5-7 billion on both revenue and EBITDA lines, and the company now targets a 6-8% drop in revenue and a 7-9% drop in EBITDA.

In a related move, Magyar Telekom also plans to cut CAPEX by 10% from 2009, compared to the originally targeted 5% drop, he added, citing the company's focus on free cash flow generation. (MTI – Econews)