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Magyar Telekom quarterly net seen rising on new units: outlook

Magyar Telekom Nyrt, Hungary's former phone monopoly, may report higher Q4 profit next week as revenue rose from the purchase of two local computer companies.

Net income probably climbed 5% to Ft 15.9 billion ($81.7 million) from 15.2 billion forint a year earlier, according to the median estimate of 10 analysts surveyed by Bloomberg News. Budapest-based Magyar Telekom Nyrt is scheduled to report earnings February 13 before the market opens. Magyar Telekom, majority-owned by Deutsche Telekom AG, is facing declining revenue from its fixed-line business and eroding profitability on mobile phones, because of increased competition from competitors such as Vodafone Group Plc.
Profit at the company, which has been increasingly relying on other businesses to make up for a lack of growth from traditional phone lines, was helped by rising sales at its new units. Sales at Magyar Telekom probably rose to Ft 177 billion in the Q4, from Ft 161.3 billion in the year-ago period, on earnings from two computer companies. Magyar Telekom bought local software developer KFKI Zrt. for Ft 9.7 billion in June and information technology services company Dataplex Kft for Ft 5.1 billion in late 2005.
Revenue was also lifted on an accounting change at a digital radio network Magyar Telekom operates for Hungarian emergency services, and by the company's sale of its minority stake in Montenegro's largest commercial bank, Crnogorska komercijalna banka AD. Hungary's OTP Bank Nyrt bought that stake for about €12 million ($15.6 million) in August.

Magyar Telekom experienced higher costs in the Q4, stemming mainly from an ongoing legal inquiry at its Montenegrin unit. The company spent Ft 3.1 billion by the end of September investigating at least four contracts at the Montenegrin business, exceeding the combined Ft 1.98 billion value of the agreements, the company said on October 9. „Sales are picking up after recent acquisitions, but operating efficiency is not similarly favorable,” said Péter Fazekas, an analyst at Buda-Cash brokerage in Budapest. Fazekas expects such costs to amount to around Ft 1 billion in the Q4, while Cashline Securities analyst Kornél Sarkadi Szabó estimated Ft 1.1 billion. Elek Straub, Magyar Telekom's former CEO who was the longest serving head of a national phone company in Europe, resigned in December after 11 years, amid the probe in Montenegro. He was replaced by Christopher Mattheisen, who formerly headed the company's fixed-line telephone service. (Bloomberg)