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Telefonica's Czech unit has profit on mobile revenue

Telefonica O2 Czech Republic AS, the country's largest phone company, increased profit by 28% last year as more lucrative mobile phone services made up for a drop in revenue at its fixed-line business.

Net income rose to 8 billion koruna ($371 million) from 6.25 billion koruna a year earlier, the Prague-based company said in a statement yesterday. Revenue was little changed, rising 0.4% to 61.3 billion koruna, the company said. Telefonica SA, Spain's largest phone company which has a controlling stake in the Czech unit, aims to sell more wireless, data and Internet products to compensate for a decline in demand for fixed-line voices services. Telefonica is one of three Czech mobile phone operators, competing with units of Vodafone Group Plc and Deutsche Telekom AG's T-Mobile. CFO Ramon Ros, speaking on a conference call, said the fact revenue didn't decline was the „most important turnaround” for the company. „The mobile business was the key driver of this growth, while revenue in the fixed business continued to decline,” the company said earlier in its statement. Telefonica said its total number of mobile service customers increased 4% to 4.86 million at the end of 2006, while revenue from mobile Internet and data services rose 25%.

Fixed-line phone revenue dropped 5% to 29.9 billion koruna last year as the number of landline telephones fell 17% to 2.4 million, the company said.
The shares rose 0.4% to 545.3 koruna yesterday. They are up 0.2% during the past year, while the benchmark PX Index increased 8% over the same time. Telefonica expects 2007 revenue to rise between 1% and 3% and 2007 operating income before depreciation and amortization to drop 1% or remain unchanged from 2006. Ros said on the conference call today that Telefonica Czech's Slovak operation is to have a negative impact on the company's 2007 profit. He did not elaborate. The company plans investments of 9 billion koruna in 2007, of which some 20% will go to its Slovak activities, where it started offering service to clients last month. Telefonica said it's aiming for a 5% share of the Slovak wireless services market this year and the expansion there also boosted costs. Overall operating expenses climbed 2.8% to 34.1 billion koruna, also because of the company's re-branding as it merged Cesky Telecom's fixed-line unit and the Eurotel cellular division into Telefonica O2 Czech in July. The company will propose a 50 koruna per-share dividend on 2006 profit. It paid a 45 koruna dividend last year. (Bloomberg)