UPDATE 3-Telekom Austria says revenue, margins under pressure

Tue Jan 8, 2013 3:59am EST

* Sees 2013 revenue around 4.1 bln euros, capex of 0.7 bln

* Sees short-term pressure on margins as price wars rage

* Gives no 2013 profit guidance, reiterates dividend plans

* Shares down as much as 2.9 pct vs Monday's near 4-mo high (Adds market reaction)

By Michael Shields

VIENNA, Jan 8 (Reuters) - Telekom Austria warned of a further fall in revenue this year, saying tough conditions would continue to weigh on margins as industry consolidation in its cut-throat home market fails to end a price war.

The group - in which Mexican billionaire Carlos Slim built a 26 percent stake last year - put expected revenue at around 4.1 billion euros ($5.4 billion), down from the 4.2 billion it has forecast for 2012, and reiterated it expected to pay a reduced dividend of 0.05 euros per share for 2012 and 2013.

In a change of policy, it gave no forecast for 2013 earnings before interest, tax, depreciation and amortisation (EBITDA).

The company said it planned a range of unspecified measures to protect its position in its most important mobile business areas, but cautioned these initiatives would come at a cost.

"While this will impact margins in the short term, the management ... is confident that this strategy will provide the optimal basis for future stabilisation," it said, adding it would intensify cost-cutting to reduce pressure on margins.

Its shares, which had risen on Monday to their highest since September, fell as much as 2.9 percent in early trading and were down 2.7 percent at 5.667 euros by 0855 GMT, while the European sector firmed 0.9 percent.

"That Telekom Austria lacks the confidence to give any guidance on EBITDA is in our view a cause for concern and underscores the lack of visibility for the company over the coming year," analysts at Espirito Santo Investment Bank said.

Cost-cutting had helped Telekom Austria hold earnings steady in the third quarter and in November it had reiterated its financial forecasts for 2012, which it cut in August, and said it intended to pay a 5 cent dividend, which it had slashed in September from 0.38 euros.

DIVIDEND PLANS

Dutch group KPN, Slim's other recent investment target in Europe, as well as European peers Deutsche Telekom , Telefonica and France Telecom, have all cut their planned dividend payments for 2012.

Hutchison Whampoa's takeover of larger rival Orange Austria has cut the number of mobile operators to three in the Austrian market of just 8.4 million people, where all-inclusive monthly packages start at just 7 euros, but competition is expected to remain fierce.

"All three providers want to grow more so price competition will stay hard," Telekom Austria Chief Executive Hannes Ametsreiter told a newspaper at the weekend. His rivals have also shown no sign of backing down on offers that let consumers be very choosy.

Ametsreiter had spooked markets by saying in the interview he expected 2012 net profit of around 100 million euros, well below market expectations..

Its 2012 forecast had been for EBITDA of between 1.40 billion euros and 1.45 billion. It said on Tuesday it would no longer provide profit forecasts, giving an outlook only for revenue and capital spending.

The group has bet on emerging European countries to offset declines in its mature and crowded home market. But there has been little sign of improvement so far.

It faces major investments this year to compete in an auction of Austrian next-generation radio frequencies and needs to prolong existing frequency contracts as well. Its chairman told a magazine last week the company was eyeing a hybrid debt issue of us to 800 million euros.

The company is due to give a presentation on its strategy on Jan. 15. ($1=0.7634 euros) (Editing by Greg Mahlich)

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