* Underlying Q2 profit down due to weak economy, taxes
* Flags cost cuts, price rises to meet 2012 profit guidance
* Shares down 1.2 percent
(Releads, adds market reaction, analyst comment)
By Gergely Szakacs
BUDAPEST, Aug 9 Magyar Telekom said it
was to raise prices and cut costs after quarterly earnings
missed expectations as austerity-hit Hungarians cut back on
discretionary spending and with a new tax on the sector taking
The Deutsche Telekom unit said on Thursday the
moves allowed it to affirm previous guidance for underlying
full-year earnings before interest, taxes, depreciation and
amortisation (EBITDA) to fall 4-6 percent.
"Telecommunication spending in Hungary came under increasing
pressure, accelerating the decline in our traditional voice
revenues in the second quarter," chairman and chief executive
Christopher Mattheisen said.
"As our growth businesses could not fully compensate for the
fallout of high-margin voice revenues, our underlying EBITDA in
the second quarter declined by 9 percent year-on-year."
EBITDA adjusted for special cost items fell to 56.2 billion
forints, compared with a forecast for 57.1 billion in a poll by
business news website portfolio.hu.
Net profit more than doubled to 10.7 billion forints ($48
million) in the second quarter, compared with a forecast for
12.05 billion. The result was flattered by Magyar Telekom having
to book a 10.6 billion forints charge in the 2011 period for
settling a U.S. investigation into the bribery of government
officials in Macedonia and Montenegro.
Magyar Telekom shares were down 1.5 percent to 404 forints
at 0845 GMT, underperforming a flat blue chip index.
"The results are clearly negative and the stock may fall
below 400 forints in the very short term," KBC Securities
analyst Gergely Palffy said.
"We believe consensus estimates need to come down, as the
new telephone tax could have a 6 billion forint negative impact
in the second half of 2012 even with the planned tariff hikes
from September/October," Palffy said.
Magyar Telekom's profitability is being weighed on by
government measures to reduce the budget deficit, such as a
special tax on the telecommunications sector first levied in
2010 and a new levy on phone calls and text messages.
It said the telecommunications sector tax would cost more
than 24 billion forints this year, while the impact of the new
phone call tax levied from the second half was estimated at 8
billion forints by the year-end.
Second-quarter revenue rose 1.3 percent to 145 billion
forints due to an increase in systems integration and energy
service revenues, while income from higher margin mobile and
fixed-line businesses fell.
"Despite the worsening EBITDA trends, outlook for our
revenues looks more positive," Mattheisen said.
($1 = 224.3 forints)
(Editing by Dan Lalor)