Magyar Telekom 4Q Disappoints But Dividend Planned on 2015 Earnings

By Margit Feher

BUDAPEST--The fourth-quarter net profit of Hungary's largest telecommunication company by market share Magyar Telekom Nyrt. (MTELEKOM.BU) disappointed Wednesday with coming in lower than analysts' expectations but the company said it plans to pay a dividend from its 2015 earnings, a much-awaited positive development for investors.

MAIN FACTS:

- Based on its dividend policy, financial position and the current operating, regulatory and taxation environment and outlook, coupled with the anticipated significant improvement in its free cash-flow generation, Magyar Telekom plans to pay a dividend of at least 15 forints per share (0.06) on 2015 earnings, it said.

- The company confirmed Wednesday its earlier plan for not paying a dividend on 2014 earnings.

- As for the firm's 2015 earnings guidance, Chief Executive Officer Christopher Mattheisen forecast that revenues will increase by up to 3% versus last year, driven by an effort to offset the fall in fixed-line revenue and supported by the purchase of alternative telecom provider GTS.

- Ebitda, a key indicator of business performance for telecommunications companies, is expected to decline this year by no more than 3% compared to 2014, he said in a filing on fourth-quarter earnings with the Budapest Stock Exchange.

- In the October-December period of last year, the company made a net profit of HUF1.54 billion forints, missing analysts' forecast in a Portfolio poll for HUF2.6 billion, but up sharply from a net profit of HUF253 million a year earlier. The fourth-quarter net profit was mostly the result of a rise in Ebitda as an increase in corporate taxes offset that. Net profit translated into per-share earnings of HUF1.48, compared with HUF0.24 a year earlier.

- Ebitda was HUF41.86 billion from a year earlier, exceeding analysts' forecast for HUF40.8 billion. It was up 8% from HUF38.75 billion on the year, owing primarily to lower severance expenses.

- Fourth-quarter revenue fell by a moderate 0.3% to HUF165.26 billion from a year earlier and was slightly below the HUF165.7 billion expected by analysts. The decline in voice and system integration and information technology revenues was mitigated by a combination of increased mobile internet and higher mobile equipment sales.

- The net debt ratio, which is key for the company's dividend policy, was 45.7% at the end of last year, up from 43.8% a year earlier and exceeded the 40% upper limit of the company's self-imposed indebtedness limit. Citing its financial position and the operating and business environment, Magyar Telekom said in October that it won't pay a dividend on its 2014 profit. Its policy of maintaining a net debt to capital ratio of between 30% and 40% meant it didn't expect to be able to pay a dividend.

- Magyar Telekom CFO Janos Szabo will hold a briefing for the press about the earnings at 0730 GMT Thursday.

- Deutsche Telekom AG (DTE.XE) holds a 59.3% stake in Magyar Telekom.

- Magyar Telekom shares closed Wednesday 0.3% lower at HUF380 on the Budapest Stock Exchange while the benchmark BUX index ended 0.3% higher.

Write to Margit Feher at [e-mail]

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