Cyrrus (Cyrrus)
Czech markets  |  July 26, 2012 15:20:18

Telefónica CR: flash analysis results for 2Q2012


Telefónica Czech Republic published the results for 2Q2012, which in our view, fell neutral to slightly positive. As we estimated in our forecast, there was a slowdown in sales decline in the Czech Republic -5.1% year on year, while a year ago, this reduction was -9.3%. I 2Q of this year, therefore, confirms that the decline in sales is slowing, but will continue for several quarters.

A positive development is mainly in the mobile segment, while sales reached 6.24 billion 2Q CZK (6.21 billion consensus, Cyrrus 6.23 billion) and decreased to 4.0% yoy, which is a significant improvement compared to the previous quarter -5% a year ago10.7%. The improvement is due among other things, a strong increase in the number of contract customers of mobile services by 5.3%. In contrast to the fixed line business improvement occurred when the annual rate of decline in sales reached 6.5% last quarter, while it was -6.2%. In this segment continues to decline in traditional voice lines, however, but a growing number of customers using broadband Internet services.

Revenues from the Slovak Republic are growing double-digit rate, while in Q2 grew by 11.5% QoQ. Total business revenues reached CZK 12.71 billion in market expectations of 12.64 billion, we expect 12.62 billion

On the cost side, the reported numbers are not very favorable. Although Telefónica CR would have to cut costs in proportion to the decline in sales, costs decline was only 0.3% (our estimate was -1.2%).However, a number of costs is rather an investment in the future (eg repair and maintenance of networks and IT). It is positive but decrease staff costs, reflecting the reduction in the number of employees. Personnel expenses dropped by 9.4% and 4.2% quarter on quarter.

The most important operating indicator, which is adjusted OIBDA, amounted to 5.15 billion CZK, which implies a 40.5% adjusted margin. According to the management of the annual adjusted OIBDA certainly above 40% and according to the outlook for 2012 is slightly lower than in 2011 (43.7%). Net profit reached CZK 1.63 billion, compared with 1.62 billion CZK consensus and our estimate of 1.57 billion CZK.

Management also commented on the ongoing repurchase its own shares. To 7.20 piled 1.73 million shares in the total volume of CZK 663 million (average price of CZK 383.3).This number is purchased 0.54% of capital, if the original plan for this year is 2% but a further 1-2% more (a total of more than 4% of capital). According to management there is a slight acceleration of redemption in the coming months and to complete the purchase of 2% of the shares should be sometime in November or December. Larger volumes can not be purchased this year to expect. Faster pace of repurchase shares could provide support.

This year will be due to the high cash position funded by debt buyback, the method of financing in the coming years (if the buyback will continue) under management is too early to say. However, this will be a critical decision that will affect the dividend may be in the next year.

The whole flash analysis results for download here



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