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Czech markets  |  November 05, 2012 15:13:35

Telefónica: Third quarter is awaiting further decrease in the spotlight dividend and share buyback

Also in the 3rd quarter Telefónica CR faced strong competition due to the high saturation of the phone market. In our opinion, lessen the annual rate of decline in sales when, after a decline of 2.4% in the second quarter, we expect a decline in the previous quarter by 3.2% (consensus -3.5%). Reduction in sales we expect in both hard segment (-6.4% yoy) and in the mobile segment (-5.5%). Conversely still strong revenue growth (+32,3%) predict the Slovak Republic. (Source: Cyrrus)

Telefónica time series - The estimated results for 3Q2012

At the operational level, according to our model achieves the Company adjusted OIBDA margin of 41.0%. This is 0.6 percentage points more than in the previous quarter, but it is a significant decrease year on year (3Q2011 adjusted margin of 45.5%). Even so, we expect year-round easy to meet the goal of slowing the pace of annual decline in adjusted OIBDA margins. Net profit according to our calculations, reached CZK 1.73 billion (1.78 billion consensus).

In our opinion, Telefónica stands against a number of important milestones. Most of them should be mentioned at the time of management commentary results for 3Q2012. Input current is particularly the first virtual operator BLESKmobil. We expect management commentary, as this will affect the company's virtual, if so, what is the financial benefit from this cooperation Telefonica. However, do not expect the virtual operators created a real threat to the existing players in the market.

In the last quarter, significantly shifted auction vacant frequencies. To the auction itself known (and approved CTO) only four companies - all three operators and Czech financial group PPF. ** We would like to hear from the management of the current view of the auction, the estimated amount of the investment or how much is the real threat of entry of a full-fledged fourth operator. If successful, PPF at auction for Telefonica is a real threat that a new operator will attack the market with lower prices and create (as opposed to virtual) full competition with the pressure on revenues, margins and profits of existing operators.

Given the current situation in the European telecommunications market, where such Telekomunikacja Polska reduced dividend due to deterioration in a major competition, and Deutsche Telekom, in which speculates on the reduction of dividends, we would expect management to deliver its opinion and refute concerns that Telefónica Czech Republic faces similar threats. statement regarding expected dividends for the year 2012 (our prediction is 40 CZK) and the comments to repurchase its own shares.

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