Cyrrus (Cyrrus)
Czech markets  |  February 26, 2013 13:00:49

Telefónica CR: prediction of financial results for 4Q 2012 - answers to questions

Results for the 4th quarter should provide answers to many questions. Our and market expectations does not significantly deviate from the long-term trend, which has a slightly downward trend. Total business revenues for the 4th quarter should be at CZK 12.65 billion, indicating a 5.6% decline. This is slightly more than in the previous quarters (1Q-3Q 2012 in average -3.1%), which is mainly due to the very strong 4Q 2011th Operating OIBDA according to our calculations, reached CZK 5.1 billion, that would be a decrease of 12.7%. Yearlong OIBDA margin is forecast at 39.3% in line with the goals that management established in 2012 and is forecast 4Q profit margin of 40.3%.

At the level of the fixed line segment, we expect revenues in the last quarter of last year's 5.40 billion CZK (annual decline of 6.0%) and the mobile segment revenues are likely to reach 5.96 billion CZK (annual decrease of 6.0%). Sales in the mobile segment will be significantly negatively affected by a decline in revenue due to lower prices of interconnection charges. On the cost side, we expect quarterly stagnation and decline by 1.9%.

The most important information is the expected dividend from the profit of 2012 paid in 2013. It is very unlikely that payment of dividends will again be divided into 2 parts - and the profit for the year 2012 and part of retained earnings. The crucial question is whether the proposed dividend of previous years, and will be reduced.Opinions vary on the market and face either the 30 CZK or 40 CZK. We rather tend to the dividend 40 CZK per share, however, draw attention to the following factors that may lead management to lower dividend.

Although management during the presentation of the previous quarterly results indirectly suggested that plans to change the current dividend policy, cash flow situation is not favorable for Telefonica CR. Therefore it would be understandable if the management to concentrate instead on ensuring that sufficient cash dividend at the expense of shareholders. Management also previously indicated that he was willing to borrow money for the ongoing auction of frequencies, which could indicate that the desired increase in debt may go through an auction, not through the issuance of debt to pay dividends. On the other hand, the parent company is in big financial trouble and it would be logical if pushed to the highest dividends.

The theme of the conference call should be the outlook for 2013, but the main information is in our opinion the above dividends. If the announced dividend 40 CZK, it is likely that the shares will be observable positive market reaction. Dividend 40 CZK is accessible on our model, but it is not sustainable. Management strategy can therefore be towards less sustainable dividend. In this case it would probably dividend was 30 CZK, for which share price could react again testing the level of 300 CZK.

The whole prediction results downloadce.pdf "> here

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