Telekom Austria Upgrades 05 Outlook, 2Q Net Doubles"

VIENNA -(Dow Jones)- Telekom Austria AG (TKA) Wednesday raised its 2005 net profit forecast after second-quarter earnings jumped on growth in its wireless activities.

Austria's largest telecommunications operator said 2005 net profit will rise 50% from EUR227 million in 2004. It had predicted growth of 25%, though analysts had expected an upgrade to guidance because Telekom Austria completed its purchase of Bulgaria's Mobiltel earlier than planned.

Net profit for the second quarter more than doubled to EUR75.7 million from EU34.6 million a year earlier, and compared with analysts' forecasts of around EUR72 million.

Aside from gains in mobile, earnings were helped by lower depreciation and falling interest charges after the company cut debt to EUR1.87 billion at the end of June from EUR1.97 billion at the end of 2004.

Sales gained 1.5% in the second quarter to EUR1.01 billion.

At an operational level, growth in Telekom Austria's mobile business continues to be fueled by its Central and Eastern European units. The domestic market remains very competitive with five companies fighting for business, though analysts say the situation could ease as Deutsche Telekom AG's (DT) planned purchase of Tele.ring will reduce the number of network operators in Austria to four.

Sales in Telekom Austria's mobile business increased 6% to EUR535.3 million in the second quarter, with the largest contribution to growth in the foreign activities stemming from Croatian subsidiary VIPnet.

VIPnet reported a 12% sales increase to EUR103.3 million, while earnings before interest and tax, or EBIT, gained 28% to EUR20.6 million. Slovenian unit Si.mobil reported a 14% rise in sales to EUR23.7 million, with EBIT jumping to EUR1.7 million from EUR300,000.

Telekom Austria's domestic mobile business also posted gains thanks to an increase in its subscriber tally and a pickup in data revenues. Sales were up 3.6% at EUR411.4 million, while earnings before interest, tax, depreciation and amortization, or EBITDA, rose 8.3% to EUR149.8 million.

The fixed-line unit, by contrast, suffered a 22% decline in EBIT to EUR15.2 million, though the year-earlier figure was padded by a gain of EUR13 million.

The Vienna-based company, like many of its larger European rivals, has looked to acquisitions in eastern Europe to generate growth.

Bulgaria's Mobiltel is the latest major purchase and is expected to be consolidated as of July 12, "significantly" boosting earnings, said Erste Bank analyst Andras Szalkai.

He said Mobiltel's EBITDA margins were very strong at 64% in the second quarter, however he expects a decline in margins next year with the entry of BDC as a third player in the Bulgarian mobile market.

"BDC had planned to enter the market already in April this year, but it was delayed, so margins should remain high for this year," Szalkai said. He has his accumulate rating on Telekom Austria under review.

Szalkai said Telekom Austria's 2005 profit forecast upgrade is in line with market expectations.

At 0750 GMT, Telekom Austria shares were down EUR0.15, or 0.9%, at EUR17.15, while Austria's benchmark ATX index was down 0.5%.

Company Web site: http://www.telekom.at

-By Eva Komarek, Dow Jones Newswires; (+43 1) 513 69 22 11; eva.komarek@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 24th August 2005