TPSA 1Q Net Profit +2.6% On Mobile, Financials"

WARSAW -(Dow Jones)- Telekomunikacja Polska, Poland's largest telecommunications operator, said its first-quarter consolidated net profit was up 2.6% on the year, driven by revenues from mobile telephony and lower financial costs.

Group net profit at the company, which is 47.5% owned by France Telecom, rose to 518 million zlotys ($186.8 million) in the first quarter from PLN505 million a year ago. The figure was below the average forecast of PLN583 million in a Dow Jones Newswires poll of seven telecom analysts.

Group revenues of PLN4.44 billion in the first quarter were down 2.7% on the year, and also a touch under analysts' average forecast of PLN4.51 billion.

The fall in sales revenues was well ahead of the company's forecasted full-year 1% fall in revenues.

"First-quarter revenue was negatively impacted by the market conditions, including regulatory decisions," TPSA said in a statement following the results release.

The company is currently reviewing its strategy for 2008-2010, which will be revealed in July. It said it had identified leverage in asset disposal, as well as improving its capital spending.

As expected, mobile telephone revenues helped offset a shrinking income stream from TPSA's dominant fixed-line franchise.

The company reported net sales in the mobile segment were up 7.4% on the year to PLN1.86 billion in the first quarter, as opposed to a 9% annual decline in fixed-line revenues to PLN2.75 billion.

TPSA said mobile operations accounted for 53% of the group's PLN784 million operating profit in the first quarter, compared with only 26% of the PLN877 million operating profit in the year-earlier period.

TPSA's bottom line also benefited from lower interest and financial costs, which totaled PLN122 million in the first quarter, down from PLN231 million in the year-earlier period.

Revenue in the data-transmission business rose by 0.2% in the first quarter to PLN557 million, after a 2.4% rise in the fourth quarter of 2006.

Broadband revenues rose 4.9% to PLN300 million, lower than the 8.7% rise in the fourth quarter as TPSA faces growing competition from other broadband Internet providers following the market deregulation.

Mobile arm Centertel had 12.78 million subscribers at the end of March, up 22.7% on the year. The company set a full-year target of over 13.5 million customers at the end of 2007.

TPSA estimates that Centertel's market share in mobile telephony subscribers fell to 33.6% at the end of March, from 33.9% a year earlier.

The number of broadband subscribers rose by 37.1% on the year, to 1.8 million. That compares to 47% jump in the broadband subscribers in the fourth quarter.

TPSA forecasts total year-end broadband subscriber numbers at over 2.2 million.

It plans to pay a 2006 dividend of PLN1.9 per share, or PLN2.66 billion.

TPSA shares, which have been under pressure over the past year due to increased competition after market deregulation, are expected to underperform the market Wednesday.

"Unconvincing results - that's how I would call it," said equity analyst Pawel Puchalski at BZ WBK brokerage in Warsaw.

Puchalski points out lower dynamics in revenue growth in mobile telephony, the driving force behind TPSA revenues. The average revenue per user, or ARPU, decreased to PLN47.5 in the first quarter, down 13.1% on the year.

Also, while Centertel added 280,000 new subscribers in the first quarter, "that's just the third of the fourth-quarter 2006 net adds," Puchalski writes in his research note.

Similarly, in the first quarter, TPSA had 92,000 newly-won broadband Internet users, but recorded a net loss of 42,000 users to competitors. That was accompanied by falling broadband ARPU, down 24.7% on the year to PLN58 in the first quarter.

"We see a poor 1Q07 as a harbinger to an even more difficult year when pressure on mobile intensifies and wireline liberalization takes its toll," equity analyst Krzysztof Kaczmarczyk of Deutsche Bank Securities in Warsaw wrote in a research note.

Tuesday, TPSA shares closed flat at the Warsaw Stock Exchange, at PLN23.75.

TPSA will hold its conference call of senior managers Wednesday, at 0800GMT.

TPSA results are fully consolidated with those of France Telecom, which reports its full-year consolidated revenues Thursday.

Company Web site: http://www.tp-ir.pl

-By Malgorzata Halaba; Dow Jones Newswires; +4822 622-2767; malgorzata.halaba@dowjones.com

(END) Dow Jones Newswires "

Posted to the site on 25th April 2007