2Q07 revenues rose 3.9% y/y to HUF 167.3bn, a touch below our and consensus estimate of HUF 168.4bn. As expected, continued mobile growth and modest contribution from IT/Systems Integration offset continued decline in the fixed-line business. The stronger HUF helped decrease MTEL’s financial expenses by 9.4% y/y , whilst the solidarity tax, higher deferred taxes on foreign assets and increase in local business tax nearly doubled tax expenses. Net income for 2Q07 therefore came-in largely flat from 2Q06 at HUF 18.3bn, some 4% above our own estimate, and a touch below the consensus forecast of HUF 18.5bn. Our view: We view the results negatively and are discouraged by the operating trends both on the revenue and cost sides. We believe the company needs to present a firm plan to curb expenses as margins remain sub-optimal compared to other CEE3 integrated operators.