Mobistar will release its 2Q11 results on Tuesday 26 July before market, followed by a conf call at 10h CET. We expect the numbers to show that Mobistar remains under pressure from regulation and competition. We arrive at a 5% decline in service revenues and a 9% drop in EBITDA. Pending the release we reiterate our Reduce rating and € 47 target on Mobistar.
Our View:
2Q profits remain under pressure: Once again, regulation (lower MTRs and lower roaming rates) and competitive pressure as well as investments in the Starpack offer will weigh on service revenues and EBITDA, this time by respectively 5% and 9% in our view. Net profit is forecast to fall 12%. This puts us below CSS in terms of sales expectations but in line on profit forecasts. Note that the acquired KPN B2B activities have been consolidated since 2Q10, and hence no longer support the reported y/y growth rates, unlike during previous quarters. We also expect a € 30.8 ARPU for the quarter (-3% y/y, +0.9% q/q), compared to a € 30.5 CSS forecast. We forecast 10k mobile adds (ex-MVNO) and we expect Mobistar to report a total TV subscriber base of 30k at quarter-end, implying about 13k net adds during the period. The consensus is looking for 10k mobile adds as well, and 10k adds for TV.
No changes to FY outlook expected: At the 1Q11 release, Mobistar reiterated its FY outlook, hinting at stable sales, € 505/535m in EBITDA, and € 210/230m in net income. Our and consensus forecasts are in line with the company guidance and we expect no changes to these targets.
Conclusion:
Reduce rating maintained: The 2Q release will again highlight that Mobistar is under pressurefrom regulation and competition. The stock is nevertheless trading at a premium to the telco sector following speculation on a buy-out by . The unattractive valuation coupled with the pressure on the Mobistar business explains our Reduce rating and € 47 target on the stock.