TPSA’s 1Q06 revenues rose 2.7% y/y to PLN 4.6bn, 5.0% higher than our estimate, and 2.5% higher than consensus. However, net income rose just 9.2% y/y to PLN 450m, 16.5% below our PLN 539m estimate, and some 20.3% below the consensus forecast of PLN 565m. The shortfall was mainly attributable to higher than expected mobile costs. Therefore, whilst EBITDA of PLN 2.0bn was 5.7% above our estimate, operating profit came in 10.1% below our forecast at PLN 877.
Despite the weakness at the bottomline, we believe that the longer-term implications from the results indicate encouraging trends for TPSA. In particular, we note that the 6.6% y/y decline in fixed revenues compared to the 8.7% y/y decline in 1Q05 indicates a deceleration in fixed-line decline. Further, mobile revenues posted stronger y/y growth of 22.2% to PLN 1.6bn compared to the 14.4% y/y growth posted in 1Q05, on the back of a 29.9% y/y rise in subscribers. Overall, we believe the results bode well for TPSA’s longer-term prospects, and recommend buying into weakness. (Kindly refer to our post-1Q06 results flashonote, TPSA: Trends on track, for more details).