TPSA is due to report its 1Q06 results on 26 April. We expect total revenues to decline 2.1% y/y to PLN 4.3bn, on the back of a forecast 12.7% y/y decline in fixed-line revenues and 18.4% y/y growth of mobile revenues. Our forecast PLN 2.6bn of fixed-line revenues is underpinned by 62.7% y/y growth in broadband revenues, slightly offsetting our expected 16.6% decline in fixed-line core revenues. We expect mobile revenues to grow by 18.4% y/y to PLN 1.5bn, versus the 14.5% y/y growth posted in 1Q05, based on continued strong subscriber and usage growth.
We are forecasting a 7.8% EBITDA contraction for 1Q06, based on lower revenues and higher expected costs, associated with the acceleration in TPSA’s broadband roll-out and mobile subscriber take-up. However, we expect slower depreciation and lower financial and tax costs, and forecast net profit in 1Q06 to grow by 30.8% y/y to PLN 539m.
Given the lack of consensus estimates, we are unable to determine market expectations but we believe that investors will focus on TPSA’s top line, looking for indications that the company is on track to deliver on its full-year 2006 guidance of a 1%-1.5% revenue decline. We are currently forecasting a 1.3% y/y decline for 2006, and believe that the 1Q06 results will provide signs that the company will achieve its revenue guidance. Overall, we expect TPSA’s results to reflect better-than-expected trends and expect the shares to trade up on the day. Moreover, TPSA still trades at a wide discount to Cesky Tel of 12% on a 2006F EV/EBITDA of 5.4x and 37% on a 2006F P/E of 13.6x. We reiterate our Buy recommendation on TPSA.