NHH, the Hungarian telecom regulator, is proposing revised termination rates to be applied retrospectively from September 15, 2005. Interconnection fees are estimated to decrease by some 14% on average across traffic direction. Note that leased lines are not included in the proposed revisions as they are regulated on a "retail minus" basis. Further, other services, such as charges for number portability and preselection installation are to decline by 39% and 55% respectively.
Although the above revisions will have an impact on both the cost and revenue lines at Mtelekom, we estmate that the net impact will be slightly negative given Mtelekom's market share. We await further details before revising our interconnect forecasts, however, note that we have already folded-in substantial declines in termination/interconnect rates in anticipation of regulatory convergence with EU standards. The news could have a slightly negative trading on impact on Mtelekom, which we would view as further buying opportunity. We maintain our HUF 1,152 fair value and Buy recommendation