TPSA will be releasing 4Q05 results on Monday, the 13th of February. Our forecast of a 1.2% y/y revenue decline is in line with the company's guidance of a 1-1.5% decline. We believe that fixed line revenues contine to be a drag, falling 11% y/y to PLN 9.9bn. Mobile, on the other hand, continues to grow, and we expect mobile revenues to have grown 16% y/y to PLN 5.7bn. We expect a modest expansion of 70 bp in EBITDA margins, although we believe higher financial costs are likely to have pushed net profit down by 2.7% y/y to PLN 2.18bn, compared to PLN 2.24bn in 2004.
We expect the focus to be on company guidance for 2006, following statements from the company that the new guidance will be based on very conservative assumptions, and will be incorporating higher levels of competition. Note that the company has had to revise its guidance downward twice in 2005. We are forecasting a 2.4% revenue decline in 2006, versus the company's guidance (as of Novermber 2005) of a flat revenue growth. We believe that TPSA will be setting targets that it can and will realistically beat, and hence, while we expect negative reaction to a more conservative set of guidance on Monday, we would view any share price weakness as a buying opportunity as the company is likely to deliver positive surprises going forward. We maintain our Buy rating and PLN 28 fair value estimate.