CT’s preliminary consolidated IAS 2000 results, released yesterday at noon, were only slightly below the market consensus (by some 2–4%) at all levels except for sales (1% above the consensus). We consider the results as neutral given that our forecasts were marginally below the market consensus.
After-tax profit stood at CZK 6.4 bil. (up 3% from 1999) vs. the market expectation of CZK 6.6 bil. and Patria’s forecast of CZK 6.3 bil. EBITDA rose 4% y-to-y, to CZK 26.7 bil., and was only some 2% below market expectations. EBITDA margin stood at less than 47%, which is a sharper deterioration from 1999 (49.6%) than we had expected (48.5%). The company said that the consolidation of EuroTel, the cellular operator, had a major impact on the consolidated EBITDA margin. We had expected a negative impact of this kind (due to the high year-end customer acquisition costs at EuroTel), but not as strong. The operating profit of CZK 12.1 bil. was down 2% y-to-y given higher depreciation charges. CT’s revenues, which grew 10% y-to-y to CZK 57.2 bil., were actually slightly better than expected. More detailed figures (breakdown of sales, costs, etc.) will be released at the end of March. CT also reported a very strong increase in the number of its Internet subscribers, from 45,000 in 1999 to almost 200,000 at year-end 2000. (A major increase in the Internet subscriber figure was anticipated after the company launched a free-access service and a portal [Quick.cz] in October).
The most immediate response to the figures was negative, but within very short time the stock reversed and gained. We do not change our assessment that the stock is undervalued but that its short-term outlook will primarily depend on the global sentiment towards telecoms, which is poor at present, and on the company’s privatization outlook. Our recommendation remains long-term buy, short-term accumulate.