MTEL is due to report its 1Q06 results tomorrow. The company will hold a conference call to discuss the results at 15h00 CET (dial-in details: +44 207 138 0836 for Europe, +1 718 354 1172 for the US).
We expect 1Q06 net income to rise 8.0% y/y to HUF 19.4bn, versus consensus estimate of HUF 18.9bn (source: Portfolio.hu). We expect group revenues to improve by 2.9% y/y to HUF 147.8bn, as the migration from traffic to access-based revenues starts to stabilise the fixed-line business, and the consolidation of TCG positively impacts both the fixed-line and mobile revenues versus 1Q05. We forecast the fixed-line revenue decline to ease to 0.9% y/y to HUF 78.5bn in 1Q06, versus the 6.7% y/y decline posted in 1Q05. Our assumption for slower fixed-line revenue deterioration is underpinned by our expectation of stable subscription revenues, continued growth in broadband, and a marginal boost from TCG. We expect mobile revenues to grow 7.5% y/y to HUF 69.3bn, based on continued subsriber growth and broadly stable ARPU. We are forecasting a 3.1% y/y rise in EBITDA to HUF 60.9bn, broadly in-line with consensus estimate of HUF 61.9bn, based on higher revenues and on-going cost control.
Overall, the results should affirm MTEL’s improving fundamentals and ability to meet guidance for 3% revenue growth in 2006 and 2007. Whilst we do not expect any surprise from the results, we believe the shares remain attractively valued at 2006F EV/EBITDA of 5.2x and a 2006F P/E of 12.1x. We reiterate our Buy rating on the stock.