MTEL's conference call yesterday following the publication of 4Q06 results provided more details on revenue and margin prospects. Management has officially downgraded its guidance for 2007 to flat revenues from 2006 versus the original guidance of 3% y/y revenue growth given by the previous CEO. EBITDA is also forecast to come-in flat from 2006.
The most important take-away in our view, is management's inability to identify sources of cost reductions and margin expansion even though cost of restructuring and consolidating of new assets is largely complete, and even 1 year after the fixed/mobile merger. This indicates to us that margin recovery is likely to come slower than we originally assumed. Even more importantly, management did not provide any additional guidance for dividends, but still emphasized M&A focus, giving rise to concerns over expectations for higher dividends.
We will shortly be publishing a flashnote with our views from the results.