Magyar Telekom 2d-quarter net up 72.4 percent

Magyar Telekom MTEL.BU (MTA.N: Quote, Profile, Research, Stock Buzz) reported on Thursday a 72.4 percent increase in consolidated second-quarter net income as lower headcount costs more than offset sluggish revenue growth.

Second-quarter net profit rose to 31.5 billion forints ($207.4 million) from 18.27 billion a year earlier and came in well above analyst forecasts for a 27.2 percent increase to 23.25 billion in a Reuters poll earlier this week.

The company, a unit of Deutsche Telekom (DTEGn.DE: Quote, Profile, Research, Stock Buzz), began cutting jobs last year to slash staff-related expenses by five percent this year and slim its overall workforce by 15 percent by the end of 2008.

It said 90 percent of the planned layoffs were completed by the end of July. Employee-related expenses for the first half dropped by 9.3 percent to 48.53 billion forints.

"Our solid performance in the first half of 2008 shows the results of our strong commitment to increasing efficiency across the group through a new management structure and reduced headcount," Chairman and Chief Executive Christopher Mattheisen said.

Despite the better-than-expected results, the company did not revise its full-year guidance for stable revenues and a slight decline in earnings before interest, taxes, depreciation and amortisation (EBITDA) over last year's earnings.

Revenues in the second quarter rose by 3.5 percent to 173.12 billion forints, driven primarily by the reversal of provisions worth 8.5 billion forints accounted for under domestic outgoing revenues.

Without the accounting revision, Magyar Telekom said revenues dropped by 1.6 percent year-on-year in the second quarter as growth in mobile and internet revenues could not offset a continued decline in fixed voice revenues.

Mobile revenues rose 3.2 percent to 82.21 billion forints, while internet revenues were up by 4.4 percent to 15.2 billion. Revenues in the fixed line segment dropped by 7.4 percent to 81.22 billion forints.

EBITDA rose by 14.7 percent to 75.4 billion forints, also exceeding analyst forecasts for an increase of just 5.6 percent, due to lower severance payments and the reversal of provisions related to fixed to mobile revenues.

However, the costs of an ongoing internal investigation into several consultancy contracts at the company's foreign units in Macedonia and Montenegro rose to 1.9 billion forints in the second quarter from 1 billion a year ago.

For the first half, the company booked 3.4 billion forints as investigation-related expenses and said it could still not predict when the probe, which delayed approval of its 2005 accounts, would be concluded.