Telefonica Czech Net Falls 13% as Call Spending Declines

Telefonica Czech Republic AS (SPTT), the country’s largest phone operator, posted a 13 percent decline in second-quarter profit as clients spent less on calls.

Net income for the three months ended June 30 was 1.63 billion koruna ($76.9 million) from 1.87 billion koruna a year ago, the Prague-based company said in a regulatory filing today. Revenue declined 2.3 percent to 12.8 billion koruna.

The results are in line with estimates and should be “neutral” to the stock, although results at the Slovakian unit are a “sweet surprise,” J&T Banka analyst Milan Vanicek wrote in a note to clients today. Vanicek recommends investors to “hold” the stock.

Telefonica Czech, a unit of Spain’s largest telecommunications company, has been battling a decline in earnings, which peaked in 2005, by streamlining operations and laying off employees. The operator plans to deploy new generation mobile technology and a fiber optic network to boost income from Internet data services and compensate for a decline in traditional voice services.

Smartphone penetration among Telefonica’s clients reached 23 percent, the company said. The number of mobile contract customers rose 5.3 percent from a year ago, it said.

Operating income before depreciation and amortization fell 5.7 percent to 4.9 billion koruna in the quarter from a year ago, Telefonica said.

Shares Decline

Telefonica declined 2.7 koruna or less than 1 percent to 381.3 koruna as of 9:11 a.m. in Prague trading today.

The company expanded its 3G network, which, at the end of June was available for about 76 percent of the population in the Czech Republic. Telefonica also continued to upgrade its fixed broadband network, including deployment of fiber-optic, Telefonica said.

The company’s Slovak unit delivered a “strong” set of commercial and financial results in the second quarter, and strengthened its position in the Slovak market, Telefonica said.

To contact the reporter on this story: Lenka Ponikelska in Prague at lponikelska1@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net