Belgacom SA (BELG), the largest telephone company in Belgium, fell to a record low in Brussels after forecasting earnings that trailed analyst estimates and saying it will spend more to get higher speeds out of its copper wires.
The stock declined 5.6 percent to 20.21 euros on Euronext Brussels, the lowest closing value since Belgacom’s initial public offering in 2004. Adjusted earnings before interest, tax, depreciation and amortization will drop to between 1.69 billion euros ($2.2 billion) and 1.73 billion euros this year, the Brussels-based company said today in a statement. Analysts projected Ebitda of 1.75 billion euros, the average of 24 estimates compiled by Bloomberg.
Belgacom also said it will increase capital spending by as much as 140 million euros, reducing cash available for payouts, as it starts deploying Alcatel-Lucent SA’s vectoring technique that lets carriers speed up signals by cutting interference in copper wires. The guidance excludes spending of at least 120 million euros for wireless spectrum in an auction that’s planned for later this year.
“Belgacom’s guidance disappoints on Ebitda and capex,” Emmanuel Carlier, an analyst at ING Groep NV in Brussels, wrote today in an investor note. “The dividend is at risk.”
Belgacom said its board of directors wouldn’t commit to a stable dividend over 2013 earnings at this stage. It plans to pay out an unchanged regular interim dividend of 50 cents a share in December, on condition that results in the first nine months match management’s guidance.
A decline in mobile revenue accelerated in the fourth quarter as Belgacom lost 88,000 customers, more than double the 39,000 client defections in the preceding quarter, and growth in mobile-data revenue evaporated due to regulatory caps on text- message and data roaming introduced in July.
The number of clients that switched operators decreased gradually during the fourth quarter after peaking in October, Dominique Leroy, head of Belgacom’s consumer-business unit, told reporters in Brussels.
While a slight increase in subsidized device offerings and efforts to retain clients by switching them to cheaper plans may help reduce so-called churn, customer defections will probably not return to the lower levels seen before October, she said.
The Belgian incumbent reacted to Telenet Group Holding (TNET) NV’s King and Kong mobile rate plans by adding more data and calling minutes as of Dec. 12 to its new rate plans that were introduced in October. Mobistar SA (MOBB) signaled last month that a similar move helped to halt postpaid customer defections in December.
Additional caps on roaming as of July 1 and a final cut in the rate Belgacom charges other operators to handle calls on its network will reduce Ebitda by an estimated 53 million euros this year and erase 93 million euros of revenue, Belgacom said.
The vectoring technology, meant to increase Belgacom lines’ download speeds to about 50 megabits per second, will cost 150 million euros in three years, said Geert Standaert, who heads the company’s network and wholesale business. Asked how much of that will be spent this year, Standaert said the vectoring investments are “mid-loaded,” meaning most of that budget will be spent in 2014.
Standaert declined to say how much the state-controlled phone company plans to spend this year on the rollout of its faster 4G wireless network beyond the eight cities covered since Nov. 5, saying only that deployment will be “substantial.”
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