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Belgacom Soars as Mobile Wins Ease Payout Threat: Brussels Mover

Belgacom SA, the largest telephone company in Belgium, climbed the most in Brussels trading since going public in 2004 as better-than-estimated earnings alleviated concern about a possible dividend cut.

Belgacom jumped 9.1 percent to 18.335 euros on Euronext Brussels, the biggest gain since it first sold shares in March 2004. The shares had lost 24 percent this year through yesterday, the worst performance among the 23 companies in the Stoxx 600 Telecommunications Index, as investors speculated that Belgacom would have to reduce its payouts amid mounting mobile competition in Belgium.

Chief Executive Officer Didier Bellens switched Belgacom’s focus to mobile customer wins in the past quarter using handset subsidies and a simplified offer of lower-priced rate plans, backed by price increases for bundled fixed-line products and direct sales through the company’s own website. Belgacom added 128,000 postpaid clients in the three months through June, halting the erosion of its mobile-customer base, and maintained its forecast for a drop of as much as 6 percent in earnings before interest, tax, depreciation and amortization this year.

“The fact that Belgacom reiterates its guidance might give investors hope that the 2013 dividend will amount to 2.18 euros a share,” Emmanuel Carlier, an analyst at ING Bank NV in Brussels, wrote in an investor note. “Free cash flow will remain under pressure in the coming years, suggesting a dividend cut is merely a question of time.”

Mobile Prices

Second-quarter earnings before interest, tax, depreciation and amortization of 430 million euros ($572 million) surpassed the 414.2 million-euro average of 12 analyst estimates compiled by Bloomberg. Revenue fell 2.5 percent on a like-for-like basis, worsening from a 0.8 percent drop in the preceding quarter amid lower mobile prices.

Mobistar, Belgium’s second-largest mobile-phone operator, lowered its forecasts and suspended its dividend earlier this week to retain cash for network investments after customer losses continued and lower-priced rate plans took a larger hit on service revenue than analysts had estimated.

Belgacom generated 371 million euros of cash from operations less capital spending before changes in working capital in the first half, a 4.9 percent drop from the same period a year earlier.

Free cash flow, which also incorporates changes in inventories, accounts receivable and accounts payable, tumbled 53 percent to 136 million euros in the same period because of timing differences in income tax payments.

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