Magyar Telekom Drops to Record on Cut at Erste: Budapest Mover
Magyar Telekom Nyrt., the Hungarian unit of Deutsche Telekom AG (DTE), fell to the lowest level on record after a government plan to raise taxes prompted Erste Group Bank AG to lower its recommendation on the shares.
The stock dropped 1.8 percent to 337 forint by the close in Budapest and the benchmark BUX Index slipped 0.5 percent, bringing a two-day decline to 1.8 percent. Hungary plans to raise charges on telephone calls, mining and financial transactions, Economy Minister Mihaly Varga said yesterday.
Erste Bank (EBS) cut its rating for the stock to reduce from hold, lowering the price target by 21 percent to 330 forint. The lender also cut Magyar Telekom’s dividend estimate, projecting higher costs. The government said the tax measures are necessary because it miscalculated revenue after the inflation rate plunged to the lowest since 1974.
“After the higher telecom usage tax, we expect Magyar Telekom to pay 32.3 billion forint ($147 million) of special telecom taxes annually,” Vera Sutedja, a Vienna-based analyst at Erste, wrote in an e-mailed report. “The weak macroeconomic situation and the heavy political pressure overshadow the underlying performance of Magyar Telekom.”
Hungary is seeking to raise the corporate phone tax to 3 forint per minute or per text message from 2 forint, Varga said yesterday. Magyar Telekom shares have slumped 6.9 percent in June, trailing a decrease of 0.4 percent for the BUX Index. About 2.2 million Magyar Telekom shares were traded today, more than 1.2 times the three-month daily average, according to data compiled by Bloomberg.
OTP Bank Nyrt. Hungary’s largest lender, slipped 1.5 percent to 4,800 forint, the lowest close since May 6.
Besides the higher tax on transactions, banks will also be required to make a payment equivalent to 7 percent of loans that the central government transferred to its books from debt-laden municipalities in December, according to a draft bill posted on Parliament’s website yesterday. The forint depreciated 1.1 percent to 293.9 per euro.
“The new and increased tax charges will add to the burden on companies and may have a negative impact on economic growth,” Imre Kerekgyarto and Karoly Bamli, Budapest-based traders at Commerzbank AG, wrote in an e-mailed report on the currency.
The Cabinet would like the tax measures, which need the approval of parliament, to take effect on Aug. 1, MTI state news service cited Varga as saying.
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