Telenet Keeps Outlook as Handset Subsidies Damp Earnings Growth

Telenet Group Holding NV, the Belgian cable operator controlled by Liberty Global Inc., said first-quarter profit growth trailed its own forecast for the year as handset subsidies and fixed bundle discounts for mobile subscribers outweighed the largest revenue gain in three years.

Earnings before interest, tax, depreciation, amortization and share-based remuneration rose 4.6 percent to 201.5 million euros ($262.2 million), the Mechelen, Belgium-based company said today in a statement. Analysts projected Ebitda of 202.7 million euros, according to the average of nine estimates compiled by Bloomberg. Revenue rose 11 percent to 405.6 million euros.

Telenet maintained its forecast for Ebitda growth of 7 percent to 8 percent this year as handset subsidies are driven mostly by seasonal effects and mobile customer additions will slow amid declining customer defections at Belgian operators following a peak late last year. Telenet’s fixed- and mobile-phone revenue rose almost threefold in the quarter and an additional 103,400 customers signed up for the cable operator’s King and Kong rate plans.

“We’re entering a more mature phase in mobile,” Chief Financial Officer Renaat Berckmoes told reporters. He also said Telenet has “enough flexibility” to respond to rival operators introducing new rate plans that are aimed to halt customer losses.

Telenet said it didn’t generate any cash available for shareholders in the first three months of the year because of the first semi-annual interest payment on 700 million euros of bonds sold in August last year and larger inventories of handsets. Berckmoes said those inventories will be sold in the coming months, forecasting stable free cash flow in the first half.

Extraordinary Dividend

The cable operator will distribute 905.4 million euros to shareholders as of May 8 and the shares will start trading without the right to the payout as of May 3, Telenet said yesterday in a statement.

The extraordinary dividend, which equals almost 101 percent of Telenet’s cash and equivalents as of March 31, will increase adjusted net debt to about 4.6 times Ebitda and leave Telenet with an equity shortfall of almost 1.6 billion euros in its group accounts.

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