T-Hrvatski 1st-Quarter Profit Falls 34.7% as Revenue Falls

T-Hrvatski Telekom d.d., the Croatian unit of Deutsche Telekom AG, said first-quarter profit fell 34.7 percent from a year earlier to 238 million kuna ($41 million), as Europe’s sovereign debt crisis continues to hurt the economy.

Revenue declined 6.1 percent to 1.7 billion kuna from the same period a year ago, the Zagreb-based company said today in a Regulatory News Service statement. Earnings before interest, taxes, depreciation and amortization dropped 22 percent from a year earlier to 609 million kuna, it said.

The phone company, in which Deutsche Telekom holds a 51 percent stake, is expanding its Internet, mobile-phone and pay-TV services to keep its leading position in Croatia as the country fights a renewed recession.

“Our business in the first quarter was again impacted by the sluggish economy as well as intensified regulatory and competitive pressure,” Chief Executive Officer Ivica Mudrinic said in an e-mailed statement. “We have increased our efforts to maintain and grow our customer base and to promote the group’s broadband and TV products.”

He added he is “confident that the investment will pay off soon.”

Croatia, which is set to join the European Union in July, is trying to revive growth after four years of recession or stagnation. The Adriatic nation may receive as much as 10 billion euros ($13 billion) in EU funds through 2020 and the government plans to use it to channel investment to infrastructure and energy projects.

Growth Outlook

The government in February reduced this year’s growth outlook to 0.7 percent, while the International Monetary Fund said in January the economy will stagnate.

The drop in the company’s earnings was caused by severance pay expenditures and higher marketing costs in the first quarter, Attila Gyurcsik, an economist at Concorde Securities brokerage in Budapest, said by e-mail.

“Results were below our estimates, but it takes time for marketing spending to bear its fruits,” Gyurcsik said. “So our full year forecasts are still achievable,” he said, reiterating the full-year EBITDA margin forecast of 43.8 percent.

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