Magyar Telekom Falls to Record Low on HSBC Cut: Budapest Mover

Magyar Telekom Nyrt., Hungary’s largest telecommunication-service provider, fell to the lowest level on record after HSBC Holdings Plc cut the stock to underweight, citing the risks to dividend payments.

Shares of the unit of Germany’s Deutsche Telekom AG slid 2 percent to 297 forint by the close in Budapest, the lowest since they started trading in 1997. More than 2 million securities changed hands, almost double the three-month daily average. HSBC cut its price estimate by 22 percent to 280 forint and lowered the recommendation from neutral.

Magyar Telekom has lost more than a fifth of its market value this year as its debt level exceeded the 30 to 40 percent range set by the company as a guideline for dividend payments. The operator reached a 34 billion-forint ($155 million) agreement with Hungary’s media authority for frequency band extensions, Magyar Telekom said last month.

“Dividends are at risk for the next two or three years due to higher-than-expected payments for a license renewal and impending spectrum payments,” London-based equities analysts at HSBC, including Herve Drouet, said in an e-mailed report today. “Frequent regulatory interference and changing revenue mix” will also impact profitability, they said.

The net-debt ratio of Magyar Telekom reached 42 percent in the second quarter, according to an earnings statement. The company has paid a 50-forint cash dividend in each of the past three years, data compiled by Bloomberg show.

Magyar Telekom shares have declined more than 7 percent in the three months through today, the most among 16 eastern European telecom companies tracked by Bloomberg. UniCredit SpA cut its rating for the shares to hold from buy yesterday as it predicted a dividend won’t be paid next year.

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