TPSA Extends 8-Month High as Web Portal Sale May Boost Dividend

Telekomunikacja Polska SA, Poland’s largest phone company, extended a rally to an eight-month high after the sale of its Internet portal fueled speculation the company will increase its dividend next year.

The shares closed 3.8 percent higher at 9.79 zloty in Warsaw, the highest since Feb. 11. The stock has gained 11 percent since TPSA, as the unit of France’s Orange SA is known, raised its cash flow target for 2013 and reported earnings that exceeded analysts’ estimates on Oct. 22.

TPSA agreed to sell Wirtualna Polska SA, Poland’s second-biggest Web portal, for 375 million zloty ($124 million) to O2 sp. z o.o. The transaction will be completed next year and increase TPSA’s pretax profit by about 180 million zloty, the Warsaw-based operator said in a regulatory filing yesterday.

“The transaction increases the chances for a slightly higher dividend in 2014,” Wlodzimierz Giller, a Warsaw-based analyst at PKO Bank Polski SA, said in a note. Giller had expected a sale price of as much as 300 million zloty.

Slumping mobile phone rates, fierce competition and economic downturn hurt TPSA earnings and prompted management to cut the 2012 dividend 67 percent to 0.5 zloty a share. TPSA shares have still slumped 20 percent this year, becoming the fourth-worst performing stock in Warsaw’s benchmark WIG30 Index.

Spectrum Auction

The proceeds from the sale will help TPSA finance a purchase of spectrum for high-speed mobile Internet that Poland will auction this or next year. The operator expects to spend as much as 2 billion zloty on new frequencies, Chief Financial Officer Jacques de Galzain said on a conference call this week.

“We take this news as positive as not only will the deal provide cash for TPSA around the time it is to acquire 4G spectrum, but the company has also managed to secure a 17 percent premium to the market’s expectations,” Tibor Bokor and Ondrej Cabejsek, analysts at Wood & Co., said in a note today.

Wirtualna, set up in 1995 as Poland’s first Internet portal, had 13.1 million users in July, according to Polish Internet research company Megapanel PBI/Gemius. Its biggest competitor, in which Ringier Axel Springer Media AG bought a 75 percent stake for 956.3 million zloty last year, had 14.4 million users.

Wirtualna had sales of about 175 million zloty in 2012 and earnings before interest, taxes, depreciation and amortization of “a bit more” than 40 million zloty, Galzain said this week. Onet’s sales were 185.6 million zloty and Ebitda stood at 76.8 million zloty in the first 10 months of 2012, the last time its earnings were published.

O2, which is being taken over by Warsaw-based private equity fund Innova Capital, owns Poland’s largest celebrity gossip website and runs an portal, which in July had 9.36 million users and was ranked fifth by Megapanel.

Innova will help O2 finance the acquisition of Wirtualna and plans to merge both portals, Innova said in an e-mailed statement yesterday.

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