Telefonica Czech Fourth-Quarter Net Up on One-Time Gain

Telefonica Czech Republic AS, majority owned by billionaire Petr Kellner, said fourth-quarter profit rose 11 percent as a one-time gain from network sharing offset a revenue decline. The net beat analysts’ estimates.

Net income for the three months ended Dec. 31 was 1.95 billion koruna ($98 million), from 1.76 billion koruna a year earlier, Prague-based Telefonica Czech, the country’s largest phone company, said in a statement. That beat estimates from eight analysts for a 1.41 billion-koruna profit, according to a Bloomberg survey. Revenue fell 9 percent to 11.7 billion koruna.

Kellner’s PPF Group NV bought a controlling stake in Telefonica Czech for about $3.4 billion from Spain’s Telefonica SA in November, returning it to Czech ownership after eight years. Kellner, with a net worth of $11.8 billion according to the Bloomberg Billionaires Index, is seeking to revive a business hurt by intensifying competition and falling prices for mobile phone plans.

“We delivered solid results while changing the rules of the market,” Chief Financial Officer David Melcon said in the statement. The new tariffs “radically changed the way we get in touch with our customers, and we manage prices. Their popularity helped us to achieve revenue and churn stabilization and operational simplification.”

Telefonica reduced charges and introduced bundles for unlimited calls and some data in April before winning frequencies in a radio-spectrum auction last year. It plans to invest in 2014 into “growth areas” such as mobile data, LTE and upgrading its fixed network, it said today.

One-Time Gain

Telefonica Czech rose 1.7 koruna, or 0.6 percent, to 299.7 koruna in Prague trading. The year-on-year results were helped by a one-time gain of 643 million koruna in cash compensation from T-Mobile Czech as part of a network sharing agreement, Telefonica said.

Telefonica also announced yesterday that it’s in talks with the Czech unit of T-Mobile about sharing their 4G networks. They plan to reach an agreement this year. The Czech unit of Vodafone Group Plc is the country’s third major mobile phone operator.

Telefonica sees a “still declining but improving revenue trend” in 2014, it said. Capital expenditure this year is expected to reach last year’s level, it said.

The board will propose a dividend of between 18 koruna to 30 koruna at a shareholders’ meeting in the second quarter, depending “mainly” on the outcome of a legal analysis of the new commercial corporations act, it said.

Buyout Offer

“The market was nervous whether there will be a dividend proposal at all, so it’s a pleasant surprise,” Tomas Mencik, an analyst at Cyrrus AS, said by phone. “Oibda and net also beat estimates, mainly on the one-time gain and accelerated cost cuts, which indicates the new owner may have started transforming the company.” Mencik has a “hold” recommendation on the stock.

PPF hasn’t announced yet a mandatory buyout offer for minorities. The company said on Jan. 29 the proposal will be based on the takeover price, taking into account other relevant conditions such as deferred part of the payment. The offer will be made in line with legal requirements, PPF said in January.

Fourth-quarter operating costs contracted to 6.98 billion koruna from 7.5 billion koruna a year earlier, Telefonica said. Operating income before depreciation and amortization, rose 1.9 percent for the period to 5.56 billion koruna, it said.

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