Telefonica Czech Profit Drops on Lower Mobile Revenue

Telefonica Czech Republic AS, majority owned by billionaire Petr Kellner, said first-quarter profit almost halved as competition and regulatory pressures curbed revenue from mobile-phone services.

Net income fell to 558 million koruna ($28 million) from 1.05 billion koruna a year earlier, the Prague-based company said in a regulatory statement today. That missed the average 627 million-koruna estimate in a Bloomberg survey of seven analysts. Revenue fell 10 percent to 10.8 billion koruna.

“The results missed estimates as revenue from mobile services fell more than expected,” Josef Nemy, an analyst at Komercni Banka AS in Prague, said by phone. “With respect to their cash flow and debt, it’s also unlikely that the dividend will reach last year’s levels.”

Kellner’s PPF Group NV bought a controlling stake in the operator for about $3.4 billion from Spain’s Telefonica SA in November, returning it to Czech ownership after eight years. Kellner seeks to revive the business hurt by intensifying competition and falling prices for mobile phone calls.

Operating income before depreciation and amortization fell 16 percent to 3.45 billion koruna in the first quarter.

Telefonica may fail to meet its target to curb the pace of full-year revenue decline from a year earlier, Chief Executive Officer Luis Malvido said on a conference call with analysts today. While the remaining quarters should show “improvement in the trend,” it will be difficult to offset the impact of the first three months on the 2014 figures, Malvido said.

Shareholders will vote on changing the company’s name to O2 Czech Republic AS during a meeting on May 19. The company will hold another meeting in June to vote on 2013 profit distribution, Malvido said.

Telefonica shares rose 0.2 percent to 303 koruna in Prague trading, extending this year’s advance to 2.7 percent.

(Updates with closing price in last paragraph.)
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