How long can Eurotel offset Cesky’s falling profits?

31 Jul 2003

The Czech Republic’s dominant fixed line and mobile services provider Cesky Telecom said that its net profit for the first half of 2003 dipped to an eight-year low, although the decline was partly offset by strong growth at its 51%-owned mobile unit Eurotel Prague. The Czech telco last month agreed to buy out Verizon and AT&T Wireless’s 49% interest in the cellco – held via their Atlantic West venture – in the move which appears a prudent one given the revenue earning track record of the country’s leading mobile player. By the end of June Eurotel had consolidated its position as the country’s market leader in terms of subscribers, with 3,993,000 people signed up to its services. Eurotel posted a 1H net profit of CZK3.8 billion on total revenues of CZK14.1 billion (up 2% year-on-year), translating to consolidated revenues of CZK6.6 billion, or 26% of the group’s total turnover. However, the cellco’s strong performances of recent years are struggling to mask the erosion of the former monopoly’s core voice services business.

Cesky Telecom’s net profit for the first six months of the year stood at CZK2.3 billion, compared with CZK2.6 billion for the same period of 2002, and EBITDA amounted to CZK12.5 billion, from CZK13.3 billion previously. Additionally, group revenues were down to CZK25.4 billion from CZK26.1 billion largely as a result of declining PSTN call revenues, which slumped by 26% year-on-year to CZK5.5 million in a period in which the company’s fixed lines in service fell by 3% to 3.617 million lines. The effects of tariff erosion on the EU accession country’s competitive liberalised market has seen its share of calls dropping sequentially and the trend looks set to continue. Moreover, with the mobile market rapidly approaching saturation levels (penetration stood at 85.6% by 31 March 2003), and with operators focusing more on developing data-based services and hanging on to high value customers, Cesky Telecom will need to see sustained growth from its data and internet related services in the short term. These segments recorded revenue growth of 19% over 2002 with ISDN contributing CZK2.6 billion to the total of CZK4.1 billion; the company had 444,000 ISDN channels at the end of the period. Internet services posted the strongest growth, with turnover up 40% to CZK279 million and the number of registered accounts up 33% to 786,000.

Czech Republic,
CIT’s Datafile of Eastern European Telecommunications

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