HTCC reports USD17.7 million net profits in 2006

20 Mar 2007

Alternative telecoms operator Hungarian Telephone and Cable Corp (HTCC) today announced results for the fourth quarter and twelve months ended 31 December 2006. For the fourth quarter the company reported gross revenues of USD53.8 million, up 7% year-on-year. Pro-forma net income and adjusted EBITDA (excluding FOREX losses/gains and other stock option non-cash accounting charges) were USD5.2 million and USD17.4 million respectively, compared with a pro-forma net loss of USD3.0 million and adjusted EBITDA of USD7.6 million in the same period last year. Income from operations was USD10.4 million, up from USD2.2 million. The telco said its results were affected by the one-time sale of optical fibre during the fourth quarter of 2006 to a local telecommunications operator. HTCC also reported a net foreign exchange gain of USD13.1 million in Q4 2006, compared to a net loss of USD2.3 million for the fourth quarter of 2005, on the back of the strengthening of the Hungarian forint against the euro.

For the twelve months ended 31 December 2006 HTCC reported gross revenues of USD193.7 million, an increase of 8% compared with 2005. Pro-forma net income and adjusted EBITDA, were USD13.9 million and USD58.7 million respectively, compared with USD7.6 million and USD53.9 million in the same period last year. This represents an increase of 83% in pro-forma net income and 9% growth in adjusted EBITDA when comparing the two periods. The telco said income from operations was USD32.6 million (USD30 million, 2005), and net income attributable to shareholders was USD17.7 million (USD2.8 million). The operator’s financial results were affected by the inclusion of PanTel for ten months in 2005 compared to a full year in 2006. HTCC also reported a net FOREX gain of USD1.9 million in fiscal 2006, compared to a net loss of USD8.5 million in 2005. Cash from operations for the year was USD44.6 million, while capital expenditure was USD18.5 million.

Commenting on the results, Torben V Holm, President and Chief Executive Officer of HTCC said: ‘During 2006 HTCC succeeded in stabilising its operations following our integration of PanTel’s operations in 2005 and the significant changes in the competitive landscape in Hungary that occurred. Our expansion beyond Hungarotel’s traditional operating areas has continued, offering competitive services to residential and small business markets. Our successful introduction of new products for the residential market allowed us to firmly cut back the loss of customers in the case of fixed line subscriptions that we experienced in 2005. We were also successful in our efforts to contain our operational costs in order to remain competitive with our expanded portfolio of products for both residential and corporate customers. We were particularly successful in our increased penetration of the DSL broadband market. In 2006, we tripled the number of subscribers in our traditional concession areas, while the Hungarian market increased by only 30% over the same period of time.’

Mr Holm went on to single out the gains being made by its PanTel unit in the wholesale and residential calls segments. ‘Through PanTel, we have continued to expand our international wholesale business in the Central and Eastern European region. PanTel has also entered the residential market in April last year, and has started to gain market visibility. Our strategy defined two years ago of reaching a 20% share of the Hungarian market will be realised upon completion of our acquisition of Invitel, the country’s second largest telecom operator, which transaction was announced in January. By combining the two companies we expect to realise significant synergies both in terms of direct cost savings and more efficient and effective investments. Consequently, we believe that we are well positioned to challenge our competitors outside our original territories and in key future growth areas. In the longer run, we will have to take provision of content through our broadband connections to the customers into consideration. IPTV is therefore high on our agenda.’

Hungary,Invitel (a subsidiary of DIGI), PanTel,

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