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UPDATE 2-TPSA Q3 net profit halves, misses forecasts

Published 10/28/2009, 05:05 AM
Updated 10/28/2009, 05:09 AM
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* Q3 net down 48% to PLN 327 mln vs 360 mln seen by analysts

* Sees FY 2009 sales drop more than the 7.6 percent in Q1-Q3

* Says work on mid-term strategy ongoing

* Shares fall 3 percent, worst performer in Polish market

(Adds CEO and analysts comments, market reaction)

By Adrian Krajewski and Pawel Bernat

WARSAW, Oct 28 (Reuters) - Poland's top telecoms group TPSA expects its fall in revenue to continue into next year as fierce competition and price pressure from the regulator hit margins and halved its third-quarter profit.

The former state monopoly has suffered from a shrinking fixed-line business, like its European peers, and recently lost the top spot in the cellphone market. It has also been under pressure from the telecoms regulator to cut mobile rates.

"We expect the market to keep eroding for now," TPSA chief executive Maciej Witucki told reporters. "I can confirm that the full-year drop in our revenues should outpace the 7.6 percent fall in the first three quarters."

By 0812 GMT, TPSA shares were the worst performers in Warsaw's main WIG20 index, dropping 3 percent.

TPSA, a unit of France Telecom, said net profit almost halved to 327 million zlotys ($116 million) in the quarter, compared with the 360 million seen in a Reuters poll.

TPSA has been trying to shift its focus towards Internet and television services, but revenue has remained under pressure. Investors are awaiting a plan to revive its top line and margins.

The operator, which was expected to publish its mid-term strategy with the third-quarter results, said it would instead release it at the start of 2010 to include details of last week's deal with the regulator, which lifted the threat of a forced split-up of the company.

TPSA committed to treat smaller rivals seeking access to its infrastructure on a par with its own operations and to roll out 1.2 million broadband connections, which it estimates would cost 3 billion zlotys.

Expectations that an agreement would chase away one of the darkest clouds on TPSA's horizon had pushed its shares roughly a third higher since falling to a record low in August.

"The agreement gives us and the market new possibilities," Witucki said. "In the longer term our results should be getting better thanks to that. But I wouldn't expect a sudden improvement in our sales before the second half of 2010."

"2010 is hard work, while 2011 is reaping the benefits."

Sales fell 11 percent in the third quarter to 4.06 billion zlotys, compared with 4.13 billion seen by analysts. The drop outpaced the sector's record 6 percent decline in the period.

"Revenue trend is disappointing," ING analyst Dalibor Vavrushka said. "Market expected the top line would not look good, and the number came in even below that ... The good news is TPSA is not losing market share in the mobile segment."

The company, which has a market capitalisation of around $9 billion, has previously said it expects sales to shrink this year along with the rest of the Polish telecoms market. ($1=2.817 Zloty) (Reporting by Adrian Krajewski, editing by Will Waterman)

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