Hrvatski Telekom hit by economic woes, EU accession

Croatia’s Hrvatski Telekom has reported a slump in revenues and profits for the three months ending September, with the country’s beleaguered economy taking a heavy toll on earnings performance.

Majority owned by Germany’s Deutsche Telekom (Bonn), the Croatian incumbent flagged a 32.1% drop in net income, to HRK394 million ($71.22 million), and said revenues fell by HRK1.77 billion, compared with the same period the year before.

Croatia’s Hrvatski Telekom has reported a slump in revenues and profits for the three months ending September, with the country’s beleaguered economy taking a heavy toll on earnings performance.

Majority owned by Germany’s Deutsche Telekom (Bonn), the Croatian incumbent flagged a 32.1% drop in net income, to HRK394 million ($71.22 million), and said revenues fell by HRK1.77 billion, compared with the same period the year before.

In a lengthy statement, chief executive Ivica Mudrinic blamed the country’s adoption of EU regulatory measures, following its recent accession to the European Union, for the setbacks, and said the operator had been forced to cut its full-year guidance as a consequence.

Hrvatski Telekom (Zagreb) is now forecasting a margin on earnings before interest, taxation, depreciation and amortization of between 42% and 43%, compared with a previous forecast of between 43% and 45%.

“In light of the country’s fiscal challenges, Croatia will enter the EU’s Excessive Deficit Procedure,” he noted. “EU accession and the related adoption of the EU regulatory framework has impacted the Group’s performance, with a greater fall in visitor revenue than had been expected.”

The operator has been forced to adhere to EU regulations on retail and visitor roaming rates, forcing it to make substantial cuts to its service charges in those areas.

However, Hrvatski Telekom also blamed ongoing economic problems and rising take-up of flat-rate tariffs for putting pressure on its performance.

The company still sees a growth opportunity in the retail broadband market, noting that penetration in Croatia is just 49.1% of households, compared with a Western European average of about 68%.

However, regulatory authorities have continued to force down the price that Hrvatski Telekom charges rivals for use of its mobile and fixed-line infrastructure.

Earlier this week, Hrvatski Telekom filed an application to bid for 800MHz spectrum that remained unsold after an auction in late 2012.

Authorities are due to sell two blocks of 2x5MHz spectrum that would help Hrvatski Telekom expand mobile broadband networks into less densely populated parts of Croatia.