Poland’s TPSA set to miss earnings targets

TPSA, Poland’s former state-owned telecoms monopoly, has warned investors it will fail to meet previous full-year earnings objectives because of the harsh macroeconomic conditions and intensification of a price war in the mobile-phone market.

The warning came as the operator, majority owned by French incumbent France Telecom (Paris), published third-quarter results that showed a 5.5% drop in revenues, to 3,473 million zlotys ($1.11 billion), compared with the same period last year, and an 18.6% decline in net income, to 307 million zlotys, before adjusting for tax relief.

TPSA, Poland’s former state-owned telecoms monopoly, has warned investors it will fail to meet previous full-year earnings objectives because of the harsh macroeconomic conditions and intensification of a price war in the mobile-phone market.

The warning came as the operator, majority owned by French incumbent France Telecom (Paris), published third-quarter results that showed a 5.5% drop in revenues, to 3,473 million zlotys ($1.11 billion), compared with the same period last year, and an 18.6% decline in net income, to 307 million zlotys, before adjusting for tax relief.

TPSA (Warsaw, Poland) lays most of the blame for its revenue setback on the introduction of unlimited voice and SMS plans, now offered by all of Poland’s mobile-phone companies, although it puts the impact of regulatory cuts to mobile termination rates (MTRs) at about 80 million zlotys.

The introduction of unlimited-usage tariffs has triggered a decline in average revenue per user, which at TPSA dropped from 40.7 zlotys per month in the third quarter of 2011 to 38 zlotys a year later.

Having previously forecast a full-year revenue decline of around 3%, TPSA now expects sales to fall by 4–5%, with net free cash flow coming in at 1.5–1.6 billion zlotys, compared with an earlier expectation of 2 billion zlotys.

Bosses are proposing to pay a dividend of 1 zloty per share in 2013 and to terminate a share buyback program, putting the 400 million zlotys in remaining funds towards the purchase of 4G licenses in an upcoming auction.

“We will participate … as we believe that 4G would allow us to move away from pure price competition and have all operators focus more on value creation through new services and usage,” said Maciej Witucki, TPSA’s chief executive officer, in a statement.

A glance through TPSA’s key performance indicators reveals some worrying signs of macroeconomic pressure. The number of postpaid mobile-phone subscribers, who generate more value than prepaid customers, fell from 6.972 million in the third quarter of 2011 to 6.894 million a year later, while the broadband customer base shrank over the last two quarters, from 2.348 million subscribers in the first three months of the year to 2.338 million in the recent quarter.

Witucki said the operator was preparing a new strategy he would unveil before shareholders early next year.

“We are finalizing our new mid-term action plan for the next three years, where we will address both current and upcoming challenges, and show how the Group will evolve into a leaner and more agile organization, one that is adjusted to the tough times ahead of us,” he said. “We will announce this plan in February 2013 in conjunction with our full-year 2012 earnings.”