TPSA cuts sales forecast, to buy rest of mobile unit

Dominant Polish telecoms provider TPSA cut its sales forecast for the second time this year after a weak third quarter, but kept other targets and said its dividend would triple year on year.

The company also said on Wednesday it had struck a deal with its strategic investor France Telecom to buy 34 percent of mobile unit Centertel for 4.88 billion zlotys ($1.50 billion), giving TPSA full control of Centertel.

Taking 100-percent ownership of the unit is part of TPSA's strategy to become an integrated operator and boost its presence in the growing mobile segment.

TPSA said nine-month sales fell by a deeper-than-expected 1.5 percent, and cut its forecast for full-year sales from flat year-on-year to a decline of 1.0 to 1.5 percent -- after ditching a forecast of 1 percent growth just three months ago.

"We want to be cautious -- this is the second time we've changed the forecast this year, and the market is changing quite rapidly," Chief Financial Officer Roger de Bazelaire told a conference call with investors.

In 2003 and 2004, TPSA was also forced to cut its sales growth targets mid-year, as competition from mobile operators and alternative fixed-line players proved tougher than management had expected. It missed the new targets both times.

De Bazelaire said the price for Centertel valued the entire company at just under seven times EBITDA, or earnings before interest, tax, depreciation and amortisation. He declined to give the precise EBITDA value he used for this calculation.

"In my view, it would be slightly below seven (times EBITDA). That's quite a fair price if you look at what's happening in the wireless world -- you've seen transactions at much higher prices," De Bazelaire told the conference call.

Before the deal was announced TPSA shares closed with a loss of 2.1 percent before the deal was announced, underperforming the blue-chip WIG 20 index's 0.9 percent loss.

Analysts credited TPSA for keeping both financial and operating costs under control and reducing its tax bill, but during the conference call the company confirmed analysts' earlier expressed belief that the improvements were one-off events rather than fundamental changes.

(Source: Reuters)