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Nov 07, 2007 12:53 EEST
ZAGREB (Croatia), November 7 (SeeNews) – Croatian Hypo Alpe-Adria-Bank said on Wednesday it has launched coverage of the shares of Croatian top telecom T-HT with a “hold” recommendation.
“Our calculation eventually yields a 12-month target price of 412 kuna for the company’s share price, which deserves a ‘hold’ rating,” Hypo’s analysts said in a note to investors. The telecom's shares traded at 363 kuna on Wednesday morning in Zagreb, unchanged from Tuesday’s closing.
T-HT is majority-owned by Deutsche Telekom. The IPO of a state-owned minority stake in T-HT held this autumn attracted unexpectedly strong investor demand and was more than seven times oversubscribed. T-HT’s stock was floated in early October on bourses in Zagreb and London, to quickly become the most liquid share on the Croatian bourse.
“Croatian telecom incumbent T-HT has faced pivotal changes provoked by intensive telecommunications market liberalisation trends, much smaller competitors’ (in size) appetite for market shares as well as immense opportunities arising from the broadband expansion,” the Hypo bank said.
A quick glance on the central and eastern Europe telecommunications market reveals that comparison with the developed European telecoms’ dynamics points to significant growth opportunities in certain areas like the broadband segment, but in general suggests a potential deterioration in financial performance of incumbents going forth, it added.
Firstly, as a percentage of the gross domestic product (GDP), total spending on telecom services including wireline, wireless, broadband, data and wholesale for Croatia is around 5.5% of GDP compared to 2.2% on the markets of the 15-member European Union and 3.0% in central Europe, indicating that domestic prices for telecom services remain on comparatively very high levels, Hypo said. “Secondly, T-HT's market share in the wireline segment hovers around 90% or 10-20 percentage points above both central and eastern Europe and overall European standards, implying potentially greater revenue erosion once competitors’ aggressive pricing policy gathers pace,” it addd.
Moreover, T-HT, like its central and eastern Europe peers, has been so far deprived of negative effects from the fixed-to-mobile and voice-to-data migration on the bottom-line mainly thanks to aggressive customer base growth, particularly in the wireless and Internet segments, according to Hypo.
T-HT is the biggest fixed-line operator in Croatia with a market share of some 97%, providing services under the T-Com brand. Its wireless unit, T-Mobile, has a market share of some 52%.
The bank estimates that T-HT’s net profit will reach this year 2.393 billion kuna ($479 million/326 million euro) from 2.214 billion in 2006, but will decline to 2.330 billion in 2008.
It projects a rise in the company’s sales revenue to 8.824 billion in 2007 and 9.097 billion in 2008, up from 8.636 billion in 2006.
T-TH will announce its nine-month results on Thursday.
(1 euro=7.3316 Croatian kuna)
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