Czech telecoms giants see results rebound

Photo: Barbora Kmentová

The biggest Czech telecoms companies are now witnessing an improvement in their fortunes as cost cutting efforts of recent years start to outpace the slide in earnings from mobile and other telecom services.

Photo: Barbora Kmentová
Telecoms companies have not been the best place to be for those seeking handsome returns in recent years.

Europe-wide, revenues are reckoned to have eased consistently over the last six years due to increased competition and pressure from regulators. The Czech telecoms regulator is not noted for its teeth and the three biggest players on the market, T-Mobile, O2, and Vodafone, are widely perceived to have colluded to keep charges higher than they should have been. In spite of that, they have shared some of the continent-wide woes of their peers.

Wednesday’s first quarter results from the Czech big two, T-Mobile and O2 suggested that the worst may well be over. O2 declared a rise in earnings of 3.7 percent to 11.2 billion crowns with its net profit more than doubling to at 1.2 billion. Analysts had predicted a profit rise but not of such proportions.

T-Mobile announced an 11 percent increase in earnings to 6.6 billion crowns compared with the same period a year earlier. Operating profits climbed half a percent at 2.54 billion crowns.

Both operators declared a rise in customers with phone contracts and a fall in the numbers using calling cards. In the case of T-Mobile the year-on-year increase was 3.7 percent to 3.5 million and for O2 its key caller number was up 1.0 percent at 3.26 million. The average earnings per client continues to fall for both companies, down to 280 crowns for O2 and 245 crowns for t-Mobile.

For O2’s new majority owner, the Czech PPF group of Petr Kellner, the turnaround in its results appears to have taken place according to a not particularly high-tech model: traditional cost cutting. Costs have been cut by around 5.0 percent since he took control a year ago. Most of that cost cutting had focused on operational costs with wages being cut and around 500 staff being offloaded in the last 12 months. The one area where the axe has not fallen is on sales of products and services. And analysts say that O2 is well positioned to deliver further cuts in its operating costs for the next year or two as well.

This week’s results will be something of a swansong for O2 as we know it. The company is due to be split from June 1. The infrastructure activities comprising fixed lines, mobile transmitters, and data centres will be spun off into the newly created Česká Telekomunikační Infrastruktura. Telecom services will stay with O2.

And one of the main direction for the future is already shaping up. O2 has already launched its television services, O2TV, and its new sports channel will make its debut from August. Meanwhile, the main grouping of Europe’s telecom operators predicts the sector should return to growth in 2016 after six difficult years.