Leading mobile operator posts lower than expected profit

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Leading mobile operator posts lower than expected profit The leading Czech mobile phone operator, Eurotel, posted a lower-than-expected profit in 2001, prompting analysts to revise estimates down to account for slowing growth in a saturated market.

Eurotel, a subsidiary of the dominant Czech fixed line operator Czech Telecom, said net profits rose to 6.07 billion Czech crowns (or 165 million USD) from 4.80 billion crowns in 2000. Analysts had forecast profits of around 6.2 billion.

While the company said it had cut its spending on operations to boost profits, analysts said that mobile operators, once shining stars, are facing a grim year. The Czech Republic has almost 70 percent mobile market penetration, the highest in eastern Europe along with Slovenia.

Eurotel beat its rivals in attracting new clients during the peak Christmas season for a total of 1.07 million new users in 2001. Its client base stood at 3.24 million at the end of 2001, or 31.5 percent of the Czech population. All operators' gains came partly from offering cheap pre-paid service and subsidising the cost of mobile phones. Eurotel spokesman Jan Kucmas said that many of the new clients the company attracted had previously not subscribed to a mobile phone service because of high costs, and that these clients in general spend less. Eurotel therefore reacted by cutting operating costs to maintain profit growth.

Earnings before interest, tax and depreciation grew to 13.25 billion from 10.04 billion. The closely-watched EBITDA margin jumped to 44 percent, the highest among eastern European mobile firms. But analysts said Eurotel's best years were over and the rate would fall. They also predict that the other two Czech operators, Deutsche Telekom's RadioMobil and the smaller rival Cesky Mobil of Canada's TIW, both due to publish its data later in the first quarter, will also likely show weaker revenue figures.