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Magyar Telekom expects to stabilise profit in next two years

By Gergely Szakacs

BUDAPEST (Reuters) - Hungary's Magyar Telekom (BUD:MTELEKOM) expects in the next two years to end a prolonged slump in core profit caused by economic downturn, unless the government's need for cash puts new burdens on firms, its CEO said.

Magyar Telekom's earnings before interest, taxes, depreciation and amortisation (EBITDA) has been falling since 2009 after Hungary staved off bankruptcy with an international loan a year earlier and governments launched austerity measures.

For 2013, the company expects EBITDA to decline further, by 9-12 percent year-on-year, partly due to recent tax rises. Its 2012 figure was 194.8 billion forints (547 million pounds).

But last month it lifted its revenue forecast to growth, up from expectations for no change, as demand improved.

"We think it is entirely realistic in the next couple of years for us to be able to stabilise and maybe even slightly grow EBITDA," Chief Executive Christopher Mattheisen told Reuters on Thursday.

"A lot of uncertainty still exists," he added in an interview. "We have been subject to a lot of external shocks. Barring any other external shocks, we think it is a realistic ambition for us."

The company, a unit of Deutsche Telekom (DTEGn.DE), was hit by special taxes levied on various sectors in 2010-12 as part of efforts by Prime Minister Viktor Orban's government to wrestle down the budget deficit after years of missed fiscal targets.

It is now paying a new utility tax and taxes on phone calls and text messages.

With an election due in 2014 and Orban's party promising more help to families - which could further strain the budget - Mattheisen said fresh burdens could not be ruled out.

RISK

"There is certainly the risk of more surprises if the government's budget targets are not met," Mattheisen said.

"I certainly see that as a risk. Maybe that would affect our sector, maybe it would not," he said, adding that the business environment was still "extremely unstable."

But he said that as Hungarians had more money available and economic growth was expected to improve next year, higher consumer spending could boost Magyar Telekom and its sector.

"What I see happening now is that we have turned revenue around. I do not see any reason why we cannot continue to grow revenue positively," Mattheisen said.

Asked about some analysts' views that the company may lower its dividend from the 50 forints ($0.22) per share paid on its 2012 results, Mattheisen declined to comment on the 2013 payout.

He said the company would be interested in buying into neighbouring Slovenia's Telekom Slovenije (LJU:TLSG), which the government has recently earmarked for sale.

"It is a small country, similar profile, we would know what we are doing acquiring that company," he said. "They are not part of any international group so there are some obvious synergies that could be exercised."

Mattheisen said that under a strategy approved last year, management would speed up development of online activities, expanding digital services and equipment sales.

At 1213 GMT, Magyar Telekom shares were 1 percent lower at 305 forints on the Budapest Stock Exchange, broadly in line with the blue chip (.BUX) index, which had shed 0.9 percent.

(Reporting by Gergely Szakacs; Editing by Anthony Barker)