EARNINGS POLL-Czech Telefonica O2 set for record 9 mth profit

By Jan Korselt

PRAGUE, Oct 23 (Reuters) - Dominant Czech phone operator Telefonica O2 CR <SPTTsp.PR> is expected to report a 25 percent jump in nine-month net profit to a record level due to lower one-off costs and investments, a Reuters poll showed on Monday.

Twelve analysts surveyed by Reuters gave an average net profit forecast of 6.35 billion Czech crowns ($281.3 million), which would be the company's best result ever for January-September, versus 5.11 billion crowns a year earlier.

Nine-month revenue is expected to have declined by 0.1 percent to 45.29 billion crowns, in line with the company's outlook of flat revenues for the full year.

The firm, formerly known as Cesky Telecom, is scheduled to publish its results at 1200 GMT on Friday.

"We expect solid results," said Lukas Dufek, an analyst at Komercni banka.

Last year's results were burdened by one-off costs related to the sale of the state's majority stake in the company to Spain's Telefonica <TEF.MC> and massive layoffs to streamline the operator amid a drop in demand for fixed-line services.

Depreciation costs arising from past network upgrades have fallen this year and the company has also cut interest expenses by paying off some of its debt.

However, analysts said they expected rebranding costs and the July merger of the firm's fixed-line and mobile businesses to hurt profitability this year and bear fruit only next year. Company spokesman Martin Zabka said the impact should not be dramatic.

The former monopoly has battled steep revenue erosion due to stiff competition on the liberalised domestic market and a shift by clients from fixed lines to mobile phones.

But analysts said new tariffs and growth in mobile and data services could offset the shrinking fixed-line voice business.

Czech Telefonica's stock has lost about 8 percent since its first-half earnings release on July 26, underperforming a more than 7.5 percent gain in the Prague blue-chip PX index <.PX>.

Analysts said investors had been looking for clues about dividend policy, but they might have to wait until early next year to hear any news from the company.

The firm, which has low debt, approved a dividend of 45 crowns per share for last year, giving it a dividend yield of 10.16 percent at the current price.

Telefonica O2 CR shares shed 0.2 percent to 442 crowns by 1320 GMT. According to Reuters Estimates, the company trades at 19 times forecast 2006 earnings, higher than the DJ Stoxx telecoms index's <.SXKE> average of nearly 14 times.

Figures in billions of crowns: 9M/06 Median Average 9M/05 Range

(restated) REVENUE 45.29 45.29 45.35 45.03-45.66 CORE PROFIT (OIBDA) 21.62 21.57 21.28 21.20-21.99 OPER.PROFIT (EBIT) 8.93 8.93 7.83 8.47- 9.39 NET PROFIT 6.41 6.35 5.11 5.88- 6.72

NOTE - The following equity houses took part in the poll: Atlantik FT, BH Securities, CA-IB, Cyrrus, Deutsche Bank, Erste Bank, HSBC, ING, Komercni Banka, Morgan Stanley, KBC/Patria, Wood & Company. ((Editing by Richard Barley; prague.newsroom@reuters.com; Reuters Messaging: jan.korselt.reuters.com@reuters.net; +420 224 190 477)) ($1=22.47 Czech Crown)

Keywords: TELECOMS CZECH TELEFONICA