UPDATE 1-Czech Telefonica O2's profit up 28 pct

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Net profit at Telefonica O2 Czech Republic rose 28.3 percent in 2006, just below market expectations, but the dividend was increased 11 percent.

The country's largest phone company said in a statement on Thursday its net profit rose to 8.02 billion crowns ($372 million), which compared with an average market forecast of 8.29 billion.

Revenue rose 0.4 percent to 61.31 billion, halting a long-term slide, and the company said it would propose a 50 crown dividend per share, up from 45 crowns paid last year.

Telefonica O2 shares rose 0.37 percent ahead of the results to close at 545 crowns, lagging the Prague PX index which rose 0.83 percent.

"At first sight the results look good, roughly in line with expectations," said Jindrich Svatek, an analyst at Raiffeisenbank. "The dividend is solid, so the share (price) could react positively."

The fixed and mobile services company, majority owned by Spain's Telefonica , said operating income before depreciation and amortisation (OIBDA) increased by 2.4 percent to 27.91 billion crowns.

"The mobile business was the key driver of this growth, while revenues in the fixed business continued to decline, although the rate of this decline slowed during the year," the company said in the statement released after trading hours.

It said the OIBDA margin grew to 45.8 percent last year from 44.9 percent in 2005, when it was affected by a high impairment charge.

The firm also said it sees OIBDA at unchanged to 1 percent down in 2007, on revenue rising by between 1 and 3 percent.

It said the OIBDA would be hit by spending on newly launched mobile operations in Slovakia.

"In 2007 the company's activities will continue to address the current trends in the Czech telecommunication market, specifically in the areas of broadband, data, value added services and convergent products," the company said.

"At the same time we will maintain a focus on revenue retention in traditional voice and data services in the both fixed and mobile segments," it said.

Capital expenditure will rise this year to 9 billion crowns from 6.5 billion last year, it said.

About a fifth of the 2007 capex will go into development in the Slovak market where it launched mobile operations this month and targets a 5 percent market share by the end of this year.

[PRAGUE/Reuters/Finance.cz]