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UPDATE 1-Poland's TPSA to cut more jobs after profit disappoints
July 25, 2012 / 7:01 AM / 5 years ago

UPDATE 1-Poland's TPSA to cut more jobs after profit disappoints

* Q2 net at PLN 255 mln vs. 310 mln in Reuters poll

* Plans to lay off 1,100 people in H2 vs 400 in H1

* Confirms full-year targets (Adds more detail, CEO and analyst quotes)

WARSAW, July 25 (Reuters) - Poland’s largest telecoms company TPSA plans to cut 1,100 jobs in the second half of this year after its second quarter net profit came in below expectations partly due to sluggish demand in its mobile business.

The company, controlled by France Telecom, reported net profit of 255 million zlotys ($73.5 million) on Wednesday, compared to 310 million expected by analysts.

The bottom line was down 74 percent from 955 million zlotys in the same period a year ago, when it was boosted by a 1.7-billion zloty sale of its Emitel unit.

Despite a big marketing campaign during the Euro 2012 soccer championships, mobile revenues came in 0.9 percent lower year-on-year in the second quarter at 1.95 billion zlotys, with its cell-phone client base by 1.5 percent higher at 14.8 million.

“Roaming did not explode during the Euro and we saw no great changes to our earlier plans for the first half,” TPSA Chief Executive Maciej Witucki said on a conference call.

TPSA continues to suffer from falling sales due to its declining fixed-line arm and a mandated reduction in fees it charges other operators for reaching its clients (MTRs).

Its plans to lay off around 1,100 people in the second half of the year is almost three times more than in the first half.

The company, a former communist monopoly, has been locked in a price war at home just like its parent France Telecom - a sign of the times as Europe’s telecom operators struggle for growth against a backdrop of intense regulatory pressure and tough price competition.

Earlier this year, TPSA moved ahead with its long-touted full rebranding to Orange, launched before the Euro 2012 tournament co-hosted by Poland and Ukraine, with Orange as the tournament’s official partner.

It reiterated it expected to limit its overall revenue decline to 3 percent this year compared to 4.1 percent in 2011, targeting a core profit (EBITDA) margin at 35-37 percent against a stagnating market.

“Despite larger than expected revenues, EBITDA was weaker due to lower profitability, which I blame mainly on the mobile segment. This segment disappointed both in revenues and costs,” Societe Generale analyst Leszek Iwaszko said.

“Amortisation was higher than I expected, the same with financial costs, and there was a very high effective tax rate, which stood at 23 percent.” ($1 = 3.4693 Polish zlotys) (Reporting by Adrian Krajewski and Pawel Bernat. Editing by Jane Merriman)

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