Magyar Telecom reviewing capital structure, reports lower revenues for 2012 and first quarter 2013

By Lisa Kerner

Charlotte, N.C., May 8 - Magyar Telecom BV saw its first quarter affected by the weak economic environment in Hungary. The company, however, is starting to experience the positive effects of its bundling strategy as well as a variety of operational improvements.

"We are also starting to see the benefits of significant cost reduction measures implemented during the second half of 2012 and during the first quarter of 2013," Invitel chief executive officer David McGowan said during a conference call on Wednesday to discuss Magyar's 2012 full year and first-quarter 2013 earnings.

Magyar provides telecommunications services through its subsidiary, Invitel Holdings A/S.

McGowan said the company initiated a strategic review of its capital structure in February. Houlihan Lokey (Europe) Ltd. and White & Case LLP will assist in the process and the public markets advised of any material updates, according to the presentation.

2012 results

Invitel chief financial officer David Blunck said for the full year 2012, revenue was down 11% at €17.5 million, adjusted operating expenses were up 7% to a negative $70.5 million, and adjusted EBITDA was down 23% at about €72 million.

At Dec. 31, Magyar had cash and equivalents of €13.9 million, third-party debt of €330.5 million and a net debt multiple of 4.4 times.

Magyar's assets were down €42 million at year-end to €315 million and its cash balance was down €22 million to €13.9 million for 2012, according to Blunck.

First-quarter results

For the first quarter 2013, Magyar's revenue was down 7% at €39.7 million and adjusted EBITDA was down 59% at €7.36 million.

Cash flow for the first quarter "was slightly negative," said Blunck, at €332,000, resulting in a cash balance at March 31 of €13.6 million.

Blunck expects cash flow to be stronger in the second quarter and, when asked about the balance, said the company could operate for 60 days with a €5 million cash balance.

Net cash provided by operations, which includes interest paid but excludes capital expenditure and debt repayments, was €9.6 million for the quarter.

Magyar reported a loss from operations for the period of €6.7 million, compared to income of €1.9 million for the prior-year period.

Budapest, Hungary-based Magyar provides telecommunications services through its subsidiary, Invitel.

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