Hungarian Telekom earns less due to windfall tax and inflation

The exceptional tax and the unfavorable economic climate have a mixed impact on Hungarian businesses. While some are still making high profits despite the extra tax, others are struggling.

Magyar Telekom will publish its quarterly report on Tuesday, after the close of trading, but the analyst consensus has already been released. According to this, the company generated 178 billion forints (450 million euros) in revenue during the April-July period, and its EBITDA (earnings before interest, tax, depreciation and amortization) margin was close. 30% off, Hungarian shopping site Vilaggazdasag wrote.

However, Telekom’s net profit after tax was only HUF 9 billion (€22.7 million), compared to an EBITDA of HUF 53 billion and an operating profit of HUF 17.5 billion.

The company’s revenue increased by more than 7% year-on-year, with data and SMS traffic and fixed broadband Internet services contributing to this positive development, according to experts at Erste. Analysts believe that in the current economic environment, given inflation, Telekom could not avoid an increase in operating costs – even though it had already fixed its energy costs for 2022.

A special tax on telecommunications companies has also further eroded profit margins. Magyar Telekom will have to pay HUF 25 billion in taxes this year. Excluding the special tax, EBITDA could have stabilized around last year’s level of HUF 59 billion, but in the current situation, Erste expects a decline of 10%. The weakening of the forint has also not been good for the company’s finances, and the net profit could fall to 9 billion HUF, a drop of 33%.

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Meanwhile, KBC Equitas, a company providing financial and investment services, forecasts an even lower net profit for Telekom of just HUF 6.4 billion.

It is therefore clear that Telekom has not been able to cope with the economic situation to the same extent as, for example, the Mol Group, which recently published its quarterly figures showing that the company closed with a result exceptional. Mol Group is a leading integrated oil and gas company in Central and Eastern Europe headquartered in Budapest, Hungary. It is present in more than 30 countries and employs 25,000 people worldwide.

In the second quarter of 2022, Mol Group achieved “pure” EBITDA estimated at 483.7 billion HUF (1.2 billion EUR) and operating profit estimated at 372.8 billion HUF (944 million EUR), according to a report published Friday on the company’s website. Morning. Like the Hungarian oil company, international players have also seen strong profits so far this year. According to reports, the American company Exxon Mobil made a profit of $18 billion in the past three months, while Shell and Chevron each made about $12 billion, a record profit.

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The Hungarian government introduced the windfall tax in June and the idea is not uncommon in Europe. Other European countries, such as Belgium, Spain, the United Kingdom or Greece have also introduced such measures, however, there are differences between the Hungarian rules and the others.

While in other countries the additional tax only applies to the energy sector, in Hungary it applies to other sectors such as banking, air transport and telecommunications. The toughest idea originated in Greece where the government released a plan in May that it would tax the additional profits of electricity producers at 90%.

Featured photo: Shutterstock

Laura T. Thrasher