Magyar Telekom to enter retail energy market

BUDAPEST, HUNGARY: Magyar Telekom will resell natural gas and electricity to retail clients from April, a move analysts said was largely designed to hang on to its existing telecoms customers during a steep economic downturn.

The company, a unit of Deutsche Telekom, will begin offering electricity and gas to a targeted segment of residential and business clients from next month as a first step, it said on Thursday.

Magyar Telekom is battling with falling revenues and eroding profitability as Hungary is mired in its biggest economic downturn in almost two decades, forcing customers and businesses to cut back on telecoms spending, its traditional revenue base.

"It is anticipated that participation in the retail electricity and gas market will enable Magyar Telekom to retain existing, and win new, telecommunication customers with attractive energy offers," Magyar Telekom said.

One analyst said the step to enter the retail energy market was unlikely to contribute significantly to top-line growth, however, it would enable the company to improve customer retention by bundling new services to its portfolio.

"I would not think this will have a major impact on revenues, what it will do however is provide a cheap way of retaining customers," said analyst Attila Gyurcsik at brokerage Concorde.

"Building on that basis, they will be able to sell new services in the traditional business once economic growth resumes."

The company said it has teamed up with a wholesale provider that would supply it with sufficient electricity and gas and will assess the potential for further penetration of the energy market in the second half of 2010.

Magyar Telekom expects revenues and earnings before interest, taxes, depreciation and amortisation to fall by an annual 5-7 percent in 2010, extending a decline last year.

At 1112 GMT, Magyar Telekom shares traded 0.4 percent higher at 718 forints ($3.65) on the Budapest Stock Exchange, slightly outperforming the wider market .BUX, which was up 0.3 per cent.