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MM02 issues upbeat(ish) trading update

But what will the writedowns be?

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MM02, the mobile network operator formerly owned by BT,
has reported an improved performance in most regions, although it will be reviewing the carrying value of its assets. MMO2's lack of size may eventually result in it becoming a takeover target, and an improved performance should help it drive a harder bargain.

Wireless carrier MMO2 says it is on course to report full-year income at the EBITDA level at around GBP838 million ($1.3 billion), in line with the consensus of analysts' estimates and 93.5% up on last year's figure.

However, in a trading update on its performance in the year to March 31, it warned that it would be reviewing the carrying value of its assets, suggesting that the final figures will be marred by huge write-downs.

On its UK operations, MMO2 said it expects to report full-year service growth above the 10% target established at the beginning of the year, and expects to show steady progress towards achieving an EBITDA margin of 30%, which it expects to achieve in the next financial year.

In Germany, where the company has been struggling behind the two major players, it said that it achieved positive EBITDA for the first time and the momentum continued into the second half, with a growth in market share. Another problem area has been the Netherlands where it expects to be close to EBITDA break-even for the year after a better performance in the second half. The Irish operation is expected to show EBITDA growth in the second half.

Capital expenditure in the second half is expected to be higher than in the first, as MMO2 plans to increase its investment in the Airwave communication network and in UMTS projects in the UK and Germany.

Chief executive of MMO2 Peter Erskine said, "Looking ahead, we are confident that we can continue to deliver improved operational and financial performance, and to build the value of the group."

The former mobile arm of UK incumbent BT Group is expected to be an early victim of consolidation in the European cellular market as it lacks the size to be a major player. Any improvement in performance will enable it to drive a harder bargain in takeover negotiations.

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