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UPDATE 2-Giant reserves for claims drag TPSA Q3 into the red

Published 10/27/2010, 03:59 AM

* Q3 net loss PLN 720 mln vs 361 mln loss in Reuters poll

* Books PLN 1.1 bln in new provisions for DPTG claims

* Adjusted net profit up 14 percent to PLN 372 million

* Sees FY 2010 net profit, slower sales decline in Q4

* Shares fall as much as 2.5 percent

(Adds CEO comments, market reaction)

By Adrian Krajewski and Pawel Bernat

WARSAW, Oct 27 (Reuters) - Hefty provisions for court claims dragged Poland's top telecoms operator TPSA to its first quarterly loss, with the group stressing it should remain in the black for all of 2010.

The France Telecom unit posted a third-quarter net loss of 720 million zlotys ($256 million), double what the market expected, hit by 1.1 billion zlotys in new provisions for claims from GN Store Nord's unit DPTG.

Last month DPTG won a 2.9 billion Danish crown ($525 million) court claim against TPSA, adding it would seek a further 1 billion crowns in a lengthy dispute over traffic volumes via a fibre-optic network in Poland.

Shares in TPSA declined as much as 2.5 percent, weighing on Warsaw's blue-chip WIG20 index, before paring losses to trade down 1.2 percent by 0755 GMT.

"Booking such reserves in the third quarter does not mean we are altering our dividend policy or our mid-term goals," Chief Executive Maciej Witucki told reporters in a conference call.

"These reserves relate both to the first phase of the court dispute and our extrapolation of the second phase. It should absolutely not be treated as our opinion on the matter or the final results of the dispute."

TPSA did not meet a deadline to pay the first fine, calling the amount disproportionate and adding it would use all legal means to lower it.

"Reserves are indeed surprising, as TPSA booked more than one could expect," said Pawel Puchalski, an analyst at BZ WBK. "It's hard to say if this seals it as far as the DPTG row is concerned. It will depend on how much DPTG claims for the second phase."

Stripped of the new provisions, TPSA net profit rose almost 14 percent to 372 million zlotys, while analysts who gave adjusted estimates had expected 339 million. Free cash flow after the quarter stood at around 2 billion zlotys.

Sales fell a touch faster than expected 3.9 percent to 3.9 billion in the quarter, with Witucki expecting the downward trend to wane.

"Fourth-quarter (pace of revenue decline) should be slightly better than the third quarter," he said. "I maintain that the full-year decline for the top line should be less than 6 percent, with the second-half pace lower than 4 percent." (Reporting by Adrian Krajewski; Editing by David Cowell and Michael Shields)

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