Equity 20 July 2016, 5:05pm

Hungary MTel keeps piling up own shares

Portfolio

Hungarian telecoms group Magyar Telekom started to buy back its shares in July, which is no surprise, because it had announced earlier that it will distribute shares among its employees and that it would buy back shares for this particular programme.

Count already at 932,000

On Tuesday, MTel bought 300,000 own shares on the Budapest Stock Exchange (BSE) at an average price of HUF 447 per share. This was the fourth day in July when the telecom group bought back shares. The count is currently at 932,000 shares worth HUF 416 million. On those days the buybacks contributed about one seventh of total turnover with MTel shares.

ESOP

The buybacks should not surprise anyone as MTel announced back in early May that it would start an Employee Share Ownership Programme (ESOP), in scope of which most of Magyar Telekom and T-Systems Hungary employees will receive MTel shares and that the company will buy the necessary amount (up to 1.6 million shares) on the open market in July.

Details of the programme

Each eligible individual will be entitled to receive shares in the value of HUF 100,000 calculated on the unweighted average share price of 20 trading days prior to June 30, 2016, along with any entitlement to the dividends attached to such shares and with no lock-up restrictions.
In July 2016, MTel will purchase a maximum of 1.6 million of Magyar Telekom shares in the open market.
The award of shares is contingent on the Company’s actual internal operating Free Cash Flow of MT-Hungary segment of the year ending December 31, 2016 exceeding that of the year ended December 31, 2015.
Upon the confirmation of the improvement of the operating Free Cash Flow of MT-Hungary segment by the Board of Directors in late February 2017, the ESOP Organization is expected to distribute the shares amongst approximately 7,500 employees in April 2017.
This program will be in addition to MTel’s regular remuneration package.

What is the programme good for?

MTel may award the shares to its local employees without tax payment liability.
It fits into the programme of the BSE's new management since it widens the scope of small investors and boosts turnover.
It probably adds to the staff’s commitment to the company.

What could be next?

MTel may buy up to 1.6 million shares, which means it could purchase another 668,000. In view of its pace over the last few trading days, this could be reached in two or three trading days.