889949--2/28/2006--HUNGARIAN_TELEPHONE_&_CABLE

related topics

{regulation, change, law}

{debt, indebtedness, cash}

{acquisition, growth, future}

{system, service, information}

{product, market, service}

{operation, international, foreign}

{control, financial, internal}

{stock, price, operating}

{condition, economic, financial}

{stock, price, share}

{competitive, industry, competition}

{cost, operation, labor}

{personnel, key, retain}

We face significant competition due to increased telecommunications industry liberalization and other market forces, which competition could adversely affect our operating results and financial performance. If we are not able to stem the loss of access lines or grow other areas of our business to compensate for these losses, our revenue may continue to decline in the Hungarotel Operating Areas. Our strategy to expand into new markets and introduce new services may not be successful. Our failure to increase revenue from the Internet services market may adversely affect our business and results of operations. Economic conditions could continue to negatively affect our business and results of operations. We may not be able to adapt to technological changes in the telecommunications marketplace. Network or system failure could result in lost revenue, increased capital expenditures or a damaged brand name. Our IT Systems are critical to our business and a failure of those systems could materially harm our business. The loss of key employees could adversely affect us. Risks Relating to Regulatory Matters We are subject to substantial government regulation, which could result in adverse consequences for our business and results of operations. Hungary has recently joined the European Union and its integration may cause changes in Hungary s laws, which could result in adverse consequences for our business and results of operations. Risks Relating to Our Debt Our ability to generate cash depends on many factors beyond our control, and we may not be able to generate sufficient cash to service our debt. We are subject to currency exchange rate risks. We are subject to risks resulting from fluctuations in interest rates. Our secured bank credit facility imposes restrictions on our ability to take certain actions and contains financial covenants that we could fail to satisfy. Our secured bank credit facility enumerates certain events which, if they were to occur, could trigger a mandatory prepayment provision, which could require us to make a prepayment on the outstanding balance under the secured bank credit facility. Risks Relating to Our Reported Financial Results as a U.S. Public Company We are subject to fluctuations in currency exchange rates which could have an adverse effect on our reported financial results. Changes in accounting rules, including the expensing of stock options granted to our employees, could have a material impact on our financial results. Our future operating expenses may be adversely affected by changes in our stock price. Changes in accounting assumptions or regulations could affect our financial results. The failure of our internal control over financial reporting could harm our business and financial results. Risks Relating to Strategic Investments or Acquisitions We may engage in future acquisitions and strategic investments that dilute the ownership percentage of our stockholders and require the use of cash, incur debt or assume contingent liabilities. We may not realize the anticipated benefits of future acquisitions and strategic investments, and the integration of acquisitions may disrupt our business and management. Our business is subject to increasingly complex corporate governance, public disclosure, accounting, and tax requirements that have increased both our costs and the risk of noncompliance. We have a majority shareholder who interests may be different from the minority shareholders with respect to some matters. The low trading volume in our stock and the small public float of our stock subjects our common stock to volatile trading.

Full 10-K form ▸

889949--2/28/2006--HUNGARIAN_TELEPHONE_&_CABLE_CORP