TeliaSonera looks at ways to become a growth companny

Swedish telecommunications firm TeliaSonera (OMX: TLSN) reported underwhelming numbers from Q1 2013. Net Sales were down 4.5% compared to last year at 24.5 billion SEK. EBITDA margin stayed firm just below 35%. Net income was nearly flat at 4.5 billion translating to earnings per share of 0.95 SEK (0.11 EUR). Currency effects were rather large. Severe winter and calendar effects existed as well. The company isn't sure what the effect of an earlier Easter had on comparisons

Due to topline pressure, particularly from voice and broadband struggles lead to continued efficiency measures. Not unexpectedly, much of the focus continues to be on ethical issues. The company is starting numerous internal and external projects to look into its practises in the Far East. The company thinks that there were growing pains in fibre installation process but that signs are increasingly pointing to the right call having being made here with fibre offering demand growing strongly.

TeliaSonera is taking a leading role to try to bring North American-esque pricing model of data usage charges to Europe. It will be difficult to manage that in Europe. The first step will be taken in Sweden and the company foresees duplicating that model elsewhere later. The plan is to have flat voice and texting where as mobile data charges come from the amount of data use. One invoice can contain several devices and persons in family accounts. Price competition seems to be toughest in Finland. TeliaSonera also thinks it cannot compete with Tele2 (OMX: TEL2 B) with prices in Norway and needs to have different value proposition.

Acting CEO Per-Arne Blomquist stressed many times that the industry can return to a growth industry once the increased mobile data use can be monetized. Regarding consolidation in Denmark the company thinks that the joint venture with Telenor (OSE: TEL) was a good decision but that he does not see any market consolidation in Denmark due to regulatory concerns. The company would certainly love to see countries such as Sweden and Denmark to have only two companies, but does not foresee Brussels signing off on that.

Given that Yoigo divestment is now seemingly no longer in the agenda since the company said it was not happy with the offers and regulatory difficulties, and dividends from Turkcell (ISE: TCELL, NYSE: TKC) seemingly no closer than before, any extra dividend hope seem lower. The stock is down just over 2% heading into final hour of trading.

Narvinger not seeking re-election in 2013 AGM

Chairman of the Board Anders Narvinger is the first domino to fall ahead of what is likely to be very interesting annual general meeting for TeliaSonera (OMX: TLSN). He said he understands that Nomination Committee will be looking for big changes to allow for a fresh start for the telecommunications behemoth. They are looking for a new candidate for the position and target end of January for an announcement. In about one year’s time CEO Lars Nyberg’s contract is ending and Nomination Committee Chairman Kristina Ekengren said one of the first tasks for the new Chairman will be to recruit a new CEO: The Swedish firm is working hard to put its well publicized troubles in the Central Asia behind it.

TeliaSonera’s Q3 2012 numbers play second fiddle to questions about Central Asia

The Swedish telecommunications company has been on the news lately pertaining to business practises in Central Asia, Uzbekistan in particular, and CEO Lars Nyberg has taken a lot of heat on the matter. Yesterday he did however get the dreaded stamp of approval from the Board. The strategy to focus on Nordic and Baltic matters as well as to further strengthen operations in Central Asia was affirmed. Board took the responsibility for investments made and forthcoming in markets such as Uzbekistan, Tajikistan and Kazakhstan. Regarding future investments, TeliaSonera is looking into possibly starting operations in Myanmar but a sure-fire decision is maybe years away.

In an unusual start to an interim report presentation today, Nyberg started commenting on the recent speculations and accusations against the company. He insisted that TeliaSonera has zero tolerance for corruption and bribery and reiterated his stance that the company did not bribe anyone or participate in money laundering. Investigations in Uzbekistan are ongoing, both by the Board of Directors and prosecutor. He also furthermore said claims made about TeliaSonera’s operations in Nepal in Swedish press last week were factually wrong.

Regarding financial performance, revenue was flat with net sales of 25.84 billion SEK and there a 4% EBITDA decrease. Margin was down in all business areas, with EBITDA margin now down to 35% and likely slipping slightly below that in Q4. Net income of 4.8 billion and earnings per share of 1.11 SEK were almost level with comparison period on better performance from associated firms. Free cash flow was down to 3.8 billion SEK. Outlook for the full-year was maintained at 0-1% sales growth and 35% EBITDA. Markets weren’t terribly happy about the news and the stock has been in the red for the entire day.

Growth in the industry is non-existent; Broadband Services continues a steady decline and Mobility Services has been growing for the longest time but the advance seems to have now stopped. Billed voice revenue is declining and data traffic monetizing has not yet succeeded. TeliaSonera obviously wants to change that. Nyberg predicts that a flat voice fee meaning you pay a certain lump sum for calls much like one already offered in the United States will be introduced in the Nordic markets but that there will be higher data bills for heavy data users in the future. Nyberg called the new Mobility Services head Tero Kivisaari as the best person he has worked with.

Since there is unlikely to be any industry growth within the next couple of years, improvements need to be made on the cost side with wages still going up. The estimate is that about 7% of the workforce will be cut company-wide in the next two years with the aim to save around 2 billion Swedish kroner per year. The actual personnel cuts could be announced after a few months but those could well be in the several hundreds in all the Nordic markets.

MegaFon intends to proceed with IPO and plans for a KCell IPO continue. The company wants to maintain conservative leverage numbers and these transactions should help with that. TeliaSonera has also made up its mind about divesting Spanish operator Yoigo that is performing rather well.

TeliaSonera operational numbers slightly down, lowers outlook

Swedish mobile operator TeliaSonera’s (OMX: TLSN) reports speak of gradual decline in legacy business but of some successes on the growth area front and new businesses. TeliaSonera is keenly aware of the wider industry need to shift from voice to data centric business model. International roaming price cuts and premium partnership with Spotify were given as examples of the future direction of the firm. Double-digit growth in Eurasia and strong fibre optic broadband demand in Nordic countries are the highlights where as sales and margins in mobility services are under pressure on mature markets. Growth in Spanish Yoigo, that has been rumoured to be up for grabs slowed.

Windfall from MegaFon transaction, including a double digit billion one-time dividend, contributed a large free cash flow increase all the way to 14.79 billion SEK. While this alone makes the MegaFon venture a big success, deadlock in Turkcell (İMKB: TCELL, NYSE: TKC) remains. There were two large extraordinary items in Q2 accounts, which pretty much cancelled each other out. Both MegaFon capital gains and impairment of Mobility Services Norway (NetCom) and Lithuania (Omnitel) totaled around 3 billion.

Second quarter net sales were almost 26.3 billion, EBITDA hovers around 9 billion excluding one-off items, and net income was just above 4.5 billion with EPS of 0.98 SEK. TeliaSonera has ”revised” its group outlook for 2012 for growth in net sales in local currencies excluding acquisitions of 0-1 percent (H1 2012: 1.5%) and EBITDA margin excluding non-recurring items of around 35% (H1 2012: 34.3%). Previously the company was guiding for 1-2 percent growth and flat EBITDA margin compared to last year (35.4%). CAPEX-to-sales ratio guidance of 13-14% was maintained.

TeliaSonera reportedly looks to sell Yoigo

Reuters is reporting that Swedish telecommunications company TeliaSonera (OMX: TLSN) is seeking to divest its non-core 76% stake in Spanish mobile operator Yoigo. Reuters confirmed this from four different sources, who said the deal might be valued close to a billion Euros. The article lists several potential suitors but cautions that TeliaSonera is under no stress to hurry a sale. It is positioning itself to maintain strength in the Nordic markets and seek growth in selected markets in central Asia.

Veikon Kone to shut down

TeliaSonera's (OMX: TLSN) loss-making Finnish home appliances retailer Veikon Kone will seize operations. Around 100 people will lose their jobs. TeliaSonera found a taker for some of the stores couple weeks ago. The remaining 11 shops and the internet shopping portal did not interest potential buyers. Closeout sale is expected next week.

FT: Turkish regulator halts Turkcell Board changes

Financial Times reported that Capital Markets Board in Turkey ruled against immediate changes in the Board of Directors of Turkcell (İMKB: TCELL, NYSE: TKC), sought by major owners TeliaSonera (OMX: TLSN) and Russian Alfa Group Consortium’s Altimo thus apparently allowing Mehmet Emin Karamehmet through his holding company Cukurova to maintain control at least for now. Turkcell’s annual meeting is this Friday and the Nordic telecommunications behemoth had been hoping it would nudge the dispute forward. There are also legal battles ongoing involving the three dancing partners and those rulings will now likely come ahead of any Board changes.

TeliaSonera seeks to weed out Veikon Kone

Finnish media is reporting that that a preliminary agreement has been struck where five of the largest retail shops of the home appliances focused retail chain Veikon Kone Oy will be sold to Expert AS, which is owned by private investment company Awilhelmsen AS. Veikon Kone is currently owned by Swedish telecommunications firm TeliaSonera Ab (OMX: TLSN). TeliaSonera has been rueing slipping sales and continued losses at Veikon Kone. Negotiations are ongoing regarding the remaining 11 stores. All 65 employees at the shops in Aleksanterikatu, Helsinki and in Tampere, Turku, Raisio and Lohja will move to Expert. The deal needs to be approved by the competition authorities before closure.

TeliaSonera arrangements continue

TeliaSonera (OMX: TLSN) said it has completed a transaction with East Capital and acquired the asset manager’s 7.87% stake in Lithuanian telecommunications company TEO LT (VSE: TEO1L, formerly Lietuvos Telekomas). TeliaSonera announced last week that it is making a public offer for all the remaining shares in TEO LT at 0.637 (LTL 2.20) per share in cash. It is purchasing stocks in the open market and has now increased its stake to 82.71%. Previously TeliaSonera had been holding just over two thirds of the stocks following a cash offer in 2009 which yielded a few percentages and the 1998 joint purchase of the then independent Telia Ab and Sonera Oyj of a 60% stake in Lietuvos Telekomas.

There is also market speculation reported by Dagens Industri, that the company is looking for takers for Norwegian telecommunications company NextGenTel. The Bergen based internet service provider has around a quarter of a million broadband customers. Dagens Industri thinks it might command something between 1 to 1.5 billion Swedish kronor with Swedish venture capitalists as the most likely buyer.

MegaFon deal reached

This time the whispers were coming from those in the know as TeliaSonera (OMX: TLSN) has made details of an agreement that was just reached between the three owners of Russia’s second largest mobile operator MegaFon public. Teliasonera, AF Telecom and Altimo have agreed that the company will pay a 5.15 billion USD dividend and pursue an IPO with 20% float in London Stock Exchange as soon as possible. Furthermore MegaFon will have a firm dividend policy going forward.

As expected, Alisher Usmanov’s AF Telecom will be gaining a majority of the company where as Mikhail Fridman’s Altimo will be exiting. TeliaSonera will reduce its holdings to 25% plus one share strategic stake (35.6% pre-IPO) as AF Telecom will be acquiring TeliaSonera’s minority stake in TelecomInvest (8.2% indirect holding in MegaFon is gone this way) and TeliaSonera will contribute a part of the shares into the IPO later on. There is also a clause on the divestment of that 10.6% contribution stake to the IPO in the event an initial public offering hasn't been completed by 2014.

Investors can also take solace in the fact that TeliaSonera and Altimo are able to agree on difficult issues. This should bode well when the two companies focus on entangling another difficult knot, namely the TurkCell ownership issue. TeliaSonera is up over 7% after first hour of trading.

MegaFon IPO speculation

TeliaSonera (OMX: TLSN) gained on Friday as more whispers that a solution for MegaFon structure going forward may be nearing surfaced. Reuters speculated, cited banking sources that the second biggest mobile firm in Russia might float 20% of its shares in a London Stock Exchange IPO that might value the company close to 20 billion USD (over 15 billion Euros).

Nordic telecommunications company TeliaSonera is currently the largest owner with 43.8% of the shares. It has long been said that billionaire Alisher Usmanov, who currently holds over 30% of shares, is seeking majority. The other billionaire owner MIkhail Fridman, who has the remaining just over a quarter of shares, is seen to be cashing out in such a scenario. This could be done through a share buyback and an ensuing cancellation of his shares.

It should be quite evident from the Telenor – Weather Investment saga in VimpelCom, that TeliaSonera can hardly hope to attain an outright majority in the operator. That is why it is being suggested, that TeliaSonera would be the party selling some of those shares in the IPO, so that control would stay in Russia.

TeliaSonera stays solid

TeliaSonera’s (OMX: TLSN) net sales climbed to 25.7 billion SEK on Q1 2012. This is a 2.9% growth in local currencies. EBITDA was down slightly to 8.82 billion with earnings per share at 0.90 SEK (about 0.1 EUR). Free cash flow dipped just below 2.2 billion on higher CAPEX and interests paid. The company expects 1-2% growth in net sales for the full-year. EBITDA margin in local currencies is expected to remain flat vs. 2011 (35.4%). The reported numbers were slightly below market expectations. This coupled with the fallout from the criticism yesterday has led to a small dip in the share price so far today.

TeliaSonera targeted for its operations in totalitarian countries

SVT’s controversial investigative journalism program Uppdrag granskning took aim at TeliaSonera’s (OMX: TLSN) business practises in former Soviet Union. The details from the document were made available earlier on in Wednesday and the program aired this evening. It is currently available from SVT’s website. The show describes individual cases where people have been spied on either through eavesdropping or through mobile phone tracking and have faced repercussions.

A major part of TeliaSonera’s profits come from countries such as Azerbaidzhan, Belarus and Kazakhstan. TeliaSonera is active in these countries mostly via investments in local operators either directly or indirectly.

TeliaSonera’s CEO Lars Nyberg said in an interview with SVT that the company needs to follow the laws of the countries it operates in. He is well aware that countries may, and sometimes do, demand and use personal information from TeliaSonera network in investigations of various types but stressed that a functioning mobile network is very important in increasing communication. Mr. Nyberg also reminded that one individual operator can only do so much and that basically every country has laws enabling such spying in some cases.

While most people seem to be taking a practical approach, certain institutional owners were appalled by the report. Insurance company Folksam in particular appears to be steaming. Since government is a major investor in TeliaSonera, political matters can come to play as well. Often the proper handling of such matters is not very clear-cut but the more perspective you get, the more often you feel that working from the inside is more effective than admonishing words from the outside even if you maintain a more high ground. It may well be that Swedish government will ask TeliaSonera to develop some sort of a plan on the matters.

MegaFon negotiations ongoing

TeliaSonera's (OMX: TLSN )nearly 44% interest in Russia's second largest mobile phone operator MegaFonis a very material asset worth several billion. Yesterday the company confirmed recent market speculation, that there are ongoing negotiations pertaining to the future of the company. The discussions circulate around the ownership structure and governance.

In 2009 TeliaSonera and Altimo, which owns around a quarter of the shares, agreed on a deal to merge MegaFon and leading Turkish operator Turkcell in a separate listed company. Russia’s anti-trust commission rejected the deal, in part since the third owner AF Telecom did not comply and also since the ownership situation in Turkcell is hardly clear.

Lately it has been rumoured that AF Telecom and its billionaire owner Alisher Usmanov is interested in buying out Altimo in some kind of an asset swap. After that a separate listing of the company might be more plausible. Three quarters of AF Telecom’s current 31.3% ownership is held indirectly through its 73.9% interest in TelecomInvest. Just less than 20% (8.2%) of TeliaSonera’s stake in MegaFon is owned indirectly via its 26.1% minority stake in TelecomInvest.

In the event of a resolution, the previous agreements with Altimo might well come into play as well. TeliaSonera said that the MegaFon talks are ongoing it will notify the stock exchange, if and when a deal is reached.

TeliaSonera down as Finnish government sells shares

Finnish state owned investment company Solidium sold 89 million shares in TeliaSonera (OMX: TLSN) through an overnight accelerated book-building offering to international and Nordic institutional investors at just over 5% discount to yesterday’s close. TeliaSonera has retreated 3.5% in today’s trading, still leaving a nice overnight return to those institutions taking part.

Solidium said it is using the proceeds to finance equity investments in Outokumpu, Outotec and Talvivaara. All of these companies originated from Outokumpu. When you add TeliaSonera into the mix, the government has a poor track record in investing in this lot. It now tries to regain billions burned in years past. At least this time Solidium did manage to make a small gain vs. book value.

Bloomberg: Turkcell interested in Vivacom

Bloomberg news is reporting that Turkcell is contemplating a bid for Bulgaria’s largest fixed-line company Vivacom AD. According to the financial news and data service provider, people with knowledge of the process said the deal might balue Vivacom at 1.4 billion USD.

Apparently there are numerous interested parties that may bid for Vivacom. According to Bulgarian newspaper Capital, these include Russia’s VTB Capital, investors Björgólfur Thor Björgólfsson, who through Novator Partners LLP had a 65% stake in Vivacom until selling the stake for around 1.2 billion USD in 2007 & Germanos SA founder Panos Germanos in a joint bid and thirdly a London based private equity firm Pamplona Capital Management LLP.

Vivacom had sales of just under 600 million USD and an EBITDA of around 240 million last year. It has had a rough few years with falling fixed-line sales. This culminated in a takeover by private equity firm PineBridge Investments, which belongs to Pacific Century Group of Hong Kong businessman Richard Li. TeliaSonera (OMX: TLSN) currently owns 38% of Turkcell . Any bid from Turkcell would need to be approved by its Board.

TeliaSonera predicts an explosion in the volume of mobile data usage

An average smartphone user in Sweden currently uses around 300 Megabytes of data per month. TeliaSonera (OMX: TLSN) forecasts this number to increase to nearly 3 gigabytes in five years. This trend should be observed worldwide. An average 4G mobile broadband user will consume as much as 45 gigabytes each month. These were some tidbits from President & CEO Lars Nyberg’s presentation at the Mobile World Congress.

TeliaSonera thinks as a large operator it will get a large chunk of the increase in machine-to-machine SIM-card connections in the Nordics and Baltics with perhaps 100 million such connections existing in the region by 2020. Its large investments in 4G network and services continue in the Nordic countries and in the Baltic market.

As an example in the increase of human data consumption, already within two years over a million Swedes may be watching television on a handset every day. For business customers videoconferencing is becoming more important all the time.

Turkcell revenue up, TeliaSonera may be getting the upper hand

The leading Turkish mobile phone operator Turkcell (ISE: TCELL, NYSE: TKC) reported quarterly earnings last Thursday. Its revenue climbed 12% to 2.44 billion TRY(just above 1 billion Euros) Net profit was down due to one-off items related to hyperinflation in Belarus. Sweden-based telecommunications company TeliaSonera AB (OMX: TLSN ) owns a large stake in Turkcell and has been trying to gain control in it.

In September 2011TeliaSonera said that ICC arbitration tribunal had made its final ruling related to the 2005 Turkcell share purchase agreement between the then Sonera Holding and Mehmet Emin Karamehmet’s Çukurova Group, which would have given Sonera a majority. The court battle was initially on whether this agreement is binding as after agreeing to sell the shares to TeliaSonera, Turkcell decided to make an arrangement for a smaller stake (13%) of shares with Russian Altimo (Alfa Telecom International Mobile), which is owned by Russian oligarch Mikhail Fridman’s Alfa Group, including a major loan.

TeliaSonera and Altimo have since managed to patch things up and have worked in cooperation merging their assets Turkcell and that of the second largest mobile phone operator in Russia called MegaFon. The thought here is to combine these assets into a new listed company. Towards this end the resolution in Turkcell fight is important.

ICC ruled that the new arrangement was against the shareholders agreement with TeliaSonera few years ago and now the tribunal ordered Cukurova to pay 932 million USD in damages plus interest. The tribunal also said that Cukurova had neglected payments to Altimo and Altimo can thus take the shares as bail. This would shift the balance of power in Turkcell from Cukurova to Altimo & TeliaSonera clique.

Russia’s anti-trust Commission has previously rejected a deal to merge MegaFon and Turkcell into a separate company. This was done particularly since the third MegaFon owner Telecominvest has been against it. Another billionaire Alisher Usmanov, often operating through Danish lawyer Jeffrey Galmond, with AF Telecom Holding and Olymp controls a majority in Telecominvest.

Just so that things would not be too clear, TeliaSonera is a minority owner in Telecominvest with 26.1% stake. TeliaSonera and Altimo have felt that the Appeals Committee and tribunal rulings contradicted Russian Foreign Investments Law. The companies wish to include Telecominvest in any resolution to the matter. Likely some kind of complex agreement is needed. Russian entry into WTO may push the matter ahead.

Turkcell has investments in Azerbaijan, Kazakhstan, Georgia and Moldov through Fintur. This was important for TeliaSonera most recently in its decision to increase ownership in Kcell. This is a good example of the complex deals that it sometimes takes to resolve complicated matters in the industry. TeliaSonera has constantly maintained that Turkcell is great company where TeliaSonera is staying long-term.

TDC tries to stay away from the competition

Danish telecommunications market has been hotly contested and the competition seems to work well with customers being able to switch to lower fixed price plans. Companies are of course not equally pleased and whispers of industry consolidation have been running wild.

The 2nd and third largest teleoperators in Denmark are TeliaSonera (OMX: TLSN) and Telenor (OSE: TEL). They have recently entered network sharing agreements and many experts see inevitable further actions one way or another on that front. TeliaSonera reported an EBITDA margin of under 10% from Danish operations in its Q4 report.

The largest telecommunications company in Denmark is the local incumbent TDC A/S (OMX: TDC). TDC is also active in broadband and pay-tv. The company reported quarterly earnings on Friday. They described fourth quarter and full year 2011 results as solid despite a challenging market sentiment.

Full-year revenue grew by half a percent and fourth quarter was 1.1% above last years’ level (26.3 and 6.66 billion DKK respectively). The company managed to maintain an EBITDA margin of over 40%. TDC said it has not responded to heavy promotion activities from its competitors but still maintained subscriber base on par with Q3 2011. Dividend for 2011 shall be 4.35 DKK, with 2.18 paid on August 10th.

TDC is guiding 2012 revenues in between 26 and 26.5 billion DKK with EBITDA before pension income of 10.3 to 10.5 billion. It currently estimates dividend per share from 2012 (pre buy-back) as per TDC’s dividend policy to grow to 4.5 DKK a share. Majority DPTG and TPSA dispute settlement proceeds will be distributed to shareholders via one-off share buy-back programme. Markets had been expecting slightly higher 2012 guidance and the stock was down by over 1.5% on Friday.

TeliaSonera: No major surprises in Q4 2011

TeliaSonera’s (OMX: TLSN) Q4 went pretty much as you could expect. Net sales were up by 2.1% in local currencies to 27,123 million Swedish kronor. Fourth quarter EBITDA, excluding non-recurring items and acquisitions, increased by 3.2% in local currencies compared to the corresponding period in 2010. Net income and earnings per share were down slightly to 4,972 million and 1.15 SEK.

Higher CAPEX lead and lower income from associated companies led to a sizeable decrease in free cash flow to mere 523 million SEK. Full year free cash flow was around 9.6 billion SEK. TeliaSonera’s board is proposing a dividend hike of about 3.6% to 2.85 SEK per share, totalling 12.3 billion SEK, which is 68% of net income. The company targets to maintain investment grade long-term credit rating. Ordinary dividend shall be at least 50% of net income attributable to the owners.

TeliaSonera also announced completion of the first phase of previously announecd GSM Kazakhstan LLP (Kcell) transaction as it acquired a 49% stake in the company for a price of 1.519 billion USD. The IPO process has also been initiated and is expected to be completed in 2012. Currently KCell is owned by Fintur Holdings (51%) and TeliaSonera (49%). TeliaSonera has a majority in Fintuer. After both phases of the transaction are completed, TeliaSonera will have 61.9% effective ownership in Kcell.

Overall the numbers from 2011 were pretty close to the outlook the company gave before but perhaps slightly on the low side. Fiber roll-out and 4G expansion are the reasons for higher CAPEX as the company seeks ways to maintain long-term competitive edge. The outlook for 2012 is net sales growth of 1-2% EBITDA margin to remain in 2011 level (35.4%) and CAPEX-to-sales ratio between 13-14%.