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.

Tele2 margins down

Sweden-based telecommunications operator Tele2 (OMX: TEL2 B) completed a difficult first quarter 2012 with net sales of just under 10.5 billion SEK. While that is 8% more than last year, EBITDA was practically unchanged at 2.57 billion as EBITDA margin faltered to 25% partially explained by increasing marketing costs. Net profit prints at 869 million.

The company said it has foreseen the trend from voice to data and prepaid to postpaid. This should persist over the medium term in their view. In the short term this presents certain challenges.

Tele2 now has almost 21 million customers in Russia, making it number 4 in the country. It has 1.7 million customers and adding in newly established Kazakhstan operations. In total it has presence in 11 countries. Still over 40% of the revenues come from its home market in Sweden and Norway. Net customers intake during Q1 overall was 559 000.

The revenue did not quite live up to expectations. Tele2 released guidance geographically, and EBITDA margin guidance downward adjustment on major markets wasn’t well received either. This meant a solid minus for the week.

Tele2 to buy Network Norway, set to net half a million customers

Tele2 AB (OMX: TEL2 B) announced it has agreed to buy the majority of shares in Network Norway from Orkla ASA (OSE: ORK) , Hafslund Venture II AS, an investment arm of Hafslund AS (OSE: HNA), and Katalysator Telekom AS. Tele2 will pay around 890 million Swedish kronor for Network Norway shares and warrants held by the three companies, valuing 100 percent of network Norway in the vicinity of 1 700 million on a cash and debt free basis.

Tele2 will make an offer to remaining shareholders on similar terms. In 2007 Network Norway released its own mobile network and established a joint venture mobile network company with Tele2. Network Norway has total mobile customer base approaching 500 000, which will raise Tele2’s customer base in Norway to over 1 million. Tele2 plans to aggressively challenge the local mobile network incumbents Telenor (OSE: TEL) and NetCom.

Network Norway reported revenues of approximately 2 billion and an EBIDA of 22 million for 2010. The acquisition is conditional on regulatory approval and acceptance of the offer from over 90 percent of total outstanding shares in Network Norway.

Tele2 Q2 result

Pan-European telecommunications operator Tele2’s (OMX: TEL2 B) Q2 sales were a hair under 10 billion SEK. The headline number declined from comparison period but grew 6 percent adjusted for currency effects and one-off items. EBITDA of 2.711 billion SEK is equivalent to EBITDA margin of 27 percent.

Tele2 now expects mid single digits mobile revenue growth in Sweden as opposed to high single digits but says mobile growth revenue in Nordic countries is robust. Russian operations contributed to earnings at a record level for the company.

The firm aims to maintain a healthy balance between growth region exposure and more mature markets. ROCE target for all operations is 20 percent and Tele2 does not enter regions where it does not feel it can reach at least a top 2 position in the market.

Tele2 has gained 4.5% at the time of writing this article. The full interim report is available for download in pdf from here: