TeliaSonera Raises Outlook on Smartphones, Eurasia

Updated:2010/10/26 09:36

TeliaSonera AB reported higher third-quarter profit and raised its full-year forecast as customers in Sweden bought more smartphones and sales expanded in Central Asia.

Full-year revenue in local currencies will rise in line with the 3.4 percent growth of the first nine months, excluding acquisitions, TeliaSonera said today in a statement. That compares with an earlier forecast of sales matching the first half’s 2.9 percent growth. Earnings before interest, taxes, depreciation and amortization as a proportion of sales will be “higher” than in 2009.

TeliaSonera, Sweden’s biggest phone company, was the first carrier to offer Apple Inc.’s iPhone in the Nordic and Baltic region. The Stockholm-based company’s third-quarter net income rose 19 percent because of growth in Eurasia, including assets in Russia, Turkey, Central Asia and Nepal.

“The headline figures were very good and the guidance adjustment appears positive,” said Frank Maao, an Oslo-based analyst with DnB NOR ASA. “The Baltics and Eurasia were strong and mobile results in Scandinavia are above expectations.”

Stock Rises

TeliaSonera rose as much as 2.8 percent to 56.8 kronor in the biggest intraday jump since Aug. 2 and was up 2.1 percent as of 1:35 p.m. in Stockholm trading.

The company said seven out of 10 customers in Sweden are buying smartphones, including devices provided by Nokia Oyj and models using Google Inc.’s Android software. TeliaSonera is investing in fiber-optic networks in Sweden while trimming costs in the older fixed-line business.

Net income in the third quarter rose to 5.99 billion kronor ($914 million), the company said. Analysts expected 6.02 billion kronor, according to the average of 16 estimates collected by Bloomberg. Revenue fell 1 percent to 26.8 billion kronor, in line with 20 analyst estimates.

Subscriber numbers in Eurasia increased 25 percent in the period at subsidiaries it controls and 17 percent at its MegaFon affiliate in Russia.

“The economies in that part of the world have improved -- basically all markets are growing except Georgia,” Chief Executive Officer Lars Nyberg said on a conference call with analysts and journalists.

Record Margin

The third-quarter Ebitda margin, excluding one-time gains or costs, rose to 36.5 percent from 36.1 percent a year earlier. Nyberg said in the statement that the margin was at a record high. TeliaSonera forecast in February that the Ebitda margin in 2010 would be “somewhat higher” than last year.

TeliaSonera lowered its estimated capital spending plan for 2010 to 13.5 percent of sales from 14 percent to 15 percent, citing slower-than-forecast introductions of fiber and shortages of components at equipment suppliers.

About 33 percent of the company’s customers in most of the Nordic countries use smartphones, which are generally used on data plans producing higher revenue, Andreas Ekstroem, TeliaSonera’s investor-relations chief, said on the call. Finland lags behind with 20 percent smartphone penetration, Ekstroem said.

Smartphones Dominate

Smartphones may make up the entire mobile-device market within three years, CEO Nyberg said.

The gain of the krona versus other currencies hurt the Swedish company more in European markets than in Eurasia. Excluding exchange-rate effects and acquisitions, group sales would have risen 4.3 percent in the quarter, the company said.

Income from MegaFon, Russia’s third-largest wireless operator, increased 23 percent to 1.44 billion kronor, helped by a stronger ruble. TeliaSonera owns 43.8 percent of Moscow-based MegaFon. Earnings from the Swedish company’s 38 percent holding in Istanbul-based Turkcell Iletisim Hizmetleri AS rose 0.7 percent to 605 million kronor. TeliaSonera agreed last year to merge its stakes in the companies with those of Russia’s Alfa Group.

A Russian court decision aimed at stopping the merger is “from a legal perspective not important,” Nyberg said. TeliaSonera is still trying to get control of some disputed Turkcell shares and will apply to the Russian government for approval of the agreement after that is achieved, he said.

“What’s really important is what happens when we apply for a verdict from the Duma,” he said. “We’ve said all along we will apply when we make some progress in Turkey.”

The Yoigo subsidiary in Spain achieved close to 4 percent market share and is now expected to become profitable at the Ebitda level this quarter, the company said. Nyberg said in October 2008 that TeliaSonera would “consider all options going forward” for Yoigo, which was set up in 2006.

“Obviously the urgency to do something or find a solution is not as high as it was two years ago” at the Spanish brand, Nyberg said today, adding that he’ll reserve further comment until he sees Yoigo’s fourth-quarter figures and a business plan for next year.

By:Diana ben-Aaron  Source:Bloomberg
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