TeliaSonera AB, the Nordic region’s largest phone company, and Royal KPN NV of the Netherlands may say third-quarter earnings rose because of job reductions and growth at wireless divisions overseas.
Stockholm-based TeliaSonera may say third-quarter net income gained 18 percent to 4.46 billion Swedish kronor ($616 million) on sales of 23 billion kronor, the median estimates of 18 analysts in an SME Direkt survey. KPN, based in The Hague, may report net income rose 15 percent to 378 million euros ($482 million), a survey of 11 analysts shows.
The former state monopolies expanded abroad because of competition and slower growth in their home markets. TeliaSonera now operates in countries from Turkey to Azerbaijan, while KPN’s E-Plus unit, Germany’s third-largest mobile operator, probably bolstered third-quarter profit at the Dutch company. The companies have shed thousands of jobs to spur earnings growth.
“Both TeliaSonera and KPN have adapted to increased competition and lower market shares” at home, said Bruno Lippens, who helps manage $12 billion at Robeco Group in Rotterdam, including shares of TeliaSonera, KPN and Sweden’s Tele2 AB. “Those changes have forced them to change strategies, look for new growth opportunities.”
TeliaSonera last year shed 3,000 jobs in Sweden. KPN, which employs about 29,000 people, last year announced plans to reduce its workforce by 1,500 to 1,750 a year through 2007.
TeliaSonera is scheduled to report earnings on Oct. 31, followed by a press meeting and analyst conference call with Chief Executive Officer Anders Igel. KPN reports on the same day before the start of trading. Tele2, Sweden’s second-biggest phone company, releases earnings on Nov. 1.
Shares of TeliaSonera and KPN are among the 10 best performers in the Bloomberg Europe Telecommunication Services Index of 24 members in the past three months, with TeliaSonera up 25 percent in the period and KPN up 23 percent. The index has gained 11 percent in the period.
Of the 32 analysts covering KPN in the last six months, 15 rate the Dutch company “buy” and four advise selling the stock, according to data compiled by Bloomberg. TeliaSonera has 10 “buy” recommendations and nine sells among 32 analyst ratings.
Telenor ASA, Norway’s largest phone company, last week said profit surged 72 percent as more clients signed up in the Ukraine and Bangladesh. Elisa Oyj, the second-biggest phone company in Finland, said Oct. 20 that third-quarter profit more than doubled on cost savings from an acquisition and faster Internet services.
“Numbers from Telenor and Elisa were encouraging so I expect Telia to also show decent domestic numbers,” said Lippens at Robeco. “Growth from Russia and the Baltics may provide a nice extra.”
TeliaSonera is expanding in faster-growing markets such as Russia. The company, formed in 2002 when Sweden’s Telia AB bought Finland’s Sonera Oyj, said in July it will book a third-quarter gain of about 600 million kronor from selling a stake in MTN Uganda.
TeliaSonera faces competition in its home markets of Sweden and Finland, where revenue probably fell in the third quarter, the SME poll showed.
The company’s biggest investors are still the Swedish and the Finnish governments. The Dutch government cut its ties with KPN in September when it sold its remaining 8 percent stake in the company to raise cash and repay debt.
KPN will likely report a third-quarter profit gain as earnings at its mobile unit rose, aided by spending reductions and sales of wireless services with lower discounts on handsets. Sales probably rose 2.4 percent to 3 billion euros.
Chief Executive Officer Ad Scheepbouwer, 62, has invested in television and Web calls and the German mobile unit E-Plus to make up for lower sales from traditional phone services.
“E-Plus has turned into the main growth driver and value creator within” the Dutch company, Luis Prota, an analyst at Morgan Stanley, wrote in an Oct. 23 note to investors. He rates KPN shares “equal-weight.”
Sales at the mobile unit probably rose 14 percent to 1.65 billion euros, surpassing the fixed-line division, which is expected to report a 4.8 percent decline in sales to 1.61 billion euros, based on nine analyst estimates.
Tele2 probably lost 3.93 billion kronor after a profit of 927 million kronor a year earlier, according to an SME survey. The company on Oct. 3 said it would book a loss of 1 billion kronor from the sale of its French fixed-line telephone and broadband unit to Vivendi SA’s SFR.
Stockholm-based Tele2 will also write down 3 billion kronor to 3.5 billion kronor of goodwill in the third quarter.
Sales probably rose 10 percent to 13.6 billion kronor, the survey found. Tele2 operates in Portugal, Russia, Austria and Latvia. Last year, it closed units in Finland, the U.K. and Ireland.
Moody’s Investors Service rates KPN Baa2, two steps above non-investment grade and one step below Standard & Poor’s rating of KPN. TeliaSonera is rated A2 at Moody’s and A- at Standard & Poor’s, which are higher ratings than those of KPN.
To contact the reporter on this story: Benedikt Kammel in Stockholm at; Joost Akkermans in Amsterdam at .