TeliaSonera AB, Sweden’s largest telephone company, reported a 12 percent gain in first-quarter profit on demand from Russia and Turkey and said it will need to cut more costs as growth at home slows.
Net income rose to 4.47 billion kronor ($752 million) from 3.98 billion kronor a year earlier, Stockholm-based TeliaSonera said today. Sales climbed 7.4 percent to 24.4 billion kronor. Analysts surveyed by Bloomberg predicted profit of 4.04 billion kronor on sales of 24.2 billion kronor.
“The report was good, this is what is wanted from companies in today’s market environment,” said Mika Heikkinen, a fund manager at Glitnir Asset Management in Helsinki, overseeing an equivalent of $4.7 billion euros, including TeliaSonera shares.
Chief Executive Officer Lars Nyberg, who has announced 2,900 job cuts since taking office in September, said the company needs to improve efficiency as customers cancel traditional phone lines and competition weighs on prices for high-speed Internet services. TeliaSonera has relied on growth from Eurasia with countries including Kazakhstan, Azerbaijan, and Georgia, where it added more than 5 million subscribers in the period.
TeliaSonera shares gained as much as 2.3 kronor, or 4.8 percent, to 51.5 kronor in Stockholm, and traded at 50 kronor as of 11:59 a.m. in the Swedish capital. Before today, the stock had lost 8.9 percent in a year. Telenor ASA shares have declined 13 percent in the same period.
France Telecom SA said April 17 it was exploring an acquisition of TeliaSonera or Norway’s Telenor, which has overtaken TeliaSonera as the region’s largest phone company.
TeliaSonera’s largest shareholder is the Swedish state, which owns 37.3 percent of the former telephone monopoly. The government sold 8 percent of its shares in May and has said it plans a further divestment. Finland owns 13.7 percent.
“I did know that the states declared a wish to sell their stock,” Nyberg told a press conference in Stockholm. “It makes it natural for companies to look at Telia. I have confidence in the board to find the right decision.”
TeliaSonera reiterated net income this year will likely be “somewhat higher” than in 2007, excluding a gain of 2 billion kronor in 2007 and other potential gains in 2008. The company also aims to maintain the margin level of earnings before interest, taxes, depreciation and amortization from 2007.
First-quarter Ebitda, excluding one-time items, rose 2.3 percent to 7.76 billion kroner, while the margin fell to 31.8 percent from 33.4 percent. The Ebitda margin at the Eurasia unit fell to 49.3 percent of sales from 55.5 percent because of more competition and regulatory changes, TeliaSonera said.
Sales from the Eurasia region gained 32 percent to 2.72 billion kronor, and growth in affiliates in Turkey and Russia also fueled earnings. Turkcell Iletisim Hizmetleri AS’s contribution rose 28 percent to 848 million kronor, while income from Russia increased 32 percent to 1.02 billion kronor.
The push into some emerging markets has not always been without stumbles and TeliaSonera has been locked in battles for control of some of its holdings.
TeliaSonera is in a legal dispute over control of Turkcell, of which it owns 37 percent, with shareholders Cukurova Group and Russia’s Alfa Group. TeliaSonera is also in a dispute with Alfa over control of Russia’s OAO MegaFon, Russia’s third-biggest mobile-phone company, in which it has a 35.6 percent stake.
Sales at the company’s mobile services unit rose 9.4 percent to 11.52 billion kronor, while revenue was little changed at 11.02 billion kronor at the broadband services business. Nyberg said he will seek to push television offerings to increase the appeal of faster Web-based services.
The mobile unit had 1.28 million more customers at the end of first quarter, while users at the broadband unit rose by 280,000. In total, TeliaSonera had 119 million subscriptions. Fornebu, Norway-based Telenor, which reports earnings on April 30, had more than 140 million wireless users at the end of 2007.
“Fixed line is going down, it’s going down in every country and it’s going down here,” Nyberg said. “It’s a fact of life.”