TeliaSonera Profit Falls Less Than Estimated on Asia

TeliaSonera AB (TLSN), Sweden’s biggest phone company, reported second-quarter profit that fell less than analysts estimated as restructuring efforts reduced costs and its Eurasian business grew.

Net income fell to 4.03 billion kronor ($610 million) from 4.85 billion kronor a year earlier, the Stockholm-based company said today. Analysts predicted 3.82 billion kronor, the average of estimates compiled by Bloomberg. Sales dropped 3.9 percent to 25.3 billion kronor, in line with the average projection.

TeliaSonera is adding users in its Eurasian unit, with operations in Turkey, Russia and several former Soviet Union countries, while battling falling sales in its home market as competition and lower fees hurt prices. The company, which made more than 60 percent of its revenue in the Nordic region last year, is also cutting jobs and focusing more on data revenue to bolster profitability.

“The report was actually better than expected, especially with TeliaSonera’s Eurasian business and mobility services businesses topping our estimates,” said Mikko Ervasti, an analyst at Evli Bank Oyj in Helsinki. “The Eurasian business really is the growth engine for the company and helps diversify the carrier during slower economic times in western Europe and the cost-cutting efforts in its mobile unit helped improve its profitability.”

TeliaSonera rose rose 1.8 percent to 45.96 kronor at 9:03 a.m. in Stockholm. The stock had advanced 2.5 percent this year through yesterday.

Restructuring Costs

The carrier had 802 million kronor in non-recurring expenses, mostly related to restructuring. TeliaSonera said on Oct. 17 that it plans to cut 2,000 jobs, or 7 percent of its workforce, to lower costs by 2 billion kronor in two years.

The second-quarter adjusted profit before interest, taxes, depreciation and amortization as a percentage of sales was 35.3 percent. TeliaSonera reiterated that it expects that margin will improve “slightly” in 2013 compared with 2012. Sales will be “flat” excluding currency swings and acquisitions, the company repeated.

Sales from mobile services slipped 4.5 percent because of lower rates for connecting calls from rivals’ networks, a fee that is regulated. Cost cuts helped lift the mobile unit’s Ebitda margin to 31.5 percent from 29.5 percent. Revenue from Eurasia rose 5.4 percent and the Ebitda margin for that region widened to 51.7 percent from 50.3 percent a year earlier.

“We maintain focus on securing our long-term profitability by implementing efficiency measures and investing for the future,” acting Chief Executive Officer Per-Arne Blomquist said in the statement. Johan Dennelind, a former Vodacom Group Ltd. (VOD) executive, is set to start as CEO on Sept. 1.

To contact the reporter on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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