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Telenor Earnings Trail Estimates as Costs Increase

Telenor ASA (TEL), the Nordic region’s largest phone operator, reported earnings and gave a forecast trailing analysts’ estimates as its expansion boosts costs. The stock fell the most in seven months.

Fourth-quarter earnings before interest, taxes, depreciation and amortization were 8.83 billion kroner ($1.4 billion), the Fornebu, Norway-based carrier said today. Analysts on average projected 9.16 billion kroner, according to data compiled by Bloomberg. Telenor forecast Ebitda of about 34.5 percent of sales for this year, also less than estimates.

Telenor is expanding in Asia and eastern Europe to compensate for slower growth in the Nordic region. Chief Executive Officer Jon Fredrik Baksaas is also seeking to curb expenses as competition weighs on calling prices.

The 2014 margin forecast is “soft,” Jon David Gjertsen, an analyst at Pareto Securities AS in Oslo, said in an e-mail. The company’s projection will lead to about 4 percent reduction in 2014 Ebitda estimates, he said.

The shares slumped as much as 6.3 percent to 128.2 kroner, the most since June 19, and fell 5.3 percent to 129.6 kroner at 12:35 p.m. in Oslo. They have lost 10 percent this year.

Ebitda as a percentage of sales, excluding some items, will be “stable” this year compared with the 34.5 percent reported for 2013, Telenor said. Analysts have been estimating about 36 percent for this year, Gjertsen said.

Norway Decline

Fourth-quarter net income fell to 2.43 billion kroner from 2.51 billion kroner. Ebitda in Norway, its largest market that makes up about a quarter of sales, declined 6.5 percent. Sales rose 6.2 percent to 27.6 billion kroner as growth in Malaysia, Serbia, Bangladesh and Thailand helped offset a drop in Norway.

“We still have a negative mobile-services revenue growth in Norway, there is still significant political unrest in Bangladesh and Thailand,” and the company still needs to deliver on planned cost savings in Norway, Chief Financial Officer Richard Olav Aa said in a presentation in Oslo. That explains Telenor’s “prudent” forecasts for 2014, he said.

Revenue, excluding acquisitions, will probably expand at a “low-single digit” percentage rate this year, Telenor said. Capital expenditures, excluding licenses and spectrum, will be about 16 percent of sales, Telenor said.

Whether Telenor will beat its forecasts will depend on its ability to return to revenue growth on mobile services in Norway, among other things, CEO Baksaas said.

“That will turn this year, because we now have a much better sales mix,” he said in an interview. “I expect growth in mobile service, we will probably still see a reduction on fixed lines, and the sum should be positive.”

The company proposed a dividend of 7 kroner a share.

To contact the reporters on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net; Mikael Holter in Oslo at mholter2@bloomberg.net

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

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