Telenor Says 2014 Profit Margin to Improve as Earnings Rise

Telenor ASA (TEL), the Nordic region’s largest phone company, said its profit margin will probably improve this year after reporting second-quarter earnings that topped analysts’ estimates.

Adjusted earnings before interest, taxes, depreciation and amortization were 9.62 billion kroner ($1.55 billion) in the three months through June, compared with 8.86 billion kroner a year earlier, the Fornebu, Norway-based carrier said today in a statement. Analysts on average predicted 9.44 billion kroner, according to data compiled by Bloomberg. Sales rose about 4 percent to 26.8 billion kroner.

Telenor is expanding in markets such as Bulgaria and Myanmar to compensate for slower growth in the Nordic region, where it competes against Sweden’s TeliaSonera AB and Denmark’s TDC A/S. Chief Executive Officer Jon Fredrik Baksaas is also seeking to curb expenses as competition in its saturated home market weighs on prices.

Full-year Ebitda as a percentage of sales, excluding some items, will be “above” last year’s 34.5 percent, Telenor said. Its previous forecast was for the margin to be little changed. The company continues to see “low single-digit” sales growth this year.

The shares increased as much as 3.1 percent to 149 kroner, the highest intraday price since May 13. They traded 2.8 percent higher at 148.6 kroner by 9:26 a.m. in Oslo.

Attractive Story

It was “a very solid set of numbers with the Norwegian performance really standing out despite the very weak performance in Denmark,” Barry Zeitoune, an analyst at Berenberg Bank in London, said in an e-mailed note to clients. Telenor is “one of the most attractive stories in the telecoms sector.”

Sales in Norway, Telenor’s largest market accounting for a quarter of revenue, rose 5.7 percent to 6.50 billion kroner as average revenue per user increased on rising data usage.

Telenor’s net income slipped to 2.32 billion kroner from 3.25 billion kroner during the period after one-time costs from associated companies.

Telenor owns about 33 percent of VimpelCom Ltd. (VIP), a wireless operator in more than a dozen markets including Russia and Ukraine. VimpelCom reduced full-year sales and earnings targets in May as competition and the ruble’s decline weighed on revenue.

Telenor took a one-time loss of 399 million kroner related to VimpelCom activities in Algeria and Uzbekistan. Profit was also hurt by a 220 million-krone cost linked to Telenor’s online joint venture with Schibsted ASA, it said.

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

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net John Bowker, David Risser

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