Tele2 Gains as Swedbank Sees Earnings Improving: Stockholm Mover

Tele2 AB rose the most in more than two weeks in Stockholm trading after Swedbank AB said earnings at Sweden’s second-largest telephone company should increase next year because of an improvement in Norway and Kazakhstan.

The shares rose as much as 1.8 percent to 82.65 kronor, their steepest intraday advance since Sept. 18. They gained 1.1 percent to 82.05 kronor as of 10:30 a.m. local time, valuing the operator at 37.1 billion kronor ($5.84 billion). Volume was at 31 percent of the daily average in the past three months.

“Tele2’s earnings should rise in 2014 as Kazakhstan and Norway should improve from low levels,” Sven Skoeld and Haakan Wranne, analysts at Swedbank in Stockholm, wrote in a report today. They raised their Tele2 rating to buy from neutral and their 12-month share-price estimate to 90 kronor from 84 kronor.

Tele2’s operations in Kazakhstan should reach break-even in terms of earnings before interest, tax, amortization and depreciation in the second half of this year with further improvement in 2014 and 2015, Skoeld and Wranne said. Margins in Norway should increase in the second half of 2014 as Tele2 can move traffic to its own mobile network, they said.

Analysts’ median estimate for the Stockholm-based carrier’s 2015 adjusted earnings of 7.4 billion kronor is “well below” management’s target of 8.3 billion, the analysts said, adding that “it’s time to start favoring Tele2.”

Tele2, which sold its Russian assets to VTB Group for $2.4 billion in equity and $1.15 billion in net debt in March, is scheduled to report its third-quarter earnings on Oct. 22.

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