Telenor misses Q2 earnings estimates despite 'extraordinary' Myanmar result

Telenor missed analyst earnings estimates despite reporting an 11 per cent rise in core earnings in the second quarter of 2015, although weaker profits across some of its main units were offset by "another extraordinary result from the start-up in Myanmar" said analysts from Jefferies International.

The Norway-based operator said adjusted EBITDA before other items increased by over NOK1 billion or 11 per cent in the second quarter to NOK10.57 billion (€1.18 billion/$1.29 billion), which missed expectations for NOK10.77 billion in a Reuters poll of analysts, and was also 1.8 per cent below consensus estimates according to Jefferies International. The EBITDA margin was slightly down at 35 per cent (37 per cent in Q2 2014).

Jefferies noted that EBITDA would have been lower if not for another "upside surprise" in Myanmar, which produced EBITDA of NOK479 million after a loss of NOK83 million a year ago--well above Reuters forecasts for NOK202 million. The good performance in Myanmar also helped to boost the Q2 net profit by 57 per cent to NOK3.64 billion.

Outgoing group president and CEO Jon Fredrik Baksaas said Myanmar continues to exceed expectations.

"In July, we passed 10 million subscribers. Customers' strong demand for voice and data services keeps driving revenues and profitability," Baksaas said. He added that the network was also expanded to 213 out of a total of 330 townships by the end of June.

The positive development in Myanmar somewhat compensated for the underperforming units in Thailand, Pakistan and Malaysia. Jefferies also noted that India produced a "positive EBITDA contribution" thanks to an improvement in the gross margin, while business stabilised in Telenor's largest single market, Norway.

Telenor reported total group revenue of more than NOK30 billion for the second quarter--up from NOK25.66 billion in the previous year--noting that it achieved organic revenue growth of six per cent. The operating cash flow neared NOK4 billion, but was down from over NOK5.6 billion in the previous year.

In the first six months as a whole, revenue increased to more than NOK60 billion from almost NOK51 billion last year, while EBITDA reached over NOK21 billion (fromNOK18.6 billion). The company noted it achieved organic revenue growth of seven per cent in this period.

Baksaas said the group is also maintaining its guidance for 2015 as a while, based on the performance in the first half of the year and expectations for the rest of the year.

Based on the current group structure, Telenor expects to see organic revenue growth of between 5-7 per cent, an EBITDA margin in the range of 34-36 per cent and capex in the range of 17-19 per cent of revenue, excluding licences and spectrum.

In May this year, Telenor appointed Sigve Brekke as its new CEO to replace Baksaas, who retires in August after 13 year at the helm of the Norway-based operator.

For more:
- see Telenor's Q2 results presentation
- see this Reuters article

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