Telenor's profits down, but outlook solid

Telenor, the Norwegian incumbent with over 150 million mobile customers, posted a fall in Q4 profit from a year earlier, when made once-only gains. Last year's earnings were boosted by gains related to selling an asset in Austria and earnings from its Ukrainian unit after an ownership dispute with Russia's Alfa Group.

The company also said it will focus on preserving cash, reports Bloomberg.

Net income fell to 2.21 billion kroner ($330 million), or 1.33 kroner a share, from 7.63 billion kroner, or 4.54 kroner, a year earlier, Telenor said today in a statement. Sales rose 11% to 26.36 billion kroner. Analysts anticipated a 3.21 billion-krone profit on sales of 25.18 billion kroner, the medians of eight estimates in a Bloomberg survey.

Telenor has dropped 47% in the past six months in Oslo trading,  compared to a 17% decline in the Bloomberg Europe Telecommunication Services Index.

The operator says it aims to reduce costs and keep capital spending under control this year. Its strategy is to look to new income streams in eastern Europe and Asia as Nordic markets are saturated and fixed-line usage shrinks. Telenor owns units in Ukraine, Russia, Hungary, Serbia, Montenegro, Pakistan, Malaysia, Bangladesh and Thailand.

Shareholders are not always convinced: in January, Telenor was obliged to abandon a 12 billion-krone share sale after investors objected. It will instead fund its investment in India's Unitech Wireless with debt and cash saved by omitting dividends.

Reuters says Telenor financial guidance for 2009 does not include any contribution from its planned investment in India. 'We have not concluded a final agreement, so it is without India,' Telenor spokesman Paal Kvalheim said. Telenor aims to close its purchase of a 60% stake in  Unitech for $1.07 billion by the end of this quarter.

Telenor set a 2009 EBITDA margin target of around 34%, and separately said it expected its India venture would contribute wit an EBITDA loss of 2.0-2.5 billion Norwegian crowns.

Telenor also announced that it has secured  28 billion crown ($4.16 billion) funding to help it refinance debt. CFO Trond Westlie said in the press conference that he was 'comfortable' that its India investment will be funded by cash flow and dividend cuts alone, without the need for raising new capital.

Telenor was also buoyed by the apparently imminent settlement of its long running dispute with Russian oligarch Mikhail Fridman's Alfa. The two have fought in courts from Siberia to New York over control at Kyivstar and VimpelCom. Kyivstar held a shareholder meeting in December and approved the payment of dividends after minority owner Alfa, through its Storm unit, participated in the meeting for the first time since 2005.

'I am pleased to see that the recent ruling in a federal court in New York has brought us several steps closer to obtaining predictable and healthy corporate governance on a permanent basis in Kyivstar. We have received dividend payments for 2004 and 2005 and we are working towards further dividend payments for the following years,' Baksaas said.

In December, a Siberian court in Omsk overturned a ruling that could have cost Telenor $2.8 billion in damages.

Baksaas concluded, "The telecom sector has been so far less affected by the global economic slowdown than other industries," CEO Jon Fredrik Baksaas said in the statement. "However we expect a more challenging business environment going forward."

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