Telenor turns to Asia Pacific as home markets falter in first quarter

Telenor improved operating profit and revenues in the opening quarter of 2014, although the biggest gains came from its businesses in Asia Pacific as European operations showed a mixed picture during the period.

Jon-Fredrik Baksaas, Telenor president and CEO

Jon Fredrik Baksaas, Telenor president and CEO

The Nordic region's largest telecoms company grew post-tax profit from NOK3.6 billion (€437 million/$608 million) in first quarter 2013 to NOK3.67 billion in the recent quarter, as revenues grew by NOK4.7 billion year-on-year. Earnings before interest, depreciation and amortisation (EBITDA) increased from NOK8.4 billion in the first quarter of 2013 to NOK9.2 billion in the first three months of 2014, and EBITDA margin hit 35.1 per cent compared to 34.1 per cent in the year-ago period.

Telenor's first-quarter 2014 EBITDA beat an average of NOK9.09 billion predicted by analysts in a Bloomberg poll.

Jon Fredrik Baksaas, president and CEO of Telenor Group, said the company enjoyed a solid start to the year, describing 6 million mobile net additions during the period as "the company's best customer surge in two years."

The CEO noted, however, that the bulk of net additions during the quarter came from Telenor's businesses in Bangladesh, Pakistan and India, which all recorded strong rises in operating profit year-on-year. Telenor's newly established Myanmar business was the only unit in Asia Pacific to generate an operating loss in the opening quarter of 2014.

Europe and Scandinavia presented more mixed results. The company slipped to an operating loss in Denmark in the opening quarter, and also recorded a loss in Bulgaria.

In Norway, operating profit dipped due to lower fixed-line telephony and data services sales in the opening three months of the year, while operating profits in Montenegro and Serbia and Hungary fell year-on-year. Operating profit in Sweden grew year-on-year, despite a fall in interconnection revenues.

Baksaas conceded that Telenor must "focus on streamlining our operations and investments," in Norway, and said a slowdown in revenue growth at the company's Thai dtac unit "is explained by reduced interconnect rates, lower voice prices and the recent weakness in the Thai economy."

Despite the mixed fortunes, Berenberg Bank analyst Barry Zeitoune told Bloomberg that Telenor's first-quarter performance was good, referring to growth in its Norwegian mobile business and a solid showing in Sweden.

Baksaas said mobile data "represents the next growth curve" for the company. The Telenor chief noted 20 per cent of the group's 172 million mobile subscribers are "currently active internet users," which represents a "large growth potential" for mobile internet services.

The company is maintaining its outlook for 2014, targeting low single-digit revenue growth, stable EBITDA margin, and a capex to sales ratio in the region of 16 per cent, Baksaas said.

For more:
- see Telenor Group's first quarter results [PDF]
- see this Bloomberg report

Related Articles:
Tele2 secures Norwegian future with Telenor roaming deal
Telenor Norway cuts staff, consultants in efficiency drive
Telenor sells digital TV firm for €180M; faces antitrust probe
Telenor misses profit estimates in 2013 fourth quarter
Telenor, Ooredoo finally sign Myanmar licences

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