Bloomberg News

Tele2 Eyes Central Asia Acquisitions to Rival TeliaSonera

November 25, 2011

(Updates with share trading in fifth paragraph.)

Nov. 17 (Bloomberg) -- Tele2 AB, Sweden’s second-biggest phone company, is looking for acquisitions in central Asia, a move set to intensify competition with TeliaSonera AB.

Former Soviet countries in the vicinity of Kazakhstan “can always be of interest,” Chief Financial Officer Lars Nilsson said in an interview at a conference organized by Morgan Stanley in Barcelona. “It’s important the market is not too small.”

Tele2, based on Stockholm, acquired a majority stake in NEO, then Kazakhstan’s third-largest wireless operator, in March 2010. The company, which specializes in discount phone services, gets more than a quarter of revenue in Russia where it has more than 20 million customers. Larger rival TeliaSonera is the biggest operator in Kazakhstan with its Kcell unit, and operates in five nearby former Soviet countries.

Target markets need at least 1 million potential customers for Tele2 to make an investment worthwhile, Nilsson said. Tele2 has more than 1 million Kazakh customers and expects to reach as many as 2.5 million by the end of 2012.

Tele2 fell 0.6 percent to 127 kronor at 9:41 a.m. in Stockholm. The stock is down 8.5 percent this year through yesterday. TeliaSonera slipped 0.9 percent to 33.79 kronor.

TeliaSonera operates in Azerbaijan, Georgia, Moldova, Tajikistan and Uzbekistan. It has sought to increase its stake in partially owned companies and is currently investing more in Kcell.

Indian Rules

Telenor ASA, the Nordic region’s largest phone company, has focused on the Indian subcontinent and southeast Asia for its emerging markets efforts. The Fornebu, Norway-based company hasn’t ruled out consolidation for its Uninor unit in India, Chief Financial Officer Richard Olav Aa said in Barcelona yesterday.

Aa said he expects Indian authorities will create more transparent rules for mergers and acquisitions within the next three years, and the company would be able to engage in mergers if it meets its 2013 breakeven goal. Telenor has targeted breakeven on earnings before interest, taxes, depreciation and amortization in 2013.

Tele2 hasn’t seen any direct effects from the European debt crisis as its markets including Scandinavia, the Baltic states and Russia have so far been less affected by the economic slowdown and because of its position in the low-price segment, Nilsson said.

The company’s Norwegian operations will probably become profitable by 2014, Nilsson said, adding that the acquisition of Network Norway was a “major step” in consolidating the local market. There’s currently no need to make any disposals, the CFO said.

--Editors: Simon Thiel, Robert Valpuesta.

To contact the reporters on this story: Cornelius Rahn in Barcelona via crahn2@bloomberg.net; Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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