TeliaSonera AB (TLSN), Sweden’s biggest phone company, reported net income that missed estimates as the company’s Spanish margin narrowed on tougher competition.
First-quarter net income fell 16 percent to 3.91 billion kronor ($580 million) from 4.65 billion kronor a year earlier, Stockholm-based TeliaSonera said in a statement today. The average estimate in a Bloomberg survey of analysts was for profit of 4.13 billion kronor. Revenue gained 3 percent to 25.7 billion kronor, beating estimates.
The margin for earnings before interest, taxes, depreciation and amortization for TeliaSonera’s Spanish business narrowed to 1.7 percent of sales and the company’s overall margin contracted 1.5 percentage points to 34.3 percent. TeliaSonera kept its forecast that the margin would be in line with last year and sales will grow 1 to 2 percent in local currencies.
“The company reiterated guidance but of course when they miss it a bit in the first quarter there might be a few question marks whether it will be kept for the full year,” said Mikko Ervasti, a Helsinki-based analyst with Evli Bank. “I expect the shares to react negatively, with free cash flow weakness as the key driver, and Spain was specifically weak.”
The company is spending to modernize its network in Spain and said customer turnover increased in that market in the first quarter as operators reduced handset subsidies that lock in clients.
TeliaSonera is also expanding to cover most of Sweden with higher-speed mobile broadband by the end of 2013. Revenues and gross margin declined in Norway on regulatory changes and Denmark on price competition, the company said. It cut data roaming costs in the Nordic and Baltic region in a bid to retain the highest-spending smartphone users.
“Changed customer behavior which leads to a mix shift in our business highlights the need to develop our business models and how we charge for our services going forward,” Chief Executive Officer Lars Nyberg said in the statement. The company is introducing separate charges for voice over Internet protocol in Spain and Sweden, he also said.
The stock fell as much as 1 percent and traded 0.9 percent lower at 42.45 kronor as of 9 a.m. in Stockholm.
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