TeliaSonera AB (TLSN), Sweden’s biggest phone company, lowered its 2012 margin forecast after sales fell in its mobile phone services and broadband units amid mounting competition, sending its shares down the most in three months.
TeliaSonera now sees the margin on earnings before interest, tax, depreciation and amortization at around 35 percent, excluding non-recurring items, below last year’s 35.4 percent. This compares with the previous guidance for an Ebitda margin in line with last year’s, Stockholm-based TeliaSonera said in a statement today.
“Operators including TeliaSonera, need to change their business models, address their structural cost base and review their way of working to secure future profitability,” Chief Executive Officer Lars Nyberg said.
The Swedish former monopoly is counting on higher-priced Nordic mobile broadband services and growth of Eurasia subscribers to make up for the decline in traditional telephone services. Sales growth in local currencies excluding acquisitions now is expected at 0 to 1 percent, the company said, compared with a previous range of 1 to 2 percent.
“Given the slowdown in organic growth and cut to guidance we expect the shares to be weak on these results,” Espirito Santo said in a note to clients. “One should note however that consensus expectations for the full year are already in line with the lower margin guidance, which implies that consensus Ebitda estimates may only have to fall by around 1 percent.”
Espirito Santo has a neutral rating on the stock. The share was down 3.1 percent to 43.98 kronor at 9:50 a.m. in the Swedish capital, the biggest intraday drop since April 23.
TeliaSonera said July 12 it would take an impairment charge of 2.75 billion kronor ($395 million) on its NetCom division, after the acquisition of Norway’s second-largest operator in 2000. In Lithuania, the company wrote down the value of its business by 318 million kronor amid rising competition. Net income in the quarter also includes a capital gain of 3.1 billion kronor from dividends in OAO MegaFon, Russia’s second- largest mobile-phone operator.
“While trends within broadband services and Eurasia have been broadly stable, mobility services experienced a slower growth in service revenues and equipment sales,” Nyberg said.
Ebitda, excluding non-recurring items, fell 2 percent to 9 billion kronor in the quarter and compared with the average in a Bloomberg survey of 9.17 billion kronor. The Ebitda margin was 34.3 percent in the quarter, compared with 35.3 percent a year earlier.
Profit in the second quarter increased 10 percent to 4.25 billion kronor from 3.86 billion kronor a year earlier, the company said. The average estimate in a SME Direkt survey of 12 analysts was for profit of 3.89 billion kronor. Revenue rose 1 percent to 26.3 billion kronor, compared with an estimate of 26.5 billion kronor in a Bloomberg survey of 17 analysts.
In its Eurasian business, which includes operations in countries such as Kazakhstan and Azerbaijan, sales grew by 19 percent to 4.93 billion kronor. The company’s mobile services unit saw revenue fall 2.3 percent to 12.6 billion kronor and the broadband unit reported sales 0.8 percent lower at 9.09 billion kronor.
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