Sweden-based telecoms group TeliaSonera today reported above-forecast third quarter earnings, and promised to double this year’s planned shareholder dividend payout to SEK20 billion (USD2.76 billion). Earnings before interest, tax, depreciation and amortization (EBITDA), excluding extraordinary items, were SEK8.76 billion (USD1.21 billion), up from SEK8.22 billion a year ago and above the average forecast in a Reuters poll of SEK8.3 billion. Revenues increased 4.2% to SEK23.16 billion, from SEK22.23 billion in the year-ago quarter, driven by growth at its foreign units.
The group’s customer base increased 22% year-on-year. At the end of September it had 29.5 million subscribers in majority-owned operations and 62.6 million customers in associated companies. A company statement confidently read: ‘The outlook for the group operations remains the same. Mobile and broadband volume growth is expected to continue…Group net sales and results before taxes are expected to grow. Free cash flow will remain strong.’
Price pressure remained very strong in Sweden in all TeliaSonera’s product areas, causing domestic revenues to decrease by 3%. In Finland, its mobile business stabilised further after big price drops in earlier quarters, while overall earnings in the country edged upwards. The company said that the Norwegian market was increasingly challenging due to the arrival of new players in the broadband and mobile sectors, driving its EBITDA margin down in the country due to increased sales and marketing activity. Income from associated company MegaFon in Russia rose to SEK761 million from SEK390 million year-on-year, but a 20% drop in the Turkish lira cut its income from 37%-owned cellco Turkcell to SEK420 million, from SEK672 million. Xfera, its 3G mobile venture in Spain, reiterated plans to launch commercial services before the end of 2006.
TeliaSonera’s dividend payout programme is one of the main attractions for its investors, even as its core telecoms markets have suffered from tough competition. The group has been under pressure to increase shareholder value from investment fund Cevian Capital, its fourth largest shareholder. The Swedish private equity firm bought around 1.6% of the telco in September 2006 and has said it wants a place on the board. Other funds which are reported to have bought shares in TeliaSonera include Zenit, Eikos, Mercury Fonder, GMO International Funds, T Rowe Price, ING Fonder and Capital Group. The Swedish government is the group’s majority shareholder with a holding of around 43.5% whilst the Finnish government has 13%; no other single shareholder has a stake in excess of 3%.