Norway's biggest telecoms group Telenor reported unexpectedly strong growth in its foreign mobile phone units on July 22, helping limit a dip in second-quarter core earnings to 1 percent. Telenor shares leapt 6.9 percent after the figures eased investor worries that expansion by the state-controlled Norwegian company in a dozen mobile units from Ukraine to Bangladesh might be tailing off amid stiffening competition.
Earnings before interest, tax, depreciation and amortisation (EBITDA) dipped to 5.63 billion Norwegian crowns ($858.7 million) in the three months to June 30 from 5.70 billion in the same period last year.
The result beat all forecasts in a Reuters poll of 16 analysts who had predicted EBITDA of 5.0 billion to 5.6 billion crowns, with an average estimate of 5.36 billion.
"It was a solid report," said Carnegie analyst Espen Torgersen who rates the stock "neutral". "The uncertainty regarding the international mobile operations and especially about (Ukrainian unit) Kyivstar should come down on this."
Telenor stuck to forecasts of higher full-year earnings, helped by the mobile units. The company said it had record growth in the number of mobile subscriptions in its consolidated accounts in the quarter, gaining 3.4 million to 24.8 million.
"Telenor expects that profits, adjusted for special items, overall will grow in 2005 compared to 2004," Chief Financial Officer Torstein Moland said, reaffirming guidance given after the first quarter.
Telenor shares were trading at 54 crowns at 0902 GMT, up 3.5 crowns and beating a 0.1 percent rise by the DJ telecoms index.
Telenor has focused more than its Nordic rivals including TeliaSonera on expanding beyond near-saturated Scandinavia. Telenor has units in Europe and Asia, also including Russia, Hungary and Malaysia.
Total sales rose to 16.54 billion crowns from 15.23 billion, beating the average forecast in the poll of 16.01 billion.
"They are really back on track with ARPU (average revenues per user) in the emerging market operators," said analyst Frank Maao at DnB NOR Markets, who has a "hold" recommendation and a 55 crowns target on the share. "That is really important because that has been a source of disappointment in previous quarters," he said.
ARPU for Telenor's majority-owned Kyivstar unit in Ukraine, for instance, fell to 62 crowns in the second quarter from 93 a year earlier but improved from the weak first quarter.
The number of Kyivstar's subscribers soared by 1.7 million in the quarter to 9.3 million. New users typically use their phones far less than clients who sign up first in new markets.
"In the second quarter we have seen significant revenue growth and record high growth in the number of mobile subscriptions," Chief Executive Jan Fredrik Baksaas said.
"The market shares of all of our mobile operations have increased or remained stable," he said.
Telenor forecast that ARPU for Kyivstar in the second half would be level with the second quarter.
"A continuously increasing share of Telenor's revenues and results come from operations outside Norway," Telenor said. "Continued high growth in revenues and EBITDA is expected for the total mobile operations in 2005."
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