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Broadband Access
Telenor Buoyed By Overseas Growth
CEO Expects Future Revenue Growth Of 3–5 Percent
by Iain Morris
Healthy growth in its overseas interests has helped push Telenor’s 1Q07 revenues up by five percent to NOK22.446 Billion (US$3.720 Billion).
EBITDA for Norway’s incumbent operator fell by nine percent to NOK7.035 Billion (US$1.166 Billion), but CEO Jon Fredrik Baksaas says that figure is ‘affected by the fact that we are not able to include Kyivstar, since the existing injunctions in Ukraine are prohibiting us from receiving financial information.’
Telenor has been fighting Russia’s Alfa Group in Ukraine over the strategy of Kyivstar, a cellular operator in the country in which both companies hold a stake. In March Telenor reported it would not include financials for Kyivstar in its Q1 earnings because of legal actions brought by Alfa Group.
With Kyivstar removed from last year’s picture, EBITDA rises by 11 percent.
Emerging-Market Growth
Like other European incumbents (see Broadband Boost For France Telecom), Telenor owes much of its current revenue growth to mobile acquisitions in emerging markets.
In Thailand, its DTAC business acquired 1.5 million new customers during the first quarter, while Malaysia’s DiGi signed up 471,000.
But both were outdone by Telenor Pakistan, which reported net additions of 2.4 million subscribers and witnessed revenue growth of 374 percent to NOK557 Million (US$92 Million).
“Telenor Pakistan is growing even faster than we expected,” says Baksaas. “They are increasing revenue per subscription thereby delivering breakeven on EBITDA.”
Less impressive were results in Bangladesh. Although first-quarter revenue rose to NOK1.054 Billion (US$175 Million) from NOK871 Million (US$144 Million) this time last year, ARPU dropped by 28 percent (as measured in local currency) and market share was down two points to 61 percent.
“In Bangladesh, increased competition and price reductions have led to lower growth,” says Baksaas.
Investment bank Dresdner Kleinwort attributes the poorer performance in Bangladesh to the market entry of new mobile competitor Warid.
Tough Conditions at Home
In its domestic market Telenor seems to have responded well to the decline of its traditional telephony business. Despite an eight percent drop in fixed-line revenues to NOK3.856 Billion (US$639 Million), the operator managed to boost its EBITDA margin from 33.3 percent to 35.5 percent through better cost control.
Revenues from the Norwegian mobile business increased only marginally, rising from NOK3.105 Billion (US$515 Million) last year to NOK3.172 Billion (US$526 Million), due to the impact of higher interconnect costs resulting from an increase in traffic to other mobile operators.
On the back of its Q1 07 results, Telenor says it is now expecting to see its revenues grow in the future at a rate of between three and five percent (assuming Kyivstar is not consolidated in 2007).
Dresdner Kleinwort describes the overall results as ‘solid’, but qualifies its assessment by saying ‘we also believe that the situation in Norwegian and Bangladesh mobile is not fully balanced by the strength in Norwegian fixed – and the strength in Thailand, Malaysia and Pakistan has already been digested. This could prevent the stock from reacting materially to the upgrade in the short term.’
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