Telenor profits boost market

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Norwegian telecoms firm Telenor delivered huge profits on Thursday that surprised analysts and sent the Oslo Stock Exchange up while most stock markets are logging declines. Telenor linked its strong earnings to its mobile telephone and broadband businesses.

Telenor’s own shares jumped 3.3 percent in early trading after the company reported much better profits than expected. Pre-tax earnings rose to NOK 5.69 billion for the third quarter, up from NOK 4.56 billion in the same quarter last year.

The number of Telenor mobile phone subscribers rose by 4 million, to a worldwide total of 172 million. Its Nordic operations alone are delivering NOK 10 billion in cash flow annually.

Revenues rose by nearly a billion kroner to NOK 24.33 billion, up from NOK 23.43 billion, while operating profits amounted to NOK 8.5 billion, up from NOK 7.4 billion.

A “strong focus” on cost control contributed to better operating margins. Chief executive Jon Fredrik Baksaas attributed the profit rise to the “solid” margins, revenue development, good management and positive investment activity.

Telenor recentlysettled a longstanding conflict with its Russian partner Alfaover control of VimpelCom, agreeing to merge their shares in VimpelCom and Kyvistar to form a new firm with reduced risk for future conflicts. The new VimpelCom Ltd will be enormous, with around 85 million subscribers, revenues of USD 12.6 billion and pre-tax profits of USD 6.3 billion.

Telenor remains embroiled, however, in conflicts over its investment in Unitech Wireless of India. The pending launch of Uninor has left Telenor dealing with pressure on prices, tough competition and charges of corruption involving Telenor’s partner in the firm. Telenor has said it expects to invest NOK 22 billion in the Uninor operation in India, in an effort to capture 8 percent of the Indian mobile market. It’s up against established competitors like Vodafone, Tata and Aircel.

Telenor, which emerged from Norway’s former state telephone utility, also has operations in several other Asian countries including Pakistan, Bangladesh, Malaysia and Thailand. The Norwegian government continues to own 54 percent of Telenor’s shares.

Analysts were clearly impressed with Telenor’s results on Thursday. “This is very good, it’s clear their shares will go up after this,” analyst Arild Nysæther of Fondsfinans told business news web site e24. “Their numbers are much better than expected, and they’ve climbed even though the (strong Norwegian currency) is working against them.”

(For earlier coverage of Telenor, see our business news rundown or tap “Telenor” into our SEARCH function at the top of the page.)