News
Norwegian telco reports strong performance in Pakistan, Bangladesh, Myanmar, but lowers full-year revenue growth guidance based on 1H results.
Telenor on Tuesday presented a mixed set of second-quarter financials with markets like Pakistan, Bangladesh and Myanmar turning in strong performances, while weaknesses elsewhere, including in its home market, took their toll.
The Norwegian-based telecoms group adjusted its full-year outlook based on its performance in the first half, revising down its expectations for revenue growth, but increasing its earnings forecast.
Organic revenue growth in Q2 came in at just 0.6%, with revenues reaching 32.48 billion kroner (€3.46 billion). The telco had aimed for 2%-4% organic revenue growth for the full year, but has now lowered its expectations to 1%-2%, acting CFO Morten Karlsen Sorby explained at the firm’s results presentation. Telenor’s capex-to-sales ratio will be around 17%, at the bottom end of its previously-announced 17%-19% range.
The operator has upped its EBITDA margin expectations to around 35% from 33%-34%. In the second quarter it generated EBITDA before other income and expenses of NOK11.55 billion and an EBITDA margin of 35.5%.
Telenor’s net profit slid by 68% to NOK1.11 billion. The telco did not go into the reasons behind this, but doubtless a NOK2.5 billion write-down on the value of its VimpelCom stake did not help. However, the firm reported a NOK4.4 billion reversal of impairment in Q1, putting its net impairment reversal over the first half of the year at NOK1.8 billion.
Having announced its decision to exit VimpelCom late last year, Telenor noted that it will continue to classify the Russian operator as an associated company until it manages to sell the asset; it is "highly probable" that a sale will come in the next 12 months, it said.
Presenting the numbers, Telenor CEO Sigve Brekke described Q2 as "strong" but conceded that while performances were good in certain markets, others struggled.
Bangladesh and Pakistan were "the star markets in this quarter," he said, noting that they recorded growth in subscription and traffic revenues in local currencies of 10% and 11% respectively.
Myanmar is "still a star in the portfolio," Brekke added, conceding that while revenues have yet to flatten, growth is not as strong as it once was. Nonetheless, Telenor added 1.4 million new subscribers in Q2 alone and estimates its share of the market at 38%-39%.
India also performed well, with revenue growing by 13% in local currency terms and EBITDA increasing to NOK141 million from NOK24 million, but there were strong hints that an exit from the market could be imminent. Brekke revealed that Telenor will not participate in the upcoming spectrum auction in India due to reserve prices being too high for it to generate a return and reiterated that the telco is evaluating its options with regard to its future there.
Reduced roaming prices and lower interconnect rates affected Telenor’s mobile operations in Norway – mobile revenues fell by 1.6% – but the telco is working on upselling customers to bigger packages to offset the impact. It is also working hard to add high-speed fixed broadband customers.
Its Norwegian arm recorded a 4% reduction in opex year-on-year in Q2 Brekke said, partly due to reductions in personnel, but "there is more to be done on the cost agenda in Norway," he admitted.
While Brekke said he is "very satisfied" with Telenor’s performance in Sweden, Denmark "is still very challenging," he explained, because "price competition is still very, very aggressive."
The telco also faces tough competition in Thailand – where operators are currently competing on the basis of offering heavily subsidised handsets to prepaid customers – and in Malaysia; the competitive landscape in the latter is "brutal," Brekke said.
