TeliaSonera on Tuesday reported a slight increase in third quarter sales but lowered its full-year earnings guidance mainly due to intense competition in Kazakhstan.
"Profitability [in Kazakhstan] was also affected by increased interconnect costs due to higher off-net volumes following recent product launches," explained TeliaSonera CEO Johan Dennelind, in a statement. "We have undertaken actions to mitigate the impact but the expectation is that the trends will continue short term."
This, combined with the ongoing macroeconomic challenges in the wider Eurasia region, prompted TeliaSonera to revise down its 2015 earnings outlook. The company now expects full-year earnings before interest, tax, depreciation and amortisation (EBITDA) to be below 2014 levels, compared to its previous guidance of in line with 2014.
Eurasia is a particularly sore point for TeliaSonera.
After two years spent trying to put its house in order following accusations of historic corruption in multiple Eurasian markets, TeliaSonera in September announced the decision to exit the region on a market-by-market basis.
Last week, investment research firm Muddy Waters claimed TeliaSonera had made corrupt payments totalling 17 billion kronor (€1.8 billion). It also accused the telco of publishing misleading financial reports and of withholding information regarding the scale of its problems in Eurasia.
Even more contentious was Muddy Waters’ assertion that TeliaSonera’s decision to sell off its Eurasian units was influenced by the impending publication of an exposé of its activities there.
TeliaSonera denied any wrongdoing, and responded at more length on Tuesday to the criticisms.
"Our auditors, Deloitte, have reviewed our financial reports and have not identified any new information that causes them to believe that the consolidated financial statements for 2014 or the 2015 interim reports issued should have been presented in a different way," TeliaSonera said, in a separate statement.
"The decision [to exit Eurasia] was not taken in haste, it was based on thorough analysis and process," the telco continued. "One important reason for the decision was that the board and management of TeliaSonera, which took office in 2013, have inherited partner relationships that the company would not have chosen today, and that the ultimate beneficiary owners of minority shareholders in Azerbaijan and Uzbekistan, remain unknown."
One criticism levelled at TeliaSonera is that it has not published the results of an investigation into its conduct carried out by U.K. law firm Norton Rose Fullbright.
TeliaSonera insisted that it is not possible to publish the review without risking lawsuits being filed against it, because "Norton Rose Fullbright’s view is not necessarily shared by those implicated."
In its third quarter financials, TeliaSonera reiterated that Eurasia will continue to weigh on results.
Group revenue for the three months to 30 September came in at SEK27 billion, up 2.4% year-on-year on an organic basis, while EBIDTA edged down 0.9% to SEK9.7 billion. Net income increased to SEK4.5 billion from SEK4.1 billion in Q3 2014.
The results were driven by positive revenue trends in Sweden, where revenue grew 1.5% to SEK9.1 billion, and Europe, where revenue increased 5% to SEK11.1 billion. The performance was offset by Eurasia, where revenues fell 3.2% to SEK5.5 billion.
At the end of the third quarter, TeliaSonera had 60.9 million mobile customers, up from 59.6 million 12 months ago.
"Looking ahead, we expect both…Sweden and Europe to show further progress in the fourth quarter, but that the challenges will remain in Eurasia, accentuated by Kazakhstan," Dennelind said.
The results were published a day after a Bloomberg report claimed that TeliaSonera’s Spanish arm Yoigo could be back on sale, after the telco received interest from local player MasMovil and multiple private equity firms.
