Telenor raises margin forecast after strong second quarter


UPDATE 2-Telenor raises margin forecast after strong second quarter

* Adjusted EBITDA 12.7 bln crowns vs 11.72 bln forecast
    * Raises forecast for 2017 earnings margin
    * Launches share buyback programme
    * Targets 1 billion crowns in cost cuts in 2017
    * Shares up 8 pct to highest since Nov. 26, 2015

 (Adds detail on cost-cutting)
    By Gwladys Fouche and Ole Petter SkonnordOSLO, July 17 (Reuters) - Norwegian telecoms company Telenor
<TEL.OL> raised its operating profit margin forecast for 2017 on
Monday and reported better than expected second-quarter results,
sending its shares to their highest since 2015.
    Telenor said it had reduced operational costs in its biggest
market, Norway, and revenue rose in its main Asian markets,
Bangladesh and Thailand, helping all its business units boost
their margins.
    The company, which is majority owned by the state, said it
now expected its operating profit (EBITDA) margin to come in at
38 percent-39 percent this year, up from a previous forecast of
37 percent.
    Second-quarter earnings before interest, tax, depreciation
and amortisation (EBITDA) rose to 12.7 billion crowns ($1.6
billion) from 11.38 billion crowns a year ago, well above the
average forecast in a Reuters poll of 11.72 billion.
    "(In Norway), we have already broken the trend of increased
opex (operational expenditure), that's why we change our EBITDA
outlook," CEO Sigve Brekke told an earnings presentation.
    Telenor is now targeting cuts in operational spending of one
billion crowns this year, of which 600 million crowns has
already been achieved, the company said.
    "To achieve our new 2017 target, the trend has to continue
in the second half. The majority of the cost cuts will come in
the fourth quarter," Chief Financial Officer Joergen C. Arentz
Rostrup told the presentation.
    He reiterated the company's target for 2018-2020 of reducing
costs by 1 percent to 3 percent annually.
    Telenor's stock jumped 8 percent to 154.6 crowns its highest
since Nov. 26, 2015 and making it the second-best performer on
the Europe's STOXX 600 <.STOXX> on Monday.
    "There were some uncertainties in the market related to
weaker development in Norway and emerging markets in Asia," said
Zilvinas Jusaitis, an analyst at Norne Securities, who has a
"Hold" rating on the stock.
    "However, today's results were strong and the company
revised its EBITDA margin target for 2017."
    Telenor has some 174 million mobile phone subscribers across
Asia, Scandinavia and southeastern Europe. Most are in Asia, in
particular Thailand, Malaysia and Bangladesh.
    With a free cash flow of 9.9 billion crowns, Telenor also
launched a buyback programme for up to 2 percent of its
registered shares, representing up to 30 million shares.
    Based on Friday's closing price, the buyback programme will
mean 4.3 billion crowns will be returned to shareholders,
Telenor said. The Norwegian state's 53.97 percent stake in
Telenor will remain unchanged, said the company.
    Rostrup repeated that Telenor was committed to increasing
its annual dividend as well.
   ($1 = 8.1891 Norwegian crowns)

 (Editing by David Clarke)
 ((terje.solsvik@thomsonreuters.com; +47 918 666 70; Reuters
Messaging: terje.solsvik.thomsonreuters.com@reuters.net))


This article appears in: Fundamental Analysis , World Markets , Stocks , Economy , Earnings
Referenced Symbols: TEL

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