The Nordic region's biggest telecoms operator TeliaSonera promised on Wednesday to return hefty amounts of cash to investors in coming years, sending its shares higher despite reporting weak earnings.
The Swedish-Finnish firm said it plans to distribute 30-50 percent of its net income as dividends, specifying its policy for the first time since the company was formed by the merger of Sweden and Finland's top operators in 2002.
It also said it would return an additional 30 billion Swedish crowns ($3.97 billion) to shareholders during 2005-2007 - worth some 6.4 crowns per share.
TeliaSonera shares jumped on the news, almost 7 percent at 33.80 crowns at 1153 GMT and outperforming a firmer DJ Stoxx telecoms index.
"The dividend policy is why the stock is so popular today because it is something people have hoped for some time," said fund manager Anders Jarheim at Ohman Kapitalforvaltning, which has $2 billion in funds under management and owns the firm's shares.
Chief Executive Anders Igel told a news conference that while TeliaSonera aimed to pay out more cash to shareholders in the coming years, it did not mean the firm was moving away from making acquisitions.
"We prioritise both," he said. "All the things we have said we want to do within our current footprint... is still valid."
The dividend announcement outweighed weak earnings from the firm, the result of fierce competition in the saturated Nordic markets that are home to telecoms majors Ericsson and Nokia.
TeliaSonera's April-June earnings before interest, taxes, depreciation and amortisation (EBITDA) - excluding one-off items - fell to 7.33 billion crowns from 8.07 billion a year ago, missing all forecasts in a Reuters poll.
Its EBITDA margin fell to 35.6 percent from 39.8 percent a year ago, below all estimates in the poll of 15 analysts.
TeliaSonera said it was able to keep its market positions at the expense of lower margins. On average prices fell 6 percent year-on-year, it added.
Sales rose slightly to 20.59 billion crowns, topping the consensus forecast of 20.34 billion.
"Sales were pretty much as expected, but profitability was slightly weaker," said Opstock Securities' analyst Olli Kahkonen who rates TeliaSonera shares "reduce".
Earlier this month, TeliaSonera bought a Danish mobile operator from France Telecom's Orange, but it has managed to buy only minority stakes in fast-growing foreign mobile companies Turkcell and Megafon in Russia.
TeliaSonera has a 43.8-percent stake in Russia's third-biggest mobile operator Megafon, and a 37.3-percent stake in Turkcell. In both cases, the robust growth of the local markets has made other owners reluctant to sell. "We have to be realistic ... we can't reach a majority in Russia or Turkey in the near future," Igel said.