Norwegian telecom group Telenor offset increased price competition in its Nordic operations with strong growth in Asia in the first quarter while Danish rival TDC compensated with cost savings. Telenor, still smarting from a battle over strategy with Russian telco group Vimpelcom, has benefited from exposure to a number of fast-growing Asian markets, with organic revenue growth at 13 percent on average in the quarter from its Thailand, Malaysia, Bangladesh and Pakistan operations.
"The Asian operations were the main contributors to subscriber and revenue growth," Telenor Chief Executive Jon Fredrik Baksaas said on Wednesday. Booming mobile data demand in strong Nordic economies also helped Telenor, though some eastern European markets where it operates have recovered more slowly from the financial crisis.
"In the Nordic region, mobile voice usage is fairly stable while data continues to grow. In Norway and Denmark, there is increased price competition and more comprehensive measures on cost reductions are required," Telenor said in a statement. Telenor reported a 4.7 percent rise in first-quarter core profit, in line with estimates, and confirmed its full-year targets.
Danish telecom operator TDC reined in costs, helping it post a bigger than forecast rise in quarterly core profit and also stuck to its full-year outlook. "Strong growth in our pay-TV division as well as continued efficiency gains across the company more than offset negative impacts from landline-to-mobile migration and price competition in the domestic mobile market," TDC said.
TDC stuck to its guidance for full-year 2011 revenue to stay at the 2010 level and for EBITDA to grow about 2 percent. First-quarter revenues grew 0.9 percent year-on-year to 6.61 billion crowns, above analysts' average expectation of 6.56 billion in the Reuters poll.
Chief Financial Officer Pernille Erenbjerg told Reuters TDC was "very pleased" the revenue growth was positive. She said that the Danish mobile telecom market is in a phase of fierce competition and transition towards lower-priced all-in-one packages marketed on line, but TDC maintained its domestic mobile clientele. Telenor repeated 2011 targets for organic revenue growth of above 5 percent and an EBITDA margin of around 31 percent.
"It was a touch below expectations at the EBITDA level, driven primarily by the higher than expected corporate costs and somewhat weaker margins in the Norwegian business," said Handelsbanken Capital Markets analyst Jan Dworsky.
Telenor stock was up 1.5 percent by 1247 GMT, TDC shares gained 3 percent and both outpaced a flat STOXX Europe 600 telecommunications index. Telenor reiterated its commitment to Vimpelcom on Wednesday after it had failed to stop the Russian mobile operator's $6 billion purchase of Wind Telecom assets in a deal that dilutes Telenor's influence in the company.
The Norwegian company is also continuing a separate arbitration process to allow it to raise its stake in Vimpelcom back to the level from before the Wind transaction. "We accept the full process (of Vimpelcom buying Wind Telecom) and now we will work constructively to improve the operational side of the new group," CEO Baksaas told Reuters.
"There is a big challenge here for the (Vimpelcom) management to make this big group efficient, at par with peers in the industry, and that's our main interest." Telenor's deal-making skills turned the Norwegian company into a global player with roughly 200 million mobile clients and a current market capitalisation of about $28 billion. But this has been tarnished by its apparent loss of influence in Vimpelcom.
Analysts have said Telenor was once again "outmanoeuvred" by Vimpelcom co-owner Altimo, controlled by Russian billionaire Mikhail Fridman, who pushed through the $6 billion deal with Egyptian tycoon Naguib Sawiris despite Telenor's objections. Telenor also has problems in India, where its unit is involved in a graft scandal.
Telenor has denied any responsibility in the multi-billion dollar scandal and said any potential wrongdoing took place before it bought its licences from Unitech in 2008. Early clarity on telecoms regulatory issues in India was "vitally important" for Telenor and the sector, Baksaas said.