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TELENOR

Telenor sees slowdown in 2016 as profits plunge

Norwegian telecoms operator Telenor said on Wednesday it expected its earnings to slow this year after provisions and impairment losses heavily impacted its 2015 earnings.

Telenor sees slowdown in 2016 as profits plunge
Telenor chief executive Sigve Brekke presented the company's 2015 results in Oslo on Wednesday. Photo: Vidar Ruud / NTB scanpix
Telenor's share price slumped on the Oslo stock exchange, shedding 7.5 percent in early afternoon trading after the group's fourth quarter earnings came in below analysts' forecasts. 
 
Last year Telenor saw its net profit plunge by 62 percent for the full-year, to 3.4 billion kroner (€353 million, $398 million), with a loss of 2.1 billion kroner in the fourth quarter alone.
 
Gross margins on earnings before taxes, depreciation and amortisation (EBITDA) remained nonetheless stable, at 34.5 percent.
 
For 2016, the group said it expected its EBITDA margin to land at between 33 and 34 percent and forecast organic growth of two to four percent, after registering growth of 4.7 percent last year, which boosted sales to 128.2 billion kroner.
 
“We are … entering 2016 with increased competition in some of our key markets,” chief executive Sigve Brekke said in a statement.
 
In the fourth quarter, Telenor registered an impairment loss of 2.1 billion kroner in Denmark.
 
The country has been the source of recurring problems for Telenor: earnings are regularly in the red and the company had to axe plans to merge its Danish subsidiary with its Swedish rival TeliaSonera in September because of the risk of anti-trust issues.
 
The Danish impairment loss comes on the heels of a 5.4 billion kroner impairment loss Telenor registered in the third quarter for problems related to its 33-percent stake in Russian subsidiary Vimpelcom, which has been accused of corruption in Uzbekistan.
 
VimpelCom is being investigated in the United States and the Netherlands for alleged kickbacks paid to a company linked to the daughter of the Uzbek president, in exchange for licenses in the country in the 2000s.
 
Telenor has denied any wrongdoing. It has said it wants to offload its stake in the Russian operator but there are few potential buyers, according to analysts.
 
Meanwhile in Thailand, Malaysia and its home market Norway, which accounts for a quarter of Telenor's sales, margins are under pressure amid rife competition.
 
The group, which is 54-percent owned by the Norwegian state, now counts more than 200 million subscribers in a dozen countries in Asia and Europe.

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TELENOR

Norway’s Telenor sells out of India as tycoon weighs in

Indian telecom giant Bharti Airtel will buy the local operations of Norway's Telenor, it said Thursday, as the ultra-competitive mobile market is shaken up by the country's richest man.

Norway's Telenor sells out of India as tycoon weighs in
Former Telenor CEO launching the company's ill-fated India business in 2009. Photo: peerdahl/Wikimedia Commons
Tycoon Mukesh Ambani launched Reliance Jio's 4G network in September with an audacious free service for the rest of 2016, followed by vastly cheaper data plans and free voice calls for life.
 
The move forced rivals to slash their tariffs and scramble to match the deep pockets of Jio, which is backed by Ambani's vast energy-to-chemicals conglomerate Reliance Industries and picked up 100 million subscribers in its first six months
   
Bharti's acquisition is the latest movement towards consolidation in India's telecoms sector as major players try to position themselves to best face the tough new environment.
   
The move, which still needs to be approved by regulators, will enhance its coverage, the company said in a statement to the Bombay Stock Exchange (BSE), and see Telenor exit India.
   
“The proposed acquisition will include transfer of all of Telenor India's assets and customers, further augmenting Airtel's overall base and network,” the Indian firm said in the statement.
   
Last month British mobile phone behemoth Vodafone announced that it was in talks to merge its Indian unit with Mumbai-based Idea Cellular in its own move to counter Jio's rise.
   
That deal would create India's largest telecoms company. Global brokerage firm CLSA estimated that the pair would command a combined 43 percent share of market revenue, ahead of Airtel, which is currently the market leader, on 33 percent.
 
Reliance Communications — owned by Ambani's brother Anil Ambani — and Tata Teleservices, part of the sprawling salt-to-steel Tata conglomerate, are also reportedly in talks to join forces.
   
Reliance merged with telecom operator Aircel in September last year. Bharti Airtel's shares surged more than five percent in Mumbai morning trade following the Telenor deal announcement.
   
“The decision to exit India has not been taken lightly,” Sigve Brekke, Telenor Group CEO, said in the statement.
   
“After thorough consideration, it is our view that the significant investments needed to secure Telenor India's future business on a standalone basis will not give an acceptable level of return,” he added.
   
Telecoms analyst Baburajan Kizhakedath said Telenor was quitting India because the intense competition meant there was no scope for growth. “The Airtel-Telenor deal is probably the best exit route for Telenor,” he told AFP.