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Telenor raises guidance on Asia recovery

Norway’s Telenor reported a larger-than-expected decline in first-quarter net profit this morning but shares in the firm rose after it raised its margin forecast for the rest of the year. Telenor reported net profit of NOK1.04 billion (US$172 million) for the quarter, down from NOK1.62 billion a year earlier and below analyst expectations of NOK1.29 billion, according to Dow Jones Newswires polling. Sales fell 3 percent to NOK23.95 billion, marginally beating expectations for NOK23.91 billion, while EBITDA fell to NOK7.09 billion from NOK7.84 billion, ahead of expectations for NOK6.83 billion. On an organic basis, revenue rose 3 percent. Telenor CEO Jon Fredrik Baksaas (pictured) described Q1 as “a strong quarter” and pointed to strong performances in its Nordic markets and signs of recovery in Asia. As a result, Telenor was able to raise its 2010 EBITDA margin forecast to around 28 percent from 27-28 percent previously, and also cut its guidance for capital expenditure (excluding licenses and spectrum) to 13-14 percent of revenue from 14-16 percent. According to an Associated Press report, Telenor shares rose 1.4 percent to NOK82.50 (US$13.67), in morning trading in Oslo in response to the news. Telenor's closely-watched Indian unit Uninor made a first-quarter EBITDA loss of NOK974 million due to start-up costs, on revenue of NOK56 million. However, despite admitting that the group faced “challenges” in India, Baksaas said that network rollout was proceeding at pace. “Network quality is already high in the circles where we have launched, and 180,000 points of sale and around 2,500 employees are in place to support Uninor’s development in the market,” he said in a statement. Elsewhere, Baksaas noted the successful completion of the VimpelCom Ltd. transaction in the quarter. The new entity – a merger between Telenor’s Kyivstar network in the Ukraine and Alfa Group’s VimpelCom in Russia – started trading on the NYSE in April 2010. Baksaas said that the market value of Telenor’s 39.6 percent economic stake in the company was worth approximately NOK55 billion after the first day of trading. Telenor’s mobile operations added 5 million subscriptions during the quarter, reaching a total of 179 million.

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