* Shares fall 9 percent
* TDC lost two government tenders
* Expects regulator to set very low broadband prices (Updates share price, adds analyst)
By Annabella Nielsen
COPENHAGEN, Aug 7 (Reuters) - Shares in Danish telecoms group TDC, a former state monopoly, fell by around 9 percent on Thursday after it said it had lost two local government service tenders and indicated it would have to offer cheaper broadband services next year.
TDC told investors the Danish Business Authority (DBA), which regulates the telecoms industry in the country, was likely to propose rules that would force it to lower prices.
“The preliminary (DBA) draft will result in a 2015 price level that is significantly lower than the level the EU recommends for its member countries,” TDC said in its results statement.
“Wholesale pricing in (Denmark) will therefore be much lower than in other EU member countries.”
TDC also said it had lost two tenders to provide telecommunication services to municipal and regional authorities and won one other, but at lower prices than current contracts.
Second-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) fell slightly to 2.35 billion Danish crowns ($421 million) from 2.4 billion crowns a year ago and the average forecast of 2.4 billion crowns given in a Reuters poll of analysts.
TDC maintained its forecast for EBITDA in 2014 of over 9.6 billion crowns and a dividend of 1.50 crowns per share.
TDC’s share price closed down 8.9 percent at 51.35 crowns, its lowest since early May.
“There is no doubt it isn’t the quarterly performance that made the shares fall but a question of the problems expected in 2015 due to contract losses and regulatory pressure,” Alm. Brand analyst Michael Friis Jorgensen said.
Alm. Brand has a neutral rating on TDC with a share price target of 51 crowns.
Competition has pushed TDC to offer new services such as streaming television shows from popular channels like Time Warner’s U.S. TV service Home Box Office (HBO), which won its mobile division 20,000 new clients in the last six weeks of the quarter.
“It is a very positive development for TDC, but also a necessity for it to maintain its turnover,” Sydbank analyst Morten Imsgard said of the new client numbers.
“Sales are under pressure because ... other companies keep lowering their prices and TDC cannot compete on prices. But they can compete with content, and they launched a product other competitors cannot match,” Imsgard said. (1 US dollar = 5.5832 Danish crowns) (Reporting by Annabella Pultz Nielsen; Editing by Sabina Zawadzki and Shadia Nasralla)