April 25, 2014 / 5:56 AM / 6 years ago

UPDATE 1-Marketing weighs on Tele2 Q1, sees higher results ahead

* Marketing costs in Sweden and Netherlands weigh on results

* Repeats outlook

* Sees improved results in coming quarters in Sweden and Netherlands (Adds detail, background)

STOCKHOLM, April 25 (Reuters) - Swedish telecom operator Tele2 repeated its 2014 outlook on Friday, promising better results in coming quarters in its two biggest markets after posting first-quarter core earnings below forecast, dragged down by marketing costs.

With doubts over its future in Norway and speculation that Hong Kong’s Hutchison Whampoa could be interested in its Swedish business, analysts see a possibility that Tele2 could be split up and sold in parts.

Hopes for M&A activity have underpinned its shares against a backdrop of top manager exits and a loss in a December auction in Norway for mobile spectrum it needs to develop its network, which left it without a clear path forward in its third biggest market.

Tele2 said last month it had hired investment bank ABG Sundal Collier to look at its options in Norway, a country it had targeted for future growth, but it provided no news on the review, which might lead to Tele2 selling the business.

Tele2 said marketing costs in Sweden and the Netherlands had weighed on results in the first quarter.

“I believe that these efforts will yield improved results in the coming quarters,” Tele2 Chief Executive Mats Granryd said in a statement.

Mobile end-user service revenue - excluding equipment sales - grew by 3 percent in Sweden in the first quarter, the same pace as in the fourth quarter. Sweden accounts for around 40 percent of Tele2 sales.

Tele2’s earnings before interest, tax, depreciation and amortisation (EBITDA) were 1.38 billion Swedish crowns ($210 million) compared with a forecast of 1.45 billion in a Reuters poll of analysts and 1.49 billion a year ago.

Tele2 said it still expected revenue of around 30 billion crowns in 2014, EBITDA earnings of around 6.0 billion, and a capex level of about 4.5 billion.

Link to full report: r.reuters.com/far78v ($1 = 6.5777 Swedish Crowns) (Reporting by Sven Nordenstam; Editing by Alistair Scrutton)

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