* Q4 adj. EBITDA 6.74 bln SEK vs 7.15 bln analyst forecast
* Poor quarter in Sweden the main factor in earnings miss
* Shares drop 3.8 pct on earnings and forecast (Adds company comments, shares, details, background, analyst comment)
By Johannes Hellstrom
STOCKHOLM, Jan 25 (Reuters) - Telia missed fourth-quarter earnings expectations on Friday and warned that weakness in Sweden, its biggest market, would persist, knocking the Nordic telecom operator’s stock.
Shares in Telia were 3.8 percent lower at 0916 GMT, compared with a flat European telecommunications sector, after it said it would cut operating costs in Sweden by around 3 percent in 2019 to limit the impact of falling fixed line income.
“That challenging environment will continue, but this has not changed my view on 2019 and 2020 for improving trends in Sweden,” Telia’s chief executive Johan Dennelind said, adding that Swedish profits would remain under pressure this year.
Telia, which competes with Sweden’s Tele2 and Norway’s Telenor, would cut staff and consultants, Dennelind told Reuters after its fourth-quarter group earnings before interest, tax, depreciation and amortisation (EBITDA) fell short of market expectations.
Excluding non-recurring items, Telia’s EBITDA rose to 6.74 billion Swedish crowns ($744 million) from 6.52 billion a year earlier, but the result was well short of the 7.15 billion crowns forecast by analysts in a Reuters poll.
Telia is refocusing on growing its core Nordic and Baltic operations, supplying a full range of mobile, fixed line and TV operations and has almost completed a withdrawal from Central Asian markets.
It has also made large acquisitions last year with a $2.6 billion deal to buy TDC’s Norwegian business and the planned $1 billion purchase of Sweden’s Bonnier Broadcasting, as it expands its media business.
Telia’s service revenue fell in Sweden, while marketing costs and credit losses increased and Dennelind said the negative trend within fixed line had been worse than expected.
“In particular, Swedish fixed trends are worsening with voice line loss reaccelerating,” Credit Suisse said in a note.
Telia said in October that it expected the impact from reforms to its Swedish business, including replacing outdated IT systems, to come in 2020 rather than 2019.
Telia said it would propose a dividend of 2.36 crowns, above a median forecast of 2.30 crowns, and said it expected operational free cash flow to rise to between 12-12.5 billion crowns in 2019 from 10.8 billion in 2018. ($1 = 9.0592 Swedish crowns)
Reporting by Johannes Hellstrom; editing by Jason Neely and Alexander Smith