February 8, 2011 / 9:25 AM / in 7 years

Telenor raps Vimpelcom on Russia as Q4 shines

OSLO/STOCKHOLM (Reuters) - Norway’s Telenor (TEL.OL) took a fresh swipe at its estranged Russian affiliate Vimpelcom VIP.N on Tuesday, saying the company has taken its eye off the ball at home as it pursues expansion abroad.

The move came as Norway’s dominant telecoms provider posted strong fourth-quarter earnings on the back of Asian growth. Telenor also sweetened its above forecast core earnings with a large dividend proposal coming at a time when its Russian operations are under threat and its biggest recent expansion, into India, is at the center of a corruption scandal.

Telenor is battling to stop 36 percent-owned Vimpelcom’s $6 billion bid to buy Italian mobile group Wind and control of Egyptian operator Orascom Telecom ORTE.CA from tycoon Naguib Sawiris. The deal would dilute Telenor’s holding, to a point where it claims it would be “dangerously close” to losing all influence.

“Telenor announced its opposition to the transaction because, from Telenor’s perspective, it was not strategically nor financially sound for Vimpelcom shareholders,” Telenor said.

“At this stage, we believe it is essential that Vimpelcom focus on regaining a loss of momentum in the Russian market.”

Concerned at losing its influence at Vimpelcom, Telenor has embarked upon legal action against Vimpelcom to try to block its Wind deal. This week it also issued an injunction that could force the Russian company to issue shares to Telenor if the cash-and-shares deal goes ahead.

Vimpelcom CEO Alexander Izosimov acknowledged in November that the group’s Russian performance was not satisfactory after losing its No. 2 ranking by subscribers to MegaFon, part-owned by TeliaSonera TLSN.ST.

MegaFon overtook Vimpelcom by Russian subscriber numbers in April 2010 and has since widened the gap between the two rivals, recording 25.8 million subscribers at the end of December to Vimpelcom’s 23.7 million.

Izosimov has said Vimpelcom plans a new range of business initiatives including network expansion in an effort to eventually win back its no. 2 ranking.


Telenor’s adjusted earnings before interest, tax, depreciation and amortization were 7.18 billion crowns ($1.24 billion) in October-December, compared with 6.93 billion a year earlier and a 6.92 billion average forecast from a Reuters poll.

Telenor said its organic revenue growth would be above 5 percent in 2011 compared with 6 percent last year, while its EBITDA margin would remain around 31 percent.

It also announced a 3.80 crown dividend, which it said was “on the high end” of the payout policy range.

    Telenor’s fourth quarter organic revenue grew 13 percent in established Asian operations -- the growth engine of its business which ranges from core Nordic markets, through Eastern Europe and into emerging Asian markets.

    “Overall, this is a positive report,” said Tore Toenseth, an analyst at Argo Securities. “EBITDA was slightly better than expected... dividend was higher than consensus estimates and guidance was slightly on the positive side as well.”

    Telenor said that it expected its Indian unit Uninor to have an EBITDA loss of around 4 billion crowns in 2011 and capital expenditure of 1.0-1.5 billion, compared with last year’s 4.25 billion EBITDA loss and 1.6 billion in CAPEX.

    “India is a very competitive market coupled with a challenging regulatory environment,” said Telenor, whose operations in India have come under the scrutiny of a corruption investigation engulfing the telecoms sector.

    Shares in Telenor were up 2.9 percent at 0916 GMT, while Tele2 was up 3.4 percent, both topping the STXE 600 Telecom index .SXKP, which was off 0.3 percent.

    Fellow Nordic telecom Tele2 (TEL2b.ST) posted in line fourth quarter earnings and also raised its dividend.

    Tele2 said it would pay out a dividend for 2010 of 27 Swedish crowns, compared to a forecast 17.34 crowns and forecast flat earnings in Sweden. Its growth engine remains in its Russian operations, for which it upped 2011 margin goals.

    Additional reporting by Patrick Lannin in Stockholm and John Bowker in Moscow

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