Telia caps share buyback on weak economic outlook

(Reuters) - Telia Company TELIA.ST ended a share buyback plan early to preserve cash in a weakening economic environment, sending its shares down on Thursday despite better than expected quarterly earnings.

Shares in the company dropped 5% at 0955 GMT, nearly erasing all of the gains made so far this year.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the third quarter came in at 8.26 billion Swedish crowns ($845 million) excluding non-recurring items, up from 6.98 billion last year.

The company’s EBITDA was expected to come in at 8.03 billion Swedish crowns, according to a Refinitiv poll.

“We have previously stated that the second half of 2019 would be an improvement versus the first half of the year and the third quarter of 2019 confirms this,” said acting Chief Executive Christian Luiga.

However, the company said it would wind up a share-buyback program at 10 billion crowns, less than the amount it previously planned to spend.

Luiga, appointed chief executive officer in September, told Reuters in an interview he had concerns about global economic trends and the effects on Nordic and Baltic markets.

A slower-than-expected start to 2019 had impacted the financial leverage negatively, the company said.

“Together with a somewhat weaker economic outlook in general and to keep flexibility to invest in the coming years, the board of directors have decided not to execute on the remaining SEK 5 billion ($511 million) of the three-year share buyback program,” the company said.

The company said opportunities to reduce capital expenditure in 2020 would be limited, due to its ambition in fiber broadband and 5G networks.

Net sales climbed 2.4% to 21.18 billion crowns ($2.16 billion), compared with 20.68 billion last year.

Telia has been withdrawing from central Asia markets to focus on Sweden, Norway, Finland, Denmark, Lithuania and Estonia, and is instead focusing on expanding in the television business.

Meanwhile, shares in Swedish rival Tele2 TEL2b.ST were up 5% after it announced its own results on Thursday.

Reporting by Colm Fulton, Editing by Sherry Jacob-Phillips and Elaine Hardcastle