TeliaSonera’s net income and revenue fell short of analysts’ expectations during the first quarter, prompting the Nordic operator to emphasise once again its cost-cutting plans to protect margins.

Per-Arne Blomquist, TeliaSonera’s chief executive, said in statement that “traditional business models are being challenged by new customer behaviour” and that the “competitive situation remains demanding in many markets and puts pressure on overall revenue streams”.

Against this difficult backdrop, the TeliaSonera chief said he remained committed to bringing total net costs down by SEK2 billion ($308 million) over a two-year period. Delivering growing amounts of data, and protecting margins, remains a priority for the firm.

In the three months ended 31 March, net income attributable to TeliaSonera’s shareholders dropped slightly, by 0.3 per cent, to SEK4.1 billion, compared with the same quarter the year previously.

An average of 15 analysts estimates, compiled by Bloomberg, had predicted a net income of SEK4.3 billion.

Net sales fell 4.5 per cent, to SEK25.5 billion, over the same period. However, in local currencies (and excluding acquisitions) net sales declined by a more modest 0.9 per cent.

Thanks primarily to lower capital spending, TeliaSonera managed to boost its year-on-year free cash flow by 10 per cent, to SEK2.4 billion, during the first quarter.

In TeliaSonera’s Mobility Services business unit, which accounts for about half of the Scandinavian group’s turnover, net sales fell by 5.1 per cent, to SEK11.87 billion.

Revenue, says TeliaSonera, was impacted by significant reductions in regulated interconnect rates in most markets in which it operates. The cuts wiped out SEK500 million from TeliaSonera’s top line compared with the previous quarter.

In Sweden, TeliasSonera’s biggest mobile market by revenue (SEK4.01 billion), the net sales drop was a comparatively modest 2.2 per cent.

Increased pressure on voice and messaging services was a contributory factor to the decline, although TeliaSonera also points out that sales in its home market were impacted by reduced equipment sales since there were no major product launches in the quarter.

More encouragingly, the underlying cash profit margin from Swedish operations improved to 46.1 per cent (from 45.3 per cent) as a result of higher gross margins from reduced sales of lower-margin equipment sales.

Drops in net sales (in local currencies) were more pronounced in Denmark (15.3 per cent), Estonia (13.2 per cent), Finland (10.5 per cent) and Norway (7.7 per cent).

In Eurasia, which accounts for about a fifth of the group’s turnover, TeliaSionera is making much sturdier progress.

Net sales were up 5.4 per cent, to SEK4.68 billion, while underlying cash profits jumped 9.9 per cent, to SEK2.48 billion. In local currencies, net sales jumped 13.6 per cent. Growth is being spurred by mobile data revenue.

In TeliaSonera’s third-biggest Eurasian market, Uzbekistan – Kazakhstan and Azerbaijan are the biggest – the group’s mobile operations have benefitted from the exit of Uzbek, a subsidiary of MTS, Russia’s largest mobile operator.

Uzbek had its licence revoked in August as part of dispute involving a criminal case against local MTS managers and a back-tax claim.

TeliaSonera’s activities in Uzbekistan have also come under scrutiny. In early February, the Swedish law firm Mannheimer Swartling released its report on TeliaSonera’s investments in Uzbekistan.

“The firm did not find any substance to the allegations that we committed bribery or participated in money laundering,” said Blomquist in his first-quarter statement, “[but] it directed serious criticism at TeliaSonera for shortcomings in the investment process.”

As part of its efforts to make its Eurasian operations more transparent, TeliaSonera announced the appointment this week of Norton Rose, a lawyer firm, to “conduct a thorough review of the transactions and agreements made in the past few years and the company’s partners in Eurasia”.

It is estimated that the review of all transactions in Eurasia will be completed by the end of 2013.