Telenor squeezed by handset subsidies, Myanmar launch – Mobile World Live

Telenor squeezed by handset subsidies, Myanmar launch

11 FEB 2015

Telenor Group attributed a Q4 fall in EBITDA margin to its launch in Myanmar and the sale of subsidised handsets in various markets, particularly Thailand, as organic revenue grew 5.3 per cent – year-on-year – to NOK29.1 billion ($3.8 billion).

Adjusted EBITDA during Q4 was NOK9.1 billion, up 4 per cent from Q4 2013, but margin on that figure dipped from 33 per cent to 31 per cent over the same period.

The margin drop was more spectacular compared with Q3 2014, during which Telenor Group could boast an adjusted EBITDA margin of 38 per cent.

Dtac, Telenor’s operation in Thailand, contributed to the margin squeeze. While Q4 revenue was up 12 per cent year-on-year, to NOK5.26 billion, growth was fuelled by sales of subsidised handsets to combat what Telenor CEO Jon Fredrik Baksaas (pictured) described as “intense competition”. Adjusted EBITDA margin dropped from 32 per cent to 27 percent over the same period (and down from 37 per cent during Q3 2014).

The handset strategy, however, has worked in terms of connections growth. During the three months ended December 2014, Dtac saw net customer additions of 228,000 – a welcome reverse from a troubling six-month period previously which saw the operator suffer a net loss of 446,000 connections.

“Dtac has taken corrective measures to strengthen its market position and return to growth,” said Baksaas. “We are seeing early signs of improvement following the introduction of a cluster-based operating model, attractive market offerings and a network improvement programme. By expanding its 3G and 4G network, dtac aims to deliver the best internet network in Bangkok and 30 major cities this year.”

Home and a new market abroad
In Norway, Telenor’s domestic market, Q4 revenue was up 4 per cent, to NOK6.7 billion. Growth was helped by an 11 per cent increase in mobile subscription and traffic revenues. There was also a 105 per cent growth in median mobile data usage. Adjusted EBITDA margin was also up from 39 per cent (Q4 2013) to 41 per cent (although the margin was much better in Q3 2014, at 46 per cent).

Baksaas was upbeat about home market performance. “In Norway, the rising number of 4G enabled handsets together with our investments in network expansion resulted in strong mobile service revenue growth of 10 per cent,” he said. “For the first time ever there are more 4G phones in Telenor’s Norwegian network than 3G phones and our customers more than doubled their data use in the past year,” said Baksaas.

Revenue remained fairly flat in Sweden, at NOK3.11 billion, while adjusted EBITDA margin fell from 28 per cent (Q4 2013) to 25 per cent.

In Myanmar, where Telenor launched 2G and 3G services in late-September 2014, the operator racked up 3.4 million connections by year-end (40 per cent of which are daily active data users). Revenue in Myanmar amounted to NOK187 million during the three-month period.

Group net income for Q4 was NOK1.8 billion versus a net loss of just over NOK2 billion the same quarter the previous year. The improvement was primarily due to better performance from “associated companies”, including VimpelCom.

“Our performance in 2014 confirms Telenor Group’s position as one of Europe’s fastest growing telcos, with organic revenue growth of 5 per cent during the final quarter and 3 per cent for the full year,” maintained the Telenor CEO. “We reported revenues and earnings in line with our guidance for the year. During 2014, we added 20 million new mobile subscribers, of which 7 million in the fourth quarter alone.”

In 2015, Telenor expects revenue to grow by “mid-single digits” and its EBITDA margin to be in the 33 percent to 35 percent range (after 35.4 percent in 2014). It predicted that capital expenditure as a ratio of revenue would be in line with the previous year’s level.

Author

Ken Wieland

Ken has been part of the MWC Mobile World Daily editorial team for the last three years, and is now contributing regularly to Mobile World Live. He has been a telecoms journalist for over 15 years, which includes eight...More

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