Telenor misses f'cast, no word on India exit

Telenor, the Norwegian mobile phone operator with 140 million subscribers across Europe and Asia, lifted its dividend and raised the prospect of a share buyback as its big Indian unit cuts its loss.

State-controlled Telenor said on Wednesday it expected organic revenue growth of five per cent this year and a rising core operating margin for 2012 as Uninor, its Indian subsidiary, cuts its core operating loss by more than three quarters.

At the group level, Telenor's most closely watched core operating figure — earnings before interest, taxes, depreciation and amortisation — rose to 7.1 billion crowns in the fourth quarter, compared with a forecast for 7.6 billion.

India is also Telenor's biggest risk, given the danger of losing its licences, after amassing 28 million customers at a cost of about $2 billion.

The Supreme Court in India, the world's second biggest mobile -phone market with 900 million customers, recently ordered the revocation of telecoms licences, including 22 held by Telenor, because of corruption in a 2008 licencing round.

The court gave four months for new rules to be set, raising the prospect Telenor might be forced to pay more for the right to stay, even as it remains loss-making in the country.

Telenor shares were up 1.9 per cent by 1010 GMT, on the dividend increase — to 5.0 crowns from 3.8 crowns —- and comment by the company that it was considering a share buyback, and would not pay any price to stay in India.

India has been a loss-making operation for Telenor as it cut margins to gain customers. India was seen loss making in 2012 as well.

"We have to see how India will develop, so we have to take our outlook with great caution," chief financial officer Richard Olav Aa said, adding Telenor would be "disciplined" if it was asked to pay more for the licence. "Our business case cannot tolerate any huge extra cost in India," he said.

Baksaas said the worst case for Telenor would be if the revoked licences were offered in a sale to all players, including incumbents, which would push prices "too high".

The comment was in line with previous Telenor statements that it may exit India, risking a further charge on top of a $712 million write down in the fourth quarter.

"The 2012 guidance is in line with expectations and, in any case, the key share price driver in the next few weeks and months will be India," Santander said in a note to clients. "At this stage, an exit would probably be the most positive outcome for shareholders, but we do not view this as a highly likely result."

Tore Toenseth, an analyst at Sparebank1 Markets said: "In total, I think the fourth quarter is mixed. But the outlook for 2012 is positive and so is the progress in India where they were able to lower the cost base quite substantially".