December 9, 2022

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Telenor receives 1 billion write-offs in Pakistan

Telenor receives 1 billion write-offs in Pakistan

On Tuesday morning, Telenor released numbers for the second quarter. Telenor’s pre-depreciation operating profit ended at NOK 12.5 billion, compared to NOK 12.08 billion in the same quarter last year. Analysts from 10 brokerages had expected an EBITDA of 11.9 billion NOK up front.

The quarterly report states that the company finished the second quarter with a pre-tax profit of NOK 222 million, down from NOK 4.83 billion in the same period last year.

The second quarter report indicates that the company is writing off NOK 2.5 billion in Pakistan due to the macroeconomic situation and the unfavorable ruling in the Supreme Court on license renewal. As a result, the Group has reassessed the value in use of Telenor Pakistan’s fixed assets with updated earnings estimates.

anticipate falling

Analyst Frank Maaø at DNB Markets was not surprised by the cuts in Pakistan and expects a decline in the company in the future.

Frank Mau, analyst at DNB Markets.

Frank Mau, analyst at DNB Markets. (Photo: DNB)

The development on the revenue side is above expectations, but when we are strict and adjust more than half a billion kronor in positive non-recurring items, the actual EBITDA result is somewhat on the weak side. Telenor is also lowering its full-year interest, tax and depreciation forecast, especially as it adjusts for non-recurring items, so their prospects end up just below analysts’ relatively low expectations for the company, Maaø writes.

Telenor stock fell about three percent after the exchange opened.

He also adds that net debt is much higher than expected, which is a negative for the company.

The company’s turnover in the second quarter was NOK 28 billion, compared to NOK 27.1 billion in the same period last year. Analysts expected an average turnover of NOK 27.3 billion in the second quarter.

When Telenor presented first-quarter results in May, the exchange declined to be impressed. Extremely high electricity prices, pandemic effects, the phase-out of the copper grid and significant investments eroded Telenor’s first-quarter results and numbers fell below analyst expectations.

Don’t lie about estimates

Henriette Trondsen, analyst at Arctic Securities, says the write-down of 2.5 billion related to Pakistan has been a case for several years, so although the issue is not new, the writedown was not in the estimates.

Henriette Trondsen, analyst at Arctic Securities.

Henriette Trondsen, analyst at Arctic Securities. (Photo: Gunnar Lear)

– I don’t foresee major impacts on Telenor’s trajectory after the report. The stock will likely make it marginally weaker than other carriers. There will only be slight changes to the estimates because the guidance for 2022 is roughly in line with the estimates, Trondsen says.

She believes the future focus will be on Capital Market Day on September 20, when there may be an update on mergers and acquisitions in Thailand and Malaysia, as well as updated guidelines.

When Borsen opened Tuesday morning after the quarterly report was announced, Telenor’s stock fell from the start. Immediately after the opening, the stock fell three percent and the price was 128.8 NOK.

progress in Asia

In Asia, Telenor has struggled, among other things, with tourists not returning to countries like Thailand after the Covid pandemic, which leads to lower guest revenue on mobile networks. But in the second quarter, Telenor will increase its sales in countries such as Thailand, Maylasia and Bangladesh, which had the strongest growth in the latter countries. The three companies gained a total of 1.6 million new mobile customers in the second quarter.

Telenor’s Thailand subsidiary, Dtac, earned an EBITDA before other items of NOK 2.26 billion in the second quarter of 2022, compared to NOK 2.58 billion in the same quarter last year.

According to estimates obtained by Infront, EBITDA was expected to occur up front before other items of NOK 2.11 billion.

The company’s sales were around NOK 5.5 billion in the second quarter, an increase of NOK 135 million over the same period last year. Thai mobile operator Telenor acquired 412,000 new mobile customers and at the end of June had nearly 20.3 million customers.

Malaysia’s Digi Mobile Telenor posted a slight increase in sales in the second quarter and improved its EBITDA by 107 million compared to the same period last year to 1.6 billion. The company increased its customer base by NOK 271,000 to NOK 10.5 million.

Grameenphone, Asia’s most profitable Telenor, maintains an EBITDA margin of 61 percent with sales of NOK 4 billion and an EBITDA result of nearly NOK 2.5 billion. The company increased its customer base by 0.9 million to 84.6 million customers.

Mergers pending

Telenor has entered into merger agreements in both Malaysia and Thailand. The quasi-governmental Norwegian Communications Group is still waiting for the green light from the authorities in the two countries.

At the end of June, it was announced that Malaysian telecom regulator had given Telenor and their merger partner Axiata Group approval for the two companies to move forward with the next stage of the proposed deal. Now, the country’s mobile integration is dependent on Finanstilsynet’s approval in Malaysia.

In November 2021, Telenor entered into an agreement to merge Thai subsidiary Dtac with rival True, owned by the Thai giant Charoen Pokphand Group. If the deal is approved, the combined company will be listed on the Thai Stock Exchange and will have a total of 55 million customers. The parties aim to leave one-third ownership.

It takes time, CEO Sigve Brekke says during the presentation on the authorities’ work to approve mobile mergers in the two countries.

We expect to get approval during the second half of 2022 in both Malaysia and Thailand, says Brik.

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