TeliaSonera Has Record Earnings, Predicts Further Growth

Feb. 4.11 | About: TeliaSonera AB (TLSNF)

As I wrote about previously (see here and here), TeliaSonera (OTCPK:TLSNF) is a Swedish-Finnish telecommunications company with strong prospects for future growth as it continues to roll out its world-class 4G network. The company's 2010 earnings released this week both confirmed and reinforced my convictions.

Here are a few highlights from the release:

  • Net sales increased 4.2 percent for the fourth quarter and 3.5 percent for the full year.
  • Net income increased 8.3 percent for the fourth quarter and 12.7 percent for the full year.
  • Free cash flow decreased 57.7 percent for the quarter, primarily due to higher capex spending and increased taxes.
  • Subscribers increased by 2.6 million in the quarter for the consolidated operations to 156.5 million.
  • The company increased its dividend by 22%.

The only negative here is the decrease in free cash flow. This is caused primarily by capex spending. This is expected in the short-term as the company continues to roll out its 4G network into more countries. By spending the money to continue to build up its network, it is positioning itself well for future profits in smart phones and other mobile data plans.

TeliaSonera's CEO Lars Nyberg commented on the potential for growth in the company's portfolio:

The demand for smart phones is growing at an exceptional rate. In 2010, seven out of 10 new mobile phones sold in our Swedish stores were smart phones. Adding a continued strong demand for mobile broadband and the launch of tablet devices, we are expecting an eight-fold growth in data traffic in our network in three years' time. In Broadband Services, the demand for on-demand services, such as films, is gaining momentum and we rented out more than 2 million films through our video-on-demand TV service in Sweden last year.

The company also increased its holdings in both Nepal and Uzbekistan with the intention of increasing its presence in those two markets. It is continuing to look for growth both within its existing footprint and in neighboring areas.

Nyberg also explains how the company intends to make itself more efficient in 2011 to increase profits further:

One of our focus areas is to run cost-efficient operations. We had tailwind from previous cost savings during the first half of 2010. During the second half, the organization has identified further savings to be implemented during 2011. We also foresee that the common operating model and cross border organization within Mobility and Broadband Services will result in synergies. All in all, we aim to reduce the workforce by some 800 employees, whereof 640 in Sweden and 165 in Finland. At the same time, we have a need to recruit new competence and aim to hire 200 new employees in 2011.

TeliaSonera predicts that mobile growth in the Nordic region, increasing market share in Spain, and continued mobile (especially smart phone) penetration in Eurasia will continue to drive increasing earnings going forward.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.