Telia to Slash 850 Jobs on Earnings DisappointmentTelia to Slash 850 Jobs on Earnings Disappointment

Telia is to cut about 850 jobs or 3% of its total workforce after sales and earnings for the second quarter came in below expectations.

The cuts will include about 650 jobs dedicated to the operator's Swedish business, or about 8% of the total Swedish headcount, said Telia Company in a statement.

Johan Dennelind, Telia's CEO, said the move was aimed at reducing costs by 5% in the second half of the year, compared with the last six months of 2016. So-called "structural" cost-saving initiatives are also expected to reduce costs by 3% in 2018.

Headquartered in Sweden, the operator has about 21,000 employees in total but also relies on some "external" consultants who will be affected by the latest cost-cutting program.

The move came as Telia reported a 6.4% year-on-year fall in revenues for the second quarter, to 19.8 billion Swedish kronor ($2.4 billion), and a 4.6% drop in earnings (before interest, tax, depreciation and amortization), to SEK6.1 billion ($730 million).

Telia blamed foreign exchange effects for much of the decline but also flagged pressure on EBITDA in Sweden. On an adjusted basis, that fell 6.9% in the second quarter, to SEK3.3 billion ($400 million), compared with the year-earlier period.

Addressing the issue of job losses, Dennelind said: "This is vital for a competitive Telia Company as we still see pressure on our legacy revenues and as anticipated falling one-off revenues from fiber."

Dennelind said Telia was starting to "reach the tail of the fiber rollout potential" and that difficulties in obtaining permits and overcoming "intermediary-related issues" had hampered the pace of its fiber deployment.

"Given that the second quarter is traditionally a quarter where many households are connected, these issues had a clear negative impact on revenues and profitability," he explained in a statement. "This, combined with increased operational expenses, are the two main reasons why our EBITDA is declining 3 percent [organically] in the second quarter."

Telia's fiber network currently passes about 1.6 million properties. It is sticking to a target of reaching 1.9 households by the end of next year, but connected just 12,000 single homes in the second quarter, down from 22,000 in the year-earlier period.

The rollout of gigabit broadband access networks is spreading. Find out what's happening where in our dedicated Gigabit Cities content channel here on Light Reading.

The redundancies program is not altogether surprising. In April, Light Reading reported that Telia was then wrestling with mounting costs at its domestic unit that might derail its earnings ambitions this year. (See Telia's Sweden Cost Problem Threatens 2017 Targets.)

Having now announced plans for job cuts, Telia is clinging to guidance that full-year EBITDA will be about the same as in 2016 and has even raised guidance for free cash flow to more than SEK7.5 billion ($900 million), up from a previous figure of SEK7 billion ($840 million).

But the earnings update sent Telia's share price down 3.5% in Stockholm during early-morning trading and marks a big disappointment for a company that has given up its emerging-market ambitions and is now focused on opportunities in Nordic and Baltic countries.

In September 2015, Telia announced plans to withdraw from seven Eurasian markets where the competitive and economic environment was proving unfavorable. (See TeliaSonera to Quit Eurasia, Focus on Europe.)

It has yet to find a buyer for most of those operations, although Dennelind insisted progress was "being made" in this area. "We reiterate that our best estimate is that the assets will be disposed during 2017," he said.

On top of its other problems, Telia was previously fined $1 billion by US and Dutch legal authorities after being charged with corruption in Uzbekistan, one of the markets it is looking to exit, although the fine was reduced from an original level of $1.45 billion.

In terms of net income, including both continuing and "discontinued" operations that Telia is selling, the operator reported a loss of SEK308 million ($37 million), compared with a profit of SEK3.9 billion ($470 million) a year earlier.

There was some good news for Telia elsewhere in Europe, with impressive growth in sales and earnings in the markets of Estonia, Finland, Lithuania and Norway.

Telia's Danish business also registered modest growth in sales but saw adjusted EBITDA fall 3.7%, to SEK153 million ($18 million), because of higher operating expenses.

— Iain Morris, , News Editor, Light Reading