TeliaSonera boss Johan Dennelind has acknowledged that economic problems in Eurasia could make it hard to complete a sale of networks in the region this year.
The Swedish operator announced plans in September to quit Eurasian markets, where its local subsidiaries face an array of competitive, economic and regulatory challenges. (See TeliaSonera to Quit Eurasia, Focus on Europe.)
Although it has already begun treating Eurasian operations as "discontinued" in its earnings reports, Telia Company today conceded that finding a buyer for these businesses could prove challenging given the circumstances.
"Macro is troublesome in many markets and you could argue the timing is wrong," Dennelind told analysts at a presentation of the operator's fourth-quarter results this morning. "But focusing efforts into the Nordic and Baltic markets is more important. We have to make sure we exit responsibly -- we are not running away and leave the keys on the table."
Following reports late last year, Dennelind confirmed that TeliaSonera is still in discussions with Turkcell Iletisim Hizmetleri A.S. (NYSE: TKC) about a sale of its 58.55% stake in Fintur, a holding company for Eurasian operations, but that other players are also interested. (See Eurobites: Telefónica, Huawei Team on Enterprise Cloud.)
"We've noted the interest from Turkcell and there are other interested parties," said Dennelind. "We'll come back when there is more to say."
Turkcell currently owns the remaining 41.45% stake in Fintur.
In December, TeliaSonera also revealed it had agreed to sell its 60.4% stake in Nepalese operator Ncell to Asian telecom group Axiata in a $1.3 billion deal. (See TeliaSonera Sells Ncell Stake to Axiata.)
Despite the concern about the timing of a Eurasian divestment, investors seemed encouraged by the latest set of earnings, sending TeliaSonera's share price up more than 1% in morning trading in Stockholm.
Revenues from continuing operations rose by 5.9% in the final quarter, to 22.7 billion Swedish kronor ($2.65 billion), compared with the year-earlier period, while EBITDA was up 11.1%, to SEK6.6 billion ($770 million).
But the withdrawal from a joint venture in Denmark with Telenor Group (Nasdaq: TELN), prompted by regulatory opposition to the deal, triggered a non-cash impairment charge of SEK1.9 billion ($220 million). As a result, net income fell from continuing operations by 51.5%, to SEK1.42 billion ($170 million).
Including discontinued operations, TeliaSonera swung to a net loss of about SEK3 billion ($350 million), from a profit of SEK2.9 billion ($340 million) a year earlier, due largely to other writedowns in Uzbekistan.
Commenting specifically on difficulties in Eurasia, Dennelind also said it had been a "terrible year" in Kazakhstan due to a mixture of "really bad macro, currency devaluation and operations not being able to adjust."
TeliaSonera is aiming to maintain EBITDA at the 2015 level of about SEK25.3 billion ($2.95 million) this year, and it says capital expenditure will "peak" in 2016 due to investments in fiber and the digital transformation of its IT systems.
It plans to spend SEK14-15 billion ($1.63-1.75 billion) in total, compared with SEK14.3 billion ($1.67 billion) last year and just SEK12 billion ($1.4 billion) in 2014.
Dennelind told analysts that legacy IT systems were no longer up to the job and that the bulk of TeliaSonera's "digital transformation" would be completed this year, although he expects to have to continue supporting some older PSTN systems "for a few years after 2017." (See TeliaSonera Looks to IT Revamp for New Lease of Life.)
"We are cleaning up the old system and setting the right platforms in place to adapt to new customer behavior, which is more online than ever before," he said. "I don't think this can [all] be done in one year but the main investments will be."
Besides overhauling its IT systems, TeliaSonera is rolling out fiber to homes in Sweden, where it faces strong competition in the broadband market.
Its network now covers about 1.3 million homes and the rollout has led to a rise in service revenues in Sweden thanks to increased customer spending on broadband and TV products, according to the operator.
— Iain Morris, , News Editor, Light Reading