I think operating profit will grow anyway in 2020 – E24

The case is being updated …

Although telecommunications is one of the industries least affected by the crown, on which society is most dependent, the industry has not avoided realizing the pandemic.

In addition to the fact that travel activity has dropped dramatically and foreign roaming billing has dropped, canceled sporting events and closed communities have also meant that sports packages on TV or SIM cards in stores have not have been sold.

Telenor lost a total of 2.1 million mobile customers in the third quarter, compared with a 5.2 million increase in the same period last year.

This is demonstrated by the company’s recent quarterly report, which comes the day after it became known that the company is selling its head office in Fornebu for NOK 5.0 billion, with a profit of NOK 1.3 billion.

Last year, the number of mobile customers in the Telenor Group increased by 12 million. So far this year, Telenor has lost 5.7 million customers and is left with 180.3 million.

CEO Sigve Brekke says he is “particularly satisfied” with the customer growth Telenor has seen in Finland, Denmark and Sweden, and also highlights growth in Pakistan and Bangladesh. But he also points out:

– We still see the effect of COVID-19 in our operations, mainly in Thailand and Malaysia. In Thailand, revenue loss from reduced tourism continues, while in Malaysia we are experiencing increased competition. In Myanmar, the customer base is affected by the ongoing ID registration associated with SIM cards, says Brekke.

Third quarter accounts – Telenor

Reduce costs

Throughout the year, Telenor had to change its forecasts both in March and this summer. In the accounts for the third quarter, the telecommunications giant is making a new change and raising its earnings expectations.

The company still believes that revenue will drop a bit, but at the same time it believes that they will be able to achieve an increase in adjusted operating profit (EBITDA, adjusted for acquisitions and sales) anyway.

– The third quarter results show the strength of Telenor’s operating model. It has given us flexibility and allowed the operation of socially critical services in all of our businesses at an uncertain time. The quarter’s result is positively affected by accelerated digitization and the organization’s increased pace of modernization, says CEO Sigve Brekke in an announcement on the stock exchange.

Lower overseas usage and lower sales in Asia contributed to underlying turnover falling 2.3% compared to the third quarter of last year. Underlying traffic and subscription revenue fell 2.0%.

At the same time, an 8.0 percent cut in operating costs contributed to underlying growth in gross operating profit (EBITDA) of 3.6 percent.

These are the key figures for Telenor (measured compared to the third quarter of 2019:

• The turnover increased from 28.4 to 30.0 billion crowns.
• Traffic and subscription revenue increased from 21.7 billion to 22.9 billion
• Adjusted profit (EBITDA before acquisitions) increased from NOK 13.1 billion to NOK 14.6 billion
• Profit after tax increased from NOK -679 million to NOK 4.5 billion, after deducting the share of the co-owners in the profits of the various Telenor companies.

The strong improvement in the bottom line of a total of 5.2 billion is due to an improvement in operating profit of 1.5 billion, a gain of 500 million from the sale of a property in September and an adjusted sales gain of 701 searches, as well like 700 million in foreign exchange earnings and lower taxes.

If you look at the analysts’ expectations, they show that the analysts got it right as expected. According to InFront consensus estimates, revenue was expected to be $ 30.3 billion and EBITDA at $ 14.0 billion. Profit after tax was expected to reach 3.9 billion, that is, well below the final figure.

Here are Telenor’s updated forecasts for 2020

• Telenor originally estimated so-called organic growth in subscription and traffic revenue (own growth adjusted for acquisitions and sales) of between zero and two percent in 2020. Thereafter, it shifted to expect “lower” revenue than last year. . This summer, this was changed in expectation of “a low single digit decline.” This forecast is still valid.
• The company also estimated organic growth in gross operating profit (EBITDA, adjusted for acquisitions and sales) of two to four percent, driven by modernization measures. This was in line with “lower EBITDA growth than indicated above.” This summer, Telenor adjusted it to “Stable organic EBITDA”, but now this is being adjusted upward to “low single digit EBITDA growth”.
• Finally, Telenor expected a level of investment, not including license and spectrum expenses, of 15% of revenues in 2020. This was reduced in March to “about 13 percent” and will not change.. As turnover is expected to decline, investments in crowns and øre will also be lower.

Telenor invested NOK 3.67 billion in the third quarter (before license fees), which is slightly less than the same period last year.