Norwegian telecom Telenor sees profit drop 61 percent amid battle over Russia stake
By APThursday, July 23, 2009
Telenor posts 61 pct drop in Q2 profit
OSLO — Norwegian telecommunications group Telenor ASA on Thursday reported a 61 percent slump in second-quarter profit, due to sliding revenues and losses in its stake in Russian mobile operator VimpelCom.
Net profit tumbled to 1.38 billion kroner ($220 million) during the quarter, a sharp decline from 3.54 billion kroner in the same period last year. Second-quarter revenues held steady, slipping slightly to 26.9 billion kroner this year from 27.1 billion kroner in 2008.
The group’s shares closed up 1 percent at 53.93 kroner in Oslo.
A strong quarter for Telenor’s Bangladeshi, Norwegian, and Pakistani operations contributed to the sustained revenue stream.
However, the Nordic group sustained heavy losses in the Ukranian market, due both to that country’s ongoing recession and to drops in the value of Ukraine’s currency, Telenor vice president Paal Kvalheim said.
This year’s second-quarter revenues from the group’s Ukranian operation were almost 1 billion kroner lower than they were in the second quarter of 2008.
In addition, a 414 million kroner loss from associated companies, in particular due to write downs of Telenor’s VimpelCom stakes, was especially damaging to the Norwegian concern’s net profits.
In April, a Russian court ordered Telenor to pay $1.7 billion to VimpelCom as restitution for earlier dealings in Ukraine. The court also froze the Nordic company’s 29.9 percent stake in VimpelCom, pending further litigation. Telenor has appealed both rulings.
In a statement, Telenor CEO Jon Fredrik Baksaas called the VimpelCom claims “unfounded.”
The Nordic telecom group warned that losses attributable to VimpelCom are estimates and may change following an external audit of VimpelCom-related finances, which Telenor will finalize in the third quarter.
“For the rest of the year we expect revenues to remain under pressure. We will continue to scale our activities to deliver a strong operating cash flow and sustain our market positions,” Baksaas said.
