Telenor beats expectations with Q1 earnings

Norway's Telenor ASA today posted higher than expected first-quarter core earnings as Western economies continue to improve, and said it would cut investment spending, paving the way for a resumption of its stock buyback programme.

Telenor, which has a majority joint venture, Uninor, with the New Delhi-based Unitech Group, cut its India investments for 2010 to between 2.0 billion and 2.5 billion kroner, from 2.5 billion to 3.5 billion kroner, and the overall plan to between 13 and 14 per cent of revenue from 14 to 16 per cent.

"There's a combination here of a delay and improved ways of rolling out the network," Telenor chief executive Jon Fredrik Baksaas said about the India investment cuts at Telenor's first-quarter presentation. Telenor's second launch phase was now planned for later in the current quarter, he said, adding that 2010 was still seen as a peak year for cash expenditures in India.

"We are still of the view that 2010 will be strongest year of cash flow burn in a combination of capital expenditure and EBITDA loss," Baksaas said.

Analysts have long been sceptical about the move into India, where margins are wafer thin and competition intense for hundreds of millions of potential clients.

Baksaas said share buybacks would be executed "when time and performance proves it relevant," adding that Telenor would maintain a cap on net debt to EBITDA of 1.6. The credit metric stood at 0.7 at the end of the first quarter, allowing for flexibility.