Scandinavia’s largest telco is having a tough time. Its operations outside Sweden are struggling: in particular, the Danish and Finnish mobile operations and the international carrier unit give cause for concern. Telia now plans to introduce efficiency measures and reduce investment. However, this could damage long-term prospects.
Swedish telecom operator Telia has reported lower-than-expected results.
The Nordic region’s largest telecom operator, Telia, has reported lower than expected earnings for Q4 and the full year 2001. The downturn in the telecoms market has left the company with over-capacity and depressed prices.
The partly privatized company recorded a Q4 pretax profit of $85.83 million. Pretax profit for the year was $455.83 million, compared to $1.11 billion in 2000. Losses increased in its Danish and Finnish mobile operations and its international carrier unit, which builds and sells telephone networks, and capacity saw a $283 million write-down. Telia shares fell 8% on the news, close to an all-time low.
The entry of new international carrier competitors, coupled with delays in the expansion of retail broadband services, has created overcapacity and reduced prices. Telia predicts that a consolidation phase is on the cards – and it could now acquire the assets or customers of its struggling competitors. The low debt that Telia enjoys should allow it to make further acquisitions.
While most operators are expecting to see some improvement in the market this year, Telia remains downbeat. It believes the economic downturn will further dampen its business and plans to lower its level of investment significantly. Although this might improve profitability in the short-term, the company could miss out on opportunities in the long-term that other operators will exploit.
Investors are waiting to see how the company will cope, as the benefits from efficiency measures start to come through in the second half of this year. However, the downbeat forecasts and the investment cuts indicate that Telia is not optimistic about the future. It must tread a fine line between reducing investment to improve short-term profits and making sure it doesn’t lose out in the long-term, through lack of coverage and infrastructure.