Growth in mobile data and emerging markets could not stop TeliaSonera registering a disappointing set of 2011 financial results.
The Sweden-based operator revealed that net sales were down two percent to €11.8 billion compared to 2010. Net income was down 11 percent year-on-year to €2.4 billion.
Last year ended with a whimper as the company unveiled fourth quarter results that delivered a modest one percent y-o-y increase in net sales to €3.1 billion. Net income fell five percent to €644 million over the same period.
President and CEO Lars Nyberg (pictured) nevertheless claimed that Q4 marked “the end of another strong year” for the company. TeliaSonera’s “longer perspective will compensate for a short-term negative impact on revenues,” he added.
Specifically, he was referring to the investments the company has made in areas such as 4G. During 2011, TeliaSonera invested more than €1.9 billion in networks and licenses, which led to the company’s capex-to-sales ration rising to 16.5 percent in 2011.
“We have taken the technology leadership in many of our countries by being the first operator to launch 4G services,” continued Nyberg. “The roll-out will continue and in Sweden our 4G services now cover 200 locations and will expand by one city or village every day during 2012.”
Worryingly, the market does not seem to share the CEO’s optimism – TeliaSonera’s share price decreased 12.3 percent in 2011 – and forecasts for the 12 months ahead are unlikely to change their opinion.
The company said it expected net sales to grow 1-2 percent, while EBITDA would remain flat.
Key to future growth and profitability is the company’s mobility services business unit, which saw rises in net sales and EBITDA both in Q4 and 2011 as a whole.
Strong performance in Sweden and, interestingly, Spain along with “exceptional demand for smartphones” across the board drove growth in this segment.
TeliaSonera’s Eurasian business unit, which is concentrated on former Soviet states such as Kazakhstan, also saw growth.
However, the company’s associated companies in Russia and Turkey proved to be a drag. Russian operator MegaFon, in which TeliaSonera holds 43.8 percent, saw a drop in income. The story was repeated in Turkey, where the company holds a 38 percent stake in TurkCell.
Another problem is the company’s broadband services unit, which includes fixed line services. Net sales there fell four percent y-o-y in Q4 and eight percent during 2011 as a whole. EBITDA was flat and down seven percent respectively.
As ever, the picture is a complicated one overall. But the bottom line remains that growth areas such as mobile data and Pay-TV are not yet making up for losses in the traditional business areas.
Until that tipping point is reached, we will have uncertainty. As such, CEOs such as Nyberg are right to take a long-term view, but success in the long term will be determined by winning battles in the short term.
One of these is ensuring it continues to win new customers amid the threat from new players to the market. Encouragingly for TeliaSonera, the total number subscriptions it has rose by 13 million to 170 million over the year.
But this is just one battle among many and, short-termist or not, it will have to improve quickly to win more.