Mkt Sees Sonera's Glass As Half Full After FY Report
Dow Jones International News Services - February 12, 2001 09:47
By Poul Funder Larsen and Xueling Lin
Of DOW JONES NEWSWIRES
COPENHAGEN (Dow Jones)--Stock in Finnish telecommunications company Sonera Corp.(SNRA) has been hammered over the past year, but Monday's full year report predicting accelerated growth for 2001 may signal a tentative change in fortunes.
Sonera is forecasting increased sales growth this year despite a considerable slowdown in key communications markets and strong growth from its mobile Internet subsidiary Sonera Zed. Analysts welcomed the report after Sonera's disappointing earnings performance last year but they added a note of caution about strategic direction.
"The release today contained no negative surprises, and on the positive side Sonera seems to be showing healthy growth in its new business areas," said John Karidis, an analyst with Commerzbank in London.
At 1420 GMT Monday Sonera stock was trading at EUR17.40, up 1.3% on the day and above an intraday low of EUR16.05, touched shortly before release of the full-year numbers. Sonera has been a major casualty of the bear market for European telecommunications stock over the last twelve months. Down some 10% this year, it has lost more than 80% of its market value since hitting a peak of EUR97 in March 2000.
And policy issues are seen as central to the company's recovery.
"The key issues for Sonera aren't so much result numbers, they're strategic," said Jo Oliver, analyst with Lehman Brothers. "Sonera lacks scale and you need scale in mobile," he argues.
And Lars Horslund, analyst with Danske Securities in Copenhagen, also said that Sonera's ambitious international investments have yet to prove their worth.
"We think some of the projects, for example the 3G (mobile investment) in Germany, are too big. We just don't understand why they're doing it. It's too risky," he said.
All key earnings figures were already contained in a preliminary statement released Jan. 18, so what analysts were keener to hear about was the future.
Sonera was upbeat about Zed's potential, predicting sales "to increase fivefold this year from last year's pro forma figure of about EUR10 million."
Within six months Sonera expects Zed to be available to at least 80 million mobile phone users on three continents.
The company also said that sales of Sonera SmartTrust, its mobile security solutions provider, are likely to be twice as high as 2000's pro forma figure of EUR25 million.
Last year Sonera invested an additional EUR240 million in the development of its new businesses, including Zed, SmartTrust and its Applications Service Provider business that offers clients on-line access to software.
This large investment was a major reason for Sonera's lower than expected pre-tax profit, excluding one-off gains, of EUR310 million for the full year 2000 - down one-third compared with 1999.
Monday Sonera also reassured the market that a planned listing of Zed and SmartTrust is on track.
But Lehman Brothers' Oliver sounded a word of caution regarding Zed and SmartTrust.
"They're still young ventures which have a lot to prove. They've started to make commercial agreements....which is encouraging, but they need to show they can create value."
On the top line Sonera continued to grow its sales last year, up 11% to EUR2.06 billion.
A breakdown of the figures for Sonera's core operations in the full year report were also a shade stronger than expected, a pleasant surprise given previous disappointments, analysts said.
"The concern in January was there was no detail on domestic operations and profitability of mobile operations. As it was, the mobile numbers were in line if not a bit better than we'd expected," said Oliver.
Company Web Site sonera.fi
-By Poul Funder Larsen, Dow Jones Newswires; 45-3311-1524; poul.larsen@dowjones.com
(END) Dow Jones Newswires 12-02-01
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