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. Last Updated: 07/27/2016

Tele2 Q3 Profits Beat Forecast

STOCKHOLM — Swedish telecoms firm Tele2 posted a slight increase in third-quarter profit on Wednesday and said expansion in its key Russian market was going well and would be sped up.

Tele2 said it planned to launch in up to 14 new regions in Russia this year, higher than its original plan of 12.

"It is a very strong report. What is really good are the 1.1 million new Russian customers," said one analyst who declined to be identified. "Russia looks really strong. Sweden looks kind of weak, but in total it's a very good report. I would expect the share to go up a few percent on this."

With its home markets mature and competition in Western Europe tough, Tele2 has sold off a number of assets in recent years, including operations in the Czech Republic and Switzerland. Earlier this month, Tele2 sold its French operations to Virgin Mobile for 575 million Swedish crowns ($83.15 million).

It has focused much of its effort on Russia, where the company has 20 new mobile licenses. Seven new regional mobile operations were launched in the third quarter.

The company now has 13.3 million customers in Russia after adding 1.1 million in the July to Sept period. Tele2's target is to have 18 million to 19 million subscribers by the end of 2011.

Much of the growth will come from the new regional operations, and chief executive Harri Koponen said all 20 should be operational during the first half of 2010. "Tele2's future growth lies within our emerging market footprint, with a strong emphasis on Russia," he said.

The rollout of new regions in Russia has gone "in line with or better than our own expectations," the company said.

Group earnings before interest, tax, depreciation and amortization (EBITDA) were 2.4 billion Swedish crowns ($347 million) versus a mean forecast in a Reuters poll of 2.3 billion and 2.2 billion in the year-earlier quarter.

In Sweden, where Tele2 has said it aimed to raise its market share among premium customers, the firm said it had added 107,000 new customers, nearly half of whom were in the higher-revenue segment. Net sales, however, were flat year on year and EBITDA was down.

The company has said it expects its EBITDA margin in Sweden to drop in 2010 as a result of higher customer acquisition costs.

In the Baltic states, the company said the environment continued to be tough and recovery will be very slow.