Nordic Telcos
Diverging Trends; downgrade Elisa to UW
Telecom Services
Maurice PatrickAC
(44-20) 7325-9025
maurice.patrick@jpmorgan.com
John-Paul Davids
(44-20) 7325-5119
jp.davids@jpmorgan.com
J.P. Morgan Securities Ltd.
For Specialist Sales advice, please
contact:
Alex Latham
(44-20) 7325-9396
alex.w.latham@jpmorgan.com
See page 57 for analyst certification and important disclosures, including non-US analyst disclosures.
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Telenor: Change (%) in NOK 3Q08-4Q08
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
NOK/USD
NOK/BDT
NOK/RSD
NOK/PKR
NOK/THB
NOK/HUF
NOK/RUB
NOK/UAH
EBITDA EPS
Source: I/B/E/S
Telia: Change (%) in SEK 3Q08-4Q08
-2 0 . 0
-1 5 . 0
-1 0 . 0
-5 . 0
0 .0
5 .0
1 0 .0
SEK/USD
SEK/DKK
SEK/EUR
SEK/NOK
SEK/EEK
SEK/LAT
SEK/LTL
SEK/RUB
SEK/TYR
E B IT DA E P S
Source: I/B/E/S
In this report we take a fresh look at the Nordic Telcos. We conclude that
operating trends are diverging, with Norway looking increasingly benign
whilst Finland deteriorates. Telenor and TeliaSonera have both been
materially impacted by recent forex moves, with TeliaSonera the main
beneficiary. Amongst the group, valuation for Telenor still looks most
attractive, despite the India overhang.
• Telenor (Overweight): All well apart from India. Recent forex moves
(NOK weakness) do boost 09e revenues/EBITDA materially, but EPS
falls due to Russia/Ukraine. Our DCF-based PT of NOK70 (prev. NOK
80) provides 53% upside, with the stock trading at a significant discount
on multiples. We see limited downside risk to forecasts, and indeed see
room for Telenor to cut costs/dividend to limit the size of the planned
rights issue.
• Elisa (Downgrade to Underweight, from Neutral): earnings risk. We
see material risk to earnings in Finland, as recent operating trends from
both Elisa and TeliaSonera show a marked deterioration in usage/pricing
trends. Cost-cutting initiatives may save 2008 EBITDA, but 2009
guidance looks at risk, with the shares trading at a slight premium to the
sector on 09e EV/EBITDA.
• Tele2 (Neutral): Refinancing overshadows solid Q4. Operational
momentum remains strong (esp Russia/Sweden mobile). Forex has a
limited impact, and bulls will be frustrated by valuation for Russia, lack
of disposals and refinancing limiting clarity (and movement) on
shareholder returns. Tele2 trades at a discount to the sector on 09e
EV/EBITDA and EV/OpFCF
• TeliaSonera (Neutral): Beneficiary of FX. Recent forex moves (SEK
weakness) boost EBITDA (09e +8%) and EPS (09e +8%) materially, and
new CEO Lars Nyberg is focusing on costs and growth. Despite this,
although 4Q08 should look robust due to Forex, we identify risk to
earnings in 2009 in key markets, and highlight lack of movement in
associate ownership. We see limited upside on DCF, with the company
trading at an 8% premium on 09e EV/OpFCF.

Table of Contents
Telenor ......................................................................................3
Elisa .........................................................................................12
Tele2 ........................................................................................17
TeliaSonera .............................................................................23
Telecom Comps......................................................................29
Appendices
Appendix I: Telenor's move into India - Is it really that bad?
.................................................................................................30
Appendix II: Finland Mobile...................................................38
Appendix III: Sweden Mobile .................................................43
Appendix IV: Norway Mobile .................................................46