Telenor announced an increased focus on cash flow, with modest revenue growth and cost reductions expected to support continued growth in dividends. At its capital markets day, the operator said it expects organic service revenue growth of 1-2 percent in 2017, after a 1.1 percent increase last year, and an EBITDA margin rising to around 36 percent, from 35.4 in 2016. Capital expenditure is expected to drop to 15-16 percent of revenue, excluding licences, from 20.0 percent last year.
For the period 2018-2020, Telenor expects the low single-digit organic revenue growth to continue, while the margin should be supported by reductions of 1-3 percent per year in operating expenses. Capex will remain at around 15 percent of revenue, helping the dividend to grow each year. For 2016, Telenor increased its dividend 4 percent to NOK 7.80 per share.
Telenor said it still targets net debt at less than 2.0x EBITDA and will also consider share buybacks extraordinary dividends on a case-by-case basis. Free cash flow in 2016 reached NOK 10.3 billion, an increase of NOK 1.9 billion compared to 2015.
In the fourth quarter of 2016, Telenor reported revenues down 1 percent year-on-year to NOK 33.14 billion, while organic growth reached 0.6 percent, led by customer growth and mobile data demand at its Asian operations. Adjusted EBITDA dipped to NOK 10.79 billion from NOK 10.86 billion a year ago, impacted by a negative tax decision in Sweden of NOK 0.2 billion. The net result moved to a profit of NOK 2.29 billion from a loss of NOK 2.13 billion a year ago, thanks to lower one-time charges and improved results from affiliates like Vimpelcom.
