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Tele2 to retreat from Eastern European markets

Tele2 AB CEO Lars-Johan Jarnheimer said Sweden's second largest phone company will likely retreat from markets in Eastern Europe as it realigns to focus on the countries where it has made acquisitions.

Tele2 will likely complete the regional retreat, first announced this month, by the middle of next year, Jarnheimer said yesterday at a conference organized by Morgan Stanley in Barcelona. “We're not talking about the Dutch market, the markets where we have already made acquisitions,” Jarnheimer said. “Your fantasy needs to go more in the direction of Hungary. Normally it takes six months for these processes.” Stockholm-based Tele2, which has expanded into markets including Russia as growth slows in Western Europe, said on November 1 that it may retreat from more broadband markets. The company last month agreed to sell its French fixed-line and broadband unit to Vivendi SA's SFR unit for 3.3 billion krona ($465 million) to focus on wireless services in France. Tele2 operates in 22 countries in Europe, and markets in central and eastern Europe include Poland, the three Baltic states, Russia and Croatia. The Baltic states, Lithuania, Estonia and Latvia, and Russia are the company's fastest growing region, with revenue surging 67% in the 3Q.

The company in May withdrew from the Czech Republic after regulatory changes made it more difficult to compete with the former monopoly Cesky Telecom AS. The retreat caused revenue from the Central European region to drop 9% in the 3Q, Tele2 said when it reported earnings on November 1. “We never fall in love with assets,” Jarnheimer said. “We have quite an open mind. If we make more money, it's a simple call.” Tele2 this month reported a 3Q loss of 3.66 billion krona on costs related to the sale of a French unit and goodwill writedowns. The company forecast full-year earnings before interest, tax, depreciation and amortization will be at the upper end or “slightly higher” than a previously forecast range of 5.5 billion krona to 6 billion krona. EBITDA in 2007 will be “significantly higher.” Tele2 had 104 million krona in costs in the 3Q from Croatia, which it entered a year ago, because of marketing spending to bolster its position there. Operating profit from Central Europe, comprising Germany, Austria, Poland and Hungary, dropped 14% in the period, Tele2 said. (Bloomberg)