TeliaSonera reported unexpectedly weak earnings on Friday and said it planned to cut 2,900 Nordic staff as part of an efficiency drive to reach a promised 5 billion Swedish crown ($775 million) savings target.
The firm, the Nordic region's biggest telecom operator, said fourth quarter earnings before interest, tax, depreciation and amortisation (EBITDA), excluding non-recurring items, fell to 7.21 billion Swedish crowns from 7.77 billion a year earlier.
The forecast in a Reuters poll was for 7.89 billion.
"The market may have missed the seasonality of TeliaSonera -- that the third quarter usually is good and the fourth quarter is bad. But the discrepancy is bigger than it usually is," said ABG Sundal Collier analyst Jesper Wilgodt.
TeliaSonera shares at 8:30 a.m. London time were at 53 crowns, down 6.2 percent.
TeliaSonera proposed a dividend of 4.00 crowns per share, near expectations for 4.05 crowns in the Reuters poll.
The dividend included an extraordinary payout representing 2.2 crowns per share.
The company said about two-thirds of the 2,900 staff cuts would be in Sweden and the rest in Finland.
It will take a restructuring cost of about 4 billion crowns, two-thirds of which will be in 2008.
Chief executive Lars Nyberg made cost savings one of his key themes when he was appointed last year.
"Intensified efficiency improvement is imperative for TeliaSonera to be able to continue shifting the product mix by investing in mobility and IP-based services," the company said.
It said operating expenses for the Swedish and Finnish operations totalled about 36 billion crowns in 2007, with a primary base of some 22 billion crowns being addressed by the planned cuts.
The firm had previously targeted a 5 billion crown reduction in its cost base.
Margin Disappointment
The company had an EBITDA margin of 28.9 percent excluding one-off items, which was below the 31.6 percent expected by analysts.
TeliaSonera said its aim was to keep these margins in 2008 at the same level as last year.
"The EBITDA margin is soft and their ambition to sustain margin levels is clearly a disappointment for the market," said Jari Honko, analyst at EQ Bank.
Sales were slightly higher than expected at 24.92 billion crowns versus the 24.89 billion forecast.
But results were dragged down by the firm's broadband division, which sells broadband services over its fixed-line network as well as IP-based television, voice over the internet and traditional telephony.
Fourth-quarter broadband sales dipped 1.2 percent to 10.37 billion crowns from 10.50 billion a year earlier.
Mobility services, which deal with mass consumer markets, boosted revenues by 10 percent to 11.46 billion crowns.
The smaller integrated enterprise business lifted sales to 3.59 billion crowns from 3.30 billion.
"I think it's quite important what's happening in Sweden in the fixed voice versus broadband business," said Honko.
"During Q3, I got the idea that broadband sales could become a growth business once again, but the fixed voice decline is not offset by the broadband business yet."
Profits from associated firms in Eurasia have been a big driver for earnings and there TeliaSonera posted some of its best growth as revenues from Kazakhstan and Azerbaijan surged.
Overall sales from Eurasian operations jumped to 2.91 billion crowns from 2.29 billion.
Angry Unions
The job cuts drew a swift response from unions.
Janne Ruden, chairman of the SEKO union in Sweden, said the cuts were irresponsible.
"There is a term which describes it very well, it is quarterly capitalism."
Antti Rinne, head of the TU union of white-collar workers in Finland, said the move was "unfathomable" and added the union would meet on Tuesday to decide on any actions.