Tele2 looking for acquisitions after Russian sale

By Mia Shanley and Simon Johnson

STOCKHOLM (Reuters) - Swedish telecoms firm Tele2 is on the look-out for acquisitions in Europe and Eurasia after the recent sale of its Russian business for $3.5 billion (2.3 billion pounds), its chief executive said on Thursday.

Tele2 has already set ambitious growth targets for its remaining operations, the biggest being in Sweden, Norway, the Netherlands and Kazakhstan, but Mats Granryd said the company's strong balance sheet now gives it the opportunity to buy additional growth.

Tele2 is looking at across Europe and Eurasia for acquisition targets, but is also looking at establishing new operations through buying mobile radio licences, Granryd said.

Targets would be countries with a population of at least 5 million, good GDP growth, a limited number of operators and preferably high prices, he said.

"There is plenty of room to grow in 4G and smartphones in other European countries," he said.

Granryd's upbeat message is in strong contrast to the gloomy picture painted by other operators in Europe.

Pressure from regulators and fierce competition has pushed many operators to cut dividends and consider asset sales.

Tele2 said it continued to see strong growth ahead after posting first-quarter earnings marginally ahead of market expectations on Thursday.

The results were the group's first since selling its Russian unit for $3.5 billion, a move which came as something of a relief for many investors as it lacked the right 3G and 4G licences to grow properly in the country.

Tele2's first-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) dipped to 1.49 billion Swedish crowns ($229.2 million) from 1.51 billion a year ago but were ahead of the average forecast of 1.45 billion given in a Reuters poll of analysts.

The company's shares were up 1.6 percent at 107.50 crowns at 1301 BST, outperforming the Stoxx 600 Europe telecoms sector index which was up 0.7 percent.

For this year Tele2 stuck to its existing forecast for Sweden, by far its most important market now that it has left Russia, of net sales of 10.1 billion to 10.3 billion crowns and an EBITDA of 2.9 billion to 3.1 billion crowns.

However, investors remain to be convinced that the company can reach its ambitious growth targets.

Following its Russian exit, Tele2 said its operations in Sweden, the Netherlands, Norway and Kazakhstan would drive compounded annual EBITDA growth of between 10-12 percent up to 2015, a goal which it repeated on Thursday.

Revenues are expected to grow 5-7 percent a year.

Tele2 itself has said analysts on average expect EBITDA to grow at a slower pace of around 7 percent a year while revenue growth is seen at around 4 percent a year.

(Editing by Greg Mahlich)