Tele2, the Swedish-based telecoms company, reported a drop in fourth-quarter earnings on Friday and disappointed investors by declining to comment on renewed speculation of a break-up of the company.

“I never comment on rumours, and I won’t comment on the Danish rumours either, because it comes and it goes,” Lars-Johan Jarnheimer, chief executive, said in a news conference on Friday. “We will always investigate if it is possible for us to be more transparent so that we can show the value of the company. But we haven’t taken a decision so far”.

A Danish newspaper article said that the company had hired Morgan Stanley to make a strategic analysis of its business aiming at a possible break-up. The news sent the company’s shares up 4 cent in early morning trade. Later in the morning the share price eased to below Thursday’s closing price.

Analysts have speculated about the possibility of a break-up especially after news this month that Securitas, the security group, was spinning off three divisions.

Tele2’s earnings before interest, tax, deprecation and amortisation fell to SKr1.60bn ($202m) in the quarter from SKr1.77bn a year earlier, disappointing some of the analysts. Profit in the quarter slumped to SKr254m from SKr1.19bn as margins got under pressure because of rapid growth in Baltic countries and in Russia. Earnings figures included a one-off gain of SKr137m from the sale of the company’s fixed-line operations in Britain and Ireland.

Average revenues per user increased to SKr157 compared with SKr148 in the fourth quarter a year earlier.

Revenues at southern Europe division collapsed but strong central Europe and growth in Baltic countries and Russia boosted operating revenue in the quarter to SKr13.9bn from SKr11.2bn. A Reuters forecast had estimated revenues to total SKr13.5bn.

Analyst Sam Morton at Dresdner Kleinwort Wasserstein said that although full-year headline revenue growth of 16 per cent is encouraging, this growth is costly and margins are falling in all regions except UK and Benelux.

“Stripping non-recurring sales gain EBITDA is 9 per cent below consensus as Baltics and Russia, Southern Europe and Benelux are weak,” he said. “Clearly Baltics and Russia margin weakness is a fair price to pay for better growth, but we are concerned that weakness in Southern Europe and Benelux is indicative of pressures facing resellers from VOIP and dial-up attrition,” Mr Morton said.

Tele2 reported that its net customer intake excluding acquired and divested companies decreased in the quarter to 1.2m new customers from 1.4m new customers in the fourth quarter of 2004. Fixed telephone line customers fell by 0.2m but was partly compensated by mobile telephony customer intake jumping to 1.3m from 0.7m. Broadband intake increased slightly.

The company expects a strong revenue growth and improved earnings in 2006.

The board proposed an increased dividend of SKr1.75, compared with SKr1.67 a year before.

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