Norwegian telecoms company Telenor reported a surprise 1.5 percent fall in second-quarter core earnings and cut its 2008 revenue growth target as resurgent inflation in emerging markets crimps spending on telephony.

With 153 million mobile clients in Europe and Asia, Telenor said that soaring inflation, especially in the fast growing markets of Bangladesh, Pakistan and Thailand, could hit results as consumers' budgets are squeezed.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was 7.21 billion crowns ($1.43 billion) in April-June from 7.32 billion in the year-ago period.

The result missed all 16 forecasts from a Reuters poll of analysts, whose predictions had ranged from 7.31 billion to 7.64 billion crowns and averaged at 7.5 billion.

"At first glance it seems they were terribly weak on margins," said DnB NOR Markets analyst Frank Maaoe. Telenor's EBITDA margin stood at 30.2 percent in the second quarter, not including its deconsolidated Ukrainian unit Kyivstar.

Telenor's results follow gloomy news on Tuesday from world No. 1 mobile phone group Vodafone, although smaller Swedish rival Tele2's beat forecasts on Wednesday.

Telenor's operating revenues grew 2.9 percent to 23.84 billion crowns in the second quarter and met the average forecast from a Reuters survey. 

Telenor cut its 2008 financial target for revenue growth to around 3 percent from 5 percent, but said strong performance of Kyivstar, which is treated as an associated company, would keep underlying revenue growth unchanged at around 6 percent.

"Based on the increased challenges linked to macroeconomic conditions, we have adjusted our reported revenue outlook for 2008 slightly," Telenor said in a statement.

Telenor maintained its 2008 EBITDA margin goal at above 31 percent and capital expenditure at 20 percent of revenues.

"In these nervous markets the revenue guidance cut will probably be negative (for the share), although we were forecasting 2008 growth around that -- at 2.9 percent actually -- and market consensus was around 3.8 percent, so the change is not that dramatic," DnB NOR's Maaoe said.

Shares in Telenor closed at 85.60 crowns on Tuesday, valuing the company at around $30 billion. The stock has lost 15 percent over the past quarter and nearly 30 percent over the past year.

Trade resumes at 0700 GMT.

Source:Reuters