Telecommunications operator TeliaSonera, Thursday reported a 7.8% increase in second-quarter net profit on higher sales and contributions from its operations in Russia and Turkey.

Net profit increased to 4.13 billion kronor ($687 million) compared with SEK3.83 billion, missing analysts' expectations of SEK4.44 billion.

Sales in the quarter rose 5.7% to SEK25.27 billion from SEK23.90 billion, as growth in Spain and the Nordic region, and increased mobile data usage, offset weaker economic development in the Baltic countries.

The Stockholm-based company kept its outlook for 2008, saying it expects 2008 sales to show stable growth from 2007, and expects to hold earnings before interest, taxes, depreciation and amortization, or Ebitda, level with last year.

It said sales at its Eurasian operations were SEK2.86 billion, with an Ebitda margin of 49.8%. Its Eurasian operations include holdings in Russia's Megafon, Turkey's Turkcell, and activities in countries including Kazakhstan, Azerbaijan, and Uzbekistan.

Chief Executive Lars Nyberg said the company is still eyeing acquisitions in the region and further east.

"I don't care where it geographically happens to be," Nyberg said. "Don't get me wrong, I have no ambition in Latin America or Africa, because I don't think we understand the culture, but if we move a bit east, or quite a bit east, that is fine by me."

He said TeliaSonera would consider a buy if the target was in a country with a large population, low mobile penetration, a growing economy, and if the company understood the local business culture.

Swedbank Markets analyst Sven Skoeld said the results were largely in line, and he was encouraged to see the company reiterate its outlook given the weakening economic climate.

He reiterated his strong buy rating and SEK54 target price.

Dresdner Kleinwort analyst Ulrich Rathe said Swedish mobile, which had an Ebitda margin of 37% from 31.6% a year prior, has hit a "sweet spot" with its current product offering. He has a hold rating and a SEK50 target price.

At 1015 GMT, Teliasonera shares traded up 3.3% at SEK44.10, but have fallen nearly 12% in the past three months.

In late June the company and the Swedish government - its largest shareholder with 37.3% - rejected an approach from France Telecom valued around $42 billion when first tabled.

After rejecting France Telecom's approach, Teliasonera said its strategy to expand in the Nordics, Baltics and Eurasia remains unchanged, and it wasn't actively seeking partners.

Source:Dow Jones