Telenor Returns to Organic Growth in Q2 but Sustainability Is in Question; Maintaining FVE

Narrow-moat Telenor returned to growth in second-quarter 2021 aided by Asian economies, mainly Pakistan and Bangladesh, which grew by high single digits adjusted for currency effects. A recovery in these economies was driven by the easing of restrictions but also came from easy comparable figures in 2020. However, there is no certainty about the sustainability of this trend in case a new COVID-19 wave hits, as Asian economies are laggards in testing and vaccinations and June already showed a deceleration in Telenor’s revenue growth in these geographies. In addition to this, currency fluctuations wiped out organic growth when translating it into Norwegian krone, as Asian currencies have strongly depreciated. Denmark and Finland also helped growth with mid-single-digit organic increases driven by upselling and mobile net customer additions. All this resulted in overall revenue (NOK 27.2 billion) growing 3.3%, adjusted for currency effects but declining almost 5% on a reported basis. Shares are fairly valued and we maintain our fair value estimate of NOK 159.