By Annabella Nielsen
COPENHAGEN (Reuters) - Danish telecoms group TDC is looking for small and medium-sized acquisitions in Sweden as part of its drive to counter falling revenues in its home market, chief executive Carsten Dilling told Reuters.
TDC, like other former state telecoms monopolies, has seen its fixed-line business hit by mobile phones, while its mobile business is now also facing stiff competition, in part as consumers use cheaper internet services to contact one another.
The group has responded with some innovative ideas, including buying 51 percent of a sports betting business and launching a new mobile service that includes streamed music, movies and television programmes.
Last month, it sold the bulk of its Finnish business for an after-tax profit of around 700 million Danish crowns (74.6 million pounds), while agreeing a cooperation deal with the buyer to continue serving pan-Nordic business customers in Finland.
Dilling said that money could now be put to use.
"Following our divestment of TDC Finland we are looking into small- or mid-size consolidation opportunities in Sweden. The profit from the sales has been earmarked for this," the 52 year-old said in his office in southwest Copenhagen.
Dilling declined to comment on potential targets, but said they did not have to be in the telecoms sector.
Sydbank analyst Morten Imsgard said it could make sense for TDC to bolster its position with business customers in Sweden.
Europe's telecoms sector has seen a wave of consolidation as companies seek to cope with the difficult market backdrop. Earlier this week, European regulators cleared Telefonica's 8.6 billion euro (6.8 billion pounds) purchase of KPN's E-Plus business in Germany.
Some analysts have seen TDC as a potential target, possibly for Swedish rival TeliaSonera, and Dilling would not rule out the Danish firm taking part in a larger consolidation deal at some point in the future.
"I am sure that some European or Nordic operators have us on the radar, because during the last 15 years TDC is the European incumbent telco operator that has delivered the best returns to its shareholders," he said, without giving figures.
INVESTING
TDC has a market share of about 40 percent in Denmark's mobile market, ahead of Norway's Telenor on 22 percent. Its revenue fell 5.2 percent year-on-year to 5.9 billion crowns in the first quarter, although earnings before interest and tax rose 2.9 percent to 1.3 billion crowns, helped by cost cutting.
Earlier this year, TDC launched a new mobile package called Telmore Play which, besides ordinary phone calls, offers content from the likes of U.S. television network HBO, on-demand TV channel TV2 Play and movie streaming service C More, as well as music streaming, web magazines and newspapers.
"We definitely see this as a possible game changer. The amount of orders have been above our own expectations," Dilling said of the new service, without giving figures.
TDC also has high hopes for a new sports betting site it has helped to launch following the purchase of a 51 percent stake in betting company Ecosys. Dilling expects the site to generate a three-figure million crowns of revenue and achieve a double-digit percentage market share within two to three years.
In the next year, TDC is replacing its entire network in Denmark with new cables and masts, while its shops will start selling Apple's popular iPad tablet computer and it will also launch an online movie rental store under the name Blockbuster, to which TDC recently bought the Danish rights.
Investing in a struggling market, however, has come at a price, with TDC shedding around 1,600 employees since 2010.
Dilling said the firm, which had 8,796 staff at the end of March, would continue to make cutbacks and outsource, though not at the same pace as before.
"Identifying savings on external spend and cutting down staff is inevitable for the sector. Revenue is falling every year, because even though the number of sales and revenue generating units are not decreasing, the earnings per customer is," he said.
(Editing by Mark Potter)