Telefonica reported a 6.3 per cent revenue drop in Q2 2018, largely due to unfavourable forex movements, but a rise in net profit and a strong underlying performance helped the operator towards an otherwise solid set of results.
The Spain-based operator said revenue for Q2 hit €12.1 billion from €12.9 billion in the same quarter the year prior, due to poor performing currencies in Latin America as well as the UK.
On an organic basis, however, Telefonica noted that revenue in the quarter increased 2 per cent. Net profit for the quarter hit €902 million, a 9.9 per cent rise from €821 million in Q2 2017, boosted by a favourable court ruling in Brazil, which included partial goodwill impairment and a tax asset reversal in Mexico.
For the fifth consecutive quarter, Telefonica was also able to reduce its debt. At the end of June, it said net debt stood at €43.6 billion, a €382 million reduction in the second quarter.
Year on year, debt decreased by 10.1 per cent.
At group level, Telefonica’s customer base reduced 1 per cent year on year to 357.5 million but did increase quarter on quarter from March 2018 by 564,000, which was “supported by intense commercial activity focused on high-value customers”.
The company also noted a “growing demand for data, speed and content” which resulted in “high-value accesses growth acceleration”.
Total LTE customers hit 106.6 million, a 31 per cent increase, while mobile contract customers hit 119.7 million, representing a 6 per cent year on year growth.
Growth in its FTTx/cable broadband business also boosted the operator, with the addition of 724,000 customers to reach a total of 12.2 million and 23 per cent growth year on year.
Jose Maria Alvarez Pallete, executive chairman of Telefonica, said its “value offer to customers remains key” and it will “continue investing and expanding our ultra broadband networks”.
Spain, Germany, UK, Brazil
In home market Spain, Telefonica experienced a 0.3 per cent lift in revenue to €3.2 billion, on the back of higher service revenue and higher handset sales (which grew 7.5 per cent year on year).
The growth was offset by a slightly poorer performance in Germany, where revenue dropped 1.2 per cent to €1.8 billion, put down to regulatory effects.
Meanwhile, in the UK, revenue grew for the seventh consecutive quarter to €1.6 billion, up 5.6 per cent, mainly due to “an increase in customer spend” through an update in tariffs as well as higher handset, whole and non-mobile revenue.
In Brazil quarterly revenue reached €2.5 billion, a small 0.5 per cent year on year increase.
Spain contributed the highest amount to group revenue with 26 per cent, followed by Brazil with 21 per cent.