Telefonica reported a significant decline in first quarter profit despite a slight increase in revenue, noting a strong performance by its Latin America business as Europe failed to keep pace.
Consolidated net profit for the quarter was EUR748 million, less than half of the EUR1.62 billion reported for the corresponding period a year ago. The company attributed this fall to a writedown of its stake in Telecom Italia. Total consolidated revenue increased by 0.5 percent in the first three months of 2012 to hit EUR15.5 billion.
With revenue growth a priority for Telefonica in 2012, chairman Cesar Alierta said the earnings were “in line with internal estimates,” with the company reiterating its previous guidance.
Its Latin American operations accounted for 48 percent of total consolidated revenue, increasing by 8.3 percent to EUR7.5 billion. With a 13 percent year-on-year increase in mobile connections to reach 170.8 million, the company said Latin America remained its “main growth engine.”
Telefonica Brasil saw mobile connections rise to 74.8 million with mobile revenue hitting EUR2.2 billion, up 10.2 percent. Telefonica Argentina increased its mobile customer base to 16.5 million with mobile revenue hitting EUR561 million, a year-on-year growth of 20.8 percent. The company saw an increase in connections and revenue in Chile, Colombia, Mexico, Peru and Venezuela.
In contrast, total revenue in Europe fell by 6.6 percent year-on-year, largely due to reduced ARPU brought on by economic conditions, and lower mobile termination rate charges. Total mobile connections in the region stood at 70.2 million by the end of the period, down 1.7 percent.
Total mobile net additions globally for the period were 4.3 million, while mobile broadband connections grew by 55 percent to hit 41 million and account for 17 percent of total mobile connections. Wireless data revenue rose by 15.4 percent with mobile data accounting for 33 percent of total mobile service revenue.
Consolidated operating expenses for the first quarter totalled EUR10.8 billion, an increase of 5.9 percent year-on-year, largely due to higher commercial-related spending. Capital expenditure was up 10.3 percent at EUR1.7 billion, with business growth and transformation the main areas of focus.