Telefonica reports increased profit, following mixed Q1

Telefonica reports increased profit, following mixed Q1

08 MAY 2013

Telefonica announced an increased profit for the first quarter of 2013, despite encountering differing challenges in both its Europe and Latin America operations.

In a statement, Cesar Alierta, executive chairman of Telefonica, said that the company is producing results which reflect “a progressive stabilisation of the business and a greater degree of diversification, together with the constant improvement in the financial position”.

For the period, the company reported a net income of €902 million, up 20.6 per cent from €748 million, on revenue of €14.14 billion, down 8.8 per cent from €15.51 billion.

Among the issues affecting the top line were the sale of the Atento call centre business, and negative exchange rate impacts, primarily from Venezuela.

For the second consecutive quarter Latin America generated more than 50 per cent of consolidated revenue, although much of the reason for this was continued weakness in Europe.

On a group level, it ended the quarter with 247.3 million mobile subscribers, up 2.6 per cent year-on-year, but essentially flat from the end of December 2012.

Of these, 164.5 million (66.5 per cent) were prepaid subscribers and 82.8 million contract, although year-on-year prepaid growth of 0.2 per cent was outstripped by contract growth of 7.6 per cent.

It noted that smartphone penetration has now reached 20 per cent on a group level, up from 14 per cent at the end of March 2012.

For the Latin American segment, Telefonica reported an operating income of €1.08 billion, down 17.7 per cent from €1.31 billion, on revenue of €7.23 billion, down 3.8 per cent from €7.52 billion. It said that in organic terms (excluding the impact of exchange rate issues, including the devaluation of the Venezuelan currency), revenue was up 6.8 per cent.

The company has 176.98 million mobile subscribers in the region, up 3.6 per cent year-on-year. The lion’s share of these (77 per cent) are prepaid, although again growth of 1.1 per cent in this segment was overshadowed by 13 per cent growth in contract customers. In the prepaid segment, the company said that “more restrictive accounting criteria” had been applied.

Smartphone penetration in the Latin America segment lags, at 14 per cent – although up from 8 per cent at the end of Q1 2012.

For its Europe group, the company reported an operating income of €1.13 billion, down 10.2 per cent from €1.26 billion, on revenue of €6.68 billion, down 11.7 per cent from €7.56 billion.  The decline would have been 8.5 per cent in organic terms, excluding the impact of regulation.

The company has 70.33 million mobile subscribers in this region, of which 67 per cent are contract. An increase of 2.9 per cent year-on-year in this category offset a decline of 3.8 per cent in its prepaid user base.

Smartphone penetration in Europe stands at 37 per cent, up from 30 per cent at the end of Q1 2012.

In the company’s troubled home market of Spain, revenue fell by 16.4 per cent to €3.26 billion from €3.9 billion, with mobile service revenue falling by 13.6 per cent to €1.17 billion. However, it noted that its OIBDA margin grew for the second consecutive quarter, and that its Fusion bundled tariffs are a “commercial lever” in the country.

The company noted that during the period, its debt burden suffered from issues such as  the devaluation of the Venezuelan currency (€873 million), payments for spectrum (€701 million), as well as seasonal effects of the period. It said that it “continued to undertake proactive management of its portfolio of assets, with the aim of accelerating its deleveraging process”.

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