Wireless write-down makes Telefónica wince

27 Feb 2003

Spanish telco Telefónica [NYSE: TEF]has reported its first ever net loss, a direct result of its decision in July to write off EUR4.58 billion from the value of its investments in 3G operations in Germany, Italy, Austria and Switzerland. Sales for the year ending 31 December 2002 slipped 8.5% to EUR28.41 billion while EBITDA fell 8.4% to EUR11.72 billion. The company posted a net loss for the year of EUR5.58 billion compared to a profit of EUR2.1 billion in 2001. Aside from the devaluation of its third-generation networks, the company’s bottom line was affected by a EUR1.43 billion write-down from its internet unit Terra Networks. Telefónica de Espana contributed most to the group’s revenues in absolute terms, generating EUR10.27 billion, followed by cellular business (EUR9.45 billion). In terms of geography, revenues from Argentina fell from 12.6% of the group total to just 3.7%, while Spain increased in importance from 50.6% to 58.5%. Latin America’s contribution as a whole dropped by 8.3 percentage points to 35.2%

In operating terms the customer base managed by the Telefónica Group totalled 89.99 million at the end of 2002, including all subsidiaries of Brasilcel, its 50/50 Brazilian joint venture with Portugal Telecom. Brasilcel managed 13.7 million customers at the end of 2002, 47.3% through operators contributed by Telefónica Móviles. Telefónica had 1.4 million ADSL connections in service at the end of the year, with its domestic base achieving a growth rate of 154% in 2002 to end the year with 957,204 connections. In terms of fixed lines, Telefonica has 20.8 million fixed lines in service in its domestic market at the end of 2002 with a further 24.13 million in Chile, Argentina, Peru, Brazil and Venezuela. In total the company has 43.94 million cellular customers, 18.41 million of which were located in Spain. Pay-TV generated a further 1.15 million customers for the group, around three quarters of which were located in Spain.

Datafile of European Telecommunications