Mobile and broadband growth leads to a solid 2003 for Telefónica

27 Feb 2004

Spain’s Telefónica Group has reported a flat set of revenues for 2003 as the negative impact of foreign exchange mechanisms from its overseas operations cancelled out healthy gains at its global mobile and broadband operations. The Madrid-based operator said total turnover reached EUR28.4 billion, down fractionally from EUR28.41 billion in 2002, although EBITDA rose by 7.5% to EUR12.6 billion and operating profit by 26% to EUR6.33 billion. Net income was returned at EUR2.2 billion in 2003, compared to a net loss of EUR5.58 billion in 2002, thanks to the effects of asset writedowns and the restructuring of the company’s third-generation mobile businesses in Germany, Austria, Switzerland and Austria.

On a geographical basis, turnover from Telefónica’s domestic fixed line operations were 0.5% lower at EUR10.22 billion, with domestic EBITDA rising by 0.4% to EUR4.53 billion. During the year the total volume of minutes processed by Telefónica’s Spanish fixed line network decreased by 3.6% to 138.2 billion and the company estimated that its voice traffic market share fell by 5% to 77%. At the end of 2003 Telefónica had 19.08 million fixed lines under its control in Spain, an increase of 378,000 or 2%, of which 1.66 million were ADSL lines, a rise of 101%; 1.07 million of these were retail customers and the company had a further 240,000 ADSL customers elsewhere in Europe. Revenues from domestic internet and broadband services rose by 32.3% to EUR850 million. The Group’s Spanish fixed line and mobile operations accounted for 61.6% of total revenues and 69.6% of EBITDA in 2003, up from 58.8% and 68.7% respectively the previous year.

Sales at Telefónica’s Latin American wireline businesses fell by more than 8% to EUR6.38 billion. However, discounting the substantial depreciation of the dollar against the euro, and the knock-on devaluation of local currencies against the euro, Telefónica said that its Latin American revenues would have actually increased by 8.4%. At the end of the year the Group had 21.62 million fixed lines in service across its Latin American subsidiaries, virtually unchanged from the year before. As in its European markets, the ongoing erosion of its narrowband wireline subscriber base was offset by an increasing proportion of broadband customers. Telefónica Latin America claimed 770,000 ADSL lines in service on 31 December 2003, up from 455,000 in 2002. Among the best performing of its Latin American subsidiaries was Brazilian fixed line telco Telesp, which recorded operating turnover of EUR3.48 billion, up 18.2% year-on-year, driven by a 52% increase in long-distance revenues.

Telefónica Moviles, which handles all of the company’s worldwide cellular operations, recorded total revenues of EUR10.43 billion in 2003, up more than 10% on the previous year’s tally of EUR9.45 billion. Moviles had 52 million mobile customers, 19.6 million of which were in Spain, where it had a market share of 52.4%. Elsewhere, in Brazil, Telefónica’s mobile subsidiary Vivo claimed 20.6 million subscribers, 2.2 million of which were added in the fourth quarter alone, whilst Telefónica Moviles Mexico had 3.5 million customers, up 43% over the year.

Telefónica’s net debt fell by 14.6% to EUR19.24 billion during 2003, whilst capital expenditure decreased by 1.6% to EUR3.73 billion. The company has said that it will pay a minimum annual dividend of EUR0.4 per share in 2004-06, and during the same period will buy back a minimum of EUR4 billion worth of shares.