Telefónica and TEM profits up; pair to merge on 31 July

27 Jul 2006

Spanish telecoms group Telefónica has posted a 40.3% jump in net profit in the first six months of the year, up to EUR2.574 billion (USD3.28 billion), thanks to the expansion of its worldwide customer base and the consolidation of UK-based O2 Group, Colombia Telecom and Cesky Telecom. However, the acquisitions impacted the group’s balance sheet, with group debt increasing by EUR24.9 billion to EUR54.9 billion, mainly due to the incorporation of O2 and heavy debts at Colombia Telecom. Telefónica’s first half revenues grew 46.4% to EUR25.16 billion, with OIBDA up 40.9% to EUR9.24 billion.

Telefónica’s wireless group Telefónica Móviles (TEM) said its first half net profit rose 12.8% year-on-year, also boosted by growth in Latin America as well as improved domestic margins. TEM said net profit in the first six months of 2006 reached EUR1.05 billion, on the back of a 13.3% rise in revenues, up to EUR8.79 billion; revenue in Spain, its largest market by sales, was up 2.9% to EUR4.42 billion. OIBDA increased 12.4% to EUR2.9 billion.

At the end of June 2006, Telefónica Group’s total number of accesses reached 191.7 million, a year-on-year increase of 32.36%, confirming the operator as the third largest in the world (after China Mobile and China Telecom) in terms of customer numbers. Cellular and retail broadband accesses accounted for the bulk of new additions – cellular access reached 134.6 million, whilst retail broadband accesses stood at 6.8 million. Latin America continues to represent the largest number of customers, equal to 55.9% of the total, compared to 22.4% in Spain and 19.6% in the rest of Europe.

Meanwhile, TEM will trade for the last time on the New York and Madrid stock exchanges tomorrow before completing its merger with parent company Telefónica, the company said in a statement. The merged company will register with the Madrid trade registry and be fully effective from 31 July. Spanish bank BBVA is overseeing the deal.

Spain, Telefonica, Telefonica Moviles Espana (Movistar)