Telefonica 9M net profit in line with forecasts as global economic conditions improve

13 Nov 2009

Spanish telecoms giant Telefonica has released its financial results for the nine months ended 30 September 2009, posting a net profit of EUR5.61 billion (USD8.41 billion), almost unchanged from the same period a year earlier; net profit for its third fiscal quarter fell marginally however, down 0.6% year-on-year to EUR1.99 billion. Revenue for the company fell in line with expectations, with exchange rate losses and the continued difficult economic conditions, particularly in Europe, impacting the results. For 9M 2009 Telefonica group revenue fell 3.3% y-o-y to EUR41.7 billion, while 3Q09 revenue was EUR14.1 billion, down 5.7% against the same period a year earlier. The company’s Latin American operations was once again the top performer, reporting revenue growth of 1.9% for the nine-month period, helping to offset y-o-y revenue declines of 6.7% and 5.9% at Telefonica’s Spanish and European arms respectively.

Operations in Spain are turning around though, with the pace of decline shrinking, and Telefonica noted that the region ‘registered a marked increase in commercial activity and solid cash flow generation to EUR6.11 billion’ in the first nine months of 2009. Spanish operations still account for just over a third of the group’s total revenue however, despite posting an 8.4% drop in revenue from wireless services in 9M 2009; by comparison revenue from fixed line operations dropped by 5% in the corresponding period.

Like a number of other major telecom players, Telefonica has sought to slim down costs in a bid to remain profitable in a time of recession, and to that end the company reported that total operating expenses in the nine months to end-September 2009 were EUR25.78 billion, a 5.2% y-o-y reduction against the figure from a year previously. However, ignoring the impact of foreign exchange rates, operating expenses fell by 1.2% , with higher costs in Latin America, predominantly related to networks and systems, offset by cost reductions at Telefonica de Espana, thanks to lower supply and commercial costs, mostly related to advertising.

As at 30 September 2009, Telefonica’s total group accesses, including wireless, fixed line and pay-TV, surpassed 268 million, up 6.6% against the same date a year earlier. Of those, 205 million were wireless subscribers, with net adds over the nine-month period of ten million, with Telefonica reporting that in the third quarter alone the pace of subscriber growth had significantly increased compared to the first half of 2009; in 3Q09 Telefonica reported five million net adds, the same as for the first six months of the year.