Telefonica net profit slumps in 2Q11 as Spanish competition heats up

28 Jul 2011

Spanish telecoms giant Telefonica has revealed that, with operations in its home territory continuing to suffer as a result of increased competition and a writedown on its stake in Telecom Italia (TI), net profit in its most recent quarter fell by more than 27%. For the three months ended 30 June 2011 Telefonica posted net income of EUR1.54 billion (USD2.2 billion), down 27.4% from the EUR2.12 million it reported in the same period a year earlier. The company noted that profit was affected by the non-cash impact resulting from its revision of the value of its holding in TI, which it said reduced net income by EUR353 million.

Consolidated revenues in 2Q 2011 stood at EUR15.45 billion, up 2.2% year-on-year when compared with turnover of EUR15.12 billion, although this was lower than had been expected, in part due to lacklustre sales at the group’s European units. For the three-month period in question Telefonica’s units in the UK, Germany, Ireland and the Czech Republic reported total revenues of EUR3.77 billion, down 3.6% y-o-y from EUR3.77 billion, while the Spanish unit saw turnover decline by more than 6% to EUR4.38 billion, which the company attributed to ‘lower average revenue per user (ARPU) across services due to reduced customer usage and intense price pressure.’ Latin America proved more positive for the group, with revenues across its operating units in the region climbing by almost 12% y-o-y to EUR7.11 billion. Operating income before depreciation and amortisation (OIBDA) in 2Q11 meanwhile stood at EUR5.73 billion, down 4% against the same period in 2010, while operating income for the quarter was EUR3.29 billion, down from EUR3.53 billion a year earlier.

In operational terms, at the end of June 2011 Telefonica reported that total accesses had risen by 6.2% year-on-year to just over 295 million, with the ‘Telefonica Latinoamerica’ and ‘Telefonica Europe’ units reporting year-on-year organic growth of 8% and 5% in their respective customer bases. Mobile subscribers continue to account for the bulk of those, numbering 227.3 million at end-June 2011, up from 210.9 million a year earlier, with Telefonica noting that it had seen a ‘sustained increase in the contract segment’, reporting a 13% y-o-y organic increase, with post-paid customers accounting for 32% of all the group’s mobile accesses at the end of period. Mobile broadband accesses totalled 29.8 million at the end of June 2011, while fixed line broadband subscriptions across all units reached 17.6 million, up 8% year-on-year. The company said that a bundling strategy remained key to the continued uptake of such services, noting that both in Spain and Latin America around 90% of retail fixed broadband accesses were part of either a double- or triple-play package.

Spain, Telefonica