Telefonica net profit slumps as European units feel the effect of financial crisis

24 Feb 2012

With a number of its European subsidiaries reporting a drop in turnover in 2011, in part as a result of the ongoing financial crisis in the eurozone, Spanish telecoms giant Telefonica has revealed that net profit in 2011 almost halved.

For the twelve months ended 31 December 2011 Telefonica posted a consolidated net income of EUR5.40 billion (USD7.02 billion), down from the EUR10.18 billion recorded in the company’s previous fiscal year. It did, however, note that its bottom line had been affected by factors both in 2010 and 2011, highlighting firstly the positive net impact it saw in FY2010 from the revaluation of the previously held stake in Brazilian operator Vivo at the date of acquisition of the 50% in Brasilcel owned by Portugal Telecom. For 2011, meanwhile, it noted that in addition to revenue declines from some of its operating units, its consolidated net income figure had also been affected by: the non-cash impact provision for restructuring expenses associated with a workforce restructuring plan, which it recorded in the third quarter (EUR1.87 billion); and cancellation of the deferred tax generated following the acquisition of the 50% stake in Vivo in 2010, with a net impact after profit attributable to minority interests of EUR952 million.

Consolidated revenues for the full year period, meanwhile, stood at EUR62.84 billion, up 3.5% year-on-year, but in organic terms turnover rose by just 0.1% compared with the previous year; Telefonica noted that revenue growth had been negatively impacted to the tune of EUR842 million by mobile termination rate (MTR) cuts across all of its operating regions. Excluding this impact, it said, organic revenue growth for the full year would have been 1.4%. The group’s Latin American unit was the only one to report a yearly rise in revenues, with it recording turnover of EUR29.24 billion, up 13.5% y-o-y, while Telefonica’s domestic subsidiary and its European unit saw revenues decline by 7.6% (EUR17.28 billion) and 1.3% (EUR15.52 billion) respectively. As previously reported by CommsUpdate, in September 2011 Telefonica revealed it will streamline its businesses’ geographical operations ‘based on stages of market. Under the revamped structure the company will operate just two subsidiary groups – Europe and Latin America – with operations in Spain to be merged with reporting for the group’s other European subsidiaries.

At the end of December 2011 Telefonica reported that total client accesses had surpassed the 300 million mark, to reach 301.31 million, up from 282.99 million a year earlier. Wireless accesses accounted for the bulk of those, with mobile subscribers across all of the group’s units totalling 238.75 million, up 8.4% against the same date a year earlier. At home, however, Telefonica Moviles Espana recorded a year-on-year drop in its wireless customer base, although it did see growth in the last quarter of the year. Group fixed voice connections meanwhile continued to decline, falling from 41.36 million at end-2010 to 40.12 million a year on, although fixed broadband services saw 5.5% annual growth to reach 18.07 million.

Spain, Telefonica