Italian writedown hits Telefonica’s first quarter net profit

11 May 2012

Spain’s Telefonica has reported an almost 54% year-on-year drop in net income for the first three months of 2012, with the company noting that the bottom line had in particular been hit by a charge for a writedown of the company’s indirect 10.5% holding in Telecom Italia. With operating income falling by 17.8% against 1Q 2011, Telefonica noted that it had registered a loss from associates in the first quarter of 2012 of EUR481 million (USD630 million), compared to a EUR16 million loss in the corresponding period a year earlier, adding that the change was ‘mainly the result of the impact of Telco S.p.A.’s adjustment of the value of its investment in Telecom Italia.’ On the back of this loss, in 1Q12 the Spanish company’s net profit totalled EUR784 million, down from EUR1.624billion a year earlier.

Total turnover for the three-month period meanwhile was EUR15.511 billion, up marginally from the EUR15.435 billion generated in the same quarter of 2011, and with the company having said that revenue growth is one of its key priorities for 2012, it noted that it had seen a ‘significant’ improvement in the pace of quarter-on-quarter growth in turnover. The increase in sales, Telefonica said, was driven by increased take-up at its Latin American units, with its Telefonica Latinoamerica division recording an annual revenue growth rate of 8.3%, more than helping to offset European turnover that was 6.6% lower. Further, the company claimed that its focus on mobile data business was reflected in the rise in revenue from such services, with mobile data turnover up 15.4% year-on-year, and now accounting for 33% of total mobile service revenues in the quarter.

The period under review saw Telefonica’s total accesses rise to 309 million, representing a 6.5% y-o-y increase, with strong quarterly additions for mobile services cited as a key factor in the growth. The company noted that in 1Q12 it registered 4.3 million mobile net additions, more than one and a half times the number added in the same period of 2011. Mobile subscribers across all of Telefonica’s regions of operation totalled 241.08 million at end-March 2012, up from 223.05 million a year earlier, while it claimed that mobile broadband accesses had increased by 55% year-on-year to reach 41 million, accounting for 17% of the total mobile customer base. Fixed broadband connections meanwhile stood at 18.341 million at end-March 2012, up from 17.423 million at the end of the corresponding quarter in 2011, while fixed telephony accesses numbered 40.283 million, down 1.6% from 1Q11.

Commenting on the results, Telefonica chairman Caesar Alierta said: ‘Our earnings for the first three months of 2012 reflect the strategic priorities set for the full year and the success of the company’s shift in commercial strategy, which began in the second half of 2011 … These results are in line with internal estimates and thus allow us to reiterate our financial and operational guidance announced for 2012.’

Spain, Telefonica