European woes continue to drag down Telefonica results

26 Jul 2012

Amid what it called ‘the difficult trading environment in key countries, including adverse economic conditions, intense competition and the negative effects of regulation’, Spanish telecoms giant Telefonica has released its financial results for the three-month period ended 30 June 2012. For the second quarter of the year Telefonica reported total revenues of EUR15.470 billion (USD19 billion), up marginally from the EUR15.451 billion recorded in the corresponding period of 2011, but down from EUR15.511 billion in 1Q12. The company’s Latin American operations continue to help offset poorer results in Europe, with the former in 2Q12 accounting for 48.1% of all turnover, up from 45.5% a year earlier, with revenues in the region climbing by 5.8% year-on-year to reach EUR7.445 billion. In Europe meanwhile Telefonica saw turnover fall by 5.7% to EUR7.522 billion, down from EUR7.975 billion a year earlier, with the group’s domestic unit reporting a 12.7% slump in revenue, which the company said ‘primarily reflected the evolution of accesses and ARPUs across services’.

Consolidated operating income before depreciation and amortisation (OIBDA) meanwhile stood at EUR5.350 billion in the second quarter of 2012, representing a decline of 6.6% compared with the same period a year earlier, although up 5.3% quarter-on-quarter; Telefonica claimed that the improvement against 1Q12 was the result of the performance of Telefonica Espana, where, despite the falls in revenue, profitability increased in the second quarter of the year. A similar pattern was reported with regards to net profit for the most recent fiscal quarter, which for the three months ended 30 June 2012 totalled EUR1.327 billion, down 13.7% y-o-y, but up significantly from the EUR748 million posted in 1Q12.

In operational terms, at the end of June 2012 Telefonica reported that its total accesses had almost reached 312 million, of which the bulk – 243.51 million – was mobile subscribers. Indeed, the company noted that strong growth in mobile accesses continued to be the core growth driver for its total customer base, with wireless voice connections increasing by 7.1% over the year to end-June 2012. Mobile broadband accesses meanwhile also continued to grow at an impressive rate, with Telefonica revealing that at the end of the second quarter of 2012 it had 44.901 million such connections, representing a more than 50% jump against mid-2011. Fixed broadband connections also continued to rise, standing at 18.429 million at end-June 2012 (up 4.5%) but fixed voice access maintained a downward trend, falling 1.6% year-on-year to 40.038 million.

Commenting on the results, Telefonica chairman Cesar Alierta noted: ‘Telefonica’s second quarter results showed an improvement quarter-on-quarter, especially at OIBDA level. In underlying terms, OIBDA increased sequentially across regions and translated into margin expansion, as a result of the strict cost-containment measures undertaken. Our strong diversification continues to be a key lever amid challenging trading conditions in some of our markets, with a growing contribution of Telefonica Latinoamerica to consolidated results and market risk perception decoupled from solid business fundamentals.’

Spain, Telefonica