Cost-cutting helps Telefonica post net profit increase in 9M 2012

7 Nov 2012

Spanish telecoms giant Telefonica has released its financial results for the three- and nine-month periods ended 30 September 2012, revealing an increase in net profit of more than 26% year-on-year in 9M 2012. For the nine-month period under review Telefonica posted a consolidated net income of EUR3.455 billion (USD 4.43 billion), while third quarter net income stood at EUR1.380 billion, having swung from a loss of EUR429 million in 3Q 2011.

In presenting its results, the Spanish company noted that ‘results in the third quarter of the year showed significant progress in priority areas’, pointing specifically to sequential operating income before depreciation and amortisation (OIBDA) growth across all of its regions of operation, which it said reflected cost-reduction strategies. Of particular note, it claimed, were the removal of handset subsidies for new customers in Spain from March 2012 and a gradual reduction of subsidies in the UK. Further, network sharing agreements signed between Telefonica’s local subsidiaries and other operators in both the UK and Mexico were pointed to as having helped improve operating income. In the first nine months of 2012 Telefonica reported OIBDA of EUR15.782 billion, up from EUR14.251 billion in 9M 2011, while third-quarter OIBDA totalled EUR5.448 billion, an increase of more than 80% compared to the year-ago period.

Revenues, however, fared less well, with consolidated turnover falling by 1.6% year-on-year to EUR15.538 billion in 3Q12, while revenues for 9M 2012 were EUR46.519 billion, down from EUR46.672 billion a year earlier. Excluding the impact of regulation Telefonica did though note that group revenues rose by 1.1% y-o-y compared with the first nine months of 2011. Further, the group’s Latin American operations continue to offset a significant part of declines in revenues at Telefonica’s European units; in 3Q12 and 9M12 turnover from its Telefonica LatinoAmerica division rose by 3.8% and 5.9% respectively. Indeed, LatAm revenues now account for 49% of the group total, up 2.9 percentage points compared to a year ago, and exceeding turnover from Europe for the first time.

In operational terms, at the end of September 2012 Telefonica’s total accesses stood at 314 million, up 5% against the same date a year earlier, with Telefonica Latinoamerica seeing its customer base rise by 8%; the division now represents 67% of the group’s total accesses. Mobile subscriber numbers totalled 245.64 million at end-September 2012, up from 231.87 million at the same date a year earlier, with mobile net additions in the first nine months of 2012 totalling 10.5 million, excluding the disconnection of 3.6 million inactive pre-paid connections in Spain and Brazil. Fixed and mobile broadband accesses, meanwhile, increased by 4% and 40% y-o-y to stand at 47.66 million and 18.52 million respectively. Fixed voice connections continued to decline, falling to 39.82 million (a 1.5% y-o-y decline) at the end of the reporting period.

Spain, Telefonica