Group transformation process sees Telefonica register 20.6% increase in net profit in 1Q13

8 May 2013

Spanish telecoms giant Telefonica posted a 20.6% year-on-year increase in net profit for the first three months of 2013, with the company’s CEO Cesar Alierta highlighting ‘the advances achieved in the [company’s] transformation process, which translate into a progressive business stabilisation and a greater degree of diversification, while at the same time maintaining a constant improvement in the financial position’.

In the three months ended 31 March 2013 Telefonica reported a net profit of EUR902 million (USD1.18 billion), as operating expenses fell by 8.8% y-o-y to EUR9.82 billion. In organic terms, however, the decline in operating expenses was 1.9%, though this was in line with the previous quarter, and it was the third consecutive period in which Telefonica had reported cost reductions; this trend, it said, was attributed in part to efficiency gains. Financial expenses, meanwhile, fell 17.6% year-on-year, a result of the reduction in average debt in the period, as well as the lower cost of gross debt due to lower interest rates and the smaller weight of higher rate currencies. Operating income before depreciation and amortisation (OIBDA) stood at EUR4.57 billion, flat against the same period a year earlier in organic terms, though 10.1% y-o-y in reported terms.

Total turnover in the period under review stood at EUR14.14 billion, representing an 8.8% drop against 1Q13, a decline which the company said reflected ‘mainly the negative impact of exchange rate fluctuations following the devaluation in Venezuela effective from 1 January 2013’. In organic terms revenues fell by 1.6%, with growth from the group’s Latin American operations failing to offset lower turnover from its European division. Notably, Telefonica Latinoamerica accounted for more than half of the group’s revenues in the first quarter of 2013 – 51% – having registered a 6.8% y-o-y increase as mobile business in the region continued to grow. By comparison, Telefonica Europe, which also includes the company’s domestic operations, represented 47% of group revenues, falling by 10.5% in organic terms to EUR6.68 billion; excluding the impact of regulation, Telefonica said that revenue would have declined by 8.5%.

In operational terms, at the end of March 2013 Telefonica’s total accesses stood at 315.7 million, up 2% year-on-year, with mobile voice connections accounting for the bulk of those – 247.3 million, up 3% against end-March 2012. Mobile broadband accesses – which Telefonica defines as ‘accesses with a data tariff attached’ – rose by 34% against the year-ago period to surpass 55 million. In terms of regional performance, Telefonica Latinoamerica, which represented 67% of the company’s total accesses, remained the main contributor to growth, with total subscriber numbers rising by 3% over the year. Mobile accesses in Latin America reached 177.0 million (up 4% year-on-year), with Telefonica noting that such growth had come ‘despite the negative impact of the application of more restrictive accounting criteria for the pre-paid segment’. Mobile broadband connections in the region, meanwhile, rose to 28.9 million at the end of the period under review. For its part, the Telefonica Europe unit reported reached 102.7 million total accesses at the end of March 2013, down 1% y-o-y, partly impacted by the disconnection of 114,000 of inactive mobile contract customers in the Czech Republic in the first quarter. European mobile customers numbered 70.33 million at end-March 2013, up marginally from 70.27 million a year earlier, with Telefonica highlighting the increased percentage of subscribers on post-paid tariffs; contract customer represented 60% of mobile accesses in 1Q13, up from 58% in the corresponding quarter of 2012.

Spain, Telefonica