Telefonica returns to organic revenue growth in 2Q12 on Latin American ops boost

25 Jul 2013

Spanish telecoms giant Telefonica has revealed that revenues in the second quarter of 2012 returned to growth on an organic basis on the back of ‘improving trends in Europe’ and a solid performance from its Latin American subsidiaries. For the three months ended 30 June 2013 Telefonica generated a total turnover of EUR14.421 billion (USD18.8 billion), up 0.5% on an organic basis, though representing a year-on-year decline of 6.8% on a reported basis. While Telefonica’s Latin American division recorded organic y-o-y growth of 10.4% in the quarter under review to EUR7.451 billion, the European division saw turnover fall by 8.8% to EUR6.717 billion. In the first half of 2013, meanwhile, revenues totalled EUR28.563 billion, down 7.8% year-on-year in reported terms, and by 0.5% organically. Alongside the group’s Latin American operations, it pointed to mobile data revenues as the other ‘key lever’ for growth, noting that turnover from such services had increased by 9.8% year-on-year in organic terms in 2Q13, and accounted for 36.4% of mobile service revenues in the year (up three percentage points compared with the first half of 2012).

Operating income before depreciation and amortisation (OIBDA) in the second quarter of 2013 reached EUR4.584 billion, down slightly in organic terms (-0.7%), attributed to lower growth at Telefonica’s Latin American division as a result of increased commercial activity targeting high-value customers. With operating income falling by almost 20% on a reported basis to EUR2.250 billion in 2Q13, Telefonica’s net profit for the three-month period totalled EUR1.154 billion, representing a 13.1% year-on-year drop in reported terms.

In terms of investments costs, capital expenditures in the first half of 2013 totalled EUR3.903 billion, up 6.7% against H1 2012, including EUR834 million related to the acquisition of spectrum; in the period Telefonica spent EUR671 million on spectrum in the UK, EUR24 million in Uruguay in the first quarter, with a further EUR47 million in the UK in the second quarter, as well as further expenditures in Spain (EUR65 million) and Brazil (28 million). Excluding the impact of spectrum purchases, as well as taking into account exchange rate fluctuations, the telco said that CAPEX was actually down by 7.6% compared to H1 2012.

Telefonica’s total mobile accesses at the end of June 20123 stood at 249.5 million, up 2% against the same date a year earlier, with the group saying that growth had been drive by the post-paid segment; contract customer numbers increased by 8% year-on-year and now account for 34% of the group’s total accesses compared to 32% at end-June 2012. Mobile broadband accesses, meanwhile, totalled 63.3 million at the end of the reporting period, having seen the largest y-o-y growth since the second quarter of 2012 (+41%). Fixed line broadband subscriber numbers stood at 18.287 million as at end-June 2013, and while this was down significantly against the 18.633 million reported at end-March 2013, Telefonica noted this was primarily the result of the disposal of its fixed line business in the UK, which meant the disconnection of 511,000 of accesses.

Telefonica’s executive chairman Cesar Alierta said of the results: ‘We have achieved significant progress in the execution of our transformation process during the second quarter of 2013 which is starting to reflect in an improved performance of both our operational and financial metrics. The quarter shows a clear intensification of the commercial activity, especially in high value segments, driven by a robust demand in mobile data, resulting in a strong growth of smartphones, and ultra-broadband (fibre, VDSL). The intense commercial activity also yields a strong acceleration of revenue which returns to organic growth in the second quarter and is driven by double-digit growth in Latin America and the improvement of the business in Europe. The on-going implementation of the transformation process has allowed us to achieve significant efficiency gains, which we have reinvested in strengthening growth.’

Spain, Telefonica