Telefonica cites success of transformation plan as it reports organic revenue growth in 3Q13

8 Nov 2013

Spanish telecoms giant Telefonica has published its financial report for the three- and nine-month periods ended 30 September 2013, with the company pointing to a second consecutive quarter of organic revenue growth as proof that its transformation plan was beginning to bear fruit.

In the first nine months of 2013 Telefonica generated a total turnover of EUR42.626 billion (USD56.05 million), up 0.4% year-on-year in organic terms, but down by more than eight percentage points in reported terms. Such organic growth represented a change in trend compared with the first half of 2013; the improvement have been triggered by a significant organic revenue growth acceleration in the third quarter to 2.1%, up from growth of 0.5% in the second quarter and contraction in revenues in organic terms of 1.6% in the first quarter. Meanwhile, for the third quarter of 2013 Telefonica noted that revenues from its Latin American subsidiaries rose by 10.9% year-on-year on an organic basis to EUR7.101 billion (though this was down by 6.8% on a reported basis). The group also highlighted a gradual improvement in European revenues which, while down 7.1% y-o-y on an organic basis in 3Q13, was a 1.7 percentage point improvement compared with the year-on-year change reported in 2Q13. Telefonica Digital revenue performance in the third quarter of 2013 was ‘particularly remarkable’, the group said, rising by 17.9% year-on-year in organic terms. By region, Telefonica Latinoamerica remained the growth driver, accounting for 51% of total revenues in 9M13 (up 2.6 percentage points year-on-year). Turnover from mobile data services meanwhile accelerated to 10.2% y-o-y in the third quarter in organic terms and now account for 63% of total data revenues and 37% of mobile service revenues.

Operating income before depreciation and amortisation (OIBDA) in the nine months ended 30 September 2013 totalled EUR14.100 billion, roughly unchanged in organic terms (down 0.4% y-o-y, though down 10.7% on a reported basis), while Telefonica said it had seen an annual improvement in OIBDA in organic terms in the third quarter (-0.3% in 3Q13 compared to -0.7% in 2Q13) which it said reflected ‘revenue growth and the on-going cost containment along with efficiency improvements from the operational transformation process’. Profit attributable to minority interests reduced net income for the first nine months by EUR190 million, mainly due to lower profit attributed to minority interests in Brazil, which were affected by foreign exchange rates. As a result, consolidated net income in 9M13 was EUR3.145 billion, representing a decline of 9.0% against the same period of 2012.

In operational terms, at the end of September 2013 Telefonica reported a total of 320.3 million accesses, up 2% against the same date a year earlier, driven by higher mobile and pay-TV customer numbers. The operator did, however, note that access evolution had been impacted by ‘changes in the perimeter of consolidation (disposal of assets relating to the fixed consumer business in the United Kingdom), the disconnection of certain accesses (Czech Republic) and the application of more restrictive criteria for the basis of calculation of prepay customers (Latin America)’. Mobile accesses stood at 252.19 million end-September 2013, up 3% from a year earlier, with strong growth reported in the post-paid segment (up 9% y-o-y), with 35% of the group’s mobile subscribers now on a contract, up from 33% a year earlier. Mobile broadband accesses, meanwhile, increased to 67.4 million across all Telefonica’s regions of operation, up 41% from the total at end-September 2012, and now accounting for 27% of mobile accesses (up seven percentage points y-o-y). Excluding the impact of the sale of the group’s UK broadband customers in the second quarter of 2013, fixed broadband accesses rose by 2% y-o-y to 18.395 million.

Commenting on the group’s performance, Telefonica’s executive chairman Cesar Alierta noted: ‘During the third quarter of 2013 Telefonica has achieved a further progress in the execution of its transformation strategy, which is starting to become visible in the improved performance of both operational and financial metrics, strengthening our growth potential and enabling us to meet, one quarter in advance, the major full-year targets established for 2013.’

Spain, Telefonica