Telefonica reports organic revenue increase in 1Q14

9 May 2014

Spanish telecoms giant Telefonica recorded a 13.5% year-on-year drop in revenues in the first three months of 2014, though it noted that in organic terms it had actually registered revenue growth of 1.5%, or 3.4% excluding the negative impact of regulation. In the quarter ended 31 March 2014 Telefonica generated a total turnover of EUR12.232 billion (USD16.8 billion), down from EUR14.141 billion in the corresponding period of 2013. Notably, in the period under review Telefonica deconsolidated results from its Czech Republic subsidiary, which was sold in that quarter; in 1Q13 the unit reported revenues of EUR466 million. Mobile data revenue growth accelerated meanwhile, rising by 8.8% y-o-y in organic terms, and now accounts for 40% of the group’s total service revenues. Telefonica also highlighted the performance of non-SMS data revenues in 1Q14, reporting a 23.6% y-o-y increase in organic terms, and accounting for 71% of total data revenues.

Operating income before depreciation and amortisation (OIBDA) stood at EUR3.929 billion in the first quarter of 2014, up 0.5% in organic terms but down 14.0% on a reported basis. With Telefonica noting, however, that growth was accelerating compared to FY 2013, it said performance was underpinned by ‘sustained revenue growth and cost containment measures, along with efficiencies and synergies from the new operating model’. Meanwhile, excluding the adverse impact of regulation, OIBDA grew by 1.9% y-o-y in organic terms. Profit attributable to minority interests reduced net income by EUR37 million in the first three months of the year, however, with this said to be mainly due to lower profit attributed to minority interests in Brazil, affected by the exchange rate, and the deconsolidation of Telefonica Czech Republic. As a result, consolidated net income in 1Q14 totalled EUR692 million, down 23.2% y-o-y (or 16.6% underlying). Capital expenditures for the first three months of 2014 stood at EUR1.555 billion, including EUR187 million related to spectrum acquisitions in Colombia and Central America.

In operational terms, the sale of its Czech Republic units along with the disposal of assets relating to the fixed consumer business in the United Kingdom saw Telefonica report a drop in total accesses, which declined by 0.8% from 315.651 million at end-March 2013 to 313.144 million a year later. Total mobile accesses fell to 247.534 million at the end of 1Q14 from 247.312 million a year earlier, while fixed voice connections dropped to 37.593 million from 39.764 million over the same period. Internet and data accesses meanwhile totalled 18.122 million at the end of the reporting period, representing a 6.6% y-o-y decline.

Commenting on the quarterly performance, Telefonica CEO Cesar Alierta said: ‘First quarter results show visible progress in the execution of the strategy announced for 2014, based on further reinforcing the differentiation of our products and services through a non-replicable infrastructure. In this sense, we are making significant investments, accelerating our network modernisation. Investments related with transformation and growth accounted for over two thirds of the total in the first quarter, enabling us to significantly expand our new fibre and LTE services.’

Spain, Telefonica