In a regulatory filing, Spain’s Telefonica says it is writing down the value of its telecoms assets in Venezuela to reflect the tumbling value of the Latin American country’s currency, the bolivar fuerte. According to the Wall Street Journal (WSJ), the write-down reduces the group’s valuation of assets and income in Venezuela to VEF50:USD1, down from VEF12:USD1 previously, effectively giving the Madrid-based operator a one-time hit of EUR2.84 billion (USD3.23 billion). The WSJ notes that Telefonica’s assets include a sizeable retained profit that the government of Venezuela has so far prohibited it from taking out of the country. Accounting for this fact, the operator is writing down its profits on said assets to the tune of EUR1.23 billion, while FY 2014 results for Venezuela will be adjusted accordingly, it says, resulting in operating profit falling EUR915 million and net income, down EUR399 million. Further, the asset write-down reduces Telefonica’s effective cash holdings in the LatAm country at just EUR390 million.
The official bolivar fuerte exchange rate remains VEF6.3:USD1 (the rate at which Telefonica continued to value its Venezuelan assets until end-2013), but as the WSJ notes, on Venezuela’s thriving black market the currency has traded at above VEF180 per dollar this month.
Despite its latest actions, Telefonica says it is still committed to its investment plans in the country, stating: ‘Telefonica wishes to emphasise that these adjustments do not affect the investment nor growth plans in Venezuela in terms of bolivars, reaffirming the commitment of the company to continue developing telecommunications in the country, recently reflected in the allocation of spectrum that will materialise shortly with the launch of 4G.’