Telefonica's revenue growth in 1Q15 driven by German and LatAm units

14 May 2015

Spanish telecoms giant Telefonica has published its financial results for the quarter ended 31 March 2015, with the company generating consolidated revenues of EUR11.543 billion (USD13.02 billion) in the period under review, a figure which it said showed a ’strong growth acceleration’.

With turnover up by 12.6% compared to the first three months of 2014, Telefonica noted that growth had been driven by its German and Latin American units, while it pointed to an exchange rate evolution as having contributed 3.2 percentage points to revenue growth. Adding that the company’s growing focus on key markets was reflected in the revenue mix, Telefonica also highlighted the fact that domestic unit Telefonica Espana, Telefonica Brazil and Telefonica Deutschland together accounted for two-thirds of group revenues. In organic terms, meanwhile, turnover was up 3.3% year-on-year, with the group’s LatAm division and Telefonica Brazil being ‘particularly noteworthy’ with organic revenue growth of 9.7% and 4.3% respectively.

Operating expenses in Q1 2015 stood at EUR8.185 billion, representing an increase of 4.0% in organic terms (up 14.9% on a reported basis) against the same period a year earlier. Such an increase was reportedly driven by higher commercial and network and system costs, despite savings generated by the simplification of the company’s operating model and scale. Operating income before depreciation and amortisation (OIBDA) meanwhile totalled EUR3.618 billion, with an OIBDA margin of 31.3% in 1Q15, stable against the first quarter of 2014. Operating income for the quarter under review was EUR1.511 billion, up by 3.2% in organic terms, with consolidated net income standing at EUR1.802 billion.

Capital expenditures in the opening quarter of 2015 totalled EUR1.682 million, up 25.8% from the EUR1.337 billion reported a year earlier, with this including EUR161 million spent on spectrum acquisitions in Ecuador, Spain and Chile. According to Telefonica, however, it was continuing to focus the bulk of its investments – 76% of the total – on growth and transformation projects.

In operational terms, Telefonica reported that customer numbers had increased in all business units, with it having more than 319 million total accesses on its books at the end of March 2015. Moreover, the company highlighted what it termed the ‘significant evolution of the higher-value services’, pointing specifically to the fact that fibre accesses had doubled y-o-y to 2.1 million, while pay-TV customers had increased by 53% y-o-y to 5.5 million. Group-wide LTE accesses meanwhile rose to 13.7 million, with total mobile subscribers numbering 252.8 million, representing an increase of 12.9% from 223.9 million at end-March 2014.

Commenting on the company’s performance in the first three months of 2015, Telefonica’s executive chairman Cesar Alierta was cited as saying: ‘In the first quarter of 2015 Telefonica initiated a new growth cycle; total accesses increased 10% year-on-year, revenues improved 12.6%, OIBDA 7.7%, free cash-flow 25.8% and net income was 2.6 times higher. These figures reflect the solid beginning of this new cycle and are leveraged on the improved organic evolution of the business. This growth is also reflected across the board as all business units, except for Spain, posted increases in accesses, revenues and OIBDA.’

Spain, Telefonica