Telefonica’s revenues fall 6.6% in 1Q16 on foreign exchange depreciation

29 Apr 2016

Spanish telecoms giant Telefonica generated total turnover of EUR10.784 billion (USD11.9 billion) in the opening three months of 2015, representing year-on-year (y-o-y) growth of 3.4% in organic terms, though a 6.6% decline from 1Q15 in reported terms as a result of depreciating currencies in some of its operational regions. On an organic basis, the group’s Latin American division Telefonica Hispanoamerica performed well, increasing revenues by 11.3% to EUR.3054 billion, though in reported terms turnover was actually down by 16.7%. By comparison, the consolidation of pay-TV provider DTS helped Telefonica’s domestic unit to post both reported and organic revenue gains (up 8.6% and 0.2%, respectively), with its total for the quarter being EUR3.126 billion. Excluding the impact of regulation, Telefonica said total turnover would have increased by 4.4% (organic) against the opening quarter of 2015. Mobile data revenues were up by 19.9% y-o-y on an organic basis, while such turnover represented 48% of mobile service revenues in the reporting period (up seven percentage points); this increase was attributed to higher smartphone penetration and the ‘growing weight’ of LTE customers.

Operating expenses in 1Q16 totalled EUR7.651 billion, equating to 2.7% organic growth against the corresponding period a year earlier, and decelerated by more than two percentage points versus the previous quarter; Telefonica said this reflected efficiencies and integration synergies, despite increased expenses in Latin America linked to higher commercial intensity, inflationary pressure and the impact of the appreciation of the US dollar against local currencies. Operating income before depreciation and amortisation (OIBDA) was EUR3.376 billion in the quarter under review, (up 5.5% organic, down 6.7% reported), underpinned by the positive performances of Telefonica Brasil (+8.2% organic) and Telefonica Espana (up 2.0% organic). Consolidated net income for the first quarter of 2016 was EUR776 million.

In operational terms, at the end of March 2016 Telefonica had a total of 246.9 million mobile accesses on its books, a decline of 2% y-o-y due to a lower pre-paid subscriber base as the company continued to focus on high value customers and services. Indeed, post-paid subscribers now represent 37% of the subscriber total, up 3% y-o-y, while the number of customers using LTE-based services group-wide increased to 35.569 million (or 15% of all Telefonica’s wireless accesses), more than double the 14.059 million it had a year earlier. Group fibre and VDSL accesses stood at 7.915 million at end-March 2016, representing 38% of the total fixed broadband base, which increased by 19% to 21.076 million. Pay-TV was another area where strong growth was reported, with the group total rising by 53% to 8.365 million, representing a penetration of 40% of its total fixed broadband base.

Jose Maria Alvarez Pallete, Telefonica’s executive chairman, said of the company’s performance: ‘In a context of intense technological disruption and transformation around digitalisation, our first quarter results reflected a strengthening of the business across the board and the capacity of our platforms (networks and infrastructure), which is enabling us to reach more customers with higher value products and services. This was all reflected in the improved quality of our customer base, with average revenue per access increasing by 5.2%, which is the main source of organic revenue growth. This growth accelerated at OIBDA level, as a result of efficiencies and operational leverage.’

Spain, Telefonica