Telefonica cites forex movements as revenues, profit fall in 2Q16

28 Jul 2016

Spain’s Telefonica has published its financial results for the three months ended 30 June 2016, with turnover in the period falling 7.7% on a reported basis against the corresponding quarter in 2015.

In the second quarter total turnover stood at EUR12.723 billion (USD11.26 billion), with Telefonica noting that was ‘practically stable’ against the year-ago period, representing a 0.2% year-on-year drop in organic terms. According to the operator, positive contributions from its Latin American division and Brazilian unit helped to partially offset declines in Germany and the United Kingdom. Meanwhile, Telefonica in part attributed the reported revenue decline to foreign exchange movements, noting that its main financial variables in the second quarter of 2016 had been affected by the depreciation of currencies against the euro, specifically the Brazilian real, Argentine peso and the sterling pound. Indeed, the Spanish company noted that ‘the variation in exchange rates deducted 9.1 percentage points from the year-on-year change in revenues’.

Operating income before depreciation and amortisation (OIBDA) in the quarter increased by 0.8% year-on-year on an organic basis, to EUR3.918 billion (down 7.1% y-o-y in reported terms), with operating income standing at EUR1.567 billion, representing a 1.5% organic year-on-year decline, and a 12.0% drop in reported terms. Consolidated net income in 2Q 2016 more than halved to EUR693 million, from EUR1.525 billion in the corresponding quarter of 2015.

In operational terms, Telefonica ended June 2016 with 341.922 million final client accesses, down 1.8% from 348.094 million a year earlier. Mobile subscribers continue to account for the bulk of the total, standing at 272.597 million at 30 June 2016, and while this represented a 2.1% year-on-year decline, the company saw a notable increase in the number of customer taking an LTE-based service, with such accesses more than doubling from 24.342 million in 2Q15 to 50.077 million at the end of the latest reporting period. Fixed broadband connections also saw numbers rising, by 2.0% y-o-y to 21.196 million, while 8.362 million of those were classified as fibre/VDSL connections (up almost 31% y-o-y). Fixed telephony accesses continued to decline, meanwhile, falling 2.8% over the year to 39.262 million.

Commenting on the quarterly performance, Jose Maria Alvarez-Pallete, Telefonica’s executive chairman, said: ‘Our second quarter results reflect the benefits of Telefonica’s structural transformation, which allowed us to build the future, driving our innovative capabilities and Big Data. The network improvements through excellent connectivity, together with the differentiation and quality of our products and services, have been key to the success of our commercial activity, focused on value, and improved customer loyalty. All this is reflected in the continued profitable growth another quarter, which along with the capture of synergies and efficiencies, was the main growth lever for service revenue, OIBDA, operating cash flow and margin expansion.’

Spain, Telefonica