Telefonica reports increased net profit in 2016

23 Feb 2017

Spanish telecoms giant Telefonica has published its financial results for the year ended 31 December 2016, and while the company reported a 1.3% increase in revenue in organic terms, revenues were down by 5.2% at EUR52.036 billion (USD54.806 billion). Excluding the negative impact of regulation, Telefonica said that turnover would have grown by 2.2% year-on-year in organic terms. Meanwhile, highlighting the fact that its revenue structure ‘reflected the high degree of diversification and scale’, Telefonica reported that its domestic unit accounted for 24.4% of consolidated revenues in 2016, while its Latin American division and Brazilian subsidiary represented 24.2% and 21.3% of the total, respectively, followed by O2 Germany (14.4%) and O2 UK (13.2%). Among the notable information segments, turnover from Telefonica’s broadband services was up 16.1% y-o-y in organic terms, while mobile data revenues continued to post double digit growth (+12.3% organic in 2016) and represented 52.0% of mobile service revenues in the financial year.

Telefonica’s operating income before depreciation and amortisation (OIBDA) amounted to EUR15.118 billion in 2016, up 4.7% in organic terms and 14.3% in reported terms, while the company said that organic OIBDA growth accelerated to 9.4% in the fourth quarter. Operating income meanwhile totalled EUR5.469 billion in the twelve-month period under review, up 8.3% y-o-y in organic terms (+55.2% reported). Consolidated net income for the year stood at EUR2.369 billion (reported), up significantly from EUR616 million in 2015.

In 2016 Telefonica’s capital expenditures totalled EUR8.928 billion, including EUR345 million for spectrum acquisition, with this figure representing a 3.9% organic y-o-y increase. In the final quarter of 2016 Telefonica said that CAPEX had increased by 11.6% to EUR2.912 billion, saying its investments had mainly been focused on the deployment of ultra-fast networks, with investment in ‘growth and transformation’ accounting for 78.8% of the total.

In operational terms, at the end of December 2016 Telefonica had a total 344.671 million ‘final clients accesses’ on its books, with the lion’s share of these being mobile, which increased from 272.104 million at end-2015 to 276.450 million a year later. 4G connections accounted for an increased proportion of the total, reaching 66.296 million (or 23.9%), up from 37.375 million (13.7%) a year earlier. Fixed broadband accesses also continued to rise, reaching 21.195 million at the end of last year, up from 20.971 million at end-2015, while pay-TV customer numbers were roughly unchanged at 8.289 million (2015: 8.272 million). Fixed voice lines continued to decline however, falling to 38.280 million at the end of 2016, a y-o-y decline of 3.7%.

Commenting on the company’s performance, Jose Maria Alvarez-Pallete, Telefonica’s executive chairman, said: ‘2016 results strengthened our sustainable growth, following the fourth quarter acceleration of growth rates in main operational metrics. At the same time, the strong acceleration of free cash flow generation in the year and the long-term financing raised, accelerated de-leverage and bolstered our financial structure. For 2017 we expect similar operating trends: revenue stability despite higher regulatory impacts mainly in European markets, OIBDA margin expansion and lower CAPEX intensity.’

Spain, Telefonica