Spain's biggest telecom company Telefonica SA (TEF: Quote,TDE.L) reported Friday a sharp increase in fourth-quarter profit, helped by gains on sale of fixed assets and improved margins. Its Italian counterpart Telecom Italia Group (TI: Quote, TIAOF.PK) also posted higher quarterly earnings, reflecting solid contribution from Argentina and Brazil business units. Telefonica holds an indirect 10.47 percent stake in Telecom Italia through Telco Spa.
Meanwhile, Telefonica's full-year 2011 operating profit dropped due to lower domestic revenues and costs related to job cuts. The top line of its Spanish unit, Telefonica España, was impacted by an intense competitive scenario and commercial pressure. Earnings in the unit bore the brunt of higher restructuring costs stemming from workforce reductions in 2010.
Telefonica said its mobile accesses reached 306 million at the end of the year, up 7 percent from last year, setting the basis for its future revenue growth.
César Alierta, executive chairman of the company said, "Telefónica has led the increase of penetration of mobile broadband services in its markets, with more than 38 million customers at the end of the year, 61% above 2010 figure. As a result, mobile data revenue also grew significantly to almost 20% in organic terms, and now represents 31% of mobile service revenues."
In the fourth quarter, Telefonica's net income increased to 2.67 billion euros from 1.33 billion euros reported last year. During the quarter, the company realized a gain on sale of fixed assets totaling 530 million euros, higher than 206 million euros in the prior year. Total group operating income margin improved to 36.9 percent from 32.9 percent in the preceding year.
Revenues declined 1.8 percent to 16.17 billion euros from 16.46 billion euros in the prior-year quarter. In Latin America, quarterly revenues increased 2.5 percent to 7.71 billion euros.
For the full year, the company's operating income declined 38.9 percent to 10.06 billion euros. Its Spanish unit revenue decreased 7.6 percent to 17.28 billion euros.
Telefónica also provided guidance for 2012 and reiterated the shareholder remuneration policy announced in December. The shareholder remuneration was set at 1.50 euros per share, including the payment of a cash dividend of 1.30 euros per share and a share buyback for the remaining amount. In 2012, Telefonica expects revenue growth of more than 1 percent at current exchange rates.
Telecom Italia announced its preliminary results, and said its fourth-quarter EBITDA increased 4.6 percent over the prior year. Adjusted net financial position rose by 466 million euros.
For the full year 2011, EBITDA, a key earnings measure, increased 7.3 percent and reached 12.25 billion euros, helped by stronger results from Argentina and Brazil business units. Consolidated organic EBITDA margin fell 1.1 percentage points to 41.2 percent, due to South American business, where margins were lower than the domestic business.
Revenues for the year grew 8.7 percent to 29.96 billion euros. In terms of organic variation, consolidated revenues grew 2.7 percent.
Telecom Italia Chairman Franco Bernabè said, "2011 was marked by the slowing of the faster growing economies and fears of recession in the more mature ones. Notwithstanding the macroeconomic difficulties, the company managed to reach all its consolidated 2011 goals in terms of stabilizing revenues, profits and operating free cash flow generation."
The company said its board will also propose distribution of a dividend of around 900 million euros.
Telefonica shares are currently trading at 12.90 euros, up 0.02 euros, or 0.15 percent, on 9.9 million shares in Madrid.
In Milan stock Exchange, Telecom Italia closed Thursday's regular trading at 0.81 euros, down 0.12 percent, on a volume of 53.18 million shares.
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by RTT Staff Writer
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