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Telefonica Profit Plunges, Yet Backs Forecast

Telefonica Profit Plunges, Yet Backs Forecast
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Spain's biggest telecom company Telefonica SA (TEF: Quote,TDE.L) reported Friday a sharp decline in first-quarter profit, as it lost 2 million mobile customers in the country to stiff competition. Telefónica Latinoamérica on the other hand drove growth with revenues rising 8.3 percent year-on-year.

The company reiterated its financial and operational guidance for the year 2012, stating that the quarterly results were in line with its internal estimates.

Apart from intense competition, Telefónica's operations in Europe faced negative impacts from regulation. Telefónica Europe's total customer base was impacted by disconnection of 2 million mobile accesses in Spain. Consequently, the segment posted a revenue decline of 6.6 percent. Meanwhile, Telefónica Latinoamérica revenues grew 8.3 percent, accounting for 48 percent of consolidated revenues. In Latin America, mobile business average revenue per user, or ARPU, rose 0.4 percent year-on-year in organic terms.

The company's total accesses at the end of March improved 6.5 percent to 309 million. Mobile net additions were 4.3 million, excluding 2 million mobile accesses disconnections in Spain, more than 1.5 times the year-ago quarter.

Executive Chairman César Alierta stated, "Our revenues have experienced a very significant year-on-year improvement, reflecting the successful change in the Company's commercial strategy introduced in the second half of 2011."

In the first quarter, Telefonica's net income plunged to 748 million euros from 1.62 billion euros in the previous year. On a per share basis, basic earnings were 0.17 euros, lower than 0.36 euros per share a year ago.

Underlying net income declined to 1.28 billion euros from 1.75 billion euros reported last year. OIBDA - a key earnings metric, was 5.08 billion euros, with over 50 percent contribution from Telefónica Latinoamérica.

Revenues for the quarter increased 0.5 percent to 15.51 billion euros from 15.44 billion euros in the previous year, driven Latin America.

Excluding the negative impact of mobile termination rates cuts, revenues rose 1.6 percent from the prior-year quarter. Organic growth was 0.1 percent.

Capital expenditure totaled 1.71 billion euros in the quarter, up 10.3 percent from last year.

Telefonica still expects revenue growth for full year 2012 of more than 1 percent at current exchange rates, with a 2011 base of 62.84 billion euros.

Telefonica shares are currently trading at 11.07 euros, down 2.2 percent, on a volume of 7.43 million shares in Madrid.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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