Telefonica will record a €2.84 billion writedown on the value of its operations in Venezuela for 2014, after the company switched to a different exchange rate to reflect the country’s weakening currency.
In a regulatory filing on Monday, the Spanish incumbent said it will calculate the performance of its Venezuelan business at a rate of 50 bolivars to the U.S. dollar, down from an earlier exchange rate of 12 bolivars to the dollar.
The value of the bolivar has fallen considerably. At the end of 2013 the conversion rate stood at 6.3 bolivars to the dollar.
As a result of the recalculation, Telefonica’s operating income and net income from Venezuela for 2014 will decline by €915 million and €399 million respectively. The net value of Telefonica’s financial assets in Venezuela will fall by €1.23 billion.
"Telefonica wishes to emphasise that these adjustments do not affect the investment nor growth plans in Venezuela in terms of bolivars, reaffirming the commitment of the company to continue developing telecommunications in the country," said Telefonica, in its regulatory filing.
The writedown leaves the country’s contribution to Telefonica’s group revenue at around 1%.
Telefonica is due to publish its full-year financial results on 25 February.
