News
Spanish incumbent upbeat on underlying growth, but net debt creeps above 50 billion.
Telefonica on Friday said its first-quarter revenue and earnings were hit by currency headwinds from Latin America; however, underlying growth was strong.
The Spanish incumbent generated revenue of €10.78 billion during the three months to 31 March, down from €11.54 billion in the same period a year earlier, but up 3.4% organically. Operating income before depreciation and amortisation (OIBDA) fell 6.7% year-on-year to €3.38 billion, but was up 5.5% on an organic basis.
"Our first quarter results reflected a strengthening of the business across the board and the capacity of our platforms (networks and infrastructure), which is enabling us to reach more customers with higher value products and services," said a statement from Telefonica CEO José María Álvarez-Pallete, who took over from César Alierta earlier this month.
"On the other hand, the performance of main financials (revenues, OIBDA) in the quarter was strongly affected by the depreciation of exchanges rates," he said.
The Brazilian real, Argentine peso, Venezuelan bolivar, and Colombian peso all weakened against the euro, deducting 16 percentage points and 14.8 percentage points from Telefonica’s revenue and OIBDA respectively.
Spain showed continued signs of recovery though, with Telefonica’s reported revenue growing 8.2% on-year to €3.13 billion, although OIBDA edged down 1.2% to €1.27 billion.
Revenue in Telefonica’s other major European market, Germany, fell to €1.86 billion from €1.9 billion, driven by declines in mobile service and handset revenues. OIBDA fell 3.8% to €392 million.
Telefonica’s overall customer base edged up to 321.89 million from 319.11 million in the corresponding quarter of 2015, as growth in fixed broadband customers offset a slight decline in mobile subscribers. At the end of March, the company had 246.85 million mobile connections and 60.84 million fixed telephony and broadband connections.
The proportion of higher-value mobile customers increased. 36.7% of Telefonica’s mobile users are now on contracts, compared to 34% a year earlier. The number of smartphones on its networks increased to 115.06 million from 91.43 million.
Meanwhile, Telefonica’s closely-watched net debt increased by €292 million during the quarter to reach €50.21 billion, as shareholder remuneration, early retirement payouts, and net financial investments offset debt reduction measures such as lowering debt in foreign currencies and free cash flow generation.
With the European Commission expected to block Telefonica’s £10.25 billion (€13.14 billion) sale of O2 UK to CK Hutchison, the company will have to look at other means of cutting debt.
Sources cited in a recent Bloomberg report claim that Telefonica is still keen to exit O2, and may look to Liberty Global or private equity firms for a way out.
The telco is also said to be moving forward with plans to spin off its recently-created infrastructure holding company Telxius.
