Latin America Unit Growth Boosts Telefonica

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On May 13, 2009, Telefonica(TEF Quote) reported that its Q1 FY09 earnings grew 9.9%, driven by impressive growth in its Latin America unit. Net income increased to EUR 1.69 billion or EUR 0.37 per basic share from EUR 1.54 billion or EUR 0.33 per basic share in Q1 FY08.

TEF's revenue fell 1.4% to EUR 13.70 billion, impacted by a 4.7% decline from foreign currency translations. Telefonica Espana revenue dropped 4.2% to EUR 4.91 billion, hurt by increased competition and reduced consumption of voice services from customers. Within the segment, Wireline business sales marginally declined to EUR 3.06 billion, while Wireless business revenue decreased 9.4% to EUR 2.17 billion. Telefonica Latin America revenue rose 4.7% to EUR 5.40 billion, fuelled by organic growth and an increase in bundled products, along with an improved portfolio of broadband, pay TV and data services. Telefonica Europe revenue dropped 6.5% to EUR 3.25 billion, driven by successful retention activities across markets.

Total number of access across regions rose 11.9% to 261.36 million, attributable to 15.4%, 17.5%, and 24.8% increases in mobile access, broadband, and pay TV access, respectively. Retail internet broadband accesses increased 17.5% to 12.80 million due to growth in penetration of voice, ADSL and pay TV bundles.

Alcatel-Lucent entered into collaboration with Telefonica in an interactive IPTV advertising proof of concept pilot for its Imagenio IPTV customers throughout Spain. TEF will use an application enablement solution from Alcatel-Lucent, thus bringing increased interactivity and web 2.0 features to the TV experience of Imagenio's IPTV platform.

TEF reiterated its cash flow expectations in FY09 for growth of 8.0% to 11.0%, and it reaffirmed 1.0% to 3.0% growth in operating income before depreciation and amortization (OIBDA). Telefonica also reiterated its dividend payment of EUR1.15 per share and anticipates its capital expenditure to be EUR 7.50 billion.