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Telefónica Reports Net Profit Of 5,403 Million Euros In 2011, With A Record High In Free Cashflow Generation, Up 9.5%

Telefónica (NYSE:TEF) (LSE:TDE) accelerates capture of growth thanks to its successful sales approach, with mobile net additions up 45% in the quarter, and 7.8 million new accesses added. In 2011 as a whole, total customers grew 7% year-on-year, to 306.6 million accesses

The company announces its commitments to the financial community for 2012*:

Financial Guidance:

- Net financial debt / OIBDA < 2.35x (equivalent to previous (Net Debt+Commitments) / OIBDA < 2.5x).

- Shareholder remuneration of 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.

Operating Guidance (considering constant perimeter):

- Revenue growth >1% at current exchange rates.

- Lower OIBDA margin decline than in 2011.

- Similar CapEx/sales as in 2011.

  • Telefónica reported an increase in revenues of 3.5% year-on-year, to 62,837 million euros in 2011. This growth was driven by the increase in wireless data revenues (+19% in organic terms), which accounted for more than 31% of mobile service revenues, and growth in Latin America (+13.5%), a region which already represents 47% of total consolidated revenues and 48% of the Telefónica Group's OIBDA.
  • The robust figures reported by the company underline the high level of diversification of its operations. 72% of consolidated revenue and 67% of Group OIBDA were generated outside Telefónica's fixed and mobile businesses in Spain.
  • The performance of its net profit of 5,403 million euros in 2011 compared to the profit obtained in 2010 was affected by several one-off accounting impacts. Among other items, particularly noteworthy was the positive net impact of 3,476 million euros in 2010, from the revaluation of Telefónica's pre-existing stake in Vivo, and the negative impact in 2011 of the 1,870-million-euro provision for restructuring expenses associated with the workforce restructuring plan in Spain.
  • Stripping out all one-off impacts for both years, growth in net profit in 2011 would be -16.6% year-on-year.
  • In 2011, Telefónica invested 10,224 million euros, including spectrum purchases in several countries, among them Spain, where investment increased by 44.2% in the year to guarantee future growth in the area. 79% of the total investment went to projects focusing on growth and transformation, linked to fixed and mobile broadband services, among others.
  • High-value customers: Almost a third of the Group's 238.7 million mobile accesses were contract customers, up 11% year-on-year, accounting for 40% of the year's mobile net additions. In addition, 16% of the company's mobile accesses were mobile broadband customers, up 61% and already accounting for 38 million accesses. Telefónica also reported 18 million retail fixed broadband accesses (+5.5%) and 3.3 million Pay TV accesses (+18.7%).
  • At 31 December 2011, OIBDA stood at 20,210 million euros, thanks to high profitability and operating efficiency. Operating income totalled 10,064 million euros in 2011.
  • Telefónica took key decisions in Spain in 2011 to reduce its operating costs and improve its competitive positioning, and these are already bearing fruit. Its new sales approach resulted in net adds in the last quarter of 72,000 customers, which reversed the trend of the three previous quarters.

(*) 2012 operating guidance criteria: Assumes current exchange rates (2012 average FX of € 1: US$ 1.32x; € 1: BRL 2.30; € 1: £ 0.85) and constant perimeter of consolidation. At the OIBDA level, excludes write-offs, capital gains/losses from companies disposals and significant exceptionals. CapEx excludes spectrum licenses.

2011 Bases for 2012 targets:

  • Net financial debt / OIBDA: 2.46 x.
  • Revenues: 62,837 million euros.
  • OIBDA margin: 36.1%.
  • CapEx/Sales ex spectrum: 14.2%.

Telefónica Chairman César Alierta took advantage of the presentation of 2011 results to give an overview of the year and of the company's performance and progress, including an analysis of the key figures during the year, as well as announcing the expected forecasts and targets set for the current year.

The Chairman, César Alierta, stated:

“2011 has been a key year in the process of transformation of Telefónica. In a difficult environment, our diversification and our flexibility has allowed us to deliver solid results, in line with the targets announced, and a record FCF generation. Revenues increased by 3.5% year-on-year, to 62,837 million euros and FCF totalled 9,270 million euros, a 9.5% increase versus 2010, and equivalent to 2.06 euros per share.

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