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TheStreet Open House

Telefónica Reports A Significant Improvement In Net Profit And OIBDA In The Second Quarter Compared To The First Three Months Of 2012

The Telefónica Group (NYSE: TEF) (LSE: TDE) presented its first half 2012 results today. In the second quarter, net profit and OIBDA were significantly higher than in the first three months of the year. Therefore, at the end of June, the company reported net profit of 2,075 million euros, 1,327 million euros in the second quarter, and consolidated OIBDA of 10,431 million euros in the first six months, growing +5.3% between April and June compared to the previous quarter.

At today’s results release, Telefónica chairman, César Alierta, discussed these figures, pointing out that “Telefónica’s second quarter results showed an improvement quarter-on-quarter, especially at OIBDA level.”, thanks to the strict cost containment measures, while at the same time highlighting “the strong diversification of our business”, which remains key to growth, “with an increasing contribution from Telefónica Latinoamérica to consolidated results”. Further, Alierta underlined the advances made in Telefónica España, where the changes implemented are leading to “increased efficiency and improved profitability, with quarter-on-quarter growth in OIBDA”.

In the first half of 2012, Telefónica's results were significantly impacted by the difficult trading environment in key countries, including adverse economic conditions, intense competition and the negative effects of regulation. Against this backdrop, the Company’s highly diversified portfolio and the increasing contribution of Latin America and Germany, where solid growth is maintained, are the key levers to offset the performance in the rest of Europe.

Nevertheless, second quarter results showed a better OIBDA performance with quarter-on-quarter growth across regions and a sequential quarter-on-quarter OIBDA margin expansion, leveraging on cost contention initiatives across regions, being particularly noteworthy the return to positive quarter-on-quarter OIBDA growth in Telefónica España.

In this regard, since the beginning of the year the Company announced a number of significant initiatives focusing on maximising efficiency and improving profitability that will result in strong benefits for the whole market. As such, it should be highlighted the introduction of a new commercial model in Spain, with handset subsidies’ removal in new customer acquisition. This will result in a strong commercial expenses reduction, with net savings already visible. In this sense, handset subsidies were gradually reduced in the UK in the second quarter of the year. Additionally, in the UK and Mexico network sharing agreements with other operators were recently signed, which will lead to further savings in the coming years.

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