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TheStreet Open House

Telefónica’s Net Profit Totals 3,145 Million Euros Up To September And The Company Meets Annual Earnings And Debt Reduction Targets 3 Months In Advance

Stocks in this article: TEF

Telefónica (NYSE:TEF) (LSE:TDE):

  • Telefónica’s revenue grew in organic terms for the second quarter in a row and showed significant acceleration by increasing 2.1%. Business momentum and the results of the company transformation plan allowed revenue, which grew 0.4% year-on-year to 42,626 million euros, to achieve the target forecast for the end of 2013 a quarter in advance.
  • By region, both Latin America and Europe continued to improve their year-on-year revenue performance rates. Telefónica Latin America showed organic growth of 10.9% in the quarter while Telefónica Europe improved by 1.7 percentage points compared to June.
  • The OIBDA also shows the first positive results of the transformation plan and thanks to the good performance of revenue and to the ongoing generation of savings and efficiencies, continues its stabilization in the third quarter and closed September with a total of 14,100 million euros (-0.4% organic). The OIBDA margin also sustained its high levels of profitability in the first nine months of the year (33,1%).
  • In reported terms, evolution of the aforementioned entries for the first nine months was particularly affected by exchange rate fluctuations, above all, by devaluation in Venezuela and depreciation of the Brazilian real and the Argentine peso, which subtracted around seven percentage points from revenue and OIBDA performance. Taking into account the impact of perimeter changes and exchange rates, reported revenue fell by 8.4% and OIBDA by 10.7%.
  • In spite of the mentioned impacts from perimeter and exchange rates, free cash flow would have reach 4,706 million euros in the first nine months of the year, in line with the same period in 2012, if we exclude spectrum payments of 1,305 million euros.
  • Including spectrum payments, free cash flow, which reached 3,401 million in the first nine months of the year, represents a ratio per share of 0.75 euros and reflects the sustainability of the dividends policy designed by the company, which on 6 November, paid out 0.35 euros per share for the first tranche.
  • The company’s financing activity, which was very intense during the first nine months of the year, exceeded 10,000 million euros and thanks to its favourable liquidity situation, Telefónica has maturities covered for the next two years.
  • At the end of September, Telefónica Group’s customer base reached 320.3 million accesses (+2%) and in mobile access, strong year-on-year growth of the contract sector stands out: 9% across the group and 79% in Latin America. Mobile broadband access now accounts for 27% of mobile accesses, reaching 67.4 million accesses in September (+41%).
  • In Spain, revenue continued to gradually stabilise its evolution and the intense effort to transform the business continues to be reflected as significant improvements to efficiency, allowing an OIBDA margin of 50.2% reached in the quarter.
  • Brazil beat a new record for the company with a net quarterly gain in mobile contracts of 1.5 million accesses, which represents capturing 64,5% of the market growth. At the same time, the landline segment continued to improve its operating evolution, also accelerating customer acquisition in fixed services.
  • Germany has been able to improve its mobile commercial traction in the quarter, with total net additions almost doubling the figure achieved in the previous quarter, reaching a total access base of 25.4 million at the end of September. There is also a broader adoption of LTE-enabled handsets, that represents approximately 55% of total shipments in the third quarter vs. 40% in the second quarter, which is an encouraging trend for further data monetisation.
  • The third quarter was also positive for Telefónica Digital, which has signed new deals, such as M2M with the British Government worth 1.5 billion pounds sterling, and for Telefónica Global Resources, which has significantly increased the percentage of sites connected to high-speed to 60%, among other achievements.
  • Investment grew by 5.6% over the first nine months of the year to 6,019 million euros and is still mainly allocated to areas of growth and transformation (83%).

Telefónica’s results for the first nine months of 2013, presented to the market today, show the first results of the company transformation plan, started a year ago. Telefónica has earned a net profit of 3,145 million euros and achieved its annual revenue and debt targets a quarter in advance. Organic revenue up until 30 September grew by 0.4%, exceeding the growth target estimated for the end of the year and debt stood at 46,101 million, thanks to a dramatic reduction of almost 10,000 million euros in just one year. This figure increases by close to 4,000 million euros if operations after the end of the quarter are considered and which bring net debt to 44,634 million euros. The debt target set for the year anticipates that the figure will not exceed 47,000 million euros.

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