The customer base totalled 309 million accesses while mobile net adds grew by 4.3 million accesses in the first quarter, 1.5 times those of the same period a year earlier, “Our earnings for the first three months of 2012 reflect the strategic priorities set for the full year and the success of the company's shift in commercial strategy, which began in the second half of 2011," said Telefónica Chairman César Alierta. “These results are in line with internal estimates and thus allow us to reiterate our financial and operational guidance announced for 2012."
- Thanks to the company’s revamped commercial strategy, year-on-year growth in the customer base kept gathering pace for the fourth straight quarter, rising by +6.5% through March. At the same time, year-on-year growth in consolidated revenues improved significantly, an increase of +0.5% in the first quarter (vs. -1.8% in the fourth quarter of 2011).
- The Group’s heavily diversified business cemented its role as the Company's No. 1 strength. Latin America accounted for 48% of consolidated revenues and more than 50% of Group OIBDA, driving growth with a revenue increase of +8.3% in the first quarter.
- Telefónica lead the adoption of mobile broadband services resulting in a steady increase in wireless data revenues, which rose by +15.4% year-on-year.
- During a quarter notable for the Group’s major commercial drive, OIBDA totalled 5,081 million euros, while operating income was 2,511 million euros. Meanwhile, consolidated net profit for the quarter stood at 748 million euros and was impacted primarily by Telco’s writedown. In underlying terms, net profit amounted to 1,284 million euros.
- Telefónica devoted 11% of its revenues to investment, particularly in the areas of business growth and transformation, including selective deployment of high speed broadband in key markets. Between January and March the Company invested 1,712 million euros, an increase of +10.3%, bolstering its investor commitment in both Latin America and Europe. Despite this, the Group’s operating cash flow stood at 3,374 million euros in the first quarter of 2012.
- From a financial standpoint, and despite market volatility, by the end of the first quarter the Company had already refinanced all of its 2012 maturities and over 40% of those for 2013.
Latin America as a region and wireless data as a business cemented their roles as the main drivers of the Group’s growth, with year-on-year revenue growth of +8.3% and +15.4%, respectively.OIBDA between January and March totalled 5,081 million euros, operating income was 2,511 million and consolidated profit amounted to 748 million euros. Net profit was negatively affected primarily by Telco's writedown of its stake in Telecom Italia. In underlying terms, net profit amounted to 1,284 million euros. On the occasion of the release of first quarter 2012 earnings, Telefónica Chairman Cesar Alierta noted that the Company’s results “reflect the priorities set for the full year." He placed particular emphasis on the success of the shift in the Company’s sales strategy, which began in the second half of 2011:"The repositioning of tariffs designed to make us more competitive, drive penetration of mobile broadband services and minimise churn, has led to a strong commercial momentum since the beginning of the year, which will materialise in increased top line growth as the year goes on.” What's more, and bearing in mind Latin America's accelerating growth rate and the fact that the region now accounts for more than 50% of consolidated OIBDA, César Alierta praised the Group's high degree of diversification as "our No. 1 strength." "Our first-quarter earnings are in line with internal estimates, and thus we reiterate the financial and operational guidance announced for 2012." Solid rise in accesses Total accesses increased by 7% year-on-year to 309 million by the end of March 2012. The strong quarterly mobile commercial activity was the main factor driving mobile net additions of 4.3 million accesses, more than 1.5 times the first quarter of 2011 figure. Mobile contract accesses rose 9% year-on-year to account for 32% of the total mobile accesses base. Mobile broadband accesses posted a strong growth of 55% year-on-year, to 41 million at the end of the quarter, accounting for 17% of total mobile accesses (+5 percentage points versus March 2011). In Latin America, mobile broadband accesses doubled vs. March 2011. In Europe, it is important to mention the significant increase in smartphone penetration to 30% (+9 percentage points year-on-year). This growth, along with the adoption of integrated data tariffs, bolstered the monetisation of our customers’ growing demand for mobile data connectivity.
By region, it is worth to highlight Telefónica Latinoamérica, whose accesses went up by 11% year-on-year.Analysis of the income statement Revenues totalled 15,511 million euros in the first quarter of 2012, a 0.5% year-on-year increase (-1.8% in the previous quarter), driven by higher sales at Telefónica Latinoamérica (+8.3% year-on-year), which more than offset lower revenues at the European businesses (-6.6% year-on-year). Excluding the negative impact of mobile termination rates cuts, revenues rose by 1.6% from the first quarter of 2011. The Company’s push into the mobile data business was reflected in a steady increase of these revenues, with a year-on-year growth of 15.4%. This business accounted for more than 33% of mobile service revenues in the quarter. Also noteworthy was the sharp increase in non-SMS data revenues of 27.3% year-on-year, which accounted for more than 55% of total data revenues (+5 percentage points year-on-year). As a result, revenues from services with the most growth potential (fixed and mobile broadband, and new services beyond connectivity) continued to increase their weight to total Telefónica revenue (27%; +3 percentage points year-on-year) offsetting a receding contribution from traditional voice and access revenue. The Company's high and increasing diversification was the driver of its positive revenue performance. Telefónica Latinoamérica accounted for 48% of consolidated revenues (+3.5 percentage points year-on-year) and remained the Company’s main growth engine and largest contributor to growth (+3.7 percentage points). Telefónica Europe accounted for 49% of consolidated revenues. Consolidated operating expenses for the first quarter totalled 10,775 million euros (+5.9% year-on-year; +5.4% in organic terms) against a backdrop of higher commercial-related spending versus the first quarter of 2011. By concepts, personnel expenses stood at 2,217 million euros, up 6.7%, year-on-year. The average headcount in the first quarter was 289,037 employees (4,685 more than the average for the first quarter of 2011), mainly due to the larger workforce at Atento. Excluding Atento, Telefónica's average workforce stood at 133,322 employees, 512 fewer than in the same period a year earlier. Gains on sale of fixed assets stood at 136 million euros in the first quarter, mainly due to the sale of non-strategic towers in Spain and Brazil, which totalled 123 million euros. As a result, operating income before depreciation and amortisation (OIBDA) in the first quarter totalled 5,081 million euros (-8.8% year-on-year). OIBDA margin stood at 32.8% in the quarter (-3.4 percentage points year-on-year). By regions, Telefónica Latinoamérica continued to increase its contribution to the Group's consolidated OIBDA, accounting for over 50% of OIBDA, while Telefónica Europe reduced its contribution to 49%. Within Europe, Telefónica España represented 33% of OIBDA.
Operating income (OI) totalled 2,511 million euros in the first three months of the year (-17.8% year-on-year). Profit from associates stood at -481 million euros in the first quarter of 2012 (-16 million euros in the same period of 2011). This year-on-year change was mainly the result of the impact of Telco S.p.A.’s adjustment of the value of its investment in Telecom Italia, as well as of the operating synergies achieved, with both effects totalling 482 million euros (337 million euros after the related tax effect). It is worth to highlight that this effect is a non-cash impact.Financial position Net financial expenses in the first quarter of 2012 reached 818 million euros. This yielded an effective cost of debt of 5.57% in the last 12 months. If foreign exchange differences were excluded, the effective cost of debt would be 5.23% compared to 4.91% at December 31st 2011. At the end of March 2012, net financial debt amounted to 57,131 million euros. The leverage ratio for the past 12 months (net debt over OIBDA, adjusted by the provision related to the redundancy program in Spain) stood at 2.55 times as of the end of March 2012. If net commitments related to workforce reduction are considered, the ratio of total net debt plus commitments over OIBDA (excluding results on the sale of fixed assets and adjusted by the provision related to the redundancy program in Spain) stood at 2.74 times. During the first quarter of 2012, Telefónica’s financing activity, excluding short-term Commercial Paper Programmes activity, stood at around 7,500 million equivalent euros, and the main focus was on financing in advance debt maturing in 2012, and smoothing the debt maturity profile for 2013 at the Holding level. At the end of March 2012, bonds and debentures represented 64% of consolidated financial debt breakdown, while debt with financial institutions weighted 36%. Corporate income tax in the first quarter of 2012 totalled 401 million euros which, over an income before tax figure of 1,212 million euros, implied an effective tax rate of 33%. Profit attributable to minority interests dragged net income by 63 million euros in the first three months of the year and fell by 42.9% year-on-year, mainly due to Telefónica’s increased stake in Vivo and to minority interests at Colombia Telecom. As a result of the above mentioned items, consolidated net profit amounted to 748 million euros in the first quarter of 2012. In underlying terms, that is excluding exceptional impacts, net profit amounted to 1,284 million euros, which represents a year-on-year drop of 26.6%. Basic earnings per share, also in underlying terms, stood at 0.29 euros. In reported terms, basic earnings per share amounted to 0.17 euros. Steady stream of investment CapEx totalled 1,712 million euros in the quarter, up 10.3% year-on-year, with a CapEx over sales ratio of 11%, excluding investments in spectrum. The Company continued to devote the bulk of its investments to growth and transformation projects (81% of total CapEx), fostering the expansion of broadband services, both fixed and mobile. Operating cash flow (OIBDA-CapEx), excluding investments in spectrum, stood at 3,374 million euros in the first quarter of 2012.