Spain’s stuttering economy weighed on Telefónica in the first quarter as growth at the eurozone’s biggest telecoms operator continued to be driven by its Latin American operations.
Telefónica said that revenues in its Spanish business fell by 5.6 per cent in the first quarter to €4.37bn ($6bn) driven by high levels of unemployment and increased price-based competition among domestic operators.
Investor concerns about Telefónica’s Spanish business have depressed the company’s share price, which has underperformed the FTSE Eurofirst 300 telecoms index by 8 per cent over the past year, prompting chairman César Alierta to pledge an increase in pay-outs to shareholders.
Telefónica last month announced that it was preparing to slash up to 20 per cent of its workforce in Spain over the next three years as falling domestic sales dent profitability.
Telefónica also plans to spin off 50 per cent of its Atento call centre unit on the Madrid exchange in a deal expected to raise about €800m.
Spain currently has an adult unemployment rate of 21 per cent, the highest rate in the European Union and the country’s highest level of joblessness in 14 years.
A bright spot in its domestic performance was a 17 per cent annual fall in bad debt provisions in Spain to €34m, accounting for 0.8 per cent of domestic revenues in the quarter.
Matthew Key, chief executive of Telefónica Europe, said that in spite of the difficult economic conditions across parts of Europe, there had been no sign of customers cutting back on usage in general.
“What is very clear is that mobile technology has become part of people’s everyday lives,” he said. “There is not evidence in any market that there is lower mobile phone usage. What is clear is that customers are optimising their usage”.
Mr Key said that a sharp increase in smartphone use, and the accordant rise in data consumption, would also drive European growth.
Data traffic in Telefónica’s UK business over the past 12 months has risen by 45 per cent, with data revenue going up by 35 per cent.
The faltering performance of Spain’s former telecoms monopoly’s domestic business contrasted sharply with its operations in Latin America, where revenues increased by 26 per cent year on year to €7bn.
This expansion, the company said, saw a 9.1 per cent growth year on year in Latin American mobile traffic on its networks, with Brazil, where it owns the Vivo operator, generating 50 per cent of regional revenues.
Rising use of smartphones in Latin America saw revenues generated by data access for mobiles on the continent increase by 32 per cent year on year for the first quarter.
Over all, first-quarter net profit dropped by 1.9 per cent year on year to €1.62bn, below various polls of analysts that had predicted a figure closer to €1.7bn, while group revenues rose by 10.8 per cent over the same period to €15.43bn.
Telefónica’s earnings before interest, tax, depreciation and amortisation rose by 9 per cent from the first quarter of 2010 to €5.574bn, but its overall ebitda margin shrunk by 0.6 percentage points, driven by a 2.5 per cent equivalent drop in the Spanish market.
At the company’s investor day last month it said it was aiming to increase revenues by 2 per cent this year, and spend about €9bn on capital expenditure.
Telefónica shares were down less than 1 per cent at the close in Madrid at €16.84.
Source: www.ft.com
Telefónica said that revenues in its Spanish business fell by 5.6 per cent in the first quarter to €4.37bn ($6bn) driven by high levels of unemployment and increased price-based competition among domestic operators.
Investor concerns about Telefónica’s Spanish business have depressed the company’s share price, which has underperformed the FTSE Eurofirst 300 telecoms index by 8 per cent over the past year, prompting chairman César Alierta to pledge an increase in pay-outs to shareholders.
Telefónica last month announced that it was preparing to slash up to 20 per cent of its workforce in Spain over the next three years as falling domestic sales dent profitability.
Telefónica also plans to spin off 50 per cent of its Atento call centre unit on the Madrid exchange in a deal expected to raise about €800m.
Spain currently has an adult unemployment rate of 21 per cent, the highest rate in the European Union and the country’s highest level of joblessness in 14 years.
A bright spot in its domestic performance was a 17 per cent annual fall in bad debt provisions in Spain to €34m, accounting for 0.8 per cent of domestic revenues in the quarter.
Matthew Key, chief executive of Telefónica Europe, said that in spite of the difficult economic conditions across parts of Europe, there had been no sign of customers cutting back on usage in general.
“What is very clear is that mobile technology has become part of people’s everyday lives,” he said. “There is not evidence in any market that there is lower mobile phone usage. What is clear is that customers are optimising their usage”.
Mr Key said that a sharp increase in smartphone use, and the accordant rise in data consumption, would also drive European growth.
Data traffic in Telefónica’s UK business over the past 12 months has risen by 45 per cent, with data revenue going up by 35 per cent.
The faltering performance of Spain’s former telecoms monopoly’s domestic business contrasted sharply with its operations in Latin America, where revenues increased by 26 per cent year on year to €7bn.
This expansion, the company said, saw a 9.1 per cent growth year on year in Latin American mobile traffic on its networks, with Brazil, where it owns the Vivo operator, generating 50 per cent of regional revenues.
Rising use of smartphones in Latin America saw revenues generated by data access for mobiles on the continent increase by 32 per cent year on year for the first quarter.
Over all, first-quarter net profit dropped by 1.9 per cent year on year to €1.62bn, below various polls of analysts that had predicted a figure closer to €1.7bn, while group revenues rose by 10.8 per cent over the same period to €15.43bn.
Telefónica’s earnings before interest, tax, depreciation and amortisation rose by 9 per cent from the first quarter of 2010 to €5.574bn, but its overall ebitda margin shrunk by 0.6 percentage points, driven by a 2.5 per cent equivalent drop in the Spanish market.
At the company’s investor day last month it said it was aiming to increase revenues by 2 per cent this year, and spend about €9bn on capital expenditure.
Telefónica shares were down less than 1 per cent at the close in Madrid at €16.84.
Source: www.ft.com
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