Telefonica Profit Misses Estimates as Spain Sales PlungeManuel Baigorri
Telefonica SA, Spain’s biggest telephone company, reported first-quarter earnings that missed analysts’ estimates as competition hurt sales throughout Latin America and Europe, with revenue at home plunging 16 percent.
Operating income before depreciation and amortization fell 10 percent to 4.57 billion euros ($6 billion), the Madrid-based company said today. Analysts projected Oibda of 4.75 billion euros, according to the average of estimates compiled by Bloomberg. Revenue fell 8.8 percent, also missing projections.
Chief Executive Officer Cesar Alierta is trying to reverse falling sales in Spain, where unemployment breached 27 percent, by offering cheaper packages of voice, broadband and TV. Still, customers are defecting to smaller rivals including TeliaSonera AB’s Yoigo unit, leaving Telefonica to rely on its Latin America units for growth. Sales in that market declined, too, even as Brazil overtook Spain as Telefonica’s biggest market.
“Results were a bit on the light side, although expectations have come down in the last few months,” said Guy Peddy, a Macquarie Securities analyst in London. “Earnings in Spain and the U.K. were slightly weaker than expected but the market was fearing that they would be even worse.”
Telefonica declined 1.3 percent to 11.14 euros at 9:34 a.m. in Madrid. The stock has lost more than a third of its value in the past two years.
Net income climbed 21 percent to 902 million euros as sales slid to 14.1 billion euros. Revenue fell mainly because of the impact of the February devaluation of the bolivar in Venezuela and the exclusion of Atento, the call-center unit sold last year, the company said.
In Latin America, with markets including Brazil, Colombia and Chile, Telefonica’s Oibda declined 9.6 percent to 2.31 billion euros as sales fell 3.8 percent. That compares with an Oibda decline of 6.4 percent to 2.35 billion euros at the phone carrier’s European division.
Brazil became the company’s biggest market for the first time, even as sales declined 9.5 percent to 3.26 billion euros.
“The impact of currency devaluations in Latin America, especially Venezuela, Brazil and Argentina, was very negative,” Borja Mijangos, an analyst at Interdin Bolsa in Madrid, said in a phone interview. “However, results are overall slightly positive helped by an improvement in profit margins in Spain on cost reductions and its bundled offering.”
In Spain, sales declined to 3.26 billion euros as the company lost 275,000 mobile subscribers and average bills shrank. Oibda margin in Spain widened to 47 percent from 42.6 percent a year earlier.
Telefonica said it has reduced its net debt to 51.2 billion euros from 51.3 billion euros at the end of 2012, slowed down by the impact of the bolivar devaluation. The company repeated it targets a net debt of less than 47 billion euros by the end of the year.
In March, Telefonica sold $1.3 billion of treasury stock and agreed to sell the company’s U.K. broadband and fixed-line phone division to British Sky Broadcasting Group Plc for as much as 200 million pounds ($310 million).