Spain’s Telefónica sees recovery momentum despite profit fall

Spain’s Telefónica pointed to rising demand for its mobile, broadband and pay-TV deals as evidence of a turnaround from its three-year slump as it posted falling revenue and profit in the first nine months of the year.

The trend echoed that at British and Dutch rivals Vodafone and KPN, which have started to benefit from investments in faster networks, though Telefónica’s trading improvement may need a few more months to bolster the bottom line.

Telefónica, which has lost more than a third of its revenue and core profit in Spain as cash-strapped consumers reduce telecoms spending, is betting on the take-up of bundled packages combining mobile and fixed-line phones, high-speed internet and TV and on its heavy investment in fibre-optic networks.

The strategy comes at a price, however. Margins in Spain, which contributes 42 per cent of revenue and 30 per cent of operating income, have continued to fall, slipping 2.7 basis points to 45.9 per cent in the nine months to September 30th.

Europe’s biggest telecoms group by revenue reported net profit down 9.4 per cent in the period to €2.85 billion, just above analysts’ forecasts.

Operating income dropped 12.6 per cent to €12.33 billion and revenue shrank 10.9 per cent to €37.98 billion.

Revenue and operating income were hit by weaker Latin American currencies, but the effect eased between July and September and the region’s underlying performance remained strong.

Net debt, a weak spot in the past, was €41.2 billion at September 30th, already beating a year-end target of €43 billion.

However, the figure was €44.9 billion when taking into account corporate moves not yet reflected in earnings.

In a conference call with analysts, finance chief Angel Vila said the company could soon issue more hybrid debt or sell assets to meet the target. – (Reuters)