|[November 07, 2012]
Telefónica's Net Profit to September up by 26.4% at 3,455 Million Euros
MADRID --(Business Wire)--
Between January and September, 2012, the Telefónica (News - Alert) Group has achieved a
consolidated net profit of 3,455 million euros, implying growth of 26.4%
with respect to the same period in 2011. At the close of the year's
third quarter, the Company has consolidated the quarter-on-quarter
improvement in returns in all regions and, between January and
September, has recorded year-on-year growth of +10.7% and +19.6% in
OIBDA (€ 15,782M) and operating result (€ 8,009 M), respectively. In
addition, the revenue generated by Telefónica Latin America at the end
of September has for the first time in history exceeded the weighting of
revenue from operations in Europe to represent 49% of the Company's
total turnover, which has remained stable at 46,519 million euros.
In the management report on the third-quarter results, the Executive
Chairman of Telefónica, César Alierta, has underscored the highly
visible progress achieved in issues of great priority for the Company
over the last few months. In this sense, he stressed that in "the third
quarter of the year there has been a consolidation of the recovery trend
initiated in the second quarter, with an outstanding sequential
improvement in underlying earnings per share, which stood at 0.36 euros
per share in the quarter (0.98 euros at the end of September), returning
to positive year-on-year growth." Alierta also points out the
strengthening of the financial positioning of the company, thanks to the
debt reduction and a proactive refinancing policy. Furthermore, the
Executive Chairman of Telefónica has highlighted that "from a strategic
standpoint, we continue making progress in our transformation into a
"Digital Telco" and we are making further progress in our transformation
journey and the results achieved so far make us feel more positive about
the future despite tough conditions".
Greater efficiencies and more financial flexibility
Telefónica's results in the third quarter of the year showed significant
progress in priority areas for the Company.
Earnings per share registered an outstanding improvement in the quarter,
delivering positive year-on-year growth in underlying terms. This
improvement reflected sequential OIBDA growth in absolute terms across
all regions, and a quarter-on-quarter improvement in underlying terms in
the consolidated OIBDA margin, reflecting transformational initiatives
and cost-reduction measures undertaken in all countries. In this sense,
particularly noteworthy were the removal of handset subsidies for new
customers acquisition in Spain from March this year -this is already
leading to significant savings in commercial expenses-, the gradual
reduction of subsidies in the UK, the focus on quality as a key lever to
reduce churn, and network-sharing agreements reached with other
operators in the UK and Mexico.
Moreover, the higher efficiency reflects the benefits of our scale.
Telefónica Global Resources is consistently contributing to higher
efficiencies and cost reduction, driven by new ways of sourcing,
building and operating our networks and IT.
Meanwhile, the third quarter also featured a considerable reduction in
net financial debt, reflecting the Company's strategy of increasing its
financial flexibility and improving its liquidity position.
In addition, the Company advanced further on the capture of new growth
opportunities in the digital world in the third quarter, with
initiatives such the joint-venture in the UK for mobile payment and
advertising approved by the European Union authorities, the agreement
signed with Aurasma, the world's leading augmented-reality platform, and
the launch of Amérigo, a 300 million euros network of private equity
funds, among others.
Customer base: 314 million accesses
Total accesses increased by 5% year-on-year
to 314 million by the end of September
2012, driven by the increase in mobile accesses, fixed and mobile
broadband, and pay TV accesses. Noteworthy was the 8% year-on-year
increase in accesses at Telefónica Latinoamérica (67% of the total).
Mobile accesses stood at 246 million at the end of the third quarter
(+6% year-on-year), driven by a sustained growth in mobile contract
accesses (+7% year-on-year), accounting for 33% of total mobile
accesses. Mobile net additions in the first nine months totalled 10.5
million accesses (excluding the disconnection of 3.6 million inactive
prepay mobile accesses in Spain and Brazil).
The Company's mobile broadband accesses maintaned solid growth of 40%
year-on-year to 47.7 million at the end of September 2012, and accounted
for 19% of mobile accesses (+5 percentage points year-on-year). It
should be highlighted the continued smartphone adoption by our customers
(with attached data tariffs), with 10.0 million net additions in the
first nine months of 2012 (+14% year-on-year).
Telefónica's retail fixed broadband accesses increased by 4%
year-on-year to 18.5 million at the end of September 2012, with 458
thousand net additions, reflecting the sustained growth of Telefónica
Latinoamérica. Retail fixed broadband accesses reached a penetration
rate of 47% over total fixed accesses.
Analysis of the operating statement
Revenues in the first nine months of 2012
totalled 46,519 million euros, virtually unchanged year-on-year (-0.3%).
This performance reflects the Company's high diversification, a key
differentiating factor in the current environment characterised by
adverse economic conditions, more intense competition and negative
effects of regulation in some countries. Excluding the negative effect
of regulation, revenues rose by 1.1% year-on-year vs. the first nine
months of 2011.
By region, Telefónica Latinoamérica's revenues continue to show strong
year-on-year growth (+5.9%) and now account for 49% of consolidated
revenues (+2.9 percentage points year-on-year), for the first time
exceeding revenues from the European operations (48% of the total).
Telefónica España's contribution decreased to 24% of consolidated
Mobile data revenues continue to post a solid growth during the first
nine months of 2012 (+14.2% year-on-year), contributing more than 34% to
mobile service revenues during the period. Also, non-SMS mobile data
revenues have posted a significant increase (+25.3% year-on-year),
representing 57% of total mobile data revenues.
Consolidated operating expenses amounted to
31,663 million euros, down 5.4% vs. the first nine months of 2011
(-21.1% in the third quarter). It should be noted that reported
year-on-year comparison is affected by the provision for expenses
related to the redundancy program in Spain booked in the third quarter
of last year (2,671 million euros).
Supplies in the January-September 2012 period totalled 13,403 million
euros and were flat year-on-year in reported terms. Subcontract expenses
(10,113 million euros) rose by 5.5% year-on-year compared to the first
nine months of 2011 (+5.5% organic), with a sequential decrease in
year-on-year growth in the third quarter, mainly due to efficiencies
implemented and reflected in a general reduction of commercial costs.
Finally, personnel costs stood at 6,507 million euros, down 27.0%
year-on-year, affected by the aforementioned provision associated with
the redundancy program in Spain.
The average headcount was 286,249 employees (1,186 employees more than
the average for the first nine months of 2011), mainly due to the higher
workforce at Atento. Excluding Atento, Telefónica's average workforce
stood at 132,192 employees.
Gains on sales of fixed assets in the first
nine months of the year stood at 289 million euros, similar to the same
period of 2011 (293 million euros). This heading in 2012 included mainly
the following: the impact of the sale of non-strategic towers, with an
impact in OIBDA of 289 million euros; the gain from the sale of
applications in the second quarter (39 million euros; 18 million euros
in Telefónica España); and the capital loss on the sale of shares of
China Unicom (News - Alert) (97 million euros in the third quarter).
Better OIBDA behaviour in all regions
In the first nine months of 2012, operating income
before depreciation and amortisation (OIBDA) amounted to 15,782
million euros and recorded an improvement vs. the first half thanks to a
sequential improvement in all regions. Thus, OIBDA in the third quarter
amounted to 5,448 million euros in underlying terms, up 1.8% from the
second quarter despite lower revenues.
OIBDA margin in January-September 2012 stood at 33.9% (-1.7 percentage
points year-on-year in underlying terms). It should be highlighted that
the OIBDA margin in underlying terms posted a sustained sequential
improvement to 35.1% in the third quarter compared to 34.6% in the
second quarter and 32.8% in the first quarter.
By region, Telefónica Latinoamérica continues increasing its
contribution to consolidated underlying OIBDA, accounting for 50% (+3.7
percentage points vs. September 2011). Telefónica Europe represents the
remaining 50%, with Telefónica España decreasing to less than a third of
the total (32%).
Depreciation and amortisation in the first
nine months of 2012 (7,773 million euros) increased by 2.9% year-on-year
and was up 1.7% year-on-year in the third quarter, mainly due to the
amortisation of the new spectrum acquired in Germany, Brazil, Colombia,
Spain, Mexico and Venezuela.
In the first nine months of 2012, operating income
(OI) totalled 8,009 million euros, particularly improving in the
Profit from associates stood at -486
million euros in the first nine months of 2012 vs. -506 million euros
during the same period in 2011, mainly due to Telco, S.p.A.'s
adjustments of the value of its investment in Telecom Italia (News - Alert), as well as
to the operating synergies achieved, with both effects totalling -542
million euros in 2012 and -505 million euros in 2011. It should be
pointed out that these effects were non-cash impacts.
Net financial expenses for the first nine
months of the year 2012 reached 2,419 million euros (+18.3%
year-on-year). This yielded an effective cost of debt of 5.65% in the
last 12 months. Free Cash Flow for
January-September 2012 amounted to 4,268 million euros posting an
improvement in the third quarter (2,541 million euros) compared to the
first half of 2012, in line with Company estimates.
At the end of September 2012, net financial debt
amounted to 56,006 million euros, posting a significant reduction in the
third quarter (-2,304 million euros). After the closing of the third
quarter, the company has executed an efficient asset portfolio
management and a successful divestment program to reach a total debt
reduction of 5,500 million euros since the end of June. Thus, the
current net financial debt stays at 52,823 million euros, in line with
the objective to reach a leverage ratio (net debt over OIBDA) of 2.35
times, versus 2.44 times at the present moment.
During the first nine months of 2012, Telefónica's financing
activity, excluding short-term Commercial Paper Programmes
activity, stood at nearly 11,900 million equivalent euros and has
exceeded the amount raised in fiscal year 2011. It is worth to highlight
the strong refinancing activity since the end of August until
mid-October, when the Company raised around 5,375 million euros
equivalent in the credit markets, improving significantly the Company's
liquidity position. The financing activity was focused on financing in
advance debt maturing in 2012, and smoothing the debt maturity profile
for 2013 and 2014 at the Holding level. Therefore, the Company maintains
a debt maturity profile covered beyond 2014.
At the end of September 2012, bonds and debentures represented 64% of
consolidated financial debt breakdown, while debt with financial
institutions weighted 36%.
Corporate income tax for the first nine
months of 2012 totalled 1,358 million euros which, while profit
attributable to minority interests dragged net income by 291
million euros in the first nine months of 2012.
As a consequence of the items mentioned above, consolidated
net income in the January-September 2012 period stood at 3,455
million euros (+26.4% year-on-year), while basic earnings per share
increase to 0.98 euros per share in underlying terms. It should be
highlighted that underlying earnings per share registered an important
improvement in the third quarter, standing at 0.36 euros per share and
growing both sequentially (+4.8%) and year-on-year (+0.5% vs. -20.3% in
the second quarter and -25.7% in the first quarter).
CapEx for the first nine months of the year
totalled 5,699 million euros. In organic terms, CapEx rose year-on-year
by 3.5%. The Company continues to devote the bulk of its investment to
growth and transformation projects (81% of total investment), fostering
the expansion of high speed broadband services, both fixed and mobile.
The CapEx over sales ratio (excluding spectrum investments) was 12.2% in
the first nine months of 2012.
Operating cash flow (OIBDA-CapEx),
excluding spectrum investment, stood at 10,122 million euros for the
first nine months of 2012 (+16.1% year-on-year).
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