Telefonica 4Q Profit Weighed By Charges, LatAm"

MADRID -(Dow Jones)- Telefonica SA (TEF) Monday posted a below-expectations fourth-quarter net profit as the growth in broadband in its home market was offset by sluggish growth in Latin America fixed-line and one-off charges in its mobile unit.

Spain's dominant telecommunications company reported a net profit of EUR760.2 million in the fourth quarter, up from EUR189.2 million for the same period last year.

The figure was well below the original EUR917.5 million consensus expectation from eight analysts polled by Dow Jones Newswires, but the since that poll some had reduced expectations after Telefonica Moviles (TEM), the company's mobile unit, released lower-than-expected earnings last week.

Telefonica de Espana, its domestic fixed-line unit, remained as the feel-good Telefonica story for the quarter, with revenue up 2.7% to EUR2.822 billion despite stepped-up challenges from alternative operators and the loss of voice revenue to mobile telephony.

At 0808 GMT, shares were up EUR0.04, or 0.3%, to EUR14.16, with the blue-chip IBEX-35 up 0.2%.

The strong bottom-line increase was largely due to a sharp reduction in one-off charges. In the last quarter of 2003 Telefonica included EUR1.2 billion in provisions, mostly for headcount cutbacks in its fixed-line unit Telefonica de Espana.

"Figures are overall in line if one takes into account the one-off charges reported last week by Moviles," said Juan Tuesta, analyst with Banesto in Madrid. "The weakness seen in LatAm was also well-flagged."

He rates the stock buy, with a EUR14.56 price target.

Moviles posted Wednesday a EUR277.4 million net profit for the quarter, around EUR100 million below the analysts' consensus, as the company took one-off charges related to the consolidation of Latin American operations bought from BellSouth Inc. (BLS) last year.

Moviles' bottom line was also hurt by additional provisions for the cancellation of an agreement in Puerto Rico and the acquisition of small operators in Brazil.

As expected, broadband Internet access on digital subscriber line, or DSL, boosted results for Telefonica de Espana. Annual revenue on traditional fixed-line business, mainly voice, was down 2.5%, while Internet-related revenue was up 34.2%.

Telefonica de Espana ended the year with 1.9 million DSL subscribers, out of 2.5 million DSL lines in Spain, and a 55% market share in the entire broadband market, including DSL and other connection methods such as cable.

The unit's earnings before interest, tax, depreciation and amortization, or EBITDA, rose 4.8% to EUR1.32 billion.

As a whole, Telefonica has EUR8.395 billion in revenue, up 11% on the year, with EUR3.408 in EBITDA, up 3%.

Telefonica's fixed-line Latin American division had a 2.1% increase of revenue in 2004, to EUR6.883 billion, with EBITDA up 1.3% at EUR3.141 billion. Results in the division were hurt by currency effects.

The company's customer-base rose to 118.1 million as of Dec. 31, up 26%, including the addition of subscribers to the Latin American mobile operations of BellSouth (BLS) bought last year.

Company Web site: http://www.telefonica.es

-By David Roman, Dow Jones Newswires; 34 913958125; david.roman@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 28th February 2005