Telefonica 4Q 06 Net Profit Falls 12% On Job Cuts
MADRID -(Dow Jones)- Telefonica Thursday posted a 12.2% decrease in fourth-quarter net profit, following a EUR503 million payout for early retirements and EUR134 million for an executive pension plan.
The company gave no update on the timing of its much anticipated sale of Dutch TV production company Endemol, in which it owns 75%. Market observers have speculated Telefonica could use cash from the sale to buy a stake in Telecom Italia. In February, Telefonica said it was in talks to buy part of the Italian company's stake in Olimpia, the holding company that controls Telecom Italia.
Madrid-based Telefonica, the largest telecommunications company in Spain and Latin America, said net profit stood at EUR1.05 billion for the quarter, 12% less than EUR1.19 billion a year earlier.
For the full year, net profit was EUR6.23 billion, 41% higher than 2005's EUR4.45 billion. The result is slightly above the EUR6.13 billion average estimate of six analysts polled by Dow Jones Newswires.
Operational income before depreciation and amortization, or OIBDA, stood at EUR4.47 billion in the fourth quarter, up 4.6% from EUR4.27 billion. OIBDA is the company's preferred measure of profitability, equivalent to earnings before interest, taxes, depreciation and amortization.
Revenue for the quarter jumped 37.4% to EUR14.19 billion from EUR10.33 billion in the same period last year.
At 829GMT, Telefonica shares were down 0.3%, or EUR0.05, to EUR16.25 in an overall positive market.
Telefonica's mobile arm achieved the highest revenue among the company's divisions in 2006. Revenue for the year stood at EUR18.40 billion, 11% more than a year earlier. Telefonica said as of December 2006 it had 145.1 million cellular customers.
Telefonica's mobile joint venture in Brazil, Vivo (VIV), a mobile operator it controls jointly through a 50-50 partnership with Portugal Telecom is a different story. It has been plagued by low margins and technical issues that forced Telefonica to upgrade its Brazilian network recently to GSM technology.
Most market observers believe Telefonica's agreement with Portugal Telecom won't last and have speculated Telefonica could buy PT's stake to gain control of the company or even try and merge it with Telecom Italia's Brazilian mobile operator, TIM Brazil.
Domestic unit Telefonica Espana reported yearly revenue growth of 1.8% to EUR11.96 billion, helped by a 26% increase in revenue from its Internet access service to EUR2.40 billion. During the last few quarters, Internet-related revenue has offset lower sales from traditional fixed-line voice services.
Traditional voice calls accounted for EUR4.87 billion in sales for the unit, a drop of 5.7% from 2005. Voice revenue is falling in most developed countries, due to competition from mobile and Internet-based telephony.
Telefonica's high-growth Latin American fixed-line division reported revenue growth of 14% in 2006 to EUR9.54 billion, boosted by the consolidation of the company's Colombian operator, Telefonica Telecom.
Telefonica said worldwide customers stood at 200.7 million at the end of 2006, 32% more than a year earlier.
Company Web site: http://www.telefonica.es
-By Jason Sinclair, Dow Jones Newswires, 34 913958127, jason.sinclair@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 1st March 2007
