Telefonica 2Q Net Doubles On Airwave; Ups '07 Targets

MADRID (Dow Jones)--Telefonica's second-quarter net profit more than doubled, boosted by a EUR1.3 billion capital gain from the sale of radio operator Airwave as the company raised its revenue growth target for 2007 to 8%-10% from 6%-9%. The company also raised its OIBDA target for the year to 10%-13% from 8%-11%.

Madrid-based Telefonica, the largest telecommunications company in Spain and Latin America, said net profit rose to EUR2.57 billion from EUR1.14 billion a year earlier. A Dow Jones Newswires survey of seven analysts pointed to a EUR2.5 billion net profit.

At 0729 GMT Telefonica shares rose 0.7%, or EUR0.11, to EUR17.13 in an overall positive Spanish market.

Telefonica also raised its 2007 capital expenditure limit to EUR8.1 billion from EUR7.81 billion, signaling the company is looking at mergers and acquisitions this year.

Operational income before depreciation and amortization, or OIBDA, stood at EUR6.16 billion for the quarter, up 34% from EUR4.59 billion. Oibda is Telefonica's preferred measure of profitability.

Revenue rose 6.5% to EUR14.08 billion from EUR13.22 billion in the same period last year. Revenue at domestic unit Telefonica Espana grew 5.4% in the period to almost EUR5.16 billion, boosted by strong growth in high-speed Internet services. Total broadband clients rose 30.4% to almost 4.2 million at the end of June as the company migrated current Internet users to high-speed connections and added new clients. Telefonica's Spanish cellular customers also rose 7% in the period to 22.1 million.

Telefonica's high-growth Latin American division reported a revenue increase of 12.6% to EUR4.94 billion. The company raised its 2007 Latin American revenue growth target for the division to 13%-16% from the previous 11%-14%. It also raised the OIBDA target to 14-17% from 12%-16%.

Telefonica's mobile joint venture in Brazil, Vivo an operator it controls through a 50-50 partnership with Portugal Telecom, has been the source of much speculation recently. 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.

Market observers will be watching for any new information about Telefonica's plans in Brazil during the company's conference call, slated for Monday at 1400 GMT.

Revenue at Telefonica's European 02 unit stood at EUR3.53 billion, 3.4% higher than a year earlier. The company has struggled, especially in the competitive German market. However, Telefonica didn't lower its revenue forecasts for 02 - currently at 11% to 14% - as many analysts had expected.

Telefonica said worldwide customers stood at 212.6 million, 11.3% more than the same period last year.

-By Jason Sinclair, Dow Jones Newswires, +34 91 395 81 27, jason.sinclair@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 30th July 2007