Telefonica 1Q Net Profit +22% on Lat Am, Spain
MADRID -(Dow Jones)- Spain's Telefonica, Wednesday said net profit rose 22% in the first quarter, bolstered by growth in its key Latin American and Spanish divisions.
Madrid-based Telefonica, the largest telecommunications company in Spain and Latin America, said net profit for the three-month period ending March 31 rose to EUR1.54 billion, from EUR1.26 a year earlier.
Analysts had expected a EUR1.52 billion net profit. Telefonica's earnings were buoyed by Latin America, and to a lesser extent Spain, Banesto said in a research note. "The best thing about these results is that they show the economic downturn in Spain and growing competition isn't hurting Telefonica as many had feared," Banesto said.
"Germany is a weak spot, but the company is on track to meet guidance for this year and beyond," it said. Banesto rates Telefonica at buy with a EUR25.67 price target.
As of May 13, Telefonica said it completed nearly 36% of the share buyback plan it rolled out in February, as increased cash generation enabled it to accelerate execution of the program. It now plans to complete the buyback program of 100 million shares by the first half of 2009.
Telefonica's shares didn't react to the earnings, and at 0920 GMT they traded 0.3% higher at EUR19.23, while at the same time the DJ Stoxx Europe 600 Telecommunications Index was flat.
Operational income before depreciation and amortization rose 5% to EUR5.38 billion for the period. Operational income before depreciation and amortization is Telefonica's preferred measure of profitability.
Revenue increased 1% to EUR13.90 billion. The company said revenue was somewhat weighed by the depreciation of Latin American currencies and the British pound against the euro during the period, and also after it sold radio operator Airwave and production company Endemol last year.
Telefonica is undergoing a restructuring program as it makes cuts in its shrinking domestic wireline business and refocuses on mobile telephony and high-speed Internet. The company is also shifting focus towards other European and Latin American high-growth markets investing in networks in both regions.
Telefonica had 171.7 million worldwide cellular customers at the end of March, 16% more than a year ago. Total broadband customers rose almost 27% from a year ago to 10.8 million as the company migrated current Internet users to high-speed connections and added new ones.
Telefonica also increased its pay television customers in the past year as it rolled out new services in Latin America. Total pay-TV users rose 64% to nearly 1.9 million. The company offers pay TV in Spain, Czech Republic, Peru, Chile, Colombia and Brazil.
Telefonica said worldwide it had 233.5 million customers at the end of March, 13% more than a year earlier.
Telefonica's shares have lost 12% since the beginning of the year, worse than the benchmark IBEX-35 index, that has shed 8%.
Analysts say concerns of an economic slowdown in Spain and uncertainties over the company's aggressive acquisition strategy are weighing on the stock.
-By Jason Sinclair, Dow Jones Newswires, 34 913 958 127; jason.sinclair@dowjones.com
(END) Dow Jones Newswires
Posted to the site on 14th May 2008