Spanish telecom giant
) reported first-half 2014 consolidated net income of €1,903
million ($2,609 million) that deteriorated 7.5% from the comparable
period last year.
The company recorded revenues of €24,957 million ($32,416
million) in the first half that dropped 12.6% year over year owing
to exchange rate fluctuations and change in consolidation
In the first half of 2014, consolidated operating expenses
increased 11.9% to €17,427 million ($23,892 million) owing to
higher network, commercial and systems cost.
In the first half, adjusted operating income before depreciation
and amortization (OIBDA) declined 14.5% to €8,055 million ($11,043
million), resulting in adjusted OIBDA margin of 32.3%, down 70
basis points year over year.
Telefonica Latin America:
In the first half, revenues in Brazil deteriorated 14.7% to €5,484
million ($7,518.6 million), while in the Hispano-American market,
revenues tumbled 13.8% to €7,066 million ($9,687.5 million). OIBDA
(Operating income before depreciation and amortization) in the two
above mentioned markets declined 16.3% and 11.9% respectively.
In Spain, wireless revenues fell 8.6% to €5,992 million ($8,215
million) due to decline in both wireless and wireline revenues.
Wireless revenues were €2,299 million ($3,151.9 million), down
12.7% over the year-earlier period, while wireline business
deteriorated 5.5% to €4,184 million ($5,736.3 million). OIBDA in
Spain declined 12.2% to €2,745 million ($3,763.4 million) during
the first six months.
Revenues from Telefonica U.K. climbed 3.4% to €3,344 million
($4,584.6 million), while in Germany, the same fell 6.6% to €2,284
million ($3,131.4 million). OIBDA performance in UK improved 6.3%
while in Germany, it deteriorated 14.6% during the first half.
At the end of the first half of 2014, total customer access
reached approximately 315.8 million, down 0.5% year over year due
to the sale of the Czech Republic business and the residential
business in U.K.
On a year over year basis, mobile access remained at 249.4
million customers. Total Internet and data access declined 4.5%
million from 19 million reported in the comparable period of last
year. Pay-TV access totaled 4.2 million, up 26.0% year over year.
Fixed telephony access dropped 5.6% to 37.5 million subscribers at
the end of the reported period.
Liquidity and Capital Expenditure (Capex)
Telefonica exited first-half 2014 with net debt of about €43.79
billion ($60 billion), down from €45.38 billion ($62.5 billion)
recorded at the end of 2013. The leverage ratio (net
debt-to-EBITDA) was 2.47 times. Telefonica ended the first half
2014 with cash and cash equivalent of €10,131 million ($13,268.8
million) as compared with €9,977 million ($13,721 million) at the
end of Dec 31, 2013.
Capex declined 9.7% year over year to €3.52 billion ($4.80
billion) in the reported period and includes €189 million ($257.9
million) incurred in the acquisition of Spectrum in Colombia and
Central America. Operating cash flow (OIBDA-capex) was €4,533
million ($6,186.6 million), down 17.9% during the reported
In 2014, Telefonica expects revenue growth while OIBDA margin
will stabilize with an expected annualized erosion of 1%.
Additionally, the company expects net financial debt of less than
The company is expected to benefit from its strategic measures
in the European markets, including expansion of broadband and data
services, pricing revision, network enhancement and collaboration
with other players. However, the company continues to remain under
pressure due to slow European recovery, weak domestic operations,
slowdown in Brazil, highly leveraged balance sheet and growing
competition from peers like Orange (
), Vodafone Group plc (
) and America Movil S.A.B. de C.V. (
Telefonica currently carries a Zacks Rank #3 (Hold).
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