Spanish telecom giant,
) reported second quarter 2013 earnings of 25 Euro cents per
share (33 cents per ADS), down 13.8% year over year. The results
were in-line with the Zacks Consensus Estimate.
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The company recorded revenues of €14,421 million ($18,828
million) in the second quarter. Revenues fell 6.8% year over year
on a reported basis but improved 0.5% on an organic basis.
Adjusted operating income, before depreciation and amortization
(OIBDA), fell 9.3% to €4,854 million ($6,337 million), resulting
in an adjusted OIBDA margin of 33.7%, down 90 basis points year
Telefonica Latin America:
Revenues remained flat year over year at €7,451 million ($9,728
million) in the second quarter. In terms of countries, revenue
growth was recorded in Chile (4.4%), Peru (6.0%), Mexico (8.0%),
Venezuela (3.5%), Central America (5.6%), Ecuador (6.5%), Uruguay
(11.9%) and Argentina (0.5%).
However, revenues from Brazil and Columbia registered a decline
of 3.9% and 3.4%, respectively, in the second quarter.
Revenues from Europe slid 10.7% year over year to €6,717 million
($8,769 million). The reported downside was owing to the
operator's Spanish revenues that slipped 13.7% year over year to
€3,299 million ($4,307 million).
In Spain, wireless revenues fell 19.5% to €1,348 million ($1,759
million) resulting from less sales of handsets. Wireline revenues
came in at €2,207 million ($2,881 million), down 7.4% from the
In the reported period, revenues from the Ireland and Czech
Republic declined 10.8% and 7.7% year over year to €141 million
($184 million) and €465 million ($607 million), respectively.
Revenues from Germany and U.K. showed a 6.1% and 5.2% decrease to
€1,295 billion ($1,690 million) and €1,628 million ($2,125
At the end of the second quarter, total customer access reached
approximately 311 million, up 1.6% year over year.
On a year-over-year basis, mobile access rose 2.4% to 249.5
million customers. The total Internet and data access fell 1.6%
to 19.0 million. Pay-TV access was 3.33 million, flat year over
year. Fixed telephony access dropped 1.3% to 39.5 million
Liquidity and Capital Expenditure (CapEx)
Telefonica exited the quarter with net debt of about €49.79
billion ($65.00 billion), down from €58.31 billion ($76.13
billion) recorded at the end of Jun 30, 2012. The leverage ratio
(net debt-to-EBITDA) stood at 2.40 times compared with 2.36 times
in 2012. Capital expenditure was €1,962 million ($2,561 million)
in the reported quarter.
We expect Telefonica to benefit from its various strategic
measures to enhance its operations in the European markets. These
steps include expansion of broadband and data services, pricing
revision, network enhancements and collaborations with other
However, the company continues to face pressure from the slowdown
in Brazil operations, adverse regulations, a highly leveraged
balance sheet and growing competition from
Vodafone Group Plc
America Movil S.A.B. de C.V.
Telefonica currently has a Zacks Rank #3 (Hold).