Spanish telecom giant
) reported financial results of the first nine months of 2012,
with adjusted earnings of €0.77 per share (95 cents per ADS)
declining 22.9% year over year.
Net income jumped 26.4% year over year to €3.46 billion ($4.3
billion). However, consolidated revenue, at €46.52 billion
($57.39 billion), edged down 0.3% over the prior-year quarter, in
the first nine months of 2012.
Adjusted operating income before depreciation and amortization
(OIBDA) rose 10.7% to €15.8 billion ($19.5 billion), resulting in
OIBDA margin of 33.9%, up from 30.5% in the year-ago period.
Telefonica Latin America: Latin America continued to grow at a
faster pace and remained one of the best performing regions.
Revenues increased 5.9% year over year to €22.6 billion ($27.9
billion), driven largely by Venezuela (representing a growth of
26.1%), followed by Ecuador (24.1%), Central America (25.8%),
Peru (20.3%), Argentina (18.5%), Columbia (14.1%), Uruguay (9.2%)
and Chile (9.8%). However, revenue from the key markets - Mexico
and Brazil - registered a decline of 0.8% and 4.4%, respectively,
in the first nine months of 2012.
Telefonica Europe: Revenues from Europe slid 6.4% year over
year to €22.5 billion ($27.8 billion). The reported downside was
owing to the operator's Spanish revenues that slipped 12.9% year
over year to €11.4 billion ($14.1 billion).
In Espana, Wireless revenue fell 16.2% to €4.9 billion ($4.4
billion) resulting from a reduction in MTRs. Hurt by weak traffic
revenue and repositioning of the new tariff portfolio, Wireline
revenues stood at €7.2 billion ($8.9 billion), down 9.6% over the
Revenues from the Ireland and Czech Republic declined 13.9%
and 6.1% year over year to €474 million ($584.7 million) and €1.5
billion ($1.9 billion) respectively in the reported period.
Meanwhile, revenues from Germany and UK showed a 4.5% and 1.3%
increase to reach €3.9 billion ($4.8 billion) and €5.2 billion
($5.6 billion) respectively.
Other companies (ATENTO): ATENTO revenue increased 5.3% to
€1.4 billion ($1.7 billion) over the year-ago period.
At the end of the first nine months of 2012, total customer
access reached approximately 308.1 million, up 4.6% year over
On an annualized basis, mobile access rose 5.9% to 245.6
million customers. Total Internet and data access grew 1.9% to
19.4 million. Pay TV access reached 3.32 million, up 3.4% year
over year. Fixed telephony access dropped 1.5% to 39.8 million
subscribers at the end of the reported period.
Liquidity and Capital Expenditure (CapEx)
Telefonica exited the first nine months of 2012 with a net
debt of about €56 billion, down from €58.31 billion recorded at
the end of the first nine months of 2011. The leverage ratio (net
debt-to-EBITDA) improved to 2.56 times.
CapEx fell 14% year over year to €5.7 billion in the reported
period. Operating cash flow (OIBDA-CapEx) jumped to €10.1 billion
from €7.6 billion in the year-ago period.
For 2012, Telefonica expects revenue growth to remain flat as
compared with fiscal 2011, with lower EBITDA margin decline.
Additionally, the company expects leverage ratio (net
debt-to-EBITDA) to be equivalent to 2.35 times.
Telefonica continues to remain under pressure by intensifying
European woes, weak domestic operations, slowdown in Brazil,
adverse regulations, highly leveraged balance sheet and growing
France Telecom S.A.
Vodafone Group Plc
America Movil S.A.B. de C.V.
We currently have our long-term Underperform recommendation on
Telefonica. For the short term (1-3 months), the stock retains
Zacks # 5 (Strong Sell) Rank.
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