Spanish telecom giant
) reported first-quarter 2014 adjusted earnings of 15 Euro cents
per share (21 cents per ADS) that deteriorated from 20 Euro cents
(26 cents per ADS) earned in the comparable quarter last year.
The company recorded revenues of €12,232 million ($16,762
million) in the first quarter that dropped 13.5% year over year.
Weak performance across most of the markets induced the decline in
In the first quarter, adjusted operating income before
depreciation and amortization (OIBDA) declined 14.0% to €3,929
million ($5,384 million), resulting in adjusted OIBDA margin of
32.1%, down 20 basis points year over year.
Telefonica Latin America:
In the first quarter, revenues in Brazil declined 18.3% to €2,666
million ($3,653.4 miliion), while in the Hispanoamerican market,
revenues tumbled 12.9% to €3,436 million ($4708.6 million). OIBDA
in the two above mentioned markets declined 21.3% and 14.3%
: In Spain, wireless revenues fell 8.2% to €2,992 million ($4,100
million) resulting from decline in both wireless and wireline
revenues. Wireless revenues were €1,155 million ($1,528.8 million),
down 10.2% over the year-earlier period, while wireline business
deteriorated 6.4% to €2,079.0 million ($2,220 million). OIBDA in
Spain declined €1,402 million ($1,921.3 million) in the
Revenues from Telefonica U.K. climbed 2.4% to €1,644 million
($2,252.9 million), while in Germany, the same plunged 8.8% to
€1,122 million ($1,537.6 million). In Ireland as well, the top line
reduced 4.4% to €130 million ($178.0 million). OIBDA performance in
UK and Ireland improved 19.4% and 3.4% respectively while in
Germany, it deteriorated 14.6% during the first quarter.
At the end of the first quarter of 2014, total customer access
reached approximately 313.1 million, down 1.0% year over year due
to the sale of the Czech Republic business and the residential
business in U.K.
On an annualized basis, mobile access rose 3.0% to 247.5 million
customers. Total Internet and data access declined to 18.1 million
from 19.4 million reported in the previous year quarter. Pay TV
access totaled 3.57 million, down 8.0% year over year. Fixed
telephony access fell 5.5% to 37.59 million subscribers at the end
of the reported quarter.
Liquidity and Capital Expenditure (Capex)
Telefonica exited first-quarter 2014 with net debt of about
€42.72 billion ($58.5 billion), down from €45.38 billion ($62.5
billion) recorded at the end of 2013. The leverage ratio (net
debt-to-EBITDA) was 2.30 times. The company also declared that if
the sale of the Ireland operations is included, net debt will be
reduced to €41.94 billion ($57.47 billion) while leverage ratio
will stand at 2.27. Telefonica ended the quarter with cash and cash
equivalent of €7,904 million ($10,870 million) as compared with
€9,977 million ($13,721 million) at the end of Dec 31, 2013.
Capex declined 19.9% year over year to €1.55 billion ($2.13
billion) in the reported period and includes €137 million ($187.7
million) incurred in the acquisition of Spectrum in Colombia and
Central America. Operating cash flow (OIBDA-Capex) was €2.37
($3.25) billion, down 9.6% year over year.
In 2014, Telefonica expects revenues to decline a mere 0.1%
while OIBDA margin will likely see an erosion of 0.4%.
Additionally, the company expects net financial debt of €42.72
billion ($58.54 billion) and capex/sales ratio of 11.5%.
Telefonica continues to remain under pressure due to slow
European recovery, weak domestic operations, a slowdown in Brazil,
adverse regulations, highly leveraged balance sheet and rising
competition from peers like
Vodafone Group plc
America Movil S.A.B. de C.V.
Telefonica currently carries a Zacks Rank #4 (Sell).
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