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Telefonica's Q3 Earnings Down Y/Y, Revenues Lag Estimates

Spanish telecom giant Telefonica S.A.TEF reported weak financial results in the third quarter of 2015. Quarterly net income decreased 1.8% to €884 million (approximately $983 million) on a year-over-year basis. Meanwhile, third-quarter earnings per ADS (American Depository Share) came in at 12 cents, down a substantial 52% year over year.

Telefonica recorded total revenue of €11,919 million ($13,259 million) in the third quarter, up 10.8% year over year. However, revenues fell considerably short of the Zacks Consensus Estimate of $13,443 million.

Operating income before depreciation and amortization (OIBDA) came in at €3,693 million ($4,108.2 million), up 2.9% on a reported basis and 4.8% on an organic basis. This resulted in OIBDA (operating income before depreciation and amortization) margin of 31%, down 2.4% year over year on a reported basis but flat on an organic basis. Consolidated operating income declined 12.6% on a reported basis to €1,589 million ($1,767.6 million) owing to higher personnel expenses. However, the figure increased 6.3% on an organic basis.

Segmental Results

Telefonica Latin America: Revenues in Brazil decreased 5.5% on a reported basis but increased 5.2% on an organic basis to €2,736 million ($3,043.6 million), while in the Hispano-American markets, revenues grew 8.9% on a reported basis and 12.6% on an organic basis to €3,634 million ($4,042.6 million). OIBDA margin in Brazil and the Hispano-American markets stood at 30.4% (down 0.1% year over year) and 29.7% (down 3.3%), respectively. In Brazil, Telefonica operates through its subsidiary Telefonica Brasil SA VIV .

Telefonica Europe: In Spain, revenues fell 0.2% to €2,998 million (approximately $3,335.1 million) owing to a decline in wireless revenues. Wireless revenues grossed €1,089 million ($1,211.4 million), down 2.6% year over year, while wireline business grew 4.6% to €2,232 million ($2,482.9 million). OIBDA margin in Spain was 44.5% compared with 46% in the year-ago quarter.

Revenues from Telefonica Deutschland were up a whopping 62.4% on a reported basis but down 1.1% on an organic basis at €1,979 million ($2,201.5 million). Revenues from Other companies climbed 14% to €856 million ($952.2 million).

Subscriber Statistics

As of Sep 30, 2015, total customer access lines reached approximately 327.196 million, up 12.1% year over year on the back of T. Brasil's and T. Hispanoamérica's solid growth pace. Notably, in the Latin American markets, Telefonica competes with large global telecom operators like AT&T Inc. T and America Movil SAB AMX .

On a year-over-year basis, mobile access increased 11.6% to 251.3827 million customers. Total Internet and data access grew 18% to 21.4104 million users. Pay-TV access totaled 8.1543 million, up 75.4% year over year. LTE customers stood at 23.6 million, up an astounding 430% year over year and representing 9.7% of total mobile accesses. Fiber access was 5.8297 million, up a massive 303% year over year.

Liquidity and Capital Expenditure

Telefonica exited the third quarter of 2015 with net debt of about €61,449 million (about $69,085 million), up from €45,087 million ($51,078.2 million) recorded at the end of 2014. Telefonica ended the reported quarter with cash and cash equivalents of €3,047 million (around $3,390 million) compared with €6,529 million ($7,396.6 million) at 2014-end. Net cash provided by operating activities in the first nine months of 2015 declined 0.5% year-over-year to €10,041 million (approximately $11,170 million).

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AT&T INC (T): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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