1st Quarter Results 2008

RNS Number : 3932U

Telefonica SA

14 May 2008

 



TELEFÓNICA GROUP

Financial Highlights

• The positive performance recorded in the first quarter of 2008 allows the Company to reiterate its 2008 guidance both for the Telefónica Group and for the different regions -Telefónica España, Telefónica Latinoamérica and Telefónica Europe -.

• Strong commercial activity, with an increase of around 13% in total accesses to 233.5 million at the end of March 2008, boosted by the sharp rise in wireless (+16.3%), broadband (+26.8%) and pay TV (+64.4%) accesses.

• Strong organic growth1 in operations underpinned by the high diversification of the Group and the integrated management of the Company, focused on improving efficiency and profitability:

  • In organic terms, revenues increased by 7.0% year-on-year, OIBDA by 8.2% and Operating Income (OI) by 17.2%. Organic OIBDA margin improves 0.4 percentage point year-on-year to 38.3%.

  • For the seventeenth consecutive quarter year-on-year organic revenue growth topped 7%. 

• Net income stood at 1,538 million euros in the quarter (+22.4%) reflecting higher growth rates from revenues down to net income:

  • Revenues increased by 1.1% compared to March 2007, OIBDA by 5.3% and OI by 14.4%, affected by the negative impact of changes in the consolidation perimeter and exchange rates.

  • Basic earnings per share rose a solid 25.8% year-on-year to 0.328 euros 

  • One quarter more, to sum up fifteen consecutive quarters, year-on-year growth was achieved in revenues, OIBDA, OI, net income and EPS.

• Financial strength, reflected in the net debt+commitments/OIBDA ratio of 2.2 times, in line with the company's targets.

• Strong cash flow generation, recording an operating cash flow (OIBDA-CapEx) of 4,057 million euros in the quarter:

  • The Free Cash Flow per share stood at 0.181 euros in the first quarter 2008.

• Regarding the shareholder remuneration policy, the increased cash flow generation allows the Company to accelerate the execution of its share buyback programme:

  • From the start of the year until 13 May 2008 the Company has executed 35.7% of the total share buyback programme (100 million shares), in force until the first half of 2009. 

TELEFÓNICA ESPAÑA:

• Telefónica continues to drive market growth, consolidating its competitive positioning with close to 47 million accesses under management (+4.5%):

  • Sustained leadership in the Spanish broadband market, leveraging a premium quality segmented offering, with an estimated market share close to 57%. The number of retail Internet broadband accesses exceeds 4.8 million (+20.2% year-on-year).

  • Increased share of Imagenio in the pay TV market (estimated market share above 13%), with net adds slightly higher than in the previous quarter and 20.7% higher than in the same period in 2007. 

  • Year-on-year growth of 5.5% in the wireless customer base to 23 million lines, driven by the sharp increase in contract customers (+11.3%), which now account for almost 61% of the total customer base.

  • Wireless churn remained steady at 1.8%, similar to the figure achieved in the first quarter of 2007, despite the larger number of competitors in the market, while contract churn fell slightly year-on-year to 1.1%.

• Revenues grew 2.6% vs. first quarter 2007 on like-for-like basis2, underpinned by higher wireline Internet and broadband revenues (+9.8%) and the sharp rise in wireless data revenues (+16.7%).

• Significant increase in OIBDA (+6.4% year-on-year), with the OIBDA margin reaching 50.6%.

TELEFÓNICA LATINOAMÉRICA:

• Solid growth in accesses managed in Latin America to 137.7 million (+17.7%), thanks to the sharp increase in wireless telephony and the advances in the transformation of the wireline businesses:  

  • Acceleration in the year-on-year growth in wireless accesses (+23.0% vs. +15.5% in the first quarter of 2007), with net adds of 3.1 million (+37.1% year-on-year) in the quarter thanks to customer acquisition initiatives and the churn containment.

  • Wireless ARPU remained steady while outgoing ARPU rose by 4.5% in local currency, despite the sharp increase in the customer base.

  • Retail internet broadband accesses topped 5.2 million, with a sound 29.5% rise, while pay TV customers exceeded 1.2 million (+77.2% year-on-year and +6.6% vs. December 2007).

  • At the end of the first quarter million wireline accesses3 stood at 25.6 million, 1.9% more than in March 2007. 

  • Wireline revenue per access in the region climbed 1.9% in constant euros, boosted by the companies' improved commercial offering and the growing weight of bundles. Duo and Trio bundles accounted for 37% of broadband accesses and 55% of wireline accesses (+11.4 percentage points vs. March 2007), including local and control bundles.

• Organic4 revenue growth rate of 12.6%, driven by robust growth in the wireless business, especially in Mexico and Venezuela, and the growing contribution of the company's Brazilian operations, underpinned by the strength of Vivo's earnings.

• Solid OIBDA organic4 growth (+11.8%), reflecting higher revenue and enhanced margins at the wireless business, which offset the change in revenue mix and the contribution of recently-launched wireline services (Pay TV). The OIBDA margin stood at 36.4%, unchanged from the first quarter of 2007.

TELEFÓNICA EUROPE:

• Strong commercial activity in all markets, with an emphasis on contract customers and broadband; accesses rose to 42.8 million:

  • Good results from the strategy followed by O2 UK, focusing on the most valuable customer segment, with an increase of more than 2.5x in net contract adds since the first quarter of 2007.

  • Notable growth in mobile customer base in Germany (+16.3%) to more than 13 million lines, with net adds in the quarter more than triple the figure seen in the same period a year earlier.

  • Steady growth in the contract customer base (+17.2%) and stemming the losses in wireline accesses in the Czech Republic, underpinned by the increase in bundled packages.

  • Strong uptake for 02 UK's wireline broadband offering in the UK market.

• Strong organic revenue5 growth (+6.4%), driven by the positive performance in the UK (+12.6% in local currency) and the sequential improvement in earnings in Germany, where positive revenue growth was again reported (+1.5%).

• 5.3% increase in OIBDA in organic5 terms. OIBDA margin stood at 26.3%.
  

  
  

1 Assuming constant exchange rates and including the consolidation of TVA in January-March 2007. Excluding the consolidation of Airwave and Endemol in January-March 2007 and including the impact at T. España due to the new model for the public use telephony service (-31.7 million euros in January-March 2007).

2 Including the impact at T. España related to the new business model for its public use telephony -PUT- (-31.7 million euros    in January-March 2007).

3    From December 31, 2006 Group's accesses have been reclassified, being fixed wireless accesses now included within the fixed telephony accesses. Till December 2007 fixed wireless accesses were included, depending on the country in mobile or fixed accesses. As from January 1, 2008, the fixed wireless accesses include public telephones with this technology.

4  Assuming constant exchange rates and including the consolidation of TVA in January-March 2007.

5  Assuming constant exchange rates and excluding the consolidation of Airwave in January-March 2007.

Disclaimer

This document contains statements that constitute forward looking statements about the Company including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations.. These statements appear in a number of places in this document and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activity and situation relating to the Company. The forward-looking statements in this document can be identified, in some instances, by the use of words such as 'expects', 'anticipates', 'intends', 'believes', and similar language or the negative thereof or by forward-looking nature of discussions of strategy, plans or intentions.

Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and other important factors that could cause actual developments or results to differ materially from those expressed in our forward looking statements. These risks and uncertainties include those discussed or identified in the documents filed by Telefónica with the relevant Securities Markets Regulators, and in particular, with the Spanish Market Regulator.

Except as required by applicable law, Telefónica undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telefónica's business or acquisition strategy or to reflect the occurrence of unanticipated events.

Neither this presentation nor any of the information contained herein constitutes an offer of purchase, sale or exchange, nor a request for an offer of purchase, sale or exchange of securities, or any advice or recommendation with respect to such securities.

The information contained in this document is subject to, and must be read in conjunction with, all other publicly available information, including if it is necessary, any fuller disclosure document published by Telefónica.

Finally, please note that this information contained in the document has not been verified or revised by the Auditors of Telefónica.

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