3rd Quarter Results - Part 2
Telefonica SA
11 November 2005
Part 2
RESULTS BY BUSINESS LINES
Mobile Business
Telefonica Moviles Group operators continued to carry out intense commercial
activity during the third quarter of the year. As a result, despite the
seasonality typical of the period and the adjustment of the pace of growth to
the different market conditions -namely in Brazil, Colombia and Mexico-, net
adds in the third quarter of 2005 stood at 2.6 million customers.
The decline in commercial activity from the second quarter of 2005 is explained
by the seasonality typical of the period and the strong impact that the launch
of the movistar brand had in the second quarter of 2005.
Telefonica Moviles ended September with over 89 million managed customers
(+52.0% vs. the third quarter of 2004 and +3.0% vs. the second quarter of 2005).
Of the total customer base, 65.6 million corresponded to Latin American
operators (+75.7% vs. the third quarter of 2004), 19.6 million to Telefonica
Moviles Espana (+5.0%) and 3.8 million to our Moroccan operator, Medi Telecom
(+49.2%).
Key aspects of the third quarter of 2005 results are as follows:
• Sharp year-over-year growth in revenues of 45.9% in the third quarter of
2005 and 45.3% in the first nine months of 2005 (compared to +44.9% in the
first half of 2005). Organic growth1 of consolidated revenues stood at 15.2%
vs. the first nine months of 2004.
Noteworthy was the solid performance of service revenues, with a 44.2%
year-over-year increase vs. the third quarter of 2004, to 10,462 million
euros in the first nine months of 2005, 43.8% higher than in the first nine
months of 2004.
Handset sales reached 495.9 million euros in the third quarter of 2005 (+60%
vs. the third quarter of 2004) and totaled 1,588 million euros in the first
nine months of 2005 (+56% vs. the first nine months of 2004).
By geographical areas, the significant increase in traffic registered by
Telefonica Moviles Espana stands as the main driver of the Company's service
revenue growth. As a result, service revenues grew by 6.8% year-over-year in
the third quarter of 2005 and by 7.1% in the first nine months of 2005. In
all, TME recorded revenues of 6,621.5 million euros in the first nine months
of 2005 (+8.2% vs. the first nine months of 2004).
The consolidated Latin American operators recorded operating revenues of
5,446 million euros in the first nine months of 2005 (+150.4% vs. the same
period of last year), representing 45.2% of the Group's total revenues
(26.2% in the first nine months of 2004). Organic growth1 of these
operators' revenues was 25.7% vs. the first nine months of 2004.
------------------------
1 Organic growth includes the consolidation of Telefonica Movil Chile and Latin
American assets acquired from BellSouth in Argentina, Colombia, Chile, Ecuador,
Guatemala, Nicaragua, Panama, Peru, Uruguay and Venezuela since 1 January 2004;
and assuming constant exchange rates.
• Sharp acceleration in the growth of consolidated operating income before
depreciation and amortization (OIBDA), which stands at 1,647.7 million euros
in the third quarter of 2005 and 4,226.5 million euros in the first nine
months of 2005. OIBDA advanced 31.4% year-over-year in the third quarter of
2005 and 21.1% year-over-year in the first nine months of 2005, compared to
15.3% in the first half of 2005. Year-over-year organic growth2 in
consolidated OIBDA was +0.7%.
As a result, OIBDA margin in the third quarter of 2005 showed a sharp
improvement compared to the second quarter of 2005 at the majority of the
Group operators, with the consolidated OIBDA margin standing at 38.4% (an
7.5 p.p advance vs. the second quarter of 2005). The OIBDA margin in the
first nine months of 2005 stood at 35.1%.
The trend in OIBDA compared to 2004 is explained by the increased commercial
activity in 2005 and more intense competition in our markets of operation.
OIBDA at Telefonica Moviles Espana stood at 1,143 million euros in the third
quarter of 2005, recovering sharply from previous quarters and remaining
virtually unchanged year-over-year vs. the third quarter of 2004. Thus,
OIBDA for the first nine months reached 3,089.9 million euros. We would
highlight the positive evolution in Telefonica Moviles Espana's OIBDA
margin, which stood at 49.1% in the third quarter of 2005 (+5.9 p.p. vs. the
second quarter of 2005) and 46.7% in the first nine months of 2005.
Stripping out the impact of the rebranding, the OIBDA margin would have
reached 47.3% in the first nine months of 2005 (vs. 51.7% in the first nine
months of 2004).
OIBDA for the consolidated Latin American subsidiaries, in euros, reached
517.4 million euros in the third quarter of 2005. This led to a margin of
26.2%, which represents an 8.6 p.p. advance from the second quarter of 2005,
mainly driven by lower commercial costs.
The Latin American operators' contribution to consolidated OIBDA in the
first nine months of 2005 stood at 1,200.7 million euros, three times their
contribution to the Group during the first nine months of 2004. In organic
terms2, OIBDA from these operators increased 11% vs. the first nine months
of 2004.
------------------------
2 Organic growth includes the consolidation of Telefonica Movil Chile and Latin
American assets acquired from BellSouth in Argentina, Colombia, Chile, Ecuador,
Guatemala, Nicaragua, Panama, Peru, Uruguay and Venezuela since 1 January 2004;
and assuming constant exchange rates.
Regarding the rest of the main items, we would highlight:
• Increase in depreciation (+59.2% vs. the first nine months of 2004),
primarily due to changes to the Group's consolidation perimeter, including
229 million euros of amortization of allocated intangible assets in the
first nine months of 2005 related to the acquisition of Telefonica Movil
Chile and the 10 Latin American operators acquired from BellSouth in 2004
and early 2005.
• Improvement in income from associated companies, as net losses from
companies consolidated by the equity method declined by 66.8% in the first
nine months of 2005 to -10.4 million euros, and remain stable vis-a-vis
those recorded in the first half of 2005. Losses attributable to the Group
from its stake in IPSE 2000 decline by 17% vs. the first nine months of
2004, while Medi Telecom maintains its positive contribution to the Group's
results in the first nine months of 2005.
• Year-over-year increase of 25% in negative net financial results,
substantially lower than the increase in the average net debt balance for
the period (+90.3%).
Consolidated net financial debt was impacted by the acquisitions made in the
second half of 2004 and January 2005 (Telefonica Movil Chile, BellSouth's
Latin American operators and the voluntary tender offers for shares in
Brasilcel's subsidiaries). Moreover, on June 15th the dividend approved at
the Shareholders' Meeting (836 million euros) was paid.
At the end of the third quarter of 2005, consolidated net debt stood at
9,463 million euros, 6.0% lower than the previous quarter, thanks to cash
flow generation in the period. Proportionate net debt stood at 9,601 million
euros.
• 31.7% effective tax rate in the first nine months of 2005, mainly affected
by the application of certain allowances for export activities in the second
quarter of 2005, although the fact that there is no tax consolidation in
various countries in Latin America detracts from this benefit, increasing
the marginal rate.
• Net income rose 24% year-over-year in the quarter, to 614.9 million euros
(496 million euros in the third quarter of 2004), leading to net income of
1,542.7 million euros in the first nine months of 2005 (+8.8% vs. the first
nine months of 2004).
• Consolidated CapEx, excluding licenses, totalled 1,422.7 million euros in
the first nine months of 2005. 39.2 million euros were recorded in the first
nine months of 2005 for the acquisition of licenses in Mexico.
Regarding the evolution of the Mobile Business of Telefonica Group (including
Telefonica Movil Chile since January 1st, 2004), as of September 2005, revenues
and Operating Income before D&A would have registered year-on-year increases of
41,7% and 19,4%, respectively.
Spain
By the end of September the Spanish market had surpassed 41.5 million lines,
equivalent to an estimated penetration rate of 93.4%. This amounts to total
market growth of 1.5% in the third quarter of 2005 vs. the second quarter of
2005 and 9% in the first nine months of 2005 vs. the first nine months of 2004.
The third quarter was marked by intense commercial activity -particularly in
customer gross adds-, by the positive evolution in the portability net balance -
overall, but especially notable in the contract segments- and the sharp increase
in managed traffic.
As for commercial activity, Telefonica Moviles Espana leveraged in the third
quarter of 2005 on the strong commercial activity carried out during the
previous quarter, leading it to post net adds of over 250 thousand, more than
four times the third quarter of 2004 figure (58 thousand customers), fuelled by
the positive performance of the contract segments.
As a result, by the end of the third quarter of 2005 the weight of the contract
segment over the total customer base increased to 52.5%, showing a growth of 5
p.p. vs. the third quarter of 2004 and 1.6 p.p. vs. the second quarter of 2005.
This trend reflects both the increase in contract gross adds (more than 500
thousand in the third quarter of 2005, setting a quarterly record for Telefonica
Moviles Espana) as well as the high number of prepaid to migrations registered
in the quarter -almost 300 thousand, 27% more than the previous quarter and 34%
more than in the third quarter of 2004-.
These factors drove the Company's customer base to over 19.6 million, a
year-over-year increase of 5%.
We would also underscore the performance of number portability, which showed a
positive net balance of almost 40 thousand lines in the third quarter of 2005,
the best figure recorded since the fourth quarter of 2002, and 136% higher than
the second quarter of 2005. This performance was driven by the increasing
positive balance in the contract segments, which stood at almost 84 thousand
lines, around 50 thousand more than recorded in the third quarter of 2004 and
clearly far superior to the second quarter of 2005 figure.
Meanwhile, Telefonica Moviles Espana upgraded close to 1 million handsets during
the third quarter of 2005, bringing the total for the first nine months of the
year to over 3.4 million (+28% vs. the first nine months of 2004).
Telefonica Moviles Espana's successful commercial results have been heavily
underpinned, both in acquisition and retention activities, by the price
initiatives implemented last quarter, which have been very well received by our
customers. In this regard, we would point out that by the end of the third
quarter of 2005 around 3 million movistar customers had signed up for 'Mi
Favorito' (My favorite number) and almost 1.5 million for 'Mis Cinco' (My five
numbers), thus reinforcing and consolidating our customers' sense of belonging
to the largest wireless community in Spain.
Continuing with Telefonica Moviles Espana's pricing initiatives, the third
quarter of 2005 was highly shaped by the summer promotion known as '100x1'3,
which has achieved over 2.3 million gross adds in the period.
In addition, the 'Anticipame Saldo'4 (Upfront credit) campaign was launched in
the third quarter of 2005, and has already been used on more than 5 million
occasions.
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3 A promotion taking place between 18 June and 17 September 2005 enabling
existing customers to talk for 100 minutes to other Movistar customers on all
calls, 7 days a week, 24 hours a day at a price of 0.12 euros, (i.e. the price
of 1 minute of talk-time plus connection fees) in exchange for a one-time
subscription charge of 3 euros.
4 A campaign which up fronts a 2 euros credit whom those customers who request
it, under certain conditions. Such credit will be then discounted in the
following recharge.
As a result, the commercial initiatives launched in the second quarter of 2005
and reinforced during the third quarter of 2005 drove MoU to 158 minutes in the
third quarter of 2005, 2.7% higher than in the second quarter of 2005 and 15.0%
more than in the third quarter of 2004, marking the highest figure in the
company's history. MoU for the first nine months of 2005 rose to 149 minutes
(+16.3% vs. the first nine months of 2004), bringing total traffic carried to
almost 14,000 million minutes in the third quarter of 2005 (+24.4 vs. the third
quarter of 2004) and almost 38,000 million minutes in the first nine months of
2005 (+19.9% vs. the first nine months of 2004), both record highs for
Telefonica Moviles Espana. Despite the sharp increase in traffic, Telefonica
Moviles Espana networks' quality indices are maintained, actually improving
relative to last year.
All of the above drove Telefonica Moviles Espana's voice ARPU to 32.4 euros in
the third quarter of 2005 and 30.9 euros in the first nine months of 2005 (+9.2%
vs. the first nine months of 2004). Excluding the impact of traffic promotions,
year-over-year growth in voice ARPU would have been 3.2% in the first nine
months of 2005. Thus, even despite the fact that the Company is clearly in the
process of cutting prices, Telefonica Moviles Espana continues to show a
positive trend in ARPU.
In terms of data services, bearing in mind the significant growth in P2P voice
traffic, Telefonica Moviles Espana's data ARPU stood at 4.5 euros in the first
nine months of 2005, representing a year-over-year increase in this ratio of
around 7.2%, and of 7.3% excluding the impact of promotions.
We would point out that non-SMS data services are becoming the main driver of
this growth. Revenues from non-SMS data services grew by almost 45%
year-over-year in the first nine months of 2005, representing almost 42% of the
Company's data revenues in the third quarter of 2005. Downloads, browsing & data
transmission revenues over total data revenues stood at 17% in the first nine
months of 2005 (12% in the first nine months of 2004) while SMS' weight stood at
62% (72% in the first nine months of 2004).
Finally, Telefonica Moviles Espana's total ARPU stood at 37.1 euros in the third
quarter of 2005 (+6.0% vs. the third quarter of 2004) and 35.4 euros in the
first nine months of 2005 (+9.0% vs. the first nine months of 2004). Excluding
the impact of promotions, total ARPU would have been 34.2 euros in the third
quarter of 2005 (+1.9% vs. the third quarter of 2004) and 33.1 euros in the
first nine months of 2005 (+3.7% vs. the first nine months of 2004).
Highlights of Telefonica Moviles Espana's financial results include:
• Revenues show 8% year-over-year growth in the third quarter of 2005 and
+5% compared to the second quarter of 2005, to over 2,300 million euros, and
maintain cumulative year-over-year growth in the first nine months of 2005
over 8%, to 6,621.5 million euros.
Revenue growth continues to be driven by the increase in service revenues,
which in the third quarter of 2005 registered year-over-year growth of 6.8%
and were up 9% over the second quarter of 2005. This brings year-over-year
growth in the first nine months of 2005 to over 7%. In addition, we would
highlight that customer revenues continue to consolidate as the Company's
growth driver, registering year-over-year rates for the third quarter of
2005 and the first nine months of 2005 of 9% and 9.2%, respectively.
Handset sales fell vis-a-vis the previous quarter, but were up 17%
year-over-year in the third quarter of 2005, totalling 241 million euros.
• The percentage of commercial costs (including SAC, SRC and advertising)
over service revenues ex-loyalty points fell by more than 30% compared to
the second quarter of 2005 and by 5.5% vs. the first quarter of 2005,
standing at 13.3% in the third quarter of 2005 and 15.5% in the first nine
months of 2005. The year-over-year increase is the result of increased
commercial activity vs. the third quarter of 2004.
• Telefonica Moviles Espana's OIBDA stood at 1,143 million euros in the
third quarter of 2005, representing an OIBDA margin of 49.1%, up 5.9 p.p.
vs. the second quarter of 2005. OIBDA surpassed 3,000 million euros in the
first nine months of 2005, representing a margin of 46.7% (and around 47.3%
if we strip out the impact of the rebranding campaign).
• CapEx totalled 507 million euros in the first nine months of 2005.
Telefonica Moviles Espana continues with the deployment of its UMTS network
in order to provide an increasing number of customers with enhanced service
and a wider range of technologies.
Finally, we must point out that the telecommunications market regulator (CMT)
introduced modifications on termination rates for the three Spanish market
mobile operators. The new tariffs will be effective from 31 October, and in the
case of Telefonica Moviles Espana they represent a reduction in the average
price per minute of 10.57%.
Morocco
At the end of the third quarter of 2005 Medi Telecom's customer base stood at
over 3.8 million (+49.2% vs. September 2004), with net adds of 399 thousand in
the third quarter of 2005, 82.4% more than in the second quarter of 2005.
Financial results continue to show a solid performance, with revenues in the
first nine months of 2005 of 298 million euros (+22% vs. the first nine months
of 2004).
The OIBDA margin in the first nine months of 2005 stood at 38.6% (+41.3% in the
first nine months of 2004), despite the sharp rise in net adds, which grew 79%
in the first nine months of 2005 vs. the first nine months of 2004. OIBDA
totalled close to 115 million euros in the first nine months of 2005 (+14% vs.
the first nine months of 2004)
Latin America
Brazil
In line with the seasonality typical of the quarter and following a strong
second quarter marked by intense commercial campaigns, the pace of growth in the
Brazilian market growth slowed down in the third quarter, even while maintaining
its solid expansion trend.
As a result, at the end of September 2005 the total market stood at 80 million
customers, equivalent to a penetration rate of 43.4% (46.5% in Vivo's areas of
operation).
Against a backdrop of continued intense competition, Vivo has targeted its
commercial initiatives at high-value customers, raising entry barriers in the
prepaid segment, fostering prepaid to contract migration and increasing its
customer retention efforts. This strategy resulted in a significant drop in
subscriber acquisition actions in the third quarter of 2005, while customer
retention initiatives have allowed monthly churn rate to remain practically flat
compared to the third quarter of 2004, despite the competitors' increased
aggressiveness.
In this context, Vivo's customer base stood at 28.84 million at the end of
September (+17,0% vs. the third quarter of 2004). We would highlight the
increasing contribution of the contract segment to total net adds, representing
35% in the third quarter of 2005 versus 14% in the second quarter of 2005 and
10% in the third quarter of 2004.
In terms of customer usage, MoU in the third quarter of 2005 was 76 minutes (87
minutes in the third quarter of 2004), impacted by trends in incoming MoU. ARPU
in the third quarter of 2005 was 28.2 reais (32.1 reais in the third quarter of
2004).
The trend in these indicators continues to be shaped by the impact on outgoing
revenues of the repositioning of prices in the contract segment in the face of
aggressive competition; as well as by the negative impact of lower incoming
traffic from fixed line operators.
However, in line with the Company's focus on high-value segments, we would
highlight the positive performance in contract ARPU, which in the third quarter
of 2005 showed growth, both compared to the second quarter of 2005 and to the
third quarter of 2004.
Regarding Vivo's financial results, service revenues grew 5% year-over-year in
the first nine months of 2005 in local currency, remaining stable to the growth
recorded in the first half oh 2005.
The slowdown in total revenue growth (+4% year-over-year in the first nine
months of 2005 in local currency) was due to the decrease in handset sales in
the third quarter of 2005 (-5% vs. the third quarter of 2004).
Moreover, data revenues continue to grow, to represent 6% of service revenues in
the first nine months of 2005.
The decrease in commercial activity in the quarter, together with lower
acquisition costs as a result of higher entry barriers after the Father's Day
campaign in August, have led to a quarter-over-quarter growth in OIBDA margin
after management fees, which stands at 28.9% in the third quarter of 2005 (28.5%
in the first nine months of 2005).
The year-over-year trend in margins despite the slowdown in net adds is due to
higher commercial and customer care costs caused by stiffer competition and
Vivo's focus on high-value customers.
Northern region
Mexico
The third quarter of 2005 was marked by lower seasonal commercial activity in
the Mexican market. This factor, combined with higher entry barriers at
Telefonica Moviles Mexico (TMM) and the lack of strong commercial campaigns by
the operator, have resulted in a slowdown in the pace of growth of net adds
compared to the second quarter of 2005.
On the other hand, improvements in credit scoring systems for contract customers
have led to a reduction in churn rate in this segment compared to previous
quarters, resulting in positive net adds in the contract segment for the first
time this year.
Net adds in the third quarter of 2005 stood over 129 thousand compared to 86
thousand in the second quarter of 20055, bringing Telefonica Moviles Mexico's
total customer base at the end of September to 5.98 million (+33,0% vs. the
third quarter of 2004). GSM customers represent 84% of the total customer base.
------------------------
5 Excludes the adjustment for 300,000 inactive lines in Mexico, no longer
considered in the reported customer base in the second quarter of 2005
In terms of customer usage, MoU in the third quarter of 2005 stood at 47 minutes
while ARPU was 124 Mexican pesos.
As for financial results, we would highlight the positive evolution in service
revenues, driven by the increase in billable traffic in the quarter. However,
the reduction in interconnection fees implemented in the second quarter of 2005
continues to impact the evolution of service revenues in local currency in the
first nine months of 2005 (+13.6% vs. the first nine months of 2004).
Despite the slowdown in gross adds, higher entry barriers pushed up revenues
from handset sales, which grew 40% in the third quarter of 2005 in local
currency compared to the second quarter of 2005.
As a result, 2005 revenues stood at 563 million euros in the first nine months
of 2005, representing year-over-year growth of 21.4% in local currency.
The increase in quarterly revenues, combined with lower commercial activity in
the third quarter of 2005, have reduced OIBDA losses in the third quarter of
2005 to 33.6 million euros (vs. 48 million euros in the second quarter of 2005),
and to 130 million euros in the first nine months of 2005.
By the end of September of 2005,Telefonica Moviles Mexico had deployed 4,300 GSM
base stations in the country, allowing the company to extend the coverage to
areas which represent close to 90% of the urban population.
Andean Region
Venezuela
Telefonica Moviles Venezuela's customer base ended September at over 5.3
million, with net adds of 122 thousand in the third quarter of 2005 and 993
thousand in the first nine months of 2005.
The strong growth in the customer base boosts the solid operator's financial
results in local currency. We would highlight the positive performance of
service revenues in local currency (+12.6% in the third quarter of 2005 vs. the
second quarter of 2005) driven by the larger customer base, higher traffic and
the sharp increase in data revenues.
The quarter-over-quarter decrease in total revenues in local currency (-1.7% vs.
the second quarter of 2005) is due to lower handset revenues (-43.1% vs. the
second quarter of 2005), following the commercial activity of the previous
quarter, when the launch of the new brand and Mother's Day campaigns took place.
The operator recorded total revenues of 993 million euros in the first nine
months of 2005, while OIBDA stood at 408 million euros.
Lower commercial activity in the quarter leads to an increase in the OIBDA
margin, which stood at 42.8% in the third quarter of 2005, bringing the overall
margin for the first nine months of 2005 to a solid 41%.
The Company has reinforced its customer care efforts, which are leading to a
significant increase in quality service indices.
Colombia
Telefonica Moviles Colombia's major milestone during the third quarter of 2005
was the commercial launch of its GSM service at the end of July.
As a result, the Company's commercial efforts in the third quarter of 2005 began
to focus on capturing GSM customers, with less commercial activity in CDMA.
Thus, at the end of September, Telefonica Moviles Colombia's customer base stood
at 5.17 million, with net adds of 414 thousand in the third quarter of 2005,
despite the limited growth in GSM customer acquisition due to the ongoing
deployment of the network. Focus on GSM customer acquisition is reflected on the
weight of GSM gross adds over total gross adds in the third quarter of 2005,
which stood at 61%, meaning GSM customers already represent 11% of the total
customer base.
Regarding financial results, accumulated revenues totaled 536 million euros in
the first nine months of 2005. The decline in revenues in the third quarter of
2005 vs. the second quarter of 2005 in local currency is due to revenues from
lower handset sales as a result of lower commercial activity.
On the other hand, we would highlight the significant recovery in the OIBDA
margin, due to lower commercial costs, to 23% in the third quarter of 2005. The
OIBDA margin in the first nine months of 2005 stood at 11.2%.
Finally, CapEx through September was 166 million euros, reflecting the ongoing
rollout of the GSM network, with coverage of 66% of the population as of
September.
Peru
At the end of September 2005 Telefonica Moviles Peru's customer base stood at
3.2 million, boosted by the positive performance of net adds, with 141 thousand
during the third quarter of 2005, 61.7% more than in the second quarter of 2005.
Regarding financial results, we would highlight the growth in revenues in local
currency (+1.1% in the third quarter of 2005 vs. the second quarter of 2005),
driven by the favorable advance in customers and traffic, which offset the
impact of the reduction in interconnection rates in the third quarter of 2005.
In addition, revenue growth was accompanied by the stability of the OIBDA margin
around 32% in the third quarter of 2005.
Southern Cone Region
Argentina
The strong advance in the Argentine cellular market continues to be one of the
main growth drivers of the Group's customer base in the third quarter of 2005.
Telefonica Moviles recorded net adds of 664 thousand in the third quarter of
2005 (+15% over the second quarter of 2005), boosted by the successful Father's
Day campaign and the operator's efforts to contain churn.
The total customer base at the end of September was almost 7.4 million (+10% vs.
June), with GSM customers representing 41% of the total.
Regarding financial results, we would highlight the acceleration in the pace of
growth in service revenues in local currency (+12.9% in the third quarter of
2005 vs. the second quarter of 2005 and compared to +5.4% in the second quarter
of 2005 vs. the first quarter of 2005), driven by growth in ARPU and in the
customer base.
Of particular note is the performance in data revenues, which rose 36% vs. the
second quarter of 2005, to represent 15% of service revenues.
Despite higher activity and ongoing competitive pressure, control in commercial
costs as a result of higher entry barriers, together with lower integration
costs, enabled operating margins to improve to 21.7% in the third quarter of
2005 (+10.9 p.p. vs. the second quarter of 2005). The OIBDA margin in the first
nine months of 2005 stood at 15.2% (16.4% excluding integration costs).
Finally, CapEx through September was 86 million euros, driven by the ongoing
rollout of the GSM network.
Chile
Telefonica Moviles Chile ended September with over 5.2 million customers.
In a quarter where commercial activity has slowed down after the positive
performance in the second quarter of 2005 (boosted by the launch of the new
brand campaigns), and as a result of an adjustment in order to comply with the
Group's criteria for accounting customers, the customer base decreased by 27
thousand customers. However, contract net adds continue showing an increasing
trend, growing 37.3% vs. the second quarter of 2005, to 29 thousand.
In addition, the number of GSM customers continued to increase, representing
almost 43% of the total customer base at the end of September.
With regard to financial results, revenues totaled 172 million euros in the
third quarter of 2005 (459 million euros in the first nine months of 2005),
while lower commercial and integration costs in the third quarter of 2005 led to
a 6.7 p.p. increase in the OIBDA margin vs. the second quarter of 2005. The
OIBDA margin stood at 38.8% in the third quarter of 2005 and at 32.5% in the
first nine months of 2005, respectively.
CapEx through September stood at 95 million euros, boosted by the deployment of
the GSM network.
CELLULAR BUSINESS
SELECTED OPERATING DATA: CELLULAR CUSTOMERS
Unaudited figures (Thousands)
September September
2005 % Chg 05/04 2005 % Chg 05/04
Telefonica Moviles Espana 19,633 0.1 TEM Mexico 5,976 33.0%
Contract 10,303 0.2 Contract 284 9.0%
Prepaid 9,330 (0.1) Prepaid 5,693 34.4%
Brasilcel 28,840 17.0% TEM Chile 5,230 74.3%
Contract 5,650 13.3% Contract 880 91.5%
Prepaid 23,190 18.0% Prepaid 4,350 71.1%
TEM Argentina 7,395 183.8% TEM Venezuela 5,319 n.c.
Contract 2,897 206.5% Contract 340 n.c.
Prepaid 4,312 159.6% Prepaid 4,393 n.c.
Fixed Wireless 186 n.c. Fixed Wireless 586 n.c.
TEM Peru 3,199 62.7% TEM Colombia 5,171 n.c.
Contract 570 68.2% Contract 1,194 n.c.
Prepaid 2,558 57.2% Prepaid 3,977 n.c.
Fixed Wireless 72 n.c. TEM Ecuador 1,624 n.c.
TEM El Salvador 494 47.7% Contract 348 n.c.
Contract 78 1.9% Prepaid 1,274 n.c.
Prepaid 396 53.1% Fixed Wireless 2 n.c.
Fixed Wireless 21 n.c. TEM Panama 788 n.c.
TEM Guatemala 924 210.2% Contract 65 n.c.
Contract 73 38.8% Prepaid 723 n.c.
Prepaid 742 202.5% TEM Nicaragua 337 n.c.
Fixed Wireless 109 n.c. Contract 45 n.c.
Medi Telecom 3,839 49.2% Prepaid 277 n.c.
Contract 162 27.4% Fixed Wireless 16 n.c.
Prepaid 3,677 50.4% TEM Uruguay 322 n.c.
Contract 56 n.c.
Prepaid 266 n.c.
Total Managed 89,092 52.0%
Note: The comparison is affected by the incorporation of BellSouth's Latam mobile operators in Colombia, Ecuador,
Guatemala, Nicaragua, Panama, Peru, Uruguay and Venezuela from November 2004 and Argentina and Chile from January
2005.
For comparison purposes, since the cancellation of Movistar Puerto Rico's management contract, its subscriber base is
excluded from the Group subscriber base. September 2005 figures include the adjustment of 300,000 inactive prepaid
lines in Mexico not longer considered in the reported customer base.
TELEFONICA MOVILES GROUP
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
January - September
2005 2004 % Chg
Spain Revenues 6,621.5 6,122.0 8.2
OIBDA 3,089.9 3,163.9 (2.3)
OIBDA margin 46.7% 51.7% (5.0 p.p.)
Latin America Revenues 5,445.7 2,174.7 150.4
OIBDA 1,200.7 377.0 n.s.
OIBDA margin 22.0% 17.3% 4.7 p.p.
Brazil Revenues 1,331.7 1,101.2 20.9
OIBDA 379.2 382.2 (0.8)
OIBDA margin 28.5% 34.7% (6.2 p.p.)
Northern Region Revenues 909.7 596.6 52.5
OIBDA (23.8) (88.2) (73.0)
OIBDA margin -2.6% -14.8% 12.2 p.p.
Andean Region Revenues 2,009.9 175.9 n.c.
OIBDA 584.0 46.0 n.c.
OIBDA margin 29.1% 26.2% 2.9 p.p.
Southern Cone Revenues 1,194.4 301.0 n.c.
OIBDA 261.3 36.9 n.c.
OIBDA margin 21.9% 12.3% 9.6 p.p.
Rest and intragroup Revenues (17.1) (1.4) n.s.
OIBDA (64.1) (50.6) 26.6
OIBDA margin n.s. n.s. n.s.
TOTAL Revenues 12,050.0 8,295.2 45.3
OIBDA 4,226.5 3,490.3 21.1
OIBDA margin 35.1% 42.1% (7.0 p.p.)
Note: The comparison is affected by the incorporation of TM Chile from August 2004, of BellSouth's Latam mobile
operators in Colombia, Ecuador, Guatemala, Nicaragua, Panama, Peru, Uruguay and Venezuela from November 2004 and
Argentina and Chile from January 2005).
TELEFONICA MOVILES GROUP
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
January - September July - September
2005 2004 % Chg 2005 2004 % Chg
Revenues 12,050.0 8,295.2 45.3 4,290.2 2,940.3 45.9
Internal expenditure capitalized in fixed 85.8 48.8 75.8 33.7 17.0 98.0
assets (1)
Operating expenses (7,785.3) (4,807.5) 61.9 (2,607.9) (1,672.5) 55.9
Other net operating income (expense) (122.7) (41.1) 198.9 (68.2) (24.9) 173.9
Gain (loss) on sale of fixed assets (1.2) (7.6) (83.9) 0.0 (5.9) c.s.
Impairment of goodwill and other assets 0.0 2.5 n.s. 0.0 0.1 n.s.
Operating income before D&A (OIBDA) 4,226.5 3,490.3 21.1 1,647.7 1,254.1 31.4
Depreciation and amortization (1,679.8) (1,055.0) 59.2 (585.7) (359.9) 62.7
Operating income (OI) 2,546.7 2,435.3 4.6 1,062.0 894.2 18.8
Profit from associated companies (10.4) (31.3) (66.8) 0.4 (9.5) c.s.
Net financial income (expense) (300.2) (240.8) 24.6 (146.3) (120.9) 21.1
Income before taxes 2,236.1 2,163.2 3.4 916.1 763.8 19.9
Income taxes (709.6) (742.0) (4.4) (312.8) (264.7) 18.2
Income from continuing operations 1,526.6 1,421.2 7.4 603.2 499.1 20.9
Income (Loss) from discontinued operations 0.0 0.0 n.s. 0.0 0.0 n.s.
Minority interest 16.1 (2.8) c.s. 11.7 (3.0) c.s.
Net income 1,542.7 1,418.4 8.8 614.9 496.1 24.0
(1) Including work in process.
CELLULAR BUSINESS
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
January - September July - September
2005 2004 % Chg 2005 2004 % Chg
Revenues 12,050.0 8,504.3 41.7 4,290.2 2,971.0 44.4
Internal expenditure capitalized in fixed 85.8 50.0 71.7 33.7 16.9 98.9
assets (1)
Operating expenses (7,785.3) (4,965.6) 56.8 (2,607.9) (1,692.7) 54.1
Other net operating income (expense) (122.7) (43.1) 185.0 (68.2) (25.3) 169.1
Gain (loss) on sale of fixed assets (1.2) (7.6) (84.0) 0.0 (5.9) c.s.
Impairment of goodwill and other assets 0.0 2.5 c.s. 0.0 0.1 n.s.
Operating income before D&A (OIBDA) 4,226.5 3,540.4 19.4 1,647.7 1,264.2 30.3
Depreciation and amortization (1,679.8) (1,108.3) 51.6 (585.7) (367.8) 59.3
Operating income (OI) 2,546.7 2,432.1 4.7 1,062.0 896.4 18.5
Profit from associated companies (10.4) (32.4) (67.9) 0.4 (9.5) c.s.
Net financial income (expense) (300.2) (250.3) 19.9 (146.3) (114.5) 27.9
Income before taxes 2,236.1 2,149.4 4.0 916.1 772.4 18.6
Income taxes (709.6) (740.1) (4.1) (312.8) (267.1) 17.1
Income from continuing operations 1,526.6 1,409.3 8.3 603.2 505.4 19.4
Income (Loss) from discontinued 0.0 0.0 n.s. 0.0 0.0 n.s.
operations
Minority interest 16.1 3.4 n.s. 11.7 (6.4) c.s.
Net income 1,542.7 1,412.7 9.2 614.9 499.0 23.2
Note: Cellular Bussines included Telefonica Movil Chile in 2004.
(1) Including work in process.
RESULTS BY BUSINESS LINES
Cesky Telecom
Since July 1 2005, Telefonica fully consolidates the 51.1% of the stake acquired
in Cesky Telecom in the privatization process. As a result of the compulsory
tender offer concluded on September 19 2005, Telefonica increased its stake to
69.4%, which will be consolidated as of October 1 2005.
Telefonica consolidates Cesky Telecom's third quarter results with a
contribution of 509.4 million euros to Telefonica's nine months gross revenues,
while the contribution to the OIBDA and OI was 252.7 million euros and 110.0
million euros, respectively.
Cesky Telecom Group revenues in the first nine months of 2005 amounted to
1,518.8 million euros, showing an increase of 3.9% over the same period of last
year, while in local currency terms, revenues were down by 2.2% y-o-y. It is
important to highlight the improved performance achieved in the third quarter
alone, with a moderate 1.1% y-o-y decline in local currency terms, mainly due to
the positive performance of the mobile business and the improving trend observed
in the fixed line business compared to the first half of the year.
Total consolidated operating expenses showed a slight increase of 0.6% y-o-y in
local currency over the first nine months of the year, while in the third
quarter alone the company managed to reduce its operating expenses by 5.4%
y-o-y, mainly thanks to the OpEx discipline exercised in the fixed line
business. Thus, OIBDA for the Group reached 707.8 million euros showing a
decrease of 0.7% y-o-y (-6.6% y-o-y in local currency), but with a 2.8% y-o-y
increase in local currency for the third quarter alone as a result of the
operating expenses discipline already mentioned. As a result, the OIBDA margin
reached 46.6% in the first nine months of 2005, up from 45.0% registered in the
first half of the year, and 2.2 percentage points below the figure reached in
the same period of last year. OIBDA margin for the third quarter has topped
49.7%, 1.9 percentage points higher than the one achieved in the same period of
last year.
Operating Income (OI) for the first nine months of the year went up by 6.7%
y-o-y in local currency to 249.2 million euros, on the back of a decrease in the
consolidated depreciation and amortization resulting from a lower CapEx and
changes in goodwill and certain items of intangible assets amortization.
Total CapEx of Cesky Telecom Group for the first nine months of 2005 amounted to
108.5 million euros, down by 6.6% y-o-y in local currency, having been reduced
in both fixed line and mobile businesses.
Operating free cash flow (OIBDA-CapEx) generated by the Cesky Telecom Group up
to the end of September 2005 reached 599.3 million euros, down by 6.6% y-o-y in
local currency, mainly as a result of the decrease in OIBDA already mentioned.
Fixed Line Business
Revenues in the fixed line business declined by 4.4% y-o-y in local currency in
the first nine months of the year to 790.1 million euros, in a continuous shift
from the traditional voice services to broadband Internet, data and other value
added services.
Revenues from monthly subscriptions and connection charges decreased by 6.2%
y-o-y in local currency mainly due to the decrease in the number of fixed
telephony accesses (-6.4% y-o-y to reach 3.0 million accesses as of September
30).
Following a 28.3% y-o-y decline in the total traffic generated by Cesky
Telecom's customers, as a result of both migration of Internet dial up traffic
to broadband and the fixed to mobile traffic substitution effect, revenues from
communication voice services were reduced by 24.1% y-o-y in local currency in
the first nine months of the year. As a first result of the elimination of
credits in monthly rental fees as part of the tariff rebalancing scheme
implemented in the second quarter of the year, the quarterly rate of decline
observed throughout the year has diminished (from 26.1% y-o-y decline in the
first quarter to 23.9% in the second quarter and 21.8% in the third quarter).
The revenues from Internet, data services, value added services and other
telecommunication services have registered a 23.3% y-o-y increase in local
currency, mainly due to a substantial growth in revenues from broadband
services.
The total number of ADSL connections amounted to 221 thousands at the end of
September, compared to 61 thousands connections registered at the end of
September 2004. Cesky Telecom recorded 120 thousands net adds in the first nine
months of 2005, with an estimated market share of net adds of 82% and confirming
its total market share on the broadband Internet of 80% as of the end of the
third quarter. As a result of the successful introduction of new Internet Expres
packages in the second quarter of the year, ADSL net adds in the third quarter
alone reached 58 thousands which is almost equal to the one achieved throughout
the first half of the year.
Operating expenses of the fixed line business in the first nine months of 2005
went down by 3.9% y-o-y in local currency, having declined by 11.4% in local
currency y-o-y in the third quarter alone. A reduction in most of the cost
categories have contributed to this positive performance. The cost category
which contributed to the cost reduction the most was personnel expenses,
declining by 3.9% y-o-y in local currency as a result of a y-o-y headcount
reduction of 15.7% since September 2004. Payments to other operators have
increased by 4.8% y-o-y due to the combined effect of an increase of payments
for international carrier transit services (+40.6% y-o-y) and the reduction of
payments to domestic networks operators (-14.9% y-o-y).
OIBDA in the fixed line business amounted to 349.4 million euros (-12.4% y-o-y
in local currency), representing an OIBDA margin of 44.2% in the first nine
months of 2005, down by 4.0 percentage points compared to the same period of
time of the year 2004, and up by 1.6 percentage points as compared to the first
half of 2005. OIBDA margin of the fixed business in the third quarter alone has
been 47.4%.
CapEx in the fixed line business amounted to 49.2 million euros in the first
nine months of the year, down by 7.0% y-o-y in local currency.
Mobile Business (Eurotel)
In the first nine months of 2005, Eurotel revenues increased by 1.1% y-o-y in
local currency and amounted to 747.3 million euros while in the third quarter
alone revenues went up by 4.0% y-o-y in local currency, mainly as a result of
the growth in data and Internet revenues.
Eurotel's communication traffic revenues and subscription charges in the first
quarter of the year increased by 0.7% y-o-y in local currency, thanks to the
increasing number of customers and successful launch of new services over the
summer season. Revenues from SMS, MMS, Internet, data and value added Services
increased by 21.3% y-o-y in local currency, accelerated from the 18.3% y-o-y
increase registered in the first half of 2005.
The total number of Eurotel's customers at the end of September amounted to
nearly 4.5 million, showing a 7.9% y-o-y increase. The successful migration
process from prepaid to contract services has led to the 37.0% y-o-y increase in
the number of contract customers, amounting to 1.3 million at the end of
September, and driving the contract over total customers ratio to 29.2% from
23.0% registered at the end of September 2004.
As a result of the continuous increase in multiple SIM card users, together with
the lower ARPU generated by the newly acquired customers, in the first nine
months of 2005 blended ARPU showed a y-o-y reduction of 3.6% in local currency.
Nevertheless, the ARPU increased in the third quarter by 1.0% compared to the
second quarter of 2005, a trend seen throughout the year resulting from the
successful acquisition of contract customers. Moreover, at the end of September
2005, the total number of Eurotel Data Expres (an unlimited high-speed Internet
access service based on CDMA technology) customers amounted to 54 thousands
(compared to 12 thousands registered as of September 2004).
Eurotel's operating expenses increased by 3.9% y-o-y in local currency in the
first nine months of the year, but went down by 0.9% y-o-y in the third quarter
alone, changing the quarterly trend observed in the first and second quarter
(+5.4% y-o-y and +7.2% y-o-y, respectively).
Personnel expenses are the major contributor to this performance, having
increased by 33.3% y-o-y in local currency as a result of one-off items posted
in the second quarter. In the third quarter alone, the personnel expenses
increased by a moderate 3.8% y-o-y. Eurotel headcount has been reduced by 0.4%
y-o-y in the first nine months of the year.
Eurotel OIBDA reached 350.4 million euros in the first nine months of the year,
which represents a 1.8% y-o-y decrease in local currency while having decreased
OIBDA margin by 1.4 percentage points compared to the end of September 2004 to
reach 46.9%. Thanks to the positive development of operating costs registered in
the third quarter alone, OIBDA margin has improved by 1.1 percentage points
compared to the end June 2005.
CapEx in the mobile business amounted to 59.1 million euros in the first nine
months of the year, down by 6.5% y-o-y in local currency.
CESKY TELECOM
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
July - September
2005
Revenues 509.4
Internal expenditure capitalized in fixed assets (1) 5.1
Operating expenses (281.6)
Other net operating income (expense) 24.8
Gain (loss) on sale of fixed assets 0.7
Impairment of goodwill and other assets (5.8)
Operating income before D&A (OIBDA) 252.7
Depreciation and amortization (142.6)
Operating income (OI) 110.0
Profit from associated companies 0.0
Net financial income (expense) (4.7)
Income before taxes 105.3
Income taxes (26.0)
Income from continuing operations 79.4
Income (Loss) from discontinued operations 0.0
Minority interest 0.0
Net income (1) 79.4
Including work in process.
RESULTS BY BUSINESS LINES
Other businesses
DIRECTORIES BUSINESS
On November 7 2005, TPI Group reached an agreement to acquire 100% capital of
Telinver, the Argentine directories market leader, for US$ 74 million,
enterprise value. As a consequence of this acquisition all the directories
businesses of Telefonica Group will be consolidated in TPI Group.
The acquisition of Telinver and the good performance after the entrance in the
Italian telephone information market suppose as well the update of the 2005
guidance; revenue growth of +5.5%/+6.5% (from former +3%/+5%) and OIBDA growth
of +7%/8% in constant euros (+7%/+9% before).
Consolidated revenues rose 4.5% in the first nine months of the year, to 462.7
million euros. Operating profit before depreciation and amortization (OIBDA)
advanced 2.0% compared to the year before reaching 161.4 million euros. Net
profit in the period was 94.9 million euros. These results can be explained as
follows:
• Advertising revenue growth in a 2.6% and rose 387.2 million euros. The
advertising revenues in Spain grew 1.7% reaching 296.8 million euros while
in Latin America the growth in euros of these revenues was 5.5%, up to 90.5
million euros.
• Revenue from telephone traffic amounted to 41.7 million euros, with a
growth of 23.2%, thanks to the positive evolution of the telephone
information services in Spain.
• Operator revenue increased 6.4%, reaching 32.6 million euros
Spain is decreasing its contribution to the group revenues in one percent point
representing now a 77% of the total revenues, due to the good performance of the
exchange rate in Latin America, and increasing its contribution to the
consolidated OIBDA of the TPI Group, from a 81% to a 85% in the nine months
period, as a consequence of the behavior of TPI Peru and Publiguias. In Spain,
revenues are growing up 4.0% to 359.7 million euros, mostly due to:
• The paper business grew in a 0.4%, reaching 266.4 million euros.
• Internet revenues present a good performance, reaching 24.6 million euros
that suppose a growth of 16.7%, as well as telephone information advertising
revenues increased 15.6% to 3.6 million euros.
• The revenue from telephone traffic amounted to 41.3 million euros, with a
growth of 23.0%.
Latin America represents the remaining 23% of the revenues and 15% of the OIBDA,
highlighting:
• Following the publication of the 2005 Santiago directory during the third
quarter of 2005, total revenues of Publiguias fell 3.4% in local currency
(+1.0% in euros). OIBDA fell 17.2% in local currency (-13.5% in euros). This
evolution is due both to the increased competition and the write-off of
default customers which begun at the beginning of the year to improve bad
debts.
• TPI Peru reported revenues of 33.5 million euros, with a growth of 7.2%,
and contributed with 8.7 million euros to the consolidated OIBDA.
• Advertising revenues of TPI Brasil grew a 6.5% in local currency during
the first nine months of the year, reaching 13.4 million euros and improving
the OIBDA in a 24.7% in local currency, up to -5.1 million euros.
In turn, the directories business of the Telefonica Group, which includes the
Argentinean company Telinver -that will be consolidated under the TPI perimeter
from now - presents revenues figure of 470.4 million euros, that implies a
growth of 4.5% compared to the same period of the year before. On the other
hand, OIBDA improves in a 2.1%, reaching 162.1 million euros in this period.
TPI - PAGINAS AMARILLAS GROUP
SELECTED OPERATING DATA IN SPAIN
Unaudited figures
January - September
2005 2004 % Chg
Books Published
Yellow Pages* 89 81
White Pages 43 45
(Euros in millions)
Revenue Breakdown (1) 359.7 346.0 0.0
Advertising 296.8 291.8 0.0
Publishing 266.4 265.5 0.0
Yellow Pages 208.8 210.2 (0.0)
White Pages 51.6 50.6 0.0
Others paper revenues 6.0 4.7 0.3
Internet 24.6 21.0 0.2
Operator Assisted Yellow Pages 3.6 3.1 0.2
Others 2.2 2.2 0.0
Telephony Traffic 41.3 33.6 0.2
Operator 19.8 18.6 0.1
Others 1.8 2.0 (0.1)
* Includes a breakdown by residential/business services and pocket guides.
(1) TPI Espana includes Telefonica Publicidad e Informacion S.A. , TPI Edita, 11888 Servicio de Consulta Telefonica
S.A.U., TPI Direct and Edinet Europa results.
TPI - PAGINAS AMARILLAS GROUP
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
January - September July - September
2005 2004 % Chg 2005 2004 % Chg
Revenues 462.7 442.8 4.5 226.6 228.3 (0.7)
Internal expenditure capitalized in fixed 0.0 0.0 n.s. 0.0 0.0 n.s.
assets (1)
Operating expenses (283.4) (261.7) 8.3 (120.0) (115.9) 3.5
Other net operating income (expense) (18.2) (20.3) (10.5) (8.0) (10.5) (23.2)
Gain (loss) on sale of fixed assets (0.2) (0.4) (41.8) (0.3) 0.1 c.s.
Impairment of goodwill and other assets 0.5 (2.1) (125.5) 0.5 (2.1) c.s.
Operating income before D&A (OIBDA) 161.4 158.3 2.0 98.9 99.9 (1.0)
Depreciation and amortization (17.3) (15.7) 10.2 (5.6) (5.2) 7.3
Operating income (OI) 144.1 142.6 1.1 93.3 94.7 (1.4)
Profit from associated companies (0.1) (0.3) (78.9) (0.0) (0.1) (97.1)
Net financial income (expense) (3.3) (1.1) n.s. (1.1) 0.5 c.s.
Income before taxes 140.7 141.2 (0.3) 92.2 95.1 (3.0)
Income taxes (45.8) (46.1) (0.6) (28.0) (29.1) (3.7)
Income from continuing operations 94.9 95.1 (0.2) 64.2 65.9 (2.7)
Income (Loss) from discontinued 0.0 0.0 n.s. 0.0 0.0 n.s.
operations
Minority interest 0.0 0.5 n.s. 0.0 0.0 n.s.
Net income 94.9 95.6 (0.7) 64.2 65.9 (2.7)
(1) Including work in process.
DIRECTORIES BUSINESS
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
January - September July - September
2005 2004 % Chg 2005 2004 % Chg
Revenues 470.4 449.9 4.5 231.3 230.8 0.2
Internal expenditure capitalized in fixed 0.0 0.0 n.s. 0.0 0.0 n.s.
assets (1)
Operating expenses (290.3) (266.6) 8.9 (123.8) (116.3) 6.5
Other net operating income (expense) (18.3) (21.9) (16.6) (8.1) (11.4) (28.9)
Gain (loss) on sale of fixed assets (0.2) (0.4) (41.8) (0.3) 0.1 c.s.
Impairment of goodwill and other assets 0.5 (2.1) c.s. 0.5 (2.1) c.s.
Operating income before D&A (OIBDA) 162.1 158.8 2.1 99.6 101.1 (1.5)
Depreciation and amortization (17.7) (16.3) 8.7 (5.7) (5.5) 4.6
Operating income (OI) 144.4 142.5 1.3 93.9 95.7 (1.9)
Profit from associated companies (0.1) (0.3) (78.9) (0.0) (0.1) (97.1)
Net financial income (expense) (4.7) (4.0) 17.8 (1.5) (0.6) 138.6
Income before taxes 139.6 138.2 1.0 92.4 94.9 (2.7)
Income taxes (45.8) (46.1) (0.6) (28.0) (29.1) (3.7)
Income from continuing operations 93.8 92.1 1.8 64.4 65.8 (2.2)
Income (Loss) from discontinued 0.0 0.0 n.s. 0.0 0.0 n.s.
operations
Minority interest 0.0 0.6 (96.1) (0.0) 0.0 c.s.
Net income 93.8 92.7 1.2 64.4 65.8 (2.2)
(1) Including work in process.
RESULTS BY BUSINESS LINES
Other businesses
ATENTO GROUP
During the first nine months of 2005, Atento Group's total revenues amounted to
608.6 million euros, 40.8% more than in the same period of the previous year.
This increase is explained by the revenue growth at Atento Espana (+26.5%
year-on-year), Atento Brazil (+30.3% year-on-year growth) and Atento Mexico
(+74.1% year-on-year)
The contribution of clients outside the Telefonica Group reached 45.2% of total
revenues in the first nine months of 2005, increasing its participation in the
total revenues of the group. By countries, we can highlight:
• In Brazil, on one hand, the higher clients in Microsoft, Bradesco and
Banco IBI and, on the other hand, the higher activity with VIVO, Sera and
Speedy.
• In Spain, on one hand the agreement with BBVA and the new services with
Gas Natural and, on the other hand, the new services with some Spanish
Government Agencies (Tesoreria General de la Seguridad Social and Agencia
Tributaria).
• In Mexico, the higher activity with BBVA, Infonavit, GE Seguros, Lexmark
and Pfizer and the higher clients in Microsoft and US Airways.
• In Puerto Rico, the higher activity with SunCom and Citibank.
• In Colombia, the higher activity with BBVA and the higher traffic in the
Microsoft campaign.
By geographical areas, Spain and Brazil both accounted for 69.7% of the total
group revenues, 2.3 percentage points less than twelve months ago, offset by the
higher contribution of Mexico (8.4% vs. 6.7% one year ago), Chile (5.9% vs. 5.7%
one year ago) and Argentina (3.3% vs. 2.6% one year ago) in the total group
revenues.
Operating expenses registered a year-on-year increase of 42.0% to 527.9 million
euros in the first nine months of the year, due to higher personnel expenses
(+43.8%) as a result of greater activity and higher supplies (+52.4%).
Operating income before depreciation and amortization (OIBDA) amounted to 82.6
million euros at the end of the first nine months of 2005, 35.9% up on
January-September of the previous year. In terms of profitability, the OIBDA
margin amounted to 13.6%, 0.5 percentage points lower than twelve months ago.
Operating income (OI) at September 2005 amounted to 61.9 million euros, 78.7%
more than that recorded in the same period of 2004, mainly due to the activity
growth and the 20.8% decrease in amortization explained by the degree of
maturity achieved in operations.
Net income obtained in the first nine months of the year amounted to 31.6
million euros compared with 24.8 million euros registered in the same period of
2004.
Cumulative CapEx at the end of the nine months totaled 26.6 million euros,
showing a year-on-year increase of 83.7%. This increase was mainly due to the
investments made by Atento Brazil to attend new services and clients at the new
Contact Center in Sao Bento, as well as the opening of new platforms in Spain to
attend new services, the implementation of a new call center in Puerto Rico
(Trujillo), the new investments in Mexico as a consequence of US Airways and
Sony activity and the new Movistar services in Venezuela. Hence, operating free
cash flow (OIBDA-CapEx) reached 56.0 million euros in September, compared with
the 46.3 million euros generated in January-September 2004.
Finally, at operating level, the Atento Group had 36,543 positions in place at
September 30th 2005, 7,187 more than one year ago. The average number of
occupied positions for the quarter was 29,314, representing a level of
occupation of 84% (78% as of September 2004).
ATENTO GROUP
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
January - September July - September
2005 2004 % Chg 2005 2004 % Chg
Revenues 608.6 432.2 40.8 220.4 151.9 45.1
Internal expenditure capitalized in fixed 0.0 0.0 n.s. 0.0 0.0 n.s.
assets (1)
Operating expenses (527.9) (371.8) 42.0 (189.8) (126.8) 49.7
Other net operating income (expense) 1.9 0.8 138.9 0.5 (1.4) c.s.
Gain (loss) on sale of fixed assets (0.0) (0.4) (99.2) 0.0 (0.0) c.s.
Impairment of goodwill and other assets 0.0 0.0 n.s. 0.0 0.0 n.s.
Operating income before D&A (OIBDA) 82.6 60.8 35.9 31.1 23.6 31.5
Depreciation and amortization (20.7) (26.1) (20.8) (7.0) (8.0) (12.6)
Operating income (OI) 61.9 34.6 78.7 24.0 15.6 54.2
Profit from associated companies 0.0 0.0 n.s. 0.0 0.0 n.s.
Net financial income (expense) (13.1) (6.2) 111.8 (5.4) (6.0) (11.0)
Income before taxes 48.8 28.4 71.5 18.7 9.6 95.1
Income taxes (14.9) (2.4) n.s. (5.9) (0.2) n.s.
Income from continuing operations 33.9 26.1 30.1 12.8 9.4 37.0
Income (Loss) from discontinued 0.0 (0.1) n.s. 0.0 (0.0) n.s.
operations
Minority interest (2.3) (1.1) 103.2 (0.8) (0.4) 98.2
Net income 31.6 24.8 27.4 12.0 8.9 34.1
(1) Including work in process.
RESULTS BY BUSINESS LINES
Other businesses
CONTENT AND MEDIA BUSINESS
The Content and Media Business obtained revenues of 878.7 million euros at the
end of the third quarter of 2005, up 5.6% from the same period of 2004.
The consolidated operating income before depreciation and amortization (OIBDA)
in the January-September period amounted to 167.1 million euros, compared with
128. million euros registered in the same period of 2004.
The information about Endemol has been limited due to IPO process of the Company
in order to not interfere in such process and avoid activities that could be
considered against information disclosure for the appropriate regulatory bodies.
ATCO
During the first nine months of the year, the advertising market in Argentina
(mainly in the Capital and Gran Buenos Aires areas) has registered year-on-year
growth of approximately 21%, which compares with the one registered in the first
half of 2004 (+46%), reflecting the recovery of the above-mentioned market
throughout 2004.
Within this favorable market context, Telefe maintains its leadership, reaching
38.5% share of audience on total population and showing a year-on-year increase
of 0.6 percentage points, followed by its main competitor, Canal 13, with an
average share of 24.5% in the first nine months of 2005. The cumulative
advertising market share as of September 2005 is 41.8%, down 3.1 percentage
points from September 2004, again followed by Canal 13 (30.9%).
The company obtained revenues of 245.4 million pesos in the first nine months of
the year, showing an increase of 8.2% over the same period of last year, due to
the advertising market growth already mentioned. OIBDA reached 71.1 million
pesos in the first nine months of the year, which compares with the 37.9 million
pesos registered in the same period of 2004, and primarily due to the capital
gains registered after the sale of Radio Continental and Radio Estereo.
CONTENT AND MEDIA BUSINESS
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
January - September July - September
2005 2004 % Chg 2005 2004 % Chg
Revenues 878.7 831.9 5.6 276.9 261.0 6.1
Internal expenditure capitalized in fixed 0.0 0.2 n.s. 0.0 0.0 n.s.
assets (1)
Operating expenses (727.4) (705.1) 3.2 (230.4) (220.2) 4.6
Other net operating income (expense) 8.4 (1.1) c.s. 6.4 14.4 (55.9)
Gain (loss) on sale of fixed assets 7.5 5.0 50.7 0.2 5.1 (96.1)
Impairment of goodwill and other assets (0.1) (2.5) (96.9) 0.0 (2.6) n.s.
Operating income before D&A (OIBDA) 167.1 128.4 30.2 53.0 57.8 (8.2)
Depreciation and amortization (20.5) (19.6) 4.6 (6.4) (6.5) (1.8)
Operating income (OI) 146.7 108.8 34.8 46.7 51.3 (9.0)
Profit from associated companies (5.1) (23.3) (78.2) 2.5 (5.4) c.s.
Net financial income (expense) (3.8) (24.9) (84.8) (7.0) (14.1) (50.4)
Income before taxes 137.8 60.6 127.5 42.1 31.7 32.8
Income taxes (46.3) (56.3) (17.7) (11.1) (23.1) (51.7)
Income from continuing operations 91.5 4.3 n.s. 31.0 8.7 n.s.
Income (Loss) from discontinued 0.0 0.0 n.s. 0.0 0.0 n.s.
operations
Minority interest (4.3) (3.4) 26.9 (1.7) (1.3) 25.0
Net income 87.2 0.9 n.s. 29.3 7.3 n.s.
(1) Including work in process.
RESULTS BY BUSINESS LINES
Other businesses
TELEFONICA DEUTSCHLAND GROUP
Telefonica Deutschland obtained revenues of 208.2 million euros in the first
nine months of 2005, showing a year-on-year reduction of 5.5%, due primarily to
the reduction in revenues from narrowband services which has not yet been offset
by the increase in broadband business.
With respect to the broadband business, it is worth to highlight the strong
increase in the number of connections resold on a retail basis by the company to
its main clients. With it, the total number of equivalent ADSL lines in service
in the German market exceeds the figure of 510 thousands at the end of the first
half of 2005, which compares with the more than 401 thousands achieved in
September 2004, providing services to four of the five top main ISPs in Germany.
Telefonica Deutschland has registered a positive operating income before
depreciation and amortization (OIBDA) of 1.1 million euros in the first nine
months of the year, which compares with the 10.0 million euros obtained in the
same period of the previous year.
TELEFONICA DEUTSCHLAND GROUP
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
January - September
2005 2004 % Chg
Revenues 208.2 220.5 (5.5)
Operating income before D&A (OIBDA) 1.1 10.0 (88.6)
OIBDA margin 0.5% 4.5% (4.0 p.p.)
ADDENDA
Companies included in each Financial Statement
Based on what was indicated at the start of this report, the results breakdown
of Telefonica Group are detailed according to the business in which the Group
has a presence. The main differences between this view and the one that would
apply attending to the legal structure, are the following:
• Telefonica, S.A. directly participates in the share capital of Endemol
Entertainment Holding, N.V., which has been included in Content and Media
Business. The results from the Sogecable stake have been also assigned to
Content and Media Business, even though a part of the investment is legally
dependent upon Telefonica, S.A.
• Telefonica Holding Argentina, S.A. holds 4.706% of Atlantida de
Comunicaciones, S.A. (ATCO) which, for those purposes, is considered to be
part of Content and Media Business, consolidating 100% share capital of
ATCO.
• Compania de Telecomunicaciones de Chile, S.A. (CTC), participated by
Telefonica Latinoamerica, sold Telefonica Moviles Chile to Telefonica
Moviles Group in the third quarter of fiscal year 2004, although the results
of this company have been assigned to the cellular business from the
beginning of the year 2004.
• The participation of Telefonica Group in IPSE 2000 SpA is assigned to the
cellular business, also including the investment legally dependent upon
Telefonica DataCorp, S.A.
• In the case of Telefonica de Argentina (TASA), participated by Telefonica
Latinoamerica Group, Telinver has been assigned to the directories business,
in line with our vision for the total Telefonica's directories business.
• Telefonica Data Group (denominated 'Telefonica Empresas'), legally
dependent upon Telefonica S.A., has been segregated and subsequentally
integrated into the fixed line activities both in Spain and Latin America
for presentation purposes, and according to geographic criteria. The stakes
not included in neither of the previous geographic areas will be
consolidated directly by Telefonica S.A. In this sense, the stakes in
Telefonica Data Espana, S.A.U. and Soluciones Group have been sold to
Telefonica de Espana S.A.U. in the third quarter of 2004, although the
results of both companies had been assigned to the fixed line business in
Spain from the beginning of the year 2004.
• Telefonica International Wholesale Services Group (TIWS) financial results
has been assigned to Telefonica Latinoamerica Group during 2004 and the
first nine months of 2005, even though is legally dependent upon Telefonica,
S.A. (92.5%) and Telefonica Data Corp (7.5%) respectively.
• The activities of Terra Networks Espana S.A., Maptel Networks, S.A.U. and
Azeler Automocion, S.A. have been included in Telefonica de Espana Group as
of July 1st 2005; at the same time, Terra Networks Chile has been included
in Telefonica Latinoamerica Group together with the rest of Latin American
companies of Terra. As of September 30th 2005, Terra Networks Espana and
Terra Networks Chile are directly held by Telefonica S.A., while Maptel
Networks and Azeler Automocion are directly held by Terra Networks
Asociadas, S.L.
ADDENDA
Key Holdings of the Telefonica Group and its Subsidiaries detailed by bu siness
lines
TELEFONICA GROUP TELEFONICA LATINOAMERICA GROUP
% Part % Part
Telefonica de Espana 100.00% Telesp 87.49%
Telefonica Moviles (1) 92.46% Telefonica del Peru 98.19%
Telefonica Latinoamerica 100.00% Telefonica de Argentina 98.03%
TPI Group 59.90% TLD Puerto Rico 98.00%
Telefonica de Contenidos 100.00% CTC Chile 44.89%
Atento Group 91.35% Terra Networks Peru 99.99%
Cesky Telecom 69.41% Terra Networks Mexico 99.99%
Terra Networks USA 100.00%
Terra Networks Guatemala 100.00%
(1) Effective participation: 92.91%. Includes Telefonica Terra Networks Venezuela 100.00%
Moviles S.A.' Stock Options Program ('Programa MOS').
Terra Networks Brasil 100.00%
TELEFONICA DE ESPANA Terra Networks Argentina 99.99%
GROUP
% Part Terra Networks Chile (1) 100.00%
Telefonica Data Colombia 100.00%
Telyco 100.00% Telefonica Empresas Brasil 93.98%
Telefonica Telecomunic. 100.00% Telefonica Empresas Peru 97.07%
Publicas
Telefonica Soluciones 100.00% Telefonica Data Argentina 97.92%
Sectoriales
Telefonica Empresas Espana 100.00% Telefonica Data USA 100.00%
Terra Networks Espana (1) 100.00% T. Intern. Wholesale Serv. (TIWS) (2) 100.00%
T. Soluciones de 100.00%
Informatica y
Comunicaciones de Espana
(1) Telefonica S.A. owns 100%.
(2) Telefonica, S.A. owns 92.51% y Telefonica DataCorp
owns 7.49%.
(1) Telefonica S.A. owns
100%.
TPI - PAGINAS AMARILLAS GROUP
% Part
TPI Edita 100.00%
Publiguias (Chile) 100.00%
TPI Brasil 100.00%
TPI Peru 100.00%
11888 Servicios de Consulta 100.00%
Telefonica
Services de Renseig. T. 100.00%
(France)
Servizio di Consultazione 100.00%
Telefonica,
S.R.L. (Italy)
GRUPO TELEFONICA MOVILES ATENTO GROUP
% Part % Part
Telefonica Moviles Espana 100.00% Atento Teleservicios Espana, S.A. 100.00%
Brasilcel (1) 50.00% Atento Brasil, S.A. 100.00%
TCP Argentina 97.93% Atento Argentina, S.A. 100.00%
TEM Peru 98.03% Atento de Guatemala, S.A. 100.00%
T. Moviles Mexico 92.00% Atento Mexicana, S.A. de C.V. 100.00%
TM Chile 100.00% Atento Peru, S.A.C. 99.46%
TEM El Salvador 99.02% Atento Chile, S.A. 77.60%
TEM Guatemala 100.00% Atento Maroc, S.A. 100.00%
Telcel (Venezuela) 100.00% Atento El Salvador, S.A. de C.V. 100.00%
TEM Colombia 100.00%
TEM Guatemala y Cia 100.00%
Otecel (Ecuador) 100.00%
TEM Panama 99.98% TELEFONICA DE CONTENIDOS GROUP
Abiatar (Uruguay) 100.00% % Part
Telefonia Celular Nicaragua 100.00%
Radiocomunicac. Moviles SA 100.00% Telefe 100.00%
(Arg)
Telefonica Moviles Chile 100.00% Endemol (1) 99.70%
Group 3G (Germany) 57.20% Telefonica Servicios de Musica 100.00%
IPSE 2000 (Italy) (2) 45.59% Telefonica Servicios Audiovisuales 100.00%
3G Mobile AG (Switzerland) 100.00% Hispasat 13.23%
Medi Telecom 32.18%
Telefonica Moviles Interacciona 100.00% (1) Ownership held by Telefonica S.A.
Mobipay Espana 13.36%
Mobipay Internacional 50.00%
T. Moviles Soluciones y 100.00%
Aplicac. (Chile)
Tempos 21 (3) 38.50%
(1) Joint Venture which fully consolidates TeleSudeste Celular Participacoes, Celular CRT Participacoes, TeleLeste
Celular Participacoes and Telesp Celular Participacoes. Telesp Celular Participacoes fully consolidates Global
Telecom Participacoes and, as from May 2003, TeleCentro Oeste Participacoes. The states that Brasilcel consolidated
in its subsidiaries in September 2005 are the following: TeleSudeste Celular Participacoes 91.0%; Telesp Celular
Participacoes 66.1%; Global Telecom Participacoes 66.1%; Celular CRT Participacoes 66.4%; TeleLeste Celular
Participacoes 50.7% and TeleCentro Oeste Participacoes 34.7%.
(2) Aditionally, Telefonica Group holds a 4.08% of IPSE 2000 through Telefonica DataCorp.
(3) In June 2005, Tempos 21 is consolidated by the equity method with a retroactive effect as from
January 1st 2005.
OTHER PARTICIPATIONS
% Part
Lycos Europe 32.10%
Sogecable (1) 23.83%
Portugal Telecom (2) 9.53%
China Netcom Group (3) 5.00%
BBVA 1.13%
Amper 6.10%
Telepizza 4.89%
(1) Telefonica de Contenidos, S.A. holds 22.23% and Telefonica, S.A. holds 1.60%.
(2) Telefonica Group's effective participation. Telefonica Group participation would be 9.64% if we exclude the
minority interests.
(3) Ownership held by Telefonica
Latinoamerica
ADDENDA
Significant Events
• On November 4th 2005, Telefonica S.A. treasury stock position was
87,373,284 shares representing 1.775% of its current share capital,
accordingly to the CNMV filing.
• On October 31, 2005, in accordance with Rule 2.5 of the U.K.'s City Code
on Takeovers and Mergers, Telefonica, S.A. announced, through their
financial advisors Goldman Sachs International and Citigroup, the launching
of an Irrevocable Takeover Offer to acquire the total share capital of the
UK company, O2 plc. This Announcement contains the principal terms and
conditions of this Offer agreed unanimously by the Board of Directors of
Telefonica, S.A. and O2 plc. The Offer, addressed to all the shareholders of
the aforementioned company, is structured as a purchase of shares in cash,
valuing each O2 plc share at 200 p and, consequently, being the entire value
of the transaction of approximately £17.710 millions. The Board of Directors
of O2 plc will be unanimously recommending its shareholders to accept the
Offer announced by Telefonica, S.A. This Irrevocable Offer is conditional,
amongst other things, upon receiving the required regulatory clearances; and
upon receiving a number of acceptances in respect of not less than 90 per
cent of O2 plc share capital to which the Offer relates, notwithstanding
Telefonica, S.A. may waive this condition as long as the number of
acceptances received represent more than 50 percent of the voting share
capital of O2 plc.
• On September 28, 2005, the Board of Directors of the Telefonica, S.A.,
accepted the resignation of Mr. Antonio J. Alonso Ureba from his position on
the Board and his post as Secretary to the Board of Directors. Likewise, the
Board of Directors agreed to appoint Mr. Ramiro Sanchez de Lerin
Garcia-Ovies as Secretary non-Director of the Board and General Secretary of
the Company.
• On September 19, 2005, the offering period related to the mandatory tender
offer that Telefonica S.A. launched for 48.9% of Cesky Telecom capital on
July 29, 2005 expired. The total acceptances tendered in the public offer
has been 59 million shares (37.5% of the free float), which at the offer
price of CZK 456 per share represent a total consideration of approximately
917 million euros. After completion of the tender offer, Telefonica's
interest in Cesky Telecom increased from 51.1% to 69.4%.
• On September 5, 2005, Telefonica, through its wholly-owned subsidiary
Telefonica Internacional, S.A.U., reached a stake equivalent to a 5% of the
equity of China Netcom Group Corporation (Hong Kong) limited (CNC). The
acquisition of the 5% equity stake of CNC represented a total investment
amounting to 418.3 million euros.
ADDENDA
Changes to the Perimeter and Accounting Criteria of Consolidation
In the period January-September of 2005, the main changes have occurred in the
consolidation perimeter were the following:
Telefonica Group
• The Spanish company Telefonica Procesos y Tecnologia de la Informacion,
S.A. was taken over by Telefonica Gestion de Servicios Compartidos, S.A. in
February this year. The company, which was consolidated within Telefonica
Group's financial statements by full integration method, has been removed
from the consolidation perimeter.
• On April 19th, Telefonica Wholesale Services, S.L.(TIWS), the Spanish
subsidiary of Telefonica Datacorp, S.A., carried out a capital increase of
212.68 million Euros, that was both fully subscribed and paid by Telefonica,
S.A. by means of a non-monetary contribution from the Uruguayan company,
Telefonica International Wholesale Services America, S.A. Following this
operation, Telefonica, S.A. owns 92.513% of the capital of the Spanish
company TIWS, which continues to be consolidated within Telefonica Group's
financial statements by the full integration method; Telefonica Group owns
100% of the company's shares.
• In March, the Telefonica Group purchased 50% of the shares held by Banco
Bilbao Vizcaya Argentaria, S.A. (BBVA) in the Spanish company Azeler
Automocion, S.A. Following the sale, the Telefonica Group now controls the
entire Azeler stake. The company, which was consolidated within Telefonica
Group's financial statements by equity method, has now been incorporated by
full integration method.
At the same time as the previous operation, the Telefonica Group sold the
50% it held in the Spanish company Iniciativas Residenciales en Internet,
S.A. (ATREA) to BBVA. Following this sale ATREA, which was consolidated
within Telefonica Group's financial statements by equity method, has been
removed from the consolidation perimeter.
This combined operation involved a total payment of 1.84 million euros and
generated goodwill amounting to 1.54 million euros.
• On April 14th 2005, the company Onetravel.com, Inc. was sold for 26.4
million dollars. Telefonica's stake in this company was 54.15%. The capital
gain registered in this disposal amounted 3 million Euros and was recorded
under the item 'Gains on sale of fixed assets '. The company, which was
included in Telefonica Group's financial statements by the full integration
method, has been removed from the consolidation perimeter.
• On June 10th, the European Commission authorized the takeover of the Czech
telecommunications company Cesky Telecom by means of the acquisition of
51.1% of the company's share capital. The deal was closed on June 16th,
offering a price of 502 Czech Crowns per share, which represented a total
purchase price of 2.747 billion Euros. Later, Telefonica launched a
compulsory takeover bid for the remaining 48.9% of outstanding shares still
controlled by minority shareholders. On September 19th, the takeover bid for
the remaining shares ended, acquiring Telefonica S.A. 58,985,703 shares at a
price of 456 Czech Crowns per share (911.3 million euros). After this
purchase, the stake of Telefonica in the Czech company reach 69.41% of the
share capital The company has been included within Telefonica Group's
financial statements by the full integration method.
• In June, Telefonica, S.A. has sold 4,300,000 shares of its subsidiary
Telefonica Publicidad e Informacion, S.A. This capital gain has been
recorded within Telefonica Group's financial statements under the item
'Gains on disposals of consolidated companies'. Following this transaction,
Telefonica Group owns 59.9% of TPI. The company continues to be consolidated
within Telefonica Group's financial statement by the full integration
method.
• In June, the Spanish company, Terra Networks Latam, S.L., and the
Dominican company, Terra Networks Caribe, S.A., were dissolved. Both
companies, which were consolidated in Terra Group's financial statements by
the full integration method, have been removed from the consolidation
perimeter.
• In July, it took place the merger by absorption of Terra Networks, S.A. by
Telefonica, S.A., with the termination of the former company, and the en
bloc transmission of all its assets to the latter company, through the
provision of Telefonica, S.A. treasury stock, in a proportion of 2
Telefonica shares for every 9 Terra shares. The company, which was included
in Telefonica Group's financial statements using the full integration
method, has been removed from the consolidation perimeter.
Telefonica de Espana Group
• The Spanish company Soluciones Tecnologicas para la alimentacion, S.L., in
which Telefonica Soluciones de Informatica y Comunicaciones de Espana,
S.A.U. had a 45% stake, was sold in February and has been removed from the
Telefonica Group consolidation perimeter where it was consolidated by equity
method.
• In March, Telefonica de Espana S.A.U.'s sold its stake of 0.73% in
INTELSAT for 17.77 million euros, obtaining a capital gain of 17.58 million
euros. The company was recorded within the 'Other investments' item of the
Telefonica Group's consolidated balance sheet.
• In May, Telefonica Soluciones Sectoriales, S.A. is not anymore a
shareholder of the Spanish company IT7 (formerly Incatel), Instituto Canario
de Telecomunicaciones S.A.. It has returned the 31% stake they owned at
December 31st, 2004 to its partners. The company has been removed from
Telefonica Group's consolidation perimeter, where it was included by the
equity method.
• In June, the Spanish company Segurvirtual MVS, S.A., in which Telefonica
Data Espana, S.A. owned 49% of the shares, was liquidated. The company has
been removed from Telefonica Group's consolidation perimeter, where it used
to be included by the equity method.
• Also in June, the Salvadoran company Telefonica Sistemas el Salvador, S.A.
de C.V., a company in which Telefonica Soluciones Informaticas y
Comunicaciones de Espana, S.A.U. owns 99.5 % of the shares, has started its
liquidation; it has been removed from Telefonica Group's consolidation
perimeter, where it was consolidated by the full integration method.
• Telefonica Telecomunicaciones Publicas took part in the constitution of
the Spanish company Telefonica Salud, S.A., subscribing and paying up 51% of
the new company's initial share capital, a total of 0.06 million euros. The
company has been included in the consolidation perimeter of the Telefonica
Group by using the full integration method.
• Telefonica Soluciones Sectoriales, S.A. took part in the constitution of
the Spanish company Ceuta Innovacion Digital, S.L., subscribing and paying
up 40% of its initial share capital. The company has been included in the
consolidation perimeter of the Telefonica Group using the equity method.
• On September 1st, in accordance with the decisions made by the sole
shareholder, the Spanish company Agencia de Certificacion Electronica, S.A.
was taken over by its sole shareholder Telefonica Data Espana, S.A. The
company, which was included in Telefonica Group's financial statements using
the full integration method, has been removed from the consolidation
perimeter.
Telefonica Latinoamerica Group
• In March, the Dutch company Telefonica International Holding, B.V., wholly
owned by Telefonica Internacional, S.A., sold its 14.41% stake in the US
company Infonet Services Corporation, Inc.
• Telefonica Internacional, S.A.U. has acquired 2.99% of the Chinese
telecommunications company, China Netcom Group Corporation (Hong Kong)
Limited (CNC) share capital, at a price of 11.45 Hong Kong dollars per
share, which represents a total price of 240 million euros. In September, it
acquired an additional 2.01% of the share capital of the Chinese company for
184 million euros. Following this purchase, the stake of Telefonica in China
Netcom rose to 5%. The company is consolidated in Telefonica Group's
financial statements at market value.
• During July 2005, Telefonica Internacional, S.A. acquired 100%
shareholding in Terra Mexico Holding, Terra Colombia Holding, Terra
Guatemala, Terra Venezuela, Terra Argentina and Terra USA from Telefonica,
S.A. Furthermore, on that same date, Telefonica Internacional, S.A. took
over 100% of the net debt that said companies from the Terra Group held with
Telefonica, S.A.
• In August, Telefonica Internacional sold the US company Communication
Technology, Inc. (CTI), in which it was the sole shareholder, leading to a
capital loss of 3.71 million euros that appear in the Telefonica Group
profit and loss account under the heading 'Losses from the sale of
consolidated companies'. The company, which was included in the consolidated
accounts of the Telefonica Group by using the full integration method, has
been removed from the consolidation perimeter.
• The Spanish company Telefonica DataCorp, S.A. fully subscribed the capital
increase made by the Colombian company Telefonica Data Colombia, S.A. in
September. Following this contribution, the Spanish company's shareholding
in the Colombian company increased from 65% to the current 100%. The
Colombian company continues to be consolidated within Telefonica Group's
financial statements by the full integration method.
Telefonica Moviles Group
• On January 7th and January 11th 2005, respectively, 100% of the shares in
the BellSouth Chile and Argentina operators were purchased, thus concluding
the acquisition of BellSouth operators in Latin America.
The total acquisition price for Telefonica Moviles, adjusted by the net debt
of these companies, totaled 510.86 million euros for Radiocomunicaciones
Moviles S.A. (Argentina) and 307.43 million euros for Telefonica Moviles
Chile, S.A.
• On October 8th 2004, Telesp Celular Participacoes, S.A. approved a capital
increase of approximately 2,054 million reaies. This increase was completed
on January 4th 2005 and was completely subscribed. Following this capital
increase and after the capitalization of tax credits of July 2005, mentioned
hereafter, Brasilcel, N.V.'s 65.12% stake rose to 66.10%.
• During 2005, TES Holding, S.A., fully-owned by Telefonica Moviles, S.A.,
has acquired an additional stake in Telefonica Moviles El Salvador, S.A..
Following the acquisition, TES Holding, S.A. stake increased to 99.02%. The
company continues to be consolidated within Telefonica Group's financial
statement by the full integration method.
• In April 2005, the tender offer launched for the minority outstanding
shareholdings of the Peruvian company, Comunicaciones Moviles de Peru, S.A.,
was concluded, increasing its stake in this company up to 99.89%. Later, on
June 1st 2005, the merger of Comunicaciones Moviles Peru, S.A. and
Telefonica Moviles Peru, S.A.C took place. Therefore, Telefonica Moviles
Group has both direct and indirect stakes of 98.03% in the new company,
Telefonica Moviles Peru, S.A. The company is included within Telefonica
Group's financial statements by the full integration method.
• Following the acquisition of an additional 0.40% stake in Telefonica
Moviles Panama in 2005, as a result of the tender offer launched in 2004,
Telefonica Moviles's stake increased to 99.98%. The company continues to be
consolidated within Telefonica Group's financial statement by the full
integration method.
• In June 2005, the Spanish company Tempos 21 Innovacion en Aplicaciones
Moviles, S.A., was consolidated within Telefonica Group's financial
statments by the equity method, with a retroactive effect starting as from
January 1st 2005.
• In July 2005, Brasilcel capitalized the tax credits used by Tele Centro
Oeste Celular Participacoes, S.A. (TCO), Celular CRT, S.A. (CRT), Tele
Sudeste Celular Participacoes (TSD), S.A. and Tele Leste Celular
Participacoes, S.A. (TBE) resulting from the tax utilization of the goodwill
in those companies. This capitalization did not entail any cash outflow for
Brasilcel, N.V., but it has caused an increase in Brasilcel, N.V.'s
shareholdings in those companies. Brasilcel, N.V.'s stakes in the companies'
share capital have increased to: 91.0% in TSD, 50.7% in TBE, 66.4% in CRT
and 34.7% in TCO.
TPI Group
• The Spanish company 11888 Servicio Consulta Telefonica, S.A., wholly owned
by Telefonica Publicidad e Informacion, S.A. (TPI), constituted, subscribed
and fully paid all of the share capital of the French company Services de
Renseignements Telephoniques, S.A.S. by the 0.04 million euros. The company
is now incorporated in the consolidated accounts of the Telefonica Group by
full integration method.
• 11888 Servicio Consulta Telefonica, S.A. also constituted the Italian
company Servizio Di Consultaziones Telefonica, S.R.L., subscribing and
paying up 0.01 million euros for all of the shares forming its share
capital.The company has been included in the consolidated financial
statements of the Telefonica Group by full integration method.
Telefonica Contenidos GRoup
• During the first quarter, the Telefonica de Contenidos Group sold all of
the shares it held in LS4 Radio Continental, S.A. and Radio Estereo, S.A.,
obtaining capital gains of 6.82 and 0.19 million euros, respectively. The
companies, which were included in the financial statements of the Telefonica
Group by full integration method, have been removed from the consolidation
perimeter.
Atento Group
• On July 29th, Atento Brasil, S.A. took over the entire shareholding in the
Brazilian company Beans Administradora de Cartoes de Credito, Ltda. In
August, Beans merged with its parent company Atento Brasil, S.A. The
company, which was included in the Telefonica Group's consolidated financial
statements by the full integration method, has been removed from the
consolidation perimeter.
DISCLAIMER
This document contains statements that constitute forward looking statements in
its general meaning and within the meaning of the Private Securities Litigation
Reform Act of 1995. 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 actual results may differ materially from
those in the forward looking statements as a result of various factors.
Analysts and investors are cautioned not to place undue reliance on those
forward looking statements which speak only as of the date of this presentation.
Telefonica 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 Telefonica's business or acquisition strategy or to
reflect the occurrence of unanticipated events. Analysts and investors are
encouraged to consult the Company's Annual Report as well as periodic filings
filed with the relevant Securities Markets Regulators, and in particular with
the Spanish Market Regulator.
This document contains financial information/data reported under IFRS. This data
is preliminary as full compliance with International Financial Reporting
Standards is not required until 31 December 2005, unaudited, and is therefore
subject to potential future modifications. This financial information has been
prepared based on the principles and regulations known to date, and on the
assumption that IFRS principles presently in force will be the same as those
that will be adopted to prepare the 2005 full year consolidated financial
statements and, consequently, does not represent a complete and final
information under these regulations. In addition, the IFRS financial information
contained herein may not be comparable to financial information published by
Telefonica that was prepared under Spanish GAAP.
For additional information, please
contact.
Investor Relations
Gran Via, 28 - 28013 Madrid (Spain)
Phone number:
+34 91 584 4700
Fax number:
+34 91 531 9975
Email:
Ezequiel Nieto -
ezequiel.nieto@telefonica.es
Diego Maus - dmaus@telefonica.es
Dolores Garcia - dgarcia@telefonica.es
Isabel Beltran - i.beltran@telefonica.es
ir@telefonica.es
www.telefonica.es/investors
This information is provided by RNS
The company news service from the London Stock Exchange
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