January-June 2007 results
Telefonica SA
30 July 2007
Quarterly results
January-June 2007
TABLE OF CONTENTS
Telefonica Group
Market Size
Financial Highlights
Consolidated Results
Financial Data
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Espana
• Wireline Business
• Wireless Business
Telefonica Latinoamerica
• Brazil
• Argentina
• Chile
• Peru
• Colombia
• Mexico
• Venezuela
• Central America
• Ecuador
• TIWS
Telefonica O2 Europe
• O2 UK
• O2 Germany
• O2 Ireland
• Telefonica O2 Czech Republic
Other Companies
• Atento Group
ADDENDA
Key Holdings of the Telefonica Group and its Subsidiaries
Significant Events
Changes to the Perimeter and Accounting Criteria of Consolidation
The financial information contained in this document has been prepared under
International Financial Reporting Standards (IFRS). This financial information
is unaudited and, therefore, is subject to potential future modifications.
The English language translation of the consolidated financial statements
originally issued in Spanish has been prepared solely for the convenience of
English speaking readers. Despite all the efforts devoted to this translation,
certain omissions or approximations may subsist. Telefonica, its representatives
and employees decline all responsibility in this regard. In the event of a
discrepancy, the Spanish-language version prevails.
TELEFONICA GROUP
Market Size
TELEFONICA GROUP
ACCESSES
Unaudited figures (thousands)
January - June
2007 2006 % Chg
-------------------------------------------------------------------------------------------
Final Clients Accesses 210,405.0 189,458.6 11.1
Fixed telephony accesses (1) 42,068.1 42,755.4 (1.6)
Internet and data accesses 12,153.1 11,313.4 7.4
Narrowband 2,873.5 4,350.6 (34.0)
Broadband (2) 9,119.3 6,758.0 34.9
Other (3) 160.4 204.8 (21.7)
Cellular accesses 154,895.7 134,606.9 15.1
Pay TV 1,288.1 782.8 64.5
-------------------------------------------------------------------------------------------
Wholesale Accesses 2,183.1 1,565.3 39.5
Unbundled loops 1,206.0 690.6 74.6
Shared UL 664.5 386.0 72.1
Full UL 541.5 304.6 77.8
Wholesale ADSL (4) 610.7 765.7 (20.2)
Other (5) 366.4 109.0 n.m.
Total Accesses 212,588.1 191,023.8 11.3
-------------------------------------------------------------------------------------------
(1) PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/
6 Access x30. Company's accesses for internal use included.
(2) ADSL, satelite, optical fibre, cable modem and broadband circuits.
(3) Remaining non-broadband final client circuits.
(4) Includes Unbundled Lines by T. Deutschland.
(5) Circuits for other operators.
Note: Cellular accesses, Fixed telephony accesses and Broadband accesses include MANX
customers.
TELEFONICA GROUP
Financial Highlights
The most relevant factors of Telefonica Group results for the January-June 2007
period are the following:
• Guidance1 upgrade for fiscal year 2007:
• Revenue growth1 is expected to be in the range +8%/+10% versus +6%
/+9% previously announced.
• OIBDA1 growth is expected to be in the range +10%/+13% (+8%/+11%
before).
• OI1 growth is expected to be between +19%/+23% compared with the
range previously communicated (+14%/+20%).
• 2007 CapEx1 is expected to be below 8,100 million euros versus the
initial estimation of < 7,814 million euros.
--------------------------------------------------------------------------------
1 Base 2006 reported numbers include eleven months of O2 Group (consolidated
since February 2006), eight months of Telefonica Telecom (consolidated since May
2006), six months of Iberbanda (consolidated since July 2006), three months of
start-up losses in Slovakia, and exclude Endemol and Airwave results. 2007
guidance assumes constant exchanges rates as of 2006 and excludes changes in
consolidation. In terms of guidance calculation, OIBDA and OI exclude other
exceptional revenues/expenses not foreseeable in 2007. Personnel Restructuring
and Real Estate Programs are included as operating revenues/expenses, with the
exception of the ones decided after the guidance communication at the beginning
of the year. For comparison purposes the equivalent other exceptional revenues/
expenses registered in 2006 are also deducted from reported figures. CapEx
excludes investments related to Real Estate Efficiency Plan.
--------------------------------------------------------------------------------
• Reinforced organic growth growth2: top line +7.4% year-on-year:
• By geographies, Telefonica Latinoamerica revenues posted an
organic growth2 of 12.8% year-on-year, Telefonica Espana 5.3% year-on-year
and Telefonica O2 Europe +4.9% year-on-year.
• By business, mobile service and broadband revenues are the main
contributors, posting organic growth of 11.8% and 23.2% respectively versus
January-June 2006 period.
--------------------------------------------------------------------------------
2 Assuming constant Exchange rates and including the consolidation of the O2
Group, Telefonica Telecom and Iberbanda in January-June 2006. It excludes the
consolidation of Telefonica O2 Slovakia in January-June 2007 and the
consolidation of Airwave in April-June 2006.
--------------------------------------------------------------------------------
• Intense commercial activity on customer acquisition and loyalty
programs boosted accesses expansion (+11.3% year-on-year) to 212.6 million,
mainly on mobile and broadband:
• Mobile accesses stood at 154.9 million, 15.1% higher than June
2006.
• Retail Internet broadband accesses totaled 9.1 million as of June
2006, up 34.9% against June 2006.
• Pay TV customers reached 1.3 million (+64.5% year-on-year).
• Twelve consecutive quarters of simultaneous growth in revenues
(+10.6%), OIBDA (+21.9%), OI (+45.4%) and net income (+66.4%).
• Operating cash flow (OIBDA-CapEx) totalled 8,062 million euros,
backed by executed synergies through the integrated management of
operations, cost optimisation and improved diversification.
• Consolidated net income reached 3,8303 million euros:
• Basic earnings per share amounted to 0.799 euros per share (0.488
euros per share in January-June 2006), the twelfth consecutive quarter of
growth.
--------------------------------------------------------------------------------
3 Includes Airwave capital gain by an amount of 1,296 million euros in
Telefonica O2 Europe OIBDA.
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TELEFONICA GROUP
Consolidated Results
+------------------------------------------------------------------------------+
|Telefonica Group organizational restructuring by Regional Business Units: |
|Telefonica Espana, Telefonica Latinoamerica and Telefonica O2 Europe, in |
|accordance with the new regional and integrated management model, defines that|
|the companies legal structure is not relevant for the presentation of the |
|Telefonica Group financial information. In this sense, operating results of |
|each regional business units are presented independently of their legal |
|structure. |
|In line with this new structure, Telefonica Group has incorporated in |
|Telefonica Espana and Telefonica Latinoamerica regional businesses units all |
|the information corresponding to fixed, cellular, cable and Internet |
|businesses. |
|Likewise, Telefonica O2 Europe includes O2 Group results and Telefonica O2 |
|Czech Republic results. |
|In the caption Other companies and Eliminations Content and Media Business is |
|included, where the results of Telefonica S.A. direct stake has been |
|integrated in the share capital of Endemol Entertainment Holding, N.V. |
+------------------------------------------------------------------------------+
Telefonica's results for the first half of 2007 prove the consolidation and
sustainability of the strong growth and returns. Basic earnings per share
increased 63.7% year-on-year.
Once again, cumulative revenues (+10.6% year-on-year), OIBDA (+21.9%
year-on-year), OI (+45.4% year-on-year) and net profit (+66.4% year-on-year),
are showing simultaneous year-on-year growth, fact that has repeated
consecutively since the January-June 2004 period.
These superb results are the consequence of the solid organic growth associated
to all businesses (Telefonica Group +7.4% year-on-year), the diversification by
geographies and businesses, the efficient cost structure and the execution of
synergies through the integrated management of the Company.
As a result, total client base rose 11.3%, due to the successful commercial
campaigns of customer acquisition and retention, and the operating cash flow
(OIBDA-CapEx) reached 8,062 million euros in the first half of the year (+29.6%
year-on-year and +8.8% excluding the capital gain of Airwave)..
Based on this positive performance the Telefonica Group is upgrading its
guidance1 for fiscal year 2007. It now expects revenues1 to increase by +8%/+10%
(+6%/9% previously); OIBDA1 by +10%/+13% (+8%/+11%) and OI1 by +19%/+23% (+14%/
+20%).
--------------------------------------------------------------------------------
1 Base 2006 reported numbers include eleven months of O2 Group (consolidated
since February 2006), eight months of Telefonica Telecom (consolidated since May
2006), six months of Iberbanda (consolidated since July 2006), three months of
start-up losses in Slovakia, and exclude Endemol and Airwave results. 2007
guidance assumes constant exchange rates as of 2006 and excludes changes in
consolidation. In terms of guidance calculation, OIBDA and OI exclude other
exceptional revenues/expenses not foreseeable in 2007. Personnel Restructuring
and Real Estate Programs are included as operating revenues/expenses, with the
exception of the ones decided after the guidance communication at the beginning
of the year. For comparison purposes the equivalent other exceptional revenues/
expenses registered in 2006 are also deducted from reported figures. CapEx
excludes investments related to Real Estate Efficiency Plan.
--------------------------------------------------------------------------------
During the second quarter of 2007 the Telefonica Group maintained its high
commercial activity, ending the period with 212.6 million accesses, 11.3% more
than a year earlier. Telefonica Espana currently boasts 45.2 million accesses,
an increase of 5.5% year-on-year. Not only has the mobile and broadband customer
base grown, but the fixed telephony line loss was desacelerated. Meanwhile, the
total number accesses in Telefonica Latinoamerica continued to register a strong
growth (+13.9% year-on-year to 121.8 million) thanks to the solid increase in
the broadband segment and a robust mobile market. Telefonica O2 Europe, which
continues to focus its efforts on capturing and retention the value customers,
saw its total accesses advance 7.4% to 39.8 million.
By access type, mobile accesses at the Telefonica Group rose 15.1% compared to
June 2006, to a total of 154.9 million. Of particular note are the net adds for
the quarter (6.0 million) driven by the 'Mother's Day' campaign in Latin
America. This means total net adds for the second quarter in Latin America were
5.0 million, taking the total customer base to 90.6 million (+18.9%
year-on-year). In Spain, net adds in in the second quarter reached 289,000,
taking the total customer base to over 22.1 million (+7.0% vs. June 2006);
higher number of contract customers should be highlighted. Net adds in Europe
totaled 534,000 in the second quarter, while the customer base grew 8.4%
year-on-year to 36.4 million at 30 June 2007.
Retail Internet broadband accesses advanced 34.9% year-on-year to end June 2007
at 9.1 million. ADSL, TV and voice bundles are still an important feature of
Telefonica's markets both in terms of developing faster the broadband market
and customer loyalty. The company ended June with over 4.2 million retail
broadband accesses in Spain (+30.4% year-on-year), 4.4 million in Latin America
(+36.8% year-on-year) and 0.5 million in Europe (+60.9% year-on-year) after
posting net adds in the second quarter of 206,000, 335,000 and 35,000
respectively.
Pay TV accesses at the end of the quarter 2007 totaled 1.3 million, 64.5% more
than a year before, with operations in Spain, the Czech Republic, Peru, Chile
and Colombia.
Thanks to the solid performance of the Group's customer base, revenues in the
first half of 2007 totaled 27,826 million euros, a 10.6% increase year-on-year.
Negative exchange rate effect deducted 1.4 percentage points to the growth (-2.6
percentage points in January-March 2007), while changes in the perimeter of
consolidation contributed with 4.5 percentage points to this growth (+9.8
percentage points in January-March 2007). Accordingly, organic growth2 in
revenues was 7.4%, with Telefonica Latinoamerica the main driver, followed by
Telefonica Espana. Therefore, and by businesses, mobile services revenues and
broadband revenues contributed the most to organic growth, rising 11.8% and
23.2% respectively vs. January-June 2006. Revenues in the second quarter totaled
14,079 million euros, up 6.5% year-on-year.
--------------------------------------------------------------------------------
2 Assuming constant Exchange rates and including the consolidation of the O2
Group, Telefonica Telecom and Iberbanda in January-June 2006. It excludes the
consolidation of Telefonica O2 Slovakia in January-June 2007 and the
consolidation of Airwave in April-June 2007.
--------------------------------------------------------------------------------
In absolute terms, Telefonica Espana contributed the most to consolidated Group
revenues, accounting for 36.6%. In the first semester of 2007, revenues at
Telefonica Espana topped 10,191 million euros, 5.4% higher than in the same
period in 2006, building on the growth seen in the previous quarter. Revenues at
Telefonica Espana Wireline Bussiness advanced 3.8% in the first half of 2007 to
6,144 million euros on the back of strong revenues from the Internet and
broadband (+18.5% year-on-year), Traditional Access (+0.5% year-on-year) and
Data Services (+6.6% year-on-year). Revenues at Telefonica Espana Wireless
Business rose 7.5% to 4,751 million euros thanks to an increase in service
revenues (+6.2%), driven by the increase customer revenues (+9.6%) derived from
the company's focus on fostering contract customer (+13.4%) loyalty.
Telefonica Latinoamerica (34.6% of consolidated revenues) recorded revenues of
9,628 million euros in the first half of 2007, 10.6% more than in the same
period of 2006 (+15.5% in constant euros). Revenues organic growth3 would stand
at 12.8%. It is worth to highlight Mexico and Venezuela's contribution to
growth in constant euros, with year-on-year increases in local currency of 60.3%
and 27.7% respectively, helped by strong growth in the customer bases, followed
by Argentina (+18.8% in local currency) and Brazil (+3.6% in local currency).
TASA is the best performing fixed telephony operator in the region, reporting
13.7% growth in local currency thanks to higher Internet and broadband revenues
(+44.3% in local currency) jointly with a strong traditional revenues (+10.0% in
local currency). In Brazil, it should be noted VIVO (+14.5% in local currency),
which results prove the advance in the target of obtaining profitable growth.
--------------------------------------------------------------------------------
3 Assuming constant exchange rates and including the consolidation of Telefonica
Telecom in January-June 2006.
--------------------------------------------------------------------------------
Telefonica O2 Europe (7,068 million euros) contributed with 25.4% to the
Telefonica Group's consolidated revenues in the first half of 2007. Telefonica
O2 Europe's 2006 revenues include in 2006 the O2 Group for February-June 2006,
as well as Telefonica Germany and Telefonica O2 Czech Republic for January-June
2006. The continued growth in the customer base and ARPU explained O2 UK's
10.4% revenues increase in local currency vs. the first six months of 2006
despite a tough market environment. At Telefonica O2 Czech Republic, first half
revenues rose 3.1% year-on-year in local currency as stable fixed business
(+0.3% in local currency) was offset by the growth of the mobile business (+5.5%
in local currency). However, at O2 Germany revenues fell 2.9% vs. the first half
of 2006 due to the cut in termination rates and the competitive environment.
In the first six months of the year, operating expenses at the Telefonica Group
totaled 18,124 million euros, 9.7% higher than the same period the year before.
This increase is largely due to the changes in the perimeter of consolidation
and the higher commercial efforts carried out in Latin America and Europe, in a
context of maximizing the cost structure efficiency.
Supplies in the first six months of 2007 totaled 8,843 million euros, up 14.3%
in relation with the same period of 2006 (+15.5% excluding the exchange rate
effect). If we also exclude new additions to the perimeter of consolidation, the
increase was due to higher interconnection expenses in Telefonica Latinoamerica,
Telefonica Moviles Espana and O2 UK.
Personnel expenses rose 1.5% in the first semester to 3,645 million (+2.7% in
constant euros). The average number of employees in the period was 240,912,
18,234 more (+8.2%) than previous year mainly due to the increase of Atento
Group's workforce and the incorporation of new companies in the consolidation
perimeter. Excluding the Atento Group, the workforce would have risen just 2.4%
to 128,281 employees. With regard to workforce restructuring costs (256 million
euros in the first half of 2007), we would highlight in the second quarter the
94 million euros provision for Telefonica Espana Wireline Business (2003-2007
Redundancy Program) related 350 employees joining the Program and 114 million
euros associated to the workforce restructuring at the O2 Group (Germany, UK and
Ireland).
External services expenses (4,793 million euros) increased 8.9% vs. the first
six months of 2006 (+10.5% in constant euros). In organic terms, Telefonica
Latinoamerica and Telefonica Espana Wireline Business explained this behaviour
mainly due to the higher commercial activity.
It is worth to highlight in the caption Other net operating income (expense)
includes in the second quarter the 152 million euros provision in Telefonica
Espana Wireline Business corresponding to the imposed fine by the European Union
Also, in the first half of 2007 sale of fixed assets totaled 1,260 million euros
due to the inclusion in the second quarter of 1,296 million euros related to the
capital gain from the sale of Airwave. In addition, the Group recorded a 45
million euro capital loss on the disposal of the 6.9% stake in CANTV.
OIBDA for the period January-June 2007 totaled 11,269 million euros, 21.9%
year-on-year increase, accelerating the trend against the first quarter (+9.6%)
due to the 34.4% year-on-year increase in the second quarter (6,163 million
euros) thanks to the inclusion of the above-mentioned capital gain of Airwave.
Stripping out this capital gain, the increase in OIBDA in the first half of 2007
would have been 7.9% year-on-year. Organic growth4 in OIBDA was 20.9% (+7.1%
stripping out the Airwave capital gain, 1.2 percentage points more than in the
first quarter of 2007). With regard to profitability, the OIBDA margin in the
first six months of 2007 was 40.5% (35.8% excluding the Airwave capital gain vs.
36.7% the year before).
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4 Assuming constant Exchange rates and including the consolidation of the O2
Group, Telefonica Telecom and Iberbanda in January-June 2006. It excludes the
consolidation of Telefonica O2 Slovakia in January-June 207 and the
consolidation of Airwave in April-June 2007.
--------------------------------------------------------------------------------
Telefonica Espana (47.4% of consolidated OIBDA) ended the first half of the year
with an OIBDA of 4,723 million euros, 10.4% higher than in the same period of
the previous year (OIBDA margin 46.3%, 2.1 percentage points higher than in fist
half of 2006). Both the Wireline Business and Wireless Business showed strong
OIBDA growth compared to the previous year (+13.1% and 7.0% respectively) help
by strong revenues and cost efficiency. The margin in the Wireline business rose
3.5 percentage points to 42.7% (+0.9 percentage points to 46.7% stripping out
the effect of the redundancy plan and the EU's fine) but fell 0.2 percentage
points at the mobile business to 44.5% given the increased efforts spent on
boosting customer loyalty, network management and commercial activity.
OIBDA at Telefonica Latinoamerica (3,391 million euros) represented 34.0%5 of
consolidated OIBDA for the first six months of 2007, a year-on-year increase of
12.9%, or organic growth6 of 15.7%. In constant euros OIBDA rose 17.8%,
highlighting the contributions from Venezuela (+48.3% in local currency), Mexico
(61 million euros vs. -34 million euros), VIVO (+38.3% in local currency) and
Argentina (+17.6% in local currency). The OIBDA margin cumulative to June 2007
was 35.2%, 0.7 percentage points higher than the same period in 2006 thanks to
an overall improvement at all mobile operators.
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5 January-June 2007 OIBDA excludes the capital gain of Airwave by an amount of
1,296 million euros.
6 Assuming constant exchange rates and including the consolidation of Telefonica
Telecom in January-June 2006.
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Telefonica O2 Europe's contribution to the Telefonica Group's total OIBDA was
18.1%7 in the first half of 2007. In absolute terms, OIBDA cumulative to June
2007 stood at 3,100 million euros, including the 1,296 million euros of capital
gain from the sale of Airwave, compared to 1,758 million euros in 2006, when
included assets from the O2 Group in February-June and from Telefonica O2 Czech
Republic and Telefonica Germany in January-June. The OIBDA margin excluding the
Airwave capital gain was 25.5% (30.2% in January-June 2006). In the second
quarter, OIBDA at O2 UK rose 5.1% year-on-year in local currency, reversing the
negative trend seen the previous quarter due to a decline in customer retention
and loyalty expenses. The OIBDA margin in the second quarter was 25.6% (26.4%
stripping out the provision for workforce restructuring). In O2 Germany, OIBDA
for the second quarter fell 49.8% year-on-year as a 96.5 million euros provision
for workforce restructuring (700 employees) was booked. On a like-for-like
basis, OIBDA would be practically similar (ex-restructuring the OIBDA margin for
the quarter was 22.6%). At Telefonica O2 Czech Republic (OIBDA -2.2% vs. the
first six months of 2006) the OIBDA margin cumulative to June 2007 was 46.0%
(48.5% in January-June 2006), with a negative impact of around 2 percentage
points from operations in Slovakia.
--------------------------------------------------------------------------------
7 January-June 2007 OIBDA excludes the capital gain of Airwave by an amount of
1,296 million euros.
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Depreciation and amortisation in the first half of the year totaled 4,713
million euros, 0.5% lower than the year earlier figure. Both Telefonica Espana
and Telefonica Latinoamerica posted declines (-6.5% and -6.8%, respectively).
Telefonica O2 Europe recorded an increase (+11.4% year-on-year) as it includes
O2 Group Purchase Price Allocation (423 million euros) and the Telefonica O2
Czech Republic (78 million euros). In organic terms8, depreciation and
amortisation in the first semester for the Telefonica Group fell 5.6%
year-on-year, 0.7 percentage points less than the decrease achieved in the first
quarter, being Tefonica Latinoamerica the main contributor to this decline.
The strong rise in OIBDA and fall in depreciation and amortisation drove a 45.4%
year-on-year increase in operating income (OI) to 6,557 million euros in the
first six months of the year. Stripping out the impact of the Airwave capital
gain, OI would have increased by 16.7%. Organic growth8 was 51.5% (+21.8%
excluding the capital gain of Airwave vs. +19.6% in the first quarter of 2007).
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8 Assuming constant Exchange rates and including the consolidation of the O2
Group, Telefonica Telecom and Iberbanda in January-June 2006. It excludes the
consolidation of Telefonica O2 Slovakia in January-June 2007 and the
consolidation of Airwave in April-June 2007.
--------------------------------------------------------------------------------
The results of associated companies surged 104.2% year-on-year to 80 million
euros in the first semester. This improvement was due to Lycos Europe, which in
April sold its investment in the Czech-based IP provider Seznam, c.z.. Sogecable
and The Link also contributed positively after they are no longer accounting by
the equity method.
Net financial results for the first half 2007 amounted to 1,437 million euros,
20.7% above those of the first half 2006. This variation arises mainly from the
increase in the average cost of debt for the Telefonica Group due to higher
interest rates in Europe and higher percentage of debt in Latinoamerica, that
drives financial expenses up by 143 million euros. Management of the present
value of pre-retirement plan commitments and other positions associated to
marked-to-market positions, have a positive impact of 86 millions euros, 20
millions below 2006 first half figure. The average cost calculated on average
total net debt for the first half 2007 is 5.45% and 5.30% when excluding FX
results.
The free cash flow generated by the Telefonica Group in the first half 2007
totaled 3,477 million euros of which 1,459 and 1,425 million euros were assigned
to Telefonica share buyback program and dividend payment respectively, and 400
million euros to commitment cancellations derived mainly from the
pre-retirements plans. Due to the fact that financial divestitures for the
period amounted to 2,789 million euros, mainly due to Airwave sale, net
financial debt decreased in 2,981 million euros. In the opposite side, net debt
has increased 56 million euros because of FX impact and changes in the perimeter
of consolidation and other effects on financial accounts. All this has been
translated in a decrease of 2,925 million euros with respect to the net
financial debt of the fiscal year 2006 (52,145 million euros), reaching the net
financial debt of Telefonica Group at June 2007 49,219 million euros.
The tax provision for the first six months of the year totaled 1,257 million
euros. However, the cash outflow for the Telefonica Group will be further
reduced as negative tax bases are compensated for.
Minority interests subtract 113 million euros from net income in the first half
of the year 2007, a 40.4% year-on-year decrease mainly due to the merger by
absorption of Telefonica Moviles by Telefonica S.A. in July 2006. The minority
shareholder participation in the net income of Telesp and Telefonica O2 Czech
Republic accounted for the bulk of the absolute total of results attributable to
minority interests.
In all, net income cumulative to June amounted to 3,830 million euros, 66.4%
more than in the same period last year. Basic earnings per share soared 63.7%
year-on-year to 0.799 euros. In the second quarter 2007, net income was 2,573
million euros (1,135 million euros in the second quarter 2006), while basic
earnings per share was 0.541 euros (0.243 euros in April-June 2006).
CapEx in the first six months of 2007 totaled 3,208 million euros, up 6.1%
year-on-year. Growth in investments by Telefonica Latinoamerica focused in the
expansion of broadband, TV and GSM networks, was the main reason for the
increase at the group level. However, these investments are highly cyclical, so
the performance cannot be extrapolated to the full year.
FINANCIAL TARGETS (9 ):
• In relation to the Telefonica Group's financial targets set for 2007
the Company expects:
• Revenue growth is expected to be in the range +8%/+10% versus +6%/+9%
previously announced.
• OIBDA growth is expected to be in the range +10%/+13% (+8%/+11%
before).
• OI growth is expected to be between +19%/+23% compared with the range
previously communicated (+14%/+20%).
• 2007 CapEx is expected to be below 8,100 million euros versus the
initial estimation of < 7,814 million euros.
--------------------------------------------------------------------------------
9 Base 2006 reported numbers include eleven months of O2 Group (consolidated
since February 2006), eight months of Telefonica Telecom (consolidated since May
2006), six months of Iberbanda (consolidated since July 2006), three months of
start-up losses in Slovakia, and exclude Endemol and Airwave results. 2007
guidance assumes constant exchange rates as of 2006 and excludes changes in
consolidation. In terms of guidance calculation, OIBDA and OI exclude other
exceptional revenues/expenses not foreseeable in 2007. Personnel Restructuring
and Real Estate Programs are included as operating revenues/expenses, with the
exception of the ones decided after the guidance communication at the beginning
of the year. For comparison purposes the equivalent other exceptional revenues/
expenses registered in 2006 are also deducted from reported figures. CapEx
excludes investments related to Real Estate Efficiency Plan.
--------------------------------------------------------------------------------
TELEFONICA GROUP
Financial Data
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
January - June
2007 2006 % Chg
------------------------------------------------------------------------------------------------------------------------
Revenues 27,826 25,163 10.6
Operating income before D&A (OIBDA) 11,269 9,242 21.9
Operating income (OI) 6,557 4,508 45.4
Income before taxes 5,200 3,357 54.9
Net income 3,830 2,302 66.4
Basic earnings per share 0.799 0.488 63.7
Weighted average number of ordinary shares outstanding 4,793.6 4,716.3 1.6
during the period (millions)
------------------------------------------------------------------------------------------------------------------------
Note: Figures are presented considering the Purchase Price Allocation of O2 as
of February 2006.
Note: For the basic earnings per share calculation purposes, the weighted
average number of ordinary shares outstanding during the period have been
obtained applying IFRS rule 33 'Earnings per share'. Thereby, there are not
taking into account as outstanding shares the weighted average number of
shares held as treasury stock during the period.
TELEFONICA GROUP
RESULTS BY REGIONAL BUSINESS UNITS
Unaudited figures (Euros in millions)
REVENUES OIBDA OPERATING INCOME
January - June January - June January - June
2007 2006 % Chg 2007 2006 % Chg 2007 2006 % Chg
----------------------------------------------------------------------------------------------------------------------
Telefonica Espana 10,191 9,665 5.4 4,723 4,278 10.4 3,516 2,987 17.7
Telefonica Latinoamerica 9,628 8,707 10.6 3,391 3,002 12.9 1,687 1,174 43.7
Telefonica O2 Europe (1) 7,068 5,828 21.3 3,100 1,758 76.4 1,350 187 n.m.
Other companies and eliminations (2) 939 963 (2.5) 56 204 (72.7) 3 160 (98.0)
Total Group 27,826 25,163 10.6 11,269 9,242 21.9 6,557 4,508 45.4
----------------------------------------------------------------------------------------------------------------------
Note: Figures are presented considering the Purchase Price Allocation of O2 as
of February 2006.
Note: OIBDA for wireline operations in Latin America is presented after
management fees.
(1) Telefonica O2 Europe includes in 2006 Telefonica O2 Czech Republic
(January-June), T. Deutschland (January-June) and O2 Group (February-June)
(2) OIBDA and Operating Income exclude the variation in investment valuation
allowances accounted by Telefonica, S.A.
CAPEX BY REGIONAL BUSINESS UNITS
Unaudited figures (Euros in millions)
January - June
2007 2006 % Chg
-------------------------------------------------------------------------------------------
Telefonica Espana 1,030 917 12.3
Telefonica Latinoamerica 1,131 853 32.5
Telefonica O2 Europe (1) 963 1,055 (8.7)
Other companies and eliminations 84 197 (57.5)
Total Group 3,208 3,022 6.1
-------------------------------------------------------------------------------------------
Note: Group CapEx in 2006 at cumulative average exchange rate.
(1) Telefonica O2 Europe includes in 2006 Telefonica O2 Czech Republic
(January-June), T. Deutschland (January-June) and O2 Group (February-June)
TELEFONICA GROUP
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
January - June April - June
2007 2006 % Chg 2007 2006 % Chg
------------------------------------------------------------------------------------------------------------------------
Revenues 27,826 25,163 10.6 14,079 13,217 6.5
Internal exp capitalized in fixed assets (1) 337 342 (1.3) 184 196 (6.1)
Operating expenses (18,124) (16,529) 9.7 (9,296) (8,888) 4.6
Supplies (8,843) (7,739) 14.3 (4,444) (4,228) 5.1
Personnel expenses (3,645) (3,590) 1.5 (1,927) (1,943) (0.8)
Subcontracts (4,793) (4,401) 8.9 (2,487) (2,326) 6.9
Bad Debt Provisions (359) (356) 0.9 (191) (165) 15.7
Taxes (483) (443) 9.1 (246) (227) 8.7
Other net operating income (expense) (19) 125 c.s (55) 66 c.s.
Gain (loss) on sale of fixed assets 1,260 152 n.m. 1,254 0 n.m.
Impairment of goodwill and other assets (11) (10) 5.0 (3) (5) (37.8)
Operating income before D&A (OIBDA) 11,269 9,242 21.9 6,163 4,585 34.4
Depreciation and amortization (4,713) (4,734) (0.5) (2,317) (2,433) (4.8)
Operating income (OI) 6,557 4,508 45.4 3,846 2,152 78.7
Profit from associated companies 80 39 104.2 46 18 n.m.
Net financial income (expense) (1,437) (1,191) 20.7 (670) (669) 0.1
Income before taxes 5,200 3,357 54.9 3,222 1,501 114.7
Income taxes (1,257) (886) 41.9 (601) (272) 120.9
Income from continuing operations 3,943 2,471 59.5 2,621 1,229 113.3
Income (Loss) from discontinued ops. 0 19 n.m. 0 11 n.m.
Minority interest (113) (189) (40.4) (48) (105) (54.2)
Net income 3,830 2,302 66.4 2,573 1,135 126.7
Weighted average number of ordinary shares 4,793.6 4,716.3 1.6 4,759.3 4,678.2 1.7
outstanding during the period (millions)
Basic earnings per share 0.799 0.488 63.7 0.541 0.243 122.9
------------------------------------------------------------------------------------------------------------------------
Note: Figures are presented considering the Purchase Price Allocation of O2 as
of February 2006. 'Bad debt provisions' have been reclassified from 'Other
net operating income (expense)' to 'Operating expenses'.
(1) Including work in process.
Note: For the basic earnings per share calculation purposes, the weighted
average number of ordinary shares outstanding during the period have been
obtained applying IFRS rule 33 'Earnings per share'. Thereby, there are not
taking into account as outstanding shares the weighted average number of shares
held as treasury stock during the period.
TELEFONICA GROUP
CONSOLIDATED BALANCE SHEET
Unaudited figures (Euros in millions)
January - June
2007 2006 % Chg
------------------------------------------------------------------------------------------------------------------------
Non-current assets 86,671 87,126 (0.5)
Intangible assets 19,267 21,145 (8.9)
Goodwill 20,470 19,660 4.1
Property, plant and equipment and Investment property 32,479 32,332 0.5
Long-term financial assets and other non-current assets 6,444 5,687 13.3
Deferred tax assets 8,011 8,303 (3.5)
Current assets 20,184 17,979 12.3
Inventories 1,044 1,134 (7.9)
Trade and other receivables 9,878 9,495 4.0
Current tax receivable 1,170 1,565 (25.2)
Short-term financial investments 1,526 1,803 (15.4)
Cash and cash equivalents 4,000 3,557 12.5
Non-current assets classified as held for sale 2,565 425 n.m.
Total Assets = Total Equity and Liabilities 106,855 105,106 1.7
Equity 21,251 15,072 41.0
Equity attributable to equity holders of the parent 18,566 12,085 53.6
Minority interest 2,684 2,987 (10.1)
Non-current liabilities 60,672 66,406 (8.6)
Long-term financial debt 49,496 54,263 (8.8)
Deferred tax liabilities 4,296 4,617 (7.0)
Long-term provisions 5,929 6,507 (8.9)
Other long-term liabilities 952 1,020 (6.7)
Current liabilities 24,931 23,628 5.5
Short-term financial debt 6,916 7,466 (7.4)
Trade and other payables 8,588 8,259 4.0
Current tax payable 2,511 2,324 8.0
Short-term provisions and other liabilities 5,652 5,212 8.4
Liabilities associate with non-current assets classified 'held for 1,264 367 n.m.
sale'
Financial Data
Net Financial Debt (1) 49,219 54,922 (10.4)
------------------------------------------------------------------------------------------------------------------------
-----
Note: Figures are presented considering the Purchase Price Allocation of O2 as of February 2006.
(1) Net Financial Debt = Long term financial debt + Other long term liabilities + Short term financial debt - Short
term
financial investments - Cash and cash equivalents - Long term financial assets and other non-current assets.
TELEFONICA GROUP
FREE CASH FLOW AND CHANGE IN DEBT
Unaudited figures (Euros in millions)
January - June
2007 2006 %
Chg
------------------------------------------------------------------------------------------------------------------------
I Cash flows from operations 9,144 8,741 4.6
II Net interest payment (1) (1,640) (1,085)
III Payment for income tax (772) (618)
A=I+II+III Net cash provided by operating activities 6,731 7,038 (4.4)
B Payment for investment in fixed and intangible (3,557) (3,247)
assets
C=A+B Net free cash flow after CAPEX 3,175 3,791 (16.3)
D Net Cash received from sale of Real Estate 19 20
E Net payment for financial investment 2,770 (23,328)
F Net payment for dividends and treasury stock (2) (2,982) (2,649)
G=C+D+E+F Free cash flow after dividends 2,982 (22,167) c.s.
H Effects of exchange rate changes on net 173 (1,223)
financial debt
I Effects on net financial debt of changes in (117) 3,911
consolid. and others
J Net financial debt at beginning of period 52,145 30,067
K=J-G+H+I Net financial debt at end of period 49,219 54,922 10.4
------------------------------------------------------------------------------------------------------------------------
(1) Including cash received from dividends paid by subsidiaries that are not under full consolidation method.
(2) Dividends paid by Telefonica S.A. and dividend payments to minoritaries from subsidiaries that are under full
consolidation method and treasury stock.
RECONCILIATIONS OF CASH FLOW AND OIBDA MINUS CAPEX
Unaudited figures (Euros in millions)
January - June
2007 2006 % Chg
------------------------------------------------------------------------------------------------------------------------
OIBDA 11,269 9,242 21.9
- CapEx accrued during the period (3,208) (3,022)
- Payments related to commitments (400) (427)
- Net interest payment (1,640) (1,085)
- Payment for income tax (772) (618)
- Results from the sale of fixed assets (1,260) (152)
- Invest. in working cap. and other deferred income and exp (815) (148)
= Net Free Cash Flow after CapEx 3,175 3,791 (16.3)
+ Net Cash received from sale of Real Estate 19 20
- Net payment for financial investment 2,770 (23,328)
- Net payment for dividends and treasury stock (2,982) (2,649)
= Free Cash Flow after dividends 2,982 (22,167) c.s.
------------------------------------------------------------------------------------------------------------------------
Note: The concept expected 'Free Cash Flow' was introduced to reflect the amount
of cash flow available to remunerate Telefonica S.A. Shareholders, to
protect solvency levels (financial debt and commitments), and to accomodate
strategic flexibility.
The differences with the caption 'Net Free Cash Flow after CapEx' included in
the table presented above, are related to 'Free Cash Flow' being calculated
before payments related to commitments (workforce reductions and guarantees) and
after dividend payments to minoritaries, due to cash recirculation within the
Group.
Jan-Jun Jan-Jun
2007 2006
Net Free Cash Flow after CapEx 3,175 3,791
+ Payments related to cancellation of commitments 400 427
- Ordinary dividends payment to minoritaries (98) (91)
= Free Cash Flow 3,477 4,128
NET FINANCIAL DEBT AND COMMITMENTS
Unaudited figures (Euros in millions)
June 2007
----------------------------------------------------------------------------
Long-term debt 49,791
Short term debt including current 6,916
maturities
Cash and Banks (4,000)
Short and Long-term financial investments (3,488)
(1)
A Net Financial Debt 49,219
Guarantees to IPSE 2000 365
B Commitments related to guarantees 365
Gross commitments related to workforce 5,120
reduction (2)
Value of associated Long-term assets (3) (813)
Taxes receivable (4) (1,625)
C Net commitments related to workforce 2,682
reduction
A + B + C Total Debt + Commitments 52,267
Net Financial Debt / OIBDA (5) 2.5x
Total Debt + Commitments/ OIBDA (5) 2.6x
----------------------------------------------------------------------------
(1) Short term investments and certain investments in financial assets with
a maturity profile longer than one year, whose amount is included in the
caption 'Investment' of the Balance Sheet.
(2) Mainly in Spain. This amount is detailed in the caption 'Provisions for
Contingencies and Expenses' of the Balance Sheet, and is the result of
adding the following items: 'Provision for Pre-retirement, Social Security
Expenses and Voluntary Severance', 'Group Insurance', 'Technical Reserves',
and 'Provisions for Pension Funds of Other Companies'.
(3) Amount included in the caption 'Investment' of the Balance Sheet,
section 'Other Loans'. Mostly related to investments in fixed income
securities and long-term deposits that cover the materialization of
technical reserves of the Group insurance companies.
(4) Net present value of tax benefits arising from the future payments
related to workforce reduction commitments.
(5) Calculation based on 12 months accumulated OIBDA. Excludes Airwave
Capital Gain.
TELEFONICA GROUP
EXCHANGES RATES APPLIED
P&L and CapEx (1) Balance Sheet (2)
Jan - Jun Jan - Jun June 2007 June 2006
2007 2006
--------------------------------------------------------------------------------
USA (US Dollar/Euro) 1.329 1.229 1.351 1.271
United Kingdom (Sterling/ 0.675 0.687 0.674 0.692
Euro)
Argentina (Argentinean Peso/ 4.106 3.768 4.177 3.923
Euro)
Brazil (Brazilian Real/Euro) 2.716 2.688 2.601 2.751
Czech Republic (Czech Crown/ 28.143 28.494 28.715 28.495
Euro)
Chile (Chilean Peso/Euro) 709.100 647.249 712.335 685.871
Colombia (Colombian Peso/ 2,815.373 2,881.844 2,644.401 3,344.482
Euro)
El Salvador (Colon/Euro) 11.629 10.750 11.817 11.124
Guatemala (Quetzal/Euro) 10.199 9.357 10.419 9.679
Mexico (Mexican Peso/Euro) 14.551 13.344 14.675 14.489
Nicaragua (Cordoba/Euro) 24.214 21.321 24.905 22.331
Peru (Peruvian Nuevo Sol/ 4.227 4.075 4.278 4.144
Euro)
Uruguay (Uruguayan Peso/Euro) 32.115 29.604 32.344 30.320
Venezuela (Bolivar/Euro) 2,857.299 2,638.522 2,903.575 2,732.240
--------------------------------------------------------------------------------
(1) These exchange rates are used to convert the P&L and CapEx accounts of the
Group foreign subsidiaries from local currency to euros.
(2) Exchange rates as of 30/06/07 y 30/06/06.
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Espana
In the second quarter of the year, Telefonica Espana Group extended the healthy
earnings trend of first quarter.
Revenues for the first half 2007 surged by 5.4% to 10,191 million euros, while
OIBDA increased by 10.4% to 4,723 million euros, leaving an OIBDA margin of
46.3%. Underlying OIBDA growth, once excluded specific effects such as those
arising from the Redundancy Programme, the European Union fine, and the Real
Estate Programme and subsidies among others, stays at 6.3%.
Telefonica Espana Group's CapEx through June amounted to 1,030 million euros,
leaving operating cash flow (OIBDA-CapEx) of 3,693 million euros.
With regards to Telefonica Espana Wireline Business the following should be
highlighted:
• Strong and sustained high growth in revenues in January-June 2007
(+3.8% year-on-year), underpinned by higher Broadband revenues together with an
improvement of Access and Voice revenues.
• Acceleration of OIBDA growth in first half 2007 to 5.6% after
stripping out specific effects such as the Redundancy Programme, the European
Union fine, and the Real Estate Programme and subsidies, driven by increased
revenues and higher efficiency.
• A smaller loss of fixed telephony lines in a growing market
environment, easing market share loss. The year-on-year decline in fixed lines
was reduced to 0.7% after posting in the second quarter the lowest quarterly
line loss since last quarter of 2004. This rate of decline positively stands out
within the European context.
• Telefonica's continued leadership of the Spanish Broadband Internet
access market, with an estimated market share of 56%.
With regards to Telefonica Espana Wireless Business the following are
particularly noteworthy:
• Strong growth in service revenues of 6.2% year-on-year in the
January-June 2007 period, driven by the positive performance of customer
revenues (+9.6%).
• Upholding of the growth of the total customer base (+7.0% vs. June
2006), mainly focusing in contract customers (+13.4%), based on the increasing
commercial activity and the success of customer loyalty initiatives, which
helped maintain churn (1.7%) at second quarter 2006 levels.
• Higher growth in data revenues (+15.4% year-on-year) during in the
first six months of the year, with data ARPU achieving its highest growth in
years, due above all to content and connectivity services.
• Solid OIBDA growth of 7.0% in the six months to June 2007, with an
OIBDA margin of 44.5%.
FINANCIAL TARGETS (1)
Telefonica Espana upgrades its financial targets for 2007 expecting:
• Growth in revenues to be in the +3.5%/+4.5% range, compared to the
+0.5%/+2.0% range announced initially.
• Growth in OIBDA2 to be in the +9%/+11% range, compared with the
initial range of +5%/+7%.
• CapEx target3 remains unchanged, with an objective for 2007 of less
than 2,400 million euros.
For Telefonica Espana Wireline Business:
• Growth in revenues to be in the +2.5%/+3.5% range, versus the
previously announced range of +0.5%/+2.0%.
• Growth in OIBDA2 to be in the +13.5%/+16% range, compared to the +9%/
+12% previously announced.
For Telefonica Espana Wireless Business:
• Service revenue growth to be in the +4%/+5% range, compared to the +2%
/+4% range announced previously.
• Growth in OIBDA to be in the +4%/+5% range, compared to +0%/+1%.
--------------------------------------------------------------------------------
1 2006 base figures for Telefonica Espana Wireline Business include 6 months of
Iberbanda (consolidated since July 2006). 2007 guidance exclude changes in
consolidation. OIBDA excludes other exceptional revenues/expenses not
foreseeable in 2007 (European Union fine of 151.9 million euros). Telefonica
Espana Wireline Business' Personnel Restructuring (980 million euros in 2006
and an estimated 630 million euros in 2007) and Real Estate (94 million euros in
2006 and an estimated 162 million euros in 2007) programmes are included as
operating revenues/expenses. For comparison purposes, the equivalent other
exceptional revenues/expenses registered in 2006 are also deducted from reported
figures. CapEx excludes investments related to Real Estate Efficiency Plan
2 E.R.E. provision expected for 2oo7 amounts to 630 million euros (2.200
employees) vs. 980 million euros accounted for in 2006; expected capital gains
related to Real Estate Programme in 2007 amount to 162 million euros vs. 94
million euros accounted for in 2006. European Union fine of 151.9 million euros
not included.
3 CapEx excludes investments related to Real Estate Efficiency Plan
--------------------------------------------------------------------------------
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Espana
WIRELESS BUSINESS
Revenues in the first half of 2007 totalled 6,144 million euros, after posting
growths of 3.6% in the first quarter and 4.0% in the second quarter to reach a
cumulative growth in the January-June 2007 period of 3.8% vs. same period 2006.
Driving the growth of revenues were solid increases in Internet and Broadband
service revenues and a better showing from the remaining services: access,
voice, data and IT.
Traditional access revenues through June amounted to 1,390 million euros, a
year-on-year increase of 0.5% led by the 2.0% increase in the PSTN line monthly
fee effective from January 1st and by fewer losses of fixed telephony accesses
over the period.
• So far this year, estimated growth of the Spanish fixed telephony
market has remained steady at 2.4% (0.9 percentage points higher than market
growth at June 2006), in stark contrast to the contraction seen at most European
markets. Telefonica Espana's fixed telephony accesses declined by a net 43,706
lines over the first half of the year, meaning that line loss is slowing down
significantly (net loss has dropped off 62.3% in comparison to that of first
half 2006); the posted number is the lowest six month loss since 2001 . Fixed
telephony accesses totalled 15,906,161 at the end of June 2007, indicating a
year-on-year decline of 0.7%, the lowest drop seen in recent years.
• Estimated fixed telephony market share for Telefonica Espana stood at
81%, with a lower rate of market share decline in the twelve months to June 2007
than in the previous 12 month period.
Traditional voice services revenues saw the rate of decline ease in the six
months to June 2007 (-3.4%) thanks to an improvement in the second quarter
(-2.3%) from the first (-4.5%). Outgoing traffic revenues, with a year-on-year
decline of 5.0% in the first half of 2007, and interconnection revenues, which
remained stable during first six month of 2007, also improved their performance
during the second quarter as first quarter declines eased.
• The second quarter of 2007 saw traffic minutes in Spain gather
momentum, with estimated growth of 0.7% in the first half of 2007 vs. first half
2006. As regards traffic carried over the Telefonica Espana Wireline Business'
network, the smaller decline in voice traffic is to be highlighted, and above
all, the 15.0% increase in international traffic and the 9.4% increase in
domestic long distance (interprovincial) traffic. DLD traffic usage is being
highly stimulated by the flat rates associated with the Duo and Trio bundles.
• The total number of pre-selected lines at the end of June stood at
1,851,470, representing a reduction of 55,049 lines over the first six months of
the year.
• Telefonica Espana's estimated market share of wireline traffic at
June was 65%, the same as at the end of March 2007.
• Interconnection revenues, that showed a decline of 1.9% in the first
quarter 2007, posted a 1.9% growth in the second quarter, to remain unchanged in
January-June 2007 period. This upturn was fuelled by the increase of two types
of incoming traffic, mobile to fixed traffic and international traffic,
especially to mobiles.
Cumulative growth to end June of Internet and Broadband service revenues was
18.5% after a 15.1% year-on-year increase in the second quarter of 2007.
• Revenues trend of Internet and Broadband services is due to both,
retail and wholesale business. Retail services posted a 25.1% revenue growth in
the second quarter 2007 compared to the 33.9% growth in the first quarter, on
the back of greater promotions carried out over the last quarter, including free
subscription fee campaigns. Wholesale services, with revenues declining 14.9% in
the second quarter (-5.5% in the first quarter) is affected by the migrations of
wholesale ADSL accesses to unbundled loops. Meanwhile, Narrowband revenues have
continued to fall at a similar rate over the course of the year, at around 32%
year-on-year.
• The estimated market for Fixed Broadband Internet Access in Spain
reached 7.5 million accesses by the close of June, with net adds of 0.34 million
in the second quarter (about same number of net adds in second quarter 2006).
• Telefonica's retail Internet Broadband net additions in April-June
2007 came to 205,617 accesses (+15.9% year-on-year), taking total accesses to
4,198,363 by the end of June. Telefonica maintained its leading position in the
broadband market, with its estimated share holding steady over the last few
months at around 56%.
• Growth in unbundled loops lost steam in the second quarter, with net
adds of 98,791 loops (-25% year-on-year), 89% of which related to migrations
from Telefonica Espana's wholesale ADSL service. The total number of unbundled
loops at June end was 1,170,008 units, giving a broadband market share of 15.6%.
Of all unbundled loops, 56.8% are shared access loops; this percentage has
remained fair stable in recent quarters.
• The wholesale ADSL service has continued to shrink due to migration to
unbundled loops. Second quarter saw a net loss of 31,283 accesses, leaving a
total of 530,457 at the end of June.
• The Spanish pay TV market has grown gradually over the course of the
year. Telefonica has enjoyed the fastest growth, thereby gradually increasing
its market share to estimated levels of slightly under 12% at the end of June
2007. Net additions in the year's second quarter were 32,307 customers.
Telefonica Espana ended June with 450,925 pay TV customers.
• The total number of Duo and Trio bundles stood at 3,336,380 units, an
increase of 21% from the end of 2006.
The growth of data service revenues accelerated in the second quarter, taking
cumulative growth in the first half of the year to 6.6% (vs. first half 2006).
Growth was higher in both retail services (leased lines, broadcast and VPNs) and
wholesale services.
Operating expenses for Telefonica Espana Wireline Business fell 5.9%
year-on-year in the January-June 2007 period to 3,464 million euros, helped by
an 8.4% year-on-year drop in the second quarter of the year. The decline was
mainly due to a lower workforce restructuring provision, of 94 million euros in
the six months to June 2007 linked to 350 employees joining the Redundancy Plan
(E.R.E.), compared to 392 million euros in first half 2006. Excluding this
effect, operating expenses would have risen by 2.4% on the back of increases in
supplies (+1.7% to 1,474 million euros), mainly due to equipment purchases for
resale and content for Imagenio, and external services (+10.1% to 691 million
euros), due to both increased commercial activity and a rise in traffic carried
in telephone booths and public call centres. Personnel costs amounted to 1,163
million euros, a 20.7% year-on-year fall from January-June 2006, or 0.5%
excluding in 2006 and 2007 E.R.E. provisions and the actuarial review.
Telefonica Espana Wireline Business (Telefonica de Espana) has provisioned in
January-June 2007 accounts 151.875 million euros corresponding to the imposed
fine by the European Union. The fine is a result of the decision by the European
Union dated July 4th 2007, related to the case COMP/38.784 Wanadoo Espana
against Telefonica. The Company has decided to fully provision the fine, without
deserting the right to fully disagree with the aforementioned decision and with
the imposed fine, that is to be opposed by Telefonica in the corresponding
European Union Court of Justice on a timely and legal basis.
Growth in revenues, coupled with the effects of lower workforce restructuring
provisions in the January-June 2007 period and the fine imposed by the European
Union, has had a considerable impact on operating income before depreciation and
amortisation (OIBDA), which amounted to 2,626 million euros for the first half
of 2007, an increase of 13.1% year-on-year.
Excluding specific effects, such as the Redundancy Plan, the fine imposed by the
EU, the Real Estate Program and subsidies, the underlying OIBDA growth, for the
six month period ending June 2007, would have accelerated to 5.6% year-on-year
(4.7% in the first quarter of the year), fuelled by a 3.8% increase in revenues
and increased efficiency, as borne out by the fact that revenues outstripped
costs (+2.3% year-on-year), once excluded the EU fine and E.R.E.
The OIBDA margin in the first half of 2007 was 42.7%, 3.5 percentage points
higher than in the same period last year. Excluding the effects of the
Redundancy Plan provisions and the actuarial review in both years, as well as
the fine imposed by the EU, the margin would have improved by 0.9 percentage
points to 46.7%.
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Espana
WIRELESS BUSINESS
In a highly competitive environment, the Spanish wireless market managed to
surpass the 49 million-line mark by the end of June 2007, with an estimated
penetration rate of close to 108% (+7 percentage points vs. June 2006).
In this context, Telefonica Espana's wireless business posted net adds in the
second quarter of 2007 of 289,006 customers (378,270 in the second quarter of
2006), pushed by the new pricing plan and churn containment. The contract
segment extended its good run of recent quarters, registering 389,887 net adds
(a year-on-year increase of 11.7%). In the first semester of 2007, Telefonica
Espana's wireless business achieved 656,721 net adds (vs. 765,094 in the first
semester of 2006), led by the contract segment (776,860, up 12.5% against the
first semester of 2006).
Commercial activity in the second quarter of 2007 was similar to that of the
same period last year, with 2.9 million commercial actions driving the total
customer base to over 22.1 million (+7.0% vs. June 2006). Here again, we would
highlight the performance of the contract segment, which posted year-on-year
growth of 13.4% and now represents more than 58% of the total customer base, a
3.3 percentage points increase on the year ago figure.
In portability, 9,375 lines were lost in the second quarter of 2007. However,
Telefonica Espana's wireless business continued to perform well in terms of
high value customers - it achieved 64,498 net contract adds, in line with the
second quarter of 2006- which is where the company focuses its efforts. Thus,
for the first half of the year, the net portability balance showed a loss of
5,761 lines, with net adds in the contract segment of 142,565 lines.
Churn was also key in the healthy commercial results achieved by the company.
During the second quarter of 2007, churn remained virtually unchanged at 1.7%
(+0.1 percentage points vs. the second quarter of 2006) and slightly below the
first quarter of 2007 (1.8%) despite the higher number of competitors operating
in the market. Noteworthy was the good performance of contract churn in the
quarter, which stood at 1.0%, the same as in the second quarter of 2006 and
slightly lower (-0.1 percentage points) than in the first quarter of 2007
(1.1%). Residential segment handset upgrades (+8.1% vs. the second quarter of
2006) contributed to this good churn performance.
As regards of usage, the number of minutes carried by the company network rose
6.2% year-on-year in the second quarter of 2007 to 15,300 million minutes. MoU
amounted to 159 minutes (+1.8% vs. the second quarter of 2006). On-net traffic
grew by 9.4% in the second quarter, spurred on by the 'Weekends Free until
Autumn' promotion of the Summer campaign -by the end of June, over 869,000
customers had signed in- and by the new rate plans launched over the quarter.
These new price plans have allowed Telefonica Espana's wireless business to
lead the commercial initiative by tailoring itself to market reality and to the
basic needs of customers. To June 30th, nearly 1.5 million customers had signed
in for the new rates.
Voice ARPU reached 28.1 euros in the second quarter, 2.0% lower than in the
second quarter of 2006, impacted by the interconnection rate cuts of November
2006 and April 2007 (-13.9% in all). Worth mentioning is the performance of
outgoing voice ARPU, which rose 0.2% year-on-year in the second quarter.
Meanwhile, data ARPU reached 4.6 euros, with growth accelerating in the second
quarter of 2007 to 8.7% year-on-year from 5.8% year-on-year in the first quarter
of 2007. Behind this were sharp jumps in connectivity revenues (+79%) and
content data revenues (+25%), as well as the new data rate options launched in
April this year and the launch of an innovative daily data rate plan. The
company ended June with more than 160,000 subscribers to its semi-flat rate data
bundle, which helped drive data ARPU. Interpersonal communications represented
just 53% of data ARPU, with the remainder relating to advanced connectivity and
content services. The second quarter also featured further increases in the
overall number of UMTS/HSDPA handsets in customer hands to 2,075,000 as
commercial activity was adapted to market reality.
Underpinned by the excellent contribution of the data business, total ARPU in
the second quarter of 2007 was 32.8 euros. This was, however, 0.5% lower than in
the second quarter of 2006 due to the cuts in interconnection rates. Total
outgoing ARPU advanced 1.3% year-on-year, boosted by increases in both outgoing
voice (+0.2%) and data ARPU (+8.6%).
• Revenues rose 7.1% in the year's second quarter to 2,415 million
euros and 7.5% in the first half to 4,751 million euros. It is worth noting that
since the 1st of January 2007 there has been a change in the way of accounting
pre-pay sales and top-up commissions which change from being registered as minor
revenues to being added to costs and the registering of revenues/costs of
portability transit routing which are now registered for the net amounts. The
net effect of this change is neutral at OIBDA level, though the operating
revenues would have grown 6.9% in the second quarter and 7.3% in the first
semester of 2007 excluding the impact of the mentioned changes. Highlights by
revenue items include:
• Service revenues grew 5.5% year-on-year in the second quarter of
2007, to 2,121 million euros, and were up 6.2% in the first semester of
2007. This good performance was driven by higher customer revenues. These
rose 9.3% year-on-year in the second quarter of 2007 to 1,706 million euros
and 9.6% in the first semester of 2007 on the back of the strong
year-on-year increase in the total customer base, particularly in the
contract segment, and by increased data usage.
• Interconnection revenues fell 8.1% year-on-year in the second
quarter of 2007 (-5.7% in the first semester of 2007), signalling a higher
decline than in the first quarter of 2007 due to the additional reduction in
interconnection rates made in April 2007.
• Roaming revenues fell 11.9% due to lower wholesale prices (-15.6%
in the first semester of 2007).
• Handset sales revenues hit the 294 million-euro mark in the second
quarter 2007, a 20.2% increase from the second quarter of 2006 due to the
different rates of distribution channel uptake. In the first semester of
2007, handset sale revenues climbed 17.1% year-on-year.
• Operating costs rose 8.0% year-on-year in the second quarter to 1,348
million euros, driven by increased commercial activity involving handsets
(+4.7%), as well as by increased customer loyalty efforts in the quarter and
higher network management costs. Cumulative growth in costs for the first six
months of the year was 7.9%.
• Driven by higher revenues, operating income before depreciation and
amortisation OIBDA in the second quarter of 2007 amounted to 1,087 million
euros, an increase of 6.1% from the same period last year. This left the OIBDA
margin virtually flat, at 45.0%. For the first semester of 2007, OIBDA rose
7.0%, leaving the margin at 44.5% (vs. 44.7% in the first semester of 2006).
TELEFONICA ESPANA
ACCESSES
Unaudited figures
(thousands)
2006 2007
June September December March June % Chg
y-o-y
---------------------------------------------------------------------------------
Final Clients 41,476.8 41,951.0 42,620.8 43,115.8 43,508.2 4.9
Accesses
Fixed telephony 16,019.7 15,978.1 15,949.9 15,920.3 15,906.2 (0.7)
accesses (1)
Internet and 4,534.6 4,648.8 4,842.0 4,963.2 5,048.4 11.3
data accesses
Narrowband 1,254.0 1,177.7 1,040.5 916.0 798.1 (36.4)
Broadband 3,220.1 3,411.3 3,742.7 3,992.7 4,198.4 30.4
(2)
Other (3) 60.4 59.8 58.8 54.4 52.0 (14.0)
Cellular 20,655.0 21,019.7 21,446.0 21,813.7 22,102.7 7.0
accesses
Prepaid 9,261.2 9,290.7 9,303.0 9,283.8 9,182.9 (0.8)
Contract 11,393.8 11,729.0 12,142.9 12,529.9 12,919.8 13.4
Pay TV 267.5 304.4 383.0 418.6 450.9 68.6
---------------------------------------------------------------------------------
Wholesale Accesses 1,369.3 1,406.5 1,531.8 1,640.8 1,707.8 24.7
Unbundled loops 678.3 774.8 939.0 1,071.2 1,170.0 72.5
Shared UL 386.0 438.5 527.7 605.2 664.5 72.1
Full UL 292.3 336.3 411.3 466.0 505.5 73.0
Wholesale ADSL 684.4 625.2 586.4 561.7 530.5 (22.5)
Other (4) 6.6 6.5 6.4 7.8 7.4 12.4
Total Accesses 42,846.0 43,357.5 44,152.6 44,756.6 45,216.0 5.5
---------------------------------------------------------------------------------
(1) PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary
access; 2/6 Access x30. Company's accesses for internal use included.
(2) ADSL, satelite, optical fibre, cable modem and broadband circuits.
(3) Leased lines.
(4) Wholesale circuits.
Note: Does not include iberbanda's accesses
TELEFONICA ESPANA
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
January - June April - June
2007 2006 % Chg 2007 2006 % Chg
------------------------------------------------------------------------------------------------
Revenues 10,191 9,665 5.4 5,157 4,893 5.4
Internal exp capitalized in fixed 112 100 11.3 60 48 26.4
assets (1)
Operating expenses (5,451) (5,503) (0.9) (2,799) (2,875) (2.6)
Other net operating income (expense) (117) 13 n.m (132) 10 n.m.
Gain (loss) on sale of fixed assets (1) 11 (105.3) 0 3 (87.3)
Impairment of goodwill and other (11) (7) n.m. (3) (4) n.m.
assets
Operating income before D&A (OIBDA) 4,723 4,278 10.4 2,284 2,074 10.1
Depreciation and amortization (1,207) (1,291) (6.5) (596) (632) (5.7)
Operating income (OI) 3,516 2,987 17.7 1,687 1,442 17.0
------------------------------------------------------------------------------------------------
Note: 'Bad debt provisions' have been reclassified from 'Other net operating income (expense)'
to 'Operating expenses'.
(1) Including work in process.
TELEFONICA ESPANA: WIRELINE BUSINESS
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
January - June April - June
2007 2006 % Chg 2007 2006 % Chg
---------------------------------------------------------------------------------------------------
Revenues 6,144 5,921 3.8 3,095 2,977 4.0
OIBDA 2,626 2,322 13.1 1,207 1,059 13.9
OIBDA margin 42.7% 39.2% 3.5 p.p. 39.0% 35.6% 3.4 p.p.
CapEx 724 676 7.2 433 361 19.7
---------------------------------------------------------------------------------------------------
TELEFONICA ESPANA: WIRELINE BUSINESS
SELECTED REVENUES DATA
Unaudited figures (Euros in millions)
January - June April - June
2007 2006 % Chg 2007 2006 % Chg
---------------------------------------------------------------------------------------------------
Traditional Access (1) 1,390 1,382 0.5 693 687 0.9
Traditional Voice Services 2,388 2,472 (3.4) 1,195 1,223 (2.3)
Domestic Traffic (2) 1,466 1,543 (5.0) 730 760 (4.0)
Interconnection (3) 462 462 0.0 235 231 1.9
Handsets sales and others (4) 460 467 (1.5) 230 232 (0.7)
Internet Broadband Services 1,373 1,159 18.5 698 607 15.1
Narrowband 54 80 (32.2) 25 37 (31.7)
Broadband 1,319 1,078 22.3 673 570 18.1
Retail (5) 1,150 890 29.2 588 470 25.1
Wholesale (6) 169 188 (10.5) 85 100 (14.9)
Data Services 568 533 6.6 287 266 7.7
IT Services 202 166 21.9 108 88 22.9
---------------------------------------------------------------------------------------------------
Note: Telefonica de Espana parent company's operating revenueS includes Terra Espana's revenues as
of the first quarter 2006.
(1) Monthly and connection fees (PSTN, Public Use Telephony, ISDN and Corporate Services) and
Telephone booths surcharges.
(2) Local and domestic long distance (provincial and interprovincial) traffic, Intelligent Network
Services, Special Valued Services, Information Services (118xy), bonusses and others.
(3) Includes revenues from fixed to fixed incoming traffic, fixed to mobile incoming traffic, and
transit and carrier traffic.
(4) Managed Voice Services and other businesses revenues.
(5) Retail ADSL services and other Internet Services.
(6) Includes Megabase, Megavia, GigADSL, and local loop unbundling.
TELEFONICA ESPANA: WIRELESS BUSINESS
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
January - June April - June
2007 2006 % Chg 2007 2006 % Chg
--------------------------------------------------------------------------------------------------
Revenues 4,751 4,420 7.5 2,415 2,255 7.1
OIBDA 2,114 1,976 7.0 1,087 1,024 6.1
OIBDA margin 44.5% 44.7% (0.2 45.0% 45.4% (0.4
p.p.) p.p.)
CapEx 306 241 26.8 171 134 27.9
--------------------------------------------------------------------------------------------------
TELEFONICA ESPANA: WIRELESS BUSINESS
SELECTED REVENUES DATA
Unaudited figures (Euros in millions)
January - June April - June
2007 2006 % Chg 2007 2006 % Chg
--------------------------------------------------------------------------------------------------
Service Revenues 4,153 3,910 6.2 2,121 2,011 5.5
Customer Revenues 3,343 3,049 9.6 1,706 1,561 9.3
Interconnection 694 736 (5.7) 348 379 (8.1)
Roaming - In 93 111 (15.6) 55 63 (11.9)
Other 23 14 61.1 12 8 44.3
Handset 598 510 17.1 294 244 20.2
--------------------------------------------------------------------------------------------------
TELEFONICA ESPANA: WIRELESS BUSINESS
SELECTED FINANCIAL DATA
Unaudited figures
2006 2007
June September December March June % Chg
y-o-y
----------------------------------------------------------------------------------------------------
Cellular customer (thousands) 20,655.0 21,019.7 21,446.0 21,813.7 22,102.7 7.0
Prepaid 9,261.2 9,290.7 9,303.0 9,283.8 9,182.9 (0.8)
Contract 11,393.8 11,729.0 12,142.9 12,529.9 12,919.8 13.4
----------------------------------------------------------------------------------------------------
2Q 3Q 4Q 1Q 2Q % Chg
----------------------------------------------------------------------------------------------------
MOU (minutes) 156 158 157 160 159 1.8
Prepaid 64 71 66 74 67 4.1
Contract 231 228 228 224 225 (2.6)
----------------------------------------------------------------------------------------------------
ARPU (EUR) 33.0 33.9 33.0 31.7 32.8 (0.5)
Prepaid 16.4 17.6 15.9 14.9 15.7 (4.0)
Contract 46.6 46.9 45.7 44.3 45.1 (3.1)
----------------------------------------------------------------------------------------------------
Data ARPU 4.2 4.6 5.0 4.6 4.6 8.7
%non-P2PSMS over data revenues 42.5% 43.9% 45.3% 48.1% 49.5% 7.0 p.p.
----------------------------------------------------------------------------------------------------
Note: MOU and ARPU calculated as monthly quarterly average.
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Latinoamerica
In accordance with the Group's new structure, Telefonica Latinoamerica's
results include Telefonica Group's fixed line and wireless operators' results
in the Latin American region. Furthermore, figures for the Telefonica
Latinoamerica Group also include the results of Telefonica Telecom, from the 1st
of May 2006.
On a yearly basis, the currencies of all the countries in which Telefonica
Latinoamerica operates have suffered a depreciation in relation to the euro,
despite them performing better during the second quarter of 2007 than in the
first quarter of 2007. Notwithstanding, this has translated into a negative
impact of 5.0 percentage points and 4.9 percentage points in revenue and OIBDA
growth respectively in the first semester of 2007, a less negative impact than
the one registered at March 2007 (8.1 percentage points both in revenues and
OIBDA).
Telefonica Latinoamerica reached revenues of 9,628 million euros during the
first semester of 2007, 10.6% up on the same semester of 2006 in current euros.
In constant euros, revenue growth has increased 15.5%, of which Telefonica
Telecom contributed 2.7 percentage points. Of the countries contributing most
towards growth in constant currency, with the exception of Colombia due to
change in the perimeter of consolidation, Mexico is particularly noteworthy with
3.1 percentage points, followed by Venezuela (+3.0 percentage points) and
Argentina (+2.2 percentage points). On the other hand, in absolute terms, Brazil
continues to be Telefonica Latinoamerica's greatest contributor with 38.3%,
followed by Venezuela (11.7%) and Argentina (11.6%).
Operating income before depreciation and amortization (OIBDA) stands at 3,391
million euros, recording a growth of 12.9% in current euros. Telefonica
Latinoamerica's OIBDA growth rose to 17.8% in constant euros, with a
contribution of 2.1 percentage points from Telefonica Telecom. With regards to
other countries (excluding Colombia due to change in the perimeter of
consolidation), the main contributor to OIBDA growth was Venezuela with 5.5
percentage points, followed by Mexico (+3.3 percentage points), Vivo (+2.5
percentage points) and Argentina (+2.1 percentage points). Brazil is Telefonica
Latinoamerica's greatest OIBDA contributor with 44.0%, followed by Venezuela
(13.8%), Argentina (11.6%) and Chile (9.7%). The OIBDA in the first semester of
2007 is impacted by a 45 million euros loss due to the divestment of the 6.9%
stake in CANTV.
CapEx for the Telefonica Latinoamerica Group stood at 1,131 million euros by the
end of June, a year-on-year growth of 32.5% (38.9% in constant euros), allocated
mainly for the expansion of broadband, television and the development of GSM
networks. By the end of June, Telefonica Latinoamerica had reached an operating
cash flow (OIBDA-CapEx) of 2,260 million euros, a growth of 5.2% in current
euros (9.4% in constant euros).
At the close of the first semester of 2007, the Telefonica Latinoamerica Group
managed 121.8 million accesses, 13.9% up on June 2006, thanks to the increase in
cellular clients, a year-on-year growth of 18.9%, exceeding 90.6 million, due
mainly to the high growth rates registered in practically all countries,
particularly Peru (+57.2% year-on-year), Mexico (+49.0% year-on-year) and
Argentina (+30.8% year-on-year). Also contributing positively to the total
growth in Latin American accesses, was the incorporation of Telefonica Telecom,
which contributed 2.3 million fixed telephony accesses and 125,000 retail
broadband Internet connections. Fixed telephony accesses reached 23.9 million,
in line with those managed at the end of June 2006, driven by the previously
highlighted incorporation of Telefonica Telecom, and by the growth of fixed
telephony accesses in Peru (+7.1% year-on-year). The Group's retail Internet
broadband accesses continued their strong growth trend reaching 4.4 million
accesses, a growth of 36.8% year-on-year, thanks to commercial efforts carried
out by all operators. With regards to pay TV, Telefonica Latinoamerica manages
800,000 clients (+55.2% year-on-year) with operations in Peru, Chile and
Colombia.
FINANCIAL TARGETS1
Telefonica Latinoamerica upgrades its financial targets for 2007 expecting:
• Growth in revenues to be in the +13%/+16% range, compared to the +11%/
+14% range announced initially.
• Growth in OIBDA to be in the +14%/+17% range, compared with the
initial range of +12%/+16%.
--------------------------------------------------------------------------------
1 T. Latam base reported figures include eight months of Telefonica Telecom
(consolidated since May 2006). 2007 guidance assumes constant exchanges rates as
of 2006. All figures exclude changes in consolidation. In terms of guidance
calculation, OIBDA excludes other exceptional revenues/expenses not foreseeable
in 2007. Personnel Restructuring and Real Estate Programs are included as
operating revenues/expenses. For comparison the equivalent other exceptional
revenues/expenses registered in 2006 are also deducted from reported figures.
--------------------------------------------------------------------------------
BRAZIL
In the first half of 2007, Telefonica Latinoamerica registered revenues of 3,690
million euros in Brazil, with year-on-year growth of 3.6% in local currency.
OIBDA was 1,493 million euros, up 1.2% year-on-year in local currency as a
result of the significant improvement in Vivo's results. CapEx in the first six
months of the year rose to 405 million euros, a rise of 23.0% year-on-year in
local currency as a result of greater investments carried out by Telesp.
From an operating standpoint, Telefonica Latinoamerica managed 45.4 million
accesses in Brazil at 30 June 2007, 2.8% higher than in the same period of last
year as a consequence of year-on-year 6.0% growth in Vivo's mobile accesses,
partially offset by a sight decline in Telesp's fixed line accesses, together
with changes to the accounting criteria applied for narrowband internet access
made in the second quarter of 2007.
TELESP
At the end of June, Telesp managed 15.1 million accesses, 3.0% less than in June
2006, due both to the reduction in the number of fixed line accesses caused by
the strong growth in the cellular business in the country and the implementation
of a more restrictive accounting criteria (based on activity) for narrowband
internet accesses. The company ended the second quarter with 12.0 million fixed
line accesses (-2.5% yoy), of which approximately 20.6% were pre-pay or lines
with consumption limits.
In the second quarter of 2007, the broadband market continued with strong growth
(over 41% yoy), having captured Telesp more than 55% of this increase and thus
reaching 1.8 million retail broadband accesses (+31.1% year-on-year), with net
adds of 122,000 accesses in the second quarter of the year, 47.9% higher than
the figure seen in the previous quarter. The launch of bundled broadband
internet/digital TV offers contributed to increase the company's broadband
customer base by 37,400 customers in the first half of the year. After obtaining
its DTH license, Telefonica expects to launch its own service in the next few
months.
Telesp's total voice traffic to June (34,320 million minutes) reflected a
year-on-year decline of 2.8%, mainly due to the drop in local traffic (-4.3%
year-on-year), affected by the decline in the number of lines in service and the
lower usage per line, caused by the market contraction triggered by the cellular
telephony expansion. To offset this, the operator is still focusing on the sale
of traffic bundles; having 2.7 million bundled lines (monthly fee+local traffic)
at the end of the first half of the year (23.3% of fixed line accesses), and 1.3
million traffic packages sold (Long Distance, Fixed-Mobile and narrowband
Internet access). Also noteworthy is the slowdown in long-distance traffic
(-5.2% year-on-year), mainly inter-state traffic (-10.4% year-on-year), as a
result of the overall market contraction, although this was partly offset by the
increase in market share.
From a regulatory standpoint, it is worth highlighting that in the middle of
March, Telesp was granted a license by Anatel to operate satellite television
services (DTH). Also the migration from invoicing by pulses to minutes, which
commenced in mid March, should be completed by the end of July. Anatel has
banned all sales and advertising of bundles to the residential segment until the
migration process is completed. Lastly, on 13th July, Anatel published its
tariff adjustments for 2007. These involve a 2.21% increase in local rates
(effective from 1st October) and Domestic Long Distance, and a rise of 3.29% for
fixed to cellular calls (VCs). On the same date, Anatel approved at 2.25%
increase in the fixed to cellular interconnection rate (VUM). All these
adjustments will come into force on 20th July, except for those related with
local rates.
Telesp reported revenues of 2,758 million euros in the first half of 2007, down
0.3% year-on-year in local currency. This slight drop was due to the fall in
traditional business revenues (-1.4% in local currency), following the tariff
adjustment made in July 2006, the loss of basic telephony billable plant and the
20% reduction in local interconnection tariffs since January. On the other hand,
the increase in broadband revenues (+14.5% in local currency) contributed
positively, driven by accesses' growth, which triggered a 10.2% year-on-year
rise in Internet revenues (broadband and narrowband), raising the weight of this
business in total company revenues from 8.3% in the first half of 2006 to 9.2%
in the first half of 2007.
Operating expenses showed year-on-year growth of 5.9% in local currency, mainly
due to the higher cost of external services (+6.8% in local currency), on an
increased commercial activity. In addition, the company, which has implemented a
process of migrating billing systems, has seen an increase in the provisions for
bad debts (+69% in local currency vs. the first half of 2006). The ratio of
provisions of bad debts of over revenues is 4.1% as of June. The company has
already implemented a set of actions aimed to contain this ratio in the next few
months, ranging from setting up strict entry filters to more actions to recover
debts. Personnel expenses (+0.8% in local currency) reflect the results of the
staff restructuring programmes carried out in March 2006 and February 2007, and
also the impact of the additional headcount reduction made in June this year
which affected nearly 500 employees. Supply costs increased year-on-year by 2.6%
in local currency despite the 20% reduction in the local interconnection tariff,
due mainly to the rise in SMP traffic.
Telesp reported operating income before depreciation and amortization OIBDA of
1,224 million euros in the first half of 2007, down 4.3% year-on-year in local
currency due to higher bad debt provision, the loss of traditional revenues and
higher staff restructuring costs. The OIBDA margin was 44.4%, 1.8 p.p. lower
than in the first half of 2006.
Cumulative CapEx in June 2007 was 300 million euros, 39.0% higher than the
figure reported in the first half in local currency, mainly due to the increased
investment in broadband, pay TV and higher cable theft (already reported in the
previous quarter). Therefore, operating cash flow (OIBDA-CapEx) was 925 million
euros (-13.9% year-on-year in local currency).
VIVO
Vivo's second quarter 2007 results shows the management measures implemented to
achieve profitable growth and increase customer satisfaction, reflected in the
significant growth of the customer base, thereby ending a prolonged period of
market share loss, although this has not diluted ARPU.
Also noteworthy was the market's positive reaction to Vivo's GSM network,
which offers coverage to more than 96% of the towns where the company operates.
Vivo obtained 65% of total subscriptions in the quarter, putting its GSM
customer base at the end of June at 3.4 million, 11% of its total customer base.
Vivo is still the only operator to provide solutions using two technologies,
offering CDMA/EVDO technology as the best data solution on the market. It has
been leveraging this technology to steadily grow its WAP offer and Vivo ZAP
solutions (EV-DO PMCIA cards and USB), and to launch innovative services using
Vivo PLAY (downloads and video streaming).
Vivo ended June with a total of 30.2 million customers (+6.0% vs. June 2006) in
a market with an estimated penetration rate of 58.3% (+7 percentage points
year-on-year). This puts an end to the slowdown in market growth seen in earlier
periods and is evidence of the strong commercial activity seen this quarter.
Vivo's commercial strategy centred on its Mother's Day and Valentine's Day
campaigns, which attracted most of the new adds. Subscriptions were 3.3 million
in the second quarter 2007, the highest number seen in last years (+30% vs.
second quarter 2006). This good performance was underpinned by the wider variety
of handsets on offer, pre-pay traffic promotions and improved contract
acquisition capabilities through the launch of the new 'Vivo Escolha' plans.
By the end of the quarter, 32.6% of the company's contract customers had
subscribed to a Vivo Escolha plan, significantly enhancing the market's
perception of Vivo's commercial offer. Contract adds rose 63.9% year-on-year in
second quarter 2007.
Other factors contributing to the improvement in Vivo's earnings were the
rollout of a new simplified billing format for contract customers and the
development of a sound distribution network, with more than 338,000 top-up
points.
Revenues through June totaled 1,102 million euros (+14.5% year-on-year in local
currency). Service revenues grew 19.0% year-on-year in local currency, largely
driven by higher interconnection revenues after the removal of the Bill & Keep
rule. Excluding this effect, the increase would have been 3.5%.
The pace of growth of service revenues accelerated in the second quarter from
the first quarter due mainly to the positive impact on results of the Escolha
plans in the contract segment. These plans played a key role in the increase in
outgoing contract ARPU (+9.4% in second quarter 2007 vs. first quarter 2007) and
also provide the company with an acquisition and retention tool for its most
valued customers.
The pre-pay segment also continued to perform well in the second quarter 2007,
with outgoing ARPU up 16.7% as a result of the successful traffic incentive
campaigns, which led to a 94% year-on-year increase in outgoing pre-pay MOU in
the second quarter 2007.
Total MoU grew 16.8% year-on-year in the second quarter, driving a 27.8%
year-on-year increase in total ARPU in the quarter.
Operating income before depreciation and amortization (OIBDA) was 268 million
euros in the first half 2007, 38.3% higher than in the first half 2006 in local
currency. Contributing to this increase was control over operating expenses in
the second quarter via improvements in customer management costs, especially the
74% year-on-year reduction in bad debts. This evidences the strict control
exercised over new customers acquired in the end-of-year campaigns. Churn in the
second quarter 2007 was 2.3%, down from 2.6% in the first quarter. The OIBDA
margin in the January-June period was 24.4%, up 4.2 p.p. on the same period last
year, although in the second quarter was 20.8% compared with 28.3% obtained in
the first quarter, as a result of the higher commercial costs relating to the
Mother's Day and Valentine's Day campaigns. Without taking into account the
impact of the Bill & Keep rule, OIBDA growth in the first half would have been
36.2% in local currency, and the margin would have stood at 27.2%.
ARGENTINA
Telefonica continued to enjoy a good competitive position in the Argentinean
market. It is the broadband market leader in its operating area, with 659,000
accesses, and the leader in the wireless market, with over 12.4 million
customers. The company managed total accesses of 18.1 million in Argentina at
the end of June 2007, an increase of 20.5% vs. June 2006. This healthy position
fed through to the company's financial results in Argentina, with an 18.8%
year-on-year increase in the first half of 2007 revenues to 1,113 million euros.
Operating income before depreciation and amortization (OIBDA) rose in the first
semester of 2007 by 17.6% vs. the same period last year, to 394 million euros.
CapEx through June 2007 totalled 123 million euros.
TELEFONICA DE ARGENTINA
Telefonica de Argentina (TASA) managed 5.7 million accesses at the end of June
2007, 2.8% more than the year earlier. This increase was fuelled by a 61.2%
year-on-year rise in retail internet broadband accesses, to 659,000, and, to a
lesser extent, a slight (+1.0%) increase in fixed line accesses, to 4.6 million
at June 2007.
The traditional business continued to show a positive trend, with traffic growth
outstripping the market average, driving a 10.0% year-on-year increase in the
first half of 2007 revenues. Total voice traffic was slightly higher than in the
first semester of 2006, thanks to the growth in mobile to fixed interconnection
traffic (+27.8% vs. the first half of 2006), intelligent network traffic (+61.4%
year-on-year) and, to a lesser extent, long distance traffic (+2.3%
year-on-year). This offset the drop in fixed to fixed traffic (-3.6% vs. the
first semester of 2006), both local and interconnection, and also public
telephony traffic (-17.6% year-on-year against the first semester of 2006). Once
again, traffic data point to the growth in the cellular and broadband
businesses.
Revenues for the fixed line business in the first semester of 2007 totalled 496
million euros, an increase of 13.7% year-on-year in local currency. Sales growth
was impacted by the changes in the accounting criteria for international
termination costs, effective from September. These were accounted as operating
expenses and no longer netted from the line of revenues, as of the 1st of
January 2006. Stripping out this impact in 2006, revenues would have increased
by 10.7% in local currency.
Revenues from the traditional business were still the main driver of business
growth, rising 10.0% year-on-year in the first semester of 2007, or 6.4%
excluding the impact of the international termination costs. This was due to the
good performance of local minutes bundles, interconnection traffic (mainly from
wireless operators), the renting of transmission facilities and value added
services. The growth of bundle revenues was spurred on by the mid-2006 launch of
flat rate call tariff and by the re-definition of the bundles at the end of
2006. The second main driver of revenue growth in the first half of 2007 was the
internet and broadband business (+44.3% vs. the first semester of 2006).
Revenues for this business accounted for 13.8% of total revenues in the first
semester of 2007 (+2.9 percentage points). The solid performance of broadband
was fuelled by overall market growth and the success of the voice and broadband
minutes bundle offer (Duo), which was launched in the last quarter of 2006 and
already has a total of 145,000 users. Broadband revenues in the first half of
2007 rose 60.8% year-on-year, in line with the 61.2% increase in accesses
already mentioned. Thanks to point-to-point circuits, VPNs and satellite
services, the data and IT business continued to make heavy inroads, with
revenues rising by 10.5% in local currency vs. the first half of 2006.
Over the first six months of the year, operating expenses grew 21.3%
year-on-year in local currency (15.3% excluding the impact of international
termination costs). This was largely due to an increase in personnel expenses
(+33.5% year-on-year in local currency) caused by salary rises and workforce
restructuring expenses related to the plan which started in the second half of
2006. Supply costs in the first half of 2007 also grew due to increased
interconnection costs and higher purchases of equipment for resale and would
have surged by 15.5% year-on-year in local currency if we exclude the impact of
the international termination costs.
The ratio of bad debt provision to revenues remained below 1% thanks to good
recovery management and to the larger volume of pre-pay and consumption control
plant, which remained at around 30% of the total lines.
TASA posted an operating income before depreciation and amortization (OIBDA) in
the first half of 2007 of 218 million euros, a 2.1% year-on-year increase in
local currency.
CapEx amounted to 72 million euros, up 17.6% in local currency on the same
period last year mainly to develop broadband and new businesses. Operating cash
flow (OIBDA-CapEx) for the Argentinean wireline business reached to 146 million
euros,
TEM ARGENTINA
The pace of growth of the Argentinean wireless market accelerated in the second
quarter of the year, spurred on by the Fathers' Day campaign boosting the
penetration rate up to 88% (+25 percentage points higher than at the end of June
2006), becoming the highest rate in the region.
Net adds in the second quarter of 2007 rose 4.3% year-on-year to 596,074
customers, bringing the total net adds for the first six months of the year to
1,209,655 customers (+5.1% vs. the first semester of 2006). The healthy
performance of net adds was due to both practically flat levels of gross adds
compared to the same period of 2006 and to the excellent performance of churn,
which stood at 1.7% for the second quarter of 2007 (0.8 percentage points lower
than in the second quarter of 2006 and 0.2 percentage points lower than in the
first quarter of 2007). As a result, the company ended the quarter with over
12.4 million customers, representing a 30.8% increase in the customer base from
June 2006. GSM customers accounted for 82% of the total customer base at the end
of the period (an 18 percentage points year-on-year increase).
Revenues extended the trend of previous quarters, totalling 662 million euros in
the first semester of 2007, a 22.2% year-on-year increase in local currency.
Driving growth was a solid performance by service revenues, with a 23.6%
year-on-year increase in local currency.
Revenue growth, coupled with lower unit commercial costs and lower customer
management expenses, as well as the lower percentage of operating costs over
revenue, led to an increase in operating income before depreciation and
amortization (OIBDA) of 45.2% year-on-year in local currency in the first half
of 2007 to 176 million euros. This left the OIBDA margin in the first semester
of 2007 at 26.5%, 4.2 percentage points higher than the year earlier figure.
CapEx for the first half of 2007 amounted to 50 million euros, reaching an
operating cash flow (OIBDA-CapEx) of 125 million euros.
CHILE
During second quarter 2007, Telefonica Latinoamerica sustained growth in terms
of managed accesses in Chile, leading the fixed telephony, mobile and broadband
markets in number of accesses. Net adds in the quarter reached more then 200,000
accesses to end June 2007 with a total of 8.9 million. Growth remains busted by
mobile customer base, 5.9 million clients at June end (+7.5% vs. June 2006).
Wireline unit, Telefonica Chile, was able to stabilize the loss of fixed
telephony accesses (-6.6%) while at the same time achieving strong growth in
retail ADSL (+40.4%) and Satellite TV, which was launched on June 2006.
Cumulative revenues to June 2007 climbed to 864 millions euros, which in
constant euros represents 11.8% growth year-on-year. Mobile business (+22.7%)
together with Broadband and TV business (+75.1%), which kept posting strong
growth as in the first quarter 2007, more than offset declining revenues of the
traditional telephony business (-7.4%). Operating income before depreciation and
amortization (OIBDA) for the six months to June 2007 climbed to 329 million
euros with a year-on-year growth in local currency of 14.0%.
Telefonica Latinoamerica maintains its strong investment activities in Chile,
with cumulative CapEx reaching 193 million euros after growing by 55.6% in local
currency vs. January-June 2006. Highest growth businesses, namely mobile, ADSL
and Pay TV, remain the target of investment activities.
TELEFONICA CHILE
The total number of accesses managed by Telefonica Chile grew by 77,636 in the
year's second quarter and ended June at 3.0 million, up 4.3% year-on-year. The
fall in fixed lines narrowed in the second quarter to 2,994 accesses, compared
to 28,852 in the first quarter. This left a total number of fixed line accesses
at end June of 2.2 million, 6.6% fewer than a year earlier, reflecting the
extraordinary drop of pre-pay lines during the second half of last year. Despite
this slight fall, which led to a 1 percentage point drop in estimated market
share to 66%, Telefonica Chile remains the leader in Chilean fixed line market.
The strong performance of Broadband and pay TV accesses, in conjunction with the
commercial roll out of bundles (the DUO and TRIO, double and triple play
bundles), offset the decline in fixed telephony lines. Retail ADSL connections
at Telefonica Chile jumped 40.4% vs. June 2006 to reach 574,088 accesses. The
growth registered in second quarter 2007 enabled Telefonica Chile to raise its
market share by 1 percentage point to 50%. Meanwhile, Telefonica Chile remains
strategically focused on the digital satellite TV business (DTH), recording more
than 40,000 net adds in the three months to June 2007. This took the total
pay-TV customer base to 171,400 at the end of June, representing an estimated
15% share of the market. Just one year after its commercial launch, Telefonica
Chile is now the second largest player in the pay-TV market by customer base.
The company has announced the launch of new Broadband pay-TV services (IPTV)
with coverage in certain areas of the city of Santiago.
The undeniable fixed to mobile substitution effect is eroding Telefonica Chile's
voice service revenues. The company's strategic focus on Triple Play has
enabled Telefonica Chile to post significant revenue growth in the Broadband and
TV businesses, offsetting the fall in traditional service revenues. Revenues for
the first six months of the year totalled 474 million euros, a year-on-year
increase of 1.4% in local currency. Internet and Broadband revenues (including
narrowband, ADSL and pay-TV) jumped 75.1% in local currency, driven by growth of
Broadband accesses and the launch of digital TV services in June 2006. This
revenue growth offset the 7.4% fall in local currency of traditional revenues,
mainly due to the fixed to mobile substitution effect. Data and IT revenues grew
1.6% year-on-year, reversing the negative trend seen in the first quarter.
Operating expenses grew 3.2% in local currency over the January-June 2007
period, heavily influenced by the extraordinary charge taken in first quarter
2006 in connection with workforce restructuring programme. Supply costs grew
2.3%, due to expenses related to the television business, mainly satellite
capacity and content, which were partially offset by a fall in interconnection
expenses, on the back of lower traffic, and lower expenses associated with
equipment for resale. Stripping out restructuring charges, personnel expenses
rose 7.6% year-on-year, still affected by the enactment of new Chilean
Subcontracting Law. External service costs rose 20.2% in local currency on the
back of more intense commercial activity, advertising campaigns for the TV
bundles, Duo and Trio (double and triple play), customer service, sales
commissions and network maintenance. Bad debt provisions were 7.0% lower
year-on-year in local currency and amounted to 2.7% of revenues.
With costs outpacing revenues, operating income before depreciation and
amortization (OIBDA) for Telefonica Chile slipped 0.4% year-on-year in local
currency in the six months to June 2007, to 181 million euros.
CapEx in the six-month period totalled 82 million euros, an increase of 30.5% in
local currency from the same period last year driven mainly by sharp growth in
satellite TV services (DTH), the upcoming launch of IPTV, growth in the number
of ADSL customers and initiatives designed to enhance network quality. n through
June amounted to 99 million euros, down 16.7% on January-June 2006 as a result
of increased investment activity.
TEM CHILE
The Chilean mobile market, characterised by intense competition, ended the
second quarter with an estimated penetration rate of 86%, a jump of 10
percentage points over the last twelve months.
Telefonica Moviles Chile continues to lead the market, with a total customer
base at the end of June 2009 of 5.9 million, an increase of 7.5% on June 2006.
Net adds of 160,750 in second quarter 2007, 247,304 in the first half of the
year, are being driven by GSM gross adds. Users of this technology now represent
82% of the total customer base. Contract clients reached 1.4 million customers,
a year-on-year increase of 35.2%. The percentage of the contract customer base
rose to 23.1%, 4.7 percentage points higher than in June 2006. During
January-June 2007, 80% of net adds were contract client net adds.
Revenues in the first half of the year amounted to 430 million euros, up 22.7%
year-on-year in local currency terms. Service revenues grew by 19.7% in local
currency during the first half, driven by growth in the customer base and ARPU,
which rose 8.4% and 10.5% in local currency in first and second quarters 2007,
respectively against the previous year. These trends are being underpinned by
migration to GSM technology, plans upgrades and the sale of minute bundles and
value added services.
Operating income before depreciation and amortization (OIBDA) rose 37.9% in
local currency during the first half of 2007 to 149 million euros, reflecting
revenue growth and enhanced operating efficiency. Thank to this operating
efficiency, the OIBDA margin jumped 3.8 percentage points to 34.5%, despite
increased commercial activity aimed at encouraging customers to switch to GSM
technology and stiffer competition in the marketplace.
CapEx in the January-June 2007 period amounted to 111 million euros, leaving
operating cash flow (OIBDA-CapEx) of 37 million euros.
PERU
Revenues for the first six months of 2007 reached 743 million euros, equivalent
to a year-on-year growth of 11.2% million euros (in local currency). The growth
of broadband revenues (+26.7% compared to the first semester of 2006, in
constant terms) and TV (+22.1% versus the same period the previous year in local
currency) in the fixed business and the prepay outgoing traffic revenues
(+184.5% compared to the first half of 2006) in the mobile division, explain the
better evolution of revenues of Telefonica in Peru.
Operating income before depreciation and amortization (OIBDA) reached 279
million euros, representing a year-on-year growth of 0.4% in local currency when
compared to the same period the previous year as the higher commercial expenses
of both businesses offset the revenue growth. CapEx for the first half of the
year reached 93 million euros, recording a growth of 31.3% compared to June
2006. CapEx of the fixed line declined 1.3% while mobile CapEx shows a
significant growth of 83.8% due to the investment on network capacity needed to
confront the strong growth of traffic.
As common projects between the fixed and mobile business, it should be
highlighted the launch in mid March of the IRIS project (fixed wireless
telephony) which reached 48,051 at the end of June of 2007.
At the end of June 2007, Telefonica reached 10.2 million accesses in Peru,
equivalent to a growth of 36.8% year-on-year, due to the strong growth of the
mobile business (+57.2%), mainly in the prepay client base, and, in a lower
extent, to the fixed line (+12.2%).
TELEFONICA DEL PERU
Intense commercial activity has enabled Telefonica del Peru to continue to post
sharp growth in total accesses, of 12.2% to 3.8 million clients by the end of
June 2007. Total fixed line accesses have performed well, with a year-on-year
growth of 7.1% to 2.6 million at June 2007. This expansion was fuelled by
increases in both broadband accesses (+35.6% year-on-year to 527,804 users) and
TV accesses (+22.3% to 599,974 clients: 540,280 in cable TV and 59,694 in
satellite TV). Fixed wireless telephony was launched on 15 March 2007 with the
aim of extending fixed coverage (48,051 fixed wireless lines by the end of June
2007).
Voice traffic grew by 8.9% due to the healthy performance of basic telephony
service traffic, largely due to increased local fixed-fixed and fixed-mobile
traffic, but also to fixed-fixed, mobile-fixed and international interconnection
traffic. On the other hand, public telephony traffic slumped as a result of
stiff competition, illegal public call centres and increased cellular
penetration in Peru.
Revenues for the first half of the year amounted to 526 million euros (-0.4%
year-on-year in local currency). Revenues from the traditional business fell by
5.8% as a result of lower revenues from monthly fees (-20.4%), due to the new
tariffs agreed with the Peruvian government, and public telephony revenues
(-23.2%). These decreases were partially offset by higher traffic revenues from
both bundles and measured traffic. Internet and TV revenues grew 23.1%
year-on-year in local currency, driven by higher ADSL and TV revenues brought on
by growth in both customer bases. The contribution of internet and TV revenues
over total revenues continued to rise, to 23.6% in the first semester of 2007
versus 19.1% in the same period last year. Data revenues were broadly flat
compare to last year's figure, while IT revenues were dragged down (-20.1%
against the first semester of 2006) by the projects carried out over the first
half of 2006 with the ONPE (the Peruvian National Office of Electoral Processes)
as a result of the elections held in Peru.
Operating expenses grew 3.8% in local currency, largely due to increased
interconnection costs (mainly because of greater fixed-mobile and international
traffic). Personnel expenses rose by 2.8% in local currency, essentially due to
higher employee participation costs. There were also higher external services
costs (+1.8% compared to the same period the previous year) due to the intense
commercial activity carried out in all business lines, which pushed up customer
service costs and sales commissions and the security costs to prevent cable
theft. Meanwhile, debt recovery led to declines in tax expenses and bad debt and
inventory provisions (to 1.2% of revenues), mainly due to the recovery of bad
debt during the January-June period.
Operating Income before depreciation and amortization (OIBDA) came to 210
million euros, a year-on-year drop of 6.6% in local currency due to lower
revenues, increased expenses and higher provisions for contingencies (mainly
employment and tax related), which remained in line with the first half of 2006
levels. The OIBDA margin as of the end of June 2007 stood at 39.9%, 2.7 p.p.
lower than the year before.
CapEx fell by 1.3% year-on-year in the first six months of the year to 43
million euros. Operating cash flow (OIBDA-CapEx) also declined, by 7.9% in local
currency to 167 million euros.
TEM PERU
The growth of the Peruvian cellular market gathered momentum in the year's
second quarter, reaching a penetration rate of 40% by the end of June 2007, 16
p.p. higher than last year.
The company's more aggressive commercial strategy, reflected primarily by the
Mothers' Day campaign, led to record gross adds for the operator of 1.2 million
in the first half of 2007, 19% higher than the first quarter of 2007 and 83%
higher than in the same period the previous year.
Telefonica Moviles Peru's customer base ended June at 6.4 million clients
(+57.2% on June 2006). The second quarter featured further customer migration to
GSM; these now represent 61% of the company's total client base.
Revenues in the first half of 2007 amounted to 276 million euros, up 42.8% in
local currency on the same period last year.
We would also highlight that the growth of service revenues is still speeding
up, thanks to the strong performance of outgoing pre-pay revenues (+184.5% yoy
in the first semester of 2007), which continue to show elasticity to traffic
promotions carried out under the double and triple top-up campaigns. The growth
of service revenues (+58.8% in local currency compared to the first half of
2006) outstripped the growth of the average customer base thanks to greater ARPU
in the second quarter (+6.2%) led by a 25.8% increase in MoU to 91 minutes per
month in the second quarter 2007.
In spite of the increased commercial activity, heady growth in revenues
alongside operational efficiency gains fuelled a 28.7% year-on-year increase in
operating income before depreciation and amortization (OIBDA) in local currency
in the first six month of 2007. The OIBDA margin at end June 2007 stood at 24.7%
(-2.7 p.p. compared to June 2006).
CapEx as of the end of June 2007 reached 50 million euros, equivalent to a
year-on-year growth of 83.8% in local currency, explained by the need to cover
the increased traffic experienced by the company. Operating cash flow
(OIBDA-CapEx) reached 19 million euros, representing a decline of 28.5% when
compared to the same period the previous year.
COLOMBIA
During the first half of 2007, revenues from fixed and mobile businesses reached
746 million euros, up 46.9% on the first semester of 2006 in local currency, on
the back of the consolidation of Telefonica Telecom from May 2006, the strong
growth in internet and broadband revenues (+90.2% year-on-year in local currency
in the first semester of 2007) and service revenues from the mobile business
(+13.0% annual growth in constant terms).
Operating income before depreciation and amortization (OIBDA) rose 119.5%
year-on-year to 209 million euros in the first six months of 2007 after of
Telefonica Telecom results from May 2006. The OIBDA margin stood at 28.1% in the
January-June 2007.
At the end of June of 2007, Telefonica reached 10.1 million clients in Colombia,
equivalent to an annual growth of 3.9%.
TELEFONICA TELECOM2
Telefonica Telecom had a total of 2.5 million accesses at the end of June 2007
(+10.7% year-on-year), underpinned by strong annual growth in broadband of
314.3% when compared to the previous year to 124,986 accesses.
--------------------------------------------------------------------------------
2 Telefonica Telecom is consolidated into the Telefonica Group since May 2006.
Year-on-year variations are calculated against a proforma first half.
--------------------------------------------------------------------------------
The Satellite TV product was launched at the beginning of the year. This is a
key product which will enable Telefonica Telecom to launch 'Trio' triple play
bundles (voice, broadband and TV). The number of customers reached 28,267 at end
of June 2007.
Revenues for the fixed telephony business reached 348 million euros in the first
semester of 2007, representing 2.9% growth in local currency, driven mainly by
internet and broadband growth (+90.2% year-on-year in local currency),
increasing its contribution to total revenues to 7.6% in the first half of 2007
from 4.1% in the same period the previous year. The strong growth in the number
of ADSL users (+314.3%) offset the drop in the narrowband revenues (-11.4% in
revenues in local currency) due to the migration to broadband. In the first half
of 2007, the company extended broadband coverage to new towns and cities, and
strengthened its position in areas where it maintains a leadership position.
Broadband business also received a boost from the marketing of speed upgrades in
the business and internet segment for corporate customers.
Overall, operating expenses grew by 3.4% year-on-year in local currency in the
first semester of 2006. There was a 2.6% drop in supply costs in constant terms,
due to lower interconnection costs caused by increased contracting of capacity
and lower traffic. External service expenses grew by 5.1% in local currency when
compared to the same period the previous year.
Telefonica Telecom's operating income before depreciation and amortization
(OIBDA) amounted to 152 million euros in the first half of 2007, which
represents a 53.0% year-on-year increase in local currency. Growth was mainly
the result of the strong commitment to broadband (revenues increased 170.9% in
local currency in the first six month of the year when compared to the same
period the previous year).
CapEx at 30 June 2007 stood at 42 million euros. The bulk of this was invested
in deploying broadband and a series of regional systems projects such as ATIS
and SAP. Operating cash flow (OIBDA-Capex) stood at 110 million euros equivalent
to a year-on-year growth in local currency of 21.3%.
TEM COLOMBIA
The Colombian cellular market ended June with a total of 28.5 million customers,
practically flat compared to June 2006 and leaving a penetration rate of 66%.
In the second quarter of 2007, there was a 27.6% year-on-year drop in gross adds
when compared to the second quarter of 2006, due to the reduction in handset
subsidies. Even though churn improved on the first quarter of 2007 figure (-0.8
p.p.), it remained high (3.8%) due to the disconnection of low value customers
who signed on in the aggressive campaigns of 2006. There was a net loss of
147,825 customers in the first half of 2007, leaving the customer base at 7.6
million at the end of June 2007 (up 1.8% year-on-year). Of the total, 71% were
GSM customers (+3.7 p.p. compared to the first quarter of 2007). It should be
highlighted the better performance during the second quarter of 2007, with net
adds reaching 66,641 compared to the net loss of the first quarter of the year
of 214,466.
Revenues in the first half of 2007 amounted to 417 million euros, up 3.9%
year-on-year in local currency. In the second quarter of 2007 revenues rose 2.2%
on an annual basis in local currency. Service revenues rose 13.0% year-on-year
in local currency in the first semester of 2007 and 16.1% in local currency in
the second quarter of 2007. In both cases, this outstripped the growth of the
average customer base. During the second quarter of 2007, outgoing revenues
experienced a significant improvement (growth of 18.7% in local currency
compared to +9.7% in the first quarter of 2007, in local currency).
Operating income before depreciation and amortization (OIBDA) in the first
semester of 2007 amounted to 58 million euros, which represents a 13.4%
year-on-year increase in local currency, as a result of service revenue growth
and lower subsidies offered to new customers. The OIBDA margin stood at 13.9%,
1.2 p.p. higher than in the first half of 2006.
Capex in the January-June 2007 period amounted to 26 million euros (22 million
euros in the second quarter of 2007), leaving operating cash flow (OIBDA-CapEx)
at 32 million euros.
MEXICO
Telefonica Moviles Mexico continued to step up its commercial activity
significantly in second quarter of the year, leveraging the success of its
commercial offer, the excellent results of the Mothers' Day campaign in May and
the results of the initiatives aimed at continually improving its commercial
processes and network quality.
The Mexican cellular market ended June 2007 with an estimated penetration rate
of 57% (+10 percentage points vs. June 2006), with the pace of growth picking up
slightly from March. The company's customer base stood at over 10.2 million (of
which 575,000 were contract customers), 49.0% higher than the year earlier
figure. Driving the growth of the customer base were the good acceptance of the
company's commercial offers in the pre-pay segment and the excellent results of
the Mothers' Day campaign. These factors led to 1.7 million gross adds in the
second quarter of 2007, up 59.6% on the second quarter of 2006 and practically
the same as in the fourth quarter of 2006, when the Christmas campaign was
carried out. The higher quality of the gross adds in recent quarters has led to
further improvement in churn, to 2.8% in the second quarter of 2007 (vs. 3.9% in
the second quarter of 2006 and 2.9% in the first quarter of 2007). As a result,
there were over 900,000 net adds in the second quarter, almost tripling the
figure for the second quarter of 2006. In the first half of 2007, net adds
nearly reached 1.7 million customers, also more than triple the figure from last
year's first semester.
The solid commercial performance and the ongoing traffic promotions within the
operator network, both underpinned by the positive impact on traffic of the
national calling party pays system, led to a strong growth of traffic,
especially outgoing and on-net. MoU in the second quarter was 142 minutes, more
than double the usage of the second quarter of 2006. This improvement fed
through to ARPU, which rose 22.0% year-on-year in the quarter to 141 Mexican
pesos.
The company's strong commercial performance fuelled a 55.3% year-on-year
increase in revenues in local currency in the second quarter of 2007 to 338
million euros and a 60.3% year-on-year increase in the first semester of 2007 to
653 million euros. The growth of service revenues accelerated in the second
quarter to 73.1% year-on-year from 66.4% in the first quarter of the year. This
outstripped the growth of the company's customer base (+49.0%), which
underscores the higher quality and usage of its customers. Driving service
revenues were increases in revenues from both outgoing and incoming traffic. The
pace of growth of outgoing revenues accelerated to 95.8% year-on-year in local
currency in the second quarter of 2007 from 85.7% in the first quarter of 2007
on the back of an increase in on-net traffic. Meanwhile, the launch of the
national calling party pays service underpinned a 45.2% advance in incoming
revenues in the second quarter of 2007.
Operating income before depreciation and amortization (OIBDA) in the second
quarter reflected both the solid growth of revenues and the efficiency gains
achieved. Despite intense commercial activity in the quarter, OIBDA still
managed to reach 39 million euros, compared with an OIBDA loss of -9 million
euros in second quarter of 2006. In the first half of 2007, OIBDA surpassed 61
million euros, reaching an OIBDA margin of 9.4%, compared with an OIBDA loss in
the first half of 2006 of -34 million euros.
CapEx through June amounted to 64 million euros. This, coupled with improvement
at OIBDA level, triggered significant improvements in operating cash flow
(OIBDA-CapEx) vs. the same period last year.
VENEZUELA
The Venezuelan cellular market continued to grow strongly in the second quarter,
with an estimated penetration around 75% by the end of June, almost 20
percentage points more than in June 2006. Strong commercial activity in the
quarter was led by the Mother's Day and Father's Day campaigns, as well as the
campaign linked to the Copa America football competition, in which Movistar
Venezuela was the sole sponsor of the Venezuelan team.
At 30 June 2007, Telefonica Moviles Venezuela's customer base stood at over 9.7
million clients (+24.6% year-on-year), after recording net adds of 920,000 lines
in the first six months of the year. GSM adds accounted for 62% of the total,
with GSM customers making up over 20% of the total customer base at 30 June
2007, less than six months after the service was launched. This fast migration
of the customer base to GSM technology, together with the sharp overall growth
of the market in the last year, is behind the 1.3 percentage points increase in
churn, to 2.9% in the second quarter. It is worth noting that fixed wireless
lines performed well, buoyed by the sale of packages which combined fixed and
mobile handsets. The number of customers in this segment reached 927,000 at 30
June 2007.
Revenues to 30 June 2007 amounted to 1,123 million euros (+27.7% year-on-year in
local currency), driven by higher growth in service revenues (+33.3%) than in
the customer base (+24.6%) and a strong ARPU performance in the second quarter
2007 (+ 3.1% year-on-year in local currency).
Operating income before depreciation and amortization (OIBDA) in first half 2007
reached 469 million euros, 48.3% more than the first half 2006 figure in local
currency, owing to growth in revenues and lower costs for GSM handsets. The
OIBDA margin stood at 41.8%, a 5.8 percentage points increase from the first
half 2006.
CapEx for the first half of 2007 amounted to 94 million euros, leaving operating
cash flow (OIBDA-CapEx) of 376 million euros.
CENTRAL AMERICA
Commercial activity by Telefonica Moviles de Centroamerica (Panama, Guatemala,
El Salvador and Nicaragua) in the first six months of 2007 was far higher than
in the same period last year, especially in Guatemala and Panama.
At the end of June 2007, the estimated penetration of the Central American
market stood at 55% (up 17 p.p. compared to June 2006). In this context,
Telefonica Moviles de Centroamerica client base rose 34.5% year-on-year and
nearly reached the 4.5 million mark (246,226 fixed wireless and 366,603 contract
customers). Growth was fuelled by the effectiveness of commercial campaigns
carried out in the second quarter, focused on the value and quality proposition
provided by the operators during the Mothers' Day and Fathers' Day and the
Eastern campaigns, all of which led to a 36.7% year-on-year increase in gross
adds in the second quarter of 2007 to 635,565.
At an operating level, growth in traffic remained strong, especially outgoing
traffic, buoyed by the promotional plan which encourages prepay usage. MoU for
the second quarter of 2007 came to 150 minutes, a 14% year-on-year increase.
As a result of the company's good commercial performance, revenues in the first
six months of 2007 totalled 297 million euros, up 21.4% year-on-year in constant
terms when compared to the same period the previous year. Service revenues rose
23.2% year-on-year in constant euros compared to the first half of 2006,
extending the positive trend of previous quarters. This was driven by higher
outgoing revenues (+31% in constant terms), on-net traffic and incoming revenues
(+21% in constant terms), mainly due to the growth of the pre-pay customer base.
Despite increase commercial activity, operating income before depreciation and
amortization (OIBDA) reached 99 million euros in the first six months of 2007, a
35.7% year-on-year increase compared to the same period last year in constant
terms. The OIBDA margin stood at 33.2% for the first six months of 2007, an
improvement of 3.6 p.p. from June 2006.
CapEx as of the end of June 2007 reached 38 million euros, up 11% when compared
to the same period of the previous year. The operating cash flow (OIBDA-CapEx)
during the first semester of 2007 grew by 57% (in constant terms) compared to
the first half of 2006, reaching 61 million euros.
ECUADOR
The Ecuadorian market experienced a strong growth in the last year reaching a
penetration of 66% at the end of June 2007 equivalent to an annual growth of 11
percentage points.
Telefonica Moviles Ecuador client base reached 2.6 million customers as of the
end of June 2007, with 58% of the base on GSM.
Revenues in the first semester of 2007 totalled 138 million euros, representing
a decline of 1.8% in local currency when compared to the same period the
previous year, mainly explained by the lower client base. Service revenues
showed a better performance in the second quarter of 2007, slowing down its
decline rate (dropped 9.3% year-on-year in the April-June 2007 period compared
to a retreat of 10.3% in the first quarter of 2007) due to the better
performance of contract outgoing revenues.
Despite the annual decline of revenues, operating income before depreciation and
amortization (OIBDA) reached 34 million euros in the first half of 2007,
standing at similar levels of the same period the previous year (-0.6% in local
currency). OIBDA margin at the end of June of 2007 stood at 24.3% (+0.3
percentage points compared to the first semester of 2006).
CapEx as of the end of June 2007 reached 15 million euros, equivalent to a
year-on-year growth of 58.6% in local currency, explained by the need to cover
the increased traffic experienced by the company. Operating cash flow
(OIBDA-CapEx) reached 18 million euros declining 24.1% in local currency when
compared to the same period the previous year due to the higher investment
efforts carried out.
TELEFONICA INTERNATIONAL WHOLESALE SERVICES
Revenue momentum remained strong across all TIWS' business lines in the second
quarter 2007. Revenues for the first half amounted to 133 million euros, up
26.8% year-on-year in constant euros (+25.5% more than in the same period 2006
in constant currency). International IP revenues (+20.2% year-on-year) remain
the main growth driver, representing over 55% of the total for the company. The
other services also posted very healthy growth, led by Broadband capacity
(+41.3% in constant euros), VPNs (+27.9% in constant euros) and satellite
services (+76.8% in constant euros).
OIBDA rose 23.0% in constant euros to 45 million euros +23.0% in constant euros.
Strong top line growth offset the 27% rise in operating expenses in constant
currency. The increase in expenses was due to higher supply costs on the back of
increased business activity. The OIBDA margin for the first half of 2007 was
34.0%, 0.6 percentage points lower than in the first half of 2006.
TELEFONICA
LATINOAMERICA
ACCESSES
Unaudited figures
(thousands)
2006 2007
June September December March June % Chg
y-o-y
----------------------------------------------------------------------------------
Final Clients Accesses 106,920.8 109,987.5 114,604.4 116,905.7 121,773.0 13.9
Fixed telephony accesses (1) 24,002.5 24,072.6 23,916.9 23,810.9 23,894.7 (0.4)
Internet and data accesses 6,206.2 6,563.3 6,723.7 6,757.6 6,467.8 4.2
Narrowband (2) 2,872.3 2,931.2 2,813.5 2,615.3 1,989.8 (30.7)
Broadband (3) (4) 3,201.9 3,500.2 3,780.3 4,045.6 4,380.4 36.8
Other 131.9 131.8 130.0 96.7 97.6 (26.1)
Cellular accesses 76,196.7 78,777.4 83,298.4 85,637.0 90,610.9 18.9
Contract 61,401.3 63,501.6 67,329.9 69,112.7 73,654.3 20.0
Prepaid 13,624.1 14,075.4 14,705.4 15,208.7 15,582.9 14.4
Fixed Wireless 1,171.3 1,200.4 1,263.1 1,315.5 1,373.7 17.3
Pay TV 515.4 574.2 665.3 700.1 799.6 55.2
Wholesale Accesses 76.8 76.0 65.9 64.6 64.5 (16.0)
Total Accesses 106,997.6 110,063.5 114,670.3 116,970.3 121,837.5 13.9
----------------------------------------------------------------------------------
(1) PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary
access; 2/6 Access x30. Company's accesses for internal use included.
(2) Includes narrowband ISP of Terra Brasil and Terra Colombia.
(3) Includes broadband ISP of Terra Brasil, Telefonica de Argentina, Terra
Guatemala y Terra Mexico.
(4) Includes ADSL, optical fiber, cable modem, broadband circuits and ISP in the
North part of the country.
TELEFONICA LATINOAMERICA
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
January - June April - June
2007 2006 % Chg 2007 2006 % Chg
-------------------------------------------------------------------------------------------------
Revenues 9,628 8,707 10.6 4,944 4,390 12.6
Internal exp capitalized in fixed 46 48 (3.3) 25 26 (2.4)
assets (1)
Operating expenses (6,353) (5,828) 9.0 (3,314) (2,982) 11.1
Other net operating income (expense) 82 81 1.1 65 43 48.7
Gain (loss) on sale of fixed assets (12) (5) 161.5 (41) (2) n.m.
Impairment of goodwill and other assets 0 (2) n.m. 0 0 n.m.
Operating income before D&A (OIBDA) 3,391 3,002 12.9 1,677 1,474 13.8
Depreciation and amortization (1,703) (1,828) (6.8) (862) (891) (3.2)
Operating income (OI) 1,687 1,174 43.7 815 583 39.8
-------------------------------------------------------------------------------------------------
Note: 'Bad debt provisions' have been reclassified from 'Other net operating income (expense)' to
'Operating expenses'.
(1) Including work in process.
TELEFONICA LATINOAMERICA
ACCESSES BY COUNTRIES
(I)
Unaudited figures
(Thousands)
2006 2007
June September December March June % Chg
y-o-y
---------------------------------------------------------------------------------
BRAZIL
Final Clients 44,095.7 44,484.7 44,716.9 44,599.1 45,344.4 2.8
Accesses
Fixed telephony 12,336.1 12,295.1 12,107.1 12,033.6 12,031.3 (2.5)
accesses (1)
Internet and 3,234.9 3,463.9 3,556.8 3,535.2 3,072.6 (5.0)
data accesses
Narrowband 1,758.0 1,884.5 1,856.6 1,786.3 1,201.1 (31.7)
Broadband 1,382.4 1,485.2 1,608.2 1,690.8 1,813.0 31.1
(2)
Other 94.5 94.2 92.0 58.1 58.6 (38.0)
Cellular 28,524.7 28,725.7 29,053.1 29,030.3 30,240.5 6.0
accesses
Prepaid 23,256.5 23,481.5 23,543.4 23,377.0 24,549.4 5.6
Contract 5,268.1 5,244.1 5,509.6 5,653.2 5,691.1 8.0
Wholesale Accesses 46.3 46.4 38.4 38.9 38.1 (17.9)
Total Accesses 44,142.0 44,531.1 44,755.3 44,638.0 45,382.5 2.8
---------------------------------------------------------------------------------
ARGENTINA
Final Clients 15,034.4 15,761.5 16,809.4 17,464.1 18,112.1 20.5
Accesses
Fixed telephony 4,586.7 4,612.4 4,636.3 4,627.9 4,633.5 1.0
accesses (1)
Internet and 961.6 998.9 973.7 1,023.2 1,069.5 11.2
data accesses
Narrowband 536.1 504.1 439.2 418.0 392.9 (26.7)
Broadband 408.7 477.9 517.7 588.1 659.0 61.2
(2)
Other 16.8 16.8 16.8 17.1 17.7 5.1
Cellular 9,486.1 10,150.2 11,199.4 11,813.0 12,409.1 30.8
accesses
Prepaid 5,951.4 6,498.1 7,315.8 7,753.1 8,112.8 36.3
Contract 3,373.8 3,499.4 3,742.9 3,925.8 4,169.9 23.6
Fixed 160.8 152.7 140.7 134.2 126.3 (21.4)
wireless
Wholesale Accesses 7.2 7.2 7.3 7.6 8.7 21.0
Total Accesses 15,041.6 15,768.7 16,816.6 17,471.7 18,120.8 20.5
---------------------------------------------------------------------------------
CHILE
Final Clients 8,368.3 8,435.3 8,538.4 8,670.5 8,909.3 6.5
Accesses
Fixed telephony 2,328.0 2,225.9 2,206.2 2,177.4 2,174.4 (6.6)
accesses (1)
Internet and 514.9 538.9 557.7 597.3 636.0 23.5
data accesses
Narrowband 95.6 72.8 53.3 59.0 52.5 (45.1)
Broadband 409.0 456.0 494.5 528.2 574.1 40.4
(2)
Other 10.3 10.1 10.0 10.0 9.5 (8.5)
Cellular 5,514.9 5,618.1 5,680.2 5,766.8 5,927.5 7.5
accesses
Prepaid 4,501.9 4,491.6 4,507.6 4,515.7 4,557.9 1.2
Contract 1,013.0 1,126.5 1,172.7 1,251.1 1,369.6 35.2
Pay TV 10.4 52.4 94.2 129.1 171.4 n.s.
Wholesale Accesses 22.8 21.9 19.9 17.6 17.2 (24.5)
Total Accesses 8,391.0 8,457.2 8,558.3 8,688.1 8,926.5 6.4
---------------------------------------------------------------------------------
(1) PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary
access; 2/6 Access x30. Company's accesses for internal use included.
(2) Includes ADSL, optical fiber, cable modem and broadband circuits.
TELEFONICA
LATINOAMERICA
ACCESSES BY COUNTRIES
(II)
Unaudited figures
(Thousands)
2006 2007
June September December March June % Chg
y-o-y
---------------------------------------------------------------------------------
PERU
Final Clients 7,423.1 7,983.8 8,710.9 9,303.2 10,152.5 36.8
Accesses
Fixed 2,434.0 2,468.2 2,498.5 2,531.2 2,605.7 7.1
telephony accesses (1)
Internet and 449.8 494.2 525.5 547.4 581.8 29.3
data accesses
Narrowband 52.0 49.6 47.8 40.3 44.2 (15.0)
Broadband 389.3 435.7 468.5 497.7 527.8 35.6
(2)
Other 8.4 8.9 9.2 9.4 9.7 15.9
Cellular 4,048.9 4,513.8 5,129.8 5,663.5 6,365.0 57.2
accesses
Prepaid 3,749.7 4,353.3 4,882.3 5,570.7 67.2
3,331.1
Contract 691.9 705.2 711.0 724.4 11.8
648.1
Fixed 72.2 71.3 70.2 70.0 0.3
wireless 69.8
Pay TV 490.4 507.5 557.2 561.1 600.0 22.3
Wholesale Accesses 0.5 0.5 0.4 0.4 0.5 (4.5)
Total Accesses 7,423.6 7,984.2 8,711.4 9,303.6 10,153.0 36.8
---------------------------------------------------------------------------------
COLOMBIA
Final Clients 9,717.9 10,094.9 10,190.0 9,995.9 10,095.6 3.9
Accesses
Fixed 2,210.7 2,362.6 2,359.4 2,346.5 2,330.5 5.4
telephony accesses (1)
Internet and 33.1 45.4 70.9 94.3 125.0 n.m.
data accesses
Narrowband 3.0 3.1 2.9 0.0 0.0 n.m.
Broadband 30.2 42.3 68.0 94.3 125.0 n.m.
(2)
Other 0.0 0.0 0.0 0.0 0.0 n.m.
Cellular 7,474.0 7,687.0 7,759.7 7,545.2 7,611.8 1.8
accesses
Prepaid 5,721.4 5,883.5 5,960.5 5,734.6 5,887.0 2.9
Contract 1,752.7 1,803.5 1,799.2 1,810.6 1,724.8 (1.6)
Pay TV 0.0 0.0 0.0 10.0 28.3 n.m.
Wholesale Accesses 0.0 0.0 0.0 0.0 0.0 n.m.
Total Accesses 9,717.9 10,094.9 10,190.0 9,995.9 10,095.7 3.9
---------------------------------------------------------------------------------
MEXICO
Cellular 6,865.6 7,443.3 8,553.2 9,319.6 10,232.8 49.0
accesses
Prepaid 6,439.0 6,950.7 8,017.8 8,775.0 9,655.2 49.9
Contract 425.3 490.9 533.4 542.4 574.8 35.1
Fixed 1.2 1.6 2.0 2.2 2.8 134.1
wireless
Total Accesses 6,865.6 7,443.3 8,553.2 9,319.6 10,232.8 49.0
---------------------------------------------------------------------------------
VENEZUELA
Cellular 7,820.6 8,025.9 8,826.2 9,100.3 9,746.6 24.6
accesses
Prepaid 6,665.7 6,813.6 7,520.2 7,724.2 8,345.1 25.2
Contract 399.2 431.6 469.4 495.4 474.7 18.9
Fixed 755.7 780.7 836.6 880.7 926.8 22.6
wireless
Total Accesses 7,820.6 8,025.9 8,826.2 9,100.3 9,746.6 24.6
---------------------------------------------------------------------------------
(1) PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary
access; 2/6 Access x30. Company's accesses for internal use included.
(2) Includes ADSL, optical fiber, cable modem and broadband circuits.
TELEFONICA LATINOAMERICA
ACCESSES BY COUNTRIES
(III)
Unaudited figures
(Thousands)
2006 2007
June September December March June % Chg
y-o-y
--------------------------------------------------------------------------------
CENTRAL AMERICA (3)
Fixed telephony 107.0 108.4 109.4 94.4 119.4 11.5
accesses (1)
Internet and data 25.0 25.2 26.0 26.0 22.3 (10.8)
accesses
Broadband (2) 23.1 23.4 24.1 24.0 20.2 (12.5)
Other 1.9 1.9 1.9 2.0 2.1 9.8
Cellular accesses 3,323.0 3,564.8 3,829.5 4,042.1 4,469.4 34.5
Prepaid 2,860.7 3,078.9 3,303.1 3,472.5 3,856.6 34.8
Contract 280.8 295.0 315.6 342.8 366.6 30.6
Fixed 181.5 190.9 210.9 226.7 246.2 35.7
Wireless
Pay TV 14.5 14.3 14.0 0.0 0.0 n.m.
Total Accesses 3,469.6 3,712.8 3,978.9 4,162.5 4,604.1 32.7
--------------------------------------------------------------------------------
ECUADOR
Cellular accesses 2,554.7 2,393.1 2,490.0 2,481.7 2,645.0 3.5
Prepaid 2,161.7 1,984.0 2,133.0 2,116.8 2,275.2 5.3
Contract 390.6 406.9 355.3 363.3 368.2 (5.7)
Fixed 2.3 2.2 1.7 1.6 1.5 (33.8)
Wireless
Total Accesses 2,554.7 2,393.1 2,490.0 2,481.7 2,645.0 3.5
--------------------------------------------------------------------------------
URUGUAY
Cellular accesses 584.4 655.4 777.3 874.6 963.1 64.8
Prepaid 511.9 569.8 675.3 761.4 844.3 64.9
Contract 72.5 85.6 102.0 113.2 118.8 63.7
Total Accesses 584.4 655.4 777.3 874.6 963.1 64.8
--------------------------------------------------------------------------------
(1) PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary
access; 2/6 Access x30. Company's accesses for internal use included.
(2) Includes ADSL, optical fiber and broadband circuits.
(3) Includes Guatemala, Panama, El Salvador and Nicaragua
TELEFONICA LATINOAMERICA
SELECTED FINANCIAL DATA (I)
Unaudited figures (Euros in millions)
January - June
2007 2006 % Chg % Var Local Cur
--------------------------------------------------------------------------------------
BRAZIL Revenues 3,690 3,599 2.5 3.6
OIBDA 1,493 1,490 0.2 1.2
OIBDA 40.4% 41.4% (1.0
margin p.p.)
CapEx 405 333 21.8 23.0
Telesp Revenues 2,758 2,796 (1.4) (0.3)
OIBDA 1,224 1,292 (5.2) (4.3)
OIBDA 44.4% 46.2% (1.8
margin p.p.)
CapEx 300 218 37.5 39.0
Vivo Revenues 1,102 972 13.3 14.5
OIBDA 268 196 36.9 38.3
OIBDA 24.4% 20.2% 4.2
margin p.p.
CapEx 105 115 (8.2) (7.2)
--------------------------------------------------------------------------------------
ARGENTINA Revenues 1,113 1,021 9.0 18.8
OIBDA 394 365 7.9 17.6
OIBDA 34.0% 34.3% (0.3
margin p.p.)
CapEx 123 103 18.7 29.4
Telefonica de Argentina Revenues 496 475 4.4 13.7
OIBDA 218 233 (6.3) 2.1
OIBDA 37.5% 41.7% (4.2
margin (1) p.p.)
CapEx 72 67 7.9 17.6
TEM Argentina Revenues 662 591 12.1 22.2
OIBDA 176 132 33.2 45.2
OIBDA 26.5% 22.3% 4.2
margin p.p.
CapEx 50 36 38.5 51.0
--------------------------------------------------------------------------------------
CHILE Revenues 864 847 2.0 11.8
OIBDA 329 316 4.0 14.0
OIBDA 38.1% 37.4% 0.7
margin p.p.
CapEx 193 136 42.0 55.6
Telefonica Chile Revenues 474 512 (7.4) 1.4
OIBDA 181 199 (9.1) (0.4)
OIBDA 38.2% 38.9% (0.7
margin p.p.)
CapEx 82 69 19.1 30.5
TEM Chile Revenues 430 384 12.0 22.7
OIBDA 149 118 25.9 37.9
OIBDA 34.5% 30.7% 3.8
margin p.p.
CapEx 111 67 65.3 81.2
--------------------------------------------------------------------------------------
OIBDA is presented after management fees. Data for Telefonica de Argentina include the
ISP business of Advance.
(1) Margin over revenues includes fixed to mobile interconnection.
MORE TO FOLLOW
This information is provided by RNS
The company news service from the London Stock Exchange