Quarterly Results January-June 2011

RNS Number : 2485L

Telefonica SA

28 July 2011

 



FINANCIAL HIGHLIGHTS

·     Telefónica reported revenues of 30,886 million euros in the first half of 2011, a 6.3% increase year-on-year:

o  Telefónica Latinoamérica remained the key growth driver and was the largest contributor to consolidated revenue, 
 accounting for 46% of the total.

o  Mobile data revenue was particularly strong (+18.5% year-on-year), consolidating its position as one of the key growth 
 engines across regions, thanks to the rapid expansion of mobile broadband, which now accounts for over 13% of  
 Telefónica's total mobile accesses.

o  The strong revenue increase reported by Telefónica Latinoamérica (+18.4% year-on-year; +20.9% year-on-year 
 excluding Mexico) together with higher sales at Telefónica Europe (+2.2% year-on-year), offset the lower contribution 
 from Telefónica España (-6.1% year-on-year).

·     OIBDA stood at 11,304 million euros in the first half of 2011, up 3.7% year-on-year:

o  Telefónica Latinoamérica (+16.6% year-on-year; +20.1% excluding Mexico) and Telefónica Europe accounted for 64%  
 of consolidated OIBDA.

o  It is worth highlighting the cost contention in Spain, which led to an OIBDA performance in the first half (-10.6% year-
 on-year) similar to the first three months of the year.

o  OIBDA margin stood at 36.6%, posting a limited year-on-year erosion (-0.9 percentage points).

·     Net income totalled 3,162 million euros in the first six months of the year (3,775 million euros in January-June 2010):

o  This result was negatively affected by the non-cash impact resulting from Telco, S.p.A.'s revision of the value of its 
 stake in Telecom Italia, which reduced net income in the first half-year by 353 million euros.

Comments from César Alierta, Executive Chairman:            

"Despite the challenging conditions in some of our markets and the significant impact of regulation on our business, Telefónica delivered solid earnings, with robust revenue growth, +6.3% in the first half and a high level of operating efficiency.

Our target to monetize the development of mobile broadband, with tiered pricing adapted to the different consumption patterns of our customers together with ongoing investment in our networks to face the increase in traffic, is yielding significant growth in mobile data revenues, which advanced 18.5% in the first six months, showing strong dynamism.

We remain focused on value and will continue to leverage our scale, scope and diversification over the coming months to achieve our full-year guidance. The recent agreements to join our "Partners Program" prove that our scale is clearly a differential asset.

I would like to highlight the agreement recently reached with the Unions in Spain to guarantee the Company's viability and competitiveness over the coming years, which includes a workforce reduction program covering up to 6,500 employees over three years as well as a new Collective Agreement that, for the first time, includes salaries reviews linked to the Company's OIBDA targets. This agreement, already approved by the Labour Authorities, underlines Telefónica's rapid execution capabilities as well as its flexibility to adapt to a changing environment.

The outstanding performance in Brazil consolidates our leadership in a market which will soon become Telefónica's main source of revenue, and where the integration of the fixed and mobile businesses will allow the Company to capture synergies of 3,700-4,600 million euros, a significantly larger amount than initially forecasted."

TELEFÓNICA
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
	January-June			% Chg
	2011	2010		Reported	Organic	2011 Guidance	Guidance fulfillment
Revenues	30,886	29,053		6.3	0,9	"up to 2%"	0.9
Telefónica España	8,752	9,321		(6.1)	(6.1)
Telefónica Latinoamérica	14,117	11,928		18.4	5.6
Telefónica Europe	7,662	7,500		2.2	0.2
OIBDA	11,304	10,905		3.7	(2.2)
Telefónica España	3,911	4,377		(10.6)	(10.6)
Telefónica Latinoamérica	5,190	4,453		16.6	4.2
Telefónica Europe	2,097	2,071		1.2	3.1
OIBDA margin	36.6%	37.5%		(0.9 p.p.)	(1.1 p.p.)	"upper 30's"	36.0%
Telefónica España	44.7%	47.0%		(2.3 p.p.)	(2.2 p.p.)	Limited
Telefónica Latinoamérica	36.8%	37.3%		(0.6 p.p.)	(0.5 p.p.)	erosion	(-1.1 p.p.)
Telefónica Europe	27.4%	27.6%		(0.2 p.p.)	0.7 p.p.	y-o-y
Operating Income (OI)	6,348	6,456		(1.7)	(3.0)
Telefónica España	2,862	3,388		(15.5)	(15.4)
Telefónica Latinoamérica	2,873	2,600		10.5	10.6
Telefónica Europe	582	535		8.9	24.4
Net income	3,162	3,775		(16.3)
Basic earnings per share (euros)	0.70	0.83		(16.1)
CapEx	3,838	4,295		(10.6)	7.3	~9,000	3,298
Telefónica España	903	831		8.7	8.7
Telefónica Latinoamérica	2,072	1,242		66.8	16.8
Telefónica Europe	708	2,144		(67.0)	(8.9)
OpCF (OIBDA-CapEx)	7,466	6,610		13.0	(5.7)
Telefónica España	3,008	3,547		(15.2)	(15.1)
Telefónica Latinoamérica	3,117	3,210		(2.9)	(0.7)
Telefónica Europe	1,389	(73)		c.s.	10.5
- Reconciliation included in the excel spreadsheets.
Notes:
- OIBDA and OI are presented before brand fees and management fees.
- OIBDA margin calculated as OIBDA over revenues.
- 2010 and 2011 reported figures include the hyperinflationary adjustments in Venezuela in both years.
- 2011 T. Latinoamérica results include from the second quarter of the year and retroactively from January 1st, 2011,  the full consolidation of TVA, company that was already part of Telefónica's perimeter since the fourth quarter of  2007.
- CapEx includes 423 million euros from the the cost of the spectrum acquired in 2010 in Brasil (355) and Costa Rica  (68), and 1,379 million euros from the acquisition of spectrum in Germany in the second quarter of 2010.
-  Organic criteria:  In financial terms, it assumes constant average exchange rates as of January-June 2010, and  excludes changes in the perimeter of consolidation and hyperinflation accounting in Venezuela. Therefore, in  January-June 2010 the consolidation of Vivo, HanseNet and Tuenti are included whereas the results of Manx  Telecom are excluded. In OIBDA terms, in January-June 2011 the positive impact from the partial reduction of our  economic exposure to Portugal Telecom is excluded, along with the impact of the capital gain from the sale of Manx  Telecom booked in the second quarter of 2010. Results from the Costa Rica operation are excluded from the organic  growth calculation. Telefónica's Capex excludes the Real Estate Efficiency Programme at T. España, the real estate   commitments associated with Telefónica's new headquarters in Barcelona and investments in spectrum.
- Guidance criteria: 2010 adjusted figures for guidance include full consolidation of Vivo, Hansenet and Tuenti in the whole year (12 months) and excludes Manx Telecom's results in January-June 2010. 2010 adjusted OIBDA excludes the capital gain from the revaluation of Telefónica's pre-existing stake in Vivo at the date of the acquisition of the 50% in Brasilcel owned by Portugal Telecom, non-recurrent restructuring expenses registered in the second half of 2010, and the capital gain derived from the disposal of Manx Telecom. 2011 guidance assumes constant exchange rates as of 2010 (average FX in 2010) and excludes hyperinflationary accounting in Venezuela in both years. At the OIBDA level guidance for 2011 excludes write-offs (impairments of subsidiaries), capital gains/losses from companies disposals and significant exceptionals mainly related with restructuring costs. Results from the operation in Costa Rica are excluded from guidance calculation. Group CapEx excludes Real Estate Efficiency Program of T. España, the Real State commitments associated to the new Telefónica premises in Barcelona and spectrum licenses.

 DISCLAIMER

This document contains statements that constitute forward looking statements about Telefónica Group (going forward, "the Company" or Telefónica) including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations which refer to the intent, belief or current prospects of the customer base, estimates regarding, among others, future growth in the different business lines and the global business, market share, financial results and other aspects of the activity and situation relating to the Company.

The forward-looking statements in this document can be identified, in some instances, by the use of words such as "expects", "anticipates", "intends", "believes", and similar language or the negative thereof or by forward-looking nature of discussions of strategy, plans or intentions.

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

Analysts and investors, and any other person or entity that may need to take decisions, or prepare or release opinions about the securities issued by the Company, are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation.

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

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

Finally, this document may contain summarized information or information that has not been audited. In this sense, this information is subject to, and must be read in conjunction with, all other publicly available information, including if it is necessary, any fuller disclosure document published by Telefónica.

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