Telefonica Earnings Top Estimates Amid Cost Cuts in Europe

Telefonica SA (TEF), Spain’s biggest phone company, reported fourth-quarter earnings that topped analysts’ estimates as the carrier cut costs in Europe to cope with falling revenue. Operating income before depreciation and amortization fell 8.7 percent to 4.98 billion euros ($6.8 billion), the Madrid-based company said today. Analysts had projected 4.91 billion euros, the average of estimates compiled by Bloomberg. Net income jumped to 1.45 billion euros from 473 million euros. European earnings rose 11 percent after Telefonica reduced operating costs 7.1 percent and wireless subscribers spent more on browsing the Web. Telefonica is increasing promotions in Europe as it can no longer rely on growth in Latin America, where earnings dropped 20 percent, partly because of currency fluctuations. “Telefonica has managed to slightly improve the business in Europe,” Andres Bolumburu, an analyst at Banco de Sabadell SA in Madrid, said by phone. “ However, it still needs to turn around the business in order to achieve further growth.” Telefonica shares were little changed at 11.48 euros at 9:15 a.m. in Madrid, giving the company a market value of 52.2 billion euros. The stock has lost 3 percent this year.

Photographer: David Ramos/Bloomberg

A logo sits on display outside the Telefonica-Diagonal Zero tower offices of Telefonica SA in Barcelona.

Dividend, Forecasts

Sales fell about 9 percent to 14.4 billion euros, compared with the 14.3 billion euros analysts predicted on average. In Europe, Oibda rose to 2.55 billion euros, while Oibda in Latin America shrank to 2.55 billion euros, mainly affected by exchange-rate changes in Venezuela, Brazil and Argentina. Yesterday, Telefonica announced a 1.5 billion-euro cost-saving program and a reorganization that gives Chief Operating Officer Jose Maria Alvarez-Pallete more executive responsibilities by overseeing operations across Europe and Latin America. The carrier will also integrate its Europe, Latin America and digital divisions and create the new position of chief commercial digital officer, who along with the chief global resources officer will report to Alvarez-Pallete. Telefonica forecast revenue growth for this year and a “stabilization” in its Oibda margin in organic terms, excluding Venezuela. The carrier targets net debt of less than 43 billion euros at the end of the year. Its net debt is now about 42.3 billion euros, down by about 16 billion euros from June 2012. The company plans to pay a 2014 dividend of 75 cents a share. In Spain, Telefonica’s fourth-quarter Oibda slid 6.3 percent to 1.6 billion euros as sales dropped 12 percent to 3.2 billion euros. In Brazil, Latin America’s biggest market, Oibda plunged 30 percent to 1.05 billion euros. Source :  http://www.bloomberg.com/news/2014-02-27/telefonica-earnings-top-estimates-as-european-business-improves.html