Telefonica reports declines in operating profit, sales

Spain’s Telefonica has reported a 20.6% increase in net income for the first three months of the year, to €902 million ($1.19 billion), but says revenues dropped by 8.8%, to €14.14 billion, largely because of unfavorable exchange-rate movements.

Net profit surged because Telefonica (Madrid, Spain) had reported losses from associates in the prior-year quarter, and the Group’s operating income fell by 17.7%, to €2.07 billion.

Spain’s Telefonica has reported a 20.6% increase in net income for the first three months of the year, to €902 million ($1.19 billion), but says revenues dropped by 8.8%, to €14.14 billion, largely because of unfavorable exchange-rate movements.

Net profit surged because Telefonica (Madrid, Spain) had reported losses from associates in the prior-year quarter, and the Group’s operating income fell by 17.7%, to €2.07 billion.

The operator remains under pressure in its domestic market – with unemployment affecting about a quarter of the population – losing nearly half a million mobile customers in the quarter and witnessing a 16.4% decline in revenues, to €3.26 billion, compared with the first quarter of 2012.

In Europe as a whole, revenues fell by 11.7%, to €6.68 billion due to the “challenging macroeconomic backdrop”.

In the company’s Latin American markets, meanwhile, revenues declined by 3.8%, to €7.23 billion, although Telefonica said they increased in organic terms by 6.8%.

Brazil overtook Spain to become the operator’s largest individual market, in terms of revenue contribution, even though sales fell by 9.5%, to €3.26 billion.

Despite the top-line setbacks, Cesar Alierta, Telefonica’s chairman, said the earnings reported showed “a progressive stabilization of the business and a greater degree of diversification, together with the constant improvement in the financial position”.

On the New York Stock Exchange, Telefonica’s share price had fallen by 0.5% in early-hours trading on Wednesday, following the publication of results.