Telefonica Posts Quarterly Loss as Spanish Phone Sales Slide
November 11, 2011, 3:32 AM ESTBy Manuel Baigorri
(Updates with share reaction, Telecom Italia profit starting in fifth paragraph.)
Nov. 11 (Bloomberg) -- Telefonica SA, Europe’s largest telephone company by market value, reported its first quarterly loss in nine years on costs to eliminate jobs and lower revenue from Spain as customers switched to cheaper rivals’ offers.
The third-quarter net loss was 429 million euros ($584 million), weighed down by 2.6 billion euros in job-cut expenses, Madrid-based Telefonica said today. Analysts had predicted a loss of 213 million euros, according to the average estimate of 11 analysts compiled by Bloomberg.
Telefonica’s sales in its home market slid 8.8 percent. Chief Executive Officer Cesar Alierta is slashing the operator’s Spanish workforce, halting major mergers and acquisitions and cutting debt to revive investor confidence. Telefonica’s stock is down 18 percent this year before today, more than double the decline in the Bloomberg Europe Telecommunication Index.
“Spain has deteriorated even further from previous quarters and we can expect weakness to persist,” said Giovanni Montalti, a London-based analyst at Credit Agricole Cheuvreux who rates the stock “underperform.” “More austerity measures will also hit consumption. Telefonica should rethink its dividend policy and capital allocation.”
Dividend Confirmed
Telefonica fell 17.5 cents, or 1.3 percent, to 13.77 euros as of 9:02 a.m. in Madrid. The company today reiterated its full-year financial and dividend targets. Telefonica plans to pay a 2012 dividend of at least 1.75 euros per share. That will also be the minimum level beyond 2012.
Telecom Italia SpA, Italy’s biggest phone company, today reported a 33 percent increase in third-quarter profit, beating estimates, as charges for eliminating jobs weren’t repeated. Revenue rose 13 percent to 7.52 billion euros, helped by the consolidation of Telecom Argentina SA. The shares added 2 percent on the Milan exchange.
In September, Alierta folded Telefonica’s domestic unit into its European division and shuffled regional chiefs, putting Jose Maria Alvarez-Pallete in charge of Europe and Santiago Fernandez Valbuena for Latin America. Telefonica also created a digital division in London run by Matthew Key.
Third-quarter sales climbed 3.7 percent to 15.79 billion euros, compared with the 15.73 billion-euro average estimate. Spanish sales fell to 4.31 billion euros from a year earlier.
Yoigo, Orange
Alierta is counting on Latin America’s economic growth to win back investors discouraged by Spain’s unemployment rate, which at 22.6 percent is the highest of the euro countries. Spain’s economy stalled in the third quarter, with gross domestic product unchanged from the previous quarter, when it expanded 0.2 percent, undermining the country’s efforts to shield itself from the sovereign debt crisis.
Sales in Latin America climbed 18 percent to 7.4 billion euros. Operating income before depreciation and amortization dropped 59 percent to 2.58 billion euros.
Telefonica’s mobile-phone market share in Spain slipped to 40.47 percent in September from 40.65 percent in August, according to the telecommunications market regulator. France Telecom SA’s Orange unit and TeliaSonera AB’s Yoigo division gained market share. Fixed-line rival Jazztel last month reported net income that almost doubled from a year earlier.
Alierta told investors in April that revenue will grow 1 percent to 4 percent annually through 2013 from an adjusted base of 63.1 billion euros in 2010. Operating margin before depreciation and amortization will be at “upper 30’s” percentages, falling from 38 percent in 2010.
Telefonica last reported a quarterly loss for the final three months of 2002.
--Editors: Kenneth Wong, Thomas Mulier
To contact the reporters on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net;
To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net
