Deutsche Tel, Telefonica fail to lift gloom

Deutsche Telekom and Telefonica did little to lift the cloud hanging over European telcos, with the former slipping to a €5 billion net loss during the year, and the latter seeing profit fall by nearly 30% year-on-year.
The German incumbent slipped from a profit of €557 million in 2011 to a loss of €5.2 billion in 2012, due to a 2.2% fall in domestic revenue and a marginal increase in sales from its international operations. However, the fourth quarter provided some upside, with a profit of €793 million in the period potentially positioning the firm for a rebound in 1Q13.
Despite the fall in annual profit, Deutsche Telekom chief René Obermann vowed to go on the offensive “with extensive investments in networks and in the market.” He notes the telco delivered “sound balance sheet figures” that allow it to “pay a stable dividend.” Furthermore, the operator cut its net debt by €3 billion to €36.9 billion during the year, Obermann points out.
Steven Hartley, telco strategy analyst at Ovum, notes Deutsche Telekom’s results aren’t as poor as other European telcos, but still serve to highlight that a “fundamental shift in the structure of the telecoms industry” is underway.
Telefonica, meanwhile, generated a profit of €3.9 billion in 2012. While that seems strong in relation to the current trend for European operators, the figure is actually down 27.3% on 2011, when the Spanish incumbent generated a profit of €5.4 billion.
The carrier’s profit was hit by adjustments in the value of its stakes in Telecom Italia and Telefonica Ireland, and was also impacted by the devaluation of the Venezuelan Bolivar during the year.
Executive chairman, César Alierta, points out the firm’s figures showed “progressive improvement quarter by quarter,” as a result of a “deep transformation process,” by the telco.
However, Ovum telco analyst Emeka Obiodu is concerned that ‘transformation’ is leaving Telefonica too reliant on its Latin American business for success. “Telefonica is bullish about its transformation and fight-back strategy in Spain…But the group also lost two million mobile customers in the country in early 2012.
“Revenue decline in the UK may have slowed but it is still falling. These all point to structural issues in Europe that need to be addressed.”