Mixed bag for Telefonica, TI in 3Q
Spanish incumbent Telefonica recorded major losses in the third quarter, with net income down almost 110% year-on-year.
The operator generated a loss of €429 million in 3Q11, a huge drop from the €5 billion profit made in the same period of 2010. Figures for the nine months to end-September were little better, with a profit of €2.7 billion a far cry from the €8.8 billion made in January to September 2010.
A glance at the firm’s results suggest higher costs are to blame, as revenue rose 3.7% year-on-year in the third quarter, and 5.4% in the nine month period. While chairman César Alierta pointed to tougher regulation and inherent weakness in European economies as one reason for the losses, he conceded the firm saw “growth in commercial expenses resulting from increased activity and higher Capex.”
However, Alierta notes a restructuring plan is beginning to bear fruit. “The challenging economic environment, the growing competition and a regulation that does not favor the development of the sector in some of our markets, mean that we face significant challenges, but the new Telefonica’s organizational structure announced in September will allow us to accelerate our growth in the digital world and to improve our efficiency,” he states.
Meanwhile, Telecom Italia shrugged off concerns over its domestic economy to grow net profit almost 40% in the third quarter.
A strong performance by its Latin American operations generated most of the operator’s 3Q11 profit of €920 million – up from €662 million in 3Q10 -, with higher revenues in Brazil and Argentina offsetting lower sales in the firm’s domestic market and at its international wholesale division.
However, results for the first nine months of 2011 paint a different picture, with the firm generating a loss of €871 million compared to a profit of €1.9 billion in the same period of 2010. The loss comes despite the firm increasing sales €2.1 billion year-on-year.
Despite the grim nine-month picture, chairman Franco Bernabè is sticking by Telecom Italia’s full-year targets of stable revenues and EBITDA, Capex in the region of €4.8 billion, and an adjusted net financial position of €30.7 billion.
“The first nine months of 2011 have been extremely eventful for our Group,” Bernabè states, referring to the acquisition of an LTE license, the buyout of AES Atimus in Brazil, and increased investments in TIM Participações and Telecom Argentina. “We also reported continued improvement in operating results on the domestic market, and in Latin America, and further reinforcement of cash generation,” the chairman adds.