Telefónica returns to revenue growth in Spain, but market appears unimpressed

Telefónica said it returned to year-on-year revenue growth in Spain for the first time in seven years in the third quarter of 2015, although analysts and investors had expected a better performance and appeared largely unimpressed.

Reflecting the wider industry sentiment, the company's share price fell 1.8 per cent following the results announcement, Reuters reported.

The Spain-based operator said revenue in Spain grew slightly by 0.2 per cent in the July-September period to reach €2.9 billion ($3.2 billion), while acquisitions such as E-Plus in Germany and GVT in Brazil helped overall group revenue to increase by 11 per cent to €11.9 billion.

The company also reported 2.9 per cent growth for group OIBDA -- which it uses for its core profit rather than EBITDA -- to €3.7 billion in the third quarter. Consolidated net income was 1.9 per cent lower at €884 million compared to the previous year.

However, analysts from Jefferies International noted that while group and core profits were closely in line with expectations in the third quarter, the narrow return to revenue growth in Spain was overshadowed by a steeper decline in domestic core earnings.

In Spain, OIBDA fell by 2.9 per cent to €1.3 billion in organic terms, despite the higher revenue. The company blamed the drop in earnings on the increase in TV content costs.

Reuters also noted that the return to positive sales growth in Spain was achieved through the application of large discounts to premium TV packages.

In the full nine-month period, group revenue increased by 11.9 per cent year on year to €35.3 billion. OIBDA increased by 5.7 per cent to €11 billion in the same period. Net income increased by 69.6 per cent, reaching €4.5 billion in the first nine months of the year.

Reuters added that Telefónica reiterated its full-year targets of over 9.5 per cent sales growth, limiting the erosion of OIBDA margins to 1.2 percentage points and achieving a capex/sales ratio of 17 per cent.

Also worth highlighting is the company's performance in Germany, where the integration of E-Plus has gone better than expected. As a result, Telefónica Deutschland has upgraded its full-year OIBDA target growth to 15-20 per cent year on year from 10 per cent previously.

For more:
- see the Telefónica results
- see this Reuters article

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