Telefonica's profit continues to slide

Telefonica management are hailing revenue and subscriber growth in 1Q12 as evidence its commercial strategy is paying off, however the firm’s profit appears to be in freefall.
The telco’s net income fell 53.9% year-on-year to €748 million on stable revenues of €15.5 billion (up 0.5% on 1Q11). The profit slide is even greater when comparing quarter-on-quarter performance, being barely a fraction of the €2.6 billion Telefonica made in 4Q11, and follows a near 50% drop in income through 2011.
However, the operator is taking heart from its 1Q12 figures, noting that even the 0.5% growth in revenue during the period is progress from a 1.8% drop during 4Q11. It also recorded its fourth straight quarter of subscriber growth, with customer numbers up 6.5% during 1Q12.
While Latin America continues to be the telco’s powerhouse, generating 48% of total revenues and half of the firm’s €5 million OIBDA during 1Q12, operating income at the division fell 5.1% year-on-year to €1.3 billion. In Europe, operating income fell 23.6% year-on-year to €1.2 billion, as revenues slid 6.6% to €7.5 billion.
Chairman César Alierta defended the first quarter results, noting the figures “reflect the strategic priorities set for the full year and the success of the company’s shift in commercial strategy, which began in the second half of 2011.” He adds that the 1Q12 figures are “in line with internal estimates,” and so confirm the firm’s full year guidance of 1% revenue growth and a lower OIBDA margin decline than in 2011.