Telefonica Q1 Profit Soars On UK Gain, Backs FY15 Revenue Growth View

(RTTNews) - Spanish telecom group Telefonica S.A. (TEF, TDE.L) reported Thursday more-than-doubled profit in its first quarter, reflecting significant profit from discontinued UK operations, which is being sold to Hutchison Whampoa Ltd. (HUWHY.PK, HUWHF.PK). Profit from continuing operations declined, despite growth in revenues and accesses. Further, the company reiterated its 2015 guidance and its ambition for 2016.

César Alierta, executive chairman, said, "In the first quarter of 2015 Telefónica initiated a new growth cycle; total accesses increased 10 percent year-on-year, revenues improved 12.6 percent, OIBDA 7.7 percent, free cash-flow 25.8 percent and net income was 2.6 times higher. These figures reflect the solid beginning of this new cycle and are leveraged on the improved organic evolution of the business."

For the first quarter, consolidated net income surged 162 percent to 1.802 billion euros from last year's 688 million euros. Basic earnings per share rose 164 percent to 0.38 euros.

Since the first quarter of 2015, Telefonica's operations in the UK are reported as discontinued operations following its deal to sell the unit to Hong Kong billionaire Li Ka-shing's Hutchison in 9.25 billion pounds deal.

The profit from discontinued operations stood at 1.30 billion euros, compared to 93 million euros last year.

On a continuing operations basis, Telefonica's profit fell 24.2 percent to 479 million euros and basic earnings per share fell 22.3 percent to 0.09 euro.

Operating income before depreciation and amortisation or OIBDA, a key earnings metric, grew 7.7 percent to 3.619 billion euros, despite an 8.6 percent drop in Spain. On an organic basis, OIBDA improved 2.4 percent on revenue growth, cost savings and simplification efforts. OIBDA margin was 31.3 percent, up 1.4 percentage points on a reported basis, but down 0.3 percent organically.

Revenue increased 12.6 percent to 11.543 billion euros from 10.251 billion euros last year with good growth in all regions, except Spain. Organic revenue growth was 3.3 percent on the back of strong commercial activity.

The company noted that organic revenue growth excluding Venezuela continued to accelerate mainly due to T. Brasil, T. Deutschland and the sustained recovery trend in T. España. Excluding the negative effect of regulation, revenues grew 14 percent.

Mobile data monetisation revenues grew 11.9 percent organically and digital services revenues climbed 33.7 percent, mainly with video revenue growth of 56.6 percent.

Total accesses increased 10 percent to 319.1 million as of March 2015, driven by the incorporation of E-Plus in T. Deutschland and the sustained pace of growth of T. Brasil and T. Hispanoamérica.

Mobile accesses increased 13 percent to 252.8 million with a strong increase in mobile contract. Smartphones reached 91.4 million, representing a strong growth of 57 percent.

For fiscal 2015, the company continues to expect revenues to grow greater than 7 percent, and OIBDA margin to have limited margin erosion of 1 percentage point.

While announcing fourth-quarter results in February, the company had projected fiscal 2016 revenues to grow greater than 5 percent, on a stabilizing OIBDA margin.

In Spain, Telefonica shares were losing around 1.20 percent to trade at 13.14 euros.