By David Roman
MADRID--Telefonica SA (TEF) on Thursday raised its revenue
forecast for the year, as the Spanish telecommunications firm
reported higher sales in its home market for the first time in over
five years.
Telefonica said the higher forecast is partly the result of the
addition of recent acquisitions in Brazil and Spain. At the same
time, it reflects strong revenue trends in April-June, when sales
totaled EUR11.88 billion ($13.05 billion), up 12% from the same
period last year.
That compares with a EUR11.71 billion consensus forecast of
analysts polled by Factset. Second-quarter net profit rose 70% to
EUR1.89 billion, driven by extraordinary gains related to earlier
deals, including tax credits, in Latin America and Europe.
The Madrid-based company said it now expects revenue to rise
over 9.5% this year, up from a previous expectation of 7%
growth.
Second-quarter sales were bolstered by steady growth in Latin
American markets as well as the recent takeover of E-Plus in
Germany and the inclusion of Brazil's GVT--a company that
Telefonica agreed to buy last year--in the accounts from May. But
the company underlined signs of recovery in Spain after a deep
economic crisis that led to a collapse in revenue.
Spanish sales fell 1.1% overall in the quarter from the same
period of 2014, but rose in May and June by 0.1% and 0.2%
respectively, the first such monthly increases since December
2009.
This is important for Telefonica because Spain, for all its
troubles, remains a highly profitable market where the company can
charge customers more while spending less to expand networks and
capabilities than in developing markets such as Brazil.
In Spain, Telefonica has focused its strategy on customers who
can afford pricier packages including telephony, super-high speed
Internet access and pay-TV. Earlier this month, Telefonica won
exclusive television rights to broadcast Spain's top soccer matches
next season, a key draw for such clients, for EUR600 million, and
immediately marketed a new integrated offering.
This underpins a high gross operating margin in Spain, at 44.4%
of sales in the second quarter, compared with a 31.2% margin for
the Brazilian operation, Telefonica's second-largest by sales, and
a 23.6% margin for the company's German operation, the
third-largest.
At the same time, a better Spanish economic outlook is timely,
since it should help offset the effects of an expected recession in
Brazil this year. Spain's statistics institute said Thursday that
gross domestic product expanded in the second quarter by 3.1%, the
highest pace since 2007.
Telefonica Brasil, Brazil's top operator by market share,
Wednesday posted a 56.4% decrease in second-quarter net profit,
largely due to the absence of extraordinary gains that inflated
profit in 2014, on revenue of 10.42 billion Brazilian reals ($3.13
billion), up 5.4% year-over-year.
Write to David Roman at david.roman@wsj.com