The company consolidates its new growth cycle quarter after
quarter: in the first half accesses grew +13% yoy, revenues +12.5%,
OIBDA +7.2%, and net profit 105.4%
The results published today “confirm the
strength of the new growth cycle initiated in the previous
quarter”, said César Alierta, Telefónica’s Executive Chairman, who
also highlighted the organic growth acceleration in the quarter
“supported by the strong recovery in the Spanish business which in
May and June reached revenue stabilization for the first time since
December 2009”
- Telefónica raises its revenue growth
guidance for the full year to >9.5
% (vs. >7% previously).
- Revenues
totalled 23,419 million euros during the first half of the year,
boosted by mobile data. Digital services revenues between January
and June increased +29.7% yoy to 1,621 million euros.
- The solid business evolution is
supported by the strong investments
made to modernize and differentiate the networks. Capex in the
first six months grew over 66% to 5,094 million euros.
- Telefónica Spain has the most extensive
Fibre-to-the-home network in Europe with the highest number of
connected customers reaching 12.5 million premises passed to June.
In Brazil, Vivo´s fibre optic network surpassed 16.1 million
premises passed.
- The evolution of sales is reflected in
the improvement of OIBDA which was boosted as well by the benefits
of the synergies in Germany and the savings derived from the
simplification and efficiencies program. Thus, OIBDA grew up to
7,320 million euros (+7.2% yoy) at the end of June and the OIBDA
margin was 31.3%.
- Telefónica customer base totalled 329.4 million accesses
after incorporating GVT in Brazil and Digital Plus in Spain, both
key assets to reinforce Telefónica’s growth potential and
leadership in quality services.
- Higher value
customers maintained a very strong growth trend, especially
in mobile contracts (+16%), LTE and Fibre (almost 5x) and Pay TV
(1,9x).
- Spain, Brazil and Germany contribute
66% to the Group’s consolidated revenues and Hispam 30%.
- Spain made
solid progress and for the first time since December 2009 reached
revenue stabilization during the months of May and June, an
inflection point in its return to growth.
- Telefónica Brasil, leading integrated operator in the market
after incorporating GVT, posted revenue growth acceleration with
positive contributions from both the mobile and fixed
businesses.
- Business in Germany already shows the benefits from synergies
related to the e-Plus integration with an organic growth of the
OIBDA of +12.5% during the quarter.
Telefónica (NYSE:TEF)(LSE:TDE) presented today its results
corresponding to the first semester of 2015 and reports a net
profit of 3,693 million euros, double the amount reached in the
same period of 2014 (+105.4%). Additionally, the Company has raised
revenue growth guidance for the full year to >9.5 % (vs. >7%
previously).
Telefónica consolidates its new growth cycle quarter after
quarter. Up until June, and in reported terms, consolidated revenue
grew +12.5% to 23,419 million euros, OIBDA increased +7.2% to 7,320
million euros, and earnings per share (0.75 euros per share)
doubled compared to the same period of 2014. At the end of June,
Telefónica Group’s customer base increased +13% yoy to 329,4
million accesses.
Second quarter numbers of the year confirm the new growth cycle
started in the previous quarter and show an acceleration in the
organic evolution of revenue and OIBDA growing +4.4% and +3.3%
respectively between April and June (+12.4% and +6.8% in reported
terms). This growth is based on a generalized improvement of the
competitive positioning driven by a high value customer base
(fibre, pay TV, LTE, “smartphones”) and supported as well by the
investments made on modernizing and transforming the networks. In
fact, Telefónica Group CapEx during the first half of the year grew
+66.4% to 5,094 million Euros.
It’s worth highlighting that Telefónica España made solid
progress and showed and inflection point in its return to growth by
reaching revenue stabilization during the months of May and June.
In this respect, the Executive Chairman of Telefónica, César
Alierta underlined “the strong recovery in the Spanish business
which in May and June reached revenue stabilization for the first
time since December 2009”.
Similarly, the Executive Chairman stressed that the strength of
the new growth cycle “is generated on a solid foundation supported
as it is by strong realised investments”. In this way, Telefónica
Spain has the most extensive Fibre-to-the-home network in Europe
with the highest number of connected customers reaching 12.5
million premises passed to June.
Alierta also highlighted “the importance of the incorporation of
GVT in Brazil and DTS in Spain during the quarter, two key assets
that are going to contribute in strengthening our presence in both
markets and leadership in quality services, and will contribute to
the generation of future synergies reinforcing our potential for
growth in both cases”.
2015 Guidance Upgraded
Finally, César Alierta explained that “the strength of the
evolution of the business in the first half of the year, coupled
with our positioning in order to capture growth opportunities in
the coming quarters, have led us to revise our objectives upwards
for 2015”. Thus, revenue guidance has been upgraded to >9.5 %
(vs. >7% previously), with the new dates for the incorporation
of GVT and DTS in the consolidation perimeter adding 1.8 percentage
point to growth.
On the other hand, as a result of the impact of the new dates
for the incorporation of GVT and DTS in the consolidation perimeter
OIBDA margin limited erosion has been updated to around 1.2 p.p.
(around 1 p.p. previously). Additionally, the CapEx/Sales excluding
spectrum guidance is maintained at 17% for 2015 and the Net
Debt/OIBDA objective is confirmed at below 2.35x, adjusted for the
closing of the sale of O2 UK.
In relation to shareholder remuneration, Telefónica reiterates
the dividend for 2015 (0.35 euros per share in the form of a
voluntary scrip dividend in the fourth quarter 2015 and 0.40 euros
per share in cash in the second quarter 2016). Additionally, the
amortization of Treasury stock for a total of 1.5% share capital
has been executed in July 2015.
Telefónica also reiterates the dividend for 2016 of 0.75 euros
per share in cash and will also propose at the 2016 AGM the
amortization of Treasury stock for a total of 1.5% share capital
(in both cases subject to the closing of the sale of O2UK).
Customer base: 329.4 million total accesses
As of June 2015, accesses reached 329.4
million and grew 3% year-on-year organic (+13% reported), on
the back of T. Brasil's and T. Hispanoamérica's solid growth pace
(+4% and +3%, respectively). The strong year-on-year growth trend
in high-value customers continued during the second quarter of
2015, especially in mobile contract (+16%), fibre (+4.6x) and Pay
TV (1.9x).
On the one hand, mobile accesses stood at 253.6 million and
increased 12% year-on-year (+3% organic) on the back of solid
mobile contract growth (+16% year-on-year; +6% organic), which
already accounted for 34% of mobile accesses. Smartphones totalled
99.2 million as of June 2015 and posted strong year-on-year growth
of 56% (+30% organic) reaching a penetration of 41% (+11 percentage
points year-on-year). LTE customers (18.6 million; 4.7x
year-on-year) represented 8% of total mobile accesses (+6
percentage points year-on-year).
On the other hand, retail broadband accesses reached 20.8
million, a 2% increase compared to June 2014 in organic terms (+18%
reported). Fibre accesses stood at 5.4 million (4.6 times vs. June
2014; 1.4 times in organic terms) and reached organic quarterly net
additions of 301 thousand accesses (+32% year-on-year). Pay TV
accesses (8 million; 1.9 times year-on-year) recorded organic
quarterly net additions of 263 thousand customers, driven by T.
Brasil and T. Hispanoamérica.
Income statement analysis
It is important to highlight that year-on-year evolution during
the second quarter reflected the consolidation of GVT's results in
Telefónica Brasil and DTS' in "Other companies and eliminations”
(both since 1 May 2015), as well as E-Plus' in T. Deutschland
(since 1 October 2014) and the deconsolidation of T. Ireland's
results (since July 2014). Likewise, Telefónica’s operations in the
UK are reported as discontinued operations within Telefónica Group,
and their assets and liabilities are classified as "held for sale"
in compliance with International Financial Reporting Standards
(IFRS), as a result of the signing in March 2015 of the definitive
sale agreement
Likewise, the Company has decided to adopt the exchange rate of
the Venezuelan bolivar set at SIMADI at the end of the first six
month-period of 2015, as being the most representative among the
available exchange rates as of that date, impacting second quarter
financial results. As of 30 June, this rate was set at 197
Venezuelan bolivars fuertes per dollar. This change in the
conversion of the financial information implied a reduction in the
quarter of 397 million euros in revenues and 90 million euros in
OIBDA, with the purpose of adapting the results of the first half
of the year to the new exchange rate.
As a result, the year-on-year variation of the exchange rates
during the second quarter of 2015 is especially affected by the
aforementioned SIMADI adoption and the depreciation of the
Brazilian reais and the Colombian peso vs. the euro. Thus, the
evolution of exchange rates detracted 2.7 percentage points from
revenue and OIBDA year-on-year growth in April-June. In
January-June 2015, FX contributed with 0.2 percentage points to
year-on-year revenue growth and detracted 0.2 percentage points
from OIBDA growth, as the aforementioned negative impacts were
partially offset by the appreciation of the other Latin American
currencies vs. the euro.
It is also important to highlight that organic growth assumes
constant exchange rates as of 2014 (average FX in 2014). Excludes
the impact of hyperinflationary adjustments in Venezuela in both
years and O2 UK results for both years after being classified as
“discontinued operations”, and considers constant perimeter of
consolidation.
Revenues stood at 11,876 million
euros in the second quarter of 2015 and increased 4.4% year-on-year
in organic terms (+12.4% reported), accelerating vs. the previous
quarter (+1.1 percentage points), on the back of better
contribution from Telefónica España (+0.8 percentage points) and
Telefónica Brasil (+0.3 percentage points). In January-June
revenues reached 23,419 million euros, +3.9% year-on-year in
organic terms (+12.5% reported). Changes in the perimeter of
consolidation contributed 10.2 percentage points to year-on-year
growth in the second quarter and 8.1 percentage points in the first
half.
Per segment, T. España, T. Brasil and T. Deutschland represented
66% of revenues during the first six months of 2015. Telefónica
Hispanoamérica represented 30%, 1 percentage point more compared to
the same period of the previous year despite the lower weight of
Venezuela, which already represented less than 1% of the total.
Mobile data revenue year-on-year growth accelerated in the
quarter 5 percentage points vs. the previous quarter to 17.3%
(+28.8% in reported terms) and already represented 42% of mobile
service revenues (+5 percentage points year-on-year), on the back
of higher smartphone penetration (+11 percentage points
year-on-year) and a growing weight of LTE customers (+6 percentage
points compared to June 2014). Non-SMS data revenue improved
year-on-year organic growth by 8 percentage points to 26.6% (+35.8%
reported) and already represented 82% of data revenue. It is
important to highlight LTE's potential, with LTE traffic already
representing 13% of mobile data traffic in the second quarter of
the year and penetration over accesses still at 8%, due to the
significant increase in unit per user consumption vs. 3G,
generating double-digit ARPU uplift.
Operating expenses totalled 8,425
million euros in April-June 2015 and increased 4.4% year-on-year in
organic terms (+14.6% reported), driven by growth in T.
Hispanoamérica and T. Brasil, and despite the savings generated by
T. Deutschland and T. España. In January-June 2015, expenses
amounted to 16,610 million euros, and increased 4.2% year-on-year
in organic terms (+14.7% reported) mainly as a result of higher
network and system expenses.
Gains on sales of fixed assets
totalled 28 million euros in the second quarter of 2015 (10 million
euros in April-June 2014) mainly due to the sale of real estate
assets in Spain (19 million euros impact in OIBDA). During the
first half of 2015 this item reached 89 million euros (49 million
euros in the same period of 2014) and primarily includes the sale
of non-strategic towers (40 million euros of OIBDA impact), the
aforementioned sale of real estate assets in Spain and the sale of
“yourfone GmbH” in Germany (17 million euros of OIBDA impact).
OIBDA boosted by greater sales, synergies, and the program
for simplification and efficiencies
Operating income before depreciation and
amortization (OIBDA) in April-June 2015 amounted to 3,702
million euros (+6.8% year-on-year reported) and posted a
year-on-year organic growth of 3.3%, accelerating vs. the first
quarter (+0.9 percentage points), driven by T. España’s
contribution improvement and by T. Deutschland’s strong growth
rate. In the first half of 2015 OIBDA totalled 7,320 million euros
(+7.2% year-on-year; +2.9% organic). The changes in the perimeter
of consolidation contributed 6.7 percentage points to year-on-year
OIBDA growth in April-June and 4.9 percentage points in the first
half.
OIBDA margin in the second quarter stood at 31.2%, with a
year-on-year organic erosion of 0.3 percentage points. In
January-June, the margin reached 31.3% (-0.3 percentage points in
organic terms vs. the same period of 2014).
Depreciation and amortization in
April-June reached 2,145 million euros and increased 24.5%
year-on-year (4,252 million euros in the first six months; +21.8%)
affected by the incorporation of GVT, DTS and E-Plus into the
perimeter of consolidation. In organic terms, it grew 7.4%
year-on-year in the quarter (+4.6% in January-June 2015)
predominantly due to the depreciation of the new spectrum acquired
in Brazil and Spain and the higher investment effort.
The Operating income (OI) amounted
to 1,557 million euros and fell 1.7% vs. to the second quarter of
2014 in organic terms (-10.8% reported). In the first half of 2015,
operating income reached 3,068 million euros (+0.6% year-on-year
organic; -8% reported).
Net financial expenses in the first
half of 2015 totalled 1,129 million euros, 8.5% lower than the same
period of the previous year. In the second quarter of 2015, net
financial expenses accelerated their year-on-year drop compared to
the previous quarter by 7.5 percentage points to -12.6% (485
million euros), despite the negative impact resulting from the
adoption of the exchange rate set at SIMADI, mainly due to the
positive impact caused by the divestment in Telecom Italia S.p.A.
and the lower cost of debt in euros. During the first six months
corporate income tax amounted to 71
million euros (230 million euros in the same period of 2014).
Profit from continuing operations
stood at 1,385 million euros in April-June 2015 and increased 16.9%
year-on-year. In the first half of the year, it reached 1,864
million euros (+2.6% vs. the same period of 2015). Profit from discontinued operations totalled 537
million euros in the quarter (88 million euros in the same period
of 2014). Thus, in January-June it reached 1,841 million euros,
with 1,320 million euros from deferred tax assets resulting from
the estimation of the difference in Telefónica, S.A. between the
fiscal value and the agreed value regarding the sale of
Telefónica’s UK operations, which are expected to materialize in
the foreseeable future when they are finally made deductible in the
sale.
Profit attributable to minority
interests detracted 31 million euros from second quarter net
income, down 80.9% year-on-year mainly due to the higher result
attributed to minority interests in Brazil in 2014 and by the
negative results attributed to T. Deutschland minorities. In
January-June they detracted 12 million euros from the net income
(-94% year-on-year).
Thus consolidated net income
reached 1,891 million euros in April-June 2015 (1.7 times higher
year-on-year) and 3,693 million euros in January-June (2.1 times
higher). This translated into basic earnings per share of 0.37
euros in the quarter (+62.1% vs. the same period of the previous
year) and of 0.75 euros up to June (2 times year-on-year).
Strong investments focused on ultrafast networks (Fibre and
LTE)
CapEx in the first half of 2015
stood at 5,094 million euros (+12.6% year-on-year organic) and
included 1,589 million euros in spectrum acquisitions (1,195
million in Germany and 204 million in Argentina, both in the second
quarter; 135 million in Ecuador and 6 million in Chile in the first
quarter; 49 million in Spain in the first six-month period). Growth
and transformation projects continued being the main focus,
reaching 76% of total investment (+5 percentage points year-on-year
in organic terms).
The operating cash-flow
(OIBDA-CapEx) totalled 289 million euros in the second
quarter of 2015 (1,717 million euros excluding spectrum
acquisitions) and fell 0.4% year-on-year organic (-83.4% reported).
In the first half of 2015, it reached 2,226 million euros (3,815
million euros excluding spectrum), 4.7% less than in the same
period of 2014 in organic terms (-40.9% reported).
Interest payments in the first half
of 2015 (1,402 million euros) fell 9.2% compared to the same period
of 2014, mainly due to lower coupon payments and the reduction in
the cost of debt. In April-June (496 million euros) they fell 45.2%
vs. the first quarter of 2015, due to the seasonality of bond
coupons. On the other hand, payment of
taxes amounted to 134 million euros in January-June 2015,
248 million euros less with respect to the same period of 2014,
primarily due to tax recoveries on definitive tax filings of
previous years.
Operations with minority
shareholders totalled 400 million in January-June 2015, 146
million euros more year-on-year, fundamentally due to higher
dividend payments in Germany. In the second quarter, these
operations reached 374 million euros due to dividend payments in T.
Deutschland.
All in all, the free cash flow, excluding spectrum payments,
reached 1,144 million euros in January-June 2015 (-194 million
euros after spectrum).
Financial Position
Net financial debt stood at 51,238
million euros as of June 2015 and increased 5,611 million euros in
the quarter, driven mainly by seasonal and non-recurrent
extraordinary factors, such as net financial investments including
changes in the perimeter of consolidation (acquisitions of GVT and
DTS and Telco S.p.A. demerger); spectrum payments; and other
factors which include the impact of the adoption of the exchange
rate set at SIMADI for the conversion of positions in Venezuelan
bolivars, among others.
Including the collection of the full firm value on the sale of
O2 UK, the leverage ratio (net debt over
OIBDA) would stand at 2.38 times (2.35 times excluding
second quarter corporate transactions: acquisitions of GVT and DTS,
adjusting corresponding OIBDA, and Telco S.p.A. demerger).
During the first half of 2015, Telefónica's financing activity in capital markets
stood at about 11.388 million euros equivalent and was mainly
focused on financing the GVT acquisition as well as on
strengthening the liquidity position and actively managing the cost
of debt, through the extension of the maturity of the credit lines
and credit margins reduction.
Telefónica maintains total undrawn committed credit lines with
different credit entities for an approximate amount of 8,148
million euros, with around 7,329 million maturing in more than 12
months, which, along with the adjusted cash position, places
liquidity at 13.9 billion euros.
Digital Services and Telefónica Global Resources
In the second quarter of 2015, digital
services revenues totalled 938 million euros (+27.0
year-on-year in organic terms), reflecting the consolidation from 1
May of DTS and GVT. During the first six months of the year
revenues totalled 1,621 million euros, with year-on-year growth in
organic terms of 29.7%.
Revenues in the Video business in the second quarter stood at
541 million euros and grew 34.8% year-on-year in organic terms (862
million in the first half of the year; +41.9% year-on-year),
leveraged on the expansion of the access base (8 million; +25%
year-on-year in organic terms) in Spain, Brazil and Hispanoamerica
as well as the inclusion of 1.4 million accesses from DTS and
almost 1 million accesses from GVT. With the DTS acquisition,
Telefónica consolidates a high-value customer base, expanding its
opportunities for cross-selling.
During the second quarter of the year, Telefónica Global Resources continued contributing
to a fast and agile development of technologies enabling the best
digital end-to-end experience for our customers.
It is important to highlight that the Global Network and
Operations Area accelerated ultra-broadband deployments, in both
fixed (FTTx) and mobile (LTE) and drove the development, design and
certification of homogeneous technological solutions. Thus,
premises passed with fibre totalled 12.5 million in Spain and 16.1
million in Brazil. In LTE, population coverage in Europe and Latin
America reached 67% and 35% respectively; LTE sites in service
surpassed 25 thousand and 89% of 3G and LTE base stations were
connected at high-speed to the transmission network. As a result,
total data traffic grew 40% year-on-year organic, driven by mobile
broadband (+52%) and fixed broadband (+39%). Moreover, average
consumption per smartphone in the second quarter increased 30%
year-on-year, driven by the higher LTE penetration, which offers a
superior customer experience.
In the Global IT area, with regards to efficiency and
simplification, 351 applications have been eliminated year-on-year,
4 Data Centers were released, the virtualization level increased 10
percentage points year-on-year organic, having reduced physical
servers by 10%.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150730005537/en/
TelefónicaMiguel Angel Garzón, +34 91 482 38 00
Telefonica (NYSE:TEF)
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