Telefónica stars a new growth cycle

Telefónica presented the results from the first quarter of 2015, a period in which the company totalled a net profit of 1,802 million euros, increasing by 2.6 times vs. the same period of the previous year. In addition, the figures for January-March 2015 show tangible progress in most items of the profit and loss account, which is a reflection of the focus on long-term sustainable growth and a result of the intense transformation executed in recent years. At the end of March, total accesses had grown in reported terms by 10% year-on-year, amounting to over 319 million customers, revenue increased by 12.6% to 11,543 million euros, OIBDA increased by 7.7%, reaching the sum of 3,618 million euros, and finally, cash flow stood at 363 million euros after growing by 25.8%.

In the earnings report published today, Telefónica’s Executive Chairman, César Alierta, stressed that the results of the first quarter «reflect a solid beginning of this new cycle and are leveraged on the improved organic evolution of the business». Alierta emphasised that this is a generalised growth and indicated that «Spain has already begun its return to growth after reporting in the quarter a year-on- year increase in accesses, which will gradually translate into growth in financials».

Moreover, in the results report of the first quarter, Telefónica reiterated its 2015 guidance and ambition for 2016, while César Alierta thanked the continued support of Company shareholders «which has yet again been reflected in the success of our recent capital increases in Telefónica and Telefónica Brasil».

But before starting to analyse the financial and operational results, it is important to note that, since the first quarter of 2015, Telefónica’s operations in the UK are reported as discontinued operations within Telefónica Group, and its 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 agreement on the sale of the Company. Likewise, 2014 results are reported following these same criteria.

Also, for better interpretation purposes only, the comparative figures for the first quarter of 2014 of those operations referenced to the Venezuelan bolivar have been restated applying the exchange rate used in the conversion for the full year 2014 results (50 bolivar fuerte per dollar). On the other hand, the consolidation of E-Plus’ results in T. Deustchland (since 1st October 2014) and the deconsolidation of T. Ireland’s results (since July 2014) affected reported year-on-year evolution.

319.1 million accesses
Telefónica’s accesses totalled 319.1 million as of March 2015 and posted double digit growth (+10% year-on-year) driven by the incorporation of E-Plus in T. Deutschland and the sustained pace of growth of T. Brasil and T. Hispanoamérica (+4% year-on-year, in both cases). Also remarkable was T. España, which posted access growth (+1%) for the first time since the second quarter of 2011. The high commercial activity during the quarter focused on value customers is reflected in the strong mobile contract (especially smartphones), fibre and pay TV access growth.

Mobile accesses (252.8 million) increased 13% thanks to a strong increase in mobile contract (+18% year-on-year), which already represented 34% of the mobile base (+1 p.p. year-on-year). Smartphones reached 91.4 million as of March 2015, maintaining a strong growth (+57% year-on-year) and reaching a penetration of 38% (+11 p.p. year-on-year). LTE customers stood at 13.7 million (5.1 times year-on-year) and represented 6% of total mobile accesses (+4 percentage points year-on-year).

Retail broadband accesses grew 1% year-on-year to 17.7 million as of March 2015, with positive net additions (55 thousand accesses) for the fourth consecutive quarter. Fibre accesses stood at 2.1 million (2.1 times vs. March 2014), with quarterly net additions of 308 thousand accesses. Pay TV accesses reached 5.5 million (1.5 times vs. March 2014), with quarterly net additions (379 thousand) that more than tripled the gains for the same quarter of the previous year.