2ND UPDATE: Telefonica Net Profit Up On Latin American Growth
July 29 2010 - 4:41AM
Dow Jones News
Spanish telecoms giant Telefonica SA (TEF) said Thursday
second-quarter net profit rose 16% as revenue growth in its Latin
American business compensated for a weaker Spanish market.
Madrid-based Telefonica said net profit rose to EUR2.12 billion,
ahead of analysts' forecasts of EUR1.92 billion.
Telefonica's earnings are solid, said ING analyst Georgios
Ierodiaconou, especially outside its home Spanish market in Latin
America and Europe. He added that organic growth is strong in Latin
America and the performance in Brazil and Colombia is especially
encouraging given past problems in those markets.
The company's shares reacted well to the results and at 0725 GMT
were up 1.9% to EUR17.32 leading an overall negative Spanish
market.
Telefonica has been making moves to bulk up its operations
outside of its mature Spanish market where it is facing diminishing
revenue and stiff low-cost competition.
The company paid EUR7.5 billion Wednesday for a stake in
Brazilian cellular company Vivo Participacoes SA (VIV), which it
plans to merge with its existing fixed-line company Telesp
(TSP).
The company also reiterated its guidance of earnings per share
of EUR2.10 in 2010 and a revenue compound annual growth rate of
between 1% and 4% until 2012. Telefonica has also promised to pay a
dividend of at least EUR1.75 per share in 2012.
Telefonica said operating income before depreciation and
amortization rose 4% to EUR5.79 billion in the second quarter,
while total revenue increased 9% to EUR15.12 billion.
Revenue in Latin America rose 16% to EUR6.44 billion in the
period as the company picked up customers in the region and revenue
was boosted by a weaker euro compared to some key Latin American
currencies.
Meanwhile in Europe, Telefonica's revenue is under pressure from
increased competition as well as the continued fallout from the
economic crisis and the impact of regulatory pressure.
Revenue in Spain, where unemployment tops 20% and low-cost
competition has increased, fell 3.2% to EUR4.69 billion.
In Europe, where Telefonica operates under the O2 brand outside
Spain, revenue increased 14% to EUR3.79 billion as the company's
operations picked up steam in the U.K. and Germany.
Telefonica is Europe's second-largest telecommunications company
by market capitalization behind Vodafone Group PLC (VOD).
-By Jason Sinclair, Dow Jones Newswires, 34 913958127,
jason.sinclair@dowjones.com
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