- The Company upgrades guidance and reiterates the dividend
announcement for 2017.
- The second quarter of 2017 shows a
general acceleration in growth in main
financials and operational terms.
- Revenues
reached €12,960m in the quarter (+1.9% vs. 2Q16, +3.1% in organic
terms), thanks to improved trends in all segments. Both service
revenues and terminal sales accelerated year-on-year organic growth
(+2.9% and +5.2%, respectively).
- OIBDA
amounted to €4.158m in April-June (+6.1% vs. 2Q16, +7.2% organic
vs. 1.3% in the first quarter). The OIBDA margin stood at 32.1% and
recorded a year-on-year expansion of +1.3 pp (+1.2 pp
organic).
- Free cash flow reached €1,620m in the
January-June period, double than in the same period a year
earlier.
- Net profit for the quarter was €821m
(18.4% vs. 2Q16) and net profit per share stood at €0.15
(+16.3%).
- Debt totaled €48,487m in June, with a
year-on-year reduction of €3,706m, or a €4,981m reduction including
the sale of Telxius. Net debt was €279M lower than at the end of
March.
José María Álvarez-Pallete, Executive Chairman of
Telefónica:
“During the second quarter of the year we have accelerated
organic growth through the execution of our structural
quality-based strategy, which was reflected in the strong
competitive positioning in our main markets. Moreover, we continued
to make progress in our transformation towards becoming a platform
Company, with CapEx devoted to UBB networks, underpinning E2E
digitalization and cognitive intelligence, with a differential
value proposition for customers. All this, with a stronger balance
sheet, after doubling Free Cash Flow in the last twelve months and
reducing net debt by 5 billion euros, when considering the sale of
the stake in Telxius.
The strength and better business trends in the first half of the
year, as well as being well-positioned to continue capturing
sustainable growth in the coming quarters, allow us to upgrade our
guidance for 2017”.
Financial results _ January-June 2017:
Telefónica today announced its results for the first half of the
year, a period characterized by growth across the board and by good
progress in the transformation process of the company and in the
reduction of the group's financial debt. The second quarter of the
year shows the acceleration of this growth, in both financial and
operational metrics.
The Company upgrades guidance and reiterates the dividend
announced for 2017.
- Revenue
guidance upgraded to growth >1.5% (vs. stable previously),
despite the negative impact from regulation (approximately 1.2
p.p.).
- OIBDA margin
guidance (y-o-y expansion up to 1 p.p.) and CapEx/Sales excluding spectrum (around 16%)
reiterated.
Growth across the board
The Company remained focused on increasing the weight of
higher-value service so quality of the Telefónica Group's customer
base continued improving, as reflected by average revenue per
customer increase (+3.1% y-o-y in organic terms) and churn
reduction (-0.2 p.p. vs. the first quarter). Total accesses stood
at 346.2m at June and showed y-o-y growth in LTE (1.6x y-o-y); in
mobile contract accesses (+5% y-o-y); in smartphones (+19%),
achieving a 61% penetration. FTTx and cable customers (10m) grew
19% vs. June 2016 and accounted for 47% of the total fixed
broadband accesses, reaching a coverage of 41.2m premises passed
(+14% y-o-y). Pay TV accesses improved sequentially and returned to
post positive net additions in the quarter (+56k) for the first
time since the second quarter of 2016.
In the second quarter, revenues (€12,960m) increased 1.9%
y-o-y and accelerated growth to 3.1% in organic terms thanks to
improved trends across the board. Also, growth accelerated in
service revenues (+2.9% y-o-y organic) and handset sales (+5.2%).
Mobile data revenues continued to be a key growth driver and
improved their pace of growth in the second quarter to 17.8% y-o-y
in organic terms, increasing their weight over mobile service
revenues by 6 p.p. to 60%. Revenues reached €26,091m in the first
half (+3.4% y-o-y; +2.3% y-o-y organic).
Operating expenses (€9,048m in April-June; -0.2% y-o-y)
grew 1.2% y-o-y in organic terms due to higher network and system
costs and increased personnel expenses.
Operating income before depreciation and amortisation
(OIBDA) totalled €4,158m in the second quarter, growing 6.1%
vs. April-June 2016 (+7.2% y-o-y organic), while OIBDA margin stood
at 32.1% in the second quarter, reflecting a y-o-y expansion of
+1.3 p.p. reported (+1.2 p.p. organic). OIBDA totalled €8,179m in
the first half of the year (+5.5% y-o-y; +4.3% organic) and the
margin reached 31.3% (+0.6 p.p. reported; +0.6 p.p. organic).
As a result, net profit in the quarter (€821m) increased
18.4% y-o-y. In January-June, it reached €1,600m (+28.9% y-o-y).
Basic earnings per share stood at €0.15 in the second quarter
(+16.3%) and reached €0.29 (+30.3%) in January-June.
Solid investment commitment and deployment of
infrastructure
The transformation process of the Company continued its progress
in the quarter, as evidenced by the high investment commitment of
the group and the deployment of infrastructure in the different
geographies. In this way, Telefónica registers at June 30, 41.2 m
premises passed with FTTx and cable (+14% y-o-y) and an LTE
coverage of 68% (89% in Europe). CapEx in the first half
(€3,507m) was focused on 4G and fibre optic network expansion, and
the simplification and digitalisation of processes and systems, and
its y-o-y performance (-4.0% reported; -5.7% organic) reflected
integration synergies, consolidation and network optimisation (“big
data”). Operating cash flow (OIBDA-CapEx) reached €4,672m in
January-June and grew at double digit rates (+13.9% y-o-y in
reported terms; +13.0% organic), reflecting business performance
and lower CapEx intensity. Y-o-y growth accelerated sequentially in
the second quarter 8.6 p.p. up to 17.5% in organic terms (+16.0%
reported).
In addition, Telefónica continues to advance its deleveraging
strategy. Net debt stood at 48,487 million euros at the end of
June and experienced a reduction of 3,706 million euros y-o-y,
or a 4,981 million euros reduction considering the closing of the
sale of Telxius. In the quarter, debt reduction is of 279
million euros compared to March, thanks to free cash flow
generation (€1,021m) and the lower value in euros of the net debt
in foreign currencies (€648m). In January-June 2017, free cash
flow totalled €1,620m, doubling y-o-y, despite the seasonality
associated with working capital.
During the first half of 2017, Telefónica’s financing
activity amounted to approximately €6,884m equivalent and
continue focused on strengthening the liquidity position, and
refinancing and extending debt maturities (in an environment of
very low rates). Therefore, as of the end of June, the Group
maintained a comfortable liquidity position, covering debt
maturities for around the next 2 years. The average debt life stood
at 7.82 years.
Definitions: Organic Growth:
Assumes constant exchange rates from 2016, excludes the impact of
hyperinflationary adjustments in Venezuela in both years and
considers a constant perimeter of consolidation. In OIBDA and OI
terms, excludes write-downs, capital gains/losses from the sale of
companies, sale of towers, restructuring costs and material
non-recurring impacts. CapEx also excludes investment in spectrum.
Underlying Growth: Reported figures excluding the impact of
write-downs, capital gains/losses from the sale of companies, tower
sales, restructuring costs and material non-recurring impacts, as
well as depreciation and amortisation charges from purchase price
allocation processes.
Separately, given the absence of official exchange rates
representative of the economic situation in Venezuela, the Company
has considered the need to estimate a synthetic exchange rate that
matches the progression of inflation to reflect the economic and
financial position of the Group’s subsidiaries in Venezuela in a
more accurate way. This rate has been fixed at 3,547 VEF/USD at the
end of June 2017, affecting the January-June 2017 results reported
by the Company. This new exchange rate reversed the positive
contribution of exchange rates in the first quarter, which became
negative in the second quarter, detracting 0.8 p.p. and 1.3 p.p. to
the y-o-y growth of revenues and OIBDA respectively. Excluding
Venezuela, the contribution would have been positive (+1.5 p.p. in
revenues and +1.8 p.p. in OIBDA in the quarter) on the back of the
appreciation of most Latin American currencies vs. the euro,
particularly the Brazilian real.
Results by geographies:(y-o-y changes in organic
terms)
Telefonica España. In the second quarter of 2017 T.
Espana’s results showed a sequential improvement in revenue
performance. This evolution was driven by higher commercial
activity, with churn reduction in virtually all services, which
reflects the sustainability of the Company's value strategy.
Quarterly service revenues improved their year-on-year performance
compared with the previous quarter and decreased by 0.8%; this
growth would have been positive (+0.2%) if the impact of the lower
revenues from wholesale TV rights of “La Liga” were excluded; an
impact that will be neutralised from August.
Revenues in the second quarter reached to €3,160m (Q2: -1.9%
year-on-year; Q1: -2.6%) and improved compared with the previous
quarter (+0.6 p.p.), thanks to the better service revenue
performance (Q2: -0.8%; Q1:-1.5%; +0.8 percentage points compared
with the first quarter) and despite a higher decline in handset
sales (-31.8%, -1.9 p.p.). Total revenues (€6,226m) and service
revenues (€6,062m) in the semester declined 2.3% and 1.1%
respectively.
OIBDA in April-June rose to €1,282m, which is 1.5% less than the
same period a year ago (Q2:-2.4%), driving a sequential improvement
of 0.9 percentage points explained by the better revenue
performance and cost containment. The OIBDA margin stood at 40.6%
(+0.8 p.p. q-o-q, +0.2 p.p. y-o-y). In the first half of the year,
OIBDA stood at €2,425m with a 1.9% year-on-year reduction. CapEx in
the semester rose to €704m (-20.6% y-o-y) and operating cash flow
grew soundly to €1,720m (+8.0% y-o-y).
Telefonica Deutschland. In a dynamic market increasingly
focused on larger data buckets, Telefónica Deutschland maintained
solid momentum in the second quarter, leveraging on “O2 Free” and
the 15 year anniversary promotions of the O2 brand.
In the second quarter, revenues reached €1,771m and improved
their y-o-y trend to -3.4% (-4.1% to €3,542m in the first half).
OIBDA reached €461m and its y-o-y growth rate accelerated to 3.8%
in the quarter (€861m in January-June; +2.7% y-o-y) as incremental
synergies of €40m offset the negative effect from regulation as
well as continued investments into the positioning of the O2 brand.
OIBDA margin was 26.1% and expanded 1.9 p.p. y-o-y.
In the first half of 2017 CapEx totalled €435m (+1.3% y-o-y),
benefitting from incremental synergy related savings of €20m while
Telefónica Deutschland pushed ahead with network integration and
further rollout of the LTE network. Operating cash flow
(OIBDA-CapEx) totalled €426m in January-June 2017; up 4% y-o-y.
Telefonica UK. Telefónica UK delivered a robust financial
performance in a competitive market, demonstrating the success of
its customer-led, mobile-first strategy, with yet another quarter
of revenue and OIBDA growth built on its market-leading customer
loyalty.
Revenues continued to grow this quarter, up 2.6% y-o-y to
€1,607m (+2.3% in the first half, €3,208m), building on the 2.1%
growth seen in the first quarter, on better trends in both mobile
service and other revenues. The robust revenue and expenses
performance resulted in OIBDA growing by 3.9% y-o-y to €433m in
April-June (vs. +0.6% in the first quarter; €849m, +2.2% in
January-June), while OIBDA margin stood at 27.0% in the quarter, up
0.3 p.p. y-o-y, and was flat y-o-y in the six months to June
(26.5%).
CapEx amounted to €434m in January-June, up 15.4% y-o-y, as
Telefónica UK continued to invest in the rollout of LTE. Thus,
operating cash flow (OIBDA-CapEx) decreased by 8.7% y-o-y to reach
€415m in the first half.
Telefonica Brasil. In the second quarter of 2017,
Telefónica Brasil continued to show an acceleration in revenue
growth that, coupled with a reduction in operating expenses for the
sixth consecutive quarter, allowed to maintain solid growth in
OIBDA and operating cash flow, in a context of expanding margins.
This performance was achieved in spite of the regulatory impacts
(-45.6% in mobile interconnection rates, -17.7% in fixed-mobile
retail, -35.3% in fixed local and -50.9% in fixed inter-urban,
since 25 February 2017).
Revenues in the second quarter (€3,028m) grew 1.8% y-o-y (+1.7%
in the half year) despite the regulatory effects (impact of -1.8
p.p. in y-o-y change for the second quarter; -2.0 p.p. for
January-June) and lower handset sales (-0.4 p.p. in y-o-y change
for the quarter and for the half year). Thus, OIBDA totalled
€1,034m in the second quarter (+7.0% y-o-y; +7.2% in the half year)
and OIBDA margin stood at 34.1% in the quarter and at 34.5% in the
first six months (+1.7 p.p. and +1.8 p.p. y-o-y respectively).
CapEx for January-June 2017 (€915m; -3.6% y-o-y) was primarily
allocated to the expansion of the 4G and fibre networks. As a
result, operating cash flow (OIBDA-CapEx) amounted to €1,223m in
the first half (+17.0% compared to January-June 2016). In the first
half of the year, synergies due to the purchase of GVT had a
positive impact in operating cash flow of €286m (€833m in the last
two years).
Telefonica Hispanoamérica. In the second quarter of the
year, Telefónica Hispanoamérica recorded strong year-on-year growth
in revenue, OIBDA and operating cash flow both in organic and
reported terms, despite the change in the Venezuelan exchange rate
to a synthetic conversion rate of 3.547 bolivars fuertes per US
dollar.
Revenues in the second quarter (€3,134m) were up 15.5% y-o-y
(+12.3% in January-June), posting robust acceleration (+9.2% in the
first quarter), with a positive contribution from mobile service
revenues (+18.2% y-o-y; +10.6% y-o-y in January-March) and fixed
(+5.7%; +4.1% y-o-y in the first quarter). In reported terms,
revenues increased by 5.9% (+6.7% in January-June). OIBDA reached
€892m in the quarter and accelerated its y-o-y growth up to 20.9%
(+6.2% in the first quarter; +13.5% in the first half) with the
notable positive contributions from Argentina, Mexico and Colombia.
In reported terms, OIBDA increased 6.9% (+5.7% in the first six
months of the year to €1,796m). Thus, OIBDA margin stood at 28.5%
for the six-month period (+1.3 p.p. y-o-y) and 28.0% in the half
year (+0.3 p.p. y-o-y).
CapEx amounted to €923m in January-June, decreasing by 6.2%
y-o-y, and was mainly aimed at improving the network, with the
deployment of 4G and fibre optic networks, as well as the
simplification and digitalisation of processes and systems. Thus,
operating cash flow (OIBDA-CapEx) amounted to €873m in the first
six months with a year-on-year growth of 43.2% (+28.2% in the
reported terms).
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170727005616/en/
TELEFÓNICA S.A.PRESS OFFICEFiona Maharg,
+91.482.36.28prensatelefonica@telefonica.com
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