Telefonica fourth-quarter operating profit falls 36% to €3.19bn

Profit weighed down by charges at telecommunications firm’s Venezuelan business

Telefonica reported a 36 per cent decline in fourth-quarter operating profit after writing down the value of its Venezuelan business to account for lower exchange rates.  Photo: Reuters
Telefonica reported a 36 per cent decline in fourth-quarter operating profit after writing down the value of its Venezuelan business to account for lower exchange rates. Photo: Reuters

Telefonica reported a 36 per cent decline in fourth-quarter operating profit after writing down the value of its Venezuelan business to account for lower exchange rates.

Operating income was €3.19 billion stripping out interest, depreciation and amortisation, compared with €4.98 billion a year earlier, the Madrid-based carrier said in a statement Wednesday. Revenue fell 14 per cent to €12.4 billion.

Europe’s largest investor in Latin American telecommunications in putting greater emphasis on a region that already accounts for half of its revenue.

Telefonica is working on completing its $9 billion acquisition of Brazilian broadband provider GVT from Vivendi.

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It's in exclusive talks to sell its UK wireless unit O2 to Hong Kong billionaire Li Ka-shing's Hutchison Whampoa, after bulking up its German business with the takeover of E-Plus last year. Fourth-quarter net income slumped 90 per cent to €152 million.

Telefonica wrote down the value of its Venezuelan assets by €2.8 billion after switching to an exchange rate 76 per cent lower than the one previously used. The revision would cut operating profit by €915 million and net income by €399 million, the company said on February 16.

Telefonica Brasil on Tuesday reported declines in earnings before interest, taxes, depreciation and amortization as well as profit margins from a year earlier.

The German business forecast higher earnings after revenue topped analysts’ estimates.

In Spain, Telefonica is seeking to improve profit margins as it grapples with a shrinking customer base.

The company’s market share in mobile services was 32 per cent in November and 45 per cent for broadband, compared with 34 and 47 per cent, respectively, a year earlier, based on the most recent data compiled by local regulators. Telefonica shares have gained 14 per cent this year.

The acquisition includes a 4.66 billion-euro cash payment by Telefonica Brasil, financed by a capital increase. Telefonica, which holds 74 per cent of the unit, would subscribe proportionally to the share sale, to be financed by a capital increase by the parent company itself.

Bloomberg