Telefonica SA Financial Highlights January-September 2018 (8462F)

TIDMTDE

RNS Number : 8462F

Telefonica SA

31 October 2018

FINANCIAL HIGHLIGHTS

   --        Improved growth trends. 

(R) Focus on value: LTE (+25% y-o-y; quarterly net adds of +4.9m), "smartphones" (+7%; +2.9m), FTTx and cable (+21%; +550k), mobile contract (+7%; +1.9m), Pay TV (+6%; +109k).

(R) Third quarter revenues, EUR11,699m (-8.3% y-o-y), accelerated their organic growth to +2.7% y-o-y.

(R) OIBDA, EUR4,038m (-1.4% vs. July-September 2017), increased by 4.1% y-o-y in organic terms and OIBDA margin expanded by 0.4 p.p. (+2.4 p.p. reported). Reported OIBDA reflects the following impacts in the quarter:

   (R)     an additional favourable court ruling (EUR307m) and contingencies in T. Brasil (-EUR110m). 
   (R)     hyperinflation adjustment in Argentina (-EUR123m). 

(R) restructuring costs (-EUR34m), capital gains from the sale of towers (EUR24m) and digital companies (EUR21m), and the adoption of IFRS 15 accounting standard (EUR15m).

(R) In the quarter, net income reached EUR1,139m, +35.8% growth y-o-y (EUR0.21 per share; +39.8%).

   --        Capacity optimisation for a sustainable digital future. 

(R) 49.0m premises passed with proprietary FTTx/Cable (+15% y-o-y) and 75% LTE coverage (+6 p.p.).

   (R)     Continued evolution towards smart networks and advanced position in Digitalisation. 
   --        Sustained deleveraging process. 
   (R)     Free cash flow (EUR2,957m in January-September 2018) grew 0.9% y-o-y excluding spectrum. 

(R) Net debt (EUR42,636m at September; -9.7% y-o-y) decreased for the sixth consecutive quarter (-EUR957m).

   --        The Company upgrades guidance and reiterates the dividend announced for 2018. 

(R) Revenue guidance upgraded to growing around 2% (vs. around 1% previously), despite the negative impact from regulation (approximately 0.9 p.p.).

(R) OIBDA margin guidance (y-o-y expansion of around 0.5 p.p.) and CapEx/Sales excluding spectrum (around 15%) reiterated.

-- T. España; best commercial activity in at least 10 years, focused on high-value customers. Net adds; +81k in Fusión, +370k mobile contract; +79k broadband, +306k fibre (+155k retail and +151k wholesale) and +101k in Pay TV. Revenues remained stable (+0.1%) and OIBDA margin stood at 40.5% despite the outstanding commercial success.

-- T. Brasil; solid OIBDA growth in the quarter (+5.5% in organic terms), OIBDA margin expansion for the seventh consecutive quarter (+2.3 p.p.), new record in fibre connections and 980k in contract net adds.

-- T. Deutschland; strong momentum following "O2 Free" portfolio update. Mobile service revenues ex-regulation remained stable and OIBDA margin increased 0.3 p.p. y-o-y in organic terms in the quarter.

-- T. UK; continued growth acceleration in revenues (+7.9% y-o-y in organic terms) and OIBDA (+9.8%), while OIBDA margin expanded by 0.5 p.p., maintaining a market leading contract churn.

-- T. Hispam Sur maintained solid growth in revenues and OIBDA in the quarter (+11.2% and +5.4% y-on-y in organic terms respectively), with positive contract net adds for the fourth consecutive quarter.

-- T. Hispam Norte; the strong commercial activity in value customers enabled a return to growth in revenues (+0.4% y-o-y in organic terms) and OIBDA stability, excluding regulation (-0.6%).

Comments from José María Álvarez-Pallete, Executive Chairman:

"Third quarter results reflect the solid execution of our strategic priorities. To begin with, both high-value customers and their average revenue continued increasing, with a strong level of net additions in mobile contract (including the best figure for Spain over the last ten years), LTE, fibre and Pay TV. More and higher-value customers, coupled with stable churn rates, translates into higher business sustainability. If we add to that the wider coverage of our high-speed networks, the efficiencies we are already achieving in digitalisation and simplification, and the launch of Movistar Home via AURA, among others, we are further strengthening our future positioning.

Additionally, revenues and operating cash flow accelerated their organic annual growth, free cash flow reached 3 billion euros, up 0.9% versus the previous year excluding spectrum, and net debt decreased for the sixth straight quarter.

Improved growth trends, robust and solid business third quarter and our good operating positioning in key markets allow us to upgrade our revenue growth guidance set for 2018."

 
 
 SELECTED FINANCIAL DATA 
  Unaudited figures (Euros in millions) 
                      Jan-Sept         % Chg          Jan-Sep*    July-Sept         % Chg          Jul-Sep* 
 
                          2018   Reported   Organic   2018 (IAS        2018   Reported   Organic   2018 (IAS 
                                                            18)                                          18) 
 
 
 Revenues               35,776      (7.9)       2.2      35,826      11,699      (8.3)       2.7      11,722 
 Telefónica 
  España            9,453        0.5       0.5       9,457       3,188        0.1       0.1       3,188 
 Telefónica 
  Deutschland            5,355      (0.7)     (1.0)       5,337       1,830      (1.1)     (1.5)       1,823 
 Telefónica 
  UK                     4,945        2.8       5.5       5,006       1,721        7.4       7.9       1,737 
 Telefónica 
  Brasil                 7,572     (17.0)       0.2       7,567       2,345     (20.1)     (1.0)       2,348 
 Telefónica 
  Hispam Sur (1)         4,689     (23.8)       9.1       4,698       1,315     (32.3)      11.2       1,326 
 Telefónica 
  Hispam Norte 
  (2)(3)                 3,038      (6.5)     (0.7)       3,041       1,041        0.3       0.4       1,042 
 Other companies 
  & eliminations           725        2.5       8.4         721         259       27.3      25.6         258 
  Telxius                  597        9.1      13.6         592         231       30.6      33.6         230 
------------------- 
 
 OIBDA                  12,035      (2.0)       3.8      11,999       4,038      (1.4)       4.1       4,024 
 Telefónica 
  España            3,797        1.8     (0.2)       3,800       1,290      (1.2)     (1.3)       1,290 
 Telefónica 
  Deutschland            1,352        2.6       0.2       1,325         470        2.9     (0.5)         461 
 Telefónica 
  UK                     1,343        6.5       8.1       1,345         464       12.6       9.8         455 
 Telefónica 
  Brasil                 3,332        5.4       5.7       3,317       1,075        5.0       5.5       1,072 
 Telefónica 
  Hispam Sur (1)         1,236     (29.3)       8.4       1,237         311     (45.1)       5.4         317 
 Telefónica 
  Hispam Norte 
  (2)(3)                   748     (19.5)     (6.1)         751         314      (0.6)     (8.0)         316 
 Other companies 
  & eliminations           227       85.1     100.1         223         114       n.m.      n.m.         113 
  Telxius                  280        6.9      11.5         276         107       29.1      30.9         105 
------------------- 
 
                                      2.0       0.5                                2.4       0.4 
 OIBDA margin            33.6%       p.p.      p.p.                   34.5%       p.p.      p.p. 
 Telefónica                      0.5      (0.3                               (0.5      (0.6 
  España            40.2%       p.p.     p.p.)                   40.5%      p.p.)     p.p.) 
 Telefónica                      0.8       0.3                                1.0       0.3 
  Deutschland            25.2%       p.p.      p.p.                   25.7%       p.p.      p.p. 
 Telefónica                      0.9       0.6                                1.2       0.5 
  UK                     27.2%       p.p.      p.p.                   26.9%       p.p.      p.p. 
 Telefónica                      9.4       1.9                               10.9       2.3 
  Brasil                 44.0%       p.p.      p.p.                   45.9%       p.p.      p.p. 
 Telefónica                     (2.1      (0.2                               (5.5      (1.5 
  Hispam Sur (1)         26.4%      p.p.)     p.p.)                   23.7%      p.p.)     p.p.) 
 Telefónica 
  Hispam Norte                       (4.0      (1.5                               (0.3      (2.6 
  (2)(3)                 24.6%      p.p.)     p.p.)                   30.2%      p.p.)     p.p.) 
 Other companies                                4.9                                          7.0 
  & eliminations         31.3%       n.m.      p.p.                   43.9%       n.m.      p.p. 
                                     (0.9      (0.9                               (0.5      (0.9 
  Telxius                46.8%      p.p.)     p.p.)                   46.0%      p.p.)     p.p.) 
 
 
 Operating Income 
  (OI)                   5,454        6.0      11.1                   1,926        8.6      12.6 
 
 
 Net income 
  attributable 
  to equity holders 
  of the Parent          2,721       11.6                             1,139       35.8 
 Basic and diluted 
  earnings per 
  share (euros)           0.46        6.1                              0.21       39.8 
 
 
 CapEx                   5,680      (4.7)       5.0                   1,795     (26.9)       4.2 
 Telefónica 
  España            1,157        5.4       4.8                     379      (3.4)     (5.2) 
 Telefónica 
  Deutschland              740        7.5       7.6                     316       24.5      24.5 
 Telefónica 
  UK                     1,202       99.1       3.0                     215       26.7      25.0 
 Telefónica 
  Brasil                 1,422      (6.0)      14.0                     530     (11.3)       9.4 
 Telefónica 
  Hispam Sur (1)           685     (26.9)      10.8                     178     (39.1)      18.0 
 Telefónica 
  Hispam Norte 

  (2)(3)                   297     (67.5)    (30.5)                     133     (79.2)    (21.6) 
 Other companies 
  & eliminations           178     (13.8)     (9.5)                      45     (59.8)    (62.1) 
  Telxius                  132      (2.7)       4.6                      34     (56.7)    (58.3) 
------------------- 
 
 Spectrum                  612       21.9      26.5                      19     (96.3)    (92.5) 
 Telefónica 
  España                7          -         -                       7          -         - 
 Telefónica             -          -         -                       -          -         - 
  Deutschland 
 Telefónica           588          -         -                       -          -         - 
  UK 
 Telefónica             -          -         -                       -          -         - 
  Brasil 
 Telefónica 
  Hispam Sur (1)            17     (40.6)      41.6                      11     (59.3)       7.0 
 Telefónica             -          -         -                       -          -         - 
  Hispam Norte 
  (2)(3) 
 
 
 OpCF (OIBDA-CapEx)      6,354        0.7       2.9                   2,243       36.8       4.0 
 Telefónica 
  España            2,641        0.2     (2.2)                     911      (0.3)       0.4 
 Telefónica 
  Deutschland              612      (2.8)     (7.3)                     154     (24.0)    (28.8) 
 Telefónica 
  UK                       141     (78.5)      12.8                     249        2.8     (0.9) 
 Telefónica 
  Brasil                 1,910       15.8     (1.9)                     545       27.8       0.2 
 Telefónica 
  Hispam Sur (1)           551     (32.1)       5.7                     133     (51.6)     (5.5) 
 Telefónica 
  Hispam Norte 
  (2)(3)                   451       n.m.      16.8                     181       c.s.       8.4 
 Other companies 
  & eliminations            48       c.s.      c.s.                      69       c.s.      c.s. 
  Telxius                  148       17.3      18.9                      72       n.m.      n.m. 
-------------------  ---------  ---------  --------              ----------  ---------  -------- 
 
 - Reconciliation included in the excel spreadsheets. 
 Notes: 
 - January-September and July-September 2018 results reported under accounting 
  standards IFRS 15 & 9, effective since January 2018. 
  (*) For comparative purpose only, January-September 2018 results reported 
  under prior accounting IAS 18. 
  - OIBDA and OI are presented before brand fees and management fees. 
  (1) Telefónica Hispam Sur includes Argentina, Chile, Peru and Uruguay 
  (2) Telefónica Hispam Norte includes Colombia, Mexico, Venezuela, 
  Central America and Ecuador. 
  (3) Following the pre-payment of the debt derived from the operating 
  agreement with PARAPAT in Colombia and after taking over its subsidiaries 
  Telebucaramanga, Metrotel and Optecom, the consolidated results are included 
  in the fixed business of T. Colombia from 1 October 2017. For organic 
  comparative purposes, the results of these subsidiaries are included since 
  1 January 2017. 
  - Organic growth: Assumes average constant foreign exchange rates of 2017, 
  except for Venezuela (2017 and 2018 results converted at the closing synthetic 
  exchange rate for each period) and excludes in 2018 the hyperinflation 
  adjustment in Argentina. Considers constant perimeter of consolidation. 
  Excludes the effects of the accounting change to IFRS 15 in 2018, write-downs, 
  capital gains/losses from the sale of companies, tower sales, restructuring 
  costs and material non-recurring impacts. CapEx excludes spectrum investments. 
 

DISCLAIMER

This document may contain forward-looking statements and information (hereinafter, the "Statements") relating to the Telefónica Group (hereinafter, the "Company" or "Telefónica") or otherwise. These Statements may include financial forecasts and estimates based on assumptions or statements regarding plans, objectives and expectations that make reference to different matters, such as the customer base and its evolution, growth of the different business lines and of the global business, market share, possible acquisitions, divestitures or other transactions, Company's results and other aspects related to the activity and situation of the Company.

The Statements can be identified, in certain cases, through the use of words such as "forecast", "expectation", "anticipation", "aspiration", "purpose", "belief" or similar expressions or variations of such expressions. These Statements reflect the current views of Telefónica with respect to future events, do not represent, by their own nature, any guarantee of future fulfilment, and are subject to risks and uncertainties that could cause the final developments and results to materially differ from those expressed or implied by such Statements. These risks and uncertainties include those identified in the documents containing more comprehensive information filed by Telefónica before the different supervisory authorities of the securities markets in which its shares are listed and, in particular, the Spanish National Securities Market Commission.

Except as required by applicable law, Telefónica does not assume any obligation to publicly update the Statements to adapt them to events or circumstances taking place after the date hereof, including changes in the Company's business, in its business development strategy or any other unexpected circumstance.

This document may contain summarized, non-audited or non-GAAP financial information. The information contained herein should therefore be considered as a whole and in conjunction with all the public information regarding the Company available, including, if any, other documents released by the Company that may contain more detailed information.

In October 2015, the European Securities Markets Authority (ESMA) published guidelines on Alternative Performance Measures (APM), applicable to regulated information published from July 3, 2016. Information related to APM used in the present document are included in the Appendix "Alternative performance measures", page 46 of this document. Moreover, recipients of this document are invited to read our condensed consolidated interim financial statements and consolidated interim management report for the six-month period ended Jun 30, 2018 submitted to the Spanish National Securities Market Commission (CNMV), in Note 2, page 13, of the pdf filed.

Neither this document nor any of its contents constitute an offer to purchase, sale or exchange any security, a solicitation of any offer to purchase, sale or exchange any security, or a recommendation or advice regarding any security.

For further information please refer to the information on 2018 third quarter financial results filed by the Company and also available on the Company's website: www.telefonica.com

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

END

MSCGCBDGBDXBGIB

(END) Dow Jones Newswires

October 31, 2018 05:26 ET (09:26 GMT)