Telefonica SA Quarterly results January-June 2018 (8455V)

TIDMTDE

RNS Number : 8455V

Telefonica SA

26 July 2018

FINANCIAL HIGHLIGHTS

   --        Acceleration in the growth of the main financial and operating metrics. 

(R) Increased value accesses: LTE (+31% y-o-y), smartphones (+6%), FTTx/Cable (+23%; record net additions in the quarter of 724k), mobile contract (+6%; 2.2m net additions, 7-year record), Pay TV (+6%).

(R) Revenues (EUR12,144m; -6.3% y-o-y) accelerated their organic growth to +2.0% in the quarter.

(R) April-June OIBDA (EUR4,237m; +1.9% y-o-y) increased by 4.1% organic (+3.3% in the first quarter) and OIBDA margin expanded (+2.8 p.p. y-o-y; +0.7 p.p. in organic terms).

(R) In the second quarter, net income (EUR902m) grew by 9.9% y-o-y and by 11.0% per share (EUR0.16).

(R) Reported April-June results are affected by net positive impacts in OIBDA (EUR225m) and negative impacts in net income (-EUR60m), mainly associated with a favourable court ruling in Brazil, and partial goodwill impairment and tax asset reversal in Mexico.

   --        Radical transformation of our networks. 
   (R)     47.3m premises passed with FTTx/cable (+15% y-o-y) and LTE coverage of 73% (+6 p.p.). 

(R) Leaders in network virtualisation and in the creation of a global customer-centric digital ecosystem.

   --        Financial flexibility continued increasing. 
   (R)     Free cash flow (EUR1,548m in January-June 2018) grew 32.7% y-o-y excluding spectrum. 

(R) Net debt (EUR43,593m at June; -10.1% y-o-y) decreased for the 5(th) consecutive quarter (-EUR382m).

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

-- T. España reinforced its positioning with the launch of O2 Brand and football content acquisition, whilst growing in revenues (+0.3% y-o-y in organic terms) and OIBDA (+0.2%), with OIBDA margin at 40.5% in April-June.

-- T. Brasil organic OIBDA growth accelerated y-o-y in the quarter (+7.1%), with OIBDA margin expansion of 2.2 p.p. after posting a new record in fibre connections and increasing contract net additions y-o-y.

-- T. Deutschland improved its commercial activity in the second quarter with the launch of O2 Free Boost and O2 Connect and grew in mobile service revenues (ex-regulation +0.2% y-o-y organic), OIBDA (+0.3%) and operating cash flow (+3.2% in the first half of the year).

-- T. UK maintained in April-June its leading contract churn in the market, and growth accelerated both in revenues (+5.6% y-o-y organic) and OIBDA (+8.2%), while operating cash flow increased by 21.0% y-o-y in January-June.

-- T. Hispam Sur; solid increase in revenues and OIBDA y-o-y organic growth in the quarter (+8.7% and +8.8% respectively) posting net contract additions in all the countries and a gradual progress in FTTx/Cable.

-- T. Hispam Norte; strong commercial activity focused on high value. April-June revenues -0.4% y-o-y organic and OIBDA -2.8%. However, excluding regulation growth trends accelerated (+1.5% and +5.1% respectively).

Comments from José María Álvarez-Pallete, Executive Chairman:

"Telefónica second quarter results showed an improvement in the y-o-y organic growth trends of revenues, OIBDA and OIBDA margin expansion. Moreover, net debt decreased for the fifth consecutive quarter thanks to the strong free cash flow generation (EUR998 million), which grew by 55% excluding spectrum payment in the UK. These results allow us to reiterate our guidance and dividends for 2018.

Our value offer to customers remains key, and we continue investing and expanding our ultra broadband networks. As of June, we have 47.3m premises passed with proprietary FTTx/cable network, +15% y-o-y. LTE coverage grew by 6 p.p. to an average 73% in all our footprint.

Lastly, we remain convinced that the key levers to a sustainable digital future lie with our capacity to radically transform our networks, create a customer-centric digital ecosystem, establish digitalisation as the cornerstone for generating efficiencies and remain at the vanguard of cognitive intelligence".

 
 TELEFÓNICA 
 SELECTED FINANCIAL 
 DATA 
  Unaudited figures 
  (Euros in millions) 
                         Jan-Jun          %Chg          Jan-Jun*   April-Jun          %Chg            Apr-Jun* 
 
                            2018   Reported   Organic       2018        2018   Reported   Organic      2018 (IAS 
                                                        (IAS 18)                                             18) 
 
 
 Revenues                 24,334      (6.7)       2.0     24,361      12,144      (6.3)       2.0         12,160 
 Telefónica 
  España              6,265        0.6       0.7      6,269       3,167        0.2       0.3          3,168 
 Telefónica 
  Deutschland              3,525      (0.5)     (0.8)      3,514       1,758      (0.7)     (1.2)          1,750 
 Telefónica UK        3,223        0.5       4.2      3,269       1,638        1.9       5.6          1,665 
 Telefónica 
  Brasil                   5,227     (15.6)       0.8      5,219       2,522     (16.7)       0.5          2,521 
 Telefónica 
  Hispam Sur (1)           3,631     (13.7)       8.2      3,630       1,798     (14.0)       8.7          1,798 
 Telefónica 
  Hispam Norte (2)(3)      1,998      (9.7)     (1.3)      1,999       1,027      (1.7)     (0.4)          1,025 
 Other companies & 
  eliminations               464      (7.8)       0.8        461         234      (9.5)     (2.0)            233 
  Telxius                    366      (1.0)       4.0        363         186        2.2       6.1            184 
---------------------- 
 
 OIBDA                     8,102      (0.9)       3.7      8,080       4,237        1.9       4.1          4,227 
 Telefónica 
  España              2,507        3.4       0.4      2,510       1,283        0.1       0.2          1,284 
 Telefónica 
  Deutschland                882        2.4       0.5        864         479        3.7       0.3            464 
 Telefónica UK          879        3.5       7.2        890         450        3.7       8.2            460 
 Telefónica 
  Brasil                   2,257        5.5       5.8      2,245       1,275       23.3       7.1          1,270 
 Telefónica 
  Hispam Sur (1)           1,024     (13.4)       9.8      1,020         507     (15.2)       8.8            506 
 Telefónica 
  Hispam Norte (2)(3)        434     (29.2)     (5.1)        435         176     (40.2)     (2.8)            175 
 Other companies & 
  eliminations               119        8.4      24.8        117          68       21.1      30.6             67 
  Telxius                    173      (3.2)       2.5        171          87        0.3       4.5             86 
---------------------- 
 
                                                  0.5                                         0.7 
 OIBDA margin              33.3%   1.9 p.p.      p.p.                  34.9%   2.8 p.p.      p.p. 
 Telefónica                                 (0.1                              (0.0      (0.0 
  España              40.0%   1.1 p.p.     p.p.)                  40.5%      p.p.)     p.p.) 
 Telefónica                                  0.3                                         0.4 
  Deutschland              25.0%   0.7 p.p.      p.p.                  27.2%   1.2 p.p.      p.p. 
                                                  0.8                                         0.7 
 Telefónica UK        27.3%   0.8 p.p.      p.p.                  27.5%   0.5 p.p.      p.p. 
 Telefónica                                  1.7                              16.4       2.2 
  Brasil                   43.2%   8.6 p.p.      p.p.                  50.5%       p.p.      p.p. 
 Telefónica                                  0.4                              (0.4       0.0 
  Hispam Sur (1)           28.2%   0.1 p.p.      p.p.                  28.2%      p.p.)      p.p. 
 Telefónica                       (6.0      (1.1                             (11.0      (0.7 
  Hispam Norte (2)(3)      21.7%      p.p.)     p.p.)                  17.1%      p.p.)     p.p.) 
 Other companies &                                4.9                                         7.0 
  eliminations             25.6%   3.8 p.p.      p.p.                  29.1%   7.3 p.p.      p.p. 
                                       (1.1      (0.7                              (0.9      (0.7 
  Telxius                  47.3%      p.p.)     p.p.)                  47.0%      p.p.)     p.p.) 
 
 
 Operating Income (OI)     3,697        9.7      10.3                  2,059       14.4      12.2 
 
 
 Net income 
  attributable to 
  equity holders of 
  the Parent               1,739        8.6                              902        9.9 
 Basic and diluted 
  earnings per share 
  (euros)                   0.29      (0.8)                             0.16       11.0 
 
 
 CapEx                     3,932       12.1       5.5                  2,441       29.4       8.8 
 Telefónica 
  España                778       10.4      10.4                    432       16.2      16.2 
 Telefónica 
  Deutschland                424      (2.5)     (2.3)                    228        0.5       0.7 
 Telefónica UK          987       n.m.     (6.1)                    804       n.m.       5.3 
 Telefónica 
  Brasil                     892      (2.6)      17.2                    504      (2.9)      17.6 
 Telefónica 
  Hispam Sur (1)             553     (14.3)       7.9                    302     (13.5)      11.2 
 Telefónica 
  Hispam Norte (2)(3)        165     (40.6)    (36.0)                    111     (22.4)    (20.4) 
 Other companies & 
  eliminations               134       39.4      51.1                     61     (10.6)     (6.4) 
  Telxius                     98       73.6      92.9                     41      (5.5)       0.6 
---------------------- 
 

 Spectrum                    595       n.m.      n.m.                    588       n.m.      n.m. 
 Telefónica               -          -         -                      -          -         - 
 España 
 Telefónica               -          -         -                      -          -         - 
 Deutschland 
 Telefónica UK          588          -         -                    588          -         - 
 Telefónica               -          -         -                      -          -         - 
 Brasil 
 Telefónica               6          -         -                      -          -         - 
 Hispam Sur (1) 
 Telefónica               0       n.m.      n.m.                      -          -         - 
 Hispam Norte (2)(3) 
 
 
 OpCF (OIBDA-CapEx)        4,170     (10.7)       2.4                  1,796     (20.9)       0.3 
 Telefónica 
  España              1,729        0.5     (3.5)                    852      (6.4)     (6.3) 
 Telefónica 
  Deutschland                458        7.3       3.2                    251        6.8       0.1 
 Telefónica UK        (107)       c.s.      21.0                  (354)       c.s.      11.0 
 Telefónica 
  Brasil                   1.365       11.6     (2.6)                    771       49.6     (3.2) 
 Telefónica 
  Hispam Sur (1)             471     (12.3)      12.0                    205     (17.5)       5.5 
 Telefónica 
  Hispam Norte (2)(3)        269     (19.9)      20.4                     64     (57.2)      13.7 
 Other companies & 
  eliminations              (15)       c.s.      c.s.                      7       c.s.      c.s. 
  Telxius                     75     (38.6)    (39.1)                     46        6.2       8.5 
----------------------  --------  ---------  --------             ----------  ---------  -------- 
 
 
 - Reconciliation 
  included in the 
  excel spreadsheets. 
  Notes: 
 - January-June and April-June 2018 results reported under 
  accounting standards IFRS 15 & 9, 
  effective since January 2018. 
  (*) For comparative purpose only, January-March 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. 
 - 2018 Organic criteria 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). 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. 
 
 

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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.

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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 45 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 9, 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.

 
                Investor Relations 
                 Distrito Telefónica - Ronda 
                 de la Comunicación, s/n 
                 28050 Madrid (Spain) 
                 Telephone: [phone] 
                 Pablo Eguirón ([e-mail]) 
                 Isabel Beltrán ([e-mail]) 
                 Adrián Zunzunegui ([e-mail]) 
                 Christian Kern ([e-mail]) 
                 [e-mail] 
                 www.telefonica.com/accionistaseinversores 
 

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July 26, 2018 03:24 ET (07:24 GMT)