Telefonica 2014 profits plunge 34.7 percent

25th February 2015, Comments 0 comments

Spain's Telefonica on Wednesday reported a 34.7 percent plunge in profits to 3.0 billion euros ($3.4 billion) in 2014, citing Venezuela's economic crisis and other exceptional costs.

Analysts had predicted an annual result of 3.7 billion euros.

The group's key measure of operating income before depreciation and amortisation (OIBDA) fell 18.7 percent to 15.52 billion euros and turnover declined 11.7 percent to 50.38 billion euros, it said in a statement.

The group had exceptional costs including a 405 million euro restructuring and a 257 million euro decrease in the value of its stake in Italian holding company Telco.

Telefonica, with operations across Europe and Latin America, nevertheless is optimistic of turning around its fortunes in the coming years.

"A period of intense transformation... has strengthened the company, its growth potential and its financial position in just over two years," Telefonica CEO Cesar Alerta said in the statement.

Telefonica is responding to changes in "our customers' technological needs, which are characterised by a booming data usage", he said.

It has set a target of boosting sales by seven percent in 2015 and five percent in 2016.

While it predicts further erosion of its OIBDA margin this year, it expects the measure to stabilise in 2016.

The group plans to step up its value-added activities such as fibre optic cable, pay TV and smartphones, and to focus on its main markets in Spain, Germany and Brazil, the statement said.

In Spain, whose economy in 2014 bounced back after six years of crisis, Telefonica saw a 7.2 percent drop in sales to 12.0 billion euros.

Sales in Germany rose 12.4 percent to 5.52 billion euros, boosted by the acquisition of E-Plus from the Dutch telecoms firm KPN.

In Brazil, Telefonica plans to buy the GVT telecoms group from French giant Vivendi, forecasting operational synergies of 4.7 billion euros.

Last year's turnover shrank 8.1 percent to 11.23 billion euros in Brazil.

Telefonica revealed last month that it was in talks to sell O2 to Hong Kong's Hutchison Whampoa, operator of the Three mobile network in Britain, for £10.25 billion (14 billion euros, $15.9 billion) including £1.0 billion in deferred payments.

The Spanish group wants to pull out of the British market where it has been present since 2005 with the acquisition of O2 for 26 billion euros.

It has already sold its operations in the Czech Republic and Ireland.

The group's debt stood at 45.09 billion euros at the end of 2014.

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© 2015 AFP

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