Convergencia Research, Consultoría especializada en Latinoamérica y Caribe
Thursday, November 04, 2021

Telefónica has record profits and confirms that it wants to reduce its exposure in Latin America

The company had revenues 11% lower than a year ago due to divestitures and mergers. Regarding the region, it aims to "crystallize" the value of its assets and increase debt in local currency. Hispam contributed 19% of the income.

Telefónica's balance sheet for the third quarter highlighted that the company continues in the process of improving its results and reducing the weight of its debt. But it also implied a ratification of the company's decision to continue reducing its exposure in Latin America.

"The company continues to execute the strategic plan announced two years ago with the development of various fiber vehicles, growth through acquisitions of Telefónica Tech or the progress derived from the management to reduce exposure at Hispam", the company said in a statement.

Telefónica reported that its quarterly revenues totaled € 9.298 billion, 11.1% less than in the same period in 2020, a decrease that is "mainly a consequence of changes in the company's perimeter", it explained in relation to the merger in the United Kingdom of O2 and Virgin, the sale of the Telxius towers and the divestment in Costa Rica. "Excluding changes to the perimeter, reported revenue growth is in line with organic growth", the report added. In this context, net profit was € 706 million for the quarter.

José María Álvarez-Pallete, President of Telefónica, highlighted: “During the third quarter, Telefónica's performance has been solid. The year-on-year growth rate of revenues and OIBDA has been maintained for the second consecutive quarter, with acceleration in the growth of revenues from services and B2B”.

The weight of revenues associated with broadband connectivity, together with services that go beyond connectivity, increased 3.8 percentage points in the last year, accounting for 71% of total service revenues.

Between July and September, and for the second consecutive quarter, both revenues and OIBDA (EBITDA) have grown in organic terms by 3.6% and 1.6%, respectively, to € 3.734 billion. The group's net financial debt fell to € 25 billion at the end of September, 31.8% less than in September 2020.

Markets and Latin America. By markets, the Group's top four provided 78% of the quarter's revenues. Spain contributed 29%; Germany, 18%; Brazil, 16%; and the United Kingdom, 15%. Hispam contributed 19%.

Regarding this region, Telefónica observed that it continues to “reduce its exposure to the region and crystallize the value of its assets, increasing local debt and reducing the capital employed”, and highlighted the sales of its operations in Costa Rica for €455 million to Liberty Global, which was completed during the quarter, and El Salvador to Corporación Multi Inversiones for US$144 million, in October.

Hispam's revenues amounted to 2.124 billion Euros, 11.6% more year-on-year. The unit totaled 93.1 million mobile accesses (+3.9% year-on-year); 5.7 million fixed broadband accesses (+5.4%), of which 4.08 million are served with FTTH; and 2.86 million pay TV (+0.5%), with 811,000 with IPTV (+61.8% year-on-year).

Hispam business unit "already operates as an autonomous company with a shared service center that generates efficiencies, while preparing to capture growth opportunities in the main markets", it added. In this sense, it reported that, in terms of potential opportunities for growth in the region, during the third quarter it signed agreements in Argentina with third parties to build more than 250,000 BUs (in relation to the infrastructure sharing alliance with Sion). In Chile, InfraCo started operations with an additional 713,000 FIUs deployed in the first nine months, while the InfraCo created in Colombia is awaiting regulatory approval.

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