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Earnings

Earnings: Telefonica Q2 Profits Down 20 Percent; iPhone Helps Boost O2 UK Customer Growth

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Telefonica (NYSE: TEF) reported second quarter results today, revealing a 20 percent drop in profits in the three months from April-June compared to the same period a year ago. (Last year’s profits, however, had been boosted by its sale of Airwave O2.)  Net income fell to 2.06 billion euros ($3.21 billion) from 2.57 billion euros ($4.01 billion) a year ago. Profits, however, beat analyst expectations, which had forecast 1.82 billion euros ($2.84 billion), according to a Bloomberg survey. Sales climbed modestly to 14.25 billion euros ($22.24 billion) from 14.08 billion euros ($21.98 billion), year on year. Meanwhile, half-year net income declined by 6.2 percent to 3.59 billion euros ($5.61 billion), from 3.83 billion euros ($5.98 billion) year on year. Amid the forest of numbers, an interesting detail on the iPhone. It’s UK unit O2 reported from January to June it added 137,596 pay-monthly customers; an 80.8 percent jump from the same period last year. O2 said the growth was driven by the iPhone and strong traditional handset connections, along with improved churn.

In contrast to Vodafone’s Q2 earnings in which its Spanish market was particularly hard hit, Telefonica saw first-half revenues in Spain grow 1.4 percent year-on-year in the first six months to 10.33 million euros ($16.12 million), with year-on-year growth of 0.8 percent posted in the second quarter of 2008.  Like-for-like revenues grew 2.1 percent, boosted by its 10.4 percent gain in mobile contract customers.

Earnings Highlights From Wireless Units After the Jump

Release | PresentationFinancials

Telefónica España:

— Net adds of 217,060 lines in the second quarter of 2008 up from 289,006 in the second quarter of 2007. At the end of June 2008 the customer base topped 23.2 million, up 5.1 percent year-on-year.

— Contract churn of 1.1 percent, stable with 2007 levels. Voice ARPU fell by 8.6 percent year-on-year in the quarter, to 25.6 euros in the half year.

— Total ARPU in the first half of 2008 stood at 30.6 euros (down 5.1 percent year-on-year). Voice ARPU fell by 8.6 percent year-on-year in the quarter, to 25.6 euros ($40) in the half year. Data ARPU grew 8.9 percent year-on- year in the second quarter of 2008. In the first half, data ARPU increased 9.5 percent year-on-year to 5.1 euros ($8). Data content revenues, including “Superconcursos” contests boosted sales in the first half of the year which also saw a jump in connectivity revenues, which grew by more than 60 percent in the first half of the year. 

Telefonica Europe

At the end of June 2008, Telefonica Europe’s total customer base reached 43.8 million, up 9.8 percent year-on-year.  Revenues for the second quarter were flat year-on-year, while for the first half they declined of 0.9 percent to reach 7.0 million euros (10.92 million).

O2 UK:

— Net mobile customer additions of 274,571 in the second quarter—8 times the second quarter of 2007 figure—taking its total mobile base to 18.7 million, a 5 percent growth year-on-year. Net mobile adds in the first half reached 295,723—up sharply 95.2 percent year-on- year.

The iPhone, in part, boosted net contract adds by a whopping 80.8 percent—or 137,596 contract customers—compared to the second quarter of 2007.

— Telefonica O2 UK’s ARPU for the first half was 30.6 euros ($48), representing a year-on-year growth of 3.7 percent in local currency. Data ARPU was up 12.1 percent year-on-year in local currency compared with the second quarter last year, driven by growth in text message volumes (up 41.4 percent year-on-year), as well as increasing usage of the mobile internet. Non-SMS data revenues grew 46.1 percent year-on-year in local currency. Data ARPU for the first half was 10.5 euros ($16), with a year-on-year growth of 10.8 percent in local currency.

O2 Germany:

— Net additions of 568,374 customers, a 52.0 percent increase on the same quarter last year and a 6.0 percent rise over the previous quarter. Total mobile customer base stands at 13.6 million.

—Total ARPU in the quarter was 15.8 percent lower than the same quarter last year. Total ARPU for the first half came in at 17.7 euros ($28), a decline of 14.7percent year-on-year. Data ARPU was 6.5 percent lower than in the second quarter last year due to the higher number of lower spending prepay users in the base and a shift from SMS to voice usage with the introduction of flat rate voice promotions. For the first half data ARPU was 4.8 euros ($7.50), down 4.7 percent year-on-year. Non-SMS data revenues grew at 22.5 percent year-on-year in the first half while SMS volumes grew 12.6 percent year-on-year.

Telefónica Latinoamérica
 
— Reached a total of 113.5 million mobile accesses, up 27.1 percent from June 2007. Growth was particularly strong in Brazil where Telefónica ended June 2008 with 56.1 million accesses in Brazil. 

Jul 31, 2008 5:45 AM ET

Posted In: Money, Earnings, Companies, O2, telefonica

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