Telefónica has registered a net profit of 298 million euros in the first quarter of the year, 57.8% less than in the same period of the previous year, in which it earned 706 million. Revenues have reached 10,047 million, which represents a growth of 6.7% compared to the same period in 2022, with increases in all business units and in key markets (Spain, Brazil, Germany and the United Kingdom), despite the existing inflationary tensions.
The company explains that the drop in net income is due to three factors outside of the main business: the capital gains recorded in the first quarter of 2022 from the sale of the fiber network in Colombia; the accounting adjustment for the valuation of the joint venture between Virgin Media and O2 in the United Kingdom (-188 million); and the corporate tax expense that increased by 71.7% to 162 million due to the tax reversal in Germany for the payment of UMTS licenses that also took place in the first quarter of last year. Telefónica’s shares dropped 2.36% at mid-morning, reaching 3.93 euros.
The operating result of the operator’s group (Oibda) stood at 3,121 million euros at the end of March, with a decrease of 2.4% compared to that registered in the first three months of last year. Exchange rates have been favorable for yet another quarter, with a positive contribution to group income of 136 million and 47 million in the case of Oibda.
At the end of the first quarter, net debt stood at 26,443 million euros, 3.5% less than that existing a year earlier, and 244 million less than at the end of last year as a result of the company’s financial strength and the cash generated by the businesses. As of March 31, free cash generation has reached 454 million euros.
Telefónica has indicated that it is facing the current scenario of inflationary pressures and interest rate rises with a solid financial and liquidity position. More than 80% of the debt is anchored at fixed rates, the company has maturities covered in the next three years, the average life of the debt is 13.2 years and the liquidity position is close to 21,400 million of euros.
The company has stressed in a statement that the results for the first quarter place it on the path to meeting the financial targets for the year as a whole and allow it to confirm the distribution of the 2023 dividend, of 0.30 euros per share, payable in two sections, in December 2023 and June 2024.
“We have started the year strong, despite the enormous challenge of the global economic environment. We continue to execute our strategic plan and add another quarter of accelerated revenue growth in all the regions in which Telefónica is present. For all these reasons, we are on the right track towards meeting our financial targets for the year as a whole, and we can also confirm the expected dividend for 2023. Telefónica continues to meet its debt reduction commitment and continues to strengthen its balance sheet thanks to its ability to anticipate ”, has indicated José María Álvarez-Pallete, president of Telefónica, in a note.
Subsidiaries and global units
All the key markets grew in turnover. The Spanish subsidiary has increased its income by 0.3%, up to 3,088 million euros; those of Germany have grown by 8%, to 2,101 million, those of Brazil, 17.5%, to 2,282 million euros, and those of the United Kingdom, where it operates through the joint venture with Virgin Media and O2, they reached 2,947 million euros, 3.9% more. Regarding the subsidiaries that report net results, Telefónica Brasil earned 152.5 million euros in the first quarter (+11.3%); Telefónica Deutschland slightly raised its profit to 30 million euros (27 million in 2022) and Virgin Media O2 recorded a net loss of 289.5 million pounds (-333 million euros) due to accounting adjustments, compared to profit from 91.9 million last year. For its part, Telefónica Hispam, which brings together all the subsidiaries in Latin America except Brazil, increased its revenues by 4.1% although its Oibda fell by 31.6%.
The good behavior of revenues has also been reflected in Telefónica Tech, a global unit in which they have grown by 43.5% in the first quarter, to 429 million euros, thanks to the growth in revenues from the B2B segment.
Telefónica Infra has also continued to strengthen Telefónica’s position thanks to the creation of value and the implementation of new fiber infrastructure models. Telxius, Telefónica’s submarine cable business, has registered an increase in reported income of 8.4% and 10.4% in the case of Oibda, which has grown for the fifth consecutive quarter.
Clients and networks
Telefónica’s customer base has grown by 4% between January and March, reaching 383.6 million, with strong growth in fiber access (+16%) and mobile contract access (+7%).
The company maintained a good rate of fiber deployment, with a total of 168.9 million real estate units passed at the end of March, 4% more than a year ago, of which a total of 66.6 million (+15 %) runs through Telefónica’s own fiber networks. Regarding 5G technology, already available in the four main markets, during the quarter the company launched the pure version (without using the 4G network or stand alone) in Brazil, and plans to launch it in the United Kingdom, Germany and Spain throughout 2023. At the end of March, 5G already covered more than 2,100 locations in the United Kingdom, more than 82% of the population in Germany, 85% of the population in Spain and 58 cities in Brazil. The acceleration of fiber and 5G deployments is compounded by the closure of the copper plants in Spain, scheduled for April 2024.
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