Telefonica signals another tough year as earnings fall short

viernes 9 de mayo de 2014 06:54 GYT

By Julien Toyer and Andrés González

MADRID (Reuters) - Spain's Telefonica set the tone for another difficult year as it missed first-quarter earnings forecasts, hit by falling sales in Europe, weaker currencies in Latin America and the sale of its Czech unit last year.

Europe's biggest telecoms firm by revenue is, like many rivals, betting on costly fibre optic networks and packages of services combining mobile and fixed-line phone, high-speed internet and TV to attract customers and boost growth in future.

For now, however, the investment is pressuring margins and driving down profits, at a time when Europe's economy is struggling to recover from a prolonged period of economic weakness and growth in many emerging markets is slowing down.

Deutsche Telekom on Thursday reported a 4 percent drop in quarterly core earnings, the same as posted by France's Orange last month.

Telefonica said its first-quarter sales dropped 13.5 percent to 12.23 billion euros (10 billion pounds), while operating income before depreciation and amortisation (OIBDA) fell 14 percent to 3.93 billion euros and net profit was down 23.2 percent to 692 million euros - all missing analysts' forecasts.

Analysts said its underperformance was due to its exposure to a still faltering Spanish economy, and to Latin America, where it makes more than half of its revenues but where economic growth has been slowing and currencies weakening.

"Telefonica reported first-quarter results 1 percent shy of expectations ... with trends which are taking longer than expected to stabilise in Spain and Brazil," said Oddo Securities analysts in a note to clients.

"Results are somewhat mixed in Spain and Brazil, good in the UK and uninspiring in Germany and Latin America. As expected, the group reiterated its guidance for organic growth and limited margin erosion. First quarter nonetheless reflects a slight lag on these targets."   Continuación...