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Telefonica subs up, revenues down

November 12, 2014

From David Del Valle in Madrid

Bundled packages – combining mobile and fixed-line phones, high speed Internet and pay TV – have stopped the subscriber decline in Spanish pay-TV market but to the detriment of revenues and profits.

Telefonica is experiencing a huge growth in the number of pay-TV subscribers becoming the main driving force behind the pay-TV business with 1.6 million customers at the end of the third quarter, up from 609,000 in the same quarter the previous year, adding 370,000 new clients only in the third quarter.

Fibre subs growth accelerated in the quarter with net additions of 208,000, up 30 percent compared with the second quarter and more than doubling year-on-year to reach 1.1 million accesses.  The operator’s fibre deployment also continued to accelerate, connecting a total of 8.8 million households at the end of September, with plans to reach 10 million households at the end of the year.

Despite the increase in the number of customers, Telefonica’s net profit fell 9.4 per cent during the period to €2.85 billion. Operating income before depreciation and amortization (OIBDA) dropped 12.6 per cent, to €12.33 billion and revenue shrank 10.9 per cent to €37.98 billion.

Telefonica’s Spanish unit (Telefonica Espana) reported sales of €3 billion in the third quarter of 2014, down 6.6 per cent from a year earlier but up 2.5 percentage on the previous quarter. Telefonica said the results showed that its gradual revenue stabilisation was continuing and reflected the positive impact of the increased commercial activity that begun in the second quarter as well as the lower customer churn. The company’s revamped Movistar Fusion convergent package continued to grow, reaching a customer base of 3.6 million and representing 70 percent of the fixed broadband base and 55 per cent of mobile contracts in the consumer segment.

Telefonica Espana’s operating income before depreciation and amortization (OIBDA) for the July-September period fell 14.4 per cent in organic terms from a year earlier to €1.38 billion, a slight improvement on the 16.5 per cent fall posted in the previous quarter. The company’s OIBDA margin stood at 46 per cent in the third quarter, down from 50.2 per cent in the year-earlier quarter but up 1.2 percentage points quarter-on-quarter. Capex for the quarter came in at €484 million, a substantial increase on the €282 million invested in the third quarter of 2013, due above all to the faster pace of connection of fibre and TV customers and the operator’s accelerated rollout of fibre and 4G networks.

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