Telefonica delivers net profit but Spanish businesses wither, Telecom News, ET Telecom

MADRID: Spanish telecommunications company Telefonica SA said on Thursday it recorded third-quarter net profit after losing a year earlier thanks to the performance of its foreign units, although rising energy costs affected the profitability of its indoor market.

The company posted net profit of 706 million euros ($ 817.6 million) in the third quarter, compared to a loss of 160 million in the same period a year ago, following an impairment of 785 million. euros of assets in Argentina.

While activity was strong in Germany and Latin America, core income in Spain for the quarter was 8.9% lower than the previous year.

This was mainly due to rising energy costs and higher costs for sports content after rights holders granted a discount in 2020 due to the pandemic, the company said. Stocks initially fell 2.9%, but then partially recovered and were down 1.4% by midday.

Rising energy costs in Spain will likely continue to weigh on Telefonica’s profitability for a few quarters to come, COO Angel Vila told analysts on Thursday on a conference call.

The effect “will wear off at some point next year,” he added. In the first nine months of the year, Telefonica posted a record net profit of 9.34 billion euros, mainly due to the capital gains realized on the sale of its Telxius tower unit and the merger of its O2 unit and Virgin Media in Great Britain.

Overall revenue fell 11% in the third quarter compared to the same period a year ago as the company grew considerably smaller as a result of the asset sale, but core profits increased by 40%.

“We maintained momentum in organic revenue and year-over-year (basic profit) growth for the second consecutive quarter,” CEO Jose Maria Alvarez-Pallete said in a statement. .

Analysts polled by Refinitiv expected a net profit of 568 million euros in the third quarter.

Telefonica reiterated that it expects revenue and basic profit to be “stable” or to “grow slightly” in 2021, according to an announcement last quarter.

Like its European rivals, Spain’s largest telecommunications company has faced growing challenges outside of the impact of the pandemic, and has sold assets to reduce debt and fund an upgrade to 5G networks. new generation.

Thanks to its asset disposal strategy, Telefonica succeeded in reducing its debt to 25 billion euros in September, 32% less than in September 2020.

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