Spanish telecom giant Telefonica S.A. (TEF - Analyst Report) reported fourth quarter 2012 results, with adjusted earnings of 46 Euro cents per share (60 cents per ADS) that rose 28.5% year over year.
Adjusted earning for the year was €1.44 ($1.85), down 11.9% year over year.
The company recorded revenues of €15,837 million ($20,541 million) in the fourth quarter that dropped 2% year over year. Revenues for the year declined 0.8% year over year to €62,356 million ($80,184 million)
In the fourth quarter, adjusted operating income before depreciation and amortization (OIBDA) rose 7.6% to €5,976 million ($7,751 billion), resulting in adjusted OIBDA margin of 37.0%, up 10 basis points year over year.
In 2012, adjusted OIBDA declined 4.1% year over year to €21,741 million ($27,957 million), reflecting an adjusted OIBDA margin of 34.9%, down 130 basis points.
Telefonica Latin America: Latin America continued to grow at a faster pace and remained one of the best performing regions. Revenues increased 5.5% year over year to €30.5 billion ($39.2 billion) in 2012, driven largely by Venezuela (representing a growth of 24.2%), followed by Central America (23.8%), Ecuador (20.3%), Peru (18.2%), Argentina (16.5%), Columbia (13.0%), Uruguay (11.2%), Chile (11.2%) and Mexico (2.5%). However, revenue from Brazil registered a decline of 0.8%, in 2012.
Telefonica Europe: Revenues from Europe slid 6.5% year over year to €29.99 billion ($38.6 billion). The reported downside was owing to the operator’s Spanish revenues that slipped 13.2% year over year to €14.98 billion ($19.26 billion).
In Spain, Wireless revenue fell 16.6% to €6.45 billion ($8.29 billion) resulting from a reduction in MTRs. Hurt by weak traffic revenue and repositioning of the new tariff portfolio, Wireline revenues stood at €9.5 billion ($12.21 billion), down 10.2% over the year-earlier period.
Revenues from the Ireland and Czech Republic declined 13.1% and 5.7% year over year to €629 million ($808.8 million) and €2.01 billion ($2.58 billion) respectively in the reported period. Meanwhile, revenues from Germany and UK showed a 3.5% and 1.7% increase to reach €5.2 billion ($6.69 billion) and €7.04 billion ($9.05 billion) respectively.
In December 2012, Telefonica sold its call-centre business-Atento to U.S. based alternative asset management and financial services company-Bain Capital for €1,051 million. The company generated a gain of €61 million from the sale of Atento
At the end of the first nine months of 2012, total customer access reached approximately 310 million, up 2.9% year over year.
On an annualized basis, mobile access rose 3.6% to 247.3 million customers. Total Internet and data access grew 1.4% to 19.4 million. Pay TV access reached 3.33 million, up 0.8% year over year. Fixed telephony access dropped 0.3% to 40 million subscribers at the end of the reported period.
Liquidity and Capital Expenditure (CapEx)
Telefonica exited the first nine months of 2012 with a net debt of about €51.25 billion ($65.90 billion), down from €56.30 billion ($78.40 billion) recorded at the end of 2011. The leverage ratio (net debt-to-EBITDA) improved to 2.36 times compared to 2.46 in 2011.
CapEx grew 0.3% year over year to €9.45 billion ($12.15 billion) in the reported period. Operating cash flow (OIBDA-CapEx) was € 12.870 ($16.59) billion in the reported period, up 6.6% year over year.
For 2013, Telefonica expects revenue and Capex to remain at similar levels as compared to 2012, with lower EBITDA margin decline. Additionally, the company expects Net financial debt to be less than €47 billion.
Telefonica continues to remain under pressure by intensifying European woes, weak domestic operations, slowdown in Brazil, adverse regulations, highly leveraged balance sheet and growing competition from France Telecom S.A. , Vodafone Group Plc (VOD - Analyst Report) and America Movil S.A.B. de C.V. (AMX - Analyst Report).
Telefonica currently has a Zacks # 5 Rank (Strong Sell).