Spanish telecom giant Telefonica S.A. (TEF) reported fourth-quarter 2014 earnings per share of 28 cents, down 32% year over year. The company recorded revenues of €12,399 million ($14,046.6 million), down 14.1% on a reported basis but up 5% on an organic basis.
Operating income before depreciation and amortization (OIBDA) came in at €3,190 million ($3,613.9 million), down 35.9% on a reported basis but flat on an organic basis. This resulted in adjusted OIBDA (operating income before depreciation and amortization) margin of 25.7%, down 8.7% year over year on a reported basis and also down 1.6% on an organic basis.
Consolidated operating income declined by a whopping 66.2% on a reported basis to €933 million ($1.057 million) owing to higher personnel expenses. This figure also declined 5% on an organic basis.
Segment Results
Telefonica Latin America: Revenues in Brazil decreased 3.1% on a reported basis and 0.3% on an organic basis to €2,850 million ($3,228.7 million), while in the Hispano-American markets, revenues fell a substantial 49.8% on a reported basis but increased 18.2% on an organic basis to €2,244 million ($2,542.2 million). On a year-over-year basis, OIBDA in Brazil and the Hispano-American markets was 32.6% (down 3.1% year over year) and 22.4% (down 12.4% year over year), respectively.
Telefonica Europe: In Spain, revenues fell 4.9% to €3,038 million ($3,441.7 million) owing to decline in both wireless and wireline revenues. Wireless revenues grossed €1,138 million ($1,289.2 million), down 7.1% year over year, while wireline business deteriorated 0.8% to €2,225 million ($2,520.7 million). OIBDA in Spain dropped 3.3% to €1,551 million ($1,757.1 million) in the fourth quarter.
Revenues from Telefonica U.K. climbed 9.8% on a reported basis and 3.2% on an organic basis to €1,913 million ($2,167.2 million), while in Deutschland, revenues jumped 62.4% to stand at €2,019 million ($2,287.3 million).
Subscriber Statistics
At the end of 2014, total customer access reached approximately 341.0485 million, up 5.5% year over year, primarily driven by increased customers in valuable segments like mobile contract, fiber and pay-TV.
On a year-over-year basis, mobile access increased 7.8% bringing the total to 274.458 million customers. Total Internet and data access declined 5% to 18.1517 million users. Pay-TV access totalled 5.0872 million, up 41.2% year over year. Fixed telephony access decreased 6.4% to 36.83 million and wholesale access inched up 2.6% to 6.5216 million.
Liquidity and Capital Expenditure
Telefonica exited fiscal 2014 with net debt of about €45,087 million ($51,078.2 million), down from €45,381 million ($51,411.2 million) recorded at the end 2013. Telefonica ended fiscal 2014 with cash and cash equivalent of €6,529 million ($7,396.6 million) compared with €9,977 million ($11,302.7 million) at the end of 2013. Net cash provided by operating activities in fiscal 2014 declined 37.3% to €6,067 million ($6,873.2 million).
2015 Outlook
For 2015, Telefonica expects total revenue growth of 7% year over year while OIBDA margin will likely to stabilize with an expected annualized erosion of 1%. Additionally, the company expects net financial debt/OIBDA ratio to below 2.35x.
Latest Developments
In Dec 2014, Telefonica received a green signal from Brazil’s regulatory authority, ANATEL, for its proposed takeover of Vivendi’s broadband assets – GVT. Per the deal, Telefonica will pay Vivendi €4.66 billion (around $6.0 billion) in cash, €450 million ($578 million) in debt obligation and also a 7.4% interest in Telefonica Brasil S.A. (VIV) valued at around €2.02 billion ($2.59 billion).
Further, Vivendi will receive Telefonica’s 5.7% stake in Telecom Italia S.p.A (TI) valued at €1.01 billion (about $1.29 billion), gaining 8.3% of voting rights in the Italian company.
The deal is expected to lend Telefonica a competitive advantage within the broadband segment against stronger rivals like America Movil SAB de C.V. (AMX) and Oi. Telefonica currently carries a Zacks Rank #4 (Sell).
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