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Telefónica Reports 2013 Profit Growth

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2/27/2014
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MADRID -- Telefónica today presented its results for the end of year 2013, a year in which the Group’s net profit rose by 16.9%, to a figure of 4,593 million euros, at the same time as it kept its focus on improving financial flexibility and strengthening the balance sheet, through proactive management of its portfolio of assets and solid cash flow generation. This translated into a reduction in the net financial debt of 5,878 million euros in 2013, which places this item significantly below the objective set for the year (€45,381 million vs. <€47,000 million), and a reduction of almost 16.000 million euros in 18 months.

Furthermore, although 2012 was a key year for Telefónica because it represented the start of its transformation process, the financial year 2013 saw the consolidation of the long-term sustainable growth model on which it has been working since then. Thanks to this dynamic, Telefónica has managed to improve its positioning with regard to the competition in the segments and markets of greatest value and has successfully managed to strengthen its efficiency levels. So, as anticipated in September, consolidated earnings rose again (+0.7% organic, +1.8% in the fourth quarter) to 57.061 million euros, while the OIBDA (€19,077 million) and the OIBDA margin (33.4%, -0.2 p.p. organic), meanwhile, remained stable compared to 2012, in line with forecasts, meeting all financial guidances for 2013.

In the report presenting the Company’s annual results, Telefónica’s Chairman, César Alierta, pointed out that the Company will accelerate its transformation in 2014: “Among our targets, we will continue accelerating revenue growth and, at the same time, we will increase investments to anticipate to the growing demand from the increasingly intensive data service usage, as well as the recovery of demand expected in some of our main markets”.

He also explained that “in 2014 Telefónica will double the fibre coverage in Spain to 7.1 million homes passed, reaching the highest coverage levels among the largest economies in Europe. In Brazil we will also increase fibre coverage to 2.5 million homes. In the mobile business, we will expand 4G usage in Europe reaching an average coverage of more than 50%, while we continue leading the mobile data market in Latin America with the progressive launch of 4G.

In addition, Telefónica also announced today its guidance and shareholder remuneration policy for 2014 and reiterates its commitment to pay shareholders, with the distribution in 2014 of a dividend of 0.75 euros per share to be paid in the fourth quarter 2014 (0.35 euros per share by means of scrip dividend) and in the second quarter 2015 (0.40 euros per share in cash).

In the report presenting the Company’s annual results, Telefónica’s Chairman, César Alierta, pointed out that the Company will accelerate its transformation in 2014: “Among our targets, we will continue accelerating revenue growth and, at the same time, we will increase investments to anticipate to the growing demand from the increasingly intensive data service usage, as well as the recovery of demand expected in some of our main markets”.

He also explained that “in 2014 Telefónica will double the fibre coverage in Spain to 7.1 million homes passed, reaching the highest coverage levels among the largest economies in Europe. In Brazil we will also increase fibre coverage to 2.5 million homes. In the mobile business, we will expand 4G usage in Europe reaching an average coverage of more than 50%, while we continue leading the mobile data market in Latin America with the progressive launch of 4G.

In addition, Telefónica also announced today its guidance and shareholder remuneration policy for 2014 and reiterates its commitment to pay shareholders, with the distribution in 2014 of a dividend of 0.75 euros per share to be paid in the fourth quarter 2014 (0.35 euros per share by means of scrip dividend) and in the second quarter 2015 (0.40 euros per share in cash). Atento Group results were deconsolidated from Telefónica Group as of the end of November 2012 (following the disposal of the Company during the fourth quarter of 2012), therefore affecting year-on-year comparisons of Telefónica's reported financial results. The results of the disposed assets relating to the fixed consumer business in the United Kingdom are also excluded as from May 1, 2013.

In 2013 exchange rate fluctuations have negatively impacted main metrics year-on-year performance, mainly due to the devaluation of the Venezuelan bolivar and the depreciations of the Brazilian reais and the Argentine peso against the euro. Thus, exchange rates reduced both revenue and OIBDA year-on-year growth by 7.5 percentage points in 2013, and by 9.2 and 9.4 percentage points respectively in the last quarter. Moreover, changes in the perimeter of consolidation reduced revenue growth by 1.7 percentage points and OIBDA growth by 1.0 percentage point.

Revenues totalled 57,061 million euros in 2013, with growth accelerating to 0.7% year-on-year in organic terms (-8.5% in reported terms) following a 1.8% year-on-year increase in the fourth quarter in organic terms (-8.9% in reported terms). Excluding the negative impact of regulation, organic revenues grew 2.3% compared with 2012 and 3.2% year-on-year in the fourth quarter.

Telefónica Latinoamérica remained the Group's main growth driver, with revenues up 9.6% in organic terms compared with 2012 and by 10.3% compared with October-December 2012. Telefónica Digital also continued improving its organic growth (+19.4% year-on-year in the fourth quarter, +17.9% in the third quarter).

Consolidated operating expenses amounted to 39,112 million euros, up 1.4% year-on-year in organic terms (-7.6% reported) mainly on the back of strong commercial momentum at T. Latinoamérica related to the strategic focus on capturing high-value customers. By components, Supplies grew 2.0% year-on-year in organic terms and Personnel costs increased 4.5% in organic terms compared with 2012 (-15.9% reported), reflecting the negative impact of inflation in some Latin American countries. Moreover, subcontract expenses fell 1.4% year-on-year in 2013 in organic terms.

The average headcount in 2013 was 129,893 employees, 3.9% lower than the average in 2012 excluding the impact of the deconsolidation of Atento.

Telefónica SA (NYSE: TEF)

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