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Euro Scorecard: Another 'A' for Telefónica

With Thanksgiving coming up, half of the U.S. is either already on vacation or on autopilot. Therefore, it seems like a good time to turn our attention to Europe and deliver the carrier scorecards for the third quarter of 2007.

Europe clearly has positioned itself as the telco TV center of the world. (See IPTV Growth Gets Euro Pop.) Two of our featured carriers now have more than 1 million TV subscribers each, and British Telecom's BT Vision service has exploded out of the gate. In addition, broadband growth does not appear to have slowed down there, as it's doing in the U.S. (See US Broadband Growth Slows.)

As always, each company is assigned a grade, A through F, derived from revenues; GAAP earnings and earnings per share; subscriber data; and our random subjective whims. "Third quarter" refers to July through September, regardless of whether the carrier labels that as its fiscal third quarter. Note that some carriers, like France Telecom, report halves instead of quarters.

Last quarter's European scorecard can be found here: Scorecard: DT's Struggles Continue. This quarter's North American scorecard can be found here: Carrier Scorecard: Ma Bell Mania.

The results, then:

BT: C
Restructuring costs were a major drag for BT Group plc (NYSE: BT; London: BTA), as its third-quarter earnings took a significant hit thanks to £167 million (US$345 million) worth of charges. (See BT Reports Q2.) But the carrier continues to show steady growth in other key performance areas.

What is most encouraging for BT is the immediate success of its BT Vision service. The service had 46,000 subscribers at the end of September, up from 20,000 at the end of the previous quarter. The carrier claims it has now taken orders for more than 100,000 subscribers. (See Soccer Kickstarts BT's IPTV Growth.)

But since restructuring charges will continue to drag down BT's earnings for this fiscal year, they'll also drag down its scorecard grade.

Table 1: British Telecom's Q3 2007 Scorecard
3Q07 3Q06 Q/Q Change
Revenue (Millions) �5,095 �4,941 +3.12%
Earnings (Millions) �339 �475 -28.63%
GAAP EPS �0.42 �0.57 -26.32%
Access Lines 20,437,000 21,309,000 -4.09%
Broadband Subscribers 11,674,000 8,651,000 +34.94%
Video Subscribers 46,000 n/a n/a




Deutsche Telekom: D
Deutsche Telekom AG (NYSE: DT) remained stuck in the mud. The German carrier has been reporting double-digit drops in income all year and this time nearly hit triple digits. (See DT Reports Q3.)

DT's key growth area remains wireless. The company even made a deal in that arena last quarter, picking up Orange Netherlands from France Telecom. (See DT Goes Double Dutch for $1.9B.)

On the wireline side, we still have no official numbers on how DT's IPTV service is performing. Its goal is to reach 200,000 subscribers by the end of this year, but given the fact that it's just cut the price of its triple-play packages, it is believed that DT is well behind that pace. (See DT Cuts Its IPTV Price.) Table 2: Deutsche Telekom's Q3 2007 Scorecard
3Q07 3Q06 Q/Q Change
Revenue (Millions) � 15,693 � 15,480 +1.38%
Earnings (Millions) � 259 � 1,955 -86.75%
GAAP EPS � 0.06 � 0.45 -86.67%
Access Lines 37,200,000 39,500,000 -5.82%
Broadband Subscribers 13,300,000 10,200,000 +30.39%




France Telecom: P
Orange (NYSE: FTE) gets a P for Pass this quarter because it only releases full financial results every six months. But it was a strong quarter nonetheless, and we expect the French to score very highly on the final scorecard of 2007.

So while we don't know how much money FT made this past quarter, we know that revenues continue to increase and that the company raised its full-year forecasts for 2007. (See France Telecom Boasts Q3 Growth.) During the quarter, its IPTV service also eclipsed the remarkable milestone of 1 million subscribers.

Table 3: France Telecom's Q3 2007 Scorecard
3Q07 3Q06 Q/Q Change
Revenue (Millions) � 13,508 � 13,050 +3.51%
Earnings (Millions) n/a n/a n/a
GAAP EPS n/a n/a n/a
Access Lines 45,441,000 45,809,000 -0.80%
Broadband Subscribers 13,295,000 12,090,000 +9.97%
Video Subscribers 1,017,000 426,000 +138.73%




Telefónica: A
What more can we say about Telefónica SA (NYSE: TEF)? Its third-quarter numbers are downright impressive, with the only decline coming in traditional access lines -- a struggle every carrier is dealing with.

The mounds of debt Telefónica rounded up during its acquisition spree remain a concern, but the company is still growing, and not just because of acquisitions. Telefonica has raised its forecasts for the year and expects total 2007 revenues to be 10 percent higher than 2006's. (See Telefónica's Profits Leap in Q3 and Telefónica Raises Growth Outlook .)

Table 4: Telef�nica's Q3 2007 Scorecard
3Q07 3Q06 Q/Q Change
Revenue (Millions) � 14,188 � 13,542 +4.77%
Earnings (Millions) � 4,018 � 2,897 +38.70%
GAAP EPS � 0.85 � 0.60 +41.50%
Access Lines 42,087,500 42,660,100 -1.34%
Broadband Subscribers 9,260,400 7,285,400 +27.11%
Video Subscribers 1,401,700 881,400 +59.03%




— Raymond McConville, Reporter, Light Reading

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