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Telefónica Slashes Capex by 10%

Telefónica SA (NYSE: TEF), it's fair to say, has momentum. While so many other companies have hit sales and earnings speed bumps in the past six to nine months, the Spanish carrier keeps churning out impressive financial results and subscriber growth numbers.

But while it's still predicting further growth in 2009, one line in the Telefónica spreadsheet that won't be increasing this year is capital expenditure -- that's set to fall by more than 10 percent.

Having splashed out €8.4 billion (US$10.7 billion) in 2008 -- an increase of 4.7 percent over 2007, "driven by investment in broadband, pay TV and expansion of the coverage and capacity of wireless networks in Latin America" -- capex is set to top out at €7.5 billion ($9.6 billion) in 2009.

That's a 10.7 percent year-on-year decrease is anticipated investment –- more bad news for the vendor community. Those figures were unveiled today as part of the carrier's full year 2008 financials, which showed group revenues up 2.7 percent to €57.9 billion ($74 billion) and operating income up 3.6 percent to €13.9 billion ($17.8 billion). The carrier's global customer base grew more than 13 percent to 259 million, of which 196 million are mobile customers. (See Telefónica Closes 2008.)

Net income, at €7.6 billion ($9.7 billion), was down nearly 15 percent compared with 2007, though the previous year's numbers had been boosted by a number of asset sales, namely Endemol and Airwave. Without the impact of M&A activities, including an impairment charge against Telefónica's investment in Telecom Italia (TIM) , net income for 2008 would have been up by 38 percent. (See Telefónica Sells Endemol.)

Its IPTV customer base in Spain continues to grow, too: It has now reached just over 612,000, up nearly 20 percent from the end of 2007. Its domestic retail broadband subscriber base is now more than 5.2 million, giving the operator an estimated 57 percent market share.

The carrier says the continued growth is due to its "unique profile," which comprises "extensive business diversification, integrated operations in key markets, strong competitive positioning in its main markets, [and] proven capacity to deliver and financial strength."

As a result, Telefónica expects to see its revenues and subscriber base increase again in 2009.

— Ray Le Maistre, International News Editor, Light Reading

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