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Telefónica's Profits Leap in Q3

Ray Le Maistre
11/12/2007

Spanish giant Telefónica SA (NYSE: TEF) reported a near 39 percent hike in third quarter net income Monday morning driven by growth from all of its three main service regions, Spain, the rest of Europe, and Latin America. (See Telefónica Reports Profit.)

In the three months to September 30, Telefónica generated revenues of €14.2 billion (US$20.7 billion) and net income of €4 billion ($5.83 billion), up 4.8 percent and 38.7 percent respectively compared with the third quarter of 2006. That leap in profits was helped by gains of €1.37 billion ($2 billion) from the sale of Endemol. (See Telefónica Sells Endemol.)

The carrier's numbers for the first nine months of 2007 were even more impressive, with revenues of €42 billion ($61.2 billion) and net income of €7.8 billion ($11.4 billion), up by 8.6 percent and 51 percent respectively compared with the same period in 2006.

Telefónica is expecting its full year revenues to be between 8 percent and 10 percent higher than 2006's €52.9 billion ($77 billion), putting its 2007 revenues range at €57.1 billion ($83.2 billion) and €58.2 billion ($84.8 billion).

With the numbers roughly in line with analyst expectations, following a very bullish recent set of investor day presentations, the carrier's share price edged up only slightly, by less than 1 percent, to €22.58 on the Madrid exchange.

Telefónica now has 218 million customers worldwide (an increase of 12 percent from September 2006), including 160.2 million mobile subscribers (up 16 percent year on year), and 9.6 million retail broadband customers (up 32 percent year on year). Of those retail broadband customers, 4.3 million are in Spain, 4.7 million are in Latin America, and 572,000 are in Europe (excluding Spain).

The Spanish broadband market has 7.7 million customers in total, giving Telefónica a 56 percent market share.

But the carrier reported a slowdown in the sequential growth of its broadband and IPTV subscriber numbers in its domestic market.

Telefónica added 146,000 new DSL customers in Spain during the third quarter, compared with an increase of 205,617 during the second quarter.

During the third quarter the operator signed up 18,142 new subscribers to its Imagenio IPTV service subscriber base, compared with an increase of 32,307 in the prior quarter. Telefónica now has (at September 30) 469,067 IPTV customers in Spain, making it one of the biggest telco TV players in the region. (See IPTV Growth Gets Euro Pop.)

The carrier also has 60,000 IPTV customers in the Czech Republic. (See More Euro IPTV Growth.)

— Ray Le Maistre, International News Editor, Light Reading

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