LatAm Saves Telefonica in Q1

Telefónica SA (NYSE: TEF) reported first-quarter net income of €1.62 billion (US$2.3 billion), down 1.9 percent compared with a year ago, despite a strong performance in Latin America and in its non-domestic European operations.

Group revenues increased 10.8 percent to €15.44 billion ($22.1 billion), fueled by a 26 percent increase in revenues in Latin America to €7 billion ($10 billion) and a 8.4 percent rise in Europe (not including Spain) to €3.9 billion ($5.6 billion). Telefónica's domestic market is where the carrier's problems lie as revenues declined to €4.4 billion ($6.3 billion), down 5.6 percent compared with the same period a year ago.

Financial analysts had been expecting slightly higher revenues and a net income of around €1.74 billion ($2.5 billion). The operator's share price slipped slightly in early-morning trading in Madrid, but recovered later in the morning to be 0.3 percent up at €17.02.

Telefónica, which now has 290.5 million customers worldwide, knows it needs to sit out the current economic downturn in Spain that's affecting customer spending, and it's cutting its domestic operating expenses accordingly during the next few years. Fortunately, though, the operator is not reliant on its domestic market, as 71 percent of revenues now come from markets outside Spain.

And the Spanish giant hasn't put the brakes on its technology spending plans -- it's determined to keep investing for the future. Group capex in the first quarter totaled €1.55 billion ($2.2 billion), up more than 30 percent year-on-year, with 81 percent of that total sunk into fixed and mobile broadband network technologies. It's not holding back on its domestic investments either, as Telefónica's first-quarter capex in Spain was €386 million ($552 million), an increase of nearly 16 percent year-on-year.

Meanwhile, it seems Telefónica is planning an IPO for its call center division Atento. According to Reuters, the Spanish carrier is hoping to raise around €800 million ($1.14 billion) by floating up to 55 percent of the operation on the Madrid stock exchange.

— Ray Le Maistre, International Managing Editor, Light Reading

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