TELEFÓNICA, S.A. NOTA DE PRENSA PRESS RELEASE
Consolidated revenues grow +12% between January and September and for the first time in seven years Spain returns to year-on-year revenue growth in the quarter
César Alierta, Executive Chairman of Telefónica, highlighted the fact that ' third quarter results reflected further acceleration in organic growth figures ', and has emphasized the better performance of the Spanish business, ' which returned to year-on-year revenue growth after 7 years of intense business transformation', and that it 'represents an improvement of commercial activity in virtually all services'.
Mobile data and Hispanoamérica revenues are the main levers in the growth of the Group's consolidated revenues, that as of September had reached 35,337 million euros.
As of September the OIBDA had grown 5.7% reaching 11,013 million euros as a result of the improvement in revenues and the savings obtained by the integration synergies (mainly in Germany) of the efficiency program. Profitability remains stable with a 31.2% margin between January and September.
The Company has invested 7,101 million euros during the first nine months of the year (+44.4% y-o-y), especially aimed at the transformation and differentiation of the networks in order to strengthen its leadership in the main markets, and to respond to the growing demand regarding data consumption.
Telefónica has accelerated the deployment of ultrafast networks. Thus, at the end of the third quarter the Company already had 13.4 million premises passed with fiber in Spain, and 16.6 million in Brazil, while the LTE coverage in Germany reached 73% of the entire population.
Clients grew +12% year-on-year reaching 327.2 million accesses at the end of September. Standing out is the solid behavior of the higher value services, among which are mobile contracts (+17.3%), pay TV accesses (+75.4%), and LTE and fiber accesses which both multiplied more than four times over.
At the end of September, and considering the sale of O2 UK, the leverage ratio is 2.32 times net debt over OIBDA. Net financial debt was reduced by 1,547 million euros in the last quarter to 49,691 million euros.
By geographic areas, 65% of all Group revenues come from its operations in Spain, Brazil, and Germany, while Hispanoamérica represents 30% of all revenues.
Boosted by a differential offer of quality and the excellent commercial activity of the quarter, the business in Spain once again grows year-on-year (+0.2% in the quarter), something that had not occurred since the third quarter of 2008. Movistar Fusión surpassed four million clients after posting 126 thousand net additions in the quarter.
The execution of integration activities has been accelerated in Germany, allowing the the update of the synergy target for 2015, and boosting the year-on-year OIBDA growth, increasing +65.1% so far this year (+16.2% in organic terms).
Despite the macroeconomic context, Telefónica Brasil maintains a sustained growth of its revenues up to September (+4.9% in organic terms), and increases its mobile contract, pay TV, and high speed broadband market share.
Hispanoamérica shows strong acceleration in the behavior of revenues in most countries in the region, translating into a growth of almost +13% between January and September. In local currency, the business in Mexico grew +17.9% between July and September, while at the same time maintaining a solid expansion in terms of profitability.
Regarding the third quarter, in other words the period of time between July and September, the revenues in Spain once again grew for the first time in the last seven years (+0.2% y-o-y). At the same time, the consolidated results of the Group show acceleration in the organic growth rhythm -in other words, assuming exchange rates and constant perimeter-, levered by solid fundamentals.
In this sense, between July and September the year-on-year organic growth in revenue (+4.8%), OIBDA (+4.8%), and operational cash flow (+6.6%) is significantly greater than that of the previous quarters thanks to a solid impulse to the commercial activity focused on clients and value services (fiber, pay TV, LTE, 'smartphones'). Furthermore, the savings obtained from the integration synergies, mainly in Germany, are already starting to produce tangible results. In reported terms, all of this translates into the fact that the year-on-year growth rate in revenue remains strong (+10.8%), OIBDA (+2.9%), and free cash flow (+3.6%) in spite of the negative rate impact of the evolution of the exchange rates during the quarter.
In the results presented today, César Alierta, Executive Chairman of Telefónica, has explained that 'third quarter results reflected further acceleration in organic growth figures derived from increased commercial momentum, mainly in high-value products and services', and has emphasized the better performance of the Spanish business, 'which returned to year-on-year revenue growth after 7 years of intense business transformation', and that it 'represents an improvement of commercial activity in virtually all services'.
Finally, César Alierta has indicated that 'business performance is in line with guidance for 2015, which we upgraded in the previous quarter', meaning that the company reiterates its compliance commitment as well as the dividends policy for 2015 and 2016.
At the end of September, the accesses stood at 327.2 million, an increase of +12% in reported terms (+1% organic y-o-y), levered on the sustained growth of T. Hispanoamérica and T. Deutschland. Worth mentioning is that compared to the previous quarter, accesses decreased slightly due to the application of more restrictive criteria when calculating the prepay customer base in Brazil. Furthermore, the strong y-o-y growth of the value clients continues to stand out, mainly 'smartphones' (+52.3%), pay TV accesses (+75.4%), and LTE and fiber accesses which both multiplied more than four times.
By segment, mobile accesses totalled 251.4 million and grew +12%, on the back of mobile contract (+17%) which already represent 35% of all mobile accesses. 'Smartphones' increased 1.5 times compared to last year, reaching 108.8 million in September 2015, representing an increase in the penetration of 12 p.p. year-on-year up to 46%. LTE clients (23.6 million; 4.3 times y-o-y) represent 10% of all mobile accesses.
For their part, retail broadband accesses stood at 20.9 million, growing +19% with respect to September 2014. There is a net gain of 192 thousand accesses in the quarter, supported by T. Brasil, T. Hispanoamérica, and T. Spain.
Fibre accesses reached 5.8 million (4 times with respect to September 2014), reaching a record net addition of 385 thousand accesses, supported by T. Spain (+230 thousand) and T. Brasil (+148 thousand), while pay television accesses totalled 8.2 million (1.8 times y-o-y), reaching a net profit of 124 thousand clients in the quarter.
Third quarter year-on-year evolution reflected the consolidation of GVT's results in Telefónica Brasil and DTS' in 'Other companies and eliminations' (both since 1 May 2015), as well as E-Plus' in T. Deutschland (since 1 October 2014). Likewise, Telefónica's operations in the UK are reported as discontinued operations within Telefónica Group since January 2014, and their assets and liabilities are classified as 'held for sale' in compliance with International Financial Reporting Standards (IFRS), as a result of the signing in March 2015 of the definitive sale agreement.
Also to take into account is the depreciation of most Latin American currencies against the euro, especially the Brazilian real, the Venezuelan bolivar and the Colombian peso, that had a negative impact on the year-on-year evolution of third quarter results, detracting 8.1 and 7.8 percentage points from reported revenue and OIBDA growth respectively (-2.6 percentage points and -2.8 percentage points respectively in January-September 2015). Also, the aforementioned changes in the perimeter of consolidation (inclusion of E-Plus, GVT and DTS) contributed 13.5 percentage points in the quarter to reported year-on-year revenue growth and 7.2 percentage points to OIBDA growth. In January- September 2015 changes in perimeter contributed 9.9 and 5.7 percentage points to reported year-on- year revenue and OIBDA growth, respectively.
Finally, organic growth comparisons assume constant exchange rates as of 2014 (average FX in 2014). Excludes the impact of hyperinflationary adjustments in Venezuela in both years and O2 UK results for both years after being classified as discontinued operations, and considers constant perimeter of consolidation.
Revenues amounted to 11,919 million euros in the third quarter of 2015 and sequentially accelerated their year-on-year organic growth by 0.4 percentage points to 4.8% (+10.8%). The main growth drivers were mobile data revenues, T. Hispanoamérica (accelerated to 12.6% year-on-year), T. Brasil (sustained mid-single digit growth) and T. España (grew year-on-year for the first time since the third quarter of 2008). In January-September revenues reached 35,337 million euros and increased
+11.9% compared to the same period of the previous year (+4.2% in organic terms).
Per segments, T. España, T. Brasil and T. Deutschland represented 65% of revenues in January- September 2015, while T. Hispanoamérica represented 30%, stable compared to the same period of the previous year.
Mobile data revenues continued to accelerate their year-on-year growth in the quarter to 19.3% (+16.3% in January-September) and represented 44% of mobile service revenues, leveraged on higher smartphone penetration and the growing weight of LTE customers. Non-SMS data revenues improved their growth rate to 26.8% year-on-year organic (+24.3% in the first nine months) and represented 82% of data revenues. Data monetisation therefore continued to contribute to the acceleration of Group revenues.
Operating expenses in July-September 2015 stood at 8,434 million euros, up 14% (+4.8.% in organic terms), driven by the higher commercial momentum and an environment marked by the depreciation of most Latin American currencies against the dollar, partially offset by the savings resulting from integration synergies in T. Deutschland. In January-September 2015, operating expenses (25,043 million euros) increased 14.5% (+4.4% year-on-year organic) mainly as a result of higher network and system costs and other operating expenses
Gains on sale of fixed assets reached 29 million euros in the quarter including the sale of real estate assets in Spain and the sale of non-strategic towers in T. Hispanoamérica. During the first nine months the year this caption reached 118 million euros and primarily included the aforementioned sale of real estate assets in Spain (51 million euros of OIBDA impact), the sale of non-strategic towers (47 million euros of OIBDA impact) and the sale of 'yourfone GmbH' in Germany (15 million euros of OIBDA impact).
Operating Income Before Depreciation and Amortisation (OIBDA) of the July-September period stood at 3,693 million euros (+2.9% year-on-year reported) and continued to accelerate sequentially its year-on-year organic growth in 1.4 percentage points to 4.8%. In January-September 2015, OIBDA totalled 11,013 million euros (+3.5% year-on-year organic; +5.7% reported). In January-September the OIBDA margin reached 31.2%, virtually stable in organic terms compared to the same period of 2014 (-1.8 percentage points in reported terms).
Depreciation and amortisation stood at 2,104 million euros in the third quarter and increased 18.8% (+3.5% organic), mainly due to the depreciation of the new spectrum acquired in Brazil and Spain and the higher investment effort. In the first nine months it amounted to 6,356 million (+4.2% year-on-year organic; +20.8% reported).Operating Income (OI) of the July-September period totalled 1,589 million euros. In January-September 2015, operating income reached 4,657 million euros (+2.6% year-on-year organic; -9.6% reported).
Net financial expenses in the first nine months of 2015 totalled 1,897 million euros, 1.7% lower than the same period of the previous year. The effective cost of the debt in the last twelve months, excluding
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