IHS Global Insight Perspective | |
Significance | Unsurprisingly, the bulk of revenues came from Latin America. There was also continued encouraging performance in Telefónica's U.K. and German markets. |
Implications | The operator has seen increases in higher end contract mobile subscribers across its operations, helping to protect ARPU as subscriber numbers grow. |
Outlook | Telefónica will look to Brazil in particular to drive future growth, having splashed out on Vivo earlier in 2010. |
Telefónica has reported that in the third quarter of 2010 its revenues rose 7.3% year-on-year (y/y) to 44.28 billion euro (US$60.3 billion), of which 42% came from Latin American operations, 11% from Spanish operations, and 25% from other European operations. Operating income before depreciation and amortisation (OIBDA) was up 22.5% y/y to 20.368 billion euro.
In operational terms total subscriber numbers across all markets rose 7.1% in organic terms to 281.8 million. This included a 10.7% y/y increase to 16.7 million retail fixed broadband accesses, a 73.4% y/y increase to 19 million mobile broadband accesses, and a 9.2% y/y increase in mobile accesses, to 214.9 million.
Outlook and Implications
Spain Stable, Europe Encouraging: Within its domestic Spanish market, Telefónica's third-quarter revenues dropped 3.6% y/y as gentle broadband and mobile growth failed to offset continuing fixed-line voice decline, but there are encouraging signs of substitution from lower end prepay to higher end contract users within the operator's Spanish mobile base. Positive second-quarter trends in other areas of Western Europe continued in the third quarter, as robust performances in the United Kingdom and Germany helped to offset testing market conditions in the Czech Republic and Ireland, resulting in 13.7% y/y revenue growth to 3.96 billion euro. Broadband subscriber numbers more than doubled, to 3.852 million, and there was a 5.5% y/y increase in mobile subscriber numbers, including an 8.7% y/y increase in contract subscribers, helped by such trends as smartphone uptake in the United Kingdom.
Latin America Remains Key: As ever, Latin America was a major driver of revenues for Telefónica, with focus now particularly increasing on Brazilian mobile unit Vivo, bought out at a high price back in July (see Brazil: 28 July 2010: Telefónica and PT Reach Agreement on Vivo Sale). Vivo remains the market leader in Brazil with a 30% market share, increasing its subscriber numbers 18% y/y to 57.7 million, including a 30% y/y increase in contract subscribers and a 70% y/y increase in revenues from mobile data services. Despite a 12% y/y increase in mobile subscribers across Latin America, to 144.8 million, the operator noted flat ARPU levels in the region, reflecting healthy uptake of contract subscribers and data revenue growth.
Regulatory Approval for Digital+ Stake Buy: As well as releasing its financials Telefónica, along with media group Telecinco, has been given regulatory approval to gain a stake in Digital+, the pay-TV unit of media group Prisa. The deal includes agreement from Telefónica and Telecinco, each of which will hold 22%, to renounce their veto rights over strategic decisions at Digital+. As such debt-laden Prisa retains controlling influence, free from restrictive behaviour from minority shareholders. Telefónica had agreed the purchase several months back, as a means of investing in the content side of its pay-TV offering (see Spain: 1 February 2010: Telefónica Ups Stake in Prisa to 22%).