Summary:

Developing markets continue to be a driving force at Telefonica (NYSE: TEF). The Spanish incumbent, which gets more than 40 percent of its r…

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Developing markets continue to be a driving force at Telefonica (NYSE: TEF). The Spanish incumbent, which gets more than 40 percent of its revenue from its holdings in Latin America, more than doubled its year-on-year net profit in January-September, to €8.84 billion ($12.2 billion), a rise of 65.6 percent. Yet Telefonica still missed analysts’ expectations of a 72 percent rise. Operations in its competition-heavy, recession-hit home market continued to be lacklustre, while the rest of its holdings in Europe actually grew. Total revenue for the period was €44.28 billion ($61 billion), a rise of six percent.

Mobile data still a small part of operations: Total mobile subscribers at the end of September for the Telefonica group stood at 214.9 million, a rise of 4.4 percent. But a large part of those customers are nowhere near using mobile data services. Telefonica reported that the total number of “mobile broadband” users at the end of September (this includes smartphones and dongles) was 19 million, or nine percent of its customer base. Still, that number represents a rise of 73 percent over the year before.

UK leading in mobile data: Mobile subscriptions at O2 UK stood at 22 million. The UK is Telefonica’s third largest market after Brazil (57.7 million) and Spain (24 million) and is one of its best performers in terms of mobile data usage: data made up €10 ($14), or 40 percent, of O2 UK’s mobile ARPU for the period, which was €25.1 ($35). This is being driven by both smartphone and dongle usage.

Broadband: Telefonica Europe, which was largely conceived as a mobile-only operation, has been steadily moving into the fixed broadband market, selling both access and products to use on the network. This is growing in its early days. In Europe it now has 3.9 million subscribers at the end of the third quarter, an increase of 2.3 million lines in the nine months of the year.

Centralising operations: Telefonica, like other large mulitnational operators, has been trying to cut costs by centralising some of its functions and how it rolls out new services in areas like mobile content – where, given its 215 million subscribers, you can see the operators’ scale playing to its advantage in areas like mobile advertising. It’s still early days here, though: Telefonica says centralising has saved it €161 million ($222 million) in the period.
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