Loss-making Telefonica bucks COVID-19 to lift revenues in Q3 | Light Reading

Loss-making Telefonica bucks COVID-19 to lift revenues in Q3 | Light Reading

In a mixed bag of results, Spanish operator Telefnica says it expects to see a return to profit by 2022, while logging a loss in Q3.

Talk it up: Telefonica CEO Jose Maria Alvarez-Pallete is upbeat about the future, as the company announces a FTTH deal with Allianz.  (Source: Telefonica)

Talk it up: Telefnica CEO Jos Mara lvarez-Pallete is upbeat about the future, as the company announces a FTTH deal with Allianz.
(Source: Telefnica)

At the same time, the telco announced a new partnership with German insurer Allianz to build energy-efficient fiber to the home (FTTH) networks in Germany. The deal is worth around 5 billion ($5.82 billion).

Telefnica and Allianz will each hold 50% under a co-control governance model, creating an independent open-access wholesale operator focused on deploying fiber in rural and semi-rural Germany.

This comes as fiber plans in Latin America, notably Brazil and Chile, are “progressing nicely,” according to COO Angel Vila.

He said the plan is to connect 5 million Brazilian homes, and includes possibly buying smaller local fiber companies. A group of local and international businesses had been selected as potential partners.

Ups and downs

Revenue rose 1.2% in the third quarter over the second, despite a 591 million ($698.50 million) blow from COVID-19.

The company claimed this was due to a surge in activity in their four main markets – Spain, Brazil, Germany and the UK.

A 785 million ($914.98 million) impairment charge in Argentina didn’t help – leading to a net loss of 160 million ($186.49 million).

Telefnica forecast free cash flow of more than 4 billion ($4.6 billion) at the end of this year.

Third quarter revenues totaled 10.46 billion $(12.19 billion); a 12.1% reduction year on year. In the first nine months of the year, revenues totaled 32.16 billion ($37.49 billion), down 10.7%.

Broken down by region, Spain accounted for 29% of total revenues in the first nine months, up to 9.1 billion ($10.72 billion). Brazil contributed 18%, with 5.67 billion ($6.6 billion), Germany 17%, with 5.5 billion ($6.41 billion) and the UK 15%, with 4.96 billion ($5.78 billion). Latin America meanwhile hit 19%, with 5.98 billion ($6.97 billion).

Switching the lens

“Thanks to the implementation of the strategy presented a year ago and the robustness of our business, trends are improving in the third quarter, with a clear recovery in commercial activity in our key markets,” said Telefnica CEO Jos Mara lvarez-Pallete

“We are growing in revenues compared to the previous quarter, and the operating cash flow margin remains stable, in line with our objectives We are facing the current scenario with a solid liquidity position, which exceeds 22,400 million euros, and allows us to cover debt maturities for the next two years.”

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While lvarez-Pallete appeared upbeat, the markets didn’t entirely agree, with shares shares were down 6.3%, making them the worst performers on Spain’s benchmark IBEX-35 index, down 0.9%

The stock has been tracking lower over the past five years and is now more than 50% below its level at the start of 2020.

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Fiona Graham, Editorial Director, Light Reading

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