telefonica’s profit declines in h1 on competition
Last Updated : GMT 00:34:39
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Arab Today, arab today

Telefonica’s profit declines in H1 on competition

Arab Today, arab today

Arab Today, arab today Telefonica’s profit declines in H1 on competition

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Telefonica, the euro zone’s largest telecoms company, suffered a decline in first-half profit as hard pressed consumers switched to cheaper providers and regulators pushed tariffs lower.While lucrative smartphone growth drove a continued boom in Brazil, the business turned in a lacklustre performance in its home market of Spain, and also in Britain, Mexico and Venezuela.  Some analysts noted a risk to Telefonica’s A-credit rating.“With leverage moving in the wrong direction in a scenario where Standard & Poor’s requires deleveraging as a condition to maintain the current ratings, we see growing risks to (Telefonica’s) A-status,” said Juliano Hiroshi Torii, credit analyst at Societe Generale after the company’s first half results.An economic crunch and unemployment of over 21 per cent in Spain has sent the former monopoly’s clients to cheaper alternative operators.In Britain the company said an increasingly complex competitive backdrop saw revenue per user decline, while tariff cuts were the issue in Venezuela and Mexico.Robin Bienenstock, analyst at Bernstein Research, has a bearish 13 euros per share target on Telefonica stock and has long argued that its dividend policy is not sustainable.“We continue to think Telefonica will miss one, and possibly both, of its key promises: that they would not pay their dividend out of debt and that their debt level would remain below 2.5 times EBITDA at year end.”Overall, first-half net profit fell 16.3 per cent to 3.16 billion euros ($4.5 billion), in line with forecasts, although revenue was below consensus.The company’s shares closed down 0.48 per cent to 15.645 euros, underperforming a 0.86 per cent rise in the STOXX Europe 600 telecoms index, but off an early low of 15.38 euros.Despite the debt concerns, Telefonica told analysts it still expected to meet its debt pledges. Telefonica has a net debt of 55.59 billion euros, up 826 million euros since year end.The sale of call centre unit Atento -cancelled because of adverse markets last month -was one way it had planned to whittle down its burden. Telefonica said it would reconsider floating Atento once market conditions improve. From / Gulf Today

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