Vivo pushes Telefónica's net profit above 10 billion euros

Spanish telecoms giant Telefónica's net profit last year climbed 30.8 percent to a record 10.167 billion euros in large part due to one-off gains generated by the purchase of Portugal Telecom's stake in their Brazilian wireless joint venture Vivo.

Excluding extraordinary gains, Telefónica's net income was up only 2.9 percent.

The weakness of its business in Spain, where revenues fell 4.4 percent due to a fall in line usage and stiff competition, was offset by the good performance of its operations in Latin America and the rest of Europe, which helped push revenues up by 7.1 percent to 60.737 billion euros.

Telefónica's gross operating profit in the form of OIBDA amounted to 25.777 billion euros, an increase of 14 percent. However, factoring out the impact of the increase in its Vivo stake the rise was only 0.8 percent.

Telefónica said it had met the financial targets it had set itself for the eighth year running, booking higher-than-expected earnings of 2.25 euros per share. The company set a goal of increasing its revenues this year by 3 percent and an OIBDA margin of close to 40 percent.

It plans to invest 9 billion euros in 2011. Capital expenditure last year was 10.8 billion euros, and included the purchase of spectrum and licenses in Germany and Mexico. Investment in Spain was up 8.4 percent at 2.021 billion euros. Net financial debt climbed by 12.042 billion euros to 55.593 billion euros.

After the purchase of PT's stake in Vivo, accounting regulations pushed up the value of the Brazilian operator on Telefónica's books and swelled earnings by 3.576 billion euros. Telefónica paid 7.5 billion euros for Vivo's holding in PT.

On the negative side, restructuring charges in the second half of the year shaved 862 million euros off Telefónica's net earnings, while a writedown of the value of assets in Colombia cost 450 million euros.

Fourth-quarter fall

The company's fourth-quarter net income fell to 1.33 billion euros from 2.44 billion euros as a result of the restructuring charges.

The number of Telefónica's lines at the end of the year stood at 287.6 million, an increase of 7.2 percent. It added 22.2 million broadband mobile lines, an increase of 63.9 percent, and 17.1 million broadband internet connections, a rise of 27 percent.

Latin America and Europe excluding Spain accounted for 68 percent of revenues, while Spain's contribution was under 31 percent.