Telefonica swings into net profit despite weakness on domestic market

Spanish telecoms firm Telefonica (MC:TEF) SA said on Thursday it swung into a net profit in the third quarter from a loss a year before thanks to its German and Latin American units though profitability in its domestic market shrunk.

The company made 706 million euros ($817.6 million) in net profit in the third quarter compared with a 160 million loss in the same period a year ago, following a 785 million euro write-down of assets in Argentina.

While business was brisk in Germany and in Latin America, core profit in Spain during the quarter fell 8.9% from the previous year, mainly because of higher energy costs, the company said, pushing its shares down 1.9%.

Over the first nine months of the year, Telefonica booked a record 9.34 billion euro net profit, mainly because of capital gains made on the sale of its Telxius tower unit and the tie-up of its O2 unit and Virgin Media in Britain.

Overall revenue fell 11% in the third quarter from the same period a year ago as the company has become significantly smaller as a result of assets sales, but core earnings rose 40%.

“Telefonica performed strongly in Q3. We maintained the momentum of year-on-year organic revenue and (core profit) growth for the second consecutive quarter,” its Chief Executive Jose Maria Alvarez-Pallete said in a statement.

Analysts polled by Refinitiv had expected net profit of 568 million euros in the third quarter.

Telefonica reiterated that it expects revenue and core profit to be “stable” or see “slight growth” in 2021, in line with an announcement last quarter.

Like European rivals, the largest Spanish telecom firm has been facing growth issues aside from the impact of the pandemic, and has been selling assets to cut debt and fund an upgrade to next-generation 5G networks.

As a result of its asset disposal strategy, Telefonica managed to reduce its debt to 25 billion euros in September, 32% less than in September 2020.

($1 = 0.8635 euro)

Telefonica swings into net profit despite weakness on domestic market