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November 14, 2006 5:49 pm

Telefónica enjoys sales surge

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Telefónica, the Spanish telecoms group, on Tuesday revised sales forecasts upwards for the year as it unveiled a 59 per cent year-on-year increase in net profits for the first nine months, to €5.2bn.

A 43 per cent surge in sales, to €38.7bn, was largely due to the consolidation of O2, the UK mobile operator it bought last year for €26bn. The figure was slightly above analysts’ expectations. However a 50 per cent year-on-year increase in amortisation and depreciation charges – reflecting the first goodwill write-down related to the O2 acquisition – meant profits came in below consensus forecasts.

After stripping out a net extraordinary gain of €1.5bn from the sale of TPI, Telefónica’s directories business, net profits were ahead about 13 per cent.

On a like-for-like basis, sales grew 7.5 per cent, and operating income, by 6.2 per cent. Telefónica said it expected sales growth for the full year of above 37 per cent, compared with guidance of between 34 and 37 per cent. It attributed its optimism to healthy growth in broadband clients in Spain and Latin America, its two main markets.

The company, which claims to be the third largest in the world by number of connections, confirmed it was keen to forge closer links with China Netcom, the state-owned Chinese carrier in which it holds a 5 per cent stake.

Executives confirmed that the planned €323m purchase of 8 per cent of PCCW, Hong Kong’s dominant telecoms group, would be a precursor to raising its holding in Netcom, which in turn holds 20 per cent of PCCW.

Executives told analysts yesterday that they hoped eventually to swap the PCCW stake for a further 5 per cent of the mainland carrier. However, they refused to be drawn on speculation that Telefónica was interested in the Brazilian business of Telecom Italia, which the Italian group wants to sell.

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