Spain’s Telefónica would support consolidation in Brazil given the prospect of a merger between operators that could strengthen its position in the increasingly important market.
The company’s businesses in Latin America were once again the brightest part of its quarterly results on Wednesday, which showed that Telefónica had managed to reduce revenue losses in its domestic business but at a cost to profitability amid fierce competition.
Angel Vila, finance director, said that Telefónica would be “supportive of in-market consolidation in Brazil”. He added that in “certain scenarios we would be active” – but would benefit even if not directly involved.
Telefónica is acquiring GVT, the Brazilian broadband provider, for about $9bn, and has been linked with a potential role in the purchase and break up of Telecom Italia’s TIM Participacoes.
However, Mr Vila added that the group had not appointed any advisers to engage in conversations with potential partners.
Telefónica said it may consider issuing hybrid debt or further asset sales, however, to cut debt to a target of less than €43bn. Mr Vila said that this could involve “non-organic options”, although he did not add any detail. He said that the UK – where its business has been rumoured with a future sale or merger – was a very important market for Telefónica.
As with other incumbent operators, the Spanish group saw improvements in its financial results, albeit in terms of moderating a long-term decline in revenues in its European markets rather than returning yet to sales growth.
Analysts at Espirito said Telefónica “managed to deliver slightly better numbers than we expected and therefore joining some of its main peers”.
Despite the gradual economic recovery in Spain, which remains the company’s largest market, the picture in the country remains mixed. Revenues fell 6.6 per cent year on year to €3bn in the third quarter, though the pace of decline fell compared to performance in previous quarters.
Overall net profit at the company was €947m over the three months to the end of September, down 13 per cent year-on-year. Operating income before depreciation and amortisation fell 8.7 per cent to €4.27bn, beating analysts’ estimates.
In Brazil, the largest telecoms market in Latin America, revenues in the third quarter rose to €2.9bn, up 1.8 per cent year on year. Operating income before depreciation and amortisation rose 7.2 per cent on a reported basis to €881m over the same period.
In Mexico, where the telecoms sector has recently been affected by a new regulatory environment, Telefónica’s operating income rose 51 per cent in the third quarter.
In addition to its purchase of GVT, Telefónica has recently received approval from the European Commission for its acquisition of E-Plus group in Germany, which is to be incorporated into Telefónica Deutschland.
Cesar Alierta, executive chairman, said: “The close of the consolidation activity in Germany and the acquisition of GVT in Brazil bring structural changes in the positioning of the company in two of its principle markets and reinforces the capacity for future growth.”
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