Telefónica breaks a new record, increasing net profit by 51% to 7,848 million euros through September

MADRID — Telefónica’s nine-month earnings show a growth position which has already been consolidated. They likewise show the great value of geographic and business line diversification, an efficient cost structure and the exploitation of synergies generated by the integrated management of the company.

For another quarter, and the thirteenth in a row, revenues (8.6%), OIBDA (24.5%), OI (51%) and net profit (51%) posted significant growth compared with the same period a year earlier. The customer base grew 11.6% due to the successful campaigns to attract and retain customers, while operating cash flow (OIBDA-CapEx) rose almost 38% year-on-year to 13,221 million euros (+10.1% ex-capital gains from the Airwave and Endemol disposals).

During the third quarter of 2007, the Telefónica Group maintained its high commercial activity, ending September with a total of 218.6 million accesses, 11.6% more than a year earlier. Telefónica España currently has 45.6 million accesses, an increase of 5.3% year-on-year. Not only have the mobile and broadband customer bases grown, but fixed line loss has been contained, with the same year-on-year loss as in June. Meanwhile, the number of total accesses in Telefónica Latinoamérica continued to accelerate (+14.9% year-on-year to 126.5 million) thanks to a robust mobile market, the strong growth in broadband, and an expanding pay TV subscriber base. Telefónica O2 Europe saw the number of total accesses advance 7.8% to 40.7 million, driven by strong performance in the mobile business, notably in the contract segment.

By access type, growth in mobile accesses at the Telefónica Group continue to accelerate to reach almost 160.2 million (+15.7% year-on-year), from which 94.7 are from Latin America, 22.4 from Spain and 37.2 from Europe.

Retail internet broadband accesses at the Telefónica Group advanced 32.1% year-on-year to over 9.6 million at the end of September. ADSL, TV and voice bundles are still an important feature for Telefónica’s markets in order to develop faster the broadband market and customer loyalty. In Spain, retail broadband accesses surpassed 4.3 million (up 27.3% year-on-year), in Latin America, 4.7 million (34.4%) while in Europe, 572,000 (+53.2%). Pay TV accesses at the end of the quarter exceeded 1.4 million, 59% more than a year before, with operations up and running in Spain, the Czech Republic, Peru, Chile, Colombia and Brazil. Meanwhile in Brazil the company enriched its proprietary satellite TV offer with Globo content from 30 September.

Telefónica España

Wireline business

Main aspects:

• Sustained topline growth (+3.7% in the nine months to September 2007 over same period 2006) underpinned fundamentally by growth in Internet and Broadband, where revenues surged 16.8% year-on-year.
• Competitive strength in the Broadband market, with Telefónica maintaining an estimated market share slightly above 56%.
• Leadership in Pay TV market growth during third quarter 2007, reaching a 12% estimated market share at the end of September.
• Contained losses of fixed telephony lines, with year-on-year decline maintained at 0.7%.
• Significant 5.6% underlying OIBDA growth (once stripped out special effects such as the redundancy programme, the real estate plan and subsidies) in the nine months to September 2007.

Revenues in the January-September 2007 period amounted to 9,219 million euros, with growth vs. nine months to September 2006 reaching 3.7%. Year-on-year revenue growth in the third quarter was 3.4%.

So far this year, growth in the Spanish wireline market has remained steady at en estimated 2.1%, in clear contrast to the prevailing trend in other European markets. Telefónica España’s fixed telephony accesses totalled 15,865,165 at the end of the third quarter in the wake of net quarterly line losses of 40,996. This figure is equivalent to a year-on-year decline of 0.7%, the same rate recorded last quarter (second quarter 2007). The strong performance during the third quarter means that January-September 2007 net line losses were contained at 84,702, down substantially on those recorded in January-September 2006 (157,429 net access losses).

Telefónica’s retail Internet broadband net adds during the third quarter came to 145,756, taking total accesses to 4,344,119 by the end of September. This gave Telefónica continued segment leadership with an estimated market share slightly above 56%.

Telefónica continues to spearhead the development of the pay TV market in Spain, reaching a 12% estimated share of the Spanish pay TV market by September 2007. Net adds in the third quarter amounted 18,142, to bring overall customer base to 469,067 subscribers at the end of September.

The total number of Duo and Trio bundles stood at 3,528,313 units at the end of September 2007; almost 11% of this figure is accounted for by triple play subscribers.

Telesp (Brazil)

It is worth highlighting the launch of the Trio Telefónica triple play bundle on 12th August, with different connection speed options and a range of TV content choices.

Chile

Telefónica Latinoamérica continues to invest heavily in Chile. CapEx in the nine-month period totalled 285 million euros, an increase of 33.3% in local currency from the same period last year. Investment is still being poured into the fastest growing businesses: mobile telephony, ADSL and pay TV.

Telefonica O2 Czech Republic

Total broadband ADSL accesses (retail + wholesale) reached 545,000 at the end of September, with 19,000 net accesses in the third quarter. The total number of O2 TV customers increased to 53,000 at the end of September.