|By Business Wire||
|July 31, 2014 03:16 AM EDT||
The company accelerated its commercial activity in Spain, where the radical transformation undertaken in recent years and the improvement in the economic conditions should reflect in a gradual revenue improvement in the coming quarters. Telefónica’s Executive Chairman, César Alierta, said: “first-half results started to reflect the benefits from the investments in network modernisation carried out in recent quarters, which are enabling us to further differentiate our offering in key markets.”
- Revenue in the first semester of the year increased by 1.4% in organic terms, to 24,957 million euros. In the second quarter, revenue grew 1.3% organically and showed the acceleration of revenue growth in mobile data (+9.2% organic) and non-SMS data (24.1%).
- The company has also made a significant commercial effort in order to capture new growth opportunities: OIBDA reached 8,055 million euros in the period January-June and remained stable compared to recent quarters (-0.1% organic year-on-year in the semester).
- First semester results are affected by exchange rate variations, which subtract 10.9 p.p from year-on-year growth of revenue and OIBDA. They are also affected by changes in the perimeter, particularly by the sale of Telefonica Czech Republic, which reduced revenue by 3.1 p.p. and OIBDA by 3.7 p.p.
- Telefónica continues to focus on technological transformation and modernisation of its networks, which translates into a significant increase in investment; this amounted to 3,523 million euros (+27.2% organic) in the first half of the year.
- Free cash flow grew significantly in the first half of the year to 1,664 million euros (+14.7%) and consequently the company's financial flexibility also improved. Similarly, net financial debt fell by 1,590 million euros in the semester. Including the sale of Telefonica Ireland, completed on the 15th of July, net debt stood at 42,961 million euros.
- In Spain, consolidation of revenue together with a radical change of commercial activity is the basis of the change in business dynamics in Spain. The results for the second quarter confirm the success of the new commercial offering and therefore, of the increase of sales in high value services, as shown by the net gain of 0.6 million in pay TV customers and the net quarterly gain in fibre, of 182,000 access. At the end of the quarter, fibre coverage stood at 7.4 million premises, almost double the figure in June 2013.
- Telefónica Brazil, which for the fourth consecutive quarter has captured more than 60% of net gains in the contract market, continues to improve its competitive position, thanks to its quality of service improvement strategy and its commitment to innovation in its commercial proposals.
In the first six months of 2014 Telefónica further progressed in its transformation towards a more sustainable business model, with lower customer churn and leveraged on higher quality services. This strategy resulted in customer value increase, both in average lifetime extension and ARPU improvement. Thus, César Alierta, Executive Chairman of Telefonica, explained how the acceleration of the commercial activity in the second quarter reflects the offering differentiation in Telefonica’s key markets “with net additions of 2 million mobile contracts, 5 million smartphones and more than six hundred thousand pay TV customers. All of which are high-value services contributing to boost average revenue per customer and reduce churn”. He also said that Telefonica “continued to strengthen its competitive position through higher investments which resulted in 10.5 million premises passed with fibre and an expansion of LTE coverage to almost half of the population in our European markets and one third of the population in Latin America”.
Commercial activity in high value segments and services was particularly noteworthy and gradually flowed into revenues, which continued to deliver organic growth. OIBDA remained stable despite higher commercial expenses, which are the cornerstone of future growth, thanks to strict cost control and operational simplification. In addition, the solid cash flow generation in the first half along with portfolio management optimisation policy, allowed further financial flexibility improvement. César Alierta also highlighted: “we continued executing our asset portfolio optimisation policy, enabling us to reduce debt to below 43 billion euros including the disposal of Ireland, completed in July”.
315 million total accesses
Total accesses grew 2% year-on-year in organic terms to 315.8 million as of June 30th (excluding T. Czech Republic following its sale on 1 January) thanks to the increased commercial intensity in the last three months. Once again, growth was driven on the one hand by higher value segments and growth levers, such as mobile contract segment (especially smartphones), pay TV and fibre, and on the other hand by T. Hispanoamérica and T. Brasil. Moreover, ongoing investment efforts resulted in 10.5 million premises passed with fibre and increased adoption of LTE services. This increasing differentiation of service quality translated into higher customer satisfaction, reflected in quarter-on-quarter improvement of total churn (-0.3 percentage points) which posted better performance across different services.
The pace of fibre deployment over the last three months significantly accelerated to reach 1.3 thousand premises passed (848 thousand in the first quarter). At the end of the quarter, fibre coverage stood at 7.4 million premises (5.0 million households), almost double the figure in June 2013, thanks to an intense commercial activity in Spain and the improvement in the economic condition.
In the first half of 2014 exchange rate year-on-year evolution negatively impacted financial results, in particular the depreciations of the Brazilian real and the Argentine peso along with the implicit devaluation of the Venezuelan bolivar following the introduction of the new exchange rate mechanism (SICAD I), although this impact eased slightly in the second quarter. Thus, in the January-June period, exchange rates reduced year-on-year revenue and OIBDA growth by 10.9 percentage points (-10.0 percentage points in the second quarter, from both revenue and OIBDA).
This way, changes in the perimeter of consolidation (deconsolidation of Telefónica Czech Republic), reduced year-on-year revenue growth in the first half of 2014 by 3.1 percentage points (-3.0 percentage points in the second quarter) and year-on-year OIBDA growth by 3.7 percentage points in both the first half and the second quarter of 2014.
Despite both impacts and the Capex increase, free cash flow generation reaches 1,664 million euros, improving significantly year-on-year (+14,7%).
Revenues totalled 24,957 million euros in January-June 2014, 12.6% lower year-on-year (-11.8% in the second quarter), impacted by the abovementioned exchange rate fluctuations and changes in the consolidation perimeter. In organic terms, revenues posted positive growth for the fifth quarter in a row (+1.3% in the second quarter; +1.4% in the first half), driven by the strong growth of T. Hispanoamérica (+11.3% in April-June; +13.0% in January-June) and mobile data. Excluding the negative impact of regulation, organic revenues grew 3.6% compared with the first half of 2013 (+3.7% year-on-year in the second quarter).
Mobile data revenue growth accelerated year-on-year in organic terms for the second consecutive quarter (+9.2% in the second; +8.8% in the first; +7.8% in the fourth quarter of 2013). In the first half of 2014, these revenues grew 9.0% year-on-year in organic terms and already accounted for 40% of mobile service revenues, 3 percentage points higher than the same period of 2013. Non-SMS data revenue performance was particularly noteworthy, with year-on-year growth improving to 23.8% in organic terms in the first half (+24.1% in the quarter) and already accounting for 72% of total data revenues (+9 percentage points year-on-year).
Consolidated operating expenses totalled 17,427 million euros in the first half, 11.9% lower year-on-year (-10.8% in the quarter). In organic terms, operating expenses rose 1.6% in the first six months (+1.7% in the quarter) mainly due to higher commercial and network and systems costs.
Operating income before depreciation and amortisation (OIBDA) in the first half amounted to 8,055 million euros, 14.5% lower year-on-year impacted by the already mentioned exchange rate fluctuations and changes in the consolidation perimeter. In organic terms, OIBDA remained virtually stable compared with January-June 2013 (-0.1%). In the second quarter, OIBDA fell 0.7% year-on-year in organic terms (-15.0% reported), mainly due to the increased commercial momentum and activity focused on capturing growth opportunities. Excluding the negative impact of regulation, OIBDA grew by 1.4% compared with January-June 2013 in organic terms. OIBDA margin stood at 32.3% in the first half of 2014, with limited erosion in organic terms (-0.5 percentage points). In the second quarter the margin stood at 32.4% (-0.6 percentage points year-on-year in organic terms).
Operating income (OI) totalled 3,892 million euros in the January-June period, 7.9% higher year-on-year in organic terms. In the second quarter, OI advanced 10.4% year-on-year in organic terms to 2,055 million euros.
As a result, consolidated net income in the first half amounted to 1,903 million euros, 7.5% lower year-on-year, and basic earnings per share amounted to 0.41 euros (-11.0% year-on-year). However, in the second quarter net income increased 4.9% year-on-year to 1,210 million euros (affected in 291 million euros by the aforementioned revaluation of deferred taxes) and basic earnings per share stood at 0.26 euros (+2.0% year-on-year).
Technological transformation and network modernisation
With regards to investment, the Company continued focused on technological transformation and network modernisation, with over 71% of total investment devoted to business transformation and growth. CapEx grew 27.2% year-on-year in organic terms (-9.8% reported) in the first six months and totalled 3,523 million euros. It is important to note that CapEx included 189 million euros relating to spectrum acquisition in the first half of 2014, primarily in Colombia and Central America (834 million euros in the first half of 2013, mainly in the UK, Spain, Brazil and Uruguay).
Again, despite this Capex increase and the impact of both exchange rates and perimeter changes, free cash flow generation reaches 1,664 million euros, improving significantly year-on-year (+14,7%).
Net financial debt stood at 43,791 million euros at the end of June 2014, down 6,002 million euros year-on-year and 1,590 million euros in the last six months. However, debt rose by 1,067 million euros in the second quarter, mainly as a result of the payment of a dividend of 0.40 euros per share in May. Including post-closing events (sale of T. Ireland), debt stood at 42,961 million euros. The leverage ratio (net debt over OIBDA) for the last 12 months stood at 2.47 times at the end of June 2014, and at 2.43 times including post-closing transactions (disposal of T. Ireland).
In the first half of 2014, Telefónica's financing activity through bond and loan markets stood at around 9,880 million equivalent euros. This activity was mainly focused on strengthening the liquidity position, actively managing the cost of debt and smoothing the debt maturity profile of Telefónica S.A. for the following years. Therefore, as of the end of June, the Group maintains a comfortable liquidity position to accommodate the next debt maturities. In Hispanoamérica, Telefónica's subsidiaries tapped financing markets for approximately 151 million equivalent euros in the January-June period. Also noteworthy is the 500 million euro bond placement by T. Deutschland in January.
Digital Services and Telefonica Global Resources
The area of the CCDO (“Chief Commercial Digital Officer”) continued focused on bringing digital services at the core of our customers’ offer. The key advances during the second quarter are as follows: In the Corporate (B2B) area, M2M revenues maintained a good performance, rising more than 50% year-on-year in organic terms on the back of the growth in M2M accesses (+16% year-on-year) following several special projects secured in the first half.
Revenues from the Cloud business continued growing at double digit rate, above 20% year-on-year in organic terms in the first six months of the year. Regarding Information Security, Telefónica signed an agreement with Etisalat that will enable both companies to collaborate in the development and implementation of a SOC (Security Operation Center) in the United Arab Emirates.
In the Consumer area, the good performance of the Video business stands out, with revenue growth in the first half accelerating to above 15% in organic terms, boosted by the solid access growth (+32% organic year-on-year), and with significant progress in both Spain and Brazil (+91% and +28%, respectively). During this quarter Telefónica also acquired the exclusive rights in Spain for Euro 2016 qualifiers and 2018 World Cup. These new exclusive rights, together with those secured previously for Roland Garros, Moto GP and Formula 1, makes the Company's sport offer the most complete in the Spanish market.
Especially noteworthy in the Financial Services area was the launch of the customer loyalty community “Yaap Shopping” through the joint venture with CaixaBank and Santander.
The Global Device Management area continued to drive smartphone adoption with a special focus on LTE. Thus, 74% of total devices acquired in the second quarter were smartphones, with the total volume of LTE devices bought by the Group increasing by 8 times year-on-year.
Telefónica Global Resources continues to drive the Company's technological transformation, accelerating the rollout of ultra broadband (UBB) infrastructure, in line with the targets set for the year, ensuring better network quality and helping businesses transformation, with IT as a key enabler. In parallel, the Company continued progressing with the development of initiatives aimed at increasing efficiency.
The global Network and Operations unit advanced with the UBB rollout, reaching 10.5 million premises passed with fibre at the end of the quarter (1.9 times more than in June 2013), surpassing the 13,500 base stations with LTE (5 times more year-on-year) and with over 80% of 3G and LTE base stations connected at high speed to the transmission network.
Thus, the Company is prepared for the material data traffic growth in the network (+35% year-on-year in the second quarter), driven both by mobile broadband (+47% year-on-year) and fixed broadband traffic (+34% year-on-year).
The global IT unit, business transformation enabler, is focused on automation, standardisation, reutilisation and modernisation as common principles. In this regard, it should be highlighted the launch of business support systems in some Hispanoamerica countries as well as the development of new online capabilities (e.g. real-time contextual marketing campaign tools, portal renewals with public and restricted access, new electronic self-service channels in stores and via mobile devices, etc.).
Additionally, shared IT services were also used to progress towards doing things once, unlocking efficiencies and quality improvements benefiting from scale. Especially noteworthy is the Group-wide availability of a new KPI “Global PKI” service that allows digital certificates issuance, improving information security management on infrastructures.
Finally, further progress was achieved towards the goals set for infrastructure consolidation and applications transformation, with a 6% reduction in physical servers in the first half of 2014, eliminating more than 160 applications and at the same time, growing virtualised servers to 38%.
While DevOps promises a better and tighter integration among an organization’s development and operation teams and transforms an application life cycle into a continual deployment, Chef and Azure together provides a speedy, cost-effective and highly scalable vehicle for realizing the business values of this transformation. In his session at @DevOpsSummit at 19th Cloud Expo, Yung Chou, a Technology Evangelist at Microsoft, will present a unique opportunity to witness how Chef and Azure work tog...
Aug. 31, 2016 07:15 PM EDT Reads: 203
The Internet of Things can drive efficiency for airlines and airports. In their session at @ThingsExpo, Shyam Varan Nath, Principal Architect with GE, and Sudip Majumder, senior director of development at Oracle, will discuss the technical details of the connected airline baggage and related social media solutions. These IoT applications will enhance travelers' journey experience and drive efficiency for the airlines and the airports. The session will include a working demo and a technical d...
Aug. 31, 2016 07:00 PM EDT Reads: 234
SYS-CON Events announced today that Isomorphic Software will exhibit at DevOps Summit at 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Isomorphic Software provides the SmartClient HTML5/AJAX platform, the most advanced technology for building rich, cutting-edge enterprise web applications for desktop and mobile. SmartClient combines the productivity and performance of traditional desktop software with the simp...
Aug. 31, 2016 06:30 PM EDT Reads: 2,527
Although it has gained significant traction in the consumer space, IoT is still in the early stages of adoption in enterprises environments. However, many companies are working on initiatives like Industry 4.0 that includes IoT as one of the key disruptive technologies expected to reshape businesses of tomorrow. The key challenges will be availability, robustness and reliability of networks that connect devices in a business environment. Software Defined Wide Area Network (SD-WAN) is expected to...
Aug. 31, 2016 06:15 PM EDT Reads: 273
Between the mockups and specs produced by analysts, and resulting applications built by developers, there exists a gulf where projects fail, costs spiral, and applications disappoint. Methodologies like Agile attempt to address this with intensified communication, with partial success but many limitations. In his session at @DevOpsSummit at 19th Cloud Expo, Charles Kendrick, CTO at Isomorphic Software, will present a revolutionary model enabled by new technologies. Learn how business and deve...
Aug. 31, 2016 06:15 PM EDT Reads: 189
DevOps at Cloud Expo – being held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA – announces that its Call for Papers is open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's largest enterprises – and delivering real results. Am...
Aug. 31, 2016 06:15 PM EDT Reads: 3,616
Developing software for the Internet of Things (IoT) comes with its own set of challenges. Security, privacy, and unified standards are a few key issues. In addition, each IoT product is comprised of (at least) three separate application components: the software embedded in the device, the back-end service, and the mobile application for the end user’s controls. Each component is developed by a different team, using different technologies and practices, and deployed to a different stack/target –...
Aug. 31, 2016 05:15 PM EDT Reads: 275
SYS-CON Events announced today that Hitrons Solutions will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Hitrons Solutions Inc. is distributor in the North American market for unique products and services of small and medium-size businesses, including cloud services and solutions, SEO marketing platforms, and mobile applications.
Aug. 31, 2016 05:00 PM EDT Reads: 876
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 19th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound change in personal and enterprise IT since the creation of the Worldwide Web more than 20 years ago. All major researchers estimate there will be tens of billions devices - comp...
Aug. 31, 2016 04:45 PM EDT Reads: 3,843
SYS-CON Events announced today that Numerex Corp, a leading provider of managed enterprise solutions enabling the Internet of Things (IoT), will exhibit at the 19th International Cloud Expo | @ThingsExpo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Numerex Corp. (NASDAQ:NMRX) is a leading provider of managed enterprise solutions enabling the Internet of Things (IoT). The Company's solutions produce new revenue streams or create operating...
Aug. 31, 2016 04:39 PM EDT Reads: 245
Enterprises have forever faced challenges surrounding the sharing of their intellectual property. Emerging cloud adoption has made it more compelling for enterprises to digitize their content, making them available over a wide variety of devices across the Internet. In his session at 19th Cloud Expo, Santosh Ahuja, Director of Architecture at Impiger Technologies, will introduce various mechanisms provided by cloud service providers today to manage and share digital content in a secure manner....
Aug. 31, 2016 04:15 PM EDT Reads: 976
We are always online. We access our data, our finances, work, and various services on the Internet. But we live in a congested world of information in which the roads were built two decades ago. The quest for better, faster Internet routing has been around for a decade, but nobody solved this problem. We’ve seen band aid approaches like CDNs that attack a niche's slice of static content part of the Internet, but that’s it. It does not address the dynamic services-based Internet of today. It doe...
Aug. 31, 2016 04:12 PM EDT Reads: 253
As the world moves toward more DevOps and Microservices, application deployment to the cloud ought to become a lot simpler. The Microservices architecture, which is the basis of many new age distributed systems such as OpenStack, NetFlix and so on, is at the heart of Cloud Foundry - a complete developer-oriented Platform as a Service (PaaS) that is IaaS agnostic and supports vCloud, OpenStack and AWS. Serverless computing is revolutionizing computing. In his session at 19th Cloud Expo, Raghav...
Aug. 31, 2016 04:00 PM EDT Reads: 1,133
As cloud adoption continues to transform business, today’s global enterprises are challenged with managing a growing amount of information living outside of the data center. The rapid adoption of IoT and increasingly mobile workforce are exacerbating the problem. Ensuring secure data sharing and efficient backup poses capacity and bandwidth considerations as well as policy and regulatory compliance issues.
Aug. 31, 2016 03:15 PM EDT Reads: 326
Why do your mobile transformations need to happen today? Mobile is the strategy that enterprise transformation centers on to drive customer engagement. In his general session at @ThingsExpo, Roger Woods, Director, Mobile Product & Strategy – Adobe Marketing Cloud, covered key IoT and mobile trends that are forcing mobile transformation, key components of a solid mobile strategy and explored how brands are effectively driving mobile change throughout the enterprise.
Aug. 31, 2016 03:00 PM EDT Reads: 795