The Spanish telecommunications group Telefonica reported a net loss of 1.3 billion euros in the first quarter of the year. The main reason for this was write-downs on its divested holdings in Argentina and Peru. In addition, unfavorable exchange rate effects weighed on the group’s balance sheet. Despite the loss, COO Emilio Gayo expressed confidence in the full-year targets and announced plans to present results of the company’s ongoing strategic realignment in the second half of the year.
In the German market, Telefonica was able to expand customer growth. In the first quarter, 164,000 new contracts were signed. The average revenue per user remained stable despite ongoing price competition in the industry. However, the departure of 1&1 customers and the end of the long-standing partnership with United Internet’s mobile subsidiary had a negative impact on revenue. As a result, total revenue in the German market fell by two percent to 2.06 billion euros. Adjusted operating profit declined by 2.2 percent to 629 million euros. 1&1 now uses Vodafone’s infrastructure in areas where it does not have its own network.
Telefonica continues to pursue a strategy of withdrawing from economically unstable markets in Latin America. In previous quarters, write-downs from the region had already burdened the company’s financial results. Without the current special charges, the group would have posted a profit of 427 million euros in the first quarter. Group-wide revenue fell by 2.9 percent year-over-year to 9.22 billion euros. Operating profit dropped by 4.2 percent to 3.01 billion euros. Analysts had expected higher figures.
In parallel with its market withdrawal, Telefonica is pursuing a cost-cutting strategy that includes job reductions. Last year, around 3,400 jobs were cut. According to media reports, an additional 4,000 to 5,000 of the company’s approximately 100,000 positions could be eliminated in the near future. The goal of these measures is to improve efficiency and strengthen the group’s economic foundation.
