One day ahead of schedule, Spanish telecom giant Telefónica reported its financial results for the second quarter and the first half of 2012. The company also announced that it will cancel payment of all remaining dividends and share buybacks for this year. The telecom operator cited the current instability of the economy as prompting the move.
At the end of June, Telefónica reported a net profit of $2.520 billion (€2.075 billion), $1.611 billion (€1.327 billion) in the second quarter. Check detailed financial results here.
Telefónica said that the board had analyzed the prevailing economic situation and financial environment and decided the dividend and share buyback program for the 2012 fiscal year will be temporarily suspended. The telecom operator noted it decided to take measures intended to protect the company and its stakeholders.
Although in Latin America, Telefónica saw its second-quarter revenue increase 6% to $9.05 billion (€7.45 billion), in Spain, where the telcom company is headquartered, the country is going through its worst economic crisis in decades. In the first half of the fiscal year, Telefónica’s Latin American revenues were $18.173 billion (€14.963 billion), a 7% year-on-year growth in reported terms.
Among the company’s objectives for suspending both the dividend and share buyback programs, Telefónica hopes to further strengthen its balance sheet through retaining earnings; deleveraging and increasing shareholder value; and substantially accelerating debt reduction in the short term.
Through these measures, Telefónica said it will be able to reduce its total debt net to below x2.35 OIBDA at the end of this year.
The company took other measures recently to cut debt. In June, Telefónica said it was planning an initial public offering of its German O2 unit as a move to raise cash to pay-down debt and protect the company against América Móvil’s efforts to expand its presence in Europe. Latin American units could be next, as the telecom giant stated that it is analyzing the potential listing alternatives for Latin American businesses.
Ten days later, Telefónica announced it had agreed to sell almost half its stake in China Unicom (4.56%) for about $1.41 billion (€1.13 billion) to the Chinese telecom’s unlisted parent company, as part of Telefónica’s efforts to cut debt.
Telefónica’s Latin American business continues to drive growth, contributing 48% of consolidated revenue and accounting for 50% of group OIBDA. By the end of June, Telefónica managed 208 million accesses in the region, with year-on-year growth of 10%.