Telefonica beat market expectations with a 9.8 percent rise in first-quarter net profit, as strong Latin American business helped offset Spanish weakness and allowed it to stick to full-year forecasts. Results at Europe's largest telecoms company by market capitalisation should boost confidence, analysts said on Wednesday, given forecast cutting at European rivals.
Net profit rose to 1.69 billion euros ($2.30 billion), versus the average forecast for a rise of 6.5 percent to 1.64 billion in a Reuters poll of 12 analysts. Telefonica said it was maintaining guidance for this year of a 1-3 percent rise in operating income before depreciation and amortisation (OIBDA). Its shares were up 0.4 percent at 14.89 euros at 0715 GMT. Chris Alliott, European telecoms analyst at RBS, said the results were "reassuring. Despite the operating environment in Spain being tough, Latin America is making up for it".
Business in Spain, which accounts for less than a third of Telefonica's revenues, is suffering the effects of a severe recession, with mobile pricing under pressure. Analysts highlighted a 9.5 percent year-on-year fall in average revenue per user at its Spanish mobile business - a key measure of profitability.
Spanish revenues overall fell 4.2 percent to 4.9 billion euros "reflecting the slowdown in the market as a whole, the stiff competition and lower consumption of voice services from customers," Telefonica said. Latin America however, which also accounts for slightly more than a third of revenue, saw a 4.8 percent rise in revenues thanks to broad-based growth, particularly in internet and mobile telephony. Still, one analyst was downbeat on results.
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