Telefónica profit drops by more than half

Despite seeing stability in revenue over the course of the first quarter of 2012, Telefónica has seen its net income plummet to less than half of what it recorded in the same period last year.

Revenue for the quarter stood at €15.51bn, a 0.5 per cent increase on the €15.44bn generated in the first quarter of 2011, while net income fell 53.9 per cent from €1.62bn to just €748m.

Profitability was impacted by rising expenses across the business, with operating expenses, cost of supplies, personnel expenses, subcontracts, bad debt provisions and taxes all increasing year-on-year.

In addition, the group recorded a €481m loss from its associated businesses, compared with a €16m loss in the same period of 2011. This year-on-year change was mainly the result of the impact of an adjustment of the value of its investment in Telecom Italia, Telefónica said.

However, Telefónica said that its decision to remove handset subsidies for customer acquisition activities in Spain from March 2012 is paying dividends.

“This decision, unprecedented in the market, reflects Telefónica’s strategy for prioritising customer retention as a key lever to regain commercial momentum,” the firm said in its earnings statement.

Chairman César Alierta said that the quarterly results reflect the firm’s strategic priorities set for the year and the success of the company’s shift in commercial strategy, which began in the second half of 2011.

“These results are in line with internal estimates and thus allow us to reiterate our financial and operational guidance announced for 2012,” he said.

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