Telefonica reveals damage dealt by COVID-19 to financials

Most telecoms operators would have felt the pinch of the coronavirus pandemic, but it appears Telefonica is wearing bigger bruises than the majority.

Total revenues for the six-month period to June-end declined 10% year-on-year, while the second quarter, the three months of dramatic societal changes, saw revenues slashed 14.8%. Spain was one of the most severely impacted regions in Europe, but the pain has been spread throughout the telcos international footprint.

“Telefónica delivered a resilient performance in a quarter marked by the COVID-19 crisis, as we contained the impact on our revenues through strong operational management, cost control and CAPEX management,” said CEO José María Álvarez-Pallete.

Impact of COVID-19 on Telefonica operations by market (in millions, €)
Market Q2 H1
Revenue Impact Revenue Impact
Spain 194 6.1% 213 3.4%
UK 130 7.6% 130 3.8%
Germany 38 2.1% 38 1.1%
Brazil 99 5% 116 2.6%
HISPAM 255 9% 293 5.3%

Over the first six months of 2020, Telefonica estimates COVID-19 cost the business €806 million. This represents a 3.4% impact to organic growth, though the 10% year-on-year decline for revenues in H1, and 14.8% drop in Q2, is a difficult one for the executives to explain away.

Irrelevant as to how much of a positive spin you put on the figures, or if you launch a new digital strategy at the same time, Telefonica has been damaged more by COVID-19 than other telecoms operators who have reported results to date.

In Qatar, Ooredoo reported a 7% decline during the second quarter. Verizon’s revenues dropped 5.1%. AT&T saw an 8.9% dip. Vodafone’s results saw 2.6% lost to COVID-19, and KPN revenues were 4.9% lower. There are more to come, and while we suspect there might be a few more shocks, Telefonica’s financials are looking much more fragile than other telecoms operators.

Alongside these results, the Telefonica team has also unveiled a new strategy where it has promised to lead Spain into the 5G era and also achieve 100% full fibre broadband deployment by 2025.

“Now, more than ever, we need a Digital Deal that reflects the contributions, aspirations and desires of society as a whole. We now have a unique opportunity to fully enter into the Fourth Industrial Revolution and achieve effective cooperation between governments, business and civil society. This is the path to a more sustainable, fair, inclusive and digital society,” said Álvarez-Pallete.

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