Europe’s largest operator, Telefónica, recorded its first quarterly loss in nine years as it grappled with a “challenging” market environment.
Net profit fell 69% to €2.73 billion for the period, with a reported 5.4% rise in revenue largely offset by a one-off restructuring charge of €2.7 billion.
For the third quarter, the group posted a loss of €429 million, compared with a net profit of €5.06 billion in the same quarter of 2010. Last year’s results had been aided by a one-off gain related to Telefónica’s acquisition of the Brazilian mobile operator Vivo.
Telefónica, which last reported a loss in 2002, attributed the decline to difficult operating conditions, regulatory impacts and a weak European economy. The company said its new organizational structure, announced in September, is expected to deliver efficiency improvements.
As part of efforts to restore investor confidence, the Spanish operator is reducing its workforce in Spain by 6,500 positions, pausing major mergers and taking measures to address its debt load.
Despite the European slowdown, a robust performance in Latin America—where Telefónica continues to expand in a rapidly growing market—helped mitigate some of the negative effects.
José María Álvarez-Pallete, chairman and chief executive of Telefónica Europe, highlighted the strength of the company’s tiered pricing strategy for mobile data. “Mobile data revenues—driven by rising smartphone penetration and soaring mobile data usage—accounted for 41% of total mobile service revenues in the first nine months of 2011, compared with 36% in the same period in 2010,” he said.
“Strong commercial results in Telefónica Germany offset more moderate performances elsewhere in the group, where operating businesses have seen growth constrained by increasingly challenging macroeconomic conditions.”