Telefónica third-quarter profit bolstered by growth in Brazil

Telefónica beat analysts’ estimates for third-quarter revenue and profit growth, bolstered by its performance in Brazil and other Latin American markets, the company reported on Friday.

The Spanish telecoms operator reiterated its targets for the full financial year as it reported revenue of €10.34bn in the three months to the end of September, up 11 per cent year on year and above consensus estimates of €10bn.

Operating income before depreciation and amortisation came in at €3.25bn, against analysts’ forecasts of €3.18bn.

Telefónica has performed better than some of its European peers this year, including Telecom Italia and the UK’s BT Group. The company’s share price gained more than 2 per cent in morning trading on Friday to reach €3.59, taking its losses this year to just over 7 per cent.

Telecoms groups across Europe have struggled to grow in recent years, as they have had to make significant investments in network upgrades and 5G against a backdrop of fierce competition and low prices. This year, the heavily energy-dependent companies have also had to contend with soaring electricity prices, as well as a tight labour market.

Telefónica said price rises implemented in some of its key markets, including the UK and Brazil, had helped it manage costs. It also said that more than 80 per cent of its energy prices were hedged for next year at reasonable prices.

“The macro environment is weighing a lot at present,” said Laura Abasolo, Telefónica’s chief financial and control officer. But she added that the fact some of the company’s key markets, including Brazil, Germany and the UK, were performing well gave the market “more comfort and predictability”.

Telefónica has been involved in two of the biggest recent deals in the European telecoms sector: a merger of its O2 mobile network in the UK with Liberty Global’s Virgin Media cable division and the €7.7bn sale of its Telxius mobile tower division to American Tower. It also acquired parts of its Brazilian rival Oi.

Abasolo said Telefónica sees “huge potential for value creation” in the UK, particularly in driving more convergence between broadband and mobile packages.

Additionally, the company has carved out separate technology and infrastructure divisions and signed fibre co-investment deals with financial companies in Germany and the UK.

Revenue from its tech business grew 70 per cent in the third quarter compared with the same period last year, reaching €386mn. Revenue in Brazil, which now accounts for a fifth of the company’s income, rose 29 per cent.