Telefonica SA fourth-quarter profit beats analysts’ projections, reduces debt

The largest phone company in Spain – Telefonica SA posted a profit for the fourth quarter of 2013, which exceeded analysts estimates. The company is currently trying to reduce its costs in Europe in order to deal with revenue decline. Telefonicas incomes increase was said to be due to the fact there werent large write-downs over the year, unlike the ones that pushed down the 2012 profit.

Telefonica SA made an official statement, announcing that its operating profit before depreciation and amortization decreased by 8.7% and reached 4.98 billion euros (6.8 billion dollars). According to data compiled by Bloomberg, the average of analysts estimates amounted to 4.91 billion euros.

Telefonica SA shared that its net income increased from 473 million euro to 1.45 billion euros. As reported by the Wall Street Journal, the company also said that its debt decreased to 45.4 billion euros and thus met Telefonicas target of reducing its debt to below 47 billion euros. According to the companys statement, it has now set a more modest goal of cutting debt to below 43 billion euro in 2014, which is considered as a sign that the company is focused on becoming one of the major players in the consolidation of the telecommunications industry.

One of the analysts working for Banco de Sabadell SA – Mr. Andres Bolumburu, said in a telephone interview for Bloomberg: “Telefonica has managed to slightly improve the business in Europe. However, it still needs to turn around the business in order to achieve further growth.”

Still, the challenges in front of Telefonica are yet to come. The operations in Europe and Latin America are to be overseen by the Chief Operating Officer of the company – Jose Maria Alvarez-Pallete, who will be provided with more executive responsibilities. The company also announced a cost-saving program estimated to 1.5 billion euros. Meanwhile, the regulators in Europe will probably issue a warning over the E-Plus bid of Telefonica, which raised concerns that the pact would harm rivalry and lead to sharp price rises not only for the mobile customers in Germany but also for the wholesale market. The company agreed last year to purchase E-Plus, the German unit of the Netherlands Royal KPN NV, for 8.55 billion euros.

Telefonica SA fell by 2.26% in Madrid to 11.22 euros by 11:54 GMT, trimming the companys market value to 51.6 billion euros.