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    KPN   NL0000009082

ROYAL KPN N.V.

(KPN)
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Spain's Telefonica sees recovery momentum despite profit fall

11/12/2014 | 10:24am EDT
A woman walks past a Telefonica building in Barcelona

MADRID (Reuters) - Spain's Telefonica (>> Telefonica SA) pointed to rising demand for its mobile, broadband and pay-TV deals as evidence of a turnaround from its three-year slump as it posted falling revenue and profit in the first nine months of the year.

MADRID (Reuters) - Spain's Telefonica (>> Telefonica SA) pointed to rising demand for its mobile, broadband and pay-TV deals as evidence of a turnaround from its three-year slump as it posted falling revenue and profit in the first nine months of the year.

The trend echoed that at British and Dutch rivals Vodafone (>> Vodafone Group plc) and KPN (>> KONINKLIJKE KPN), which have started to benefit from investments in faster networks, though Telefonica's trading improvement may need a few more months to bolster the bottom line.

Telefonica, which has lost more than a third of its revenue and core profit in Spain as cash-strapped consumers reduce telecoms spending, is betting on the take-up of bundled packages combining mobile and fixed-line phones, high-speed Internet and TV and on its heavy investment in fibre-optic networks.

The strategy comes at a price, however. Margins in Spain, which contributes 42 percent of revenue and 30 percent of operating income, have continued to fall, slipping 2.7 basis points to 45.9 percent in the nine months to Sept. 30.

Europe's biggest telecoms group by revenue reported net profit down 9.4 percent in the period to 2.85 billion euros (2.25 billion pounds), just above analysts' forecasts. Operating income dropped 12.6 percent to 12.33 billion euros and revenue shrank 10.9 percent to 37.98 billion euros.

CURRENCY EFFECTS

Revenue and operating income were hit by weaker Latin American currencies, but the effect eased between July and September and the region's underlying performance remained strong.

In Brazil, where Telefonica bought broadband provider GVT in September and is now considering bidding for assets of TIM Participacoes (>> TIM Participacoes SA), the currency effect was positive on the quarter, boding well for the rest of the year.

Net debt, a weak spot in the past, was 41.2 billion euros at the Sept. 30, already beating a year-end target of 43 billion euros. However, the figure was 44.9 billion euros when taking into account corporate moves not yet reflected in earnings.

In a conference call with analysts, finance chief Angel Vila said the company could soon issue more hybrid debt or sell assets to meet the target.

Shares in the company were little changed at 12.19 euros by 1444 GMT but were outperforming a 1.6 percent fall in Spain's blue-chip Ibex index <.IBEX>.

(Editing by Louise Heavens and David Goodman)

By Julien Toyer and Andrés González


ę Reuters 2014
Stocks mentioned in the article
ChangeLast1st jan.
EURO / BRAZILIAN REAL (EUR/BRL) -0.58% 6.1578 Delayed Quote.-3.00%
IBEX 35 0.86% 9285 Delayed Quote.14.01%
ROYAL KPN N.V. 0.52% 2.681 Real-time Quote.7.24%
TELEFÓNICA, S.A. 0.97% 4.12 Delayed Quote.25.72%
VODAFONE GROUP PLC 0.51% 130.46 Delayed Quote.7.36%
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Financials
Sales 2021 5 224 M 6 328 M 6 328 M
Net income 2021 541 M 656 M 656 M
Net Debt 2021 5 693 M 6 896 M 6 896 M
P/E ratio 2021 20,5x
Yield 2021 5,19%
Capitalization 11 194 M 13 541 M 13 561 M
EV / Sales 2021 3,23x
EV / Sales 2022 3,17x
Nbr of Employees 9 237
Free-Float 79,8%
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Mean consensus OUTPERFORM
Number of Analysts 24
Average target price 3,12 €
Last Close Price 2,67 €
Spread / Highest target 50,0%
Spread / Average Target 16,9%
Spread / Lowest Target -13,8%
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Managers and Directors
NameTitle
Joost F. E. Farwerck Chairman-Management Board, CEO & COO
Chris H. Figee Chief Financial Officer
Duco W. Sickinghe Chairman-Supervisory Board
Babak Fouladi Chief Technology & Digital Officer
Derk Johan Haank Vice Chairman-Supervisory Board
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