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Telefónica profits rise
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November 16, 1999: 8:02 a.m. ET
But 44% nine-month gain is below expectations, sending stock lower
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LONDON (CNNfn) - Telefónica, Spain's dominant phone carrier, Tuesday reported a 44 percent increase in nine-month results -- weaker-than-expected figures that gave investors an excuse to sell after meteoric stock gains of around 25 percent over the past three weeks.
Net income at Telefónica, the former monopoly that provides fixed-line and mobile telephone service to more than 31 million customers, rose 44 percent between January and September to 1.41 billion euros ($1.46 billion), bolstered by one-time gains.
Analysts had been expecting a net rise of around 48 percent for the quarter.
Operating revenue grew 9.6 percent to 9.86 billion euros, restrained by lower tariffs and reductions in interconnection fees that cost the company an estimated 145 million euros in lost revenue. Excluding these factors, the company said net profit would have risen 29 percent.
Extraordinary gains over the period totaled 196.4 million euros, primarily accounted for by proceeds from the offering of the company's TPI yellow-pages unit and the sale of its Temasa submarine unit, By contrast, the company reported one-time losses of 586.9 million euros in the same period a year earlier.
Stripping out the extraordinary gains, profit growth stood at 19.1 percent. The growth was depressed, in analysts' view, by lower local telephone tariffs and interconnection fees that came into effect in the third quarter, biting into the company's margins.
Telefónica also said in a statement that loss of its domestic market share had slowed due to successful marketing campaigns at heading off new competition in the booming Spanish telecom market.
Customer fixed-line consumption rose 9.8 percent over the nine-month period, while mobile phone customers grew by 2.8 million to 7.7 million.
Income from the company's fast-growing mobile phone business accounted for 37.6 percent of the company's 9.86 billion euros in operating revenues during the period.
Shares of Telefónica were down 0.7 percent at 17.68 euros, recovering from an initial slide of 1.97 percent after the results were released.
Analysts say the recent stock gains have been generated by excitement ahead of Wednesday's eagerly awaited offering of Terra Networks, Telefónica's Internet unit. Terra priced the offering Tuesday at 13 euros per share, the top of the pricing range -- making it potentially Europe's largest Net float to date, with a market capitalization of about 3.6 billion euros. 
--from staff and wire reports
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Telefónica
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