Telefónica to build Brazilian network by 2021 amid Q3 result

Telefónica to build Brazilian network by 2021 amid Q3 results

30 October 2020 | Natalie Bannerman

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Telefónica has published its third quarter 2020 results including details of a new wholesale network to be built in Brazil.

For the period, the group reported that revenues reached €10,461 million, down 12.1% year-on-year (YoY) as a result of Covid-19 and what it described as “intensifying foreign exchange headwinds”.

However, there were some positive trends, as on a per quarter basis revenues were up slightly from Q2 2020 when revenues were €10,340 million and down -14.8% YoY.

Group Operating Income Before Depreciation and Amortization (OIBDA) was down 2.8% YoY to €2,672 million in Q3 2020 due to “the impairment allocated to Telefónica Argentina in the amount of -€785 million.

Net income for the quarter totalled -€160 million, again due to the impairment allocated to Telefónica Argentina, but reached €734 million on an underlying basis.

Looking ahead, Telefónica is forecasting “flat to slightly negative” full year 2020 financial results with its dividend of approximately €0.40 for 2020 to be maintained. With organic revenue growth and an improvement of approximately 2 p.p. in revenues ratio vs. 2019, for 2022.

The company also reaffirmed its commitment to its four core markets, as detailed in its 5-point plan back in November 2019, the highlights of this new group strategy included:

  • to prioritise Spain, Brazil, the UK and Germany, as key markets.
  • the operational spin-off of its businesses in Hispanoamérica; launch of Telefónica Tech, a newly created unit for the B2B segment focused on cybersecurity, IoT and Big Data, and cloud.
  • the creation of Telefónica Infra which will house towers, distributed antenna systems, data centres (including Edge), greenfield fibre projects and subsea cables assets.
  • and evolve its operating model to increase agility, speed up execution and maximise synergies between all Telefónica units.

With the company having recently confirmed its €5 billion partnership with Allianz to build a new joint venture wholesale project in Germany, it was confirmed during the round of earnings calls that something similar was on the cards for Brazil.

According to BN Americas, Christian Gebara, CEO of Telefônica Brasil told a Q3 earnings call “our InfraCo project is very well advanced. It’s progressing very rapidly. We have a series of investors interested in being partner of it and we’re confident of having it operational in 2021.”

Additionally, during a seperate Q&A session, Ángel Vilá, Chief Operating Officer at Telefônica added: “In Brazil, we are quite progressed. We are in round two of offers for a FibreCo, which, unlike Germany which is pure greenfield, in Brazil, we have a brownfield component plus a greenfield build-out to reach."

"In Germany, it is going to be slightly over 2 million fibre home passed, in Brazil, we're aiming for above 5m including the initial contribution of brownfield plus the build-out of greenfield. That second project is progressing nicely, we have interested parties in the second round, as I said. And in Chile, we are also in the process of bringing potentially investors into the fibre vehicle.”