28th Jul 2006 07:00
Telefonica SA27 July 2006 RESULTS BY BUSINESS LINES Others Business CONTENT AND MEDIA BUSINESS The Content and Media business reported revenues of 775.1 million euros at theend of the first half of 2006, 28.8% higher than for the same period last year.This increase reflects the positive trends in results posted by all businesslines. During the period from January through June, consolidated operating incomebefore interest, depreciation and amortization (OIBDA) increased to 222.5million euros, compared with 114.1 million euros for the same period in 2005.This substantial growth in 2006 was primarily attributable to the gain on thesale by the Telefonica Group of a part of Sogecable stake in the takeover bidlaunched by the Prisa Group. ENDEMOL NV Endemol enjoyed a strong overall performance in the first half of 2006,recording a 22.6% growth in revenues, reaching a level of 516.6 million euros.The company registered revenues growth in every business line, compared to thesame period of last year. Growth in Non-scripted came in at 24.1% and Scriptedgrew by 3.7%. Digital Media registered a very sound performance as well in thefirst semester, growing by 38.2%. Organic growth accounted for the vast majority of total growth, with a 21.1% outof the 22.6%. This organic development is mainly due to the strong performanceof Endemol's operating companies in the UK, the US, and Italy. While Big Brotherremained the top format with very sound ratings worldwide, the performance ofDeal or no Deal was especially remarkable, triggering an increasing appetite forgame shows, one of the core elements of Endemol's product portfolio. Thisincreasing demand was leveraged by closing a number of deals in variousterritories on other game shows such as "One vs 100", "Show me the Money" and"For the Rest of your Life". EBITDA in the first half year of 2006 reached a level of 87.2 million euros, a13.6% increase compared to last year, when it amounted to 76.8 million euros. Interms of EBITDA margin, Endemol has moved from 18.2% of turnover in June 2005 to16.9% in June 2006. If non recurring items in the turnover and costs areexcluded in both years, EBITDA would have reached a level of 99.1 million euros(19.2% margin) compared to 71.6 million euros (17.3% margin) in the first yearof 2005. ATCO In the first half of the year, the advertising market in Argentina (in theCapital and Greater Buenos Aires regions) saw an 8% increase over the sameperiod last year. This figure is in sharp contrast to the 25% increase reportedfor the first half of 2005, which reflected the recovery that this marketexperienced during 2004 and 2005. In this market situation, Telefe maintained its leadership position, with 40.1%of the total audience in the first half of 2006, compared with 38.8% during thesame period last year, followed by Canal 13, its main rival, which had anaverage audience share of 29.3%. Telefe's accumulated market share in the firsthalf of 2006 was 42.1%, the same as in 2005, once again followed by Canal 13with 37.7%. Thus, ATCO reported an improvement in financial results over the previous year,thanks to the growth in the advertising market, which enabled it to increaseadvertising sales in the Greater Buenos Aires area, and to the positive audienceresults, which also allowed it to increase sales on the broadcasting networks itowns in the Inland Provinces. Elsewhere, international proprietary content salesexceeded those during the same period last year by almost 75%, which contributedto an improvement in the channel's results. CONTENT AND MEDIA BUSINESSCONSOLIDATED INCOME STATEMENTUnaudited figures (Euros in millions) January - June April - June 2006 2005 % Chg 2006 2005 % ChgRevenues 775.1 601.9 28.8 426.1 335.3 27.1Internal expenditure 0.3 0.0 n.s. 0.3 0.0 n.s.capitalized in fixed assets (1)Operating expenses (700.2) (497.1) 40.9 (401.0) (268.2) 49.5Other net operating income 4.7 2.1 126.1 30.1 1.3 n.s.(expense)Gain (loss) on sale of fixed 142.7 7.3 n.s. 0.4 0.2 68.4assetsImpairment of goodwill and (0.1) (0.1) 62.3 (0.1) (0.1) 115.5other assetsOperating income before D&A 222.5 114.1 95.0 55.7 68.7 (18.8)(OIBDA)Depreciation and amortization (13.9) (14.1) (1.5) (7.0) (6.8) 3.1Operating income (OI) 208.6 100.0 108.7 48.8 61.9 (21.2)Profit from associated (8.0) (7.6) 5.4 (0.5) 1.2 c.s.companiesNet financial income (expense) (51.1) 3.2 c.s. (29.5) 0.4 c.s.Income before taxes 149.5 95.6 56.3 18.8 63.4 (70.4)Income taxes (10.5) (35.2) (70.1) (9.6) (22.2) (56.5)Income from continuing 138.9 60.5 129.8 9.1 41.3 (77.9)operationsIncome (Loss) from 0.0 0.0 n.s. 0.0 0.0 n.s.discontinued operationsMinority interest (14.6) (2.6) n.s. (7.2) (2.3) n.s.Net income 124.4 57.9 114.9 1.9 39.0 (95.2) (1) Including work in process. ADDENDA Companies included in each Financial Statement Based on what was indicated at the start of this report, the results breakdownof Telefonica Group are detailed according to the business in which the Grouphas a presence. The main differences between this view and the one that wouldapply attending to the legal structure, are the following • Telefonica O2 Europe Group includes O2 Group results from February 1st2006, and Telefonica O2 Czech Republic and Telefonica Deutschland results fromJanuary 1st 2006. Telefonica Group 69.4% stake in Telefonica O2 Czech Republicis legally dependent upon Telefonica S.A. In the case of Telefonica Deutschland,the company is a 100% dependent upon Telefonica Data Corp, S.A. • Telefonica, S.A. directly participates in the share capital of EndemolEntertainment Holding, N.V., which has been included in Content and MediaBusiness. The results from the Sogecable S.A. stake have been also assigned toContent and Media Business, including the portal divestiture that took place inthe first quarter, even though a part of the investment is legally dependentupon Telefonica, S.A. • Telefonica Holding Argentina, S.A. holds 6.98% a minority stake ofAtlantida de Comunicaciones, S.A. (ATCO) which, for those purposes, isconsidered to be part of Telefonica de Contenidos, consolidating 100% sharecapital of ATCO in the Content and Media Business. • The participation of Telefonica Group in IPSE 2000 SpA is assigned tothe cellular business, also including the investment legally dependent uponTelefonica DataCorp, S.A. • Telefonica de Argentina (TASA), participated by TelefonicaLatinoamerica Group, sold in November 2005 its 100% stake in Telinver, S.A.share capital to TPI Group. Nevertheless, the results from this company has beenassigned to the directories business through 2005 in line with our vision forthe total Telefonica's directories business. • Telefonica Data Group (denominated "Telefonica Empresas"), legallydependent upon Telefonica S.A., has been segregated and subsequently integratedinto the fixed line activities in Latin America for presentation purposes, andaccording to geographic criteria. • Telefonica International Wholesale Services Group (TIWS) financialresults has been assigned to Telefonica Latinoamerica Group, even though islegally dependent upon Telefonica, S.A. (92.5%) and Telefonica Data Corp (7.5%). • The activities of Terra Networks Espana S.A., Maptel Networks, S.A.U.and Azeler Automocion, S.A. have been included in Telefonica de Espana Group. Asof June 30th 2006, Terra Networks Espana is directly held by Telefonica S.A.,while Maptel Networks and Azeler Automocion are directly held by Terra NetworksAsociadas, S.L. • Latin American companies formerly dependent upon Terra Group have beenlegally transferred to Telefonica International, S.A. during the second half of2005, although the results have been assigned to Telefonica Latinoamerica Groupfrom the beginning of 2005. ADDENDA Key Holdings of the Telefonica Group and its Subsidiaries detailed by businesslines TELEFONICA GROUP TELEFONICA DE ESPANA GROUP % Part % Part Telefonica de Espana 100,00 Telyco 100,00Telefonica Moviles (1) 92,50 Telefonica Telecomunic. 100,00 PublicasTelefonica Latinoamerica 100,00 Telefonica Soluciones 100,00 SectorialesTPI Group 59,90 Telefonica Empresas Espana 100,00Telefonica de Contenidos 100,00 Terra Networks Espana (1) 100,00Atento Group 91,35 T. Soluciones de Informatica 100,00 yTelefonica O2 Europe 100,00 Comunicaciones de Espana (1) Effective participation: (1) Telefonica S.A. owns92.92%. 100%. TELEFONICA MOVILES GROUP % PartTELEFONICA LATINOAMERICAGROUP % Part Telefonica Moviles Espana 100,00 Brasilcel (1) 50,00Telesp 87,49 TCP Argentina 100,00Telefonica del Peru (1) 98,19 T. Moviles Peru 98,40Telefonica de Argentina 98,03 T. Moviles Mexico 100,00TLD Puerto Rico 98,00 TM Chile 100,00Telefonica Chile (2) 44,89 T. Moviles El Salvador 99,06Terra Networks Peru 99,99 T. Moviles Guatemala 100,00Terra Networks Mexico 99,99 Telcel (Venezuela) 100,00Terra Networks USA 100,00 T. Moviles Colombia 100,00Terra Networks Guatemala 100,00 Otecel (Ecuador) 100,00Terra Networks Venezuela 100,00 T. Moviles Panama 99,99Terra Networks Brasil 100,00 T. Moviles Uruguay 100,00Terra Networks Argentina 99,99 Telefonia Celular Nicaragua 100,00Terra Networks Chile 100,00 Radiocomunicac. Moviles SA 100,00 (Arg)Terra Networks Colombia 99,99 Telefonica Moviles Chile 100,00Telefonica Data Colombia 100,00 Group 3G (Germany) 57,20Telefonica Empresas Brasil 93,98 IPSE 2000 (Italy) (2) 45,59Telefonica Data Argentina 97,92 3G Mobile AG (Switzerland) 100,00Telefonica Data USA 100,00 Medi Telecom 32,18T. Intern. Wholesale Serv. 100,00 Mobipay Espana 13,36(TIWS) (3) Mobipay Internacional 50,00 T. Moviles Soluciones y 100,00 Aplicac. (Chile)(1) Telefonica Empresas Peru has been Tempos 21 43,68absorbed by T.del Peru as of May 1st2006.(2) CTC has changed itsname.(1) Telefonica, S.A. owns 92.51% yTelefonica DataCorp owns 7.49%. (1) Joint Venture which fully consolidates Telergipe Celular, S.A., Telebahia Celular, S.A., Telest Celular, Telerj Celular, Celular CRT, Global Telecom, Telesp Celular and TeleCentro Oeste Part., S.A. through participation at Vivo Participacoes (62.77%). (2) Additionally, Telefonica Group holds a 4.08% of IPSE 2000 through Telefonica DataCorp. TPI - PAGINAS AMARILLAS TELEFONICA O2 EUROPEGROUP % Part % Part TPI Edita 100,00 O2 UK 100,00Publiguias (Chile) 100,00 O2 Gemany 100,00TPI Brasil 100,00 O2 Ireland 100,00TPI Peru 100,00 Manx 100,00Teleinver (Argentina) 100,00 Airwave 100,0011888 Servicios de Consulta 100,00 Be 100,00TelefonicaServices de Renseig. T. 100,00 Telefonica O2 Czech Republic 69,41(France) (1)Servizio di Consultazione 100,00 Telefonica Deutschland (2) 100,00Telefonica,S.R.L. (Italy) (1) Company owned through Telefonica S.A. (2) Telefonica S.A. owns 100% through Telefonica DataCorp. ATENTO GROUP % Part Atento Teleservicios Espana, 100,00S.A.Atento Brasil, S.A. 100,00Atento Argentina, S.A. 100,00Atento de Guatemala, S.A. 100,00Atento Mexicana, S.A. de 100,00C.V.Woknal (Uruguay) 100,00Atento Peru, S.A.C. 99,46 OTHER PARTICIPATIONSAtento Chile, S.A. 77,95 % PartAtento Maroc, S.A. 100,00Atento El Salvador, S.A. de 100,00C.V. Lycos Europe 32,10 Sogecable (1) 16,80 Portugal Telecom (2) 9,84 China Netcom Group (3) 5,00 BBVA 1,07 Amper 6,10 Telepizza 4,33 (1) Telefonica de Contenidos, S.A. holds 15.67% and Telefonica, S.A. holds 1.13%.TELEFONICA DE CONTENIDOS (2) Telefonica Group's effectiveGROUP participation. Telefonica Group participation would be 9.96% if we exclude the minority interests. % Part (3) Ownership held by Telefonica Latinoamerica Telefe 100,00Endemol (1) 99,70Telefonica Servicios de 100,00MusicaTelefonica Servicios 100,00AudiovisualesHispasat 13,23 (1) Ownership held by Telefonica S.A. Endemol Holding NV is the parentcompany of Endemol Group and owns 75% of Endemol NV, company quoted in theAmsterdam Stock Exchange. ADDENDA Significant Events • On 26 July 2006, the Board of Directors of Telefonica S.A approvedplans to adapt the Company's management structure to a new regional andintegrated management model. This view has led to the creation of three Regional Business Units: TelefonicaSpain, Telefonica Europe and Telefonica Latin America) in charge of theintegrated business, i.e. both fixed and mobile assets. The Divisions will bemanaged as follows: Antonio Viana-Baptista has been appointed General Manager of Telefonica Espana. Jose Maria Alvarez-Pallete has been appointed General Manager of TelefonicaLatinoamerica. Peter Erskine, appointed General Manager of Telefonica O2 Europa. • On 26 July 2006, the Board of Directors of Telefonica, S.A., acceptedthe resignation of Mr. Luis Lada Diaz from his position on the Board (alsomember of the Service Quality and Customer Service Committee). Likewise, the Board agreed, preceded by the relevant favourable report from theNominating, Compensation and Corporate Governance Committee, the appointment ofMr. Jose Maria Alvarez-Pallete Lopez as executive Director. • On July 4th, 2006, once the legal timeframe provided for presentingcounterbids elapsed and the Board of Directors of TPI issued its report infavour of the transaction on Tuesday, 27 June, Telefonica S.A. accepted thePublic Tender Offer launched by Yell Group Plc for TPI (Euro8.50 for every TPIshare tendered), tendering its 216,269,764 TPI shares, representing 59.905% ofthe company's share capital. By transfering all its shares to Yell, Telefonicawill receive 1,838 million euros, which equates to account for net capital gainsof 1,577 million euros. • On June 20th and 21th 2006, the approval of the merger and takeover ofTelefonica Moviles, S.A. by Telefonica, S.A. at the companies' respectiveshareholders meetings. The merger includes an exchange ratio of four Telefonica shares for every fiveTelefonica Moviles shares and the payment of two special cash dividends ofE0.435 per share. These dividends, which were paid on 21 July, coupled with theapproved E0.205 dividend paid out of 2005 profit leave a total gross dividend ofE0.64 per share. It is likewise placed on the record that, in compliance with article 14 of theRegulations of the Company Board of Directors, in the Annual GeneralShareholders' Meeting of Telefonica, S.A., Mr. Mario Eduardo Vazquez has givenup his directorship. • On May 26th, 2006, Telefonica announced that it has set as a strategictarget for the year 2009 to double both earnings per share and dividend pershare from the 0.91 euros and 0.50 euros reported for 2005. Moreover, the Chairman of Telefonica will submit to the Board of Directors aproposal to pay an interim dividend of 0.30 euros per share from 2006 profits,to be paid in November 2006. This payment will be followed by an additional 0.30euros per share to be paid in the first semester of 2007. Finally, and until the end of 2007, the Company has decided to set a limit of1.5 billion euros and a commitment not to issue new shares to execute net newacquisitions over those already announced. Shares to be acquired to complete thecurrent buyback program will be cancelled. ADDENDA Changes to the Perimeter and Accounting Criteria of Consolidation In the period January-June of 2006, the main changes have occurred in theconsolidation perimeter were the following TELEFONICA GROUP • On the 31st of October 2006, Telefonica, S.A. announced a BindingOffer for the purchase of all the shares in the UK company O2 plc. Once theBinding Offer ended and the procedure began for the mandatory sale of O2 sharesaccording to the UK Law, by June Telefonica held 100% of the shares forming thecapital of this company that, as of 7th March this year, were no longer listedon the London Stock Exchange. The acquisition cost for the buyout of O2 Groupwas 26,127.71 million euros (17,882.37 million sterling pounds). TelefonicaGroup financial statements include the results from O2 Group since February 1st,2006. The company has been included in the consolidation perimeter of theTelefonica Group using the full integration method. • The subsidiary company Comet, Compania Espanola de Tecnologia, S.A.,made a capital increase of 0.23 million euros in February this year through anincrease in the par value of existing shares. In March Comet made anothercapital increase. Both were fully subscribed and paid up by its sole shareholderTelefonica. The company continues to be included in the consolidation perimeterof the Telefonica Group using the full integration method. TELEFONICA DE ESPANA GROUP • In February, the Spanish company Telefonica Cable, S.A. acquired 15%of the share capital of Telefonica Cable Galicia, S.A. Through this purchase,Telefonica Cable became the sole shareholder of the company. The companycontinues to be included in the consolidation perimeter of the Telefonica Groupusing the full integration method. • In June, Telefonica Cable, S.A. took over its subsidiary companySociedad General de Cablevision Canarias, S.A.U. Following this operation, thecompany taken over was removed from the Telefonica Group perimeter ofconsolidation in which it was included using the full integration method. • The Spanish companies Barcelona Emprend, S.A., Barcelona Ventures,S.G.E.C.R., Foment Ciutat Vella and Euroinfomarket, S.A. have been included inthe perimeter of consolidation of the Telefonica Group using the equity method. TELEFONICA LATINOAMERICA GROUP • The Brazilian company Santo Genovese Participacoes Ltda., a holdingcompany that owned all of the capital stock of the Brazilian AtriumTelecomunicacoes Ltda., was liquidated during the first quarter of 2006 aftertaking over its subsidiary Atrium. Both companies, which were included in theconsolidated accounts of the Telefonica Group using the full integration method,have been removed from the consolidation perimeter. • In April, Telefonica Internacional, S.A. purchased 50% plus one sharein the Colombian company Colombia de Telecomunicaciones, S.A. ESP by tender for289 million euros. The company has been included in the perimeter ofconsolidation of the Telefonica Group using the full integration method. • Telefonica del Peru, S.A.A. took over its subsidiary TelefonicaEmpresas Peru, S.A.A. in June. The company, which was included in the financialstatements of the Telefonica Group using the full integration method, has beenremoved from the perimeter of consolidation. • The Mexican companies Katalyx Mexico S.A. de C.V. and TelefonicaEmpresas Mexico S.A. de C.V., wholly-owned subsidiaries of the TelefonicaInternacional Group, were sold in 2006. Both companies, which were included inthe financial accounts of the Telefonica Group using the full integrationmethod, have been removed from the perimeter of consolidation. TELEFONICA MOVILES GROUP • On the 22nd of February 2006, the Shareholders' Meetings of TelespCelular Participacoes S.A. ("TCP"), Tele Centro Oeste Celular ParticipacoesS.A., ("TCO"), Tele Sudeste Celular Participacoes S.A. ("TSD"), Tele LesteCelular Participacoes, S.A. ("TBE") and Celular CRT Participacoes S.A.("CRTPart") approved corporate restructuring in order to exchange TCO shares forTCP shares to become a wholly-owned TCP subsidiary and the take-over of TSD, TBEand CRT Part by TCP. • In June 2006 VIVO Paticipacoes made a capital increase by assetcontribution for a total of 194 million reais. Once the capital increase wascompleted, Brasilcel, N.V. stake in VIVO Participacoes stood at 62.77%. • In June 2006 Telefonica Moviles Group increased its participation inTelefonica Moviles Peru (TMP), from 98.03% to 98.40%, through the buyout ofminorities. The company continues to be included in the consolidation perimeterof the Telefonica Group using the full integration method. TELEFONICA O2 EUROPE • During the first half of the year, the Czech company Eurotel Praha,spol. s r.o. (Eurotel) was taken over by its parent company Telefonica O2 CzechRepublic, a.s. to give the new integrated operator Telefonica O2 Czech Republic,a.s.. Following this operation, Eurotel, which was included in the financialstatements of the Telefonica Group using the full integration method, wasremoved from the perimeter of consolidation. • In June, O2 UK Ltd. purchased 100% of the British internet serviceprovider Be Un Limited (Be). The operation involved a total payment of 50million pounds sterling (approximately 73.5 million euros). Be is now includedin the perimeter of consolidation using the full integration method. ATENTO GROUP • In May, Atento Chile Holding purchased the percentage shareholding ofPubliguias Chile in Atento Chile, S.A. Following this operation, theshareholding of the Atento Group in Atento Chile increased from 69.99% to71.16%. The company continues to be included in the perimeter of consolidationof the Telefonica Group using the full integration method. • In June, Atento, N.V. purchased the 100% shareholding in the Uruguayancompany Woknal, S.A., with an initial share capital of 0.4 million uruguayanpesos, around 0.01 million euros. The company has been included in the financialstatements of the Telefonica Group by the full integration method. TELEFONICA CONTENIDOS GROUP • In March, Prisa launched a partial take-over bid for the 20% ofSogecable, S.A. The Telefonica Group sold shares representative of 6.57% of thecompany's share capital, reducing its stake from 23.83% to 17.26%. Later inMarch, Sogecable made a capital increase although without Telefonica Grouptaking part, thus diluting its stake in the company's share capital to thepresent 16.84%. In April, Sogecable once again increased its capital to coverthe options plans for company directors, executives and managers and turnedClass B and series B2005 callable shares into ordinary Class A shares, leadingto another decrease in the Telefonica Group shareholding, currently standing at16.80%. Telefonica Group continues consolidating Sogecable into the financialstatements by the equity method. • The Telefonica de Contenidos Group sold all of its shares held in theArgentine company Patagonik Film Group, S.A. in May 2006. The company, which wasincluded in the financial statements of the Telefonica Group using the equitymethod, has been removed from the perimeter of consolidation. • Andalucia Digital Multimedia, S.A. made a capital increase with theparticipation of Telefonica de Contenidos, S.A., which subscribed enough sharesto enable it to increase its shareholding to 24.20%. The company continues to beincluded in the consolidation perimeter of the Telefonica Group using the fullintegration method. TPI GROUP • In July Telefonica has decided to accept Yell Group Plc bid for 100%of TPI. By accepting the Public Tender Offer, Telefonica is complying with itscommitment to accept Yell's bid, made in an agreement signed on 28 April,pursuant to which the Company, in its capacity as controlling shareholder ofTPI, is transferring all its shares to Yell, that is, 216,269,764 TPI shares,equivalent to 59.905% of the company's share capital. As a consequence of the former, in the Telefonica Group consolidated financialstatements as of June 2006, the results from TPI Group are under the caption"Income (loss) from discontinued operations". Moreover, and for comparisonpurposes, the Telefonica Group financial statements for 2005 have been restatedto present TPI Group results under the same caption. DISCLAIMER This document contains statements that constitute forward looking statements inits general meaning and within the meaning of the Private Securities LitigationReform Act of 1995. These statements appear in a number of places in thisdocument and include statements regarding the intent, belief or currentexpectations of the customer base, estimates regarding future growth in thedifferent business lines and the global business, market share, financialresults and other aspects of the activity and situation relating to the Company.The forward-looking statements in this document can be identified, in someinstances, by the use of words such as "expects", "anticipates", "intends","believes", and similar language or the negative thereof or by forward-lookingnature of discussions of strategy, plans or intentions. Such forward-looking statements are not guarantees of future performance andinvolve risks and uncertainties, and other important factors that could causeactual developments or results to differ materially from those expressed in ourforward looking statements. Analysts and investors are cautioned not to place undue reliance on thoseforward looking statements which speak only as of the date of this presentation.Telefonica undertakes no obligation to release publicly the results of anyrevisions to these forward looking statements which may be made to reflectevents and circumstances after the date of this presentation, including, withoutlimitation, changes in Telefonica's business or acquisition strategy or toreflect the occurrence of unanticipated events. Analysts and investors areencouraged to consult the Company's Annual Report as well as periodic filingsfiled with the relevant Securities Markets Regulators, and in particular withthe Spanish Market Regulator. The financial information contained in this document has been prepared underInternational Financial Reporting Standards (IFRS). This financial informationis unaudited and, therefore, is subject to potential future modifications. For additional information, please contact. Investor Relations Gran Via, 28 - 28013 Madrid (Spain) Phone number: +34 91 584 4700 Fax number: +34 91 531 9975 Email address: Ezequiel Nieto - ezequiel.nieto@telefonica.es Diego Maus - dmaus@telefonica.es Dolores Garcia - dgarcia@telefonica.es Isabel Beltran - i.beltran@telefonica.e ir@telefonica.es www.telefonica.es/accionistaseinversores This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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