Spotlight: Telefónica's performance in LatAm over the last 5 years

With its operations now limited to nine Latin American countries, Spanish group Telefónica’s footprint in the region is now smaller than ever from an operational standpoint. 

The group has been gradually reducing its exposure to Latin America over the last three years, downscaling its operations and aiming at leaner, more strategic and growth-oriented markets and segments.

Earlier this year, the company concluded its exit from Central America, with the sale of its operations in El Salvador joining those in Guatemala, Nicaragua, Panama and Costa Rica as being formally completed.

While the company's logo could be seen across the region in the recent past, it is now limited to Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay and Venezuela.

"We have approached the region with a very disruptive model, both from an organizational perspective and from an infrastructure perspective. And I think we’ve achieved very solid results with that new management model,” Laura Abasolo, chief financial and control officer and head of Telefónica HispAm (LatAm minus Brazil), told a May earnings call  on the firm’s regional strategy.

But how has all that actually materialized over the years? BNamericas took a look at the company's financial reports over the last five years to see how its regional performance has evolved, beginning with the latest results released in 1Q22.

[Note: Telefónica is expected to release its 1H22 results on July 28]

DECLINING CAPEX, RECOVERING REVENUES

In the first quarter of this year, Telefónica’s investments in HispAm plunged by 66.8% to 116mn euros (US$123mn). Part of the drop is due to the 135mn euros it reported spending on spectrum in the first quarter of 2021. 

In Brazil, one of its priority markets, capex in euros reached 323mn euros, up 9.7% year-on-year. And overall, the group's global capex stood at 1.07bn euros in 1Q22, down nearly 50%.

Revenues, meanwhile, grew 10.9% to 2.15bn euros in HispAm, and in Brazil they rose 18.1% to 1.94bn euros. Worldwide, they dipped 9% to 9.14bn euros.

The group also sought to improve its quarterly OIBDA (operating income before depreciation and amortization – a critical metric to show financial performance), with a 50.7% increase in HispAm to 597mn euros and a 14.6% hike in Brazil to 804mn euros. Globally, its OIBDA in 1Q22 was 3.19bn euros, down 6.4% year-on-year.

Looking back to previous years, HispAm revenues amounted to 8.36bn euros in 2021. This was up from 7.92bn euros in 2020, but down from the 9.65bn euros reported in 2019 and 9.93bn euros in 2018. 

All values are as described and have not been updated with current exchange rates. 

In 2019 and 2018, the company's Spanish-speaking operations in Latin America comprised more countries than it does today, specifically because of the regional divestment strategy that it launched in 2019. And in 2018, the HispAm unit did not formally exist, with operations in the region being divided between Brazil, HispAm North and HispAm South.

Globally, the group's annual revenues in the past few years were 39.2bn euros in 2021, 43bn euros in 2020, 48.4bn euros in 2019 and 48.6bn euros in 2018.

This meant that HispAm’s share of the group’s total revenues was 21.3% in 2021, up from 18.4% in 2020, 19.9% in 2019 and 20.4% in 2018.

Meanwhile, OIBDA in HispAm was 1.71bn euros in 2021, 990mn euros in 2020, 2.03bn euros in 2019 and 2.25bn euros in 2018. Globally, Telefónica’s OIBDA was 21.9bn euros (2021), 13.4bn euros (2020), 15.1bn euros (2019) and 15.5bn euros (2018).

All in all, revenue and OIBDA figures show that Telefónica managed to deliver positive momentum to its regional operations while reducing the overall size of its businesses.

ACCESSES

In 2021, Telefónica increased the total number of subscribers in HispAm after three years of drops. 

This came mostly through rises in its main markets and in the segments which the company has given emphasis, such as fixed broadband.

HispAm accesses reached 110mn at end-2021, compared with 108.5mn at end-2020), 110.6mn at end-2019 and 130.4mn at end 2018 (73.5mn HispAm Norte, plus 56.9mn in HispAm Sur).

Last year, fixed broadband accesses grew more in HispAm than in any other unit, rising 20% to 4.43mn. That compares with 9% growth in Brazil (to 5.53mn), 3% in Germany (to 1.85mn) and 5% in Spain (to 4.84mn).

Worldwide, Telefónica’s total accesses, including mobile, fixed telephony, pay-TV and fixed broadband, both on a retail and wholesale basis, ended 2021 at 369mn, up from 354mn in 2020, 344mn in 2019 and 357mn in 2018.

INVESTMENTS

In terms of investments, capex in HispAm also showed growth last year, rising to 978mn euros, up from 833mn euros in 2020.

Regional capex was 1.48bn euros in 2019 and 1.68bn euros in 2018. Values exclude spending on spectrum.

As a result, capex as a percentage of revenues in HispAm was 8.5% last year, 9.5% in 2020, 6.5% in 2019 and 5.9% in 2018.

Worldwide, the group's global capex (excluding spectrum) was 7.26bn euros in 2021, 5.86bn euros in 2020, 8.78bn euros in 2019 and 8.11bn euros in 2018.