Telefonica First-Half Profit Drops, Pay TV Subs Grow in Key Markets

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MADRID – Spanish telecom giant Telefonica on Thursday posted a profit of $2.5 billion (1.9 billion euros) for the first half of 2014, down 7.5 percent from the same period in 2013, even as it grew pay TV susbcribers in key markets.

Telefonica blamed the profit drop largely on fluctuations in the currency exchange rate, especially the depreciation of the Brazilian real and the Argentine peso. 

“Pay-TV access growth accelerated 32 percent year-on-year in organic terms to 4.2 million at the end of June, with 610,000 net additions in April-June posting positive net additions for five consecutive quarters,” the group said.

Growth was primarily driven by the company's home market following the launch of Movistar Fusion TV in April, which accounted for a quarter of new additions of 464,000 and to nearly double the access base compared to 2013.

Movistar Fusion TV is Telefonica's new pay-TV service available on smartphones, tablets, PCs and TVs. The service comes bundled with fixed line phone service, mobile telephony and high-speed Internet. 

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The 32 percent increase boosted Telefonica’s revenue from the video business by more than 15 percent in organic terms with significant progress in Spain and Brazil, the group said.

Telefonica also boasted of its recent exclusive rights acquisitions in Spain to major upcoming international sporting events such as the qualifying matches for the 2016 UEFA European Championships and the 2018 FIFA World Cup.

“First-half results started to reflect the benefits from the investments in network modernization carried out in recent quarters, which are enabling us to further differentiate our offering in key markets,” CEO Cesar Alierta said.

“This increased differentiation resulted in an acceleration of commercial activity in the second quarter, with net additions of 2 million mobile contracts, 5 million smartphones and over six hundred thousand pay-TV customers,” Alierta added. 

Alierta also had some comforting words on the Spanish market:  "I would also like to highlight the status of the business in Spain, where the radical transformation undertaken in recent years and the clear improvement in the economic conditions resulted in a change of the business dynamics in the second quarter." 

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