Covid and Argentina drag Telefónica to 160-million-euro 3Q loss

Spain’s Telefónica has posted losses of 160 million de euros (US$187 million) in the third quarter due to the impact of the Covid-19 pandemic, bad business in Argentina and the devaluation of Latin American currencies.

For the first three quarters of this year net profits have fallen 60 percent to 671 million euros (US$788 million), the firm said.

Despite the negative effect of the pandemic on both subscriptions and mobile telephone sales, the group underlines a third-quarter pickup in comparison with the previous quarter, especially for telephone sales. 

Invoicing retreated 12 percent in the third quarter to 10.46 billion euros (US$12.3 billion) and 10 percent from the start of the year to 32.167 billion euros (some US$37.8 billion).

The markets hit hardest by the virus were Latin America and Spain, followed by Brazil and the United Kingdom, while the impact on Germany was limited.

The group’s accounts felt the depreciation of Latin American currencies with respect to the euro, also a consequence of the economic volatility provoked by the pandemic. That phenomenon had a negative impact of 358 million euros (US$421 million) on operating profits ahead of amortisation, according to the communiqué. The Argentine peso registered the sharpest depreciation worldwide, 78 percent over the last three years according to Bloomberg.

Profits have also been savaged by the deterioration of the Argentine market, implying a fall of 785 million euros (US$923 million). The local branch was hit by the Frente de Todos government imposing a price freeze on telephone services throughout the year (after both profits and invoicing rose annually by double-digit percentages under the pro-market 2015-19 Mauricio Macri presidency, which sought to update pricing to inflation). Capital controls, powerful trade unions and the cumulative effect of three years of recession (with the International Monetary Fund forecasting economic shrinkage of 11.8 percent for this year) all make Argentina a rough place to invest, reported Bloomberg.

The third quarter also saw the Spanish multinational starting to activate its 5G network in the UK, Spain, Brazil and Germany.

The group, which last year embarked on an ambitious restructuring plan in Spain, cut its payroll by 4.5 percent in the first nine months of this year as against the first three quarters of 2019, implying almost 114,000 less employees.

Argentina has a huge symbolic value for Telefónica as one of its first two overseas market entries when it went international in 1990. Early in 2015 Telefónica amortised the value of its Venezuelan assets at 2.8 billion euros, also in a deteriorating economic context.

– TIMES/AFP/BLOOMBERG