Telefonica Withdraws FY20 View, To Form UK JV With Liberty Global; Stock Dips

(RTTNews) - Shares of Telefonica SA (TDE.L, TEF) were losing around 2 percent in the trading in Spain after the telecom major on Thursday reported weak first-quarter profit and withdrew fiscal 2020 guidance due to the current level of uncertainty amid Covid-19 impact. However, for the mid-term, the company backed 2022 guidance of revenue growth.

José María Álvarez-Pallete, Chairman and Chief Executive Officer noted that the coronavirus crisis has had a limited impact on its first quarter financial results and that its four key markets have performed well in a unique and challenging environment.

Separately, Telefonica announced an agreement with Liberty Global plc (LBTYA, LBTYB and LBTYK) to merge their operating businesses in the U.K. to form a 50:50 joint venture.

Liberty Global's Virgin Media will be combined with Telefonica's O2 to create a nationwide integrated communications provider with over 46 million video, broadband and mobile subscribers and 11 billion pounds of revenue. The transaction is expected to close around the middle of 2021, subject to regulatory approvals.

In the transaction, Telefonica would receive 5.7 billion pounds in total proceeds, while Liberty Global would receive 1.4 billion pounds in total. The JV is expected to deliver substantial synergies valued at 6.2 billion pounds.

For the first quarter, Telefonica's net income declined 56.2 percent from last year to 406 million euros. Adjusted net income was 619 million euros, down 30.1 percent.

OIBDA amounted to 3.76 billion euros, down 11.8 percent on a reported basis and down 1.7 percent in organic terms.

Meanwhile, OIBDA of the four core markets increased 0.8 percent organically from the prior year.

OIBDA margin was 33.1 percent, down 2.5 percentage points from last year.

Revenues were 11.37 billion euros, a decline of 5.1 percent on a reported basis and down 1.3 percent organically mainly due to lower service revenues while handset sales remained broadly stable. Revenues of the four core markets increased 0.1 percent organically.

Further, the company confirmed the announced 0.40 euro dividend for 2020.

In Spain, Telefonica shares were trading at 4.18 euros, down 2.36 percent.