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Telefonica 2007 net up 42.9 pct, beats forecasts

Date: 2/28/2008 4:06:00 PM

Spanish telecoms giant Telefonica posted fullyear net profit of 8.91 billion euros ($13.4 billion) on Thursday, up 42.9 percent on continued strong mobile and Latin American growth and ahead of analyst forecasts.

The worlds fourthlargest telecoms group by market value made OIBDA (operating income before depreciation and amortization) of 22.8 billion euros, up 19.3 percent, while revenues climbed 6.7 percent to 56.44 billion euros.
In a statement, Telefonica said it expected OIBDA growth to slow to between 7.5 and 11 percent this year while sales should increase by 6 to 8 percent, with higher growth in Latin America.

A Reuters poll of 36 analysts had forecast Telefonica would make net profit of 8.5 billion euros and OIBDA of 23.2 billion.

"OIBDA is slightly below forecasts but its not catastrophic because the charges are mostly linked to restructurings," said one fund manager. "The guidance is good, so is the increase in investment, which means theyre confident."

Telefonica expects to invest 8.6 billion euros this year, up from 8.0 billion in 2007.
The firm has spent billions over the years to expand in Latin America and Europe, where it bought mobile operator O2 and last year took a six percent stake in Telecom Italia. It has 10 percent voting rights in the Italian group.
Chairman Cesar Alierta said on Thursday he expected to squeeze 1.3 billion euros of synergies out of the alliance with Telecom Italia over three years and squashed any talk of disagreement among shareholders about the companys management.

"The new team has very clear ideas and is going to focus them along the right lines," Alierta said, adding he was "delighted" with the Telecom Italia stake despite a fall of about 20 percent in its shares so far this year.

Telefonicas own stock has fallen about 11.5 percent this year, only slightly outperforming the sector, as investors fret about Spains everdarkening economic outlook.

They have played catchup in the last week and are now trading at 13.5 times forecast 2008 earnings against a sector average of 13.0. Telefonica shares closed down 1.4 percent on Thursday, in line with the sector.
Late on Wednesday, Telefonica opened a new share buyback programme for 100 million shares or 2.1 percent of its stock, the continuation of a policy to improve earnings per share.

Citi analysts said the buyback was not a surprise but was a "weak response to a cheap share".
O2 CEO Matthew Key said the Apple iPhone had boosted European mobile phone revenues as hoped, with customers paying Telefonica to surf the Internet, but that competition in the German mobile market was still very tough.
"In Q4 we saw the fourth consecutive quarter of improving revenue trends and were very confident that well return to positive revenue growth in 2008," Key told a conference call.

Alierta said Telefonica had no plans to sell its 17 percent stake in payTV group Sogecable, which is under full buyout offer from its parent Prisa. The stake is worth 625 million euros at the bid price.

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