* D.Telekom, Telefonica, T.Italia report lower Q1 revenues
* Telefonica total rev down 9 percent at 14.1 bln euros
* D.Telekom total rev falls 4.5 pct to 13.8 bln
* European telcos much lower valued than U.S. peers
* Telefonica shares down 0.9 pct, DTel up 4.6 pct
By Harro Ten Wolde and Clare Kane
FRANKFURT/MADRID, May 8 Three of Europe's
biggest telecom operators reported lower revenues on Wednesday,
blaming the weak European economy and stiff regulation while
seeing some bright spots in markets abroad.
The figures from Spain's Telefonica SA, Deutsche
Telekom AG and Telecom Italia chimed with
recent statements from peers such as France Telecom,
Swisscom and KPN as European operators
struggle with an overcrowded market, tough regulations and
They complain such pressures are hampering their ability to
invest in faster networks, important for future growth.
Telefonica, Europe's biggest telecom group by revenue,
reported a 11.7 percent drop to 6.7 billion euros ($8.8 billion)
for its European operations in the first quarter, with total
revenue down 9 percent at 14.1 billion.
Deutsche Telekom said revenue in Europe shrank 6.9 percent
to 3.33 billion euros, while overall revenue fell 4.5 percent to
And Telecom Italia also posted a fall in revenue in the
quarter, down 8.1 percent at 6.79 billion euros, weighed on by
its domestic business which was hit by stiffer competition and
Reflecting the pressures the sector is under, European
telecom stocks are much lower valued than U.S. peers and trade
at roughly 11 times prospective earnings against 19 times for
U.S. peers, according to Thomson Reuters data.
Telefonica's shares closed down 0.9 percent at 11.2 euros
after reporting an increase in its debt despite being on a
debt-cutting drive, as well as a weaker-than-expected
performance in Spain.
Telefonica aims to cut debt to less than 47 billion euros by
year end but reported net debt of 51.8 billion at end-March,
against 51.3 billion three months earlier. The company has sold
all its treasury stock and 40 percent of its central American
businesses to slash debt this year.
A 701 million payout for spectrum, the devaluation of the
Venezuelan bolivar and seasonally more payments due in the first
quarter set back progress on debt reduction, though Moody's
analyst Carlos Winzer said the company was still on track to
reach its debt target of 2.35 times EBITDA by year-end.
However, Deutsche Telekom shares closed up 4.6 percent at
9.56 euros, top of the sector gainers after reporting slightly
better than expected core earnings and the first net addition of
customers in the United States since early 2009.
Telecom Italia closed 0.6 percent lower at 0.64 euros as the
company put off making a decision on whether to open formal
merger talks with Hong Kong-based conglomerate Hutchison Whampoa
, buying more time to win over its divided
Telefonica is the biggest shareholder in Telecom Italia.
While Telefonica generated cash in some Latin American
countries, it depleted its cash reserves in Europe, with
operational cashflow decreasing particularly in Britain, the
Czech Republic and Ireland. Operational cashflow was 22 percent
down on a year ago at 2.6 billion euros, with cashflow in Europe
falling 40 percent to 1 billion.
European telecom operators face particular challenges in
their home markets.
In Telefonica's recession-hit domestic patch, revenue fell
16 percent to 3.3 billion euros, though margins continued to
improve, reaching 47 percent following Telefonica's decision to
scrap costly handset subsidies last year.
"It's a tough year ... because the domestic market continues
to suffer as a result of contraction in consumer spending," said
Deutsche Telekom meanwhile is facing a turf war in its home
mobile market, the European Union's largest, where consumers are
catching up with the rest of the continent by switching to
smartphones from basic mobiles.
However, Deutsche Telekom said mobile service revenues
across the group declined 0.1 percent during the quarter. "This
was the best figure since the fourth quarter of 2011 and
underlines the progress Deutsche Telekom has made compared with
the competition," the company said in a statement.