Telefonica sees profits drop, hurt by Venezuelan devaluation
Monday, 08 February 2010 11:24
Telefonica announced its 2009 net profit will be reduced by nearly EUR 548 million, due to Venezuela's rising inflation and the devaluation of the bolivar. Venezuela is Telefonica's second-largest revenue generator in Latin America, accounting for almost 7 percent of revenues in the first nine months of 2009. Telefonica also said the loss would be offset by fiscal gains of EUR 591 million from a Spanish law that allows firms to deduct from taxes goodwill charges from foreign acquisitions and spread that deduction over a 20-year-period. According to the operator, during 2009 and the first days of 2010 several factors emerged in the Venezuelan economy which have forced the need to reconsider its accounts there. These factors include the need to take into account the higher inflation rate achieved in 2009 and those accumulated on the three previous years, restrictions on converting currency and the devaluation of the bolivar. On 8 January this year, Venezuela's President Hugo Chavez devalued the Venezuelan currency in relation to the US dollar by 50 percent, to an exchange rate of VEF 4.3 per dollar from VEF 2.15, and set a rate of VEF 2.6 per dollar for imports of essential items such as food and medicine. As a result of the devaluation, Telefonica calculated that its assets in Venezuela will be worth EUR 1.81 billion less. Telefonica reiterated its earnings targets after Venezuela announced its currency devaluation, which include 2010 earnings per share of EUR 2.10.
(Source: Telecom Paper)
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