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Telefonica first quarter revenues drop as debt rises

Telefonica hit by unfavourable exchange rates in Latin America and weakness in Europe
Telefonica hit by unfavourable exchange rates in Latin America and weakness in Europe

Revenue dropped 9% at Spanish telecoms company Telefonica in the first quarter, hit by unfavourable exchange rates in Latin America and weakness in Europe.

Revenues at the company, which owns O2 Ireland, were €14.1 billion, in line with analyst expectations.

The decline was less marked in Latin America, which accounts for over half the group's revenue, dipping 4%, compared with a 12% drop in Europe to €6.7 billion.

European peers like France Telecom, Swisscom and KPN also reported drops in revenue in the first quarter, with France Telecom hit by a price war in its home market.

Telefonica, which plans to cut debt to under €47 billion by the end of 2013, reported net borrowings of €51.8 billion at the end of March compared with €51.3 billion at the end of 2012.

The company said debt was hit by the devaluation of the Venezuelan bolivar and a €701m investment in spectrum, but added that it was on track to meeting its 2013 target after shaving an additional €653m from debt since the end of the first quarter to €51.2 billion.

Telefonica took steps to trim debt in the first quarter, including selling its treasury stock and disposing of 40% of its Central American assets.

The company said that first quarter profit rose 21% to €902m, owing to better financing costs and a favourable comparison with last year when the company wrote down its stake in Telecom Italia.