Telefonica signed a deal with Liberty Latin America to sell its business in Costa Rica for a cut-price €425 million, as Covid-19 (coronavirus) and currency movements pummelled its revenue and profit in Q2.
Notification on the sale of its Costa Rica operation comes less than three months after an agreement to sell the unit to Millicom [1] for $570 million (€484.8 million) collapsed.
Telefonica is still chasing compensation from the original buyer for what it described as an “unjustified breach of the terms of the agreement reached in 2019”.
Its move is the latest in its attempts to “rationalise” its portfolio in the region, having sold off its several other units in central America [2] in 2019.
The latest sale was announced alongside the operator group’s Q2 results, where revenue fell 15 per cent year-on-year to €10.3 billion and net income dropped 51 per cent to €425 million, as the Covid-19 pandemic and foreign exchange movements took their toll.
Telefonica estimated the revenue impact of the pandemic at €729 million in Q2, taking the overall hit in H1 to €806 million. It cited a decline in handset sales due to lockdown measures, cuts in service revenue, discounts offered to bars for a lack of La Liga football, and lower B2B sales.
The operator said the greatest effects were felt in May with “notable improvements” from June.
Meanwhile, currency movements wiped an estimated €791 million off Q2 revenue. It also booked a goodwill impairment of €109 million related to its Argentina business.
CEO Jose Maria Alvarez-Pallete (pictured) said the operator “delivered a resilient performance in a quarter marked by the Covid-19 crisis”, noting it had “contained the impact” on revenue through cost controls and managing expenditure.
Digital deal
Alongside the company’s results, it unveiled its digital deal proposal, which outlines ways for authorities and the company to address digital inequality in Spain.
It also details targets for domestic fibre connectivity and 5G.
Among the broad societal aims outlined are: boosting digitalisation for a more sustainable society and economy; addressing inequalities by investing in digital skills; modernising fiscal, regulatory and competition frameworks; and improving trust through ethical and responsible use of technology.
[1] https://www.mobileworldlive.com/featured-content/top-three/millicom-abolishes-telefonica-costa-rica-acquisition/
[2] https://www.mobileworldlive.com/featured-content/top-three/millicom-moves-on-telefonica-central-america-units/
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