Telefonica reveals surge in operating profit following O2 sale

Spanish telecommunications giant Telefonica announced a major growth in operating profit, following the sale of O2 to Hutchison Whampoa for £10 billion.

The deal was announced a few months ago, following rumours Three UK wanted another carrier to bolster its position in the UK market. Telefonica had previously sold O2 Ireland to Three, which in March 2015 merged into Three Ireland.

Telefonica revealed £1.3 billion operating profit, up from £220 million in the fourth quarter last year. It is a surprising rise in profit, and a telling sign of why Telefonica wanted rid of O2 for less than it bought the company for in 2006.

Even with the removal of O2, Telefonica reported 13 per cent growth in revenue, thanks to the takeover of mobile carrier E-Plus in Germany and strong performance on fiber optic and 4G LTE in Spain and Latin America.

Spain’s recovery from the economic downturn might turn out to be the best news Telefonica has heard for a while. It recently pushed prices by €5 in Spain for broadband, alongside upgrading speeds across the country.

It plans to continue investment in high-speed fiber optic, even if right now most customers are happy on lower broadband speeds. It will continue to invest in more European ventures, although we suspect it will be glad to stay out of the UK.

The UK is one of the most regulated and competitive mobile markets in Europe, meaning it is hard to make money. EE managed to make a quick push with 4G LTE investments, but operating profit was low throughout - BT plans to acquire the company for £12.5 billion, with the buyout currently under review by Ofcom.

Vodafone and Three UK both reported slim operating profits this quarter, showing the lack of revenue in the mobile market despite growing contract prices.