(Corrects to read billion, paragraph 11)
* Core profit up 14.3 pct as business improves, costs drop
* Cash flow improves, helps cutting debt
* Sees stable revenue for 2017, improving margins
By Julien Toyer and Andrés González
MADRID, Feb 23 Spanish telecoms group Telefonica
will focus on higher profitability in 2017 in efforts
cut debt and find the right opportunity to divest assets
including its British unit O2.
The firm, which turned a corner last year after a long
crisis when core profit halved, is still mired in debt, slowing
its transformation from a traditional telecoms company into a
more content and data driven firm.
It reported a 14.3 percent rise in operating income before
depreciation and amortisation (Oibda) for 2016 to 15.118 billion
euros ($15.95 billion) while net profit was 2.369 billion euros,
as an improving underlying business and lower restructuring
costs which more than offset negative currency effects.
Telefonica's debt was 48.595 billion euros at the end of
December, down 1 billion euros from the previous three months
thanks to an improving cash flow.
It is expected to fall by a further 1.275 billion euros once
the sale of a 40 percent stake in its telecom towers business
Telxius announced earlier this week is completed.
Telefonica is also trying to sell part or all of its British
business with sources familiar with the company's plans saying
an initial public offering may be launched later this year.
For now, however, the company's plans are to focus on
organic deleveraging, with further improvement in cash flow
expected to come from lower investments, cost savings and higher
margins as clients subscribe to more premium services.
The company said it targeted stable revenues for 2017,
improving its profit margin by 1 percentage point and reducing
by 1 percentage point its investment to sales ratio.
With both the bulk of restructuring costs linked to a plan
to cut thousands of staff and investments in new high-speed
internet and mobile phone infrastructures well under way, this
goal is in reach, analysts say.
"We expect a positive impact from improving core profit,
debt reduction and cash flow generation, which should accelerate
significantly in 2017 thanks to lower investment and expanding
margins," Sabadell analysts said in a note to clients.
Free cash flow, which rose 24 percent year on year in 2016
to 4.37 billion euros, will also be helped this year by a lower
dividend, which is expected to save around 1.9 billion euros.
Telefonica said it would pay a 0.4 euro per share dividend,
all in cash, against 2017 earnings, in line with a new policy
announced in October last year.
Shares in Telefonica were up 3 percent at 9.6 euros at 0845
GMT, outperforming Spain's blue-chip index Ibex and
($1 = 0.9476 euros)