Spanish incumbent Telefonica has lowered the value of its Venezuelan assets due to the devaluation of the country’s currency, the bolivar.
In a securities filing, the telco announced that in its 2014 consolidated financial results it will apply an…
Spanish incumbent Telefonica has lowered the value of its Venezuelan assets due to the devaluation of the country’s currency, the bolivar.
In a securities filing, the telco announced that in its 2014 consolidated financial results it will apply an exchange rate of VeB50 (US$7.90) per dollar, down from the previous exchange rate of VeB12 (US$1.80) per dollar to record transactions, cash flows and balances related to its Venezuelan operations.
As a result, the company will write down its assets by €2.84bn (US$3.24bn), which includes a €1.23bn (US$1.4bn) reduction in net financial assets.
The currency adjustment – the second carried out by the telco in the past year – will also result in a decline in its operating and net profits of €915m(US$1bn)and €399m(US$455m) respectively, leaving Telefonica Venezuela with a €390m(US$445m) net cash position.
Last week, the Venezuelan government introduced a new free-floating exchange rate, but said it would keep its fixed official exchange rate at VeB6.3(US$0.9) for key imports. It also has an auction rate at VeB12(US$1.8), but only 12% of its economy trades at those levels.
Recurring currency devaluations, high inflation and government’s tight control on the economy have prompted many international companies to write down their investments in the country or exit the market altogether.
However, Telefonica pointed out that “these adjustments do not affect the investment nor growth plans in Venezuela in terms of bolivars, reaffirming the commitment of the company to continue developing telecommunications in the country, recently reflected in the allocation of spectrum that will materialise shortly with the launch of 4G.”
Last December, Telefonica’s Movistar, which is the second-largest carrier, state-backed incumbent Movilnet, and DirecTV’s Galaxy Entertainment were all granted 4G licenses in the country’s latest spectrum auction, which raised a total of VeB4.6bn (US$724m).
In 2013, the Madrid-based operator lost €1bn (US$1.1bn) on the value of its assets in Venezuela after the government devalued the bolivar from VeB4.3 (US$0.60) per dollar to VeB6.3(US$0.90) per dollar.
At the time, the company said the devaluation had no impact on debt or any other aspects of its yearly performance.
