Spain's Telefonica raises revenue target, shares rise

By Isla Binnie and Andrés González

MADRID (Reuters) - Spain's Telefonica raised its revenue target for the year, boosted by a brighter outlook for its domestic market and growth in Britain, despite a fall in third-quarter core profit caused by currency volatility in Latin America.

Shares rose 3.8 percent in early trade to lead Spain's .IBEX after the bourse's fourth-largest company upgraded its 2018 revenue target to a 2 percent rise, compared with a previous forecast for a 1 percent increase.

Currency turbulence in Brazil and Argentina have dented the telecoms group's results in recent quarters, even as its dual strategy to aim for both the upper and lower ends of the Spanish market has shown signs of bearing fruit.

"FX, one-offs obfuscate a solid set of numbers," Bernstein analysts wrote in a note.

Operating income before depreciation and amortization (OIBDA) fell 1.4 percent year-on-year to 4.04 billion euros ($4.58 billion). But stripping out currency effects, this was a 4.1 percent rise from a year earlier.

At home in Spain, which accounts for just over a quarter of its core earnings, 81,000 customers signed up in the quarter to the premium Movistar Fusion package, which includes broadband, pay TV and mobile.

Core profit rose 12.6 percent in Britain, where Telefonica trades under the O2 brand, partly thanks to higher-value smartphone sales and rising subscriptions.

Rights to broadcast Spanish soccer - an expensive asset which British rival Vodafone recently relinquished - are also starting to attract high-paying customers.

But the good commercial results have yet to translate into earnings success in Spain as reported core income sagged 1.2 percent in July-September to 1.29 billion euros.

Earlier this month, Telefonica warned that rising prices in Argentina would reduce its core profit there by around 215 million euros in the first nine months of 2018.

($1 = 0.8817 euros)

(Reporting by Isla Binnie and Andres Gonzalez; Editing by Louise Heavens and David Evans)

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