Telefonica First-Quarter Results Boosted by Broadband

Spain's Telefonica announced a 7.7% rise in first-quarter net profit on Wednesday, meeting expectations as a strong performance in Latin America was coupled with booming broadband growth at home.

Revenues at the euro zone's biggest telecoms company were ahead of expectations, up 15.1% to 13.75 billion euros ($18.56 billion) vs. a Reuters poll consensus of 13.58 billion.

Net profit increased to 1.26 billion euros ($1.7 billion), broadly in line with the 1.25 billion forecast in a poll of eight analysts.

The main driver of first quarter profit was booming business in Latin America, where markets are not as mature as in Europe.

Another factor was broadband expansion in Spain, which as a geographical area still accounts for nearly 37% of the group's revenues.

Operating income before depreciation and amortisation rose 9.6% to 5.11 billion euros, ahead of expectations of a rise to 5.08 billion euros in the poll.

The number of customer access points -- including fixed-line, mobile and broadband -- rose 11.4% year-on-year to 206 million.

The group holds a conference call at 3 pm London time, in which analysts will be watching out for more details on a deal giving it a 10 percent indirect stake in Telecom Italia and its implications.

In a statement accompanying results, Telefonica reconfirmed its 2007 financial targets.

Its stock is trading at 13.7 times forecast 2007 results vs. an average of 14.2 times for its six closest peers, according to Reuters Estimates.

Many analysts consider the stock undervalued given the company is geographically diversified and its acquisition risk has diminished since the deal with Telecom Italia.