While Telefonica de Espana’s $150m profits for the first quarter of this year showed no increase compared with the same period last year, profits for the first five months show an 18% increase. This success is due to the introduction of new rates which have led to a rise in the company’s revenue to $3,450m. The sluggish start to the year was due to two factors: Telefonica introduced a salary increase, and, secondly, it was waiting for government approval before it could raise its rates. The company’s cash-flow for the five month period reached $1,385m and it invested $2,320m (up 43% on last year) updating the phone service. Its mid-term strategy is to reduce international rates and increase local ones. Total investments for this year will amount to $6,600m while net profit for 1990 is expected to be as much as $781m (up 11% on last year). The company is also now signing contracts with its major suppliers: Alcatel, Ericsson and AT&T, but it is unlikely that these contracts will cover Telefonica’s 2.9m line demand, and thus supply will fall short by 400,000 lines. The company has increased demand since 1986 from 586,000 lines then, to the current figure of 3m lines. So Telefonica is negotiating to acquire a 6% stake in AT&T’s main European unit the Dutch-based AT&T Network Systems International BV. The Spanish company currently holds 20% of AT&T Microelectronica Espana SA and wants to swap this holding for the stake in the Dutch AT&T subsidiary and a seat on its board and management committee. Telefonica signed a similar agreement in 1986 with Telettra when it swapped its 51% stake in Telettra Espana SA for a 10% stake in the parent company Telettra SpA.
