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June 24, 1990

TELEFONICA PLANS TO FINANCE THIS YEAR’s AMBITIOUS GROWTH FROM OWN RESOURCES

By CBR Staff Writer

The president of Telefonica de Espana SA, Candido Velazquez, has announced that the company is to stick to its original debt programme, which will mean relying on call charges and a special exemption from Spanish foreign currency financing limitations to finance its plans to improve the quality and range of Spanish telecommunications products and services. Although rentals are Telefonica’s main source of income and last year the company made a net profit of $640m, this year it is planning to spend $6,308m, just part of a three billion peseta plan stretching to 1994. The phone company is currently endeavouring to make local charges better cover the cost of international calls (at the moment they don’t by any means, while the price of international calls is far from competitive), but the rate rise for last year was only 3.4%. The increase for this year is still under discussion with the Ministry of Transport, Tourism & Communications. Last year’s turnover was $6,576m, up 16% on the previous year by virtue of a 5.6% increase in the average use per line. Main growth was seen in data transmission services which rose by 32%, inland direct dial calls, up 16%, and cellular business, up 90%. Investment amounted to $5,440m (up 63% on the year before), representing 5% of Spanish fixed capital investment, of which $1,791m went to external plant, $1,275m to switching systems, $820m to transmission and radio systems and $14m to line installation. Of these lines, 87% were digital. This year the majority of Telefonica’s investment ($4,776m) will go towards network infrastructure but the company is also concentrating on reducing the waiting list for phone lines to 400,000 (100,000 less than last year). This is a reasonable aim given that Telefonica installed 1.5m lines in 1989. Within five years, it would also like to increase the current 31 lines per 100 inhabitants to the European average of 45 lines. In the period 1982 to 1987, the figure for annual line installment was 400,000 and, at the end of last year, 13m lines, 19% of them digital, had been installed. Demand rose 8% and the waiting list dropped to 503,000 – of these 153,600 were already being allocated at the end of the financial year. As for Telefonica’s advanced corporate communications services and cellular phones, data transmission connections via the Iberpac packet switching network went up 22% while those via Ibercom went up 116% (to 145,000) and cellular telephone subscriptions rose 156%. Telefonica’s current mid to long term debt is $8,312m, about 50% of the total debt.

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