Telefonica’s O2’s Professional Competences in Business

Telefonica, S.A. has over the past several years experienced a tumultuous market environment which has witnessed its re3venue reduce by a by a big margin. The company however still managed to increase its net income despite a shrink in its overall revenue. The group’s revenue reduced to 57 billion Euros from 62 billion Euros while the net income grew to 4.6 billion Euros from 3.9 billion Euros. The company also reduced the percentage that had been devoted to the cost of goods sold to 42.22% from 42.73% which contributed largely to the growth in the net income despite the falling in revenue growth. Telefonica is the holding company of the O2 brand which is found across many countries in Europe and America.

In 2010 the company’s total revenue stood at 60.7 billion Euros while the gross profit stood at 36 billion Euros, operating income at 12 billion Euros and the net income stood at 10 billion. This period was followed by the 2011 period which saw an increase in total revenue to stand at 63 billion Euros. The gross profit remained stagnant at 36 billion Euros while the operating income fell to 11 billion Euros and the net income fell sharply to 5 billion Euros. This was a significant fall which can be attributed to the fall in market share as a result of the gains made by other close competitors like Vodafone.

The year 2012 witnessed a stagnation in both the revenue and gross profit margins which stood at 63 billion Euros and 36 billion Euros respectively. The operating income however fell to 10 billion Euros during this period together with the net income which declined to 3.9 billion Euros. This period also experienced a fierce competition from the big global players who took on the different client clusters in Europe in order to gain both market share and to increase their revenue and profits. The competitive environment and the volatility of the global telecommunications market can be attributed to the reduction in the net income of the company.

Total revenues further declined in the year 2013 to 57 billion Euros while the gross profit declined by 4 billion Euros to stand at 32 billion Euros. During this period operating profit also declined to 8 billion Euros while the net income increased to 4 billion Euros. The increase in the net income during this period is as a result of the reduction of the amount that had been devoted to the cost of goods sold.

In the year 2013 the company realized a 4.07% return on assets and an 18.02% return of equity in comparison to the industry while the return on capital stood at 5.53%. The company’s gross margin compared to the industry was 57.78% while the levered cash flow margin stood at -3.31%. The EBITDA margin stood at 31.05% in the same period compared to the industry.

The year 2013 saw the company’s total asset turnover compared to the industry stand at 0.5x while the fixed asset turnover being 1.7x the industry average. The Accounts receivables turnover was 6.2x the industry while the inventory turnover was 22.2x the industry average.

The stock price has also experienced a significant increase, a magnificent decrease and then a slight increase in the past five years as indicated by the chart below.

As of March 2014, the company’s market share stands at 4.30% which is above the market median which is a good indicator for the company.