Champagne all round at Telefonica on Wednesday morning as the Spanish carrier reported a 22.4 per cent year on year increase in first quarter net profit to Eur1.54bn.

Group revenues were slightly short of expectations, up just 1.1 per cent year on year to Eur13.9bn, but Latin America continues to provide good growth.

Revenues for Latin America, where Telefonica operates in ten markets, were up 10.1 per cent to Eur5.16bn, driven by a 17.7 per cent growth in subscribers to 137.7 million access lines.

In its domestic market the Spanish carrier recorded a 1.9 per cent increase in revenue to Eur5.1bn, while European revenue, which includes O2 UK, Germany, Ireland and Czech Republic, dropped 1.7 per cent to Eur3.5bn. This was largely due to the weakening of the pound and the disposal of emergency services unit, Airwave, last year.

Commenting on the results, European telecoms analyst Michael Kovacocy, of the Daiwa Institute of Research Europe, said, “At first view, the results tend to support our investment thesis for Telefonica – Latin America continues to grow strongly in-line with our expectations, whilst Spain continues to hold up despite fears in some corners stemming from macro-economic difficulties.

Telefonica Europe was down, but largely due to the depreciation of Pound Sterling against the Euro, which hit Telefonica’s UK O2 mobile operations. Adjusting group revenue for currency and other non-comparables, organic growth YoY in 1Q 2008 was 7% – strong and in-line with our expectations.”