The move by Venezuelan government to devalue their currency by 32 percent last week was unexpected and shocking, not least to Telefonica who operates a mobile network in the Latin American country. As a result of the currency devaluation Telefonica has taken a US$585 million hit to its 2012 financial results.

The move by the Government to try and shore up the troubled economy has also resulted in Telefonica taking a billion Euro write-down on its Venezuelan assets.

The new exchange rate of 6.3 bolivars per dollar will be used from 2013 in the translation of the financial information of Venezuelan companies.
As part of the decrease, there will also be a reduction on the euro value of the net financial assets denominated in bolivars, for approximately EUR873 million, considering the existing balance as of December 31, 2012.

Telefonica is also constrained from raising prices to offset the currency losses due to price-controls introduced by President Chávez’s government to try and curb the current 22% inflation rate.

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