By JASON SINCLAIR

MADRID--Spanish telecommunications giant Telefónica SA said Thursday second-quarter net profit rose 16% as revenue growth in its Latin American business compensated for a weaker Spanish market.

Net profit rose to €2.12 billion ($2.75 billion) from €1.83 billion, while revenue increased 9% to €15.12 billion from €13.87 billion, Madrid-based Telefónica said.

Latin America drove much of the company's growth. Revenue in teh region rose 16% to €6.44 billion, as the company picked up customers and the euro lost valued compared to some key Latin American currencies.

In Europe, where Telefónica operates under the O2 brand outside Spain, Telefónica faces increased competition, the continued fallout from the economic crisis and the impact of regulatory pressure on its revenue. Revenue for the region neverthless increased 14% to €3.79 billion as the company's operations picked up steam in the U.K. and Germany.

Revenue in Spain, where unemployment tops 20% and low-cost competition has increased, however, fell 3.2% to €4.69 billion.

The company also reiterated its forecast until 2012 that includes earnings per share of €2.10 in 2010 and annual revenue growth of between 1% and 4%.

After months of negotiations, Telefónica agreed Wednesday to buy Portugal Telecom SGPS SA's stake in Vivo Participacoes SA in order to take full control of the Brazilian mobile operator. Telefónica wants to merge the company with fixed-line telecommunications company Telesp (to bulk up its operations in the high-growth market.

Telefónica is Europe's second-largest telecommunications company by market capitalization behind Vodafone Group PLC.

Write to Jason Sinclair at jason.sinclair@dowjones.com