Company Reports

After expanding to many European and Latin American countries during the 1990s and 2000s, Telefonica turned around its strategy to focus on four key markets: Spain, the United Kingdom, Germany, and Brazil. Telefonica is divesting or restructuring its Latin American operations (except Brazil) and selling infrastructure assets such as towers or noncore fiber networks, and intends to use the proceeds to reduce debt. Marc Murtra, CEO since 2025, is pushing for market consolidation across Europe, a move we look favorably upon, although we don't have high hopes from a regulatory perspective.

Telefonica reported flat organic revenue growth and 2.7% EBITDA growth in the second quarter, with strength in Spain and Brazil offset by weaker performance in Germany. Management reaffirmed its 2026 targets, with revenue outlook dependent on a stronger second half, while EBITDA is tracking well.

After expanding to many European and Latin American countries during the 1990s and 2000s, Telefonica turned around its strategy to focus on four key markets: Spain, the United Kingdom, Germany, and Brazil. Telefonica is divesting or restructuring its Latin American operations (except Brazil) and selling infrastructure assets such as towers or noncore fiber networks, and intends to use the proceeds to reduce debt. Marc Murtra, CEO since 2025, is pushing for market consolidation across Europe, a move we look favorably upon, although we don't have high hopes from a regulatory perspective.

Telefonica reported 0.8% organic revenue growth and 1.8% EBITDA growth in the first quarter. Although revenue growth was below the 1.5%-2.5% 2026 guidance range, management reiterated that it remains on track to meet guidance.

Telefonica met its 2025 outlook and launched 2026 guidance for 1.5%-2.5% growth in both revenue and adjusted EBITDA, in line with the 2028 targets set at its capital markets day in November.

The Morningstar Developed Markets Europe Communication Services Index has returned 23.7% year to date, thanks to renewed hopes for consolidation and modestly improving conditions in markets like Italy.

We were underwhelmed by Telefonica’s 2030 strategic plan and assign low credibility to management’s long-term forecasts.

After expanding to many European and Latin American countries during the 1990s and 2000s, Telefonica turned around its strategy to focus on four key markets: Spain, the United Kingdom, Germany, and Brazil. Telefonica is divesting or restructuring its Latin American operations (except Brazil) and selling infrastructure assets such as towers or noncore fiber networks and intends to use the proceeds to reduce debt. Marc Murtra, CEO since 2025, is pusing for market consolidation across Europe, a move we look favorably upon.

Spanish newspaper El Confidencial reported on Aug. 26 that Telefonica is considering the acquisition of Vodafone Spain from private equity fund Zegona Communications.

Telefonica confirmed its 2025 targets during its second-quarter results: organic growth in revenue and EBITDA, a capital expenditures to sales ratio below 12.5% for the full year, and similar free cash flow to that in 2024. Year-to-date EBITDA has grown a shy 1.2% organically.

Telefonica’s first-quarter results were largely as expected, with revenue of EUR 9.2 billion and EBITDA of EUR 3 billion, up 1.3% and 0.6% organically, respectively. Vague guidance of “organic growth” was reaffirmed, rebased for the sale of Argentinian and Peruvian businesses.

After expanding to many European and Latin American countries during the 1990s and 2000s, Telefonica has turned around its strategy in recent years to focus on four key markets: Spain, the United Kingdom, Germany, and Brazil. Telefonica is divesting or restructuring its Latin American operations (except Brazil) and infrastructure assets such as towers or noncore fiber networks and intends to use the proceeds to reduce debt, a strategy we look favorably upon.

Telefonica’s fourth-quarter results were a mixed bag, with revenue of EUR 10.7 billion ahead of company-compiled consensus but EBITDA of EUR 3.5 billion behind. Guidance for 2025 was elusive, with management guiding for “organic growth” in revenue and EBITDA but without committing to any targets. Free cash flow and the dividend are expected at the same absolute level as 2024, at EUR 2.6 billion and EUR 0.30 per share, respectively. This quarter marks the start of Marc Murtra as chair and CEO after replacing José María Álvarez-Pallete. We are maintaining our EUR 4.70/$5 fair value estimate and no-moat rating.

No-moat Telefonica’s third-quarter results were hit by the depreciation of Latin American currencies, mainly the Brazilian real. Reported revenue growth was negative 2.9% and EBITDA declined by 2.5%, to EUR 10.02 billion and EUR 3.26 billion, respectively. Although management maintained all its guidance targets, we believe the revenue target might be difficult to achieve as Telefonica's revenue growth year to date is negative 0.3%, while guiding for 1% growth for the full year. This would imply a significant acceleration in the last quarter of the year and require appreciation in Latin American currencies, which is difficult to predict. Our 2024 revenue forecast is already more bearish than management’s revenue target. EBITDA and capital expenditure guidance seem within reach. We maintain our EUR 4.70 fair value estimate.

No-moat Telefonica’s second quarter was stable across the board with revenue growth of 1.2% and EBITDA growth of 1.8%, reaching EUR 10.26 billion and EUR 3.22 billion, respectively. Timid revenue growth together with slight cost reductions are placing Telefonica on track to reach its yearly target of 1%-2% growth in EBITDA, which stood at 1.9% in the first half of the year. We maintain our EUR 4.70 fair value estimate.

After expanding its operations to many European and Latin American countries during the 1990s and 2000s, Telefonica has turned around its strategy in recent years to focus on four key markets: Spain, the United Kingdom, Germany, and Brazil. Telefonica is divesting or restructuring its Latin American operations (except Brazil) and infrastructure assets such as towers or noncore fiber networks and intends to use the proceeds to reduce debt, a strategy we look favorably upon.

Telefónica reported a 0.9% year-on-year increase in revenue in the first quarter of the year, mainly driven by strong service revenue growth of 2.3%. EBITDA grew by 1.9% year over year thanks to revenue growth and control of operating expenses, which just increased by 0.5%. Shares have run by 20% since the lows recorded in February. We are maintaining our EUR 4.90 fair value estimate.

No-moat Telefonica's revenue grew by 4.1% organically year over year in fourth-quarter 2023, while EBITDA increased by 4.5% after restructuring and goodwill impairments were removed. In Spain, EBITDA continued to stabilize as seen in prior quarters, growing 0.1% on an organic basis as service revenue increased 3.2% compared with a decline of 2.1% last year as the firm delivered on cost efficiencies. It’s the second big restructuring Telefonica has undertaken in the past three years and will generate EUR 285 million in annual savings, compared with a restructuring expense of EUR 1.38 billion. We are pleased with Telefonica’s recent focus on cost-cutting, especially in Spain as we believe the firm's employee base is too large here. In Germany, Telefonica continued with the healthy performance we are used to as EBITDA grew organically by 3.7%. Brazil and Virgin Media O2 were the standouts with EBITDA up 8.9% and 10.6% in the quarter, respectively, the latter due to subscriber growth and realization of synergies after the merger. For 2024 Telefonica expects 1% revenue growth with EBITDA up 1%-2%, also in line with its medium-term targets for the next three years announced at its most recent capital markets day. Capital intensity will decrease in 2024, enhancing free cash flow generation, from 14% of sales this year to a maximum of 13%. We maintain our EUR 4.90 fair value estimate.

After expanding its operations to many European and Latin American countries during the 1990s and 2000s, Telefonica has turned around its strategy in recent years to focus on four key markets: Spain, the United Kingdom, Germany, and Brazil. Telefonica is divesting or restructuring its Latin American operations (except Brazil) and infrastructure assets such as towers or noncore fiber networks and intends to use the proceeds to reduce debt, a strategy we look favorably upon.

We maintain our no moat rating and EUR 4.90 fair value estimate after Telefonica’s third-quarter results and capital markets day. It achieved 2.5% organic revenue growth, which translated into 3% EBITDA growth, helped by cost controls. The strongest organic revenue growth was recorded in Germany and Brazil at 2.2% and 7.5%, respectively. In Spain, the EBITDA growth trend keeps improving with negative 0.5% in the third quarter after four quarters at negative 1%-3%.