Telefonica Set to Meet 2022 Guidance; Sells Stake in Spanish Rural Fiber Network for EUR 1 Billion

Telefonica delivered in the second quarter, with sales growing 5.2% organically driven by healthy performance in Germany, Latin America, and Brazil. EBITDA only grew by 3.4% as the cost base remains pressured due to higher energy costs and general inflation. Telefonica also gave an update on guidance and now expects to finish the year at the upper part of its previously guided range of low-single-digit growth in sales and EBITDA. The company continued its value crystallization strategy and closed the sale of a 45% stake in BlueVia, its rural fiber-to-the-home network in Spain, for EUR 1 billion, which implies a valuation of EUR 2.5 billion for the whole entity. The sale was done at a multiple of 27 times EBITDA, which we consider attractive. The proceeds will be used for debt reduction purposes, which we consider the main capital allocation priority. As we have highlighted in the past, we believe Telefonica is doing a good job in highlighting the value of its assets by taking a portfolio approach. We are maintaining our EUR 4.90 fair value estimate, and at this point the shares remain slightly undervalued.