Telefonica SA’s Mixed Earnings Call Highlights Growth and Challenges

Telefonica SA ((TEF)) has held its Q1 earnings call. Read on for the main highlights of the call.

Telefonica SA’s recent earnings call painted a mixed picture, highlighting strong performances in core markets and network expansion, while also acknowledging challenges such as foreign exchange impacts and revenue declines in specific segments. The company emphasized its focus on strategic execution and maintaining financial flexibility.

Strong Customer Engagement and Network Expansion

Telefonica reported impressive customer engagement, with Net Promoter Scores (NPS) reaching new highs, particularly in Spain, Brazil, and Germany. The company successfully rolled out fiber to over 1.5 million premises and achieved 75% 5G coverage in its core markets, underscoring its commitment to enhancing network capabilities.

Growth in Core Markets

The company saw robust growth in its core markets, with Spain’s domestic revenue increasing by 1.7% year-on-year and Brazil’s revenue rising 6% above inflation. These figures highlight Telefonica’s strong commercial and financial performance in key regions.

Reduction in Net Debt

Telefonica made strides in reducing its net debt, which decreased by €0.1 billion in the first quarter. The company anticipates further reductions, expecting net debt to fall to €25.8 billion following the sale of its operations in Peru and a binding agreement in Colombia.

Telefonica Tech and Infra Growth

Telefonica Tech experienced a 6.6% year-on-year revenue increase, with a 15% expansion in its commercial funnel. Meanwhile, Telefonica Infra reached 29 million premises passed with fiber, showcasing significant growth in its technological and infrastructural capabilities.

Forex Impact on Financial Metrics

Despite organic growth in main metrics, Telefonica’s reported results were negatively impacted by foreign exchange fluctuations, affecting both revenue and EBITDA figures.

Wholesale Revenue Decline in Spain

As anticipated, Telefonica faced a decline in wholesale revenues during Q1, which affected its overall financial performance. However, the company has secured new long-term agreements set to commence in 2024.

Hispam EBITDA Decline

The company’s Hispam segment saw a 31% decline in EBITDA minus CapEx, attributed to lower EBITDA and increased lease costs due to the launch of a single network in Colombia.

Forward-Looking Guidance

Looking ahead, Telefonica remains on track to meet its 2025 financial targets, with expectations of organic growth in revenue, EBITDA, and EBITDA minus CapEx. The company plans to maintain its focus on network expansion, customer engagement, and operational efficiency. Despite forex challenges, Telefonica expects free cash flow to align with 2024 figures and has reiterated its dividend for 2025. A strategic review is set for the second half of the year to further enhance performance.

In conclusion, Telefonica SA’s earnings call reflected a balanced outlook, with strong performances in key markets and network expansion efforts countered by challenges such as forex impacts and revenue declines in certain segments. The company remains committed to strategic execution and financial flexibility, with a positive outlook for future growth.