Reasons to invest in Telefónica

Telefónica is committed to delivering sustainable, profitable growth and long-term industry leading total shareholder return (TSR). The Group’s strategy is built on a streamlined, future-proof operating model with embedded sustainability objectives, robust revenue growth, an efficient balance sheet, strongly improving ROCE and optionality beyond the core business.

Telefónica has an effective capital allocation strategy aimed at increasing ROCE across the business while adhering to the following key objectives:

  • Maintain an efficient balance sheet to support the business and solid investment grade rating
  • Provide attractive shareholder remuneration through dividends and opportunistic share buybacks
  • Invest in future growth areas in the most efficient way
  • Use strategic M&A to accelerate growth and divest non-core assets

Clear long-term strategy to generate sustainable, profitable growth and industry leading TSR

Telefónica’s strategy is based on the following pillars:

Leverage four core businesses in Spain, Germany, UK and Brazil as platform for sustainable growth and value creation and capture new and adjacent growth areas

We are well positioned in our large, attractive markets with the scale, best-in-class networks and high-value customer services and strategies in each to capture and monetise ever rising demand for data and connectivity, improving our operating leverage over time. These businesses are, or are well on their way to being, our free cash flow and capital generation engines. We continue to develop new growth areas to position the group for sustainable, profitable growth.

  • Proactively driving in-market consolidation: VMO2 in the UK and Oi Mobile in Brazil
  • Delivering ongoing network enhancement and rollout: key 5G spectrum secured in the UK, Spain and Brazil; enhanced network in Germany; acceleration in FTTH rollout in Spain and Brazil; Gigabit upgrade in the UK completed
  • Invest for growth and develop adjacent growth areas

Develop Telefónica Tech, a global digital business

Telefónica Tech is our fast-growing technology company comprising two business units, Cybersecurity & Cloud Tech and IoT & Big Data Tech. T. Tech’s strong capabilities in these areas help business customers digitally transform their operations while playing a key role in the economic recovery.

  • Outperforming the market with >30% revenue growth in 2021 and increased scale generating c. €1bn revenues in 2021
  • Increasing capabilities through new acquisitions (Cancom UK&I and Geprom in 2021) and enhancing the value proposition with further partnerships (e.g., Microsoft and Amazon)

Pursue value creation opportunities through Telefónica Infra

Telefónica Infra, our infrastructure portfolio manager, is focused on pursuing value creation opportunities, in line with the Group’s strategy of crystallising the value of its infrastructure assets and capabilities, improving the competitive position of Telefónica’s operating business units by accelerating their FTTH rollout, while capturing future value upside from its infrastructure assets and co-investments.

  • Towers value optimised at record multiples
  • Developing fibre vehicles to create capital-light growth opportunities in Spain, Brazil, UK, Germany, Chile, and Colombia
  • Strategic partnerships forged to increase deployment and commercialisation, e.g. reinforced position in submarine cables through partnership with Pontegadea

Reduce and optimise exposure to Hispam portfolio

Telefónica continues to reduce its exposure to the Hispam region and crystallise value from its assets. T. Hispam is focused on improving the quality of its customer base through growth in mobile contract and FTTH, operational efficiencies and acceleration in digitalisation.

  • Reducing capital employed and new operating model in place
  • Higher share of debt in local currencies
  • Portfolio simplification (sale of Central America operations) and value crystallisation

Streamline and digitalise operating model to build a simplified future-proof operating model

Telefónica continues to strive for enhanced efficiency and to drive digitalisation initiatives across its operating businesses and corporate centre.

  • 80% of processes digitised by the end of 2021
  • Embracing agile technology solutions, including fibre, 5G, and OpenRAN
  • Wayra, Telefónica’s open innovation hub, invested in 49 start-ups in Europe and Latam (e.g., artificial intelligence, fintech, e-health or sustainability)
  • Increasingly customer centric and agile business

Maintain strong commitment to sustainable ESG development

Sustainability forms the basis for the way we do business, and we are aligned with the United Nations Sustainable Development Goals. In 2021, Telefónica was an important contributor to the economy in terms of GDP contribution (€48.9bn), provision of employment (1.2m jobs) and fiscal contribution (€9.1bn).

Our Sustainability Strategy is based on three pillars:

  • Environmental: Building a greener future
  • Social: Helping society to thrive
  • Governance: Leading by example

This strategy includes clearly defined targets:

  • Net zero (scopes 1&2) by 2025 in key markets and across whole footprint by 2040, including the value chain
  • Zero-waste company by 2030
  • Avoid 12m CO2t emissions annually by 2025
  • Expand connectivity: 90-97% rural coverage in main markets by 2024
  • ESG financing of more than €10bn in the coming years

Delivery against objectives

Telefónica delivered a robust performance across its key metrics and successfully achieved its upgraded full year guidance in 2021, whilst significantly reducing net debt. This performance was supported by a strong balance sheet and robust operating model.

  • 2021 guidance achieved:
    • – Organic revenues up 2.0% y-o-y vs. target of “stable to slight growth”
    • – Organic OIBDA up 1.4% y-o-y vs. target of “stable to slight growth”
    • – CapEx to Sales ratio (ex-spectrum) of 14.2% vs target of “back to normalised levels of up to 15%”
  • Reinforced connectivity leadership with Group accesses up 3% to 369m whilst remaining world leaders in UBB, excluding China (159m premises passed)
  • Net debt significantly reduced, by €26.2bn, since June 2016 to €26.0bn (-26.1% y-o-y), as a result of M&A transactions and solid free cash flow generation
  • Shareholder equity doubled y-o-y, to €22bn, mainly due to capitals gains
  • Return to organic growth for three consecutive quarters

Our ambitions

Telefónica is well positioned in its markets to leverage its leading position and competitive advantages. The Group continues to invest for future growth and build its digital ecosystem in key markets. As part of Telefonica’s commitment to industry leading TSR the Group reintroduced a full cash dividend of €0.30 per share in 2022.

2022 financial targets (organic including 50% of VMO2 JV)

  • Revenues “low single digit growth”
  • OIBDA “low single digit growth”
  • CapEx (ex-spectrum) to sales up to 15%

2022 shareholder remuneration

  • Dividend of €0.30 per share in cash (€0.15 per share in December 2022 and €0.15 per share in June 2023)
  • To cancel 2.41% of the Company’s share capital held as treasury stock as of 31 December 2021

NOTE: Financial data as of 31 December 2021. For further detail please visit our financial reports publications.