• Free Cash Flow Growth: Increased by close to 90% in Q3 and 28% over nine months.

• Capital Intensity: 12% up to September.

• 5G Coverage: Reached 71% in core markets.

• Fiber to the Home: Expanded to 82 million premises passed.

• Revenue Growth (Brazil): Increased by 7.1% in local currency.

• EBITDA Margin (Brazil): Increased by 0.2% year on year.

• Net Financial Debt: Reduced to EUR28.7 billion as of September 2024.

• Net Debt to EBITDA: Reduced from 2.78 times to 2.76 times.

• Liquidity Position: EUR19.9 billion.

• Interest Cost: Reduced to 3.61%.

• Warning! GuruFocus has detected 7 Warning Signs with TEF.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Telefonica SA (NYSE:TEF) reported a significant acceleration in free cash flow, growing by close to 90% in Q3 and 28% over nine months, surpassing their target of more than 10% growth for the year.

• The company achieved strong operating and strategic progress across key markets, with Spain delivering its best performance in six years and Brazil sustaining growth momentum.

• Telefonica SA (NYSE:TEF) expanded its 5G coverage to 71% and fiber to the home to 82 million premises, achieving its 2026 target more than two years ahead of schedule.

• The company maintained a strong focus on customer satisfaction, achieving a record Net Promoter Score (NPS) of 34 and adding 1 million accesses to reach 393 million.

• Telefonica SA (NYSE:TEF) continues to make progress in network leadership and operational excellence, with significant advancements in AI-driven solutions and industry collaboration.

Negative Points

• The company faced headwinds from the depreciation of the Brazilian real, which reduced revenue growth by 4.2 percentage points and EBITDA growth by 4.7 percentage points.

• Reported results were impacted by a EUR314 million non-cash impairment charge, particularly affecting operations in Hispam due to currency depreciation and strong competition.

• Despite strong underlying performance, Telefonica SA (NYSE:TEF) experienced FX headwinds impacting reported revenue and EBITDA figures.

• The competitive environment in Spain remains intense, particularly in the low-end market, with some players repositioning their products and strategies.

• In Germany, revenue faced headwinds due to MTR reductions and shifts in the business model, resulting in a 1.6% year-on-year decline in Q3.

Q & A Highlights

Q: How is the competitive environment in Spain affecting Telefonica, especially with recent price cuts by competitors like DIGI? A: Angel Vila Boix, Chief Operating Officer, explained that the market remains segmented and rational, with low churn levels and strong net adds. Telefonica maintains a rational approach with value-based services and best-in-class infrastructure. The DIGI agreement is structured to be value-creating and rational, with no market distortions expected.