Telefónica S.A (TEF.MC) Q1 2026 Earnings Call Transcript
Bullish Telecommunications Services 21.48B Spain
Next Earnings
2026-11-06
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Telefonica delivered solid 2025 results with improving momentum and raised 2026 free cash flow guidance to ~€3.0 billion, underscoring progress in Spain, Brazil, and portfolio simplification with a path to deleverage and sustainable growth.
⭐ Key Highlights
2025 Momentum and 2026 Guidance
Telefonica reports accelerating momentum in Q4 2025 and confirms 2026 guidance including 1.5-2.5% constant revenue and adjusted EBITDA growth, CapEx ~12% of sales, and free cash flow around 3.0 billion euros.
Spain Back to Growth Trajectory
Spain delivered best growth metrics since 2018 with record fiber/TV net ads, high contract mobile base, low churn, and convergent ARPU around 90 euros; 2025 saw profitable growth and improving cash generation.
Brazil Vivo Strength and B2B Upside
Brazil Vivo posted solid growth in revenue and EBITDA with double-digit cash flow expansion, driven by mobile service growth, fiber gains, and expanding B2C/B2B digital services.
Germany Stabilization After 1&1 Impact
Germany shows positive underlying metrics but Q4 2025 EBITDA declined due to 1&1 migration comps; management expects a return to growth in 2027 with ongoing efficiency and investment.
UK/VMO2 and Nexfibre
Virgin Media O2 remains on track with fiber/5G expansion; Nexfibre acquisition of Netomnia strengthens fiber footprint and future growth, while impairment considerations for VMO2 were acknowledged.
Portfolio Simplification and Leverage Progress
Telefonica completed multiple Hispam exits, refined portfolio, and aims to reach ~2.5x net debt/adjusted EBITDA by 2028, while maintaining investment-grade rating and disciplined capex.
✔Positive Signals
- 2025 momentum accelerating into 2026 across revenue, EBITDA, and free cash flow
- Spain: record customer metrics, low churn, and strong ARPU growth
- Brazil Vivo: above-inflation revenue and EBITDA growth with expanding B2C/B2B
- Free cash flow guidance raised to ~€3.0 billion for 2026
- Portfolio simplification: multiple Hispam exits completed; leverage trajectory toward 2.5x by 2028
✖Negative Signals
- Germany: 2025 EBITDA after leases declined due to 1&1 migration and tough comps
- FX headwinds remained meaningful through 2025, impacting revenue/EBITDA
- Regulatory/antitrust uncertainties around consolidation could delay potential deals
- Near-term pressure from lower wholesale revenues and shifting revenue mix in Spain
- UK/Virgin Media O2 impairment considerations and integration dynamics with Netomnia
📊Financial Results
- Full-year revenue €35.1 billion, +1.5% year-on-year (constant terms)
- Adjusted EBITDA €11.9 billion, +2% year-on-year
- Adjusted operating cash flow after leases €5.0+ billion, +5.9% year-on-year
- Free cash flow €2.8 billion, above prior base guidance of €2.7 billion
- Net financial debt €26.8 billion, down 1.2% YoY; 2028 target leverage 2.5x
🔮Future Guidance
- 2026 constant revenue and adjusted EBITDA growth: 1.5% to 2.5%
- CapEx to sales around 12%
- Adjusted operating cash flow after leases growth >2%
- Free cash flow ≈€3.0 billion (upgraded to upper end of CMD range)
- Leverage toward ~2.5x by 2028; dividend €0.15 per share in 2026/2027 cycle
💡Interesting Insights
- Management expects 2028 free cash flow to be higher than initial 2025 CMD guidance, signaling a longer-term upgrade in cash generation despite near-term macro and regulatory uncertainties.
Detailed Analysis
AI-generated summary of Telefónica S.A earnings call transcript.
Telefonica closed 2025 with improving momentum across core markets: Spain reported record performance metrics and profitability, Brazil Vivo demonstrated strong growth and expanded digital services, and Germany showed improving trajectory despite near-term headwinds from legacy migrations; the group reduced exposure in Hispam via exits and accelerated efficiency programs. For 2026, management forecast 1.5-2.5% constant revenue and adjusted EBITDA growth, CapEx around 12% of sales, and free cash flow of about €3.0 billion, supported by ongoing cost reductions, mitigation of lease costs, and a strategy to deleverage toward a 2.5x net debt/adjusted EBITDA target by 2028. The 2026 plan also contemplates continued consolidation efforts in core markets, a strong dividend policy, and selective M&A discipline aligned with an investment-grade balance sheet.
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