Telefonica Look on The Bright Side with Rising Revenues

Telefonica has revised its full-year revenue and earnings outlook following a robust second-quarter performance, primarily driven by increased customer spending on services. The Spain-based telecommunications group now predicts a growth of approximately 4% in turnover for the calendar year 2023 and a 3% rise in earnings, as measured by OIBDA (operating income before depreciation and amortization). This new guidance represents double the revenue growth target previously set, even though the percentage increase may seem modest.

For the three months ending in June, Telefonica reported €10.1 billion in revenue, a 0.9% increase on a reported basis. However, when accounting for its 50% stake in Virgin Media O2 and organic growth, the top line reached €11.7 billion, marking a 3.3% increase. The OIBDA followed a similar pattern, and net profit surged by 44.5% to €462 million.

In the second quarter, Telefonica succeeded in attracting high-value customers in the fiber and 5G segments, leading to an improved customer mix. The company’s ability to raise prices in most operating markets contributed to the revenue boost, coupled with cost-cutting measures that positively impacted earnings.

According to José María Álvarez-Pallete, Chairman, and CEO of Telefonica, the period of peak investment is now behind them. The company’s resilient free cash flow generation and sustainable financial policy will facilitate the acceleration of debt reduction in the upcoming quarters.

Looking ahead, Álvarez-Pallete indicated that a new strategic plan is in development, centered on customer focus, shareholder value creation, and leveraging technology to connect with the world. The plan will be based on three pillars: Growth, Profitability, and Sustainability. While further details are yet to be unveiled, it appears that Telefonica aims to position itself as a digital champion, emphasizing digital transformation and sustainability efforts, including initiatives related to green issues like power consumption, renewable energy, and smartphone recycling.

Telefonica’s investor day on 8th November is expected to shed more light on this three-year strategy and its potential impact on the company’s evolution in the digital era.