June 13, 2021

Telefónica will explore new sales of its infrastructures to further reduce its bulky debt

Telefónica closed the year of the pandemic with an increase of 38% in its profit, up to 1,582 million euros, as reported by the company this Thursday to the National Securities Market Commission. Thus, the company has managed to improve its results despite the impact that COVID-19 has had on its accounts.

The towers of the 'telecos': the business that moves billions and in which Amancio Ortega or La Caixa invest

The towers of the ‘telecos’: the business that moves billions and in which Amancio Ortega or La Caixa invest

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Where the group does notice a decline is in income. The company ended the year with an 11% cut in turnover, ending the year with a turnover of 43,000 million euros. The company attributes this collapse to the effects of the pandemic in its activity, which amounts to 1,905 million euros in turnover, and to the evolution of currencies.

With regard to activity in Spain, the drop in income has been less pronounced, by 3.5%. The company indicates in its accounts that it has closed the year of the pandemic with a decline in customer lines, with almost 400,000 fewer than at the end of 2019, representing a drop of 1.1%. The greatest decreases were seen in fixed telephony, 3.2% less, and in prepaid mobile telephony, with 22% less. At the same time, fiber optic customers have increased, with 6.7% more, the line of business that has performed better.

The company lost 70,000 pay-TV customers, although it blamed those customers with “lower value.” Ángel Vila, CEO of the group, has played down this fact, ensuring that it is a trend in which customers who had television in the lower-cost Fusion packages and that used it less, are going to other alternatives within the group, such as its low-cost subsidiary O2. At the same time, he pointed out that customers “with premium services” such as football are growing. “We have tendencies to reduce the customer base that less used television, while continuing to generate value in medium and high-value packages,” he said.

One of the important points in Telefónica’s accounts is the evolution of financial debt. The company has been urged by the market in recent years to reduce its significant debt. In the last year, it has been cut by 2,516 million euros, reaching 35,228 million euros. However, with different operations announced in recent months (the sale of the telecommunications towers, the merger of its business in the United Kingdom or the sale of the subsidiary in Costa Rica) the company plans to reduce by 9,000 million euros, which which represents a quarter of the total, which represents a cut of 25%.

The infrastructures have become a way for the company to make cash with which to reduce financial debt. “All infrastructure transactions have to do with the use so relevant that the pandemic has accelerated,” said its president, José María Álvarez Pallete. “The infrastructures are tremendously relevant and we are working to crystallize the value”, he added. In this sense, it has opened the door to work on new operations to sell assets. “There is a lot of optionality and we are going to explore it,” he said.

The group also has other processes on the table. In addition to the sale of the Telxius towers, the divestment in Chilean fiber and other operations closed in recent weeks, the market assumes that the submarine cables that are still in its infrastructure subsidiary or its business in Latin America are also in sale. In 2019 it was announced that the group would focus on Spain, Germany, the United Kingdom in Brazil, placing the rest of the subsidiaries in Latin America, for sale. Regarding how this operation is going, with some sale last year as in Costa Rica, Laura Albasolo, financial director of the group, has indicated that work is being done to “value” this activity, while progress is being made in “reducing exposure” .

At the same time, the company is preparing for an intense year in investments, due to the fact that several spectrum auctions are held for 5G, the one in Spain in the coming weeks. This reason is what has led Telefónica to announce a reduction in the dividend forecast for 2021, to 0.30 euros per share, which can be decided between the collection in cash or in new company securities.

Pallete celebrated that the sector in Europe is debating a trend towards concentration and assured that Telefónica has been “active”, with its operations in the United Kingdom or Germany. It has avoided assessing the trend in Spain but has encouraged its competitors to participate in mergers. “If there are consolidations, we will support them,” he assured. “It makes no sense what happens in Europe. There are more than 400 operators and only 4 in the US or China,” he lamented, in line with other major executives in the sector in Europe. “The average income per client is half that in the US”, has affected.


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