2023-11-29 16:18:00
After several lean years, Telefonica posted a solid third quarter at the beginning of the month. The Spanish historic operator reported a stabilization of its sales, at 10.3 billion euros. But at the same time, its profits have skyrocketed. It reached 502 million euros, compared to 460 million euros in the same period last year. Above all, this amount is significantly higher than the forecasts of analysts surveyed by Factset: they expected, on average, 242 million euros.
This good dynamic allowed Telefonica’s management to confirm its objectives for the 2023 financial year: namely growth of 4% in sales, combined with an increase of 3% in its gross operating income. Management also committed to paying a dividend of at least 0.30 euros per share to its shareholders until 2026. A few days later, José Maria Alvarez-Pallete, the operator’s boss, spoke congratulated on these results during the presentation of its strategic plan for the period 2023-2030. “After years of profound transformation, we have returned to a solid growth trajectory”, trumpeted the leader. He indicated that he wanted, thus, “move forward decisively” to get the group out of debt”, while “guaranteeing an attractive dividend for shareholders”.
Debt reduction remains the priority
That said, the “years of transformation” are probably not completed. At all even. This Tuesday, Telefonica announced that it intended to cut its workforce. No figures have been provided by the operator, details of which are expected next week. But the Spanish press claims that 2,500 to 5,000 employees would be affected. This is a lot, even taking the low end of the range, knowing that Telefonica currently has 21,000 employees. This is not the operator’s first attempt. In recent years, no less than 15,000 positions have been eliminated through various voluntary departure plans.
This new policy of reducing the payroll comes as the operator actively wishes to reduce its debt, which is around 26 billion euros. At the same time, the group does not refrain from large purchases. In particular, it announced this month the launch of a takeover bid for the 28% of its German subsidiary which does not belong to it, for nearly 2 billion euros.
Strong competition
If Telefonica continues to reduce its costs, it is in particular because competition remains fierce in Spain. The operator could in particular pay the price of a marriage between Orange Spain, its runner-up in this market, and MasMovil, number four. This operation, if it gets the green light from Brussels, could give rise to a major competitor capable of overshadowing it. Telefonica has already suffered greatly in recent years from strong competition and an intense price war.
Finally, Telefonica is today the subject of major maneuvers. In September, the Saudi STC became the operator’s reference shareholder, taking 9.9% of the capital. This arrival sparked strong criticism in Spain. The government was particularly concerned about this, given the strategic nature of the historic operator. The executive is also considering, according to the Spanish press, taking a minority stake to counterbalance the Saudi fund… The coming months promise to be decidedly turbulent for the Spanish telecoms giant.
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