The Spanish operator is not capable of lifting its head on the stock market. Since last February 19, a 37% while the IBEX 35 has dropped a 26%. If we look at their rivals, Orange it has barely dropped 18% while Vodafone It has fallen 16% on the London Stock Exchange. The situation is worrying if we consider that the blue teleco has fallen even more than companies like Amadeus that are completely impacted by the tourism sector and the COVID-19 crisis. Another alarming fact for Telefónica is that Cellnex It already capitalizes 1,000 million more than the operator and some market analysts comment that at the time it could have been fused with Telxius, the tower subsidiary of the company managed by Pallete.
Changes to raise the price of Telefónica
First, the company plans again to take out its towers subsidiary to list more than 6,000 million euros. There was already an attempt in 2016 but the operator decided to abort the premiere of Telxius in the markets because the ideal circumstances did not exist. The operation that valued the company at more than 3,000 million raised doubts about the impact of a submarine cable that was the one that contributed the most income to the company. Furthermore, at that time the markets were turbulent but not as turbulent as now after the impact of the pandemic in Europe.
The operator’s objective is to generate value to regain the confidence of the markets. Although the IPO of Telxius has not been decided, it is planned for next year and could be an oxygen balloon for 2021 that is complicated at the stock market level if the coronavirus vaccine does not appear soon.
OI purchase in Brazil
Last November we learned about Telefónica’s new plans that were based on two fundamental axes. Concentrate all the effort on four main markets, Spain, Germany, the United Kingdom and Brazil; and the creation of the two subsidiaries, Telefonica Infra and Telefónica Tech to generate value. Despite the fact that the operator is totally focused on debt reduction, we have just learned that plans to invest 3,000 million of dollars in the acquisition of the Brazilian operator OI. The teleco carioca that is in bankruptcy has 38 million lines and is the operator with the highest number of fixed accesses. Brazil is a priority market for Telefónica since it contributes 21% of revenues and some quarters it has even exceeded revenues in Spain.
Telefónica’s revenues were between January and March in the 11,366 million euros, which supposes a decrease of 5.6% and is that the situation of the country is not the most favorable. With the Brazilian Real devaluing and the coronavirus crisis impacting with virulence after Bolsonaro’s refusal to take more drastic measures, income could continue to decline in the coming quarters.
In the coming weeks we will know more details about both operations and that is that the financial storm has only just begun and there are even rumors in the market that speak of a possible sdividend pension Telefónica to protect its rating. Bank Of America considers that the Spanish teleco is obliged to adopt forceful measures if it does not want to lose its investment grade. Canceling the dividend or reducing it would mean a jug of cold water for all small shareholders, but above all for larger shareholders. Some banks such as BBVA or Caixabank make up their results thanks to the income contributed by Spanish teleco.