The value of the Telefónica network exceeds its market price

The Spanish stock market continues in free fall and some sectors such as tourism or telecommunications do not raise their heads. The outbreaks of the coronavirus in Spain and the decisions of some countries such as the United Kingdom or Germany that recommend not traveling to our country have been the highlight. The airlines and hotel companies plummet in the markets and Telefónica is not spared from the burning either, since if fewer foreign tourists arrive, less income from roaming will have the operator.

The government is also not helping to calm the markets. In the last quarter, one million jobs have been destroyed, not counting Temporary Employment Regulation Records. For Telefónica, there are two problems: on the one hand, the residential customer seeks maximum savings and switches to cheaper operators, or the one that stays tries to reduce their bill by eliminating services. Professional clients and SMEs are also in a delicate situation and that means that they minimize their telecommunications services.

Target price cuts before results

Telefónica lost the support of the 4 euros a few days ago and precisely bad news continues to come for the operator chaired by José María Álvarez-Pallete who will be accountable this Thursday. Deutsche Bank has just lowered the teleco target prices from 7.8 euros to 6.4 euros. It still represents a significant revaluation taking into account the current price, but the truth is that analysts continue to lower target prices as the price plummets. According to the German bank, Telefónica’s revenues could fall 5.7% and EBITDA even double digits.

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What else can the operator do to reverse the situation

In the words of its President at the last Shareholders’ Meeting held in June, “The New Telephone” launched last year should be reflected in action sooner rather than later. ” The reality is quite different since from that moment the operator has left another 15%. The markets may be looking for something more like a drastic reduction in the dividend in order to accelerate the debt reduction or a corporate agreement in one of the countries where it has a presence.


A few days ago we learned about Cellnex’s plans to increase capital and acquire new towers where precisely Telxius could have an important role. Judging by the evolution of Telefónica’s shares, the markets do not believe that an agreement between the two companies will be possible, but it will be necessary to be vigilant as Cellnex continues to grow on the stock market and that is something that worries Telefónica as it does 5 years the capitalization difference between both companies was abysmal.

After the results, we will see if the market has already discounted the impact of the coronavirus on the operator or, on the contrary, it is drilling new lows due to the increase in regrowths and the deterioration of the Spanish economy. What is a fact is that today the Telefónica fiber network has more value than the operator itself with its more than 350 million clients.

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