These days are 2,000 days since the arrival of José María Álvarez-Pallete to the presidency of Telefónica and such a round figure invites analysis. From that April 8, 2016 to date, the teleco has starred in one of the greatest transformationsof its almost century-old history. The balance of this sum and continues yields a handful of magnitudes of different sign.
On the one hand, investors remember that the value of the company was around 9.31 euros when Alierta gave up the baton, compared to the current 3.99 euros, with a fall of almost 57.1% in that period, but also with a revaluation of 22.71% in the last year. To the defense of the Spanish multinational, and with few exceptions, the whole of its European sector has also suffered a similar downward fate.
If stock market performance blurs the picture, the battle to clean up the company financially outweighs other woes. Debt has been reduced by half in the last five years and five months of Álvarez-Pallete’s management, from 52,000 million in the spring of 2016 to 26,200 million this summer, after excluding leases.
This battle for deleveragingit can be taken for granted, once the teleco has reached debt levels below the industry average. Among other singular data from last summer, the Factset consensus projected Telefónica’s liabilities for the end of the year at 1.8 times its EBITDA (profit before taxes, interest, amortizations and depreciations), compared to the 3 times that it was forecast for at the beginning of the year, in an advantageous position compared to the average of the 10 largest in the sector, with a debt of 2.6 times EBITDA.
Only the Swiss Swisscom and the Finnish Elisa Oyj expect a lower leverage than the Spanish one by the end of next December. Another encouraging aspect for Telefónica can be seen in the debt in Latin American currencies, which has already reached 30% of the financial commitments of the entire company, including leases,
Both the cash generation of the telecom and the divestments carried out were decisive in the consolidation, sales that have alternated with corporate growth operations. Free cash flow has exceeded 25,000 million euros in the last five years, with an average of 5,000 million annually. Even in such a difficult year as 2020, the company generated free cash flow of $ 4.794 million.
The pandemic has turned connectivity into a vaccine for the salvation of millions of businesses
In summary, five major milestones can be seen in Telefónica’s last five years: the merger of O2 with Virgin Media to create a leading operator in the United Kingdom; the entry of investors such as KKR and Pontegadea in Telxius ; the purchase, together with TIM and Claro, of Oi’s mobile business in Brazil ; the sale of the Telxius towers at record multiples; the creation of fiber vehicles in Germany and Brazil and the recent alliances with KKR to deploy fiber in Chile and Colombia . The capital gains from the various operations have reinforced the group’s balance sheet with an increase in equity of more than 10,000 million euros at the end of June and with a liquidity of 26,924 million euros.
Teleco customers were set at 367.2 million accesses in June 2021, compared to 321.9 million at the end of March 2016. Quarterly revenues at that time were 10. 784 million, compared to 9,964 million at the second quarter of this year. Ebitda has quadrupled , from 3,376 million in the first quarter of 2016 to 13,469 million in the last quarterly results of last summer, while net profit has multiplied by ten in the same period, from 776 in the first quarter of 2016 at 7,743 in the second quarter of 221.
Fiber-to-the-home (FTTH) and VDSL real estate units have increased 6.5-fold since the end of 2015, from 7.9 million to 51.4 million units. The ultra-broadband network (UBB) reached at the end of this year a record of 154.7 million real estate units passed.
The reinvention of Telefónica in the last 2,000 days has coincided with a spectacular transformation of society in the same period, especially in the last year and a half due to Covid-19 . Thus, the Planet has become convinced of the value of digitization for the prosperity of people and companies. In case there was any doubt, the pandemic has turned connectivity into a saving vaccine for millions of businesses embracing teleworking.
In such extreme situations, investments in fiber optic networks were justified, an effort that both Telefónica and its most direct Spanish competitors undertook earlier and faster than the rest of their peers on the continent. Thus, 4G coveragereaches more than 90% of the population in the four main countries in which it operates (Spain, Germany, the United Kingdom and Brazil), with the accelerated deployment of 5G in its large markets, where in Spain it is already available to 80% of the population.