STRATEGY, TARGETS AND GROWTH DRIVERS

“Telefónica continued to post solid & profitable revenue growth in a quarter marked by a strong performance in our main markets, Spain, Brazil, Germany and UK. We continued to generate very strong free cash flow, up 40% year-on-year in the first nine months of 2019, driving a reduction in net debt for the 10th consecutive quarter.
We made good progress on key strategic initiatives to simplify our business this quarter, including a workforce restructuring program in Spain. We are forging ahead with plans to monetise further our mobile telco infrastructure, making a more efficient use of our networks by sharing them, whilst adding new partners to enrich the value of our commercial offer in the home.
Telefónica remained focus on deploying next generation networks in our markets, improving our 4G coverage and launching 5G selectively, as we have in the UK. Looking ahead, we reiterate our guidance for this year and are confident that our digital transformation will boost returns and deliver the best technological solutions for our customers.”

 

GUIDANCE 2019

2018 Base   2019 Guidance 2019
Jan - Sep
48,817 Revenues (% Chg YoY) Growing around 2% 3.6%
15,879 OIBDA margin (Chg YoY) Growing around 2% 1.1%
  CapEx / Sales Around 15% 14.4%

Organic criteria 2019: Assumes average constant foreign exchange rates of 2018, except for Venezuela (2018 and 2019 results converted at the closing synthetic exchange rate for each period) and excludes the hyperinflation adjustment in Argentina. Considers constant perimeter of consolidation. Excludes the effects of the accounting change to IFRS 16, write-offs, capital gains/losses from the sale of companies, restructuring costs and material non-recurring impacts. CapEx excludes spectrum investments.

 

Trend evolution

The environment in which Telefónica carries on its business underwent considerable change over the course of the last financial year, driven by two fundamental trends: growing instability and the need and desire for long-term sustainability.

Instability is inherent in times that represent or precede a change of era, as is the case today. That is particularly evident in two areas: in political terms, 2018 saw a number of fast-evolving upheavals around the world, the outcomes or consequences of many of which, such as Brexit, are still far from clear; in economic terms, volatility has been high and has specifically affected leading technology companies, whose (until now) solid business models are being questioned.

All of this is having considerable social consequences. Last year, mistrust among citizens and companies increased, notably affecting people's perceptions and expectations regarding technological challenges and advances. There is growing concern about the level of technology and how it is used and this has led to greater caution and a demand for accountability in both its management and impact. This has been the case, for example, with personal privacy, the use of data as a mass-management and decision-making tool and the effects and uncertainties associated with digitalization, such as digital well-being or the possible impacts on employment and social relations.

The World Economic Forum has referred to this context as 'Globalisation 4.0' and has included a number of imbalances which have yet to be resolved:

Tendencias
  • Economic growth vs conservation of the planet.
  • Global citizenship vs patriotism.
  • People's work vs machines.
  • Technology ‘for’ vs ‘against’ people.
  • Economic growth vs reduction of inequalities/eradication of poverty.
  • International competition vs collaboration.

The solutions to these issues are a priority which require a genuine focus on sustainability in keeping up with the demands of every stakeholder: from society, governments and regulatory bodies to the world's leading investors, in the conviction that sustainability is necessary if we are to achieve prosperity, efficiency and profitability in the medium term.

Addressing these challenges also entails a wide range of growth opportunities for society in all its fields. The combination of sustainability with the latest technology is especially important and this is where Telefónica already plays a special and increasingly important role. Our Company, because of its position as the enabler of all digital services, its history, its social and economic involvement in all the countries in which it operates, is in a key position to make a substantial contribution to sustainable development. A contribution which, despite being a company with almost 100 years of existence, has only just begun and which is fundamentally articulated around three lines of action:

Tendencias
  • Provide people with the power of connectivity.
  • Optimize our capabilities for a sustainable digital future.
  • Ensure maximum responsibility in all our actions.