STRATEGY, TARGETS AND GROWTH DRIVERS

“Telefónica again achieved profitable and sustainable growth during the second quarter of 2019. Our accesses were up, especially in the high-value segments, while average revenue per access increased (+4.4% y-o-y) and churn rate remained stable. This shows that our commercial strategy is bearing fruits, underpinned by increasingly advanced networks that allow us to better service our customers’ needs. This turns into increased customer satisfaction rate, which makes this strategy even more sustainable.
Organic growth trends (revenues +3.7% and OIBDA +1.6% y-o-y) are consistent with this year's targets, which we reiterate. Growth is profitable and driven by the digitalisation and simplification plan, among other measures.
This profitable and sustainable growth has further allowed us to reduce debt, which comes down for the ninth consecutive quarter, thanks to healthy cash generation (+78.0% in the first half of the year).”

 

GUIDANCE 2019

2018 Base   2019 Guidance 2019
Jan - Jun
48,817 Revenues (% Chg YoY) Growing around 2% 3.8%
15,879 OIBDA margin (Chg YoY) Growing around 2% 1.3%
  CapEx / Sales Around 15% 14.1%

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.