In November 2019, Telefónica set out its medium and long term value creation strategy aimed at building a scalable platform for future service revenue growth and returns, based on five key pillars, to:

  1. Focus on our core Spain, Germany, UK and Brazil businesses
  2. Reduce exposure to our non-core Hispam portfolio
  3. Launch a global Tech business
  4. Create a global Infra businesses
  5. Streamline and digitalise our operating model

Throughout H1 20, the Group accelerated its delivery against the strategic objectives for each of these pillars, despite the significant challenges posed by the COVID-19 crisis. In light of recent developments, the focus across Telefónica’s operations has been on reinforcing resilience, leveraging opportunities to enhance efficiency and reduce exposure to emerging risks, and supporting economic recovery across the Group’s key markets. As such, our sustainable business model's focus on growth, efficiency and trust remained intact.


  1. Focus on our core Spain, Germany, UK and Brazil businesses

    These large, attractive markets are our free cash flow and capital generation engines. In each of these markets, Telefónica is well positioned with the right scale, quality of network, services and market strategies to capture and monetise ever rising demand for data effectively, through improving operating leverage over time. Our core operations are well-invested with CapEx spend largely complete.

    Strategic objectives

    Telefónica intends to optimise value creation by prioritising investment in its core operations to foster sustainable and profitable growth which will enable the return of cash to shareholders. The value generated by these operations is expected to in turn drive continued organic de-leveraging of the Group.

    Key developments

    UK: Combination of O2 and Virgin Media enhances Telefónica’s position in the UK and provides an opportunity to improve operating leverage over time.

    The 50:50 joint venture between Telefónica and Liberty Global to create a nationwide integrated communications provider in the UK through the combination of O2 and Virgin Media was announced on 7 May 2020. Both parties expect to receive net cash proceeds at closing following a series of recapitalisations that will generate £5.7 billion in proceeds for Telefónica and £1.4 billion for Liberty Global (after an equalisation payment to Telefónica of £2.5 billion). The joint venture is expected to deliver substantial synergies valued at £6.2 billion on a net present value basis after integration costs, and equivalent to cost, CapEx and revenue benefits of £540 million on an annual basis by the fifth full year post-closing. The joint venture will target ongoing net leverage of 4.0-5.0x, with proceeds from any future free cash flow generation and financing to be distributed equally between Telefónica and Liberty Global. The transaction is expected to close around the middle of 2021.

    Brazil: Driving consolidation in Brazilian telecoms through binding bid for Oi, submitted jointly with TIM and Claro

    Telefónica is driving consolidation of the Brazilian telecoms market through its binding bid for Oi, submitted jointly with TIM and Claro. The transaction, if completed, will generate significant value through synergies, while helping to rationalise the market and make it more profitable going forward.


    On 2 July 2020, Telefónica acquired the broadcasting rights to the Champions League and UEFA Europa League, as well as the UEFA Europa Conference League and UEFA Youth League, for the next cycle comprising 3 seasons between 2021 and 2023. The agreement guarantees all media rights for Telefónica’s residential and catering customers in Spain, and reinforces the Group’s commitment to football as the main axis of its sports content.

    On 17 June 2020, the European Commission approved the creation of Buendía Estudios, a joint venture between Telefónica and Atresmedia, aimed at creating and producing audiovisual content in Spanish and developing a large part of its activities for third operators. This collaboration reinforces Telefónica’s ability to promote its original productions in Spanish across the global market.

    On 10 June 2020, Telefónica became the first telecommunications company in the world to join forces with a leading cloud game developer company, EPIC GAMES, to facilitate in-game purchases through the operator's bill over Movistar’s Online Payments system. This service will initially only be available in Spain, however, a rollout in other countries across Telefónica footprint’s is planned going forward, in line with the Group’s strategic focus on gaming and eSports.

    Other core market developments:

    To further enhance its ability to attract and retain customers, Telefónica has signed several new partnerships during 2020, including the following:

    • Disney, for Disney+ content in Spain and the UK
    • Prosegur, a joint venture in the smart alarm space in Spain
    • Movistar Car/ Eurotaller; to become an official distributor in Spain
    • Ericsson, for 5G roll out in Germany
    • Netflix, for integration into IPTV platform in Brazil

    In addition, Telefónica continues to expand its leading FTTH networks in Spain and Brazil, while its largest mobile network in Germany is being reinforced through growing mobile coverage and increasing urban capacity.


  2. Reduce exposure and optimise our non-core Hispam portfolio

    Telefónica has classified its operations across Latin America (excluding Brazil) as non-core, given the challenging market conditions across these markets and their declining contribution to revenues and profitability in recent years. These operations retain attractive positions within their national markets, but have since November 2019 been operationally autonomous and managed as an independent unit.

    Strategic objectives

    Telefónica seeks to optimise its Hispam operations to streamline its Group structure and core market focus, reduce exposure to emerging markets and foreign exchange volatility, and to accelerate its de-leveraging.

    Key developments

    Telefónica continued to streamline its portfolio, with the sale of its business in Costa Rica to Liberty Latin America, bringing its disposal plans back on track within just three months following the disappointing third party failure to honour contractual terms for its sale.

    Telefónica also continued to monetise assets that have a higher value for third parties as a way of optimising its capital allocation. Examples of such initiatives include sales of towers (2,400 towers sold during the last 12 months, to Telxius in Chile and Perú, and to Phoenix Towers in Colombia and Ecuador), buildings and data centres.

    In parallel, the Group is exploring network sharing agreements to reduce capital intensity and optimise investment. The unprecedented network sharing agreement signed with AT&T in Mexico represents an important milestone in this respect.

    In addition, Telefónica is reviewing numerous options to further reduce its exposure to the region and is preparing for potential operational and financial spin-offs going forward.


  3. Launch Telefónica Tech - a global digital business

    Telefónica Tech is a global business providing the Group with the agility to leverage rising demand for technology services including cloud, cybersecurity and IoT/Big Data in the business segment.

    Strategic objectives

    Telefónica Tech aims to accelerate existing revenue growth streams, making them more visible and increasing optionality (e.g. M&A, monetising a stake, bringing in a partner to provide resources or capabilities).

    Key developments

    Telefónica has signed strategic agreements with global providers including Amazon Web Services, Microsoft, Google, GE Healthcare, Fortinet and has invested in Nozomi Networks, a leader in industrial IoT cybersecurity.

    On 28 July 2020, Axiata joins the Telefónica Partners Program as the only Asian partner signing a strategic partnership. The agreement leverages on the companies' footprint in Asia, Europe and LatAm and focuses on sales to multinational corporations of cybersecurity, cloud and IoT/Big Data services, sharing their expertise in the B2B value chain and cooperation in strategic projects.

    On 6 July 2020, Telefónica and SAP España signed an alliance to accelerate digital transformation of Spanish businesses. The agreement will allow Telefónica to distribute SAP licenses as part of its offer of cloud solutions, as well as to offer for the first time services associated with the private cloud from its data centre in Madrid.

    On 11 June 2020, Telefónica formed a partnership with Google Cloud to foster digital transformation and advance 5G mobile edge computing in Spain. Google Cloud intends to open a new cloud region in Spain that will leverage Telefónica's infrastructure in the Madrid region. Telefónica and Google will jointly develop a portfolio of solutions for 5G using Google Cloud's Mobile Edge Computing platform.

    On May 26 2020, ElevenPaths, the Cyber Security Company which forms part of Telefónica Tech announced that it had achieved Amazon Web Services (AWS) Security Competency status.

    On February 25 2020, Microsoft Corp. and Telefónica announced plans to further expand their global strategic partnership to accelerate digital transformation for public and private entities of all sizes. Together, the two companies will help their respective customers leverage the cloud to more quickly, securely and easily innovate and scale their operations to create new business opportunities and improve competitiveness.

    T. Tech carve outs

    In line with its strategy, Telefónica will complete some of the carve-outs in the cybersecurity space required to create a separate entity for these businesses by the end of July. The Group plans to implement the same in Cloud and IoT/big data segments.

    Despite the challenging environment, performance of these businesses remains strong, with revenue growth in H1 20 of 26.6% y-o-y in cloud and 19.7% in cybersecurity.


  4. Launch Telefónica Infra - our global infrastructure business

    Telefónica Infra will operate as a portfolio manager owning stakes in infrastructure vehicles to maximise value creation for the Group. T. Infra is developing infrastructure assets and making progress in some asset classes (towers, submarine cable, fibreCos and data centres).

    Strategic objectives

    Telefónica Infra’s strategic objectives are to:

    1. Crystallise value of Telefónica infrastructure assets and capabilities
    2. Capture future value from infra assets and co-investments
    3. Improve Telefónica business lines’ competitive position, accelerating operating companies growth and improving returns through efficient deployment models

    Key developments

    On 8 June 2020, Telefónica Infra accelerated the monetisation of infrastructure assets through a €1.5 billion transaction between Telxius, an infrastructure company majority-owned by Telefónica Infra, and Telefónica Deutschland.

    As part of the agreement, Telxius is to acquire approximately 10,100 sites, which will see it double the size of its tower portfolio since 2016 to over 32,900 sites, improving returns through efficient deployment models and cementing its position as one of the leading global infrastructure operators. The transaction will reduce Telefónica Group's net debt by approximately €500m by 2021.


  5. Streamline and digitalise our operating model

    Telefónica has a long track record of capitalising on the growing opportunities presented by digitalisation of the customer experience. This strategic pillar reinforces the focus on such initiatives within Telefónica’s operations, helping to create a more agile, streamlined operating model.

    Strategic objectives

    Telefónica’s new operating model is expected to accelerate the simplification and digitisation of the Group's operations going forward, supporting the Telefónica´s efforts to grow (OIBDA-CapEx)/Revenues by 2 p.p. by 2022 in organic terms vs. 2019.

    Key developments

    Accelerated digitalisation

    During H1 20, Telefónica achieved significant progress in digitalisation of its business, with digital sales in its four core markets increasing by 53% compared to H1 19. In addition to customer facing operations, the number of robots automating internal processes increased to 1,864 (x3.4 y-o-y).

    Process optimisation and innovation

    Telefónica’s automation program is aimed at improving customer experience, quality of service and at capturing efficiencies. The Group’s Open Innovation program is focused on generating revenue and new services through investments in disruptive startups. Telefónica demonstrated its unwavering commitment to this goal during the COVID-19 crisis, with investments into 20 new startups, adding up to a total of 521 by the end of June, of which more than 140 are already adding value to the Group’s clients. One of the highlights of Q2 20 was Telefónica’s investment in Cobrainer, a data analytics company specialised in developing software for the analysis and visualisation of an organisation’s expertise knowledge.

    Streamlined HQ and support functions

    Telefónica is in the process of streamlining its support functions, both at business line level and at its headquarters. During H1 20, these efforts resulted in a 6% y-o-y reduction in headquarters costs.


Priorities for the future

Looking forward, Telefónica's priority is to continue executing and delivering the value creation potential in its strategy. Accordingly, the Group has identified three short-term priorities within each of our 5 pillars.

Focus on our core Spain, Germany, UK and Brazil businesses:

  1. stabilise operating cash flow generation to mitigate COVID-19 impact
  2. close the transaction with Liberty Global in the UK and advance Brazilian mobile consolidation
  3. strengthen our competitive advantage via FTTH deployments and partnerships

Reduce exposure to our non-core Hispam portfolio:

  1. stabilise organic cash flow generation to mitigate COVID-19 impact
  2. close Costa Rica and El Salvador deals
  3. further develop strategic options

Launch a global tech business (Telefónica Tech):

  1. maintain strong growth momentum
  2. strengthen capabilities through focused inorganic acquisitions
  3. finalise outstanding carve outs

Create a global Infra business (Telefónica Infra):

  1. close the German towers acquisition transaction
  2. continue to develop strategic options
  3. increase towers tenancy ratio

Streamline and digitalise our operating model:

  1. accelerate digitalisation
  2. expand network sharing agreements
  3. further progress simplification and streamlining



Notwithstanding the impact of COVID-19, the results for the first half of 2020 are in line with the Group’s expectations and, based on the signs of recovery observed in June and the proactive measures taken to reduce operational and capital expenditure, Telefónica remains on track to deliver its 2020 outlook.

The dividend for 2020 is confirmed at €0.40, the first tranche of which (€0.20) is payable in December 2020 through a voluntary scrip dividend and the second tranche (€0.20) in June 2021, for which the adoption of the corresponding corporate resolutions will be proposed in due course.

We reiterate our guidance for 2022 reflecting our confidence in sustained demand and long-term growth trends for connectivity and digital services.


Organic criteria Assumes constant exchange rates of 2019 (average in 2019). Considers constant perimeter of consolidation, does not include capital gains/losses from the sale of companies and assets sales (material), restructuring costs and other impacts (write-offs, material non-recurring impacts). In addition, excludes contribution to growth from T. Argentina and T. Venezuela and the results from Central America. CapEx excludes investments in spectrum



In the context of our industry, we operate in a highly dynamic sector with sustained growth and the forecast is that 'Industry 4.0' will generate billions of euros in value, unstoppable progress and increasingly intelligent societies thanks to:

  • An unprecedented accumulation of technology that changes the way we do things (the so-called ‘smart spaces’).
  • Everything and everyone are connected, or even hyper-connected (cars, cities, people, …)
  • Exponential growth of digital data describing what things and people are and do. New technologies such as cognitive and artificial intelligence to predict their behaviour.

At the same time, inequality in the world is increasing, the demographic, labour and environmental challenges are multiplying and there is growing concern about fake news and privacy, etc. For the first time in ten years, the top five global risks in terms of probability of occurrence have to do with the environment. They are followed by fraud, data theft and cyberattacks (Source: Global Risks 2020 - World Economic Forum).

The digital revolution is at the root of some of these challenges and involves major ethical dilemmas that demand unavoidable responsibility for the sector. At the same time, new technologies can help solve problems that have so far remained unanswered and ensure fair, inclusive progress. These societies must be able to address the above-mentioned economic, social and environmental challenges and, to do so, people turn to enterprise.

This requires an evolution of the current models towards "stakeholder capitalism" in which the purpose of businesses is to engage a central, cross-functional approach focused on collaboration with all stakeholders to create shared and sustained value as outlined in the Davos 2020 manifesto (Source: Davos 2020 Manifesto: The Universal Purpose of Business in the Fourth Industrial Revolution) in the framework of Industry 4.0.


As universal providers of connectivity and technology, telecommunications companies are called upon to play a key role in this revolution. We will have to complete a metamorphosis towards new generation networks with a change to fibre in their fixed networks and the evolution to 5G in their mobile networks, at a time when the sector is also subject to stiff competition As a result, we are at a moment in time when our industry’s status quo is changing at an increasingly rapid pace; this brings with it the challenge to find new models that adapt to the new rules of the game.