Telefónica's change of course makes investors doubtful

MadridMarc Murtra, president of Telefónica, anticipated a change of course last February. He had only been in the company for a month. telecom replacing José María Álvarez-Pallete, he argued that the company needed to adapt to the changing times. Nine months later, coinciding with the presentation of results for the period between January and September – Telefónica lost 1.08 billion euros – Murtra has put the announced change in writing. This Tuesday, under the name Transform and GrowTelefónica has presented its strategic plan for the next five years. "It will be a difficult battle," the Catalan executive acknowledged to analysts and investors, referring to the plan presented. However, he defended the need to fight it to become "the leading [telecommunications] operator in Europe." But the difficulties, at least initially, have not gone unnoticed by the market. Telefónica closed Tuesday's trading session with a 13.12% drop, one of the steepest in its history, with the share price settling at €3.73. One of the most sensitive issues for investors, and one that Telefónica has managed to address, is its shareholder remuneration policy. The company will maintain its 2025 dividend (0.30 cents per share), but has announced a cut for 2026 (0.15 cents per share, to be paid in cash in 2027). Management explained that the decision was unanimously approved by the board of directors, which includes shareholders such as SEPI, the state investment arm (10%), and Criteria (10%), La Caixa's holding company, which relies primarily on dividends from its subsidiaries. Murtra, however, downplayed the stock market decline. "[At Telefónica] there has been an aversion to making difficult decisions, whether cutting the dividend or acknowledging losses [...] these decisions are often difficult to explain or understand. [...] The market, when the time comes, or however it comes, will follow us," the Catalan executive stated at a press conference.

Reduce costs to reduce debt

In fact, within the framework of the plan presented, Murtra's Telefónica has set its sights on reducing its current debt – which stood at €28.233 billion as of September 30 – and this entails, in the words of the executive himself a few months ago, applying "ironclad financial discipline." Although the telecom It has not set a debt target for 2030, but it does foresee cost reductions of up to €2.3 billion by 2028, reaching €3 billion by 2030.

Among the issues surrounding this cost reduction, Telefónica is considering salesfor example, old copper power plants—and does not rule out implementing a workforce reduction plan (ERE). "We have incorporated all the savings opportunities we foresee as feasible, and when I say all, I mean all [...] if this includes a decision that affects people, what we can say is that whatever we have to do, we will do it hand in hand with the workers' representatives," said Emilio Gayo, CEO of Telefónica, at a press conference.

The uncertainty of a merger

The goal of all this is to invest the revenue generated in areas that not only allow the company to grow, but also "transform" it, Murtra has repeatedly argued. telecomFor example, it has focused on operational simplification; the role of artificial intelligence in the products it offers customers; and evolving its technological capabilities. It also explored investments in the defense sector, particularly cybersecurity. But the other major challenge Telefónica has set for itself is to gain scale, that is, to move towards consolidation within the telecommunications sector. telecoms in Europe, capable of competing with the Chinese or American markets, where there are far fewer operators.

The big question remains: who and how? Telefónica hasn't included any concrete elements in this regard in its strategic plan. Only in response to questions from analysts, and after media inquiries, did it acknowledge that one of the ways to execute an acquisition opportunity, should one arise, is to approve a capital increase. A move that isn't always welcomed by investors.

Beyond that, and while defending the intention to "capture acquisition opportunities that arise and generate value for shareholders"—that is, to explore acquisitions—the telecom company has avoided giving specific names, regions, or timelines, although the market has speculated about firms like Vodafone Spain. "Discretion," Murtra stated regarding operations that affect third parties. However, the executive acknowledged that he will need the support of the European Commission, which has so far remained silent, to facilitate this process: "There is always the possibility of inaction in the European Union [...] but we believe it will happen, and when it does, we must be well prepared."

The final farewell in Latin America

As in the first half of the year, Telefónica's withdrawal from Latin America explains the losses recorded between January and September 2025: €1.08 billion, compared to a profit of €954 million during the same period last year. This result is due to the sale of subsidiaries in Argentina, Peru, Ecuador, and Uruguay, and the losses recorded from these transactions. Colombia is expected to be added to the list of countries soon, and Chile, Mexico, and Venezuela will follow in the long term. "We will leave Spanish-speaking America," confirmed Murtra. The exit from territories like Chile, the first country where Telefónica established a presence, would mark the end of an expansion that began in 1989.

Meanwhile, Brazil and Spain remain the markets driving the business – the intention of the telecom It is precisely to grow in Europe—along with Germany and the United Kingdom—where Telefónica wants to focus its efforts. Without the impact of having divested its Latin American subsidiaries, Telefónica would have posted a net profit of €828 million from continuing operations in the first nine months of the year, 45.9% less than in the same period of 2024. This figure, including foreign exchange earnings, reached €26.97 billion. As for EBITDA (gross profit), it also fell to €8.938 billion, a 3.6% decrease compared to the first nine months of 2024.