Telefónica(US:TEF)2021-08-01 09:28Financial Data and Key Metrics Changes - The second quarter reported figures showed a year-on-year decline narrowed by 3.6% to EUR 10 billion, with organic growth of 3.4%, accelerating by 4.8 percentage points compared to the first quarter [8] - Net income reached EUR 7.7 billion, with earnings per share (EPS) at EUR 1.37 [8] - Free cash flow amounted to EUR 877 million in the second quarter, exceeding EUR 1.6 billion when excluding spectrum payments, representing a 31% increase year-on-year [9] - Net financial debt was reduced by EUR 11 billion year-on-year to EUR 26.2 billion, which is half of the June 2016 net debt position [9][36] Business Line Data and Key Metrics Changes - The Spanish operation showed annual revenue growth for the first time since late 2019, with improved trends in service and handset revenue [17] - In Germany, revenue and OIBDA improved year-on-year by 5.7% and 10.3%, respectively, with CapEx growing by 6.9% [20] - In Brazil, revenue growth accelerated to 3.2% year-on-year in Q2, with OIBDA returning to positive growth at 3% year-on-year [26] - Telefonica Tech revenue growth accelerated to 26.6% year-on-year, with B2B revenues growing by 4.5% [30] Market Data and Key Metrics Changes - In Spain, the competitive environment is rationalizing, leading to improved customer satisfaction and reduced churn [18] - The U.K. market saw the completion of the Virgin Media O2 JV, with a total base of EUR 54.6 million, up 7% year-on-year [21] - In Hispam, the company reported simultaneous year-on-year revenue and OIBDA growth for the first time in 15 quarters [34] Company Strategy and Development Direction - The company is transitioning to sustainable profitable growth, with a focus on digitalization and ESG initiatives [5][7] - The strategic focus includes reinforcing positions in core markets, such as the U.K. and Brazil, while modulating exposure to Hispam [6][10] - The company aims to upgrade its U.K. network to full fiber to the premise by 2028, leveraging its existing infrastructure [42][43] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the year, expecting ARPU improvements and a return to OIBDA margins above 39% [9][10] - The company anticipates continued operational momentum in Brazil and Germany, with a positive outlook for revenue and OIBDA stabilization [10] - Management highlighted the importance of rational market behavior in Spain, which is expected to support ARPU recovery [56] Other Important Information - The company has launched an industry-wide eco-rating scheme for mobile phones and has been recognized as a climate leader by the Financial Times [12] - The company is committed to diversity and inclusion, aiming for at least 33% of women in management positions by the end of 2024 [13] Q&A Session Summary Question: Thoughts on the U.K. business moving from cable to fiber - Management confirmed the decision to upgrade to fiber is driven by the unique position of having a deep fiber network, allowing for low-cost upgrades and better competitive positioning [42][43] Question: Impact of football season on ARPU in Spain - Management explained that the end of the football season led to temporary downgrades, but expects ARPU to improve in the second half as promotions decrease and new portfolio offerings take effect [44][46] Question: Outlook for EBITDA in Spain - Management indicated that while Q2 EBITDA improved slightly, the comparison was tough due to nonrecurring factors from the previous year, but expects a return to close to 40% margins in the second half [65][67] Question: Potential for further inorganic options in LATAM - Management stated the focus is on profitability and efficiencies rather than pursuing deals, but sees opportunities for growth through fiber initiatives [71][74] Question: Future of the voluntary scrip option - Management noted that the scrip option provides flexibility during uncertain times, but aims to mitigate dilution impacts through excess free cash flow [92]