Telefónica(US:TEF)2023-11-09 05:30Financial Data and Key Metrics Changes - In Q3, OIBDA grew by 2.5% year-on-year to EUR 3.3 billion, with revenues surpassing EUR 10.3 billion, remaining virtually stable year-on-year [5][12] - Net income reached EUR 1.3 billion in the first 9 months of 2023, with free cash flow growing 0.4% year-on-year in Q3, reaching EUR 2.4 billion in the first 9 months [5][13] - Net debt declined by 3.4% quarter-on-quarter and 7.4% year-on-year, reaching EUR 26.5 billion, with a leverage ratio of 2.5x [5][35] Business Line Data and Key Metrics Changes - Service revenue grew by 3.1% year-on-year, with B2B performance showing a remarkable growth of 4.6% year-on-year [4][14] - In Brazil, Vivo's revenue grew by 7.5% year-on-year in Q3, with OIBDA growth of 11.6% and a margin of 44% [18] - Telefónica Tech delivered a 30% year-on-year revenue growth in the first 9 months, supported by a 26% increase in bookings [21][22] Market Data and Key Metrics Changes - In Spain, the commercial momentum positively impacted financial trends, with retail revenue growth driven by a refreshed B2C portfolio [29] - In Germany, revenue and OIBDA accelerated to 7.1% and 6.3% respectively, supported by network investments and synergies [32] - The U.K. joint venture Virgin Media O2 continues to invest in product services and networks, reaching an agreement to sell a 16.7% stake in a mobile tower joint venture for GBP 360 million [20] Company Strategy and Development Direction - The company is focused on next-generation networks, including 5G deployment, to enhance customer satisfaction and reduce churn [3] - The strategic emphasis on operational efficiencies and network transformation is expected to stabilize OIBDA and improve margins [6][50] - The company aims to achieve around EUR 4 billion in free cash flow for the year, with a confirmed dividend of EUR 0.3 per share [15][45] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year guidance, with organic revenue growth expected around 4% and organic OIBDA growth around 3% [15][35] - The company anticipates a better OIBDA minus CapEx trend in Q4 2023, despite challenges in certain markets [42] - Management highlighted the importance of adapting to market dynamics and maintaining a focus on value share to lead the market [58] Other Important Information - The company is ahead of regulatory requirements with a solid climate action plan and has issued a green hybrid bond for EUR 750 million [16][60] - The company maintains about 80% of its debt linked to fixed rates, providing a comfortable position to face rising interest rates [28] Q&A Session Summary Question: Will new tariff plans improve conversion ARPU and what is the competition doing? - Management noted that the new tariff plans are expected to improve conversion ARPU, with no significant increase in promotional activity compared to the previous year [37][39] Question: What is driving the deceleration in wholesale business in Spain? - Management explained that the deceleration is linked to seasonal impacts related to content resale, while fiber access continues to show good traction [48] Question: Can you elaborate on the different items affecting domestic EBITDA? - Management indicated that lower energy costs and content costs, along with network transformation efficiencies, are contributing to improved EBITDA performance [55]