BY EU STUDIO
Updated Thursday, May 12, 2022-17:27
Share on Facebook
Share on Twitter
send by email
Telefónica has signed a solid start to 2022. The strength of commercial activity, the increase in revenues, the efficiencies resulting from the company's new operating model and the favorable behavior of exchange rates have allowed Telefónica to successfully overcome a quarter marked by geopolitical uncertainty and inflationary pressures.
The company's revenues and operating income before amortization (OIBDA) have grown, respectively, by 3.2% and 2.1% in the first quarter organically, with which Telefónica is well on the way to achieving financial targets set for the year as a whole.
In addition, it obtained a profit of 706 million euros in the first three months of 2022.
In this period, Telefónica has continued to make progress in fulfilling the strategic plan launched at the end of 2019, aimed at creating value.
The closing of the acquisition of Oi's mobile assets in Brazil stands out, which will generate synergies of approximately 1,000 million euros.
Telefónica has achieved these achievements in a context marked by instability.
The invasion of Ukraine, inflationary pressures and interest rate hikes by central banks have multiplied volatility and uncertainty in financial markets, especially in debt markets, with sovereign bond yields rising to the highest levels in recent years in the heat of the highest inflation in recent decades and the actions of central banks to try to contain it.
Telefónica faces this scenario with the protection afforded by the strength of its balance sheet and financial position, and the management carried out in recent years, which now strengthens its situation.
Cash generation, equity and management
Since mid-2016, Telefónica has reduced its net financial debt by almost half, to 27,453 million euros in March 2022. The company's cash generation capacity, which has amounted to nearly 29,000 million euros in last six years, has been a fundamental engine to lighten the debt.
Cash generation has risen to 29,000 million euros in the last six years
Another fundamental factor has been the corporate operations carried out in recent years, guided by the strategic plan announced in 2019 and aimed at creating value.
The joint venture between Virgin Media and O2 (VMO2) stands out to create a leading operator in the United Kingdom and the sale of the Telxius towers to American Tower, carried out at unprecedented multiples.
Both operations, closed during the past year, allowed the company's net worth to double in 2021, to 22,207 million.
In the first quarter of 2022 this sum has grown again to approach 24,700 million euros.
The lower debt, the strong cash generation and a healthier and more robust balance sheet are underpinned by other reinforcements resulting from the management applied in recent years.
The company has blocked a large percentage of its debt at historically low interest rates, so that more than 80% is at a fixed rate, a proportion that in the current context offers formidable protection.
Reinforcement
Telefónica has also focused on its financing and refinancing activity to strengthen its situation, an action that has allowed it to extend the average life of its debt to 12.9 years and cover maturities beyond 2024. At the end of March, the company had a liquidity position of 22,302 million euros.
Regarding inflationary tensions, Telefónica is also well prepared.
Despite the pressure of inflation in all the regions in which the company operates, both revenues and OIBDA have grown sequentially in all of them, and 80% of revenues incorporate mechanisms in the rates that protect against this effect.
In addition, Telefónica has decades of experience in markets with high inflation rates that now give it added knowledge to manage the current uncertain scenario.
Made by UE Studio
This text has been developed by UE Studio, a creative branded content and content marketing firm from Unidad Editorial, for TELEFÓNICA.
Conforms to The Trust Project criteria
Know more