Core Viewpoint - Telefonica, S.A. reported a significant decline in net income for Q4 2024, with a year-over-year drop of 41.8% to €425 million, alongside a decrease in basic earnings per share (EPS) from €0.12 to €0.06 [1][2]. Financial Performance - Total revenues for Q4 2024 increased by 5.4% year over year to €10,701 million, driven by strong performance in key markets, with residential revenues up 6.5% and business segment revenues up 10% [2]. - For the full year 2024, revenues reached €41,315 million, reflecting a 1.6% year-over-year increase, surpassing the initial growth target of around 1% [2]. Business Unit Results - **Telefonica Espana**: Revenues increased by 1.3% year over year to €3,364 million, supported by an 8.9% rise in handset sales and a 1% growth in service revenues. Adjusted EBITDA grew by 1% to €1,255 million [3]. - **Telefonica Deutschland**: Revenues fell by 3.7% to €2,205 million, primarily due to weak mobile business trends, while adjusted EBITDA margin stood at 33.4% [4]. - **VirginMedia-O2 U.K.**: Revenues slightly decreased by 0.1% to €3,263 million, with an adjusted EBITDA margin of 36.6% [4]. - **Telefonica Brasil**: Revenues decreased by 7.4% to €2,350 million, impacted by foreign exchange headwinds, with adjusted EBITDA declining by 6.9% to €1,050 million [5]. - **Telefonica Hispam**: Revenues surged by 47.1% to €2,432 million, largely due to a lower comparison base from the previous year and other factors [8]. - **Telefonica Tech**: Revenues increased by 11.1% year over year to €612 million, driven by growth in cybersecurity and IoT sectors [7]. Cash Flow and Liquidity - For the year ending December 31, 2024, Telefonica generated €10,994 million in net cash from operating activities, down from €11,649 million the previous year. Free cash flow totaled €2,634 million, exceeding the target with a 14.1% increase from the prior year [10]. - As of December 31, 2024, the company held €8,062 million in cash and cash equivalents, with non-current financial liabilities amounting to €33,192 million [11]. Future Guidance - The company anticipates continued organic growth in revenues, EBITDA, and EBITDAaL minus CapEx for 2025. Free cash flow is expected to remain stable compared to 2024 [12]. - A cash dividend of €0.30 per share has been confirmed for 2025, to be distributed in two installments [12].

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Financial Data and Key Metrics Changes - Free cash flow generated was €2.634 billion, representing a 14% year-on-year growth, exceeding the guidance of more than 10% [15][50] - Revenue increased by 5.4% in Q4, reflecting solid commercial momentum across the company's footprint [22] - EBITDA remained flat year-on-year in Q4, while CapEx increased by 5.7% due to Argentina and foreign exchange impacts [23] Business Line Data and Key Metrics Changes - Telefonica Spain saw year-on-year growth in all main accesses for the first time since 2018, with revenue growth of 1.3% in Q4 [25][27] - Telefonica Brasil's revenue increased by nearly 8% in local currency, with a record high in fixed line business [29] - Telefonica Tech exceeded €2 billion in revenue, with a growth acceleration of 10% year-on-year in Q4 [35] Market Data and Key Metrics Changes - The company passed an additional 10 million premises with fiber during the year, extending 5G coverage by 10 percentage points across core markets [20] - In Germany, O2 brand maintained strong appeal with revenue declining by 3.7% year-on-year in Q4 due to various market pressures [31] - In the U.K., revenue was flat year-on-year in Q4, with significant fiber rollout and stable mobile contract churn [32] Company Strategy and Development Direction - The company aims to enhance execution across its business, focusing on core connectivity services and growing B2B technology solutions [11][12] - A strategic review is planned to be completed by the end of 2025, focusing on operational rationale and improving margins [57][116] - The company is committed to disciplined capital allocation while exploring consolidation opportunities in Europe [12][68] Management's Comments on Operating Environment and Future Outlook - Management highlighted the need for rapid adaptation to capture full potential in a dynamic macro environment [10] - The company sees significant opportunities in Europe, driven by technological disruption and a favorable regulatory framework [12][68] - The outlook for 2025 includes expectations for organic growth in revenue, EBITDA, and free cash flow generation similar to 2024 [59][130] Other Important Information - The company has maintained a robust balance sheet with net financial debt at €27.2 billion and a net debt-to-EBITDA ratio of 2.58x [47] - The company is committed to reducing leverage and has a solid liquidity position of €20.9 billion [48] - The company received recognition for its sustainability efforts, with 89% of electricity sourced from renewable sources [53][55] Q&A Session Summary Question: Why was the midterm guidance put on hold? - Management clarified that the decision was made to allow for strategic flexibility during the ongoing review, not due to doubts about achievability [66] Question: Is there scope for in-market mobile consolidation? - Management acknowledged potential for more flexibility in consolidation but refrained from specifics at this stage [68] Question: What are the driving elements for market analysis? - Management indicated that the analysis will focus on operational rationale, improving margins, and consolidating markets for better positioning [77] Question: What is the outlook for OpEx in Spain? - Management expects revenue growth in Spain to sustain year-on-year, with EBITDA growth slightly above revenue growth due to operational efficiencies [130][132] Question: Is there appetite for cross-border consolidation in Europe? - Management detected a determination for drastic change in Europe regarding strategic autonomy, but acknowledged challenges in execution [140]

Group 1 - The core viewpoint is that Telefónica's high-dividend yield may be misleading due to weak growth prospects and insufficient dividend coverage by earnings and cash flows [1] Group 2 - The company has been identified as having a high-dividend yield, which could be perceived as a trap for investors [1] - Concerns are raised regarding the adequacy of the company's earnings and cash flows to support its dividend payments [1]

Group 1: Partnership and Solutions - Telefonica has partnered with Collibra to enhance data governance solutions for enterprises, focusing on reliability, transparency, and compliance [1] - Collibra's platform evaluates and tracks data and AI use cases, automating compliance with data privacy regulations and protecting sensitive information [2] - The solution is flexible, allowing organizations to integrate with cloud services and data lakes, and will be showcased at the Mobile World Congress 2025 [3] Group 2: Strategic Initiatives - Telefonica continues to form strategic partnerships, including a recent agreement with IBM to develop security solutions for a post-quantum world [4] - The company aims to optimize value creation by focusing on core operations and accelerating digitization, despite concerns over a debt-laden balance sheet [5] Group 3: Financial Performance - Telefonica's shares have increased by 10.9% over the past year, contrasting with a 12.9% decline in the industry [6] - The company currently holds a Zacks Rank of 3 (Hold) [6]

Core Insights - Telefónica Tech and IBM have entered a collaboration agreement to develop security solutions addressing challenges posed by future quantum computers [1][6] - The partnership aims to integrate IBM's quantum-safe technology with Telefónica Tech's cybersecurity services to protect organizations from potential data vulnerabilities [6][9] Group 1: Quantum Computing and Security Challenges - Quantum computing presents opportunities for advanced calculations but also poses significant cybersecurity challenges as traditional encryption may become vulnerable [3] - Data may already be at risk of being harvested by cybercriminals for future decryption, even before cryptographically relevant quantum computers are available [3] Group 2: IBM's Quantum-Safe Technology - IBM has developed enterprise software focused on quantum-safe solutions, including IBM Guardium Quantum Safe, which helps organizations manage cryptography and improve security posture [4] - Additional tools such as IBM Quantum Safe Explorer and IBM Quantum Safe Remediator are designed to identify cryptographic vulnerabilities and test quantum-safe algorithms [5] Group 3: Implementation and Collaboration - The collaboration will focus on creating solutions that adhere to new quantum-safe cryptography standards defined by the U.S. National Institute of Standards and Technology (NIST) [7] - IBM's infrastructure has been deployed at Telefónica's headquarters in Madrid to support business development aimed at enhancing cyber resiliency against future quantum threats [12][9] Group 4: Future Directions - The agreement includes the establishment of a joint use case office to focus on communications encryption and adaptation to new secure algorithms [11] - Telefónica Tech will assist organizations in transitioning to new cryptographic standards to ensure resilience against cybersecurity risks posed by quantum computing [10]

Core Insights - Telefonica's subsidiary Movistar has launched a 12-month free subscription to Perplexity Pro, an AI-powered response engine, showcasing the company's commitment to integrating advanced technology in the telecom sector [1][5] - The collaboration with Perplexity aims to enhance user experiences through AI, with significant investments from Telefonica's corporate venture capital division, Wayra, and other notable investors [5] Group 1: Product Offering - Movistar users can activate their Perplexity Pro subscription via the Movistar website or the miMovistar app, allowing up to five individuals to share the benefits [4] - Perplexity Pro utilizes advanced AI models to facilitate personalized communication and deeper engagement through follow-up questions [2] Group 2: Technological Capabilities - Perplexity Pro can analyze uploaded files and images, providing real-time insights and summaries, and retrieving relevant information from the Internet [3] - The service has been integrated into Movistar Plus+, enabling users to interact with AI through voice commands and receive real-time responses displayed on their screens [6] Group 3: Strategic Partnerships - Telefonica's partnership with Perplexity has expanded to Brazil and the United Kingdom, with plans for further rollout in other markets [5] - Movistar has also collaborated with Xbox to enhance the esports ecosystem in Colombia, offering access to high-quality games and training programs [7] - A partnership with Tigo aims to improve mobile connectivity for millions of Colombians, enhancing overall mobile experience [8] Group 4: Market Performance - Telefonica currently holds a Zacks Rank 3 (Hold), with its shares declining 6% over the past year, compared to a 17.3% decline in the industry [9]

Group 1: Partnership and Offerings - Movistar, a subsidiary of Telefonica, has partnered with Xbox to enhance the esports ecosystem in Colombia, targeting over 10 million active gamers in the country [1] - Movistar customers can access the Xbox Game Pass Ultimate for $38,690 per month, which includes unlimited access to over 100 high-quality games [2] - Prepaid customers can purchase the Xbox Game Pass Ultimate package online or at Movistar Experience Centers, with a promotional offer of a free one-month license for select gaming smartphones until February 28 [3] Group 2: Community Engagement and Training - The Movistar GameClub has hosted over 9,000 gamers and organized 50 events in eight months, demonstrating a commitment to building a vibrant gaming community [4] - Movistar GameClub is offering training courses for children aged 12 and older on video game creation, covering popular games and providing both in-person and virtual learning options [5] Group 3: Digital Transformation and Infrastructure - Telefonica is driving digital transformation in the Spanish industry through partnerships with Siemens, focusing on advanced connectivity and technologies like 5G and IoT [6] - Telefonica has invested significantly in network upgrades to enhance speed, coverage, and security across its mobile and fixed communication services in Europe and Latin America [7]

Core Insights - Telefonica, S.A. has achieved over 90% population coverage in Spain with its 5G network by the end of 2024, significantly reshaping the digital landscape since the launch of its services in September 2020 [1] - The company has experienced a 50% growth in its 5G coverage across more than 1,500 municipalities in the last six months, enhancing its market position in the critical 3,500 MHz spectrum [2] - Telefonica's 5G+ services provide high performance with ultra-fast speeds and minimal latency, improving user experience and network quality [3] 5G Network Deployment - The 3,500 MHz band enables innovative features like Network Slicing, which allows tailored network quality for various industries, and has been utilized in collaboration with emergency services for improved communication [4] - The 700 MHz band enhances indoor connectivity and outdoor coverage, extending across over 3,585 municipalities in Spain, significantly increasing from an initial coverage of 78% in 2020 [5] Fiber Network Expansion - Telefonica has accelerated the expansion of its Fiber-to-the-Home (FTTH) network, complementing its 5G coverage and ensuring high-quality connectivity for users [6] - By September 2024, the company reported 393 million accesses globally, with fiber connections growing by 11% and mobile contracts by 3%, positioning it as a leader in fiber networks [7] Stock Performance - Telefonica currently holds a Zacks Rank of 2 (Buy), with its shares rising 1.5% over the past year, contrasting with a 16% decline in the industry [8]

Core Insights - Telefonica, S.A. has launched a pilot service with 112 Extremadura to enhance emergency response through advanced technologies, including 5G+ Network Slicing and a cloud-based Push-To-Talk solution [1][3] - The integration of rugged 5G+ terminals for rescue teams ensures reliable communication in extreme conditions, enhancing operational efficiency [2][9] - Telefonica's investment in network transformation aims to improve connectivity across Spain, with plans to phase out retail copper services by 2024 and expand fiber coverage to 5 million [4][10] Technology and Innovation - The 5G+ Network Slicing technology guarantees uninterrupted connectivity for emergency services, even during high demand, and supports features like video sharing and real-time location tracking [3][9] - The service allows emergency units to share audio, video, and location data seamlessly, improving coordination and management during operations [9] Market Position and Performance - Telefonica holds a Zacks Rank 2 (Buy), with its shares gaining 3% over the past year, contrasting with a 15.2% decline in the industry [5] - The company's 5G network currently covers almost 89% of the population in Spain, with plans to expand 5G SA coverage in core markets by 2025 [10] Strategic Partnerships - Movistar Colombia, a subsidiary of Telefonica, has partnered with Tigo to enhance mobile connectivity for over 35 million users, launching a unified mobile access network [11]