Telefónica sticking to strategy of 'optimizing' capital exposure in Latin America

Spain’s Telefónica will remain focused on its strategy announced in 2019 to reduce exposure to Latin America. 

“We remain very focused on the five pillars of action that we announced back in November 2019,” CEO José María Álvarez Pallete said during an investors’ call on Q4 results. “The first one, focus on our four core markets being Spain, Brazil, the UK and Germany, [secondly] reducing capital or optimizing our capital exposure to Latin America, the third one being Telefónica Infra, the fourth Telefónica Tech, and the fifth being a leaner and more digitized operational model.” 

Laura Abasolo, CFO and head of Telefónica Hispam, said the strategy in Latin America “continues to bear fruit” and added Telefónica will continue “to modulate exposure to the region, reducing capital employed by 22% year-on-year [in the year].” 

This has been accomplished by implementing incremental and progressive operational synergies and a new operational model, said Abasolo. 

Telefonica Hispam financial results show its capex/revenue ratio was 10% in 2021. The company said that “with growth in service revenues and synergies captured with [the] new operating model” it allows it to present growth in Oibda-capex by 2% in 2021. 

Capex in Hispam reached 978mn euros (US$1.1bn) in 2021.

Telefónica Hispam saw 6% growth in revenues in 2021 and 4% in Oibda to 1.9bn and 471mn euros, respectively. 

DEBT

Telefónica is now in a better position than in 2019 when it announced the new strategy, according to the company. Net debt was reduced by 9.2bn euros last year to 26.3bn euros. 

“Looking ahead, we are well covered,” Abasolo said. 

She said Telefónica plans to increase to over 10bn euros ESG financing “in the coming years.” Early this year, Telefónica announced the refinancing of its main syndicated loan of 5.5bn euros with sustainable criteria. 

Inorganic initiatives like the sale of Telxius Towers and the joint venture in the UK helped the company improved its balance sheet. But mergers and acquisitions will continue to be part of the strategy and the company said it is looking for opportunities for its infrastructure business.

“We continue to explore alternatives to crystallize the value of our infra assets and look for growth opportunities while assessing our optionality across all asset classes,” COO Angel Vila told the call. 

Telefónica closed the sale of its fiber operation in Colombia to KKR in January and before that, announced the acquisition, together with Pontegadea, of KKR’s stake in Telxius Cable.