Telefónica increases revenue in all markets and earns 706 million euros in the first quarter, Access Evolution

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• Telefónica’s growth accelerated in the first quarter, driven by revenue growth in all countries where the company operates, with double-digit increases in Brazil and Hispam as well as growth in Germany, the UK UK and Spain, and by continuing to execute a strategy focused on value creation.
• The company is on track to meet its annual targets, with organic growth in revenue (+3.2%) and OIBDA (+2.1%) in the first three months of 2022.
• The Group is overcoming the current scenario of inflationary pressure supported by revenue growth, the efficiency of the new operational model and the favorable evolution of exchange rates.
• Telefónica has covered maturities beyond 2024, it has more than 80% of its debt at fixed rates and the average debt maturity is 12.9 years.
• Telefónica Tech accelerates its growth with revenues reaching 299 million euros, 80.6% more than in the first quarter of 2021.
• “Telefónica’s strong start to the year in a context of inflationary pressures and geopolitical instability demonstrates the company’s strength in facing the most adverse situations. Once again, it confirms that the company’s strategic plan Group is fair and represents a valid and solid roadmap to continue providing the best service to our customers,” said José María Álvarez-Pallete, President and CEO of the company.

Madrid, May 12, 2022. Telefónica accelerated its growth in the first quarter of 2022, recording an increase in revenues in all the company’s markets in reported terms and a net profit of 706 million euros.

During the first three months of the year, the company also made progress in the execution of its strategic plan, with the achievement of new milestones aimed at creating value. Of particular note in this area is the finalization of the acquisition of Oi’s mobile assets in Brazil, which will generate synergies of approximately 1,000 million euros. Also note the agreements concluded in Spain concerning La Liga, with a reduction in net costs of 15% following the agreement with DAZN; improving the network in Germany; advancing the process of creating fiber vehicles in Spain and the UK; and the acquisition of the British company Incremental by Telefónica Tech, followed by the purchase of BE-terna.

“Telefónica’s strong start to the year in a context of inflationary pressures and geopolitical instability testifies to the company’s strength in facing the most adverse situations. Once again, this confirms that the group’s strategic plan is right and represents a valid and solid roadmap to continue providing the best service to our customers,” said José María Álvarez-Pallete, President and CEO of Telefónica. .

“During the first quarter, we pursued our strategy, centered on value creation. The successful conclusion of the Oi deal in Brazil and the agreement signed with DAZN for LaLiga rights shows that Telefónica never rests in the execution of its strategic plan,” said the company’s COO, Ángel Vilá. Laura Abasolo, Chief Financial and Control Officer & Head of Telefonica Hispam, underlines “the robust start to the year, with widespread organic growth and solid free cash flow generation”.

In this context of compliance and execution of the strategic plan, Telefónica has shown progress in digitizing the business model – with 81% of processes already digitized – with the aim of continuing to take advantage of technology and the efficiency to make further progress in this area. direction.

Revenue: growth in all countries

First quarter revenue reached €10,883 million, aggregating 50% of the VMO2 JV created in the UK, representing growth of 3.2% compared to the same period in 2021.

On a reported basis, revenue growth spread across all of the markets in which the group operates, with double-digit growth in Brazil (+18.1%) and Hispam (+10.9 %), for a total of 9,410 million euros. Of that revenue, 73% now comes from broadband connectivity and digital services, up 2.1 percentage points from the same period in 2021.

Operating income before depreciation and amortization (OIBDA) increased by 2.1% to 3,753 million euros, of which 50% from VMO2. In published data, it amounted to 3,199 million euros, again with double-digit increases in Brazil (+14.6%) and Hispam (+50.7%).

For the first time in recent years, the favorable evolution of exchange rates had a positive effect on both revenue and OIBDA in the same quarter, with a contribution of 242 million euros to revenue and of 95 million euros in operating income before depreciation.

By markets, Spain represented 28% of the company’s revenues; Hispanic, 20%; Brazil, 18%; Germany, 18%; and the United Kingdom, 14%. Also by market, 30% of OIBDA came from Spain, 21% from Brazil, 16% from Germany, 16% from Hispam and 15% from the United Kingdom.

Revenue and OIBDA growth is on track to meet the company’s full-year financial targets of achieving single-digit organic growth in both positions. The same is true for the CapEx to sales ratio, which stands at 12%, against an annual target of 15%.

Telefónica Tech: 80% growth

Telefónica Tech accelerated its growth in the first three months of 2022. Revenues increased by 80.6% year-on-year to reach 299 million euros, thanks to the good performance of all areas and to the integration of operations during 2021.

At Telefonica Infra, the company made progress during the quarter in the process of creating fiber vehicles in Spain and the United Kingdom, with ongoing discussions with potential investors, and concluded the alliance with Pontegadea in Telxius, following the sale of KKR’s stake.

Generation of free cash: 15.5 times more than in 2021

In the first three months of the year, Telefónica recorded free cash flow generation of €513 million, including leasing, 15.5 times more than in the first quarter of 2021 due to spectrum auctions encountered during the first months of last year.

CapEx fell by 4.9% organically to €1,320 million, of which 50% VMO2, while operating cash flow (OIBDA – CapEx) increased by 6.4%, also organically, to €2,433 millions of euros.

Solid financial position: maturities covered beyond 2024

At the end of the first quarter, Telefónica’s solid financial position allowed it to face the current scenario of inflationary pressures and rising interest rates, a position which also benefits from the efficiency gains derived from the new business model. Despite inflationary pressure in all regions where the company operates, revenues and OIBDA have increased sequentially in each, and 80% of the revenue base has pricing mechanisms as a buffer against this effect. Additionally, Telefónica has decades of experience in high inflation markets.

At the end of the first quarter, net financial debt had fallen to 27,453 million euros, 23.3% less than in March 2021. Of the total debt, more than 80% is at fixed rates, so that the company is protected against possible increases in financing costs and the average maturity of the debt is 12.9 years.

In addition, Telefónica has a large liquidity position of €22,302 million and has hedged debt maturities beyond 2024.

More and better customers: 368 million hits

The Telefónica group’s access base stood at 368.3 million at the end of March, 1.1% more than a year earlier. Fiber customers increased by 20% and mobile plan customers by 4.3% compared to March 2021.

The company continues to focus on fiber deployment and the development of sustainable, open and virtualized technologies. At the end of March, Telefónica maintained its leading position in terms of the number of premises served by fiber, increasing its presence by 6% to reach a total of 162.9 million premises, of which approximately 85 million pass through Telefónica’s own network. .

In terms of 5G technology, Telefónica offers coverage in over 400 UK cities, around 250 German cities and 21 Brazilian cities, while in Spain it covers around 82% of the population. In addition, the deployment of 5G autonomous technology continues, following the acquisition of frequencies in Spain, the United Kingdom and Brazil in 2021.

ESG and solidarity with Ukraine

Telefónica’s sustainability goals, embedded in the company’s business strategy and aligned with the United Nations SDGs, advanced during the quarter with milestones such as the boost given to the Innovation Hub and talents through the opening of the new Universitas campus, Telefónica’s firm commitment to employability and digital training, as well as the three WDA mentions received in recognition of the transparency in the management of information concerning employees of the business and the value chain.

Telefónica’s ESG objectives are tangible. The company aims to achieve net zero emissions by 2040, with an intermediate deadline of 2025 in the main markets (scope 1+2), and to be a zero waste company by 2030. It must also achieve mobile broadband coverage of 90-97% in rural areas. regions of Spain, Brazil and Germany by 2024; have 33% of women managers by 2024; and to eliminate the gender pay gap by 2050. Equally tangible is the goal to fund more than €10,000 million according to sustainability criteria in the coming years; achieve gender parity in the company’s main governing bodies by 2030; and maintaining a “zero tolerance” policy towards corruption.

Telefónica and Fundación Telefónica also showed solidarity with Ukraine during the quarter with assistance for people living in Ukraine, people with friends and family there, and anyone seeking protection in other country. The initiatives were articulated through monetary donations and free telecommunications services (calls, roaming or SMS), and by employees, volunteers and organizations in the various countries in which the company operates.

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