Telefonica S.A.

Telefónica reported Q2 constant-currency revenue growth slowing versus Q1 because of lower handset sales in Germany, while service revenue grew 0.9% year over year and adjusted EBITDA and adjusted operating cash flow after leases grew 2.7% and 2.9%, respectively. Juan Azcue said operating cash flow after leases margin rose 0.4 points year over year in both Q2 and H1, CapEx over revenue was 11.6% flat year over year in the first half, current free cash flow was EUR 611 million in the quarter and EUR 944 million in H1, and net financial debt was EUR 25.3 billion. Management upgraded 2026 adjusted operating cash flow after leases guidance to over 3% from over 2%, reiterated the dividend of EUR 0.15, said EBITDA is expected at the high end of the 1.5% to 2.5% range, and said revenue growth should land at the low end of the range due mainly to handset weakness in Germany.

Marc Murtra framed the quarter as evidence that the Transform and Grow plan is translating into results through disciplined execution, cost control, and network-led commercial traction. He emphasized stronger growth in Spain and Brazil, continued transformation in Germany, and the company’s focus on becoming the “best gateway” for digital technologies. His tone was confident but selective: he highlighted the cash-flow upgrade and deleveraging while still flagging softness in handset revenue and saying 2026 revenue growth will likely be at the low end of the range.

Juan Azcue focused on the financial build: Q2 service revenue rose 0.9% in constant terms, adjusted EBITDA and adjusted operating cash flow after leases increased 2.7% and 2.9%, and the operating cash flow after leases margin improved 0.4 points year over year. He said current free cash flow reached EUR 611 million in Q2 and EUR 944 million in H1, while net financial debt declined to EUR 25.3 billion. He also pointed to funding discipline, noting 5 financing transactions year to date raised EUR 4.5 billion of long-term financing, and said interest cost payments fell from 3.23% to 2.95% as of June 26.

Analysts pressed on Spain’s competitive intensity and whether strong service revenue growth can continue; management said competition remains disciplined, the company is sustaining growth through service, content, and customer service, and B2B is becoming stronger. On capital allocation and consolidation, Murtra said any deal needs clear cost and network synergies, the right price, and regulatory comfort, but he would not tie Telefónica’s timing to any single transaction. Questions on Germany centered on leverage, store closures, and partnerships; management said VMO2 is aligned with Liberty on deleveraging, Germany is shifting to value over volume, and FWA will remain opportunistic rather than a major growth push.