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Telefonica: Looking More GARP as Spain Advances

In this 50-page note Jefferies restates the view that retail segmentation is restoring Spain to growth. Netflix upsell, O2 retention and weaker wholesale headwinds should benefit 1Q19. Jefferies estimates group organic revenues/OIBDA +1.8%/2.6% in 2019 and normalized free cash flow growing from €3.1bn 2018 to €3.3/3.6 billion 2019/20. Leverage decline from 3.4x to 3.2x/3.1x can be enhanced by ~€2.3 billion proceeds from disposals of CentAm assets and data centres, as well as a material tax rebate. TEF trades on 11.1x/10.3x EV/OpFCF 2019/20 (sector 13.2x/12.5x). FULL REPORT

Jerry Dellis, European Telecoms