Telefónica FY21 Guidance: growth expected, aided by deal-making

Telefónica’s outlook for the current FY was relatively robust and optimistic.

Continued revenue and OIBDA growth is anticipated, albeit in low single digits, while the normalised sub-15% capex-to-sales ratio level is expected to remain. The Group is planning a €0.30 dividend for FY22, to be paid in cash after several years of offering scrip options. The Group is also cancelling 2.4% of its share capital, currently held as treasury stock.

The guidance, though, may amount to slightly less than meets the eye. Although Telefónica in FY21 reaped the benefits of spinning out the UK business, it intends to continue to include VM O2’s financial performance within guidance, making the most of the converged business’s expansion plans rather than accounting for the business in a more hands-off manner. This should see Telefónica guidance benefit from improvements in fixed performance at the JV after a period of investment preceding its amalgamation.

The anticipated divvying up of Oi’s mobile interests — a deal completed since the results announcement — was also baked into guidance, with Vivo absorbing new customers and gaining additional spectrum. While management said that further guidance on synergies in Brazil would be provided once the formalities of the deal were done (and pointed to a history of exceeding initial estimates in the market on earlier inorganic activity), there was an audible sigh of disappointment from a Bank of America analyst when it was confirmed that a considerable degree of any upside has already been accounted for in the outlook.