Telefonica Q4 Earnings Call Highlights

27 Feb 2026, 04:14 by Sarita Garza · The Markets Daily

Telefonica (NYSE:TEF) reported its January-to-December 2025 results and outlined 2026 priorities, emphasizing that it “delivered on all its 2025 commitments” while exiting the year with “improving momentum,” according to Chairman and CEO Marc Murtra.

Murtra said the group’s “Transform & Grow” strategy—presented at the company’s Capital Markets Day in November—centers on enhancing customer experience, expanding B2C, scaling B2B, evolving technological capabilities, simplifying the operating model, and disciplined portfolio management. He highlighted progress in 2025 across those pillars, including labor agreements in Spain to improve productivity and further steps to reduce exposure to Latin America.

Momentum accelerated in Q4 as B2B stood out

Management pointed to an acceleration in fourth-quarter performance. Murtra said adjusted EBITDA grew 2.8% in constant currency in the quarter and adjusted operating cash flow after leases rose nearly 13%. He also called out B2B as a particular highlight, with growth of 7.3% in the quarter.

Chief Financial and Corporate Development Officer Juan Azcue provided full-year figures, stating revenue reached EUR 35.1 billion, up 1.5% year-over-year in constant terms. Adjusted EBITDA was EUR 11.9 billion, up 2%, and adjusted operating cash flow after leases increased 5.9% to “just over EUR 5 billion.” CapEx to sales was 12.4%, which he said was within target.

Azcue said free cash flow came in at EUR 2.8 billion, above the company’s base guidance of approximately EUR 2.7 billion. He added that free cash flow including employee restructuring commitments and Virgin Media O2 dividends was EUR 2.1 billion, which he said exceeded updated 2025 guidance.

Foreign exchange was “a meaningful headwind” in 2025, Azcue said, describing an approximate 3 percentage point drag on revenue, adjusted EBITDA, and adjusted operating cash flow after leases, with the impact easing in Q4.

Spain, Brazil, Germany, and the UK: operating updates

Chief Operating Officer Emilio Gayo described 2025 as a “landmark year” for Telefónica Spain, citing the “best KPIs since 2018.” He highlighted record fiber and TV net adds, robust portability ratios, and the “highest customer base ever” in contract mobile and fixed broadband. Gayo said convergent ARPU remained at leading levels around EUR 90, while Q4 churn fell to 0.7%, the lowest level since the convergent proposition launched. He also said call volumes have been reduced 10% and claims 50% over three years, attributing that to improvements in key processes.

In Spain’s B2C, Gayo noted growth in Telefónica’s ecosystem, including alarms exceeding 600,000, rising football customers, and device penetration (“three out of four customers have a device”), which he said supports lower churn and higher revenues. In B2B, he said the company has strong momentum and cited IT as “a growth engine,” noting “double-digit growth” in IT. He also said Spain is seeing “profitable growth and solid cash generation,” with revenues and adjusted EBITDA growing and margins around 57%. Gayo said a new efficiency agreement signed at the end of 2025 is expected to deliver more than EUR 250 million in savings by 2026.

For Telefônica Brasil (Vivo), Gayo said the accesses base reached an all-time high. He cited contract mobile growth driven by network quality and customer experience, ARPU growth, and low churn. In fixed, he said fiber connections increased at a double-digit rate and that Vivo Total accounted for 53% of fiber connections. He reported that revenue increased over 7%, supported by acceleration in mobile service revenue in Q4 and growth in new businesses, while ecosystem revenues (health and wellness, consumer electronics, financial services, and entertainment) rose more than 20%. Gayo added that adjusted EBITDA grew 8% in the quarter and adjusted operating cash flow after leases rose almost 20%.

In Germany, Gayo said momentum continued in Q4, with signs of reduced promotional activity. Telefónica’s O2 network rollout brought 5G population coverage to 99%, and connect Magazine rated the network “very good,” placing it second for the first time. He said churn remained low at 1.1%, IoT accesses growth accelerated, and fixed broadband returned to slight growth for a second consecutive quarter with ARPU increasing. However, he said revenue and adjusted EBITDA declined, mainly reflecting the completion of a one-on-one customer migration by year-end and the associated Q4 2024 comparison. Management reiterated an expectation of a return to growth in 2027 once one-on-one impacts are behind them.

In the UK, Virgin Media O2 CEO Lutz Schüler said the business ended 2025 delivering guidance, progressing on fiber and 5G deployment and improving fixed-line trading for a second consecutive quarter. He said 2025 “guided revenue” increased 0.2% and “guided EBITDA” increased 0.9%. Schüler also said 2026 expectations reflect increased promotional intensity and continued uncertainty in the consumer fixed market, along with B2B product portfolio simplification and ongoing cost efficiency efforts. He noted that nexfibre announced an agreement to acquire Netomnia, which is expected to strengthen the network and accelerate fiber rollout and penetration.

Portfolio actions, cost savings, and simplification

Murtra said Telefónica accelerated portfolio transformation and has “more or less exited” Hispam, with six out of eight markets sold. Azcue added that after disposals, Argentina, Peru, Ecuador, Uruguay, Colombia, and other small companies are classified as discontinued operations, while Chile, Venezuela, and Mexico are now reported under other companies, affecting comparability but, in management’s view, creating a more focused business.

On efficiency, Murtra said a workforce transformation agreement in Spain is expected to deliver approximately EUR 0.6 billion of run-rate savings by 2028. He also highlighted copper switch-off progress in Spain and said it has started in Brazil.

2026 guidance: growth, cash flow, leverage, and dividend reconfirmed

For 2026, management guided to constant currency revenue and adjusted EBITDA growth of 1.5%–2.5%, with a CapEx-to-sales ratio around 12%. Telefónica expects adjusted operating cash flow after leases growth of more than 2% and guided to free cash flow of approximately EUR 3 billion, described as an upgrade to the upper end of the range provided at the Capital Markets Day.

Azcue said leverage is progressing toward the company’s target of 2.5x net debt to adjusted EBITDA in 2028. He reported net debt to EBITDA of 2.78x in December versus 2.87x in September. Net financial debt was EUR 26.8 billion year-end, and he added that including the sale of Colombia, Chile, and the FiBrasil stake, net debt would be EUR 24.6 billion.

The company reconfirmed a EUR 0.15 dividend per share for 2026 and reiterated its multi-year targets.

In Q&A, Azcue said employee-related commitments are expected to peak around EUR 1.2 billion in 2026 before fading over time. Management also discussed leasing costs, saying lease growth in 2025 was driven mainly by 5G rollout, fiber expansion, and inflation impacts, and that leases are an area of focus for efficiencies.

On consolidation, Murtra said the biggest barrier has been European Commission M&A guidelines, noting there have been “good messages” as well as “mixed messages,” but that the specifics will matter. He said Telefónica will assess opportunities case by case.

On competition in Spain, Gayo said Telefónica’s segmentation strategy emphasizes high-end customers where it believes it has a strong position due to its network, content and ecosystem, brand, and commercial approach. He acknowledged increased competition in the low end from Vodafone and Digi but said Telefónica is “competing very well” and that portability results show solid performance relative to those competitors.

About Telefonica (NYSE:TEF)

Telefónica, SA is a Spanish multinational telecommunications company headquartered in Madrid. Founded in 1924 as Compañía Telefónica Nacional de España, it has grown into one of the world’s largest telecommunications groups. Telefónica provides a broad range of communications services to residential and business customers, including mobile and fixed-line telephony, broadband internet, and pay-TV. The company also develops and sells network infrastructure and related services to support connectivity at scale.