Tear Sheet: Telefónica S.A.

This report does not constitute a rating action. We view as credit supportive the reduction in the 2026 dividend to €0.15 per share and the company?s intention to link distributions to 40%-60% of base free cash flow. This underpins its commitment to maintaining an investment-grade rating. In addition, management has indicated that any large-scale in-market consolidation would involve equity financing to mitigate the impact on credit metrics. While no major M&A transactions have been announced to date, we understand Telefónica will focus on in-market consolidation in its core geographies of Spain, Germany, the U.K., and Brazil. Its ability to sustain an investment-grade rating in the context of larger-scale transactions remains to be tested, however. The company has completed disposals in

...December 15, 2025 This report does not constitute a rating action. Telef=nica's recently announced strategy update signals a shift toward balance sheet protection and disciplined financial policy. We view as credit supportive the reduction in the 2026 dividend to 0.15 per share and the company's intention to link distributions to 40%-60% of base free cash flow. This underpins its commitment to maintaining an investment-grade rating. In addition, management has indicated that any large-scale in-market consolidation would involve equity financing to mitigate the impact on credit metrics. While no major M&A transactions have been announced to date, we understand Telef=nica will focus on in-market consolidation in its core geographies of Spain, Germany, the U.K., and Brazil. Its ability to sustain an investment- grade rating in the context of larger-scale transactions remains to be tested, however. In our view, Telef=nica's ongoing exit from its Hispam operations is mildly positive for the...

Full Report