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    TEF   ES0178430E18

TELEFÓNICA, S.A.

(TEF)
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Telefonica, TIM to move ahead with Brazil M&A plans despite COVID-19

05/06/2020 | 03:47pm EDT
FILE PHOTO: A general view shows the Telefonica headquarters in Madrid

By Gabriela Mello

Brazilian telecoms firms Telefonica Brasil SA and TIM Participacoes SA are moving ahead with a potential joint bid for rival Oi SA's mobile unit despite the challenges of the COVID-19 outbreak, executives said Wednesday.

The carriers have begun due diligence on a plan announced in March to acquire Oi's assets together. Meanwhile, they remain focused on expanding their fiber-to-the-home (FTTH) network, as well as fourth-generation (4G) mobile coverage, while a long-awaited auction for next-generation spectrum remains uncertain.

"We're confident that our strategy is the right one," Telefonica Brasil Chief Executive Christian Gebara told investors on a call, noting it is still early to assess the full extent of the global pandemic.

"The level of uncertainty is much higher, but we're not willing to cut costs or capital expenditure that will help us grow and compete in the long term," TIM Chief Executive Pietro Labriola said on a separate call.

The executives did not detail how long the due diligence on Oi's mobile unit would take, but said they would have a clearer idea on the timeline in coming months.

TIM and Telefonica Brasil are also working together on an infrastructure sharing agreement, pending regulatory approval, as well as exploring other partnerships to accelerate FTTH deployment in Brazil, they said.

In the first-quarter, the two companies reported weaker-than-expected results, as the pandemic hit revenues, mostly in pre-paid plans and handset sales, overshadowing efficiency gains from digitalization efforts and other cost-cutting initiatives.

TIM shares fell nearly 2% in afternoon trading and Telefonica Brasil slipped around 1%.

UBS analysts see Telefonica Brasil, the local unit of Spain's Telefonica SA, which operates under the brand Vivo, less affected by economic and mobility challenges in the country given its premium brand and subscriber mix.

"FTTH momentum and apparent competitive landscape stability provide evidence of Vivo's resiliency, which should remain even as the pandemic and its effects further hinder economic activity," UBS analyst Vinicius Ribeiro wrote in a report.

At the end of March, 58.5% of Telefonica Brasil's mobile customers were using post-paid plans.

For TIM, Ribeiro flagged uncertainty about the impact of the coronavirus crisis, given the carrier's higher exposure to pre-paid plans, which represented 59% of its mobile base in March.

In the last two weeks of March, the local subsidiary of Telecom Italia saw pre-paid recharges drop as much as 25%, said Labriola, adding that numbers are slowly improving as social distancing measures are relaxed.

Vivo has also noted a slight recovery in handset sales and mobile data usage in April compared with the second half of March, when stay-at-home measures led customers to use more home internet and stores were shut by lockdowns.

"We don't expect customers to downgrade their post-paid plans because we offered a lot of benefits," Gebara added.

(Reporting by Gabriela Mello; Editing by Brad Haynes, Louise Heavens and Andrea Ricci)


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
BASE CO., LTD. 0.56% 5370 End-of-day quote.-12.68%
BASE, INC. -0.12% 1678 End-of-day quote.-14.04%
BYD COMPANY LIMITED 4.22% 232.4 End-of-day quote.14.37%
OI S.A. 0.45% 2.23 End-of-day quote.-20.92%
TELECOM ITALIA S.P.A. -1.91% 0.4364 Delayed Quote.17.89%
TELEFÓNICA, S.A. -1.75% 3.966 Delayed Quote.24.39%
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Financials
Sales 2021 40 831 M 48 484 M 48 484 M
Net income 2021 2 377 M 2 823 M 2 823 M
Net Debt 2021 37 614 M 44 663 M 44 663 M
P/E ratio 2021 9,45x
Yield 2021 7,76%
Capitalization 22 300 M 26 437 M 26 479 M
EV / Sales 2021 1,47x
EV / Sales 2022 1,46x
Nbr of Employees 112 543
Free-Float 91,4%
Chart TELEFÓNICA, S.A.
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Telefónica, S.A. Technical Analysis Chart | TEF | ES0178430E18 | MarketScreener
Technical analysis trends TELEFÓNICA, S.A.
Short TermMid-TermLong Term
TrendsNeutralBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 29
Average target price 4,80 €
Last Close Price 4,04 €
Spread / Highest target 116%
Spread / Average Target 18,8%
Spread / Lowest Target -35,6%
EPS Revisions
Managers and Directors
NameTitle
José María Álvarez-Pallete López Executive Chairman & Chief Executive Officer
Laura Abasolo García de Baquedano Chief Financial & Control Officer
Alejandro Ramos Chief Information Security Officer
Ángel Vilá Vilá Boix Chief Operating Officer & Director
Peter Erskine Independent Non-Executive Director
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