Telefónica presented a robust set of Q4 and FY21 financials, strengthened by cost-cutting on its home turf in Spain and solid growth in Brazil and Germany.

Underlining the feel-good factor was restoration of a cash dividend for 2022 (at €0.30), which replaces the voluntary scrip dividend introduced at the beginning of the pandemic in which shareholders could forfeit cash in exchange for more shares.

Analysts at Jefferies, as reported by the Financial Times (paywall applies), said the return of a cash dividend "signaled a step forward in growth expectations."

Figure 1: The scrapping of the scrip dividend reflects growing confidence at the Spanish group after Q4 and FY21 results exceed expectations.
(Source: Reuters/Alamy Stock Photo)

José María Álvarez-Pallete, Telefónica’s chairman and CEO, seemed ebullient in prepared remarks.

"Telefónica has once again delivered on all its targets in 2021," he said. He went on to say that Telefónica was now "leaner, more efficient and stronger."

Show me some numbers

Telefónica's organic revenues increased by 2% in the full year (to €39.3 billion) and by 3.1% in Q4 (to €9.7 billion). Q4 revenue performance was 3.1 per cent higher than consensus expectations, said the Financial Times.

If taking into account full-year revenue from its 50% joint venture in the UK with Virgin Media – formally established last June – Telefónica said Group turnover would have reached €42.8 billion for 2021.

Underlying operating income before depreciation and amortization (OIBDA) – which ignores "restructuring provisions", including redundancy packages for employees at Telefónica Espana – was €3.2 billion during Q4 and 4.7% higher than expected.

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According to an average forecast by eight analysts surveyed by Bloomberg, Q4 underlying OIBDA was expected to come in at €2.6 billion.

Telefónica Tech, which focuses on big data, cloud, cybersecurity and IoT, continues to gain traction. Year-on-year, turnover was up 34% to nearly €1 billion. Q4, however, saw faster year-on-growth at just over 50% to €346 million.

For 2022 Telefónica has set targets to achieve low single-digit organic growth in both revenues and OIBDA, as well as a capex to sales ratio of up to 15%.

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— Ken Wieland, contributing editor, special to Light Reading