Eventually this will bottom out. Is TEF really worth less now than at the peak of the financial crisis when the Dow was around 6000? If you have ever travelled anywhere in the 3rd world, young people will go hungry before giving up their mobile. TEF is loaded with debt precisely because of the growth opportunities worldwide. S&P thinks it can continue to service the debt and pay the divvy and still rates it 4 stars. The big danger comes if their credit rating is cut. They may have enough FCF now but if they need cash at higher rates the divvy will be cut and all bets are off.
What if the Euro drops to parity with the dollar? Does the stock price and divvy drop 30% along with the Euro? Lots of pundits expect the Euro to drop to parity. I expect it to. Remember they have to inflate to get out of the mess Europe is in. And with so many of the leaders there intent on causing a depression, something already true in some countries there, you could have the Euro go lower than parity with the dollar IMHO.
If you generate income outside the EU and then repatriate that income or translate that income into euros you will have a inverse relationship between total income and euro price. So if the euro drops significantly from here, which I doubt it will it is already below 1.3, and they are generating income in Latin america and Brazilian reals are increasing in reference to the euro then they translate into more euros at the partent company. So, TEF will benefit from a depreciating euro.
TEF receives 70% of its income from outside Europe. Presumably, the countries in which it does business would be stronger than the Euro. So, if the Euro drops in value (in comparison to the Brazilian Real, Mexican peso etc), my thinking is that this would serve as an offset for any losses within their European business even if TEF experiences no growth in those markets. Next, I am assuming that TEF's debt is denominated in Euros. If they are receiving a fair amount of their income in a different, stronger currency, this would seem to help TEF.
The biggest concern would be the dividend, which could some of its value because of the exchange rate between the dollar and the Euro. But, it seems like the company wouldn't have that big of a problem if the Euro experienced a drop in value.
Maybe but S. America gets a lot of financing from aggressive European banks which are pulling in their horns at the moment trying to survive. And China does a lot of business with S.A. and they are feeling the pinch of their biggest market, ta-da, Europe. This train is all interconnected and if one idiot, Europe, slams on the breaks with idiotic Cro-Magnon, beggar thy neighbor economics we can ALL go down.
And there are quite a few Cro-Magnons right here in the US, hint, many of whom say they don't want the US to be like Europe but then promote the same austerity grind us all to hell stuck on stupid BS Germany is proposing to punish their southern neighbors.
Good luck selling all your BMWs to China Germany. They are going to get whacked by the same tail they are wagging when it comes back around.