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Telefonica Fortifies Business Operations With Segment Rejig

Zacks Equity Research
·4 min read

In a bid to simplify its day-to-day operations with enhanced capabilities, Telefonica, S.A. TEF recently announced the consolidation of three of its global businesses under a single umbrella — Telefonica Global Solutions. Markedly, the latest move is part of Telefonica’s ongoing transformation process in order to strengthen its international businesses. As part of this segmental rejig, wholesale and roaming along with multinational business segments have been incorporated into a single unit to speed up operational execution and maximize synergies with greater flexibility.

As a wholly owned subsidiary, Telefonica Global Solutions will strengthen global business operations and facilitate seamless connection between customers and partners with a consistent service offering. On the back of nearly 400 roaming agreements and alliances, the unit caters to more than 1500 customers in 170 countries. Apart from delivering innovative solutions to Telefonica customers, the all-in-one segment has been entrusted with the responsibility of undertaking projects for global clientele. Interestingly, in late 2019, the Spanish telco had announced its strategy to spin off company assets to focus more on IoT, cybersecurity and cloud businesses for a more dynamic approach.

One of the primary concerns of Telefonica is its massive debt load, which currently stands at approximately $44 billion. The company has apparently dropped from the second to the sixth place among European telecom operators over a span of last 10 years. Last year, Telefonica sold two of its operations in Central America to America Movil for $648 million to improve its liquidity. Further, it has trimmed around $647 million of its debt load in the first half of 2020. With the recent segment restructuring, it is expected that Telefonica will reward shareholders with risk-adjusted returns amid the ongoing COVID-19 situation.

Telefonica provides a comprehensive suite of service platforms for fast go-to-market launches. Its IoT connectivity platform has been designed to address dynamic business requirements and enable a cost-effective solution to improve business productivity. Over the past years, it has invested heavily in the deployment and transformation of its network to provide seamless connectivity with enhanced capacity, speed, coverage and security. With operations across 17 countries, the Spanish telecom company is capitalizing on the opportunities in the digital world through several growth strategies to enhance long-term prospects, while experiencing healthy traction in the smartphone market.

Telefonica currently has a Zacks Rank #4 (Sell). The company’s shares have plunged 53.1% compared with the industry’s decline of 21.4% in the past year.




Some better-ranked stocks in the broader industry are Deutsche Telekom AG DTEGY, CMS Energy Corporation CMS and NextEra Energy, Inc. NEE. While Deutsche Telekom sports a Zacks Rank #1 (Strong Buy), CMS Energy and NextEra Energy carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Deutsche Telekom has a long-term earnings growth expectation of 10%.

CMS Energy delivered a trailing four-quarter positive earnings surprise of 9.2%, on average.

NextEra Energy delivered a trailing four-quarter positive earnings surprise of 2.7%, on average.

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CMS Energy Corporation (CMS) : Free Stock Analysis Report
 
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