I’ve been invested in Telefónica for as long as I can remember. It’s always been undervalued.

However, my system now places it in the CAUTION quadrant. Why?

• It detects a persistent structural contraction in long-term revenue, reflected in a -4% CAGR over the last 10 years, while the core business requires high and ongoing capital investments for the rollout of 5G and fiber

(data from EODHD, chart from DividendQuad)

• Several dividend cuts over the past 10 years, including a 50% cut this year

• A recent amendment to the Spain-Brazil double taxation treaty closes a long-standing tax loophole, resulting in a structural and permanent tax increase on profits

Market report: Deutsche Telekom

The $DTE (-0,69 %) remains a dominant player in the German telecommunications market, supported by strong financial results and ambitious projects. In 2024, the Group achieved strong revenue growth, particularly through fiber and mobile projects, and exceeded forecasts in several segments .

Current projects and developments

1.Fiber optic expansion:

- Deutsche Telekom plans to connect around 2.5 million new households to the fiber-optic network (FTTH) every year until 2027. The total number of households that can be connected is set to rise to 17.5 million, with a target take-up rate of 20% .

- A record 131,000 new fiber optic tariffs were already achieved in the third quarter of 2024 .

2.5G network and digitalization:

- The expansion of the 5G network is being systematically driven forward, with a target network coverage of 95% in Europe by 2027. The company is also investing in campus solutions and network slicing.

- Customer care processes and self-service offerings are increasingly being optimized using artificial intelligence to increase efficiency.

3.Business customers and B2B:

- Global business with business customers, particularly via the subsidiary T-Systems, is to be accelerated through cloud-based platforms and ICT solutions. Revenue growth in the billions is expected .

4.Sustainability and financial flexibility:

- In addition to record dividends (90 cents per share), Telekom is planning share buybacks worth up to 2 billion euros .

Competitive situation

Deutsche Telekom faces intense competition from other major providers such as $VOD (+0,55 %) , $TEF (+0,64 %) (O2) and regional players such as 1&1. While Vodafone and Telefónica are also investing in fiber projects and 5G, Deutsche Telekom stands out due to its dominant market position and global commitment.

Competitors:

-Vodafone: Strong focus on IoT and 5G technologies.

-Telefónica Germany (O2): Aggressive expansion of low-cost offers and regional partnerships.

-Freenet and 1&1: Increasing focus on innovative tariff models and attractive price points .

Prospects and possible new projects

Deutsche Telekom plans to further expand its digital offering, with a focus on payment services, AI-supported solutions for end customers and sustainable infrastructures. In addition, future investments in cloud-based services and partnerships could further increase revenue in the B2B area. Expansion in Europe remains a key area, while growth via T-Mobile US continues to be a key driver in the USA.

Overall, Deutsche Telekom is demonstrating a strong strategic focus on both sustainable infrastructure and digital innovation. It is expected to maintain and further expand its leading position in the German market.

https://www.telekom.com/de/medien/medieninformationen/detail/zwischenbericht-drittes-quartal-2024-1083042

https://www.mordorintelligence.com/de/industry-reports/germany-telecom-market

https://www.telekom.com/de/medien/medieninformationen/detail/deutsche-telekom-will-wachstum-beschleunigen-1080408

Telefonica Q3 2024 $TEF (+0,64 %)

Financial performance:

• Revenue: Telefónica recorded revenue of 10.023 billion euros in the third quarter of 2024, a decrease of 2.9% compared to the previous year. The decrease is mainly due to currency fluctuations, which had a negative impact of 4.2 percentage points.
• EBITDA: Adjusted EBITDA amounted to EUR 3.260 billion, a decrease of 2.5% year-on-year, albeit with a slight margin improvement of 0.1 percentage points to 32.5%.
• Net income: Net income attributable to shareholders amounted to just EUR 10 million in the third quarter of 2024, which was heavily influenced by non-ordinary expenses.

Balance sheet overview:

• Total assets: Total assets amounted to EUR 100.484 billion as at September 2024, a decrease of 3.7% compared to December 2023.
• Equity: Equity attributable to shareholders fell by 5.9% to 20.562 billion euros.

Income structure:

• Operating expenses: Operating expenses fell by 3.8% year-on-year to EUR 7.084 billion in the third quarter of 2024.
• Impairments: Included a non-cash impairment of goodwill and other intangible assets in Peru amounting to 314 million euros.

Cash flow overview:

• Free cash flow (FCF): FCF increased by 89.5% year-on-year in the third quarter of 2024, supported by a strong operating performance and natural hedging effects.
• Investing activities: Net capital expenditure increased by 51.3% year-on-year to EUR 4.76 billion in the first nine months of 2024.

Key figures and profitability metrics:

• Debt ratio: The ratio of net debt to EBITDAAL was 2.76x as at September 2024.
• EBITDA margin: Slight margin improvement of 0.1 percentage points to 32.5% in the third quarter of 2024.

Segment information:

• Spain: Sales growth of 1.0% compared to the previous year in the third quarter of 2024, as well as EBITDA growth of 1.0%.
• Brazil: Year-on-year sales growth of 7.1% in the third quarter of 2024.
• Germany: Decline in revenue of 1.6% in the third quarter of 2024, however EBITDA grew by 3.0%.

Competitive position:

Telefónica remains the leader in FTTH (fiber) and 5G, supported by significant investments in network expansion.

Forecasts and management comments:

The company reiterated its guidance for 2024, with expected revenue growth of 1% to 2% and EBITDAAL - CapEx growth of up to 13%.

Risks and opportunities:

• Risks: Exchange rate volatility, particularly from the Brazilian real, and competitive pressure in key markets.
• Opportunities: Expansion in FTTH and 5G as well as potential regulatory changes in Brazil and the EU.

Summary of results:

Positive aspects:

Strong free cash flow growth of 89.5% year-on-year in the third quarter of 2024, indicating solid operating results and effective financial management

Improvement in the EBITDA margin by 0.1 percentage points year-on-year, a sign of efficiency in cost control.

Further growth in Spain and Brazil despite challenging macroeconomic conditions.

Strategic focus on the expansion of FTTH and 5Gstrengthening the market position.

Effective hedging strategythat mitigates the negative impact of exchange rate fluctuations.

Negative aspects:

Decline in sales of 2.9% year-on-year in the third quarter of 2024, which has a negative impact on revenue.

Significant non-cash impairment in Peruaffecting the balance sheet and comprehensive income.

Decrease in net profit due to non-recurring expenses, which could make the company less attractive to investors.

Increased net expenditure on investments by 51.3 % compared compared to the previous year, which ties up capital and may limit short-term financial flexibility.

Competitive pressure in the core marketswhich could put pressure on margins in the long term.

Earnings Summary, Nov. 7

$MUV2 (-0,49 %)
| Munich Re Q3 24 Earnings

EPS: 7.02 (est. 6.67)

Forecasts FY insurance revenue of approximately 61B, compared to 59B

Forecasts FY profit above 5B, compared to 5B

$RHM (+0,24 %) | Rheinmetall AG Q3 24 Earnings

Sales: 2.45B (est. 2.42B)

Still expects FY sales of about 10B (est. 9.99B)

Expects FY operating margin at the upper end of guidance

Nissan Motor Q2 2024 Earnings $7201 (+2,63 %)

Q2 Operating Income 31.91B Yen (est. 65.25B Yen)

Q2 Net Loss 9.34B Yen (est. Profit 49.07B Yen)

Expects FY Operating Income of 150.00B Yen, Previously Forecast 500.00B Yen

To Cut 9,000 Jobs Globally

To Reduce Global Production Capacity By 20%

To Sell Back Up To 10.02% Of Mitsubishi Motors Shares

Air France KLM Q3 2024 Earnings $AF

EBITDA: 1.90B EU (est. 1.9B EU)

Revenue: 8.98B EU (est. 8.88B EU)

Net Income: 780M EU (est. 874.3M EU)

Forecasts FY Capex at 3B EU, Saw Below 3B EU

$TEF (+0,64 %) | Telefónica Q3 24 Earnings

Revenue: EU10.02B (est. EU10B)

Adj. EBITDA: €3.26B (est. €3.26B)

Net Income: €10M (est. €357M)

To Book €314 Million Non-Cash Impairment for Peru

ArcelorMittal Q3 24 Earnings: $MT (+2,75 %)

- Sales $15.20B (est. $15.23B)

- EBITDA $1.58B (est. $1.47B)

- Still Expects FY CAPEX of $4.5B to $5.0B

- Market Conditions Are ‘Unsustainable’

- Positive on Medium- and Long-Term Outlook

Daimler Truck Holdings Q3 2024 Earnings: $DTG (+2,1 %)

- Revenue: €13.14B (est. €12.98B)

- Adjusted EBIT: €1.19B (est. €1.13B)

- Still Expects FY Revenue of €53B to €55B (est. €53.45B)

Adyen disappoints with lower-than-expected revenue growth and loses 13% of its value on the stock market. $ADYEN (+0,67 %)

Lanxessshares rise 4.4% to 26.80 euros following a positive quarterly report, after having previously fallen 13%. The operating margin exceeds expectations, despite weak prices. $LXS (-4,26 %)

National Grid increases adjusted operating profit by 14% to 2 billion pounds in the first half of the fiscal year and expects growth of around 10% for the full year. Higher fees in New York and higher revenues in the U.K. are driving growth. $NG. (+1,24 %)

AMS-Osram increased profitability in the third quarter despite a decline in revenue, but expects subdued business performance for the fourth quarter and early 2025. To ensure profitability, the company plans further cost cuts of 225 million euros by the end of 2026. $AMS

Süss Microtec is more optimistic following a strong third quarter and now expects to achieve its annual targets in the upper half of the forecast range. Revenue is expected to total 380 to 410 million euros, with an EBIT margin of 14 to 16 percent. $SMHN (+1,14 %)

The investment company Mutares slipped into the red operationally in the third quarter with an adjusted EBITDA loss of 16.5 million euros. Revenue, however, rose by 14% to 3.9 billion euros. $MUX (+1,67 %)

Delivery Hero expects free cash flow of 50 to 100 million euros for 2024 and anticipates GMV growth at the upper end of the forecast range of 7 to 9 percent. However, the group expects adjusted EBITDA to be only at the lower end of the range of 725 to 775 million euros. $DHE

Deutz reported an 80% drop in profit to 7.2 million euros in the third quarter and slipped into the red with a net loss of 2 million euros. Revenue fell by 14.9% to 430.4 million euros due to sluggish demand. $DEZ (+5,03 %)

Compugroup Medical reported a

12% decline in EBITDA to 54.9 million euros in the third quarter, but slightly exceeded

analysts’ expectations. Revenue fell by 1% to 283.4 million

euros, and the company confirmed its revised forecast for 2024. $COP (+0,44 %)

Alzchem reports a jump in profits for the first nine months, with

EBITDA rising 36% to 76.8 million euros, and increases its

EBITDA margin to 18.5%. The group is sticking to its profit target for 2024

but, due to the decision to discontinue low-margin businesses,

is aiming for the lower end of the revenue forecast. $ACT (+4,54 %)

Nordex has raised its forecast for the 2024 EBITDA margin and

now expects it to be closer to the upper end of the range of three to four

percent. In the first nine months, the company reported

a 14 percent increase in revenue to 5.1 billion euros and an

improved EBITDA margin of 3.7 percent. $NDX1 (+1,13 %)

Nemetschek reported a 15.1% increase in revenue to 253 million euros in the third quarter thanks to the

GoCanvas acquisition,

but earnings remained slightly below expectations. The

operating costs associated with the acquisition are weighing on profits, resulting in an

EBITDA increase of 6.7%. $NEM (+1,04 %)

Rational increased its earnings before interest and

taxes by 18% to just under 78 million euros in the third quarter, exceeding

analysts’ expectations, while revenue grew by 8% to 294 million

euros. The company confirmed its full-year forecast. $RAA (+1,57 %)

It was the time when shares went up for a long time. Fortunately, I sold several shares. Now I'm starting to fear a sell-off. Will it continue to go down? I will soon be focusing more on cryptocurrencies.

Sold:

$IHG (+0,45 %)
$1810 (-0,48 %)
$PHIA (+0,31 %)
$TEF (+0,64 %)
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