After a 2021 Full of Good Changes, We Expect More in 2022; Telefonica Shares Still Offer Upside

Fiscal 2021 has been one of changes for Telefonica, with the sale of its towers, reduced exposure to Latin America (sale of El Salvador, Costa Rica and fiber assets in Colombia and Chile) and the creation of its U.K. joint venture with Virgin Media. We are pleased with this strategic direction as it is crystalizing the value of Telefonica’s assets and using the proceeds to reduce debt, while simplifying the company’s structure and reducing currency exposure at the same time. We expect Telefonica will continue to pull different levers during 2022, like a partial monetization of its tech unit (approximately EUR 1 billion in revenue), continued reduction in Latin America or sale of remaining assets. All of this is supported by favorable regulatory changes in Spain, its main market, in late 2021. We maintain our EUR 4.90 fair value estimate, which represents 15% upside.