Don‘t pick up yet

Research evidence excerpt

Don‘t pick up yet

FICC Research

Credit Research

30 July 2026

Telefonica (TELEFO)

Don't pick up yet

Telefo posted a solid H1 print led by Spain and Brazil, while

Germany remained weak. FY26 guidance was affirmed with

EBITDA tracking towards the high end of the range and Victoria Adé + 33 (0) 14458 8939

modest uplift on OpCFaL. Still, valuations are lacking appeal victoria.ade@barclays.com

compared to US Telcos; we maintain our UW and suggest BBI, Paris

switches.

Barclays Rating: Underweight

S&P/Moody's/Fitch: BBB- Stable/Baa3 Stable/BBB Stable

Senior trade ideas: Switch out of TELEFO €4.055% 36 into T €4.05% 37

Hybrid trade ideas: Switch out of TELEFO €6.135% 30-Perp into VZ €3.9962% 31-56

Telefonica delivered solid H1 26 results, supported by strong performances in Spain and

Brazil, while Germany remained subdued. Trends are expected to improve in H2 in Spain and

Germany, helped by easier comparables on the latter, while Brazil should continue on a similar

trajectory. Management reiterated FY 26 guidance, with EBITDA tracking towards the upper

end of the range, although the revenue outlook requires some acceleration in H2. OpCFaL

guidance was modestly upgraded to growth of above 3%, from above 2% previously. FCF was

soft in H1, reflecting the usual seasonality, but management confirmed its €3.0bn target for FY

26, with cash generation expected to be weighted towards H2, and expressed strong confidence

in delivery. Net debt is improving, although leverage is still elevated at 2.68x at end Q2 26. As

usual, management reiterated its clear commitment to maintain its IG rating.

On M&A, management reiterated that any potential transaction would need to fit within its

M&A framework, with a focus on cost and network synergies as well as the right valuation. As