Better trends yet still much to fix

Research evidence excerpt

Better trends yet still much to fix

Equity Research

European Telecom Services

3 August 2026

Telefonica SA

Telefonica published better than expected results and raised

guidance notably thanks to Spain. We edge our estimates/PT

accordingly. However much remains to fix: the sub-scale TEF.MC/TEF SQ EQUAL WEIGHT Unchanged

German assets, the challenges in the UK and leverage. We European Telecom Services NEUTRAL

remain EW. Unchanged

Price Target EUR 3.90

raised 3% from EUR 3.80

Telefonica posted results above expectations with an acceleration of growth in Spain and

Price (30-Jul-26) EUR 3.60very solid trends in Brazil. On the negative, German trends were worse than we expected.

Potential Upside/Downside +8.3%Meanwhile VMEDO2 (not consolidated) has reported a challenged set of results. Telefonica Source: Bloomberg, Barclays Research

increased 2026 OpFCF guidance and also indicated EBITDA growth would be at the higher

end of the guidance range with continued solid growth in Spain/Brazil and improving

Market Cap (EUR mn) 20423

trends in Germany. Leverage is down but remains elevated, in our view. Looking ahead, we

Shares Outstanding (mn) 5670.16believe Telefonica needs to structurally address its sub-scale position in Germany

Free Float (%) 69.42(see Inflection ahead with additional M&A optionality, upgrade 1&1/UI to OW - 24 June

52 Wk Avg Daily Volume (mn) 12.42026). Also whilst Spain service revenue growth has accelerated, our analysis suggests

Dividend Yield (%) 8.33that incremental revenues continue to come with a very low margin. We edge our PT to

Return on Equity TTM (%) -20.44€3.9 (up from €3.8) and remain EW.

Current BVPS (EUR) 2.59

Source: Bloomberg2Q26 Results review and outlook. Revenues came in +0.5%/+0.4% above company consensus/

Barclays, EBITDA adj.