Telefónica continues to draw scenarios in Brazil, its main market in number of clients, shaken by the crisis derived from the pandemic. For now, in its last corporate presentation for investors, Telefónica Brasil seems to regain optimism regarding the economic recovery of the South American giant, with its effect on unlocking value for the telecom company.
The operator advocates a growth of the Brazilian GDP of 3.5% in 2021, after the fall of 4.1% registered last year. For 2022 and 2023, it foresees advances of 2.4% and 2.5%, respectively. “The recovery of economic activity will be sustained by the vaccination process, financial aid from the Government and strong global growth,” says Telefónica, who points to a normalization of interest rates due to higher inflation, but still at levels relatively low. The teleco believes that the country is undertaking reforms to reduce fiscal risks.
With regard to the price index, Telefónica expects a rebound of 5.2% this year. In relation to exchange rates, an issue that has penalized Telefónica in the last two years due to the depreciation against the euro, it foresees an average rate of 5.3 reais per dollar for 2021, 5.4 units in 2022 and 5, 2 in 2023.
5G auction
Telefónica Brasil also communicates its forecast on the spectrum auction for 5G and points out that it will take place in the second half, and will focus on the coverage obligations for the winners. It will be the fourth major tender that the group faces this year after those of the United Kingdom, Chile and Spain. The teleco recalls that 5G is already available in eight large cities in Brazil.
The company highlights the positive impact that the new regulation will have on the sector. This change is focused on the possibility of a transition from a system of concessions in fixed voice to one of authorizations. This scenario, according to Telefónica, will contribute to significantly reduce maintenance costs for traditional infrastructures in order to focus investment in new technologies. In addition, it will facilitate an automatic renewal of spectrum concessions.
The operator also highlights that the Brazilian market is registering growth in areas such as fiber, contract mobiles or the internet of things, in which Telefónica has a strong position. Thus, it stands out that business core, which already account for 90% of the group’s total, grew 4.7% in the first quarter.
Telefónica indicates that it is pending to receive authorization from the regulators to start up FiBrasil, the fiber vehicle in which it has CDPQ as a partner. Teleco expects this new company to be fully operational in the second half, with the goal of reaching five million homes with fiber in four years.
The teleco is also pending the closing of the purchase of Oi’s mobile assets, an operation carried out together with América Móvil and TIM. The transaction must be approved by the competition authorities.
New dividend and evolution in the Stock Market
Action. Telefónica Brasil shares have been hit hard in recent months by the uncertainty that has prevailed in the country due to the crisis. In recent weeks, ADRs appear to have regained ground on Wall Street. Last Tuesday, in fact, they rose almost 5%, and once again touched the level of 9 dollars.
Dividend. Telefónica Brasil defends its strategy of strong shareholder remuneration. Thus, since the beginning of the year, it has declared new dividends (under the classic Brazilian form of equity interest) for 700 million reais (about 111 million euros), with a profitability of 7.9%. For this year, the operator plans to pay shareholders 5.4 billion reais in two tranches, one in July and the other in October.
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