Telefonica shares fall on FX drag, German and U.K. weakness in Q2

Investing.com -- Telefonica (BME:TEF) shares declined on Wednesday after the mobile network provider posted second-quarter results that met expectations, with stable revenue and EBITDA growth on an organic basis, but foreign exchange losses and underperformance in Germany and the United Kingdom (TADAWUL:4280) weighed on the overall outcome.

The telecom operator reported group revenue of €8.95 billion for the three months ended June 30, slightly ahead of the €8.92 billion company-compiled consensus. 

The figure marked a 3.7% decline from the previous year on a reported basis, though it rose 1.5% when adjusted for currency and other changes. 

Adjusted EBITDA was €2.92 billion, in line with expectations, down 4.8% year over year in reported terms and up 1.2% organically. The reported EBITDA margin fell to 32.6% from 33.0% a year earlier.

Currency effects, particularly the depreciation of the Brazilian real against the euro, reduced revenue by €453 million and EBITDA by €156 million in the quarter. 

The combined FX impact equaled about a 5% hit to group-level results, according to the company data.

Telefonica’s Spanish unit, its largest business, delivered modest growth. Revenue rose 1.9% organically to €3.19 billion, while service revenue advanced 1%. 

EBITDA increased 1% to €1.13 billion. The Spanish company reported stable commercial trends in Spain, with low customer churn and consistent net additions.

In Germany, revenue dropped 2.4% on an organic basis to €2.04 billion, and EBITDA fell 6% to €638 million. 

The decline was attributed to the ongoing migration of 1&1 MVNO subscribers from Telefonica’s network to Vodafone’s, a trend that had been expected but resulted in EBITDA coming in 70 basis points below internal forecasts. The company also noted a rise in mobile promotional activity in the market.

The U.K. joint venture with Virgin Media O2 continued to struggle. Revenue declined 5.5% year over year in local currency, following a 4.2% drop in the first quarter. EBITDA fell 1.3%, improving from a 3.3% decrease in the prior quarter.

Telefonica Brasil (NYSE:VIV), which had already published its earnings, reported a 7.5% increase in service revenue, outpacing the country’s 5.4% inflation rate. 

EBITDA rose 9% year over year, while operating cash flow grew 12.2%. Capital intensity declined to 16.7%, down 50 basis points from a year earlier.

The Hispam region continued to lag, with revenue falling 15.4% organically to €1.04 billion. EBITDA declined 20.1% to €208 million. The region faced ongoing challenges related to economic instability and structural issues.

Telefonica maintained its full-year 2025 guidance and stated it expects stronger performance in the second half of the year compared with the first.