The rating agency Fitch Ratings has ratified the long-term credit risk rating of Telefónica at 'BBB' and maintains a "stable" outlook, considering its "leadership position" in the markets of Spain and Brazil and its "solid" presence in Germany.
According to Fitch's calculations, Telefónica will manage to strengthen its level of indebtedness and reduce it to below 2.7 times by 2028, supported by a more contained dividend policy, revenues obtained from divestitures, and an organic and gradual increase in its Ebitda.
Likewise, the operator has "solid" operations in Spain, which will account for around 43% of the group's operating free cash flow in 2026, while maintaining a benchmark position in the wholesale, consumer, and enterprise segments, allowing it to leverage significant economies of scale in its network and sustain good cash generation.
The group chaired by Marc Murtra remains the company with the highest revenues in the telecommunications sector in Spain and the second operator in the country behind MasOrange. Fitch projects a market share of 31% in fixed broadband, 45% in pay television, and 37% in mobile telephony for 2025.
The rating agency positively assesses Telefónica's decision to cut the dividend for shareholders by 50% in 2026 and its plan to link the future evolution of the remuneration to a 'payout' on free cash flow situated between 40% and 60%.
Fitch expects 2026 to be the last year in which the 'teleco' is affected by the loss of the wholesale contract with Mobilfunk and considers that the most intense impact on its German subsidiary is already behind, anticipating low single-digit revenue growth in that market starting from 2027. In parallel, the company maintains a dominant position in the mobile business in Brazil, with a share of 42%, where the agency expects favorable growth dynamics over the next two or three years.
"Telefónica has a rating similar to that of other European telecommunications operators with geographical diversification (...). Its greater exposure to emerging markets with sovereign ratings below investment grade and the associated exchange rate risk translates into a sensitivity to leverage moderately lower per rating tranche than that of its peers," the report highlights.