Buying Telefónica at 20-30 euros: the bet of those expecting a windfall

Buying Telefónica at 20-30 euros: the bet that divides opinion

Is it worth buying Telefónica shares at current prices? Some argue that in five or ten years the telecom operator will trade between 20 and 30 euros, well above today's levels, and that anyone who can't see it is a bubble-blind doubter. The thesis rests on two pillars: the arrival of artificial intelligence and the company's semi-public nature. The problem is that the numbers behind that thesis don't add up.

The 20-30 euros per share scenario

The prediction is blunt: over a five-to-ten-year horizon, Telefónica could be worth between 20 and 30 euros per share, or even more. The central argument is that artificial intelligence will drive up demand for connectivity and digital services, and that the operator, given its size and infrastructure, is well placed to capture that business. "Once it gets into AI, it will take off," sums up one of the idea's defenders. Buying the stock is presented as something simple, almost effortless: liquid shares, easy to purchase at any branch, no need for sophisticated platforms. The comparison with a property comes up again and again: a tangible asset, the old-fashioned kind, that you buy and hold.

The problem is that the company's accounting reality paints a far less flattering picture. Critics of the thesis sum it up coldly: twenty years of decline, negative earnings per share, a growth estimate in negative double digits and a negative payout too. With those ingredients, the question is not whether the share will rise, but why anyone would buy it today.

The legacy of share issues and dividends

Telefónica's recent history has been shaped by a shareholder remuneration policy that has raised more doubts than confidence. Some recall that many investors have held their shares since the company went public, and that prices close to 30 euros were once seen. The trick of paying dividends funded by capital increases is described, with a knowing wink, as "a flawless plan". The result is an ageing shareholder base, made up of investors who bought in for the regular income and who now watch the value of their stake dwindle.

The profile of the operator's average shareholder is another point of debate. It is pointed out that most of the company's executives, on high salaries, are at retirement age, and that its most loyal customers — the ones who keep the full bundle of services — are also starting to disappear. "The dead don't renew the top-tier rip-off package," one message declares, a mix of dark humour and demographic analysis.

Management and the landmark building

The criticism is not limited to the numbers. It also targets management and the company's relationship with power. Some recall that the nation built a landmark building for the company — the tallest in Madrid and in Spain at the time — and that the company is now selling it, only to have it extended and disfigured. The reference to the building illustrates what is perceived as a loss of identity and roots. The company is described, in the words of one participant, as a "semi-public monstrosity" that runs badly and inspires disgust. Distrust of public or semi-public management is a recurring thread in the scepticism.

Artificial intelligence as a catalyst

The bullish thesis rests on the idea that artificial intelligence will transform the telecoms business. Connectivity will be more necessary than ever, and operators with their own infrastructure will have the advantage. It is a plausible argument, but also a generic one: it could apply to any operator in the world. The question left hanging is whether Telefónica is positioned to capture that value, or whether, as the sceptics maintain, its cost structure and debt will swallow up any improvement in the business.

The discussion leaves a curious picture: a company that was once a symbol of the country's modernisation, that built the tallest building, that paid generous dividends for years, and that now faces an uncertain future with an ageing investor base and a windfall prediction that sounds more like wishful thinking than analysis. In five or ten years we will see who was laughing and who was crying. Or maybe not.