Telefónica shares plunge 13% amid asset sales

Telefónica and the debate over its market decline

What is the value of a company that holds more than half of the Spanish captive market yet continues to lose money? This question looms large whenever Telefónica releases results or announces operations. Discussions have highlighted a 13% drop in share price, according to forum posts, reigniting debates about the incumbent operator's future. The slump is not an isolated incident but the result of management accumulating losses from subsidiary sales, cutting dividends, and facing competitors offering similar services at half the price, argue some participants.

Market punishes sale of Latin American subsidiaries

The decision to exit Argentina just as Javier Milei took office resulted in a fire sale causing €1.8 billion in losses, according to forum messages. In a normal scenario, such an operation would trigger executive consequences. Here, the CEO remains in post while the company sells assets to plug holes. A logical question arises: why rush the exit at the lowest point of the Argentine crisis instead of waiting for potential stabilization?

This is compounded by dividend cuts, historically the main attraction for maintaining share value. The company now offers an uncertain future, promising to distribute between 40% and 60% of cash flow, a range so wide it commits to nothing. For investors who bought Telefónica for income, the message is clear: look elsewhere.

Why does a company with half the market lose money?

It remains a mystery how a company with over half the Spanish captive market loses such significant amounts. It provides the same service Digi offers for half the price. Many analyses suggest the problem is not the market, but management: grandiose projects, bureaucratic structures, and brutal competition operating much more efficiently at significantly lower prices.

Some argue the issue is political, citing government intervention, Saudi funds, or TV control. The reality is more prosaic: a company that lived off a monopoly for decades never learned to compete. When the monopoly broke, corporate culture remained intact. And that has a cost.

The ghosts of Abengoa and Terra

Comparisons with Abengoa haunt the collective imagination. That was also a company deemed too big to fail, which ultimately collapsed. In Telefónica, parallels are reinforced by memories of Terra, the internet bubble that wiped out thousands of savers. After Terra and Telefónica Móviles, those holding money in this company get what they deserve, summarizes general sentiment.

The pattern repeats: companies believing themselves strategic, untouchable, and expecting state rescue. And the State does indeed rescue them, with public money. If Telefónica falls to disappearance, the Government will support it, if only to provide excuses for placing former high-ranking officials after leaving administration posts, one participant argues.

What happens if Telefónica disappears?

Hypotheses of a takeover by a friendly government or foreign telecom are not far-fetched. Just as Endesa ended up in Italian hands due to a former Prime Minister's actions, it wouldn't be surprising if Telefónica, after slimming down, ends up in the arms of a foreign telecom. The company is selling itself piece by piece, and someone with connections wants to acquire it cheaply, according to forum messages.

Meanwhile, minority shareholders watch the spectacle. Shares trade well below levels many considered bottom. Some wait for drops below €2 to calculate, though with a company free-falling in both revenue and strategy, valuation would be purely accounting-based. Expecting a takeover isn't unreasonable.

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Ultimately, Telefónica's story is Spain's story: a public company privatized, believed invincible, now bleeding out while the Government looks away. The 13% drop is not the end. It is merely a reminder that no one is too big to fail. And taxpayers, as always, will pay the bill.