---
skill: model-update
plugin: equity-research@claude-for-financial-services
slash_command: /model-update
test_name: Telefónica (TEF.MC) — post-Q1 2026 hypothetical
trigger: earnings release (Q1 2026)
v2: anchored on facts pack (file 14)
as_of: 2026-05-06 (illustrative — Q1 prints May 14)
note: Structural sample assuming a base-case Q1 print. Numbers illustrative.
---

# Telefónica — model update post-Q1 2026 (v2 hypothetical)

## Trigger

Q1 2026 earnings to be released 14 May 2026 (verified). Base-case print modelled here:
- Revenue ~€8,950M (+1.7% YoY constant)
- Adjusted EBITDA ~€3,005M (+2.0%)
- Spain mobile ARPU stable sequential (Movistar net add momentum continues)
- Capex / sales ~12.5% (slightly above full-year 12% target — back-loaded historical pattern)
- FCF €620m (in line)
- Mexico deconsolidation effects flowing through

## What we're checking

**Pillar status updates (v2 thesis)**
- Pillar 1 (Spain delivers organically) — *confirmed* if Spain ARPU stable + Movistar net add momentum
- Pillar 2 (Brazil compounds) — *confirmed* if Vivo continues +6-8% growth
- Pillar 3 (Capital allocation reset funds deleveraging) — *on track* — net debt continued reduction
- Pillar 4 (Plan execution drives multiple expansion) — *first data point in* — depends on whether Spain delivery + capex pacing on track
- Pillar 5 (Strategic optionality) — VMO2 commentary key; STC silent

## Plug actuals into model

| Q1 2026 line item | Prior estimate | Actual (illustrative) | Delta | Note |
|---|---|---|---|---|
| Revenue (€m) | 8,950 | 8,950 | 0 | In line |
| Adjusted EBITDA | 3,005 | 3,005 | 0 | In line |
| EBITDA margin | 33.6% | 33.6% | 0 | In line |
| Spain mobile ARPU YoY | flat | +0.3% | +0.3pp | Better — Movistar stabilising |
| Spain fibre net adds | 50k | 65k | +15k | Strong |
| Capex (€m) | 1,120 | 1,135 | +15 | Slightly above; capex/sales ~12.7% |
| Net debt (€m) | 26,500 | 26,400 | -100 | Slight beat |
| FCF | 620 | 645 | +25 | Slight beat |

## Forward estimate revisions

Given a clean Q1 print, modest upgrades to FY26-27 estimates:

| | FY26E (old) | FY26E (new) | Δ | FY27E (old) | FY27E (new) | Δ |
|---|---|---|---|---|---|---|
| Revenue (€m) | 35,820 | 36,000 | +0.5% | 36,540 | 36,800 | +0.7% |
| Adj EBITDA (€m) | 12,190 | 12,260 | +0.6% | 12,500 | 12,640 | +1.1% |
| EBITDA margin | 34.0% | 34.1% | +10bps | 34.2% | 34.3% | +10bps |
| FCF (€m) | 3,000 | 3,050 | +1.7% | 3,200 | 3,280 | +2.5% |
| EPS (€) | 0.20 | 0.21 | +5% | 0.27 | 0.29 | +7% |
| Net debt (€m) | 25,500 | 25,300 | -0.8% | 23,500 | 23,000 | -2.1% |

**Key assumption changes:**
- Spain ARPU growth: stable → +0.3% sequential (modest upward)
- Spain margin: tracking ahead of plan (cost takeout pacing)
- Capex: slight overrun in Q1 absorbed; full year holds at 12%
- Mexico deconsolidation effects confirmed; clean run-rate from Q2 onwards

## Valuation impact

| Method | Prior | Updated | Δ |
|---|---|---|---|
| DCF (€3bn FCF anchor, WACC 8.5%) | €3.85 mid | €3.95 mid | +€0.10 |
| Comps (peer 50-75 pctile blend) | €3.60 mid | €3.65 mid | +€0.05 |
| Sum-of-parts | €3.30 mid | €3.35 mid | +€0.05 |
| **Blended PT** | **€4.10** | **€4.15** | **+€0.05** |

Upside vs €3.80 spot: **+9%** (was +8%)
Total return (with 3.9% 2026 yield): **+13%** (was +12%)

## Action

- **Maintain HOLD.**
- **Raise PT €4.10 → €4.15** (modest — illustrative response to clean Q1 print).
- **No change to position sizing** (held through print).
- Update thesis tracker: Pillar 1 status → confirmed; Pillar 4 status → on track; conviction held at Medium.

## Summary paragraph for distribution

"We update our Telefónica model post Q1 2026 (illustrative scenario), nudging FY26 EBITDA estimate +1% on Spain operational delivery and Mexico deconsolidation cleanliness. Our blended PT rises to €4.15 (from €4.10), implying 9% upside; we maintain HOLD given balanced risk/reward. Pillar 1 (Spain delivers) is confirmed; Pillar 4 (plan execution) gets its first data point. Conviction unchanged at Medium until 2-3 more quarters of execution evidence accumulate."

## What changed v1 → v2

| Element | v1 | v2 |
|---|---|---|
| Trigger framing | "Earnings release Q1 2026 (assumed Thursday 2026-05-08)" | **"Q1 2026 to be released 14 May 2026"** (verified) |
| Forward FCF | "Old €5,333M / New €5,890M" (EODHD basis, inflated) | **"Old €3,000M / New €3,050M"** (company definition, anchored on guidance) |
| Forward net debt | "Old €25.5B / New €25.0B" (vs €27B EODHD baseline) | **"Old €25.5B / New €25.3B"** (vs €26.8bn FY25A company baseline) |
| Pillar updates | Pillar 1 confirmed, Pillar 2 on track, etc | **Same shape but pillars renumbered to v2 thesis** |
| PT impact | "€4.85 → €5.05 = +€0.20" | **"€4.10 → €4.15 = +€0.05"** (smaller magnitude, calibrated to consensus) |
| Recommendation logic | BUY at PT €5.05 | **HOLD at PT €4.15** |

## Caveat

This is structurally how a model update works after a print. A production model update would (a) write back into the actual Excel coverage workbook (the v2 xlsx file 17), (b) produce an audit-xls pass over the revised model, (c) link directly into the thesis-tracker scorecard. This markdown shows only the analytical content of what those files contain.