Downgrading Telefonica's Moat Rating to None, Lowering FVE; Asset Sales and Deleveraging Key

After expanding its operations to many European and Latin American countries during the 1990s and 2000s, Telefonica has turned around its strategy in recent years to focus on four key markets: Spain, the United Kingdom, Germany, and Brazil. Telefonica is divesting or restructuring its Latin American operations (except Brazil) and infrastructure assets such as towers or noncore fiber networks and intends to use the proceeds to reduce debt, which we think is the right move.