Telefonica Aims for Low-Single-Digit Growth in 2023; EBITDA Pressure Slowly Easing in Spain

No-moat Telefonica's revenue grew by 3.9% organically year over year in the fourth quarter, while EBITDA increased by 3.5% as management controlled inflation well in its cost base. Spain continues to see declines in EBITDA (down 2.1% in the quarter) despite flat revenue growth due to cost pressures, although the declining trend is easing as the year progresses. This decline has been compensated by the remainder of its geographies. In Germany, Telefonica’s strongest performer in the past two years, sales and EBITDA grew by 6.6% in the fourth quarter. In the U.K, after the joint venture with Virgin Media, EBITDA grew by 9.9% as merger synergies were realized, while Brazil had a 6.6% increase. We are maintaining our EUR 4.90 fair value estimate.