Revenue at least seems to have stopped shrinking in Spain, Telefonica's biggest market and equal to one-quarter of the group's 52 billion euro total last year. Thursday's results showed flat domestic sales in the final three months of 2017 - better than a 1.2 percent decline over the full year once currency moves, disposals and acquisitions are stripped out.
Much of the good news is already in Telefonica's price, however. Add its market value and net debt of 44 billion euros to hybrids, minorities, pensions and other liabilities estimated at around 17 billion euros by Berenberg analysts, and the group's enterprise value is 103 billion euros.
That's more than six times analysts' forecast EBITDA this year of almost 16.6 billion euros. Peers BT, Telecom Italia, Orange , Deutsche Telekom and Vodafone trade on an average multiple of 5.3 times forward EBITDA according to Eikon. Even after stripping out bargain-basement BT, Telefonica is still priced at a 12 percent premium.
That's hard to justify, given a mediocre growth outlook. Telefonica expects its top line to inch up by 1 percent this year, roughly in line with Deutsche Telekom, while analysts are penciling in similar sales growth for Orange. True, Telefonica's capital spending has peaked - unlike BT and Deutsche Telekom - but it is also more indebted, which means less cash will flow through to shareholders, and makes it more vulnerable as central banks start to push up rates.
Crucially, Telefonica is vulnerable to continued competition from rivals like Orange Spain, Masmovil and Vodafone. The Spanish incumbents' market share of 51 percent is more concentrated than in any other large European country other than the Netherlands, Bernstein reckons. That means Telefonica is doing much right, but also potentially has a long way to fall.