invest like never before, cut back like always

Telephone will communicate an ERE to the unions throughout today, Monday which will initially affect between 6,000 and 7,000 workers, 24%-28% of the workforce in Spain. The final figure, after negotiations, could be around 4,000 departures.

Thus, the company that was a public monopoly with 67,000 employees in 1997 will remain at around 18,000 workers. A reduction of more than 70% in three decades.

Why is it important. This adjustment is the logical consequence of a broken model. Telecom companies have invested more than anyone in 5G infrastructure, fiber optics and next-generation networks, but they have less capacity than ever to raise prices.

Telefónica spends billions on deploying and updating its networks while WhatsApp, Netflix or YouTube capture the value without paying hardly for transportation, the old complaint of telecoms that dates back to the times of Alierta. The result is a sector condemned to shrink staff to balance numbers.

Between the lines. The ERE has an uncomfortable political dimension:

1. The State owns 10% of Telefónica after investing 2,285 million in 2024 and appointed Marc Murtra as president in January 2025.
2. Now Murtra is executing a plan that includes massive layoffs financed indirectly by the taxpayer via the ‘Telephone Clause’which forces the company to reimburse unemployment benefits.

That is to say: the Government is the main shareholder, promotes the ERE and then recovers part of the cost. Meanwhile, the Minister of Labor, Yolanda Díaz criticizes staff adjustments in profitable companies like Amazon. The contradiction is clear.

In figures. Each departure from the previous ERE cost 380,000 euros on average. If the pattern is repeated with 4,000-6,000 layoffs, the cost will range between 1,500 and 2,000 million euros that Telefónica will charge in 2025, adding to the losses of 1,080 million per the sale of Latin American subsidiaries. All to leave the 2026 balance sheet clean and concentrate the pain in a single exercise.

• Expected annual savings: between 300 and 500 million euros depending on the final scope of the agreement.
• Objective of the Strategic Plan: cut operating costs by 3 billion by 2030.
• Current staff in Spain: 25,000 employees (18,305 in the three main subsidiaries plus 7,000 in other companies).

Yes, buteither. The unions warn that Telefónica’s problem is not the wage bill but the debt (close to 30,000 million) and the undervaluation of the stock market. An ERE does not reduce short-term debt or reactivate the price, which fell 16% after presenting the strategic plan. What’s more: pre-retiring a worker costs between 450,000 and 500,000 euros in the telecom sector, so the savings take years to materialize.

Telefónica’s trend is not new but it is relentless:

• Between 1997 and 2025 it has executed EREs every two or three years.
• The last one, in 2024, affected 3,421 workers with a peculiarity: it was covered entirely by people born in 1968 because the company prioritized those who had not taken advantage of previous adjustments.
• Now there are only 200 workers in that situation, so the new ERE will be “multi-year” and will reach employees born in 1969, 1970, 1971 and possibly 1972.

This ERE is framed in the strategic plan Transform & Grow from Murtrawhich includes cut the dividend in half (0.15 euros per share in 2026), reduce debt, generate cash and keep the door open to acquisitions in Europe through a possible capital increase. The logic is clear: impoverish the present to prepare a future of sectoral consolidation. The market, for the moment, has not celebrated it.

The company has called seven different EREs, one for each affected legal entity:

1. Telefónica Spain.
2. Telefónica Móviles.
3. Telefónica Solutions.
4. Movistar+.
5. Telefónica Global Solutions.
6. Telefónica Digital Innovation.
7. And the corporate center.

The calendar is tight: 15 days to establish negotiating tables after this Monday’s notice, then 30 days to reach an agreement. The objective is to sign before December 31 or, at most, in the first days of January 2026.

What is new is that for the first time the adjustment reaches the corporate center, traditionally shielded. This reinforces Murtra’s message to the market: total discipline, no exceptions. It also points out the structural severity of the problem.

The big question. Is a business model that invests in critical infrastructure but does not capture sufficient value sustainable? Telefónica has deployed 5G, high-speed symmetric fiber and intercontinental submarine networks. But Google, Meta, Netflix and Amazon enjoy that investment by paying marginal interconnection fees while hoarding advertising and subscription revenue. European telecoms have been demanding for years that big technology companies contribute to financing the network they operate. Nothing has changed.

And now what. The union consensus is total, something notable in an adjustment of this magnitude. UGT, CCOO and Sumados-Fetico signed Telefónica’s social framework in Octoberunifying rights of the entire Spanish workforce. This prior agreement now facilitates the negotiation of the ERE, but it also shows that the unions have accepted the inevitability of the adjustment. Conditions and amounts will be negotiated, not the principle of the cut.

Murtra and CEO Emilio Gayo They have each invested more than 500,000 euros in Telefónica shares after presenting the strategic plan, purchasing securities at 3.67-3.69 euros. A symbolic gesture of confidence that has not prevented the stock from continuing to trade 15% below the level prior to the announcement of the plan. Managers are betting on a future recovery. Investors, at the moment, are not.

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Featured image | Telephone