The stock has done well over the past one year. It has appreciated by more than 25%. There have been some positive views from analysts about the company with recommendation to buy it from a long term perspective. While some investors may like to wait to see how the restructuring efforts play out, some could bet on the company in anticipation of good things. An article on seekingalpha had recently mentioned that Telefonica's value is currently clouded due to uncertainty about the forward dividend, high leverage ratios and integration issues. The company has been trying to reduce debt to improve the leverage position. The dividends were stopped, and that was one of the reasons for reduced interest in the stock. Compared to some peers who operate in saturated, regulated and intensely competitive markets, Telefonica has delivered good performance in Latin America, and the prospects are still good. The growth in Latin American markets and recovery in European countries where it operates makes top-line growth possibilities better. Companies like AT&T (T) and Verizon (VZ) are facing increased competition from America Movil (AMX) and Deutsche Telekom (DTEGF.PK). The competition is cost based, which may put pressure on the margins. Further, there is also an increasing market for used phones which is making topline growth difficult. Usell (USEL), which provides a platform for buying / selling used phones, reported great growth in revenues in the first half of 2013. The resumption of dividend of 0.75 Euro per share by Telefonica will give a yield of around 4.6% at current market price. This, coupled with the improving leverage position, and better growth prospects make it a good bet from a 2-3 years perspective. Even on the valuations front, the stock is not expensive, and if the dividends become recurring, then the current levels will appear to be good entry points in hindsight.
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