What happened? The Telefonica 2Q25 conference call has just concluded, shares are now -0.5% (slightly worse than we initially expected) - possibly the result of weaker UK trends which only came through with VMO2 numbers (post TEF results this morning). See below for our 3x key takeaways and let us know if you''d like to discuss in more detail: . MandA ambitions - trying to read the tea leaves... CEO Marc Murtra was clear that limited detail would be provided ahead of the strategic review, which is due to complete in 2H25. But there were a few hints during the call, in our view. First, TEF spoke about the need to ''gain scale and consolidate'' the European market before making ''higher risk'' investments and investing in technology. Second, the company noted that whilst the balance sheet is important (and TEF is more leveraged than peers) they do not see this as a constraint for their strategic ambitions, that if they identify good targets then they expect the market will help them to finance them, and that whilst acquiring higher-leverage companies could be an issue for TEF they could also acquire assets with lower leverage. Third, TEF noted that data centre investments will be part of the strategic review and that ''things have changed'' with regards to cybersecurity/ IT investments to make them potentially more appealing - namely the reinvigorated focus on European strategic autonomy which coincides with a ramp up of defence/ cybersecurity spending. Many of these comments mirror those initially made at FY24 results, and subsequently reiterated in the Spanish press. Our high-level take however is that this could potentially suggest a preference for a 1and1 /United Internet deal (in market consolidation) rather than VMO2 (which would increase leverage), and it seems likely to us that TEF is moving towards increased tech investments/ MandA with the startegic review. Of these deals we expect investors would be more supportive of in-market German consolidation,...