Telefonica''s investment case remains tied to leverage concerns 3Q20 results came in slightly ahead of consensus (as with last quarter), however once again TEF has closed -5% reflecting: 1) continued leverage concerns; 2) a lukewarm reaction to the new German FTTH vehicle; and 3) worse than expected ''other'' EBITDA drag. TEF can still deliver solid FCF this year, as spectrum auctions have been delayed and the company has pulled back on capex in all markets. But we do not believe the dividend can be covered on an ongoing basis and without meaningful asset sales in HispAm management will need to focus on debt reduction. We cut our dividend to zero in 2021 (and the years thereafter) as a result. We also lower mid-term EBITDA/FCF forecasts by -1%/-2%, and cut our TP to EUR 2.60, remaining Underperform rated. What do we know now that we didn''t know on Wednesday? Telefonica confirmed the details of their German FTTH vehicle, and whilst the announcement was broadly in line with what has been reported recently in the press TEF''s own investment in the vehicle (EUR 400 mn through TEF Infra, EUR 100 mn through TEF DE) is lower than many expected. There was little incremental change to report in the key operating segments, however TEF''s ''other'' EBITDA drag (including items such as restructuring and central costs) was worse than expected, and is likely to drive further consensus downgrades. Has the thesis changed? Not really As laid out in our report Running out of growth, Telefonica faces significant structural challenges in the Spanish market which are being compounded by LatAm FX pressures and a challenging leverage position. On a reported basis revenue/EBITDA was -11%/-15% this quarter, and whilst some COVID impacts are likely to be transitory ND/EBITDA is nearing 4x and TEF has EUR 50 bn of debt/liabilities on a fully adjusted basis - vs. a market cap of c. EUR 15 bn. Changes to estimates: we lower mid-term EBITDA/FCF by -1%/-2%, and cut the...