Telefonica, S.A. TEF and Microsoft Corporation MSFT have strengthened their five-year collaboration with an innovation initiative aimed at accelerating digital transformation in the telecommunications industry. This project focuses on using Open Gateway, the GSMA-led initiative, transforming telco networks into programmable platforms, through Kernel, Telefonica’s artificial intelligence (AI)-driven platform for digital services.

As part of this partnership, Kernel’s capabilities will migrate to Microsoft Azure, which will be part of its Software-as-a-Service offering. This move will simplify digital transformation for mobile operators and accelerate the adoption of Open Gateway. Additionally, both companies will implement a joint "Go-to-Market" strategy, making Kernel-based digital services available to operators, developers and telecom firms via Microsoft’s Azure Marketplace.

Beyond migration to Azure, Telefonica and Microsoft will collaborate on new Generative AI and Advanced Analytics capabilities, enhancing Kernel’s functionality and opening new possibilities for AI-driven decision-making. The partnership will also benefit the Open Gateway community, providing seamless access to Microsoft’s extensive ecosystem, including its partners, Independent Software Vendors and global research hubs. This will accelerate the creation of next-generation digital solutions in the telecom sector.

Telefonica SA Price and Consensus

Telefonica SA price-consensus-chart | Telefonica SA Quote

With this partnership, Telefonica and Microsoft are set to redefine digital transformation in telecommunications, creating opportunities for innovation and efficiency across the industry.

TEF continues to ink strategic partnerships, which position it for long-term growth and success. On Feb. 14, 2025, the company teamed up with Collibra, which specializes in data intelligence and governance, to provide enterprises with robust data governance solutions that ensure reliability, transparency and compliance. With Collibra’s unified data governance platform integrated into Telefonica’s offerings, organizations in Spain can now harness the power of high-quality, efficiently managed data to drive informed decision-making and accelerate AI adoption.

On Jan. 30, 2025, Telefonica signed an agreement with IBM to engineer robust security solutions that safeguard businesses and public institutions from the risks of a post-quantum world. By combining Telefonica’s cybersecurity capabilities with IBM’s expertise in quantum-safe cryptography, businesses and public organizations can proactively protect their critical data and stay ahead of potential threats.

On Jan. 23, 2025, Telefonica’s subsidiary, Movistar, introduced an innovative offering of a 12-month free subscription to Perplexity Pro, an advanced AI-powered response engine. The tool is designed to deliver clear, customized answers to user queries in natural language.

Telefonica is focused on maximizing value creation by strategically investing in its core operations. However, the company remains cautious about challenges such as a high debt burden, intense competition and foreign exchange risks. At present, its debt-to-capital ratio is 0.61.

TEF’s Zacks Rank & Stock Price Performance

TEF currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 4.6% in the past year against the Zacks Diversified Communication Services industry’s decline of 12.9%.

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Stocks to Consider in Utilities Market Space

Some better-ranked stocks from the broader utility space are American Electric Power Company, Inc. AEP and Exelon Corporation EXC. AEP and EXC each presently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for American Electric’s 2025 earnings per share is pegged at $5.87. The company’s long-term earnings growth rate is 6%. Its shares have risen 30.4% in the past year.

The Zacks Consensus Estimate for Exelon’s 2025 earnings per share is pegged at $2.63. EXC’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing in one occasion, the average surprise being 7.63%. The company’s long-term earnings growth rate is 5.7%. Its shares have rallied 21.8% in the past year.

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This article originally published on Zacks Investment Research (zacks.com).

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