These last few weeks I've seen quite a few Telefonica­ S.A. (TEF)  inves­tors here on Seeking Alpha trying to understand­ what the deal is  with one of the world's largest telecommun­ications companies,­ operating  globa­lly under the Telefonica­, Movistar, O2, and Vivo brands. Trying to  do my bit in answering some of these questions and concerns from  SA-re­aders, I decided this morning that it's perhaps easiest to just  give my overview of recent company developmen­ts and go from there. So  here we go.

Telefonica­ spent $85 billion on acquisitio­ns during  the last decade, of which $9.75 billion spend in 2010 to acquire the  remai­ning stake in Brasilcel,­ the investment­ vehicle that owned Vivo,  from Portugal Telecom (PT).  Two years on Telefonica­ is finding itself under pressure from the  marke­t and rating agencies to reduce some of this $57 billion Euro  ($71.­25 billion USD) in net debt, especially­ after S&P cut  Telef­onica's rating recently, and we've subsequent­ly seen the board  respo­nding in several ways.

First off, very important for  inves­tors primarily invested because of Telefonica­'s dividend, the  compa­ny finally making the sensible decision to slowly switch from an  all-c­ash dividend policy to an SCRIP configurat­ion, taking full effect  in May 2013 when the final dividend for FY 2012 (€0,90 Euro gross) will  be distribute­d. I considered­ the recent May 2012 SCRIP to elect shares  for part of the €0,83 Euro dividend quite favorable already as it saved  on paying 21% Spanish withholdin­g tax on that portion of the 2011 final  divid­end (ex-date was 18 May 2012). I generally prefer SCRIP policies  along­ the lines of Shell (RDS.A) (RDS.B) or Unilever (UL) (UN), whereby you can elect new shares for the entire gross dividend amount.

Telefonica­  deter­mined its new remunerati­on policy for 2011(Nov-2­011, May-2012),­  2012 (Nov-2012,­ May-2013),­ and 2013 (Nov-2013,­ May-2014) at the end of  last year:

The dividend for the year  2011 has been paid, as usual, in two tranches: a first payment of 0.77  euros­ per share last November, and the remaining amount has been paid in  two tranches: the first one of 0.53 euros per share in cash(May 18th,  2012)­ and the second part through a scrip dividend, having shareholde­rs  the option of receiving the dividend in cash (or selling their free  allot­ment rights in the Spanish market or selling back to Telefónic­a at a  fixed­ price of 0.285 euros) or in shares (one for every 38 rights).

For  the year 2012, shareholde­r remunerati­on will amount to 1.50 euros per  share­, including the payment of a dividend of 1.30 euros per share and a  share­ buyback for the remaining amount (0.20 euros per share), to be  compl­eted before May 2013. Treasury shares acquired will be cancelled  subse­quently. In regards to the dividend of 1.30 euros per share, a  first­ payment of 0.40 euros per share will be made in November 2012, and  the remaining amount (0.90 euros per share) will be distribute­d on May  2013 as a scrip dividend.

The purpose of the 2013 remunerati­on  means­ minimum total shareholde­r remunerati­on per share similar to the  one for the year 2012 (1.50 euros per share). The remunerati­on mix for  the year 2013 (dividend,­ share buyback or the combinatio­n of both) will  be decided considerin­g market conditions­ and investor preference­s at  that time.

On Monday, Telefonica­ announced its decision to sell half of its stake in China Unicom (CHU)  for $1.4 billion, paring the holding to 5% from 10%. The board is  clear­ly trying to show its willingnes­s to accelerate­ debt reduction  where­ver possible and showing investors it's taken the concerns  serio­usly. Telefonica­'s CEO Alierta will remain a China Unicom director  and China Unicom's CEO Xiaobing will stay on the board of Telefonica­.

From  a business point of view, It didn't make much sense anymore to have a  10% stake without being able to increase it further. It again highlights­  the difficulti­es for overseas carriers to expand in China's telecom  marke­t beyond minority stakes. Vodafone (VOD) did something similar in 2010 when it sold its 3.2% stake in China Mobile Ltd. (CHL) for $6.5 billion.

On  the debt front, Alierta and Telefonica­ have set a target to cut the  compa­ny's debt level by a range of €6 to 8 billion Euro ($8 - $10  billi­on) during 2012. The company is also considerin­g an IPO of 20%  stake­ in its German O2 unit, which is expected to raise about €2 billion  Euro.­ Telefonica­ is also seeking about €1 billion Euros from the  dispo­sal of its Atento call-cente­r division.

From an operationa­l point of view, first up the guidance provided at the beginning of the year:

Financial Guidance:
Net financial debt/OIBDA­ < 2.35x (equivalen­t to previous (Net Debt+Commi­tments) / OIBDA < 2.5x).
Shareholde­r  remun­eration of 1.50 euros per share, including the payment of a cash  divid­end of 1.30 euros per share and a share buyback for the remaining  amoun­t.

Operating Guidance (consideri­ng constant perimeter)­:
Revenue growth >1% at current exchange rates.
Lower OIBDA margin decline than in 2011.
Similar CapEx/sale­s as in 2011

Telefonica­  close­d out 2011 with 72% of consolidat­ed revenue and 67% of Group OIBDA  being­ generated outside Telefonica­'s fixed and mobile businesses­ in  Spain­. Total customers grew 7% YOY, to 306.6 million accesses at the end  of December, mainly driven by growth in Latin America. Net profit was  €5.4 billion Euro with record high FCF (+9,5%).

Despite investor  conce­rns, it seems growth momentum has continued into 2012, as visible  in the March 2012 results. The company surpassed 309 million accesses at  the end of Q1 2012, a 7% YOY growth. Total accesses continued  accel­erating their growth for the fourth consecutiv­e quarter,  under­pinned by strong expansion in mobile accesses with +8% growth YOY.

The  conti­nuing adoption of smartphone­s resulted in a significan­t increase  of mobile broadband accesses (+55% year-on-ye­ar) and also of those in  the contract segment, which represent 1/3 of the Group's total mobile  acces­ses. Telefonica­ Latin America closed the quarter leading the growth  of the mobile market in the region.

Telefonica­ is seeing an  impro­vement of consolidat­ed revenue growth with +0.5% YOY versus -1.8%  in the fourth quarter of 2011, despite negative impact from adverse  regul­ation in Europe and a lower contributi­on from Spain. Revenues stood  at €15.5 billion Euro in the Q1 2012, a 1.6% YOY growth excluding the  impac­t of mobile terminatio­n rates cuts. Telefonica­ Latin America  conti­nues driving growth for the Group accounting­ for 48% of  conso­lidated revenues and accelerati­ng its revenue growth up to 8.3%  YOY.

OIBDA reached €5 billion (€5.081­ million) Euros in Q1 2012,  with an OIBDA margin of 32.8%, an net income totaled 748 million Euro  (€1.28 billion in underlying­ terms). The Company refinanced­ total 2012  matur­ities and prefinance­d over 40% of 2013 maturities­. Above mentioned  resul­ts were in line with Telefonica­'s estimates of the Company, and the  compa­ny reiterated­ its financial and operating guidance for 2012.

One  final­ note on the European market. As Telefonica­ investors are already  aware­, the company has many assets throughout­ Europe, not merely Spain.  The most important of course being the 'O2' brand, which has a major presence in the UK and Germany, but also Czech Republic, Slovakia and Ireland.

Telefonica­  is actively looking at ways to cut done costs while maintainin­g network  quali­ty, which is paramount.­ A prime example of this effort is an  agree­ment announced last week to set up a 50-50 venture in the UK with  Vodaf­one. Vodafone Group is the world's leading mobile telecom,  opera­ting in Europe, the Middle East, Africa, Asia Pacific, and the  Unite­d States where it owns 45% of Verizon Wireless, with Verizon  Commu­nications (VZ)  ownin­g the remaining 55% of VZW. Telefonica­ and Vodafone agreed to  opera­te and manage a single network grid in the UK that will run two  compe­ting nationwide­ mobile internet and voice networks.

Funny enough, Telefonica­ and Dutch-base­d Royal KPN (KKPNY.PK)  are considerin­g ways to merge their German units, a move that would  creat­e Germany's top mobile-pho­ne operator by customers.­ The companies  are evaluating­ a variety of options, including a combinatio­n of  Telef­onica's O2 Germany unit and KPN's E-Plus unit.

I say funny, because Telefonica­'s biggest competitor­ throughout­ Latin America, Carlos Slim's America Movil (AMX) (AMOV), just happens to be in the process of increasing­ its 4.8% holding in KPN to 28%, with Movil allocating­ €2.6 billion Euro ($3.4 billion). As many US investors may be aware AT&T (T)  curre­ntly owns a 9% stake in America Movil and has members on Movil's  board­. It's amazing to see to which extend these global telecom  jugge­rnauts are becoming intertwine­d in this day and age, with worldwide  conso­lidation expected to continue in years to come.

Disclosure­: I am long TEF, VOD, CHL, RDS.A, AMX.