Telefonica, S.A. (TEF) has recently altered its strategic focus, moving away from high dividend payouts towards balance sheet deleveraging. The company has cut its dividend payout ratio by about 50%, indicating a shift in priorities to strengthen its financial standing. Management has set a target leverage ratio of 2.5x by 2028, emphasizing the importance of maintaining an investment-grade credit rating over returning capital to shareholders. This strategic pivot comes amid muted growth prospects, particularly due to the maturity of its core markets and the divestment from operations in Latin America. Although Telefonica is currently trading at a lower valuation compared to its peers, with an EV/EBITDA of 9x, the overall weak growth outlook and the company's historical performance suggest continued bearish sentiment among analysts. Investors may need to reassess their positions as the company navigates these changes.