First-quarter adjusted earnings before interest, tax, depreciation and amortization grew 1.9% year over year to €3.2 billion ($3.4 billion), the company said in a statement on Thursday. That’s in line with an average of analyst estimates compiled by Bloomberg.

The company reiterated its outlook for the year, which aims for profit growth of 1% to 2% and confirmed a dividend of 30 euro cents per share.

“In general I think that the message is positive, the commercial dynamics remain generally good, the company maintains guidance and I do not see any ‘scares’,” GVC Gaesco Valores analyst Juan Peña told Bloomberg News.

Free cash flow, a key pillar of Telefonica’s new strategy, was negative €41 million, compared with the company’s compiled analyst estimate of €111 million. The company said this was down to expected seasonal costs and came down to higher working capital consumption, higher anticipated tax payments and the impact of lease and interest payments. 

“Except for the FCF, which looks a bit ugly because it is negative, but it is due to seasonal effects, and the company has not touched the guidance, I see the rest as fine,” Peña said.

As part of its three-year strategic plan presented in November, Telefonica aims to grow free-cash-flow by 10% year-on-year.

The carrier’s adjusted earnings before interest, tax, depreciation and amortization for Spain was in line with estimates, and continued to grow after last quarter’s first positive reading in four years.

Net debt grew 7.7% year over year to €28.5 billion, mostly due to the acquisition of an additional stake in the German unit. Telefonica said it anticipated debt would decline.

The company said it had signed a non-binding memorandum of understanding to keep upstart Digi Communications NV as a wholesale customer in Spain. It expects to sign the definitive contract in the next few weeks, with the pair’s current deal set to end in September of 2026.

Telefonica, formerly a state monopoly, is navigating a changing competitive landscape in Spain. A merger involving two rivals, Masmovil Ibercom SA and the Spanish operations for Orange SA, was greenlit in March and will establish the country’s biggest mobile operator. Buyout firm Zegona is awaiting regulatory clearance for its acquisition of Vodafone Group Plc’s Spanish business. Meanwhile, Digi has agreed to sell part of its fiber networks in Spain to a consortium led by Macquarie Group. The deal is considered a harbinger of more consolidation in Spain’s fiber market.

Telefonica’s ownership structure is also changing. The Saudi government-controlled Saudi Telecom Co. announced a plan in September to acquire 9.9% stake for a $2.25 billion. Spain considers the carrier a strategically important company, and countered with plans to acquire a stake of up to 10%. As of May 8, it has a stake above 7%.

The stock has risen about 19% so far this year, in part supported by the government’s stake building.