Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — Investor Day (September 2018)
42 slides from Telefonica Sa's investor day presentation, Sep 27, 2018
Slide 1: Video Strategy
Video Strategy London, September 27th 2018
Slide 2: Video Strategy Session
Video Strategy Session Adrián Zunzunegui Director of Investor Relations
Slide 3: Key Objectives
Key Objectives Laura Abasolo Chief Financial and Control Officer
Slide 4: Key Objectives
Key Objectives Video revenue (€1.4 bn in H1 18); 44% of Digital Service Revenue Video at the core TV base: 8.8m Pay TV (Spain + Latam); 1.1m OTT TV (Latam) Powerful Video platforms: Fiber in Spain, Unified Platform in Latam Differential Relevant scale and distribution power (Movistar series)
Slide 5: Video Strategy Latam
Video Strategy Latam Michael Duncan CEO Group Consumer of Telefónica
Slide 6: Capturing the OTT video opportunity in LatAm
Capturing the OTT video opportunity in LatAm Telefonica September 2018 1
Slide 7: Telefónica already delivers video services in most of its LatAm footprint
Telefónica already delivers video services in most of its LatAm footprint, mainly via Pay TV Satellite Competition map (main players) Satellite Satellite Satellite IPTV Cable Satellite Cable (CATV) Satellite IPTV IPTV 2 Note: Pay TV (Satellite, IPTV and CATV) includes Set-Top-Box
Slide 8: Huge opportunity to enrich our connectivity with OTT video in LatAm
Huge opportunity to enrich our connectivity with OTT video in LatAm Industry Context opportunities TEF’s unique strategy pillars (assets & capabilities) Customer LatAm socioeconomic base & specificities product Advanced Bundling Avid demand for Telefónica’s LatAm Networks capabilities video consumpt
Slide 9: LatAm specifics: opportunity for TEF, challenge for traditional TV players
LatAm specifics: opportunity for TEF while huge challenge for traditional TV players 25% Low credit card 30% 27% penetration in some key countries1 26% Low formal Pay TV 25% 2 20% penetration 30% Low FTTX 16% penetration3 Very low Interactive <5% Pay TV penetration5 Relatively high smartphone >60% p
Slide 10: Avid but latent demand for mobile video consumption
Avid but latent demand for mobile video consumption Huge demand for video Although video usage has been … people are eager to Demand for video on mobility consumption over limited to WiFi … consume on mobility will grow exponentially smartphones Total video usage per smartphone WiFi vs cellular traf
Slide 11: Content fragmentation and other structural challenges in the video industry
Content fragmentation and other structural challenges in the video industry Some Fragmentation examples: Content fragmentation, • 4 of the most iconic TV shows belong to different • Different seasons of the same show in makes it difficult for companies different distribution channels customer to acc
Slide 12: Unique opportunity for TEF to leverage video and improve monetization
Unique opportunity for TEF to leverage video as a new value attribute and improve monetization Context opportunities TEF’s strengths TEF’s opportunity LatAm socioeconomic More than 160M mobile customers, with New value lever to foster specificities full bundling and billing capabilities monetization
Slide 13: Reaching customers with a modular product based on aggregation
Reaching customers with a modular product based on aggregation and selective exclusive content 160M mobile customers, most of them already Internet TV offer able to engage with video: 70% with smartphone Premium VoD catalogue + Live TV Ex: FOX Premium (HBO PREMIUM Aggregation is king: Disrupting the
Slide 14: Bundling with our core offer to drive up ARPU and stickiness
Bundling with our core offer to drive up ARPU and improve customer stickiness Tier-pricing Bundling to foster upsell and increase ARPU Hardbundling video content to gain scale XL L M S XS Fixed PREMIUM FULL LITE Bundling different products depending on the Postpaid & Prepaid FULL LITE plan value to
Slide 15: Optimal video experience via best in class functionality
Optimal video experience via best in class functionality Most advanced, simple and easy UX: • Personal recommendations and content curation • Unified search • Download to Play • Time-shifting options - Start-over - Catch-up Deploy Interactive services and a homogeneous experience • Online recording
Slide 16: Complemented with distinct customer management capabilities
Complemented with distinct customer management capabilities SINGLE BILLING Differential billing capabilities: - Simplicity and convenience: Video content integration in one single bill for the customer - Potential to obtain value from all customer CUSTOMER AURA segments, regardless of its banking ci
Slide 17: Enabled by our high capacity networks (4G, 5G and UBB)
Enabled by our high capacity networks (4G, 5G and UBB) More capable, agile and efficient networks to facilitate traffic growth, and ensure optimal customer experience Evolution to 5G, that paves the way for new formats and service evolution: - 4k / 8k video - Augmented / Virtual reality - Video 360
Slide 18: Huge opportunity with encouraging early results
Huge opportunity with encouraging early results Our Internal Opportunity Movistar Play growth Movistar Play roll-out 160 M 20-30 M Sept March May June Oct Dec Jan Feb ( 2017 2018 2018 2018 2018 2018 2019 2019 Aprox 1% Registered users penetration 10-20% OTT Penetration 1.5 M 78% Ambition over Mobile
Slide 19: To wrap up: take advantage of context opportunities and unique capabilities
To wrap up: our objective is to take advantage of context opportunities and unique capabilities to increase our monetization potential Improved customer engagement and loyalty Enhanced ARPU development via upsell and add-ons Increased brand awareness and communication impact 14
Slide 20: Video Strategy Spain
Video Strategy Spain Sergio Oslé Video Director Spain/President of Movistar+
Slide 21: Creating sustainable value through leadership
Creating sustainable value through leadership Sergio Oslé President of Movistar+ / Video Director Spain September 2018 1
Slide 22: Key messages
Key messages Unbeatable proposition that 1 translates to value A new TV scenario that brings 2 new opportunities 3 A case for growth 2
Slide 23: Distinctive assets in the market
Distinctive assets in the market… Best Network Best Content Best Technology Largest FFTH network in Europe Own content production ~20M 68% Premises coverage households Multidevice Sports Modern & efficient 4G network “All football & Top 10 majors sports in exclusivity“ Movies ~97% Aura Cloud-based C
Slide 24: Customer leadership and sizeable local scale
…that translates into customer leadership and sizeable local scale… The reference in the Spanish market Movistar+ ~4M TV Households ~12M TV users ~60% Pay TV market share “Prime time” share 15-20% M+ own production channels Data as of June 2018 4
Slide 25: Ensuring healthy growth and customer stickiness
… ensuring a healthy growth and customer stickiness More TV subscribers… …while growing ARPU… … and increasing loyalty x3 vs the next competitor x3 TV ARPU vs the next competitor TV drives ~ 4M ~ 90€(1) churn 25% reduction vs ~7% ~6% Fusion non-TV customers Best in class churn - stable JuneQ1 2017 2
Slide 26: Positive spillover in brand attributes
As a plus, positive spillover in brand attributes 6 FEROZ Awards 4 Vergüenza - 2 La Zona San Sebastián International film festival 'La peste', first TV series that participates in the Official Section 2 Fotogramas Awards “La Zona”, Best Spanish TV Series 2017 according to the critic. Malena Alterio,
Slide 27: Key messages
Key messages Unbeatable proposition that 1 translates to value A new TV scenario that brings 2 new opportunities 3 A case for growth 7
Slide 28: A new scenario that brings new opportunities
A new scenario that brings new opportunities New customer Emergent new Advanced habits players technologies Unique platform New alliances Cognitive capabilities Differentiation through Telco-Media advantage exclusivity Aura 8 8
Slide 29: A unique platform, differential for new consumer habits
A unique platform, differential for new consumer habits Network Efficient Architecture Cloud-based Cognitive Intelligence Customers using Customers have used TV interactions/day Multi device customers 300M ~2M 80% advanced functionalities ~500K AURA Robust OTT - already tested Cost-effective equipme
Slide 30: Differential content: The case for own production
Differential content: The case for own production Fiction Fiction Entertainment 10 Movistar Originals Series launched 5 Originals in TOP 6 platform series audience 48 Countries – International sales +35% Ratings growth in prime time vs 2017 #0 addicted fans st 23% 1 Movie - producing: “Mientras dure
Slide 31: Differential content: The case for selected exclusive rights
Differential content: The case for selected exclusive rights Sports Premium content Exclusive deals… …and exclusive priority blockbusters releases(1) Focus on key properties (1) Content from top majors – “Movistar Estrenos”. 1111 Scope for Atresmedia and Mediaset agreement in Spanish movies
Slide 32: Differential content: The case for football rights
Differential content: The case for football rights Critical rights for high value • Highest ARPU customers • Lowest churn Provides stability while • Gaining visibility for 3-4 years controlling inflation • From Q3 2019, flat football costs Ownership of rights • Gaining commercial/monetization flexib
Slide 33: Differential content: Extracting the best value from other sports
Differential content: Extracting the best value from other sports New channel, new experience Launched 16th September 2018 Upgrade tool for premium packages Advertising opportunity 1313
Slide 34: Building new alliances: Netflix as a case of example
Building new alliances: Netflix as a case of example UX Integration Total integration of the Netflix experience within the Movistar+ UX Commercial Agreement with Netflix allows us bundling to boost commercial offers with bundles to maximize ARPUs Establishment of a new integration In conversation wi
Slide 35: New tech that enables new opportunities
New tech that enables new opportunities 1 Personalized advertising 2 Movistar Home 3 More than TV VoD (today) Security + eHealth Linear Cloud (Oct-15th) October / November 2019 Creation of different signals for Comms, television, video calls and + Button that allows enjoy new advertising commercial
Slide 36: Key messages
Key messages Unbeatable proposition that 1 translates to value A new TV scenario that brings 2 new opportunities 3 A case for growth 1616
Slide 37: A case for growth
A case for growth Value generating business: positive margins stand-alone plus additional value through increased stickiness and ARPU growth Leadership position, enabling differentiation on scale and commercialization Relevant scale enabling efficiency in negotiation and own content production 34% T
Slide 38: Key Takeaways
Key Takeaways Laura Abasolo Chief Financial and Control Officer
Slide 39: Key Takeaways
Key Takeaways Unmatchable Video Platform We built a superior platform to deliver a unique UX and drive stickiness Flexible approach To continue leading in Spain and to unlock value in Latam leveraging enhanced capabilities Sustainable and profitable lever Video to drive further scale and profitable
Slide 40: Q&A Session
Q&A Session Laura Abasolo Michael Duncan Sergio Oslé
Slide 41: Disclaimer
Disclaimer This document and the Q&A session may contain forward-looking statements and information (hereinafter, the “Statements”) relating to the Telefónica Group (hereinafter, the "Company" or "Telefónica") or otherwise. These Statements may include financial forecasts and estimates based on assu
Slide 42: Signatures
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Telefónica, S.A. Date: September 27, 2018 By: /s/ Pablo de Carvajal González Name: Pablo de Carvajal Go