Telefonica Sa · BME:TEF
Telefonica Sa — Telefónica Brasil (Vivo) — Investor Day (May 2024)
46 slides from Telefonica Sa's investor day presentation, May 20, 2024
Slide 1: Telefonica Brazil / VIVO deep-dive
Telefonica since 1924 Telefonica Brazil / VIVO deep-dive May 20, 2024 - London
Slide 2: Disclaimer
Disclaimer This document and any related conference call or webcast (including any related Q&A session) has been prepared exclusively for its use during this presentation. Telefónica does not assume any liability for the content of this document if used for any purposes different from the one outlin
Slide 3: Telefónica Brazil / Vivo Deep-Dive Session
Telefónica Brazil / Vivo Deep-Dive Session 09:30 to 09:55 Christian Gebara (CEO) Presentation 09:55 to 10:15 David Melcon (CFO) Presentation 10:15 to 11:00 Q&A Session
Slide 4: Vivo Day - Christian Gebara, CEO
Vivo Day Christian Gebara Chief Executive Officer
Slide 5: Over time, we have built a unique set of assets...
Over time, we have built a Largest access base unique set of assets... in Latin America Top 10 retailer in Brazil 3rd largest Data Lake in Latin America Top 10 Great Place to Work in Brazil Most sustainable company in Brazil 3rd most valuable brand in Brazil 5
Slide 6: ...that have placed us in a privileged position in the Brazilian market
...that have placed us in a privileged position in the Brazilian market… #1 Market Share¹ 1 42% 35% 18% Postpaid Prepaid Fiber #1 Revenue Share² NPS 43% #1 Revenue Sector leader 1 — Dec/23. 2 — Public information of the 3 largest players (Vivo, Claro, TIM) – reference 2023. 6
Slide 7: Consistent, solid results even in challenging times
…allowing us to deliver consistent, solid results even in challenging times Strong operating Accelerated Revenue Improvement in performance growth Profitability Accesses Total Revenue Total Revenue Recurring EBITDA Margin million R$ billion +4.2% % 52.1 CAGR 19-23 41.1% 40.9% 40.9% +26mn 40.5% 40.1%
Slide 8: Our leadership is supported by irreplicable differences that set Vivo apart
Our leadership is supported by irreplicable differences that set Vivo apart Robust Largest access base in Broad and Powerful infrastructure Latin America complete portfolio channels Contemporary and Inspiring Brand 8
Slide 9: In mobile, we have the best coverage-quality balance
In mobile, we have the best coverage- quality balance Total Coverage 4.5G Coverage 5G Coverage % population cities (thousand) % population +2.4k ~60% 5.1k 98% ~90% 173 cities cities with population greatest 47% mobile 96% covered by 4.5G population coverage coverage 3.6 23% 1.2 2019 2023 2019 2023 2
Slide 10: In fiber, we built the largest network in Latin America
In fiber, we built the largest network in Latin America +279 +15 mn cities Homes and Cities Companies with Fiber 443 29.0 Passed 26.2 million 164 10.9 2019 2023 2024 2019 2023 Fiber Average ~4 mn ~3x Customers Speed million 6.2 Mbps 303 104 2.5 2019 2023 2019 2023 10
Slide 11: Our customer base is massive and predominantly recurrent
Our customer base is massive and predominantly recurrent... Customer Base Engagement 57 million $ 36 million individuals invoices issued/month 1.6 million 3.4 million commercial companies transactions/month 136 million accesses on digital Ownership channels/month 1.4 products 4 million customers eng
Slide 12: A complete portfolio that enables us to lead across segments
... and is served by a complete portfolio, that enables us to continue growing and lead across different segments B2C Portfolio B2B Portfolio % of Total Revenue by Segment 76% B2C +8.6% CAGR 2021-23 Digital Services 24% B2B¹ +9.5% CAGR 2021-23 1 – Considers B2B and wholesale revenues. B2B ex-wholesa
Slide 13: Mobile is at the heart of our revenue generation
Mobile is at the heart of our revenue generation, and we are improving both monetization and churn Mobile Leadership Liderança móvel ARPU Expansion Cobertura Postpaid R$ Total Mobile 41.5% +7.8% +8.1% 40.4% Mobile Postpaid ARPU 29.1 ARPU 51.3 36.7% 38.7% 27.0 38.1% 47.5 32.9% Dec/2021 Apr/2022 Dec/2
Slide 14: Fiber is a key component of our strategy
Fiber is a key component of our strategy, and our share of net adds is increasing, leading to improved take-up rates Share of FTTH net adds FTTH Take-up FTTH Market Share 19.7% 16.1% 32% >50% 12.5% 24.2% 27.2% 2021 2022 2023 Cities with Mature cities Cities with Mature cities coverage (≥ 60 months)
Slide 15: Convergent plans enhance lifetime value
Our convergent plans, with the best of Mobile and Fiber, represent a distinct value proposition that enhances lifetime value Convergent B2C Base Million B2C Accesses Convergent WITH Vivo Total Ticket Churn Convergent WITHOUT Vivo Total Standalone fiber 5.2 4.7 +4% -39% 4.0 +85% -14% 100 100 Dec/21 D
Slide 16: Going beyond connectivity with new digital businesses
We are going beyond connectivity with new digital businesses, that have become an important growth lever for Vivo B2C B2B Fintech Entertainment Cloud Cybersecurity Consumer Edutech Electronics Health & Smart Wellness Home IoT, Big Data & Networking Open Gateway Energy ~3% ~6.5% of Total Revenue of T
Slide 17: New B2C businesses represent R$ 1.3 billion in revenues
Combined, the new B2C businesses already represent R$ 1.3 billion in revenues, with annual growth above 40% Revenue¹ (R$ bn) Highlights 2023 +40% 1.3 ~R$ 380 mn additional in 2023 revenue 1.0 > 4 mn subscriptions² by the end of 2023 ~3% oftotalVivo’s revenue 2022 2023 1 – Considers Fintech, Entertai
Slide 18: B2B growth driven by a broad technology portfolio
In B2B, growth has been driven by a broad technology portfolio, that grew 25.4% y/y in digital revenues in 2023 Digital Revenue B2B Total B2B Revenue (R$ million) Mix Telecom¹ Digital Services² +25.4% Cyber IoT & TI & Networking Security Big Data Cloud 3,374 80% 76% 73% 2,691 24% 27% 20% Ecosystem w
Slide 19: Clients served by a powerful combination of channels
Our clients are served by a powerful combination of channels, that offer the best in-person and digital experience 18k 12.5k Call center attendants Field technicians 1.8k 240k Stores Top-up stations 22 million +50 million Unique users E-commerce Vivo App monthly sessions +5k +3k B2B Sellers B2C in-p
Slide 20: New Vivo App launched in March
In March we launched our new Vivo App, further developing our digital experience Simpler, Financial easier and services more effective Subscription Smart management for home all Vivo services Offering all products, services and benefits A customer relationship app that goes beyond self-service 20
Slide 21: Supported by a contemporary and inspirational brand
All of this is supported by the strength of a contemporary and inspirational brand Viva no Seu tempo 3rd most valuable brand in Brazil among Vivo is Brazil’s most remembered all sectors, with a market value of US$3 brand in mobile, 5G and fiber, billion according to "The Most Valuable Brands in Braz
Slide 22: Employee diversity has become a pillar of Vivo's culture
Employee diversity has become a pillar of Vivo's culture Gender LGBTI+ Women in top management Self-declared LGBTI+ Mulheres em cargo diretivo Mulheres em cargo diretivo +12 p.p. 45% +5 p.p. 108 of women in Trans the company employees ~33% 21% 410 8% women field technicians 3% 2019 2023 2019 2023 Ra
Slide 23: Most sustainable company in Brazil per ISE B3
Vivo is the most sustainable company in Brazil according to the ISE B3 ranking, among all sectors Protagonism in building a more sustainable society Equipment and Distributed Reduction of accessories collected Generation Emissions (tons) 12 (power plants) 67 (thousand CO2 tons) 78 8 CO2 Carbon 26 Re
Slide 24: Our ambition is to consolidate our leadership even further
Now, our ambition is to consolidate our leadership even further We reached 26mn HPs with fiber ... and we still have more than 10mn HPs with legacy technology We connected 6.2mn homes with fiber ... with ~24% network occupancy and 50% of convergent customers We bring 5G coverage to 47% of the popula
Slide 25: Vivo Day - David Melcon, CFO
Vivo Day David Melcon Chief Financial Officer
Slide 26: Transformation of the business mix leading to strong revenue growth
Transformation of the business mix leading to strong revenue growth... Net Revenues CAGR R$ billion 2019-23 52.1 +4.2% 48.0 44.3 43.1 44.0 Core Revenue¹ 82% 86% 89% 92% 94% +7.6% Non-Core Revenue² 18% 14% 11% 8% 6% -20.0% 2019 2020 2021 2022 2023 High exposure to services with recurrent billing Reve
Slide 27: Revenue growth above inflation in the past two years
...above inflation in the past two years Net Revenue Growth x IPCA 10.1% 9.1% 8.4% 5.8% 4.3% 4.5% 4.6% Continuity of IPCA positive revenue 2.1% growth trend, Revenue 1.9% leveraged by Growth business mix -2.6% 2019 2020 2021 2022 2023 Real Revenue Growth -2.5% -7.1% -8.0% +3.3% +3.8% 27
Slide 28: Changes in cost base reflect the new business mix
Changes in cost base reflect the new business mix and the continuous digitization of the Company Total Costs CAGR R$ billion 2019-23 30.8 +4.0% 28.8 Evolution in line with commercial 26.3 25.4 26.0 activity, sale of electronics and Costs of 32% 32% +9.3% digital services, with potential savings Serv
Slide 29: Additional efficiencies expected to contribute to opex control
Additional efficiencies are expected to be captured, contributing to opex control Back Office Cost: -29% vs 2020 4Q23 Postpaid ex-M2M % Digital Channel Sales: Churn: 0.97% approx. 30% (-14% vs 2020) (+15 p.p. vs 2020) 4Q23 FTTH Churn: 1.63% (-3% vs 2020) % of PIX in received Customer Acquisition pay
Slide 30: Foundation for sustained EBITDA expansion
By combining revenue growth above inflation with controlled cost evolution, we establish the foundation for sustained EBITDA expansion EBITDA¹ R$ billion +10.6% +7.0% +1.7% -1.2% EBITDA with positive evolution in the next years, reflecting our commercial and 21.3 operational efficiency 18.0 19.3 17.
Slide 31: Investments made enable us to reduce capital intensity
The investments made to date enable us to reduce capital intensity Investments optimization benefiting from efficiencies and expansion of new services that do not consume Capex Improvement in the mobile mix, 9.5 9.0 8.8 8.7 as traffic migrates from 4G to 5G, 7.8 coupled with ongoing efficiency initi
Slide 32: Operating cash flow margin with positive trend
Operating cash flow margin with positive trend as business performance improves Operating Cash Flow Margin¹ 23.7% 23.1% 20.6% 21.2% 20.3% 16.7% 15.1% 14.6% OpCF Margin 13.1% 11.3% OpCF AL² Margin 2019 2020 2021 2022 2023 2024 2025 2026 Improvement in operational results, combined with …with positive
Slide 33: Free cash flow generation will continue to be a main attribute
Free cash flow generation will continue to be one of our main attributes, allowing for different value creation opportunities Free Cash Flow R$ billion 2024-26 9.1 Trend 8.2 8.1 7.4 7.3 2019 2020 2021 2022 2023 FCF Yield 9.9% 11.6% 9.1% 11.3% 9.2% Free Cash Flow expansion, boosted mainly …continuing
Slide 34: Our low leverage serves as a shield and creates optionality
Our low leverage serves as a shield and creates optionality for the future Net Debt¹ R$ billion Low leverage allows us to maintain the best ratings of all agencies on a local basis, highlighting how solid our balance sheet is... Rating AAA bra ositi e utloo 16.4 14.2 10.4 7.3 5.2 Rating AAA bra osit
Slide 35: Solid shareholder remuneration will continue
Solid shareholder remuneration will continue to be one of our defining characteristics... Shareholder Remuneration¹ R$ billion 6.9 5.8 5.9 Share Buyback According to the guidance 4.8 Interest on published on November 11th, Capital 2023, the payout over net income for the years Dividends 2024, 2025 a
Slide 36: Share buyback program and capital reduction
...strengthened by a robust share buyback program and capital reduction Share Buyback Capital Reduction From 2020 to 2023, we invested R$1.6 billion In September 2023, ANATEL approved in share buybacks (38.4 million shares), our request for a capital stock reduction equivalent to 2.3% of our total s
Slide 37: 1Q24 Results
°$* Telefonica | VIVO EISTED ( B3 LISTED &) NYSE (| ISEB3 ICO2B3 VIVT oS NIV,
Slide 38: Strong operating performance leading to above-inflation growth
Strong operating performance leading to above- inflation growth in revenues, EBITDA and net income Growth Profitability Sustainability 1Q24 Mobile Postpaid Accesses Total Revenue EBITDA Net Income² +6.6% 62.6 mn +6.5 % +6.8 % R$0.9 bn YoY 99.7mn Total Mobile YoY YoY +7.3% YoY Accesses (+1.6% YoY) Fi
Slide 39: Positive revenue momentum remains intact
Positive revenue momentum remains intact, supported by mobile and fiber revenues Total Revenues Mobile Service Revenues R$ million R$ million +6.5% Postpaid² Prepaid Double-digit growth 3, in postpaid revenues Handsets & +3.1% driven by positive Electronics commercial Data, ICT & , 32 +3.5% momentum
Slide 40: B2C revenues grew well above inflation
B2C revenues grew well above inflation, highlighting the new businesses, that increased over 30% YoY Total B2C Revenues¹ New Businesses R$ million R$ million 33 3 ,3 B2C new businesses 0, continue its rapid 3 , ,3 +33.5% ,032 3 growth, and already New represents 2.6% of ,032 Consumer lectronics 2 to
Slide 41: B2B continues to accelerate driven by digital solutions
B2B continues to accelerate driven by digital solutions, and already represents 21% of Vivo’s total revenues Total B2B Revenues¹ Digital B2B R$ million R$ million 20 ,0 3, Digital B2B 0,23 continues to grow, 2, and already Cybersecurity 22 2 represents 31.5% Digital B2B 3, +20.4% igital Solutions of
Slide 42: Robust commercial performance drove operating cash flow expansion
Robust commercial performance drove operating cash flow expansion with margin improvement Capex¹ Operating Cash Flow¹ R$ million R$ million, 1Q24 OpCF Margin¹ LTM % % of sales Capex efficiency remains a priority, as we are the only 5G operator in all cities with >200 inhabitants, co ering of Brazil’
Slide 43: Free cash flow remains solid and net income continues to expand
Despite challenging comps, free cash flow generation remains solid and net income continues to expand Net Income¹ Free Cash Flow³ R$ million R$ million 3 5 YoY Free Cash Flow reduction due to seasonality and 23 2 positive effects recognized in Net Debt² 1Q234 R$ million Mar-24 Net Debt including IFR
Slide 44: Vivo Day - Christian Gebara, CEO
Vivo Day Christian Gebara Chief Executive Officer
Slide 45: In summary
In summary Vivo is the leader in Significant growth Relevant acceleration Continued focus on the Brazilian market, potential through opportunity, individually improvement of both in customers and convergence, and through customer experience, financial results combining the best partnerships, for new
Slide 46: Telefonica Brazil / VIVO deep-dive
Telefonica since 1924 Telefonica Brazil / VIVO deep-dive May 20, 2024 - London