Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — H1 2013 Earnings Presentation
27 slides from Telefonica Sa's earnings presentation, Jul 25, 2013
Slide 1: Results January - June 2013
Results Investor RelationsTelefonica, S.A. January - June 2013
Slide 2: Forward-looking statements disclaimer
This document contains statements that constitute forward looking statements about Telefonica Group (going forward, "the Company" or Telefonica) including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations which may refer, am
Slide 3: Highlights
Highlights TELEFONICA Continued progress in our transformation strategy Recovering organic growth in Q2Revenues +0.5% y-o-y in organic terms; -0.5% in H1Revenues ex-regulation +2.1% y-o-y in organic terms; +1.0% in H1OIBDA roughly stable: €4,854m in Q2 (-0.7% organic y-o-y) & €9,421m in H1 (-0.4%)OI
Slide 4: Financial Summary
Reported growth rates negatively impacted by: Forex effects dragging around 5.5 p.p. in revenues and OIBDA Changes in the perimeter (Atento) Financial Summary H1 performance fully consistent with FY outlook; 2013 guidance reiterated H1 13 H1 13 H1 13 Q2 13 Q2 13 Q2 13 € in millions Reported Reported
Slide 5: Strong cash flow generation
Strong cash flow generation FCF (€ in millions) (CHART) +16.0 % FCF (€/share) (CHART) EPS (€/share) (CHART) FCF (ex spectrum y-o-y) (CHART) +19.0% FCFS & EPS improving sequentially Seasonal factors reducing FCF generation in H1 to become positive in H2LTE spectrum granted in major markets 5 TELEFONI
Slide 6: Intense commercial activity boosted by smartphones
Intense commercial activity boosted by smartphones Smartphone net adds ('000) (CHART) Smartphone penetration FBB net adds ('000) (CHART) UBB coverage(Fiber+VDSL/Fixed Accesses) Further push on high value and quality customers Mobile contract, specially smartphones drives mobile growthBest ever quart
Slide 7: Recovering revenue growth
Recovering revenue growth (CHART) Organic revenue (y-o-y) Q1 13 Q2 13 Returning to organic growth pace T. Latam boosting Telefonica growth and accelerating y-o-y performance vs. Q1 Enlarged contribution from digital servicesTop line gradual recovery in T. EuropeLimiting H1 organic y-o-y decline to -
Slide 8: Cumulative OIBDA virtually stable
Cumulative OIBDA virtually stable (organic y-o-y) Leveraging targeted efficiencies and savings on several initiatives (H1 OpEx -0.1% y-o-y organic)Lower commercial expenses ( -8.9% H1 y-o-y organic) on new commercial model across EuropeInterconnection continue to decline on lower MTRsFocus on data c
Slide 9: T. Global Resources: Execution of priority projects
T. Global Resources: Execution of priority projects TELEFONICA Network and Operations: Evolving towards the best-in class fixed and mobile networks:Foster LTE sites deployment: >1,600 in Brazil and >800 in Germany Increasing fiber coverage (homes passed): 2.7m in Spain and 1.3m in Brazil as of Jun-1
Slide 10: T. Digital: Innovation at the forefront of our strategy
Accomplishments in Q1 13 T. Digital: Innovation at the forefront of our strategy TELEFONICA Financial Services: Strong partnerships to build a credible mCommerce ecosystem in core marketsBrazil - MFS, a JV with Mastercard, launched "Zuum", the first mobile payment service in Brazil giving unbanked p
Slide 11: T. Latam: Top line accelerating to double digit growth
Net Adds ('000) T.LATAM (CHART) Q1 13 Q2 13 Q2 12 Accesses y-o-y +14% +7% +2% T. Latam: Top line accelerating to double digit growth 11 OIBDA (organic y-o-y) (CHART) Revenues (organic y-o-y) (CHART) +11.6% +7.9% +0.3 p.p. -2.3 p.p. OIBDA margin y-o-y Commercial activity momentum across services Stro
Slide 12: Brazil: Strong commercial momentum across the board
(CHART) Brazil: Strong commercial momentum across the board Record high in contract Starting turnaround on fixed services Fixed Net Adds (millions) T.LATAM Grabbing more than half of contract net adds share in Q2 to 37.8% of market share (+1.2 p.p. y-o-y)Smartphones doubling y-o-y to 17% of mobile a
Slide 13: Brazil: Commercial activity starting to flow into revenues
Brazil: Commercial activity starting to flow into revenues OIBDA Margin Revenue growth ex-regulation (organic y-o-y) T.LATAM Consistent revenue growth with improved mix OIBDA margin impacted by higher commercial activity OIBDA margin erosion affected by positive one offs in Q2 12 (-2.1 p.p. y-o-y) a
Slide 14: T. Latam: Widespread revenue acceleration (I/II)
(CHART) (CHART) T. Latam: Widespread revenue acceleration on outstanding commercial activity (I/II) Strong total net adds (4x y-o-y)Double digit revenue growthHigher commercial activity and inflation driven costs dragging OIBDA margin y-o-y Strong recovery in revenue y-o-y trendOIBDA margin dragged
Slide 15: T. Latam: Widespread revenue acceleration (II/II)
T. Latam: Widespread revenue acceleration on outstanding commercial activity (II/II) Mexico Venezuela Peru Colombia Revenues & OIBDA (Organic y-o-y) % out of Group revenues T.LATAM Net Adds ('000) 3.0% 2.8% 5.3% Net Adds ('000) Net Adds ('000) Revenues & OIBDA (Organic y-o-y) Revenues & OIBDA (Organ
Slide 16: T. Europe: Executing transformation for a more sustainable model
Acceleration in mobile contract net adds amid increasing competitionCustomers appreciate simple, transparent and value for money portfolioSubsidy reduction compatible with innovative handsets propositionsChurn improvement across marketsSuccessful mobile data monetisation fostered by data-centric tar
Slide 17: Spain: Leading the convergent market
(CHART) Spain: Leading the convergent market Movistar Fusion further strengthens market positioning Convergence: the key market trend Customer mix continues to improve (new & upselling customers)Steady fiber up-take (431k customer in Jun-13; x2 y-o-y)Ongoing mobile add-ons increase >70% of Fusion gr
Slide 18: Spain: Massive improvement in operating leverage
Increased new revenue stream from FusionBetter mobile access performance in Q2Mobile hardwate sales y-o-y drop easing (-51.6% in Q2, vs -67.4% in Q1) following new commercial model (Mar-12)Positive impact from loyalty program on MSR y-o-y evolution fading off(CHART) Spain: Massive improvement in ope
Slide 19: UK: Strong momentum while transforming the business
Contract base up 9% driving mobile base (+3% y-o-y)High smartphone base penetration of 48% (+5 p.p. y-o-y)"O2 Refresh" encouraging results:20% of contract commercial activity opt for Refresh in Q2. Only available for high-end devices in direct channel Towards a more sustainable business model: Savin
Slide 20: Germany: Market moving towards data
Market moving towards data Successful retention of high-value customer base New O2 Blue Offers indicators:Accelerating smartphone penetration to 29% (+6 p.p. y-o-y)Nearly all shipments in Q2 13 are smartphonesTariff renewals within our customer base increased by 20% y-o-yLTE network deployment in al
Slide 21: Creating a Leading Digital Telco in Germany (I)
Creating a Leading Digital Telco in Germany (I) Transaction Summary Total consideration of €5 Bn in cash and a 17.6% stake Two Step StructureAcquisition of E-Plus by Telefonica Deutschland for a combination of cash and a stake in the enlarged Telefonica Deutschland €3.70bn of cash, financed through
Slide 22: Creating a Leading Digital Telco in Germany (II)
Improved profitability and enhanced cash flow generationStronger competitive position from increased scale Creating a Leading Digital Telco in Germany (II) Combining a Bright Past with a Brighter Future A leading player with a combined customer base of 43m, 42% in contractStrong scale benefits with
Slide 23: Creating a Leading Digital Telco in Germany (III)
(CHART) (CHART) Unlocks significant value for Telefonica shareholdersInvesting in future growth Reinforced geographical diversification, increasing exposure to an attractive marketPositive impact on Telefonica's cash flow generation profileEPS and FCF accretive from year 1(2) Credit friendly financi
Slide 24: Net Financial Debt
€ in millions Net Financial Debt/OIBDA2.36x Net Financial Debt (CHART) € in millions Pre- retirement commitments Net Financial Investments Net Fin. DebtDec-12 Fx Effects FCF Post minorities FX Venezuelan Devaluation Net Fin. DebtDec-12 after Venezuelan devaluation Net Financial Debt (CHART) FCF Post
Slide 25: Proactive diversified 2013 YTD financing
(CHART) € in billions (CHART) Proactive diversified 2013 YTD financing Decreasing effective interest cost (12 month rolling) 6% 5% (CHART) € Bonds at Holding(8.5yr. Av. maturity) Syndicated Loans(4&5yrs) ECA Loans & Latam USD Bonds at Holding (5&10yrs) TELEFONICA Refinancing YTD Guidance € in billio
Slide 26: Closing remarks
Closing remarks TELEFONICA Continued progress in our transformation strategy Recovering organic revenue growth in Q2T. Latam, mobile data and T. Digital continued driving growthFurther push on commercial activity in every categoryRecord high smartphone quarterly net adds Organic OIBDA virtually flat
Slide 27: Organic growth / 2013 guidance notes
Organic growth / 2013 guidance: Assumes constant exchange rates as of 2012 (average Fx in 2012), excludes hyperinflationary accounting in Venezuela and considers constant perimeter of consolidation. In OIBDA and OI terms excludes write-downs, capital gains/losses from companies' disposals, tower sal