Telefonica Sa · BME:TEF
Telefonica Sa — Telefónica Móviles — 5th Annual Technology, Media & Telecoms Conference 2005
30 slides from Telefonica Sa's conference presentation, Nov 18, 2005
Slide 1: Telefónica Móviles: Delivering on the Execution
Telefónica Móviles: DELIVERING ON THE EXECUTION Antonio Viana-Baptista, Chairman & CEO 5TH ANNUAL TECHNOLOGY, MEDIA & TELECOMS CONFERENCE November 18th, 2005 Telefónica Móviles S.A. Investor Relations
Slide 2: Safe harbour
Safe harbour This presentation contains statements that constitute forward looking statements in its general meaning and within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this document and include statements regarding the int
Slide 3: Index
INDEX 01 9M05 Results: strong performance in every 5TH ANNUAL TMT CONFERENCE line 02 Execution capabilities: delivering synergies from BS’s Latam assets integration 03 Economies of scale in the cellular business: the facts Telefónica Móviles, S.A. Investor Relations 3
Slide 4: 9M05 Results: Very strong performance in every line with outstanding cash flow generation
9M05 Results: Very strong performance in every line with outstanding cash flow generation 9M05/9M04 5TH ANNUAL TMT ! Boost in managed customers to 89.1MM +52% CONFERENCE ! Robust service revenue growth +44% ! Acceleration of OIBDA growth rate +21% ! Significant margin expansion vs. 2Q05 across most
Slide 5: On track to achieve Group growth guidance
On track to achieve Group growth guidance Revenues (y-o-y growth1,2) 48.5% 45.2% 41.9% 41.3% 43.8% 2005 5TH ANNUAL TMT CONFERENCE Guidance 1,2 33%-36% 33%-36% 1Q05/ 2Q05/ 3Q05/ 1H05/ 9M05/ 1Q04 2Q04 3Q04 1H04 9M04 OIBDA (y-o-y growth1,2) 29.0% 19.5% 23%-26% 23%-26% 19.8% 8.9% 14.3% 1Q05/ 2Q05/ 3Q05/
Slide 6: Strong Group revenues & OIBDA diversification
Strong Group revenues & OIBDA diversification 9M041 9M051 5TH ANNUAL TMT REGION CONFERENCE 7% Northern 8% Revenues Spain 2% Andean 17% Spain 74% 13% Brazil2 11% 55% 4% Southern 10% 9M041 9M051 REGION -2% Northern -1% Spain 1% Andean 14% Spain OIBDA 11% Brazil2 9% 72% 89% 1% Southern 6% Telefónica Mó
Slide 7: SPAIN: Commercial initiatives are clearly paying off
SPAIN: Commercial initiatives are clearly paying off New pricing plans “Mi Favorito”: 1€ cent/minute Churn rate (%) Number portability (000s) 5TH ANNUAL TMT CONFERENCE 1.7 2.0 1.7 84 1.6 69 38 -181 -45 16 3Q04 1Q05 2Q05 3Q05 ! 3MM customers ! Contract churn <1% in 3Q05 1Q05 2Q05 3Q05 “Mis CInco”: 3€
Slide 8: Solid operating profitability & top line growth ahead of peers
… leading to a solid operating profitability & top line growth ahead of peers OIBDA margin (9M05) 5TH ANNUAL TMT CONFERENCE +23% in commercial activity TM Spain 46.7% movistar brand launch: €40MM opex European 41.7% Average2 Operating revenues growth Service revenues growth (9M05/04) (9M05/04) TM Sp
Slide 9: SPAIN: ongoing leadership on the UMTS rollout
SPAIN: ongoing leadership on the UMTS rollout ! Focus on high quality coverage in key urban areas ! Coverage in areas in which 70% of population lives 5TH ANNUAL TMT CONFERENCE ! HSDPA successfully tested on our network ! Commercial launch pending on handset availability ! ≈ 150,000 3G customers ! F
Slide 10: LATIN AMERICA: Sound customer growth & margin recovery
LATIN AMERICA: Sound customer growth & margin recovery Customers (000s) +30% 5TH ANNUAL TMT 65,621 ! +15.1MM customers (3Q05/3Q04) CONFERENCE 50,569 ! Increased contract weight in Latam total net adds: ! 24% in 3Q05 vs. 15% in 2Q05 3Q041 3Q05 Revenues OIBDA1 Reported OIBDA margin 9M05 y-o-y growth e
Slide 11: LATIN AMERICA: Only operator with positive OpCF outside its home market
LATIN AMERICA: Only operator with positive OpCF outside its home market 5TH ANNUAL TMT CONFERENCE 9M05 Operating CF Northern Region Northern Region -185 MM€ Northern Region ex-Mexico 45 MM€ Brazil Brazil 130 MM€ Andean Region Andean Region 279 MM€ Southern Cone 61 MM€ TOTAL LATAM 286 MM€ Southern Co
Slide 12: Execution capabilities: delivering synergies
INDEX 5TH ANNUAL TMT 01 9M05 Results: strong performance in every line CONFERENCE 02 Execution capabilities: delivering synergies from BS’s Latam assets integration 03 Economies of scale in the cellular business: the facts Telefónica Móviles, S.A. Investor Relations 12
Slide 13: Record-time integration: 10 Companies in 10 months
Record-time integration: 10 Companies in 10 months 8 Closings 5TH ANNUAL TMT Ecuador, Guatemala, CONFERENCE Panama, Colombia, Peru, Venezuela, Uruguay & Nicaragua Agreement Signed 2 Closings: Legal merger of Regulatory Peruvian Operators approvals Argentina & Chile 2004 2005 March 04 October 04 Janu
Slide 14: Results from integration in overlapping operations already obtained in several areas
Results from integration in overlapping operations already obtained in several areas Project Description Status Commercial offer ! Unified offer & commercial practices in all 4 countries " ! Contracts with 170 dealers renegotiated 5TH ANNUAL TMT CONFERENCE Commercial " network ! Rationalization/Unif
Slide 15: We are progressing faster than anticipated
We are progressing faster than anticipated ... Operations in BS + TEM BS + TEM Argentina, Chile, ∑“Stand Alones” 05 post -synergies 05E Guatemala & Peru 5TH ANNUAL TMT Handset subsidies1 100 89 CONFERENCE Commissions1 100 86 Advertising2 100 76 Network opex 100 94 Call Centers 100 80 Personnel 100 9
Slide 16: ... with stronger results
... with stronger results Synergies minus integration costs 5TH ANNUAL TMT CONFERENCE Annual Flows (Opex + Capex) 2005E 2006E 2008E (US$ MM) Investor Day (April, 2005) ~100 ~150 ~250 Current estimates >170 Opex & capex synergies will clearly exceed initial estimates + Additional benefits from revenu
Slide 17: Economies of scale in the cellular business
INDEX 5TH ANNUAL TMT 01 9M05 Results: strong performance in every line CONFERENCE 02 Execution capabilities: delivering synergies from BS’s Latam assets integration 03 Economies of scale in the cellular business: the facts Telefónica Móviles, S.A. Investor Relations 17
Slide 18: Scale economies in the industry
Scale economies in the industry Scale GLOBAL SCALE REGIONAL SCALE LOCAL SCALE Impact 1 Handset & equipment purchasing COSTS & 5TH ANNUAL TMT CAPEX 2 Advertising CONFERENCE 3 Content purchasing 4 Software development & IT operations 5 Network efficiency 6 Headquarter rationalisation 7 Corporate solut
Slide 19: Handset purchasing
Costs & capex 1 Handset purchasing GLOBAL SCALE REGIONAL SCALE GSM handsets average cost ! TEM LATAM: 5TH ANNUAL TMT CONFERENCE Low-end handsets High-end handsets ! Unification of technical 100% 87% specifications for handsets and 100% 76% 73% 56% SIM cards ! Common approval process for 2004 2005E 2
Slide 20: Equipment purchasing
Costs & capex 1 Equipment purchasing GLOBAL SCALE Average cost per 5TH ANNUAL TMT CONFERENCE GSM base station (€) 100% 92% 41% 2003 2004 2005E ! GSM networks in 13 countries: ! Rollout in 5 new countries in 2005 (Colombia, Ecuador, Nicaragua, Panama, Uruguay) ! Global management & planning of capex
Slide 21: Advertising
Costs & capex 2 Advertising GLOBAL SCALE REGIONAL SCALE ! Improved awareness & perception ! Unified advertising campaigns, 5TH ANNUAL TMT through global sponsorships with higher quality and lower CONFERENCE production costs: ! 6%-10% of total marketing Production cost of Xmas expenses managed global
Slide 22: Content purchasing
Costs & capex 3 Content purchasing GLOBAL SCALE 5TH ANNUAL TMT CONFERENCE Exclusivity agreements: Telefónica Móviles, S.A. Investor Relations 22
Slide 23: Software development, IT & network infrastructures
Costs Software development, IT & network infrastructures & capex GLOBAL SCALE –REGIONAL SCALE 4 Software development & IT operations 5 Network infrastruct. Examples: Northern Region ! Shared resources through 5TH ANNUAL TMT CONFERENCE ! Deployment of ! Deployment of a regionalization: common platfor
Slide 24: HQ rationalisation
Costs 6 HQ rationalisation & capex GLOBAL SCALE –REGIONAL SCALE ! Acquisition of 10 companies from ! Integrated regional management 5TH ANNUAL TMT CONFERENCE BS in 4Q04-1Q05 of Latam operation HQ costs/managed customer Workforce in Central America 100% ±50% from customer service (call 68% centers, b
Slide 25: Corporate solutions development, MNCs & roaming
Corporate solutions development, MNCs & roaming Revenues GLOBAL SCALE –REGIONAL SCALE Corporate solutions Multinational Corporates 7 8 9 ROAMING development (MNCs) 5TH ANNUAL TMT ! TM Spain : ! TM Spain + European ! TM Spain + European CONFERENCE ! Movistar CORPORATIVO partners: partners: (VPN) ! On
Slide 26: New services: enhanced high quality P&S portfolio
10 New services: enhanced high QUALITY P&S portfolio Revenues GLOBAL SCALE - REGIONAL SCALE Regional management enhances competitive position 5TH ANNUAL TMT CONFERENCE Guatemala El Salvador 1H06 VAS offer Competition Competition C1 C2 C1 C2 C3 Messaging $ Voice SMS $ MMS $ Chat $ Messenger VPN Conte
Slide 27: Distribution channel
11 Distribution channel Revenues REGIONAL SCALE ! TEM Latam 5TH ANNUAL TMT CONFERENCE ! Lower wholesale commissions for prepaid recharges ! Increased weight of electronic recharges Example: Southern Cone Electronic Commission/ recharges/total recharge >2x 15%-20% 2005E 2006E 2005E 2006E Total Saving
Slide 28: Others: Attracting talent
Others: Attracting talent Other GLOBAL SCALE 5TH ANNUAL TMT CONFERENCE ! 95% of management teams in 10 companies acquired from BS continue to work for Telefónica Móviles ! 90% of our employees believe the Telefónica Group is a solid group which is moving ahead successfully ! Career opportunities: 12
Slide 29: Conclusions
Conclusions: % Very strong results in every line & healthy cash-flow generation despite aggressive competition in our markets: 5TH ANNUAL TMT CONFERENCE ! TM Spain continues to outperform its peers ! Strong OCF results in Latam ! On track to achieve 2005 demanding goals % We deliver on synergies: We
Slide 30: www.telefonicamoviles.com/investors
www.telefonicamoviles.com/investors
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