Slide 1: Results January – December 2016
Results January – December 2016
Slide 2: Disclaimer
Disclaimer This document and the conference-call webcast (including 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 financi
Slide 3: 2016 Overview and 2017 Outlook
01 2016 Overview 2017 Outlook Mr. José María Álvarez-Pallete Chairman & CEO 2 Investor Relations Telefónica, S.A.
Slide 4: 2016 highlights; positioned to grow sustainably
2016 highlights; positioned to grow sustainably Building sustainable growth (high quality base) Improved data monetisation A year of GROWTH OIBDA growth across the board Mid-single digit EPS growth (underlying y-o-y) Strong FCF: €4.4bn (+24.4% y-o-y; incl. significant CapEx effort) Recov
Slide 5: Consolidation of growth trends
Consolidation of growth trends (Organic growth y-o-y) 2.9% 2.6% Service 1.9% Revenue growth Revenues 4.7% 3.2% OIBDA 0.2% & Margin expansion 5.6% 1.3% OpCF (12.7%) CapEx (ex-spectrum)/ Sales 16.2% 16.2% 16.5% 24.4% (Reported growth y-o-y) Driving FCF growth (7.9%) FCF (29.2%) €4.4bn FY 14 FY 15 FY 1
Slide 6: FY 16: Key financials
FY 16: Key financials FY 16 Organic Q4 non-cash effects: €1.3bn in OIBDA € in millions Reported y-o-y FY 16 Revenues 52,036 1.3% Service revenues 48,005 2.6% € in millions Underlying OIBDA 15,118 4.7% OIBDA 16,519 OIBDA Margin 29.1% 1.0 p.p. OIBDA Margin 31.7% OpCF (ex-spectrum) 6,535 5.6% OpCF (ex-
Slide 7: Performance on 2016 guidance
Performance on 2016 guidance 2016 Guidance Guidance 2016E FY 16 (Constant FX 2015; ex-VZ; ex-UK) Service Revenues Revenues >4% +2.6% +4.0% OIBDA margin Stabilising vs. 2015 +0.9 p.p. Focus on service revenues (handset sales weak, in line CapEx ex-spectrum/Sales Around 17% 17.0% with market dynamics)
Slide 8: Superior customer growth & improved retention
Superior customer growth & improved retention High value customers Penetration Dec-16 (y-o-y) Upgrading customer value +77% +24% +17% • Double digit growth of LTE, FFTx/Cable & Smartphones accesses o 9.0m LTE accesses added in Q4 (+25% y-o-y; +23% q-o-q) +6% o Q4 mobile contract net adds +18% y-o-y
Slide 9: Revenues accelerating; improving quality
Revenues accelerating; improving quality 2016 Revenues (y-o-y organic) Total Handset sales Service revenues Transitioning to a more sustainable mix 3.7% 2.8% 3.9% 1.5% 1.4% 2.7% • Service revenues +2.3 p.p. q-o-q o Hispam +1.2 p.p.; UK +0.4 p.p.; Spain: +0.3 p.p. (0.2%) (0.2%) (9.0%) (5.1%) o German
Slide 10: Higher speeds and data proposals fuel growth
Higher speeds and data proposals fuel growth LTE accesses Strong boost in unitary usage Capturing the data opportunity (million) Avg. usage/smartphone +44% +77% • “More 4 More” strategy leveraging mobile data allowance 66.3 1.2 GB 37.4 0.8 GB • Value accretion from recurrent prepay plans & tiered-pr
Slide 11: Extensive transformation starting to bear fruits
Extensive transformation starting to bear fruits FTTx/Cable E2E digitalisation New revenue generators Premises passed x6 2014 1 6 38% 61% 2014 2016 2014 2016 15m 39m 2016 Full Stack (Countries live) 47% 43% IT Simplification BB & SoC Access & Voice (2014-2016) -14% -13% -12 +8 p.p. Applications Phys
Slide 12: TGR: excellent connectivity; further digitalisation
TGR: excellent connectivity; further digitalisation 17 m (+19% y-o-y) 87% Europe (+11 p.p. y-o-y) Access FTTx/Cable 53% Latam (+10 p.p. y-o-y) premises passed 17 m (+4% y-o-y) LTE coverage Accelerating Network 5 m (+48% y-o-y) (62% pop.) coverage & capacity Core • Transport transformation • Advanced
Slide 13: Digital Services: enlarged growth platform
Digital Services: enlarged growth platform Digital Services Revenues (€m) y-o-y organic Driving data monetisation with video 4,792 4,090 • Virtuous circle: robust network intensive usage higher loyalty Video +12.4% +14.1% Cloud +17.3% • Cutting edge TV proposition: content, connectivity, custome
Slide 14: 2017 outlook & dividend policy
2017 outlook & dividend policy Operating 2017 Guidance Guidance 2017E (Organic) Revenues Stable (in spite of regulation: ~-1.2 p.p.) OIBDA margin Expansion up to 1 p.p. Growing profitability (expanding margins) CapEx ex-spectrum/Sales Around 16% 2017 Dividend To be paid in 2017/18 Interim Q4 17 €0.2
Slide 15: 2017 priorities set on milestones reached
2017 priorities set on milestones reached Focusing on revenue, OIBDA, OpCF and CF growth P&L + CF growth Focused investment in UBB/4G, in a more granular and targeted way Company transformation A platform and data-driven Co.; Cognitive Intelligence: a new way to interact with our customers Managing
Slide 16: Q4 16 Highlights & Results
02 Q4 16 Highlights & Results Mr. Ángel Vilá CSFO 15 Investor Relations Telefónica, S.A.
Slide 17: Q4 summary: Robust results
Q4 summary: Robust results Pick-up in service revenues to +3.7% y-o-y organic Significant OIBDA acceleration to +9.4% y-o-y organic Business improvement +2.0 p.p. y-o-y organic margin expansion; efficiency a non-stop process FX negative impact y-o-y diminishing (strengthening growth) Hispa
Slide 18: Financials in a nutshell
Financials in a nutshell FY 16 Q4 16 Organic Organic € in millions Reported Reported y-o-y y-o-y FY 16 Q4 16 Revenues 52,036 1.3% 13,721 2.7% Service revenues 48,005 2.6% 12,493 3.7% € in millions Underlying y-o-y Underlying y-o-y OIBDA 15,118 4.7% 3,187 9.4% OIBDA 16,519 -2.0% 4,464 6.0% OIBDA Marg
Slide 19: Reported Q4 affected by several factors
Reported Q4 affected by several factors Q4 factors impacting OIBDA (€1.3bn) Q4 factors impacting Net Income (€1.1bn) +6.0% 2.5x 215 (228) 1,290 4,464 (171) 215 94 1,233 3,187 950 145 OIBDA Restructuring Impairments Capital Gains OIBDA Net Income Restructuring Impairments PPA Capital Gains Net Income
Slide 20: Strong and healthy FCF generation
Strong and healthy FCF generation FCF 2016 (€ in millions) Delivering on >€4bn FY stated objective +24.4% • Growing FCF and FCFS throughout the year (including a record high 4,370 2,055 CapEx level and with a balanced WC effort) 3,514 1,500 • +€857m FCF improvement in FY y-o-y o Growth in adj. OpCF
Slide 21: Outstanding organic OIBDA growth in Q4
Outstanding organic OIBDA growth in Q4 2016 OIBDA (y-o-y organic) 9.4% +6.3 p.p. Q4 vs Q3 5.5% 4.7% 3.1% 0.8% FY 16 Q1 Q2 Q3 Q4 Efficiency across the board OIBDA +1.0p.p. +0.8p.p +0.3p.p +1.0p.p +2.0p.p margin • Strengthening operating leverage o Q4 OpEx -2.3% y-o-y organic (Q3: -1.6%; FY: -0.7%) •
Slide 22: Accelerating OIBDA growth; FX easing
Accelerating OIBDA growth; FX easing OIBDA: Organic growth vs. FX impact (€ in millions) Q1 y-o-y Q2 y-o-y Q3 y-o-y Q4 y-o-y +394 +230 +135 (94) +34 (187) (553) (332) Organic acceleration; FX neutralising Organic Organic Organic Organic FX FX FX FX Growth Growth Growth Growth • Organic OIBDA trends
Slide 23: Growing OpCF despite CapEx still increasing in 2016
Growing OpCF despite CapEx still increasing in 2016 2016 CapEx (€ in millions) y-o-y organic 8,928 (345) 8,583 Network leadership +3.9% • Consistently investing in networks & platforms Total Spectrum Ex-spectrum o 79% of CapEx devoted to growth/transformation o Network CapEx allocation through Big D
Slide 24: Spain: superior franchise; sustained upselling
Spain: superior franchise; sustained upselling Net adds (‘000) Q3 16 Q4 16 Q4 trading improvement & better value mix 159 132 147 147 • Ongoing benefits from “Fusión” (4.3m customers: +5% y-o-y) 15 22 o +81% TV (+10 p.p.); +73% contract (+6 p.p.); +83% FBB (+3 p.p.) o Lower churn vs. unbundled servic
Slide 25: Spain: growing Service Revenues, OIBDA, OpCF
Spain: growing Service Revenues, OIBDA, OpCF Steady growth on Service Rev. & OIBDA (2016) Service Revenues (y-o-y organic) Q4 revenues acceleration; margin expansion OIBDA (y-o-y organic & ex-factors) 2.6% 2.6% • Sequential improvement in service revenues growth (+1.2 p.p. q-o-q) o “Consumer: +3.5%
Slide 26: Germany: realising synergies; improving profitability
Germany: realising synergies; improving profitability 2016 MSR ex-regulation (y-o-y organic) MSR Maintaining market momentum FY 16 Q1 Q2 Q3 Q4 • 1.3m contract net adds in 2016; 336k in Q4 o 54% of gross adds from partners; 58% in Q4 (-1 p.p. q-o-q) o Signs of easing price pressure in non-premium (0.
Slide 27: UK: consistently outperforming the market
UK: consistently outperforming the market 2016 contract net adds (ex-M2M) (‘000) Blended ARPU ex- “O2 Refresh” (y-o-y) Solid commercial Continued customer & ARPUin growth performance a challenging market 421 • Mobile base 25.5m o Contract 62% o/total (+4 p.p. y-o-y) 100 125 119 76 o Market-leading c
Slide 28: Brazil: focus on value; customer upgrades
Brazil: focus on value; customer upgrades Mobile accesses (y-o-y) Market share 35.7% x2 Mobile ARPU +18.4% 30.2% 42.1% Q4 y-o-y 25% Selective commercial approach 7% Data ARPU 1% +23.5% Q4 y-o-y • Mobile: leading contract while protecting value in prepay Total Contract Smarthphones LTE o 38% of contr
Slide 29: Brazil: robust growth in revenues, OIBDA, OpCF
Brazil: robust growth in revenues, OIBDA, OpCF 2016 (y-o-y organic & ex-Q4 15 positive factor) Service Revenues Gaining revenue market share (36%; +1 p.p. y-o-y) OIBDA 9.5% 8.9% • Capturing full incremental market revenue growth in 2016 8.2% • Q4 MSR +4.0% y-o-y (FY: +3.1%) 5.8% o Data/MSR: 57% (+8
Slide 30: HispAm: strengthened market positioning
HispAm: strengthened market positioning Mobile accesses (y-o-y) Accesses penetration Sustainable growth 86% • Steady increase on value accesses driving sustained ARPU growth 15% Q4 Mobile ARPU +6.9% y-o-y 2% 3% • ARGENTINA: Quality base growth & gradual tariff updates fostering Q4 ARPU (mobile +28.7
Slide 31: HispAm: revenues and OIBDA y-o-y acceleration
HispAm: revenues and OIBDA y-o-y acceleration 2016 Revenues (organic y-o-y) Sound financials 11.3% 10.9% • Strong Q4 MSR (+12.0% y-o-y; FY: +7.0%); accesses + ARPU growth acceleration (booming data volumes + “More 4 More” strategy) 7.5% 4.1% • Double-digit growth in fixed rev. (Q4: +10.9% y-o-y; FY:
Slide 32: Further deleverage on stronger FCF generation
Further deleverage on stronger FCF generation Net Financial Debt € in millions Net Financial Net Financial Debt/OIBDA (€3.6Bn) Debt/OIBDA 3.18x 2.95x 52,193 (3,555) 682 406 (1,000) (648) 516 48,595 (1,275) Jun-16 FCF Shareholder Pre-retirement Hybrid issue Net financial FX, MTM Dec-16 Post - closing
Slide 33: Strengthening balance sheet with long term financing
Strengthening balance sheet with long term financing Interest payments cost Sources of long-term financing (2016 – 2017 YTD) € in billions 1.4 13.1 3.3 1.02 p.p. Avg. maturity new 4.96% debt >7 yr 6.8 0.07% 3.94% 1.0 (1.09%) 0.6 Dec-15 Europe Latam Dec-16 Equity Hybrids Bonds Other bank Latam Total
Slide 34: Closing remarks
Closing remarks • Solid year of growth flowing into FCF; strong strategy execution • Delivered promising Q4 operating momentum • Best-placed structurally • Enhancing Balance Sheet • 2017 outlook: further growth; consistent deleverage; sustainable dividend A solid platform for sustainable growth 33 I
Slide 35: For further information: Investor Relations
For further information: Investor Relations Tel. +34 94 482 87 00 ir@telefonica.com www.telefonica.com/investors