Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — FY2018 Earnings Presentation
34 slides from Telefonica Sa's earnings presentation, Feb 21, 2019
Slide 1: Results January | December 2018
RESULTS JANUARY | DECEMBER 2018
Slide 2: 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 3: 2018 Highlights, 2019 Outlook
2018 Highlights 2019 Outlook Mr. José Mª Álvarez-Pallete Chairman & CEO
Slide 4: 2018 Highlights
2018 Highlights Gaining customers’ relevance Transforming our revenue mix Investing to reinforce our platforms Top digital customer experience, Radical transformation in demand Best technological platforms at the best technology at their service from voice to data service of our customers’ needs Dem
Slide 5: 2018 proof points backing up our strategy
2018 proof points backing up our strategy Gaining customers’ relevance Transforming our revenue mix Investing to reinforce our platforms 356 mill accesses; stable churn 53% BB & SoC revs; +1pp y-o-y #1 fiber in Europe & Latam Excellence in value customers 35% Voice & access revs. ; -4pp y-o-y #1 vir
Slide 6: Last years: organic growth; growing cash; reducing debt
Last 4 years: organic growth; growing cash; reducing debt Revenues OpCF ex-spectrum y-o-y organic €m 9000 8,027 8,320 8000 6,535 3.5% 3.4% 7000 2.4% 6000 1.3% 4,353 5000 4000 3000 FY 15 FY 16 FY 17 FY 18 2000 1000 FY 15 FY 16 FY 17 FY 18 OIBDA (0.1 p.p.) +1.0 p.p. +0.6 p.p. +0.3 p.p. Margin FCF ex-s
Slide 7: Financials in a nutshell
Financials in a nutshell FY 18 Q4 18 Reported Reported Organic Reported Reported Organic € in millions IFRS 15&9 y-o-y y-o-y IFRS 15&9 y-o-y y-o-y Revenues 48,693 (6.4%) 2.4% 12,917 (1.9%) 3.0% Profitable Growth Service revenues 43,585 (8.9%) 1.0% 11,275 (5.1%) 1.3% OIBDA Underlying 15,813 (5.0%) 4,
Slide 8: Delivering on our commitments
Delivering on our commitments Operating 2018 guidance Upgraded Guidance 2018 FY 18 (organic) Growth of around 2% Revenues +2.4% (despite regulation dragging: ~-0.9 p.p.) Continues expanding around 0.5 p.p. (despite OIBDA Margin +0.3 p.p. regulation dragging ~-1.6 p.p. on OIBDA growth) CAPEX Around 1
Slide 9: Our platforms make us relevant to our customers
Our platforms make us relevant to our customers Normalisation Cognitive 4P AURA Normalised Data AI Use Cases power 6 Countries Common dictionary of data Network deployment: FTTH CapEx optimisation Normalised APIs TV recommender: 5x Content on Demand Personalisation Digital Revenues Products & 3P SoC
Slide 10: FY & Q4 Results
FY & Q4 18 Results Mr. Ángel Vilá COO
Slide 11: Ongoing strong momentum
Ongoing strong momentum Revenues Sequential improvement in Revenues & OpCF y-o-y organic • +30 bps revs. acceleration +3.6% LATAM - Services revs. (+10 bps.); mainly Brazil + Spain +3.1% +3.2% +2.6% +3.0% GROUP Handsets sales (+20bps) +2.0% +2.7% - +1.9% +2.2% EUROPE +1.6% • Both Latam and Europe re
Slide 12: B2C | Enriched portfolio, video and data boost growth
B2C | Enriched portfolio, video and data boost growth Growth across regions in 2018 Larger scale in Video (‘000) y-o-y • New offers developed in convergent markets 9,821 - “M4M” new Fusión portfolio (SP Oct-18) 8,875 5,338 - Pay TV launch (ARG Oct-18) 3,537 945 - First convergent offer (PER Jan-19)
Slide 13: B2B | Differentiated proposal, relevant and distinctive growth engine
B2B | Differentiated proposal, relevant and distinctive growth engine Business Revenues 2018 Lego-like value proposal (€m) y-o-y organic • Integral Digital Solutions portfolio, ready to tailor 9,622 - “Digital Core“ services: Comms + Cloud + Security 4,753 4,869 - Building blocks: In-house digital s
Slide 14: Digital Transformation | Customer at the centre
Digital Transformation | Customer at the centre Increase Direct customer Foster top-ups & Make payments & collections Improve experience Enhanced customer interaction for sales add-ons through own digital more efficient fulfillment and technical care experience channels and user friendly support Tra
Slide 15: Spain | Competitive differentiation in a rational market
Spain | Competitive differentiation in a rational market Accesses ARPU growth ramps up on value strategy y-o-y Dec- 17 Dec-18 14% 15% 10% • Competitive offering underpins sound trading 9% 6% 7% 5% 6% - New “Fusión”(Oct), “O2”(Oct), Netflix (Dec) 2% - Positive contract portability (Q4 & FY) (1%) • Ch
Slide 16: Spain | Improved delivery: revenue acceleration, stronger cash
Spain | Improved delivery: revenue acceleration, stronger cash 6th straight quarter of SR growth Service Revenues Service Revenues 6th straight quarter of SR growth y-o-y organic FY 17 FY 18 SR ex-MTR/MásMóvil • Q4 service revenues growth improved (+0.6 p.p. q-o-q) - “Consumer” (+0.6 p.p.) on conver
Slide 17: Germany | Network integration largely finalised
Germany | Network integration largely finalised Contract net adds Accelerating data monetisation Positive operational momentum (k) y-o-y Avg. data usage of O2 contract LTE cust • 47.1m accesses in EU largest market LTE penetration • Monetising data demand: Innovative tariff portfolio - O Free 2 4.1G
Slide 18: UK | Consistently outperforming the market
UK | Consistently outperforming the market Net adds Customer-centric (k) Postpay incl. M2M Prepay • Market-leading UK mobile operator with 32.6m accesses 284 (25.0m own brand + 7.6m MVNO partners) 117 - Strong contract net adds on the back of differentiated 84 16 propositions (+284k in Q4; +501k in
Slide 19: Brazil | Strong operating momentum
Brazil | Strong operating momentum The best customer base profile Contract Net adds 2018 Prepaid Revenues 2018 (‘000) Contract MS (y-o-y) • Strengthening leadership - Contract Net adds: 3.6m (+7% vs 2017) 40.5% (12.7%) - Churn 2018: stable y-o-y 936 980 990 727 (17.5%) • Better performance in Q4 in
Slide 20: Brazil | Best quarterly OIBDA margin ever
Brazil | Best quarterly OIBDA margin ever Revenues OpEx vs Inflation Revenue trend reversed y-o-y organic Q3 18 Q4 18 y-o-y organic cumulative • FY 18 Total Revenues: +0.3% y-o-y (+1.5 p.p. q-o-q in Q4) OpEx Inflation - MSR +1.1% (+1.0 p.p. q-o-q in Q4) 0.5% 13.0% - Better macro & prepaid 6.3% 9.2%
Slide 21: South Hispam | Sustainable growth in a difficult environment
South Hispam | Sustainable growth in a difficult environment Accesses (Dec-18) Growth in value; still low penetration y-o-y Penetration • 5th consecutive quarter of positive contract net adds, +860k in 50% 2018 (-565k in 2017) 28% • Focus on fiber deployment - 2.1m prem. Passed in 2018 (8.3m Dec-18)
Slide 22: North Hispam | Regulation and competition dragging growth
North Hispam | Regulation and competition dragging growth Accesses Outstanding FY OpCF (+18%) in a difficult environment Dec-18 y-o-y Penetration 2.4x • Value growth offseting Mexico headwinds - Contract accesses y-o-y growth in COL, MEX & CAM 43% - 304k FTTx connections (x2.4 y-o-y); 27% FTTx take
Slide 23: Telxius | Crystallising value from premium infrastructure
Telxius | Crystallising value from premium infrastructure Growing asset portfolio Towers Tenants # Net adds # Net adds • Increased traction in Towers - 291 new tenants in Q4; largest quarterly gain in 2018 22,639 Q4 FY Q4 FY - Higher tenancy ratio: 1.36 (+0.01x q-o-q; +0.03x y-o-y) 16,679 +291 +920
Slide 24: FY & Q4 Results
FY & Q4 18 Results Ms. Laura Abasolo CFCO
Slide 25: Q4 OIBDA & Net income special factors
Q4 OIBDA & Net income special factors Q4 impacts in OIBDA -€472m Q4 impacts in Net Income -€651m 80 54 (46) (101) (262) (242) (242) (651) (363) (472) Hyperinflation Others Impairment Restructuring TOTAL Hyperinflation Others Restructuring Impairment TOTAL Mex Provisions factors Provisions Mex factor
Slide 26: FY Net income surpassed €3.3bn; EPS €0.57
FY Net income surpassed €3.3bn; EPS €0.57 FY 2018 €m (3.8%) reported 15,571 9,049 (4.0%) reported +6.4% reported 6,522 4 (955) (1,621) (619) 3,331 OIBDA D&A OI Associates Net financial Taxes Minorities Net Income expenses EPS +2.2% reported Underlying EPS €0.81 +9.0% 21
Slide 27: Managing FX headwinds
Managing FX headwinds OIBDA Lower drag from FX in Q4 €m • FX (ex. hyperinflation) reduced y-o-y (93) 1,137 (1,511) 16,187 (148) -Revs. (Q4: -7.2 p.p.; FY: -8.2 p.p.) 15,571 -OIBDA (Q4: -7.8 p.p.; FY: -9.3 p.p.) • Positive contribution from hyperinflation in Q4 FY 17 Other Organic FX Hyperinfl. FY 18
Slide 28: Strong FCF; mid-single digit growth in FY ex-spectrum
Strong FCF; mid-single digit growth in FY ex-spectrum FCF ex-spectrum 2018 FCF ex-spectrum growing on improved business performance €m +5.3% y-o-y €m 5,578 8,320 79 +14.1% y-o-y +5.3% y-o-y 1,987 1,588 1,435 (1,636) 5,578 579 4,904 (1,184) (674) Q1 Q2 Q3 Q4 FY FCF reported 550 998 1,420 1,947 4,904
Slide 29: Steady net debt reduction out of strong FCF
Steady net debt reduction out of strong FCF Net Financial Debt €m € Bn -2,445 ND/OIBDA ND/OIBDA ND/OIBDA 2.66x 2.65x 2.61x 44,230 (4,904) 775 (392) (532) 2,608 41,785 (1.4) 40.4 Dec-17 FCF Shareholder Pre-retirement Net financial FX & Dec-18 Post-closing Dec-18 remun. (incl. commitments investments
Slide 30: Strong liquidity thanks to attractive long-term financing
Strong liquidity thanks to attractive long-term financing Sources of long-term financing Net Debt maturities FY 2018 & 2019 YTD | €Bn Dec-18 | €Bn; not considering hybrid NC dates 5.5 13.5 74% debt Avg. debt life in fixed rates 9.0 years 2.3 1.1 5.5 5.6 2.0 Cash > gross 1.6 maturities 1.0 2019E 2020
Slide 31: Conclusion
Conclusion Mr. José Mª Álvarez-Pallete Chairman & CEO 31
Slide 32: 2019 guidance
2019 guidance Operating 2019 guidance Guidance 2019E (organic) Revenues Around +2% Sustainable revenue & OIBDA growth despite regulation OIBDA Around +2% CapEx / Sales Around 15% ex-spectrum CapEx rationality Attractive, stable & sustainable dividend 2019 DIVIDEND €0.4/SH. CASH Dividends to be paid
Slide 33: Summary
Summary 2018 • Focus and invest in transformation • Leading the pack in digitalisation, virtualisation & AI • Upgrade customer base; clear drive towards FTTx and 4G • Sustainable organic growth; margin expansion; further deleverage on robust FCF • Growth & returns; leveraging our differential assets
Slide 34: For further information: Investor Relations
For further information: Investor Relations Tel. +34 91 482 87 00 FOLLOW US: ir@telefonica.com www.telefonica.com/investors 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, thereu