Telefonica Sa · BME:TEF
Telefonica Sa — FY2002 Earnings Presentation
26 slides from Telefonica Sa's earnings presentation, February 2003
Slide 1: January - December 2002 Results
January - December 2002 Results This presentation is being broadcast live on the Internet
Slide 2: Safe Harbour
SAFE HARBOUR This presentation to analysts contains statements that constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation and include statements regarding the intent. belief
Slide 3: 2002: A year of executing our key strategic initiatives
2002: A YEAR OF EXECUTING OUR KEY STRATEGIC INITIATIVES... More than 957.000 ADSL subs., above target Spain More than 18,4 Mill. wireless clients, 55% mkt. share STRENGTHENING OUR POSITION IN CORE +36% & 32% mkt. share in DLD & ILD for Telesp BUSINESSES IN NATURAL Brazil Incorporation of JV+acquisit
Slide 4: One-offs negatively impacting 2002 net income, but reinforcing balance sheet quality
ONE-OFFS NEGATIVELY IMPACTING 2002 NET INCOME, BUT REINFORCING THE QUALITY OF OUR BALANCE SHEET 1.2 Bn. Euros of external Azul Tv, ETI, 1.89% of share net debt in $US Onda Cero & capital valued at UMTS, Terra, Media Lycos ventures 8.53 € & Mediaways From 1.70 to 3.37 Peso/$US Reported Argentina Non
Slide 5: We have kept a consistent cash flow generation despite one-offs
WE HAVE KEPT A CONSISTENT CASH FLOW GENERATION DESPITE ONE-OFFS OPERATING CASH FLOW * OPERATING CASH FLOW BREAKDOWN (Million Euros) (Million Euros) 27.9% 26.1% -75.0% 62.6% 7,935.2 2,658.8 327.5 94.1% 7,935.2 15.7% 4,881.5 2,830.6 5.6% 2,773.2 2001 2002 TdE Mobile T. Latam Other Total Business Busin
Slide 6: Bottom line: 2002 strategic decisions will pave the way for profitable growth
2002 STRATEGIC DECISIONS WILL PAVE THE WAY FOR PROFITABLE GROWTH IN COMING YEARS... IMPROVING P&L AT ALL LEVELS... ...STRENGTHENING BALANCE SHEET QUALITY CONSISTENT GROWTH * IN: LEVERAGING ON: % INTANGIBLES/TOTAL REVENUES CLIENTS & NATURAL ASSETS MARKETS TOP LINE EBITDA EBIT SERVICES 31.9% EFFICIENC
Slide 7: ...that will derive into a set of sound financials
...THAT WILL DERIVE INTO A SET OF SOUND FINANCIALS * REVENUES EBITDA EBIT (€ IN MM) (€ IN MM) (€ IN MM) +5/8% +6/9% +18/21% 28,411.3 11,724.2 5,031.8 2002 2003 2002 2003 2002 2003 CAPEX CASH FLOW ** (€ IN MM) (€ IN MM) 0/+3% +9/12% 3,789.0 7,935.2 2002 2003 2002 2003 * All financials are excluding f
Slide 8: We have taken the decisions to drive growth and profitability across the Group
WE HAVE TAKEN THE DECISIONS TO DRIVE GROWTH AND PROFITABILITY ACROSS THE GROUP 9 WE HAVE WORKED TO IMPROVE THE OUTLOOK OF OUR BUSINESSES, ADAPTING TO MACRO AND SECTOR CONDITIONS, AND STRENGTHENING THEIR EFFICIENCY AND CAPACITY TO GENERATE CASH FLOW 9 WE HAVE IMPROVED THE QUALITY OF THE COMPANY´S BAL
Slide 9: 2002 Financial Highlights
2002 FINANCIAL HIGHLIGHTS... REVENUES EBITDA EBIT (€ in millions) (€ in millions) (€ in millions) 31.052.6 -8.5% -7.3% -8.4% 12.804.3 5.430.3 28.411.3 11.724.2 5,031.8 2001 2002 2001 2002 2001 2002 JANUARY-DECEMBER 2002 KEY DRIVERS 9 DEPRECIATED FOREIGN EXCHANGE RATES Fx drains 14.6 p.p. to revenues
Slide 10: ...Negatively impacted by Latam forex...
...NEGATIVELY IMPACTED BY LATAM FOREX... DEPRECIATION OF LATAM CURRENCIES FX IMPACT ON REVENUES (2002 AVERAGE EXCHANGE RATES AGAINST $US) AND EBITDA GROWTH IN 2002 BRL ARS CLP* PEN* MXN* 1Q02 1H02 9M02 FY 2002 -2.0 % -8.9 % -11.3 % -19.5 % -7.5 p.p. -8.0 p.p. -10.0 p.p. Revenues -12,5 p.p.-12,4 p.p.
Slide 11: ...and Argentina reduced contribution
... AND ARGENTINA REDUCED CONTRIBUTION € in Million Revenues EBITDA EBIT 2001 2002 2001 2002 2001 2002 Telefónica Group 31,052.6 28,411.3 12,804.3 11,724.2 5,430.3 5,031.8 Argentina 3,906.8 1,048.9 1,647.1 431.9 764.3 158.4 Telefónica Group 27,145.9 27,362.4 11,157.2 11,292.2 4,666.0 4,873.3 ex-Arge
Slide 12: Keeping cost structures under control...
KEEPING COST STRUCTURES UNDER CONTROL... COST CONTROL ACROSS THE GROUP * € in Million % Change % Change % Change % Change 1Q02/1Q01 1H02/1H01 9M02/9M01 FY02/FY01 TdE Group +3.9% +3.9% +2.9% +0.9% Cell. Business +11.9% +9.4% +8.2% +4.7% T. LATAM -14.7% -22.0% -26.5% -29.2% T. Data +6.7% -6.1% -12.3%
Slide 13: ...while gearing capex towards revenue streams
...WHILE GEARING CAPEX TOWARDS REVENUE STREAMS TELEFONICA LATAM * 2002 vs 2001 in local currency Telesp Tasa CTC TdP A RATIONALIZED GROUP CAPEX -30.0% -46.8% -63.4% -12.2 p.p. -67.7% 25.5% 13.3% TELEFONICA DE ESPAÑA PARENT 7,922.8 -52.2% Transformation 1,854.6 -7.0% 1,725.6 Traditional 40% 46% 3,789
Slide 14: Telefónica de España: Traditional business
TELEFONICA DE ESPAÑA: TRADITIONAL BUSINESS TRADITIONAL REVENUES 9 3.1 p.p. ACCESS MARKET SHARE LOSS IN 2002 0,0% 9 1, 8 MILL. PRESELECTED LINES AS OF 12/31/02 -1.3% (435,000 ADDITIONAL TO 2001 FIGURE) -1.9% -1.9% -3.9% -2.0% 9 4.2 p.p. OF TRAFFIC MARKET SHARE LOSS IN 2002 -4.0% 1Q02 1H02 9M02 FY02 9
Slide 15: Telefónica de España: ADSL 2002 performance
TELEFONICA DE ESPAÑA : ADSL 2002 PERFORMANCE 361.4 276.4 -38.5% GROSS INCREMENTAL CAPEX per new MARGIN connection (€) (euros in millions) 84.9 2001 2002 REVENUES DIRECT GROSS INCREMENTAL COSTS(1) MARGIN ADSL CONNECTIONS RETAIL SAC per RETAIL ARPU (thousands) new connection (€) 957.2 660.9 747.0 42.0
Slide 16: T. Latinoamerica: Wireline performance under...
T. LATINOAMERICA: WIRELINE PERFORMANCE UNDER ... T. LATAM REV / OPERATING REVENUES EBITDA % change Dec02 / Dec01 % change Dec02 / Dec01 EBITDA EX FOREX Local Currency Local Currency Revenues EBITDA Real Real 11.4% 8.0% 0.6% N Sol -3.4% 1.9% Arg. Peso Ch Peso N Sol Arg. Peso Ch Peso -3.5% -6.6% -9.1%
Slide 17: ...the solid underlying performance of Telesp...
...THE SOLID UNDERLYING PERFORMANCE OF TELESP... LOCAL REVENUES LONG DISTANCE REVENUES ($R in millions) ($R in millions) 6,901 1,522 +10.5% +37.2% 6,244 1,110 2001 2002 2001 2002 9 6% growth in average lines in service 9 36% DLD market share as of December 02 9 Average tariff increases: +10.4% in 01
Slide 18: ...and an active management of TASA's operating environment
...AND AN ACTIVE MANAGEMENT OF TASA´S OPERATING ENVIRONMENT STABILIZING KEY BUSINESS METRICS... FIXED LINE NET ADDS TRAFFIC/LINE/DAY (min.) BAD DEBT (% of revenues) 15.26 9.2% 9.4% 9.0% 1Q02 2Q02 3Q02 4Q02 Local 14.62 12.92 13.70 7.7% -5,000 6.9% -10,000 -24,000 1.71 1.59 1.44 1.69 LDN 0.150 0.140 0
Slide 19: 2003 Wireline Outlook
2003 WIRELINE OUTLOOK TELEFONICA DE ESPAÑA GROUP REVENUES EBITDA * CAPEX (€ IN MM) (€ IN MM) (€ IN MM) -3/+0% -4/-1% -15/-20% 10,272.1 4,517.2 1,744.0 2002 2003 2002 2003 2002 2003 TELEFONICA LATINOAMERICA ** REVENUES EBITDA CAPEX (€ IN MM) (€ IN MM) (€ IN MM) +6/9% +4/7% -2/+1% 6,954.1 3,346.7 687.
Slide 20: T. Móviles Group performed strongly...
T. MOVILES GROUP PERFORMED STRONGLY... 2001 EBITDA BREAKDOWN (€ in millions) 2002 reported 18.7% 2002 ex-fx 181.8 225.0 8.7% 9,984.0 425.8 9,139.8 14.7 122.4 19.1% 3,735.8 8,411.1 3,490.3 12.1% 3,970.4 3,333.7 3,735.8 Spain Brazil Mexico Rest 3G Intercompany Total Revenues EBITDA of Latam Europe & O
Slide 21: Telefónica Data: Execution on operating efficiency
TELEFONICA DATA: EXECUTION ON OPERATING EFFICIENCY 2002 GROUP REVENUES INCUMBENT MARKETS REMAIN ROBUST (Annual % Change) (EBITDA MARGIN *) 2001 SPAIN LATAM 2002 +8% 24% 19% 19% +3% 17% 16% 19% 14% Reported 7% Ex-Fx Ex-Fx & Changes 6% 4% in consolidation -6% 2001 ** 2002 Argentina Brazil Chile Peru I
Slide 22: Net financial expenses
NET FINANCIAL EXPENSES (*) Euros in millions Dec02 Dec01 % Change Debt financial expense (1,783.5) (2,016.8) (11.6%) Other financial expenses (43.2) (55.4) (22.0%) Financial Income 337.8 456.5 (26.0%) Net interest (1,488.9) (1,615.7) (7.8%) Financial provisions and net forex (1) (732.7) (775.4) (5.5
Slide 23: Strengthening our credit profile through 2002
STRENGTHENING OUR CREDIT PROFILE THROUGH 2002 CONSOLIDATED DEBT EVOLUTION COMPONENTS OF 2002 (€ IN MM) DEBT REDUCTION -27.9% 28,942 4,546 31,244 28,942 3,044 1,564 1,618 22,533 25,789 2,000 22,533 2Q01 FY2001 2Q02 FY2002 2001 Operating Forex Preferred Financial Changes in Total FCF shares Investment
Slide 24: 2002 Cash flow statement
2002 CASH FLOW STATEMENT (Euros in millions) December 2002 I Cash flows from operations 11,757.5 II Other payment related to operating activities (1,139.10) III Net interest payment (1,610.90) IV Payment for income tax (226.60) A= I+II+III+IV Net cash provided by operating activities 8,780.9 V Net p
Slide 25: Conclusions
CONCLUSIONS 9 LATIN AMERICAN FOREX & ARGENTINA HAVE BEEN SUBSTANTIALLY DRAINING REVENUES AND EBITDA GROWTH THROUGHOUT THE YEAR 9 BRAZILIAN SUBSIDIARIES HAVE SHOWN ROBUST OPERATING PERFORMANCE, AND WE HAVE SET THE BASIS FOR FUTURE GROWTH IN WIRELINE & WIRELESS 9 WE HAVE KEPT OUR PRESSURE ON COSTS AND
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