Telefonica Sa · BME:TEF
Telefonica Sa — Non-Deal Roadshow (October 2008)
30 slides from Telefonica Sa's roadshow presentation, Oct 1, 2008
Slide 1: Telefónica Latam: The key growth lever of Telefónica
Telefónica Latam: The key growth lever of Telefónica José María Álvarez-Pallete General Manager Telefónica Latinoamérica New York and Boston, September 30th – October 1st, 2008 TELEFONICA S.A. Investor Relations 1
Slide 2: Disclaimer
Disclaimer This document contains statements that constitute forward looking statements about the Company including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations. These statements appear in a number of places in this doc
Slide 3: Index
Index 1 Telefónica Latinoamérica at a glance 2 Unique top line growth potential in a fast growth region 3 Regional integrated management and scale benefits to further enhance efficiency 4 On track to deliver a superior growth guidance TELEFONICA S.A. Investor Relations 3
Slide 4: The leading integrated player in a growth region
The leading integrated player in a growth region… June-2008 #2 #1 #2 #2 Operations in 15 •2.3 m Fixed countries1 •9.8 m Mobile •14.1 m Mobile •0.3 m Broadband •9.4 m Mobile •0.1 m TV 31% 2007 market share (E2) #2 •5.5 m Mobile •0.4 m Fixed •0.02m Broadband #2 #1 FY 2007 #2 •2.9 m Mobile •11.9 m Fixe
Slide 5: …with a strategic alliance in a very dynamic market
…with a strategic alliance in a very dynamic market 5.5% stake1 in the merged entity China Netcom-China Unicom 9 132 million accesses (Jun-08) 9 In a country with a population of 1,300 million 9 Huge ICT growth potential: 21% of forecasted world telecom revenue growth 2007-20102 TELEFONICA S.A. 1-
Slide 6: The main growth driver of Telefónica
The main growth driver of Telefónica … H1 08 T.Latam weight in TEF 37.4% 34.4% Revenues OIBDA H1 08 Revenue growth H1 OIBDA growth 1 (Organic y-o-y growth) (Organic2 y-o-y growth) +12.2% +15.8% +12.0% +6.7% +11.8% y-o-y in Q1 08 TEF T. Latam TEF T. Latam Contribution Contribution to Group growth +4.
Slide 7: … with a highly diversified portfolio…
… with a highly diversified portfolio… Jun-08 Accesses (in millions) +69.3% +26.1% +27.1% 1.4 +7.5 p.p. acceleration +21.4% 5.5 vs. Jun-07 25.8 147.9 113.5 +1.9% Total accesses Mobile BB1 Pay TV Fixed2 Revenue 42% Contribution to T.Latam H1 08 results OIBDA 40% Countries in orange are Investment G
Slide 8: Index
Index 1 Telefónica Latinoamérica at a glance 2 Unique top line growth potential in a fast growth region 3 Regional integrated management and scale benefits to further enhance efficiency 4 On track to deliver a superior growth guidance TELEFONICA S.A. Investor Relations 8
Slide 9: For the future, LATAM holds huge potential for Telefónica
For the future, LATAM holds huge potential for Telefónica 75% of the GDP of LATAM Peru & Brazil Debt in investment grade Rating upgraded to countries estimated for Investment Grade in Region GDP per capita 2010 2008 PPP growth expectations CAGR 2006-2010: 5.7%1 74 million people living in Increased
Slide 10: Significant top line growth potential, capitalising on our unique integrated approach
Significant top line growth potential, capitalising on our unique integrated approach WIRELESS WIRELINE Accesses expansion Further penetration increase (Broadband, TV, fixed wireless) Voice usage upside + Traffic bundles 3G will be launched Further Broadband development Data potential by
Slide 11: Solid growth prospects in wireless penetration …
WIRELESS Solid growth prospects in wireless penetration … +6 p.p. +6 p.p. 83% Fast growth, exceeding expectations 69% 75% Wireless 56% 62% Further upside driven by: penetration in Latin Bigger addressable market America Lower entry barriers (GSM, scale benefits) Dec-06 Jun-07 Dec-07 Jun-08
Slide 12: …fully flowing into our customer base
WIRELESS …fully flowing into our customer base T. Latam 22.4% 22.3%1 wireless 18.9% Customer growth acceleration: customer Double digit customer growth across growth markets (y-o-y growth) Jun-07 Dec-07 Jun-08 8.9m net adds in H1 08 3 Leveraging enhanced distribution channels and GSM network
Slide 13: Fostering usage to expand ARPU
WIRELESS Fostering usage to expand ARPU New commercial offerings to drive elasticity: 190 MoU potential1: 161 95 Jun-08 Contract weight Exploiting (y-o-y) voice usage Latam Spain UK levers +3.5 p.p. +2.2 p.p. Recharge incentives: “Duplicame” Customer migrations to higher value products: Prep
Slide 14: Fostering usage to expand ARPU
WIRELESS Fostering usage to expand ARPU New commercial offerings to drive elasticity: 190 MoU potential1: 161 95 Jun-08 Contract weight Exploiting (y-o-y) voice usage Latam Spain UK levers +3.5 p.p. +2.2 p.p. Recharge incentives: “Duplicame” Customer migrations to higher value products: Prep
Slide 15: Brazil: sound results, capitalising our strengthened competitive position
WIRELESS Brazil: sound results, capitalising our strengthened competitive position Brand strength: Net adds market share3 Higher than market average customer satisfaction1 24.7% 19.6% Best service quality2 Nationwide footprint: Jan-Aug 07 Jan-Aug 08 Telemig’s acquisition Acquisition of a
Slide 16: Mexico: reinforcing market positioning, capitalising a profitable growth model
WIRELESS Mexico: reinforcing market positioning, capitalising a profitable growth model Enhanced distribution channel: Revenue market share Better quality adds and lower churn Further initiatives to better address the postpay market (Maxcom, Alestra …) Innovative +3 p.p.commercial offers, dr
Slide 17: Sum-up: Capturing growth opportunities in the wireless market
WIRELESS Sum-up: Capturing growth opportunities in the wireless market 53% H1 08/H1 07 Mobile outgoing service revenue growth H1 08/H1 07 Mobile outgoing serv. Rev.-Customer growth Customer 41% 33% 30% & mobile 28% 27% 24% outgoing +15p.p. 19% 17% 17% service +9p.p. revenue +16 p.p. +15p.p -15p.p. +
Slide 18: Transforming our wireline business to capture the BB opportunity
WIRELINE Transforming our wireline business to capture the BB opportunity +2 p.p. 23% +2 p.p. Broadband 17% penetration1 15% 10% 12% Healthy growth rates in Latin America Further potential driven by: Bigger addressable market Dec-06 Jun-07 Dec-07 Jun-08 Dec-10E Expanded network coverage N
Slide 19: Expanding our access base at a strong pace …
WIRELINE Expanding our access base at a strong pace … Regional replication of successful products: 1.1m new BB accesses in last 12 months Speedy Duo, Speedy business portfolio Expanded coverage in Colombia with Jun-08 5,526 positive impact in net adds (Q2-08: +46.1% vs. 2,297 y-o-y growth Retail
Slide 20: … fostering bundles penetration, with positive results per access …
WIRELINE … fostering bundles penetration, with positive results per access … Jun-08 Local & Control Bundles Jun-08 2P&3P/DSL Y-o-y growth +2P&3P/Fixed Accesses Accesses 92% Broader launch of Voice/BB/TV 96% 70% 55% 50% 57% 62% 55% bundles to keep leadership in high 46% value segment and increase l
Slide 21: …with healthy top line expansion, reducing exposure to regulated services
WIRELINE …with healthy top line expansion, reducing exposure to regulated services H1 08/H1 07 Total revenue growth H1 08/H1 07 Internet &TV revenue growth 101.9% 40.6% 33.7% 32.6% 27.9% Revenue1 growth 11.3% 16.5% 3.8% 4.7% 6.4% 1.2% T.Latam Brazil Argentina Chile Peru Colombia Wireline -7.6% Tradi
Slide 22: Index
Index 1 Telefónica Latinoamérica at a glance 2 Unique top line growth potential in a fast growth region 3 Regional integrated management and scale benefits to further enhance efficiency 4 On track to deliver a superior growth guidance TELEFONICA S.A. Investor Relations 22
Slide 23: Regionalization, a key and differential operating and commercial model in the region
Regionalization, a key and differential operating and commercial model in the region Telefónica´s Regionalization process Multiple operational systems Regional management and planning model F and outsourcing policies T Unique outsourcing and network R Local management of data development pol
Slide 24: OIBDA Margin levers
OIBDA Margin levers WIRELESS WIRELINE Leveraging scale: Smoother change in revenue mix: Handsets & equipment purchasing Lower contribution from high margin Marketing and sponsorships services already materialised in most markets Further efficiency in commercial costs Enlarged scale in
Slide 25: Already capitalising on enhanced efficiency levers …
Already capitalising on enhanced efficiency levers … >X3 H1 08 OIBDA y-o-y growth (ex- forex) Total OIBDA 70.3% Wireless OIBDA 59.1% 58.2% 32.7% 31.5% 30.7% 23.5% 22.1% 12.6% 12.2% 11.4% 8.1% 0% 2.0% Mexico Uruguay Colombia Peru Chile Argentina Venezuela Ecuador Brazil C. America OIBDA growth 1 OIBD
Slide 26: … with a direct impact on margins
… with a direct impact on margins Leveraging scale benefits +2.4 p.p. Total employees to leave in 2008 and cost measures: (Index) Solid OIBDA 36.4% Workforce reorganization margin 33.9% programs 100% expansion Lower subsidies 73% (T. Latam) Enhanced quality service & commercial efficiency 20
Slide 27: On track to meet 2010 targets
On track to meet 2010 targets +12.5%(2) +10/+13% +14% +14.5% +8.0%(1) +11% Revenue H1 08/H1 07: +13.2% 2007-10 Capex: 2006 2007 2008 2009-2010 2006-2010 €14-16 bn Reported Guidance3 Implicit4 CAGR Guidance +18.3%(2) +12/+17% +16% 2010 +15.5% +10.3%(1) OpCF: >€7 +12% bn OIBDA H1 08/H1 07: +15.4% 2006
Slide 28: Index
Index 1 Telefónica Latinoamérica at a glance 2 Unique top line growth potential in a fast growth region 3 Regional integrated management and scale benefits to further enhance efficiency 4 On track to deliver a superior growth guidance TELEFONICA S.A. Investor Relations 28
Slide 29: Closing remarks
Closing remarks On track to deliver a superior growth guidance Best positioned player to capture the strong growth Differentiated potential of the telecom market in the region strategy in high growth + Our differentiated management model and scale potential area economies will lead to continuous imp
Slide 30: TELEFONICA S.A. Investor Relations
TELEFONICA S.A. Investor Relations 30