Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — Q2 2018 Earnings Presentation
32 slides from Telefonica Sa's earnings presentation, Jul 26, 2018
Slide 1: Telefónica
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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: Q2 Highlights
Q2 18 Highlights Mr. José María Álvarez-Pallete Chairman & CEO 3
Slide 4: Continued progress with strategic priorities
Q2 Highlights | Continued progress with strategic priorities Enable people with the • Strong demand drives value momentum; +31% LTE; +23% FTTx/Cable; +6% Pay TV power of connectivity • UBB deployments; +15% y-o-y premises passed with FTTx/Cable ; +6pp LTE cov. • Bundling & Upselling; Avg. Rev per Ac
Slide 5: Financial achievements
Financial achievements H1 18 Q2 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 24,334 (6.7%) 2.0% 12,144 (6.3%) 2.0% Service revenues 22,042 (9.0%) 0.7% 11,002 (8.6%) 0.7% Sustained Revenue, OIBDA 8,102 (0.9%) 3.7% 4,237 1.9%
Slide 6: Guidance confirmed
Guidance confirmed Operating 2018 Guidance 2018E (IAS 18) H1 18 guidance (organic) Growth of around 1% Solid balance sheet Revenues +2.0% (despite regulation dragging: -0.9 p.p.) Additional deleveraging Continues expanding around 0.5 p.p. Improved ROCE OIBDA Margin (despite regulation dragging -1.6
Slide 7: Continued Revenue, OIBDA and OpCF increase
Continued Revenue, OIBDA and OpCF increase Revenues, OIBDA, & OpCF (ex spectrum) Healthy growth rates in main metrics y-o-y organic Reported y-o-y • Improving Q2 revenue trends y-o-y Revenues OIBDA - Service rev. trends maintained (Q2: +0.7%; Q1: +0.8%), 4.1% despite regulatory drag of -1.2p.p. 3.3%
Slide 8: A platform Company advancing towards a Digital Telco
A platform Company advancing towards a Digital Telco Customer 4P AI applied to E2E network control & customer care Artificial centric Intelligence 1.3 PB/month Our customers Data being normalised talking to the Network AURA Pilot in Spain on Movistar Home 3P Digital value proposition enhancing reven
Slide 9: Data monetisation: Capturing the added value of connectivity
Data monetisation | Capturing the added value of connectivity B2C B2B Open platform ecosystem to integrate digital services at home A leading technological partner to B2B digitalisation • Smart Wi-Fi, Consumer IoT, Movistar Play • Comprehensive solution: flexible, secure, on-demand Evolved portfolio
Slide 10: Video: a key driver for engagement gaining scale
Video| a key driver for engagement gaining scale Latam • Connected STB and “TV Everywhere” service (multidevice) Pay TV _ More interactive & flexible • Platform “Best in class”, advance life functionalities • Content: HBO, FOX, ESPN/Disney, Viacom, Discovery & Turner 4.8m • Encouraging progress new
Slide 11: Q2 Results
Q2 18 Results Mr. Ángel Vilá COO
Slide 12: Digitalization increases customer value and lifespan
Digitalization increases customer value and lifespan Build…. Accesses y-o-y • Leading-edge smart networks - Network stands for >50% of total customer satisfaction 12.2m 106.6m 8.7m • Radical processes automatisation FTTx/Cable LTE Pay-TV - Full stack deployment, the seed of our transformation +23% x
Slide 13: Digital Transformation: Easing customer's digital life
Digital Transformation | Easing customer’s digital life 5 priorities on the customer journey …. 2017-20 Increase Direct Foster top-ups & Make the payments & Improve experience Enhanced customer add-ons through own collections more efficient Fulfilment and customer care interaction for sales digital
Slide 14: Spain: Good trading; increasing long-term high-value
Spain | Good trading; increasing long-term high-value Accesses (y-o-y) Growth in accesses; higher ARPU 17 8 233 117 163 Q2 Net adds (‘000) • Sustained growth at retail base (+1.4% y-o-y) 115% 14% • FBB back to growth (Fiber net adds exceed DSL loss) 7% 7% 0.2% • "Fusión" trends positive overall FBB
Slide 15: Spain: Solid financials; stronger franchise
Spain | Solid financials; stronger franchise Service Revenues Q2 Serv. Revs. Growth; +1.4% ex-MTR/MasMóvil (€M) Residential Business Wholesale & other • Serv. Rev. growth deceleration due to calendar effect y-o-y organic Tariff phasing • “Residential” & “Business” revs. growing (83% o/Serv. Rev.) -
Slide 16: Germany: Network integration well on-track
Germany | Network integration well on-track Robust operational momentum Improving data monetisation • Q2 Contract net adds +333k (+69% y-o-y) LTE customers & Penetration (M) Penetration - Launched refreshed O2 Free (boost option) & O2 Connect O contract LTE cust. avg. data usage of 3.4GB (+22% q-o-q
Slide 17: UK: Ongoing growth delivery across the period
UK | Ongoing growth delivery across the period MSR Sustained customer growth y-o-y organic MSR ex-regulation • Remains the UK’s favourite network carrier (>32m customers) - Contract net adds 84k (43k ex-M2M) 3.5% - Market leading loyalty with lowest churn at 1% in contract 1.4% 1.2% 1.1% • 59% LTE p
Slide 18: Brazil: Reinforcing a leading sustainable business
Brazil | Reinforcing a leading sustainable business Unrivaled assets; enhancing differentiation Mobile Penetration (Jun-18) (y-o-y) • Accelerating high-quality growth 86% - Sustainable leadership: 41.3% contract M.S. (stable q-o-q) 58% Highest ARPU & 51% - 4G+: 714 cities (+596 in 2018) lowest mobil
Slide 19: Brazil: Expanding profitability
Brazil | Expanding profitability Consistent evolution of revenue Revenues y-o-y organic Q1 18 Q2 18 • Total Revenue : Q2 +0.5% y-o-y - MSR +1.9% 3.5% - Sustained postpaid evolution offsetting weaker prepaid 1.9% trend on tougher macro trends 1.0% 0.5% - +11.8% data revenue driven by plan upgrades Ha
Slide 20: South Hispam: Solid revenue & OIBDA growth
South Hispam | Solid revenue & OIBDA growth Commercial momentum Net adds (‘000) • Value-acesss growth acceleration Contract FTTx Pay TV - Positive contract net adds in every country 353 - FTTx/Cable: 2.1M connected (1.5M FTTH/Cable) 260 135 159 142 173 41 34 72 • Q2 ARGENTINA (Revs. €703m; OIBDA €21
Slide 21: North Hispam: Maintaining solid commercial performance
North Hispam | Mantaining solid commercial performance Network improvements driving value growth Net adds (‘000) • FTTx/Cable: 284k connected (+117 in Q2 18) Contract FTTx Pay TV • Record Pay TV net adds in Q2 197 200 • LTE (+70%), Smartphones (+1%) 92 117 40 41 29 0.5 20 • Financials strongly affec
Slide 22: Telxius: Accelerating growth
Telxius | Accelerating growth Towers Tenants Speeding up infrastructure deployment # # 16,312 16,453 21,858 22,112 • Adding 141 towers in Q2 +141 • Steady increase of new tenants; 1.34x ratio +254 • Strong international cable demand, both in IP traffic and bandwidth capacity services +24 +139 Q1 18
Slide 23: Q2 Results
Q2 18 Results Ms. Laura Abasolo CFCO
Slide 24: Q2 results factors
Q2 results factors Q2 impacts in OIBDA €225m Q2 impacts in Net Income -€60m 485 (106) 452 (108) (74) (36) (46) (108) 225 (294) (60) Court Ruling Contingencies Impairment Restructuring TOTAL Court Ruling Contingencies Restructuring Impairment DTA Total net Brazil Brazil Mex Provisions factors Brazil
Slide 25: H1 Net income of €1.7bn and EPS of 0.29€
H1 Net income of €1.7bn and EPS of 0.29€ H1 2018 impacted by Q2 factors €m Q2 18 factors +225 +398 (549) (134) (60) (0.9%) reported 8,102 4,405 +9.7% reported +8.6% 3,697 5 (383) reported (1,298) (282) 1,739 OIBDA D&A OI Associates Net financial Taxes Minorities Net Income expenses EPS (0.8%) report
Slide 26: FX remains a major drag in Q2
FX remains a major drag in Q2 OIBDA year-on-year OIBDA Better organic performance vs Q1 €m Reported y-o-y 289 (445) +1.9% y-o-y 225 10 • FX drag of 10.7 p.p. on H1 18 OIBDA growth 4.237 4,158 - -€445m in Q2 vs. -€361m in Q1 (continued BRL and ARS depreciation vs. the EUR) Q2 17 Factors IFRS 15 Organ
Slide 27: Strong cash generation
Strong cash generation FCF ex. spectrum €m H1 18 FCF affected by UK spectrum & H1 seasonality +32.7% +54.7% €m 2,167 Negative seasonality 1,588 1,633 4,765 1,027 +32.7% (985) (986) 2,167 Q2 17 Q2 18 H1 17 H1 18 1,548 (597) FCF reported (619) 1,023 998 1,626 1,548 OpCF WC Interest Taxes, FCF Spectrum
Slide 28: Net debt reduction on strong FCF
Net debt reduction on strong FCF Net Financial Debt €m -€637m ND/OIBDA ND/OIBDA 2.66x 2.68x 44,230 (1,548) 1,186 (226) 398 99 (546) 43,593 Dec-17 FCF Shareholder Hybrid Pre-retirement Net financial FX & Jun-18 remuneration (incl. replacement commitments investments Others hybrid coupons) 4,765 (985)
Slide 29: Strong liquidity thanks to attractive long-term financing
Strong liquidity thanks to attractive long-term financing Sources of long-term financing Net Debt maturities 2018 YTD | €bn Jun-18 | €bn; not considering hybrid NC dates LM: annual coupons -93bps to 4.4%. Avg. years to call from 3.2Y 5.5 11.4 debt Avg. debt life to 4.7Y 73% in fixed rates 9.0 years
Slide 30: Conclusion
Conclusion Mr. José María Álvarez-Pallete Chairman & CEO 30
Slide 31: Concluding remarks: Solid quarterly results
Concluding remarks| Solid quarterly results 1 Executing 2 Delivering 3 Returning 4 Outlook on key robust financials, value to 2018 priorities strenghtening BS shareholders confirmed Revenues (y-o-y organic) OIBDA (y-o-y organic) Reported y-o-y • Spain: Consistent trends; stronger franchise (O2 brand
Slide 32: For further information: Investor Relations
For further information: Investor Relations Tel. +34 91 482 87 00 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, thereunto duly au