Slide 1: Results January-December 2010
Results January-December / 2010
Slide 2: Disclaimer
Disclaimer This document contains statements that constitute forward looking statements about Telefonica Group (going forward, "the Company" or Telefonica) including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations which re
Slide 3: 2010 reinforces our track record as a highly predictable & reliable company
2010 reinforces our track record as a highly predictable & reliable company GROUP FINANCIALS Strong top line growth backed by our high-class diversification: Latin America now 43% of Group sales Mobile data revenue up 19% (y-o-y organic); non-P2P SMS up 32% y-o-y organic Fast customer expansion, con
Slide 4: Crystallizing the value of our diversification
OIBDA Ex-VIVO capital gain Rev 25% 18% 17% 43% 41% 45% 47% 39% Crystallizing the value of our diversification 58% (+7 p.p. y-o-y) Jan-Dec 2010 Revenues Operating Income (OI) Chg 2010/2009 Net income +7.1% +20.7% € in millions Operating Income before D&A (OIBDA) +14.0% +30.8% - -2.7% OIBDA Margin +2.
Slide 5: Solid growth in EPS, up 31.6% y-o-y
Solid growth in EPS, up 31.6% y-o-y FY 10 EPS reached € 2.25 vs. target of €2.10 January-December 2010 € in millions (% change y-o-y) Revaluation of our stake in Vivo: € 3.8 Bn Non-recurrent restructuring expenses: € 1.3 Bn 25,777 - -9,303 (+3.9%) D&A OIBDA +14.0% 76 (+59.8%) - -2,649 (-19.9%) - -3,
Slide 6: Very high commercial activity focused on growth levers
Very high commercial activity focused on growth levers Total net adds x1.5 vs. 2009 organically, backed by higher gross adds and churn control Q4 10 net adds improved q-o-q and y-o-y Strong boost in Mobile Contract to 31% of the mobile base (+3 p.p. y-o-y organic) Positive MBB momentum, reaching the
Slide 7: Strong sales performance along the year
Strong sales performance along the year Organic revenue (y-o-y growth) FY 10 Reported revenue (y-o-y growth) Organic Organic ex-MTR cuts GROUP FINANCIALS 5.4% FY 09 Q1 10 FY 10 - -2.1% 1.7% H1 10 6.0% 9M 10 7.1% +9.2 p.p. Positive effect from forex and changes in the perimeter of consolidation Extra
Slide 8: Improved revenue profile
Improved revenue profile Regional contribution to organic revenue growth Revenue mix by service FY 09 FY 10 2% 5% 18% 74% 1% 5% 15% 79% Others Applications & new business Accesses & Voice BB connectivity Solid growth across strategic areas Mobile data: +19% organic y-o-y FBB: +5% organic y-o-y Appli
Slide 9: Driving fast adoption of MBB to further boost revenue
Driving fast adoption of MBB to further boost revenue Customers with MBB devices + attached data rates now 10% of our total mobile base, ~20% in Europe Wider portfolio of devices Leveraging scale to further reduce device costs Tiered pricing in our markets Mobile data already 27% of MSR (+3 p.p. y-o
Slide 10: Benchmark underlying profitability
Benchmark underlying profitability GROUP FINANCIALS 9 Improved OIBDA trends along the year Cost reduction initiatives on track Maximizing benefits from global projects: € 200 m in 2010 Limited erosion in underlying profitability y-o-y despite higher commercial efforts: Reinvesting efficiencies to fo
Slide 11: Higher CapEx to support growth in customers & volumes
Higher CapEx to support growth in customers & volumes Strengthening our networks to foster top line growth: Focused CapEx: 77% oriented to growth and transformation 3G CapEx up 30% y-o-y in organic terms Spectrum acquisition in Germany (€ 1.4 Bn) & Mexico (€ 1.2 Bn) GROUP FINANCIALS y-o-y organic gr
Slide 12: Meeting our year-end targets for years in a row
Meeting our year-end targets for 8 years in a row OIBDA CapEx €7,646 m FY 10 Revenue FY 10/FY 09 +1.4% FY 10/FY 09 2010 GUIDANCE +1%/+3% 2010 GUIDANCE €7,450/7,650 m 2010 GUIDANCE +1%/+4% +3.8% ? ? EPS FY 10: € 2.25 ? 2010 GUIDANCE € 2.10 ? Figures according to guidance criteria. GROUP FINANCIALS 11
Slide 13: T. Espana: Delivering on 2010 priorities
T. Espana: Delivering on 2010 priorities Maintain a strong commercial momentum (FBB & MBB) and market leadership to capture market recovery Reinvest efficiency gains in the short term to ensure business growth prospects Deliver a strong cash-flow generation Revenue Market Share (Estimated) FY 10 53.
Slide 14: Top line impacted by regulation and increased competition
Top line impacted by regulation and increased competition in a difficult economic environment Wireless business Outgoing voice ARPM MSR (comparable) - -9.1% - -7.2% Q4 10 (y-o-y) 2010 (y-o-y) - -9.3% - -5.6% ARPU - -8.3% - -7.3% Increased price competition from traditional network competitors in Q4
Slide 15: There is still ample room to further increase our efficiency
There is still ample room to further increase our efficiency Reduction of Smartphone unit costs Value-based policy on handset subsidies .... optimizing our commercial costs... We are working to reshape our labour costs ... Less overhead: 6% reduction of manager positions Potential outsourcing of ope
Slide 16: T.Latam: Sound profitable growth
TELEFONICA LATAM T.Latam: Sound profitable growth Organic growth assumes constant exchange rates as of FY 09 (average fx) and excludes hyperinflation accounting in Venezuela in both years. OIBDA, OIBDA margin, and OpCF exclude the capital gain from the revaluation of our pre-existing stake in VIVO i
Slide 17: Wireless: A perfect combination of voice and data growth
Wireless: A perfect combination of voice and data growth TELEFONICA LATAM Organic Revenue growth (FY 10 y-o-y) Mobile Data Contract net adds/total Robust Commercial Activity FY 09 - -40.3% FY 10 +28.7% MBB Total Customers Contract +10.8% +28.9% x1.9 >5% of customer base Accesses growth (Dec-10 y-o-y
Slide 18: Wireline: Enhanced quality fuelling commercial activity
Wireline: Enhanced quality fuelling commercial activity Latam Retail FBB y-o-y growth FBB growth acceleration for 5th quarter in a row Churn contention across services Successful bundling strategy; 86% of total FBB 35.6% Latam 22.0% Brazil 14.8% Arg. 24.0% +2.9p.p .. Chile 28.1% +2.3p.p .. Peru +3.2
Slide 19: Gradual improvement in financial metrics
Gradual improvement in financial metrics TELESP VIVO Sequential ramp up in financial metrics 9M 10 (y-o-y in l.c.) FY 10 (y-o-y ex-fx and perimeter) TELEFONICA LATAM +7.8% +9.1% Total Rev. MSR +8.4% OIBDA +0.2 p.p. OIBDA Margin +9.3% +11.4% +13.1% +1.1p.p. 9M 10 (y-o-y in l.c.) FY 10 (y-o-y in l.c.)
Slide 20: Brazil: Tender offer for Vivo's ONs and Corporate Restructuring
Brazil: Tender offer for Vivo's ONs and Corporate Restructuring BoDs Approvals: Expected end Q1/Beginning Q2 11 TSP/VIVO GSMs Approvals (Assuming ANATEL approval) : Expected Q2 11 Close of restructuring: Expected H1 11 CVM approval of the tender offer: February 11th Filing of "Edital" and launch of
Slide 21: Good performance in key operations
Good performance in key operations Solid mobile customer growth (+13.0% y-o-y), gaining market share Strengthened position in MBB after acquisition of spectrum Repositioning of prepay offer on track Mexico Lower commercial activity y-o- y on limited availability of handsets Robust financials despite
Slide 22: T.Europe: Continuing strong performance
T.Europe: Continuing strong performance TELEFONICA EUROPE Improving growth trends driven by data: Solid non-P2P SMS revenues, up 26.4% organic y- o-y in FY 10 Very strong performance of handsets sales (+22.5% y-o-y organic in FY 10) High commercial activity focused on value: 72% of mobile net adds i
Slide 23: T.O2 UK: Leading the wave of profitable data monetization
T.O2 UK: Leading the wave of profitable data monetization Strong momentum in MBB, while excelling the core: New tiered tariffs taken by 36% of consumer contract data users Market leading contract churn kept at 1.1% Contract base is 47% over total (+2 p.p. y-o-y) Continued top line growth to 6.5% y-o
Slide 24: T.O2 Germany: Maintaining strong momentum
T.O2 Germany: Maintaining strong momentum Leveraging our network and integrated approach: Building scale in core mobile (+18% y-o-y net adds) iPhone and smartphone tariffs were 80% of commercial activity in Q4 Retail FBB net adds in Q4 (x2.6 q-o-q) driven by integrated distribution with HanseNet Pro
Slide 25: Leverage ratio within target range after Brasilcel acquisition
Leverage ratio within target range after Brasilcel acquisition Leverage target (Total Net Debt + Commitments € 57.3 Bn) not exceeding the 2.5x OIBDA limit 24 Net Financial Debt Evolution € in millions FCF Post- Minorities 55,593 43,551 +8,554 +6,755 +834 - -8,466 Net Fin. Debt Dec-09 Commitments can
Slide 26: Contained interest expense and strong liquidity position
Contained interest expense and strong liquidity position Contained interest expenses at 5% while increasing the amount of fixed debt in a low interest rate environment Reinforced liquidity position thanks to unused committed lines increased by €1.8bn in 2010 Recent 2011 issuances cover full net matu
Slide 27: 2011 guidance: continued focus on growth
2011 guidance: continued focus on growth Strong momentum in LatAm & further outperformance of T. Europe to outpace decline in Spain: Fully exploiting mobile data opportunity in our markets Capturing quality growth Negative impact from severe regulation across European footprint Industry leading prof
Slide 28: Maintaining premium returns on strong FCF generation
Maintaining premium returns on strong FCF generation €1.40 €1.75 Dividend coverage >1 Tactical share buybacks to be considered for FCF excesses €1.15 €1.60 FY 09 FY 10 FY 11 FY 12 Leverage target: Total net debt+ commitments/OIBDA at 2.0/2.5x. M&A focused on acquiring spectrum in current markets to
Slide 29: Regional priorities
Regional priorities T. LATAM T. EUROPE Defend revenue market leadership: Rational commercial approach focused on customer value Capture growth opportunities leveraging our integrated offer: Total BB, Pay TV and ICT services (SMEs & corporates) Disciplined CapEx, growth oriented Further reshaping of
Slide 30: Closing remarks
Closing remarks Solid set of results in 2010 Delivering on our commitments Completed key strategic transactions Continued focus on growth and maintaining premium returns in 2011 Leveraging our integrated asset portfolio to fully capture the digital world opportunity GROUP FINANCIALS 29
Slide 31: Signatures
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 authorized. Telefónica, S.A. Date: February 25 th , 2011 By: /s/ Santiago Fernández Valbuena Name: Santiago Fernánd