Slide 1: Results January – June 2016
Results_ January – June 2016
Slide 2: Disclaimer
Disclaimer This document and the conference-call webcast (including 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 financi
Slide 3: Q2 16 Highlights
01 Q2 16 Highlights Mr. José María Álvarez-Pallete Chairman & CEO Investor Relations Telefónica, S.A.
Slide 4: Q2 Highlights; strategy is working
Q2 16 Highlights; strategy is working • Service revenue +1.5%, offsetting handset sales (-18.0%) Profitable o Data monetisation driver continue their positive trend (Non-SMS data revs +16.0%) growth o Av. Rev/Access +2.0% capitalising on fiber, smartphones, LTE and Pay TV remained solid • Maintainin
Slide 5: Key financials (UK full consolidation)
Key financials (UK full consolidation) H1 16 Q2 16 Reported Organic Reported Organic € in millions Reported Reported y-o-y y-o-y y-o-y y-o-y Revenue 25,235 (7.1%) 1.3% 12,723 (7.7%) (0.2%) Service revenue 23,364 (5.7%) 2.7% 11,824 (6.1%) 1.5% OIBDA 7,756 (6.4%) 3.1% 3,918 (7.1%) 0.8% OIBDA Margin 30
Slide 6: H1 affected by FX and perimeter impacts
H1 affected by FX and perimeter impacts FX impact (y-o-y) Revenues OIBDA FX to ease in H2 16 Q1 16 Q2 16 H1 16 • H1 16 results impacted by average FX, following sharp depreciation o Q3 15: BRL and COP o Q4 15: ARS (7.9 p.p.) (9.1 p.p.) (10.7 p.p.) (13.6 p.p.) (11.7 p.p.) (14.3 p.p.) Perimeter impact
Slide 7: Full-year guidance on track
Full-year guidance on track 2016 Guidance Guidance 2016E H1 16 (Constant FX 2015; ex-VZ; ex-UK) Service Revenue >4% +5.0% Revenues +6.4% OIBDA margin Stabilising vs. 2015 +0.1 p.p. CapEx/Sales Around 17% 15.1% €0.75/sh. Dividend €0.35/sh. voluntary scrip Nov-16 €0.4/sh. cash Q2 17 Share buyback: % s
Slide 8: Strong FCF performance in Q2
Strong FCF performance in Q2 16 FCF (€ in millions) 2015 2016 Cash generation improvement (y-o-y and q-o-q) • Robust H1 FCF y-o-y (+€1,009m) on the back of: 746 815 o Better performance of OpCF in Q2 o Lower spectrum, CapEx, financial payments & minorities 363 o Higher WC consumption (partly due to
Slide 9: Continued strong momentum with quality customers
Continued strong momentum with quality customers Expanding reach Jun-16 (y-o-y) Securing a distinctive top-line growth profile Mobile Contract/ Smartphone • Exploiting growth opportunities to foster service revenues Total Mobile penetration o X2 LTE accesses vs. Jun-15 39% (+3 p.p.) 51% (+9 p.p.) o
Slide 10: Resilient growth of service revenues
Resilient growth of service revenues Total Revenues (y-o-y organic) Handset Revenues (y-o-y organic) Quality of revenues 1.3% • Service revenues growth offset handset sales (9.0%) • Service revenues expansion higher than total revenues in all (0.2%) (18.0%) segments Q2 H1 Q1 Q2 o Consistent trends i
Slide 11: Sustaining OIBDA growth, strong diversification
Sustaining OIBDA growth, strong diversification H1 OIBDA (y-o-y organic) Ongoing synergies & efficiencies improvements 7.0% 3.1% • OIBDA growth for 8 Q in a row th 1.7% 1.5% 0.6% • Outstanding OpEx in Q2 (-0.8% y-o-y organic); outpacing revenue decline (1.2%) o Merger synergies on track (BZ, DE) TEF
Slide 12: Clear data monetisation results
Clear data monetisation results Q2 LTE dynamics Q2 mobile data traffic Traffic (y-o-y) LTE data upselling; ARPU growth +50% y-o-y 3x Usage uplift • LTE customers 50.1m (x2 y-o-y) LTE traffic 32% of o Q2 avg. usage/per smartphone +34% y-o-y (955 MB/month) 68% mobile data traffic (+4 p.p. y-o-y ) • Pr
Slide 13: Digital Services: enhancing customer experience
Digital Services: enhancing customer experience Revenues (y-o-y organic) Building on solid platforms 17.4% 15.7% • Video: 8.4m accesses (+5% y-o-y) o Introduction of new functionalities and success of own productions Q2 16 H1 16 • Cloud: o Chile & Brazil: new “Open Telefónica Cloud” services €1,212m
Slide 14: TGR: Technology excellence
TGR: Technology excellence Enlarged UBB footprint Network modernisation Premises Passed with Fibre • All-IP upgrade: More capability & efficiency o Native VoWiFi in Germany based on IMS (IP Multimedia Subsystem) 32.9m 20.7m FTTX o New metro network in Spain; OTN (Optical Transport Network) FTTH +14%
Slide 15: Q2 Results
02 Q2 16 Results Mr. Angel Vilá CSFO Investor Relations Telefónica, S.A.
Slide 16: Spain: Commercial momentum gaining pace
Spain: Commercial momentum gaining pace Quarterly net adds (‘000) Q1 16 Q2 16 Unique platform Churn q-o-q • High customer stickiness -0.2 p.p. -0.1 p.p. -0.2 p.p. -0.1 p.p. o Fusion churn: 1.1% in Q2 (-0.2 p.p. q-o-q) 111 114 56 • Best-in-class UBB network in Europe 52 50 17 27 o FTTH coverage: 15.7
Slide 17: Spain: Further progress in the new growth cycle
Spain: Further progress in the new growth cycle Revenues (y-o-y organic) Total Handset sales Service Rev. Sustainable service revenues growth Total Revenues €3,126m 1.0% €3,202m 1.1% • Accelerating service revenues increase despite negative calendar effect 0.2% from “Fusión” tariffs update • All rev
Slide 18: Germany: Outstanding OpCF; synergies on track
Germany: Outstanding OpCF; synergies on track Contract Gross Adds mix Revenues (y-o-y) Strong trading of partner brands GA retail GA partners • Increasing competition in non-premium (aggressive pricing) • Revenues pressure in Q2 339k (2.3%) (0.3 p.p.) o Lower handset sales y-o-y (Q2: -25.5% y-o-y; Q
Slide 19: UK: Strong trading; leading loyalty
UK: Strong trading; leading loyalty Net adds (‘000) Total Contract Continued customer Continued growth customer in a challenging market growth 240 New record low • Strongest quarterly net additions in 6 quarters 115 134 contract churn • Contract customers: 61% of the total; +5 p.p. y-o-y of 0.8% • F
Slide 20: Brazil: Best positioned in the market
Brazil: Best positioned in the market Mobile accesses (y-o-y) ARPU Q2 y-o-y Superior quality; Outperforming peers x3 21% Mobile ARPU +18.6% • Mobile: o Best 3G & 4G coverage (89% population) 7% o Best satisfaction and perceived quality (Anatel survey) Data ARPU o 42.3% contract market share (LTM: 55
Slide 21: Brazil: Growing market share with margin expansion
Brazil: Growing market share with margin expansion Service Revenues (y-o-y organic) Total service revenues (F+M) Sustaining revenue growth Mobile service revenues • Q2 MSR accelerated to +3.9% y-o-y ex-regulation 2.3% Service Revenues 1.7% o Data revs. continues ramping-up (Q2: +24.8% y-o-y) market
Slide 22: HispAm: Reinforcing leadership in high-value
HispAm: Reinforcing leadership in high-value Contract accesses (y-o-y) Quality investments paying-off 24.4% • T. HispAm: o Strong performance in contract 11.5% o Net adds x2.5 vs. Q2 15 7.3% 8.5% 7.4% o Very intense competition, mainly Peru and Chile, hitting 1.5% prepaid performance o Rapid take-up
Slide 23: HispAm: Healthy growth in top line
HispAm: Healthy growth in top line Revenue (organic y-o-y) Peers’ outperformance in broad markets Change vs. Q1 16 y-o-y contribution • Robust Q2 fixed revenues: +16.1% y-o-y 11.3% (4.7 p.p.) • Sequential deterioration of OIBDA y-o-y (Q2: -3.4%; Q1: +0.8%) affected by MEX and VZ (2.5 p.p.) 3.6% (0.5
Slide 24: Leverage impacted by Q2 dividend payment
Leverage impacted by Q2 dividend payment Net Financial Debt € in millions Net Financial Net Financial Debt/OIBDA Debt/OIBDA 3.02x 3.20x 1,950 86 499 52,568 Mid-term 50,588 (746) 191 target < 2.35x reiterated Mar-16 FCF Pre- Shareholder Net financial FX, MTM Jun-16 retirements remuneration& investmen
Slide 25: Strong liquidity to face upcoming maturities
Strong liquidity to face upcoming maturities Effective interest cost: 96 b.p. lower y-o-y Sources of long-term financing (Jun-16) Guidance € in billions 0.4 5.6 1.8 Below 5.31% 5% 2.8 0.02% 4.35% (0.98%) 0.6 Jun-15 Lower cost of Others Jun-16 Equity Bonds Other bank Latam Total European Linked-bond
Slide 26: Summary: Structural transformation
Summary: Structural transformation • Networks upgrades & product differentiation driving commercial activity: growing value & improving sustainability Executing • Strengthening market positioning across markets and building • Ongoing efficiencies & synergies driving margin expansion for the • Profit
Slide 27: For further information: Investor Relations
For further information: Investor Relations Tel. +34 94 482 87 00 ir@telefonica.com www.telefonica.com/investors