Telefonica Sa · BME:TEF

Telefonica Sa — Investor Day (March 2008)

29 slides from Telefonica Sa's investor day presentation, Mar 10, 2008

  1. Slide 1: Telefónica: Solid fundamentals and high returns

    TELEFONICA: Solid fundamentals and high returns CESAR ALIERTA EXECUTIVE CHAIRMAN March 10-11th, 2008

  2. Slide 2: Disclaimer

    Disclaimer This document contains statements that constitute forward looking statements in its general meaning and within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this document and include statements regarding the intent, b

  3. Slide 3: Index

    Index 1 2007 results confirm our strong momentum 2 2008 guidance reassures our differentiated growth profile 3 Excess FCF allocated to our 1st priority: shareholder remuneration TELEFONICA S.A. Investor Relations 3

  4. Slide 4: In 2007 we recorded a solid performance across the board

    In 2007 we recorded a solid performance across the board… € in millions Jan-Dec % Change % Change (% change y-o-y) 2007 FY 07/FY 06 organic1 Revenues 56,441 +6.7% +7.4% Growth rates OIBDA 22,825 +19.3% +6.8% acceleration from top to OI 13,388 +42.1% +18.1% bottom line OpCF (OIBDA-CapEx) 14,797 +33.0

  5. Slide 5: Meeting or exceeding our upgraded guidance

    … meeting or exceeding our upgraded guidance … Guidance Telefónica results1 Revenue OIBDA 60,000 22,000 55,000 20,000 50,000 18,000 45,000 16,000 40,000 35,000 14,000 30,000 12,000 FY2004 FY2005 FY2006 FY2007 FY2004 FY2005 FY2006 FY2007 OI 12,000 „ Consistently delivering on our 11,000 commitments „

  6. Slide 6: Delivering once again a superior performance

    … delivering once again a superior performance +8.0% +6.0% +4.0% +2.0% 2007 Organic EBITDA Growth 0.0% -2.0% -4.0% -6.0% -8.0% -2.0% -1.0% 0.0% +1.0% +2.0% +3.0% +4.0% +5.0% +6.0% 2007 Organic Revenue Growth Source: company press releases BT: April-December 07 vs. 06; EBITDA before specific items an

  7. Slide 7: Capitalizing our scale and diversification, driving customer growth

    We are capitalizing our scale and diversification, driving customer growth … Strong customer expansion across markets & businesses Accesses (Dec-07/Dec-06) millions +64.3% +16.9% +12.5% +28.9% 134.1 1.7 +8.7% 228.5 10.3 +5.0% +16.6% 41.9 42.0 46.4 169.2 -0.9% T. España T. Europe T. Latam Total Mobil

  8. Slide 8: Fostering top line and OIBDA expansion

    … fostering top line and OIBDA expansion… 2007 Revenue growth by regions 2007 Revenue breakdown (Organic1 y-o-y growth) Others & eliminations +13.0% T. Europe 1% T. España +7.4% 26% 37% +4.6% +4.5% TEF T. España T. Europe T. Latam T. Latam Group 36% 2007 OIBDA growth by regions 2007 OIBDA breakdown

  9. Slide 9: High OpCF generation despite strong CapEx in transformation

    …with a high OpCF generation despite strong CapEx in transformation 2007 OpCF (OIBDA-CapEx) growth Organic1 y-o-y growth rate (€ in millions) Organic1 +11.8% OpCF/Revenues: 1,100 14,797 21.6% (+0.8 p.p. vs. 2,852 FY 2006) 3,778 +34.6% (*) +33.0% +0.5% 7,067 +11.4% T. España T. Latam T. Europe Others

  10. Slide 10: Telefónica España maintains a strong momentum

    Telefónica España maintains a strong momentum, both in Q4 and FY07 … Revenues OIBDA (€ in millions) (€ in millions) +4.7% +9.3% 20,683 9,448 19,750 8,647 FY 2006 FY 2007 FY 2006 FY 2007 WIRELINE WIRELESS „ Lowest fixed telephony access loss since 2001 „ Sustained leadership „ Higher access base and

  11. Slide 11: Leading the wireline Broadband and Pay-TV growth

    … leading the wireline Broadband and Pay-TV growth… Real/Nominal download speed for 3Mb ADSL connections (1) (Telefónica base 100) “Preferred BB provider” (19-Dec-07) (1) -18% FIXED TELEPHONY „ Improving y-o-y access loss rate to record low levels: -0.3% (Dec-07 vs. Dec-06) #1 #2 #3 #4 #5 High INTER

  12. Slide 12: Shaping the market in wireless

    … and shaping the market in wireless… „ Limited impact from new entrants Customers 2007 Net adds Q4 07 Churn1 „ High contract Leading (thousands) (in thousands) commercial activity: 1,502 the 1,381 +12.0% in gross adds +6.4% vs. 2006 growth 22,827 1,346 1,233 in the 21,446 536 „ Higher customer sati

  13. Slide 13: Telefónica Latinoamérica recorded a robust performance in 07

    Telefónica Latinoamérica recorded a robust performance in 2007 … Revenues OIBDA (€ in millions) (€ in millions) +11.0% € terms +8.4% 20,078 7,121 18,089 6,571 +11.5% Constant FX +14.5% FY 2006 FY 2007 FY 2006 FY 2007 „ Strong commercial activity in a high growth region: 134.1 m customers, +16.9% vs.

  14. Slide 14: Capturing the growth opportunities of the region

    … capturing the growth opportunities of the region WIRELINE: FOCUS ON TRANSFORMATION Bundles weight Retail Internet Pay TV clients2 Local & Control bundles+2P&3P/Fixed Accesses BB connections1 (in thousands) Local bundles+2P&3P/Fixed Accesses (in thousands) 2P&3P/DSL Accesses 5,036 1,164 3,780 +74.9

  15. Slide 15: Brazil & Mexico wireless operations: solid top line, enhanced profitability

    In Brazil & Mexico our wireless operations combined solid top line with enhanced profitability VIVO 2007/2006 change 2007/2006 change 2007/2006 growth 33.5m (in local currency) (in local currency) 85% of Q4 Gross (34% GSM) Excluding B&K effect x4.1 +7% adds in GSM adjusting for +30.8% B&K +18.4% +18

  16. Slide 16: Telefónica Europe increased commercial activity to foster revenue growth

    Telefónica Europe increased commercial activity to foster revenue growth … Excluding Airwave, personnel Revenues1 OIBDA1 reorganization and other non- foreseeable charges (€ in millions) (€ in millions) +9.9% 14,458 +34.2% 4,977 13,159 3,708 +11.7% +10.1% FY2006 FY2007 FY2006 FY2007 „ Steady expansi

  17. Slide 17: Maintaining momentum as an integrated operator

    … maintaining momentum while positioned to exploit opportunities as an integrated operator UK: continued outperformance Contract net adds ARPU OIBDA margin (in thousands) (in £) 23.5 26.4% Ex one-offs +3.6% „ 18.4m mobile 79% of 2007 net adds 24.0% 26.0% customers (43% in 2006) 22.7 (+4.2% y-o-y) 27

  18. Slide 18: Index

    Index 1 2007 results confirm our strong momentum 2 2008 guidance reassures our differentiated growth profile Excess FCF allocated to our 1st priority: shareholder 3 remuneration TELEFONICA S.A. Investor Relations 18

  19. Slide 19: Solid 2008 guidance, in line with long term targets

    Solid 2008 guidance, in line with our long term targets… Group Revenues Group OIBDA (€ in millions) (€ in millions) +7.5%/+11% +6.0%/+8.0% 22,825 56,441 20,863 55,550 2007 2007 adjusted 2008E 2007 2007 adjusted 2008E for guidance for guidance Group OI Group CapEx (€ in millions) (€ in millions) +13%

  20. Slide 20: Fully on track to meet 2010 targets

    … fully on track to meet 2010 targets … Implicit 08E-10E 2006-2007A under 2007-2008E 2006-2010E (***) CAGR to meet 2010 guidance criteria (*) guidance (**) CAGR guidance guidance Revenues 9.8% 6.0% / 8.0% 2.2% / 7.1% 5% / 8% OIBDA 12.8% 7.5% /11% 4.0% /10.1% 7.0% / 11.0% + + OI 27.6% 13% /19% 12.1%

  21. Slide 21: Significant increases in EPS and FCFS

    … flowing into significant increases in EPS and FCFS 2006 2010E EPS 1 1.304 € 2.304 € +1€ FCFS 2 1.87 € 2.87 € (1) Reported EPS (2) FCF available to remunerate Telefonica S.A. shareholders, to protect solvency levels and to accommodate strategic flexibility TELEFONICA S.A. Investor Relations 21

  22. Slide 22: Strong growth opportunities in Spain support 2008 and long term guidance

    Strong growth opportunities in Spain supports robust 2008 and long term guidance T. ESPAÑA1 Revenues „ Superior population and GDP growth vs. EU (€ in millions) +2.0% / +3.5% „ Fixed and mobile broadband- massive adoption 20,536 CAGR 06-10E2 DEC-06 DEC-10E +2.0% / +3.5% Fixed BB penetration per 42%

  23. Slide 23: Advancing our strategy to build a bigger business at Telefónica Europe

    We are advancing in our strategy to capture growth potential and build a bigger business at Telefónica Europe T. O2 EUROPE „ Become an integrated operator and exploit cross-selling opportunities Revenues (€ in millions) „ UK: Continue to grow above the market +4.0% / +7.0% DEC-06 DEC-10E 14,358 CAGR

  24. Slide 24: Well positioned to capture the growth opportunity in Latin America

    We are well positioned to capture the huge growth opportunity in Latin America T. LATAM1 „ Unique macro momentum: GDP per capita (PPP): +5.7% Revenues CAGR 2006-10E (€ in millions) „ Improving demographics in the next 10 years: ƒ +58 million workers +11.0% / +14.0% ƒ +74 million people in urban area

  25. Slide 25: Index

    Index 1 2007 results confirm our strong momentum 2 2008 guidance reassures our differentiated growth profile Excess FCF allocated to our 1st priority: shareholder 3 remuneration TELEFONICA S.A. Investor Relations 25

  26. Slide 26: A disciplined use of FCF with clear priorities

    03 We set a disciplined use of FCF with clear priorities… > € 40 bn Cumulative FCF 07E-10E (1) 1st: SHAREHOLDER A growing path Share buybacks of dividends to be considered, REMUNERATION as stated below Net Debt + Cash Commitments over OIBDA in the 2nd: DELEVERAGE 2.0 – 2.5x range: 2.3x OIBDA Dec-07(

  27. Slide 27: A growing path on shareholder returns

    … leading to a growing path on shareholders returns DPS (in €) 1.0 „ 5.2 Bn€ paid to 0.75 Dividends 0.6 shareholders in 2007 + 2006 20071 20082 „ € 2.7 Bn completed in 2007 Buyback programs „ 2008- H1 09 program: 100 m shares, sensitive to cash flow generation and share price Cash Yield3 6.08% 5.77%

  28. Slide 28: In summary: a value growth stock in an expanding industry

    In summary Ahead of our commitments Strong performance + in 2007 Unmatched organic growth ahead of peers A value growth stock in an ++ expanding High FCF yield industry Reinforced investment + case Strong growth prospects TELEFONICA S.A. Investor Relations 28

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Telefónica — Investor Day (March 2008) on 6ix