Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — Q1 2019 Earnings Presentation
30 slides from Telefonica Sa's earnings presentation, May 10, 2019
Slide 1: Results January | March 2019
RESULTS JANUARY | MARCH 2019
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: Q1 19 Highlights
Q1 19 Highlights Mr. Ángel Vilá COO
Slide 4: Q1 Group achievements
Q1 Group achievements 1. Increasing customer relevance 3. Consistent & profitable growth Best technology to engage customers P Reliable revenue growth (accelerating to +3.8%) FFTx/Cable +18% (63% penetration, +9 p.p.) P P 56% of revenues coming from BB & SoC LTE +18% (49% penetration, +9 p.p.) OIBDA
Slide 5: Financial summary Q1
Financial summary Q1 19 Reported Reported Organic € in millions IFRS 16 y-o-y y-o-y Revenues 11,979 (1.7%) 3.8% Consistent revenue growth Service revenues 10,700 (3.1%) 2.6% OIBDA 4,264 10.3% 1.0% Reported & Organic growth OIBDA margin 35.6% 3.9 p.p. (0.9 p.p.) OIBDA underlying 3,730 (3.9%) OpCF (ex
Slide 6: 2019 guidance reiterated
2019 guidance reiterated Operating 2019 guidance Guidance 2019E Q1 19 (organic) Revenues Around +2% 3.8% Sustained revenue & OIBDA growth despite regulation OIBDA Around +2% 1.0% CapEx / Sales Around 15% 13.1% ex-spectrum CapEx rationality 2019 DIVIDEND €0.4/SH. CASH Dividends to be paid in 2019 cal
Slide 7: Double digit increase in net income
Double digit increase in net income Q1 19 Reported €m IFRS-16 impact +414 -384 -53 -17 +10.3% +17.4% reported reported 4,264 (2,614) +0.7% +7.7% (34.8%) reported reported +30.8% reported reported +10.6% 1,650 4 (411) reported (234) (83) 926 OIBDA D&A OI Associates Net financial Taxes Minorities Net
Slide 8: Revenue trends ramped-up
Revenue trends ramped-up Growth and quality at the top line Revenues y-o-y organic • Q1 shows +80 bps acceleration - Service revenues +130 bps to +2.6% +6.2% LATAM - Handsets sales +15.6% vs. Q1 18 +3.8% GROUP • All revenue segments growing y-o-y (org.) +2.0% +3.0% 1.6% EUROPE +1.9% +2.7% - UK, stea
Slide 9: OIBDA growth: both reported & organic
OIBDA growth: both reported & organic OIBDA IFRS 16 impacting OIBDA/margin since Jan-19 Reported (€m) • Reported OIBDA growth (+€400m) reflecting - Positive impact from IFRS-16 (+€414m) 4,264 3,864 +10.3% y-o-y reported - FX drag (-€180m) +1.0% y-o-y organic - Organic growth (+€40m) Q1 18 Q1 19 +1.7
Slide 10: Accelerated deleverage on robust FCF generation
Accelerated deleverage on robust FCF generation FCF incl. lease principal payments €+858m higher FCF y-o-y €m €m 1,408 Negative seasonality Tax refund 2.6x y-o-y 2,728 +€702m 550 563 1,908 (711) 1,408 (500) Q1 18 Q1 19 (673) FCF ex-spectrum 579 1,429 OpCF WC Interest Taxes, FCF Lease FCF ex-spectrum
Slide 11: B2C | Accelerating data monetisation, fueling growth
B2C | Accelerating data monetisation, fueling growth Increased differentiation & customisation Video: Increased scale (‘000) y-o-y • Convergent markets; more video and M4M - First convergent offer in Latam (PER Jan-19) 9,761 - “Movistar Play” (OTT) in all HispAm (MEX & ARG Q1) 8,828 5,518 - M4M in S
Slide 12: B2B | Speeding up growth on a sustainable basis
B2B | Speeding up growth on a sustainable basis Business Revenues Superior proposal for a key segment y-o-y organic Q4 18 Q1 19 • Growth y-o-y improved across regions 9.6% • 20% of Group revenue 5.9% • Evolved Lego-like offering 5.3% 3.4% - “Digital Core” (Comms + Cloud + Security) leveraging leadin
Slide 13: Best platforms; improving customer relationship & operations
Best platforms; improving customer relationship & operations 4P AI focused on personalisation and decision making AURA Movistar Home (Spain) Global Big Data & Data Analytics 6 Countries N New functionalities (videocalls...) Single data & management tools bank Open to 3rd parties (eCommerce,...) More
Slide 14: Digital Transformation | Progressing as planned
Digital Transformation | Progressing as planned Gross savings ~20% achieved in Q1 >€1Bn >€340M >€300M FY 18 Incremental FY 19E Cumulative FY 20E Agile Mindset 39% 31% 30% Digital Experience in sales Digital Customer Service Process Automation • Boosting own digital channels • Contact Centers (-11% y
Slide 15: Q1 Results
Q1 19 Results Ms. Laura Abasolo CFCO
Slide 16: Spain | Growing share of value within a rational market
Spain | Growing share of value within a rational market Accesses Sustained growth in value accesses y-o-y Dec-18 Mar-19 15% • Tariff upgrades’ impact fades along the Q 13% 9% 7% 7% 7% 6% 4% - Trading improved gradually; Mar better than Feb, Feb better than Jan Convergent TV FTTH Mobile • Continue im
Slide 17: Spain | Improving revenue and OIBDA trends
Spain |Improving revenue and OIBDA trends Service Revenues & OIBDA Setting better trends on wholesale turnaround y-o-y organic Serv. Revs. OIBDA • Service Revenue grows for 7 straight Qs - “Consumer” flat y-o-y; lower tariff impact vs. Q1 18 - “Business” +3.0%; growing for 4 Q’s 0.8% 0.8% 0.2% 0.6%
Slide 18: Germany | Strong trading performance
Germany | Strong trading performance Contract net adds Accelerating data monetisation Innovative commercial propositions k y-o-y Avg. data usage of O2 contract LTE cust • New value-added initiatives to enhance ARPU and churn LTE penetration • Enhanced infrastructure portfolio; cable wholesale access
Slide 19: UK | Customer centric approach drives growth trends
UK | Customer centric approach drives growth trends Strong commercial performance O2 contract net dds Leading in the UK (incl. M2M) “Best Network Performance” • Leading as UK’s favourite mobile network at Mobile News Awards Q1 customer growth of +2% y-o-y - +220k - O2 contract customers +4% y-o-y -
Slide 20: Brazil | Delivering profitable value growth
Brazil | Delivering profitable value growth Value growth amidst M4M strategy Accesses Penetration y-o-y Q1 18 Q1 19 • M4M strategy backs solid mobile ARPU growth & stable churn - Tariff changes: +9% in Pure Contract in Sep-18; +11% in Hybrid Dec-18; +20% in prepaid in Mar-Apr 44% 44% 66% 50% 56% 55%
Slide 21: Brazil | Confirmation of top-line improvement
Brazil | Confirmation of top-line improvement Value growth flowing into P&L Revenues y-o-y organic Q3 18 Q4 18 Q1 19 • Service revenue y-o-y trend again improved (+1.1 p.p. vs Q4 18) MSR: - 1.7% 1.6% - Strong postpaid growth (+8.2% vs. +6.9% in Q4 18) 0.5% - Fostering migration to higher data plans
Slide 22: South Hispam | Better revenue trends
South Hispam | Better revenue trends Penetration Positive contract net adds for 6th consecutive Q Q1 18 Q1 19 TEF Penetration in Europe • Fiber deployment acceleration: 8.8m premises passed (8.3m Dec-18); 70% 67% 56% 30% FTTx take-up 46% 49% 38% 40% 33% 40% • Q1 ARGENTINA (Revs. €543; OIBDA €145m) -
Slide 23: North Hispam | Top-line turns around
North Hispam | Top-line turns around Accesses Accelerating revenue growth in COL & CAM Mar-19 y-o-y organic Penetration • Value growth: contract (+3%), FTTx (+82%) & LTE (+43%) 82% • OIBDA: -14.9% highly affected by MEX (+0.3% ex. MEX) 43% • Q1 COLOMBIA (Revs. €359m; OIBDA €131m) - Sound increase in
Slide 24: Telxius | Reaping the benefits of premium infrastructure
Telxius | Reaping the benefits of premium infrastructure Positive operational momentum Towers Tenants # # Net adds • Towers Net adds - Solid growth of new tenants in Q1 (>2x net adds y-o-y) 291 285 - 75 towers built in Q1 (>3x y-o-y) 125 - Increased tenancy ratio: 1.37x (+0.03x y-o-y) 75 139 24 • Ca
Slide 25: One more quarter of material debt reduction
One more quarter of material debt reduction Net Financial Debt €m -693 € billions ND/OIBDA ND/OIBDA ND/OIBDA 2.62x 2.61x 2.54x 41,074 (1,408) 570 40,381 (1.7) (139) (186) 232 239 38.7 Dec-18 FCF Hybrid Shareholder Pre-retirement Net financial FX & Mar-19 Post-closing Mar-19 2 replacement remun. (inc
Slide 26: Strong liquidity thanks to attractive long-term financing
Strong liquidity thanks to attractive long-term financing Sources of long-term financing Net Debt maturities 2019 YTD | €bn Hybrids LME Mar 18 & Mar 19 Mar-19 | €bn; not considering hybrid NC dates Annual coupons -102 b.p. to 4.1% Avg. years to call from 3.2Y to 4.9Y 78% debt Avg. debt life of 10.2Y
Slide 27: FX impact neutralised at FCF
FX impact neutralised at FCF Currency weakness in Q1 • Solid organic contribution to Revenues & OIBDA - Q1 y-o-y: +€464m revenues & +€40m OIBDA FX headwinds • FX detracts 4.9 p.p. in revenues, 4.7 p.p. in OIBDA • ARG & BRL depreciation, major drags in Q1 • Impact in net debt (Spot GBP/EUR appreciati
Slide 28: Conclusion
Conclusion Mr. Ángel Vilá COO 28
Slide 29: Wrap-up | Solid start of the year
Wrap-up | Solid start of the year Revenue Consistent, profitable & sustainable growth +3.8% organic EPS +33.8% EPS & Net Income double digit growth Net Income +10.6% Net Debt Continued net debt reduction, for 8 consecutive quarters -€0.7Bn in Q1 Cov. Infrastructures are key to ensure best customer-e
Slide 30: For further information: Investor Relations
For further information: Investor Relations Tel. +34 91 482 87 00 FOLLOW US: 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, thereu