Telefonica Sa · BME:TEF
Telefonica Sa — FY2013 Earnings Presentation
37 slides from Telefonica Sa's earnings presentation, February 2014
Slide 1: Results January – December 2013
Results January – December 2013 Investor Relations Telefónica, S.A.
Slide 2: Disclaimer
Disclaimer This document contains statements that constitute forward looking statements about Telefónica Group (going forward, “the Company” or Telefónica) including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations which ma
Slide 3: Agenda
TELEFÓNICA 1. One step further into Digital transformation 2. 2013 Results 3. 2014 Outlook Investor Relations Telefónica, S.A. 2
Slide 4: More than ever convinced about the digital opportunity
TELEFÓNICA More than ever convinced about the digital opportunity Mobile Data Traffic 2013-2018E x14 x13 x13 x11 x7 x8 Video +23,700% 53% y-o-y 2013 Latam Asia Pacific EMEA Western North Europe América 2013 2018E 2005 2006 2010 2012 2013 440 3.8 Traffic per customer MB GB Smartphone LTE + CLOUD Sour
Slide 5: Telcos are in a privileged position to capture the digital revolution
TELEFÓNICA Telcos are in a privileged position to capture the potential from the digital revolution From To Traditional Telco Digital Telco Leverage unique assets (networks/IT & BI/distribution) • Copper, 2G/3G • Fiber, LTE, Cloud-RAN, virtualisation… • Traditional IT • IT as a Digital enabler (infr
Slide 6: Taking now the next step in our digital transformation journey
TELEFÓNICA Taking now the next step in our digital transformation journey OUR CORE BELIEFS REMAIN UNCHANGED: Capture digital growth opportunities Reinventing the telco Increase our relevance in our clients’ digital lifes Accelerate operating transformation, DIGITAL MONETISATION & deleveraging &
Slide 7: Evolving our operating model to capture the digital opportunity
TELEFÓNICA To fully capture the digital opportunity & maximise value creation we are evolving our operating model… • Absolute focus on data traffic monetisation and digital services + A quantum leap in customer insights Revenues Sophistication and industrialisation of commercial functions More
Slide 8: Leading to a digital customer centric & leaner organisation
TELEFÓNICA …leading to a digital customer centric & leaner organisation Chairman & CEO Group General Strategy Counsel Public affairs & Finance & Corp. regulation Development COO Controller New area to foster growth based on distinctive & Planning customer insights Reinforce CCDO CGRO empowerment (Ch
Slide 9: T. Digital: Towards a differential commercial proposition
TELEFÓNICA T. Digital: Towards a differential commercial proposition Accomplishments in Q1 13 Pioneers as a Telco Company moving forward to the Digital world Developing platforms: differential capabilities Revenue growth(1) (organic y-o-y) OTT services for fiber customers in Brazil and Spain Sma
Slide 10: The Chief Commercial Digital Officer is key to ensure data monetisation
TELEFÓNICA The Chief Commercial Digital Officer is key to ensure data monetisation “Take a giant leap in “Offer the most valued “Ensure the best customer insight” proposition” commercial experience” Main responsible for revenue growth in the Optimise the Know the customer Design the value propositio
Slide 11: T. Global Resources: Capturing value from scale
TELEFÓNICA T. Global Resources: Capturing value from scale and empowering the Digital Telco Network Development Global IT Data evolution (y-o-y) • Consolidation of IT commodity infrastructure 49% • Set up of the world-class data center in Madrid Data Centers Fewer physical Servers virtualised 26% +3
Slide 12: 2014 building infrastructure based-long term advantages
TELEFÓNICA 2014 building infrastructure based-long term advantages Developing High Speed Networks (LTE & FTTH) 2014 CapEx in FTTH CapEx LTE CapEx 3G CapEX Transport CapEx TV CapEx growth & transformation: 75% of organic CapEx +65% +27% +27% +35% +84% +7 p.p. y-o-y y-o-y y-o-y y-o-y y-o-y y-o-y FTTH
Slide 13: Opportunity to generate significant synergies through a new operating model
TELEFÓNICA Opportunity to generate significant synergies trough a new operating model Network Savings from new operating model (€ Bn) • Run a more integrated network factory: generating efficiencies and delivering top quality 1.50 “One design”: adoption of global standards and designs for key netw
Slide 14: 2013 Highlights
TELEFÓNICA 2013 Highlights 1. Back to organic growth • Third consecutive quarter of organic revenue increase (+1.8% y-o-y; +0.7% in FY) Highly diversified portfolio; double digit growth of T. Latam and digital services in Q4 (y-o-y organic) Higher value & more sustainable access base 2. Stabilis
Slide 15: Financial summary
TELEFÓNICA Financial summary FY 13 Q4 13 Reported Organic Reported Organic € in millions Reported Reported y-o-y y-o-y y-o-y y-o-y Revenues 57,061 (8.5%) 0.7% 14,436 (8.9%) 1.8% OIBDA 19,077 (10.1%) 0.0% 4,977 (8.7%) 1.2% OIBDA Margin 33.4% (0.6 p.p.) (0.2 p.p.) 34.5% 0.1 p.p. (0.2 p.p.) OpCF (ex-sp
Slide 16: Maintaining strong cash flow generation
TELEFÓNICA Maintaining strong cash flow generation FCF 2013 (€ in millions) 2013 FCF (ex spectrum) y-o-y 6,890 5,391 1,908 1,949 1,990 (9.1%) (457) FY Q1 Q2 Q3 Q4 FY FCFS/EPS comfortably exceeding DPS FCFS 2013 (€/share) 1.19 0.42 0.43 0.44 (0.10) DPS 13 Q1 Q2 Q3 Q4 FY 63% FCF payout €0.75 EPS 2013
Slide 17: Delivering on 2013 guidance
TELEFÓNICA Delivering on 2013 guidance Guidance 2013 2013 Revenue growth +0.7% Lower OIBDA margin decline than in 2012 (-1.4 p.p.) -0.2 p.p. Similar CapEx/Sales as in 2012 (14.1%) 14.5% 14.0% excluding Venezuela CapEx increase Net Financial Debt < €47bn €45.4bn Investor Relations Telefónica,
Slide 18: Investing in quality, setting stage for future growth
TELEFÓNICA Investing in quality, setting stage for future growth Mobile contract accesses (y-o-y) Capturing high value customers 9% 8% • Q4 mobile net adds: 83% contract 7% 89.2 m contract • Contract segment is already 35% of mobile base (+2 p.p y-o-y) accesses Dec-12 Jun-13 Dec-13 Smartphone penetr
Slide 19: Improved trends in 2013 across all items
TELEFÓNICA Improved trends in 2013 across all items Revenue (organic y-o-y) TEF Group TEF Group excl. Spain Progressive improvement 5.4% in Spain already 4.0% accelerating Group growth 0.7% (0.8%) FY 12 FY 13 Capitalising diversification and business transformation OIBDA (organic y-o-y) TEF Gr
Slide 20: Revenue accelerating; profitability stabilising
TELEFÓNICA Revenue accelerating; profitability stabilising 2013 Revenues (organic y-o-y) 0.7% Q4: +1.8% 0.4% Accesses growth translating to sales increase (0.5%) • T.Latam (51% of total) growing at 10.3% organic y-o-y in Q4 (1.6%) • T.Digital ramping-up (Q4:+19.4% organic y-o-y) Q1 H1 9M FY • Enlarg
Slide 21: Focused CapEx to promote growth opportunities
TELEFÓNICA Focused CapEx to promote growth opportunities Capex ex spectrum (€ in millions) Organic y-o-y Targeted investments 1,224 9,395 8,171 • Improved spectrum position x2.1 • 4G spectrum secured in core markets Enabling fast and efficient LTE expansion +3.8% • Solid execution of investment ef
Slide 22: T. Latam: Outstanding commercial activity boosting growth
T.LATAM T. Latam: Outstanding commercial activity boosting growth Net Adds (‘000) FY 12 FY 13 Q4 13 Accesses y-o-y Leading sector transformation 2.0m 98 144 131 • Best quality customer base: Upgrading to contract & smartphone 7.0m Mobile contract: 46.4m. Penetration: 25% (+3 p.p. y-o-y) Smartpho
Slide 23: T. Latam: Revenue growth drivers ramping-up
T.LATAM T. Latam: Revenue growth drivers ramping-up Mobile Service Revenues (organic y-o-y) Non-SMS Data organic growth Steady MSR increase improvement on booming data Contribution to MSR growth • Increased contribution of mobile data on successful 37.4% 38.3% 40.1% strategy oriented to customer val
Slide 24: Brazil: Strengthened market position
T.LATAM Brazil: Strengthened market position Contract Mobile Net Adds (million) ARPU (y-o-y) Net adds market share Outgoing Data Leadership in high value customers 4.9 18.9% • Record contract net adds for third quarter in a row: accesses 2.7 +26% y-o-y; smartphone penetration: 24% (+11 p.p. y-o-y) 1
Slide 25: Brazil: Solid revenue and OIBDA performance
T.LATAM Brazil: Solid revenue and OIBDA performance 2013 Revenue (organic y-o-y) Fixed & Mobile service revenues MSR Fixed Consistent revenue growth 7.0% 7.0% • Outgoing mobile revenue growing by 9.7% y-o-y in Q4 and 5.4% 5.3% 9.3% in FY on strong data growth (+20.9% y-o-y in FY) 0.7% 1.1% 1.7% • En
Slide 26: T. Latam: Strengthened market positioning (I/II)
T.LATAM T. Latam: Strengthened market positioning (I/II) % out of Group revenues Peru Peru 4.3% Argentina 6.5% Chile 4.4% Net Adds (‘000) Net Adds (‘000) Net Adds (‘000) FY 12 FY 13 FY 12 FY 13 FY 12 FY 13 2.4m 862 54 38 29 723 0.8m 198 434 123 141 99 419 (160) FBB Mobile FBB Mobile Mobile FBB Mobil
Slide 27: T. Latam: Strengthened market positioning (II/II)
T.LATAM T. Latam: Strengthened market positioning (II/II) % out of Group revenues Colombia Peru 3.0% Mexico 2.8% Venezuela 6.2% Net Adds (‘000) Net Adds & Voice Traffic Traffic (y-o-y) FY 12 FY 13 FY 12 FY 13 Q4 13 FY 12 FY 13 264 275 33.7% 1.2 m 16.1% 28.5% 148 20.0% 93 1.2 m 38.1% 12.9% (0.6 m) FB
Slide 28: T. Europe: Focused portfolio with enhanced margins
T.EUROPE T. Europe: Focused portfolio with enhanced margins Growing quality base (penetration) Dec-13 y-o-y Differential customer propositions 61% • Sound commercial trading in very dynamic markets 42% Leadership in Spain: “Fusión” (quality premium on FTTH) +1 p.p. Ongoing momentum in contract m
Slide 29: Spain: Remarkable trading, strong push on fiber
T.EUROPE Spain: Remarkable trading, strong push on fiber Movistar Fusión % New & upselling customers /gross adds Fusión customers (m) Improved trends in Q4: Turnaround to higher value New & upselling customers 60% 64% • Record-high fiber and Pay TV net adds in Q4 56% 47% 2.9 • Christmas campaign lev
Slide 30: Spain: Consolidating trends across the board
T.EUROPE Spain: Consolidating trends across the board 2013 Revenue (organic y-o-y) Revenue ex MTR Revenue Consistent revenue stabilisation Q1 Q2 Q3 Q4 • Fixed revenue trend improvement on better commercial trend of “Fusión” (9.9%) (9.8%) (13.0%) • Strong regulatory impact (MTR -60% on 1st July) (11.
Slide 31: UK: Solid commercial momentum
T.EUROPE UK: Solid commercial momentum 2013 Mobile net adds (‘000) Total Contract Successful commercial proposition 251 303 292 219 222 222 214 46 • “O2 Refresh” surpasses the 1 million mark Only available in direct channels; 56% of contract activity (+3 p.p. q-o-q) Q1 Q2 Q3 Q4 • LTE progressively
Slide 32: Germany: Data monetisation in a competitive environment
T.EUROPE Germany: Data monetisation in a competitive environment Contract base highlights LTE enabled devices sold % over total handset sales Solid progress in LTE 53% contract mix (+1 p.p. y-o-y) • LTE population coverage at >40% 80% +2% 31% • 4G customers: 3x usage vs non-LTE smartphone 55% +5 p.p
Slide 33: Substantial net debt reduction, well below our 2013 target
TELEFÓNICA Substantial net debt reduction, well below our 2013 target Net Financial Debt € in millions Net Financial Debt/OIBDA 2.36x Net Financial Net Financial €-8.9bn Debt/OIBDA Debt/OIBDA 2.36x 2.31x 51,259 873 52,132 (5,391) 1,464 84 (2,466) (1,231) 789 45,381 (3,056) 42,325 Net Fin. FX Net Fin
Slide 34: Outstanding liquidity while reducing interest costs
TELEFÓNICA Outstanding liquidity while reducing interest costs Increased average debt life above 7 years (1) (Dec-13) Total liquidity cushion at €22.6bn Net debt maturities (€ in billions) € in billions +1.6 €1.9Bn loans 21.0 22.6 prepaid in Feb-14 9.1 Undrawn credit 11.6 13.2 6.6 lines & 5.2 syndic
Slide 35: 2014 outlook
TELEFÓNICA 2014 outlook Guidance 2013 2013 Guidance 2014 (organic and excluding Venezuela) Revenue growth (>0%) 0.7% Positive revenue growth OIBDA margin towards stabilisation with erosion of Lower OIBDA margin decline than in 2012 (-1.4 p.p.) (-0.2 p.p.) around 1 p.p. y-o-y to allow for commercial
Slide 36: Closing remarks
TELEFÓNICA Closing remarks • One step further in our evolution to the Digital era Faster, simpler, closer, efficient, sustainable: capabilities needed to maximise returns from the Digital opportunity Technology strength and differential infrastructure are non-replicable competitive advantages •
Slide 37: ‘Jelefonica
‘Jelefonica