Slide 1: Results January – September 2017
Results January – September 2017_
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: Q3 17 Highlights
01 Q3 17 Highlights Mr. Ángel Vilá COO Investor Relations Telefónica, S.A.
Slide 4: Q3: Solid execution on key priorities
Q3: Solid execution on key priorities Growing strategic KPIs: fiber, LTE supporting customer lifetime value o Ramping-up avg. rev per access to +4.3% y-o-y; churn control Consistent and profitable Revenue acceleration to +4.0% y-o-y; Spain back to service rev. growth organic growth Continued O
Slide 5: On track to deliver FY outlook
On track to deliver FY outlook 2017E Guidance Guidance 2017E 9M 17 (Organic) Revenues >1.5% 2.9% (in spite of regulation: ~-1.2 p.p.) (regulation -1.1 p.p.) OIBDA margin Expansion up to 1 p.p. 0.3 p.p. CapEx ex-spectrum/Sales Around 16% 14.1% 2017 Dividend To be paid in 2017/18 Dividends to be paid
Slide 6: Summary: Financials
Summary: Financials 9M 17 Q3 17 Reported Organic Reported Organic € in millions Reported Reported y-o-y y-o-y y-o-y y-o-y Revenue 38,846 1.4% 2.9% 12,754 (2.5%) 4.0% Service revenues 35,970 1.3% 2.7% 11,746 (3.3%) 3.3% Q3 OIBDA impacted by OIBDA 12,274 2.9% 3.8% 4,095 (1.9%) 2.8% RLAH (-1.7 p.p. OIB
Slide 7: Bottom line increased by 10%, with EPS €0.44
Bottom line increased by 10%, with EPS €0.44 9M 2017 (€m) +2.9% reported (6.6%) +9.6% 12,274 +7.1% reported (7,131) 25% P&L Reported reported tax rate +9.5% Underlying 5,143 5 (1,729) (867) (113) 2,439 OIBDA D&A OI Associates Net Financial Taxes Minorities Net Income Expenses Q2 & Q3: -€130m Q3 16:
Slide 8: Progressive improvement in FCF
Progressive improvement in FCF FCF (€m) Strong FCF growth (y-o-y) 2016 2017 y-o-y +909m 9M 17 FCF components (y-o-y; €m) +39.2% (24.3%) +39.2% 1,600 +6.7% (97) 1,500 424 909 1,023 3,226 185 2,317 397 603 747 69 OpCF WC Interest Taxes FCF growth payments & Others growth Q1 Q2 Q3 9M 16 9M 17 • FCF to
Slide 9: Growth fuelled by organic contribution
Growth fuelled by organic contribution OIBDA: Organic growth & FX impact (€m) Q1 17 y-o-y Q2 17 y-o-y Q3 17 y-o-y 9M 17 y-o-y +457 Remarkable organic trends despite regulation +191 +285 +52 +119 (85) (51) • Up to September, organic performance added €457m (+€119m in Q3) (224) o FX dragged €85m or -0
Slide 10: Revenue trends ramped-up
Revenue trends ramped-up Revenues (y-o-y organic) +4.0% Ex-reg. 4.0% 2.9% 3.1% Strong and quality top line 1.5% • Q3 revenues accelerated +90 bps Q1 Q2 Q3 9M • Q3 service revs increased y-o-y in all segments, except Germany o Better performance in Spain; explains most of the improvement Service Reve
Slide 11: Revenue growth based on successful data monetisation
Revenue growth based on successful data monetisation LTE (Q3 y-o-y organic) Smartphones (Q3 y-o-y organic) Penetration Penetration Several levers to foster data revenues 35% 62% x3 (+12 p.p.) +10% ARPU uplift (+5 p.p.) 1.7 GB/ month 75% • Prepaid recurrent plans in Latam boost ARPU growth 61% 55% 67
Slide 12: Generating profitability and cash
Generating profitability and cash OIBDA (y-o-y organic) Margin 7.2% Ex-reg Ex-reg +5.3% +5.2% Positive OIBDA: operating leverage increase 1.3% +2.8% +3.8% • Committed to improve efficiency and operational excellence Q1 Q2 Q3 9M • Q3 y-o-y OIBDA maintaining trends ex-regulation o RLAH -1.7 p.p. impac
Slide 13: Upselling existing customer relationships
Upselling existing customer relationships Cognitive Intelligence Qualitative leap in cust. experience Services Beyond Connectivity TEF: Pioneering new relationship model (talk to technology and get things done) Speed & ARPU uplift AURA launch in the next 6M in 6 countries. Capacity NOVUM smartphone
Slide 14: Digital Services: differentiated offering
Digital Services: differentiated offering 58% o/9M Dig. Revs. VIDEO: Revs: +6.8% vs. Q3 16 • Accelerated revenue growth (+2.0 p.p. q-o-q) o IPTV 40% o/total base o Continued ARPU expansion • 8.4m accesses; IPTV +11% y-o-y • New series produced by Movistar+ premiered at S. Sebastian Film Festival 6%
Slide 15: TGR: progressing on UBB & digitalisation
TGR: progressing on UBB & digitalisation 90% 18.6m FTTH (+13% y-o-y) 69% 62% ~43m FTTx/Cable +4 p.p. Excellent 18.0m (+7%) LTE coverage premises passed +11 p.p. +14 p.p. (%pop) connectivity 6.2m (+53%) Total Europe Latam Enabling digital capabilities Network transformation to All-IP 55% +5 p.p. Virt
Slide 16: At the forefront of digitalisation
At the forefront of digitalisation DRIVER FOR DIFFERENTIATION AND EFFICIENCY …tomorrow E2E Digitalisation Programme Moving towards Digital Customer Connectivity; foundation for digital revolution Engagement Digital services over connectivity Network Operating System …today… (NOS). Transparent Networ
Slide 17: E2E digitalisation programme underway
E2E digitalisation programme underway LEVER TO TRANSFORM CUSTOMER PROCESSES … IMPACTING DIRECTLY ON COST STRUCTURE • Automation and real-time processes • Fostering digital channels • Reducing assisted channels interactions • Improving customer experience Back-office and commercial Costs Commissions
Slide 18: Digitalisation bearing clear benefits in Spain
Digitalisation bearing clear benefits in Spain Transformation process started in 2012 towards building a leaner and more competitive Company Simplification programmes and Full Stack have driven benchmark efficiency and business process enhancement Tangible Benefits Commercial Var 12-17E 2017E •
Slide 19: Digitalisation being gradually adopted group-wide
Digitalisation being gradually adopted group-wide SELF-MANAGEMENT LEVEL, PROCESS AUTOMATION BRAZIL EXAMPLE Impact on Operations… … is boosted by BUSINESS INITIATIVES to become digital … Initiatives promoting the use of digital channels % unique users in % digital Monthly calls to call center … Simpl
Slide 20: Q3 17 Results
02 Q3 17 Results Ms. Laura Abasolo CFCO Investor Relations Telefónica, S.A.
Slide 21: Spain: Recovered momentum; focus on value
Spain: Recovered momentum; focus on value Net adds 2017 (‘000) Q2 Q3 Better trading on enhanced positioning 225 164 51 100 • Positive volumes from new “Fusión” packs (launched in July) 26 27 o Q3 gross adds recovery: “Fusión” (+16% y-o-y), FBB (+13%) (2) o Best contract quarterly net adds in last 10
Slide 22: Spain: Improved revenue trends; strong OpCF
Spain: Improved revenue trends; strong OpCF 2017 Financials (y-o-y organic) Service Revenues OIBDA ex-real estate sale Back to growth in Service Revenue 0.4% (1.5%) (0.8%) (0.6%) • Consumer revs. ramping-up (+1.0 p.p. q-o-q) (2.4%) (2.1%) • Business revs. (+0.2 p.p. q-o-q) affected by IT seasonality
Slide 23: Germany: Data monetisation opportunity ahead
Germany: Data monetisation opportunity ahead MSR ex-regulation (y-o-y organic) MSR Regulation Larger data buckets Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 (0.1%) • Stimulating data usage (mobile data traffic +49% vs Q3 16) (0.4%) o Commercial activities O2 Free 15 & new O2 Free portf. (Sep.) (0.6%) (0.9%) (0.9
Slide 24: UK: Sustained top line growth in spite of RLAH
UK: Sustained top line growth in spite of RLAH MSR ex-regulation (y-o-y organic) MSR Regulation Strong operational Continued base and customer growth in aKPIs challenging market 3.5% 2.0% 2.1% 2.1% (3.1 p.p.) • Contract expanding: 63% o/total (+1 p.p.) o Sustained, best-in-class contract churn: 1.0%
Slide 25: Brazil: Enhancing best-in-class value positioning
Brazil: Enhancing best-in-class value positioning Contract net adds 2017 (‘000) Expanding differentiation gap 981 858 • Network quality widening 435 Highest contract o 76% population 4G cov.; 1,919 cities already covered (700 net adds in last 7 Qs MHz spectrum in 199 cities) o 18.0m premises passed
Slide 26: Brazil: Delivering growth; expanding profitability
Brazil: Delivering growth; expanding profitability 2017 Service revenues (y-o-y organic) 2.3% Data driving steady positive revs performance 2.1% 2.0% 1.7% • Q3 Revenue growth +1.2% y-o-y (9M; +1.5%) o Healthy MSR performance (Q3: +3.8% y-o-y) on data revs. (+28.2%) despite tougher comps o Gradual im
Slide 27: HispAm: Improved commercial traction
HispAm: Improved commercial traction Accesses (y-o-y) Penetration; y-o-y Focus on value 67% 69% • LTE cov. 56% (+8 p.p. y-o-y); 6.2m premises passed FTTx & Cable (+2.1m LTM) 2% o Record net adds in Q3 for LTE (2.8m; 9M 6.2m) & LTE FTTx/Cable Pay TV FTTx/cable (249k; 9M 492k) 20% +8 p.p. 29% +12 p.p.
Slide 28: HispAm: Solid revenues & OIBDA; OpCF +26.8%
HispAm: Solid revenues & OIBDA; OpCF +26.8% 2017 Revenues (y-o-y organic) Delivering growth 15.5% 16.1% 9.2… 13.6% €9.4Bn • Solid MSR and fixed growth (Q3: +19.0% and +5.6%, respectively) Reported o Mobile data revs. acceleration Q3: +38.2%; +3.5 p.p. q-o-q +2.8% o Double-digit growth in FBB & new s
Slide 29: Telxius: Solid operational momentum
Telxius: Solid operational momentum Revenue (y-o-y organic) OIBDA Margin 47.8% Strong set of results 46.5% 8.0% 7.5% • 9M financials; strong revenue growth and solid profitability o Revenues: €547m o OIBDA: €261m o OpCF: €126m Q3 9M Q3 9M • Robust OIBDA margin across both businesses o Sequential dec
Slide 30: Deleverage on strong organic FCF and disposals
Deleverage on strong organic FCF and disposals Net Financial Debt (€m) ND/OIBDA ColTel Deal closed: 2.95x net impact €0.8Bn +€32m already ND/OIBDA collected 2.80x 48,595 (3,226) 1,321 507 (514) 540 47,222 (1,275) €45,947 2.72x Dec-16 FCF Shareholder Pre- FX MTM & Sep-17 Post-closing remuneration ret
Slide 31: Stronger balance sheet and credit profile
Stronger balance sheet and credit profile Sources of long-term financing (YTD) Net Debt maturities (Sep-17) (€bn) (€bn; not considering hybrid NC dates) Avg. debt life 7.8 years 0.9 8.2 3.3 6.9 4.7 4.0 Cash > gross maturities USD Bonds € Bonds Latam Total 2017E 2018E 2019E Financing Liquidity positi
Slide 32: Summary: executing on fundamentals
Summary: executing on fundamentals • Delivering profitable organic growth o Top line accelerating trends; sound OIBDA performance despite regulation, high-single digit OpCF growth in 9M (CapEx peak is behind) • Best technology platforms, IT systems integration, development of new digital P&S o Build
Slide 33: For further information: Investor Relations
For further information: Investor Relations Tel. +34 94 482 87 00 ir@telefonica.com www.telefonica.com/investors