Slide 1: Results January-June 2010
Results January—June / 2010
Slide 2: Disclaimer
Disclaimer This document contains statements that constitute forward looking statements about the Company including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations which refer to the intent, belief or current prospects of
Slide 3: Continue to execute 2010 priorities
Continue to execute 2010 priorities GROUP FINANCIALS #1 Capturing top line growth prospects Enhanced revenue trends across all regions of operations Continued wireless data revenue growth and further expansion of FBB Benchmark profitability, improving sequentially High CF generation & Balance sheet
Slide 4: Growth reacceleration...
Growth reacceleration... Organic growth assumes constant exchange rates as of H1 09 (average fx) and excludes the consolidation of HanseNet (since mid February) and Jajah (January-June) in 2010. Telyco Morocco results are excluded in January-June 2009. OIBDA and OI figures do not include the impact
Slide 5: .... from top to bottom
.... from top to bottom 4 GROUP FINANCIALS H1 10 EPS up 10.1% y-o-y to reach 0.83 € January-June 2010 € in millions (% change y-o-y) 10,905 - -4,449 (+0.9%) D&A OIBDA +0.0% 72 (+140.8%) - -1,254 (-13.7%) - -1,428 (-8.1%) - -71 (+10.8%) 6,456 3,775 OI Associates Financial expenses Taxes Minorities Ne
Slide 6: Sustained commercial push ...
Sustained commercial push ... Organic: figures and growth: exclude Medi Telecom customers in 2009 and HanseNet in 2010. It also excludes the disconnection of inactive customers made in the second quarter of 2010. 5 GROUP FINANCIALS Gross adds increased 16.2% y-o-y in H1 10 Churn contained in H1 10 t
Slide 7: ....translates into a superior revenue growth
....translates into a superior revenue growth Organic growth revenues assumes constant exchange rates as of H1 09 (average fx) and excludes the consolidation of HanseNet (since mid February) and Jajah (January-June) in 2010. Telyco Morocco results are excluded in January-June 2009. It excludes hyper
Slide 8: Strong profitability despite increased commercial activity
Strong profitability despite increased commercial activity 7 Organic growth assumes constant exchange rates as of H1 09 (average fx) and excludes the consolidation of HanseNet (since mid February) and Jajah (January-June) in 2010. In OIBDA and OI, Telyco Morocco results are excluded in January-June
Slide 9: Solid cash flow generation
Solid cash flow generation Efficiency ratio: Defined as last twelve months (OpEx+CapEx- Internal exp. Capitalized in fixed assets)/Revenues. CapEx excludes the acquisition of spectrum and Efficiency Program at T. Espana. Organic growth assumes constant exchange rates as of H1 09 (average fx) and exc
Slide 10: On track with 2010 full year outlook
On track with 2010 full year outlook OIBDA CapEx €2,845 m H1 10 Revenue H1 10/H1 09 - -1.2% H1 10/H1 09 2010 GUIDANCE +1%/+3% 2010 GUIDANCE €7,450/7,650 m 2010 GUIDANCE +1%/+4% +3.3% ? ? 2010 EPS target confirmed (€ 2.1) H1 10 9M 10E Q1 10 FY 10E - -3.0% T. Espana: TV Tax in T. Espana (2010), USO in
Slide 11: T. Espana: Gradual recovery and improved profitability
T. Espana: Gradual recovery and improved profitability TELEFONICA ESPANA Comparable terms for H1 10 y-o-y change exclude the following effects: USO in Q1 09, real estate capital gains in Q1 09, Telyco Morocco in Q1 09 and Q2 09 , TV Tax in Q1 10 and Q2 10, and revision of the estimates in Q2 09 for
Slide 12: Sound commercial momentum focused on contract
Sound commercial momentum focused on contract Wireless service revenues Mobile Broadband accesses (m) Wireless contract customers - -7.7% - - 8.1% - -8.0% H1 10 - 6.4% Leading the market with the highest gap between access and revenue share Net adds boosted by total gross adds (up 27.0% vs. H1 09) a
Slide 13: Revenue recovery, leveraging integrated leadership
Revenue recovery, leveraging integrated leadership Sequential improvement in top line driven by positive contribution from all revenue concepts, but subsidiaries Market leader leveraging on strong customer uptake and increased loyalty across businesses, thanks to focus on bundles Strong y-o-y reduct
Slide 14: T.Latam: Revenue and OIBDA growth acceleration
TELEFONICA LATAM T.Latam: Revenue and OIBDA growth acceleration Organic growth assumes constant exchange rates as of H1 09 (average fx) and excludes hyperinflation accounting in Venezuela in both years. Accesses growth (y-o-y) Strong commercial momentum maintained in Q2: Ramp up in accesses to 176.1
Slide 15: Wireless business: Strong commercial activity
Wireless business: Strong commercial activity Organic growth assume constant exchange rates and excludes hyperinflation accounting in both years. Mobile customers include Telemig as of January 1st, 2008. 1.4 3.3 5.4 3.7 3.5 14 TELEFONICA LATAM Gross adds up 22.6% y-o-y in H1 10 (+43.1% in contract)
Slide 16: Wireline business: Stabilizing revenue drivers
Q4 09 wireline net adds and growth rates exclude the disconnection of fixed telephony accesses in Colombia. Wireline business: Stabilizing revenue drivers Record FBB net adds since Q3 08, with increasing net adds q-o-q for the last 3: Latam Retail FBB y-o-y growth Latam 21.9% Brazil 14.4% - -0.2p.p.
Slide 17: Telesp: Sustained commercial recovery gradually flowing into financials
OIBDA Telesp: Sustained commercial recovery gradually flowing into financials Positive fixed line net adds for the 1st quarter since Q1 06: positive net adds for 4 consecutive months in a row Record BB net adds since launch 10 years ago: 2x vs. H1 09; +6.1% q-o-q Strong gross adds and further churn
Slide 18: Colombia: Turnaround efforts start to pay off
Colombia: Turnaround efforts start to pay off Wireline Financials (y-o-y in local currency) Wireless KPIs Contract net adds/total Wireless Financials (y-o-y in local currency) Wireline net adds (000) - -5.3% Q4 09 FBB and wireline net adds and growth rates exclude the disconnection of inactive fixed
Slide 19: Good performance across key operations
Good performance across key operations Mexico Ramp up in customer growth (+15.7% y-o-y) driven by contract segment (+47.7% y-o- y) Improved gross adds & best in class churn rate (2.2% in H1 10) Solid service revenue growth (+9.7% y-o-y) & OBDA margin expansion to 33.9% in H1 10 Venezuela Strong fina
Slide 20: Becoming the leader in the growing Brazilian market
Becoming the leader in the growing Brazilian market The leading integrated telco player in Brazil ... .... with strong growth potential (FBB, wireless penetration, MBB, pay TV ...) The most profitable player ... .... with further room for improvement leveraging significant synergies potential An EPS
Slide 21: Telefonica's value proposition is in line with the offer supported by PT's shareholders
Telefonica's value proposition is in line with the offer supported by PT's shareholders at the EGM PT services to Vivo + NPV of total cash outflows@5: €7.3bn 5% guaranteed return on deferred sale value Call option on TEF's stake in PT Acquisition of Dedic Cash Offer for PT's 50% stake in Brasilcel P
Slide 22: Control price averaged down by tender offer for ONs
Control price averaged down by tender offer for ONs Multiples based on analysts consensus estimates for Vivo. % Vivo Acquired Excluding synergies 11.6x 9.4x FV/EBITDA 10 Excluding synergies 10.4x 8.4x FV/EBITDA 11 29.7% 33.5% 3.8% €8.1bn €0.8bn €7.3bn Control ONs tender offer Total 11.4x Vivo busine
Slide 23: Key dates of the transaction
Key dates of the transaction 28 of July-10 Signing of agreement with PT End of Sep-10 Closing End of October-10 Filing of the application for registration of the tender offer with CVM Anatel approval 60 days maximum 30 days maximum ONs: 88.9% PNs: 44.1% Total: 59.4% ONs: 100.0% PNs: 44.1% Total: 63.
Slide 24: T. Europe: Improving trends, continued momentum
T. Europe: Improving trends, continued momentum Organic growth: assumes constant exchange rates (avg. H1 09) and excludes the consolidation of HanseNet (since mid February) and Jajah (January- June), and the capital gain from Manx T. disposal (€61 m). CapEx excludes spectrum acquisition in Germany (
Slide 25: T.O2 UK: Steady growth, shaping the business
T.O2 UK: Steady growth, shaping the business OIBDA (y-o-y growth in local currency) Driving smartphone adoption & innovation: The "Home of Smartphones": sustained iPhone momentum since exclusivity ended 47% of the base in contract (+3 p.p. y-o-y) Bold move to tiered data pricing Steady revenue growt
Slide 26: T.O2 Germany: Sustained solid momentum, smooth HanseNet integration
T.O2 Germany: Sustained solid momentum, smooth HanseNet integration H1 10 Profitability (organic y-o-y growth) Continued customer base expansion: Sustained leadership in MBB Total mobile net adds grew 4.1% y-o-y in H1 Q2 prepay net adds up 13.5% y-o-y To June, HanseNet focused on integration Custome
Slide 27: Effective interest rate contained below 5%
Effective interest rate contained below 5% GROUP FINANCIAL EXPENSES AND DEBT Lower Cost of Debt Net Financial Debt Evolution Total un-drawn credit lines Leverage target, including commitments, up to the middle of our target range (2.3x OIBDA) Solid liquidity helped by € 1.8 bn increased in committed
Slide 28: Conclusions
Conclusions 27 Sequential ramp-up in growth rates across the P&L Robust top line growth, above peers, driven by strong commercial momentum Benefiting from diversification: Increased exposure to Brazil; #1 integrated player Retaining benchmark profitability and very healthy cash generation Solid fina
Slide 29: Signatures
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, thereunto duly authorized. Telefónica, S.A. Date: July 29 th , 2010 By: /s/ Santiago Fernández Valbuena Name: Santiago Fernández V