Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — Merger or Acquisition (July 2013)
20 slides from Telefonica Sa's merger presentation, Jul 23, 2013
Slide 1: Creating a Leading Digital Telco in Germany
Telefonica, S.A. Investor Relations 23 July 2013 Creating a Leading Digital Telco in Germany
Slide 2: Forward-looking statements disclaimer
This document contains statements that constitute forward looking statements about Telefonica Group (going forward, "the Company" or Telefonica) including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations which may refer, am
Slide 3: Transaction Summary
Transaction Summary Key Terms Total consideration of €5bn in cash and a 17.6% stake in the enlarged Telefonica Deutschland, as a result of two subsequent steps: Acquisition of E-Plus by Telefonica Deutschland for a combination of cash and a stake in the enlarged Telefonica Deutschland (i) €3.70bn of
Slide 4: Transaction Structure
Transaction Structure 4 Transaction Summary Total consideration of €5 Bn in cash and a 17.6% stake Two Step Structure Acquisition of E-Plus by Telefonica Deutschland for a combination of cash and a stake in the enlarged Telefonica Deutschland €3.70bn of cash, financed through a rights issue fully un
Slide 5: Transaction Rationale: Creation of a Leading Digital Telco
Improved profitability and enhanced cash flow generation Stronger competitive position from increased scale Transaction Rationale Creation of a Leading Digital Telco A leading player with a combined customer base of 43m, 42% in postpaid Strong scale benefits with combined mobile revenue market share
Slide 6: Transaction Rationale (Cont'd)
Unlocks significant value for Telefonica Deutschland shareholders Increases financial flexibility (improving leverage) while maintaining an attractive shareholder remuneration Conservative pro forma balance sheet EPS and FCF accretive from first year of full operation 1(1) Unlocks significant value
Slide 7: Creation of a Leading Mobile Operator in Germany
1 Creation of a Leading Mobile Operator in Germany Creation of a Leading Digital Telco Q1 2013 Mobile Revenue Market Share (%) 7 Source: Company data, broker research Leading Postpaid Subscriber Growth 2010 - 2012 Postpaid Mobile Market Share Growth (pp) Combining Telefonica Deutschland and E-Plus's
Slide 8: Highly Attractive Mobile Market
Relatively Low Churn Strong Subscriber Base Growth Smartphone Penetration Upside Highly Attractive Mobile Market EBITDA Growth Monthly Churn, 2012 Smartphone Connections as % of Mobile Connections, 2012 2013E YoY Growth 2009 - 2013E CAGR 2.7% 1.4% Germany EU Average 27.4% 34.4% Germany EU Average 1.
Slide 9: Identified and Realisable Synergies of €5.0-5.5bn NPV
Identified and Realisable Synergies of €5.0 - 5.5 bn NPV 9 2 Operating Synergies of €4.5 bn NPV Revenue and Other Synergies of €0.5-1.0 bn NPV + Distribution and Customer Service Rationalisation of distribution network Increased efficiency in customer service costs leveraging best practices and scal
Slide 10: Synergies Value of €5.0-5.5bn NPV
Synergies Value of €5.0 - 5.5 bn NPV €bn % of Total Synergies 32% 70% (16%) 10 2 14% NPV €5.0-5.5bn: Net savings from year 2 Run-rate synergies approx. €800 m from year 5; 75% of run-rate synergies by year 4 Incremental value from additional revenues, financial and tax synergies
Slide 11: Stronger Competitive Position from Increased Scale in Germany
Stronger Competitive Position from Increased Scale in Germany 11 2013 Revenue 2013 OIBDA 2013 Capex 2013 OpFCF(1) €bn €bn €bn €bn Source: Broker consensus. Not adjusted for accounting differences, pre-synergies 1. Defined as OIBDA-Capex 3 Based on Consensus Forecasts
Slide 12: Enhanced Profitability and Cash Flow Generation in Germany
Enhanced Profitability and Cash Flow Generation in Germany Pro forma Financial Impact on Telefonica Deutschland, based on Consensus Forecasts Revenues €Bn OIBDA €bn OpFCF(1) €bn 12 3 Source: Broker consensus, not adjusted for differences in accounting policies Defined as OIBDA-Capex Based on run-rat
Slide 13: Single LTE Network to Deliver the Best Mobile Broadband Experience
Single LTE Network to Deliver the Best Mobile Broadband Experience Strong commitment to invest in the German market Spectrum and network capacity to cope with growing data volumes Access to fibre backhaul Environmental benefits through reduction of sites Improved situation in the business sector Imp
Slide 14: Enhancing Telefonica's Geographic Diversification
Enhancing Telefonica's Geographic Diversification Telefonica Revenue Breakdown Telefonica Standalone, 2012 Telefonica OIBDA(1) Breakdown Telefonica Standalone, 2012 1. Underlying OIBDA Pro-forma Telefonica (Pre-Synergies), 2012 Pro-forma Telefonica (Pre-Synergies), 2012 Total Revenues: €62bn Germany
Slide 15: Building a Stronger Competitor in the Attractive German Market
2011 - 2013E Real GDP CAGR 2012 GDP per Capita 2011 - 2013E Telecom Market CAGR Building a Stronger Competitor in the Attractive German Market Sovereign Debt Yield % % € % Source; Global Insight, IMF, IDC 1. Excludes Cyprus, Luxembourg and Malta for which data is not available 2. Average 10Y Governm
Slide 16: Attractive Transaction for Telefonica Shareholders
Attractive Transaction for Telefonica Shareholders Pro forma Financial Impact on Telefonica Group, based on Consensus Forecasts Revenues €Bn OIBDA €bn OpFCF(1) €bn 16 6 Source: Broker consensus, not adjusted for differences in accounting policies Defined as OIBDA-Capex Based on run-rate synergies be
Slide 17: Financing without Increasing Leverage
Limited debt increase 1/3 long term financing considered Weighting around 2x incremental OIBDA, excluding synergies Neutral to positive metric impact in short term Net debt/ratio preserved Keeping strong liquidity to maintain 24 months maturities covered Alternative financing in process to further s
Slide 18: Expected Transaction Timetable
Expected Transaction Timetable 18 Regulatory Approval of Acquisition Mid 2014 Regulatory approvals expected and other conditions cleared Mid 2014 Completion of merger Telefonica Deutschland & KPN EGM 23 July 2013 Signing of Agreement September 2013 KPN convocation of EGM July/Aug 2013 Submission for
Slide 19: Closing Remarks
Closing Remarks Post transaction, Telefonica would have the second largest subscriber base in Europe In each of its top 3 markets (Spain, Brazil and Germany), Telefonica would be the leader in terms of subscribers and network quality A natural strategic move for Telefonica Deutschland to create a le
Slide 20: Signatures
Table of Contents 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 23 th , 2013 By: /s/ Ramiro Sánchez de Lerín García-Ovies