Slide 1: Results January–March 2017
Results_ January –March 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: Q1 17 Highlights
01 Q1 17 Highlights Mr. José María Álvarez-Pallete Chairman & CEO Investor Relations Telefónica, S.A.
Slide 4: Sustainable business model; differential quality
Sustainable business model; differential quality Sustained fiber, LTE, smartphone growth driving avg. rev per access (+2.1% org.) Delivering growth (reported Financials in euro terms reflecting FX tailwind effect and organic) Accelerating OpCF growth trends across the board; outstanding perfor
Slide 5: Q1 performance fully consistent with FY outlook
Q1 performance fully consistent with FY outlook 2017E Guidance Guidance 2017E Q1 17 (Organic) Revenues Stable 1.5% (in spite of regulation: ~-1.2 p.p.) (regulation -1.1 p.p.) OIBDA margin Expansion up to 1 p.p. (0.0 p.p.) CapEx ex-spectrum/Sales Around 16% 12.2% 2017 Dividend To be paid in 2017/18 D
Slide 6: Financials in a nutshell
Financials in a nutshell Q1 17 Reported Organic €m Reported y-o-y y-o-y Revenues 13,132 5.0% 1.5% Service revenues 12,187 5.6% 1.7% OIBDA 4,021 4.8% 1.3% OIBDA Margin 30.6% (0.1 p.p.) (0.0 p.p.) OIBDA Underlying 4,109 6.5% OpCF (ex-spectrum) 2,404 12.1% 8.9% Net Income 779 42.2% EPS 0.14 48.8% FCF 5
Slide 7: Reported growth accelerating at net income level
Reported growth accelerating at net income level Underlying EPS €0.18 +46.1% +4.8% 4,021 (2,451) +3.6% +42.2% 1,570 2 (449) (314) 779 (30) OIBDA D&A OI Associates Net Financial Taxes Minorities Net Income Expenses 5 Investor Relations Telefónica, S.A.
Slide 8: Accelerating free cash flow generation in Q1
Accelerating free cash flow generation in Q1 FCF (€m) Higher FCF y-o-y (+€530m) +€530m y-o-y 599 363 246 (96) 530 69 120 260 Q1 15 Q1 16 Q1 17 OpCF WC Interest Taxes FCF growth payments & Others growth Q1 q-o-q change in Net Debt (€m) Lower ND increase 938 in Q1 17 in spite of seasonal effects FCF t
Slide 9: Significant recovery in reported trends
Significant recovery in reported trends Revenues (y-o-y reported) OIBDA (y-o-y underlying) 6.0% 6.5% Reported 5.0% +4.8% (1.0%) (1.3%) (4.3%) (6.4%) (5.9%) (8.3%) (7.7%) Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 OpCF (y-o-y underlying) 15.0% Reported +12.1% 7.8% 3.8% (5.8%) (4.0%)
Slide 10: Organic performance and FX driving growth
Organic performance and FX driving growth OIBDA: Organic growth & FX impact (€m) Q1 16 y-o-y Q1 17 y-o-y +230 +191 +52 Strong currency contribution Organic (553) Organic • Positive FX impact y-o-y, reverting 2016 negative trend FX FX Growth Growth o +€191m in OIBDA vs. -€553m in Q1 16 Net o Q1 y-o-y
Slide 11: Steady organic growth of Revenues & OIBDA
Steady organic growth of Revenues & OIBDA Q1 17 (y-o-y organic) Delivering growth from service revenues +2.6% Ex-reg. • Service Revenues +1.7%, despite regulation (-1.1 p.p.) 1.7% o Hispam (+2.1 p.p.), BZ (+0.4 p.p.) & UK (+0.3. p.p.) to Q1 y-o-y org 1.5% • BB & SoC revs. +5.3 p.p. y-o-y to 51% o/to
Slide 12: Boosting OpCF growth; high cash conversion
Boosting OpCF growth; high cash conversion OpCF underlying (OIBDA-CapEx ex-spectrum) (€m) Operating leverage and lower CapEx intensity 2,492 2,166 1,991 2,201 1,556 • Robust business performance • Q1 CapEx €1,621m (-8.4% y-o-y org.) • All segments accelerating trends (q-o-q org.) o Spain (+10.1 p.p.
Slide 13: Enhanced network and offer fostering data growth
Enhanced network and offer fostering data growth LTE accesses (m) Data usage/smartphone Penetration Penetration Proven data monetisation +72% +52% 75.5 1.3 GB • Delivering value in Latam: recurrent plans & tiered schemes 0.9 GB o ~20% ARPU uplift after data adoption o 45% smartphone penetration in p
Slide 14: A new wave of data monetisation opportunities
A new wave of data monetisation opportunities Cognitive Higher customer Intelligence value Services Beyond Connectivity Optimised customer experience: ARPU increased through upselling Speed & ARPU uplift Enhanced operational efficiency Capacity ~€20 in basic TV bundles New optionality: Broader servi
Slide 15: Digital Services: Distinctive model
Digital Services: Distinctive model Q1 17 Digital Services Revenues (€m) Video: differential contents & widening partnerships y-o-y organic 1,274 • Sustained revenue growth +4.6% o ARPU growth across footprint +4.9% o Successful customer development on Premium TV offering 755 • International distrib
Slide 16: TGR: UBB deployment and E2E Digitalisation
TGR: UBB deployment and E2E Digitalisation 17.5 m (+16%) 88% Europe (+7 p.p) Access ~40m FTTx/Cable 56% Latam (+12 p.p.) 17.4 m (+4%) LTE coverage Enhancing Network premises passed 5 m (+50%) (64% pop.) speeds and capacity OSS + Core • New system for FTTH deployment tasks assignment (2017E: -40% tim
Slide 17: Telxius: Solid performance
Telxius: Solid performance Q1 Financials (€m) (y-o-y organic) Leading telecom infrastructure Co. +5.4% 48.9% • Balanced asset portfolio: solid revs. + strong profitability 188 margin • Towers: 27 new sites under build to suit program with TEF in Q1 59% Cable • Submarine Cable: solid traffic growth o
Slide 18: Q1 Results
02 Q1 17 Results Mr. Ángel Vilá CSFO Investor Relations Telefónica, S.A.
Slide 19: Spain: Trading skewed to high value
Spain: Trading skewed to high value Net adds (‘000) Q4 16 Q1 17 Base y-o-y Successful smart bundling dynamic +1% +30% -3% +5% • “Fusión” upselling gaining traction 217 176 o “Fusión” high-end: 21% of base (Fusión+2 and above) 132 91 22 o “Fusión” customers (+4%); stable churn • Mobile base growth (f
Slide 20: Spain: Zoom on revenue evolution
Spain: Zoom on revenue evolution Service revenues to improve from Q2 (€m; organic) -1.5% (46) 82% “Flattish” 3,031 91 1 2,985 (97) (41) - Slowdown from lower - DTS (~-€34m); tariff impact; - Line losses (~-€16m) + Re-accelerating in Q2 Q1 16 Fusión No Fusión Business Wholesale & Other Q1 17 54% 28%
Slide 21: Spain: Accelerating operating cash flow growth
Spain: Accelerating operating cash flow growth Strong Profitability (Q1 y-o-y organic) Margin organic Growing OpCF +8.3% y-o-y 8.3% • Service revenues (-1.5%) reflecting tougher comps • OIBDA evolution driven by top line (OpEx:-3.3%) (2.6%) (2.4%) • Best-in-class cash conversion: easing CapEx cycle
Slide 22: Germany: Executing on synergies; improving quality
Germany: Executing on synergies; improving quality MSR ex-regulation (y-o-y organic) MSR Dynamic market Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 • Focus on stimulating data growth (0.6%) o LTE cust. +61%; penetration 32% (+11 p.p.); cov. 79% (+3 p.p.) (1.0%) o +52% avg. data usage O2 LTE to 1.8GB (0.9%) (0.9%)
Slide 23: UK: customer brand of choice
UK: customer brand of choice Accesses (Mar-17; m) y-o-y Solid performance Continued in a competitive customer growth market in a challenging market 25.0 • Contract 63% o/total (+1 p.p.) 15.6 o Leading contract churn: 0.9% in Q1 12.4 • 57% LTE penetration (+14 p.p.); 96% outdoor cov. (+10 p.p.) • Avg
Slide 24: Brazil: Growing & expanding margins; OpCF +21.6%
Brazil: Growing & expanding margins; OpCF +21.6% Accesses (y-o-y) ARPU (y-o-y l.c.) Commercial activity focus on value • 30.5% mobile market share; 42.0% in contract; 34.5% in LTE Mobile +4.3% FBB +9.0% Pay TV +6.5% 26% x2 57% • Market leading contract churn (1.6%; - 0.1 p.p.) 8% 7% • Mobile positiv
Slide 25: HispAm: Focus on quality growth
HispAm: Focus on quality growth Accesses (y-o-y) ARPU Accesses penetration (y-o-y l.c.) ARPU increases across services 73% 22% 10.3% • Ongoing improvement in QoS o LTE coverage 51%; +9 p.p. y-o-y 2% o 5.0m prem. passed with FTTx/Cable (+1.7m in LTM) Contract Smartphones LTE Mobile 23% 46% 15% • ARGE
Slide 26: HispAm: Solid revenues, OIBDA and OpCF growth
HispAm: Solid revenues, OIBDA and OpCF growth Revenues (organic y-o-y) Robust y-o-y growth 11.0% 9.2% • Solid top line increase 3.6% 4.1% o Double-digit MSR growth (+10.6%) o Fixed revenue +4.1% Q2 16 Q3 16 Q4 16 Q1 17 • Slight OIBDA margin erosion (-0.8 p.p.) • OpCF up 23.6% Financials (y-o-y organ
Slide 27: Leverage reduced on better operating performance
Leverage reduced on better operating performance Net Financial Debt (€m) ND/OIBDA ND/OIBDA 2.95x 2.91x 48,766 (1,275) 48,595 (599) 277 166 141 186 €47,491m 2.84x Dec-16 FCF Shareholder Pre-retirement FX MTM & Mar-17 Post-closing remuneration commitments Others event (incl. hybrid (40% Telxius) coupo
Slide 28: Average debt life above 8 years
Average debt life above 8 years Sources of long-term financing (YTD) Net Debt maturities (Mar-17) (€bn) (€bn; not considering hybrid NC dates) Avg. debt life from 6.3yr in Dec-16 to Avg. maturity new Avg. cost of 3.3% on 8.3yr in Mar-17 incl. debt >16yr new financing YTD Apr-17 bonds 6.9 0.7 6.8 2.1
Slide 29: Summary
Summary • Solid performance with full-year guidance on track • Distinctive OpCF generation and growth fuelling FCF • Retaining benchmark profitability • Outstanding EPS growth • Reinforcing B/S: Deleverage; Active and diversified financing strategy Strong set of results; advancing in sustainable gro
Slide 30: For further information: Investor Relations
For further information: Investor Relations Tel. +34 94 482 87 00 ir@telefonica.com www.telefonica.com/investors