Telefonica Sa · BME:TEF

Telefonica Sa — 9M 2010 Earnings Presentation

25 slides from Telefonica Sa's earnings presentation, November 2010

  1. Slide 1: Results January-September 2010

    Results January-September / 2010

  2. 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 re

  3. Slide 3: Solid execution, delivering on 2010 priorities

    GROUP FINANCIALS Solid execution, delivering on 2010 priorities ƒ Sustained acceleration of organic revenue growth vs. H1 10 driven by: Strong commercial push Continued strength in mobile data revenue growth ƒ Strong profitability: Contained margin erosion despite higher commercial costs on rapid cu

  4. Slide 4: Sustained earnings momentum fuelled by diversification

    GROUP FINANCIALS Sustained earnings momentum fuelled by diversification Jan-Sep Chg Organic chg € in millions 2010 9M 10/9M 09 9M 10/9M 09 Group Contribution by regions Revenues 44,280 , +6.0% +2.5% Rev OIBDA OpCF 9M 10 Operating Income Ex-spectrum and Ex-capital gain VIVO VIVO’s capital gain (IFRS3

  5. Slide 5: Robust bottom line

    GROUP FINANCIALS Robust bottom line JJanuary-September S t b 2010 € in millions (% change y-o-y) • Revaluation of stake in Vivo ((IFRS 3 Revised): ) € 3.8 Bn • Restructuring costs in Germany: € 202 m • € -191 m due to 20 368 20,368 difference in • € -321 321 m ttax effect ff t market value of relate

  6. Slide 6: Sound commercial performance across the board

    GROUP FINANCIALS Sound commercial performance across the board Customer growth: exploiting growth levers Sep-10 y-o-y organic growth Total Accesses: 282 m 73.4% (+7.1% organic y-o-y) 15.9% 9.2% 10.7% 7 0% 7.0% 41 m Accesses 215 m 67 m 19 m 17 m 3m -4.1% Mobile Contract MBB FBB Pay TV Fixed accesses

  7. Slide 7: Strong sales, ramp up in growth rates

    GROUP FINANCIALS Strong sales, ramp up in growth rates Organic revenue (y-o-y growth) Reported revenue (y-o-y growth) • Positive effect from forex 3.7% and changes in the perimeter of consolidation 3.3% • Reaping the benefits of customer growth 7.3% 2.4% 6.0% 2.5% 5.4% 1.5% 1.4% Ex-MTRs 2.0% 0.9% 1.

  8. Slide 8: Booming mobile data revenue on increased MBB adoption

    GROUP FINANCIALS Booming mobile data revenue on increased MBB adoption MBB penetration Total mobile data revenue/MSR Sep 09 Sep-09 Sep-10 • 14% in Venezuela 19% • 6% in Chile 18% 26% • 5% in Brazil 23% 14% • Total mobile data revenue: +21.2% • Non P2P SMS data 9% 9% revenue: +35.8% 5% 4% 2% T. Group

  9. Slide 9: Healthy profitability driven by costs discipline & scale benefits

    GROUP FINANCIALS Healthy profitability driven by costs discipline & scale benefits OpEx OIBDA OIBDA margin Organic y-o-y growth Organic y-o-y growth 37.4% Ex revaluation +6.1% of stake in Vivo ~2/3 of OpEx growth 9M 10 Regulatory and non driven by commercial recurrent effects -1.9 p.p. -1.8% and net

  10. Slide 10: High cash flow generation despite increased CapEx

    GROUP FINANCIALS High cash flow generation despite increased CapEx Operating Cash Flow (OIBDA-CapEx) € in millions y-o-y growth 13,127 (3,797) 1,010 11,720 1 379 1,379 Solid underlying growth at +7.1% -5.2% Organic T. Latam and T. Europe offset Reported p by lower contribution from T. España and res

  11. Slide 11: 2010 guidance confirmed

    GROUP FINANCIALS 2010 guidance confirmed Revenue OIBDA +3.9% 2010 GUIDANCE +1%/+4% 9 9M 10/9M 09 2010 GUIDANCE +1%/+3% 8 -0.2% 9M 10/9M 09 CapEx 9 OIBDA growth to accelerate in Q4 as: 2010 GUIDANCE • Ramp up in commercial activity from Q3 09 €7,450/7,650 m • Easier y-o-y comps in Telesp and Colombia

  12. Slide 12: T. España: Gradual improvement continues y-o-y

    TELEFÓNICA ESPAÑA T. España: Gradual improvement continues y-o-y Q1 Q2 Q3 9M Revenues ƒ Sustained slowdown in top line (comparable y-o-y -2.9% y-o-y decline compared with 2009 -3.9% -3.8% change) -5.7% -4 6% -4.6% -6.4% ƒ Q3 10 performance f i impacted t d by b -6.9% -6.6% weaker consumption in a di

  13. Slide 13: Continued strength in contract and MBB

    TELEFÓNICA ESPAÑA Continued strength in contract and MBB Wi l Wireless service i revenues (comparable ( y-o-y)) Wi l Wireless contract t t customers t Q1 Q2 Q3 9M 16.1 m 767 -3.5% -2.6% -3.3% -3.8% 441 +7.3% 318 -5.7% 253 -7.3%-7.1% -8.1% -7.0% -6.6% +26% x 1.7 -8.0% -8.1% +0.2 p.p. +2.4 p.p. +1.0 p

  14. Slide 14: Enhanced commercial activity across portfolio

    TELEFÓNICA ESPAÑA Enhanced commercial activity across portfolio Market Wireline revenues (comparable yy-o-y) o y) FBB share Data Voice & Internet Subsidia ~54%E & IT Access & BB 36% 195 ries 35% +1.0 p.p. +3 p.p. 43% 177 Q3 10 40% 24% 26% 22% +1 p.p. 52 25% 42 +10% +2 p.p. 17% +24% 15% -5.6 p.p. -0.

  15. Slide 15: T.Latam: Revenue and OIBDA growth acceleration

    TELEFÓNICA LATAM T.Latam: Revenue and OIBDA growth acceleration +9.5% +9.4% +8.1% +6.5% ƒ Sustaining positive trends from previous quarter: Accesses 3.1m • 179.2 m accesses growth 3.8m net adds (y-o-y growth) 3 7m 3.7m net et adds • 10.6 10 6 m net adds in 9M 10: 1 1.9x 9x y-o-y yoy net adds • Churn

  16. Slide 16: Wireless: growth in voice & data fuel double digit top line

    TELEFÓNICA LATAM Wireless: growth in voice & data fuel double digit top line Mobile KPIs Net adds (in million) Accesses growth „ Gross adds up 20.6% y-o-y in 9M 10 (+34.5% in contract) (Sep-10 y-o-y) 10.1 x2.1 „ Flat churn at 2.5% in 9M 10, down in contract „ Intensified focus on contract: +4.7 p.p.

  17. Slide 17: Wireline: Strong commercial performance

    TELEFÓNICA LATAM Wireline: Strong commercial performance Accesses (m) Net adds (‘000) 756 7.2 „ Strong growth ramp up in FBB (+5 p.p. 267 Latam 237 vs. Jun-10 growth rate): Retail eta FBB x3.2 32 • Q3 10 net adds, exceeding 9M 09 volume +13.9% • Lower churn across countries -48 y-o-y growth Sep-10 •

  18. Slide 18: Brazil: Gaining momentum across businesses

    TELEFÓNICA LATAM Brazil: Gaining momentum across businesses TELESP VIVO Net adds (000) Total 9M 10 9M 09 +173 Contract +163 +165 Contract weight 6.0 500 22 +59 +64 y-o-y increase FBB +42 42 45 -339 57 7 m 57.7 2.3 Traditional -61 1.7 -69 x2.1 lines x3.8 -147 +18.2% 0.7 -149 Q3 09 Q4 09 Q1 10 Q2 10 Q

  19. Slide 19: Good performance in key operations

    TELEFÓNICA LATAM Good performance in key operations Mexico Venezuela PERU „ Robust customer growth „ Lower commercial activity y-o-y „ 6% customer growth on FBB and (+13.6% y-o-y) driven by contract on limited availability y of handsets mobile segment (+53.0% y-o-y) „ Solid financials despite „ Top

  20. Slide 20: T.Europe: Sound financials driven by commercial momentum

    TELEFÓNICA EUROPE T.Europe: Sound financials driven by commercial momentum +13.8% +46.2% ƒ Continued focused customer growth: Incl HanseNet +8.7% • Maintained commercial push on targeted growth Accesses +5.8% (Sep-10; y-o-y +5.5% • 48% of mobile base on contract (+1 p.p. y-o-y) >8.5 m growth) 55.3 m

  21. Slide 21: T.O2 UK: Mobile Internet boosting customer lifetime value

    TELEFÓNICA EUROPE T.O2 UK: Mobile Internet boosting customer lifetime value Sep-10 Customers 24 months contracts +10.4% 41% ƒ Targeted investment in high value base: Mobile 34% • Increased upgrading pg g activity y in Q3 10 ((+19.3% y y-o-y) y) +4 8% +4.8% customer KPIs • Market leading contract chu

  22. Slide 22: T.O2 Germany: Solid financials, acceleration of HanseNet integration

    TELEFÓNICA EUROPE T.O2 Germany: Solid financials, acceleration of HanseNet integration Sep-10 Mobile base Mobile Net Adds ƒ Enhanced commercial activity: +8.0% +7.9% 1.1 m • Solid positioning in MBB Customer • 48% of customer base on contract, stable y-o-y Base • Q3 10 prepay mobile net adds (+5.8%

  23. Slide 23: Leverage ratio within target range after Brasilcel acquisition

    GROUP FINANCIAL EXPENSES AND DEBT Leverage ratio within target range after Brasilcel acquisition € in millions Net Financial Debt Evolution 1.9x 2.4x OIBDA OIBDA +6,540 54,504 +5,170 43 551 43,551 +3,740 +612 -5,110 Includes pending payments on Brasilcel acquisition Net Fin. Debt FCF Commitments Sha

  24. Slide 24: Summary

    GROUP FINANCIALS Summary Solid earnings momentum ƒ Sound financial performance across the P&L leveraging our differentiated profile ƒ Continued strength in revenue growth capitalizing on our diversification ƒ Strong commercial push with profitability showing sequential stabilization „ Driving MBB ad

  25. Slide 25: Telefónica, S.A Investor Relations

    Telefónica, S.A Investor Relations

Telefónica — 9M 2010 Earnings Presentation on 6ix