Slide 1: Results January - June 2020
Results January - June 2020
Slide 2: Disclaimer
Disclaimer This document and any related conference call or webcast (including any related Q&A session) may contain forward-looking statements and information (hereinafter, the “Statements”) relating to the Telefónica Group (hereinafter, the "Company" or "Telefónica"). These Statements may include f
Slide 3: Key takeaways
Key takeaways Mr. José María Álvarez-Pallete Chairman & CEO
Slide 4: Accelerated delivery of our strategic priorities
Accelerated delivery of our strategic priorities ✓ Business resilience: OIBDA-CapEx up 1.9% y-o-y in Q2 (organic); margin up 1.3 p.p. vs. Q2 19 Core markets: Spain, ✓ Increased customer satisfaction: record NPS 1 Germany, UK and ✓ Enhanced position in the UK through combination of O2 UK and Virgin M
Slide 5: Swift and effective action in response to COVID-19
Swift and effective action in response to COVID-19 Q2 y-o-y (€bn) Revenues OIBDA OIBDA-CapEx FCF June-Mar 20 June-Mar 19 Efficiently managing unprecedented times: 1.0 0.2 • Absorbing a €1.8bn shock in revenues from COVID, FX & (0.4) Debt (0.5) perimeter changes (1.1) reduction • Debt reduction impro
Slide 6: Swift and effective action in response to COVID-19: supporting stakeholders
Swift and effective action in response to COVID-19 Supporting stakeholders • Reliable networks: +500% increase in video calls since start of lockdowns • Additional entertainment and mobile data provided at no extra cost Customers • Dividend maintained • Protecting the health and safety (€0.4/sh. in
Slide 7: Q2 performance highlights
Q2 20 performance highlights (OIBDA-CapEx) Revenue OIBDA-CapEx Net Debt y-o-y organic y-o-y organic /Revenues y-o-y organic (3.8%) +1.9% +1.3 p.p. (7.5%) 4 core markets 4 core markets 4 core markets y-o-y (>90% of T. Group €2.1Bn) T. Group (5.6%) T. Group (0.7%) T. Group +1.0 p.p. • Group UBB access
Slide 8: 2020 dividend and outlook reiterated; 2022 guidance confirmed
2020 dividend and outlook reiterated; 2022 guidance confirmed Stable and sustainable dividend reflects continuing resilience and strong liquidity 2020 dividend €0.40/share Interim Dec-20 €0.20/sh. (Voluntary Scrip) June payment: 63% of shareholders opted to receive Final Jun-21 €0.20/sh. new shares
Slide 9: Q2 Group results
Q2 20 Group results Mr. Ángel Vilá COO
Slide 10: Financial performance | Resilient performance in COVID-19 crisis
Financial performance | Resilient performance in COVID-19 crisis H1 20 Q2 20 Organic Organic Reported Organic y-o-y Reported Organic y-o-y € in millions Reported aggregated 4 Reported aggregated 4 y-o-y y-o-y core markets y-o-y y-o-y core markets Revenues 21,706 (10.0%) (3.5%) (1.9%) 10,340 (14.8%)
Slide 11: COVID-19 | Financial and operational impacts
COVID-19 | Financial and operational impacts First full quarter of COVID-19 impact; recovery underway from Jun-20 Q2 revenue impact –(€729m) Q2 OIBDA –(€338m) -6.1 p.p. to organic y-o-y -7.8 p.p. to organic y-o-y Impacts and challenges • Revenues • B2C: Discounted tariffs - Handset sales decline due
Slide 12: Revenue | Notable improvement from June 2020
Revenue | Notable improvement from June 2020 Spain revenues y-o-y organic ✓ Clear signs of recovery in Spain from June Covid-19 (p.p. to org. Rev y-o-y) ✓ May was the worst affected month by COVID-19 ✓ Operating trends remain positive ex-COVID-19 (2.7%) (4.5 p.p.) (6.2%) (6.6 p.p.) (6.8%) (7.2 p.p.)
Slide 13: Q2 y-o-y declines reducing from top to bottom
Q2 y-o-y declines reducing from top to bottom €m y-o-y (14.8%) reported y-o-y (1,802) (5.6%) organic y-o-y Revenues OpEx (13.7%) reported y-o-y OIBDA main impacts: (4.9%) organic y-o-y (1,122) (25.3%) reported y-o-y -€338m COVID-19 -€297m FX OIBDA (10.0%) organic y-o-y -€109 goodwill impairment ARG
Slide 14: Execution skills | Moving at pace on operational management
Execution skills | Moving at pace on operational management Q2 20 OIBDA-CapEx y-o-y organic H1 y-o-y organic 14.8% 10.1% 1.9% 1.8% (0.7%) (2.7%) (10.8%) 4 core markets Group Spain UK GER BZ Hispam 2.6% (2.3%) 1.6% (5.6%) (0.3%) 10.4% (12.8%) Q2 (OIBDA-CapEx)/Revenues p.p. y-o-y organic H1 p.p. y-o-y
Slide 15: Q2 segments results
Q2 20 segments results Mr. Ángel Vilá COO
Slide 16: Spain | Resilient commercial activity
Spain | Resilient commercial activity Positive net adds Performance and COVID-19 response Accesses (k) ✓ Responding to employees, communities and society first ✓ Clear signs of recovery; leveraging football rights 70 FBB • 100% of stores open by Jun (16% in Mar) 24 • >50% consumer football downgrade
Slide 17: Spain | Resilient Cash Flow generation
Spain | Resilient Cash Flow generation Key financials Performance and COVID-19 response y-o-y organic Q2 H1 ✓ 60% of impact on revenue offset at OIBDA level; >80% at OpCF level • Lower equipment, commercial and content cost (5.1%)* • CapEx prioritisation maintaining investment for growth 1.8% 1.6% ✓
Slide 18: Germany | Solid operational performance despite COVID-19
Germany |Solid operational performance despite COVID-19 Momentum at O2 - ARPU-accretive effects Key milestones Accesses (m, y-o-y) ✓ Gradual recovery of trading momentum, prepaid dynamics and O2 contract churn roaming post lockdown +5% ✓ ~10,000 sites sold to Telxius for €1.5bn - enhancing financial
Slide 19: UK | Resilient performance
UK | Resilient performance Customer base Performance and COVID-19 response Accesses (m; y-o-y) ✓ Largest UK network +3% ✓ Network voice and data resilience 34.1 +1% ✓ Enhanced direct trading resulting in lower commercial costs Contract churn ✓ Q2 COVID-19 impacts: revenue (€130m); OIBDA (€62m) ‒ Pri
Slide 20: Brazil | Resilient cash generation despite COVID-19 impacts
Brazil | Resilient cash generation despite COVID-19 impacts Growth in value accesses: Improving mix Resilient business Accesses (y-o-y) ✓ Improved commercial trading since June; gradual opening of stores: +73% contract gross adds in June vs. April 32% ✓ Digital channels boost: Share of digital top-u
Slide 21: Infra | Telxius accelerating growth and tower expansion
Infra| Telxius accelerating growth and tower expansion Sites | Doubling scale since creation Tenants # BTS 147 +16.4% # +14.5% y-o-y y-o-y Acquired 1,927 2,452 27,363 2,074 20,422 Pre German deal 24,911 18,348 Dec-19 Net Adds Jun-20 Dec-19 Net Adds Jun-20 H1 20 H1 20 Tenancy 1.34x Ratio Revenues and
Slide 22: Tech | Driving growth
Tech| Driving growth An increasingly important growth engine T. Tech revenues y-o-y organic ✓ COVID-19 impact in B2B revenues largely mitigated • Corporate (60% of H1 revs) less impacted than SMEs +18.0% 756 ✓ Tech services essential for remote working 679 • Strengthen on-line channels and productiv
Slide 23: Q2 Results
Q2 20 Results Ms. Laura Abasolo CFCO
Slide 24: Hispam | Transformation to Fibre; Focus on profitability
Hispam | Transformation to Fibre; Focus on profitability Large accesses base Better trends since June Accesses (m) 9.2m FTTH homes passed (+1.4m in LTM) ✓ Higher COVID-19 impact vs other regions: greater exposure to handset sales and prepaid Co-investing with ATP & ATC in most 105.6 relevant markets
Slide 25: Foreign exchange | Managing impact on FCF
Foreign exchange | Managing impact on FCF Limited FX impact on FCF through effective hedging strategy Revenue and OIBDA affected by unfavorable foreign exchange movements H1 20 currency translation impact y-o-y €m WC + ✓ Revenue: Q2 -6.5 p.p.; H1 -4.9 p.p. OIBDA CapEx Taxes Interest FCF Net debt ✓ O
Slide 26: Debt | Clear focus on continuous debt reduction
Debt | Clear focus on continuous debt reduction Net Financial Debt 52.2 €15bn €bn 48.6 net deduction since June 16 44.2 41.1 37.7 37.2 Jun-16 Dec-16 Dec-17 Dec-18 Dec-19 Jun-20 ND/OIBDAaL ND/OIBDAaL 2.52x 493 (9) (900) 2.68x 37,744 (1,222) 723 372 37,201 Dec-19 FCF Hybrids Shareholder Pre-reti. Net
Slide 27: De-risked balance sheet: debt cut and termed out
De-risked balance sheet: debt cut and termed out with lower financial payments Sources of long-term financing (2016 to 2020 YTD) Average Debt Life Avg. Debt (€bn) (years) Life almost Including £4bn doubled vs. syndicated loan to €10bn YTD Dec-15 back O2 – VMED Climate Bonds Initiative merger 10.5 11
Slide 28: De-risked balance sheet: lower HISPAM equity exposure and changed FX mix
De-risked balance sheet: lower HISPAM equity exposure and changed FX mix REDUCING CAPITAL EMPLOYED AND EQUITY IN HISPAM GRADUALLY INCREASING LEVERAGE IN BRAZIL ▪ HISPAM current situation: ▪ Net Debt+ Leases of €3.1bn in Brazil (Jun-20), reduced by €0.9bn YTD due to FX impact ̶ CAM assets sold ▪ Larg
Slide 29: Optimising capital allocation and increasing returns
Optimising capital allocation and increasing returns ✓ 1 Robust FCF generation ✓ (OIBDA-CapEx)/Revenues +2 p.p. in 2022 (vs. 2019) while continuing to invest in long term growth Optimising OpEx and prioritising investments to maintain strong performance Prudent financial ✓ Sustainable and balanced d
Slide 30: Strategy update
Strategy update Mr. José María Álvarez-Pallete CEO & Chairman
Slide 31: Strengthened focus on our four core markets: Spain, UK, Germany and Brazil
Strengthened “focus” on our four core markets: Spain, UK, 1 Germany and Brazil… “Focus” through building leadership positions underpinned by differentiated assets and partnerships that attract and retain the best customer bases and guarantee loyalty SPAIN UK GERMANY BRAZIL • Largest fibre network in
Slide 32: Reducing exposure and optimising our non-core Hispam portfolio
… while reducing exposure and optimising our non-core Hispam 2 portfolio Streamlining Capital-light operating Monetising assets Optimising investment portfolio models • Sale of TEF Costa Rica • Sale of 2,400 towers LTM • Strategic network sharing • Asset light model in Mexico • Analysing Fibre spin-
Slide 33: Launching Tech to better capitalise on the digital growth opportunity
Launching Tech to better capitalise on the digital growth 3 opportunity Strong growth momentum Best-in-class partnerships Advanced carve-out T. Tech (H1 y-o-y organic revenue) “Telefonica's Cybersecurity Firm ElevenPaths Achieves AWS Security Cybersecurity Competency Status” (May 26, 2020) €756m B2B
Slide 34: Creating Infra to extract more value from existing assets
Creating Infra to extract more value from existing assets while 4 building a leading global infrastructure player Almost 60m owned UBB; 15m connected Already one of Europe’s leading TowerCos # Telxius sites UBB network (Million) 2,400 32,922 10,100 30,522 9% 131.2 12% +10% +5% 34% 20,422 22% 58.2 pe
Slide 35: Rolling out a new operating model; adapting the HQ
Rolling out a new operating model; taking advantage of 5 digitalisation and adapting the HQ to the new portfolio Business lines (OIBDA-CapEx)/Revenues %; organic Massive digitalisation ✓ Digital sales up 53% vs Q2 19 in core markets ✓ 1,864m Robots (x3,4 y-o-y) +2 p.p. vs. 2019 Network sharing ✓ Agr
Slide 36: Priorities H2; continue executing and delivering value
Priorities H2; continue executing and delivering value • Stabilise operating cash flow generation to mitigate COVID-19 impact Focus on four core • 1 markets: Spain, UK, • Close UK deal with Liberty Global Strengthen competitive advantages through FTTH deployment and partnerships Germany, Brazil • Co
Slide 37: Conclusion
Conclusion Mr. José María Álvarez-Pallete Chairman & CEO
Slide 38: Supporting sustainable economic recovery post COVID-19
Supporting sustainable economic recovery post COVID-19 BUILDING A GREENER FUTURE HELPING SOCIETY TO THRIVE LEADING BY EXAMPLE Digital innovation to power a lower Supporting customers and Run an inclusive, fair and ethical carbon economy communities business inside out Green Networks: Zero carbon tar
Slide 39: Summary | Value creation for all stakeholders
Summary | Value creation for all stakeholders • Robust delivery for stakeholders in the midst of an unprecedented global crisis ‒ Clarity of our mission and values sharpened by COVID-19 ‒ Timely actions to protect employees, support customers and communities, and preserve value for shareholders ‒ Va
Slide 40: Results presentation and Q&A Session
Results presentation and Q&A Session The management will host a webcast to discuss the results on 30th July at 10:00am (CET), 09:00am (BST), 04:00am (EST) Participants from Telefónica: Jose María Alvarez-Pallete (Chairman & CEO), Ángel Vilá (COO), Laura Abasolo (CFCO), and Pablo Eguirón (Global Head
Slide 41: For further information, please contact
For further information, please contact: Investor Relations Pablo Eguirón (pablo.eguiron@telefonica.com) Isabel Beltrán (i.beltran@telefonica.com) Adrián Zunzunegui (adrian.zunzunegui@telefonica.com) Tel. +34 91 482 87 00 FOLLOW US: ir@telefonica.com www.telefonica.com/investors