Pharol Sgps S.a. · EURONEXT:PHR
Pharol Sgps — Portugal Telecom SGPS — Q1 2014 Earnings Presentation
48 slides from Pharol Sgps's earnings presentation, May 15, 2014
Slide 1: 1Q14 results
Rio de Janeiro, 15 May 2014 1Q14 results
Slide 2: Important Notice
IMPORTANT NOTICE This release contains forward-looking statements, according to the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about perspectives and expectations, are forward-looking statements. The words "anticipates", "bel
Slide 3: Progress against our business priorities
Progress against Our business priorities
Slide 4: Opex control
OPEX CONTROL 1Q14 Results – Progress against our business objectives 347371363 1Q14 -6.5% -4.4% 4Q13 1Q13 Opex Portugal2 Euro million Portugal key initiatives •Convergent CRM and self-care platform enabling lower Customer Care Costs •New system and process reengineering to increase efficiency in sal
Slide 5: Capex control
capex CONTROL Capex Portugal2 Euro million Portugal key initiatives • Extensive FTTH network with 1.7 million households passed • ~93% of population covered with 4G-LTE • Investment in a world-class data center aimed at offering new and differentiated cloud-based services Brazil key initiatives Cape
Slide 6: R$3.3 billion of cash inflow from asset monetization
R$ 3.3 billion of cash inflow from asset monetization Fixed towers Real Estate1 Mobile towers Date of Signed Contract Term of lease (Years) Quantity Date of closing Transaction value (R$ billion) EBITDA impact of disposals (R$ billion) Operational cost in 1Q14 EBITDA (R$ million) Operational cost in
Slide 7: Synergies
SYNERGIES 192 261 69 Run Rate (R$ million)(2) Synergies NPV Overview1 R$ billion Total synergies 5.5 Financial synergies 2.2 Operational synergies 3.3 Capex synergies 1.2 Opex synergies 2.1 • Connected Residence: Over 20 initiatives to promote complete residential connectivity and optimize accessibi
Slide 8: Transformation of the business and operating model
Transformation of the business and operating model Non-voice revenues per segment %. 1Q14 Portugal 54.7 Enterprise 57.6 Personal Mobility 37.7 Residential 67.8 +3.0pp +1.8pp +4.8pp +2.1pp 1Q14 Results – Progress against our business objectives Brazil • Oi TV relaunch •Oi Voz Total •Oi Conta Total Re
Slide 9: Highlights
HIGHLIGHTS Ois.A.|8
Slide 10: Geographic segmentation
GEOGRAPHIC segmentation 1Q14 highlights – Oi & PT 14% 13% 73% Customers 22% 2% 76% 4% 19% 76% Revenues EBITDA Other Portugal Brazil Oi S.A. | 9
Slide 11: Over 100 million customers RGUs
OVER 100 MILLION CUSTOMERs RGUs Thousand Oi Group Residential Fixed Lines Broadband Pay-TV Personal Mobility Prepaid Postpaid Enterprise Fixed Lines Broadband Pay-TV Mobile Other Total 21,509 13,194 6,319 1,996 54,461 46,047 8,415 10,776 5,764 901 165 3,945 14,943 101,689 PT ex-Brazil 17,661 11,556
Slide 12: Pro-forma combined financials
PRO-FORMA COMBINED FINANCIALS 1- Calculated as EBITDA less Capex. 2- Includes Oi’s cash capital increase effect, net of transaction costs Financial R$ million Revenues EBITDA margin (Pct) Capex Operational FCF1 Gross debt2 Net debt2 Combined Group post-transaction Oi Group PT ex. Brazil 9,073 3,874
Slide 13: Strong liquidity position and no FX exposure
Strong liquidity position and no fx exposure 1- Considering Swap as (Liabilities Derivatives – Assets Derivatives). 2- Net cash position of Portugal Telecom post closing of the transaction. Liquidity R$ million. March 2014 Gross debt amortization schedule R$ million. March 2014 Average debt maturity
Slide 14: Brazil
BRAZIL
Slide 15: Transformation of the business model - Residential
Transformation of the business model 1Q14 Results - Residential High density areas Low density areas http://tweakyourbiz.com/sales/files/Fourteen-Traits-Of-A-Great-Sales-Person.jpg• Revised commissioning model (incentive to reduce mis- sales) • Simplification of offer and pricing structure Quality o
Slide 16: Strong growth of affordable fixed/prepaid mobile bundle
Strong growth of affordable fixed/prepaid mobile bundle 1Q14 Results - Residential Fixed lines with prepaid mobile bundle Thousands Churn %. Fixed lines 952 +48% Apr 14 1,408 1Q14 1,351 1Q13 April 1Q14 4Q13 3Q13 2Q13 1Q13 With Oi Voz Total Without Oi Voz Total https://fbcdn-photos-a-a.akamaihd.net/h
Slide 17: Multiple play growth driving churn performance
Multiple play growth driving churn performance 1Q14 Results - Residential Revenues Indexed Fixed voice Broadband Pay TV -3.1% 1Q14 1Q13 +6.5% 1Q14 1Q13 1Q14 1Q13 +18.0% Voluntary churn % Mar/14 Jan/13 3P - Oi Conta Total 2P - fixed line + broadband 1P - fixed line 5956+3pp 1Q14 1Q13 Households with
Slide 18: Targeted prepaid offers with focus on value
Targeted prepaid offers with focus on value with simple plans 1Q14 Results - Personal Mobility Below the line Above the line Voz Total • Bundle offer: fixed + mobile • Lock-up fixed line • Focus on youth segment • Bundled voice, SMS, music and data • Free Wi-Fi access to >670 thousand hotspots • Lev
Slide 19: Aggressive move into prepaid delivering growth in recharges
Aggressive move into prepaid delivering growth in recharges Recharges Indexed 1Q14 Results - Personal Mobility +7.1% 1Q14 1Q13 Top quartile of consumption growth CAGR 2010 - 2020 Oi’s market share >20% Oi’s market share <20% CE 10.4 MA 10.5 PB 10.8 AL 11.1 PI 11.1 PE 11.4 31% #2 15% #3 Oi’s market s
Slide 20: Simple affordable FM offer
Simple affordable FM offer, already accounts for 10% of customer revenues 1Q14 Results - Personal Mobility – Oi controle • Unlimited calls to Oi Fixed and Mobile in Brazil for R$29.90/month, including also R$10.90/month to be used for other services including off-net calls • Additional consumption r
Slide 21: Oi Mais Conectado represents 17% of postpaid sales
“Oi Mais Conectado” already represents 17% of postpaid sales 1Q14 Results - Personal Mobility Voice + Data Package + Unlimited SMS + Unlimited on-net calls Oi Mais Conectado Oi Mais Conectado of promotion “Oi, Eu Tô na Copa” Postpaid churn Indexed -0.65pp 1Q13 1Q14
Slide 22: Mobile data revenues up by 43%
Mobile data revenues up by 43% y.o.y 1Q14 Results - Personal Mobility Pospaid RGUs Thousand Personal mobility customer revenues1 R$ million Data 1,654 +8pp +3.6% 1Q14 27% 1Q13 1,597 19% Prepaid RGUs Thousand +3.8% 1Q14 41,417 1Q13 39,905 +1.0% 1Q14 6,729 1Q13 6,664 Mobile internet Indexed 1Q14 1Q13
Slide 23: Commercial turnaround in progress - SMEs
Commercial turnaround in progress 1Q14 Results - SMEs 1– Confirmation of sales with the customer 2– Transformation of inbound customer interactions in new sales Quality of sales Jun 13 Sep 13 Jan 14 Today • Review of commissioning model • Launch of quality call1 • Offers • Convergent offers • Redesi
Slide 24: Data, IT and cloud are growth drivers
Data, it and cloud are growth drivers 1Q14 Results – Corporate Innovative and differentiated IT offering already delivering results IT revenues Indexed 1Q14 1Q13 +20% Data revenues Indexed 1Q13 +16% 1Q14
Slide 25: Steady progress through customer and new services growth
Steady progress through customer and new services growth 1Q14 Results - Corporate/SMEs - Net Revenues -3.5% +0.6% 1Q14 2,091 4Q13 2,117 1Q13 2,079 4Q12 2,195 •Leading operator in data services •Data should continue to drive future growth •Explore new segments of the market to enhance leadership in h
Slide 26: Revenues were impacted by MTR cuts
Revenues were impacted by mtr cuts 1Q14 Results – Consolidated Brazil – Net Revenues 6,877 -0.1% -6.5% +0.6% -2.3% 1Q14 66 2,091 2,166 2,552 1Q13 7,041 91 2,079 2,316 2,555 Personal Mobility Residential Other Corporate / SMEs Net revenues R$ million 172 1Q14 6,877 Other 38 B2B 9 Personal mobility Cu
Slide 27: Improving customer revenue trends
Improving customer revenue trends 1Q14 Results – Consolidated Brazil – Net Revenues Residential y.o.y Personal mobility y.o.y Corporate / SMEs y.o.y Revenues y.o.y 1Q14 -0.1 4Q13 0.7 3Q13 3.0 1Q14 -5.3 3.6 4Q13 -1.7 3.4 3Q13 2.9 7.5 1Q14 4Q13 3Q13 -1.3 -3.6 0.6 3.4 1.5 4Q13 0.8 -1.8 -2.0 0.9 -2.4 -2
Slide 28: Focus on quality of sales is delivering results
Focus on quality of sales is delivering results 1Q14 Results – Brazil Revenues 756 Gross margin contribution 5,917 Interconection costs Provision for bad debt 203 Net Revenues 6,877 Net revenue R$ million. 1Q14 y.o.y. 1Q14 4.4 4Q13 1.3 3Q13 1.4 2Q13 0.2 Gross margin contribution1 y.o.y.% 1- Revenues
Slide 29: Cost discipline delivering savings
cost discipline delivering savings but room for further optimization Operating cost and expenses R$ million 1Q14 Results – Consolidated Brazil – OPEX Insourcing of internal plant maintenance 1-Adjusted OPEX to ensure adequate comparison with 2014 reporting • Reduction in mis-sales and churn • Improv
Slide 30: EBITDA improvement underpinned by cost savings
1 – Routine 2 - 1Q14 y.o.y excluding interconnection, non-core and rentals on asset sales +5.9% 1Q14 1,710 1Q13 1,615 Ebitda improvement underpinned by cost savings 1Q14 Results – Consolidated Brazil – OPEX and EBITDA EBITDA1 R$ million Opex1 R$ million -4.8% 1Q14 5,167 1Q13 5,426 25 23 EBITDA Margi
Slide 31: R$578 million growth in operating free cash flow
+R$578 million growth in operating free cash flow 1Q14 Results – Consolidated Brazil –CAPEX and OCF Operating FCF (Routine EBITDA-CAPEX) R$ million 502 484 -76 +R$578 million +4% 1Q14 4Q13 1Q13 78% 1,691 13% 16% 1Q14 10% -29% 1,208 6% 1Q13 78% Capex R$ million Other Network IT • Rationalization of s
Slide 32: Free cash flow improvement of R$500 million
Free cash flow improvement of R$500 million 1Q14 Results – Consolidated Brazil – Debt Change in Net debt R$ million 1 - Proceeds from Globenet and mobile towers disposals 2 – Payment done in January 8th 782 784 383 359914 4Q13 reported 30,416 +R$1.0 billion vs +R$ 1.5 billion in 1Q13 Net Debt 1Q14 F
Slide 33: Consolidated Brazil - Capex and OCF
1Q14 Results - Consolidated Brazil -CAPEX and OCF +R$578 MILLION GROWTH IN OPERATING FREE CASH FLOW Relationship with suppliers + Rationalization of suppliers + Renegotiation of contracts + “Pay As You Go” model (Users and Capacity) + Focus on network TCO optimization Extracting network synergies +
Slide 34: M4O with 2.1 million RGUs
M4O with 2.1 million RGUs 1Q14 Results – Portugal Consumer M4O RGUs Million. Portugal May February 2014 1.7 November 1.3 August 1.0 May 0.6 11 January 2013 0.0 2.1 M4O customers % 192259 4 SIM cards 3 SIM cards 2 SIM cards 36% of gross adds are new RGUs ~1 MILLION SIM cards
Slide 35: Continued traction in triple-play
Continued traction in triple-play 1Q14 Results – Portugal Consumer (+1pp y.o.y) Note: Pay-TV penetration calculated with Anacom 4Q13 numbers and Primary households in Portugal. Source: Anacom, INE and Pordata Net adds Thousand. Portugal Pay-TV penetration 4Q13. Portugal Pay-TV market share %. Portug
Slide 36: Continued market share gains in mobility
continued MARKET SHARE gains IN MOBILITY 1Q14 Results – Portugal Consumer Source: Anacom 47.9 +13.5pp 1Q14 1Q13 34.4 Personal mobility flat-fees % of customer revenues Personal mobility data revenues % of customer revenues 41.7 +3.7pp 1Q14 1Q13 38.0 Postpaid net adds Thousand 11611311711399119-414 4
Slide 37: Resilient performance in B2C
resilient performance in b2c 1Q14 Results – Portugal Consumer -2.01 1Q14 -4.21 -2.4 -5.2 -0.2 -0.5 -3.6 -0.2 -2.6 -5.7 -1.3 -2.7 -8.8 -1.3 1Q13 -2.4 -9.9 1.3 Consumer Personal mobility, services Residential Consumer segment revenues % y.o.y Consumer segment customers Thousand. 1Q14 Fixed BB 1,042 TV
Slide 38: RGUs in SMEs positively impacted by M4O
RGUs IN SMEs POSITIVELY also IMPACTED BY M4O 1Q14 Results – Portugal Enterprise segment Revenue contribution from convergent customers %. SMEs Pct of customers that subscribe to at least 1 fixed and 1 mobile product Indexed. SMEs Pct of customers that subscribe to convergent offers (4P and 5P) Index
Slide 39: Focus on capturing new service revenues and driving efficiency
FOCUS ON CAPTURING NEW SERVICE REVENUES AND DRIVing EFFICIENCY 1Q14 Results – Portugal Enterprise segment Contribution of non-voice revenues and revenues from VAS1 %. 1Q14 1-Value-added services: Outsourcing, Managed Services, IT/IS, BPO, Cloud • Certification in Cisco Powered Hosted Collaboration S
Slide 40: Delivering results despite pricing pressure
DELIVERING RESULTS DESPITE PRICING PRESSURE 1Q14 Results – Portugal Portugal1 revenues % y.o.y Non-voice revenues per segment %. 1Q14 Flat-fees in Portugal % -4.8 -3.2 -6.1 -6.8 -4.7 -6.7 -5.5 -5.8 -6.1 1Q14 -3.4 1Q13 57.6 Personal Mobility Residential Portugal 54.7 Enterprise 67.8 37.7 +3.0pp +1.8p
Slide 41: Competitive dynamics and FX impacting revenues
Competitive dynamics and fx impacting revenues Residential 1Q14 Results – Consolidated PT – Revenues Revenues Euro million • Higher contribution from MTC • Timor Telecom performance impacted by increased competition and pricing pressure • Stable residential revenues • Personal mobility revenues impa
Slide 42: Efficiency improvements underpinning margin and cash flow
EFFICIENCY IMPROVEMENTs underpinning margin AND CASH FLOW 1Q14 Results – Consolidated Portugal – OPEX, CAPEX, EBITDA Opex Portugal1 Euro million 347363 -4.4% 1Q14 1Q13 Capex Portugal1 Euro million 8099 -19.8% 1Q14 1Q13 EBITDA Portugal1 y.o.y 186172 +7.9% 1Q14 1Q13 EBITDA - Capex Portugal1 Euro milli
Slide 43: Success based capex growth in the future
success based capex growth in the future Consolidated – Capex http://www.plio.pt/wp-content/uploads/4g_3.jpgCapex Euro million. Portugal • 1.7 million homes passed with fiber • 95% of base stations connected with fiber • Leadership in the 4G-LTE development • Coverage of ~93% of population • Backbon
Slide 44: Consolidated Portugal - Opex, Capex, EBITDA
1Q14 Results — Consolidated Portugal - OPEX, CAPEX, EBITDA EFFICIENCY IMPROVEMENTS UNDERPINNING MARGIN AND CASH FLOW Opex Portugal? Euro million 4.4% 363 347 1Q13 1Q14 Capex Portugal! Euro million 719.8% 99 80 1Q13 1Q14 EBITDA Portugal’ y.o.y -11. 1Q13. 2Q13.-3Q13. 4Q13——: 1Q14 EBITDA - Capex Portug
Slide 45: Progress against our business priorities: Wrap up
Progress against Our business priorities 1Q14 Results – Wrap up https://encrypted-tbn3.gstatic.com/images?q=tbn:ANd9GcThO1HOS-5CsS9HTaYJkC2pAyFwncbY5GekVy31TTyMamu3_9tmOpex control Capex control Asset monetization Synergies https://encrypted-tbn2.gstatic.com/images?q=tbn:ANd9GcS6aJE3uawA9H5XUHeH4UUN
Slide 46: For further information
For further information: Nuno Vieira | Investor Relations Director +351 21 500 1701 | nuno.t.vieira@telecom.pt ir.telecom.pt | www.telecom.pt
Slide 47: Progress against our business priorities: Wrap up
Progress against Our business priorities 1Q14 Results – Wrap up https://encrypted-tbn3.gstatic.com/images?q=tbn:ANd9GcThO1HOS-5CsS9HTaYJkC2pAyFwncbY5GekVy31TTyMamu3_9tmOpex control Capex control Asset monetization Synergies https://encrypted-tbn2.gstatic.com/images?q=tbn:ANd9GcS6aJE3uawA9H5XUHeH4UUN
Slide 48: For further information
For further information: Nuno Vieira | Investor Relations Director +351 21 500 1701 | nuno.t.vieira@telecom.pt ir.telecom.pt | www.telecom.pt
Portugal Telecom SGPS — Q1 2014 Earnings Presentation on 6ix