Telefonica Sa · BME:TEF

Telefonica Sa — H1 2011 Earnings Presentation

27 slides from Telefonica Sa's earnings presentation, July 2011

  1. Slide 1: Results January-June 2011

    Results January-June 2011 . ¢ Tetefinica— F

  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: H1 11 Highlights

    TELEFÓNICA H1 11 Highlights  Performance consistent with FY 2011 guidance, outlook reiterated  Strong revenue growth (+6.3%) amid challenging conditions & severe regulation • T. Latam ex-Mexico revenue remains very robust (+20.9%) • Fast growth in mobile data revenues (+18.5%)  Retaining benchmar

  4. Slide 4: Key financials

    TELEFÓNICA Key financials Jan-Jun Change Organic € in millions 2011 y-o-y change Broad diversification (H1 11) Revenues Revenues 30,886 +6.3% +0.9% OIBDA OpCF ex-spectrum OIBDA 11,304 +3.7% -2.2% 46% (+5 p.p. y-o-y) T. Latam 46% (+5 p.p. y-o-y) 45% (+5 p.p. y-o-y) OIBDA Margin 36.6% -0.9 p.p. -1.1 p

  5. Slide 5: Net income mainly affected by a non-recurrent effect

    TELEFÓNICA Net income mainly affected by a non-recurrent effect Jan-Jun 2011 € in millions (y-o-y change) • T. España (21% of total): +6.0% • T. Latam (47% of total): +25.1% driven by Vivo (100% in H1 11 + PPA: € 171 m) • T. Europe (31% of total): -1.4% • Total PPAs: € 564 m (+9.3%) 11,304 • Reducti

  6. Slide 6: Building consistent “value over volume” commercial strategy

    TELEFÓNICA Building consistent “value over volume” commercial strategy Accesses (Jun- 11 y-o-y ) 295 m 227 m 18 m 73 m 30 m +71% +13% +8% +8% +6% TOTAL Mobile FBB Mobile MBB Contract Mobile contract base Data penetration (Jun- 11) Over total base (Jun-11) Smartphone Over total H1 net adds MBB 28% 25

  7. Slide 7: Strong mobile data momentum, fast revenue growth

    TELEFÓNICA Strong mobile data momentum, fast revenue growth Mobile data revenue growth Mobile data/MSR Non-P2P SMS/Mobile data revenue Q1 11 (organic y-o-y) H1 10 H1 10 H1 11 (organic y-o-y) H1 11 H1 11 31.5% 30.6% 73% 41% 36% 66% 52% 24% 25% 42% 44% 20% 21% 35% 10.0% 11.4% 11.7% 12.1% T. España T.

  8. Slide 8: Increasingly capturing growth opportunities

    TELEFÓNICA Increasingly capturing growth opportunities Contribution to H1 11 revenue growth Contribution to H1 11 organic revenue growth +2.1 % ex MTRs +7.5 p.p. +0.2 p.p. +6.3% T. Latam +0.9% +0.3 p.p. +2.4 p.p. T. España T. Europe T. España T. Europe +0.6 p.p. T. Latam Others & TEF Others & TEF -2

  9. Slide 9: Healthy profitability sustained

    TELEFÓNICA Healthy profitability sustained OIBDA margin OpEx growth (y-o-y organic) Q1 11 H1 11 36.6% 3.7% -1.3 p.p. 36.1% 36.0% 35.6% 2.7% 2.4% Reported Organic FY 10 Q1 11 H1 11  Sequential OIBDA margin improvement despite increased commercial activity  Limited y-o-y margin erosion in H1 (≈1 p.p

  10. Slide 10: On track to meet full year outlook

    TELEFÓNICA On track to meet full year outlook 2011 Guidance H1 11 Revenues Up to 2% 0.9%  OIBDA Margin Upper 30s Limited erosion y-o-y 36.0% (-1.1 p.p)  CapEx € ~ 9,000 m € 3,298 m   Solid growth in Latin America despite MTR cuts in Mexico, fully capturing integration synergies in Brazil H2 11E

  11. Slide 11: T. España: Contained OIBDA decline in a challenging environment

    T. ESPAÑA T. España: Contained OIBDA decline in a challenging environment Revenue OIBDA  Revenue impacted by volatile consumer trends amid weak confidence in a very Revenue competitive market & OIBDA  Focus on “value over volume” led to ( y-o-y change) -5.6% lower gross additions but better churn

  12. Slide 12: Sustained solid momentum in mobile data

    T. ESPAÑA Sustained solid momentum in mobile data MSR (y-o-y change) Q1 11 Q2 11 26.1%  Decrease in voice revenues driven by 21.4% lower outgoing ARPU and MTRs cuts +12.7%  Ramp-up in data revenue growth led by +10.0% higher MBB adoption: • MBB penetration up 7 p.p. y-o-y to 23% -7.6% -8.1% • Stro

  13. Slide 13: Continued pressure in fixed line, more rational FBB market

    T. ESPAÑA Continued pressure in fixed line, more rational FBB market Fixed Revenue (y-o-y change) Voice Internet Subsi- Q1 11 Data IT & Access & BB diaries Q2 11  Solid growth in IT continues at 14.6% y-o-y in H1 11  Internet & BB revenue driven by ARPU +0.2 p.p. erosion and lower commercial activ

  14. Slide 14: New Social Agreement will lead to higher flexibility and efficiency gains

    T. ESPAÑA New Social Agreement will lead to higher flexibility and efficiency gains Conditions Workforce Reduction Plan impacts P&L  Voluntary, universal and non discriminatory  One-off cost to be recorded in H2 11:  Agreed with unions & approved by labour authorities • Current value of the cost

  15. Slide 15: T.Latam: Strong commercial momentum and robust profitability

    T. LATAM T.Latam: Strong commercial momentum and robust profitability 8% 10% 14% -1% 21% 4.3m 3.9m 231k 237k 2.3m 2.3m 187k Net Adds 38% in Fixed 78k contract -207k -23k  Strong commercial activity in Q2 11 Q1 11 Total Mobile FBB TV(*)  Solid top line growth: Q2 11 % y-o-y accesses • Brazilian rev

  16. Slide 16: T.Latam: Data revenues drive growth across businesses

    T. LATAM T.Latam: Data revenues drive growth across businesses Revenue mix by business (H1 11) Wireless Revenue (H1 11 y-o-y organic ) y-o-y organic % Data Rev/MSR 25% Wireline 3.5 p.p. +12.3% 38% Wireless +9.5% 8.7 p.p. +2.1% +5% 62% +3% +9% +0.3% Total Mobile Mobile Outgoing ARPU Outgoing Wireless

  17. Slide 17: Brazil: Perfect balance, sequential growth with higher profitability

    T. LATAM Brazil: Perfect balance, sequential growth with higher profitability Q1 11 Net Adds Q2 11 Revenue Breakdown (y-o-y organic) Q1 11 y-o-y accesses H1 11 % Data Revenue/MSR 12% 14% 17% -1% 45% +47.0% +14.1% 2.2m +12.9% 2.0m 173k +14.8% +42.0% 1.7m 1.8m +14.6% 93k 22% +4.7% 74k 46% in +1.7% con

  18. Slide 18: Brazil: operating synergies target upgraded by over 16%

    T. LATAM Brazil: operating synergies target upgraded by over 16% TOTAL SYNERGIES NPV (€ in billions) 2.3/2.7 initially 1.0 / 1.5 3.7 / 4.6 estimated 0.6 /0.7 2.7 / 3.1 3.3/4.2 initially estimated 0.5 / 0.6 -0.2 1.1 / 1.2 • 20% revenues • 60% OpEx 0.7 / 0.8 • 20% CapEx Revenues G&A & OpEx CapEx Integ

  19. Slide 19: Brazil: Faster than anticipated synergies execution path

    T. LATAM Brazil: Faster than anticipated synergies execution path LEVERS Initiatives Innovation projects  Integrated offer, mainly for Corporates and SMEs, leveraging cross- selling potential 1.7 m sold packages Offer  Fixed wireless inside & outside Sao Paulo, to offer fixed outside SP Torpedo Me

  20. Slide 20: Mexico: improving operating KPIs, sharp MTRs cuts

    T. LATAM Mexico: improving operating KPIs, sharp MTRs cuts Mobile gross adds (y-o-y change) Outgoing Traffic & ARPU (y-o-y change) +12.3 % Outgoing Traffic +26% +26% +13% Mobile accesses y-o-y +17% -1.1% +21% Contract accesses y-o-y -11.8% -9.8% +26% x4 MBB accesses y-o-y -8.6% +4% -16.0% Outgoing A

  21. Slide 21: Solid performance in other key operations

    T. LATAM Solid performance in other key operations South Region Contribution to TEF H1 Argentina  Acceleration in double digit top line growth Revenue 4.9%  Strong net adds in mobile and FBB businesses in Q2, stabilization of fixed telephony accesses Chile  Steady growth in mobile and Pay TV acce

  22. Slide 22: T.Europe: growing value from mobile data

    T. EUROPE T.Europe: growing value from mobile data Strong commercial performance Sound financial results focused on MBB  “Value over Volume” selective approach  Top line driven by mobile data • Solid contract net adds and stable churn y-o-y at 2.5% • Mobile data accounts for 41% of MSR (+5 p.p. y-

  23. Slide 23: T. UK: driving a profitable MBB ecosystem

    T. EUROPE T. UK: driving a profitable MBB ecosystem Focus on MBB Mobile customers (Jun-11 y-o-y) Smartphone penetration1  Limited commercial activity, sustained market leading +6 p.p. 35% contract churn 29%  Extracting value from increased MBB adoption +6% • ≈ 55% of contract smartphone users base

  24. Slide 24: T. Germany: continued strong momentum in the market

    T. EUROPE T. Germany: continued strong momentum in the market Customer mobile KPIs Contract Net Adds (‘000) Contract gross adds  Improving momentum in the growing MBB market 459 53% Voice and Data tariffs • Contract churn trending down to 1.5% in Q2 11 236 • Growing success of “O2 Blue” data tariff

  25. Slide 25: Containing financial expenses despite debt increase

    TELEFÓNICA Containing financial expenses despite debt increase Contained Financial Expenses (€ in millions) Solid liquidity position (€ in billions) H1 11 9.9  Net interest Expenses -1,167 LT Undrawn amount on 5.5 syndicated to cover  FX results +2 pending payments on Brasilcel acquisition 2 Total

  26. Slide 26: Conclusions

    TELEFÓNICA Conclusions  H1 11 performance consistent with FY 2011 guidance, outlook reiterated  Very strong revenue growth & benchmark profitability despite challenging conditions & severe regulation  Diversification and exposure to Latam, our key differential factor  Fully capturing the mobile

  27. Slide 27: Organic growth definitions

    Organic growth: In financial terms, it assumes constant average exchange rates as of January-June 2010, and excludes changes in the perimeter of consolidation and hyperinflation accounting in Venezuela. Therefore, in January-June 2010 the consolidation of Vivo, HanseNet and Tuenti are included where

Telefónica — H1 2011 Earnings Presentation on 6ix