Telefonica Sa · BME:TEF
Telefonica Sa — Q1 2020 Earnings Presentation
32 slides from Telefonica Sa's earnings presentation, May 7, 2020
Slide 1: Results January - March 2020
Results January - March 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") or otherwise. These Statements
Slide 3: Creating a leading communications provider in the UK
Creating a leading communications provider in the UK Mr. José María Álvarez-Pallete Chairman & CEO
Slide 4: Transaction Summary
Transaction Summary • Telefónica and Liberty Global have agreed to combine their telecom assets in the UK (Telefónica UK and Virgin Media UK) ‒ 50/50 JV creates UK leading convergent player with complementary strengths in mobile, broadband, video and B2B ‒ Stronger, larger, more diversified; combine
Slide 5: Transaction Structure and Key Terms
Transaction Structure and Key Terms Key Terms Telefónica Liberty Global Pre- Transaction 100% Pre-Transaction Structure 100% • Based on the enterprise value of each business, and Structure after deducting Virgin Media UK’s £11.3bn net debt, Telefónica UK(1) Virgin Media UK(2) Liberty Global will mak
Slide 6: Stronger, larger and more sustainable player
Stronger, larger and more sustainable player 46.5 46.3 Accesses 22.7 20.2 11.6 9.0 (m; 2019) (7) (1) 13.5 11.3 9.4 5.5 2.4 Revenue 1.6 (£bn; 2019) (2) (4) (3) (5) (6) Margin 31% 37% 26% 21% 30% 12% (%) (1) 4.2 4.1 OIBDA Pre-IFRS 16 2.5 1.2 0.7 0.2 (£bn; 2019) (2) (4) (3) (5) (6) Margin (%) 19% 19% 2
Slide 7: Compelling and differentiated value proposition
Compelling and differentiated value proposition • Broadband speeds up to 1GBps by 2021 Fastest broadband Customer Rich centric content mobile • Industry leader in NPS offering proposition • Only UK operator offering Netflix, • Sector leading loyalty Amazon & all sports Premium brands Complete Cyber
Slide 8: National Connectivity Champion
National Connectivity Champion Telefonica UK network: Highly competitive and Virgin Media UK network: High performance & Ultrafast cost-effective 5G ready mobile infrastructure Today and Future proof for tomorrow • 99% population 4G coverage and • 100% of VM UK homes DOCSIS 3.1 hardware ready consis
Slide 9: Identified synergies of c.£6.25bn NPV, 80% related to OpEx and CapEx
Identified synergies of c.£6.25 bn NPV, with 80% of full potential related to OpEx and CapEx synergies Identified synergies of c.£6.25bn(1) Run-rate operating and revenue synergies of c.£540m £6.25bn NPV Cash positive since £540m 2023 • Cross-selling and bundling opportunities run-rate Revenue c.20%
Slide 10: Transaction fully consistent with TEF’s strategy
Transaction fully consistent with TEF’s strategy Creates a leading and fully integrated champion in one of the 4 core markets for TEF ✓ Significant value creation through synergies ✓ Partnering with VMED UK is the most Transaction compelling consistent with option for ✓ TEF’s global Telefonica UK st
Slide 11: Governance, Exit and Timetable
Governance, Exit and Timetable • The JV Board of Directors will consist of eight members, four from each of Liberty Global and Telefonica Governance / • Certain matters will require unanimous approval of both companies’ representatives Shareholders • The position of Chairman of the JV will be held f
Slide 12: Closing Remarks
Closing Remarks • Creating a leading integrated player with significant cross-selling opportunities in the second largest European market, improving market positioning, group profile and business sustainability • Combining Telefonica UK’s leading mobile operations and Virgin Media UK’s extensive sup
Slide 13: COVID 19 implications Q1 20 highlights
COVID 19 implications Q1 20 highlights Mr. José María Álvarez-Pallete Chairman & CEO
Slide 14: Telecoms proving essential; responding all stakeholders
Telecoms proving essential; responding all stakeholders Connectivity is critical Strengthened confidence on our resilience • Reliable, stable and secure networks • Increased Demand for connectivity& Guaranteed Sustainable digitalisation (B2C+B2B) continuity of – +40% bandwith demand; +50% model for
Slide 15: Doing well; not immune, but relatively well protected
Doing well; not immune, but relatively well protected Potential hit… …but relatively well protected • Managing impacts; yet uncharted territory • Demand for telcos on the rise; potential for further monetization • Pressure on B2B revs (SMEs; corporates with higher exposure to • Stable L/T revenue ba
Slide 16: 2022 Guidance and 2020 €0.4 dividend reiterated
2022 Guidance and 2020 €0.4 dividend reiterated 2022 Guidance Confirmed Financial Targets (organic ex-contribution to growth from Guidance 2019-2022E ARG) Despite current uncertainty; confidence in future demand Revenues Revenue growth growth for connectivity, digital services… (OIBDA-CapEx)/ Revenu
Slide 17: Q1 Results
Q1 20 Results Mr. Ángel Vilá COO
Slide 18: Financial summary Q1
Financial summary Q1 20 Reported Organic Organic y-o-y € in millions Reported aggregated 4 y-o-y y-o-y core markets Revenues 11,366 (5.1%) (1.3%) 0.1% 65% BB & SoC/Service Revs; +2 p.p. OIBDA 3,760 (11.8%) (1.7%) 0.8% FX impact & Cap gains Q1 19 OIBDA margin 33.1% (2.5 p.p.) (0.1 p.p.) 0.2 p.p. OIBD
Slide 19: Spain | The most reliable and advanced telco in Europe
Spain | The most reliable and advanced telco in Europe Engaged customer base Proof-tested network y-o-y + 1 p.p. flat +2 p.p. ✓ Outstanding delivery with record traffic (both retail & + 7 p.p. + 16 p.p. +4 p.p. wholesale) 73% 94% ✓ Critical connectivity on top quality assets 65% 89% 61% 84% • Larges
Slide 20: Germany | Robust start to year
Germany | Robust start to year Good commercial performance Solid trading Accesses (m, y-o-y) O2 contract ARPU ✓ Good contract momentum of O2 brand; blended ARPU +2% +6% stable and contract churn -0.1 p.p. y-o-y +12% +0.4% ✓ Sustained VDSL demand: +36k net adds; 76% o/FBB 43.6 ✓ Resilient network cop
Slide 21: UK | Once again outperforming the market
UK | Once again outperforming the market Continued contract customer growth Another solid quarter Accesses (m; y-o-y) ✓ Largest UK network carrier +6% +1% +47% +6% ✓ Continued revenue and OIBDA growth ✓ Market leading loyalty with 1% contract churn 34.8 ✓ Exclusive agreement for mobile distribution
Slide 22: Brazil | Predictable & resilient FCF generation
Brazil | Predictable & resilient FCF generation Strengthened market leadership Resilient Business Market Share (Feb-20) ✓ Better fixed and mobile network in the market ✓ Low prepaid impact & handset exposure (~10% & 39.0% 22.1% ~5% of Total Revs) ✓ Highest contract penetration in the market 33.0% 20
Slide 23: Telxius | Growth and margin; continuing tower expansion
Telxius | Growth and margin; continuing tower expansion Sites Tenants Revenues & OIBDA # # Q1 20 y-o-y organic Q1 20 y-o-y organic ex-capacity sale in Q1 19 (cable) +21.4% +18.6% Towers +11.5% y-o-y y-o-y revs. y-o-y 11.8% 2,270 27,181 1,983 20.331 Tenants (ex anchor tenant) 287 5.8% 4.4% 24,911 18,
Slide 24: Q1 Results
Q1 20 Results Ms. Laura Abasolo CFCO
Slide 25: Hispam | Working on transformation; increasing efficiencies
Hispam | Working on transformation; increasing efficiencies Large accesses base Simplification to support cash generation Accesses (m) +10.9% UBB y-o-y ✓ Largest Fiber network in the region (9.0m FTTH 108.8 homes passed) ✓ Prepaid less relevant (~11% of Total Revenues) ✓ High contract penetration (2
Slide 26: Currency headwinds structurally neutralised
Currency headwinds structurally neutralised Effects on FX moves FX impact neutralised at FCF level y-o-y €m; Q1 20 FX impact WC + ✓ BRL; major drag in Q1 Revenue & OIBDA y-o-y OIBDA CapEx Taxes Interest FCF + Others ✓ Revenue: Q1: -3.2 p.p. y-o-y ✓ OIBDA: Q1: -3.5 p.p. y-o-y 63 ✓ -€151m at OIBDA dow
Slide 27: Slight debt increase on hybrids amortisation
Slight debt increase on hybrids amortisation Net Financial Debt €m 479 ND/OIBDAaL ND/OIBDAaL 2.52x 2.60x 723 351 284 4 (651) 37,744 (233) 38,223 Dec-19 FCF Hybrids Shareholder Pre-retirement Net financial FX & Mar-20 remun. (incl. commitments investments Others hybrid coupons) €44.8bn incl. IFRS-16
Slide 28: Strong liquidity position coupled with smooth maturity profile
Strong liquidity position coupled with smooth maturity profile Liquidity position Financing activity from June 16 to YTD Mar-20 | €bn YTD | €bn 91% LT Avg coupon cost €2.3bn YTD reduced by 22.5 ~200bps/~€150m in 13.7 annual payments 8.5 38.8 6.1 8.7 10Y 20Y 30Y €1.4 €0.8 €4.5 6.1 10.0 6.7 Cash posit
Slide 29: Conclusion
Conclusion Mr. José María Álvarez-Pallete Chairman & COO
Slide 30: Conclusion | Sustainable; Long term focus
Conclusion | Sustainable; Long term focus 1 2 Telecoms proving essential… … responding socially to all stakeholders…. Delivering value for all stakeholders 3 4 … doing well; not immune… …committed to our strategy and guidance Resilient business • Robust, reliable and secure network • Good liquidity;
Slide 31: Conference Call with Q&A Session
Conference Call with Q&A Session The conference call will be held on May 7 at 11:00 AM CET, 10:00 AM GMT, 5:00 AM ET. TEF Participants: Jose María Alvarez-Pallete (Chairman & CEO), Ángel Vilá (COO), Laura Abasolo (CFCO), Pablo Eguirón (Global Head of IR). Webcast Q&A Session • To be webcasted online
Slide 32: For further information: Investor Relations
For further information: Investor Relations Tel. +34 91 482 87 00 FOLLOW US: ir@telefonica.com www.telefonica.com/investors