Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — 9M 2018 Earnings Presentation
32 slides from Telefonica Sa's earnings presentation, Oct 31, 2018
Slide 1: Results January-September 2018
RESURESULTTSADOS NEROJANUARY | SEPTIEMBRE| SEPTEMBER 2018 2018
Slide 2: Disclaimer
Disclaimer This document and the 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 may include financial forecasts and estimates based on assu
Slide 3: Q3 18 Highlights
Q3 18 Highlights Mr. Ángel Vilá COO
Slide 4: Q3 Highlights: Executing on strategy
Q3 Highlights | Executing on strategy • Enhancing high-value; UBB 49.0m premises passed; 75% LTE cov. (+6 p.p y-o-y) Enable people with the • Strong net adds: 1.9m contract; 4.9m LTE; 550k UBB; 109k Pay TV power of connectivity • Steady Avg. Rev per access growth (+3.5% y-o-y); building loyalty (sta
Slide 5: Key Financials
Key Financials 9M 18 Q3 18 Reported Reported Organic Reported Reported Organic € in millions IFRS 15&9 y-o-y y-o-y IFRS 15&9 y-o-y y-o-y Revenues 35,776 (7.9%) 2.2% 11,699 (8.3%) 2.7% Service revenues 32,310 (10.2%) 0.9% 10,499 (10.7%) 1.2% Growth acceleration OIBDA 12,035 (2.0%) 3.8% 4,038 (1.4%) 4
Slide 6: Upgraded full-year guidance
Upgraded full-year guidance Operating 2018 guidance Guidance 2018E (IAS 18) Upgraded Guidance 2018 9M 18 (organic) Growth of around 1% Growth of around 2% Revenues +2.2% (despite regulation dragging: -0.9 p.p.) (despite regulation dragging: -0.9 p.p.) Continues expanding around 0.5 p.p. (despite Con
Slide 7: Improved earnings momentum driven by Europe
Improved earnings momentum driven by Europe Revenues, OIBDA, & OpCF Strengthening growth trends y-o-y organic Reported y-o-y • Revenue acceleration vs. Q2 Revenues OIBDA Services revenues +0.5 p.p. 4.1% 4.1% - +0.7 p.p. 2.7% 2.0% = - European operations ramped-up to 1.6%; +0.4 p.p. q-o-q - Latam sim
Slide 8: Solid FCF generation
Solid FCF generation FCF ex-spectrum FCF just -€0.3Bn vs. 9M 17 (rational spectrum acquisition) €m +0.9 y-o-y 3,591 €m 1,588 1,435 6,988 579 +0.9% y-o-y (1,160) Q1 Q2 Q3 9M (1,283) 3,591 2,957 (954) FCF reported (634) 550 998 1,420 2,957 y-o-y OpCF WC Interest Taxes, FCF Spectrum FCF (8.3%) ex-spect
Slide 9: Digital transformation framework across our platforms
Digital transformation framework across our platforms 4P ✓ New functionalities ✓ Strategic alliances Frontrunner in Movistar Home smart device Contents manager: th More use Cognitive in Spain (from 15 . Nov) • Movistar+ • El Corte Inglés • Iberia cases to come Intelligence ✓ AURA • Communications •
Slide 10: Data monetisation | Compelling proposals
Data monetisation | Compelling proposals B2C Fostering customer value and engagement B2B Supporting customers’ digitalisation journey • Innovative proposals in mobile post-paid • Complete Digital solutions portfolio - New flexible tariffs in UK & BRA - Boosting Multi-cloud through strategic agreemen
Slide 11: Video at the core
Video at the core Large scale, 10m base (Sep-18) (‘000) y-o-y 9,889 8,845 5,124 3,721 1,044 OTT DTH IPTV/Cable Pay TV Total (8.2%) +18.5% +5.6% (332) +802 +470 Superior Video Capabilities Sustainable value leadership in Spain Capturing the OTT opportunity in Latam Best Network + Best Content + Best
Slide 12: B2B | Exploiting the digitalisation opportunity
B2B | Exploiting the digitalisation opportunity Strategic and growing business Relevant unit delivering a positive performance Enhancing our growth profile • 4 million corporates • Sustainable revenues & service mix Gaining traction across Telefónica’s footprint - 60% revs: Advanced Data Comms. & Di
Slide 13: Successful focus on value customers; providing sustainability
Succesful focus on value customers; providing sustainability Deep business transformation … Accesses y-o-y • Network leadership - Towards customer-centric networks (softwarisation; data 12.8m 111.5m 8.8m analytics & AI) • Process automation FTTx/Cable LTE Pay-TV - Full stack deployment, efficient sa
Slide 14: Digital Transformation | Optimising customer relationship
Digital Transformation | Optimising customer relationship Digital relationship with our Customers Increase Direct Foster top-ups & Make the payments & Improve experience Enhanced customer add-ons through own collections more efficient Fulfilment and customer care interaction for sales digital channe
Slide 15: Q3 Results
Q3 18 Results Ms. Laura Abasolo CFCO
Slide 16: Spain | Record commercial activity in a reshaped market place
Spain | Record commercial activity in a reshaped market place Q3 Net adds Largest-ever capture of high value customers (‘000) y-o-y • Football strategy proven right 370 • Gross adds surged, Fusion churn stable 155 151 101 - Record portability (fixed & mobile) 81 79 - Best FBB net adds since Fusion l
Slide 17: Spain | Sustained profitability despite commercial pick-up
Spain | Sustained profitability despite commercial pick-up Top line trends maintained Service Revenues y-o-y organic OIBDA margin • Serv. Revs. growth unchanged (+1.4% y-o-y in Q3) ex-MTR cut/MásMóvil - “Consumer” (+0.4%) decelerates on calendar effect 1.8% 1.4% - “Business” (+1.5%) accelerates; str
Slide 18: Germany | On-track to complete network integration
Germany | On-track to complete network integration Strong commercial momentum Improving data monetisation • Contract net adds +27% y-o-y in Q3 LTE customers & penetration - Partner trading; 57% of gross additions (58% in Q2) (M) Penetration 40% 41% 39% • Updated O2 Free tariffs; Boost & Connect driv
Slide 19: UK | Customer focus drives further growth
UK | Customer focus drives further growth MSR Strong operational base y-o-y organic MSR ex-regulation • Largest UK mobile operator (32.3m accesses Sep-18) - Strong contract net adds: 117k (incl. M2M) 3.5% 3.6% - 3rd. consecutive Q of ARPU growth (+3.2% y-o-y) 1.1% 1.2% - Leading customer loyalty; co
Slide 20: Brazil | Irreplicable position in key segments
Brazil | Irreplicable position in key segments Continued high-quality growth Contract Net adds 2018 (‘000) Share of contract net adds • Best Network. Strong evolution of 4G/4G+ - 87% 4G Coverage (+12 p.p. y-o-y) 40% - 4G+: 850 cities (+736 in 2018) 37% 27% • Best customers; sustained leadership 41.2
Slide 21: Brazil | Strong margin improvement & cash generation
Brazil | Strong margin improvement & cash generation Consistent revenue evolution Financials y-o-y organic Q2 18 Q3 18 • Q3 total Revenues: -1.0% y-o-y Margin (organic) - MSR -1.0% 7.1% 5.5% - Prepaid performance affected by macro & competition 0.5% - +7.6% in contract revenues (75% of MSR) 0.2% • F
Slide 22: South Hispam | Value growth in a challenging environment
South Hispam | Value growth in a challenging environment Transforming toward a more sustainable business Mobile Penetration Sep-18 (y-o-y) • Sound commercial trends 52% FTTx/Cable: 2.3m connected (1.8M FTTH/Cable) - 40% 36% - +677k Contract net adds in 9M (-700k in 9M 17) - Further differentiation:
Slide 23: North Hispam | Colombia speeds-up; Mexico hit by regulation
North Hispam | Colombia speeds-up; Mexico hit by regulation Revenue growth despite regulation Mobile Penetration Sep-18 (y-o-y) 48% • Accelerating value 27% - 176k new FTTx connections in 9M (+59k in 9M 17) 15% - +409k Contract net adds in 9M (+405k in 9M 17) • Growth driven by COL & CAM; financials
Slide 24: Telxius | Value adding growth
Telxius | Value adding growth Towers Tenants Larger portfolio of premium-quality # # Q3 Q3 • BRUSA cable (US - Brazil) came into service in Q3 16,554 22,348 - Highest capacity cable connecting the Americas (11,000km, +101 +236 138 Tbps) • Towers - +266 new towers YTD; +629 new tenants YTD Sep-18 Sep
Slide 25: Q3 non-recurrents impacting OIBDA and net income
Q3 non-recurrents impacting OIBDA and net income Q3 impacts in OIBDA +€100m Q3 impacts in Net Income -€10m 59 (34) 197 (123) 100 174 (13) (68) (103) (10) Court Ruling + Others Restructuring Hyperinflation TOTAL Court Ruling + Restructuring Others Hyperinflation TOTAL contingencies Provisions conting
Slide 26: Net income up +11.6%, EPS +6.1%
Net income up +11.6%, EPS +6.1% 9M 2018 €m (2.0%) reported 12,035 6,581 +6.0% reported +11.6% 2 (575) reported 5,454 (1,669) (491) 2,721 OIBDA D&A OI Associates Net financial Taxes Minorities Net Income expenses EPS +6.1% reported 23
Slide 27: FX impacts in P&L, FCF and net debt
FX impacts in P&L, FCF and net debt OIBDA EM currencies, particularly BRL and ARS major drag in Q3 €m Reported y-o-y • FX (ex. hyperinflation) decreased growth by 735 1,205 (2.0%) y-o-y 459 -Revs.: -8.1 p.p. in Q3 y-o-y (-8.5 p.p. in 9M) 12,274 229 12,035 -OIBDA: -9.5 p.p. in Q3 y-o-y (-9.8 p.p. in
Slide 28: Net debt reduction on strong FCF
Net debt reduction on strong FCF Net Financial Debt €m -1,594 ND/OIBDA ND/OIBDA 2.66x 2.68x (2,957) 44,230 (349) (553) 1,684 581 42,636 Shareholder Dec-17 FCF remun. (incl. hybrid Pre-retirement Net financial FX & Sep-18 coupons and LME) commitments investments Others 6,967 (1,160) (1,283) (518) (1,
Slide 29: Strong liquidity thanks to attractive long-term financing
Strong liquidity thanks to attractive long-term financing Sources of long-term financing Net Debt maturities 2018 YTD | €bn Sep-18 | €bn; not considering hybrid NC dates LME: annual coupons -93bps to 4.4%. Avg. years to call from 3.2Y 5.5 12.4 76% debt Avg. debt life to 4.7Y in fixed rates 9.2 years
Slide 30: Conclusion
Conclusion Mr. Ángel Vilá COO 55
Slide 31: Summary
Summary Progress on Focus on Financial 2018 1 strategic 2 delivering 3 discipline 4 Guidance positioning profitable results upgraded Long-term value creation (sustainable growth; business excellence; focus on FCF) 27
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 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereu