Telefonica Sa · BME:TEF
Telefonica Sa — Non-Deal Roadshow (September 2008)
27 slides from Telefonica Sa's roadshow presentation, Sep 2, 2008
Slide 1: TELEFONICA: “A return to fundamentals”
TELEFONICA: “A return to fundamentals” CÉSAR ALIERTA TELEFONICA, EXECUTIVE CHAIRMAN AND CEO September 2nd, 2008 TELEFONICA S.A.
Slide 2: Disclaimer
Disclaimer This document contains statements that constitute forward looking statements about the Company including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations. These statements appear in a number of places in this doc
Slide 3: Index
Index 1 Solid performance in H1 08 2 Addressing investors’ concerns TELEFONICA S.A. Investor Relations 3
Slide 4: Robust set of financials in H108
Robust set of financials in H108 Jan-Jun Change Change organic(1) € in millions 2008 H1 08/H1 07 H1 08/H1 07 Revenues 28,149 +1.2% +6.7% OIBDA 11,123 -1.3% Strong earnings, exploiting +12.0% our differential profile: OIBDA Margin 39.5% -1.0 p.p. +1.8 p.p. Execution OI 6,602 +0.7% +24.0% Diversificat
Slide 5: Strong cash-flow generation, leveraging our proven track record to manage costs and CapEx
Strong cash-flow generation, leveraging our proven track record to manage costs and CapEx H1 08 OpCF (OIBDA-CapEx) (€ in millions) Organic1 y-o-y +12.9% growth rate +7.7% +15.1% 7,673 2,332 -42 H1 08 FCFS: T. Europe 5,299 0.731€ vs. 1,177 0.725€ in H1 07 T. España 4,122 Europe T. Latam Others & Tota
Slide 6: Distinctive growth profile, capitalising on our high diversification
Distinctive growth profile, capitalising on our high diversification … Accesses Jun-08/Jun-07 Bundles: 38% of total accesses (+7 p.p. vs. Jun-07) millions +57.4% +21.4% +15.2% +25.1% 2.0 +9.8% 147.9 245.1 +3.9% +19.0% 11.5 43.8 47.0 182.7 43.4 -0.1% T. España T. Europe T. Latam Total Mobile BB Pay T
Slide 7: … driven by the strong growth in Latam
… driven by the strong growth in Latam Contribution to organic revenue and OIBDA growth by region H1 08 Revenue1 H1 08 OIBDA1 +5.5 p.p. +12.0% +4.3 p.p. +6.7% +2.2 p.p. +1.6 p.p. +4.6 p.p. +0.5 p.p. TEF T. España T. Europe T. Latam TEF T. España T. Europe T. Latam Group Group Organic growth by regio
Slide 8: We are fully on track to meet 2008 Group guidance…
We are fully on track to meet 2008 Group guidance… Revenue Growth1 OIBDA Growth1 +7.1% +8.7% GUIDANCE GUIDANCE 7.5%/11% 6%/8% % Change H1 08/H1 07 % Change H1 08/H1 07 OI Growth1 CapEx1 +17.2% € 3,513 m GUIDANCE 13%/19% GUIDANCE ~ € 8,600 m % Change H1 08/H1 07 H1 08 (1) Guidance criteria: 2007 adju
Slide 9: … with all our regions delivering 2008 commitments
… with all our regions delivering 2008 commitments T. España T. Latinoamérica T. Europe +13.2% GUIDANCE +6.2% +2.1% 11%/14% GUIDANCE Revenue 4%/7% GUIDANCE Revenue Growth 1 2%/3.5% Growth (1) +15.4% +6.2% GUIDANCE 12%/16% OIBDA GUIDANCE +4.0% 6%/8% Growth1 GUIDANCE 2%/6% % Change H1 08/H1 07 % Chang
Slide 10: Delivering once again a superior performance
Delivering once again a superior performance +12% +10% +8% +6% +4% H1 08 Organic +2% EBITDA Growth 0% -2% -4% -6% -8% -4% -3% -2% -1% 0% +1% +2% +3% +4% +5% +6% +7% H1 08 Organic Revenue Growth Source: company press releases. BT: Reported figures for March-June 08 vs. 07; EBITDA before specific item
Slide 11: Index
Index 1 Solid performance in H1 08 2 Addressing investors’ concerns TELEFONICA S.A. Investor Relations 11
Slide 12: How is the economic growth affecting your business in Spain?
How is the economic growth affecting your business in Spain? HARD DATA FOR THE MARKET Telecom expenditure in our market only represents 3% of the total family expenses Industry’s performance is more dependent on the evolution of households than on new houses: Fixed line telephony market continues to
Slide 13: How are you facing intense competition in Spain?
How are you facing intense competition in Spain? Strong commercial push to sustain our leadership T.España Retail BB High quality BB offering: Net adds (y-o-y change) > 57%E +18.3% y-o-y in retail BB accesses 391K 382K MARKET Enhanced market share -15.6% SHARE -28.2% > 83% of retail BB accesses with
Slide 14: What factors will contribute to sustain revenue growth in Spain in H208?
What factors will contribute to sustain revenue growth in Spain in H208? 1 The deceleration started to be noticed in 2H 07: Assuming currents trends, y-o-y comparison should improve 2 Negative impact from roaming tariff cuts should ease: Sharp price cuts in force from September 07 3 Higher revenue s
Slide 15: Are you noticing any impact from higher inflation in Latin America? (Revenue)
Are you noticing any impact from higher inflation in Latin America? (Revenue) +6 p.p. Sound y-o-y increases in wireless and BB +6 p.p. Wireless 69% 75% penetration despite higher levels vs. 2007 56% 62% penetration Strong customer expansion across markets in Latin and businesses: America Wireless cu
Slide 16: Are you concerned about costs inflation in Latin America?
Are you concerned about costs inflation in Latin America? +2.4 p.p. Leveraging scale benefits Total employees to leave in 2008 and cost measures: (Index) Solid OIBDA 36.4% Workforce reorganization margin 33.9% programs 100% expansion Lower subsidies 73% (T. Latam) Enhanced quality service & commerci
Slide 17: How are you progressing in Germany?
How are you progressing in Germany? Delivering 2008 commitment +2.7% On track with H1 07 H2 07 H1 08 Total Revenue growth execution Service revenue growth of our turnaround -1.0% -1.1% strategy -2.9% -4.2% -5.9% Advancing in the rollout of our own mobile network Building Further expansion of distrib
Slide 18: How are facing the current operating environment in UK?
How are facing the current operating environment in UK? Mobile +11.4% Continue to outperform the market: +10.0% service Very strong contract net adds (344 k; +121% y-o-y) revenue (y-o-y change Contract churn down to 1.4% in Q2 vs. 1.8% in Q2 07: #1 in the in l.currency) market Q2 08 H1 08 Mature pre
Slide 19: What is your view on MTRs across your markets?
What is your view on MTRs across your markets? Group net exposure1 to MTRs in Medium term glide paths approved by national Europe regulators in most countries < 1% Europe EU draft recommendation published on June 08 for convergence for MTRs in Europe H1 08 Termination rates in most countries are con
Slide 20: How are you facing the credit crunch?
How are you facing the credit crunch? Continued de-leverage with a -15% comfortable liquidity position: 2.7x -8% Net Financial €44.0 bn of net fin. debt in Jun-08 Debt/OIBDA 2.3x 2.0x 5.96% effective interest rate in H1 08: 6% target for the year Dec -061 Dec -072 Jun-083 Average debt life around 6
Slide 21: Do you need further scale in Europe?
Do you need further scale in Europe? Scale DOES matter at the Telco sector We early Anticipation Scale IS NOT size realized that… It is ALL ABOUT being integrated and diversified 2005-2007 we Acquisitions to gain scale in Europe and strategic were leaning alliances were not always well received Expa
Slide 22: How achievable is your guidance?
How achievable is your guidance? Revenue, OIBDA, OI and CapEx guidance (*) fully flowing in strong increases in reported (ALL FACTORS INCLUDED) EPS and FCPS Fully on track to meet 2008 and 2010 guidance 2006 2010E EPS 1 1.304 € 2.304 € +1€ FCPS 2 1.87 € 2.87 € (1) Reported EPS (2) FCF available to r
Slide 23: What are your priorities for use of FCF?
What are your priorities for use of FCF? > 40%2 > € 40 bn of current market cap Cumulative FCF 07E-10E1 to be generated in the next 3 years 1st: SHAREHOLDER A growing path Share buybacks REMUNERATION of dividends to be considered Net Debt + Cash Commitments over OIBDA in the 2nd: DELEVERAGE 2.0 – 2.
Slide 24: Should we expect new announcements on shareholder remuneration in the short term?
Should we expect new announcements on shareholder remuneration in the short term? Prioritizing shareholder remuneration 1€ DPS in 2008 vs. 0.75€ in 2007 Dividends Growing pace in DPS in the future + New program announced in February 2008: 2008- H1 09: 100 m shares New framework: 2008: 100 m shares B
Slide 25: Are your interests aligned with those of your shareholders?
Are your interests aligned with those of your shareholders? A management team highly committed to share price performance EXPOSURE TO TELEFÓNICA SHARE César Alierta - EXECUTIVE CHAIRMAN 3.848 m shares + 10.2 m call options Julio Linares – COO 0.121 m shares Santiago Fernandez Valbuena – CFO 0.161 m
Slide 26: In summary
In summary Big disconnection between TEF’s stock price performance and our solid fundamentals On track to fulfill Unmatched organic Strong our commitments + growth ahead of peers performance in H1 08 Leveraging our differentiated profile: Execution, Diversification & Integrated management model ++ V
Slide 27: TELEFONICA S.A. Investor Relations
TELEFONICA S.A. Investor Relations 27