Telefonica Chile S.a. · BCS:CTC
Telefonica Chile — Non-Deal Roadshow (June 2007)
26 slides from Telefonica Chile's roadshow presentation, June 2007
Slide 1: Roadshow Telefónica Chile
Roadshow Telefónica Chile June 2007
Slide 2: Chilean Macroeconomic Estimates
> Chilean Macroeconomic Estimates GDP* & Inflation Dynamic growth & Exchange Rate Peso depreciation mitigated by controlled inflation 700 higher copper prices 10.0 650 8.0 603 5.7 600 6.0 Ch$ per US$1 (EoP) 6.0 5.7 557 550 513 528 4.0 (%) 4.0 3.7 540 4.0 2.4 2.6 3.2 500 2.0 1.1 450 0.0 400 2003 2004
Slide 3: Current Regulatory Issues
> Current Regulatory Issues Creation of panel of experts to resolve conflicts in the Chilean telecommunications industry Proposed Creation of a separate telecommunications oversight Modifications to commission Chilean Telco Law Modification of public telco service concession regime, allowing c
Slide 4: Upcoming Tariff-Setting Process (2009-2013)
> Upcoming Tariff-Setting Process (2009-2013) Telefónica Chile services subject to tariff regulation: Local service, public telephone service, line connections and network unbundling services Antitrust Antitrust Commission reviews competition in the Commission telco industry and defines the scope
Slide 5: Competition in the Chilean Telco Industry
> Competition in the Chilean Telco Industry Telefónica Chile’s market share vs. competitors as of 3/ 31/ 2007 Telefónica Telefónica Chile Main Competitor Market Chile Market Others Second Competitor Penetration Position Lines Fixed Telephony 67% 15% 18% 19.7 1 /100 inhab. (7 participants) Minutes/ D
Slide 6: Evolution of Service Penetration in the Chilean Telco Market
> Evolution of Service Penetration in the Chilean Telco Market Service Penetration 78% Mobile 100 inhab. 69% Mobile11 58% 46% In fixed telephony, 32% 39% penetration has remained constant over 100 households the past 4 years 53% 53% 54% 52% 52% 52% Fixed Fixed22 Growth in pay TV 24% Pay accelera
Slide 7: Telco Services per Home: Growth Potential in C3 and D Segments
> Telco Services per Home: Growth Potential in C3 and D Segments Large gap with respect to % households, Dec. 2006E developed countries Household Socio- income Households Econ. Development US$/ month1 thous. Segm. Mobile Fixed Broadband Pay TV Level 5,506 314 ABC1 ABC1 98% 89% 70% 72% High High 2,03
Slide 8: Company Strategy
Company Strategy
Slide 9: Drivers of the Company's Strategic Transformation
> Drivers of the Company’s Strategic Transformation: Focus on segmentation of clients, bundling Integration of services and flexible commercial offer Innovation New technology and commercial creativity Cost efficiency and solid financial structure Efficiency facilitate business development I
Slide 10: Integration: Bundling of voice with broadband and TV
Integration: Bundling of voice with broadband and TV > facilitates revenue diversification and greater client loyalty Clients with Flexible Plans Consolidated Revenues +19% Other 58% 71% revenues Thous. 1,149 1,365 Clients Regulated 42% 29% revenues 1Q06 1Q07 1Q06 1Q07 Client Mix The market 22% 35%
Slide 11: Integration: Consolidating our Broadband leadership position
Integration: Consolidating our Broadband leadership > position through bundling number one in the market ADSL Accesses* ADSL Market Share* (thous.) +58% 48% 49% 49% 46% 44% 527 357 1Q06 1Q07 1Q06 2Q06 3Q06 4Q06 1Q07 T. Chile has been the engine of broadband growth in Chile: More than one million con
Slide 12: Innovation in Service: Digital TV and IPTV
Innovation in Service: Launch of Digital TV in June 2006 > and IPTV in June 2007 Customized solutions: Dúos and Tríos drive TV growth 14% 156,547 “Singles” TV (2%) market share after 94,209 “Dúos” Voice +TV only one 52,380 (30%) year 37,822 24,434 “Tríos” Voice + TV + 10,423 ADSL (68%) Jun-06 Jul-06
Slide 13: Innovation in Offer: Commercial Flexibility
> Innovation in Offer: Commercial Flexibility Segmentation of clients and bundling of service differentiate T. Chile from other operators. Voice Broadband Pay TV Different Capacity Content Plans of Minutes (Speed) On Demand Service 300 minutes 128 – 1 Mbps 30 channels + premium 500 minutes 2 Mbps Th
Slide 14: Transformation strategy allows the Company to stabilize revenues
Transformation strategy allows the Company to stabilize > revenues Quarterly Revenues (1Q07/1Q06) -1.0% Millions of Ch$ Flexibility + bundling of services 144,482 +4,228 143,034 +7,573 -460 -677 +9,465 Ongoing price competition -21,577 Decrease in Migration to flexible plans network + rental Lower t
Slide 15: Efficiency: Labor relations focused on stability and productivity
Efficiency: Labor relations focused on stability and productivity > 100% of unionized employees have contract conditions 2006 Collective defined for a period of 3-4 years Bargaining Salary adjustments in line with CPI Process Incentives aligned with business objectives The Company plans to h
Slide 16: Efficiency: Effective financial management supports business development
Efficiency: Effective financial management supports > business development Financial expenses: Local and international (Millions of US$) Dec 06 / Dec 00 = -84% Dec 06 / Dec 05 = -35% credit ratings: 250 232 1Q07 / 1Q06 = -20% Decrease in spreads 201 200 170 9 International 150 ratings: 127 110 Baa1
Slide 17: Efficiency: Focus of Financial Strategy
> Efficiency: Focus of Financial Strategy Cover financial needs in anticipation of maturities Maintain a level of debt of not more than 2 times EBITDA Adjustment of spreads to market conditions Maintain low exposure to foreign exchange fluctuations Total Debt as of 3.31.07: Average Term Amou
Slide 18: Efficiency: Investment plan targets growth
Efficiency: Investment plan targets growth, in line with > the Company’s strategy 1Q06 1Q07 Fixed telephony 5.5 12.0 Broadband and TV 11.3 25.2 Data 7.4 6.4 Long Distance 0.2 0.0 Other 11.1 4.0 In 2007, US$2 Millions of nominal US$ Total 35.5 47.6 of every US$3 221 will be invested Fixed Tel. in gro
Slide 19: Breakdown of Tax Rate
> Breakdown of Tax Rate Millions of Ch$ Tax / Rate vs. Income before Ch$29,885 / 56% income tax Other* 7,074 13% Ch$5,458 / 85% Deferred Taxes 13,816 1,069 17% 26% 3,297 51% Income Tax 8,995 17% 1,092 17% 2006 1Q07 * “Others” includes reversal of monetary correction of shareholders’ equity; write-of
Slide 20: Giving Back to Our Shareholders: Additional Cash Distributions
>Giving Back to Our Shareholders: Additional Cash Distributions The Company distributes 100% of net income to shareholders, per its dividend policy. In addition, the dividend policy allows additional cash distributions to shareholders, as long as business and financial obligations have been fulf
Slide 21: Quality: A Top Priority Within Our Strategy
> Quality: A Top Priority Within Our Strategy Enhance external and internal network infrastructure Network Redesign installation and repair contracts to better align incentives Improve handling of customer requests by implementing accountability and zero tolerance Commercial Support policies
Slide 22: Challenges for 2007
> Challenges for 2007 Face changes in the industry by making significant advances in terms of tariff deregulation Develop simpler regulation that facilitates development Regulation of technological convergence and provides consumers with more alternatives, thereby increasing the scope and penetr
Slide 23: Additional Information
Additional Information
Slide 24: Financial Summary
> Financial Summary Variation Variation Millions of Ch$ 2006 1Q07 2006/2005 1q07/1q06 Revenues 577,204 -2.6% 143,034 -1.0% Operating Costs 494,580 -1.9% 130,073 +4.5% Operating income 82,624 -7.1% 12,961 -35.1% EBITDA 289,906 +0.1% 64,289 -10.0% EBITDA margin 50.2% +1.4 p.p. 44,9% -4.5pp Non-operati
Slide 25: Summarized Balance Sheet
> Summarized Balance Sheet Millions of Ch$ 03.31.07 03.31.06 (as of 03.31.07) Current Assets 323,792 317,397 Fixed Assets, net 1,214,990 1,307,435 Other Assets 80,212 84,863 TOTAL ASSETS 1,618,994 1,709,695 Short-Term Liabilities 191,884 235,687 Long-Term Liabilities 522,411 524,590 TOTAL LIABILITIE
Slide 26: For information contact
For information contact: Sofía Chellew - Verónica Gaete María José Rodríguez – Carolyn McKenzie TELEFONICA CHILE Tel.: 562-691-3867 Fax: 562-691-2392 E-mail: sofia.chellew@telefonicachile.cl, veronica.gaete@telefonicachile.cl mariajose.rodriguez@telefonicachile.cl carolyn.mckenzie@telefonicachile.cl