Slide 1: Results January-June 2011
Results January-June 2011 Felina ee \g anne Le sik : vee
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
Slide 3: Telefónica 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 benchmark prof
Slide 4: Key financials
Key financials Jan-Jun Change Organic € in millions 2011 y-o-y change Broad diversification (H1 11) Revenues 30,886 +6.3% +0.9% Revenues 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.p. Operati
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
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
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% 11.4% 11.7% 12.1% 10.0% T. España T.
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 hers & T
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.) b
Slide 10: On track to meet full year outlook
TELEFÓNICA On track to meet full year outlook 2011 Guidance H1 11 9 Revenues Up to 2% 0.9% 9 OIBDA Margin Upper 30s 36.0% Limited erosion y-o-y (-1.1 p.p) 9 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 No
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) lower gross additions but better churn -5.6% -6.6
Slide 12: T. España: 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 Ramp-up in data revenue growth led by +12.7% +10.0% higher MBB adoption: • MBB penetration up 7 p.p. y-o-y to 23% -7.6% • Strong H1 non-
Slide 13: T. España: 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 Subsi- Solid growth in IT continues at 14.6% Q1 11 Data IT & Access Internet & BB diaries Q2 11 y-o-y in H1 11 Internet & BB revenue driven by ARPU +0.2 p.p. erosion and lower commercial activity:
Slide 14: T. España: 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 of ERE
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 • Brazilian revenues speeding up %
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. +5% +2.1% 62% +3% +9% +0.3% Total ARPU Wireless Mobile Data Mobile Voice Outgoi
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% 2.2m +47.0% +14.1% 2.0m 173k +12.9% +14.8% +42.0% 1.7m 1.8m +14.6% 93k 22% +4.7% 74k 46% in +1.7% con
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 Inte
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 Message
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% +13% +26% 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% -12.7% -13
Slide 21: T. Latam: 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 accesses,
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 FSolid contract net adds and stable churn y-o-y at 2.5% FMobile data accounts for 41% of MSR (+5 p.p. y-o-y) F
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 penetration 1 Limited commercial activity, sustained market leading contract churn +6 p.p. 35% 29% Extracting value from increased MBB adoption +6% F 55% of contract smartphone users based on
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 Voice and FContract churn trending down to 1.5% in Q2 11 53% Data tariffs 236 FGrowing success of “O2 Blue” data tariff and
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 Total Fin
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 data opp