Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — Investor Presentation (April 2011)
37 slides from Telefonica Sa's investor presentation, Apr 13, 2011
Slide 1: Accounting and cash: Dividends here!
Título, máximo 2 líneas Accounting and cash: Dividends here! Santiago Fernández Valbuena Razón social Área Chief Strategy Officer, Telefónica
Slide 2: Disclaimer
Disclaimer This presentation contains statements that constitute forward-looking statements about the Company, within the general meaning of the term and within the meaning of applicable securities laws, including financial projections and estimates and their underlying assumptions, statements regar
Slide 3: Index
Index Investing in Telefónica: A true Story CF growth opportunities: outside and inside Telefónica Completing the P&L and the CF statement The asset side: portfolio The liability side: debt and equity Conclusions
Slide 4: Investing in Telefónica: A true story
Investing in Telefónica: A true story
Slide 5: Telefónica: a sizeable company
Telefónica: a sizeable company FY 2010 OIBDA Source: Bloomberg Annual equivalent total returns in local currencies. March 2006 to March 2011
Slide 6: ... beating returns...
... beating returns... Total shareholders returns (last 5 years)1 Source: Bloomberg 1Annual equivalent total returns in local currencies. March 2006 to March 2011
Slide 7: for many years now
for many years now Total shareholders returns (last 20 years) 1 Source: Bloomberg 1 Annual equivalent total returns in local currencies. March 1991 to March 2011
Slide 8: CF growth opportunities: outside and inside Telefónica
CF growth opportunities: outside and inside Telefónica
Slide 9: There is a macro recovery in our footprint...
There is a macro recovery in our footprint... Telefónica’s footprint: 2014 private consumption 14% above 2008 Dynamism to remain in Latam: average annual growth of 4% in FY 2011-2013 (f) Slow recovery in Spain Source: Consensus estimates and Telefónica .
Slide 10: ... income growth drives penetration and we are well placed to benefit from trends...
... income growth drives penetration and we are well placed to benefit from trends...
Slide 11: .. and monetise it
.. and monetise it < 6 o ro) < 6 o ° = © cite O18DA grows as penetration does And the same in all the countries ste Tinea
Slide 12: To deliver CF growth as seen in many of our business units
To deliver CF growth as seen in many of our business units Selected Telefónica wireless units: OpCF change FY 2005-2010 (as percentage of FY 2010 revenues) Challenge: all units at full speed
Slide 13: Reforms to revert underperformance of Spain
Reforms to revert underperformance of Spain SPAIN vs. EURO ZONE: GDP growth rate differential Source : IMF and OECD
Slide 14: Completing the P&L and the CF statement
Completing the P&L and the CF statement
Slide 15: Our financial policy has served well our strategy
Our financial policy has served well our strategy CapEx increased where appropriate Spectrum won in major markets Vivo and other acquisitions fostering growth Dividends raised Valuation supported by low cost debt financing to be embedded in CF discount rates
Slide 16: Depreciation & Amortization growing in 2011
Depreciation & Amortization growing in 2011 Total D&A € bn Growth in FY 2011E mainly driven by increased in PPA due to the acquisition of Vivo and spectrum PPA decline from FY 2012E led by T. Europe 1 Includes 3 months of Vivo’s PPA 2 Subject to FX rates and assuming constant perimeter
Slide 17: Funding costs kept under control
Funding costs kept under control Yield from recent Bonds from Telefónica, S.A. at 4.465% at issue
Slide 18: Financial expenses below 6% medium term benchmark
Financial expenses below 6% medium term benchmark Financial Expenses (ex-FX & Inflation adj) Percentage of Net Debt (Dec-10) Euro debt fixed ~1/4 p.p. better than prevailing rates at bond issue dates Floating exposure saving ~0.4 p.p. per year 1 Includes forward starting swaps fixing debt in FY 2011
Slide 19: Cash taxes below average nominal tax rate
Cash taxes below average nominal tax rate Effective and cash tax rate starting to decrease from FY 2012 onwards Beating nominal rates in the countries where we operate whilst being fair with the Societies Interests taxed at marginal tax rate, close to 30%: to be used for WACC, but FCF projections to
Slide 20: Working Capital active and efficiently managed
Working Capital active and efficiently managed FY 2011—2013E working capital consumption between 2% and 5% of OpCF FY 2010 investment in WC: € 2.7 bn Non-recurrent business ~ €1 bn spectrum payment in Mexico ~ €0.7 bn restructuring provisions ~ €0.4 bn Fundación Telefónica commitments Recurrent busi
Slide 21: The asset side: portfolio
O3 The asset side: portfolio
Slide 22: A sizable profitable asset portfolio
A sizable profitable asset portfolio
Slide 23: ... enjoying a high diversification and upstream cash flow capacity
... enjoying a high diversification and upstream cash flow capacity Diversified portfolio: > 2/3 of our revenues and OIBDA generated outside Spain in FY 2010 Oriented towards growth areas in FY 2010 : > 60% of our accesses in Latam > 75% of our accesses are mobile
Slide 24: We have fostered growth
We have fostered growth Investing in the network acquiring spectrum Awarded spectrum processes FY 2010-2011 YTD, € in billions and through acquisitions
Slide 25: We have achieved the right scale in our target footprint
We have achieved the right scale in our target footprint Spectrum auctions in current markets to foster growth Predictable M&A strategy Product & Service innovation to further strengthen our growth capabilities Atento Divesting non core assets PT
Slide 26: The liability side: debt and equity
The liability side: debt and equity
Slide 27: Debt currency mix related to OIBDA and FCF to protect solvency
Debt currency mix related to OIBDA and FCF to protect solvency Non — € debt reducing sensitivity of Debt/OIBDA ratio to FX movements without incurring in high costs Historical simulation: changes in FY 2010 debt/OIBDA ratios if changes in FX rates were equal to those seen in y-o-y
Slide 28: Our balanced approach to the credit markets...
Our balanced approach to the credit markets... FY 2011 loan maturity extended Getting Bank Support € 12 bn in FY 2009 and Brasilcel acquisition loan FY 2010 Undrawn credit lines increase Average debt Access to Bond Market Access life of bonds diverse funding € Major currencies : €, US$ and GBP issue
Slide 29: ... has contributed to a solid liquidity position to manage debt maturities
... has contributed to a solid liquidity position to manage debt maturities Unused committed lines Average Net Debt Life Maturity profile (Dec-10) € bn Years € bn 11.7 11.0 Includes undrawn €5 bn of Vivo 9.0 amount on new 6.3 syndicated facility +1.8 6.1 syndicated to cover 5.7 (ex-Brasilcel) pendin
Slide 30: On the way to de-leveraging
On the way to de-leveraging Stable policy: Net Debt + Debt like Cash Commitments / OIBDA in the 2.0 — 2.5 range Trending progressively towards the middle of the leverage range Net Financial Debt + Commitments/OIBDA Leverage ratio sensitivity 0.05 improvement requires Average leverage ratio in the pe
Slide 31: Disciplined growing remuneration policy, changing mix...
Disciplined growing remuneration policy, changing mix... € 6.7 bn FCF Pre- Committed dividends spectrum € 5.5 bn Payout 67% FCF Payout €7.9 bn 60% 90% €7.2 bn in 2010 52% in 2006 Dividends Dividends € 3.6 bn €5.8 bn Share Buy-Back € 1.9 bn Share Buy-Back € 0.9 bn Avg. FY 2006-2009 FY 2010 H2 11/H1 1
Slide 32: ... supported by Earnings well above Dividends, and...
... supported by Earnings well above Dividends, and...
Slide 33: ... by FCF also exceeding dividend payments
... by FCF also exceeding dividend payments Sustained OIBDA growth trend Regions with positive organic growth in FY 2010 offset Spain decrease Change: 2010 vs. 2009 Spain Latam Europe € -0.8 bn € +0.8 bn € +0.1 bn Additional FCF from Vivo acquisition: €0.2 bn 1 No critical reliance on uncertain CF V
Slide 34: To get the best combination of growth expectations and cash remuneration
To get the best combination of growth expectationsand cash remuneration 1 Source: average of 20 analysts: T. Italia pro-forma 2010, consensus analyst 2012
Slide 35: Conclusions
O5 Conclusions
Slide 36: Solid business and financial trends supporting shareholders returns and solvency
Solid business and financial trends supporting shareholders returns and solvency 1 Shareholder remuneration, to be sustained beyond 2012 Solvency protection, aiming to limit net debt & cash 2 Financial policy focused on allocation of generated Cash- commitments within the range 2.0 to 2.5x OIBDA 3 P
Slide 37: Telefonica
Telefonica 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, thereunto duly authorized. Telefónica, S.A. Date: April 13 th , 2011 By: /s/ Ramiro Sánchez de Lerín García-Ovies Name: