Slide 1: Results January-June 2019
RESULTS JANUARY | JUNE 2019
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: Q2 19 Highlights
Q2 19 Highlights Mr. José María Álvarez-Pallete Chairman & CEO 3
Slide 4: The most advanced network | Q2 Group highlights
The most advanced network | Q2 Group highlights 1. More customers, more loyal 2. Reliable & sustainable growth Unabated momentum in value Sustained revenue growth (+3.7% y-o-y) P FTTx/Cable retail accesses +14% y-o-y; 65% penetration P 55% of revenues coming from BB & SoC P LTE acceses +18% y-o-y; 5
Slide 5: Financial achievements
Financial achievements H1 19 Q2 19 Reported Reported Organic Reported Reported Organic € in millions IFRS 16 y-o-y y-o-y IFRS 16 y-o-y y-o-y Revenues 24,121 (0.9%) 3.8% 12,142 (0.0%) 3.7% Improving revenue trends Service revenues 21,556 (2.2%) 2.5% 10,856 (1.2%) 2.3% OIBDA 8,702 7.4% 1.3% 4,438 4.7%
Slide 6: 2019 guidance reiterated
2019 guidance reiterated Operating 2019 guidance Guidance 2019E H1 19 (organic) Revenues Around +2% 3.8% Sustained revenue & OIBDA growth despite regulation OIBDA Around +2% 1.3% CapEx/Sales Around 15% 14.1% CapEx rationality ex-spectrum 2019 DIVIDEND €0.4/SH. CASH Dividends to be paid in 2019 calen
Slide 7: Delivering robust financials
Delivering robust financials Q2: steady top line organic growth Revenues organic y-o-y • Strong growth in Digital revenues (+19.0%) and B2B (+4.3%) 3.8% 3.8% 3.7% 4.5% • Service revenue +2.3%; handset sales +16.7% (+1.1 p.p. q-o-q) ex-reg • All regions growing organically • LatAm-fuelled growth (+6.
Slide 8: B2C | Growing engagement and monetisation
B2C | Growing engagement and monetisation Expanding video base Flexible, simple and personalised offers (M Jun-19) +16.2% (19.7%) +0.4% +59.2% +5.5% y-o-y • Video, the most relevant adjacent service to drive value - Movistar+ (SP); leading position allows capturing market growth 8.8 10.0 5.7 - Movis
Slide 9: B2B | Relevant growth, leading comms & IT portfolio
B2B | Relevant growth, leading comms & IT portfolio Q2 revenues: mid single digit increase Business Revenues 2019 y-o-y organic Q2 H1 • Corporate and Latam main growth drivers • SME accelerating trend mainly in Latam • H1 B2B Digital Revenues (21% of B2B revs) €1,029m (+29.9% y-o-y; 20% +26.0% in Q2
Slide 10: Best technological platforms
Best technological platforms 4P Artificial Intelligence AURA Pioneer in data Data normalisation & Data Analytics; Open APIs capabilties “Movistar Home” evolves to an open service ecosystem 7 Countries Cognitive Centers: 100% mobiles customers in BRA 3P Leading technology provider Q2 Digital Revenues
Slide 11: Q2 19 Results
Q2 19 Results Mr. Ángel Vilá COO
Slide 12: Spain | Improved commercial activity on superior offering
Spain | Improved commercial activity on superior offering Proven success of differential value Net adds Q1 19 Q2 19 • Access growth in all value services in Q2 (0.1) (0.2) (0.3) (0.3) (0.2) Churn q-o-q • Solid TV net adds despite end of football season (p.p) 326 • Convergent accesses (22.8m); +7% y-
Slide 13: Spain | Service revenue growth for 8th straight quarter
Spain | Service revenue growth for 8th straight quarter Service Revenues Q2 slowdown to be reversed in H2 y-o-y organic 0.8% 0.5% • Lighter growth due to tougher comps 0.4% 0.3% - Q2 “Consumer” decline on negative phasing and calendar from tariff upgrade 0.1% - Q2 “Business” +0.1% affected by season
Slide 14: Germany | Enhanced network supporting commercial performance
Germany |Enhanced network supporting commercial performance Contract net adds O2 driving data growth Strong trading quarter driven by O2 and partners k Avg. data usage of O2 contract LTE cust • High demand for O2 Free & sustained retention focus LTE penetration • Significant partner contribution (4G
Slide 15: UK | Delivering another robust set of results
UK | Delivering another robust set of results O2 has been recertified to the Solid commercial trading O2 contract net adds Carbon Trust Standard for Supply Chain at level 3, one of (incl. M2M) • Continues to be UK’s favourite network operator only three companies globally to achieve this highest lev
Slide 16: Brazil | Unmatched quality assets sustains market leadership
Brazil | Unmatched quality assets sustains market leadership Best network, growing share & ARPU Contract net adds Prepaid Revenues Mobile (‘000) (y-o-y) • Vivo best rated network in terms of overall capacity, coverage and service quality according to “P3 Connect” mobile review (8.7%) 1,308 • Undispu
Slide 17: Brazil | Sound FCF growth despite Capex acceleration
Brazil | Sound FCF growth despite Capex acceleration Revenue growing despite punctual deceleration Revenues y-o-y organic Q4 18 Q1 19 Q2 19 • Continued growth on handsets (+31.9%; H1: +42.3%) (2.8%) (4.0%) (3.5%) - MSR (+0.1%; H1: +0.8%) Fixed revenue (3.2%) - Postpaid (+3.7% vs. H1: +5.9%). Tariff
Slide 18: South Hispam | Service revenue improving across the region
South Hispam | Service revenue improving across the region Accesses (Jun-19) Value KPI’s behind service revenue improvement FTTx Contract y-o-y organic • Positive contract net adds in all countries • Fiber take-up: 31% (+3 p.p.) 39% • Better fixed rev. trends on: fiber and lower legacy drag 51% • Q2
Slide 19: North Hispam | Sound commercial performance in value segments
North Hispam | Sound commercial performance in value segments Accesses (Jun-19) Financials strongly affected by Mexico headwinds y-o-y organic FTTx Contract • Positive contract net adds in main countries • OIBDA ex. Mexico +7.6% y-o-y in Q2 8% 8% • Q2 COLOMBIA (Revs. €352m; OIBDA €131m) 4% - Acceler
Slide 20: Telxius | Strengthening value creation
Telxius | Strengthening value creation Expanding infrastructure under solid financials Revenues & OIBDA 2019 Towers & Tenants Net adds y-o-y organic Ex-MAREA effect # Towers Tenants • Towers portfolio expansion (Tenancy Ratio: 1.36x) Revenues OIBDA Base (Jun 19) - Accelerating Build To Suit (1.8x vs
Slide 21: Improving Customer Value via Devices
Improving Customer Value via Devices Driving up handset sales… …whilst improving customer value Org. y-o-y Phoenix: Digital Renewal Program Higher ARPU 16.7% 16.1% -1 p.p. CHURN Analysis for UK, BR, MEX, SP, ARG. Q2 19 H1 19 ✓ Fast Rollout 8 countries in 2019 (5 already) ✓ Increased handset x40 in C
Slide 22: Digital Transformation; evolving customer experience
Digital Transformation; evolving customer experience Gross savings 45% achieved in H1 >€1Bn >€340M >€300M FY 18 Incremental FY 19 Cumulative FY 20 Agile Mindset 40% 35% 25% Digital Sales Experience Digital Customer Service Process Automation • Acceleration of digital channels operations • Contact Ce
Slide 23: Optimising Networks
Optimising Networks Network sharing agreements Switching-off legacy ✓ Faster roll-out and higher quality ✓ Decommissioning infrastructure & reusing spectrum ✓ Smart CapEx allocation, OpCF efficiencies ✓ Capturing value from asset freed monetisation Germany: Agreement with Vodafone Rationalising mobi
Slide 24: Q2 19 Results
Q2 19 Results Ms. Laura Abasolo CFCO
Slide 25: H1 Net Income +2.8% y-o-y to 1.8bn€
H1 Net Income +2.8% y-o-y to 1.8bn€ H1 19 Reported €m IFRS-16 impact +768 -783 -101 -87 +7.4% reported v +19.1% reported 8,702 (5,248) (6.6%) +70.0% reported (41.8%) (5.3%) reported reported reported +2.8% reported 3,454 7 (651) (756) (267) 1,787 OIBDA D&A OI Associates Net financial Taxes Minoritie
Slide 26: FX impact neutralised at FCF
FX impact neutralised at FCF Lower FX drag in Q2 FX headwinds • FX negative factor in Q2 OIBDA y-o-y • FX drag softened y-o-y FX reduces OpEx FX reduces CapEx, FX reduces - Revs (Q2: -4.1 p.p.; H1: -4.5 p.p.) Taxes & others NDebt - OIBDA (Q2: -3.6 p.p.; H1: -4.1 p.p.) - BRL and ARS sequentially impr
Slide 27: FCF generation remains strong
FCF generation remains strong 2019 FCF incl. lease principal payments FCF +€1,135m y-o-y €m €m +78.0% Negative seasonality Q1 Tax refund 2,756 5,339 +€702m 2.6x y-o-y +35.1% 1,408 1,348 111 3,587 (669) 2,756 (972) (831) Q1 Q2 H1 FCF ex-spectrum 1,429 1,350 2,779 OpCF WC Interest Taxes, FCF Lease FCF
Slide 28: Steady net debt reduction
Steady net debt reduction Net Financial Debt €m -844 € billions ND/OIBDA ND/OIBDA ND/OIBDA 2.62x 2.62x 2.56x 41,074 (2,756) 726 40,230 (1.5) 419 (321) 1,275 38.7 (186) Dec-18 FCF Hybrid Shareholder Pre-retirement Net financial FX & Jun-19 Post-closing Jun-19 replacement remun. (incl. commitments inv
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 2019 YTD | €bn Hybrids LME Mar 18 & Mar 19 Jun-19 | €bn; not considering hybrid NC dates Annual coupons -102bps to 4.1% Avg. years to call from 3.2Y to 4.9Y 76% debt Avg. debt life of 0.5 6.4
Slide 30: Conclusion
Conclusion Mr. José María Álvarez-Pallete Chairman & CEO 30
Slide 31: Concluding remarks Q2 | Consistent trends
Concluding remarks Q2 | Consistent trends Cov. Excellent network leadership; world’s largest UBB/FTTH footprint (ex-China) UBB/FTTH 121m LTE 78% Avg. Higher avg. revenue per access driving into continued earnings increase Rev/Acces +4.4% H1 EPS +12.0% H1 45% of 2019E Digital transformation; accelera
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