Telefonica Sa · BME:TEF

Telefonica Sa — H1 2010 Earnings Presentation

29 slides from Telefonica Sa's earnings presentation, July 2010

  1. Slide 1: Telefónica, S.A Investor Relations

    Telefónica, S.A Investor Relations

  2. 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 which refer to the intent, belief or current prospects of

  3. Slide 3: Continue to execute 2010 priorities

    GROUP FINANCIALS Continue to execute 2010 priorities #1  Ramp-up in revenue growth in Q2 10 Capturing top line growth prospects  Continued strong commercial momentum  Enhanced revenue trends across all regions of operations • Continued wireless data revenue growth and further expansion of FBB  B

  4. Slide 4: Growth reacceleration…

    GROUP FINANCIALS Growth reacceleration… Jan-Jun Chg Organic chg The value of diversification € in millions 2010 H1 10/H1 09 H1 10/H1 09 Revenues 29,053 +5.4% +2.0% Group Contribution by regions Operating Income OpCF H1 10 Rev OIBDA before D&A 10,905 0.0% -2.3% Ex-spectrum (OIBDA) 32% 40% 44% T. Espa

  5. Slide 5: … from top to bottom

    GROUP FINANCIALS … from top to bottom January-June 2010 € in millions Non-operating results (% change y-o-y) managed efficiently 10,905 +10.0 p.p. +0.0% 6,456 -4,449 -0.6% 72 (+0.9%) (+140.8%) -1,254 (-13.7%) 3,775 -1,428 -71 +9.4% (-8.1%) (+10.8%) OIBDA D&A OI Associates Financial Taxes Minorities

  6. Slide 6: Sustained commercial push …

    GROUP FINANCIALS Sustained commercial push … Total organic net adds (million)  Gross adds increased 16.2% y-o-y in H1 10 9.0 +11.6%  Churn contained in H1 10 to 2.2% (-0.1 p.p. y-o-y) 4.3 4.8 x2.4  Contract organic mobile net adds gaining traction (56% over total mobile net adds in H1 10, +10 p.p

  7. Slide 7: …translates into a superior revenue growth

    GROUP FINANCIALS …translates into a superior revenue growth Organic revenue (y-o-y growth) Reported revenue (y-o-y growth) +3.3% 9.0% Ex-MTRs +2.5% +2.4%  Strong FX appreciation +1.4% +1.5%  Hansenet consolidation +2.0% (3 months vs. 45 days in Q1) 5.4% +1.4% +0.9% +0.1% +0.2% 1.7% FY 09 H1 09 9M

  8. Slide 8: Strong profitability despite increased commercial activity

    GROUP FINANCIALS Strong profitability despite increased commercial activity  H1 10 OIBDA evolution impacted by: OIBDA  Regulatory and other non recurrent effects, dragging 2.7 p.p. of (organic y-o-y growth) growth  OpEx organic growth (+5.5% vs. H1 09) mainly due to external Q1 10 H1 10 services

  9. Slide 9: Solid cash flow generation

    GROUP FINANCIALS Solid cash flow generation Operating Cash Flow (OIBDA-CapEx) € in millions € 1,379 m spectrum acquisition in Germany 7,989  T. Latam OpCF up 6.3% y-o-y organically 6,610 to € 3,239 m  Solid 3.1% y-o-y organic growth at T. Europe -3.4%  T. España delivered 3,547 m of OpCF in -18.6

  10. Slide 10: On track with 2010 full year outlook

    GROUP FINANCIALS On track with 2010 full year outlook Revenue OIBDA +3.3% 2010 GUIDANCE +1%/+4%  H1 10/H1 09 2010 GUIDANCE +1%/+3%  -1.2% H1 10/H1 09 2010 EPS target confirmed (€ 2.1) CapEx OIBDA  Q1 10 H1 10 2010 GUIDANCE €7,450/7,650 m 9M 10E FY 10E -1.2% -3.0% €2,845 m • T. España: TV Tax in T

  11. Slide 11: T. España: Gradual recovery and improved profitability

    TELEFÓNICA ESPAÑA T. España: Gradual recovery and improved profitability Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Revenues -2.9%  Ongoing top line recovery from the (comparable y-o-y bottom in Q2 09 -3.9% H1 10 change) -4.5% -3.4%  Improved fixed and mobile revenues -6.9% -6.6% Q2 09 Q3 09 Q4 09 Q1 10 Q2 10

  12. Slide 12: Sound commercial momentum focused on contract

    TELEFÓNICA ESPAÑA Sound commercial momentum focused on contract Wireless service revenues Wireless contract customers 15.8 m 449 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 x 3.6 253 vs H1 09 +6.7% +7.4% 197 -5.7% -7.1% H1 10 +29% -8.0% -7.7% -6.4% -8.1% Mar-10 Jun-10 Q1 10 Q2 10 H1 10 Customer y-o-y growth Net a

  13. Slide 13: Revenue recovery, leveraging integrated leadership

    TELEFÓNICA ESPAÑA Revenue recovery, leveraging integrated leadership Top line Wireline revenue (Comparable y-o-y) FBB Market decline easing share ~54%E 143 Data Voice & Internet >20% 5.6 m Q1 10 & IT Access & BB Subsidiaries Q2 10 VAS ARPU x 1.7 over total y-o-y +0.1 p. p. 42 +0.9 p. p. 5.4% +5% +0.

  14. Slide 14: T.Latam: Revenue and OIBDA growth acceleration

    TELEFÓNICA LATAM T.Latam: Revenue and OIBDA growth acceleration +9.5% +8.1%  Strong commercial momentum maintained +6.5% in Q2: Accesses growth 3.8m net adds  Ramp up in accesses to 176.1 m 3.7m (y-o-y) net adds  7.5 m net adds in H1 10: 2.9x y-o-y Dec-09 Mar-10 Jun-10  Churn contention  Robust

  15. Slide 15: Wireless business: Strong commercial activity

    TELEFÓNICA LATAM Wireless business: Strong commercial activity Mobile KPIs Net adds (in million) Accesses growth  Gross adds up 22.6% y-o-y in H1 10 (+43.1% in contract) (Jun-10 y-o-y) 7.2 x2.3  Churn improvement: 2.5% in Q2 10 (-0.2 p.p. y-o-y)  +1.6 p.p. acceleration in customer growth q-o-q to

  16. Slide 16: Wireline business: Stabilizing revenue drivers

    TELEFÓNICA LATAM Wireline business: Stabilizing revenue drivers Accesses (m) Net adds (‘000)  Record FBB net adds since Q3 08, with 489 increasing net adds q-o-q for the last 3: Latam 6.9 285 275 Retail  Robust push in net adds FBB 143 +92%  New record at Telesp in Q2 10 -42%  BB/fixed lines: +3

  17. Slide 17: Telesp: Sustained commercial recovery gradually flowing into financials

    TELEFÓNICA LATAM Telesp: Sustained commercial recovery gradually flowing into financials X2.5  Strong commercial momentum: 173  Positive fixed line net adds for the 1st 69 quarter since Q1 06: positive net adds 163 FBB 59 +64 for 4 consecutive months in a row Net adds  Record BB net adds since la

  18. Slide 18: Colombia: Turnaround efforts start to pay off

    TELEFÓNICA LATAM Colombia: Turnaround efforts start to pay off Wireline net adds (000) Wireless KPIs y-o-y growth x3 +5.6% 40 35 +5.2% +1.7% Access y-o-y 12 growth FBB 5 -2.2% 12 -3.5% -4.1% -5.3% -12 -14.5% -1 ARPU Wireline (chg lc) -9.2% -10.0% -98% -64 -60 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 -109 Q2 09

  19. Slide 19: Good performance across key operations

    TELEFÓNICA LATAM Good performance across key operations Mexico Venezuela Vivo  Ramp up in customer growth  Strong financials despite  Net adds up 2.3x vs. H1 09 (+15.7% y-o-y) driven by contract devaluation  Market share gain for 4th quarter segment (+47.7% y-o-y)  Lower commercial activity on

  20. Slide 20: Becoming the leader in the growing Brazilian market

    TELEFÓNICA LATAM Becoming the leader in the growing Brazilian market Total accesses (Million, Mar-10) Revenues (Bn euros, FY 09) OIBDA (Bn euros, FY 09) OIBDA margin 69.2 11.8 4.1 62.2 62.1 10.7 3.5 9.8 #1 #1 #1 2.5 35% 33% 26% Vivo+Telesp Broi Amx+TMX Vivo+Telesp Broi Amx+TMX Vivo+Telesp Broi Amx+T

  21. Slide 21: Telefónica's value proposition is in line with the offer supported by PT's shareholders

    TELEFÓNICA LATAM Telefónica’s value proposition is in line with the offer supported by PT’s shareholders at the EGM €7.5bn for PT’s 50% stake in Brasilcel to Offer voted at the EGM be paid in 3 tranches + PT services to Vivo + PT services to Vivo + Acquisition of Dedic + Call option on TEF’s stake i

  22. Slide 22: Control price averaged down by tender offer for ONs

    TELEFÓNICA LATAM Control price averaged down by tender offer for ONs €0.8bn €8.1bn €7.3bn €4.0bn €7.3bn Operating synergies from Vivo+ Telesp combination + Benefits from integrated TEF management model + Financial & Tax synergies €3.4bn €3.3/3.9bn NPV of priced Vivo business TEF min. value Control O

  23. Slide 23: Key dates of the transaction

    TELEFÓNICA LATAM Key dates of the transaction Acquiring control of Vivo Tender offer for ONs (11% free-float) 28 of July-10 End of Sep-10 End of October-10 End of Dec-10 End of Feb-11 Signing of Closing Filing of the application Publication of tender End of tender offer agreement with PT for registr

  24. Slide 24: T. Europe: Improving trends, continued momentum

    TELEFÓNICA EUROPE T. Europe: Improving trends, continued momentum +14.6% +10.4% Incl HanseNet  Customer growth, quality improvement: +6.1% • Mobile contract: 48% of base (+2 p.p. y-o-y) +6.0% 21.8 m Accesses • Strong MBB expansion to over 8 m accesses (Jun-10; y-o-y 54.5 m (+53.9% y-o-y) 45.2 m gro

  25. Slide 25: T.O2 UK: Steady growth, shaping the business

    TELEFÓNICA EUROPE T.O2 UK: Steady growth, shaping the business Jun-10 Customers Contract churn +11.7%  Driving smartphone adoption & innovation: 1.1% 1.1%  The “Home of Smartphones”: sustained iPhone Mobile momentum since exclusivity ended +4.5% customer KPIs -0.1p.p. -0.1p.p.  47% of the base in

  26. Slide 26: T.O2 Germany: Sustained solid momentum, smooth HanseNet integration

    TELEFÓNICA EUROPE T.O2 Germany: Sustained solid momentum, smooth HanseNet integration Jun-10 Mobile base Breakdown 22.0 m  Continued customer base expansion: Customer +9.0% +9.8% FBB & 16.5 m  Sustained leadership in MBB Others Base 91%  Total mobile net adds grew 4.1% y-o-y in H1 (y-o-y growth)

  27. Slide 27: Effective interest rate contained below 5%

    GROUP FINANCIAL EXPENSES AND DEBT Effective interest rate contained below 5% € in millions 1.9x Net Financial Debt Evolution 2.2x OIBDA OIBDA +2,208 48,412 +1,025 +3,668 43,551 +427 -2,467 Net Fin. Debt FCF Commitments Shareholder Post- Net Financial FX, accruals Net Fin. Debt Dec-09 cancellation re

  28. Slide 28: Conclusions

    GROUP FINANCIALS Conclusions Solid set of results, delivering our 2010 priorities  Sequential ramp-up in growth rates across the P&L  Robust top line growth, above peers, driven by strong commercial momentum  Benefiting from diversification: • Increased exposure to Brazil; #1 integrated player 

  29. Slide 29: Telefónica, S.A Investor Relations

    Telefónica, S.A Investor Relations

Telefónica — H1 2010 Earnings Presentation on 6ix