Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — Q1 2018 Earnings Presentation
28 slides from Telefonica Sa's earnings presentation, Apr 26, 2018
Slide 1: Telefónica
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Slide 2: Forward-looking statements 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 assumptions or
Slide 3: Q1 18 Highlights
Q1 18 Highlights Mr. Ángel Vilá COO
Slide 4: Highlights | Execution of strategic priorities
Highlights | Execution of strategic priorities Enable people with the power of connectivity • 357m accesses; +36% LTE; +7% smartphones; +20% FFTx/Cable; +5% Pay TV • Extending leadership in FTTx/Cable: 45.8m premises passed (+5.9m y-o-y) • More services, more usage; more ARPU Operate in markets wher
Slide 5: Key financials
Key financials Q1 18 Q1 18 (€m) Reported IFRS 15 & 9 Reported y-o-y Organic y-o-y Revenues 12,190 (7.2%) 1.9% Service revenues 11,040 (9.4%) 0.8% OIBDA 3,864 (3.9%) 3.3% Underlying OIBDA 3,863 (5.6%) OIBDA margin 31.7% 1.1 p.p. 0.4 p.p. OpCF (ex-spectrum) 2,381 (1.0%) 4.4% Net Income 837 7.4% EPS (€
Slide 6: Guidance confirmed
Guidance confirmed Operating 2018 guidance organic Guidance 2018E (IAS 18) Q1 18 Revenues Growth of around 1% (despite regulation dragging: -0.9 p.p.) +1.9 % OIBDA Margin Continues expanding around 0.5 p.p. (despite regulation dragging -1.6 p.p. on OIBDA growth) +0.4 p.p. CAPEX ex-spectrum/Sales Aro
Slide 7: Strong Q1 FCF, operational leverage
Q1 15 Q1 16 Q1 17 Q1 18 Q1 15 Q1 16 Q1 17 Q1 18 Strong Q1 FCF, operational leverage Sustained free cash flow generation FCF 550 €m 363 69 603 Q1 q-o-q change in Net Debt €m ND decrease in Q1, changing trends vs. previous years €m 2,374 (255) 693 938 171 ...FCF to improve throughout the year Q1 FCF a
Slide 8: FX impact structurally neutralised
FX impact structurally neutralised OIBDA -€372m y-o-y FX impact in FCF is mitigated, “natural hedge” FCF -€26m y-o-y • € appreciation, the major drag in Q1 - Q1: BRL and ARS explain 80% of negative FX impact in OIBDA - FX spot rates explain Q1 increase in Net Debt • At current FX, weaker H1 18 y-o-y
Slide 9: Q1 Robust profitability
Q1 18 Robust profitability y-o-y organic 31.7 % 19.5 % +0.4 p.p. +0.5 p.p. 1.9% 4.4% 3.3% €12.2bn €3.9bn €2.4bn Positive delivery on Revenues, OIBDA & OpCF • Revenue mix transformation • Service Revenue growth +0.8%, despite regulation (-1.2 p.p.) • Margin expansion; continued focus on efficiencies
Slide 10: Monetisation focus enhanced
• M4M evolution to add more value - Revamped mobile in Latam ‣ “Movistar Series” launch (Feb-18) ‣ “Movistar Play” (OTT video) in 13 countries - New bundle with TV at the core ‣ “ Fusion+ Ocio Total” (300 Mbps + series&films +2 mobiles) (Feb-18) - Enhanced prepaid portfolio in mid-high tiers ‣ More
Slide 11: Pioneer in AI, Cognitive Intelligence in an open data ecosystem
45% Video Revs Pioneer in AI, Cognitive Intelligence in an open data ecosystem We are a platform Co. to better serve customer needs Platform UBB coverage premises passed (o/w 46m owned)76m 4.5G GER, BRA, MEX, COL 5G Spain Cities 4K Unified video platform Fixed equipment New tech (Smart WiFi) 61% E2E
Slide 12: Aura, the new customer relationship model
Aura, the new customer relationship model Leading the integration of AI in networks & customer care Our 4th Platform is open to main technological players Main virtual assistants 2019E Movistar Home Aura will come to the home via Movistar Home device Aura is available in 6 countries Data Portability
Slide 13: Digitalisation, a leap forward in our bold transformation
x2.1 online top-ups Digitalisation, a leap forward in our bold transformation Enhancing Customer Experience and Operational Efficiency Focus on 5 priorities centred on the customer journey…. Increase Direct customer interaction for sales Foster top-ups & add-ons through own digital channels x2.5 sal
Slide 14: Q1 Results
14 Ms. Laura Abasolo CFCO Q1 18 Results
Slide 15: Spain | Solid trading in a rational market
• “M4M”, main strategy in the market in Q1 • Increasingly competitive offering: solid Mobile, Fiber (retail & wholesale) and TV • "Fusión" growing base and ARPU - Improved value mix: 27% in high-value (+6 p.p. y-o-y) • Churn reduction across services - "Fusión", FBB, TV, Mobile: -0.1 p.p. q-o-q Unma
Slide 16: Spain | Improving revenue and OIBDA trend
Sustained growth Spain | Improving revenue and OIBDA trend Service Revenues & OIBDA Serv. Revs. y-o-y organic Strong margins (0.5 p.p.)(0.2 p.p.) 39.5% 28.3% OIBDA margin OpCF margin Cash conversion • OpEx increase eased (+0.6% y-o-y; -0.1 p.p. q-o-q) - Lower commercial cost q-o-q • Upside in saving
Slide 17: Germany | Continuous market momentum
Continuous market momentum • Solid Q1 mobile contract net adds (+157K) -Strong Partner trading on 4G offers -LTE cust. (+15% y-o-y); penetration 39% (+7 p.p.) • O2 Free ARPU accretive • O2 Ranked #2 in Connect Mobile Hotline-Test Germany | Positive financial performance Successful data usage monetis
Slide 18: UK | Solid financials, capability enhanced
Robust financials Largest customer base & trusted network 2.9% 6.1% Revenues OIBDA UK | Solid financials, capability enhanced • Leading network: 32.0m customers (incl. MVNO partners) • Continued contract base expansion, despite seasonally slower Q - Market-leading churn: 1.0% (broadly stable y-o-y a
Slide 19: Brazil | Growth and value
Unique assets Mobile FBB Pay TV • M4M strategy is paying off - New hybrid portfolio launched in February - Largest and most reliable 3G and 4G network - Sustainable leadership: 41.4% contract market share - 1.6% contract churn (stable y-o-y); unrivaled value proposition - Strong growth opportunity;
Slide 20: Brazil | Delivering profitable growth
Sustained revenue growth Brazil | Delivering profitable growth • MSR : +3.5% (+3.9% in Q4 17) - Boosted by data growth (+17.1%) and price upgrades - Outgoing postpaid revenue improved to +9.2% (Q4 17: +9.3%) • Fixed: -4.0% (-3.8% in Q4 17) - Affected by voice decrease, fixed to mobile substitution &
Slide 21: South Hispam | Commercial recovery & margin expansion
Commercial recovery & margin expansion (2%) 47% 7% FBB FTTx & Cable Pay TV • Strong improvement in contract net adds • Better performance in Chile and Peru • FTTx/Cable: 1.8M connected (1.2M FTTH/cable connected) • ARGENTINA (Revs. €755m; OIBDA €245m) - Growth in value: (contract +5%; LTE +61%; FTTx
Slide 22: North Hispam | Commercial success overshadowed by regulation
(2.2%) (7.4%) Revenues OIBDA Financials y-o-y organic Margin +25% +1% FBB FTTx & Cable Pay TV 5%35% 29% Contract net adds Fixed accesses y-o-y Penetration o/ voice acc. Negative regulatory impact in MEX North Hispam | Commercial success overshadowed by regulation Ex-reg. +0.1% +0.9% • Contract net a
Slide 23: Telxius | New MAREA cable now in service
Solid financials across business Q4 17 Q1 18 Q4 17 Q1 18 Capacity Services IP trafficSites Tenants • New state-of-the-art cables progressed according to plan - MAREA (US-Europe) in service since the end of March - BRUSA (Brazil-US) to come into service later this year • Revenue increase explained by
Slide 24: Net debt reduction despite seasonal Q1 effects
Net debt reduction despite seasonal Q1 effects 43,97544,230 54 43 Dec-17 FCF Pre-retirement commitments Mar-18Hybrid replacement FX & Others Net financial investments 201(226) (550) 2,381 ND/OIBDA 2.67x ND/OIBDA 2.66x Net interest payment TaxWorking capital OpCF ex- spectrum FCFDividend to minoritie
Slide 25: Focused on attractive long-term financing
Focused on attractive long-term financing Sources of long-term financing 2018 YTD | €bn Net Debt maturities Mar-18 | €bn; not considering hybrid NC dates Liquidity position Mar-18 | €bn Interest payments cost Mar-18 1.6 10.7 1.0 0.3 2.3 5.5 USD Bonds € Bonds Financing at Subsidiaries Hybrids Bank Fi
Slide 26: Conclusion
26 Mr. Ángel Vilá COO Conclusion
Slide 27: Q1 summary | Delivering robust financials
Q1 summary | Delivering robust financials Progress on strategy Our mission Let our customers choose it all 1 Robuststart to the year 2 Reiterating2018 guidance 3 23
Slide 28: For further information: Investor Relations
For further information: Investor Relations Tel. +34 94 482 87 00 ir@telefonica.com www.telefonica.com/investors 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 au