Telefonica Sa · BME:TEF

Telefonica Sa — Non-Deal Roadshow (April 2010)

38 slides from Telefonica Sa's roadshow presentation, Apr 8, 2010

  1. Slide 1: Telefónica: Delivering sustainable growth

    Telefónica: Delivering sustainable growth TELEFÓNICA, S.A. New York-Boston, April 8th-9th, 2010

  2. Slide 2: Disclaimer

    Disclaimer This document does not constitute or form part of any offer for sale or solicitation of any offer to buy any securities in the United States or elsewhere nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment to purchase shares. Secu

  3. Slide 3: Index

    Index 1. Industry: Is there growth in the Telecoms sector? 2. Telefónica Group: i. Will Telefónica maintain its differential growth profile? ii. Is your dividend policy sustainable? iii. What are your M&A ambitions? 3. T. España: i. Macroeconomic situation ii. Revenue performance: is the worst over?

  4. Slide 4: In the new digital world, advanced global operators are key to build new value proposals

    1 In the new digital world, advanced global operators are key to build new value proposals Global Telco Advanced data distribution & services platform Operators Software & App User equipment manufacturers providers $ Internet content access platforms Network equipment $ providers Content creators Ag

  5. Slide 5: Service platforms enable a new wave of revenues

    1 Service platforms enable a new wave of revenues TELEFONICA S.A. Investor Relations 5

  6. Slide 6: Our scale and value chain positioning places us as the partner choice in the new digital ecosystem

    1 Our scale and value chain positioning places us as the partner choice in the new digital ecosystem to build high potential intersectorial alliances with every sector TELEFONICA S.A. Investor Relations 6

  7. Slide 7: Communication demand will keep growing

    1 Communication demand will keep growing TELEFONICA S.A. Source: Ericsson, LTE Webinar October 2009 & Vision 2020 December 2009. Investor Relations 7

  8. Slide 8: New digital applications and services will accelerate this trend

    1 New digital applications and services will accelerate this trend, increasing ICT share in consumer’s wallet TELEFONICA S.A. Source: Worldwide. Euromonitor international. Bain Analysis. Investor Relations 8

  9. Slide 9: We see a larger business with a change of mix in Telefónica

    1 We see a larger business with a change of mix in Telefónica Access and Voice (1) BB (2) Applications (3) Others (4) 2008 81% 13% 4% 2% Voice 2009(5) 79% 15% 5% 1% 2012 E(5) 72% 21% 6% 1% Data % Revenues (1) Access & Voice: Fixed and mobile access and voice (SMS included), fixed and mobile equipmen

  10. Slide 10: 2. Telefónica Group

    Index 1. Industry: Is there growth in the Telecoms sector? 2. Telefónica Group: i. Will Telefónica maintain its differential growth profile? ii. Is your dividend policy sustainable? iii. What are your M&A ambitions? 3. T. España: i. Macroeconomic situation ii. Revenue performance: is the worst over?

  11. Slide 11: We have maintained our superior performance despite a very challenging environment

    02 We have maintained our superior performance despite a very challenging environment 2009 Revenue Organic Growth(1) +3.9 p.p. +0.2% gap  Despite the adverse economic environment in Spain, we have maintained our growth gap vs. the sector… -1.9% -2.6%  … while maintaining our benchmark cash Average

  12. Slide 12: We have already set the bases for future growth

    2 We have already set the bases for future growth  Geographical & Business DIVERSIFICATION  Strong GROWTH POTENTIAL in our markets Telefónica markets (1) CAGR 08 – 12 E number of accesses and traffic FBB(2) Fixed +10% +0% Traffic +46% MBB(3) Mobile +70% +4% Broadband everywhere Access to support b

  13. Slide 13: Growing our customer base & improving its quality

    2 Growing our customer base & improving its quality Total accesses (1) Mobile Retail Accesses (1,2) millions millions +41 m >+68 m >320 ≈228 264 00 252 187 198 Dec-08 Dec-09 Dec-12E Dec-08 Dec-09 Dec-12E Contract Mobile Accesses (1) MBB (1,3) millions millions Enlarging customer average life >+34 m

  14. Slide 14: Massive MBB development (i)

    2 Massive MBB development (i) MBB (2) penetration MBB accesses (2) MBB connectivity revenues (3) % Big and Small screen accesses over mobile accesses millions € in billions ~67 5/5.7 27% +40%/+45% +65% 8% 9 15 1.3 5% Dec-08 Dec-09 Dec-12E Dec-08 Dec-09 Dec-12E FY 2008 FY 2012E CAGR 08-12 E CAGR 08-1

  15. Slide 15: Massive MBB development (ii)

    2 Massive MBB development (ii)  A reality even in a difficult environment: T. España 2009 434 303 Wireless data 177 2m data rates in 2009 rates net adds 168 (000’s) (1) >x2 vs. 2008 Q1 09 Q2 09 Q3 09 Q4 09 Data connectivity +52% revenue growth revenues +50% +57% +47% +55% in 2009 (y-o-y change)  T

  16. Slide 16: Further FBB expansion through DSL upgrade and selective FO deployment

    2 Further FBB expansion through DSL upgrade and selective FO deployment FBB (1) penetration FBB retail accesses (1) FBB connectivity revenues (2) % FBB penetration: FBB accesses over fixed accesses millions € in billions >19 52% +5%/+8% +11% 33% 29% 12.5 13.5 6.3 Dec-08 Dec-09 Dec-12E Dec-08 Dec-09

  17. Slide 17: Development of applications and new business

    2 Development of applications and new business Apps. & New business revenue (1) € in billions +12%/+15% Mobile Apps. Market from €6 bn to €17.5 bn 2.3 in 2009-12(3) FY2008 FY 2012E CAGR 08-12 E(2)  Mobile applications: >120m Mobile applications downloaded in 2012E WAC  Pay TV: >4.5m Customers by 2

  18. Slide 18: Defense and growth of traditional business

    2 Defense and growth of traditional business Retail accesses (1) Access & voice revenue (4) millions € in billions ~3.5% -2%/+1% +5 p.p 47.1 ~265 232 240 +1%/+4% 75% (2) Mobile 67% Mobile 83% 81% 86% Fixed 33% -9%/-6% Fixed (3) 19% 18% 14% 25% Dec-08 Dec-09 Dec-12E FY 2008 FY 2012E CAGR 08-12 E Mobi

  19. Slide 19: We will fully capture revenue growth potential in our markets

    2 We will fully capture revenue growth potential in our markets CAGR 08-12E(1) Revenue Mix(1) FY 2008 MBB +40%/+45% 81% 13% 4% 2% Applications & new business +12%/+15% FY 2012E FBB +5%/+8% 72% 21% 6% 1% Accesses & Voice(2) Traditional -2%/+1% BB connectivity(3) Applications & new business(4) Others(

  20. Slide 20: Medium term guidance will lead to a sustainable growth and an even lower risk profile

    2 Medium term guidance will lead to a sustainable growth and an even lower risk profile 2008 CAGR 08-12E (2) Adjusted (2) Accesses (1) 252 >320 (millions) Revenues 57,946 +1%/+4% € in millions OIBDA € in millions 22,602 +2%/+4% OI +4%/+7% € in millions 13,556 > € 40 bn OpCF +5%/+7.5% Cumulative FCF

  21. Slide 21: We have clear priorities for 2010

    2 We have clear priorities for 2010  Reinvesting efficiency 2009 Adjusted(1) 2010 Guidance(1) gains to foster revenue #1 Capturing top expansion line growth Revenue 56,407 +1%/+4% prospects  Higher CapEx to OIBDA 22,344 +1%/+3% support growth in CapEx (€ in millions) 7,262 7,450/7,650 customers &

  22. Slide 22: We maintain our selective M&A approach

    2 We maintain our selective M&A approach Continue capturing synergies M&A Priorities from our Strategic Alliances  Spectrum auctions in current €620 m cash markets to foster growth: synergies(1) since Mar-08  Germany & Mexico in H1 2010 +  Potential awarding process in Spain along 2010  In-marke

  23. Slide 23: Dividend commitments are supported by our FCF generation

    2 Dividend commitments are supported by our FCF generation 1.75 1.40 #1 on Dividend Yield 1.15 among top 50 companies worldwide by Mkt Cap DPS (€) FY 2009 FY 2010E(1) FY 2012(1) minimum target(2)  DPS targets reiterated  Dividend is well covered  No dependence on cash repatriation from any partic

  24. Slide 24: 3. T. España

    Index 1. Industry: Is there growth in the Telecoms sector? 2. Telefónica Group: i. Will Telefónica maintain its differential growth profile? ii. Is your dividend policy sustainable? iii. What are your M&A ambitions? 3. T. España: i. Macroeconomic situation ii. Revenue performance: is the worst over?

  25. Slide 25: Macroeconomic situation

    3 Macroeconomic situation Unemployment Real GDP growth Household consumption rate increase (y-o-y) (y-o-y) growth (y-o-y) Economy +4.9 p.p. Gradual 2009 2010 E 2009 2010 E improvement indicators (1) +1.5 p.p. -0.5% -0.5% 2009 2010 E -3.6% -5.0% Number of households: +226K in 2009 yoy 8 6 4 2 Spain:

  26. Slide 26: Revenue performance: is the worst over?

    3 Revenue performance: is the worst over? REVENUE (Underlying(1) y-o-y change) Revenue trends improving for T. ESPAÑA -4.5% the second consecutive -5.7% -6.2% -5.9% -6.6% quarter across businesses WIRELINE -3.7% -3.0% -2.9% The worst is -4.2% -4.0% behind us! MTRs cuts impact: WIRELESS -2.6 p.p. (Se

  27. Slide 27: Competitive environment: is there a price war in Spain?

    3 Competitive environment: is there a price war in Spain? 55% 54% 57% 56% 46% 46% Telefónica Strong leadership in Market 14% 17% the market Shares (1) 2008 2009 Dec-08 Dec-09 Dec-08 Dec-09 Dec-08 Dec-09 Total market Wireless Fixed BB Pay TV revenues Contract Rational pricing environment FY 08 FY 09

  28. Slide 28: Commercial activity across businesses

    3 Commercial activity across businesses Strong commercial activity in the last part of the year building foundations for 2010 737.0 639.7 Sustained peak-up in Q4 09 345.5 Net adds 126.5 85.0 145.4 93.4 (000’s) -3.0 H1 09 H2 09 H1 09 H2 09 H1 09 H2 09 H1 09 H2 09 H1 09 H2 09 -491.3 -634.8 Wireless Wi

  29. Slide 29: Are you under investing?

    3 Are you under investing? +56% y-o-y CapEx +4% evolution (1) (2009; % change) Weighted market -19.5 % -15.6% -12.1% average (ex-TEF) -22.6% Weight in -41.2% market 57% 19% 13% 7% 2% 2% CapEx (1) (2009 %) 96% 4% total CapEx total CapEx TEF ACHIEVING HIGHER EFFICIENCIES BASED ON  Lower economic acti

  30. Slide 30: 4. T. Latam

    Index 1. Industry: Is there growth in the Telecoms sector? 2. Telefónica Group: i. Will Telefónica maintain its differential growth profile? ii. Is your dividend policy sustainable? iii. What are your M&A ambitions? 3. T. España: i. Macroeconomic situation ii. Revenue performance: is the worst over?

  31. Slide 31: Is LatAm growth potential exhausted?

    4 Is LatAm growth potential exhausted?  Macroeconomic strength:  >5% annual GDP growth in 2004-08, but –2.3% in 2009E 28% of population in  >3.7% GDP growth in 2010E & 2011E the region < 14 years Population (million inhabitants)  Structural social improvements in the growth period:  Unemploymen

  32. Slide 32: What are the growth opportunities in the region?

    4 What are the growth opportunities in the region? POSTPAY MIGRATION: UP & MBB: NEXT KEY WAVE OF FURTHER PENETRATION INCREASE CROSS SELLING GROWTH Mobile penetration Customer mix % postpay MBB accesses(2) + 130-140 m ARPU accesses: ~65% voice Tiered pricing improvement accesses(1) WIRELESS >100% 25-

  33. Slide 33: ARPU upside through up & cross selling in a more mature market

    4 ARPU upside through up & cross selling in a more mature market EXAMPLE (1) Outgoing ARPU evolution in Chile, Jul-09 (Index) Customer mix (% Postpay)  106% penetration ~35%  Strong customer growth in the market 28%  Lowest churn in the region Dec-08 Dec-12E Prepay +Usage Prepay 100 143 Upselling

  34. Slide 34: Quality improvements in Telesp starting to pay off

    4 Quality improvements in Telesp starting to pay off 37.6% 40.7% 37.0% 38.0% OIBDA margin (%)  Stabilizing OIBDA margins sequentially: Q1 09 Q2 09 Q3 09 Q4 09 Stabilization  Despite transformation initiatives & more resources on quality Quality  Improving quality standards: Anatel claims (y-o-y -

  35. Slide 35: 5. T. Europe

    Index 1. Industry: Is there growth in the Telecoms sector? 2. Telefónica Group: i. Will Telefónica maintain its differential growth profile? ii. Is your dividend policy sustainable? iii. What are your M&A ambitions? 3. T. España: i. Macroeconomic situation ii. Revenue performance: is the worst over?

  36. Slide 36: How are you going to deliver growth in UK and Germany?

    5 How are you going to deliver growth in UK and Germany? Q4 09 Mobile Service Revenue Growth (1)  Mobile internet driving growth (y-o-y ; local currency)  “Home of Smartphones”: 28 m by 2012 E (x4 vs. 2008), positively impacting ARPU & churn  Acquisition of Jajah: leapfrog step in social communic

  37. Slide 37: Conclusions

    6 Conclusions  One of the best positioned players to take advantage of the growth industry  Top quality performance in 2009 in a very challenging environment  Clear priorities and positive outlook for 2010  Lower risk investment case supported by recent events in Venezuela (FX)  Very attractive

  38. Slide 38: Telefónica S.A. Investor Relations

    TELEFONICA S.A. Investor Relations 38

Telefónica — Non-Deal Roadshow (April 2010) on 6ix