Telefonica Sa · BME:TEF
Telefonica Sa — Non-Deal Roadshow (June 2008)
29 slides from Telefonica Sa's roadshow presentation, Jun 5, 2008
Slide 1: Telefónica Latam: The key growth lever of Telefónica
Telefónica Latam: The key growth lever of Telefónica Jose María Alvarez-Pallete General Manager Telefónica Latinoamérica London, June 5th-6th, 2008 TELEFONICA S.A. Investor Relations 1
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. These statements appear in a number of places in this doc
Slide 3: Index
Index 1 Telefónica Latinoamérica at a glance 2 Unique top line growth potential in a fast growth region 3 Regional integrated management and scale benefits to further enhance efficiency 4 On track to deliver a superior growth guidance TELEFONICA S.A. Investor Relations 3
Slide 4: The leading integrated player in a growth region
The leading integrated player in a growth region… #2 #1 #2 #2 Operations in 15 •2.4 m Fixed countries1 •9.3 m Mobile •13.3 m Mobile •0.2 m Broadband •8.8 m Mobile 31% 2007 market share (E2) #2 •5.3 m Mobile •0.4 m Fixed •0.02m Broadband #2 #1 FY 2007 #2 •2.7 m Mobile •11.9 m Fixed 134.1 m Accesses •
Slide 5: …with a strategic alliance in a very dynamic market
…with a strategic alliance in a very dynamic market 5.0% stake1 in China Netcom Chinese Government announced large scale 9 131 million accesses (Mar-08) telco restructuring giving CNC mobile 9 In a country with a population of entry 1,300 million 9 Huge ICT growth potential: 21% of forecasted worl
Slide 6: The main growth driver of Telefónica
The main growth driver of Telefónica … Q1 08 T.Latam weight in TEF 37% 35% Revenues OIBDA Q1 08 Revenue growth Q1 08 OIBDA growth 1 (Organic y-o-y growth) (Organic2 y-o-y growth) +12.6% +11.8% +7.0% +8.2% TEF T. Latam TEF T. Latam Contribution Contribution to Group growth +4.4 p.p. to Group growth +
Slide 7: … with a highly diversified portfolio
… with a highly diversified portfolio… Mar-08 Accesses (in millions) +77.2% +29.5% +23.0% 1.2 +3.6 p.p. acceleration +17.7% 5.2 vs. Mar-07 25.6 137.7 103.7 +1.9% Total accesses Mobile BB1 Pay TV Fixed2 Revenue 41% Contribution to T.Latam Q1 08 results OIBDA 40% Countries in orange are Investment G
Slide 8: Index
Index 1 Telefónica Latinoamérica at a glance 2 Unique top line growth potential in a fast growth region 3 Regional integrated management and scale benefits to further enhance efficiency 4 On track to deliver a superior growth guidance TELEFONICA S.A. Investor Relations 8
Slide 9: For the future, LATAM holds huge potential for Telefónica
For the future, LATAM holds huge potential for Telefónica 75% of the GDP of LATAM Peru & Brazil Debt in investment grade Rating upgraded to countries estimated for Investment Grade in Region GDP per capita 2010 2008 PPP growth expectations CAGR 2006-2010: 5.7%1 74 million people living in Increased
Slide 10: Significant top line growth potential, capitalising on our unique integrated approach
Significant top line growth potential, capitalising on our unique integrated approach WIRELESS WIRELINE Accesses expansion Further penetration increase (Broadband, TV, fixed wireless) Voice usage upside + Traffic bundles Further Broadband development Data potential (upselling through 2P
Slide 11: Solid growth prospects in wireless penetration
WIRELESS Solid growth prospects in wireless penetration … +3 p.p. +3 p.p. 83% Fast growth, exceeding expectations 69% 71% Wireless 56% 59% Further upside driven by: penetration in Latin Bigger addressable market America Lower entry barriers (GSM, scale benefits) Dec-06 Mar-07 Dec-07 Mar-08
Slide 12: …fully flowing into our customer base
WIRELESS …fully flowing into our customer base T. Latam 20.3% 23.0% wireless Customer growth acceleration: 15.5% customer Double digit customer growth across growth markets (y-o-y growth) Mar-07 Sep-07 Mar-08 3.1m net adds in Q1 08 Leveraging enhanced distribution +37.1% channels and GSM net
Slide 13: Fostering usage to expand ARPU
WIRELESS Fostering usage to expand ARPU New commercial offerings to drive elasticity: MoU potential1: 161 190 Exploiting 95 Mar-08 Contract weight (y-o-y) voice usage Latam Spain UK levers +3.7 p.p. +1.9 p.p. Recharge incentives: “Duplicame” Customer migrations to higher value products: Prep
Slide 14: Fostering usage to expand ARPU
WIRELESS Fostering usage to expand ARPU New commercial offerings to drive elasticity: MoU potential1: 161 190 Exploiting 95 Mar-08 Contract weight (y-o-y) voice usage Latam Spain UK levers +3.7 p.p. +1.9 p.p. Recharge incentives: “Duplicame” Customer migrations to higher value products: Prep
Slide 15: Brazil: sound results, capitalising our strengthened competitive position
WIRELESS Brazil: sound results, capitalising our strengthened competitive position Net adds market share3 Brand strength: Higher than market average customer satisfaction1 19% 30.4% m.s. in Best service quality2 3% Apr-08, +2.6 p.p. gap in revenue4 Nationwide footprint: Jan-Apr.07 Jan-Apr.08
Slide 16: Mexico: reinforcing market positioning, capitalising a profitable growth model
WIRELESS Mexico: reinforcing market positioning, capitalising a profitable growth model Enhanced distribution channel: Revenue market share Better quality adds and lower churn Further initiatives to better address the postpay market (Maxcom, Alestra …) Innovative +3 p.p.commercial offers, dr
Slide 17: Sum-up: Capturing growth opportunities in the wireless market
WIRELESS Sum-up: Capturing growth opportunities in the wireless market 65% Q1 08/Q1 07 Mobile outgoing service revenue growth Q1 08/Q1 07 Mobile outgoing serv. Rev.-Customer growth Customer 48% 41% & mobile outgoing 29% 29% 25% 25% +22p.p. 25% 23% service -7p.p. 20% revenue +17 p.p. +7p.p +7p.p. +2p
Slide 18: Transforming our wireline business to capture the BB opportunity
WIRELINE Transforming our wireline business to capture the BB opportunity +1 p.p. 23% +1 p.p. Broadband 16% penetration1 15% 10% 11% Healthy growth rates in Latin America Further potential driven by: Bigger addressable market Dec-06 Mar-07 Dec-07 Mar-08 Dec-10E Expanded network coverage N
Slide 19: Expanding our access base at a strong pace
WIRELINE Expanding our access base at a strong pace … Regional replication of successful products: 1.2m new BB accesses in last 12 months Speedy Duo, Speedy business portfolio (+7% y-o-y) Expanded coverage in Colombia with Mar-08 5,237 positive impact in gross adds (Mar-08: +53% 2,168 y-o-y grow
Slide 20: …fostering bundles penetration, with positive results per access
WIRELINE … fostering bundles penetration, with positive results per access … Q1 08 Local & Control Bundles Q1 08 2P&3P/DSL Y-o-y growth +2P&3P/Fixed Accesses Accesses Broader launch of Voice/BB/TV bundles to keep leadership in high 92% 55% 50% 54% 60% 56% 75% value segment and increase loyalty 36%
Slide 21: …with healthy top line expansion, reducing exposure to regulated services
WIRELINE …with healthy top line expansion, reducing exposure to regulated services Q1 08/Q1 07 Total revenue growth Q1 08/Q1 07 Internet &TV revenue growth 37.2% 119.8% 32.8% 27.4% 26.0% Revenue1 growth 10.4% 19.7% 3.1% 4.0% 6.8% 1.2% T.Latam Brazil Argentina Chile Peru Colombia Wireline -7.1% Y-o-y
Slide 22: Index
Index 1 Telefónica Latinoamérica at a glance 2 Unique top line growth potential in a fast growth region 3 Regional integrated management and scale benefits to further enhance efficiency 4 On track to deliver a superior growth guidance TELEFONICA S.A. Investor Relations 22
Slide 23: Regionalization, a key and differential operating and commercial model in the region
Regionalization, a key and differential operating and commercial model in the region Telefónica´s Regionalization process Multiple operational systems Regional management and planning model F and outsourcing policies T Unique outsourcing and network R Local management of data development pol
Slide 24: OIBDA Margin levers
OIBDA Margin levers WIRELESS WIRELINE Smoother change in revenue mix: Leveraging scale: Lower contribution from high margin Handsets & equipment purchasing services already materialised in most Marketing and sponsorships markets Enlarged scale in new business: Further efficiency in com
Slide 25: Already capitalising on enhanced efficiency levers
Already capitalising on enhanced efficiency levers Q1 08 OIBDA y-o-y growth (local currency) Total OIBDA X>3 88.5% Wireless OIBDA 73.3% 36.9% 29.4% 28.6% 19.2% 16.3% 14.0% 13.3% 13.2% 15.3% -1.3% -3.6% -7.2% +0.4% ex one-offs Mexico Uruguay Venezuela C. America Ecuador Chile Colombia Argentina Brazi
Slide 26: Index
Index 1 Telefónica Latinoamérica at a glance 2 Unique top line growth potential in a fast growth region 3 Regional integrated management and scale benefits to further enhance efficiency 4 On track to deliver a superior growth guidance TELEFONICA S.A. Investor Relations 26
Slide 27: On track to meet 2010 targets
On track to meet 2010 targets +12.5%(2) +10/+13% +14% +14.5% +8.0%(1) +11% Revenue Q1 08/Q1 07: 2007-10 +12.9% Capex: €14-16 bn 2006 2007 2008 2009-2010 2006-2010 Reported Guidance3 Implicit4 CAGR Guidance +18.3%(2) +12/+17% 2010 +16% OpCF: >€7 +15.5% +10.3%(1) bn +12% OIBDA Q1 08/Q1 07: +12.0% 2006
Slide 28: Closing remarks
Closing remarks We are the best positioned player to capture the strong growth potential of the telecom market in the region: The leading integrated player in Latin America Highly diversified operations across 15 countries Sound social and macroeconomic outlook Strong growth opportunities
Slide 29: TELEFONICA S.A. Investor Relations
TELEFONICA S.A. Investor Relations 29