Telefonica Sa · BME:TEF
Telefonica Sa — H1 2012 Earnings Presentation
28 slides from Telefonica Sa's earnings presentation, July 2012
Slide 1: Results January-June 2012
Results January-June/2012 Investor Relations Telefónica, S.A.
Slide 2: Disclaimer
Disclaimer This document contains statements that constitute forward looking statements about Telefónica Group (going forward, “the Company” or Telefónica) including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations which ma
Slide 3: H1 Highlights
TELEFÓNICA H1 Highlights • Improved OIBDA performance in Q2 across the board • Further OIBDA improvements in H2 12 OIBDA growth and margin expansion q-o-q • Benefits from best-in class diversification, different realities across countries • Risk perception decoupled from business fundamentals • Posi
Slide 4: Key financials
TELEFÓNICA Key financials Reported Underlying € in millions H1 12 H1 12 Q2 12 H1 12 H1 12 Q2 12 y-o-y y-o-y y-o-y y-o-y Revenues 30,980 +0.3% +0.1% 30,980 +0.3% +0.1% OIBDA 10,431 (7.7%) (6.6%) 10,431 (6.2%) (5.1%) OIBDA Margin 33.7% (2.9 p.p.) (2.5 p.p.) 33.7% (2.3 p.p.) (1.9 p.p.) OI 5,300 (16.5%)
Slide 5: Enhanced profitability in Q2 across the board
TELEFÓNICA Enhanced profitability in Q2 12 across the board Underlying OIBDA (€ in millions) Q1 12 5,350 Q2 12 5,081 2,513 2,672 2,549 2,663 1,669 1,718 1,246 1,270 1,303 1,394 334 402 295 333 TEF T. Europe Spain UK Germany T. Latam Brazil Rest of T. Latam Underlying OIBDA Margin 34.6% 32.8% (2.8 p.
Slide 6: Risk perception decoupled from business fundamentals
TELEFÓNICA Risk perception decoupled from business fundamentals Brazil Rest T. Europe 22% 24% Revenue 34% originated in (H1 12) euros Rest T. Latam Spain 26% 25% Brazil Rest T. Europe 24% 18% Underlying 39% originated in OIBDA euros (H1 12) Spain Rest T. Latam 32% 26% Brazil Rest T. Europe 23% 16% U
Slide 7: Transitioning from “Telco” to “Digital Telco” model
TELEFÓNICA Transitioning from “Telco” to “Digital Telco” model New opportunities from digitalisation “Digital Telco” well placed to capture them • Traditional Internet models* not the answer for Telcos … • Telcos have key assets … Advertising-funded businesses taking their revenues Customers and
Slide 8: We already kick started this journey
TELEFÓNICA We already kick started this journey Telefónica: extracting value from Digitalisation 3 As digital service providers • Develop and eHealth market selected digital services 2 As an enabler/retailer eSecurity of digital services Partnerships • Commission models based on distribution M2M A
Slide 9: Regaining commercial momentum
TELEFÓNICA Regaining commercial momentum 51% Sustained Smartphone penetration 8% 16% accesses 7% 7% 10% 6% 5% growth (y-o-y) 18 m 312 m 244 m 3m 79 m 45 m Jun-11 Jun-12 FBB Total Mobile Pay-TV Mobile MBB Contract • Total commercial activity up 6% y-o-y in H1 12 Mobile • Net adds rose 18% vs. H1 11 e
Slide 10: Positive top line growth, improved margin sequentially
TELEFÓNICA Positive top line growth, improved margin sequentially Revenue (y-o-y) 33% 35% 8.3% 5.8% T. Latam and 15.4% 16.0% 0.5% 0.1% mobile data monetisation Mobile Data (y-o-y) Mobile data /MSR Q2 12 driving (6.6%) (5.7%) Q1 12 Q1 12 Q2 12 revenue T. Europe T. Latam Telefónica expansion • Revenue
Slide 11: Latam: Solid revenue growth driven by mobile
T. LATAM Latam: Solid revenue growth driven by mobile Sustaining commercial momentum Sustained double digit mobile revenue growth Q2 12 H1 12 Revenue increase ex-regulation (organic y-o-y) 37.4 8.5 Strong mobile Regulation drags 19.2 +21% 4.0 commercial Q2 y-o-y growth +36% y-o-y by 1.5 p.p. activit
Slide 12: Latam: Improved margin quarter-on-quarter
T. LATAM Latam: Improved margin quarter-on-quarter Sequential OIBDA margin expansion on efficiency gains Commercial costs driving OIBDA performance OIBDA margin (underlying q-o-q) OIBDA margin (underlying y-o-y) +1.9 p.p. +0.8 p.p. 35.8% 37.1% 33.9% (0.7 p.p.) (0.1 p.p.) 35.8% (0.7 p.p.) (0.6 p.p.)
Slide 13: Brazil: Leading service quality & investing in future growth
T. LATAM Brazil: Leading service quality & investing in future growth Clear competitive advantages in mobile network Transforming the fixed business under the VIVO brand Jun-12 (y-o-y) 18% 21% • Fiber uptake acceleration: 1.0 m homes passed 14% (Jun-12) Strong growth in • New IPTV proposition in H2
Slide 14: Brazil: Keeping growth on a balanced & diversified structure
T. LATAM Brazil: Keeping growth on a balanced & diversified structure Double digit growth in MSR drives top line increase Improved profitability in Q2 Revenue growth ex-regulation OIBDA margin (organic q-o-q) Q1 Q2 (organic y-o-y) (BRL in millions y-o-y; absolute terms) +0.3 p.p. +2.9 p.p. 38.4% 14.
Slide 15: Latam: Diversified growth, revenue growth in all countries (i)
T. LATAM Latam: Diversified growth, revenue growth in all countries (i) Southern Region: Advances to transform the business Contribution to TEF Revenue breakdown ex-regulation1 (y-o-y organic) H1 Revenue OIBDA margin impacted by service Q1 12 Q2 12 interruption OIBDA Margin IT project seasonality 18
Slide 16: Latam: Diversified growth, revenue growth in all countries (ii)
T. LATAM Latam: Diversified growth, revenue growth in all countries (ii) Northern Region: Consolidating positive trends Impressive operational and financial Revenue breakdown ex-regulation1 (y-o-y organic) performance, growth across all MSR acceleration metrics (customers, ARPU, margin) Q1 12 Q2 12
Slide 17: T.Europe: Improved commercial performance, growing OIBDA in the quarter
T. EUROPE T.Europe: Improved commercial performance, growing OIBDA in the quarter Contract net adds Regaining trading 375 458 • Focus on high value customers and better prepay evolution momentum across 59% Contract mix • Churn reduction on successful tariff refreshment footprint • Further expansion
Slide 18: Spain: Gradual progress in our turnaround plan
T. EUROPE Spain: Gradual progress in our turnaround plan Change industrial model to enhance efficiency and Recovering competitiveness change market dynamics 68% FBB • Significant drop in mobile number 50% portability activity in the market on drastic Fast penetration Mobile contract reduction in sub
Slide 19: Spain: Improved profitability on strong cost savings
T. EUROPE Spain: Improved profitability on strong cost savings OIBDA OIBDA margin OIBDA (€ millions) (y-o-y) 1,669 45.0% 1,718 42.8% OIBDA growth and margin (1.4 p.p.) (0.5 p.p.) y-o-y Q1 12 Q2 12 expansion q-o-q y-o-y Q1 12 Q2 12 Q1 12 Q2 12 € 28 m from € 18 m tower sales capital gain (13.6%) (13.7
Slide 20: UK: Sequentially improving performance
T. EUROPE UK: Sequentially improving performance Consolidating enhanced commercial momentum OIBDA expansion q-o-q, improved revenue trend OIBDA (€ millions) OIBDA margin 26% 402 Better contract 8% 23.4% gross adds on 334 19.4% refreshed y-o-y commercial -21% Sequential OIBDA Q1 12 Q2 12 portfolio Q1
Slide 21: Germany: Growth across the board, basis set for the future
T. EUROPE Germany: Growth across the board, basis set for the future Solid trading momentum Well positioned to further expand market share 18.8% 18.0% Contract m.s.1 16.5% • Adapted contract portfolio mix in Q2 12 Total m.s.1 Successful commercial • New regional value led offers Increasing 15.1% 16.
Slide 22: Germany: Strong operating performance flowing into financials
T. EUROPE Germany: Strong operating performance flowing into financials Solid revenue performance Enhanced profitability on efficiency measures Euros Data ARPU 5.6 6.0 6.1 OIBDA (€ millions) OIBDA margin growth on 4.7 Sustained OIBDA 44% successful data and margin 333 32% 295 25.7% monetisation expa
Slide 23: Updated revenue outlook, OIBDA margin and CapEx/sales targets unchanged
TELEFÓNICA Updated revenue outlook, OIBDA margin and CapEx/sales targets unchanged FY 12 Outlook H2 12 Flat to positive in current euros • More challenging than anticipated performance driven by a Revenue Growth weaker macro environment and further negative impacts (previously >1%) from regulation •
Slide 24: Net debt evolution impacted by timing of dividend payment
TELEFÓNICA Net debt evolution impacted by timing of dividend payment Net Financial Debt evolution € in millions Net Financial Net Financial Debt/ OIBDA1 Debt/ OIBDA2 (1,499) 2.65x 2.59x 343 660 3,318 58,310 (1,261) 57,131 (1,645) 57,049 € 277 m in Telco Net Fin. Debt FCF Dividend & Share Net Financi
Slide 25: 2012-13 debt maturities covered
TELEFÓNICA 2012-13 debt maturities covered Net debt maturities & Liquidity position (Jun-12) € in billions 8.9 6.7 7.9 • 2013 net debt maturities reduced by € 0.9bn in the quarter 5.1 82% • € 2.4 billion credit line maturities LT extension • Ample geographic diversification 2013 2014 Cash & cash Und
Slide 26: Fully committed to increase financial flexibility, improve liquidity and defuse potential risks
TELEFÓNICA Fully committed to increase financial flexibility, improve liquidity and defuse potential risks • Cancellation of 2012 dividend (Nov-12 cash+May-13 scrip) and share buyback program as one-time exceptional measure • Cash savings up to Q2 13: • Shareholder remuneration to be resumed in 2013
Slide 27: Conclusions
TELEFÓNICA Conclusions • Improved performance in Q2 12 from OIBDA to net income in underlying terms: Benefits from best-in class diversification Risk perception decoupled from business fundamentals Positive revenue growth on strong top line performance in Latin America OIBDA growth and margi
Slide 28: Definitions of organic and underlying growth
Organic growth: In financial terms, it assumes constant average exchange rates as of January-June 2011, and excludes hyperinflation accounting in Venezuela. Therefore, in OIBDA and OI terms, the first half-year of 2011 excludes the positive impact of the partial sale of our stake in Portugal Telecom