Pharol Sgps S.a. · EURONEXT:PHR
Pharol Sgps — Portugal Telecom SGPS — Merger or Acquisition (June 2010)
29 slides from Pharol Sgps's merger presentation, Jun 17, 2010
Slide 1: Telefónica's offer for 50% of Brasilcel
Lisbon, 17 June 2010 Telefónica’s offer for 50% of Brasilcel Zeinal Bava Chief Executive Officer
Slide 2: Important notice
This release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not statements of historical fact, and reflect goals of the company's management. The words "anticipates," "believes," "estimates," "e
Slide 3: PT's response to Telefónica's new offer
PT’s response to Telefónica's new offer Telefónica's Views on Vivo PT’s Board Response (1) (2) Based on article from Wall Street Journal online 17 May 2010 Based on article from Financial Times, 10 July 2007 “Request a Shareholder’s Meeting so that PT’s Shareholders may come to a decision on the off
Slide 4: What is the upside in Brazil?
ec What is the upside in Brazil?
Slide 5: A very large market set to outpace Western European economies
0 % ’09-15 CAGR 2009A 2015E World LatAm 1 5 Population (m) IMF. Dec 2009 Gross Domestic Product (US$trn) IMF. Current Price - Dec 2009 – Dec 2015 World LatAm 1 8 4.2% 3.4% 11.5% 1.7% 2.5% 4.5% 2.1% 8.7% 1.4% 6.7% 2009 2015 1 7 1 2 3 A very large market set to outpace Western European Economies Sourc
Slide 6: Increasingly stable investment environment
Increasingly stable investment environment Brazilian CDS Close from 5-Year Low Brazil 5-year CDS (USD) Bloomberg. June 2010 Dec 2008 BRL has Gained Momentum vs. Euro and Expected to Stabilize EUR/BRL evolution FactSet & Broker Projections. June 2010 Last 12 months Evolution Broker Projections Inflat
Slide 7: Strong economic growth and a growing middle class
Strong economic growth and a growing middle class Income Classes 2000 2009 Unemployment Unemployed as % of Economic Active Population Note: Average Monthly Income by Class: A and B (R$4,591+), C (R$1,064-4,591), D (R$768-1,064) and E (R$0-768) Source: IBGE, Bacen and Cetelem (2009) Strong expansion
Slide 8: The Brazilian telecoms market in perspective
The Brazilian telecoms market in perspective Value of #1 Domestic Mobile Player (USDbn) Domestic Telecom Sector - Total Revenue (2009) Source: Euromonitor (USDbn) Subs. Market Share 32% 70% 49% 43% 36% 35% 42% 44% 29% 51% 1. 2. 3. 4. 5. 6. 8. 7. 10. 9. 1. 2. 3. 4. 5. 6. 8. 7. 10. 9. Verizon Wireless
Slide 9: The Brazilian mobile opportunity
The Brazilian mobile opportunity Brazilian Telecoms revenue breakdown (US$bn) BofAML Wireless & Wireline Matrix. Dec 2009 % Mobile Revenues Mobile Revenues Wireline Revenues Projected mobile penetration % Population Growing market from increasing penetration and fixed-to-mobile substitution Source:
Slide 10: Vivo is the rising star in Brazil
Vivo is the rising star in Brazil Operating performance comparison(1) Note: Claro Capex not available Source: Company filings (1) Vivo metrics as per Vivo reporting (2) Defined as EBITDA - Capex Best Performing Mobile Operator Vivo TIM Claro Oi LTM EBITDA Margin – Brazilian Mobile Operators % LTM Op
Slide 11: Mobile data with high growth potential
Mobile data with high growth potential Mobile and fixed broadband accesses Million Source: National regulators; IDC; European commission; Pyramid Research Potential penetration of mobile broadband % population. 2009 Fixed Mobile 2015 104 2014 86 2013 67 2012 54 2011 44 2010 29 2009 14 Portugal Europ
Slide 12: Vivo will cover 85% of the Brazilian population with 3G by December 2011
Vivo will cover 85% of the Brazilian population with 3G by December 2011 Increase in coverage: 2,832 municipalities with 3G coverage in 2011 vs. 600 currently 85% of population covered with 3G in 2011 vs. 61% currently
Slide 13: Vivo investment highlights
Vivo investment highlights Significant optionality in the Brazilian economy Vivo to benefit from increasing penetration of mobile and voice and data growth Leadership in voice and data despite aggressive competitive market conditions Country’s largest network with coverage of more than 2,900 municip
Slide 14: Breakdown of Telefónica's Offer
Breakdown of Telefónica’s Offer
Slide 15: Telefónica's statements continue to ignore intrinsic value arguments
Telefónica’s most recent statements continue to ignore the intrinsic value arguments Several metrics indicate that the intrinsic value of Vivo is significantly in excess of €3.6bn Why doesn’t Telefónica use the latest business plan approved by the Board of Vivo? Why doesn’t Telefónica use, at least,
Slide 16: Telefónica continues to rely on market estimates for the value of synergies
Telefónica continues to rely on market estimates for the value of synergies If precedents are not applicable, shouldn’t Telefónica provide a detailed analysis on synergies? Operators usually give information to the market on synergies, not the reverse. TIM Brasil said they could generate R$1.2bn of
Slide 17: Telefónica's "value proposition" is erroneous
Services are existing and essential to Vivo and need to be delivered by PT Dedic has a stand-alone value and cannot be seen as an upside on Vivo VWAP is an appropriate methodology for buying shares in the market 5% return is lower than Telefónica´s current funding cost(1) and only means that PT woul
Slide 18: Implied intrinsic EBITDA multiples of Telefónica's offer are low
Implied intrinsic EBITDA multiples of Telefónica’s offer are low €6,500m Synergies (€m) 2,800 3,000 4,000 5,000 Minority Share of Synergies 25% (€m) 700 750 1,000 1,250 Telefónica's Share (€m) 2,100 2,250 3,000 3,750 Price Paid for 50% of Brasilcel ex. Synergies (€m) 4,400 4,250 3,500 2,750 EV/EBITD
Slide 19: Telefónica has tried to intimidate PT shareholders
Telefónica has tried to intimidate PT shareholders to force them to accept the offer and failed Telefónica has no response PT Clarification Statements "There is no obligation on us to act favourably in Brasilcel". "The money could stay in Brasilcel indefinitely.“ Financial Times, 25 May 2010 “Analys
Slide 20: but is still trying to intimidate investors
but is still trying to intimidate investors What guarantee does Telefónica give you that PT shares will trade over 60% of PT’s unaffected share price if you accept the offer? If you vote against the Telefónica proposal, the investment case of PT will remain intact while Telefónica will still need to
Slide 21: Strategic value of Vivo for Telefónica
Strategic value of Vivo for Telefónica Brazilian market offers strong growth potential Vivo is the leading mobile operator and has value upside from increasing fixed-to mobile migration and mobile broadband penetration Considering market consensus, announced synergies lack ambition Excluding synergi
Slide 22: We are focused on shareholder value
We are focused on shareholder value
Slide 23: Share price and total shareholder return since Lehman collapse
3 Relative Share Price Performance since Lehman Collapse(1) Total Shareholder Return since Lehman Collapse(1) Best performing telco in EMEA (9.4%) (7.7%) +9.3% Source: Bloomberg, Market data from FactSet until 10 May 2010, Company information (1) 15 September 2008 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09
Slide 24: PT investment highlights
PT investment highlights Focused strategy in developing its businesses in Portugal, Brazil and sub-saharan Africa, which ensures diversification and thus lower execution and financial risks Solid customer growth in the domestic and international markets against intense competition and a challenging
Slide 25: Shareholders of Portugal Telecom have two options
Shareholders of Portugal Telecom have two options: Forgo optionality and crystallise value of PT’s investment in Brazil now OR Empower Portugal Telecom to continue to create value by leveraging on Brazilian and Vivo exposure in the future
Slide 26: Frequently Asked Questions
ec Frequently Asked Questions
Slide 27: Frequently Asked Questions
Frequently Asked Questions Could Telefónica increase its Offer? Telefónica is free to increase its offer at any time. It can raise it prior to the EGM, in which case shareholders would vote on the increased offer. It can also make a higher offer after the EGM, in which case Portugal Telecom would ta
Slide 28: Frequently Asked Questions
Frequently Asked Questions What is the timing of the Shareholders Meeting? The EGM is expected to take on June 30th, 2010 What will be the voting threshold? The decision will be taken by a simple majority (50% of present) Can the Golden Share veto the transaction? This is not a Golden Share matter W
Slide 29: For further information
For further information: Nuno Vieira Investor Relations Director +351 21 500 1701 nuno.t.vieira@telecom.pt www.telecom.pt SIGNATURE 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
Portugal Telecom SGPS — Merger or Acquisition (June 2010) on 6ix