Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — Investor Day (April 2011)
48 slides from Telefonica Sa's investor day presentation, Apr 14, 2011
Slide 1: Grab the future today
Grab the future today José María Álvarez-Pallete Chairman and Chief Executive Officer, Telefónica Latinoamérica
Slide 2: Disclaimer
Disclaimer This presentation contains statements that constitute forward-looking statements about the Company, within the general meaning of the term and within the meaning of applicable securities laws, including financial projections and estimates and their underlying assumptions, statements regar
Slide 3: Sustaining market leadership
Sustaining market leadership Regional revenues share 1 Market revenue share Leader in value & growth (Constant FX effect) FY10 Dec-10 #1 #1 29% 0 p.p. 29% Pe Ve #1 #1 35 % MBB 2 Ch Ur #1 #2 Regional access share 1 Ar Ec #1 #2 40% Br C A Brazil #2 #2 Co Mx 30 MM The largest mobile contract base FY 20
Slide 4: Delivering profitable growth
Delivering profitable growth Accesses Revenue OIBDA Millions € in billions € in billions 184 14 26 +9.0% +6.7% 169 +9.1% +6.5% 23 +5.3% 9 158 22 +10.1% 8 Dec — 2008 Dec — 2009 Dec — 2010 FY 2008 FY 2009 FY 2010 FY 2008 FY 2009 FY 2010 44.5% 43.4% 39.9% FBB+MBB access growth 2010 vs. 2009 Mobile data
Slide 5: Index
Index 01 Latin America in bold letters 02 Capturing current growth, building new options 03 Our Portfolio: leading Brazil, leveraging diversity 5
Slide 6: Latin America in bold letters
Latin America in bold letters
Slide 7: Latin America plays a key role in the new international arena
Latin America plays a key role in the new international arena MSCI 1 Latin America was Multilatinas are 31/Dec/2008 to the 2 nd major 31/Mar/2011 emerging as a new force destination of Chinese FDI, just behind Asia Latin America +123% North America +52% Asia-Pacific +51% Sovereign wealth US$141 bn o
Slide 8: Latin America is growth & stability
Latin America is growth & stability Population Millions 559 565 552 Nobody’s Backyard The rise of Latin America >70% 2008 2009 2010 GDP GDP 5.9 Investment Grade % 4.3 -1.8 Latin America in an Uneven Global Recovery: Managing Abundance Paris, January 24, 2011 2008 2009 2010 Source: IMF, Standard & Po
Slide 9: Investor Telefónica
investor Télefinica S Telefonica
Slide 10: Latin America time is NOW
200 m The population of Germany, France Middle Class and Italy as a whole population Young and 150 m The population of Russia Urban <14 years Addicted to 400 m Double since 2010 Internet Internet users in 2015 Latin America time is NOW Source: ECLAC & Pyramid 10
Slide 11: Latin America has reached a critical level of development
Latin America has reached a critical level of development GDP per capita GDP per capita US$ ppp US$ ppp 2010 12.000 11.000 > 11 10.000 US $ thousand 9.000 X 2.2 8.000 7.000 6.000 5.000 4.000 Developing Asia Latam Income levels Income levels support new and way ahead of more intense other emerging pa
Slide 12: Telecom sector: thriving on regional growth
Telecom sector: thriving on regional growth Telecom market expected to grow faster Positive context for Telcos than GDP in Latin America CAGR Stable regulation, MTRs expected to follow 2010 - 2013E predictable glide path 7.7% Low and decreasing exposure to regulated prices 4.3% (mobile retail prices
Slide 13: Plenty of room to grow
Plenty of room to grow Latin American Market European Market = 100% Penetration 77% 100% Mobile voice MOU 1 79% 100% Voice and Smartphone data growing MBB penetration 25% 100% simultaneously FBB/ Fixed 62% 100% FBB accesses & TV Pay TV/ 47% 100% Households 1 Incoming and outgoing traffic Source: Yan
Slide 14: Capturing current growth, building new options
Capturing current growth, building new options Where? How?
Slide 15: Capturing current growth, building new options
Capturing current growth, building new options Boosting the value of a complete offer Where? Growth of Accelerating Building new traditional advanced businesses business connectivity
Slide 16: Driving mobile voice to the limit of its potential
Driving mobile voice to the limit of its potential Targeting untapped Systematic up selling Key targets potential across segments Mobile voice market Penetration Caribú % population Project 110-115% 99% New commercial approach 2.8 millions of net to valuable young migrations to contract in customers
Slide 17: Accelerating on mobile broadband
Accelerating on mobile broadband Lowering entry barriers Enhancing our commercial offer Key targets MBB accesses T. Latinoamérica millions Paquete NAVEGACIÓN 45-50 100 US$ Smartphone to Paquete boost REDES SOCIALES growth 8 Paquete MAIL+CHAT Dec-10 Dec-13E Paquete X3 Dongles Mobile data revenues CHA
Slide 18: Capturing the fixed opportunity
Capturing the fixed opportunity Segmented development of Intensifying bundles Key targets multimedia and connectivity offer Bundling 1 FBB penetration %Traditional fixed accesses T. Latinoamérica ADSL UBB % BB accesses/ fixed lines 66% ~50% TV TV Basic Advanced 32% 38% Dec-06 Dec-10 Dec-10 Dec-13E M
Slide 19: Building new options
Building new options Video OTT Financial Services Cloud Computing Terra TV Increased market Banking the Leverage of Multimedia potential unbanked (70% Telefonica’s services across of population Global Network music, video and Profitability without savings information improvement account) Global T-Cl
Slide 20: Capturing current growth, building new options
Capturing current growth, building new options Boosting the value of a complete offer >20% CAGR 10-13 E Where? Positive CAGR 10-13 E Growth of Accelerating Building new traditional advanced businesses business connectivity 22
Slide 21: Capturing current growth, building new options
Capturing current growth, building new options Business Intelligence Quality How? Brand Platform 23
Slide 22: Leveraging a non replicable platform
Leveraging a non replicable platform Ensuring the Commercial Network infrastructure best basics Global Enhancing with TIWS Terra unique assets 24
Slide 23: Extracting value from our global model
Extracting value from our global model 7 Verticals Leveraging global scale Sharing best practices Video & DH Quality and customer oriented projects Apps Network management Financial services ~ 290 m accesses Fixed transformation initiatives eHealth Medianetworks and TIWS Key strategic capabilities S
Slide 24: TIWS allows us to manage traffic growth and implement new technologies
TIWS allows us to manage traffic growth and to implement new technologies quicker and cheaper Competitive advantages Unique Infrastructures SAm 1 Activated Capacity Economies Gbps 4,080 of scale 2,440 1,770 1,320 Economies 1,000 of scope FY 2009 FY 2010 FY 2011E FY 2012E FY 2013E Access to new marke
Slide 25: Our brand attributes strengthen the value of a customer oriented strategy
Our brand attributes strengthen the value of a customer oriented strategy 1# or 2# Top of mind in every market
Slide 26: Quality as the main driver for customer satisfaction
Quality as the main driver for customer satisfaction What we said in What we have achieved so far October 9th 2009 Consistent Delivery FCR 2 Billing claims · End to end process focus & % % COPC 1 methodology · FCR 2 focus & billing claims reduction -32% +11% Best Customer Experience · Unique experie
Slide 27: Business intelligence as a key driver to enhance customer focus
Business intelligence as a key driver to enhance customer focus Key initiatives Best in class churn FCR focus & billing Mobile Churn claims reduction FY 2010 % 2.4% 2.2% Seamless multichannel experience 3.4% Reference in Customer culture 2.7% customer satisfaction in main markets 2.8% 2.1% An integr
Slide 28: Capturing current growth, building new options
Capturing current growth, building new options Increased Where? CapEx How? commitment to the region 30
Slide 29: Committed to the opportunity
Committed to the opportunity We are investing to capture the growth High Speed FBB 1 MBB coverage/ T. Latinoamérica population % FBB accesses Fixed leveraged T. Latinoamérica by mobile % population Mobile leveraged by fixed Increased ~20% ~80% CapEx 60% +20 p.p. commitment to the region x10 2% Dec-1
Slide 30: Our portfolio: leading Brazil, leveraging diversity
Our portfolio: leading Brazil, leveraging diversity
Slide 31: Leveraging diversity
Leveraging diversity FY 2010 1 Latam revenue Our key growth pool Brazil · Improving commercial momentum 48% · Capture synergies Mexico, strong bet on 3G as the key driver to recover North Region momentum 16% (7 countries) Venezuela, focus on value through a complete offer Complete and integrated off
Slide 32: Mexico, refocusing our commercial approach and recover momentum
Mexico, refocusing our commercial approach and recover momentum Solid track record as an attacker Challenging situation in 2010 OIBDA FY 2010 vs. FY 2009 € in millions % Local Currency 564 420 179 -10 Revenues 5% FY 2006 FY 2007 FY 2008 FY 2009 OpCF € in millions 313 OIBDA -1.7% 103 +6.5 p.p. -190 -
Slide 33: A large growth potential
A large growth potential The opportunity 11 th largest Mobile voice MBB population in _____ % contract / Total Smartphone the World Penetration mobile accesses penetration Young & 100% 100% 100% Urban ~32 m <14 78% urban Internet Users 35 m Social Networking 76% penetration among <24 63% years Highe
Slide 34: And the platform to build upon it
And the platform to build upon it Spectrum LD Backbone Customer satisfaction MHz Thousands Km CSI Dec-10 552 ~ 20 8.71 352 ~ 5 Mobile 8.50 2009 2010 2009 2010 8.79 Prepay Q310 Signed dark fiber 8.60 Spectrum acquisition consortium in June 2010 1,700-1,900 MHz Band 8.42 Contract Starting point to cap
Slide 35: Betting on 3G to kickstart the new wave of growth
Betting on 3G to kickstart the new wave of growth 3G coverage by socioeconomic segment Telefónica MBB accesses % In millions 95% ~ 5.5 43% ABC+ 70% 27% 0.2 ABCD+ 60% 23% Dec-10 Dec-13E Total population Dec-10 Dec-11E
Slide 36: Brazil, a very large and rapidly growing market
Brazil, a very large and rapidly growing market Top 10 telecom markets in the world Total Revenues Telecom Market Brazil per 2010 revenue R$ in billion Total market revenues CAGR FY06 — FY10 120 +2% 116 113 109 +8% 105 101 +12% 92 +13% 87 80 -1% +3% 54 -6% -1% +17% 2006 07 08 09 10 11E 12E 13E 14E 2
Slide 37: Brazil, plenty of opportunities
Brazil, plenty of opportunities The opportunity Brazilian Market European Market = 100% Middle class ~100 m Penetration 80% 100% population Young & Mobile voice Urban MOU 1 54% 100% ~50 m <14 87% urban Internet Users Smartphone 80 m MBB 25% 100% penetration Leading penetration in Social Networks FBB
Slide 38: Brazil, much more to come
Brazil, much more to come Mobile Voice Market MBB Market FBB & TV Market FY 2010-2013E FY 2010-2013E FY 2010-2013E Mobile Mobile Pay TV Penetration + 17 p.p. data users + 23 p.p. Subscribers / + 5 p.p. % % Households % MOU 1 Smartphone FBB/STB Min + 3% penetration + 8 p.p. % + 12 p.p. % 1 Incoming a
Slide 39: Telefónica in Brazil, clear leadership
Telefónica in Brazil, clear leadership A leadership position 1 December 2010 Telefónica Access Market Share Vs. the main competitor Position 73% +49 p.p. #1 Fixed accesses 30% +4 p.p. #1 Mobile accesses 61% +28 p.p. #1 FBB accesses 14% -49 p.p. #3 Pay TV accesses 1 Share and position in fixed voice,
Slide 40: Telesp, a strong fixed incumbent
Telesp, a strong fixed incumbent Best performance vs. peers in Latin America Customer satisfaction improvement Thousands of fixed accesses net adds, FY 2010 First company to offer >30 Mbps 39 Positive churn evolution -291 -1,268 Historical level of FBB net gain Source: Company data
Slide 41: Vivo, the indisputable leader
Vivo, the indisputable leader VIVO 2010 40% # 1 Top of mind #1 Customer Dongles (6 p.p. above Market Share satisfaction competition) 35% Contract Market Share Leader in Leader in 3G population coverage 30% coverage (over (x3 covered Market Share 25 m advantage) towns closest competitor) Source: Anat
Slide 42: We are increasingly capturing growth opportunities
We are increasingly capturing growth opportunities TV accesses ~1.4 FBB accesses ~ 5.1 Millions Millions 3.3 0.5 Dec — 2010 Dec — 2013E Dec — 2010 Dec — 2013E MBB accesses Mobile data revenues / Millions Mobile service revenues >20 % >30% 19% 3.3 Dec — 2010 Dec — 2013E FY 2010 FY 2013E
Slide 43: We are transforming our company
We are transforming our company Revenue Mix Services TEF Brazil beyond Access & Voice BB connectivity 82 % 15% 3 % FY 2010 68 % 25 % FY 2013E 7% Margin expansion Investments leveraging on of R$24,300 m synergies until 2014 1 Figures for guidance assume constant FX (average FY 2010), excludes hyperin
Slide 44: We are going to capture a significant value
We are going to capture a significant value Minimum Synergy targets On track Operating synergies NPV Projects Launched Q4 10 — Q1 11 € in billions — 0.2 Examples 0.5 / 0.6 2.3 /2.7 0.5 / 0.6 Interconnection optimization 1.1 / 1.2 Topology and network common design 0.4 / 0.5 (voice and IP core) Reven
Slide 45: Brazil, a country of opportunities
Brazil, a country of opportunities
Slide 46: Index
Index 01 Latin America in bold letters 02 Capturing current growth, building new options 03 Our Portfolio: leading Brazil, leveraging diversity
Slide 47: Telefónica Latinoamérica: Championing growth
Telefónica Latinoamérica Championing growth Accelerating investment Leading Brazil
Slide 48: Telefónica
Telefónica 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 authorized. Telefónica, S.A. Date: April 14 th , 2011 By: /s/ Ramiro Sánchez de Lerín García-Ovies Name: