Telefonica Sa · BME:TEF
Telefonica Sa — H1 2003 Earnings Presentation
24 slides from Telefonica Sa's earnings presentation, July 2003
Slide 1: January - June 2003 Results
January - June 2003 Results This presentation is being broadcast live on the Internet
Slide 2: Disclaimer
DISCLAIMER This presentation contains statements that constitute forward looking statements in its general meaning and within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this document and include statements regarding the inten
Slide 3: Leading shareholder remuneration among our peers
LEADING SHAREHOLDER REMUNERATION AMONG OUR PEERS STRONG 1H03 DELIVERY ON EXECUTION RESULTS PROGRESS PROGRESS BETTER P&L ON ON + AT BUSINESS INITIATIVES RE-FOCUSING ALL LEVELS IMPROVED BUSINESS OUTLOOK WE ARE CONFIDENT ON FREE CASH FLOW GENERATION AND HAVE ACCESS TO IT OUR STRONG CASH FLOW IS THE
Slide 4: Improving business outlook
... IMPROVING BUSINESS OUTLOOK... PROGRESS PROGRESS ON ON BUSINESS INITIATIVES RE-FOCUSING Launch of unified brand name VIVO and acquisition of TCO in Brazil completed in April Completion of Vía Digital/Sogecable merger in July 2nd (22.23% Telefónica).Start of joint Launch of GSM service in Me
Slide 5: A solid set of results in 1H03, with the P&L improving at all levels
A SOLID SET OF RESULTS IN 1H03, WITH THE P&L IMPROVING AT ALL LEVELS... € in Millions -2.0% -11.9% Annual growth rate 5,956.0 -3,138.0 +12.0% -47.6% -38.5% c.s. -81.6% c.s. c.s. 2,818.0 -132.5 c.s. -212.2 39.8 -296.5 2,216.6 -791.0 1,425.6 EBITDA Depreciation EBIT Associates Goodwill Extraord. Finan
Slide 6: Backing our confidence on future cash flow generation
...ARE BACKING OUR CONFIDENCE ON THE GROUP´S FUTURE CASH FLOW GENERATION... FREE CASH FLOW BEFORE FINANCIAL CONSISTENCY OF CASH FLOW * (€ in INVESTMENTS (€ in Millions) Millions) 51% over 1H02 FCF 4,546 66% of FY2002 FCF 2,218 2,205 1,548 3,006 1,984 1,458 2002 1Q03 2Q03 1H03 Quarterly 1Q03 2Q03 ave
Slide 7: Mid term dividend policy
...AND HAS LED THE BOARD TO SET THE COMPANY´S MID TERM DIVIDEND POLICY EXPLICITLY A COMMITMENT BASED ON A SET OF PRINCIPLES... To be sustainable for the period 2003-2006, setting a floor to shareholder remuneration To allow the full development of our growth potential To represent a strong med
Slide 8: Financial highlights
FINANCIAL HIGHLIGHTS % Change % Change Apr-Jun 03 Apr-Jun 03/ Apr-Jun 02 Jan-Jun 03 Jan-Jun 03/ Jan-Jun 02 Operating Rev. 7,104.3 -1.6% 13,563.2 -7.3% Operating Costs * 4,147.3 -5.5% 7,969.7 -10.9% EBITDA 3,136.9 +3.5% 5,956.0 -2.0% EBIT ** 1,559.9 +19.4% 2,818.0 +12.0% Net Income 882.2 c.s. 1,425.6
Slide 9: Underlying performance of businesses
UNDERLYING PERFORMANCE OF BUSINESSES Telefónica de España: Voice and narrowband Internet REVENUE BREAKDOWN * revenues remain under pressure. Reduced drop led by increase in monthly fee revenues % Change % Change 1Q03/1Q02 2Q03/2Q02 Cellular Business: Strong performance of Spanish operations led
Slide 10: Foreign exchange impact
FOREIGN EXCHANGE IMPACT ANNUAL CHANGE IN AVERAGE EXCHANGE RATES 1Q02 1H02 9M02 FY02 1Q03 1H03 $R vs € 0% ARS vs € -11% -12% -17% -24% -20% -27% -44% -38% -40% -48% -48% -60% -63% -68% -70% -80% FX IMPACT ON REVENUES AND EBITDA GROWTH 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 Revenues EBITDA -7,5 p.p. -7,5 p.p.
Slide 11: Cost structure by business line
COST STRUCTURE BY BUSINESS LINE COSTS BREAKDOWN * Telefónica de España: Slow down of personnel expenses and reduced interconnection costs % Change % Change 1Q03/1Q02 1H03/1H02 Cost contention at Telefónica Data and Terra Lycos TdE Group -2.1% -2.2% Cellular Business: Increase in commercial exp
Slide 12: Consolidated group capex
CONSOLIDATED GROUP CAPEX QUARTERLY EVOLUTION OF CAPITAL EXPENDITURES (€ in Millions) -15.6% 863.9 1,815.5 -36.9% 932.0 1,532.9 951.6 600.9 1Q02 2Q02 1H02 1Q03 2Q03 1H03 1H03 CAPEX BREAKDOWN Total % Change % Change € in Million 1H03/1H02 1Q03/1Q02 Acceleration of ADSL take-up in Spain and Latam TdE
Slide 13: Telefónica de España parent: 1H03 operating revenues
TELEFONICA DE ESPAÑA PARENT: 1H03 OPERATING REVENUES OPERATING REVENUES (€ in Million) 4,878 1,494 (-1.7%) (+4.0%) 1,718 30.6% (-8.7%) 1,666 35.2% (1.5%) 34.2% Total revenues Client Network Access Voice Usage Rest of revenues ACCESS LINES TRAFFIC PRESELECTED LINES (PSTN + B.A. ISDN; Thousands) (esti
Slide 14: Telefónica de España: improving ADSL metrics in 1H03
TELEFONICA DE ESPAÑA: IMPROVING ADSL METRICS IN 1H03 323.6 159.1 -47.7% GROSS INCREMENTAL 164.5 CAPEX per new -15.0% MARGIN connection (€) (euros in millions) (12 month rolling) Revenues Direct Gross Incremental 2001 2002 2Q03 Costs (1) Margin RETAIL ARPU ADSL CONNECTIONS RETAIL SAC per (€) (NET ADD
Slide 15: T. de España workforce reduction program
T. DE ESPAÑA WORKFORCE REDUCTION PROGRAM: ADAPTING TO A DEMANDING OPERATING ENVIRONMENT ESTIMATED CASH FLOW IMPACT ** € in Millions +430/+470 Yearly impact=Savings (Personnel PROGRAM expenses+G&A expenses)-Payments to pre-retirees-tax effect KEY HIGHLIGHTS UP TO 15,000 EMPLOYEES (TARGET 3.5-3.8 Bi
Slide 16: Real estate program: update on execution
REAL ESTATE PROGRAM: UPDATE ON EXECUTION 2002-2006 VALUE OF REAL ESTATE PROJECT (€ in millions) 165 1,875 908 689 1,021 967 Direct NPV NPV Gross Cost Net Sales cancellation maintenance Financial Efficiency Financial of rents costs Resources Plan (*) Resources ON TRACK TO REACH 2003 TARGETS Target 20
Slide 17: Telefónica Latinoamerica results
TELEFONICA LATINOAMERICA RESULTS 2002 REVENUE GROWTH Organic growth driven by Telesp (contributing with 9 2003 (Ex-Fx) p.p. & 4 p.p. to T. Latam revenues & EBITDA growth) and TASA (1.5 p.p. & 4 p.p., respectively) 8.0% Local & Long distance continue as drivers of 7.0% Telesp´s performance 3.1%
Slide 18: Solid underlying performance of Telesp
...WITH THE SOLID UNDERLYING PERFORMANCE OF TELESP LOCAL REVENUES LONG DISTANCE REVENUES ($R in millions) ($R in millions) 3,644 1,024 +10.2% +68.9% 3,307 606 1H02 1H03 1H02 1H03 Around 45 % DLD (interstate) estimated Monthly fee: +7.4% yoy driven by a 13% tariff increase in 02 market share as o
Slide 19: Data, solutions & international services business
DATA, SOLUTIONS & INTERNATIONAL SERVICES BUSINESS 1H03 GROUP REVENUES INCUMBENT MARKETS REMAIN ROBUST (Annual % Change) (DATA OPERATIONS EBITDA MARGIN) 1H02 SPAIN LATAM 1H03 Ex-Changes in consolidations +13 % 26.6% 21.9% 18.5 % +3.6 % 28.0% 17.7 % 14.8% Reported 22.3% 14.3% Ex-Fx & Changes 9.0% in c
Slide 20: Net financial expenses
NET FINANCIAL EXPENSES (*) Euros in millions Jun03 Jun02 % Change Debt financial expense (996.6) (960.0) 4.1% Other financial expenses (36.0) (20.9) 72.0% Financial Income 200.1 185.8 7.7% Financial provisions and net forex (1) 539.0 (813.9) (n.m.) Net financial results (296.5) (1,609.0) (81.6%) Net
Slide 21: We have further strengthened our credit profile
WE HAVE FURTHER STRENGTHENED OUR CREDIT PROFILE CONSOLIDATED DEBT EVOLUTION COMPONENTS OF 1H03 (€ IN MM) DEBT REDUCTION -22.5% 22,533 3,006 25,789 198 19,991 22,533 663 21,502 531 134 19,991 2Q02 FY2002 1Q03 2Q03 2002 Operating Forex Financial Changes in 2Q03 Dividends Cons. & FCF Investm. others EX
Slide 22: Jan-Jun 2003 cash flow statement
JAN-JUN 2003 CASH FLOW STATEMENT (Euros in millions) Jan-Jun 2003 I Cash flows from operations 5,753.6 II Other payment related to operating activities (443.7) III Net interest payment (759.7) IV Payment for income tax (114.4) A= I+II+III+IV Net cash provided by operating activities 4,435.8 B Net pa
Slide 23: Conclusions
CONCLUSIONS UNDERLYING OPERATING PERFORMANCE IS IMPROVING ACROSS THE GROUP AND FALLS IN LINE WITH YEAR END TARGETS REVENUES ARE RECOVERING IN THE SECOND QUARTER, REFLECTING SOLID SPANISH OPERATIONS AND THE STEADY PROGRESS OF LATAM UNDERLYING OPERATING PERFORMANCE FOREX IS PROGRESSIVELY REDUCIN
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