Telefonica Sa · BME:TEF

Telefonica Sa — H1 2006 Earnings Presentation

23 slides from Telefonica Sa's earnings presentation, Jul 27, 2006

  1. Slide 1: Quarterly Results January – June 2006

    Quarterly Results January – June 2006 July 27th, 2006 Telefónica, S.A. Investor Relations This presentation is being broadcast live on the Internet

  2. Slide 2: Disclaimer

    Disclaimer This document 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 Quarterly Results number of places in this document and include statements regar

  3. Slide 3: A very attractive set of financials in 1H06…

    A very attractive set of financials in 1H06… € in Millions Quarterly Results (% change y-o-y) % Change % Change January – June 2006 Jan-Jun Jan-Jun % Change 1H06/1H05 1H06/1H05 2006 2005 1H06/1H05 ex-forex 1 Organic 2 Revenues 25,162.5 17,186.4 +46.4% +41.0% +7.7% Operating Income before D&A 9,242.4

  4. Slide 4: …from top to bottom

    …from top to bottom € in Millions (% change y-o-y) +40.9% +40.8% +40.3% Quarterly Results January – June 2006 9,242.4 4,896.9 -4,345.5 39.4 (+41.0%) (n.m.) -1,190.6 (+63.0%) 2,574.0 -1,001.7 -169.9 (+27.0%) (+32.0%) 1H06 D&A 1H06 Associates Financial Taxes Minorities & 1H06 OIBDA Operating results D

  5. Slide 5: Healthy growth in clients to secure a distinctive top-line growth profile in the sector

    Healthy growth in clients to secure a distinctive top-line growth profile in the sector Mobile Accesses Retail Internet BB Accesses Pay TV Accesses Quarterly Results 1 (Organic growth, thousands) (Organic1 growth, thousands) (Organic1 growth, thousands) January – June 2006 134,608 +47.5% 6,728 783 +

  6. Slide 6: Deeper cost contention to drive profitability

    Deeper cost contention to drive profitability OpEx1 Organic Growth 1H06 Organic OpEx1 breakdown 2/3 of Opex Growth -5.9 p.p. +2.0p.p. +9.6% Quarterly Results January – June 2006 +15.5% +14.0% +2.9 p.p. +12.2% +3.3 p.p. +12.0% +9.6% +0.8 p.p. +0.6 p.p. 1H05 9M05 FY05 1Q06 1H06 TdE T. Latam TEM T. O2

  7. Slide 7: Cash flow remains solid across businesses

    Cash flow remains solid across businesses 1H06 CapEx evolution 1H06 CapEx breakdown (€ in Millions) (€ in Millions) +59.5% Quarterly Results +1.9% +41.1% (2) January – June 2006 +0.2% 1,054.6 192.6 3,021.6 3,021.6 -15.3% 2,925.9 2,930.5 +22.6% 678.9 +10.0% 419.3 1,894.9 675.9 1H05 1H05 1H06 1H06 TdE

  8. Slide 8: 1H06 performance is in-line with year-end targets

    1H06 performance is in-line with year-end targets Group Revenues 2006 target (€ in Millions) +34%/+37% +40.4% Quarterly Results January – June 2006 25,162.5 24,129.4 17,186.4 -1,033.1 1H05 1H06 Adjustments 1H06 reported reported for guidance adjusted for guidance Group OIBDA 2006 target Group OI 200

  9. Slide 9: Telefónica de España Group: solid underlying revenue growth…

    Telefónica de España Group: solid underlying revenue growth… Contribution to Telefónica de España Group y-o-y growth +2.6% Quarterly Results 1H06 Revenue Growth 2006 target +2.4p.p. -0.6p.p January – June 2006 +4.1p.p. +0.3p.p. +0.4p.p. +1.8% +0.5%/+2% -0.5p.p. -1.9p.p. Traditional Traditional Inter

  10. Slide 10: …matched with cost contention…

    …matched with cost contention… TdE Group OpEx Breakdown (€ in Millions) +4.5% -4.0% -4.1% Quarterly Results 101.3 3,644.5 January – June 2006 -0.6% 627.8 1,449.6 -7.6% Annual 1,465.8 growth rate +1.2% Remaining Personnel Costs -25.3% Redundancy Provisions + Actuarial revision Personnel Supplies Exte

  11. Slide 11: …in a scenario where the pressure on the traditional business…

    …in a scenario where the pressure on the traditional business… Accesses Evolution Pre-selected Lines Net Adds (in thousands) 2Q06 (in thousands) Quarterly Results January – June 2006 Fixed Telephony Accesses (June-06) 16,019.7 Change vs. June-05 (%) -1.3% +3.8 2Q05 4Q05 1Q06 2Q06 Fixed Telephony Acc

  12. Slide 12: …is being offset by the drive to develop broadband penetration

    …is being offset by the drive to develop broadband penetration Quarterly Results „ Spanish market reaches 5.85 Million Internet BB accesses as of June January – June 2006 2006 with net adds of +0.35 M. Internet BB accesses in 2Q06. „ Telefónica de España Internet Broadband connectivity ARPU down 9%

  13. Slide 13: Telefónica Latinoamérica: sustaining top-line growth across the region…

    Telefónica Latinoamérica: sustaining top-line growth across the region… 1H06 revenues 1H06 contribution to revenue growth by company (€ in Millions) (in €, constant currency) Quarterly Results +0.3 p.p. +4.4% January – June 2006 +4.4% 2006 target(*) +0.3 p.p. +0.1 p.p. +4%/+6% +1.1 p.p. +23.2% 4,660

  14. Slide 14: …by capitalizing on broadband development…

    …by capitalizing on broadband development… Retail Internet BB Connections (Thousands) 2,589 +49.8% Quarterly Results 1H05 January – June 2006 1H06 1,728 +40.7% 1,382 983 +77.7% +40.9% +70.8% 409 409 389 239 230 276 Telesp TASA T.Chile TdP 1 T. Latam 2 Broadband revenue growth Contribution of Interne

  15. Slide 15: …while keeping a focus on efficiency through local and regional management

    …while keeping a focus on efficiency through local and regional management Operating expenses growth1 Adjusted OIBDA 2 Quarterly Results (Local currency) (€ in Millions) January – June 2006 +21.6% 2006 target 2 y-o-y growth +5.3% rate +6.0% +3%/+5% 2,004.4 +4.5% 1,735.8 +268.5 1H06 Forex 1H06 1Q06 1

  16. Slide 16: O2 UK: revenue growth underpinned by strong customer and ARPU growth

    O2 UK: revenue growth underpinned by strong customer and ARPU growth Evolution of client base Quarterly Results (in thousands) January – June 2006 16,814 ƒ 474,000 net new subs. in Service Revenues 14,616 +15.0% 2Q06, more than double (£ in Millions) 2Q05 figure 10,941 1,692 9,598 +14.0% ƒ +29% in t

  17. Slide 17: O2 Germany: solid client growth offsets pressures on ARPU

    O2 Germany: solid client growth offsets pressures on ARPU Evolution of client base Quarterly Results (in thousands) January – June 2006 ƒ 236,000 net new clients in 10,335 2Q06 Service Revenues 8,388 +23.2% (€ in Millions) 5,143 ƒ 50.2% of total base on 1,238 3,888 +32.3% contract at the end of 2Q06

  18. Slide 18: The solid performance of UK leads us to upgrade its service revenue guidance

    The solid performance of UK leads us to upgrade its service revenue guidance Quarterly Results Service Revenue Growth O2 UK January – June 2006 16.6% 14.9% UPGRADED FROM +6%/+9% 1Q06 2Q06 TO „ Strong client growth (474k added in 2Q06 vs 359k in 1Q06) +8%/+11% „ Churn control through branding & loyal

  19. Slide 19: T. O2 Czech Republic: underlying trend on track with guidance

    T. O2 Czech Republic: underlying trend on track with guidance % Change € in Millions Jan-Jun Jan-Jun % Change 1H06/1H05 (% change y-o-y) 2005 2006 1H06/1H05 local currency Quarterly Results January – June 2006 Revenues 998.0 1,048.9 +5.1% -0.1% OIBDA 458.3 509.1 +11.1% +5.2% OIBDA Margin 45.9% 48.5%

  20. Slide 20: Actively managing liabilities to limit the impact of higher gearing

    Actively managing liabilities to limit the impact of higher gearing 1H06 1H05 Quarterly Results Net Interest Expenses (1,192.4) (871.6) +36.8% January – June 2006 FX Results 1.8 141.1 Reported Financial Expenses (1,190.6) (730.5) +63.0% Average Total Net Debt Evolution of Average Effective (€ in Mil

  21. Slide 21: Cash Flow & Debt: starting to de-lever

    Cash Flow & Debt: starting to de-lever 2Q06 Net Financial Debt Evolution (€ in Millions) Quarterly Results 2.8x 2.7x 2.8x January – June 2006 OIBDA2 OIBDA3 OIBDA2 53,890.4 +1,432.3 +110.7 +1,954.1 54,922.1 52,968.0 52.9 Bn.€ +216.3 -368.1 -2 Bn.€ -2,313.6 554.3 M€ for debt reduction Net Fin. Debt FC

  22. Slide 22: Conclusions

    Conclusions „ Financial performance remains solid across the P&L, with high Quarterly Results single digit organic revenues and OIBDA growth January – June 2006 „ Underlying margins are sustained despite strong subscriber growth and intense competitive environments „ Top-line growth is being success

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