Telefonica Sa · BME:TEF
Telefonica Sa — Investor Day (March 2002)
32 slides from Telefonica Sa's investor day presentation, March 2002
Slide 1: Building Value
Second Investor Conference March 2002, Sevilla Building Value César Alierta Chairman & CEO Telefónica S.A.
Slide 2: Objectives for these two days
Objectives for these two days • Review the progress since Río, during a difficult year • Update Group’s strategy • Understand why our strengths and strategic plan make us different • Communicate a clear picture of divisional performance and outlook • Have an opportunity to meet Telefónica’s senior m
Slide 3: Contents
Contents • Progress since Río 2001 • Telefónica’s strengths • Telefónica’s Strategic Vision 3
Slide 4: Progress since Río 2001 - Telefónica performance during a difficult year
Progress since Río 2001 - Telefónica performance during a difficult year 4
Slide 5: Telefónica today
Telefónica today Scale & breadth Performance • 78 Million clients • One of the most efficient Telcos in the world • Operating in 17 countries • Best credit rating among • Participating in all key European incumbent Telcos businesses (Wireline, wireless, data, internet, media/ content) • Outperformin
Slide 6: Our Challenge - Building Value
Our Challenge - Building Value • Improve returns from core assets – Focus on customer innovation, service and quality to drive top line Organic growth – Continue efficiency improvements to drive bottom line • Strengthen Business Lines by leveraging all group assets across the customer base • Selecti
Slide 7: Highlights 2001 (I): Wireline
Highlights 2001 (I): Wireline SPAIN LATAM Largest EBITDA contributor even in difficult TdE: Return to EBITDA growth (+1.3%) macroeconomic environment Successfully defended market share and Top level EBITDA margin (51%) margins (EBITDA margin: 44%) Significant cost cutting and conservative
Slide 8: Highlights 2001 (II): Wireless
Highlights 2001 (II): Wireless 26% OF CONSOLIDATED EBITDA 29.8 MM CLIENTS* Becoming the European benchmark on business execution: Record EBITDA margin (49%; + 12pp) Spain Strong increase in customer base (+23%) coupled with reductions in SAC+SRC & churn rates Expanding market share gap with 2n
Slide 9: Highlights 2001 (III): Other businesses
Highlights 2001 (III): Other businesses Delivering proforma revenue growth (+22% yoy) and improving profitability Terra Lycos (24 pp improvement in EBITDA margin) (Internet) Record 55% growth in pay subs (1.7 MM pay subs as of Dec’01) T Data Incumbent data operations met Rio expectations (Data
Slide 10: 2001 - Financial Highlights
2001 - Financial Highlights Eur mn 2001 Change CASH & RETURNS • Significant FCF growth FCF * 2,292 218% • Top ROCE among major CAPEX ** 7,923 (12.9%) European Incumbent Telcos ROCE *** 7.9% 0.6 pp • Lowest Intangible assets to total asset ratio P&L Revenues 31,053 9.0% • Growth rates on track with R
Slide 11: Telefónica Operations in Argentina
Telefónica Operations in Argentina Impact of crisis Action taken z Devaluation effects: z Actively working towards renegotiation of the regulatory framework Total 2001 P&L effect (Eur 369 mn) z Drastic Efficiency Measures Additional Shareholder Equity impact in 2001 (Eur 1.4 bn) Active negotia
Slide 12: Telefónica's strengths: A solid base for Building Value
Telefónica’s strengths A solid base for Building Value 12
Slide 13: A solid base for Building Value
A solid base for Building Value Telefónica has all of the assets required to maintain “momentum” and will take advantage of its strong position to selectively seize available opportunities in the sector • Good track record • Powerful core skill set • Solid financial position Building Shareholder Val
Slide 14: Good Track Record
Good Track Record • Consistently outperformed stock market and Telecom sector • Increased and broadened sources of revenue and EBITDA • Balance sheet strength maintained to reduce costs and keep flexibility • Created credibility in capital markets Relative Share Price Performance Sustainable Operati
Slide 15: Powerful Core Skill Set
Powerful Core Skill Set Strong Skills to Manage Growth Best Talent, Know-how and Strengthen Leadership and Assets CAGR 9% Ranking* • Strong management team broadly recognised in Managed 42.3 Spain #1 the sector 35.8 Brazil #1 Fixed Clients Argentina #1 (Million) Peru #1 • Successful track record in
Slide 16: Strong Financial Position (I)
Strong Financial Position (I) • Conservative investment strategy leading to the strongest balance sheet in the sector • Diversified cash flow resulting in reduced volatility and superior credit rating • Lower cost of debt : enhanced returns for equity investors • Increased flexibility from strong ca
Slide 17: Strong Financial Position (II)
Strong Financial Position (II) Cash Flow provides Flexibility Cash Flow generation capacity would allow full Capacity to invest debt repayment before in new opportunities maturity (6 years) 2002-2007 Accumulated cash flow Improving Rio targets (Constant FX, 2ARS/US$) Eur bn Extra EBITDA-CAPEX from n
Slide 18: Telefónica's Strategic Vision: Current Focus
Telefónica’s Strategic Vision: Current Focus 18
Slide 19: Corporate Strategy Drivers
RECENT Corporate Strategy Drivers DRIVERS CURRENT FOCUS y Focus on profitable quality y Individual Business Line customers aggressive capture of customer y Build advanced commercial and base marketing platforms for deeper segmentation and customer care y Accelerated Growth Model Customers •Fast buil
Slide 20: Customer satisfaction: our priority
Customer satisfaction: our priority RECENT DRIVERS CURRENT FOCUS • Individual Business Lines • Focus on profitability and quality encouraged to rapidly services for customers expand customer base MILLION CUSTOMERS* CAGR • Build advanced commercial and 18% 68 78 marketing platforms for deeper 56 segm
Slide 21: Services: Embracing the Digital Revolution
Services: Embracing the Digital Revolution y Infotainment The Digital &Entertainment Revolution y Digital Home ds ee y e-Company Traditional e rn Transformation tom y BroadBand Solutions l cus y Entertainment for Corporations ta y e-Administration d igi Applications y Market Places y …. fo r y VoD,
Slide 22: Services: Leveraging on Internal and External Skills
Services: Leveraging on Internal and External Skills New partnership model with New Service external contractors to achieve closer development model alignment of objectives and reinforce through Telefonica’s customer facing partnerships operations EXTERNAL Contents Access Network (Services and INTER
Slide 23: Geographic Footprint: LatAm
Geographic Footprint: LatAm Deepen Telefonica’s position in Latam and increase its contribution to the Group’s EBITDA • Expand in new high growth potential markets where we are not incumbent (e.g., Brazil beyond Sao Paulo and Mexico): 9 Organic growth (e.g., Brazil 2002) 9 JVs (e.g., Mobile JV with
Slide 24: Geographic Footprint: Europe
Geographic Footprint: Europe • Spain: Maximising Cash Flow from existing businesses and defending competitive position by enriching the current portfolio with new Broadband Services • The restructuring process of the European telecom sector will create new opportunities for Telefónica in the next fe
Slide 25: Financial: Profitable Growth
Financial: Profitable Growth 9 INCREASE OPERATING 9 GROWTH IN CUSTOMER EFFICIENCY BASE Profitable 9 EXCELLENCE IN CAPEX Growth 9 GROWTH IN USAGE OF EXECUTION CURRENT SERVICES 9 CLEAR INVESTMENT CRITERIA 9 GROWTH IN NEW SERVICES 25
Slide 26: Financial: Profitable Growth
Financial: Profitable Growth Key business priorities to deliver profitable growth 2001 Results * EBITDA Net Income (Eur mn) • Strengthen core business performance T. LATAM 5,163 1,275 TdE 4,508 1,078 • Capture growth opportunities TEM profitably (particularly increasing 3,334 893 penetration in LatA
Slide 27: Financial: Profitable Growth
Financial: Profitable Growth Increase Customer Revenues Growth Customer Growth in Usage of Growth in new Base Current Services Services Around 100MM Clients in 2004 Proactive commercial Rising ARPU mainly through Total our Broadband strategy initiatives to encourage Over 13 MM BB Clients gro
Slide 28: Financial: Profitable Growth
Financial: Profitable Growth Increase Operating Efficiency 2001 LIS/EMPLOYEE LATAM Telemar 1,287 TELESP 1,198 Brasil Telecom 1,095 • Still room for CTC 803 TASA 526 improvement in TdP 471 LIS/Employee Telecom Argentina 379 TLatAm 804 EUROPE TdE 505 • Improve OPEX to TI* 448 add efficiency gains DT*
Slide 29: Financial: Profitable Growth
Financial: Profitable Growth INVESTMENT PRINCIPLES • Focus on extension of Latin American and European •Standalone risk Markets with special attention to Brazil, Mexico, adjusted returns Western Europe and Mediterranean Basin required to be above the cost of Capital • Broadband connectivity key to e
Slide 30: In summary,
In summary, • Since we last met in Rio, we have delivered against an ambitious set of performance targets. The performance gap with our peers has widened • We will continue building value by improving returns from our core assets and seeking and developing new sources of profitable growth • Our trac
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Slide 32: Safe Harbour
Safe Harbour This presentation contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current