Telefonica Sa · BME:TEF

Telefonica Sa — 9M07 Earnings Presentation

28 slides from Telefonica Sa's earnings presentation, Nov 12, 2007

  1. Slide 1: Quarterly Results January – September 2007

    Quarterly Results January – September 2007 TELEFONICA S.A. November 12th, 2007 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 number of places in this document and include statements regarding the intent, b

  3. Slide 3: 9M07 financial highlights: Strong organic growth…

    GROUP FINANCIALS 9M07 financial highlights: Strong organic growth… € in millions 9M07 9M06 % Change % Change 9M07/9M06 (% change y-o-y) 2007 2006 9M07/9M06 organic 1 Revenues 42,014 38,704 +8.6% +7.6% Operating Income before D&A 18,248 14,654 +24.5% +6.8% (OIBDA) Operating Income 11,263 7,460 +51.0%

  4. Slide 4: …turning into a solid growth in EPS…

    GROUP FINANCIALS …turning into a solid growth in EPS… € in millions (% change y-o-y) +24.5% +51.0% +51.0% „ € 616 m (O2’s PPA) „ €117 m (T.O2 CR´s PPA) 18,248 11,263 -6,985 107 7,848 (-2.9%) (+75.6%) -2,095 -1,271 -156 (+8.6%) (-25.9%) (c.s.) 9M07 OIBDA D&A 9M07 OI Associates Financial results Taxes

  5. Slide 5: …as we leveraged our customer growth and diversification…

    GROUP FINANCIALS …as we leveraged our customer growth and diversification… Accesses Accesses by regions Accesses by business (in millions) (Sep-07/Sep-06) (Sep-07/Sep-06) +59.0% +14.9% +11.6% 218.6 +32.1% +7.8% 195.9 +5.3% +15.7% Sep-06 Sep-07 T. España T. O2 Europe T. Latam Mobile Broadband Pay TV

  6. Slide 6: …with the benefit of our scale fostering profitability…

    GROUP FINANCIALS …with the benefit of our scale fostering profitability… OpEx1 Organic Growth Organic2 OIBDA Margin Evolution -0.3 p.p. +12.2% 37.5% 35.8% 37.2% +9.0% +7.4% (2) 2005 2006 9M07 9M06 H1 07 9M07 9M07 Organic OIBDA Margin 47.8% 36.1% 37.2% 26.7% T. España T. Latam T.O2 Europe Group TELEF

  7. Slide 7: Telefónica España: delivering sound results

    TELEFÓNICA ESPAÑA Telefónica España: delivering sound results Revenues OIBDA and Underlying OIBDA (1) (€ in millions) (€ in millions) +6.3% +5.0% +7.6% 14,720 15,462 6,863 7,384 Underlying OIBDA growth (1) 9M06 9M07 9M06 9M07 „ Over 45 million accesses, posting a (+5.3%) y-o-y growth „ Wireline: Bro

  8. Slide 8: Wireline Business: TEF leads Broadband and Pay-TV growth …

    TELEFÓNICA ESPAÑA WIRELINE BUSINESS Wireline Business: TEF leads Broadband and Pay-TV growth … Fixed Telephony Accesses Retail Internet BB Accesses Pay TV subscribers (in thousands) (in thousands) (in thousands) -0.7% +27.3% +54.1% 15,978 15,865 3,411 4,344 304 469 Sep-06 Sep-07 Sep-06 Sep-07 Sep-06

  9. Slide 9: Wireline Business: superior top line growth

    TELEFÓNICA ESPAÑA WIRELINE BUSINESS Wireline Business: superior top line growth Revenue evolution (% change 9M07/9M06) Revenues +16.8% €9,219 m (9M 07) +8.8% +3.7% -1.2% Traditional Internet & Data & IT TOTAL WIRELINE Access & Voice Broadband BUSINESS „ Expanding BB customer base 9 49% of Spanish ho

  10. Slide 10: Wireline Business: strong focus on operational efficiency leading to margin improvement

    TELEFÓNICA ESPAÑA WIRELINE BUSINESS Wireline Business: strong focus on operational efficiency leading to margin improvement OIBDA Growth Q3 07/Q3 06 +5.6% +4.5 p.p. OIBDA 2.2 p.p. ahead €1,442 m of revenue (Q3 07) growth (+3.4%) +1.5 p.p. -0.4% Reported Higher E.R.E. Subsidies, Real provision in Q3

  11. Slide 11: Wireless Business: significant growth in Q3 07 focused on value

    TELEFÓNICA ESPAÑA WIRELESS BUSINESS Wireless Business: significant growth in Q3 07 focused on value CONTRACT Gross Adds Churn Number Portability Net adds (in thousands) (%) (in thousands) (in thousands) +13.1% +2.0% 539 610 72 335 342 1.0 1.0 59 Q3 06 Q3 07 Q3 06 Q3 07 Q3 06 Q3 07 Q3 06 Q3 07 Net ad

  12. Slide 12: Wireless Business: sustained ARPU on strong voice & data usage

    TELEFÓNICA ESPAÑA WIRELESS BUSINESS Wireless Business: sustained ARPU on strong voice & data usage Q3 07/Q3 06 (y-o-y growth rates) ARPU Growth OUTGOING MoU Growth INCOMING VOICE TOTAL ARPU 1 +9.3% +6.3% -1.4% -2.1% -0.8% +0.2% -14.5% VOICE DATA TOTAL Cumulative 13.9% MTR cut in Oct-06 & April-07 US

  13. Slide 13: Wireless Business: strong top line growth while improving efficiency

    TELEFÓNICA ESPAÑA WIRELESS BUSINESS Wireless Business: strong top line growth while improving efficiency 9M07 Q3 07/Q3 06 9M07/9M06 (€ in millions) Revenues 7,287 +3.6% +3.3%1 +6.1% +5.9%1 Handset Revenues 888 +6.7% +13.5% Service Revenues 6,398 +3.3% +2.9%1 +5.2% +4.9%1 Service Revenue Customer rev

  14. Slide 14: Telefónica Latinoamérica: robust access growth fully flowing to top line and OIBDA growth

    TELEFÓNICA LATAM Telefónica Latinoamérica: robust access growth fully flowing to top line and OIBDA growth Local € terms Currency Sep-07 Accesses Revenues OIBDA y-o-y growth (in millions) (€ in millions) (€ in millions) 126.5 94.7 +10.8% +10.4% 14,676 5,309 13,242 4,811 4.7 +53.2% +13.8%1 +20.2% +14

  15. Slide 15: Healthy growth in revenues and OIBDA in all major markets

    TELEFÓNICA LATAM Healthy growth in revenues and OIBDA in all major markets Excluding PIS/COFINS impact Revenues OIBDA 9M07 % 9M07 % (€ in millions) change1 (€ in millions) change1 Integrated „ Brazil 2 5,637 +3.5% 2,226 -5.4% -0.4% „ Argentina 1,678 +16.6% 605 +16.6% „ Chile 1,319 +12.3% 514 +10.3%

  16. Slide 16: Accelerating fixed transformation by fostering bundles, broadband and Pay TV

    TELEFÓNICA LATAM BROADBAND Accelerating fixed transformation by fostering bundles, broadband and Pay TV Retail Internet BB connections1 Pay TV clients (in thousands) (in thousands) +34.4% 4,704 +53.2% 880 3,500 Over 37% on 574 DTH +8.3% +36.5% ƒ 197,300 clients in Chile 298 323 ƒ 77,600 clients in P

  17. Slide 17: Brazil wireless: strong commercial activity along with robust top line and enhanced profitability

    TELEFÓNICA LATAM VIVO Brazil wireless: strong commercial activity along with robust top line and enhanced profitability 9M07/9M06 change ARPU Adjusting for B&K effect (local currency) +11.3% 31.3M 77% of Q3 Gross (22% GSM) 32.6 +204% 29.2 adds in GSM +25% 31.1 +9% +8.9% 28.6 -0.6 p.p. „ Leadership i

  18. Slide 18: Mexico wireless: strong and sustained performance in a highly competitive market

    TELEFÓNICA LATAM MEXICO Mexico wireless: strong and sustained performance in a highly competitive market Gross adds Net adds Blended churn Customer growth (in thousands) (in thousands) (%) (y-o-y) -0.6 p.p. +49% 3.1 11.1M x2.3 2.9 2.8 4,972 2.5 3,335 2,519 +49% +50% +27% 1,075 9M06 9M07 9M06 9M07 Q3

  19. Slide 19: Key highlights for other Latam mobile operations

    TELEFÓNICA LATAM REST OF MOBILE Key highlights for other Latam mobile operations 9M07/9M06 9M07/9M06 y-o-y growth Sep-07 customer 9M07 OIBDA service revenue outgoing service base (million) margin growth1 revenue growth1 ARGENTINA 13.1 +29% +22% +24% 28.9% +5.0 p.p. Strong customer growth fully flows

  20. Slide 20: Telefónica O2 Europe: maintaining momentum and positioned to exploit opportunities

    TELEFÓNICA O2 EUROPE Telefónica O2 Europe: maintaining momentum and positioned to exploit opportunities as an integrated operator Revenues1 OIBDA1 OIBDA Margin1 (€ in millions) (€ in millions) (%) +14.2% -3.2 p.p. +2.0% 9,434 10,776 29.7% 2,855 26.5% 2,798 9M06 9M07 9M06 9M07 9M06 9M07 „ UK: managin

  21. Slide 21: O2 UK: managing growth / margin balance

    TELEFÓNICA O2 EUROPE UK O2 UK: managing growth / margin balance Mobile customer growth ARPU Revenues (y-o-y) (in £) (Organic1, £ in millions) 6.5M 17.9M +7.4% +10.2% 3,738 +5.2% 24.3 3,393 23.1 +3.2% 36.5% of base (+1.4 p.p.) Total Contract Q3 06 Q3 07 9M06 9M07 „ MoU2: +10.3% y-o-y to 193 minutes „

  22. Slide 22: O2 Germany: segmented approach to capture growth in mobile and fixed BB market

    TELEFÓNICA O2 EUROPE GERMANY O2 Germany: segmented approach to capture growth in mobile and fixed BB market Mobile customer growth Mobile Net additions ULL lines 473 (y-o-y) (in thousands) 610 (in thousands) 2007 2006 12.2M 374 6x 330 +15.6% 293 +14.5% +13.3% 236 159 75 49.2% of base Total Pre-pay C

  23. Slide 23: T.O2 Czech Republic: Healthy growth based on solid fundamentals performance

    TELEFÓNICA O2 EUROPE CZECH REPUBLIC T.O2 Czech Republic: Healthy growth based on solid fundamentals performance Fixed Telephony Access Operating revenues (Quarterly net adds, in thousands) Q1 07 Q2 07 Q3 07 ƒ Fixed line losses contention trend (CZK in billions) ƒ Focus on bundling and value +3.3% 46

  24. Slide 24: 9M07 synergies very close to annual guidance

    GROUP SYNERGIES 9M07 synergies very close to annual guidance OpCF 9M07 from synergies (€ in millions) 9M07 main initiatives for synergies generation LOCAL ~20% 89% 25 1,112 2007 COMMERCIAL F-M INTEGRATION ( P&S + Channels) 169 GUIDANCE T.O.S.(3) INTEGRATION ( F-M + Combination of 3 areas) 736 ~1,250

  25. Slide 25: Stable financial profile

    GROUP FINANCIAL EXPENSES Stable financial profile Stable cost of debt Currency mix 9M07 USD EUR 4% Net Interest Expenses (2,095) 58% LATAM Total Average Debt 51,939 16% Effective Interest rate 5.39% GBP 16% CZK 6% ƒ Slight decrease in the cost of debt vs. H1 07 (-6 b.p.) ƒ Broadly stable liabilities

  26. Slide 26: De-leverage target achieved

    GROUP DEBT De-leverage target achieved 9M07 Net Financial Debt Evolution (€ in millions) 2.7x OIBDA1 2.25x OIBDA1 52,145 2.11x +3,222 OIBDA1 47,026 +587 44,004 -5,959 -4,875 -1,117 Net Fin. Debt FCF Commitments Share buy-back Net Financial Change in Net Fin. Debt Net Fin. Debt & Dec-06 Post- cancell

  27. Slide 27: Conclusions

    Conclusions 1. Strong commercial activity backed on mobile and broadband „ Accesses: 218.6 millions (+11.6% y-o-y) „ Pushing 2P/3P offers (4.8 millions as of September 07) 2. Solid growth across the board, from top to bottom „ Non-stop growth for 14th consecutive quarters in revenues, OIBDA, OI and

  28. Slide 28: Slide 28

Telefónica — 9M07 Earnings Presentation on 6ix