Telefonica Sa · BME:TEF
Telefonica Sa — 1H 2005 Earnings Presentation
29 slides from Telefonica Sa's earnings presentation, Jul 28, 2005
Slide 1: Quarterly Results January – June 2005
Quarterly Results January – June 2005 July 28th, 2005 Telefónica, S.A. Investor Relations This presentation is being broadcast live on the Internet
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
Slide 3: 1H05 financial highlights: nurturing top-line growth…
1H05 financial highlights: nurturing top-line growth… % Change Quarterly Results % Change 1H05/1H04 January – June 2005 Jan-Jun Jan-Jun 1H05/1H04 organic(1) 2005 2004 Revenues 17,359.7 14,469.9 +20.0% +10.1% Operating Expenses(2) (11,022.2) (8,945.2) +23.2% Operating Income 6,621.4 5,740.3 +15.3% +6
Slide 4: …that flows down the P&L by successfully managing non-operating results
…that flows down the P&L by successfully managing non-operating results € in Millions (% change y-o-y) Quarterly Results January – June 2005 +10.1 p.p. +15.3% +21.4% +25.4% 6,621.4 +5.2 3,528.4 (c.s.) -3,093.0 (+9.2%) -733.7 (+22.6%) 1,835.1 -806.7 -158.1 (+25.9%) (+32.1%) 1H05 D&A 1H05 Associates F
Slide 5: The diversification advantage, leveraging on the value of being an integrated operator
The diversification advantage, leveraging on the value of being an integrated operator Contribution to revenue growth Contribution to Operating Income before Quarterly Results D&A (OIBDA) growth January – June 2005 +15.4 p.p. +20.0% +2.0 p.p. +15.3% -0.3 p.p. +5.3 p.p. +4.6 p.p. +2.8 p.p. +3.5 p.p.
Slide 6: The evolution of foreign currencies is positively contributing to Group´s growth…
The evolution of foreign currencies is positively contributing to Group´s growth… Revenues: constant vs current OIBDA: constant vs current (€ in Millions) (€ in Millions) Quarterly Results +20.0% y-o-y growth rate +15.3% January – June 2005 +1.2 p.p. +1.3 p.p. +18.8% +14.0% 17,187.4 +172.3 17,359.7
Slide 7: …supporting our solid underlying revenue performance…
…supporting our solid underlying revenue performance… Quarterly Results January – June 2005 Revenue growth evolution (1) Organic revenue growth (2) (constant currency) % Change % Change 1Q05/1Q04 1H05/1H04 TdE Group +6.0% +5.4% 10.1% Cell. Business +36.6% +40.6% 9.2% T. LATAM +3.4% +6.5% Group +17.3
Slide 8: …that is being driven by commercial initiatives to strengthen market position
…that is being driven by commercial initiatives to strengthen market position Repositioning Marketing new products Running focused Quarterly Results our brands & pricing schemes promotions January – June 2005 Group retail ADSL net additions Group cellular net additions (Thousands) (Thousands) Spain
Slide 9: The drive on revenues and customers are impacting costs and margins...
The drive on revenues and customers are impacting costs and margins... Quarterly Results Operating costs growth (1) 1H05 contribution to OpEx(1) growth January – June 2005 23.2% +21.3 p.p. -1.7 p.p. +23.2% 18.2% +1.2 p.p. +2.4 p.p. 1Q05 1H05 TdE T. Latam Cellular Others & Total Group Group business
Slide 10: …with cash generation remaining at healthy levels backed by wireline
…with cash generation remaining at healthy levels backed by wireline CapEx breakdown by division CapEx breakdown: traditional vs growth (€ in Millions) (€ in Millions) Quarterly Results Group % Change % Change January – June 2005 50% of growth at TEM (GSM/CDMA + 2.5G/3G). Total 1H05/1H04 1H05/1H04
Slide 11: Evolution of guidance
Evolution of guidance Group Revenues (€ in Millions) +18.8% 2005 target Quarterly Results +12%/+15% January – June 2005 17,359.7 17,187.4 14,469.9 1H04 1H05 1H05 Reported Reported Adjusted for guidance Group OIBDA 2005 target Group OI 2005 target (€ in Millions) +10%/+13% (€ in Millions) +12%/+18% +
Slide 12: Telefónica de España Group: managing business lines to drive top line growth…
Telefónica de España Group: managing business lines to drive top line growth… Defend traditional Drive broadband Lead Data & IT Quarterly Results business growth opportunities January – June 2005 Traditional Services Internet & Broadband Services IT & Data Services (€ in Millions) (€ in Millions) (€
Slide 13: … and keep a solid OIBDA margin despite the increase in supplies and commercial costs…
… and keep a solid OIBDA margin despite the increase in supplies and commercial costs… TdE Group OpEx breakdown (€ in Millions) Quarterly Results +9.4% +3.0% +12.7% January – June 2005 Annual growth rate 96.9 3,797.3 +11.7% 638.7 1,486.3 -7.4% 1,575.4 -0.5% Remaining Personnel Costs -18.6% E.R.E. Pr
Slide 14: …to close the quarter in line with our expectations for the end of the year
…to close the quarter in line with our expectations for the end of the year TdE Group OIBDA guidance Quarterly Results (€ in Millions) Adjustments for OIBDA guidance calculations January – June 2005 1H04 1,941.1 -46.2 1,894.9 1H05 2,141.5 -20.5 2,121.0 Growth 10.3% +11.9% TdE Group OIBDA: 1H05 vs gu
Slide 15: Telefónica de España parent: traditional services
Telefónica de España parent: traditional services Lines evolution Pre-selected lines net adds (Thousands) (Thousands) 2Q04 3Q04 4Q04 1Q05 2Q05 Quarterly Results 230.2 -72.9% 62.4 January – June 2005 Access lines 69.9 70.1 17.4 85.1 29.9 net losses - Full ULL 17.0 16.6 20.7 21.8 20.2 122.7 90.0 83.2
Slide 16: Telefónica de España: Keeping BB market share under a highly competitive scenario
Telefónica de España: Keeping BB market share under a highly competitive scenario Retail BB net adds market share (*) Retail BB market share (*) Quarterly Results 2P offers by competitors 57.3% 62.1% January – June 2005 57.8% 58.1% 55.5% 54.2% 54.1% 53.5% -2.6 p.p. -1.3 p.p. -0.1 p.p. 44.0% 38.0% 2Q
Slide 17: Telefónica Latinoamérica: accelerating top-line performance across divisions…
Telefónica Latinoamérica: accelerating top-line performance across divisions… Revenues +12.5% Quarterly Results (€ in Millions) y-o-y growth rate (1) January – June 2005 +6.5% 2005 target +4%/+7% +3.4% 2Q05 growing at 9.7% in 3,496.5 +195.6 3,692.1 constant currency terms 1,716.2 Forex adding 6
Slide 18: …with the fast progression of broadband connectivity in the region…
…with the fast progression of broadband connectivity in the region… Total ADSL Connections 1,738.4 (Thousands) 1.7x Quarterly Results 1H04 January – June 2005 1H05 1.6x 976.1 1,014.0 605.5 2.2x 1.5x 2.0x 238.5 247.6 275.8 109.0 164.5 134.9 Telesp TASA CTC TdP (1) T. Latam Broadband revenue growth by
Slide 19: …being coupled with our capacity to extract value from the traditional business
…being coupled with our capacity to extract value from the traditional business Quarterly net adds of traditional lines 1Q05 Quarterly Results (Thousands) 2Q05 January – June 2005 Traditional lines +1.8% +3.6% +2.7% +10.7% GDP & population y-o-y growth rate growth +78.4 +50.5 +50.1 +48.9 +43.1 C
Slide 20: And we are keeping our focus on profitable growth
And we are keeping our focus on profitable growth Adjusted OIBDA (1) +15.0% Quarterly Results (€ in Millions) y-o-y growth rate (1) January – June 2005 +8.9% 2005 target +6%/+9% +6.5% 2Q05 growing at 11.6% in 1,569.9 +88.4 1,658.3 constant currency terms 771.9 Forex adding 6 p.p. to organic grow
Slide 21: Higher financial expenses due to a larger debt level in Latin America
Higher financial expenses due to a larger debt level in Latin America Evolution of financial expenses Evolution of average total debt (€ in Millions) (€ in Millions) 5.3% Quarterly Results Average Effective Debt 27,753 January – June 2005 Service Rate (1) +10.7% 4.8% 733.7 25,075 +22.6% 598.5 1H04 1
Slide 22: Cash flow & Debt reconciliation
Cash flow & Debt reconciliation Adjusted FCF (€ in Millions) 387.0 201.4 2,614.4 2,800.0 Quarterly Results January – June 2005 Net FCF Commitments Dividends FCF post after CapEx Amortization to Minorities (1) Minorities Net Financial Debt reconciliation (€ in Millions) 1,865.5 27,990.5 3,455.3 387.0
Slide 23: Share buyback program progress report
Share buyback program progress report Evolution of shares in treasury Quarterly Results (in Millions) Options for an additional 29 million January – June 2005 shares, expiring in 2006 29.7 252.1 246.1 23.6 Treasury stock Acquisition Distribution/Cancellation Treasury stock 15 Feb.-05 of shares of sh
Slide 24: Conclusions
Conclusions We are delivering on our commitment to push top-line up, Quarterly Results January – June 2005 with organic growth accelerating sequentially, mainly driven by the cellular business The evolution of foreign currencies is adding to the Group´s underlying performance, a reflection of st
Slide 25: Appendix: updated 2004 IFRS key financial metrics
Quarterly Results January – June 2005 Appendix: updated 2004 IFRS key financial metrics Telefónica, S.A. Investor Relations 25
Slide 26: Reconciliation of Equity 31/12/04 under IFRS
Reconciliation of Equity 31/12/04 under IFRS € in Millions As of December 31, 2004 Quarterly Results January – June 2005 Parent shareholder’s equity under Spanish GAAP 16,225.1 Goodwill and fair value adjustments in business combinations (3,341.7) Treasury shares and equity instruments (846.8) Reven
Slide 27: Reconciliation of Debt 31/12/04 under IFRS
Reconciliation of Debt 31/12/04 under IFRS € in Millions As of December 31, 2004 Quarterly Results January – June 2005 Consolidated Net Financial Debt & Commitments under Spanish GAAP 24,614 Net Financial Debt 20,982 Commitments related to guarantees 609 Net commitments related to workforce reductio
Slide 28: Reconciliation of P&L metrics under IFRS
Reconciliation of P&L metrics under IFRS FY 2004 € in Millions Quarterly Results Revenues Operating Income Operating Net profit January – June 2005 Before D&A Income Spanish GAAP 30,321.9 13,215.4 7,235.3 2,877.3 Goodwill & Fair Value adjust. (60.1) 9.7 84.8 455.0 in Business Combinations Financial
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