Telefonica Sa · BME:TEF

Telefonica Sa — Q1 2007 Earnings Presentation

29 slides from Telefonica Sa's earnings presentation, May 16, 2007

  1. Slide 1: Annual Results January – March 2007

    Annual Results January – March 2007 TELEFONICA S.A. May 16th, 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: Sustaining top financial performance in 1Q07…

    GROUP FINANCIALS Sustaining top financial performance in 1Q07… € in millions (% change y-o-y) Jan-Mar Jan-Mar % Change % Change 1Q07/1Q06 2007 2006 1Q07/1Q06 organic 1 Revenues 13,747 11,946 +15.1% +7.8% Operating Income before D&A 5,106 4,657 +9.6% +5.9% (OIBDA) Operating Income 2,710 2,356 +15.0%

  4. Slide 4: …with solid underlying EPS, up by more than 20%...

    GROUP FINANCIALS …with solid underlying EPS, up by more than 20%... € in millions (% change y-o-y) +9.6% +15.0% +7.7% „ 231 M€ (O2’s PPA) „ 39 M€ (Cesky’s PPA) 5,106 2,710 -2,396 +35 (+4.1%) (+60.2%) -768 1,257 (+47.1%) -656 -65 (+6.9%) (-14.5%) 1Q07 OIBDA D&A 1Q07 OI Associates Financial results Ta

  5. Slide 5: …as we leveraged our diversification, with a solid position in each business…

    GROUP FINANCIALS …as we leveraged our diversification, with a solid position in each business… 1Q07 Revenue breakdown by region 1Q07 Revenue breakdown by business Others & eliminations Others & eliminations 4% T. España Fixed services 3% T. O2 Europe 37% (traffic & access) Mobile services 26% 33% 57

  6. Slide 6: …and a continuous focus on cost management to keep profitability

    GROUP FINANCIALS …and a continuous focus on cost management to keep profitability OpEx1 Organic2 Growth Organic2 OIBDA Margin -0.7 p.p. +12.2% 37.9% 37.2% +9.0% +8.1% 2005 2006 1Q07 1Q06 1Q07 1Q07 OIBDA Margin 48.5% 36.6% 37.1% 26.4% T. España T. Latam T.O2 Europe Group (1) Supplies, Personnel Expen

  7. Slide 7: Telefónica España: strong quarter on growth & profitability

    TELEFÓNICA ESPAÑA Telefónica España: strong quarter on growth & profitability Revenues OIBDA OIBDA Margin (€ in millions) (€ in millions) (%) +5.5% +10.7% +2.3p.p. 5,033 2,439 48.5% 4,772 2,205 46.2% 1Q06 1Q07 1Q06 1Q07 1Q06 1Q07 „ Sound top line growth driven by customer expansion „ Healthy profita

  8. Slide 8: Telefónica España: high commercial activity focused on value customers

    TELEFÓNICA ESPAÑA Telefónica España: high commercial activity focused on value customers -1.2% 15,949.9 -29.6 15,920.3 Fixed Telephony Total accesses Accesses (in thousands) (in thousands) Dec06 Mar07 +5.5% 44,152.6 +604.0 44,756.6 +31.2% +250.1 3,992.7 3,742.7 Retail Internet Broadband Accesses (in

  9. Slide 9: Wireline Business: leading Broadband and PayTV

    TELEFÓNICA ESPAÑA WIRELINE BUSINESS Wireline Business: leading Broadband and PayTV Retail Internet BB Accesses (in millions) 30.1% +31.2% 7.1 5.5 Sustained market share at 56% after 4.0 capturing same share of net adds 3.0 Mar06 Mar07 Mar06 Mar07 MARKET TELEFÓNICA ESPAÑA Pay TV subscribers (in milli

  10. Slide 10: Wireline Business: ongoing ARPU growth to push top line

    TELEFÓNICA ESPAÑA WIRELINE BUSINESS Wireline Business: ongoing ARPU growth to push top line ARPU MAJOR DRIVERS (€/month) „ Expanding BB customer base +6.7% 66 62 9 25.1% of lines have BB (18.9% in 1Q06) „ Promoting 2P/3P (ARPU uplift & loyalty) 9 75% of retail BB accesses with 2P/3P 9 Retail BB VAS

  11. Slide 11: 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 1Q07/1Q06 (€ in millions) +12.4% -7.5 p.p. -0.2 p.p. 1.1 p.p. ahead +4.7% of revenue growth (+3.6%) Reported Lower E.R.E. Subsidies, Real Underlying provision in 1

  12. Slide 12: Wireless Business: strong 1Q07 performance focused on value

    TELEFÓNICA ESPAÑA WIRELESS BUSINESS Wireless Business: strong 1Q07 performance focused on value Customer growth (y-o-y) „ 57% contract mix (54% in Mar06) „ Total net adds: 368,000 in 1Q07 vs 387,000 in 1Q06 >21.8M +13.4% „ Blended churn: 1.8% (-0.1 p.p. vs 1Q06) „ Strong push on loyalty: ~1.2 M hand

  13. Slide 13: Wireless Business: stimulation of voice and data usage

    TELEFÓNICA ESPAÑA WIRELESS BUSINESS Wireless Business: stimulation of voice and data usage 1Q07/1Q06 OUTGOING (y-o-y growth rates) 1Q07/1Q06 Data Revenue growth Highest y-o-y Data ARPU +71% growth since 4Q05 +5.8% +27% +5.3% +14% +0.6% Non P2P SMS Connectivity Total TOTAL ARPU 1 -0.4% revenues VOICE

  14. Slide 14: Wireless Business: healthy top line performance & robust OIBDA growth

    TELEFÓNICA ESPAÑA WIRELESS BUSINESS Wireless Business: healthy top line performance & robust OIBDA growth 1Q07/1Q06 Revenues +7.9% Comparable growth 1 Handset Revenues +14.3% Service Revenues +7.0% +6.7%1 Service Revenue „Customer base: +7.6% vs Mar06 Customer revenues +10.0% +8.4% 1 „Outgoing ARPU:

  15. Slide 15: Telefónica O2 Europe: proactively tackling mobile pressures & selectively exploiting BB growth opportunities

    TELEFÓNICA O2 EUROPE Telefónica O2 Europe: proactively tackling mobile pressures & selectively exploiting BB growth opportunities Revenues 1 OIBDA 1 OIBDA Margin 1 (€ in millions) (€ in millions) (%) +46.7% +23.3% -5.0p.p. 3,534 933 2,409 756 31.4% 26.4% 1Q06 1Q07 1Q06 1Q07 1Q06 1Q07 „ UK: positive

  16. Slide 16: O2 UK: healthy top-line pushed by customer and ARPU growth

    TELEFÓNICA O2 EUROPE UK O2 UK: healthy top-line pushed by customer and ARPU growth Mobile customer growth Average Revenue per User Revenues (y-o-y) (quarterly monthly average, in £) (Organic1, £ in millions) 17.8M 1,180 +10.2% +10.8% +0.8% 22.3 1,070 +8.6% +7.5% 22.2 35.5% of base (+0.7 p.p.) Total

  17. Slide 17: O2 Germany: management focus on ARPU potential amid competitive pressures

    TELEFÓNICA O2 EUROPE GERMANY O2 Germany: management focus on ARPU potential amid competitive pressures Mobile customer growth Average revenue per User Revenues (y-o-y) (quarterly monthly average, in €) (Organic1, € in millions) 11.2M 869 -3.0% 24.1 843 +12.5% -14.8% +10.7% +9.0% 20.5 49.8% of base (

  18. Slide 18: T.O2 Czech Republic: delivering a solid financial performance through a tight operational focus

    TELEFÓNICA O2 EUROPE CZECH REPUBLIC T.O2 Czech Republic: delivering a solid financial performance through a tight operational focus Increasing the value proposition for fixed and mobile Operating revenues Broadband 1Q07 trends (CZK in billions) (y-o-y) +54.5% +56.2% ƒ Promote bundles +2.6% 15.1 (O2

  19. Slide 19: Telefónica Latinoamérica: solid fundamentals driven by mobile and broadband

    TELEFÓNICA LATAM Telefónica Latinoamérica: solid fundamentals driven by mobile and broadband Revenues OIBDA OIBDA Margin (€ in millions) (€ in millions) (%) +8.5% +12.1% +1.2p.p. 4,685 1,713 36.6% 4,317 1,528 35.4% 1Q06 1Q07 1Q06 1Q07 1Q06 1Q07 „ Sound top line growth driven by mobile expansion „ He

  20. Slide 20: Healthy growth in revenues and OIBDA in all major markets

    TELEFÓNICA LATAM Healthy growth in revenues and OIBDA in all major markets Revenues OIBDA 1Q07 % 1Q07 % (€ in millions) change1 (€ in millions) change1 Integrated „ Brazil 2 1,801 +2.8% 749 +2.8% „ Argentina 561 +21.0% 217 +29.7% „ Chile 423 +10.0% 164 +22.5% „ Peru 370 +9.7% 144 +0.3% „ Colombia 35

  21. Slide 21: A consistent push to lead broadband across the region

    TELEFÓNICA LATAM BROADBAND A consistent push to lead broadband across the region Retail Internet BB connections1 Pay TV clients (in thousands) (in thousands) +38.1% 4,045.6 2,928.7 Close to 25% +43.1% 700.1 on DTH +19.5% 489.3 ƒ 129,100 clients in Chile 222.1 265.3 ƒ 30,300 clients in Peru ƒ 10,000

  22. Slide 22: Brazil wireless: improving financial results amid a very competitive environment

    TELEFÓNICA LATAM VIVO Brazil wireless: improving financial results amid a very competitive environment Net Adds MoU ARPU Excluding B&K effect (Thousands) (minutes) (local currency) +19.0% Total +12.9% Contract 30.6 1,072 25.7 75 67 26.1 133 144 +2% -23 1Q06 1Q07 1Q06 1Q07 20061 1Q07 Service revenue

  23. Slide 23: Mexico wireless: strong commercial momentum leads to very healthy revenue & OIBDA growth

    TELEFÓNICA LATAM MEXICO Mexico wireless: strong commercial momentum leads to very healthy revenue & OIBDA growth Gross adds Net adds Blended churn Customer growth (in thousands) (in thousands) (%) (y-o-y) 4.2 +57% x4 >9.3M 766 2.9 1,578 +47% 1,002 +42% +42% 191 1Q06 1Q07 1Q06 1Q07 1Q06 1Q07 Total Co

  24. Slide 24: Key highlights for other Latam mobile operations

    TELEFÓNICA LATAM REST OF MOBILE Key highlights for other Latam mobile operations 1Q07/1Q06 1Q07/1Q06 y-o-y growth 1Q07customer 1Q07/1Q06 OIBDA service revenue outgoing service base (M) margin growth1 revenue growth1 ARGENTINA 11.8 +33% +27% +31% 29.0% +6.3 p.p. VENEZUELA 9.1 +36% +36% +41% 46.5% +4.

  25. Slide 25: 1Q07 synergies are totally aligned with year-end target, leveraging our top initiatives

    GROUP SYNERGIES 1Q07 synergies are totally aligned with year-end target, leveraging our top initiatives OpCF from synergies 2007E OpCF from synergies 1Q07 (€ in millions) (€ in millions) 2007 top priorities for synergies generation „ Regionalization ~23% 9 Branding & commercial campaigns 23 11 182 9

  26. Slide 26: Pro-active management of cost of debt

    GROUP FINANCIAL EXPENSES Pro-active management of cost of debt 1Q07 1Q06 Net Interest Expenses (751) (517) +45.1% FX Results (17) (5) Reported Financial Expenses (768) (522) +47.1% Evolution of effective debt service rate 1 Breakdown of net debt by currency (1Q07/2006) (March 07) EUR 56% USD 2006 av

  27. Slide 27: Progressing on de-leveraging

    GROUP DEBT Progressing on de-leveraging 1Q07 Net Financial Debt Evolution (€ in million) 2.7x 2.5x OIBDA1 OIBDA1 +201 52,145 +744 51,884 -469 +214 -950 Net Fin. Debt FCF Commitments Share Net Financial Change in Net Fin. Debt Dec. 06 post-minorities cancellation Buyback Investments consolidation, Ma

  28. Slide 28: Conclusions

    Conclusions 1.Showing commercial momentum across countries and businesses „ 206.5 M accesses, +11.4% 2.Retaining benchmark organic growth from top to bottom „ +7.8% in Revenues & +22.5% in EPS 3.Benefiting from diversification, pushing on our distinctive growth levers „ +11.4% organic growth of mobi

  29. Slide 29: Slide 29

Telefónica — Q1 2007 Earnings Presentation on 6ix