Telefonica Sa · BME:TEF

Telefonica Sa — FY2008 Earnings Presentation

29 slides from Telefonica Sa's earnings presentation, Feb 26, 2009

  1. Slide 1: Annual Results January-December 2008

    Annual Results January-December 2008 TELEFONICA, S.A. February 26th, 2009 TELEFONICA S.A. 1 Investor Relations

  2. Slide 2: Disclaimer

    Disclaimer This document contains statements that constitute forward looking statements about the Company including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations.. These statements appear in a number of places in this do

  3. Slide 3: 2008 key highlights

    GROUP FINANCIALS 2008 key highlights „ Robust results in a challenging environment, capitalizing our highly diversified portfolio, execution skills, and integrated business model „ Group guidance met or exceeded on all metrics, boosted by a brilliant performance in Latin America „ Outstanding organi

  4. Slide 4: A set of very strong results

    GROUP FINANCIALS A set of very strong results Jan-Dec Change Change ex-forex(1) Change organic(2) € in millions 2008 FY 08/FY 07 FY 08/FY 07 FY 08/FY 07 Revenues 57,946 +2.7% +5.6% +6.9% Operating Income before D&A 22,919 +0.4% +2.5% +14.7% (OIBDA) OIBDA Margin 39.6% -0.9 p.p. -1.2 p.p. +2.6 p.p. Op

  5. Slide 5: Robust underlying EPS growth

    GROUP FINANCIALS Robust underlying EPS growth € in millions (% change y-o-y) „ € 689 m (T. Europe´s PPA) +38.0% underlying „ € 131 m (T. O2 CR´s PPA) Telco impairment y-o-y growth(1) on its TI investment 22,919 -€209m Tax credits from sale 13,873 of Endemol in 2007 -9,046 -161 (-4.1%) (c.s.) -2,797

  6. Slide 6: Meeting Group guidance by far

    GROUP FINANCIALS Meeting Group guidance by far Revenue Growth(1) OIBDA Growth(1) +10.6% +7.3% GUIDANCE 6%/8% 9 GUIDANCE 7.5%/11% 9 % Change FY 08/FY 07 % Change FY 08/ FY 07 OI Growth(1) CapEx(1) +20.4% 9 € 8,544 m 9 GUIDANCE 13%/19% GUIDANCE ~ € 8,600 m % Change FY 08/FY 07 FY 08 TELEFONICA S.A. (1

  7. Slide 7: Leveraging a highly diversified portfolio

    GROUP FINANCIALS Leveraging a highly diversified portfolio Accesses Dec-08 (millions) 258.9 42% with voice, BB y-o-y growth 195.6 +13.2% and TV bundles 158.3 (+8 p.p. vs Dec-07) 47.3 45.8 +16.6% +18.0% 42.9 12.5 -1.2% +2.0% +9.0% 2.3 +20.9% +29.7% T. España T. Europe T. Latam Total Mobile BB Pay TV

  8. Slide 8: High conversion rate of top line growth into cash-flow

    GROUP FINANCIALS High conversion rate of top line growth into cash-flow FY 08 Organic(1) growth (y-o-y) Telefónica Group +20.2% +14.7% Leveraging efficiency +6.9% measures and scale economies Revenues OIBDA OpCF(2) Telefónica España Telefónica Latam Telefónica Europe +30.6% +14.3% +21.5% +21.8% +14.

  9. Slide 9: Strengthening our networks

    GROUP FINANCIALS Strengthening our networks CapEx +4.7% y-o-y +8.6 p.p. -0.7 p.p. -1.0 p.p. 23% „ CapEx growth driven by T. Latam: Recurrent 25% „ Expansion of mobile networks 77% Recurrent -2.2 p.p. Growth (coverage &capacity) 75% 75 „ Enhanced BB platforms Growth % „ Building a proprietary high qu

  10. Slide 10: T.España: Strong OIBDA and high cash-flow generation

    TELEFÓNICA ESPAÑA T.España: Strong OIBDA and high cash-flow generation +2.3% guidance +2% / +3.5% „ Positive revenue growth in 2008 Revenue U.S.O. (2) +1.5% growth (1) Revenues in a very challenging economic in Q3 08 (y-o-y) Q4 08 environment 9M 08 FY 08 „ Leveraging our market -0.9% leadership and

  11. Slide 11: Revenue growth slowdown trend on worse trading conditions

    TELEFÓNICA ESPAÑA Revenue growth slowdown trend on worse trading conditions +0.3p.p. +2.7% +0.2p.p. <+0.1p.p. „ 2.7%(1) wireline revenue growth in FY +2.0p.p. Contribution 08: +1.4p.p.-1.3 p.p. to Wireline „ Internet and Broadband as a key driver Revenue (+8.7% y-o-y) growth (FY08 vs FY07) „ Positiv

  12. Slide 12: Wireline Business: Sustained commercial activity fostering 2P & 3P adoption

    TELEFÓNICA ESPAÑA Wireline Business: Sustained commercial activity fostering 2P & 3P adoption 15,326 Fixed „ Fixed line losses due to full & naked shared ULL, -3.7% Telephony 77%E competition and market growth slowdown: m.s. Lines (´000) „ 0.7%(E) market growth in FY08. Negative evolution 83% Telefó

  13. Slide 13: Wireless Business: ARPU trends remain stable in Q4 08

    TELEFÓNICA ESPAÑA Wireless Business: ARPU trends remain stable in Q4 08 +6.8% Customer „ Customer growth: +3.4% 62% of growth total (Dec-08 y-o-y customer „ 23.6 m mobile customers in a 116% base penetration market change) „ 923 k contract net adds in 2008; 778 k in total -1.6% TOTAL Contract Prepay

  14. Slide 14: T.Latam: Robust set of results, beating guidance

    TELEFÓNICA LATAM T.Latam: Robust set of results, beating guidance GUIDANCE(4) +14.2% +12.9% +12.9% „ Successfully managing growth, 2.6p.p Others(3) Revenue 1.7p.p Mex. transformation and 2008 target growth 2.4p.p Arg. +11% / +14% profitability: 2.8p.p Ven. (y-o-y change; organic) 3.5p.p Brazil „ Ste

  15. Slide 15: Wireless business: Solid growth enhancing our profitability

    TELEFÓNICA LATAM Wireless business: Solid growth enhancing our profitability 44.9 15.3 „ Double digit customer growth in most 14.8 markets: Dec-08 10.6 10.6 10.0 10.2 „ Mobile penetration up +13 p.p. y-o-y to 82% mobile 6.9 in Dec-08 customers +34% +22% +9% +32% +12% +19% +9% +17% (in millions) +20%

  16. Slide 16: Wireline business: Accelerating the transformation

    TELEFÓNICA LATAM Wireline business: Accelerating the transformation 32.1% „ Sound BB accesses growth to reach 6.1m: 23.6% x2 20.5% 22.1% Dec-08 „ Strong push in bundles (+18 p.p. in 2P&3P/DSL 10.9% bundles) Retail BB accesses 49% 58% 29% 44% 95% 83% „ Higher BB speeds (Brazil & Chile) and expanded c

  17. Slide 17: Main operations review

    TELEFÓNICA LATAM Main operations review Telesp y-o-y growth TASA y-o-y growth y-o-y growth Revenues (in local currency) OIBDA Margin Revenues (in local currency) OIBDA Margin(2) +10.6% +8.2% +13.5% +13.8% +12.5% +7.4% 43.9% 41.3% +9.9% 34.7% 33.6% 34.4% 40.6% IT project in Q4 07 Flat 2007 2008 9M 08

  18. Slide 18: Strong growth on the back of our integrated and diversified operations

    TELEFÓNICA LATAM Sum-up: Strong growth on the back of our integrated and diversified operations Mobile Mobile Total BB & TV Total Mobile FY 08 y-o-y growth service outgoing revenue revenue OIBDA OIBDA (in local currency) revenue service revenue Brazil(1) +12.2% +41.1% +13.6%(2) +15.6%(2) +9.8% +22.4

  19. Slide 19: T. Europe: Delivering results, anticipating customer needs

    TELEFÓNICA EUROPE T. Europe: Delivering results, anticipating customer needs +5.9% +5.9% guidance +4% / +7% +1.5% „ Financial targets successfully Revenue growth achieved in a worse economic (y-o-y) environment: „ UK: Sustained market 9M 08(1) FY 08(1) outperformance +4.7% „ GER: Finishing foundatio

  20. Slide 20: T. O2 UK: sustained market outperformance

    TELEFÓNICA EUROPE T. O2 UK: sustained market outperformance Mobile 455 contract 344 „ Commercial approach focused on long term net adds customer value: (´000) H1 08 H2 08 „ Clear leader in customer satisfaction(1) „ Simplicity, iPhone and leading contract churn driving +9.2% contract customer growth

  21. Slide 21: T. O2 Germany: finishing foundations & new commercial approach

    TELEFÓNICA EUROPE T. O2 Germany: finishing foundations & new commercial approach 1,727 Mobile „ Mobile service revenues turnaround achieved in net adds 997 Q4 08: 730 +19.4% in 2008 „ ARPU declines stabilizing with larger portion of (´000) customer base on value tariffs y-o-y growth (%) Contract Pre

  22. Slide 22: Financial expenses on target and upgraded credit ratings

    GROUP FINANCIAL EXPENSES AND DEBT Financial expenses on target and upgraded credit ratings € in millions Leverage falling below 2x at year end 2.3x OIBDA1 45,284 1.9x +1,327 +6,340 OIBDA1 42,733 +920 -1,994 -9,145 Net Fin. Debt FCF Commitments Shareholder Net Financial FX, accruals Net Fin. Debt Dec

  23. Slide 23: Group guidance for 2009

    GROUP GUIDANCE Group guidance for 2009 Group OpCF (OIBDA-CapEX) (€ in millions) +8%/+11% 14,519 14,201 2008 A 2008 adjusted 2009E for guidance Group Revenues Group OIBDA Group CapEx (€ in millions) (€ in millions) (€ in millions) +1%/+3% Growing Revenues <7,500 57,946 22,919 8,401 22,602 2008A 2009E

  24. Slide 24: 2009 regional priorities

    GROUP FINANCIALS 2009 regional priorities „ Sustain leading competitive position across businesses, emphasizing customer loyalty & rational value creation SPAIN commercial initiatives „ Strong focus on OpCF Focused „ Continue to outperform the market in the UK. strategy & EUROPE „ Capitalize strengt

  25. Slide 25: Accelerating transformation to adapt to new environment

    Accelerating transformation to adapt to new environment „ Network transformation: „ Site build cost reduction „ Transport optimization „ Greater coordination in transport networks between Fixed-Mobile businesses TECHNOLOGY „ Outsourcing initiatives „ Global partner for network support contracts in I

  26. Slide 26: Prioritizing shareholder returns

    GROUP FINANCIALS Prioritizing shareholder returns Growing path in DPS 1.15 (in euros) 1.0 0.75 Current DY(4): DIVIDENDS 8.2% 20071 20082 20093 + Tactical Share Buybacks SHARE „ 126.7 million shares bought in 2008 BUYBACKS „ Pending tranche of 2008 program to be completed in Q1 09 10%(5) of the curre

  27. Slide 27: 2010 "stress case" vs. guidance

    GROUP FINANCIALS 2010 “stress case” vs. guidance 2010 Guidance “Stress case” October 2007 Scenario EPS 1 2.304 € 2.10 € FCFS 2 2.87 € 2.50 € TELEFONICA S.A. (1) Reported EPS. Investor Relations (2) FCF available to remunerate Telefonica S.A. shareholders, to protect solvency levels and to accommodat

  28. Slide 28: Conclusions

    CONCLUSIONS Conclusions DISTINCTIVE PROFILE IN THE INDUSTRY „ Strategically diversified portfolio, execution skills and integrated business model „ Very strong performance in 2008, delivering our Group commitments „ 2009 focus on maximizing free cash-flow generation „ Fully committed to return value

  29. Slide 29: TELEFONICA S.A. Investor Relations

    TELEFONICA S.A. Investor Relations 29

Telefónica — FY2008 Earnings Presentation on 6ix