Telefonica Sa · BME:TEF

Telefonica Sa — FY2007 Earnings Presentation

38 slides from Telefonica Sa's earnings presentation, Feb 28, 2008

  1. Slide 1: Annual Results January – December 2007

    Annual Results January – December 2007 TELEFONICA S.A. February 28th, 2008 TELEFONICA S.A. This presentation is being broadcast live on the Internet Investor Relations 1

  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: Telefónica: Solid fundamentals and high returns

    Telefónica: Solid fundamentals and high returns „ Sound 2007 results: upgraded guidance met or Delivering our exceeded commitments „ Strong execution of operations Strong performance + in 2007 „Unmatched organic „ Leveraging our diversification growth ahead of „ Steady customer base expansion peers

  4. Slide 4: 2007 results: Solid performance across the board

    GROUP FINANCIALS 2007 results: Solid performance across the board… € in millions Jan-Dec Jan-Dec % Change % Change organic 1 (% change y-o-y) 2007 2006 FY 07/FY 06 Revenues 56,441 52,901 +6.7% +7.4% Operating Income before D&A 22,825 19,126 +19.3% +6.8% Growth rates (OIBDA) acceleration from top to

  5. Slide 5: …with very strong increases in net income and EPS

    GROUP FINANCIALS …with very strong increases in net income and EPS … € in millions (% change y-o-y) +19.3% +42.9% +42.1% „ € 802 m (O2’s PPA) „ €158 m (T.O2 CR´s PPA) 22,825 13,388 -9,437 140 -2,844 8,906 (-2.8%) (+83.3%) -1,565 -213 (+4.0%) (-12.1%) (c.s.) FY 2007 D&A FY 2007 OI Associates Financia

  6. Slide 6: We have met or exceeded our upgraded guidance

    GROUP FINANCIALS We have met or exceeded our upgraded guidance … Revenue Growth OIBDA Growth +9.8% +12.8% 9 9 GUIDANCE GUIDANCE 10%/13% 8%/10% % Change FY 07/FY 06 % Change FY 07/FY 06 OI Growth CapEx +27.6% 8,087 GUIDANCE 19%/23% 9 GUIDANCE < 8,100 9 % Change FY 07/FY 06 FY 2007 Base 2006 reported

  7. Slide 7: We are implementing restructuring measures that will further enhance efficiency

    GROUP FINANCIALS We are implementing restructuring measures that will further enhance efficiency in the coming future FY 2007 OIBDA € in millions -2,619 22,825 +452 +152 +259 € 21,069 18,688 OIBDA growth under guidance criteria +12.8% +10%/+13% FY 2006 OIBDA FY 2007 Net capital Personnel EU fine Oth

  8. Slide 8: We are capitalizing our diversification, driving customer growth

    GROUP FINANCIALS We are capitalizing our diversification, driving customer growth … FY 2007 Revenue growth by regions Strong customer expansion across markets & businesses (Organic1 y-o-y growth) +13.0% Accesses (Dec-07/Dec-06) +7.4% millions +64.3% +4.6% +4.5% +16.9% +12.5% +28.9% 134.1 1.7 +8.7% 2

  9. Slide 9: …while scale and cost contention sustain a healthy profitability

    GROUP FINANCIALS … while scale and cost contention sustain a healthy profitability… OpEx1 Organic Growth -1.8 p.p. +9.0% (2) +7.2% (2) Organic2 OIBDA Margin -0.2 p.p. FY 2006 FY 2007 36.0% 35.8% 2007 Organic OpEx1 breakdown +0.7 p.p. +7.2% +4.5 p.p. FY 2006 FY 2007 +1.1 p.p. +0.9 p.p. T. España T. E

  10. Slide 10: We are investing for future growth while generating high OpCF

    GROUP FINANCIALS We are investing for future growth while generating high OpCF CapEx spending 2007 Group CapEx breakdown (€ in millions) Organic1 y-o-y (€ in millions) • Mobile coverage & capacity to face growth rate high demand +0.3% • Deployment of new services (Pay TV) 25% Maintenance • BB expans

  11. Slide 11: Telefónica España: strong results, delivering on guidance

    TELEFÓNICA ESPAÑA Telefónica España: strong results, delivering on guidance Revenues OIBDA CapEx (€ in millions) (€ in millions) (€ in millions) +11.6% 2007 target +4.7% +9% / +11% 2007 target +9.3% 20,683 +3.5% / +4.5% 9,448 +2.3% 19,750 8,647 2,293 2,346 2007 target OIBDA growth (1) according < 2,

  12. Slide 12: Wireline Business: expanding access base by upselling and getting new customers

    TELEFÓNICA ESPAÑA WIRELINE BUSINESS Wireline Business: expanding access base by upselling and getting new customers … Line losses in Fixed Telephony Accesses 2007 reduced by (in thousands) 72% (vs. 2006) RETAIN Total ARPU 15,950 -41 +33 15,898 (€) CUSTOMER +5.1% BASE 67.0 Dec-06 Q3 07 Q4 07 Dec-07 6

  13. Slide 13: Wireline Business: outstanding top line growth

    TELEFÓNICA ESPAÑA WIRELINE BUSINESS Wireline Business: outstanding top line growth Revenue growth and contribution to revenue growth (1) (FY2007 vs. FY2006) +11.6% -2.0% +7.8% +14.1% 2007 target +3.7% +3.7% +15.5% +11.9% +0.4 p.p. +2.5% / +3.5% +0.7 p.p. -1.0% -0.1% +3.1 p.p. Revenues € 12,401 m (FY

  14. Slide 14: Wireline Business: Top line growth increased at OIBDA level

    TELEFÓNICA ESPAÑA WIRELINE BUSINESS Wireline Business: Top line growth increased at OIBDA level OIBDA (million euros) +15.8% +14.8% 5,249 4,572 OIBDA growth (1) according guidance criteria FY 2006 FY 2007 Underlying OIBDA Growth FY 2007/FY 2006 +14.8% -11.0 p.p. +5.1% 1.4 p.p. ahead +2.7 p.p. -1.4 p

  15. Slide 15: Wireless Business: Strong focus on value

    TELEFÓNICA ESPAÑA WIRELESS BUSINESS Wireless Business: Strong focus on value CONTRACT 2,544 Gross adds 633 2,272 580 (in thousands) Contract: +12.4% +12.0% Prepaid: -1.3% 9 MVNOs and 4th Q4 06 Q4 07 FY 2006 FY 2007 operator entering the market in 2007 -0.0 +0.1 Customers 1.7 (thousands) Churn 0.9 1.

  16. Slide 16: Wireless Business: Sustained outgoing ARPU on solid data usage

    TELEFÓNICA ESPAÑA WIRELESS BUSINESS Wireless Business: Sustained outgoing ARPU on solid data usage FY 2007 / FY 2006 (y-o-y growth rates) ARPU Growth OUTGOING MoU Growth INCOMING VOICE TOTAL ARPU 1 +5.2% +4.2% -0.2% -1.0% -0.1% VOICE DATA TOTAL -10.6% -1.8% Cumulative 14.9% MTR cut in April 07 & Oct

  17. Slide 17: Wireless Business: robust top line growth while improving efficiency

    TELEFÓNICA ESPAÑA WIRELESS BUSINESS Wireless Business: robust top line growth while improving efficiency FY 2007 Q4 07/Q4 06 FY 2007/ Comparable growth 1 (€ in millions) FY2006 Revenues 9,693 +3.2% +2.9%1 +5.4% +5.1%1 Handset Revenues 1,184 +7.6% +11.9% Service Revenues 8,509 +2.6% +2.3%1 +4.5% +4.2

  18. Slide 18: Telefónica España: from Reported OIBDA to adjusted OIBDA for guidance comparison

    TELEFÓNICA ESPAÑA Telefónica España: from Reported OIBDA to adjusted OIBDA for guidance comparison ADJUSTMENTS DUE TO … 2006 Reported Personnel EU Fine Real Estate 2007 (million euros) adjusted for 2007 reorganization provision(3) capital gains adjusted for guidance provision and others (4) guidance

  19. Slide 19: Telefónica Latinoamérica: robust performance, meeting targets

    TELEFÓNICA LATAM Telefónica Latinoamérica: robust performance, meeting targets Criteria guidance € terms Dec-07 Accesses Revenues OIBDA 2007 OpCF2 y-o-y growth (in millions) (€ in millions) (€ in millions) €3,778m 134.1 102.0 +11.0% +8.4% 20,078 7,121 18,089 6,571 5.0 +74.9% +15.5% 2007 target +22.4

  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 Ex personnel reorganization provision Revenues OIBDA FY 2007 % FY 2007 % (€ in millions) change1 (€ in millions) change1 Integrated „ Brazil2 7,662 +3.2% 3,026 -3.8% -3.0% „ Argentina 2,264 +15.7% 773 +8.0% +18.9% „ Chile 1,8

  21. Slide 21: 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 clients2 (in thousands) (in thousands) +33.2% 5,036 1,164 +74.9% 3,780 665 +18.7% +45.4% 332 ex TVA 280 impact Q4 06 Q4 07 Dec-06 Dec-07 Dec-06 Dec-07 NET AD

  22. Slide 22: Brazil wireless: robust commercial activity accelerates top line and OIBDA growth

    TELEFÓNICA LATAM VIVO Brazil wireless: robust commercial activity accelerates top line and OIBDA growth Q4 07/Q4 06 change Market leader 2007/2006 change ARPU in December (local currency) +14.5% 33.5 m 85% of Q4 Gross 65% of 2007 Gross 31.6 x4.1 (34% GSM) x6.6 adds in GSM adds in GSM 27.6 +66% +36%

  23. Slide 23: Mexico wireless: further enhancement of operations

    TELEFÓNICA LATAM MEXICO Mexico wireless: further enhancement of operations Q4 07/Q4 06 change 2007/2006 change Customer growth (y-o-y) 12.5 m +82% +43% +48% +31% +32% +47% +31% -0.4 p.p. -0.8 p.p. Total Contract Pre-pay Gross Churn Net Adds Gross Churn Net Adds Adds Adds 2007/2006 growth OIBDA Op CF

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

    TELEFÓNICA LATAM REST OF MOBILE Key highlights for other Latam mobile operations FY 2007/FY 2006 Outgoing service1 Dec-07 customer FY 2007 OIBDA service revenue revenue growth y-o-y growth base (million) FY 2007/ Q4 07/ margin growth1 FY 2006 Q4 06 ARGENTINA 13.7 +23% +21% +24% +24% 30.9% +4.1 p.p.

  25. Slide 25: Telefónica Europe: increased commercial activity to foster revenue growth

    TELEFÓNICA EUROPE Telefónica Europe: increased commercial activity to foster revenue growth Growth (1) Revenues1 OIBDA1 Capex1 according (€ in millions) (€ in millions) (€ in millions) guidance criteria +11.7% 2007 target 2007 target 2007 target <2,200 +9.9% +11% / +14% +10.1% +7% / +10% -16.7% 2,09

  26. Slide 26: O2 UK: continued outperformance

    TELEFÓNICA EUROPE UK O2 UK: continued outperformance Growth rates under guidance criteria Mobile contract net adds ARPU Revenues (in thousands) (in £) (Organic1, £ in millions) 716 2007 target 591 +4.4% +15% / +18% 24.0 +3.6% +18.6% 23.5 +9.5% 5,068 23.0 276 79% of total 4,626 net adds 22.7 136 Mobi

  27. Slide 27: O2 Germany: increasing commercial activity to capture growth

    TELEFÓNICA EUROPE GERMANY O2 Germany: increasing commercial activity to capture growth Growth rates under guidance criteria Mobile customer growth Contract Net additions ULL lines (y-o-y) (in thousands) (in thousands) Including prepay base 671 12.5 m adjustment (310k) 756 Order book of ~50,000 +13.8

  28. Slide 28: T.O2 Czech Republic: Maintaining growth with improved efficiency

    TELEFÓNICA EUROPE CZECH REPUBLIC T.O2 Czech Republic: Maintaining growth with improved efficiency Fixed Telephony net adds Operating revenues (in thousands) ƒ Decline in fixed line losses trend (CZK in billions) 2007 target +1% / +3% Q1 07 Q2 07 Q3 07 Q4 07 ƒ Focus on bundled propositions +2.8% 62.6

  29. Slide 29: Maintaining good performance in Synergies

    GROUP SYNERGIES Maintaining good performance in Synergies OpCF (OIBDA-CapEx) 2007 Synergies by Business Units (€ in millions) >1,600 ~36% T.Latam 69% 28% above ~46% initial target T. Europe T.España 14% 15% Others ~18% 2% Others: Distrito C, Corporate University Local Regional Global 2007 LOCAL REGI

  30. Slide 30: Stable financial profile and Comfortable liquidity position

    GROUP FINANCIAL EXPENSES AND DEBT Stable financial profile and Comfortable liquidity position Stable cost of debt Currency mix € in millions 2007 EUR USD 60% 3% Net Interest Expenses (2,844) Total Average Debt 50,844 LATAM 15% Effective Interest rate 5.59% GBP CZK 15% 7% Dec-07 Net Financial Debt Ma

  31. Slide 31: Shareholder remuneration increased and de-leverage target achieved

    GROUP DEBT Shareholder remuneration increased and de-leverage target achieved 12M07 Net Financial Debt Evolution (€ in millions) 2.7x OIBDA1 52,145 +5,189 2.3x OIBDA1 +781 45,284 -2,512 -8,847 -1,472 Net Fin. Debt FCF Commitments Share buy-back Net Financial Change in Net Fin. Debt Dec-06 Post- canc

  32. Slide 32: Solid 2008 guidance, in line with our long term targets

    GROUP GUIDANCE Solid 2008 guidance, in line with our long term targets… Group Revenues Group OIBDA (€ in millions) (€ in millions) +7.5%/+11% +6.0%/+8.0% 22,825 56,441 20,863 55,550 2007 2007 adjusted 2008E 2007 2007 adjusted 2008E for guidance for guidance Group OI Group CapEx (€ in millions) (€ in

  33. Slide 33: …well positioned to capture additional growth in our markets

    GROUP GUIDANCE …well positioned to capture additional growth in our markets … Telefónica España (1) Revenues OIBDA (€ in millions) (€ in millions) +2% / +3.5% +6% / +8% 20,536 9,635 2007 2008E 2007 2008E adjusted for guidance adjusted for guidance Telefónica Latinoamérica (2) Revenues OIBDA (€ in mi

  34. Slide 34: On track to meet 2010 targets

    GROUP GUIDANCE On track to meet 2010 targets Implicit 08E-10E 2006-2007A under 2006-2010E (**) CAGR to meet 2010 guidance criteria (*) CAGR guidance guidance Revenues 9.8% 2.2% / 7.1% 5% / 8% OIBDA 12.8% 4.0% /10.1% 7.0% / 11.0% + 2007-2008E guidance + OI 27.6% 12.1% /16.9% 16.0% / 20.0% ±€ 8,000 m

  35. Slide 35: 2008 targets, a guide to calculations

    GROUP GUIDANCE 2008 targets, a guide to calculations 2007 ADJUSTED FIGURES FOR GUIDANCE: „ Excludes Endemol and Airwave (revenues: € 643 m and € 99 m respectively; OIBDA: € 87 m and € 40 m ) „ Excludes Airwave and Endemol capital gains (€ 1,296 m and € 1,368 m respectively) „ Telefónica España and G

  36. Slide 36: A growing path on shareholders returns

    A growing path on shareholders returns „ 5.2 Bn€ paid to shareholders in 2007 Dividends „ Total 20071 DPS : 0.75 € „ Total 20082 DPS: 1 € + „ € 2.7 Bn completed in 2007 Buyback programs „ 2008- H1 09 program: 100 m shares, sensitive to cash flow generation and share price Enhanced shareholder remune

  37. Slide 37: Closing remarks

    Closing remarks Delivering our commitments Strong performance + in 2007 „Unmatched organic growth ahead of peers A growth stock in ++ a promising industry „Very attractive returns Reinforced investment + case „Strong growth prospects TELEFONICA S.A. Investor Relations 37

  38. Slide 38: TELEFONICA S.A. Investor Relations

    TELEFONICA S.A. Investor Relations 38

Telefónica — FY2007 Earnings Presentation on 6ix