6-K
Table of Contents

 

 

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of July, 2017

Commission File Number: 001-09531

Telefónica, S.A.

(Translation of registrant’s name into English)

Distrito Telefónica, Ronda de la Comunicación s/n,

28050 Madrid, Spain

3491-482-8700

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F   ☒             Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes  ☐             No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes  ☐             No  ☒

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Ye  ☐             No  ☒

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

 

 

 

 


Table of Contents

Telefónica, S.A.

TABLE OF CONTENTS

 

Item

       Sequential
Page
Number
 
1.  

Quarterly Results of Telefónica Group: January - June 2017

     2  


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FINANCIAL HIGHLIGHTS

 

  Growth acceleration across the board in main financials and KPIs.

 

    Customer base quality improvement: LTE (1.6x y-o-y), smartphones (+19%), FTTx & cable (+19%) and mobile contract (+5%).

 

    Revenues totaled €12,960m in the quarter (+1.9% y-o-y reported) and increased 3.1% organic (+1.6 p.p. vs. the first quarter), accelerating service revenue growth (+2.9%; +1.2 p.p.) and handset sales (+5.2%; +6.8 p.p.).

 

    Double-digit growth in mobile data revenues continued (+17.8% y-o-y in organic terms).

 

    OIBDA (€4,158m; +6.1% y-o-y) growth accelerated to 7.2% y-o-y organic vs. 1.3% in the first quarter. The OIBDA margin stood at 32.1% (+1.2 p.p. y-o-y in organic terms).

 

    Underlying OIBDA in the quarter excluded €25m restructuring costs (€4,183m; +5.5% y-o-y).

 

    Operating Cash Flow excluding spectrum (€2,273m) improved its organic growth by 8.6 p.p. vs. the first quarter to reach 17.5% year-on-year.

 

    Net income totaled €821m (+18.4% y-o-y) and earnings per share €0.15 (+16.3%). In underlying terms, net income totaled €1,092m (+23.6%) and earnings per share €0.20 (+21.9%).

 

  Ongoing Company transformation.

 

    CapEx (€3,507m in January-June): mainly devoted to UBB network expansion, simplification, digitalisation and cognitive intelligence. As of June, 41.2m premises passed with FTTx & cable and LTE coverage of 68%.

 

  Progress in de-leveraging.

 

    Free cash flow in first the half year reached €1,620m (2x y-o-y).

 

    Net debt stood at €48,487m at the end of June and decreased €3,706m vs. June 2016.

 

  T. España improved service revenues (-0.8% y-o-y in organic terms in the quarter; +0.8 p.p. vs. the first quarter) and OIBDA (-1.5%; +0.9 p.p.); operating cash flow grew a solid 7.8%.

 

  T. Brasil accelerated revenue growth in the quarter (+1.8% y-o-y in organic terms) and maintained solid performance in OIBDA (+7.0%) and operating cash flow (+11.6%), levered on margin expansion.

 

  T. Deutschland posted in April-June solid commercial momentum, OIBDA growth acceleration (+3.8% y-o-y in organic terms) and margin expansion (+1.9 p.p.).

 

  T. UK; revenues and OIBDA accelerated their pace of growth in April-June (+2.6% and +3.9% y-o-y in organic terms respectively) and the operating cash flow returned to growth (+5.3%).

 

  T. Hispanoamérica in the quarter reported strong growth acceleration in revenues (+15.5% y-o-y in organic terms) and OIBDA (+20.9%) and a significant operating cash flow evolution (+71.8%).

 

  The Company upgrades guidance and reiterates the dividend announced for 2017.

 

    Revenue guidance upgraded to growth >1.5% (vs. stable previously), despite the negative impact from regulation (approximately 1.2 p.p.).

 

    OIBDA margin guidance (y-o-y expansion up to 1 p.p.) and CapEx/Sales excluding spectrum (around 16%) reiterated.

 

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Comments from José María Álvarez-Pallete, Executive Chairman:

“During the second quarter of the year we have accelerated organic growth through the execution of our structural quality-based strategy, which was reflected in the strong competitive positioning in our main markets. Moreover, we continued to make progress in our transformation towards becoming a platform Company, with CapEx devoted to UBB networks, underpinning E2E digitalization and cognitive intelligence, with a differential value proposition for customers. All this, with a stronger balance sheet, after doubling Free Cash Flow in the last twelve months and reducing net debt by 5 billion euros, when considering the sale of the stake in Telxius.

The strength and better business trends in the first half of the year, as well as being well-positioned to continue capturing sustainable growth in the coming quarters, allow us to upgrade our guidance for 2017”.

 

 

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TELEFÓNICA

SELECTED FINANCIAL DATA

Unaudited figures (Euros in millions)

 

     January -
June
    % Chg     April -
June
    % Chg  
     2017     Reported     Organic     2017     Reported     Organic  

Revenues

     26,091       3.4       2.3       12,960       1.9       3.1  

Telefónica España

     6,226       (2.3     (2.3     3,160       (2.0     (1.9

Telefónica Deutschland

     3,542       (4.1     (4.1     1,771       (3.4     (3.4

Telefónica UK

     3,208       (7.4     2.3       1,607       (6.2     2.6  

Telefónica Brasil

     6,193       21.8       1.7       3,028       14.1       1.8  

Telefónica Hispanoamerica

     6,419       6.7       12.3       3,134       5.9       15.5  

Other companies & eliminations

     504       (16.9     (8.5     259       (23.5     (12.9

Telxius

     370       27.1       8.3       182       18.7       11.4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OIBDA

     8,179       5.5       4.3       4,158       6.1       7.2  

Telefónica España

     2,425       (5.0     (1.9     1,282       (1.6     (1.5

Telefónica Deutschland

     861       2.1       2.7       461       2.2       3.8  

Telefónica UK

     849       (7.4     2.2       433       (5.0     3.9  

Telefónica Brasil

     2,138       30.1       7.2       1,034       23.3       7.0  

Telefónica Hispanoamerica

     1,796       5.7       13.5       892       6.9       20.9  

Other companies & eliminations

     110       10.2       (7.7     56       55.4       108.5  

Telxius

     179       78.0       11.1       87       17.8       7.9  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OIBDA margin

     31.3     0.6  p.p.      0.6  p.p.      32.1     1.3  p.p.      1.2  p.p. 

Telefónica España

     38.9     (1.1  p.p.)      0.1  p.p.      40.6     0.2  p.p.      0.2  p.p. 

Telefónica Deutschland

     24.3     1.5  p.p.      1.6  p.p.      26.1     1.4  p.p.      1.9  p.p. 

Telefónica UK

     26.5     (0.0  p.p.)      (0.0  p.p.)      27.0     0.3  p.p.      0.3  p.p. 

Telefónica Brasil

     34.5     2.2  p.p.      1.8  p.p.      34.1     2.5  p.p.      1.7  p.p. 

Telefónica Hispanoamerica

     28.0     (0.3  p.p.)      0.3  p.p.      28.5     0.3  p.p.      1.3  p.p. 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income (OI)

     3,370       9.3       12.2       1,800       14.9       19.0  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to equity holders of the Parent

     1,600       28.9         821       18.4    

Basic and diluted earnings per share (euros)

     0.29       30.3         0.15       16.3    
  

 

 

   

 

 

     

 

 

   

 

 

   

CapEx

     3,507       (4.0     (5.7     1,886       (3.7     (3.3

Telefónica España

     704       (21.2     (20.6     371       (19.8     (18.6

Telefónica Deutschland

     435       0.5       1.3       226       6.3       6.9  

Telefónica UK

     434       4.4       15.4       209       (6.5     2.4  

Telefónica Brasil

     915       15.5       (3.6     518       16.6       2.7  

Telefónica Hispanoamerica

     923       (9.4     (6.2     493       (11.5     (3.9

Other companies & eliminations

     96       (5.7     (2.6     68       17.4       22.4  

Telxius

     56       29.2       24.8       44       85.7       86.0  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Spectrum

     4       (57.9     (56.3     1       (93.8     (95.8

Telefónica España

     —         —         —         —         —         —    

Telefónica Deutschland

     1       (79.8     (79.8     0       (78.7     (78.7

Telefónica UK

     —         —         —         —         —         —    

Telefónica Brasil

     —         —         —         —         —         —    

Telefónica Hispanoamerica

     4       n.m.       n.m.       0       n.m.       n.m.  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OpCF (OIBDA-CapEx)

     4,672       13.9       13.0       2,272       16.0       17.5  

Telefónica España

     1,720       3.7       8.0       910       8.5       7.8  

Telefónica Deutschland

     426       3.8       4.0       235       (1.4     1.2  

Telefónica UK

     415       (17.3     (8.7     224       (3.6     5.3  

Telefónica Brasil

     1,223       43.7       17.0       515       30.9       11.6  

Telefónica Hispanoamerica

     873       28.2       43.2       399       44.0       71.8  

Other companies & eliminations

     14       c.s.       (30.5     (12     (45.1     (71.5

Telxius

     123       115.5       5.7       43       (14.0     (23.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

- Reconciliation included in the excel spreadsheets.

Notes:

- 2016 and 2017 reported figures include hyperinflationary adjustments in Venezuela in both years.
- OIBDA and OI are presented before brand fees and management fees.
- Telxius financials are fully reported in Other Companies & Eliminations in T. Group since 1 January, 2017, reflecting the final integration into Telxius of the mobile communications towers transferred from T. España, T. Deutschland, T. Brasil and T. Hispanoamérica segments and the international submarine fiber optic cable (which was already being reported within Other Companies and Eliminations). As a consequence, 2017 reported figures for these segments follow the same criteria. In addition, 2016 segment results have been revised to reflect the different dates of asset integration into Telxius, affecting T. España (since 1 January, 2016), T. Deutschland (since 1 May, 2016), T. Brasil (since 1 April, 2016) and T. Hispanoamérica (T. Perú since 1 April 2016 and T. Chile since 1 May 2016). Organic y-o-y changes on segments reflect all the charges related to the towers transferred to Telxius since 1 January 2016. The results of the segments do not include intra-group capital gains resulting from the transfer of towers to Telxius in 2016.
- Organic criteria: Assumes constant exchange rates as of 2016 (average FX in 2016), excludes the impact from hyperinflation in Venezuela in both years and considers constant perimeter of consolidation. In OIBDA and OI terms, excludes write-downs, capital gains/losses from the sale of companies, tower sales, material non-recurring impacts and restructuring costs. CapEx also excludes investment in spectrum.

 

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TELEFÓNICA

  

Consolidated Results

     5  

•       Digital Services

     8  

•        Telefónica Recursos Globales

     8  

•       Telxius

     9  

RESULTS BY BUSINESS UNITS

  

Telefónica España

     16  

Telefónica Deutschland

     20  

Telefónica UK

     22  

Telefónica Brasil

     24  

Telefónica Hispanoamérica

     26  

•       Telefónica_Argentina

     28  

•       Telefónica_Chile

     30  

•        Telefónica Perú

     32  

•       Telefónica Colombia

     34  

•        Telefónica México

     36  

•       Other Hispam countries

     38  

ADDENDA

  

Key Holdings of the Telefónica Group

     39  

Changes to the Perimeter

     40  

Alternative performance measures

     41  

The financial information related to January-June 2017 contained in this document has been prepared under International Financial Reporting Standards (IFRS), as adopted by the European Union, which do not differ for the purposes of the Telefónica Group, from IFRS as issued by the International Accounting Standards Board (IASB).

Telefónica’s management model, regional and integrated, means that the legal structure of the companies is not relevant for the release of Group financial information, and therefore, the operating results of each of these business units are presented independently, regardless of their legal structure. For the purpose of presenting information on a business unit basis, revenue and expenses arising from invoicing among companies within Telefónica’s perimeter of consolidation for the use of the brand and management contracts have been excluded from the operating results for each business unit. This breakdown of the results does not affect Telefónica’s consolidated earnings.

The English language translation of the consolidated financial statements originally issued in Spanish has been prepared solely for the convenience of English speaking readers. Despite all the efforts devoted to this translation, certain omissions or approximations may subsist. Telefónica, its representatives and employees decline all responsibility in this regard. In the event of a discrepancy, the Spanish-language version prevails.

 

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01

CONSOLIDATED RESULTS

During the quarter, the quality of the Telefónica Group’s customer base continued improving, as reflected by average revenue per customer increase (+3.1% y-o-y in organic terms; +1 p.p. vs. January-March) and churn reduction (-0.2 p.p. vs. the first quarter). Total accesses stood at 346.2m at June and remained stable y-o-y.

The Company remained focused on increasing the weight of higher-value services. Thus, i) LTE customers totalled 81.6m (1.6x y-o-y) with quarterly net additions of 6.1m and 32% penetration (+12 p.p. y-o-y); ii) mobile contract accesses stood at 112.6m (+5% y-o-y) with quarterly net additions of 1.2m (1.9x vs. January-March) and accounted for 41% of the total (+2 p.p. y-o-y); iii) smartphones (+19% y-o-y; 155.1m) achieved 61% penetration (+10 p.p. y-o-y) and quarterly net additions of 3.6m (2.1x y-o-y); iv) FTTx and cable customers (10.0m) grew 19% vs. June 2016 and accounted for 47% of the total fixed broadband accesses (+7 p.p. y-o-y), reaching a coverage of 41.2m premises passed (+14% y-o-y); and v) Pay TV accesses improved sequentially and returned to post positive net additions in the quarter (+56k) for the first time since the second quarter of 2016.

In the second quarter, revenues (€12,960m) increased 1.9% y-o-y (€26,091m in the first half; +3.4%). In organic terms, revenue growth accelerated to 3.1% (+1.6 p.p. vs. January-March; +2.3% y-o-y growth in the first six months) with improved trends across the board. Excluding the negative impact of regulation, organic revenues would have risen 4.1% y-o-y in the second quarter (+3.3% in January-June).

Also, growth accelerated in service revenues (+2.9% y-o-y organic; +1.2 p.p. vs. the first quarter) and handset sales (+5.2%; +6.8 p.p.).

Mobile data revenues continued to be a key growth driver and improved their pace of growth in the second quarter to 17.8% y-o-y in organic terms (+15.7% organic in the first half), increasing their weight over mobile service revenues by 6 p.p. to 60%.

Separately, given the absence of official exchange rates representative of the economic situation in Venezuela, the Company has considered the need to estimate a synthetic exchange rate that matches the progression of inflation to reflect the economic and financial position of the Group’s subsidiaries in Venezuela in a more accurate way. This rate has been fixed at 3,547 VEF/USD at the end of June 2017, affecting the January-June 2017 results reported by the Company. This new exchange rate reversed the positive contribution of exchange rates in the first quarter, which became negative in the second quarter, detracting 0.8 p.p. and 1.3 p.p. to the y-o-y growth of revenues and OIBDA respectively. Excluding Venezuela, the contribution would have been positive (+1.5 p.p. in revenues and +1.8 p.p. in OIBDA in the quarter) on the back of the appreciation of most Latin American currencies vs. the euro, particularly the Brazilian real.

Mobile data traffic in the quarter maintained a strong pace of growth (+83% y-o-y), underpinned by LTE traffic, which accounted for 50% of the total (+19 p.p. y-o-y) with higher average use (+59% in January-June) and ARPU around 10% higher in the first half. The average traffic per customer has thus reached 1.3GB per month (+52% y-o-y).

Operating expenses (€9,048m in April-June; -0.2% y-o-y) grew 1.2% y-o-y in organic terms due to higher network and system costs and increased personnel expenses, mostly associated with inflationary pressures in some Latin American countries, despite the savings linked to redundancy programmes and lower supplies (interconnection savings). Operating expenses in January-June amounted to €18.396m and grew 2.1% y-o-y (+1.1% organic). The average headcount in the first half totalled 126,388 employees (-6.3% y-o-y).

 

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In the second quarter, a provision for restructuring costs amounting to €25m (primarily T. Deutschland) affected “personnel expenses” in €11m and “other net income/expense” in €14m. In the second quarter of 2016, the provision for restructuring costs amounted to €42m (primarily in T. Brasil and T. Deutschland).

Operating income before depreciation and amortisation (OIBDA) totalled €4,158m in the second quarter, growing 6.1% vs. April-June 2016 (€8,179m in the first half of the year; +5.5% y-o-y).

In organic terms, OIBDA growth accelerated to 7.2% y-o-y (+1.3% in the first quarter), with an improved contribution from all the segments, reflecting the acceleration of revenues, costs containment efforts, synergy capture and efficiencies arising from the transformation process. Excluding the impact of the regulation, OIBDA would have risen 8.9% y-o-y organic in the quarter.

Underlying OIBDA (€4,183m), which excluded restructuring costs, increased 5.5% vs. April-June 2016.

OIBDA margin stood at 32.1% in the second quarter, reflecting a y-o-y expansion (+1.3 p.p. reported; +1.2 p.p. organic). In January-June, the margin reached 31.3% (+0.6 p.p. reported; +0.6 p.p. organic).

Depreciation and amortisation (€2,358m) grew 0.3% y-o-y in the quarter; -0.9% in organic terms.

Thus, operating income (OI) (€1,800m) increased y-o-y by 14.9% in April-June (+19.0% organic vs. +5.2% in the first quarter). In the first six months, operating income (€3,370m) increased by 9.3% (+12.2% organic).

Net financial expenses in January-June (€1,197m) decreased compared with the same period in the previous year (€1,320m), primarily due to the reduction in the cost of the debt, thanks to the refinancing in European currencies. In the second quarter, financial expenses (€748m) rose 13.3% y-o-y mainly due to the savings from GBP hedging management associated to T. UK in 2016 and higher losses and impairments in 2017 from the stake in Mediaset Premium (€76m) and Prisa (€30m).

Corporate Income Tax in the second quarter totalled €206m (€520m in January-June 2017) and decreased 17.8% y-o-y, primarily due to a higher activation of deferred tax assets in 2017.

Profit attributable to minority interests in April-June amounted to €26m and reversed signs in comparison with the same period in 2016 (€-37m), mainly due to the greater profit attributable to the minority interests of T. Deutschland and T. Brasil.

As a result, profit attributable to ordinary equity holders of the parent in the quarter (€821m) increased 18.4% y-o-y. In January-June, it reached €1,600m (+28.9% y-o-y).

In underlying terms, this profit rose to €1,092m and grew 23.6% y-o-y in the second quarter (€2,052m in the first half; +31.2% y-o-y).

Basic earnings per share stood at €0.15 in the second quarter (+16.3%; €0.20 in underlying terms, +21.9%). In January-June, it reached €0.29 (+30.3%; €0.38 underlying, +32.3%).

CapEx in the first half (€3,507m) was focused on 4G and fibre optic network expansion, and the simplification and digitalisation of processes and systems, and its y-o-y performance (-4.0% reported; -5.7% organic) reflected integration synergies, consolidation and network optimisation (“big data”).

In January-June 2017, free cash flow totalled €1,620m, doubling y-o-y, despite the seasonality associated with working capital. Thus:

i) Operating cash flow (OIBDA-CapEx) reached €4,672m in January-June and grew at double digit rates (+13.9% y-o-y in reported terms; +13.0% organic) reflecting business performance (organic growth in all segments except T. UK) and lower CapEx intensity. Y-o-y growth accelerated sequentially in the second quarter 8.6 p.p. up to 17.5% in organic terms (+16.0% reported).

 

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ii) Interest payments in the first half (€976m) reduced by 29.2% y-o-y mainly due to the lower cost of debt in European currencies and the deferral to the third quarter of the Parapat payments corresponding to the second quarter. These payments amounted to €334m in April-June (-31.8% y-o-y). The effective cost of interest payments in the last 12 months stood at 3.22% as of June, 72 b.p. lower than the 3.94% at December 2016.

iii) Tax payments totalled €537m vs. €228m in January-June 2016 due to lower refunds from previous years. The effective payment rate stood at 24.7%.

iv) Working capital consumed €1,351m in January-June 2017 (€278m in the second quarter), affected by CapEx seasonality, payments of taxes and rentals, partially offset by the execution of factoring measures on receivables and the extension of payment terms with suppliers or with the factoring company where those had been discounted. This consumption is €62m lower vs. the first half of 2016, mainly due to the regularisation of payments in foreign currency in Argentina in 2016.

v) Operations with minority shareholders in January-June (€255m) were mainly associated with dividend payments in T. Deutschland and T. Brasil, and the y-o-y performance (-3.4%) is explained by the higher stake of Telefónica in T. Deustchland (+6 p.p. y-o-y).

Net financial debt as of June (€48,487m) decreased by €279m compared with March thanks to free cash flow generation (€1,021m) and the lower value in euros of the net debt in foreign currencies (€648m), which more than offset: i) shareholder remuneration (€829m, including the dividend and coupons of capital instruments), ii) payment of labour-related commitments (€164m) and iii) other factors (€397m), including the extension of payment terms with suppliers or with the factoring company where those had been discounted.

Compared with December 2016, net financial debt decreased by €108m thanks to free cash flow generation (€1,620m) and the lower value in euros of net debt in foreign currencies (€506m), partially offset by: i) shareholder remuneration (€1,016m, including the dividend and coupons of capital instruments), ii) payment of labour-related commitments (€331m) and iii) other factors (€671m), including the extension of payment terms with suppliers or with the factoring company where those had been discounted.

During the first half of 2017, Telefónica’s financing activity amounted to approximately €6,884m equivalent (without considering the refinancing of short-term bank loans and commercial paper) and focused on strengthening the liquidity position, and refinancing and extending debt maturities (in an environment of very low rates). Therefore, as of the end of June, the Group maintained a comfortable liquidity position, covering debt maturities for around the next 2 years. The average debt life stood at 7.82 years.

The main financing transactions in the quarter included the first transaction on the South Asian market in April targeting Taiwanese investors amounting to 200m USD at a 20-year term and a coupon of 4.90%. The 30-year bond issued in March 2017 was also re-opened in April for an amount of 500m USD.

Throughout the first half, Telefónica Group obtained funding by means of extending payment terms with suppliers or with the factoring company where those had been discounted, for a total €598m equivalent (€231m in the second quarter). In the first six months of 2016, this financing amounted to €788m equivalent.

Moreover, Telefónica S.A. and its holding companies continued their issuance activity under the Promissory Notes and Commercial Paper Programmes (Domestic and European), maintaining an amount outstanding of approximately €2,503m at the end of June.

At the end of June, Telefónica maintained undrawn, committed credit lines with different credit institutions for an approximate amount of €11,697m (€10,754m maturing in more than twelve months) which, combined with the cash equivalents position and current financial assets excluding Venezuela placed liquidity at €21,303m.

 

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Definitions:

Organic Growth: Assumes constant exchange rates from 2016, excludes the impact of hyperinflationary adjustments in Venezuela in both years and considers a constant perimeter of consolidation. In OIBDA and OI terms, excludes write-downs, capital gains/losses from the sale of companies, sale of towers, restructuring costs and material non-recurring impacts. CapEx also excludes investment in spectrum.

Underlying Growth: Reported figures excluding the impact of write-downs, capital gains/losses from the sale of companies, tower sales, restructuring costs and material non-recurring impacts, as well as depreciation and amortisation charges from purchase price allocation processes.

Digital Services

(y-o-y changes in organic terms)

Digital service revenues totalled €1,284m, +0.8% more than in the second quarter of 2016 (€2,558m in the half year; +2.7%), driven by the growth in Video and M2M.

Video, with €747m revenues in the quarter, maintained a solid growth rate of 4.8% y-o-y (+0.2 p.p. compared with the first quarter; +4.7% in January-June), thanks to improvements in ARPU and the customer base in Hispanoamerica (+2% y-o-y). Pay TV accesses declined 1.7% y-o-y, mainly due to the decline in satellite TV accesses (-8.4% to 4.1m).

Security revenues totalled €84m in April-June and decreased 1.4% y-o-y (stable in the first half) affected by the consumer security business. Nonetheless, it is worth noting the another quarter of robust growth in the B2B segment (+24.9%), which accelerated by 5.9 p.p vs. the previous quarter. Additionally, ElevenPaths announced that its security platform has complied with the new European data protection regulation one year ahead of its implementation.

M2M (revenues of €70m in April-June) reported a 25.5% y-o-y growth (+31.1% in January-June), supported by both the “Smart M2M” managed connectivity platform, which enables global and digital IoT connectivity management, and also the end-to-end services catalogue (Metering, Retail, energy efficiency and connected car). By launching “Open Labs”, Telefónica takes the lead in new IoT connectivity and networks (NB-IoT and LTE-M).

Cloud revenues (€116m in the quarter) decreased by 19.4% compared with April-June 2016 (-14.7% in January-June 2017) due to higher competitive pressure in main markets and a tougher y-o-y comparison associated with specific projects carried out in Spain and Hispanoamerica in 2016.

Telefónica Global Resources

The Global Network and Operations area kept a steady pace in UBB rollout with 41.2m premises passed with FTTx and cable (+14% y-o-y); 17.7M in Brazil (FTTx and cable), 18.0m in Spain (FTTH) and 5.4m in Hispanoamérica (FTTx and cable). Video consumption fostered the average consumption of fixed data by customers (+41% in the quarter) and total fixed broadband traffic (+38% y-o-y). Additionally, 4G coverage rose to 68% (+12 p.p. y-o-y) with a total of 63,726 sites, and LTE traffic tripled year-on-year in the quarter accounting for more than 50% of the total for mobile data. In Europe, LTE coverage reached 89% of the population.

In the quarter it was remarkable the launch of the “Service Operations Centres” (SOC) in Argentina, Chile and Germany for smart network management based on real-time analysis of customer experience. In addition, an LTE voice pilot (VoLTE) was also launched for international roaming at Telefónica Brasil. Deployments also began in the quarter in Colombia, Peru, Germany and Argentina for “UNICA”, la Telefónica’s network virtualisation solution that will provide Group’s operators with a common environment and appropriate tools to be able to efficiently manage the evolution of physical network equipment towards end-to-end virtual solutions.

 

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Regarding innovation, it is noteworthy the initiative carried out in Peru to provide emergency mobile internet in areas affected by flooding, and in the field of 5G, the award received for “CloudRAN based 5G UCNC (user-centric no-cell) Network” 5G, which is highly relevant for 5G’s future commercial deployment.

The Global IT area, focused on the end-to-end digitalisation of the Company, continued progressing with “Full Stack”: Uruguay concluded the migration of all of its customers, Chile of 2.7m prepay customers, Peru of 5.0m of prepay customers and Mexico 800k contract customers. On the other hand, progress was made in the integration of systems in Uruguay (tariff calculator), Argentina (commission management) and Chile (commercial logistics notification management).

Regarding the digitalisation of channels and data management, the corporate mobile application was launched in Argentina for B2B customers, and the B2C mobile application was renovated in Spain, Brazil and Colombia. “Movistar TV” was also deployed in Nicaragua in the quarter.

All the above has led to a 52% level of capacity enablement in the quarter. Finally the quarter saw the reduction of 1.6% servers, -1 Data Centres and -42 applications, thus increasing virtualisation by 0.6 p.p. in comparison with March.

Telxius

(y-o-y changes in organic terms)

Telxius posted solid results in the second quarter of 2017, with revenues of €182m and a strong growth of 11.4% y-o-y (+8.3% in the first half), driven by new tower lease contracts and by adjustments in pass-through revenues/costs affecting the second quarter of 2016, which also reflected the cancellation of IRU contracts in the cable business.

OIBDA amounted to €87m (€179m in the first half) with a margin of 47.9% (48.4% in January-June). It should be kept in mind that as the Company was created in 2016, the y-o-y OIBDA comparison does not reflect actual business performance as it was affected by the progressive establishment of activities over the course of the year and by the negative impacts associates with the formation of the Company.

The tower business reported a quarterly increase in its “tenancy ratio” of 0.02x to 1.30x at June, with new lease contracts signed primarily in Spain, Germany and Brazil. Moreover, the tower portfolio grew (15,907 towers as of June) with the net addition of 10 towers in the quarter (37 in the half year). Revenues have thus amounted to €77m in April-June (€153m in January-June).

In the cable business, the international traffic demand managed by Telxius showed strong y-o-y growth in IP traffic (+31% y-o-y in the first half) and bandwidth in capacity services (+62%). As such, revenues totalled €105m in the quarter (€216m in the first six months). Additionally, it is worth mentioning that marine deployment of MAREA has started since the beginning of June (cable that will connect the USA with northern Spain) from the landing station at Sopelana (Vizcaya). BRUSA (cable that will connect the USA with Brazil) continues its rollout as expected.

CapEx reached €56m in the first six months of the year, albeit this item is subject to a high degree of seasonality during a year of notable investment for Telxius, in the context of the above-mentioned rollout of new cables. Likewise, project execution seasonability also affected the operating cash flow (OIBDA-CapEx), which stood at €123m in January-June.

 

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TELEFÓNICA

ACCESSES

Unaudited figures (thousands)

 

     2016      2017         
     March      June      September      December      March      June      % Chg  

Final Clients Accesses

     341,262.7        341,922.3        343,932.9        344,671.1        341,785.7        341,347.3        (0.2

Fixed telephony accesses (1)

     39,606.5        39,262.1        38,914.0        38,280.1        37,853.0        37,488.4        (4.5

Internet and data accesses

     21,507.7        21,641.4        21,738.4        21,652.1        21,657.8        21,697.3        0.3  

Broadband

     21,097.2        21,195.9        21,266.5        21,194.9        21,196.4        21,240.4        0.2  

FTTx/Cable

     7,933.6        8,378.1        8,704.0        9,137.6        9,580.6        9,960.5        18.9  

Mobile accesses

     271,783.2        272,596.8        274,883.7        276,450.0        274,055.6        273,886.6        0.5  

Prepay

     166,005.2        165,619.6        165,912.1        165,663.2        162,648.4        161,271.6        (2.6

Contract

     105,778.0        106,977.2        108,971.6        110,786.8        111,407.2        112,615.0        5.3  

M2M

     12,583.9        12,988.2        13,591.7        14,002.0        14,488.0        15,009.9        15.6  

Pay TV

     8,365.4        8,422.0        8,396.7        8,289.0        8,219.3        8,274.9        (1.7
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Wholesale Accesses

     5,826.7        5,591.7        5,480.7        5,300.9        5,087.1        4,887.2        (12.6
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Accesses

     347,089.4        347,514.0        349,413.5        349,972.1        346,872.8        346,234.5        (0.4
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Includes fixed wireless and VoIP accesses.

TELEFÓNICA

MOBILE ACCESSES

Unaudited figures

 

     2016     2017        
     March     June     September     December     March     June     % Chg  

Contract percentage (%)

     38.9     39.2     39.6     40.1     40.7     41.1     1.9  p.p. 

Smartphones (‘000)

     128,326.0       130,058.4       144,588.9       147,161.8       151,547.7       155,126.7       19.3  

Smartphone penetration (%)

     50.6     51.1     56.4     57.1     59.4     60.9     9.8  p.p. 

LTE (‘000)

     43,870.2       50,077.3       57,342.4       66,295.7       75,458.8       81,604.2       63.0  

LTE penetration (%)

     16.9     19.3     22.1     25.3     29.1     31.5     12.2  p.p. 

 

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TELEFÓNICA

CONSOLIDATED INCOME STATEMENT

Unaudited figures (Euros in millions)

 

     January - June     % Chg     April - June     % Chg  
     2017     2016     Reported     Organic     2017     2016     Reported     Organic  

Revenues

     26,091       25,235       3.4       2.3       12,960       12,723       1.9       3.1  

Internal exp. capitalized in fixed assets

     430       428       0.5       (1.2     222       214       3.4       2.7  

Operating expenses

     (18,396     (18,010     2.1       1.1       (9,048     (9,067     (0.2     1.2  

Supplies

     (7,362     (7,423     (0.8     (1.2     (3,632     (3,748     (3.1     (2.2

Personnel expenses

     (3,493     (3,436     1.7       1.7       (1,675     (1,687     (0.7     4.3  

Other operating expenses

     (7,541     (7,152     5.4       3.2       (3,741     (3,632     3.0       3.3  

Other net income (expense)

     28       98       (71.8     (55.8     (1     49       c.s.       (68.3

Gain (loss) on sale of fixed assets

     18       8       n.m.       n.m.       10       2       n.m.       n.m.  

Impairment of goodwill and other assets

     9       (2     c.s.       c.s.       16       (3     c.s.       c.s.  

Underlying operating income before D&A (OIBDA)

     8,292       7,824       6.0         4,183       3,964       5.5    

Operating income before D&A (OIBDA)

     8,179       7,756       5.5       4.3       4,158       3,918       6.1       7.2  

OIBDA Margin

     31.3     30.7     0.6  p.p.      0.6  p.p.      32.1     30.8     1.3  p.p.      1.2  p.p. 

Depreciation and amortization

     (4,809     (4,673     2.9       (1.1     (2,358     (2,351     0.3       (0.9

Operating income (OI)

     3,370       3,083       9.3       12.2       1,800       1,567       14.9       19.0  

Share of profit (loss) of investments accounted for by the equity method

     3       (3     c.s.         1       0       n.m.    

Net financial income (expense)

     (1,197     (1,320     (9.3       (748     (660     13.3    

Profit before taxes

     2,176       1,760       23.7         1,053       907       16.1    

Corporate income tax

     (520     (549     (5.2       (206     (251     (17.8  

Profit for the period

     1,656       1,211       36.7         847       656       29.1    

Attributable to equity holders of the Parent

     1,600       1,241       28.9         821       693       18.4    

Attributable to non-controlling interests

     56       (30     c.s.         26       (37     c.s.    

Weighted average number of ordinary shares outstanding during the period (millions)

     5,094       5,066       0.6         5,123       5,053       1.4    

Basic and diluted earnings per share attributable to equity holders of the Parent (euros)

     0.29       0.22       30.3         0.15       0.13       16.3    

Underlying basic and diluted earnings per share attributable to equity holders of the Parent (euros)

     0.38       0.28       32.3         0.20       0.16       21.9    

Notes:

 

- After considering Venezuela as a hyperinflationary country, P&L and CapEx from the operations in the country are to be accounted at the closing exchange rate Bolivar Fuerte/Euro. For the January-June 2017 period Telefónica has adopted a synthetic exchange rate of 3,547 Venezuelan bolivars fuertes per dollar at June 2017 (please see Note 3 of the Condensed Consolidated Interim Financial Statements for the six-month period ended June 30, 2017).
- Basic and diluted earnings per share ratio is calculated dividing Profit for the period Attributable to equity holders of the Parent, adjusted for the net coupon corresponding to “Other equity instruments” (€68m in April-June 17; €136m in January-June 17), by the weighted average number of ordinary shares outstanding during the period.
- 2016 and 2017 reported figures include hyperinflationary adjustments in Venezuela in both years.

TELEFÓNICA

GUIDANCE 2017

 

    

Original Operative 2017 Guidance
(Feb-2017)

  

Upgraded Operative 2017 Guidance
(Jul-2017)

     2017  
  2016 Base                Jan -Jun  
  51,734    

Revenues (% Chg YoY)

   Stable
(in spite of regulation: ~-1.2 p.p.)
   Growth >1.5%
(in spite of regulation: ~-1.2 p.p.)
     2.3
  31.8  

OIBDA margin (Chg YoY)

   Expansion up to 1 p.p.    Expansion up to 1 p.p.      0.6  p.p. 
  16.5  

CapEx / Sales

   Around 16%    Around 16%      13.4

 

- Organic criteria: Assumes constant exchange rates as of 2016 (average FX in 2016), excludes the impact from hyperinflation in Venezuela in both years and considers constant perimeter of consolidation. In OIBDA and OI terms, excludes write-downs, capital gains/losses from the sale of companies, tower sales, material non-recurring impacts and restructuring costs. CapEx also excludes investment in spectrum.

2016 adjusted base excludes:

- The results of the companies sold in 2016 (Telefé, T. Personalizadas and Vocem) from 1 January, 2016 to the date of exiting the perimeter of consolidation.
- OIBDA excludes additionally write-downs, capital gains/losses from the sale of companies, tower sales, material non-recurrent impacts and restructuring costs.
- CapEx excludes additionally spectrum acquisition.

 

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TELEFÓNICA

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Unaudited figures (Euros in millions)

 

     June 2017      December 2016      % Chg  

Non-current assets

     97,475        103,667        (6.0

Intangible assets

     18,813        20,518        (8.3

Goodwill

     27,362        28,686        (4.6

Property, plant and equipment and Investment properties

     34,202        36,393        (6.0

Investments accounted for by the equity method

     71        76        (6.5

Non-current financial assets

     8,863        9,765        (9.2

Deferred tax assets

     8,164        8,229        (0.8

Current assets

     22,876        19,974        14.5  

Inventories

     1,029        1,055        (2.5

Trade and other receivables

     10,740        10,675        0.6  

Current financial assets

     3,590        2,954        21.5  

Tax receivables

     1,454        1,533        (5.1

Cash and cash equivalents

     6,046        3,736        61.8  

Non-current assets and disposal groups classified as held for sale

     17        21        (19.6

Total Assets = Total Equity and Liabilities

     120,351        123,641        (2.7

Equity

     25,534        28,385        (10.0

Equity attributable to equity holders of the parent and other holders of equity instruments

     16,877        18,157        (7.0

Non-controlling interests

     8,657        10,228        (15.4

Non-current liabilities

     62,331        59,805        4.2  

Non-current financial liabilities

     48,780        45,612        6.9  

Non-current trade and other payables

     1,802        1,925        (6.4

Deferred tax liabilities

     2,284        2,395        (4.6

Non-current provisions

     9,465        9,873        (4.1

Current liabilities

     32,486        35,451        (8.4

Current financial liabilities

     13,715        14,749        (7.0

Current trade and other payables

     14,386        16,150        (10.9

Current tax payables

     2,313        2,332        (0.8

Current provisions

     2,072        2,220        (6.7

Liabilities associated with non-current assets and disposals groups held for sale

     —          —          —    

Financial Data

        

Net Financial debt

     48,487        48,595        (0.2

Notes:

 

- 2016 and 2017 reported figures include hyperinflationary adjustments in Venezuela in both years.

TELEFÓNICA

NET FINANCIAL DEBT PLUS COMMITMENTS

Unaudited figures (Euros in millions)

 

     June 2017  

Non-current financial liabilities

     48,780  

Current financial liabilities

     13,715  

Gross Financial Debt

     62,495  

Cash and cash equivalents

     (6,046

Current financial assets

     (3,590

Positive mark-to-market value of long-term derivative instruments

     (3,894

Other non-current liabilities included in “Trade and other payables”

     726  

Other current liabilities included in “Trade and other payables”

     230  

Other assets included in “Non-current financial assets”

     (907

Other assets included in “Current trade and other receivables”

     (527

Net Financial Debt (1)

     48,487  

Gross commitments related to employee benefits

     6,524  

Value of associated Long-term assets

     (732

Tax benefits

     (1,510

Net commitments related to employee benefits

     4,282  

Net financial debt plus commitments

     52,769  

Net Financial Debt / OIBDA

     2.86

Notes:

 

(1) Net financial debt includes a positive value of the derivatives portfolio for a net amount of €2,185m, €3,296m included as financial liabilities and €5,482m included as financial assets.

 

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TELEFÓNICA

CONSOLIDATED CASH FLOW STATEMENT

Unaudited figures (Euros in millions)

 

     January - June  
     2017      2016      % Var  

Cash received from operations

     32,024        30,670     

Cash paid from operations

     (24,557      (23,673   

Net payments of interest and other financial expenses net of dividens received

     (976      (1,377   

Taxes paid

     (537      (228   

Net cash flow provided by operating activities

     5,954        5,392        10.4

(Payments on investments)/proceeds from the sale in property, plant and equipment and intangible assets, net

     (4,405      (4,643   

Proceeds on disposals of companies, net of cash and cash equivalents disposed

     30        450     

Payments on investments in companies, net of cash and cash equivalents acquired

     (6      (103   

Proceeds on financial investments not included under cash equivalents

     155        34     

Payments on financial investments not included under cash equivalents

     (544      (128   

(Payments)/proceeds on placements of cash surpluses not included under cash equivalents, net

     (1,112      (40   

Government grants received

     —          —       

Net cash flow used in investing activities

     (5,882      (4,430      32.8

Dividends paid

     (1,136      (2,211   

Proceeds from issue of share capital increase

     3        —       

(Payments)/proceeds of treasury shares and other operations with shareholders, net

     0        (651   

Operations with other equity holders (1)

     (135      (118   

Proceeds on issue of debentures and bonds, and other debts

     6,789        3,415     

Proceeds on loans, borrowings and promissory notes

     2,823        10,445     

Cancellation of debentures and bonds, and other debts

     (2,534      (6,534   

Repayments of loans, borrowings and promissory notes

     (2,439      (3,728   

Financed operating payments and investments in property, plant and equipment and intangible assets payments

     (841      (1,457   

Net cash used in financing activities

     2,530        (839      c.s.  

Effect of changes in exchange rates

     (292      151        c.s.  

Effect of changes in consolidation methods and others

     0        (5      c.s.  

Net increase (decrease) in cash and cash equivalents during the year

     2,310        269        n.m.  

Cash and cash equivalents at the beginning of the period

     3,736        2,615     

Cash and cash equivalents at the end of the period

     6,046        2,884     

Notes:

 

- After considering Venezuela as a hyperinflationary country, P&L and CapEx from the operations in the country are to be accounted at the closing exchange rate Bolivar Fuerte/Euro. For the January-June 2017 period Telefónica has adopted a synthetic exchange rate of 3,547 Venezuelan bolivars fuertes per dollar at June 2017 (please see Note 3 of the Condensed Consolidated Interim Financial Statements for the six-month period ended June 30, 2017).
- 2016 and 2017 reported figures include the hyperinflationary adjustments in Venezuela in both years.
1) Includes issuance and coupons of undated deeply subordinated securities.

 

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TELEFÓNICA

FREE CASH FLOW AND CHANGE IN DEBT

Unaudited figures (Euros in millions)

 

         January - June  
         2017     2016     % Chg  

I

  

Cash flow from operations

    7,467       6,996       6.7  

II

  

Net interest payment (1)

    (976     (1,377  

III

  

Payment for income tax

    (537     (228  

A=I+II+III

  

Net cash provided by operating activities

    5,954       5,391       10.4  

B

  

Net payment for investment in fixed and intangible assets

    (4,411     (4,644  
  

Spectrum (2)

    (8     (13  

C=A+B

  

Net free cash flow after CapEx

    1,543       747       106.6  

D

  

Net Cash received from sale of Real Estate

    6       1    

E

  

Net payment for financial investment

    (366     244    

F

  

Net payment for operations with minority shareholders and treasury stock (3)

    (1,268     (2,970  

G=C+D+E+F

  

Free cash flow after dividends

    (85     (1,978     (95.7

H

  

Effects of exchange rate changes on net financial debt

    (506     (165  

I

  

Effects on net financial debt of changes in consolid. and others

    314       1,220    

J

  

Net financial debt at beginning of period

    48,595       49,161    

K=J-G+H+I

  

Net financial debt at end of period

    48,487       52,193       (7.1

TELEFÓNICA

RECONCILIATIONS OF CASH FLOW AND OIBDA MINUS CAPEX FROM CONTINUING OPERATIONS

Unaudited figures (Euros in millions)

 

     January - June  
     2017      2016      % Chg  

OIBDA

     8,179        7,756        5.5  

- CapEx accrued during the period

     (3,507      (3,654   

- Payments related to cancellation of commitments

     (331      (332   

- Net interest payment

     (976      (1,377   

- Payment for tax

     (537      (228   

- Gain (loss) on sale of fixed assets and impairment of goodwill and other assets

     (10      (6   

- Investment In working capital and other deferred income and expenses (4)

     (1,275      (1,412   

= Net Free Cash Flow after CapEx

     1,543        747        106.6  

+ Payments related to cancellation of commitments

     331        332     

- Dividends paid to minority shareholders

     (255      (264   

= Free Cash Flow

     1,620        815        98.6  

Weighted average number of ordinary shares outstanding during the period (millions)

     5,094        5,066     

= Free Cash Flow per share (euros)

     0.32        0.16        97.5  

Notes:

 

- 2016 and 2017 reported figures include hyperinflationary adjustments in Venezuela in both years.
(1) Includes cash received from dividends paid by subsidiaries that are not fully consolidated.
(2) Figures in €m. 2017 includes mainly: 4 in Spain, 2 in Colombia and 2 in Mexico. In 2016 mainly: 4 in Spain, 2 in Germany, 2 in Colombia and 6 in Peru.
(3) Dividends paid by Telefónica S.A., operations with treasury stock, issuance of shares, issuance and coupons of undated deeply subordinated securities, issuance of mandatorily convertible bonds into Telefónica S.A. shares and operations with minority shareholders from subsidiaries that are consolidated through the equity method.
(4) Other deferred expenses include €76m in Q1 2017 related to commitments associated with long-term restructuring plans in Spain.

 

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TELEFÓNICA

EXCHANGES RATES APPLIED

 

     P&L and CapEx (1)      Statement of Financial Position (2)  

Currency units per Euro

   Jan - Jun 2017      Jan - Jun 2016      June 2017      December 2016  

USA (US Dollar)

     1.082        1.115        1.140        1.054  

United Kingdom (Sterling)

     0.860        0.778        0.879        0.855  

Argentina (Argentine Peso)

     16.980        15.968        18.930        16.706  

Brazil (Brazilian Real)

     3.437        4.118        3.773        3.435  

Chile (Chilean Peso)

     713.796        768.533        757.587        705.622  

Colombia (Colombian Peso)

     3,161.635        3,474.913        3,478.866        3,162.745  

Costa Rica (Colon)

     616.523        606.796        661.376        591.366  

Guatemala (Quetzal)

     7.991        8.561        8.365        7.928  

Mexico (Mexican Peso)

     20.979        20.137        20.599        21.733  

Nicaragua (Cordoba)

     32.116        31.532        34.262        30.904  

Peru (Peruvian Nuevo Sol)

     3.544        3.772        3.710        3.537  

Uruguay (Uruguayan Peso)

     30.733        35.012        32.497        30.924  

Venezuela (Bolivar Fuerte) (3)

     4,045.307        697.350        4,045.307        710.227  

 

(1) Average exchange rate for the period.
(2) Exchange rates as of 30/06/17 and 31/12/16.
(3) After considering Venezuela as a hyperinflationary country, P&L and CapEx from the operations in the country are to be accounted at the closing exchange rate Bolivar Fuerte/Euro. For the January-June 2017 period Telefónica has adopted a synthetic exchange rate of 3,547 Venezuelan bolivars fuertes per dollar at June 2017 (please see Note 3 of the Condensed Consolidated Interim Financial Statements for the six-month period ended June 30, 2017).

NET FINANCIAL DEBT STRUCTURE BY CURRENCY

Unaudited figures

 

     June 2017  
     EUR     LATAM     GBP     USD  

Net financial debt structure by currency

     80     11     7     2

TOTAL FINANCIAL LIABILITIES BREAKDOWN

Unaudited figures

 

     June 2017  
     Bonds and
commercial
paper
    Debt with
financial
institutions
    Other financial debt
(including governments) and
net derivatives
 

Total financial liabilities (1)

     82     16     2

 

(1) Includes positive value of derivatives and other financial debt.

CREDIT RATINGS

 

     Long-Term      Short-Term      Perspective      Date of last rating change  

Moody’s1

     Baa3        P-3        Stable        7/11/2016  

Fitch1

     BBB        F-3        Stable        5/9/2016  

S&P1

     BBB        A-2        Stable        05/17/2016  

 

(1) The rating is issued by a credit rating agency established in the EU and registered under Regulation (EC) 1060/2009.

 

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02

TELEFÓNICA ESPAÑA

(y-o-y changes in organic terms)

In the second quarter of 2017 T. España’s results showed a sequential improvement in revenue performance. This evolution is driven by higher commercial activity, with churn reduction in virtually all services, which reflects the sustainability of the Company’s value strategy. Quarterly service revenues improved their year-on-year performance compared with the previous quarter and decreased by 0.8%; this growth would have been positive (+0.2%) if the impact of the lower revenues from wholesale TV rights of “La Liga” were excluded; an impact that will be neutralised since August.

The penetration of “Movistar Fusión” reached 85% in broadband, 84% in TV and 77% in mobile contract. Fusión continues growing in value, which is reflected in the customers with UBB fibre (38%, +7 p.p. y-o-y) and TV (70%, +3 p.p.) and in the high-value bundles (24%, +3 p.p. q-o-q). The quarterly ARPU stood at €84.8 and accelerated its year-on-year growth to 6.4% while churn was reduced vs previous quarter to 1.3%. In addition, “Fusión+” portfolio was enlarged at the beginning of July with the launch of a new convergent “entry level” proposal incorporating TV and all its functionalities.

Mobile accesses increased year-on-year for the second quarter in a row (+1%), posting the best performance since the third quarter of 2010. Net additions (+69k ex M2M) reflect the success of the “totalisation” strategy and the better evolution of the portability balance. As such, contract accesses ex M2M growth accelerated their growth rate (+5%; +1.7 p.p. q-o-q) and churn reduced (1.3%; -0.2 p.p. q-o-q).

Fixed telephony accesses (-4% y-o-y) reduced their quarterly net loss (-121k vs -136k in the first quarter) as the effect of tariff repositioning dilute. Fixed broadband accesses remained stable year-on-year and still posted a net loss of 31k; however, the monthly performance showed an improvement anticipating a shift in trend that is expected to be consolidated in the coming months on the back of the new “Fusión+” bundles. The broadband churn stood stable vs the first quarter (1.6%). Fibre accesses already represent 53% of the total broadband (+9 p.p. y-o-y), and 67% are ultrafast broadband (300Mb). Premises passed with fibre to the home reached 18.0m (+500k compared with March).

Pay TV net additions returned to positive figures (+51k vs. -41k in the previous quarter), fostered by new customers and the migration from low-value options to the “Fusión+ Ocio” bundle launched in April (151k customers as of 30 June).

Wholesale accesses totalled 4.4m (-7% year-to-year), slowing their quarter decline (-65k vs. -83k in the first quarter) due to the higher growth of NEBA fibre (+114k quarterly net additions vs. 101k in the previous quarter) to reach 540k accesses.

Revenues in the second quarter reached to €3,160m (-1.9% year-to-year) and improved compared with the previous quarter (+0.6 p.p.), thanks to the better service revenue performance (-0.8%, +0.8 percentage points compared with the first quarter) and despite a higher decline in handset sales (-31.8%, -1.9 p.p.). Total revenues (€6,226m) and service revenues (€6,062m) in the semester declined 2.3% and 1.1% respectively.

Consumer revenues (€1,654m) returned to growth in the quarter (+1.1% y-o-y; +1.4 p.p vs. the first quarter), pushed by a higher growth in “Fusión” revenues (+9.7%), reflecting tariff upgrade in April in some Fusión bundles and a better value mix. Non-converging revenues improved their year-on-year performance (-13.0%).

Business revenues (€870m) decreased by 1.3% year-on-year (-1.4 p.p. vs. the first quarter), affected by seasonal factors resulting in a drop in communications revenues (-3.9%), though IT revenues continued to post strong growth (+8.4%).

 

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Other revenues (€554m) dropped by 5.1% year-on-year because of less wholesale TV revenues (impact of -€30m in the quarter and whose comparison will be much more favourable since August), OMVs and regulatory impacts (NEBA, ORLA, etc.).

Operating expenses in the quarter rose to €1,978m but reduced by 1.2% year-on-year (vs. -3.3% in the previous quarter). In the semester they stood at €3,981m and posted a 2.3% year-on-year reduction.

Supplies (€856m) changed their trend and decreased 2.4% (+3.6% in the first quarter) on the back of a smaller growth in content and handset costs. The net content cost increased by 11% year-on-year (+21% in January-March) with an increasingly homogeneous comparison.

Personnel expenses (€520m) decreased by 1.9% slowing down their pace of year-on-year decline (vs. -12.6% in the first quarter) due to the lower year-on-year savings arising from the employment suspension plan (€28m), since most personnel departures occurred in the second quarter of 2016 (2,256 of a total of 4,600 since January 2016 up to June 2017). Personnel expenses were also affected in the quarter by particular cost of €9m. Headcount at the end of June totalled 28,033 employees (-5.0% y-o-y).

Other operating expenses (€602m) increased in the quarter by 1.0% (-3.2% in the first quarter) mainly because of higher commercial costs.

An €8m capital gain on real estate sales was registered in the quarter.

OIBDA in April-June rose to €1,282m, which is 1.5% less than the same period a year ago, driving a sequential improvement of 0.9 percentage points explained by the better revenue performance and cost containment. The OIBDA margin thus stood at 40.6% (+0.8 p.p. q-o-q, +0.2 p.p. y-o-y). In the first half of the year, OIBDA stood at €2,425m with a 1.9% year-on-year reduction.

CapEx in the semester rose to €704m (-20.6% y-o-y), reflecting a lower pace of deployment in fiber and 4G as well as higher efficiencies, and operating cash flow grew soundly to €1,720m (+8.0% y-o-y).

 

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TELEFÓNICA ESPAÑA

CONSOLIDATED INCOME STATEMENT

Unaudited figures (Euros in millions)

 

     January - June     % Chg     April - June     % Chg  
     2017     2016     Reported     Organic     2017     2016     Reported     Organic  

Revenues

     6,226       6,374       (2.3     (2.3     3,160       3,224       (2.0     (1.9

Mobile handset revenues

     165       238       (30.9     (30.9     83       121       (31.8     (31.8

Revenues ex-mobile handset revenues

     6,062       6,136       (1.2     (1.1     3,077       3,103       (0.8     (0.8

Consumer (1)

     3,273       3,262       0.4       0.4       1,654       1,636       1.1       1.1  

Fusión

     2,184       1,994       9.5       9.5       1,114       1,015       9.7       9.7  

Non-Fusión

     1,090       1,268       (14.0     (14.0     540       621       (13.0     (13.0

Business

     1,710       1,721       (0.6     (0.6     870       881       (1.3     (1.3

Communications

     1,331       1,374       (3.2     (3.2     667       694       (3.9     (3.9

IT

     379       346       9.6       9.6       203       187       8.4       8.4  

Other (2)

     1,078       1,153       (6.5     (6.2     554       586       (5.4     (5.1

Internal expenditure capitalized in fixed assets

     153       169       (9.8     (9.8     77       82       (7.1     (7.1

Operating expenses

     (3,981     (3,997     (0.4     (2.3     (1,978     (2,003     (1.2     (1.2

Supplies

     (1,672     (1,664     0.4       0.5       (856     (877     (2.4     (2.4

Personnel expenses

     (1,121     (1,131     (0.9     (7.6     (520     (531     (1.9     (1.9

Other operating expenses

     (1,189     (1,202     (1.1     (1.1     (602     (596     1.0       1.0  

Other net income (expense)

     11       (2     c.s.       c.s.       9       (7     c.s.       c.s.  

Gain (loss) on sale of fixed assets

     18       10       76.2       76.2       14       6       147.0       147.0  

Impairment of goodwill and other assets

     (2     (2     6.6       6.6       (1     (1     8.3       8.3  

Operating income before D&A (OIBDA)

     2,425       2,553       (5.0     (1.9     1,282       1,302       (1.6     (1.5

OIBDA Margin

     38.9     40.0     (1.1  p.p.)      0.1  p.p.      40.6     40.4     0.2  p.p.      0.2  p.p. 

CapEx

     704       894       (21.2     (20.6     371       463       (19.8     (18.6

Spectrum

     —         7       —         —         —         7       —         —    

OpCF (OIBDA-CapEx)

     1,720       1,659       3.7       8.0       910       839       8.5       7.8  

Notes:

 

- Since 1 January, 2016, T. España reflects all the charges related to the towers transferred to Telxius, which are now presented in Telxius (Other Companies & Eliminations), and includes the results of the data center business, of T. Studios and of T. Servicios Audiovisuales, which where before presented in Other Companies & Eliminations.
- The results of the T. España do not include intra-group capital gains resulting from the transfer of towers to Telxius in 2016.
- T. Personalizadas has been deconsolidated since 1 January, 2017.
- OIBDA before management and brand fees.
(1) Consumer revenues include residential and SOHO revenues.
(2) Other revenues include wholesale, subsidiaries and other revenues.

 

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TELEFÓNICA ESPAÑA

ACCESSES

Unaudited figures (Thousands)

 

     2016      2017         
     March      June      September      December      March      June      % Chg  

Final Clients Accesses

     36,791.3        36,765.2        36,769.8        36,709.4        36,537.3        36,464.3        (0.8

Fixed telephony accesses (1)

     9,910.6        9,854.2        9,783.7        9,720.2        9,584.2        9,463.3        (4.0

Internet and data accesses

     6,012.8        6,061.6        6,076.6        6,094.5        6,075.9        6,044.4        (0.3

Broadband

     5,978.6        6,030.2        6,045.3        6,067.3        6,050.9        6,020.1        (0.2

FTTH

     2,458.3        2,675.7        2,830.7        2,998.3        3,127.8        3,213.5        20.1  

Mobile accesses

     17,140.1        17,094.4        17,198.2        17,237.7        17,261.7        17,289.8        1.1  

Prepay

     2,675.7        2,579.7        2,466.1        2,329.3        2,135.9        2,000.4        (22.5

Contract

     14,464.5        14,514.7        14,732.1        14,908.4        15,125.7        15,289.4        5.3  

M2M

     1,827.2        1,890.5        1,968.8        2,006.3        2,015.6        1,974.7        4.5  

Pay TV (2)

     3,727.8        3,755.0        3,711.4        3,657.0        3,615.6        3,666.8        (2.4
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Wholesale Accesses

     4,866.9        4,693.3        4,589.3        4,525.5        4,442.3        4,377.8        (6.7

Fibre

     176.6        210.3        259.7        324.9        426.2        539.7        156.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Accesses

     41,658.2        41,458.6        41,359.2        41,234.9        40,979.6        40,842.1        (1.5
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Includes fixed wireless and VoIP accesses.

CONSUMER ACCESSES (Fusión + non-Fusión)

Unaudited figures (thousands)

 

     2016      2017         
     March      June      September      December      March      June      % Chg  

Fixed telephony accesses

     7,428.5        7,382.1        7,319.0        7,260.4        7,146.2        7,041.5        (4.6

Internet and data accesses

     5,145.4        5,186.4        5,195.5        5,207.8        5,195.3        5,174.0        (0.2

Mobile accesses

     11,759.7        11,676.5        11,691.5        11,732.3        11,754.9        11,813.6        1.2  

Prepay

     2,675.7        2,579.7        2,466.1        2,329.3        2,135.9        2,000.4        (22.5

Contract

     9,084.0        9,096.8        9,225.4        9,403.0        9,618.9        9,813.2        7.9  

Pay TV

     3,727.8        3,755.0        3,711.4        3,657.0        3,615.6        3,666.8        (2.4
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Consumer Accesses

     28,061.4        28,000.0        27,917.4        27,857.6        27,711.8        27,695.9        (1.1
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL MOBILE ACCESSES

Unaudited figures

 

     2016     2017        
     March     June     September     December     March     June     % Chg  

Contract percentage (%)

     84.4     84.9     85.7     86.5     87.6     88.4     3.5  p.p. 

Smartphones (‘000)

     10,200.2       10,295.8       10,500.3       10,715.8       10,800.7       11,240.4       9.2  

Smartphone penetration (%)

     67.2     68.3     69.5     70.9     71.3     73.8     5.5  p.p. 

LTE (‘000)

     4,520.7       5,050.0       5,444.0       6,073.0       6,589.6       6,976.3       38.1  

LTE penetration (%)

     29.5     33.2     35.7     39.9     43.2     45.6     12.3  p.p. 

CONSUMER FUSIÓN

Unaudited figures (thousands)

 

     2016      2017         
     March      June      September      December      March      June      % Chg  

Fusión Customers

     4,209.1        4,268.8        4,286.1        4,333.2        4,379.0        4,374.7        2.5  

Fibre 100/300

     1,267.4        1,345.9        1,491.0        1,593.5        1,669.1        1,677.9        24.7  

IPTV/Satellite

     2,768.6        2,873.6        2,914.9        2,943.1        2,970.9        3,071.9        6.9  

Mobile add-ons

     2,023.3        2,084.1        2,302.7        2,542.0        2,861.6        3,138.5        50.6  

CONSUMER FUSIÓN

Unaudited figures

 

     2016     2017        
     Q1     Q2     Q3     Q4     Q1     Q2     % Chg  

Fusión ARPU (EUR)

     78.2       79.8       81.8       81.6       81.6       84.8       6.4  

Fusión churn

     1.3     1.1     1.3     1.4     1.4     1.3     0.2  p.p. 
     Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun     % Chg  

Fusión ARPU (EUR)

     78.2       79.0       79.9       80.4       81.6       83.2       5.4  

Fusión churn

     1.3     1.2     1.2     1.3     1.4     1.4     0.1  p.p. 

SELECTED OPERATIONAL DATA

Unaudited figures

 

     2016      2017         
     Jan - Mar      Jan - Jun      Jan - Sep      Jan - Dec      Jan - Mar      Jan - Jun      % Chg  

Total data traffic (TB)

     1,333,989        2,697,613        4,140,131        5,690,140        1,473,501        3,166,713        17.4  

Fixed data traffic

     1,291,860        2,610,901        3,991,793        5,479,375        1,406,556        3,009,891        15.3  

Mobile data traffic

     42,129        86,712        148,338        210,765        66,944        156,821        80.9  

Notes:

 

- Data traffic is defined as Terabytes used by the company customers, both upload and download (1TByte = 10^12 bytes). Promotional traffic is included. Traffic not associated to the Company’s mobile customers (roaming-in, MVNOs, interconnection of third parties and other business lines) is also included. Traffic volume non-rounded.

 

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03

TELEFÓNICA DEUTSCHLAND

(y-o-y changes in organic terms)

In a dynamic market increasingly focused on larger data buckets, Telefónica Deutschland maintained solid momentum in the second quarter, leveraging on “O2 Free” and the 15 year anniversary promotions of the O2 brand.

Contract mobile customers (20.9m; +7% y-o-y) posted strong quarterly net additions of 197k (+172k in the first quarter) on the back of continued resilient partner trading (55% of gross additions; stable q-o-q). Prepay customers stood at 24.3m, up 2% y-o-y, with robust quarterly net additions of 322k (4.6x y-o-y; +183k in January-March). Smartphone penetration continued to grow y-o-y (+1 p.p. to 57%), as a result of the succesful data monetization strategy, LTE accesses (14.4m) increased 53% and penetration (33%) was 11 p.p. higher. The average data usage for O2 contract LTE customers was up 48% vs. April-June 2016 to 2.0 GB. At 2.1m retail broadband accesses were slightly lower y-o-y (-1%); however, the strong demand for VDSL (88k quarterly net additions; +67k in the first quarter) drove the VDSL base to 960k (+43% y-o-y). Wholesale DSL (428k accesses) registered 134k net disconnections due to the planned dismantling of the legacy infrastructure.

In the second quarter, revenues reached €1,771m and improved their y-o-y trend to -3.4% (-4.1% to €3,542m in the first half). Mobile service revenues (MSR) (€1,318m) decreased 3.0% y-o-y (-3.3% in January-March), on strong regulatory headwinds (termination rate cuts and European roaming regulation), the higher share of wholesale revenues and the ongoing legacy base rotation. Excluding regulation, MSR performance improved sequentially by 0.2 p.p. to -0.4% y-o-y. Handset revenues (€229m) increased 1.5% y-o-y (-2.2% in January-June to €482m), despite continued longer replacement cycles. Fixed revenues (€217m) fell 11.2% y-o-y (-11.6% y-o-y in the first half) as a result of the lower year-on-year customer base in retail DSL and the planned phasing-out of the wholesale DSL business.

Operating expenses stood at €1,313m in April-June and decreased 8.6% y-o-y (€2,696m in the first six months; -7.5% y-o-y). Supplies totalled €547m (-5.6% y-o-y; -6.8% in January-June), benefitting from lower interconnection and hardware costs. Personnel expenses (€157m) increased 1.3% vs April-June 2016(-1.8% in the first half) mainly due to the insourcing of external employees (e.g. in customer service), that offset savings obtained from the execution of the employee restructuring programme. Other operating expenses (€609m in the quarter) were down 13.2% y-o-y (-9.5% in the first six months) on the back of successful synergy capture (network consolidation and FTE restructuring). Total restructuring costs amounted to €19m in the quarter (€14m in the second quarter of 2016).

OIBDA reached €461m and its y-o-y growth rate accelerated to 3.8% in the quarter (€861m in January-June; +2.7% y-o-y) as incremental synergies of €40m offset the the negative effect from regulation as well as continued investments into the positioning of the O2 brand in the premium segment and the O2 15 anniversary promotion. OIBDA margin was 26.1% and expanded 1.9 p.p. y-o-y.

In the first half of 2017 CapEx totalled €435m (+1.3% y-o-y), benefitting from incremental synergy related savings of €20m while Telefónica Deutschland pushed ahead with network integration and further rollout of the LTE network.

Operating cash flow (OIBDA-CapEx) totalled €426m in January-June 2017; up 4.0% y-o-y.

 

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TELEFÓNICA DEUTSCHLAND

CONSOLIDATED INCOME STATEMENT

Unaudited figures (Euros in millions)

 

    January - June     % Chg     April - June     % Chg  
    2017     2016     Reported     Organic     2017     2016     Reported     Organic  

Revenues

    3,542       3,691       (4.1     (4.1     1,771       1,834       (3.4     (3.4

Mobile Business

    3,092       3,187       (3.0     (3.0     1,548       1,584       (2.3     (2.3

Mobile service revenues

    2,610       2,694       (3.1     (3.1     1,318       1,358       (3.0     (3.0

Data revenues

    1,488       1,478       0.7       0.7       772       749       3.1       3.1  

Handset revenues

    482       493       (2.2     (2.2     229       226       1.5       1.5  

Fixed Business

    440       498       (11.6     (11.6     217       245       (11.2     (11.2

FBB and new services (1)

    344       379       (9.3     (9.3     167       187       (10.5     (10.5

Voice & access revenues

    96       118       (18.7     (18.7     50       58       (13.4     (13.4

Internal expenditure capitalized in fixed assets

    48       51       (5.9     (5.9     27       26       2.2       2.2  

Operating expenses

    (2,696     (2,923     (7.7     (7.5     (1,313     (1,439     (8.8     (8.6

Supplies

    (1,132     (1,206     (6.2     (6.8     (547     (578     (5.3     (5.6

Personnel expenses

    (313     (333     (6.3     (1.8     (157     (160     (1.8     1.3  

Other operating expenses

    (1,252     (1,383     (9.5     (9.5     (609     (701     (13.2     (13.2

Other net income (expense)

    (33     23       c.s.       c.s.       (24     30       c.s.       c.s.  

Gain (loss) on sale of fixed assets

    1       —         —         —         0       (0     c.s.       c.s.  

Impairment of goodwill and other assets

    —         —         —         —         —         —         —         —    

Operating income before D&A (OIBDA)

    861       843       2.1       2.7       461       451       2.2       3.8  

OIBDA Margin

    24.3     22.8     1.5  p.p.      1.6  p.p.      26.1     24.6     1.4  p.p.      1.9  p.p. 

CapEx

    435       432       0.5       1.3       226       213       6.3       6.9  

Spectrum

    1       3       (79.8     (79.8     0       1       (78.7     (78.7

OpCF (OIBDA-CapEx)

    426       411       3.8       4.0       235       238       (1.4     1.2  

Notes:

 

- Since 1 May, 2016, T. Deutschland reflects all the charges related to the towers transferred to Telxius, which are now presented in Telxius (Other Companies & Eliminations)
- Organic y-o-y changes reflect all the charges related to the towers transferred to Telxius since 1 January 2016. The results of the T. Deutschland do not include intra-group capital gains resulting from the transfer of towers to Telxius in 2016.
- OIBDA before management and brand fees.
(1) Includes broadband connectivity services (retail and wholesale), including value added services, data and ICT revenues, other services over connectivity and FBB equipment.

TELEFÓNICA DEUTSCHLAND

ACCESSES

Unaudited figures (Thousands)

 

     2016      2017         
     March      June      September      December      March      June      % Chg  

Final Clients Accesses

     47,341.7        47,754.9        48,404.8        48,655.5        48,988.0        49,478.7        3.6  

Fixed telephony accesses (1)

     2,002.8        2,007.4        2,006.5        2,010.3        2,000.1        1,987.9        (1.0

Internet and data accesses

     2,330.9        2,329.8        2,324.8        2,324.5        2,312.5        2,297.2        (1.4

Broadband

     2,101.5        2,103.9        2,101.6        2,104.0        2,095.3        2,082.4        (1.0

FTTx

     593.0        669.3        731.8        805.5        872.2        959.9        43.4  

Mobile accesses

     43,008.0        43,417.8        44,073.5        44,320.7        44,675.3        45,193.6        4.1  

Prepay

     23,743.5        23,814.2        23,872.8        23,784.0        23,967.0        24,288.6        2.0  

Contract

     19,264.4        19,603.6        20,200.7        20,536.6        20,708.4        20,905.0        6.6  

M2M

     682.2        704.3        748.0        787.8        830.1        896.8        27.3  

Wholesale Accesses

     910.5        850.1        790.8        691.0        561.8        428.0        (49.7
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Accesses

     48,252.2        48,605.0        49,195.6        49,346.4        49,549.8        49,906.7        2.7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Includes fixed wireless and VoIP accesses.

SELECTED OPERATIONAL DATA

Unaudited figures

 

     2016     2017        
     March     June     September     December     March     June     % Chg  

Contract percentage (%)

     44.8     45.2     45.8     46.3     46.4     46.3     1.1  p.p. 

Smartphones (‘000)

     23,083.0       23,707.1       25,353.5       25,623.1       24,781.1       25,227.4       6.4  

Smartphone penetration (%)

     55.4     56.2     59.2     59.5     57.0     57.4     1.2  p.p. 

LTE (‘000)

     8,690.5       9,399.8       10,566.3       12,063.1       13,967.6       14,422.0       53.4  

LTE penetration (%)

     20.5     22.0     24.4     27.7     31.9     32.6     10.6  p.p. 

Mobile churn (quarterly)

     2.5     2.1     2.1     2.3     1.9     1.9     (0.3  p.p.) 

Contract (1)

     1.8     1.6     1.5     1.6     1.6     1.5     (0.1  p.p.) 

Mobile churn (cumulative YTD)

     2.5     2.3     2.2     2.3     1.9     1.9     (0.4  p.p.) 

Contract (1)

     1.8     1.7     1.5     1.6     1.6     1.6     (0.1  p.p.) 

Mobile ARPU (EUR)(cumulative YTD)

     10.3       10.3       10.4       10.3       9.6       9.6       (6.6

Prepay

     5.7       5.7       5.8       5.7       5.0       5.1       (10.9

Contract (1)

     16.6       16.6       16.6       16.5       15.5       15.5       (6.4

Fixed data traffic (TB) (cumulative YTD)

     612,603       1,216,470       1,811,886       2,518,545       709,516       1,399,083       15.0  

Mobile data traffic (TB) (cumulative YTD)

     51,599       113,324       187,685       269,326       86,423       185,036       63.3  

Notes:

 

- ARPU: monthly average revenue divided by the monthly average accesses of the period.
- Data traffic is defined as Terabytes used by the company customers, both upload and download (1TByte = 10^12 bytes). Promotional traffic is included. Traffic not associated to the Company’s mobile customers (roaming-in, MVNOs, interconnection of third parties and other business lines) is also included. Traffic volume non rounded.
(1) Excludes M2M.

 

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04

TELEFÓNICA UK

(y-o-y changes in organic terms)

Telefónica UK delivered a robust financial performance in a competitive market, demonstrating the success of its customer-led, mobile-first strategy, with yet another quarter of revenue and OIBDA growth built on its market-leading customer loyalty.

All this while network investments to improve customer experience continued, resulting in 97% outdoor population LTE coverage (+7 p.p. y-o-y), and driving LTE base growth up 17% y-o-y to 12.6m accesses, with a penetration of 58% (+9 p.p. y-o-y).

Total mobile accesses were broadly stable y-o-y at 25.1m and contract net additions reached 78k (customer base +2% y-o-y), as the shift towards postpay continued (representing 62% of the total) while contract churn remained broadly stable y-o-y at 1.0%. Prepay quarterly net additions amounted to 52k and customers with frequent top-ups increased by 0.4% y-o-y.

Revenues continued to grow this quarter, up 2.6% y-o-y to €1,607m (+2.3% in the first half, €3,208m), building on the 2.1% growth seen in the first quarter, on better trends in both mobile service and other revenues.

Mobile service revenues reached €1,276m (+1.4% y-o-y; +1.3% in January-June), driven by higher average subscriptions, with an update of tariffs for RPI since April, and out-of-bundle revenue. Growth was partially offset by the continued impact from regulation (-0.7 p.p.; -0.9 p.p. in January-June 2017).

Handset & other revenues increased 7.6% y-o-y to €331m (+6.4% in the first six months) driven by a widespread increase in the price of devices across the market due to the impact of FX. Contribution from the smart metering programme (SMIP) helped other revenues.

Operating expenses were up 2.4% y-o-y (decelerating vs. first quarter +3.1%), totalling €1,204m in April-June. Supplies (€732m) grew 1.7% y-o-y in the quarter due to the impact of FX on handset costs. Personnel expenses totalled €111m (-10.1%) on lower headcount. Other expenses were up 8.8% reaching €360m on IT and network growth.

The robust revenue and expenses performance resulted in OIBDA growing by 3.9% y-o-y to €433m in April-June (vs. +0.6% in the first quarter; €849m, +2.2% in January-June), while OIBDA margin stood at 27.0% in the quarter, up 0.3 p.p. y-o-y, and was flat y-o-y in the six months to June (26.5%).

CapEx amounted to €434m in January-June, up 15.4% y-o-y, as Telefónica UK continued to invest in the rollout of LTE. Thus, operating cash flow (OIBDA-CapEx) decreased by 8.7% y-o-y to reach €415m in the first half.

 

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TELEFÓNICA UK

CONSOLIDATED INCOME STATEMENT

Unaudited figures (Euros in millions)

 

     January - June     % Chg     April - June     % Var  
     2017     2016     Reported     Organic     2017     2016     Reported     Organic  

Revenues

     3,208       3,464       (7.4     2.3       1,607       1,712       (6.2     2.6  

Mobile service revenues (1)

     2,531       2,761       (8.3     1.3       1,276       1,376       (7.3     1.4  

Data revenues

     1,468       1,573       (6.7     3.1       740       786       (5.9     2.9  

Handset revenues and other (1)

     677       703       (3.7     6.4       331       336       (1.5     7.6  

Internal expenditure capitalized in fixed assets

     59       70       (15.5     (6.6     30       36       (14.6     (6.5

Operating expenses

     (2,418     (2,601     (7.0     2.8       (1,204     (1,285     (6.3     2.4  

Supplies

     (1,479     (1,594     (7.2     2.5       (732     (787     (7.0     1.7  

Personnel expenses

     (222     (267     (16.9     (8.0     (111     (135     (17.9     (10.1

Other operating expenses

     (718     (741     (3.1     7.1       (360     (362     (0.5     8.8  

Other net income (expense)

     0       (13     c.s.       c.s.       (0     (4     (92.7     (92.1

Gain (loss) on sale of fixed assets

     0       (2     c.s.       c.s.       0       (2     c.s.       c.s.  

Impairment of goodwill and other assets

     —         —         —         —         —         —         —         —    

Operating income before D&A (OIBDA)

     849       918       (7.4     2.2       433       456       (5.0     3.9  

OIBDA Margin

     26.5     26.5     (0.0  p.p.)      (0.0  p.p.)      27.0     26.6     0.3  p.p.      0.3  p.p. 

CapEx

     434       415       4.4       15.4       209       223       (6.5     2.4  

Spectrum

     —         —         —         —         —         —         —         —    

OpCF (OIBDA-CapEx)

     415       502       (17.3     (8.7     224       233       (3.6     5.3  

Notes:

 

(1) T. UK mobile service revenues include revenues from MVNOs since 1 January 2017, which were previously accounted as “Handset revenues and others”; these criteria are applied across T. Group. For comparative purposes, mobile service revenues and handset revenues for 2016 are reported using the same criteria.
- OIBDA before management and brand fees.

TELEFÓNICA UK

ACCESSES

Unaudited figures (Thousands)

 

     2016      2017         
     March      June      September      December      March      June      % Chg  

Fixed telephony accesses (1)

     249.8        257.7        264.7        272.6        277.2        281.3        9.1  

Internet and data accesses

     21.5        22.3        23.1        23.7        24.0        24.7        10.4  

Broadband

     21.5        22.3        23.1        23.7        24.0        24.7        10.4  

Mobile accesses

     24,933.0        25,172.5        25,404.2        25,462.7        25,009.3        25,139.7        (0.1

Prepay

     9,640.1        9,745.8        9,778.0        9,701.4        9,375.4        9,427.4        (3.3

Contract (2)

     15,292.8        15,426.7        15,626.2        15,761.3        15,633.9        15,712.3        1.9  

M2M

     3,143.4        3,176.8        3,250.9        3,266.9        3,330.3        3,373.1        6.2  

Total Accesses

     25,204.2        25,452.6        25,692.0        25,759.0        25,310.5        25,445.6        (0.0

 

(1) Includes fixed wireless and VoIP accesses.
(2) Includes the disconnection of 228 thousand inactive contract accesses in the first quarter 2017.

SELECTED OPERATIONAL DATA

Unaudited figures

 

     2016     2017        
     March     June     September     December     March     June     % Chg  

Contract percentage (%)

     61.3     61.3     61.5     61.9     62.5     62.5     1.2  p.p. 

Smartphones (‘000)

     13,267.7       13,301.8       14,130.8       14,680.8       14,910.2       15,514.3       16.6  

Smartphone penetration (%)

     62.8     62.4     65.9     68.4     71.2     73.8     11.4  p.p. 

LTE (‘000) (1)

     9,460.3       10,783.4       11,530.3       12,092.4       12,438.0       12,592.0       16.8  

LTE penetration (%)

     43.4     49.0     52.0     54.5     57.4     57.8     8.8  p.p. 

Mobile churn (quarterly)

     2.0     1.5     1.8     2.1     2.2     1.5     0.0  p.p. 

Contract (2)(3)

     0.9     0.8     0.9     1.0     1.5     1.0     0.1  p.p. 

Mobile churn (cumulative YTD)

     2.0     1.8     1.8     1.9     2.2     1.9     0.1  p.p. 

Contract (2)(3)

     0.9     0.9     0.9     0.9     1.5     1.2     0.3  p.p. 

Mobile ARPU (EUR)(cumulative YTD)

     17.9       17.7       17.3       17.0       16.1       16.1       0.5  

Prepay

     7.8       7.7       7.5       7.5       7.3       7.1       1.3  

Contract (2)(3)

     30.1       29.9       29.3       28.8       26.6       27.0       (0.2

Mobile data traffic (TB) (cumulative YTD)

     49,648       105,368       170,977       244,957       79,926       173,446       64.6  

Notes:

 

- ARPU: monthly average revenue divided by the monthly average accesses of the period. % Change in local currency.
- Data traffic is defined as Terabytes used by the company customers, both upload and download (1TByte = 10^12 bytes). Promotional traffic is included. Traffic not associated to the Company’s mobile customers (roaming-in, MVNOs, interconnection of third parties and other business lines) is also included. Traffic volume non-rounded.
(1) giffgaff accesses included since 1 January 2017, and also given for comparative purposes since January 2016.
(2) Excludes M2M.
(3) Includes the disconnection of 228 thousand inactive contract accesses in the first quarter 2017.

 

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05

TELEFÓNICA BRASIL

(y-o-y changes in organic terms)

In the second quarter of 2017, Telefónica Brasil continued to show an acceleration in revenue growth that, coupled with a reduction in operating expenses for the sixth consecutive quarter, allowed to maintain solid growth in OIBDA and operating cash flow, in a context of expanding margins. This performance was achived in spite of the regulatory impacts (-45.6% in mobile interconnection rates, -17.7% in fixed-mobile retail, -35.3% in fixed local and -50.9% in fixed inter-urban, since 25 February 2017).

Mobile accesses increased by 1% y-o-y, highlighting growth in the contract segment (+10%), smartphones (+33%; 79% penetration, +19 p.p. y-o-y) and LTE (+90%; penetration of 42%, population coverage of 71%). Net contract additions rose to 858k accesses in the quarter (1,292k accesses in the half year), 2.3x higher than those reported in the same quarter of the previous year (381k accesses, 560k in the first half). Thus, the Company captured 59% of new contract accesses in the market in the second quarter, strengthening leadership in the segment (market share of 42.3% as of June, +0.3 p.p. vs. March 2017), despite greater competitive intensity in the market.

Retail broadband accesses (7.5m; +3% y-o-y) reported a significant improvement in the quarterly net additions (99k; 158k in the half year) as a consequence of the boost in FTTx accesses (record net additions of 139k accesses, 220k in the half year). Thus, FTTx and cable accesses increased 9% y-o-y to 4.4m connected (premises passed reached 17.7m in 204 cities as of June, 5 new ones in the half year). The pay TV strategy continued to focus on value (IPTV accesses +65% y-o-y) and thus ARPU increased 5.0% in the quarter.

Revenues in the second quarter (€3,028m) grew 1.8% y-o-y (+1.7% in the half year) despite the regulatory effects (impact of -1.8 p.p. in y-o-y change for the second quarter; -2.0 p.p. for January-June) and lower handset sales (-0.4 p.p. in y-o-y change for the quarter and for the half year).

Mobile service revenues (€1,776m in April-June) increased 4.8% y-o-y in the quarter (+5.0% in January-June) with an ARPU growth of 4.6% driven by data (+35.9%). The y-o-y trend in fixed revenues improved, decreasing 1.3% (-2.2% in the first quarter), mainly due to the strong broadband revenue growth (+7.3% in the quarter; +7.6% in January-June) and despite regulation and voice decline.

Operating expenses (€2,006m in the quarter) decreased y-o-y for yet another quarter (-0.2% in the quarter, -0.7% in January-June) thanks to efficiency measures and despite inflation. Supplies (€557m) decreased by 7.3% y-o-y in the quarter due to the reduction in termination rates and lower content expenses. Personnel expenses (€300m; +1.1% y-o-y in the quarter) reflected the impact of the annual collective agreement, which is almost offset by the headcount reduction (in the second quarter of 2016, a provision of €25m was recorded for this reason, without any impact on organic growth). Other operating expenses (€1,149m) grew 3.2% compared to April-June 2016, mainly due to greater commercial activity in value accesses.

Thus, OIBDA totalled €1,034m in the second quarter (+7.0% y-o-y; +7.2% in the half year) and OIBDA margin stood at 34.1% in the quarter and at 34.5% in the fist six months (+1.7 p.p. and +1.8 p.p. y-o-y respectively).

CapEx for January-June 2017 (€915m; -3.6% y-o-y) was primarily allocated to the expansion of the 4G and fibre networks. As a result, operating cash flow (OIBDA-CapEx) amounted to €1,223m in the first half (+17.0% compared to January-June 2016). In the first half of the year, synergies due to the purchase of GVT had a positive impact in operating cash flow of €286m (€833m in the last two years).

 

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TELEFÓNICA BRASIL

CONSOLIDATED INCOME STATEMENT

Unaudited figures (Euros in millions)

 

     January - June     % Chg     April - June     % Chg  
     2017     2016     Reported     Organic     2017     2016     Reported     Organic  

Revenues

     6,193       5,085       21.8       1.7       3,028       2,654       14.1       1.8  

Mobile Business

     3,781       3,037       24.5       4.0       1,850       1,589       16.4       3.8  

Mobile service revenues

     3,631       2,888       25.7       5.0       1,776       1,511       17.5       4.8  

Data revenues

     2,548       1,581       61.2       34.5       1,276       856       49.0       32.3  

Handset revenues

     151       148       1.6       (15.2     74       78       (4.8     (15.2

Fixed Business

     2,411       2,048       17.7       (1.7     1,178       1,065       10.7       (1.3

FBB and new services (1)

     976       757       29.0       7.6       483       401       20.5       7.3  

Pay TV

     277       233       19.0       (0.7     134       122       9.9       (1.9

Voice & access revenues

     1,159       1,059       9.4       (8.6     562       543       3.6       (7.4

Internal expenditure capitalized in fixed assets

     74       52       42.9       19.3       37       27       36.3       21.3  

Operating expenses

     (4,109     (3,475     18.2       (0.7     (2,006     (1,819     10.3       (0.2

Supplies

     (1,171     (1,062     10.2       (8.2     (557     (538     3.6       (7.3

Personnel expenses

     (619     (538     15.1       0.7       (300     (290     3.6       1.1  

Other operating expenses

     (2,319     (1,875     23.7       3.2       (1,149     (991     15.9       3.2  

Other net income (expense)

     (16     (19     (15.4     (29.4     (22     (21     4.1       (14.2

Gain (loss) on sale of fixed assets

     (15     1       c.s.       c.s.       (20     (0     n.m.       n.m.  

Impairment of goodwill and other assets

     11       (0     c.s.       c.s.       17       (2     c.s.       c.s.  

Operating income before D&A (OIBDA)

     2,138       1,643       30.1       7.2       1,034       838       23.3       7.0  

OIBDA Margin

     34.5     32.3     2.2  p.p.      1.8  p.p.      34.1     31.6     2.5  p.p.      1.7  p.p. 

CapEx

     915       792       15.5       (3.6     518       444       16.6       2.7  

Spectrum

     —         —         —         —         —         —         —         —    

OpCF (OIBDA-CapEx)

     1,223       851       43.7       17.0       515       394       30.9       11.6  

Notes:

 

- Since 1 April 2016, T. Brasil reflects all the charges related to the towers transferred to Telxius, which are now presented in Telxius (Other Companies & Eliminations)
- Organic y-o-y changes reflect all the charges related to the towers transferred to Telxius since 1 January 2016. The results of the T. Brasil do not include intra-group capital gains resulting from the transfer of towers to Telxius in 2016.
- OIBDA before management and brand fees.
(1) Includes broadband connectivity services (retail and wholesale), including value added services, ICT revenues, other services over connectivity and FBB equipment.

TELEFÓNICA BRASIL

ACCESSES

Unaudited figures (thousands)

 

     2016      2017         
     March      June      September      December      March      June      % Chg  

Final Clients Accesses

     97,283.7        97,121.4        97,276.6        97,204.2        97,331.7        97,679.1        0.6  

Fixed telephony accesses (1)

     14,945.4        14,742.1        14,629.9        14,338.4        14,242.0        14,167.6        (3.9

Internet and data accesses

     7,294.2        7,321.8        7,397.5        7,383.2        7,439.6        7,537.2        2.9  

Broadband

     7,229.2        7,263.5        7,325.3        7,311.0        7,369.5        7,468.6        2.8  

FTTx/Cable

     3,954.5        4,023.2        4,115.4        4,145.8        4,226.8        4,365.9        8.5  

Mobile accesses

     73,257.4        73,296.1        73,486.9        73,769.8        73,988.8        74,327.1        1.4  

Prepay

     42,011.5        41,669.4        40,995.6        40,387.2        40,171.5        39,652.1        (4.8

Contract

     31,245.8        31,626.7        32,491.3        33,382.6        33,817.3        34,675.0        9.6  

M2M

     4,390.0        4,590.3        4,770.4        5,005.1        5,271.5        5,590.8        21.8  

Pay TV

     1,786.7        1,761.4        1,762.2        1,712.7        1,661.3        1,647.2        (6.5

Wholesale Accesses

     21.0        20.7        18.7        17.9        17.5        17.0        (18.0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Accesses T. Brasil

     97,304.7        97,142.1        97,295.4        97,222.2        97,349.2        97,696.1        0.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Terra Accesses

     141.5        133.8        125.4        118.2        111.9        106.6        (20.4
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Includes fixed wireless and VoIP accesses.

SELECTED OPERATIONAL DATA

Unaudited figures

 

     2016     2017        
     March     June     September     December     March     June     % Chg  

Contract percentage (%)

     42.7     43.1     44.2     45.3     45.7     46.7     3.5  p.p. 

Smartphones (‘000)

     40,327.0       39,670.8       49,573.1       50,008.2       50,647.3       52,687.8       32.8  

Smartphone penetration (%)

     61.0     60.0     74.8     75.2     76.0     78.8     18.8  p.p. 

LTE (‘000)

     12,498.3       15,115.2       18,295.7       22,240.9       25,422.1       28,645.5       89.5  

LTE penetration (%)

     18.1     22.0     26.6     32.3     37.0     41.7     19.7  p.p. 

Mobile churn (quarterly)

     3.3     3.1     3.4     3.5     3.3     3.3     0.2  p.p. 

Contract (1)

     1.8     1.9     1.8     1.7     1.6     1.8     (0.1  p.p.) 

Mobile churn (cumulative YTD)

     3.3     3.2     3.3     3.4     3.3     3.3     0.1  p.p. 

Contract (1)

     1.8     1.8     1.8     1.8     1.6     1.7     (0.1  p.p.) 

Mobile ARPU (EUR)(cumulative YTD)

     6.1       6.4       6.8       7.1       8.2       8.0       4.5  

Prepay

     3.2       3.3       3.5       3.4       4.1       3.9       (2.5

Contract (1)

     11.5       12.1       12.9       12.9       15.4       15.1       4.1  

Mobile data traffic (TB) (cumulative YTD)

     79,146       164,803       265,603       379,541       129,160       286,854       74.1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed telephony ARPU (EUR) (cumulative YTD)

     11.3       11.7       12.2       12.3       13.7       13.3       (4.9

Pay TV ARPU (EUR) (cumulative YTD)

     20.6       21.6       23.0       23.8       28.2       27.5       5.7  

Broadband ARPU (EUR) (cumulative YTD)

     10.3       10.8       11.3       11.7       14.5       14.2       9.8  

Fixed data traffic (TB) (cumulative YTD)

     2,485,715       5,215,363       8,031,104       11,164,483       3,428,917       7,379,965       41.5  

Notes:

 

- ARPU: monthly average revenue divided by the monthly average accesses of the period. % Change in local currency.
- Data traffic is defined as Terabytes used by the company customers, both upload and download (1TByte = 10^12 bytes). Promotional traffic is included. Traffic not associated to the Company’s mobile customers (roaming-in, MVNOs, interconnection of third parties and other business lines) is also included. Traffic volume non rounded.
(1) Excludes M2M.

 

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06

TELEFÓNICA HISPANOAMÉRICA

(y-o-y changes in organic terms)

In the second quarter of the year, Telefónica Hispanoamérica recorded strong year-on-year growth in revenue, OIBDA and operating cash flow both in organic and reported terms, despite the change in the Venezuelan exchange rate to a synthetic conversion rate of 3.547 bolivars fuertes per US dollar.

Mobile accesses rose to 111.5m at June 2017 (-2% y-o-y), affected by a quarterly net loss of 1.1m accesses in the prepay segment. In the contract segment, accesses remained stable compared to June 2016, recording a net loss in the quarter of 141k accesses (-256k in the first half) with noteworthy solid net additions in countries such as Argentina, Mexico and Colombia, compensated by the competitive intensity in Peru and Chile. Moreover, the continuous improvement in the quality of the network resulted in an increase of 17% in smartphones (47% penetration, +8 p.p. y-o-y) and of 72% in LTE accesses (17% penetration, +8 p.p. y-o-y).

Additionally, retail broadband accesses (-2% y-o-y) reflected the results of the investment efforts in new networks (FTTx and cable) and the aim to increase speeds and bundling, with 1.4m accesses connected to FTTx and cable (+46% y-o-y; coverage of premises passed at 5.4M as of June). Additionally, pay TV accesses increased by 2% with net additions of 19k accesses in the quarter (42k in the first half).

Revenues in the second quarter (€3,134m) were up 15.5% y-o-y (+12.3% in January-June), posting robust acceleration (+9.2% in the first quarter), with a positive contribution from mobile service revenues (+18.2% y-o-y; +10.6% y-o-y in January-March) and fixed (+5.7%; +4.1% y-o-y in the first quarter). In reported terms, revenues increased by 5.9% (+6.7% in January-June).

Operating expenses in the quarter (€2,313m) increased by 14.1% y-o-y (+12.0% in the first half), mainly because of inflation, which was primarily reflected in higher personnel expenses (+24.9%; +22.7% in January-June) and other operating expenses (+19.5%; +16.6% in January-June). Supplies (+4.2% y-o-y; +2.8% in the first half) indicated higher interconnection costs in Peru and Argentina, which were offset by lower interconnection costs in Mexico, Colombia and Chile and lower commercial activity (focused on value).

OIBDA reached €892m in the quarter and accelerated its y-o-y growth up to 20.9% (+6.2% in the first quarter; +13.5% in the first half) with the notable positive contributions from Argentina, Mexico and Colombia. In reported terms, OIBDA increased 6.9% (+5.7% in the first six months of the year to €1,796m). Thus, OIBDA margin stood at 28.5% for the six-month period (+1.3 p.p. y-o-y) and 28.0% in the half year (+0.3 p.p. y-o-y).

CapEx amounted to €923m in January-June, decreasing by 6.2% y-o-y, and was mainly aimed at improving the network, with the deployment of 4G and fibre optic networks, as well as the simplification and digitalisation of processes and systems.

Thus, operating cash flow (OIBDA-CapEx) amounted to €873m in the first six months with a year-on-year growth of 43.2% (+28.2% in the reported terms).

 

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TELEFÓNICA HISPANOAMÉRICA

CONSOLIDATED INCOME STATEMENT

Unaudited figures (Euros in millions)

 

     January - June     % Chg     April - June     % Chg  
     2017     2016     Reported     Organic     2017     2016     Reported     Organic  

Revenues

     6,419       6,014       6.7       12.3       3,134       2,961       5.9       15.5  

Mobile Business

     4,394       4,070       8.0       15.8       2,128       1,969       8.0       20.4  

Mobile service revenues

     3,841       3,637       5.6       14.3       1,844       1,760       4.8       18.2  

Data revenues

     2,109       1,796       17.4       28.8       1,038       876       18.5       34.7  

Handset revenues

     553       433       27.6       28.9       284       209       35.6       39.2  

Fixed Business

     2,025       1,944       4.2       4.9       1,007       991       1.5       5.7  

FBB and new services revenues (1)

     1,060       994       6.7       8.8       526       518       1.6       7.3  

Pay TV revenues

     335       293       14.2       12.0       166       149       11.0       13.4  

Voice & access revenues

     629       657       (4.2     (4.3     315       324       (3.0     (0.6

Internal expenditure capitalized in fixed assets

     68       55       23.3       21.1       34       28       20.6       19.4  

Operating expenses

     (4,737     (4,409     7.4       12.0       (2,313     (2,172     6.5       14.1  

Supplies

     (1,878     (1,813     3.6       2.8       (920     (897     2.5       4.2  

Personnel expenses

     (832     (745     11.7       22.7       (397     (365     8.9       24.9  

Other operating expenses

     (2,027     (1,851     9.5       16.6       (996     (911     9.4       19.5  

Other net income (expense)

     32       39       (18.5     (27.9     23       18       25.8       12.0  

Gain (loss) on sale of fixed assets

     13       (0     c.s.       c.s.       14       (1     c.s.       c.s.  

Impairment of goodwill and other assets

     —         —         —         —         —         —         —         —    

Operating income before D&A (OIBDA)

     1,796       1,700       5.7       13.5       892       834       6.9       20.9  

OIBDA Margin

     28.0     28.3     (0.3  p.p.)      0.3  p.p.      28.5     28.2     0.3  p.p.      1.3  p.p. 

CapEx

     923       1,018       (9.4     (6.2     493       557       (11.5     (3.9

Spectrum

     4       —         —         —         —         —         —         —    

OpCF (OIBDA-CapEx)

     873       682       28.2       43.2       399       277       44.0       71.8  

Notes:

 

- T. Hispanoamérica results reflects all the charges related to the towers transferred to Telxius (T. Perú since 1 April 2016 and T. Chile since 1 May 2016), which are now presented in Telxius (Other Companies & Eliminations). Likewise, since 1 January 2016, T. Chile includes the results of the data center business which were before presented in Other Companies & Eliminations of T. Group.
- Organic y-o-y changes reflect all the charges related to the towers transferred to Telxius since 1 January 2016. The results of the T. Hispam do not include intra-group capital gains resulting from the transfer of towers to Telxius in 2016.
- Since 1 January 2016 Mobile Revenues and Fixed revenues have been revised due to different allocation criteria. This change does not affect total revenue figure reported for 2016.
- Also since 1 January 2016 Mobile Data Revenues have been revised due to different allocation criteria between Mobile Data revenues and Other Mobile Service revenues. This change does not affect total Mobile Service Revenue figure reported for 2016.
- After considering Venezuela as a hyperinflationary country, P&L and CapEx from the operations in the country are to be accounted at the closing exchange rate Bolivar Fuerte/Euro. For the January-June 2017 period Telefónica has adopted a synthetic exchange rate of 3,547 Venezuelan bolivars fuertes per dollar at June 2017 (please see Note 3 of the Condensed Consolidated Interim Financial Statements for the six-month period ended June 30, 2017).
- OIBDA before management and brand fees.
- 2016 and 2017 reported figures include the hyperinflationary adjustments in Venezuela in both years.
(1) Includes broadband connectivity services (retail and wholesale), including value added services, data and ICT revenues, other services over connectivity and FBB equipment.

ACCESSES

Unaudited figures (thousands)

 

     2016      2017         
     March      June      September      December      March      June      % Chg  

Final Clients Accesses

     134,274.3        134,422.4        135,343.0        135,850.3        133,093.4        131,707.4        (2.0

Fixed telephony accesses (1)

     12,497.9        12,400.6        12,229.2        11,938.6        11,749.5        11,588.3        (6.6

Internet and data accesses

     5,706.8        5,772.1        5,791.0        5,707.9        5,693.9        5,687.3        (1.5

Broadband

     5,624.8        5,642.2        5,645.8        5,570.7        5,544.8        5,538.0        (1.8

FTTx/Cable

     835.4        923.8        946.2        1,109.1        1,279.9        1,351.9        46.3  

Mobile accesses

     113,218.7        113,344.0        114,399.7        115,284.5        112,707.5        111,470.8        (1.7

Prepay

     87,934.3        87,810.5        88,799.5        89,461.2        86,998.6        85,903.0        (2.2

Contract (2)

     25,284.4        25,533.6        25,600.2        25,823.3        25,709.0        25,567.8        0.1  

M2M

     2,315.1        2,354.3        2,532.4        2,561.3        2,627.4        2,709.0        15.1  

Pay TV

     2,850.9        2,905.6        2,923.1        2,919.2        2,942.5        2,961.0        1.9  

Wholesale Accesses

     28.2        27.5        81.8        66.5        65.5        64.5        134.0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Accesses T. Hispanoamerica

     134,302.5        134,449.9        135,424.8        135,916.8        133,158.9        131,771.9        (2.0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Includes fixed wireless and VoIP accesses.
(2) Since the third quarter 2016, 55 thousand wholesale accesses have been reclassified from Mobile contract to Wholesale accesses in México.

SELECTED OPERATIONAL DATA

Unaudited figures

 

     2016     2017        
     March     June     September     December     March     June     % Chg  

Contract percentage (%)

     22.3     22.5     22.4     22.4     22.8     22.9     0.4  p.p. 

Smartphones (‘000)

     41,448.0       43,082.8       45,031.3       46,134.0       50,408.4       50,456.8       17.1  

Smartphone penetration (%)

     37.8     39.3     40.7     41.3     46.3     46.9     7.6  p.p. 

LTE (‘000)

     9,859.6       11,023.3       12,998.2       15,493.4       17,041.5       18,968.5       72.1  

LTE penetration (%)

     8.9     9.9     11.9     13.8     15.5     17.5     7.5  p.p. 

 

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Telefónica Argentina

(y-o-y changes in organic terms)

In the second quarter of 2017, Telefónica Argentina reported an acceleration of y-o-y growth in revenue (+39.3%) and OIBDA (+79.0%), leading to an OIBDA margin expansion of 6.6 p.p. to 30,0%. This solid performance was based on the positive commercial results, price update, improved efficiency and a more favourable macroeconomic environment.

Thus, the Company’s focus on greater value accesses and the growth in prepay top-ups (+44.8% y-o-y) boosted the y-o-y growth of mobile and broadband ARPU in the quarter (+49.1% and +32.4% respectively).

In mobile accesses (stable y-o-y), higher value segment performance stood out: postpay (net additions of 84k accesses; +118k in the first half), with a positive net portability in the three months (+62k, +132% y-o-y); and the strong y-o-y increase in LTE accesses and smartphones (+91% and +6% y-o-y). In prepay, net additions continued to be affected by the disconnection of low value accesses (-374k in the quarter; -1.0m in the first half), though accesses with frequent top-ups increased by 6% y-o-y.

In retail broadband accesses, the focus on improving quality of the access base translated into a positive rate of FTTx access connections with net additions that reached 58k accesses (+99k accesses in the first half, coverage of 799k premises passed) and already accounted for 8% of the total broadband accesses one year after its launch.

Revenues in the second quarter rose to €918m, accelerating y-o-y growth to 39.3% (+36.4% in the half year) with better performance both in the mobile and fixed businesses.

Thus, mobile service revenues (€515m in the second quarter) accelerated their y-o-y growth (+47.3% in the second quarter, +45.2% in the fist six months), boosted by stronger performance in contract and prepay. Data revenues continued to be the main driver of growth following a 65.6% y-o-y increase due to higher data traffic (+78.5% y-o-y). Likewise, handset sales continued to show a solid increase (+63.7% in the quarter; +47.8% in the first half) with tactical promotions in an environment of a generalised reduction in subsidies.

Fixed business revenues (€327m in the second quarter) increased by 24.4% y-o-y in the quarter (+22.3% in the first half) with broadband ARPU growth driven by base quality improvements (average speed y-o-y growth of more than 50%) and the growth of FTTx accesses.

Operating expenses in the second quarter rose to €653m maintaining a similar y-o-y growth level to the previous quarter (+28.8% in the quarter and +27.5% in the first half). Y-o-y growth continued to be affected by inflation, mainly on personnel expenses and higher interconnection costs as a result of the rise in termination rates.

OIBDA (€275m in the second quarter of 2017) increased by 79.0% y-o-y (+71.4% in the first half) and the OIBDA margin stood at 30.0%, growing 6.6 p.p. y-o-y (28.2% in the first six months, +5.8 p.p. y-o-y).

CapEx totalled €297m in the first half (+1.4% y-o-y) dedicated to improving and expanding the 3G and 4G mobile networks, the deployment of the fibre network and improvements in copper network.

Thus, operating cash flow (OIBDA-CapEx) rose to €210m (€3m in the first half of 2016).

 

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TELEFÓNICA ARGENTINA

SELECTED FINANCIAL DATA

Unaudited figures (Euros in millions)

 

    January - June     April - June  
    2017     2016     % Chg     % Organic Chg     2017     2016     % Chg     % Organic Chg  

Revenues

    1,794       1,398       28.3       36.4       918       709       29.4       39.3  

Mobile Business

    1,164       851       36.8       45.5       591       426       38.6       49.2  

Mobile service revenues

    1,026       751       36.5       45.2       515       377       36.8       47.3  

Data revenues

    580       382       51.8       61.4       302       196       53.9       65.6  

Handset revenues

    138       99       39.0       47.8       75       50       52.3       63.7  

Fixed Business

    630       548       15.0       22.3       327       283       15.6       24.4  

FBB and new services (1)

    378       348       8.5       15.4       193       179       7.4       15.7  

Voice & access revenues

    252       200       26.3       34.3       135       104       29.8       39.6  

OIBDA

    506       314       61.2       71.4       275       165       66.7       79.0  

OIBDA margin

    28.2     22.5     5.8  p.p.      5.8  p.p.      30.0     23.3     6.7  p.p.      6.6  p.p. 

CapEx

    297       311       (4.6     1.4       146       152       (3.8     3.7  

Spectrum

    —         —         —         —         —         —         —         —    

OpCF (OIBDA-CapEx)

    210       3       n.m.       n.m.       129       13       n.m.       n.m.  

Notes:

 

- Since 1 January 2016 Mobile revenues and Fixed revenues have been revised due to different allocation criteria. This change does not affect total revenue figure reported for 2016.
- Also since 1 January 2016 Mobile data revenues have been revised due to different allocation criteria between Mobile data revenues and Other mobile service revenues. This change does not affect total Mobile service revenues figure reported for 2016.
- OIBDA is presented before management and brand fees.
(1) Includes broadband connectivity services (retail and wholesale), including value added services, data and ICT revenues, other services over connectivity and FBB equipment.

ACCESSES

Unaudited figures (Thousands)

 

    2016     2017  
    March     June     September     December     March     June     % Chg  

Final Clients Accesses

    26,430.8       26,242.8       26,755.4       27,096.0       26,370.4       25,981.8       (1.0

Fixed telephony accesses (1)

    4,599.7       4,550.5       4,503.3       4,447.7       4,374.3       4,314.5       (5.2

Fixed wireless

    276.0       256.2       243.5       237.2       233.3       227.7       (11.1

Internet and data accesses

    1,911.8       1,910.9       1,907.7       1,882.9       1,841.0       1,802.5       (5.7

Broadband

    1,880.6       1,878.5       1,875.6       1,851.5       1,800.5       1,762.6       (6.2

FTTx

    9.1       9.8       13.8       35.1       75.8       133.6       n.m.  

Mobile accesses

    19,919.2       19,781.5       20,344.4       20,765.4       20,155.1       19,864.8       0.4  

Prepay

    12,989.8       12,851.6       13,258.6       13,579.8       12,936.0       12,561.7       (2.3

Contract

    6,929.4       6,929.9       7,085.8       7,185.6       7,219.1       7,303.1       5.4  

M2M

    439.2       428.3       501.3       521.3       546.2       581.0       35.6  

Wholesale Accesses

    22.4       21.8       21.3       21.1       20.4       20.2       (7.5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Accesses

    26,453.2       26,264.7       26,776.7       27,117.1       26,390.8       26,002.0       (1.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Includes fixed wireless and VoIP accesses.

SELECTED OPERATIONAL DATA

Unaudited figures

 

    2016     2017  
    March     June     September     December     March     June     % Chg  

Contract percentage (%)

    34.8     35.0     34.8     34.6     35.8     36.8     1.8  p.p. 

Smartphones (‘000)

    7,700.6       8,328.3       9,286.3       8,953.5       9,194.8       8,789.6       5.5  

Smartphone penetration (%)

    39.8     43.4     47.1     44.5     47.2     45.9     2.5  p.p. 

LTE (‘000)

    2,213.3       2,462.0       3,130.3       3,744.8       4,136.7       4,707.5       91.2  

LTE penetration (%)

    11.4     12.7     15.8     18.5     21.1     24.4     11.7  p.p. 

Mobile churn (quarterly)

    3.3     3.1     2.7     2.7     3.4     3.1     (0.1  p.p.) 

Contract (1)

    1.2     1.4     0.8     1.3     1.2     1.2     (0.2  p.p.) 

Mobile churn (cumulative YTD)

    3.3     3.2     3.1     3.0     3.4     3.2     (0.0  p.p.) 

Contract (1)

    1.2     1.3     1.1     1.1     1.2     1.2     (0.1  p.p.) 

Mobile ARPU (EUR)(cumulative YTD)

    6.5       6.6       6.6       7.1       8.6       8.7       45.6  

Prepay

    1.9       2.0       1.9       1.9       2.5       2.6       50.1  

Contract (1)

    16.2       16.2       16.1       15.7       21.0       21.0       42.8  

Mobile data traffic (TB) (cumulative YTD)

    23,517       51,940       87,337       126,846       42,378       92,707       78.5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed telephony ARPU (EUR) (cumulative YTD)

    6.6       7.1       9.2       8.5       8.6       9.5       49.0  

Broadband ARPU (EUR) (cumulative YTD)

    17.6       18.1       22.0       18.4       20.8       21.7       27.9  

Fixed data traffic (TB) (cumulative YTD) (2)

    203,887       449,311       723,644       1,011,610       296,597       636,815       41.7  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Notes:

 

- ARPU: monthly average revenue divided by the monthly average accesses of the period. % Change in local currency.
- Data traffic is defined as Terabytes used by the company customers, both upload and download (1TByte = 10^12 bytes). Promotional traffic is included. Traffic not associated to the Company’s mobile customers (roaming-in, MVNOs, interconnection of third parties and other business lines) is also included. Traffic volume non rounded.
(1) Excludes M2M.
(2) Includes solely traffic related with FBB accesses, not Business customers.

 

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Telefónica Chile

(y-o-y changes in organic terms)

In the second quarter of the year, Telefónica Chile maintained its competitive positioning, based on the quality of service in an environment of high competitive intensity, which affected the y-o-y comparison of revenues and OIBDA. The progressive deployment of high-speed networks in both the fixed and mobile businesses resulted in a strong increase in value accesses (pay TV, FTTx and LTE). Additionally, the quarterly results were affected by the reduction in MTRs (-23% since 25 January) and FTRs (-9% since 7 May 2016).

Mobile accesses stood at 8.9m and, while they decreased 3% y-o-y in an environment of elevated competitive intensity with high subsidy levels, their decline slowed once again (-5% at March) in light of lower net losses in prepay (-74k in the quarter; -375k in the same quarter in 2016), thanks to an ongoing improvement of the offering (“PrePlan” launched in the previous quarter) and timely promotions. Contract accesses remain relatively stable (+1% y-o-y), with a small net loss of 15k accesses (-10k in the first six months). On the other hand, smartphones increased 1% y-o-y and LTE accesses rose by 40% (up to 1.9m) with a population coverage that reached 81% (+2 p.p. y-o-y).

Retail fixed broadband accesses stood at 1.1m (+2% compared with June 2016) with net additions of 23k accesses in the quarter. FTTx accesses grew 18% y-o-y to 342k after once again reporting quarterly net additions of 13k accesses (+5k in the previous quarter); and coverage continued to increase steadily (1.2m premises passed; 29% connected). Additionally, pay TV accesses grew by 2% y-o-y to 670k, with net additions of 13k (net loss of 4k at March 2017).

Revenues amounted to €538m in the second quarter with a y-o-y decrease of 1.9% (-1.3% in the first half of the year), reflecting the competitive intensity, primarily in the mobile prepay segment and also the effect of the regulation, which had a negative impact of 0.9 p.p. on the y-o-y change in the quarter as well as in the first half.

Mobile service revenues (€268m) decreased 4.1% y-o-y (-3.6% in the first six months), mainly caused by a lower prepay base, lower ARPU (-1.1% in the quarter; +1.5% in the first half) and regulatory impact (-1.7 p.p. in April-June; -1.8 p.p. in January-June). On the other hand, handset revenues reported a 26.7% increase (+26.4% in the half year), reflecting the increased commercial activity in both segments. Fixed business revenues stood at €231m in the quarter (-3.0% y-o-y, -2.3% in the first six months of the year), despite the growth in pay TV revenues (+2.4% y-o-y; +1.5% in January-June) and broadband and new services revenues (+0.7% y-o-y; +3.1% in January-June) with a solid performance in the B2B segment.

Operating expenses amounted to €383m in April-June, practically stable y-o-y (+1.6% in the half year to €777m), despite greater commercial activity, due to simplification and efficiency measures.

OIBDA amounted to €165m in the quarter and decreased by 5.9% y-o-y (-10.0% in the first quarter). Thus, OIBDA margin stood at 30.6% in April-June (-1.3 p.p. y-o-y; 30.8% in January-June, -2.2 p.p.), improving compared with performance in the first quarter (-3.2 p.p.).

CapEx amounted to €180m in January-June (-23.4% y-o-y), primarily aimed at expanding the 4G network and improving the fixed network (FTTx coverage). Thus, operating cash flow (OIBDA-CapEx) stood at €159m and increased by 19.0% vs. the first half of 2016.

 

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TELEFÓNICA CHILE

SELECTED FINANCIAL DATA

Unaudited figures (Euros in millions)

 

    January - June     April - June  
    2017     2016     % Chg     % Organic Chg     2017     2016     % Chg     % Organic Chg  

Revenues

    1,099       1,035       6.2       (1.3     538       523       2.7       (1.9

Mobile Business

    636       594       6.9       (0.6     307       296       3.5       (1.0

Mobile service revenues

    555       535       3.7       (3.6     268       267       0.3       (4.1

Data revenues

    284       263       8.0       0.3       137       133       3.1       (1.4

Handset revenues

    81       59       36.1       26.4       39       29       32.6       26.7  

Fixed Business

    463       440       5.2       (2.3     231       227       1.7       (3.0

FBB and new services (1)

    225       203       11.0       3.1       113       107       5.6       0.7  

Pay TV

    123       113       9.3       1.5       62       58       7.4       2.4  

Voice & access revenues

    115       125       (7.8     (14.4     56       62       (10.2     (14.2

OIBDA

    339       344       (1.4     (8.0     165       168       (1.8     (5.9

OIBDA margin

    30.8     33.2     (2.4  p.p.)      (2.2  p.p.)      30.6     32.0     (1.4  p.p.)      (1.3  p.p.) 

CapEx

    180       218       (17.5     (23.4     93       102       (9.0     (13.2

Spectrum

    —         —         —         —         —         —         —         —    

OpCF (OIBDA-CapEx)

    159       126       26.7       19.0       72       66       9.4       5.5  

Notes:

 

- Since 1 May 2016, T. Chile reflects all the charges related to the towers transferred to Telxius, which are now presented in Telxius (Other Companies & Eliminations), and also, since 1 January 2016, T. Chile includes the results of the data center business which were before presented in Other Companies & Eliminations of T. Group
- Organic y-o-y changes reflect all the charges related to the towers transferred to Telxius since 1 January 2016. The results of T. Chile do not include intra-group capital gains resulting from the transfer of towers to Telxius in 2016.
- Since 1 January 2016 Mobile revenues and Fixed revenues have been revised due to different allocation criteria. This change does not affect total revenue figure reported for 2016.
- Also since 1 January 2016 Mobile data revenues have been revised due to different allocation criteria between Mobile data revenues and Other Mobile service revenues. This change does not affect total Mobile service revenues figure reported for 2016.
- OIBDA is presented before management and brand fees.
(1) Includes broadband connectivity services (retail and wholesale), including value added services, data and ICT revenues, other services over connectivity and FBB equipment.

ACCESSES

Unaudited figures (Thousands)

 

    2016     2017  
    March     June     September     December     March     June     % Chg  

Final Clients Accesses

    12,741.5       12,481.1       12,430.0       12,301.3       12,210.5       12,142.9       (2.7

Fixed telephony accesses (1)

    1,459.0       1,438.4       1,422.8       1,406.5       1,380.5       1,365.1       (5.1

Internet and data accesses

    1,109.1       1,150.8       1,146.2       1,140.5       1,138.8       1,162.9       1.0  

Broadband

    1,098.4       1,093.3       1,096.7       1,090.3       1,088.1       1,111.6       1.7  

FTTx

    268.9       290.2       312.2       324.3       329.0       341.9       17.8  

Mobile accesses

    9,527.9       9,235.1       9,199.8       9,093.9       9,034.4       8,945.3       (3.1

Prepay

    6,524.9       6,150.1       6,070.5       5,956.0       5,891.1       5,817.3       (5.4

Contract

    3,002.9       3,085.0       3,129.2       3,137.9       3,143.3       3,128.0       1.4  

M2M

    331.2       354.8       378.0       369.4       377.8       387.0       9.1  

Pay TV

    645.6       656.8       661.3       660.5       656.8       669.7       2.0  

Wholesale Accesses

    5.2       5.1       5.1       5.1       5.3       5.2       2.4  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Accesses

    12,746.7       12,486.2       12,435.2       12,306.5       12,215.7       12,148.1       (2.7
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Includes fixed wireless and VoIP accesses.

SELECTED OPERATIONAL DATA

Unaudited figures

 

    2016     2017  
    March     June     September     December     March     June     % Chg  

Contract percentage (%)

    31.5     33.4     34.0     34.5     34.8     35.0     1.6  p.p. 

Smartphones (‘000)

    2,957.2       2,864.1       2,883.2       2,902.4       2,962.3       2,894.6       1.1  

Smartphone penetration (%)

    32.9     33.0     33.5     34.2     35.3     35.0     2.0  p.p. 

LTE (‘000)

    1,179.6       1,340.9       1,583.4       1,743.7       1,837.2       1,879.7       40.2  

LTE penetration (%)

    12.8     15.1     17.9     20.0     21.2     22.0     6.9  p.p. 

Mobile churn (quarterly)

    3.6     3.7     3.2     3.6     3.3     3.4     (0.3  p.p.) 

Contract (1)

    2.0     2.1     2.2     2.4     2.4     2.6     0.4  p.p. 

Mobile churn (cumulative YTD)

    3.6     3.7     3.5     3.6     3.3     3.3     (0.4  p.p.) 

Contract (1)

    2.0     2.1     2.3     2.4     2.4     2.5     0.4  p.p. 

Mobile ARPU (EUR)(cumulative YTD)

    8.9       9.0       9.1       9.5       10.1       9.8       1.5  

Prepay

    3.0       3.0       2.9       2.6       2.9       2.8       (10.9

Contract (1)

    24.7       24.8       24.9       23.9       26.6       25.8       (2.6

Mobile data traffic (TB) (cumulative YTD)

    27,449       55,131       90,932       131,081       42,969       92,426       67.6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed telephony ARPU (EUR) (cumulative YTD)

    13.1       13.3       14.8       14.5       13.0       12.8       (10.1

Pay TV ARPU (EUR) (cumulative YTD)

    24.4       24.6       24.8       25.2       26.1       25.6       (3.5

Broadband ARPU (EUR) (cumulative YTD)

    16.2       16.6       18.0       17.5       18.8       18.1       0.3  

Fixed data traffic (TB) (cumulative YTD)

    321,246       665,841       1,050,624       1,490,584       434,322       970,592       45.8  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Notes:

 

- ARPU: monthly average revenue divided by the monthly average accesses of the period. % Change in local currency.
- Data traffic is defined as Terabytes used by the company customers, both upload and download (1TByte = 10^12 bytes). Promotional traffic is included. Traffic not associated to the Company’s mobile customers (roaming-in, MVNOs, interconnection of third parties and other business lines) is also included. Traffic volume non-rounded.
(1) Excludes M2M.

 

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Telefónica Perú

(y-o-y changes in organic terms)

The second quarter results of Telefónica Perú continue to be affected by higher competitive intensity, mainly in the mobile business, and were exacerbated by the natural disaster caused by the “El Niño” phenomenon. However, commercial activity in the fixed business remained positive during the quarter with signs of recovery in the mobile business and a continued focus on improving the quality of service (increased 4G coverage and high-speed network deployment).

Total accesses amounted to 19.9m as of June (-8% y-o-y). Mobile accesses amounted to 14.4m (-11% y-o-y). In contract, the net loss was 340k accesses in the quarter due to the competitive intensity. Moreover, in prepay (net loss of 32k in the quarter; -410k in the first half) positive signs started to be reflected in the commercial performance following the launch of “Pre-Plan” plans at the end of May, which resulted in a change in the direction of the top-up base trend (+1.6% since launch) and a decrease in churn in April-June (-0.1% y-o-y; -0.6% vs. the previous quarter). Smartphones maintained a strong growth (+70% y-o-y) and 4G accesses increased 35% with net additions of 135k, 6 times more than in the first quarter.

In the fixed business, there was significant growth in pay TV (+5% y-o-y up to 1.3m accesses) with net additions of 12k accesses in April-June leveraged on the exclusivity of the football offer. Retail broadband accesses amounted to 1.7m (+2% y-o-y) with quarterly net additions of 15k accesses and focus on the deployment of the FTTx and cable network, reaching a coverage of 3.0m premises passed (+38% y-o-y) and 822k homes connected as of June (+32% y-o-y).

Revenues amounted to €578m in April-June (-10.6% y-o-y; -9.5% in January-June).

Mobile service revenues in the quarter (€275m) declined by 12.0% y-o-y (-14.6% in the first quarter), reflecting the decrease in the customer base, though there was a stabilization in the y-o-y ARPU decrease in the quarter (-3.1%; -5.7% in the previous quarter) after the launch of the new plans mentioned above. Handset revenues decreased by 4.9% y-o-y in April-June (+1.4% in January-June).

Fixed business revenues in April-June (€266m) decreased by 9.9% y-o-y (-6.9% in the semester), affected by lower voice revenues (-26.8%) and the seasonal effect of IT projects. On the other hand, pay TV revenues grew 8.1% y-o-y, due to the increase in both accesses and ARPU (+3.3% y-o-y).

Operating expenses rose to €460m in the quarter (+2.9% y-o-y, stable in the first half), mainly on higher content costs, due to the growth in pay TV, and higher interconnection expenses. The y-o-y performance in the quarter is affected by other factors such as the negative impact related to the “El Niño” phenomenon.

Thus, OIBDA amounted to €137m in the second quarter with a 34.3% decrease compared with the previous year (-28.3% in the first half), impacted by the effect of the reversal of a canon expense provision (second quarter 2016). OIBDA margin stood at 23.8% (-8.6 p.p. y-o-y, -6.5 p.p. in January-June).

CapEx (€156m in January-June; -1.0% y-o-y) was aimed at expanding the UBB and 4G infrastructure in order to grow in new areas and provide higher speeds.

Operating cash flow (OIBDA-CapEx) amounted to €137m as of June 2017 (-45.2% y-o-y).

 

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TELEFÓNICA PERÚ

SELECTED FINANCIAL DATA

Unaudited figures (Euros in millions)

 

    January - June     April - June  
    2017     2016     % Chg     % Organic Chg     2017     2016     % Chg     % Organic Chg  

Revenues

    1,199       1,245       (3.7     (9.5     578       620       (6.8     (10.6

Mobile Business

    647       689       (6.0     (11.7     313       338       (7.4     (11.2

Mobile service revenues (1)

    565       612       (7.7     (13.3     275       299       (8.2     (12.0

Data revenues

    319       325       (1.8     (7.8     146       164       (11.3     (14.8

Handset revenues

    83       77       7.9       1.4       38       38       (1.0     (4.9

Fixed Business

    551       556       (0.9     (6.9     266       283       (6.1     (9.9

FBB and new services (2)

    278       278       (0.1     (6.1     134       145       (7.2     (11.0

Pay TV

    161       140       15.3       8.3       80       71       12.9       8.1  

Voice & access revenues

    112       138       (18.8     (23.7     51       67       (23.8     (26.8

OIBDA

    294       390       (24.6     (28.3     137       202       (32.1     (34.3

OIBDA margin

    24.5     31.3     (6.8  p.p.)      (6.5  p.p.)      23.8     32.6     (8.9  p.p.)      (8.6  p.p.) 

CapEx

    156       149       5.1       (1.0     103       94       9.1       3.4  

Spectrum

    —         —         —         —         —         —         —         —    

OpCF (OIBDA-CapEx)

    137       241       (43.0     (45.2     35       108       (67.8     (67.2

Notes:

 

- Since 1 April 2016, T. Perú reflects all the charges related to the towers transferred to Telxius, which are now presented in Telxius (Other Companies & Eliminations)
- Organic y-o-y changes reflect all the charges related to the towers transferred to Telxius since 1 January 2016. The results of T. Perú do not include intra-group capital gains resulting from the transfer of towers to Telxius in 2016.
- Since 1 January 2016 Mobile Revenues and Fixed revenues have been revised due to different allocation criteria. This change does not affect total revenue figure reported for 2016.
- Also since 1 January 2016 Mobile Data Revenues have been revised due to different allocation criteria between Mobile Data revenues and Other Mobile Service revenues. This change does not affect total Mobile Service Revenue figure reported for 2016.
- OIBDA is presented before management and brand fees.
(1) Includes fixed wireless revenues.
(2) Includes broadband connectivity services (retail and wholesale), including value added services, data and ICT revenues, other services over connectivity and FBB equipment.

ACCESSES

Unaudited figures (Thousands)

 

    2016     2017  
    March     June     September     December     March     June     % Chg  

Fixed telephony accesses (1)

    2,452.1       2,491.0       2,486.8       2,445.1       2,455.0       2,458.2       (1.3

Fixed wireless

    127.7       117.6       95.5       72.3       84.6       84.9       (27.8

Internet and data accesses

    1,663.9       1,685.0       1,696.5       1,691.1       1,707.3       1,722.1       2.2  

Broadband

    1,639.2       1,660.3       1,666.8       1,660.9       1,676.8       1,691.9       1.9  

FTTx/Cable

    557.0       623.7       620.1       722.7       841.7       821.7       31.7  

Mobile accesses

    16,445.4       16,211.9       15,954.2       15,498.5       14,810.6       14,438.8       (10.9

Prepay

    10,530.0       10,228.5       10,214.7       9,807.8       9,429.8       9,397.5       (8.1

Contract

    5,915.5       5,983.4       5,739.5       5,690.7       5,380.9       5,041.3       (15.7

M2M

    81.7       79.7       90.1       85.1       82.9       82.1       2.9  

Pay TV

    1,229.6       1,250.3       1,261.3       1,275.1       1,297.4       1,309.3       4.7  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Accesses

    21,791.0       21,638.3       21,398.8       20,909.8       20,270.3       19,928.4       (7.9
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Includes fixed wireless and VoIP accesses.

SELECTED OPERATIONAL DATA

Unaudited figures

 

    2016     2017  
    March     June     September     December     March     June     % Chg  

Contract percentage (%)

    36.0     36.9     36.0     36.7     36.3     34.9     (2.0  p.p.) 

Smartphones (‘000)

    4,652.9       4,867.0       4,951.9       4,900.5       8,130.0       8,283.6       70.2  

Smartphone penetration (%)

    28.6     30.3     31.4     32.0     55.5     58.0     27.7  p.p. 

LTE (‘000)

    1,464.1       1,851.4       2,095.7       2,348.3       2,370.0       2,505.4       35.3  

LTE penetration (%)

    8.9     11.5     13.2     15.2     16.1     17.5     6.0  p.p. 

Mobile churn (quarterly)

    4.8     5.0     5.2     5.4     5.3     5.1     0.1  p.p. 

Contract (1)

    2.5     2.6     3.5     3.1     2.7     3.1     0.4  p.p. 

Mobile churn (cumulative YTD)

    4.8     4.9     5.0     5.1     5.3     5.2     0.3  p.p. 

Contract (1)

    2.5     2.6     3.1     3.3     2.7     2.9     0.3  p.p. 

Mobile ARPU (EUR)(cumulative YTD)

    6.3       6.2       6.1       6.3       6.3       6.3       (3.1

Prepay

    2.8       3.0       2.5       2.5       2.1       2.0       (24.7

Contract (1)

    12.0       11.8       12.5       11.3       13.7       13.8       3.9  

Mobile data traffic (TB) (cumulative YTD)

    11,451       23,486       39,758       77,864       37,157       84,961       261.8  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed telephony ARPU (EUR) (cumulative YTD)

    9.4       9.1       7.6       8.3       7.5       7.0       (13.5

Pay TV ARPU (EUR) (cumulative YTD)

    16.6       16.3       17.6       17.8       19.4       19.1       3.3  

Broadband ARPU (EUR) (cumulative YTD)

    16.4       16.2       19.3       15.9       15.6       15.1       (12.6

Fixed data traffic (TB) (cumulative YTD)

    407,019       809,376       1,317,625       1,968,734       692,053       1,378,078       70.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Notes:

 

- ARPU: monthly average revenue divided by the monthly average accesses of the period. % Change in local currency.
- Data traffic is defined as Terabytes used by the company customers, both upload and download (1TByte = 10^12 bytes). Promotional traffic is included. Traffic not associated to the Company’s mobile customers (roaming-in, MVNOs, interconnection of third parties and other business lines) is also included. Traffic volume non-rounded.
(1) Excludes M2M.

 

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Telefónica Colombia

(y-o-y changes in organic terms)

In the second quarter of the year, Telefónica Colombia consolidated the positive trend of the recent quarters with a strong y-o-y growth in both OIBDA (+9.7%) and operating cash flow (+27.5% in the first half), leveraged on a meaningful expansion of margins in an environment of greater competitive rationality.

Thus, total accesses rose to 16.6m at June (+3% y-o-y).

Mobile accesses stood at 13.8m (+4% y-o-y) posting net additions of 166k accesses in the quarter, with a sound performance both in contract accesses (+5% y-o-y), with net additions of 43k accesses in the quarter, and prepay (+4%; net additions of 122k accesses) due to the “Todo en Uno” offer and the new “Prepagada” offer, which had a positive impact in the sequential churn performance (-1.1 p.p.). On the other hand, the strong y-o-y growth trend in smartphones (+21%) and LTE accesses (+92%) was maintained.

In the fixed business the bundling strategy continued to be successfully executed, leveraged on pay TV (529k accesses, +2% y-o-y) with net additions of 4k accesses in the quarter. Retail broadband accesses totalled 969k (-3% y-o-y), with focus on increasing speeds through the deployment of the FTTx network (21k connected homes in the quarter; 441k premises passed at June), highlighting the FTTH launch in five cities with speeds of up to 100 Mbps.

Revenues totalled €368m (+0.8% in the quarter; +2.6% in January-June), with a slowdown in y-o-y growth, mainly due to the impact of IT projects in the second quarter of 2016 in the fixed business. Moreover, the recent increase in VAT slightly slowed consumption levels, and regulatory measures (end of the asymmetry in mobile termination and the new regulation of MVNOs and national roaming tariffs, from February in both cases) had an effect of -2.4 p.p. in the y-o-y change (-2.1 p.p. in the semester).

Mobile service revenues (€194m) maintained a positive y-o-y growth (+2.8%; +3.4% in the half year) as a result of solid commercial performance, a better customer mix towards contract and strong growth in data revenues (+40.1% y-o-y). Furthermore, there was a significant growth in handset revenues in the quarter (+16.7% y-o-y) in an environment characterised by the lower level of subsidies.

Fixed business revenues in the second quarter (€138m) decreased by 4.9% (+0.7% in the first quarter) due to the positive effect of IT revenues in the second quarter of 2016 mentioned above, and despite continuing to be driven by pay TV revenues (+16.0% y-o-y) and broadband revenues (+14.5%), with ARPU growing by 11.9% and 20.4% y-o-y respectively due to the management of the customer base towards higher value plans.

Operating expenses totalled €252m in April-June and declined by 3.1% y-o-y (+0.1% in January-June) given the decrease in subsidies, the reduction in tariffs after the end of the asymmetry and the higher expenses associated with IT projects in the second quarter of 2016.

Therefore, OIBDA in the second quarter (€124m) increased by 9.7% y-o-y (+7.3% in January-June), while OIBDA margin expanded y-o-y by 2.7 p.p. to reach 33.7% (+1.5 p.p. to 33.6% in the first half).

CapEx (€116m in January-June; -9.7% y-o-y) included the licence renewal related to the TV services, the continuous improvement of the fixed broadband network and other projects such as the FTTH network launch and deployment.

Hence, operating cash flow (OIBDA-CapEx) totalled €138m in the first half of 2017, with strong y-o-y growth of 27.5%.

 

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TELEFÓNICA COLOMBIA

SELECTED FINANCIAL DATA

Unaudited figures (Euros in millions)

 

     January - June     April - June  
     2017     2016     % Chg     % Organic Chg     2017     2016     % Chg     % Organic Chg  

Revenues

     756       670       12.8       2.6       368       347       6.0       0.8  

Mobile Business

     472       406       16.2       5.7       230       209       9.9       4.7  

Mobile service revenues

     400       352       13.7       3.4       194       180       7.9       2.8  

Data revenues

     221       144       53.8       39.9       112       76       47.6       40.1  

Handset revenues

     72       55       32.2       20.3       36       29       22.7       16.7  

Fixed Business

     284       264       7.5       (2.2     138       138       (0.1     (4.9

FBB and new services (1)

     143       139       3.1       (6.2     70       74       (5.5     (10.1

Pay TV

     45       35       28.1       16.6       22       18       21.9       16.0  

Voice & access revenues

     95       90       6.0       (3.6     46       46       (0.0     (4.7

OIBDA

     254       215       17.8       7.3       124       108       15.1       9.7  

OIBDA margin

     33.6     32.1     1.4  p.p.      1.5  p.p.      33.7     31.0     2.7  p.p.      2.7  p.p. 

CapEx

     116       117       (0.8     (9.7     56       83       (32.5     (36.8

Spectrum

     —         —         —         —         —         —         —         —    

OpCF (OIBDA-CapEx)

     138       99       39.7       27.5       68       25       175.5       179.8  

Notes:

 

- Since 1 January 2016 Mobile data revenues have been revised due to different allocation criteria between Mobile data revenues and Other Mobile service revenues. This change does not affect total Mobile service revenues figure reported for 2016.
- OIBDA is presented before management and brand fees.
(1) Includes broadband connectivity services (retail and wholesale), including value added services, data and ICT revenues, other services over connectivity and FBB equipment.

ACCESSES

Unaudited figures (Thousands)

 

    2016     2017        
    March     June     September     December     March     June     % Chg  

Final Clients Accesses

    15,977.2       16,161.0       16,503.1       16,573.4       16,471.3       16,610.7       2.8  

Fixed telephony accesses (1)

    1,414.2       1,402.7       1,389.4       1,353.4       1,352.7       1,330.6       (5.1

Internet and data accesses

    1,008.4       1,011.6       1,025.1       977.2       990.0       982.3       (2.9

Broadband

    999.9       1,003.2       1,003.2       964.1       976.8       969.1       (3.4

FTTx

    —         —         —         27.1       33.4       54.6       —    

Mobile accesses

    13,057.2       13,226.3       13,556.9       13,725.3       13,603.0       13,768.6       4.1  

Prepay

    9,625.1       9,730.2       10,019.0       10,136.8       9,974.3       10,096.8       3.8  

Contract

    3,432.1       3,496.1       3,537.9       3,588.5       3,628.6       3,671.8       5.0  

M2M

    471.0       464.3       481.3       478.7       474.8       463.7       (0.1

Pay TV

    497.4       520.4       531.7       517.5       525.6       529.3       1.7  

Wholesale Accesses

    0.6       0.6       0.6       0.5       0.5       0.5       (16.7
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Accesses

    15,977.8       16,161.6       16,503.7       16,573.9       16,471.8       16,611.2       2.8  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Includes fixed wireless and VoIP accesses.

SELECTED OPERATIONAL DATA

Unaudited figures

 

    2016     2017        
    March     June     September     December     March     June     % Chg  

Contract percentage (%)

    26.3     26.4     26.1     26.1     26.7     26.7     0.3  p.p. 

Smartphones (‘000)

    4,391.3       4,516.1       4,744.8       5,043.4       5,324.1       5,477.0       21.3  

Smartphone penetration (%)

    35.5     36.0     36.8     38.6     41.1     41.7     5.7  p.p. 

LTE (‘000)

    1,375.6       1,667.1       1,943.0       2,340.6       2,682.5       3,193.6       91.6  

LTE penetration (%)

    10.9     13.1     14.9     17.7     20.4     24.0     10.9  p.p. 

Mobile churn (quarterly)

    3.2     3.2     2.9     3.5     4.2     3.4     0.2  p.p. 

Contract (1)

    1.8     1.7     1.7     1.6     1.5     1.6     (0.2  p.p.) 

Mobile churn (cumulative YTD)

    3.2     3.2     3.1     3.2     4.2     3.8     0.6  p.p. 

Contract (1)

    1.8     1.8     1.6     1.5     1.5     1.5     (0.3  p.p.) 

Mobile ARPU (EUR)(cumulative YTD)

    4.2       4.3       4.3       4.4       4.7       4.6       0.7  

Prepay

    1.1       1.2       1.1       1.0       1.2       1.2       0.5  

Contract (1)

    14.6       14.8       15.0       14.2       16.4       15.9       (1.0

Mobile data traffic (TB) (cumulative YTD)

    14,077       29,400       46,343       66,085       22,498       48,002       63.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed telephony ARPU (EUR) (cumulative YTD)

    9.8       10.1       10.7       10.7       11.1       10.8       (1.4

Pay TV ARPU (EUR) (cumulative YTD)

    11.0       11.3       11.9       12.2       14.3       14.1       11.4  

Broadband ARPU (EUR) (cumulative YTD)

    8.2       8.5       10.3       9.2       11.0       11.1       18.7  

Fixed data traffic (TB) (cumulative
YTD)(2)

    70,654       149,797       234,125       319,800       89,505       192,552       28.5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Notes:

 

- ARPU: monthly average revenue divided by the monthly average accesses of the period. % Change in local currency.
- Data traffic is defined as Terabytes used by the company customers, both upload and download (1TByte = 10^12 bytes). Promotional traffic is included. Traffic not associated to the Company’s mobile customers (roaming-in, MVNOs, interconnection of third parties and other business lines) is also included. Traffic volume non rounded.
(1) Excludes M2M.
(2) Includes solely traffic pertaining to FBB accesses, not Business customers.

 

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Telefónica México

(y-o-y changes in organic terms)

In the second quarter, Telefónica Mexico’s results showed a greater rationality in the competitive environment and a significant improvement in the performance of its main financial metrics, returning to y-o-y growth in both revenues and OIBDA.

Mobile accesses stood at 25.3m (-3% y-o-y), increasing the quality of the base with a greater weight of contract accesses (8%, +1 p.p. y-o-y), smartphones (48%, +3 p.p.) and LTE (16%, +7 p.p.). Thus, quarterly contract net additions increased to 62k accesses (143k accesses in the half year) with a 43% y-o-y increase in gross additions and a 1.0 p.p reduction in churn. On the other hand, in prepay, there was a loss of 442k accesses (-1.4m in the half year) as a result of the reduction in low-value accesses.

Mobile ARPU showed a significant improvement in its y-o-y trend decreasing by 2.5% (-22.3% in the first quarter of 2017 and -30.1% in the fourth quarter of 2016) and improved sequentially as a result of the higher average revenue per minute in prepay and in contract.

Revenues (€356m) returned to growth in the quarter (+5.4% y-o-y; -6.4% in the half year) thanks to the improvement in service revenues (-3.0%; -11.8% in the half year), with better performance in outgoing revenues (increased sequentially for the first time in the last 5 quarters), as well as handset sales (+85.8% in the quarter; +36.5% in the half year) due to the strong growth of contract gross additions and the greater weight of the high value range.

Operating expenses stood at €292m in the quarter increasing 3.3% y-o-y, reversing the y-o-y trend vs. the previous quarter (-5.3% y-o-y in January-June) due to higher commercial expenses, which returned to growth on the back of increased activity in the higher-value segment, and lower decrease in interconnection expenses.

Thus, OIBDA stood at €81m increasing 22.8% y-o-y in the quarter (-11.6% in the half year) as a result of the improvement in service revenues and the positive impact of capital gains generated by fibre optic sales in the quarter, which formed part of the asset optimisation strategy (impact of €12m). Thus, OIBDA margin stood at 22.8% with a y-o-y increase of 3.2 p.p. (21.7% in the half year, -1.3 p.p. y-o-y).

CapEx amounted to €79m in the first half of the year with an 18.5% y-o-y decrease, primarily aimed at the deployment and improvement in mobile networks.

Overall, operating cash flow (OIBDA-CapEx) reached €67m in January-June (-2.9% y-o-y).

 

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TELEFÓNICA MÉXICO

SELECTED FINANCIAL DATA

Unaudited figures (Euros in millions)

 

    January - June     April - June  
    2017     2016     % Chg     % Organic Chg     2017     2016     % Chg     % Organic Chg  

Revenues

    670       746       (10.2     (6.4     356       337       5.6       5.4  

Service revenues

    561       663       (15.4     (11.8     294       303       (3.0     (3.0

Data revenues

    270       300       (10.0     (6.3     159       133       19.5       20.7  

Handset revenues

    109       83       31.0       36.5       62       33       84.6       85.8  

OIBDA

    146       168       (13.3     (11.6     81       62       31.4       22.8  

OIBDA margin

    21.7     22.5     (0.8  p.p.)      (1.3  p.p.)      22.8     18.4     4.5  p.p.      3.2  p.p. 

CapEx

    79       96       (18.0     (18.5     35       54       (35.3     (35.7

Spectrum

    4       —         —         —         0       —         —         —    

OpCF (OIBDA-CapEx)

    67       72       (7.0     (2.9     46       8       n.m.       n.m.  

Note:

 

- Since 1 January 2016 Data Revenues have been revised due to different allocation criteria between Data revenues and other service revenues. This change does not affect total Service revenues figure reported for 2016.
- OIBDA is presented before management and brand fees.

ACCESSES

Unaudited figures (Thousands)

 

    2016     2017  
    March     June     September     December     March     June     % Chg  

Mobile accesses

    25,655.4       25,928.8       25,937.5       26,557.2       25,657.9       25,277.7       (2.5

Prepay

    23,803.2       24,069.1       24,081.0       24,620.1       23,639.3       23,197.6       (3.6

Contract (1)

    1,852.2       1,859.7       1,856.5       1,937.2       2,018.6       2,080.1       11.9  

M2M

    602.6       629.2       658.3       668.4       710.1       744.0       18.2  

Fixed Wireless

    1,296.9       1,252.9       1,176.8       1,057.4       974.4       924.2       (26.2

Wholesale Accesses (1)

    —         —         54.8       39.8       39.2       38.5       —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Accesses

    26,952.3       27,181.7       27,169.1       27,654.4       26,671.5       26,240.4       (3.5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Since the third quarter 2016, 55 thousand wholesale accesses have been reclassified from Mobile contract to Wholesale accesses.

SELECTED OPERATIONAL DATA

Unaudited figures

 

    2016     2017  
    March     June     September     December     March     June     % Chg  

Contract percentage (%)

    7.2     7.2     7.2     7.3     7.9     8.2     1.0  p.p. 

Smartphones (‘000)

    10,916.0       11,489.4       11,569.6       11,961.4       11,865.9       11,789.9       2.6  

Smartphone penetration (%)

    43.8     45.6     45.8     46.3     47.6     48.1     2.5  p.p. 

LTE (‘000)

    2,154.7       2,477.9       2,776.6       3,312.1       3,658.0       4,035.0       62.8  

LTE penetration (%)

    8.6     9.8     11.0     12.8     14.7     16.4     6.6  p.p. 

Mobile churn (quarterly)

    3.5     3.3     3.6     3.7     4.8     3.9     0.6  p.p. 

Contract (1)

    1.7     2.9     1.7     1.9     2.1     1.9     (1.0  p.p.) 

Mobile churn (cumulative YTD)

    3.5     3.4     3.5     3.6     4.8     4.4     0.9  p.p. 

Contract (1)

    1.7     2.4     1.7     1.4     2.1     1.7     (0.7  p.p.) 

Mobile ARPU (EUR)(cumulative YTD)

    3.8       3.5       3.3       3.3       2.7       2.9       (11.9

Prepay

    3.3       3.0       2.8       2.1       2.3       2.4       (14.3

Contract (1)

    14.6       14.2       14.2       12.8       12.1       12.4       (11.5

Mobile data traffic (TB) (cumulative YTD)

    17,192       37,369       60,088       86,315       30,861       69,939       87.2  

Notes:

 

- ARPU: monthly average revenue divided by the monthly average accesses of the period. % Change in local currency.
- Data traffic is defined as Terabytes used by the company customers, both upload and download (1TByte = 10^12 bytes). Promotional traffic is included. Traffic not associated to the Company’s mobile customers (roaming-in, MVNOs, interconnection of third parties and other business lines) is also included. Traffic volume non rounded.
(1) Excludes M2M.

 

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Other Hispam countries

SELECTED FINANCIAL DATA

Unaudited figures (Euros in millions)

 

    January - June     April - June  
    2017     2016     % Var     % Organic Chg     2017     2016     % Var     % Organic Chg  

Revenues

    912       931       (2.0     41.0       381       428       (11.1     51.5  

Telefónica Venezuela

    66       98       (33.0     n.m.       (32     21       c.s.       n.m.  

Telefónica Central America

    450       447       0.6       (0.8     216       220       (1.8     (2.5

Telefónica Ecuador

    273       280       (2.5     (5.5     137       135       1.4       (1.3

Telefónica Uruguay

    124       106       17.0       2.7       60       52       14.7       1.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Service revenues

    843       871       (3.2     41.6       347       399       (13.1     52.5  

Telefónica Venezuela

    64       96       (33.1     275.6       (31     21       c.s.       410.2  

Telefónica Central America

    419       419       0.0       (1.3     200       205       (2.7     (3.4

Telefónica Ecuador

    244       258       (5.3     (8.2     122       124       (2.2     (4.7

Telefónica Uruguay

    116       99       17.3       2.9       56       48       16.2       2.5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OIBDA

    258       256       0.5       58.9       109       117       (6.5     87.9  

Telefónica Venezuela

    20       26       (21.5     n.m.       (2     4       c.s.       n.m.  

Telefónica Central America

    114       110       3.3       5.0       51       57       (10.9     (5.7

Telefónica Ecuador

    80       83       (3.9     (6.8     39       38       2.2       (0.6

Telefónica Uruguay

    43       37       17.2       3.3       21       17       18.7       5.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

CapEx

    95       128       (25.4     9.1       60       71       (16.0     37.2  

Telefónica Venezuela

    7       22       (68.8     84.8       4       13       (71.6     114.3  

Telefónica Central America

    50       67       (24.8     (26.3     30       35       (13.8     (15.3

Telefónica Ecuador

    26       30       (14.1     (16.7     19       18       4.1       0.8  

Telefónica Uruguay

    13       9       42.2       24.8       8       6       34.3       18.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Spectrum

    —         —         —         —         —         —         —         —    

Telefónica Venezuela

    —         —         —         —         —         —         —         —    

Telefónica Central America

    —         —         —         —         —         —         —         —    

Telefónica Ecuador

    —         —         —         —         —         —         —         —    

Telefónica Uruguay

    —         —         —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OpCF (OIBDA-CapEx)

    162       128       26.2       114.6       49       45       8.6       191.8  

Telefónica Venezuela

    13       3       n.m.       n.m.       (5     (9     (42.8     c.s.  

Telefónica Central America

    64       44       45.9       52.3       21       22       (6.3     9.2  

Telefónica Ecuador

    54       53       1.9       (1.1     20       20       0.4       (1.9

Telefónica Uruguay

    31       28       9.4       (3.4     13       12       11.0       (1.1

 

- After considering Venezuela as a hyperinflationary country, P&L and CapEx from the operations in the country are to be accounted at the closing exchange rate Bolivar Fuerte/Euro. For the January-June 2017 period Telefónica has adopted a synthetic exchange rate of 3,547 Venezuelan bolivars fuertes per dollar at June 2017 (please see Note 3 of the Condensed Consolidated Interim Financial Statements for the six-month period ended June 30, 2017).
- OIBDA is presented before management and brand fees.
- 2016 and 2017 reported figures include the hyperinflationary adjustments in Venezuela in both years.
- Central America includes Guatemala, Panama, El Salvador, Nicaragua and Costa Rica.

ACCESSES

Unaudited figures (Thousands)

 

    2016     2017  
    March     June     September     December     March     June     % Chg  

Fixed telephony accesses (1)

    1,276.1       1,263.7       1,250.3       1,229.8       1,212.6       1,195.8       (5.4

Internet and data accesses

    13.7       13.7       13.0       13.3       16.9       17.6       28.3  

Broadband

    6.7       6.9       2.8       3.0       2.6       2.7       (60.2

Mobile accesses

    28,613.6       28,960.4       29,407.0       29,644.2       29,446.6       29,175.6       0.7  

Prepay

    24,461.3       24,780.9       25,155.7       25,360.7       25,128.1       24,832.2       0.2  

Contract

    4,152.2       4,179.5       4,251.4       4,283.5       4,318.5       4,343.5       3.9  

M2M

    389.6       397.9       423.5       438.6       435.5       451.2       13.4  

Pay TV

    478.2       478.1       468.7       466.1       462.6       452.7       (5.3
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Accesses

    30,381.6       30,715.9       31,139.0       31,353.4       31,138.7       30,841.7       0.4  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Includes fixed wireless and VoIP accesses.

 

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07

ADDENDA

Key Holdings of the Telefónica Group

 

     % Stake  

TELEFÓNICA ESPAÑA

  

Telefónica de España

     100.0  

Telefónica Móviles España

     100.0  

Telyco

     100.0  

Iberbanda

     100.0  

Acens Technologies

     100.0  

Tuenti

     100.0  

Telefónica Servicios Integrales de Distribución

     100.0  

DTS, Distribuidora de Televisión Digital

     100.0  

TELEFÓNICA UK

     100.0  

TELEFÓNICA DEUTSCHLAND

     69.2  

TELEFÓNICA BRASIL

     73.7  

TELEFÓNICA HISPANOAMÉRICA

  

Telefónica de Argentina

     100.0  

Telefónica Móviles Argentina

     100.0  

Telefónica Móviles Chile

     100.0  

Telefónica Móviles México

     100.0  

Telefónica Venezuela

     100.0  

Telefónica Ecuador

     100.0  

Telefónica Móviles Uruguay

     100.0  

Telefónica Costa Rica

     100.0  

Telefónica del Perú

     98.6  

Telefónica Chile

     99.0  

Telefónica Colombia

     67.5  

Telefónica Móviles El Salvador

     59.6  

Telefónica Móviles Guatemala

     60.0  

Telefonía Celular Nicaragua

     60.0  

Telefónica Móviles Panamá

     60.0  
     % Stake  

OTHER STAKES

  

Telefónica de Contenidos

     100.0  

Telxius Telecom S.A.U (1)

     100.0  

Telefónica Digital

     100.0  

Mediaset Premium (2)

     —    

China Unicom (3)

     0.8  

BBVA

     0.7  

Prisa (4)

     13.1  
 

 

(1) On February 10, 2017, Telefónica reached an agreement for the sale of up to 40% of the total share capital of Telxius Telecom, S.A.U. The closing is subject to obtaining the corresponding regulatory approvals.
(2) As of 19 June 2017, Telefónica S.A. sold 11.1% of the share capital of Mediaset Premium. As a result, Telefónica no longer maintains a stake in the Company.
(3) As of 24 May 2017, Telefónica S.A. sold 0.2% of the share capital of China Unicom.
(4) As of February 19, 2016, stake communicated to CNMV.

 

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Changes to the Perimeter

During the first six months of 2017, the following changes have been made to the perimeter of consolidation:

 

    On 13 March 2017, Telefónica increased its shareholding in Telefónica Deutschland Holding AG from 63.2% to 69.2% through a share swap agreement with KPN. Telefónica delivered 72.0m of its treasury shares (representing 1.43% of its share capital), in exchange for 178.5m shares of its subsidiary Telefónica Deutschland Holding AG, representing 6.0% of the share capital of the latter.

 

    Additionally, on 20 February 2017, Telefónica reached an agreement for the sale to Taurus Bidco S.à.r.l. of up to 40% of the capital stock of Telxius for €1,275m (€12.75 per share). The closing is subject to obtaining the corresponding regulatory approvals. After the transaction Telefónica will maintain control over Telxius.

 

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Alternative performance measures

Information included in compliance with the ESMA Guidelines, 5 October 2015, on Alternative Performance Measures (APM), applicable to published regulated information from 3 July 2016.

The management of the Group uses a series of APM in its decision-making, in addition to those expressly defined in the IFRS, because they provide additional information useful to assess the Group’s performance, solvency and liquidity. These measures should not be viewed in isolation or as a substitute for the measures presented according to the IFRS.

The APM included in this report are: Operating Income Before Depreciation and Amortization, Net financial debt and Net financial debt plus commitments, leverage ratio, Free cash flow, Organic result and Underlying result.

Operating income before amortisation (OIBDA)

Operating income before depreciation and amortization (OIBDA) is calculated by excluding solely depreciation and amortization from operating income. OIBDA is used to track the performance of the business and to establish operating and strategic targets of the Telefónica Group companies. OIBDA is a commonly reported measure and is widely used among analysts, investors and other interested parties in the telecommunications industry, although not a measure explicitly defined in IFRS, and therefore, may not be comparable to similar indicators used by other companies. OIBDA should not be considered as a substitute for operating income or cash flow from operating activities.

The detailed reconciliation of Telefónica Group’s OIBDA and Operating Income and each of its segments, can be found on this document (Telefónica Group and Segment P&Ls), as well as on the selected financial information contained on “https://www.telefonica.com/documents/162467/138879215/rdos17t2-data.zip”.

The OIBDA is also defined on the financial information published by the Group as of 30th June, 2017 (see particularly Note 3 and Note 5 of the Condensed Consolidated Interim Financial Statements for the six-month period ended June 30, 2017).

Debt indicators

 

  a) Net financial debt and Net financial debt plus commitments

As calculated by us, net financial debt includes: (i) current and non-current financial liabilities in our consolidated statement of financial position (which includes the negative mark-to-market value of derivatives) and (ii) other payables included in “Trade and other payables” (mainly corresponding to payables for deferred payment of radio spectrum). From these liabilities, it is deducted: i) the cash and cash equivalents, ii) the current financial assets (which includes short-term derivatives), iii) the positive mark-to-market value of derivatives with a maturity beyond one year, and iv) other interest-bearing assets (components of “Trade and other receivables” and “Non-current financial assets” in our consolidated statement of financial position).

We calculate net financial debt plus commitments by adding to net financial debt gross commitments related to employee benefits, and deducting the value of long-term assets associated with those commitments and the tax benefits arising from the future payments of those commitments.

We believe that net financial debt and net financial debt plus commitments are meaningful for investors and analysts because they provide an analysis of our solvency using the same measures used by our management. We use net financial debt and net financial debt plus commitments to calculate internally certain solvency and leverage ratios used by Management. Nevertheless, neither net financial debt nor net financial debt plus commitments as calculated by us should be considered as a substitute for gross financial debt.

The reconciliation of Telefónica Group’s gross financial debt according to the consolidated statement of financial position, net financial debt and net financial debt plus commitments at the end of June 2017 can be found on page 12 of this document and on the financial information contained on

 

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https://www.telefonica.com/documents/162467/138879215/rdos17t2-data.zip”. Net financial debt is also defined on the financial information published by the Group as of 30th June 2017 (see Note 3 of the Condensed Consolidated Interim Financial Statements for the six-month period ended June 30, 2017).

 

  b) Leverage ratio

The leverage ratio is calculated as the ratio of net financial debt over OIBDA for the past 12 months, including or excluding the OIBDA of the companies which are incorporated or removed from the perimeter of consolidation, and excluding certain factors in line with the calculation of organic OIBDA.

The reconciliation of the leverage ratio can be found in the selected financial information contained on “https://www.telefonica.com/documents/162467/138879215/rdos17t2-data.zip”.

Free Cash Flow

The Group’s Free cash flow is calculated starting from “Net cash flow provided by operating activities” as indicated in the consolidated statement of cash flows, deducting payment/proceeds on investments/divestments of property, plant and equipment and intangible assets (excluding cash received from the sale of real state), adding the cash received form government grants and deducting dividends paid to minority interests. The impact of the cancellation of commitments related to employee benefits is added back (originally included in the Net cash flow provided by operating activities) as it represents the payments for the principal of the debt incurred with those employees.

We believe that Free cash flow is a meaningful measure for investors and analysts because it provides an analysis of the cash flow available to protect solvency levels and to remunerate the parent company’s shareholders. The same measure is used internally by our management. Nevertheless, Free cash flow as calculated by us should not be considered as a substitute for the consolidated statements of cash flows.

The reconciliation of net cash flow from operations, according to the consolidated statement of cash flows (on a straight-line basis) and the Group’s Free cash flow according to the above definition, can be found on the selected financial information contained on “https://www.telefonica.com/documents/162467/138879215/rdos17t2-data.zip”. Free cash flow is also defined in the financial information published by the Group as of 30th June 2017 (see Note 3 of the Condensed Consolidated Interim Financial Statements for the six-month period ended June 30, 2017).

Organic Result

Year-on-year changes referred to in this document as “organic” or presented “in organic terms” intend to present a homogeneous comparison, by applying a constant perimeter of consolidation, constant exchange rates and other specific adjustments which are described herein. “Organic” variations, provide useful information about the evolution of the business due to several factors:

 

    They provide information on the organic performance of the Group’s operations in the different markets in which it operates, by maintaining constant exchange rates and perimeter, removing the impact of certain exogenous factors which may distort the year-on-year comparison since they are specific to a certain moment and not associated with the ordinary performance of the business (such as, for example, capital gains or losses from the sale of companies or restructuring associated to simplification plans and aimed at improving efficiency and future profitability of the Company) and therefore, helping the business performance analysis in homogeneous terms.

 

    Organic results are therefore used both internally and by the various agents in the market to conduct consistent monitoring of trends and of the operating performance of the business. Moreover, this data helps the comparison between the business performance of Telefónica and that of other operators, although the term “organic” is not a term defined in IFRS, and the “organic” measures” included herein may not be comparable to similar measures presented by other companies.

 

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For the purposes of this document, “organic” variation 2017/2016 is defined as the reported variation adjusted by the following factors:

 

    Assumes average constant foreign exchange rates of 2016, excludes the impact of hyperinflation adjustment in Venezuela in both years.

 

    Considers a constant perimeter of consolidation.

 

    At OIBDA and Operating cash flow levels, excludes write-downs, capital gains/losses from the sale of companies, sale of towers, restructuring expenses and non-recurrent material impacts.

 

    CapEx also excludes investment in spectrum.

Reconciliation between reported data and organic revenue figures, OIBDA and operating cash flow can be found on the selected financial information contained on “https://www.telefonica.com/documents/162467/138879215/rdos17t2-data.zip”.

The Management Report contained in the Consolidated Financial Statements for the six-month period ended June 30, 2017 of Telefónica Group also include the description of the adjustments for the calculation of the organic results

Underlying Result

“Underlying” results or results in “underlying” terms and year-on-year changes referred to in this document as “underlying” or presented “in underlying terms” intend to present a comparison with the adjustment of certain factors which distort the year-on-year comparison of the business performance. Unlike the organic result, no exchange rate or perimeter adjustments are made to the underlying result. Likewise, the underlying result is calculated up to net income, while organic variations are calculated up to the Operating Cash Flow (OIBDA - CapEx). The “underlying” result and variations, provide useful information for the company and market agents because:

 

    They provide additional information on the underlying performance of the Group’s operations in the different markets, removing the impact of certain factors which distort the year-on-year comparison, as they are specific to a certain moment and not associated with the ordinary performance of the business, and facilitate the underlying analysis of the business.

 

    The inclusion of the business underlying performance is used both internally and by the various agents in the market to perform consistent monitoring of trends and operating performance of the business; this data also facilitates the comparison between the business performance of Telefónica and that of other operators, although the term “underlying” is not a term defined in IFRS, and the “underlying” measures included herein may not be comparable to similar measures presented by other companies.

For the purposes of this document, “underlying” variation 2017/2016 is defined as the reported variation as adjusted by the following factors:

 

    At OIBDA level, excludes write-downs, capital gains/losses from the sale of companies, sale of towers, restructuring expenses and material non-recurrent impacts.

 

    At net income level, amortisation of assets from purchase price allocation processes is also excluded.

Reconciliation between reported data and OIBDA underlying figures and net can be found on the selected financial information contained on “https://www.telefonica.com/documents/162467/138879215/rdos17t2-data.zip”.

 

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DISCLAIMER

This document may contain forward-looking statements regarding intentions, expectations or forecasts related to the Telefónica Group (hereinafter, the “Company” or “Telefónica”). These statements may include financial forecasts and estimates based on assumptions or statements regarding plans, objectives and expectations that make reference to different matters, such as the customer base and its evolution, growth of the different business lines and of the global business, the market share, possible acquisitions, divestitures or other transactions, Company results and other aspects related to the activity and situation of the Company.

The forward-looking statements can be identified, in certain cases, through the use of words such as “expectation”, “anticipation”, “purpose”, “belief” or similar expressions, or the corresponding negative forms, or through the own predictive nature of all issues referring to strategies, plans or intentions. These forward-looking statements or forecasts reflect the current views of Telefónica with respect to future events, do not represent, by their own nature, any guarantee of future fulfilment, and are subject to risks and uncertainties that could cause the final developments and results to differ substantially from the ones put forward through these intentions, expectations or forecasts. These risks and uncertainties include those identified in the documents containing more comprehensive information filed by Telefónica before the different supervisory Authorities of the securities markets in which its shares are listed and, in particular, the Spanish National Securities Market Commission.

Except as required by applicable laws, Telefónica does not assume any obligation to publicly update these statements to adapt them to events or circumstances taking place after this document, including changes in the Company’s business, in its business development strategy or any other unexpected circumstance.

This document may contain summarized, non-audited or Non-GAAP financial information. The information contained herein should therefore be considered as a whole and in conjunction with all the public information regarding the Company available, including, if any, other documents released by the Company that may contain more detailed information.

In October 2015, the European Securities Markets Authority (ESMA) published guidelines on Alternative Performance Measures (APM), applicable to the regulated information published from July 3, 2016. Information and disclosure related to APM used in the present document are included in the Appendix. Moreover, recipients of this document are invited to read our condensed consolidated interim financial statements and consolidated interim management report for the six-month period ended Jun 30, 2017 submitted to the Spanish National Securities Market Commission.

Finally, it is hereby stated that neither this document or any of its contents constitutes an offer to purchase, sale or exchange any securities, a solicitation of any offer to purchase, sale or exchange of securities, or a recommendation or advice regarding any security.

 

Investor Relations
Distrito Telefónica - Ronda de la Comunicación, s/n
28050 Madrid (Spain)
Telephone: +34 91 482 87 00

Pablo Eguirón (pablo.eguiron@telefonica.com)

Isabel Beltrán (i.beltran@telefonica.com)

Gonzalo Borja (gonzalo.borjadelsur@telefonica.com)

ir@telefonica.com

www.telefonica.com/accionistaseinversores

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    Telefónica, S.A.
Date: July 27, 2017     By:  

/s/ Laura Abasolo García de Baquedano

      Name:   Laura Abasolo García de Baquedano
      Title:   Chief Finance and Control Officer for Telefonica, S.A.