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 February, 2012
Commission File Number: 001-09531
Telefónica, S.A.
(Translation of registrant’s name into English)
Distrito C, Ronda de la Comunicación s/n,
28050 Madrid, Spain
3491-482 85 48
(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 x 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 x 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 x
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:
Yes ¨ No x
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.
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| 1. | Telefónica Group: Presentation on quarterly results January-December 2011 | 2 | ||||
Table of Contents
| ResultsJanuary-December 2011 |
| Disclaimer This document contains statements that constitute forward looking statements about Telefonica Group (going forward, "the Company" or Telefonica) including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations which may refer, among others, to the intent, belief or current prospects of the customer base, estimates regarding, among others, future growth in the different business lines and the global business, market share, financial results and other aspects of the activity and situation relating to the Company.The forward-looking statements in this document can be identified, in some instances, by the use of words such as "expects", "anticipates", "intends", "believes", and similar language or the negative thereof or by forward-looking nature of discussions of strategy, plans or intentions. Such forward-looking statements, by their nature, are not guarantees of future performance and involve risks and uncertainties, and other important factors that could cause actual developments or results to differ from those expressed in our forward looking statements. These risks and uncertainties include those discussed or identified in fuller disclosure documents filed by Telefonica with the relevant Securities Markets Regulators, and in particular, with the Spanish Market Regulator.Analysts and investors, and any other person or entity that may need to take decisions, or prepare or release opinions about the securities issued by the Company, are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation.Except as required by applicable law, Telefonica undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telefonica's business or acquisition strategy or to reflect the occurrence of unanticipated events.This document may contain summarized information or information that has not been audited. In this sense, this information is subject to, and must be read in conjunction with, all other publicly available information, including if it is necessary, any fuller disclosure document published by Telefonica.Finally, it is stated that neither this presentation nor any of the information contained herein constitutes an offer of purchase, sale or exchange, nor a request for an offer of purchase, sale or exchange of securities, or any advice or recommendation with respect to such securities. 2 |
| 3 Agenda2011 results and 2012 priorities 2011 HIGHLIGHTS, 2012 STRATEGIC PRIORITIES AND GUIDANCE2011 FINANCIAL RESULTS, CAPITAL STRUCTURE AND BUSINESS PRIORITIES Mr. Cesar AliertaExecutive Chairman and CEOMr. Angel VilaChief Finance and Corporate Development Officer 01 02 |
| 01 2011 HIGHLIGHTS, 2012 STRATEGIC PRIORITIES AND GUIDANCEMr. Cesar Alierta 4 |
| 2011, a year of record FCF generation and significant progress globally and vertically 01 TELEFONICA Steady revenue growth (+3.5%) driven by key growth engines (Latam & mobile data)Solid underlying OIBDA margin over 36% amid increased commercial investmentsRecord FCF generation at € 9.3 bn despite higher investment to bolster future growthGuidance fulfilled (revenue, OIBDA margin & CapEx within targets) Very attractive shareholder remuneration Solid financial results against a difficult backdrop RECORD FCFGENERATION 5 |
| 01 FCF Generation Outperforming top European based peers1 (CHART) (CHART) +9.5% -4.5% -1.9% -6.3% -7.2% TELEFONICA € in billions € in billions Record yearly FCF generation 6 Source: Company releases and broker estimates. |
| Telefonica and DT in network collaboration agreement Restructuring of Colombian operations 01 Sale of 2,500 non-strategic towers in Mexico Refocused commercial strategy in Europe & further push in Latam Accelerate portfolio management & network sharing to free resources New shareholder remuneration targets, increased financial flexibility Progress in our transformation journey to foster growth Sale of minority stakes New organization, enhanced position in the value chain T. Digital to bolster our position in the new digital world T. Global Resources to get the most from our scale TELEFONICA New strategic boost from last summer to drive transformation and increase our growth potential 7 |
| 01 Record mobile net adds in Q4, with best ever quarter for smartphonesOutstanding growth in MBB to exceed over 38 m accessesContract segment is already 1/3 of the mobile baseSustained expansion of FBB accesses leveraging bundles Pay TV net adds in FY 11 almost doubled y-o-y TELEFONICA Strong investments in customer expansion, setting stage for future growth (CHART) Total accesses Mobile accesses Smartphones Net adds H1 11 Net adds H2 11 (CHART) Decisive commercial actions to regain momentum already bearing fruits across the board +72% +79% +59% (Figures in millions) Accesses growth organic (y-o-y) Total FBB Mobile Pay TV MBB Total: 307 m 8 |
| 01 . All revenues figures in aggregated terms. TELEFONICA Mobile data/MSR Non-SMS data/Mobile data revenue (CHART) (CHART) (CHART) P2P SMS +3.6% y-o-y (CHART) FY 11 mobile data revenue growth (organic y-o-y) Smartphone MBB Total mobile data Non-SMS data Data penetration (Dec-11) FY 10 FY 11 FY 10 FY 11 Delivering growth from data on rapid adoption of MBB 9 |
| Monetising the MBB explosion 01 Data traffic converging to revenue growthT. Europe1 Major focus on smartphones2:ARPU uplift 1.5x Higher profit up to 1.4x Pricing consistent with data monetisation:Tiered pricing across marketsIntegrated tariffs in EuropeAll MBB users with a data-tariff attachedNegligible VoIP traffic volumes in our European markets(CHART) +65% +46% +26% +29% Traffic (y-o-y growth) Non-SMS data revenue (y-o-y growth) TELEFONICA (CHART) +48% +47% +32% +32% Traffic (y-o-y growth) Non-SMS data revenue (y-o-y growth) Successful monetisation in Germany 10 +39 p.p. -15 p.p. +17 p.p. +16 p.p. Includes T. Espana and T. Europe.Comparison vs. average contract across footprint. Q1 11 Q4 11 Q1 11 Q4 11 |
| (CHART) Robust outlook for Latam, where structural growth remains intact and we have strengthened our leadEnhanced positioning in the growing German marketSignificant lower exposure to Spain with enhanced commercial propositions and more cost flexibility Lower drag from MTRs in EuropeLimited impact from data roaming prices regulation 01 (CHART) Revenues outside Europe Net revenue exposure to MTR & roaming in Europe Tough macro scenario in EuropeCompetitive markets across footprintNew market dynamicsRegulatory action Environment Telefonica strengths Tiered data across our footprintIntegrated tariffs (voice+data+SMS) in Europe Cheaper handsets to boost smartphone penetration in Latam (CHART) Mobile data/MSR (CHART) Revenues from Services Beyond Connectivity Launch of Telefonica Digital to bolster our position in the digital world TELEFONICA Building on our strengths to successfully execute our growth strategy in 2012 11 Strong positions in an industry where local market shares are key#1/#2 in most markets Services Beyond Connectivity revenues include content, digital services, ICT solutions and vertical units revenues. |
| 01 Unique combination of Assets and Capabilities leading to a strong position in a changing Digital Environment To bolster revenue growth Fostering core business transformation"Giff Gaff", "O2 Connect" Driving Additional Growth from Digital Services & Very attractive Partner for emerging Digital Players TELEFONICA Telefonica Digital, our platform to monetise the opportunity in the digital world Telefonica Digital Combination of Fixed & Mobile Delivery Strength in Enterprise & Government segments 18 months ahead in Digital Product Development Breadth of Existing Customer Relationship points Leading exploitation of changing value chains "Verticals" coming to fruition; sharing best experiences from UK Social;Portal;Customer2Customer; enabling Cross-exploitation 307 m billing relations Multiaccess IP network Venture Capital 12 |
| 01 Single & Ubiquitous Customer Experience Telefonica Digital End-to-End Quality of Service Guaranteed5 Core. Core network + Computing&Storage~ 5M Kms terrestrial fiber >100K Servers worldwideFull IP, IMS: flexibility>2 Tbps Capacity Content Delivery Network Multi-access NetworkMBB UBB3G/LTE/WIFI LEVERAGE COOPER/ FIBER>100K mobile sites Rollout in 6 of 9 main markets High Capacity/Converged core: key to manage MBB traffic (~50% sites connected by fiber in FTTX markets)Maximising efficiencies through right balance of technology, spectrum availability and ownership Strong R&D franchise, >1K internal; ~10K using our APIsGrowing IP portfolio; ~100 Patents/year; 50% in actual P&S 307 m accesses61 m BB accesses Cloud Digital Services Large footprint to reach all customers Monetise services from 3rd parties Best position for new services ~€ 31 bn invested in networks & spectrum over the last 4 years TELEFONICA Best in class networks place us in the best position to maximise value across the whole value chain 13 |
| 01 TELEFONICA In 2012 we will further advance in our transformation journey, prioritising investments to drive forward growth 14 Strong commercial momentum to reinforce competitive position with focus on FBB & MBBLaunch of Telefonica Digital Foster Revenue Growth Improve Efficiency to balance increased customer investments T. Global Resources to fully capitalise scaleIn-country efficiencies Sustained CapEx effort to support broadband expansion Targeted investment in fiber/VDSL to increase speeds/coverage in FBBEnlarged coverage/capacity in MBB Selective LTE roll-outSpectrum acquisition 2012 GUIDANCE FINANCIAL GUIDANCE:Shareholder remuneration in 2012:Cash dividend € 1.30 per shareBuyback € 0.20 per shareNet financial debt / OIBDA < 2.35x (equivalent to previous (ND+Commitments) / OIBDA < 2.5x)OPERATING GUIDANCE (considering constant perimeter)Revenue growth >1% at current exchange ratesLower OIBDA margin decline than in 2011Similar CapEx/sales as in 2011 2011 base for guidance purposes: Net financial debt/OIBDA: 2.46x, Revenue (€ 62,837 m), OIBDA margin (36.1%), CapEx/Sales ex spectrum 14.2%. Assumes average FX for 2012 of €1: US$1.32; €1: BRL2.30; €1: £0.85. |
| (CHART) Sharebuyback (CHART) 01 Fully sustainable remunerationDividend not to be financed with debtThe highest DY among "top 100" companies by market capitalisation Total declared shareholder remuneration (€ per share) 2011 2012 2013 1.60 0.2 Max € 0.3 in kind Mix to be decided considering market conditions and investor preferences Share buyback Dividends 2.06 2011 FCF/share Remuneration cash outflow per year +10% y-o-y Graph assumes 50/50 execution of share buyback in FY 2012/2013. 1.50 1.50 0.20 TELEFONICA A very attractive shareholder remuneration fully covered by FCF generation 15 2011 2012 2013 2011 FCF Timing of cash out-flows depending on interim payments and path of SBB execution1 € in billons 0.5 0.5 0.4 Net sharebuyback |
| 02 2011 FINANCIAL RESULTS, CAPITAL STRUCTURE AND BUSINESS PRIORITIESMr. Angel Vila 16 |
| 02 Underlying performance: reported figures excluding exceptional items and spectrum acquisition. Jan-Dec2011Underlying Revenues UnderlyingChangey-o-y +3.5% € in millions OIBDA 62,837 Jan-Dec2010Underlying 60,737 -2.1% 22,697 23,188 Exceptional items1 OIBDA -2,487 +2,590Net Income -2,091 +1,184 Spectrum -1,296 -2,616 Jan-Dec2011Reported 62,837 20,210 ReportedChangey-o-y +3.5% -21.6% +4.8% -1.3% Underlying Change y-o-y ex-MTRs -2.1 p.p. -10.3 p.p. OIBDA Margin 36.1% 38.2% 32.2% -9.0% -38.9% OI 13,671 15,027 10,064 -16.6% -46.9% Net income 7,494 8,983 5,403 -16.4% -46.7% EPS 1.66 1.99 1.20 -8.0% -35.7% OpCF(OIBDA - CapEx ex-spectrum) 13,769 14,959 11,282 FY 11 FY 10 TELEFONICA 2011 Key financials 17 |
| 02 Organic: assumes constant average exchange rates as of FY 10 and excludes changes in the perimeter of consolidation and hyperinflation accounting in Venezuela. Further details included at the end of the document. TELEFONICA 2011 Organic evolution 18 Jan-Dec2011Organic Revenues OrganicChangey-o-y +0.1% € in millions OIBDA 63,104 Jan-Dec2010Organic 63,058 -5.1% 22,784 24,017 Jan-Dec2011Reported 62,837 20,210 +1.4% -4.3% Organic Change y-o-y ex-MTRs -2.0 p.p. OIBDA Margin 36.1% 38.1% 32.2% -9.6% Operating Income 12,713 14,068 10,064 -9.8% OpCF(OIBDA - CapEx ex-spectrum) 13,965 15,478 11,282 Revenue, OIBDA margin and CapEx in line with 2011 targets |
| 02 Underlying figures: reported excluding exceptional items and spectrum acquisitions. Contribution to consolidated figures before intercompany eliminations.Includes T. Espana and T. Europe. (CHART) (CHART) Revenue OIBDA1 52% (-4 p.p.) (y-o-y change) Latam Europe2 52% (-4 p.p.) Brazil: 23% (+4 p.p.) Brazil: 23%(+6 p.p) FY 11 Europe1 Others &Eliminations TEF T. Latam Revenue contribution to FY 11/10 growth +3.5% TELEFONICA Best portfolio diversification drives revenue growth 19 (CHART) |
| 02 Organic OIBDA margin Record smartphone sales in FY11 drive rise in commercial costs (+5.7% organic y-o-y)Higher coverage, capacity and speed in MBB & FBB lead to increased network expensesMTR cuts drive interconnection costs down (CHART) Limited y-o-y erosion Truly exploiting our unique scale, scope and global projects through TGR, strategic alliances and partnerships Savings in FY 11 from standardization and increased aggregation in global sourcingOngoing assets and services rationalization TELEFONICA Industry leading profitability 20 |
| FY 11 CapEx (ex-spectrum) (CHART) Organic y-o-y change -3.8% +6.6% +2.6% Improved network capabilities to support growth in mobile data and FBB through the expansion of capacity/coverage and speedIncreasing service quality CapEx1/Sales FY 11: 14.2% (+0.7 p.p. y-o-y)Reinforcing our network through spectrum acquisition T. Latam T. Espana T. Europe Others&Eliminations TEF T. Espana Brazil Costa Rica Colombia TEF FY 11 Spectrum € in millions 02 TELEFONICA Strong CapEx to deliver long-term growth 21 CapEx ex-spectrum |
| (CHART) Net Financial Debt evolution € in millions FCF Post-Minorities Net Fin. DebtDic-10 CommitmentsCancellation Net Fin. DebtDec-11 FX & Others Net share purchases Net FinancialInvestments Dividends Net Fin. Debtpre-discretionary & non-cash items(Dec-11) Net Fin. DebtDec-11 post closing events Post closing events: Colombia restructuring & sale of minority stakes Net Financial Debt/ OIBDA1 2.46x € 1.6bn Reported OIBDA ex- Redundancy Program in Spain.Net Financial Debt + Commitments at 2.63x OIBDA ex-Redundancy Program in Spain & ex-Sale of Fixed Assets. Post closing events 02 2.63x2 TELEFONICA Strong FCF allows for debt reduction 22 |
| Active management of WC: €1.35 Bn cash-generation 02 TELEFONICA FY 10 cash tax rate excluding impact of revaluation of stake in Vivo; FY 11 cash tax rate adjusted by Redundancy Plan in Spain. Active financial management to minimize cost and maximize cash preservation Dec-10 (CHART) (CHART) Effective Financial Cost Dec-11 Effective Interest Cost (ex-FX) Beating guidance5%-6% LatAm gross repatriation (€ Bn) Cash tax rate 1 (CHART) (CHART) FY 11 FY 10 23 Beating guidance23% |
| 02 Strong liquidity position, proactive refinancing (CHART) (CHART) € in billions Balanced access to markets Bonds Bank lending LatAm & Public entities Total 2011 financing€ 11.5 Bn Undrawn credit lines (Dic-10) Undrawn creditlines (Dic-11) 57%LT 76%LT Cash & increased available credit lines (CHART) Cash & cash equivalents excluding Venezuela € in billions 24 TELEFONICA (CHART) € in billions Extendable Preferred Shares €2.0 bn YTD Financing €2.4 bn Syndicated refinancing in advanced progress 2012 Net maturities Short-termDebt rolled over Sep-11 2012 LT net debt maturities Cash & cash equivalents ex-Venezuela (Dec-11) (CHART) 2014 2013 Manageable net maturities & strong refinancing effort YTD |
| 02 TELEFONICA 2012 outlook: Increase financial flexibility, maximise value 25 Colombia restructuringMinority stakes divestmentFurther portfolio optimisation Beat cash tax rate guidance leveraging integration synergies & tax allowancesOngoing improvements in WC 2012 maturities substantially refinanced Improve leverage ratio towards target: Net financial debt/OIBDA < 2.35x 1Rating preservation Fully sustainable levelsDividend not to be paid with debt SHAREHOLDER VALUE Equivalent to previous target of Net Debt + Commitments/OIBDA < 2.5x |
| (CHART) -1.4% Ex- Mexico Ex-Regional projects + Earthquake's collections Ex-Higher Commercial Activity Organic FY 11 Ex-Towers -2.8 p.p. +3.4 p.p. +3.0 p.p. +5.6 p.p. Organic growth: assumes average constant exchange rates as of FY 10 and excludes changes in the consolidation perimeter and hyperinflation accounting in Venezuela in both years. Profitability impacted by commercial costs and non-recurrent items Higher gross adds and different mix impacting OIBDA y-o-yDrag from Mexico, heavily hit by unexpected interconnection cutsNo contribution from regional projects in FY 11 (241 million in FY 10) Strong CAPEX efforts bolstering growth 86% of CapEx for business transformation 40% y-o-y organic growth in MexicoCapEx / revenues at 18.1% (16.6% excluding spectrum; +0.2 p.p. y-o-y) (CHART) +6.6% y-o-y organic growth 02 SAC y-o-y-10% T. LATAM FY 10 FY 11 FY 09 Increased investments for future growth in the region 27 |
| (CHART) Corporate restructuring completedIntegration synergies upgraded New services launched to extract value from our differential integrated assets:Integrated offer, VIVO Sempre & LD improvement, HSPA+ offer in SP, FW outside SP, PTT,1800 Mhz band, corporate, SME and consumer cross selling (Speedy +MBB)Focus on long-term growth drivers:FBB & MBB, contract segment in mobile Best spectrum Best 3G mobile network: coverage, quality and customer perceptionIncreased fiber coverage, speeds and quality 02 Integration and transformation Commercial focus CapEx effort 2.3/2.7 1.0/1.5 3.3/4.2 2.7/3.1 ^1.7 4.4/4.8 NPV. € Bn Prepaid Contract & MBB + FBB (CHART) +318% 21.0% 22.5% Customers with internet packages MBB 82% population covered by 3G, well above competitors6,000 km of fiber in the FTTH solution + T. LATAM Brazil: 2011 a year of progress on multiple fronts Contract/total base (CHART) 28 |
| (CHART) (CHART) 02 Top line growth acceleration Excludes the disconnection of 1,034k inactive prepay mobile accesses.Source: Anatel. Data Market Share includes M2M and dongles. Revenue (y-o-y organic) MSR acceleration (+15.8% y-o-y in Q4) driven by data (+42%) and growing outgoing voice revenues (+8%)Traditional fixed revenues impacted by substitution and price competition (-3.9% y-o-y in Q4)Sound growth of FBB & TV revenues (+16% y-o-y)Still limited contribution from recent product launches Best in class margin amid increased activity and strong competitionSynergies crystallization, meeting targets, visible below OINet Income = 2.6x y-o-y in reported terms 29.5% Total Contract 36.6% Data 43.4% Mobile market share (Dec-11)2 +1.3p.p. -0.2p.p. +3.3p.p. Recordnet adds Strong margin and bottom line performance Mobile net adds x2 vs. FY 10Market share gains in high value segments, leveraging quality, coverage and product innovationAccelerating momentum in prepaid exploiting expanded capacity in Northeast & North regions Mobile net adds (millions)1 Q3 Q1 Q2 Q4 5.5 3.0 2.0 1.8 2.2 2.0 1.7 2.6 FY 11 FY 10 Q4 11 y-o-y +5.2% FY11organicy-o-y Ex-Towers Ex-Higher Commercial Activity T. LATAM OIBDA drivers (y-o-y) Brazil: Strengthened leadership and solid profitability Q3 11 (CHART) 29 |
| Growth rates in financials are given in local currency. Revenue FY 11y-o-y organic Contribution to TEF FY Revenue 02 T. LATAM South Region: further advances to transform the businesses 30 5.1% 3.7% Argentina Chile +14.5% +4.8% Solid double digit top lineHealthy OIBDA growth (+11.1% y-o-y in FY 11)Strong commercial activity, focused on growth levers: Contract is 37% of mobile accesses MBB base up 2.5x y-o-y Mobile data revenue is 39% of MSR, in line with European countriesFBB accesses up 11% y-o-y(FBB + IT + data) revenues = 44% of fixed revenues (+3 p.p. y-o-y) OIBDA margin 45% leveraged on fully integrated approachConsolidated leadership in the marketRobust accesses growth (+6% y-o-y), Contract is 29% of mobile accesses MBB base 1.9x y-o-y in FY 11Mobile data revenue 19% of MSRFBB accesses +7% y-o-y, Pay TV +15% (FBB + Pay TV+ IT + data) revenues = 48% of fixed revenues (+5 p.p. y-o-y) Peru Colombia 3.2% +6.1% 2.5% +4.5% Top line growth acceleration thought the year (+7.0% in Q4 y-o-y)Strong leadership across businesses Record commercial activity:Mobile accesses rose 12% y-o-y (contract +21%)FBB accesses +28% y-o-y, Pay TV +16%Mobile data revenue +32% y-o-y(FBB + Pay TV + IT + data) revenues = 55% of fixed revenues (+5 p.p. y-o-y) Consistent double digit y-o-y accesses growth:Mobile contract (+19%), FBB (+12%), Pay TV (+24%)Good revenue performance with positive mobile revenue evolution and fixed business stabilization Combined OpCF FY 11 € 1.9 bn Ecuador Fast growth, acceleration in Q4Revenue +12.8% y-o-y in 4Q11MSR +14.9% y-o-y in Q4 11, +11.0% in FY 11 0.6% +8.4% |
| Growth rates in financials are given in local currency. In Venezuela, excludes also hyperinflation accounting in both years. Revenue FY 11y-o-y organic Contribution to TEF FY Revenue Venezuela 4.3% +11.2% Commercial activity improvement in Q4; 27% MBB penetrationAcceleration in top line growth (+12.3% organic y-o-y in Q4) boosted by outgoing revenuesMobile data revenue is 36% of MSR, in line with European countries, leveraged on high quality customer baseSound OIBDA margin (43.8%) despite higher commercial activity 02 T. LATAM North Region accelerating growth 31 Mexico 2.5% -12.3% Strong drag from MTR cut in FY 11 OIBDA margin impacted by commercial activity, 3G network rollout & MTR cutsImproved outgoing revenue growth with outgoing ARPU returning to positive growth (+0.3% y-o-y in Q4)MBB tripling 2010 figure Commercial strategy focused on quality growth OutgoingRevenue (y-o-y) Q3 11 Q4 10 Q1 11 Q2 11 -4.0% Q4 11 +2.2% +4.7% Central America 0.9% +1.3% Successful launching of Movistar Costa Rica with 116 thousand accesses in its first two months of commercial activityConsolidation of enhanced revenue growth trend (+2.6% organic y-o-y in Q4)Mobile accesses +16% organic y-o-y Combined OpCF Fy 11 € 0.9 bn |
| 02 2012 outlook: Ramp-up in growth leveraging best asset portfolio in Latin America Growth acceleration in 2012 as basis are firmly set Consolidate mobile leadership in all segmentsSustain FBB position in SPCapture fixed voice & FBB value for- money opportunity outside SP Sustain strong operating momentum leveraging a single brand Exploit operational & financial/fiscal synergies to free resources for valuable growth driversFully on track with targets Maximize integration benefits Focus on fixed network quality & FBBConsolidate the lead of our mobile networkHSPA+ and 4G spectrum offer Strengthening competitive advantages in quality & coverage Further growth leveraging diversification in the region T. LATAM Foster FBB & MBB penetration (bundles/tiered pricing)Commercial strategies tailored to local conditionsIntegration synergiesSustained CapEx (coverage, speeds, service quality) Defend revenue market leadership Capture MBB opportunity and growth potential in FBB with focus on VAS (i.e: OTT-Video) Fully capture FBB & MBB opportunity and exploit value of TV leveraging premium content Reinforce commercial strategy to consolidate accesses and revenue growth Continue to deliver outstanding operational performance Turnaround financial performance & enhance quality of the base leveraging new commercial and pricing strategy 32 |
| Strong mobile data revenues Ramp-up in commercial activity Leverage on new commercial proposition results on commercial turnaroundFocus on value customers Better revenue mix, with non-SMS data revenues representing 54% of total dataNon-SMS data revenues up 30% y-o-y in FY 11 1. Last published data available from competitor, based on attached rates. 02 T. EUROPE T. Europe: Improving commercial momentum, leading MBB adoption in our markets MBB lead Increased smartphone penetration underpins base expansionHigher quality base sets basis for future growth T. Europe FY 11 net adds (thousands) (CHART) Mobile Contract Retail FBB (CHART) Data revenues TEF Main Competitor1 +9 p.p. +6 p.p. +4 p.p. y-o-y growth 33 Data penetration (CHART) 26% 22% +11 p.p. (CHART) 38% 33% +9 p.p. Smartphone penetration (Dec-11) Smartphone MBB TEF Main Competitor1 (CHART) y-o-y growth |
| 02 Strong data ARPU as customers move towards higher value tariffsVoice ARPU driven by further usage optimization in Q4 -weaker economy-, MTR cut (-10% in Oct.) and new tariffs T. EUROPE Spain: New offerings already paying-off 34 Mobile net adds ('000) (CHART) Total data Non SMS data Total ARPU FBB net adds ('000) Connectivity ARPU (y-o-y change) (CHART) Q1 Q2 Q3 Q4 Turnaround of FBB net adds, ARPU trends continue improving Record mobile net adds since Q4, very healthy data ARPU Back to positive net adds in Q4Inflection point in FBB churn, down y-o-y in Q4 11Preference for high-end offering; price take up levels above previous promotions:2/3 of gross adds and migrations in €24.9 offer Improvement across segments driven by new contract and prepay service portfolioSignificant improvement in contract, already 70% of total base (+2 p.p. y-o-y)Best ever quarterly MBB net adds (400K; +33% y-o-y) ARPU (y-o-y change) Q3 Q2 Q1 Q4 Traditional fixed accesses improving trends (CHART) (CHART) (CHART) +155 Q3 Q2 Q1 Q4 (CHART) (CHART) (CHART) Contract Total |
| Benefits from new collective bargaining, fast execution of Redundancy Program Wage increase below CPI, leveraging increased flexibility36% of potential headcount reduction already executed, beating targets^^ 1,980 employees to join the plan in FY 12E~ € 200 m savings in FY 12E Total plan Signed-upas of Dec-11 6,500 2,359 1,925 left the company at FY 11434 have left in Jan-12 Headcount reduction Targeted investment in growth levers Ramp-up in fiber roll-out in Q4 adapted to market conditions and regulatory frameworkEnhanced coverage & capacity in MBB Strong investments to ensure the best spectrum in the market FY10 FY11 2,072 2,914 FY 2011 842 CapEx (€ in millons) 2,021 10.8% 12.0% CapEx/sales Spectrum 02 Spain: Significant progress in strategic areas in 2011 35 All data in comparable terms: y-o-y changes. T. EUROPE Q4 financials hit by a weaker economy & stronger commercial activity Improved trend in fixed revenues (-5.4% in Q4; -6.2% in Q3) due to access, IT & DataMSR deterioration (-11.2% in Q4 ex-MTR and one-offs) impacted by a lower voice ARPUStrong data revenue, up 10.9% in FY 11Lower handset sales (-14.5% in Q4 11)Limited cost savings from workforce reduction in 2011 OIBDA (y-o-y) Revenue (y-o-y) (CHART) Q4 11 FY 11 -14.4% -11.6% Q4 11 FY 11 (CHART) -8.5% -6.8% |
| New commercial offering Improved net addsLower market shares erosion Further actions to enhance customer experience Lower churn ? Commercial costs ? Revenue Improved customer evolution y-o-y Sept - Nov 11 Dec- 11 FY 2012E Focus on customer satisfaction leveraging new commercial propositions and enhanced customer experienceNew price points will allow us to increase effectiveness of commercial costsContinue to execute Redundancy Program according with plans: savings from the beginning of the yearSustained investment in MBB and fiber ACTIONS 02 T. EUROPE Spain: A clear roadmap to turn around commercial momentum and improve financial performance in 2012 36 |
| (CHART) ... impacting commercial costs (CHART) Contract upgrades (y-o-y) Contract net adds ('000) 175 151 25 91 -24% -12% -14% +35% Q4 Q3 Q2 Q1 (CHART) OIBDA margin 24.2% 27.3% Q4 Q3 Q2 Q1 27.9% 26.7% Increased commercial momentum in H2... Pressure in H2 OIBDA driven by:Weaker revenues ex MTRs: Q4 MSR -4.8% y-o-y; -4.1 p.p. q-o-qIncreased commercial activity Commercial refocus from August to face a challenging economy and increased competition Best quarterly contract net adds in Q4 11Stable contract churn at 1.2% in Q4 driven by targeted investments in retention Strong increase in upgrades in Q4 Success of Tesco Mobile1 as the UK market polarizes between volume vs. value 02 1. Not included in T. UK mobile customer base T. EUROPE UK: Stronger finish to the year in commercial terms 37 |
| (CHART) (CHART) Increased smartphone penetration (+9 p.p. y-o-y)>80% consumer contract data base on tiered plans>80% choosing higher-priced plansSmartphone contract shipments over 95% of total in Q4Robust growth in non-SMS data revenues (+33.1% y-o-y in FY 11) (CHART) FY 10 Customer base OOB optimisation & lower tariffs MTR cuts FY11 MSR (y-o-y) -3.7% Mobile data +4.0 p.p. +2.6 p.p. -7.1 p.p. -3.3 p.p. Adapting price points to macro environment and intense competitionIntegrated tariffs revenues are 74.5% of contract MSR in Q4 (+2.7 p.p. y-o-y)Drag from MTR cuts Top line pressure Sustained leadership in smartphone adoption Q4 Q3 Q2 Q1 Data revs/MSR 02 Smartphone penetration T. EUROPE UK: Robust mobile data offset by adverse market conditions 38 |
| (CHART) Market leading revenue growth Leader in smartphone adoption: 90% of sales in Q4MBB penetration at 26%, 6 p.p. y-o-y Mobile data revenue at 41% of MSR (+8 p.p. y-o-y)Sustained MSR growth in Q4 (+7.1% y-o- y ex-MTRs). Sequential trend impacted by very strong performance prior period Full benefits from business restructuring & ongoing efficiencies in Q4 11 (26.1% OIBDA margin) Strongtrading momentum maintained O2 Blue tariff re-launched in H2 11Contract churn improvementContinued success in partner & business channels Profitability (y-o-y in organic terms) FY 11 Contract net adds ('000) (CHART) Q4 252 Further margin expansion, strong OpCF (CHART) MSR Total Mobile 7.1% 11.4% Non-SMS data revenues Total Mobile Data 23.5% 48.9% +4.9% FY 11OIBDA 24.2%(+0.8 p.p.) FY 11OpCF OIBDA margin 252 206 271 1.9% 1.8% Churn Q3 Q2 Q1 02 T. EUROPE Mobile revenue growth FY 11 (y-o-y, ex MTRs) Organic terms excludes spectrum acquisition in 2010 (€1,379 m) and restructuring costs (€ 202 m). (CHART) FY 10OpCF +39.2% Germany: a story of success in a profitable market 39 |
| 02 High-value customer attraction & retention Lead the digital services adoptionFocus on innovation and execution of new and existing revenue streams: O2 Wallet, Priority Moments, Media Strengthened customer satisfaction leadershipFurther network investments to maintain our differentiated performance1 Recover momentum towards stabilisation of revenue share Segmented approach to reduce churnMaintain highest exposure to mobile data in the market Significant customer investments, better revenue dynamics We aim to continue outperforming in a profitable market Sustainable benefits from network collaboration with DTOngoing LTE roll-out in cities with a profitable approachLTE smartphone launch Push data penetration, building high value smartphone baseNew tariffs launched for mobile & FBBOngoing revenue improvement from stable MTR framework & increased scale Most satisfied2 customer base in the last 5 yearsMultichannel approachExploiting customer base through a converged brand strategy Continued focus on customer experience Capturing new business opportunities Sustaining market momentum Focus on customer relationship Strengthening network quality O2 network: the highest 3G data download speeds, highest levels of responsiveness & lowest levels of latency External survey by Ofcom, May 2011.Kundenmonitor Deutschland 2011. T. EUROPE 2012 outlook: Strengthening positions in two key markets 40 |
| T. EUROPE Czech R.: Outstanding OpCF, sustained improving trends 41 (CHART) Efficiencies drive healthy OIBDA margin 2nd quarter of top-line sequential improvement Better mobile revenues driven by stabilisation of consumer spendFixed revenue improved due to ICTProven approach shown in financials Savings from restructuring programsPositive and growing OIBDA in SlovakiaTop quality cash generation; OpCF of € 702 m in 2011 Robust commercial momentum Contract mix 62% driven by MBB (16% penetration, up 4 p.p. y-o-y)Solid prepay net adds boosted by Xmas campaign Enhanced churn in fixed and mobileDSL helps to protect existing base, managing fixed BB ARPU & enhance churn Growth rates in financials are given in constant currency terms. FBB base ('000) Mobile net adds ('000) Revenue (y-o-y change) (CHART) +20% ~4x 59 103 FY 11 Q4 11 (CHART) Czech Republic Slovakia -5.4% -6.4% -4.4% -6.9% 34.7% 40.9% MSR (ex-MTRs) Fixed Revs Q4 11/Q4 10 (CHART) 840 +11% y-o-y growth y-o-y contract net adds Dec-11 02 FY 11/FY 10 OIBDA (y-o-y change) (CHART) FY 11 -4.9% -6.1% 9M 11 OIBDA margin (CHART) 43.7% 43.1% |
| 02 TELEFONICA DIGITAL Increase savings in procurement:Global handset portfolio: from 234 handsets to < 100. 80% of global portfolio negotiated globallySimplification &global standardization of specifications for increased aggregationIncrease efficiency in Network & IT: Consolidation towards global NOCs1 and ITSale of non-strategic towers and network sharing Double digit growth in MNC revenues in FY 12E Launch a new range of digital services in high potential marketplaces:Financial services: Mastercard JV in Latam; mobile wallet in EuropeM2M: OnStar agreement , largest ever deal for TEF in General Motors markets outside North America and ChinaVideo & Digital Home: multiscreen functionalities & Videoclub services in Pay TV offersIncrease competitiveness and protect our core business: Coordinate new MBB offers in more data- centric environmentsBusiness intelligence & customer insightStrengthen relationships with digital partners TELEFONICA GLOBAL RESOURCES >€1 Bn benefits in FY 12E TELEFONICA Network operating centres. Making the most from our new global units 42 |
| Our business has the right fundamentals for sustained profitable growth We have recorded a promising commercial momentum heading to 2012In 2012 we are prioritising investments to drive forward growthWe are determined to increase financial flexibilityWe are fully committed to very attractive shareholder remuneration targets 02 TELEFONICA Closing remarks 43 |
| Organic growth: In financial terms, it assumes constant average exchange rates as of January-December 2010, and excludes changes in the perimeter of consolidation and hyperinflation accounting in Venezuela. Therefore, in January-December 2010 the consolidation of Vivo, HanseNet and Tuenti are included whereas the revaluation of our pre-existing stake in VIVO accounted for in Q3 10 and the results of Manx Telecom are excluded from organic growth calculation. In addition, excluded from OIBDA and OI in 2010 is the impact of the capital gain from the sale of Manx Telecom booked in the second quarter of 2010, and the one-off restructuring expenses, most of which were associated with workforce adjustment plans and firm commitments relating to the Telefonica Foundation's social activities, registered in the second half of 2010. In OIBDA terms, in January-December 2011 the positive impact from the partial reduction of our economic exposure to Portugal Telecom is excluded, as well the workforce provision related to the Redundancy Program approved in Spain. Results from the Costa Rica operation are excluded from the organic growth calculation. Telefonica's CapEx excludes the Real Estate Efficiency Programme at T. Espana, the real estate commitments associated with Telefonica's new headquarters in Barcelona and investments in spectrum. Net additions exclude accesses disconnections made in the second quarter of 2010 and in the third and fourth quarters of 2011.2011 financial results and accesses include from the second quarter of the year and retroactively from January 1st, 2011, the full consolidation of TVA, company that was already part of Telefonica's perimeter since the fourth quarter of 2007. In addition, 2011 results include from September (retroactive effect August 1st) the global consolidation of Acens Technologies. Underlying growth: All figures in million euros, net of taxes and minorities. In 2011: Workforce Reduction Plan in Spain (-1,870), PT capital gain (+184), reduction in the value of TI investment and operating synergies achieved (-481), deferred tax liability related with PPA on Vivo's acquisition (+952), PPAs (-790) and others (-86). In 2010: VIVO's capital gain (+3,476), non recurrent restructuring expenses (-862), tax asset reassessment (-450), PPAs (-847) and others (-133). |
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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: February 24, 2012 |
By: |
/s/ Miguel Escrig Meliá | ||||
| Name: Miguel Escrig Meliá | ||||||
| Title: Chief Financial Officer | ||||||