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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 November, 2015
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 87 00
(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 ¨ No x
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
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Telefónica, S.A.
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Telefónica Group: Presentation on quarterly results January-September 2015 |
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Results
January—September 2015
Telefónica, S.A. Investor Relations
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Disclaimer
This document contains statements that constitute forward looking statements about Telefónica Group (going forward, “the Company” or Telefónica) 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 Telefónica 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, Telefónica 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 Telefónica’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 Telefónica.
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.
Investor Relations
Telefónica, S.A. 1
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Highlights; Q3 fueling our organic growth profile
1 3rd consecutive quarter in 2015 of improving organic performance
Revenue accelerated to +4.8%; Spain returned to positive growth (+0.2% y-o-y), first time since Q3 08
OIBDA growth accelerated to +4.8% y-o-y (+1.4 p.p. q-o-q); extracting value from synergies in Germany
Maintaining healthy profitability: OIBDA margin at 31.0% (flat y-o-y)
OpCF growth in Q3 (+6.6% y-o-y)
2 Differential infrastructure leading to solid and targeted high-value commercial activity
Consistent investments in UBB drive CapEx up 8.8% vs. 9M 14 (organic)
Delivering product innovation & quality: 13.4m FTTH premises passed in Spain; 16.6m FTTx in Brasil; LTE coverage: 71% in Europe; 40% in LatAm
Increasing customer lifetime value: Ramping-up Avg Rev/Access (+2.8% y-o-y organic); reducing churn (-0.7.p.p. y-o-y)
3 Strong earnings and FCF despite Q3 FX headwinds
9M EPS 0.91€ (+63.5% y-o-y); strong execution on non-operating results
Sequential FCF improvement to €1.2Bn in 9M (€2.5Bn ex-spectrum). Q3 FCF: €1.4Bn
Net debt: €49.7Bn Sep-15; leverage ratio at 2.32x (post-O2 UK sale), within <2.35x target
4 2015 results solid across the year and completely on track with upgraded guidance in Q2
DPS 2015 & 2016 confirmed
Investor Relations
Telefónica, S.A.
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Key financials
9M 15 Q3 15
Reported Organic Reported Organic
€ in millions Reported Reported
y-o-y y-o-y y-o-y y-o-y
Revenues 35,337 11.9% 4.2% 11,919 10.8% 4.8%
OIBDA 11,013 5.7% 3.5% 3,693 2.9% 4.8%
OIBDA Margin 31.2%(1.8 p.p.)(0.2 p.p.) 31.0%(2.4 p.p.)(0.0 p.p.)
OpCF (ex-spectrum) 5,499(3.4%)(1.3%) 1,684(3.0%) 6.6%
Net Income 4,577 69.6% 884(1.9%)
EPS 0.91 63.5% 0.17(9.6%)
FCF 1,206(58.8%) 1,400 3.6%
FCF pre-spectrum 2,511(19.1%) 1,397 1.8%
Net Financial Debt 49,691 17.7%
ND/OIBDA (post-O2 UK sale) 2.32x
NEGATIVE FX EFFECT IN OIBDA OFFSET AT FCF LEVEL (THROUGH LOWER CAPEX, INTEREST, TAX AND MINORITIES
Investor Relations
Telefónica, S.A.
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Full year guidance confirmed; on track to meet targets
2015 Guidance Guidance 2015E 9M 15
(Constant FX 2014; ex-UK; ex-VZ; incl. 12M E-Plus, 8M GVT, 8M DTS)
Revenues Growth >9.5% 13.8%
Limited margin erosion
OIBDA margin around 1.2 p.p.(1.3 p.p)
(to allow for commercial
flexibility if needed)
CapEx/Sales Around 17% 15.6%
Net Debt/OIBDA (adjusted for O2 UK sale) <2.35x 2.32x
€0.75/sh. First Tranche:
Dividend €0.35/sh.
€0.35/sh. voluntary
scrip Q4 15 Voluntary scrip
€0.40/sh. Cash Q2 16 dividend Nov-15
Share buyback: % share capital cancelled (treasury) 1.5% Executed in
Jun-15
Investor Relations
Telefónica, S.A. 4
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Strong FCF in Q3, to accelerate further in Q4
FCF 2015 (€ in millions)
€+1,957m
9M FCF
1,400 1,206 ex-spectrum
€2,511m
363
(557)
Q1 Q2 Q3 9M
€2Bn FCF improvement q-o-q
Lower spectrum payments (-€1.2bn)
Reduced interest payments (+€60m)
Savings on tax payments (+€38m)
Improved WC generation (+€98m)
Less minority drag (+€363m)
FCFS 2015 (€/share)
9M FCFS
ex-spectrum
0.08 0.29 0.25 €0.52
(0.12)
Q1 Q2 Q3 9M
EPS 2015 (€/share)
0.91 9M EPS
0.38 0.37 63.5% y-o-y
0.17
Q1 Q2 Q3 9M
FCF TO IMPROVE IN Q4 AS SEASONAL FACTORS IMPACT POSITIVELY
Investor Relations
Telefónica, S.A.
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Organic growth and perimeter outweighing Q3 FX impact
Q3 Revenue
€ in millions
1,449 582 11,919
10,759
(871)
Q3 14 Perimeter Organic FX Q3 15
+10.8%
Contribution +13.5 p.p. +5.4 p.p.(8.1 p.p.)
9M Revenue
€ in millions
3,127 35,337
31,577 1,457
(824)
9M 14 Perimeter Organic FX 9M 15
+11.9%
Contribution +9.9 p.p. +4.6 p.p.(2.6 p.p.)
Q3 OIBDA
€ in millions
3,590 259 182 3,693
(281)(57)
Q3 14 Perimeter Organic FX Towers & Q3 15
Restruct.
+2.9%
Contribution +7.2 p.p. +5.1 p.p.(7.8 p.p.)(1.6 p.p.)
9M OIBDA
€ in millions
592 384 11,013
10,415
(292)(88)
9M 14 Perimeter Organic FX Towers & 9M 15
Restruct.
+5.7%
Contribution +5.7 p.p. +3.7 p.p.(2.8 p.p.)(0.8 p.p.)
Investor Relations Telefónica, S.A.
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Revenue & OIBDA continue to accelerate
Revenue 2015(organic growth y-o-y)
+0.4 p.p.
4.8%
4.2% 4.4%
Spain: +1.3 p.p. q-o-q
3.3% Hispam: +2.2 p.p. q-o-q
9M Q1 Q2 Q3
Group organic revenue growth ramping-up in Q3
Proving strong progress in Spain to positive y-o-y
Hispam ramping-up to +12.6% y-o-y
Continued solid mid-single digit y-o-y in Brazil
Data increase remains robust: +19.3% y-o-y
Higher Digital Services sales
SoC revenues 11% of total; +1.9 p.p. y-o-y
OIBDA 2015 (organic growth y-o-y)
+1.4 p.p.
4.8%
3.5%
3.3%
Germany: +15.3 p.p. q-o-q
2.4% Brazil: +1.6 p.p. q-o-q
9M Q1 Q2 Q3
Margin
(reported) 31.2% 31.3% 31.2% 31.0%
Margin y-o-y
(organic)(0.2 p.p.)(0.3 p.p.)(0.3 p.p.) 0.0 p.p.
Right balance between growth and profitability
OIBDA improved performance in Q3 supported by Germany and Brazil
Successful execution of initial synergies in Germany; Brazil to follow
Strengthening efficiency over the year
Flattish margin at 31% (Range Q3: Spain 45%—Germany 20%)
OpEx +4.8% (vs. Q3 14 organically)
Investment in value customers to capture market growth… … despite cost and simplification initiatives
Investor Relations Telefónica, S.A.
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Attracting more customers and with higher value
Accesses growth (Sep. organic y-o-y; except LTE)
4.3x
36% 28%
18%
6%
LTE FTTx Smartphones Pay TV Mobile
Contract
Accesses
base (m) 23.6 5.8 108.8 8.2 88.5
Growing customer value
327m accesses; steady increase of 1% y-o-y organic
Reported +12% (GVT+ DTS incorporation since May)
Rapid LTE adoption drives robust smartphone growth in Q3
Added 5m LTE customers
Contract mix improved to 35% (+2 p.p. y-o-y)
385k FTTx connected accesses added to the base in Q3 (+28% q-o-q)
Well positioned for Pay TV opportunities
Average Revenue / Access (organic y-o-y)
2.8%
1.7%
1.5%
0.8%
9M 15 Q1 Q2 Q3
Enhanced customer loyalty:
Lower Q3 churn y-o-y across all services
SUBSCRIBER VALUE DRIVES REVENUE PERFORMANCE
Investor Relations Telefónica, S.A.
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Data monetisation contributing to revenue acceleration
Smartphone penetration
Contract Prepay
65% 69%
61%
31% 35%
28%
Mar-15 Jun-15 Sep-15
Blended 38% 41% 46%
LTE 6% 8% 10%
LTE strong take-up
Developing initiatives to further monetise data usage & upsell
Evolving data propositions towards recurrent integrated packages in Hispam & Brazil Roaming opportunity: new commercial proposals
Boosting data traffic growth
LTE usage 63% higher vs. 3G
Q3 avg. usage per smartphone +21% y-o-y (563 MB/month) LTE traffic (5x y-o-y) represents 17% of mobile data traffic
Further data potential in Hispam
Prepay smartphone penetration at 27% vs. 47% in T. Brazil
Mobile data revenue (y-o-y organic)
Data revs. Non-SMS data revs.
26.6% 26.8%
19.1% 19.3%
17.3% Non-SMS/Mobile
Data: 82% in Q3
11.9%(+5 p.p. y-o-y)
Q1 15 Q2 15 Q3 15
Mobile Data/MSR: 44% in Q3 (+5 p.p. y-oy)
Foundations to monetise data opportunity
Data beyond allowance
Adds ~1 p.p. to Q3 organic revenue growth
“Bundle breakage”: 30% clients; of which >44% buy extra data
Clear ARPU benefits
Double digit LTE ARPU uplift
ARPU strongly pushed by increasing data adoption in Hispam
& Brazil
Significant ARPU uplift on prepay once they become data users
Investor Relations Telefónica, S.A.
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Digital services: developing a platform for growth
Video:
Technological
superiority & ever-
improving portfolio
Digital Services Revenue
€ in millions
Organic y-o-y
Video Revenue
€ in millions
541 652
Q2 15 Q3 15
organic
+34.8% +25.6% y-o-y
Pay TV Accesses (m)
Satellite IPTV/Cable
8.0 8.2
3.2 3.5
4.8 4.7
Jun-15 Sep-15
Exclusive content & superior technology driving accesses growth
Total accesses in Spain (DTS + T. España): 3.6m (+18% y-o-y organic) In Brazil, capturing whole market growth in 9M
Spain: exclusive ‘Star Wars’ content, basketball (“Liga ACB”)
Colombia: launched ‘Win Sports’ channel (football league)Integration of DTS & GVT delivering best available technology
Growing adoption of Pay TV services driving ARPU upside
1,069
938
Q2 15 Q3 15
+27.0% +24.6%
Cloud: partnering to widen global footprint M2M: leading in an ever-growing market €99m; +22.7% (Q3 y-o-y organic) €46m; +41.5% (Q3 y-o-y organic)
VDC – launches in Peru, Argentina, Colombia & Chile ‘Leader’ in global M2M services – Gartner
Partnerships – CU & Equinix (data centres); New energy efficiency projects in Spain
Microsoft (SMEs packages)
Security: innovating the industry LTE & smartphones growth driving the data
€72m; +29.4% (Q3 y-o-y organic) usage explosion
FiLIP launched – the smartwatch for children 86% of Q3 purchased devices were smartphones Gesdatos – now part of TEF’s security portfolio (+14 p.p. y-o-y), o/w 59% were LTE (+29 p.p. y-o-y)
Other Digital Services:
Pioneering partnerships & solid growth in key areas
Investor Relations Telefónica, S.A.
10
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TGR: Towards all-IP network; Further IT simplification
More technological
Co. (UBB developments)
Best Quality Networks Network Innovation
Premises passed with fiber Competitive differentiation
HGU to substitute home devices
FTTH FTTX
13.4m 16.6m Launched R&D lab for 5G (Successful Multivendor Wireless transport SDN Trial)
Tested automatised VNFs deployment
LTE Coverage (%PoP)
71% 40%
LTE sites 3G/4G UBB
>30K 96%
All-IP Best-in-class operations
Deploying All-IP Architecture for Core and Addressing demand efficiently
Backhaul in Spain OSS transformation: deploying E2E diagnosis and
Further simplification integrated field force management
Higher capacity (for video traffic surge) Submarine cable network: increasing quality and capacity in Europe and LatAm
Executing IT strategy: Better time to market & user experience
Supporting Business Transformation Simplification (y-o-y organic)
Full Stack : Applications -313
Projects progressing in-line with 2015 targets: under -9% deployment in 15 countries Physical Servers Migrated prepay customers in Mexico
Real Time Decision (RTD) launched in Argentina Chile Data Centers -4
&
Brazil Online program: New store (mobile) rollout Virtualisation +7 p.p. completed
Investor Relations Telefónica, S.A.
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Spain: Strong trading and increasing value
25% Group Rev.
Net adds Q3 14 Q2 15 Q3 15
Traditional Fixed(120)(195)(62)
Mobile Contract
(ex M2M) 20(48) 70
Pay TV 370 90 275
FBB 11(67) 45
FTTH 208 230
160
Capturing customers
Strong recovery in quarterly gross adds
Solid churn despite removal of retention clauses
Positive portability in contract mobile
Best FBB & fixed telephony net adds since
“Fusion” launch in Q4 12
“Fusión” base: +14% y-o-y to 4m
FTTH FBB base (%) TV Add-ons/Pay TV base (%) (1)
Fiber Fiber UBB
33% 36% 29% 28%
18% 23% 21% 15%
Sep-14 Jun-15 Sep-15 Jun-15 Sep-15
“Fusión+” gross adds “Fusión” ARPU (Euros)
New customers Adding new services +8.4%
89%
78% +5.1% 75.5 51%
71.8 30% 69.7
Q3 14 Q3 15 Q3 14 Q2 15 Q3 15
Upselling strategy is delivering value growth
“Fusión” fostering high-value
UBB: 28% of base; 38% of Q3 gross adds IPTV: 58% of base; 61% of Q3 gross adds TV add-ons: 450 K joining TV promotion in Q3 o 20% of the base (12% as of June)
Quad-play churn 25% below 3-Play
Fusión churn reduced (1.1%; -0.3 p.p. q-o-q)
Undisputed leadership in network
13.4 m premises passed with FTTH (+4.6 m y-o-y) LTE coverage: ~66% pop. after 800 MHz release
Investor Relations Telefónica, S.A.
(1) Do not include 1.1 m of DTS customers (satellite TV)
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Spain: Return to revenue growth
25% Group Rev.
Revenue (y-o-y)
Total Revenue
Ex-handset sales
+1.3 p.p
0.2%
(0.9%) 0.1%
(1.1%)
(6.6%)
(8.2%)
Q3 14 Q2 15 Q3 15
Q Revenue (m) €2,993 €2,966 €2,998
Value-oriented strategy driving a new revenue growth cycle
First quarterly revenue y-o-y growth since Q3 08
+1.0 p.p. q-o-q improvement in service revenue y-o-y in Q3
Quality accesses growing & ARPU uplift
Successful upselling and new revenue stream
Full impact in Q3 from tariff update
Improved customer mix (UBB; Premium TV; LTE)
Wholesale revenues: Growing Pay TV & lower MVNO due to consolidation Focus on IT services for corporates Better market dynamics
OIBDA (organic y-o-y)
Q3 14 Q2 15 Q3 15
(1.3%)(2.9%)
(2.7%)(5.2%) Ex-real estate sale
(14.4%)
OIBDA margin 46.0% 44.4% 44.5%
Margin
(organic y-o-y)(4.2 p.p.)(0.1 p.p.)(1.4 p.p.)
Solid OIBDA margin, slight erosion linked to new product launch
Q3 OpEx (+3.8% y-o-y) mainly on increased content cost
Increased y-o-y margin erosion in Q3 due to
Higher content costs; coupled with price promotion Increased equipment and network costs
Real estate capital gain (€32m in Q3; €19m in Q2)
Investor Relations Telefónica, S.A.
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Germany: Maintaining market momentum
16% Group Rev.
Net adds 2015 (‘000)
Contract Prepay
672
438
503
237
54
141 201 169
(87)
Q1 Q2 Q3
LTE
penetration 12% 14% 16%
Smartphone
penetration 50% 51% 53%
Balancing value with growth; Mobile customers +3% y-o-y organic
Q3 total net adds up 16% y-o-y
Prepay segment leveraged on ethnic brands 45% of Q3 contract gross adds from partners
Improved customer loyalty (contract churn: -0.1 p.p. y-o-y to 1.7%) Enhanced O2 Premium brand; Revamped Blau portfolio
Continued mobile data monetisation
LTE coverage: 73% at Sep-15; 75% target by YE 37% new O2 Blue All-in clients take >1 Gb tariff
54% automatic data extensions (opted-in O2 Blue All-in)
Steady VDSL growth (Q3 net adds at 64k vs. 58k in Q2)
Revenue 2015 (organic y-o-y)
1.3%
(2.0 p.p.)(0.4 p.p.)
(1.1%)
Q2 Hardware MSR Q3
Total revenues +0.9% vs. 9M 14 organic
Q3 handset sales growth decelerated to 2.7% (Q2: +18.7% y-o-y)
Focus on retention & customer base management
Slightly negative MSR performance in Q3 (-0.3% y-o-y); broadly stable in 9M (+0.4% y-o-y)
Increased contribution from key partners in contract Non-SMS data up 2.9% y-o-y in Q3
Sustained trends in fixed (Q3: -9.5% y-o-y; 9M: -10.0%)
Investor Relations Telefónica, S.A.
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Germany: Early synergy capture boosting profitability
16% Group Rev.
OIBDA 2015 (y-o-y)
Organic ex non-recurrent items
28.5%
12.5%
4.4%
Q1 Q2 Q3
Outstanding Q3 OIBDA growth; >45% driven by integration savings
Continued synergies & Commercial costs savings on focused subsidy approach & easier comps y-o-y
€63m restructuring costs in Q3; mainly from network integration
9M 15 OpCF +44.9% y-o-y (organic ex non-recurrent items)
Network synergies outweigh cost for LTE deployment
OIBDA margin 2015
Organic ex non-recurrent items
23.8% 23.7%
20.5%
Q1 Q2 Q3
y-o-y +0.3 p.p. +2.4 p.p. +5.5 p.p.
Updated outlook on synergy ramp-up
Acceleration on synergy capture; total synergy case unchanged1;
2015 synergies: €280m OpCF savings (previous €250m run-rate)
Increased OIBDA growth target for 2015 (organic; post Group fees)
Expected to grow by 15% to 20% (previous +10%)
Lower CapEx spend expected in 2015
Low double-digit pct. decline (vs. high single digit pct. decline prior)
MSR to remain broadly stable in 2015 y-o-y (unchanged outlook)
Proposed €0.24 DPS (stable vs. 2014)
Investor Relations Telefónica, S.A.
(1) Synergies >€5 bn; run-rate: Approx. €800m run-rate OpCF synergies from year 5 of integration onwards
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Brazil: Outperforming in high-value services
24% Group Rev.
Mobile accesses (Sep-15 y-o-y)
Penetration
10% MSR growth share
(9M 15):
54% 4x 100%
38% 35%
Contract net adds share
12%(Q3 15) (1):
53%
Contract Smartphones LTE
848 6,384 1,851 Net Adds
Q3 (‘000)
Strengthening leadership
Best-ever quarterly contract gross adds (+11% y-o-y)
Retaining the most profitable prepay customers
Q3 R$ volume top-ups +1.6% y-o-y vs. accesses -7% Smartphone and LTE adoption driving data ARPU acceleration (+32.7% y-o-y; +27.1% in Q2)
Q3 data traffic: +20.0% y-o-y; LTE traffic 34% o/total in main cities LTE deployment: 161 cities covered (leadership in market share: 38.5%)
Fixed accesses (Sep-15 organic y-o-y) ARPU & Churn (Q3 15 organic y-o-y)
Penetration o/FBB ARPU Churn
53% 25%
19% 19%
5.4%
2.4%
FTTx Pay TV(0.1 p.p.)
(0.3 p.p.)
Net Adds 148 43
Q3 (‘000) FBB Pay TV
Fiber & video strategy paying-off
Progressive take-up of the most valuable services
Capturing the entire Pay TV market growth (Jan-Aug 15) 57% net adds share in FBB > 34 Mbps (Jan-Aug 15) 3.8m accesses connected; FTTx premises passed 16.6m (Sep-15)
(1) Up to August
Investor Relations Telefónica, S.A.
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Brazil: Robust revenue & OIBDA growth
24%
Group
Rev.
Revenue (organic y-o-y)
Total
Mobile
Fixed
6.9% 6.2%
3.2% 5.2%
5.2%
3.9%
1.1% 2.4%
(3.0%)
Q3 14 Q2 15 Q3 15
Continued mid-single digit revenue growth
Fixed & mobile growth rates outperforming the market
Q3 MSR +4.5% y-o-y on data rev +36.0% (46% o/ MSR; +11 p.p. y-o-y) Handset sales (+36.8% y-o-y) reflecting FX depreciation on handset prices and higher gross adds Fixed revs acceleration mainly driven by return to growth in São Paulo Negative impact from regulation (-2.5 p.p. Q3; -2.8 p.p. 9M)
OIBDA organic (y-o-y)
5.3%
2.0%
0.4%
Q3 14 Q2 15 Q3 15
OIBDA margin
(organic y-o-y) +1.2 p.p.(1.5 p.p.)(1.0 p.p.)
OIBDA y-o-y ramping-up in Q3 amid tough macro backdrop
Revenue flowing into OIBDA
Better sequential y-o-y trend in OpEx (Q3: +6.6%; Q2: +7.0%) despite both higher commercial cost and energy prices Personnel expenses slowing down (+1.9% y-o-y; +4.6% Q2) o Redundancy program executed in Sep-15 (2.2k headcount) to further reinforce efficiency Tougher macro driving higher bad debt y-o-y increase Q3 OIBDA margin 30.4% (9M: 30.6%; -1.2 p.p. y-o-y).
Synergy execution evolving according to expectations
Investor Relations Telefónica, S.A.
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Hispam: Commercial momentum driving revenue acceleration
30% Group Rev.
Net adds (‘000)
Q3 14 Q3 15
449
117 86 72 48 93
Contract FBB Pay TV
mobile
Accesses (y-o-y) +3% +5% +17%
Revenue (organic y-o-y)
Q2 15 Q3 15
Robust commercial activity across segments
Contract mobile boosted by higher gross adds volume
(+14% y-o-y; +13% q-o-q)
Booming smartph. penetration (35%; +9 p.p. y-o-y) & LTE (6%) Q3 data traffic +60% y-o-y; voice traffic +12%
Sound performance in Pay TV over the year
Best-ever net adds in 9M (310k; +48% y-o-y)
10.3% 12.6%
7.7% 9.1%
Hispam Hispam ex-VZ
OIBDA margin (organic y-o-y ex-VZ)
0.9 p.p.
(2.8 p.p.) Inc-VZ
(1.9)
(0.9)(0.1)(2.0 p.p.)
Q2 15 Commercial Network & Others Q3 15
Expenses systems
Strong trading flowing into top line growth
Revenue acceleration in Q3 on better traction in MEX & COL
Data revs +27.6% y-o-y to 36% o/MSR (+4 p.p. y-o-y)
FBB & new services +18.4% to 64% o/fixed revs (+4 p.p. y-o-y)
OIBDA deceleration y-o-y (Q3 +3.0%; Q2 +9.1%)
Higher commercial expenses (+15.1% y-o-y; +6.2% in Q2) Growing handset sales & costs affected by FX depreciation
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Mexico: Increasing scale & profitability
Net adds (‘000) Accesses (y-o-y)
Contract Prepay
87%
497
350
226
130 14%
15
(33) Mobile Smartphones
Q3 14 Q2 15 Q3 15
Continued strong commercial momentum
Outstanding improvement in contract gross adds; launch of new “Planes Vas a Volar” (17th August)
Smartphone penetration increased to 40% (+16 p.p. y-o-y)
Progressive LTE deployment (1.3m accesses; 34% population coverage
Revenue (organic y-o-y) OIBDA margin
Revenue
Revenue ex-regulation
17.9% 29.5%
24.6% 22.9%
10.0% 10.5% 14.8%
9.5% 7.8%
Q3 14 Q2 15 Q3 15 Q3 14 Q2 15 Q3 15
OIBDA 50.6% 43.6% 39.0%
(organic y-o-y)
Accelerating revenue growth
Sequential improvement
Interconnection adjustment neutral in 9M (rev up +10.5% y-o-y) Data revs +18.2% y-o-y in Q3 (Non-SMS data +28.2% y-o-y)
Robust OIBDA & margin expansion
Q3 margin +4.4 p.p y-o-y organic; 9M 25.6% (+6.6 p.p.) Accesses growth flowing into economies of scale Q3 OIBDA y-o-y deceleration due to comparable regulation from Aug-15
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Rest of Hispam: Capturing market value
27% Group Rev.
Revenue (organic y-o-y)
Q2 15 Q3 15
43.0%
22.5% 22.8% 34.7%
2.8% 4.4%
0.5% 2.6% 2.6%
(1.8%)
Colombia Peru Argentina Chile VZ & CA
OIBDA (organic y-o-y)
Q2 15 Q3 15
40.9%
7.1% 14.5% 6.9% 15.3%
0.2%
(4.1%)
(6.9%)
(10.3%)(10.3%)
Colombia Peru Argentina Chile VZ & CA
OIBDA margin (organic y-o-y)
Q3 15(4.2 p.p.)(5.0 p.p.)(1.9 p.p.)(0.8 p.p.)(6.0 p.p.)
9M 15 +0.6 p.p.(3.3 p.p.) +1.6 p.p.(0.3 p.p.)(6.3 p.p.)
Better commercial trading across the board
Colombia:
Q3 revs return to positive y-o-y variation despite regulation (-3.6 p.p.) Highest contract mobile net adds of last 2 years & record-high Pay TV gross adds impacting Q3 OIBDA
Peru:
Solid revenue increase despite MTRs reduction (-2.8 p.p. y-o-y) Positive commercial momentum on high-value segments amid intense competition
Argentina:
Sound y-o-y mobile data rev. (+24.8%; 47% of MSR) and FBB & new services (+31.5%; 56% of fixed revs) Profitability affected by outstanding commercial performance across services
Chile:
Sustained y-o-y accesses growth in contract mobile (+2%); FBB (+7%) and Pay TV (+10%) Positive rev & OIBDA growth amid highly competitive market
Venezuela & Central America:
Launch of LTE services in Nicaragua from Oct 5th Q3 voice & data traffic ramping-up y-o-y (+14%; +51% respectively), driving top line & OIBDA improvement
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UK: Continue outperforming the market
Consolidated as discontinued operation
Mobile contract net adds (‘000)
Q3 15 total net
adds: 224k
172 194
133
Q1 15 Q2 15 Q3 15
Contract 1.0% 0.9% 0.9%
Churn
Mobile Service Revenues (y-o-y)
MSR MSR ex “O2-Refresh”
4.0% 4.2%
2.9%
(3.9%)(2.6%)
(5.3%)
Q1 15 Q2 15 Q3 15
OIBDA margin
y-o-y ex non-recurrent
24.5% 26.5% 26.3%
+1.7 p.p.
Q1 15 Q2 15 Q3 15
OIBDA y-o-y
Ex non-recurrent +6.1% +14.0% +8.3%
Record loyalty maintained
Sixth quarter in a row with mobile base growth (+4% y-o-y to 25m)
Strong contract performance
LTE driving growth
Penetration: 30% (+16 p.p. y-o-y) Net adds at 862k in Q3 (Q2: 864k) 78% outdoor coverage at Sep-15
Increasing demand for higher subscription bundles o >65% of gross adds & upgrades chose tariffs of 1GB or more
Twelfth quarter of continued MSR improvement (ex “O2 Refresh”)
Total revenue up +5.1% y-o-y in Q3 ex “O2 Refresh”
ARPU broadly flat ex “O2 Refresh” (Q3: -0.3% y-o-y; Q2: -0.8%) MSR sequential improvement (+0.2 p.p. vs. Q2 ex “O2 Refresh”) Marginally lower handset sales
Strong OIBDA growth & profitability
Optimisation of commercial costs
“O2 Refresh” deducted 0.1 p.p. of OIBDA margin
Q3 OIBDA impacted by increased investment in digital services Q3 14 non-recurrent impact mostly related to final settlement from disposal of fixed business assets (+€34m)
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€1.5bn net debt reduction in Q3 15
Net Financial Debt
€ in millions
Net Financial Net Financial
Debt/OIBDA Debt/OIBDA (1)
2.92x 2.84x
51,238(1,400) 701(110)(892) 154 49,691
Net Fin. FCF SBB & Hybrid Net financial FX & Pre- Net Fin.
Debt coupon investments Others retirements Debt
Jun-15 commitments Sep-15
Net Fin. Debt post O2 UK sale €35.9Bn
ND/OIBDA at
2.32x
Target < 2.35x reiterated
297(436)
1,686
(240)
(40) 133 1,400
OpCF Working Net Interest Tax Dividend to FCF FCF
continued capital minorities & discontinued
operations Others operations
(1) OIBDA 12 month rolling, not considering O2 UK discontinuation, incorporating DTS’ and GVT’s OIBDA corresponding to Jul 14-April 15, and excluding the non-recurring impact from restructuring costs twelve month rolling.
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Progressive improvement in financial costs
Effective interest cost: 54 b.p. lower y-o-y
Guidance
6%
5.45%
0.10% 4.91%
5%
(0.03%)
(0.61%)
Sep-14 Lower cost Higher Venezuela Sep-15
of non- Latam &
Latam debt ex VZ Others
leverage
Liquidity position (Sep-15)
€ in billions
16.2
9.5
Undrawn credit
lines &
syndicated
94% LT credit facilities
Cash position
6.7 excluding
Venezuela
Sep-15
Long-term financing (€13.3bn YTD)
€ in billions 35% equity
markets
financing
Euro Bond: 1.0
Schuldschein: 0.3
Private Bond Placements: 0.4
Other banking loans TSA: 0.5 Undrawn Syndicated
Credit Facilities
Other LatAm Debt:0.9 renewal: 5.5
Colombia Hybrid: 0.5 Debt
Telefónica Rights Issue: 3.0
T. Brasil Capital Increase
(minorities): 1.2
Equity
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Summary
Q3 ACCELERATING SUSTAINABLE PROFITABLE GROWTH
1 3rd consecutive quarter in 2015 of improving organic revenue & OIBDA performance
2 Continued momentum in commercial activity (fiber, LTE, Pay TV) backed by superior infrastructure
3 First tangible results from integration synergies in Germany; Brazil to follow
4 Investing in network quality; Data demand rocketing
5 Leadership in major markets; better competitive position on strong CapEx
6 9M 15 key metrics aligned with guidance; DPS confirmed (2015 & 2016)
ROBUST FUNDAMENTALS & STRENTHENING POSITONING FOR FUTURE GROWTH
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For further information:
Investor Relations
Tel. +34 91 482 87 00 ir@telefonica.com www.telefonica.com/investors
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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: November 6, 2015 | By: | /s/ Miguel Escrig Meliá | ||||||
| Name: | Miguel Escrig Meliá | |||||||
| Title: | Chief Financial Officer | |||||||