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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 February, 2016
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
Table of Contents
Telefónica, S.A.
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Telefónica Group: Presentation on quarterly results January-December 2015 | 1 |
Table of Contents
Telefonica
Results
January - December 2015
Investor Relations
Telefónica, S.A.
Table of Contents
Disclaimer
This document contains forward-looking statements regarding intentions, expectations or forecasts related to the Telefónica Group (hereinafter, the “Company” or “Telefónica”). These statements include financial forecasts and estimates based on underlying premises, statements regarding plans, objectives and expectations that make reference to different matters, including, 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 or forecasts contained herein 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 do not represent, by their own nature, any guarantee of future fulfilment, and are subject to risks, uncertainties and other relevant factors 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.
The content of this statement must be taken into account by any individual or entity who may have to adopt a decision, or elaborate or disseminate opinions related to the securities issued by the Company, and, in particular, by analysts and investors that may be examining this document. Except as required by applicable laws, Telefónica is not required to inform publicly of the result of any review it may perform concerning 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 or non-audited information. To this regard, the information contained herein must be read as a whole and is subject to all the public information available, including, if any, other documents released by the Company that may contain more detailed information.
Finally, it is hereby stated that neither this report nor any of its contents should be interpreted as a securities purchase, sale or exchange offer, or a request for offers regarding the purchase, sale or exchange of securities, or a recommendation or advice regarding any security
Investor Relations
Telefónica, S.A.
1
Telefonica
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01 2015 Highlights 2016 Outlook
Mr. César Alierta
Chairman & CEO
2
Telefonica
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Unprecedented wealth creation ahead of us
Social Development Index
Digital Revolution
Industrial
Revolution
800
700
600
500
400
300
200
100
0
10000
2000
1500
1000
500
0
500
1000
1500
2000
TODAY
2025
BC
AD
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Telefonica
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Digitalisation will foster growth and innovation
Positive economic impact…
1/5 of global growth in the last two decades
A 10% rise in digitalisation of the economy increases GDP/capita growth by 40%
… though not fully reflected in traditional metrics
Digitalisation yields benefits from
o Enhanced efficiency & productivity
o Greater innovation across industries
o Inclusion
Digitalisation and Big Data will transform all the productive models
Industrial Internet is a huge opportunity to unleash all the potential of the Digital Economy
Digital Single Market in Europe is a clear step in the right direction to foster digitalisation
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Telefonica
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An era of exponential growth
Exponential speeds
10 GPS
5G
25 MBPS
4G
5 MBPS
3G
Source: Huawei and Telefónica
Exponential traffic growth
(EB/month estimated in TEF networks)
8.7
x5
6.2
4.5
3.2
2.3
1.7
2015 2016E 2017E 2018E 2019E 2020E
Exponential growth in connections
50Bn
by
2020E
Source: Ericsson
Exponential information volume
(Data/month)
x13 >1,000
EXABYTES
<80
EXABYTES
2015 2020E
Source: Alcatel-Lucent
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The Digital Economy opens up a new growth wave
Wave 3
Big Data
Wave 2
Services over connectivity
Wave 1
Connectivity
Our priorities
Ensure
monetisation
Accelerate growth
(Video; Smart home; Cloud;
Security; IoT)
Build a new competitive advantage
to increase customer engagement and
reduce churn
Give the data back to our customers
6
Telefonica
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Telefónica’s ongoing transformation
2012-2015: Positive proof points; returning to growth
Data monetisation underway (smartphones x2; double digit ARPU uplift), driving revenue growth
Back to growth in Spain, expanding profitability in Germany and widening leadership in Brazil
Building a solid set of differential assets
Active portfolio management & record debt reduction
Outstanding shareholder returns
2016: Step forward in accelerating growth
Increase data monetisation to foster revenue acceleration
Enhance Big Data & Innovation capabilities
Massive value from synergies (integration & simplification)
Maintain financial flexibility & continue portfolio optimisation (improve ROCE)
Full cash dividend (post-O2 UK sale)
Positive 2015, better prospects for 2016 and further upside potential from Data revolution
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2015 Highlights: A profitable & growing Company
Accelerating revenue growth
(organic y-o-y)
Avg. revenue per accesses
4.0%
2.6%
0.7%
(0.8%)
FY 12 FY 13 FY 14 FY 15
(1.5%) +0.3% +1.9%
Clear progress on OIBDA growth
(organic y-o-y)
Margin y-o-y organic
3.6%
0.0% 0.2%
(3.9%)
FY 12 FY 13 FY 14 FY 15
(0.2 p.p.) (0.8 p.p.) (0.1 p.p.)
Return to OpCF growth
OIBDA-CapEx (organic y-o-y)
CapEx/Sales (organic)
1.9%
(2.7%)
(6.6%) (12.7%)
FY 12 FY 13 FY 14 FY 15
14.5% 16.4% 17.2%
Underlying EPS
(Euros) y-o-y
1.12
0.91
FY 14 FY 15
+23.9%
FCFS ex-spectrum
(Euros) y-o-y
1.01 0.98
FY 14 FY 15
(2.8%)
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Telefonica
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2015 Main financials: a year of return to growth
FY 15
Organic y-o-y
€ in millions
Reported
Revenues 47,219 4.0%
OIBDA 11,414 3.6%
OIBDA Margin 24.2% (0.1 p.p.)
OpCF (ex-spectrum) 3,420 1.9%
Net Income 2,745
EPS 0.51
FCF 3,514
FCF pre-spectrum 4,821
Net Financial Debt 49,921
FY 15
€ in millions
Underlying
OIBDA 14,926
OIBDA Margin 31.3%
OpCF (ex-spectrum) 6,872
Underlying
Underlying y-o-y
Net Income (€ millions) 5,787 29.7%
EPS (€) 1.12 23.9%
Non-cash effects
Mainly €3.2bn Restructuring charges to improve profitability & productivity going forward
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Telefonica
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Delivering on our commitments
2015 Guidance
(Constant FX 2014; ex-UK; ex-VZ; incl. 12M E-Plus, 8M GVT, 8M DTS)
UPGRADED
Guidance 2015
FY 15
Revenues Growth >9.5% 12.3%
OIBDA margin
Limited margin erosion around 1.2 p.p. (to allow for commercial flexibility if needed) (1.1 p.p)
CapEx/Sales Around 17% 16.9%
Net Financial Debt/OIBDA (adjusted for O2 UK sale) <2.35x 2.38x
Dividend
€0.75/sh.
€0.35/sh. voluntary scrip Q4 15
€0.40/sh. Cash Q2 16
First Tranche Scrip dividend: €0.35/sh. Nov-15
Share buyback: % share capital cancelled (treasury) 1.5%
Executed in Jun-15
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Telefonica
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2016 Outlook
Base 2015 (Ex-VZ; incl. 8M GVT & DTS)
Guidance (Constant FX 2015; Ex-VZ)
2016E
46,757 Revenues >4%
31.5% OIBDA margin Stabilising vs. 2015
16.8% CapEx/Sales Around 17%
€0.75/sh. Full Cash Dividend (subject to the closing of O2 UK sale) €0.75/sh.
1.5%
Share buyback: % share capital cancelled (treasury; subject to the closing of O2 UK sale)
1.5%
Net Financial Debt/OIBDA
<2.35x
(adjusted for O2 UK sale)
Better than 2yr outlook guided in Feb- 15
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Telefonica
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02
2015 Achievements
2016 Priorities
Mr. José María Alvarez-Pallete
COO
12
Telefonica
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2015 Highlights: A profitable & growing Company
Strong year of commercial performance/ accelerating revenue growth
Focus on value customers (Fiber, LTE, Pay TV, …) rather than volumes
o Increasing customer lifetime value
Several assets delivering organic growth
Focused level of investments to build outstanding connectivity
o CapEx/Sales ex-spectrum 16.9%
Focus on value customers
FY 14 FY 15
Smartphone penetration 34% 48%
Fiber connections 1.8m 6.1m
Pay TV 5.1m 8.3m
Benefitting from consolidation in key markets/ Simplifying to transform
Enhancing competitive position via in-market consolidation
Spain recovering top line traction; Germany accelerating profitability; Brazil continuing leadership expansion
E-Plus, GVT & DTS integration on track and ramping-up
Driving profitability; advancing in simplification
Healthy FCF generation/ Robust Balance Sheet
FCF of €4.8bn pre-spectrum, up nearly 2% y-o-y o Enabled shareholder returns and high investments (network, systems and financial)
Leverage progressing towards post-O2 UK sale target (2.38x as of Dec-15)
Substantial diversified financing reinforcing credit quality
Managing asset portfolio to improve ROCE
Delivering on operating guidance in all metrics
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Telefonica
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Revenue & OIBDA growth with margin stabilisation
Revenue 2015 (organic y-o-y growth)
4.2%
3.9% 4.0%
3.3% Q4
3.3%
Q1 H1 9M FY
OIBDA 2015 (organic growth y-o-y)
Organic margin y-o-y
Q4
3.8%
3.5%
2.9%
2.4%
3.6%
Q1 H1 9M FY
31.2% 31.2% 31.3% 31.6%
(0.3pp) (0.3pp) (0.2pp) (0.1pp)
Q4
32.2%
+0.2 p.p.
Investor Relations
Telefónica, S.A.
Strong organic revenue increase in 2015
Engines of organic growth
Mobile data: Q4 15 +18.7% y-o-y (FY 15 +16.9%)
T. Hispam: Q4 15 +8.1% y-o-y (FY 15 +10.1%)
Revenue mix improvement
BB Connectivity & SoC: 43% o/total; +5 p.p. y-o-y
Access & Voice: <50% o/total for the first time ever (47%)
Improving OIBDA growth in 2015
Positive, meaningful operating leverage
Revenue flow-through
Execution in synergies & simplification initiatives
Maintaining cost control: FY +4.6% y-o-y organic
Good momentum in organic OIBDA margin: ongoing expansion in absolute level and y-o-y stabilisation
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Capturing value for Revenue per Access expansion
Quality platform
Accesses (y-o-y organic; LTE reported) Accesses base
3.0x
30% 29%12% 6%
LTE FTTx Smartphones Pay TV Mobile Contract
29.7m 6.1m 112.9m 8.3m 89.8m
Strengthened customer value
Average Revenue / Access (organic y-o-y) Accesses y-o-y organic
2.7%
2.8%
1.9%
1.5%
0.8%
Q1 Q2 Q3 Q4 FY
3.0% 2.5% 1.1% (1.1%) 322m Total
accesses
Profitable growth driven by high quality connections
Strong momentum in KPIs
Added 6.1m LTE devices in Q4; +42% y-o-y; +22% q-o-q
271k fiber connections net adds in Q4
Pay-TV take-up gaining traction to 8.3m accesses
Record mobile contract net adds in the last 6 Qs (1.7m)
T. Hispam delivered accesses growth (42% o/total): +2% y-o-y
Excellent customer retention
Continued churn reduction across regions coupled with higher commercial activity (growth and quality services)
Enhancing customer experience Customer knowledge embedded in every decision taken
Investor Relations Telefónica, S.A.
15
Telefonica
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Data monetisation: Accelerating data growth
LTE penetration LTE usage
Usage per customer
3x +63%
12%
4%
Dec-14 Dec-15 3G LTE
2015 revenue (y-o-y organic)
Data Non-SMS data
26.6% 26.8% 27.8%
25.3%
19.1% 19.3% 18.7%
17.3%
16.9%
11.9%
Q1 Q2 Q3 Q4 FY
FY Mobile data/MSR: 42% (+5 p.p. y-o-y)
Strong mobile data performance
LTE: Outstanding dynamics
LTE traffic (4x y-o-y) is 20% of mobile data traffic in Q4
Double digit LTE ARPU uplift
Continued smartphone growth: 48% penetration (+15 p.p. y-o-y)
Q4 avg. usage per smartphone +27% y-o-y (643 MB/month)
Capturing the prepay data opportunity in Brazil & T. Hispam
T. Hispam prepay penetration: 29% (+11 p.p. y-o-y)
Double digit prepay ARPU uplift once client uses data
Roaming initiative to foster usage and improve experience
Continued monetisation data usage
Mobile data traffic up 45% vs. Q4 14
~30% of customers run-out of data
>40% of customer hitting caps buy extra data
Further usage & monetisation through data test drive
Connectivity & data monetisation is starting; but it is just the first wave
Investor Relations
Telefónica, S.A.
16
Telefonica
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Digital Services: Driving innovation and value
VIDEO:
Wider footprint & robust content portfolio
Digital Services Revenue
(€ in millions) 3,758
1,068
Q4 15 FY 15
+15.1% +23.6%
OTHER DIGITAL SERVICES:
Combining partnerships with in-house capabilities to support open ecosystems
Video Revenue
(€ in millions)
2,142
628
Q4 15 FY 15
Organic +14.0% +27.3%
y-o-y
Pay TV Accesses (m)
Satellite IPTV/Cable
8.3
5.1 3.7
2.8
4.6
2.2
Dec-14 Dec-15
Dec-15
DTS: 0.9m
GVT: 0.8m
2015
Video: larger scale (+63% accesses y-o-y); higher traffic (+74% y-o-y)
Investing in content to drive customer upgrades
Expanding uptake and expansion of Pay TV services across LatAm
2016
Leading growth
VoD, multi-device, multi-platform, differential content (own productions, exclusive, football)
Consolidate HD leadership, improve content & simplify platforms
(€ in millions in FY 15; % y-o-y organic)
Cloud (€402m; +28.7%): continued growth and strong alliances. Huawei: joint innovation center using “OpenStack”
Security (€282m; +34.7%): B2B HispAm: 56% growth. Alliances w/market leaders: Palo Alto Networks, Bluecoat, RSA…
M2M (€169m; +16.5%): future-proofing solutions. 4G-LTE IoT: new “Smart m2m” solutions
LTE supporting surge in data usage: 56% of purchased smartphones were LTE. Joint Procurement Program w/ China Unicom
Big Data: consolidating worldwide reach. China Unicom JV: “Smart Steps” technology in China
SmartSteps
Investor Relations
Telefónica, S.A.
17
Telefonica
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TGR: Creating value through transformation
Best Network: Quality & Capacity
Excellent
Connectivity
Premises Passed with Fiber (FTTx)
Million 31
>30%
26 FTTH y-o-y
FY 14 FY 15
LTE Coverage (%PoP) p.p. y-o-y
Europe
75%
(+14 p.p.)
49% 2015
LatAm >33K LTE
43% sites
(+18 p.p.)
E2E digitalisation
Simplification
(y-o-y organic)
Applications -321 (-8%)
Physical Servers -1,447 (-8%)
Data Centers -3 (-5%)
Virtualisation +5.7 p.p.
All-IP Transformation
All IP & Network Innovation
All-IP Architecture: Starting to shutdown legacy Copper COs
VoLTE launched in Germany
LTE-A with 2 carriers available
R&D 5G lab to develop and test 5G technologies
Automatised Virtual Network Functions deployment trials
Transforming Operations
4 Global Centers launched, delivering results
E2E diagnosis and integrated field force management
Home Gateway Unit (ONT+router+video bridge) Up to 300Mbps speed
>60% new home devices designed by Devices Global Center
Unprecedented transformation
Full Stack Acceleration: 15 countries
Digitalisation capabilities:
Boosting Big Data and Real Time Decision
Maintained Record IT Service Delivery
13%
Full Stack Customers
-40%
IT Critical Incidents
Investor Relations
Telefónica, S.A.
18
Telefonica
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Telxius: A global infrastructure Company TELXIUS
Optimising TEF’s asset portfolio & improving ROCE by bringing together best-in-class infrastructure assets
Specialised and focused management of the telecommunications infrastructure
Targeting to increase services provided to other operators
More active participation in growth opportunities of the industry, including the possibility of acquiring third party assets
More of TEF’s assets expected to be progressively incorporated (towers, DAS, Small Cells, Backhaul)
Tower business
~15k telecommunication towers out of ~62k total owned by Telefónica
~11k towers in Spain; ~4k in other countries
Primary functions include to build, maintain and operate passive tower infrastructure
Submarine cable business
Extensive international network with over 65k km of which 31k km of proprietary submarine fiber optic cable
SAM-1 (25k km) the largest submarine cable connecting the US with LatAm
PCCS (6k km) linking Ecuador, Panama, Colombia, the Caribbean and the US
Unisur (0.2k km) linking Argentina and Uruguay
Capacity & IP businesses
Capacity: >3.5Tbps of lit capacity on submarine systems
IP: >4.5Tbps of IP traffic delivered during peak hours
Non-TEF clients representing approx. 50% of revs
International Tier 1 Network
Reduce traffic costs and improve sustainability on peering agreements; maximise content access quality
Considering different strategic alternatives
Investor Relations
Telefónica, S.A.
19
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CapEx is paying off
CapEx 2015 (€ in millions)
Organic y-o-y
1,585 9,578
7,993
+5.0%
Ex-spectrum Spectrum Total
75% of total devoted to growth & transformation
2015 OpCF
(OIBDA - CapEx organic y-o-y)
+10.2 p.p.
1.9%
(1.3%)
(4.7%)
(8.3%)
Q1 H1 9M FY
CapEx intensity in technology leadership
Driving competitive advantage
Transforming networks and systems (Fiber, LTE, Full Stacks…)
CapEx/Sales 13-14% in Germany & Spain and 19% in LatAm
Reinforcing our network position and securing future growth through spectrum acquisition
Passing peak investment for spectrum, expected to be lower in the coming years
Back to growth in OpCF
Investment boost enabled us to become a stronger Co.
Improved trends throughout the year led by enhanced profitability and targeted efficiencies (CapEx+OpEx)
Simplification, CapEx optimisation and prioritisation
Investor Relations
Telefónica, S.A.
20
Telefonica
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03 2015 Results
Mr. Angel Vilá
CSFO
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Key financials
FY 15
Q4 15
€ in millions Reported Organic y-o-y Reported Organic y-o-y
Revenues 47,219 4.0% 11,881 3.3%
OIBDA 11,414 3.6% 401 3.8%
OIBDA Margin 24.2% (0.1 p.p.) 3.4% 0.2 p.p.
OpCF (ex-spectrum) 3,420 1.9% (2,078) 17.6%
Net Income 2,745 (1,832)
EPS 0.51 (0.38)
FCF 3,514 2,307
FCF pre-spectrum 4,821
Net Financial Debt 49,921
FY 15
Q4 15
€ in millions
Underlying Underlying
OIBDA 14,926 3,781
OIBDA Margin 31.3% 31.8%
OpCF (ex-spectrum) 6,872 1,302
FY 15
Underlying Underlying
y-o-y
Net Income (€ in millions) 5,787 29.7%
EPS (€) 1.12 23.9%
Q4 results strongly impacted by non-recurrent / non-cash effects
TOTAL Personnel reorganisation: -€3,122m in OIBDA in Q4 (T. España Voluntary Employment Suspension Plan: -€2,896m, Other Companies: -€227m, mainly Telefónica Headquarters)
Additionally, Q4 includes, among others, commitments in the following years relating to TEF’s Foundation: -€325m in OIBDA
Investor Relations
Telefónica, S.A.
22
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Reported Q4 reflects non-recurrent & FX
FX: Latam depreciation dragging growth in H2
Forex impact revenue (y-o-y)
Q1 15 Q2 15 Q3 15 Q4 15
3.2 p.p (2.7 p.p) (8.1 p.p) (9.1 p.p)
FX impact OIBDA (y-o-y)
2.5 p.p. (2.7p.p. ) (7.8 p.p.) (11.8 p.p.)
Q4 non-recurrent impacts in OIBDA (€3.4bn)
325(67) 3,781 3,122 401
OIBDA Reported
Provision for Restructuring Costs
TEF Foundation
E-Plus final settlement & Others
OIBDA Underlying
Perimeter: E-Plus no longer impacting in Q4
Perimeter impact revenue (y-o-y)
Q1 15 Q2 15 Q3 15 Q4 15
13.5 p.p. 10.2 p.p. 5.9 p.p. 5.7 p.p.
Perimeter impact OIBDA (y-o-y)
3.0 p.p. 6.7 p.p. 7.2 p.p. 4.6 p.p.
Q4 non-recurrent impacts in Net Income (€2.6bn)
2,340 195 104 (37) 769 (1,832)
Net Income Reported
Provision for Restructuring Costs
TEF Foundation
PPA
E-Plus final settlement & Others
Net Income Underlying
Investor Relations
Telefónica, S.A.
23
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Maintaining a solid FCF generation
FCF 2015
(€ in millions)
3,514 2,307 1,400 363 (557) Q1 Q2 Q3 Q4 FY FY FCF
ex-spectrum
€4,821m
FCFS 2015
(€/share)
0.46
0.71
0.29
0.08
(0.12)
Q1 Q2 Q3 Q4 FY FY FCFS
ex-spectrum €0.98
Reduced FX impact in 2015 FCF
(€ in millions)
67 41 404 (94) 96 (103) (616)
OIBDA
CapEx
Wcapital
Taxes + Interest
Minorities
FCF discont. Ops.
FCF
€1.4Bn FCF improvement in Q4 y-o-y
Improved Cash from Operations (+€441m)
Lower spectrum payments (+€750m)
Savings on tax payments (+€173m)
Attractive shareholder returns
66% cash dividend pay-out
48% cash dividend pay-out ex-spectrum payments
€1.12 underlying EPS: +23.9% vs. FY 14
Negative FX effect mitigated at FCF level
FX impact in OIBDA absorbed through lower CapEx, interest, taxes and minorities
Investor Relations
Telefónica, S.A.
24
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Spain: Sustained momentum, new market dynamics
Net adds FY 15 (000)
y-o-y
(31%) c.s. x2 +25% +47%
1.8m 906
234 926
DTS 76
0.5m UBB
base (442)
Traditional Fixed
Mobile Contract
FBB
Fiber
Pay TV
FY churn
1.3% 1.4% 1.4% 1.0%
1.3% ex-DTS
y-o-y
(0.1 p.p.) (0.7 p.p.) (0.1 p.p.) 0.1 p.p. (0.0 p.p.)
“Fusión” gross adds mix
FY 14 FY 15 Q4 15
50% 47% 46% 35% 30% 19%
UBB
New Movistar customers
High-value penetration
Dec-14 Dec-15
53% 26% 17% 25%
UBB/FBB base
TV Add-ons/ Pay TV base
Reinforced leadership based on value
Excellent trading balance: higher loyalty and gross adds
Solid Q4 net adds improving q-o-q
Churn decline y-o-y despite eliminating retention
“Fusión” ARPU uplift: +7.3% y-o-y to €74.4 in Q4
4.2m base (+13% y-o-y); 36% with mobile add-ons
Largest Pay TV platform
3.7m customers (+10% y-o-y organic)
“TV Premium” promo reached ~700K customers in Q4
Largest FTTH in Europe: 14.3m premises passed (+4.0m y-o-y)
LTE expansion: 75% pop. coverage (+17 p.p. y-o-y)
“More for more”: further commercial upgrades
New tariff repositioning from Q1 16
“Fusión”, mobile contract, FBB non convergent
Best content guaranteed until 2018/19
Investor Relations
Telefónica, S.A.
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Spain: Strong revenue recovery in 2015
Revenue ex-DTS 2015 (y-o-y)
Including DTS since May (y-o-y organic)
Solid start from a leading position
0.8% 0.2% (1.1%) (1.0%)
(1.5%)(2.0%)
(3.8%)
+6 p.p.
(7.2%)
FY 14
Q1 Q2 Q3 Q4
FY 15
OIBDA including DTS 2015
(since May, ex non-recurrent)
y-o-y
1,311
1,272
(4.2%)
(6.4%)
FY 15
(5.7%)
Q3 15
Q4 15
Solid start from a leading position
Second consecutive quarter of revenue growth (ex-DTS)
Strong performance in IT and handset sales in Q4
Growth y-o-y decelerated vs. Q3 partly due to TV promo
FY Revenue including DTS (May 1st) €12.4Bn: -2.1% y-o-y organic
Successful TV add-ons uptake post promo
~€30m incremental revenue (Q1 16E vs. Q4 15)
Pay TV penetration still at 30%
Profitability reflecting TV promo
Non-recurrent: Restructuring costs, tower and real estate sales gains and adjustment in DTS supplies in Q3
OIBDA (ex -DTS) non-representative due to content cost allocation
FY organic margin incl. DTS: 42.1% (-1.0 p.p. y-o-y)
Q4 net content cost including DTS: -8.1% y-o-y organic Q4 net content cost/Pay TV sub: -16.8% y-o-y organic
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Spain: A reference in efficiency; new plan 16-17
Voluntary Employment Suspension Plan
Adapt the organization to the new competitive, economic and technological reality
Conditions
2 year plan (2016-2017)
Minimum age: 53 years old before YE 17 with at least 15 year in the Co.
68% of salary until age of 65 + social security + social benefits fully covered by TEF
Periods to join: Jan-Mar 16; Jan-Mar 17. Acceptance so far in line with expectations
Will leave no later than Dec-17
Agreed with largest unions
Other agreements
Salary increases: +1.9% in 2016; +1.5% in 2017
Job creation through the incorporation of young talent
Impacts
Cash Flow positive
since year 1
Direct cost savings
run-rate
~370m
since year 2
One-off cost recorded in Q4 15
€2.9Bn (before taxes) as personnel expenses
Additional efficiency gains
Indirect savings (G&A) in the coming years
Committed payments
> 75% FTEs signed up to leave in 2016
Total cash commitments in Spain (this plan and former ones) will peak in 2016 and then recede
Speeding up transformation to improve profitability in a new growth cycle
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Germany: Successfully maintained momentum
Contract net adds 2015 (‘000)
Ex-adjustments: 400k in Q4 15; 428k in Q4 14
141 201 169 198
Q1 Q2 Q3 Q4
2015 Revenue (y-o-y organic)
2.9% 1.3% (1.1%) 2.0% 1.2%
Q1 Q2 Q3 Q4 FY
Solid commercial performance
Rational and dynamic market
Contract delivers growth & loyalty
o Solid LTE demand: 7.9m base (+13% q-o-q) to 19% penetration
o LTE coverage at 75% (+13 p.p. y-o-y)
o Contract churn improved 0.2 p.p. to 1.7% in Q4
VDSL drives fixed performance
o Strong VDSL net adds in Q4: 73k (+12% y-o-y)
Slight MSR market share increase
Sequential top line improvement
o Strong handset sales (Q4 +17.9% y-o-y vs. Q3 +2.7%) on Christmas promotions
o Better fixed trends (Q4: -3.2% y-o-y vs. Q3: -9.5%)
Continued data monetisation
o 40% of new O2 Blue opting for a tariff with >1GB
MSR (+0.1% vs. FY14) meets outlook; higher contribution from partners
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Germany: Anticipated synergies drive growth
OIBDA 2015
Organic y-o-y ex non-recurrent
4.4% 12.5% 28.5% 35.5% 19.9%
Q1 Q2 Q3 Q4 FY
OIBDA margin 2015
Organic ex non-recurrent y-o-y
20.5% 23.8% 23.7% 23.9% 23.0%
Q1 Q2 Q3 Q4 FY
+0.3 p.p. +2.4 p.p. +5.5 p.p. +5.9 p.p. +3.6 p.p.
Strong profitability
Better OIBDA growth trends throughout 2015 (+35.5% in Q4)
Synergies & commercial efficiencies drive exceptional OIBDA growth
o Synergies: >50% of Q4 OIBDA growth; successful execution in first full year of integration
o Leavers programme: 50% of total target
o Shop footprint reduction: 80% of target
o In-city consolidation of facilities: 30% of target
o 3G National roaming
o Focused subsidy approach based on retention of value base
Continued OIBDA margin expansion to 23.9% in Q4
FY 15 OpCF at €826m (>2x vs 2014)
o Rev & OpEx synergies of €140m
o CapEx synergies of €140m
Reported OIBDA (2015: €1,858m; Q4: €586m) affected by
o Final agreement on E-Plus purchase price (Q4: +€102 m)
o Restructuring expenses (2015: €73m; Q4: €7m)
2015 OIBDA & synergies meet upgraded outlook
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Brazil: Capturing value across segments
Mobile accesses (Dec-15 y-o-y)
Accesses
ARPU 2015 (y-o-y)
Data
Total
10% 33% x4
Contract Smartphones LTE
31.1m 39.9m 10.2m
25.6% 40.5%
3.3% 3.0%
Q1 Q4
Fixed accesses (Dec-15 y-o-y)
Accesses
ARPU 2015 (y-o-y)
Pay TV
FBB
10% 14%
Pay TV FTTx
1.8m 3.8m
4.4% 0.0% 7.8% 5.7%
Q1 Q4
Outstanding commercial results
97m customers in a market of >200m people
New portfolio of mobile tariffs launched in Nov-15 to further push market outperformance
o 69% Q4 contract net adds share (50% in FY 15)
o 100% of 2015 MSR market growth
Data ARPU: 52% of total (+15 p.p. vs. Q4 14) boosted by LTE
o LTE 15% penetration (+11 p.p. y-o-y)
Increased uptake of UBB & Pay TV
Growing share of UBB & Pay TV
o Capturing 100% of Pay TV market growth in 2015
o 52% UBB net adds share in 2015
16.6m FTTx premises passed as of Dec-15 (4.7m FTTH ex. GVT) o Increasing take-up ratio (3.8m HH connected vs 3.3m a year ago)
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Brazil: Sustained market outperformance
Revenue 2015 (organic y-o-y)
Total
Mobile
Fixed
8.4%
4.3% 3.5% 3.4% 4.5%
(4.0%) 3.3%
Q1 Q2 Q3 Q4 FY
OIBDA Margin 2015
Organic margin y-o-y
34.2%
ex-one off
30.1% 31.2% 30.4% 38.0% 32.3%
Q1 Q2 Q3 Q4 FY
(1.0.pp) (1.5pp) (1.0pp) +1.3pp (0.5pp)
Robust revenue performance
Balanced mobile & fixed growth
o Q4 MSR +2.7% y-o-y (+5.3% FY)
o Mobile revenue market share +5p.p. in 2015
o 2nd consecutive Q leading fixed revenue growth
o Negative impact of regulation y-o-y (-2.5 p.p. Q4 15; -2.7 p.p. FY)
Accelerating mobile data trends (Q4 +37.6% y-o-y; FY +34.5%)
o Mobile data 49% o/MSR in Q4
o New data monetisation initiatives
Accelerating OIBDA growth despite macro
Outstanding OIBDA performance: +7.3% y-o-y in Q4; +2.9% in FY
o OpEx y-o-y well below inflation (Q4 15: +5.6%; FY: +6.1%)
o Better sequential costs trend; bad debt reduction standing out
Synergy initiatives aligned with Best case scenario
Organisation fully integrated and operating as a single Co.
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Hispam: Sound performance on quality growth
Accesses (Dec-15 y-o-y)
Penetration
+6% +44% +4% +16%
Contract Smartphones FBB Pay TV
22% 37% 44% 50%
O/ Fixed O/ FBB
Revenue 2015 (organic growth y-o-y)
Total Revenue
Rev ex-handset
9.7% 10.3% 12.6% 9.5% 10.1%
9.5% 10.1% 12.5% 8.1%
Q1 Q2 Q3 Q4 FY
OIBDA Margin 2015
Organic margin y-o-y
30.8% 29.6% 29.7% 31.0% 30.3%
Q1 Q2 Q3 Q4 FY
+1.3pp (0.3pp) (2.8pp) (1.3pp) (0.8pp)
Increase adoption of value services
Contract mobile consolidates improving trend in Q4
o Highest-ever net adds (732k; >3x y-o-y)
o Booming Smartphone & LTE penetration (+10 p.p. y-o-y & +6 p.p.)
Enhanced capabilities pushing bundled fixed services
o FBB speeds >4Mb: 54%; +4 p.p. y-o-y
o Growing Pay TV: best-ever net adds (380k in 2015; +27% y-o-y)
Solid top line growth & profitability over the year
Sequential revenue growth deceleration
o Lower handset sales y-o-y (Q4: -5.0%; Q3: +13.7%)
o Tariffs promotions & repositioning in MEX / different seasonality on tariffs update in ARG
o Strong Pay TV & FBB top line expansion
Solid OIBDA increase (Q4: +4.0% y-o-y; FY: +7.2%)
o Efficiency measures and cost rationalisation offsetting FX impact and higher commercial expenses
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Hispam: Commercial momentum; solid performance
Revenue (organic y-o-y)
Q4 15
FY 15
(0.1%) 7.6% 0.3% (0.1%) 3.4% 3.5% 18.0% 21.5% (0.6%) 1.7% 29.7% 33.2%
Mexico Colombia Peru Argentina Chile VZ & CA
OIBDA (organic y-o-y)
Q4 15 FY 15
19.7% 38.7% 12.1% 17.2% 1.1% 34.7% 16.2%
(5.4%)(0.6%) (1.5%) (11.2%) (0.5%)
Mexico Colombia Peru Argentina Chile VZ & CA
OIBDA margin (organic y-o-y)
Q4 15 +5.3 p.p. (2.3 p.p.) +2.8 p.p. (6.0 p.p.) Flat +1.2 p.p.
FY 15 +6.1 p.p. (0.2 p.p.) (1.7 p.p.) (0.4 p.p.) (0.2 p.p.) (4.1 p.p.)
Mexico
o Strengthening market position with Q4 best-ever net adds (postpay and prepay); LTE coverage of 45m POPs at Dec-15
o Sound FY Rev, OIBDA & OpCF increase; Q4 deceleration on intense tariff promotions and higher commercial costs
Colombia:
o Continued momentum on value segments: highest quarterly net adds of last 2 years (72k) in contract mobile
o Sequential OIBDA margin improvement (Q4 36.3% vs. Q3 34.3%) despite commercial intensity
Peru:
o Robust accesses (contract mobile +13%; FBB +8%; Pay TV +27%) driving revenue & profitability improvement
o Data promotions underpinned traffic (2.5x vs. Q4 14)
Argentina:
o Rev & OIBDA y-o-y trends affected by seasonality of tariffs update & higher commercial expenses
Chile:
o Steady growth of contract mobile (+4%), FBB (+6%) and Pay TV (+7%)
o Lower handset sales & regulation dragging revenue y-o-y
VZ & CA:
o Handset availability limiting commercial trading and leading y-o-y margin expansion in Q4
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UK: Gaining market value
Consolidated as
discontinued
operation
Contract net adds 2015 (‘000)
133 172 194 240 739
Q1 Q2 Q3 Q4 FY
Best loyalty
in UK; Q4
contract
churn 1.0%
Contract mobile
base: +5% to 14m
Total base >25m
MSR (y-o-y ex “O2 Refresh”)
OIBDA margin ex-non recurrent
0.3% 2.9% 4.0% 4.2% 2.4% 3.4%
FY 14 Q1 15 Q2 15 Q3 15 Q4 15 FY 15
24.0% 24.6%
Substantial progress in commercial momentum
Strongest quarterly contract net adds in 2015
Solid gross adds on successful propositions
O2 had the most satisfied customers in the mobile market for the 7th year in a row (Ofcom)
LTE as main lever of growth
LTE Penetration: 35% (+5 p.p. q-o-q)
80% outdoor coverage at Dec-15
Continued revenue growth
Total revenue up 4.6% y-o-y in FY ex “O2 Refresh”
Ongoing customer appetite for high-value tariffs
Q4 growth decelerating y-o-y
Primarily due to slowdown of high-end handset sales
Strong OIBDA margin on top-line progress and cost control
2015 OIBDA grew 2.2% y-o-y ex non-recurrent
Q4 OIBDA maintained similar growth to Q3
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Leverage in line for reaching the target
Net Financial Debt
€ in millions
Net Financial
Debt/OIBDA
2.74x
Net Financial
Debt/OIBDA
2.91x
45,087 (3,514) 721 4,188
2,673 (419) 1,185 49,921
Net Fin. Debt Dec-14
FCF
Pre- retirements commitments
Shareholder remuneration & Hybrid coupon
Net financial investments
Hybrid
Others
Net Fin. Debt Dec-15
ND/OIBDA post-O2 UK sale at 2.38x, close to target leverage
Target < 2.35x reiterated
6,439 1,855 (2,410) (664) (796) 675 (1,585) 3,514
Adjusted OpCF continued operations
Working capital
Net Interest
Tax
Dividend to minorities & Others
FCF discontinued operations
Spectrum accrued
FCF
FCF pre-spectrum: €4,821m
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Effective interest cost below guidance
Effective interest cost: 57 b.p. lower y-o-y
Guidance
6%
5% 5.26% (0.51%) 0.09% (0.15%) 4.69%
Dec-14
Lower cost of European currencies
Higher cost and leverage in Latam
Venezuela & Others
Dec-15
Liquidity position
€ in billions
Undrawn credit lines & syndicated credit facilities Cash position
ex-VZ
19.1
91% LT
5.5
Dec-15
O2 UK sale
upfront payment
~32
Liquidity post
UK sale
Sources of financing
€ in billions
4.7 1.9 8.5 2.9 18.0
Equity
Bonds
Undrawn syndicated credit facilities
Other bank financing
Total
Net debt maturities (Dec-15)
€ in billions; not considering hybrid NC dates
Average debt life at 5.15 years
7.0 7.4 6.2
2016E 2017E 2018E
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04 Conclusion
Chairman & CEO
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Summary
2015 Solid set of results in 2015; Improving position to accelerate growth
2015 Robust momentum in fiber, 4G and Pay TV; Investing in differentiation
2015 Bold step in integration (GVT, DTS, E-Plus); Advances in simplification
2016 Maintain revenue momentum; Significant data monetisation potential
2016 Accelerate in transformation, Synergies & Simplification
2016 Ongoing investments & Attractive shareholder remuneration
GROW PROFITABLY; MAINTAINING FINANCIAL FLEXIBILITY
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Telefonica
For further information:
Investor Relations
Tel. +34 94 482 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: February 26, 2016 | By: | /s/ Miguel Escrig Meliá | ||||
| Name: Miguel Escrig Meliá | ||||||
| Title: Chief Financial Officer | ||||||