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, 2017
Commission File Number: 001-09531
Telefónica, S.A.
(Translation of registrant’s name into English)
Distrito Telefónica, Ronda de la Comunicación s/n,
28050 Madrid, Spain
3491-482 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 ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes ☐ No ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes ☐ No ☒
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes ☐ No ☒
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
Table of Contents
Telefónica, S.A.
| Item | Sequential Page Number | |||
| 1. | Telefónica Group: Presentation on quarterly results January-December 2016 |
1 |
Table of Contents
Telefonica
Results
January – December 2016
Table of Contents
Disclaimer
This document and the conference-call webcast (including the Q&A session) may contain forward-looking statements and information (hereinafter, the “Statements”) relating to the Telefónica Group (hereinafter, the “Company” or “Telefónica”) or otherwise. These Statements may include financial forecasts and estimates based on assumptions or statements regarding plans, objectives and expectations that make reference to different matters, such as the customer base and its evolution, growth of the different business lines and of the global business, market share, possible acquisitions, divestitures or other transactions, Company results and other aspects related to the activity and situation of the Company.
The Statements can be identified, in certain cases, through the use of words such as “forecast”, “expectation”, “anticipation”,
“aspiration”, “purpose”, “belief” or similar expressions or variations of such expressions. These Statements reflect the current views of Telefónica with respect to future events, do not represent, by their own nature, any guarantee of future fulfilment, and are subject to risks and uncertainties that could cause the final developments and results to materially differ from those expressed or implied by such Statements. These risks and uncertainties include those identified in the documents containing more comprehensive information filed by Telefónica before the different supervisory authorities of the securities markets in which its shares are listed and, in particular, the Spanish National Securities Market Commission.
Except as required by applicable laws, Telefónica does not assume any obligation to publicly update the Statements to adapt them to events or circumstances taking place after the date hereof, including changes in the Company’s business or business development strategy or any other unexpected circumstance.
This document and the conference-call webcast (including the Q&A session) may contain summarized, non-audited or non-GAAP financial information. The information contained herein and therein should therefore be considered as a whole and in conjunction with all the public information regarding the Company available, including any other documents released by the Company that may contain more detailed information.
In October 2015, the European Securities Markets Authority (ESMA) published guidelines on Alternative Performance Measures (APM), applicable to the regulated information published from July 3, 2016. Information and disclosure related to APM used in this presentation are included in the Appendix to the “Results January – December 2016” report. Recipients of this document are invited to read our consolidated financial statements and consolidated management report for 2016 submitted to the Spanish National Securities Market Commission.
Neither this document nor the conference-call webcast (including the Q&A session) nor any of their contents constitute an offer to purchase, sale or exchange any securities, a solicitation of any offer to purchase, sale or exchange of any securities, or a recommendation or advice regarding any security.
Investor Relations
Telefónica, S.A.
1
Telefonica
Table of Contents
01 >
2016 Overview
2017 Outlook
Mr. José María Álvarez-Pallete
Chairman & CEO
2
Investor Relations
Telefónica, S.A.
Telefonica
Table of Contents
2016 highlights; positioned to grow sustainably
A year of GROWTH
Co. transformation paying off
Strengthening Balance Sheet
Consistent organic deleverage
Building sustainable growth (high quality base)
Improved data monetisation
OIBDA growth across the board
Mid-single digit EPS growth (underlying y-o-y)
Strong FCF: €4.4bn (+24.4% y-o-y; incl. significant CapEx effort)
Recovery in margins (efficiencies + synergies + simplification)
CapEx peak behind us; the best network
Customer care transformation; New Customer Relationship Model (Cognitive Intelligence)
FCF improvement (business momentum + lower interests)
FX drag easing throughout the year
LT financing: €13.1bn in 2016-2017 YTD
Strategically driven portfolio optimisation (Telefé; Telxius in Feb-17)
Sustainable shareholder remuneration
€0.40/share 2017
Investor Relations Telefónica, S.A.
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Consolidation of growth trends
(Organic growth y-o-y)
Service 1.9% 2.9% 2.6%
Revenue growth
Revenues
4.7% 3.2%
OIBDA
0.2%
& Margin expansion
5.6% 1.3%
OpCF
(12.7%)
CapEx (ex-spectrum)/ Sales
16.2% 16.2% 16.5% 24.4%
(Reported growth y-o-y)
Driving FCF growth
(7.9%)
FCF
(29.2%)
€4.4bn
FY 14 FY 15 FY 16
4
Investor Relations
Telefónica, S.A.
Telefonica
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FY 16: Key financials
FY 16
Organic € in millions Reported y-o-y
Revenues
52,036
1.3%
Service revenues
48,005 2.6%
OIBDA
15,118 4.7%
OIBDA Margin
29.1% 1.0 p.p.
OpCF (ex-spectrum)
6,535 5.6%
Net Income 2,369
EPS 0.42
FCF 4,370
Net Financial Debt
48,595
Q4 non-cash effects: €1.3bn in OIBDA
FY 16
€ in millions Underlying
OIBDA
16,519
OIBDA Margin
31.7%
OpCF (ex-spectrum)
7,937
Net Income 4,038
EPS 0.75 +5.1%
Investor Relations Telefónica, S.A.
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Performance on 2016 guidance
2016 Guidance (Constant FX 2015; ex-VZ; ex-UK)
Guidance 2016E
FY 16
Revenues
>4%
+2.6%
OIBDA margin
Stabilising vs. 2015
+0.9 p.p.
CapEx ex-spectrum/Sales
Around 17%
17.0%
Service Revenues
+4.0%
Focus on service revenues
(handset sales weak, in line with market dynamics)
2016 Dividend
• Voluntary scrip paid in Nov-16; €0.35/sh.
• Cash dividend to be paid in Q2 17; €0.20/sh.
Dividends paid in 2016 calendar year amounted to €0.75/sh.
• Cash dividend paid in May-16; €0.40/sh.
• Voluntary scrip paid in Nov-16; €0.35/sh.
Investor Relations Telefónica, S.A.
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Telefonica
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Superior customer growth & improved retention
High value customers
Penetration Dec-16 (y-o-y)
+77%
+24%
+17%
+6%
LTE
FTTx/Cable
Smartphones
Mobile Contract
25%
43%
57%
40%
+10 p.p.
+8 p.p.
+8 p.p.
+2 p.p.
Average revenue/access
(organic y-o-y)
5.2%
4.4% +2.8 p.p.
2.8% 2.7% Q4 vs Q3
1.6%
FY 16 Q1 Q2 Q3 Q4
Accesses +1%; 350m
Upgrading customer value
Double digit growth of LTE, FFTx/Cable & Smartphones accesses
9.0m LTE accesses added in Q4 (+25% y-o-y; +23% q-o-q)
Q4 mobile contract net adds +18% y-o-y to 1.8m
Mobile and fixed upsell strategies gaining traction (FFTx/4G/TV)
Focus on customer loyalty
Q4 churn -0.5 p.p. y-o-y
Enhancing customer experience
Omnichannel initiatives
Investor Relations Telefónica, S.A.
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Revenues accelerating; improving quality
2016 Revenues (y-o-y organic)
Total Handset sales Service revenues
3.7%
3.9%
1.5%
1.4%
2.8%
2.7%
(0.2%)
(0.2%)
(9.0%)
(5.1%)
(16.6%)
(18.0%)
Q1
Q2
Q3
Q4
Transitioning to a more sustainable mix
Service revenues +2.3 p.p. q-o-q
Hispam +1.2 p.p.; UK +0.4 p.p.; Spain: +0.3 p.p.
Germany -0.2 p.p.; Brazil -0.1 p.p.
Total revenues returned to positive growth (+3.0 p.p. q-o-q)
Broadband sales accelerated to 15.6% y-o-y in Q4
Continued strong performance of mobile data (+12.3% y-o-y)
Q4 Service Revenues (y-o-y organic)
9.9%
3.7%
2.4%
2.1%
1.9%
(3.1%)
TEF
Hispam
UK
Brazil
Spain
Germany
MSR ex-
regulation
(0.9%)
2016 Revenues
Access
Services Over
Other
Broadband
& Voice
Connectivity
10%
43%
35%
12%
Var. vs.
FY 15
(1 p.p.)
(5 p.p.)
+4 p.p.
+2 p.p.
Investor Relations Telefónica, S.A.
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Higher speeds and data proposals fuel growth
LTE accesses
Strong boost in unitary usage
(million)
Avg. usage/smartphone
+77%
+44%
66.3
1.2 GB
0.8 GB
37.4
Dec- 15
Dec- 16
Q4 15
Q4 16
Leading networks accelerating monetisation
(Q4 16)
Usage
ARPU uplift
LTE
+65%
+11%
FTTx
>2 (vs DSL)
>€10 premium
Solid Mobile Data Revenues (y-o-y organic)
Q4 16
FY 16
19.2% 19.7%
12.3% 12.3% 82%/Data
52%/MSR
Data
Non-SMS data
Capturing the data opportunity
“More 4 More” strategy leveraging mobile data allowance
Value accretion from recurrent prepay plans & tiered-pricing
o ~15-20% ARPU uplift in Latam
Roaming propositions evolved to play elasticity
Data buckets for certain services (avoiding zero-rated)
Data sharing & family plans to unleash demand and drive upsell
NGN fostering volumes & ARPU growth
Q4 LTE traffic (3x y-o-y); Mobile data traffic ramp-up: +71% y-o-y
Q4 FBB traffic +44% y-o-y driven by UBB
Strong upside in data usage & upselling
Investor Relations
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Extensive transformation starting to bear fruits
FTTx/Cable
Premises passed
2014 2016
15m 39m
European 4G
coverage
+28
p.p.
2014
2016
59%
87%
E2E digitalisation
x6
1 6
2014 2016
Full Stack
(Countries live)
IT Simplification
(2014-2016)
-14%
-13%
-12
+8 p.p.
Applications
Physical Servers
Data Centers
Virtualisation
Big Data storage
x6.7
2014
2016
4 PB
27 PB
New revenue generators
2014
38%
61%
2016
47%
43%
BB & SoC
Access & Voice
STRUCTURAL ADVANTAGE
Investor Relations Telefónica, S.A.
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TGR: excellent connectivity; further digitalisation
Accelerating coverage & capacity
Access Network
Core Network
17 m (+19% y-o-y)
FTTx/Cable premises passed
17 m (+4% y-o-y)
5 m (+48% y-o-y)
Transport transformation
Legacy management
Advanced analytics
Virtualisation
LTE coverage
(62 % pop.)
87% Europe (+11 p.p. y-o-y)
53% Latam (+10 p.p. y-o-y)
Fostering Transformation with Digital Capabilities and Innovation
Network evolution
VoIP
VoLTE
countries
countries
Global Centers
• Home connectivity: Smart Wi-Fi, new devices for FW & Video
• Efficiency in energy & rentals
Innovation
• Network softwarsation (SDN/NFV)
• Big Data: Network management & Video evolution (UHD)
• 5G: “user centric” trial; pre-5G tech. deployment
E2E Digitalisation (IT)
• Full Stack: on-going in 15 countries
o Live in 3 new countries (x2 vs. 2015)
45m
Accesses
migrated • Single Online Charging System (OCS)
Customers
59% (+9 p.p. y-o-y)
• Security integration
• Boosting data capabilities
o 6 new Big Data platforms
o Real Time Decision: x3 use cases
Investor Relations Telefónica, S.A.
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Digital Services: enlarged growth platform
Digital Services Revenues (€m)
y-o-y organic
4,792
4,090
Video
+12.4%
+14.1%
Cloud
+17.3%
2,577
+24.5%
Security
+22.7%
2,271
M2M
+21.9%
1,843
Fin.Serv.
+12.3%
+28.9%
+16.2%
Others
+12.7%
+17.6%
FY 12
FY 13
FY 14
FY 15
FY 16
2016 Digital Services Rev. Mix
Financial
M2M
Security
7%
6% 5%
Cloud 11%
Video 58%
Others
13%
Driving data monetisation with video
Virtuous circle: robust network intensive usage higher loyalty
Cutting edge TV proposition: content, connectivity, customer experience
Adapting to new market dynamics (VoD, multiplatform, curated content)
Pragmatic approach to quality content: Wide variety to differentiate vs. OTTs
Growing relevance of adjacent services
CLOUD: Relevant player; very solid portfolio
SECURITY: Own technology and global partnerships
M2M: Best-in-class managed connectivity platform
BIG DATA: Launched new service (LUCA) enabling companies to execute on actionable insights
Telefónica Open Future_: Committed to innovation to benefit core business
Investor Relations
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2017 outlook & dividend policy
Operating 2017 Guidance (Organic)
Guidance 2017E
Revenues
Stable
(in spite of regulation:
-1.2 p.p.)
OIBDA margin
Expansion up to 1 p.p.
CapEx ex-spectrum/Sales
Around 16%
Growing profitability (expanding margins)
2017 Dividend
To be paid in 2017/18
Interim Q4 17
€0.20/sh. Cash
Final Q2 18
€0.20/sh. Cash
Dividends to be paid in 2017 calendar year amount to €0.40/sh.:
Cash dividend in Q2 17; €0.20/sh. Cash dividend in Q4 17; €0.20/sh.
MAINTAINING A SOLID INVESTMENT GRADE RATING Growing CF + organic deleverage
Investor Relations Telefónica, S.A.
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2017 priorities set on milestones reached
Focusing on revenue, OIBDA, OpCF and CF growth
P&L + CF growth
Focused investment in UBB/4G, in a more granular and targeted way
A platform and data-driven Co.; Cognitive Intelligence: a new way to interact with our customers
Company transformation
Managing all situations in our portfolio and looking transversally at asset classes
Solid Investment Grade; Balance Sheet
Attractive and sustainable shareholder remuneration allowing cash preservation & organic deleverage
Investor Relations Telefónica, S.A.
14
Telefonica
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02 >
Q4 16 Highlights
& Results
Mr. Ángel Vilá
CSFO
Investor Relations Telefónica, S.A.
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Telefonica
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Q4 summary: Robust results
Business improvement (strengthening growth)
Fit for growth (competitive position reinforced)
Strong FCF
Pick-up in service revenues to +3.7% y-o-y organic
Significant OIBDA acceleration to +9.4% y-o-y organic
+2.0 p.p. y-o-y organic margin expansion; efficiency a non-stop process
FX negative impact y-o-y diminishing
Hispam & Spain accelerating trends in main metrics
Materialisation of synergies in Brazil & Germany
UK ramp-up in top line & OIBDA growth
+11.6% CapEx y-o-y organic
Differential infrastructure
Best quality base & targeted commercial actions
Data monetisation: Non-SMS mobile data revs. +19.2% organic y-o-y
Enhanced FCF in Q4 (€2.1bn) to € 4.4bn in FY (+24.4% y-o-y)
Sale of Telefé (€0.3bn cash repatriated); Telxius (€1,275m announced in Feb-17)
Organic deleverage: Dec-16 Net Debt € 48.6bn
Underlying Q4 EPS €0.23: threefold y-o-y
Investor Relations
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Financials in a nutshell
FY 16 Q4 16
€ in millions
Reported
Organic y-o-y
Reported
Organic y-o-y
Revenues 52,036 1.3% 13,721 2.7%
Service revenues 48,005 2.6% 12,493 3.7%
OIBDA 15,118 4.7% 3,187 9.4%
OIBDA Margin 29.1% 1.0 p.p. 23.2% 2.0 p.p.
OpCF (ex-spectrum) 6,535 5.6% 279 5.4%
Net Income 2,369 145
EPS 0.42 0.01
FCF 4,370 2,055
Net Financial Debt 48,595
FY 16 Q4 16
€ in millions
Underlying
y-o-y
Underlying
y-o-y
OIBDA 16,519 -2.0% 4,464 6.0%
OIBDA Margin 31.7% 1.3 p.p. 32.5% 2.2 p.p.
OpCF (ex-spectrum) 7,937 0.3% 1,556 3.8%
Net Income 4,038 4.8% 1,233 2.5x
EPS 0.75 5.1% 0.23 2.7x
Underlying growth in € terms accelerating
Reported results reflecting FX and non-cash factors
• FX drag easing in Q4 16 y-o-y on easier comps and BRL appreciation
• Q4 16 restructuring costs: -€1.3bn in OIBDA
• Other factors in OIBDA: Capital gains +€228m, Impairments -€215m
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Reported Q4 affected by several factors
Q4 factors impacting OIBDA (€1.3bn)
3,187
1,290
215
(228)
4,464
+6.0%
OIBDA Reported
Restructuring Provisions
Impairments
Capital Gains
OIBDA Underlying
Q4 factors impacting Net Income (€1.1bn)
145
950
215
94
(171)
1,233
2.5x
Net Income Reported
Restructuring Provisions
Impairments
PPA
Capital Gains
Net Income Underlying
Non-cash effects; mainly restructuring charges to improve future profitability, productivity & cash flow
• Restructuring (personnel, channels): -€1,290m in OIBDA (T. España -856m; T. UK -36m; T. DE -30m; T. Brasil -14m; T. Hispam -81m and Others -274m)
• Capital gains: Telefé (+€199m in OIBDA) and T. Personalizadas (+€29m in OIBDA)
• Goodwill impairments: Venezuela (-€124m in OIBDA) and Mexico (-€91m in OIBDA)
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Strong and healthy FCF generation
FCF 2016
(€ in millions)
+24.4%
4,370
3,514
69
746
1,500
2,055
FY 15 FY 16 Q1 16 Q2 16 Q3 16 Q4 16
FCF & CapEx (ex-spectrum)/ Sales
(€ in millions)
6,951
5,391
3,817
3,514
4,370
FY 12 FY 13 FY 14 FY 15 FY 16
14.2% 14.3% 16.2% 16.2% 16.5%
Delivering on >€4bn FY stated objective
• Growing FCF and FCFS throughout the year (including a record high CapEx level and with a balanced WC effort)
• +€857m FCF improvement in FY y-o-y
o Growth in adj. OpCF (€+1,676m y-o-y)
o Savings on interest, tax and minorities (€+369m y-o-y)
o Lesser WC contribution (€-1,189m y-o-y)
FCF acceleration in spite of CapEx peaking
FCFS FY 16: €0.86; +24.6% y-o-y
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Outstanding organic OIBDA growth in Q4
2016 OIBDA (y-o-y organic)
4.7% 5.5% 0.8% 3.1% 9.4%
+6.3 p.p. Q4 vs Q3
FY 16 Q1 Q2 Q3 Q4
OIBDA margin +1.0p.p. +0.8p.p +0.3p.p +1.0p.p +2.0p.p
Q4 OIBDA (y-o-y organic)
9.4% 11.5% 4.1% 3.8% 3.4%
TEF Hispam UK Germany Spain (0.9%) Brazil
Efficiency across the board
Strengthening operating leverage
Q4 OpEx -2.3% y-o-y organic (Q3: -1.6%; FY: -0.7%)
Main contributors to OIBDA sequential improvement: Hispam & Spain
Simplification initiatives (commercial, network, CRM, billing, …)
Synergies (BZ & Germany)
FY OIBDA growth across segments
Q4 y-o-y in Brazil impacted by positive factor in Q4 15; +8.9% excl. this impact
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Accelerating OIBDA growth; FX easing
OIBDA: Organic growth vs. FX impact
(€ in millions)
Q1 y-o-y Q2 y-o-y Q3 y-o-y Q4 y-o-y
+230 (553) +34 (332) +135 (187) +394 (94)
Organic Growth FX Organic Growth FX Organic Growth FX Organic Growth FX
Net Impact -323m -298m -53m +300m
2016 Negative FX effect on OIBDA neutralised at FCF level
(€ in millions)
(1,175) 795 37 176 (166)
OIBDA CapEx Working Capital Taxes + interest + Others FCF
Organic acceleration; FX neutralising
Organic OIBDA trends significantly accelerating
€+394m in Q4 vs. €+135m in Q3
FX impact in OIBDA sequentially reduced
Q4: €-94m (Q3: €-187; Q2: €-332m; Q1: €-553m)
Q4: BRL appreciation; GBP and ARS depreciation
2016 FX impact: -8.8 p.p. to OIBDA y-o-y; -4.7 p.p. to FCF y-o-y
2017 FX impact: at current rates; FX would be a tailwind in Q1 17
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Growing OpCF despite CapEx still increasing in 2016
2016 CapEx (€ in millions)
y-o-y organic
8,928 (345) 8,583 +3.9%
Total Spectrum Ex-spectrum
2016 OpCF ex-spectrum (Underlying)
+13.6% y-o-y
GER 10%
+0.3% y-o-y
BRAZIL 21%
SPAIN 44%
HISPAM 15%
UK 10%
OpCF +5.6% y-o-y
Network leadership
Consistently investing in networks & platforms
79% of CapEx devoted to growth/transformation
Network CapEx allocation through Big Data
Boosting revenue increase
Building the future (Big Data; differential experience)
Driving competitive advantage
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Spain: superior franchise; sustained upselling
Net adds (‘000)
Q3 16 Q4 16
159 132 147 147
15 22
(71) (63)
(44) (54)
Traditional Fixed FBB UBB TV Mobile contract (Voice)
Accesses (y-o-y) (3%) +2% +34% flat +2%
High-value penetration (Dec-16) y-o-y
“Fusión” ARPU (€) y-o-y
+8 p.p. +5 p.p. +11.5%
37% 68% 73.2 81.6
UBB/Fusión TV/Fusión Q4 15 Q4 16
Q4 trading improvement & better value mix
• Ongoing benefits from “Fusión” (4.3m customers: +5% y-o-y)
o +81% TV (+10 p.p.); +73% contract (+6 p.p.); +83% FBB (+3 p.p.)
o Lower churn vs. unbundled services; consistent ARPU growth y-o-y
o 58% of gross adds totally new customers in Q4
• Accretive adoption of higher value services on enhanced portfolio
o More speed, more mobile capacity, more content
Best-placed structurally
• Ahead of the pack on differential assets (upselling tools)
o FTTH: 17.1m premises passed (+2.7m y-o-y); ~60% homes
o LTE: 96% pop. coverage (+10 p.p. y-o-y)
o TV: exclusive content and platform
• “More 4 More” strategy to successfully continue in 2017
o Constructive market landscape
o Promotions targeting differentiation
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Spain: growing Service Revenues, OIBDA, OpCF
Steady growth on Service Rev. & OIBDA (2016)
Service Revenues (y-o-y organic)
OIBDA (y-o-y organic & ex-factors)
2.0% 2.6%1.8% 2.6%
1.0% 1.1% 0.6% 1.9%
Q1 Q2 Q3 Q4
Back to growth; operating leverage starts to work
y-o-y organic & ex-factors
FY 15 FY 16 Margin
Service Rev. OIBDA OpCF
1.1% 2.2% 1.8%
(2.2%) +3.3 p.p. (5.7%) +8.0 p.p. (11.1%) +12.9 p.p.
41.1% +0.9 p.p. 26.6% +0.5 p.p.
Q4 revenues acceleration; margin expansion
• Sequential improvement in service revenues growth (+1.2 p.p. q-o-q)
o “Consumer: +3.5% in Q4 y-o-y (FY: +1.8%)
o “Business”: +1.4% in Q4 y-o-y (FY: -1.4%)
o “Other” decline on lower TV wholesale: -1.8% in Q4 y-o-y (FY:+3.2%)
• Margin +1.1 p.p. y-o-y to 40.6%, despite higher content costs
Cash conversion benchmark
• Strong execution in OpEx (Q4: -3.5% y-o-y; FY: -2.3% organic & ex-factors)
o Substantial savings in personnel, commercial, network & systems
o Higher net content cost (Q4: +46% y-o-y)
• Redundancy plan and channel optimisation extended (Q4 provision: -€856m)
o Additional savings of €100m run rate from 2019
• FY CapEx: +3.0% y-o-y organic
o Expected to ease on lower legacy and LTE investment
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Germany: realising synergies; improving profitability
2016 MSR ex-regulation (y-o-y organic)
MSR
FY 16 Q1 Q2 Q3 Q4
(1.0%) (0.9%)
(1.1%) (1.5%) (0.9%)
(1.7%) (1.3%) (1.7%) (1.8%) (2.1%)
2016 OIBDA (y-o-y organic & ex-yourfone in Q1 15)
6.2%
3.8% 3.9%
3.6%
1.8%
FY 16 Q1 Q2 Q3 Q4
23.9% +2.1 p.p. 24.8% +2.5 p.p.
Maintaining market momentum
• 1.3m contract net adds in 2016; 336k in Q4
o 54% of gross adds from partners; 58% in Q4 (-1 p.p. q-o-q)
o Signs of easing price pressure in non-premium
• Solid metrics of “O2 Free” (“More 4 More”)
o Data traffic 1.5x vs. “O2 Blue All-in” portfolio
• Focus on data growth
o LTE cust. +53%; penetration 28% (+9 p.p.); cov. 79% (+4 p.p.)
o +41% y-o-y avg. data usage to 1.7 Gb
o +62% mobile data traffic vs. Q4 15
Better OIBDA and margin trends; synergy-driven
• MSR ex-regulation performance stable q-o-q
• Successful synergy capture: Q4: ~€25m; incremental savings of ~€150m in 2016
o Synergy case upgrade: +€100m to ~€900m OpCF synergies in 2019 (~€670m by YE2017)
• 2016 guidance met; expanding FCF
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UK: consistently outperforming the market
2016 contract net adds (ex-M2M) (‘000)
Blended ARPU ex- “O2 Refresh” (y-o-y)
421 76 100 125 119
FY Q1 Q2 Q3 Q4
0.4% 1.8% (0.8%) (0.6%) 1.3%
2016 (y-o-y organic)
MSR ex-”O2 Refresh”
OIBDA
5.7%
4.1%
2.6%
1.6%
(0.2%)
1.5%
1.1%
(4.0%)
Q1 Q2 Q3 Q4
Roaming & MTR impact on MSR y-o-y ex- “O2 Refresh”
(0.4 p.p.) (2.0 p.p.) (2.1 p.p.) (1.7 p.p.)
Solid commercial & ARPU performance
• Mobile base 25.5m
o Contract 62% o/total (+4 p.p. y-o-y)
o Market-leading contract churn: 1.0% in Q4
o 47% LTE penetration (+12 p.p.); 95% outdoor cov. (+16 p.p.)
• Q4 ARPU up 1.3% y-o-y (ex-”O2 Refresh”)
o Solid data revenues; +4.5% y-o-y
o Data traffic +63% y-o-y
Sustained total revenues uptick
Q4 total revs. accelerated to 2.5% y-o-y ex-”O2 Refresh”
o MSR pick-up; larger out-of-bundle spend, lower regulatory impact and customer growth
o Handset and other revs. +5.2% y-o-y (+13.3 p.p. q-o-q) on new device launches
• Q4 OIBDA increase driven by better top line and cost control
• FY CapEx/Sales 13.6%: investment in LTE rollout (CapEx: +18.7% y-o-y)
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Brazil: focus on value; customer upgrades
Mobile accesses (y-o-y)
Market share
35.7% 30.2% 42.1%
1% 7% 25% x2
Mobile ARPU +18.4% Q4 y-o-y
Data ARPU +23.5% Q4 y-o-y
Total Contract Smarthphones LTE
Fixed accesses (y-o-y)
Q4 ARPU y-o-y
Market share
37.8% 28.1% 41% 9.1% 48% 3%
FBB >34 Mbps (4%) Pay TV IPTV
+7.7% +9.3% +1.9%
Selective commercial approach
• Mobile: leading contract while protecting value in prepay
o 38% of contract net adds share in LTM. Positive portability every month in 2016
o +13.2% prepaid ARPU vs. Q4 15
o Successful data-bundling strategy o Accelerating LTE deployment: 60% cov. (+13 p.p.)
• Target YE 17: >80%
• Fixed: upgrading customers on increased network quality
o 17.3m FTTx premises passed (4.2m connected)
• Target YE 17: 18.8m FTTx premises passed
o Selective TV strategy, focusing on IPTV
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Brazil: robust growth in revenues, OIBDA, OpCF
2016 (y-o-y organic & ex-Q4 15 positive factor)
Service Revenues OIBDA
8.2% 5.8% 9.5% 8.9%
1.1% 1.7% 3.0% 2.1%
Q1 Q2 Q3 Q4
2016 (y-o-y organic & ex-Q4 15 positive factor)
Margin y-o-y
+2.2 p.p. +3.0 p.p.
26.2%
8.1%
2.0%
Service Revenues OIBDA OpCF
Gaining revenue market share (36%; +1 p.p. y-o-y)
• Capturing full incremental market revenue growth in 2016
• Q4 MSR +4.0% y-o-y (FY: +3.1%)
o Data/MSR: 57% (+8 p.p. vs. FY 15)
• Regulation dragged 2.3 p.p. on revenues y-o-y in Q4 and FY
Expanding margins
• Continued OpEx reduction (Q4: -1.6% y-o-y; FY: -1.9%)
• CapEx below initial guidance on optimisation and Big Data
o 18.8% Capex/Sales: 4G, IP backbone, fiber and selective Pay TV
o Enlarging quality gap: FY 16 CapEx BR$8bn; BR$24bn 2017-2019E
• Successful execution of operational synergies: €372m in OpCF
o Fully secured base case NPV; 71% of best case
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HispAm: strengthened market positioning
Mobile accesses (y-o-y)
Accesses penetration
2% 3% 15% 86%
Total Contract Smartphones LTE
22% 41% 14%
Q4 Mobile ARPU +6.9% y-o-y
FBB & Pay TV
Accesses y-o-y
ARPU Q4 y-o-y
+12.2% 48% +6.3% 4% (1%)
FBB FTTx/Cable Pay TV
Sustainable growth
Steady increase on value accesses driving sustained ARPU growth
ARGENTINA: Quality base growth & gradual tariff updates fostering Q4 ARPU (mobile +28.7% y-o-y; FBB +35.2%)
CHILE: Leadership position reinforced by LTE and UBB
LTE coverage 79%; 1.1m FTTx premises passed
PERU: Solid growth in value amid intense competition
LTE coverage 65%; 2.8m FTTx/Cable premises passed
COLOMBIA: +6% y-o-y mobile accesses on offer simplification
Solid ARPU growth in FBB (+9.1%) & Pay TV (+14.8%)
MEXICO: Positive commercial momentum (Q4 mobile net adds: 620k)
Better sequential ARPU
Easing aggressiveness since Q1 17 (reducing duration of prepaid recharges in unlimited tariffs)
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HispAm: revenues and OIBDA y-o-y acceleration
2016 Revenues (organic y-o-y)
7.5% 11.3% 3.6% 4.1% 10.9%
FY Q1 Q2 Q3 Q4
2016 OIBDA (organic y-o-y)
3.9% 0.8% 6.3% 11.5% (3.4%)
FY Q1 Q2 Q3 Q4
Sound financials
Strong Q4 MSR (+12.0% y-o-y; FY: +7.0%); accesses + ARPU growth acceleration (booming data volumes + “More 4 More” strategy)
Double-digit growth in fixed rev. (Q4: +10.9% y-o-y; FY:+12.2%) driven by Pay TV and UBB
OIBDA margin widening in H2 amid strong commercial activity
OpCF stable in 2016 (-0.3% y-o-y organic); CapEx/Sales 18.5%
ARGENTINA: Growth across the board; Q4 rev. +31.6% y-o-y; OIBDA +96.4% (higher volumes; tariff updates and better comm. comps)
CHILE: Q4 top line ramp-up (+3.8% y-o-y; FY: +0.6%) due to mobile. Profitability affected by higher commercial trading
PERU: Q4 Revenue & OIBDA trends reflect intense competition and promotional actions
COLOMBIA: Solid top line growth (Q4: +2.5% y-o-y; FY:+4.3%); steadily grabbing revenue market share
MEXICO: Better revenue and OIBDA (ex-factors affecting Q4 15)
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Further deleverage on stronger FCF generation
Net Financial Debt
€ in millions
Net Financial Debt/OIBDA 3.18x (€3.6Bn) Net Financial Debt/OIBDA 2.95x
52,193 (3,555) 682 406 (1,000) (648) 516 48,595 (1,275)
Jun-16 FCF Shareholder remuneration (incl. hybrid cost) Pre-retirement commitments Hybrid issue Net financial investments FX, MTM & Others Dec-16 Post - closing event (Telxius)
3,530 1,795 (766) (422) (582) 3,555
Offseting -€1.4bn WC in H1
Adjusted OpCF Working capital Net Interest payment Tax Dividends to minorities & spectrum FCF
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Strengthening balance sheet with long term financing
Interest payments cost
1.02 p.p.
4.96%
0.07% 3.94%
(1.09%)
Dec-15 Europe Latam Dec-16
Liquidity position (Dec-16)
€ in billions
23.8 incl. Jan/Feb 17 Bonds issuances
14.6 21.3
92% LT
6.6
Cash position ex-VZ Undrawn credit lines & syndicated credit facilities Liquidity position
Sources of long-term financing (2016 – 2017 YTD)
€ in billions 1.4 13.1
3.3
Avg. maturity new debt >7 yr 6.8
1.0
0.6
Equity Linked-bond (non-dilutive convertible)
Hybrids Bonds Other bank financing Latam Financing Total
Net debt maturities (Dec-16)
€ in billions; not considering hybrid NC dates
Avg. debt life Dec-16: 6.35yr; 6.77yr inc. liquidity and 2017 bonds
7.2 6.4 4.9
2017E 2018E 2019E
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Closing remarks
Solid year of growth flowing into FCF; strong strategy execution
Delivered promising Q4 operating momentum
Best-placed structurally
Enhancing Balance Sheet
2017 outlook: further growth; consistent deleverage; sustainable dividend
A solid platform for sustainable growth
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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 23, 2017 | By: | /s/ Laura Abasolo García de Baquedano | ||||||
| Name: | Laura Abasolo García de Baquedano | |||||||
| Title: | Managing Director of Planning, Accounting, Control and Tax for Telefonica, S.A. | |||||||