REG - Telefonica SA - Quarterly results January-June 2014 <Origin Href="QuoteRef">TEF.MC</Origin>
06/09/2014 22:44
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RNS Number : 8385N
Telefonica SA
31 July 2014
FINANCIAL HIGHLIGHTS
· Accelerating commercial activity in the second quarter, focused on
high-value customers, with sequential churn improvement.
Mobile contract accesses increased 9% year-on-year in organic terms, pay TV
accesses were up 32%, smartphone penetration reached 32% (+8 percentage points
year-on-year) and fibre accesses grew by 98%, with 10.5 million premises
passed with fibre.
Total net additions in the quarter reached 2.6 million, 40% higher than the
first quarter, registering an improved trend in nearly all services. Thus,
quarterly net additions reached 2 million mobile contracts, 5 million
smartphones, 610 thousand pay TV accesses, 228 thousand fibre customers and a
limited net loss of 99 thousand fixed traditional accesses.
· Organic revenue growth for the fifth consecutive quarter.
Revenues totalled 12,725 million euros in the second quarter and rose 1.3%
year-on-year in organic terms (+3.7% year-on-year excluding regulation). In
the first half, revenues advanced 1.4% year-on-year in organic terms (+3.6%
year-on-year excluding regulation) to 24,957 million euros.
Second quarter in a row of sequential mobile data revenue growth acceleration
(+9.2% year-on-year organic in the second quarter), highlighting non-SMS data
revenues (+24.1% year-on-year organic in the second quarter).
The Company maintained its focus on technological transformation and network
modernisation, translating in a significant CapEx increase in the first half
of the year.
· Stable OIBDA in the first half, despite increased commercial momentum
in the second quarter.
In the second quarter, OIBDA fell 0.7% year-on-year in organic terms (+0.9%
year-on-year excluding regulation) mainly due to higher commercial investments
to capture growth opportunities.
OIBDA totalled 8,055 million in January-June 2014 and remained stable
year-on-year (-0.1% in organic terms; +1.4% year-on-year excluding
regulation). OIBDA margin stood at 32.3%, with limited organic erosion of 0.5
percentage points compared to the first half of 2013 and of 0.6 percentage
points vs. the second quarter of 2013.
· Solid cash flow generation, enhancing financial flexibility.
Free cash flow amounted to 1,664 million euros, with a significant
year-on-year growth (+14.7%) despite strong CapEx increase, the sale of T.
Czech Republic and exchange rates variation.
· Net financial debt declined 1,590 million euros in the first half to
43,791 million euros.
Net debt increased by 1,067 million euros in the second quarter, mainly due to
the cash dividend payment of 0.40 euros per share in May.
Including post-closing events (disposal of T. Ireland, completed in July), net
debt stood at 42,961 million euros and the leverage ratio at 2.43 times.
· Second quarter net income increased 4.9% year-on-year to 1,210
million euros (1,903 million euros in the first half).
EPS improved in the second quarter to 0.26 euros (0.41 euros in the first six
months to June).
· Telefónica reiterates financial and operating targets for 2014,
including the dividend.
First half 2014 results are in line with the Company's internal estimates for
revenues, OIBDA margin erosion and CapEx/Sales (+0.1% year-on-year, -0.9
percentage points year-on-year and 13.7%, respectively, in organic terms and
excluding Venezuela).
· Telefónica España second quarter results confirmed the success of the
refreshed offer, reflecting increased commercial activity in high value
services. Including backlog increase in the quarter, Pay TV net additions
amounted to 0.5 million; quarterly fibre net additions increased 69% vs. first
quarter to reach 182 thousand; 721 thousand Fusión customers were repositioned
(resetting their long-term contracts); and, for the first time since the
second quarter of 2011, the Company posted positive mobile contract net
additions. Revenue consolidation trend along with the radical change in
commercial activity, demonstrate a change in the business dynamics in Spain,
confirming its gradual turnaround, which should be gradually reflected in
year-on-year performance.
· Telefónica Brasilcompetitive position continued to improve in the
second quarter through its focus on service quality and innovation in
commercial offerings. Thus, the Company captured over 60% of total contract
net additions in the market for the fourth quarter in a row. In the fixed
business, 2.9 million premises were passed with fibre. Revenue growth
accelerated in the second quarter despite the higher impact of regulation,
driven by the acceleration in the mobile business. OIBDA returned to
year-on-year growth for the first time in five quarters, after increasing 4.0%
in organic terms in the second quarter. OIBDA margin stood at 32.1% in the
quarter (+0.9 percentage points year-on-year), reflecting efficiency measures
and despite higher commercial and network costs.
Comments from César Alierta, Executive Chairman
"First-half results started to reflect the benefits from the investments in
network modernisation carried out in recent quarters, which are enabling us to
further differentiate our offering in key markets. This increased
differentiation resulted in an acceleration of commercial activity in the
second quarter, with net additions of 2 million mobile contracts, 5 million
smartphones and over six hundred thousand pay TV customers. All these are
high-value services contributing to boost average revenue per customer and to
reduce churn.
In financial terms, the performance in the first six months of the year was in
line with our full-year expectations; organic revenue growth trend was similar
to the first quarter while OIBDA was stable
year-on-year, despite increased commercial investments in high-value
customers. This organic revenue and OIBDA performance was again overshadowed
in reported terms by the negative impact of exchange rate fluctuations and
recent disposals, though the impact of the first factor on cash flow
generation was negligible.
In parallel, we continued to strengthen our competitive position through
higher investments which resulted in 10.5 million premises passed with fibre
and an expansion of LTE coverage to almost half of the population in our
European markets and one third of the population in Latin America.
All this is accompanied with the ongoing improvement of our financial
flexibility driven by strong cash flow generation. We also continued executing
our asset portfolio optimisation policy, enabling us to reduce debt to below
43 billion euros including the disposal of Ireland, completed in July.
This asset portfolio optimisation policy includes the consolidation of
Germany, expected to be completed in the third quarter, which will enable us
to significantly increase our scale in this market and to generate significant
synergies, thereby increasing the value of the business.
I would also like to highlight the status of the business in Spain, where the
radical transformation undertaken in recent years and the clear improvement in
the economic conditions resulted in a change of the business dynamics in the
second quarter. Both our new commercial offering and the growing
differentiation of our service quality have triggered a significant
transformation in commercial activity that should be reflected in a gradual
revenue improvement in the coming quarters".
TELEFÓNICA
SELECTED FINANCIAL
DATA
Unaudited figures
(Euros in millions)
2014 Reported Organic 2014 Reported Organic
Revenues 24,957 (12.6) 1.4 12,725 (11.8) 1.3
Telefónica España 5,992 (8.6) (8.6) 3,000 (9.1) (9.1)
Telefónica UK 3,344 3.4 (0.1) 1,700 4.4 0.1
Telefónica Deutschland 2,284 (6.6) (6.6) 1,162 (4.4) (4.4)
Telefónica Brasil 5,484 (14.7) 0.6 2,818 (11.0) 1.0
Telefónica 7,066 (13.8) 13.0 3,630 (14.6) 11.3
Hispanoamérica
Other companies & 787 (53.7) 416 (51.7)
eliminations
Telefónica Ireland 259 (6.7) (6.7) 129 (8.4) (8.4)
Telefónica Czech - n.m. - n.m.
Republic
OIBDA 8,055 (14.5) (0.1) 4,126 (15.0) (0.7)
Telefónica España 2,745 (12.3) (14.0) 1,342 (16.0) (16.5)
Telefónica UK 805 6.2 2.6 401 (4.4) (8.4)
Telefónica Deutschland 515 (14.6) (14.6) 265 (14.5) (14.5)
Telefónica Brasil 1,732 (16.3) 0.1 904 (11.1) 4.0
Telefónica 2,267 (11.9) 17.5 1,192 (9.7) 20.1
Hispanoamérica
Other companies & (8) n.m. 22 (88.2)
eliminations
Telefónica Ireland 51 (1.6) (1.6) 26 (5.9) (5.9)
Telefónica Czech - n.m. - n.m.
Republic
OIBDA margin 32.3% (0.7 p.p.) (0.5 p.p.) 32.4% (1.2 p.p.) (0.6 p.p.)
Telefónica España 45.8% (1.9 p.p.) (2.8 p.p.) 44.7% (3.7 p.p.) (4.0 p.p.)
Telefónica UK 24.1% 0.6 p.p. 0.6 p.p. 23.6% (2.2 p.p.) (2.2 p.p.)
Telefónica Deutschland 22.6% (2.1 p.p.) (2.1 p.p.) 22.8% (2.7 p.p.) (2.7 p.p.)
Telefónica Brasil 31.6% (0.6 p.p.) (0.1 p.p.) 32.1% (0.0 p.p.) 0.9 p.p.
Telefónica 32.1% 0.7 p.p. 1.3 p.p. 32.8% 1.8 p.p. 2.4 p.p.
Hispanoamérica
Operating Income (OI) 3,892 (9.8) 7.9 2,055 (8.7) 10.4
Net income 1.903 (7.5) 1,210 4.9
Basic earnings per 0,41 (11.0) 0,26 2.0
share (euros)
CapEx 3,523 (9.8) 27.2 1,968 0.3 25.4
Telefónica España 703 12.1 24.9 436 16.3 40.5
Telefónica UK 375 (65.0) 2.5 184 (19.5) (3.0)
Telefónica Deutschland 266 (10.1) (10.1) 134 (10.9) (10.9)
Telefónica Brasil 833 12.3 37.6 523 10.6 35.5
Telefónica 1,234 26.7 44.2 629 2.0 31.3
Hispanoamérica
Other companies & 112 (42.3) 62 (48.0)
eliminations
Telefónica Ireland 27 1.5 1.5 13 (27.8) (27.8)
Telefónica Czech - n.m. - n.m.
Republic
Spectrum 189 (77.3) (75.3) 3 (98.2) n.m.
Telefónica España - n.m. n.m. - n.m. n.m.
Telefónica UK - n.m. n.m. - n.m. n.m.
Telefónica Deutschland - n.m. n.m. - n.m. n.m.
Telefónica Brasil - n.m. n.m. - n.m. n.m.
Telefónica 189 n.m. n.m. 3 n.m. n.m.
Hispanoamérica
OpCF (OIBDA-CapEx) 4,533 (17.9) (13.5) 2,159 (25.3) (16.9)
Telefónica España 2,042 (18.4) (22.6) 907 (25.9) (30.3)
Telefónica UK 429 c.s. 2.7 216 13.7 (12.6)
Telefónica Deutschland 249 (18.9) (18.9) 130 (18.0) (18.0)
Telefónica Brasil 899 (32.3) (20.0) 381 (29.9) (21.6)
Telefónica 1,033 (35.5) 1.9 563 (19.9) 9.9
Hispanoamérica
Other companies & (120) c.s. (39) c.s.
eliminations
Telefónica Ireland 24 (4.9) (4.9) 13 32.8 32.8
Telefónica Czech - n.m. - n.m.
Republic
- Reconciliation
included in the excel
spreadsheets.
Notes:
- OIBDA and OI are
presented before brand
fees and management
fees.
- OIBDA margin
calculated as OIBDA
over revenues.
- 2013 and 2014
reported figures
include the
hyperinflationary
adjustments in
Venezuela in both
years.
- From January 1st,
2014, and due to the
implementation of the
new organization
announced in February
2014, the activities
carried out to date by
Telefónica Digital,
Telefónica Europe and
Telefónica Latam are
integrated into the
Global Corporate
Centre, thus
simplifying the
organization.
Additionally, from the
beginning of the year,
the new organizational
structure will be
composed of T. España,
T. Brasil, T.
Deutschland, T. U.K.
and T. Hispanoamérica
(Argentina, Chile,
Peru, Colombia,
Mexico, Venezuela &
Central America,
Ecuador and Uruguay).
All that is not
specifically included
in these new segments
is part of "Other
companies and
eliminations". Thus,
the results of T.
España, T. Brasil, T.
Deutschland, T. U.K.,
T. Hispanoamérica and
"Other companies and
eliminations" have
been revised for the
year 2013, to reflect
the above mentioned
new organization. As
this is an intragroup
change, Telefónica
consolidated results
for 2013 are not
affected.
- Organic criteria:
Assumes constant
exchange rates as of
2013 (average FX as of
January - June 2013),
excludes
hyperinflationary
accounting in
Venezuela in both
years and considers
constant perimeter of
consolidation. In
OIBDA and OI terms
excludes write-downs,
capital gains/losses
from companies'
disposals, tower sales
and material non
-recurring impacts.
CapEx excludes
spectrum acquisition.
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.
Relaciones con Inversores
Distrito Telefónica - Ronda de la Comunicación, s/n
28050 Madrid (España)
Teléfono: +34 91 482 87 00
Fax: +34 91 482 85 99
Pablo Eguirón (pablo.eguiron@telefonica.com)
Isabel Beltrán (i.beltran@telefonica.com)
Gonzalo Borja (gonzalo.borjadelsur@telefonica.com)
ir@telefonica.com
www.telefonica.es/accionistaseinversores
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