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Disclaimer
This presentation may contain forward-looking statements concerning future prospects and objectives regarding growth of the subscriber base, a breakdown of the various services to be offered and their respective results
The exclusive purpose of such statements is to indicate how we intend to expand our business and they should therefore not be regarded as guarantees of future performance
Our actual results may differ materiallyfrom those contained in such forward-looking statements, due to a variety of factors, including Brazilian political and economic factors, the development of competitive technologies, access to the capital required to achieve those results, and the emergence of strong competition in the markets in which we operate
For a better understanding, we are presenting pro forma numbers combining Telefônica Brasil and GVT results for all financial and operational indicators for every period as of January, 2015
2
FOUNDATIONS AND POSITIONING
MOBILE LEADERSHIP
FIXED: FIBER AS NEW GROWTH ENGINE
DIGITALIZATION
UNIQUE FINANCIALS AND SHAREHOLDER REMUNERATION
BACKUPS
Commitment to Shareholders
Upside opportunity
Starting Point
Value Drivers
Solid track record and an irreplicable position with unique assets
Sustainable mobile leadership
Fiber as new growthengine Digitalization
driving margin expansion
Strong foundation for a convergent future
Potential upside from external environment
Robust FCF generation and shareholder remuneration
44
31.4% 36.5% 39.7%56.6%
30.5%30.0% 27.4%
23.4%19.0% 13.7% 16.1%
15.3%19.2% 19.9% 16.8%4.8%
Customers ¹ NetRevenue
RecurrentEBITDA
OpCF²
100%³
2017
Player 2
Player 3
Player 4
Largest and most profitable Telco in Brazil, with a unique set of assets...
≈100 MillionCustomers¹
Vivo’s Share
_National presence
_Full portfolio for B2C and B2B
_Unique and highly admired brand
_Largest fiber operation in Latin America
_Integrated organization with great talents
551 - RGUs2 - EBITDA – CAPEX3 - Including Vivo, AMX, TIM and Oi
Solid leadership in Mobile
74.9
59.0 58.6
38.9
Player 2 Player 3 Player 4
31.7%
25.0% 24.8%
16.5%
Mobile accesses (million)
Strong position in Broadband
BB accesses (million)
8.47.4
6.3 5.9
Player 2 Player 3 Others
31.2%26.1%
22.1%20.6%
Superior quality perception
Net Promoter Score (NPS)
39
13 10 7
Player 2 Player 3 Player 4
Dec’17
…an undisputable leadership position…
8
-3
-34Player 2 Player 3
Mobile B2C
Fixed B2C
6
Dec’17 Dec’17
6
Market Share
Total Net Revenue Recurrent EBITDA
42.1 42.543.2
2015 2016 2017
R$ Billion
1.3%CAGR
R$ Billion
7.3%CAGR
12.713.7
14.7
2015 2016 2017
30.2% 32.1% 33.9%Margin
OpCF¹R$ Billion
4.45.7 6.7
2015 2016 2017
22.9%CAGR
…and able to deliver consistent and superior results even in challenging times
OpCF Margin² 2017
15.4%
10.5% 11.1%
5.9%
Vivo Player 2 Player 3 Player 4
CAGR 15-17
1.3%
-1.2%-2.7%
-5.0%Vivo Player 2 Player 3 Player 4
CAGR 15-17
7.3%
1.9%4.9%
-4.7%
Vivo Player 2 Player 3 Player 4
77 1- OpCF: EBITDA – Capex2- OpCF (EBITDA-Capex)/ Net Revenue
FOUNDATIONS AND POSITIONING
FIXED: FIBER AS NEW GROWTH ENGINE
DIGITALIZATION
UNIQUE FINANCIALS AND SHAREHOLDER REMUNERATION
BACKUPS
MOBILE LEADERSHIP
Over the last years, Vivo generated strong results in the mobile business, especially in the postpaid segment and data services…
Net Mobile Service Revenues¹ R$ Billion
10.4 8.9 6.0
11.4 14.1 18.3
1.7 1.3 1.1
2015 2016 2017Outgoing voice Data and Digital Services Incoming voice
-24.4%
26.7%
-19.0%23.6 24.3 25.4 CAGR 15-17
Solid and consistent revenues growth in Postpaid² YoY
10.9% 8.6% 9.0%
2015 2016 2017
Data and digital services as the main lever for future growth
48% 58% 72%
33.5%
23.3%30.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
2015 2016 20170.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
% Mobile Data over MSRData and Digital Services Revenues YoY
_4G potential still high as only 46% of our customer base is on 4G while we cover 85% of population
_Large opportunity for upselling data in Hybrid and Family Plans
_Rebound in prepaid with expected economy pick-up
3.6%
CAGR 15-17
91- Simplified view, the chart’s breakdown does not disclose other services revenues 2- YoY evolution does not include wholesale, M2M and other services revenues
39%
28.4% 30.2% 31.7%42.4% 42.1% 41.8%
2015 2016 2017 Total Postpaid
mobile revenue share
Absolute leadership in the mobile market
Mobile Market Share
2,719 2,3173,381
42.4% 45.3% 49.1%
0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%50.0%
0500
1,0001,5002,0002,5003,0003,5004,000
2015 2016 2017 Net Adds (thousand) Customer Mix
Supported by strongest level of postpaid net adds
Vivo Postpaid
postpaid share of net adds
Leading to unrivaled value proposition and ARPU
Prepaid Migration to Hybrid
2015 2016 2017
13%
18%1.87% 1.79% 1.76%
1.1% 1.0% 1.0%
2015 2016 2017
Voluntary churn
Postpaid Churn
24.527.6 28.5
2015 2016 2017
Total ARPU | R$ per month
13.0%
3.0%
11.8 16.0 20.5
2015 2016 2017
35.2%28.6%
Data ARPU | R$ per month
30%
Higher than competitors average
43%
…based on solid and consistent operational results, reflected in high market and revenue share, lower churn and improving ARPU
10
R$/client/month
Vivo created family plan concept, with all services available to all family members
% Prepaid with Vivo Turbo
PREPAID POSTPAID
36 59
2015 2017 Other offers Vivo Turbo
+50%
# of additional linesR$/client/month
Other postpaid Family Plans
+31%
Vivo’s strategy focused on offering “more for more” is paying off…
First operator with a completeweekly offer (voice, data and SMS)
11
2016 2017
4G Cities
% pop. covered
16 States
+ Leadership in 3G, with 93% of population coverage
5162016 Feb 18
4G Coverage Leadership Map*
*Leadership in number of 4G covered cities
60% 85%
2,667 248cities
…supported by our robust nationwide mobile network, which provides a unique network availability and the best customer experience…
12
_Nationwide coverage with 20+20MHz bandwidth 30+30MHz in 478 in cities such as São Paulo, Rio de Janeiro, Niterói and Florianópolis
_Spectrum optimization: 1,800MHz refarming and carrier aggregation
_Best positioned in premium spectrum bandwidth in Brazil
_700MHz already available in 472 cities, 1,356 expected in 2018
2,600MHz
1,800MHz
700/850MHz
…boosted by the best spectrum holding in the market, a crucial factor in fulfilling the exponential data consumption growth
13
FOUNDATIONS AND POSITIONING
DIGITALIZATION
UNIQUE FINANCIALS AND SHAREHOLDER REMUNERATION
BACKUPS
FIXED: FIBER AS NEW GROWTH ENGINE
MOBILE LEADERSHIP
Voice and others¹
Pay TV ²
UBB
Data and IT4
xDSL³
9.3 8.6 7.7
1.7 1.91.9
1.9 2.3 2.8
1.6 1.6 1.8
2.4 2.6 2.6
17.0 17.0 16.7
2015 2016 2017
Net Fixed Revenues | R$ Bn
CAGR15-17
-0.7%
2.6%
5.0%
20.2%
5.1%
-9.0%
Despite historical decline in fixed voice, Vivo has been presenting double-digit growth in UBB and IPTV
FTTH Revenue | R$ million IPTV Revenue | R$ million
Strong momentum in key revenue lines
Reducing exposure to mature voice business
2015 2016 2017 2015 2016 2017
50.0% 53.4% 58.0%
2015 2016 2017
% of Non-Voice Revenues over Fixed Revenues
+40.5% +63.4%
CAGR 15-17
CAGR15-17
151- Includes voice, interconnection and other services. 2- Includes DTH and IPTV. 3- Includes other broadband revenues (VAS and installation fee). 4- Corporate Data and IT
46% 43% 39%
46% 45% 44%
8% 12% 17%
2015 2016 2017
FTTH
TOTAL
Average speed of 22Mbps (+24% yoy) for B2C customers
Strong performances in FTTH and IPTV are leading to customer mix and ARPU improvement
Broadband Accesses and ARPU
BB Accesses | Thousand CAGR15-17
xDSL
FTTC¹
2%
-6%
0%
48%
212 300 402
2015 2016 2017
FTTH AccessesThousand Net Adds
Pay TV Accesses and ARPU
90% 85% 76%
10% 15% 24%
2015 2016 2017
TOTAL
DTH
IPTV-6%
-14%
49%
1,732 1,713 1,588
30% take-up IPTV over FTTH
IPTV AccessesThousand Net Adds
76 82 128
2015 2016 2017
TV ARPU R$ per month
2015 2016 2017
+8.8%
BB ARPU R$ per month
2015 2016 2017
+10.9%
41.9
7,117 7,296 7,432
Pay TV Accesses| Thousand
CAGR 15-17 CAGR 15-17
45.1 51.6 81.7 91.3 96.8
CAGR15-17
161- FTTC (Fiber to the Cabinet) includes Cable accesses
… but already growing fast
UBB² penetration still very low…
Composition of Brazilian fixed broadband market (Million)
7.1%
-1.5%-2.8%
FBB TV Fixed Voice
Brazil subscriber growthYoY 2016-2017
33
61
24
4
PotentialMarket¹
Connectedwith BB
Connectedwith UBB²
NotConnected
UBB is a clear growth opportunity in Brazil…
17
UBB² +47.0% Only 7% of UBB²
penetration
171 - ABC Household and B2B2 - UBB: Speeds above 34 Mbps (FTTH, FTTC and Cable)
FTTH Expansion Accelerationin 2017:
_Superior FTTH deployment
_Scale and learning curve gains leveraging on TEF Group
_Field operations and channels prepared for quick launch
16New FTTH cities
Increasing Operational Know-How
-50%
Jan'17 Oct'17
Technical Complaints
Capex/ HP
-32%
2015 2017
ChurnFTTH
-9%
4Q16 4Q17
FTTH FTTC FTTx
87Cities
HPsmillion
128
7.0 11.4
215
18.419kvertical structures
2017 new cities
FTTH footprint
…and Vivo is expanding existing footprint and accelerating its learning curve for FTTH deployment
18
6% 8%13%
Mo.1 Mo.2 Mo.3
Network occupancyPouso Alegre - MG
MS UBB (>34Mbps)
3 months after launch
89%
10%
23%35%
Mo.1 Mo.2 Mo.3
Vitória da Conquista - BA
55%
Overall customerbase
Pouso Alegre
ARPUR$ / month
+39%
Overall customerbase
Vitória daConquista
Vivo had a successful track record in new FTTH cities launched in 2017, quickly leading the UBB market
+46%
19
Footprint EvolutionFTTH HPs (M)
_Cities above 50k inhabitants
_Selected neighborhoods in cities already covered
_Favorable competitive areas
_Cherry-picking based on IRR* 4,200 km additional backbone
2017 12m 24m 36m
7.0
In 2020_1.0 M additional clients(33% expected take-up)
_>R$ 1 Bn in additional UBB revenues in 2020
_EBITDA margin accretive
Acceleration Project
Base Plan
+3.0*
+1.0
R$2.5Bn
And to continue capturing the UBB opportunity, Vivo will invest an additional R$2.5bn in order to boost FTTH expansion in the next 36 months
20
_60% on Network Expansion
_40% on Installation and CPEs (variable to access growth)
_Leveraging on the Telefónica Group’s global scale and expertise and synergies on existing infrastructure
_Cities with >50k inhabitants
_Cherry-picking of high-potential homes
_Additional 3.0 million FTTH HPs
_Threshold of IRR >17%
_>R$1bn in additional UBB revenues in 2020
_90% of incremental revenues coming from new fixed customers
_Increased Capex efficiency and smart allocation
_Maintaining solid capital structure and flexibility
_Self-funding contribution
The Fiber Acceleration Project will be cash flow accretive from year 3
Maintain strong shareholder remuneration benefiting from growth profile
21
INVESTMENT CORRELATED TO REVENUE GENERATION
FUNDINGCLEAR GUIDELINES AND OBJECTIVES
FOUNDATIONS AND POSITIONING
UNIQUE FINANCIALS AND SHAREHOLDER REMUNERATION
BACKUPS
MOBILE LEADERSHIP
DIGITALIZATION
FIXED: FIBER AS NEW GROWTH ENGINE
Digitalization Scope
Total annual OpEx (2017)
Perimeter of OpExinfluenced by digitalization
≈1/3 OpEx
R$ 29 bn
R$ 11 bn
Prioritization of digitalization initiatives
Annual gross
Opexsavings
of at least
R$1.2 Billion
(by 2020)
Digitalization is a driver for margin expansion and improvement in customer experience
Advertising
Administrativeprocesses
Back office
Cost with own stores
Installation and Maintenance
Commissions
Billing and collection
Customer care
Top-ups
Improvement in customer experience +-
Pote
ntia
l for
dig
ital
izat
ion
+
-
2323
In the digital space, we plan to achieve promising results and have ambitious targets for the future…
2020Fronts 2017KPIs
Enhanced customer care
experience
Fostering sales and top-ups
through digital channels
19% >30%_% of digital top-ups
14 million ≈45 million_Unique users of Meu Vivo
-15% YoY -30% vs 2017_Call center calls
_Online FTTH B2C sales 24% >50%
_Online hybrid plan activations x5
24
More efficient and friendly payments &
collection
Robust IT and improved
technical support
_Digital credit scoring ≈55% >65%
_Penetration of e-billing 43% >80%
_Collections through digital channels ≈50% >75%
_IT legacy systems (B2C customers in Full Stack) <5% >90%
25
2020Fronts 2017KPIs
In the digital space, we plan to achieve promising results and have ambitious targets for the future…
_Incidents solved remotely ≈50% >70%
26
1Q17 1Q18
-6% YoY
BILLING &POSTING
CALL CENTER
INSTALLATION &MAINTENANCE
PHYSICAL TOP-UPS
1Q17 1Q18
-21% YoY
1Q17 1Q18
-7% YoY
1Q17 1Q18
-15% YoY
1Q17 1Q18
-10% YoY
Reduction of Opex within the digitalization perimeter is contributing to continued cost control
…which have been already yielding significant savings across key Opex lines
26
Opex lines evolution
Opex within Digitalization PerimeterApproximately 1/3 of Total Opex
FOUNDATIONS AND POSITIONING
BACKUPS
MOBILE LEADERSHIP
FIXED: FIBER AS NEW GROWTH ENGINE
UNIQUE FINANCIALS AND SHAREHOLDER REMUNERATION
DIGITALIZATION
In 2017, we presented real growth across all lines
2 0 1 7 N O M I N A L G R O W T H Y o Y %
Service Revenues¹ +3.6%
RecurringEBITDA
+7.3%
NetIncome
+12.8%
OperatingCash Flow
+17.8%
FreeCash Flow
+20.1%
>2.9% Inflation (IPCA)
A new cycle of real growth across all lines
Consecutive cost reduction in the last 8 quarters
Recurrent operating costs reduced almost 3% in the last two years vs. accumulated inflation of more than 9%
281- Ex-regulatory effects. Note: All figures presented are recurring
New Capex Guidance for the 2018-2020 Period
Up to
R$24 billionRecurring Capex focused on 4G, Fiber expansion and IT transformation
And to support our unique positioning, we will invest accordingly in the next three-year period to further improve quality, customer experience and accelerate revenue growth
29
Non-recurring Capex envelope does not change long-term
downward trend in Capex/Sales
R$2.5 billionIncremental, non-recurring Capex for
the execution of the Fiber AccelerationProject (2018-2020) aiming to speed
up our already successful expansion of FTTH
Investing in higher return growth projects while reducing investments in legacy
_Cost of FTTH deployment32% lower vs. 2015
_Cost of 4G expansionoptimized with 700MHz roll-out
Lower unitary cost of growth technologies
2 0 1 6 - 2 0 1 8
4G +44%
FTTH +174%
IPTV +108%
IT +8%
3G -27%
Copper -38%
DTH -53%
Additionally, the Fiber Acceleration Project Capex will be fully directed to growth in FTTH
Spectrum and larger technological cycles in mobile are behind us
_Vivo already has a superior spectrum portfolio in Brazil
_Optimization with 1.8GHz refarming and 700MHz roll-out
30
2/3 of R$24bn Capex plan
oriented for growth
2 0 1 6 - 2 0 1 8
Total Capex is clearly focused on capturing growth opportunities
…
As a result, Vivo’s ROCE should expand at a premium to the expected risk-free rate
8%10%
13.75%
7.00%6.75%
8.00% 8.00%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2016 2017 2018 2019 2020
Vivo ROCE Risk-Free Rate
RETURN ON CAPITAL EMPLOYED¹ EVOLUTION ABOVE RISK -FREE RATE
311- ROCE ex-goodwill
32
A strong financial discipline guarantees solid conversion of Operating Cash Flow into Free Cash Flow…
4.4 5.7 6.7 3.9 4.8 5.7
88.0% 84.4% 86.1%
2015 2016 2017
OpCF FCF from Business Activities Cash Conversion
1- FCF after taxes and interest
FCF +21.5%OpCF +22.9%C A G R 1 5 - 1 7
CONVERSION OF OpCF TO FCF¹ (R$ Bn)
+ 17. 6 %
…allowing Vivo to sustain a solid capital structure and boost shareholder remuneration
_Rating Ba1, Negative Outlook_One notch above sovereign rating
_Rating brAAA, Stable Outlook_One notch above sovereign rating
Net Debt/EBITDA YE2017
0.26x
4.6
4.1
3.3
- 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00
2018
2017
2016
LOW LEVERAGERESULTING IN STRONG RATINGS
IMPROVED PROFITABILITY AS A FOUNDATION OF OUR SOLID SHAREHOLDER REMUNERATION
Payment of Dividends¹ (R$ Bn)
C A G R 16 - 1 8
R$20.5 billion distributed as dividends¹ since 2013
331- Includes Interest on Capital
_Acceleration of Total Revenues
_Sustaining solid Mobile Service Revenue growth
_Resuming Fixed Revenue growth
_>R$1bn in additional UBB Fixed Revenues in 2020 from the Fiber Project, further improving evolution
_Sustainable margin increase, maintaining the current pace of EBITDA growth
_Annual gross Opex savings of >R$1.2bn from digitalization by 2020
_2018-20 Capex: up to R$24bn + R$2.5bn envelope for the Fiber Acceleration Project
_OpCF margin, excluding the Fiber Project, consistently above 20% as of 2020
_At least +2 p.p. already in 2018 (vs. 2017)
_Continuous ROCE expansion
_Strong FCF and Net Income evolution with double-digit growth in 2018 (vs 2017)
_R$4.6bn to be paid as dividends¹ in 2018 (+13% YoY)
_Unmatched shareholder remuneration
Absolute leader in REVENUESin the Brazilian telco space
(70% share of incremental revenues in the last 3 years)
The most efficient Company with the largest OpCF in the
sector
(+5.0 p.p. in OpCF margin since 2015)
Second to none SHAREHOLDER REMUNERATION
in the industry(Dividend Yield ≈6% in 2017)
In a nutshell, our past execution positions Vivo with a strong present and a brilliant vision for the future
TODAY TOMORROW (2018-20)
341- Includes Interest on Capital. 2- Based on gross dividends of R$2.82 per preferred share declared during 2017. Note: Trends excluding eventual non-recurring items.
FOUNDATIONS AND POSITIONING
MOBILE LEADERSHIP
FIXED: FIBER AS NEW GROWTH ENGINE
DIGITALIZATION
BACKUPS
UNIQUE FINANCIALS AND SHAREHOLDER REMUNERATION
-3.5% -3.5%
1.0%2.5% 3.0% - 2.5%
2015 2016 2017 2018E 2019-20E
10.7%
6.3%
3.0% 3.5% 4.0% - 4.0%
2015 2016 2017 2018E 2019-20E
14.3% 13.8%
7.0% 6.3%8.0% - 8.0%
2015 2016 2017 2018E 2019-20E
8.5%11.5% 12.6% 12.4% 11.6% - 10.9%
2015 2016 2017 2018E 2019-20E
% YoY
% annual rate %
Expectations for an economic recovery represent a potential upside…
GDP Growth1
% YoY
Inflation¹
Interest Rate¹ Unemployment2
36361) Source: Focus (May 11, 2018 – GDP numbers were revised by IBGE;2) Source: Telefônica Brasil estimates.
…while a regulatory simplification trend might provide an additional upside
Reduction ofconcession’s obligations
Revision of quality goals
Potential to optimize real estate portfolio
3737
Highlights – 1Q18
381) New accounting standard in force since January 2018, which requires revenue to be recognized based on the contract with the customer, not necessarilyaligned with billing. For Vivo, revenue recognition of mobile offers with handset subsidy will change, as the subsidy will now be distributed between servicesand handset. In addition, certain costs to acquire a customer through a contract will now have to be capitalized if the amortization period is >12 months.
1Q18 1Q17 ∆% 1Q18 1Q17 ∆%
Net Operating Revenues 10,759.0 10,590.1 1.6 10,789.0 10,590.1 1.9
Net Operating Service Revenues 10,449.8 10,334.2 1.1 10,403.1 10,334.2 0.7
Net Mobile Service Revenues 6,425.7 6,208.0 3.5 6,379.0 6,208.0 2.8
Net Operating Fixed Revenues 4,024.1 4,126.2 (2.5) 4,024.1 4,126.2 (2.5)
Net Handsets Revenues 309.1 255.9 20.8 385.9 255.9 50.8
Operating Costs (6,993.8) (7,076.2) (1.2) (6,994.5) (7,076.2) (1.2)
EBITDA 3,765.3 3,513.9 7.2 3,794.5 3,513.9 8.0
EBITDA Margin % 35.0% 33.2% 1.8 p.p. 35.2% 33.2% 2.0 p.p.
Net Income 1,078.8 996.2 8.3 1,098.0 996.2 10.2
Capex (ex-Licenses) 1,547.4 1,328.2 16.5 1,547.4 1,328.2 16.5
Operational Cash Flow 2,217.9 2,185.8 1.5 2,247.1 2,185.8 2.8
Total Accesses (thousand) 97,812 97,236 0.6 97,812 97,236 0.6
Total Mobile Accesses 75,098 73,997 1.5 75,098 73,997 1.5
Total Fixed Accesses 22,714 23,239 (2.3) 22,714 23,239 (2.3)
2018 Pro forma (ex-IFRS 15)¹ 2018 Data (Reported) Consolidated in R$ million
Financial Figures – 1Q18
39
1Q18 1Q17 ∆% 1Q18 1Q17 ∆%
Net Operating Mobile Revenues 6,734.9 6,464.0 4.2 6,764.8 6,464.0 4.7
Net Mobile Service Revenues 6,425.7 6,208.0 3.5 6,379.0 6,208.0 2.8
Outgoing Voice 1,159.7 1,672.2 (30.6) 1,165.4 1,672.2 (30.3)
Interconnection 265.1 272.7 (2.8) 265.1 272.7 (2.8)
Data and Digital Services 5,000.4 4,258.7 17.4 4,947.9 4,258.7 16.2
Messaging P2P 307.2 372.8 (17.6) 307.2 372.8 (17.6)
Internet 3,127.8 3,394.2 (7.8) 3,075.3 3,394.2 (9.4)
Digital Services 1,565.4 491.8 218.3 1,565.4 491.8 218.3
Other Services 0.6 4.5 (86.5) 0.6 4.5 (86.5)
Net Handset Revenues 309.1 255.9 20.8 385.9 255.9 50.8
% Data and Digital Services Revenues / MSR 77.8% 68.6% 9.2 p.p. 77.6% 68.6% 9.0 p.p.
2018 Data (Reported) Consolidated in R$ million
2018 Pro forma (ex-IFRS 15)
1Q18 1Q17 ∆% 1Q18 1Q17 ∆%
Net Operating Fixed Revenues 4,024.1 4,126.2 (2.5) 4,024.1 4,126.2 (2.5)
Voice 1,542.6 1,796.3 (14.1) 1,542.6 1,796.3 (14.1)
Interconnection 42.7 50.4 (15.4) 42.7 50.4 (15.4)
Broadband¹ 1,230.7 1,064.0 15.7 1,230.7 1,064.0 15.7
UBB 792.1 646.5 22.5 792.1 646.5 22.5
xDSL 438.6 417.5 5.1 438.6 417.5 5.1
Corporate Data and IT 588.5 584.7 0.6 588.5 584.7 0.6
Pay TV 471.5 478.6 (1.5) 471.5 478.6 (1.5)
Other Services 148.2 152.2 (2.6) 148.2 152.2 (2.6)
% Non-Voice Revenues² / Net Operating Fixed Revenues 60.6% 55.2% 5.4 p.p. 60.6% 55.2% 5.4 p.p.
2018 Data (Reported) Consolidated in R$ million
2018 Pro forma (ex-IFRS 15)
1) Broadband Revenue includes residential customers and SMEs;2) Non-voice revenue includes revenue from Broadband, Corporate Data and IT, Pay TV and Other Services.
Mobile Operating Figures – 1Q18
401) Pro forma figures, excluding the effects of IFRS 15
Thousand 1Q18 1Q17 ∆% 4Q17 ∆%
Total Mobile Accesses 75,098 73,997 1.5 74,940 0.2
Postpaid 37,499 33,825 10.9 36,772 2.0
M2M 6,674 5,279 26.4 6,321 5.6
Prepaid 37,599 40,171 (6.4) 38,168 (1.5)
Market Share 31.9% 30.5% 1.4 p.p. 31.7% 0.2 p.p.
Postpaid 41.4% 42.0% (0.7) p.p. 41.8% (0.4) p.p.
M2M 41.6% 39.8% 1.8 p.p. 41.5% 0.1 p.p.
Net Additions 158 219 (27.6) 378 (58.1)
Postpaid 727 435 67.4 1,107 (34.3)
Market Share of Postpaid Net Additions 27.4% 39.3% (30.3) 34.0% (19.4)
Market Penetration 113.0% 116.9% (3.9) p.p. 113.4% (0.4) p.p.
Monthly Churn 3.1% 3.3% (0.2) p.p. 3.3% (0.2) p.p.
Postpaid ex. M2M 1.6% 1.7% (0.0) p.p. 1.7% (0.1) p.p.
Prepaid 4.5% 4.7% (0.2) p.p. 4.8% (0.3) p.p.
ARPU (R$/month)1 28.6 28.0 2.1 29.2 (2.2)
Voice 6.4 8.8 (27.6) 7.3 (12.8)
Data 22.2 19.2 15.8 21.9 1.4
Postpaid ex. M2M ARPU1 52.6 52.0 1.1 52.9 (0.6)
Prepaid ARPU1 12.9 13.6 (5.5) 13.6 (5.6)
M2M ARPU1 2.6 3.0 (13.9) 2.8 (6.3)
Fixed Operating Figures – 1Q18
41
Thousand 1Q18 1Q17 ∆% 4Q17 ∆%
Total Fixed Accesses 22,714 23,239 (2.3) 22,857 (0.6)
Fixed Voice Accesses 13,679 14,242 (4.0) 13,837 (1.1)
Residential 8,728 9,237 (5.5) 8,899 (1.9)
Corporate 4,510 4,561 (1.1) 4,498 0.3
Others 442 444 (0.6) 441 0.3
Fixed Broadband 7,443 7,336 1.5 7,432 0.1
UBB 4,643 4,227 9.9 4,541 2.3
FTTC 3,231 3,268 (1.1) 3,251 (0.6)
FTTH 1,412 959 47.2 1,290 9.5
Others 2,800 3,109 (9.9) 2,891 (3.2)
Pay TV 1,591 1,661 (4.2) 1,588 0.2
IPTV 430 281 52.9 381 12.9
DTH 1,161 1,380 (15.8) 1,207 (3.8)
Voice ARPU (R$/month) 37.4 41.9 (10.8) 38.7 (3.4)
Broadband ARPU (R$/month) 55.2 48.6 13.7 56.1 (1.7)
Pay TV ARPU (R$/month) 99.1 94.7 4.6 98.3 0.7
IFRS Income Statement – 1Q18
42
Consolidated in R$ million 1Q18 1Q17 ∆% 4Q17 ∆%
Gross Operating Revenue 16,334.4 16,570.4 (1.4) 16,536.7 (1.2)
Mobile 10,331.2 10,153.0 1.8 10,357.6 (0.3)
Fixed 6,003.2 6,417.4 (6.5) 6,179.1 (2.8)
Net Operating Revenue 10,789.0 10,590.1 1.9 11,033.5 (2.2)
Mobile 6,764.8 6,464.0 4.7 6,850.0 (1.2)
Fixed 4,024.1 4,126.2 (2.5) 4,183.6 (3.8)
Operating Costs (6,994.5) (7,076.2) (1.2) (7,266.9) (3.7)
Personnel (959.3) (911.9) 5.2 (949.4) 1.0
Costs of Services Rendered (2,776.8) (2,911.2) (4.6) (2,828.4) (1.8)
Interconnection (284.1) (393.0) (27.7) (371.5) (23.5)
Taxes and Contributions (413.7) (457.4) (9.6) (437.6) (5.5)
Third-party Services (1,369.1) (1,415.7) (3.3) (1,360.5) 0.6
Others (709.9) (645.1) 10.0 (658.8) 7.8
Cost of Goods Sold (484.4) (472.7) 2.5 (534.6) (9.4)
Commercial Expenses (2,227.7) (2,245.4) (0.8) (2,346.7) (5.1)
Provision for Bad Debt (398.0) (357.7) 11.3 (372.1) 7.0
Third-party Services (1,735.8) (1,806.3) (3.9) (1,857.8) (6.6)
Others (93.9) (81.4) 15.4 (116.8) (19.6)
General and Administrative Expenses (374.0) (367.7) 1.7 (382.3) (2.2)
Other Net Operating Revenue (Expenses) (172.3) (167.3) 3.0 (225.5) (23.6)
EBITDA 3,794.5 3,513.9 8.0 3,766.6 0.7
EBITDA Margin % 35.2% 33.2% 2.0 p.p. 34.1% 1.0 p.p.
Depreciation and Amortization (1,998.3) (1,943.6) 2.8 (1,990.9) 0.4
EBIT 1,796.2 1,570.3 14.4 1,775.7 1.1
Net Financial Income (172.7) (290.4) (40.5) (177.8) (2.9)
Gain (Loss) on Investments 0.5 0.8 (37.5) 0.2 150.0
Taxes (526.0) (284.5) 84.9 (81.2) 547.8
Net Income 1,098.0 996.2 10.2 1,516.9 (27.6)
Debt – 1Q18
43
Consolidated Currency Due Date Short-Term Long-Term Total
Local Currency
BNDES UR LTIR 2023 658.3 770.1 1,428.5
BNDES R$ 2023 71.4 147.3 218.7
BNDES R$ 2023 76.5 291.8 368.3
BNB R$ 2022 15.1 51.0 66.1
Confirming R$ 2019 395.3 - 395.3
Debentures 4th Issue - Series 3 R$ 2019 0.7 40.4 41.1
Debentures 1st Issue - Minas Comunica R$ 2021 25.5 76.6 102.1
Debentures 4th Issue - Single Series R$ 2018 1,340.7 - 1,340.7
Debentures 5th Issue - Single Series R$ 2022 17.1 1,996.9 2,014.0
Debentures 6th Issue - Single Series R$ 2020 22.8 999.5 1,022.3
Financial Leases R$ 2033 52.9 338.2 391.1
Contingent Consideration R$ 2025 - 451.1 451.1
Foreign Currency
BNDES UMBND 2019 142.6 47.4 190.0
Total 2,818.8 5,210.3 8,029.2
March 2018
Interest Rate
LTIR + 0.00% to 3.38%
2.5% to 6.0%
SELIC D-2 + 2.32%
7.0% to 10.0%
101.4% to 109.7% of CDI
IPCA + 4.0%
100% of CDI + 0.68 spread
108.25% of CDI
100.00% of CDI + 0.24%
-
IPCA + 0.5%
-
ECM + 2.38%
Consolidated in R$ million 03/31/2018 12/31/2017 03/31/2017
Short-Term Debt 2,818.8 3,033.4 4,455.1 Amount
Long-Term Debt 5,210.3 5,428.4 6,367.8 (R$ miillion)
Total Debt 8,029.2 8,461.8 10,822.9 2019 612.0
Cash and Cash Equivalents¹ (4,366.4) (4,062.1) (6,296.1) 2020 1,416.2
Net Derivatives Position (127.9) (143.8) 22.3 2021 1,286.7
Contingent Consideration Guarantee Asset² (451.1) (446.1) (424.3) 2022 1,234.5
Net Debt 3,083.8 3,809.9 4,124.8 After 2022 660.9
Net Debt / EBITDA³ 0.21 0.26 0.30 Total 5,210.3
Year
March 2018
1) Includes the investment in BNB given as a guarantee for the loan from that bank.2) Alignment of the classification criterion for the asset backing the contingent consideration to calculate pro-forma net debt.3) LTM EBITDA.
4444
IFRS 15: new accounting standard in force since January 2018, which requires revenue to be recognized based on the contract with the customer, not necessarily aligned with billing. For Vivo, revenue recognition of mobile offers with handset subsidy will change, as the subsidy will now be distributed between services and handset. In addition, certain costs to acquire a customer through a contract will now have to be capitalized if the amortization period is >12 months.
Pro forma¹ Reported¹
R$ million 1Q18w/o IFRS Δ% YoY IFRS
Adjustments1Q18
w/ IFRS Δ% YoY
Net Operating Revenue 10,759.1 1.6% 29.9 10,789.0 1.9%
Net Service Revenue 10,449.9 1.1% (46.8) 10,403.1 0.7%
Net Mobile Service Revenue 6,425.8 3.5% (46.8) 6,379.0 2.8%
Net Fixed Revenue 4,024.1 (2.5%) 0.0 4,024.1 (2.5%)
Net Handset Revenue 309.1 20.8% 76.7 385.9 50.8%
Operating Costs (6,993.7) (1.2%) (0.8) (6,994.5) (1.2%)
Personnel (964.2) 5.7% 4.9 (959.3) 5.2%
Commercial Expenses (2,222.0) (1.0%) (5.7) (2,227.7) (0.8%)
EBITDA 3,765.3 7.2% 29.2 3,794.5 8.0%
EBITDA Margin 35.0% 1.8 p.p. 0.2 p.p. 35.2% 2.0 p.p.
Net Income 1,078.8 8.3% 19.2 1,098.0 10.2%
Effects of IFRS 15 on our 1Q18 results
1- Reported figures and YoY variation consider in 2017 IAS 18 accounting and in 2018 IFRS 15 accounting, while pro forma figures and YoY variation consider in 2017 and 2018 IAS 18 accounting.
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