Presentation 2Q15 - ENG
-
Upload
hoangkhanh -
Category
Documents
-
view
245 -
download
2
Transcript of Presentation 2Q15 - ENG
Investor RelationsTelefônica Brasil S.A.
Investor RelationsTelefônica Brasil S.A.July, 2015.
Results 2Q15_
Investor RelationsTelefônica Brasil S.A.
For the first time, in this quarter we are presenting pro forma numberscombining Telefônica Brasil and GVT results for all financial andoperational indicators. For a better understanding of trends, we are alsopresenting pro forma information for all periods as of January, 2014.
This presentation may contain forward-looking statements concerning futureprospects and objectives regarding growth of the subscriber base, abreakdown of the various services to be offered and their respective results.
The exclusive purpose of such statements is to indicate how we intend toexpand our business and they should therefore not be regarded as guaranteesof future performance.
Our actual results may differ materially from those contained in suchforward-looking statements, due to a variety of factors, including Brazilianpolitical and economic factors, the development of competitive technologies,access to the capital required to achieve those results, and the emergence ofstrong competition in the markets in which we operate.
Disclaimer
2
Investor RelationsTelefônica Brasil S.A.
1- Considers TEF Brasil + GVT figures as of January, 2014. 2- Includes Net Handset Revenues. 3 - The tax basis revision of certainintangibles due to the businesses combination (Law 12,973), whose net positive effect on the net income was R$1,196.0 million in the2Q14.
Net Operating Revenue2 (R$ million)
Net Fixed Revenue (R$ million)
EBITDA (R$ million)
EBITDA Margin (%)
Net Mobile Revenue (R$ million)
R$ million
3
2Q151 %YoY 1H151 %YoY
10,427.6
4,215.3
3,131.5
30.0%
6,212.3
5.4
3.1
2.8
(0.8) p.p.
7.0
20,792.1
8,350.6
6,246.0
30.0%
12,441.5
5.3
1.8
2.3
(0.9) p.p.
7.8
Recurrent Net Income3(R$ million) 932.9 (1.4) 1,404.1 (20.8)
Vivo’s results for the 2Q15 are solid and reflect the strength of our strategy
KEY FINANCIAL HIGHLIGHTS
Capex (R$ million) 2,063.2 0.2 3,824.0 7.5
EBITDA – CAPEX (R$ million) 1,068.3 8.4 2,422.0 (4.9)
Investor RelationsTelefônica Brasil S.A.
Net Mobile Revenue
R$ Million
Data and VAS Revenues Growth
Mobile Service Revenue Share1
Accumulated in the last 12 months
1- Based on net mobile service revenues (MSR) accumulated in the last 12 months. For comparative purposes, we calculate the MSRbased on ARPU released by each. Some competitors’ ARPU may not eliminate intercompany resulting in an overestimated revenue.Considering that TIM and Oi still haven’t released 2Q15 results, we are using the same revenue of the 1Q15 in the 2Q15.
% of Data and VAS Revenue over MSR
46%37%
2Q14 2Q15
435 429400 481
1,1781,777
2,013
2,686
2Q14 2Q15
Growth of mobile revenue continue to outperform the market driven by robust data growth
4
-1%
20%
51%
2Q15 YoYR$ Million
Internet
VAS
SMS -11%
42%
29%
2Q14 YoY
33%19%
38%
25%19% 18%
Vivo Player 2 Player 3 Player 4
2,850 2,686
538 385
2,013 2,686
294383
11271
5,8076,212
2Q14 2Q15
-5.7%
YoY
-28.5%
33.5%
30.4%
7.0%
Mobile Service Revenues grow 5.7% in the 2Q15
Others
Data and VAS
Incoming voice
Outgoing voice
Handsets
-36.6%
Investor RelationsTelefônica Brasil S.A.
Total Mobile Accesses
53.2 53.0 53.1
26.2 28.9 29.6
79.4 81.9 82.7
2Q14 1Q15 2Q15
-0.2%
13.1%
YoY
Postpaid Market Share and Mix
Million4.2%
Voluntary Churn2
0.9%
28.8% 29.3%
41.3% 41.7%
33%36%
2Q14 2Q15Total Market Share Postpaid Market Share Mix of Postpaid
0.2%
2.3%
QoQ
Customer Satisfaction Index¹Postpaid and Prepaid - June, 2015
0.20.2 0.2 0.2 0.2 0.2
0.3 0.3 0.3
0.40.3 0.3 0.3
0.30.3 0.3 0.3 0.3
0.30.4
0.4 0.4
0.50.4 0.4 0.4
jun/14 aug/14 oct/14 dec/14 feb/15 apr/15 jun/15
Control Plans Contract
7.36.8
6.3
Vivo Player 2 Player 3
Postpaid
7.47.0 7.0
Vivo Player 2 Player 3
Prepaid
We continue to solidify our leading mobile market position with robust growth in postpaid accesses due to our distinctive value proposition
5
Postpaid
Prepaid
1- Information based on internal data. 2- When the customer wants to leave our base proactively.
Investor RelationsTelefônica Brasil S.A.
ARPUReais and % YoY
1- Teleco. 2- Includes smartphones and webphones. 3- Data cards, data packages and M2M, excluding eventual data user with no datapackage or plan. 4- Average data traffic of our customers as a percentage of the total data traffic in São Paulo, Rio de Janeiro,Brasília, Porto Alegre and Belo Horizonte.
Data ARPUR$/month
Data ARPU Growth
yoy
8.510.8
2Q14 2Q15
Highest data ARPU annual growth in the last 5 years
ARPU MixR$/month
37% 46%
63% 54%
23.3 23.5
2Q14 2Q15
15% 27%
4G Coverage1 Smartphone Penetration and Data users
58% 69% 71%
3341
44
2Q14 1Q15 2Q15
Smartphone Penetration Data Access
Million
4G Data Adoption
2
14%
22%28% 30%
jun/14 dec/14 mar/15 jun/15
4G Data traffic % 4G data traffic
3x
4
140 107 63 45
40% 39%33% 30%
Vivo Player 2 Player 3 Player 4
# cities covered % of population
+13pp
+33%
YoY
Our high quality mobile network combined with the most valuable brand in the industry and innovative offer portfolio led to record data ARPU growth
6
Data
Voice
3
Investor RelationsTelefônica Brasil S.A.
Net Fixed Revenue
Evolution without regulatory effect3
2,163 2,107
324 423
726 784
690712
183189
4,087 4,215
2Q14 2Q15
-2.6%
30.4%
7.9%
R$ Million
3.2%
1- Includes voice, accesses and network usage. 2- B2C segment. 3- Regulatory effect include VC and basic tariff reductions.
YoY
3.2%
715 711
482 495
224 250
1,421 1,456
1Q15 2Q15
3.1%5.6%
Strong acceleration of fixed revenue due to high growth in premium segments of pay TV and UBB
7
Others
Corporate Data and IT
BB2
Pay TV
Voice1
1,586 1,601
986 1,012
169 172
2,740 2,785
1Q15 2Q15
R$ Million
3%
10%
40%
2Q15 YoY
3%
9%
40%
1Q15 YoY
10%10%
R$ Million
Pay TV
Broadband
Voice
Pay TV
Broadband
Voice
2Q15 YoY1Q15 YoY
-0.3%-4.0%
-4%
3%
19%
-10%
2%
22%
Investor RelationsTelefônica Brasil S.A.
Solid growth above 20% y-o-y in accesses…
… is leading to improved market share…
… and driving ARPU growth in the period.
1- FTTX includes FTTH (Fiber to the Home) and FTTC (Fiber to the Curb) accesses. 2- Consider speeds of 12Mbps and higher. Based onMay,15 for competitors, the last public information released by ANATEL. For Telefônica Brasil, we are using internal data.
MonetizationUBB
Pay TV
3,028 3,641
2Q14 2Q15
GVT Vivo Fiber
20%
14%
78%
YoY
FTTX Accesses1
Thousand
Share of Pay TV net addsJan-May/15
93%38% 19%
-77%Vivo +GVT
Player 2 Player 3 Player 4
1,4601,786
2Q14 2Q15
GVT Vivo
Pay TV AccessesThousand
36 37
2Q14 2Q15
57%
31%
3% 5%
Vivo Player 2 Player 3 Player 4
UBB Market Share2
75 80
2Q14 2Q15
Broadband ARPUR$ per month
2%
Pay TV ARPUR$ per month
22%
26%
18%
YoY
Vivo continues to gain share and increase ARPU on the most attractive services
8
6%
Investor RelationsTelefônica Brasil S.A.
Cost Evolution% of Net Revenues
Personnel• Collective bargaining
agreement of 7% (Jan,15) partially compensated by organizational restructuring in 1H15
Selling Expenses• Increased volume of
higher-value handsets and FX variation
• Higher commissions related to postpaid and data growth
ORGANIC
Cost evolution driven by higher selling expenses to promote growth, bad debt and energy costs partially offset by efficiency in G&A and personnel
9
8.3% 8.2%
29.7% 29.3%
24.0% 25.2%
2.6% 2.9%4.7% 4.5%
69.2% 70.0%
2Q14 2Q15
G&A and othersBad debt
Selling Expenses1
Services Rendered
Personnel 4.0%
3.7%
10.6%
17.0%
J YoY
2.1%
6.5%
Main variation drivers:
1- Excludes bad debt.
Services Rendered• MTR reduction• Higher leasing of
sites, maintenance, TV content
• Higher energy costs due to tariff hikes
G&A• Continued
stabilization of G&A expenses in different fronts
Bad debt• Provision for
uncollectibles in a more challenging macroeconomic environment
Investor RelationsTelefônica Brasil S.A.
Recurrent Net Income1
1- Reflects the tax basis revision of certain intangibles due to the businesses combination (Law 12,973), whose net positive effect onthe net income was R$1,196.0 million in the 2Q14.Net profit reported in 2Q14 was R$ 2,142.1 million.
R$ Million and % yoy
YoY
2.8% 19.4% 180% 53%
ORGANIC
-1.4%
D&A increase
• Gain from the periodical review of the useful life of fixed assets that reduced D&A in 2Q14
• Increase in amortization of intangible assets generated by the incorporation of GVT as of May/15
Taxes
• Non recurrent tax gain due to review of certain intangibles generated by combination of business
• Tax benefit from IOC declared in 2Q15
Financial Results
• Exchange variation of GVT’s Loans and financing in foreign currency (R$60MM)
• Taxes related to the settlement of the cash portion relating to GVT acquisition (R$30MM)
946 933
86 297
78276
2Q14 EBITDA D&A Financial Result Taxes excludingnon recurrent tax
gain
2Q151
Recurrent Net Income remained almost stable on an annual comparison
10
Main variation drivers:
M R$ million
%
2,142.11
Investor RelationsTelefônica Brasil S.A.
OCF: EBITDA (-) CapexCapex
Gross and Net Debt
3.6 3.8
18.0% 18.4%
1H14 1H15
Capex % Capex / Net Revenues
2.5 2.4
1H14 1H15
R$ Billion R$ Billion
Stable evolution on Capex and slight decrease in OCF despite exchange rate and inflation
7%
13.2 11.5
2Q14 2Q15
R$ Billion
7.04.2
0.570.33
2Q14 2Q15
Net debt Net debt / EBITDA
-5%
-40%
Gross debt
-13%
11
DISCOVER, DISRUPT, DELIVER
Strategy and Synergies_
Investor RelationsTelefônica Brasil S.A. 13
Management started integration planning early on
Integration best practices followed by VivoKey advances
25/Mar
2015Pre-
closing
2015Post-
closing
28/May
28/Jul
Final integration plan launched internally
Start of synergies initiatives (quick wins)
Management announcement
Roadshow and equity offering
Integration planning kick-off
Start Management bottom-up review of synergies potential
Review of synergies potential Review of synergies potential
Plan well and execute quicklyPlan well and execute quickly
Operate as one single company as quickly as possibleOperate as one single company as quickly as possible
Minimize disruptions: maintain day-to-day focus on prioritiesMinimize disruptions: maintain day-to-day focus on priorities
Investor RelationsTelefônica Brasil S.A. 14
Post-closing analysis by Management confirms the Base Case scenario of Operational Synergies while pointing out to upside potential
Revenue Synergies
Opex Synergies
Capex Synergies
Total of Operational Synergies
• Cross-sell and customer loyalty on B2C and B2B
Due Diligence view /
Base Case
Post-closing view /
Best Case
Main sources of synergies
R$ 2.7 Bi
R$ 3.9 Bi
R$ 3.0 Bi
R$ 9.6 Bi
R$ 5.5 Bi
R$ 6.6 Bi
R$ 4.1 Bi
R$ 16.2 Bi
Operational Synergies
Base CaseNew Opportunities and changes on Best Case
• 3P portfolio integration• Revision of cross-sell potential
• Network Opex (leased lines, maintenance)
• Pay TV content costs• Organization (2017)
• New operational model for field operations in São Paulo
• New customer care model• SG&A expenses reduction• Anticipation of organization
redesign (2015)
• Network Capex avoidance (backbone, backhaul, São Paulo)
• Procurement gains on customer premise equipment
• Revision of assumptions• Procurement gains in Network
and IT
Investor RelationsTelefônica Brasil S.A. 15
Value estimation of synergies / additional considerations
• Best Case synergies were based on the macro-economic scenario available during the exercise (June). The deterioration of the economic situation may impact Company’s ability to deliver estimated synergies
• In addition, it should be noted that Revenue Synergies mostly depend on market conditions (ex.: customers’ acceptance of the Company’s offers, competitive and macro-economic scenario, etc.) while some Opex and Capex Synergies depend on the Company’s success in negotiating revised terms with 3rd
parties (ex.: procurement gains), and other Opex and Capex Synergies depend solely on Company’s ability to execute (ex.: organization changes, use of expanded network to substitute leased lines)
• There are two types of Capex synergies:
i. Capex Avoidance (R$ 3.4 Bi, on the Best Case scenario): related mostly to leveraging GVT’s network to accelerate backhaul of Vivo’s mobile sites and to complementing Vivo and GVT’s networks to reduce future investments in backbone expansion
ii.Capex Savings (R$ 0.7 Bi, on the Best Case Scenario): related mostly to reduction in Capex running rate due to lower unitary spending (i.e. leverage larger scale of the combined entity and Telefonica Group’s purchasing power)
• The variation in exchange rate between deal announcement (in Aug. 2014) and deal closing (in May 2015), increased transaction value, thus increasing the value of Fiscal Synergies from R$ 4.5 Bi to R$ 5.9 Bi (R$ 4.0 Bi in Interest on Equity and R$ 1.9 Bi on Goodwill Amortization and other impacts)
• To conclude, much of the upside related to the Best Case estimations will be tested during 2016, allowing to confirm the assumptions taken in the last exercise. This will allow Management to have better visibility of actual value potential
Investor RelationsTelefônica Brasil S.A. 16
Management has set-up a comprehensive integration plan, with key milestones in 2016, and a full set of KPIs that will be tracked
Anti-trust (CADE) approval
Closing
2015Pre-closing
2015Post-closing
201625/Mar 28/May
New Organizational Structure (1st Level)
26/March
Kick-off of Integration Planning project
31/March
Internal Launch of Integration project
June
Quick-wins (start of cross-selling activities in Consumer and Enterprise market)
June
Use of GVT IT, field operations and customer care systems to support
Vivo’s Fixed Customers in SP
18 days Roadshow and Capital Increase
R$ 3.9 Billion
30/March to 27/April
3 Play Portfolio Unification
Consolidation of Pay TV platforms and contents
Convergent (4P) offers
Launch of operational synergies fronts (Field Operations, Customer
Care, IT)
Organization redesign (under study)
Corporate Legal Merger (one company), followed by Brand
Integration
New field operations and customer care model for Fixed Customers in
SP
Start operation as one single company (organization, culture)
June
Investor RelationsTelefônica Brasil S.A. 17
Synergy capture has started on many fronts
Revenue Synergies
OpexSynergies
CapexSynergies
• GVT sale pilot in 8 Vivo own stores
• 50 contracts renegotiated with providers and 40 RFPs in progress
• Backbone integration
• Initiated Mobile cross-sell among residential customers
• Improved competitive position when negotiating with Large Accounts
• Initiated migration of leased lines (from third parties to Vivo’s network, based on contract expiration)
• Initiated Fixed cross-sell
• 34% sales conversion upon customer inquiry, of which 40% result in 3 Play sales
• R$ 60M in annual savings as of now
• 8 backbone routes shared (out of more than 60 routes to be integrated until end of 2016)
• Mailing sent to over 400K Fixed customers
• Outbound sales conversion 2.7x above average• Inbound sales conversion 15% above average
• 8 successful Corporate negotiations, with full contract value of R$ 62 Million
• More than 200 leased lines migrated (out of more than 7,000 by 2019)
1
2
3
4
5
6
7
Examples of Recent Advances First measured impact until beginning of July
Key synergies enabling projects have been kicked off, including:- Project to unify 3P national portfolio in 2016
- Project to migrate Vivo Fixed customers to GVT's IT systems in 2016
Investor RelationsTelefônica Brasil S.A. 18
Summary
• Outperforming the industry on mobile revenue growth
• Accelerating fixed revenue growth
• Expanding leadership in key segments
• Increasing substantially mobile data ARPU
• Growing EBITDA despite persistent macro-economic headwinds
• Planning early on and already executing integration
• Confirming Base Case synergies, with upside potential
Back Up_
Investor RelationsTelefônica Brasil S.A.
1- Considers TEF Brasil and GVT figures consolidated as of May, 2015. 2- Includes Net Handset Revenues. 3 - The tax basis revision ofcertain intangibles due to the businesses combination (Law 12,973), whose net positive effect on the net income was R$1,196.0million in the 2Q14.
20
2Q15 results reported on financial statements (incorporating GVT from May 2015)
Net Operating Revenue2 (R$ million)
Net Fixed Revenue (R$ million)
EBITDA (R$ million)
EBITDA Margin (%)
Net Mobile Revenue (R$ million)
R$ million 2Q151 %YoY 1H151 %YoY
9,962.1
3,745.5
2,949.0
29.6%
6,216.6
15.6
34.1
15.9
0.1 p.p.
6.7
18,945.2
6,485.7
5,517.8
29.1%
12,459.5
10.0
14.9
8.0
(0.5) p.p.
7.6
Recurrent Net Income3(R$ million) 869.8 9.2 1,449.5 (0.5)
KEY FINANCIAL HIGHLIGHTS
Capex (R$ million) 1,903.0 17.8 3,172.7 21.3
EBITDA – CAPEX (R$ million) 1,046.0 12.5 2,345.1 (5.9)
Telefônica Brasil S.A. – Investor Relations
Av. Eng. Luis Carlos Berrini, 1376 – 28th floor – Cidade Monções – Sao Paulo/SP – 04571-000Phone: +55 11 3430-3687
E-mail: [email protected] available from the website: http://www.telefonica.com.br/ir