Quarterly results January-December 2010
TELEFÓNICA GROUP
Financial Highlights
· In 2010, Telefónica Group delivered solid results, reflected in the strong top line growth (+7.1% year-on-year) and the high cash flow generation.
· The increased commercial activity during the year drove the total number of accesses to over 287 million at the year end (+7.2% year-on-year in organic terms):
o Total gross additions increased by 13.3% year-on-year, while the churn rate remained stable.
o The focus on expanding the customer base and increasing the value of customers led to a solid advance in mobile broadband accesses (+63.9% year-on-year), which now account for 10.1% of the Group's mobile accesses, and retail fixed broadband accesses (+10.9% in organic terms).
o The positive trend in the contract segment (+15.9% year-on-year in organic terms) boosted growth in mobile accesses (+8.9% year-on-year in organic terms). 53% of net additions in 2010 were in the contract segment, which already accounts for 31% of total mobile accesses.
· Consolidated revenue for 2010 stood at 60,737 million euros (+7.1% year-on-year), leveraging the high diversification of the Group:
o Fourth quarter revenues were up 9.9% year-on-year, driven by the growing contribution from Latin America as a result of the strong performance of operations and the higher exposure to Brazil.
o Telefónica Latinoamérica and Telefónica Europe reported solid revenue growth, accounting together for 68% of consolidated revenue for 2010.
o Mobile data revenue rose sharply, to close to 9,300 million euros, posting a 19.3% year-on-year increase in organic terms.
o Revenues were up 2.4% in organic terms, pushed by Telefónica Latinoamérica and Telefónica Europe, which contributed with 2.7 percentage points and 1.0 percentage points, respectively, to revenue growth, offsetting the lower contribution from Telefónica España (-1.6 percentage points).
· Operating income before depreciation and amortization (OIBDA) stood at 25,777 million euros in 2010, posting a 14.0% year-on-year growth. Operating efficiency levels remain a sector benchmark:
o OIBDA was affected by the positive contribution from the revaluation of the previously-held stake in Vivo at the date of acquisition of the 50% in Brasilcel owned by Portugal Telecom (3,797 million euros in the third quarter). On the other hand, the Group recognised non-recurrent restructuring expenses of 1,262 million euros in 2010 (1,060 million euros in the fourth quarter), mainly related to personnel reorganization and firm commitments relating to the Telefónica Foundation's social activities. Excluding both impacts, consolidated OIBDA margin would reach 38.3% in 2010.
o In organic terms, which exclude the non-recurrent items mentioned above, OIBDA was up 0.8% year-on-year in 2010. The OIBDA margin remained virtually stable compared to 2009, despite the higher commercial activity registered during the year.
· Net income amounted to 10,167 million euros, up 30.8% on 2009, positively affected by the net impact of non-recurrent items totalling 2,164 million euros (revaluation of the stake in Vivo, restructuring expenses and reassessment of the tax assets in Colombia).
· Telefónica Group's operating cash flow (OIBDA-CapEx) amounted to 14,933 million euros in 2010 (-2.7% year-on-year in reported terms):
o In organic terms which exclude spectrum acquisitions, operating cash flow dropped 1.7%, despite growth in Telefónica Latinoamérica (+6.9% year-on-year organic) and Telefónica Europe (+16.6% year-on-year in comparable terms).
· Telefónica has met its guidance for eight years in a row. Under the criteria applied for 2010 guidance:
o Revenues were up 3.8%, in the high end of the range announced (1.0% - 4.0%).
o OIBDA increased by 1.4%, within the forecast range of 1.0% - 3.0%.
o CapEx, excluding spectrum, totalled 7,646 million euros, in line with the target of 7,450-7,650 million euros.
o EPS stood at 2.25 euros, above the target of 2.10 euros.
· The Group maintains its financial strenght, with a ratio of net debt + commitments to OIBDA of 2.5 times at year end.
· The Company announces its guidance for 2011, which reflect a strategy focused on capturing the growth in its markets while maintaining a high level of profitability. Telefónica forecasts:
o Revenue growth up to 2%
o An OIBDA margin in the upper 30s, with a limited erosion year-on-year
o CapEx of approximately 9 billion euros
2010 Bases for Telefónica's 2011 financial targets:
o Consolidated revenues: 63,144 million euros
o OIBDA margin 38.0%
o Consolidated CapEx: 8,541 million euros
· The solid cash flow generation perspectives for 2011 allow the Company to propose the distribution of a dividend of 1.6 euros per share. This represents a 14.3% increase compared to the 2010 dividend. The proposal confirms Telefónica's commitment to prioritize shareholder remuneration in the use of cash and to gradually increase dividends per share. The Company reiterates its target of distributing a minimum dividend of 1.75 per share in 2012.
Organic growth:In financial terms, it assumes constant exchange rates as of 2009 (average fx), excludes changes in the perimeter of consolidation (HanseNet since mid February 2010, Jajah in January-December 2010, Telyco Marruecos in January-December 2009, and Manx Telecom in July-December 2009) and includes 100% of Vivo since October in 2009 and 2010 and Tuenti in August-December 09. OIBDA and OI figures do not include the impact of capital gains (Manx Telecom in Q2 2010, Medi Telecom in Q4 2009 and the revaluation of our pre-existing stake in Vivo at the date of the acquisition of the 50% in Brasilcel owned by Portugal Telecom in Q3 2010), non-recurrent restructuring expenses, mainly related to personnel reorganization and firm commitments relating to the Telefónica Foundation's social activities, recorded in the second half of the year. CapEx excludes the spectrum acquisition in Germany in Q2 2010 and in Mexico in H2 2010. Figures exclude hyperinflationary accounting in Venezuela in both years. In terms of accesses, HanseNet, Medi Telecom (following its disposal in the fourth quarter of 2009), and Manx Telecom as of July 2010 are excluded. At the same time, organic net additions exclude accesses disconnections made in the second quarter of 2010.
Comparable growth in T. Europe:In financial terms, Organic growth: (financial figures in million euros) in financial terms, assumes constant exchange rates (average of January-December 2009) and excludes HanseNet and JaJah contributions, included in Telefónica Europe's consolidation perimeter from mid-February 2010 and January 1st, 2010, respectively. Manx Telecom results in the July-December of 2009 are excluded. OIBDA also excludes capital gain from the sale of Manx Telecom in the second quarter of 2010 and non recurrent restructuring expenses mainly related to personnel reorganization in the second half of the year of 2010 and CapEx excludes the acquisition of spectrum in Germany in May, 2010. In addition, the following non-recurrent effects are excluded: restructuring expenses, ii) Universal Service Obligation in the Czech Republic, iii) real estate gains in the Czech Republic, and iv) the proceeds from the settlement agreement with T-Mobile in the Czech Republic in 2009.
In access terms, comparisons exclude HanseNet and Manx Telecom. Net additions also exclude the disconnection of inactive mobile contract customers in the Czech Republic in the second quarter of 2010.
Guidance criteria 2010:2009 adjusted figures for guidance exclude Telyco Marruecos results in T. España, Medi Telecom capital gain and write-offs. 2010 guidance assumes constant exchange rates as of 2009 (average FX in 2009) and excludes hyperinflationary accounting in Venezuela in both years. It includes 100% of Vivo since October, both 2009 and 2010, and it also includes the consolidation of HanseNet and Jajah in T. Europe. In terms of guidance calculation, OIBDA excludes non-recurrent restructuring expenses, mainly derived from personnel reorganization and firm commitments relating to the Telefónica Foundation's social activities. OIBDA also excludes the capital gain from the revaluation of our pre-existing stake in Vivo. Group CapEx includes 50% of Vivo in the fourth quarter 2009 and excludes Real Estate Efficiency Program of T. España and spectrum licenses.
Guidance criteria 2011:2010 adjusted figures for guidance include full consolidation of Vivo, Hansenet and Tuenti in the whole year (12 months) and excludes Manx Telecom's results in January-June 2010. 2010 adjusted OIBDA excludes the capital gain from the revaluation of Telefónica's pre-existing stake in Vivo at the date of the acquisition of the 50% in Brasilcel owned by Portugal Telecom, non-recurrent restructuring expenses registered in the second half of 2010, and the capital gain derived from the disposal of Manx Telecom.
2011 guidance assumes constant exchange rates as of 2010 (average FX in 2010) and excludes hyperinflationary accounting in Venezuela in both years. At the OIBDA level guidance for 2011 excludes write-offs (impairments of subsidiaries), capital gains/losses from companies disposals and significant exceptionals mainly related with restructuring costs. Results from the operation in Costa Rica are excluded from guidance calculation. Group CapEx excludes Real Estate Efficiency Program of T. España, the Real State commitments associated to the new Telefónica premises in Barcelona and spectrum licenses
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TELEFÓNICA GROUP |
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SELECTED FINANCIAL DATA |
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Unaudited figures (Euros in millions) |
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January-December |
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%Change |
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2010 |
2009 |
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Reported |
Organic |
Guidance Criteria |
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Revenues |
60,737 |
56,731 |
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7.1 |
2.4 |
3.8 |
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Telefónica España |
18,711 |
19,703 |
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(5.0) |
(4.8) |
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Telefónica Latinoamérica |
26,041 |
22,983 |
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13.3 |
6.7 |
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Telefónica Europe |
15,255 |
13,533 |
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12.7 |
4.4 |
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OIBDA |
25,777 |
22,603 |
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14.0 |
0.8 |
1.4 |
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Telefónica España |
8,520 |
9,757 |
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(12.7) |
(8.5) |
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Telefónica Latinoamérica |
13,782 |
9,143 |
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50.7 |
9.1 |
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Telefónica Europe |
4,014 |
3,910 |
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2.6 |
3.8 |
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OIBDA margin |
42.4% |
39.8% |
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2.6 p.p. |
(0.6 p.p.) |
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Telefónica España |
45.5% |
49.5% |
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(4.0 p.p.) |
(1.9 p.p.) |
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Telefónica Latinoamérica |
52.9% |
39.8% |
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13.1 p.p. |
0.9 p.p. |
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Telefónica Europe |
26.3% |
28.9% |
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(2.6 p.p.) |
(0.2 p.p.) |
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Operating Income (OI) |
16,474 |
13,647 |
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20.7 |
4.5 |
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Telefónica España |
6,511 |
7,617 |
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(14.5) |
(9.2) |
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Telefónica Latinoamérica |
9,721 |
5,350 |
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81.7 |
21.2 |
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Telefónica Europe |
923 |
1,015 |
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(9.1) |
15.1 |
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Net income |
10,167 |
7,776 |
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30.8 |
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Basic earnings per share (euros) |
2.25 |
1.71 |
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31.6 |
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OpCF (OIBDA-CapEx) |
14,933 |
15,346 |
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(2.7) |
(1.7) |
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Telefónica España |
6,499 |
7,893 |
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(17.7) |
(12.6) |
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Telefónica Latinoamérica |
8,247 |
5,693 |
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44.9 |
6.9 |
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Telefónica Europe |
942 |
2,183 |
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(56.8) |
14.6 |
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- Reconciliation included in the excel spreadsheets. |
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Notes: |
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-OIBDA and OI are presented before brand fees and management fees. |
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-OIBDA margin calculated as OIBDA over revenues. |
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- 2009 and 2010 reported figures include the hyperinflationary adjustments in Venezuela in both years. |
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- Organic criteria: Figures in million euros. In financial terms, it assumes constant exchange rates as of 2009 (average fx), excludes changes in the perimeter of consolidation (HanseNet since mid February 2010, Jajah in January-December 2010, Telyco Marruecos in January-December 2009, and Manx Telecom in July-December 2009) and includes 100% of Vivo since October in 2009 and 2010 and Tuenti in August-December 09. OIBDA and OI figures do not include the impact of capital gains (61 from Manx Telecom in Q2 2010, 220 from Medi Telecom in Q4 2009 and 3,797 from the revaluation of the pre-existing stake in VIVO at the date of the acquisition of the 50% in Brasilcel owned by Portugal Telecom in Q3 2010), non-recurrent restructuring expenses (1,262), mainly related to personnel reorganization (658) and firm commitments relating to the Telefónica Foundation's social activities (400) in the second half of the year. Figures exclude hyperinflationary accounting in Venezuela in both years. CapEx excludes the spectrum acquisition in Germany in Q2 2010 and in Mexico in the second half of 2010. |
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- Guidance criteria: Figures in million euros. 2009 adjusted figures for guidance exclude Telyco Marruecos results in T. España, Medi Telecom capital gain (220 in the fourth quarter of 2009) and write-offs. 2010 guidance assumes constant exchange rates as of 2009 (average FX) and excludes hyperinflationary accounting in Venezuela in both years. It includes 100% of Vivo since October, both 2009 and 2010, and it also includes the consolidation of HanseNet and Jajah in T. Europe. In terms of guidance calculation, OIBDA excludes non-recurrent restructuring expenses (1,262), mainly related to personnel reorganisation (658) and firm commitments relating to the Telefónica Foundation's social activities (400) in the second half of the year. OIBDA also excludes the capital gain from the revaluation of the pre-existing stake in VIVO. Group CapEx includes 50% of Vivo in the fourth quarter 2009 and excludes Real Estate Efficiency Program of T. España and spectrum licenses. |
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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 refer 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.
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.
Finally, 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.
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