Investor Presentation • Feb 23, 2023
Investor Presentation
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This document and any related conference call or webcast (including any related Q&A session) may contain forward-looking statements and information (hereinafter, the "Statements") relating to the Telefónica Group (hereinafter, the "Company" or "Telefónica"). These Statements may include financial forecasts and estimates or statements regarding plans, objectives and expectations regarding 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, the outcome of recently completed transactions, the Company's results and its operations, including its environmental, social and governance commitments and targets.
The Statements can be identified, in certain cases, through the use of words such as "forecast", "expectation", "anticipation", "aspiration", "purpose", "belief" "may", "will", "would", "could", "plan", "project" or similar expressions or variations of such expressions. These Statements reflect the current views or aspirations 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 with the different supervisory authorities of the securities markets in which its shares are listed and, in particular, the Spanish National Securities Market Commission (CNMV) and the U.S. Securities and Exchange Commission (SEC).
Except as required by applicable law, 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, changes in its business developmentstrategy or any other circumstances.
This document and any related conference call or webcast (including any related Q&A session) may contain summarised, non-audited or non-IFRS financial information (including information referred to as "organic" and "underlying"). Such information may not be prepared in accordance with the financial reporting requirements established by the SEC, is presented for supplemental informational purposes only and should not be considered a substitute for audited financial information presented in accordance with IFRS. The Company's non-IFRS financial measures may differ from similarly titled measures used by other companies. In addition, there are material limitations associated with the use of non-IFRS financial measures since they exclude significant expenses and income that are recorded in the Company's financial statements. The information contained herein should therefore only be considered in conjunction with Telefónica's consolidated financial statements for the year ended December 31, 2022, as filed with the CNMV and the SEC, as well as other publicly available information regarding the Company. Information related to Alternative Performance Measures (APM) used in this presentation are included in Telefónica's consolidated financial statements and consolidated management report for the year 2022 submitted to the CNMV, in Note 2, page 13 of the .pdf filed. Recipients of this document are invited to read it.
Neither this document nor any related conference call or webcast (including any related Q&A session) nor any of their contents constitute an offer to purchase, sale or exchange any security, a solicitation of any offer to purchase, sale or exchange any security, or a recommendation or advice regarding any security.
This document and any related conference call or webcast (including any related Q&A session) may include data or references to data provided by third parties. Neither Telefónica, nor any of its administrators, directors or employees, either explicitly or implicitly, guarantees that these contents are exact, accurate, comprehensive or complete, nor are they obliged to keep them updated, nor to correct them in the case that any deficiency, error or omission were to be detected. Moreover, in reproducing these contents by any means, Telefónica may introduce any changes it deems suitable, may omit partially or completely any of the elements of this document, and in case of any deviation between such a version and this one, Telefónica assumes no liability for any discrepancy.
Mr. José María Álvarez-Pallete Chairman & CEO
Delivering on commitments
Progressing on regulatory priorities
Fair share consultation process
Proactive management
Leveraging on opportunities
Disciplined capital allocation Robust FCF, well covered DVD, high liquidity
UK: operational progress; strong OIBDA growth on synergy delivery
T. Tech; built new capabilities to sustain growth
Solid sustainability record; enabling positive impact towards the UN Sustainable Development Goals of >€95bn annually
| FY 22 Revenue y-o-y organic +4.0% Growth across the board |
FY 22 OIBDA y-o-y organic +3.0% Stable underlying OIBDA |
Net debt €26.7bn Leverage reduction YTD to 2.54x |
FCF FY 22 €4,566m +72.5% y-o-y |
|---|---|---|---|
| 2022 reported revenue growth (+1.8% y-o-y), 1st | time since 2015 | Robust FCF performance; €0.80 FCFs comfortably covering DPS |
Solid revenue mix, service revenue growth, B2B strength
Prudent debt management; maturities covered over 3yr
| FY 22 | ||||
|---|---|---|---|---|
| € in millions | Reported + 50% VMO2 JV |
Organic y-o-y |
||
| Revenue | 45,978 | 4.0% | ||
| OIBDA | 15,066 | 3.0% | ||
| OIBDA-CapEx (ex-spectrum) |
8,067 | 1.8% |
| FY 22 | ||
|---|---|---|
| € in millions | Reported | Reported y-o-y |
| Revenue | 39,993 | 1.8% |
| OIBDA | 12,852 | (41.5%) |
| OIBDA Underlying | 12,940 | (0.6%) |
| Net Income | 2,011 | (75.3%) |
| FCF (incl. leases principal payments) |
4,566 | 72.5% |
| Net Financial Debt ex-leases | 26,687 | 2.3% |
2022 guidance
organic including 50% of VMO2
| Targets | Initial 2022 guidance |
Updated 2022 guidance | FY 22 | |
|---|---|---|---|---|
| Revenue | "Low single digit growth" |
"High-end of low single digit growth" | 4.0% | |
| OIBDA | "Low single digit growth" |
"Mid-to-high-end of low single digit growth" |
3.0% | |
| CapEx/Sales (ex spectrum) |
Up to 15% | Maintained up to 15% | 14.8% | |
| Shareholder remuneration | ||||
| 2022 Dividend | €0.30/share | 2022 calendar payments Jun-22 €0.15/sh.; voluntary scrip |
||
| Dec-22 | €0.15/sh. (cash) | Dec-22 €0.15/sh.; cash 139m treasury stock cancelled |
||
| Jun-23 | €0.15/sh. (cash) |
April 22 | ||
| 8 |
| ESG ranking/recognition |
TEF performance | Detail |
|---|---|---|
| Climate A List | th 9 consecutive year |
|
| Supplier Engagement Leader |
rd 3 consecutive year |
|
| #1 worldwide | Digital Inclusion Benchmark | |
| #1 worldwide in sector | Social Transformation Baseline Assessment |
|
| 1 of 17 telcos included worldwide |
th 6 consecutive year |
|
| #1 in sector | Leader across all categories (privacy, governance and freedom of expression) |
| ESG analyst | TEF rating | Relative position |
|---|---|---|
| 4.4/5 | st 1 (sector) Member of FTSE4Good |
|
| B- | st 1 decile (sector) |
|
| A | Avg. in telco sector | |
| 86/100 | Top 10 in sector (worldwide) Member of DJSI Europe |
|
| 15.2 (low risk) |
th 6 / 223 ( sector) |
|
| 67/100 | nd 2 / 33 (sector) |
Core markets. As of Dec-22: Brazil >80%, Germany 99%, Spain >94%, UK >99% Adjusted pay gap: equal pay for jobs of equal value (+/-1%) Financing includes balance-sheet debt, hybrids and undrawn committed credit lines Parity defined as not less than 40% of each gender represented
Mr. Ángel Vilá COO
| Q4 22 Revenue y-o-y organic +3.9% Growth across the board |
Stable | Q4 22 OIBDA y-o-y organic +3.5% OIBDA margin |
y-o-y | Net debt Dec-22 €26.7bn Reduction of €2bn in Q4 22 |
FCF Q4 222 €2,093m +77.7% y-o-y |
|||
|---|---|---|---|---|---|---|---|---|
| Service revenue | +1.3 p.p. q-o-q to | Reported: 3rd straight Q of rev. growth, 2nd Q of underlying OIBDA growth +4.1% y-o-y org.; B2B +1.4 p.p. to Q4 22 |
+7.9% y-o-y org. | Q4 22 | FCF improvement along the year, Q4 strongest Debt decline; €1,750m ESG financing |
|||
| € in millions | Reported + 50% VMO2 JV |
Organic y-o-y |
€ in millions | Reported | Reported y-o-y |
|||
| Revenue | 11,751 | 3.9% | Revenue | 10,200 | 5.4% | |||
| OIBDA | 3,802 | 3.5% | OIBDA | 3,259 | 139.2% | |||
| OIBDA-CapEx (ex-spectrum) |
1,677 | 4.7% | Net Income | OIBDA Underlying | 3,419 525 |
6.0% c.s. |
||
| payments) | FCF (incl. leases principal | 2,093 | 77.7% |
Structural advantage; operating in high-inflation LatAm markets for decades Managing top line through pricing power and inflation pass through Improving customer metrics (NPS and churn) T. Tech revenue +33.7% y-o-y in Q4 22
Managing OpEx Lower weight of personnel expenses than peers (13% o/Group revenues) Long-term hedging on energy in place, >60% for 2023 Long terms PPAs; 100% electricity renewable in core markets, PER and CHL Environmental impact per petabyte of FTTH <18x than cooper; per PB 4G/5G <7x 2G/3G Generating efficiencies (simplification, digitisation, synergies …)
CapEx peak behind; advanced FTTH deployment, new partner-models Legacy shutdown opportunity (Spain cooper decommission in 2024) Active tax management, proactive debt refinancing adding to FCF
11.8
FY 21 FY 22
12.4
Business turnaround Superior value, leading NPS & churn Defended revenue share
Service revenue stabilised Retail revenue recovery Top wholesale player Exceling in efficiency
Stronger NGN (FTTH & 5G)
12
Net adds (k)
Revenue & OIBDA growth (y-o-y organic)
Improving KPIs in a rational market (leading NPS 42%; lowest churn since Q1 15)
FBB & contract net adds in Q4 22
Tariff update in Q1 23 (+6.8% avg)
Service Rev. +0.6% y-o-y in Q4 22 OIBDA trend improved sequentially Benchmark (OIBDA-CapEx)/sales (25% FY 22)
Supporting circular economy (buyback of devices)
Fixed BB net adds (k)
Successful completion of 3-yr 'Investment for
3rd time in a row 'very good' in connect magazine's mobile network test
Growth' programme, 5G pop coverage >80%
Sustained Revenue and OIBDA growth on strong own brand performance
M4M announced for 'O2 Mobile' portfolio
ESG leadership: Ranked 3rd in sector by Sustainalytics & included in Bloomberg GEI
Postpay net adds (k)
Revenue & OIBDA growth (y-o-y organic)
Improved growth and operational progress Strong customer growth 1.3m Volt converged customers 16.1m PPs; 5G in >1.6k towns & cities Q4 22 revenue and OIBDA growth Synergies target exceeded: 30% of annualised run-rate Achieved "Advancing level" in the Carbon Trust's Route to Net Zero
All organic according to Telefonica criteria
Dec-21 Mar-22 Jun-22 Sept-22 Dec-24E
Revenue & OIBDA growth (y-o-y organic)
Double digit growth in Q4 revenue & total accesses
Strengthened leadership in FTTH & contract
Revenue +31% / OIBDA +27% (Q4 22 in € terms)
Organic OIBDA margin >40% in Q4 22
20% CapEx/Sales FY 22: investment peak
OIBDA-CapEx +5.1% in FY 22
Leader in ESG ratings: CDP A List, Bloomberg GEI, 2nd on ISE B3
Our people, our asset
Successful execution of FibreCos at attractive valuations eg. Bluevía 2.5 Bn EV @27.1xOIBDA; TEF retains 55% stake
• Growing financials2 (y-o-y organic):
Mrs. Laura Abasolo CFCO & Head of T. Hispam
Sources of ESG Financing as of Feb -23 (€bn)
1 Including net proceeds from the recovery of Telxius tax payments in advance, after the acquisition of an additional stake in Telxius and the impact from the fibre assets acquisition by FibreCo Chile. 2. Excludes extraordinaries, mainly the tax refund.
Mr. José María Álvarez-Pallete Chairman & CEO
organic and including 50% of VMO2
| Targets | 2023 | |
|---|---|---|
| Revenue | "Low single digit growth" |
|
| OIBDA | "Low single digit growth" |
|
| CapEx/Sales (ex spectrum) |
~14% | |
| Shareholder remuneration | ||
| 2023 Dividend | €0.3/share (cash) | |
| Dec-23 | €0.15/sh. (cash) | |
| Jun-24 | €0.15/sh. (cash) |
Boost profitable growth Double down on simplicity Decreasing Capex/Sales ratio
At the forefront for the future on digital capabilities; leveraging NaaS
Robust and future-proof networks; technological leader in fibre
Record FCF and net debt reduction reflecting tax refund and Bluevía 45% stake sale
Guidance "low single digit growth" in Rev/OIBDA, 1 p.p. reduced CapEx intensity, sustained cash dividend
| ٦ | Е ۳ |
|---|---|
Telefónica's management will host a webcast on 23 February at 10:00 AM (CET), 9:00 AM (GMT), and 4:00 AM (EST)
Adrián Zunzunegui l Global Director of Investor Relations
To access the webcast: click here
• To participate in the Q&A session, please register using the following link to receive the dial in and PIN details. click here.
For further information, please contact: Investor Relations Adrián Zunzunegui ([email protected]) Isabel Beltrán ([email protected]) Torsten Achtmann ([email protected]) Tel. +34 91 482 87 00 [email protected] www.telefonica.com/investors
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