130225 - Apresentação 4Q12 - eng - SD [Somente leitura]

Results 4Q12

2Investor RelationsTelefônica Brasil S.A.

Highlights of the quarter

1 Expanding leadership in customer satisfaction index

Consistent performance of the business with recurrent EBITDA margin of 35.7% in the quarter

Sustaining leadership in post paid and high mobile revenue growth even with rational commercial policy

Stabilization of fixed revenue decline and solid quality standards

Dividend yield of 8% and payout of 96% of the profit in the year

2

3

4

5

Operating Performance

4Investor Relations Telefônica Brasil S.A.

Quality standards in fixed and mobile remain solid, driving satisfaction and superior brand recognition

01

Higher satisfaction in fixed and mobile

CSI(Mobile)

CSI(Fixed)

sep/11 dec/11 mar/12 jun/12 sep/12 dec/12

Vivo Comp 1

6.92

7.40

* Ban on sales imposed by ANATEL for some of our competitors; ** Launch of the Vivo brand for fixed services; *** Folha de São Paulo.

sep/11 dec/11 mar/12 jun/12 sep/12 dec/12Vivo Comp 1 Comp 2 Comp 3

6.90

7.81

6.34

7.30

*

**

3223 20 18

Vivo Comp 1 Comp 2 Comp 3

Top of Mind (Brand Recall)***

Our brand image:

Best quality of signal

Best coverage

Best portfolio of handsets

Best customer care

Leader for the last 5 years


We accelerated the growth in data and post paid, which is enhancing our value generation

AccessesMillion

1 Includes fixed voice, fixed broadband and pay TV.2 Includes pre and postpaid customers.Source: Anatel.

01

1

6.4%

-2.2%86.9 91.9

71.6 76.8 76.1

15.3 15.1 15.0

4Q11 3Q12 4Q12

Mobile Fixed

YoY91.1

4.9%

-0.8%

Post paid Accesses and Mobile Data Users (Handsets and Data cards with data plans and packages / Million)

QoQ Post paid growth

16.6

17.2

18.0

18.8

1Q12 2Q12 3Q12 4Q12

Post paid

QoQ Data growth

2

3.3% 4.5%3.1% 4.7%

24.2%9.0%10.8%

More strict disconnection

policy

8.39.2

10.0

12.4

Data


Our selective approach in prepaid has led to efficient growth in recharges

Mobile AccessesMillion

Mobile Market Share%

01

Source: Anatel.

*

* Anatel data available since 2Q12.

55.4 58.9 57.3

16.1 18.0 18.8

4Q11 3Q12 4Q12

Prepaid Postpaid

3.4%

16.7%

YoY

6.4%

71.676.8 76.1

-0.9%29.5% 29.1%

36.6% 36.9%47.2%

4Q11 4Q12Blended Postpaid Data cards

Efficient Prepaid Growth

16%

3%

17%14%

4Q11 4Q12

∆% prepaid customers - YoY∆% of recharge - YoY

Selective commercial

strategyreduced

commercial efforts and produced a

more active customer

base

More strict disconnection

policy as of Oct,12(a reduction from

60 to 50 days without traffic)

+0.3 pp

Leadershipof + 18 pp

vs. the second place


Better mix of additions and efficiency in acquiring new clients significantly reduced payback per customer

ARPUR$

ARPU adjusting for MTR effectR$

01

-6.1%

6.6%

YoY

-2.8%7.9%

18.2 16.0 17.1

6.4 6.2 6.8

24.6 22.2 23.9

4Q11 3Q12 4Q12

Voice Data

4Q11 3Q12 4Q12

-0.8%7.2%

24.6 22.8 24.4

SACR$

-28.8%

YoY

% smartphones over total adds

59.7 42.5

42%

68%

4Q11 4Q12

PAYBACK (SAC/ARPU)Months

2.43 2.31 1.78

4Q11 3Q12 4Q12

-27%-23%


Fixed broadband and voice maintain annual improvement. We are working to turn around the TV business

01

Voice and Fixed Broadband AccessesMillion

Evolution of Broadband accesses through FTTH

-3.1%

2.8%

4Q11 4Q12

2.2 x 50% of Fiber BB sales in the city of SP included IPTV since December. ARPU uplift of R$100 on average

11.0 10.7 10.6

3.6 3.8 3.7

0.7 0.6 0.6

4Q11 3Q12 4Q12

Fixed Voice Fixed Broadband Pay TV

-14.2%

YoY-0.7%

-2.2%

15.3 15.1 15.0

Fixed Voice disconnections

(97) (114)(57) (68)

1Q12 2Q12 3Q12 4Q12


Corporate segment is sustaining superior performance in mobile and fixed

Evolution of Corporate Accesses

01

4Q11 4Q12

+13%

ARPU 50% higher than the average of the market

Greater volume of adds in post paid and data plans

4Q11 4Q12

4Q11 4Q12

2.5 x

Fixed Voice accesses

4Q11 4Q12

Annual growth of 19% in fiber gross adds during the 4Q12

Fixed UBB accesses

Mobile accesses Penetration of data plans

ARPU strongly benefited by the increase of data penetration

+11pp

+10%


Recurrent profitability of 36% in the quarter driving consistent results for the year

Negocios

R$ million 4Q12 ∆% YoY 2012 ∆% YoY

Net Operating Revenue 8,910.3 3.6% 33,931.4 2.3%

Total Net Operating Service Revenue 8,561.5 1.5% 32,970.1 2.3%

Wireless Service Revenue 5,474.4 7.4% 20,436.4 9.7%

Wireline Service Revenue 3,087.2 -7.6% 12,533.6 -7.7%

Net Handset Revenue 348.8 114.0% 961.4 0.7%

EBITDA 3,854.0 16.5% 12,705.4 5.6%

EBITDA Margin 43.3% +4.8 p.p. 37.4% +1.2 p.p.

Adjusted EBITDA 3,178.3 +8.6% 11,562.9 0,0%

Adjusted EBITDA Margin 35.7% +1.6 p.p. 34.1% -0.8 p.p.

Net Result 1,474.3 0.8% 4,452.2 -12.2%

01


We are the indisputable market leader in revenues and EBITDA share with strong operational and financial management

01

* Capex excluding licenses.** Cash flow after investing activities.

2.3% 4.7% 5.6%

47.0%

NetOperatingRevenue

EBITDA(-) Capex

EBITDA FCF

2012 - YoY growth

Share of Revenues - FY12

Share of EBITDA - FY12

31%23%

28%

17%


39%24% 22% 15%


* **37.4%

31.3% 23.6% 26.7%

EBITDA Margin

Financial Performance


Mobile Net Service RevenueR$ Million

Mobile Service revenue growth remains healthy during the quarter and reached 9.7% in 2012 even with MTR reduction

In order to simplify the analysis the chart does not include ‘Other Revenues’.

Network UsageAccess and Usage Data and VAS

Mobile Net Service Revenue∆% QoQ

% Mobile Net Rev. / Total Revenue

QoQ growth excluding MTR impact

MTR impact

02

9.3%

-8.8%

17.3%

9,724 10,876

4,155 3,830

4,642 5,648

2011 2012

9.7%

20,43618,633

4,924 4,960 5,078 5,474

1Q12 2Q12 3Q12 4Q12

62.2%61.4% 63.1%

2.8% 2.1%-2.5%

65.4%

7.2%

YoY

11.8%

-7.8%

21.7%YoY

2,661 2,717 2,908

1,059 936 966

1,334 1,414 1,565

4Q11 3Q12 4Q12

5,097 5,0785,474

7.4%

7.8%


Data and VAS revenue accounts for 29% of mobile net service revenue in the quarter. Internet revenues are growing 21.1% yoy in the 4Q12.

Data and VAS RevenueR$ Million

InternetMessaging P2P Other

Mobile Internet Revenue

11.4%

21.1%

02

473 482 527

646 705 782

215 227 255

4Q11 3Q12 4Q12

YoY

18.6%

1,334

17.3%

10.6%

1,414 1,565

1,562 1,921

2,367 2,826

713

901

2011 2012

4,642

21.7%

5,648

23.0%

19.4%

YoY

26.4%15.8% 16.4%

21.1%

1.6%4.6%

10.9%

2Q12 3Q12 4Q12

YoY growth QoQ growth


Our efforts to improve the fixed business can be noticed in the improving trends in fixed voice revenues

02

* Includes voice, accesses and network usage.

Wireline Net RevenueR$ Million

Data and Pay TVVoice* Others

-11.1%

-3.2%

2,031 1,841 1,805

1,070 1,031 1,036

238 251 246

4Q11 3Q12 4Q12

3.2%

YoY

-7.6%

-1.1%

3,3403,122 3,087

8,559 7,407

4,096 4,155

929 972

2011 2012

-13.5%

+1.4%

4.6%

YoY

-7.7%

13,58412,534

-17.0%-13.4% -12.7%

2Q12 3Q12 4Q12

Voice and Accesses Revenue∆% yoy


Non recurrent events 4Q12 + R$675.7

Non recurrent events 4Q11 + R$380.1

02 Consolidated expenses remained controlled during the quarter with a rational commercial strategy and reducing G&A expenses

R$ Million

-4.5%+55.9%-19.4%+4.9%+30.4%-6.0%-5.1%YoY

5,292

5,262 5,100 5,100 5,227 5,234 5,056

5,056 30 162 128 76 69 178

4Q11 Personnel ServicesRendered

Goods Sold Selling Expenses G&A Other 4Q12

4Q12 YoYadjusted

+1.0%+190.4%-19.4%+4.9%+30.4%-6.0%-5.1%


Sequential improvement in recurrent margin for the last 2 quarters, reaching 35.7% in 4Q12

Recurrent EBITDA EBITDA

02

R$ Million

Solid growth of EBITDA and EBITDA margin in the quarter, helped produce consistent business performance in the yearRecurrent MarginRecurrent EBITDA

R$ Million

2,783 2,731 2,871 3,178

33.5% 33.1%33.9%

35.7%

1Q12 2Q12 3Q12 4Q12

EBITDA MarginEBITDA

3,308 3,854

38.5%

43.3%

4Q11 4Q12

12,035

12,705

36.3%

37.4%

2011 2012


4Q12 EBIT reaches R$2.4 billion, 22% higher yoy

Net Result

Financial ResultEBIT

Net Income Build-up

02

R$ Million R$ Million

0.8%

1,985 2,417

4Q11 4Q12

+21.7%-94 -125

4Q11 4Q12

6,903

7,212

2011 2012

+4.5%

33.9%

-179-291

2011 2012

62.0%

1,462 1,474

546 115 32 388

4Q11 EBITDA D&A FinancialResult

Taxes 4Q12

210

4Q11 4Q12

1,462 1,474

IOC impact

635

2011 2012

5,0724,452

-12.2%

17.7% 0.3%


Capex reached R$6.1 billion in 2012 in line with expectations for the year

Net Debt

Capex

02

R$ Million

R$ Million

6,1175,741

3,165

1,083 440

4Q11 3Q12 4Q12

-86.1%-59.4%

4,929 5,067

812 1,050

14.9% 14.9%

17.3% 18.0%

2011 2012

Licenses% Capex (-) Licenses / Net Operating Rev.% Capex / Net Operating Revenues

Strategic Update


EducationServices.

In 2012 we achieved important goals in our strategic pillars

Unm

atch

ed q

ualit

y an

d cu

stom

er s

atis

fact

ion

1

2

3

4

5

To provide a unique and integrated VIVO experience to each customer

To strengthen our convergent infrastructure focusing on quality

To continue fostering profitable growth

To drive innovation and capture new opportunities

To transform our operational model

Rebranding of fixed

services

Spectrum aquisition

To 90% of population

New DataCenter . FTTH .

coupled.with IPTV

Academy .HealthCare.

Prepaid...Account..

MFS….

Unified visionof customer

#1 in . .Satisfaction.

ImprovingIDA

Convergence in Sales Channels

Evolution ofCustomer

Intelligence

VivoBox Unbeatable

BroadbandSpeeds..

New...roaming

Offer...

Plans:3G Plus /

Smartphone 3G Plus

Backbone/Backhaul Partnerships

Tower..Sharing

Selfcare App. IntegratedWorkingFacilities

Virtual...Channel/

CustomerManagement

03


Pillar 1: We plan to advance even further to make a unique and integrated Vivo

Different brands

Customer known by service / device

Separate channels with different processes

Complex IT infrastructure with different systems and processes for fixed and mobile services

Separated Billing and Call centers

Fixed + Mobile Cross Selling

Only one brand for all services

Single vision of customers with multiple devices and services

Integrated channels

Convergent IT infrastructure

Convergent Customer Care and Billing

Fixed + Mobile Bundling

2011 GOAL

03


Pillar 2: We are further strengthening our convergent infrastructure by focusing on quality

Negocios

Expansion of fiber footprint

Improving speeds in copper, cable and fiber

Mobile internet in 3G Plus and 4G

Enable backbone to handle data traffic growth

Increase infrastructure sharing

Having the best network with investment and sharing

Transform the applications to a vision focused on the customer (Convergent CRM and Online Company)

Consolidate IT Commodities through the Data CenterConsolidation

Capture efficiency opportunities with the simplification of applications map

Efficient and dynamic IT infrastructure

03


Pillar 3: We continue fostering profitable growth

Keep Momentum in Mobile Protect Value in Fixed Services Consolidate Leadership in Corporate

• Focus on broadband growth in 3G Plus and 4G

• Leverage on our competitive advantages in quality, brand and network to gain share in higher revenue segments

• Bet on prepaid growth and convergence

• Grow smartphones for all segments (post and prepaid)

• Increase fixed + mobile convergence to improve ARPUs and loyalty

• Grow in innovative services and products (PTT, M2M, Vivo Cloud, “Perto de você”)

• Expand IT services to promote loyalty and revenue increase

• Unlock new opportunities with new data center

03

• Improve speeds in broadband and corporate data services

• Grow FTTH footprint and adoption for premium customers with unbeatable speeds and the best IPTV offer

• Focus on Bundling and cross selling to promote loyalty with fixed customers

• Implement a tactical plan to turn around TV business


Pillar 4: We are driving innovation and capturing new opportunities

03

DifferentiatedServices Offers Recent

Developments

eHealth Acquistion of Aximed by TDigital

Financial

New co branded credit cards with Bradesco and Santander

M2M Growth of 108% yoy

Security

Education

Exploring the great potential of Digital Services in Brazil


Pillar 5: We are transforming our operational model03

Optimizing customer management• Self-care • Own stores productivity• Stringent disconnection policy

Driving network efficiency• Tower sharing• Backbone and backhaul sharing

partnerships• Continuous analysis of other network models

Enhancing IT infrastructure• Private cloud• Unified data center• Unified billing infrastructure

Reinforcing a culture of excellence• Culture and quality-centric• Innovation driven• Agile

Billing

• # Online Account

Virtual

• Volume ofCustomer Carevia SMS

• Adoption to “Meu Vivo”(Selfcare app)

+ 5x

+3x

+2x

Sales Channels

• Most complete and convergent online store in the industry

• New recharges channel via Facebookand Paypal

Jan/12 Dec/12

Jan/12 Dec/12

Jan/12 Dec/12

Leveraging on our virtual channels Improving our operacional efficiency


In Conclusion03

Quality is and will continue to be the driving force behind our strategy, with leadership in mobile and fiber as our objectives

Our results for 4Q12 and 2012 confirm we are headed in the right direction…

Leadership in satisfaction

Gaining space in higher revenue segments

Stronger profitability

High dividend return to shareholders

Unifying vision on customers

Having the best network and convergent IT infrastructure

Growing with profitability in all customer segments

Expanding digital services

Increasing efficiency trough transformation of our operational model

… and we plan on evolving strongly in our strategic pillars in 2013


Disclaimer03

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 materially from 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.

130225 - Apresentação 4Q12 - eng - SD [Somente leitura]

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