140507 - Apresentação 1Q14 - ENG SDstatic.telefonica.aatb.com.br/Arquivos/Download/... · 14.9...

Results 1Q14_

Investor RelationsTelefônica Brasil S.A.May, 2014.

Investor RelationsTelefônica Brasil S.A.

2

Highlights of the 1Q14

Operating Financial

Revenues

Profitability

Controlling costs below inflation leading to a consistent level of recurrent EBITDA margin.

Recovering solid annual growth in net service revenues when excluding the regulatory effect.

HIGHLIGHTS

Increasing contract

market share leading to

higher data

adoption and

ARPU growth.

Achieving positive fixed

net adds despite

seasonal

effects in the

1st quarter.

25%17%

28%

1Q12 1Q13 1Q14

Contract Access Growth*yoy

6.0 6.9 8.1

1Q12 1Q13 1Q14

Data ARPU R$ per month

-15 -22

44

1Q12 1Q13 1Q14

Total Fixed Net Adds**Monthly Average

6.7%5.8%

4Q13 1Q14

IPCA*

-0.9 pp

Recurrent Costs - yoy

31.2% 29.8%

4Q13 1Q14

Recurrent EBITDA Margin

Net Service Revenues - yoy

* Accumulated in the last 12 months.

** Thousand. Excludes Vivo Play and includes Vivo Box accesses. * Million.

-7 pp +10 pp

15% 18%

-47% n.m.

0.7% 1.2% 1.5% 2.0%1.3%

2.2% 2.8% 3.1% 3.6% 4.1%

1Q13 2Q13 3Q13 4Q13 1Q14

Net Service Revenues Net Service Revenues ex-regulatory effect

3

1. Operating Performance


4

The annual and quarterly growth in total accesses was driven mainly by the evolution of contract and fixed accesses out of São Paulo State.

OPERATING

INTEGRATED PERFORMANCE

Total Accesses Million

1 Includes prepaid and contract customers.2 Includes fixed voice, fixed broadband and PayTV.Source: ANATEL.

3.3%

3.5%

YoY

76.0 77.2 78.5

14.9 15.3 15.4

90.9 92.5 93.9

1Q13 4Q13 1Q14

Mobile Fixed21

3.3%

1.4%

56.5 53.6 53.6

19.5 23.7 24.9

76.0 77.2 78.5

1Q13 4Q13 1Q14

Prepaid Contract

3.3%

1.6%

-5.2%

27.6%

YoY

Fixed Accesses Million

3.5%

10.6 10.7 10.8

3.8 3.9 3.90.6 0.6 0.614.9 15.3 15.4

1Q13 4Q13 1Q14

Voice Broadband PayTV*

0.6%

2.6%

4.4%

16.6%

YoY

Mobile AccessesMillion

Strict disconnection policy based on

profitability analysis

* Excludes Vivo Play accesses, our OTT solution.


5

Superior quality standards drive strong customer attraction, resulting in accelerated growth in high value contract customers.

OPERATING

SUPER MOBILE

Contract ChurnEx-M2M

Contract Accesses GrowthYoY

1.9% 1.9% 1.6% 1.5% 1.5%

1Q13 2Q13 3Q13 4Q13 1Q14

-0.4 p.p.

17.4% 20.4% 23.3% 26.0% 27.6%

37.1% 37.8% 38.9% 39.8% 40.6%

1Q13 2Q13 3Q13 4Q13 1Q14

Contract market share

Mobile Port in and Port outMobile IDA and Complaints

91.9 92.4 93.8 94.0 96.7

oct/13 nov/13 dec/13 jan/14 feb/14

IDAComplaints

Port in Port out

Source: ANATEL.

1Q14

4G1Q14

Contract*

1Q14

Total

2x4x16x

* Individual.


6

Improving mobile data adoption continue to drive annual ARPU growth even with MTR cuts.

OPERATING

SUPER MOBILE

Mobile data users and data trafficMillion

Mobile Bad Debt

Smartphone and Data packages PenetrationWeb and smartphone

ARPUR$

-6.4%

17.5%

Evolution without the 2014/2013 MTR reduction

16.3 15.26.9 8.1

23.1 23.3

1Q13 1Q14

Voice Data

YoY0.7%3.8%

* Data cards, Data packages and M2M, excluding eventual data user with no data package or plan.

17.2 21.5 24.1 27.6 30.2

1Q13 2Q13 3Q13 4Q13 1Q14

Data Access* Data Traffic

75.1%

62.1%

YoY

76% 71%

1Q14

Individual Contract

45%

23%

1Q14

Individual Prepaid

Smartphones Data packages

1.3% 1.4% 1.3%

1Q12 1Q13 1Q14

Bad Debt / Mobile Gross Revenues

47%

28%

1Q14

Total


In the fixed business, we achieved solid annual evolution, with improving trends in April.

OPERATING

FIBER AND VIDEO COMPANY

Total Fixed Net Adds* Monthly Average and Thousand

7

-22

44

59

1Q13 1Q14 apr-14 (**)

ExcludesMMDS and includes

Vivo BOX(*)

Notes: (*) Contrary to ANATEL’s criteria, Vivo Box is being considered as fixed accesses since it is meeting the demand for fixed broadband. Excludes Vivo Play accesses, our OTT solution. (**) Accesses for April are forecasted.

Fixed Voice Net AddsMonthly Average and Thousand

Fixed Broadband + Vivo BOX Net AddsMonthly Average and Thousand

Pay TV Net AddsMonthly Average and Thousand

-7

515

1Q13 1Q14 apr-14 (**)

Great

adoption of

IPTV and DTH

1513

15

1Q13 1Q14 apr-14 (**)

Selective

adds with

higher ARPU

and speeds

-31

26 28

1Q13 1Q14 apr-14 (**)

Accelerating

fixed voice

sales (FWT)

out of SP


We are transforming ourselves into a Fiber Company, enhancing footprint and adoption, and building the first digital city in Brazil.

OPERATING

FIBER COMPANY

Net adds Net adds

13

32

1Q13 1Q14

2.5x

2

12

1Q13 1Q14

6.6x

Vivo Fiber BBThousand

Vivo Fiber TVThousand

FTTH Homes PassedMillion

0.71.4 1.5

1.0

1.92.3

2012 2013 1Q14

Addressable homes

• Broadband up to 10 Mbps limited by the distance between the customer and the central

• Limited portfolio as a consequence of network features

• 100% copper network

Before

• Broadband up to 25 Mbps for 100% of the city

• Services offered with better quality and capacity

• Partial replacement of copper by fiber

After

Digital Education

E-Health

Tourism Municipal management

Unlocking new business opportunities:

8

The first 100% digital city in Brazil, a new concept in management and technology

Digital CityÁguas de São Pedro


And we are also leveraging fixed net adds using the mobile network and strengthening our Video Company strategy.

OPERATING

INTEGRATED OFFERS

DTHThousand

9

VIDEO COMPANY

Net adds

26

44

1Q13 1Q14

1.7x

27

169

1Q13 1Q14

Net adds

6.4x

Coverage OSP: 344 cities or 50% of the homes and 460 cities expected for Dec/14

Coverage: 87% of the population with 3G and 30%

with 4G

Net adds

-5

9

1Q13 1Q14

FWTThousand

Vivo BOXThousand

Unlimited on-net fixed voice

Plug and play fixed broadband solution

Fixed services provided through the mobile network

653 thousand accesses nationwide in the 1Q14

339 thousand accesses in the 1Q14 Repositioning our DTH offer

� Improving the portfolio to 26 HD channels

� Increasing ARPU (from R$29.90 to R$49.90)

�Better customer experience and loyalty


10

On the Corporate segment, we continue to succeed in our strategy to be a convergent nationwide provider.

OPERATING

CONVERGENT CORPORATE SERVICES PROVIDER

Fixed voice accessesConsistent growth

Fixed UBB accessesHigher adoption of fiber

and VDSL

Penetration of Mobile Data Packages

Leveraged by 4G

M2M accesses Almost doubled in 1 year

1Q13 1Q14

+3.0%

1Q13 1Q14

1.5x

1Q13 1Q14

1.8x

1Q13 1Q14

+6 p.p.

Extension of fiber network OSP

Continuity of our strategic plan to increase our participation in fixed

services outside of São Paulo, ensuring the quality of data services

to corporate customers.11% 15%

89% 85%

1Q13 1Q14

OSP SPFixed Data Gross adds


11

Cost control below inflation drove a Margin of 29.8% in the 1Q14, despite of strong commercial efforts.

1Q14

8,611.9

8,299.2

5,446.1

2,853.2

312.7

6,049.1

2,562.8

29.8%

660.8

1Q13

8,555.5

8,189.7

5,270.5

2,919.2

365.8

5,807.9

2,747.6

32.1%

810.2

F% YoY

0.7

1.3

3.3

-2.3

-14.5

4.2

-6.7

-2.4 p.p.

-18.4

R$ million

Net Operating Revenue

OPERATING

Operating Costs

Net Handset Revenue

EBITDA

EBITDA Margin

Net Result

Mobile Net Service Revenue

Net Operating Service Revenue

Fixed Net Service Revenue

12

2. Financial Performance


13

Recovering a solid annual growth in recurrent mobile service revenues.

Mobile Net Service RevenueR$ Million

Recurrent Mobile Service Revenuey-o-y

FINANCIAL

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


3.3%

-5.5%

6.5%

2,784 2,891 2,834

905 797 672

1,566 1,864 1,888

5,2705,763

5,446

1Q13 4Q13 1Q14

Access and usage Network usage Data and VAS

1.8%

YoY

-25.8%

20.6%

-2.6%

2.2%

3.3%

4.1%

6.5%

4Q13 1Q14

With MTR Without MTR


14

Data and value added service revenues represent 35% of mobile service revenues driven by soaring internet revenues along the year.

FINANCIAL

Data and VAS RevenueR$ Million

Mix of Data and VAS RevenueYoY

20.6%

1.3%

8131,056 1,096

511468 428

242

340 3641,566

1,864 1,888

1Q13 4Q13 1Q14

Internet Messaging P2P VAS

34.9%

YoY

-16.4%

50.4%

34.9%

YoY1Q14

-16.4%

50.4%

22.5%

YoY1Q13

14.5%

16.4%

18.8% 20.6%

51.9%58.1%

32.6% 22.6%

15.5% 19.3%

1Q13 1Q14

Internet Messaging P2P VAS

% of Data and VAS Revenue over Mobile Service Revenue

34.7%32.4%29.7%

1Q13 4Q13 1Q14


15

Solid performance in accesses continue to drive an improved trend of fixed revenues in 2014.

Fixed Net Service RevenueR$ Million

Fixed Net Service Revenuey-o-y

(1) Includes voice, accesses and network usage.(2) Includes Pay TV and Other Revenues.

FINANCIAL


-2.3%

-3.9%

-0.1%

1,562 1,511 1,448

355 396 386

894 942 905

2,919 2,970 2,853

1Q13 4Q13 1Q14

Voice (1) Others (2) Data

-7.3%

YoY

8.7%

1.2%

-8.9%

-2.3%

1Q13 1Q14

-6.7 p.p.

-1.8%


16

EBITDA Margin of 29.8% supported by discipline on costs which grew below inflation, even with higher commercial activity.

Recurrent EBITDA MarginR$ Million

FINANCIAL

EBITDA MarginR$ million

� Capturing synergies with restructuring

compensating inflationary pressures

� G&A reduction through renegotiation with

providers

� Commissions with contract and data

adoption� Launch of new prepaid

offer� Fixed turnaround

Personnel + G&ASubsidies + Selling

Expenses

32.1% +1.4 p.p. +1.3 p.p. -3.8 p.p. -0.2 p.p. -1.1 p.p. 29.8%

+1.3% -10.7% +16.3% +0.6% n.m. -2.4 p.p.

Impact in

EBITDA Margin

y-o-y

evolution

� MTR reduction driving reduced

interconnection costs� Higher TV and mobile

content costs

Services Rendered

2,7482,563

110 105 29516 88

EBITDA 1Q13 Net ServiceRevenues

Personnel + G&A Subsidies +Selling Expenses

ServicesRendered

Others EBITDA 1Q14


Operating Cash FlowR$ Million

Net DebtR$ Million

CapexR$ Million

Financial ResultR$ Million

17

We executed our Capex according to the guidance for the year while sustaining low leverage.

FINANCIAL

1,271

1.1 1.3

1Q13 1Q14

Recurrent Operating Cash FlowOCF / (EBITDA - Capex)

-8%

-17

-88

1Q13 1Q14

-72

655

1,800

3,667

1Q13 4Q13 1Q14

7081,001

8.3%

11.6%

1Q13 1Q14

Licenses % Adjust Capex / Net Revenues

Payment of dividends in the

1Q14 in the amount of

R$1.8 billion.

2,261 2,072

18

3. Transforming our Company


19

Our plan is to be the leading Digital Telco with a clear strategy for transformation.

Leverage the Mobile Leadership_

Transform our Fixed Business_

Transform CustomerExperience_

Capture the

Digital

Opportunity_

Foster simplicity, agility and Efficiency_

Leverage the strenght of a single Cultureand Leading

Brand_

Digital

World

Simple

Practices

Single

Purpose

Customer-centric organization fully focused on monetizing the digital opportunity.

TRANSFORMATION


20

We have defined an agenda to accelerate the implementation of our strategy with clear goals and strong commitment throughout the organization.

TRANSFORMATION

Transformation Agenda_

IT process and transformation

Renewed and efficient

fixed business

Super mobile network

Data monetization

IT process and transformationFiber and Video

Company

Online experienceand channels

Efficient evolution of

customer care

1

2

3

4

5

6

7


21

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 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.

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

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