Digital Trends and Telefonica - MITA...

Digital Trends and Telefonica

Jack Leeney, MITA Tech Talks2016

DISCOVER, DISRUPT, DELIVER

1924 - 1964 1965 - 1989 1990 - 1994 1995 - 1999

2

Telefónica is the result of 90 years of anticipation and transformation...

• CTNE is set up in Madrid; ITT is one of its initial shareholders (1924)

• The Spanish government takes 79.6% of CTNE shares (1945)

• Installs the phone 1 million (1953)

• CTNE becomes the #1 Spanish enterprise (1960)

• Start of satellite communications (1967)

• Begins operations of the 1st European Data Transmission Special Network (1971)

• Installs the phone number 10 million (1978)

• Lists on New York Stock Exchange (1987)

• Enters in Chile (CTC) and in Argentina (TASA) (1990)

• Launches MoviLine in Spain (1990), the analogue mobile service, reaching a geographic coverage of 98% in three years.

• Enters in Peru (TdP) (1994)

• Launches digital mobile telephony: Movistar (1994)

• Commercial Internet is being born. Telefónica launches Infovía (1995)

• Wins the tender for Telesp in Brazil (1998)

• Telefónica becomes fullypublic again (1999)

• Launches fixed broadband access service ADSL (1999)


2000 - 2005 2006 - 2009 2010 - 2012 2013 - 2014

3

...especially during the last decade

1. Operation is subject to obtaining the relevant regulatory approval.2. The stake in China Unicom has been reduced to 2.51%.

• Veronica Operation: Telefónica de Argentina; Telefónica del Perú; Telesp and Tele Sudeste in Brazil (2000)

• Joint venture of Telefónica and Portugal Telecom in Brazil: Vivo(2003)

• Launches Imagenio (2003)

• Acquisition of BellSouth's assets in Latin America (2004)

• Acquisition of Cesky Telecom(2005)

• Takes a 5% stake in ChinaNetcom (2005)

• Acquisition of the O2 assets in the UK, Germany and Ireland (2006)

• Mobile license awarded in Slovakia (2006)

• 51% stake taken in ColombiaTelecom (2006)

• Industrial alliance with TelecomItalia (10.47% of the voting rights) (2007)

• Acquisition of Telemig by Vivo in Brazil (2008)

• Reaches a 5.38% participation in China Unicom after the CU-CNC merger (2008)

• Strengthening of the strategic alliance with China Unicom (2009)

• Acquisition of Hansenet in Germany, Jajah in Israel and Tuenti in Spain (2010)

• Control of Vivo obtained by buying PT stake out of Brasilcel (2010)

• Mobile license awarded in CostaRica (2011)

• T.Digital and TGR creation (2011)

• Sale of 4.56% stake in ChinaUnicom (2012)

• IPO Telefónica Deutschland (2012)

• Sale of Atento (2012)

• Sale of 40% of Telefónica’sstake in Centroamérica (2013)

• Sale of Telefónica Czech Republic (2014)

• New totally customer-centredorganization (2014)

• Acquisition of E-Plus in Germany (2014)

• Sale of Telefónica Ireland(2014)

• Acquisition of Digital+ in Spain (2014)1

• Acquisition of GVT (2014)1

• Sale of Telecom Italia’s stake(2014)

• Sale of 2.5% stake in ChinaUnicom (2012)2

DISCOVER, DISRUPT, DELIVER4

Since the beginning of internationalization, the company has experienced a significant growth

* Data as of FY 2013

1989 Sep14 1989–Sep14

Customers (Mn) 12 316 x26

Countries 1 21 +20

Team (‘000 employees) 71 120 x2

Revenues (Mn €) 4.273 57.061* x13


Telefónica is a reference in the Latin American Telco market and has a relevant scale in Europe …

Spain: 41.2

Germany: 25.3

United Kingdom: 24.3

Accesses: 91 MnSeptember 2014

Accesses: 225 MnSeptember 2014

Brazil: 95.6

Argentina: 26.0

Mexico: 22.1

Peru: 21.6

Colombia: 15.4

Chile: 13.6

Central America: 12.3

Venezuela: 11.5

Ecuador: 5.0

Uruguay: 1.9

Notas: Centroamérica incluye Guatemala, Panamá, El Salvador, Nicaragua y Costa Rica.


… with a remarkable growth in mobile broadband

Nota: T. Czech Republic accesses are de-consolidated since the first quarter of 2014. T. Ireland accesses are de-consolidated since the third quarter of 2014.

249.4

37.3

17.74.7

7.1

Sep'2014

Total Accesses: 316 million

Fixed Telephony

Fixed Broadband

Mobile Accesses

Pay TVOther accesses

Mobile Accesses - % contract

Mobile Broadband

Pay TV

35.0%

35.6%

Dec'2013 Sep'2014

72.889.1

Dec'2013 Sep'2014

3.6 4.7

Dec'2013 Sep'2014

Var. YtD+29%

Var. YtD+22%


Telefónica enjoys a unique portfolio in the industry...

9M 2014(EUR Mn)

% Var. Reported vs 9M2013

% Var. Organic1

vs 9M 2013

Accesses Revenues3 OIBDA3

1. Organic growth: assumes constant 2013 exchange rates (average FX in 2013), excludes Venezuela in both years and considers a constant perimeter of consolidation. OIBDA level guidance excludes write-offs, capital gains/losses from the sale of companies, tower sales and material non-recurring impacts such as restructurings, etc.

2. Operating CF = OIBDA - CapEx (excluding spectrum).3. Differences up to and over 100% are due to “Others & Eliminations”.

13%

8%

8%

30%

41%

Spain

United Kingdom

Germany

Brazil

Hispano America

Revenues 37,978 (10.9) 1.9

OIBDA 12,325 (12.6) 0.2

OIBDA Margin 32.5% (0.6 p.p.) (0.5 p.p.)

Operating Free Cash Flow2 6,779 (25.3) (14.4)

23%

14%

9%22%

29% 33%

11%6%

21%

29%


...both by its diversification...

% out of market of origin

Operational data as of September 2014 and financial data as of January-September 2014.Vodafone: Financial data as of March-September 2014. Revenues data calculated with Service Revenue

Accesses Revenues OIBDA

* 95.5% 84.5% 89.0%

87.0% 76.3% 66.6%

74.6% 67.9% 56.3%

74.6% 50.9% 61.0%

62.7% 62.2% 48.0%

58.9% 29.0% 19.6%


...as well as by its customer base and revenues...

... by total accesses (Million, September 2014)

...by revenues(Euro million, FY 2013)

Top 10 Worldwide …

799.1

449.4

438.5

433.6

364.4

316.1

303.7

356.3

239.5

231.8

China Mobile

China Unicom

Vodafone

China Telecom

America Movil

Barthi-Airtel

Axiata*

Orange

Vimpelcom

96,923

90,748

81,282

77,173

60,132

57,061

51,702

49,599

46,356

40,981

at&t

Verizon

NTT

China Mobile

Deutsche Telekom

Vodafone

Softbank

América Móvil

France TelecomTotal accesses (as reported by companies) = Fixed Lines + Mobile Customers + Narrowband and Broadband Internet + Pay TV.* Accesses as of June14. Note: FY 2013 revenues as reported by companies.


...and by its commitment to innovation

Worldwide Telco sector ranking by R&D(EUR million)

2,357

1,113969

812 811602

367 337218 167

NTT at&t Orange BT TI Vodafone KT SK Telecom

PT

Source: The 2013 EU Industrial R&D Scoreboard (European Commission)

#2 TelcoBy R&D

Telefónica’s activity has a clear positive impact in the societies where it is present

As an engine for economic sustainable development and innovation...

...and to help overcome social divides


The ICT sector is key to improve productivity and for economic sustainable growth

Increase in GDP growth (pp) per each 10 pp increase in penetration of Telco services

Developed countries Developed countries

ICT impact on the economy

0.0 0.3 0.6 0.9 1.2 1.5

Fixed

Mobile

Broadband

Mobile Broadband

Source: World Bank; Qiang.

Broadband development

Direct BenefitsInfrastructure Investment

Consumer surplus

Contribution to GDP growth

Private IncomeTotal Factor Productivity

Household Penetration

Enterprise penetration

0.0 0.3 0.6 0.9 1.2 1.5


Telefónica’s activity contributes to economic development in the countries where it operates...

Broadband increases productivity 5% in industrial

sector and 10% in service sector due to process improvement

Digital Agenda implementation for EuropeImpact on jobs

CPI Evolution versus CPI Communications EU

(Base 100 = 2005)

Telefónica CapExEUR Million

CapEx (non spectrum)/Revenues CapEx

60708090

100110120130

2005 2006 2007 2008 2009 2010 2011 2012 2013

General CPI Communications CPI

Jobs (Mn)

Short Term 1.2

Long Term 3.5 – 5.5

Source: Eurostat

8,228

8,928 8,871

8,172

13.5%

14.2% 14.2% 14.3%

2010 2011 2012 2013CapEx incl.

espectro 10,844 10,224 9,458 9,395


Our brands, one of our main assets, are managed globally

Speaks to:• Institutions•Governments•Employees•Multinational Clients,• ...

Speaks to Customersand Society

Brand Architecture

Institutional Role

Commercial Role


Global Distribution and Scale to Reach a Significant Userbase

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There has never been more network activity


Users spend incredible amounts of time engaged with their devices


As next generation networks and gigabit mobile and fixed internet rolls out

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Carriers have the unique position to truly understand the customer

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How we can deliver the dramatic increase in external innovation

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Corporate Fund

Start-up accelerator

Grants programme

Crowdworking spaces

Social entrepreneurship programme

Fund in process of creation

Network VC funds

• ~30,000 analyzed projects

• Accelerated more than 400 start-ups worldwide

• 14 Wayra academies worldwide

MARKET ACCESS

CrowdworkingSpaces


Now to deliver a new host of digital products and services

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Understand how user data can and will shape new services

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Digital Businesses Built in Developed Markets Can Translate to LatAm

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Digital Trends and Telefonica - MITA...

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