Table of Contents
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
of the Securities Exchange Act of 1934
For the month of November, 2008
Commission File Number: 001-09531
Telefónica, S.A.
(Translation of registrant’s name into English)
Distrito C, Ronda de la Comunicación s/n,
28050 Madrid, Spain
3491-482 85 48
(Address of principal executive offices)
28050 Madrid, Spain
3491-482 85 48
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form
20-F or Form 40-F:
Form 20-F þ Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(1):
Yes o No þ
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(7):
Yes o No þ
Indicate by check mark whether by furnishing the information contained in this Form, the registrant
is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934:
Yes o No þ
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with
Rule 12g3-2(b): N/A
Telefónica, S.A.
TABLE OF CONTENTS
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Quarterly results
January–September 2008
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The financial information contained in this document has been prepared under International
Financial Reporting Standards (IFRS). This financial information is unaudited.
The English language translation of the consolidated financial statements originally issued in
Spanish has been prepared solely for the convenience of English speaking readers. Despite all the
efforts devoted to this translation, certain omissions or approximations may subsist. Telefónica,
its representatives and employees decline all responsibility in this regard. In the event of a
discrepancy, the Spanish-language version prevails.
January — September 2008 Results Telefónica 1
Table of Contents
TELEFÓNICA GROUP
Market Size
(Data in thousands accesses)
January — September 2008 Results Telefónica 2
Table of Contents
TELEFÓNICA GROUP
Market Size
TELEFÓNICA
GROUP ACCESSES
GROUP ACCESSES
Unaudited figures (thousands)
| January - September | ||||||||||||
| 2008 | 2007 | % Chg | ||||||||||
Final
Clients Accesses |
248,725.0 | 216,430.9 | 14.9 | |||||||||
Fixed telephony accesses (1) |
43,243.9 | 43,492.1 | (0.6 | ) | ||||||||
Internet and data accesses |
14,393.5 | 12,767.0 | 12.7 | |||||||||
Narrowband |
2,212.1 | 2,952.0 | (25.1 | ) | ||||||||
Broadband (2) |
12,028.1 | 9,657.3 | 24.5 | |||||||||
Other (3) |
153.2 | 157.7 | (2.8 | ) | ||||||||
Mobile accesses (4) |
188,929.5 | 158,770.1 | 19.0 | |||||||||
Pay TV |
2,158.1 | 1,401.7 | 54.0 | |||||||||
Wholesale
Accesses |
3,243.5 | 2,361.7 | 37.3 | |||||||||
Unbundled
loops |
1,633.9 | 1,277.5 | 27.9 | |||||||||
Shared ULL |
640.2 | 713.5 | (10.3 | ) | ||||||||
Full ULL |
993.6 | 564.1 | 76.1 | |||||||||
Wholesale ADSL (5) |
570.8 | 588.2 | (3.0 | ) | ||||||||
Other (6) |
1,038.8 | 496.0 | 109.4 | |||||||||
Total
Accesses |
251,968.5 | 218,792.6 | 15.2 | |||||||||
| (1) | PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/ 6
Access x30. Company’s accesses for internal use and total fixed wireless included. |
|
| (2) | ADSL, satellite, optical fibre, cable modem and broadband circuits. |
|
| (3) | Remaining non-broadband final client circuits. |
|
| (4) | Includes accesses of Telemig from April 2008. |
|
| (5) | Includes Unbundled Lines by T. Deutschland. |
|
| (6) | Circuits for other operators. |
|
Notes: |
||
| • | Iberbanda accesses are included from December 2006. |
|
| • | As of 31 December 2006, Group accesses have been reclassified, including “fixed wireless”
accesses under the caption of fixed telephony. These accesses were previously classified,
depending on the country, under mobile or fixed accesses. |
|
| • | As of 1 January 2008, “fixed wireless” public telephony accesses are included under the
caption of fixed telephony accesses. |
|
January — September 2008 Results Telefónica 3
Table of Contents
TELEFÓNICA
GROUP
Consolidated Results
Telefónica Group organizational restructuring by Regional Business Units: Telefónica España,
Telefónica Latinoamérica and Telefónica Europe, in accordance with the new regional and integrated
management model, defines that the companies legal structure is not relevant for the presentation
of the Telefónica Group financial information. In this sense, operating results of each regional
business units are presented independently of their legal structure.
In line with this new structure, Telefónica Group has incorporated in Telefónica España and
Telefónica Latinoamérica regional businesses units all the information corresponding to fixed,
cellular, cable, Internet and Television businesses.
Likewise, Telefonica Europe includes Telefonica O2 UK, Telefonica O2 Germany, Telefonica O2
Ireland, Telefónica O2 Czech Republic and Telefonica O2 Slovakia results.
In the caption “Other companies and Eliminations” Atento together with other companies and
eliminations in the consolidation process are included.
For the presentation of the reporting by regions, revenue and expenses arising from the use of the
trademark and management contracts that do not affect the Group’s consolidated results have been
eliminated from the operating results of each Group region.
From December 31, 2006 Group’s accesses have been reclassified, being fixed wireless accesses now
included within the fixed telephony accesses. Till December 2007 fixed wireless accesses were
included, depending on the country, in mobile or fixed accesses. As from January 1, 2008, the fixed
wireless accesses include public telephones with this technology.
Additionally, in order to provide comparable information, Iberbanda’s accesses, a Telefónica
España’s subsidiary, have been included in the total accesses of Telefónica Group effective from
31st December 2006.
Moreover, in Latinoamérica, year-on-year organic growth rates including Telemig results for the
period April-September 2007 are provided, with the best comparable information available at the
closing of this document.
The Telefónica Group’s results for the first nine months of 2008 mark a consolidation of the trends
recorded in the first half, showing significant organic growth rates excluding capital
gains1. Given the current operating environment, these results highlight the more
defensive profile of the telecommunications sector in general and Telefónica in particular, thanks
to its high diversification, both in terms of geographies and services, its strong competitive
positioning in its main markets (number one or two player in each market) and its integrated
management model.
Similarly, the high organic growth excluding capital gains1 across the P&L -that shows
an acceleration from the topline down to OI-, together with the high cash flow generation level
during the period (outpacing year-on-year revenue growth), reflect the Company’s strategic focus on
maximising efficiency and leveraging its economies of scale.
During the third quarter the Company continued to register a strong commercial activity across the
markets, underpinning growth in the total number of accesses of 15.2% on the first nine months of
2007 to almost 252 million. This growth was driven by the increase in wireless (+19.0%), broadband
(+24.5%) and Pay TV (+54.0%) accesses. By region, it is worth highlighting the contribution by Telefónica Latinoamerica, with
over 150 million accesses across the region at the end of September 2008 (up 21.1% year-on-year).
| 1 | Assuming constant exchange rates and including the
consolidation of TVA in January-September 2007 and Telemig in April-September
2007. Excluding the consolidation of Airwave in January-March 2007 and Endemol
in January-June 2007. In revenues, the impact in Telefónica España of the new
model for the public use telephone service (-106.1 million euros in
January-September 2007) is included. In OIBDA and OI, the impact of asset
disposals (Airwave, Endemol and Sogecable) is excluded from both periods. |
January — September 2008 Results Telefónica 4
Table of Contents
TELEFÓNICA GROUP
Consolidated Results
By access type, the Telefónica Group’s wireless accesses stood at approximately 189 million at the
end of September, with 6.2 million net adds during the third quarter of 2008 (year-on-year
organic2 growth of 17.4%) and of 17.23 million net adds in January-September
(year-on-year organic4 growth of 14.2%). The main countries contributing to growth in
net adds were Brazil (4.8 million), Mexico (2.1 million), Peru (1.9 million) and Germany (1.5
million).
Retail internet broadband accesses stood at 12.0 million, a year-on-year increase of 24.5%, driven
by the growing penetration of voice, ADSL and pay-TV bundles. In fact, in Spain over 84% of retail
broadband accesses are bundled as part of some kind of dual or triple service package while in
Latin America the weight of bundles is growing rapidly, with 46% of retail broadband accessed
bundled as part of Duo or Trio packages. Net adds in the third quarter of 2008 amounted to 0.6
million accesses (year-on-year growth of 14.9%), bringing total net adds for the first nine months
to 1.7 million accesses (up 1.5% year-on-year), of which 0.8 million come from Latin America, 0.5
million from Spain and 0.4 million from Europe.
Total broadband accesses in Latin America at the end of September surpassed 5.8 million (up 24.9%
year-on-year), compared to over 5.1 million in Spain (up 16.8% year-on-year), and just over 1
million in Europe (year-on-year growth of 80.8%).
Pay TV accesses stood at over 2.1 million at the end of the third quarter, up 54.0% on the prior
year, driven by net adds of 130,000 accesses in the third quarter (year-on-year growth of 14.4%)
and approximately 410,000 in January-September (up 21.4% year-on-year). By September the Company
offered Pay-TV services in Spain, the Czech Republic, Peru, Chile, Colombia and Brazil, whereas in
October Telefonica launched its Pay TV services in Venezuela.
The positive evolution of the operating results led to revenues of 43,141 million euros, for a
year-on-year increase in the first nine months of the year of 2.7%, boosted by the outstanding
growth rate of 5.7% in the third quarter. In January-September 2008, the negative impact of
exchange rates eroded 2.5 percentage points of revenue growth, while changes in the consolidation
perimeter reduced topline growth by a further 1.8 percentage points.
In organic terms5, revenue growth accelerated as compared to the first half, reaching
7.0% in the first nine months (+6.7% in the first half of the year), mainly driven by the
significant increase in Telefónica Latinoamérica (4.6
percentage points contribution to growth in the first nine months of 2008) and, to a lesser degree,
in Telefónica Europe (1.5 percentage points contribution to growth in January-September 2008). By
service, wireless service revenues, with a growing contribution by data services, along with
wireline broadband and pay-TV, were the main drivers of organic revenue growth.
In absolute terms, in the first nine months of 2008 Telefónica Latinoamérica accounted for 37.8% of
total Group revenues, with Telefónica España and Telefónica Europe accounting for 36.4% and 24.8%,
respectively.
Meanwhile, the Telefónica Group’s operating expenses totalled 27,186 million euros in the
January-September 2008, virtually flat year-on-year. Stripping out the impact of exchange rates,
operating expenses would have risen 3.5% year-on-year.
| 2 | Including Telemig in July-September of 2007. |
|
| 3 | The Telemig customers incorporated by the Group in
April 2008 (close to 4 million) are not included as net adds in the period. |
|
| 4 | Including Telemig in April-September of 2007. |
|
| 5 | Assuming constant exchange rates and including the
consolidation of TVA in January-September 2007 and Telemig in April-September
2007. Excluding the consolidation of Airwave in January-March 2007 and Endemol
in January-June 2007. In revenues, the impact in Telefónica España of the new
model for the public use telephone service (-106.1 million euros in
January-September 2007) is included. In OIBDA and OI, the impact of asset
disposals (Airwave, Endemol and Sogecable) is excluded from both periods. |
January — September 2008 Results Telefónica 5
Table of Contents
TELEFÓNICA GROUP
Consolidated Results
Supply costs fell 0.3% year-on-year to 13,210 million euros in the first nine months. Stripping out
the impact of exchange rates, these costs would have risen 3.5%, mainly due to higher
interconnection expenses and equipment and circuit rental in Telefónica Latinoamérica and at
Telefónica O2 UK.
Personnel expenses fell 4.7% year-on-year to 5,065 million (-2.9% in constant euros), mainly due to
personnel restructuring expenses recognised in January-September 2007 (299 million euros). The
average headcount during the period was 250,759, an increase of 8,154 employees, mainly due to the
expansion of the Atento Group’s workforce. Excluding the Atento Group workforce, the average
headcount at the Telefónica Group fell by 2,656 employees from September 2007, in part due to the
deconsolidation of Endemol and Airwave, to 124,728 employees.
External service expenses (7,472 million euros in the first nine months of 2008) rose 3.5%
year-on-year (+5.9% in constant currency), mainly due to higher expenses in Telefónica
Latinoamerica, primarily in Brazil, Venezuela and Chile, and to higher customer retention costs in
Telefónica O2 UK and subscriber acquisition costs in Telefónica O2 Germany, all driven by the
intense commercial activity.
Gains on sale of fixed assets totalled 236 million euros in the first nine months of 2008, mainly
in connection with capital gains recorded on the sale of its stake in Sogecable (143 million euros)
and the Real Estate programmes in Telefónica España and Telefónica Europe. It is worth recalling
that in January-September 2007 the Company
registered the capital gains realised on the disposal of Airwave (1,296 million euros) and Endemol
(1,368 million euros), the latter in the third quarter of 2007.
Operating income before depreciation and amortisation (OIBDA) reached 17,026 million euros for the
first nine months of 2008, down 6.7% year-on-year, due primarily to the impact of the
aforementioned capital gains, which also explain the year-on-year decline in OIBDA in the third
quarter of 2008 (-15.4%).
In organic terms6, OIBDA declined 4.8% in the first nine months. However, excluding also
capital gains7, OIBDA would have risen 9.8% in the period, outpacing topline growth by
2.8 percentage points. Telefónica Latinoamérica (+5.4 percentage points) and Telefónica España
(+3.0 percentage points) were the main contributors to this growth.
In absolute terms, OIBDA at Telefónica España accounted for 46.1% of total Group OIBDA, compared to
35.4% and 18.0% from Telefónica Latinoamérica and Telefónica Europe, respectively.
The OIBDA margin for January-September 2008 stood at 39.5% (compared to 43.4% a year earlier), due
to capital gains on the disposals of Airwave and Endemol.
In organic terms, and excluding capital gains7, the OIBDA margin was 38.5% in the first
nine months of 2008, up 1.0 percentage points year-on-year, driven by efficiency improvements and
economies of scale, in the context of high commercial activity in the Group and transformation of
the wireline business in Latin America.
Depreciation and amortisation in the first nine months totalled 6,803 million euros, down 2.6%
year-on-year. Telefónica Europe includes the amortisation of the purchase price allocation made
following the O2 Group acquisition (523 million euros) and the Telefónica O2 Czech Republic
acquisition (133 million euros). In organic terms6 the Telefónica Group’s depreciation
and amortisation charges for the nine months fell 0.3% year-on-year, with Telefónica Europe and
Telefónica España contributing the most to this decline.
Operating income (OI) totalled 10,223 million euros for the period from January to September 2008,
down 9.2% year-on-year, due to recognition of the aforementioned capital gains on the sale of
Airwave and Endemol in 2007. In organic terms6, the drop in operating income stands at
7.8%. Also stripping out the capital gains on the Sogecable, Endemol and Airwave disposals from
both periods, operating income would grow 18.0% year-on-year.
| 6 | Assuming constant exchange rates and including the consolidation of TVA in
January-September 2007 and Telemig in April-September 2007. Excluding the consolidation of Airwave
in January-March 2007 and Endemol in January-June 2007. |
|
| 7 | Assuming constant exchange rates and including the consolidation of TVA in
January-September 2007 and Telemig in April-September 2007. Excluding the consolidation of Airwave
in January-March 2007 and Endemol in January-June 2007. In revenues, the impact in Telefónica
España of the new model for the public use telephone service (-106.1 million euros in
January-September 2007) is included. In OIBDA and OI, the impact of asset disposals (Airwave,
Endemol and Sogecable) is excluded from both periods. |
January — September 2008 Results Telefónica 6
Table of Contents
TELEFÓNICA GROUP
Consolidated Results
Accordingly, growth accelerated in the third quarter in organic terms and ex-capital
gains7, from revenue to operating income (revenue up 7.0%, OIBDA up 9.8%, and OI up
18.0%).
Net profit from associates amounted to 20 million euros in the first nine months (vs. 107 million
euros in January-September 2007), mainly contributed by the investment in Portugal Telecom. The
year-on-year decline reflects a lower contribution from Portugal Telecom and losses attributable to
the Company’s investment in Telco SpA.
Net financial results at the end of September 2008 amounted to 2,099 million euros, virtually flat
vs. the same period of 2007 (+0.2%), mainly due to the decrease of 10% in the average debt, which
has generated savings of 230 million euros. This effect is balanced by:
a) an increase of the average cost of the Group’s debt, to 6.06% over total average debt
excluding foreign exchange results, that leads to a higher expense of 142 million euros due
to higher interest rates;
b) changes in the present value of pre-retirement plan commitments and other
marked-to-market positions that have a positive impact of 25 million euros, 116 million
euros lower than the figure reported in January-September 2007 due to the existing
volatility in financial markets.
Free cash flow generated by the Telefónica Group up to the end of September 2008 amounted to 6,276
million euros of which 1,766 million euros were assigned to Telefonica’s share buyback program,
1,869 million euros to Telefónica S.A. dividend payment and 552 million euros to commitment
cancellations derived mainly from the pre-retirements plans. Due to the fact that financial and
Real Estate net divestments for the period amounted to 339 million euros, net financial debt
decreased in 1,749 million euros. Also, net debt was reduced by an additional 679 million euros
because of the foreign exchange impact, changes in the consolidation perimeter and other effects on
financial accounts. All this has led to a decrease of 2,428 million euros with respect to the net
financial debt at the end of the fiscal year 2007 (45,284 million euros), leaving the net financial
debt of the Telefónica Group at September 2008 at 42,856 million euros.
Leverage ratio, net debt over OIBDA, continues to fall down to 1.91x at September 2008,
compared to 2.0x at June 2008, thanks to both the reduction of the net financial debt in the
period and to an increase in the OIBDA figure. Nonetheless, in the fourth quarter, the ratio
will slightly increase due to the disbursements foreseen for the dividend payment on November
and the payment of the acquisitions already committed (basically the increase in China
Unicom’s stake and CTC minority’s stake acquisition).
During the first nine months of the year, the financing activity of Telefónica Group,
excluding short term Commercial Paper Programmes activity, rose to approximately 2,700 million
euros, less intense compared to previous periods due to the instability of the credit markets
and the Group’s liquidity position. Included in this amount, we highlight the Euro bond
issuance for an amount of 1,250 millions raised by Telefónica S.A. last May. It is worth
mentioning that in the last quarter of 2007 a number of facilities were signed with
multilateral entities and several financial institutions, totalling 1,039 million euros,
initially forecasted for the first quarter of 2008.
In the first nine months of the year, Telefónica S.A. and its holding companies remained
active under its various Commercial Paper Programmes (domestic and European), for an
outstanding balance of 1,335 million euros, maintaining spreads despite adverse market
conditions.
Regarding Latin America, our subsidiaries have tapped the capital markets up to September
2008 for an amount of 1,310 of million equivalent euros, mainly renewing existing debt.
As of September 30th, the breakdown of consolidated financial debt is 56% bonds
and debentures and 44% debt with financial institutions.
January — September 2008 Results Telefónica 7
Table of Contents
TELEFÓNICA GROUP
Consolidated Results
The cash position as of September 30th covers in excess debt maturities in the
last quarter of the year. Net debt maturities forecasted for 2009 stand at 4,085 million
euros.
The tax provision for January-September 2008 totalled 2,374 million euros, implying an effective
tax rate of 29.2%. However, the Telefónica Group’s cash outflow is being lower in 2008 as tax
losses generated in prior years and pending deductions are used. It is worth highlighting that in
2007 the tax provision was lower, as a result of the disposal of Endemol, which generated a fiscal
loss.
Minority interests grew 11.4% year-on-year, reducing net profit for the first nine months of the
year by 174 million euros. Minority interests in Telesp and Telefónica O2 Czech Republic account
for the bulk of this item.
As a result of the above, consolidated net income for the first nine months of 2008 amounted to
5,596 million euros, down 28.7% on the same period of 2007. This decrease is mainly due to the
recognition in 2007 of capital gains on the sale of Airwave and Endemol. Stripping out the impact
of asset disposals (Airwave, Endemol and Sogecable) from both periods, growth in net income in
January-September rises to 23.5%.
Basic earnings per share in the first nine months of 2008 stood at 1.2 euros, year-on-year growth
of 26.4% on comparable terms8.
CapEx amounted to 5,406 million euros in January-September, to leave operating cash flow
(OIBDA-CapEx) at 11,621 million euros, with a year-on-year organic growth ex-capital
gains9 of 10.1%. By region, Telefónica España accounted for 6,302 million euros of the
total, while Telefónica Latinoamérica generated 3,626 million euros and Telefónica Europe, 1,693
million euros. Free cash flow per share was 1.346 euros for the first nine months of 2008, compared
to 1.249 euros the year before.
In relation to shareholder remuneration, on November 12th, 2008, the Company paid out a
per share interim dividend of 0.50 euros against 2008 profits, equivalent to 50% of the total
dividend to be paid against this year’s profits. In addition, on October 13th, 2008,
Telefónica announced a 50% expansion of its 2008 share buyback programme, implying the acquisition
of 50 million own shares by year-end, in addition of the 100 million already bought since the
beginning of the year.
| 8 | Excluding the impact of asset disposals (Airwave, Endemol and Sogecable) from both periods. |
|
| 9 | Assuming constant exchange rates and including the consolidation of TVA in January-September
2007 and Telemig in April-September 2007. Excluding the consolidation of Airwave in
January-March 2007 and Endemol in January-June 2007. In revenues, the impact in Telefónica
España of the new model for the public use telephone service (-106.1 million euros) is
included. In OIBDA and OI, the impact of asset disposals (Airwave, Endemol and Sogecable) is
excluded from both periods. |
January — September 2008 Results Telefónica 8
Table of Contents
TELEFÓNICA GROUP
Financial Data
TELEFÓNICA GROUP
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
| January - September | July - September | |||||||||||||||||||||||
| 2008 | 2007 | % Chg | 2008 | 2007 | % Chg | |||||||||||||||||||
Revenues |
43,141 | 42,014 | 2.7 | 14,993 | 14,188 | 5.7 | ||||||||||||||||||
Internal exp capitalized in fixed assets |
529 | 497 | 6.5 | 177 | 160 | 10.5 | ||||||||||||||||||
Operating expenses |
(27,186 | ) | (27,050 | ) | 0.5 | (9,341 | ) | (8,927 | ) | 4.6 | ||||||||||||||
Supplies |
(13,210 | ) | (13,254 | ) | (0.3 | ) | (4,548 | ) | (4,411 | ) | 3.1 | |||||||||||||
Personnel expenses |
(5,065 | ) | (5,315 | ) | (4.7 | ) | (1,676 | ) | (1,670 | ) | 0.4 | |||||||||||||
Subcontracts |
(7,472 | ) | (7,220 | ) | 3.5 | (2,532 | ) | (2,427 | ) | 4.3 | ||||||||||||||
Bad Debt Provisions |
(562 | ) | (537 | ) | 4.8 | (185 | ) | (178 | ) | 4.1 | ||||||||||||||
Taxes |
(876 | ) | (725 | ) | 20.9 | (400 | ) | (242 | ) | 65.4 | ||||||||||||||
Other net operating income (expense) |
314 | 166 | 89.4 | 77 | 185 | (58.4 | ) | |||||||||||||||||
Gain (loss) on sale of fixed assets |
236 | 2,634 | (91.0 | ) | (1 | ) | 1,375 | c.s. | ||||||||||||||||
Impairment of goodwill and other assets |
(9 | ) | (13 | ) | (32.1 | ) | (1 | ) | (2 | ) | (39.5 | ) | ||||||||||||
Operating income before D&A (OIBDA) |
17,026 | 18,248 | (6.7 | ) | 5,903 | 6,979 | (15.4 | ) | ||||||||||||||||
OIBDA margin |
39.5 | % | 43.4 | % | (4.0 p.p. | ) | 39.4 | % | 49.2 | % | (9.8 p.p. | ) | ||||||||||||
Depreciation and amortization |
(6,803 | ) | (6,985 | ) | (2.6 | ) | (2,282 | ) | (2,272 | ) | 0.4 | |||||||||||||
Operating income (OI) |
10,223 | 11,263 | (9.2 | ) | 3,621 | 4,707 | (23.1 | ) | ||||||||||||||||
Profit from associated companies |
20 | 107 | (81.7 | ) | 24 | 26 | (8.0 | ) | ||||||||||||||||
Net financial income (expense) |
(2,099 | ) | (2,095 | ) | 0.2 | (711 | ) | (657 | ) | 8.1 | ||||||||||||||
Income before taxes |
8,144 | 9,275 | (12.2 | ) | 2,934 | 4,075 | (28.0 | ) | ||||||||||||||||
Income taxes |
(2,374 | ) | (1,271 | ) | 86.7 | (854 | ) | (15 | ) | n.m. | ||||||||||||||
Income from continuing operations |
5,770 | 8,004 | (27.9 | ) | 2,080 | 4,061 | (48.8 | ) | ||||||||||||||||
Income (Loss) from discontinued ops. |
0 | 0 | n.m. | (0 | ) | 0 | c.s. | |||||||||||||||||
Minority interest |
(174 | ) | (156 | ) | 11.4 | (77 | ) | (43 | ) | 78.7 | ||||||||||||||
Net income |
5,596 | 7,848 | (28.7 | ) | 2,003 | 4,018 | (50.1 | ) | ||||||||||||||||
Weighted average number of ordinary shares
outstanding during the period (millions) |
4,663.7 | 4,772.3 | (2.3 | ) | 4,625.8 | 4,730.2 | (2.2 | ) | ||||||||||||||||
Basic earnings per share (euros) |
1.200 | 1.644 | (27.0 | ) | 0.433 | 0.849 | (49.0 | ) | ||||||||||||||||
Notes: |
||
| • | For the basic earnings per share calculation purposes, the weighted average number of ordinary
shares outstanding during the period have been obtained applying IFRS rule 33 “Earnings per share”.
Thereby, there are not taking into account as outstanding shares the weighted average number of
shares held as treasury stock during the period. Excluding the impact of asset disposals (Airwave and Sogecable) in both periods, net income grows
23.5% as of the end of September 2008. |
|
| • | Airwave and Endemol are not consolidated since the second and third quarter of 2007,
respectively. The disposal of Airwave generated a capital gain of 1,296 million euros, recorded in
the second quarter of 2007. The disposal of Endemol generated a capital gain of 1,368 million
euros, recorded in the third quarter of 2007. |
|
| • | Sogecable capital gain amounting 143 million euros is
recorded in the second quarter of 2008. |
|
| • | Starting April
2008, Vivo consolidates Telemig. |
|
| • | Excluding the impact of asset disposals, organic OIBDA growth reaches 9.8% and organic OI growth
reaches 18.0% in the period January-September 2008. |
|
January — September 2008 Results Telefónica 9
Table of Contents
TELEFÓNICA GROUP
Financial Data
TELEFÓNICA GROUP
RESULTS BY REGIONAL BUSINESS UNITS
Unaudited figures (Euros in millions)
RESULTS BY REGIONAL BUSINESS UNITS
Unaudited figures (Euros in millions)
| REVENUES | OIBDA | OIBDA MARGIN | ||||||||||||||||||||||||||||||||||
| January - September | January - September | January - September | ||||||||||||||||||||||||||||||||||
| 2008 | 2007 | % Chg | 2008 | 2007 | % Chg | 2008 | 2007 | Chg | ||||||||||||||||||||||||||||
Telefónica España (1) |
15,706 | 15,462 | 1.6 | 7,857 | 7,384 | 6.4 | 50.0 | % | 47.8 | % | 2.3 p.p. | |||||||||||||||||||||||||
Telefónica Latinoamérica (2) |
16,311 | 14,676 | 11.1 | 6,029 | 5,309 | 13.5 | 37.0 | % | 36.2 | % | 0.8 p.p. | |||||||||||||||||||||||||
Telefónica Europe (3) |
10,691 | 10,776 | (0.8 | ) | 3,072 | 4,151 | (26.0 | ) | 28.7 | % | 38.5 | % | (9.8 p.p. | ) | ||||||||||||||||||||||
Other companies and eliminations (4) |
434 | 1,101 | (60.6 | ) | 68 | 1,403 | (95.2 | ) | n.m. | n.m. | n.m. | |||||||||||||||||||||||||
Total Group (1)(2)(3)(4) |
43,141 | 42,014 | 2.7 | 17,026 | 18,248 | (6.7 | ) | 39.5 | % | 43.4 | % | (4.0 p.p. | ) | |||||||||||||||||||||||
| OPERATING INCOME | CAPEX | OPCF (OIBDA-CAPEX) | ||||||||||||||||||||||||||||||||||
| January - September | January - September | January - September | ||||||||||||||||||||||||||||||||||
| 2008 | 2007 | % Chg | 2008 | 2007 | % Chg | 2008 | 2007 | % Chg | ||||||||||||||||||||||||||||
Telefónica España |
6,168 | 5,590 | 10.3 | 1,555 | 1,571 | (1.0 | ) | 6,302 | 5,814 | 8.4 | ||||||||||||||||||||||||||
Telefónica Latinoamérica (2) |
3,312 | 2,760 | 20.0 | 2,403 | 1,885 | 27.5 | 3,626 | 3,425 | 5.9 | |||||||||||||||||||||||||||
Telefónica Europe (3) |
768 | 1,585 | (51.6 | ) | 1,380 | 1,450 | (4.9 | ) | 1,693 | 2,701 | (37.3 | ) | ||||||||||||||||||||||||
Other companies and eliminations (4) |
(24 | ) | 1,328 | c.s. | 69 | 121 | (43.5 | ) | (1 | ) | 1,282 | c.s. | ||||||||||||||||||||||||
Total Group (2)(3)(4) |
10,223 | 11,263 | (9.2 | ) | 5,406 | 5,027 | 7.5 | 11,621 | 13,221 | (12.1 | ) | |||||||||||||||||||||||||
Notes: |
||
| • | OIBDA and OI are presented bebore brand
fees and management fees. |
|
| • | CapEx at cumulative average exchange rate. |
|
| • | OIBDA margin calculated as OIBDA over revenues. |
|
| (1) | 2008 figures reflect the new applicable framework for public telephony services (net revenues).
2007 figures reported figures have not changed (gross revenues and gross expenses). Therefore,
2008/2007 variations are not homogeneous. |
|
| (2) | Starting April 2008, Vivo consolidates Telemig. |
|
| (3) | Airwave is not consolidated since the second quarter of 2007 (the disposal of Airwave generated
a capital gain of 1,296 million euros, recorded in the second quarter of 2007). |
|
| (4) | Endemol is not
consolidated since the third quarter of 2007 (the disposal of Endemol generated a capital gain of
1,368 million euros, recorded in the third quarter of 2007). Sogecable capital gain amounting 143
million euros is recorded in the second quarter of 2008. |
|
January — September 2008 Results Telefónica 10
Table of Contents
TELEFÓNICA GROUP
Financial Data
TELEFÓNICA GROUP
CONSOLIDATED BALANCE SHEET
Unaudited figures (Euros in millions)
CONSOLIDATED BALANCE SHEET
Unaudited figures (Euros in millions)
| September 2008 | Dec 2007 | % Chg | ||||||||||
Non-current assets |
85,556 | 87,395 | (2.1 | ) | ||||||||
Intangible assets |
17,360 | 18,320 | (5.2 | ) | ||||||||
Goodwill |
19,571 | 19,770 | (1.0 | ) | ||||||||
Property, plant and equipment and Investment property |
31,803 | 32,469 | (2.0 | ) | ||||||||
Long-term financial assets and other non-current assets |
9,056 | 9,007 | 0.5 | |||||||||
Deferred tax assets |
7,765 | 7,829 | (0.8 | ) | ||||||||
Current assets |
20,027 | 18,478 | 8.4 | |||||||||
Inventories |
1,206 | 987 | 22.3 | |||||||||
Trade and other receivables |
10,298 | 9,662 | 6.6 | |||||||||
Current tax receivable |
997 | 1,010 | (1.4 | ) | ||||||||
Short-term financial investments |
1,666 | 1,622 | 2.7 | |||||||||
Cash and cash equivalents |
5,735 | 5,065 | 13.2 | |||||||||
Non-current assets classified as held for sale |
125 | 132 | (5.6 | ) | ||||||||
Total Assets = Total Equity and
Liabilities |
105,583 | 105,873 | (0.3 | ) | ||||||||
Equity |
19,980 | 22,855 | (12.6 | ) | ||||||||
Equity attributable to equity holders of the parent |
16,977 | 20,125 | (15.6 | ) | ||||||||
Minority interest |
3,003 | 2,730 | 10.0 | |||||||||
Non-current
liabilities |
55,981 | 58,044 | (3.6 | ) | ||||||||
Long-term financial debt |
45,503 | 46,942 | (3.1 | ) | ||||||||
Deferred tax liabilities |
3,933 | 3,926 | 0.2 | |||||||||
Long-term provisions |
5,531 | 6,161 | (10.2 | ) | ||||||||
Other long-term liabilities |
1,014 | 1,015 | (0.2 | ) | ||||||||
Current
liabilities |
29,622 | 24,974 | 18.6 | |||||||||
Short-term financial debt |
7,371 | 6,986 | 5.5 | |||||||||
Trade and other payables |
8,540 | 8,729 | (2.2 | ) | ||||||||
Current tax payable |
4,844 | 2,157 | 124.6 | |||||||||
Short-term provisions and other liabilities |
8,866 | 7,102 | 24.8 | |||||||||
Financial
Data |
||||||||||||
Net Financial Debt (1) |
42,856 | 45,284 | (5.4 | ) | ||||||||
| (1) | Net Financial Debt = Long term financial debt + Other long term liabilities + Short
term financial debt - Short term financial investments - Cash and cash equivalents -
Long term financial assets and other non-current assets. |
January — September 2008 Results Telefónica 11
Table of Contents
TELEFÓNICA GROUP
Financial Data
TELEFÓNICA GROUP
FREE CASH FLOW AND CHANGE IN DEBT
Unaudited figures (Euros in millions)
FREE CASH FLOW AND CHANGE IN DEBT
Unaudited figures (Euros in millions)
| January - September | ||||||||||||||
| 2008 | 2007 | % Chg | ||||||||||||
I |
Cash flows from operations | 14,685 | 14,068 | 4.4 | ||||||||||
II |
Net interest payment (1) | (2,392 | ) | (2,373 | ) | |||||||||
III |
Payment for income tax | (999 | ) | (1,157 | ) | |||||||||
A=I+II+III |
Net cash provided by operating activities | 11,294 | 10,538 | 7.2 | ||||||||||
B |
Payment for investment in fixed and intangible assets | (5,498 | ) | (5,067 | ) | |||||||||
C=A+B |
Net free cash flow after CapEx | 5,796 | 5,471 | 5.9 | ||||||||||
D |
Net Cash received from sale of Real Estate | 65 | 29 | |||||||||||
E |
Net payment for financial investment | (404 | ) | 4,846 | ||||||||||
F |
Net payment for dividends and treasury stock (2) | (3,708 | ) | (3,321 | ) | |||||||||
G=C+D+E+F |
Free cash flow after dividends | 1,749 | 7,024 | |||||||||||
H |
Effects of exchange rate changes on net financial debt | (528 | ) | (421 | ) | |||||||||
I |
Effects on net financial debt of changes in consolid. and others | (151 | ) | (696 | ) | |||||||||
J |
Net financial debt at beginning of period | 45,284 | 52,145 | |||||||||||
K=J-G+H+I |
Net financial debt at end of period | 42,856 | 44,004 | |||||||||||
| (1) | Including cash received from dividends paid by subsidiaries that are not under full
consolidation method. |
|
| (2) | Dividends paid by Telefónica S.A. and dividend payments to minoritaries from subsidiaries
that are under full consolidation method and treasury stock. |
RECONCILIATIONS OF CASH FLOW AND OIBDA MINUS CAPEX
Unaudited figures (Euros in millions)
Unaudited figures (Euros in millions)
| January - September | ||||||||||||
| 2008 | 2007 | % Chg | ||||||||||
OIBDA |
17,026 | 18,248 | (6.7 | ) | ||||||||
- CapEx accrued during the period |
(5,406 | ) | (5,027 | ) | ||||||||
- Payments related to commitments |
(552 | ) | (587 | ) | ||||||||
- Net interest payment |
(2,392 | ) | (2,373 | ) | ||||||||
- Payment for income tax |
(999 | ) | (1,157 | ) | ||||||||
- Results from the sale of fixed assets |
(236 | ) | (2,634 | ) | ||||||||
- Investment in working capital and other deferred income and expenses |
(1,646 | ) | (1,000 | ) | ||||||||
= Net Free
Cash Flow after CapEx |
5,796 | 5,471 | 5.9 | |||||||||
+ Net Cash received from sale of Real Estate |
65 | 29 | ||||||||||
- Net payment for financial investment |
(404 | ) | 4,846 | |||||||||
- Net payment for dividends and treasury stock |
(3,708 | ) | (3,321 | ) | ||||||||
= Free Cash
Flow after dividends |
1,749 | 7,024 | (75.1 | ) | ||||||||
Note: The concept “Free Cash Flow” reflects the amount of cash flow available to
remunerate Telefónica S.A. Shareholders, to protect solvency levels (financial debt and
commitments), and to accomodate strategic flexibility.
The differences with the caption “Net Free Cash Flow after CapEx” included in the table
presented above, are related to “Free Cash Flow” being calculated before payments related
to commitments (workforce reductions and guarantees) and after dividend payments to
minoritaries, due to cash recirculation within the Group.
Unaudited figures (Euros in millions)
| January - September | ||||||||
| 2008 | 2007 | |||||||
Net Free
Cash Flow after CapEx |
5,796 | 5,471 | ||||||
+ Payments related to cancellation of commitments |
552 | 587 | ||||||
- Ordinary dividends payment to minoritaries |
(72 | ) | (99 | ) | ||||
= Free Cash
Flow |
6,276 | 5,959 | ||||||
Weighted average number of ordinary shares outstanding during
the period (millions) |
4,664 | 4,772 | ||||||
= Free Cash
Flow per share (euros) |
1.346 | 1.249 | ||||||
January — September 2008 Results Telefónica 12
Table of Contents
TELEFÓNICA GROUP
Financial Data
NET FINANCIAL DEBT AND COMMITMENTS
Unaudited figures (Euros in millions)
Unaudited figures (Euros in millions)
| September 2008 | ||||||
| Long-term debt (1) | 45,833 | |||||
| Short term debt including current maturities | 7,371 | |||||
| Cash and Banks | (5,735 | ) | ||||
| Short and Long-term financial investments (2) | (4,613 | ) | ||||
A |
Net Financial Debt | 42,856 | ||||
| Guarantees to IPSE 2000 | 365 | |||||
B |
Commitments related to guarantees | 365 | ||||
| Gross commitments related to workforce reduction (3) | 4,704 | |||||
| Value of associated Long-term assets (4) | (613 | ) | ||||
| Taxes receivable (5) | (1,420 | ) | ||||
C |
Net commitments related to workforce reduction | 2,671 | ||||
A + B + C |
Total Debt + Commitments | 45,892 | ||||
| Net Financial Debt / OIBDA (6) | 1.9x | |||||
| Total Debt + Commitments/ OIBDA (6) | 2.0x | |||||
| (1) | Includes “long-term financial debt” and 330 million euros of “other long-term debt”. |
|
| (2) | Short-term investments and 2,947 million euros recorded
under the caption of “financial assets and other long-term
assets”. |
|
| (3) | Mainly in Spain. This amount is detailed in the caption
“Provisions for Contingencies and Expenses” of the Balance Sheet,
and is the result of adding the following items: “Provision for
Pre-retirement, Social Security Expenses and Voluntary
Severance”, “Group Insurance”, “Technical Reserves”, and
“Provisions for Pension Funds of Other Companies”. |
|
| (4) | Amount included in the caption “Investment” of the Balance
Sheet, section “Other Loans”. Mostly related to investments in
fixed income securities and long-term deposits that cover the
materialization of technical reserves of the Group insurance
companies. |
|
| (5) | Net present value of tax benefits arising from the future
payments related to workforce reduction commitments. |
|
| (6) | Calculated based on September 2008 OIBDA, excluding results on
the sale of fixed assets and annualized. |
DEBT STRUCTURE BY CURRENCY
Unaudited figures
Unaudited figures
| September 2008 | ||||||||||||||||||||
| EUR | LATAM | GBP | CZK | USD | ||||||||||||||||
Currency mix |
63 | % | 14 | % | 11 | % | 8 | % | 4 | % | ||||||||||
CREDIT RATINGS
| Long-Term | Short-Term | Perspective | Last review | |||||
Moody’s |
Baa1 | P-2 | Stable | 03-May-07 | ||||
JCR |
A- | — | Stable | 12-Jun-07 | ||||
S&P |
BBB+ | A-2 | Positive | 12-Nov-07 | ||||
Fitch/ IBCA |
BBB+ | F-2 | Positive | 29-Feb-08 |
January — September 2008 Results Telefónica 13
Table of Contents
TELEFÓNICA GROUP
Financial Data
TELEFÓNICA GROUP
EXCHANGES RATES APPLIED
EXCHANGES RATES APPLIED
| P&L and CapEx (1) | Balance Sheet (2) | |||||||||||||||
| Jan - Sep 2008 | Jan - Sep 2007 | Sep 2008 | December 2007 | |||||||||||||
USA (US Dollar/Euro) |
1.520 | 1.344 | 1.430 | 1.472 | ||||||||||||
United Kingdom (Sterling/Euro) |
0.781 | 0.677 | 0.790 | 0.733 | ||||||||||||
Argentina (Argentinean Peso/Euro) |
4.721 | 4.172 | 4.484 | 4.636 | ||||||||||||
Brazil (Brazilian Real/Euro) |
2.562 | 2.688 | 2.738 | 2.608 | ||||||||||||
Czech Republic (Czech Crown/Euro) |
24.832 | 28.076 | 24.665 | 26.620 | ||||||||||||
Chile (Chilean Peso/Euro) |
733.676 | 710.657 | 788.644 | 731.472 | ||||||||||||
Colombia (Colombian Peso/Euro) |
2,824.859 | 2,808.805 | 3,125.000 | 2,965.928 | ||||||||||||
El Salvador (Colon/Euro) |
13.300 | 11.756 | 12.515 | 12.881 | ||||||||||||
Guatemala (Quetzal/Euro) |
11.463 | 10.313 | 10.687 | 11.234 | ||||||||||||
Mexico (Mexican Peso/Euro) |
15.983 | 14.714 | 15.436 | 15.996 | ||||||||||||
Nicaragua (Cordoba/Euro) |
29.261 | 24.625 | 28.043 | 27.827 | ||||||||||||
Peru (Peruvian Nuevo Sol/Euro) |
4.358 | 4.261 | 4.254 | 4.409 | ||||||||||||
Uruguay (Uruguayan Peso/Euro) |
30.529 | 32.199 | 30.665 | 31.724 | ||||||||||||
Venezuela (Bolivar/Euro) |
3.268 | 2.889 | 3.075 | 3.165 | ||||||||||||
| (1) | These exchange rates are used to convert the P&L and CapEx accounts of the Group
foreign subsidiaries from local currency to euros. |
|
| (2) | Exchange rates as of 30/September/08 and 31/December/07. |
January — September 2008 Results Telefónica 14
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica España
At the end of September 2008, Telefónica España managed 47.2 million accesses, a year-on-year
increase of 3.3%, boosted by year-on-year growth of 4.5% in mobile accesses –to over 23.4 million–
and 16.8% growth in retail wireline broadband Internet accesses –to over 5.1 million–.
In the current economic environment, results in the first nine months show Telefónica’s
differential profile in the market, and reflect the soundness of its business model, which
leverages the advantages it enjoys as an integrated operator with a strong position in the
highest-value segments.
Revenues rose 1.6% year-on-year in the first nine months, to 15,706 million euros, and climbed 2.0%
in the third quarter. On a like-for-like terms1, revenues increased 2.7% in the third
quarter and by 2.3% in the first nine months.
It is worth mentioning that in the third quarter the Company booked 182.8 million in revenues
associated with the Universal Service Obligation at Telefónica España wireline business for the
2003-2005 period, generating a positive OIBDA contribution of 50.6 million euros.
OIBDA rose 0.9% in the third quarter and by 6.4% in the first nine months, to 7,857 million euros,
bringing the OIBDA margin to 50.0%. Excluding one-off effects2 booked in the first nine
months of 2007 and 2008, OIBDA rose 1.5% in January-September.
CapEx at Telefónica España totalled 1,555 million euros in January-September, with investment
focused on growing broadband businesses, fuelling investment in fibre and 3G.
In the first nine months of 2008, Telefónica España generated operating cash flow (OIBDA-CapEx) of
6,302 million euros, a year-on-year increase of 8.4%, reflecting the Company’s ability to preserve
cash flow generation in the current environment.
WIRELINE BUSINESS
The Spanish wireline market grew by an estimated 1.6% year-on-year.
The Company’s wireline telephony accesses exceeded 15.5 million at the end of September 2008 (down
2.2% vs. September 2007) after registering a net loss of 143,182 lines in the third quarter of 2008
and of 391,906 in the first nine months, pushed in large part by loop unbundling and intensified
market competition. Telefónica’s estimated share of the wireline access market surpassed 78% at the
end of September.
The number of pre-selected lines continued their declining trend, dropping by 75,613 in the third
quarter of 2008 and by 254,855 in the first nine months, to 1.5 million lines.
Telefónica España’s estimated share of wireline traffic remained stable at around 64.5%.
The Spanish market for wireline broadband Internet access reported an increase of 0.2 million
connections in the third quarter and of 0.8 million in the first nine months. Accordingly, at the
end of September 2008, the estimated size of the wireline broadband Internet access market topped
8.9 million, up 16.1% on September 2007.
| 1 | Including the impact on Telefónica España of the new
model for public use telephone service (-106.1 million euros in the period from
January to September 2007). |
|
| 2 | Bad debt recovery amounting to 25 million euros in the
first quarter of 2008, the 152 million euros fine levied by the European Union
in the second quarter of 2007, the 116 million euros provision linked to a
redundancy programme in the first nine months of 2007, and Real Estate capital
gains of 73 million euros in the first nine months of 2008 (vs. 9 million euros
in January-September 2007). |
January — September 2008 Results Telefónica 15
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica España
Telefónica’s retail Broadband Internet accesses net adds totalled 112,001 in the third quarter and
502,924 in the first nine months (a year-on-year drop of 17.9%), resulting in a 16.8% year-on-year
increase in accesses to over 5.1 million by September end. The Company has reinforced its market
position with an estimated share of over 57%. This performance is the result of the strategy of
offering a differentiated, high-quality service along with a portfolio of services tailored to the
needs of each customer segment. Highlights in this area include the positive results achieved
through the launch of high-speed products. It is likewise worth noting, in accordance with our
policy for supplying our customers with highly competitive services, the steady migration of 3MB
customers to 6MB.
The estimated share of unbundled loops in the wireline broadband Internet access market grew
slightly, to 18%. Net quarterly adds amounted to 52,554 loops (down 22.5% vs. the third quarter of
2007) and 231,260 in cumulative terms (down 22.6%). Total unbundled loops by September end amounted
to about 1.6 million, of which 40.4% (640,242) were shared access loops. The remaining 944,958 were
fully unbundled loops (including 211,328 naked shared access loops). A highlight was a 95,873
increase in fully unbundled loops in the quarter, of which 43,110 (45.0%) were naked shared access
loops. Shared access loops showed a net loss of 43,319 accesses in the third quarter.
The decline of the wholesale ADSL service continued due to migrations to unbundled loops. In the
wake of net third-quarter losses of 18,512 accesses, total wholesale accesses amounted to 444,772
at the end of September, down 12.7% year-on-year.
In the Pay TV business, Telefónica‘s estimated market share stood at around 13.5% at the end of
September 2008, with 12,993 new customers added in the third quarter and 78,464 in the first nine
months. Pay TV customers totalled 589,551 (up 25.7% year-on-year).
The total number of Duo and Trio bundles reached 4.4 million units. This means that more than 84%
of the Company’s retail broadband accesses were part of a double or triple offer bundle.
Revenues rose 2.7% year-on-year in the first nine months, to 9,468 million euros, and climbed 5.9%
in the third quarter. On a like-for like terms3, revenues increased 3.9% so far this
year and by 7.2% in the third quarter, when the Company booked 182.8 million euros related to the
Universal Service Obligation for 2003-2005.
| • | Traditional access revenues were up 25.2% year-on-year in the third quarter and amounted to
2,263 million euros in January-September, a year-on-year increase of 8.6%. Stripping out the
revenues related to the Universal Service Obligation, revenues dropped 1.1% in the third
quarter and by 0.2% in the first nine months, due to lower average accesses. |
|
| • | The decline in voice service revenues was 4.7% like-for-like4 in the third
quarter (8.7% reported drop), and 2.6% in the nine months (6.4% reported decrease) reflecting
lower fixed-to-mobile and international traffic. |
|
| • | Internet and broadband revenues were up 9.7% year-on-year in the third quarter, virtually
in line with previous quarters, and amounted to 2,262 million euros in January-September, a
year-on-year increase of 9.9%. By item: |
| • | Retail broadband service revenues grew 12.2% in the quarter and 13.5% in the first
nine months, contributing 2.5 percentage points to revenue growth at Telefónica España
Wireline Business. |
||
| • | Improved performance at the wholesale broadband business, (up 6.9% in the quarter,
and down 0.4% in the nine months), reflecting growth in revenues from a higher number of
unbundled loops. |
| 3 | Including the impact on Telefónica España of the new
model for public use telephone service (-106.1 million euros in the period from
January to September 2007 in revenues). |
|
| 4 | Including the impact on Telefónica España of the new
model for public use telephone service (-140.0 million euros in voice service
revenues in the period from January to September 2007). |
January — September 2008 Results Telefónica 16
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica España
| • | Data service revenues rose 3.0% year-on-year in the first nine months of 2008 (up 2.9% in
the third quarter) to 877 million euros. |
|
| • | IT service revenues had a positive performance in the quarter (up 3.7%), and in the first
nine months amounted to 312 million euros, up 2.5% year-on-year. |
Operating expenses, following a 1.2% increase in the third quarter of 2008, totalled 5,007 million
euros (down 2.8% year-on-year) in the first nine months. This is explained by i) a 4.4% decline in
external service expenses to 977 million euros due to the new model for the PUT and call centres
business; ii) a 1.3% decrease in supply costs to 2,184 million euros due to lower costs for
interconnection, equipment purchasing and special projects; iii) the 8.0% decline in personnel
expenses to 1,569 million euros due to the lower average headcount in the period and workforce
reorganization expenses of 116 million euros in the first nine months of 2007 (no workforce
reorganization expenses were accounted for in 2008) –stripping out the impact of these costs,
personnel expenses would have fallen by 1.3% to September–; iv) the 17 million euro reduction in
the bad debt provision following the bad debt recovery booked in the first quarter; v) 73 million
euros contribution to cover the Universal Service Obligation. On a like-for-like basis5,
operating expenses dropped 0.8% in the first nine months and fell 3.5% in the third quarter.
OIBDA rose 9.9% in the third quarter, reflecting the effect of the Universal Service Obligation
(with a net positive impact of 110 million euros), lower workforce reorganization provisions (22
million euros in the third quarter of 2007 and zero in the same quarter of 2008), and higher Real
Estate capital gains (5 million euros in July-September 2008 vs. 1 million euros in July-September
2007).
In the first nine months of 2008, OIBDA totalled 4,629 million euros, a year-on-year increase of
13.8%. This growth reflects: the effect of the Universal Service Obligation (with a positive impact
of 110 million euros in 2008), lower provisioning linked to the workforce reorganization programme
(116 million euros to September 2007 and zero in 2008), higher Real Estate capital gains (73
million euros in the first nine months of 2008 vs. 9 million euros a year earlier), sale of the bad
debt portfolio for 17 million euros in 2008 and a fine levied by the European Union for 152 million
euros in the second quarter of 2007.
The OIBDA margin stood at 48.7% in the quarter and at 48.9% in the first nine months.
CapEx amounted to 1,043 million euros in the first nine months, leaving operating cash flow
(OIBDA-CapEx) at 3,586 million euros.
WIRELESS BUSINESS
The Spanish wireless market reached 52.5 million lines in September 2008, with an estimated
penetration rate of 115% (6 percentage points higher than in September 2007).
Telefónica España’s wireless business posted net adds of 210,533 customers in the third quarter of
2008 (317,038 in the third quarter of 2007), largely underpinned by the contract segment, which
accounted for 93.4% of the total, with 196,617 lines. In cumulative terms, net adds in the first
nine months of 2008 reached 609,418 lines (973,759 in the first nine months of 2007), with a
noteworthy number of net adds achieved in the contract segment (812,718 lines vs. 1,118,751 in the
same period of 2007).
At the end of September 2008, the customer base topped 23.4 million lines, up 4.5% year-on-year,
fuelled by the positive performance among contract customers (9.0% increase), which now make up
61.7% of the total customer base (up 2.5 percentage points vs. September 2007).
| 5 | Including the impact on Telefónica España of the new
model for public use telephone service (-106.1 million euros in the period from
January to September 2007). |
January — September 2008 Results Telefónica 17
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica España
In terms of portability, which has slowed in recent months, the net balance in the third quarter
was -14,830 lines (vs. +348 in the third quarter of 2007), with a noteworthy positive net gain of
15,886 contract lines in the quarter and of 59,366 lines in the first nine months.
Another highlight was the positive performance of the churn rate, both in the third quarter and the
first nine months, which held at 1.8%. Also noteworthy was the Company’s containment of contract
churn, which stood at 1.1% in the quarter, in line with previous quarters and only slightly higher
than in the third quarter of 2007, while in the first nine months of the year it was virtually flat
from a year earlier.
In terms of usage, the volume of traffic carried on the network rose 3.2% year-on-year in the
quarter and 3.6% in the first nine months of the year. Meanwhile, MoU in the third quarter stood at
163 minutes (down 2.6% year-on-year) and at 158 minutes in the first nine months (down 2.9%
year-on-year).
Voice ARPU reached 25.6 euros in the third quarter, 9.4% lower than in the same period in 2007, as
it was heavily impacted by cuts in interconnection rates implemented in October 2007 and April
2008, totalling 16.0%. Outgoing voice ARPU posted a better year-on-year performance (down 8.7%) in
the third quarter than overall voice ARPU, driven by the smaller drop in outgoing ARPM vs. incoming
ARPM and by changes in customer usage patterns in the current economic environment. In
quarter-on-quarter terms, both indicators registered a smaller percentage drop than in previous
quarters, after signs of slowdown first appeared a year ago. Nine-month voice ARPU fell 8.2%
year-on-year, while outgoing ARPU decreased 7.2%.
Meanwhile, data ARPU continued to grow at a healthy pace in the third quarter, rising 8.2%
year-on-year to 5.3 euros. Nine-month data ARPU increased 8.1% to 5.1 euros, with year-on-year
growth of 15.3% in data revenues. Performance at the data business was underpinned by content
revenues and significant growth in connectivity revenues, which continued to mark a solid
performance, with year-on-year growth exceeding 65.1% in the first nine months and an advance of
71.3% in the third quarter, the sharpest year-on-year increase in the last three quarters.
The number of 3G handsets held by customers rose further in the third quarter to over 5.6 million,
1.9 times more handsets than in September 2007, attaining a penetration rate of 25% of the base
excluding M2M (up 11.5 percentage points year-on-year).
Consequently, total ARPU in the third quarter fell 6.8% year-on-year (outgoing ARPU down 5.9%).
Total ARPU in the first nine months stood at 30.7 euros (down 5.7% year-on-year) and outgoing ARPU
stood at 26.0 euros (down 4.6% vs. the same period a year earlier).
Revenues in the third quarter decreased by 2.1% year-on-year to 2,484 million euros due to lower
customer usage and lower incoming revenues. However, nine-month revenues increased by 0.2% to 7,301
million euros year-on-year. Highlights by revenue item:
| • | Service revenues dropped 2.1% in the third quarter year-on-year, but were virtually
unchanged in the first nine months vs the same period last year, at 6,402 million euros (up
0.1% year-on-year). |
|
| • | Customer revenues were slightly lower in the quarter (down 0.8% year-on-year) impacted by
lower roaming-out revenues after the introduction of new regulated tariffs during the third
quarter of 2007, though in the first nine months they rose by 1.7% year-on-year to 5,230
million euros. |
|
| • | Interconnection revenues fell 7.9% year-on-year in the third quarter and in the first nine
months, due largely to the reduction in interconnection rates. |
|
| • | Roaming-in revenues fell 12.2% in the quarter year-on-year as wholesale roaming prices
continued their downward trend following the sharp reduction implemented in September 2007,
and as the volume of traffic dropped vs. the third quarter of 2007, with a year-on-year
decline of 8.4% up to September. |
|
| • | Revenues from handset sales in the third quarter dropped 1.6% year-on-year to 286 million
euros, reflecting different rates of channel uptake during the summer campaign, while in the
first nine months they rose 1.2% year-on-year, to 899 million euros. |
January — September 2008 Results Telefónica 18
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica España
Operating expenses increased 4.8% year-on-year in the third quarter to 1,397 million euros,
impacted by the costs related with the Universal Service Obligation (59.4 million euros).
Nine-month operating expenses increased by 2.5% to 4,110 million euros year-on-year.
As a result of the performance of revenues and expenses outlined above, operating income before
depreciation and amortisation (OIBDA) in the third quarter of 2008 stood at 1,106 million euros
(down 9.8% year-on-year) with an OIBDA margin of 44.5% (down 3.8 percentage points vs. the third
quarter of 2007), reflecting the impact of the cost of Universal Service Obligation (59.4 million
euros). Nine-month OIBDA stood at 3,253 million euros, a decrease of 2.6% year-on-year, with a
margin of 44.6%.
CapEx in the first nine months totalled 511 million euros, generating operating cash flow
(OIBDA-CapEx) of 2,741 million euros.
January — September 2008 Results Telefónica 19
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica España
TELEFÓNICA ESPAÑA
ACCESSES
Unaudited figures (thousands)
ACCESSES
Unaudited figures (thousands)
| 2007 | 2008 | |||||||||||||||||||||||
| September | December | March | June | September | % Chg y-o-y | |||||||||||||||||||
Final Clients Accesses |
43,939.7 | 44,578.2 | 44,872.9 | 45,019.7 | 45,160.7 | 2.8 | ||||||||||||||||||
Fixed telephony accesses (1) |
15,882.8 | 15,918.8 | 15,842.1 | 15,670.0 | 15,526.9 | (2.2 | ) | |||||||||||||||||
Internet and data accesses |
5,168.1 | 5,321.8 | 5,468.4 | 5,547.6 | 5,608.3 | 8.5 | ||||||||||||||||||
Narrowband |
736.5 | 660.8 | 589.5 | 502.3 | 453.9 | (38.4 | ) | |||||||||||||||||
Broadband (2) |
4,381.0 | 4,614.0 | 4,835.9 | 5,005.0 | 5,117.0 | 16.8 | ||||||||||||||||||
Other (3) |
50.7 | 47.0 | 43.1 | 40.4 | 37.4 | (26.1 | ) | |||||||||||||||||
Mobile accesses |
22,419.7 | 22,826.6 | 23,008.4 | 23,225.4 | 23,436.0 | 4.5 | ||||||||||||||||||
Pre-Pay |
9,158.0 | 9,181.8 | 9,058.4 | 8,964.6 | 8,978.5 | (2.0 | ) | |||||||||||||||||
Contract |
13,261.7 | 13,644.7 | 13,950.0 | 14,260.8 | 14,457.5 | 9.0 | ||||||||||||||||||
Pay TV |
469.1 | 511.1 | 554.0 | 576.6 | 589.6 | 25.7 | ||||||||||||||||||
Wholesale Accesses |
1,753.7 | 1,855.5 | 1,953.3 | 2,001.3 | 2,035.0 | 16.0 | ||||||||||||||||||
Unbundled loops |
1,237.9 | 1,353.9 | 1,467.4 | 1,532.6 | 1,585.2 | 28.1 | ||||||||||||||||||
Shared ULL |
713.5 | 776.4 | 755.0 | 683.6 | 640.2 | (10.3 | ) | |||||||||||||||||
Full ULL (4) |
524.4 | 577.6 | 712.5 | 849.1 | 945.0 | 80.2 | ||||||||||||||||||
Wholesale ADSL |
509.3 | 495.5 | 480.3 | 463.3 | 444.8 | (12.7 | ) | |||||||||||||||||
Other (5) |
6.5 | 6.0 | 5.7 | 5.3 | 5.0 | (22.4 | ) | |||||||||||||||||
Total Accesses |
45,693.4 | 46,433.6 | 46,826.3 | 47,020.9 | 47,195.7 | 3.3 | ||||||||||||||||||
| (1) | PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/6
Access x30. Company’s accesses for internal use included. |
|
| (2) | ADSL, satellite, optical fibre, cable modem and broadband circuits. |
|
| (3) | Leased lines. |
|
| (4) | Includes naked shared loops.
|
|
| (5) |
Wholesale circuits. |
|
| Note: |
Iberbanda’s accesses are included from December 2006. |
TELEFÓNICA ESPAÑA
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
| January - September | July - September | |||||||||||||||||||||||
| 2008 | 2007 | % Chg | 2008 | 2007 | % Chg | |||||||||||||||||||
Revenues |
15,706 | 15,462 | 1.6 | 5,375 | 5,271 | 2.0 | ||||||||||||||||||
Internal exp capitalized in fixed assets |
151 | 161 | (6.0 | ) | 45 | 50 | (8.3 | ) | ||||||||||||||||
Operating expenses |
(8,080 | ) | (8,138 | ) | (0.7 | ) | (2,749 | ) | (2,688 | ) | 2.3 | |||||||||||||
Other net operating income (expense) |
31 | (79 | ) | c.s. | 13 | 38 | (65.6 | ) | ||||||||||||||||
Gain (loss) on sale of fixed assets |
54 | (7 | ) | c.s. | 1 | (7 | ) | c.s. | ||||||||||||||||
Impairment of goodwill and other assets |
(5 | ) | (14 | ) | (60.7 | ) | (1 | ) | (2 | ) | (42.3 | ) | ||||||||||||
Operating income before D&A (OIBDA) |
7,857 | 7,384 | 6.4 | 2,684 | 2,661 | 0.9 | ||||||||||||||||||
OIBDA margin |
50.0 | % | 47.8 | % | 2.3 p.p. | 49.9 | % | 50.5 | % | (0.6 p.p. | ) | |||||||||||||
Depreciation and amortization |
(1,689 | ) | (1,794 | ) | (5.9 | ) | (549 | ) | (587 | ) | (6.4 | ) | ||||||||||||
Operating income (OI) |
6,168 | 5,590 | 10.3 | 2,135 | 2,074 | 2.9 | ||||||||||||||||||
| Notes: | ||
| • | OIBDA and OI before brand fees. |
|
| • | 2008 figures reflect the new applicable framework for public telephony services (net revenues).
2007 figures reported figures have not changed (gross revenues and gross expenses). Therefore,
2008/ 2007 variations are not homogeneous. |
|
January — September 2008 Results Telefónica 20
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica España
TELEFÓNICA ESPAÑA: WIRELINE BUSINESS
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
| January - September | July - September | |||||||||||||||||||||||
| 2008 | 2007 | % Chg | 2008 | 2007 | % Chg | |||||||||||||||||||
Revenues |
9,468 | 9,219 | 2.7 | 3,255 | 3,074 | 5.9 | ||||||||||||||||||
OIBDA |
4,629 | 4,068 | 13.8 | 1,585 | 1,442 | 9.9 | ||||||||||||||||||
OIBDA margin |
48.9 | % | 44.1 | % | 4.8 p.p. | 48.7 | % | 46.9 | % | 1.8 p.p. | ||||||||||||||
CapEx |
1,043 | 1,062 | (1.7 | ) | 342 | 337 | 1.3 | |||||||||||||||||
OpCF (OIBDA-CapEx) |
3,586 | 3,006 | 19.3 | 1,243 | 1,104 | 12.5 | ||||||||||||||||||
| Notes: | ||
| • | OIBDA before brand fee. |
|
| • | 2008 figures reflect the new applicable framework for public telephony services (net
revenues). 2007 figures reported figures have not changed (gross revenues and gross
expenses). Therefore, 2008/2007 variations are not homogeneous. |
|
TELEFÓNICA ESPAÑA: WIRELINE BUSINESS
SELECTED REVENUES DATA
Unaudited figures (Euros in millions)
SELECTED REVENUES DATA
Unaudited figures (Euros in millions)
| January - September | July - September | |||||||||||||||||||||||
| 2008 | 2007 | % Chg | 2008 | 2007 | % Chg | |||||||||||||||||||
Traditional Access (1) |
2,263 | 2,084 | 8.6 | 869 | 694 | 25.2 | ||||||||||||||||||
Traditional Voice Services |
3,358 | 3,589 | (6.4 | ) | 1,097 | 1,201 | (8.7 | ) | ||||||||||||||||
Domestic Traffic (2) |
1,947 | 2,192 | (11.2 | ) | 612 | 726 | (15.7 | ) | ||||||||||||||||
Interconnection (3) |
730 | 715 | 2.1 | 261 | 253 | 3.0 | ||||||||||||||||||
Handsets sales and others (4) |
681 | 681 | 0.0 | 224 | 222 | 1.0 | ||||||||||||||||||
Internet Broadband Services |
2,262 | 2,058 | 9.9 | 752 | 685 | 9.7 | ||||||||||||||||||
Narrowband |
48 | 77 | (38.7 | ) | 13 | 23 | (44.3 | ) | ||||||||||||||||
Broadband |
2,215 | 1,981 | 11.8 | 739 | 662 | 11.6 | ||||||||||||||||||
Retail (5) |
1,972 | 1,737 | 13.5 | 658 | 587 | 12.2 | ||||||||||||||||||
Wholesale (6) |
243 | 244 | (0.4 | ) | 80 | 75 | 6.9 | |||||||||||||||||
Data Services |
877 | 851 | 3.0 | 291 | 283 | 2.9 | ||||||||||||||||||
IT Services |
312 | 304 | 2.5 | 105 | 102 | 3.7 | ||||||||||||||||||
| (1) | Monthly and connection fees (PSTN, Public Use Telephony, ISDN and Corporate Services) and
Telephone booths surcharges. |
|
| (2) | Local and domestic long distance (provincial, interprovincial and international) fixed to
mobile traffic, Intelligent Network Services, Special Valued Services, Information Services
(118xy), bonuses and others. |
|
| (3) | Includes revenues from fixed to fixed incoming traffic, mobile to
fixed incoming traffic, and transit and carrier traffic. |
|
| (4) | Managed Voice
Services and other businesses revenues. |
|
| (5) | Retail ADSL services and other Internet Services. |
|
| (6) | Includes Megabase, Megavía, GigADSL and local loop unbundling. |
|
| Note: | 2008 figures reflect the new applicable framework for public telephony services (net
revenues). 2007 figures reported figures have not changed (gross revenues and gross
expenses). Therefore, 2008/2007 variations are not homogeneous. |
January — September 2008 Results Telefónica 21
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica España
TELEFÓNICA ESPAÑA: WIRELESS BUSINESS
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
| January - September | July - September | |||||||||||||||||||||||
| 2008 | 2007 | % Chg | 2008 | 2007 | % Chg | |||||||||||||||||||
Revenues |
7,301 | 7,287 | 0.2 | 2,484 | 2,536 | (2.1 | ) | |||||||||||||||||
OIBDA |
3,253 | 3,340 | (2.6 | ) | 1,106 | 1,226 | (9.8 | ) | ||||||||||||||||
OIBDA margin |
44.6 | % | 45.8 | % | (1.3 p.p. | ) | 44.5 | % | 48.3 | % | (3.8 p.p. | ) | ||||||||||||
CapEx |
511 | 510 | 0.3 | 162 | 204 | (20.4 | ) | |||||||||||||||||
OpCF (OIBDA-CapEx) |
2,741 | 2,830 | (3.1 | ) | 943 | 1,022 | (7.7 | ) | ||||||||||||||||
| Note: | OIBDA before brand fee. |
TELEFÓNICA ESPAÑA: WIRELESS BUSINESS
SELECTED REVENUES DATA
Unaudited figures (Euros in millions)
SELECTED REVENUES DATA
Unaudited figures (Euros in millions)
| January - September | July - September | |||||||||||||||||||||||
| 2008 | 2007 | % Chg | 2008 | 2007 | % Chg | |||||||||||||||||||
Service Revenues |
6,402 | 6,398 | 0.1 | 2,198 | 2,245 | (2.1 | ) | |||||||||||||||||
Customer Revenues |
5,230 | 5,143 | 1.7 | 1,786 | 1,801 | (0.8 | ) | |||||||||||||||||
Interconnection |
957 | 1,039 | (7.9 | ) | 318 | 345 | (7.9 | ) | ||||||||||||||||
Roaming — In |
161 | 176 | (8.4 | ) | 72 | 83 | (12.2 | ) | ||||||||||||||||
Other |
54 | 40 | 33.9 | 21 | 17 | 24.2 | ||||||||||||||||||
Handset |
899 | 888 | 1.2 | 286 | 291 | (1.6 | ) | |||||||||||||||||
TELEFÓNICA ESPAÑA: WIRELESS BUSINESS
SELECTED OPERATING DATA
Unaudited figures
SELECTED OPERATING DATA
Unaudited figures
| 2007 | 2008 | |||||||||||||||||||||||
| Q3 | Q4 | Q1 | Q2 | Q3 | % Chg y-o-y | |||||||||||||||||||
MoU (minutes) |
168 | 156 | 151 | 159 | 163 | (2.6 | ) | |||||||||||||||||
Pre-pay |
89 | 64 | 63 | 69 | 84 | (4.8 | ) | |||||||||||||||||
Contract |
223 | 218 | 209 | 216 | 213 | (4.6 | ) | |||||||||||||||||
ARPU (EUR) |
33.1 | 31.8 | 30.5 | 30.8 | 30.9 | (6.8 | ) | |||||||||||||||||
Pre-pay |
16.5 | 15.0 | 14.6 | 14.5 | 15.4 | (7.0 | ) | |||||||||||||||||
Contract |
44.8 | 43.2 | 41.0 | 41.1 | 40.6 | (9.3 | ) | |||||||||||||||||
Data ARPU |
4.9 | 5.0 | 5.1 | 5.0 | 5.3 | 8.2 | ||||||||||||||||||
%non-P2P SMS over data revenues |
48.4 | % | 47.7 | % | 52.7 | % | 53.6 | % | 54.8 | % | 6.4 p.p. | |||||||||||||
| Note: | MoU and ARPU calculated as monthly quarterly average. |
TELEFÓNICA ESPAÑA: WIRELESS BUSINESS
SELECTED OPERATING DATA
Unaudited figures
SELECTED OPERATING DATA
Unaudited figures
| January - September | ||||||||||||
| 2008 | 2007 | % Chg | ||||||||||
MoU (minutes) |
158 | 162 | (2.9 | ) | ||||||||
Pre-pay |
72 | 77 | (6.6 | ) | ||||||||
Contract |
213 | 224 | (5.2 | ) | ||||||||
ARPU (EUR) |
30.7 | 32.6 | (5.7 | ) | ||||||||
Pre-pay |
14.8 | 15.7 | (6.0 | ) | ||||||||
Contract |
40.9 | 44.8 | (8.6 | ) | ||||||||
Data ARPU |
5.1 | 4.8 | 8.1 | |||||||||
%non-P2P SMS over data revenues |
52.7 | % | 47.9 | % | 4.8 p.p. | |||||||
| Note: | MoU and ARPU calculated as monthly January-September period average. |
January — September 2008 Results Telefónica 22
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
The Latin American telecommunications market continued to show strong growth in all countries in
the third quarter, and Telefónica Latinoamérica continued to focus on maintaining its commercial
effort to capture growth in the mobile business and further transform its wireline business
activities, with a higher contribution from Internet, broadband and Pay TV services.
At the end of September 2008 Telefónica Latinoamérica managed over 150 million accesses in the
region (153.1 million), 26.6 million more than in the same period last year, a year-on-year advance
of 21.1%.
In the mobile business, after reporting 4.8 million net adds in the third quarter and 13.7 million
in the year to date1, Telefónica Latinoamérica had 118.3 million accesses, with solid
year-on-year growth that is virtually flat vs. the level recorded in the first six months of the
year at 26.7% (+22.0% organic2), and healthy growth across all operations. This
performance was underpinned by the higher number of gross adds recorded in the first nine months of
the year (+24.8% year-on-year; +21.7% in organic terms3), and the churn evolution, which
held stable year-on-year.
Of particular note was the operator’s performance in Brazil, where Vivo strengthened its position
as market leader with over 42.3 million wireless accesses (almost 11 million customers more than in
September 2007, with close to 4 million added following the acquisition of Telemig in April 2008);
Mexico, where Telefónica continues to gain market share thanks to the 32.5% year-on-year growth in
its customer base, with more than 3.6 million customers added in the last twelve months; and Peru,
where customer numbers increased by 39.9% year-on-year to over 10 million mobile accesses. The
Company also performed well in markets with high penetration levels, such as Argentina and
Venezuela where it continues to achieve significant year-on-year increases in its customer base
(+15.5% in Venezuela and +13.0% in Argentina).
In parallel with the sharp growth in mobile accesses, Telefónica’s strategy of increasing usage
levels led to an increase in MoU, +11.0% year-on-year in the first nine months of 2008 in
organic3 terms (+7.0% organic4 in the third quarter), while ARPU for the
first nine months fell in organic terms3 by 3.5% in constant euros (-4.7% in the
quarter4), impacted by the new interconnection tariffs in several countries and the
commercial policies implemented to stimulate usage. In the first nine months, outgoing ARPU grew by
1.2% year-on-year in constant euros in organic terms3 (-1.3% organic4 in the
third quarter), with 24.9 million more accesses than in September 2007.
In the wireline business, as a result of the transformation process for operations, the
contribution of growth businesses (broadband, Pay TV and data) rose, boosted by the increase in
bundled products and an improved portfolio of services, leaving the customer base at almost 34.9
million accesses, up 5.1% year-on-year. Highlights include:
| • | In broadband net adds to September 2008 totalled close to 840,000 accesses (almost 350,000
in the third quarter) leaving the customer base at 5.9 million (+24.9% year-on-year). Of
particular note are the expansion of the service in Colombia (+112.0% year-on-year), the
sustained growth recorded in Argentina (+45.4% year-on-year) where the 1 million access mark
was surpassed, and the consolidation of growth in Brazil (+26.9% year-on-year) to almost 2.5
million. |
| 1 | The Telemig customers incorporated by the Group in
April 2008 (close to 4 million) are not included as net adds in the period. |
|
| 2 | Including Telemig accesses in September 2007. |
|
| 3 | Including Telemig in April-September 2007. |
|
| 4 | Including Telemig in July-September 2007. |
January — September 2008 Results Telefónica 23
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
| • | Telefónica Latinoamérica now has almost 1.5 million Pay TV customers, with operations in
Peru, Chile, Colombia and Brazil, compared to 880,000 customers in September 2007. In October,
the Pay TV service was also launched in Venezuela. |
|
| • | Fixed telephony accesses stood at 25.8 million at the end of the third quarter, up 1.4%
year-on-year. Particularly noteworthy was the IRIS fixed-wireless project which underpinned
the 4.7% year-on-year growth in fixed telephony accesses in Peru. The increase in fixed
wireless accesses in Venezuela (year-on-year growth of 36.7%, to almost 1.3 million accesses)
should also be highlighted. |
Additionally, average revenue per fixed telephony access grew 5.5% to September in constant euros,
driven by the improved commercial offer and the growing weight of bundled services aimed at
enhancing customer loyalty, with 46% of broadband accesses under a duo or trio bundle (+17
percentage points vs. September 2007). Including local and control usage bundles, the figure rises
to 59% of total fixed telephony accesses (up almost 8 percentage points from September 2007).
The Company’s strong commercial performance underpinned solid growth in its economic results in
constant currency, which have been negatively impacted by exchange rate fluctuations when
translated into euros. Exchange rates evolution detracted 3.0 percentage points from revenue and
OIBDA growth in January-September, slightly lower than the negative impact seen in the first half
of the year (-3.8 percentage points in revenues and -3.7 percentage points in OIBDA).
Revenues in the first nine months of 2008 stood at 16,311 million euros, a year-on-year increase of
11.1% in current euros, showing in the third quarter a higher growth rate (+14.5%) compared to
previous quarters. Brazil continued to account for the largest portion of Telefónica
Latinoamérica’s revenues in current euros (40.2%), and has even increased its contribution to the
Group total (38.4% in the same period of 2007) thanks to the good evolution of revenues at Telesp
and Vivo. The next largest contributions were made by Venezuela (11.5%) and Argentina (11.0%).
Organic revenue growth5 in January-September 2008 stood at 12.9%, 0.7 percentage points
higher than the figure reported in the first half of the year. This performance was due to the
higher revenue growth seen mainly in Brazil, and to a lesser extent in Venezuela and Argentina,
with these countries contributing most to organic revenue growth (+3.1 percentage points, +2.7
percentage points and +2.4 percentage points, respectively).
Operating income before depreciation and amortization (OIBDA) grew 13.5% in current euros in
January-September 2008 to 6,029 million euros, with a slightly higher increase of 14.5% booked in
the third quarter. In absolute terms and in current euros, Brazil is still Telefónica
Latinoamérica’s largest contributor accounting for 42.0% of total OIBDA, followed by Venezuela
(14.4%) and Argentina (10.4%). We highlight the higher contribution of the Mexican business to
Telefónica Latinoamérica’s OIBDA up from 2.1% in the first nine months of 2007 to 4.7% in the same
period of 2008.
In organic terms5 OIBDA grew 15.6% in the first nine months of 2008, in line with the
growth recorded in the first half of the year. By country, Venezuela is the largest contributor to
organic OIBDA growth with 4.2 percentage points, followed by Mexico (3.6 percentage points).
Despite the scenario of high commercial activity and business transformation, Telefónica
Latinoamérica continues to develop measures to improve efficiency and contain costs, which are
growing at a lower pace than revenues (+8.6% in current euros and +11.6% in constant euros in the
first nine months of 2008). Therefore, the OIBDA margin stood at 37.0% in January-September 2008,
an improvement of 0.8 percentage points year-on-year, driven by higher margins in the mobile
business. The OIBDA margin was 38.0% in third quarter, up 1.6 percentage points on the first half
of 2008, with the stable margin in the wireline business and the significant improvement in the
wireless business worthy of mention.
Telefónica Latinoamérica’s CapEx in the first nine months of 2008 amounted to 2,403 million euros,
with investment largely deployed in developing commercial activities for the wireline broadband and
Pay TV businesses, in addition to enhancing the coverage and capacity of its mobile GSM networks
and the rollout of 3G networks.
| 5 | Assuming constant exchange rates and including the
consolidation of TVA in January-September 2007 and Telemig in April-September
2007. |
January — September 2008 Results Telefónica 24
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RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
In the first nine months of 2008 Telefónica Latinoamérica generated operating cash flow
(OIBDA-CapEx) of 3,626 million euros, a 5.9% year-on-year increase in current euros, and a rise of
9.6% in constant currency.
BRAZIL
The Brazilian telecommunications market in the third quarter of 2008 continued to show the same
rapid pace of growth registered in the first half, with sharp gains in penetration rates in both
mobile telephony and broadband.
In this context, Telefónica now has over 58.2 million accesses in Brazil, thanks to Vivo’s on-going
market leadership and Telesp’s commercial success. Vivo boosted its number of accesses to 42.3
million (+35.0% year-on-year), after recording net adds of more than 1.8 million customers in the
third quarter. Meanwhile, Telesp had nearly 2.5 million retail broadband accesses (+26.9% vs.
September 2007), reporting 388,656 net adds in the first nine months of the year. Similarly, the
growth trend in the Pay TV business continued, with accesses now exceeding 426,000. On the back of
the increasing weight of bundled services and segmented offerings for each type of customer, the
fixed-line access base remained at 11.9 million accesses.
From a financial standpoint, Telefónica’s third-quarter results in local currency in Brazil
outpaced growth recorded in the first half of 2008, in both revenue and operating income before
depreciation and amortisation (OIBDA).
Telefónica’s revenues from its Brazilian businesses in the first nine months of 2008 stood at 6,565
million euros, a year-on-year increase of 11.0% in local currency terms, following a solid 15.3%
rise in the third quarter. Vivo’s sustained ramp-up in revenue growth in local currency was coupled
by a sharp jump in revenues at Telesp, which grew at a significantly higher pace compared with the
first half of 2008.
Operating income before depreciation and amortisation (OIBDA) reported by Telefónica in Brazil
increased by 7.4% year-on-year in local currency to 2,533 million euros in the first nine months,
following a noteworthy 18.7% increase in the third quarter. A highlight was the excellent
performance of OIBDA at Vivo, which, in an environment marked by strong growth and significant
commercial efforts, continued to improve its margin. OIBDA at Telesp, despite the greater weight of
new businesses that require a higher expense effort, remained unchanged from the first nine months
of 2007.
CapEx through to September totalled 1,106 million euros. The Company continued to develop its
fixed-line business, enhancing the broadband, Pay TV and data services, along with mobile services,
with a particular emphasis on 3G and strengthening its GSM network.
Operating cash flow (OIBDA-CapEx) generated by Telefónica in Brazil came to 1,426 million euros in
the first nine months of 2008, 14.6% down year-on-year in local currency, due to the Company’s
investment efforts. Excluding the acquisition of the 3G licences, Telefonica’s operating cash flow
in Brazil remained almost flat vs. the same period in 2007 (-0.5% year-on-year in local currency).
VIVO
The mobile telephony market continued to mark a dynamic performance in the third quarter, achieving
a penetration rate of 73%, about 4 percentage points higher than in June 2008 and nearly 14
percentage points up on September 2007. The Brazilian market now has more than 140 million mobile
accesses, approximately 28 million more than in the same period a year earlier.
Vivo remains the market leader, with a customer base of 42.3 million subscribers at the end of
September 2008, an increase of 35.0% from September 2007 (+21.0% in organic terms6). In
the past 12 months Vivo increased its customer base with nearly 11 million new subscribers (+7.3
million in organic terms7).
| 6 | Including Telemig accesses in September 2007. |
|
| 7 | The Telemig customers incorporated by the Group in
April 2008 (close to 4 million) are not included as net adds in the period. |
|
January — September 2008 Results Telefónica 25
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RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
Vivo’s substantial marketing efforts in the quarter are also worth noting, as they allowed to
achieve more than 5.0 million gross adds, almost 1.5 million more than in the same period a year
earlier in
organic terms8. This increase was fuelled by the success of the Father’s Day campaign
and the Company’s improved competitive positioning. GSM gross adds accounted for more than 90% of
the total in the third quarter, with GSM customers making up 62% of the total customer base at the
end of September, or more than 26 million subscribers.
Despite a sizeable increase in the customer base in a highly competitive environment, churn stood
at 2.6%, in both the first nine months and the third quarter. In the first nine months, churn rose
0.2 percentage points year-on-year, in line with third-quarter churn evolution, which increased 0.3
percentage points year-on-year (+0.2 percentage points in organic terms8), and fell
slightly from the second quarter of 2008 (-0.1 percentage points).
As a result, Vivo posted net adds of 1.8 million accesses in the third quarter, up 60.2% in
like-for-like terms8, with organic net adds9 of 4.8 million accesses in the
first nine months, more than double like-for-like net adds10 in the same period a year
earlier. A highlight was the growth of net adds in the contract segment in the first nine months,
to over 1 million accesses, which, in organic terms10, nearly triples the figure
registered a year earlier. These gains are the fruit of the success of the retention policies
coupled with efforts to capture high value customers, with the Company’s “Vivo Escolha” plans a
noteworthy success.
Meanwhile, MoU rose significantly, climbing 15.7% year-on-year in organic terms8 in the
third quarter and reaching 87 minutes in the first nine months, an organic10 increase of
13.9% above January-September 2007.
Third-quarter ARPU fell 7.8% (-6.9% in organic terms8) in local currency, due largely to
the sharp increase in the customer base and more promotions in the first half of the year, with a
decrease of 5.3% (-4.9% in organic terms10) in the first nine months. Nevertheless, ARPU
rose from the previous quarter (+1.4% vs. the second quarter of 2008).
In the data business, revenues continued to grow rapidly, rising 52.9% in local currency (+45.6%
organic growth10) in the first nine months. This growth is the result of the success of
card/modem offerings and new service plans (Vivo Zap, Vivo Wap, Vivo Play), along with the launch
of 3G/HSPA services. Against this backdrop, 9.3% of service revenues now come from the data
business (vs. 7.2% in the first nine months of 200710), with more than 55% generated by
services other than SMS (connectivity, Internet, content...).
Thanks to the Company’s excellent operating performance, revenues rose 20.6% year-on-year in local
currency in the first nine months (+12.6% in organic terms10), to 2,202 million euros,
following a 22.5% increase in the third quarter (+11.5% in organic terms8). Revenue
growth was based largely on the increase in service revenues, which in the third quarter rose 24.1%
year-on-year (+12.2% in organic terms8), and in the first nine months grew 22.0% in
local currency (+13.5% in organic terms10).
Growth in operating income before depreciation and amortisation (OIBDA) continued to outpace that
of revenues, with an increase of 33.9% (+21.9% organic growth10) in the first nine
months in local currency, to 616 million euros, and 55.1% in the third quarter (+37.3% organic
growth8). This reflects the Company’s efforts to increase the efficiency of commercial
and customer management costs, underpinned by the higher weight of GSM gross adds and larger
economies of scale. The nine-month OIBDA margin climbed to 28.0%, 2.8 percentage points higher than
in the same period of 2007 (+2.1 percentage points in organic terms10) and to 31.5% in
the third quarter (+6.5 percentage points year-on-year; +5,8 percentage points in organic
terms8), despite higher commercial activity and the consolidation of Telemig, which has
lower margins.
| 8 | Including Telemig in July-September 2007. |
|
| 9 | The Telemig customers incorporated by the Group in
April 2008 (close to 4 million) are not included as net adds in the period. |
|
| 10 | Including Telemig in April-September 2007. |
January — September 2008 Results Telefónica 26
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RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
Finally, CapEx totalled 528 million euros, while operating cash flow (OIBDA-CapEx) in the first
nine months amounted to 87 million euros, as a result of the Company’s CapEx efforts, Telefónica’s
commitment to and reliability in improving its networks and services in Brazil, expansion into new
areas and the acquisition of 3G licenses auctioned in late 2007.
TELESP
Sao Paulo, the area of Telefónica’s wireline business in Brazil, is a benchmark within Latin
America in the adoption of new technologies and is noteworthy for being a demanding and dynamic
market.
Telefónica’s strategy for pursuing innovation and transforming its operations are the levers of the
wireline business and the key to its success.
The Sao Paulo broadband market continues to show its potential, with nearly 3.7 million accesses,
or a penetration rate of about 30% of total households (more than 5 percentage points above
September 2007 figure).
In this market, the Company continues to pursue a strategy for bundling both traditional services
(e.g. monthly fee plus unlimited local calling) and new services (2P/3P). Thanks to this policy,
Telesp is keeping its number of basic telephony accesses virtually unchanged while it continues to
boost its number of broadband and Pay TV customers.
Telesp ended September 2008 with 15.9 million accesses, 4.0% more than a year earlier: 11.9 million
fixed line accesses, nearly 2.5 million broadband connections (+26.9% year-on-year) and 426,123 Pay
TV customers.
At the broadband business, Telesp is focusing on ongoing improvement to its service, increasing
speeds from 1 Mb — the minimum speed in its current range of services-. These efforts paid off as
Telesp registered 161,194 net adds in the third quarter (+29.6% year-on-year and +24.6% vs. the
second quarter of 2008), with net adds in the first nine months totalling 388,656.
In the Pay TV segment, Telesp strengthened its position as a key player in the market with 79,229
new accesses in the third quarter, the largest quarterly net adds in 2008.
As a result, Telesp enjoyed sharp growth in revenues, with an increase of 12.8% in local currency
in the third quarter (+11.8% organic11), and 7.4% in the first nine months of the year
(+6.5% organic12) to 4,680 million euros. This evolution is largely explained by the
good performance in fixed telephony revenues and the acceleration in revenue growth at the
Internet, Pay TV, data and IT businesses.
Fixed-line revenues climbed 2.0% year-on-year in local currency in the first nine months, reversing
the decline seen in the first half following solid growth of 7.4% in the third quarter. Besides
being fuelled by a rate increase in July and higher traffic linked to growth in the wireless
business, this performance reflects the success of service bundling policies and the rollout of a
segmented range of services tailored to customers’ needs. Over 56% of Telesp’s lines have bundled
services (vs. 47% in September 2007), and the Company posted a noteworthy advance in average
revenue per fixed telephony access of 6.6% year-on-year in local currency in the first nine months
of 2008.
Meanwhile, Internet and Pay TV revenues rose 47.2% in the third quarter and 42.9% in the first nine
months, and now account for 12.5% of total revenues (vs. 9.4% in September 2007). In addition,
data, IT and capacity rental revenues were key to bolstering growth in new businesses linked to
fixed-line telephony and the wholesale business, along with expansion in mobile sector, with an
advance of 21.4% year-on-year in local currency in the first nine months and 23.5% in the third
quarter.
Nine-month operating expenses rose 8.9% year-on-year in local currency (+13.6% in the quarter).
Expenses rose largely because of higher supply costs, due to higher interconnection spending linked
to increased traffic volumes, and rising costs associated with stepped-up activity in broadband and
Pay TV. External service expenses rose due to higher customer service costs and network maintenance
spending. These increases were partially offset with lower personnel costs and a significant drop
in bad debt provisions, which fell to 3.2% of revenues in the first nine months (down 0.8
percentage points year-on-year).
| 11 | Including TVA revenues in July-September 2007. |
|
| 12 | Including TVA revenues in January-September 2007. |
January — September 2008 Results Telefónica 27
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RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
Operating income before depreciation and amortisation (OIBDA) in the first nine months amounted to
1,898 million euros, similar in local currency to the figure reported a year earlier, following the
significant year-on-year rise of 8.8% in the third quarter, which reversed a decline seen in the
first half.
The third-quarter OIBDA margin stood at 40.2%, slightly lower than in the same period a year
earlier (-1.5 percentage points), but showing an improvement vs. the trend recorded in the first
half of 2008 (-3.7 percentage points year-on-year), while the nine-month margin stood at 40.6%. The
third-quarter margin (40.2%) was affected by the impacts related to technical problems with the
data transmission network in July 2008. Stripping out this effect, the third-quarter margin stood
at 40.9%.
Nine-month CapEx amounted to 578 million euros, which was focused on the broadband and Pay TV
businesses, as well as data networks for corporates, while operating cash flow (OIBDA-CapEx)
totalled 1,320 million euros.
ARGENTINA
Argentina has been one of the fastest-growing telecommunications markets in the region in 2008, in
both the wireless and broadband segments.
In this environment, Telefónica in Argentina managed a total of 20.5 million accesses at the end of
September 2008, nearly 1.1 million more than in December 2007 (year-on-year growth of 9.2%). This
sharp growth was underpinned by the performance of wireless accesses (+13.0%), with net adds of one
million since December 2007, and a booming broadband business (+45.4% year-on-year), with 226,905
new accesses registered since December 2007.
This robust business momentum led to another quarter with a ramp-up in year-on-year revenues growth
rate, which stood at 24.6% in local currency in the third quarter (vs. +19.9% in the first half of
2008). Revenues for the first nine months of the year totalled 1,802 million euros, a year-on-year
increase of 21.5% in local currency.
Revenue growth is likewise reflected in operating income before depreciation and amortisation
(OIBDA). Third-quarter OIBDA climbed 19.8% in local currency terms, outpacing first-half growth
(+12.2% in local currency), while in the first nine months it totalled 627 million euros, an
increase of 14.9% in local currency vs. the same period a year earlier.
CapEx in the first nine months totalled 187 million euros, generating operating cash flow
(OIBDA-CapEx) of 440 million euros (+13.6% in local currency year-on-year).
T. MÓVILES ARGENTINA
The wireless telephony market in Argentina continued to post significant growth in accesses,
achieving a penetration rate of 106% by the end of September, 14 percentage points higher than a
year earlier and 4 percentage points higher than in June 2008.
Net adds in the third quarter totalled 544,234 new customers, a 53.9% increase from the second
quarter of 2008, bringing the total so far this year to 1,022,948. This robust performance in net
adds was underpinned by a reduction in churn in the third quarter which left nine-month churn at
2.0% (+0.3 percentage points higher than the first nine months of 2007). Thus, the total access
base reached 14.7 million in September 2008, up 13.0% vs. September 2007.
MoU rose 20.3% year-on-year to more than 74 minutes in the first nine months of 2008. This strong
advance in MoU was mainly due to the strategy for increasing on-net traffic, which soared 119%
year-on-year in the first nine months and 121% year-on-year in the third quarter. To this end, the
Company ran several marketing campaigns in the last three months concurrently with its “Comunidad
Movistar” campaign, which offers differential on-net rates.
January — September 2008 Results Telefónica 28
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RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
This strategy is paying off in the form of rising ARPU, which was up 9.8% year-on-year in the first
nine months in local currency and up 14.3% in the third quarter of 2008. ARPU also benefited from
good performance at the data business, as nine-month data revenues in local currency climbed 30.2%
year-on-year to account for 24.8% of service revenues.
Growth in revenues ramped up in the third quarter, climbing 31.7% year-on-year in local currency,
and 27.6% in the first nine months vs. 2007 to 1,128 million euros. This positive performance was
largely due to growth in outgoing voice revenues, which are rising as a result of the measures
implemented to increase traffic and grow a 33.6% in the quarter and a 31.1% on cumulative terms to
September 2008, driving service revenue up 31.3% in the third quarter and 28.4% in the first nine
months of the year.
Nine-month operating income before depreciation and amortisation (OIBDA) outpaced revenue growth,
gaining 30.2% year-on-year in local currency and rising 28.4% in the third quarter to reach 333
million euros. This left the nine-month OIBDA margin at 29.5% (+0.6 percentage points higher than
in the same period in 2007), while the third-quarter margin stood at 32.4%.
Operating expenses in the first nine months were up by 25.6% year-on-year in local currency,
primarily due to higher interconnection costs arising from soaring traffic volumes and rising
customer management costs linked to the larger customer base and increases of the prices of
customer services in an environment of higher inflation.
Nine-month CapEx totalled 55 million euros, bringing operating cash flow (OIBDA-CapEx) to 278
million euros.
TELEFÓNICA DE ARGENTINA
Telefónica de Argentina continued its high commercial activity, broadening its customer base by
0.6% year-on-year in the first nine months, to 5.9 million accesses.
The Company surpassed the 1-million-access mark in the broadband segment, with 1,046,224 accesses,
up 45.4% from September 2007. Net adds reached 79,820 accesses in the third quarter of 2008
maintaining the growth pace registered in the second quarter of 2008, and bringing the total for
the year to 226,905 new accesses. The broadband business’ healthy performance was due mainly to its
attractive Duo offer and significant efforts to improve speeds (the number of accesses of over 2 Mb
more than tripled in the last twelve months). Additionally, 53.2% of broadband connections are
contracted with Duo packages, driven by the ever-increasing portion of these packages in gross adds
(90% in the third quarter). Likewise, and due in large part to the strategy of bundling services,
fixed-line accesses totalled 4.6 million at the end of September 2008.
It is noteworthy the sound performance of revenues, which showed an acceleration in its
year-on-year growth rate to 18.9% in local currency in the third quarter of 2008, generating a
13.8% year-on-year increase in the first nine months, to 736 million euros. This performance was
based on higher Internet revenues, which rose 37.1% in local currency in the first nine months from
a year earlier (+45.7% in the quarter) to account for 16.9% of total revenues (+2.9 percentage
points vs. the first nine months of 2007) and on data revenues, IT and circuits rental, which rose
28.0% in the first nine months. Faster growth in the traditional telephony business, which
continues to accelerate its growth rate quarter after quarter, reached 4.2% in the first nine
months (+5.2% in the quarter). This was driven by the good performance at the basic service
business, which partially offset lower revenues from the public phone business, whose weight of
revenues fell to 5.8% in the first nine months of 2008 (-2.6 percentage points year-on-year).
Operating expenses in the first nine months rose 24.7% year-on-year in local currency (+26.4% in
the first half of 2008), largely as a result of higher external services and personnel expenses due
to higher activity and general increases in prices, offsetting savings generated on other items.
Nevertheless, third-quarter expenses showed improvement from past quarters (-1.4% vs. the second
quarter).
Bad debt levels were unchanged from a year earlier, with bad debt provisions of approximately 1.1%
of cumulative 2008 revenues.
January — September 2008 Results Telefónica 29
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RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
Telefónica de Argentina’s operating income before depreciation and amortisation (OIBDA) totalled
294 million euros in the first nine months, a year-on-year increase of 1.4%. The OIBDA margin stood
at 34.7% in the first nine months of the year, 3.5 percentage points lower than in the same period
a year earlier and in line with the first half of 2008.
CapEx totalled 133 million euros and was devoted largely to strengthen networks and provide the
best broadband service on the market.
Operating cash flow (OIBDA-CapEx) amounted to 162 million euros in the first nine months.
CHILE
In a market with one of the highest penetration rates, both in mobile telephony and in broadband,
Telefónica is steadily expanding its total number of accesses, which stood at 9.8 million at the
end of
September 2008, 8.1% more than a year earlier. This growth was driven by an increase in the
wireless customer base (+10.8% year-on-year to 6.7 million), a 15.4% year-on-year rise in broadband
connections to more than 700,000, and a 27.2% increase in Pay TV subscribers to over 250,000.
Meanwhile, fixed line accesses registered a slight year-on-year decline of 1.8%.
Telefónica’s revenues in Chile in the first nine months totalled 1,463 million euros, a
year-on-year increase of 14.4% in local currency (+13.1% in the third quarter of 2008), largely
underpinned by higher revenues at the mobile business, although the wireline business also posted
positive growth.
Operating income before depreciation and amortisation (OIBDA) totalled 539 million euros, up 8.3%
year-on-year in local currency (+0.6% in the third quarter), benefiting from growth in wireless
business OIBDA.
CapEx in the first nine months stood at 290 million euros, reflecting the Company’s commitment to
enhance its networks, both fixed, with improvements in broadband and Pay TV, and wireless,
consolidating the network and speeding the rollout of 3G services.
Operating cash flow (OIBDA-CapEx) in the first nine months amounted to 249 million euros, 12.4%
more than in September 2007 in local currency.
T. MÓVILES CHILE
The Chilean mobile market continued to grow at a strong pace, with penetration estimated at 94% in
September 2008 (7 percentage points higher than in September 2007).
In this environment, Movistar Chile had 6.7 million customers at the end of September, 10.8% more
than in September 2007, with net adds of 91,349 accesses in the third quarter and 419,942 in the
first nine months. Highlights included 26.4% year-on-year growth in the contract customer base, the
result of Telefónica’s focus on higher-value customers, who now account for 27.5% of the customer
base (+3.4 percentage points from September 2007). This customer segment accounted for 73% of net
adds in the first nine months and for 93% in the third quarter.
This improved customer mix and lower contract churn prompted a reduction in overall churn to 1.8%
in the first nine months (-0.1 percentage points year-on-year) and to 1.7% in the quarter (-0.3
percentage points year-on-year).
Equally noteworthy were the gains in GSM services, as more than 95% of customers now use this
technology (+9 percentage points vs. September 2007). Movistar Chile has more than 73,000 3G
subscribers since the launch of these services in late 2007.
Usage ratios have grown steadily in 2008, reflecting Movistar Chile’s policy for unlocking value.
The Company is successfully developing policies to encourage customer migration and plan upgrades
through the sale of minutes packages and value-added services. As a result, MoU in the first nine
months rose 19.9% year-on-year to 122 minutes (+15.6% in the third quarter), a highlight of which
was the Company’s efforts to increasing on-net traffic, whose share of total outgoing traffic rose
5.1 percentage points year-on-year. Meanwhile, ARPU rose 10.3% in the first nine months in local
currency (+7.5% in the third quarter).
January — September 2008 Results Telefónica 30
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RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
Turning to financial results, revenues rose 20.1% year-on-year in local currency in the third
quarter, and climbed 22.8% in the first nine months, totalling 787 million euros.
Service revenues in the third quarter climbed 18.1% year-on-year in local currency (+22.5% in the
first nine months), underpinned by ongoing expansion of the customer base and rising ARPU. Worthy
of note was the increase in outgoing revenues (+16.1% year-on-year in local currency in the
quarter, +22.8% in the first nine months), driven by growth in data services (+42.5% year-on-year
in local currency in the quarter, +48.5% in the nine months), which accounted for 9.0% of service
revenues in the first nine months (+1.6 percentage points year-on-year).
Operating income before depreciation and amortisation (OIBDA) in the first nine months totalled 288
million euros, an increase of 23.9% year-on-year in local currency, while third-quarter OIBDA rose
9.7% year-on-year. The nine-month OIBDA margin held steady at 36.6%, 0.3 percentage point higher
than in the same period a year earlier.
CapEx amounted to 159 million euros in the first nine months, with operating cash flow
(OIBDA-CapEx) totalling 129 million euros.
TELEFÓNICA CHILE
Telefónica Chile managed 3.1 million accesses in September 2008, 2.7% more than in September 2007,
boosted by expansion in the number of broadband and Pay TV connections. Fixed-line accesses dropped
1.8% year-on-year.
The Company’s service bundling strategy remains the growth driver at the broadband and Pay TV
businesses. Broadband connections exceed 700,000, with year-on-year growth of 15.4% following net
adds of 20,397 in the third quarter and 54,174 in the first nine months. Similarly, Pay TV accesses
registered year-on-year growth of 27.2% following net adds of 10,049 in the third quarter and
30,934 in the first nine months, and consolidated their role as a key element in the
differentiation of our commercial offer, with an estimated market share of 17.6%.
Building on efforts to unlock value in the customer base, it is worth noting that 96% of broadband
customers have a Duo or Trio bundle. Thanks to this commitment to differentiate its offering,
Telefónica was able to maintain its share of the broadband market at 49% as market leader in a
highly competitive environment.
Revenues grew 6.3% year-on-year in both the third quarter and first nine months in local currency,
bringing nine-month revenues to 741 million euros. This performance is driven by the strong growth
in Internet and Pay TV revenues, which climbed 29.0% and continued to drive growth, raising their
weight in total revenues to 21.9% (3.8 percentage points higher than in the first nine months of
2007). The fixed-line business outperformed previous quarters, with year-on-year growth in the
third quarter of 1.4% in local currency, vs. declines in previous quarters, containing the
year-on-year drop in the first nine months to 0.5%. Data, IT and capacity rental revenues likewise
had a positive performance, rising 21.1% in local currency in the first nine months.
An increase in the percentage of bundled lines (63% of lines in September 2008 vs. 51% in September
2007) pushed up average revenue per fixed telephony access by 6.0% in local currency in the first
nine months, slightly outpacing the 5.8% increase registered in the first half of 2008.
Nine-month operating expenses performed in line with previous quarters. They rose 14.1% in local
currency, slightly less than in the first half (+14.5% in local currency). This trend in expenses
was dirven by higher customer care costs, higher network and energy costs and spending to expand
the Pay TV business. It was likewise affected by the higher cost of international capacity rental
linked to greater use of broadband and the increase in broadband speed implemented for all
customers beginning in March 2008. On the other hand, the pace of growth in personnel costs
continued to slow. Bad debt provisions as a percentage of revenues stood at 5.0% (2.1 percentage
points higher than in the first nine months of 2007).
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Operating income before depreciation and amortisation (OIBDA) fell by 8.6% in the third quarter in
local currency, leaving nine-month OIBDA at 251 million euros, a 5.7% decrease in local currency
from a year earlier. Meanwhile, the OIBDA margin in the third quarter was 32.8% and 33.9% in the
first nine months (-4.3 percentage points year-on-year).
CapEx in the first nine months amounted to 131 million euros. The top drivers of spending were the
Company’s commitment to Pay TV and broadband, coupled with constant quality improvement as the
cornerstones of change at the wireline business.
Telefónica Chile generated operating cash flow (OIBDA-CapEx) of 120 million euros in the first nine
months of 2008.
PERÚ
Total accesses managed by Telefónica in Peru stood at 14.3 million at the end of September 2008, an
increase of 27.7% year-on-year. This sharp growth was driven by the sharp increase in new mobile
customers, with net adds of 1.9 million so far this year, with the total now exceeding 10 million
(up 39.9% year-on- year), an increase in the number of fixed line accesses (up 4.7% year-on-year)
and the significant growth in the number of broadband connections (up 20.5% year-on-year), which
reached 669,836 at the end of September.
Enhanced commercial activity boosted revenues by 8.3% year-on-year in local currency in the third
quarter of 2008, bringing nine-month revenues to 1,168 million euros, with a year-on-year increase
of 6.2% in local currency that overtook the first half growth of 5.1%, thanks to the rise in
revenues from the mobile business, broadband and Pay TV.
Operating income before depreciation and amortisation (OIBDA) following a high increase in the
third quarter (up 11.2% year-on-year in local currency) totalled 432 million euros at the end of
September. This brought the nine-month year-on-year increase to 3.8% in local currency, underpinned
by good OIBDA performance at the wireless business.
CapEx through to September was mainly devoted to growth businesses (wireless, broadband and Pay TV)
and amounted to 129 million euros, while operating cash flow (OIBDA-CapEx) rose 15.0% year-on-year
in local currency to 304 million euros.
T. MÓVILES PERÚ
The penetration rate of the mobile telephony market in Peru maintained an exceptional pace of
growth in the first nine months of 2008 to 58% (+15 percentage points year-on-year), showing a more
than 3 percentage points advance in the third quarter.
Telefónica’s total wireless accesses in Peru at the end of September 2008 topped the 10 million
mark, with a significant increase of 39.9% year-on-year, driven by a sharp rise in prepay customers
(up 41.4% year-on-year) and a steady growth in the contract customer base (up 27.5% vs. September
2007).
Gross adds remained strong topping 1.5 million adds in the quarter, up 10.6% on the same period in
2007, and 4.5 million adds in the first nine months (up 25.5% year-on-year). Churn was slightly
improved in the quarter, at 3.0% (0.4 percentage points lower than in the second quarter of 2008),
with 686,088 net adds in the quarter. In cumulative terms, churn stood at 3.2% (0.4 percentage
points higher than in the same period in 2007). In the first nine months of the year 1.9 million
new clients were added to the customer base (vs. 2 million in the first nine months of 2007),
highlighting the growth in contract net adds (up 149.0%), thanks to both new subscribers and
existing customers migrating from prepay. GSM customers accounted for 87.8% of the total at the end
of September (up 16.3 percentage points vs. September 2007).
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Telefónica Latinoamérica
MoU recovered the upward trend again in the third quarter, boosted by changes in the commercial
offer, with a 3.6% year-on-year increase which brought the nine-month MoU to 90 minutes, up 3.3%
vs. September 2007. Although the fall in ARPU in the third quarter was limited to 18.6% in local
currency, nine-month ARPU dropped by 19.4% year-on-year, negatively impacted by the reduction in
mobile termination rates (down 19% in nominal terms from January 1st, 2008), higher
traffic promotions compared with the same period in 2007 and the strong growth in the customer
base.
Revenue growth accelerated in the third quarter compared with the first half of 2008, rising 33.2%
year-on-year in local currency. Nine-month revenues in local currency rose 29.5% to 544 million
euros, thanks to higher cumulative mobile service revenues (up 18.5% in local currency). Outgoing
mobile revenues maintained a sharp increase through to September (up 27.8% year-on-year in local
currency) offsetting flat incoming revenues (down 0.9% in local currency). However, it is worth
mentioning that despite lower termination rates, higher incoming traffic volumes helped third
quarter incoming revenues to register a significant year-on-year increase of 18.7% in local
currency, reversing the decrease of 10.6% registered in the first half of 2008.
Data revenues likewise posted significant growth, climbing 82.3% year-on-year in the first nine
months in local currency and accounting for 13.4% of mobile service revenues (up 4.6 percentage
points from September 2007).
OIBDA posted strong year-on-year growth in the third quarter, rising 83.3% in local currency, which
boosted nine-month OIBDA by 67.5% year-on-year to 177 million euros. This positive performance is
explained not only by stronger revenue growth but also by lower subscriber acquisition costs (lower
unit subsidies) and retention costs. The trend in margins expansion also intensified, with the
third-quarter OIBDA margin at 35.3%, 9.6 percentage points higher than in the same period in 2007,
and a nine month margin of 32.5% (up 7.4 percentage points vs. September 2007).
CapEx in the first nine months amounted to 59 million euros, leaving operating cash flow
(OIBDA-CapEx) at 118 million euros.
TELEFONICA DEL PERÚ13
Total accesses managed by Telefónica del Perú stood at 4.3 million at the end of September 2008, up
6.0% year-on-year underpinned by the increases in wireline telephony accesses (up 4.7%
year-on-year), primarily driven by the expansion of fixed-wireless telephony, broadband accesses
(up 20.5% year-on-year) and Pay TV which benefited from the good performance of cable customers, to
total 645,974 accesses (up 2.9% year-on-year).
Growth in broadband connections accelerated in the third quarter as a result of the Company
strategy to foster these accesses expansion. Broadband net adds in the quarter amounted to 43,031
accesses, up 32.1% vs. the second quarter of 2008, with an increase of 53.3% versus the third
quarter of 2007. In the first nine months, broadband net adds stood at 97,748 (up 11.9% vs.
January-September 2007), bringing the total base to 669,836 accesses.
Along the quarter Telefónica del Perú continued to focus on bundling and a segmented product range
as the key drivers of the business transformation. Duo and Trio bundles accounted for 30.6% of the
broadband accesses at the end of September, an increase of 23.3 percentage points in the third
quarter of 2008. Additionally, in September the Company bought Star Global, a supplier of cable TV
and broadband in Arequipa and Tacna — Peru’s largest the economies after Lima — which enhanced its
market position.
Against this backdrop, third quarter revenues tracked the trend seen in previous quarters (down
7.1% year-on-year in local currency), resulting in a year-on-year decrease of 7.4% in local
currency in the first nine months to 711 million euros. The main factors behind this decline were
lower revenues from traditional telephony and public telephones, affected by the boom in wireless
penetration, the use of unofficial call centres, and the October 2007 elimination of long-distance
carrier pre-selection by default. In contrast, the success of new businesses partly offset this
trend, being particularly noteworthy the nine-month growth in broadband revenues (up 21.8% in local
currency). Revenues from Internet and Pay TV rose by 14.4% year-on-year in local currency in the
first nine months, and now contribute 30.2% of total revenues (up 5.7 percentage points vs. the
same period in 2007).
| 13 | Wireline telephony accesses include all Telefónica’s
fixed wireless accesses in Peru, both those managed by the wireline business
and those managed by the wireless business. However, earnings from fixed
wireless accesses are included in the results of the Peruvian wireless
business. |
January — September 2008 Results Telefónica 33
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RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
Additionally, revenues from public use telephony slowed again their year-on-year drop thanks to a
cut in the price of calls from public phones that prompted a sharp increase in traffic. The weight
of these revenues over the total continued to reduce to account for 11.2% in September (down 4.4
percentage points from September 2007). In the long-distance calling business likewise, the Company
kept its focus on customer pre-selection.
In the third quarter operating expenses were up by 0.8% year-on-year in local currency, bringing
the nine-month drop to 0.2%. This achievement is explained by lower supplies along with lower
personnel costs. Bad debt provisions in the third quarter stood at 2.5% of total revenues, 0.2
percentage points lower than the previous quarter, while it accounted for 3.0% of cumulative
revenues (vs. 1.4% in the first nine months of 2007).
Nine-month OIBDA totalled 255 million euros (down 18.0% year-on-year in local currency and down
17.1% in the third quarter), affected by the traditional telephony revenue performance and by
commercial efforts to develop new businesses. The OIBDA margin in the third quarter stood at 35.2%
and in the first nine months at 35.9%, (down 4.6 percentage points vs. September 2007).
CapEx in the first nine months amounted to 70 million euros, leaving operating cash flow
(OIBDA-CapEx) at 185 million euros.
COLOMBIA
At the end of September 2008, Telefónica managed more than 12.5 million accesses in Colombia, a
23.9% advance from a year earlier, underpinned by continued growth in wireless accesses (+28.5%) to
more than 9.7 million, a significant increase in broadband (+112.0%) to 355,068 accesses and the
advance of Pay TV to 137,508 customers (a threefold increase from a year earlier).
In the first nine months of 2008, revenues totalled 1,131 million euros, virtually unchanged from a
year earlier in local currency, after a third quarter decrease of 3.0% year-on-year in local
currency, due to lower revenues at the wireless business not offset by growth in wireline revenues.
Even though revenues were virtually unchanged, reflecting efficiency improvements and lower
wireless interconnection expenses, operating income before depreciation and amortisation (OIBDA)
registered a significant growth of 11.8% year-on-year in local currency to 380 million euros in the
first nine months, outpacing the first-half increase (+8.1% year-on-year), as the third quarter saw
year-on-year growth of 18.7%.
CapEx through to September 2008 totalled 252 million euros and was mainly used for the development
of wireless and broadband networks, while operating cash flow (OIBDA-CapEx) fell 34.0% year-on-year
in local currency terms, to 128 million euros.
T. MÓVILES COLOMBIA
The estimated penetration rate in the Colombian mobile market topped 84% at the end of September,
up more than 15 percentage points in the last twelve months and 3 percentage points in the last
quarter.
Against this backdrop, mobile accesses managed by Telefónica in Colombia totalled 9.7 million at
the end of September, year-on-year growth of 28.5% which tops the increase reported in the previous
quarters (+22.9% to June and +16.0% to March) accounting GSM customers for 89.7% of the total
(+13.0 percentage points year-on-year).
Gross adds grew by a robust 66.2% year-on-year in the third quarter (vs. 61.8% in the second
quarter), taking gross adds in the first nine months of 2008 to 4.1 million, up 58.0% from the same
period in 2007. This strong commercial activity reflects the Company’s efforts to expand its
distribution network. Accordingly, Telefónica had around 50% more points of sale at the end of
September than at the start of 2008.
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Telefónica Latinoamérica
Churn in the third quarter, in the context of the Colombian market dynamic, stood at 3.6%, reducing
0.3 percentage points versus the third quarter of 2007, while churn in the first nine months stood
at 3.5%, improving 0.7 percentage points versus the same period a year earlier. As a result, net
adds were 343,494 accesses in the third quarter (compared with a net loss in the same quarter of
2007), bringing net adds in the first nine months to 1.3 million (vs. -208,142 in the same period
in 2007).
In terms of use, MoU amounted to 123 minutes in the third quarter (vs. 120 in the second quarter),
up 5.4% year-on-year. In cumulative terms, MoU increased by 18.2% year-on-year to September, driven
by a higher number of promotions and measures to boost top-ups.
ARPU continued to be affected by the sharp reduction of approximately 50% in interconnection
tariffs since December 2007, with incoming traffic revenues declining 44.9% in local currency in
the year to date. As a result, despite the growth in MoU, ARPU in local currency fell 26.9%
year-on-year in the quarter and 19.4% in the first nine months. Additionally, ARPU was also
affected by the increased weighting of the pre-paid customer base, which stood at 82.0% at the end
of the quarter, 4.3 percentage points more than in September 2007. The Company is taking action to
improve the quality of adds, which should improve future ARPU performance.
As a result, revenues fell 8.7% in the third quarter in local currency vs. the same period in 2007,
with revenues in the first nine months falling 2.4% in local currency to 623 million euros. Service
revenues fell 4.2% in local currency to September, affected by lower incoming revenues which were
not offset by the strong performance of outgoing revenues (+14.1% year-on-year in local currency to
September). Particularly noteworthy was the solid growth in data revenue in the first nine months,
up 61.1% year-on-year in local currency, to account for 5.5% of service revenues (+2.2 percentage
points vs. January-September 2007).
Thanks to efforts to control costs and lowered interconnection expenses, operating income before
amortisation and depreciation (OIBDA) grew 15.2% year-on-year in local currency in the quarter to
reach year to date 149 million euros, up 38.8% from September 2007 in local currency. The OIBDA
margin in the quarter stood at 28.4% (6.0 percentage points higher than in the same quarter in
2007), and improved by 7.1 percentage points year-on-year in the first nine months to 24.0%.
CapEx amounted to 130 million euros in the first nine months, leaving operating cash flow
(OIBDA-CapEx) of 19 million euros.
TELEFÓNICA TELECOM
Telefónica Telecom reported 2.8 million total accesses at the end of September, up 10.2%
year-on-year, being noteworthy the increased achieved by broadband (+112.0%) to 355,068 accesses,
and Pay TV that almost tripled in the year to 137,508 accesses.
Thanks to the bundling and broadband expansion strategy, the strong pace of broadband and TV
customer acquisition continued the positive trend in the third quarter. Broadband net adds totalled
61,104 in the quarter, up 43.7% on the same quarter in 2007 and 9.8% on the second quarter of 2008.
In the year to date net broadband adds totalled 154,797, showing a growth of 55.6% vs. the same
period in 2007. Meanwhile, Pay TV net adds amounted to 24,893 in the quarter (up 38.8% vs. the
third quarter of 2007), bringing the figure for the first nine months to 64,578 new accesses (up
39.8% from the first nine months of 2007).
Revenue growth accelerated in the third quarter, increasing by 3.0% year-on-year in local currency,
to amount to 533 million euros in the first nine months, up 1.8% year-on-year and therefore
improving the 1.2% rise achieved to June. This acceleration was mainly driven by the growing
contribution of Internet and Pay TV revenues which, with cumulative year-on-year growth of 89.5% in
local currency, accounted for 15.7% of total revenues at the end of the quarter (an increase of 7.3
percentage points from a year earlier). In addition, traditional telephony revenues dropped 7.7%
year-on-year in the quarter in local currency, reducing the year-to-date decline in local currency
to 9.9%, still affected by the mobile substitution effect and the sharp cut in interconnection
tariffs (-38% in average) since December 2007.
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Particularly noteworthy is the growth in average revenue per fixed telephony access, which rose
3.4% year-on-year to September in local currency (+1.5% to June), reflecting the success of the
service bundling strategy.
Operating expenses advanced 9.9% year-on-year in local currency in the first nine months of 2008,
due to higher supplies costs and larger commissions related to the increased ADSL and Pay TV
commercial activity. However, expenses growth eased from June and increased by 3.3% in local
currency compared with the third quarter of 2007 despite the increase in commercial activity. Bad
debt provisions amounted to 2.4% of revenues at the end of September, down 0.7 percentage points
vs. September 2007.
As a result, operating income before amortisation and depreciation (OIBDA) advanced 21.6%
year-on-year in the quarter in local currency, reversing the trend seen in the first half of the
year and amounting to 231 million euros in the first nine months, virtually unchanged from the same
period in 2007 (down 0.5% year-on-year in local currency). The improvement on previous quarters is
also evident in the third-quarter margin, which advanced 9.0 percentage points from the second
quarter to 47.2%. The cumulative margin stood at 43.3% (down 1.0 percentage points from September
2007).
CapEx in the first nine months amounted to 122 million euros, leaving operating cash flow
(OIBDA-CapEx) of 109 million euros.
MÉXICO
The estimated penetration rate in the Mexican wireless market surpassed 69% in September (+10
percentage points from a year earlier), close to 2 percentage points higher than in the second
quarter of 2008. In the third quarter of the year marketing became less aggressive in the market,
after the strong commercial activity for the Mother’s Day campaign in the second quarter of 2008.
Telefónica Móviles México continues to focus on growth and profitability, registering 1.5 million
gross adds in the third quarter (compared with 1.6 million in the same quarter in 2007). Efforts
geared toward increasing customer loyalty, along with commercial actions aimed at boosting top-ups,
were reflected in a notably churn reduction (standing at 2.2% in the quarter; -0.3 percentage
points year-on-year).
Net adds in the third quarter amounted to 547,739 customers (vs. 839,513 in the third quarter of
2007), with 2.1 million customers added in the first nine months.
Telefónica Móviles México had a customer base of 14.7 million at the end of September 2008 (of
which 882,805 were contract customers), an increase of 32.5% from September 2007, thanks mostly to
its competitive and flexible commercial offer in the prepay segment.
Total traffic continued to show sound growth (+41.9% vs. the first nine months of 2007), especially
outgoing and on-net traffic. MoU in the first nine months (139 minutes) rose by 1.7% from a year
earlier, despite sharp growth in the customer base, driven by improvements in marketing offers
(“Pagamenos” and “Movistar por llamada”), which boosted total outgoing ARPU by 2.7% in local
currency, and partially offset lower incoming ARPU as a result of the cut in interconnection rates
early in the year. Total ARPU in the first nine months dropped year-on-year in local currency
(-3.6%). Quarterly ARPU was affected by changes in the commercial offer.
Revenues in the third quarter rose 21.3% year-on-year in local currency, with nine-months revenue
up 29.5% in local currency to 1,204 million euros. Service revenue registered another quarter of
sharp increases (+25.9% in the quarter and +35.2% in the nine months), bolstered mainly by growth
in outgoing revenues (+29.3% in local currency vs. the third quarter of 2007 and +44.2% vs. the
first nine months of 2007), which were fuelled by a steady rise of on-net traffic and a noteworthy
increase in data traffic. Incoming revenues advanced 6.8% in local currency year-on-year in the
third quarter of 2008 and by 13.5% in the first nine months, despite the 9.7% reduction in call
termination prices in January 2008.
Operating income before depreciation and amortisation (OIBDA) in the third quarter reflects
sustained growth in revenues, efficiency improvements stemming from economies of scale and cost
containment, which limited the rise in operating expenses lagging far behind revenue growth. That
helped the Company to more than double OIBDA in the third quarter from a year earlier in local
currency, leaving the margin at 25.5% (+11.0 percentage points year-on-year). Nine-month OIBDA
totalled 283 million euros, 2.7 times the amount booked in the same period a year earlier in local
currency, with a margin of 23.5% (+12.2 percentage points higher than the margin posted in the
first nine months of 2007).
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CapEx in the first nine months amounted to 157 million euros, resulting in operating cash flow
(OIBDA-CapEx) of 126 million euros, a significant improvement on the same period in 2007 (-40
million euros).
VENEZUELA
The penetration rate in the Venezuelan wireless market increased to an estimated 97% at the end of
the third quarter of 2008, 17 percentage points higher than in September 2007, making Venezuela one
of the region’s fastest-growing markets in the past 12 months.
Telefónica once again reported strong operating growth in Venezuela in the third quarter of 2008,
thanks to a stepped-up commercial activity which generated a year-on-year increase of 41.8% in
wireless subscriber gross adds, to 1.2 million, bringing nine–month wireless gross adds to 3.1
million (up 4.7% vs. the first nine months of 2007). The Company continued to follow the strategy
of offering the widest range of handsets, boosting wireless broadband and fixed wireless sales.
Wireless broadband gross adds rose 118% in the third quarter vs. the same period a year earlier,
while fixed wireless gross adds jumped 135%.
Churn in the third quarter was down 0.4 percentage points year-on-year, to 2.4% (2.7% in the first
nine months, virtually unchanged from the first nine months of 2007). This reduction was driven by
improved retention policies, with initiatives segmented according to the usage profile of each
customer.
Wireless net adds rose sharply in the third quarter to 438,981 customers (a more than fivefold
increase from the third quarter of 2007), bringing the nine-month total to 846,180 new customers
(912,866 in the first nine months of 2007).
Telefónica Móviles Venezuela had 11.6 million total accesses at the end of September 2008 (up 17.5%
vs. September 2007), underpinned by its wireless customer base (up 15.5%) to reach 10.3
million accesses and sharp growth in fixed wireless (up 36.7%). GSM customers now account for 52.0%
of total wireless customers (up 24.5 percentage points vs. September 2007).
MoU decreased 1.5% year-on-year in the first nine months vs. the same period a year earlier, to 128
minutes, and by 3.9% in the third quarter from the same period in 2007 impacted by the changes
introduced in the commercial offer. ARPU rose by 8.6% year-on-year in the first nine months
(increasing 13.9% in the third quarter in local currency), driven by the growing contribution of
data services, which accounted for 21.0% of service revenues in the first nine months (up 2.5
percentage points year-on-year).
Revenue growth picked up in the third quarter, accelerating its growth rate to 26.5% year-on-year
in local currency, while in the first nine months it totalled 1,871 million euros (a year-on-year
increase of 23.3% in local currency). Underpinning this growth was the advance in service revenues
(up 20.6% vs. January-September 2007 in local currency and up 25.0% in the third quarter), which
outpaced customer growth. Good performance in outgoing wireless ARPU (up 12.4% in local currency in
the first nine months), translated into a 29.1% increase in outgoing revenues in local currency in
the first nine months, which offset the lower incoming revenues (down 4.9% to September 2008). This
was due to the reduction in mobile termination rates (down 18% since July 2008, following the 34%
fee reduction introduced in July 2007).
Operating income before depreciation and amortisation (OIBDA) grew 28.0 % in the quarter in local
currency, with nine-month OIBDA totalling 866 million euros (up 29.6% in local currency), thanks to
higher revenues and commercial savings deriving from lower handset subsidies. The OIBDA margin in
the quarter stood at 48.6%, up 0.4 percentage points on the third quarter of 2007, and 46.3% in the
year to date (up 2.3 percentage points vs. the same period in 2007).
CapEx for the first nine months amounted to 143 million euros, being noteworthy the investment in
the rollout of the 3G network, leaving operating cash flow (OIBDA-CapEx) in the period at 723
million euros (an increase of 35.8% in local currency from the first nine months of 2007).
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Telefónica Latinoamérica
CENTRAL AMERICA
At the end of September 2008 wireless penetration in Central America stood at around 77%, up 14
percentage points from September 2007.
In a highly competitive environment, Telefónica has maintained its position in all the markets in
which it operates. This required a significant commercial effort, especially in El Salvador and
Guatemala. In this context, the Company’s customer base topped 6.1 million accesses in Central
America with an increase of 694,887 customers in January-September 2008 (1,040,889 accesses in the
same period in 2007) and 140,735 in the third quarter.
Revenues to September 2008 amounted to 411 million euros, up 6.1% year-on-year in constant euros
and maintaining the same growth rate as in July-September 2008 due to higher incoming revenues
(6.2% year-on-year growth in constant euros in the third quarter of 2008).
Operating income before depreciation and amortisation (OIBDA) fell 1.9% in constant euros in the
first nine months of 2008 to 149 million euros. The OIBDA margin stood at 36.2% in
January-September (down 2.9 percentage points year-on-year). OIBDA was affected by the sale of
spectrum in El Salvador in the third quarter of 2007 (16.4 million euros). Stripping out this
impact, OIBDA to September 2008 would have grown 8.4% and the OIBDA margin would have advanced by
0.8 percentage points.
CapEx in the first nine months amounted to 54 million euros and operating cash flow (OIBDA CapEx)
to 95 million euros, down 1.0% in constant euros from September 2007.
ECUADOR
The Ecuadorian wireless market continued to grow at a strong pace, with penetration estimated at
79% in the third quarter of 2008 (+11 percentage points versus September 2007).
In this context of growth, Telefónica Móviles Ecuador reported wireless net adds of 95,193 accesses
in the third quarter of 2008 (vs. 8,230 in the third quarter of 2007), and 376,299 accesses in the
first
nine months of the year (163,393 to September 2007). The total customer base stood at of over 3.0
million at the end of September, a year-on-year increase of 14.7%. Highlights include the strong
performance of the prepay segment, which lead total mobile customer base to reach 427,935 accesses
in the third quarter of 2008, up 2.7% on the second quarter.
Following the closure of the TDMA network, GSM customers account for 80.6% of the total, 15.8
percentage points higher vs. September 2007.
Revenues grew 18.5% year-on-year in the third quarter of 2008 in local currency, and 20.6%
year-on-year to September, to 225 million euros. This strong revenue performance was driven by the
increase in service revenues (+19.7% year-on-year in local currency in the third quarter and +20.5%
year-on-year to September 2008), underpinned by positive outgoing revenues (+25.1% in the first
nine months of 2008) on the back of higher MoU (reflecting the success of the commercial
initiatives undertaken to stimulate usage). Therefore, MoU grew 78.9% year-on-year in the third
quarter and 77.6% year-on-year in first nine months of 2008. ARPU grew sharply in the third quarter
(+11.8% year-on-year in local currency), rising 8.4% in January-September 2008.
Operating income before depreciation and amortisation (OIBDA) grew by 51.5% year-on-year in local
currency in the third quarter, with January-September revenues up 33.5% at 61 million euros. The
increase in operating expenses (+17.2% in local currency vs. January-September 2007) lower than
revenue growth, led OIBDA margin to reach 27.0% in the first nine months of 2008 (+2.6 percentage
points year-on-year). This marks a rising trend compared to previous quarters (+6.8 percentage
points in the third quarter of 2008 vs. +1.5 percentage points in the second quarter).
CapEx in the first nine months of the year stood at 34 million euros, leaving operating cash flow
(OIBDA-CapEx) at 27 million euros in the first nine months of 2008, a year-on-year increase of
26.9% in constant euros.
January — September 2008 Results Telefónica 38
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
TELEFÓNICA INTERNATIONAL WHOLESALE SERVICES
Revenues at TIWS in the first nine months of 2008 totalled 235 million euros, up 22.6% year-on-year
in constant euros, in line with the growth reported in the first half.
TIWS enjoyed significant growth at all of its business lines, consolidating its position as a
unique asset that complements and differentiates Telefónica’s range of services. Nine-month
revenues from international capacity climbed 50.5% in constant euros, while revenues from corporate
services (Virtual Private Networks) rose 26.1%. Revenues from satellite services were up 15.1%. IP
interconnection services accounted for 47% of total revenues, rising 13.6% in constant euros.
Revenue growth is reflected in improved operating income before depreciation and amortisation
(OIBDA), which rose 13.3% in constant euros, keeping up the pace registered in the first half of
2008. OIBDA totalled 75 million euros in the first nine months, with a margin of 31.8%.
January — September 2008 Results Telefónica 39
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
TELEFÓNICA LATINOAMÉRICA
ACCESSES
Unaudited figures (thousands)
ACCESSES
Unaudited figures (thousands)
| 2007 | 2008 | |||||||||||||||||||||||
| September | December | March | June | September | % Chg y-o-y | |||||||||||||||||||
Final Clients Accesses |
126,423.0 | 134,041.8 | 137,612.4 | 147,845.8 | 153,060.9 | 21.1 | ||||||||||||||||||
Fixed telephony accesses (1) |
25,411.4 | 25,381.0 | 25,595.4 | 25,757.6 | 25,758.2 | 1.4 | ||||||||||||||||||
Internet and data accesses |
6,803.4 | 6,954.8 | 7,099.9 | 7,275.1 | 7,572.4 | 11.3 | ||||||||||||||||||
Narrowband (2) |
2,000.6 | 1,815.6 | 1,752.9 | 1,635.3 | 1,587.9 | (20.6 | ) | |||||||||||||||||
Broadband (3) (4) |
4,703.5 | 5,035.9 | 5,237.2 | 5,525.8 | 5,875.7 | 24.9 | ||||||||||||||||||
Other (5) |
99.3 | 103.4 | 109.8 | 114.0 | 108.8 | 9.5 | ||||||||||||||||||
Mobile accesses (6) |
93,328.2 | 100,542.2 | 103,676.7 | 113,459.6 | 118,269.8 | 26.7 | ||||||||||||||||||
Contract |
77,117.4 | 83,162.9 | 85,634.0 | 93,527.9 | 97,713.7 | 26.7 | ||||||||||||||||||
Pre-Pay |
16,210.8 | 17,379.3 | 18,042.7 | 19,931.7 | 20,556.1 | 26.8 | ||||||||||||||||||
Pay TV |
880.0 | 1,163.8 | 1,240.4 | 1,353.6 | 1,460.5 | 66.0 | ||||||||||||||||||
Wholesale Accesses |
64.1 | 62.6 | 56.0 | 57.6 | 69.6 | 8.5 | ||||||||||||||||||
Total Accesses |
126,487.1 | 134,104.4 | 137,668.4 | 147,903.4 | 153,130.5 | 21.1 | ||||||||||||||||||
| (1) | PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/ 6
Access x30. Company’s accesses for internal use included. Total “fixed wireless” accesses
included. |
|
| (2) | Includes narrowband ISP of Terra Brasil and Terra Colombia. |
|
| (3) | Includes broadband ISP of Terra Brasil, Telefónica de Argentina, Terra Guatemala and Terra
México. |
|
| (4) | Includes ADSL, optical fiber, cable modem, broadband circuits and Telefónica de
Argentina ISP in the North part of the country. |
|
| (5) | Retail circuits other than
broadband. |
|
| (6) | Includes accesses of Telemig from April
2008. Notes: |
|
| • | As of 31 December 2006, Group accesses have been reclassified, including “fixed wireless”
accesses under the caption of fixed telephony. These accesses were previously classified,
depending on the country, under mobile or fixed accesses. |
|
| • | As of 1 January 2008, “fixed wireless” public telephony accesses are included under the caption
of fixed telephony accesses. |
TELEFÓNICA LATINOAMÉRICA
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
| January - September | July - September | |||||||||||||||||||||||
| 2008 | 2007 | % Chg | 2008 | 2007 | % Chg | |||||||||||||||||||
Revenues |
16,311 | 14,676 | 11.1 | 5,780 | 5,048 | 14.5 | ||||||||||||||||||
Internal exp capitalized in fixed assets |
81 | 69 | 18.6 | 26 | 23 | 12.0 | ||||||||||||||||||
Operating expenses |
(10,469 | ) | (9,639 | ) | 8.6 | (3,630 | ) | (3,285 | ) | 10.5 | ||||||||||||||
Other net operating income (expense) |
99 | 200 | (50.7 | ) | 27 | 118 | (77.4 | ) | ||||||||||||||||
Gain (loss) on sale of fixed assets |
7 | 3 | 127.6 | (5 | ) | 15 | c.s. | |||||||||||||||||
Impairment of goodwill and other assets |
(0 | ) | 0 | c.s. | (0 | ) | 0 | c.s. | ||||||||||||||||
Operating income before D&A (OIBDA) |
6,029 | 5,309 | 13.5 | 2,198 | 1,919 | 14.5 | ||||||||||||||||||
OIBDA Margin |
37.0 | % | 36.2 | % | 0.8 p.p. | 38.0 | % | 38.0 | % | 0.0 p.p. | ||||||||||||||
Depreciation and amortization |
(2,717 | ) | (2,550 | ) | 6.6 | (936 | ) | (846 | ) | 10.7 | ||||||||||||||
Operating income (OI) |
3,312 | 2,760 | 20.0 | 1,261 | 1,073 | 17.6 | ||||||||||||||||||
Note:
| • | OIBDA and OI before management and brand
fees. |
|
| • | Starting April 2008, Vivo
consolidates Telemig. |
January — September 2008 Results Telefónica 40
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
TELEFÓNICA LATINOAMÉRICA
ACCESSES BY COUNTRIES (I)
Unaudited figures (Thousands)
ACCESSES BY COUNTRIES (I)
Unaudited figures (Thousands)
| 2007 | 2008 | |||||||||||||||||||||||
| September | December | March | June | September | % Chg y-o-y | |||||||||||||||||||
BRAZIL |
||||||||||||||||||||||||
Final Clients Accesses |
46,607.3 | 48,963.1 | 49,906.5 | 56,098.3 | 58,165.3 | 24.8 | ||||||||||||||||||
Fixed telephony accesses (1) |
12,019.0 | 11,960.0 | 11,931.9 | 11,893.5 | 11,860.7 | (1.3 | ) | |||||||||||||||||
Internet and data accesses |
3,259.5 | 3,288.6 | 3,369.3 | 3,423.1 | 3,601.9 | 10.5 | ||||||||||||||||||
Narrowband |
1,262.3 | 1,155.9 | 1,133.6 | 1,055.2 | 1,079.2 | (14.5 | ) | |||||||||||||||||
Broadband (2) |
1,937.3 | 2,069.6 | 2,167.7 | 2,297.1 | 2,458.3 | 26.9 | ||||||||||||||||||
Other (3) |
59.9 | 63.1 | 68.0 | 70.8 | 64.4 | 7.5 | ||||||||||||||||||
Mobile accesses (4) |
31,320.2 | 33,483.5 | 34,323.0 | 40,434.8 | 42,276.6 | 35.0 | ||||||||||||||||||
Pre-Pay |
25,456.8 | 27,236.4 | 27,849.8 | 32,689.9 | 34,161.5 | 34.2 | ||||||||||||||||||
Contract |
5,863.5 | 6,247.1 | 6,473.2 | 7,745.0 | 8,115.1 | 38.4 | ||||||||||||||||||
Pay TV |
8.5 | 230.9 | 282.3 | 346.9 | 426.1 | n.m. | ||||||||||||||||||
Wholesale Accesses |
37.4 | 37.4 | 34.1 | 35.0 | 47.1 | 25.8 | ||||||||||||||||||
Total Accesses |
46,644.7 | 49,000.5 | 49,940.5 | 56,133.3 | 58,212.4 | 24.8 | ||||||||||||||||||
ARGENTINA |
||||||||||||||||||||||||
Final Clients Accesses |
18,812.2 | 19,462.1 | 19,587.3 | 19,999.2 | 20,533.4 | 9.1 | ||||||||||||||||||
Fixed telephony accesses (1) |
4,747.4 | 4,682.5 | 4,664.2 | 4,656.1 | 4,599.0 | (3.1 | ) | |||||||||||||||||
Fixed wireless |
114.3 | 104.3 | 98.1 | 90.1 | 13.2 | (88.4 | ) | |||||||||||||||||
Internet and data accesses |
1,101.3 | 1,149.9 | 1,168.3 | 1,234.6 | 1,281.6 | 16.4 | ||||||||||||||||||
Narrowband |
363.6 | 312.2 | 264.5 | 249.4 | 215.9 | (40.6 | ) | |||||||||||||||||
Broadband (2) |
719.7 | 819.3 | 885.3 | 966.4 | 1,046.2 | 45.4 | ||||||||||||||||||
Other (3) |
18.1 | 18.4 | 18.5 | 18.9 | 19.5 | 7.8 | ||||||||||||||||||
Mobile accesses |
12,963.5 | 13,629.7 | 13,754.8 | 14,108.4 | 14,652.7 | 13.0 | ||||||||||||||||||
Pre-Pay |
8,553.1 | 8,836.0 | 8,865.6 | 9,003.9 | 9,473.6 | 10.8 | ||||||||||||||||||
Contract |
4,410.4 | 4,793.7 | 4,889.2 | 5,104.6 | 5,179.0 | 17.4 | ||||||||||||||||||
Wholesale Accesses |
8.9 | 9.3 | 9.4 | 9.8 | 10.1 | 13.0 | ||||||||||||||||||
Total Accesses |
18,821.2 | 19,471.4 | 19,596.8 | 20,009.0 | 20,543.4 | 9.2 | ||||||||||||||||||
CHILE |
||||||||||||||||||||||||
Final Clients Accesses |
9,077.8 | 9,361.7 | 9,482.8 | 9,709.4 | 9,816.7 | 8.1 | ||||||||||||||||||
Fixed telephony accesses (1) |
2,172.7 | 2,172.4 | 2,140.1 | 2,148.1 | 2,134.6 | (1.8 | ) | |||||||||||||||||
Internet and data accesses |
656.0 | 686.8 | 679.1 | 709.3 | 728.7 | 11.1 | ||||||||||||||||||
Narrowband |
40.1 | 31.8 | 22.1 | 20.7 | 19.7 | (50.8 | ) | |||||||||||||||||
Broadband (2) |
606.9 | 646.0 | 648.1 | 679.8 | 700.2 | 15.4 | ||||||||||||||||||
Other (3) |
9.0 | 8.9 | 8.8 | 8.8 | 8.8 | (3.1 | ) | |||||||||||||||||
Mobile accesses |
6,051.9 | 6,282.7 | 6,432.0 | 6,611.3 | 6,702.6 | 10.8 | ||||||||||||||||||
Pre-Pay |
4,591.4 | 4,742.2 | 4,797.1 | 4,850.0 | 4,856.3 | 5.8 | ||||||||||||||||||
Contract |
1,460.5 | 1,540.5 | 1,634.9 | 1,761.3 | 1,846.3 | 26.4 | ||||||||||||||||||
Pay TV |
197.3 | 219.9 | 231.6 | 240.8 | 250.9 | 27.2 | ||||||||||||||||||
Wholesale Accesses |
17.3 | 15.4 | 12.1 | 12.4 | 12.0 | (30.4 | ) | |||||||||||||||||
Total Accesses |
9,095.1 | 9,377.2 | 9,494.9 | 9,721.8 | 9,828.8 | 8.1 | ||||||||||||||||||
| (1) | PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/6
Access x30. Company’s accesses for internal use included. Total “fixed wireless accesses
included. |
|
| (2) | Includes ADSL, optical fiber, cable modem and
broadband circuits. |
|
| (3) | Retail circuits other than
broadband. |
|
| (4) | Includes accesses of Telemig from April
2008. |
Notes:
| • | As of 31 December 2006, Group accesses have been reclassified, including “fixed wireless”
accesses under the caption of fixed telephony. These accesses were previously classified,
depending on the country, under mobile or fixed accesses. |
|
| • | As of 1 January 2008, “fixed wireless” public telephony accesses are included under the caption
of fixed telephony accesses.
|
January — September 2008 Results Telefónica 41
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
TELEFÓNICA LATINOAMÉRICA
ACCESSES BY COUNTRIES (II)
Unaudited figures (Thousands)
ACCESSES BY COUNTRIES (II)
Unaudited figures (Thousands)
| 2007 | 2008 | |||||||||||||||||||||||
| September | December | March | June | September | % Chg y-o-y | |||||||||||||||||||
PERU |
||||||||||||||||||||||||
Final Clients Accesses |
11,199.0 | 12,173.8 | 12,839.9 | 13,542.8 | 14,300.9 | 27.7 | ||||||||||||||||||
Fixed telephony accesses (1) |
2,809.7 | 2,843.4 | 2,867.7 | 2,893.1 | 2,941.5 | 4.7 | ||||||||||||||||||
Fixed wireless |
257.1 | 290.0 | 321.4 | 349.2 | 412.0 | 60.2 | ||||||||||||||||||
Internet and data accesses |
608.4 | 623.1 | 639.4 | 672.4 | 703.3 | 15.6 | ||||||||||||||||||
Narrowband |
42.4 | 40.3 | 33.9 | 34.1 | 21.5 | (49.2 | ) | |||||||||||||||||
Broadband (2) |
555.9 | 572.1 | 594.2 | 626.8 | 669.8 | 20.5 | ||||||||||||||||||
Other (3) |
10.2 | 10.7 | 11.2 | 11.5 | 11.9 | 17.2 | ||||||||||||||||||
Mobile accesses |
7,152.9 | 8,067.3 | 8,699.4 | 9,324.0 | 10,010.1 | 39.9 | ||||||||||||||||||
Pre-Pay |
6,389.7 | 7,238.1 | 7,826.1 | 8,411.1 | 9,036.7 | 41.4 | ||||||||||||||||||
Contract |
763.2 | 829.2 | 873.3 | 912.9 | 973.4 | 27.5 | ||||||||||||||||||
Pay TV |
628.0 | 640.0 | 633.4 | 653.2 | 646.0 | 2.9 | ||||||||||||||||||
Wholesale Accesses |
0.5 | 0.5 | 0.4 | 0.4 | 0.4 | (11.1 | ) | |||||||||||||||||
Total Accesses |
11,199.5 | 12,174.3 | 12,840.3 | 13,543.2 | 14,301.3 | 27.7 | ||||||||||||||||||
COLOMBIA |
||||||||||||||||||||||||
Final
Clients Accesses |
10,105.5 | 10,973.8 | 11,484.3 | 12,116.7 | 12,516.9 | 23.9 | ||||||||||||||||||
Fixed telephony accesses (1) |
2,340.3 | 2,328.5 | 2,396.7 | 2,349.9 | 2,320.4 | (0.8 | ) | |||||||||||||||||
Internet and data accesses |
167.5 | 200.3 | 240.0 | 295.7 | 357.0 | 113.1 | ||||||||||||||||||
Narrowband |
0.0 | 0.0 | 0.3 | 0.3 | 0.3 | n.m. | ||||||||||||||||||
Broadband (2) |
167.5 | 200.3 | 238.3 | 294.0 | 355.1 | 112.0 | ||||||||||||||||||
Other (3) |
0.0 | 0.0 | 1.3 | 1.5 | 1.6 | n.m. | ||||||||||||||||||
Mobile accesses |
7,551.5 | 8,372.1 | 8,754.5 | 9,358.5 | 9,702.0 | 28.5 | ||||||||||||||||||
Pre-Pay |
5,867.4 | 6,612.9 | 6,931.7 | 7,506.0 | 7,959.7 | 35.7 | ||||||||||||||||||
Contract |
1,684.1 | 1,759.2 | 1,822.8 | 1,852.5 | 1,742.2 | 3.5 | ||||||||||||||||||
Pay TV |
46.2 | 72.9 | 93.0 | 112.6 | 137.5 | 197.6 | ||||||||||||||||||
Total Accesses |
10,105.5 | 10,973.8 | 11,484.3 | 12,116.7 | 12,516.9 | 23.9 | ||||||||||||||||||
MEXICO |
||||||||||||||||||||||||
Mobile accesses |
11,069.5 | 12,534.1 | 13,258.6 | 14,114.2 | 14,662.0 | 32.5 | ||||||||||||||||||
Pre-Pay |
10,446.9 | 11,833.7 | 12,492.6 | 13,288.9 | 13,779.2 | 31.9 | ||||||||||||||||||
Contract |
622.6 | 700.4 | 766.0 | 825.4 | 882.8 | 41.8 | ||||||||||||||||||
Fixed wireless |
3.2 | 3.6 | 47.7 | 62.5 | 99.4 | n.m. | ||||||||||||||||||
Total Accesses |
11,072.7 | 12,537.6 | 13,306.3 | 14,176.7 | 14,761.3 | 33.3 | ||||||||||||||||||
VENEZUELA |
||||||||||||||||||||||||
Mobile accesses |
8,902.5 | 9,434.0 | 9,311.1 | 9,841.2 | 10,280.2 | 15.5 | ||||||||||||||||||
Pre-Pay |
8,392.2 | 8,900.3 | 8,771.8 | 9,238.5 | 9,659.7 | 15.1 | ||||||||||||||||||
Contract |
510.3 | 533.7 | 539.3 | 602.7 | 620.5 | 21.6 | ||||||||||||||||||
Fixed wireless |
937.5 | 995.9 | 1,043.6 | 1,242.5 | 1,281.8 | 36.7 | ||||||||||||||||||
Total Accesses |
9,840.0 | 10,429.9 | 10,354.7 | 11,083.8 | 11,562.0 | 17.5 | ||||||||||||||||||
| (1) | PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/6
Access x30. Company’s accesses for internal use included. Total “fixed wireless” accesses
included. |
|
| (2) | Includes ADSL, optical fiber, cable modem and
broadband circuits. |
|
| (3) | Retail circuits other than
broadband. |
|
Notes: |
||
| • | As of 31 December 2006, Group accesses have been reclassified, including “fixed wireless”
accesses under the caption of fixed telephony. These accesses were previously classified,
depending on the country, under mobile or fixed accesses. |
|
| • | As of 1 January 2008, “fixed wireless” public telephony accesses are included under the caption
of fixed telephony accesses. |
January — September 2008 Results Telefónica 42
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
TELEFÓNICA LATINOAMÉRICA
ACCESSES BY COUNTRIES (III)
Unaudited figures (Thousands)
ACCESSES BY COUNTRIES (III)
Unaudited figures (Thousands)
| 2007 | 2008 | |||||||||||||||||||||||
| September | December | March | June | September | % Chg y-o-y | |||||||||||||||||||
CENTRAL AMERICA (1) |
||||||||||||||||||||||||
Fixed telephony accesses (2) |
380.1 | 393.4 | 419.3 | 429.2 | 435.2 | 14.5 | ||||||||||||||||||
Fixed Wireless |
259.8 | 268.2 | 272.4 | 281.4 | 276.7 | 6.5 | ||||||||||||||||||
Internet and data accesses |
22.2 | 22.0 | 20.9 | 20.1 | 19.3 | (13.1 | ) | |||||||||||||||||
Broadband (3) |
20.0 | 19.8 | 19.1 | 18.2 | 17.3 | (13.4 | ) | |||||||||||||||||
Other (4) |
2.2 | 2.2 | 1.9 | 1.8 | 1.9 | (10.0 | ) | |||||||||||||||||
Mobile accesses |
4,617.5 | 5,009.9 | 5,256.6 | 5,530.2 | 5,665.8 | 22.7 | ||||||||||||||||||
Pre-Pay |
4,240.8 | 4,628.6 | 4,881.7 | 5,152.1 | 5,281.6 | 24.5 | ||||||||||||||||||
Contract |
376.7 | 381.2 | 375.0 | 378.1 | 384.1 | 2.0 | ||||||||||||||||||
Total Accesses |
5,019.8 | 5,425.3 | 5,696.9 | 5,979.5 | 6,120.2 | 21.9 | ||||||||||||||||||
ECUADOR |
||||||||||||||||||||||||
Mobile accesses |
2,651.7 | 2,581.1 | 2,675.8 | 2,862.2 | 2,957.4 | 11.5 | ||||||||||||||||||
Pre-Pay |
2,272.1 | 2,177.5 | 2,251.9 | 2,406.4 | 2,491.5 | 9.7 | ||||||||||||||||||
Contract |
379.6 | 403.6 | 423.9 | 455.8 | 465.9 | 22.7 | ||||||||||||||||||
Fixed Wireless |
1.5 | 1.3 | 83.6 | 82.7 | 85.5 | n.m. | ||||||||||||||||||
Total Accesses |
2,653.2 | 2,582.4 | 2,759.4 | 2,944.9 | 3,042.9 | 14.7 | ||||||||||||||||||
URUGUAY |
||||||||||||||||||||||||
Mobile accesses |
1,047.0 | 1,147.8 | 1,210.8 | 1,274.7 | 1,360.6 | 30.0 | ||||||||||||||||||
Pre-Pay |
907.0 | 957.0 | 965.8 | 981.3 | 1,013.8 | 11.8 | ||||||||||||||||||
Contract |
140.0 | 190.8 | 245.0 | 293.5 | 346.7 | 147.6 | ||||||||||||||||||
Total Accesses |
1,047.0 | 1,147.8 | 1,210.8 | 1,274.7 | 1,360.6 | 30.0 | ||||||||||||||||||
| (1) | Includes Guatemala, Panamá, El Salvador and Nicaragua. |
|
| (2) | PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/6
Access x30. Company’s accesses for internal use included. Total “fixed wireless” accesses
included. |
|
| (3) | Includes ADSL, optical fiber and broadband
circuits. |
|
| (4) | Retail circuits other than
broadband. |
|
Notes: |
||
| • | As of 31 December 2006, Group accesses have been reclassified, including “fixed wireless”
accesses under the caption of fixed telephony. These accesses were previously classified,
depending on the country, under mobile or fixed accesses. |
|
| • | As of 1 January 2008, “fixed wireless” public telephony accesses are included under the caption
of fixed telephony accesses. |
January — September 2008 Results Telefónica 43
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
TELEFÓNICA LATINOAMERICA
OPERATING DATA BY COUNTRY
Unaudited figures
OPERATING DATA BY COUNTRY
Unaudited figures
| 2007 | 2008 | |||||||||||||||||||||||
| Q3 | Q4 | Q1 | Q2 | Q3 | % Chg y-o-y Local Cur | |||||||||||||||||||
BRAZIL (1) |
||||||||||||||||||||||||
MoU (minutes) |
77 | 80 | 75 | 94 | 89 | 14.9 | ||||||||||||||||||
ARPU (EUR) |
12.3 | 12.3 | 11.7 | 10.9 | 12.0 | (7.8 | ) | |||||||||||||||||
ARGENTINA |
||||||||||||||||||||||||
MoU (minutes) |
65 | 67 | 64 | 78 | 79 | 22.5 | ||||||||||||||||||
ARPU (EUR) |
8.4 | 8.5 | 7.9 | 8.1 | 8.9 | 14.3 | ||||||||||||||||||
CHILE |
||||||||||||||||||||||||
MoU (minutes) |
106 | 119 | 120 | 122 | 122 | 15.3 | ||||||||||||||||||
ARPU (EUR) |
11.9 | 13.0 | 13.5 | 12.2 | 11.7 | 7.5 | ||||||||||||||||||
PERU |
||||||||||||||||||||||||
MoU (minutes) |
85 | 94 | 97 | 88 | 88 | 3.5 | ||||||||||||||||||
ARPU (EUR) |
7.2 | 6.4 | 6.4 | 5.8 | 5.9 | (18.6 | ) | |||||||||||||||||
COLOMBIA |
||||||||||||||||||||||||
MoU (minutes) |
117 | 129 | 125 | 120 | 123 | 5.4 | ||||||||||||||||||
ARPU (EUR) |
9.2 | 8.9 | 7.3 | 7.3 | 6.6 | (26.9 | ) | |||||||||||||||||
MÉXICO |
||||||||||||||||||||||||
MoU (minutes) |
145 | 164 | 142 | 149 | 126 | (13.0 | ) | |||||||||||||||||
ARPU (EUR) |
9.3 | 9.2 | 8.6 | 8.2 | 8.2 | (9.7 | ) | |||||||||||||||||
VENEZUELA |
||||||||||||||||||||||||
MoU (minutes) |
133 | 136 | 125 | 132 | 128 | (3.9 | ) | |||||||||||||||||
ARPU (EUR) |
16.3 | 16.5 | 15.1 | 15.3 | 16.7 | 13.9 | ||||||||||||||||||
CENTRAL AMERICA |
||||||||||||||||||||||||
MoU (minutes) |
140 | 139 | 127 | 129 | 118 | (15.9 | ) | |||||||||||||||||
ARPU (EUR) |
9.5 | 8.6 | 7.8 | 7.0 | 7.1 | (18.2 | ) | |||||||||||||||||
ECUADOR |
||||||||||||||||||||||||
MoU (minutes) |
49 | 58 | 67 | 80 | 88 | 78.9 | ||||||||||||||||||
ARPU (EUR) |
6.7 | 6.2 | 6.3 | 6.3 | 6.7 | 11.8 | ||||||||||||||||||
URUGUAY |
||||||||||||||||||||||||
MoU (minutes) |
51 | 70 | 82 | 101 | 130 | 152.9 | ||||||||||||||||||
ARPU (EUR) |
7.8 | 8.7 | 8.3 | 8.1 | 8.5 | (0.5 | ) | |||||||||||||||||
| (1) | Includes Telemig from April 2008. |
Note: MoU and ARPU calculated as a monthly quarterly average.
January — September 2008 Results Telefónica 44
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
TELEFÓNICA LATINOAMERICA
OPERATING DATA BY COUNTRY
Unaudited figures
OPERATING DATA BY COUNTRY
Unaudited figures
| January - September | ||||||||||||
| 2008 | 2007 | % Chg Local Cur | ||||||||||
BRAZIL (1) |
||||||||||||
MoU (minutes) |
87 | 76 | 13.3 | |||||||||
ARPU (EUR) |
11.6 | 11.7 | (4.9 | ) | ||||||||
ARGENTINA |
||||||||||||
MoU (minutes) |
74 | 62 | 20.3 | |||||||||
ARPU (EUR) |
8.3 | 8.6 | 9.8 | |||||||||
CHILE |
||||||||||||
MoU (minutes) |
122 | 101 | 19.9 | |||||||||
ARPU (EUR) |
12.5 | 11.7 | 10.3 | |||||||||
PERU |
||||||||||||
MoU (minutes) |
90 | 87 | 3.3 | |||||||||
ARPU (EUR) |
6.0 | 7.6 | (19.4 | ) | ||||||||
COLOMBIA |
||||||||||||
MoU (minutes) |
123 | 104 | 18.2 | |||||||||
ARPU (EUR) |
7.1 | 8.8 | (19.4 | ) | ||||||||
MÉXICO |
||||||||||||
MoU (minutes) |
139 | 137 | 1.7 | |||||||||
ARPU (EUR) |
8.3 | 9.4 | (3.6 | ) | ||||||||
VENEZUELA |
||||||||||||
MoU (minutes) |
128 | 130 | (1.5 | ) | ||||||||
ARPU (EUR) |
15.7 | 16.4 | 8.6 | |||||||||
CENTRAL AMERICA |
||||||||||||
MoU (minutes) |
124 | 145 | (14.5 | ) | ||||||||
ARPU (EUR) |
7.3 | 10.2 | (18.7 | ) | ||||||||
ECUADOR |
||||||||||||
MoU (minutes) |
79 | 45 | 77.6 | |||||||||
ARPU (EUR) |
6.4 | 6.7 | 8.4 | |||||||||
URUGUAY |
||||||||||||
MoU (minutes) |
105 | 50 | 110.6 | |||||||||
ARPU (EUR) |
8.3 | 7.8 | 0.6 | |||||||||
| (1) | Includes Telemig from April 2008. |
Note: MoU and ARPU calculated as a monthly January-September period average.
January — September 2008 Results Telefónica 45
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
TELEFÓNICA LATINOAMÉRICA
SELECTED FINANCIAL DATA (I)
Unaudited figures (Euros in millions)
SELECTED FINANCIAL DATA (I)
Unaudited figures (Euros in millions)
| January - September | July - September | |||||||||||||||||||||||||||||||
| 2008 | 2007 | % Chg | % Var Local Cur | 2008 | 2007 | % Chg | % Var Local Cur | |||||||||||||||||||||||||
BRAZIL |
||||||||||||||||||||||||||||||||
Revenues |
6,565 | 5,637 | 16.5 | 11.0 | 2,360 | 1,946 | 21.3 | 15.3 | ||||||||||||||||||||||||
OIBDA |
2,533 | 2,248 | 12.7 | 7.4 | 925 | 742 | 24.6 | 18.7 | ||||||||||||||||||||||||
OIBDA margin |
38.6 | % | 39.9 | % | (1.3 p.p. | ) | 39.2 | % | 38.1 | % | 1.1 p.p. | |||||||||||||||||||||
CapEx |
1,106 | 656 | 68.6 | 60.7 | 402 | 251 | 60.1 | 51.7 | ||||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
1,426 | 1,592 | (10.4 | ) | (14.6 | ) | 523 | 491 | 6.5 | 1.7 | ||||||||||||||||||||||
Vivo (1) |
||||||||||||||||||||||||||||||||
Revenues |
2,202 | 1,740 | 26.6 | 20.6 | 823 | 638 | 29.0 | 22.5 | ||||||||||||||||||||||||
OIBDA |
616 | 438 | 40.5 | 33.9 | 260 | 160 | 62.6 | 55.1 | ||||||||||||||||||||||||
OIBDA margin |
28.0 | % | 25.2 | % | 2.8 p.p. | 31.5 | % | 25.0 | % | 6.5 p.p. | ||||||||||||||||||||||
CapEx |
528 | 175 | n.m. | n.m. | 169 | 69 | 143.7 | 129.7 | ||||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
87 | 264 | (66.9 | ) | (68.4 | ) | 91 | 90 | 0.4 | (2.2 | ) | |||||||||||||||||||||
Telesp |
||||||||||||||||||||||||||||||||
Revenues |
4,680 | 4,154 | 12.6 | 7.4 | 1,657 | 1,397 | 18.7 | 12.8 | ||||||||||||||||||||||||
OIBDA |
1,898 | 1,810 | 4.9 | (0.0 | ) | 666 | 583 | 14.3 | 8.8 | |||||||||||||||||||||||
OIBDA margin |
40.6 | % | 43.6 | % | (3.0 p.p. | ) | 40.2 | % | 41.7 | % | (1.5 p.p. | ) | ||||||||||||||||||||
CapEx |
578 | 482 | 20.0 | 14.4 | 233 | 182 | 28.2 | 22.0 | ||||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
1,320 | 1,328 | (0.6 | ) | (5.3 | ) | 433 | 401 | 8.0 | 2.7 | ||||||||||||||||||||||
ARGENTINA |
||||||||||||||||||||||||||||||||
Revenues |
1,802 | 1,678 | 7.4 | 21.5 | 660 | 565 | 16.8 | 24.6 | ||||||||||||||||||||||||
OIBDA |
627 | 618 | 1.6 | 14.9 | 241 | 215 | 11.9 | 19.8 | ||||||||||||||||||||||||
OIBDA margin (2) |
33.7 | % | 35.4 | % | (1.7 p.p. | ) | 35.2 | % | 36.6 | % | (1.4 p.p. | ) | ||||||||||||||||||||
CapEx |
187 | 179 | 4.4 | 18.1 | 62 | 57 | 8.9 | 15.3 | ||||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
440 | 438 | 0.4 | 13.6 | 179 | 158 | 13.0 | 21.5 | ||||||||||||||||||||||||
T. Moviles Argentina |
||||||||||||||||||||||||||||||||
Revenues |
1,128 | 1,000 | 12.8 | 27.6 | 417 | 338 | 23.4 | 31.7 | ||||||||||||||||||||||||
OIBDA |
333 | 289 | 15.1 | 30.2 | 135 | 114 | 19.0 | 28.4 | ||||||||||||||||||||||||
OIBDA margin |
29.5 | % | 28.9 | % | 0.6 p.p. | 32.4 | % | 33.6 | % | (1.2 p.p. | ) | |||||||||||||||||||||
CapEx |
55 | 72 | (23.9 | ) | (13.9 | ) | 18 | 21 | (13.3 | ) | (8.4 | ) | ||||||||||||||||||||
OpCF (OIBDA-CapEx) |
278 | 218 | 27.9 | 44.8 | 117 | 92 | 26.4 | 36.9 | ||||||||||||||||||||||||
Telefónica de Argentina |
||||||||||||||||||||||||||||||||
Revenues |
736 | 731 | 0.6 | 13.8 | 263 | 236 | 11.8 | 18.9 | ||||||||||||||||||||||||
OIBDA |
294 | 328 | (10.4 | ) | 1.4 | 106 | 102 | 3.9 | 10.3 | |||||||||||||||||||||||
OIBDA margin (2) |
34.7 | % | 38.2 | % | (3.5 p.p. | ) | 34.9 | % | 36.6 | % | (1.7 p.p. | ) | ||||||||||||||||||||
CapEx |
133 | 108 | 23.2 | 39.4 | 44 | 36 | 22.1 | 29.5 | ||||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
162 | 221 | (26.8 | ) | (17.2 | ) | 62 | 66 | (6.0 | ) | (0.1 | ) | ||||||||||||||||||||
CHILE |
||||||||||||||||||||||||||||||||
Revenues |
1,463 | 1,319 | 10.9 | 14.4 | 474 | 456 | 4.0 | 13.1 | ||||||||||||||||||||||||
OIBDA |
539 | 514 | 4.9 | 8.3 | 171 | 185 | (7.8 | ) | 0.6 | |||||||||||||||||||||||
OIBDA margin |
36.8 | % | 38.9 | % | (2.1 p.p. | ) | 36.0 | % | 40.6 | % | (4.6 p.p. | ) | ||||||||||||||||||||
CapEx |
290 | 285 | 1.7 | 5.0 | 102 | 92 | 10.6 | 19.5 | ||||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
249 | 229 | 8.9 | 12.4 | 69 | 93 | (25.9 | ) | (18.2 | ) | ||||||||||||||||||||||
T. Móviles Chile |
||||||||||||||||||||||||||||||||
Revenues |
787 | 662 | 19.0 | 22.8 | 256 | 231 | 10.4 | 20.1 | ||||||||||||||||||||||||
OIBDA |
288 | 240 | 20.0 | 23.9 | 92 | 91 | 0.7 | 9.7 | ||||||||||||||||||||||||
OIBDA margin |
36.6 | % | 36.3 | % | 0.3 p.p. | 36.0 | % | 39.5 | % | (3.5 p.p. | ) | |||||||||||||||||||||
CapEx |
159 | 148 | 7.1 | 10.5 | 52 | 37 | 39.4 | 51.3 | ||||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
129 | 92 | 41.0 | 45.5 | 40 | 54 | (25.7 | ) | (18.7 | ) | ||||||||||||||||||||||
Telefónica Chile |
||||||||||||||||||||||||||||||||
Revenues |
741 | 720 | 3.0 | 6.3 | 240 | 246 | (2.3 | ) | 6.3 | |||||||||||||||||||||||
OIBDA |
251 | 275 | (8.6 | ) | (5.7 | ) | 79 | 94 | (16.2 | ) | (8.6 | ) | ||||||||||||||||||||
OIBDA margin |
33.9 | % | 38.2 | % | (4.3 p.p. | ) | 32.8 | % | 38.3 | % | (5.4 p.p. | ) | ||||||||||||||||||||
CapEx |
131 | 137 | (4.2 | ) | (1.1 | ) | 50 | 55 | (8.8 | ) | (1.9 | ) | ||||||||||||||||||||
OpCF (OIBDA-CapEx) |
120 | 138 | (13.0 | ) | (10.2 | ) | 29 | 39 | (26.7 | ) | (18.0 | ) | ||||||||||||||||||||
Note: OIBDA is presented before management and brand fees.
| (1) | 50% of Vivo. Includes Telemig from April 2008. |
|
| (2) | Margin over revenues includes fixed to mobile interconnection. |
January — September 2008 Results Telefónica 46
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
TELEFÓNICA LATINOAMÉRICA
SELECTED FINANCIAL DATA (II)
Unaudited figures (Euros in millions)
SELECTED FINANCIAL DATA (II)
Unaudited figures (Euros in millions)
| January - September | July - September | |||||||||||||||||||||||||||||||
| 2008 | 2007 | % Chg | % Var Local Cur | 2008 | 2007 | % Chg | % Var Local Cur | |||||||||||||||||||||||||
PERU |
||||||||||||||||||||||||||||||||
Revenues |
1,168 | 1,126 | 3.8 | 6.2 | 412 | 383 | 7.6 | 8.3 | ||||||||||||||||||||||||
OIBDA |
432 | 426 | 1.5 | 3.8 | 156 | 141 | 10.6 | 11.2 | ||||||||||||||||||||||||
OIBDA margin |
37.0 | % | 37.9 | % | (0.9 p.p. | ) | 37.9 | % | 36.8 | % | 1.0 p.p. | |||||||||||||||||||||
CapEx |
129 | 156 | (17.5 | ) | (15.7 | ) | 63 | 63 | (1.2 | ) | (0.2 | ) | ||||||||||||||||||||
OpCF (OIBDA-CapEx) |
304 | 270 | 12.4 | 15.0 | 93 | 78 | 20.3 | 20.5 | ||||||||||||||||||||||||
T. Móviles Perú |
||||||||||||||||||||||||||||||||
Revenues |
544 | 430 | 26.7 | 29.5 | 203 | 153 | 32.2 | 33.2 | ||||||||||||||||||||||||
OIBDA |
177 | 108 | 63.8 | 67.5 | 71 | 39 | 81.9 | 83.3 | ||||||||||||||||||||||||
OIBDA margin |
32.5 | % | 25.1 | % | 7.4 p.p. | 35.3 | % | 25.6 | % | 9.6 p.p. | ||||||||||||||||||||||
CapEx |
59 | 81 | (27.2 | ) | (25.5 | ) | 27 | 31 | (12.7 | ) | (11.9 | ) | ||||||||||||||||||||
OpCF (OIBDA-CapEx) |
118 | 27 | n.m. | n.m. | 44 | 8 | n.m. | n.m. | ||||||||||||||||||||||||
Telefónica del Perú (1) |
||||||||||||||||||||||||||||||||
Revenues |
711 | 786 | (9.5 | ) | (7.4 | ) | 240 | 260 | (7.6 | ) | (7.1 | ) | ||||||||||||||||||||
OIBDA |
255 | 318 | (19.8 | ) | (18.0 | ) | 84 | 102 | (17.5 | ) | (17.1 | ) | ||||||||||||||||||||
OIBDA margin |
35.9 | % | 40.5 | % | (4.6 p.p. | ) | 35.2 | % | 39.4 | % | (4.2 p.p. | ) | ||||||||||||||||||||
CapEx |
70 | 75 | (7.2 | ) | (5.1 | ) | 35 | 32 | 10.1 | 11.3 | ||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
185 | 243 | (23.7 | ) | (22.0 | ) | 49 | 70 | (30.0 | ) | (29.9 | ) | ||||||||||||||||||||
COLOMBIA |
||||||||||||||||||||||||||||||||
Revenues |
1,131 | 1,138 | (0.6 | ) | (0.0 | ) | 372 | 392 | (5.1 | ) | (3.0 | ) | ||||||||||||||||||||
OIBDA |
380 | 342 | 11.2 | 11.8 | 142 | 122 | 16.3 | 18.7 | ||||||||||||||||||||||||
OIBDA margin |
33.6 | % | 30.0 | % | 3.6 p.p. | 38.1 | % | 31.1 | % | 7.0 p.p. | ||||||||||||||||||||||
CapEx |
252 | 147 | 71.6 | 72.6 | 105 | 80 | 32.0 | 34.1 | ||||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
128 | 195 | (34.4 | ) | (34.0 | ) | 37 | 42 | (13.2 | ) | (10.6 | ) | ||||||||||||||||||||
T. Móviles Colombia |
||||||||||||||||||||||||||||||||
Revenues |
623 | 641 | (2.9 | ) | (2.4 | ) | 200 | 224 | (10.8 | ) | (8.7 | ) | ||||||||||||||||||||
OIBDA |
149 | 108 | 38.0 | 38.8 | 57 | 50 | 13.2 | 15.2 | ||||||||||||||||||||||||
OIBDA margin |
24.0 | % | 16.9 | % | 7.1 p.p. | 28.4 | % | 22.4 | % | 6.0 p.p. | ||||||||||||||||||||||
CapEx |
130 | 63 | 107.7 | 108.9 | 64 | 37 | 73.2 | 75.6 | ||||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
19 | 45 | (58.5 | ) | (58.3 | ) | (7 | ) | 13 | c.s. | c.s. | |||||||||||||||||||||
Telefónica Telecom |
||||||||||||||||||||||||||||||||
Revenues |
533 | 527 | 1.2 | 1.8 | 180 | 179 | 0.7 | 3.0 | ||||||||||||||||||||||||
OIBDA |
231 | 233 | (1.0 | ) | (0.5 | ) | 85 | 71 | 19.0 | 21.6 | ||||||||||||||||||||||
OIBDA margin |
43.3 | % | 44.3 | % | (1.0 p.p. | ) | 47.2 | % | 40.0 | % | 7.3 p.p. | |||||||||||||||||||||
CapEx |
122 | 84 | 44.7 | 45.6 | 41 | 43 | (3.9 | ) | (2.0 | ) | ||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
109 | 149 | (26.9 | ) | (26.5 | ) | 44 | 29 | 52.7 | 56.7 | ||||||||||||||||||||||
MEXICO (T. Móviles Mexico) |
||||||||||||||||||||||||||||||||
Revenues |
1,204 | 1,011 | 19.2 | 29.5 | 421 | 358 | 17.6 | 21.3 | ||||||||||||||||||||||||
OIBDA |
283 | 113 | 149.3 | 170.8 | 107 | 52 | 106.3 | 115.2 | ||||||||||||||||||||||||
OIBDA margin |
23.5 | % | 11.2 | % | 12.2 p.p. | 25.5 | % | 14.5 | % | 11.0 p.p. | ||||||||||||||||||||||
CapEx |
157 | 154 | 2.0 | 10.8 | 19 | 89 | (78.4 | ) | (79.5 | ) | ||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
126 | (40 | ) | c.s. | c.s. | 88 | (37 | ) | c.s. | c.s. | ||||||||||||||||||||||
VENEZUELA (T. Móviles
Venezuela) |
||||||||||||||||||||||||||||||||
Revenues |
1,871 | 1,716 | 9.0 | 23.3 | 685 | 593 | 15.5 | 26.5 | ||||||||||||||||||||||||
OIBDA |
866 | 756 | 14.6 | 29.6 | 333 | 286 | 16.4 | 28.0 | ||||||||||||||||||||||||
OIBDA margin |
46.3 | % | 44.0 | % | 2.3 p.p. | 48.6 | % | 48.3 | % | 0.4 p.p. | ||||||||||||||||||||||
CapEx |
143 | 154 | (6.8 | ) | 5.3 | 83 | 60 | 38.2 | 52.9 | |||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
723 | 602 | 20.1 | 35.8 | 251 | 226 | 10.6 | 21.4 | ||||||||||||||||||||||||
CENTRAL AMERICA (2) |
||||||||||||||||||||||||||||||||
Revenues |
411 | 439 | (6.4 | ) | n.c. | 138 | 142 | (2.8 | ) | n.c. | ||||||||||||||||||||||
OIBDA |
149 | 171 | (13.3 | ) | n.c. | 53 | 73 | (26.7 | ) | n.c. | ||||||||||||||||||||||
OIBDA margin |
36.2 | % | 39.1 | % | (2.9 p.p. | ) | 38.6 | % | 51.3 | % | (12.6 p.p. | ) | ||||||||||||||||||||
CapEx |
54 | 63 | (14.7 | ) | n.c. | 29 | 25 | 12.8 | n.c. | |||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
95 | 108 | (12.5 | ) | n.c. | 25 | 47 | (47.9 | ) | n.c. | ||||||||||||||||||||||
ECUADOR (T. Móviles Ecuador) |
||||||||||||||||||||||||||||||||
Revenues |
225 | 211 | 6.6 | 20.6 | 79 | 73 | 8.1 | 18.5 | ||||||||||||||||||||||||
OIBDA |
61 | 52 | 18.0 | 33.5 | 25 | 18 | 37.8 | 51.5 | ||||||||||||||||||||||||
OIBDA margin |
27.0 | % | 24.4 | % | 2.6 p.p. | 31.4 | % | 24.6 | % | 6.8 p.p. | ||||||||||||||||||||||
CapEx |
34 | 28 | 23.0 | 39.1 | 19 | 13 | 47.3 | 63.7 | ||||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
27 | 24 | 12.2 | 26.9 | 6 | 5 | 15.8 | 24.0 | ||||||||||||||||||||||||
Note: OIBDA is presented before management and brand fees.
| (1) | Telefónica del Perú includes Cable Mágico. |
|
| (2) | Includes Guatemala, Panamá, El Salvador and Nicaragua. |
January — September 2008 Results Telefónica 47
Table of Contents
RESULTS
BY REGIONAL BUSINESS UNITS
Telefónica Latinoamérica
TELEFÓNICA LATINOAMÉRICA
SELECTED FINANCIAL DATA (III)
Unaudited figures (Euros in millions)
SELECTED FINANCIAL DATA (III)
Unaudited figures (Euros in millions)
| January - September | July - September | |||||||||||||||||||||||||||||||
| 2008 | 2007 | % Chg | % Var Local Cur | 2008 | 2007 | % Chg | % Var Local Cur | |||||||||||||||||||||||||
URUGUAY (T. Móviles Uruguay) |
||||||||||||||||||||||||||||||||
Revenues |
107 | 72 | 48.0 | 40.4 | 39 | 26 | 53.5 | 40.1 | ||||||||||||||||||||||||
OIBDA |
30 | 17 | 75.1 | 66.1 | 11 | 6 | 73.9 | 58.4 | ||||||||||||||||||||||||
OIBDA margin |
28.3 | % | 23.9 | % | 4.4 p.p. | 27.2 | % | 24.0 | % | 3.2 p.p. | ||||||||||||||||||||||
CapEx |
13 | 8 | 53.9 | 45.9 | 5 | 4 | 4.7 | (4.1 | ) | |||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
18 | 9 | 94.4 | 84.3 | 6 | 2 | 260.8 | 225.7 | ||||||||||||||||||||||||
TIWS |
||||||||||||||||||||||||||||||||
Revenues |
235 | 202 | 16.5 | 22.6 | 80 | 69 | 16.4 | 20.8 | ||||||||||||||||||||||||
OIBDA |
75 | 70 | 7.1 | 13.3 | 27 | 25 | 8.8 | 13.4 | ||||||||||||||||||||||||
OIBDA margin |
31.8 | % | 34.6 | % | (2.8 p.p. | ) | 33.4 | % | 35.7 | % | (2.3 p.p. | ) | ||||||||||||||||||||
CapEx |
26 | 30 | (14.8 | ) | (6.6 | ) | 13 | 10 | 29.2 | 45.0 | ||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
49 | 39 | 24.1 | 28.7 | 14 | 15 | (5.0 | ) | (8.1 | ) | ||||||||||||||||||||||
Note: OIBDA is presented before management and brand fees.
January — September 2008 Results Telefónica 48
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Europe
Telefonica Europe continued to perform well in the third quarter of 2008, adding 0.8 million mobile
customers (+1.1% year-on-year) and 2.2 million in the first nine months (+8.3% year-on-year). As a
result, Telefonica Europe grew its total mobile customer base by 3.2 million compared to September
2007 (+8.6% year-on-year), driven by a very strong performance in the contract segment (+14.5%
year-on-year), including record quarters for both UK and Ireland. At the end of September 2008,
Telefonica Europe’s total customer base reached 44.9 million (+9.9% year-on-year).
Revenues for the third quarter were down 0.6% year-on-year, while for the first nine months they
showed a year-on-year decline of 0.8% to reach 10,691 million euros. Excluding the impact of
foreign exchange rates and the exit of Airwave in April 2007, revenue showed a year-on-year
increase of 5.9% for the first nine months, on the back of a strong operational performance,
particularly on mobile contract.
Operating income before depreciation and amortization (OIBDA) in the third quarter of 2008 recorded
a decline of 1.1% year-on-year. For the first nine months reported OIBDA totalled 3,072 million
euros, a year-on-year decline of 26.0%, reflecting the proceeds from the disposal of Airwave in the
second quarter last year (+1,296 million euros), and the weaker sterling/euro exchange rate. On a
like for like basis1, OIBDA would have grown by 3.4% year-on-year for the first nine
months, with growth in revenues partly offset by higher commercial activity in mobile and DSL as
compared with last year.
OIBDA margin was 28.2% in the third quarter, while for the first nine months was 28.7%, 0.6
percentage points lower than the same period last year on a like for like basis1 despite
the higher mobile net adds recorded in 2008.
CapEx for the first nine months was 1,380 million euros, a year-on-year decline of 4.9%, mainly as
a result of the weaker sterling/euro exchange rate. Operating Cash Flow (OIBDA-CapEx) for the first
nine months totalled 1,693 million euros, an increase of 5.2% year-on-year on a like for
like1 basis.
TELEFONICA O2 UK
Telefonica O2 UK recorded its best ever third quarter with very strong net mobile customer
additions of 401,778 (3.5 times the third quarter of 2007), taking the total mobile base to 19.1
million (excluding Tesco Mobile) representing growth of 6.6% year-on-year. Net mobile adds in the
first nine months reached 697,501 (2.6 times higher year on year).
A total of 277,593 net contract customers were added in the quarter, a record high, which was 74.4%
above the third quarter of 2007, driven by a strong performance across all segments, as well as
market leading churn levels. After adding 621,574 contract customers in the first nine months (2.0
times higher than the same period last year), at the end of September contract customers made up
38.9% of the total base (36.5% in September 2007), reflecting the focus on higher value customers
and prepay to contract migration, as well as the strength of propositions on contract. A new
regional sales structure also helped to drive strong performance in the small business segment.
The number of prepay customers grew by 124,185 during the quarter (compared to a decline of 44,298
in the third quarter 2007) to reach a base of 11.6 million, driven by propositions such as
“Unlimited” and newly launched “4 Free SIMs”, each with 500 free UK texts a month when the customer
tops up 15 pounds a month.
| 1 | Assuming constant exchange rates and excluding the
consolidation of Airwave in the first quarter of 2007. Capital gain from the
sale of Airwave is also excluded, as well as gains related to the Real Estate
sale in the Czech Republic, restructuring and similar charges and the result of
the application of provisions made in respect of potential contingencies
deriving from the past disposal of shareholdings, once these risks had
dissipated or had not materialized. |
January — September 2008 Results Telefónica 49
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Europe
Churn continued to improve, with contract churn falling to 1.3% in the quarter from 1.7% in the
same period last year and 1.4% in the previous quarter, a record low reflecting market leading
customer satisfaction (CSI) scores, strength of propositions, increased retention activity and
total upgrades, which rose by over 17% year-on-year to September. Blended churn was 2.5% in the
third quarter, from 3.0% in the third quarter of 2007, and 2.6% in the first nine months of the
year (0.2 p.p. down year-on-year).
MoU growth in the quarter remained robust at 8.1% year-on-year, reaching 205 minutes in the nine
months to September (+9.5% year-on-year), stimulated by customer propositions such as “Unlimited”
offering free on net calls to prepay customers subject to a minimum monthly top-up, and better
value tariffs such as Simplicity and unlimited on net bolt-ons for new and existing contract
customers.
Telefonica O2 UK’s total ARPU in the third quarter was flat year on year in local currency,
reflecting the change in the mix of the customer base offsetting the declines in contract and
prepay ARPU and the continued growth in data ARPU, which in turn offsets the decline in voice ARPU.
In the first nine months of the year total ARPU reached 30.6 euros (+2.4% year-on-year growth in
local currency).
Contract ARPU was 2.5% lower year-on-year in local currency in the third quarter, as a result of an
increase in migrations from prepay, the increase in SIM-only customers and the continued optimizing
behaviour of customers when using bundles, along with lower roaming out revenues following the
introduction of new prices starting in July last year. Prepay ARPU fell by 3.9% in local currency
in the third quarter, reflecting higher value customers taking one of the new prepay tariffs
offering free allowances of minutes, texts or both depending on how much the customer tops-up each
month, along with migrations to contract.
Data ARPU was 8.9% higher year-on-year in local currency than the third quarter last year, mainly
driven by a significant increase in usage of the mobile Internet, with growth in non-SMS revenues
of 61.1% year-on-year in local currency in the third quarter. In the fourth quarter the HSDPA
network will continue to be upgraded to 3.6 Mbps across its entire footprint and to 7.2 Mbps in
hotspots. SMS growth continued, with text message volumes +44.7% year-on-year in the third quarter.
In the first nine months of 2008 data ARPU grew 10.2% year-on-year in local currency to reach 10.4
euros.
Telefonica O2 UK’s DSL broadband service registered 72,870 net additions in the quarter (+16.0% vs.
the previous quarter), and 196,381 in the first nine months, leaving the total broadband customer
base at 267,090 at the end of September. In independent market surveys during the quarter O2 was
rated as delivering the fastest broadband and having the most satisfied customers, and a new
fixed/mobile broadband bundle was recently launched.
Revenues in the third quarter grew by 8.7% year-on-year in local currency, a strong performance
relative to the market. For the first nine months, revenues were 5,297 million euros, an increase
of 10.7% year-on-year in local currency. In the current economic environment, mobile service
revenue for the quarter maintained a robust growth rate of 9.6% year-on-year in local currency,
mainly driven by continued customer growth and resilient ARPU. For the first nine months mobile
service revenue totalled 3,812 million euros, an increase of 10.8% year-on-year in local currency.
Operating income before depreciation and amortization (OIBDA) for the quarter rose 5.5%
year-on-year in local currency, reflecting the increased commercial activity, including retention
spend, which drove strong customer net additions, along with additional DSL investment. For the
first nine months OIBDA totalled 1,360 million euros, growth of 10.6% year-on-year in local
currency (+9.5% on a like for like basis2). OIBDA margin was 26.5% in the quarter,
compared to 27.3% in the same quarter in 2007 (stable quarter on quarter despite higher commercial
activity) and for the first nine months margin was 25.7% (0.3 percentage points lower on a like for
like basis2).
CapEx for the January-September period amounted to 519 million euros, with Operating Cash Flow
(OIBDA-CapEx) amounting to 841 million euros.
| 2 | Excluding restructuring
charges in 2007. |
January — September 2008 Results Telefónica 50
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Europe
TELEFONICA O2 GERMANY
In the first nine months Telefonica O2 Germany’s mobile customer base grew by 1.5 million (31.8%
higher than the same period last year), taking the total customer base to 14.0 million (+14.9% vs.
September 2007). Mobile net additions were strong in the quarter (402,405 lines) on O2 Genion and
“Inklusivepakete” tariffs and partners brands. The Tchibo Mobile brand added 26,241 customers in
the third quarter, while the Fonic brand added 163,585 customers, to end September with a base of
580,021. Partner channels, including HanseNet, Tchibo and Fonic, had a strong quarter and recorded
179,776 mobile net additions, totalling 680,807 net additions for the first nine months of the
year.
A total of 146,623 net contract customers were added in the quarter, 35.5% lower than the third
quarter of 2007 driven by disconnections of customers due to the alignment of active customer
definitions on partner brands with O2 (with no impact in revenues), and a focus on quality customer
growth. The mix of higher value customers in gross adds on O2 branded Genion and “Inklusivpakete”
tariffs increased to around 80% from approximately 60% in the first quarter. In the first nine
months 644,523 contract customers were added (+25.9% year-on-year) to take the base to 6.9 million
(+14.8% year-on-year). Contract customers made up 49.2% of the total mobile base at the end of
September, stable versus September 2007. A total of 255,782 net prepay customers were added during
the third quarter, leading to a net gain of 862,250 customers in the first nine months (+36.6%
year-on-year) to give a prepay base of 7.1 million customers at the end of September (+14.9%
year-on-year), reflecting balanced growth between prepay and contract.
Churn was higher by 0.5 percentage points year-on-year in the quarter at 2.0%, mainly driven by
partner’s contract disconnections mentioned previously, with prepay churn broadly stable at 1.9%
but improving quarter on quarter. In the first nine months of 2008 churn rate increased 0.3 p.p.
year on year to 1.8%.
MoU grew by 4.2% year-on-year in the third quarter to reach 141 minutes in the first nine months
(+8.8% year-on-year), driven mainly by flat rate promotions on prepay.
Total ARPU in the quarter was 16.8% lower than the same quarter last year, mainly as a result of
the acceleration in migrations from legacy to new tariffs like Genion and “Inklusivpakete”, which
offer significantly better value to the customer. At the end of September, 85% of expected
migrations had been completed, with the program ahead of schedule and expected to be completed
during the fourth quarter. One-off tariff promotions launched during the second quarter and lower
roaming out activity also impacted in the quarter, leaving a total ARPU in the first nine months of
17.5 euros (-15.4% year-on-year) . Contract ARPU for the nine months (-15.8% year-on-year)
reflected the dilution from lower spending partner customers (who have a low acquisition cost),
while prepay ARPU declined 11.5% year-on-year.
Data ARPU was 6.7% lower than the third quarter last year due to the shift from SMS to voice usage
with the introduction of better value tariffs and flat rate voice promotions. For the nine months
data ARPU was 4.8 euros (-5.4% year-on-year). Non-SMS revenues grew at 23.0% year-on-year in the
first nine months, driven by mobile Internet “Surfsticks” and web browsing packs, while SMS volumes
grew 12.6% year-on-year, up to September.
O2 DSL acquired 32,681 customers during the third quarter to add 123,366 customers in the first
nine months of the year, reaching a total customer base of 198,070. Telefonica Deutschland reported
1.2 million ULL lines in total at the end of September 2008 (472,910 lines in September 2007).
Revenue growth in the third quarter was 0.7% year-on-year, reflecting seasonality impacts in ULL
growth during the summer, and the ARPU trends mentioned previously impacting mobile service
revenues. For the nine months of the year, revenues totalled 2,664 million euros, growth of 2.0%
year-on-year.
January — September 2008 Results Telefónica 51
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Europe
Mobile service revenue for the third quarter was down 2.8% compared to the same period last year,
due to the ongoing optimising behaviour of customers, ongoing migration process of customers to
better value tariffs, one off promotions and lower roaming-in revenues, which were partially offset
by growth in the customer base (+14.9%). For the first nine months mobile service revenues totalled
2,139 million euros, down 1.7% year-on-year.
Revenues from wholesale fixed broadband customers increased 38.9% year-on-year in the third quarter
to reach 310 million euros in the first nine months (+42.8% year-on-year).
Operating income before depreciation and amortization (OIBDA) for the third quarter declined by
2.4% year-on-year (though increased 7.6% quarter on quarter), reflecting increased acquisition and
retention activity on contract and the change in tariff mix on gross adds, partly offset by lower
staff and administrative costs. OIBDA for the first nine months totalled 533 million euros, growth
of 16.9% year-on-year; while on a like for like basis3 OIBDA declined by 3.5%. OIBDA
margin in the third quarter was 21.0%, an increase of 1.5 percentage points over the first half
2008, and sequentially improving (19.0% in the first quarter, 19.9% in the second quarter)
resulting in a margin for the first nine months of 20.0% (21.1% in the first nine months of 2007 on
a like for like basis3).
CapEx amounted to 619 million euros for the first nine months with operating cash flow
(OIBDA-CapEx) amounting to -86 million euros, mainly as a result of the acceleration of the
wireless network rollout, which is in line with Telefonica O2 Germany’s network investment plans.
TELEFONICA O2 IRELAND
Telefonica O2 Ireland recorded net additions of 25,547 in the third quarter (1,027 in the third
quarter 2007 and 24,620 in the previous quarter) to total 66,972 net additions in the nine months.
The total customer base stood at 1.7 million at the end of September, 4.9% higher than a year ago,
with the number of mobile broadband customers stood at 68,109.
Telefonica
O2 Ireland added 37,956 contract customers in the third quarter, 81.6% higher than the
same quarter last year, and more than double the number of the previous quarter, to add 75,351
customers in the first nine months of the year (+55.1% year-on-year) driven by the success of the
new O2 Clear tariffs and the continued momentum in mobile broadband. At the end of the quarter the
contract base totalled 630,578, making up 36.8% of the total base vs. 32.7% in September 2007. The
prepay customer base declined by 12,409 customers in the quarter, a significant improvement over
the third quarter last year (-19,874) driven by cross net text and on net voice and text offers. As
a result, prepay net adds for the first nine months were -8,379 customers, with the base reaching
1.1 million at the end of September (-1.5% year-on-year).
Churn was broadly stable quarter on quarter and reached 2.8% in the first nine months of 2008 (+0.3
p.p year-on-year).
MoU fell 0.2% year-on-year in the first nine months to 246 minutes, with a decline of 1.4% in the
quarter, on the back of contract customers optimising their usage, particularly in the SME segment
and limited voice to text substitution on prepay.
Total ARPU in the third quarter was 7.1% lower than in the same period last year to reach 43.4
euros in the nine moths to September (-5.5% year-on-year). Prepay ARPU declined 5.0% year-on-year
in the third quarter and 6.7% in the first nine months of the year. Contract ARPU in the third
quarter was 15.0% lower than the same period (-11.7% to September 2008) due to the introduction of
new customer offers and promotions.
Data ARPU in the third quarter was 8.5% lower than the same period last year and 5.7% lower
compared with the first nine months of 2007, driven by customer promotions offering unlimited SMS
as part of the new better value “Experience” tariffs (SMS volumes +29.3% year-on-year up to
September) to reach 10.8 euros, while non-SMS revenues grew by 27.1% year-on-year in the first nine
months on the back of the growing mobile broadband base.
| 3 | Excluding restructuring
charges in 2007. |
January — September 2008 Results Telefónica 52
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Europe
Revenues in the third quarter improved slightly versus the first half of the year, showing a
decrease of 3.4% compared to the same period last year. For the first nine months revenues were 714
million euros, a decline of 3.5% compared to last year, due to the lower prepay base and re-fresh
of the tariff portfolio to enhance competitiveness, offsetting the growth in the contract base.
Mobile service revenue for the quarter decreased 3.4% compared to the same period last year, while
for the first nine months declined 3.0% year-on-year to reach 682 million euros.
Operating income before depreciation and amortization (OIBDA) for the third quarter decreased 13.0%
year-on-year due to lower revenues and increased investment to regain momentum in the market. For
the first nine months OIBDA was 228 million euros, 10.1% lower than the same period last year
(-11.1% like for like4). OIBDA margin in the third quarter was 31.7%, while for the year
to September it was 31.9%.
CapEx for the first nine months totalled 53 million euros and operating cash flow (OIBDA-CapEx)
amounted to 174 million euros.
TELEFONICA
O2 CZECH REPUBLIC
At the end of September, the total number of fixed and mobile accesses for Telefonica O2 Czech
Republic, including Slovakia, stood at 8.4 million, a slight decrease of 0.3% year-on-year.
Fixed telephony accesses amounted to 1.9 million at the end of September, a 11.3% decline
year-on-year. However, net losses of fixed telephony accesses improved by 34.0% year-on-year in the
January to September period, consolidating the positive quarter-on-quarter trend recorded since the
beginning of the year. This is a result of the improvement in gross adds and lower number of
disconnections driven by enhancements to fixed line propositions with broadband and bundled offers.
At the end of September, 10.0% of fixed accesses had a bundled product.
Retail Internet broadband accesses reached 552,180 (+14.2% year-on-year), with 11,808 net customers
added in the third quarter. The ADSL offer was significantly improved in the quarter, with speed
increasing by four times with no change in price, with 8 Mbps now the basic reference product. The
total number of O2 TV customers increased by 10,143 to reach 108,061 at the end of September.
The total number of mobile customers in the Czech Republic increased by 4.4% year-on-year to reach
5.2 million at the end of September, mainly driven by the increase in the contract customer base,
reaching 2.4 million at the end of September, with net additions of 60,360 in the third quarter.
The prepay customer base decreased by 59,253 customers in the third quarter to reach 2.8 million at
the end of September, following the active prepaid to contract migration strategy. Telefonica O2
Slovakia registered 412,677 customers at the end of September, with the contract customer base
increasing sequentially, reflecting a positive response to the recent launch of the “O2 Fér”
customer proposition, which is SIM only based and offers one simple tariff for both contract and
prepay.
In the Czech Republic, the churn rate reached 1.6% in the third quarter, 0.3 percentage points
higher than in the same period of last year, but stable on a nine month basis and similar to the
churn rate of the first half of the year.
MoU in the Czech Republic in the third quarter increased by 3.2% year-on-year to reach 120 minutes
in the first nine months of 2008 (+4.1% year-on-year) due to the higher contract base and the good
performance of “Neon” flat rate tariffs, introduced in May, with close to 140 thousand customers
opting for one of these tariffs at the end of September.
| 4 | Excluding restructuring
charges in 2007. |
January — September 2008 Results Telefónica 53
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Europe
Total mobile ARPU in the Czech Republic in the third quarter declined by 3.0% year-on-year in local
currency to reach 20.9 euros in the first nine months of 2008 (-0.7% year-on-year in local
currency). Contract ARPU declined 7.7% year-on-year in local currency in the third quarter (-6.7%
up to September 2008) mainly due to the dilution caused by customer migration from the prepay
segment. Prepay ARPU in the third quarter decreased by 3.8% year-on-year in local currency (-1.9%
up to September 2008). Data ARPU in the nine months increased by 2.6% year-on-year in local
currency to 4.5 euros as a result of the growth in mobile data customers.
Revenues for the Telefonica O2 Czech Republic Group in the third quarter were 5.1% higher
year-on-year in constant currency, leading to a 2.5% year-on-year increase in constant currency for
the January-September period to reach 1,930 million euros, with approx. 39 million euros registered
in the quarter from the regulatory accrual of Universal Service Obligations. The Czech mobile
business continued to be the key driver of the underlying growth of the Company, with service
revenue growing by 2.2% year-on-year in local currency in the third quarter and 4.3% in the
January-September period. Traditional fixed revenues fell by 7.6% year-on-year in local currency in the third quarter, an improved
performance compared to the January-September period (-9.5% year-on-year), with fixed internet,
broadband and TV revenues growing by 4.0% year-on-year in local currency in the third quarter and
6.8% in the January-September period.
Operating income before depreciation and amortization (OIBDA) in the third quarter increased by
1.6% year-on-year in constant currency, while for the January-September period, growth was 2.5%
year-on-year in constant currency to reach 886 million euros. Operating costs in the third quarter
increased by approx. 27 million euros as a result of the Universal Service Obligation already
mentioned. On a like for like basis5, OIBDA would have decreased by 0.5% year-on-year in
constant currency in the first nine months. OIBDA margin was 44.0% in the third quarter compared to
45.4% in the same period of last year, with margin for the January-September period of 45.9%
diluted less than 3 percentage points by the Slovak operation.
CapEx for the first nine months totalled 167 million euros and operating cash flow (OIBDA-CapEx)
amounted to 719 million euros.
| 5 | Excluding restructuring charges, Real Estate gains and others |
January — September 2008 Results Telefónica 54
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Europe
TELEFÓNICA EUROPE
ACCESSES
Unaudited figures (thousands)
ACCESSES
Unaudited figures (thousands)
| 2007 | 2008 | |||||||||||||||||||||||
| September | December | March | June | September | % Chg y-o-y | |||||||||||||||||||
Final
Clients Accesses |
40,282.9 | 41,347.0 | 41,967.5 | 42,794.3 | 43,718.9 | 8.5 | ||||||||||||||||||
Fixed telephony accesses (1) |
2,194.9 | 2,130.0 | 2,056.5 | 1,998.1 | 1,952.3 | (11.1 | ) | |||||||||||||||||
Internet and data accesses |
795.4 | 880.0 | 996.1 | 1,101.4 | 1,212.7 | 52.5 | ||||||||||||||||||
Narrowband |
215.0 | 202.4 | 188.7 | 177.0 | 170.3 | (20.8 | ) | |||||||||||||||||
Broadband |
572.8 | 670.3 | 800.2 | 917.3 | 1,035.5 | 80.8 | ||||||||||||||||||
Other (2) |
7.7 | 7.3 | 7.2 | 7.1 | 6.9 | (9.8 | ) | |||||||||||||||||
Mobile accesses |
37,239.6 | 38,263.8 | 38,827.7 | 39,596.9 | 40,445.8 | 8.6 | ||||||||||||||||||
Contract |
21,972.2 | 22,327.7 | 22,387.7 | 22,643.0 | 22,965.1 | 4.5 | ||||||||||||||||||
Pre-Pay |
15,267.3 | 15,936.1 | 16,440.0 | 16,953.9 | 17,480.7 | 14.5 | ||||||||||||||||||
Pay TV |
53.0 | 73.2 | 87.2 | 97.9 | 108.1 | 103.8 | ||||||||||||||||||
Wholesale
Accesses (3) |
543.9 | 706.2 | 831.3 | 1,008.1 | 1,139.0 | 109.4 | ||||||||||||||||||
Total
Accesses |
40,826.8 | 42,053.2 | 42,798.8 | 43,802.4 | 44,857.9 | 9.9 | ||||||||||||||||||
| (1) | PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/6 Access
x30. Company’s accesses for internal use included. |
|
| (2) | Remaining non-broadband final circuits. |
|
| (3) | Includes Unbundled Lines by T. Deutschland. |
Note: Mobile accesses, Fixed telephony accesses and Broadband accesses include MANX customers.
TELEFÓNICA EUROPE
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
| January - September | July - September | |||||||||||||||||||||||
| 2008 | 2007 | % Chg | 2008 | 2007 | % Chg | |||||||||||||||||||
Revenues |
10,691 | 10,776 | (0.8 | ) | 3,685 | 3,708 | (0.6 | ) | ||||||||||||||||
Internal exp capitalized in fixed assets |
132 | 156 | (15.4 | ) | 46 | 49 | (6.7 | ) | ||||||||||||||||
Operating expenses |
(7,898 | ) | (8,091 | ) | (2.4 | ) | (2,696 | ) | (2,712 | ) | (0.6 | ) | ||||||||||||
Other net operating income (expense) |
119 | 11 | n.m. | 1 | 5 | n.m. | ||||||||||||||||||
Gain (loss) on sale of fixed assets |
33 | 1,298 | (97.5 | ) | 3 | 1 | n.m. | |||||||||||||||||
Impairment of goodwill and other assets |
(3 | ) | 0 | c.s. | (0 | ) | 0 | c.s. | ||||||||||||||||
Operating
income before D&A (OIBDA) |
3,072 | 4,151 | (26.0 | ) | 1,039 | 1,051 | (1.1 | ) | ||||||||||||||||
OIBDA Margin |
28.7 | % | 38.5 | % | (9.8 p.p. | ) | 28.2 | % | 28.3 | % | (0.1 p.p. | ) | ||||||||||||
Depreciation
and amortization |
(2,305 | ) | (2,566 | ) | (10.2 | ) | (764 | ) | (816 | ) | (6.4 | ) | ||||||||||||
Operating income (OI) |
768 | 1,585 | (51.6 | ) | 275 | 235 | 17.2 | |||||||||||||||||
Notes:
| • | OIBDA and OI before brand fees. |
|
| • | Airwave is not consolidated since the second quarter of 2007. The disposal of Airwave generated a
capital gain of 1,296 million euros, recorded in the second quarter of 2007. |
January — September 2008 Results Telefónica 55
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Europe
TELEFÓNICA
EUROPE
ACCESSES BY COUNTRIES
Unaudited figures (Thousands)
ACCESSES BY COUNTRIES
Unaudited figures (Thousands)
| 2007 | 2008 | |||||||||||||||||||||||
| September | December | March | June | September | % Chg y-o-y | |||||||||||||||||||
UK |
||||||||||||||||||||||||
Final Clients Accesses |
17,938.0 | 18,452.8 | 18,534.7 | 18,872.0 | 19,346.7 | 7.9 | ||||||||||||||||||
Internet and data accesses |
38.4 | 70.7 | 131.4 | 194.2 | 267.1 | n.m. | ||||||||||||||||||
Broadband |
38.4 | 70.7 | 131.4 | 194.2 | 267.1 | n.m. | ||||||||||||||||||
Mobile accesses |
17,899.6 | 18,382.1 | 18,403.2 | 18,677.8 | 19,079.6 | 6.6 | ||||||||||||||||||
Pre-Pay |
11,366.4 | 11,573.4 | 11,388.1 | 11,525.1 | 11,649.3 | 2.5 | ||||||||||||||||||
Contract |
6,533.2 | 6,808.7 | 7,015.1 | 7,152.7 | 7,430.3 | 13.7 | ||||||||||||||||||
Total Accesses |
17,938.0 | 18,452.8 | 18,534.7 | 18,872.0 | 19,346.7 | 7.9 | ||||||||||||||||||
GERMANY |
||||||||||||||||||||||||
Final Clients Accesses |
12,205.1 | 12,546.2 | 13,132.3 | 13,741.3 | 14,176.4 | 16.2 | ||||||||||||||||||
Internet and data accesses |
37.0 | 74.7 | 124.7 | 165.4 | 198.1 | n.m. | ||||||||||||||||||
Broadband |
37.0 | 74.7 | 124.7 | 165.4 | 198.1 | n.m. | ||||||||||||||||||
Mobile accesses |
12,168.1 | 12,471.5 | 13,007.5 | 13,575.9 | 13,978.3 | 14.9 | ||||||||||||||||||
Pre-Pay |
6,175.4 | 6,235.0 | 6,565.4 | 6,841.4 | 7,097.2 | 14.9 | ||||||||||||||||||
Contract |
5,992.7 | 6,236.6 | 6,442.1 | 6,734.5 | 6,881.1 | 14.8 | ||||||||||||||||||
Wholesale Accesses (1) |
435.9 | 596.0 | 719.9 | 897.4 | 1,026.7 | 135.5 | ||||||||||||||||||
Total Accesses |
12,641.0 | 13,142.3 | 13,852.1 | 14,638.7 | 15,203.1 | 20.3 | ||||||||||||||||||
IRELAND |
||||||||||||||||||||||||
Mobile accesses |
1,632.5 | 1,646.1 | 1,662.9 | 1,687.6 | 1,713.1 | 4.9 | ||||||||||||||||||
Pre-Pay |
1,098.8 | 1,090.9 | 1,089.1 | 1,094.9 | 1,082.5 | (1.5 | ) | |||||||||||||||||
Contract |
533.7 | 555.2 | 573.8 | 592.6 | 630.6 | 18.2 | ||||||||||||||||||
Total Accesses |
1,632.5 | 1,646.1 | 1,662.9 | 1,687.6 | 1,713.1 | 4.9 | ||||||||||||||||||
CZECH REPUBLIC |
||||||||||||||||||||||||
Final Clients Accesses |
7,861.1 | 7,986.8 | 7,964.8 | 7,946.3 | 7,917.3 | 0.7 | ||||||||||||||||||
Fixed telephony accesses (2) |
2,134.6 | 2,069.2 | 1,995.6 | 1,937.7 | 1,892.4 | (11.3 | ) | |||||||||||||||||
Internet and data accesses |
706.1 | 719.1 | 723.4 | 724.4 | 729.4 | 3.3 | ||||||||||||||||||
Narrowband |
215.0 | 202.4 | 188.7 | 177.0 | 170.3 | (20.8 | ) | |||||||||||||||||
Broadband |
483.5 | 509.4 | 527.4 | 540.4 | 552.2 | 14.2 | ||||||||||||||||||
Other (3) |
7.7 | 7.3 | 7.2 | 7.1 | 6.9 | (9.8 | ) | |||||||||||||||||
Mobile accesses |
4,967.4 | 5,125.4 | 5,158.7 | 5,186.3 | 5,187.4 | 4.4 | ||||||||||||||||||
Pre-Pay |
2,806.6 | 2,881.5 | 2,853.2 | 2,817.3 | 2,758.0 | (1.7 | ) | |||||||||||||||||
Contract |
2,160.9 | 2,243.9 | 2,305.5 | 2,369.1 | 2,429.4 | 12.4 | ||||||||||||||||||
Pay TV |
53.0 | 73.2 | 87.2 | 97.9 | 108.1 | 103.8 | ||||||||||||||||||
Wholesale Accesses |
108.0 | 110.2 | 111.5 | 110.7 | 112.2 | 3.9 | ||||||||||||||||||
Total Accesses |
7,969.2 | 8,097.0 | 8,076.3 | 8,057.1 | 8,029.5 | 0.8 | ||||||||||||||||||
SLOVAKIA |
||||||||||||||||||||||||
Mobile accesses |
495.6 | 565.4 | 523.1 | 394.7 | 412.7 | (16.7 | ) | |||||||||||||||||
Pre-Pay |
475.9 | 502.4 | 449.0 | 319.8 | 334.6 | (29.7 | ) | |||||||||||||||||
Contract |
19.7 | 63.0 | 74.1 | 74.9 | 78.1 | n.m. | ||||||||||||||||||
Total Accesses |
495.6 | 565.4 | 523.1 | 394.7 | 412.7 | (16.7 | ) | |||||||||||||||||
| (1) | Includes Unbundled Lines by T. Deutschland. |
|
| (2) | PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/ 6
Access x30. Company’s accesses for internal use included. |
|
| (3) | Retail circuits other than broadband. |
January — September 2008 Results Telefónica 56
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Europe
TELEFÓNICA EUROPE
SELECTED OPERATING DATA MOBILE BUSINESS BY COUNTRIES
Unaudited figures
SELECTED OPERATING DATA MOBILE BUSINESS BY COUNTRIES
Unaudited figures
| 2007 | 2008 | |||||||||||||||||||||||
| Q3 | Q4 | Q1 | Q2 | Q3 | % Chg y-o-y Local Cur | |||||||||||||||||||
TELEFÓNICA O2 UK |
||||||||||||||||||||||||
MOU (minutes) |
193 | 197 | 197 | 208 | 208 | 8.1 | ||||||||||||||||||
ARPU (EUR) |
35.7 | 33.9 | 31.1 | 30.2 | 30.6 | 0.0 | ||||||||||||||||||
Pre-Pay |
19.3 | 18.0 | 16.2 | 15.6 | 15.9 | (3.9 | ) | |||||||||||||||||
Contract |
64.8 | 61.0 | 56.0 | 53.6 | 54.1 | (2.5 | ) | |||||||||||||||||
Data ARPU |
11.1 | 11.1 | 10.7 | 10.3 | 10.3 | 8.9 | ||||||||||||||||||
%non-P2PSMS over data revenues |
15.2 | % | 15.9 | % | 18.3 | % | 18.2 | % | 21.0 | % | 5.9 p.p. | |||||||||||||
TELEFÓNICA O2 GERMANY |
||||||||||||||||||||||||
MOU (minutes) |
128 | 134 | 147 | 144 | 133 | 4.2 | ||||||||||||||||||
ARPU (EUR) |
20.8 | 19.4 | 17.7 | 17.6 | 17.3 | (16.8 | ) | |||||||||||||||||
Pre-Pay |
6.8 | 6.4 | 5.9 | 6.1 | 6.0 | (12.8 | ) | |||||||||||||||||
Contract |
34.9 | 32.3 | 29.7 | 29.3 | 28.9 | (17.2 | ) | |||||||||||||||||
Data ARPU |
5.2 | 5.1 | 4.9 | 4.8 | 4.9 | (6.7 | ) | |||||||||||||||||
%non-P2PSMS over data revenues |
25.9 | % | 25.7 | % | 28.4 | % | 26.9 | % | 29.6 | % | 3.7 p.p. | |||||||||||||
TELEFÓNICA O2 IRELAND |
||||||||||||||||||||||||
MOU (minutes) |
250 | 252 | 240 | 250 | 246 | (1.4 | ) | |||||||||||||||||
ARPU (EUR) |
47.0 | 45.7 | 43.4 | 43.2 | 43.7 | (7.1 | ) | |||||||||||||||||
Pre-Pay |
29.2 | 29.0 | 26.7 | 26.9 | 27.7 | (5.0 | ) | |||||||||||||||||
Contract |
84.9 | 78.8 | 75.5 | 73.8 | 72.2 | (15.0 | ) | |||||||||||||||||
Data ARPU |
11.6 | 12.4 | 11.2 | 10.6 | 10.6 | (8.5 | ) | |||||||||||||||||
%non-P2PSMS over data revenues |
26.5 | % | 31.4 | % | 27.5 | % | 30.2 | % | 31.2 | % | 4.7 p.p. | |||||||||||||
TELEFÓNICA O2 CZECH REPUBLIC (1) |
||||||||||||||||||||||||
MOU (minutes) |
117 | 122 | 117 | 122 | 120 | 3.2 | ||||||||||||||||||
ARPU (EUR) |
19.2 | 20.5 | 19.4 | 21.0 | 21.7 | (3.0 | ) | |||||||||||||||||
Pre-Pay |
9.1 | 9.7 | 8.9 | 9.8 | 10.2 | (3.8 | ) | |||||||||||||||||
Contract |
32.6 | 34.5 | 32.7 | 34.7 | 35.1 | (7.7 | ) | |||||||||||||||||
Data ARPU |
4.0 | 4.4 | 4.4 | 4.5 | 4.7 | (0.5 | ) | |||||||||||||||||
%non-P2PSMS over data revenues |
45.0 | % | 42.0 | % | 43.0 | % | 44.0 | % | 45.7 | % | 0.7 p.p. | |||||||||||||
| (1) | KPIs for Mobile business in Czech
Republic do not include Slovakia. |
Note: MoU and ARPU calculated as monthly quarterly average.
January — September 2008 Results Telefónica 57
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Europe
TELEFÓNICA EUROPE
SELECTED OPERATING DATA MOBILE BUSINESS BY COUNTRIES
Unaudited figures
SELECTED OPERATING DATA MOBILE BUSINESS BY COUNTRIES
Unaudited figures
| January - September | ||||||||||||
| 2008 | 2007 | % Chg Local Cur | ||||||||||
TELEFÓNICA O2 UK |
||||||||||||
MOU (minutes) |
205 | 187 | 9.5 | |||||||||
ARPU (EUR) |
30.6 | 34.5 | 2.4 | |||||||||
Pre-Pay |
15.9 | 18.2 | 1.0 | |||||||||
Contract |
54.6 | 64.0 | (1.5 | ) | ||||||||
Data ARPU |
10.4 | 10.9 | 10.2 | |||||||||
%non-P2PSMS over data revenues |
19.2 | % | 14.4 | % | 4.8 p.p. | |||||||
TELEFÓNICA O2 GERMANY |
||||||||||||
MOU (minutes) |
141 | 130 | 8.8 | |||||||||
ARPU (EUR) |
17.5 | 20.7 | (15.4 | ) | ||||||||
Pre-Pay |
6.0 | 6.8 | (11.5 | ) | ||||||||
Contract |
29.3 | 34.8 | (15.8 | ) | ||||||||
Data ARPU |
4.8 | 5.1 | (5.4 | ) | ||||||||
%non-P2PSMS over data revenues |
28.3 | % | 25.2 | % | 3.0 p.p. | |||||||
TELEFÓNICA O2 IRELAND |
||||||||||||
MOU (minutes) |
246 | 246 | (0.2 | ) | ||||||||
ARPU (EUR) |
43.4 | 46.0 | (5.5 | ) | ||||||||
Pre-Pay |
27.1 | 29.0 | (6.7 | ) | ||||||||
Contract |
73.8 | 83.6 | (11.7 | ) | ||||||||
Data ARPU |
10.8 | 11.4 | (5.7 | ) | ||||||||
%non-P2PSMS over data revenues |
30.5 | % | 23.3 | % | 7.2 p.p. | |||||||
TELEFÓNICA O2 CZECH REPUBLIC (1) |
||||||||||||
MOU (minutes) |
120 | 115 | 4.1 | |||||||||
ARPU (EUR) |
20.9 | 18.6 | (0.7 | ) | ||||||||
Pre-Pay |
9.8 | 8.8 | (1.9 | ) | ||||||||
Contract |
34.4 | 32.6 | (6.7 | ) | ||||||||
Data ARPU |
4.5 | 3.9 | 2.6 | |||||||||
%non-P2PSMS over data revenues |
43.6 | % | 42.9 | % | 0.7 p.p. | |||||||
| (1) | KPIs for Mobile business in Czech Republic do not include Slovakia. |
Note: MoU and ARPU calculated as monthly January-September period average.
January — September 2008 Results Telefónica 58
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica Europe
TELEFÓNICA EUROPE
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
| January - September | July - September | |||||||||||||||||||||||||||||||
| 2008 | 2007 | % Chg | % Chg Local Cur | 2008 | 2007 | % Chg | % Chg Local Cur | |||||||||||||||||||||||||
TELEFÓNICA O2 UK |
||||||||||||||||||||||||||||||||
Revenues |
5,297 | 5,526 | (4.1 | ) | 10.7 | 1,803 | 1,939 | (7.0 | ) | 8.7 | ||||||||||||||||||||||
OIBDA |
1,360 | 1,420 | (4.2 | ) | 10.6 | 479 | 530 | (9.7 | ) | 5.5 | ||||||||||||||||||||||
OIBDA margin |
25.7 | % | 25.7 | % | (0.0 p.p. | ) | 26.5 | % | 27.3 | % | (0.8 p.p. | ) | ||||||||||||||||||||
CapEx |
519 | 560 | (7.3 | ) | 7.0 | 157 | 196 | (20.2 | ) | (6.4 | ) | |||||||||||||||||||||
OpCF (OIBDA-CapEx) |
841 | 860 | (2.2 | ) | 12.9 | 322 | 333 | (3.5 | ) | 12.6 | ||||||||||||||||||||||
TELEFÓNICA O2 GERMANY |
||||||||||||||||||||||||||||||||
Revenues |
2,664 | 2,612 | 2.0 | 2.0 | 915 | 909 | 0.7 | 0.7 | ||||||||||||||||||||||||
OIBDA |
533 | 456 | 16.9 | 16.9 | 192 | 197 | (2.4 | ) | (2.4 | ) | ||||||||||||||||||||||
OIBDA margin |
20.0 | % | 17.5 | % | 2.6 p.p. | 21.0 | % | 21.7 | % | (0.7 p.p. | ) | |||||||||||||||||||||
CapEx |
619 | 605 | 2.3 | 2.3 | 262 | 199 | 31.4 | 31.4 | ||||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
(86 | ) | (149 | ) | (42.1 | ) | (42.1 | ) | (70 | ) | (3 | ) | n.m. | n.m. | ||||||||||||||||||
TELEFÓNICA O2 IRELAND |
||||||||||||||||||||||||||||||||
Revenues |
714 | 741 | (3.5 | ) | (3.5 | ) | 245 | 254 | (3.4 | ) | (3.4 | ) | ||||||||||||||||||||
OIBDA |
228 | 253 | (10.1 | ) | (10.1 | ) | 78 | 89 | (13.0 | ) | (13.0 | ) | ||||||||||||||||||||
OIBDA margin |
31.9 | % | 34.2 | % | (2.3 p.p. | ) | 31.7 | % | 35.2 | % | (3.5 p.p. | ) | ||||||||||||||||||||
CapEx |
53 | 81 | (34.3 | ) | (34.3 | ) | 23 | 19 | 24.2 | 24.2 | ||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
174 | 172 | 1.3 | 1.3 | 55 | 71 | (22.8 | ) | (22.8 | ) | ||||||||||||||||||||||
TELEFONICA O2 CZECH REPUBLIC |
||||||||||||||||||||||||||||||||
Revenues |
1,930 | 1,667 | 15.8 | n.c. | 694 | 572 | 21.5 | n.c. | ||||||||||||||||||||||||
OIBDA |
886 | 763 | 16.1 | n.c. | 306 | 259 | 17.8 | n.c. | ||||||||||||||||||||||||
OIBDA margin |
45.9 | % | 45.8 | % | 0.1 p.p. | 44.0 | % | 45.4 | % | (1.4 p.p. | ) | |||||||||||||||||||||
CapEx |
167 | 164 | 1.6 | n.c. | 71 | 67 | 6.7 | n.c. | ||||||||||||||||||||||||
OpCF (OIBDA-CapEx) |
719 | 599 | 20.1 | n.c. | 235 | 193 | 21.7 | n.c. | ||||||||||||||||||||||||
Note: OIBDA before brand fees.
January — September 2008 Results Telefónica 59
Table of Contents
RESULTS BY REGIONAL BUSINESS UNITS
Other Companies
ATENTO GROUP
Revenues rose 11.8% year-on-year in the first nine months of 2008 (+12.4% in constant euros), to
972 million euros, and climbed 12.5% in the third quarter. The main driver of this growth was the
increase in activity with Atento’s main customers, especially in Brazil (higher activity with
Telefónica, Vivo and the financial sector) and Latin America (higher activity with the financial
and telecommunications sector, particularly in Central America, Peru, Mexico, and Venezuela), which
more than offset the drop in activity in Spain due to the impact of offshoring.
With regard to the geographical breakdown of revenues, Brazil was the largest contributor to total
revenues, with 47% (41% at September 2007), followed by Spain with 18% (23% last year) and Mexico
with 12% (unchanged vs. the same period in 2007). Meanwhile, the percentage of revenues generated
by multi-sector customers (outside the Telefónica group) stood at 53% to September 2008. Offshored
revenues accounted for 7% of Atento’s total revenues in the first nine months of the year, mainly
from Spain to Latin America and Morocco.
Operating income before depreciation and amortisation (OIBDA) grew by 26.9% year-on-year in the
third quarter and by 15.1% in the first nine months of 2008 (16.9% in local currency), to 135
million euros. The more rapid increase in OIBDA recorded in the third quarter compared to the first
half of the year is due to higher business activity and the containment of operating expenses
growth rate (+8.5% year-on-year in July-September vs. +12.0% year-on-year in January-June 2008).
The cumulative increase in operating expenses to September was mainly due to higher costs relating
to personnel, maintenance and platform leasing.
The OIBDA margin was 16.2% in the quarter, 1.8 percentage points higher than in the same period
last year and 13.9% in the first nine months (+0.4 percentage points on January-September 2007).
CapEx amounted to 31 million euros in the first nine months, leaving operating cash flow
(OIBDA-CapEx) at 104 million euros (+5.2% vs. the first nine months of 2007 and +7.2% in constant
currency). The CapEx was used mainly to build new platforms (Brazil and Venezuela), refurbish
centres and purchase equipment (Brazil, Mexico, Peru and Spain).
At 30 September, the Atento group had 60,048 workstations in place, 12.7% more than in September
2007.
January — September 2008 Results Telefónica 60
Table of Contents
RESULTS BY REGIONAL BUSINESS LINES
Others Companies
ATENTO GROUP
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
| January - September | July - September | |||||||||||||||||||||||
| 2008 | 2007 | % Chg | 2008 | 2007 | % Chg | |||||||||||||||||||
Revenues |
972 | 869 | 11.8 | 343 | 305 | 12.5 | ||||||||||||||||||
Internal exp capitalized in fixed assets |
0 | 0 | N.M. | 0 | 0 | n.m. | ||||||||||||||||||
Operating expenses |
(838 | ) | (756 | ) | 10.8 | (287 | ) | (265 | ) | 8.5 | ||||||||||||||
Other net operating income (expense) |
1 | 2 | (38.0 | ) | 0 | 2 | n.m. | |||||||||||||||||
Gain (loss) on sale of fixed assets |
(0 | ) | 2 | c.s. | (0 | ) | 2 | c.s. | ||||||||||||||||
Operating income before D&A (OIBDA) |
135 | 117 | 15.1 | 56 | 44 | 26.9 | ||||||||||||||||||
OIBDA Margin |
13.9 | % | 13.5 | % | 0.4 p.p. | 16.2 | % | 14.4 | % | 1.8 p.p. | ||||||||||||||
Depreciation and amortization |
(24 | ) | (22 | ) | 8.3 | (8 | ) | (8 | ) | 6.7 | ||||||||||||||
Operating income (OI) |
111 | 95 | 16.7 | 48 | 36 | 31.1 | ||||||||||||||||||
January — September 2008 Results Telefónica 61
Table of Contents
ADDENDA
Key Holdings of the Telefónica Group detailed by regional business units
TELEFÓNICA ESPAÑA
| % Part | ||||
Telefónica de España |
100.00 | |||
Telefónica Móviles España |
100.00 | |||
Telyco |
100.00 | |||
Telefónica Telecomunic. Públicas |
100.00 | |||
T. Soluciones de Informatica y Comunicaciones de España |
100.00 | |||
Iberbanda |
58.94 | |||
Medi Telecom |
32.18 | |||
TELEFÓNICA LATINOAMÉRICA
| % Part | ||||
Telesp (1) |
87.95 | |||
Telefónica del Perú |
98.18 | |||
Telefónica de Argentina |
98.19 | |||
TLD Puerto Rico |
98.00 | |||
Telefónica Chile |
44.89 | |||
Telefónica Telecom |
52.03 | |||
Telefónica USA |
100.00 | |||
T. Intern. Wholesale Serv. (TIWS) (2) |
100.00 | |||
Brasilcel (3) |
50.00 | |||
T. Móviles Argentina |
100.00 | |||
T. Móviles Perú |
98.63 | |||
T. Móviles México |
100.00 | |||
Telefónica Móviles Chile |
100.00 | |||
T. Móviles El Salvador |
99.08 | |||
T. Móviles Guatemala |
100.00 | |||
Telcel (Venezuela) |
100.00 | |||
T. Móviles Colombia |
100.00 | |||
Otecel (Ecuador) |
100.00 | |||
T. Móviles Panamá |
100.00 | |||
T. Móviles Uruguay |
100.00 | |||
Telefonía Celular Nicaragua |
100.00 | |||
T. Móviles Soluciones y Aplicac. (Chile) |
100.00 | |||
| (1) | Effective participation 88.01%. |
|
| (2) | Telefónica, S.A. owns 92.51% and Telefónica DataCorp owns 7.49%. |
|
| (3) | Joint Venture which fully
consolidates the subsidiary Vivo, S.A., through participation at Vivo Participaçoes, S.A. (63.73%). |
TELEFÓNICA O2 EUROPE
| % Part | ||||
Telefónica O2 UK |
100.00 | |||
Telefónica O2 Gemany (1) |
100.00 | |||
Telefónica O2 Ireland |
100.00 | |||
Manx |
100.00 | |||
Be |
100.00 | |||
Group 3G (Germany) (2) |
100.00 | |||
Telefónica O2 Czech Republic (1) |
69.41 | |||
Telefónica O2 Slovakia (3) |
100.00 | |||
| (1) | Company owned through Telefónica S.A. |
|
| (2) | Company owned through Telefónica O2 Germany. |
|
| (3) | Company owned through Telefónica O2 Czech Republic. |
OTHER PARTICIPATIONS
| % Part | ||||
3G Mobile AG (Switzerland) |
100.00 | |||
Atento Group |
100.00 | |||
Telefónica de Contenidos (Spain) |
100.00 | |||
Mobipay Internacional |
50.00 | |||
Telco SpA (Italy) (1) |
42.30 | |||
IPSE 2000 (Italy) (2) |
39.92 | |||
Mobipay España (2) |
13.36 | |||
Lycos Europe |
32.10 | |||
Hispasat |
13.23 | |||
Portugal Telecom (3) |
9.83 | |||
China Netcom Group (4) |
9.90 | |||
ZON Multimedia (5) |
5.40 | |||
BBVA |
0.97 | |||
Amper |
6.10 | |||
| (1) | Telefónica holds an indirect
participation of the ordinary share
capital (with voting rights) of Telecom
Italia through Telco of 10.36%. If we
take into account the saving shares
(azioni di risparmio), which do not have
voting rights, the indirect
participation of Telefónica over Telecom
Italia would be 7.15%. |
|
| (2) | Ownership directly or indirectly
held by Telefónica Móviles España. |
|
| (3) | Telefónica’s Group effective
participation. Telefónica Group
participation would be 9.96% if we
exclude the minority interests. |
|
| (4) | Ownership held by Telefónica
Latinoamérica. In October this Company
was merged with China Unicom (Hong Kong)
Limited (CU). After this transaction,
the participation of Telefónica over the
share capital of CU is 5.38%. |
|
| (5) | Telefónica’s Group effective
participation. Telefónica Group
participation would be 5.46% if we
exclude the minority interests. |
January — September 2008 Results Telefónica 62
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ADDENDA
Significant Events
| • | On November 12th, 2008, Telefónica paid an interim dividend from 2008 net income
of a fixed gross amount of 0.50 euros for each Company share issued, in circulation and
carrying entitlement to this dividend. |
|
| • | On October 31st, 2008, Telefónica announced to the Spanish National Securities Market
Commission (Comisión Nacional del Mercado de Valores) a position of 113,195,734 own shares
(treasury stock), representative of 2.406% of the share capital of the Company. |
|
| • | On September 17th, 2008, Telefónica announced its intention to launch a Tender
Offer through its wholly-owned subsidiary Inversiones Telefónica Internacional Holding Ltda.,
to acquire all of the outstanding shares of Companía de Telecomunicaciones de Chile S.A
(“CTC”) that TELEFÓNICA did not control direct or indirectly, which amounted to 55.1% of CTC’s
share capital. |
|
The offer was addressed to all CTC shares listed on Santiago de Chile and New York Stock
Exchanges (represented by American Depositary Shares), and was structured as a purchase of
shares in cash, at a price of 1,000 Chilean Pesos — for class A shares and 900 Chilean Pesos
for class B. On October 11th, 2008 the offer price was increased to 1,100 Chilean Pesos — for
class A shares and 990 Chilean Pesos for class B. |
||
The Offer was conditioned among other things, to (i) the shareholders of the Company approving
bylaw amendments that would eliminate the restriction currently contained in the Company’s
bylaws that limits to 45% the percentage of shares that may be owned or voted by one
shareholder, directly or through related persons, at an extraordinary meeting of the
shareholders requested for such purpose; and (ii) to a minimum acceptance of the Offer. |
||
On October 28th, 2008, at the Special Meeting of Shareholders of CTC held, 85.9% of the share
capital voted in favour of the by-law Amendment. Consequently, the by-law Amendment was
approved. |
||
Upon completion of the acceptance period of the tender offer, a total of 496,341,699 shares
issued by CTC have been tendered, representing 94.11% of the shares to which the offer related
which represented a total investment of approximately 640 million euros. |
||
After settlement of the transaction, Telefónica’s indirect ownership in CTC’s share capital will
increase from 44.9% to 96.75%. |
||
| • | On September 4th, 2008 Telefónica Internacional, S.A.U., has reached today an agreement
with AllianceBernstein L.P. to acquire an additional stake of up to approximately 5.74% of the
share capital of the Chinese telecommunications Company CHINA NETCOM GROUP CORPORATION (HONG
KONG) LIMITED (“CNC”). |
|
The acquisition was structured in two tranches, (i) the first tranche will be in respect of
shares representing approximately 2.71% of the issued share capital of CNC as of the date
hereof, and (ii) the second tranche comprised a number of shares in CHINA UNICOM LIMITED (“CU”)
issued after its merger with CNC in exchange of shares representing up to a 3.03% stake in CNC.
The completion of the second tranche of the acquisition was subject to certain conditions,
including but not limited to the successful completion of the scheme of arrangement of CNC
through which CNC will be merged with CU. |
||
The acquisition of the shares included in the first tranche were executed on September 9th, 2008
and implied an investment by Telefónica of approximately 374 million euros. |
January
— September 2008 Results Telefónica 63
Table of Contents
ADDENDA
On October 28th, upon the completion of the merger between CNC and CU, the second tranche of the
acquisition was executed for a total of 413 million euros. After this transaction, the
participation over the share capital of the merged Company, China Unicom (Hong Kong) Limited
(“CU-HK”), stands at 5.38%. In accordance with Telefónica’s participation over the share capital
of the Company, Telefónica appointed one board member in CU-UK.
January — September 2008 Results Telefónica 64
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ADDENDA
Changes to the Perimeter and Accounting Criteria of Consolidation
The main changes in the consolidated group during the first nine months of 2008 were as follows:
TELEFÓNICA LATINOAMÉRICA
| • | After the acquisitions described in “Significant Events”, as of the end of September 2008,
Telefónica’s stake over the share capital of CNC has varied from 5% at December 2007 to 5.38%
over the share capital of CU-HK, the enlarged entity resulting from the merger of CNC and CU. |
|
| • | On April 3rd, 2008, in accordance with the terms of a sale and purchase agreement entered
into on 2 August 2007, the corresponding administrative authorisations having been obtained,
Vivo Participaçoes, S.A. (“Vivo”), the Brazilian entity that is wholly controlled by
Brasilcel, N.V., which is at the same time jointly owned by Telefónica and Portugal Telecom,
completed the acquisition of 53.90% of the voting stock (ON) and 4.27% of the preferred stock
(PN) of Telemig Celular Participaçoes S.A., the controlling shareholder of Telemig Celular
S.A., a mobile telephony operator in the State of Minas Gerais (Brazil). According to the
terms of the sale and purchase agreement, the total purchase price was 1,163 million Reais
(approximately 429 million euros). Vivo also acquired the right held by the seller, Telpart
Participaçoes S.A. (“Telpart”) to subscribe in the future for paid up shares in Telemig
Celular Participaçoes S.A. for a price of approximately 70 million Reais (approximately 26
million euros). |
|
In addition to this, on April 8, Vivo, through its subsidiary Tele Centro Oeste IP, S.A. (“TCO
IP”) launched a voluntary tender offer for shares representing up to one third of the free float
represented by the preferred stock in Telemig Celular Participaçoes S.A. and in its subsidiary
Company and Telemig Celular S.A. with a price per share of 63.90 R$ y 654.72 R$, respectively.
This offer, which concluded on May 15, 2008, reached a level of acceptance of close to 100%,
which implied the acquisition by TCO IP of 31.9% and 6% of the preferred shares of Telemig
Celular Participaçoes S.A. and Telemig Celular S.A., respectively. Furthermore, in accordance
with Brazilian Corporations law, TCO IP submitted a mandatory tender offer on July 15th, 2008,
for all the voting stock in Telemig Celular Participaçoes S.A. and Telemig Celular S.A., with a
price per share equivalent to 80% of the purchase price of the voting stock of these companies.
After this tender offer Vivo reached 90.481% of the share capital of Telemig Celular S.A. and
58.80% of the share capital of Telemig Celular Participaçoes S.A.. Both companies are
incorporated in the consolidation perimeter of Telefónica Group by the equity method. |
OTHER COMPANIES
| • | In March, Telco SpA, in which Telefónica holds a stake of 42.3%, acquired 121.5 million
shares at a price of 1.23 euros per share in the Italian Company Telecom Italia (equivalent to
0.9% of its share capital), bringing its total direct interest to 24.5% (voting rights) and
16.9% (economic rights). This transaction implied a payment of 149.8 million euros. |
|
Accordingly, the Telefónica Group currently holds an indirect interest of 10.4% and 7.1% of
voting rights and economic rights, respectively, in Telecom Italia. The Telefónica Group
accounts for its interest in Telco S.A. using the equity method. |
January — September 2008 Results Telefónica 65
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DISCLAIMER
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.
The information contained in this document 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.
Finally, please note that this information contained in the document has not been verified or
revised by the Auditors of Telefónica.
For additional information, please contact.
Investor Relations
Distrito C
Ronda de la Comunicación s/n
28050 Madrid (Spain)
Distrito C
Ronda de la Comunicación s/n
28050 Madrid (Spain)
Phone number:
+34 91 482 87 00
+34 91 482 87 00
Fax number:
+34 91 482 85 99
+34 91 482 85 99
Email address:
María García-Legaz (maria.garcialegaz@telefonica.es)
Dolores García (dgarcia@telefonica.es)
Isabel Beltrán (i.beltran@telefonica.es)
María García-Legaz (maria.garcialegaz@telefonica.es)
Dolores García (dgarcia@telefonica.es)
Isabel Beltrán (i.beltran@telefonica.es)
ir@telefonica.es
www.telefonica.es/accionistaseinversores
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
| Telefónica, S.A. |
||||
| Date: November 14th, 2008 | By: | /s/ Santiago Fernández Valbuena | ||
| Name: | Santiago Fernández Valbuena | |||
| Title: | Chief Financial Officer | |||