Quarterly results January-June 2016

RNS Number : 4898F

Telefonica SA

28 July 2016

 

FINANCIAL HIGHLIGHTS

·           Solid value growth: LTE (2.1x year-on-year), smartphones (+18%), fibre + VDSL (+31%) and TV (+5%).

·           Quarterly revenues reached 12,723 million euros (-0.2% organic year-on-year; -7.7% reported).

®  Service revenues posted solid growth of +1.5% organic year-on-year; handset revenues -18.0% year-on-year.

®  Broadband connectivity revenues increased by 15.3% organic year-on-year in April-June.

·           Growth of OIBDA in the quarter to 3,918 million euros (+0.8% organic; -7.1% reported).

®  Solid margin (30.8%; +0.3 percentage points organic year-on-year); capture of synergies and efficiencies.

·           CapEx for the semester (+2.9% organic year-on-year) was focused on the transformation of networks and systems. Operating cash flow (OIBDA-CapEx) increased by 3.3% organic year-on-year.

®  32.9 million homes passed with fibre (+14% year-on-year); 55% LTE coverage (84% in Europe).

·           During the first six months, free cash flow increased to 815 million euros and net income to 1,241 million euros (0.23 euros per share).

·           Net financial debt stood at 52,568 million euros after the dividend payment in the quarter.

·           Telefónica reiterated its 2016 guidance and dividend and the leverage ratio for the mid-term.

·           T. España maintained a positive trend in line with the new growth cycle and the commercial activity improved, with a widespread reduction of churn. The initial savings from the employment suspension plan contributed to the OIBDA year-on-year growth (+2.6% year-on-year excluding non-recurrents). Operating cash flow returned to growth for the first time since the third quarter of 2013.

·           T. Brasil maintained solid financial results with year-on-year growth of revenue, OIBDA, operating cash flow (+35.3% organic year-on-year in the quarter) and margins expansion thanks to its data-centric and quality strategy along with the capture of synergies and efficiencies.

·           T. Deutschland continued to present an increase in its profitability and growth of operating cash flow (+17.3% year-on-year in the quarter) in a context of higher competitive intensity in particular segments. In parallel, further progress was made in the integration of E-Plus and generation of synergies.

·           T. UK posted its best commercial performance in the last 6 quarters (net mobile additions of 240 thousand), leveraging the O2 brand recognition, the success of its commercial offering and the high customer base loyalty.

·           T. Hispanoamérica, one growth driver of the Group, continued to make progress in implementing its
value-focussed strategy, thus enabling the expansion of year-on-year revenues, underpinned by the fixed business (+16.1% organic in the quarter). Profitability was affected by the higher level of competition and commercial effort in some markets.

Comments from José María Álvarez-Pallete, Executive Chairman:

"Our second quarter results reflect the benefits of Telefónica's structural transformation, which allowed us to build the future, driving our innovative capabilities and Big Data. The network improvements through excellent connectivity, together with the differentiation and quality of our products and services, have been key to the success of our commercial activity, focused on value, and improved customer loyalty.

All this is reflected in the continued profitable growth another quarter, which along with the capture of synergies and efficiencies, was the main growth lever for service revenue, OIBDA, operating cash flow and margin expansion.

These results and the expected improvement of free cash flow generation in the second half of the year, allow us to confirm 2016 guidance, including the dividend (0.75 euros per share) and the leverage ratio in the mid-term."

TELEFÓNICA
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
	January-June			%Chg				April-June		%Chg
	2016			Reported	Organic			2016		Reported	Organic
Revenues	25,235			(7.1)	1.3			12,723		(7.7)	(0.2)
Telefónica España (1)	6,328			5.4	0.0			3,202		2.5	(0.1)
Telefónica Deutschland	3,691			(4.1)	(4.1)			1,834		(5.9)	(5.9)
Telefónica UK	3,464			(8.9)	(3.2)			1,712		(12.3)	(4.4)
Telefónica Brasil (2)	5,087			(11.3)	0.8			2,656		(9.8)	0.9
Telefónica Hispanoamérica	6,015			(15.7)	7.5			2,961		(14.6)	3.6
Other companies & eliminations	650			3.7				359		1.5
OIBDA	7,756			(6.4)	3.1			3,918		(7.1)	0.8
Telefónica España (1)	2,583			(0.1)	1.5			1,317		0.9	1.1
Telefónica Deutschland	850			(2.2)	1.7			458		(0.7)	1.8
Telefónica UK	918			(5.4)	0.6			456		(11.8)	(4.0)
Telefónica Brasil (2)	1,647			(6.4)	7.0			842		(8.4)	5.8
Telefónica Hispanoamérica	1,701			(20.9)	(1.2)			836		(18.5)	(3.4)
Other companies & eliminations	57			c.s.				10		c.s.
OIBDA margin	30.7%			0.2 p.p.	0.5 p.p.			30.8%		0.2 p.p.	0.3 p.p.
Telefónica España (1)	40.8%			(2.3 p.p.)	0.6 p.p.			41.1%		(0.6 p.p.)	0.5 p.p.
Telefónica Deutschland	23.0%			0.5 p.p.	1.4 p.p.			25.0%		1.3 p.p.	1.9 p.p.
Telefónica UK	26.5%			1.0 p.p.	1.0 p.p.			26.6%		0.2 p.p.	0.1 p.p.
Telefónica Brasil (2)	32.4%			1.7 p.p.	1.9 p.p.			31.7%		0.5 p.p.	1.5 p.p.
Telefónica Hispanoamérica	28,.%			(1.9 p.p.)	(2.5 p.p.)			28.2%		(1.3 p.p.)	(2.0 p.p.)
Operating Income (OI)	3,083			(10.9)	4.6			1,567		(12.0)	(1.5)
Net income	1,241			(42.1)				693		(54.5)
Basic earnings per share (euros)	0.23			(45.2)				0.13		(55.6)
CapEx	3,654			(33.7)	2.9			1,959		(45.8)	0.2
Telefónica España (1)	889			0.0	4.1			463		(2.8)	1.2
Telefónica Deutschland	433			(73.9)	(7.1)			213		(85.2)	(12.5)
Telefónica UK	415			0.0	6.3			223		10.1	19.9
Telefónica Brasil (2)	792			(17.5)	(12.4)			445		(21.4)	(12.2)
Telefónica Hispanoamérica	1,015			(31.1)	20.3			556		(34.7)	12.4
Other companies & eliminations	109			(3.5)				59		(27.6)
Spectrum	10			(99,4)	n.m.			8		(99.4)	n.m.
Telefónica España (1)	7			(85,7)	n.m.			7		(74.0)	n.m.
Telefónica Deutschland	3			(99,8)	n.m.			1		(99.9)	n.m.
Telefónica UK	-			-	-			-		-	-
Telefónica Brasil (2)	-			-	-			-		-	-
Telefónica Hispanoamérica	-			-	-			-		-	-
OpCF (OIBDA-CapEx)	4,102			47,6	3.3			1,959		n.m.	1.4
Telefónica España (1)	1,694			(0,2)	0.2			854		3.0	1.0
Telefónica Deutschland	417			c.s.	11.7			245		c.s.	17.3
Telefónica UK	502			(9,5)	(3.7)			233		(26.0)	(19.4)
Telefónica Brasil (2)	855			7,1	33.6			398		12.6	35.3
Telefónica Hispanoamérica	686			1,1	(24.8)			280		61.9	(30.0)
Other companies & eliminations	(52)			(67,6)				(50)		(45.4)
- Reconciliation included in the excel spreadsheets.
Notes:
- Since the second quarter of 2016 Telefónica's operations in the United Kingdom are no longer reported as discontinued operations within Telefónica Group and all its assets and liabilities have ceased to be reported as "held for sale", and have been reclassified back into full consolidation within Telefónica Group financial statements, in compliance with International Financial Reporting Standards (IFRS). For comparative purposes, the results of Grupo Telefónica of 2015 and the first quarter of 2016 are reported following the same criteria.
- 2015 and 2016 reported figures include hyperinflationary adjustments in Venezuela in both years.
- Organic criteria: Assumes constant exchange rates as of 2015 (average FX in 2015) and considers constant perimeter of consolidation. In OIBDA and OI terms, excludes write-downs, capital gains/losses from the sale of companies, tower sales, material non-recurring impacts and restructuring costs. CapEx also excludes investment in spectrum.
- OIBDA and OI are presented before brand fees and management fees.
- OIBDA margin calculated as OIBDA over revenues.
(1) DTS has been consolidated since 1 May 2015.
(2) GVT has been consolidated since 1 May 2015.

DISCLAIMER

This document may contain forward-looking statements regarding intentions, expectations or forecasts related to the Telefónica Group (hereinafter, the "Company" or "Telefónica"). These statements may include financial forecasts and estimates based on assumptions or statements regarding plans, objectives and expectations that make reference to different matters, such as the customer base and its evolution, growth of the different business lines and of the global business, the market share, possible acquisitions, divestitures or other transactions, Company results and other aspects related to the activity and situation of the Company.

The forward-looking statements can be identified, in certain cases, through the use of words such as "expectation", "anticipation", "purpose", "belief" or similar expressions, or the corresponding negative forms, or through the own predictive nature of all issues referring to strategies, plans or intentions. These forward-looking statements or forecasts reflect the current views of Telefónica with respect to future events, do not represent, by their own nature, any guarantee of future fulfilment, and are subject to risks and uncertainties that could cause the final developments and results to differ substantially from the ones put forward through these intentions, expectations or forecasts. These risks and uncertainties include those identified in the documents containing more comprehensive information filed by Telefónica before the different supervisory Authorities of the securities markets in which its shares are listed and, in particular, the Spanish National Securities Market Commission.

The content of this document must be taken into account by any individual or entity who may have to purchase and sell, or elaborate or disseminate opinions related to any securities issued by the Company, and, in particular, by analysts and investors. Except as required by applicable laws, Telefónica does not assume any obligation to publicly update these statements to adapt them to events or circumstances taking place after this document, including changes in the Company's business, in its business development strategy or any other unexpected circumstance.

This document may contain summarized or non-audited financial information. The information contained herein should therefore be considered as a whole and in conjuction with all the public information regarding the Company available, including, if any, other documents released by the Company that may contain more detailed information.

Finally, it is hereby stated that neither this document or any of its contents constitutes an offer to purchase, sale or exchange any securities, a solicitation of any offer to purchase, sale or exchange of securities, or a recommendation or advice regarding any security.

Investor Relations

Distrito Telefónica - Ronda de la Comunicación, s/n

28050 Madrid (Spain)

Telephone: [phone]

Fax: [phone]

Pablo Eguirón ([e-mail])

Isabel Beltrán ([e-mail])

[e-mail]

www.telefonica.com/accionistaseinversores

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