January-September 2007 - Pt.2
Telefonica SA
12 November 2007
PART 2.
RESULTS BY REGIONAL BUSINESS UNITS
Telefonica O2 Europe
At the end of September 2007, Telefonica O2 Europe revenue was 10,776 million euros
(9,434 million euros in 2006), and operating income before depreciation and
amortization (OIBDA) reached 4,151 million euros (2,798 million euros in 2006),
which included restructuring charges totaling 114 million euros related to the
UK, Ireland and German businesses, as well as the capital gain from the sale of
Airwave (1,296 million euros), booked in the second quarter. Operating Income
(OI) was 1,585 million euros in the January-September period, mainly affected by
the impact of higher assets amortizations derived from the Purchasing Price
Allocation (PPA) process, which also impacted negatively the 2006 OI figure (336
million euros).
Telefonica O2 Europe CapEx for the nine month period ended 30 September 2007
amounted to 1,450 million euros (1,675 million euros in 2006).
Strategic and operational highlights:
• O2 to be the exclusive carrier partner for Apple iPhone in UK. iPhone
combines three devices into one: a mobile phone, a widescreen iPod, and the
best mobile Internet device, all based on Apple's revolutionary touch screen
interface. iPhone users in the UK will also have access to the recently
launched iTunes Wi-Fi Music Store.
iPhone is on sale from November 9 and is only available on the O2 UK
network. It is available exclusively in the UK through the retail and online
stores of Apple, O2 and The Carphone Warehouse. iPhone is available in an
8GB model for £269 (inc VAT) and works with either a PC or Mac.
Three new iPhone tariffs will be available starting at £35, which all
include unlimited anytime, anywhere mobile data usage and, in a market
first, free unlimited use of the UK's largest single public Wi-Fi network,
covering over 7,500 cafes, restaurants, airport lounges, pubs and other
locations across the UK.
• O2 Broadband launched in UK. O2 Broadband aims to make broadband better by
offering a service quality that sets a new standard in the market. Launched
on 15 October, O2 Broadband is simple to set up and use, offers total
transparency in both pricing and service speeds, and offers free UK-based
customer services from UK landlines or O2 mobiles through a single number
and 24x7 technical support. Security software from McAfee is also included
at no extra cost, giving antivirus and spyware protection as well as spam
filters, a firewall, and parental controls.
Three price plans are available for O2 Pay Monthly customers starting with
the Standard Package at £7.50 per month for up to 8 Mbps; the Premium
Package at £10 per month for up to 16 Mbps and the Ultimate Package at £15
per month for speeds of up to 20 Mbps. All other customers pay an additional
£10 per month.
O2 Broadband utilises one of the most advanced and high quality broadband
networks in the UK and uses the latest ADSL2+ technology. At launch, O2
Broadband covered 50% of the population, focusing on the major urban areas.
The network will be further rolled-out in line with customer demand.
• FONIC brand launched in Germany. O2 Germany launched a new discount
SIM-only mobile service, offering calls and texts for just 9.9 euro cents on
any network at any time without a monthly fee or contract. Fonic, available
online and also through an exclusive sales partnership with supermarket
giant Lidl, includes a money-back guarantee on credits, easy payment and no
minimum charges.
Fonic SIM cards are available for a one-off charge of 9.99 euros online at
www.fonic.de and all branches of Lidl. After registering online, customers
can choose two ways of re-charging their account - either through an
automatic monthly direct debit or manually. With the automatic option, the
amount and the time when it is debited can be changed at any time by the
customer. Manual recharging is carried out over the Internet or by a free
telephone call - customers can recharge their account with 10, 20 or 30
euros.
• Tesco Mobile Ireland launched. At the end of October Tesco Mobile launched
in Ireland, using O2's network via a 089 prefix. Customers pay 20 cents a
minute for calls to any network at any time, with all text messages costing
9 cents. Special bundles, In Touch 10 (10 days) and In Touch 30 (30 days),
provide unlimited calls, texts and picture messages for 4.99 euros and 11.99
euros respectively to other Tesco Mobile customers.
• Telefonica O2 Czech Republic acquires DELTAX systems. During the quarter
Telefonica O2 Czech Republic announced that it had acquired 100% of the shares
in DELTAX Systems a.s., one of the top ten system integrators in the Czech
Republic. The transaction is subject to the approval of the Office for the
Protection of Competition.
DELTAX has been operating in the Czech market since 1992, with current
turnover in excess of CZK 300 million. The company has a workforce of more
over 150 employees and key clients include top Czech companies and
government agencies. DELTAX has a long-term track record of successful
co-operation with Telefonica O2 Czech Republic on several major projects.
• BMW contract win in Germany. O2 Germany has been awarded a major new
contract to provide mobile telephony and data communication services for the
BMW Group in Germany until 2011. BMW Group selected O2 Germany to manage its
communications network - which includes more than 40,000 mobile connections
- and provide remote email access for its staff worldwide.
Further contract elements encompass the provision of 'Mobile Office',
including e-mail via O2 Xda and mobile laptop solutions, which gives staff
members worldwide access to the company network while on the move.
O2 UK
Total revenues in the three months to 30 September 2007 were 1,939 million
euros, an increase of 9.7% in local currency compared to the same period of last
year. For the nine months to 30 September 2007, total revenues were 5,526
million euros, an increase of 23.1% in local currency compared to the eight
month period to 30 September 2006. On a like for like basis total revenue growth
was 10.2%. Net service revenue for the three months to 30 September 2007 was
1,779 million euros, an increase of 10.5% in local currency compared to the same
period last year, driven by continued strong customer and ARPU growth.
Operating income before depreciation and amortization (OIBDA) for the three
months to 30 September 2007 was 530 million euros, an increase of 9.0% in local
currency compared to the three month period to 30 September 2006. OIBDA in the
year to date totalled 1,420 million euros, an increase of 14.8% in local
currency compared to the eight month period to 30 September 2006. On a like for
like basis, OIBDA grew 3.4%. Excluding the restructuring charge from the second
quarter, OIBDA for the year to date was 16.2% ahead compared to the eight month
period to 30 September 2006; on a like for like basis it was 4.6% ahead.
OIBDA margin in the third quarter was 27.3%, compared to 27.5% in the same
quarter in 2006 and 25.6% in the previous quarter. OIBDA margin for the year to
date was 25.7%, while excluding restructuring charges it was 26.0%.
The quarter again saw tough competition in the market, but the business
continued to perform well. Gross additions in the quarter were around 5% lower
than the same period in 2006, reflecting the increasingly mature nature of the
UK market but also the focus on customer retention. A total of 115,000 net
customers were added in the quarter, taking the base to 17.9 million, 3.2%
higher than at the same time last year (excluding the Tesco Mobile customer
base). O2 UK's own channels accounted for over 60% of gross connections in the
third quarter.
A total of 159,000 net contract customers were added in the quarter and at the
end of the period contract customers made up 36.5% of the total base, compared
to 35.1% at the same time last year. Quarterly monthly contract ARPU of 64.8
euros was up 1.7% quarter on quarter in local currency, and up 1.5% compared to
the third quarter last year, due to increased minutes of use and non-voice
services. Average monthly contract churn fell to 1.7% in the quarter, from 1.9%
in the third quarter last year.
The number of pre-pay customers fell by 44,000 during the quarter, continuing
the trend seen in the second quarter, reflecting migrations from pre-pay to
contract, along with the highly penetrated market. However, those customers that
left had, on average, a lower monthly spend, as demonstrated by quarterly
monthly pre-pay ARPU of 19.3 euros, 8.3% higher in local currency than the third
quarter last year and 6.3% higher than the second quarter. It is expected that
the pre-pay segment in the UK market will actually show a year on year decline
in customers in 2007, the first time this has happened.
As a result, O2 UK's blended quarterly monthly ARPU of 35.7 euros was 3.8%
higher than the second quarter in local currency, and 5.2% higher than the third
quarter of last year, reflecting the increased proportion of contract customers
in the base, and the continued growth in data ARPU offsetting declines in voice
ARPU.
Quarterly monthly minutes of use were up 10.3% year on year at 193 minutes a
month, driven by propositions such as 'Long Weekends' and 'Favourite Place'.
Quarterly monthly Data ARPU of 11.1 euros was 4.2% higher in local currency than
the same period last year, driven primarily by growth in text message volumes up
15.7% as well as increasing usage of a range of non-SMS services, and 1.2%
higher than the previous quarter.
O2 UK's broadband unit Be had rolled out to 814 exchanges by the end of the
quarter, giving its broadband network a population coverage of 50%, with over
38,000 customers. On 15 October O2 Broadband was launched utilising the Be
network, offering speeds of up to 20 Mbits per second and discounted tariffs for
O2 post-pay customers.
CapEx in the third quarter was 196 million euros, with continued investment in
both the 3G network and existing 2G network to ensure a high level of service.
O2 UK promoted a number of products and services during the quarter, aimed at
acquisition and retention of customers and revenue growth. These included:
• Simplicity - a new range of SIM-only pay monthly tariffs with O2's best
ever calling rates. O2 simplicity tariffs start from just £15 a month for
200 minutes and 200 texts, and can save a customer £180 to £270 compared to
a standard 18 month contract. Customers can cancel or change their tariff at
any time and only need to give 30 days notice.
• 'Businesses Efficiencies' Campaign across all corporate vertical sectors
offering businesses one-off consultancy, free of charge, to understand their
key mobile communication requirements.
• Your Country - Pay and Go customers get up to 200 free minutes to call any
international mobile or landline at any time, depending on how much they top
up each month. The tariff is available to new and existing customers and
requires a minimum monthly top up of £10 to receive 50 free minutes. A
customer may also choose to top up by £15 for 100 free minutes and £30 for
200 free minutes.
O2 GERMANY
O2 Germany includes Telefonica Deutschland and comparable 2006 figures have been
restated on this basis. Total revenues in the three months to 30 September 2007
were 909 million euros, a decrease of 1.8% compared to the three month period
ended 30 September 2006. Year to date total revenue was 2,612 million euros, an
increase of 9.4% compared to the eight month period to 30 September 2006. On a
like for like basis, revenue declined by 2.5%.
Mobile service revenue for the three months to 30 September 2007 was 753 million
euros, down 5.4% compared to the same period last year, reflecting the continued
ARPU weakness in the German market and the impact of the 20% termination rate
cut in November 2006, partly offset by growth of the customer base. The
termination rate cut reduced third quarter service revenue by over 4%.
Operating income before depreciation and amortization (OIBDA) for the three
months to 30 September 2007 was 197 million euros, an increase of 8.4% compared
to the same period in 2006. OIBDA for the nine months to 30 September 2007
totalled 456 million euros, a decline of 10.1% compared to the eight month
period to 30 September 2006. On a like for like basis the decline was 16.7%.
Excluding the restructuring charges from the second quarter, OIBDA for the nine
months to 30 September 2007 was 552 million euros, 0.9% ahead of the same period
last year on a like for like basis, and growth of 9.3% compared to the eight
month period to 30 September 2006.
OIBDA margin in the third quarter was 21.7%, compared to 19.6% in the same
quarter last year. OIBDA margin for the nine months to 30 September 2007 was
17.5%; excluding the restructuring charge it would have been 21.1%.
In a highly competitive environment, a total of 610,000 net new customers were
added in the quarter, taking the base to 12.168 million, 14.5% higher than at
the same time last year. The Tchibo Mobile customer base grew by 191,000 to 1.1
million by the end of the quarter.
O2 Germany added a total of 227,000 net contract customers in the quarter, with
quarterly monthly ARPU of 34.9 euros, 0.9% lower than the previous quarter, and
16.2% lower than the same quarter last year. This reflected the impact of the
termination rate cut in November 2006, increasing competition in the German
market and the introduction of new customer offers.
A total of 383,000 net pre-pay customers were added in the quarter, almost
double the level achieved in the third quarter of 2006, boosted by the launch of
the Fonic brand with its 9.9 euro cent tariff. Quarterly monthly ARPU of 6.8
euros was 1.5% higher than the previous quarter and 24.4% lower than the third
quarter last year, reflecting in addition to the above mentioned factors, higher
market penetration and the growth in multiple SIM ownership.
Blended quarterly monthly ARPU in the third quarter was 20.8 euros, a decrease
of 0.5% from the previous quarter, but 17.8% lower than the same quarter last
year. This trend reflects the ongoing impact of the termination rate cuts, the
rapid growth in the pre-pay customer base over the past twelve months, which now
makes up 50.8% of the total base, and the increasingly competitive market
environment. Termination rate cuts reduced quarterly monthly ARPU in the quarter
by approximately 3 euros.
Blended quarterly monthly minutes of use grew by 3.2% year on year to 128
minutes, driven by new propositions such as Genion flat rate and Genion S/M/L.
O2 Germany now has a total of 4.15 million Genion customers (69% of the post-pay
base), of which over 1.7 million are on the new Genion S/M/L tariffs, generating
on average 40% higher minutes of use and 10% higher ARPU than the standard
Genion base.
Quarterly monthly data ARPU was 5.2 euros, an increase of 2.0% compared to the
previous quarter and 10.3% lower than the third quarter last year due to the
higher number of lower spending pre-pay users in the base and a shift from SMS
to voice usage with the introduction of flat rate voice tariffs.
CapEx in the quarter was 199 million euros, with continued expenditure on both
the 3G and 2G networks.
O2 DSL had acquired 37,000 customers by the end of the quarter, with orders
growing to reach an average of 4,000 - 4,500 per week in September, which has
yet to be fully reflected in the net additions number. Telefonica Deutschland
reported 473,000 ULL lines in total, from around 75,000 lines at the end of the
third quarter in 2006. Equivalent ADSL lines in service reached just over
813,000 at the end of September, from 459,000 at the end of September last year.
O2 Germany launched a number of new products and services during the quarter,
including:
• New tariffs for O2 DSL - the new S tariff offers broadband Internet access
and fixed telephony for a basic fee of 20 euros, while the L tariff offers
flatrates for both Internet surfing and fixed telephony for 35 euros.
Connection and the DSL router are both free until the end of the year.
• In August O2 launched Genion XL - the best value flatrate for calls to all
German networks. Customers who sign up to Genion XL enjoy unlimited calling
to any German mobile network and the fixed network for 80 euros a month.
• Fonic, a new 'no frills' brand, offering phone calls to any German network
for 9.9 cents a minute, with no monthly fees, minimum charges, or contract.
Fonic is available online at www.fonic.de, as well as through Lidl's 2,700
stores across Germany.
• O2 has exclusive rights in Germany to distribute the new Xda comet,
launched in September. With a 624 MHz Intel processor, the comet is the
fastest device of its kind and includes: HSDPA, WLAN, Bluetooth, 1GB
internal memory and a 2.0 megapixel camera with auto focus and flash.
• In September O2 Germany and Anschutz Entertainment Group celebrated the
'topping-out' of O2 World in Berlin. O2 World will be one of the most modern
multi-functional arenas in the world and will be the future setting of for
the best sports and entertainment events in Berlin.
O2 IRELAND
Total revenues in the three months to 30 September 2007 were 254 million euros,
an increase of 4.3% compared to the same period last year. Revenue for the nine
month period to 30 September 2007 was 741 million euros, an increase of 15.9%
compared to the eight month period to 30 September 2006. On a like for like
basis growth was 3.3%. Mobile service revenue for the three months to 30
September 2007 was 243 million euros, an increase of 6.8% compared to the same
period last year, reflecting the growth of the customer base and the increase in
blended ARPU. The termination rate cut reduced third quarter service revenue by
just under 1%.
Operating income before depreciation and amortization (OIBDA) for the three
months to 30 September 2007 was 89 million euros, an increase of 4.3% compared
to the same period last year. OIBDA margin in the third quarter was 35.2%.
In a competitive market O2 Ireland traded well, with gross connections up 13%
compared to the third quarter last year. At the end of September the total
customer base was 1.632 million customers, 1.9% higher than at the same time
last year.
O2 Ireland added a total of 21,000 net contract customers in the quarter.
Quarterly monthly ARPU of 84.9 euros was 1.7% higher than the third quarter last
year and 1.3% ahead of the previous quarter.
Due to the impact of increased competitor activity, the pre-pay customer base
fell during the quarter, by 20,000 customers. Quarterly monthly pre-pay ARPU was
29.2 euros, a decrease of 2.0% on the same period a year ago and 2.7% compared
to the previous quarter.
Blended quarterly monthly ARPU of 47.0 euros was reduced by approximately 0.4
euros due to the termination rate cut, but was still 0.6% higher than the
previous quarter and 4.0% higher than the third quarter last year.
Quarterly monthly minutes of use increased by 3.6% year on year to 250 minutes,
mainly due to the higher proportion of post-pay subscribers in the base.
Quarterly monthly data ARPU was 11.6 euros, 17.1% higher than the third quarter
last year and 3.6% higher than the previous quarter.
In addition O2 Ireland launched a number of pricing initiatives and services
during the quarter. These included:
• O2 Broadband, which provides wireless broadband on the move at speeds of
up to 3.6Mbps. Delivered via a USB wireless modem, the new service offers a
viable alternative to fixed broadband in the home, providing one of the
fastest and easiest ways for customers in Ireland to get Internet access,
whether they are at home, in the office, or on the move. The initial
introductory pricing of 15 euros per month for new and existing O2 post-pay
customers, or 20 euros per month for all other customers, has been extended
until 31st January 2008. After this date the monthly cost will be 30 euros
per month and 40 euros per month respectively.
• O2 Ireland also launched the LG Prada mobile phone, billed as the ultimate
fashion must have for this season. The LG Prada phone is where fashion meets
technology with its classic minimalist design and pure black exterior, and
is exclusively available from O2 from 349 euros.
TELEFONICA O2 CZECH REPUBLIC
Total revenues in the third quarter amounted to 572 million euros, an increase
of 3.4% year on year in local currency, and for the first nine months of the
year revenues were 1,667 million euros, an increase of 3.3% in local currency.
The Czech mobile business was the key driver of this growth, with the Czech
fixed line business reporting a flat revenues year on year in the first nine
months.
Operating income before depreciation and amortization (OIBDA) in the third
quarter was 259 million euros, a decrease of 5.2% in local currency year on
year, and for the first nine months was 763 million euros, a decrease of 3.3% in
local currency, giving a margin of 45.8%, 3.1 percentage points lower than the
same period last year, with around 2 points coming from the impact of the Slovak
operations.
Total CapEx for the Telefonica O2 Czech Republic Group in the first nine months
amounted to 164 million euros, an increase of 14.4% in local currency, mainly
related to the deployment of infrastructure in Slovakia.
The Czech mobile business maintained its focus on developing attractive voice
and data packages, along with its policy of pre-pay to contract migration. Total
business revenues for the Czech mobile business grew by 5.4% year on year in
local currency in the first nine months to reach 857 million euros, with a 5.4%
increase in the third quarter alone.
The total number of mobile customers reached 4.967 million at the end of
September, an increase of 4.4% year on year. A total of 84,000 net contract
customers were added in the third quarter, bringing the total contract base to
2.161 million, an increase of 21.3% year on year, with contract customers
representing 43.5% of the total customer base, up from 37.4% a year ago.
Contract quarterly monthly ARPU of 32.6 euros was down 8.1% year on year in
local currency, reflecting the migration of pre-pay customers, but stable
compared to the previous quarter.
The pre-pay customer base declined by 5.8% year on year to 2.806 million at the
end of September, mainly due to the pre-pay to contract migration strategy.
Quarterly monthly ARPU of 9.1 euros was up 4.1% in local currency compared to
the third quarter last year and up 1.6% compared to the previous quarter.
Blended quarterly monthly ARPU was 19.2 euros, an increase of 3.1% year on year
in local currency, with minutes of use growing to 117 minutes.
Activities in the Czech fixed line business continued to focus on the
development of broadband services and increasingly the ICT/Business Solutions
area. The total number of fixed telephony accesses fell by 15.9% to reach 2.135
million at the end of September, with net disconnections of 72,000 in the third
quarter, compared to 81,000 in the previous quarter and 129,000 in the third
quarter last year. Total broadband ADSL accesses (retail + wholesale) reached
545,000 at the end of September, with 19,000 net accesses in the third quarter.
The total number of O2 TV customers increased to 53,000 at the end of September,
a net gain of 16,000 in the third quarter. O2 TV recently began broadcasting
live O2 Extraliga hockey matches, and expanded the number of films offered in
the Videote, O2's virtual video rental shop, through deals with Warner Brothers
and Disney.
Total business revenues for the Czech fixed line business grew by 0.1% year on
year in local currency in the first nine months to reach 802 million euros, with
a decrease of 0.2% in the third quarter alone. Year on year growth of 17.7% in
Internet and Broadband revenues, together with growing revenues from IT and
Business Solutions, driven by new contract wins from Government institutions,
offset the decline in revenues from the traditional voice and access business.
With regard to Telefonica O2 Slovakia, after the launch of pre-pay services in
February, and a credit-based billing tariff in June, the company enlarged its
portfolio with a fully fledged contract service during the third quarter. The
contract offer helped to increase the number of total registered customers to
nearly 500,000 at the end of September 2007. The majority of these are customers
from the pre-pay segment, using a Telefonica O2 SIM card as their second SIM.
Expansion of the service portfolio with a Post-Pay tariff will support the
company's aim of acquiring new customers and migrating existing pre-pay
customers to Post-Pay tariffs. This in turn will lead to higher customer
activity in terms of network usage with a positive impact on ARPU.
In the third quarter the company continued to rollout its own mobile network,
with more than 500 base stations in operation by the end of September 2007,
exceeding the licence requirement of 400. This will allow for the gradual
migration of traffic from the national roaming contract onto the O2 network,
with a positive impact on margins.
TELEFONICA O2 EUROPE
ACCESSES
Unaudited figures (thousands)
2006 2007
September December March June September % Chg y-o-y
Final Clients Accesses 37,564.5 38,310.9 38,866.0 39,341.4 40,136.3 6.8
Fixed telephony accesses (1) 2,598.3 2,462.9 2,347.8 2,267.2 2,194.9 (15.5)
Internet and data accesses 564.6 607.1 627.3 637.0 648.9 14.9
Narrowband 178.6 143.7 110.9 85.6 68.4 (61.7)
Broadband 373.9 451.9 505.2 540.5 572.8 53.2
Other 12.1 11.6 11.2 10.9 7.7 (36.5)
Mobile accesses 34,398.9 35,225.2 35,865.5 36,399.7 37,239.6 8.3
Contract 20,757.5 21,143.6 21,504.0 21,643.9 21,972.2 5.9
Pre-Pay 13,641.3 14,081.7 14,361.5 14,755.8 15,267.3 11.9
Pay TV 2.8 15.6 25.5 37.5 53.0 n.m.
Wholesale Accesses (2) 160.7 243.8 329.5 410.8 543.9 n.m.
Total Accesses 37,725.2 38,554.7 39,195.5 39,752.2 40,680.3 7.8
(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) Includes Unbundled Lines by T. Deutschland.
Note: Mobile accesses, Fixed telephony accesses and Broadband accesses include MANX customers.
TELEFONICA O2 EUROPE
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
January - September July - September
2007 2006 % Chg 2007 2006 % Chg
Revenues 10,776 9,434 14.2 3,708 3,607 2.8
Internal exp capitalized in fixed assets (1) 156 162 (3.6) 49 64 (23.3)
Operating expenses (8,091) (6,794) 19.1 (2,712) (2,627) 3.2
Other net operating income (expense) 11 6 86.3 5 1 n.m.
Gain (loss) on sale of fixed assets 1,298 (9) c.s. 1 (4) c.s.
Impairment of goodwill and other assets 0 (1) c.s. 0 (0) c.s.
Operating income before D&A (OIBDA) 4,151 2,798 48.3 1,051 1,041 1.0
Depreciation and amortization (2,566) (2,462) 4.2 (816) (891) (8.4)
Operating income (OI) 1,585 336 n.m. 235 149 57.2
Note: Figures are presented considering the Purchase Price Allocation of O2 as of February 2006.
Note: 'Bad debt provisions' have been reclassified from 'Other net operating income (expense)' to 'Operating expenses'.
Note: Telefonica O2 Europe includes in 2006 Telefonica O2 Czech Republic (January-September), T. Deutschland
(January-September) and O2 Group (February-September).
(1) Including work in process.
TELEFONICA O2 EUROPE
ACCESSES BY COUNTRIES
Unaudited figures (Thousands)
2006 2007
September December March June September % Chg y-o-y
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UK
Final Clients Accesses 17,337.7 17,650.0 17,774.9 17,815.4 17,938.0 3.5
Internet and data accesses 0.0 16.8 24.0 30.7 38.4 n.m.
Broadband 0.0 16.8 24.0 30.7 38.4 n.m.
Mobile accesses 17,337.7 17,633.2 17,750.9 17,784.7 17,899.6 3.2
Pre-Pay 11,255.8 11,415.1 11,452.9 11,410.7 11,366.4 1.0
Contract 6,081.9 6,218.1 6,298.0 6,374.1 6,533.2 7.4
Total Accesses 17,337.7 17,650.0 17,774.9 17,815.4 17,938.0 3.5
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GERMANY
Final Clients Accesses 10,628.7 11,043.8 11,215.2 11,591.5 12,205.1 14.8
Internet and data accesses 0.0 19.0 31.4 33.7 37.0 n.m.
Broadband 0.0 19.0 31.4 33.7 37.0 n.m.
Mobile accesses 10,628.7 11,024.8 11,183.8 11,557.8 12,168.1 14.5
Pre-Pay 5,340.7 5,544.1 5,609.6 5,792.4 6,175.4 15.6
Contract 5,288.0 5,480.7 5,574.2 5,765.4 5,992.7 13.3
Wholesale Accesses (1) 75.3 149.3 227.4 305.1 435.9 n.m.
Total Accesses 10,704.0 11,193.1 11,442.6 11,896.6 12,641.0 18.1
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IRELAND
Mobile accesses 1,602.8 1,631.7 1,632.5 1,631.5 1,632.5 1.9
Pre-Pay 1,134.7 1,146.7 1,133.6 1,118.7 1,098.8 (3.2)
Contract 468.1 485.1 499.0 512.8 533.7 14.0
Total Accesses 1,602.8 1,631.7 1,632.5 1,631.5 1,632.5 1.9
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CZECH REPUBLIC
Final Clients Accesses 7,854.3 7,842.9 7,712.3 7,698.1 7,714.6 (1.8)
Fixed telephony accesses (2) 2,537.3 2,402.5 2,287.5 2,207.2 2,134.6 (15.9)
Internet and data accesses 554.6 560.3 559.9 559.8 559.5 0.9
Narrowband 178.6 143.7 110.9 85.6 68.4 (61.7)
Broadband 363.9 405.1 437.9 463.3 483.5 32.9
Other 12.1 11.6 11.2 10.9 7.7 (36.5)
Mobile accesses 4,759.7 4,864.5 4,839.5 4,893.7 4,967.4 4.4
Pre-Pay 2,978.3 2,989.7 2,873.2 2,816.7 2,806.6 (5.8)
Contract 1,781.3 1,874.8 1,966.3 2,076.9 2,160.9 21.3
Pay TV 2.8 15.6 25.5 37.5 53.0 n.m.
Wholesale Accesses 85.4 94.5 102.1 105.7 108.0 26.5
Total Accesses 7,939.8 7,937.4 7,814.4 7,803.8 7,822.6 (1.5)
-----------------------------------------------------------------------------------------------------------------------
SLOVAKIA
Mobile accesses - - 386.8 455.0 495.6 n.m.
Pre-Pay - - 386.8 454.0 475.9 n.m.
Contract - - 0.0 1.0 19.7 n.m.
Total Accesses - - 386.8 455.0 495.6 n.m.
(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.
TELEFONICA O2 EUROPE
SELECTED OPERATING DATA MOBILE BUSINESS BY COUNTRIES
Unaudited figures
2006 2007
3Q 4Q 1Q 2Q 3Q % Chg y-o-y Local Cur
-----------------------------------------------------------------------------------------------------------------------
O2 UK
MOU (minutes) 175 180 179 189 193 10.3
ARPU (EUR) 34.0 34.1 33.3 34.5 35.7 5.2
Pre-Pay 17.9 18.2 17.0 18.2 19.3 8.3
Contract 63.9 63.5 63.2 63.9 64.8 1.5
Data ARPU 10.6 10.7 11.0 11.0 11.1 4.2
%non-P2PSMS over data revenues 13.1% 12.5% 13.4% 14.2% 15.2% 2.1 p.p.
-----------------------------------------------------------------------------------------------------------------------
O2 GERMANY
MOU (minutes) 124 129 129 133 128 3.2
ARPU (EUR) 25.3 23.7 20.5 20.9 20.8 (17.8)
Pre-Pay 9.0 8.3 6.8 6.7 6.8 (24.4)
Contract 41.7 39.2 34.2 35.2 34.9 (16.2)
Data ARPU 5.8 5.9 5.1 5.1 5.2 (10.3)
%non-P2PSMS over data revenues 21.4% 22.6% 24.9% 25.0% 25.9% 4.5 p.p.
-----------------------------------------------------------------------------------------------------------------------
O2 IRELAND
MOU (minutes) 241 246 240 249 250 3.6
ARPU (EUR) 45.2 45.0 44.2 46.7 47.0 4.0
Pre-Pay 29.8 29.6 28.0 30.0 29.2 (2.0)
Contract 83.5 81.4 82.0 83.8 84.9 1.7
Data ARPU 9.9 10.0 11.5 11.2 11.6 17.1
%non-P2PSMS over data revenues 18.4% 19.6% 19.9% 23.4% 26.5% 8.1 p.p.
-----------------------------------------------------------------------------------------------------------------------
T. O2 CZECH REPUBLIC (1)
MOU (minutes) 102 109 109 120 117 14.7
ARPU (EUR) 18.3 18.8 17.7 18.5 19.2 3.1
Pre-Pay 8.6 8.8 8.3 8.8 9.1 4.1
Contract 34.9 35.0 32.2 32.2 32.6 (8.1)
Data ARPU 3.8 4.0 3.8 3.9 4.0 4.6
%non-P2PSMS over data revenues 43.0% 40.0% 41.0% 42.0% 45.0% 2.0 p.p.
Note: MOU and ARPU calculated as monthly quarterly average.
(1) KPIs for Mobile business in Czech Republic do not include Slovakia.
TELEFONICA O2 EUROPE
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
January - September
2007 2006 % Chg % Chg Local Cur
-----------------------------------------------------------------------------------------------------------------------
O2 UK (1) Revenues 5,526 4,435 24.6 23.1
OIBDA 1,420 1,222 16.2 14.8
OIBDA margin 25.7% 27.6% (1.9 p.p.)
CapEx 560 511 9.6 8.3
-----------------------------------------------------------------------------------------------------------------------
O2 GERMANY (2) Revenues 2,612 2,388 9.4 9.4
OIBDA 456 507 (10.1) (10.1)
OIBDA margin 17.5% 21.2% (3.8 p.p.)
CapEx 605 794 (23.8) (23.8)
-----------------------------------------------------------------------------------------------------------------------
O2 IRELAND (1) Revenues 741 639 15.9 15.9
OIBDA 253 236 7.4 7.4
OIBDA margin 34.2% 36.9% (2.7 p.p.)
CapEx 81 109 (25.7) (25.7)
-----------------------------------------------------------------------------------------------------------------------
TELEFONICA O2 CZECH REPUBLIC Revenues 1,667 1,592 4.7 3.3
OIBDA 763 779 (2.0) (3.3)
OIBDA margin 45.8% 48.9% (3.1 p.p.)
CapEx 164 142 15.9 14.4
(1) In 2006 includes February-September period.
(2) In 2006 includes February-September period for O2 Germany and Telefo Deutschland.
RESULTS BY REGIONAL BUSINESS UNITS
Others Companies
ATENTO GROUP
Revenues for the Atento Group reached 869 million euros during the first nine
months of 2007, equivalent to an annual growth of 14.7% when compared to the
same period the previous year, as a result of the higher activity, mainly in
Brazil and Mexico.
Revenues generated by non-Telefonica Group customers advanced 21.9% year-on-year in
the third quarter of 2007 and represented 49.6% of Atento's total revenues to
September 2007, 3.0 percentage points more than in the same period the previous
year. The main drivers of this growth were:
• Brazil: the strong growth in business from financial services customers
such as Itau, Bradesco, Banco IBI, Redecard and Banco Santander.
• Mexico: the collaboration with BBVA, primarily in the Finanzia and
collections services, boosted by new operations from the US.
• Venezuela: revenues generated by the CANTV Group increased as did
financial sector business volumes with Banco Banesco.
• Argentina: revenues generated by existing customers such as Lexmark, Mc
Donalds and Nokia were higher.
• Colombia: higher activity with ETB, Citibank and Colpatria.
In terms of the geographical breakdown of revenues, Brazil accounted for 40.9%
of the total compared to 38.7% a year earlier. The contribution of other Latin
American units to the total is also on the rise. The Mexican business continued
to post strong growth, contributing 12.4% of the Group's total revenues,
compared to 9.9% in the same period the previous year. Venezuela accounted for
4.2%, up from 3.7% in the same period last year, while Peru contributed 3.8%, up
from 2.8% in the January-September 2006 period. On the other hand, Spain and
Chile made smaller contributions. Spain accounted for 22.9% of total revenues
compared to 29.8% in the same period the previous year, while Chile contributed
5.8% down from 6.2%. These figures reflect the strong performance of the
Brazilian operation and the enhanced geographical breakdown of the overall
revenue mix.
Operating expenses amounted to 756 million euros in the January-September 2007
period, equivalent to a year-on-year growth of 15.1%. The strong growth in
revenues underlies the increase in personnel expenses owing to a larger
teleoperations workforce, higher telecommunications costs due to the increased
activity and higher facility leasing and maintenance costs following new service
centre openings.
Operating income before depreciation and amortization (OIBDA) for the Atento
Group rose 14.6% year-on-year to 117 million euros in the first nine months of
2007. The OIBDA margin was 13.5%, flat year-on-year. Atento Brasil contributed
51 million euros or 43.2% of OIBDA. Of the remaining operations, the largest
contributions to consolidated OIBDA were by Mexico (16.4% or 19 million euros),
Chile (9.0% or 10 million euros), Venezuela (8.2% or 10 million euros) and Peru
(7.4% or 9 million euros).
Operating income (OI) in the first nine months of the year amounted to 95
million, equivalent to a year-on-year growth of 16.8 %.
CapEx through September 2007 amounted to 19 million euros, flat year-on-year.
Investment was deployed principally in new service centre openings in Brazil,
Mexico, Venezuela and Peru.
Operating cash flow (OIBDA-Capex) presented a growth of 18.9% when compared to
the first nine months of 2006, reaching 98 million euros, as a result of
continued growth in operating income coupled with a stable investment effort.
At the operating level, the Atento Group ended September 2007 with 53,287
positions in place, 21.5% more than the previous year. The average number of
occupied positions to September 2007 stands at 42,155. Productivity in the
January-September 2007 period was 78.2%, 0.9 percentage points lower than in the
same period the previous year.
ATENTO GROUP
CONSOLIDATED INCOME STATEMENT
Unaudited figures (Euros in millions)
January - September July - September
2007 2006 % Chg 2007 2006 % Chg
Revenues 869 758 14.7 305 250 22.0
Internal exp capitalized in fixed assets 0 0 n.m. 0 0 n.m.
(1)
Operating expenses (756) (657) 15.1 (265) (212) 24.6
Other net operating income (expense) 2 1 72.1 2 0 n.m.
Gain (loss) on sale of fixed assets 2 (0) c.s. 2 (0) c.s.
Impairment of goodwill and other assets 0 0 n.m. 0 0 n.m.
Operating income before D&A (OIBDA) 117 102 14.6 44 38 16.0
Depreciation and amortization (22) (21) 6.1 (8) (7) 7.6
Operating income (OI) 95 81 16.8 36 31 17.9
(1) Including work in process.
ADDENDA
Key Holdings of the Telefonica Group detailed by regional business units
TELEFONICA ESPANA TELEFONICA O2 EUROPE
% Part % Part
Telefonica Espana 100.00 O2 UK 100.00
Telefonica Moviles Espana 100.00 O2 Gemany 100.00
Telyco 100.00 O2 Ireland 100.00
Telefonica Telecomunic.
Publicas 100.00 Manx 100.00
T. Soluciones de Informatica y
Comunicaciones de Espana 100.00 Be 100.00
Iberbanda 51.00 Telefonica O2 Czech Republic (1) 69.41
Medi Telecom 32.18 Telefonica O2 Slovakia (2) 100.00
(1) Company owned through Telefonica S.A.
(2) Company owned through Telefonica O2 Czech Republic.
TELEFONICA LATINOAMERICA OTHER PARTICIPATIONS
% Part % Part
Telesp (1) 87.95 3G Mobile AG (Switzerland) 100.00
Telefonica del Peru 98.18 Atento Group 100.00
Telefonica de Argentina 98.04 Group 3G (Germany) 57.20
TLD Puerto Rico 98.00 Mobipay Internacional 50.00
Telefonica Chile 44.89 Tempos 21 (1) 43.69
Telefonica Telecom 52.03 IPSE 2000 (Italy) (1) 39.92
Telefonica USA 100.00 Lycos Europe 32.10
T. Intern. Wholesale Serv. (TIWS)(2) 100.00 Sogecable (2) 16.83
Brasilcel (3) 50.00 Mobipay Espana (1) 13.36
T. Moviles Argentina 100.00 Hispasat 13.23
T. Moviles Peru 98.53 Portugal Telecom (3) 9.84
T. Moviles Mexico 100.00 China Netcom Group (4) 5.00
Telefonica Moviles Chile(4) 100.00 BBVA 1.02
T. Moviles El Salvador 99.08 Amper 6.10
T. Moviles Guatemala 100.00 (1) Ownership directly or indirectly held by Telefonica
Telcel (Venezuela) 100.00 Moviles Espana.
T. Moviles Colombia 100.00 (2) Telefonica de Contenidos, S.A. holds 15.63% and
Otecel (Ecuador) 100.00 Telefonica, S.A. holds 1.20%.
T. Moviles Panama 100.00 (3) Telefonica's Group effective participation. Telefonica T.
T. Moviles Uruguay 100.00 Group participation would be 9.96% if we exclude the
Telefonia Celular Nicaragua 100.00 minority interests. Taking into account the own shares held
T. Moviles Soluciones y by the Portuguese company and excluding the minority
Aplicac. (Chile) 100.00 interests, Telefonica's Group voting rights reached 10.96%.
(4) Ownership held by Telefonica Latinoamerica.
(1) Effective participation 88.01%.
(2) Telefonica, S.A. owns 92.51% and Telefonica
DataCorp owns 7.49%.
(3) Joint Venture which fully consolidates the
subsidiary Vivo, S.A., through participation at
Vivo Participacoes, S.A. (62.94%)
(4) Telefonica Moviles Chile made a capital
increase in the month of May. As a result it became
the unique shareholder of Telefonica Moviles de
Chile, that was disolved. This operation ended the
1st of July.
ADDENDA
Significant Events
•On October 25th, 2007, TELEFONICA, S.A., ASSICURAZIONI GENERALI S.p.A., INTESA
SANPAOLO S.p.A., MEDIOBANCA S.p.A. and SINTONIA S.A. (BENETTON) acquired the
whole of the capital of OLIMPIA S.p.A., through the Italian company, TELCO
S.p.A. which holds approximately 23.6% of the capital that confers voting rights
of TELECOM ITALIAS.p.A.
•On October 11th, 2007, Telefonica, at its Sixth Investor Conference, announced
a proposal to distribute a dividend of (1) euro per share corresponding to 2008
fiscal year.This dividend will be payable in two tranches: the first one in the
second half of 2008, and the second one in the first half of 2009.
•On September 26th, 2007, Telefonica S.A. announced the distribution of an
interim dividend from 2007 net income, of a fixed gross amount of 0.35 euros on
November 14th, 2007. Likewise, it is the Board's intention to propose to the
next Annual General Shareholders' Meeting, to be held in 2008, the payment of a
final dividend of 0.40 euros per share, so that the total shareholder
remuneration for fiscal year 2007 will amount to 0.75 euros
•On August 3rd, 2007, Vivo Participacoes, S.A. ('VIVO'), a Brazilian company
controlled by Brasilcel NV jointly controlled by Telefonica, S.A. and Portugal
Telecom SGPS, signed an agreement with Telpart Participacoes S.A. ('Telpart')
for the acquisition of Telpart's stakes in Telemig Celular Participacoes S.A and
Tele Norte Celular Participacoes S.A.
•On July 25th, the Board of Directors of the Company announced that Gregorio
Villalabeitia Galarraga resigned as Director, which entailed his ceasing to hold
office as Vice-Chairman of the Board, and as a member of the Executive Committee
and of the Audit and Control, Regulation and International Affairs Committees.
The Board of Directors also unanimously resolved the interim appointment of the
new Board member Jose Maria Abril Perez, as proprietary Director. He has also
been appointed as a member of the Executive Committee of the Board of Directors.
Lastly, the Board also approved the appointment of Vitalino Nafria Aznar as
Vice-Chairman of the Board of Directors.
ADDENDA
Changes to the Perimeter and Accounting Criteria of Consolidation
In the period January-September of 2007, the main changes have occurred in the
consolidation perimeter were the following:
TELEFONICA O2 EUROPE
•In April, Telefonica O2 Europe PLC, 100%-owned by Telefonica, S.A. and its
wholly owned subsidiary O2 Holdings LTD, sold 100% of British firm Airwave O2
Ltd. This company, which was consolidated in the Telefonica Group financial
statements using the full integration method, has been removed from the
perimeter of consolidation.
OTHER COMPANIES
•In August the Telefonica Group sold its 100% stake in Spanish company Azeler
Automocion, S.A. for 0.34 million euros. This company, which had been fully
consolidated in the Telefonica Group, was removed from the consolidation
perimeter.
•In June, Atento Teleservicios Espana, S.A. of Spain incorporated US company,
Contact US Teleservices Inc., contributing 100% of the initial share capital of
0.1 million US dollars. This company was added to the Telefonica Group's
consolidation perimeter and is fully consolidated. In August this company took
out a 0.55 million US dollar capital increase, which was fully subscribed by
Atento Teleservicios Espana, S.A.
•In June, Telefonica, S.A. sold its entire 31.75% stake in Sistemas Tecnicos de
Loterias del Estado, S.A. This company, which had been accounted for by the
Telefonica Group under the equity method, was removed from the consolidation
perimeter.
•In May, Telefonica, S.A. agreed to sell its 99.7% stake in Dutch company Endemol
Investment Holding B.V. to a newly created consortium held equally by Mediacinco
Cartera S.L., a newly incorporated company owned by Mediaset and its listed
Spanish subsidiary Gestevision Telecinco, Cyrte Fund II B.V. and G.S. Capital
Partners VI Fund, L.P. for 2,629 million euros. The agreement was executed on 3
July. This company, which had been fully consolidated in the Telefonica Group,
was removed from the consolidation perimeter.
•In April, US firm Katalyx, Inc. sold its 54% stake in Brazilian company
Mercador, S.A. The company had been consolidated in the financial statements of
the Telefonica Group under the equity method and was thus removed from the
perimeter of consolidation.
•During the first quarter of 2007, the Telefonica Group sold shares in the
Italian company Ipse 2000 S.p.A. reducing its direct and indirect percentage in
the Italian company to 39.9158%. The company continues to be incorporated in the
consolidated financial statements of the Telefonica Group using the equity
method.
•In February 2007 the company sold 100% of its stake in Endemol France to the
company Endemol, N.V., in which the Group had 75% participation, and thus
reducing its stake in the company to that percentage.
•The Spanish company Communicapital Gestion, S.A. has been liquidated. The
company, which was included in the financial statements of Telefonica Group
using the full integration method, has been removed from the perimeter of
consolidation.
DISCLAIMER
This document contains statements that constitute forward looking statements in
its general meaning and within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements appear in a number of places in this
document and include statements regarding the intent, belief or current
expectations of the customer base, estimates regarding future growth in the
different business lines and the global business, market share, financial
results and other aspects of the activity and situation relating to the Company.
The forward-looking statements in this document can be identified, in some
instances, by the use of words such as 'expects', 'anticipates', 'intends',
'believes', and similar language or the negative thereof or by forward-looking
nature of discussions of strategy, plans or intentions.
Such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and other important factors that could cause
actual developments or results to differ materially from those expressed in our
forward looking statements.
Analysts and investors are cautioned not to place undue reliance on those
forward looking statements which speak only as of the date of this presentation.
Telefonica undertakes no obligation to release publicly the results of any
revisions to these forward looking statements which may be made to reflect
events and circumstances after the date of this presentation, including, without
limitation, changes in Telefonica's business or acquisition strategy or to
reflect the occurrence of unanticipated events. Analysts and investors are
encouraged to consult the Company's Annual Report as well as periodic filings
filed with the relevant Securities Markets Regulators, and in particular with
the Spanish Market Regulator.
The financial information contained in this document has been prepared under
International Financial Reporting Standards (IFRS). This financial information
is unaudited and, therefore, is subject to potential future modifications.
For additional information, please
contact.
Investor Relations
Gran Via, 28 - 28013 Madrid
(Spain)
Phone number:
+34 91 584 4700
Fax number:
+34 91 531 9975
Email address:
Ezequiel Nieto -
ezequiel.nieto@telefonica.es
Dolores Garcia -
dgarcia@telefonica.es
Isabel Beltran -
i.beltran@telefonica.es
ir@telefonica.es
www.telefonica.es/
accionistaseinversores
END
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