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Safe Harbour

Safe Harbour.

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Safe Harbour

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  1. Safe Harbour This presentation contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation 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 activities and situation relating to the Company . Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward looking statements as a result of various factors. Analysts are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Telefónica 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 Telefónica´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 on Form 20-F as well as periodic filings made on Form 6-K, which are on file with the United States Securities and Exchange Commission.

  2. Telefónica´s Financial Profile and Prospects

  3. Ebitda: Profitability, growth and diversification A milestone year in terms of assets growth Strong balance sheet Stable Financial strategy and timely execution Telefónica’s financial profile: Y2k

  4. Euro Mill. 1999 2000 YoY Growth TURNOVER 22,957 28,485 24% EBITDA 10,885 11,919 9.5% NET INCOME 1,805 2,505 38.8% E.P.S. (Euros) 0.57 0.67 18.5% Steady growth record

  5. EBITDA: Growth + diversification Data / Media / Internet 4% Cellular 20% Cellular Wireline (Spain) Wireline (Spain) 26% 36% 36% Wireline (LATAM) Wireline (LATAM) 44% 34% Revenue 2000: 28,485 Millions Euro EBITDA 2000: 11,919 Millions Euro

  6. EBITDA: SIZE 2000E EBITDA 13.8 12.6 11.9 10.5 9.7 (Euro Bn) 3.3 Deutsche Telecom Telefónica France BT KPN Telekom Italia Telecom

  7. Strong historical growth (Euro Bn) 28.4 11.9 2.5 10.9 22.9 9.3 1.8 17.5 1.3 1998 1999 2000 1998 1999 2000 1998 1999 2000 Revenues EBITDA Net Income

  8. A milestone year: Asset growth ... 62,211 45,571 1999 2000 Consolidated Net Assets (Euro Mill.) YoY growth: + 36.5%

  9. … while preserving a strong balance sheet 1999 2000 Net Debt 20,472 26,951 Minority Interest 10,614 9,330 Shareholders’ Equity 14,485 25,930 Total Capital Employed 45,571 62,211 Net Debt / Total Capital Employed 44.9% 43.3% Net Debt / EBITDA (x) 1.9 2.3 EBITDA / Net financial expenses (x) 6.1 6.4

  10. Equity funding Full access to LATAM’s cash flows Optimising WACC and credit rating Financial flexibility Enhancing stability of a growing cash flow Efficiency and transparency in capital allocation With a clear financial strategy andtimely execution

  11. Equity funding: now and before ... • 2000 Equity issues Bn Eur • Verónica 21 • Endemol 5 • New equity • Mobile IPO 3.3 • TPI 3% sale 0.1 • Motorola Assets 2 • Total Equity 31.4 • New equity: 82% of attributable UMTS licenses costs • Verónica: EPS accretive by 29.7% (*) • (*) Before extraordinary income; after extraordinary income EPS accretive by 15.3%

  12. Rating stability 09/99 12/99 03/00 06/00 09/00 12/00 02/01 FT AA+ BT BT BT FT AA KPN KPN KPN KPN FT FT AA- DT DT DT TELEFONICA TELEFONICA TELEFONICA TELEFONICA TELEFONICA TELEFONICA TELEFONICA A+ FT FT BT VODAFONE VODAFONE VODAFONE BT BT BT VODAFONE A VODAFONE VODAFONE KPN KPN FT A- DT DT DT DT VODAFONE KPN BBB+

  13. … Enhancing financial flexibility 7 5.5 1999 2000 (*) Average debt maturity (years) (*) Average life global bond: 12.5 years / Amortisation of short term debt

  14. … and diversifying risk Euro Medium Term Notes + Commercial Other Paper 1.6% 5.3% LATAM 19.1% Global bonds 20.8% USD Loans 41.7% 43.1% Domestic bonds EURO 30.8% 37.6% By instrument (*) By currency (*) (*) Net Debt breakdown (31/12/00)

  15. Financial Profile above European peers Net Debt/Market Cap 20/02/01 Net Debt/ EBITDA 5.18 77.00% 4.65 71.00% 69.60% 4.36 2.3 35.10% DT FT BT TEF DT FT BT TEF Source: analyst estimates

  16. Cash - flows accretion • Verónica: 3.6 billion Euro additional cash - flow • Avoiding intrinsic subordination • Internal loans (*): • TEM : 4.9 Billion Euro • TISA : 585 M USD • T. Media : 945 M USD • Enhanced financial flexibility (*) Market prices

  17. Improving cash - flow quality 20.5% 11% 5.4% Stand-alone LATAM countries Telefónica's LATAM portfolio Telefónica's LATAM + SPAIN portfolio US$ EBITDA Average Standard Deviation

  18. Business lines Third parties Companies Looking for more efficiency Corporation Services Shared Services Centers Services Services Services Expected NPV of USD 850 millions

  19. WIRELESS CALL CENTERS DATA INTERNET WIRELINE YELLOW PAGES Improving capital allocation WACC 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% INTERNET DATA ARGENTINA PERÚ CALL CENTERS BRASIL WIRELESS CHILE YELLOW PAGES MÉJICO USA WIRELINE ESPAÑA

  20. Solid and well diversified revenue growth Reinforcing capital discipline: Capex / Operating Revenue Improving asset turnover: Revenue / Capital employed Well balanced and growing EBITDA margin: EBITDA / Revenue Enhancing Free cash flow margins What’s next

  21. Solid and well diversified revenue growth Data / Media / Internet Wireline (Spain) 21% 22% 24.00% 13%-15% Wireline LATAM Cellular 20% 37% 2000 CAGR 00/04 Revenue growth Revenue Breakdown 2004

  22. Reinforcing Capital discipline (Capex / Op. Revenue) 31% 21%-23% 2000 (*) Average 2001 - 2004 (*) 2000 : UMTS Licenses / Op. Revenue = 41%

  23. Improving Asset turnover (*) 0.50-0.55 0.46 2000 Average 2001 - 2004 (*) Asset turnover: Revenue / Capital employed

  24. Well balanced and growing EBITDA Data / Media / Internet Wireline 41.8% 24.5% (LATAM) 28.5% 38%-41% Cellular 20.3% Wireline (Spain) 2000 Average 2001 - 2004 26.7% EBITDA / Operating Revenue EBITDA breakdown 2004

  25. Enhancing Free Cash Flow margins 8%-12% 2.8% 2000 Average 2001-2004 % Free Cash Flow / Operating Revenue

  26. Proven management execution capability Accountability and transparency Diversification and growth Capital allocation discipline A value creating group with a focused strategy Unique position to take advantage of the market environment Messages

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