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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. To create consumer habits through multiplatform contents and leading brands for Telefonica’s clients in the Spanish and Portuguese speaking world.

  3. WHY TELEFONICA IN MEDIA? : TELECOM, MEDIA & INTERNET ... CONVERGENCE Telecom • Strong cash generation. • Distribution channels. • Clients data bases. • CRM capacity. Internet • Growth potential businesses. • New business models. • Interaction with clients. • Innovation. • Media • New business models. • Alternative distribution channels. • Access to clients and advertisers. CONTENTS CONVERGENCE Convergence of these industries ensures the leading position of players focused in an integrated relationship with clients

  4. T v I SINCE 1997, TELEFONICA MEDIA HAS INVESTED ALONG THE WHOLE VALUE CHAIN OF MEDIA 22,74% 51% 20% 100% 100% 47,4% 100% 100% Telefónica Sport 100% 5% Telefónica Sport 25% 40% 70% 100% 48,6% 100% 30% 100% 100% 50% 100% 100% 100% 1997 1998-1999 2000

  5. TELEFONICA MEDIA: SELECTED COMPANIES I) Free-to-air-TV & Radio • Number one channel in terms of TV-advertising in 2000. • The most attractive audiences for advertisers (best commercial profile) • Successful turnaround track record of management team. • Outstanding profitability and high growth. • Excellent non-advertising growth potential (i.e.:New Media, theme channels, events, etc.). (Spain) • Telefe has been the number one player over the last ten years in Argentina. • Excellent brand recognition. • Potential for cross-fertilization with Antena 3. (Argentina) • Number 2 radio company in Spanish market. • Consolidation play on Spanish market. • Re-structuring plans of new management recently in place. (Spain)

  6. Significant current market share of around 38%. • Currently with over 650.000 subscribers. • Good access to leading Spanish movies and key agreements with majors. • Developing a wide range of interactive services. • Leading provider of satellite sevices in fastest growing DTH markets in Europe and Latam. • Potential for new services (i.e. mobile, broadband, DAB). • Core part of Via Digital business. Leading position with Spanish and international clients. TELEFONICA MEDIA: MAIN COMPANIES II) Contents • Leading content provider with some of the most succesful TV formats worldwide. • Potential leverage of Endemol content through traditional and new media networks of • Telefónica (Europe - UMTS). • Attractive content for convergence as demonstrated by Big Brother success. • UMTS applicable content under development. (Netherlands) III) Pay TV & Distribution (Spain) (Spain) (Spain)

  7. TELEFONICA HAS DEVOTED SUBSTANTIAL RESOURCES TO ACHIEVE THIS POSITION (a) 962 8,102 Investments € million 138 313 319 409 974 4,988 Endemol Telefe & Azul Vía Digital Antena 3 Telefonica Onda Cero Pearson/ TOTAL (b) (c) others Sport As % of total: 62% 12% 5% 4% 4% 2% 12% (a) Investments: cash plus equity (b) Includes Telefonica Sport, GMAF, Audiovisual Sport, Euroleague and Torneos y Competencias (c) Includes Art Media, Hispasat, Interocio Games, Lola Films, Media Park, Pearson, Patagonik, Rodven, ST Hilo, Telefonica Servicios Audiovisuales and TMIC

  8. STRATEGY: CAPTURE SINERGIES AS AN INTEGRATED GROUP MANAGEMENT CORPORATE UNIT • Highly professional management teams to improve companies’ results and implement a growth strategy. • Well defined business plans and operational control processes. • Lead strategic development of each of the three divisions (free-to-air-TV, contents and pay TV). • Identify and capture economies of scale among businesses and markets. TARGETS • New management team in Argentina and Onda Cero. • Top executives appointed. • Control process coordinated by the Corporate Unit. • Creation of new units: > New Media and Broadband. > Alliances and Music. > Integration and synergies. ACTIONS IN PLACE

  9. STRATEGY: CREATE VALUE IN TELEFONICA MEDIA’S THREE BUSINESS LINES Pay TV & Distribution Contents Free-to-air-TV and Radio Telefónica Sport Consolidate as a leading player in free-to-air-TV in Spanish speaking countries Create a leading content manager Consolidate Telefonica Media’s position in Pay TV

  10. STRATEGY: CREATE VALUE IN TELEFONICA MEDIA’S THREE BUSINESS LINES Pay TV & Distribution Contents Free-to-air-TV and Radio Telefónica Sport Consolidate as a leading player in free-to-air-TV in Spanish speaking countries Create a leading content manager Consolidate Telefonica Media’s position in Pay TV

  11. MAIN MANAGEMENT CHALLENGES IN ANTENA 3 Management challenges Audience and advertising investment share Audience share Advertising investment share Maintain strong audience share in segments attractive to advertisers • Continue pursuing commercial target audience (under 55 years, from cities with more than 10,000 inhabitants, middle to upper income brackets). • Ensure a stable audience share throughout the day, reducing dependence on prime time. Improve efficiency of fixed cost structure • Maximize the level of in-house production, reducing dependence on majors. 28.3 27.9 27.4 22.8 22.8 21.5 1998 1999 2000 Production figures (% growth 1997-2000) 122% Minutes produced Cost/minute produced -40% 1997 1998 1999 2000

  12. MAIN MANAGEMENT CHALLENGES IN ANTENA 3 (cont’d) Management challenges Net sales 696 €million 602 New businesses 13% Diversify into new media activities • Identify new business opportunities to leverage value of the brand, content and promotional capabilities. • Optimise sale of advertising services through different delivery platforms (TV, cinema, Internet, etc). Strict control of operating expenses • Consolidate as a cash generating company. Antena 3 Television 9% 468 5% 386 600 547 431 386 1997 1998 1999 2000 Financial statements 179 144 € million 96 78 -30 € million 2000 CAGR 00-04 Sales 696 11%-16% EBITDA 200 16%-21% Net Debt (Cash)*: -78 * as of 31/12/2000 -41 -111 Net debt EBT -225 1997 1998 1999 2000

  13. MAIN MANAGAGEMENT CHALLENGES IN TELEFE AND AZUL Management challenges Telefe: Advertising sales (€ '000) + 33% 4,424 3,337 • New management team in place with strong focus on return and cash generation. • Improvement of the commercial division with the hiring of executives focused on profitability. • Cost-control policy: renegotiation of contracts with key artists. • Preliminary results of turnaround on both assets. jan 2000 jan 2001 Telefe: Coproduction costs (€ '000) 13 - 50% 7 TELEFE (€ mill)2000 CAGR 00-04 Sales 296 8%-13% EBITDA -24 Breakeven in 2001 Net Debt (Cash)*: 428 * as of 31/12/2000 2000 2001E

  14. MAIN MAGAGEMENT CHALLENGES IN ONDA CERO Management challenges Onda Cero Revenues (€ millions) + 45% 4.8 • New management in place with focus in: • Internal operations: strict cost cutting policy and improvement of advertising sales. • External operations: national third party alliances (Radio Blanca, Europa FM, Radio Marca) • New programme portfolio with the hiring of solid talents with a view to increase audience share consolidating as the 2nd option. 3.0 jan-00 jan-01 Onda Cero Audience Thousands of people + 35% 2,530 1,879 € million2000 CAGR 00-04 Sales 52 14%-19% EBITDA 12 Breakeven in 2001 Net Debt (Cash)*: 26 * as of 31/12/2000 3rd. survey 99 3rd. survey 2000

  15. REINFORCE PRESENCE IN LATINAMERICA Main trends Growth strategy • Attractive growth market: - Advertising investment above US$ 50,000 mill. in 2000. - 500 mill. inhabitants. • Industry deregulation. • Absence of a global main player due to the high number of family owned companies. • Higher segmentation and a more sophisticated audience. • Acquire assets in those markets where Telefonica has presence (Peru, Brasil, Chile). • Create alliances in those markets with high entry barriers (Brasil, Mexico). • In an selective way, acquire presence in other markets through acquisitions (Colombia, Uruguay).

  16. Successful model in Spain Argentina T v I REPLICATE SUCCESSFUL DIVERSIFICATION MODELS IN OTHER MARKETS Free-to-air-TV Peru Children Cinema advertising Artists’ management Events Direct marketing New Media Megatrix Argentina Chile Brasil FAMA Argentina Mexico Battres Argentina Colombia

  17. STRATEGY: CREATE VALUE IN TELEFONICA MEDIA’S THREE BUSINESS LINES Pay TV & Distribution Contents Free-to-air-TV and Radio Telefónica Sport Consolidate as a leading player in free-to-air-TV in Spanish speaking countries Create a leading content manager Consolidate Telefonica Media’s position in Pay TV

  18. MAIN MAGAGEMENT CHALLENGES IN ENDEMOL Management challenges Maximise synergies with Telefonica • Leverage Endemol as main content provider of Grupo Telefonica. • Monitor and transfer creative skills among the companies. Consolidate leading position in a convergence context • Support Endemol’s growth strategy of entering into new markets (Latam, USA) through acquisition of leading local players or through organic growth in a convergence and interactive context. Reinforce management and pursue new projects • Enhance coordination with Telefonica Media and Telefonica. • Optimise e-business resources to pursue new projects. Leverage European footprint • Vehicle to explore alliances with European media players. € million2000 CAGR 00-04 Sales 519 31%-36% EBITDA 88 29%-34% Net Debt (Cash)*: -4 * as of 31/12/2000

  19. SPORT STRATEGY: CREATE VALUE IN TELEFONICA MEDIA’S THREE BUSINESS LINES Pay TV & Distribution Contents Free-to-air-TV and Radio Consolidate as a leading player in free-to-air-TV in Spanish speaking countries Create a leading content manager Consolidate Telefonica Media’s position in Pay TV

  20. MAIN MAGAGEMENT CHALLENGES IN VIA DIGITAL Number of subscribers and average fee per subscriber (€) Number of subscribers Management challenges Average fee per subscriber 30 30 1,000 30 27 24 • Non recourse bank financing, already in place, to compete in a highly competitive market with low operating margins and high fixed costs. • Improve market position and financial risk via strategic international alliances. • Focus on short and medium term results: • Increase number of subscribers and their average fee on a profitability basis. • Increase revenues of interactive TV and t-commerce. 650 750 633 20 450 500 290 10 250 2 75 0 0 1997 1998 1999 2000 jan 2001 New sources of revenues 5% iTV, t-commerce 20% € million2000 CAGR 00-04 Sales 227 31%-36% EBITDA -287 Breakeven in 2003 Net Debt (Cash)*: 842 * as of 31/12/2000 95% Monthly fee, PPV 80% 2000 2005P

  21. Thematic channels packager Contents distribution channel Technical infraestructure STRATEGY IN PAY TV AND DISTRIBUTION Consolidate Telefonica Media’s position in Pay TV • Strategic defense asset for Telefonica Media in the DTH and ADSL platform (full positioning of Telefonica Media in UMTS, DTH, ADSL, TDT and Broadcasting). • Powerful distribution channel integrated with Telefónica (i.e. package of ADSL and Via Digital). • Consolidate TSA as the thematic channel packager within Telefonica. • Examine synergies and economies of scale that might potentially arise from close cooperation with other European DTHplatforms.

  22. IN THE NEW MEDIA ARENA WE ARE WELL POSITIONED TO CAPTURE VALUE Cash Flow Growth New Media Traditional media • New channels • Interactive advertising • Technological standards • Transmission, distribution streaming • Digital content management • Free TV • Pay TV • Radio • Events • Brand promotion Broadband Internet iTV Telephone

  23. ... BASED ON A COMMUNITIES MANAGEMENT MODEL PCs iTV PDA’s Thematic channel TV Website Fridges Radio COMMUNITIES Telephone Cinema ADSL(Telef. España) Consoles Teletext Promotional platforms Broadband Platforms Communities / Brands Children Young Women Travel Music Cinema Sports Others: Health / Education News Games

  24. THE STRATEGIC BUSINESS PLAN PROJECTS AN IMPROVEMENT OF ALL ASSETS Companies’ EBITDA(a) (2000P - 2004E) € million CAGR 2000E - 2004E Investment Stake 2000 Free TV 16%-21% 200 47,4% Antena 3 318 Telefe Breakeven in 2001 100% -24 974 Azul TV -27 100% Breakeven in 2002 Radio Onda Cero 138 100% -12 Breakeven in 2001 Contents 29%-34% 15 Endemol 830 100% Pay TV & related companies Breakeven in 2003 Via Digital -287 49% 409 13%-18% Media Park 30 25% 63 TSA 21%-26% 8 19 100% Hispasat 27 72 24% 11%-16% 140 Aggregated of the other (a) Represents 100% of companies’ EBITDA The EBITDA of Telefonica Media is not the sum of the EBITDAs of the companies above, since some of them do not consolidate through global consolidation.

  25. “Per se” value Independent assets operator CAPTURE SYNERGIES WITH TELEFONICA AND TELEFONICA MEDIA (I) Synergies with global operators Main player in a global market Synergies with Telefonica Convergence among divisions Synergies with Telefonica Media Media assets integrator EXAMPLES

  26. CAPTURE SYNERGIES WITH TELEFONICA AND TELEFONICA MEDIA (II) Synergies with global operators Main player in a global market Synergies with Telefonica Convergence among divisions Synergies with Telefonica Media Media assets integrator “Per se” value Independent assets operator EXAMPLES

  27. MEDIA IN TELEFONICA : TELECOM, MEDIA & INTERNET ... CONVERGENCE Telecom Internet CONTENTS Media CONVERGENCE Integrated management of these industries maximises value for clients

  28. Main player in a global market Synergies with Telefonica Convergence among divisions Synergies with Telefonica Media Media assets integrator “Per se” value Independent assets operator CAPTURE SYNERGIES WITH TELEFONICA AND TELEFONICA MEDIA (III) Synergies with global operators EXAMPLES

  29. Synergies with global operators Main player in a global market Synergies with Telefonica Convergence among divisions Synergies with Telefonica Media Media assets integrator “Per se” value Independent assets operator CAPTURE SYNERGIES WITH TELEFONICA AND TELEFONICA MEDIA (IV)

  30. TELEFONICA MEDIA’S STRATEGY AND CHALLENGES IN THE SHORT AND MEDIUM TERM Value creation in the short term Strategy • Focus on operations’ management and consolidate “turnaround” of Telefe, Azul and Onda Cero. • Promote synergies in advertising sales, based on the know how of Antena 3. • Active management of Via Digital, reinforcing customer growth and migration to interactivity. • Create solid brands, supported by successful and integrated management of the assets. • Develop an educational project. • Synergies with other divisions of Telefonica. • Enhance customer relationship management. • Brand and content consolidation focused on the development of new businesses. • Asset acquisition in those markets where Telefonica has presence (Perú, Brasil, Chile) and creation of alliances in those markets with high entry barriers (Brasil, Mexico). • Development of new business models based on the potential growth of broadband. • Alliances with key players. • Ongoing reassesment of our investment in order to maximise value and divest from non-core assets.

  31. To create consumer habits through multiplatform contents and leading brands for Telefonica’s clients in the Spanish and Portuguese speaking world.

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