2Q13 RESULTS. Rio de Janeiro, August 2013 Oi S.A. 0

Transcription

1 RESULTS Rio de Janeiro, August 2013 Oi S.A. 0

2 IMPORTANT NOTICE This release contains forward-looking statements, according to the U.S. Private Securities Litigation Reform Act of Statements that are not historical facts, including statements about perspectives and expectations, are forward-looking statements. The words "anticipates", "believes", "estimates", "expects", "forecasts", "intends", "plans", and similar terms, when related to the Company or its management, indicate forwardlooking statements. These statements reflect the current view of management and are subject to various risks and uncertainties. These statements are based on various assumptions and factors, including general economic, market, industry, and operational factors. Any changes to these assumptions or factors may lead to practical results different from current expectations. Excessive reliance should not be placed on those statements. Forward-looking statements relate only to the date they are made, and the Company is not obligated to update them as new information or future developments arise. Oi S.A. 1

3 BUSINESS PERFORMANCE Oi S.A. 2

4 Results - Highlights SOLID CUSTOMER GROWTH Operational highlights Thousand RGUs Total 72,334 74, % +2,423 Residential 18,037 18, % +401 Fixed Line 12,744 12, % -502 Broadband 4,806 5, % +490 Pay TV % +413 Personal Mobility 45,198 46, % +1,698 Pre-paid 39,407 40, % +828 Post-paid 5,791 6, % +870 Corporate/SMEs 8,370 8, % +385 Net adds Fixed Line 5,249 5, % +57 Broadband % +89 Mobile 2,596 2, % +238 Public Telephones % -62 y.o.y Oi S.A. 3

5 Results - Highlights REVENUE GROWTH AND EBITDA IMPACTED BY HIGHER COSTS Financial highlights R$ million Net Revenue Residential Personal Mobility Service Corporate/SMEs Operating Costs and Expenses Provision for bad debt Personnel Marketing EBITDA EBITDA Margin Depreciation and Amortization EBIT Net Financial Expenses Net Income Capex Net Debt 6,909 2,466 2,229 1,533 2,070 4, , % 864 1, ,360 23,535 7,073 2,578 2,255 1,595 2,154 5, , % 1, ,506 29,489 y.o.y +2.4% +4.5% +1.2% +4.0% +4.1% +10.8% +97.0% +42.5% +45.8% -16.4% -5.7p.p % -44.9% +25.9% n.m % +25.3% Oi S.A. 4

6 Brazil MACRO ENVIRONMENT Market forescasts 2013 Brazil is one of the largest global economy Changing macro fundamentals and instability leading to higher risk in the short term IPCA (%) Inflation Dec/ Mar/ Jun/ Attractive demographics, low unemployment combined with a rising middle class should support future growth Exchange rate end of period (R$/USD) Selic end of period (%p.y.) GDP (% of growth) Brazil Country Risk* /20 highest Brazil Risk in the year Source: Central Bank, Bloomberg 1/1/2013 7/31/2013 *CDS 5Y Oi S.A. 5

7 Brazil STRONG DEMOGRAPHICS SHOULD UNDERPIN DEMAND FOR TELECOMS Change in demographics % of population 2005 AB Class 15% C Class 34% DE Class 51% Unemployment rate % of population Jun/13 Jun/ Average monthly household income R$ Jun/ AB Class C Class DE Class 22% 53% 25% Jun/08 Jun/ Rising middle class with higher purchasing power Higher employment Average income growth ( ) of 8.9% Source: Teleco, IBGE, Cetelem BGN / Ipsos Oi S.A. 6

8 Brazil ATTRACTIVE MARKET FOR TELECOM SERVICES Broadband penetration in 2012 % of population Pay TV penetration in 2012 % households 3G penetration in 2012 % population Smartphone penetration in 2012 % population Brazil 9.6 Brazil 26 Brazil 35 Brazil 16 China 13.0 China 58 China 16 China 18 Portugal 22.2 Portugal 79 Italy 83 Portugal 33 USA 28.2 USA 86 USA 81 USA 39 United Kingdom 34.0 United Kingdom 54 United Kingdom 77 United Kingdom 49 Low penetration of Broadband, Pay TV and Mobile Internet y Source: Teleco, IBGE, INE Census 2011 preliminary values, Ofcom, Digital TV Research Ltd, wikipedia, TeleGeography s Global Telecomms, Global Wireless Matrix Bank of America Merrill Lynch, Informa WCIS Oi S.A. 7

9 Footprint BROAD INFRASTRUCTURE STRONG GEOGRAPHICAL COVERAGE NATIONAL REGIONAL LOCAL 115,000 km National backbone Largest coverage area in Brazil Present in all Brazilian states and +4,800 municipalities 30,000 km of metropolitan rings 2G/3G and 4G coverage including WiFi in over 4,500 sites One of the largest and most diversified Telecom networks in the world Source: Oi, Anatel, Atlas Brasileiro de Telecomunicações 2011; Teleco; press Oi S.A. 8

10 Residential DECLINING LINE LOSS AND GROWING PENETRATION OF BROADBAND AND PAY TV UNDERPINNED BY BUNDLED OFFERS Broadband net adds Thousand y.o.y Pay-TV net adds Thousand y.o.y Q11 3Q11 4Q11 1Q12 3Q12 2Q11 3Q11 4Q11 1Q12 3Q12 Fixed line net adds Thousand y.o.y -1,193-1,210-1,115-1, Q11 3Q11 4Q11 1Q12 3Q12 Oi S.A. 9

11 Residential GOOD PROGRESSION IN BROADBAND TRENDS Residential broadband RGUs % 5 Mbps and < 10 Mbps Mbps Q12 Broadband customers and Household penetration rates 37 % of Oi household % Customers (thousand) Investments deployed to increase coverage, capacity and connection speeds 4,806 4,975 5,102 5,251 5,296 Loyalty programs / speed upgrades used to enhance value proposition for customers Focus is on increasing penetration of bundled offerings by leveraging F/M access networks 3Q12 Oi S.A. 10

12 Residential PAY TV POSTING SEQUENTIAL IMPROVEMENT AND IS KEY TO DRIVING FUTURE GROWTH Pay TV customers Thousand. % +84.8% Q12 Oi household penetration % Solid first steps in Pay TV DTH is the main Pay TV platform Personalization and multiscreen will provide unique customer experience Most complete entry package in the market HD channels in all packages Upselling potential still to be realized 4 5 3Q12 Oi S.A. 11

13 Residential BUNDLED OFFERINGS MITIGATE FIXED LINE ATTRITION AND SUPPORT RGU GROWTH (1/2) Oi Bundle Offers Oi Conta Total w/ TV Fixed + Postpaid + Velox + TV + WiFi Oi Conta Total Fixed + Postpaid + Velox + WiFi Casa Total TV + Fixed + Velox + WiFi Internet Total Velox + 3G Unlimited + WiFi Fixo Total Fixed + Prepaid 4P 3P 3P 2P 2P local, off-net and LD minutes 50 min. 200 min. 500 min min. Additional Services Pay TV Oi Conta Total + Unlimited on-net and local traffic + F/M Traffic + Broadband: 2/10 Mbps + Family packages (up to 4) + + SMS* Plan Unlimited Data & SMS Unlimited Long Distance Mobile Broadband Oi Conta Total Smartphone Handset Subsidy Unlimited SMS Mobile Internet * SMS and MMS plan equal to voice plan Oi S.A. 12

14 Residential BUNDLED OFFERINGS MITIGATE FIXED LINE ATTRITION AND SUPPORT RGU GROWTH (2/2) Households with more than 1P thousand +7.0% RGUs thousand 6,529 6,684 6,744 6,948 6, % 3Q12 18,037 18,189 18,337 18,471 18,438 Fixed line customers thousand -3.9% 12,744 12,610 12,478 12,383 12,242 3Q12 3Q12 Oi S.A. 13

15 Residential...RESULTING IN 4.5% REVENUE GROWTH Households with more than 1P % +6p.p. Residential revenues % y.o.y ARPU R$ Q % Q12 3Q12 Oi S.A. 14

16 Personal Mobility CONSISTENT EXPANSION OF PRE PAID CUSTOMER BASE WITH GOOD PROGRESSION IN RECHARGES Voice, text and data promotions by regional market Gross recharges vs. Prepaid customer base Base Gross Recharge Prepaid RGUs Strict disconnection policy 80 2Q11 Oi S.A. 15

17 Personal Mobility POST PAID SUPPORTS TRANSITION FROM VOICE AND TEXT TO DATA Postpaid RGUs Thousand Trends in mobile postpaid mix % % 6,472 6,664 6,661 Postpaid was 51% of personal mobility net additions in LTM Jun Jun13 5,791 6,085 Increase of 1.4p.p. in weighting of postpaid in personal mobility y-o-y Postpaid market share Percentage points 1.2 Penetration of connected devices accelerating Q12 Tightening of credit policy and subsidies Jun Jun13 Player 1 Player 2 Player 3 OI Source: Anatel Oi S.A. 16

18 DATA SERVICES DRIVING REVENUES AND TRAFFIC IS EXPECTED TO GROW EXPONENTIALLY IN THE COMING YEARS 3G coverage Personal Mobility Q % of urban population Municipalities (thousand) Personal Mobility Service Revenue R$ million 1, % 1,595 Data RGUs Thousand +3.8% Prepaid Postpaid 45,198 45,568 46,305 46,569 46,896 39,407 39,483 39,832 39,905 40, % 346 5,791 6,085 6,472 6,664 6,661 3Q12 Oi S.A. 17

19 Personal Mobility 4G LTE COVERAGE 4G LTE technology is efficient, will add capacity and improve quality of customer experience Offer launched in April/13 Coverage in June/13: 50% of 6 cities Clients in June/13: 21,390 4G Cities that already have Oi s 4G 4G Manaus 4G Cities that will have Oi s 4G by December G Fortaleza 4G Natal 4G Recife Network cooperation (RAN sharing) with TIM allows optimization of capex Joint network planning with independent PMO FIFA World Cup cities to be covered by Dec/13 SP/Curitiba brought forward to Sep/13 Adoption by customers should be underpinned by increased usage of mobile internet, more devices and coverage Traffic per device (3G/4G) to continue growing 4G LTE complementary to fixed line broadband Too early to make conclusions on impact 4G Cuiabá Brasília 4G 4G São Paulo 4G Curitiba 4G Porto Alegre 4G Belo Horizonte 4G Rio de Janeiro 4G Salvador Oi S.A. 18

20 SMEs Corporate/SMEs SERVICE OFFERING COMBINING END-TO-END TELECOM AND IT SOLUTIONS Corporate/SMEs revenues R$ million Voice, broadband and mobile growth Focus on profitability Disconnection of mobile clients with bad debts 2,070 2, % 2,195 2,079 2,154 Corporate Official supplier of Telecom and IT services of the Confederations Cup Continued focus on increasing RGUs of digital trunks, VPN network and internet access (+18% YoY) 3Q12 Corporate/SMEs RGUs Thousand 8,370 8,782 8,971 Fixed 8,949 Broadband Mobile 8,755 Growth of +16% in VPN network, internet access and mobile postpaid revenues Focus on revenue assurance actions to increase ARPU of installed RGUs 5,249 2,596 5, ,830 5, ,955 5, ,946 5, ,834 3Q12 Oi S.A. 19

21 Corporate/SMEs CLOUD OFFERS TO BE LAUNCHED PROVIDE VALUE ADDED IT SOLUTIONS TO CUSTOMERS Selected Offers Rationale Collaboration Solutions Web Presence SaaS/CaaS market represents more than 60% of the Brazilian Cloud market in both segments and collaboration solutions are applications with the largest potential to migrate to the Cloud Business Uses SAP Hana and B1 Leverage strategic partnerships, where growth of PaaS market has been ~60% per year in the Corporate segment and ~80% per year in the SMEs Mobility SAP Mobility (MDM) Offer mobile handset management in the Cloud to Corporates Capture ~60% growth in the IaaS market by offering Remote Desktop, focused on SMEs Security Anti-SPAM Filtering of web content Enrich Oi s Cyber DC portfolio by adding security and reporting solutions Oi S.A. 20

22 FINANCIAL REVIEW Oi S.A. 21

23 Consolidated Revenues REVENUE GROWTH ACROSS ALL SEGMENTS Residential net revenue % y.o.y Net revenue R$ million Personal Mobility Service Revenue Growth Residential Business/Corporate Personal Mobility Other +2.4% 2Q11 3Q11 4Q11 1Q12 3Q12 6,909 7,041 7,073 Personal mobility net revenue % y.o.y % Q11 3Q11 4Q11 1Q12 3Q12 2,466 2,229 2,555 2,316 2,578 2, % +1.2% Corporate/SMEs net revenue % y.o.y ,070 2,079 2, % 2Q11 3Q11 4Q11 1Q12 3Q12 Oi S.A. 22

24 Consolidated OPEX and EBITDA EBITDA IMPACTED BY HIGHER COSTS EBITDA and EBITDA margin R$ million. % EBITDA margin Operating cost and Expenses R$ million Reversal of provisions for losses on labor claims of circa R$201 million % 2,149 2, ,797 Insourcing of internal network maintenance Payment of wage benefits Inflation adjustment of salary 4, ,276 Sponsorship of the Confederations Cup Personnel Third- Party Services Marketing Rent and Provision for bad Insurance debt Other Oi S.A. 23

25 Consolidated OPEX and EBITDA COMMITMENT TO ACHIEVE OPERATIONAL EXCELLENCE Operating costs and expenses R$ million.% Costs and Expenses/Net revenue % 4,760 4,890 5,276 Productivity and Cost efficiency initiatives IT platform Implement best practice IT architecture to improve time to market and efficiency Networks focus on TCO, infrastructure sharing and benefits of convergence Field force improve installation time, technician productivity, redo rates and prevent customer calls and truck rolls Customer care selfcare and improve service and collection cost per customer Sales Focus on lower churn and customer lifetime G&A - Leaner structure and internal culture of cost and financial discipline Oi S.A. 24

26 Consolidated Net income LOWER EBIT AND HIGHER FINANCIAL COSTS IMPACTED NET INCOME Net income R$ million Financial result R$ million net loss was impacted by lower EBIT and higher financial expenses Higher average net debt and interest rates resulted in increased interest expense Foreign exchange devaluation and hedging cost also impacted performance Cash financial result R$ million , Treasury Other P&L Other Net Financ. Revenue Construc. in Progress Interest Other Cash Flow Financ. Results Oi S.A. 25

27 Consolidated CAPEX INVESTMENTS DIRECTED TO BROADBAND, PAY TV AND 3G/4G CAPEX R$ million 20 1, , ,319 CAPEX/Net revenues 21 1, ,144 In, capex was R$1,506 million, reaching R$ 3,196 million in the first half, supporting growth in the customer base and higher future recurring revenues Investments to expand coverage and capacity of 3G and launch of 4G network Capex aligned with focus on churn and customer lifetime value Other IT services Network Oi S.A. 26

28 Consolidated Debt COMPETITIVE COST OF DEBT AND ONLY 1% EXPOSED TO FOREX Debt R$ million Interest rate exposure (post-hedge) % Gross debt 33,582 TJLP 15% 26% Pre-fixed Cash 4,092 IPCA 10% Net debt 29,489 CDI 49% Oi S.A. 27

29 Consolidated Debt AVERAGE DEBT MATURITY OF 4.7 YEARS, WITH STRONG LIQUIDITY POSITION Liquidity R$ million Gross debt amortization schedule R$ million 20,534 4,092 3,400 1,500 2, ,030 1,532 4,109 2,693 4,714 Cash BNDES Revolving in R$ Revolving in USD* ECAs in USD* Liquidity position onwards *Exchange rate of June/13 Oi S.A. 28

30 Consolidated Debt NET DEBT IMPACTED BY 3G AND 4G LICENSES AND SEASONAL PAYMENTS OF FISTEL AND CONCESSION FEES Change in Net debt R$ million 27,495 1,797 Fistel and Concession Fees G and 4G Licenses 1,506 1, , ,061 29,489 Working Capital impacted by seasonal payment of Fistel / Concession Fees and 3G / 4G licenses Cash received from the disposal of two tranches of fixed towers Net Debt EBITDA Judicial Deposits Taxes Capex WC Financial Result Dividends Asset Disposals Net Debt Oi S.A. 29

31 ASSET DISPOSALS ENHANCE FINANCIAL FLEXIBILITY AT AN ATTRACTIVE COST OF FUNDING Pro-forma Numbers Mobile towers Fixed towers Globenet Total Date of Signed Contract Dec/12 Apr/13 and Jul/13 Jul/13 - Term of lease (Years) Quantity 1,208 6, Average unit price (R$ thousand) Total value of the transaction (R$ million) 516 1,774 1, ,035 Non- recurring impact of the sale on EBITDA (R$ million) 200 n.m. 1, ,439 Cost of 8%-9% (including opex, capex and tax) and estimated EBITDA impact of R$550mn in Reference values (contracted in USD) - Exchange rate of R$ Considering current book value The chart above reflects the current view of management and is subject to various risks and uncertainties, including economic, regulatory and anti-trust factors. Any changes to these assumptions or factors may lead to practical results different from current expectations. Oi S.A. 30

32 NEW DIVIDEND POLICY FISCAL YEARS 2013 TO 2016 In light of current macroeconomic environment and with the objective of strengthen the Company's financial flexibility, Oi has revised its Shareholder Compensation Policy aiming at having a short and long term policy consistent with the Company s strategic priorities and operational challenges. For fiscal years 2013 to 2016: Minimum amount necessary to currently meet the following objectives: pay dividends in the amount equivalent to the greatest of (i) 25% of adjusted net income for the year, (ii) 3% of shareholders equity, and (iii) 6% of the capital stock; ensure equitable pay between species of preferred and common shares. Current estimated amount of R$500 million. Payment of intermediate or interim dividends will also be permitted, subject to market conditions and Oi s then-prevailing financial condition. By October 2013 Board of Directors will resolve upon the payment of interim dividends in amount of R$500 million, which will be considered as part of the dividends for the 2013 fiscal year. Oi S.A. 31

33 For further information: Bayard Gontijo Marcelo Ferreira Cristiano Grangeiro Patricia Frajhof Leonardo Mantuano Address: R. Humberto de Campos th floor Leblon - Rio de Janeiro RJ Oi S.A. 32