Results _ May, 2015.
Disclaimer This presentation may contain forward-looking statements concerning future prospects and objectives regarding growth of the subscriber base, a breakdown of the various services to be offered and their respective results. The exclusive purpose of such statements is to indicate how we intend to expand our business and they should therefore not be regarded as guarantees of future performance. Our actual results may differ materially from those contained in such forward-looking statements, due to a variety of factors, including Brazilian political and economic factors, the development of competitive technologies, access to the capital required to achieve those results, and the emergence of strong competition in the markets in which we operate.
Highlights: sustaining positive evolution of main operational drivers leading to strong revenue growth 3 Contract Accesses and 4G adoption 1 Outgoing Mobile Service Revenue yoy Net Revenues yoy 26% 32% 35% Mobile 9% 28% 11% 9% 14% 1.5% 1.2% 1.8% 4.3% 1Q13 1Q13 2Q14 3Q14 4Q14 % 4G data traffic Mix of contract accesses Highest growth recorded in about 3 years Highest growth recorded in about 3 years FTTH BB and Pay TV Net Adds Thousand and yoy 77% Consumer Fixed Broadband Revenues Million 3.7% 3.4% Recurrent EBITDA 2 Billion and yoy 2.0% 7.0% 6.6% 0.2% Fixed 111 83 74% 193 146 360 373 385 2.5 2.5 3.0 2.6 2Q14 3Q14 4Q14 FTTH BB PayTV 1Q13 4 th consecutive quarter of EBITDA growth 1- Average data traffic of our customers as a percentage of the total data traffic in São Paulo, Rio de Janeiro, Brasília, Porto Alegre and Belo Horizonte. 2- Excludes organizational restructuring expenses in the 4Q14.
DISCOVER, DISRUPT, DELIVER Operating Performance_
Integrated Performance: strong growth in Mobile Contract and resilient fixed accesses evolution in the 5 Total Accesses Mobile Accesses Million 3.5% 1.9% Million 4.3% 2.4% 78.5 79.9 81.9 24.9 28.4 28.9 YoY 16.0% 93.9 95.4 97.2 15.4 15.4 15.3 YoY -0.5% 53.6 51.6 53.0 4Q14 Prepaid Contract -1.1% Fixed Accesses 78.5 79.9 81.9 4.3% Million -0.5% -0.8% YoY 4Q14 Mobile 1 Fixed 2 15.4 15.4 15.3 0.6 3.9 0.8 3.9 0.8 3.9 10.8 10.7 10.6 4Q14 Voice Broadband PayTV 3 22.7% -0.2% -2.0% 1- Includes prepaid and contract customers. 2- Includes fixed voice, fixed broadband and Pay TV. 3- Excludes Vivo Play accesses, our OTT solution.
Mobile: ARPU growth acceleration driven by consistent evolution in Contract accesses and improved trends in 4G Data adoption 6 Million 26% 37% Contract MKT Share and Mix 32% 41% 42% 4G Coverage 35% 1Q13 Contract market share 41% 37% Mix of contract 141 95 63 45 Million 17 Smartphone Penetration and Data users 30 39% 47% 41 69% 1Q13 Smartphone Penetration 4G Data Adoption 2 3 33% 31% 9% 14% 17% 22% +35% +22pp YoY Data Access 28% 5x 1 Total ARPU yoy Voice ARPU Reais and % YoY Total ARPU and Mix 23.1 23.3 24.3 +3.4% +0.7% +4.3% 30% 35% 42% 70% 65% 58% 1Q13 Data Benchmark 53% higher than market average in the 1Q 15.9 +53% Total ARPU R$/month 24.3 Vivo Player 2 Player 3 Player 4 # cities covered % of population mar/14 jun sep dec mar/15 4G Data traffic % 4G data traffic Average of competitors 4 Vivo 1- Data cards, data packages and M2M, excluding eventual data user with no data package or plan.. 2- Teleco. 3- Average data traffic of our customers as a percentage of the total data traffic in São Paulo, Rio de Janeiro, Brasília, Porto Alegre and Belo Horizonte. 4- Average of competitors ARPU in the.
Mobile Strategy: improved portfolio and value proposition driving a better customer monetization and experience 7 Commercial approach and value proposition Monetization and Customer experience Prepaid: large portfolio of data packages for eventual use Prepaid Recharges per Client Average R$ per month Penetration of Data Packages % Daily Weekly Monthly +3% +10% +15pp +11pp 15MB 40MB 200MB 250MB 400MB 600MB R$ 0.99 R$ 2.90 Mar/14 CURRENT Mar/14 CURRENT Mar/14 CURRENT NEW R$ 11.90 R$ 14.90 R$ 19.90 R$ 24.90 New Control Plans: stimulating higher usage NEW 1Q13 45 34 19 1Q13 n.a. 200 MB n.a. R$ 29.90 R$ 34.99 R$ 39.90 500 MB R$ 49.99 250 MB R$ 49.90 800 MB R$ 64.99 Limiting usage after end of the bundle is improving network quality and customer experience Mobile on-net R$0.5 per SMS (on and off net) Mobile/Fixed on-net (on and off- net) Mobile on-net on-net Mobile/Fixed on-net (on and off- net) Mobile on-net on-net Contract: successful upselling of data bundles 1 5.2 pp 5.5 pp Mobile/Fixed on-net (on and off- net) 5% Improvement in PMQ4 2 before and after limited connectivity PMQ4 = Data disconnection rate 3 15% 20% 21% 22% 34% 34% 44% 44% 51% 29% -3.8 pp <2GB 2GB >3GB PR/SC NE RS RJ ES CO MG BA/SE SP N Average Feb/15 Feb/15 No/14 Feb/15 Mar/15 Feb/15 Nov/14 Feb/15 Feb/15 Feb/15 Limiting data usage 4 1- Evolution in % of customers per data bundle ( vs ). 2- PMQ4 was created by Anatel in the Quality Improvement Plan (PMQ) in Aug/12 to analyze if telco's investments are being allocated to improve the quality of services provided. 3- Data connections discontinued / total data connections. 4- Month when data limit was implemented in each region.
UBB and Video Company: leadership position in UBB with approx. 60% share of net adds above 34Mbps and steady growth in Pay TV 8 UBB Video Vivo Fiber Net Adds Thousand 32 1.7 x 54 Share of UBB adds above 34Mbps 1 57% 22% 11% 8% 480 DTH 26% Pay TV Accesses Thousand 605 48 IPTV 2.3x 111 Vivo Player 2 Player 3 Player 4 Broadband ARPU R$ per month FTTH HPs Million Trio Thousand 4% 4.2 24% 31.7 32.8 2.3 2.7 1.5 Addressable homes HPs Customer base 1- Market share of accesses with speeds higher than 34Mbps in the State of SP, according to ANATEL from Mar/14 to Mar/15.
Convergent Corporate Services Provider: strong annual growth in revenues and accesses in the most relevant services 9 4G M2M Customer base Customer base 2.6 x 777 thousand customers in the 1.4 x Leader in market share of net adds with 1.1 million new accesses in the year Fiber Revenues New customers 1.4 x Growth sustained by HPs expansion and customer migration (XDSL) Data packages 33% IT 44%
DISCOVER, DISRUPT, DELIVER Financial Performance_
Key Financial Figures: record Net Revenue growth in the quarter mainly driven by Mobile Data Revenues evolution in the period 11 R$ million %YoY Net Operating Revenue 1 8,983.1 8,611.9 4.3 Net Operating Service Revenue 8,644.5 8,299.2 4.2 Net Mobile Service Revenue 5,904.3 5,446.1 8.4 Net Fixed Service Revenue 2,740.2 2,853.2 (4.0) Operating Costs (6,414.3) (6,049.1) 6.0 EBITDA 2,568.8 2,562.8 0.2 EBITDA Margin 28.6% 29.8% (1.2) p.p. Net income 579.7 660.8 (12.3) Capex ex-licenses 1,269.7 1,001.0 26.8 1- Includes Net Handset Revenues.
Mobile Service Revenue: the highest level of growth in around 3 years capturing 93% of incremental revenues generated by the market 12 Net Mobile Service Revenue Share of Incremental Mobile Service Revenue 1 Accumulated in the last 12 months R$ Million 11.6% 8.4% yoy 1Q13 3.3% 7.0% YoY -0.2% 5,919 5,446 5,904 52 118 69 1,888 2,282 2,479 YoY 32.2% 31.3% 672 569 485 2,834 2,949 2,871-27.9% 1.3% 59% 66% 68% 78% 93% 4Q14 Access and usage Data and VAS Network usage Others 2Q14 3Q14 4Q14 Evolution without the 2015 MTR reduction 1- Based on net mobile service revenues accumulated in the last 12 months. For comparative purposes, we calculate the Mobile Service Revenue based on ARPU released by each operator and according to the criteria adopted by the Global Wireless Matrix from Merrill Lynch.
Data and VAS: strong acceleration of Internet adoption driving superior growth in data revenue which represented 42% of MSR in 13 Data and VAS Revenue Internet and VAS Revenues R$ Million 1,888 428 364 31.3% 2,282 418 466 8.6% 2,479 414 468 YoY -3.3% 22% 28.3% Internet Revenues yoy 2x 35% 46% 1Q13 1,096 1,398 1,598 45.8% VAS Revenues R$ million E-health 4Q14 Internet VAS Messaging P2P % of Data and VAS Revenue over Mobile Service Revenue 4Q14 35% 39% 42% 2x 468 364 242 1Q13 Media Financial IT Education Cloud
Fixed Revenue: resilient evolution sustained by solid presence in Pay TV and Broadband Revenues 14 Net Fixed Revenue Pay TV and Broadband Revenues R$ Million -0.4% -4.0% -3.1% 2,853 2,829 2,740 191 183 176 589 604 600 YoY -7.8% % over Fixed Revenues 4% -23% Pay TV Revenues R$ Million 4 5% 6% 14% 22% 121 138 169 1Q13 Steady growth both in revenues and accesses (the latter 23% yoy in the and 15% in the 4Q14) 373 381 385 138 162 169 1,562 1,499 1,410 4Q14 1 2 Voice PayTV BB Corporate Data and IT Others Evolution without regulatory effect 3 1.9% 3.4% 22.0% -9.8% % over Fixed Revenues PayTV Revenues 12% 360 Broadband Revenues 2 R$ Million 373 yoy evolution 32 32 33 385 1Q13 Data Revenues 13% 14% ARPU Consistent ARPU growth in the B2C segment mainly driven by the broadband through FTTH 1- Includes voice, accesses and network usage. 2- B2C segment. 3- Regulatory effect include VC and basic tariff reductions. 4- Negative evolution because of MMDS clean-up.
EBITDA: sustaining slight growth in the even in face of a higher level of provision for uncollectibles in a more challenging environment 15 EBITDA and EBITDA Margin R$ Million and % yoy REPORTED 29.8% 4.2% 1.8% 9.5% 2.9% 46.6% 28.6% 345 16 201 2,563 117 1 77 46 2,569 Recurrent EBITDA Net Service Revenues Personnel + G&A Subsidies + Selling Expenses 2,692 2,615 2,569 Services Rendered Others Recurrent EBITDA YoY EBITDA Margin Personnel + G&A Collective bargaining agreement held in January, 2015 Lower G&A expenses in in different fronts Subsidies + Selling Expenses Increased volume of higher-value handsets with 4G technology Higher commissions, subsidies and mainly provision for uncollectibles in a more challenging environment Services Rendered MTR reduction driving reduced interconnection costs Ex-MTR, higher costs associated with maintenance, TV content and leasing of sites to ensure our quality coverage 1- Evolution of provision for uncollectibles in the period.
Financial Figures: higher investments in the to sustain our quality differential while sustaining solid capital structure 16 Capex OCF R$ Million R$ Billion 27% 0.8 0.8 1,001 1,270 1.3 1.0 OCF OCF/(EBITDA-Capex) Gross and Net Debt Net Margin 1 R$ Billion 8.6-18% 7.0 R$2.8 bn paid as IOC and dividends during 2014. -29% 0.35 0.25 3.7 2.6 % 13.7% -24.8% 7.7% -2.5% Gross debt Net debt Net debt / EBITDA Vivo Player 2 Player 3 Player 4 1- Based on net revenue and net result accumulated in the last 12 months.
Conclusion: resilient growth in different fronts even in face of worse macro conditions 17 1. Sustaining leading position in premium segments 2. Commercial rationality improving network quality and customer experience 3. Achieving record revenue growth driven by mobile data, VAS and pay TV 4. Recurrent EBITDA annual growth for the fourth consecutive quarter 5. Sustaining differentiated net profitability and solid capital structure
DISCOVER, DISRUPT, DELIVER GVT acquisition_
Vivo + GVT Combined and non audited Key Figures: improved growth in main operational and financial numbers during 19 Combined, non audited numbers %YoY Total accesses (thousand) 105,383 101,041 4.3 Mobile (thousand) 81,869 78,465 4.3 Fixed Voice (thousand) 14,856 14,655 1.4 Fixed Broadband (thousand) 6,955 6,561 6.0 Pay TV (thousand) 1,703 1,360 25.3 Net Operating Revenue 1 (R$ MM) 10,388.2 9,877.0 5.2 Net Service Revenue (R$ MM) 10,049.6 9,564.3 5.1 Net Mobile Serv. Revenue (R$ MM) 5,891.4 5,427.3 8.6 Net Fixed Revenue (R$ MM) 4,158.2 4,137.0 0.5 EBITDA (R$ MM) 3,137.2 3,073.6 2.1 EBITDA Margin 30.2% 31.1% (0.9) p.p. 1- Excludes intercompany eliminations and includes Net Handset Revenues.
Av. Eng. Luis Carlos Berrini, 1376 28 th floor Cidade Monções Sao Paulo/SP 04571-000 Phone: +55 11 3430-3687 E-mail: ir.br@telefonica.com Information available from the website: http://www.telefonica.com.br/ir