INVESTOR DAY. Amos Genish Chief Executive Officer. São Paulo March 15 th 2016

Transcription

1 INVESTOR DAY Amos Genish Chief Executive Officer São Paulo March 15 th 2016

2 MARKET LEADERSHIP THROUGH DATA-CENTRIC STRATEGY LEVERAGING EFFICIENCIES AND SYNERGIES Largest national integrated telco player Largest player in revenues (R$ 42.1 B) and customer base (97 Million accesses) Largest mobile network, covering more than cities (~89% of population) with 3G and 4G, and the best spectrum assets National fixed network, reaching 761 cities in 21 states Full portfolio of products for consumer and enterprise segments in all states Outperformed the market in 2015 Top line growth of +4.8% (vs around -3% of competitors) in 2015 (+3.4% vs -7.9% in 4Q) Mobile revenue growth of +6.2% (vs -11.3% competitors) in 2015 (+3.3% vs -17.7% in 4Q) Resilient performance on fixed business, growing 2.7%, driven not only by former GVT (+8%), but also by former Vivo (+1.4%) Solid leadership in key segments Solidified leadership in mobile post-paid, increasing market share to 42%, and capturing 69% of net additions in 4Q15 Maintained leadership in UBB¹ with 45% market share, and reached 55% market share in speeds above 34 Mbps Captured most of market growth in Pay TV (158k net additions) Leveraging synergies Rapid and effective integration process of former GVT, delivering all major milestones planned for 2015, not only in tactical opportunities (cross-selling, networks' integration) but also starting key structural projects Significant ramp-up of direct and indirect cash flow synergies, in line with Management's expectations Data-centric strategy, leveraging superior quality and innovation Non-voice revenues growing 23% y/y, reaching 54% of revenues in 4Q15 Premium positioning reflected on mobile ARPU 55% higher than competitors, and 7% ARPU increases in BB & Pay TV ARPU FTTX coverage increased to 16 M Home Passed. Average speed on FTTX sales reached almost 34 Mbps Consistent improvement in customer experience, improving total customer satisfaction index from 7.03 to 7.39 throughout the year (7.41 to 7.85 in mobile), and expanding gap vs best competitor... and efficiencies, to deliver robust cash flow generation Relentless focus on efficiencies contained expenses, which grew at roughly half the inflation rate (5.4% vs 10.7%) Capex containment effort (decrease of 0.9% vs 2014), allowing delivery of solid OpCF (EBITDA-Capex) growth of 13% 1 UBB: Ultra Broadband (speeds > 12Mbps) 2

3 SYNERGIES AND TRANSFORMATION STRATEGY WILL ALLOW TO CAPTURE OPPORTUNITIES AND SUSTAIN LEADERSHIP IN THE LONG-RUN In 2016, synergies will continue driving tactical gains Continue cross-selling (in consumer and enterprise markets) and network integration activities Launch national and integrated 3P portfolio Start sales of Pay TV under unified DTH and VOD platform Unify brands... and that pursues a more sustainable and value-driven business model, Leverage the potential of Big Data to optimize the business through scientific and fact-based decision making Accelerate the transformation of the business through end-to-end digitalization Simplify, optimize and better allocate resources to maintain profitability in an era with lower growth and higher inflation Build a high-performance, agile and results-oriented culture, to face transformational challenges in the ecosystem as well as strategic benefits, Transform Fixed São Paulo business leveraging GVT s know-how and systems to monetize current copper network, improving ARPU and margins Rollout 4P offers... will allow Vivo to successfully capture opportunities Play a leading role in the Gigabit Economy, benefiting from emerging disruptive technologies such as Internet of Things (IoT), cloud and Big Data Leverage potential positive changes in the fixed concession model to allocate resources to value-adding activities... while a renewed strategy that reinforces focus on the customer, Provide the best mobile and fixed broadband connectivity to enable people s digital lives Put the customer as the center of the value proposition, with excellence across the entire customer journey Innovate with integrated and convergent offers, from 3P to 4P and 5P, in all segments... reinforcing its leadership and continuing to deliver robust results Sustained leadership in key and high-value segments such as mobile and fixed broadband, Pay TV, and IT/cloud services for Enterprise Consistent EBITDA growth, EBITDA margin improvement and smart Capex allocation, leading to constant improvement in Free Cash Flow 3

4 2015: RESULTS AND COMPETITIVE POSITIONING

5 Convergence Financials LARGEST INTEGRATED NATIONAL TELCO, OUTPERFORMING PEERS IN KEY METRICS Player 2 Player 3 Player 4 FY 2015 (A) YoY FY 2015 (A) YoY FY (F) YoY FY 2015 (A) YoY Net Revenue (R$ mm) 42, % 36, % 25, % 17, % EBITDA (R$ mm) 12, % 9, % 7, % 5, % EBITDA Margin (%) 30.2% -0.4p.p. 26.8% +1.6p.p. 29.0% +5.1p.p. 31.5% +3.1p.p. Operating Cash Flow¹ (R$ mm) 4, % (10.4% of revenues) 3,097³ +11.6% (8.5% of revenues) 3, % (11.9% of revenues) % (4.3% of revenues) Product Portfolio National 4P Capability Brands One Multiple One One 1) Calculated as EBITDA Capex 2) Player 3 has not released 4Q15 Results, values based on Bloomberg Consensus 3) CapEx Brazil estimated as a percentage of CapEx/Revenue of the group 5

6 WITH A CLEAR FOCUS ON VALUE, WE CONTINUE TO STRENGTHEN OUR POSITION ACROSS HIGH VALUE SEGMENTS BOTH IN MOBILE AND FIXED SERVICES Leadership in mobile, with undisputed position in post-paid Solid position in Broadband and leadership in High Speed BB Improving competitiveness of Pay TV business with the highest net adds in 2015 Mobile Accesses FY15 (Millions) Postpaid Fixed BB Accesses FY15 (Millions) FTTX¹ Pay-TV Accesses FY15 (Millions) Prepaid xdsl & Others Player 2 Player 3 Player 4 Player 1 Player 3 Player 4 Player 1 Player 2 Player % -18.2% YoY Growth (14-15) -12.5% -7.2% -16.7% -11.0% -5.6% -5.8% +7.8% +14.0% -6.1% YoY Growth (14-15) -2.8% +64.9% YoY Growth (14-15) -2.7% -3.5% +9.7% -6.3% Postpaid Market Share 4Q15 (%) 42% 23% 19% 12% Player 2 Player 3 Player 4 YoY Growth (14-15) High Speed BB Market Share FY15 (> 34Mbps) (%) 55% 21% 17% 3% Player 2 Player 3 Player 4 YoY Growth (14-15) Pay TV Net Adds FY15 (Thousands) Player 2 Player 3 Player 4 YoY Growth (14-15) +0.6 pp -0.4pp +0.1pp -1.6pp -2.2pp +3.6pp -0.4pp -1.6pp +0.9pp -0.3pp -0.3pp -0.2pp Source: TEF BR Annual Results FTTX includes FTTH (Fiber to the Home) and FTTC (Fiber to the Curb) accesses 6

7 SOLID REVENUE GROWTH (+5% YOY) Due to a record increase of mobile data & VAS (+34% YoY) and outstanding performance in FTTx and Pay-TV (+17% & +28% YoY) B2C Revenues per Segment (R$ MM) % 7% Total Others Data & VAS Incoming Voice Outgoing Voice Handsets Total Data & IT¹ xdsl FTTx Pay-TV Mobile Revenues (R$ MM) FY14 Fixed Revenues (R$ MM) % -1% 34% -28% -9% 23% +3% 3% 18% 28% FY B2B Voice and Others² 9.5-3% 9.3 FY14 FY15 FY14 FY15 1) Corporate Data and IT 2) Includes voice, interconnection and other services 7

8 LEVERAGING DATA-CENTRIC STRATEGY TO DRIVE ARPU GROWTH THROUGH THE INCREASED ADOPTION OF MOBILE DATA OFFERINGS AND 3P BUNDLES 50% Post-Paid Fixed Broadband Pay TV Market Share and Net Adds (%) 33% 44% 41.8% 41.6% 41.7% 65% 69% 42.1% 42.4% Total >34Mbps 12 34Mbps Accesses (Thousands) 6,866 +4% 7,114 6% 74% 11% 30% 14% 32% Market Share² 29% 55% 43% Total Premium Pay TV ³ Accesses (Thousands) 1, % 1,788 23% 954 1,173 Market Share 4 9% 13% 4Q14 1Q15 2Q15 3Q15 4Q15 Share of net adds Market Share <12Mbps 64% -8% 57% % DTH 675-9% % Voice ARPU 1 (R$ per month) % % -18% 46% ARPU (R$ per month) +7% ARPU (R$ per month) +7% Data 40% 47% 54% 4Q14 4Q15 4Q14 4Q15 4Q14 4Q15 1) Mobile B2C ARPU 2) Based on ANATEL Report, December, 2015, for comparison purposes 3) Includes IPTV and Interactive DTH 4) Based on ANATEL Report and internal analysis for comparison purposes 8

9 THE FOUNDATIONS FOR SYNERGY DELIVERY ARE IN PLACE Value capture in 2015 was in line with Management s expectations Mar/ Pre-closing May/ Post-closing Synergies NPV Anti-trust (CADE) approval New Organization Structure (March, 26 th ) Integration Planning Closing Start of Tactical synergies capture (cross-selling, integration of telecom networks, etc.) Launch of Structural Projects (integration of fixed systems and portfolios, SAP integration, etc.) R$ Billion +57% Operational Tax and Working Capital 2015 Results Start of operational synergies fronts (insourcing of field operations, etc.) Rightsizing Company operating as one Base Case Due dilligence 5.9 Best Case Integration Plan EBITDA +R$ 100 M OpCF: +R$ 1 M Avoidance: R$ 635 M Early Start Execution according to plan 2015 Results in line with expectations 9

10 CURRENT TRENDS AND FUTURE PERSPECTIVES

11 AFTER YEARS OF DOUBLE-DIGIT ACCESS GROWTH, THE BRAZILIAN TELCO MARKET HAS SLOWED DOWN, WHILE BEING PRESSURED BY THE MACRO SCENARIO MARKET EVOLUTION Mobile Market Access Growth 16.7% 19.4% 8.1% 3.5% 3.6% -8.2% Broadband Market Access Growth 19.7% 13.8% 16.5% 11.9% 8.0% 6.3% Pay TV Market Access Growth 30.7% 30.5% 27.0% 11.3% 8.3% -3.9% MACROECONOMIC TRENDS 0.1% GDP Growth (%) IPCA Inflation (%) -3.8% -3.5% % Unemployment (%) 6.9% 10.2% % 10.7% Average Exchange Rate (BRL/USD) % Source: Focus Report for 2016 projections of GDP Growth, Inflation and Average FX and Bradesco for forecasts of Unemployment 11

12 GLOBAL SECTOR TRENDS Are already demanding significant adaptations from telecom companies VIDEO STIMULATING DEMAND FOR DATA Global online video traffic will increase 13x in 5 years (from 1.4 Eb/mo in 2014 to 17.5 Eb/mo in 2019) leveraged by: 4 screen video usage (multi-screen) Higher definitions (4K and 8K) Traditional TV substitution for VoD Others (i.e. short films, real time video and videoconferences) Exponential growth of data traffic (EB/month estimated in Global TEF networks) x5 AND COMMUNICATIONS OTTS REDUCING DEMAND FOR VOICE E 2017E 2018E 2019E 2020E DEMANDING ADAPTATIONS FROM TELECOM COMPANIES Faster Connectivity Higher speeds Lower latency Digital First Products and services digital by default 5Mbps 3G 25Mbps 4G 10Gbps 5G Emerging OTT communications alternatives are driving the reduction of mobile voice usage, accelerating voice-data migration Brazilian mobile voice reduction¹ (Minutes/user) -21% Data Monetization Initiatives Data cap (mobile and fixed) ¹ Source: Teleco up to 1Q15 12

13 While disruptive technologies related to the gigabit economy are poised to accelerate the transformation of business, bringing NEW OPPORTUNITIES FOR TELCOS DISRUPTIVE TECHNOLOGIES ARE REACHING MATURITY Cloud Anytime, anywhere Consumers demanding access to their digital lives (photos, videos, documents, etc.) anytime, anywhere Economies of scale in storage and processing power Faster networks IOT Internet of Things Smart cars Smart cities (metering, etc.) Connected homes ehealth Wearables (watches, etc.) Virtual Reality devices Big Data Exponential growth of data Lower cost of processing power and storage capacity Advanced Analytics AND WILL BRUTALLY ACCELERATE THE TRANSFORMATION OF MANY INDUSTRIES Connectivity: more human efficiency IoT: asset productivity Cloud: instant scalability Amazon Web Services Revenue Increase +69% from 14 to 15 Everything that can be connected, will be connected Connected Things (Billion) Data Volume Growth (EB/per month) >80 x13 < E Opportunities for Telcos Leverage massive increase in connected devices to assume a leading role in IoT platforms Leverage substantial demand for cloud services Smartly evolve networks to offer very high speeds and low latency Leverage Big Data for optimized decision making in diverse areas Source: Ericsson, Huawei and TFN 13

14 VIVO S STRATEGY

15 VIVO S STRATEGY We choose to reinvent Customer Focus Sustainable Business Model Outstanding Connectivity Big Data & Innovation Values & Customer Experience End-to-End Digitalization Integrated Offering Capital Allocation & Simplification HIGH PERFORMANCE CULTURE 15

16 Objectives OUTSTANDING CONNECTIVITY Maintain mobile leadership through robust and smart expansion of 4G coverage Increase Homes Passed with FTTH and FTTC to capture UBB growth Expand capacity and capillarity of backbone and backhaul 16

17 Objectives VALUES & CUSTOMER EXPERIENCE Fix the basics, improving customer experience across the entire customer life cycle (e.g. rightselling, technical support, etc.) Insource field and call center operations, in order to better serve top clients and provide a benchmark to outsourcing thirdparties Develop and improve digital channels and Apps (Meu Vivo, virtual assistant and new online store) Simplify clients contact with Vivo through a seamless omni-channel experience (multi and cross channel) Delight customers (Vivo Valoriza, Welcome pack, Guru in each Vivo store) 17

18 INTEGRATED OFFERING Objectives Consolidate our national leadership in 3P offers Lead the digital services market growth (5P) Develop a full 4P offer with integrated customer care, network and billing Bundle traditional telco services for B2B with new digital solutions / ICT 1 offers 1 Information and communication technologies 18

19 Objectives BIG DATA & INNOVATION Develop a 360º view of the customer (preferences, behaviours, mobility, social networks, quality, etc.) Expand capabilities of processing and storage (Data Lake) Attract and retain specialized talent Implement projects ( use cases ) that impact the business, such as: Network optimization Fraud prevention Collection improvement Marketing expenses optimization Network maintenance Field operations optimization 19

20 Objectives END-TO-END DIGITALIZATION Transform and digitalize backend process and core applications, implementing a new full stack system, ensuring faster time-tomarket and a unified customer view Build front-end capabilities to create a differentiated and consistent customer experience (self-service, online sales) Digital First: focus on launching fully digital products (e.g. Vivo Easy) 20

21 CAPITAL ALLOCATION & SIMPLIFICATION Objectives Smart Capex allocation, leveraging analytical criteria to optimize decisions Obsession for efficiency and financial discipline, aiming to maximize the return of all activities, and relentlessly looking for opportunities to reduce costs Radically reduce bureaucracy, redesigning and simplifying processes Maximizing and anticipating synergies 21

22 RIGHT PEOPLE, RIGHT STRUCTURE The right person, at the right time, in the right position Unique set of values, lived by all employees HIGH PERFORMANCE CULTURE A results driven Company should have solid values and a unique culture within its DNA AUTONOMY AND ACCOUNTABILITY Focus on execution, with autonomy and responsibility Owner mentality ( act like an owner ) Little tolerance for consistent underperformance WELL DEFINED GOALS Clearly defined goals, well distributed and communicated Objective assessment of success or failure of initiatives BONUS AS AN ACCELERATOR OF TRANSFORMATION Proper compensation plan, aligned with business objectives 22

23 Market leadership through data-centric strategy leveraging efficiencies and synergies Largest national integrated telco player Solid leadership in key segments Data-centric strategy, leveraging superior quality and innovation Outperformed the market in 2015 Leveraging synergies and efficiencies, to deliver robust cash flow generation Synergies and transformation strategy will allow to capture opportunities and sustain leadership in the long-run In 2016, synergies will continue driving tactical gains as well as strategic benefits, while a renewed strategy that reinforces focus on the customer, and that pursues a more sustainable and value-driven business model, will allow Vivo to successfully capture opportunities reinforcing its leadership and continuing to deliver robust results 23

24 DISCLAIMER These presentations 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. For a better understanding, we are presenting pro forma numbers combining Telefônica Brasil and GVT results for all financial and operational indicators for every period as of January, 2014.

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