Vivo Investor Day Unique combination of Value and Growth

Transcription

1 Vivo Investor Day Unique combination of Value and Growth Eduardo Navarro CEO New York March 12 th 2018

2 Disclaimer This presentation may contain forwardlooking 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 forwardlooking 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,

3 Starting Point Solid track record and an irreplicable position with unique assets Value Drivers Sustainable mobile leadership Fiber as new growth engine Strong foundation for a convergent future Digitalization driving margin expansion Upside opportunity Potential upside from external environment Commitment to Shareholders Robust FCF generation and shareholder remuneration 3

4 Vivo: a 20 year story of growth and efficiency DRIVERS _Privatization _Universalization _M&A (Telemig, TCO, TVA, etc.) _National mobile network _3G/ GSM _Broadband _Vivo Telesp Merger _Mobile Leadership _Acquisition and integration of GVT _National presence _Start of digital initiatives _Solid and sustainable Mobile Leadership _Fiber as growth engine _Acceleration of Digital Transformation Growth Universalization of fixed services Massification of mobile services Consolidation of mobile leadership Acceleration of UBB Penetration of mobile data Expansion of fiber Monetization of mobile data Efficiency Rationalization of privatized companies Integration of acquired Cellcos Integration of Vivo and Telesp Integration of Vivo and GVT Digitalization Vivo always leveraging from the scale and capabilities of Telefonica Group _Sourcing _Infrastructure _Innovation & Technology 4

5 ...building the largest and most profitable Telco in Brazil, with a unique set of assets... Vivo s Share 2017 _National presence _Full portfolio for B2C and B2B _Unique and highly admired brand _Largest fiber operation in Latin America _Integrated organization with great talents 100%³ Player 4 Player 3 Player % 20.1% 17.6% 19.4% 13.7% 15.9% 29.9% 27.1% 28.8% 31.4% 36.4% 39.3% 10.4% 13.2% 27.5% 48.9% ~100 Million Customers¹ Customers ¹ Net Revenue Recurrent EBITDA OpCF² RGUs 2 - EBITDA CAPEX 3 - Including Vivo, AMX, TIM and Oi

6 an undisputable leadership position Solid leadership in Mobile Mobile accesses (million) Dec % % 24.8% % Strong position in Broadband BB accesses (million) Dec % 26.1% % 20.6% Superior quality perception Net Promoter Score (NPS) Dec Mobile B2C Player 2 Player 3 Player Fixed B2C -3 Player 2 Player 3 Player 4 Player 2 Player 3 Others -34 Player 2 Player 3 Market Share 6

7 and able to deliver consistent and superior results even in challenging times Total Net Revenue Recurrent EBITDA OpCF¹ R$ Billion 42.1 CAGR 1.3% R$ Billion 12.7 CAGR 7.3% R$ Billion 4.4 CAGR 22.9% Margin 30.2% 32.1% 33.9% CAGR CAGR OpCF Margin² % -1.2% -2.7% -5.0% Vivo Player 2 Player 3 Player 4 7.3% 4.9% 1.9% -4.7% Vivo Player 2 Player 3 Player % 10.5% 11.1% 5.9% Vivo Player 2 Player 3 Player OpCF: EBITDA Capex 2- OpCF (EBITDA-Capex)/ Net Revenue

8 Significant mobile data monetization opportunity ahead MOBILE DATA BRAZIL Growing Demand Consumption Potential Monetization Upside Vivo s Mobile Data Traffic Petabyte/ Month Mobile Data traffic per month¹ Gigabyte/ Month/ User Comparison of prepaid mobile data prices² with the Big Mac price # Big Macs that can be bought with 500MB 6.2 Australia % USA 4.7 UK 2.9 Russia % Italy South Korea Portugal France Spain China Brazil India Brazil China Spain Russia Australia USA Sweden India Source : Cisco VNI Source : O Desempenho Comparado das Telecomunicações do Brasil TeleBrasil: Mobile Broadband Prepaid, which represents the use of mobile broadband on prepaid cell phones with data consumption of 500 MB or more

9 Vivo s sustainable market leadership will allow it to monetize the mobile data opportunity Best Data Connectivity Best Value Proposition Best Customer Experience Superior spectrum holding 4G coverage leadership in 16 states 97K km National backbone Network Optimization: Carrier More for More strategy Relevant data-based innovations Family Plans Essentials apps Data Sharing Advertising 1.8K stores E-care app Simplified portfolio URA Humanization Meu Vivo Mais aggregation (4G+), refarming and 700Mhz 93% of population covered with mobile data network Data and digital services represents 75% of MSR¹ 93 Anatel Quality Index (Best among main players) 9 1- Based on 4Q17 results. 9

10 UBB is a clear growth opportunity in Brazil UBB² penetration still very low Composition of Brazilian fixed broadband market (Million) but already growing fast Brazil subscriber growth YoY Only 7% of UBB² penetration 7.1% UBB² +47.0% Potential Market¹ Connected with BB Connected with UBB² Not Connected -1.5% -2.8% FBB TV Fixed Voice ABC Household and B2B 2 - UBB: Speeds above 34 Mbps (FTTH, FTTC and Cable)

11 Vivo has a unique position to capture the UBB opportunity, leveraging Telefonica s expertise Fiber industrialization experience Complete value proposition Outstanding commercial results in new cities BB Mkt Share (%) Installation FTTH Gross adds +44% Full portfolio _IPTV _VAS _Smart Wi-Fi Volta Redonda (RJ) 0% Apr'17 (Launch) 21% Jan'18 Technical complaints FTTH NPS Fiber Jan'17-50% Dec'17 Valued brand Garanhuns (PE) 0% Jul'17 (Launch) 30% Jan' TEF Spain is a global reference in fiber deployment Itabuna (BA) 0% Aug'17 (Launch) 19% Jan'18 11

12 Vivo announces today a plan to accelerate fiber expansion in Brazil I N V E S T M E N T P L A N Up to R$ 24 Billion in F I B E R A C C E L E R A T I O N P R O J E C T R$ 2.5 Billion Non recurring incremental CapEx in Our solid track record ensures that this accelerated fiber deployment plan will create value 12

13 We are building a strong foundation for future convergence SOLID MOBILE LEADERSHIP EXPANDED, FUTURE- PROOF, FIBER NETWORK Best convergent offer in B2C and B2B 13

14 Digitalization is a driver for margin expansion and improvement in customer experience Digitalization Scope Prioritization of digitalization initiatives R$ 29 bn Total annual OpEx (2017) R$ 11 bn ~1/3 OpEx Perimeter of OpEx influenced by digitalization +Potential for digitalization - - Commissions Back office Administrative processes Advertising Billing and collection Top-ups Customer care Installation and Maintenance Cost with own stores Improvement in customer experience + Annual gross Opexsavings of at least R$1.2 Billion (by 2020) 14

15 Vivo is already leading the Brazilian Telco industry in the digitalization journey, supported by Telefonica s global initiatives From To e-care App Artificial Intelligence IT System Multiple Full-Stack Big Data Lake Local Global Network Legacy Virtualization 15

16 Vivo s strategy is enabled by consistent investments to develop four solid and leading platforms 4 th Platform Cognitive Power 3 rd Platform 2 nd Platform 1 st Platform Big Data & Artificial Intelligence o AURA: First real-time AI application for personal interactions o Corporate-wide application of Big Data use cases Products & Services Complete Value Proposition o B2C: Convergent offering, preferred partner for leading third-parties o B2B: Cloud, mobile advertising, cyber security IT & Systems E2E Digital Transformation o Comprehensive Full Stack IT transformation o e-care Physical Assets Unique Infrastructure o Best Mobile network o Largest FTTH operation in Latin America ~R$ 1 Billion ~R$ 5 Billion Organic CapEx ~R$ 42 Billion ~ R$ 48 Billion 16

17 Company s values and commitment to social responsibility ensure sustainability of Vivo s strategy Telefonica Values Trusted Bold Open Responsible Business Diversity o Strong commitment to increase workplace diversity Environment o Strong commitment with renewable energy and to recycling of electronics Social Responsibility o Strong commitment to digital transformation in education Privacy Principles o Strong commitment to data security, transparency and customer empowerment as one of the most valuable brands in Brazil Brazilian Stockmarket Sustainability Index ESG criteria evaluation Only 30 companies selected 17

18 Additionally, economic recovery represents a potential upside GDP Growth Inflation¹ % YoY 1.0% 2.8% 2.7% - 3.0% % YoY 10.7% -3.8% -3.6% 6.3% 3.0% 3.8% 4.0% - 4.3% E E E E Interest Rate¹ Unemployment¹ % annual rate % 14.3% 13.8% 7.0% 6.8% 8.0% 8.5% 11.5% 12.6% 11.9% 9.5% % E E E E 18 Source: Focus Bulletin (Central Bank of Brazil) 19/Feb/18 except Unemployment data (MCM Consultores) 1 - Average

19 Regulatory simplification trend might provide additional upside Potential to optimize real estate portfolio Reduction of concession s obligations Revision of quality goals 19

20 In all, Vivo is solidly positioned to continue delivering growing cash flow to shareholders TODAY PERSPECTIVES COMMITMENT Highest cash flow generation in the market 15.4% OpCF/ Revenue Among the highest dividend yields in Brazil R$2.82 Per share¹ (13% y.o.y.) Robust results combining Growth and Profitability _ Revenue acceleration _ Margin expansion _ ROCE improvement Strong commitment to shareholder return _ Sustainable cash flow generation _ Solid Shareholder remuneration Gross dividends of R$2.82 per preferred share declared during 2017.

21 In Summary We are strongly positioned as the leading Telco in Brazil, for the long term We will strengthen and leverage our leadership in mobile to monetize the mobile data opportunity We will accelerate our fiber plan to capture the UBB growth opportunity We are building the foundations for a winning convergent offer We will continue leading the way to digital transformation We are committed to maintain our solid evolution in remuneration to shareholders Trends _Acceleration of total revenues Sustaining solid Mobile revenue growth Resuming Fixed revenue growth _Sustainable Margin Increase _At least R$ 1.2Bn in gross Opex savings from digitalization by 2020 _Continuous ROCE expansion _> 20% OpCF margin¹ by 2020 _Strong FCF and Net Income growth _Solid shareholder remuneration 1 Excluding Fiber Acceleration Project 21

22 Vivo Investor Day Unique combination of Value and Growth Eduardo Navarro CEO New York March 12 th 2018