FY 2010 Results & Plan Update - F. Bernabè


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FY 2010 Results & Plan Update - F. Bernabè

  1. 1. Telecom ItaliaFY10 Results & Plan UpdateFRANCO BERNABE’
  2. 2. Safe HarbourThese presentations contain statements that constitute forward-looking statements within the meaning of thePrivate Securities Litigation Reform Act of 1995. These statements appear in a number of places in thispresentation 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, financialresults and other aspects of the activities and situation relating to the Company and the Group.Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, andactual results may differ materially from those projected or implied in the forward looking statements as a result ofvarious factors.Forward-looking information is based on certain key assumptions which we believe to be reasonable as of the datehereof, but forward looking information by its nature involves risks and uncertainties, which are outside our control,and could significantly affect expected results.Analysts are cautioned not to place undue reliance on those forward looking statements, which speak only as of thedate of this presentation. Telecom Italia S.p.A. undertakes no obligation to release publicly the results of anyrevisions to these forward looking statements which may be made to reflect events and circumstances after thedate of this presentation, including, without limitation, changes in Telecom Italia S.p.A. business or acquisitionstrategy or planned capital expenditures or to reflect the occurrence of unanticipated events. Analysts and investorsare encouraged to consult the Companys 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.It should also be noted that starting from the year 2010, Telecom Italia reclassified some taxes paid in Brazil ofnon-material amount, previously included in “Other operating expenses”, in reduction of “Revenues” and “Otherincome” in order to ensure a better comparability and intelligibility of the financial information. FRANCO BERNABE’
  3. 3. Agenda TI Group 2010 Results Telecom Italia Plan Update Italy Brazil Argentina FRANCO BERNABE’
  4. 4. TI Group FY10 Key Financial Achievements Operating Free Cash Flow: 6.2 bln € (6.6 excluding TIS Settlement, +0.3 bln € YoY) Focus on Organic Group Ebitda: 11.8 bln € (+0.1% YoY) Core Markets: Organic Domestic Ebitda: 9.8 bln € (-2.9% YoY) Domestic Organic Ebitda Margin: 48.7% (+2.3 p.p. YoY) & TIM Brasil Ebitda: 1.8 bln € (+16.6% YoY) 2010 DPS Ebitda Margin: 29.1% (+2.9 p.p. YoY) Ord.: 5.8 €/cents Brazil Sav.: 6.9 €/cents Group Net Income: 3.1 bln € (+97% YoY, +18.4% YoY on a normalized basis) NFP Adj.: 31.5 bln € at YE10 (-2.5 bln € vs YE09) Financial Discipline Average Cost of Debt YE10: 5.2% (vs 5.4% YE09) Telecom Argentina results are included only in the 4Q 2010. Organic comparison considers Telecom Argentina in 4Q09 FRANCO BERNABE’
  5. 5. TI Group: Revenues & EbitdaEuro mln, % Reported Revenues Organic Revenues 26,894 27,571 -1,089 -3.8% 28,667 27,578 IVQ +11.2% IVQ -0.8% IIIQ 0.0% IIIQ -4.4% IIQ -0.5% IIQ -5.3% -4.9% IQ -1.0% IQ Reported EBITDA Organic EBITDA 42.9% % on 41.4% % on 41.1% 41.3% +1.8p.p. Revenues +0.1 p.p. +3M€ Revenues +297 +0.1% excl. +32 0.3% 11,115 +2.7% 11,412 Headcount 11,785 11,817 reduction costs IVQ +3.4% IVQ +13.5% IIIQ -2.0% IIIQ -8.0% IIQ +3.5% IIQ -0.4% IQ +3.2% IQ +0.1%Telecom Argentina Results are included only in the 4Q 2010 consolidated results Telecom Argentina results are included in the 4Q2010 and for comparison purpose, in 4Q 2009 consolidated results (proforma unadited at the same Exchange Rate). FRANCO BERNABE’
  6. 6. Strong Free Cash Flow GenerationEuro mln, Reported Data Operating Free Cash Flow Net Cash Flow Hansenet: 810 +304 Mln 6,602 Normalized 6,298 Bolivia: 71 389 TIS Settlement +1,904 BBned: 47 (*) Sparkle (428) 2,481 500 -85 Mln 6,213 Reported 577 +1,404 1,981 Normalized 2009 2010 2009 2010 4Q10 2,366 +396 2,762 Argentina +195M€ (*) 418M€ cash out +10M€ not released funds FRANCO BERNABE’
  7. 7. Net Income EvolutionEuro mln; reported data % on Revenues 11.3% 11,412 (5,599) 5.9% Sofora Fair Value Revaluation +266 FY09 FY10 Brazilian tax asset ∼+700 (1,686) 4,127 (548) (7) (451) 3,121 EBITDA Deprec. / Net Interest & Income Taxes Net Income Minorities Net Income Reported Amortiz.* Net Income Before Taxes of assets 2010 /Equity & Disc.Ops. disposed Δ vs. FY +2.7% -0.4% -21.7% +23.6% -51.1% n.m. n.m. +97.4%2009 +18.4% on a normalized basis (2010 headcount reduction costs, Sofora FV, Brazilian Tax Asset and other non recurring impacts; 2009 HNS GW writedown and* Including gains/losses of non current assets realization other non recurring impacts) FRANCO BERNABE’
  8. 8. Net Debt DynamicsEuro mln, Reported Data EBITDA (11.412) CAPEX +4.583 Δ WC & Others +616* Operating FCF (6.213) 33,949 (6,213) +1,392 +1,093 (607) 31,468 +1,854 Cash Financial Expenses +1,903 Financial Accruals (49) (2,481) 2009YE Operating Cash Financial Cash Taxes Dividends Other 2010YE Adjusted FCF Expenses/ Impacts Adjusted Financial Accruals 2008YE (577) 1Q09 34,526 (6,298) +2,019 +2,301 +1,050 +351 33,949 Δ vs. 09 +85 (165) (909) +43 (958) * Including TIS Settlement FRANCO BERNABE’
  9. 9. Agenda TI Group 2010 Results Telecom Italia Plan Update Italy Brazil Argentina FRANCO BERNABE’
  10. 10. 2008 – 2010: We Built a Solid Company Efficient & Lean Flexible Italy Enhanced Focus on Free Cash Core Flow -4€bln -4.5€bln Markets Generation 2007 2010 2007 2010 Brazil Domestic Net Debt Cash Cost Today TI is more: % Int’l Customer No M&A for Deleverage Revenues Satisfaction Geographic Expansion & Capital +10pp Strengthen +4% Discipline Non-Core Assets Balance 2007 2010 2007 2010 Disposal Sheet International Customer Driven FRANCO BERNABE’
  11. 11. 2011-13 – TI’s Strategic Priorities Strengthen Our Assets leveraging on: Italy Generate Sustainable Growth in Shareholder Remuneration Efficiency Flexibility Enhance Brazil Free Cash Flow Generation Innovation Complete the Deleverage Program Latam Footprint Customer Centric Argentina FRANCO BERNABE’
  12. 12. Agenda TI Group 2010 Results Telecom Italia Plan Update Italy Brazil Argentina FRANCO BERNABE’
  13. 13. Italy: Improve Revenues Trend… Drivers Actions & Goals Fixed Mobile mln lines Protect the Value of the Voice ~35 15.4 >14.0 31 Defend Protect Market Shares Traditional Increase “Value For Money” avoiding aggressiveness on pricing Services % % bundle Exploit the knowledge of the Customer flat/semiflat >40% offers ∼30% 2010 2013 2010 2013 Fixed BB Access Mobile BB User Lever on QoS to sustain price premium mln lines Push on innovation through Super Internet: ADSL at Strengthen 10Mbps/100Mbps 7.2 6.3 x2 BB Experience Boost on Mobile Internet & Smartphone ADSL as new applications enabler for new bundled 2010 2013 2010 2013 product offers ICT Revenues Cloud Computing Launch of Home Gateway and content € bn on ICT Rev. enrichment: TV programs, MUSIC, gaming, Cagr ‘10-’13 Develop Double Digit betting 0,8 Innovative OTT Services Services Cloud Computing Smart Cities, Health & Digital Burocracy 2010 2013 2010 2013 FRANCO BERNABE’
  14. 14. Italy: …Continuing to Protect Profitability & FCF Generation Domestic Cash Cost Reduction Plan 18%€ bln, Organic 64% 18% 56% Capex 44% Opex ~67% Cash Cost on Revenues ~64% 13.4 -1.0 _ Efficiency Continued processes assessment towards the Lean Organization Opex Rationalize Control of discretionary costs Leverage on Scale Efficiency Capex Optimization Focused Commercial Investment Selective deployment of NGAN Capex Reduce Roll out of NG wireless access Core Network Delayering Cloud and SOA IT Architectures FRANCO BERNABE’
  15. 15. Italy: Capex 2011-13 Plan Total Capex Highlights € Bn, % 3.1 Cum ‘11-13 ~8.7 bln€ Network Platforms: ~3.0 Towards UBB in Wired and Wireless access 79% 82% Optimization and de-layering in the Transport and Core Network Service Platform: Focus on Cloud Architectures and 21% 18% Content Delivery Networks NG network intelligence for Customer and Context Aware Services BB & Ultra Wired and Wireless Wired Access Wireless Access Transport 20 Mbps Availability Multistandard band Cash Costs/Petabytes on ADSL SW defines Nodes 2,500 Nodes with high speed Backhauling 1,500 50/100 Mbps Availability on FTTX ADSL Evolution (IP DSLAM, DSM, Vectoring) Multistandard and SW defined Access Nodes Petabytes Selective Deployment of Fiber (GPON with FTTH and (80% of existing Nodes) FTTC architectures) High Speed Backhauling (>70% existing Nodes) Introduction of Full Packet Transport and replacement Launch of first commercial trials LTE in 2013 of legacy technologies (PDH, ATM, SDH) FRANCO BERNABE’
  16. 16. Italy: NGAN Deployment Drivers Actions & Goals FTTH Home Passed mln FTTH GPON in the main 13 Cities TI Stand Alone FTTC GPON in 27 cities ~0.5 x5 Plan Low Capex per unit through the existing “Socrate” Infrastructures Main Regulatory Steps 2010-2011 Plan Horizon New Draft NGAN Regulation under public consultation Expected Regulatory Geographical segmentation of bitstream offer Public consultation approval of TI Supportive Risk premium introduction Regulatory Framework on NGAN commercial fiber offer framework for NGN guidelines investment Projects Public Investment in Passive Infrastructures (Ducts, Dark Fiber) Trentino Project PPP Projects Key Role of TI Subsidiarity vs TI’s plan Lombardia Project Technological Architectures Neutrality FRANCO BERNABE’
  17. 17. Agenda TI Group 2010 Results Telecom Italia Plan Update Italy Brazil Argentina FRANCO BERNABE’
  18. 18. Brazil: Fully Exploit the Pure Mobile “Infrastructured” Approach Drivers Actions & Goals Increase Size ∼24% 25% ∼26% Consistent community expansion Market Share >70 Consolidate TIM as the 2nd mobile operator in 58 Size the Brazilian market (>25% value share) Customer 41 51 Base Market Share: from ~24% YE09 @ ~26% YE13 2009 2009 2010 2010 2011 2011 2012 2013 2013 Revenues Growth: the Key Driver Usage Data Revenues Keeping the pace of top line growth Min/month % on Service 26% Revenues Drive FMS: doubling voice MOU vs 2010 Revenues Growth Doubling VAS participation on Total Service 2x 12% 13% 2x Revenues 2009 2010 2013 Profitabilty & Capex Trend Increase network capacity to support voice Bln R$ and data >4.5 4.2 Cum’11-13 Enhance 3G full coverage OFCF: >6 Bln R$ Strengthening property trasmission Value Creation 2.8 ∼2.9 Efficiency in Go-2-Market (low subsidy) Improve Profitability and Cash Generation FRANCO BERNABE’
  19. 19. Agenda TI Group 2010 Results Telecom Italia Plan Update Italy Brazil Argentina FRANCO BERNABE’
  20. 20. Argentina: Further Growth Opportunity Drivers Actions & Goals Increase Customer Base Fixed Business: Consolidate M/S on fixed Fixed BB Mobile* access and strong increase in BB lines Mln lines Cagr ‘10-’13 Mln lines Cagr ‘10-’13 +7% +5% Size 1.4 16.3 Mobile Business: steady churn reduction and sound acquisitions in postpaid & mobile BB segments 2010 2013 2010 2013 BB ARPU Mobile Service Revenues ARS/month ARS Bn Bundling offers to increase loyalty and ARPU Cagr ‘10-’13 Cagr ‘10-’13 +14% +19% Revenues Boost innovative services both on fixed and 76 8.5 mobile business Growth Double digit growth on Interactive VAS through Smartphone leadership 2010 2013 2010 2013 Profitability & Capex Trend Capex growth to support BB and Mobile ARS Bln, Organic development >5.5 Cum’11-13 4.8 Enhance Strong focus on high margin services and OFCF: >7 Bln ARS products Value Creation 2.6 ∼3.2 Solid FCF Generation Capital structure optimization* Argentinean Operations only FRANCO BERNABE’