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Investor ConferenceMarch 2001, Rio de Janeiro.
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This presentation contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation 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, financial results and other aspects of the activities and situation relating to the Company . Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward looking statements as a result of various factors. Analysts are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Telefónica undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telefónica´s business or acquisition strategy or to reflect the occurrence of unanticipated events. Analysts and investors are encouraged to consult the Company´s 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.
Safe Harbour
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Telefónica´s Financial Profile and Prospects
Telefónica´s Financial Profile and Prospects
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Telefónica’s financial profile: Y2kTelefónica’s financial profile: Y2k
Ebitda: Profitability, growth and diversification
A milestone year in terms of assets growth
Strong balance sheet
Stable Financial strategy and timely execution
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Steady growth recordSteady growth record
Euro Mill. 1999 2000 YoY Growth
TURNOVER 22,957 28,485 24%
EBITDA 10,885 11,919 9.5%
NET INCOME 1,805 2,505 38.8%
E.P.S. (Euros) 0.57 0.67 18.5%
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Data / Media / Internet
4%
Cellular26%
Wireline (LATAM)34%
Wireline (Spain)36%
EBITDA: Growth + diversificationEBITDA: Growth + diversification
Revenue 2000: 28,485 Millions Euro
Wireline (LATAM)44%
Wireline (Spain)36%
Cellular20%
EBITDA 2000: 11,919 Millions Euro
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2000E EBITDA
(Eu
ro B
n)
(Eu
ro B
n)
3.3
9.710.5
11.912.613.8
DeutscheTelekom
TelecomItalia
Telefónica FranceTelecom
BT KPN
EBITDA: SIZEEBITDA: SIZE
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2.5
1.3
1.8
1998 1999 2000
11.910.9
9.3
1998 1999 2000
28.4
22.9
17.5
1998 1999 2000
Revenues EBITDA Net Income
Strong historical growth (Euro Bn)Strong historical growth (Euro Bn)
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A milestone year: Asset growth ... A milestone year: Asset growth ...
62,211
45,571
1999 2000
Consolidated Net Assets (Euro Mill.) YoY growth: + 36.5%
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… while preserving a strong balance sheet… while preserving a strong balance sheetNet DebtNet Debt 20,47220,472
26,95126,951
Minority InterestMinority Interest 10,61410,614 9,330 9,330
Shareholders’ EquityShareholders’ Equity 14,48514,48525,93025,930
Total Capital EmployedTotal Capital Employed 45,57145,57162,21162,211
Net Debt / Total Capital EmployedNet Debt / Total Capital Employed 44.9%44.9%43.3%43.3%
Net Debt / EBITDA (x)Net Debt / EBITDA (x) 1.9 1.9 2.3 2.3
EBITDA / Net financial expenses (x)EBITDA / Net financial expenses (x) 6.1 6.1 6.4 6.4
1999 2000
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With a clear financial strategy andtimely executionWith a clear financial strategy andtimely execution
Equity funding
Full access to LATAM’s cash flows
Optimising WACC and credit rating
Financial flexibility
Enhancing stability of a growing cash flow
Efficiency and transparency in capital allocation
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Equity funding: now and before ...Equity funding: now and before ...
2000 Equity issues Bn Eur
Verónica 21
Endemol 5
New equity
Mobile IPO 3.3
TPI 3% sale 0.1
Motorola Assets 2
Total Equity 31.4
New equity: 82% of attributable UMTS licenses costs
Verónica: EPS accretive by 29.7% (*)
(*) Before extraordinary income; after extraordinary income EPS accretive by 15.3%
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Rating stabilityRating stability
09/99 12/99 03/00 06/00 09/00 12/00 02/01
AA+ FTBT BT BT
AA FTKPN KPN KPN KPN
AA- FT FTDT DT DT
A+ TELEFONICATELEFONICATELEFONICA TELEFONICA TELEFONICATELEFONICATELEFONICA
FT FT BTA VODAFONE VODAFONEVODAFONE BT BT BT VODAFONE
VODAFONEVODAFONEA- KPN KPN FT
DT DT DT DTVODAFONE
BBB+ KPN
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7
5.5
1999 2000 (*)
… Enhancing financial flexibility… Enhancing financial flexibility
Average debt maturity (years)
(*) Average life global bond: 12.5 years / Amortisation of short term debt
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… and diversifying risk… and diversifying risk
USD41.7%
EURO37.6%
Other1.6%LATAM
19.1%
By currency (*)
Domestic bonds30.8%
Loans43.1%
Euro Medium Term Notes + Commercial
Paper5.3%
Global bonds20.8%
By instrument (*)
(*) Net Debt breakdown (31/12/00)
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Financial Profile above European peers
Financial Profile above European peers
Net Debt/Market Cap 20/02/01 Net Debt/ EBITDA
Source: analyst estimates
2.3
4.655.18
4.36
DT FT BT TEF
35.10%
77.00%71.00%69.60%
DT FT BT TEF
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Cash - flows accretionCash - flows accretion
Verónica: 3.6 billion Euro additional cash - flow
Avoiding intrinsic subordination
Internal loans (*):
– TEM : 4.9 Billion Euro
– TISA : 585 M USD
– T. Media : 945 M USD
Enhanced financial flexibility
(*) Market prices
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11%
5.4%
20.5%
Stand-alone LATAM countriesTelefónica's LATAM portfolioTelefónica's LATAM + SPAINportfolio
Improving cash - flow quality Improving cash - flow quality
US$ EBITDA Average Standard Deviation
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Services
CorporationCorporation
Business linesBusiness lines
CompaniesCompaniesThird partiesThird parties
Looking for more efficiencyLooking for more efficiency
Services
Expected NPV of USD 850 millions
Shared Services Centers
Shared Services Centers
Services
Services
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Improving capital allocation Improving capital allocation
WIRELINE YELLOW PAGES WIRELESS CALL CENTERS DATA INTERNET
ESPAÑ
A USAM
ÉJICOCH
ILE
BRASI
LPERÚ
ARGEN
TINA
WIRELINE
YELLOW PAGES
WIRELESS
CALL CENTERS
DATA
INTERNET0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
WACC
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What’s nextWhat’s next
Solid and well diversified revenue growthSolid and well diversified revenue growth
Reinforcing capital discipline: Capex / Operating RevenueReinforcing capital discipline: Capex / Operating Revenue
Improving asset turnover: Revenue / Capital employedImproving asset turnover: Revenue / Capital employed
Well balanced and growing EBITDA margin: EBITDA / RevenueWell balanced and growing EBITDA margin: EBITDA / Revenue
Enhancing Free cash flow marginsEnhancing Free cash flow margins
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Solid and well diversified revenue growthSolid and well diversified revenue growth
13%-15%
24.00%
2000 CAGR 00/04
Wireline (Spain)22%
Wireline LATAM20%
Data / Media / Internet
21%
Cellular37%
Revenue Breakdown 2004
Revenue growth
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Reinforcing Capital discipline Reinforcing Capital discipline
31%
21%-23%
2000 (*) Average 2001 - 2004
(*) 2000 : UMTS Licenses / Op. Revenue = 41%
(Capex / Op. Revenue)
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0.50-0.55
0.46
2000 Average 2001 - 2004
Improving Asset turnover (*)Improving Asset turnover (*)
(*) Asset turnover: Revenue / Capital employed
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Well balanced and growing EBITDAWell balanced and growing EBITDA
41.8%
38%-41%
2000 Average 2001 - 2004
Wireline (LATAM)28.5%
Data / Media / Internet24.5%
Wireline (Spain)26.7%
Cellular20.3%
EBITDA breakdown 2004
EBITDA / Operating Revenue
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Enhancing Free Cash Flow marginsEnhancing Free Cash Flow margins
8%-12%
2.8%
2000 Average 2001-2004
% Free Cash Flow / Operating Revenue% Free Cash Flow / Operating Revenue
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MessagesMessages
Proven management execution capability
Accountability and transparency
Diversification and growth
Capital allocation discipline
A value creating group with a focused strategy
Unique position to take advantage of the market environment
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