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Apresentation of 2nd Quarter 2006 Results
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1
July 21, 2006
Vivo Participações S.A.
2Q06 Results
2
Executive Summary
• Stabilize Market Share • Promote Revenue GrowthChallenges
Operational Highlight
Increase in the post-paid outgoing revenue of 15.3% in SP and 21.2% in RJ/ESIncrease in the post-paid outgoing ARPU of 4% in SP and 9% in RJ/ESDecrease in the inbound traffic with migration F-M to M-M/ Decrease in interconnection revenueInactive clients write-off with effects in churn but without effects in revenues
3
Introduction
Write-off of inactive clientsImpact in ChurnNo effect on revenue
Client Base
Reduction due to non higher provisionsNormalized value: R$467.8 MM and 18.0% margin
EBITDA
Outgoing revenues grew in relation to 2Q05Pressure on prices with strong competition
Revenues
Competitive marketMother's Day/ Valentine's DayCommercial Campaigns
Strong Commercial Activity
Impact of R$ 161.5 MM QoQNormalized PDD of R$177.2 MM or 4.7% of gross revenue
Provision for Bad Debt(PDD)
Manageable volume and reduction of financial costsNet Debt
4
Launching of GSM’s network (overlay)Competition and evolution in 3GMaintenance of Leadership in 850MHz and better networkCosts ReductionNo impact of CapEx
Medium Term
Combat Fraud and CloningConsolidation/ Rationalization of IT/ISNational CoverageDedicated attention to Corporate SegmentCorporate Restructuring
Short Term
Quality : 98% of Anatel’s goals achievedNetwork completely authenticated78% of client base centralized in a single billing system57% of client base centralized on prepaid platforms72% of client base centralized at the front office
Advances
Introduction
5
22.935 23.257 24.377
5.511 5.2685.761
2Q05 2Q06 1Q06
Prepaid Post-paid
Client Base
• Retention and loyalty programs;
• Focus on the value clients;
• More than 78% of the clients base integrated to the unified IT/IS platforms.
+1.4%
28,446 28,525
+ 0.3%
30,138
- 5.4%
- 4.6%
-4.4% - 8.6%
30,348 total without write-off of clients
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4,806
3,231
327
4,054
2,795
104
3,907
2,118
91
Vivo C1 C2
Retail Third Party Own Stores
8,3646,953
6,116
Leadership in Distribution & CoverageOnly Operator in 3G
2,256
1,759 1,660
Vivo C1 C2
Municipalities Covered
Channels of distribution Coverage
7
Vivo offers the recharge value in bonus for local calls from Vivo to Vivo to speak in double.
Change handsets using the program based on points.
Program based on PointsProgram based on Points
2Q06 Main Marketing Actions
Recharge in DoubleRecharge in Double
Mother’s DayMother’s Day
Buy a handset and get the second for free.
Talk more Vivo PrepaidTalk more Vivo Prepaid
Client speaks for free with any Vivo or fixed phone after the 3rd minute
Soccer World Cup 2006Soccer World Cup 2006
When buying or changing handset, the client speaks for how long he/she wants for only R$0.30/min in local calls or long distance calls from Vivo to Vivo
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Loyalty and RetentionFocus Value Clients
Incentive to retain Prepaid client through discounts
in the exchange for a new handset keeping the
number
LOYALTYSe
gmen
ted
Ch
ange
sfo
r
Pre
paid
Pro
gram
ofP
oin
ts Points are added and can be used when handset is
exchanged. Balance of points is sent by SMS in a
monthly basis.
Ove
rlay
CD
MA
Incentive to change TDMA handsets for CDMA
based on the program of points.
Enables value clients to acquire the Globalmoto
handset at differentiated prices.
Glo
balm
oto
Dir
ect
mai
l
Segm
ente
dO
ffer
Mig
rati
onP
re-P
ost
Upg
rade
of
Pla
ns
and
Pac
kage
s
Retention of clients through segmented offers such as “Right Planning” and “Vivo Smart”
Using base segmentation, to inform to prepaid clients the advantages of being a Post-Paid.
Maxime value-for-money to client and increase customer satisfaction
RETENTION
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Net Revenue
Right Planning;
Campaigns to encourage the intra network traffic;
Data transmission ;
Internet access cards, PDA’s and SMS.
Increase in the outgoing revenues;
Drop in the inbound fixed-to-mobile traffic.
519 414 315
2Q05 2Q06 1Q06Handsets
-20.2% +31.4%
Service Revenue Handset Revenue
136 157 143
1,059 868 930
1,1651,159 1,189
2Q05 2Q06 1Q06
Other Services Network Usage Monthly Subscription
- 7.5%
2,360 2,2622,184
- 3.4%
R$ million
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Data Net Revenue Data Net Rev./Service Net Rev.
Data Revenue Evolution
2Q05
1Q06
2Q06
+14%6.1%
7.0%
7.7%
2Q05 1Q06 2Q06
21%
65%
14%
WAP SMS ZAP + others
2Q05
35%
18%
65%
17%
WAP SMS ZAP + others
2Q0635%
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15.9 14.4 15.0
12.7
9.710.4
2Q05 2Q06 1Q06
-15.7% -5.1%
ARPU Blended Evolution2Q05 vs. 2Q06 2Q06 vs. 1Q06
24.1 25.4
15,5 17,3
Inbound
Outgoing
28.6
12
52.7 50.1 53.2
25.3
20.821.6
2Q05 2Q06 1Q06
- 9.1% - 5.1%
ARPU Post-Paid Evolution
70.974.7
Inbound
Outgoing
78.0
2Q05 vs. 2Q06 2Q06 vs. 1Q06
13
6.3 6.0 5.6
9.2
6.8 7.4
2Q05 2Q06 1Q06
-17.4% -0.8%
ARPU Prepaid Evolution
12.8 12.9
Inbound
Outgoing
15.5
2Q05 vs. 2Q06 2Q06 vs. 1Q06
14
3631 31
43
35 37
2Q05 2Q06 1Q06
-16.5% -2.9%
MOU Blended Evolution
6668
Inbound
Outgoing
79
2Q05 vs. 2Q06 2Q06 vs. 1Q06
15
127 127 123
82 73 76
2Q05 2Q06 1Q06
-4.3% +0.5%
MOU Post-paid Evolution
200 199
Inbound
Outgoing
209
2Q05 vs. 2Q06 2Q06 vs. 1Q06
16
149 9
32
25 26
2Q05 2Q06 1Q06
- 26.1% -2.9%
MOU Prepaid Evolution
34 35
15,5 17,3
Inbound
Outgoing
46
2Q05 vs. 2Q06 2Q06 vs. 1Q06
17
*SAC Blended
SAC*Strategy focused on Acquisition of Value Clients
125128
171
2Q05 2Q06 1Q06
-25.1% 2.4%
18
R$ million
Operating Costs*Growth with Competitive Activity
146
1002
547
155
418
129
711
433
156
434
127
809
830
152
382
General &administrative
expenses
Sellingexpenses
Cost ofhandsets
Personnel
Cost ofservices rendered
2Q051Q062Q06
PDD
*Depreciation is not included.
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2Q05 1Q06 2Q06
Others
Insolvency Clients
PDD* Evolution
Structure and Process Initiatives :
Authentication of the Analog network and TDMA third party network already concluded;
Interception of calls posted by Vivo clients in roaming, is fully implemented (“screening” of clients);
“Credit Scoring” (already implemented);
Strong billing actions;
“Management of Consumption”.
136.6161.0
338.7R$ million
PDD extraordinary in the 2Q06.
161.5
*PDD = Provision for Bad Debt
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125.562.5
- 299.9
2Q05 1Q06 2Q06
EBITDA EBIT
717.1
599,3
306.3
20.8%
27.8%
11.8%
2Q05 1Q06 2Q06
EBITDA EBITDA Normalized
EBITDA Margin
467.8
18.0%
EBITDA Normalized
EBITDA and EBITDA Margin
R$ Million
21
4,3344,464
8,4167,985
1Q06 2Q06
Net Debt
Shareholder's Equity
Gross Debt, Net Debt and GearingCovered Short Term Debt
1Q06 2Q06
Short Term Long Term
4,686.45,482.6
60%
40%
60%
40%
2Q06
R$ million
0.53 0.54
1Q06
1Q06 2Q06
4,464.4
4,333.9
Gross Debt (R$ million) Net Debt (R$ million)
Gearing
22
R$ million
2Q05 2Q06 1Q06
-13.3% + 14.7%
(186.3)(213.6)
(246.7)
Net Financial ResultReduction in Financial Expenses
23
Capex
R$ million
13%
11%
14%
2Q05 1Q06 2Q06
% Capex/Net Rev.
249.1
92.1139.5
53.7
85.9
87.6
116.2
103.3
108.6
2Q05 1Q06 2Q06
Network Technology Others
419.0
281.3 335.7Total Capex
633.8
231.6
120.3
173.5
200.1
211.9
Accumulated 2005 Accumulated 2006
Network Technology Others
12%
18%
Accumulated 2005 Accumulated 2006
Main Investments
954.2
617.0
Network Quality/Capacity;Centralized systems and platforms;Corporate segment: handsets and technology.
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4.3%3.6% 3.3%
3.8%
9.3%
12.1%
14.0%15.0%
Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Apr-06 May-06 Jun-06
Anatel StandardsReduction in Indicators of Non-Compliance
Best Performance
Source: ANATEL (June/2006)
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ACTIONS
Vivo has continued with its internal voluntary program with several actions of support to visually disabled person:
Opening of Vivo Voluntary Space, located at the company’s building in Rio de Janeiro, for recording of spoken books.
Three courses were provided for training Vivo volunteers –audiodescription, revisers and readers.
Production of approximately 11,000 pages of Braile books, only in June, which work was carried out by approximately 600 volunteers of the company.
VIVO Social Responsibility
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GSM Overlay
Construction of a GSM/EDGE network capable of upgrade to W-CDMA to be added to the network, which will continue in full operation.
ProjectWe will use the frequency of 850MHz and CDMA with EV-DO.
Frequency• Capex to the overlay of GSM will be approximately R$ 1,080MM;• Capex already included in the Company’s plan with no impact by the balance between investments in CDMA and GSM;
Capex
• Future coverage also in GSM;• Digital roaming facilitated by present contracts;• Lower GSM’s handset cost;• Gain of scale;• Evolution to UMTS;• High use of the existing infrastructure;• Reduction in the price of GSM equipments;• Recurrent Economy in Capex.
Reasons• Handset prices;• Short term pay-back;• Improvement in the competitive positioning;• Experience from TEM and PT in other markets.
Advantages Competitive Differentials• Higher offer of handsets and services to the market;
• Only Brazilian operator to offer both technologies CDMA and GSM;
• Its offers services that fits all market segments.
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Final Remarks
• Search for Nationwide coverage;• 100% Digital;•1xRTT in 1,825 municipalities.Coverage
• Unified IT and SI platforms;• 75% of clients already integrated;• Simplified control;• Increased Reliability and Control.
Systems
• Sustainable effort to detect and control;• Authentication of prepaid and post-paid customer base;• System’s Prevention;• Reduction of PDD.
Fraud and Cloning
• Structure Simplification (reduction of 14 operator to 1); • Synergies;• Cost control;• Transparency.
Corporate Restructuring
• 3G’s Competitively;• Easier Roaming;• Lower handsets’ costs.GSM
28
• This presentation contains statements that constitute forward looking statements in its general meaning and within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this document and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines, market share, financial results and other aspects of the activity and situation relating to the Company. The forward looking statements in this document can be identified, in some instances, by the use of words such as "expects", "anticipates", "intends", "believes", and similar language or the negative thereof or by forward-looking nature of discussions of strategy, plans or intentions. 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 and investors are cautioned not to place undue reliance on those forward looking statements which speak only as of the date of this presentation.
Safe Harbor Clause Forward Looking Statements
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