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Corporate
Presentation
Investor RelationsTelefônica Brasil S.A.
November, 2016
This presentation may contain forward-looking statements concerning future prospects and objectives regarding growth of the subscriber base,a breakdown of the various services tobe 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 notbe regarded as guarantees of future performance.
Our actual results may differ materially from those contained in such forward-looking statements, due toa variety of factors, including Brazilian political and economic factors, the developmentof 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 TelefônicaBrasil and GVT results for all financial and operational indicators for every periodas of January, 2014.
DISCLAIMER
2
HIGHLIGHTS
STRATEGY
MARKET OVERVIEW
FINANCIALS
SYNERGIES
BACK-UP
3,4 4,8
9M15 9M16
-2,0% -1,8% -1,9%
1Q16 2Q16 3Q16
7,0% 7,0% 8,1%
1Q16 2Q16 3Q16
Largest national integrated telco player with solidleadership in key segments
HIGHLIGHTSService revenue growth, continued margin expansion and optimized Capex
driving outstanding cash flow generation
Outperformed the market in all 2016 quarters
Sustained EBITDA1 expansion enhanced by synergies, efficiency and improving macroeconomic scenario
Outstanding OpCF increase resulting from stronger EBITDA and Capex optimization through synergies
Base Case of synergiesestimated during the due diligence fully captured representing almost 2/3 of the Best Case of R$22bn
OpCFR$ Billion +43%
23%
42%
19%
12%
Vivo
Postpaid Market ShareAugust/16
Recurring Operating CostsYoY
Recurring EBITDA YoY
UBB Market Share>34MBpsAugust/16
21%
55% 16%
3%Vivo
4
1- Adjusted for the sale of towers in 1Q16, in the total amount of R$513.5 million and the provision for organizational restructuring in the total amount of R$101.2 million in 2Q16 and R$19.2 million in 3Q15.
Mobile Service Revenue YoY
0,4% 2,6%4,9%
1Q16 2Q16 3Q16
Total Service RevenueYoY
1,0% 1,6%
2,2%
1Q16 2Q16 3Q16
HIGHLIGHTS
STRATEGY
MARKET OVERVIEW
FINANCIALS
SYNERGIES
BACK-UP
Demand opportunities in Brazil
● Low penetration of mobile data
● Incipient 4G Coverage● Pent-up demand of UBB● Low Pay TV penetration● IoT¹ growth
Change in consumer behavior
Voice Data
Challenging macroeconomic scenario Global industry trends
GDPCurrency
InflationUnemployment
IoT¹Big Data Cloud
1. Internet of Things6
6
We are executing a strategy that addresses customers’ needs leveraging our strongest capabilities
Sustainable Business Model
Outstanding Connectivity
Values & Customer Experience
Integrated Offering
Big Data & Innovation
End-to-End Digitalization
Capital Allocation
& Simplification
HIGH PERFORMANCE CULTURE
Customer Focus
7
We are executing a strategy that addresses customers’ needs leveraging our strongest capabilities
Maintain mobile leadership through robust and smart expansion of 4G, balancing investments in coverage and capacity
Increase Homes Passed with FTTH and FTTC to capture UBB growth
Expand capacity and capillarity of backbone and backhaul
Fix the basics, improving customer experience across the entire customer life cycle (e.g. right selling, technical support, etc.)
Simplify clients’ contact with Vivo through a seamless omni-channel experience
Develop and improve digital channels and Apps (Meu Vivo and online store)
Insource field and call center operations, in order to better serve top clients and provide a benchmark to outsourcing third parties
Delight customers (Vivo Valoriza, Welcome pack, Guru in each Vivo store)
Customer Focus
8
Consolidate our national leadership in 3P offers
Lead the digital services market growth (5P)
Bundle traditional telco services for B2B with new digital solutions / ICT1 offers
Develop a full 4P offer with integrated customer care, network and billing
Outstanding
ConnectivityValues & Customer
ExperienceIntegrated Offering
Operate with one distinctive and highly-valued brand
Expand fiber coverage outside SP;
Optimize penetration and leverage FTTC in SP
Strengthen leadership in Satisfaction and Service Quality Perception
Sustainable Business Model
9
Big Data
& InnovationEnd-to-End
DigitalizationCapital Allocation
& Simplification
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:
• Best Next Offer• Revenue Assurance• Network optimization (faster
failures detection)
Build front-end capabilities to create a differentiated customer experience (self-service app, online sales platforms, etc.)
Transform and digitalize back-end process and core applications, implementing a new full stack system, ensuring faster time-to-market and a unified customer view
Digital First: focus on launching fully digital products (e.g. Vivo Easy)
Smart Capex allocation, leveraging analytical criteria to optimize decisions
Obsession for efficiency and financial discipline, aiming to maximize return of all activities, and relentlessly looking for opportunities to reduce costs (i.e. Zero Waste)
Radically reduce bureaucracy, redesigning and simplifying processes
Maximizing and anticipating synergies
Leverage systems andoperational models of former GVT for the fixed business in São Paulo
HIGHLIGHTS
STRATEGY
MARKET OVERVIEW
FINANCIALS
SYNERGIES
BACK-UP
As the largest integrated national telco, Vivo outperforms peers in revenue growth, EBITDA and cash flow
1- Calculated as EBITDA – Capex. 2- CapEx not disclosed for the Brazilian subsidiary.
11
Fin
ancia
lsConverg
ence
Net Service Revenue(R$ mm)
EBITDA(R$ mm)
EBITDAMargin (%)
Operating Cash Flow¹ (R$ mm)
Product Portfolio
National4P Capability
Brands
3,410
31.9%
1,469(13.7% of ROL)
+8.1%
+2.1p.p.
+42.3%
3Q16 YoY
One
2,408
26.5%
n.a.2
-2.2%
-0.5p.p.
n.a.
3Q16 YoY
Multiple
Player 2
1,534
24.8%
552
(8.9% of ROL)
-11.8%
-1.9p.p.
-30.1%
3Q16 YoY
One
Player 3
1,303
33.4%
181
(4.6% of ROL)
+0.5%
+1.9p.p.
+41.5%
3Q16 YoY
One
Player 4
10,386 +2.2% 8,826 +0.2% 6,149 -4.9% 3,689 -2.5%
1- FTTx includes FTTH (Fiber to the Home) and FTTC (Fiber to the Curb) accesses. 2- xDSL and Other technologies.
3- Speeds of 34Mbps or higher.
With a rational and data centric strategy Vivo continues to lead in postpaid and ultra broadband
Fixed BB Accesses 3Q16 (Millions)
Solid position in Broadbandand leadership in High Speed BB
Leadership in mobile,with undisputed position in post-paid
YoY Growth
+3.3%+3.1%+7.1%+6.8%-16.3% -8.3%-16.6%-14.7%
YoY Growth
-0.3pp-0.5pp+0.3pp+0.4pp
42%
23% 19%12%
Player 2 Player 3 Player 4
Postpaid
Prepaid
73.5 63.5 63.246.432.5
41.0
17.3
46.2
14.2
49.0
9.1
37.2
Player 2 Player 3 Player 4VIVO
VIVO
YoY Growth
-0.7pp+0.6pp+1.0pp-2.5pp
55%
21% 16%
3%
Player 2 Player 3 Player 4
FTTx¹
xDSL2
8.7 7.35.2
0.3
4.1
3.2
Player 3 Player 4Player 1 VIVO
VIVO
12
Best positioned in revenuesand EBITDA generation
35%
30%
21%
13%
VIVO Player 2Player 3 Player 4
39%
28%
18%
14%
VIVO Player 2Player 3 Player 4
High Speed3 BB Market Share 3Q16 (%)
YoY Growth
+55.1%-1.2%+7.1%+8.6%-5.7%
EBITDA Share 9M16 (%)
Net Revenue Share 9M16 (%)
Postpaid Market Share 3Q16 (%)
Mobile Accesses 3Q16 (Millions)
Postpaid
Prepaid
HIGHLIGHTS
STRATEGY
MARKET OVERVIEW
FINANCIALS
SYNERGIES
BACK-UP
2.2% y-o-y growth of Service Revenues:
● Non voice revenues growing 15.7% and compensating for reduction in voice
● Reduction of fixed revenues, up -1.4% (+1.2% excluding reduction of TU-RL)
● Reaccelerating growth (4.9%) of Mobile Service Revenues (7.0% excluding reduction of VUM)
Higher share and growth acceleration in
non-voice products continue to drive total revenues to a positive
trend, despite regulatory effects
Continuous delivery of data centric strategy driving resilient evolution in key services
14
3Q16 RESULTS
Service Revenues R$ Million
Voice ServicesNon-voice Services
4.5%
1- Excluding Regulatory Effect of tariff cuts (MTR/VC/TUR-L/TUR-IU).
5,0 4,4
5,1 6,0
10,2 10,4
3Q15 3Q16
● Continue to sustain growth in B2C business
● IPTV revenues growing 63% y-o-y
● Over 19% y-o-y growth in B2C FTTx (+2.0 p.p. over 3Q15)
Fixed: resilient growth in high
value fixed segments
R$ Million Revenues YoY%
Net IPTV Rev. B2C FTTx Rev.
3Q15 3Q16
63.3%
● Data revenue growth (23% y-o-y), representing 59% of revenues in the quarter
● With a rational and data centric strategy Vivo continues to lead in postpaid while protecting value in prepaid
● Data consumption accelerating, with total ARPU boosted by upselling campaigns (15% y-o-y)
Mobile: reacceleration
driven by postpaid growth and higher data
proportion
Mobile Service Revenue Growth YoY%
-12,3% -11,6%-8,2%
6,8% 9,6%10,9%
0,4% 2,6%4,9%
1Q16 2Q16 3Q16
Prepaid Postpaid Total
QoQ
+3.4 p.p.
+1.3 p.p.
+2.3 p.p.
2.2%
YoY1
Adjusted
-11.5%
YoY
15.7%
17,6% 19,6%
3Q15 3Q16
+2.0 pp
● 1.9% reduction in Adjusted Operating Costs¹ (increase of only 0.1% excluding reduction of interconnection rates), successfully facing inflationary pressures in the period
● 8.1% y-o-y growth in Recurring EBITDA, increase of 1.1 p.p. vs. the previous quarter
● Recurring EBITDA margin increase of 2.1 p.p., reaching 31.9% in 3Q16
● Services EBITDA margin reached 32.8%
● Investments of R$ 5.2 billion in 9M16, representing 16.4% of net revenues
● Capex lower than our guidance for the year (~ 20%) continuing to benefit from optimization and use of Big Data
● OpCF (EBITDA - Capex) growth of 42% y-o-y (not considering sale of towers and provision for restructuring programs)
● Accumulated Free Cash Flow 137% higher than in 9M15
Financial discipline and
capture of synergies
Stronger EBITDA
Capex optimization
Outstanding increase in Cash Flow from
Operations
1- Adjusted for the sale of towers in 1Q16, in the total amount of R$513.5 million and for the provision for organizational restructuring in 2Q16, in
the amount of R$101.2 million AND IN 3Q15 in the amount of R$ 19.2 million. 15
Synergies and efficiency continue to drive cost reduction and consistent EBITDA growth
3Q16 RESULTS
EBITDA1 Growth %YoY
Adjusted Operating Costs %YoY
Capex R$ Billion and % over Net Revenues
OpCF: EBITDA1 (-) Capex R$ Billion
4,2%5,9%
7,0% 7,0%8,1%
3Q15 4Q15 1Q16 2Q16 3Q16
3,44,8
9M15 9M16
5,6 5,9 5,2
18,9% 19,0%16,4%
9M14 9M15 9M16
5,7% 5,4%
-2,0% -1,8% -1,9%
9,5% 8,4%
0,5% 0,9% 0,8%
3Q15 4Q15 1Q16 2Q16 3Q16
Adjusted Costs Adjusted Costs exc. ITX
HIGHLIGHTS
STRATEGY
MARKET OVERVIEW
FINANCIALS
SYNERGIES
BACK-UP
17
NPV
R$ Billion
R$ 12,2 Bilhões já capturados
Strong execution led Vivo to fully secure base case NPV and guarantee 64% of best case scenario
Base Case
141%
100%
114%
30%
90%
% of captured value over:
Best Case
83%
64%
85%
15%
68%
4,45,9 5,0 5,0
3,0
4,14,6
2,7
3,9
6,79,8
5,5
2,7
5,5
5,5
0,8
14
22
25
14
Base Case Due Diligence
Best CaseIntegration
Plan
Trending NPV Already Captured
Revenues
Tax
Opex
Capex
55%64%
2Q16 3Q16
• Larger guaranteed NPV in
3Q16 mainly due to
additional rightsizing in
2016
• Leveraging new scale with
all TV content suppliers
Already executed synergy actions to secure R$14.0Bn in NPV
1541
FY15 9M16
1- Net of impact from upfront integration costs. 2- Includes the impact of the provision for organizational restructuring in 2Q16, in the total amountof R$101.2 million. 3- Opex avoidance is not considered for Fiber HP’s.
Direct Cash Flow Synergies1
Capex and Opex
Avoidance Synergies
Indirect Cash Flow Synergies
-99-35
FY15 9M16
Impact of Synergies on Opex
Impact of Synergies on EBITDA
Impact of Synergies on Revenues
Impact of Synergies on Capex (net of enabling investments)
Impact on Direct OpCF
Economic gains related to companies’ leveraging on each
other assets, thus avoiding investments and expenses
R$3629M16 Impact
+ Revenues
- Opex
- Capex
+ EBITDA
+ OpCF
18
FY15 Impact
28
246
FY15 9M16
Million
R$635
Backbone
(Capex)R$133Million
Backhaul
(Capex)
R$33Million
Fiber HP's
(Capex)R$91Million
Opex
Avoidance3R$106Million
73331
FY15 9M16
100576
FY15 9M16
2
2
2
Impact from Operational Synergies in free cash flow amounts to R$0.9 Bn in 2016
HIGHLIGHTS
STRATEGY
MARKET OVERVIEW
FINANCIALS
SYNERGIES
BACK-UP
3Q16 RESULTS
FIGURES
BACK-UP
3Q16 Results - Pro forma Financial Statements
21
INCOME STATEMENT
Consolidated in R$ million 3Q16 3Q15 ∆% 2Q16 ∆% 9M16 9M15 ∆%
Gross operating revenues 16,259.1 16,080.4 1.1 16,036.4 1.4 48,294.1 48,023.4 0.6
Net Operating Revenues 10,693.4 10,580.8 1.1 10,510.0 1.7 31,634.8 31,372.9 0.8
Mobile 6,439.0 6,266.8 2.7 6,293.7 2.3 18,945.6 18,709.3 1.3
Fixed 4,254.4 4,314.0 (1.4) 4,216.3 0.9 12,689.2 12,663.6 0.2
Operating costs (7,283.1) (7,445.2) (2.2) (7,309.7) (0.4) (21,235.7) (22,090.9) (3.9)
Personnel (939.0) (889.8) 5.5 (1,012.2) (7.2) (2,871.6) (2,631.6) 9.1
Costs of services rendered (3,050.6) (3,038.0) 0.4 (3,013.1) 1.2 (9,124.1) (9,217.0) (1.0)
Interconnection (453.7) (651.4) (30.4) (451.2) 0.6 (1,461.3) (2,032.0) (28.1)
Taxes and contributions (496.3) (356.3) 39.3 (478.9) 3.6 (1,430.4) (1,322.7) 8.1
Third-party services (1,463.9) (1,440.3) 1.6 (1,464.8) (0.1) (4,384.6) (4,154.9) 5.5
Others (636.7) (590.0) 7.9 (618.2) 3.0 (1,847.8) (1,707.4) 8.2
Cost of goods sold (513.5) (689.1) (25.5) (533.6) (3.8) (1,565.1) (1,904.3) (17.8)
Selling expenses (2,257.8) (2,308.4) (2.2) (2,202.5) 2.5 (6,619.8) (6,879.9) (3.8)
Provision for bad debt (342.6) (349.4) (1.9) (317.0) 8.1 (1,004.0) (1,022.7) (1.8)
Third-party services (1,840.9) (1,873.2) (1.7) (1,808.1) 1.8 (5,371.3) (5,585.9) (3.8)
Others (74.3) (85.8) (13.4) (77.4) (4.0) (244.5) (271.3) (9.9)
General and administrative expenses (372.9) (336.9) 10.7 (390.1) (4.4) (1,148.6) (988.1) 16.2
Third-party services (292.3) (261.3) 11.9 (294.5) (0.7) (908.7) (802.0) 13.3
Others (80.6) (75.6) 6.6 (95.6) (15.7) (239.9) (186.1) 28.9
Other net operating revenue (expenses) (149.3) (183.0) (18.4) (158.2) (5.6) 93.5 (470.0) n.a.
EBITDA 3,410.3 3,135.6 8.8 3,200.3 6.6 10,399.1 9,282.0 12.0
EBITDA Margin % 31.9% 29.6% 2.3 p.p. 30.5% 1.4 p.p. 32.9% 29.6% 3.3 p.p.
Depreciation and Amortization (1,972.6) (1,817.9) 8.5 (1,953.3) 1.0 (5,839.2) (5,404.7) 8.0
EBIT 1,437.7 1,317.7 9.1 1,247.0 15.3 4,559.9 3,877.3 17.6
Net Financial Income (296.3) (258.5) 14.6 (306.1) (3.2) (919.2) (908.4) 1.2
Gain (loss) on investments 0.3 0.8 (62.5) 0.5 (40.0) 1.0 1.4 (28.6)
Taxes (189.0) (190.7) (0.9) (241.9) (21.9) (771.3) (753.6) 2.3
Net income 952.7 869.3 9.6 699.5 36.2 2,870.4 2,216.7 29.5
3Q16 Results - Pro forma Financial Figures
22
NET OPERATING MOBILE REVENUES
Consolidated in R$ million 3Q16 3Q15 ∆% 2Q16 ∆% 9M16 9M15 ∆%
Net operating mobile revenues 6,439.0 6,266.8 2.7 6,293.7 2.3 18,945.6 18,709.3 1.3
Net service mobile revenues 6,131.7 5,844.5 4.9 5,984.1 2.5 18,026.9 17,564.9 2.6
Outgoing voice 2,245.9 2,482.6 (9.5) 2,213.3 1.5 6,903.1 8,026.1 (14.0)
Interconnection 271.8 394.0 (31.0) 327.3 (17.0) 956.1 1,251.2 (23.6)
Data plus Digital Services 3,612.9 2,930.9 23.3 3,399.7 6.3 10,120.9 8,219.8 23.1
Messaging P2P 385.4 431.4 (10.6) 381.2 1.1 1,149.0 1,236.9 (7.1)
Internet 2,671.2 1,958.1 36.4 2,450.5 9.0 7,289.1 5,332.5 36.7
Digital Services 556.3 541.4 2.8 568.0 (2.1) 1,682.8 1,650.4 2.0
Other services 1.1 37.0 (97.1) 43.8 (97.6) 46.7 67.8 (31.1)
Net handset revenues 307.3 422.3 (27.2) 309.7 (0.8) 918.7 1,144.4 (19.7)
NET OPERATING FIXED REVENUES
Consolidated in R$ million 3Q16 3Q15 ∆% 2Q16 ∆% 9M16 9M15 ∆%
Net operating fixed revenue 4,254.4 4,314.0 (1.4) 4,216.3 0.9 12,689.2 12,663.6 0.2
Voice 1,860.4 2,019.6 (7.9) 1,924.2 (3.3) 5,735.0 5,968.8 (3.9)
Interconnection 57.9 118.8 (51.2) 55.7 4.0 217.4 374.7 (42.0)
Broadband 978.4 889.5 10.0 968.2 1.1 2,901.7 2,621.6 10.7
Corporate Data and IT 690.2 616.2 12.0 609.5 13.2 1,863.3 1,837.1 1.4
Pay TV 489.1 447.6 9.3 481.6 1.6 1,446.8 1,263.4 14.5
Other services 178.4 222.3 (19.7) 177.2 0.7 524.9 598.0 (12.2)
% Data / Net Operating Revenue 39.2% 34.9% 4.3 p.p. 37.4% 1.8 p.p. 37.6% 35.2% 2.3 p.p.
3Q16 Results - Pro forma Mobile Operational Figures
23
OPERATING MOBILE PERFORMANCE
Thousand 3Q16 3Q15 ∆% 2Q16 ∆% 9M16 9M15 ∆%
Mobile total accesses 73,495 79,414 (7.5) 73,304 0.3 73,495 79,414 (7.5)
Postpaid 32,499 30,435 6.8 31,629 2.8 32,499 30,435 6.8
Postpaid ex. M2M/Dongles 25,313 23,198 9.1 24,472 3.4 25,313 23,198 9.1
M2M 4,778 4,112 16.2 4,598 3.9 4,778 4,112 16.2
Prepaid 40,996 48,979 (16.3) 41,675 (1.6) 40,996 48,979 (16.3)
Market Share (*) 29.1% 28.8% 0.4 p.p. 28.9% 0.2 p.p. 29.1% 28.8% 0.4 p.p.
Postpaid 42.4% 42.1% 0.4 p.p. 42.4% 0.1 p.p. 42.4% 42.1% 0.4 p.p.
Mobile broadband (modem only) 39.5% 54.8% (15.3) p.p. 39.1% 0.4 p.p. 39.5% 54.8% (15.3) p.p.
Net additions 191 (3,241) n.a. 33 477.5 226 -524 n.a.
Postpaid 870 849 2.5 370 135.1 1,425 2,080 (31.5)
Market Share of postpaid net additions (*) 46.7% 65.1% (18.4) p.p. 39.7% 7.0 p.p. 42.9% 49.7% (6.7) p.p.
Market penetration (*) 122.3% 134.7% (12.4) p.p. 123.0% (0.7) p.p. 122.3% 134.7% (12.4) p.p.
Monthly churn 3.4% 4.7% (1.3) p.p. 3.3% 0.2 p.p. 3.3% 3.6% (0.3) p.p.
Postpaid ex. M2M 1.7% 1.9% (0.1) p.p. 1.9% (0.2) p.p. 1.8% 1.8% (0.0) p.p.
Prepaid 4.7% 6.3% (1.6) p.p. 4.3% 0.4 p.p. 4.5% 4.6% (0.1) p.p.
ARPU (R$/month) 27.8 24.2 14.9 27.2 2.3 27.3 24.0 13.9
Voice 11.4 12.1 (5.3) 11.8 (2.7) 12.0 12.8 (6.1)
Data 16.4 12.1 35.0 15.5 6.1 15.3 11.2 36.6
Postpaid ex. M2M ARPU 51.2 49.7 3.0 51.3 (0.2) 50.8 49.9 1.8
Prepaid ARPU 13.6 11.9 14.4 13.4 1.6 13.6 12.1 12.0
M2M ARPU 2.4 3.3 (28.6) 3.3 (27.1) 3.0 3.2 (7.3)
MOU 158.9 134.2 18.4 160.3 (0.9) 156.8 131.6 19.2
(*) Source: ANATEL. Last available information: August/16.
3Q16 Results - Pro forma Fixed Operational Figures
24
OPERATING FIXED PERFORMANCE
Thousand 3Q16 3Q15 ∆% 2Q16 ∆% 9M16 9M15 ∆%
Total fixed accesses 23,707 24,259 (2.3) 23,754 (0.2) 23,707 24,259 (2.3)
Fixed voice accesses 14,634 15,250 (4.0) 14,744 (0.7) 14,634 15,250 (4.0)
Residential 9,581 9,975 (3.9) 9,670 (0.9) 9,581 9,975 (3.9)
Corporate* 4,609 4,699 (1.9) 4,623 (0.3) 4,609 4,699 (1.9)
Others 444 576 (22.9) 451 (1.5) 444 576 (22.9)
Fixed broadband 7,311 7,179 1.8 7,248 0.9 7,311 7,179 1.8
FTTx* 4,117 3,792 8.6 4,007 2.7 4,117 3,792 8.6
Others 3,194 3,388 (5.7) 3,241 (1.4) 3,194 3,388 (5.7)
Pay TV 1,762 1,829 (3.7) 1,762 0.0 1,762 1,829 (3.7)
Voice ARPU (R$/month) 42.2 44.1 (4.3) 43.2 (2.2) 42.9 43.6 (1.4)
Broadband ARPU (R$/month) 44.8 41.6 7.8 44.6 0.4 44.6 41.5 7.6
Pay TV ARPU (R$/month) 92.6 82.4 12.4 90.6 2.2 90.6 80.7 12.4
(*) Includes GVT SOHO accesses not previously accounted.
3Q16 Results - Pro forma Financial Data
25
LOANS AND FINANCING (R$ million)
Consolidated Currency Annual Interest Rate Due Date Short-term Long-term Total
Local currency
BNDES UR LTIR LTIR + 0.0% to 4.08% Until 2023 585.8 1,589.8 2,175.7
BNDES R$ 2.5% to 6.0% Until 2023 116.0 242.8 358.7
BNDES R$ IPCA + 2.95% + TR Until 2016 0.0 0.0 0.0
BNDES R$ SELIC D-2 + 2.32% Until 2023 1.5 292.5 293.9
BNB R$ 7.0% to 10.0% Until 2022 12.9 36.6 49.6
Confirming R$ 108% of CDI Until 2017 383.0 0.0 383.0
Debentures 4th issue - Series 3 R$ IPCA + 4% Until 2019 1.4 36.7 38.1
Debentures 1st issue - Minas Comunica R$ IPCA + 0.5% Until 2021 0.0 97.2 97.2
Debentures 3rd issue - Single Series R$ 100% of CDI + 0.75 spread Until 2017 2,016.4 0.0 2,016.4
Debentures 4th issue - Single Series R$ 100% of CDI + 0.68 spread Until 2018 83.0 1,299.4 1,382.4
Financial Leases R$ - Until 2033 36.9 285.4 322.3
Contingent Consideration R$ - Until 2025 0.0 404.8 404.8
Foreign currency
Resolution 4131 US$ 2.05% and Libor + 2.00% Until 2017 343.0 583.0 926.0
BNDES UMBND ECM + 2.38% Until 2019 135.7 260.5 396.2
Total 3,715.7 5,128.5 8,844.2
September 2016
Year Amount
2017 820.2
2018 2,273.5
2019 764.3
2020 336.9
2021 209.9
After 2021 723.8
Total 5,128.5
L.T. OBLIGATIONS
(R$ million)
September 2016
NET FINANCIAL DEBT
Consolidated in R$ million 09/30/16 09/30/15 06/30/16
Short-term Debt 3,715.7 3,913.5 1,643.7
Long-term Debt 5,128.5 6,829.7 6,983.7
Total Debt 8,844.2 10,743.2 8,627.3
Cash and cash equivalents (5,837.4) (6,369.5) (5,717.1)
Net derivatives position (10.6) (715.4) (11.7)
Net debt 2,996.3 3,658.4 2,898.5
Net debt/EBITDA 0.22 0.29 0.21
MACRO
BACK-UP
New government focused on improving confidence and promoting the fiscal adjustment while growth should return in 2017
1- Source: Focus bulletin, October 28, 2016. 2- Source: MCM Consultores estimates, July 2016.
Exchange Rate1
Inflation1 10,76,9 5,0 4,5
IPCA %
InterestRate1
3,33,4 3,3
3,5
Average R$/US$
GDP1
Unemployment2
-3,8 -3,3
1,22,4%
13,6 14,1 11,6 10,3
Average Selic %
8,511,3 11,8 11,3
2015 2016F 2017F 2018F
Average %
In order to restore economic stability, the new government is
focused on recovering the confidence by giving more
efficiency to public services and sponsoring public-private
partnerships.
The fiscal adjustment should also be produced, by reestablishing the equilibrium of the public accounts
and by promoting the social security reform.
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The sector shows resilience to some economic trends, while the Company’s management is taking actions to protect results
• 50% of Opex
Exchange Rate
Inflation
• Full renegotiation with suppliers with readjustment below inflation for 2016
• Collective agreement with 7% wage readjustment
Energycosts
• Passing through the increase in cost of handsets
• Negotiation with main providers neutralizing FX impact in 2016
• Debt fully hedged
• Replacement of equipment with short term payback
• Quick wins on efficiency activities
• 8% of Opex
• 32% of Capex
• 14.9% of gross debt
ACTIONS TAKENEXPOSURE BEFORE ACTIONS TAKEN
• 3% ofOpex
Bad Debt Rate
• Credit and collecting actions driving bad debt to the previous year level
• 4% ofOpex
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Large potential in new customers1
47 Millionpeople (23% of the Brazilian population) with less than 14 years old² 51%
of population with mobile data coverage
but no usage
• Telco sector3 GDP shows resiliency even in recession periods
• Brazilians demand more connectivity than in any other country4
• Telecom services are perceived as more essential to consumers than energy and water5
1 – GSMA and IBGE. 2- IPC_Maps 2015. 3- Telco sector includes telecommunications, IT, audiovisual, press agencies and News services. 4- AT Kearney Analysis. 5- SPC Brasil (Service of Credit Protection) resource.
ECONOMIC ISSUES
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For further information:Investor Relations+55 11 3430.3687
[email protected] www.telefonica.com.br/ir