DGAP-News:Telefónica Deutschland Holding AG: Telefónica Deutschland updates 2015 OIBDA and CapEx outlook resulting from early capture of synergies; dividend proposal of EUR 0.24/share
DGAP-News: Telefónica Deutschland Holding AG / Key word(s): Preliminary Results/9-month figures Telefónica Deutschland Holding AG: Telefónica Deutschland updates 2015 OIBDA and CapEx outlook resulting from early capture of synergies; dividend proposal of EUR 0.24/share 05.11.2015 / 07:29
MUNICH, 5 Nov 2015 Preliminary results for January to September 2015: Telefónica Deutschland updates 2015 OIBDA and CapEx outlook resulting from early capture of synergies; dividend proposal of EUR 0.24/share - Strong +16.1% year-on-year OIBDA growth in the first nine months and +29.8% year-on-year in the third quarter from synergies and optimisation of commercial costs - MSR -0.3% year-on-year in the third quarter and broadly stable at +0.4% in the first nine months in line with expectations amidst continued focus on customer base development and mobile data monetisation; reiterating full-year MSR outlook - Financial outlook for the year 2015 updated as follows: - Increased OIBDA growth expectations to +15-20% year-on-year (from >10% year-on-year previously expected) - Increased expectations for CapEx reduction to a low double-digit percentage decline year-on-year (from high single-digit percentage decline previously expected) - Expected in-year savings from synergies for the year 2015 updated to EUR 280 million (from EUR 250 million run-rate previously) as a result of bringing forward significant integration activities from 2016 into 2015; overall synergy case unchanged - Continuity reflected in stable cash dividend proposal of EUR 0.24/share Third quarter 2015 operational & financial highlights1, - Net additions in mobile postpaid were 169 thousand with a strong contribution from partner brands and were affected by the disconnection of Kabel Deutschland customers after the Vodafone integration. Contract churn improved 0.2 percentage points year-on-year to 1.7% in the third quarter excluding M2M. Prepaid showed seasonally strong growth with 503 thousand net additions, driven by strong performance from partners and a high share of net additions from our ethnic brands over the summer. - The LTE customer base continued to grow to 7.0 million by the end of September 2015, reflecting the success of our data monetisation strategy. - The development of mobile service revenues (-0.3% year-on-year) was mainly the result of company strategy to develop its customer base and focus on retention, as well as the growth of the partner business. - Revenues reached EUR 1,979 million (-1.1% year-on-year) with revenue from handsets growing by 2.7% year-on-year, while MSR was slightly negative. Fixed revenues continued to fall driven by voice and wholesale, while retail DSL showed a slight sequential improvement. - OIBDA excluding exceptional effects continued to increase to EUR 454 million (+29.8% year-on-year), driven by synergies and commercial cost savings. Due to the accelerated execution of various integration initiatives, more than 45% of the year-on-year OIBDA growth was driven by integration savings. - CapEx (excluding investments in spectrum) declined 15.6% year-on-year to EUR 241 million as synergies from building one single LTE network outweighed investments for growth and network integration. The Company is on track to deliver its LTE coverage target of approximately 75% by the end of 2015. - Consolidated net financial debt was EUR 1,415 million at the end of September 2015. Financial leverage returned to 0.9x, after dividend and spectrum investment payments in the second quarter of 2015. Progress of integration and transformation activities During the third quarter of 2015, Telefónica Deutschland continued to make significant progress in terms of the execution of integration and transformation projects, to the extent that the Company now expects to reach EUR 280 million in-year savings from synergies for the full year 2015 (compared to the run-rate of EUR 250 million previously expected): - By the end of September, Telefónica Deutschland came close to finalising the execution of the 2015 leaver programme of restructuring 800 full time equivalents (FTEs) out of a total of 1,600 FTEs. - Telefónica Deutschland is progressing well with the transfer of the 301 shops to be handed over to Drillisch, 102 of which are own shops and 199 partner shops. This transfer of shops will contribute significantly to the planned consolidation of the shop footprint of Telefónica Deutschland from 1,800 to 1,200 shops. In addition to the Drillisch transfer, the Company aims to consolidate another 100 shops until year-end. - In July 2015 Telefónica Deutschland agreed to transfer approx. 7,700 mobile sites to Deutsche Telekom as part of the planned network consolidation, helping to drive a more efficient site dismantling process. - Telefónica Deutschland continues to push ahead with the in-city consolidation of its facilities, focussing on Munich, Düsseldorf and Hamburg as the main activity centres, with the intention to reduce office space by one third of the total target by year-end 2018 (total target is a reduction of approximately 100 thousand sqm or 50% of total office space). - Telefónica Deutschland is also currently optimising the management of external staff, including agency workers, outsourcing and consultants, and expects to see significant benefits from these initiatives also by year-end. Recent developments in Telefónica Deutschland's commercial offer and network During the third quarter of 2015 Telefónica Deutschland continued to execute commercial initiatives to retain market momentum, including an enhancement of its O2 Blue All-in portfolio and relaunch of its value brand Blau based on customer insights: - As of 1 October O2 Blue customers will benefit from more attractive conditions for phone calls to other countries and roaming packages. LTE roaming has been available since August in selected EU countries. - The 'O2 Guru' service and iPhone 6S campaigns were successfully launched in September to help drive our focus on digitalisation and value generation in the premium segment. - The O2 Blue data automatic was redesigned to give customers with a larger data allowances a proportionally more appropriate option if they exceed their allowance, thus facilitating data monetisation. - As part of its strategy of digital innovation Telefónica Deutschland now offers the 'O2 Message+Call' app as added value, enabling customers to use wifi calling via their mobile phones. - Value brand Blau was relaunched in September through physical and online channels with a clear focus on simplicity to offer customers the best value for money in their segment. - Independent surveys show the ongoing improvement of our network quality perception: In October Computer Bild confirmed that Telefónica Deutschland has significantly reduced the gap to its competitors as a result of national roaming and improved LTE coverage. Update 2015 financial outlook During the first nine months of 2015, Telefónica Deutschland successfully pursued its strategic priorities of maintaining market momentum, driving the integration and transforming the Company. Having reached a number of important milestones on our path to becoming the leading digital telco, we are now updating the outlook for the financial year 2015. As a result of leveraging a strong network and attractive commercial offering with an emphasis on data monetisation, we continue to expect mobile service revenue to remain broadly stable compared to the 2014 combined figure (EUR 5,528 million). Moreover, Telefónica Deutschland saw significant OIBDA growth (excl. exceptional effects) in the first nine months of 2015 driven by the early capture of synergies, as we were able to accelerate and bring forward significant integration activities from 2016 into 2015. The focus on the development of the customer base further helped to optimise commercial costs. As such, we now expect OIBDA to grow 15-20% year-on-year versus the 2014 combined6 figure (EUR 1,461 million), compared to previous growth expectations of more than 10% year-on-year. With regard to synergies Telefónica Deutschland now expects to achieve around EUR 280 million of OpCF (OIBDA-CapEx) synergies in 2015, which is approximately 35% of the synergy target run-rate (EUR 800 million) after five years ; the overall synergy case remains unchanged. OpEx savings and revenue synergies are expected to amount to ca. 50% of the total OpCF synergies in 2015. The Company has been able to make significant progress in terms of accelerating the execution of various initiatives. Major synergy drivers in this first year include the headcount restructuring programme, retail footprint optimisation, consolidation of facilities, reduction of external staff as well as various projects relating to the simplification of business processes and the elimination of duplications. Expectations for the total synergy case are unchanged. Revenue and other synergies are expected to come primarily from the contribution of the Mobile Bitstream Access agreement to our partner business. CapEx synergies are expected to represent around 50% of total OpCF synergies for 2015 and largely stem from a single rather than dual network roll-out. Moreover, in 2015 synergy effects in the latter half of the year are expected to outweigh the initial efforts required to consolidate the two networks as well as additional investments necessary to accelerate the deployment of LTE. As a result, we expect CapEx8 in 2015 to show a low double-digit percentage decline year-on-year from a combined6 base of EUR 1,161 million. With regards to shareholder remuneration, we intend to show continuity with respect to the dividend for the year 2015 and to propose to the next ordinary Annual General Meeting a cash dividend of EUR 0.24/per share, amounting to EUR 714 million in total, payable in May 2016. In line with our publicly stated dividend policy, the Company intends to maintain a high pay-out ratio in relation to Free Cash Flow while keeping the leverage ratio at or below 1.0x over the medium term. With regards to the integration of the E-Plus Group, the management board may consider synergies expected to be realised in the future when making a dividend proposal.
Base line for 9M 2015 Initial Outlook Updated Outlook 2014 (y-o-y pct. 2015 201511 (EUR million) growth) (year-on-year pct. (year-on-year growth) pct. growth) MSR 5,528 +0.4% Broadly stable Broadly stable OIBDA 1,461 +16.1% >10% 15-20% before except. effects CapEx 1,161 -2.8% High single digit Low double digit pct. decline pct. decline Dividend EUR 0.24/ - - EUR 0.24/share share
Telefónica Deutschland's operating performance in the third quarter of 2015 At the end of September 2015 Telefónica Deutschland reached an access base of 48.6 million, an increase of 1.8% year-on-year driven by strong growth in the prepaid and postpaid mobile base, which stood at 43.3 million (+2.6% year-on-year). Fixed accesses continued to fall by 4.4% year-on-year to 5.4 million driven by wholesale DSL, while retail broadband continues to improve its year-on-year trend. Net additions in mobile postpaid in the third quarter were 169 thousand with a strong contribution from partner brands and were affected by the disconnection of Kabel Deutschland customers following the integration into Vodafone Germany. Contract churn improved 0.2 percentage points year-on-year to 1.7% in the third quarter excluding M2M. Lower year-on-year trading in the retail postpaid business is a reflection of our strategic focus on the evolution of our customer base. However, the share of partner brands over total gross adds has now stabilised at 45% compared with the previous quarter. The total postpaid mobile base reached 19.3 million accesses at the end of September 2015, i.e. 44.5% of total mobile customers. Prepaid showed strong growth with 503 thousand net additions in the third quarter of 2015 compared to 237 thousand in the second quarter of 2015, as a result of strong growth in partner brands and seasonal good performance of ethnic brands in the summer period. The prepaid base thus increased to 24.0 million accesses. Postpaid churn was 1.7% in the third quarter 2015, an improvement year-on-year and stable quarter-on-quarter as a result of Telefónica Deutschland's focus on retention. The O2 consumer brand reported an even lower churn of 1.3% in the quarter. Smartphone penetration across all brands continued to improve to 52.9% (vs. 51.3% in the second quarter of 2015), as demand for data and smartphones continues to rise among the prepaid customer base also, particularly in high-value partner brands. The LTE customer base continued to grow to 7.0 million by September 2015, up 14.9% versus the previous quarter, reflecting the success of the LTE and data monetisation strategy, including the opening of the LTE network to the whole O2 postpaid customer base. In the third quarter of 2015 mobile ARPU was EUR 10.9 (-2.5% year-on-year), a slight improvement from the second quarter (EUR 10.8). Postpaid ARPU15 came to EUR 17.4 in the same period, above the EUR 17.2 of the second quarter of 2015, but a decline of 4.2% year-on-year. This largely resulted from the higher number of wholesale customers acquired via the partner business. The value of prepaid customers continued to improve with a prepaid ARPU of EUR 6.0 for the third quarter of 2015, up 3.9% from EUR 5.8 in the third quarter of 2014. With a lower number of net disconnections (-12.6 thousand), the decline in the retail fixed broadband access base continued to improve over consecutive quarters, bringing the total base to just over 2.1 million. Strong VDSL net additions of 64 thousand (vs. 58 thousand in the second quarter) could not quite compensate for the decline in fixed wholesale accesses (-42 thousand) driven by the progressive decommissioning of the ULL broadband access infrastructure and the decline in fixed voice accesses. Telefónica Deutschland's financial performance in the third quarter and nine months of 2015 , Revenues for the first nine months of 2015 totalled EUR 5,828 million, an increase of 0.9% over the previous year, while in the third quarter they declined 1.1% year-on-year to EUR 1,979 million. Mobile service revenues for January to September showed slight year-on-year growth of 0.4%, with a slight decline of -0.3% to EUR 1,419 million in the third quarter. The latter was mainly the result of company strategy to develop its customer base and focus on retention, as well as the growth of the partner business. Mobile data revenues came to EUR 2,127 million for the nine months period (EUR 728 million in the third quarter). The share of mobile data revenues over total mobile service revenues continued to increase to 51.3% in the third quarter 2015 (plus 0.1 percentage points versus the first half of 2015), of which 71.9% (plus 0.9 percentage points versus the first half of 2015) were non-SMS data revenues. Mobile data usage for LTE customers continued to show strong growth of +11% quarter-on-quarter to 1.1 Gb/month ), driven by the adoption of LTE-enabled handsets and the growing usage of audio and video streaming applications. In the O2 postpaid premium business the Company continued to see a sequential improvement in the adoption mix of tariffs, with approx. 37% of gross additions in the third quarter of 2015 taking a tariff with more than 1 Gb monthly allowance (approx. 35% in the previous quarter). Moreover, the rate of automatic extensions of monthly data allowances has increased to 54% of the opted-in customer base, as the data automatic itself has also been refined to allow bigger 'snacks' for high-end users. Handset revenues continued to grow 15.5% year-on-year to EUR 887 million for January to September 2015, while in the third quarter they reached EUR 301 million (+2.7% year-on-year), as a result of our focus on retention and customer base development. Fixed revenues amounted to EUR 778 million in the period until September 2015, a decline of 10.0% year-on-year, while in the third quarter they reached EUR 256 million (-9.5% year-on-year; unchanged compared to the second quarter of 2015). Improved traction of the retail DSL business helps to stem the decline in the wholesale ADSL and voice carrier business. The contribution of retail DSL revenues to the year-on-year reduction of total fixed revenues thus also improved from -4.8 percentage points in the second quarter to -3.6 percentage points in the third quarter. Operating expenses for January to September 2015 fell 1.4% year-on-year to EUR 4,714 million including restructuring costs of EUR 66 million, while in the third quarter they amounted to EUR 1,627 million (an improvement of 4.3% year-on-year) including restructuring costs of EUR 63 million. The latter were mainly related to network integration. - Supplies amounted to EUR 1,965 million in the first nine months and EUR 660 million in the third quarter of 2015, of which 45% were hardware costs of sales and 47% connectivity-related cost of sales - Personnel expenses amounted to EUR 500 million in the first nine months. In the third quarter, personnel expenses came to EUR 155 million of which base salaries made up 78% - Other operating expenses amounted to EUR 2,248 million in the first nine months of 2015 and EUR 812 million in the third quarter of 2015, of which commercial and non-commercial costs represented 53% and 37% respectively Operating Income before Depreciation and Amortisation (OIBDA) improved significantly in the first nine month of 2015 to EUR 1,234 million (EUR 388 million in the third quarter). OIBDA before exceptional effects20 and after group fees increased by 16.1% year-on-year in the nine months of 2015 and by 29.8% in the third quarter. The substantial OIBDA growth was driven by the early capture of integration synergies as well as a reduction in commercial costs. In-year savings from integration activities contributed 45% to the year-on-year OIBDA increase in the third quarter. The OIBDA margin was 21.2% for the nine months period and 22.0% before exceptional effects , the latter with an improvement of 2.9 percentage points versus the same period last year. In the third quarter of 2015 the OIBDA margin before exceptional effects came to 22.9% (+5.5 percentage points year-on-year). Group fees amounted to EUR 38 million in the first nine months of 2015 and EUR 15 million in the third quarter of 2015. Depreciation & Amortisation totalled EUR 1,545 million in the first nine months of 2015, compared to EUR 779 million reported in the same period of 2014. The strong increase over last year's reported numbers is mainly driven by the incorporation of E-Plus Group in 2014 and the first impacts from the consolidation of both networks. With respect to the spectrum assets acquired in the frequency auction in the second quarter (book value of EUR 1,196 million at the end of September 2015 including capitalised costs on borrowed capital), the renewed licenses in the 900 and 1800 MHz bands will begin to be amortised from January 2017, while the newly acquired spectrum in the 700 MHz band will contribute to amortisation expenses after its final release by the Authorities. Operating income was EUR -312 million for January to September 2015 (EUR -124 million in the third quarter), as depreciation & amortisation charges still exceeded OIBDA. Net financial result for the first nine months of 2015 was negative in the amount of EUR 36 million (EUR -11 million in the third quarter). This was mainly the result of different financing activities executed in the past (the bonds issued in November 2013 and February 2014), the promissory note executed in March 2015 as well as interest expenses from finance lease obligations. The Company did not report significant current income taxes for January to September 2015. The result for the nine months period 2015 was EUR -347 million (EUR -134 million in the third quarter), mainly due to the above-mentioned performance of the operating income. CapEx (excluding investments in spectrum) fell 2.8% year-on-year to EUR 704 million in the first nine months of 2015 and by 15.6% year-on-year to EUR 241 million in the third quarter. The steepening of the rate of decline in the third quarter was mainly due to phasing and the realisation of CapEx synergies which outweighed effects from investments in the LTE rollout as well as network integration costs. Operating cash flow (OIBDA minus CapEx excluding investments in spectrum) for the nine month period of 2015 was EUR 530 million (EUR 147 million in the third quarter). Before exceptional effects, operating cash flow showed strong year-on-year growth of 51.9% and 231.2% respectively for the nine months and the third quarter of 2015. Free Cash Flow (FCF) for the first nine months of 2015 reached EUR 350 million, of which EUR 58 million were proceeds from the sale of yourfone GmbH in the first quarter. Working capital movements of EUR -201 million were mainly driven by prepayments (mainly rents) of EUR -86 million until September, a CapEx reversal of EUR -166 million from the fourth quarter of 2014, as well as regular working capital movements which include silent factoring transactions for O2 myHandy receivables. These were partly offset by the upfront payment of EUR 150 million received in July 2015 from the MBA contract with Drillisch. Consolidated net financial debt was EUR 1,415 million at the end of September 2015, reaching a leverage ratio of 0.9x after 1.2x in the first half of 2015. This was mainly due to the effect from the EUR 714 million dividend for the financial year 2014 paid in May 2015, and the payment in June for long-term investments in spectrum licenses (EUR 977 million out of a total consideration of EUR 1,198 million). APPENDIX - DATA TABLES Please refer to the following link to access the download of the data tables. Thank you. https://www.telefonica.de/investor-relations-en/financial-publications/q3- 2015.html Further information Telefónica Deutschland Holding AG Investor Relations Georg-Brauchle-Ring 23-25 80992 München Veronika Bunk-Sanderson, Director Investor Relations Marion Polzer, Senior Manager Investor Relations Pia Hildebrand, Office Coordinator Investor Relations (t) +49 89 2442 1010 firstname.lastname@example.org www.telefonica.de/investor-relations Disclaimer: This document contains statements that constitute forward-looking statements and expectations about Telefónica Deutschland Holding AG (in the following "the Company" or "Telefónica Deutschland") that reflect the current views and assumptions of Telefónica Deutschland's management with respect to future events, including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations which may refer, among others, to the intent, belief or current prospects of the customer base, estimates regarding, among others, future growth in the different business lines and the global business, market share, financial results and other aspects of the activity and situation relating to the Company. Forward-looking statements are based on current plans, estimates and projections. 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, by their nature, are not guarantees of future performance and are subject to risks and uncertainties, most of which are difficult to predict and generally beyond Telefónica Deutschland's control and other important factors that could cause actual developments or results to materially differ from those expressed in or implied by the Company's forward-looking statements. These risks and uncertainties include those discussed or identified in fuller disclosure documents filed by Telefónica Deutschland with the relevant Securities Markets Regulators, and in particular, with the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht - BaFin). The Company offers no assurance that its expectations or targets will be achieved. Analysts and investors, and any other person or entity that may need to take decisions, or prepare or release opinions about the shares / securities issued by the Company, are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date of this document. Past performance cannot be relied upon as a guide to future performance. Except as required by applicable law, Telefónica Deutschland undertakes no obligation to revise these forward-looking statements to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telefónica Deutschland's business or strategy or to reflect the occurrence of unanticipated events. The financial information and opinions contained in this document are unaudited and are subject to change without notice. This document contains summarised information or information that has not been audited. In this sense, this information is subject to, and must be read in conjunction with, all other publicly available information, including if it is necessary, any fuller disclosure document published by Telefónica Deutschland. 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Language: English Company: Telefónica Deutschland Holding AG Georg-Brauchle-Ring 23-25 80992 München Germany Phone: +49 (0)89 24 42 0 Internet: www.telefonica.de ISIN: DE000A1J5RX9 WKN: A1J5RX Listed: Regulated Market in Frankfurt (Prime Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Munich, Stuttgart TecDAX End of News DGAP News Service