28.04.2016
DGAP-News:Telefónica Deutschland Holding AG: Telefónica Deutschland has progressed further with integration while keeping momentum in a dynamic yet rational market environment
DGAP-News: Telefónica Deutschland Holding AG / Key word(s): Quarter
Results/Preliminary Results
Telefónica Deutschland Holding AG: Telefónica Deutschland has progressed
further with integration while keeping momentum in a dynamic yet rational
market environment
28.04.2016 / 07:30
The issuer is solely responsible for the content of this announcement.
MUNICH, 28 April 2016
Preliminary results for January to March 2016
Telefónica Deutschland has progressed further with integration while
keeping momentum in a dynamic yet rational market environment
- Solid OIBDA growth of +6.2% year-on-year reflects successful synergy
capture
- Operating cashflow savings related to synergies of ca. EUR 55m
primarily from 2015 roll-over effects with customer migration and
network integration progressing rapidly
- MSR shows a continuation of trends in line with guidance (-1.3%
year-on-year), reflecting a continued strong development of the partner
business, as well as legacy base and regulatory effects
- VDSL uptake drives continues improvement of retail DSL trends; 3
thousand positive net additions
First quarter 2016 operational & financial highlights
- Net additions in mobile postpaid came to 181 thousand on the back of a
continued strong performance of partners. Contract churn remained low
at 1.8% and broadly stable year-on-year as the Company maintained its
focus on retention and customer base management.
- Mobile prepaid registered net disconnection of 236 thousand mainly due
to seasonality effects.
- The LTE customer base stood at 8.7 million, +10.2% quarter-on-quarter
as of the end of March, reflecting the successful data monetisation
strategy. Data usage for LTE customers in O2 consumer postpaid
continued to benefit from the demand for music and video streaming
services and stabilised quarter-on-quarter at 1.2 GB per month, up 50%
year-on-year.
- Revenues reached EUR 1,858 million (-2.3% year-on-year) mainly as a
result of lower year-on-year mobile services revenues and handset
revenues. The reduction in handset revenue reflects seasonality as well
as lower demand for handset in the market.
- Mobile service revenues was EUR 1,336 million (-1.3% year-on-year),
showing a continuation of trends from previous quarters, as MSR
continues to be impacted by continued strength of the partner business,
legacy base drag and regulatory effects. The company continues to focus
on retention and the development of our customer base.
- OIBDA excluding exceptional effects grew 6.2% year-on-year to EUR 401
million, benefitting particularly from the rollover effect from synergy
initiatives executed in 2015. At the same time there were upfront costs
related to the larger integration projects running in parallel in the
first half of 2016.
- CapEx came to EUR 218 million (-1.2% year-on-year), as Capex phasing
across the year is back-end loaded due to the expected intensification
of the network integration effort in the second half of 2016.
- Consolidated net financial debt was EUR 1,266 million at the end of
March 2016 and with a leverage of 0.7x, in line with the stated target
of at or below 1.0x.
Progress of integration and transformation activities
Telefónica Deutschland made further progress with the execution of its
integration and transformation initiatives and is executing according to
plan. During 2016 the company focusses on a number of core projects which
include the network integration, IT landscape transformation and customer
migration.
- After the successful execution of the first wave of the restructuring
programme or 800 FTEs in 2015, Telefóncia Deutschland has now finalised
the future target organisation of the company. After constructive
negotiations with the workers council another 500 FTEs will be given
clarity about their employment situation by the middle of 2016. The
company continues to target a reduction of 1,600 FTEs in total by 2018.
- As part of the integration process Telefónica Deutschland has started
to unify its brand and tariff portfolio and will henceforth focus on
the O2 brand in the premium sector. The transfer of BASE and E-Plus
customers to O2 has already started. We thus simplify our offer in the
premium segment and provide customers with high-quality products and
services under one brand. Over the coming months the company will
continue with the migration in other customer segments.
- After the realisation of 3G national roaming and preparation of the key
phase of the network integration in 2015, Telefónica Deutschland pushed
ahead with the physical integration of O2 and E-Plus networks in the
first quarter. At the same time the company continues to focus
significant efforts on rolling out LTE with the target of integrating
the 4G networks from summer 2016.
- Telefónica Deutschland has sold its passive tower infrastructure of
approximately 2,350 towers to Telxius, Telefónica S.A.'s infrastructure
company for a purchase price of EUR 587 million. The company is hereby
taking advantage of the current favourable market conditions for
infrastructure assets. The transaction will have no impact on the
targeted synergies related to the merger with E-Plus.
Recent developments in Telefónica Deutschland's commercial offer and
network
The company retained market momentum in a dynamic yet rational market
environment driven by investments into the repositioning of the O2 brand
while at the same time keeping a clear focus on retention and the
development of the customer base. Telefónica Deutschland has taken some
important steps to enhance its network quality and focus on customer
service as confirmed by independent surveys.
- Positioning of the O2 brand for customers in the premium segment
through a number of campaigns with a clear focus on supporting their
digital lifestyle plus excellent network and customer service quality.
- LTE was launched for smartphone plans for new O2 prepaid customers in
February 2016; the LTE network will be opened for the existing O2
consumer prepaid base from summer 2016.
- In early February 2016 the company launched 'Blue One', bringing
together various fixed/mobile product combinations under a single brand
name to facilitate ease of access for customers.
- At the end of February the company presented the first smartwatch with
eSIM at the World Mobile Congress in Barcelona. The Samsung Galaxy Gear
S2 has been available since April and the embedded SIM allows the
remote, electronic installation of customer profiles.
- For six month, COMPUTERBILD has asked 60 of its readers to test the
combined network of Telefónica Deutschland all over Germany. All trail
users confirmed that the network clearly improved in all regions.
- Connect "Netzwetter", a customer perception-based test of mobile data
usage in 3G and 4G, sees Telefónica Deutschland's network at eyes level
with competitors. LTE coverage clearly improved in rural areas due to
the ongoing rollout.
- Network planning is one of the first areas where Telefónica Deutschland
applies ADA (Advanced Data Analytics) to customer solutions. With new
algorithms the company tailors the deployment of its LTE network to
customer demand as data specialists are able to predict and data usage.
-
Financial outlook 2016
The financial outlook for 2016 remains unchanged as published in the Annual
Financial Report 2015 (page 60ff).
Exceptional and special effects are excluded from our guidance. Exceptional
effects include the capital gain from the sale of Telefónica Deutschland's
passive tower infrastructure to Telxius, Telefónica S.A.'s infrastructure
company, in the second quarter. The OIBDA impact resulting primarily from
higher operating lease expenses between May and December 2016 will also be
treated as a special effect for 2016 and thus excluded from our guidance.
Financial outlook 2016:
Base line 2015 Outlook 2016 (year-on-year) (EUR million) MSR 5,532 Slightly negative to broadly stable OIBDA 1,760 Low to mid single-digit % growth Before exceptional effects CapEx 1,032 % growth in the low tens
Telefónica Deutschland's operating performance in the first quarter of 2016
At the end of March 2016 Telefónica Deutschland's access base was 48.3
million, +1.2% year-on-year driven by a 2.0% year-on-year growth of the
mobile base, which stood at 43.0 million.
Mobile postpaid saw 181 thousand net additions in the first quarter 2016
versus 141 thousand in the same period of 2015. Telefónica Deutschland
maintained its focus on retention over acquisition and partner brands
sustained their strong performance, contributing 45% of gross additions
(43% in the fourth quarter of 2015). At the end of March mobile postpaid
base consisted of 19.3 million accesses (+1.8% year-on-year), representing
a broadly stable 44.8% share of total mobile customers.
The mobile prepaid customer base was up 2.1% year-on-year with a strong
performance from partners to 23.7 million while the first quarter of 2016
registered 236 thousand net disconnections, mainly due to seasonality.
Postpaid churn was broadly stable year-on-year and quarter-on-quarter at
1.8% in the first three months of 2016 while the O2 consumer brand reported
an even lower churn of 1.4% again, clearly supported by the Company's
retention focus.
Smartphone penetration across all brands continued to rise and was up 5.6
percentage point year-on-year to 55.4% at the end of March (+1.2 percentage
points quarter-on-quarter) driven by the steady increase of demand for data
both in the postpaid and the prepaid customer base; 77.8% and 26.9%
smartphone penetration respectively within the O2 consumer brand.
The LTE customer base was up 10.2% quarter-on-quarter to 8.7 million as of
31. March 2016, reflecting the success of the company's data monetisation
strategy.
Mobile ARPU was EUR 10.3 (-3.3% year-on-year) in the first quarter.
Postpaid ARPU7 came to EUR 16.6 and reflects the high share of wholesale
gross adds, the legacy customer base mix and regulatory effects with the
rate of year-on-year decline slowing to 3.8% (from -4.3% in the prior
quarter). As a result of the growing demand for data amongst prepaid
customers the prepaid ARPU continued to rise, reaching EUR 5.7 in the first
three months of 2016 (+1.3% year-on-year).
On the back of continued strong demand for VDSL - up 4.6%
quarter-on-quarter to 76 thousand net additions - retail fixed broadband
registered 3 thousand net additions in the quarter after 5 years of net
losses. The total retail DSL customer base stabilised at 2.1 million.
Fixed wholesale accesses continued to decline as expected (61 thousand net
disconnections until March) due to the progressive decommissioning of the
ULL (unbundled local loop) broadband access infrastructure.
Telefónica Deutschland's financial performance in the first quarter of 2016
Revenues came to EUR 1,858 million, 2.3% lower year-on-year mainly as a
result of the performance of mobile service revenues and the handset
business.
Mobile service revenues (MSR) reflect the continued strength of the partner
business and the associated higher share of wholesale revenues as well as
the company's ongoing focus on the development of its customer base and
regulatory effects. As a result, MSR declined 1.3% year-on-year to EUR
1,336 million.
Mobile data revenues rose 5.4% year-on-year to EUR 729 million for the
three months period and increased their share over MSR by 3.4 percentage
points year-on-year to 54.6% as revenue growth in non-SMS data outweighed
the further decline in SMS revenues. Non-SMS data revenues amounted to EUR
550 million, a strong 12.7% year-on-year growth and increased their share
of data revenues to 75.4%, up 4.9 percentage points.
Handset revenues fell 5.5% year-on-year to EUR 267 million, mainly due to a
lower demand for handsets after a particular strong Q4 2015 as well as
growing smartphone saturation in the market.
Fixed revenue trends stabilised with a year-on-year decline of 3.1% (-3.2%
in the prior quarter) and came to EUR 253 million on the back of the
growing traction of VDSL in the retail business while we continued to
benefit from spot trading opportunities in the carrier voice business. DSL
retail revenue performance was broadly stable year-on-year at -3.9%.
Other income was EUR 31 million with the year-on-year decline resulting
from the exceptional gain from the sale of yourfone in the first quarter of
2015.
Operating expenses including restructuring costs of EUR 23 million amounted
to EUR 1,509 million until March 2016, down 2.7% year-on-year mainly driven
by savings from integration projects. Restructuring costs were mainly
related to the leaver programme.
- Supplies came to EUR 629 million, 4.6% lower year-on-year mainly due to
lower hardware costs of sales (44% of supplies) and lower
connectivity-related cost of sales (47% of supplies).
- Personnel expenses were EUR 173 million (including restructuring costs
of EUR 18 million) with the decline of 3.1% year-on-year mainly
resulting from the successful execution of the first wave of the
employee restructuring programme in 2015.
- Other operating expenses were broadly stable year-on-year (-0.9%) at
EUR 707 million, including restructuring expenses of EUR 4 million.
Commercial costs and non-commercial costs made up 56% and 40%
respectively. Savings resulted from the 2015 synergy initiatives while
at the same time we registered costs related to the 2016 integration
activities and investments into the company's commercial positioning
and brands.
Operating Income before Depreciation and Amortisation (OIBDA) in the period
up to March 2016 benefitted from the roll-over effect of synergies executed
in prior year and were affected by the before-mentioned cost positions.
OIBDA in reported terms fell 4.2% year-on-year to EUR 379 million, as the
company had a capital gain from the sale of yourfone in the prior year
period.
Excluding exceptional effects OIBDA rose 6.2% year-on-year to EUR 401
million with in-year savings from integration activities (OPEX & revenue)
amounting to EUR 55 million. The OIBDA margin increased by 1.7 percentage
points year-on-year to 21.6%
Group fees amounted to EUR 13 million in the first quarter of 2016
Depreciation & Amortisation amounted to EUR 540 million in the first three
month of 2016, a slight increase of 2.1% year-on-year compared to the same
period of 2015 (EUR 529 million).
The operating result for January to March 2016 was negative in the amount
of EUR 161 million as depreciation & amortisation charges still exceed
OIBDA.
The net financial result for the three months period was negative in the
amount of EUR 8 million resulting from various financing activities
including the bonds issued in November 2013 and February 2014 as well as
promissory note executed in March 2015, as well as interest expenses from
finance lease obligations.
The Company did not report income tax expense for January to March.
The result for the first quarter of 2016 came to EUR -170 million.
CapEx was EUR 218 million (-1.2% year-on-year) in the first quarter of
2016. Telefónica Deutschland is executing according to plan with back-end
loaded Capex phasing across the year due to the expected intensification of
the network integration effort in the second half of 2016.
Operating cash flow (OIBDA minus CapEx) for the three months period of
2016 was EUR 161 million. Excluding exceptional effects9, operating cash
flow was up 16.7% year-on-year.
Free Cash Flow (FCF) for the first quarter of 2016 reached EUR -20 million
in 2015.
Working capital movements of EUR 159 million were mainly driven by seasonal
prepayments (mainly rents) of EUR 186 million as well as regular working
capital movements which include silent factoring transactions for O2
myHandy receivables.
Consolidated net financial debt stood at EUR 1,266 million at the end of
March 2016, maintaining a leverage ratio of 0.7x. The slight increase
compared to year end 2015 mainly comes from different financing activities
that resulted in offsetting effects as well as from the negative FCF that
was generated in the period.
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/q1-
2016.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, Investor Relations Officer
(t) +49 89 2442 1010
ir-deutschland@telefonica.com
www.telefonica.de/investor-relations
Disclaimer:
This document contains statements that constitute forward-looking
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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
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such as "expects", "anticipates", "intends", "believes", and similar
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are subject to risks and uncertainties, most of which are difficult to
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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
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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.
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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; Terminbörse EUREX
TecDAX
End of News DGAP News Service
458353 28.04.2016