DGAP-News: Telefónica Deutschland Holding AG: Telefónica Deutschland releases full year 2013 preliminary results
(DGAP Corporate News Via Acquire Media NewsEdge) DGAP-News: Telefónica Deutschland Holding AG / Key word(s): Final
Telefónica Deutschland Holding AG: Telefónica Deutschland releases
full year 2013 preliminary results
26.02.2014 / 07:30
26th February 2014
Telefónica Deutschland releases full year 2013 preliminary results
MUNICH. The operating and financial performance of Telefónica Deutschland
in 2013 reflects the execution of its strategy in a very dynamic
competitive environment, with a clear focus on mobile data monetisation.
The strong conversion of operating results into Free Cash Flow exceeded the
proposed dividend of 525 million Euro for financial year 2013.
"We are facing 2014 with renewed optimism for the future as we see
significant value creation opportunities to be materialised with the
envisaged transaction with E-Plus", said Markus Haas (CSO) and Rachel Empey
(CFO) added, "We have been able to demonstrate our ability to increase Free
Cash Flow in a particularly demanding environment while strengthening our
Full year 2013 financial highlights:
- Telefónica Deutschland total revenues amounted to 4,914 million Euro, a
decrease of 5.7% year-on-year, of which 2,989 million Euro were
wireless service revenues (-5.2% year-on-year; -1.5% excluding mobile
termination rate cuts).
- OIBDA reached 1,237 million Euro, 3.3% below 2012 and -9.2%
year-on-year if adjusted for capital gains of 76.2 million Euro from
the sale of assets in the fourth quarter of 2013. As a result, OIBDA
margin was 25.2% (23.6% if adjusted for capital gains, -0.9 percentage
- CapEx increased 9.4% year-on-year to 666 million Euro, and after a net
positive contribution of 127 million Euro from Working Capital and
other effects, Free Cash Flow pre-dividends increased 3.3%
year-on-year to 699 million Euro.
- Net debt decreased year-on-year by 375 million Euro to reach 468
million Euro at the end of December, 2013, with a leverage ratio of
0.4x . The Company successfully debuted in the debt capital market with
a 600 million 5-year Eurobond issuance in Mid-November 2013, followed
by a 500 million 7-year Eurobond at the beginning of February, 2014.
Summary of achievements on 2013 Strategic Priorities for the business:
- Capitalise on our multi-brand portfolio & superior customer
satisfaction, driving additional efficiencies for the business.
- Tariff portfolio updates for a more smartphone-centric customer
demand: "O2 Blue All-in" for the consumer postpaid segment; "O2
Loop Smart" and "Fonic Smart S" tariffs for prepaid customers.
- Development of new distribution channels and special propositions
for digital customers: O2 Facebook shop launch, online tariffs for
specific segments (e.g. young people).
- Further development of a fixed-mobile convergent approach, also
leveraging Telefónica Deutschland's strong partnership with
Deutsche Telekom in fixed access: improved "Kombi-Vorteil", new "O2
DSL All-in" portfolio.
- Monetise the data opportunity in all segments through innovative
products, digital services & LTE network.
- Consolidation of "O2 My Handy" handset model with the design of
specific bundles to foster LTE adoption (summer campaign "Alles
Drin" and Christmas campaign "Hol alles raus" with one year access
to LTE when selecting the "O2 Blue M" tariff).
- Key partnerships in the Digital space to foster penetration and
usage of mobile data: "Games Flatrate", "Napster Music-flat", new
- New financial services, such as "O2 Wallet" and "O2 Smartphone
Insurance", digital advertising solutions ("O2 More", "O2 Pad") and
machine-to-machine developments, such as "Telefónica Insurance
- Maintain a competitive 3G network while delivering LTE technology to
- Acceleration of LTE network deployment: All planned high speed
areas on air, reaching more than 40% population coverage at the end
of 2013, with a much focused investment approach in the areas where
most O2 customers live.
- Delivering online, accurate information to customers on network
quality and geographical network availability ("Live check"
smartphone application): solid position in mobile data quality as
per recent independent network tests (e.g. "Chip", "Connect").
- Further densification of the 3G network with the enhancement of
HSPA+ technology with Dual Cell deployment in selected areas (up to
42 Mbps downstream speed).
Fourth quarter 2013 operational and financial highlights:
- Sustained net additions in mobile postpaid O2 consumer segment, with
approx. 100% of new customers taking data-centric tariffs, while total
postpaid net additions were negative in 30 thousand, due to the
disconnection of lines in the business segment and a change of platform
in some partners. Smartphone penetration continued its positive trend
in both postpaid and prepaid segments, with a significant
quarter-on-quarter increase in LTE-enabled devices sold (approx. 80%
- Operating improvement in the fixed broadband business, with 22 thousand
retail DSL net disconnections (vs. -29 thousand in the previous
quarter), reflecting the success of the new "O2 DSL All-in" portfolio.
- Continuation of trends for wireless service revenue performance (-3.4%
year-on-year vs. -1.8% in the previous quarter, excluding the impact
from mobile termination rate cuts), with an acceleration of the
decrease in SMS volume in the quarter. Mobile data continued to be the
main growth lever for the business (+18.6% year-on-year in non-SMS data
revenues), leveraging increased demand of mobile data from customers.
- OIBDA increased 8.8% year-on-year, mainly due to a capital gain from
the sale of assets in the quarter. The underlying OIBDA performance
(excluding the capital gain) of -13.4% year-on-year and 23.9% margin
(-1.7 percentage points, year-on-year) continued to reflect the flow
through from revenues and sustained commercial investments in the
second half of the year.
- CapEx increased 26.6% year-on-year, with strong performance in the
quarter due to a different year-on-year phasing of investments and a
continued focus on the deployment of the LTE-based network, while
maintaining the quality of mobile data services through the
densification of the 3G network.
Telefónica Deutschland's operating performance:
At the end of December 2013, Telefónica Deutschland had 25.2 million
customer accesses, a year-on-year decrease of 0.8%. Mobile access base
remained stable (+0.5% year-on-year) to reach 19.4 million.
Main commercial highlights for the fourth quarter of 2013 include:
- New "O2 DSL All-in" portfolio; the first all-net offer in the market
with speed as main differentiator, further facilitating a converged
approach in combination with the new "Kombi-Vorteil".
- Christmas campaign "Hol alles raus", offering a combination of the
newest smartphones (e.g. "Samsung Galaxy S4 mini" or "HTC One mini")
with the "O2 Blue All-in M" tariff and one-year access to LTE from
- Launching of value added digital services: "O2 Protect", "Napster
Music-flat" and the new O2 Facebook shop, a full-dedicated space to
deal with customers in their own digital environment.
In the fourth quarter of 2013, Telefónica Deutschland continued executing
its strategy in a very dynamic market, with commercial activities designed
around bundles of smartphones and related tariffs, especially the ones
introducing LTE to new and existing customers. The demand for higher speeds
was also prevalent in the fixed business, with initial encouraging results
from the new "O2 DSL All-in" portfolio.
Postpaid mobile net additions in 2013 were 178 thousand, while in the
fourth quarter they were negative in 30 thousand, mainly due to the
disconnection of lines in the business segment and a change of platform in
some partners. The O2 consumer segment progressed well in the fourth
quarter, with a sustained number of net additions over the previous
quarter. Close to 100% of new customers in that segment took one
data-centric tariff in 2013. Total postpaid base reached 10.3 million
customers (+1.8% year-on-year) and its penetration over total mobile base
grew 0.6 percentage points year-on-year, to 53.0%.
The mobile prepaid segment registered 76 thousand net disconnections in
2013, with 146 thousand net disconnections in the fourth quarter due to the
usual seasonal behaviour of prepaid customers in both O2 consumer and
partner segments. Prepaid customer base reached 9.1 million at the end of
December 2013 (-0.8% year-on-year).
Blended churn in 2013 was 2.4%, while in the fourth quarter it reached 2.8%
(+0.1 and +0.3 percentage points over the previous year, respectively).
Postpaid churn in 2013 was 1.6% (+0.1 percentage points, year-on-year)
while in the fourth quarter, it reached 2.1% (+0.6 percentage points,
year-on-year), due to the effects mentioned before, and the intense
competition seen in the German mobile market.
Smartphone penetration reached 31.4% at the end of December 2013, an
improvement of 5.0 percentage points over the previous year. In the
specific segment of O2 consumer postpaid, smartphone penetration reached
68.8%; +7.1 percentage points year-on-year. In the prepaid segment,
penetration is also improving to 17.3% in O2 consumer and 22.7% in Fonic
(+5.8 and +11.2 percentage points year-on-year increases, respectively).
The adoption rate of LTE-enabled handsets from new and existing customers
showed a remarkable improvement to make up approximately 80% of total sales
in the fourth quarter vs. 55% in the previous quarter, which is a leading
indicator for future monetisation of mobile data.
Mobile ARPU, excluding the impact from mobile termination rate cuts,
declined 4.3% year-on-year in 2013 and 5.1% in the fourth quarter (-7.9%
year-on-year in 2013 and -8.0% in the quarter to 12.7 Euro and 12.5 Euro,
respectively, in reported terms).
Postpaid ARPU in the fourth quarter, excluding mobile termination rate
cuts, registered a similar performance over the previous quarter (-6.6%
year-on-year, also in the full year). In reported terms, postpaid ARPU
declined 9.8% year-on-year in 2013 and -9.2% in the fourth quarter to 19.4
Euro and 19.1 Euro, respectively. This performance was a continuation of
trends seen in previous quarters, as tariff migrations, plus the
acceleration in the quarter of SMS substitution by IP messaging within the
customer base, was not fully compensated by the positive contribution from
the addition of new customers. The increased share of online channels in
trading activity, with their associated discounts, and the stronger
commercial focus on bundles of selected handsets with tariffs from the "O2
Blue All-in" portfolio is also having an impact in postpaid ARPU.
Prepaid ARPU, excluding the impact from mobile termination rate cuts, was
down 1.8% year-on-year in 2013 and -3.1% in the fourth quarter (-0.6% in
the third quarter), as the higher adoption of data tariffs from prepaid
customers is also reducing the usage of traditional voice and messaging
services. Prepaid ARPU declined 6.8% year-on-year in 2013 and -7.1% in the
fourth quarter to 5.1 Euro for both periods, in reported terms.
Retail fixed broadband accesses declined by 132 thousand in 2013 and by 22
thousand in the fourth quarter, a continued improvement over the previous
quarters (-29 and -40 thousand in the third and second quarter,
respectively), showing the increased traction of demand for speed amongst
customers and the good acceptance of the new "O2 DSL All-in" portfolio. On
the other hand, wholesale broadband accesses registered net disconnections
of 5 thousand in the fourth quarter.
Telefónica Deutschland's financial performance:
Telefónica Deutschland's revenues reached 4,914 million Euro in 2013, a
5.7% year-on-year decline (-3.5% excluding the impact from mobile
termination rate cuts). Revenues in the fourth quarter were 1,243 million
Euro, a decline of 7.4% over the same period of last year (-5.7% excluding
the impact from mobile termination rate cuts).
Wireless service revenues amounted to 2,989 million Euro in 2013 (-5.2%
year-on-year; -1.5% excluding the impact from mobile termination rate
cuts), while in the fourth quarter they amounted to 743 million Euro (-6.3%
year-on-year; -3.4% excluding the impact from mobile termination rate
The year-on-year performance in the fourth quarter relative to the previous
quarter continued to be dominated by the O2 consumer postpaid segment. This
was mainly the result from a lower ARPU performance and a combination of a
stable quarter-on-quarter number of net additions with an increasing number
of tariff renewals in the base. The share of bundled revenues over total
wireless service revenues in the fourth quarter continued to grow by 9
percentage points over the previous year to reach 66% in the O2 consumer
Mobile data continued to be the main driver for revenue performance,
reaching 1,443 million Euro in 2013 and 364 million Euro in the fourth
quarter (+3.7% and +2.1% year-on-year, respectively). Non-SMS data revenues
registered growth of 21.7% year-on-year in the full year 2013 (+18.6% in
the fourth quarter), resulting in a ratio of non-SMS data over total data
revenues of 69.6% in the fourth quarter, 9.7 percentage points above the
same period of last year.
Handset revenues, mainly through "O2 My Handy" distribution model, reached
684 million Euro in 2013, a decline of 1.4% year-on-year. In the fourth
quarter, handset revenues were 8.9% lower than in the same period of last
year, due to lower number of devices sold over the previous year, and the
increase of more affordable handsets in the mix.
Wireline revenues stood at 1,235 million Euro in 2013 (-9.4% year-on-year;
-9.2% in the fourth quarter), mainly as a result of a lower retail DSL base
(mitigated by an increasing uptake of VDSL) and a stable evolution of the
retail DSL ARPU. This revenue line was also impacted by a further reduction
of revenues from the low margin voice transit business.
Operating expenses in 2013 amounted to 3,846 million Euro, a year-on-year
decrease of 3.7% (-3.9% in the fourth quarter to 976 million Euro, a stable
year-on-year performance over the previous quarter).
Main drivers for expenses evolution were:
- Decline in supplies of 8.1% year-on-year to 1,958 million Euro (-9.5%
in the fourth quarter), driven by a reduction in mobile voice and SMS
interconnection expenses (voice rates were cut in December, 2012 by 45%
and in 2013 by 3%), and lower costs associated with the fixed business
offsetting higher costs from handsets sold in the period.
- Personnel expenses decreased by 0.7% year-on-year to 419 million Euro
(-7.5% in the fourth quarter) as a result of a different phasing of
activities compared to the fourth quarter of 2012 (overtime payments
and increase of activities in the business towards the end of the
- Other expenses increased by 1.9% year-on-year to 1,469 million Euro
(+6.6% in the fourth quarter), with efficiencies in overheads,
advertising spend and lower bad debts not compensating a significant
increase in commercial expenses, mainly related to customer retention
and promotions made in the second half of the year.
Operating Income before Depreciation and Amortisation (OIBDA) reached 1,237
million Euro in 2013 and 373 million Euro in the fourth quarter (-3.3% and
+8.8% year-on-year, respectively). OIBDA in the fourth quarter registered
capital gains from the sale of assets amounting to 76.2 million Euro .
Underlying performance of 2013 OIBDA (excluding capital gains) was -9.2%
year-on-year (-13.4% in the fourth quarter).
OIBDA margin was up 0.6 percentage points year-on-year in 2013 to 25.2%
(-0.9 percentage points to 23.6% excluding capital gains). OIBDA margin in
the fourth quarter, excluding capital gains, amounted to 23.9% (-1.7
percentage points, year-on-year), a similar performance over the previous
OIBDA excluding group fees totalled 1,308 million Euro in 2013 (-3.2%
year-on-year; +6.8% in the fourth quarter). If in addition, capital gains
in the fourth quarter were also excluded, full year performance would have
been -8.8% year-on-year (-14.1% in the fourth quarter) and OIBDA margin
would have gone down 0.9 percentage points year-on-year in 2013 to reach
25.1% (-2.0 percentage points to 25.2% in the fourth quarter).
The year-on-year OIBDA performance was mainly due to an increase in
commercial investments focused on mobile customer base retention activities
and specific promotions on devices attached to high value tariffs. This
added to the negative flow-through effect from revenues to results.
Depreciation & Amortisation was stable year-on-year (-0.1%), and amounted
to 1.132 million Euro for the full-year 2013. In 2013, the Company
increased its investments in the rollout of 4G network and in the capacity
of the 3G network throughout the year.
Operating income amounted to 105 million Euro in 2013 (146 million Euro in
the previous year), while in the fourth quarter it was 84 million Euro (42
million Euro in the previous year).
Net financial result in 2013 was -27 million Euro (-6 million Euro in the
previous year). This was the result of the new capital structure of the
Company from September 2012 onwards. In the fourth quarter the net
financial result amounted to -4 million Euro (-9 million Euro in the fourth
quarter of 2012), mainly due to the partial redemption of a loan.
In 2013, a minimal deferred tax expense was registered (1 million Euro),
while in the same period of 2012 the Company registered a positive income
of 168 million Euro from deferred taxes.
Profit after taxes from continuing operations in 2013 was 78 million Euro
(79 million Euro in the fourth quarter), which compares with a positive
figure of 308 million Euro in the same period of the previous year (199
million Euro in the fourth quarter of 2012).
CapEx in 2013 amounted to 666 million Euro, an increase of 9.4%
year-on-year, supporting future growth with accelerated investments in the
development of the LTE network, which more than doubled compared to the
same period of 2012 and allowed LTE network coverage over the total German
population to exceed 40% (ca. 15% at the end of December 2012). CapEx in
the fourth quarter increased by 26.6% year-on-year due to a different
year-on-year phasing of investments while maintaining the quality of mobile
data services through the densification of the 3G network.
Operating Cash Flow (OIBDA-CapEx) reached 571 million Euro in the full-year
2013, a year-on-year decline of 14.8% (-6.2% year-on-year in the fourth
quarter). Underlying performance of 2013 Operating Cash flow (excluding
capital gains) was -26.2% year-on-year (-47.4% in the fourth quarter).
Free Cash Flow pre dividends from continuing operations (FCF) reached 699
million Euro (from 676 million Euro in 2012). The strong conversion from
Operating Cash Flow to FCF was the result of a positive working capital
development of 132 million Euro, with different silent factoring
transactions executed in both years having a major role, as well as a net
effect of 31 million Euro from the sale of assets made in the fourth
quarter 2013. In 2013 the Company registered a net interest payment of 21
million Euro (1 million Euro receipt in the same period of 2012) and a
contribution to a term deposit in the amount of 14 million Euro which will
be released over time.
In the fourth quarter of 2013, FCF amounted to 155 million Euro (vs. 123
million Euro registered in the same period of 2012).
The Company did not pay income taxes neither in 2013 nor in the same period
With a debut issuance of a 600 million Euro 5-Year Eurobond in November,
2013 and a subsequent 500 million Euro 7-Year Eurobond in February, 2014,
Telefónica Deutschland established itself successfully in the debt capital
market and achieved very attractive funding and spread levels, leading to a
1.875% coupon in the 5-Year issuance and a 2.375% coupon in the 7-Year
issuance. These transactions strengthened the Company's liquidity position,
extending its maturity profile while diversifying its investor base.
Consolidated net financial debt decreased year-on-year by 375 million Euro
to 468 million Euro at the end of December 2013, reaching a leverage ratio
APPENDIX - DATA TABLES
Please refer to the following link to access the download of the data
tables. Thank you.
Telefónica Deutschland Holding AG
Victor J. García-Aranda, Head of Investor Relations
Marion Polzer, Manager Investor Relations
Pia Hildebrand, Office Coordinator Investor Relations
(t) +49 89 2442 1010
The financial information contained in this document (in general prepared
under International Financial Reporting Standards (IFRS)) contains in
respect of the results for January - December 2013 period only preliminary
numbers. The financial information and opinions contained in this document
are unaudited and are subject to change without notice.
None of the Company, its subsidiaries or affiliates or by any of its
officers, directors, employees, advisors, representatives or agents shall
be liable whatsoever for any loss however arising, directly or indirectly,
from any use of this document its content or otherwise arising in
connection with this document.
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 Market Regulator (Bundesanstalt für
Finanzdienstleistungsaufsicht - BaFin). The Company can offer 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, and shall take into account that the numbers published are
only preliminary. Past performance cannot be relied upon as a guide to
Except as required by applicable law, Telefónica Deutschland 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 Deutschland's business or acquisition
strategy or to reflect the occurrence of unanticipated events.
This document contains summarized 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
Finally, it is stated that neither this document nor any of the information
contained herein constitutes an offer of purchase, subscribe, sale or
exchange, nor a request for an offer of purchase, subscription, sale or
exchange of shares / securities of the Company, or any advice or
recommendation with respect to such shares / securities. This document or a
part of it shall not form the basis of or relied upon in connection with
any contract or commitment whatsoever.
These written materials are especially not an offer of securities for sale
in the United States, Canada, Australia, South Africa and Japan. Securities
may not be offered or sold in the United States absent registration under
the US Securities Act of 1933, as amended, or an exemption there from. The
issuer or selling security holder has not and does not intend to register
any securities under the US Securities Act of 1933, as amended, and does
not intend to offer any securities in the United States. No money,
securities or other consideration from any person inside the United States
is being solicited and, if sent in response to the information contained in
these written materials, will not be accepted.
End of Corporate News
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Company: Telefónica Deutschland Holding AG
Phone: +49 (0)89 24 42 0
Listed: Regulierter Markt in Frankfurt (Prime Standard);
Freiverkehr in Berlin, Düsseldorf, Hamburg, München,
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