2Q15 RESULTS RIO DE JANEIRO, 13 AUGUST 2015

Transcription

1 RESULTS RIO DE JANEIRO, 13 AUGUST 2015

2 IMPORTANT NOTICE This release contains forward-looking statements, according to the U.S. Private Securities Litigation Reform Act of Statements that are not historical facts, including statements about perspectives and expectations, are forward-looking statements. The words "anticipates", "believes", "estimates", "expects", "forecasts", "intends", "plans", and similar terms, when related to the Company or its management, indicate forward-looking statements. These statements reflect the current view of management and are subject to various risks and uncertainties. These statements are based on various assumptions and factors, including general economic, market, industry, and operational factors. Any changes to these assumptions or factors may lead to practical results different from current expectations. Excessive reliance should not be placed on those statements. Forward-looking statements relate only to the date they are made, and the Company is not obligated to update them as new information or future developments arise. Oi S.A. 1

3 Results Oi s Strategic Priorities Oi has made progress towards priorities Operational turnaround: cost transformation and network improvement EBITDA and OCF continue on track to deliver 2015 guidance*: Routine EBITDA R$ bn Routine EBITDA CAPEX improvement R$ bn Complete sale of PT Portugal Balance sheet: refinancing and reducing debt; and building a better regulatory environment First liability management moves Near-term debt refinancing Other asset disposals TAC: projects filed with ANATEL Corporate governance: moving to highest standards, no controlling shareholders Announcement of Oi s new Board Alternative structure approved by Anatel and EGM called to Sept 1 st Voluntary conversion of preferred to common shares (30-day period) Consolidation and market evolution Company remains alert to market movements to assess potential alternatives of consolidation. * Guidance for Brazilian operations. Oi S.A. 2

4 OPERATIONAL TURNAROUND Oi S.A. 3

5 Results Financial Highlights cost efficiency, EBITDA & OCF IMPROVEMENT IN LINE TO DELIVER 2015 GUIDANCE Financial highlights R$ million y.o.y 1H15 1H14 y.o.y Brazil Net Service Revenues 1 6,486 6, % 13,125 13, % Residential 2,460 2, % 4,951 5, % Personal Mobility Customer 2 1,950 1,757 2,023 1, % +3.5% 4,009 3,557 4,075 3, % +6.1% Corporate/SMEs 2,001 2, % 4,019 4, % Routine OPEX 4,739 5, % 9,651 10, % Routine EBITDA 1,816 1, % 3,745 3, % Routine EBITDA Margin 27.7% 23.7% +4.1pp 28.0% 24.3% +3.7pp Capex 1,041 1, % 2,025 2, % Routine EBITDA Capex % 1, % Consolidated Reported EBITDA 1,899 1, % 3,910 4, % 1 - Excludes handset revenues. The handset operations outsourced in this quarter had a negative impact of approximately R$ 140 million in handset revenues. 2 - Includes subscriptions, outgoing calls, mobile long distance, roaming, data and value added. Oi S.A. 4

6 Results Operational Highlights continuous FOCUS ON IMPROVING PROFITABILITY OF THE EXISTING CUSTOMER BASE Operational highlights Thousand RGUs q.o.q 2Q y.o.y 1Q y.o.y Total - Brazil 72,975 73, % 74, % -1.4% Residential 16,791 17, % 17, % -2.9% Fixed Line 10,440 10, % 11, % -7.4% Broadband 5,167 5, % 5, % -1.2% Pay TV 1,184 1, % % +48.8% Residential ARPU % % +5.4% Personal Mobility 47,756 47, % 48, % -0.4% Prepaid 40,719 40, % 41, % -1.4% Postpaid 7,037 7, % 6, % +5.8% Corporate/SMEs 7,778 7, % 8, % -3.7% Fixed Line 4,677 4, % 4, % -5.9% Broadband % % -2.8% Mobile 2,497 2, % 2, % +0.6% Public Telephones % % -0.7% Oi S.A. 5

7 Results Brazil Revenues GROWTH IN MOBILE CUSTOMER REVENUES AND RESILIENCE IN RESIDENTIAL DESPITE MACRO ENVIRONMENT Personal Mobility % y.o.y Service Revenues Customer Revenues Net Revenues % y.o.y 4Q14 Residential % y.o.y Q Q14 Corporate / SMEs % y.o.y Q14 Oi S.A. 6

8 Results Personal Mobility (Brazil) DEMAND FOR DATA IS DRIVING GROWTH IN BOTH RECHARGES AND ARPU 3G/4G handset penetration % of total base +23pp Postpaid ARPU (ex-mtr) Indexed +7.4% Personal Mobility Customer Revenues R$ million +3.5% Voice Data 31% 54% 1,698 1,646 1,808 1,799 1,757 Recharges¹ % y.o.y (Financial volume) % Q14 28% 30% 34% 38% 40% Data / Total 4Q Recharges include the prepaid portion of fixed+prepaid offers (OVT). Oi S.A. 7

9 Results Personal Mobility (Brazil) OI IS PERFORMING WELL RELATIVE TO PEERS IN A DIFFICULT MACROECONOMIC ENVIRONMENT Data revenues % y.o.y MOU In minutes Q14 4Q Q14 4Q14 OI Player A Player B Player C Source: Companies public reports Oi S.A. 8

10 Results Residential (Brazil) PROFITABILITY OF OUR RESIDENTIAL CUSTOMER BASE CONTINUES TO IMPROVE IN ALL LINES RGUs Million Residential ARPU R$ Fixed Broadband TV % % 78.5 ARPU Indexed +0.4% +1.8% +4.7% 4Q14 Fixed Broadband TV Oi S.A. 9

11 Results Corporate / SMEs (Brazil) B2B FACING CHALLENGES IN THE MACROECONOMIC ENVIRONMENT BUT IMPROVING THE QUALITY OF ITS REVENUES Corporate: less voice services dependency Non-voice revenues % of Corporate revenues +1.7pp Non-traditional services 1,2 Indexed. Revenues +22.6% IT VAS SMEs: focus on quality and profitability Portfolio simplification Indexed. # of offerings -50% -87% -92% Mobile Fixed Broadband Focus on profitability through data and VAS (Network Security, Cloud Services, Managed Services, etc) Growth on IT and other non-traditional services to reduce dependency on voice End of handset subsidies Upgrading customer services without the use of additional investments New post-sales structure Focus on improving quality of services Portfolio simplification End of handset subsidies 1 - IT = Cloud, ICT and Datacenter services; VAS = Managed Services, Security Solutions and Special Projects 2 - figures excludes FIFA contract revenues Oi S.A. 10

12 Results Operating Costs and Expenses (Brazil) OPEX REDUCTION ACCELERATED IN Q2 DESPITE FX, ENERGY AND INFLATION HEADWINDS Routine operating costs and expenses R$ million Brazilian operations Inflation in the period: +8.9% In : -4.8% LTM inflation in : +8.1% 5, , % ,739 MTR tariffs cut Lease back from assets sold Handset costs Personnel Interconnection (traffic) Third-party services Network maint. Marketing Rent & insurance Others 10, , % ,651 1H14 MTR tariffs cut Lease back from assets sold Handset costs Personnel Interconnection (traffic) Third-party services Network maint. Marketing Rent & insurance Others 1H15 Oi S.A. 11

13 Results Operational Turnaround FOCUS HAS SHIFTED FROM SHORT-TERM COST CUTTING TO MID-TERM TRANSFORMATION initiatives; GREAT OPPORTUNITIES REMAIN Jan-Jun 2015 Stage 1 Quick wins and focus on cash generation July 2015 onwards Stage 2 Structural initiatives Structural initiatives - Stage 2 Front office / Back office optimization Contracts renegotiation Rationalize discretionary spending Selective Capex allocation Selective price increase Sales channel optimization Outsource handset operation Headcount & org. structure Process and organizational efficiency Commercial and operational productivity Transversal improvement initiatives Improved customer experience Productivity and efficiency improvement in field services operations Improve technical remote resolution rate Increase collections and revenue assurance efficiency Convergence / multi-skill in sales and customer care operations Oi S.A. 12

14 Results EBITDA and OCF (EBITDA CAPEX) IMPROVEMENTS IN EBITDA AND OCF IN LINE TO DELIVER 2015 GUIDANCE Proforma EBITDA 1 R$ million Brazil Other Proforma CAPEX R$ million Brazil Other 1,754 1, % 1,836 2,011 1, % 1,427 1,380 1,470 1, % 1,108 1,025 1,069 1, ,041 4Q14 1,640 1,573 1,689 1,928 1,816 Proforma EBITDA 1 minus CAPEX R$ million Brazil Other +168% Q Q routine Oi S.A. 13

15 Results Oi s Infrastructure WE ARE NOT SACRIFICING QUALITY FOR CASH: OI S WIRELESS NETWORK QUALITY IS CONSISTENTLY IMPROVING IN SPITE OF GROWING DATA TRAFFIC Migration 2G to 3G with more data QoE Only Voice With Data Data traffic increase with consistent improvement in ANATEL s metrics 2G data traffic PBytes 3G data traffic PBytes 3G/4G +241% +202% +20% +67% Jun/14 Dec/14 Jun/15 Jun/14 Dec/14 Jun/15 2G -21% SMP8 Data connection rate % Target Values SMP9 Data drop rate % +48% 99% 98% 5% Proactive migration of customers from 2G to 3G 0.6% Higher number of 2G customers using data Jun/14 Dec/14 Jun/15 Jun/14 Dec/14 Jun/15 Source: ANATEL and Company s data Oi S.A. 14

16 Results Oi s Infrastructure OI S FIXED BROADBAND NETWORK IS IMPROVING: KEY PROJECTS AHEAD OF SCHEDULE AND BELOW BUDGET, OFFERING FASTER SPEEDS AND MORE DATA Transport network expansion OTN New optical backbone 100G 81% completed Increasing data traffic Average bandwidth per user Mbps Quality improvement ADSL congestion % Congestion +37.9% -22.7% Jan/15 Jun/15 Dec/15 Projected Jun/14 Dec/14 Jun/15 Jun/14 Dec/14 Jun/15 Actual Single Edge New IP router network 69% completed IP traffic Tbps ADSL subscribers (>= 10 Mbps) +33% +40.9% Jan/15 Jun/15 Dec/15 Jun/14 Dec/14 Jun/15 Oi S.A. 15

17 BALANCE SHEET Oi S.A. 16

18 Results Balance Sheet STRENGTHENING THE BALANCE SHEET Realize asset value Sale of PT Portugal concluded Africatel available for sale Other asset disposals (mobile towers, real estate properties, call center) Liability management already started with Debt liability management the use of PT sale proceeds aiming to extend maturities and to reduce financial expenses Reduce regulatory impacts on cash flow Build a better regulatory framework TAC 1 projects filed with ANATEL: Reduce current and potential new regulatory fines through TAC 1 - TAC = Term of Adjustment of Conduct Oi S.A. 17

19 Results Indebtedness GROSS DEBT REDUCTION: LIABILITY MANAGEMENT STARTED RIGHT AFTER RECEIVING PT PORTUGAL DISPOSAL PROCEEDS; debt with no fx exposure Debt reduction with PT Portugal disposal proceeds R$ million 1 20,080 54,717 3,548 1, ,202 1,167 51,280 Debt profile (before hedge) By Currency % EUR 38% USD 31% BRL 31% By Index % IPCA 3% TJLP 9% CDI 15% Libor 11% Fixed 62% 34,637 Gross Debt PT debt Proforma Gross Debt Funding Amortizations Proforma debt reduction Financial results Debt reduction of R$ 6,2 billion in June, equivalent to 11% of proforma gross debt Pre-payment of PTIF Notes in the total amount of EUR 174 million in July Gross Debt Debt profile (after hedge) Foreign currency debt is fully hedged through long-term swaps, NDFs and cash held in euros and dollars No impact on P&L due to currency volatility MTM receivables amounting to R$ 2.9 billion as of June-15 spread across 13 top-tier banks Vast majority of derivatives portfolio with long term maturities, perfectly matching the debt hedged By Index % TJLP 9% CDI 48% IPCA 4% Fixed 39% 1 It includes R$ 3 billion of debt left in PT Portugal. Oi S.A. 18

20 Results Indebtedness LIQUIDITY POSITION MORE THAN ENOUGH TO AMORTIZE DEBT THROUGH 2017 Liquidity R$ million Gross debt amortization schedule R$ million 1,461 19,598 51,280 Average debt maturity: 3.7 years ,766 16, ,238 5,223 19,598 8,554 Cash 3,649 10,851 Cash BNB Revol. in R$ Revol. in USD ECAs in USD/EUR Liquidity position Liquidity position onwards Gross debt Oi S.A. 19

21 Results Net Debt Variation NET DEBT IMPACTED BY REGULATORY FEES AND FINANCIAL RESULTS; ANNUAL REGULATORY PAYMENTS IMPACTED 1H15, WILL NOT recur IN 2H15 Change in Net debt R$ million 34,644 1,167 32,557 1,816 1, million , Routine EBITDA Capex WC Judicial deposits + taxes 3G licenses annual payment Anatel fees¹ Non recurring² Financial results Net Debt 1 - Includes the biannual payment of the STFC concession fee. 2 - Payments related to the workforce reduction program. Oi S.A. 20

22 CORPORATE GOVERNANCE Oi S.A. 21

23 Results Corporate Governance DELIVERING CORPORATE GOVERNANCE IMPROVMENT: NO CONTROLLING SHAREHOLDER, NEW BOARD & BY-LAWS Execution of the Exchange of Rio Forte Commercial Papers ANATEL approval on alternative structure EGM called on Aug 1 st Extraordinary Shareholder Meeting (EGM) to approve the alternative structure Sept 1 st Oct CorpCo share registration at SEC Pending approval from SEC to the 2013 PT SGPS 20F generated a need to explore alternative structures Oi s Board of Directors approved alternative structure: Voluntary conversion from preferred to common shares Changes on Oi s By-Laws to incorporate the Novo Mercado requirements Announcement of Oi s new Board 30-day period for conversion of preferred to common shares Oi S.A. 22

24 Results Oi s Strategic Priorities WRAP-UP: Oi has made progress towards priorities Operational turnaround: cost transformation and network improvement EBITDA and OCF continue on track to deliver 2015 guidance*: Routine EBITDA R$ bn Routine EBITDA CAPEX improvement R$ bn Complete sale of PT Portugal Balance sheet: refinancing and reducing debt; and building a better regulatory environment First liability management moves Near-term debt refinancing Other asset disposals TAC: projects filed with ANATEL Corporate governance: moving to highest standards, no controlling shareholders Announcement of Oi s new Board Alternative structure approved by Anatel and EGM called to Sept 1 st Voluntary conversion of preferred to common shares (30-day period) Consolidation and market evolution Company remains alert to market movements to assess potential alternatives of consolidation. * Guidance for Brazilian operations. Oi S.A. 23

25 RESULTS RIO DE JANEIRO, 13 AUGUST 2015