Robust financial performance and material progress toward strategic objectives
Key strategic achievements
- Combination of O2 and Virgin Media in the UK, creating the leading mobile and fixed provider in the country, on track for completion in mid-2021.
- Launched winning joint bid together with TIM and Claro for Oi's mobile assets in Brazil, progressing to completion this year.
- Risk profile mitigation in T. Hispam to maximise efficiencies and increase profitability, whilst reducing our equity exposure to the region. Legal separation completed with continued progress on efficiency improvements and transition to asset-light operating model.
- Telefónica Tech Cloud, Cyber and IoT & Big data carve-outs almost completed and fully functional.
- Increased efficiency from continued operational streamlining with 79% of all business processes digitalised in 2020, up 10 p.p. y-o-y, and now managed in real time.
- Continued de-leveraging with net financial debt down 6.7% y-o-y in FY 20, supported by strong cash flow generation (€4,794m free cash flow).
- €9bn announced inorganic initiatives to add flexibility and further reduce net debt (c. 25% of year-end €35.2bn).
- Agreement reached with American Tower Corporation ("ATC") in January 2021 for the sale of Telxius towers in Europe and Latin America for a total cash consideration of €7.7bn, achieving a record multiple for the Group of 30.5x of proforma OIBDAaL and reducing net financial debt by €4.6bn.
- Notable improvement against ESG targets in key focus areas of growth, efficiency and trust; strong credentials recognised by reputable organisations, such as Ranking Digital Rights (#1 globally for the second consecutive year) and Digital Inclusion Benchmark (#1 in Europe and the US; #2 worldwide), which analyses how businesses promote a more inclusive digital economy and society.
- Improved customer mix driven by continuing y-o-y growth in high value accesses due to enhanced infrastructure; FTTH up 21%, representing 65% of UBB accesses; contract mobile up 2%, reaching 45% of total mobile accesses.
- 5G networks launched in core markets.
- Prioritising investments to further strengthen next generation network.
- Continuing improvement in NPS to 24% in our core four markets, up 7 p.p. y-o-y.
- 4th consecutive quarter of improvement in Group churn, down 0.7 p.p. y-o-y to 2.3%.
- Q4 20 revenues declined by 12.0% y-o-y to €10,909m (€43,076m; -11.0% y-o-y in FY 20), mainly as a result of COVID-19 and the unfavourable foreign exchange trend. However, OIBDA for the quarter grew by 2.2% y-o-y to €3,751m due to special factors in the same period of 2019, but declined by 10.7% y-o-y in FY 20. Unfavourable FX trends negatively affected Q4 20 and FY 20 revenues by €1,003m and €3,138m, respectively, and OIBDA by €399m and €1,205m. COVID-19 impacted Q4 20 and FY 20 revenues by €508m and €1,905m respectively and OIBDA by €291m and €977m.
- In organic terms, Q4 20 revenues declined by 2.0% y-o-y and OIBDA by 2.8% y-o-y, improving trends sequentially in 2.2 p.p. and 5.4 p.p. respectively.
- FY 2020 OIBDA-CapEx increased by 20.5% y-o-y to €7,637m while OIBDA-CapEx margin stood at 17.7%, up 4.6 p.p. y-o-y thanks to effective management of operating expenses and CapEx through the COVID-19 crisis. In organic terms, OIBDA-CapEx declined 0.9% y-o-y, with margin up 0.5 p.p y-o-y. In Q4 20 OIBDA-CapEx returned to growth, up by 1.9% y-o-y in organic terms while the margin expanded by 0.7 p.p.
- Recovery across four core markets driven by proactive management and dynamic commercial activity:
- Gradual recovery in revenue and OIBDA since the start of the pandemic, down 1.9% y-o-y and 1.3% y-o-y respectively in Q4, improving versus Q3 20 by 2.0 p.p. and 1.9 p.p., respectively.
- Focus on cash preservation led to a 1.9% y-o-y increase in organic OIBDA-CapEx for FY 20 and an expansion of organic margin of 1.0 p.p.
- Net income reached €1,582m in FY 20, with €911m generated during Q4 20. In underlying terms it stood at €3,086m in FY 20 and EPS reached €0.52.
- Free cash flow stood at €4,794m in FY 20, improving by 13.2% y-o-y in Q4 20 to €1,993m.
- Net financial debt reduced by €2,516m to €35,228m in FY 20, of which €1,449m was achieved in Q4 20.
- Delivery of flat to slightly negative organic OIBDA-CapEx y-o-y (-0.9% y-o-y) in 2020.
- Financial targets for 20211 as follows:.
- Revenues and OIBDA; "stabilisation" (organic y-o-y).
- CapEx to Sales back to normalised levels of up to 15%.
1 2021 guidance:
- Assumes constant exchange rates of 2020 (average in 2020).
- Excludes the contribution to growth from T. Argentina and T. Venezuela.
- Considers constant perimeter of consolidation and does not include capital gains/losses from the sale of companies, for significant impacts.
- Does not include write-offs, material non-recurring impacts and restructuring costs.
- CapEx excludes investments in spectrum.
2020 adjusted bases: Revenues (€43,076m), OIBDA (€14,481m)*
*Considering consolidation perimeter as of December 2020 and average exchange rates in 2020 with the exception of Venezuela and Argentina (exchange rate of the end of the period).