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Apimec-RIo
RIO DE JANEIRO, DECEMBER 15, 2015
IMPORTANT NOTICE
This release contains forward-looking statements, according to the U.S. Private Securities Litigation
Reform Act of 1995. 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.
AVISO
Oi S.A. | 1
Oi’s Strategic Priorities
Oi progresses towards its priorities
1. Operational turnaround: cost transformation and network improvement
2. Balance sheet: refinancing and reducing debt; and building a better regulatory
environment
3. Corporate governance: completion of migration to the highest standards, with
no controlling shareholders
4. Consolidation and market evolution
Oi S.A. | 1
OPERATIONAL
TURNAROUND
Oi S.A. | 2
Financial Highlights
Greater EFFICIENCY in cost and investment supports EBITDA & OCF
IMPROVEMENT TO DELIVER 2015 GUIDANCE
Financial highlights
3Q15
3Q14
y.o.y
9M15
9M14
y.o.y
6,463
6,526
-1.0%
19,588
19,991
-2.0%
6,066
6,009
+0.9%
18,400
18,366
+0.2%
Routine OPEX
4,775
5,165
-7.5%
14,426
15,626
-7.7%
Routine EBITDA
1,740
1,573
+10.6%
5,485
4,923
+11.4%
26.7%
23.3%
+3.4pp
27.5%
24.0%
+3.6pp
CAPEX
950
1,431
-33.6%
2,976
4,018
-25.9%
Routine EBITDA – Capex
790
142
+455%
2,509
904
+177%
R$ million
Brazil
Net Service Revenues
1
Net Customer Revenues
2
Routine EBITDA Margin
1 - Exclui receita de aparelhos.
2 - Exclui receita de aparelhos e de uso de rede.
Oi S.A. | 3
Operational Highlights
FOCUS on quality and PROFITABILITY OF THE EXISTING CUSTOMER BASE
Operational highlights
3Q15
3Q14
y.o.y
2Q15
q.o.q
Total - Brazil
71,838
75,035
-4.3%
72,975
-1.6%
Residential
16,524
17,401
-5.0%
16,791
-1.6%
Fixed Line
10,217
11,128
-8.2%
10,440
-2.1%
Broadband
5,136
5,241
-2.0%
5,167
-0.6%
Pay TV
1,171
1,032
+13.4%
1,184
-1.1%
Residential ARPU
79.5
73.4
+8.3%
78.5
+1.2%
47,059
48,976
-3.9%
47,756
-1.5%
Prepaid
40,296
41,990
-4.0%
40,719
-1.0%
Postpaid
6,763
6,986
-3.2%
7,037
-3.9%
7,602
8,004
-5.0%
7,778
-2.3%
Fixed Line
4,584
4,909
-6.6%
4,677
-2.0%
Broadband
594
622
-4.6%
604
-1.6%
2,424
2,472
-1.9%
2,497
-2.9%
651
653
-0.3%
651
0.0%
Thousand RGUs
Personal Mobility
Corporate/SMEs
Mobile
Public Telephones
Oi S.A. | 4
Brazil Revenues
REVENUEs trend improvement in all segments DESPITE MACRO ENVIRONMENT
Personal Mobility
% y.o.y
Service Revenues 1
8.8
4.1
8.1
Customer Revenues 2
3.5
-2.0
-11.4
3Q14
-3.4
4Q14
0.3
1Q15
0.9
-3.6
2Q15
Net Revenues
% y.o.y
3Q15
-1.1
-2.4
% y.o.y
-2.4
-4.4
-5.1
3Q14
4Q14
-3.5
-1.1
2Q15
-1.0
-1.7
-3.3
-3.8
1Q15
0.9
0.8
-0.6
Residential
3Q15
-6.7
Corporate / SMEs
% y.o.y
3Q14
-1.5
4Q14
1Q15
2Q15
3Q15
-3.1
-3.1
-3.1
3Q14
4Q14
1Q15
1 - Excludes handset revenues.
2 - Excludes revenues from handsets and network usage.
-3.8
2Q15
3Q15
Oi S.A. | 5
Personal Mobility (Brazil)
IMPROVEMENT IN DATA CONSUMPTION DRIVES GROWTH IN BOTH RECHARGES AND
ARPU
3G/4G handset penetration
Postpaid gross ARPU
(ex-MTR)
% of total base
Indexed
+19pp
37%
39%
49%
Personal mobility customer revenues
+23.1%
54%
Data
+8.1%
56%
1,646
3Q14
4Q14
1Q15
2Q15
Voice
R$ million
3Q15
3Q14
4Q14
1Q15
2Q15
1,808
1,799
1,757
1,780
3Q15
+52.8%
Recharges¹
% y.o.y (Financial volume)
7.6
5.4
2.7
1.9
500
613
686
709
764
3Q14
4Q14
1Q15
2Q15
3Q15
30%
34%
38%
40%
43%
2.4
3Q14
4Q14
1Q15
2Q15
Data / Total
3Q15
1 - Recharges include the prepaid portion of fixed+prepaid offers (OVT).
Oi S.A. | 6
Personal Mobility (Brazil)
Oi leads market transformation for “all-net” model, eliminating the
community effect, and expands data offer to use freely
Targets
•
Project developed over more than 10
months
•
Much more data to use freely
• Extensive research program indicated
•
Simplicity with no tricks
customer needs for more freedom:
•
Minutes to call any operator anywhere
in the country
•
All in a single SIM card
Improve revenues and market share
• Consolidate customers with prepaid
multi-Sim card
•
Increase share in postpaid segment
Value proposal
 to surf the internet with no data
usage restrictions
 to speak to any operator at any
location
It includes all offers of prepaid, Controle
and postpaid
ARPU increase by consolidation of recharges in Oi’s prepaid and Controle SIM cards and by postpaid mix
improvement
Oi S.A. | 7
Residential (Brazil)
Improvement in gross adds reverting net adds trend and higher base
PROFITABILITY support revenues recovery
Net adds
ARPU
Thousand
Indexed
+2.4%
Residential ARPU
R$
-171
Fixed
-223
+8.3%
-232
-254
+1.2%
-263
+9.2%
18
73.4
Broadband
75.2
77.6
78.5
79.5
1Q15
2Q15
3Q15
-30
-27
-46
-47
+12.7%
215
TV
3Q14
146
4Q14
-13
-15
-48
3Q14 4Q14 1Q15 2Q15 3Q15
3Q14 4Q14 1Q15 2Q15 3Q15
Oi S.A. | 8
Residential (Brazil)
Launch of oi play platform and new broadband speeds (VDsl) reinforce oi'S
positioning IN RESIDENTIAL SEGMENT
New broadband portfolio
Offer
Price*
35 Mb
R$ 89.90
• Speeds of 20, 25 and 35 Mega
Up to 25 Mb
R$ 79.90
• Simplified offer, no price step
Up to 15 Mb
R$ 69.90
Up to 10 Mb
R$ 59.90
Up to 2Mb
R$ 49.90
• Available in more than 500 cities
* Reference of the municipality of Rio de Janeiro
Oi Play launch
• Extension of Oi TV content to multi-devices.
• Live programming and non-linear content: more than 30 channels and 13,000
titles available.
• A single website bringing together all content while optimizing the customer
browsing experience.
• Apply to all Oi TV customers.
Oi S.A. | 9
Corporate / SMEs (Brazil)
B2B FACES CHALLENGES IN MACROECONOMIC ENVIRONMENT BUT IMPROVES QUALITY
OF ITS REVENUES
Corporate: less voice services dependency
Non-voice revenues
Non-traditional services1,2
% of Corporate revenues
Indexed. Revenues
SMEs: focus on quality and profitability
TI
Channel mix
Churn rate Fixed+BB+Mobile
% of Gross
Disconnections as a % of the base
Local
VAS
+4,0pp
Remote
-12%
56
47
42
44
53
58
3Q14
2Q15
3Q15
+17.8%
3Q14
Fixed+BB
Fixed+BB
Days
Hours
-68%
2Q15
3Q15
3Q14
2Q15
3Q15
Average time of installation
Average time of repair
3Q14
2Q15
-45%
3Q15
3Q14
1 - IT = Cloud, ICT and Datacenter services; VAS = Managed Services, Security Solutions and Special Projects
2 - 3Q14 figures excludes FIFA contract revenues
2Q15
3Q15
3Q14
2Q15
3Q15
Oi S.A. | 10
Operating Costs and Expenses (Brazil)
Strict COST control despite high inflation, ENERGY AND Fx
Routine operating costs and expenses
R$ million – Brazilian operations
Inflation in the period: +9.5%
-4.1%
5,165
117
98
166
4,979
35
18
3Q14
MTR
tariffs cut
Lease back
from
assets sold
Handset
costs
Personnel
79
11
Interconnection
(traffic)
Third-party
services
51
70
Network
maint.
Marketing
4,775
111
Rent &
insurance
Other
3Q15
-5.5%
15,626
358
260
268
15,260
198
334
78
65
244
6
14,426
208
9M14
MTR
tariffs cut
Lease back
from
assets sold
Handset
costs
Personnel
Interconnection
(traffic)
Third-party
services
Network
maint.
Marketing
Rent &
insurance
Other
9M15
Oi S.A. | 11
Operational Turnaround
Transversal and structuring projects start generating positive results
Launch of Forum of Quality focusing on customer experience
Process optimization to reduce revenues leakage
Forum of Quality
Marketing and sales
Customer
Experience
Customer service
Field operations
Billing and collection
Downgrades
Initiative
Impact
▪ Customers’
Revenue retention
R$
downgrade requests
are treated with by a
specialized unit
reducing ARPU
losses
+16%
Impact
-7%
Rate
▪ Revision of
Calls/Customer
Complaints
Average time to
repair
-13%
Hours
Jul-15
Sep-15
processes and
adherence control,
ensuring that the
correct amount is
attributed when the
bill is contested
Value returned to the
customer
R$
-40%
Jul-15
Sep-15
Oi S.A. | 12
EBITDA and OCF (EBITDA – CAPEX)
IMPROVEMENTS IN EBITDA AND OCF IN LINE TO DELIVER 2015 GUIDANCE
Proforma EBITDA1
Brazil
R$ million
1,698
Other
1,836
1,689
2,011
1,947
1,928
1,816
5,279
1,852
4,923
Brazil
R$ million
Other
+11.4%
+10.6%
1,740
Proforma EBITDA minus CAPEX1
5,810
5,485
2,732
986
1,573
878
868
728
3Q14
4Q14
1Q15
2Q15
3Q15
9M14
9M15
944
Proforma CAPEX
229
R$ milion
634
775
790
+455%
1,109
+177%
2,509
904
142
1,108
1,025
1,069
984
1,056
984
1,041
950
4Q14
1Q15
2Q15
3Q15
1 - routine
-34%
3,078
4,018
1,431
3Q14
3Q14
4,170
1,470
9M14
4Q14
1Q15
2Q15
3Q15
9M14
9M15
-25.9%
2,976
9M15
Oi S.A. | 13
Oi’s Infrastructure
CONTRACTs RENEGOTIATION, 2G 3G MIGRATION PLAN, NETWORK SHARING AND
ADJUSTMENTs in OFFERS ensure CAPEX OPTIMIZATION WITH QUALITY IMPROVEMENT
Renegotiations and network efficiency
Opportunities for improvement in sharing
Contractual renegotiations of mobile Core and
Access
Consistent improvement in customer experience
SMP8 – Data connection rate
4G Ran Sharing with Tim
Traffic cost
%
R$
MoU
Mbyte
-32%
99%
98%
-45%
-32%
R$ (MM)
2013
2014
2013
Sep/14
2014
2014/2017 (Only Oi)
2G to 3G customer migration
Mar/15
2014/2017
(RAN Sharing)
# of clients
Target
-49%
2G
Potential improvement of 2G/3G coverage
through network sharing agreements with Tim
-65%
3Q14
3G/4G
2Q15
3Q15
%
3G
2G
+30%
With data
+253%
Values
SMP9 – Data drop rate
Cities
Only voice
Sep/15
5%
+75%
0.3%
+156%
Current
3Q14
2Q15
3Q15
Future
Current
Future
Sep/14
Mar/15
Sep/15
Source: ANATEL and Company’s data
Oi S.A. | 14
Oi’s Infrastructure
Measures to EXPAND TRANSPORT NETWORK support data TRAFFIC INCREASE AND
IMPROVE QUALITY OF CUSTOMERS EXPERIENCE
Contracts renegotiation
Expansion of Oi’s Modernization of
national backbone IP network
R$ / Mbps (TX)
R$ / Mbps (IP)
-40%
-25%
Transport network expansion
OTN 100G
New optical backbone
Increasing data traffic
Quality improvement
Average bandwidth
ADSL congestion
Mbps / user
% congestion
91% completed
-17%
+45%
81% completed
Former
Current
Agreement Agreement
Former
Current
Agreement Agreement
Jan/15
Jun/15
Sep/15
Dec/15
Sep/14
Mar/15
Sep/15
Sep/14
Mar/15
Sep/15
Projetado
Fiber swap
Strategy of fiber swap
Single Edge
New IP router network
Atual
IP traffic
ADSL subscribers
(>= 10 Mbps)
Tbps
88% completed
R$ / km
+28%
+40%
+43%
-83%
R$
69% completed
Own built
Swap
Jan/15
Jun/15 Sep/15
Dec/15
Sep/14
Mar/15
Sep/15
3Q14
2Q15
3Q15
Oi S.A. | 15
BALANCE SHEET
Oi S.A. | 16
Net Debt Variation
Operating cash flow improved substantially;
NET DEBT impacted by FINANCIAL RESULTs and accounting impact of
derivatives
Change in net debt
Accounting and temporary effect:
mismatch between MTM and accrual
of derivatives converge at the
maturity of the contracts
Operating cash flow
R$ million
686
-301
-290
3Q14
4Q14
-5
-3
1Q15
2Q15
37,241
1,519
3Q15
+686 million
34,644
1,763
33,958
1,740
950
228
332
Impact from MTM
41
1.519
22
-32
-5
-1.028
3Q14 4Q14 1Q15 2Q15 3Q15 Oct/15
2Q15
Routine EBITDA
Capex
WC
Judicial
deposits + taxes
3T15
Financial results
Accounting
impact from MTM
of derivatives
Net Debt
3Q15
Oi S.A. | 17
Indebtedness
Solid LIQUIDITY POSITION to meet short-term obligations
Liquidity
Gross debt amortization schedule
R$ million
R$ million
654
53,656
20,132
1,192
Average debt maturity: 3.7 years
1,500
16,415
19,403
371
5,958
6,899
8,960
20,132
Cash
11,354
1,083
Cash
BNB
Revol. in R$
Revol. in USD
ECAs in
USD/EUR
Liquidity
position
Liquidity
position
2015
2016
2017
2018
2019
2020
Gross debt
onwards
Oi S.A. | 18
CORPORATE
GOVERNANCE
Oi S.A. | 19
Corporate Governance
New CORPORATE GOVERNANCE: pulverized capital, independent BOARD and new
BY-LAWS reflecting requisits of novo mercado
Execution of the
Exchange of Rio Forte
Commercial Papers
CorpCo share
registration at SEC
Pending approval from SEC to
the 2013 PT SGPS 20F
generated a need to explore
alternative structures
ANATEL approval on
alternative structure
EGM called on
Aug 1st
O i’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
Extraordinary Shareholder
Meeting (EGM) to approve the
alternative structure
Sep 1 st
Oct 31
2015
Completion of the conversion
of 2/3 of preferred shares into
common shares
Post-conversion share
capital (ex-treasury)
Common: 519,751,658
Preferred: 155,915,486
Oi S.A. | 20
Oi’s Strategic Priorities
Wrap-up: Oi progresses towards its priorities
Operational turnaround: cost transformation and
network improvement
3Q15 EBITDA and OCF on track to deliver 2015 guidance*:
 Routine EBITDA R$ 7.0-7.4 bn
 Routine EBITDA – CAPEX improvement R$ 1.2-1.8 bn
Complete sale of PT Portugal
Balance sheet: refinancing and reducing debt; and
building a better regulatory environment
Refinancing and debt payment: focus on improving debt profile
Other asset disposals
TAC: projects filed with ANATEL
Discussion on Concession Terms
Corporate governance: completion of migration to
the highest standards, with no controlling
shareholders
Consolidation and market evolution
Completion of TmarPart merger, resulting in dispersion of control
Oi’s new Board already acting
New Bylaws already in place, reflecting Novo Mercado governance
standards
Completion of voluntary conversion of 2/3 of preferred into common
shares
Signing of a 7-month exclusivity agreement with LetterOne
for potential transaction that enables the consolidation of
the Brazilian telecommunications sector
* Guidance for Brazilian operations.
Oi S.A. | 21
Apimec-RIo
RIO DE JANEIRO, DECEMBER 15, 2015
Oi S.A. |