vivo - apresentation of 3rd quarter 2006 results
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Apresentation of 3rd Quarter 2006 ResultsTRANSCRIPT
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Vivo Participações – 3Q06 Results October 27, 2006
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Higher coverage – 2,272 municipalities against 1,757 from competitor 1 and 1,694 from competitor 2.
VIVO has the best channels of distribution of the Brazilian telecom sector with 8,364 points of sales, being 319 own stores, 3,175 third party stores and 4,718 retails stores.
Second stage of the Corporate Reorganization about to be concluded and which will cause 14 operators to be merged into one only company, with consequent simplification of structures and processes and allowing operating and control efficiency.
Sustainable combat against cloning and fraud, with certification of network and prepaid and post-paid customer base, provided approximately 84% reduction in the number of cloning occurrences in comparison to the same period the last year;
VIVO is a leader in compliance of ANATEL’s quality goals, having achieved 96.7% of the pre-established goals.
Total net revenue grew 13.0% in relation to the previous quarter. Termination of the partial Bill&Keep system in July contributed to such increase.
Executive Summary
More than 90.0% of our customers are already inserted in the new IT/IS platform, which attests that the unification projects is now entering in the final stage and have been successful.
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SAC was reduced by 31.4% and 18% in relation to 3Q056 and 2Q06, respectively.
Increase of 18.3% of the post-paid ARPU and 21.7% in the pre-paid ARPU when compared to the 2Q06.
The net indebtedness in the amount of R$4,147.6 millions presents a 4.3% reduction in the quarter in relation to the 2Q06 due to the benefit of the first stage of the corporate restructuring.
Positive reversal of the operating cash flow in 3Q06 over the previous quarter represented a consequence of improvement in the EBITDA. The amount of R$270.8 million recorded in the quarter increases the year-to-date operating cash flow to R$675.0 million.
EBITDA of R$715.6 million, with Ebitda margin of 25.3% in the quarter, represented a significant growth in relation to R$306.3 million and 11.8% Ebitda margin recorded in 2Q06.
The losses recorded in 3Q06 were 60.1% lower than the previous quarter (from R$ 493.1 million to R$ 196.9 million)
GSM – coverage and overlay have been fulfilled as planed.
Executive Summary
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Client Base
23,190 23,482 23,257
5,650 5,244 5,268
3Q05 3Q06 2Q06
Pre Post
+1.3%
28,840 28,726
- 0.4%
28,525
+ 0.7%
+ 1.0%
-7.2% - 0.5%
Market leadership in its authorized area;Stable mix of clients;Loyalty and retention;Maintenance of the entry level handset prices.
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4,718
3,175
319
4,386
2,500
97
4,011
1,954
89
Vivo C1 C2
Retail Third Party Own Stores
8,364
6,9536,116
Leadership in Distribution & CoverageOnly operator in 3G
2,272
1,757 1,694
Vivo C1 C2
Distribution Channels Covered Municipalities
87% of clients covered by 1xRTT
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Upon receiving calls win bonus for local calls from Vivo to Vivo
Vivo ZAP 3G: Promotional prices
3Q06 Main Marketing Actions
Buy any handset and win up to R$1,000 every month, till the end of the year
Client speaks for free to any Vivo or fixed phone after 3 minutes of connection
Talk more: Vivo-PrepaidFather’s Day
Inbound Traffic Vivo ZAP 3G
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+52%
Loyalty and Retention
Postpaid Clients Prepaid Clients
Program based on PointsChange of non-authenticated handsets and/or of obsolete technologyRight PlanningClient Bring-back ProgramSpecial Care Program
Implementation of new values to rechargeIncentives to rechargeBonus in minutesMore options in points to recharge
3Q05 2Q06 3Q06
Number of binded clients
+20%
Accomplishment of Campaigns
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136 136 157
1,285 1,182 1,159
992 1,150868
3Q05 3Q06 2Q06
Other Services Monthly SubscriptionNetwork Usage Bill & Keep effect and others
Net Revenues
Bill & Keep effect and others (R$ 261 MM);Campaigns to stimulate recharges
398 357 414
3Q05 3Q06 2Q06
Handsets
-10.3% -13.8%
Service Revenues Handset Revenue+ 2.3%
2,412 2,184
2,468
+ 13.0%
R$ million
+ 261
- 8%
+ 1%
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Data Revenues Evolution
62%23%
15%
SMS WAP ZAP + others
Data Net Revenues
+8.5%
3Q05 3Q06
54%
24%
22%
SMS WAP ZAP + others
3Q06
2Q06
3Q05
- 4.5%
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16.7 15.3 14.4
13,4
9.7
11.5
3Q05 3Q06 2Q06
+1.8%
ARPU Blended Evolution3Q05 vs. 3Q06 3Q06 vs. 2Q06
28.7
24.1
Inbound
Outgoing
28.2
Bill & Keep effect and others
3.1
+19.1%
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59.0 55.150.1
23.9
20.8
28.8
3Q05 3Q06 2Q06
+ 1.1% + 18.3%
Post-Paid ARPU Evolution3Q05 vs. 3Q06 3Q06 vs. 2Q06
83.9
70.9
83.0
Inbound
Outgoing
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Pre-Paid ARPU Evolution
6.0 6.1 6.0
8.16.8
9.6
3Q05 3Q06 2Q06
11.3% 22.7%
3Q05 vs. 3Q06 3Q06 vs. 2Q06
15.7
12.8
14.1
Inbound
Outgoing
13
3631
35
40
40
38
3Q05 3Q06 2Q06
+ 2.6% +18.2%
MOU Blended Evolution3Q05 vs. 3Q06 3Q06 vs. 2Q06
78
66
76
+11.1% +29.0%
Inbound
Outgoing
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*SAC Blended
SAC*
128
105
153
3Q05 3Q06 2Q06
-18.0%-31.4%
15
113
697
512
151
664
146
1002
547
155
418
159
768
557
149
372
General &administrative
expenses
Sellingexpenses
Cost ofhandsets
Personnel
Cost ofservicesrendered
3Q052Q063Q06
*Depreciation is not included
390
R$ million
Operating Costs*
Bill & Keep effect
274
16
147.8
338.7
161.3
3.7%
9.0%
4.1%
3Q05 2Q06 3Q06
PDD % Gross Revenues
PDD* EvolutionR$ million
Control of cloning and fraud with reduction of approximately 84%;Management of the credit risk involved in the capture of new clients;Increased number of actions to improve collection;Authentication of client base.
* PDD = Provision for Bad Debt
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796.6715.6
306.3
28.3%
11.8%
25.3%
28.4%
728.4
3Q05 3Q06 2Q06
EBITDA Adjusted EBITDA
EBITDA Margin Adjusted EBITDA Margin
EBITDA & Free Cash Flow
406.8
-31.6
270.8
3Q05 3Q06 2Q06
EBITDA Free Cash Flow*
R$ million
* EBITDA - Capex
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2Q06 3Q06
Short-Term Long-Term
4,1484,334
7,928 7,733
2Q06 3Q06
Net Debt
Shareholder's Equity
2Q06 3Q06
Gross Debt, Net Debt and GearingCovered Short-Term Debt
Gross Debt (R$ million) Net Debt (R$ million)
Gearing
4,686.4 4,699.6
60%
40%
68%
32%
3Q06
R$ million
0.55 0.54
2Q06
4,147.6
4,334.0
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R$ million
Net Financial ResultReduction in Financial Expenses
3Q05 3Q06 2Q06
(213.6)
(201.6)
(212.7)
-5.6%-5.2%
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CapexR$ million
15.7%
13.0%
13.9%
3Q05 2Q06 3Q06
% Capex/Net Rev.
IT / IS Programs; Quality and Coverage; Corporate Market Segment.
139.5202.6
71.2
87.6
107.1
94.0
110.8
135.1
224.6
3Q05 2Q06 3Q06
Network Technology Others
389.8 444.8
337.9Total Capex
858.5
434.3
191.4
280.6
294.1
349.1
Accumulated 2005 Accumulated 2006
Network Technology Others
13.3%16.3%
Accumulated 2005 Accumulated 2006
Main Capex Targets:
1,344.0
1,064.0
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ANATEL StandardsImprovement in Indicators
Source: ANATEL (September/2006)
3.3%3.3%3.8%
9.3%
12.1%
Sep-05 Dec-05 Mar-06 Jun-06 Sep-06
Best Performance
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ACTIONS
Vivo Social Responsibility
Vivo is one of the first companies to adhere to the “Everyone Committed to Education” program, a nationwide mobilization to the benefit of improvement of public education quality in Brazil..
Four months after its opening, the Portuguese Language Museum, sponsored by Vivo, was awarded UNESCO’s recognition diploma due to its contribution in Communication and Information..
Vivo Institute, in a partnership with the City of São Paulo Government, has launched the Reading to Believing project, whichwill allow visually deficient people to have access to education and to reading.
The Environmental Education School – Park School, a project sponsored since 2004 by Vivo Institute, won the 2006 Telecom Yearbook Citizenship Prize.
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Competitiveness
GSM Overlay
Overlay
Coverage
Quality
Technology
More handset models available. National coverage in digital roaming.Lower risk of cloning.
Overlay in 850 MHz results in:Superposition of coverage areas;Good indoor coverage.
Commitment to maintain the same levels of quality in CDMA and GSM.PT and TEF expertise in GSM.
Availability of GSM in parallel to CDMA.
Opex off-set by reduced costs in other items.
More choices in providing communication solutions.
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Final Remarks
New Campaigns Price of Handsets and Services
AssuredCoverage Quality
UnificationIT / IS Platforms
• Digital Roaming (hybrid handsets)• 1.9 MHz Frequency
National Coverage
Final stage toward conclusionCorporate Restructuring
Permanent combat and progressive reduction
Cloning and Fraud
Main Strategic Points
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Safe Harbor Clause Forward Looking Statements
• This presentation contains statements that constitute forward looking statements in its general meaning and within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this document and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines, market share, financial results and other aspects of the activity and situation relating to the Company. 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 are not guarantees of future performance and involve risks and uncertainties and actual results may differ materially from those in the forward looking statements as a result of various factors.
• Analysts and investors are cautioned not to place undue reliance on those forward looking statements which speak only as of the date of this presentation.