130507 - apresentação 1q13 -...

May, 2013.

Results 1Q13

2Investor RelationsTelefônica Brasil S.A.

Highlights of the quarter

� Strong post paid and data adoption driving annual growth in ARPU

� Recurrent EBITDA growing 2.0% y-o-y

� Fixed trends improving especially in recent months

� Sustaining benchmark mobile revenue growth

� Cash Flow in the quarter reaching 2.5x the amount o f 1Q12

Mobile

Fixed

2. F

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NC

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PE

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Revenues

EBITDA

Cash Flow

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P

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01Operating Performance


Our access evolution reflects our selective growth in mobile and ongoing turnaround in the fixed

AccessesMillion

1 Includes fixed voice, fixed broadband and pay TV.2 Includes pre and postpaid customers.Source: Anatel.

01

1

1.6%

-2.5%

YoY

74.8 76.1 76.0

15.3 15.0 14.9

1Q12 4Q12 1Q13

Mobile Fixed

90.0 91.1 90.9

0.9%

-0.3%

Mobile AccessesMillion

-2.9%

17.4%

YoY

58.2 57.3 56.5

16.6 18.8 19.5

1Q12 4Q12 1Q13

Prepaid Postpaid

1.6%

74.8 76.1 76.0

-0.2%

Fixed AccessesMillion

Continuousprocess of revision of

disconnection policy based on profitability of

customers

-3.0%

1.8%

-17.2%

YoY-2.5%

10.9 10.6 10,6

3.7 3.7 3,80.7 0.6 0,6

1Q12 4Q12 1Q13Fixed Voice Fixed Broadband Pay TV

-0.7%15.3 15.0 14.9


In mobile, we sustain strong post paid and data adoption and efficient growth in recharges

Mobile Market Share%

01

Source: Anatel.

* Impacted by the revision of the disconnection policy. ** Anatel data available since 2Q12.

Evolution of Prepaid Recharges

Sustaining high growth in financial amount of recharges with a more

active customer

base

**

*

**

29,8% 28,8%36,5% 37,1%

39,7%47,4%

1Q12 1Q13Blended PostpaidPostpaid ex M2M Data cards

Strong leadership

vs. the second place

(+18 p.p.)

0.6 p.p.

3%-3%

23,1%

9,5%

4Q12 1Q13

∆% prepaid customers - YoY∆% of recharge - YoY

Post paid Accesses and Mobile Data Users (DataCards, Data Packages and M2M / Million)

YoY Post paid growth YoY Data and M2M growth

16,6 17,2 18,0 18,8 19,5

10,511.6

12,8

15,717,2

1Q12 2Q12 3Q12 4Q12 1Q13

Postpaid Data

20.6% 16.9%24.8% 16.7% 17.4%

64.7%69.8%102% 64.0%


The improved customer mix is driving relevant annual growth in ARPU and reducing acquisition costs

ARPUR$

Outgoing ARPU y-o-y

01

SACR$

PAYBACK (SAC/ARPU)Months

-26.0%

YoY

% individual smartphones over postpaid net adds

16,4 17,1 16,3

6,0 6,8 6,9

22,4 23,9 23,1

1Q12 4Q12 1Q13Voice Data

-0.8%

14.8%

YoY3.4%

2,26 2,311,78 1,98

2Q12 3Q12 4Q12 1Q13

YoY growth

3.0% -6.9% -26.8% -28.5%

61,9 45,8

62%

81%

1Q12 1Q13

-2,1% -3,8%

1,5%

7,1%

2Q12 3Q12 4Q12 1Q13


Quality

We continue to be perceived as the best in quality, satisfaction and coverage

01

Superior quality in the market delivering the best mobile services…

91,7

63,8

83,0

95,1

Comp 3

Comp 2

Comp 1

Vivo

Mobile IDA (*) Complaints / 1,000 accesses (*)

0,366

0,675

0,426

0,299

Comp 3

Comp 2

Comp 1

Vivo

… enhanced by our absolute leadership in cities with 3G coverage (**).

3G Coverage**

3.121

1.119726 593

Vivo Comp 1 Comp 2 Comp 3

Satisfaction*

Vivo Comp 1 Comp 2 Comp 3

Vivo ranked No. 1 by Anatel in recent customersatisfaction survey in post paid and prepaid

… producing higher customer satisfaction…

(*) Source: Anatel – Jan/2013 - Mar/13 for satisfaction survey - IDA (Customer Satisfaction Index). (**) Source: Teleco – Mar/2013 and Company’s report.


We are reinforcing our position with valuable customers with an innovative offer and deployed 4G network

01

Affordable: R$ 29 per month / additional device

Simpler: unified billing for up to 5 devices

With the Best Quality: best 3G Plus coverage and quality in more than 3,000 cities

� Launch in April, 30 th in the 6 cities of the Confederation´s Cup

� Commercial launch in São Paulo city anticipating coverage goals

� More than 60 cities covered with 4G until December, 2013

� Monetization with Premium pricing and limited capacity

� 40Mhz of spectrum in 2.5Ghz

� Speeds until 10x faster than 3G

� Big vendors with handset portfolio available in the short term

MultiVivo, is the first multidevice offer in Latin America, to connect the internet on your

smartphone, tablet or notebook

We have the right offer, coverage, infrastructure, pricing and handsets to lead

value capturing in the 4G space

Improving loyalty

Enhancing revenue per user

Benefits


In fixed broadband and voice we have seen improvement especially in more recent months

01

Broadband Accesses >= 4Mbps (% of base)

1Q12 4Q12 1Q13

+2 p.p.

+12 p.p.

… and we can already see some positive trends in April.

2,8 4,513,4

20,0

Jan/13 Feb/13 Mar/13 Apr/13

-4,2% -4,2%

-3,0%-2,4%

Jan/13 Feb/13 Mar/13 Apr/13

* Forecast for April/13

In broadband, we continue improving mix of broadband speeds…

…and have accelerated adoption in the last 2 months

Net adds of ADSL + FTTH

Evolution of voice accesses (% yoy)

In fixed voice, we keep reducing the annual level of disconnections…

Evolution of voice accesses (% yoy)

-3,4%-3,1% -3,0%

3Qx3Q 4Qx4Q 1Qx1Q

Highest monthly net adds in fiber in the last 12

months

7x *

*

* Forecast for April/13


Our turnaround in the fixed has many levers and should improve results for the year

01

Expansion of Fiber and acceleration of adoption

1.11.8

Jan/13 Dec/13

• +700 thousand HPs until Dec/13

• Better economics of HPs (pre connectorized fiber)

• Driving IPTV adoption

FTTH footprint (million HPs)

DTH offer

Bundling and cross sellingSegmented tactical actions in São Paulo

FOCUS ON QUALITY

• Segmentation between areas with different competitive landscapes

• Different approach and actions to improve revenue per home, improve adoption and loyalty in each segment

• Improved intelligence on customer

• Focus on improving revenue per account

• Matching bundles with each customers’ needs

• Intense communication

• Focus in the state of São Paulo

• Improve loyalty in voice and broadband


Corporate segment continues to sustain superior performance in mobile and fixed driven by cross selling of services

In corporate we continue to outperform in the core services…

01

1Q12 1Q13

+20%

1Q12 1Q13

1Q12 1Q13

1.9 x

1Q12 1Q13

+5.2%

…and paving the way for future growth.

• Duplicated access base in 1 year

M2M

…but are also expanding in other fronts…

• First to launch a management

platform for M2M (“Smart Center”)

• Grew 174% y-o-y IT equipment sales

IT

• Grew 42% y-o-y Soluciona TI sales in

1Q13

New Offers Investments in own network to expand and

increase competitiveness of our corporate data

offer nationally.

+5 p.p.

Penetration of mobile data plans

Mobile Device Net adds

Fixed Voice accesses Fixed UBB accesses


Innovative Services

We are also focusing on offering innovative products and services to enhance revenue growth

01

1. Financial (Mobile Payments)

2. E-health

3. Education (Exclusive partnerships)

Low income

Prepaid Solutions for Unbanked population Secure transactions through USSD

Middle Class High income

Vivo´s walletVivo´s NFC wallet

Chronic Medical support / Selfcare Telecare

Management of population health (Biostatistics, Multidevice)

General health, selfcare programs, 24hs assistance

from nurses

Alarm Devices, Monitoring Centers, Direct contact with

emergency

Learning Virtual Library CareerKantoo and Vivo PortuguêsFree and training courses

Cloud of books with unlimited access

Tips for building a successful career and entrepreneurship


We continue to evolve in our integration effort to become more convergent, dynamic and efficient

01

IT Space Customer care

Forecasted for 2013

Contracts

Unification and renegotiation

Simplification with reduction in applications in 2013

Forecasted for 2013

Data Center

Reducing 1 data center in 2013 and goal to pass from 8 to 3 in the

long term

Large part already integrated

Forecasted for 2013

Contracts

Unification and renegotiation

Stores, IVR and internet portal already integrated

Forecasted for 2013

Call Center

Integrated multi channel already implemented

Billing and CRM

Both in process of convergence

Virtualization

Enhancing virtualization in billing, call center and recharges

�

�

.

� Convergent offers

� Simplified and Flexible IT infrastructure

� Convergent customer care and CRM

Improved customer satisfaction and cost efficiency

Infrastructure

Channels

Applications Map

�

�

�


Recurrent EBITDA registered an annual growth of 2.0% in the quarter

Negocios

R$ million 1Q13 1Q12 ∆% YoY

Net Operating Revenue 8,555.5 8,311.3 2.9%

Total Net Operating Service Revenue 8,189.7 8,130.0 0. 7%

Wireless Service Revenue 5,270.5 4,924.4 7.0%

Wireline Service Revenue 2,919.2 3,205.6 -8.9%

Net Handset Revenue 365.8 181.4 101.7%

EBITDA 2,747.6 2.845,9 -3.5%

EBITDA Margin 32.1% 34.2% -2.1 p.p.

Recurrent EBITDA 2,837.4 2,781.1 2.0%

Recurrent EBITDA Margin 33.2% 33.5% -0.3 p.p.

Net Result 810.2 956.5 -15.3

01

02Financial Performance


Mobile Net Service RevenueR$ Million

Mobile Service revenue annual growth remains above market levels and reached 7.0% in 1Q13

In order to simplify the analysis the chart does no t include ‘Other Revenues’.

Network UsageAccess and Usage Data and VAS

Mobile Net Service Revenue∆% y-o-y

% Mobile Net Rev. / Total Revenue

YoY growth

MTR impact

02

7.1%

-8.1%

18.8%

YoY

2,600 2,908 2.784

985966 905

1,3181,565 1.566

1Q12 4Q12 1Q13

4,9245,474 5,270

7.0%

-3.7%

4.960 5.0785.474 5.270

2Q12 3Q12 4Q12 1Q13

60.2% 60.0%

10.9% 8.1%

61.5%

7.4%

61.6%

7.0%


Data and VAS revenue already accounts for 30% of mobile net service revenue in the quarter. Internet revenues are growing 22.5% y-o-y in the 1Q13

Data and VAS RevenueR$ Million

InternetMessaging P2P Other

Mobile Internet Annual Growth

14.5%

22.5%

02

16.4%

YoY1,318

18.8%

0.1%

1,565 1,566

446 527 511

664782 813

208

255 242

1Q12 4Q12 1Q13

15,8% 16,4%21,1% 22,5%

2Q12 3Q12 4Q12 1Q13

New Services with the Highest Growthy-o-y

13,8%

20,2%

32,9%

Education Vivo Som Chamada Voice Portal


We have sustained controlled reduction in fixed revenues with an improved revenue mix

02

* Includes voice, accesses and network usage.

Wireline Net RevenueR$ Million

Data and Pay TVVoice* Others

-13.1%

-3.3%

0.3%

YoY

% of Data and Pay TV Revenues over Wireline Net Revenue

1,922 1,805 1.670

1,050 1,0361.015

234 244234

1Q12 4Q12 1Q13

-8.9%

-5.4%

3,206 3,085 2,919

38.6% 34.6% 34.1%% over Net Operating Revenue

27,4%

32,8%34,8%

1Q11 1Q12 1Q13

+7.4 p.p.


02 Recurrent expenses remained controlled during the quarter as a consequence of the rational commercial strategy

R$ Million

y-o-y

+3.4%+0.1%-58.2%+8.3%+4.3%-15.3%-1.8%+3.4%

Non recurrent events 1Q12 130.2 21.5 -216.5

Non recurrent events 1Q13 89.8

1Q13 y-o-y adjusted

+6.3%-108%+2.8%-2.9%

5.530

5.349

5.349 5.319 5.284 5.284

5.352

5.352

5.718

181

20 5035

6622 20

366

1Q12 Handsetrevenues

1Q12

Expenses(-) Handsetrevenues

Personnel ServicesRendered

Subsidies SellingExpenses

G&A Other Expenses(-) Handsetrevenues

Handsetrevenues

1Q13

1Q13


02 Our integration efforts are paying off with greater productivity in many fronts

Personnel

Customer care

R$ per access per month

4.071 4.677 4.738

2011 2012 1Q13

Accesses per Employee

* Excluding non-recurrent items.

1,11 0,99 0,90

2011 2012 1Q13

1% 15%

-11% -9%

Efficiency IndexCapex + Opex / Net Op Rev

(Excluding licenses and non-recurrent Opex)

Telefônica Brasil (%)

Competitors – 1Q13

YoY evolution.

75,1% 93,5% 84,1%

Vivo Comp 1 Comp 2

80,0% 80,9% 75,1%

2011 2012 1Q13

-0.8 -5.7Opex + Capex / Net Op Rev

3,5%2,8%

2011 2012

-0.6

IT


Recurrent EBITDA

02

R$ Million

� Annual decrease in margin driven by non recurring events and higher subsidies to enhance data adoption

Recurrent EBITDA

R$ Million

2.781 2.730 2.8723.178

2.837

1Q12 2Q12 3Q12 4Q12 1Q13

-2.1% -7.0% 1.7% 8.5%

YoY growth

2.0%

Recurrent EBITDA Margin adjusted by handsets activities

34,2%

32,1%33,5% 33,2%

37,0% 37,0%

1Q12 1Q13

EBITDA MarginRecurrent EBITDA MarginRecurrent EBITDA Margin adjusted by handsets activi ties

Annual stability in EBITDA Margin excluding strong handset activity in the quarter oriented to enhance data adoption


956810

98 7947 1 14

1Q12 EBITDA D&A FinancialResult

Investmentgains

Taxes 1Q13

Cash Flow in the quarter reaching 2.5x the amount of 1Q12

Net Income Build-up

02

EBITR$ Million

Net DebtR$ Million

2.658

440 655

1Q12 4Q12 1Q13

-75.3%

48.9%

-3.5% +6.0% -74% n.a.YoY

growth 2.8% -15%

560

1.421

1Q12 1Q13

2.5 x

Free Cash Flow*R$ Million

1.528 1.350

1Q12 1Q13

-11.6%

* Operating cash flow after investments.


In Conclusion02

Quality is and will continue to be the driving forc e behind our strategy, with growth with profitability as our mai n objective

Our results for 1Q13 confirm we are headed in the right direction…

� Leadership in all quality metrics and satisfaction

� Expanding our share in higher revenue segments

� Sustaining strong growth in mobile revenue

� Improving fixed trends

� Strong profitability

� Continuity of strong cash flow generation

� Reinforcing our position with valuable customers with new offers and evolution to 4G

� Implementing tactical plan to turn around the fixed business

� Consolidating synergies in all fronts

� Expanding in digital services and innovation to enhance long term revenue growth

… and we are taking actions to improve results further for the year


Disclaimer

This presentation may contain forward-looking statements concerning future prospects and objectives regarding growth of the subscriber base, a breakdown of the various services to be offered and their respective results. The exclusive purpose of such statements is to indicate how we intend to expand our business and they should therefore not be regarded as guarantees of future performance.

Our actual results may differ materially from those contained in such forward-looking statements, due to a variety of factors, including Brazilian political and economic factors, the development of competitive technologies, access to the capital required to achieve those results, and the emergence of strong competition in the markets in which we operate.

130507 - apresentação 1q13 -...

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