EQUITY REPORT – Telefónica July 2015

Corporate Finance Department | fepfinanceclub@gmail.com| www.fep.up.pt/skillsacademy/fepfinanceclub/

America Movil

IBEX 35

Vodafone

Telefonica

BT Group PLC

IBEX 35

Market Profile

Share Price (20/07/2015) €15.13 52-Week Price Range (€) 10.64 – 13.95 Outstanding Shares (mn) 4,938.42 Market Cap. (€mn) 68,002 Free Float (%) 2.26

Source: Reuters

Stock Performance

Source: Company Data

Stock Performance

Source: Company Data

Revenues vs Spanish GDP (%)

Source: Company Data

0

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-14

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-14

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-14

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-14

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v-14

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-14

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-15

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-15

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-15

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r-15

0 €

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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

RevenuesGDP

Telefonica

America Movil

Vodafone

Telefonica

Business

Telefónica is one of the largest telecommunications companies

in the world in terms of market capitalization and number of

customers. With its best in class mobile, fixed and broadband

networks, and innovative portfolio of digital solutions,

Telefónica is transforming itself into a ‘Digital Telco’, a company

that will be even better placed to meet the needs of its

customers and capture new revenue growth.

The company has a significant presence in 21 countries and a

customer base that amounts more than 341 million accesses

around the world. Telefónica has a strong presence in Spain,

Europe and Latin America, where the company focuses an

important part of its growth strategy.

Telefónica is a 100% listed company, with 1.5 million direct

shareholders. Its capital is traded on the continuous market on

the Spanish Stock Exchanges (Madrid, Barcelona, Bilbao and

Valencia) and on those of London, New York, Lima and Buenos

Aires.

The company’s main brands, with worldwide recognition, are

Telefónica, Movistar, O2 and Vivo.

Value per share: 15,97€

BT Group PLC

IBEX

EQUITY REPORT – Telefónica July 2015

Corporate Finance Department | fepfinanceclub@gmail.com| www.fep.up.pt/skillsacademy/fepfinanceclub/

Balance Sheet (th M€) 2012 2013 2014 2015F 2016F 2017F 2018F 2019F Total Assets 129,78 118,86 122,30 121,85 116,48 118,43 120,34 122,24

Goodwill 27,96 23,43 25,11 25,11 25,11 25,11 25,11 25,11

Intangible 22,08 18,55 22,35 22,35 22,35 22,35 22,35 22,35

Fixed Assets 35,02 31,04 33,34 33,34 27,76 29,50 31,25 33,00

Net Financials 13,68 12,32 13,51 13,51 13,51 13,51 13,51 13,51

Inventory 1,19 0,99 0,93 0,92 0,96 1,01 1,05 1,09

Recievables 10,71 9,64 10,61 10,71 10,88 11,04 11,16 11,27

Cash and Equivalents 9,85 9,98 6,53 6,00 6,00 6,00 6,00 6,00

Others 9,29 12,92 9,91 9,91 9,91 9,91 9,91 9,91

Equity 27,66 27,48 30,29 31,68 35,91 39,20 42,60 46,00

Total Liabilities 102,11 91,38 92,01 90,17 80,56 79,23 77,74 76,24

M/L Liabilities 70,6 62,23 62,31 59,48 56,73 53,98 51,22 48,46

M/L term Debt 56,61 51,17 50,69 48,55 46,41 44,28 42,14 40,00

M/L others 13,99 11,06 11,62 10,93 10,31 9,70 9,08 8,46

S Liabilities 31,52 29,15 29,69 30,69 23,85 25,25 26,52 27,78

S Debt 10,25 9,53 9,09 10,69 3,51 4,60 5,63 6,65

Payables 4,18 4,40 3,66 3,66 3,66 3,66 3,66 3,66

Others 17,09 15,22 16,94 16,34 16,68 16,99 17,23 17,47

Inc. Statement (th M€)

2012

2013

2014

2015F

2016F

2017F

2018F

2019F

Revenues 62,36 57,06 50,38 51,99 54,07 56,19 58,15 60,20

Operational Costs (41,13) (37,98) (34,86) (35,23) (35,23) (37,80) (38,93) (40,12)

EBITDA 21,23 19,08 15,52 16,76 18,84 18,39 19,22 20,08

Margin 34,0% 33,4% 30,8% 32,2% 34,8% 32,7% 33,1% 33,4%

Depreciations (10,43) (9,63) (8,55) (8,74) (8,04) (8,50) (8,97) (9,45)

Imparities - - - - - - - -

EBIT 10,80 9,45 6,97 8,02 10,8 9,89 10,25 10,63

Margin 17,3% 16,6% 13,8% 15,4% 20% 17,6% 17,6% 17,7%

Share of profit (loss) of investment

(1,28) (0,30) (0,51) - - - - -

Financial Operations (3,66) (2,87) (2,82) (3,79) (2,80) (2,48) (2,16) (1,85)

EBT 5,86 6,28 3,64 4,23 8 7,41 8,09 8,78

Taxes (1,46) (1,31) (0,38) (0,58) (1,31) (1,43) (1,79) (2,20)

Net Profit 4,40 4,97 3,25 3,65 6,69 5,98 6,30 6,58

WACC 8.98%

Beta 1.2

Equity Market Premium 7%

Risk Free Rate 3.17%

D/V 33%

Kd 4.92%

Ke 11.58%

Source: Reuters, Yahoo Finance

Margins

News

Telefonica finalizes £10bn sale of O2 mobile phone firm (source: BBC News);

Telefonica Brazil to Raise $4.9 Billion to Fund GVT Acquisition (source: Bloomberg)

Table 1 - WACC for Telefónica

(long term), group estimates.

Multiples

0%

10%

20%

30%

40%

50%

0

5

10

15

20

25

302

010

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

in t

ho

usa

nd

EBITDA (M€) EBITDA Mg