Latin

America
A dynamic
telecom sector

Santiago Fernández Valbuena

Chairman & CEO
Telefónica Latinoamérica
Three regions lead the world’s growth rates

GDP growth constant prices

2011 Source: IMF

Mexico and Brazil are the main contributors to Latin

America’s progress, Peru leads growth

2
But Latin America is not only growth, it has
also reached a critical level of development
GDP per capita
Purchasing Parity Power Source: IMF

18000
≈ 17.000
18000
16000
Latin America has surpassed
16000
14000 10.000 USD per capita barrier
14000 > 13.000
12000
12000
10000
10000
8000 The region is turning to a socially
8000 ≈ 7.000
6000
6000
sustainable model of growth, less
4000 4000
dependant of global cycles and with
2000
≈ 2.500 intensive use of ICT´s
2000

0 0
2006 2006
2007 2007
2008 2008
2009 20092010 201020112011 20122012 2013
2013 2014
2014

Central and
Central and eastern
eastern Europe
Europe Developing
Developing AsiaAsia
Latin America and the Caribbean
Latin America and the Caribbean
Sub-Saharan Africa
Sub-Saharan Africa

3
And also, Latin America has consolidated a
very positive economic outlook
General government gross debt General government fiscal balance Current account balance
% GDP - 2011 % GDP - 2011 % GDP - 2011 Source: IMF
Source: IMF Source: IMF

5.2%
233%

-1.6%
-2.5%
2.5%
-4.1%

0.1%
100%
89%

50%
-1.4%
27% -9.6%
-10.3%
-3.1%

China Latam Euro USA Japan China Latam Euro USA Japan China Japan Euro Latam USA
Zone Zone Zone

> 70% Latin America GDP – Investment grade

4
Together with economic performance, the
social structure has changed
>80% 200 m
Living in big cities A growing middle class Middle class
Urban Pop.
Pop.

Mexico DF Ex. Brazil

POP 23 MM

São Paulo 17%

POP 17 MM A/B
+18 m
C
Middle class pop. added
Lima
POP 11.5 MM
56% 2014 D
E
60%
Buenos Aires
POP 13 MM 12%
15% 150 m
And Young <14 years
Rio de Janeiro
POP 11.4 MM 2011E
Source: CEPAL

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In this environment, telecom sector is one of
the key drivers for growth
Telecom market expected to grow faster than
Positive context for Telcos
GDP in Latin America Source: IMF & IDC

CAGR 7.7%
Stable regulation, MTRs expected to follow predictable
2010 - 2013E
glide path
4.3%

Low and decreasing exposure to regulated prices

(mobile retail prices, FBB, MBB and bundles not
regulated)
GDP ICT Market

Major spectrum auctions already done

According to the IDB, specifically for Latin America, it is

estimated that a 10 % rise in BB penetration increases the Consolidated competitive market structure
GDP in 3.2% on average and boosts productivity by 2.6 %

6
There is plenty of opportunities to grow
Latin America Europe

Fixed penetration Vs households 65% 100%

Voice
Mobile penetration Vs pop. 80% 100%

MOU 79% 100%

Smartphones Vs total sales 37% 100%

Broadband

FBB Vs fixed accesses 66% 100%

Source: Pyramid

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And specially connectivity is booming

Latin America CAGR 2010-15 IP Traffic

Pb / month
4.7 48%

39% “ IP traffic is growing

x7 3.2
32%
35% fastest in Latin
America, followed
2.2 26% 27% closely by the Middle
1.5
East and Africa”
1.0
0.7

North Japan Western Asia Central Latin

2010 2011 2012 2013 2014 2015 America Europe Pacific and America
Eastern
Europe

8
Telefónica is an essential player for
this radical transformation
Million accesses December 2011

1 2 Argentina: 23,0 Total Accesses 201,5

2 1 Brazil: 87,2
Mobile 166,3
2 Central America 8,1 Fixed 24,0
Fixed BB 8,4
2 2 Colombia: 13,8
1 1 Chile: 12,7 TV 2,3
2 Ecuador: 4,5
2 Mexico: 20,5
1 1 Peru: 18,8
Fixed market position
2 Uruguay: 1,8
Mobile market position
2 Venezuela: 10,4

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Company’s profile reflects our leading
position in “the sector’s revolution”
Data Revenue No voice Revenue Broadband accesses
%total mobile service revenue %total fixed revenue December 2011

36%
26% 11 Mill.
smartphones

5 Mill.
Dongles
>53% +16%
No SMS Vs 26% Internet, TV
16% Data and content
Revenue YOY
8 Mill.
Fixed
4T08 4T09 4T10 4T11 4T08 4T09 4T10 4T11 Broadband
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 Mobile broadband strategy is key to capture
the opportunity to grow
MBB growth expectations Main strategic drivers

MBB accesses1 Enhance our offer by designing service based products

T. Latinoamérica
millions and avoiding flat rates
45-50

Capturing M2M market explosion

8

Lower entry barriers due to smartphone´s price

evolution and a focused strategy on dongles
2010 2013 >33% 100 US$
mobile data Smartphone to
revenues in boost
2013 growth

1 MBB accesses: smartphones with data attached rate, smart devices and dongles 11
Most importantly, new services are changing the
productivity and social profile of the region
Financial services e-health e-cloud

 Emergency management

 Digitalization of healthcare
Joint Venture processes  Virtual hosting
Telefónica & Mastercard
 Health Presence
 Virtual data center
Services “prepaid wallet”:
 Remote management of patients
• ATM
• Transfers  Productivity suite
• Electronic paid
• e/m commerce
• Payment of bills  Remote virtual desktop
• Payment of taxes and
fees and collection of
public benefits

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Sustained investment is the
cornerstone of our strategy
The main foreign investor The best telecom platform Long term vision
(Cum. Sep. 2011)

High Speed FBB

T. Latinoamérica 20
% FBB accesses
220.000 x10
49% Km Fiber
51% 2

Dec-10 Dec-13E
33.000
Unique selling MBB coverage
FDI Infrastructure
points T. Latinoamérica
% population +20 p.p.
80%
57.000 60%
Increased
Call Center
Bn € 109 Jobs
CapEx
commitment
Dec-10 Dec-13E

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But our bet for Latin America goes much
further than investing

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In summary

1. Latin America is growth and stability

2. Telecom is booming and changing radically

3. We are leading change and capturing growth

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But above all, we are convinced that emerging
markets will shape the future of the sector
Smartphones Internet Users Total IP Traffic
Global Share Million pop. Exabytes per Month

Developed
countries

x 18 + 45%
71% 60%
2011 Vs 2000 CAGR 2010-2015
Developing Developing
countries countries

Since 2000 the number of In the next 5 years IP Traffic in

internet users in developing developing countries will
29% 40% countries has grown by x18, in increase by 45%, compared to
Developing developed countries only by x3. only 30% in developed
countries
countries.
2011 2012 2013 2014 2015 2016
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