Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — Fifth Investor Conference 2006
24 slides from Telefonica Sa's conference presentation, May 26, 2006
Slide 1: Fifth Investor Conference
FIFTH INVESTOR CONFERENCE Valencia. May 25 th - 26 th. Ciudad de las Artes y las Ciencias Peefinica
Slide 2: Value Addition by Cost Subtraction
VALUE ADDITION BY COST SUBTRACTION Santiago Fernandez Valbuana Chief Financial Officer, Telefénica, S.A. SVAVAWava na NS FIFTH INVESTOR CONFERENCE Valencia - May 26, 2006 Telefonica, S.A Chief Financial officer
Slide 3: Disclaimer
Disclaimer ‘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 ina number of places in this document and include statements regarding the inte
Slide 4: Index
Index 00 Introduction O1 Leverage 02 Financial Expense 03 Liability and FX Management O4 Tax Matters O5 — Conclusions Telefonica S Chie Financial Oficer
Slide 5: Introduction
Introduction From Bean-Counting to Bean-Growing Finance helps transform top line growth and operating margins into Free Cash Flow. Finance delivers very visible sinergies Active Management of liabilities, currencies and tax planning boost profits: IEVING BETTER RATE: Teleinia Sa, Chie Financial Ofic
Slide 6: Index
Index 00 Introduction O1 Leverage 02 Financial Expense 03 Liability and FX Management O4 Tax Matters O5 — Conclusions Telefonica S Chie Financial Oficer
Slide 7: Telefónica has historically kept leverage under control
Sue Telefénica has historically kept leverage under control... Debt & Commitments have been moving between 1.8 and 2.6 times OIBDA, averaging 2.1 in 2001-05. 2.97 Debt & Commitments 2.54 OIBDA, 56.8 1.83 1.86 326 Debt & Commitments (bn Eur) 33.6 255 24.6 23.4 2001 2002 2003 2004 2005 1Q06 Telefonica
Slide 8: ...and we will bring it back to normal
am ..and we will bring it back to normal Our updated Financial Policy rests on two pillars Telef6nica targets: BBB+/Baal as rating floor Net debt + cash commitments over the «<=2. 5% medium term Operating Income before D&A Teleinia Sa, Chie Financial Oficer
Slide 9: Index
Index 00 Introduction O1 Leverage 02 Financial Expense 03 Liability and FX Management O4 Tax Matters O5 — Conclusions Telefonica S Chie Financial Oficer
Slide 10: Decreasing financial expenses
Telefonica Decreasing financial expenses Evolution of Latam cost 13.9% 13.9% js Evolution of average cost >ox 7.8% expected tea% 65%, | 2006 4.4% 2002 2008 2005 Evolution of ex-Latam cost zon: 20082005 1906, 55% 5.0% sae latam debt 2002 2008 2005 Telafinia Sa Chie Financial Oficer a0
Slide 11: Index
Index 00 Introduction O1 Leverage 02 Financial Expense ©3 Liability and FX Management O4 Tax Matters O5 — Conclusions Telefonica S Chie Financial Oficer
Slide 12: Average financial debt maturity
Average financial debt maturity close to 5 years After Q1 6.6 bn Eur refinancing, we face negative 2006 maturities. 19,538 Over 20% of 02 acquisition loan has already been cancelled. 8,809 7,048 4,428 060 " 1 as 3,465 3,461 1,376 1,032 a 490 +203 | | | | | | = om Year 2006 Year 2007 Year 2008 Year 2
Slide 13: Currency diversification in liability portfolio
am Currency diversification in liability portfolio Latam hedging: 9 bn Eur denominated in USD and Latam currencies Europe hedging: 12 bn Eur in sterling, 2 bn eur in Czech Koruna 57% (30 bn Eur) denominated in Euros EUR usb 57% 6% cep aK 23% a% Our strategy is not focused on debt percentages, but on
Slide 14: Hedging asset value of European acquisitions
03 Hedging asset value of European acquisitions Peer © Risk reduction requires lower than 100% hedging due to the lack of perfect wewreneme’ correlation between foreign asset and liabilities values in Euro terms. © Hedging degree higher than in Latam as interest rate differentials are smaller. Maron
Slide 15: Healthy Liquidity Position
Healthy Liquidity Position No Liquidity More than 8.2 bi risk in 2006 68% tobl cedlt nes 2006 Net debt maturities ‘Available Credit lines with Maturities > year = Teleinia Sa, Chie Financial Oficer
Slide 16: Average debt maturity (yrs)
16 Average debt maturity (yrs) 5. age ry (05) 4.85 4.73 3.75 Apri 6 2006 n Euro long term refinancing V More than 1 yearaverage debt maturity extension Teleinia Sa, Chie Financial Oficer 03 Liquidity increased through refinancing Peers() _ Teleférica Telefinica ator acqnition ‘asof Qt Banking Debt 2
Slide 17: Index
Index 00 Introduction O1 Leverage 02 Financial Expense 03 Liability and FX Management 04 Tax Matters O5 — Conclusions Telefonica S Chie Financial Oficer
Slide 18: Recorded Tax Credits
OZ. Recorded Tax Credits LIABILITIES ASSETS Investments including: Long term li Net Taxcredits | 4,020 MME Deferred Taxes’ 2,477 MME Deferred Taxes 4,365 MME "Tnesase duet goodwill aloctad toassate x TEF expects to serene] [HRB | stent 195 MMe ee Others S6MME BEFORE FINAL TAX RATE CONVERGENCE Telein
Slide 19: Tax Outlook: Tax and accounting reforms in progress
Felefinica Tax Outlook: Tax and accounting reforms in progress May-hme | Definitive ruling on the Tax allowance for Export Activities (DAEX) 2006} | case (European Union) Proposal to amend Corporate Income 34% Tax in Spain: gradual ae em reduction oftaxrates | cirreform || and phasing out of —_/fnd
Slide 20: Tax Outlook (cont.)
Tax Outlook (cont.) ..and the planned reduction will be insufficient to catch up with the “leaders” Telefinica Teleinia Sa, Chie Financial Oficer (cal tava not included The current nominal tax rate in Spain is the highest in Europe (*)
Slide 21: Goodwill: Amortization taxwise
Se Goodwill: Amortization taxwise Financial Goodwill arising out of the acquisition of a foreign entity can be amortized taxwise in Spain under certain and exceedingly strict circumstances once an allocation analysis for the underlying assets, rights and contingent liabilities has been produced (PPA
Slide 22: Index
Index 00 Introduction O1 Leverage 02 Financial Expense 03 Liability and FX Management O4 Tax Matters 05 Conclusions Telefonica S Chie Financial Oficer
Slide 23: Conclusions
CONCLUSIONS Unit cost of debt fallin, Debt targets and metrics clearly defined: Tax outlook encouraging: ratin edit HIGHER CASH FLOWS AND LOWER DISCOUNT RATES Teleinia Sa, Chie Financial Oficer 24
Slide 24: Signatures
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Telefónica, S.A. Date: May 26 th , 2006 By: /s/ Ramiro Sánchez de Lerín García- Ovies Name: Ramiro Sánc