Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — H1 2006 Earnings Presentation
23 slides from Telefonica Sa's earnings presentation, Jul 27, 2006
Slide 1: Quarterly Results January–June 2006
Quarterly Results January — June 2006 July 27%, 2006 Telefénica, S.A Investar Relations This presentation is being broadcast live on the Internet
Slide 2: Disclaimer
_ QuartestyResuts January }une2006 Disclaimer ‘This document 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 3 umber of places in this dacument and include
Slide 3: A very attractive set of financials in 1H06
_ QuartestyResuts January }une2006 Avery attractive set of financials in 1HO6... € in Millions (% change y-o-y) JanJun Jan-Jun % Change 2006 2005 1HO6/1HOS, Revenues 25,162.5 17,186.4 1+4.6.4%| Operating Income before D&A 9.2424 65589 | +40.934 (o1BDA) Operating Income 4,2969 3,477.9 [+40.894 (ol) N
Slide 4: ...from top to bottom
..from top to bottom € in Millions (% change y-o-y) 1+40.9% +40.8% QuartestyResuts January }une2006 ‘Associates Financial ‘Minorities & —1HO6 results Discontinued Net Incame Seaton EPS growth (ine) Gaey 0546 Annual growth rate Telenica, SA, 1008 "2006 THO Investor Relations ‘ote: 71 ha been decontin
Slide 5: Healthy growth in clients to secure a distinctive top-line growth profile
Healthy growth in clients to secure a distinctive Ee : top-line growth profile in the sector be aie SME Mobile Accesses Retail Internet BB Accesses Pay TV Accesses CEE (Organic growth, thousands) (Organict growth, thousands) (organict growth, thousands) January }une2006 i" 334,608 Rs” 627 Ie 78 416.
Slide 6: Deeper cost contention to drive profitability
Deeper cost contention to drive profitability OpEx Organic Growth ‘4H06 Organic OpEx* breakdown 2A of OpexGrowth 59pp. +20pp.+9.6% January }une2006 +140% THOS 905 ~AIOS «1005 IHS Tae Tisam Tem TO? Omen So) * Group Group Greup Eurape Elimination 1H06 OIBDA Margin Organic OIBDA Margin evolution ee, 41
Slide 7: Cash flow remains solid across businesses
Cash flow remains solid across businesses 1H06 Capex evolution 4H06 Capex breakdown (€ inition) (€ in titions) +4595% 19% 443% January tune2006 e 10.2% 192.6 3,021.6 Ga 045 ES BBs 678.9 400% 4193 6759 THOS, anDS INGE 1HOS Te Taam Tem Tn One Tot ceponed organic? reported ofgame> Group "Group! Geupeti
Slide 8: 1H06 performance is in-line with year-end targets
1HO06 performance is in-line with year-end targets Group Revenues “> s2oo6 target {€ in Millions) 434%437% +40.4% Janay lune 206 254625 Naao4 17364 [I soa. cP Es RS AEs Group O1BDA > poster) Group > rw06 target inition £26%429% inition: £26%+30% (€ in titions) r TSEEES 9 (€ in titions) rete 3 _ 3976
Slide 9: Telefónica de España Group: solid underlying revenue growth
amiss QuartestyResuts January }une2006 Telefonica de Espafia Group: solid underlying revenue growth Contribution to TelefénicadeEspariaGroup semi” 4H06 Revenue Growth = 2m & 2006 target app. O6pp +4ipp. t03pp. 104PP. SAPP TPP 1 8% 405 %12% O5pp. -19pp. ‘Traditional Traditional Internetand ata (TServ
Slide 10: ...Matched with cost contention
.-Matched with cost contention. ‘TdE Group OpEx Breakdown (inion: # é } ax 45% 1013 Jamry- lune 2006 ay _ 0273 1449.6 78% Annual 14658 growth rate « tena = Personnel Cats 3s fecundangy Provisions cara revion Personnel Supplies External —Taxes-Oferating Senos Clpenees TdE Group Adjusted OIBDA? , for
Slide 11: Pressure on the traditional business
in a scenario where the pressure on the traditional business. Pre-selected Lines Net Adds {in thousands) Accesses Evolution {in thousands) QuartestyResuts January }une2006 2006 Fixed Telephony Accesses (lune-06) 16,019.7 Change vs. june-05 (%) | 1.3% 38 Fixed Telephony Access net 88.8 josses Full UL
Slide 12: ...is being offset by the drive to develop broadband penetration
..is being offset by the drive to develop Ee broadband penetration oe amiss Spanish market reaches 5.85 Million Internet BB accesses as ofJune January tune2006 2006 with net adds of +0.35 M. Internet BB accesses in 2Q08, Telefonica de Espaiia Internet Broadband connectivity ARPU down 9% fram June 20
Slide 13: Telefónica Latinoamérica: sustaining top-line growth across the region
; Telefonica Latinoamérica: sustaining top-line Ee : growth across the region... be ie ORE 1106 revenues 1Ho6 contribution to revenue growth by company PP (€ in Millions) ’ a (in, constant currency) +0. OharieryRen BPP 144% Jamry- lune 2006 Ga) 2006 target") Be ez +h%ds6% app ep OBB 4.6603 +26pp. 3
Slide 14: ...by capitalizing on broadband development
.-by capitalizing on broadband development... Retail Internet BB Connections usands) 7 2539 (Tmousands) Ps QuartestyResuts January }une2006 4 SBP 1302 Telesp TASA. Tchile Tap Titatam? Broadband revenue growth Contribution of Internet#BB to revenue growth (aHo6/2Ho5, local currency) (local currency)
Slide 15: ...while keeping a focus on efficiency
..while keeping a focus on efficiency through : local and regional management SHEE Operating expenses growtht ‘Adjusted OIBDA? omereeme (eocal currency) {(€ in millions) January tune2006 216% Zoos targa» = Y-o-ygrowth 53% 3% 5% vate 2,008.4 17353 (68 THO6 Forex HOS 1008 aH08 (eonstantterms® impact (
Slide 16: O2 UK: revenue growth underpinned by strong customer and ARPU growth
O2 UK: revenue growth underpinned by strong customer and ARPU growth Evolution of client base QuartestyResuts (in thousands) January }une2006 16,814 474,000 net new subs. in Service Revenues 14,616 Gi50% 2006, more than double (e inwittions) 2005 figure +29% in total gross adds yoy in 2006 val 415.1
Slide 17: O2 Germany: solid client growth offsets pressures on ARPU
O2 Germany: solid client growth offsets pressures on ARPU Evolution of client base QuartertyResutts (in thousands) Jamary—lune2006 236,000 net new clients in ¥ 10,335 2006 Service Revenues 3308 3a" * (€ inmittions} “ 50.2% of total base on 1,238 contract at the end of rad 2006 (53.6% end 2005) so 4
Slide 18: Solid UK performance leads us to upgrade service revenue guidance
The solid performance of UK leads us to upgrade its service revenue guidance Service Revenue Growth 02 UK QuartestyResuts January }une2006 16.6% 14.9% UPGRADED FROM +6%/49% 1008 2008 TO Strong client growth (474k added in 2006 vs 359kin 1006) 4B%/11% Churn control through branding & loyalty schemes
Slide 19: T.O2 Czech Republic: underlying trend on track with guidance
T.O2 Czech Republic: underlying trend on track with guidance % Change € in Millions Jan-Jun Jarrun—% Change 1106/1405 (96 change y-o-y) 2005, 2006 __1HO6/1H05_ local aurrency OE TIERD Revenues 998.0 1,048.9 45.1% 0.1% OIBDA 458.3 soot [4aaa%] G62% OIBDA Margin 459% 485% L426pp. Operating Income(ol)
Slide 20: Actively managing liabilities to limit the impact of higher gearing
e QuartestyResuts January }une2006 Actively managing liabilities to limit the impact of higher gearing 1HO6 1HO5 Net Interest Expenses (1,192.4) (871.6) +36.8% FX Results 18 144.4 Reported Financial Expenses (1,190.6) (730.5) +63.0% Average Total Net Debt. Evolution of Average Effective (€ in tilion
Slide 21: Cash Flow & Debt: starting to de-lever
Cash Flow & Debt: starting to de-lever Ee 2006 Net Financial Debt Evolution “pails {€ in Millions) QuartastyResuts 2.8% Jamary-tune2006 | OIBDA? 2.8% OIBDAt +1107 4,954.1 54,9221 414323 52.9Bn€ #2163 a a ved-in in the Telefniea, SA, (Gil ort rowtalington nln Teconso see Investor Relations {Genet on
Slide 22: Conclusions
QuartestyResuts January }une2006 Conclusions Financial performance remains solid across the P&L, with high single digit organic revenues and OIBDA growth Underlying margins are sustained despite strong subscriber growth and intense competitive environments Top-line growth is being successfully trans
Slide 23: 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: July 27 th , 2006 By: /s/ Santiago Fernández Valbuena Name: Santiago Fernández V