Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — Merger or Acquisition (October 2005)
24 slides from Telefonica Sa's merger presentation, Oct 31, 2005
Slide 1: Delivering Balanced Growth and Cash Returns Through Enhanced Scale
Delivering Balanced Growth and Cash Returns Through Enhanced Scale ee ‘October 31,2005,
Slide 2: Disclaimer
Disclaimer Felefonica meaning f the Private Securtis Litigation Reform Act of 1995. These statements appear in a number of places inthis document and include statements regarding the intent, bei or curent expectations of the customer bar, estimates in ‘marketshare, ssp of the acy and stuaton retin t
Slide 3: Table of Contents
01 02 03 04 05 06 Table of Contents Transaction Overview and Rationale A Compelling Transaction for Telefonica’s Shareholders: Growth, Scale and Portfolio Rebalancing 02 is a Top Quality Asset for Telefonica to Build on Positive Financial Impact and Value Creation A Compelling Transaction for 02's S
Slide 4: Transaction Overview
Transaction Overview Feira All-cash consideration through a tender offer 200p per 02 share: Key Terms 22% premium over 164.25p (closing price 28/10/05) 25% premium over 159.77p (average price last month) Implies £ Offer document expected to be posted in mid November Expected closing in January 2006
Slide 5: Transaction Rationale: The Strategic Benefits of Acquiring a High Quality Asset
Transaction Rationale: The Strategic Benefits of Acquiring a High Quality Asset Improving Accelerates Telefonica’s growth profile Growth Widens Telefénica’s growth gap versus peers Enhances Telefénica’s scale benefits by entering the two largest markets in Europe with critical mass Sizeable OpEx and
Slide 6: Improving Growth: The Fastest Growing Operator
Improving Growth: The Fastest Growing Operator Feira EBITDA Growth (vost -cvose cack) ‘ ‘OpFcF* Growth
Slide 7: Gaining Scale: Increasingly Important to Better Serve Our Clients & Expand Efficiencies
Gaining Scale: Increasingly Important to Better Serve Our Clients & Expand Efficiencies CESKY TELECOM From the announced NPV of synergies of UsD abn to a new estimate of USD 4.5 bn NPV of synergies initially semiouncal IR 250 ~ 280 millio stronger results Handsets price reduction due to volume incre
Slide 8: Gaining Scale: Entering the Two Largest Markets in Europe with Critical Mass
Gaining Scale: Entering the Two Largest Markets in Europe with Critical Mass Felofinica ‘Managed Mobile Subscribers (hune2cosa) = More than Doubling European Handset and Equipment Purchasin; 1 Accessing 3.8x more POPs in Euroy pe 1 Increasing Content Purchasing, Power i in Top 5 European Markets 200
Slide 9: Gaining Scale: Integrating O2 to Result in Sizeable Synergies
Selefonioa Gaining Scale: Integrating O2 to Result in Sizeable Synergies jnual Synergies * Synergies >euR2¢9m Corporat Sohtons evclopren costs and elidel Taentitied bat Aaicting not quantified 293m and Equpment Purchasing Wother tances Networks NPV OF QUANTIFIED SYNERGIES** EUR 3.3 bn ™89% at O2 =11
Slide 10: Rebalancing the Portfolio: A Diversified Exposure Across Businesses
Selefonioa Ter on Rebalancing the Portfolio: A Diversified Exposure Across Businesses 2005E EBITDA, 20086 EBITDA other3% Fed other a 5a Fixed sam obit oie we 3% 2005PF EBITDA 2008PF EBITDA other 3% other 5% Fixed oe mss Mobile _ % Mobile - 18% Total EBITDA: “EUR 17-5bn Total EBITDA: >£UR 22.0bn
Slide 11: Rebalancing the Portfolio: A Diversified Exposure Across Regions
Ter on Rebalancing the Portfolio: A Diversified Exposure Across Regions 2005E EBITDA other Europe 5%, Latin America Spain 34% on! 2005PF EBITDA other Europe 21%, Spain Total EBITDA: “EUR 17-56n 2008E EBITDA (ther Europe Th atin America aiaer 40% 53% 2008PF EBITDA, ‘ther Europe 23%, Latin america Tot
Slide 12: O2: A Top Quality Asset for Telefonica to Build On
02: A Top Quality Asset for Telefonica to Build On strong traci reed Differentiated brand in gaining market aalunaue predict share and enhancing eee margins Strong management team committed to building the business within Telefonica The fastest growing network operator with critical Top tier cash fl
Slide 13: O2: Strong Financial Performance and Superior Cash Flow Growth Prospects
O2: Strong Financial Performance and Superior alofinica TEES Cash Flow Growth Prospects (eunen) (curr) < d [ rs a 6a 2 as 06 bail Expected OpFCF* Grewth C¥05.0108 cAGR
Slide 14: O2 UK: High Growth Operator in the Largest Mobile European Market
Feira 2005E Revenue Market Share Tmobile ay Hutehison Vodafone 1% 30% orange 23% B 20% CY 2004A-2005E Revenue Growth 02 UK: High Growth Operator in the Largest Mobile European Market +8% subscriber y-o-y growth & +17% annual revenue growth (FY 2005) 2"4 highest ARPU in the UK 28% of June 05 revenues
Slide 15: O2 Germany: Achieved Critical Mass and Highest ARPU
O02 Germany: Achieved Critical Mass and Pelefinica . = Highest ARPU Market Share ‘Accelerating Revenue Growth SA EUR be cAGROs-05¢ Achieving n°3 ae 34% a4 2 26 PP. ak 25 PP. “16pp. 2 Tobie eos Vodafone yooh 30s 3063300) Blended ARPU — {EUR/month as of une 2005) +33% subscriber y-o-y growth & =e, a g
Slide 16: O2 Germany: Strong Upside Potential & Comparable in Size with Recent Transactions
O2 Germany: Strong Upside Potential & fee Comparable in Size with Recent Transactions ‘eal 3 F . sagt) (2o0se) feUt yea) 1 specemany 8 6a conser T aa oy ul | Pe] 2 Comparing Different Transactions 02 Germany HOSA Customers (mn) 8a 29 97 2005E Revenues (EUR bn) 32 49 36 (C¥04-C¥0S EBITDA Growth (%) 4
Slide 17: O2 Ireland and Airwave: Attractive Operating Profile
Feira Profile High ARPUs (2905 EUR) is mélent ia arofune lin 335 330 514 Strong EBITDA Margin (2905), 28.2% 37.0% 36.0% O2 Ireland and Airwave: Attractive Operating Primary wireless operator for UK emergency services Long term contracts with high quality customer base Significant operating leverage
Slide 18: Building on O2's Successful Platform to remain a UK based entity
03 Building on 02’s Successful Platform 02 to remain a UK based entity 02 will continue to be led by the current management team No business disruption Maintenance of highly successful brand The Board of Directors of Telefénica will procure, as soon as practicable following the date the Offer become
Slide 19: Positive Financial Impact: Accretive from Year One
Selefonioa Positive Financial Impact: Accretive from Year Expected FCF per Share Accretion 48.3% 45.6% One Expected EPS Accretion Expected Cash EPS Accretion 46.0% 410.0% 43.5% #738) 20068 20078 2086 207
Slide 20: ..and Value Creation: A Compelling Valuation Case
..and Value Creation: A Compelling Valuation Case Firm Value Breakdown bn) Pelefinica eVieoMTO805 r-based ——> («2 “fin FimValue NPVOZNOIs —ImpliedO2 Quantified Implied O2—_entified but Total mpied usiessValue Synergies usiessVaue not quantited usinessvalue Synergies Synergies» ‘GWT: Dedctibilty Mult
Slide 21: Financing Structure and Shareholder Remuneration
04 Financing Structure and Shareholder Remuneration = Dividend and Buyback program unchanged = No equity issuance is contemplated as a consequence of the transaction = Financing 100% with debt = GBP 18.5 bn (EUR 27.2 bn*) bridge facility underwritten by Citigroup, Goldman Sachs and Royal Bank of Sco
Slide 22: Compelling Transaction for O2's Shareholders
05 Compelling Transaction for 02’s Shareholders © 22% premium over last Compelling value > Friday closing price © 25% premium over average price of the last month Price certainty se Allcash Completion certainty >No foreseen regulatory risk Expected closing in January- Rapid timetable sabe No busines
Slide 23: Conclusion
° Conclusion ‘© Improving Underpins Telefénica’s Strategic Goal to Provide the Best Combination of Growth and Cash yf Returns in the Industry... Growth ™ Gaining of ..Through an Offer that Provides to Scale 02's Shareholders a Compelling Value, Price Certainty and a Rapid Execution w= Rebalancing th
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: October 31 st , 2005 By: /s/ Ramiro Sánchez de Lerín García- Ovies Name: Ramiro
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