Slide 1: Annual Results January-December 2008
Annual Results January-December 2008 TELEFONICA, S.A. February 26th, 2009
Slide 2: Disclaimer
Disclaimer This document contains statements that constitute forward looking statements about the Company including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations.. These statements appear in a number of places in this do
Slide 3: 2008 key highlights
2008 key highlights Robust results in a challenging environment, capitalizing our highly diversified portfolio, execution skills, and integrated business model Group guidance met or exceeded on all metrics, boosted by a brilliant performance in Latin America Outstanding organic growth rates, ramping
Slide 4: A set of very strong results
A set of very strong results Constant exchange rate as of FY 07. Assuming constant exchange rates and including the consolidation of TVA in January-September 2007 and Telemig in April-December 2007. Excluding the consolidation of Airwave in January-March 2007 and Endemol in January-June 2007. In rev
Slide 5: Group OI to net income and underlying EPS growth
- -161 (c.s.) - -2,797 (-1.6%) - -3,089 (+97.3%) - -234 (+10.2%) 13,873 7,592 FY 08 OI Associates Financial results Taxes Minorities FY 08 Net Income 22,919 - -9,046 (-4.1%) D&A FY 08 OIBDA € 689 m (T. Europe^s PPA) € 131 m (T. O2 CR^s PPA) € in millions (% change y-o-y) GROUP FINANCIALS +38.0% unde
Slide 6: Meeting Group guidance by far
Meeting Group guidance by far GROUP FINANCIALS Guidance criteria: 2007 adjusted figures exclude Airwave and Endemol, include 3 months of consolidation of TVA. 2007 T. Espana revenues are adjusted for new public voice telephone services business model. Group revenues are also adjusted accordingly. 20
Slide 7: Leveraging a highly diversified portfolio
Dec-08 (millions) 158.3 47. 3 45.8 T. Espana T. Europe T. Latam 2.3 195.6 12.5 Mobile BB Pay TV 258.9 Total +2.0% +9.0% +18.0% +13.2% y-o-y growth +16.6% +20.9% +29.7% - -1.2% 42.9 Fixed Leveraging a highly diversified portfolio Accesses GROUP FINANCIALS 42% with voice, BB and TV bundles (+8 p.p. vs
Slide 8: High conversion rate of top line growth into cash-flow
High conversion rate of top line growth into cash-flow FY 08 Organic(1) growth (y-o- y) GROUP FINANCIALS Leveraging efficiency measures and scale economies Assuming constant exchange rates and including the consolidation of TVA in January-September 2007 and Telemig in April-December 2007. Excluding
Slide 9: Strengthening our networks: CapEx breakdown
GROUP FINANCIALS Strengthening our networks CapEx breakdown CapE x T. Europe: 25% (€2,072 m) Others & eliminations 1% T. Espana: 26% (€2,208 m) T. Latam: 48% (€4,035 m) FY 08 € 8,401 m +4.7% y-o-y CapEx growth driven by T. Latam: Expansion of mobile networks (coverage &capacity) Enhanced BB platform
Slide 10: T.Espana: Strong OIBDA and high cash-flow generation
OIBDA growth (y-o-y) T.Espana: Strong OIBDA and high cash-flow generation TELEFONICA ESPANA Revenue growth (1) (y-o-y) Revenues adjusted for impact of the new model for public use telephone service (-147,4 million euros in January-December 2007); (equal to guidance criteria). USO: Universal Service
Slide 11: Revenue growth slowdown trend on worse trading conditions
Revenue growth slowdown trend on worse trading conditions TELEFONICA ESPANA Including PUT effect. USO: Universal Service Obligation. Contribution to Wireline Revenue growth (FY08 vs FY07) Contributio n to Wireless Revenue growth (FY08 vs FY07) Trad. Access Trad. Voice (1) Internet & BB +2.7% Other +
Slide 12: Wireline Business: Sustained commercial activity fostering 2P & 3P adoption
Wireline Business: Sustained commercial activity fostering 2P & 3P adoption TELEFONICA ESPANA Fixed Telephony Lines (^000) Telefonica Retail BB accesses (^000) Pay TV clients (^000) y-o-y change - -592 Total accesses Dec-08 FY08 net adds +101 612 +632 57%E m.s. 14%E m.s. 77%E m.s. Fixed line losses
Slide 13: Wireless Business: ARPU trends remain stable in Q4
Wireless Business: ARPU trends remain stable in Q4 08 TELEFONICA ESPANA Customer growth (Dec-08 y-o-y change) Outgoing ARPU Data revenue (FY08 y-o-y change) TOTAL +3.4% Contract Prepay +6.8% - -1.6% 62% of total customer base Q2 08 Q3 08 Q4 08 Q4 08 vs. Q4 07 Total P2P Commun. Content Connectivity +
Slide 14: T.Latam: Robust set of results, beating guidance
TELEFONICA LATAM Revenue growth (y-o-y change; organic) OIBDA growth (y-o-y change; organic) T.Latam: Robust set of results, beating guidance Successfully managing growth, transformation and profitability: Steady customer growth across businesses: total accesses up 14.7%(5) driven by mobile (+18.1%(
Slide 15: Wireless business: Solid growth enhancing our profitability
Wireless business: Solid growth enhancing our profitability TELEFONICA LATAM Includes Central America, Ecuador and Uruguay. Includes Telemig in April-Dec 2007. The Telemig customers incorporated to the Group in April 2008 (3,986,439 customers) are not considered as net adds. Aggregated margin. Doubl
Slide 16: Wireline business: Accelerating the transformation
Wireline business: Accelerating the transformation TELEFONICA LATAM Bundled BB lines: 2P&3P/DSL Accesses Sound BB accesses growth to reach 6.1m: Strong push in bundles (+18 p.p. in 2P&3P/DSL bundles) Higher BB speeds (Brazil & Chile) and expanded coverage in Colombia 191k net adds in Q4 08 1.5m Pay
Slide 17: Main operations review
Main operations review TELEFONICA LATAM Includes Telemig in April-Dec 2007. Margin over revenues include fixed to mobile interconnection. y-o-y growth y-o-y growth OIBDA Margin(2) Revenues (in local currency) TASA 2008 34.4% 9M 08 34.7% 33.6% Flat Q4 08 OIBDA Margin Revenues (in local currency) y-o-
Slide 18: Sum-up: Strong growth on the back of our integrated and diversified operations
Sum-up: Strong growth on the back of our integrated and diversified operations TELEFONICA LATAM Includes 50% of Vivo. Includes Telemig in April-September 2007. Guatemala, El Salvador, Panama and Nicaragua. Year-on-year variation in constant currency. Total revenue BB & TV revenue Mobile service reve
Slide 19: T. Europe: Delivering results, anticipating customer needs
T. Europe: Delivering results, anticipating customer needs TELEFONICA EUROPE Revenue growth (y-o-y) OIBDA growth (y-o-y) FY 08(1) Margins over Revenues (%) 9M 08(1) +5.9% +5.9% guidance +4% / +7% Financial targets successfully achieved in a worse economic environment: UK: Sustained market outperform
Slide 20: T. O2 UK: sustained market outperformance
T. O2 UK: sustained market outperformance TELEFONICA EUROPE Commercial approach focused on long term customer value: Clear leader in customer satisfaction(1) Simplicity, iPhone and leading contract churn driving contract customer growth: Contract churn at 1.4% in 2008 (-0.3 p.p. y-o-y) Contract: 39.
Slide 21: T. O2 Germany: finishing foundations & new commercial approach
T. O2 Germany: finishing foundations & new commercial approach TELEFONICA EUROPE Mobile service revenues turnaround achieved in Q4 08: ARPU declines stabilizing with larger portion of customer base on value tariffs Q4 08 non SMS data revenues +33.2% y-o-y Highly competitive and overall smaller marke
Slide 22: Financial expenses on target and upgraded credit ratings
22 GROUP FINANCIAL EXPENSES AND DEBT Financial expenses on target and upgraded credit ratings Calculated based on FY 08 OIBDA figure excluding results on the sale of fixed assets. 3 rating upgrades in Q4 08 (Fitch+S&P, A-/stable, JCR A/stable) plus 1 outlook upgrade in Q1 09 (Moody's Baa1/positive)
Slide 23: Group guidance for 2009
Group guidance for 2009 GROUP GUIDANCE +8%/+11% Group OpCF (OIBDA-CapEX) (€ in millions) 14,519 2008 A 2009E 14,201 2008 adjusted for guidance Group OIBDA (€ in millions) 22,919 2008 A 2008 adjusted for guidance 2009E +1%/+3% 22,602 Group CapEx (€ in millions) Group Revenues (€ in millions) 57,946 2
Slide 24: 2009 regional priorities
2009 regional priorities SPAIN Sustain leading competitive position across businesses, emphasizing customer loyalty & rational value creation commercial initiatives Strong focus on OpCF EUROPE Continue to outperform the market in the UK. Capitalize strengthened business foundations in Germany to dri
Slide 25: Accelerating transformation to adapt to new environment
Accelerating transformation to adapt to new environment Network transformation: Site build cost reduction Transport optimization Greater coordination in transport networks between Fixed-Mobile businesses Outsourcing initiatives Global partner for network support contracts in IP, GSM, 3G and microwav
Slide 26: Prioritizing shareholder returns
Prioritizing shareholder returns Paid in H2 07 (0.35€) and 0.4€ paid in H1 08. Fiscal year 2008, paid in H2 08 (0.5€) and to be paid in H1 09 (0.5€). BoD approved the proposal to increase the dividend corresponding to 2009 fiscal year. It is Company^s intention to maintain its current practice so th
Slide 27: 2010 "stress case" vs. guidance
2010 "stress case" vs. guidance Reported EPS. FCF available to remunerate Telefonica S.A. shareholders, to protect solvency levels and to accommodate strategic flexibility. 2010 Guidance October 2007 "Stress case" Scenario 2.304 € EPS 1 2.87 € FCFS 2 2.10 € 2.50 € GROUP FINANCIALS
Slide 28: Conclusions
DISTINCTIVE PROFILE IN THE INDUSTRY Conclusions Strategically diversified portfolio, execution skills and integrated business model Very strong performance in 2008, delivering our Group commitments 2009 focus on maximizing free cash-flow generation Fully committed to return value to our shareholders
Slide 29: 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: February 26 th , 2009 By: /s/ Santiago Fernández Valbuena Name: Santiago Fernánd