Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — Telefónica Fifth Investor Conference 2006
33 slides from Telefonica Sa's conference presentation, May 25, 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: Building on Momentum
02 Building on Momentum David Finch Chief Financial Officer, 02 AY FIFTH INVESTOR CONFERENCE Valencia - May 25, 2006 on
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: Overview
Overview = We are already gaining benefits from being part of the Telefonica group ~ Customer propositions — Knowledge sharing ~ Benefits of scale * There are further opportunities for growth in the sector — Core services ~ New mobile services — DSL = We have maintained our momentum in competitive m
Slide 5: Index
o1 02 03 Index Delivering superior performance Management priorities Ambitious financial and operational targets
Slide 6: Operating in highly competitive environments
Sue Operating in highly competitive environments ARPU & VOICE YIELD GROWTH PENETRATION 104.05 vs.0404 (Growth 04 05 vs.04 04) 0% NZ ae s9pp 1.2% | I 1.2% WM oarru Bi vie on 6
Slide 7: Strong operational performance in 2005
Strong operational performance in 2005 UK Germany Superior growth ina highly Grew share of customers and competitive market revenues in highly competitive Successful execution of market Custorner Plan 2. m customers added Customers Revenues Customers Revenues 12% 6% 32% 22% 04 05 04 05 04 05 04 05 I
Slide 8: Strong financial performance in 2005
Sep 2004 Six months ended Mar 2005 Strong financial performance in 2005 Sep 2005 Change y- oy Subscribers (000s) 22,017 23,956 25,668 17% Revenues 3,227 3,348 3,615 12% Service revenues 2,845 2,907 3,143 10% EBITDA 850 910 975 15% EBITDA margin 26.3% 27.2% 27.0% 3% Operating cash flow 185 242 366 98
Slide 9: Germany — 2005 success
Sm Ot 02 Germany — 2005 success cour tatwer SUBSCRIBER GROWTH 2005 vs. 2004 32% 15% 02 Market Average SERVICE REVENUE GROWTH DATA AS % OF SERVICE REVENUES 2005 vs. 2004 (22 months to Dec. 2005) 2% 23% 19% 8% 02 Market Average 02 Market Average on a0
Slide 10: O2 Ireland - 2005 success
O2 Ireland - 2005 success Grow customer base in penetrated market Hold share more effectively than Vodafone Brand strength New propositions 6% growth 2005 vs. 2004 Maintain growth in usage and ARPU Usage stimulation propositions e.g. 1 cent weekends Service revenue grew 9% Qa '0S vs. Qd4 ‘04. Minute
Slide 11: Airwave Overview
O1 02 Airwave Overview = Secure digital radio network dedicated to UK’s emergency and public safety services = £2.9 billion 19-year police force contract signed in 2000 = £800m+ capital investment to date = Network build now completed with 99% geographic coverage = Positive cash-flow in 6 months to
Slide 12: Momentum continues in Q1 '06
O71 Momentum continues in Q1 ‘06 3 SERVICE REVENUE GROWTH 17% ” NTA Tals 7% ‘MINUTES OF USE T-Mobile 94 2005 Mos Q205 gees QuUs gros er Q4'05 Qu'e6 Qu'os Q2'05 305, 2B
Slide 13: We will extend our existing strategy
We will extend our existing strategy Strengthen 02's platform for future profitable growth Take customer experience to the next level Continue to strengthen the 02 brand Foster “Fresh Thinking” and innovation DSL & Convergence Integrate fixed and mobile in Czech Rep. Bundled offers in Germany Data s
Slide 14: Driving deeper
we Driving deeper nee Grow customer base comes focus on high value Further loyalty initiatives to control churn Move customer experience to the next level continue execution of Customer Plan & extend to Germany Brand development Protect key market USPs through innovation e.g. Genion with UMTS. Usage
Slide 15: Extending the width (scope and scale)
Telefonica Extending the width (scope and scale) HSDPA / i-mode / 02 Active ‘true mabile broadband browsing, advertising, downloads, transactions Music / TY obile the primary communication and entertainment jevice personalised and integrated experience Enterprise services work with Maviles and other
Slide 16: UK total market growth potential
Telefinica Population growth = 1- 296 2005-2003 GOP annual growth: average Total market growth potential Renewed competition from existing players Change of contral New termination regime from March 2007 Regulation of aG 2006 - 2009 = 2.3% Further MVNOs Consolidation ss L777) SI CAGR 05-098 _ a 2005
Slide 17: Germany total market growth potential
a Total market growth potential Population growth = 1% 2005 Multiple MVNO brands New termination regime = 2003 from December 2008 Pricing pressure GOP annual growth 2006-2009 = 1.5% average Fixed/mobile convergence Maturing market 100 CAGR 05-098 — el 2005 service Voicerevenue Penetration Data reven
Slide 18: Growth in market penetration
Growth in market penetration MULTI-SIM AS % OF TOTAL laes| pepayimee TOTAL MARKET PENETRATION MARKET SUBSCRIPTIONS 160% 25% aa won | ont? 20% | 25%) oom 15% fod 15% 20% 7 10% » 2% 40 ox 0% 0% UK Germany uK Germany Telefinica Generational effect Dual Sins Work / Personal or Peak / Off peak Dual devic
Slide 19: Growth in mobile voice usage
250 Growth in mobile voice usage TOTAL MOBILE MINUTES 350 2005 2009 so uK Germany CAGR 2005 - 2009 Germany 19% UK 11% Telefinica ‘% OF TOTAL OUTBOUND MINUTES ON MOBILE mu Gernmany 44% 40% 37% 31% 33% 31% 27% 23% 1935 x 2005 2006 2007 2008 2009 a1
Slide 20: Growth in mobile data revenues
O2 Growth in mobile data revenues DATA AS A PERCENTAGE OF SERVICE REVENUES 50% 40% 33% 34% 30% fm 2005 122009] 2% 20% 20% 10% 0% UK Germany Data ARPU CAGR 2005 - 2009 Germany 17% UK 14% Source Stategy Real tee Aaabeie on 2
Slide 21: Initiatives to capture future growth
O2 Initiatives to capture future growth = Customer experience = Growth opportunities in core services = Growth opportunities in new services = Measured rollout of 3G = Leverage Group size, scale and knowledge
Slide 22: Same O2 customer experience
Same O2 customer experience eeranvere = Continue to grow customer base — 2m customers added in both UK and Germany in last 12 months — Reach new segments through MYNOs — Tap into growth in multi-SIM = Improve customer loyalty — Focus on things that really matter to customers — Long term contracts (1
Slide 23: Growth opportunities in core services
fefonica Growth opportunities in core services MOU AND SMS PER CUSTOMER FER DAY muK 6,000 Gernmny iretnd 5,000 2,000 1,000 TOTAL SMS MESSAGES SMS Demand stimulation Bolt ons Rewards & Treats Talk a lot more Genion flat rate Qos Quo 25
Slide 24: Growth opportunities in new services
Pee §=6() Growth opportunities in new services exer (02 UK12 MONTH SMS / NON-SMS DATA ARPL ‘ 5%, msms #29% too 02 UK 12 MONTH DATA ARPU. Spon ss és 95 &e 02 ze ee 362 a5 3 2 2 2 60 3 qa 2005 ood se “ 1s “ 1 Qn Qe re} Qa qa source! Company reps en eae = Non-SMS making an increasing contribution to da
Slide 25: Underpinned by growth in users
Underpinned by growth in users cower PUK GERMANY NON-SMS DATA USERS NON-SMS DATA USERS a223 8,654 a3 24D il F | I I I i | I MDs Q205 Q305 QDS gros Mos Os gEOF gaDs gio6 47% of customers still do not usea 76% of customers still do not use a non-SMS data service non-SMS data service We expect non-SMs
Slide 26: Growth opportunities from new services
Telefonica Growth opportunities from new services 375 O2 customers for upto 6 months 85% satisfied with the end-to-end service provided 72% indicate they would take up the service within 12 months Extend trial in Oxford —interactivity, Video on Demand Irish trial December 2006 and “showcase” for Ryd
Slide 27: Growth opportunities from new services: Fixed Broadband (DSL)
a Growth opportunities from new services Fixed Broadband (DSL) FIXED BROADBAND SUBSCRIBERS (CAGR 2004—2009) 18% 18% 11% 9% 9% Germany Frame Spain Netherlands Italy Belgium Germany and UK among the largest and fastest growing broadband markets in Europe German market particularly fragmented UK seeing
Slide 28: Continuing to take a measured approach to 3G roll-out
fefonica Continuing to take a measured approach to 3G roll-out Optimise roll-out to customer demand for 3G services ‘Take advantage of later generation equipment Lower cast to upgrade to HSDPA r Offer best range of devices on both 3G and 2G Devices Propositions Ensure Q2 is competitive in each local
Slide 29: Leveraging Group size, scale and knowledge
Leveraging Group size, scale and knowledge Roaming “My Europe” Joint promotions with Moviles for summer ‘06 Services to & “high roarner proposition” Customers: Devices Solutions for MNCs DSL Marketing Products & Services e.g, i-mode, Genion Airwave MVNO Procurement and R&D Networks Benefits of scale
Slide 30: Index
01 02 03 Index Delivering superior performance Management priorities Ambitious financial and operational targets
Slide 31: CAGRs for 2005-2009
O3 02 CAGRs for 2005-2009 FY CAGR € in Millions 2005 (11 months) 2005-09E * Revenues 9,716 6% to 10% Operating Income before Dea 2,633 7% to 11% Operating Income ** 877 15% to 21% CAPEX 41,987 6,800 to 7,500 (2006-2009 curnulative) of
Slide 32: Summary
Summary = Maintain above average growth in UK = Superior execution of Customer Plan = Maintain above average growth in Germany = Exploit DSL opportunity = Grow margin = Capitalize on wider TEF Group size, scale and expertise See Boost O2 group operating performance 34
Slide 33: 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 25 th , 2006 By: /s/ Ramiro Sánchez de Lerín García- Ovies Name: Ramiro Sánc
Telefonica S A — Telefónica Fifth Investor Conference 2006 on 6ix