Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — Q1 2007 Earnings Presentation
29 slides from Telefonica Sa's earnings presentation, May 16, 2007
Slide 1: Annual Results January - March 2007
Annual Results January - March 2007 TELEFONICA S.A. May 16th, 2007 | Ss st Lv iS Ay ia ie er This presentation is being broadcast live on the Internet
Slide 2: Disclaimer
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 a number of places in this document and include statements regarding the intent, b
Slide 3: Group Financials: Sustaining top financial performance in 1Q07
GROUP FINANCIALS Sustaining top financial performance in 1007... € in millions (% change yoy) Jan-Mar Jan-Mar —-% Change % Change 1007/1006 2007 2006 1007/1006 organic* Revenues 13,747 11,946 Operating income before D&A 5,106 4,657 (o1ppa) Operating income 2,710 2,356 (01) Net Income 4,257 1,167 OpC
Slide 4: Group Financials: solid underlying EPS growth
GROUP FINANCIALS ..With solid underlying EPS, up by more than 20%... € in millions (% change y-o-y) 49.6% +15.0% 231 ME (02’s PPA) 39.ME (Cesky’s PPA) 4,257 -656 “65 (6.9%) (14.5%) (1007 OIBDA DRA Assodates Financial results Taxes Minorities & (1007 Net Income Discontint Operations * EPS growth EPS
Slide 5: Group Financials: diversification by region and business
GROUP FINANCIALS ..as we leveraged our diversification, with a solid position in each business... 1007 Revenue breakdown by region Others & eliminations 4% T. Espaita T.02 Europe 37% 26% T. Latinoamérica 34% Revenue growth by region (Organic!, € in millions) T.Espaia ‘7.02 Europe 1. Latinoamérica in
Slide 6: Group Financials: cost management to keep profitability
GROUP FINANCIALS ..and a continuous focus on cost management to keep profitability OpExt Organic? Growth Organie O1BDA Margin 412.2% 37.9% 37.2% 19.0% 48.1% 2005 2006 1007 1006 1007 1007 OIBDA Margin 48.5% T. Espaiia T.tatam 7.02 Europe Group Bis oso ps bs adap od - TEOMA SA. let ge ac eee eR Sn net
Slide 7: Telefónica España: strong quarter on growth & profitability
TELEFONICA ESPANA Telefonica Espana: strong quarter on growth & profitability Revenues OIBDA OIBDA Margin (€ in millions) (€ in millions) (6) 5,033 = 2,439 2 48.5% 4772 2,205 46.2% a 1906 1907 1906 1907 1906 1907 = Sound top line growth driven by customer expansion = Healthy profitability across bus
Slide 8: Telefónica España: high commercial activity focused on value customers
TELEFONICA ESPANA Telefonica Espafia: high commercial activity focused on value customers ‘am Total accesses Feed Telephony it lccesses fin thousands) {in thousands) CS TT +60: 44, 756.6 pz 44,152.6 4.0 3742.7 - Retail intemet — Broadband Accesses {in thousands) Dewos Mar07 Des ‘Mas07 Strong competi
Slide 9: Wireline Business: leading Broadband and PayTV
TELEFONICA ESPANA WIRELINE BUSINESS Wireline Business: leading Broadband and PayTV Retail Iintemet BB Accesses (in millions) Sustained market share at 56% after capturing same share of net adds Pay TV subscribers (in millions) = 44% share of net adds = 11% Pay TV market share TELEFONICA S.A. Nol All
Slide 10: Wireline Business: ongoing ARPU growth to push top line
TELEFONICA ESPANA . 2 . . WIRELINE BUSINESS Wireline Business: ongoing ARPU growth a to push top line ARPU MAJOR DRIVERS (€/month) = Expanding BB customer base @ ae ha V 25.1% of lines have BB (18.9% in 1006) = Promoting 2P/3P (ARPU uplift & loyalty) v 75% of retail BB accesses with 2P/3P v Retail B
Slide 11: Wireline Business: operational efficiency leading to margin improvement
TELEFONICA ESPANA . ° ° ° WIRELINE BUSINESS Wireline Business: strong focus on operational efficiency leading to margin improvement OIBDA Growth 1007/1006 (€ in millions) +12.4% 7.5 Pops Reported Lower ERE, ‘Subsidies, Real Underlying provision in 1007 Estate program Growth and others OIBDA Margin 1
Slide 12: Wireless Business: strong performance focused on value
TELEFONICA ESPANA . ° WIRELESS BUSINESS Wireless Business: strong 1007 performance focused on value Customer growth voy) = 57% contract mix (54% in Mar06) = Total net adds: 368,000 in 1007 vs 387,000 in 21006 413.4% = Blended churn: 1.8% (-0.1 p.p. vs 1006) = Strong push on loyalty: ~1.2 M handset u
Slide 13: Wireless Business: stimulation of voice and data usage
TELEFONICA ESPANA . ° ° . ° WIRELESS BUSINESS Wireless Business: stimulation of voice and data usage jeov/orotth ates) 1007/1006 Data Revenue growth Highest y-o-y Data ARPU 471% ‘growth since 4905 414% Non P2PSMS Connectivity Total revenues fay TOTAL ARP? Data revenues split 4 P2P Communications 59%
Slide 14: Wireless Business: healthy top line & robust OIBDA growth
TELEFONICA ESPANA . : . WIRELESS BUSINESS Wireless Business: healthy top line performance & robust OIBDA growth Revenues 479% @® Comparabie growth* Handset Revenues 414.3% Service Revenues 47.0% 46.798 Gal ie “ nCustomer base: +7.6% vs Maro6 ustomer revenues +10.0 Outgoing ARPU: 40.6% vs 2006 interc
Slide 15: Telefónica O2 Europe: tackling mobile pressures
TELEFONICA 02 EUROPE Telefonica O2 Europe: proactively tackling mobile pressures & selectively exploiting BB growth opportunities Revenues * O1BDA* O1BDA Margin * (€ in millions) (€ in millions) (%) 3,534 2,409 756 933 31.4% = UK: positive top-line performance driven by client & ARPU expansion = Ger
Slide 16: O2 UK: healthy top-line pushed by customer and ARPU growth
TELEFONICA 02 EUROPE O2 UK: healthy top-line pushed by customer and ARPU “ growth Mobile customer growth Average Revenue per User Revenues oy) (quarterly monthly average, in£) (Organic, £ in millions) f 1086 22.3 4,070 22. 35,5% of base (10.7 pp) Pre-pay Contract 1006 4007 4906 4007 = MotP: +10.6% y
Slide 17: O2 Germany: management focus on ARPU potential
TELEFONICA 02 EUROPE O02 Germany: management focus on ARPU potential ©" amid competitive pressures Mobile customer growth Average revenue per User Revenues yoy) (quarterly monthly average, in€) (Organict, € in millions) cB. 412.5% 26.4 “aso, 543 410.7% 20.5 Total Pre-pay Contract 4006 1007 4906 MTR:
Slide 18: T.O2 Czech Republic: solid financial performance
TELEFONICA 02 EUROPE (CZECH REPUBLIC T.02 Czech Republic: delivering a solid financial performance through a tight operational focus ree | Operating revenues Broadband 1007 trends (CZK in billions) vow) % © Promote bundles 5% +56.2' net eee (02 Trio & 02 Duo Mobile) 147 15.4 " Upgrade speed (2 to 4
Slide 19: Telefónica Latinoamérica: solid fundamentals driven by mobile and broadband
TELEFONICA LATAM Telefonica Latinoamérica: solid fundamentals driven by mobile and broadband Revenues OIBDA OIBDA Margin (€ in millions) (€ in millions) (%) an SS 713 4347 1,528 35.4% = Sound top line growth driven by mobile expansion = Healthy profitability across countries = Strong leadership in t
Slide 20: Healthy growth in revenues and OIBDA in all major markets
TELEFONICA LATAM Healthy growth in revenues and OIBDA in all major markets Revenues OIBDA 1007 % 1007 % €€ in miffions) change* €€ in miffions) change* = Brazil? = Argentina = Chile = Peru = Colombia = Venezuela = Mexico = Central America? = Ecuador = Uruguay TELEFONICA S.A. (2) Excluding forex effe
Slide 21: A consistent push to lead broadband across the region
TELEFONICA LATAM ° 2 | BROADBAND A consistent push to lead broadband across the region Retail intemet BB connections* Pay TV clients (in thousands) (in thousands) Ss 2,928.7 = 129,100 clients in Chile * 30,300 clients in Peru * 40,000 clients in Colombia Breakdown of BB growth ) +70% mm BB revenues
Slide 22: Brazil wireless: improving financial results
TELEFONICA LATAM ° ° ° ° ° ° vivo Brazil wireless: improving financial results amid a very competitive environment MoU ARPU SS Bxcheadh fect eens (minutes) (local asrrency) EB etc ect = Eiht eed she 14,072 a 75 SOOO 67 133 244 23 2006! 1007 2906 = 1907 Service revenue growth OIBDA growth (local asrr
Slide 23: Mexico wireless: strong commercial momentum
TELEFONICA LATAM MEXICO Mexico wireless: strong commercial momentum leads to very healthy revenue & OIBDA growth Gross adds Net adds Blended chum Customer growth (in thousands) (in thousands) (%) Goy) 42 766 29 tot a 42% a +42% 1906 1007 4,002 4,578 1006 ©1007 1006 ©1007 Total Contract Pre-pay 1007/
Slide 24: Key highlights for other Latam mobile operations
TELEFONICA LATAM REST OF MOBILE Key highlights for other Latam mobile operations 1007customer eee 2007/1006 | 1907/1006 O1BDA @® vor grout service revenue || outgoing service aooie revenue growth! ARGENTINA VENEZUELA } ' Strong customer growth PERU ' Sully flowing to outgoing | service revenue growt
Slide 25: 1Q07 synergies aligned with year-end target
GROUP SYNERGIES 1007 synergies are totally aligned with year-end target, leveraging our top initiatives OpCF from synergies 2007E OpCF from synergies 1007 (€ in millions) (Cin millions) 2007 top priorities for synergies generation Regionalization (2%) Branding & commercial campaigns Handset & Sis pu
Slide 26: Pro-active management of cost of debt
GROUP FINANCIAL * EXPENSES Pro-active management of cost of debt 1007 1Q06 Net Interest Expenses (754) (517) 445.1% FX Results (17) (5) Reported Financial Expenses (768) (522) “ATA Evolution of effective debt service rate * Breakdowm of net debt by currency (1007/2006) (Marcho7) Bo usD 2006 average
Slide 27: Progressing on de-leveraging
GROUP DEBT Progressing on de-leveraging 1007 Net Financial Debt Evolution (€ in million) 2.7K x OIBDA? OIBDA? 52,145 ‘Net Fin, Debt FOF Commitments Share Net Financial. Change in Net Fin, Debt Dec.06 —post-minorities cancellation Buyback investments consolidation, ‘Mar 07 FX and others TELEFONICA S.
Slide 28: Conclusions
Conclusions i.$howing commercial momentum across countries and businesses © 206.5 M accesses, +11.4% 2.Retaining benchmark organic growth from top to bottom +7.8% in Revenues & +22.5% in EPS 3.Benefiting from diversification, pushing on our distinctive growth levers ™ +11.4% organic growth of mobile
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: May 16 th , 2007 By: /s/ Santiago Fernández Valbuena Name: Santiago Fernández Va