Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — FY2017 Earnings Presentation
38 slides from Telefonica Sa's earnings presentation, Feb 22, 2018
Slide 1: Results January-December 2017
> my | - Results January =December 20 Telefonica
Slide 2: Disclaimer
Disclaimer This document and the conferencecall webcast (neluding the QBA seston) may contin forward-looking statements and information (hereinafter, the “Statements”) relating to the Telefénica coir (hereinafter, the "Company" or “Telefénica") or othen Statements may include finance forecasts and e
Slide 3: 2017 Highlights and 2018 Outlook
2017 Highlights 2018 Outlook Mr. José Maria Alvarez-Pallete Chairman & CEO Felefinica
Slide 4: Our mission: Let our customers choose it all
Our mission: Let our customers choose it all Operate in countries Optimise our where we can have capabilities for a an impact & create sustainable digital value future SCO Strong financial performance & shareholders’ returns Enable people with the power of connectivity iso tons yy Flefinica Teleféni
Slide 5: Our mission: Let our customers choose it all
Our mission: Let our customers choose it all Operate in countries Optimise our capabilities Enable people with the P P Pp ‘ “oe where we can have an for a sustainable digital Coe CCU Y, impact & create value future © UBB connectivity Leaders in convergent markets * Becoming a platform Co. tailored t
Slide 6: Excellent execution of 2017 priorities
Excellent execution of 2017 priorities Growth Organic: Revs. +3.4%; OIBDA +5.3%; OpCF +12.2% acceleration Reported: Revs. -0.1%; OIBDA +7.1%; OpCF +22.8%; FCF +13.0% Data monetisation: traffic explosion, more users, more services, turning volume into revenues Digital Co. transformation Latam; Spain
Slide 7: Growth acceleration
Growth acceleration Service revenues (rover) Europe -0.9% (+0.2% ex-reg.) Latam +8.0% Europe ¥6.7% — { (+10.3% ex-reg,) Latam +24.9% Investor Relations VW Telefénica, S.A. Growth. acceleration OIBDA (yoyor,) fia VIS 47% Europe 0.3% 53% 4 (41.7% ex-reg.) Latam +12.9% (© Net Deby/o1BDA 4378 3,817 T 35
Slide 8: Revenues gaining momentum
Revenues gaining momentum Revenues & Service revenues (y-o-y organi) Yielding improvement in Europe & Latam ex-reg. * Further transforming our revenue mix towards BB and Sot © 52% 0/ total pup. vs. 2016 ‘Turning volumes into revenues (© Mobile data revs +19.5% y-ovy in Q8 (FY: 416.8% y-o-y) * Balanc
Slide 9: Telefónica's model: digitalisation at the core
Telefénica’s model: digitalisation at the core |= Data monetisation Digital transformation * Enhance high-value connectivity * Network leadership ©. FITH,LTE, transport network, all1P © New network elements virtualised, IP Comms, legacy switeh-off * Monetisation of data traffic explosion © New techn
Slide 10: Monetisation opportunities continuing
Monetisation opportunities continuing Cognitive Power Services Beyond Connectivity ‘Talk to technology and get things done: new ‘options for customer to interact (speech recognition and natural language processing) A " ) @ (Cextremm Tv oontes-canonTeTs) _sn4 operates tency J ooo (mz accessible throu
Slide 11: Targeted, ROI-based CapEx effort; peak already behind us
Targeted, ROI-based CapEx effort; peak already behind us Platform Company ap6x 2012-17 nel. spectrum Cognitive Power Anew customer relationship Products and services Video, cloud, security, loT. IT & Systems Full stack, computing Physical Assets Networks, data centre: Investor Relations Telefénica,
Slide 12: 2017 key financials & solid financial position
2017 key financials & solid financial position Fv17 €inmillions Reportea | eporied | organic yoy Revenues 52,008 | (0.1%) 3.4% Service revenues 47,857 (0.3%) 3.1% GEDA 36187 7am am Revenue growth and margin expansion Underlying O1BDA 16,638 0.7% O1BDA margin 311% | 24pp.| 06 pe. PCF (ex-spectrum) 30
Slide 13: Beating 2017 guidance
Beating 2017 guidance 2017E Guidance (een6) Guidance 2017E = aux |e Revewwies {in spite of regulation: ~1.2 pp) | {regulation 21.1 p.p.) 1804 margin coenienwwipe [a capex ex-spectrum/Sales. ieniataial a5 Payable in 2017/18, Interim 14-Dec-17 €0.20/sh. cash Final Jun-18 €0.20/sh. cash FCF {Dividends
Slide 14: Q4 2017 Results
O 2 © 0417 Results Ms. Laura Abasolo CFCO Vv Peefinica
Slide 15: 2017 key financials: FY & Q4
2017 key financials: FY & Q4 Fva7 817 €inmillions Reported RePorted | Orga Reported | Reported | Organic ay yoy yoy Revenues 52,008 | (0.1%) 3.4% 13,162 (aa) 48% Service revenues 47,857 (0.3%) 3.1% 11,875 (9%) 43% 01808, 16,187 7.3% 5.3% 3,913, 22.8% 9.2% Underlying O1BDA 16,638 0.7% 4230| 5.2%) ‘O1
Slide 16: Q4 results factors
Q4 results factors Q4 impacts in OIBDA (€0.3Bn) Q4 impacts in Net Income (€0.3bn) 4230 so 29 107 @ bee @ 192 Pe) OIBDA Restructuring Contingencies Others OIBDA Net Income Restructuring PPA Contingencies Others Net income Feported provisions underlying Reported Provisions underying ‘© Non-cash: : Esp
Slide 17: FX impact structurally neutralised
FX impact structurally neutralised Revenues (-¢1,653m) Net Debt (-e639m) OIBDA (-¢717m) FCF (-e171m) FX reduces NDebt FX impactin FCF is mitigated, “natural hedge” 2015 (ém) 2016 oii io 180A FF Net Debt O1BDA FCF Net Debt OWA FCF Net Debt Debt structure “ =_— = a7) (616) _ o“ a7) a (1275) FCFS 2017
Slide 18: Deleverage driven by growing organic FCF
Deleverage driven by growing organic FCF Net Financial Debt (em) ‘No/o1BDA 5x v 43,595, (4.947) 2,264 (1,269) (2,000) 696 (639) dec 36 FCF Shareholder Net. Hybridissue Pre K remuneration _ financial retirement {incl hybrid investments ‘commitments 3027 434 (1,726) (2,005) (783) per OpCF ex- Working
Slide 19: Cost effective long-term financing strengthens B/S
Cost effective long-term financing strengthens B/S (en) USD €Bonds Latam Hybrids Bank Total nds Financ Financing Liquidity position (o¢e-17) (en) BS 209 73 ‘Cash position Undrawn credit Liquidity position XV) lines & synd. credit facilities Investor Relations Telefénica, S.A. (on; not considering hy
Slide 20: Q4 2017 Results
O 3 © 0417 Results Mr. Angel Vila coo Vv Peefinica
Slide 21: Spain: Improved trading and value mix
Spain: Improved trading and value mix Net adds (000) mat mn Superior offer for premium customers Bees tay] (ax) [326 45% | [46% '* Improved operational momentum, seasonal promos Q4 275 proved on ™ ° 2g os © “Fusién’ net adds recovered (+41; #31k q-0-4) bc ma © FBB growth; strong TY, positive mobile
Slide 22: Spain: Revenue acceleration & OIBDA growth
Spain: Revenue acceleration & OIBDA growth Improving Service Rev. & OIBDA mn cnasnanmyoroee Service Revenue consolidate growth 18D 037 ecprovsins ca. esn) Margin ex prosions cp. ga © aoa service revenues growth improved (¥0.3 p.p.4-0-4) © *Consumer"(53% of SRI: 61.3% in Q4; 41.0% in FY (© “Business”
Slide 23: Germany: MSR ex-regulation back to growth
Germany: MSR ex-regulation back to growth MSR ex-regulation (yo- o 1B mst © equation Solid momentum driven by larger data buckets au aay 37 aaa * 0, Free portfolio well received; data usage >7 G8/month © Avg use postpay LTE customers 2.8 GB/month (968% y-o-V) © Mobile data traffic up 55% vs. 2016 *
Slide 24: UK: Solid financials and commercial performance
UK: Solid financials and commercial performance MSR excregulation (y--y organic) Base O fepiiton Momentum despite competition 2.8% 23%. Contract base expanding © Q4 net adds +70k (excl. M2M; Q3: +32k) * 60%L tic vs. Dec-16) ‘Avg, data usage per smartphone +46% vs. 2016 Robust financials 2017 Orton O
Slide 25: Brazil: Further improvement on differentiation
Brazil: Further improvement on differentiation Better customer strongest contract net adds over last 3 years © New contract portfolio (23° October) delivering results (© Better mix on high-end Family Pans: +82% y-o-y Contract net adds (n) © 42% contract market share © 84% 4G population cov. Cau a7 a
Slide 26: Brazil: Solid margin improvement, above 35%
Brazil: Solid margin improvement, above 35% Revenues (yo-y organi) © be teguation Consistent revenue growth tox 18% ia 14% 09% * MsR growing above inflation (Q4:+3.9%y-0-y, FY: +4.4%) ‘©. Data till booming y-o-y (a: 424.934 FY: 130.2%) (©. Postpaid revenue improved to +9.3% y-o-y (FY: #9.636) 117 21
Slide 27: Hispam: Sound commercial results
Hispam: Sound commercial results Mobile net adds (4) LTE penetration Value customers growth yielding results mae? aFri7 © yerlon) DEDODCDCDED * Contract net adds back to positive (+227k; -82k in 2017) re on a 30.39629.1% © Improvements in ARG, MEX, CHI and PER . 228% 21.1% * Positive prepaid net add
Slide 28: Hispam: Delivering strong financial performance
Hispam: Delivering strong financial performance FY 17 Financials (yo-yeeported) Expanding profitability ese _ 1.8% * Organic growth more than offsetting FX depreciation 6 Weantrouon 0.2% fou ream OK 36 (0.2%) © ARG reported OIBDA +21.8% y-o-y (organic +42,0%) Revenue OIBDA Opcr " ¥-o-¥ (ore ened «.F
Slide 29: Telxius: Leading infrastructure, solid profitability
Telxius: Leading infrastructure, solid profitability Robust operational performance rotons W Holstes @ Tenmnyeatio 2719 aaa 65% Growing demand across businesses 20403 20.617 ° er 1.33 ‘© MAREA (connecting US & Spain) in Q4.18 128K 16220 16.288 =e © BRUSA (connecting Brazil, Puerto Rico & US) by mid-
Slide 30: Clear proofs points in 2017
Clear proofs points in 2017 Digital transformation Data monetisation Enhanced Connectivity FTTx/Cable premises passed (o/w 44m owned) ® Europe LTE cov. (66% in Latam) v5 2016018. a Network virtualisation worldwide Pisani agent czeDteel (+9 p.p. vs. 2016) Countries wth Fl Stack (23% customers migrate
Slide 31: More value customers, more services
More value customers, more services (11m ) ( sem ) Demand for fiber and LTE unabated FITx/Cable UE x12 xLS * signiticant growth of contract, LTE, FITx/Cable accesses © QULTEnet adds +16% ¢-0-408.6m © FTTxCable drives 450k net adds, +4% vs. 4 16 (©. Pay TV gaining traction (FY net adds x10.3 y-0-y) U
Slide 32: Driving usage, increasing yield
Driving usage, increasing yield Data monetisation strategy; upselling 51% 38% © stmana; enhancing value beyond pure data © Dedicated data for certain Apps & Video © BRA, PER, CHL. © Smartphones UTEusers FIT users Pace deaabainiel © Double F8B speed & more mobile datain Spain ©. Family plans (CH, 8RA
Slide 33: Digitalisation at the core of customer journey
Digitalisation at the core of customer journey Digitalisation evolves towards a customer centric digital experience 2017-2020E Foster top-ups & Make the payments Liskacrriene Improve experience Enhanced customer care experience ww aS > ial fest for Sales friendly > Foster onine sales > Field force e
Slide 34: Further room to improve efficiency
Further room to improve efficiency 2017 Figures '* More invested than peers ~ More sustainable business CapEx: €8.7bn ° ©. HGU equipment: 35% savings vs gacy equipment * Scaling it up! Efficiencies to be captured at group scale '* Network modernisation/legacy switch-off © Copper switch “3500 Tegacy
Slide 35: Conclusion
© Conclusion Mr. José Maria Alvarez-Pallete Chairman & CEO Investor Relations Vv Telefonica Teleteniea 3
Slide 36: 2018 outlook
2018 outlook Guidance 2018 (IAS 18) ‘organic Growth of round 3% C-2%)) (Gestaned potable growin "Third consecutive year of margin expansion {cost discipline, digitalisation, synergies, network...) - Continues expanding around 0.5 p.p. Sehware (ero eution cache 1.6p.9.00 01808 rot) Capex ex- ; spectr
Slide 37: Closing remarks
Closing remarks 017 2018 Investor Relations Telefénica, S.A. * Solid results: Growing across all fronts * Advancing in digitalisation and data monetisation © Firm progress on deleverage * Exploiting a more sustainable business model © Growing revenues, higher margins, lower Capex © Value creation th
Slide 38: 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 22, 2018 By: /s/ Laura Abasolo García de Baquedano Name: Laura Abasolo