Telefonica Sa · BME:TEF

Telefonica Sa — Telefonica S A — Merger or Acquisition (August 2014)

15 slides from Telefonica Sa's merger presentation, Aug 29, 2014

1. Slide 1: Creating the Leading Integrated Telco in Brazil

   Creating the Leading Integrated Telco in Brazil 29 August 2014 Telefónica, S.A. Investor Relations

2. Slide 2: Disclaimer

   Disclaimer This document contains statements that constitute forward looking statements about Telefónica Group (going forward, “the Company” or Telefónica) including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations which ma

3. Slide 3: Transaction Summary

   TELEFÓNICA Transaction Summary Telefónica and Telefónica Brasil have entered into an exclusivity agreement with Vivendi in relation to their binding offer to acquire 100% of GVT Total implied consideration for 100% of GVT of €7.45bn, through a combination of cash and a stake in the enlarged Telefóni

4. Slide 4: Proposed Transaction Structure

   TELEFÓNICA Proposed Transaction Structure Transaction Summary Post Capital Raise and 1 Pre Transaction Structure 2 Contribution in Kind Total consideration of €7.45bn Acquisition of GVT by Telefónica Brasil for a combination of cash and a stake in the enlarged Telefónica Brasil i. €4.66bn in cash, f

5. Slide 5: Transaction Rationale

   TELEFÓNICA Transaction Rationale 1 GVT’s Strong NGN with more than 10.4m Homes Passed in 152 cities/21 Brazilian states Attractive More than 2.5m UBB clients (86%>10Mbps), of which 92% outside Sao Paulo Standalone Sustained double-digit growth (26% revenue CAGR 10-13) with further potential Business

6. Slide 6: Transaction Rationale (Cont'd)

   TELEFÓNICA Transaction Rationale (Cont’d) 3 NPV of total synergies of at least €4.7bn, net of integration costs Value Crystallization ? Net savings from year one through ? Annual run-rate of operating and revenue synergies of at least €450 m; c70% of Significant run-rate synergies by year 2017 Syner

7. Slide 7: Leading Integrated Telco Operator in Brazil

   TELEFÓNICA 2 Leading Integrated Telco Operator in Brazil Total accesses – 1Q 2014 (000’s) Source: Company filings, Anatel and Teleco; Converted to € using average 2013 R$/€ FX rate 1. Considers retail and corporate segments; Considers América Móvil Brazil only; Considers Oi standalone Investor Relat

8. Slide 8: Leading Integrated Telco Operator in Brazil (cont'd)

   TELEFÓNICA 2 Leading Integrated Telco Operator in Brazil (cont’d) Source: Company filings, Anatel and Teleco; Converted to € using average 2013 R$/€ FX rate 1. Considers retail and corporate segments; Considers América Móvil Brazil only; Considers Oi standalone Investor Relations Telefónica, S.A.

9. Slide 9: Identified Synergies of at Least €4.7bn NPV

   TELEFÓNICA 3 Identified Synergies of at Least €4.7bn NPV Telefónica Brasil to leverage GVT’s extensive metro fiber network to significantly improve its mobile backhaul outside Network of Sao Paulo (material increase in sites connected via fiber) Combination Telefónica Brasil and GVT to consolidate a

10. Slide 10: Synergies Value of at Least €4.7bn NPV

    TELEFÓNICA 3 Synergies Value of at Least €4.7bn NPV €bn % of Total 28% 21% 20% 31% Synergies Network Other Direct SG&A Opex Capex Operating Revenue Total Financial, Total costs Synergies Synergies Synergies Synergies Operating Fiscal & Other Synergies and Revenue Synergies Synergies NPV at least €4.

11. Slide 11: Attractive Transaction for Telefónica Brazil Shareholders

    TELEFÓNICA 4 Attractive Transaction for Telefónica Brazil Shareholders Pro forma Financial Impact on Telefónica Brazil Source: Broker consensus, not adjusted for differences in accounting policies 1. Defined as OIBDA-Capex 2. 2015 (post includes run rate synergies) Investor Relations Telefónica, S.A

12. Slide 12: Attractive Transaction for Telefónica Shareholders

    TELEFÓNICA 5 Attractive Transaction for Telefónica Shareholders Pro forma Financial Impact on Telefónica Group Revenues OIBDA TEF Stand-alone GVT incremental growth Synergies incremental growth Source: Broker consensus 1. 1. Defined as OIBDA-Capex FCF Accretion from year 1 of full operation(3) 2. 20

13. Slide 13: Transaction Entirely Financed with Equity

    TELEFÓNICA 6 Transaction Entirely Financed with Equity Transaction entirely financed with equity at both Telefónica and Telefónica Brasil to strengthen Telefónica’s capital structure The cash consideration to Vivendi will be fully financed through a capital Telefónica Cash increase at Telefónica Bra

14. Slide 14: Expected Transaction Timetable

    TELEFÓNICA Expected Transaction Timetable Expected Timeline 28 August 2014 Nov 2014 Mid 2015 Signing of Exclusivity Signing of Definitive Telefónica Brasil EGM Agreement Agreements Key Milestones Sep/Oct 2014 H2 2014 Mid 2015 Mid 2015 French workers’ Telefónica Brasil EGM Regulatory approvals Closin

15. Slide 15: Closing Remarks: The Perfect Fit

    TELEFÓNICA Closing Remarks: The Perfect Fit A natural strategic move in a core market to improve market positioning and growth profile while improving financial flexibility In each of its top 3 markets (Spain, Brazil, Germany) Telefónica to be the leader in subscribers and network quality Creating a

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