Telefonica Sa · BME:TEF
Telefonica Sa — Telefonica S A — Investor Day (October 2007)
44 slides from Telefonica Sa's investor day presentation, Oct 11, 2007
Slide 1: Sixth Investor Conference: Telefónica España: A Winning Mindset
Sixth Investor Conference Telefonica Espafia: A Winning Mindset ‘Antonio Vara Baptista lendon,Cetober 13% 2007 6 investor
Slide 2: Disclaimer
Disclaimer ‘This presentation contains statements that constitute forward looking statements in its general meaning and within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this document and include statements rega
Slide 3: Telefónica España agenda
Telefénica Espaiia ... [2 A growth environment 3] The best starting position t4) An ambitious strategy that will extend our leadership
Slide 4: Strong execution: consistent delivery above expectations
Strong execution: consistent delivery above expectations 2004 REVENUE GROWTH ‘OIBDA GROWTH* +6.1% +2.4% +5.0% “There are strong signs that competitive and pricing dynamics inthe Spanish Broadband market areabout to deteriorate and erode REVENUE GROWTH [OIBDAMARGIN. | >+9.0% 49.3% “In our view, DSL p
Slide 5: Strong execution: consistent delivery above expectations
Strong execution: consistent delivery above expecta’ REVENUE GROWTH ‘OIBDA GROWTH* jaaom 148% ‘in our view it could be challenging for the company to deliver on such upbeat numbers” iN “We expect increasing competition in broadband to eventually cause a slowing mieof revenue grovth ot Td et ns 2005
Slide 6: Strong execution: consistent delivery above expectations
‘ent delivery above expecta’ Strong execution: con: “| arn skeptical about Telefonica’s growth forecast | can see that its main market is suffering continued price erosions” “Ourestimates “pick up im ULL ae tas declines at TE CEC NGG could jeopardize | DP evenve crows a ial guidance” ~ 2 ML OBDAMARG
Slide 7: Progressively, we get some credit for our results and the gap narrows
Progressively, we get some credit for our results and the gap narrows PERCENT Revenue guidance 05-09E Revenue guidance 05-09E (vay-05) (onay-06) Analyst #4 ‘Analyst for CAGR as for CAGR 05-09E aq 05-09E May.06 Sqp.06 Dec-06 Mar-07 Jun-07 Sep-07 May06 Sqp.06 Dec-06 Maro? Jun07 Sepo7 "2907 should defi
Slide 8: This year, we are even more confident about our future performance
This year, we are even more confident about our future performance REVENUE OIBDA REVENUE OIEDA 40.5% /+2.0% — +3.0%/+6.0% +1.59%/+3.0% +1.596/+4.0% | Wiles | 20850% 40.0% /+2.0% WE CONTINUE TO INCREASE OUR LEVEL OF REVENUE OIBDA AMBITION +2,0%/+3.5% +3,0%/+6.0% | bore 2005 figures or. pare Wine ince
Slide 9: Telefónica España agenda
Telefénica Espaiia ... e A track record of strong delivery 3] The best starting position t4) An ambitious strategy that will extend our leadership
Slide 10: Our market offers significant growth opportunities
Our market offers significant growth opportuni 29.8 Adjacent Businesses Retail Fixed Communications Retail Mobile Communications FY2006 FY2010E ‘Target marks: telephony, broadband, Pay, target Tareas indudesCPO outsourcing, LAN and Workstations management, Security, Contact Cantars Relationship Solu
Slide 11: We are leaders in a healthy competitive environment
environment and we are leaders in a healthy competi Rest of — BB — Mobile —= Pay Tv players 60% © Telefonica 55% 50% a 45% 6 10% vodafone eo 0% ‘ i Q206 9306 04.06 Q1o7 Q207 fetal evenvsfrom fasdand mobile telephony Inemet, Fay and erie Corporate Communications MNCs Newly Bayes Shute chi compat pres
Slide 12: No regulatory free ride
No regulatory free ride © Decreasing roaming prices identical to other European markets, in aroaming-in country = Mobile termination regime equivalent to European countries: €7 cents/min by 209 © Obligation to identify new and 1g Prepaid users in the near future © Capacity based fixed line interconn
Slide 13: Our regulatory environment going forward is now more predictable
Our regulatory environment going forward is now more predictable Markets definition (2009) © Access to FITX Networks Wireline monthly fee (2009) Bp rus rercnerrent ole) Mobile termination rates framework (2003) = DVBH International roaming voice prices (2010) 6 inyestor 23 Telefonica
Slide 14: Spain will maintain a positive macro environment
Spain will m ive macro environment Spain _Euro zone © Increasing demand for _ @@ telecommunication services © New users * Private consumption: +€666 E> E> © Room to increase © Population: +4.5m people > &> adoption rates © Business opportunity beyond connectivity Source: "Consensus Forecast” for GOP
Slide 15: Telefónica España agenda
Telefénica Espaiia ... e A track record of strong delivery [2 A growth environment t4) An ambitious strategy that will extend our leadership a5 Felefinica
Slide 16: We are in the best starting position to capture this growth
We are in the best starting position to capture this growth Felefonica
Slide 17: The broadest and deepest customer relationships
The broadest and deepest customer relationships > 45 million accesses = 535% exclusivity in Households = 50% exclusivity in SMEs and SOHO = 970% exclusivityin Corporate Fired Broadband 59% EB : Share of revenues share of accesses ‘Source: CHT, Telefnica, companies press rleacas Mobile 50% | 46% Shar
Slide 18: We have the most satisfied customers
We have the most satisfied customers Global satisfaction index (Q2 07) Residential; TV and Broadband custorners 6.99 a 6.85 ‘Felefniea § Global satisfaction index (Q2 07) 2. Sourez: Asociacon Internautasfeb-07,Telfnicas CF 18 Felefinica
Slide 19: The strongest commercial reach with outstanding growth opportunities
The strongest commercial reach with outstanding growth opportunities »- 24 million customers/month ~» more than twice the number of exclusive points than any other compet “ 27,300 points of sale Po SECU MCE ... >80,000 interactions/month Cee | ...23.5 million contacts/month Onlinechannels 6 inyestor
Slide 20: We are a reference in efficiency
We area reference in efficiency Employees (wireline) pec-06 == & Increase in Accesses per Employee (wireline) (Decn7e/Decc2) +70% ‘Felefonica - +40% Accesses/equivalent Accesses/emplayee employee? 99,902 Source: ML European Broadband MatrixQ207, Telefénica * Incucescwn workfors and autsourcsd employ
Slide 21: Telefónica España agenda
Telefénica Espaiia ... e A track record of strong delivery [2 A growth environment 3] The best starting position a1 Tilefinic
Slide 22: Our winning mindset is our key value driver
Our winning mindset is our key value driver Lead the mobile space More More customers revenues 5 / Lead the broadband business customer_/ Controlled Lead the growth in entertainment churn Lead the Corporate business 6 inyestor 2 Felefonica
Slide 23: We will lead the rapid growth of the mobile data business
We will lead the rapid growth of the mobile data business Mobile BE/laptops (market) 270% a 7 cman’ Data ARPU/ARPU (fi = New services: = Applications on the move = Access to leading services from mabile = Speed and ease of use 3Groll-out (i = 80% population coverage with HSDPA by 20108 _ 20%-25% = |
Slide 24: We will keep enhancing our services
We will keep enhan = Mecommerce = Betting... ig our services Enhanced messaging (5MS 2.0) Fulfilling group communication and mobile-PC communication needs Easing browsing systern New partnerships (GYM) ] Open access navi Extending mail services to residential business J Enhanced handset navigation c
Slide 25: Mobile business: customer acquisition and value
‘e business Mobile penetration ‘Mobile customers Milions ee ass = 204% 07% 120% 7 | Decos Juno? Decode = Proactive custorner acquisition focused on value = Maintain a “Bestin class” churn rate = Expanding MoU through innovative pricing schemes leveraging community effect (A Outgoing MOU (20741208) i
Slide 26: Our actions are yielding good results
Our actions are yielding good results | Postpaid netadds. Jun.o7/Jun.06. thoussnds | 8.6% 1,526 408 390 1,356 349 355 1.5% 472 106 0208 0306 G46 Q107 Q207 ee Increase in data usage in 207: Gos Geos Gos Gio? ora, x7 year-on-year ia See 6 investor 26 Felefinica
Slide 27: New services and enhanced functionality
New services and enhanced functiona! = Blackberry service for 5€/month = “Mail Express” for 2€/month = Ast player in the world to launch: = Smartphone Blackberry 8120: convergence in access (WiFi/GPRS} and services (multimedia applications and e- mail) BlackBerry Unite: downloads of content from a B
Slide 28: Increased demand for broadband
Increased demand for broadband = ates EERIE 7 bo: . 15 5 Ty Sora | | telecrcry en ee : mi’ 20 mops Gala) #22 p= ' eS ee) eal ny ee o-7 mbps f (EBSA! 26 ops Total communications traffic in Spain* Thousands Terabytes 18,000 7000 2006 20108 Pelee 6 oyster . Gala
Slide 29: We will lead the massive adoption of broadband connectivity
We will lead the massive adoption of broadband connectivity services BE Market Million accesses Decas Dec10e = From 42% to 75% BB penetration in Retail Be households with fixed access Marlet share Wireline BB Coverage % loops nex = Selective deployment by zane 80 ee | oe “ | Decos DecI9E Dacd6 DacIO
Slide 30: We are using micro marketing to deploy fiber
We are using micro marketing to deploy fiber
Slide 31: Entertainment: A new digital TV
Entertainment: A new digital TV in 04 07 Enhanced functionalities and new content = Access to most of the content of the 4 leading TV channels in Spain broadcasted during the last week = Capability to pause live TV channels Rewind TV Instant recorder Personal recorder From 120 to 160 channels New th
Slide 32: Entertainment: the consumer as the declared protagonist
Entertainment: the consumer as the de Entertainment value proposition To be developed * Past TV * Shit TV * PVR = Rewind TV HDTV = Multiroom Advanced EPG Advanced PVR + Real video on demand + Most flexible Pay TVotfer in the market = Imagenio on the move + Advanced T- commerce * Other advanced *inst
Slide 33: This will support the growth of the Pay TV market
This will support the growth of the Pay TV market Pay TV Market growth i ee Areas with Imagenio coverage Juno7éunos = Commercialization in bundles = Continuous learning ta improve custamer experience Imagenio customers jwitions ‘Additional growth | potgtal seraginsrew unctionaliies 6 yest 34 Felefin
Slide 34: We will continue to successfully execute our strategy in SMEs
We will continue to successfully execute our strategy in SMEs with ‘Respuesta Empresarios’ and ‘ Puestos de Trabajo’ mn responds fo the market demands Car yale prone Number of Workstations 7: ‘All your ITC needs under a monthly fee: advice, sale, installation, maintenance, management and renewal’ cr
Slide 35: Integrated approach to Corporate clients
We will leverage our unique po: approach to Corporate clients ion to offer an integrated Public Sector = Unique commercial teams © Unified custorner care, support and Financial institutions engineering, Industry, Distribution , & Services = Integrated services to enhance custorners' productivity and
Slide 36: All this will further enhance our market leadership
All this will further enhance our market leadershi| Fixed BB penetration per household with fixed line 42% mmm 75% Mobile BB penetration per laptop 20% mmm > 70% 3G handsets over customer base 5% > 70% Loops 100Mb - eee 25% HSDPA population coverage 25% meme 80% 6 inyestor ” Telefonica
Slide 37: We will transform our revenue profile
ally transform our revenue profile Fixed and mobile data Mobile and fixed voice and access Wholesale and other’ Fy2002 Fy2006 FY2010E * Induces Wholesale Interapnnsction,concolidation adjustmantsand others (Group companies handsets thers) 6 yest 38 Felefinica
Slide 38: We will also increase our efficiency and effectiveness
We will also increase our efficiency and effectiveness Make the best use of our resources Lead the mobile space : Leverage Lead the broadband business ieeetion Lead the growth in entertainment New operating model Lead the Corporate business 6 inyestor 33 Telefinica
Slide 39: We are leveraging integration to better serve our customers
We are leveraging integration to better serve our customers and to be more efficient... @ Full integration of key functions: single management team v1 Full integration of IT and operations to capture synergies and develop common platforms under a new operating model o Full integration in Corporate b
Slide 40: We are developing a new operating model
We are developing a new opera ~€130 million savings from network upgrade (comman ig model = Externalize non- " Put customer core activities servers, single IP network, shared needs first mobile infrastructure, etc.) = Capture fixed- J ™ More mobile integration resources in synergies ‘ Ue aAinieraal
Slide 41: We are transforming our networks and IT to further enhance efficiency
We are transforming our networks and IT to further enhance efficiency and meet customer needs = Access networktransformation — = €1.0bn in FTTx — €1.3bn in UMTS/HSXPA 5-5 7bn ae = Transformation of aggregation, transport ae & IP networks = Ete. = Customer premises equipment = Provisioning & customer
Slide 42: This will lead us to a unique growth profile
This will lead us to a unique growth profile (€ in millions) FY2006 (2) FY2006 (Adj.) ») CAGR 06-108 (:) | oma 8,647 8,634 +3.0%/+6.0% pore | 2,293 2,293 €9.2-9.7bn Cum (07E-10E) 9) Base 2006 guresforT. sparta Wirelineincudesic manthsof Iberbanda 4) Intermsof guidance cleulation C180 exluds other xc
Slide 43: Telefónica: a unique incumbent
Telefonica: a unique incumbent ON MARKET LEADERSHIP. ON GROWTH WITH A WINNING MINDSET
Slide 44: 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: October 11 th , 2007 By: /s/ Santiago Fernández Valbuena Name: Santiago Fernánde