Telefonica S A : 2020 January - March Presentation

Results

January - March

2020

Disclaimer

This document and any related conference call or webcast (including any related Q&A session) may contain forward-looking statements and information (hereinafter, the "Statements") relating to the Telefónica Group (hereinafter, the "Company" or "Telefónica") or otherwise. These Statements may include financial forecasts and estimates or statements regarding plans, objectives and expectations regarding matters such as the customer base and its evolution, growth of the different business lines and of the global business, market share, possible acquisitions, divestitures or other transactions, the Company's results and other aspects related to the activity and situation of the Company.

The Statements can be identified, in certain cases, through the use of words such as "forecast", "expectation", "anticipation", "aspiration", "purpose", "belief" "may", "will", "would", "could", "plan", "project" or similar expressions or variations of such expressions. These Statements reflect the current views of Telefónica with respect to future events, do not represent, by their own nature, any guarantee of future fulfilment, and are subject to risks and uncertainties that could cause the final developments and results to materially differ from those expressed or implied by such Statements. These risks and uncertainties include those identified in the documents containing more comprehensive information filed by Telefónica before the different supervisory authorities of the securities markets in which its shares are listed and, in particular, the Spanish National Securities Market Commission (CNMV). They also include risks relating to the effect of the COVID-19 pandemic on Telefónica's business, financial condition, results of operations and/or cash flows.

Except as required by applicable law, Telefónica does not assume any obligation to publicly update the Statements to adapt them to events or circumstances taking place after the date hereof, including changes in the Company's business, changes in its business development strategy or any other circumstances.

This document and any related conference call or webcast (including any related Q&A session) may contain summarized, non-audited or non-GAAP financial information. The information contained herein and therein should therefore be considered as a whole and in conjunction with all the public information regarding the Company available, including any other documents released by the Company that may contain more detailed information. Information related to Alternative Performance Measures (APM) used in this presentation are included in Telefónica's consolidated financial statements and consolidated management report for the year 2019 submitted to the CNMV, in Note 2, page 19 of the pdf filed. Recipients of this document are invited to read it.

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1

Creating a leading

communications provider in

the UK

Mr. José María Álvarez-Pallete

Chairman & CEO

Transaction Summary

• Telefónica and Liberty Global have agreed to combine their telecom assets in the UK(Telefónica UK and Virgin Media UK)
• • 50/50 JV creates UK leading convergent player with complementary strengths in mobile, broadband, video and B2B
  • Stronger, larger, more diversified; combined £11.0bn revs. £3.6bn(1)OIBDA and £1.5bn OIBDA-CapEx(2)(pre-synergies)
  • Telefonica UK valued at 7.8x OIBDA 2019; Virgin Media UK at 9.3x
  • Enterprise Value of the combined entity estimated at c.£38bn, including synergies. £12.7bn EV for TUK, £18.7bn for

Key Terms

VMED UK

• • Pro forma combined entity will have 46.5m(3)accesses, of which, 32.6m correspond to mobile, 5.3m to broadband, 4.9m to fixed voice and 3.7m to Pay-TV
• Liberty Global will make a cash payment to Telefónica of £2.5bn to equalize ownership in the JV
• New joint venture will target leverage of4.0-5.0x OIBDA
• • Telefónica expected to receive£5.5-5.8bn of proceeds in total from the transaction (post dividend recap)

Value-

creation

Rationale

Expected Key

Dates

• Complementary fit creates leading UK integrated player, significantcross-selling opportunities for B2B, B2C and wholesale
• • Convergent capabilities' platform withbest-in-class infrastructure and a technological advantage over peers
• Transaction to unlock significant value, with synergies of c.£6.25bn NPV(after integration costs)
• • Sizeable and highly visible synergies and efficienciesrun-rate of c.£540m
• Transaction to create significant value for Telefónica shareholders
• • FCF accretive(4)for Telefonica from year 1 and expected to reduce Telefónica's net debt by £5.5-5.8bn(5)
  • Credit positive; improves competitive positioning and business sustainability, reduces net debt at Telefonica
• Transaction is subject to satisfactory approvals from relevant authorities and expected to close inmid-2021

(1) Pre-IFRS 16; (2) OpCF = OIBDA-Capex,ex-spectrum Capex; (3) Figures as of 2019, ex-M2M subscribers; (4) Pro-Formarun-rate synergies basis; (5) Including leases.

2

Transaction Structure and Key Terms

Key Terms

•Based on the enterprise value of each business, and

after deducting Virgin Media UK's £11.3bn net debt,

Liberty Global will make a cash payment to

Telefónica of £2.5bn to equalize JV ownership

‒Telefónica UK contributed to the JV on a debt

and cash free basis

‒Virgin Media's Irish business to be carved-out

ahead of completion

‒Telefonica to contribute its 50% stake in CTIL

•The JV will target a leverage ratio of 4.0-5.0x OIBDA

‒JV expected to raise new debt to reach its

target leverage ratio; proceeds to be

distributed equally between Telefónica and

Liberty Global

‒The deal will not trigger a change of control

under Virgin Media's existing third party debt

•Following completion of the transaction, neither

Telefónica nor Liberty Global will consolidate the JV

•Equal governance rights in line with 50-50

Pre-			Telefónica		Liberty Global
	100%			100%
Transaction
		Pre-Transaction Structure
Structure
		Telefónica UK(1)		Virgin Media UK(2)

						£2.5bn
			Telefónica		Equalization	Liberty Global
				Payment to
						Telefónica
		50%			50%
		Enterprise Value: £12.7bn
Intermediate				Enterprise Value: £18.7bn
			EV/OIBDA 2019: 7.8x		EV/EBITDA 2019: 9.3x
Structure				Pre-Transaction Structure
			Proceeds from			Proceeds from
				financing distributed	financing distributed
				equally			equally
			New debt to
		targetleverage of	Telefónica UK(1)	+ Virgin Media UK(2)
		4.0x-5.0x OIBDA

Telefónica		Liberty Global
50%	50%

shareholding

Structure at

Pre-Transaction Structure

•Telefónica and Liberty Global have agreed to provide

a suite of services to the JV post completion

ClosingTelefónica UK(1)

+

Virgin Media UK(2)

(1) Transaction perimeter includes 50% stake in CTIL; (2) Transaction perimeter excludes Virgin Media's operation in Ireland.

3

Stronger, larger and more sustainable player

Accesses	46,5	46,3
			20,2
				22,7	11,6	9,0
(m; 2019)
				(7)

	13,5		11,3	(1)
		9,4
					5,5	2,4
Revenue							1,6
(£bn; 2019)			(2)		(4)	(3)	(5)	(6)

Margin	31%	37%	26%	21%	30%	12%
(%)

OIBDA Pre-IFRS 16	4,2	4,1	(1)	2,5	1,2
			0,7	0,2
(£bn; 2019)
(2)		(4)	(3)	(5)	(6)

	Margin	19%	19%	21%(8)	19%	9%	12%	6%
	(%)
OIBDA-CapEx Pre-
		2,6			(1)
					2,1	1,8	0,5	0,3
IFRS 16 (£bn;						0,1
2019)				(2)			(4)	(3)	(5)	(6)

EUR/GBP converted at 0.877; HK/GBP converted at 0.100; USD/GBP converted at 0.808. Source: Companies Information, Analysys Mason, Ampere Analysis, GlobalCom. Excluding M2M subscribers
and including MVNO subscribers. (1) Pro-forma of run-rate synergies; (2) Financials for BT are LTM Dec-19A, excluding Global Services and Openreach; (3) Financials for Vodafone are LTM Dec-19A
(Vodafone reports regional results half-yearly); (4) Sky UK financials based on 2019E broker estimates; (5) 3 UK financials are 2019A (reported in December 2019); (6) Talk Talk financials are 2019A	4
statutory results (reported in March 2019); (7) Excluding Virgin Media MVNO subscribers; (8) Excluding Project Lightning.

Compelling and differentiated value proposition

• Industry leader in NPS
• Sector leading loyalty

Cyber

•	IoT with Big Data •	Cloud
•	Cybersecurity	•	Advertising

• Wide MVNO offering
• Growing B2B to leading companies

Customer

centric mobile proposition

Complete

portfolio of

digital

solutions

• Broadband speeds up to 1GBps by 2021

Fastest

broadband

Rich

content offering

	•Only UK operator offering Netflix,
Premium brands	Amazon & all sports

	Leading
Attractive	technology
•State-of-the art platforms and
value	product offering
proposition

and business

sectors

5

National Connectivity Champion

Telefonica UK network: Highly competitive and		Virgin Media UK network: High performance & Ultrafast
cost-effective 5G ready mobile infrastructure		Today and Future proof for tomorrow

• 99% population 4G coverageand consistently recognizedasmost reliable andbest coverage network
• Access to thelargest tower portfolioin the UK with 15k sitesthrough its 50% stake in CTIL
• Successful long term relationship with Vodafoneextended to 5G &Industry-ledsingle rural network progressing
• O2 5G already live in 30 placesand will reach 50 towns and cities by summer 2020
• Strong holding of <1GHz frequency,resulting in bestin-doorcoverage; ongoing network optimizationwithspectrum refarming

• 100% of VM UK homes DOCSIS 3.1hardware ready and100% 1Gbps coverage in 2021
• 15 million homes passedof which 14.3 million are HFC and 0.7 million are FTTP/RFOG
• Access network100% ducted in owned ducts, 0% aerial, creating flexibility in upgrade path to future coaxial or fibre
• 8m km of fibre strandsof which the access network is 7.3m km
• Analogue TV and FM over cable radio services decommission complete

• Unique infrastructure in Europe to seize new opportunities arising fromFixed-Mobile convergence
• • No network monetization to date - retains ownership of its mobile and fixed infrastructure
  • • Clear market leader in UBB (FTTP, HFC)

6

Identified synergies of c.£6.25 bn NPV, with 80% of full potential related to OpEx and CapEx synergies

Identified synergies of c.£6.25bn(1)		Run-rate operating and revenue synergies of c.£540m

	£6.25bn NPV
				Cash positive since	£540m
		•	Cross-selling and bundling opportunities	2023		run-rate
Revenue	c.20%
	for residential and businesses customers
CapEx		•				100% by
c.15%	Combination of regional and national			2026
			network infrastructures and IT systems			>75% within
					42 months
		•			>50% within 30
		Migration of Virgin Media mobile traffic		months
			to Telefonica UK's network
OpEx	c.65%	•			Proven track record delivering synergies
		Reduced marketing expenditures(2)
		•	Structure rightsizing	•Both parties havecompleted several acquisitions over the last
				years with substantial value creation achieved through synergies

	SYN NPV	•	Extensive experience with respect tobuilding business cases,
			leading integration phases and realizing identified synergies
▪	c.80% of full potential related to cost and capex synergies	•
Proven track-record of achieving and exceeding initial targets
▪	Financial / fiscal synergies not considered

(1) Net of integration costs; (2) Synergies Plan not assumes single brand strategy, which will be evaluated in the future.

7

Transaction fully consistent with TEF's strategy

Creates a leading and fully integrated champion in one of the✓

4 core markets for TEF

		Significant value creation through synergies	✓
Transaction
consistent with
TEF's global			✓
strategy		Secures superior next generation fixed infrastructure
		to drive customer experience, complementing TUK's
		mobile network

Stronger, more valuable and sustainable platform with high✓dividends to continue reducing TEF's net debt

Partnering

with VMED UK

is the most compelling option for Telefonica UK and best strategic path forward

8

Governance, Exit and Timetable

Governance /

Shareholders

Agreement

• TheJV Board of Directors will consist of eight members, four from each of Liberty Global and Telefonica
• Certain matters will require unanimous approval of both companies' representatives
• The position ofChairman of the JV will be held for alternating 24 month periods by a Telefónica or Liberty Global appointed director. The Chairman has no casting vote
• Key management positionswill be announced prior to completion of the transaction

Exit

•

•

•

3 year lock-up

Each shareholder has the right to initiate an Initial Public Offering of the JV after the third anniversary of closing, with the opportunity for the other shareholder to sell shares in the IPO on a pro-rata basis

The parties have agreed restrictions on other transfers of interests in the JV until the fifth anniversary of closing

• After the fifth anniversary, each shareholder will be able to initiate a sale of the entire JV to a third party, subject to a right of first offer in favour of the other shareholder

Expected

Transaction

Timetable (1)

•

•

•

•

Transaction notifiable to the European Commission (EC)

The transaction may be referred back and require clearance by the Competition and Markets Authority (CMA)

If approvedat Phase 1, closing would take placein Q4 2020 - Q3 2021

If approved atPhase 2, closing would take placeinQ2 2021 - Q1 2022

(1) External counsel estimation.

9

Closing Remarks

• Creating aleading integrated player with significant cross-selling opportunities in the second largest European market,improving market positioning, group profile andbusiness sustainability
• Combining Telefonica UK'sleading mobile operations and Virgin Media UK'sextensive superfast broadband network to benefit consumers, businesses and the public sector through investment to accelerate digital infrastructure deployment and improving customer experience
• Significantvalue creation: total cost, capex and revenue synergies with an estimated NPV of c.£6.25bn(after integration costs), additional financial / fiscal synergies not considered

•

•

M&A processes in 2 (UK and Brazil) out of 4 core markets, progressing on the New Telefonica strategy

Substantial value creation for Telefónica shareholders

• Stronger convergedchallenger in the UK market, leading in customers and profitability
• Improvinggrowth profile and market positioning
• FCF accretive(1)from the outset
• Transaction expected to reduce Telefonica'snet debtby £5.5-5.8bn(2)
• Credit positiveimproving competitive positioning and long term business sustainability
• 1. On aPro-Formarun-rate synergies basis; (2) Including leases.

10

COVID 19 implications

Q1 20 highlights

Mr. José María Álvarez-Pallete Chairman & CEO

Telecoms proving essential; responding all stakeholders

Connectivity is critical

Strengthened confidence on our resilience

• Reliable, stable and secure networks

Guaranteed

continuity of	-+40% bandwith demand; +50%
mobile data traffic; …
service;
resources built	->€90Bn CapEx since 2012 pays off
upon years	•Ring-fence cash secure access to
	liquidity

Sustainable model for the long term; experience in crisis situations

• Increased Demand for connectivity& digitalisation(B2C+B2B)
• Mobility work & securitysolutions rising demand
• CapEx flexibility(~50% of annual OIBDA)

Telefónica part of the solution…

Caring for	•	Our people = our greatest asset
employees	•	95% working from home;

• Health & Safety come first; ahead of any commercial initiative
• Services & capabilitiestoPublic

Responding	Admin.(big data, mobility data)
to society	•Wiring and connecting field hospitals
needs

• Donating sanitary equipment;
• Free educational and training content

We care

about our customers

Caring about our vendors

• doing good
• • Increasing data allowances, broadband speeds
  • Enriching content bundles, children apps available
  • Shortened payments to key suppliers
  • Protect health or providers
  • Help vendors(problems of liquidity)

Evidence-based mission: "Making our world more human by connecting lives"

11

Doing well; not immune, but relatively well protected

Potential hit…

• Managing impacts;yet uncharted territory
• Pressure on B2B revs(SMEs; corporates with higher exposure to
  COVID19; sales funnel, com. activity…)
• Pressure on B2C revs(roaming, prepaid, lower traffic to stores)
• Potential increase inbad debt
• Potentialsupply chain/network/handset inventorydisruptions

…but relatively well protected

• Demand for telcos on the rise;potential for furthermonetization
• Stable L/T revenue base:flat rate contracts, L/T customers
• High quality,future-proofasset base(e.g. Fiber networks)
• OIBDA better covered than top line(costs relief, lower churn…)
• Social goodwill earned(close to society needs & all stakeholders)

	•	Upselling of digital services,specially Cybersecurity and Cloud	We need to
	•Higher demand in some services(TV consumption, content fiction; VoD, higher BB speeds)	adapt to new
	reality
FCF Buffers	•Acceleratedigitalization; strengthen on-line channels; transform network/ IT
from top to
bottom	•	Decrease in churn, commercial costs, advertising
	•	Discretionary CapEx management = OIBDA-CapEx shelter	Levers to
	secure FCF

•Delay of spectrum auctions (Spain, UK, Brazil)

12

2022 Guidance and 2020 €0.4 dividend reiterated

2022 Guidance Confirmed

Financial Targets	Guidance 2019-2022E
(organic ex-contribution to growth from
ARG)		Despite current uncertainty;
Revenues	Revenue growth	confidence in future demand
growth for connectivity,
		digital services…
(OIBDA-CapEx)/ Revenues	+2 p.p. by 2022

2020 Stable &Sustainable Dividend

2020 Dividend	€0.40/Share
Interim Dec-20	€0.20/sh. (Voluntary Scrip)
Final Jun-21	€0.20/sh.

2020 calendar payments

Jun/20 €0.20/sh. (Voluntary Scrip)

Dec/20 €0.20/sh. (Voluntary Scrip)

Confidence in business

model flexibility to weather

current environment,

coupled with solid liquidity position & business resiliency

2020 Guidance Withdrawn;significant changes in context & high level of uncertainty

Closely monitoring
business evolution;	2020 current outlook: slightly
managing	negative to flat OIBDA-CapEx
Opex+CapEx

13

Q1 20 Results

Mr. Ángel Vilá

COO

Financial summary

	Q1 20
	Reported	Organic	Organic y-o-y
€ in millions	aggregated 4
Reported	y-o-y
	y-o-y	core markets

Revenues

OIBDA

OIBDA margin

OIBDA-CapEx

(ex-spectrum)

OIBDA-CapEx / Revenues

(ex-spectrum)

Net Income

EPS (€)

FCF

(inc. leases principal payments)

Net Financial Debt

ex-leases

11,366	(5.1%)	(1.3%)	0.1%
3,760	(11.8%)	(1.7%)	0.8%
33.1%	(2.5 p.p.)	(0.1 p.p.)	0.2 p.p.
2,275	(16.6%)	(3.8%)	3.2%
20.0%	(2.8 p.p.)	(0.5 p.p.)	0.7 p.p.

406 (56.2%)

0.06 (62.0%)

233 (83.4%)

38,223 (5.3%)

65% BB & SoC/Service Revs; +2 p.p.

FX impact & Cap gains Q1 19

Maintaining leading profitability

€0.11 Underlying EPS

Q1 seasonal effect; Q1 19 tax refund €702m

Reduction of €14Bn since Jun-16

Q1 COVID 19 impacts;

Revenues (-€77m); OIBDA (-€33m); CapEx (-€17m)

14

Spain |The most reliable and advanced telco in Europe

Engaged customer base

y-o-y
+ 7 p.p. + 16 p.p. +4 p.p.	+ 1 p.p. flat	+2 p.p.
73%		94%
65%	89%
84%
61%

o/FBBo/wholesale UBB		FBB Contract TV
Fibre base		Convergent penetration
	(consumer)

• Churn improvedy-o-y

✓No TV lock in period

Leading content platform

Proof-tested network

• Outstanding delivery with record traffic(both retail & wholesale)
• Critical connectivity on top quality assets
• • Largest FTTH network & digitalisation
• Effective remote activity
• • Best in class Cloud, Security, Big Data
  • >50% activity in online/phone channel
• Value added to the offer for free
• • MBB, Premium TV (even tonon-customers)

Key financials

Sound (OIBDA-CapEx)/Revs.; cash in focus

y-o-y organic

y-o-y organic

39,8%

+ 0.9 p.p.

(1.6%)

(1.2%)

(1.8%)

+1.4%

28.6%

3.078

3.014

1.225

11,2%

881

Revenue

Service Rev

OIBDA

OpCF

OIBDA/Revs. CapEx/Revs. (OIBDA-CapEx)/

Revs.

Limited impact from COVID-19 so far

Prudent OpEx/CapEx policy

Proven success of transformation strategy

5G auction delayed

15

Germany |Robust start to year

Good commercial performance

Accesses (m, y-o-y)

+2%					O2contract ARPU
	+6%
					+0.4%
43.6				+12%
22.7			O2contract churn

			1.7
				Stable at
Total mobile						1.3%
	Mobile		VDSL
	contract

Gaining momentum across all revenue lines

y-o-y organic							Q4			Q1
										6,0%
3,8%
			3,4%
0,2%						2,0%
			(0,1%)
	Revenues	Mobile business	Fixed revenues

Solid trading

• Good contract momentumof O2brand; blended ARPU stable and contract churn -0.1 p.p. y-o-y
• Sustained VDSL demand: +36k net adds; 76% o/FBB
• Resilient networkcoping with COVID-19 traffic increase
• Supporting employees, customers and the wider society
• 4G/LTE steady progress;preparing 5G deployment

Improving profitability

Q4 Q1

12.9%

1.5%

(1.2%)

OIBDAOIBDA-CapEx

16

UK |Once again outperforming the market

Continued contract customer growth

Accesses (m; y-o-y)
+6%	+1%	+47%	+6%
34.8
	12.3		8.8
		5.6
Total mobile	Retail mobile	M2M	MVNO

15th consecutive quarter of y-o-ytop-line growth

y-o-y organic

Q1

1,5%

1,1%

Another solid quarter

• Largest UK network carrier
• Continued revenue and OIBDA growth
• Market leading loyalty with 1% contract churn
• Exclusive agreement for mobile distribution of Disney+
• Continued investment momentum in network

COVID -19 - keeping communities connected

• Network voice and data resilience
• Industry cooperation and ongoing dialog w/ government
• Existing processes supporting vulnerable customers
• Free access to NHS and 22 additional websites
• Connectivity provision for Nightingale hospitals

RevenuesOIBDA

17

Brazil |Predictable & resilient FCF generation

Strengthened market leadership

Market Share (Feb-20)

39,0%22,1%

33,0%20,8%

Mobile

Contract

FBB

FBB>12 Mbps

Exposed to most valuable segments

Accesses Penetration (m; y-o-y)

Resilient Business

• Better fixed and mobile networkin the market
• Low prepaid impact & handset exposure(~10% & ~5% of Total Revs)
• Highest contract penetrationin the market
• RobustOIBDA-Capex/Revs(22.5% 2019; 27.7% Q1)
• Solid FCF generation

Sustainable business model

Q1 y-o-y organic

+1 p.p.		+12 p.p

53%

45%

• Accelerating Fiber deployment to 11.7m homes passed
• New alternative FTTH expansion models to boost Fiber connections

7,1%

3,4%

Contract/	FTTH/	(1,4%)
Total Mobile	FBB	Revenues	OIBDA	OIBDA-CapEx

18

Telxius |Growth and margin; continuing tower expansion

Sites

#

+21.4%

y-o-y

1.983 20.331

18.348

Dec-19	Net Adds	Mar-20
	Q1 20

BTS 56

Acquired 1,927

Tenants

#

		+18.6%
		y-o-y
Tenants	2.270	27.181
287
(ex anchor tenant)

24.911

Dec-19	Net Adds	Mar-20
	Q1 20

Tenancy 1.34x

Ratio

1.36x

ex acquisition

Revenues & OIBDA

Q1 20 y-o-y organic

Q1 20y-o-yorganicex-capacity sale in Q1 19 (cable)

Towers +11.5%revs. y-o-y

11,8%

5,8%

4,4%

-6,1%

Revenues OIBDA

	€207M		€135M
		CapEx (1)
		€22M
	OIBDA-CapEx(1)	€113M
Inorganic investment
€133M

(1) excluding M&A CapEx fom inorganic operations in the quarter (acquisition of towers in Brazil and Peru)

19

Q1 20 Results

Ms. Laura Abasolo

CFCO

Hispam |Working on transformation; increasing efficiencies

Large accesses base

Accesses (m)

				+10.9% UBB
108,8				y-o-y
	21,9	16,8	5,4
		2,9
Total	Contract	Fixed	FBB	Pay TV

Simplification to support cash generation

• Largest Fiber network in the region(9.0m FTTH homes passed)
• Prepaid less relevant(~11% of Total Revenues)
• High contract penetration(24%)
• Digitalisation process is stillon-going
• Achieving CapEx efficiencies

Higher penetration in valuable segments

Strongly affected by competition in Peru & Chile

Accesses Penetration (m; y-o-y)

+1 p.p.		+14 p.p.

54%

y-o-y org.

24%

Contract/	FTTH/
Total Mobile	FBB

9.0m FTTH homes passed (+1.7m in LTM)

Co-investing with ATP & ATC in most relevant markets

(4,8%)

(10,6%)

Revenues OIBDA

Similar y-o-y trend vs Q4 19 excluding ARG and one-offs

MEX; Back to OIBDA growth (transformation model paying off)

20

Currency headwinds structurally neutralised

Effects on FX moves

y-o-y

• BRL;major drag in Q1 Revenue & OIBDA y-o-y
• Revenue:Q1: -3.2 p.p. y-o-y
• OIBDA:Q1: -3.5 p.p. y-o-y
• -€151mat OIBDAdown to -€20m in FCF
• FX reducenet debt (-€824m 12 month rolling)

FX impact neutralised at FCF level

€m; Q1 20 FX impact

WC +

OIBDA CapEx Taxes Interest FCF

+ Others

63

66 2

(20)

(151)

Actively hedging 2020 Cash flows of Brazil and UK

21

Slight debt increase on hybrids amortisation

Net Financial Debt

€m

479

ND/OIBDAaL							ND/OIBDAaL
2.52x							2.60x
		723	351	284	4	(651)
37,744	(233)	38,223

Dec-19	FCF	Hybrids	Shareholder	Pre-retirement		Net financial	FX &	Mar-20
				remun. (incl.	commitments		investments	Others
				hybrid coupons)						€44.8bn incl.
											IFRS-16 Leases
		(2)	(640)
2,275
				(666)
					(173)	(4)	(557)
								233
OIBDA-CapEx	Non-cash	Working	Net interest	Tax	Dividend to	Lease	FCF
ex-spectrum	items &	capital	payment		minorities	principal
accrued	others					payments

22

Strong liquidity position coupled with smooth maturity profile

Liquidity position

Mar-20 | €bn

91% LT

Financing activity from June 16 to YTD

YTD | €bn

13.7

8.7

22.5

Avg coupon cost		€2.3bn YTD
reduced by
~200bps/~€150m in
annual payments	8.5	38.8

6.1

10Y	20Y	30Y	6.1
€1.4	€0.8	€4.5
10.0

Cash position	Undrawn credit	Liquidity position
	lines & synd.

1.5

6.7

credit facilities

Net Debt maturities

Mar-20 | €bn; not considering hybrid NC dates

Over 2/3 debt in fixed rates

Cash > gross	4.3	5.1
maturities

€ Green USD Bonds € Bonds	Hybrids Financing at	Bank	Total
Financing*	Subsidiaries	Financing

Strengthening debt profile

Mar-20

10.7Y	3.49%
Avg. debt life vs.	Interest payment
costs vs.
5.6Y Jun-16
4.58% Jun-16

2020E

2021E

2022E

* Includes the €1,000M senior bond & €500 million green hybrid	23

Conclusion

Mr. José María Álvarez-Pallete Chairman & COO

Conclusion |Sustainable; Long term focus

1		2
	Telecoms proving essential…			… responding socially to all
			stakeholders….
							Delivering
							value for all
							stakeholders
	3
			4
	… doing well; not immune…			…committed to our strategy and
			guidance

Resilient business

• Robust, reliable and secure network
• Good liquidity; BS in a good shape
• Society; serve everyone everywhere
• Protecting human rights in our value chain
• Customers; enable safety through P&S
• Employees; ensure protected continuity
• Provide support to providers
• Progression in sustainable model; growth, efficiency and trust

2020 Dividend and 2022 Guidance reiterated

24

Conference Call with Q&A Session

The conference call will be held on May 7 at 11:00 AM CET, 10:00 AM GMT, 5:00 AM ET. TEF Participants: Jose MaríaAlvarez-Pallete(Chairman & CEO), Ángel Vilá(COO), Laura Abasolo(CFCO), Pablo Eguirón(Global Head of IR).

Webcast

• To be webcasted online:click here
• The link to the webcast will be available 30 minutes before the call starts
• The webcast inHD Voice Quality
• Therecording will be uploaded on our websiteafter the call.

Q&A Session

• Toparticipate in the Q&A session, please join the call using the link below (available 15 minutes before the call):click here
• No need to dial in(1).From any device, click the link above, then simply enter your details and phone number, the system will call you.

Use theClick to Joinoption above for the easiest way to join your conference orview the complete list of access numbers and conference start times

1. If you have further questions, please contact the Investor Relations team at [e-mail] or [phone]

25

For further information:

Investor Relations

Tel. [phone] [e-mail] www.telefonica.com/investors

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