Telefónica S A : Results January - March 2021

RESULTS

January - March

2021

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"). 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 summarised, 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 2020 submitted to the CNMV, in Note 2, page 17 of the .pdf filed. Recipients of this document are invited to read it.

Neither this document nor any related conference call or webcast (including any related Q&A session) nor any of their contents constitute an offer to purchase, sale or exchange any security, a solicitation of any offer to purchase, sale or exchange any security, or a recommendation or advice regarding any security.

This document and any related conference call or webcast (including any related Q&A session) may include data or references to data provided by third parties. Neither Telefónica, nor any of its administrators, directors or employees, either explicitly or implicitly, guarantees that these contents are exact, accurate, comprehensive or complete, nor are they obliged to keep them updated, nor to correct them in the case that any deficiency, error or omission were to be detected. Moreover, in reproducing these contents by any means, Telefónica may introduce any changes it deems suitable, may omit partially or completely any of the elements of this document, and in case of any deviation between such a version and this one, Telefónica assumes no liability for any discrepancy.

Q1 21 Results

Mr. Ángel Vilá

COO

A strong start to 2021; improving growth outlook

Q1 21 highlights

Revenues	OIBDA		EPS		Cash conversion	Customer experience
y-o-y org	y-o-y org		y-o-y org		y-o-y org	y-o-y
Declined 1.3%		Up +0.3%		€886m net income, +118%		OIBDA - Capex margin +0.3 p.p.		Churn declined 0.3 p.p.
+0.7 p.p. vs. Q4 20		+3.1 p.p. vs. Q4 20		€0.15 EPS +158%		FCF x3.0 y-o-y		NPS +9 p.p. in core markets
B2B revenues+2.8 p.p. vs. Q4		Improvement across the board		Strong earnings,		(ex spectrum payments)		Digital sales +37% in 4 core
Robust customer metrics		OIBDA margin +0.6 p.p.		greater value		Smart capital allocation		markets

• 3rd consecutive quarter of sequential improvement in revenue and OIBDA trends; OIBDA and OIBDA-CapEx already growing y-o-y
• March was the strongest month in Q1, showing y-o-y organic growth in revenues, OIBDA and OIBDA-CapEx
• Q1 faced the toughest y-o-y comparison

Progress on strategy

• Advancing towards completion of UK JV (preliminary CMA approval) + Telxius Towers; ~€9bn net debt reduction, >€6bn capital gains to be booked in Q2 21E
• Hispam: further improvements to operating model, +2.6 p.p. y-o-y in OIBDA-CapEx margin; Chilean InfraCo operational in H2 21
• Strong growth across T. Tech companies; revenues +25.1% y-o-y
• T. Infra: regulatory approval of towers sale to ATC most likely in Q2 21; launch of FiBrasil underway; UGG rollout & commercialisation initiated
• Streamlined operations: 79% of processes and 35% of sales digitised in Q1; implementation of Open RAN solutions progressing to plan
• Strong ESG focus recognised by S&P Global Rating (72 out of 100) and Bloomberg Gender Equality; founding member of European Green Digital Coalition

1

Financial performance

		Q1 21
		Reported	Organic	4 core
€ in millions	Reported	markets
y-o-y	y-o-y
		y-o-y org.
Revenues	10,340	(9.0%)	(1.3%)	(2.0%)
OIBDA	3,417	(9.1%)	0.3%	0.3%
OIBDA margin	33.0%	(0.0 p.p.)	0.6.p.p.	0.9 p.p.
OIBDA-CapEx(ex-spectrum)	2,079	(8.6%)	0.1%	(2.9%)
(OIBDA-CapEx)/Revenues(ex-spectrum)	20.1%	0.1 p.p.	0.3.p.p.	(0.2 p.p.)
Net Income	886	118.3%
EPS	0.15	157.8%
FCF (incl. leases principal payments)	33	(85.8%)
FCF (ex-spectrum paid)	727	201.4%
Net Financial Debt (ex- leases)	35,796	(6.4%)

Revenue Q1 21 y-o-y

OIBDA Q1 21 y-o-y

Reported

Fx

Other

Organic

Reported

Fx

(6.6 p.p.)

(1.1 p.p.)

(7.7 p.p.)

(1.3%)

COVID-19

-2.5 p.p.

(9.1%)

(9.0%)

Q4 20 (12.0%)

(8.1 p.p.)

(1.9 p.p.)

(2.0%)

Q4 20 2.2%

(10.9 p.p.)

FX and C-19 impacts on reported

figures less pronounced than in Q4 20

Organic margin expansion on

accelerating digitalisation

CapEx stable y-o-y org.;

• 50% on NGN
  Neutralised FX impact at FCF level

	Other		Organic
(1.8 p.p.)	0.3%

COVID-19-3.3 p.p.

16.0 p.p.

(2.8%)

2