Results January-September 2012

Investor Relations Telefnica, S.A.

Disclaimer
This document contains statements that constitute forward looking statements about Telefnica Group (going forward, the Company or Telefnica) including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations which may refer, among others, to the intent, belief or current prospects of the customer base, estimates regarding, among others, future growth in the different business lines and the global business, market share, financial results and other aspects of the activity and situation relating to the Company. The forward-looking statements in this document can be identified, in some instances, by the use of words such as "expects", "anticipates", "intends", "believes", and similar language or the negative thereof or by forward-looking nature of discussions of strategy, plans or intentions. Such forward-looking statements, by their nature, are not guarantees of future performance and involve risks and uncertainties, and other important factors that could cause actual developments or results to differ from those expressed in our forward looking statements. These risks and uncertainties include those discussed or identified in fuller disclosure documents filed by Telefnica with the relevant Securities Markets Regulators, and in particular, with the Spanish Market Regulator. Analysts and investors, and any other person or entity that may need to take decisions, or prepare or release opinions about the securities issued by the Company, are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Except as required by applicable law, Telefnica undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telefnicas business or acquisition strategy or to reflect the occurrence of unanticipated events. This document may contain summarized information or information that has not been audited. In this sense, this information is subject to, and must be read in conjunction with, all other publicly available information, including if it is necessary, any fuller disclosure document published by Telefnica. Finally, it is stated that neither this presentation nor any of the information contained herein constitutes an offer of purchase, sale or exchange, nor a request for an offer of purchase, sale or exchange of securities, or any advice or recommendation with respect to such securities.
Investor Relations Telefnica, S.A.

TELEFNICA

Highlights: Visible results from execution of our strategy

Consolidation of sequential improvement in OIBDA flowing into EPS

OIBDA growth and margin expansion q-o-q Outstanding improvement in underlying EPS

Significant savings from transformational initiatives to enhance business model already flowing into P&L
Continued growth in key revenue levers: Latin America and mobile data

Over 2.3 bn debt reduction in Q3 (-4% q-o-q) on the back of strong FCF generation and disposals Further leverage reduction in Q4 close to 3.2 bn on fast execution of assets divestments and preferred share swap for treasury shares Proactive refinancing of over 13 bn YTD enlarges liquidity cushion to 18 bn TEF Deutschland largest IPO in Europe YTD

Increased financial flexibility

Further progress in our journey, globally and locally Amrigo

Transitioning from Telco to Digital Telco model

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TELEFNICA

Key financials: improved performance from OIBDA to net income in Q3

Reported
in millions

Underlying
Q3 12
y-o-y

9M 12
46,519 15,782 33.9% 8,009 3,455 0.77 10,122 12.2%

9M 12
y-o-y

9M 12
46,519 15,879 34.1% 8,835 4,414

9M 12
y-o-y

Q3 12
y-o-y

Revenues OIBDA OIBDA Margin OI Net income EPS OpCF (OIBDA-CapEx ex-spectrum) CapEx (ex-spectrum)/sales Exceptional items
OIBDA OI Net Income
Capital loss on sale of stake in CU Reduction of value of TI investment

(0.3%) 10.7% 3.4 p.p. 19.6% 26.4% 28.9% 16.1% +0.3 p.p.

(1.6%) 81.6% 15.8 p.p.

(0.3%)

(1.6%) (3.0%) (0.5 p.p.) (7.8%) (2.0%) 0.5% (1.8%) -0.5 p.p.

(5.1%)
(1.7 p.p.) (11.9%) (17.4%) (15.8%)

n.s.
c.s. c.s. n.s. -0.5 p.p.

0.98
10,219 12.2%

(8.8%)
+0.3 p.p.

9M 12
(97) (826) (959)

9M 11
(2,489) (3,332) (2,609)
Workforce reduction plan in Spain & sale of stake in PT

Q3 12
(97) (334) (216)

Q3 11
(2,671) (2,951) (2,058)
Workforce reduction plan in Spain

Underlying growth: Reported figures excluding major exceptional items and spectrum acquisition. Q3 11: Workforce Reduction Plan in Spain (impact in OIBDA: -2,671 m and in net income: -1870 m).

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TELEFNICA

Second consecutive quarter of OIBDA growth and margin expansion q-o-q

2012 Underlying OIBDA and OIBDA Margin
OIBDA ( in millions)
OIBDA Margin y-o-y

T.EUROPE

2,513 TELEFONICA

2,672

2,765 37.2%

35.5%

33.3%
5,350 5,448 Q1 34.6% 32.8% T.LATAM 35.1% Q2 Q3

5,081

Q1
(2.8 p.p.)

Q2
(1.9 p.p.)

Q3
(0.5 p.p.)

2,549

2,663

2,694

35.8%

Consistent improvement in y-o-y trends, in line with internal estimates

33.9%

35.4%

Q1

Q2

Q3

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TELEFNICA

Outstanding improvement in underlying EPS

2012 Underlying EPS (Euros/share)

0.36

0.34
0.29 0.5%

Q1

Q2

Q3

(20.3%) (25.7%)
y-o-y

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TELEFNICA

Well diversified operations, growing exposure to Latin America

9M 12

Revenue
Brazil 22% Brazil 23%

OIBDA

Spain 24%

Spain 32%

Rest T. Latam 26%

Rest T. Europe 24%

Rest T. Latam 27%

Rest T. Europe 18%

OpCF
Brazil 23%

Spain 39%

Rest T. Latam 26%

Rest T. Europe 16%

OIBDA and OpCF are underlying. OpCF: OIBDA-CapEx ex-spectrum. Differences up to and over 100% are due to Others & Eliminations.

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TELEFNICA

Continued revenue growth in strategic areas

Revenue (y-o-y) 8.3% 5.8% 3.8%
Q1 12 Q2 12 Q3 12

0.5% 0.1% (1.6%) (6.6%) (5.7%) (6.8%)

1.1% consolidated revenue (y-o-y growth in 9M 12) ex-regulation Revenue growth acceleration in Latam in organic terms ex-regulation to 8.2% in Q3 12 y-o-y (+6.7% in Q2) European revenues continue to be impacted by challenging economic conditions, intense competition and regulatory drag

Solid expansion at T. Latam

T. Latam
Accesses y-o-y

T. Europe (2%) 103 m

Telefnica 5% 314 m

8% 210 m

Mobile data revenues ( in millions) Smartphone penetration

3,055

3,120 17%

Fast growth of non-SMS data sales in Q3 (+22.0% y-o-y) Smartphone net adds up 14% y-o-y in 9M 12 to 10.0 m 40% y-o-y growth in MBB base to 48 m

2,824

Double digit growth in mobile data revenues

16% 11% Q3 11 53% Q2 12 56%

Q3 12 59%

Focus on pricing consistent with data monetisation (tiered pricing, integrated tariffs)

Non-sms data revenue/total mobile data revenues

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TELEFNICA

Delivering targeted efficiency gains

OpEx (y-o-y) Underlying OIBDA Margin evolution
35.6% 5.9% 3.6%
(0.3 p.p.) (0.6 p.p.) 0.4 p.p.

35.1%

(1.0%)(1)

Q3 11

Commercial Costs

Networks & System Costs

Others

Q3 12

Q1 12

Q2 12

Q3 12

One more quarter of strong hold on costs:

Key transformational efficiency initiatives and scale benefits through T. Global resources already driving savings: lower subsidies, managing commissions, optimising advertising costs, overheads, outsourcing Commercial costs down 0.2% y-o-y in Q3 (+2.4% y-o-y in Q2) on easier comps, handset subsidies removal in Spain and lower upgrades in T. Europe Double digit decline in interconnection costs driven by MTRs cuts

(1)

Excluding Workforce Reduction Plan provision in T.Espaa in Q3 11 ( -2,671 m).

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TELEFNICA

T. Global Resources contributing to capture the value of our global scale

Global Sourcing Increased savings from aggregation: +4pp in last 9 months to > 40% Full end-to-end global sourcing for 12 categories (~45% of total value)

Already 2 rounds of global negotiations setting the basis for a global approach Global Devices Increasing to 80% of the value negotiated globally More balanced OS map and market relevance As a consequence, reduced number of references (95% value in <100 references) Network sharing deals on track (UK, Mexico) Network and Operations Global agreement for network management support systems Global standards defined for key categories (site build, support contracts, RAN)

Production consolidation into hubs under-way IT Brazil data centre completed and Alcala data centre finished by year-end Application simplification with good results in Latam and Spain in the last 9 months

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T. LATAM

Latam: Diversified sources for revenue acceleration

Solid commercial activity
Net Adds
(000)

Revenue improvement with solid growth across regions

Revenue growth ex-regulation
(organic y-o-y)
Additions(1)
Regulation drags 1.8 p.p. in Q3 y-o-y

Q2 12

Q3 12

% Over Total Mobile Net

13.4% 12.8% 1.1m

1.1m
163.4 178.5 54%

6.7%

8.2%

28% 13.6 25.3 34.0

(4.6%)

(2.3%)
MSR Total

Fixed Q2 12 Q3 12

(45.3)
Mobile Contract Fixed FBB Pay TV

Revenue growth ex-regulation by region

(organic y-o-y) 2.9 p.p. 8.2% 0.1 p.p.

Mobile growth focused on high value customers Smartphone accesses x2 y-o-y Improved performance in fixed business
Brazil

2.7 p.p. 2.5 p.p.

Northern Region

Southern Region

Others

Q3 (y-o-y) T.Latam

5.0%
(1) Excluding the disconnection of 1,600k inactive prepay mobile accesses in Brazil in Q2 12.

18.1%

8.4%

Q3 y-o-y

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T. LATAM

Latam: Further OIBDA and margin expansion

Sustained OIBDA acceleration
2012 OIBDA ( in millions)
Underlying y-o-y

Outstanding OIBDA margin performance

2012 OIBDA Margin
Underlying y-o-y
Stable q-o-q excluding specific impacts in Q2

2,549

2,663

2,694 4.8%

33.9%

35.8%

35.4%

(1.3 p.p.) (2.5 p.p.)

0.4 p.p.

2.1% 0.8% Q1 Q2 Q3

Q1

Q2

Q3

OIBDA y-o-y improvement on the back of:

OIBDA margin breakdown (underlying y-o-y)

1.3 p.p. 35.0% 0.4 p.p. (0.7 p.p.) 35.4%

Easier comparable commercial costs basis in Q3 y-o-y Ongoing efficiency measures

Regulation dragging OIBDA growth by 1.4 p.p.

(0.2 p.p.)

Q3 11

Commercial Costs

Network & System costs

Other costs

Q3 12

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T. LATAM

Brazil: Focus on quality paying-off

Mobile CSI
(Gap vs competitors avg.)

Fixed CSI
(Gap vs competitors avg.) 16%

Expanding CSI lead and improved access performance on integration

7%

Increased gap in mobile CSI from selling ban to competitors VIVO rebranding fuelling fixed CSI turnaround Improved access performance across segments leveraging VIVO Favoritos

7%

Sep-11

Sep-12

(4%) Sep-11

Sep-12

Mobile accesses (Sep-12 y-o-y)

Higher Value in Prepaid (y-o-y) x2

Accesses Top Ups 21% 14%

Q3 12

Increased total mobile market share to 29.7% Strengthening position in the most valuable segments (36.9% contract share) Prepaid top ups growing at a faster pace than accesses

More selective commercial approach focus on value

15%

17%

13% 10%

Total

Contract

Smartphones

Q3 11

Fiber UBB accesses (000) 104

Fiber uptake acceleration: 1.0 m homes passed (Sep-12)

New 200Mb offer launched in Oct

Transforming the fixed business

Q3 11

x4

Reinforcing positioning in Pay-TV New IPTV Platform launched in Oct

Q3 12

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T. LATAM

Brazil: Strong acceleration in revenue and OIBDA growth

Yearly and quarterly improvement across businesses
Revenue growth ex-regulation
Q2 12 Q3 12

Consolidating best-in-class profitability

2012 OIBDA (organic y-o-y)
OIBDA Margin organic y-o-y

(organic y-o-y)

13.3%

12.8%

3.2%

5.0% 2.1%

1.4%
0.5%

Q1
(6.6%) (9.7%)

Q2

Q3

Total

Fixed

MSR (1.3 p.p.) 0.5 p.p. 0.3 p.p.

Regulation dragging 2.7 p.p. of revenue growth Better revenue performance of both fixed and mobile businesses on a sequential basis (+3.1% vs. Q2 12 ex-regulation)

Accelerating OIBDA y-o-y growth despite higher negative impact from regulation OIBDA margin expansion y-o-y to 34.5% in Q3 12 Increased efficiency in personnel expenses and G&A leveraging integration

Organic growth: Local currency and excludes the positive impact of the partial sale of our stake in PT in Q2 11.

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T. LATAM

Latam: Widespread improvement in OIBDA performance (i)

OIBDA margin
Q2 12 Q3 12

Southern Region

33.3%

35.1%

33.0%

36.1%

39.3% 34.1% 26.3% 25.9%

40.6% 41.7%

Southern Region
Revenue ex-regulation (y-o-y organic)

Colombia 2.5% 0.7%

Peru 7.4% 8.7%

Argentina 17.5% 17.7%

Chile 3.5% 0.2%

9.2%

8.4%

COLOMBIA:
2.8%

Significant OIBDA and margin improvement driven by the integration process and efficiency measures Revenue performance negatively impacted by regulation and IT projects seasonality

Contribution to TEF 9M Revenue

PERU:
3.8%

Very strong commercial momentum across all businesses Acceleration in revenue and OIBDA in Q3

ARGENTINA: Sustained double digit revenue growth OIBDA margin in Q3 impacted by strong commercial momentum

5.9%

CHILE:
4.1%

Increased competition on number portability across businesses affecting revenue growth. OIBDA margin remains strong

Organic growth: assumes average constant exchange rates and excludes changes in the consolidation perimeter in both years.

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T. LATAM

Latam: Widespread improvement in OIBDA performance (ii)

Northern Region: Increased profitability across the countries
OIBDA margin
Q2 12 Q3 12

48.5% 39.1% 34.3% 26.5% 28.5% 19.8% 20.5% 41.1%

Northern Region
Revenue ex-regulation (y-o-y organic)

Mexico
4.3% 1.2% 12.5%

CA
17.2%

Venezuela
26.8% 30.3%

16.5%

18.1%

VENEZUELA:
5.0%

Growth acceleration and margin expansion amid strong commercial activity

Contribution to TEF 9M Revenue

MEXICO:
Ongoing turnaround process to accelerate growth: ARPU acceleration drives inflection point in MSR Margin expansion y-o-y (+7 p.p.) on the back of higher commercial efficiency. Iusacell agreement effective from Q3
2.5%

1.1%

CENTRAL AMERICA: Sustained acceleration in revenue Progress on OIBDA margin driven by efficiency measures

Organic growth: assumes average constant exchange rates and excludes changes in the consolidation perimeter and hyperinflation accounting in Venezuela in both years.

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T. EUROPE

T. Europe: Changes in business model delivering results

Focus on higher quality customer base
Mobile Net Adds (000) 112 2,513
(14.8%)

Sequential improvement in profitability

2012 OIBDA ( millions) 67 2,765

(10.7%)

2,672
(13.1%)

(221)
Q1 12 (1)
Upgrades (y-o-y)

Q2 12 4.7%

Q3 12 (11.8%)

Q1
Organic y-o-y change

Q2

Q3

15.7%

2012 OIBDA margin

59%
56%

37.2% 35.5%

25%

33%

33.3%
(3.1 p.p.) (2.4 p.p.) (0.7 p.p.)

Contract /Mobile
Sep-11 Sep-12

Smartphone penetration

Q1
Organic y-o-y change

Q2

Q3

(1)

Commercial performance driven by refreshed propositions Low churn sustains growth in mobile Upgrades delayed to Q4 ahead of Fusion and new devices launch Higher customer satisfaction on enhanced quality

Strict cost cutting (-9.0% in Q3 y-o-y organic; -2.6% in H1) on efficiency gains across countries amid top line pressure (Q3: -9.0% y-o-y organic)

Excluding disconnections in Spain in Q1 12.

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T. EUROPE

Spain: OIBDA stabilisation driven by new business model

1 New Tariffs to recover competitiveness
76% of FBB customers and 57% of mobile base on new tariffs in Sep-12:

Removal of subsidies in acquisition

3 Efficiency actions

Lower acquisition costs

Redundancy program: 6,500 net reduction in headcount Improved quality of service y-o-y:

Limited commercial activity in Q3 ahead of Fusin launch 1.4% in mobile contract (-0.4 p.p.) 1.9% in FBB (-0.4 p.p.)

Sharp reduction in churn in Q3 12 y-o-y:

Highest CSI in Sep-12 (+0.2 p.p.) Customer claims down 45% in Q3 12

Simplification across areas (catalogue of products, devices, processes)

Lower OpEx and CapEx on lower churn ARPU pressure in Q3 12 y-o-y: -16.1% in mobile -15.1% in FBB

More than 250 m savings in commercial costs in 9M 12 Sustainable 17% y-o-y CapEx reduction in 9M 12

Savings in personnel costs on track ( 183 m in 9M 12)

CapEx savings in IT and services development due to simplification (~ 90 m in 9M 12)

2012 OIBDA ( millions)

Rev OIBDA OpCF

Rev OIBDA OpCF 1,669

Visible results from turn around plan after 1 year of execution

1,718
45.0%

1,733
47.5%

(8.8%) (13.0%) (19.3%)

(9.7%) (13.4%) (15.3%)

42.8%

Q1 Margin y-o-y (1.4 p.p.)

Q2 (0.5 p.p.)

Q3 1.0 p.p.

Q3 11/Q3 10

Q3 12/Q3 11

Penetration of new tariffs in the residential segments. OIBDA, CapEx and OpCF y-o-y change excluding provision for redundancy program and spectrum in Q3 11.

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T. EUROPE

Spain: Recovering leadership in the market

4 The best convergent offer in the market leveraging our core assets
Simple & transparent 3P/4P offer Single bill Convergent call centre attention Handset financing facilities with special handset catalogue No handset subsidies Additional mobile lines, multi-sims, voice minutes VAS 49.9 59.9 79.9 89.9
Fixed Voice Internet Mobile Voice+ Data Fiber TV

Monitoring the right mix of loyalty and growth to enhance revenue performance & profitability

Leading experience Flexible handset solutions Add-ons for tailor-made offerings

Defending profitability of existing totalised customers

Lower revenues on ARPU dilution (best value for money) partially offset with upselling potential Lower churn on increased customer satisfaction

Lower commercial costs

Upselling and lower churn from existing customers

Additional revenues from FBB customers taking mobile/ mobile customers taking FBB partially offset by ARPU dilution on existing services Upside from add-ons Lower churn Lower commercial costs

Capturing new customers

New revenue streams with low acquisition costs

Fixed telephony line (monthly fee included) Fixed broadband access 500 min. F-M weekends + 50 min. week-days 500 min. mobile traffic 1 GB mobile data

12 months contract commitment

430 k Fusin customers one month after launch

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T. EUROPE

UK: Stabilisation of revenue trends

Maintained commercial momentum Sustained sequential OIBDA and margin improvement

26%

18%

Solid trading with customers delaying upgrades to Q4

(14%) 5% (18%) (9%)

Contract gross adds Contract Upgrades

OIBDA ( millions) 454 402

Q3 11

Q2 12

Q3 12

OIBDA margin expansion on contained commercial expenses

334 19.4% Q1 12
25%

23.4% Q2 12
8%

25.3% OIBDA margin Q3 12

1% Commercial cost (y-o-y)

Sustained levels of benchmark contract churn

1.1%

1.0%

1.1%

OIBDA positively impacted by ladder pricing ruling

Q3 11

Q2 12

Q3 12

Q1 12 251 206

Q2 12

Q3 12

Solid contract net adds

(000)

91
Q3 11 Q2 12 Q3 12

Revenue performance stabilising

(5.0%)

(4.7%) (5.1%) (5.3%) (5.4%)

MSR ex-regulation

(1)

Total Revenue

(6.0%) 36% 42% 44%

Smartphone penetration

(y-o-y in local currency)

(1)

Excluding MTR cuts and new roaming regulation.

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T. EUROPE

Germany: Sustained outperformance, additional share gains

Continued strong commercial performance, capturing the mobile data opportunity
Contract net adds Total net adds

Strong MSR growth, further OIBDA margin expansion

Revenues ( millions) MSR ( millions)

Consistent trading momentum

(000)

215

294

239

189

280

171
MSR outperformance

1,258 758 Q1 12 10.5%

1,295 789

1,317 812 Q3 12 5.6%

MSR (y-o-y)

Q2 12 8.6%

Q1 12

Q2 12

Q3 12

Sustained low contract churn

1.6% Q1 12 Data ARPU () 6.0 Q1 12 6.1 Q2 12 6.2 Q3 12 1.4% Q2 12 1.4% Q3 12

Slowing revenue growth y-o-y due to momentum built mainly in Q3 11 Non-SMS data revenue acceleration in Q3 Continued focus on value management with sequential improvement

OIBDA ( millions) 358

333 295

Monetising data

Q3 12 (y-o-y growth) 28.3%

8.6% Non-SMS data Data traffic

OIBDA acceleration on further efficiencies

23.4% Q1 12

25.7% Q2 12

27.2% OIBDA margin

Q3 12

OIBDA growth accelerates sequentially (+13.9% y-o-y in Q3 vs. +12.0% y-o-y in Q2) Further efficiencies, increased scale and revenue growth drive OIBDA margin expansion (+2.4 p.p. y-o-y in Q3)

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Smartphone penetration up 6 p.p. y-o-y to 24% in Q3

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TELEFNICA

Further progress in our journey to become a Digital Telco

3

As digital service providers

Collaboration with 172

start-ups Amrigo Launch of VC

Agreement with the

worlds leading augmented reality platform

Mobile payments &

advertising JV in the UK approved by EU authorities

New IPTV platform in

Brazil

2 As an enabler/retailer

of digital services
Extension of operator billing
agreements to new countries

HTML5-based Firefox OS for mobile.

First product launches planned for Q1 13 in Brazil

3.0 m customers in Brazil

M2M services developed in a

number of key industry areas

As smart connectivity provider

New convergent offer in Spain
launched in October

Selective UBB rollout in key markets (Brazil &

Spain)

First convergent tariffs in Colombia Mobile tiered pricing in all markets

Ongoing LTE deployment (networks +

spectrum)

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TELEFNICA

Substantial net debt reduction since June driven by FCF generation and disposals
Net Financial Debt/OIBDA 2.65x
58,310
in millions

Net Financial Debt evolution

Net Financial Debt/OIBDA 2.56x
899

(2,541) 331

Mainly China Unicom disposal (993)

Close to 6 bn YTD disposals / restructuring

56,006

(3,183)

Net Financial Debt/OIBDA(2) 2.44x

52,823

Net Fin. Debt Jun-12

FCF Post Minorities

Dividend & Share repurchase

Net Financial Investments

FX, Commitments Cancellation & Other

Net Fin. Debt Sep-12

Post closing events(1)

Net Fin. Debt Sep-12 Post closing events

3,342

(469) (483) 151 2,541

OpCF

Net Interest

Tax

Working capital, Minorities & others

FCF Post Minorities

Net financial debt/12 months rolling OIBDA. Excludes the provision for Workforce Reduction in Spain in Q3 11. (1) Post closing events include 934 m (Atento, Hispasat, Rumbo), 1,449 m Telefnica Deutschland IPO and up to 800 m Preferred shares swapped for treasury shares. (2) Net Financial Debt and OIBDA adjusted by post closing events.

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TELEFNICA

Over 13 bn long term diversified financing raised year-to-date

Strong financing activity YTD
in billions 2.1 1.1 8.1 2.2

13.4

Issuance Sep-12/ Oct-12 YTD Financing activity

Above 5 bn financing since Jun-12 Topping 11.5 bn full year financing in 2011 +500 credit investors in Europe, +400 credit investors in LatAm

H1 12 Financing activity

Chinese ECA &TCR Loans

BRL, Chile & Colombia USD Issuances & Other LatAm

and well diversified

Geographic split by banking financing
Spain 15% Asia 26%

Ample diversification by funding instruments

Very strong demand and

Syndicated Loans 32% Bonds at LatAm 13%

Bonds at Holding 1 750 m Sep-12 9.3x ms+485 5yr

2 250 m Sep-12
3 1.200 m Oct-12

3.3x ms+390 5yr

6.7x ms+330 7yr

Rest Europe 30% North America 12%

Latam 17%

Bonds at Holding 36%

Public entities financing for equipment 9%

Other Loans 10%

Bonds at LatAm Col USD 750 m Sep-12 Chi USD 500 m Oct-12 10.7x UST+361 10yr 10.6x UST+225 10yr

77% undrawn credit lines with non-domestic financial entities

All markets open

costs dropping

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TELEFNICA

Dramatically improved liquidity and interest cost contained

Net debt maturities Sep-12 & Liquidity position
in billions +14% 10.1

8.9
7.4 6.4 +53% 7.8

5.1

87% LT 82% LT

18 bn total liquidity
Circa 4 bn liquidity increase in Q3 (+28%) Maturities covered beyond 2014

Net debt Net debt maturities maturities 2013 2014

Cash Cash position position excluding excluding Venezuela(1) Venezuela(1) Jun-12 Sep-12

Undrawn Undrawn credit credit lines & lines & syndicated syndicated RCF (Jun-12) RCF (Sep-12)

Effective interest cost and average debt maturity within guidance

Guidance: 5%-6% 5.47% 5.50%

Average debt maturity above 6 years

Jun-12
(1)

Sep-12

Cash & cash equivalents + Current Financial Assets excluding Venezuela

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TELEFNICA

Closing remarks
Delivering visible results from continued execution of our strategy

Consolidation of sequential improvement in underlying EPS leveraging growth in OIBDA q-o-q. Full year outlook and dividend reiterated Increased financial flexibility Further progress in our journey to become a Digital Telco

We are accelerating our business transformation

Investor Relations Telefnica, S.A.

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Organic growth: In financial terms, it assumes constant average exchange rates as of January-September 2011, and excludes hyperinflation accounting in Venezuela. Therefore, in OIBDA and OI terms, the first nine months of 2011 exclude the positive impact of the partial sale of our stake in Portugal Telecom (+183 million euros), and the provisions for the redundancy program in Spain (-2,671 million euros). In OIBDA and OI terms, the first nine months of 2012 exclude the capital loss of China Unicom (-97 million euros). Telefnica's CapEx excludes spectrum investment and, in 2011, real estate commitments in relation to the new Telefnica headquarters in Barcelona. Underlying growth: Reported figures, excluding exceptional impacts and spectrum acquisition. The first nine months of 2012 also exclude the reduction in the value of the Telecom Italia investment and operating synergies achieved (-542 million euros; -379 million euros net of taxes), and also PPAs (-799 million euros; -513 million euros net of taxes and minority interests), the capital loss of China Unicom (-97 million euros; -45 million euros net of taxes) and the difference in market value of the BBVA stake (-30 million euros; -21 net of taxes). Figures for the first nine months of 2011 exclude the provision for the redundancy program in Spain (-2,671 million euros; -1,870 million euros net of taxes), value adjustments in relation to the stake in Telecom Italia and the operating synergies achieved (-505 million euros; -353 million euros net of tax), the positive impact arising from a partial reduction of Telefnicas economic exposure to Portugal Telecom (+183 million euros) and also PPAs (-928 million euros; -569 million euros net of taxes and minority interests).