Telefonica Deutschland Holding AG

Earnings Release • May 20, 2020

MUNICH, 06 May 2020

Interim statement for January to March 2020

Telefónica Deutschland delivered a robust start to the year – confirming FY20 guidance while closely monitoring COVID-19 impacts

• Telefónica Deutschland supported employees as well as customers and assumed social responsibility through a variety of COVID-19 initiatives; the network proofed very resilient and ensured highly reliable connectivity for customers
• Revenue grew +3.8% y-o-y in Q1 20 with sustained trends across all revenue lines; mobile service revenue (MSR) with visible ARPU accretive effects from good traction of the O2 Free portfolio
• Underlying¹ OIBDA improved +1.6% y-o-y in Q1 20, reflecting flow-through from MSR and fixed revenue partly offset by higher costs, mainly in supplies
• C/S ratio of 12.1% in Q1 20 with annual phasing more back-end loaded and focus on improving CEX also reflected in strong network resilience; despite COVID-19 steady progress with LTE roll-out while preparing for ramp-up of 5G
• Robust start to the year with good operational and financial momentum despite softer trading trends following the government imposed COVID-19 nationwide lockdown as of mid-March; confirming FY20 guidance across all metrics while closely monitoring COVID-19 impacts

First quarter 2020 operational & financial highlights

• Telefónica Deutschland supported employees as well as customers and assumed social responsibility through a variety of COVID-19 initiatives such as providing the Robert Koch-Institut with mobility analysis on the basis of anonymised and aggregated data, faster unlimited surfing guarantee ('#WeStayConnected') until the end of May, offering complementary app access for a limited time period (e.g. 'O2 TV', 'Kidomi'), partnering with 'Deutschland gegen Corona' ('#allefüralle') and launching a series of live-streamed O2 concerts ('#StayOn'). Part of the company's 'O2 Office Tower' in Munich is also used by the crisis management team of the Bavarian Red Cross as temporary headquarters.
• The company's network proofed very resilient coping well with the COVID-19-driven change in traffic patterns and ensured highly reliable connectivity for customers.
• In a dynamic yet rational environment, Telefónica Deutschland kept its operational and financial momentum during Q1 20. The company achieved this despite softer trading trends following the government imposed COVID-19 lockdown also resulting in the nationwide closure of the O2 shops as of mid-March. The O2 shop closure resulted in a visible reduction in both, gross additions and churn entries. O2 shops have been re-opened nationwide on 20 April 2020 with the exception of Bavaria and Thuringia the following week.
• Mobile postpaid² registered +188k net additions (excl. +39k M2M) in Q1 20, mainly driven by the sustained traction of the O2 Free tariff portfolio, including the speed-tiered unlimited tariffs launched in February. Partner trading was solid, delivering 61% share of gross additions in Q1 20. Total postpaid churn remained at low levels of 1.5% in Q1 20 while churn in the O2 brand continued to be

2 As of 1 January 2020, M2M is separately reported from postpaid; for comparability this change has also been applied to 2019, retrospectively.

¹ Adjusted for exceptional effects. As of 31 March 2020, exceptional effects amounted to EUR -8m including EUR -9m of losses from sale of assets related with the sale of spectrum assets in line with the agreed merger remedies as well as EUR 1m of restructuring income. Exceptional effects as of 31 March 2019, include restructuring expenses amounting to EUR -10m.

even lower at 1.3% driven by a clear retention focus helped by sustained network quality improvements.

• LTE customer base climbed +31.1% y-o-y and stood at 25.2³m at the end of March 2020. LTE penetration stood at 60%, up +13 p.p. y-o-y. Mobile data usage continued to grow with a three year CAGR of >50% as the ongoing adoption of LTE and the O2 Free portfolio drove data usage through large data bundles. The average data usage by O2 Free customers reached 7 GB per month.
• Revenue stood at EUR 1,846m an increase of +3.8% y-o-y, with sustained trends across all revenue lines.
• o Mobile service revenue⁴ (MSR) rose +2.4% y-o-y to EUR 1,311m and showed visible APRUaccretive effects on sustained good performance of the own retail business including the further easing of legacy base headwinds while trends in the partner business remained solid also as a result of the MBA MVNO dynamics.
• o Handset revenue grew +7.7% y-o-y to EUR 339m on continued strong demand for high value handsets. However, demand started to soften from mid-March as a result of the COVID-19 related closure of O2 shops.
• o Fixed-line revenue built on its positive trend, posting +6.0% y-o-y growth to EUR 193m supported by retail customer base growth on the back of strong VDSL demand. Fixed retail revenue maintained its upward trend and registered +7.7% y-o-y growth, reflecting the y-o-y higher customer base driven by strong demand for VDSL.
• Underlying⁵ OIBDA stood at EUR 532m (before exceptional effects of EUR -8m), up +1.6% y-o-y in Q1 20 driven by the flow-through from MSR and fixed revenues partly offset by higher costs, mainly due to supply volumes. Underlying OIBDA margin stood at 28.8% in Q1 20 (-0.6 p.p. y-o-y) reflecting the before mentioned effects including the strong growth of lower margin handset revenues.
• CapEx⁶ reached EUR 224m with a C/S ratio of 12.1% with annual phasing more back-end loaded. The company remained a clear focus on improving customer experience also reflected in strong network resilience despite major changes in traffic volumes during the COVID-19 related lockdown; mainly a strong increase in fixed & mobile voice volumes and higher fixed data traffic while mobile data traffic trends remained broadly unchanged. Even in the tough COVID-19 environment, the 4Grollout made steady progress while also preparing for the ramp-up in 5G network rollout.
• Consolidated net financial debt⁷ stood at EUR 3,863m as of 31 March 2020 with a leverage ratio of 1.7x⁸ , and thus in line with the company's self-defined target ratio of at or below 2.5x.

6 Excluding additions from capitalised right-of-use assets.

³ Includes a technical database adjustment of +3.2m customers in Q4 19.

⁴ Mobile service revenue includes base fees and fees paid by the company's customers for the usage of voice, SMS and mobile data services; it also includes access and interconnection fees as well as other charges levied on partners for the use of the company's network.

⁵ Adjusted for exceptional effects. As of 31 March 2020, exceptional effects amounted to EUR -8m including EUR -9m of losses from sale of assets related with the sale of spectrum assets in line with the agreed merger remedies as well as EUR 1m of restructuring income. Exceptional effects as of 31 March 2019, include restructuring expenses amounting to EUR -10m.

⁷ Net financial debt includes current and non-current interest-bearing financial assets and interest-bearing liabilities as well as cash and cash equivalents while excluding payables for spectrum.

⁸ Leverage ratio is defined as net financial debt divided by the OIBDA for the last twelve months adjusted for exceptional effects.

Financial outlook 2020

Telefónica Deutschland's Q1 20 results were in-line with management expectations while affected by limited COVID-19 impacts. In Germany, we are seeing first signs of easing the COVID-19 lockdown and we are closely monitoring the situation and its further developments. On this background, we confirm the company's FY20 outlook as published in the 2019 Annual Financial Report.

	Baseline 2019	Outlook 2020	Q1 20
Revenue	EUR 7,399m	flat to slightly positive y-o-y	+3.8% y-o-y
OIBDA Adjusted for exceptional effects	EUR 2,316m	broadly stable to slightly positive y-o-y	+1.6% y-o-y
Capex to Sales Ratio	14.1%	17 – 18%	12.1%

Following the recent temporary change in German corporate law now allowing virtual Annual General Meetings (AGMs) in 2020, Telefónica Deutschland has invited to its first virtual AGM as initially planned on 20 May 2020 to resolve upon the announced dividend proposal of EUR 0.17 per share for the financial year 2019.

Telefónica Deutschland operating performance in the first quarter of 2020

Operating performance in mobile

As of 31 March 2020, Telefónica Deutschland's mobile customer accesses reached 43.6m (+1.7% y-o-y) driven by strong +6.3% y-o-y growth of the mobile postpaid ex M2M base which climbed to 22.7m accesses. Thus, mobile postpaid accounted for 52.1% of the company's total mobile base, a plus of +2.3 p.p. y-o-y. M2M accesses came to 1.2m; +1.7% y-o-y in Q1 20. The mobile prepaid registered -407k net disconnections reflecting the ongoing prepaid to contract migration trends in the market as well as usual seasonality.

Mobile postpaid⁹ posted +188k net additions in Q1 20 compared to +283k in Q1 19. This growth is mainly driven by sustained customer demand for the O2 Free portfolio and the successful launch of speed-tiered O² Free unlimited tariffs further supporting the company's ARPU-up strategy. In addition, the contribution from partner brands remained solid and delivered 61% of gross additions in the first quarter of the year.

M2M saw +39k net additions in Q1 20 versus +22k a year ago.

Mobile prepaid registered -407k net disconnections reflecting the continued weaker demand for prepaid offerings on the back of ongoing prepaid to contract migration trends in the market as well as seasonality.

Postpaid churn remained stable y-o-y at low levels of 1.5% in Q1 20, while the O2 consumer postpaid churn was again even lower at 1.3%, also stable y-o-y. The implied annualised churn rate in Q1 20 stood at 15.7% vs. 16.0% in Q1 19, thus providing clear evidence of an excellent customer experience on the O2 network.

LTE customer base climbed +31.1% y-o-y, reaching 25.2¹⁰m accesses as of 31 March 2020, fuelled by the sustained demand for high-speed mobile data services. LTE-penetration across the base reached 59.5%, up +13.3 p.p. y-o-y. LTE penetration in postpaid continues to be significantly higher (~75%).

ARPU trends remain driven by visible ARPU accretive effects from the O2 Free portfolio and new value-added services, partly offset by regulatory effects and lower ARPUs y-o-y in the partner business. The blended mobile ARPU was EUR 9.8 in the first three months of 2020, flat y-o-y. Prepaid ARPU was +3.3% higher y-o-y in the January to March period and reached EUR 5.9. Postpaid ARPU stood at EUR 13.7 in Q1 20 a decline of -3.7% y-o-y while own brand postpaid ARPU continued its growth path, up +0.4% y-o-y. The combination of the successful volume-based O2 Free portfolio and the new speed-tiered O2 Free unlimited tariffs launched in February 2020 further supported the company's APRU-up strategy.

Operating performance in fixed

The fixed broadband customer base reached 2.2m accesses at the end of March 2020, an increase of +5.1% y-o-y, with a VDSL base of 1.7m, a step-up of +12.0% y-o-y to 76% of the fixed broadband base. Fixed broadband saw +25k net additions in in the January to March period, driven by continued strong demand for VDSL with +36k in Q1 20.

Fixed churn remained low at 0.8% in Q1 20, an improvement of +0.2 p.p y-o-y.

The fixed broadband ARPU improved by +1.5% y-o-y to EUR 23.7 in Q1 20 reflecting the growing proportion of VDSL customers.

⁹ As of 1 January 2020, M2M is separately reported from postpaid; for comparability this change has also been applied to 2019, retrospectively. 10 Includes a technical database adjustment of +3.2m customers in Q4 19.

Telefónica Deutschland financial performance in the first quarter of 2020

Revenue stood at EUR 1,846m in Q1 20, posting +3.8% y-o-y growth with sustained trends across all revenue lines; in particular further improvements in both, mobile and fixed service revenues, as well as a continued strong handset business.

Mobile service revenue¹¹ (MSR) grew +2.4% y-o-y and amounted to EUR 1,311m in Q1 20, reflecting the maintained positive performance of the own retail business including the further easing of legacy base headwinds. Trends in the partner business remained solid also as a result of the MBA MVNO dynamics.

Handset revenue reached EUR 339m (+7.7% y-o-y) in Q1 20 on sustained demand for high value smartphones, which however slowed down in the second half of March following the COVID-19 related closure of O2 shops.

Fixed revenue built on its positive trends and was up +6.0% y-o-y at EUR 193m in Q1 20 supported by retail customer base growth on strong VDSL demand. Thus, fixed retail revenue further improved its positive trend and posted a strong growth of +7.7% y-o-y in the first quarter of 2020.

Other income totalled EUR 25m in Q1 20 (-17.4% y-o-y) and is mainly related to the capitalisation of network rollout costs.

Operating expenses stood at EUR 1,348m (including exceptional¹² effects of EUR -8m) in Q1 20, an increase of + 4.0% y-o-y, mainly due to higher supply volumes.

• Supplies were EUR 604m, +6.4% higher y-o-y in Q1 20 mainly as a result of strong demand for handsets and related hardware cost of sale (56% of supplies). Also, connectivity-related cost of sales (40% of supplies) were slightly higher y-o-y reflecting the COVID-19 driven increase of mobile and fixed voice volumes as well as higher fixed data traffic on the network.
• Personnel expenses were broadly stable (+0.1% y-o-y) in Q1 20 at EUR 150m, with a lower FTE base versus prior year mostly offsetting the inflation-related pay rises as of 1 December 2019.
• Other operating expenses¹³ were EUR 593m in Q1 20 including exceptional effects of EUR -9m (EUR -10m in Q1 19) related with the sale of spectrum assets in line with the agreed merger remedies. They were higher by +2.6% y-o-y mainly as a result of commercial activities. Commercial costs and non-commercial costs made up 66% and 30% in the January to March period. Group fees reached EUR 8m in in the January to March period, flat y-o-y.

Operating Income before Depreciation and Amortisation (OIBDA) adjusted for exceptional effects¹¹ of EUR -8m amounted to EUR 532m, up +1.6% y-o-y in Q1 20 driven by the flow-through from MSR and fixed revenues partly offset by higher supply volumes. Underlying OIBDA margin stood at 28.8% in Q1 20 (-0.6 p.p. y-o-y) reflecting the before mentioned effects including the strong growth of the lower margin handset business.

Depreciation & Amortisation totalled EUR 553m in the January to March period, a decline of -9.0% y-o-y, mainly due to individual assets in PPE reaching the end of their useful life.

The operating loss for the first three month of the year improved to EUR -29m versus an operating loss of EUR -94m in the prior year.

¹¹ Mobile service revenue includes base fees and fees paid by the company's customers for the usage of voice, SMS and mobile data services; it also includes access and interconnection fees as well as other charges levied on partners for the use of the company's network.

¹² As of 31 March 2020, exceptional effects amounted to EUR -8m including EUR -9m of losses from sale of assets related with the sale of spectrum assets in line with the agreed merger remedies as well as EUR 1m of restructuring income. Exceptional effects as of 31 March 2019, include restructuring expenses amounting to EUR -10m.

¹³ Includes other expenses and impairment losses in accordance with IFRS 9 in the amount of EUR 19m in Q1 20 (EUR 18m in Q1 19).

The net financial expenses accounted for EUR -15m in Q1 20 compared to EUR -14m in the same period 2019.

The Company reported no material income tax expenses in the first three month of 2020.

The net loss stood at EUR -44m in the January to March 2020 period, compared to a net loss of EUR -107m in the same period of the prior year.

CapEx¹⁴ in Q1 20 came to EUR 224m with a C/S ratio of 12.1%. The company remained a clear focus on improving customer experience also reflected in the strong network resilience despite major changes in traffic volumes during the COVID-19 related lockdown; mainly a strong increase in fixed & mobile voice volumes and higher fixed data traffic while mobile data traffic trends remained broadly unchanged. The 4Grollout made steady progress while also preparing for the ramp-up in 5G network rollout.

Operating cash flow (OIBDA minus CapEx¹⁴) amounted to EUR 300m in Q1 20 (+14.6% y-o-y).

Free cash flow (FCF)¹⁵ was EUR 241m for Q1 20. Lease payments, primarily for leased lines and antenna sites, amounted to EUR -259m. As a result, FCF aL stood at EUR -18m for the reporting period compared to EUR -11m in the prior year.

Working capital movements and adjustments were negative in the amount of EUR -54m in Q1 20. This seasonal development was mainly driven by prepayments for incidental lease costs, low value and short-term leases in connection with leased line and mobile site rental and other prepayments (EUR -33m), a reduction in capex payables (EUR -23m), a decrease in restructuring provisions (EUR -8m) as well as other working capital movements in the amount of EUR 11m. The latter include silent factoring transactions for handset receivables in the gross amount of EUR 252m, which were outweighed by other working capital movements, including a reduction in trade and other payables.

Consolidated net financial debt16 came to EUR 3,863m as of 31 March 2020 with a leverage ratio of 1.7x¹⁷ , benefitting from the deferral of spectrum payments. Thus, leverage was well below with the company's the self-defined target ratio of at or below 2.5x. This leaves comfortable leverage headroom with regards to the company's BBB-rating by Fitch.

¹⁴ Excluding additions from capitalised right-of-use assets.

¹⁵ Free cash flow pre dividends and payments for spectrum (FCF) is defined as the sum of cash flow from operating activities and cash flow from investing activities and does not contain payments for investments in spectrum as well as related interest payments.

¹⁶ Net financial debt includes current and non-current interest-bearing financial assets and interest-bearing liabilities as well as cash and cash equivalents and excludes payables for spectrum.

¹⁷ Leverage ratio is defined as net financial debt divided by the OIBDA for the last twelve months adjusted for exceptional effects.

APPENDIX – DATA TABLES

TELEFÓNICA DEUTSCHLAND GROUP

ACCESSES

Unaudited

	2020	2019
(in thousands)	Q1	Q1	Q2	Q3	Q4
Mobile accesses	43,647	42,913	43,218	43,607	43,827
Prepai d	19,689	20,332	20,335	20,332	20,096
Postpaid	22,727	21,371	21,729	22,096	22,539
Postpaid (%)	52.1%	49.8%	50.3%	50.7%	51.4%
M2M (1)	1,230	1,210	1,154	1,179	1,192
Internet and data accesses	2,325	2,248	2,260	2,290	2,302
Broadband	2,232	2,124	2,162	2,193	2,207
thereof VDSL	1,688	1,507	1,566	1,619	1,652

(1) Includes a revenue-neutral technical base correction in Q2 2019.

TELEFÓNICA DEUTSCHLAND GROUP

SELECTED OPERATIONAL DATA

Unaudited

	2020	2019
	Q1	Q1	Q2	Q3	Q4
Mobile ARPU (in Euros) (1)	9.8	9.8	10.0	10.2	10.0
Prepaid	5.9	5.7	5.9	6.2	6.1
Postpaid	13.7	14.2	14.4	14.4	14.0
Fixed BB ARPU (in Euros) (1)	23.7	23.4	23.4	23.2	23.1
Mobile voice traffic (million minutes) (2)	31,138	26,017	26,747	26,460	27,801
Mobile data traffic (TB) (3)	313,949	193,007	226,753	252,522	283,266
Mobile churn (%)	2.0%	1.9%	1.8%	1.9%	2.0%
Postpaid churn (%)	1.5%	1.6%	1.5%	1.5%	1.5%

(1) ARPU (average revenue per user) is calculated as monthly average of the quarter.

(2) Mobile voice traffic is defined as minutes used on the company's network, both outbound and inbound. Promotional traffic and traffic not associated to the Company's mobile customers (roaming-in, MVNOs, interconnection of third parties and other business lines) is also included. Traffic volume is not rounded.

(3) Mobile data traffic is defined as Terabytes used by the company customers for both uploads and downloads (1TByte = 10^12 bytes). Promotional traffic is included. Traffic not associated with the Company's mobile customers (roaming-in, MVNOs, interconnection of third parties and other business lines) is also included. Traffic volume is not rounded.

TELEFÓNICA DEUTSCHLAND GROUP

CONSOLIDATED INCOME STATEMENT & SELECTED CONSOLIDATED FINANCIAL DATA

Unaudited

		1 January to 31 March
(Euros in millions)	2020	2019	Change	% Chg
Revenues	1.846	1,779	67	3.8
Mobile business	1,650	1,596	55	3.4
Mobile service revenues	1,311	1,281	30	2.4
Handset revenues	339	315	24	7.7
Fixed business	193	182	11	6.0
Other revenues	3	$\mathbf{1}$	$\overline{2}$	>100,0
Other income	25	31	(5)	(17.4)
Operating expenses	(1, 348)	(1, 296)	(52)	4.0
Supplies	(604)	(568)	(36)	6.4
Personnel expenses	(150)	(150)		0.1
Impairment losses in accordance with IFRS 9	(19)	(18)		2.6
Other expenses	(574)	(560)	(15)	2.6
thereof Group fees	(8)	(8)		(5.2)
Operating income before depreciation and amortization (OIBDA)	524	514	10	2.0
OIBDA margin	28.4%	28.9%		$(0.5%-p.)$
Exceptional effects (1)	(8)	(10)	$\overline{2}$	(17.3)
OIBDA adjusted for exceptional effects (1)	532	524	9	1.6
OIBDA margin adjusted for exceptional effects	28.8%	29.5%		$(0.6%-p.)$
Depreciation and amortization	(553)	(607)	54	(9.0)
Operating income	(29)	(94)	65	(69.1)
Net financial income (expense)	(15)	(14)	(1)	8.1
Profit (loss) before tax for the period	(44)	(107)	64	(59.2)
Income tax		$\overline{\phantom{0}}$	$\overline{\phantom{0}}$	(100.0)
Total profit for the period	(44)	(107)	64	(59.2)
Number of shares in millions as of end of period date	2,975	2,975
Basic earnings per share (in euros) (2)	(0.01)	(0.04)	$\qquad \qquad -$	(59.2)
CapEx (3)	(224)	(252)	28	(11.1)
CapEx/Sales ratio	12.1%	14.2%		$(2.0%-p.)$
Operating cash flow (OIBDA-CapEx)	300	262	38	14.6
Free cash flow	241	247	(6)	(2.4)

(1) Exceptional effects as of 31 March 2020 include losses from sale of assets related with the sale of spectrum assets in line with the agreed merger remedies amounting to EUR 9 million as well as restructuring income amounting to EUR 1 million. Exceptional effects as of 31 March 2019 include restructuring expenses amounting to EUR 10 million.

(2) Basic earnings per share are calculated by dividing profit (loss) after taxes for the period by the weighted average number of ordinary shares of 2,975m for the years 2020 and 2019.

(3) Excluding additions from business combinations and from captalised finance leases.

TELEFÓNICA DEUTSCHLAND GROUP

RECONCILIATION OF FREE CASH FLOW

Unaudited
-----------

	2020	2019
(Euros in millions)	Jan - Mar	Jan - Mar	Jan - June	Jan - Sept	Jan - Dec
OIBDA	524	514	1,084	1,672	2,292
- Ca pEX (1)	(224)	(252)	(496)	(782)	(1,044)
= Operating Cashflow (OIBDA-CapEx) (1)	300	262	588	890	1,248
+/- Other non-cash i ncome / expenses	–	–	–	–	–
+/- Change in working capital	(54)	20	(228)	(210)	(148)
+/- (Gai ns) l osses from sa le of assets	9	–	–	–	(1)
+/- Proceeds from sa le of companies	5	–	–	–	–
+/- Proceeds from sa le of fi xed assets and other effects	–	–	1	–	3
+ Net i nterest payments	(19)	(21)	(26)	(42)	(49)
+ Taxes paid	–	–	–	–	–
+/- Proceeds / Payments on financial assets	1	(13)	(12)	(5)	(21)
+ Acquisition of compani es net of cash acqui red	(1)	–	–	–	(9)
= Free cash flow	241	247	322	633	1,023

(1) Excluding additions from business combinations and from captalised finance leases.

	2020	2019
	Jan - Mar	Jan - Mar	Jan - June	Jan - Sept	Jan - Dec
Free cash flow (Euros i n mi lli ons)	241	247	322	633	1,023
Number of shares (i n mi lli ons)	2,975	2,975	2,975	2,975	2,975
Free cash flow per sha re (in Euros)	0.08	0.08	0.11	0.21	0.34

TELEFÓNICA DEUTSCHLAND GROUP

DIVIDEND POLICY

Unaudited

	2020	2019
(Euros in millions)	Jan - Mar	Jan - Mar	Jan - June	Jan - Sept	Jan - Dec
Free cash flow	241	247	322	633	1,023
- Lea se payments	(259)	(259)	(327)	(406)	(484)
= Free cash flow after lease payments	(18)	(11)	(5)	227	539

TELEFÓNICA DEUTSCHLAND GROUP CONSOLIDATED NET FINANCIAL DEBT EVOLUTION

Unaudited

	As of 31 March	As of 31 December
(Euros in millions)	2020	2019	Change %
A Liquidity	654	781	(16.3)
B Current financial assets (1)	158	211	(24.8)
Current financial debt (2) C	1,202	801	50.2
D=C-A-B Current net financial debt	390	(191)	(>100,0)
Non-current financial assets (1) E	80	129	(37.6)
Non-current financial debt (2) F	3,554	4,180	(15.0)
G=F-E Non-current net financial debt	3,473	4,051	(14.3)
Net financial debt (3) H=D+G	3,863	3,860	0.1

(1) Current and non-current financial assets include handset receivables not yet due, net investments in the lease, positive fair value hedges for fixed interest financial liabilities as well as loans to third parties.

(2) Current and non-current net financial debt includes bonds, promissory notes and registered bonds issued, other loans, as well as lease liabilities.

(3) Net financial debt includes current and non-current interest-bearing financial assets and interest-bearing financial liabilities as well as cash and cash equivalents.

Note:

Handset receivables are presented in trade and other receivables on the Consolidated Statement of Financial Position.

Further information

Telefónica Deutschland Holding AG Investor Relations Georg-Brauchle-Ring 50 80992 München

Christian Kern, Director Investor Relations; (m) +44 7517 999208 Marion Polzer, Head of Investor Relations; (m) +49 176 7290 1221 Eugen Albrecht, Senior Investor Relations Officer; (m) +49 176 3147 5260 (t) +49 89 2442 1010 ir-deutschland@telefonica.com www.telefonica.de/investor-relations

Disclaimer:

This document contains statements that constitute forward-looking statements and expectations about Telefónica Deutschland Holding AG (in the following "the Company" or "Telefónica Deutschland") that reflect the current views and assumptions of Telefónica Deutschland's management with respect to future events, 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. Forward-looking statements are based on current plans, estimates and projections. 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 are subject to risks and uncertainties, most of which are difficult to predict and generally beyond Telefónica Deutschland's control and other important factors that could cause actual developments or results to materially differ from those expressed in or implied by the Company's forward-looking statements. These risks and uncertainties include those discussed or identified in fuller disclosure documents filed by Telefónica Deutschland with the relevant Securities Markets Regulators, and in particular, with the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin). The Company offers no assurance that its expectations or targets will be achieved.

Analysts and investors, and any other person or entity that may need to take decisions, or prepare or release opinions about the shares / 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 document. Past performance cannot be relied upon as a guide to future performance.

Except as required by applicable law, Telefónica Deutschland undertakes no obligation to revise these forward-looking statements to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telefónica Deutschland's business or strategy or to reflect the occurrence of unanticipated events.

The financial information and opinions contained in this document are unaudited and are subject to change without notice.

This document contains summarised 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 Telefónica Deutschland.

None of the Company, its subsidiaries or affiliates or by any of its officers, directors, employees, advisors, representatives or agents shall be liable whatsoever for any loss however arising, directly or indirectly, from any use of this document its content or otherwise arising in connection with this document.

This document or any of the information contained herein do not constitute, form part of or shall be construed as an offer or invitation to purchase, subscribe, sale or exchange, nor a request for an offer of purchase, subscription, sale or exchange of shares / securities of the Company, or any advice or recommendation with respect to such shares / securities. This document or a part of it shall not form the basis of or relied upon in connection with any contract or commitment whatsoever.

These written materials are especially not an offer of securities for sale or a solicitation of an offer to purchase securities in the United States, Canada, Australia, South Africa and Japan. Securities may not be offered or sold in the United States absent registration under the US Securities Act of 1933, as amended, or an exemption there from. No money, securities or other consideration from any person inside the United States is being solicited and, if sent in response to the information contained in these written materials, will not be accepted.