Telefonica S.A. — Investor Presentation 2010

Sep 30, 2010

Results January-September / 2010

Disclaimer

This document contains statements that constitute forward looking statements about Telefónica Group (going forward, "the Company" or Telefónica) including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations which refer 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 andother aspects of the activity and situation relating to the Company 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 forward-looking lookingstatements 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 Telefónica 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, Telefónica 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 Telefónica s' business or acquisition strategy or to reflect the occurrence of unanticipated events.

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.

Finally, 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 Telefónica.

Solid execution, delivering on 2010 priorities

Sustained acceleration of organic revenue growth vs. H1 10 driven by:

• Strong commercial push
• Continued strength in mobile data revenue growth

Strong profitability:

Contained margin erosion despite higher commercial costs on rapid customer growth

Benefits from our integrated business model and scale

• Solid OpCF generation with sound financial position
• Full year and mid-term outlook confirmed:

Improving revenue and OIBDA y-o-y growth under guidance criteria in 9M 10

€2.10 EPS in 2010

Growing DPS reiterated (2010: €1.40; 2012: minimum of €1.75)

Sustained earnings momentum fuelled by diversification

Positive impact in OIBDA in Q3 10 from the revaluation1 of our pre-existing stake in Vivo

• Positive effect of forex across the P&L despite Venezuelan Bolivar devaluation
• 9M 10 CapEx includes spectrum acquisition in Germany (Q2 10) and Mexico (Q3 10)

Telefónica, S.A

Organic growth assumes constant exchange rates as of 9M 09 (average fx) and excludes changes in the perimeter of consolidation. Therefore, it excludes the

Investor Relationsconsolidation of HanseNet (since mid February 2010), Jajah (January-September 2010), Telyco Marruecos in January-September 2009, and Manx Telecom in July-September 2009 and includes Tuenti (August-September 2009). OIBDA and OI figures do not include the impact of capital gain registered in the second quarter of 2010 from Manx Telecom disposal and in the third quarter from the revaluation of our pre-existing stake in VIVO. CapEx excludes the spectrum acquisition in Germany in Q2 10 and in Mexico in Q3 10. Figures exclude hyperinflationary accounting in Venezuela in both years.

3

IFRS 3 Revised –Business combinations

Robust bottom line

Sound commercial performance across the board

• Healthy gross adds to September up 15.3% y-o-y despite commercial push in Spain from Q3 09
• Continued churn contentionat 2.3% in 9M 10 (flat y-o-y)
• Robust organic net adds at 13.5 m, up 71.5% vs. 9M 09
• Focus on contract, driving 58% of organic mobile net adds in 9M 10 (64% in Q3 10), to 31% of the base
• Outstanding MBB increase on rapid adoption ^o fsmartphones
• Sustained momentum in FBB: Q3 10 organic net adds 2.4x Q3 09
• Improved trends in fixed line in all regions, halving net line losses (-54.5% y-o-y organic in Q3 10)

Strong sales, ramp up in growth rates

Telefónica, S.A Investor Relations

⁶ Organic growth assumes constant exchange rates as of 9M 09 (average fx) and excludes changes in the perimeter of consolidation. Therefore, it excludes the consolidation of HanseNet (since mid February 2010), Jajah (January-September 2010), Telyco Marruecos in January-September 2009, and Manx Telecom in July-September 2009 and includes Tuenti (August-September 2009). Figures exclude hyperinflationary accounting in Venezuela in both years.

Booming mobile data revenue on increased MBB adoption

• Rapid adoption of MBB, boosted by growing penetration of smartphones and high-end devices
• Strong commercial push across markets
• Attractive commercial offers to monetize the growth opportunity through segmentation/tiered pricing based on offers with data control
• Enlarging portfolio of devices through collaboration with suppliers & new operating systems to further boost MBB revenues

Healthy profitability driven by costs discipline & scale benefitsGROUP FINANCIALS

Organic growth assumes constant exchange rates as of 9M 09 (average fx) and excludes changes in the perimeter of consolidation. Therefore, it excludes the

consolidation of HanseNet (since mid February 2010), Jajah (January-September 2010), Telyco Marruecos in January-September 2009, and Manx Telecom in July-September 2009 and includes Tuenti (August-September 2009). OIBDA and OI figures do not include the impact of capital gain registered in the second quarter of 2010 from Manx Telecom disposal and in the third quarter from the revaluation of our pre-existing stake in VIVO. Figures exclude hyperinflationary accounting in

Telefónica, S.A Investor Relations

Venezuela in both years.

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High cash flow generation despite increased CapEx

Organic growth assumes constant exchange rates as of 9M 09 (average fx) and excludes changes in the perimeter of consolidation. Therefore, it excludes the

Investor Relations ⁹ consolidation of HanseNet (since mid February 2010), Jajah (January-September 2010), Telyco Marruecos in January-September 2009, and Manx Telecom in July-September 2009 and includes Tuenti (August-September 2009). OIBDA figure does not include the impact of capital gain registered in the second quarter of 2010 from Manx Telecom disposal and in the third quarter from the revaluation of our pre-existing stake in VIVO. CapEx excludes the spectrum acquisition in Germany in Q2 10 and in Mexico in Q3 10. Figures exclude hyperinflationary accounting in Venezuela in both years.

Telefónica, S.A

2010 guidance confirmed

Telefónica, S.A Investor Relations 2009 adjusted figures for guidance exclude Telyco Marruecos results in T. España, Medi Telecom capital gain and write-offs. 2010 guidance assumes constant exchange rates as of 2009 (average FX in 2009) and excludes hyperinflationary accounting in Venezuela in both years. It also includes the consolidation of HanseNet and Jajah in T. Europe. In terms of guidance calculation, OIBDA exclude write-offs and exclude the capital gain from the revaluation of our pre-existing stake in VIVO and the restructuring in T. 02 Germany. Group CapEx also excludes Real Estate Efficiency Program of T. España and spectrum licenses.

10

T. España: Gradual improvement continues y-o-y

Telefónica, S.A Investor Relations Comparable terms for 9M 10 y-o-y change include Tuenti in the period Aug-Sept 2009 and exclude the following effects: USO in Q1 09 and Q3 10, real estate capital gains in Q1 09 and Q3 09, Telyco Morocco in Q1 09 , Q2 09 and Q3 09, TV Tax in Q1 10 , Q2 10 and Q3 10, revision of the estimates in Q2 09 for the personnel commitments provided for in prior periods to 2009, bad debt recovery in Q3 10, application sales in Q3 09 and Q3 10. Previous quarters year-on-year comparable changes published in Company´^s press releases.

Continued strength in contract and MBB

Leading the market with the highest gap between access and revenue share:

• Net adds boosted by contract gross adds (+29.5% y-o-y) and benchmark churn rate in the market (q-o-q reduction)
• Contract accounting for 67% of total base with stable churn at 1.4%
• Difficult trading conditions & different summer promotions impacting traffic (-3.0% y-o-y) and outgoing voice ARPM (-2.3% y-o-y) in Q3 10
• Enhanced data revenue trends, boosted by wireless connectivity revenues offsettin g lower premium SMS due to re gulation y y gp g
• Further MBB adoption, doubling customer base

Comparable terms include Tuenti in the period Aug-Sept 2009 and exclude the application sales in Q3 09 and Q3 10. MBB accesses include: Monthly and daily wireless data flat rates. 12

TELEFÓNICA ESPAÑA

Enhanced commercial activity across portfolio

• Top line evolution in Q3 10 impacted by weaker traffic & lower contribution from subsidiaries amid challenging trading conditions
• Sustained leadership in FBB on the back of premium quality offer and best Sustained leadership in FBB on the back of premium quality offer and best-in class churn (y in class churn (y-o-y decline): y
• •Share of net adds in Q3 10 increased to its best level since Q3 09 at 36%
• •ARPU erosion (-8.0% y-o-y up in 9M 10) in a very competitive market
• Further y-o-y reduction in retail line losses on improved value offering, despite lowest wholesale ULL prices in Europe
• Stabilization of total wireline accesses (-0.6% y-o-y ) as wholesale net adds offset nearly 90% of retail line losses ( y y ) y
• Strengthened competitive position in Pay TV driving ARPU and churn improvement

Comparable terms exclude the following effects: USO in Q1 09 and Q3 10, application sales in Q3 10 and Telyco Morocco in Q1 09, Q2 09 and Q3 09. Total fixed accesses include: Retail wireline telephony accesses, wholesale line rental, fully unbundled loops and naked wholesale ADSL.

T.Latam: Revenue and OIBDA growth acceleration

• Sustaining positive trends from previous quarter:
• •179.2 m accesses
• • 10 6 ^m net adds in 9M 10: 1 9x y-o-y 1.9x y oy
• •Churn contention across services
• Ramp up in organic revenue growth (+0.7 p.p. vs H1 10):
• • Continued acceleration for 3rd consecutive quarter
• • Double digit growth in mobile service and Internet & Pay TV revenue
• • Revenue acceleration in businesses accounting for more than 70% of sales
• Sequential organic OIBDA improvement (+0.9 p.p. vs. H1 10), ahead of revenue acceleration
• Limited organic OIBDA margin y-o-y erosion (-0.8 p.p. in 9M 10) despite higher commercial activity and lower profitability in Venezuela
• Growing OpCF in euro terms y-o-y despite the

TELEFÓNICA LATAM

Wireless: growth in voice & data fuel double digit top line

Mobile KPIs

Revenue growth (9M 10 y-o-y or ganic chan

• Sustained top line across all services

• +5.7 p.p. or ganic y-oy ram p u p in data/service pp g y y pp revenues to >21%

• Gross adds up 20.6% y-o-y in 9M 10 (+34.5% in contract)

• Flat churn at 2.5% in 9M 10, down in contract
• Intensified focus on contract: +4.7 p.p. vs. Jun-10 growth rate, leveraging migrations (~2.5 m net)
• •60% of Q3 10 net adds on contract (17% in Q3 09)
• •20% of the base on contract (+2.5 p.p. y-o-y)

ge) ARPU & Traffic (9M 10 y-o-y or ganic chan ge) g ( y y g g)( y y g g)

Wireline: Strong commercial performance

• Strong growth ramp up in FBB (+5 p.p. vs. Jun-10 growth rate):
• •Q3 10 net adds, exceeding 9M 09 volume
• •Lower churn across countries
• •BB/fixed lines: +4 p.p. y-o-y to 29%

Peru

Chile

Arg. Col.

Arg

Col

Brazil

Latam

• Retail fixed line accesses stabilization driven by enhanced quality and focus on bundles:
• • Positive trend in traditional fixed accesses excluding fixed wireless performance
• •66% of wireline accesses on bundles
• Churn reduction on improved quality

Increased contribution from Internet & from &Pay TV revenue:

•2P&3P/BB: +2 p.p. y-o-y to 57%

y-o-y growth

Brazil: Gaining momentum across businesses

• Data revenue explosion (+70% y-o-y in l.c.) on innovative and high quality offer
• Robust OIBDA margin up y-o-y despite commercial margin, y-o-y, activity and focus on contract

Good performance in key operations

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T.Europe: Sound financials driven by commercial momentum TELEFÓNICA EUROPE

Telefónica, S.A Investor Relations

Organic growth: assumes constant exchange rates and excludes the consolidation of HanseNet (since mid February) and Jajah (January-September), Manx T. in Q3 09 and the capital gain from its disposal in Q2 10 (€61 m). CapEx excludes spectrum acquisition in Germany (€1,379m). HanseNet and Manx T. customers are also excluded. Comparable growth: organic evolution and excluding one-offs affecting OIBDA: Restructuring costs (€42m in 9M 09; €228m in 9M 10), USO (€6m in 9M09; €1m in 9M 10), T-Mob settlement (€39m in 9M 09) and real estate disposals in the Czech Republic (€13m in 9M 09).

T.O2 UK: Mobile Internet boosting customer lifetime value TELEFÓNICA EUROPE

Targeted investment in high value base: • Increased upgradin g activit y in Q3 10 (+19.3% y-o-y) ( y y)•Market leading contract churn at 1.1% in 9M 10

•20% of mobile base in 9M 10 on MBB

Total revenue growth acceleration to 5.6% y-o-y in 9M 10:

• •R i MSR d i bh i P2P SMS Ramp-up in drivenby growt in nonrevenue: +35% y-o-y in l.c. to 33% of data revenues (+6 p.p. y-o-y)
• • Handset sales up 9.7% y-o-y in l.c. driven by higher demand for smart^phones Ex-MTRs p

Q3 ¹⁰ OIBDA impacted by higher number of +5.8% 25.7% higher upgrades:

• Higher commercial costs supporting MBB adoption to drive data revenue growth

Telefónica, S.A Investor Relations

T.O2 Germany: Solid financials, acceleration of HanseNet integration TELEFÓNICA EUROPEEnhanced commercial activity:

• Solid positioning in MBB •• Q3 10 prepay mobile net adds (+5.8% y-o-y) •Strong push in FBB net adds y-o-y (+68.3% in Q3)

Solidorganic revenue increase on the back of:

• • Sustained ramp up in service revenue growth (+3.6% y-o-y in Q3 10: +0.9 p.p. q-o-q) driven by contract segment and data
• • Non-P2P SMS revenue up 34 %y-o-y in 9M 10 to NonPy oy41% of data revenues (+6 p.p. y-o-y)
• • Strong fixed line sales (+10.1% y-o-y organic in 9M 10)
• • Handset sales growth deceleration in Q3 10 due to annualization of My Handy (Q2 09 introduction)

Profitable growth:

• • HanseNet dragging 1.2 p.p. of 9M 10 OIBDA margin
• • Cumulative OpCF close to 3x higher y-o-y in comparable terms
• HanseNet integration ahead of schedule:
• •Pay back of restructuring costs in 2 years

Organic growth: excludes the consolidation of HanseNet in January-September 2010 and the acquisition of additional spectrum. Comparable: organic evolution and excluding restructuring costs (Q3 10: € 202 m and € 7 m in Q3 09).

Leverage ratio within target range after Brasilcel acquisition GROUP FINANCIAL EXPENSES AND DEBT

• • Average debt life of our total debt standing at 6 years
• Contained financial expenses at 5% benefiting from floating exposure positioning

Leverage ratio: Dec-09: calculated based on FY 09 figure, excluding results on the sale of fixed assets. Sep-10: 9M 10 annualized excluding results on the sale of fixed assets and includes 100% of Vivo's OIBDA for 9M 10.

Investor RelationsFinancial expense rate excluding the transfer of the difference in market value of our stake in BBVA from equity to financial results, which continues to be registered as financial investments available for sale.

Summary

Solid earnings momentum

• Sound financial performance across the P&L leveraging our differentiated profile
• Continued strength in revenue growth capitalizing on our diversification
• Strong commercial push with profitability showing sequential stabilization
• Driving MBB adoption and investing in growth projects to further boost revenue growth
• Strong cash-flow generation
• Robust financial position, with leverage ratio in line with Company guidance
• 2010 and 2012 outlook reiterated
• Prioritizing shareholder returns, with DPS in line with previously outlined targets