Telefonica S.A. — Investor Presentation 2012

Mar 31, 2012

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 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 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.

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.

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.

Q1 Overview: Delivering on our 2012 strategy

Financial summary

	Re p	d te or	Un de ly in r g		O ic rg an
€ in i l l ion m s	Q 1 1 2	C ha ng e y- o- y	Q 1 1 2	C ha ng e y- o- y	C ha ng e y- o- y
Re ve nu es	1 1 1 5, 5	0. % 5 +	1 5, 5 1 1	0. % 5 +	0. 1 % +
O I B D A	5, 0 8 1	-8 8 %	5, 0 8 1	-7 4 %	-7 6 %
O I B D A M in ar g	3 2. 8 %	-3 4 p. p.	3 2. 8 %	-2 8 p .p.	-2 7 p .p.
O I	2, 5 1 1	-1 7. 8 %	2, 7 7 3	-1 5. 8 %	-1 5. 0 %
Ne t in co m e	7 4 8	3. 9 % -5	1, 2 8 4	-2 6. 6 %
E P S	0. 1 7	-5 3. 4 %	0. 2 9	-2 % 5. 7
O C F p ( OI BD A- Ca Ex tru m) p ex -sp ec	3, 3 4 7	-1 6. 1 %	3, 3 7 4	-1 4. 2 %	-1 6. 3 %
Ca /s Ex le p (ex tru m) a s -sp ec	1 1. 0 %	1. 0 p + .p.	1 1. 0 %	1. 0 p + .p.	1. 5 p + .p.

Ex t io l i te ce p na m s		Q 1 1 2	Q 1 1 1
O I B D A		0	8 9 +
O I	Re du ctio n i he lue of n t va	2 6 2 -	2 3 6 -
Ne In t co m e	TI inv € - est nt: 33 7 m me	5 3 6 -	1 2 5 -

Q1 performance in line with expectations, 2012 guidance confirmed

Underlying growth: Reported figures excluding major exceptional items and spectrum acquisition.

Organic growth: Constant exchange rates, excludes changes in the perimeter of consolidation and hyperinflation in VZ. It also excludes spectrum acquisition and exceptional items.

Solid commercial start for 2012

Mobile net adds

(in millions)

• •Smartphones represent 81% of commercial activity in Europe
• • 17%y-o-y increase in mobile gross adds coupled with churn control
• • 2xmobile net adds in Latin America vs. Q1 11

Net additions excluding the impact of the disconnections of 2.0 million mobile accesses in Spain in Q1 12.

Revenue growth driven by key strategic areas

•Improved trends across regions

•Similar contribution from Brazil (23%) and Spain (25%)

Traffic converging (y-o-y)

Outstanding perfomance in Latam, our key growth engine

Telefónica, S.A.

Increased customer investment impacting profitability

Q1 11 Commercial Costs Network&System costs Others Q1 1235.5% 32.8%(2.4 p.p.) (1.1 p.p.) 0.7 p.p. • Savings from headcount reduction in Spain already flowing • New restructuring programs in Brazil, Czech R. and Ireland. Savings to flow in coming quarters • Interconnection costs down on lower MTRs• Higher costs driven by strong commercial push from H2 11; easier comps from H2 • Further benefits from actions to improve market dynamics to comeQ1 11 Q1 12 3.9%10.8%Organic change (y-o-y) • Network expansion (coverage & capacity) impacting OpEx • Optimizing resources through TGR: nonstrategic tower sales in Q1 for € 123 mUnderlying OIBDA margin > € 1 Bn impact in FY 12 OpCF from scale benefits through TGR to flow

Latam: Robust growth acceleration across regions

Excludes MTRs cuts in Mexico, Brazil, Venezuela and Peru, changes on F-M retail tariffs in Brazil and Peru, and other regulatory changes in Peru.

Brazil: Widening leadership

Sources: Anatel for market shares, Teleco for 3G coverage.

Brazil: Commercial momentum flowing to financials, synergies materialised below OIBDA

Telefónica, S.A.

T. LATAM

Latam: Widespread growth acceleration (i) Contribution to TEF Q1 Revenue

1Excludes MTRs cuts, changes on F-M retail tariffs and other regulatory changes in Peru.

T. LATAM

Latam: Widespread growth acceleration (ii) Contribution to TEF Q1 Revenue

1Excludes MTRs cuts.

T. Europe: Building momentum on commercial refresh

Focused commercial activity towards a data centric model

• Smartphone were 81% of handset sales in Q1
• Contract segment at 58% of total base (+3 p.p. y-o-y)
• •FBB accesses close to 60% of traditional fixed
• • Robust data revenue growth:
• Smartphone penetration at 30% of base (+9 p.p. y-o-y)
• Integrated plans across footprint
• • Top line pressure driven by voice usage optimization, price competition and MTR drag

Mobile

OIBDA primarily hit by strong commercial costs

• • OIBDA driven by revenue pressure and strong customer investment to defend/increase market share and lead MBB:
• Cost contention initiatives drive OpEx decline: -1.6% y-o-y in Q1
• • Transforming the commercial model:
• Successful "My Handy" model in Germany
• No acquisition subsidies in Spain from March

Spain: Executing our transformation plan (i)

(1) FBB customer in € 24.9 tariffs, Mobile contract customers in tariffs >€ 30.

Spain: Executing our transformation plan (ii)

Note: All data excluding the impact of the disconnection of 2.0 million mobile accesses in Spain in Q1 12.

Spain: Further efficiency gains across the board

UK: Regaining momentum

R i e c o v e r n g i l c o m m e r c a t m o m e n u m	• In d v lu & lu in i ive t t cr ea se o m e va e a v er y co mp e ke t: ma r H ig he d ds inc Q 3 1 0 o  t c tra t n t a s on c e s e n ( ) l i d g d ds 8 % so ro ss a + y- o- y Co ix 0 % ( 2 )  tra t m t 5 n c a + p. p. y- o- y • In d ha f g d ds i ho "a l l y t t cr ea se s re o ro ss a w u ou " da f fe ( E ) t ta ca n e a o rs • Ne "O &o " ta i f fs in fo ing 2 0 1 1 's lau h w n n r re rc nc , f ier d da i f fs t ta ta o e r
S t b i l i i a s n g r e v e n u e t d r e n s	• Im d tre ds in ice S M S p ro ve q- o- q re ve nu e n vo ; ta b i l isa t io s n • So l i d S M S da ta 1 % 7 no n- re ve nu es up y- o- y , • Re im i ly im d by te ve nu es p r ar p ac sa g e u im isa ion d low ice in t t try ts op a n er e n p r p o
S i i f i t g n c a n t c u s o m e r i t t n v e s m e n	• Ma in io dr ive by h ig he lu f rg er os n n r v o m es o te t io d is i t io re n n a n ac q u n • Co ia l e to de te ing m m er c xp en se s m o ra g o fo d: rw ar Be hu in ha 2 y  t c tra t c t s on c rn mo re n ea rs

Percentage of out of contract customers down 3.4 p.p. q-o-q

Smartphone penetration

MSR (ex-MTRs; y-o-y)

Contract segment

Data revenues/MSR

Germany: Successful strategy driving growth

		Co d ds tra t n t a ( '0 ) 0 0 n c e	S ho io tp tra t m ar ne p en e n
B t- e s e v e r t t t q a r e r c o n r a c u d d t n e a s	• Sm tp ho ha lea de h ip ( 9 % 5 ar ne s re rs l s h ip ) to ta ts ov er me n • S tro bu in t a d tn ng s es s s eg m en n p ar er d in iv i tra t ty g ac • Co % f ( ) tra t is 5 1 ba 3 n c o se up p. p. y- o- y • Co is hu im te t c t ns n rn p rov em en	Co hu tra t c n c rn 2 9 4 2 7 1 2 0 6 1. 9 % 1. 8 % 1. 6 % Q 1 1 1 Q 4 1 1 Q 1 1 2	+5 p. p. 2 1 % 1 6 % Ma 1 1 Ma 1 2 r- r-
D t a a i i t t m o n e s a o n d i i r v n g r e v e n u e t h g r o w	• M S R ler io lev in t ac ce a n er ag g : Su fu l da isa ion  ta t t cc es s mo ne Co A R P U h  tra t t n c g row M T R l isa ion in Q  ts t 1 cu an nu a • Be ix, b i le da is t te ta 4 4 % r r ev en ue m m o f M S R ( ) 5 o + p. p. y- o- y	M S R h t ( g ro w y- Ex -M TR Re 1 % 7. 2. 2 % Q 4 1 1	) o-y rte d po 1 0. 5 % Q 1 1 2
S t r o n g f i b i l i t t p r o a y, L T E k t o n r a c	• Pr f i ta b le im t a o p ro ve m en s re ve nu e f O t h low to I B D A, ke t ma r g ro w s inv f fse by f f ic ien tm t o t es en e cy • Ag fo in D T f i be k t tw re em en r u s g r n e or fu he da h t ts ta t r r s up p or g row	Pr f i b i l i ta ty ( o y- o-y O I B D A in ma rg 1 3. 1 % % 2 3. 4 ( ) 2. 2 p .p. O I B D A	) 9. 2 % Op C F

Czech R.: Further improvement in financial performance

TELEFÓNICA

Balanced access to credit markets, 2012 refinancing completed

Implementing measures to reduce our debt

1. OIBDA 12 months rolling ex-Redundancy Program in Spain in 2011.

2. Net Financial Debt ex-Redundancy Program in Spain and adjusted by Post Closing events.

3. Post Closing events include Colombia restructuring and other minority stakes disposals (Hispasat, PT and Zon).

Further actions to enhance financial flexibility

Concluding remarks: Delivering on our 2012 strategy

• •Solid commercial start for 2012
• •Significant top line improvement
• •Outstanding performance in Latin America
• •Setting the new paradigm in the sector
• •Balanced access to credit markets
• •2012 outlook reiterated, progressive improvement along the year

Organic growth: In financial terms, it assumes constant average exchange rates as of January- March 2011 and excludes hyperinflation accounting in Venezuela. In addition, the positive impact from the partial reduction of our economic exposure to Portugal Telecom is excluded in OIBDA and OI in Q1 11 (+89 million euros). Telefónica's CapEx excludes investments in spectrum and, in Q1 11, the real estate commitments associated with Telefónica's new headquarters in Barcelona.

Underlying growth: Reported figures excluding exceptional items and spectrum acquisition. All figures in million euros, net of taxes and minorities. Q1 12: reduction in the value of TI investment and operating synergies achieved (-337) and PPAs (-199). Q1 11: PT capital gain (+89), PPAs (-215).