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Q1 18 Highlights

Mr. Ángel Vilá COO

Highlights | Execution of strategic priorities

Enable people with the power of connectivity

357m accesses; +36% LTE; +7% smartphones; +20% FFTx/Cable; +5% Pay TV
Extending leadership in FTTx/Cable: 45.8m premises passed (+5.9m y-o-y)
More services, more usage; more ARPU

Operate in markets where we can have an impact & create value

All business units growing in Revenues & OIBDA ex-regulation

Spain: Accelerating revenue and OIBDA growth
Brazil: Growth and margin expansion
Germany: MSR ex-reg. continued to grow
UK: Robust financial performance; new spectrum to further strengthen operations
South Hispam: Solid growth rates
North Hispam: Impacted by new regulation in MEX

Optimise our capabilities for a sustainable digital future	• Strengthened our differential platforms • Solid advance in customer-centric digitalisation & data monetisation • Launch of AURA in 6 countries
Deliver on our financial targets	• Revs, OIBDA, OpCF org. growth in Q1 • Further net debt reduction • Q1 results in line with expectations • Reiterating guidance

Key financials Q1 18

Q1 18 (€m)	Reported IFRS 15 & 9	Reported y-o-y	Organic y-o-y
Revenues	12,190	(7.2%)	1.9%
Service revenues	11,040	(9.4%)	0.8%
OIBDA	3,864	(3.9%)	3.3%
Underlying OIBDA	3,863	(5.6%)
OIBDA margin	31.7%	1.1 p.p.	0.4 p.p.
OpCF (ex-spectrum)	2,381	(1.0%)	4.4%
Net Income	837	7.4%
EPS (€)	0.12	(13.2%)
Underlying EPS (€)	0.17	(3.0%)
FCF	550	(8.7%)
Net Financial Debt	43,975	(9.8%)

Reported figures y-o-y affected by

Negative FX evolution
Regulation
Restructuring costs, tower sales
Different accounting standards (2018 IFRS 15 & 9; 2017 IAS18)

IFRS 15 impacts Q1 18 -€10m in Revenues +€11m in OIBDA

Guidance confirmed

Operating 2018 guidance organic	Guidance 2018E (IAS 18)	Q1 18
Revenues	Growth of around 1% (despite regulation dragging: -0.9 p.p.)	+1.9 %
OIBDA Margin	Continues expanding around 0.5 p.p. (despite regulation dragging -1.6 p.p. on OIBDA growth)	+0.4 p.p.
CAPEX ex-spectrum/Sales	Around 15%	12.3 %

Solid balance sheet Additional deleveraging Improved ROCE Attractive, stable & sustainable dividend

Dividends to be paid in 2018 calendar yr. €0.40/sh.

Cash: 15/Jun/18 €0.20/sh.

Cash: 20/Dec/18 €0.20/sh.

Final Jun-19 €0.20/sh.

Sustained free cash flow generation

Strong Q1 FCF, operational leverage

Q1 q-o-q change in Net Debt

ND decrease in Q1, changing trends vs. previous years ND -9.8% y-o-y; (-€4.8bn y-o-y)

Q1 FCF affected by WC seasonality and extraordinary minority payment...

...FCF to improve throughout the year

FX impact structurally neutralised

Q1: BRL and ARS explain 80% of negative FX impact in OIBDA
FX spot rates explain Q1 increase in Net Debt
At current FX, weaker H1 18 y-o-y comps than in H2 18
Strong organic contribution
Q1 y-o-y: +€250m to revenues; +€134m to OIBDA

FX impact in Q1 FCF

Positive delivery on Revenues, OIBDA & OpCF

Growth acceleration Q1 18

Revenue mix transformation
Service Revenue growth +0.8%, despite regulation (-1.2 p.p.)
Margin expansion; continued focus on efficiencies & synergies; increasing relevance of digitalisation
All regions contributing to OIBDA growth (ex. N. Hispam)
Reported OpCF stable despite FX
Holistic and efficient CapEx (+1.5% y-o-y)
Covering more with less investments

Q1 18 Robust profitability

Monetisation focus enhanced

Attracting, bundling and upselling Capturing more usage with improved capabilities

M4M evolution to add more value
Revamped mobile in Latam
‣ "Movistar Series" launch (Feb-18)
‣ "Movistar Play" (OTT video) in 13 countries
New bundle with TV at the core
‣ " Fusion+ Ocio Total" (300 Mbps + series&films +2 mobiles) (Feb-18)
Enhanced prepaid portfolio in mid-high tiers
‣ More data and digital services ("GoRead", "NBA", "Vivo Bem")
Continued to develop recurrent data plans in prepaid Latam

• Enriched prepaid mid-level plans (Mar-18)

We are a platform Co. to better serve customer needs

Aura, the new customer relationship model

Leading the integration of AI in networks & customer care

10

Digitalisation, a leap forward in our bold transformation

Enhancing Customer Experience and Operational Efficiency

…initiatives already onboard to capture impact along 2018

Digitalisation drives cost savings…. ...higher CSI and digital engagement

Increased customer satisfaction, loyalty and usage

Q1 18 Results

Ms. Laura Abasolo CFCO

Spain | Solid trading in a rational market

Improving churn

"M4M", main strategy in the market in Q1
Increasingly competitive offering: solid Mobile, Fiber (retail & wholesale) and TV
"Fusión" growing base and ARPU
Improved value mix: 27% in high-value (+6 p.p. y-o-y)
Churn reduction across services
"Fusión", FBB, TV, Mobile: -0.1 p.p. q-o-q

Unmatchable platforms in quality and scale

Largest Fiber, LTE and TV coverage
Wholesale upside (just 24% accesses on Fiber)
Fiber wholesale agreements with main players

+2.2m 19.7m FTTH p. passed Q1 17 52% 10% 59% 24% o/FBB Retail o/Wholesale accesses Q1 18 y-o-y

Spain | Improving revenue and OIBDA trend

Sustained growth

Serv. Revs. growth improved to +0.8%; +1.8% ex-MTR/MásMóvil
Acceleration in "Consumer": +2.9% in Q1 (+1.6 q-o-q)
Improvement in "Business": -0.6% in Q1 (+2.0 q-o-q)
Decline in "Wholesale & Other": -3.5% in Q1 (-7.7 q-o-q)
Negative impacts at Wholesale revs. line start to kick-in
Wholesale/MVNO loss and MTR cut
Partially offset by fiber wholesale growth

Cash conversion

OpEx increase eased (+0.6% y-o-y; -0.1 p.p. q-o-q)
Lower commercial cost q-o-q
Upside in savings (personnel, digitalisation…)
Margin impacted by revenue mix
+0.2 p.p. y-o-y excluding Wholesale/MVNO loss
CapEx (+3.9%) & OpCF (-0.7%) on different CapEx phasing

Service Revenues & OIBDA

Strong margins

Germany | Positive financial performance

Continuous market momentum

Solid Q1 mobile contract net adds (+157K)
-Strong Partner trading on 4G offers
-LTE cust. (+15% y-o-y); penetration 39% (+7 p.p.)
O² Free ARPU accretive
O2 Ranked #2 in Connect Mobile Hotline-Test

Strong OpCF

Revenue trend improving
-MSR ex-regulation (+0.3% y-o-y); handset sales (+10.5%)
Sustained OIBDA growth and margin expansion
-Regulatory drag (-€14m vs. -€7m in Q1 17)
Incremental synergy savings on-track (OIBDA: €35m; CapEx: ~€15m)
CapEx (-5.6% y-o-y): efficient network consolidation & LTE rollout

Financials (y-o-y organic)

UK | Solid financials, capability enhanced

Largest customer base & trusted network

Leading network: 32.0m customers (incl. MVNO partners)
Continued contract base expansion, despite seasonally slower Q
Market-leading churn: 1.0% (broadly stable y-o-y and q-o-q)
Network quality assured with latest spectrum auction results
40 MHz of 2.3 GHz and 40 MHz of 3.4 GHz
Av. data usage per smartphone +36% vs. Q1 17

Robust financials

Revenue growth (ex-reg.): +4.2% y-o-y (vs. +4.5% in Q4)
Growing subscriptions, handsets, MVNO & non-mobile revenues
Consistent OIBDA growth
Ongoing impact from RLAH (-€23m in Q1; -€25m in Q4)
Supported by reduced annual licence fee payment
Strong OpCF growth +32.9% y-o-y on CapEx phasing

MSR ex-regulation

Q1 18

Brazil | Growth and value

Unique assets

M4M strategy is paying off
New hybrid portfolio launched in February
Largest and most reliable 3G and 4G network
Sustainable leadership: 41.4% contract market share
1.6% contract churn (stable y-o-y); unrivaled value proposition
Strong growth opportunity; LTE penetration 55%
‣ 364 cities with 4G+ (+250 in Q1 18)
Fiber as growth engine
⁸⁸ cities already covered with FTTH
‣ 4.6M already connected
TV: Best value proposition with cutting-edge technology
‣ IPTV available in 65 new cities

Brazil | Delivering profitable growth

Sustained revenue growth

MSR : +3.5% (+3.9% in Q4 17)
Boosted by data growth (+17.1%) and price upgrades
Outgoing postpaid revenue improved to +9.2% (Q4 17: +9.3%)
Fixed: -4.0% (-3.8% in Q4 17)
Affected by voice decrease, fixed to mobile substitution & DTH

Digital initiatives drive margins upward

OIBDA and margin growth
OpEx continue declining (-1.9%; 9 consecutive Qs of cost reduction)
Best Q1 margin since 2009
Digitalisation and efficiency as main levers
CapEx (+16.5%; on different phasing)
Solid investment over the years to create a unique combination of network, IT and service platforms
OpCF (-2.2%; different CapEx phasing); 22.0% margin

South Hispam | Healthy and consistent growth

('000)

Commercial recovery & margin expansion

Strong improvement in contract net adds
Better performance in Chile and Peru
FTTx/Cable: 1.8M connected (1.2M FTTH/cable connected)
ARGENTINA (Revs. €755m; OIBDA €245m)
Growth in value: (contract +5%; LTE +61%; FTTx: x4)
Solid Revenues and OIBDA growth
CHILE (Revs. €526m; OIBDA €153m)
Positive contract net adds for the 3rd consecutive quarter
Accelerating FTTx net adds (x4 y-o-y)
Better y-o-y OIBDA trend: -4.3% (vs -14.5% in Q4 17)
PERU (Revs. €501m; OIBDA €98m)
Positive contract net adds for the first time in 7 Qs
Continued solid performance in fixed business
Revenues and OIBDA declined affected by commercial intensity, competition and regulation

North Hispam | Commercial success overshadowed by regulation

Telxius | New "MAREA" cable now in service

Sustained commercial momentum

New state-of-the-art cables progressed according to plan
MAREA (US-Europe) in service since the end of March
BRUSA (Brazil-US) to come into service later this year

Solid financials across business

Revenue increase explained by towers; cable impacted by tougher comps in Q1 17
Operating efficiency sustained high OIBDA margin
CapEx intensity reflects deployment efforts in MAREA and BRUSA
To be reduced during H2 18

Net debt reduction despite seasonal Q1 effects

Focused on attractive long-term financing

lines & synd.…

Net Debt maturities

Interest payments cost

Conclusion