Telefonica S.A. — Investor Presentation 2021

Nov 4, 2021

RESULTS January - September 2021

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Q3 21 Results

Mr. Ángel Vilá COO

Higher growth, smart capital allocation, further de-leveraging

Q3 21 highlights

Revenues	OIBDA	EPS	Further net debt	Commercial
y-o-y org	y-o-y org	y-o-y	reduction	momentum
Sequential acceleration	Consistent growth	Net income €706m	Streamlined net debt	Including VMO2 accesses, ex-C.Rica
+3.6%	+1.6%	€0.12	€25.0bn1	+3% y-o-y
Service revs. +3.3%, B2B +4.8%	OIBDA margin flat y-o-y	9M Underlying EPS +6.1%	9M FCF ex-spectrum €2.5bn	Increased customer satisfaction

✓ Second straight quarter of simultaneous organic revenue and OIBDA y-o-y growth

• ✓ Flat FX impact to revenues and OIBDA y-o-y, growth in reported revenues (ex-changes in perimeter) aligned with organic growth
• ✓ Stabilisation in OIBDA-CapEx on smart capital allocation; CapEx (ex spectrum)/Sales at 12.7% in Q3 (Hispam at 7.3%)
• ✓ Net debt -31.8%¹ y-o-y; improved capital structure on FX rebalancing and higher debt in Latam currencies (26%¹ of total net debt+leases; +11 p.p. y-o-y)
• ✓ One of the largest fibre footprint in Europe & Latam: 156.6m UBB PPs; an opportunity to facilitate social progress by extending connectivity and digitalisation
• ✓ Digital transformation: paving the way for economic and social recovery and a slowdown in climate change

Progress in strategic priorities; Reducing complexity

• ✓ Re-prioritising capital allocation to core markets; spectrum acquisition (SP in Q3, BRA auction 4/11); GER 5G network is live in >100 cities. UK integration at pace
• ✓ T. Hispam: reduced capital employed, improved efficiencies, creating value. Closing of Costa Rica deal (€455m). Sale of El Salvador for \$144M (7x 2020 OIBDA)
• ✓ T. Infra: development of fibre vehicles creates growth opportunities. Closing of T. Deutschland sites sale to ATC. Maintaining optionality across asset base
• ✓ T. Tech: growth of 24.9% in Q3 21; Cancom UK&I consolidated as of 1st August; strengthening portfolio through new partnerships
• ✓ More sustainable operating model: 79% of process digitised; agreement with NEC to build Open RAN; live pilots underway in four core markets
• ✓ Sustainability commitment: "E" (new PPAs to supply renewable energy), "S" (connecting rural & inland areas), "G" (Vivo "Best EM Performers Ranking" by Vigeo Eiris)

Financial summary

		9M 21			Q3 21
€ in millions	Reported	Reported y-o-y	Organic y-o-y	Reported	Reported y-o-y	Organic y-o-y
Revenues	29,603	(8.0%)	1.7%	9,298	(11.1%)	3.6%	Reported figures affected by capital
OIBDA	20,620	111.6%	1.7%	3,734	39.8%	1.6%	gains and changes in perimeter
OIBDA Underlying	9,797	(8.9%)		3,034	(13.7%)
OIBDA-CapEx (ex-spectrum)	16,716	194.3%	(3.0%)	2,556	92.8%	(0.5%)
(OIBDA-CapEx)/Revenues (organic)	19.9%		(1.0 p.p.)	20.1%		(0.8 p.p.)
Net Income	9,335	n.s		706	c.s.		Record net income in 9M
EPS (€)	1.63	n.s.		0.12	c.s.
FCF (incl. leases principal payments)	1,470	(47.5%)		560	(64.5%)
FCF (ex-spectrum paid)	2,482	(11.7%)		869	(44.9%)		Solid FCF ex spectrum
Net Financial Debt (€bn) (Post estimated distribution of proceeds to Telxius minorities) ex-leases	25.0	(31.8%)					Net Debt down 4.6% vs. Jun-21

FX impact From headwind to tailwind in Q3

€ (m)	Q3	9M
Revenues	(22)	(981)

OIBDA 1 (365)

Changes in the perimeter impact (T. UK, Telxius towers, Costa Rica)

€ (m)	Q3	9M
Revenues	(1,604)	(2,134)
OIBDA	(541)	(717)

2021 guidance

Telxius Towers and T. UK deconsolidated as of 1 June and Costa Rica as of 1 August

Financial Targets	2021 Guidance	9M 21
Revenues (y-o-y organic)	"Stable to slight growth" (upgraded in H1 from "stabilisation")	1.7%
OIBDA (y-o-y organic)	"Stable to slight growth" (upgraded in H1 from "stabilisation")	1.7%
CapEx/Sales (ex spectrum)	Back to normalised level up to 15%	13.2%

Shareholder remuneration

2021 Dividend	€0.30/Share
Interim Dec-21	€0.15/sh. (Voluntary Scrip)
Final Jun-22	€0.15/sh. (Voluntary Scrip)

2021 calendar payments

Jun/21 €0.20/sh. (Voluntary Scrip) Dec/21 €0.15/sh. (Voluntary Scrip) 1.65% treasury stock to be cancelled

Strategy aligned with the UN SDGs

"E": ENVIRONMENTAL BUILDING A GREENER FUTURE

Through digitalisation we contribute to a more sustainable, circular, and decarbonised world

• New long-term renewable electricity agreements in Spain and Brazil (SDG #7)
• >1k COs closed in Spain, saving 1k GWh; accelerated 3G switch-off in Germany, leading to annual energy savings of 60 GWh (SDG #12, #13)
• Launched Net-Zero Hub to help small businesses become net-zero in the UK (SDG #13)

LEADING BY EXAMPLE

"S": SOCIAL HELPING SOCIETY TO THRIVE

Economic and social development facilitated by digitalisation

• First ever National Databank launched in the UK, providing free mobile data to tackle data poverty (SDG #9)
• Connecting people in rural and inland areas: 600 black-out zones eliminated in Spain, 250k PPs in Southern Argentina, 13k areas in Peru; 13m PPs with gigabit BB in the UK (SDG #9)
• Telefónica's International Volunteering Day; 25k+ employees in 300 initiatives (SDG #4, #8, #13)
• ProFuturo: 1 st Spanish project to be awarded "WISE Prize" for educational innovation (SDG #4)

Building trust capital with customers, employees, suppliers, and shareholders

• Vivo named in Vigeo Eiris' "Best Emerging Market Performers" Ranking
• Awards in diversity; Ministerial "Equal Conciliation Seal" in Chile; Scotiabank "Equality Grand Prize 2021" in Peru (SDG #5)
• New target of 30% of black executives in leadership positions in Brazil by 2024 (SDG #5)

Spain | Ongoing recovery, strong cash generation preserved

Q2 21 Q3 21

Net adds & Convergent KPIs

Accesses (m)

Key financials

Key milestones

• Sequential improvement in all accesses' trend
• Convergent ARPU +2.5% q-o-q, improved customer mix
• Sustained focus on revenue share
  • Increased share in high value segment as market cooled down
  • "Back to school" promos softer at high-end vs Q3 20
  • Low value segment fragmented and highly competitive
• Record NPS (33%), segmented valued oriented offer
  • ……, #1 brand in quality of service
  • Competitive entry level proposition, new O2 offering (Oct.)
• Long term agreement awarded, green energy for 50% of buildings
• Supporting areas affected by the La Palma volcano eruption
• Awarded with the 1 st allocation of NextGen funds for rural UFBB

Financial highlights

• Sustained y-o-y revenue growth
  • Handset sales +37.2% y-o-y on new Fusion portfolio
  • OIBDA y-o-y hit by higher energy cost and lower content cost in Q3 20
  • OIBDA q-o-q trend improved ex energy costs rise & base effect
• Solid cash conversion
  • 9M OpCF organic margin 27.2%, European benchmark
  • Limited capital intensity (9M CapEx/Sales 11.2%)

Germany | Strong commercial and financial performance

O2

churn stable y-o-y

Q3: 1.0%

Operational KPIs

ARPU

Key milestones Q2 21 Q3 21

• Strong commercial traction; driven by O² free portfolio
  • 'Willkommen im sehr guten Netz von O2' marketing campaign promoting equalised mobile network quality
• Fixed base +2k, sequential improvement over 2021 on TAA approach
• 5G network active in >100cities
  • On track to achieve 30% 5G population coverage by YE 2021
• Accelerated 3G switch-off, improving 4G/5G and saving energy
• 100% green energy consumption (incl. 3rd party sites) beyond 2021

Key financials

Financial Highlights

• Sustained revenue trends; strong commercial momentum supporting service revenues
• Strong OIBDA performance; top line growth, incremental efficiencies, partially offset by phasing back of marketing spend
• 9M CapEx +11.6% y-o-y; C/S 14.2% back-end loaded phasing
• OIBDA-CapEx/Revenues -0.2 p.p. vs 9M 20

UK | Strong commercial momentum, integrating at pace

Operational KPIs Key milestones

Accesses, m (y-o-y)

Key financials

• Integration on track, combining capabilities by launching Volt in October, the first VMO2 consumer and SoHo converged product
• Strong commercial focus and traction, total base 55.3m +5% y-o-y; mobile contract net adds +108k, FBB net adds +42k
• Investing for the future with NGN expansion; 5G in 210 towns & cities and fixed gigabit network extended to 12.8m PPs
• FTTP upgrade pilots underway, completion in 2028
• Created National Databank, providing free mobile data to tackle data poverty and Net Zero Hub to help SoHo become net zero.

Financial highlights

• Revenue back to growth, mobile improves q-o-q on flagship handset launches; fixed q-o-q decline on B2B wholesale phasing
• 9M OIBDA +3.1% y-o-y, Q3 slowdown as a result of investment in marketing and digitalisation offsetting revenue growth
• OIBDA Margin reflects change in revenue mix, coupled with investment in commercial performance and future growth
• 9M CapEx +9.2% y-o-y > NGN investments in Lightning and 5G
• Cash profitability; OIBDA-CapEx margin -0.3 p.p. y-o-y vs. 9M 20
• FY 21 proforma transaction-adjusted EBITDA growth expected

Brazil | Strongest service revenue growth in 6 years

Service Revenue OIBDA

• Vivo again confirms its leadership
  • 33.0% MS in mobile; 36.8% MS in postpaid; 28.8% MS in prepaid
• Strong mobile momentum, digital services gaining relevance
  • Enlarging lifetime with contract churn under control (1.2%)
• Impressive transformation to FTTH
  • Accelerating deployment goals: 29m in 2024
  • 1m new connections YTD (0.9m in FY 20; 0.6m in FY 19)…
  • …with lower cost to deploy (-60% in 2 yrs)

22.5%

Revenues

OIBDA Margin OIBDA-CapEx/

Superior financial performance

• Accelerating service revenue growth
  • MSR +5.7% on access & price increases
  • Fixed revenues back to growth (+0.4%) after 4 yrs
• Growth & transformation CapEx 87% of total (> fibre; < legacy)
• Vivo's ESG initiatives continue to evolve
  • 100% renewable energy since 2018. Signed long-term contracts for distributed green electricity generation
  • 50% of their Internship program to be destined for black students

Tech | High growth and increasing scale

Improved business profile

• Increased scale, enhanced capabilities and revenue mix (VAS) with the addition of T. Tech UK&I (formerly CANCOM UK&I)
• Annualised¹ revenue base of c. €1bn
• Unique assets & premium partnerships
  • Cloud Hub Spain, Intelligent SOCs , global IoT, in-house AI/Big data
• Significant cross-selling advantage: >5.5M B2B T. Group customers

T. Cloud & Cyber Tech

• "FlexWAN"- First managed service for Cloud-Native in Spain
• Enhanced SMB offer in Chile and Germany
• New partners: Additional Zoom functionality; CrowdStrike Falcon platform (MDR)
• Security: OT Specialisation of Fortinet's channel program; First Cybersecurity robot's laboratory (CS4R) in Munich
• Global agreement with STC Cybersecurity

MICROSOFT "Partner of the year in SMB digitalisation"

• CLOUD BLUE "Global Partner of the year"
  • ZOOM "EMEA Services Provider of the Year"

T. IoT & Big Data Tech

• Increasing activity in connected Car, Big Data, Industry 4.0 and Utilities
• IoT connectivity revenue acceleration (+23.6% y-o-y in Q3)
• Leveraging connectivity technology (NB-IoT/LTE-M and p-LTE/5G), best in class partners
• Key for B2B digitisation post COVID-19
• Unique AI of Things

STL Partners	"Innovation leader case study: Telefónica Tech AI of Things"
KALEIDO	"Champion in Intelligence in Private Networks" &
INTELLIGENCE	"Highflyers in Connectivity Management Platform"

Infra | Growth and optionality ahead

Q3 21 Results

Ms. Laura Abasolo

CFCO & Head T. Hispam

Hispam | Renewed strategy bears fruit

Q2 21 Q3 21

Operational KPIs Key milestones

Net additions (k) y-o-y

Key financials

• Accelerating value growth
  • FTTH connections +26% y-o-y
    • 11.7m FTTH PPs (+2.1m in LTM)
    • Further to come thanks to COL & CHL fibre vehicles
  • Contract accesses +9%
• Speeding up business transformation
  • Accelerating digitalisation: 21.4% sales via digital sales
  • New operational model to capture value of economies of scale
• Launch of social services & initiatives in most countries
  • Movistar Mex selected as the most responsible Co. (Expansión's 2021)
  • Launched Health Tech Community, 1st digital health ecosystem in COL

Solid financial performance

• Service revenue growth across the region (excl. MEX's MTR cut)
• Growth in reported OIBDA
• Reduced capital employed (9M: -23% y-o-y)
  • Asset light models, reducing exposure to legacy
• 8.6% CapEx/sales in 9m, -0.6 p.p. y-o-y
• Rational approach to spectrum auction

Significant debt reduction on deals completion

Net Financial Debt

12

1. Includes net proceeds from the closing of the sale of El Salvador, the closing of Colombia fiber vehicle and including the acquisition of Oi

2. Post estimated distribution of proceeds to Telxius minorities

Final Remarks

Mr. Ángel Vilá COO

Wrap up | Sustainable long-term strategy

Strategic focus on sustainable, profitable growth

• Portfolio simplification to continue with reduced exposure to Hispam, further de-leveraging and execution of transactions to crystallise value
• Leveraging attractive fibre opportunities and unlocking value through own deployment and fibre vehicles
• Continued digitisation driven by high-quality, secure and greener connectivity

Steady revenue and OIBDA organic growth

• Accelerated revenue growth (both organic and reported); positive organic revenue growth in all business lines

Smart capital allocation

• Capturing growth opportunities; ~45% CapEx ex spectrum allocated to NGN; fibre and 5G
• Spectrum acquisitions in the UK and Spain at 40% to 50% lower prices than benchmark

JV VMO2 integration progressing at pace

• Return to top line growth; investing for the future

Enhanced balance sheet and capital structure

• Ongoing net debt reduction, with €1.2bn decline in Q3 to €25.0bn
• Net financial debt+leases in Latam currencies 26% of total; 15% in Sep-20

Confirming 2021 outlook and dividend

Results presentation and Q&A Session

Telefónica's management will host a webcast on 4 th November at 10:00 AM (CET), 9:00 AM (GMT), and 5:00 AM (EST)

Participants from Telefónica: Ángel Vilá (COO), Laura Abasolo (CFCO & Head T. Hispam), Eduardo Navarro (Chief Corporate Affairs & Sustainability Officer), and Adrián Zunzunegui (Global Director of Investor Relations). From Virgin Media-O² JV: Lutz Schüler (CEO)

• To access the webcast: click here
• The webcast replay will be available on Telefónica IR's website after the event

Webcast Q&A Session

• To participate in the Q&A session, please register using the following link to receive the dial in and PIN details. click here.

For further information, please contact: Investor Relations Adrián Zunzunegui (adrian.zunzunegui@telefonica.com) Isabel Beltrán (i.beltran@telefonica.com) Torsten Achtmann (torsten.achtmann@telefonica.com) Tel. +34 91 482 87 00 ir@telefonica.com www.telefonica.com/investors

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