Telefonica S.A. — Investor Presentation 2023

Jul 27, 2023

Disclaimer

This document and any related conference call or webcast (including any related Q&A session) may contain forward-looking statements and information (hereinafter, the "Statements") relating to the Telefónica Group (hereinafter, the "Company" or "Telefónica"). These Statements may include financial forecasts and estimates or statements regarding plans, objectives and expectations regarding matters, such as the customer base and its evolution, growth of the different business lines and of the global business, market share, possible acquisitions, divestitures or other transactions, the outcome of recently completed transactions, the Company's results and its operations, including its environmental, social and governance commitments and targets.

The Statements can be identified, in certain cases, through the use of words such as "forecast", "expectation", "anticipation", "aspiration", "purpose", "belief" "may", "will", "would", "could", "plan", "project" or similar expressions or variations of such expressions. These Statements reflect the current views or aspirations of Telefónica with respect to future events, do not represent, by their own nature, any guarantee of future fulfilment, and are subject to risks and uncertainties that could cause the final developments and results to materially differ from those expressed or implied by such Statements. These risks and uncertainties include those identified in the documents containing more comprehensive information filed by Telefónica with the different supervisory authorities of the securities markets in which its shares are listed and, in particular, the Spanish National Securities Market Commission (CNMV) and the U.S. Securities and Exchange Commission (SEC).

Except as required by applicable law, Telefónica does not assume any obligation to publicly update the Statements to adapt them to events or circumstances taking place after the date hereof, including changes in the Company's business, changes in its business developmentstrategy or any other circumstances.

This document and any related conference call or webcast (including any related Q&A session) may contain summarised, non-audited or non-IFRS financial information (including information referred to as "organic" and "underlying"). Such information may not be prepared in accordance with the financial reporting requirements established by the SEC, is presented for supplemental informational purposes only and should not be considered a substitute for audited financial information presented in accordance with IFRS. The Company's non-IFRS financial measures may differ from similarly titled measures used by other companies. In addition, there are material limitations associated with the use of non-IFRS financial measures since they exclude significant expenses and income that are recorded in the Company's financial statements. Information related to Alternative Performance Measures (APM) used in this presentation are included in Telefónica's condensed consolidated interim financial statements and consolidated interim management report for the six-month period ended June 30, 2023, submitted to the CNMV, in Note 2, page 12 of the .pdf filed. Recipients of this document are invited to read it.

Neither this document nor any related conference call or webcast (including any related Q&A session) nor any of their contents constitute an offer to purchase, sale or exchange any security, a solicitation of any offer to purchase, sale or exchange any security, or a recommendation or advice regarding any security.

This document and any related conference call or webcast (including any related Q&A session) may include data or references to data provided by third parties. Neither Telefónica, nor any of its administrators, directors or employees, either explicitly or implicitly, guarantees that these contents are exact, accurate, comprehensive or complete, nor are they obliged to keep them updated, nor to correct them in the case that any deficiency, error or omission were to be detected. Moreover, in reproducing these contents by any means, Telefónica may introduce any changes it deems suitable, may omit partially or completely any of the elements of this document, and in case of any deviation between such a version and this one, Telefónica assumes no liability for any discrepancy.

Key takeaways

Mr. José María Álvarez-Pallete Chairman & CEO

Delivering on our goals

Key

2

Driving profitable and sustainable growth

Growing accesses; ongoing commercial momentum

• Fibre (+15% y-o-y); mobile contract (+3% y-o-y); 5G coverage increasing
• Long term customer relationships; high NPS, churn under control
• CapEx devoted to long term growth; smart capital allocation

Consistent revenue growth (org. y-o-y)

• B2B a solid driver; +6.9%
• Sustained service revenue growth (+3.4%)
• Price rises flow through to OIBDA

OIBDA (org. y-o-y) sequential improvement (+2.4 p.p.)

• All core operations improved vs. Q1 y-o-y org.
• Costs efficiencies and digitalisation measures
• OIBDA margin up y-o-y org.

Focused on investment grade credit rating and deleverage

• Prudent debt management
• Q2 23 FCF €842m, +0.9% y-o-y
• FCF almost doubling sequentially

Improved OIBDA and FCF momentum

Financial update

	H1 23		Q2 23
€ in millions	Reported + 50% VMO2 JV	Organic y-o-y	Reported + 50% VMO2 JV	Organic y-o-y
Revenue	23,164	4.1%	11,667	3.3%
OIBDA	7,323	2.3%	3,689	3.5%
OIBDA-CapEx (ex-spectrum)	4,326	2.7%	2,006	3.4%

	H1 23		Q2 23
€ in millions	Reported	Reported y-o-y	Reported	Reported y-o-y
Revenue	20,178	3.7%	10,133	0.9%
OIBDA	6,266	(1.2%)	3,144	(0.1%)
OIBDA Underlying	6,306	1.3%	3,161	0.1%
Net Income	760	(25.9%)	462	44.5%
FCF (incl. leases principal payments)	1,296	(3.9%)	842	0.9%
Net Financial Debt ex-leases	27,479	(3.9%)

FX impact Net debt -€0.6bn
€ (m)	H1 23	Q2 23
Revenue	48	(88)
OIBDA	10	(37)

Strong momentum supports 2023 guidance upgrade

2023 guidance

Organic

Targets	Initial 2023 guidance	Upgraded 2023 guidance	H1 23
Revenue y-o-y organic	"Low single digit growth"	" ~4% growth "	4.1%
OIBDA y-o-y organic	"Low single digit growth"	" ~3% growth "	2.3%
CapEx/Sales organic	~14%	Maintained ~14%	12.7%

Shareholder remuneration

2023 Dividend	€0.3/share (cash)
December 2023	€0.15/sh. (cash)
June 2024	€0.15/sh. (cash)

2023 calendar payments 15th June 2023 €0.15/sh.; cash 14th December 2023 €0.15/sh.; cash

24.8m own shares cancelled April 2023

1.4% treasury stock to be cancelled

ESG progress

	Environmental	Social	Governance
Key targets	Net-zero by 2040 (SBTi validated) 100% renewables by 2030 Zero-waste by 2030	>90% MBB rural coverage by 20241 33% women executives by 2024 Zero adjusted pay gap by 20242	Parity3 in top governing bodies by 2030 Zero-tolerance of corruption 30-35% sustainable linked financing by 20244

On the path to net-zero: VMO2's targets validated by SBTi, following TEF's (Jul-22)

Examples of our progress

Fostering Renewables: 8 distributed generation plants added during Q2 (BR)

Circular economy: new commitments to takeback, reuse & recycle devices

Connecting communities: T. Group 169.7m UBB PPs; new fibreCo (PE)

Driving diversity & inclusion: >32% women executives (Jun-23)

Promoting employability: ~1.2m beneficiaries via T. Foundation (H1 23) Sustainable financing: GlobalCapital Award for Most Impressive Corporate Hybrid Issuer

Protecting customers: Blocked +533m cybersecurity threats (SP)

ESG Academy; launched Group wide training on sustainability topics

¹ Core markets.

²Adjusted pay gap: equal pay for jobs of equal value

1. Parity defined as not less than 40% of each gender represented

2. Financing linked to sustainability criteria includes balance sheet debt, hybrids and undrawn committed credit lines based on ICMA sustainable bond principles, LMA Sustainability Linked Loan Principles and other ESG criteria. Not necessarily linked to EU Taxonomy aligned activities

Q2 23 Results

Mr. Ángel Vilá COO

Spain

Revenue & OIBDA growth (y-o-y organic)

Net adds (k)

Stronger commercial traction accelerates retail revenue

Growing FBB & postpaid base y-o-y Solid churn, ARPU growth and best-in-class NPS Customer lifetime, +23% y-o-y Refreshed B2C portfolio (since 1st August)

Improved retail revenue (+1.9% y-o-y in Q2) OIBDA closer to stabilisation Benchmark (OIBDA-CapEx)/Sales (24% in H1)

Promoting circular economy (device recycling)

Germany

374 368

Fixed BB net adds (k)

Postpay net adds (k) Revenue & OIBDA organic growth

Good operational traction & sustained financial performance

M4M 'O² Mobile' successfully launched

O2 contract ARPU +1.0% (vs. Q2 22)

Strong OIBDA growth (+1.1 p.p. q-o-q)

YE 23 target of 90% 5G pop coverage already achieved at mid-year

2023 Revenue & OIBDA outlook narrowed to "upper range of low single-digit growth"

Promoting digital skills & inclusion

Virgin Media O2

Revenue & OIBDA growth (y-o-y organic)

Growing converged base; Volt surpassed the 1.5m customers milestone 175k PPs in Q2 23 and 5G connectivity >2,800 towns and cities

Focus on network investment

Price increases in fixed & mobile

Accelerating revenue and OIBDA growth

Executing synergies above plans

29% reduction in carbon emissions (Scope 1 & 2) against 2020 baseline

Mobile contract churn (%)

All organic according to Telefonica criteria

Brazil

FTTH Premises passed (m)

Revenue & OIBDA growth (y-o-y organic)

Outgrowing, outlasting inflation

Leader in contract m.s. 43.6% (+1.9 p.p. y-o-y)

Rational mobile market Entry top-up level R\$15 (+25% vs. previous) Contract churn decreasing (1.0%) Mobile ARPU: +8% y-o-y in Q2 23

Service revenue booming despite Oi annualisation

MSR (+10.4%): strong trading & tariff increase Fixed (+2.3%): FTTH & B2B Digital services (+31%)

Lower CapEx intensity:+27.8% OIBDA-CapEx H1 23

Ethnic diversity: 41% employees self-declared as black (+7% vs. 2022)

T. Tech, a leading IT provider for B2B digitalisation

Double-digit y-o-y growth across T. Tech businesses Accelerated growth in constant perimeter

• Q2 23 ~+29% y-o-y (+2 p.p. q-o-q); >2x market growth

Key differential growth driver for T. Group B2B revenue

Well-balanced revenue mix

• High weight of Managed & Professional services & own platforms

• 85% revenues in hard currency markets

Differential customer journey; relevant in the B2B market

• Telefónica, leader in "Telecom Services Sector Scorecard" (GlobalData)

T. Tech Revenue (€m) Operational Highlights

Strong commercial activity, solid position in customers

• LTM Bookings ~+35% y-o-y

Highly skilled team close to customers

• Talent-led Co': hiring, skilling & retaining
• >6.2k professionals; 80% in Europe; ~4k certifications; 16% attrition (LTM)

New operating model for a new cycle of sustainable growth

• Geographical BUs with commercial focus
• Transversal service and delivery units to expand portfolio and capabilities

Reinforced delivery

• New DOC in Colombia (Cloud & Cyber)
• TheThinX (IoT) lab in Spain

T. Infra, crystalising value of assets and capabilities

12

Q2 23 Results

Mrs. Laura Abasolo CFCO & Head of T. Hispam

T. Hispam

5% 5% 4% 4% 3% 19% 18% 19% 18% 16% Contract FTTH & Cable Q2 22 Q3 22 Q4 22 Q1 23 Q2 23

FTTH & Cable PPs (m)

Accesses growth (y-o-y) Revenue & OIBDA growth (y-o-y organic)

Margins (organic)

-27% invested capital (since Dec-19)

Continued execution

Reducing exposure to the region: MOU in Colombia to share mobile infrastructure Agreement with KKR & Entel in Peru for PangeaCo

Continue growing in high value accesses CapEx/Sales: 8% on new operational model

OIBDA-CapEx expected to grow in 2023

Closing connectivity gap: e.g., IpT reached >3.3m people

Further deleverage, sound liquidity and contained cost

Comfortable liquidity position

Contained interest payment cost

Completing our transformation journey

Mr. José María Álvarez-Pallete Chairman & CEO

Future-ready

Technology levers Revenue OpEx+CapEx

• NextGen infrastructure (fibre & 5G)
• High storage & processing capabilities
• Data-centric mediation platform
• Decommission copper, 2G, 3G and IT
• Open architectures towards programmable networks
• AI as brain of future autonomous networks

• Blockchain and tokenisation to capture Web3 wave

• Growing in all business

• Decisive transformation of revenue function
• Growing in B2C; all time low churn and record NPS
• AI for real-time service customisation
• Outgrowing peers and market in B2B
• NaaS (Open Gateway) and network slicing for NextGen of customised services

Improved revenue mix

• Massive virtualisation and softwarisation
• 83% of processes digitalised
• Route to zero-touch networks
• Broader vendors ecosystem
• Less capital intensive
• Decommission broadly digested
• Leading CapEx/Sales at ~14% in 2023

Accelerated profitable growth

Declining CapEx/Sales

Radical transformation, benefits starting to materialise

Time to grow our ambition

Save the date

Telefonica 2023 CMD November 8th, Madrid & streaming

• New company vision and 2023-26 strategic plan. "GPS": growth, profitability, sustainability
• Main pillars
• Customers at the centre, technology enabling better understanding of needs and deliver better service
• Digitalisation at the core, technology-driven efficiency, operational excellence

• Focus on profitable growth to fuel FCF, to increase financial flexibility, reduce leverage, reward shareholders

• Consistent revenue growth; volume, value and B2B drivers. API-based ways to monetise NextGen networks

• Key levers include
• Exploring OpEx & leases efficiencies. E2E digital transformation, leveraging AI. Commercial, network & IT, processes
• Accelerate capital intensity reduction; legacy switch-off, traffic optimisation to reduce capacity CapEx

Driving profitable growth, increasing ambition

• Continued to deliver in Q2, confident in our strategy and ability to maximise value for shareholders
• Consistent and solid revenue growth (organic y-o-y); highlighting B2B
• Significant OIBDA growth acceleration (organic and reported y-o-y); operational leverage

• Networks leading; FTTH, 5G. Open Gateway; pioneers in driving efficiency through digitalisation / AI
• FCF improvement in Q2 23; to continue in H2 23
• Committed to maintain an investment grade credit rating and leverage reduction

• Upgrading 2023 revenue and OIBDA guidance, 1.4% treasury to be cancelled, dividend confirmed
• Positioned to benefit from industry, regulatory and technological changes
• CMD Nov-23, to present our new company vision
• ESG: enabling positive impact on the business and society

Results presentation and Q&A Session

	1
10001 allet	100000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 alence

Telefónica's management will host a webcast on 27 July at 10:00 AM (CEST), 9:00 AM (BST), and 4:00 AM (EDT)

Participants from Telefónica

• José María Álvarez-Pallete l Chairman & CEO
• Ángel Vilá l COO
• Laura Abasolo l CFCO & Head T. Hispam
• Lutz Schüler l CEO Virgin Media O2
• Eduardo Navarro l Chief Corporate Affairs & Sustainability Officer
• Adrián Zunzunegui l Global Director of Investor Relations

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

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

Bloomberg GEI 2023

A List 2022

Member of DJSI Europe

1

1 st company worldwide in 2022 Digital Inclusion Benchmark st in sector 2022

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