Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 (6-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of July, 2022

Commission File Number: 001-09531

Telefónica, S.A.

(Translation of registrant's name into English)

Distrito Telefónica, Ronda de la Comunicación s/n,

28050 Madrid, Spain

3491-482 87 00

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F

Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes

Telefónica, S.A.

TABLE OF CONTENTS


Item		Sequential Page Number

1.	Telefónica - Half yearly financial Report January June 2022	2


Condensed Consolidated Interim Financial Statements 2022

Index


Consolidated statements of financial position			3
Consolidated income statements			4
Consolidated statements of comprehensive income			5
Consolidated statement of changes in equity			6
Consolidated statements of cash flows			8
Note 1. Background and general information			10
Note 2. Basis of presentation of the consolidated financial statements			10
Note 3. Accounting policies			16
Note 4. Segment information			18
Note 5. Business combinations			25
Note 6. Intangible assets			27
Note 7. Goodwill			29
Note 8. Property, plant and equipment			31
Note 9. Associates and joint ventures			33
Note 10. Related parties			37
Note 11. Changes in equity and shareholder remuneration			41
Note 12. Financial assets and other non-current assets			45
Note 13. Inventories			45
Note 14. Receivables and other current assets			46
Note 15. Breakdown of financial assets by category			47
Note 16. Financial liabilities			49
Note 17. Derivative financial instruments			51
Note 18. Payables and other non-current liabilities			52
Note 19. Payables and other current liabilities			53
Note 20. Provisions			54
Note 21. Leases			54
Note 22. Average number of Group employees			56
Note 23. Other income and Other expenses			57
Note 24. Income tax matters			58
Note 25. Cash Flow Detail			59
Note 26. Other information			64
Note 27. Operations held for sale			66
Note 28. Events after the reporting period			67
Note 29 . Additional note for English translation			68
Appendix I. Changes in the consolidation scope			69
Appendix II. Key regulatory issues			70
Interim consolidated management report
Consolidated results			73
Segment results			81
Committed to Sustainable Development			94
Risks and uncertainties facing the Company			97


Condensed Consolidated Interim Financial Statements 2022

Telefónica Group

Consolidated statements of financial position


Millions of euros	Notes	06/30/2022	12/31/2021
ASSETS
A) NON-CURRENT ASSETS		89,033	84,284
Intangible assets	(Note 6)	12,458	11,725
Goodwill	(Note 7)	18,725	16,519
Property, plant and equipment	(Note 8)	23,723	22,725
Rights of use	(Note 21)	8,172	7,579
Investments accounted for by the equity method	(Note 9)	12,661	12,773
Financial assets and other non-current assets	(Note 12)	7,881	7,347
Deferred tax assets	(Note 24)	5,413	5,616
B) CURRENT ASSETS		22,108	24,929
Inventories	(Note 13)	1,565	1,749
Receivables and other current assets	(Note 14)	9,240	8,287
Tax receivables	(Note 24)	2,210	2,120
Other current financial assets	(Note 15)	2,669	3,835
Cash and cash equivalents	(Note 15)	6,385	8,580
Non-current assets and disposal groups held for sale	(Note 27)	39	358
TOTAL ASSETS (A+B)		111,141	109,213


	Notes	06/30/2022	12/31/2021
EQUITY AND LIABILITIES
A) EQUITY		31,685	28,684
Equity attributable to equity holders of the parent and other holders of equity instruments	(Note 11)	24,909	22,207
Equity attributable to non-controlling interests	(Note 11)	6,776	6,477
B) NON-CURRENT LIABILITIES		55,317	55,034
Non-current financial liabilities	(Note 16)	34,914	35,290
Non-current lease liabilities	(Note 21)	6,754	6,391
Payables and other non-current liabilities	(Note 18)	3,628	3,089
Deferred tax liabilities	(Note 24)	3,080	2,602
Non-current provisions	(Note 20)	6,941	7,662
C) CURRENT LIABILITIES		24,139	25,495
Current financial liabilities	(Note 16)	5,387	7,005
Current lease liabilities	(Note 21)	1,964	1,679
Payables and other current liabilities	(Note 19)	13,537	13,210
Current tax payables	(Note 24)	1,740	2,026
Current provisions	(Note 20)	1,511	1,441
Liabilities associated with non-current assets and disposal groups held for sale	(Note 27)	—	134
TOTAL EQUITY AND LIABILITIES (A+B+C)		111,141	109,213

Unaudited data at June 30, 2022. The accompanying notes and appendices are an integral part of these condensed consolidated interim financial statements.



						Telefónica, S.A. 3


Condensed Consolidated Interim Financial Statements 2022

Telefónica Group

Consolidated income statements


Millions of euros	Notes	January- June 2022	January- June 2021
Revenues	(Note 4)	19,450	20,305
Other income	(Note 23)	1,069	10,875
Supplies		(6,200)	(6,217)
Personnel expenses		(2,673)	(2,744)
Other expenses	(Note 23)	(5,301)	(5,333)
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION (OIBDA)	(Note 4)	6,345	16,886
Depreciation and amortization	(Notes 4, 6, 8 and 21)	(4,336)	(4,139)
OPERATING INCOME	(Note 4)	2,009	12,747
Share of income (loss) of investments accounted for by the equity method	(Notes 4 and 9)	105	(68)
Finance income		680	901
Exchange gains		2,964	1,513
Finance costs		(1,266)	(1,430)
Exchange losses		(3,038)	(1,536)
Net financial expense		(660)	(552)
PROFIT BEFORE TAX		1,454	12,127
Corporate income tax	(Note 24)	(312)	(1,200)
PROFIT FOR THE PERIOD		1,142	10,927
Attributable to equity holders of the Parent		1,026	8,629
Attributable to non-controlling interests		116	2,298
Basic and diluted earnings per share attributable to equity holders of the parent (euros)		0.16	1.44

Unaudited data. The accompanying notes and appendices are an integral part of these condensed consolidated interim financial statements.



						Telefónica, S.A. 4


Condensed Consolidated Interim Financial Statements 2022

Telefónica Group

Consolidated statements of comprehensive income


Millions of euros	January - June 2022	January - June 2021
Profit for the period	1,142	10,927
Other comprehensive (loss) income	2,761	4,411
(Losses) gains from financial assets measured at Fair value through comprehensive income	(3)	1
Income tax impact	1	—


	(2)	1
Gains (losses) on hedges	1,110	509
Income tax impact	(286)	(121)
Reclassification of (gains) losses included in the income statement	(900)	(1,353)
Income tax impact	224	337
	148	(628)
(Losses) gains on hedges costs	(46)	105
Income tax impact	11	(26)
Reclassification of (gains) losses included in the income statement	(5)	(5)
Income tax impact	1	1
	(39)	75
Share of gains (losses) recognized directly in equity of associates and others	51	5
Income tax impact	—	—


	51	5
Translation differences	2,422	4,465
Total other comprehensive income (loss) recognized in the period (Items that may be reclassified subsequently to profit or loss)	2,580	3,918
Actuarial gains (losses) and impact of limit on assets for defined benefit pension plans	220	58
Income tax impact	(70)	(15)
Reclassification to reserve actuarial losses (gains) and impact of limit on assets for defined benefit pension plans (Note 2)	—	392
	150	435
(Losses) gains from financial assets measured at Fair value through comprehensive income	(30)	60
Income tax impact	—	(2)
Reclassification to reserve of gains (losses) from financial assets measured at Fair value through comprehensive income	71	—
	41	58
Share of gains (losses) recognized directly in equity of associates	(10)	—
	(10)	—
Total other comprehensive income (loss) recognized in the period (Items that will not be reclassified subsequently to profit or loss)	181	493
Total comprehensive income (loss) recognized in the period	3,903	15,338
Attributable to:
Equity holders of the parent and other holders of equity instruments	3,217	12,830
Non-controlling interests	686	2,508
	3,903	15,338

Unaudited data. The accompanying notes and appendices are an integral part of these condensed consolidated interim financial statements.



						Telefónica, S.A. 5


Condensed Consolidated Interim Financial Statements 2022

Telefónica Group

Consolidated statements of changes in equity


	Attributable to equity holders of the parent and other holders of equity instruments											Non-controlling interests	Total equity
Millions of euros	Share capital	Share premium	Treasury Shares	Other equity instruments	Legal reserve	Retained earnings	Fair value financial assets	Hedges	Equity of associates and others	Translation differences	Total
Financial position at December 31, 2021	5,779	4,233	(547)	7,550	1,038	26,091	(547)	438	64	(21,892)	22,207	6,477	28,684
Profit for the year	—	—	—	—	—	1,026	—	—	—	—	1,026	116	1,142
Other comprehensive income (loss) for the year	—	—	—	—	—	104	39	161	3	1,884	2,191	570	2,761
Total comprehensive income (loss) for the year	—	—	—	—	—	1,130	39	161	3	1,884	3,217	686	3,903
Dividends and distribution of profit (Note 11)	135	—	—	—	21	(369)	—	—	—	—	(213)	(309)	(522)
Capital reduction	(139)	(409)	548	—	—	—	—	—	—	—	—	—	—
Net movement in treasury shares	—	—	(108)	—	—	(12)	—	—	—	—	(120)	—	(120)
Acquisitions and disposals of non-controlling interests and business combinations (Note 2)	—	—	—	—	—	(64)	—	—	—	—	(64)	(78)	(142)
Undated deeply subordinated securities (Note 11)	—	—	—	—	—	(132)	—	—	—	—	(132)	—	(132)
Other movements	—	—	—	—	—	14	—	—	—	—	14	—	14
Financial position at June 30, 2022	5,775	3,824	(107)	7,550	1,059	26,658	(508)	599	67	(20,008)	24,909	6,776	31,685

Unaudited data.

The accompanying notes and appendices are an integral part of these condensed consolidated interim financial statements.



						Telefónica, S.A. 6


Condensed Consolidated Interim Financial Statements 2022

Telefónica Group

Consolidated statements of changes in equity


	Attributable to equity holders of the parent and other holders of equity instruments											Non-controlling interests	Total equity
Millions of euros	Share capital	Share premium	Treasury Shares	Other equity instruments	Legal reserve	Retained earnings	Available-for-sale investments	Hedges	Equity of associates and others	Translation differences	Total
Financial position at December 31, 2020	5,526	4,538	(476)	7,550	1,038	19,046	(597)	647	(57)	(25,980)	11,235	7,025	18,260
Profit for the year	—	—	—	—	—	8,629	—	—	—	—	8,629	2,298	10,927
Other comprehensive income (loss) for the year	—	—	—	—	—	426	59	(641)	80	4,277	4,201	210	4,411
Total comprehensive income (loss) for the year	—	—	—	—	—	9,055	59	(641)	80	4,277	12,830	2,508	15,338
Dividends and distribution of profit (Note 11)	195	—	—	—	—	(503)	—	—	—	—	(308)	(282)	(590)
Capital reduction	(83)	(305)	388	—	—	—	—	—	—	—	—	—	—
Net movement in treasury shares	—	—	(79)	—	—	(11)	—	—	—	—	(90)	—	(90)
Acquisitions and disposals of non-controlling interests and business combinations (Note 2)	—	—	—	—	—	(382)	—	—	—	—	(382)	(15)	(397)
Undated deeply subordinated securities	—	—	—	242	—	(164)	—	—	—	—	78	—	78
Other movements	—	—	—	—	—	(1)	—	—	—	—	(1)	1	—
Financial position at June 30, 2021	5,638	4,233	(167)	7,792	1,038	27,040	(538)	6	23	(21,703)	23,362	9,237	32,599

Unaudited data.

The accompanying notes and appendices are an integral part of these condensed consolidated interim financial statements.



						Telefónica, S.A. 7


Condensed Consolidated Interim Financial Statements 2022

Telefónica Group

Consolidated statements of cash flows


Millions of euros	January - June 2022	January - June 2021
Cash received from operations	23,208	24,368
Cash paid from operations	(17,463)	(18,238)
Net payments of interest and other financial expenses net of dividends received	(738)	(777)
Taxes (paid)/proceeds	(268)	(241)
Net cash flow provided by operating activities	4,739	5,112
(Payments on investments)/proceeds from the sale in property, plant and equipment and intangible assets, net	(2,632)	(3,550)
Proceeds on disposals of companies, net of cash and cash equivalents disposed	135	13,514
Payments on investments in companies, net of cash and cash equivalents acquired	(1,511)	(328)
Proceeds on financial investments not included under cash equivalents	1,513	607
Payments on financial investments not included under cash equivalents	(771)	(1,026)
Proceeds/(payments) on placements of cash surpluses not included under cash equivalents	1,638	(607)

Net cash flow used in investing activities	(1,628)	8,610
Dividends paid	(388)	(498)

(Payments)/proceeds of treasury shares and other operations with shareholders and with minority interests	(226)	(112)
Operations with other equity holders	(175)	19
Proceeds on issuance of debentures and bonds, and other debts	1,100	152
Proceeds on loans, borrowings and promissory notes	300	2,028
Repayments of debentures and bonds, and other debts	(1,993)	(3,353)
Repayments of loans, borrowings and promissory notes	(2,656)	(1,907)
Lease principal payments (Note 21)	(1,011)	(916)
Financed operating payments and investments in property, plant and equipment and intangible assets payments (Note 16)	(490)	(124)
Net cash used in financing activities	(5,539)	(4,711)
Effect of changes in exchange rates	235	(74)
Cash reclassified to assets held for sale	—	(7)
Effect of changes in consolidation methods and others	(2)	(12)
Net increase (decrease) in cash and cash equivalents during the period	(2,195)	8,918
CASH AND CASH EQUIVALENTS AT JANUARY 1	8,580	5,604
CASH AND CASH EQUIVALENTS AT JUNE 30	6,385	14,522
RECONCILIATION OF CASH AND CASH EQUIVALENTS WITH THE STATEMENT OF FINANCIAL POSITION
BALANCE AT JANUARY 1	8,580	5,604
Cash on hand and at banks	7,353	4,600
Other cash equivalents	1,227	1,004
BALANCE AT JUNE 30	6,385	14,522
Cash on hand and at banks	5,559	12,953
Other cash equivalents	826	1,569

Unaudited data.

The accompanying notes and appendices are an integral part of these condensed consolidated interim financial statements.



						Telefónica, S.A. 8


Condensed Consolidated Interim Financial Statements 2022

Telefónica, S.A. and subsidiaries composing the Telefónica Group

Notes to the condensed consolidated interim financial statements for the six-months ended June 30, 2022



						Telefónica, S.A. 9


Condensed Consolidated Interim Financial Statements 2022

Note 1. Background and general information

Telefónica, S.A. and its subsidiaries and investees (hereinafter “Telefónica”, “the Company”, the “Telefónica Group” or "the Group”) make up an integrated and diversified telecommunications group operating mainly in Europe and Latin America. The Group’s activity is centered around services of wireline and wireless telephony, broadband, internet, data traffic, Pay TV and other digital services.

The parent company of the Group is Telefónica, S.A., a public limited company incorporated on April 19, 1924 for an indefinite period. Its registered office is at calle Gran Vía 28, Madrid (Spain).

As a multinational telecommunications company which operates in regulated markets, the Group is subject to different laws and regulations in each of the jurisdictions in which it operates, pursuant to which permits, concessions or licenses must be obtained in certain circumstances to provide the various services.

In addition, certain wireline and wireless telephony services are provided under regulated rate and price systems.

Note 2. Basis of presentation of the consolidated financial statements

The condensed consolidated interim financial statements for the six-month period ended June 30, 2022 (hereinafter, the “interim financial statements”) have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting and Article 12 of Royal Decree 1362/2007, of October 19. Therefore, they do not contain all the information and disclosures required in complete annual consolidated financial statements and, for adequate interpretation, should be read in conjunction with the consolidated financial statements (Consolidated annual accounts) for the year ended December 31, 2021.

The accompanying interim financial statements were approved by the Company’s Board of Directors at its meeting of July 27, 2022.

The figures in these interim financial statements are expressed in millions of euros, unless otherwise indicated, and may therefore be rounded.

Comparison of information

Comparisons in the accompanying interim financial statements refer to the six-month periods ended June 30, 2022 and 2021, except in the consolidated

statement of financial position, which compares information at June 30, 2022 and at December 31, 2021.

The main changes in the consolidation scope are described in Appendix I.

With respect to seasonality, the historical performance of consolidated results does not indicate that the operations of the Group, taken as a whole, are subject to significant variations between the first and second halves of the year.

Agreement between Telefónica and Liberty Global plc to combine their operating businesses in the UK

On May 7, 2020, Telefónica reached an agreement with Liberty Global plc to combine into a 50-50 joint venture their operating businesses in the UK (O2 Holdings Ltd. and Virgin Media UK, respectively). On June 1, 2021 after obtaining the relevant regulatory approvals, consummation of the necessary recapitalisations and satisfaction of other closing conditions, the closing of the transaction was carried out, resulting in the combination of both businesses into the joint venture called VMED O2 UK Ltd. (VMO2).

Telefonica United Kingdom, which was fully consolidated within the Group, was excluded from the



						Telefónica, S.A. 10


Condensed Consolidated Interim Financial Statements 2022

scope of consolidation from June 1, 2021 (see Note 4). From that date, VMO2 is registered under the equity method (see notes 4 and 9).

The constitution of the joint venture provided Telefónica with 5,439 million pounds sterling of funds in the first half of 2021 (equivalent to 6,307 million euros at the transaction day), of which 2,686 million pounds corresponded to the cash payment to Telefónica to equalise ownership in the joint venture (before post-completion adjustments in the second half of 2021) and 2,754 million pounds corresponded to proceeds from recapitalisation.

As a consequence of this transaction, the Group recognized a gain amounting to 4,434 million euros in “Other income” (see Note 23) of the consolidated income statement for the first half of 2021.

In addition, in the first half of 2021 the accumulated actuarial losses of Telefonica United Kingdom amounting to 392 million euros were reclassified to retained earnings, with no effect in equity.

Agreement between Telxius Telecom and American Tower Corporation for the sale of its telecommunications towers divisions in Europe and Latin America

On January 13, 2021 Telxius Telecom, S.A. (a company of the Telefónica Group minority-owned, directly or indirectly, by KKR and Pontegadea), signed an agreement with American Tower Corporation ("ATC") for the sale of its telecommunications towers divisions in Europe (Spain and Germany) and in Latin America (Brazil, Peru, Chile and Argentina).

The agreement established the sale of approximately 30,722 telecommunication tower sites and comprised two separate and independent transactions (on one hand, the Europe business and, on the other hand, the Latin American business). The agreement included the transfer to ATC of the towers that Telxius agreed to acquire from Telefónica Germany GmbH & Co. under the agreement signed on June 8, 2020, both the towers acquired in the first phase on September 1, 2020 as well as the towers that were acquired in the second phase in August 2021 (4,080 sites sold to ATC in the second half of 2021).

The closing of the transactions took place in June 2021 following regulatory approvals.

These transactions generated a gain of 5,761 million euros registered in "Other income" (see Note 23) of the consolidated income statement for the first half of 2021. The result of this transaction attributed to non-controlling interests of Telxius amounted to 2,166 million euros (see Note 11).

Acquisition of mobile assets of Oi Group

On April 20, 2022, the closing of the transaction related to the Purchase Agreement for Acquisition of Unidade Produtiva Isolada (UPI) Mobile Assets of Oi Group took place, and Telefónica Brasil acquired, on such date, all the shares of the company Garliava RJ Infraestrutura e Redes de Telecomunicações S.A. (Garliava), to which the mobile assets of Oi Group assigned to Telefónica Brasil had been contributed, in accordance with the segregation plan stated in the Oi Agreement (see Note 26).

Telefónica Brasil thus acquired its share of mobile assets of the Oi Group for an approximate amount of 5,373 million Brazilian reais, having paid, on such day, the amount of 4,885 million Brazilian reais. The remaining amount, equivalent to 10% of the payment made on that date, is withheld subject to certain price adjustments and potential indemnification obligations contained in the Oi Agreement. The total consideration also includes 110 million Brazilian reais subject to the fulfilment of certain targets. Thus, the total consideration transferred amounted to 5,483 million Brazilian reais (1,091 million euros at the date of the closing of the transaction).

At the date of preparation of these consolidated financial statements, the purchase price allocation is provisional. The fair value assigned to Oi's licenses amounts to 506 million euros. The preliminary goodwill amounts to 696 million euros (see Note 5).

Exchange rates evolution


Variation of average exchange rate versus euro
	First half (2021 vs 2020)		First half (2022 vs 2021)
Brazilian real	(17.5	%)	17.4	%
Pound sterling	0.7	%	3.1	%
New peruvian sol	(16.2	%)	8.9	%

Chilean peso	3.1	%	(3.8	%)
Colombian peso	(7.3	%)	2.2	%
Mexican peso	(2.8	%)	9.8	%


Variation of closing exchange rate versus euro
	06/30/21 vs 12/31/20		06/30/22 vs 12/31/21
Brazilian real	7.2	%	16.1	%
Pound sterling	4.7	%	(2.1	%)
New peruvian sol	(3.2	%)	13.6	%

Chilean peso	0.8	%	(1.2	%)
Colombian peso	(5.5	%)	4.5	%
Mexican peso	3.2	%	10.8	%

In the first half of 2022, there was a positive impact on Equity attributable to equity holders of the Parent



						Telefónica, S.A. 11


Condensed Consolidated Interim Financial Statements 2022

Company for translation differences amounting to 1,884 million euros (see Note 11), mainly due to the appreciation of the Brazilian real.

Alternative measures not defined in IFRS

The Management of the Group uses a series of measures in its decision-making, in addition to those expressly defined in the IFRS, because they provide additional information useful to assess the Group’s performance, solvency and liquidity. These measures should not be viewed in isolation or as a substitute for the measures presented according to the IFRS.

Operating income before depreciation and amortization (OIBDA)

Operating income before depreciation and amortization (OIBDA) is calculated by excluding solely depreciation and amortization from operating income. OIBDA is used to track the performance of the business and to establish operating and strategic targets of the Telefónica Group companies. OIBDA is a commonly reported measure and is widely used among analysts, investors and other interested parties in the telecommunications industry, although not a measure explicitly defined in IFRS, and therefore, may not be comparable to similar indicators used by other companies. OIBDA should not be considered as a substitute for operating income.

Furthermore, the Group management uses the measure OIBDA margin, which is the result of dividing the OIBDA by the revenues.

After the implementation of IFRS 16 Leases in 2019, most of the lease expenses that affected OIBDA until 2018 affect instead depreciation and amortization and net financial expenses, resulting in higher reported OIBDA under IFRS 16, which is therefore not directly comparable with OIBDA for the years before 2019.

The following table presents the reconciliation of OIBDA to operating income for the Telefónica Group for the six-months periods ended June 30, 2022 and 2021:


Millions of euros	January - June 2022	January - June 2021
Operating Income Before Depreciation and Amortization (OIBDA)	6,345	16,886
Depreciation and amortization	(4,336)	(4,139)
Operating income	2,009	12,747

The OIBDA of "Other companies" for the first half of 2021 includes the gains from the sale of the tower divisions of Telxius, amounting to 5,761 million euros and from the establishment of VMED O2 UK Ltd, amounting to 4,434 million euros explained above.

The following table presents the reconciliation of OIBDA to operating income for each business segment for the six-months periods ended June 30, 2022 and 2021:


January - June 2022
Millions of euros	Telefónica Spain	Telefónica Germany	Telefónica Brazil	Telefónica Hispam	Other companies	Elimina-tions	Total Group
Operating Income Before Depreciation and Amortization (OIBDA)	2,254	1,247	1,714	1,094	78	(42)	6,345
Depreciation and amortization	(1,075)	(1,131)	(1,133)	(922)	(94)	19	(4,336)
Operating income	1,179	116	581	172	(16)	(23)	2,009


January - June 2021
Millions of euros	Telefónica Spain	Telefónica United Kingdom	Telefónica Germany	Telefónica Brazil	Telefónica Hispam	Other companies	Elimina-tions	Total Group
Operating Income Before Depreciation and Amortization (OIBDA)	2,352	919	1,172	1,479	769	10,382	(187)	16,886
Depreciation and amortization	(1,071)	—	(1,192)	(927)	(984)	(128)	163	(4,139)
Operating income	1,281	919	(20)	552	(215)	10,254	(24)	12,747



						Telefónica, S.A. 12


Condensed Consolidated Interim Financial Statements 2022

OIBDA-CapEx and OIBDA-CapEx excluding spectrum acquisitions

OIBDA-CapEx is defined as operating income before depreciation and amortization, reduced by accrued capital expenditures, and OIBDA-CapEx excluding spectrum acquisitions is defined as operating income before depreciation and amortization, reduced by accrued capital expenditures excluding those related to spectrum acquisitions.

We believe that it is important to consider capital expenditures, and capital expenditures excluding spectrum acquisitions, together with OIBDA in order to have a more complete measure of the performance of our telecommunications businesses. We use these measures internally to track the performance of our business, to establish operating and strategic targets of the businesses of the Group and in our internal budgeting process.

Neither OIBDA-CapEx nor OIBDA-CapEx excluding spectrum acquisitions are measures expressly defined in IFRS, and therefore they may not be comparable to similar indicators used by other companies. In addition, neither OIBDA-CapEx nor OIBDA-CapEx excluding spectrum acquisitions should be considered substitutes for operating income, the most comparable financial measure calculated in accordance with IFRS, or any measure of liquidity calculated in accordance with IFRS.

Furthermore, the Group management uses the measures OIBDA-CapEx margin and OIBDA-CapEx excluding spectrum acquisitions margin, which is the result of dividing these measures by the revenues.

In the table below we provide a reconciliation of our OIBDA-CapEx and OIBDA-CapEx excluding spectrum acquisitions to operating income for the periods indicated:


Millions of euros	January-June 2022	January-June 2021
Operating income	2,009	12,747
Depreciation and amortization	(4,336)	(4,139)
OIBDA	6,345	16,886
Capital expenditures in intangibles assets (Note 6)	(716)	(1,271)
Capital expenditures in property, plant and equipment (Note 8)	(1,766)	(2,129)
CapEx	(2,482)	(3,400)
OIBDA-CapEx	3,863	13,486
Spectrum acquisitions (Note 6)	132	674
OIBDA-CapEx excluding spectrum acquisitions	3,995	14,160

Debt indicators

As calculated by us, net financial debt includes:

(A) adding the following liabilities:

i. current and non-current financial liabilities in our consolidated statement of financial position (which includes the negative mark-to-market value of derivatives),

ii. other liabilities included in "Payables and other non-current liabilities" and "Payables and other current liabilities" (mainly corresponding to payables for deferred payment of radio spectrum that have an explicit financial component), and

iii. financial liabilities included in "Liabilities associated with non-current assets held for sale".

(B) subtracting the following amounts from the resulting amount of the preceding step:

i. cash and cash equivalents,

ii. other current financial assets (which include short-term derivatives),

iii. cash and other financial assets included in "Non-current assets and disposal groups classified as held for sale",

iv. the positive mark-to-market value of derivatives with a maturity beyond one year,

v. other interest-bearing assets (included in "Financial assets and other non-current assets", "Receivables and other current assets" and "Tax receivables" in our consolidated statement of financial position), and

vi. mark-to-market adjustment by cash flow hedging activities related to debt.

With respect to step (B)(v), "Financial assets and other non-current assets" includes derivatives, installments for the long-term sales of terminals to customers and other long-term financial assets, and "Receivables and other current assets" includes the customer financing of terminal sales classified as short-term.

The indicator net financial debt plus leases is calculated by adding lease liabilities calculated under IFRS 16 (including those corresponding to companies held for sale) to net financial debt and deducting assets from subleases.

We calculate net financial debt plus commitments by adding gross commitments related to employee benefits to net financial debt and deducting the value of long-term assets associated with those



						Telefónica, S.A. 13


Condensed Consolidated Interim Financial Statements 2022

commitments related to employee benefits and the tax benefits arising from the future payments of those commitments related to employee benefits. Gross commitments related to employee benefits are current and non-current provisions recorded for certain employee benefits such as termination plans, post-employment defined benefit plans and other benefits.

We believe that net financial debt, net financial debt plus leases, net financial debt plus commitments and net financial debt plus leases plus commitments are meaningful for investors and analysts because they provide an analysis of our solvency using the same measures used by our management. We use them to

calculate internally certain solvency and leverage ratios. Nevertheless, none of them as calculated by us should be considered as a substitute for gross financial debt as presented in the consolidated statement of financial position.

The following table presents a reconciliation of net financial debt, net financial debt plus leases, net financial debt plus commitments and net financial debt plus leases plus commitments as of June 30, 2022 and December 31, 2021 to the Telefónica Group’s gross financial debt as indicated in the consolidated statement of financial position:


Millions of euros	06/30/2022	12/31/2021
Non-current financial liabilities	34,914	35,290
Current financial liabilities	5,387	7,005
Gross financial debt (Note 16)	40,301	42,295
Cash and cash equivalents	(6,385)	(8,580)
Other assets included in "Other current financial assets"	(2,659)	(3,823)
Cash and other financial assets included in "Non-current assets and disposal groups classified as held for sale"	—	(7)
Positive mark-to-market value of long-term derivative instruments (notes 12 and 17)	(2,780)	(2,772)
Other liabilities included in "Payables and other non-current liabilities"	1,397	933
Other liabilities included in "Payables and other current liabilities"	183	455
Other assets included in "Financial assets and other non-current assets"	(1,799)	(1,808)
Other assets included in "Receivables and other current assets"	(352)	(468)
Other current assets included in "Tax receivables"	(120)	(250)
Financial liabilities included in "Liabilities associated with non-current assets held for sale"	—	35
Mark-to-market adjustment by cash flow hedging activities related to debt	1,031	22
Net financial debt	28,817	26,032
Lease liabilities	8,683	8,080
Net financial debt plus leases	37,500	34,112
Gross commitments related to employee benefits	5,441	6,337
Value of associated long-term assets	(95)	(94)
Tax benefits	(1,395)	(1,626)
Net commitments related to employee benefits	3,951	4,617
Net financial debt plus commitments	32,768	30,649
Net financial debt plus leases plus commitments (*)	41,451	38,729
(*) Includes assets and liabilities considered to be "net financial debt plus leases plus commitments" for companies classified as held for sale (see Note 27).

As explained above, Telefonica United Kingdom, which was fully consolidated within the Group, is excluded from the scope of consolidation from June 1, 2021. From that date, VMED O2 UK Ltd is registered under the equity method. As a consequence, the net financial debt of VMED O2 UK Ltd is not consolidated in the Group's net financial debt. Note 9 to these financial statements provides a breakdown of the main items in the statement of financial position of VMED O2 UK Ltd as at June 30, 2022 and December 31, 2021.



						Telefónica, S.A. 14


Condensed Consolidated Interim Financial Statements 2022

Free Cash Flow

The Group’s free cash flow is calculated starting from “Net cash flow provided by operating activities” as indicated in the consolidated statement of cash flows; deducting (Payments on investments)/Proceeds from the sale of investments in property, plant and equipment and intangible assets, net, adding the cash received from government grants and deducting dividends paid to non-controlling interests and payments of financed spectrum without explicit interest. The cash used to cancel commitments related to employee benefits (originally included in the Net cash flow provided by operating activities) is added as it represents the payments of principal of the debt incurred with those employees.

We believe that free cash flow is a meaningful measure for investors and analysts because it provides an

analysis of the cash flow available to protect solvency levels and to remunerate the parent company’s shareholders and other equity holders. The same measure is used internally by our management. Nevertheless, free cash flow as calculated by us should not be considered as a substitute for the various flows of cash as presented in the consolidated statements of cash flows.

The following table presents the reconciliation between Telefónica Group’s Net cash flow provided by operating activities as indicated in the consolidated statement of cash flows (see Note 25) and the free cash flow for the six-months periods ended June 30, 2022 and 2021:


Millions of euros	January - June 2022	January - June 2021
Net cash flow provided by operating activities (Note 25)	4,739	5,112
(Payments on investments)/Proceeds from the sale of property, plant and equipment and intangible assets, net (Note 25)	(2,632)	(3,550)

Dividends paid to minority shareholders (Note 25)	(170)	(181)
Payments related to cancellation of commitments related to employee benefits (Note 25)	443	466
Payments of financed spectrum without explicit interest (Note 25)	(21)	(21)
Free cash flow excluding lease principal payments	2,359	1,826
Lease principal payments (notes 21 and 25)	(1,011)	(916)
Free cash flow	1,348	910



						Telefónica, S.A. 15


Condensed Consolidated Interim Financial Statements 2022

Note 3. Accounting policies

The accounting policies applied in the preparation of the interim financial statements for the six-month period ended June 30, 2022 are consistent with those used in the preparation of the Group’s consolidated annual financial statements for the year ended December 31, 2021, except for the following new standards and amendments to standards published by the International Accounting Standards Board (IASB) and endorsed by the EU for use in Europe, which are effective for annual periods beginning on or after January 1, 2022.

The application of these amendments for the current reporting period did not have a significant impact on the interim condensed consolidated financial statements of the Group. The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these amendments.

Onerous Contracts: Costs of Fulfilling a Contract - Amendments to IAS 37

The amendments to IAS 37 clarify that when assessing whether a contract is onerous, an entity needs to include all unavoidable costs that relate directly to a contract, including both incremental costs and an allocation of costs directly related to fulfilling contract activities. The Group applied the amendments to the contracts for which it had not fulfilled all of its obligations at the beginning of the reporting period.

Reference to the Conceptual Framework – Amendments to IFRS 3

Minor amendments were made to update the references to the Conceptual Framework for Financial Reporting and to add an exception to the recognition principle in IFRS 3 Business Combinations regarding liabilities and contingent liabilities within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets and Interpretation 21 Levies. The exception requires entities to apply the criteria in IAS 37 or IFRIC 21, respectively, instead of the Conceptual Framework, to determine whether a present obligation exists at the acquisition date. The amendments to IFRS 3 also clarify that contingent assets do not qualify for recognition at the acquisition date.

Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16

The amendment prohibits entities from deducting from the cost of an item of property, plant and equipment, any proceeds of the sale of items produced while the entity is preparing the asset for its intended use (including while assessing technical and physical performance of the asset). Instead, an entity recognises the proceeds from selling such items, and the costs of producing those items, in profit or loss.

Annual improvements to IFRS Standards 2018-2020

As part of the annual improvements finalised in May 2020, IFRS 9 Financial Instruments was amended to clarify which fees should an entity include when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf.



						Telefónica, S.A. 16


Condensed Consolidated Interim Financial Statements 2022

New standards and amendments to standards issued but not effective as of June 30, 2022

At the date of preparation of the interim consolidated financial statements, the following IFRSs and amendments had been published by the IASB, but their application was not mandatory:


Standards and amendments		Mandatory application: annual periods beginning on or after
Amendments to IAS 1	Classification of Liabilities as Current and Non-Current	1 January 2023
IFRS 17	Insurance Contracts	1 January 2023
Amendments to IAS 1	Disclosure of Accounting Policies	1 January 2023
Amendments to IAS 8	Definition of Accounting Estimates	1 January 2023
Amendments to IAS 12	Deferred Taxes related to Assets and Liabilities arising from a Single Transaction	1 January 2023

Based on the analyses conducted to date, the Group estimates that the adoption of these new pronouncements will not have a significant impact on the consolidated financial statements in the initial period of application, although the Group is currently assessing whether there are any contracts that meet the definition of insurance contracts and therefore could be affected by the future adoption of IFRS 17 Insurance Contracts.



						Telefónica, S.A. 17


Condensed Consolidated Interim Financial Statements 2022

Note 4. Segment information

In 2022 the Telefónica Group is reporting financial information, both internally and externally, according to the following segments: Telefónica Spain, VMO2 (accounted for under the equity method), Telefónica Germany, Telefónica Brazil and Telefónica Hispam (formed by the Group's operators in Colombia, Mexico, Venezuela, Ecuador, Argentina, Chile, Peru and Uruguay).

During 2021, the Telefónica Group changed its reporting segments as follows:

(i) On June 1, 2021, upon the establishment of the 50:50 joint venture with Liberty Global (whose results are accounted for under the equity method), the former Telefónica United Kingdom segment was replaced by the VMO2 segment (see notes 2 and 9). The results of the first half of 2021 include the consolidation of Telefónica United Kingdom from January 1 to June 1, and the equity accounting of 50% of the net result of VMO2 from June 1 to June 30 (see Note 9). The gain registered on the establishment of the VMED O2 UK Ltd, amounting to 4,434 million euros (see notes 2 and 23), are recorded in "Other companies".

(ii) The Telxius Group ceased to be a reporting segment in 2021 as a result of the sale of the telecommunications towers divisions in Europe and Latin America (see Note 2). The Telxius Group’s results are included in "Other companies" as well as the gain obtained for the sale of the telecommunications towers divisions, amounting to 5,761 million euros (see notes 2 and 23).

The segments referred to above include the information related to the fixed, wireless, cable, data, internet and television businesses and other digital services provided in each country. Inter-segment transactions are carried out at market prices.

Information relating to other Group companies not specifically included in these segments is reported under "Other companies", which includes Telefónica, S.A. and other holding companies, as well as companies whose main purpose is to provide cross-sectional services to Group companies and other operations not included in the segments. The Incremental and BE-Terna groups, acquired by Telefónica Tech in the first half of 2022 (see Note 5), are reported within "Other companies".

The Group centrally manages borrowing activities, mainly through Telefónica, S.A. and other companies included in "Other companies", so most of the Group's financial assets and liabilities are reported under "Other

companies". In addition, Telefónica, S.A. is the head of the Telefónica tax group in Spain. Therefore, a significant part of the deferred tax assets and liabilities is included under "Other companies". For these reasons, the results of the segments are disclosed up to operating income.

Revenues and expenses arising from intra-group invoicing for the use of the trademark and management services were eliminated from the operating results of each Group segment. The results of the holding companies also exclude dividends from Group companies and impairments of investments in Group companies. These adjustments have no impact on the Group’s consolidated results. In addition, segment reporting considers the impact of the purchase price allocation to the assets acquired and the liabilities assumed by the companies included in each segment. The assets and liabilities presented in each segment are those managed by the heads of each segment, regardless of their legal structure.



						Telefónica, S.A. 18


Condensed Consolidated Interim Financial Statements 2022

The following table presents income, CapEx information (capital expenditures in intangible assets and property, plant and equipment, see

Notes 6 and 8) and acquisitions of rights of use (see Note 21) of the fully consolidated reportable segments:


January - June 2022
Millions of euros	Telefónica Spain	VMO2	Telefónica Germany	Telefónica Brazil	Telefónica Hispam	Other companies	Eliminations	Total Group
Revenues	6,164	—	3,949	4,199	4,526	1,499	(887)	19,450
External revenues	6,053	—	3,938	4,191	4,471	799	(2)	19,450
Inter-segment revenues	111	—	11	8	55	700	(885)	—
Other operating income and expenses	(3,910)	—	(2,702)	(2,485)	(3,432)	(1,421)	845	(13,105)
OIBDA	2,254	—	1,247	1,714	1,094	78	(42)	6,345
Depreciation and amortization	(1,075)	—	(1,131)	(1,133)	(922)	(94)	19	(4,336)
Operating income	1,179	—	116	581	172	(16)	(23)	2,009
Share of (loss) income of investments accounted for by the equity method	—	138	—	—	(4)	(29)	—	105
Capital expenditures (CapEx)	642	—	556	809	429	45	1	2,482
Acquisitions of rights of use	187	—	340	321	264	7	7	1,126


January - June 2021
Millions of euros	Telefónica Spain	Telefónica United Kingdom (1)	VMO2	Telefónica Germany	Telefónica Brazil	Telefónica Hispam	Other companies	Eliminations	Total Group
Revenues	6,095	2,628	—	3,743	3,318	3,945	1,547	(971)	20,305
External revenues	5,968	2,609	—	3,731	3,310	3,895	798	(6)	20,305
Inter-segment revenues	127	19	—	12	8	50	749	(965)	—
Other operating income and expenses	(3,743)	(1,709)	—	(2,571)	(1,839)	(3,176)	8,835	784	(3,419)
OIBDA	2,352	919	—	1,172	1,479	769	10,382	(187)	16,886
Depreciation and amortization	(1,071)	—	—	(1,192)	(927)	(984)	(128)	163	(4,139)
Operating income	1,281	919	—	(20)	552	(215)	10,254	(24)	12,747
Share of (loss) income of investments accounted for by the equity method	—	—	(65)	—	—	(1)	(2)	—	(68)
Capital expenditures (CapEx)	720	933	—	508	647	501	107	(16)	3,400
Acquisitions of rights of use	283	389	—	532	260	122	93	(251)	1,428
(1) On June 1, 2021 Telefónica United Kingdom was excluded from the scope of consolidation (see Note 2).



						Telefónica, S.A. 19


Condensed Consolidated Interim Financial Statements 2022

The table below shows the income, CapEx and acquisitions of rights of use of VMED O2 UK Ltd since its constitution on June 1, 2021 (see Note 2) until June 30, 2022. VMED O2 UK Ltd is a joint venture 50% owned by Telefónica and Liberty Group and is recorded under the equity method (see Note 9). The tables below show the information of the joint venture at 100%.


VMO2
Millions of euros	January-June, 2022	June 1 to June 30, 2021
Revenues	5,996	993
Other operating income and expenses	(3,771)	(640)
OIBDA	2,225	353
Depreciation and amortization	(2,065)	(345)
Operating income	160	8
Share of income (loss) of investments accounted for by the equity method	1	—
Financial income	9	2
Financial expenses	(457)	(66)
Exchange rate differences and change in fair value of derivatives	523	(84)
Net financial expense	75	(148)
Result before taxation	236	(140)
Taxes	(41)	9
Result for the period (100% VMO2)	195	(131)
50% attributable to Telefónica Group	97	(65)
Share-based compensation	8	—
Other adjustments	33	—
Share of income (loss) of investments accounted for by the equity method	138	(65)
Capital expenditures (CapEx) (100% VMO2)	1,270	188
Acquisitions of rights of use (100% VMO2)	64	—



						Telefónica, S.A. 20


Condensed Consolidated Interim Financial Statements 2022

The segmentation of assets and liabilities of the reportable segments is as follows:


June 2022
Millions of euros	Telefónica Spain	VMO2(1)	Telefónica Germany	Telefónica Brazil	Telefónica Hispam	Other companies	Eliminations	Total Group
Fixed assets	14,246	—	11,762	18,580	8,120	2,207	(9)	54,906
Rights of use	1,419	—	3,360	2,140	1,196	105	(48)	8,172
Investments accounted for by the equity method	263	11,874	—	—	164	360	—	12,661
Financial assets and other non-currents assets	701	—	861	1,113	1,532	7,079	(3,405)	7,881
Deferred tax assets	2,151	—	415	539	660	1,648	—	5,413
Other current financial assets	40	—	53	57	565	7,059	(5,105)	2,669
Non-current assets and disposal groups classified as held for sale	—	—	—	—	39	—	—	39
Total allocated assets	24,958	11,874	18,965	25,677	16,902	26,344	(13,579)	111,141
Non-current financial liabilities	736	—	1,552	207	2,820	30,620	(1,021)	34,914
Non-current lease liabilities	1,050	—	2,703	1,692	1,278	55	(24)	6,754
Deferred tax liabilities	103	—	272	1,143	750	812	—	3,080
Current financial liabilities	2,150	—	133	139	4,053	7,693	(8,781)	5,387
Current lease liabilities	382	—	563	605	413	19	(18)	1,964
Liabilities associated with non-current assets held for sale	—	—	—	—	—	—	—	—
Total allocated liabilities	16,065	—	10,149	9,939	14,148	42,494	(13,339)	79,456

(1) The detail of assets and liabilities of VMO2 is detailed in a later table in this note.



						Telefónica, S.A. 21


Condensed Consolidated Interim Financial Statements 2022


December 2021
Millions of euros	Telefónica Spain	VMO2	Telefónica Germany	Telefónica Brazil	Telefónica Hispam	Other companies	Eliminations	Total Group
Fixed assets	14,499	—	12,124	15,056	7,637	1,667	(14)	50,969
Rights of use	1,433	—	3,349	1,701	1,064	99	(67)	7,579
Investments accounted for by the equity method	263	12,129	—	—	128	253	—	12,773
Financial assets and other non-currents assets	549	—	883	888	1,001	7,428	(3,402)	7,347
Deferred tax assets	2,345	—	433	454	713	1,671	—	5,616
Other current financial assets	40	—	70	56	838	8,379	(5,548)	3,835
Non-current assets and disposal groups held for sale	—	—	—	—	102	256	—	358
Total allocated assets	24,971	12,129	19,953	21,461	15,628	29,544	(14,473)	109,213
Non-current financial liabilities	2,140	—	1,627	11	2,778	31,288	(2,554)	35,290
Non-current lease liabilities	1,082	—	2,781	1,317	1,192	55	(36)	6,391
Deferred tax liabilities	119	—	291	1,040	594	558	—	2,602
Current financial liabilities	1,019	—	89	199	4,620	9,669	(8,591)	7,005
Current lease liabilities	378	—	548	460	295	14	(16)	1,679
Liabilities associated with non-current assets and disposal groups held for sale	—	—	—	—	—	134	—	134
Total allocated liabilities	17,042	—	10,819	7,600	14,306	45,129	(14,367)	80,529



						Telefónica, S.A. 22


Condensed Consolidated Interim Financial Statements 2022

The detail of assets and liabilities of VMED O2 UK Ltd as of June 30, 2021 is as follows (amounts corresponding to 100% of the company, see Note 9):


VMO2
Millions of euros	06/30/2022	12/31/2021
Fixed assets	44,671	46,258
Rights of use	968	1,058

Financial assets and other non-currents assets	2,489	1,348
Deferred tax assets	67	115
Other current financial assets	287	214

Total assets	51,939	52,333
Non-current financial liabilities	19,658	19,185
Non-current lease liabilities	774	885
Deferred tax liabilities	6	9
Current financial liabilities	2,963	2,841
Current lease liabilities	230	219

Total liabilities	28,315	28,198



						Telefónica, S.A. 23


Condensed Consolidated Interim Financial Statements 2022

The detail of revenues of the fully consolidated reportable segments is as follows:


Millions of euros	January - June 2022				January - June 2021
Segments	Fixed	Mobile	Other and elims.	Total	Fixed	Mobile	Other and elims.	Total
T. Spain (1)				6,164				6,095
T. United Kingdom (2)	—	—	—	—	95	2,533	—	2,628
T. Germany	399	3,540	10	3,949	400	3,342	1	3,743
T. Brazil	1,357	2,842	—	4,199	1,136	2,182	—	3,318
T. Hispam	1,582	2,944	—	4,526	1,363	2,574	8	3,945
Other and inter-segment eliminations			612	612			576	576
Total Group				19,450				20,305

(1) The detail of revenues for Telefónica Spain is shown in the table below.

(2) On June 1, 2021 Telefónica United Kingdom is excluded from the scope of consolidation (see Note 2).

Given the convergence reached at Telefónica Spain due to the high penetration of the convergent offers, the revenue breakdown by fixed and mobile is less relevant in this segment. For this reason, the following revenue breakdown is shown, which Management believes is more meaningful.


Millions of euros
Telefónica Spain	January - June 2022	January - June 2021
Mobile handset sale	283	154
Ex-Mobile handset sale	5,881	5,941
Retailers	4,772	4,827
Wholesalers and others	1,109	1,114
Total	6,164	6,095



						Telefónica, S.A. 24


Condensed Consolidated Interim Financial Statements 2022

Note 5. Business combinations

Acquisition of mobile assets of Oi Group

On April 20, 2022, the closing of the transaction related to the Purchase Agreement for Acquisition of UPI Mobile Assets of Oi Group took place, and Telefónica Brasil acquired, on such date, all the shares of the company Garliava RJ Infraestrutura e Redes de Telecomunicações S.A. (Garliava), to which the mobile assets of Oi Group assigned to Telefónica Brasil had been contributed, in accordance with the segregation plan stated in the Oi Agreement (see Note 26).

The mobile assets of Oi Group finally assigned to Telefónica Brasil were the following:

•Customers: approximately 12.5 million (equivalent to 30% of the total customer base of the mobile assets of Oi Group) – according to ANATEL’s February 2022 data;

•Spectrum: 43MHz as national population-weighted average (46% of the radiofrequency of the mobile assets of Oi Group); and

•Infrastructure: contracts for the use of approximately 2.7 thousand sites of mobile access (corresponding to 19% of the sites of the mobile assets of Oi Group).

This transaction brings benefits to the Brazilian telecommunications sector, expanding the capacity to make investments and create technological innovations in a sustainable and rational manner, contributing to the digitalization of the country through the construction and expansion of networks in cutting-edge technologies, such as 5G and fiber, which translates into services with better coverage and quality to users. In addition, the transaction has the potential to generate synergies for the Company, through the optimization of operating costs and efficient allocation of investments due to the integration of the incorporated assets.

At the date of preparation of these consolidated financial statements, the purchase price allocation is provisional. The following table presents the consideration, the fair value of assets and liabilities identified at the acquisition date and the preliminary goodwill (which once the adjustment and review process is completed could be used for tax purposes):


Millions of euros


Consideration			1,091
Intangible assets
Licenses			506
Customer relationships			22

Property, plant and equipment			29
Rights of use			129
Deferred tax assets			53
Trade receivables			79
Other assets			30
Cash and cash equivalents			13
Lease liabilities			(142)
Trade payables			(24)
Provisions			(245)
Other liabilities			(55)
Fair value of net assets			395
Preliminary goodwill (Note 7)			696

The fair value of the licenses has been determined using the discounted cash flow method of the Income Approach, which considers the earning capacity of the asset. The amortization period of the licenses ranges from 5 to 15 years (average period of 10.04 years).

The fair value of trade receivables amounts to 79 million euros, which does not differ from the book value consisting of a gross amount of 81 million euros, net of estimated impairment losses of 2 million euros.

At the acquisition date, contingent liabilities have been recognized at fair value in the amount of 90 million euros.

The contribution of Garliava since its inclusion in the scope of consolidation and until June 30, 2022 was 68 million euros in revenues and 3 million euros in profit for the period.

Acquisition of Incremental
On March 21, 2022, Telefónica Tech completed the acquisition of 100% of the shares of the British group Incremental, one of Microsoft's fastest-growing business partners in the UK, for a 104 million euros consideration (including potential contingent payments linked to its future performance). In addition, at the closing of the transaction a payment was made in the amount of 91 million euros to cancel payment obligations of the acquired companies.



						Telefónica, S.A. 25


Condensed Consolidated Interim Financial Statements 2022

With this new acquisition, Telefónica Tech significantly increases its scale and competencies in Microsoft technologies, making it one of Microsoft's largest business partners in the UK.


Millions of euros
Share purchase price			104
Payment obligations cancelled			91
Total			195
Intangible assets
Customer relationships			23
Other intangible assets			1
Property, plant and equipment			1
Rights of use			1
Accounts receivable			11
Other assets			1
Cash and cash equivalents			9

Lease liabilities			(2)
Accounts payable			(3)
Deferred tax liabilities			(6)
Other liabilities			(10)
Fair value of net assets			26
Preliminary goodwill (Note 7)			169

Acquisition of BE-Terna
On June 9, 2022, Telefónica Tech completed the acquisition of 100% of the shares of the German group BE-Terna, for a 191 million euros consideration (including potential contingent payments linked to its future performance). In addition, at the closing of the transaction a payment was made in the amount of 162 million euros to cancel payment obligations of the acquired companies.

BE-Terna currently has a highly qualified team of more than 1,000 employees in 28 locations in Germany, Austria, Switzerland, the Adriatic region and the Nordic countries, among other markets. With this new acquisition, Telefónica Tech significantly enriches its geographic scale and its professional and managed services capabilities across Europe.

At the date of preparation of these consolidated financial statements, the purchase price allocation is in the process of being determined. The analysis is expected to be completed in the next few months, within the twelve-month period from the date of acquisition established in the standard. The following table presents the consideration, the preliminary book

values of assets and liabilities at the date of entry in the scope of consolidation and the preliminary goodwill recorded in the consolidated statement of financial position as of June 30, 2022:


Millions of euros
Share purchase price			191
Payment obligations cancelled			162
Total			353
Property, plant and equipment			6
Rights of use			4
Accounts receivable			15
Other assets			12
Cash and cash equivalents			18

Lease liabilities			(4)
Trade payables			(12)
Deferred tax liabilities			(3)
Current tax payables			(6)
Other liabilities			(14)
Accounting value of net assets			16
Preliminary goodwill (Note 7)			337



						Telefónica, S.A. 26


Condensed Consolidated Interim Financial Statements 2022

Note 6. Intangible assets

The composition and movements in "intangible assets" in the first half of 2022 and 2021 are as follows:


January-June 2022
Millions of euros	Balance at 12/31/2021	Additions	Amortization	Transfers and others	Translation differences and hyperinflation adjustments	Business acquisitions	Balance at 06/30/2022
Service concession arrangements and licenses	7,328	132	(414)	—	497	506	8,049
Software	2,494	189	(664)	481	149	—	2,649
Customer base	971	—	(175)	2	5	45	848
Trademarks	276	—	(17)	1	21	1	282
Other intangible assets	42	13	(12)	1	1	—	45
Intangible assets in process	614	382	—	(434)	23	—	585
Total intangible assets	11,725	716	(1,282)	51	696	552	12,458


January-June 2021
Millions of euros	Balance at 12/31/2020	Additions (1)	Amortization	Disposals	Transfers and others	Translation differences and hyperinflation adjustments	Balance at 06/30/2021
Service concession arrangements and licenses	6,573	159	(359)	—	228	149	6,750
Software	2,380	243	(610)	(1)	407	55	2,474
Customer base	1,238	—	(183)	—	—	5	1,060
Trademarks	512	—	(23)	(207)	—	17	299
Other intangible assets	51	7	(8)	—	(3)	—	47
Intangible assets in process	734	294	—	(4)	(544)	5	485
Total intangible assets	11,488	703	(1,183)	(212)	88	231	11,115

(1) Total additions of intangible assets until 06/30/2021, amounted to 1,271 million euros, including the additions corresponding to companies held for sale and sold companies during the first half of 2021 (see Note 2).



						Telefónica, S.A. 27


Condensed Consolidated Interim Financial Statements 2022

The gross cost, accumulated amortization and impairment losses of intangible assets in the first half of 2022 and December 31, 2021 are as follows:


Balance at 06/30/2022
Millions of euros	Gross cost	Accumulated amortization	Impairment losses	Intangible assets
Service concession arrangements and licenses	16,182	(7,986)	(147)	8,049
Software	16,674	(14,013)	(12)	2,649
Customer base	5,055	(4,207)	—	848
Trademarks	951	(669)	—	282
Other intangible assets	869	(824)	—	45
Intangible assets in process	585	—	—	585
Total intangible assets	40,316	(27,699)	(159)	12,458


Balance at December 31, 2021
Millions of euros	Gross cost	Accumulated amortization	Impairment losses	Intangible assets
Service concession arrangements and licenses	14,456	(7,007)	(121)	7,328
Software	15,442	(12,938)	(10)	2,494
Customer base	4,888	(3,917)	—	971
Trademarks	901	(625)	—	276
Other intangible assets	910	(868)	—	42
Intangible assets in process	614	—	—	614
Total intangible assets	37,211	(25,355)	(131)	11,725

"Additions" of spectrum in the first half of 2022 amounted to 132 million euros, mainly corresponding to the renewal of 15 MHz of spectrum in the 1900 MHz band by Colombia Telecomunicaciones (see Appendix II) recorded in the first half of 2022 in the amount of 130 million euros. As of June 30, 2022, this amount was pending payment (see notes 18 and 19).

CapEx additions by segment are detailed in Note 4.

"Business acquisitions" in the first half of 2022 corresponds mainly to the acquisition of the intangible assets of Oi, amounting to 528 million euros (see notes 2, 5 and 26).



						Telefónica, S.A. 28


Condensed Consolidated Interim Financial Statements 2022

Note 7. Goodwill

The movement in goodwill assigned to each Group segment was as follows:

January-June 2022

Millions of euros

Balance at 12/31/2021

Additions

Transfers

Exchange rate impact

Balance at 06/30/2022

Telefónica Spain

4,291

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