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Telefónica assumes no liability for any discrepancy. 1
Key takeaways
Mr. José María Álvarez-Pallete Chairman & CEO
Our strategic
framework 2 2019 plan based on 5 key decisions; aiming at long term
impact and value creation Spain, Brazil, Germany and the UK: Key
markets Telefónica Tech launch Creation of Telefónica Infra
Operational spin-off of the businesses in HispAm New operating
model • Cutting-edge operators • Units at the forefront of
Technology • All options open in T. Hispam • Agility to capture
opportunities • Synergy model/economies of scale • Optimise capital
allocation 3 1 2 4 5
Delivering on
commitments Proactive management Back on growth track at revenue,
OIBDA & FCF level Consistent and predictable financial
performance (guidance fulfilled in the last 6 years) Outstanding
shareholder remuneration Price action in all markets Mitigating
inflation pressure Prioritising investments, addressing challenges
In-market consolidation Embracing industry-wide transformation
Strong ESG; ratings, performance, priorities Resilience, execution,
delivery 3 Progressing on regulatory priorities Sector bringing
back rationality (spectrum auctions) Pursuing fairer regulatory
environments Fair share consultation process Leveraging on
opportunities
39.8 64.5
Dec-19 Dec-22 (m) Total FTTH (PPs) Legacy switch off Traffic
growth/customer (Gbytes/month) Digitalised processes (%) Coverage
4G (% pop) Pioneers in Telco Cloud paradigm x1.6 79% 90% Dec-19
Dec-22 Coverage 5G (% pop) 487 2,236 Dec-19 Dec-22 85% >80% +11
p.p. 69% 83% Dec-19 Dec-22 +14 p.p. 236 468 Dec-19 Dec-22 3.8 7.6
Dec-19 Dec-22 FBB MBB x2.0 x2.0 l l Open Broadband Open RAN Multi
Edge Computing -53% since 2017 >25% COs 2G Since 2021 3G 2025 E
Virtualisation & softwarisation Focus on executing our strategy
4
344.3 383.1
Dec-19 Dec-22 Revenue (organic y-o-y) 3.2% 4.0% FY 19 FY 22
Accesses (m; y-o-y) +11% Dividends + SBB (€bn) Shareholders Equity
(€bn) Customer growth Accelerated profitable growth Shareholder
remuneration; EquityRobust FCF; Net debt decline Improved revenue
mix 64% 73% 34% 27% FY 19 FY 22 FCF (€bn) Net debt (€bn) 17.9 FY 19
- FY 22 BB & SoC o/total service revenue Voice & Access
o/total service revenue 37.7 26.7 FY 19 - FY 22 17.2 25.1 FY 19 -
FY 22 9.0 FY 19 - FY 22 -€11bn Advancing in the transformation of
our company +46% CapEx/Sales organic 15.0% 14.8% FY 19 FY 22
Declining CapEx/sales 5
2022:
Strategy execution adds quality growth Steady progress through 2022
Revenue, OIBDA & OIBDA-CapEx growth Strengthened competitive
position Looking ahead 6 Cost efficiencies offset headwinds Stable
OIBDA margin (FY 22 y-o-y org.) Disciplined capital allocation
Robust FCF, well covered DVD, high liquidity Delivered 2022 updated
guidance Mitigating impacts from macro challenges • Spain; improved
commercial momentum; 7 straight quarters of top-line growth •
Brazil; reinforced market leadership, record net-adds, double digit
reported growth in revenue & OIBDA • Germany; record commercial
traction on state-of-the-art network, healthy revenue & OIBDA
growth • UK: operational progress; strong OIBDA growth on synergy
delivery • T. Tech; built new capabilities to sustain growth • T.
Infra; executing fibre roll-outs, build optionality • T. Hispam;
growth captured, increased optionality • B2B accelerating more
towards digitalisation Solid sustainability record; enabling
positive impact towards the UN Sustainable Development Goals of
>€95bn annually
Resilient
performance in a challenging year FY 22 Revenue y-o-y organic +4.0%
Growth across the board FY 22 OIBDA y-o-y organic +3.0% Stable
underlying OIBDA Net debt €26.7bn Leverage reduction YTD to 2.54x
FCF FY 22 €4,566m +72.5% y-o-y 7 Solid revenue mix, service revenue
growth, B2B strength 2022 reported revenue growth (+1.8% y-o-y),
1st time since 2015 Robust FCF performance; €0.80 FCFs comfortably
covering DPS Prudent debt management; maturities covered over 3yr
FY 22 € in millions Reported + 50% VMO2 JV Organic y-o-y Revenue
45,978 4.0% OIBDA 15,066 3.0% OIBDA-CapEx (ex-spectrum) 8,067 1.8%
FY 22 € in millions Reported Reported y-o-y Revenue 39,993 1.8%
OIBDA 12,852 (41.5%) OIBDA Underlying 12,940 (0.6%) Net Income
2,011 (75.3%) FCF (incl. leases principal payments) 4,566 72.5% Net
Financial Debt ex-leases 26,687 2.3%
Delivering on
our commitments; we are predictable 2022 Dividend €0.30/share
Dec-22 €0.15/sh. (cash) Jun-23 €0.15/sh. (cash) 2022 calendar
payments Jun-22 €0.15/sh.; voluntary scrip Dec-22 €0.15/sh.; cash
139m treasury stock cancelled April 22 8 2022 guidance organic
including 50% of VMO2 Shareholder remuneration Targets Initial 2022
guidance Updated 2022 guidance FY 22 Revenue “Low single digit
growth” “High-end of low single digit growth” 4.0% OIBDA “Low
single digit growth” “Mid-to-high-end of low single digit growth”
3.0% CapEx/Sales (ex spectrum) Up to 15% Maintained up to 15%
14.8%
Pressing
ahead with ESG priorities, getting recognition Net-zero by 2040
(SBTi validated) 100% renewables by 2030 Zero-waste by 2030 >90%
MBB rural coverage by 2024 1 33% women directors by 2024 Zero
adjusted pay gap by 2024 2 1 Core markets. As of Dec-22: Brazil
>80%, Germany 99%, Spain >94%, UK >99% 2 Adjusted pay gap:
equal pay for jobs of equal value (+/-1%) 3 Financing includes
balance-sheet debt, hybrids and undrawn committed credit lines 4
Parity defined as not less than 40% of each gender represented Key
targets Environmental Social Governance Zero-tolerance of
corruption 30-35% sustainability linked financing by 2024 3 Parity
4 in top governing bodies by 2030 ESG rankings & recognitions
ESG analysts’ ratings 9 ESG ranking/recognition TEF performance
Detail Climate A List 9th consecutive year Supplier Engagement
Leader 3rd consecutive year #1 worldwide Digital Inclusion
Benchmark #1 worldwide in sector Social Transformation Baseline
Assessment 1 of 17 telcos included worldwide 6th consecutive year
#1 in sector Leader across all categories (privacy, governance and
freedom of expression) ESG analyst TEF rating Relative position
4.4/5 1st (sector) Member of FTSE4Good B- 1st decile (sector) A
Avg. in telco sector 86/100 Top 10 in sector (worldwide) Member of
DJSI Europe 15.2 (low risk) 6th / 223 ( sector) 67/100 2nd / 33
(sector)
Q4 22 Results
Mr. Ángel Vilá COO
Sequential
acceleration in Revenue, OIBDA & OIBDA-CapEx Q4 22 Revenue
y-o-y organic +3.9% Growth across the board Q4 22 OIBDA y-o-y
organic +3.5% Stable OIBDA margin y-o-y Net debt Dec-22 €26.7bn
Reduction of €2bn in Q4 22 FCF Q4 222 €2,093m +77.7% y-o-y 10
Service revenue +1.3 p.p. q-o-q to +4.1% y-o-y org.; B2B +1.4 p.p.
to +7.9% y-o-y org. Reported: 3rd straight Q of rev. growth, 2nd Q
of underlying OIBDA growth FCF improvement along the year, Q4
strongest Debt decline; €1,750m ESG financing Q4 22 € in millions
Reported + 50% VMO2 JV Organic y-o-y Revenue 11,751 3.9% OIBDA
3,802 3.5% OIBDA-CapEx (ex-spectrum) 1,677 4.7% Q4 22 € in millions
Reported Reported y-o-y Revenue 10,200 5.4% OIBDA 3,259 139.2%
OIBDA Underlying 3,419 6.0% Net Income 525 c.s. FCF (incl. leases
principal payments) 2,093 77.7%
Structurally
positioned to offset inflationary pressures 11 Structural
advantage; operating in high-inflation LatAm markets for decades
Managing top line through pricing power and inflation pass through
Improving customer metrics (NPS and churn) T. Tech revenue +33.7%
y-o-y in Q4 22 Managing OpEx Lower weight of personnel expenses
than peers (13% o/Group revenues) Long-term hedging on energy in
place, >60% for 2023 Long terms PPAs; 100% electricity renewable
in core markets, PER and CHL Environmental impact per petabyte of
FTTH <18x than cooper; per PB 4G/5G <7x 2G/3G Generating
efficiencies (simplification, digitisation, synergies …) CapEx peak
behind; advanced FTTH deployment, new partner-models Legacy
shutdown opportunity (Spain cooper decommission in 2024) Active tax
management, proactive debt refinancing adding to FCF
Spain KPIs
Reinforced leading position in a more rational market 89.2 90.4 36
42 1.4% 1.2% NPS (%)Conv. ARPU (€) 26.9 28.1 11.8 12.4 0.0 5.0 10.0
15.0 20.0 25.0 30.0 CapEx/Sales (organic) & Coverage Revenue
& OIBDA growth (y-o-y organic) 12 0.1% (1.0%) (5.3%) 0.6%
(0.6%) (3.3%) Service Rev. OIBDARevenue Business turnaround
Superior value, leading NPS & churn Defended revenue share
Service revenue stabilised Retail revenue recovery Top wholesale
player Exceling in efficiency Stronger NGN (FTTH & 5G) Accesses
(m) Dec-22Dec-21 FY 21 FY 22 FY 21 FY 22 Conv churn (%) CapEx/Sales
(%)FTTH PP (m) FY 22FY 21 4.8 3.0 15.2 4.65.0 3.2 15.1 4.5
Wholesale fibre ContractRetail fibre Convergent
Spain
Convergent KPIs Service revenue back to growth after 3 years 90.4
91.1 90.1 90.1 90.3 1.4% 1.3% 1.1% 1.2% 1.0% Churn (%)ARPU (€)
Revenue OIBDA 40% 37% 36% 37% 39% 26% 27% 25% 24% 23%
OIBDA-CapExOIBDA Margins (organic) Revenue & OIBDA growth
(y-o-y organic) 13 Q3 22 Q4 22Q4 21 Q1 22 Q2 22 0.5% 0.9% 1.3% 0.2%
0.2% (3.4%) (4.9%) (3.4%) (2.8%) (2.1%) Q3 22 Q4 22Q4 21 Q1 22 Q2
22 Improving KPIs in a rational market (leading NPS 42%; lowest
churn since Q1 15) FBB & contract net adds in Q4 22 Tariff
update in Q1 23 (+6.8% avg) Service Rev. +0.6% y-o-y in Q4 22 OIBDA
trend improved sequentially Benchmark (OIBDA-CapEx)/sales (25% FY
22) Supporting circular economy (buyback of devices) Net adds (k)
(29) 6 3 1 (71) (56) 3 14 (42) (27) (26) (9) Q1 22 Q2 22 Q3 22
Postpaid Convergent Q4 22 FBB Q3 22 Q4 22Q4 21 Q1 22 Q2
22
Germany Fixed
BB net adds (k) Revenue OIBDA 1.6% 5.2% 5.8% 6.0% 6.6% (2.2%) 7.0%
3.1% 4.2% 6.6% Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Margins (organic)
OIBDA-CapExOIBDA Revenue & OIBDA organic growth 7 (10) 5 19 18
Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 31% 31% 32% 31% 31% 8% 18% 17% 15%
17% Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Postpay net adds (k) 518 287 374
304 264 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 14 Solid commercial traction
& sustained financial momentum Successful completion of 3-yr
‘Investment for Growth’ programme, 5G pop coverage >80% 3rd time
in a row ‘very good’ in connect magazine’s mobile network test
Sustained Revenue and OIBDA growth on strong own brand performance
M4M announced for ‘O2 Mobile’ portfolio ESG leadership: Ranked 3rd
in sector by Sustainalytics & included in Bloomberg
GEI
Virgin Media
O2 93 101 114 115 188 129 11 13 47 79 Improved growth and
operational progress Strong customer growth 1.3m Volt converged
customers 16.1m PPs; 5G in >1.6k towns & cities Q4 22
revenue and OIBDA growth Synergies target exceeded: 30% of
annualised run-rate Achieved “Advancing level” in the Carbon
Trust’s Route to Net Zero (0.7%) (0.1%) 0.2% (0.6%) 0.4% (1.1%)
2.6% 4.8% 8.1% 9.9% 33% 37% 38% 38% 37% 13% 18% 19% 16% 17% Fixed
network build (k PPs) Postpay net adds (k) Revenue OIBDA Margins
(organic) OIBDA-CapExOIBDA All organic according to Telefonica
criteria Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 15 Revenue & OIBDA
growth (y-o-y organic) Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Q4 21 Q1 22 Q2
22 Q3 22 Q4 22 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22
Brazil 19.6
20.5 21.0 22.3 23.3 29.0 Strengthened leadership in FTTH &
contract Revenue +31% / OIBDA +27% (Q4 22 in € terms) Organic OIBDA
margin >40% in Q4 22 20% CapEx/Sales FY 22: investment peak
OIBDA-CapEx +5.1% in FY 22 Leader in ESG ratings: CDP A List,
Bloomberg GEI, 2nd on ISE B3 Accesses growth (y-o-y) FTTH Premises
passed (m) Double digit growth in Q4 revenue & total accesses
8% 7% 20% 18% 18% 36% 29% 25% 21% 19% FTTHContract 2.8% 4.6% 11.1%
10.6% 10.1% 1.7% 1.6% 8.5% 12.3% 6.6% Revenue OIBDA 45% 41% 40% 43%
44% 25% 25% 19% 22% 24% OIBDA-CapExOIBDA Revenue & OIBDA growth
(y-o-y organic) Margins (organic) Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 16
Dec-21 Mar-22 Jun-22 Dec-24ESept-22 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22
Q4 21 Q1 22 Q2 22 Q3 22 Q4 22Dec-22
Tech, strong
growth on resilient demand of next generation IT 706 944 1,482
+33.6% Sustainable Portfolio FY 20 FY 21 FY 22 • Strong commercial
activity across businesses o FY 22 Bookings >+50% y-o-y •
Revenue profile improved (constant perimeter + M&A) o Higher
weight of Managed & Professional Services o Better-balanced
footprint • New partners on board: Qualys, Checkpoint, Livall •
Reinforced credentials by increasing customer base, Partners’
accreditations and Industry Analysts recognition +57.1% ~60% of
portfolio certified as ECOSMART Cyber + Cloud + IoT + Big Data + AI
Wide partner ecosystem Excellent Delivery Our people, our asset
x2.1 Magic Quadrant Managed IoT Connectivity Services (9th
consecutive year) Managed Hybrid Cloud & Security Services Very
Strong by GlobalData Leader by Gartner Strong capabilities and
highly skilled team Headcount evolution (k) 28% 35% 37% Telefónica
Hired M&A ~80% in Europe Talent Source 2.5 4.0 6.0 Dec-20
Dec-21 Dec-22 x2.4 Constant Perimeter ~+27% y-o-y T. Tech Revenue
(€m) 17
• 3.7m PPs in
FY22 • Wholesale agreements with Direct TV and Entel • 24k PPs in
Q4 22 • Accelerating roll-out to boost digital inclusion • 3.9m PPs
as of Dec-22 • Green connectivity to rural underserved areas •
Growing financials2 (y-o-y organic): • €421m revenue in FY22
(mainly USD); +12.6% reported y-o-y • €218m OIBDA, 52% margin FY22
(+6 p.p. y-o-y); +30.3% reported y-o-y • Deployment of new cable
Tikal (Guatemala/USA), partnership with AMX • 70% T. Infra and 30%
Pontegadea after jointly acquiring KKR’s stake 18 Infra, leading
portfolio of FibreCos and critical infrastructure Continued
progress in roll-out expansion Combining profitability and growth •
3.3m PPs as of Dec-22 (+1.3m PPs in FY22) • Wholesale agreements
with Sky and Vero • 2.4m PPs in FY22 (market leaders in FTTH) •
Liwa wholesale agreement • Operations in 8 Länder • MoUs to deploy
720k premises 1 Included in the total Group’s FTTH PPs 2 Constant
perimeter (excluding tower business) Total FTTH Premises Passed1
(m) 10 13 Dec-21 Dec-22 7.8% 30.6% Revenue OIBDA Q4 22 2.8% 17.2%
Revenue OIBDA FY 22 Successful execution of FibreCos at attractive
valuations eg. Bluevía 2.5 Bn EV @27.1xOIBDA; TEF retains 55% stake
25 2026E
Q4 22 Results
Mrs. Laura Abasolo CFCO & Head of T. Hispam
T. Hispam,
value growth & improved returns 13.0 14.0 14.8 15.8 16.8 FTTH
& Cable premises passed (m) 8% 6% 5% 5% 4% 25% 22% 19% 18% 19%
FTTH & CableContract 6.0% 4.3% 4.2% 3.8% 2.8% 4.0% 2.3% 10.2%
1.2% (1.5%) Revenue OIBDA 23% 21% 22% 22% 22% 11% 15% 14% 15% 4% 1m
contract & 0.8m FTTH net adds in FY 22 Focus on value-led ARPU
growth FTTH transformation boosted by InfraCos OIBDA-CapEx +2.0% in
FY 22 “Internet for all” connecting 3m people & receiving
industry recognitions KPIs and OIBDA-CapEx growth Accesses Growth
(y-o-y) Revenue & OIBDA growth (y-o-y organic) Margins
(organic) Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 19 OIBDA-CapExOIBDA Dec-21
Mar-22 Jun-22 Sep-22 Dec-22 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Q4 21 Q1
22 Q2 22 Q3 22 Q4 22 13.1m FTTH
Deleverage
trend confirmed, contained cost and sound liquidity 2.80x 2.60x
2.54x Dec-21 Dec-22 ND €35.3bn Total interest payment cost ex
leases Contained interest payment costDeleverage trend confirmed
Dec- 21 Dec-22 +100 bps in short- term rate = +€34m in interest
payment 2.51x Post closing 1 Outstanding ESG financing at €17bn
Sources of ESG Financing as of Feb -23 (€bn) 17.0 2.0 4.0 0.6 5.5
0.8 4.1 Telefónica, leading ESG financing telco Senior Bonds
Syndicated RCF TSA Syndicated RCF Germany Total Hybrid Bonds
Committed Credit Lines & Other 1 Including net proceeds from
the recovery of Telxius tax payments in advance, after the
acquisition of an additional stake in Telxius and the impact from
the fibre assets acquisition by FibreCo Chile. 2. Excludes
extraordinaries, mainly the tax refund. Debentures Brazil Dec-20 ND
€26.1bn ND €26.7bn ND €26.4bn Sep-22 Comfortable liquidity position
11.7 Liquidity cushion, Dec-22 (€bn) 9.7 Cash position Undrawn
credit lines & synd. credit facilities Cash liquidity 21.4 3.5
2.6 4.3 2.2 20242023 2025 2026 Gross debt maturities, Dec-22 (€bn)
€3.1bn avg (-58% vs 4 yrs avg. at Dec-16) >80% Total fixed debt
13.1 yrs Avg. debt life Net Debt/OIBDAaL 20 Deleveraging despite
M&A activity in 2022 3.86% 3.94% 3.76% 2
Conclusions
Mr. José María Álvarez-Pallete Chairman & CEO
2023 guidance
Targets 2023 Revenue “Low single digit growth” OIBDA “Low single
digit growth” CapEx/Sales (ex spectrum) ~14% 2023 Dividend
€0.3/share (cash) Dec-23 €0.15/sh. (cash) Jun-24 €0.15/sh. (cash)
2023 calendar payments Jun-23 €0.15/sh.; cash Dec-23 €0.15/sh.;
cash 0.4% treasury stock cancelled1 21 2023 guidance organic and
including 50% of VMO2 Shareholder remuneration 1. The adoption of
the corresponding corporate resolutions will be proposed to the AGM
for the cancellation of the shares representing 0.4% of the share
capital held as treasury stock (June 30th, 2022). Boost profitable
growth Double down on simplicity Decreasing Capex/Sales
ratio
Strategic
pillars T. Hispam Core Markets Value-Adding Group Evolving our
framework and boosting ambitions for 2023 1 Vision & ambition
Drive profitable growth, from leading players in attractive,
at-scale markets 22 2 3 4 5 Sustain Growth & crystallise value,
by focusing on being a digital B2B specialist Unlock value from TEF
digital infrastructure, accelerating deployments and enabling
further monetisation Sustainable regional player, providing
optionality for the group Scaled group, focusing on driving
shareholder value, power & simplicity
• Guidance
“low single digit growth” in Rev/OIBDA, 1 p.p. reduced CapEx
intensity, sustained cash dividend • Changing connectivity paradigm
through differentiated connectivity • Pursuing a fairer regulatory
environment • We delivered on updated 2022 guidance despite a
challenging context • Executing on strategy; strong performance
sustaining organic growth and smart capital allocation • Sound FCF
generation proves the effectiveness from more flexible operations
and a right financial strategy • Solid sustainability record;
validated by 3rd party ratings; sector leader in sustainable
financing • At the forefront for the future on digital
capabilities; leveraging NaaS Summary • Robust and future-proof
networks; technological leader in fibre • Sequential improvement in
y-o-y organic growth in revenue, OIBDA & OIBDA-CapEx • Record
FCF and net debt reduction reflecting tax refund and Bluevía 45%
stake sale 23
Results
presentation and Q&A Session Telefónica’s management will host
a webcast on 23 February at 10:00 AM (CET), 9:00 AM (GMT), and 4:00
AM (EST) Participants from Telefónica • 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. • 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 Webcast
Q&A Session
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 FOLLOW US: A List
2022 Bloomberg GEI 2023 1st company worldwide in 2021 Digital
Inclusion Benchmark 1st in sector 2022 Member of DJSI
Europe