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Telefónica´s Financial Profile and Prospects

Telefónica´s Financial Profile and Prospects. Ebitda: Profitability, growth and diversification A milestone year in terms of assets growth Strong balance sheet Stable Financial strategy and timely execution. Telefónica’s financial profile: Y2k. Euro. Mill. 1999. 2000. YoY. Growth.

margaret-evans
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Telefónica´s Financial Profile and Prospects

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  1. Telefónica´s Financial Profile and Prospects

  2. Ebitda: Profitability, growth and diversification A milestone year in terms of assets growth Strong balance sheet Stable Financial strategy and timely execution Telefónica’s financial profile: Y2k

  3. Euro Mill. 1999 2000 YoY Growth TURNOVER 22,957 28,485 24% EBITDA 10,885 11,919 9.5% NET INCOME 1,805 2,505 38.8% E.P.S. (Euros) 0.57 0.67 18.5% Steady growth record

  4. EBITDA: Growth + diversification Data / Media / Internet 4% Cellular 20% Cellular Wireline (Spain) Wireline (Spain) 26% 36% 36% Wireline (LATAM) Wireline (LATAM) 44% 34% Revenue 2000: 28,485 Millions Euro EBITDA 2000: 11,919 Millions Euro

  5. EBITDA: SIZE 2000E EBITDA 13.8 12.6 11.9 10.5 9.7 (Euro Bn) 3.3 Deutsche Telecom Telefónica France BT KPN Telekom Italia Telecom

  6. Strong historical growth (Euro Bn) 28.4 11.9 2.5 10.9 22.9 9.3 1.8 17.5 1.3 1998 1999 2000 1998 1999 2000 1998 1999 2000 Revenues EBITDA Net Income

  7. A milestone year: Asset growth ... 65,043 47,744 1999 2000 Consolidated Net Assets (Euro Mill.) YoY growth: + 36.2%

  8. … while preserving a strong balance sheet 1999 2000 Net Debt 20,472 26,951 Minority Interest 10,614 9,330 Shareholders’ Equity 16,658 28,762 Total Capital Employed 47,744 65,043 Net Debt / Total Capital Employed 42.9% 41.4% Net Debt / EBITDA (x) 1.9 2.3 EBITDA / Net financial expenses (x) 6.1 6.4

  9. Equity funding Full access to LATAM’s cash flows Optimising WACC and credit rating Financial flexibility Enhancing stability of a growing cash flow Efficiency and transparency in capital allocation With a clear financial strategy andtimely execution

  10. Equity funding: now and before ... • 2000 Equity issues Bn Eur • Verónica 21 • Endemol 5 • New equity • Mobile IPO 3.3 • TPI 3% sale 0.1 • Motorola Assets 2 • Total Equity 31.4 • New equity: 82% of attributable UMTS licenses costs • Verónica: EPS accretive by 29.7% (*) • (*) Before extraordinary income; after extraordinary income EPS accretive by 15.3%

  11. Rating stability 09/99 12/99 03/00 06/00 09/00 12/00 02/01 FT AA+ BT BT BT FT AA KPN KPN KPN KPN FT FT AA- DT DT DT TELEFONICA TELEFONICA TELEFONICA TELEFONICA TELEFONICA TELEFONICA TELEFONICA A+ FT FT BT VODAFONE VODAFONE VODAFONE BT BT BT VODAFONE A VODAFONE VODAFONE KPN KPN FT A- DT DT DT DT VODAFONE KPN BBB+

  12. … Enhancing financial flexibility 7 5.5 1999 2000 (*) Average debt maturity (years) (*) Average life global bond: 12.5 years / Amortisation of short term debt

  13. … and diversifying risk Euro Medium Term Notes + Commercial Other Paper 1.6% 5.3% LATAM 19.1% Global bonds 20.8% USD Loans 41.7% 43.1% Domestic bonds EURO 30.8% 37.6% By instrument (*) By currency (*) (*) Net Debt breakdown (31/12/00)

  14. Financial Profile above European peers Net Debt/Market Cap 20/02/01 Net Debt/ EBITDA 5.18 77.00% 4.65 71.00% 69.60% 4.36 2.3 35.10% DT FT BT TEF DT FT BT TEF Source: analyst estimates

  15. Cash - flows accretion • Verónica: 3.6 billion Euro additional cash - flow • Avoiding intrinsic subordination • Internal loans (*): • TEM : 4.9 Billion Euro • TISA : 585 M USD • T. Media : 945 M USD • Enhanced financial flexibility (*) Market prices

  16. Improving cash - flow quality 20.5% 11% 5.4% Stand-alone LATAM countries Telefónica's LATAM portfolio Telefónica's LATAM + SPAIN portfolio US$ EBITDA Average Standard Deviation

  17. Business lines Third parties Companies Looking for more efficiency Corporation Services Shared Services Centers Services Services Services Expected NPV of USD 850 millions

  18. WIRELESS CALL CENTERS DATA INTERNET WIRELINE YELLOW PAGES Improving capital allocation WACC 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% INTERNET DATA ARGENTINA PERÚ CALL CENTERS BRASIL WIRELESS CHILE YELLOW PAGES MÉJICO USA WIRELINE ESPAÑA

  19. Solid and well diversified revenue growth Reinforcing capital discipline: Capex / Operating Revenue Improving asset turnover: Revenue / Capital employed Well balanced and growing EBITDA margin: EBITDA / Revenue Enhancing Free cash flow margins What’s next

  20. Solid and well diversified revenue growth Data / Media / Internet Wireline (Spain) 21% 22% 24.00% 13%-15% Wireline LATAM Cellular 20% 37% 2000 CAGR 00/04 Revenue growth Revenue Breakdown 2004

  21. Reinforcing Capital discipline (Capex / Op. Revenue) 31% 21%-23% 2000 (*) Average 2001 - 2004 (*) 2000 : UMTS Licenses / Op. Revenue = 41%

  22. Improving Asset turnover (*) 0.50-0.55 0.43 2000 Average 2001 - 2004 (*) Asset turnover: Revenue / Capital employed

  23. Well balanced and growing EBITDA Data / Media / Internet Wireline 41.8% 24.5% (LATAM) 28.5% 38%-41% Cellular 20.3% Wireline (Spain) 2000 Average 2001 - 2004 26.7% EBITDA / Operating Revenue EBITDA breakdown 2004

  24. Enhancing Free Cash Flow margins 8%-12% 2.8% 2000 Average 2001-2004 % Free Cash Flow / Operating Revenue

  25. Proven management execution capability Accountability and transparency Diversification and growth Capital allocation discipline A value creating group with a focused strategy Unique position to take advantage of the market environment Messages

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