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Q3 23 Results Mr. Ángel Vilá COO
We delivered another solid quarter Revenue y-o-y organic +2.5% Service revenue +3.1% OIBDA y-o-y organic +3.0% Increasing OIBDA margin OIBDA-CapEX y-o-y organic +9.3% Accelerating in 9M to +4.8% Net Debt Q3 23 -€0.9bn €26.5bn FCF 9M €2.4bn Progress on net debt and leverage reduction • Leverage ratio 2.5x vs 2.6x (Jun-23) • Q3 23 FCF €1.1bn; further improvement expected in Q4 • Strengthened balance sheet Profitable and sustainable revenue & OIBDA organic growth • Strong B2B revenue growth; +4.6% • Profitability reflecting efficiencies and price actions • Consistent and disciplined execution Maintaining strong market position; growth in value • FTTH +14% y-o-y; mobile contract +3%; 5G deployment acceleration • Satisfied customers; leading NPS; attractive offerings • Constantly investing in NGN (innovation, digitalisation) Improvement in reported OIBDA growth; operational leverage • Q3 23 +2.5% y-o-y; + 2.6 p.p. q-o-q • Efficiencies, digitalisation and synergy realisation • Despite FX headwinds y-o-y Continuing to deliver in all metrics Q3 23 2
FX impact Net debt -€0.5bn € (m) 9M 23 Q3 23 Revenue 35 (12) OIBDA (4) (14) 9M 23 Q3 23 € in millions Reported Reported y-o-y Reported Reported y-o-y Revenue 30,499 2.4% 10,321 (0.2%) OIBDA 9,595 0.0% 3,330 2.5% OIBDA Underlying 9,648 1.3% 3,342 1.5% Net Income 1,262 (15.0%) 502 9.3% FCF (incl. leases principal payments) 2,426 (1.9%) 1,130 0.4% Net Financial Debt ex-leases 26,537 (7.4%) 9M 23 Q3 23 € in millions Reported + 50% VMO2 JV Organic y-o-y Reported + 50% VMO2 JV Organic y-o-y Revenue 35,048 3.5% 11,885 2.5% OIBDA 11,198 2.6% 3,875 3.0% OIBDA-CapEx (ex-spectrum) 6,437 4.8% 2, 111 9.3% 3 Overview of key financials
2023 guidance and dividend reiterated 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 2023 guidance Organic Shareholder remuneration 4 1.4% treasury stock to be cancelled Targets Initial 2023 guidance Upgraded 2023 guidance 9M 23 Revenue y-o-y organic “Low single digit growth” “ ~4% growth ” 3.5% OIBDA y-o-y organic “Low single digit growth” “ ~3% growth ” 2.6% CapEx/Sales organic ~14% ~14% 13.4% FCF 2023 ambition ~€4bn ex-spectrum
Ahead of the regulatory curve in ESG with a transparent roadmap Net-zero by 2040 (SBTi validated) 100% renewables by 2030 Zero-waste by 2030 >90% MBB rural coverage by 2024 1 33% women executives by 2024 Zero adjusted pay gap by 2024 2 Key targets Environmental Social Governance Parity 3 in top governing bodies by 2030 Zero-tolerance of corruption 30-35% sustainable linked financing by 2024 4 5 Climate Action Plan updated and approved by the Board, outlining climate-related risks and opportunities together with our governance model Due Diligence process report published; impact on human rights and how our actions affect the environment in view of upcoming European regulation More sustainable financing, new €750m green hybrid bond and updated our Sustainable Financing Framework to meet best practices and investor expectations Examples of our progress 1 Core markets. 2 Adjusted pay gap: equal pay for jobs of equal value. Achieved in 2022 3. Parity defined as not less than 40% of each gender represented 4. 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
90.1 90.3 92.6 91.5 90.6 1.2% 1.0% 0.9% 0.9% 0.9% Spain Convergent KPIs Growth in convergence and TV Improved financials Churn (%)ARPU (€) 37% 39% 36% 36% 36% 24% 23% 26% 22% 24% OIBDA-CapExOIBDA Margins (organic) Revenue & OIBDA growth (y-o-y organic) 6 0.2% 0.2% 0.3% 0.3% 1.0% (0.1%) 0.9% 1.7% 1.9% 2.4% (2.8%) (2.1%) (1.7%) (1.0%) (0.5%) Successful refreshed B2C offer (Q3) Back to positive net adds in all accesses Rational “Back to school” campaign Leading Customer Lifetime Value Higher retail revenue (+2.4% y-o-y in Q3) OIBDA progress for stabilisation Benchmark (OIBDA-CapEx)/Sales (24% in 9M) Compliance certification (Criminal and Antibribery by EQA) Net adds (k) 1 21 24 28 14 23 43 69 (9) (5) (7) 3 Postpaid ConvergentFBB Q3 22 Q4 22 Q1 23 Q2 23 Q3 22 Q4 22 Q1 23 Q2 23 Revenue OIBDARetail Rev. CL 9 years +34% Q3 23 Q3 23 Q4 22 Q1 23 Q2 23 Q3 23 +0.5% y-o-y Q3 22 Q4 22 Q1 23 Q2 23 Q3 23
Leading contract & FTTH market share (44% & 17%) Rational mobile market Progressive tariff update, even in prepaid Low contract churn (1.1%) Mobile ARPU: +11% vs. Q3 22 Solid above inflation top-line growth OIBDA-CapEx:+25.6% in 9M 23 y-o-y Vivo began to produce its own renewable energy in partnership with 4 solar parks. Brazil 23.3 24.4 24.7 25.1 29 Accesses growth (y-o-y) FTTH Premises passed (m) Solid operating & financial performance 18% 18% 15% 3% 4% 21% 19% 17% 15% 14% FTTHContract 10.6% 10.1% 12.1% 7.6% 7.5% 12.3% 6.6% 9.5% 11.1% 11.6% Revenue OIBDA 43% 44% 40% 42% 44% 22% 24% 27% 23% 24% OIBDA-CapExOIBDA Revenue & OIBDA growth (y-o-y organic) Margins (organic) Q3 22 Q4 22 Q1 23 Q2 23 Mar-23 Dec-24EJun- 23 Sep-23 7 Mobile contract share 41.8% 41.7% 43.5% 43.7% 43.6% Q3 23 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23Dec- 22
Germany Fixed BB net adds (k) Revenue OIBDA 6.0% 6.6% 8.0% 4.4% 2.2% 4.2% 6.6% 1.7% 2.8% 3.6% Margins (organic) OIBDA-CapExOIBDA Revenue & OIBDA organic growthPostpay net adds (k) 304 264 368 302 396 19 18 25 22 31 31% 31% 30% 31% 32% 15% 17% 18% 19% 17% 8 Q2 23Q3 22 Q4 22 Q1 23 Q3 23 Q2 23Q3 22 Q4 22 Q1 23 Q3 23 Q2 23Q3 22 Q4 22 Q1 23 Q3 23 Q2 23Q3 22 Q4 22 Q1 23 Q3 23 Robust commercial traction & improved operating leverage Strong trading momentum driven by ‘value-over-volume’ focus & normalised churn Sustained top line and strong OIBDA growth Launch of “5G Plus”, available to more than 90% of the population Nominated as finalist for the ‘16th German Sustainability Award’
Virgin Media O2 115 188 108 175 251 0.8% 0.9% 1.0% 0.9% 1.0% (0.6%) 0.4% 3.9% 6.2% 7.1% 8.1% 9.9% 1.4% 3.7% 6.3% 38% 37% 36% 37% 37% 16% 17% 18% 17% 18% Fixed network build (k PPs) Mobile contract churn (%) Revenue OIBDA Margins (organic) OIBDA-CapExOIBDA Q3 23Q3 22 Q4 22 Q1 23 Q2 23 9 Revenue & OIBDA growth (y-o-y organic) Q3 23Q3 22 Q4 22 Q1 23 Q2 23 Q3 23Q3 22 Q4 22 Q1 23 Q2 23 Q3 23Q3 22 Q4 22 Q1 23 Q2 23 UBB PPs 16.7m Improved trading and main financials Customer growth in fixed and mobile 251k PPs, 9M: >500k PPs 5G connectivity >3,200 towns and cities Sale of 16.67% of Cornerstone to GLIL Accelerating revenue and OIBDA growth Revenue outlook updated from growth to stable All organic according to Telefonica criteria
T. Tech, leading provider of advanced NextGen solutions in B2B Operational HighlightsT. Tech Revenue (€m) Strong commercial activity & solid position in customers • LTM Bookings growth ~+26% y-o-y Industry Analysts Recognition Leader: IoT Managed Connectivity Services Worldwide Representative Vendor: 4G and 5G Private Mobile Network Services for Industry T-Tech, one of the most relevant Microsoft partners in Europe • 6 Cloud Solution Partner Designations (Infrastructure, AI&Data, Modern Work, Security, App&Innovation, and BizApps) • 2023/2024 Microsoft Business Applications Inner Circle Continued consolidating new operating model • Global Services Lines to enhance commercial focus • First 2 lines already launched (IoT & BizApps) 10 442 1,327 30.0%14.4% Q3 23 9M 23 y-o-y Highly skilled team close to customers • Talent-led Co’: hiring, skilling & retaining • >6.2k professionals; 80% in Europe; ~4k certifications Solid revenues growth in constant perimeter • 9M 23 +22.9% y-o-y; largely above market growth Double-digit y-o-y growth across all T. Tech businesses in Q3 Well-balanced revenue mix • High weight of Managed & Professional services & own platforms • >85% revenues from hard currency geographies
Boosting penetration in FTTH Best-in class international connectivity infrastructure 11 Extension of new cable Tikal to Cancun (MEX) adding a new market to our subsea network Traffic +17% 9M 23 y-o-y 53.3% OIBDA margin (9M 23) Maintaining solid profitability despite inflationary context 10 13 15 19 20 Dec-21 Dec-22 Mar-23 Jun-23 Sep-23 Valuable portfolio, efficient wholesale vehicles ~30 2026ETotal FTTH Premises Passed1 (m) • 4.5m PPs with fibre • Entel Chile agreement approval expected to be approved in Q4 23 • Stake sale to KKR expected for Q2 24Pangea Co T. Infra, top-tier infrastructure portfolio • MoUs reaching >1m PPs; continuing network construction • FTTH deployed in over 150 municipalities, reaching 4.4m PPs • Roll-out milestone of 500k PPs reached. Upp acquisition to add 175k PPs 1 Included in the total Group’s FTTH PPs. Jun-23 and 2026E includes Pangea PPs.
Q3 23 Results Mrs. Laura Abasolo CFCO & Head of T. Hispam
Progressing in reducing exposure to the region: MOU in COL approved (share mobile infrastructure) More sustainable business: CapEx/Sales: 7.5% 9M 23 on new operational model Growing contract and FTTH accesses Fostering digitalisation OIBDA-CapEx expected to improve in Q4 23 Best Telco company reputation in Merco ranking T. Hispam 15.8 16.8 17.6 18.6 19.5 FTTH & Cable PPs (m) 5% 4% 4% 3% 3% 18% 19% 18% 16% 12% FTTH & CableContract 3.8% 2.8% 1.6% (0.4%) (2.7%) 1.2% (1.5%) (3.9%) (5.0%) (17.1%) Revenue OIBDA 22% 22% 20% 20% 18% 15% 4% 15% 12% 9% Continued execution Accesses growth (y-o-y) Revenue & OIBDA growth (y-o-y organic) Margins (organic) 12 OIBDA-CapExOIBDA Jun-22 Sep-22 Dec-22 Mar-22 15.8m FTTH Q3 22 Q4 22 Q1 23 Q2 23 Jun-23 Q3 23 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23
Strong FCF generation, sound liquidity and contained cost Net Financial Debt Comfortable liquidity position 11.4 Liquidity cushion, Sep-23 (€bn) 9.4 Cash position Undrawn credit lines & synd. credit facilities Cash liquidity 20.8 1.5 3.4 4.5 2.4 20242023 2025 2026 Gross debt maturities, Sep-23 (€bn) Total debt related interest payment cost ex leases Contained interest payment cost Sep- 22 +100 bps in short- term rate = +€38m in interest payment Sep-23 ND/OIBDAaL 2.62x ND/OIBDAaL 2.51x Jun-23 FCF Pre-retirement commitments Sep-23 FX & Others Net financial investments Shareholder Remuneration Hybrids 27,479 26,537 (1,130) 258 (362)220 87 (15) >80% Total debt fixed 12.3 yrs Average Debt Life 13 4.12% 3.61%
Conclusions Mr. Ángel Vilá COO
22 • On track to meet 2023 upgraded guidance, 1.4% treasury to be cancelled, 2023 dividend confirmed • Continue monitoring industry and regulatory changes • ESG priorities at the core of our business • Steady revenue and OIBDA growth (organic y-o-y) • Accelerating OIBDA-CapEx to +9.3% (organic y-o-y) • Stronger KPIs (FTTH accesses, 5G penetration), improving customer satisfaction (churn, NPS) We delivered another solid quarter 14 • Ongoing technology transformation; promoting AI, ML; bringing benefits • Net debt and leverage reduction (to €26.5bn and 2.51x) • FCF ex spectrum progressing to ~€4bn FY 23 ambition (9M 23: €2.5bn ex spectrum)
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 2022 Digital Inclusion Benchmark 1st in sector 2022 Member of DJSI Europe