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Investor Conference March 2001, Rio de Janeiro. This presentation contains statements that constitute forward-looking statements within the meaning of.

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Presentation on theme: "Investor Conference March 2001, Rio de Janeiro. This presentation contains statements that constitute forward-looking statements within the meaning of."— Presentation transcript:

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2 Investor Conference March 2001, Rio de Janeiro. This presentation contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activities and situation relating to the Company. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward looking statements as a result of various factors. Analysts are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Telefónica undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telefónica´s business or acquisition strategy or to reflect the occurrence of unanticipated events. Analysts and investors are encouraged to consult the Company´s Annual Report on Form 20-F as well as periodic filings made on Form 6-K, which are on file with the United States Securities and Exchange Commission. Safe Harbour

3 Investor Conference March 2001, Rio de Janeiro. A leading wireless operator 5 countries POPs: 195 mm Subs.: 13.7 mm Europe 8 countries POPs: 211mm 1 Subs.: 12.4 mm Managed subs: 13.7 1 Latin America 1 country POPs: 28 mm Subs.: 0.5 mm Mediterranean basin 14 countries POPs: 434 mm 1 Subs: 26.6 mm Managed subs.: 27.9 mm 1 (1) Figures include Chile & P.Rico All the figures are proforma, including the JV with PT. Subs. figures exclude Mexico One of the top 5 wireless operators Presence in high growth markets Focused footprint + #2 by controlled pops # 9 by equity subs.

4 Investor Conference March 2001, Rio de Janeiro. A quality player with a differentiated profile l Leadership in major countries of operation... + … with a solid profitable growth model... + … managing operations & cash-flows... + … with a diversified growth profile... + … a successful track record as an innovator in VAS and wireless data... + and an acquisition currency already in place

5 Investor Conference March 2001, Rio de Janeiro. TEM strategy: Enhance our leadership l Strengthen leadership in Spain l Consolidate leadership in Latin America l Selectively increase scale in Europe, with control of operations l Lead wireless Internet and data markets l Maintain focus on profitability, with higher contribution from Latam l Capture value through integration l Use acquisition currency with a prudent approach based on value creation Become one of the top five players in the sector worldwide

6 Investor Conference March 2001, Rio de Janeiro. Large market opportunity l 388 mm POPs l 35% of wireless subscribers will be Internet users by 2003 Western Europe l 500 mm POPs l 13% wireless penetration & 13% wireline penetration l Subscriber CAGR of 29% until 2004 l 238 mm POPs l Low wireless penetration: 4% l 69% customer CAGR through 2004 Latin America Mediterranean Basin ++ Unique position to capture high growth potential

7 Investor Conference March 2001, Rio de Janeiro. SPAIN Latin America European footprint Wireless data Financials

8 Investor Conference March 2001, Rio de Janeiro. Regulation l Number portability l Termination fees l Spectrum fee l New players Market trends l Slowdown of growth rate: â Lower pressure on market share loss â Fundamental profitability TEM-Spain: 2001 market environment

9 Investor Conference March 2001, Rio de Janeiro. Total market 2000: 24.3 MM customers; 60.9% penetration (+23 p.p.) Sound competitive track record in the Spanish market … continuously expanding gap relative to #2 Spanish operator TEM Spain Airtel-VOD Subscribers (mm) +6.7 1996199719981999 2000 13.7 6.9 l Market share: 56.1% l Traffic share: 61.5% l Record of net adds: 4.62 mm vs 4.16 mm in 1999 l > 50% GSM net adds market share l High market share in corporate segment

10 Investor Conference March 2001, Rio de Janeiro. Focus on high value customers 485 1220 26% 12% 19992000 Contract net adds (000)Contrat net adds/total net adds Launch of loyalty program for contract customers MoviStar Plus (February 00) Increased customer loyalty Contract Customers3,547,1924,766,926

11 Investor Conference March 2001, Rio de Janeiro. Growing contribution of wireless data services… l 21% over total SMS derived from content & VAS l 48 mm SMS from new chat service in December l 500 MM SMS or 35 SMS/customer in January 01 Only includes billable SMS Wireless data revenues already represent 8% of customer revenues

12 Investor Conference March 2001, Rio de Janeiro. TEM-Spain: non-stop innovation l GPRS services (already launched): â e-moción based on GPRS â Internet GPRS â Intranet GPRS (Corporate WANs) l PIM applications & access to corporate data bases l Location based services: â Information services, fleets management, Find a friend.... l Advertising & promotion services: â Cell broadcasting l M2M applications (machine to machine) â Telemetry, telecontrol, domotic... l Voice portal l Entertainment services: games, gambling, logos, ringing tones... l New features in e-moción Increasing service attractiveness & speeding up VAS revenue growth

13 Investor Conference March 2001, Rio de Janeiro. l Intensification of customer LOYALTY and/or management of customer base l Increase penetration of 2.5G services l Introduction of new WI products & services (localization) l Establishing e-mocion as the market leader in WISP l Launch of nationwide GPRS network in January (1st operator) l Gradual roll-out of UMTS network TEM-Spain strategic goals for 2001 Maintain competitive position and traffic share …... maintaining sound profitability levels & adapting capex to market environment

14 Investor Conference March 2001, Rio de Janeiro. CAGR 00-04 Customers 4%-8% Customers by 2004 (MM)17-18 Revenues 10%-14% Wireless data/revenues by 200425%-30% EBITDA16%-20% EBITDA margin by 200444%-48% Capex(5%-10%) Significant growth potential

15 Investor Conference March 2001, Rio de Janeiro. Spain LATIN AMERICA European footprint Wireless data Financials

16 Investor Conference March 2001, Rio de Janeiro. Outstanding growth to be captured 1 Source: Pyramid Research 1999-2004 CAGR (1) Fixed line customers10.6% Wireless customers29.3% Wireless revenues27.4% Internet penetration38% l Macro recovery l Low penetration rates l Leadership l Management of operations l Unique player with presence in the 3 key markets TEMs POSITION IN THE REGION

17 Investor Conference March 2001, Rio de Janeiro. Strong position in our markets TEM-PTM JV Tele Sudeste (Brazil) CRT (Brazil) Telesp (Brazil) Tele Leste (Brazil) Global Telecom (Brazil) TCP (Argentina) TEM Peru Startel (Chile) TEM El Salvador TEM Guatemala NewCom Wireless (P. Rico) #1 #2 #1 #2 #3 #5 64% 74% 63% 61% 25% 26% 69% 36% 23% 12% 2.5 1.5 4.3 0.7 0.5 1.8 0.9 1.2 0.2 0.1 Market position Company 2000A Market share Subs (MM) Subs y-o-y growth The leader in a market with 500 MM pops, doubling the customer base in the region by 2004 organically and with further growth potential from expansion 35% 50% 49% 26% 186% 67% 26% 6% 74% 187% 221%

18 Investor Conference March 2001, Rio de Janeiro. l 9.3 MM controlled customers l Overpassing 2 nd, 3 rd & 4 th operators total customer base l Potential market of over 93 MM POPs (56% of Brazil) l Leadership in 4 of 5 richest areas in Brazil (71% GDP) l 60% of average market share l Unique player operating in Sao Paulo & Rio de Janeiro l Pioneer in VAS l Expansion into new areas trough new acquisitions & PCS spectrum re- auctions Far ahead of competitors, leading the first and best positioned consolidation initiative Teleleste Bahía & Sergipe TeleSudeste Rio J.& E.Santo Telesp Celular Sao Paulo CRT Celular Rio Grande do Sul Global Telecom Sta Catarina & Paraná Brazil: TEM-PT JV, the #1 player in the #1 LatAm market

19 Investor Conference March 2001, Rio de Janeiro. Telesp Celular Participaçoes 41.2% / 85.1% Firm (% economic / %vote) Global Telecom 83.0% / 49.0% TeleSudeste Celular Part. 81.6% / 75.7% CRT Celular 43.9% / 75.4% TeleLeste Celular Part. 10.8% / 21.9% Assets to be transferred

20 Investor Conference March 2001, Rio de Janeiro. Capitalizing our financial strength REGIONSREVENUESEBITDAEBITDA 2000AMM MM margin Sao Paulo1,638526 32% Rio de Janeiro & E Santo91131535% Rio Grande do Sul44916036% Bahia & Sergipe1964724% Sta.Catarina & Paraná146(81) (55%) TOTAL (aggregated)3,340967 With new investment opportunities to consolidate #1 position Operating Synergies Network already in place Avoid PCS licenses costs Already profitable since the beginning Benefits from

21 Investor Conference March 2001, Rio de Janeiro. Argentina: #2 in the country with the highest GDP per capita Dec. 2000October 1999 TI/FT 21% TEM 30% 24% 20% 26% BLS VZ TEM #2 #4 0.6 1.1 1998 19992000 Mkt. share 1.8 Subscribers (MM) Solid customer growth & improved competitive position

22 Investor Conference March 2001, Rio de Janeiro. Mexico: key step in our consolidation strategy l Enhances Latin American footprint: #2 market l Provides broadened scale Outstanding fit with existing business l > 1 MM subscribers in 2000 l TEMs management team since February 2001 l Transfer of assets in 2Q01 l Positive upside in EBITDA margins Value creation potential derived from integration within TEM & several alternatives for potential footprint increase

23 Investor Conference March 2001, Rio de Janeiro. Startel l New direction of operations l Focus on profitable growth l Target EBITDA 2001: >30% l New PCS spectrum to be awarded l Transfer to TEM to be considered TEM Peru l 69% share of net adds despite increasing competition l 36% EBITDA margin l Launching of WAP services Peru & Chile

24 Investor Conference March 2001, Rio de Janeiro. TEM El Salvador l #2 market position achieved in only 18 months: 36% share of net adds 36% market share 22% EBITDA margin TEM Guatemala l 23% market share after 1 year of operations l EBITDA breakeven in the first year Proven trackrecord as successful new entrant Central America NewCom Wireless l 12% market share in a 5 player market l 20% share of net adds

25 Investor Conference March 2001, Rio de Janeiro.... further improving EBITDA margins Maintain market leadership & consolidate TEMs position in the region... l Continue profitable growth policy l Improve customer loyalty l Reinforce actions in corporate segment l Reduce SAC and control ARPU through introduction of new services l Improve synergies among operations Strategic goals for 2001

26 Investor Conference March 2001, Rio de Janeiro. CAGR 00-04 Customers 17%-21% Aggregated revenues 12%-16% Aggregated EBITDA24%-28% Aggreg. EBITDA margin by 200439%-43% Aggregated Capex(14%-18%) Strong growth to be captured CAGR 00-04 ( based) Figures include Mexico, Chile & Puerto Rico

27 Investor Conference March 2001, Rio de Janeiro. Significant cash-flow generation EBITDA Capex

28 Investor Conference March 2001, Rio de Janeiro. Spain Latin America EUROPEAN FOOTPRINT Wireless data Financials

29 Investor Conference March 2001, Rio de Janeiro. % Mobile Service Revenues on GDP Austria0.9%1.9% Germany0.8%2.2% Spain1.6&3.9% Italy1.1%3.2% Switzerland0.9%1.7% 2000E2010E 195 MM POPs already secured 40% Europe GDP Expanding European Scale Selectively Source: CSFB l Participating in attractive countries with weak 3rd & 4th players l Access to other profitable business opportunities: MVNO, new licences, special roaming agreements, wireless portal subscriptions, consolidation … Focus on key markets & leverage economies of scale, playing an active role to build up one of the top 4 pan-European operators Strategic alliances with PT & Sonera +

30 Investor Conference March 2001, Rio de Janeiro. l Technological leap â Broadband capabilities â Portability of the customer profile â High quality voice services â Per volume/content billing l Capacity is Key â Spectrum scarcity l Massive distribution channel â Attractive for third parties The UMTS value UMTS will definitely shape a mobile future where skilled new entrants are well positioned

31 Investor Conference March 2001, Rio de Janeiro. LICENCES GRANTED IN SPAIN, UK, GERMANY & ITALY COMPANYSECUREDCONTROLPOPSTOTAL COSTCOST/POP/MHz LICENCESINTEREST(M)(M ) (1)( ) (2) VODAFONE4423720,9221.77 DEUTSCHE TEL2214015,6085.59 BT3217915,4402.46 TELECOM ITALIA21972,4521.01 NEW ORANGE3219810,5291.78 KPN211407,7392.22 AV. (ex-TEF)n.m.n.m16512,1152.47 T.MOVILES331796,4670.90 (1) Considering economic interest in the consortia (2) Does not consider unpaired spectrum TEM UMTS Strategy: Footprint at lower cost

32 Investor Conference March 2001, Rio de Janeiro. Market share (2009E) SIM cards (2009E) ARPU/SIM (Eur 2009E) 13%12.1 MM593.9 Bn 13%6.7 MM473.5 Bn 12%1.1 MM620.9 Bn 20%1.5 MM660.9 Bn Cum. Capex 2009E ( ) UMTS business projections EBITDA break-even in 4-5 years after starting operations (2002) >15% IRR plus additional returns from synergies with Telefónica

33 Investor Conference March 2001, Rio de Janeiro. TEMs entry strategy Achievable estimates Pioneer in Wireless Data UMTS potential l Potential upsides of the Business Plans: â Roaming agreements to provide GPRS services in a first phase under discussion â Sharing of infrastructure with other players under discussion l Offering innovative & high quality services l Benefiting from TEMs WISP & wireless portal l Developing innovative distribution channels l Benefiting from Telefónica´s increased presence in Europe (Mediaways, Atlanet, Terra-Lycos, Endemol, European Telecom...)

34 Investor Conference March 2001, Rio de Janeiro. Current ARPU : 34-38 Estimated ARPU: 50-70 20002010 (E) Messaging Information services Voice services Time Video Telephony Multimedia Internet Browsing E-commerce & advertising Turning point 2001-2002 ARPU UMTS services in Europe

35 Investor Conference March 2001, Rio de Janeiro. TEM financing approach l Management control with limited financial exposure l 50%-50% debt to equity l Long-term vendor financing l Business plans improved through shared infrastructure & early market entrance with 2.5G services l Strong & complementary local & international partners, like Sonera, Fiat or Banca di Roma l Growing cash-flows from Spain & Latin America l Turn-key natural procurement, including base stations & sites l Common platform for advanced services

36 Investor Conference March 2001, Rio de Janeiro. Italy Austria & Switzerland Germany UMTS: steps already made l Proprietary wireless company deployment methodology: Cellco in a box l German CEO and Management Team already appointed l Ongoing negotiations with German incumbent operators for roaming, interconnection & infrastructure sharing agreements l Headquarters selected & operational in Munich l Italian CEO and Management Team already appointed l Ongoing negotiations with Italian incumbent operators for roaming, interconnection & infrastructure sharing agreements l Location & headquarters selected: Rome l In process of selecting local Management Teams l Ongoing negotiations with country incumbent operators for roaming, interconnection & infrastructure sharing agreements

37 Investor Conference March 2001, Rio de Janeiro. Mediterranean Basin: Medi Telecom l 2 nd GSM license granted in 1999. l Service launched on March 29 th 2000 l Fast growing market: 400% in 2000E, with over 6% of penetration l 515,000 customers by Dec.2000 vs. 400,000 originally forecasted l 28% market share in 9 months l Expected EBITDA break-even during 2001, second year of operations l Studying opportunities unveiled by second GSM license grants in Tunisia and Argelia & consolidation

38 Investor Conference March 2001, Rio de Janeiro. Spain Latin America European UMTS footprint WIRELESS DATA Financials

39 Investor Conference March 2001, Rio de Janeiro. Leadership across the wireless value chain Network Operator WISP Gateway PortalsApplicationsContent Mobipay MoviStar Net MoviStar Datos SMS

40 Investor Conference March 2001, Rio de Janeiro. Content Providers 60 79 128300 l WISP solution for all TEMs operators: â Already launched in Spain, Brazil, Argentina, Guatemala, El Salvador & Puerto Rico l Open platform non wallet garden e-moción: Internet in your hand 153 1,106 1,922 Jun-003Q 00 4Q 00 Quarterly WAP calls (000) TEM-España case Commercial launch GPRS launch 2001 l > 300,000 active WAP customers l 15 MM WAP minutes l Average usage: 4 min./call l 25 MM WAP page views JANUARY 2001

41 Investor Conference March 2001, Rio de Janeiro. Terra Mobile: the leading mobile portal l Target markets: Europe & Latam l Preferred portal for TEMs operators l Already launched in Spain, Brazil, Finland, UK, Germany & Sweden Registered users as of December 2000 (000) l Commercial agreements already signed with 15 operators: 98 MM potential users l Registered customer base tripled in 6 months

42 Investor Conference March 2001, Rio de Janeiro. Mobipay: an innovative mobile payment service l Fast, low cost and secure mobile payment system l Open platform l Customers can use existing handsets, SIM cards and bank accounts l Revenues from induced traffic and licensing fees l Access to new markets and segments Complete in 10 seconds MERCHANT Cellco CUSTOMER Cellco Launched in Spain in 2001 Mobipay

43 Investor Conference March 2001, Rio de Janeiro. Spain Latin America European UMTS footprint Wireless Data FINANCIALS

44 Investor Conference March 2001, Rio de Janeiro. High quality results already delivered … IPO 2000E2000A Customers (000)21,10021,840 Revenues (MM ) 7,3007,401 EBITDA (MM )2,3002,451 EBITDA Margin31.5%33.1% Connections/employee--2,056... applying very conservative criteria

45 Investor Conference March 2001, Rio de Janeiro. Sound capital structure 2000A Pro-forma net debt 10.1 bn Proportionate pro-forma net debt 6.5 bn Proport. pro-forma Net debt / market cap.20% Proport. net debt/ EBITDA2.7x

46 Investor Conference March 2001, Rio de Janeiro. Key financial targets through 2004 Subscriber growth14%-18% Revenue growth (pre-UMTS)12%-16% Revenue growth (post-UMTS)19%-23% EBITDA (pre-UMTS) annual growth20%-24% margin by 200441%-45% EBITDA (post-UMTS)annual growth13%-17% margin by 200425%-29%

47 Investor Conference March 2001, Rio de Janeiro. l Efficient operator: â Capture the largest & highest quality market share â Profitable growth â Proactive management of regulatory risk l Launch new wireless data services to foster usage & revenues A leading wireless operator l Selective geographic expansion maximizing shareholder return l Use of TEMs currency + Increase synergies through integration Organic Growth New business opporunities One of the 5 global players in the sector worldwide

48 Investor Conference March 2001, Rio de Janeiro.


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