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Investor Conference March 2001, Rio de Janeiro 1 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 1 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 1 This presentation contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 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 Investors Conference March 2001, Rio de Janeiro A value growth company: Delivering results

4 Investor Conference March 2001, Rio de Janeiro 3 WE ARE CONFIDENT THAT BY BUILDING ON OUR FUNDAMENTALS WE WILL DELIVER ON PROFITABILITY AND GROWTH Strengthen focus on earnings Strong emphasis on efficiency and execution Multiple growth dimensions Building business models that are profitable and sustainable Profitability: Growth: AS A CONSEQUENCE, OUR COMPANYS VALUE WILL INCREASE

5 Investor Conference March 2001, Rio de Janeiro 4 DELIVERING RESULTS: PROFITABILITY AND GROWTH We will capture opportunities based on our strong strategic position and fundamentals We manage key performance metrics Management priorities to crystallize value Our Group model enables delivery

6 Investor Conference March 2001, Rio de Janeiro 5 Current market environment forces management more than ever to focus on key metrics and on delivery of results OUR STRONG FUNDAMENTALS AND SOLID STRATEGIC POSITION PUT US IN A SUPERIOR SITUATION TO CAPTURE PROFITABILITY AND GROWTH Large client base Strong operational skills Unmatched intangibles Balanced and flexible business structure Strong fundamentals Internet Broadband Mobility Content Strong strategic position along growth engines Telefónica is in a good position to simultaneously capture profitability and growth

7 Investor Conference March 2001, Rio de Janeiro 6 DELIVERING RESULTS: PROFITABILITY AND GROWTH We will capture opportunities based on our strong strategic position and fundamentals We manage key performance metrics Management priorities to crystallize value Our Group model enables delivery

8 Investor Conference March 2001, Rio de Janeiro 7 WE FOCUS ON KEY ASPECTS TO ENSURE PROFITABLE GROWTH... billion, in constant exchange rates. Current business perimeter Cost efficiency Operational leverage Quality Operational excellence EBITDA % % Focus on key aspects Manage customer profitability and market share Marketing effectiveness to enhance usage Cross-selling Leverage client base TOP LINE % % Asset turnover Capex allocation and control Reducing asset base Focus on ROCE EBIT* *Calculated exc. goodwill % % CAGR

9 Investor Conference March 2001, Rio de Janeiro 8 WE FOCUS ON LEVERAGING OUR CLIENT BASE,... We have a growing client base... …which we expect to expand …and leverage to extract its full potential Manage client profitability and market share Accelerate marketing initiatives and effectiveness Push cross-selling across the Groups businesses 25% >100 million

10 Investor Conference March 2001, Rio de Janeiro 9 53,9 47,5 Accelerate e-business implementation Tighten performance parameters Monitor improvements with further developed cost accounting tools Turn fixed costs into variable Externalize functions, transparency Outsourcing of non-core functions Monitor quality with customer centric perspective Reduce cost of non-quality …ON RAISING OUR OPERATIONAL PERFORMANCE... This is already a clear strength... …but it is an on- going priority... …and we will raise our performance by: Cost efficiency* Operational leverage** Quality*** 18,6 16,8 12, % % % 90-95% *Personal expenses (exc. Atento)/revenues **Fixed cost/total cost (estimates) ***Residential + business satisfaction index in TdE 1999 <40

11 Investor Conference March 2001, Rio de Janeiro % 73.6% 64.2% … AND ON IMPROVING OUR RETURN ON CAPITAL We are success- fully improving our capital expenditure... …but with growing uncertainty, the environment asks for improving EBIT... …by being more selective Net fixed asset turnover Capex*/ revenues % 31% Capex allocation and control Disposal of non-core assets (de-assetization) Seek opportunities for non-investing *Ex-UMTS

12 Investor Conference March 2001, Rio de Janeiro 11 DELIVERING RESULTS: PROFITABILITY AND GROWTH We will capture opportunities based on our strong strategic position and fundamentals We manage key performance metrics Management priorities to crystallize value Our Group model enables delivery

13 Investor Conference March 2001, Rio de Janeiro 12 MANAGEMENT PRIORITIES Achieve sustained superior earnings growth Continue improving results in consolidated businesses 1 Continue the expansion in Latin America 2 Drive developing businesses towards profitability leveraging the Group 3 Continue business building 4 Capture inter-business and Group synergies

14 Investor Conference March 2001, Rio de Janeiro 13 Achieve sustained superior earnings growth Continue improving results in consolidated businesses 1 Continue the expansion in Latin America 2 Drive developing businesses towards profitability leveraging the Group 3 Continue business building 4 Capture inter-business and Group synergies MANAGEMENT PRIORITIES Telefónica de España Telefónica Móviles España TeleSP and other Latam wireline operators Leverage existing client bases and maximize cash generation short and long term: we cannot fail

15 Investor Conference March 2001, Rio de Janeiro 14 TELEFONICA DE ESPAÑA Winning the broadband battle Push ADSL deployment Deepen customer segmentation Continuing to increase efficiency Transform into e-business Control/manage capex intensity Quality improvement Winning the broadband battle Push ADSL deployment Deepen customer segmentation Continuing to increase efficiency Transform into e-business Control/manage capex intensity Quality improvement More cash-flow More stable More business opportunities for TdE and rest of the Group

16 Investor Conference March 2001, Rio de Janeiro 15 TELEFONICA MOVILES ESPAÑA Monitor client profitability & traffic share – Loyalty programs – Product portfolio – Contract/prepaid mix Get the 2.5G offering right – Contribute to the development of applications and services – Develop, launch and promote appealing services – Speed-up time-to-market and customer migration More cash generation Improve customer mix Build solid know-how on 2.5G business and market approach

17 Investor Conference March 2001, Rio de Janeiro 16 TELESP Accelerate Metas accomplishment Key for roll-out to Brazilian telecom market Continue to build on solid operational fundamentals Ensure additional capex meets strict return criteria Tighten metrics and bring efficiency to the next level Sharpen the marketing approach and broaden product catalogue More cash flow, exceeding organic growth needs Maintain outstanding competitive position Platform to leverage Telefonicas Brazilian opportunity

18 Investor Conference March 2001, Rio de Janeiro 17 Achieve sustained superior earnings growth Continue improving results in consolidated businesses 1 Continue the expansion in Latin America 2 Drive developing businesses towards profitability leveraging the Group 3 Continue business building 4 Capture inter-business and Group synergies Telefónica de España Telefónica Móviles España TeleSP and other Latam wireline operators Leverage existing client bases and maximize cash generation short and long term: we cannot fail MANAGEMENT PRIORITIES Brazil Mexico Argentina Rest of Latam Profit from a natural extension of our leadership

19 Investor Conference March 2001, Rio de Janeiro 18 EXPANSION IN LATIN AMERICA Launch Brazilian wireline operations outside Sao Paulo in 2002 (Brazil 2002) Consolidate TEM-PT JV as the #1 player in Brazilian mobile markets Successfully develop recently entered markets, e.g., northern Argentina, Mexico Complete the Latin-American portfolio profiting from a natural extension of our leadership

20 Investor Conference March 2001, Rio de Janeiro 19 BRAZIL CONTINUES TO BE A BIG OPPORTUNITY Integrated offering of voice and data services for large businesses Long distance national and international services Transport (carriers carrier) Brazil 2002 as a first priority project TEM-PT JV to lead the Brazilian mobile market 9.3 million controlled customers, and potential market over 93 million POPs 60% of average market share and single player operating in Sao Paulo & Rio de Janeiro Leadership in 4 of 5 wealthiest areas in Brazil

21 Investor Conference March 2001, Rio de Janeiro 20 MANAGEMENT PRIORITIES Terra Lycos Telefónica Data Telefónica Media Europa UMTS Anticipate break-even leveraging the overall group position Achieve sustained superior earnings growth Continue improving results in consolidated businesses 1 Continue the expansion in Latin America 2 Drive developing businesses towards profitability leveraging the Group 3 Continue business building 4 Capture inter-business and Group synergies Telefónica de España Telefónica Móviles España TeleSP and other Latam wireline operators Leverage existing client bases and maximize cash generation short and long term: we cannot fail Profit from a natural extension of our leadership Brazil Mexico Argentina Rest of Latam

22 Investor Conference March 2001, Rio de Janeiro 21 TERRA-LYCOS Building a strong organization in business and geographic fronts Adapting the business model to the current market context Extract the full potential of and for the Group: collaboration of Terra- Lycos with other Lines of Business to exploit the Internet opportunity Become one of the top four world leaders Work with other Lines of Business to capture the Internet opportunity Accelerate breakeven

23 Investor Conference March 2001, Rio de Janeiro 22 TELEFONICA DATA AND EMERGIA Telefónica Data: Telefónica Data: – Relationship with largest corporate customers and NEPs – Support Telefónicas WLOs business customers data needs – Strengthen position from selective expansion in new markets – Leverage infrastructure/presence to serve multi-national clients Emergia: Emergia: Aggregate and manage the Groups bandwidth needs Telefónica Data: Telefónica Data: – Relationship with largest corporate customers and NEPs – Support Telefónicas WLOs business customers data needs – Strengthen position from selective expansion in new markets – Leverage infrastructure/presence to serve multi-national clients Emergia: Emergia: Aggregate and manage the Groups bandwidth needs Strengthen our position in corporate and NEPs segments Develop a strong VAS as a client loyalty and revenue enhancing tool Bring forward Emergias cash generation

24 Investor Conference March 2001, Rio de Janeiro 23 TELEFONICA MEDIA Improve operational performance Capturing existing synergies within current businesses Making T.Media cash neutral for the Group Complete the portfolio to lead in our natural market Extract the full potential of its position within the Group Improve return on investments Contribute content to other Lines of Business

25 Investor Conference March 2001, Rio de Janeiro 24 MANAGEMENT PRIORITIES Push current businesses under development and open new options Atento Katalyx Develop related businesses leveraging our franchise Achieve sustained superior earnings growth Continue improving results in consolidated businesses 1 Continue the expansion in Latin America 2 Drive developing businesses towards profitability leveraging the Group 3 Continue business building 4 Capture inter-business and Group synergies Terra Lycos Telefónica Data Telefónica Media Europa UMTS Anticipate break-even leveraging the overall group position Telefónica de España Telefónica Móviles España TeleSP and other Latam wireline operators Leverage existing client bases and maximize cash generation short and long term: we cannot fail Profit from a natural extension of our leadership Brazil Mexico Argentina Rest of Latam

26 Investor Conference March 2001, Rio de Janeiro 25 CONTINUE BUSINESS BUILDING We have launched several initiatives: eg., Atento, Katalyx We have launched several initiatives: eg., Atento, Katalyx – Clear progress – Still improvements/adjustments to make – Focus on performance and clear value potential with a flexible approach We will continue to develop opportunities and build new businesses: We will continue to develop opportunities and build new businesses: – Leveraging our customer base and franchise – Creating a competitive advantage by building on our strengths and intangibles – Adjacent businesses with low asset intensity and short pay-backs

27 Investor Conference March 2001, Rio de Janeiro 26 DELIVERING RESULTS: PROFITABILITY AND GROWTH We will capture opportunities based on our strong strategic position and fundamentals We manage key performance metrics Management priorities to crystallize value Our Group model enables delivery

28 Investor Conference March 2001, Rio de Janeiro 27 TELEFONICAS GROUP MODEL IS THE KEY TO SIMULTANEOUSLY ACHIEVE PROFITABILITY AND GROWTH Focused, transparent, accountable complementary Lines of Business operating as good specialists in each business Owned by a company, Telefónica, that manages across businesses and articulates the group Our group model... Allows to lead at a pure play development Allows, whenever suitable, to integrate efforts to leverage our client base Facilitates new options … puts us at an advantage... Still young structure, started two years ago and boosted after the completion of Operación Verónica Achieved significant progress in several areas, but working hard to continuously improve … and we are working continuously to sharpen it

29 Investor Conference March 2001, Rio de Janeiro 28 IN THIS MODEL, HIGH VALUE ADDING ACTIVITIES ARE PERFORMED AT GROUP LEVEL Manage across businesses Assist to and demand strong business performance Achieve functional articulation for effectiveness and efficiency Shape the development of the group

30 Investor Conference March 2001, Rio de Janeiro 29 WE HAVE PROGRESSED SIGNIFICANTLY IN SEVERAL ACTIVITIES TO BE PERFORMED AT GROUP LEVEL AND ARE WORKING HARD TO ADVANCE ON THE REST Plan Futurnet to extract maximum potential of broadband across businesses Shared distribution channels... Manage across businesses Assist to and demand strong business performance Achieve functional articulation for effectiveness and efficiency Architect and shape the development of the group Examples Strategic reviews and budgeting process Common management information systems Coherent reward schemes... Lowest cost of funding through centralized management of cash and finance Strong brand management Development of Shared Service Centers... Adaptiveness in partnerships/alliances Launch of dedicated Real Estate Management Unit... A process of continuous development and improvement

31 Investor Conference March 2001, Rio de Janeiro 30 WHAT WEVE SAID SO FAR Telefónicas performance is based on solid, lasting business fundamentals This fundamentals underpin our financial results Building on our fundamentals and our solid financial position, we are confident that we will deliver on profitability and growth We focus on four management priorities to crystallize our value Our group model is a key enabler that puts us at an advantage to deliver value and growth

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